Digital bank B? underwhelms investors as RBS revamp looms

B? concerns follow calls to downsize investment bank


LONDON- Royal Bank of Scotland's new boss Alison Rose must decide the fate of two key businesses in her debut strategy revamp, investors said, with fledgling digital bank B? joining NatWest Markets at the top of the list of problem areas to tackle.

RBS veteran Rose took charge of the taxpayer-backed lender in November, becoming the first woman to lead one of Britain's major banks.

Shareholders are hopeful Rose will downsize RBS's weakened investment bank and outline more ambitious targets for B?, which launched to the public three months ago but has already run into problems.

The bank is expected to confirm this week that B? CEO Mark Bailie is quitting. B? has also had to reissue around 6,000 customer cards to comply with regulations aimed at protecting customers from fraud.

An RBS spokesman said: "B? remains a key part of the bank's innovation strategy, along with other brands we have launched such as Mettle and Tyl."

"We are focusing on the areas where we can have the biggest positive impact on our customers."

Specialist fintech investors and RBS shareholders told Reuters they had been underwhelmed by B?'s launch and said Rose needed to present clearer commercial goals for the project.

"Frankly, RBS is not even on my radar screen at the moment as it does not tend to rate highly in the global fintech universe," said Vincent Vinatier, portfolio manager, fintech and financials at AXA Framlington.

"The real key challenge absolutely has to be to keep customers with the main bank brand. So the real question is: is RBS willing or able to offer an attractive digital interface under its own brand" he added.

B? is not yet a major cost drain for RBS - costing an estimated 100 million pounds to build against operating expenses of more than 9.6 billion pounds in 2018 for the bank as a whole.

But banks are under increasing pressure to make their digital spend count, amid rising competition from other start-ups including Monzo and Starling.

When a bank launches a new digital brand this is expected to target new customers, fintech industry experts say. But B? is still largely seen as a savings tool for existing RBS customers with functionality that compares poorly against other brands, investors said.

"My understanding is that B?'s functionality is improving materially imminently, which will make the service a lot more competitive with the new entrants," said a second investor.

"These new competitors are not yet gaining a great deal of traction as main accounts for many customers – many seem to be using them for specific limited purposes and retaining current accounts with the big incumbents."

Bailie declined to reveal any commercial targets for B? when speaking to reporters in November. He said RBS wanted the brand to attract a "material" number of customers relative to its main NatWest brand's 16 million customers within five years.

Rose is also expected to outline further cost-cutting, plans to return more excess capital to shareholders and a beefed up climate policy when RBS publishes full-year results on Friday.

(Editing by Jane Merriman) ((; 020 7542 5154; Reuters Messaging:

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