Stephen Hester: the first name on every headhunter's hitlist

Fresh from turning round RSA, the banker who did taxpayers a favour at RBS is unemployed again. But don't expect that to last – Nick Goodway can think of at least one financial giant that could use him 

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The Independent Online

The City’s army of rapacious headhunters are already sharpening their pencils and calculating the commissions they could earn for finding the next big job for Stephen Hester.

The chief executive of insurance giant RSA, and former boss of Royal Bank of Scotland, is unlikely to hang around for long once its £5.6bn takeover by Swiss rival Zurich Insurance is cut and dried next month.

Mr Hester, 55, could walk away with around £8.5m in share bonuses and contracted pay. But the money won’t matter and no one expects him to spend much time counting it.

In fact the headhunters are likely to be disappointed. He won’t need their services. Not only is his own contact book pretty impressive, the network of boardroom directors with whom he has worked or even crossed swords over the past 13 years means he will be near the top of any list being drawn up by any big public company looking for a new boss.

Indeed speculation is rife that he might become the next chief executive of Barclays. After all, he took the helm at RBS one month after John McFarlane became a non-executive director in October 2008, just before the bank was bailed out by the taxpayer and Fred Goodwin was ousted as chief executive. 

Mr McFarlane, of course, is now chairman of Barclays, where, in turn, he ousted the chief executive Antony Jenkins – and made it clear that the next boss would preferably be someone with experience of investment banking, since that will remain a key part of the business.

Mr Hester’s CV certainly fits that requirement. He joined the unusual combination of Swiss and Wall Street bankers that  was Credit Suisse First Boston at the start of the 1980s immediately after graduating in politics, philosophy and economics from Oxford. Educated at Easingwold comprehensive school in North Yorkshire, he went up to the former all-women’s college Lady Margaret Hall.

CSFB was created by Credit Suisse and Wall Street’s First Boston in 1978 as a joint investment banking venture based, somewhat oddly, just behind London’s Oxford Street in Great Titchfield Street.

It became known as a radical innovator in devising financing solutions for its multinational clients, often winning business from the City’s traditional merchant banks. Mr Hester was at the forefront of this with the launch of the world’s first-ever Eurosterling bond on behalf of British Gas – an instrument denominated in sterling but tradable across the Continent. He became CSFB’s youngest- ever managing director.

But his CV was to accrue even more blue-chip appointments – the breadth of which explains the excitement among headhunters now.

Mr Hester left what by then had again become just Credit Suisse, where he had risen to finance chief and head of fixed income, in 2002.

In his first venture outside the bank, he became finance director to the newly appointed chief executive Luqman Arnold at the building society turned bank Abbey National. The company’s share price had tumbled following its demutualisation, in spite of which it had rejected takeover bids from both Bank of Ireland and National Australia Bank.

It took them two years but Messrs Arnold and Hester succeeded in attracting an £8bn takeover bid from Spain’s Banco Santander in 2004, which left investors more than happy.

Next stop on the Hester career ladder was British Land, which for more than 30 years had been run by its founder Sir John Ritblat in his inimitable forthright style. As the era of corporate governance arrived and activist shareholders started to make noises off, Mr Hester cleverly brought the property giant into the 21st century while the same time subtly guiding Sir John to non-executive chairman and then life president.

Then came the global financial crisis. In this country, the first signs of the downturn were the queues of people around the blocks trying to withdraw their money from Northern Rock in September 2007. It was no great surprise that when the bank was nationalised and its entire management and board fired, Mr Hester was parachuted in as a non-executive director in February 2008.

But as first Lloyds and then RBS rolled up for their respective £20bn and £45bn taxpayer bailouts over the course of the next few months, he was never likely to remain a mere board member at a smallish former building society.

The Prime Minister, Gordon Brown, and his Chancellor, Alistair Darling – no doubt on the advice of City grandee Lord Myners – asked Mr Hester to replace Fred Goodwin at RBS. Friends say that he genuinely felt a sense of public duty in accepting their offer. He had already made enough money that financial inducements were certainly far from the main draw.

The task was enormous. Mr Goodwin’s global ambitions had turned RBS into a basket case. Morale was rock-bottom and the culture, certainly within its investment bank, more akin to the gambling halls of Macau than the hallowed banking halls of its founding Scottish fathers.

Mr Hester achieved a huge amount in a relatively short time doing what he liked to call “the heavy lifting”. He sold off billions of pounds worth of non-core assets, closed branches and cut more than 11,000 staff across the organisation as he shrank the bank to a sustainable size.

But by this point he had a new political master and he did not get on with the Chancellor, George Osborne, who, through the taxpayer’s 80 per cent stake, controlled hiring and firing at the top of the bank.

One former Treasury official said: “If you told George he was having dinner with Antonio Horta-Osorio [chief executive of Lloyds] that night, he would smile. If you said he had a meeting with Stephen that afternoon, he would bristle. It wasn’t just over strategy – it was personal.”

In February 2013 Mr Hester came under intense political pressure and, after three days pondering the matter, turned down the £1m bonus awarded to him by the board for his work in 2012. He felt he had earned it fair and square but the politicians would not wear it.

In June, after he admitted he had probably not spoken to the Chancellor for “two or three months”, he was out. The two appeared to have disagreed not just about the speed at which Mr Osborne could start selling taxpayer shares in RBS, but also on just how big an investment bank it needed to retain. Mr Hester was later rather than sooner on the sell-off and convinced that investment banking was a key adjunct to offering global banking to big corporate clients.

At the time of his ousting, many in the City came to his defence. Robert Talbut, chief investment officer at Royal London Asset Management and head of the Association of British Insurers’ influential investment committee, said: “I think history will be a lot kinder to Stephen Hester than perhaps some current commentators think. He took over RBS in a distressed situation and has nursed it back to reasonable financial health.”

When asked whether he would have taken the job with the benefit of hindsight, Mr Hester said: “Honestly, I don’t know. There was a degree of complete selfishness. It was a huge professional test and I’m the kind of animal that likes that. I invested the most important part of my life in the bank and I gave it everything I could.”

Then he smiled: “I’m immensely proud of what we have done and the people who have done that.”

Mr Hester instils loyalty. He is a big man physically and described by colleagues as a demanding but fair boss. One said: “He expects people to do their very best, and if they don’t, he lets them know. But he also appreciates those who make the effort.”

He also has an unfortunate tendency to go pink or even red around the neck and face when annoyed or embarrassed. One thing guaranteed to send him beetroot is newspapers printing that photograph of him on horseback dressed in full hunting gear.

In fact, hunting was his former wife Barbara’s passion. She, not he, is Master of the Warwickshire Hunt. They met at CSFB and married in 1991 – but separated five years ago. His private life remains very private and he is immensely protective of their two children.

Mr Hester’s passion is gardens. Alongside his west London home and ski chalet in Verbier, he has owned the 350-acre Broughton Grange estate in Oxfordshire since 1992.

Here he has indulged his passion, creating – with the help of the renowned landscape designer Tom Stuart-Smith – not one but eight gardens. Broughton is open to visitors for charity days several times a year, and is widely recognised as one of the most impressive modern gardens in Britain. Its newly built walled gardens host a mass of architectural and herbaceous plants, thousands of tulips burst into flower every spring, and the arboretum is rapidly becoming a leading collection of specimen trees.

But few people in the City believe Mr Hester will be gardening for long once he leaves RSA.