Events | 2009.05.18
Lloyds boss Sir Victor Blank to step down
Blank avoids showdown at bank\'s annual meeting over HBOS losses that soured rescue takeover
Sir Victor Blank, one of Gordon Brown\'s favourite businessmen, has been forced to step down as chairman of Lloyds Banking Group after losing the confidence of major shareholders in the high-street bank, which has been crippled by the rescue takeover of HBOS.
The resignation of the 66-year old City veteran was accepted by the board of the embattled bank today and may prompt speculation about succession planning for Eric Daniels, chief executive of the bank, which is 43% owned by the taxpayer.
Blank, who brokered Lloyds TSB\'s rescue takeover of HBOS last September with the prime minister\'s intervention, will leave before the annual meeting in 2010. In an attempt to demonstrate boardroom unity, Lord Leitch, the most senior non-executive director on the board, is becoming deputy chairman with immediate effect.
Blank, who became chairman three years ago after a distinguished career as a businessman, is not entitled to a payoff after receiving £669,000 last year. He is the latest bank boss to lose his job in the ongoing crisis, following the departure of senior bankers from HBOS, who were ousted by Lloyds after the takeover, and top executives at Royal Bank of Scotland.
Leitch insisted the board had not forced out Blank and said it had wanted him to stand for re-election at the annual meeting in June, which is taking place a month later than usual. Directors must stand for election every three years.
Blank was aware that major institutional investors were preparing to vote against him, in a protest of as much as 20% of the vote that would create difficulties for UK Financial Investments, the body which owns the taxpayer\'s stakes in the bailed-out banks.
UKFI had been sounding out shareholders about Lloyds and its management team after a series of shock profit warnings caused by multiplying losses at HBOS. The body was increasingly aware of the pressure on Blank and was keen to avoid a full-blown confrontation at the shareholder meeting in Glasgow. Last night UKFI, which is thought to have communicated the shareholder feedback to Blank, paid tribute to the "distinguished chairman".
"UKFI confirms its support for Sir Victor Blank\'s re-election at the forthcoming annual general meeting, in the context of its wider support for the Lloyds board, strategy and executive team led by Eric Daniels," it said.
Lloyds Banking Group, created in January when the deal between Lloyds and HBOS was completed, has issued two profits warnings in just five months. The most recent was a week ago when it warned that bad debts would soar by more than 50% to an estimated £14bn this year as loans granted by HBOS to property companies in the UK and Ireland turn sour in the deepening recession.
The latest profits warning ended a recent rally in the shares, which had crept above the 120p at which the government breaks even on its stake and eased some of the pressure on Blank. The shares were at 89p on Friday, but still above the 38.4p at which Lloyds must convert £4bn of preference shares into ordinary shares.
After today\'s emergency board meeting, Blank reiterated his view that the HBOS deal would eventually be a success. But, he said: "I believe it is the right time for the group to appoint a new chairman. I will continue working until my successor is appointed to ensure the successful integration of the two banks. This remains – in the medium term – a unique value-enhancing opportunity."
A successor must now be found for Blank, who has one of the top jobs in British banking and one of the toughest. The integration of Lloyds and HBOS could cost up to 25,000 jobs, while the bank has yet to complete the negotiations on the government\'s asset protection scheme, which is insuring up to £260bn of its most troublesome assets in return for a stake in the bank of as much as 75%.
Leitch insisted the Lloyds board was "very sad" about Blank\'s departure. "The board was unanimous in wanting Sir Victor Blank to seek re-election as chairman for another three years. We are very sad about Sir Victor\'s personal decision to retire, although we respect and understand his reasons for it," he said.
The chairman\'s position was made more difficult when Daniels told the Treasury select committee that the bank had carried out less due diligence on HBOS than it might have preferred because of the speed with which the deal had to be brokered.
Daniels\'s own future has been questioned. His pay has been frozen and his bonus potential almost halved, despite the fact he is running a bank twice as large as previously. Last night he said: "Victor has played a very important role as our chairman during a period of significant change for our company and at a time when there has been unprecedented volatility in the markets."
For more information, please visit
http://www.guardian.co.uk/business/2009/may/17/sir-victor-blank-lloyds
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