RBS Could Struggle to Find New Chairman

Morningstar's Erin Davis believes the bank could struggle to attract a chairman given the lack of private enterprise, but questions whether this matters for shareholders in the medium term

Holly Cook 26 September, 2014 | 10:14AM
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Royal Bank of Scotland (RBS) announced on Thursday that its chairman, Sir Phillip Hampton, will step down in 2015 to become the chairman of GlaxoSmithKline (GSK).

Morningstar banking analyst Erin Davis was not surprised by Hampton's impending departure from RBS, since he and the bank have long signalled that he intended to serve as chairman for five to seven years after taking on the role in February 2009.

Davis thinks that finding a strong replacement may be difficult: "RBS remains more than 80% owned by the UK government and any illusion that it is being run as a private enterprise has long since been shattered." However, for the same reason, she's also not sure that succession matters much for independent shareholders—RBS' strategy will continue to be set by the government, at least until it becomes a minority shareholder, Davis believes. The Morningstar analyst plans to maintain her poor stewardship rating on RBS; her fair value estimate of 400p per share; and her no-moat rating, which signals the bank's lack of a sustainable competitive advantage.

Glaxo, meanwhile, is valued by Morningstar's Damien Conover at 1,520p per share with a standard stewardship rating and boasting a wide economic moat. "Glaxo holds a wide economic moat on the basis of patents, a powerful distribution network, economies of scale and diverse operations," says Conover. 

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
GlaxoSmithKline PLC1,631.80 GBX1.08Rating
NatWest Group PLC244.20 GBX2.69Rating

About Author

Holly Cook

Holly Cook  is Manager, Morningstar EMEA Websites