Monday, 29 November 2010

The Men at The Top - Stephen Hester

Stephen Hester was born on 14 December 1960 and went to Easingwold Comprehensive in North Yorkshire before moving on to Oxford University. Here he was chairman of the Tory Reform Club and obtained first-class honours in politics and economics.

On leaving university, his first job was as assistant to the chairman of Credit Suisse First Boston (CSFB). Clearly of no mean ability or indeed ambition, he impressed his colleagues enough to become the youngest-ever managing director when aged only 35. Following this, he became Chief Financial Officer, then Head of Fixed Income and co-Head of European Investment Banking. He left when John Mack (aka "the Knife") took over. There are different versions of the reasons behind this, with Hester claiming that Mack didn’t want anyone who might be competition!

From CSFB he moved to Abbey National where he oversaw a major overhaul (“slash and burn” was how he described it in a 2007 interview with The Sunday Times) resulting in disposals and a successful sale before changing direction briefly for the job of Chairman of British Land after a fortuitous meeting with Sir John Ritblat in Venice. Despite his lack of experience, he successfully modernised BL.

In 2008 he was appointed non-executive Deputy Chairman of Northern Rock – a position he had to relinquish some eight months later as he was nominated for the top job in RBS in November 2008.

Apparently, when asked what he would do if he took over RBS (This Is Money October 2008), he listed six actions:

1. Make the business less risky; (because it needed to be);
2. Re-engineer the retail versus wholesale businesses mix, with more bias towards retail;
3. Introduce a higher customer component with less proprietary involvement;
4. Be completely international;
5. Grow the group - after shrinking, then grow but carefully;
6. Ensure the bank kept and attracted good employees (the most challenging?).

As a person, Hester could be characterised as:

Ambitious: apparently fellow students at Oxford remember his drive for a First and his colleagues at CSFB will also have seen this in his rise to almost the top. He has been quoted as saying, "If you are a footballer you want to play in the Champions League final. It's the same in business... you want to test yourself against the biggest and most complicated challenges."

Realistic: "Jobs like this are unbelievably stressful, leaving you open to unpleasant scrutiny, and there is a 50% chance it ends in tears, because that is the way the world works. But, as they say, if you can't stand the heat, get out of the kitchen." (The Guardian January 2009).

Ruthless (Abbey National) is how some would see him at Abbey National as he cut costs and disposed of what he felt were non-core businesses.

Open: unlike Fred Goodwin at RBS, he has made himself as available as is possible “for someone struggling to wrest a bank from the brink of collapse” (The Guardian). He has also been described (again by The Guardian) as “transparent in his management style” and as leaving “people in no doubt what is expected of them”. .

In terms of successes: at British Land, he introduced a more transparent culture, rationalised its structure and moved its offices from Regent’s Park to Marble Arch as well as making several good acquisitions.

At Abbey National he helped rescue this former building society with disposals and rationalisations before selling it to Banco Santander.

At RBS he has stopped a 10-year long expansion drive and has raised more than £1.65billion from exiting or selling over 20 businesses.

On the other side, he can be seen as “unclubbable” and lacking intuition about other people (not unusual in highly intelligent and able people).

Hester is not doing the RBS job because he needs the money – he made this before joining during his 19 years at CSFB. He has properties in Verbier, London and Oxfordshire. Yes, he’s taking a £1.2million salary from RBS (not out of line with his peers) but the real payback will come from the 10.4m shares he was granted on arrival if he can turn RBS around. Some question on this though - they were priced at £0.65 (the price at which the government subscribed for shares in October 2008) and are languishing well below this at the time of writing. Contrast this with the £6+ high enjoyed in 2007!

His real challenge is to create the conditions for the government (read “Taxpayer”) to start selling its 83% stake which he wants to do from 2011. This does look tricky at the moment, and RBS will need some spanking good news to achieve this.

Hester has a long way to go, but seems to be the right man for what must be one of banking’s most poisoned chalices. He’s putting the building blocks for RBS’ recovery in place, but with the current banking headwinds, expect his to be a longer and tougher job than at first expected.

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At 23 August 2014 at 17:54 , Anonymous Anonymous said...

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