RBS: Stephen Hester has a tough year ahead of him Gone are WorldPay, its global payments processing operation; RBS Aviation, its aircraft leasing unit; Sempra Commodities, a commodities trading joint venture; Hoare Govett, the British corporate broker; as well as several other businesses that, for one reason or another, no longer fitted with the bank's strategy. However, even after this long catalogue of sales, there are several important pieces of work still to be done. As RBS confirmed yesterday, it will be looking to float its Citizens US retail banking business within the next two years, as well as most likely attempting to list the 316 Project Rainbow branches after Santander UK withdrew from a deal to buy the operation last year. But floating a business is a time consuming and difficult operation and running two IPOs at the same time is likely to be challenging. Meanwhile, RBS also has to consider its current equity stakes, most notably the more than 50pc of Direct Line it still owns following the insurer's London stock market flotation last year. If some of the hawks within the Bank of England had their way, RBS would be selling off far more than it has pledged, to fill what they see as a still enormous potential capital shortfall at the heart of the bank. The Bank's Financial Policy Committee is expected to give its view on the capital position of major banks at the end of next month, which is expected to result in RBS being forced to raise new capital. The bank is currently looking at issuing about £5bn of new subordinated debt in the next couple of years and could issue some of this in the form of contingent convertible bonds that would transform into ordinary shares if the bank were to get into trouble. The Citizens IPO could also give RBS a capital windfall, however, Mr Hester was at pains to say he did not think the bank would actually need the money. Next year could be the big one for RBS if Mr Hester and Sir Philip Hampton, the bank's chairman, have their way. Yesterday came the most explicit statements yet that 2014 will likely be the year when the state might finally begin to sell some of its 82pc holding in the bank. For a share sale to have any realistic prospect, however, there are some major obstacles to be cleared. For a start, RBS must be in a position to pay a dividend and that will mean removing the state's dividend access share (DAS) that effectively prevents the bank from making any payouts to shareholders. Mr Hester said the most likely way this could be achieved would be for the bank to buy out the instrument and then cancel it. Once the DAS is removed, RBS will be technically free to pay a dividend, but will still have to convince regulators that what could amount to little more than a symbolic payout is an appropriate use of capital when the bank is likely to remain loss-making. At the same time, any decision to sell will be the Government's alone to make and, while RBS's management may want the Government to begin selling down its stake, it is far from clear that George Osborne and David Cameron would be happy to sanction this, given the loss it is likely to incur. Judging from the signals coming out of Downing Street yesterday this could be the source of a brewing row between the two sides, with a Government increasingly unwilling to sell the stake, setting it against an executive team at RBS that is convinced the moment has arrived to begin setting the bank back on the path to being fully privately owned. Back in 2011, RBS executed a major strategic about turn when it decided to cut back significantly its investment banking arm and focus more on UK retail and corporate banking. The decision was made under heavy pressure from Mr Osborne, who yesterday said he welcomed the bank's decision to "accelerate" this strategy and make even deeper cuts to the capital allocated to the investment bank. Cutting more capital from the investment bank will put RBS's earnings increasingly at the mercy of the UK's economic recovery, which is looking shaky at present. Mr Hester recognises the problem and was clear yesterday that RBS's earnings depended on Britain growing faster, which if sustained could also allow interest rates to rise, which would be a major boost for the more retail-focused lender.