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By IFR Editor-at-large Keith Mullin
LONDON, June 14 (IFR) - When one door closes, another oneopens. Last Wednesday, UK Chancellor George Osborne had RBSchief executive Stephen Hester fired; a day later an ad appearedin the Financial Times job section that has Hester's name allover it. Maybe there is justice in the world after all.
So what will he have to exhibit to land this plum job? Well,"exceptional financial acumen and strategic vision, andextensive financial services experience. A proven changemanager, with a high level of intellect".
Big ticks all along there, I'd say.
"Personal credibility, gravitas and authority to negotiateon highly complex and contentious issues with chairmen/CEOs ofinvestee banks, the investor community, and Cabinet-levelministers and senior civil servants."
Yep. All good there.
"Politically astute. A confident, articulate and measuredleader, with first-rate interpersonal skills together with adiplomatic, collegiate and persuasive style."
Got that covered, too. Next?
"Able to demonstrate strong influencing, negotiating andinterpersonal skills, and provide strong leadership andmanagement. A commitment to valuing equality and diversity inthe workplace."
Tick. Tick. Tick.
"Substantial experience of operating in or with Whitehall,and with Ministers, would be a significant advantage."
Got that in spades.
GOOD ENOUGH FOR GOVERNMENT WORK
So what is this fabulous job? Well, it's none other than thead for the vacant chief executive slot at wait for it UKFinancial Investments Ltd, the agency tasked with looking afterthe government's shareholdings in RBS and Lloyds. Think aboutit: Hester would be perfect.
He knows RBS inside-out for a start; and over the past fiveyears he has come to know the government and civil service backchannels like the proverbial back of his hand. I can't think ofanyone better qualified. I say: go for it, Stephen, Who knows,maybe you'll relish the poacher-turned-gamekeeper career shift.And once the bank is privatised, you can take the credit youdeserve.
As for his unceremonious removal from office, it was hardlya secret that the board had begun to look for the next CEO, butthe sloppy and amateurish manner in which Hester's departure washandled cost UK taxpayers dear as the shares tumbled at themarket open on Thursday, down almost 8.5% at one point asinvestors made their feelings clear at the bizarre turn ofevents. RBS bonds and CDS spreads also got whacked.
Hester was unable to hide his dismay at the way he wasturfed out before he was ready to go. But in dispensing with hisservices prematurely without naming the person who is going tosee the bank to privatisation and beyond has just created anoverhang of uncertainty.
It's a dreadful botch. RBS chairman and chief governmentstooge Philip Hampton, and George Osborne both acknowledgedHester's contribution; a blasé Hampton telling us Hester's wasone of the most demanding business jobs in the world.
But none of their emotionless, tick-box acknowledgementschanged the reality, which was that Hester wanted to stay andcomplete the task he started in 2008 to get the bank on the roadto privatisation. If Hester's was among the most demandingbusiness jobs in the world, depriving him of the chance to stickaround until re-privatisation in 2014 just seems, well, almostmean-spirited.
The man spent five years attempting what many considered animpossible task, has worked tirelessly to fix a broken bank amidsmall-minded and relentless digs from smart-ass politicians andan unacceptable level of baiting around his comp, to the extentthat he had no option but to forgo bonuses that were due to him.
But despite all the flak and unpleasantness, Hester achieveda considerable amount: cutting close to a trillion pounds offthe bloated balance sheet, reducing the loan-to-deposit ratiofrom 154% to 99% by the first quarter of 2013, dramaticallyreducing reliance on short-term wholesale funding from £297bn tojust £43bn (equivalent to 5% of the funded balance sheet nowversus 24% at the worst point) and halving leverage to 15 times.That's some feat.
WHO NEXT AT RBS?
Nathan Bostock, RBS's finance director, is the front-runnerto replace Hester. Bruce Van Saun, who held that position untilhe moved a few weeks ago to head Citizens Financial to preparethe group's US unit for a partial IPO in 2015, is also mentionedin dispatches.
The list of credible external alternatives includes RichardMeddings, finance director of Standard Chartered; David Roberts,deputy chairman of Lloyds; Barclays vice-chairman Naguib Kheraj;National Australia Bank CEO Cameron Clyne; Gary Hoffman formerCEO of Northern Rock and now with NBNK Investments; oh and BillWinters of course (although Bill must be getting mightily tiredof being tipped to have his hat in the ring for pretty muchevery senior banking job that comes up).
Even amid the furore created by the news of Hester'sdeparture, the pruning continues. The bank is losing another2,000 jobs in the markets division, exiting equity derivativesand retail structured products, and running down peripheraleurozone government bond market-making. The division now has apretty tight orientation around FX and rates, DCM, credit andABS, with corporate clients at the centre of the proposition.
I do wonder about the future of the division, though.Through the restructuring, the proportion of group assetsaccounted for by markets has been slashed from 56% to 22% as thegroup exited products and sold businesses, Assets have been cutby 67% to £288bn, not far off the £250bn target. There's been asimilar reduction in RWAs to £89bn, close to the £80bn target.Divisional costs have been halved. Retail and commercial bankingassets, by contrast, had risen to 65% of the group total at theend of last year from 44% in 2008. That's a bit of a clue.
Has the markets division been prepped for sale? Peoplediscount a break-up of the group but I'm not so sure. But that'ssomething for the new CEO to figure out.
