David Cameron appeared to play down the prospect of an early sell-off of Royal Bank of Scotland on Thursday even as the bailed-out bank kickstarted the search for Stephen Hester's successor as chief executive.
RBS appointed City headhunter Anna Mann to seek candidates to lead the 81% taxpayer-owned bank through a privatisation that the bank believes could start next year.
But the prime minister told Bloomberg that he thought taxpayers were more interested in getting their money back than in seeing the bank returned swiftly to the private sector.
"It will take time, because this is a bank that is still healing," he said. "As for when we get it back into the private sector, I just have two very simple concerns: one is we must make sure this bank contributes to the recovery of the UK economy. Secondly, people put their money in. I want them to get their money out."
Shares in the 81% taxpayer-owned bank slumped as investors gave their first reaction to Hester's surprise resignation, cushioned by a payoff of up to £5.6m, amid anxiety about political interference. Labour's Treasury spokesman, Chris Leslie, attacked the government for a "shambolic and uncertain approach".
A further scaling-back of the investment bank was announced on Thursday, involving 2,000 job cuts – 20% of the workforce. It has already been reduced from 24,000 under Hester's tenure, which started at the time of the October 2008 bailout.
Uncertainty about the future leadership of the bank was compounded when chairman Sir Philip Hampton told Bloomberg that when Hester's successor had been named, "other aspects of board succession will be addressed". Hampton, chairman for just over four years, added that he had "no plans to step down at this stage".
Despite reports that Hampton had been told by UK Financial Investments, which looks after the taxpayer's stake in bailed-out banks, that the Treasury wanted to privatise RBS next year, the Treasury insisted there was no timetable for a sell-off.
In a statement to MPs, forced by Labour, Treasury minister Sajid Javid attempted to justify a payoff for Hester – a £1.6m contractual entitlement and up to £4m in share bonuses – by saying it was a third of what he was entitled to under a contract signed by the previous Labour government. He also said Labour had overpaid for RBS shares. Javid told MPs the government had no target price for the sell-off and no fixed timetable and was not eyeing the May 2015 general election.
The shares, down 7% at one stage, ended the day more than 3% lower at 315p after Javid's statement, wiping nearly £1bn off the bank's value and making it the biggest faller on the FTSE 100.
The government is awaiting publication of the report by the parliamentary commission on banking standards before setting out its strategy for the banks in next week's Mansion House speech. The report is complete but a publication date has not yet been set, although Pat McFadden, the Labour MP who sits on the commission, told Javid it did not contain a "permission slip" to sell off RBS on the cheap.
In appointing Mann to find Hester's replacement, Hampton is turning to one of the City's best-known headhunters. She founded Whitehead Mann but now runs WMW Consulting.
As RBS announced another overhaul of its investment bank following a £390m fine for rigging Libor, Hester wrote to staff to thank them for their support since he was parachuted in to replace the ousted Fred Goodwin.
"Five years is a long time for anyone to serve as chief executive. The endless scrutiny we all face carries a cost, but it has always been offset for me by the warmth and support of colleagues from across the business to carry on," Hester said. "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. Investment bankers were told that the bank was further retrenching from overseas and pulling out of risky operations such as complex derivatives. "Our aim is to streamline the business, reduce complexity, mitigate operational risk and improve the way in which we manage our activities front-to-back," said the newly appointed heads of the investment bank, Peter Nielsen and Suneel Kamlani. The pair, appointed after John Hourican quit in the wake of the Libor fine, have effectively created a mini "bad bank" for the operations being run off.
The latest job cuts signalled the restructuring of a key RBS unit ahead of a privatisation that Hester said could take years.
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