RBS announced excellent results today (4/8/17) and their share price soared 4% to £2.67 in early trading. For detailed commentary see http://www.telegraph.co.uk/business/2017/08/04/rbs-posts-rare-half-year-profit-eyes-amsterdam-move-staff/ . Things are looking better. The RBS share price is 57% up from its nadir of £1.70 in Oct 2016, but 95% less than its 2007 peak of £69 (this is the figure adjusted for subsequent recapitalisations). However, this blog is about the shareholder event earlier in the week.
RBS held a shareholder event at their London HQ on 31 July, attended by nearly 200 shareholders. RBS invited 40,000 of its South East based shareholders and had 280 acceptances before they closed the list. There is clearly demand from many shareholders to attend such events, unlike the AGM at which there were less than 90 shareholders (other than current staff) present, although part of the reason may have been the Edinburgh location of the AGM. Another event will be held in Edinburgh in October and it is likely there will be two more in early 2018, before next year’s AGM.
This was the 7th RBS shareholder event, outside of AGMs. There had been no shareholder events in 2016 but these new shareholder events are now viewed by RBS as an important part of its new stakeholder engagement program. They had a lot of staff present, so it must have cost lots of money to stage.
The agenda was a 5 minute intro from Company Secretary and General Counsel Aileen Taylor, 10 minutes from NED Penny Hughes, who is Chairman (their word – I thought chair was the politically correct word) of their Sustainable Banking Committee, and 10 minutes from Les Matheson, Chief Executive of Personal and Business Banking (roughly up to £2million p.a. turnover). I found their presentations pitched at too low a level. My benchmark is the presentations made by companies at ShareSoc investor seminars and the BHP Billiton presentation to ShareSoc members in Sep 2016.
Part of the problem was the date of the event 4 days before the half year results will be announced. Was this a cock up in diary planning or a conspiracy (to avoid having to explain what is happening in detail and to refuse to answer probing questions with the excuse the listing rules prevent us so doing)? I suspect the latter but either explanation is poor.
I also expected RBS “to give our private shareholders additional access and information, as is provided to our major shareholders” (the quote is from M&S: it is their objective for their private shareholder panel). I wanted an analyst style presentation and not a fluffy, fine words and little content approach. But then I am a numbers man and I like to see the numbers and the assumptions that drive the numbers and a cohesive and integrated plan that links it all together.
So, after 25 minutes of presentations (no questions at this stage) we adjourned to the atrium for light buffet and wine or fruit juice and 8 stalls manned by various staff highlighting the different parts of the business, and plans for the future. 60 minutes was given to this task. It was fast and furious networking and I managed to give out about 10 ShareSoc brochures, so hopefully we may have recruited some new members! I also managed to have 5 minutes together with another chap talking to Les Matheson which was a treat to be able to talk to a senior executive.
Suitably refreshed and invigorated, the audience went back to the main presentation room for the questions and answers session. However, the Q&A session almost descended into farce, with shouting and heckling. Parts were amusing, there was laughter at times, and there was ridicule. Fuelling the audience with wine may not have helped either. Nevertheless, one has to admire the RBS directors and executives who are willing to be on stage and try to answer questions.
On reflection, the “shareholders” were actually made up of several different groups and they tended to think of things from a stakeholder perspective. I identified these stakeholder groups:
- Most of their questions were about the customer experience and the hostile questions were about branch closures.
- Ex employees. Within this group there were different subgroups, e.g. National and Provincial, Westminster, NatWest.
- RBS pensioners and representatives of pensioners (e.g. the London Secretary of the RBS Pensioners Association, who said lots of people talk to her about branches that have shut).
- Members of the RBoS Action Group, who split up into those who were in the latest settlement and those who were late joiners and currently excluded (I declare an interest, my wife is in this category).
- Those non-members of the RBoS Action Group, who split up into those who were told of its existence until too late and those who made a personal decision not to join the Action Group.
- Shareholders who looked at the issues from a shareholder perspective.
The first 5 groups effectively hijacked the Q&A session. They monopolised the time and set a tone, culture and style which was less than conducive to a useful shareholder meeting. I do not deny that the first 5 groups have legitimate concerns, but they should have been engaged with earlier and in different ways. It did not take a rocket scientist to realise that this mayhem would most likely happen. The AGM was also hijacked by loads of customer service complaints – so RBS knew the types of questions that might be asked. Perhaps this was why they put Les Matheson on the stage. But RBS is full of clever people. I think they could have planned the event rather better and got more useful feedback.
I would have liked to see the Finance Director and the meeting held a week later, i.e. after the results had been announced.
The danger here is that RBS will say -we had a shareholder event and all they wanted to talk about was branch closures, customer complaint issues, the RBoS Action Group and the rights issue settlement. To a large extent you get the questions you seek. It is important that RBS are not allowed to disenfranchise individual investors, who should have equal access to analyst style meetings and shareholder engagements.
Another issue is whether the attendees were representative or shareholders or whether RBS picked from a biased sample. The only people I know who received an invite held their RBS shares in paper form. I suspect that those who held their shares in nominee accounts did not get invited. Does this matter? Well Yes, it does because holding shares in nominee accounts is a relatively new approach, and it is the method which new purchasers of shares are strongly encouraged to use, by stock brokers and wrapper providers (as it is to their commercial advantage to have their customers locked into a relationship with them). Thus, short term shareholders will by and large were probably not invited. Also, a lot of employees and ex-employees of RBS and its acquired companies have had long service and have held RBS shares for a long term. Such employees have a certain loyalty to RBS (or in some cases the loyalty is more to Nat West or other acquired companies) and again influences the representativeness of the sample.
Summary and conclusions? Well done for RBS for having an event. There is real demand for shareholder and other stakeholder events. Let us hope RBS listen to this feedback and do more events, invite all their shareholders and try to segment those concerned with shareholder issues from the other stakeholders. Please make it less fluffy and more like an analyst style meeting.