RBS political risk too much for investors

INVESTORS are refusing to hold shares in RBS because they see it as too politically risky, a view compounded by chief executive Stephen Hester’s decision to waive his £1m bonus due to pressure from politicians, according to a banking source.

RBS’s shares lost 3.5 per cent, or £575m, yesterday, dwarfing the £1m given up by Hester.

“The investment market is highly suspicious of exactly who is running that business and whether or not decisions are being taken on a commercial basis or for political reasons,” the source told City A.M., after having spoken to to dozens of clients who are investors in the sector.

“It’s all very well having this mob running around saying we shouldn’t ever pay a banker again. The reality is that Hester is a very valuable asset and he’s done a very good job,” said the source, adding: “If Hester were to walk out tomorrow, which I think he would have every right to do, you would see billions wiped off RBS’s share price. The whole thing is very stupid.”

Bank analysts said Hester’s move had little impact on models, but that there are political risks associated with being a shareholder in the bank, which is 83 per cent taxpayer-owned after its £45bn rescue in 2008.

Shailesh Raikundlia, banks analyst at Espírito Santo, said: “It seems to be very closely tied up with what’s happening in politics and, more importantly, in coalition politics where Vince Cable wants to stamp his authority on pay.” A Treasury spokesman said the bank is run “at arm’s length on a commercial basis”.