People Moves

Hester To Give Up The Helm Of RBS By End Of 2013 As Bank Eyes Privatisation

Tom Burroughes Group Editor London 13 June 2013

Hester To Give Up The Helm Of RBS By End Of 2013 As Bank Eyes Privatisation

Stephen Hester, chief executive of Royal Bank of Scotland, the part-state owned bank that is parent of Coutts, is stepping down later this year after a five-year stint in the role that saw him at the helm in the wake of the 2008 financial crash.

Some media reports claimed Hester was forced to step down; a statement from the bank however pointed to how the bank, which had been one of the worst-hit firms in the credit crunch, has made “huge progress” since under his watch. Hester said RBS is now in a position to move back into full private ownership.

“The Board believes that an orderly succession process will give a new CEO time to prepare the privatisation process and to lead the bank in the years that follow. Stephen was unable to make that open-ended commitment following five years in the job already,” a statement from RBS yesterday said.

RBS will search for a successor immediately; Hester will stay in post until December this year to “ensure a smooth handover, unless a successor is in post before then”, the bank said.

Hester joined the bank’s board in October 2008 – weeks after the collapse of Lehman Brothers and a period that saw a number of US and European banks bailed out with taxpayers’ money, including RBS.

He took on the CEO role in November 2008.

“Since then [November 2008] he has led the rescue of RBS, its recovery plan and one of the largest and most complex company restructurings ever seen. Nearly five years into the strategic plan, RBS has made huge progress in becoming a strong bank, with balance sheet and funding transformed and the business fundamentally re-shaped. It is now beginning to prepare for possible share sales by the UK government. Accordingly, both the board and Stephen agreed this provided a window to begin a transition of leadership,” a statement 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. All the while we supported 30 million customers every day to help them manage their finances,” Hester said.

"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. I will therefore step down at the end of this year to allow a new CEO to lead the group in this next stage,” he said.

At the point of his departure, in line with his contractual arrangements, he will receive payment in lieu of notice of £1.6 million representing 12 months pay and benefits. He will not receive a bonus for 2013, which is also in line with contract terms.

Hester’s unvested Long Term Incentive Plan awards will be cut significantly through pro rating in line with normal policy. Current expectations are that approximately 2 million shares will be available to vest after time pro rating. The awards will also be subject to published performance conditions which will be assessed at the end of the performance period in line with plan rules. At an expected value of 45 per cent the awards would be worth around £3 million at today's share price. The number of shares is capped at 65 per cent which would be just over £4 million at today’s share price.

 

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