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BIG HITTERS ARRIVE IN RBS SHAKE-UP

RBS shares rose 4p to 221.75p

Thursday August 28,2008

By Andrew Johnson

BRITISH Land chief executive Stephen Hester yesterday emerged as the hot favourite to take over from Sir Fred Goodwin as the boss of Royal Bank of Scotland.

Hester and two other heavyweights joined the bank’s board in a major boardroom shake-up designed to address concerns about governance at the bank in the face of a torrid year. RBS shares rose 4p to 221.75p.

Some investors have called for the heads of Goodwin and chairman Sir Tom McKillop in the wake of the bank’s £12billion rights issue and first-half losses of £691million.

Hester stepped down as deputy chairman of Northern Rock yesterday.

The other non-executive directors are former Australia & New Zealand Banking Group chief executive John McFarlane — seen as a replacement for McKillop — and US insurance industry veteran Arthur Ryan.

Analysts and investors said Hester, 47, was young and credible enough to replace Goodwin. “He is immensely ambitious, aggressive and talented,” said interdealer broker BGC Partners’ David Buik.

Hester has extensive banking experience. He worked for Swiss bank Credit Suisse and was chief operating officer of Abbey National, playing a key role in sorting out the bank before its sale to Spanish bank Santander.

McFarlane has also worked for Standard Chartered, providing the RBS board with emerging markets experience, needed after buying the Asian assets of ABN Amro.

One analyst said Goodwin should have gone “yesterday” after buying ABN Amro for too much money last year. “RBS stepped on a landmine,” he said.

Insiders said replacing Goodwin and McKillop might take time, with the next key appointment being a senior independent director.