British lender Royal Bank of Scotland Group (RBS, RBS.L) announced Wednesday that Group Chief Executive Stephen Hester would step down from his position later this year as the lender, in which the U.K. Government has an 81 percent stake, goes ahead with its privatization plan.
"The Board believes that an orderly succession process will give a new CEO time to prepare the privatization process and to lead the bank in the years that follow. Stephen was unable to make that open-ended commitment following five years in the job already," RBS said in a statement.
Hester will continue to lead the business until the end of 2013 in order to ensure a smooth handover, unless a successor is named prior to that.
Hester has been at the helm of RBS since November 2008 after Fred Goodwin was removed from the position. The bank was rescued after a 45 billion British Pounds bailout in that year, following its ill-timed purchase of Dutch bank ABN Amro.
"On behalf of the Board I would like to thank Stephen for his leadership and dedication over the past five years. In the midst of a major crisis, he accepted the challenge of stabilizing the bank, turning it around, and putting us in a position where we can begin to plan for returning the organization to the private sector. His achievements have been considerable," Chairman Sir Philip Hampton said in the statement.
The company said Hampton would lead the search for a successor to Hester, which would commence immediately and consider both internal and external candidates.
Hester joined RBS after it was rescued by the U.K. Government in 2008. For the past five years, he has led the lender through one of the largest and most complex company restructuring ever that has seen RBS progress towards becoming a strong bank, with balance sheet and funding transformed and the business fundamentally re-shaped.
The company also went through investigations by U.S. and UK regulators recently, and settled the allegations that its employees manipulated key global benchmark interest rates, including the London Interbank Offered Rate or Libor and the Euro Interbank Offered Rate or Euribor.
"We are now in a position where the Government can begin to prepare for privatizing RBS. While leading that process would be the end of an incredible chapter for me, ideally for the company it should be led by someone at the beginning of their journey. I will therefore step down at the end of this year to allow a new CEO to lead the Group in this next stage," Hester said.
The company noted that both the Board and Hester agreed that this provided a window to begin a transition of leadership as it now begins to prepare for possible share sales by the U.K. Government.
Hester has previously served as chief executive of British Land Co. plc (BLND.L), COO of Abbey National plc and also held positions with Credit Suisse First Boston including being CFO, head of fixed income and co-head of European investment banking. He also served as non-executive deputy chairman of Northern Rock plc after its nationalization in 2008.
While leaving, Hester will receive a pay-out in lieu of notice of 1.6 million pounds, representing 12 months pay and benefits, but will not receive a bonus for 2013. Additionally, his unvested Long Term Incentive Plan (LTIP) awards could rake in up to 4.0 million pounds.
"We will continue Stephen's work to remove the barriers to privatization over the next year and continue to do everything possible to support the British economy. Stephen will be leaving RBS in a vastly improved position that many would have thought impossible five years ago," Hampton added.
RBS closed Wednesday's regular trading session at $9.84, down $0.39 or 3.81% on a volume of 3.86 million shares. Meanwhile, RBS.L closed on the LSE at 325.60 pence, down 1.90 pence or 0.58% on a volume of 8.89 million shares.
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