Andy Richardson meets Stephen Hester, the new boss of Royal Bank of Scotland.

THE day before The Northern Echo is invited to meet him, Stephen Hester faced two very different audiences – a gathering of RBS employees where he fielded questions about looming job cuts, and as guest of honour at the prizegiving for pupils at his former school in North Yorkshire.

He declines to say which gathering gave him the rougher ride.

The former head boy at Easingwold School is said to have excelled in drama and debating classes during his seven years at the state-run secondary.

He is certainly an assured performer in front of the press. When addressing grim topics such as job losses, he adopts the politicians’ trick of upping the smile quotient and peppering his replies with upbeat language where problems become “exciting challenges”.

His clipped tones and judicious use of language marks him out as every inch the prudent, level-headed character the beleaguered bank needed after it was bailed out by the taxpayer.

Two years and 27,000 job cuts later, Mr Hester says he is on target to achieve his fiveyear plan to return the partnationalised lender to the private sector.

Waiving his reported £1.6m bonus earlier this year earned him some positive PR, however, his insistence on paying his investment bankers hefty bonuses fuelled public discontent and earned the bank more unwelcome headlines.

If RBS takes temporary control of Liverpool FC – if the club’s US owners fail to meet loan payments – it would at least shift the bank to the back pages, although Mr Hester looks forward to the day when the bank’s activities are the preserve of the business section.

A swift return to private ownership would help that process, although Mr Hester is concerned that the launch of the year-long Independent Banking Commission could hold things up.

He said: “It was always my hope that the Government could start selling shares (in RBS) at a profit next year.

“I think the Banking Commission is likely to put the date back as it will be hard to sell the shares while there is a debate going on that could have an impact on other banks.

“But, once that is out of the way, it is in our and the Government’s best interests for there to be an initial privatisation and offering of shares to the wider public.

“That first offering will be of great symbolic importance.

It will signify the turning of the UK economy since the crisis and a substantial contributor to closing the deficit.

“From RBS’s standpoint, it will be a message to our customers and staff that the recovery is really happening.

The sooner the better as far as I am concerned.”

He added that he believes it will take several share offerings before RBS is completely free of Government control.

In the meantime, business customers need the likes of RBS to help stimulate the recovery.

Responding to accusations that his bank has been reluctant to back business, he points to its recent record that shows 85 per cent of businesses have loan requests approved by RBS, and in personal loans and mortgages, the figure is closer to 90 per cent.

He concedes that it is scant consolation for those who have their requests rejected, but refutes claims that in the wake of the financial crisis, RBS is being over-cautious.

He said: “It requires a bit of mental agility to think that banks are evil for lending to the wrong people and just as evil for not lending to some other people.

“At the same time people say that, with their previous breath they are castigating the banks for causing the crisis by their reckless lending. We have to be careful about some of the rhetoric being used.

“I think it is our function to provide finance to our customers provided it is responsible to do so.

“Sadly, someone has to make that judgement. The person you turn down for a loan never thinks you are doing that correctly – it is a fact of life.

“The people who you do not make a loan to have the ability to make a lot of noise. In difficult times, it is more difficult and stressful to assess when a loan is going to help support a company and when is it encouraging it to continue with a business strategy that is flawed and going to collapse.

“We are lending an awful lot of money, but not to everyone and somewhere you have to make a judgement.

“I can say without any shadow of doubt that we have the money, the capital and the willingness to lend, and our only constraint is we do not want to lend to people who cannot pay us back.

“We do not think that helps them or us. I think two years ago, we were lending to some people we should not have done. There are some people who might say that we have tightened up too much.”

Keeping a close eye on the bottom line has meant Mr Hester overseeing a huge reduction in staff numbers.

The closure of RBS’s service centre in Harrogate will mean 509 staff are redeployed or made redundant over the next two years.

He said: “Delivering a quality service at the right price is an issue that every business faces.

“The objective is, take out the unnecessary bits of our processes – there is a lot of paper shuffling that goes on in banks – while preserving and hopefully improving the bits that matter to the customer.

That is what we are attempting to do. I will continue to make tough decisions – that is what I was brought in to do.”