Hester's successor: the runners and riders emerge

With seven figure salary, job hardly a "thankless task".

A successful sell off the State’s shareholding in Royal Bank of Scotland (RBS) seems further away than ever. The RBS share price continues to tank. RBS shares kicked off the year at around 366p each; today they are down to 288p, down 23 per cent for the year to date, the worst performing UK banking share. Take a bow Mr. Osborne.

Since his latest RBS comments at the Mansion House speech on 19 June, the share price has fallen by more than 30p. The kindest interpretation of the Chancellor’s intervention in the past 10 days relating to the future of RBS is that he has created fresh political confusion. Encouraging the RBS board to dispense with Stephen Hester prematurely did little in the short term for the RBS share price.

Just to really put the boot in, Osborne then performed a U-turn of stunning proportions by saying that he would examine a good bank/bad bank split at RBS. This proposal was one that Osborne had argued against consistently despite strong arguments in its favour from such distinguished advocates as Mervyn King and Lord (Nigel) Lawson. If such an argument had merits – and it had three year ago – that time has passed.

A period of silence from Mr. Osborne concerning RBS would be welcome for the foreseeable. Meantime, keep a close eye on possible obfuscation relating to the share price that the government requires to obtain to break even on its RBS share acquisition. The UK government currently holds 81.14 per cent of shares in RBS, having injected £45.5bn. The average government buy-in price was 502.26p.

According to RBS, the break-even price has dropped to 440.6p, taking into account fees that RBS has paid to the government. This does not however take inflation into account. A more accurate breakeven figure would be somewhere about 470p but the RBS website continues to promote the notion of 440p as the magic figure.

One thing that the Chancellor could do by way of damage limitation would be to encourage an acceleration of the process to appoint Stephen Hester’s successor. The RBS board does not have to look too far for the standout candidate. The bank has reportedly engaged the doyen of City headhunters, Anna Mann, co-founder of blue-chip consultancy MWM, to recruit Hester’s replacement. MWM certainly has form: it has recruited 16 of the current CEOs of the present FTSE 100. Ignore the guff in the press about the CEO of RBS being a thankless task.

The job carries a seven figure salary, generous bonuses and guaranteed recognition in a future Honours List for successful execution. The latest odds, courtesy of Ladbrokes, suggest that Chris Sullivan, RBS chief executive of corporate banking, is the favourite at 9/4. Nathan Bostock, RBS’ head of restructuring and risk and the early front-runner – Ladbrokes quoted him as short as 1/2 last week – has drifted like a barge out to 3/1. National Australia Bank Group CEO Cameron Clyne has attracted support and has been backed into 4-1 from an initial show of 6-1. As Investec analyst Ian Gordon argues today in a note to clients, Ross McEwan, CEO, UK Retail at RBS is a stand-out choice. This time last week, his odds were a generous 20-1. This morning, his odds have tumbled to 8-1.

Last Wednesday, just ahead of George Osborne’s Mansion House speech, I asked a group of senior bankers attending a meeting of The Digital Banking Club I was chairing, to name what they reckoned was the world’s leading retail bank. There was strong support for Royal Bank of Canada – a view with which I concurred by the by. Interestingly, the CEO of Royal Bank of Canada, Gordon Nixon, is quoted at 16/1 to succeed Hester.

But the retail bank currently most admired in my straw poll last week was Commonwealth Bank of Australia. Much of the credit for CBA’s current success can be attributed to the work of Ross McEwan. McEwan joined RBS in August last year from CBA where he was Group Executive for Retail Banking Services for 5 years.

If Osborne has to interfere again in the running of RBS – on balance it would be better if he did not – he could do worse than give a nudge to the RBS chairman and to his expensively engaged headhunter – to view McEwan as a worthy successor to Hester.

Hester ousted: who's next? Photograph: Getty Images

Douglas Blakey is the editor of Retail Banker International

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Lord Empey: Northern Ireland likely to be without government for a year

The former UUP leader says Gerry Adams is now in "complete control" of Sinn Fein and no longer wants to be "trapped" by the Good Friday Agreement

The death of Martin McGuinness has made a devolution settlement in Northern Ireland even more unlikely and has left Gerry Adams in "complete control" of Sinn Fein, the former Ulster Unionist leader Reg Empey has said.

In a wide-ranging interview with the New Statesman on the day of McGuinness’ death, the UUP peer claimed his absence would leave a vacuum that would allow Adams, the Sinn Fein president, to consolidate his hold over the party and dictate the trajectory of the crucial negotiations to come. Sinn Fein have since pulled out of power-sharing talks, leaving Northern Ireland facing the prospect of direct rule from Westminster or a third election in the space of a year. 

