Chez Patrick is a good five-minute jog-cum-sprint from High Street Kensington Tube station. I know because after three years of trying to persuade the head of Royal Bank of Scotland to have Lunch with the FT, I find myself in the painful position of being so late for my assignation with Stephen Hester that, even with my best athletic efforts, I arrive, panting and sweating, 10 minutes after our appointed time of 12.30pm.
“Don’t worry, he’s not here yet,” says a figure I can barely see in a dazzling burst of rare May sunshine. This, I soon gather, is Patrick Tako, owner of the neighbourhood restaurant and a friend of Hester, who lives around the corner. “I’m not expecting many in today,” he adds as if to explain both his clairvoyance at who I am and the absence of other diners as he ushers me inside.
The restaurant is a charming front-room-of-a-terraced-house affair with a handful of all-French staff chatting amiably in the back. Even after another 10 minutes of chit-chat with the patron, there are no customers out front. It occurs to me that Hester, who made the reservation, might have gone as far as to book the whole place.
That would be just the kind of thing a brash City banker might do, both to ensure privacy and to show off. And it would fit neatly with Hester’s public image as Britain’s highest-profile financier and chief executive of the bank the nation loves to hate – the one that cost taxpayers £45bn of bailout money in 2008 and 2009, the one that won’t lend to Britain’s struggling small businesses but pays out bonuses hand over fist, the one that is still, humiliatingly, 82 per cent owned by the government.
Hester, 52, looks the part too. More than any of his peers, he exudes the air of a multimillionaire banker and landowner: round-faced, ruddy and often smug-looking on camera, he appears the embodiment of fat-cat capitalism.
Except he’s not. Of course, he heads a bank, gets paid more than most people could ever dream of, and boasts the predictable three homes (one in Notting Hill Gate; Broughton Grange, a 350-acre estate in Oxfordshire; and a fancy chalet in the Swiss ski resort of Verbier). Though some former colleagues say he can be bullying, and some politicians and policy makers are said to have been infuriated by his stubbornness, those close to him say Hester’s public image is a long way from the principled manager, loving husband and devoted father they know. “He’s such a sweet man,” Tako murmurs as he delivers a glass of champagne.
While I have interviewed Hester before, our meetings have always been strictly defined, formal matters. This, for him, is a rare move away from strait-laced bank talk, and for me a rare opportunity to get to know something of the real Stephen Hester.
When Hester arrives, his beefy frame – solidified by obsessive running and skiing – quickly dominates the room. He declines a glass of champagne, which is placed in front of me instead, joining the first glass. I debate whether to continue drinking or whether I should join Hester in the Badoit mineral water he has ordered. I compromise, alternating sips of champagne and water.
We are meeting the day after RBS has received a rare piece of good news from regulators – that the bank will not be forced to raise swaths of fresh capital to absorb loan losses as some had predicted. I ask Hester how he would assess his progress in turning round RBS, a near-bankrupt mess that threatened the whole financial system when he was parachuted in as chief executive four-and-a-half years ago to replace the disgraced Fred Goodwin. Hester came from British Land, a property group where he had overseen another dramatic restructuring. Now, as he likes to say, “RBS is something approaching a normal bank”.
As a menu is brought to us, and a couple of other diners arrive to ease the burdensome atmosphere of staff outnumbering customers, I pose the question Hester has been asked virtually throughout his stint at RBS. How long will he stay in a job that, notwithstanding the £1.2m salary plus bonuses of up to six times that, is often described as the most challenging, and thankless, in British business?
Usually, it is an issue Hester deflects with a few set responses. He has often talked, colourfully but formulaically, of his focus on the five-year task of “defusing the time-bomb” on RBS’s balance sheet – a reference to the bad loans that he has sought to restructure or sell before they blow up and burn through the group’s capital resources. Another standard default statement is that he wants to “see the job through”, which is generally taken to mean that he would like to lead the bank’s reprivatisation over the next couple of years. But over lunch he is somewhat franker.
Apologising if he sounds “pompous”, Hester says the RBS job was something he took on as a “mission. I could have stayed out of the limelight at British Land but I wanted the challenge. Now I’ve taken it on, it commands all my focus.” Returning RBS to sustainable profitability and to private sector ownership will be the key measures of success. “I hate not winning, I hate it,” he says with a glimmer of passion.
Tako arrives to take our order. Hester, the model of a modern austerity-minded businessman – and a weightwatcher – declines a first course and opts for tuna steak, medium-rare, with green salad. I’m vegetarian and choose a double-size asparagus starter as my main course with new potatoes to fill it out. As if mindful of not appearing too austere, Hester takes the opportunity to tell me he loves cooking. “I cooked for my son last night,” he says with pride – though when I ask what, he looks slightly crestfallen, admitting that, at his son’s insistence, “it was only beans on toast with bacon.”
Hester further resists pigeonholing as the old-fashioned red-in-tooth-and-claw banker by revealing that, at weekends in particular, his diet revolves around the vegetables grown on his Oxfordshire estate. “I love being able to pick a whole meal from the vegetable patch,” he says. “At this time of year, when the asparagus starts coming up and you feel spring has arrived, you start feeling brighter about everything.”
That green streak stems from a childhood growing up in rural Yorkshire. Hester hails from a small village that he asks me not to mention for the sake of his parents’ privacy (they still live there). Though he still considers himself a Yorkshireman, you wouldn’t know it to hear him talk. After a 30-year career in international finance, notably with Credit Suisse in New York and latterly in the City of London, all trace of Yorkshire vowels has been subsumed into a soft, clipped placeless accent.
