Focus on 'Fred the Shred' after Royal Bank losses

THE global maelstrom continues. Bank share prices are on a daily rollercoaster. And those rescue rights issues shoring up balance sheets in the summer seem a distant memory.

Royal Bank of Scotland has been plunged back into the spotlight over the past two days with an aggregate 14 per cent – nearly £5 billion – slashed from its share price. Last night the shares closed at 179p, down 1 per cent. They fell 13 per cent on Monday.

City analysts say RBS has been hit by the twin blows of the failure of the US bail-out, and concerns about whether the nationalisation of Belgo-Dutch banking giant Fortis will hit the Scottish bank, its partner in a buy-out of ABN Amro.

The fall has led some in the City to again question whether RBS's chief executive, Sir Fred Goodwin, is the man to steer the embattled bank through this convulsed financial landscape.

Some in the Square Mile believe not. Sir Fred was the man – "not desperately patient" as one associate described him – who pressed ahead with the expensive purchase of ABN Amro (as part of a consortium with Fortis and Santander) even after the credit crunch broke in 2007.

Critics in the City said it was another example of "serial acquirer" hubris unsuited to the insecure banking climate. To them, Sir Fred is a "war general", with greater aptitude for acquiring assets than managing a bank through a severe downturn. Many in the City also cannot forgive Sir Fred's perceived U-turn on RBS's £12 billion rights issue earlier this summer.

One City banking analyst said: "I'm amazed Fred is still there actually, primarily for the ABN purchase. It was for top-dollar and at the wrong time."

Another said: "His (Sir Fred's] credibility has obviously been damaged over the past year."

But not everyone agrees. Others think it would be folly to change the admiral in the middle of high seas. One RBS follower in the City said: "It is fair to say the clock is ticking. But nobody doubts Goodwin's ability to cut costs – that's where he got his 'Fred the Shred' nickname."

One banker added: "Fred is a pretty tough cookie. Part of him would be in his element in this sort of situation." Another said: "It is in Sir Fred's favour in these times – the City might think, 'Better the devil you know'."

But Sir Fred would not be human if, after a stellar banking career, he was not hurt that people are questioning his credentials. He joined accountants Touche Ross from Glasgow University, winning his spurs as chief operating officer of the worldwide liquidation of Bank of Credit & Commerce International in 1990, aged just 32.

He became deputy chief executive of Clydesdale Bank in 1995, and chief executive a year later. In 1998 he was poached by RBS and took the top job in 2001.

Yesterday, RBS moved quickly to try to limit the damage from the initial market "read-across" of the part-nationalisation of Fortis by the Belgian, Dutch and Luxembourg governments.

That requires Fortis to sell the ABN Amro assets it bought as part of the RBS consortium last year. RBS said in a statement to the Stock Exchange that Fortis had already paid in full in cash for its ABN Amro stake, which is held in RFS Holdings, the consortium vehicle.

RBS said: "Should it sell this holding, the financial consequences would lie with Fortis."

Alex Potter, a banking analyst at broker Collins Stewart, agreed the Fortis relevance to RBS was exaggerated. He said: "I don't see how RBS can lose."

Meanwhile, some point out that even if Sir Fred does eventually depart, there will be financial consolation – his total pay was £4.2 million in 2007, made up of a basic salary of £1.29 million, a £2.86 million performance bonus, plus a £1.3 million boost to his pension pot.