* Hester says would have liked to stay for privatization
* RBS says Hester could not make "open-ended" commitment
* Hester says his exit was a "board decision"
* Hester to stay on until successor is in place
* Hampton met with Finance Minister Osborne last week
By Matt Scuffham and Steve Slater
LONDON, June 12 Royal Bank of Scotland Group Plc
boss Stephen Hester will step down later this year,
after the bank's board decided it wanted new leadership to
oversee the sale of Britain's majority stake in the bank, which
could take years.
Hester said on Wednesday he would have liked to carry on at
the helm for the start of the sale of the government's 81
percent stake, which could happen before the next election in
However, the bank said the 52-year-old had been unable to
make an open-ended commitment to remain as chief executive,
having held the role for five years, and that the board believed
a change at the top now would give the new CEO time to prepare
for the government sale and lead it in the years following.
Political and industry sources told Reuters that RBS's
chairman, Philip Hampton, initiated talks with Britain's finance
minister, George Osborne, last week to discuss possible
leadership changes at the bank.
Hester admitted that the decision to leave had not been his
and said he had been willing to stay on to oversee the start of
the bank's return to private ownership.
"It is a board decision, not mine, but I am comfortable with
the rationale. I was prepared to carry on through
privatisation," he told reporters on a conference call.
Britain pumped 45.8 billion pounds ($71.8 billion) into
Royal Bank of Scotland to keep it afloat during the 2008
Osborne is expected to say next week that the time is right
for the government to start offloading its stakes in the
country's state-backed banks, with shares in rival Lloyds
expected to be sold off first. Hampton said the bank
would be ready to start the return to private ownership at the
end of 2014.
Hester has been praised by the government and investors for
restructuring RBS by slashing risky assets and costs, in a drive
he dubbed the "biggest turnaround in corporate history". The
bank has shrunk its investment bank and will cut a further 2,000
jobs on Thursday, sources familiar with the matter said.
RBS's underlying profit nearly doubled to 3.5 billion pounds
last year, the highest since its bailout, although a 4.6
billion-pound charge for losses on the value of its own debt
drove it to a pretax loss of 5.2 billion pounds.
One of RBS's 20 biggest shareholders said Hester would be
missed but his departure now was better than coming halfway
through the sale of the government's stake.
"If you're going to go, you either wait until afterwards or
you do it now. He's a well-respected manager of RBS and he's
stood up well for shareholder interests, so he'll be missed,"
the investor told Reuters.
The list of potential successors is likely to be short given
the task of dealing with regulators and politicians. Richard
Meddings, finance director at Standard Chartered Plc,
has been tipped as a potential successor, along with the
ex-co-head of JP Morgan's investment bank, Bill Winters, and
former Barclays Plc finance director Naguib Kheraj.
Hester will continue to lead the business until December,
unless a successor is in post before then. He has been CEO since
November 2008 and there has been frequent speculation this year
that he could leave at the end of his five-year plan.
"Of course I'd like to have stayed as I feel I've been in
the trenches with all of my people helping RBS to recover and
privatisation would have been a fitting end to those
endeavours," Hester said in a video posted by the bank. "But it
has been a very bruising and difficult job so I certainly don't
have to be prised away reluctantly."
"Ideally the phase of privatisation and beyond should be a
beginning for someone, and for me it would have been an end."
The soft-spoken Hester arrived at RBS after a long career as
an investment banker, including 19 years at Credit Suisse Group
AG. He was finance director at Abbey in 2002, purging
it of its complex assets, and then became CEO of property firm
The government parachuted him in and told him to sort out
the mess left by former RBS CEO Fred Goodwin, who over-reached
with a string of acquisitions and ran capital too low.
RBS said the search for a successor would be led by Hampton
and consider internal and external candidates.
Hester will receive 1.6 million pounds when he leaves,
representing 12 months' pay and benefits in line with his
contract. He will not receive a bonus for 2013.
Osborne said RBS was "a bust bank with a broken culture"
when Hester took over and he had made it safer and stronger.
Hampton said the bank had been thinking about succession
planning "for a while," which had been given more urgency by the
government's plan to start selling its stake.
The board finalised the decision at a meeting on Wednesday.