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 Images
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I'm far from convinced by Cameron's plans for Syria

The Prime Minister has a plan for when the bombs drop. But what about after?

In the House of Commons today, the Prime Minister set out a powerful case for Britain to join air strikes against Isil in Syria.  Isil, he argued, poses a direct threat to Britain and its people, and Britain should not be in the business of “outsourcing our security to our allies”. And while he conceded that further airstrikes alone would not be sufficient to beat Isil, he made the case for an “Isil first” strategy – attacking Isil now, while continuing to do what we can diplomatically to help secure a lasting settlement for Syria in which Assad (eventually) plays no part.

I agreed with much of David Cameron’s analysis. And no-one should doubt either the murderous barbarism of Isil in the region, or the barbarism they foment and inspire in others across the world.  But at the end of his lengthy Q&A session with MPs, I remained unconvinced that UK involvement in airstrikes in Syria was the right option. Because the case for action has to be a case for action that has a chance of succeeding.  And David Cameron’s case contained neither a plan for winning the war, nor a plan for winning the peace.

The Prime Minister, along with military experts and analysts across the world, concedes that air strikes alone will not defeat Isil, and that (as in Iraq) ground forces are essential if we want to rid Syria of Isil. But what is the plan to assemble these ground forces so necessary for a successful mission?  David Cameron’s answer today was more a hope than a plan. He referred to “70,000 Syrian opposition fighters - principally the Free Syrian Army (FSA) – with whom we can co-ordinate attacks on Isil”.

But it is an illusion to think that these fighters can provide the ground forces needed to complement aerial bombardment of Isil.  Many commentators have begun to doubt whether the FSA continues to exist as a coherent operational entity over the past few months. Coralling the myriad rebel groups into a disciplined force capable of fighting and occupying Isil territory is a heroic ambition, not a plan. And previous efforts to mobilize the rebels against Isil have been utter failures. Last month the Americans abandoned a $500m programme to train and turn 5,400 rebel fighters into a disciplined force to fight Isil. They succeeded in training just 60 fighters. And there have been incidents of American-trained fighters giving some of their US-provided equipment to the Nusra Front, an affiliate of Al Qaeda.

Why has it proven so hard to co-opt rebel forces in the fight against Isil? Because most of the various rebel groups are fighting a war against Assad, not against Isil.  Syria’s civil war is gruesome and complex, but it is fundamentally a Civil War between Assad’s forces and a variety of opponents of Assad’s regime. It would be a mistake for Britain to base a case for military action against Isil on the hope that thousands of disparate rebel forces can be persuaded to change their enemy – especially when the evidence so far is that they won’t.

This is a plan for military action that, at present, looks highly unlikely to succeed.  But what of the plan for peace? David Cameron today argued for the separation of the immediate task at hand - to strike against Isil in Syria – from the longer-term ambition of achieving a settlement in Syria and removing Assad.  But for Isil to be beaten, the two cannot be separated. Because it is only by making progress in developing a credible and internationally-backed plan for a post-Assad Syria that we will persuade Syrian Sunnis that fighting Isil will not end up helping Assad win the Civil War.  If we want not only to rely on rebel Sunnis to provide ground troops against Isil, but also provide stable governance in Isil-occupied areas when the bombing stops, progress on a settlement to Syria’s Civil War is more not less urgent.  Without it, the reluctance of Syrian Sunnis to think that our fight is their fight will undermine the chances of military efforts to beat Isil and bring basic order to the regions they control. 

This points us towards doubling down on the progress that has already been made in Vienna: working with the USA, France, Syria’s neighbours and the Gulf states, as well as Russia and Iran. We need not just a combined approach to ending the conflict, but the prospect of a post-war Syria that offers a place for those whose cooperation we seek to defeat Isil. No doubt this will strike some as insufficient in the face of the horrors perpetrated by Isil. But I fear that if we want not just to take action against Isil but to defeat them and prevent their return, it offers a better chance of succeeding than David Cameron’s proposal today. 

Stewart Wood is a former Shadow Cabinet minister and adviser to Ed Miliband. He tweets as @StewartWood.