Monday interview: Ross McEwan, Royal Bank of Scotland CEO

Very few chief executives of big banks know how to brand a cow, what to do when calving season starts, or how to tell Angus from Shorthorn cattle. Except, that is, Ross McEwan.

The Royal Bank of Scotland boss owns a cattle farm with his wife in their native New Zealand. He holidays there twice a year to get away from the strains of his London-based day job and says they bought it as an alternative to spending a similar amount on a "tiny" city flat.

An added advantage of his agricultural escape near Auckland, he says, is that it gives him a glimpse of the choices that small business owners face, such as whether to hire a second farmhand.

That sort of recruitment dilemma is a far cry from the management challenge he himself took on at the part-nationalised UK bank, which has been shedding staff in industrial quantities.

Mr McEwan took over as CEO from Stephen Hester in 2013 only a year after the latter lured him from the Commonwealth Bank of Australia to run RBS's retail arm. Since then he has taken a hatchet to what was once the world's biggest bank by assets.

"We're retreating across many parts that just don't give us a good return and are not connected into our core business, which is the UK," the 57-year-old says. "This is now a core UK bank."

RBS is pulling out of many activities in Asia, the Middle East, continental Europe and the US. It has drastically cut back its once mighty investment bank and is selling the international part of its Coutts private bank.

The bank is shrinking as fast as it once expanded under Fred Goodwin before the financial crisis struck and it was bailed out at the cost of £45bn to the taxpayer in 2008. Since the crisis its balance sheet has more than halved from £2.4tn and its staff numbers are set to drop almost two-thirds from their peak of 225,000. Its non-UK operations are set to fall from 40 per cent of the group to 20-25 per cent.

A tall man - he met his wife playing basketball at university and recalls being picked for school rugby because he could win the ball in the line-out - Mr McEwan exudes a bonhomie that seems to help people warm to him.

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Mr McEwan feels his retrenchment strategy is in tune with the times. "The regulators quite rightly want safe banking in their territories," he says. "I think what you are seeing is that as companies become more global, banks actually are becoming more regional."

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He says fragmented regulation and stiffer national capital requirements are making life tougher for banks that still have truly global ambitions, such as JPMorgan Chase and HSBC. "I think there will be very few what I would call international banks." He adds: "You've got to have the people on the ground and to work with all those regulatory frameworks and have the capital trapped in territories and not be able to move it around like you used to."

Mr McEwan admits to being more comfortable with people than with numbers and only passed his university accountancy exam at the third attempt. Yet he is sure his strategy will show signs of bearing fruit on February 26, when RBS is expected to report its first annual pre-tax profit since the crisis.

He remembers the scepticism among investors about his plans to cut £1bn of its £18bn costs in the first year of a restructuring plan he unveiled almost 12 months ago. "Most of the market said that is far too aggressive, you'll never get it out. Wait until the results and you'll see we've got £1bn out," he says.

Perhaps the biggest challenge for Mr McEwan is to rebuild the bank's reputation, which has been tarnished by a string of scandals. These include fines for Libor interest rate rigging and foreign exchange manipulation, as well as accusations that its restructuring team - dubbed the Global Restructuring Group - was trying to profit from the struggling small business clients it was supposed to help.

"They all add up," he says, listing several of the setbacks. "Each of those is taking a little bit more out of the reservoir of trust for RBS. It is about how we start rebuilding that reservoir of trust and getting it right."

Mr McEwan's plan, which he repeats mantra-like, is based on "having customers at the centre of everything we do". One of his daughters is in the process of setting up a business and he says this has shown him what banks are like to deal with from the other side.

He describes the allegations about the GRG restructuring team as "probably the only area that I've got quite emotional about in my time here, in the sense that it hit to the core of our business". The unit is still being investigated by the Financial Conduct Authority. Mr McEwan defends its record, arguing it was impossible to cope with an eightfold rise in the number of struggling businesses moved to GRG after the crisis.

"There is no way any organisation can get all of those cases right," he says. "That is where some of the accusations come from . . . we will have applied a methodology that I suspect was in some cases right and in some cases won't have been. But that is sheer volume."

The GRG unit has recently been disbanded, many of its top managers have left and it is being folded into other parts of the bank. Mr McEwan says RBS has clarified its charges and the process for transferring companies to its restructuring team. "Our fee structure was a mystery to some," he admits.

Another embarrassing episode that led to RBS being fined by regulators was the meltdown of its IT systems in 2012 that left millions of customers without access to their money for several days.

Mr McEwan says this has been addressed, partly by replacing the "core processing engine" of the bank at a cost of £750m.

"I know now that what we have is a much more resilient IT platform that we can be comfortable with and that will hold up," he says, adding: "If it does fall over it will be for much shorter periods of time." However, he concedes there is still a big job to reduce the number of systems and applications at RBS from more than 3,000.

A bugbear for Mr McEwan is the temporary "teaser" rates many banks offer on credit cards and savings products - a practice that does not exist in Australia or New Zealand, he says, and one he has curtailed at RBS.

"You would have thought you would get a better rate for staying, rather than a worse rate for staying and a better rate for going," he says, adding that since RBS ditched teaser rates its credit card business has suffered but its savings book has grown.

The RBS boss, who started his career as a human resources manager at Unilever in New Zealand, still has several hurdles to clear. One is the need to settle allegations in the US that the bank mis-sold mortgage-backed securities before the crisis, which analysts expect to cost £5bn. The bank also aims to cut its stake in Citizens, the US retail lender it floated last year, below 30 per cent by the end of the year - a key step to lift RBS's capital ratio above its target of 12 per cent.

Faced with all this, Mr McEwan and most of his top executives have agreed not to take a bonus for three years. But ultimately, the New Zealander knows he will be judged on only one thing: whether the bank's share price - which closed at 384p on Friday - hits the 500p level at which the government can start selling its 81 per cent stake at a profit.

Second opinion: The former fix-it man

Jim O'Neil used to run UK Financial Investments, the body that manages the government's stake in RBS. Now at Bank of America Merrill Lynch, he says Ross McEwan "quickly earned the respect" of those who did not know him as RBS CEO.

Mr O'Neill describes him as "quietly firm and decisive". He adds: "The shares have performed positively under his leadership. The ultimate test will be whether he can drive results to a level where the taxpayer as shareholder can start to get some of its money back."

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