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RBS share price drops 6% on news of Hester departure RBS shares down on political interference fears as Hester quits
(about 2 hours later)
RBS has seen its share price fall by 6% amid speculation about the manner of boss Steven Hester's departure. RBS has seen its share price fall by 6% amid speculation of political influence in Stephen Hester's departure.
The bank has also announced cuts of 2,000 jobs across the UK and worldwide. 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."
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. RBS has also said it would cut another 2,000 jobs within 18 months, taking the number lost since 2008 to 41,000.
The shares fell amid analysts' fears that political interference prompted Mr Hester's departure. The cuts represent a 20% reduction in staff working in its investment arm.
"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."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."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.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."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."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 Back from the brink
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." 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."
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." There has been some speculation that Mr Hester's departure may have been triggered by disagreements between him and Mr Osborne.
"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." 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.
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. "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."
Urgency "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.
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 has been some speculation that Mr Hester's departure may have been triggered by disagreements between him and Mr Osborne, he adds.
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."
Mr Hester will receive 12 months' pay and benefits worth £1.6m and the potential for £4m in shares.
'Strange''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".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 the BBC 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 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."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.
"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."