RBS tumbles after Hester departure as 2,000 job cuts planned

ROYAL BANK of Scotland, Britain's biggest government-owned lender, fell as much as 8.2 percent after CEO Stephen Hester quit and the company started to cut 2,000 investment-banking jobs.
Posted 6/13/13

LONDON – Royal Bank of Scotland Group Plc, Britain’s biggest government-owned lender, fell as much as 8.2 percent after CEO Stephen Hester quit and the company started to cut 2,000 investment-banking jobs.

RBS will exit its equity derivatives and structured retail products divisions, Edinburgh-based RBS said in a memo to employees today. Hester, 52, said yesterday he would step down after almost five years in the post, without naming a successor.

His exit may delay the government’s plans to reduce its 81 percent stake in RBS to late 2014, according to Bank of America Corp. analyst Michael Helsby. It may be hard to find a replacement given the political interference in how the bank is run, said Crispin Odey, whose London-based Odey Asset Management LLP oversees $9.5 billion. A panel of British lawmakers is this week considering whether to push for a break-up of the lender, which received the biggest banking bailout in the world during the financial crisis.

“The real problem for the government is that they’ve made the job look so unattractive that I can’t imagine who they are going to fill it with,” said Odey, who said he sold his RBS shares because of government meddling in the bank.

The shares were down 6 percent to 306.1 pence by 11:28 a.m. in London trading, below the 407 pence a share the government sees as the break-even price on its investment.

Earlier cuts

RBS said today it will cut back more complex structured products that are capital-intensive and focus risk-management in four hubs – London; Stamford, Conn.; Singapore and Toyko – according to a statement from Peter Nielsen and Suneel Kamlani, co-CEOs of the markets business. The division is RBS’s second-biggest after consumer and commercial-banking.

After coming under pressure from government and regulators to bolster capital, the bank said in February it was considering how to shrink its investment bank further. It had announced about 3,800 job-cuts the previous year as well as plans to sell or close the unprofitable cash equities, mergers advisory and equity-capital markets divisions.

“It needs to downsize,” Deputy Prime Minister Nick Clegg said of RBS on LBC Radio today. “It can’t carry on being this huge, big hulking, what they call ‘universal bank.’ It’s got to shrink down to a size where it has got a sustainable, stand- alone future.”

Board request

RBS sped up its succession plans because of the Treasury’s desire to start reducing its stake in the lender, Chairman Philip Hampton said. Hester said yesterday he was leaving by the end of the year at the board’s request to enable a successor to be in place when the government starts selling. He told the BBC’s Today Program earlier he was a “very willing participant” in the job handover.

Hampton indicated that he might leave after a CEO has been appointed, though he has no current plans to do so, in an interview with Francine Lacqua on Bloomberg Television.

“At the moment we will want to have stability and continuity,” Hampton said. “When we’ve got a new CEO in place then other aspects of board succession will be addressed.”

Next Page
PBN Hosted

Join PBN for the best networking event and party of the winter - January 15, 2015 - the Book of Lists Party at the Providence Public Library. Reserve your spot early!
  • Best Places to Work
    Enrollment is now open for the 7th annual Best Places to Work program. Winners w ...
  • Manufacturing Awards
    Applications are now being accepted for the 2nd Annual Manufacturing Awards. Dea ...
Purchase Data
Book of Lists
Book of Lists cover
PBN's annual Book of Lists has been an essential resource for the local business community for almost 30 years. The Book of Lists features a wealth of company rankings from a variety of fields and industries, including banking, health care, real estate, law, hospitality, education, not-for-profits, technology and many more.
Data icons
Data can be purchased as single lists, in either Excel or PDF format; the entire database of the published book, in Excel format; or a printed copy of the Book of Lists.
  • Purchase an e-File of a single list
  • Purchase an e-File of the entire Book of Lists database
  • Purchase a printed copy of the Book of Lists
    Latest News