business

RBS CEO Search Is Said to Intensify After McEwan Seals DOJ Deal

  • Current chief signaled he would exit after restoring dividends
  • CFO Stevenson, Alison Rose said to be top two candidates

The search for a new chief executive officer at Royal Bank of Scotland Group Plc will intensify after Ross McEwan finally reached a deal with U.S. authorities, according to people familiar with the matter.

The New Zealander, who took the reins in 2013 looking to get the lender out of state ownership, may leave as early as next year, the people said, as the bank announced a preliminary agreement with the Department of Justice to pay a $4.9 billion fine over how it sold residential mortgage-backed securities more than a decade ago. A spokesman at the bank declined to comment.

RBS favors two internal candidates to replace McEwan -- the bank’s chief financial officer and its most senior female banker, the people said, asking not to be identified as the details are private. RBS management was originally optimistic about settling the probe during the Obama administration, but negotiations dragged on for years. McEwan said in February that he’d like to stay at least until the lender starts paying dividends again, which was contingent on settling with the DOJ first.

“With the job of RMBS settlement almost complete and a return to dividends in sight, we also expect RBS to confirm a successor” in the second half, Jason Napier, head of European bank research at UBS Group AG, said in a note to clients after the announcement.

Internal Candidates

McEwan said on a call with reporters Thursday morning that he remained committed to achieve the lender’s 2020 targets, including reducing the bank’s cost-income ratio to less than 50 percent.

The shortlist for his replacement primarily includes internal candidates, as the lender doesn’t require a drastic change in strategy, one of the people said. Ewen Stevenson has been chief financial officer since 2014 and McEwan’s right-hand man on most earnings calls; Alison Rose, who would be the bank’s first female CEO, looks after the growing commercial and private banking business.

Naming Rose CEO would be a choice for continuity. She has only ever worked at RBS and one of its predecessor firms, National Westminster Bank, since joining the latter after university in 1992. The Briton, 48, now leads a business that generates a third of the bank’s revenue.

To read about Rose’s efforts to grow the commercial bank in 2016, click here.

Like McEwan, Stevenson, a 52-year-old former investment banker, is a Kiwi. The two have worked closely to reverse pre-crisis CEO Fred Goodwin’s aggressive global expansion, and thus would ensure a smooth transition, according to headhunters. Stevenson joined the lender in 2014 after 25 years at Credit Suisse Group AG, where his last job was co-head of investment banking for Europe, the Middle East and Africa.

People with knowledge of the government’s plans said the U.K. may start selling RBS shares sooner than the end of next March, as originally targeted, if market conditions are favorable. A spokesman for the bank declined to comment on a report last week that said RBS is in talks to hire Oliver Holbourn, the government official who oversaw the state’s investment.

A new CEO would push forward the strategy of slashing costs and finding growth, in a U.K. market which McEwan has described as “very competitive.” Under McEwan, RBS finally swung to profit in 2017, and has generated capital far greater than required by the regulators in the first three months of the year.

Before that, there were ten years of losses as RBS was hit by the multitude of scandals that ensnared British and global banks -- mis-sold payment-protection insurance, Libor and foreign-exchange index rigging -- even before firms started settling with the DOJ on how they packaged and sold the mortgage-backed securities that fueled the financial crisis. RBS, nationalized after being sunk by bad loans stemming from the disastrous takeover of ABN Amro, also incurred large expenses to restructure its investment bank, once one of the world’s largest.

“We are paying a high price for the past behavior, and we should never forget that,” McEwan said Thursday. “This bank has changed enormously.”

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