I had worried that the interruption that came with ordering and the chat about food might puncture Hester’s moment of openness about his state of mind in running RBS. But he has clearly relaxed now, and the set tentative smile that some have interpreted as a sneer has dissolved into a frequent, hearty grin.
So as our food arrives, I follow up on his point about liking to win. Has he always been that way? “Until I was 16,” he admits, “I had always coasted a bit. I’d always come third in the class or something but I never saw the point in winning … [but] when O-levels came along, I suddenly realised that I wanted to do well, and I set my sights on going to Oxford.”
His academic aspirations were based on high-achieving parental foundations – his mother is a doctor of psychology and his father a chemistry professor – but he attended a local comprehensive school that had never before guided anyone to Oxbridge. Toying with his salad, he explains how acutely he felt the difference between his upbringing “where all my friends were farmers’ sons and I spent all my holidays as a farm labourer”, and the elite set he met at university.
In his final year at Oxford, where he read politics, philosophy and economics at Lady Margaret Hall and was a contemporary of foreign secretary William Hague, he blagged his way into a dinner at a fancy restaurant hosted by Credit Suisse. It was part of the milk-round interviews but, despite not having applied for the group’s graduate scheme, he sneaked in as a way of eating somewhere that would otherwise have been out of his price range. Though he recalls being thrown by the plethora of cutlery on display for the five-course meal – “I didn’t have the first idea how to tackle the avocado prawn” – he clearly acquitted himself well, and ended up working for the bank for the next 20 years.
So, after that accidental beginning, what made him decide to pursue a career in the City rather than in farming or academia? He explains that a sharp mind (he ended up with a first) combined with high-life aspirations (he was not only interested in gourmet restaurants but “obsessed” by skiing) made banking the natural choice. “It wasn’t about the high pay,” he says, though he admits he was earning more than his father by the time he was 25, “it appealed because it seemed meritocratic.” He returns to his theme of doing his best and getting on – a drive that lay behind his career progression at Credit Suisse and his move from there to become finance director at Abbey National in 2002. He then went on to become chief executive of British Land in 2004, and finally head of RBS in 2008.
With his adroit sidestepping and blocking, Hester has consumed about 90 minutes and barely half his tuna. Pudding is obviously not on Hester’s menu and when Tako returns for our order, I request a mint tea and Hester asks for a double espresso. Our conversation turns to a few of the big picture topics of the day – the UK’s place in Europe (it’s “risky” to debate an exit, he says), and the importance of progressive taxation (it would be “legitimate” to consider tightening tax rules to help facilitate the redistribution of the wealth of companies and individuals, including bankers).
At RBS he has spent the bulk of his time in charge resisting the reformist pressures of politicians and regulators, whether over his own bonuses or the size and scope of the group’s investment bank and foreign operations. In the past year, however, he has been reinventing himself as more of a compliant public servant. First, he waived a bonus after an embarrassing IT glitch that saw customers unable to access their money, then he agreed to sell RBS’s US subsidiary and scale back its investment banking arm.
With all the pressures he faces and his negative public image, does he not now regret where his career has taken him? Does he not bemoan his punishing “mission”, and have the sacrifices not been too much to bear?
We are in touchy territory. Hester’s 19-year marriage to first wife Barbara, a Canadian and former Credit Suisse banker, broke up three years ago, just as some of the political rows around RBS, and Hester’s bonus entitlement, were at their most vitriolic. It may simply be the sun but Hester, suddenly discarding his jacket, is evidently feeling uncomfortably hot. There is a momentary pause. The commitments of running RBS, he says firmly, played no role in his divorce – that, unfortunately, had quite another trigger. “The only way I survive,” he goes on more brightly, “is by having a pretty strong on-off switch.”
He tries not to commit to more than two evening events a week, aims to leave the office by 7pm and makes a point of not working at weekends. He is similarly disciplined about his other routines – every day starts with a 6am run through Holland Park, traditionally alone, though more recently accompanied by his new wife Suzy, a wealth manager at JO Hambro.
Free time is spent with family (he has a 17-year-old son and a 15-year-old daughter) and a small coterie of longstanding, low-profile friends from Hester’s student days. And then there is his beloved Broughton Grange, its gardens part-designed by the Chelsea gold medal winner Tom Stuart-Smith, where Hester spends every other weekend. “Plants to me are what beautiful music would be for someone else,” he says, adding excitedly that he has just selected Suzy’s birthday present – a cedar tree and a Japanese katsura. And suddenly there is another flash of the impassioned Stephen Hester – a side to the banker that is so often hidden from view by the sheer scale of his task at RBS. His eyes light up as he talks of his family. Being happily married again is “so lovely”, he says.
If his private life, after a difficult period over the past few years, is looking up, a similar evolution may finally be in prospect at RBS – assuming a report due next week from an influential parliamentary commission does not recommend breaking up the bank. So can he claim to be happy in his job as well as wanting to see it through? It is a question I put to Hester several times in different ways during the course of our lunch but the answer is always evasive. He clearly dislikes much of the day-to-day grind of his role – from the cutting of jobs to the political interference – though he won’t spell it out. “Pursuing a short-term tunnel vision is a route to be happy and fulfilled,” he says. “In retrospect, I’m sure I will look back and enjoy what I have achieved.”
As I pay the bill, and we wander out into the blazing May afternoon saying our goodbyes, a glint of sunlight catches Hester’s discarded glass of champagne, still untouched on our table by the window. It is not time to celebrate yet.
Patrick Jenkins is the FT’s banking editor
7 Stratford Road
Tuna and green salad £17.80
New potatoes £2.90
Bottle Badoit water x2 £8.20
Mint tea £2.10
Double espresso £3.00
Glass champagne x2 complimentary
Total (incl service) £56.00