Aberdeen CEO wants UK banks to become "boring"

By Chris Vellacott

LONDON, Feb 13 (Reuters) - Britain's banks should scale backinvestment banking, focus on domestic markets, hold more indeposits than they lend and pay bigger dividends, the head ofmajor European asset manager Aberdeen Asset Management said.

Martin Gilbert, Chief Executive of the Scotland-based fundmanager, told a conference in London that investors want banksto be "boring".

"It's absolutely vital that banks get back to being theseboring models that they were in the late 90s early 2000s,"Gilbert said, highlighting Lloyds as "the UK bank thatis going most towards that model."

Gilbert's views are about to carry additional weight asAberdeen is set to become Europe's biggest standalone investmentmanager following completion of its acquisition of ScottishWidows Investment Partnership (SWIP) from Lloyds.

The deal, announced in November, is currently awaitingapproval from regulators.

Aberdeen currently holds stakes of more than 5 percent inaround 25 banks, all of which are in emerging markets as thefund manager exited stakes in developed world lenders in 2006,he said.

It will create a fund management giant with around $500billion in assets and significant stakes in UK banks such asBarclays and Royal Bank of Scotland (RBS),inherited from SWIP.

Lloyds has pledged to move towards paying a dividend whichwill increase over time as profitability improves and it doesnot operate an investment banking arm.

Gilbert said RBS would "benefit from selling off (UnitedStates business) Citizens and becoming a much more domesticallyoriented bank and really running off its investment bank."

RBS is planning a partial flotation of Citizens this yearand to sell the entire business by the end of 2016. Analystsvalue it between $9 billion and $15 billion.

He was also critical of Barclays raising bonuses in itsinvestment bank last year when profits at the business haddropped, announced earlier this week.

"It does seem incredible to me that when profits go downfrom the investment bank, they put bonuses up," he said.

He conceded, however, that the bank is in a difficultposition, coming under pressure from regulators and the publicto 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 portraythemselves as boring," he said.

Barclays has defended the bigger bonus pot, saying the bankhad to recruit the best staff to compete with global rivals andcontinued to have "constructive" talks with investors over pay.