Rbs shares plunge as chief stephen hester quits with £5. 6m deal after

Shares in the bank plunged 5 per cent as the City reacted badly to the departure of Stephen Hester. Hester was brought in five years ago to sort out the chaos at RBS following the reign of

Fred Goodwin and make it fit to return to the private sector after it had to be rescued by a huge taxpayer bailout. Uncertainty about the future of the 81 per cent-taxpayer-backed bank saw

its price plunge 17.5p to 308.1p as analysts at Shore Capital downgraded the stock to a "sell" rating. Gary Greenwood of Shore Capital said: "Overall, we think this

announcement increases the uncertainty around the shares and potentially delays further any return of the bank to private ownership." The bank is expected to announce 2,000 job losses

today in the wake of Mr Hester's decision to stand down after five years at the helm. But in a statement yesterday RBS said Mr Hester was “unable to make an open-ended commitment” to

oversee its re-privatisation before the next election in 2015. Hester, 52, is understood to be walking away with a pay and shares deal worth £5.6million. The board of directors said it will

begin the search for a new chief executive immediately. Unless a replacement is found quickly, Mr Hester will step down from his post in December. Questions about the nature of his

resignation were also raised by his statement that said while the move was “amicable” and “not foisted” on him, it was “the board’s decision”. The board was rumoured to be holding

discussions over a replacement last month. RBS and the Government are working on the bank’s return to the private sector but it is still 81 per cent owned by the taxpayer. Chancellor George

Osborne insisted RBS had become “safer, stronger and better able to support its customers” under Mr Hester. He said: “When Stephen Hester took on the job at RBS in 2008 it was a bust bank

with a broken culture and posed a huge risk to financial stability.” He said Mr Hester had “brought RBS back from the brink”. But the resignation still raised doubts over the future of RBS.

Yvonne Goodwin, of Yvonne Goodwin Wealth Management, said: “It makes you wonder what is behind this. It also throws up all sorts of awkward questions for the rest of the board.” And

financial expert Richard Wagner, chief executive of Advanced Payment Solutions, said: “It will inevitably delay the return of investment to the Government. This has come as a little bit of a

surprise.” Mr Hester said that, under him, RBS had “reduced the bank’s balance sheet by nearly a trillion pounds, repaid hundreds of billions of taxpayer support, and removed the imminent

threat that this bank’s size and complexity posed to the UK economy.” Mr Hester is married for the second time and has a home in Notting Hill, London, a 35-acre estate in Oxfordshire and a

ski chalet in Verbier, Switzerland. Less than 24 hours after news of Mr Hester’s departure RBS is expected to announce today that it is axing 2,000 jobs. A source confirmed the losses and

said the posts going will be lost in the markets division. COMMENT BY PETER CUNLIFFE BROUGHT in to rescue Royal Bank of Scotland after a taxpayer bailout that prevented the worst corporate

collapse in British history, Stephen Hester was given one of the toughest jobs in the country. His task was to undo the mess created by his disgraced predecessor Fred Goodwin, and prepare

RBS for a return to the private sector. He has succeeded in meeting most of his targets, slashing costs, selling off unwanted businesses and restoring its finances to a state where partial

re-privatisation could become a reality next year. But Hester, the bank’s board and the Treasury reached a point where each had to decide whether he was the right person to steer it through

the next phase in its history. He was unwilling to stay on for another five years. However the prospect of a temporary chief executive would have been an unattractive one for investors. His

departure now means Hester can step down having fulfilled the first part of the task and his successor can steer RBS through the choppy waters of denationalisation. He walks away a wealthy

man, departing with up to £5.6milion in pay and shares. But taxpayers have already saved billions of pounds thanks to Hester. The question now is who is capable of taking on what could turn

out to be a poisoned chalice. It will need someone with the skills to pull off one of the most difficult turnarounds ever tackled and having a skin thick enough to cope with all the flak

that goes with the job.