Royal Bank of Scotland chief executive Ross McEwan is to exit the business saying that he had ‘delivered the strategy that I set out in 2013’ and had restored the bank to profitability.
Investors cheered the bank’s return to the ranks of yield stocks earlier this year but shares in the business remain struck in the doldrums well off a post-crash high of 375p, and the business has only begun to escape the long shadow of earlier conduct issues.
In early trading this morning the stock was 1.3% lower at 253p.
Chair Howard Davies recognised the uphill battle McEwan (pictured) had faced when he took on the job in late 2013, saying he had accepted one of the ‘toughest jobs in banking’ and delivered one ‘of biggest UK corporate turnarounds in history’.
McEwan added: ‘After over five-and-a half very rewarding years, and with the bank in a much stronger financial position it is time for me to step down as CEO.
‘It has been a privilege to lead this great bank and to have worked with some really outstanding people in the process. It is never easy to leave somewhere like RBS. However with much of the restructuring done and the bank on a strong and profitable footing, I have delivered the strategy that I set out in 2013 and now feels like the right time for me to step aside and for a new CEO to lead the bank.’
The bank said it had not yet identified a successor and McEwan would serve out a 12-month notice period.
The weak share price means that he exits while 62% of equity in the business remains in public hands, however, with the official target for selling that off now pushed out to 2024, 16 years after the state was forced to step in and nationalise the liabilities on the debt-loaded balance sheet.
UK taxpayers are forecast to face a £28 billion loss on the £45 billion bailout, which was executed at a price of 502p.
RBS in February declared an expectations-busting annual dividend of 3.5p and a special dividend of 7.5p following an strong 2018 which saw it double profits, although it warned on the potential fallout of a botched Brexit.
The business currently trades at a premium to its sector on a forecast PE multiple of 11x versus a peer average of 8x, and with a comparatively strong core capital ratio of 16.2% remains well placed to return cash.
In a 22-strong universe of City analysts tracking the stock 15 rate it a buy, on an average target of 310p, indicating 20% upside.
Following a meeting with management in March, Jefferies – which sits at the bullish end of the spectrum with a target of 489p – said it expected the bank to begin to deploy excess cash.
‘Excess capital return in the form of buybacks now forms part of our base case on RBS,’ the house noted. ‘The CFO highlighted the ability to buy up to a further 10% of shares in the open market (prospectively meaning that RBS could buy back up to 14.99% of its shares in a year – however unlikely in practice).’