RBS confirms McEwan as chief executive

RBS made a pre-tax profit of £1.37bn in the six months to June 30. This compared with a £1.68bn loss in the same period a year earlier.

Story highlights

  • McEwan, who currently heads its UK retail banking arm, will take over at the start of October
  • His basic salary, meanwhile, has been set at £1m a year, less than the £1.2m that was paid to Mr Hester
  • RBS said McEwan had asked not to be given an annual bonus in 2014, or the remainder of 2013

Royal Bank of Scotland confirmed that Ross McEwan will be the state-controlled group's new chief executive as it reported first-half results that were hit by investment banking weakness and charges linked to regulatory and legal issues.

McEwan, a 56 year-old New Zealander who currently heads its UK retail banking arm, will take over at the start of October. He succeeds Stephen Hester, who is being ousted after pressure from the Treasury.

RBS said McEwan had asked not to be given an annual bonus in 2014, or the remainder of 2013 for his work as chief executive. In addition, conditions have been attached to the payment of any 2013 bonus related to his current role.

His basic salary, meanwhile, has been set at £1m a year, less than the £1.2m that was paid to Hester, who waived his own bonus in 2011 and 2012.

The bonus sacrifice and reduced salary represent an acknowledgment of the fierce public scrutiny that pay still attracts within the bailed-out banking sector.

Philip Hampton, RBS chairman, said: "He [McEwan] wanted to make some gesture in relation to both basic pay and what has been a very contentious issue around bonuses."

However, McEwan -- who joined RBS from Commonwealth Bank of Australia last year -- will be eligible for a long-term incentive award in 2014.

    Presenting his last set of results before leaving the bank, Hester said he had promised McEwan an "adventure" when recruiting him. "An adventure is what we are delivering," he added.

    Ian Gordon, an analyst at Investec Securities, welcomed the appointment, saying it should signify "a degree of strategic continuity".

    Shares in RBS nevertheless fell 4 per cent to 319p on Friday morning as investors digested the first-half results.

    RBS made a pre-tax profit of £1.37bn in the six months to June 30. This compared with a £1.68bn loss in the same period a year earlier.

    But its performance in 2013 was flattered by a £376m "own credit" gain linked to the fluctuating value of its own debt and derivative liabilities. Own credit losses of £3bn had wiped out its profit in the first half of 2012, meanwhile.

    The deliberate shrinking of RBS's investment banking arm took a heavy toll on the unit's operating profit, which was £371m in the first half of 2013, down from £1.08bn a year earlier. In the second quarter, it made just £93m.

    "We hope that profits [from investment banking] will be bolstered over the next two years by cost-cutting," Mr Hester said.

    Like peers Barclays and Lloyds Banking Group earlier in the week, RBS had to set aside yet more money in the second quarter to compensate customers mis-sold payment protection insurance.

    This charge amounted to £185m, taking its cumulative PPI charge to £2.4bn. It also had to set aside £385m against regulatory and legal actions during the second quarter, mainly related to its investment banking and international banking arms.