Royal Bank drops its CEO

LONDON — Fresh questions are being raised about the future privatization of the partly nationalized Royal Bank of Scotland after its chief executive, Stephen Hester, said he is leaving the bank.

The surprise departure could add uncertainty for the lender, which got a multibillion dollar bailout during the financial crisis. The British government owns an 81 percent stake, though RBS had hoped to start reducing the taxpayers’ holding in the second half of next year.

“This is a bruising, difficult job,” said Hester, who will depart by the end of the year with a salary and pension package worth up to $8.8 million. “I have regrets about not completing the job.”


“I was prepared to carry on through the start of privatization,” he said. “This was the board’s decision, not mine, but I am comfortable with their decision.”

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Chairman Philip Hampton said the board decided it needed a new chief executive to carry out the government’s pending share sale without questions being raised about how long he would stay in the job.

He said RBS had been in contact with the British government over the management change. The decision to replace Hester was made Wednesday.

The chairman declined to comment on whether the bank already has candidates for the top job, adding that it would offer a competitive package. Hester was forced to turn down several bonuses after public outcry over the multimillion-dollar payouts.

The British lender, parent company of Providence-based Citizens Financial Group, has undergone a huge overhaul since it led a consortium of banks in a mistimed acquisition of the Dutch financial giant ABN Amro in 2007.


Since the beginning of the financial crisis, Hester has overseen a major restructuring of RBS, including shedding hundreds of billions of dollars of assets and shrinking its investment banking operations.

The bank also agreed to a $612 million settlement with US and British officials in a rate-rigging scandal.

Analysts said the starting gun on the company’s privatization has now been fired. Many investors would probably have raised questions about the executive team during the road show to sell shares, and changing the CEO now may help to assuage their fears.

“There are no more surprises left on the bank’s balance sheet,” said Chirantan Barua, a banking analyst. “Headhunters will find it much easier to find a candidate than when Stephen Hester was appointed.”

The stock price is 35 percent below the government’s break-even point at which taxpayers would not lose money through a share sale.