26th Jul 2023 12:49
(Alliance News) - NatWest Group PLC investors were left disappointed, but not surprised, on Wednesday by news of Alison Rose's departure, as the market calculated the scale of the reputational damage to the partly state-owned bank.
On Tuesday evening, Rose resigned as chief executive officer after admitting to being the source of an inaccurate news story about the finances of pro-Brexit politician Nigel Farage.
In a statement released Wednesday, NatWest Group Chair Howard Davies said: "The board and Alison Rose have agreed, by mutual consent, that she will step down as CEO of the NatWest Group. It is a sad moment.
"She has dedicated all her working life so far to NatWest and will leave many colleagues who respect and admire her."
In 2019, Rose became NatWest's CEO. He was the first woman to take the job at one of their four UK banks back in 2019, and leaving means that the handful of women leaders with the FTSE 100 firms has gotten even smaller.
interactive investor's head of investment Victoria Scholar said the departure is a "sad moment for the female representation".
"She was a role model to many and a champion of diversity and inclusion," she said, but agreed that her discussions about Farage breached client confidentiality and meant her role as CEO was "no longer tenable."
AJ Bell's Danni Hewson agreed: "She will be a loss, having worked her way up the ranks and championed diversity and inclusion in the sector with a huge focus on getting more women in financial services."
In a statement of her own, Rose thanked her colleagues "for all that they have done", adding: "I remain immensely proud of the progress the bank has made in supporting people, families and business across the UK, and building the foundations for sustainable growth."
Earlier, Rose said she made a "serious error of judgment" when she discussed Farage's relationship with private bank Coutts, owned by NatWest, with a BBC journalist.
Davies initially said the board members had decided the CEO retained their "full confidence" but her position became ever more uncertain after UK Chancellor Jeremy Hunt and Downing Street were said to have "serious concerns" over her conduct.
An emergency board meeting was called late on Tuesday night to determine her future, with the announcement of her resignation coming a few hours later.
Last week, Farage presented evidence, in the form of a 40-page dossier, that his account at Coutts had been closed partly due to his political views conflicting with those of the bank. The evidence obtained from the bank through a data request contradicted a BBC story, which had claimed that the account closure was motivated by commercial reasons only, citing Farage's failure to meet a GBP1 million borrowing requirement.
The BBC and its business editor, Simon Jack, apologised, saying the reporting had been based on information from a "trusted and senior source" but "turned out to be incomplete and inaccurate".
In a statement, released alongside Davies on Tuesday evening, Rose said: "I recognise that in my conversations with Simon Jack of the BBC, I made a serious error of judgment in discussing Farage's relationship with the bank."
AJ Bell's Hewson said: "Banks play a crucial role in making the country tick. They are trusted with our hard-earned cash and relied upon to fund a myriad of purchases from buying a house to business expansion which delivers jobs and prosperity.
"With that in mind it now seems absurd that the board of NatWest had considered that Alison Rose could ride out this storm."
She also noted that "NatWest is no ordinary bank," with the UK taxpayer at one point owning most of the bank. This has been gradually reduced over time by several share sales by the government, with the latest bringing its ownership down to 38.6%.
CMC Markets chief market analyst Michael Hewson said the saga raises wider questions over NatWest's governance and confidentiality rules.
"Only 24 hours ago, Davies and the board expressed full confidence in Rose after she admitted being behind the leak to a BBC journalist. On any other level this behaviour would have invited a disciplinary procedure against a more junior member of staff and probable dismissal, yet for some reason the board adopted the position of nothing to see here," he said.
"This would suggest a deeper problem behind the bank's governance and the rules around the behaviour of staff, as well as the future of Howard Davies as chair. On what world would a junior member of staff have been allowed to stay on with a simple apology if they had been found to have committed a similar transgression? Howard Davies has serious questions to answer about the bank's disciplinary procedures. Do they not apply to senior management?"
Shore Capital analyst Gary Greenwood said he "cannot overemphasise what a serious issue this has turned into for NatWest".
"The unilateral closure of Farage's account was clumsily handled by Coutts, that is another story, but is in isolation not a game changer for the investment case. However, for the CEO to have behaved in such an inappropriate manner, an understatement, regarding client confidentiality is inexcusable and clearly of greater concern regarding reputational damage," Greenwood continued.
The news of Rose's departure damaged NatWest's share price Wednesday morning. NatWest shares were down 3.7% to 241.85 pence each in London, putting it towards the bottom of the FTSE 100 index.
The ramifications of the episode are expected to be felt throughout the UK banking sector. Lloyds Banking Group PLC shares were down 3.0% at 44.73 pence, despite reporting positive half-year results on Wednesday.
Peer Barclays PLC was down 1.2%.
NatWest is scheduled to release its own half-year results on Friday.
ii's Scholar said the lower share price highlighted "the disappointment" among investors about Alison's departure as well as the uncertainty around the bank's future direction without her.
AJ Bell's Hewson warned that "the political and regulatory ramifications of this episode are likely to ripple out for months to come".
For now, NatWest said that Paul Thwaite will take over as CEO, for an initial period of 12 months.
In July 2022, Thwaite was appointed as CEO of NatWest's Commercial & Institutional ring-fence bank, after leading the company's commercial banking division as CEO since November 2019.
The board said in a statement that a further process to appoint a permanent successor will take place "in due course".
By Sophie Rose, Alliance News reporter
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