The RBS boss lacks Diamond’s ingenuity and ruthlessness on the tough issues – the wrong CEO has gone
What a mess. Bob Diamond has resigned from his role as chief executive of Barclays, the chairman Marcus Agius has also left and RBS has been in the news for all the wrong reasons.
But have the right people gone? Simple. Agius was right to resign, Diamond should have stayed and Hester should be fired.
Banker bashing is back in fashion. I am not going to defend them against their own failures. Fixing rates of any kind is not only undermining confidence, it’s fraudulent and demonstrates a lack of corporate governance.
Marcus Agius, the chairman of Barclays, has resigned. He’s been in that post since 1 January 2007 and is paid a reported £750,000 a year. So it’s right that he should have gone. He was in charge when rate fixing was going on and knew the FSA was investigating.
Given that it took the FSA five years to opine, he’s had plenty of time to take action.
But he hasn’t. Clearly it wasn’t top of his agenda. It should have been.
Personally, I’d also fire him from his position as a senior non-executive director of the BBC Executive Board.
Should Bob Diamond have resigned too? No. He’s one of the best bankers out there. The knives are out because he’s made so much money. However, he’s made even more for the teams that work with him, investors and shareholders.
So who is top of my list? RBS.
“When everything went pear-shaped for the bank in 2008, the UK government panicked. They had to find a new CEO and they had to find someone who would be credible. It’s very clear they didn’t do their homework”
Because of the Barclays furore it has managed to hide under a bushel. A group of its traders have been fired as a direct result of this latest rate fixing scandal. So that’s the second disaster this week for Stephen Hester – adding to a catalogue of errors.
It’s time to fire him from his post as CEO of RBS.
I have an element of sympathy for Stephen Hester. He is a very nice chap. Very bright, with a level of experience that is required for a top job such as leading RBS through these dark days.
So why on earth do I want to fire him?
Square peg. Round hole. Looking at his story, Mr Hester has an interesting CV. Educated at a rural comprehensive in North Yorkshire, followed by a degree in PPE at Oxford, he joined the investment bank Credit Suisse in 1982.
There he remained until 2002 when he became the finance director of Abbey National. Shortly after he was promoted to the role of chief operating officer but departed to become chief executive of British Land in 2004.
Yet as seemingly impressive his CV may be, it’s not really suited to the running of RBS.
Indeed it’s most certainly not suited to the running of an RBS that is largely owned by the UK taxpayer.
When everything went pear-shaped for the bank back in 2008, the UK government panicked. They had to find a new CEO and they had to find someone who would be credible.
It’s very clear they didn’t do their homework and they hired someone with one remit while asking them to perform another. From what I know of the situation Mr Hester isn’t one for publicity. This role requires you to lead from the front.
To be prepared to make statements quickly and promptly to a baying media – to get the message out there.
This isn’t a job for someone who is either publicity shy or unprepared to make a strong case for why they’re in the job and what they intend to achieve.
I’m not even going to attempt to cover the complexities of the group in this article. Suffice it to say that we know Royal Bank of Scotland and NatWest as the two main parts of the bank – as well as the Queen’s bankers, Coutts, and the other private specialised banks; Drummonds, Adam & Company, and Child & Co.
Those are the retail elements of the bank and of course there is the investment banking arm of the group which encompasses the folly that is ABN Amro, purchased by Fred “the Shred” Goodwin and his team.
It wasn’t considered a good deal at the time. It certainly isn’t considered any good now. What a ghastly mistake.
Anyway, the most significant part of the bank is its balance sheet: what’s on its books.
The companies it owns, the outstanding loans, the extensive range of property transactions. Let me tell you, there’s some toxic stuff in there. The bank got involved in many transactions over the years. Many of them it should not have gone near. In its fierce expansion during the noughties, it bought market share, over lent on asset-backed transactions and extended itself well beyond its balance sheet capabilities.
An absolute hospital case.
None of this, of course, is anything to do with Mr Hester. He simply had to come in and clear up the mess.
I daresay that when approached he had no idea of the extent of the poor decisions that had been taken. The sprawling nature of the business and the gargantuan task ahead.
Critics have rightly indicated that Mr Hester did well to minimise the losses of the company – stem the haemorrhaging and stabilise the beast. Yes, he has. But that’s not enough.
When it comes to retail banking it means you have to offer more. Although the UK retail banking market suffers from inertia, customers do still matter, innovation is incredibly important, as is brand.
