RBS facing an uncertain future
Taxpayer-backed Royal Bank of Scotland is facing an uncertain future as it began the search for a successor to chief executive Stephen Hester and confirmed it was shedding another 2,000 investment banking jobs.
Shares were down 4% as markets digested the surprise announcement that Mr Hester was to leave before the Government's 81% holding in RBS is returned to the private sector - amid speculation about political interference in the decision.
Ministers denied direct involvement but MPs were told that Chancellor George Osborne had met the bank's chairman last week to discuss the move. There was also anxiety about whether the departure could delay privatisation plans and speculation that it would increase the likelihood of RBS being split into a good bank and a bad bank.
Mr Hester is to leave later this year and will receive 12 months' pay and benefits worth £1.6 million, as well as being in line for a long-term shares windfall of up to £4 million. He will receive no bonus for 2013.
In a thank-you memo to 100,000 staff, he stressed just how dire the group's predicament had been during the financial crisis in 2008, when he was appointed. He said: "RBS lost sight of why it was founded, and it nearly died as a result. We've got back to a place where we can once again focus on the customer above all else."
The overhaul of the bank since its bail-out has already seen thousands of jobs go. Sources at the bank have confirmed that 2,000 worldwide jobs at the bank's investment banking arm would go over the next two years. The division has already shrunk from a high of 24,100 to 11,300 last year. It was not clear how many UK staff will be affected by the latest cull but the group's Asian operations are expected to take the brunt of the cuts.
Mr Hester said that he had "some human regrets" about not completing the bank's transition back to the private sector. He made clear last night that it was the board's choice for him to make way for someone to lead the bank through the sell-off, and that he had been prepared to carry on.
Former City minister Lord Myners told BBC2's Newsnight that Mr Osborne had made Mr Hester's position "close to impossible" and that the board - dominated by UKFI, which manages the Government's shareholdings - was "doing the bidding" of the Chancellor. He said Mr Osborne had been increasingly at odds with the chief executive over the running of the bank. It is thought he has put pressure on RBS to increase the scale and pace of its investment banking restructure.
The Chancellor publicly praised Mr Hester on Wednesday night, saying he had "brought RBS back from the brink". But the timing of his departure was seen by some as curious, with the Commission on Banking Standards due to report imminently and Mr Osborne widely expected to set out his plans for the future of taxpayer-backed RBS as well as Lloyds at next week's Mansion House speech to the City.
Nic Clarke, banking analyst at Charles Stanley, said Mr Hester's departure was a "damaging development" for the bank. He added: "This announcement smashes any lingering pretence that RBS is being run on an arms length basis."