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

Photo: Getty
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PMQs review: Jeremy Corbyn prompts Tory outrage as he blames Grenfell Tower fire on austerity

To Conservative cries of "shame on you!", the Labour leader warned that "we all pay a price in public safety" for spending cuts.

A fortnight after the Grenfell Tower fire erupted, the tragedy continues to cast a shadow over British politics. Rather than probing Theresa May on the DUP deal, Jeremy Corbyn asked a series of forensic questions on the incident, in which at least 79 people are confirmed to have died.

In the first PMQs of the new parliament, May revealed that the number of buildings that had failed fire safety tests had risen to 120 (a 100 per cent failure rate) and that the cladding used on Grenfell Tower was "non-compliant" with building regulations (Corbyn had asked whether it was "legal").

After several factual questions, the Labour leader rose to his political argument. To cries of "shame on you!" from Tory MPs, he warned that local authority cuts of 40 per cent meant "we all pay a price in public safety". Corbyn added: “What the tragedy of Grenfell Tower has exposed is the disastrous effects of austerity. The disregard for working-class communities, the terrible consequences of deregulation and cutting corners." Corbyn noted that 11,000 firefighters had been cut and that the public sector pay cap (which Labour has tabled a Queen's Speech amendment against) was hindering recruitment. "This disaster must be a wake-up call," he concluded.

But May, who fared better than many expected, had a ready retort. "The cladding of tower blocks did not start under this government, it did not start under the previous coalition governments, the cladding of tower blocks began under the Blair government," she said. “In 2005 it was a Labour government that introduced the regulatory reform fire safety order which changed the requirements to inspect a building on fire safety from the local fire authority to a 'responsible person'." In this regard, however, Corbyn's lack of frontbench experience is a virtue – no action by the last Labour government can be pinned on him. 

Whether or not the Conservatives accept the link between Grenfell and austerity, their reluctance to defend continued cuts shows an awareness of how politically vulnerable they have become (No10 has announced that the public sector pay cap is under review).

Though Tory MP Philip Davies accused May of having an "aversion" to policies "that might be popular with the public" (he demanded the abolition of the 0.7 per cent foreign aid target), there was little dissent from the backbenches – reflecting the new consensus that the Prime Minister is safe (in the absence of an attractive alternative).

And May, whose jokes sometimes fall painfully flat, was able to accuse Corbyn of saying "one thing to the many and another thing to the few" in reference to his alleged Trident comments to Glastonbury festival founder Michael Eavis. But the Labour leader, no longer looking fearfully over his shoulder, displayed his increased authority today. Though the Conservatives may jeer him, the lingering fear in Tory minds is that they and the country are on divergent paths. 

George Eaton is political editor of the New Statesman.

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