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RBS chief Hester's homecoming to UK banking

It was often joked in banking circles that London's City had mapped out new Royal Bank of Scotland chief Stephen Hester's career path long before he did.

Less than two weeks after taking up a non-executive directorship at the bank, the British Land chief executive has landed the top job, sealing one of the most widely anticipated financial sector reshuffles since the UK banking crisis began.

The UK government is preparing to become RBS' top shareholder as part of a rescue of three top banks announced on Monday.

Hester replaces Fred Goodwin, who resigned in the face of criticism of his acquisitive style.

The UK property sector has long since been resigned to losing Hester, who moved from banking into property in 2004.

Widely seen as a square peg in a round hole, banking and property market commentators said Hester's short stay in the property industry was little more than a brief interlude to the high-profile bank role he has always coveted.

"This is certainly SH's big chance, the one he has been waiting for," said an executive from one of Europe's biggest property share investors. "I am sure he has the financial skills and market knowledge, the political nous and, probably, the theoretical management skills to do the job."

A property sector novice, he was a surprise successor to real estate doyen Sir John Ritblat, who retired from British Land, the UK's second-largest property firm, in January 2007.

After several years at Credit Suisse First Boston and a stint as chief operating officer at pre-Banco Santander Abbey, some in the banking elite thought Hester had put himself out to pasture with a move into property.

Few in the property sector saw Oxbridge-educated Hester as a natural, long-term replacement to Ritblat, one of property's biggest personalities.

A barrel-chested gardening enthusiast who keeps rare plants and trees at his Oxfordshire country home, Hester cut a sober figure next to the flamboyant Ritblat, who created British Land after a reverse takeover in 1970, when Hester was 10 years old.

"SAFE HANDS"

Ritblat's quest for a suitable successor was punctuated by a trip to Venice, where he had a chance meeting with Hester who was holidaying at the same hotel.

The pair bonded over a shared passion for skiing, and by the end of the trip, Hester was front-runner for the most demanding job in UK property.

Property commentators say Ritblat saw Hester as a "safe pair of hands" to protect British Land's then 18 billion pounds ($31.11 billion) portfolio from an imminent market correction and a transition to a real estate investment trust (REIT).

These same safe hands were identified by the UK government, who called on Hester for advice following the nationalization of Northern Rock in September 2007.

Hester's cool character will be vital to calm panic among RBS shareholders, but underneath his contemplative exterior lies a ruthless strategist with little fear of making unpopular decisions when necessary.

In his short property career, Hester authorized share buybacks when property shares were in freefall, broke British Land's complete ownership of London City office complex Broadgate and put Meadowhall -- the company's flagship shopping mall -- up for sale.

"Stephen has added something different," said Ian Coull, chief executive of UK REIT Segro and former British Property Federation president.

"He was very valuable at a time when the industry was going through major change particularly with REITs, where his financial bent was a real benefit."

Hester said in a conference call he was looking forward to rebuilding RBS.

"We have to make sure our risk is resized downwards. And we have to rebuild shareholder value," he pledged.

His departure from high-level UK banking four years ago shocked almost everyone but no-one in the Square Mile or the UK property world will be surprised at his return.

(additional reporting by Steve Slater; Editing by Andrew Callus and Sue Thomas)

(See www.reutersrealestate.com for the global service for real estate professionals from Reuters)

Source:  http://uk.reuters.com/

Print   2008-10-15