Hester: ‘Happy and relaxed about what I achieved’

Stephen Hester looked back over five years at RBS with a mixture of disappointment and satisfaction. Picture: Reuters

Hester, who has spent five years as chief executive turning around the bank after it crashed to a £24bn loss in 2008, unveiled a profit of £1.4bn in the first half of the year.

That compared with a loss of £1.7bn in the first half of 2012, helped by a 15 per cent fall in bad debt charges at its core businesses.

Hester, whose successor was confirmed as Ross McEwan, head of the bank’s retail bank, again indicated disappointment that he was not allowed to steer the taxpayer majority-owned group back to reprivatisation.

“In a perfect world I would have steered the company past that moment,” Hester said. “But I’m happy and relaxed about what I have done and how I leave the company, and the quality of leadership the company now has.”

Hester, who hired McEwan from Commonwealth Bank of Australia, said he believed the stronger trading performance meant that an investigation of whether to split RBS into “good” and “bad” banks meant the idea was “an option, not a necessity”.

Sir Philip Hampton, chairman, revealed that the government would not be able to vote its 81 per cent stake if it came to such a split. The decision will be made by the independent minority shareholders, mainly institutional investors.

RBS made an operating profit before tax of £548 million in the second trading quarter to end-June following a profit of £826m in the first three months of the year.

Hester said the bank’s remaining toxic assets would be down to £37bn by the end of this year, compared with £720bn five years ago when RBS had the biggest balance sheet in the world just as the market peaked.

Hester repeated the view of Hampton in February that the bank would be “in shape” for privatisation by the end of 2014.

“Whether the share price will be is anyone’s guess, and it will be the government’s decision anyway,” he added.

Core UK retail profits rose to £954m from £914m as bad debt charges fell by more than 40 per cent and income improved in the second quarter.

Losses at Ulster Bank reduced to £329m from £555m, while profits at the investment banking business slumped to £371m from more than £1bn, largely due to its radical pruning that McEwan is expected to continue.

The slide in the contribution of investment banking, historically a big profits motor at RBS, was largely behind the 3.3 per cent, or 11p, slide in the bank’s shares yesterday to 322.5p.

That is still way below an average taxpayer buy-in price of about 500p in 2008, and is seen as putting RBS some way behind partly taxpayer-owned Lloyds in a privatisation timetable.

UK corporate banking profits fell 25 per cent, partly due to a “subdued” first three months of the year. It was a better picture with the US retail and commercial division, led by Citizens Bank, which saw profits rise to £363m from £331m as the US economic recovery gained traction.