Stephen Hester is stepping down as chief executive of the Royal Bank of Scotland group plc.
He has been in the role for five years, having been brought in to rescue the stricken bank in 2008.
It is believed the board wanted its chief executive to take the bank through privatisation and beyond, whereas Hester (pictured) was unable to make that open-ended commitment following five years in the job already.
The board believes that an orderly succession process will give a new CEO time to prepare the privatisation process and to lead the bank in the years that follow.
Hester said: “It has been nearly five years since I joined RBS after the bank was rescued by the Government. In that time we have reduced the bank’s balance sheet by nearly a trillion pounds, repaid hundreds of billions of taxpayer support, and removed the imminent threat that this bank’s size and complexity posed to the UK economy. All the while we supported 30 million customers every day to help them manage their finances.
“We are now in a position where the Government can begin to prepare for privatising 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. Over the coming months I will put all my effort into completing the final recovery and continuing to build a strong customer focused culture. I thank all of the people of RBS for their support and wish them all the best for the future.”
At the point of Hester’s departure, in line with his contractual arrangements, he will receive payment in lieu of notice of £1.6m representing 12 months pay and benefits. He will not receive a bonus for 2013, which is also in line with contract terms.
His unvested Long Term Incentive Plan (LTIP) awards will be reduced significantly through pro rating in line with normal policy. Current expectations are that approximately 2 million shares will be available to vest after time pro rating. The awards will also be subject to published performance conditions which will be assessed at the end of the performance period in line with plan rules. At an expected value of 45% the awards would be worth around £3m at today’s share price. The number of shares is capped at 65% which would be just over £4m at today’s share price.