By Matt Scuffham
LONDON (Reuters) - State-backed Royal Bank of Scotland said Stephen Hester will step down as chief executive later this year and it will begin searching for a successor immediately.
RBS said on Wednesday Hester had been unable to make an open-ended commitment to the role having held it for five years. It said the board believed an orderly succession process would give a new chief executive time to prepare for the bank's eventual privatization and lead it in the years that follow.
Britain pumped 45.8 billion pounds into the bank to keep it afloat during the 2008 financial crisis leaving it with an 81 percent shareholding. Britain's Finance Minister George Osborne is expected to say next week the time is right for Britain to start offloading its shares in the country's part-nationalized banks.
RBS said the search for a successor will be led by Chairman Philip Hampton and consider both internal and external candidates.
Hester will continue to lead the business until December, unless a successor is in post before then. He has been CEO since November 2008 and there has been frequent speculation this year he could leave at the end of his five year plan.
Hester has been praised for leading the turnaround of RBS, which he has described as the "biggest turnaround in corporate history".
One of RBS's biggest 20 shareholders said Hester would be missed but his departure now was better than coming halfway through the privatization process.
"If you're going to go you either wait until afterwards or you do it now. He's a well respected manager of RBS and he's stood up well for shareholder interests so he'll be missed," the investor told Reuters.
(Additional reporting by Chris Vellacott; Editing by Steve Slater)