RBS Investing Banking Head Brings More Unwanted Attention To Executive Compensation

RBS: Royal Bank of Scotland Group logo
Royal Bank of Scotland Group

John Hourican, who heads the investment banking division at The Royal Bank of Scotland (NYSE:RBS), recently sold a major slug of his holdings. In total, he sold 17.6 million RBS shares last Wednesday for a tidy sum of £4.77 million ($7.5 million). [1] This fed into already heightened scrutiny around executive pay in the U.K. for banks such as RBS that were bailed out the British government. The British government still owns an 82% stake in the banking group is considering a ways to reduce its stake in the bank without disrupting the market.

We have a $8.60 price estimate for RBS’s stock, which is about 7% above the current market price.

See our full analysis for RBS here

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Last month, current CEO Stephen Hester suggested that the British government should start selling its stake in RBS and competitor Lloyds (NYSE:LYG). He opined that the bank’s share price is currently depressed because the huge government holding has acted as a deterrent for investors, and that the shares will rally once the government starts cutting its stake. In fact, the British government also took this advice seriously and started discussing a stake sale with potential buyers.

Hourican, however, clearly saw more benefit in getting rid of the shares now rather than wait for some time. The fact that RBS’s share prices have risen considerably the last few weeks, combined with the fact that Hourican’s shares vested this month definitely contributed to the decision. But this move from the bank’s head of investment banking clearly sent a strong, albeit negative signal to investors – the fact that Hourican still holds nearly as many shares as he sold notwithstanding.

This brouhaha comes as former RBS CEO Fred Goodwin was stripped of his knighthood for his role in the bank’s drumming preceding and during the financial crisis. Current CEO Hester has also faced intense scrutiny on his pay.

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  1. RBS investment chief John Hourican makes £4.8m selling bank’s shares, The Telegraph, Apr 4 2012 []