(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.

Royal Bank of Scotland Group Plc’s new boss, Alison Rose, is abandoning the bank’s three-century-old name and slashing its markets business as the state-controlled lender steps away from its tumultuous past.

RBS will be renamed NatWest Group Plc later this year, adopting the brand of the sprawling English branch network it acquired in a merger that reshaped British banking two decades ago. Rose is also paring back profit targets and embarking on further cost cutting in her first set of earnings since replacing Ross McEwan.

Under McEwan, the bank went through a multi-billion-pound restructuring and returned to profit after a decade of losses. The bank is still struggling to grow, however, as mortgages and lending to small business amid the tangled Brexit process continue to deliver lackluster returns.

“If you now look at the group, 80% of our customers deal with us as NatWest,” Chairman Howard Davies said. “It really makes no sense for us to continue to be called RBS, which was a concept designed for a global group of banks which we no longer have.”

The Edinburgh-based firm, which is still recovering from one of the costliest bailouts of the financial crisis, said Friday that it will incur costs of as much as 1 billion pounds ($1.3 billion) as it cuts expenses in the face of “challenging market conditions.”

The shares slid more than 8% on concern about the weaker targets and as dividend payouts missed some analysts’ forecasts. RBS proposed a 3-pence final dividend for the year and a 5-pence special dividend, while pledging to keep its future payouts at about 40% of profit.

“Capital repatriation is particularly disappointing,” Jefferies International analysts Joseph Dickerson and Aqil Taiyeb wrote. They speculated that RBS may be hoarding cash to buy back more stock from the U.K. government after next month’s budget.

RBS softened its outlook for a key measure of profitability, targeting returns of 9% to 11% for the “medium to long term.” It had previously dropped its 12% return on tangible equity target for 2020, blaming low growth while the Brexit process is unsettled. For the fourth quarter, RBS beat consensus estimates, posting operating profit before tax of 1.55 billion pounds.

Markets Unit

Rose said the NatWest Markets restructuring will focus the unit on financial and risk management for corporate and institutional customers. This will mean reducing the size of the rates business, she said on a call.

“Our performance doesn’t yet match the potential that exists in this bank,” Rose said in a statement Friday. “We can deliver so much more.”

NatWest Markets’s risk-weighted assets will almost halve in size to about 20 billion pounds, the firm said. The unit accounts for 4,500 of the group’s 65,400 staff, according to 2018 filings. The bank said it expects to book about 600 million pounds this year for “exit, restructuring and disposal costs” at the division.

Since Rose’s appointment was announced in September, several senior managers have departed, including Chris Marks and Richard Place, who were the CEO and chief financial officer respectively of NatWest Markets. The bank said Friday that Mark Bailie, head of RBS’s digital lender, Bo, will leave the bank with immediate effect.

RBS’s stock dropped 22% last year after repeatedly warning that Brexit was causing businesses to delay their borrowing decisions. “U.K. economic growth remains subdued, compared to its historic trend, and interest rates are likely to be lower for longer,” Rose said on Friday. “Business confidence continues to be affected by the U.K.’s departure from the European Union.”

The U.K. government still owns a majority stake in RBS, and last sold shares in mid-2018, when the stock traded at about 270 pence, about 25% higher than its current level. The state has the right to offload some of its stake in so-called directed buybacks.

“We remain prepared to participate in any government sale of RBS shares,” Rose said in an interview with BBC Radio 4 on Friday. Chairman Howard Davies said the government remains committed to reducing its stake.

In 2000, the former National Westminster Bank accepted a bid from RBS worth more than $30 billion at the time. That takeover was part of a decade-long process of empire building that made RBS Europe’s biggest bank by assets, culminating in the record-breaking, ill-fated 2007 takeover of ABN Amro, and RBS’s subsequent nationalization in 2008.

RBS is only 20 years younger than the union between England and Scotland in 1707, and ironically enough owes its genesis to a previous government bailout. The failure of a trading colony at Darien, Panama, ruined Scotland’s finances; England financed a rescue in exchange for a united Parliament in London. In 1727, some of the bailout funds were used to found the lender under a royal warrant.

Davies, the chairman, was also asked by a Scottish newspaper on Friday whether the bank’s headquarters would leave Edinburgh for London. He replied that the name change will have no impact on where the bank is based, but a new Scottish referendum on independence could change that, echoing RBS’s stance during the last vote in 2014.

(Adds dividend details, RBS history, comments on Edinburgh remaining headquarters from 6th paragraph.)

To contact the reporter on this story: Stefania Spezzati in London at sspezzati@bloomberg.net

To contact the editors responsible for this story: Ambereen Choudhury at achoudhury@bloomberg.net, Keith Campbell, Marion Dakers

For more articles like this, please visit us at bloomberg.com

©2020 Bloomberg L.P.