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Royal Bank of Scotland to cut 2,000 more jobs RBS share price drops 6% on news of Hester departure
(about 3 hours later)
RBS is cutting 2,000 jobs and beginning a search for a new chief executive - moves that have sparked a 6% fall in its share price. RBS has seen its share price fall by 6% amid speculation about the manner of boss Steven Hester's departure.
The job losses will come in the next 18 months and represent a 20% cut in staff working in its investment arm. The cuts are expected to be spread worldwide, with some going in the UK. The bank has also announced cuts of 2,000 jobs across the UK and worldwide.
The latest announcement means 41,000 jobs have been cut since 2008. The job losses will come in the next 18 months and represent a 20% cut in staff working in its investment arm. They will take the total number of jobs lost since 2008 to 41,000.
The news came after it emerged that its boss, Stephen Hester, is to quit. The shares fell amid analysts' fears that political interference prompted Mr Hester's departure.
Mr Hester, who spent five years in the job, said he would have liked to stay on as boss until the bank - 81% publicly owned - was reprivatised. "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.
Ex-City minister Lord Myners has said the decision he should quit was taken at Chancellor George Osborne's bidding. "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.
BBC economics correspondent Hugh Pym says the search starts today for Mr Hester's successor in a position with "more than its share of public scrutiny" - given that a large stake of the bank is owned by taxpayers following a government bailout. 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.
Successor
Hargreaves Lansdown's head of UK equities, Richard Hunter said: "The market can only hope that a replacement has already been identified in order to minimise the uncertainty which has now been added to the company's turnaround plans."
Michael Hewson, senior market analyst at CMC Markets, was another who expressed concern: "The general consensus is that Mr Hester has done a great job under very trying circumstances having been used as a political punch bag for much of his tenure."
"It will certainly be difficult to find a capable replacement prepared to be subject to the public scrutiny such a high-profile role currently entails."
Mr Hester, who spent five years in the job, said he would have liked to stay on as boss until the bank - 81% publicly owned - was re-privatised.
Urgency
BBC economics correspondent Hugh Pym says the search starts today for Mr Hester's successor in a position with "more than its share of public scrutiny", given that a large stake of the bank is owned by taxpayers following the government bailout.
There was a strong hint from RBS chairman Sir Philip Hampton that the government was keen to start the sale process late next year, but the Treasury has denied there is any firm timetable, our correspondent says.There was a strong hint from RBS chairman Sir Philip Hampton that the government was keen to start the sale process late next year, but the Treasury has denied there is any firm timetable, our correspondent says.
'Osborne's bidding'
There has been some speculation that Mr Hester's departure may have been triggered by disagreements between him and Mr Osborne, he adds.There has been some speculation that Mr Hester's departure may have been triggered by disagreements between him and Mr Osborne, he adds.
Speaking on the BBC's Newsnight programme, Lord Myners said Mr Hester had "made it very clear he didn't really want to go now. He's going because the board has said he should go and I think they are doing the bidding of George Osborne. That view was put forward by former City minister, Lord Myners, who told the BBC Mr Hester had "made it very clear he didn't really want to go now. He's going because the board has said he should go and I think they are doing the bidding of George Osborne.
"George Osborne has been increasingly at odds with Stephen Hester over the management of this bank.""George Osborne has been increasingly at odds with Stephen Hester over the management of this bank."
Mr Hester will receive 12 months' pay and benefits worth £1.6m and the potential for £4m in shares.Mr Hester will receive 12 months' pay and benefits worth £1.6m and the potential for £4m in shares.
In a statement, RBS said an "orderly succession" would allow the new CEO to oversee the re-privatisation of the bank and lead it "in the years that follow". 'Strange'
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".It said Mr Hester "was unable to make that open-ended commitment".
Lord McFall, a former chairman of the Treasury select committee, told Radio 4's the World Tonight that the announcement from RBS was "really strange". Lord McFall, a former chairman of the Treasury select committee, told the BBC that the announcement from RBS was "really strange".
"I would have thought if they want to privatise - and it's obvious the prime minister and the chancellor are pushing this like mad... then the person who's been there since the beginning, who picked it up when the company was a basket case and has taken it on, would be the person best fit to see to that.""I would have thought if they want to privatise - and it's obvious the prime minister and the chancellor are pushing this like mad... then the person who's been there since the beginning, who picked it up when the company was a basket case and has taken it on, would be the person best fit to see to that."
Speaking to reporters on a conference call, chairman Sir Philip Hampton said the timetable, pushed by the Treasury, for the bank's return to the private sector had forced the transition.Speaking to reporters on a conference call, chairman Sir Philip Hampton said the timetable, pushed by the Treasury, for the bank's return to the private sector had forced the transition.
'Bruising and difficult''Bruising and difficult'
He 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.He 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 CEO role arises largely from the Treasury's determination... where it can be returned to the private sector by the end of 2014," he said. "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.Mr Hester led the large-scale restructuring of RBS following its near collapse in 2008 at the height of the financial crisis.
In a video statement released by RBS, he expressed mixed feelings about his departure.In a video statement released by RBS, he expressed mixed feelings about his departure.
"Of course I'd like to have stayed as I feel I've been in the trenches with all of my people helping RBS to recover, and privatisation would have been a fitting end to those endeavours," he said."Of course I'd like to have stayed as I feel I've been in the trenches with all of my people helping RBS to recover, and privatisation would have been a fitting end to those endeavours," he said.
"But it has been a very bruising and difficult job so I certainly don't have to be prised away reluctantly.""But it has been a very bruising and difficult job so I certainly don't have to be prised away reluctantly."