LONDON -- The shares of Royal Bank of Scotland (LSE: RBS ) (NYSE: RBS ) slumped 21 pence, or 6%, to 305 pence during early trade this morning after the bank revealed the forthcoming departure of its chief executive last night.
The FTSE 100 member confirmed boss Stephen Hester would step down later this year.
RBS said Hester would continue to lead the business until December to ensure a "smooth handover," unless a successor was appointed before then.
The state-backed bank added that a search for a new chief executive would start immediately, and that it would consider both internal and external candidates.
RBS admitted an "orderly succession process" would give the new chief executive time to prepare for the bank's "privatisation process," and lead the group in the years that followed.
Hester confessed he was unable to make an "open-ended commitment" following five years in the job. He said:
We are now in a position where the Government can begin to prepare for privatising RBS. While leading that process would be the end of an incredible chapter for me, ideally for the company it should be led by someone at the beginning of their journey.
Philip Hampton, the chairman of RBS, added:
On behalf of the Board I would like to thank Stephen for his leadership and dedication over the past five years. In the midst of a major crisis, he accepted the challenge of stabilising the bank, turning it around, and putting us in a position where we can begin to plan for returning the organisation to the private sector. His achievements have been considerable.
Hester will depart with a £1.6 million payment in lieu of notice, representing his annual salary and benefits. His long-term incentive plan is expected to pay out £3 million.
Of course, whether Hester's departure, the mooted "privatisation process," as well as the general outlook for the banking sector all combine to make RBS a buy or a sell remains something only you can decide.
For what it's worth, taxpayers acquired 9 billion shares during 2008 and 2009 and need to sell at 502 pence to avoid a loss.
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