RBS CEO Tells Staff Decision to Leave Wasn't Easy

Royal Bank of Scotland Group PLC (RBS) "nearly died" after losing sight of its principles in the lead-up to the financial crisis, but the hard work of staff means it overcame the odds to recover, outgoing Chief Executive Stephen Hester told staff in a memo late Wednesday announcing his departure.

Mr. Hester resigned Wednesday, saying he would have liked to stay longer but that the board decided he should go and bring in a new CEO to oversee the bank's eventual privatization. RBS is 81%-owned by the government after a 46 billion pound ($72.03 billion) bailout in 2008 and 2009. Mr. Hester was brought in as CEO in November 2008 and put in place a five-year recovery plan that is near completion. The government is expected to start selling down its stake some time after 2014.

"Nothing about this decision was easy, but I can see that as we head towards a potential privatization, now provides a window for the company to put in place a chief executive that can give fresh energy to the challenge of leading RBS through the next phase," Mr. Hester wrote to staff.

U.K. Treasury chief George Osborne issued a statement Wednesday, praising Mr. Hester's tenure but also endorsing his planned departure, noting that "now is the right time to move on."

In the memo, Mr. Hester said endless scrutiny of the bank "carries a cost," but that, for him, it has been offset by the "warmth and support of colleagues from across the business to carry on."

"This strength of teamwork is no more evident than in the leadership team that exists in RBS today. It is the strongest such team we could wish for and is well placed to steer the business through the next phase of our journey to become a really good bank," he said.

Mr. Hester's departure, which is set to happen by the end of the year unless a successor is found sooner, comes as Finance Director Bruce Van Saun prepares to leave the bank in October to take up the role of CEO at RBS Citizens Financial Group Inc., RBs' U.S. retail bank that is preparing to float in 2015. Nathan Boston, currently chief risk officer, will take over as finance director and is being tipped as a potential successor to Mr. Hester.

RBS Chairman Philip Hampton Thursday signaled that he too could leave the bank, telling Bloomberg TV that he "has no plans to step down at this stage," but that a natural time frame for a chairman to serve would be between five and seven years. He joined the RBS board in January 2009 and started the chairman job the following month.

Mr. Hester told RBS employees that the bank's future success "starts and finishes' with its focus on customers.

"RBS lost sight of why it was founded, and it nearly died as a result. We've got back to a place where we can once again focus on the customer above all else. If there is one positive legacy to take from our past mistakes it must be that we never, ever forget why we are here," he said.

RBS needed to be bailed out after the sharp turn in markets in 2008 pushed it to the brink of collapse, in large part because of mounting losses within ABN Amro, the Dutch bank RBS bought in 2007.

Write to Margot Patrick at [e-mail]

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