Lloyds Vision

by Mark Johnston

Recently there has been a raft of financial institutions reporting and delivering the results of their strategic reviews.  June will see Lloyds Banking Group, the third big lender behind Barclays and HSBC Bank plc to report on significant changes being made.  The Lloyds boss, Antonio Horta-Osorio will be seen as a man on a mission at the helm of the tax supported banking group. 

The Lloyds boss has been working hard recently, provisioning and setting aside £3.2 billion to pay compensation to the customers who appear to have been mis-sold personal protection insurance and he has also been setting aside greater than expected amounts to aid their Irish business.  Comfortable with the scale of the challenges he faces, Horta-Osorio said that “It will take three to five years to get Lloyds standing on its own feet again,” this along with the candid description of the Lloyds Banking Group as “fragile” it appears he, unlike his predecessor, is not looking lightly on the problems their organization is facing.

The group, which is 41 per cent owned by the UK Taxpayers, is quite startled by the speed and tenacious focus at which Mr Horta-Osorio approaches the issues on the table.  The board and those close to him have reported that the new chief has the cool resolve to transform the Lloyds group.  Mr Horta-Osorio has shown even greater grit and determination since the Independent Commission on Banking (ICB) issues a directive that the Lloyds Group was to sell more than 600 branches

The biggest mortgage lender in Britain, have solicited the help of the investment giants Citygroup Incorporated and JP Morgan Chase & Co. to help find buyers for about 600 branches that Lloyds has to sell.  Lloyds were bailed out in 2008 with an injection of tax payer’s money to the tune of £37 billion which was quoted as being an “absolute humiliation” by a BBC boss at the time.  They are now 41 per cent owned by the current UK coalition Government.  The highest bids are likely to come from the National Australian Bank and Sir Richard Branson’s Virgin Money.  The sale of these branches is required by the European Union regulators.  

Private discussions have revealed that the sale is due to generate somewhere in the region of between £2 billion and £3 billion on the market and accounts for about 5 per cent of the U.K’s checking account market.  The sale must go ahead, according to the stipulation of their bailout, by the end of 2013 in order to comply with the terms and conditions. 

The new chief executive, who took office on the first of March has been quoted as saying “We made the decision to accelerate the start of the sale process in order that we met the timescales agreed with the government and EU,” Horta-Osorio said in the statement. “By doing this we also bring greater certainty and clarity for our colleagues and our customers.”  This decision was made within 10 days of taking up his new post. 

Horta-Osorio aims to wean his organization off the funding supplied by the government and hopes to speed up the sale of the non core functions.  Hopefully his clear strategy will provide investors with enough confidence to support a return.

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