A change of Chief Executive for RBS

 

          I support the Board and Mr Hester’s decision to seek a new CEO now who can see the bank through privatisation. The Labour party is making heavy weather of this development, ignoring the fact that Mr Hester is not seeking to keep the job, and failing to understand the need for continuity of management from a new CEO over what might be several years of privatisation and its aftermath.

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28 Comments

  1. Posted June 14, 2013 at 7:06 am | Permalink

    I have little sympathy for Mr Hester, the variance between what he publicly claimed over lending to MPs and the public and the huge damage the bank actually did, to perfectly solid and sound customers was huge. To run a Natwest “Helpful Banking” advertising campaign at the same time takes some Chutzpah and just add insult to injury and pointless economic damage. Countless projects delayed, jobs and growth lost, extra cost incurred, assets wasted and all for no benefit to anyone.

    He either he had no idea about what was (and still is) going on at the coal face or he was simply not being honest.

    Even now the bank is refusing lending to existing customers with good security in order to “encourage” them to pay back old loans agreed (and fees paid for) on lower margins than currently. The government though RBS has been destroying jobs, the economy and growth by restricting what would have been perfectly solid & profitable lending by the government owned and controlled bank.

    Had the government sorted RBS quickly in 2015, the economy would be in a far, far better position now.

    • Posted June 14, 2013 at 7:31 am | Permalink

      I meant 2010 (not 2015).

  2. Posted June 14, 2013 at 7:14 am | Permalink

    You have been saying for some time that RBS ought to be privatised and most people, on this blog anyway, seem to agree with you.
    So this cannot be anything but a good thing.

    • Posted June 14, 2013 at 2:38 pm | Permalink

      Let’s see how it’s privatised first…..

      zorro

      • Posted June 16, 2013 at 12:02 pm | Permalink

        Zoro

        “let’s see how it’s privatised first”

        Agreed, it could be a real dogs dinner, or even a giveaway.

        We (the taxpayer) could even still be left with the bad bits (all the debts) as part of the solution.

  3. Posted June 14, 2013 at 7:35 am | Permalink

    Presumably the stockmarket is making heavy weather of it too with £1billion reported as being wiped off the bank’s value yesterday.

  4. Posted June 14, 2013 at 7:36 am | Permalink

    Labour are making heavy weather of this because the Government is too, what ever the reasons for Mr Osborne not being in the chamber (never mind not making the statement) why was it so impossible to inform the house of his diary? Sorry but the government has reaped what is sowed.

  5. Posted June 14, 2013 at 7:55 am | Permalink

    Something went wrong. Osborne didnt even have time to have a successor secured.

    I would guess that Hestor resigned because the Government demanded Hestor sell RBS before the election and Hestor felt it would not work. I also think that something was demanded of the retail / investment bank relationship.

    I’m due to start a contract at RBS next week in the investment bank so will be interesting.

  6. Posted June 14, 2013 at 8:20 am | Permalink

    ” … failing to understand the need for continuity of management …”, come off it JR. How come they need a head-hunter to find a new CEO. The non-execs are Treasury place-men and UKFI is now, proven, waste of space and money.

    Several years of privatisation with 9 billion out of 11 billion shares (after 3 splits), overhanging the market. £5 shares now at £3.15 and a long way from those crazy bankster days of near £7 a share.

    Nationalise it, and send the shares to income tax payers. It doesn’t matter if UKFI holds the shares or tax slaves do, the national deficit and the debt will be the same. Think of it as a bit of fiscal stimulus (in the form of a tax rebate)

    • Posted June 14, 2013 at 8:36 am | Permalink

      Sorry £70 a share at the current split equivalent, not £7.

    • Posted June 14, 2013 at 12:45 pm | Permalink

      “Nationalise it, and send the shares to income tax payers. “

      There could be a rush to sell without some kind of embargo.

      How would the allocation work?
      There are many kinds of tax payers, do you really mean to restrict it to just income tax payers? If so, which tax years would qualify?

      Sounds like a bad idea to me, even on the basis of the admin costs alone.

      • Posted June 14, 2013 at 4:13 pm | Permalink

        May need to slice the issue across three or four years to limit the impact and the rules of CGT. Pro-rata on income tax paid since the first bail-out, December 2007. Income tax is the largest and broadest direct tax paid by the middle classes; the spenders. HMRC could handle it within the current Tax Credit operating system.

  7. Posted June 14, 2013 at 8:40 am | Permalink

    I wouldn’t mind a 1.7 mill pay off . It’s a hard life for Hester. Do you fancy the job John?

  8. Posted June 14, 2013 at 10:27 am | Permalink

    Why we taxpayers ever paid anything for a bankrupt bank, let alone the price we paid, is a historical issue. It is a sunk cost.
    Hanging on with public ownership in the hope that the bank will one day get back to that value may be a very expensive mistake. The Government should move ahead as quickly as possible with returning the bank to the private sector before public ownership drives out the remaining talent and destroys the remaining value.
    The poisonous political context made Mr Hester’s job almost impossible and he did very well to keep a positive approach as long as he did. Sacking him without a successor in line doesn’t strike me as good management and I expect we will find out that there are serious splits in the Board over the future direction of the bank, in particular the issue of the “good bank – bad bank” split being proposed now, some years after it might have made some sense.

    • Posted June 14, 2013 at 1:04 pm | Permalink

      @John Eustace

      It’s a question that traders often face, when to take your losses.
      The general rule of thumb I believe is “your first loss is your best loss”.

      Unfortunately our current crop of politicians have very little understanding of commerce, as demonstrated by Gordon Brown’s sale of the gold reserves.

      Let’s just hope that we get some better qualified MPs at the next election, preferably some with commercial experience (like metal futures traders for example).

