Ross McEwan emerges as insiders’ tip to take over RBS

In the aftermath of the ouster of Stephen Hester as chief executive of RBS, bookmakers have been shortening their odds on an internal appointment to replace him.

That’s because managing a big and complex bank through continued restructuring, eventual privatization and beyond, while all the time being second-guessed by its largest shareholder, the UK government, then being roundly, publicly abused every bonus season – simply for daring to pick up contracted pay awards that are at the low end of industry standards – all the while receiving minimal support from a weak chairman, looks so spectacularly unattractive.

One reason why Hester was so popular with the troops still left at RBS was because he did such a good job restructuring it against the tough backdrop of a tumultuous relationship with chancellor George Osborne and Robin Budenberg, the former UBS FIG banker who now heads UKFI, the body that manages the UK government’s shareholdings in RBS and Lloyds. One of the first names suggested to take over from Hester was Richard Meddings, chief financial officer of Standard Chartered.

“I have no doubt he could do it,” says one RBS banker. “But why on earth would he want to come here when he has a good shot at taking over from Peter Sands and being chief executive of a much better bank?”

Ladbrokes was quoting Meddings at 6/1 two weeks after the news broke. It might be as wise to take the 16/1 on offer for Ana Patricia Botín. There’s always the chance of a surprise external candidate. The UK government could even insert a senior figure from among the various bankers assembled since the financial crisis in oversight, advisory and regulatory roles.

Another source mentions – perhaps mischievously, because he has only just been named to the board of the Prudential Regulation Authority – Nick Prettejohn, who previously chaired Brit Insurance having also been chief executive at Lloyd’s and who ran the Prudential in the UK and Europe.

Much more likely is an incumbent. Of the potential candidates now on the executive RBS committee, one of the early favourites was Nathan Bostock, who has managed down the bank’s non-core division rather like Michael Corbat did before taking the top job at Citi.

The RBS insider advises caution: “I don’t think he’s ready for it. He’s only just getting set for the CFO role.”

Bruce van Saun, the present CFO, who joined RBS in 2008 from Bank of New York Mellon to help Hester through the restructuring, has been lined up to run Citizens for RBS in the US in the run-up to flotation. He has slipped to 20/1.

The new bookies’ favourite at 9/4 is Chris Sullivan, who runs the corporate division, overseeing RBS’s business with SMEs as well as Lombard, its asset finance business.

He previously headed Direct Line, the insurance division. But inside the bank there’s growing talk about Ross McEwan, head of UK retail since August 2012 when he joined from Commonwealth Bank of Australia, where he had spent five years running the retail banking business.

“He’s a kind of antipodean Antony Jenkins,” says one RBS banker. And while McEwan is back in sixth place at the bookies at odds of 8/1, this insider says: “The next CEO needs to be a retail banker.”  But would any of the internal candidates be willing to take the job? They had just agreed refinements to the RBS business strategy and it might have been disagreements over this that lay behind the decision to remove Hester.

This is the conclusion from Osborne’s Mansion House speech. Much attention has focused on the chancellor’s revival of the old idea of splitting RBS into a good bank and a bad bank. It’s probably too late for that and Osborne is only allowing a study as a sop to parliament.

More likely, it seems, is a further wind down of the shrunken investment banking division and a further retreat from overseas business.

Who wants to manage that?

One external adviser says: “These guys [RBS senior management] need to understand that what’s going on here is a de facto Glass-Steagall.”