Retail Boss McEwan Leads Race For Top RBS Job

By Mark Kleinman, City Editor

The head of Royal Bank of Scotland's (RBS's) UK retail banking operations, Ross McEwan, has become a frontrunner to replace Stephen Hester at the helm of the state-backed lender.

Sky News understands that Mr McEwan has become the leading internal candidate for the job and could be announced as Mr Hester's successor as soon as RBS's half-year results on August 2.

People close to RBS cautioned that the chairman, Sir Philip Hampton, had yet to make a decision about his preferred choice, who would almost certainly oversee the eventual reprivatisation of the taxpayer's 82% shareholding in the bank.

A number of unidentified external candidates are also still in the running, although some other outsiders have been deterred from participating in the process by the extent of the Government's interference in the bank's strategy, according to insiders.

"The process is still live and there is no final decision at this point," a person close to the situation said. They stressed that it was possible that one of the external candidates could yet be picked to take over from Mr Hester.

RBS CEO Stephen Hester has announced his decision to leave the lender

Sir Philip's search for a new boss is understood to have encompassed candidates in Australia, Canada, Hong Kong, Singapore, the UK and the US - "the entire English-speaking banking world," as one insider said on Tuesday.

Mr McEwan, a New Zealand national, is understood to have told Sir Philip that he would be prepared to commit to a long-term stint in the UK if he is chosen as the new boss.

RBS's board will meet next week to finalise the bank's interim results announcement and discuss the appointment of a new chief executive, although naming a new boss could yet slip beyond next week.

UK Financial Investments, the agency which manages the Government's shareholding in RBS, has not yet been asked to give its verdict on Mr McEwan or the other contenders.

Mr McEwan would - if chosen as Mr Hester's successor - almost certainly win the crucial support of Cabinet ministers such as Vince Cable, the Business Secretary, and George Osborne, the Chancellor.

He spent five years as the group executive for retail banking services at Commonwealth Bank of Australia before joining RBS, and is credited at the Edinburgh-based lender with driving through reforms aimed at improving customer service.

Some analysts have positioned Mr McEwan as a similar candidate to Antony Jenkins, who headed Barclays' retail banking business before being appointed to replace Bob Diamond in the wake of the Libor rate-rigging scandal last year.

Appointing Mr McEwan would, nevertheless, represent something of a gamble for RBS and the Government. He has limited experience of the British banking sector, having only been appointed to his current role in August last year.

His experience of investment banking is also negligible, although RBS's investment banking operations are now sufficiently small at less than 20% of its balance sheet that appointing a deputy to Mr McEwan with greater experience in that area is seen as possible but unlikely.

The Treasury is carrying out a review of whether a 'bad bank' containing approximately £60bn of assets could be carved out of RBS, enabling its 'good bank' to accelerate lending to the UK economy.

Mr Cable has been vocal in his demands for RBS to grow its business lending, prompting the bank to announce this month an independent review of its lending practices.

Such a split has been opposed by Mr Hester and was among the factors that triggered tensions between the outgoing boss and the Chancellor in recent months.

One advantage of appointing Mr McEwan would be his availability to take over the top job in time for Mr Hester's departure in December.

Among the other RBS executives who have been seen as credible candidates for the chief executive's role were Nathan Bostock, the new finance director, who may still be in the frame; Chris Sullivan, the chief executive of corporate banking; and Rory Cullinan, who has led the rundown of RBS's non-core division during the last five years and is leading the group's engagement with the Treasury's 'bad bank' review.

Bruce Van Saun, who is leaving as finance director to head RBS's US retail bank, Citizens, was also a possibility if he could have been persuaded to remain in the UK, although his dealings with the Treasury about RBS's strategy are also understood to have been tense at times.

RBS declined to comment.

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