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Stephen Hester steps down as RBS Chief Executive
Royal Bank of Scotland (RBS) Chief Executive Stephen Hester is to step down it was announced yesterday, causing much speculation over the reasons behind the decision. In recent months, Hester had spoken of his desire to see the project through to completion and so the surprise announcement begs the question of whether he was pushed.
Hester succeeded disgraced former CEO Fred Goodwin in September 2008 after the bank was forced to go cap-in-hand to the UK government to ask for a £45bn capital injection. Hester has been central to the bank’s turnaround plan, of which the ultimate aim is to return to fully private ownership and Chancellor George Osbourne praised him for the role he has played in that process: “I want to commend Stephen Hester for everything he has done to make this turnaround possible. The size and complexity of the bank has been significantly reduced, with a far greater focus on serving its UK customers. “Mr Osbourne later on went on to add: “Stephen Hester has made an important contribution to Britain’s recovery from the financial crisis.”
There is no doubt that Mr Hester inherited something of a basket case when he took the reins almost five years ago and despite continued losses, few would dispute the assertion that RBS is now in a much better position than it was. So all of this begs the question: ‘Why is Hester leaving RBS?’
Within minutes of the announcement being made, banking experts were already speculating about the reasons for the sudden announcement. Has Hester jumped or has he been pushed? His own words (“This is a board decision – it’s not mine. But I understand the rationale”) suggest that he may have been pushed, but upon further inspection, the truth seems to lie somewhere between the two.
In the weeks leading up to the announcement, Hester had been keen to stress his desire to see the job through to the end (the end being a return to profitability and privatization) and just last week he told the Financial Times that he wanted to stay for another two years because “I hate not winning, I hate it.” The board is believed to be happy with Hester’s work but to have doubts over his long-term commitment to the bank and this may be the major factor influencing the decision.
Maybe there are grounds for their concern as Hester’s recent statements are in stark contrast to the noises he was making last year following the public outcry over his bonus. Hester in fact told ITV News at the time that it had made him consider quitting his post and that it was a part of the job that he had underestimated when accepting it. Perhaps it was thinking back to this that caused Hester to tell the Financial Times yesterday “It’s been a very bruising and difficult job, so I certainly don’t have to be prised away reluctantly.” Not exactly the words of a man you would have to sack to get rid of.
The truth therefore seems to be that he had not considered leaving but was not exactly dragged away kicking and screaming. Whatever the case, attention now turns to appointing a successor. With the government eager to begin selling off its 82% stake in RBS before the 2015 General Election, time of the essence and Richard Meddings, finance director at Standard Chartered is one name being linked to the job. It’s an important decision for RBS, its board and the UK government and one they must get right as the bank really cannot afford a disaster that will undermine already fragile consumer confidence. I for one await the announcement of the next CEO with great anticipation.