Hester tipped as new Abbey chief

Stephen Hester, Abbey National's finance director, is frontrunner for the top job following the departure of chief executive Ian Harley in the summer. Abbey's board is expected to formally appoint Harley's successor within a fortnight.

Hester is thought to have won favour in the City and, crucially, with Abbey's influential chairman Lord Burns, after showing determination to cut costs and re-shape the company around its core lending and mortgage business.

Britain's sixth largest bank has issued a string of profits warnings and disappointed investors, who were furious after revelations earlier this year of losses on junk bonds.

The company recently held merger talks with National Australia Bank, but the negotiations fizzled out in July.

Hester is a former high-flier with Credit Suisse First Boston, the Swiss-owned US investment bank.

City analysts say that Hester has shown flair since join ing Abbey in April and has won acclaim for imposing a more efficient system of risk management. He is seen as a possible deal maker, who could engineer a merger of Abbey with a foreign rival.

Other candidates for the job are John Stewart, deputy chief executive of Barclays, Gordon Pell, head of retail banking at the Royal Bank of Scotland, and Adam Applegarth, chief executive of Northern Rock.

Last Friday, rumours that it could be forced to halve its dividend hit Abbey's shares.