This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

The Deal: RBS Confirms Retail Bank Chief as New CEO

NEW YORK ( The Deal) -- Royal Bank of Scotland (RBS - Get Report) confirmed Friday, Aug. 2, that it had appointed the New Zealand head of its retail banking unit as its new CEO, holding an olive branch to the Edinburgh institution's Westminster overlords as they consider whether to split the bank in two.

Ross McEwan, 56, will replace Stephen Hester, 52, on Oct. 1, Royal Bank announced as it posted first-half results. These showed that overall operating profit rose 5% year-on-year to £1.68 billion ($2.55 billion), in line with forecasts, but declined at the bank's core business.

McEwan will take the helm after Hester was effectively forced out by the U.K. government, which holds about 82% of the bank after rescue funding worth £45.5 billion dispensed at the height of the credit crisis.

The appointment of a retail banker meshes well with the government's desire to refashion the once-thrusting global institution into a dramatically scaled-back consumer and business lender. It comes as the government, aided by advisers Rothschild, Slaughter and May and BlackRock Solutions, weighs whether to split Royal Bank into a "good" and "bad" bank to help boost its lending. P/>Chancellor of the Exchequer George Osborne agreed to the review following a recommendation by a committee of parliamentarians charged with vetting Britain's financial sector. High-profile figures such as former Bank of England Governor Mervyn King had also argued in favor of the split, even though this would inevitably delay the government's long-awaited sell-down of its majority stake. P/>Investec analyst Ian Gordon was among many observers to criticize Hester's forced resignation in June and opposes the notion of the" bad" bank split--a move Hester had previously argued was pointless since he hived off Royal bank's "noncore" business into a separate division back in February 2009 and spent the past four years slashing risky assets.

Gordon Friday welcomed McEwan's appointment. "We believe the importance extends well beyond Ross' own personal credentials. It should signify a degree of strategic continuity and (we hope) help to head off the threat of fresh Government-initiated value-destruction," the analyst noted.

However, although the choice of a retail banking specialist may please regulators, others pointed out McEwan's lack of regulatory and political connections. Before arriving in the U.K. to head Royal Bank's retail bank in September 2012 McEwan led retail banking services at Commonwealth Bank of Australia Ltd. for five years.

His entire career before Commonwealth Bank was spent in Australia and New Zealand, where he held various roles in the insurance and investment industries from the mid-1980s.

Hester told a conference call Friday that he'd appointed McEwan as retail banking chief last year because of a customer service turnaround he'd achieved at Commonwealth Bank.

"What Ross had done was take one of the major banks in Australia and move it really clearly forward in customer service and therefore customer rankings while making profit out of it," he said. "I was impressed with his detailed operational skills and customer-focused skills. He also has a personality that will do the human things of leadership that will need to be done well."

"I promised him an adventure; he was a little unsure," added Hester. "He will now get a bigger adventure than he bargained for."

Royal Bank of Scotland is preparing to hold an IPO for a minority stake in Providence, R.I.-based RBS Citizens Financial Group. in early 2014, a move Hester had initially resisted. First-half operating profit at Citizens, which Royal Bank has been restructuring to improve returns on equity, rose £32 million to £363 million. Operating profit at Royal Bank's markets unit, which the lender is paring back to focus on fixed income, was down by about two thirds to £371 million.

Royal Bank's core group operating profit fell 17% to £2.46 billion.

Royal Bank shares were down 4.6% at 318.2 pence by late morning in London as its results drew unfavorable comparisons with those of bailed-out peer Lloyds Banking Group plc, whose strong first-half results Thursday stoked expectations the state could start selling down its 40% holding as early as this month.

--Written by Laura Board

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
RBS $11.29 0.00%
AAPL $128.82 -1.20%
FB $78.97 0.00%
GOOG $558.40 0.00%
TSLA $203.34 0.00%

Markets

DOW 18,132.70 -81.72 -0.45%
S&P 500 2,104.50 -6.24 -0.30%
NASDAQ 4,963.5270 -24.3630 -0.49%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs