LONDON, Feb 13 (Reuters) - Britain’s banks should scale back investment banking, focus on domestic markets, hold more in deposits than they lend and pay bigger dividends, the head of major European asset manager Aberdeen Asset Management said.
Martin Gilbert, Chief Executive of the Scotland-based fund manager, told a conference in London that investors want banks to be “boring”.
“It’s absolutely vital that banks get back to being these boring models that they were in the late 90s early 2000s,” Gilbert said, highlighting Lloyds as “the UK bank that is going most towards that model.”
Gilbert’s views are about to carry additional weight as Aberdeen is set to become Europe’s biggest standalone investment manager following completion of its acquisition of Scottish Widows Investment Partnership (SWIP) from Lloyds.
The deal, announced in November, is currently awaiting approval from regulators.
Aberdeen currently holds stakes of more than 5 percent in around 25 banks, all of which are in emerging markets as the fund manager exited stakes in developed world lenders in 2006, he said.
It will create a fund management giant with around $500 billion in assets and significant stakes in UK banks such as Barclays and Royal Bank of Scotland (RBS), inherited from SWIP.
Lloyds has pledged to move towards paying a dividend which will increase over time as profitability improves and it does not operate an investment banking arm.
Gilbert said RBS would “benefit from selling off (United States business) Citizens and becoming a much more domestically oriented bank and really running off its investment bank.”
RBS is planning a partial flotation of Citizens this year and to sell the entire business by the end of 2016. Analysts value it between $9 billion and $15 billion.
He was also critical of Barclays raising bonuses in its investment bank last year when profits at the business had dropped, announced earlier this week.
“It does seem incredible to me that when profits go down from the investment bank, they put bonuses up,” he said.
He conceded, however, that the bank is in a difficult position, coming under pressure from regulators and the public to adopt a back to basics retail-focused model while running “the only world class investment bank in the UK.”
“They are in a very tricky position trying to portray themselves as boring,” he said.
Barclays has defended the bigger bonus pot, saying the bank had to recruit the best staff to compete with global rivals and continued to have “constructive” talks with investors over pay.