Philip Hampton eyes end to tumultuous time at RBS

After six-and-a-half years at the helm of Royal Bank of Scotland, Sir Philip Hampton is tired. He is particularly tired of banking. As the straight-talking 61-year-old told a headhunter recently, he would rather be tortured than take another job at a bank.

Sir Philip — a serial finance director and later chairman of J Sainsbury — has only two months left as RBS chairman before he moves to the same role at GlaxoSmithKline. The new job will hardly be relaxing, given the drugmaker’s long-running scandal in China and ongoing restructuring. But it is unlikely to compare with his tumultuous time at RBS.

Eight years ago, RBS was briefly lauded as the world’s biggest lender, before becoming the world’s biggest bank bailout following its collapse and £45bn rescue by the UK government.

The deliberate — and dramatic — shrinkage that followed has been managed by a string of chief executives, finance directors and other senior executives, but as an overarching presence, Sir Philip has been a rare constant. It has been an unusually awkward remit, a kind of buffer position between commercial management and politicians who have attempted to exert increasing influence over RBS strategy. He is generally reckoned to have handled the role well, although some have accused him of failing to protect management from political meddling.

Simon Samuels, an independent banking consultant, says: “Philip took over at the largest banking failure in history and leaves with the organisation within sight of the start of its return to the private sector. A job well done”

James Leigh-Pemberton, head of UK Financial Investments — which manages the government’s stake in RBS — said Sir Philip’s legacy was “in short a significantly healthier organisation than he inherited”.

Sitting in his unglamorous corner office overlooking London’s workaday Liverpool Street Station, Sir Philip exudes a casual charm, and professes no real regrets from his time in charge. But it is clear he is not looking forward to Tuesday’s annual meeting — his seventh and final as chairman.

“Most AGMs are a roasting,” he says. “It is a richer roast for the banks.” And richer still for RBS, he might have added — given the years of losses and scandals, and the tensions between commercial investors and the government.

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The stock is unlikely ever to return to its pre-crisis highs — and remains a stubborn 30 per cent shy of the price at which taxpayers’ money was invested. But at least the shares are worth three-and-a-half times more now than they were in Sir Philip’s early days in 2009.

This month — several years after Sir Philip began lobbying for it — the government finally announced it would soon begin reprivatising RBS. The City veteran is unromantic about the exact timing, admitting it would be neat if it began before he leaves the bank at the end of August — although that appears unlikely. “Governments tend not to be good shareholders of competitive businesses. The sooner they start to [sell], the better it will be for the bank.”

That said, he admits it may be wise to wait until after a US regulatory settlement is struck “in the coming months” over mis-sold mortgage products. The share price may reflect an overly gloomy view of that risk, although on the other hand Sir Philip admits the bank’s $2.5bn provision for the affair may be insufficient. “We will have to see what the final settlement is — some analysts are saying it could be substantially bigger than that.”

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One other legacy issue is also looming — a legal battle next year with shareholders angry over the terms of RBS’s 2008 rights issue. But the bulk of the bank’s scandals — from PPI and interest rate swap mis-selling to Libor and foreign exchange manipulation — appear to have been dealt with.

Overall, Sir Philip is convinced that the bank has done as good a job as it could over the past seven years — deleveraging as fast as capital resources allowed and cleaning up past misdemeanours more speedily than some rivals. Despite the bank’s well publicised technical glitches, the overall revamp, which involved integrating the pre-crisis ABN Amro acquisition and then shedding £900bn of assets, was “a phenomenal change that was done with a high degree of expertise”.

If the remainder of RBS’s restructuring goes to plan (selling off the rest of its US arm, Citizens, for example), RBS may finally be able to put longtime allegations of capital weakness behind it. “We expect to have surplus capital by the back end of 2016 and that will give options to the board and management at the time in terms of what they want to do with that in terms of distributions and share buybacks or whatever.”

After all the nightmares of recent years, that would be a welcome bequest to leave his successor Sir Howard Davies.