RBS Bad Bank’s Cullinan Seen as Only Top Executive to Get Bonus

By Richard Partington

Photographer: Simon Dawson/Bloomberg

Royal Bank of Scotland Group Plc Chief Executive Officer Ross McEwan is trying to... Read More

The only member of Royal Bank of Scotland Group Plc’s executive committee likely to get a bonus this year is the man charged with getting rid of the lender’s unwanted assets, according to a person with knowledge of the matter.
While Rory Cullinan, who heads RBS’s bad bank, will receive a payment, the nine other members of its top leadership team won’t, including Chief Executive Officer Ross McEwan and Chief Financial Officer Ewen Stevenson, said the person, who asked not to be identified because the details are private.
Bonuses at Cullinan’s division, which sold off more assets than expected, are likely to exceed other units that were hobbled by poor performance and fines, said the person. The fines mean Edinburgh-based RBS will probably cut the size of its overall bonus pool, the person added.
James Abbott, an RBS spokesman, declined to comment. Cullinan couldn’t immediately be reached for comment.
McEwan, 57, is trying to revive earnings by shedding assets,
shrinking the investment bank and cutting jobs. The lender, still 80 percent owned by British taxpayers more than six years after the biggest bank bailout in history, has repeatedly come under political fire for the bonuses it awards.
Cullinan, 55, helped oversee an 11-billion-pound ($16.7 billion) reduction in assets in the first nine months of last year and the bank is on course to beat its wind-down goals, RBS said when it posted third-quarter earnings. Rising property prices in Ireland and a stronger economy in the U.K. helped Cullinan’s division sell assets at a faster pace than expected.
RBS shares fell 1.2 percent to 369.1 pence at 8:12 a.m. in London. While the stock rose about 17 percent last year, it’s still trading below the 407-pence price at which the government says it would break even on its holding.

Toxic Assets

He’s the only member of the executive committee to get a bonus this year because his division and role are designed to disappear once all assets have been sold, the person said.
The bonus pool is likely to shrink from last year’s 576 million pounds after RBS was hit with $634 million in fines from U.S. and U.K. authorities for currency manipulation. Faltering performance and staff cuts also mean bonuses will probably be lower at RBS’s investment bank, the person added.
Cullinan is also responsible for two initial public offerings. He has yet to finish selling shares in the bank’s Citizens Financial Group Inc. (CFG) U.S. unit, or start the planned IPO of the Williams & Glyn consumer bank.
RBS transferred 29 billion pounds of its worst loans to the internal bad bank in January last year to accelerate disposals of toxic assets and free up capital to meet new regulations.
The lender had expected to cut the bad bank’s assets by at least 55 percent within the first two years. However, the unit had already cut assets 38 percent to 17.9 billion pounds by the end of September, according to its third-quarter earnings.

Van Saun, Rose

The division is now on an “accelerated timetable to achieve its wind-down goals,” RBS said then.
Cullinan, who joined RBS in 2002 and previously led its non-core division, was paid 800,000 pounds in shares last year, according to filings, the most in role-based allowances designed to sidestep European Union bonus cap rules among the bank’s senior executives.
Alongside Bruce Van Saun, CEO of Citizens and head of RBS in the Americas, Cullinan is one of the only senior executives at RBS who will be paid an annual bonus. Van Saun isn’t on the executive committee. RBS scrapped annual awards for nine other leaders, including McEwan, in favor of long-term deferred incentives last year, the bank said that January.
Cullinan was the bank’s top paid executive last year, receiving a 2.6 million-pound share-based award in March for his 2013 performance. Alison Rose, the head of the lender’s commercial and private banking arm and now a member of the executive committee, got the second-biggest payment, worth about 875,000 pounds.
Unlike other banks, RBS didn’t seek shareholder approval to pay bonuses of twice fixed pay, as is permitted under the EU rules. U.K. Financial Investments, which manages the government’s 80 percent stake in RBS, said it would veto such a proposal.