  9. Posted June 14, 2013 at 10:38 am | Permalink

    I’m surprised to see JR endorsing a process leading to a big bang privatisation of RBS, since in the past he has advocate its breakup. Rather than a process designed to get all components of RBS in a fit state to privatise simultaneously, would it not be better to slough off those original components which were never associated with corporate or investment banksterism; this could be done on a piecemeal basis,with the government holding a golden share in each to prevent later consolidation, and could assist a recovery by facilitating lending policies only constrained by good sense.

  10. Posted June 14, 2013 at 12:36 pm | Permalink

    JR’s original idea to break up the bank was a good one! I suppose it would be too messy from a political perspective.

  11. Posted June 14, 2013 at 1:04 pm | Permalink

    As has been said many times before, ‘Labour’ , do not know how the market works. And never will they grasp it.
    They have not a clue on how business functions except that it is a good place to start taxing.
    Any sane patriot within the UK should look at another Labour Government with immense foreboding and vote accordingly.

    To keep Britain, British and prosperous, keep Labour out. Please!

  12. Posted June 14, 2013 at 1:49 pm | Permalink

    John, on a totally unrelated note, surely it can’t be right for the West to arm the Iranian Presidential Guard, in their role as ‘Syrian Rebels’/the FSA? Have we learnt nothing from Bin Laden?

    • Posted June 14, 2013 at 2:42 pm | Permalink

      Eh?…….Iranian Presidential Guard in their role as ‘Syrian Rebels/FSA’…..Where is your evidence for this? The Iranians are backing the Syrian Government…..

      zorro

  13. Posted June 14, 2013 at 1:57 pm | Permalink

    As I understand it, Hester was recruited to save this bank from the basket case previous directors had turned it into. It is reported that he wanted to stay and finish the job which he says is two thirds completed. The figures seem to support the good work he has achieved. I have read and heard that it was a board decision to let Hester go but this seems thin and there has been little confirmation in the press.
    The market wiped value from the share price, the government pleads that the global indices were down to match so nothing really to do with market disappointment. I believe this is a dash for cash and now we shall see a right old tea party with the sell off.

  14. Posted June 14, 2013 at 2:01 pm | Permalink

    I am far more concerned by Osborne’s attempt to privatise the state owned banks by fueling a house price boom to make their mark-to-market mortgage books look healthier, and then leave the next government with the problem of trying to promote an even more ridiculous house price boom, or bail out the banks (and those given state guarantees on their “equity”) for even more than the £1 trillion+ of financial interventions already on the national books.

    Osborne may not have appreciated the hospital pass on banking he got from the previous government, but that is not a good reason to try to make an even more dangerous one to the next government.

    The banks need to be broken up if they are to compete effectively, and not be too big to fail. The same applies to the Big 6 energy companies: having read OFGEM’s ideas about trying to forcibly create a forward market to allow new entrants to access it, it is plain they haven’t a clue that the rigged markets the Parliament is authorising will completely swamp this fig leaf (which seems to be motivated by the desire to deem a “free market” price that can be used to benchmark the CFDs the Bill seeks to put in place).

    http://www.ofgem.gov.uk/Markets/RetMkts/rmr/Documents1/Liquidity%20draft%20IA%20120613.pdf

  15. Posted June 14, 2013 at 2:21 pm | Permalink

    Given that Northern Rock was sold at a loss it’s unlikely that the Government will be able to recover the cost of bailing out RBS from the sale of RBS.

    • Posted June 15, 2013 at 10:03 am | Permalink

      In Sep. 2008, Warren Buffet loaned Goldman Sachs $5 billion at an interest rate of 10 percent p.a., and the money was repaid in 2011.

      As part of the deal he received warrants giving him the right to buy appx 43.5m shares at $115 per share within the following 5 years. Based on the current price that deal is showing a 40% profit.

      Maybe George Osborne should ask Mr Buffet for a some advice.

  16. Posted June 14, 2013 at 4:16 pm | Permalink

    My memory is that Hester originally said he DID want to see the bank through to privatisation (and having done that, why would he not want to carry on?) and how this all helps the goal of continuity you mention (a good goal in itself) rather escapes me. And please, less of the ‘supporting-the-Board’ guff–they were obviously and explicitly leant on by the Treasury. From where I sit, this is just another very strange decision from this very strange Government. Mind you I am used to thinking that everything I read these days on banking is very strange, Item: the Business Leader in the Torygraph on Tuesday referring to, the Leader writer reckoned, the banks having rediscovered Credit Analysis and Business Plans (was this a joke??) in the making of loans instead, he reckoned, of simply secured lending against and apparently only against Fixed Assets. Wonderful!

    Repl;y Of course the main shareholder had to be content with the actions of the Board, as it clearly was from the Statement in the Commons.

    • Posted June 15, 2013 at 2:08 pm | Permalink

      reply to reply, and vice-versa, as implied by the post

  17. Posted June 15, 2013 at 12:58 am | Permalink

    Let us consider the privatisation of RBS. To what extent does is still possess undeclared toxic assets? What are its likely liabilities from the LIBOR related suits now being prepared in the American courts (and let us not forget that our very own Chancellor played up the extent of the LIBOR fiddling for his own political purposes)?
    You would expect a corporate buyer of RBS shares to be allowed to do due diligence prior to making an offer. One suspects that the general public will not be afforded the same opportunity.

  18. Posted June 15, 2013 at 1:43 pm | Permalink

    This has all the makings of another British Steel. A compendium of formerly profitable companies, it should really have died in 2008. Kept on life support to privatise it. It will shrink and shrink, only for it to eventually “merge” with a larger organisation in a few years time, its share price having gone nowhere. Customers treated as fools, shareholders treated as ATMs. AVOID.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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