The IT failure at NatWest and its parent group RBS has destroyed the “helpful banking” mantra that has cost so much.
After all, it’s not as if being helpful is innovative. It’s rather desperate. If you have to spend that much time drawing up a customer charter to give clients the very basics in customer service, the wheels really have fallen off your business.
As for the ads?
Tired, boring, drab, old fashioned, annoying and, actually, just bad. They have no redeeming features. Even their choice of Will Young’s “Grace” as the theme is tired, has been used for too long.
And might I suggest that you take a look at the lyrics of that particular track? You may wonder what they were thinking.
Grace, you’re getting away with it
Words, but nothing to say with it
You smile and take what you need in a way that you please
So yes, Mr Hester. Your bank is getting away with it; the words are hollow because the banking service you offer is anything but helpful.
Meanwhile your team may offer a smile but cost us a fortune at customer and taxpayer level while you pay yourselves a bundle and overcharge for your services.
Er, have you seen the cost of a NatWest Mortgage these days?
The lyrics go on and so does the sorry tale of a bank that is being run down.
The profitable parts of the organisation are being starved of the creative oxygen they need to recover. Meanwhile, the retail banking part is staid and uncompetitive. Critically, the decisions that are essential now are not being taken.
IT, marketing, PR, customer care, product development, competitiveness, rebuilding the brand, retaining existing customers and winning new customers. All a failure.
At Barclays, however, things are different.
The investment-banking arm is powering ahead. Let’s not forget that while he was head of Barclays Capital Bob Diamond pulled off the deal of the century by buying the profitable rump of Lehman Brothers.
Funds and products have performed well and throughout the financial crisis Mr Diamond and his team avoided going cap in hand to the government. Yes, it has been tough and shareholders have not seen a great return, but the reasons for that are more related to the general sentiment towards the sector than a lack of performance at the bank.
While I am not a particular fan of their advertising campaign, B
arclays have managed to innovate. Their branches have enjoyed considerable investment and they pioneer technological advances such as the swipe pay and app based financial transactions that have shaken up how you use and spend your money.
Of course the scandals at the two banks are very different – the Libor fixing at Barclays is appalling. Yet what seems clear is that the practise is systemic across many banks. Indeed the British Bankers Association is at the very heart of all this and it’s lucky that their chief executive Angela Knight resigned in April. If she were still in her job I’d fire her for a lamentable performance in her position.
That doesn’t mean we shouldn’t look for those responsible to fire, punish and, where appropriate, prosecute, we should, but the problems at NatWest are strategic. They have invested in the wrong areas of their business, made the wrong choices about how to market and PR their brands and have limited the opportunities for us, the taxpayer, to see a return of our investment in the bank.
Indeed I don’t think they have communicated their problems terribly well and if you speak to people who work there, the culture has been sapped.
There is no incentive plan in place to reward the individuals who could lead the bank out of crisis.
There is no vision to restore shareholder confidence or customer loyalty and there’s still a range of problems and scandals yet to be addressed.
One area where all banks need to improve is their PR. The public have never been so angry about banks and bankers.
It is simply no longer acceptable to go to ground. Indeed, much as the Treasury Select Committee may think they are wonderful, I don’t care whether leading bankers appear in front of them or not.
I would like leading figures from leading organisations to engage with the media. Crafted press releases are not good enough. Orchestrated advertising campaigns won’t cut it either. If you want the public to back you and accept you’re being paid such a lot of money, then must sing for your supper.
So while it may be a tough and bitter pill to swallow, Bob Diamond was the person to lead Barclays through these challenging times. The court of public opinion has struck again. This time to the detriment of shareholders, investors, customers and the nation’s financial services industry. However had Mr Diamond engaged effectively with the media when this storm broke, he may have been able to save his job. For Mr Hester, no matter how much engagement you do, your time is up. You can sing all you like. Maybe just pick another refrain from Grace…
Isn’t it a shame you’ve nothing to show from these lies?
I told you you’d pay for it
Lonely are the days of your life
James Max presents Weekend Breakfast every Saturday and Sunday mornings on London’s Biggest Conversation, LBC 97.3 FM. He is a qualified surveyor and worked in property and finance for 15 years. After working for one of the country’s leading property advisory firms, he completed healthy stints in investment banking and private equity, before becoming a candidate on The Apprentice, which launched a career in broadcast media. Visit JamesMax.co.uk.
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