McEwan's Imports: focus on customers and costs
Ross McEwan's appearance at the Scottish Parliament at its annual business conference on Friday signalled another attempt by the Royal Bank of Scotland to get on to the front foot.
The chief executive continued his immediate predecessor's humility, the appeal to be worthy of the British public's trust after the bailout and the responsibility to pay its dues.
It came with a renewed attempt to get on to the front foot with a focus on the consumer.
It doesn't help that the reduced risk on the balance sheet has been replaced, at least to some extent, by the uncertain future costs of litigation and penalties for allegedly rigging markets and mis-selling.
American accounting rules allow US banks to put money aside for what's coming, but UK rules require RBS and others to hold back with provisions until the bills come in. That makes the front foot harder to get to.
And so it makes it harder to see when RBS will be in shape for the UK government to start selling its 81% stake. The announcement, earlier this month, that £38bn of unwanted 'bad' assets are to be ring-fenced for selling off with rather more urgency than under Stephen Hester's leadership. That could take three years, and all those litigation and 'conduct issues' could rumble at least that long.
Off the high street
With that backdrop, Ross McEwan came to Holyrood as a public forum in which to send the message as clearly that the new management is emphasising customers, customers and then customers.
Any business can claim that. The Kiwi chief executive is the first RBS boss to have made it happen, as head of retail. That used to be described as 'high street banking'.
But although he worded it carefully, that's not where he sees the future. Yes, he said, branches will be the places to go for specific services, such as advice. It will still be necessary to eyeball the bank manager, sometimes.
But with a 30% drop in in-branch transactions in only three years, the bank is preparing the ground for some messages that may look unpalatable to the MSPs Mr McEwan was addressing. People like to know branches are there, and employing local people, even if they rarely go into them.
So the other part of the story is following customers to where they are, and at the times they want. It turns out that is often with their breakfast. With one billion mobile log-ins so far, they've got plenty data to show it's around 8am that people are most often checking their balances and making payments.
Putting more bank facilities into railway stations was one of the ideas McEwan was punting. That's where the footfall is. And the new generation of machines being devised between the RBS innovation team in Edinburgh and NCR's automated teller machines (ATMs) in Dundee are intended to provide a familiar digital face.
Whereas the bank presents numerous faces to online, mobile, ATM transactions, the new machines should look identical wherever you go. And with the familiar, they come with security measures which recognise your behaviour in keying your passwords and codes. Anything unusual, and the data tells the machine to tell the bank that it should be wary.
This customer focus is intended also to bear down on the time it takes to open accounts, and to get loan applications handled.
But I'm told it will also come with a bearing down on costs and on what makes money. If the top priority is to provide what customers want, then an equal priority is to focus on what they're willing to pay for. Expect the 'free' current account to come under more pressure to reform into a fee-based one, with bells and whistles attached.
The cost:income ratio at RBS - a key indicator watched by all banks - remains above comparable operations. With operating expenses above £17bn last year, the ratio ran to 63%. The target has been to get it down to 55%.
You could achieve that with higher income, but prospects for that are constrained by an uncertain recovery with low interest rates. So having shed around a quarter of RBS staff in the past five years, it looks like there's a lot more where that came from. If income isn't going to grow, a rough calculation of the most recent ratio makes it look like £2bn further cuts to get towards that 55% target.
In February, it will be five years since Stephen Hester reported losses of £24bn, an unenvied British record. The message on the 'fundamental review' being prepared with the new chief executive's first full-year results also looks like it will be challenging, but in some very different ways.