Royal Bank of Scotland has announced that Stephen Hester will step down as the group’s chief executive later this year after five years in the post replacing Fred Goodwin in October 2008.
Hester, who joined from the bank after its government bailout from British Land, is expected to remain at RBS until December, with the search for his successor beginning immediately, led by Philip Hampton.
In a conference call with journalists this afternoon, Hester said: “It is the board’s decision.”
Hester added: “This is a busing job, a difficult job, in that sense I am completely comfortable with where we are coming out and I will work hard to make the handover smooth.”
Philip Hampton, chairman of RBS, said: “Working back from a likely re-privatisation in 18 months time, we need to have a new chief executive in place at least nine months ahead of that point.
“That is why the timing is now.”
Nathan Bostock, RBS’ head of restructuring and risk, who u-turned on plans to joins Lloyds Banking Group in February 2011, is thought to be among the possible successors to Hester, as is Richard Meddings, finance director of Standard Chartered.
Bostock had also been one of the contenders thought to be under consideration by Sir Win Bischoff, Chairman of Lloyds Banking Group, to replace group CEO, António Horta-Osório, when his position was in doubt following his stress-related medical leave in November 2011.
Hester’s five-year tenure has seen the bank dramatically de-leverage: by almost £1trn across the group’s aggregate balance sheet, and by just over £200bn – from £258bn at the end of 2008 to £57bn at the end of 2012 – in its non-core balance sheet.
Within real estate, RBS will have reduced its exposure to global commercial property to a rump of less than £15bn by the end of this year – crystallising a near £50bn de-leveraging programme in five years.
In a detailed analysis of RBS’s 2012 annual results in February, CoStar News examined this colossal run-down: how it was achieved, the scale of write-downs the bank had to bear, the remaining loan book’s maturity profile for the year ahead, as well as its new lending ambitions and its £12bn “slotting” bill.
RBS said the bank is now beginning to prepare for the government’s ultimate share sales, paving the way for a new leadership to usher in the next critical phase of the bank’s recovery from crisis.
In a statement, Hester said: “It has been nearly five years since I joined RBS after the bank was rescued by the Government. In that time we have reduced the bank’s balance sheet by nearly a trillion pounds, repaid hundreds of billions of taxpayer support, and removed the imminent threat that this bank’s size and complexity posed to the UK economy.
“We are now in a position where the Government can begin to prepare for privatising RBS. While leading that process would be the end of an incredible chapter for me, ideally for the company it should be led by someone at the beginning of their journey.”
Philip Hampton, chairman of RBS, said: “On behalf of the Board I would like to thank Stephen for his leadership and dedication over the past five years. In the midst of a major crisis, he accepted the challenge of stabilising the bank, turning it around, and putting us in a position where we can begin to plan for returning the organisation to the private sector. His achievements have been considerable.”
The British taxpayers’ attitude to bailed-out bankers still receiving annual bonuses running into the millions proved to be one of the biggest controversies of Hester’s tenure. He ultimately agreed to forego a £1m bonus in February 2012 after rolling broadcast news channels covered the story relentlessly.
The focus was so intense that Hester contemplated resigning during the period.