Empey, who led the UUP between and 2005 and 2010 and was briefly acting first minister in 2001, went on to suggest that, “as things stand”, Northern Ireland is unlikely to see a return to fully devolved government before the inquiry into the Renewable Heat Incentive scheme is complete -  a process which could take up to a year to complete.

“Adams is now in complete control of Sinn Fein,” he said, adding that it remained unclear whether McGuinness’ successor Michelle O’Neill would be “allowed to plough an independent furrow”. “He has no equal within the organisation. He is in total command of Sinn Fein, and that is the way it is. I think he’s even more powerful today than he was before Martin died – by virtue of there just being nobody there.”

Asked what impact the passing of McGuinness, the former deputy first minister and leader of Sinn Fein in the north, would have on the chances of a devolution settlement, Empey, a member of the UUP’s Good Friday Agreement negotiating delegation, said: “I don’t think it’ll be positive – because, for all his faults, Martin was committed to making the institutions work. I don’t think Gerry Adams is as committed.

Empey added that he believed Adams did not want to work within the constitutional framework of the Good Friday Agreement. In a rebuke to nationalist claims that neither Northern Ireland secretary James Brokenshire nor Theresa May can act as honest or neutral brokers in power-sharing negotiations given their reliance on the DUP’s eight MPs, he said: “They’re not neutral. And they’re not supposed to be neutral.

“I don’t expect a prime minister or a secretary of state to be neutral. Brokenshire isn’t sitting wearing a hat with ostrich feathers – he’s not a governor, he’s a party politician who believes in the union. The language Sinn Fein uses makes it sound like they’re running a UN mandate... Gerry can go and shout at the British government all he likes. He doesn’t want to be trapped in the constitutional framework of the Belfast Agreement. He wants to move the debate outside those parameters, and he sees Brexit as a chance to mobilise opinion in the republic, and to be seen standing up for Irish interests.”

Empey went on to suggest that Adams, who he suggested exerted a “disruptive” influence on power-sharing talks, “might very well say” Sinn Fein were “’[taking a hard line] for Martin’s memory’” and added that he had been “hypocritical” in his approach.

“He’ll use all of that,” he said. “Republicans have always used people’s deaths to move the cause forward. The hunger strikers are the obvious example. They were effectively sacrificed to build up the base and energise people. But he still has to come to terms with the rest of us.”

Empey’s frank assessment of Sinn Fein’s likely approach to negotiations will cast yet more doubt on the prospect that devolved government might be salvaged before Monday’s deadline. Though he admitted Adams had demanded nothing unionists “should die in a ditch for”, he suggested neither party was likely to cede ground. “If Sinn Fein were to back down they would get hammered,” he said. “If Foster backs down the DUP would get hammered. So I think we’ve got ourselves a catch 22: they’ve both painted themselves into their respective corners.”

In addition, Empey accused DUP leader Arlene Foster of squandering the “dream scenario” unionist parties won at last year’s assembly election with a “disastrous” campaign, but added he did not believe she would resign despite repeated Sinn Fein demands for her to do so.

 “It’s very difficult to see how she’s turned that from being at the top of Mount Everest to being under five miles of water – because that’s where she is,” he said. “She no longer controls the institutions. Martin McGuinness effectively wrote her resignation letter for her. And it’s very difficult to see a way forward. The idea that she could stand down as first minister candidate and stay on as party leader is one option. But she could’ve done that for a few weeks before Christmas and we wouldn’t be here! She’s basically taken unionism from the top to the bottom – in less than a year”.

Though Foster has expressed regret over the tone of the DUP’s much-criticised election campaign and has been widely praised for her decision to attend Martin McGuinness’ funeral yesterday, she remains unlikely to step down, despite coded invitations for her to do so from several members of her own party.

The historically poor result for unionism she oversaw has led to calls from leading loyalists for the DUP and UUP – who lost 10 and eight seats respectively – to pursue a merger or electoral alliance, which Empey dismissed outright.

“The idea that you can weld all unionists together into a solid mass under a single leadership – I would struggle to see how that would actually work in practice. Can you cooperate at a certain level? I don’t doubt that that’s possible, especially with seats here. Trying to amalgamate everybody? I remain to be convinced that that should be the case.”

Accusing the DUP of having “led unionism into a valley”, and of “lashing out”, he added: “They’ll never absorb all of our votes. They can try as hard as they like, but they’d end up with fewer than they have now.”

Patrick Maguire writes about politics and is the 2016 winner of the Anthony Howard Award.