RBS shares down on political interference fears as Hester quits
- 13 June 2013
- From the section Business
RBS has seen its share price fall amid speculation of political influence in Stephen Hester's departure.
But when asked if there was pressure put on Mr Hester to leave by the prime minister or chancellor, David Cameron's official spokesman said: "I wouldn't put it in those terms at all."
RBS has also said it would cut another 2,000 jobs within 18 months, taking the number lost since 2008 to 41,000.
The cuts represent a 20% reduction in staff working in its investment arm.
RBS shares closed down 3.3% in London, having fallen 7.5% in early trading.
"The manner of Stephen Hester's departure is deeply unsatisfactory. Despite persistent speculation over whether Stephen would resign, it was not his decision to leave," said Investec's Ian Gordon.
"Officially, no front-runner to succeed him has been identified. If true, we believe that it is negligent. If untrue, then it may constitute market abuse," added Mr Gordon.
Shore Capital's Gary Greenwood said that Mr Hester's departure was a mistake, and because the bank would struggle to find a replacement, it was advising investors to sell their RBS shares.
"We believe Mr Hester has done an excellent job in guiding the company towards safer waters following its near death experience in 2008," said Mr Greenwood.
"Overall, we think this announcement increases the uncertainty around the shares and potentially delays further any return of the bank to private ownership," he added.
Back from the brink
In a memo sent to staff about his departure, Mr Hester said: "Nothing about this decision was easy, but I can see that as we head towards a potential privatisation, (his departure) now provides a window for the company to put in place a chief executive that can give fresh energy to the challenge of leading RBS through the next phase."
There has been some speculation that Mr Hester's departure may have been triggered by disagreements between him and Mr Osborne.
In a statement to the House of Commons, Economic Secretary to the Treasury, Sajid Javid said that Mr Hester should be congratulated on what he has achieved at RBS.
"When Stephen Hester took over, the bank was on the edge of collapse with a broken culture and posed a huge risk to financial stability. It had been bailed out by the British taxpayer at a cost of over £45bn."
"Steven Hester brought it back from the brink and since then he has worked hard to make RBS a safer and a stronger bank, better able to support its customers," added Mr Javid.
He also told the House of Commons that Stephen Hester had only received one bonus out of a possible five during his tenure. He added that he expected the RBS boss's leaving package to be a third of the maximum he was entitled to in the contract that was agreed under the previous Labour government.
Shadow treasury minister Chris Leslie asked about the role that George Osborne had played in Mr Hester's departure, saying: "When did the chancellor set out to the chairman and the board his desire that Stephen Hester should go?"
Mr Javid replied that the chancellor had not been directly involved, and that the decision was one made by RBS and its board.
In a statement, RBS said an "orderly succession" would allow the new chief executive to oversee the re-privatisation of the bank and lead it "in the years that follow".
It said Mr Hester "was unable to make that open-ended commitment".
Private sector return
RBS chairman Sir Philip Hampton said a new chief executive would need to be in place by early next year if the bank was to begin its return to private ownership at the end of 2014.
"The acceleration of considering succession for a chief executive role arises largely from the Treasury's determination... where it can be returned to the private sector by the end of 2014," he said.
Mr Hester led the large-scale restructuring of RBS following its near collapse in 2008 at the height of the financial crisis.