Comment: Osborne’s long shadow lies over RBS debacle

Martin Flanagan
Martin Flanagan
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IT’S always gratifying when a well-considered plan is seamlessly executed. Unfortunately, no chance of that with Stephen Hester’s enforced departure from the helm of Royal Bank of Scotland.

As the dust settles after the shock announcement, it looks increasingly clear Chancellor George Osborne has shot the government in the foot over the clumsy denouement to four years of broadly very successful turnaround work of RBS by Hester.

The RBS boss and chairman Sir Philip Hampton have danced around the head of a semantics needle on whether the chief executive jumped or was pushed. Personally, I think he jumped after being given a nudge.

It was the board’s decision, not Hester’s, and it looks pretty clear that Osborne and the Treasury also thought it was a good idea to have a new face at the top ahead of RBS’s mooted re-privatisation beginning towards the end of 2014.

Ahead of the next general election, fortuitously. String-pulling from offstage by the bank’s 81 per cent shareholder looks a virtual certainty, even if only in terms of astute acquiescence.

But the result? RBS’s shares closed down 3.3 per cent yesterday, after initially being off more than 6 per cent, as traders reacted negatively to the news. The City feels the unexpected ousting of Hester has injected much greater uncertainty into both how successful a part-selldown of the taxpayer stake would be with investors; and also whether the government will back a split of RBS into “good” and “bad” banks.

Analysts and fund managers look far from enamoured with the latter possibility, particularly given that Hester has achieved most of the bad asset runoffs already. He has reduced the size of predecessor Fred Goodwin’s balance sheet by some £1 trillion.

Then there is the significant collateral damage done to the hunt for a successor as chief executive, if he or she does come from outside.

The unsubtle political trail of the past couple of days suggests it would deter most banking high-flyers with any stamp of independence about them.

The Chancellor looks more than ever like a shadow boardroom director who would be second-guessing the new person at every step, while maintaining he and the semi-quango UK Financial Investments have only an arm’s-length relationship with RBS. It looks a prehensile limb, however.

After what looks startling ingratitude to Hester, whatever euphemisms are used to dress it up, the job specification could read as follows.

Wanted: chief executive with good communication skills to communicate government’s message about lending to the UK economy being the only game in town in future. Previous experience of polishing a poisoned chalice possible advantage. Pay (particularly bonuses,) not commensurate with experience. No frivolous applications from investment bankers.

Earlier applicants when RBS nearly went bust in 2008 need not… oh, there were none.

HRG will be listening to the weather forecast

IT IS surprising how often one or t’other of Home Retail Group’s two businesses bail out the overall performance. This time tablet and TV sales at its Argos chain have done the trick, while its Homebase DIY business has been hit by the bad weather on outdoor items such as barbecues and plants.

Technology is here to stay, so if we ever get decent weather again HRG could be on a roll.