RBS shares fell 7.14% to 302p just after the market opened, while the FTSE was 1% lower at 6,236.

After the market closed on Wednesday, the bank announced Hester is to leave his role as chief executive later this year as RBS “begins to prepare for privatisation”.

Hester, who took over at the part-nationalised bank five years ago, said the privatisation process should be led by a CEO “at the start of their journey”.

He will step down in December 2013, having joined the board at the height of the financial crisis in October 2008 and becoming group chief executive the following month.

RBS chair Philip Hampton is to begin the search for a successor with immediate effect. Nathan Bostock, head of restructuring and risk at RBS, is rumoured to be the front-running candidate for the job.

The government is hoping to sell down its 82% stake in RBS before the next general election in 2015, though the nature and timing of the sale remain uncertain.

“RBS has made huge progress in becoming a strong bank, with balance sheet and funding transformed and the business fundamentally reshaped. It is now beginning to prepare for possible share sales by the UK government,” the bank said in a statement.

The RBS board said Hester was “unable to make…an open-ended commitment following five years in the job already.”