RBS no longer a 'bust bank' as it appoints new chief executive Ross McEwan

The 81 per cent taxpayer-owned bank announced swing into profits of £1.4bn under outgoing boss Stephen Hester

Royal Bank of Scotland has appointed New Zealander Ross McEwan as its new chief executive to replace Stephen Hester, as the largely taxpayer-owned bank recorded a major swing from losses last year to a £1.4 billion profit.

Mr McEwan, 56, will step up from his current role as head of retail banking from 1 October, and will receive a £1 million salary, somewhat less than the outgoing boss’s £1.2 million.

The former retail banker from Commonwealth Bank of Australia has decided to forgo an annual bonus as chief executive for 2013 and 2014, and will not receive any performance-based awards under his new role until 2017, although he will receive a £350,000 cash payment in lieu of pension.

Philip Hampton, chairman of RBS, said Mr McEwan was taking on a job that was “among the most important and challenging in the business world”.

He called him a “champion for customers” and added that his appointment came after an international search including internal and external candidates.

The decision to appoint Mr McEwan came as his predecessor revealed a quite remarkable return to profit for the previously “broken” bank.

RBS announced its first two consecutive quarters of growth since the crash of 2008, and the 81 per cent taxpayer-owned organisation saw a huge swing into the black from losses of £1.7 billion a year ago.

The incoming boss paid tribute to the man he is replacing, saying: “Stephen Hester and all of our employees have done a remarkable job in saving this bank.

“And now five years on we are ready to focus on the future. We have a lot of work ahead of us and I'm very much looking forward to getting started.”

In revealing his last major set of accounts before standing down, Mr Hester said: “RBS's journey from 'bust bank' to 'normal bank' is largely done.

”But no small task remains - to harness the energies and strengths that have driven the bank's recovery, and to take RBS towards the target of being a 'really good bank' for customers, shareholders and society as a whole.“

Mr Hester “retired” partly due to pressure from the Chancellor to downsize the importance of RBS’s investment banking arm, and it is widely expected that the decision to appoint a specialist in high street banking as chief executive will see a shift away from more risky forms of money-making.

As with the news of Lloyds’ return to profit yesterday, however, there was an element of bad news in with the good. RBS has become the latest bank to set aside extra funds to cover claims of miss-sold Payment Protection Insurance.

While on a smaller scale to its fellow Government-bailed-out rival, RBS had to commit another £185 million to cover legal costs, taking its losses resulting from the scandal to £2.4 billion.

And an important part of Mr McEwan’s new job will be to steer the ship through choppy waters of litigation and investigation ahead. Including the fallout of the Libor inter-bank lending rate rigging scandal, RBS had to set aside a staggering £385 million for legal and regulatory costs.

With much work to be done, Chancellor George Osborne welcomed Mr McEwan's appointment and said he was impressed with his ”vision of RBS as a strong, UK-centred corporate bank that is focused on supporting the British economy“.

He said: ”He'll provide the leadership RBS needs as the bank puts the mistakes of the past behind it, and the Government seeks to get the best value for the taxpayer from the money the last Government put into the bank.“

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