City angry over Hester ousting

Tim Wallace
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CITY analysts rallied round ousted RBS chief Stephen Hester yesterday, condemning George Osborne for forcing a damaging and expensive new strategy on the bank.

Hester has led the bank’s recovery since 2008 but was pushed out this week, following months of increasing pressure from the Treasury.

He will leave in around six months when a replacement is found.

The bank’s share price plunged eight per cent when markets opened after the announcement, before recovering partly to close down 3.26 per cent.

“This smashes any lingering pretence RBS is being run on an arm’s length basis,” said Nic Clarke from Charles Stanley. “This is a damaging development. Hester is very well respected by the City and has executed the gigantic task of de-risking RBS’ balance sheet with dexterity.”

Investec’s Ian Gordon said Osborne’s meddling makes it less likely the taxpayer will get its money back.

“The UK government has repeatedly made a bad situation worse. It overpaid for its stake, it has imposed moving goalposts in terms of the regulatory framework, triggering five years of costly rolling restructuring,” Gordon said. “Inconsistency and mismanagement has hurt shareholder value. As an 81 per cent shareholder, the government reaps what it sows.”

And the treatment of Hester means it will be hard to find a successor.

“The replacement will need to be thick skinned. After Fred took the biscuit, Stephen should take the title – good luck Sir,” said Accendo Markets’ Mike van Dulken. “He’s left RBS in a far better state than he received it.”

Treasury minister Sajid Javid told MPs yesterday it is time to prepare for privatisation, and paid tribute: “Stephen Hester has made an important contribution to Britain’s recovery from the financial crisis and I am sure MPs would like to join me in congratulating him in all he has achieved.”

Chairman Sir Philip Hampton hinted he may go when the next chief settles in, possibly as soon as 2014.

“When we have a new CEO, other aspects of board succession will be addressed,” he told Bloomberg. “Chairmen normally do five, six, or seven years. That’s a normal lifespan.”

RBS has appointed headhunters MWM Consulting to find the new CEO. According to an internal list seen by Sky News, Lloyds’ deputy chair David Roberts is a favoured choice.