RBS in profit as new boss named

Ross McEwan will succeed Stephen Hester as chief executive of RBS
Ross McEwan will succeed Stephen Hester as chief executive of RBS
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TAXPAYER-backed Royal Bank of Scotland has appointed retail banking boss Ross McEwan as successor to outgoing chief executive Stephen Hester from October 1.

Mr McEwan will take on the top job on a £1 million salary and receive a £350,000 cash payment in lieu of pension.

He has asked to defer awards under his current role until 2017 and to forgo an annual bonus as chief executive for 2013 and 2014, but will be eligible for a long term incentive award next year.

The announcement came alongside half-year figures showing RBS swung out of the red with pre-tax profits of £1.4 billion against losses of £1.7 billion a year earlier, following its first two consecutive quarters of growth since 2008.

Philip Hampton, chairman of RBS, said Mr McEwan was taking on a job that was “among the most important and challenging in the business world”.

He added his appointment came after an international search including internal and external candidates.

He said: “With his extensive experience in banking and the leadership that he has shown in his time at RBS, Ross will be a great chief executive for the group.

“Ross has already become a champion for customers in our business and will continue that role as chief executive.”

Mr McEwan, 56, will take the helm just over a year after joining RBS as chief executive of UK retail last September.

He said: “Stephen Hester and all of our employees have done a remarkable job in saving this bank.

“And now five years on we are ready to focus on the future.

“We have a lot of work ahead of us and I’m very much looking forward to getting started.”

In his last set of major figures before handing over the reins at RBS, Mr Hester: “RBS’s journey from ‘bust bank’ to ‘normal bank’ is largely done.

“But no small task remains - to harness the energies and strengths that have driven the bank’s recovery, and to take RBS towards the target of being a ‘really good bank’ for customers, shareholders and society as a whole.”

But RBS became the latest bank to set more cash aside for mis-selling of payment protection insurance (PPI), confirming another £185 million to cover claims, taking its total bill for the scandal to £2.4 billion.

It also revealed £385 million put by for legal and regulatory costs as it faces a raft of ongoing litigation cases and investigations, including for ongoing action in the United States related to the Libor rigging scandal.

Chancellor George Osborne welcomed Mr McEwan’s appointment and said he was impressed with his “vision of RBS as a strong, UK-centred corporate bank that is focused on supporting the British economy”.

He said: “He’ll provide the leadership RBS needs as the bank puts the mistakes of the past behind it, and the Government seeks to get the best value for the taxpayer from the money the last Government put into the bank.”

Shares in the 80% state-owned bank fell 5% in early trading despite the removal of uncertainty over the top job.

RBS has been under pressure since Mr Hester announced his plans to quit and amid the Government’s review of whether to split the group into a “good” bank and “bad” bank.

But the lender today revealed minority shareholders would have to support such a split for it to go ahead, as it was likely that the Government would not be included in any vote.

The bank’s return to the black comes after fellow state-backed lender Lloyds Banking Group also moved into profit at the half-year stage, yesterday reporting pre-tax profits of £2.1 billion in what is widely expected to fire the starting gun on the Government’s sale of its 39% stake.

However, Mr Hester said while RBS has made progress, there were “challenges left” before it can be returned to the private sector.

It will “take some time” to get the bank’s balance sheet back into shape, while restructuring measures have had an impact across the business, according to Mr Hester.

Shares, at around 317p, also remain some way below the 407p minimum break-even price for the Government to recoup its cash from the bank’s £45 billion bail-out and even further from the 471p actual average price paid.

RBS said earnings at its investment banking business more than halved to £371 million in the first six months of the year from £1.1 billion a year earlier as it continued to shrink the division.

Revenues in the markets arm also dropped 21% quarter-on-quarter in the three months to June 30.

Its troubled Ulster Bank business saw bad debts fall by 30% and narrowed interim losses, although it remained in the red by £329 million.

The wider group cut losses on loans turned sour by 21% to £569 million.

RBS also updated on plans to offload its 315 branches following the collapse of the sale to Santander.

It plans to create a separate bank under the Williams & Glyn’s brand by early 2015 and is currently seeking bids from private equity and institutional investors to invest as partners ahead of a likely flotation.

Gary Greenwood at Shore Capital Stockbrokers said today’s half-year results were better than expected.

He added that the bank should benefit with the uncertainty around the chief executive now resolved.

Banking analyst Ian Gordon at Investec said he “heartily” welcomed Mr McEwan’s appointment.

“We believe the importance extends well beyond Ross’s own personal credentials - it should signify a degree of strategic continuity and we hope help to head off the threat of fresh government-initiated value-destruction,” he said.