Lloyds shareholders demand succession plan

Large shareholders in Lloyds Banking Group are calling on the high street lender to strengthen its internal succession plan and address a perceived overreliance on chief executive António Horta-Osório.

Richard Buxton, chief executive of Old Mutual Global Investors and a fund manager who has long invested in Lloyds, said: “I suspect there is limited internal choice for a successor and planning should be a priority.”

Two top 25 shareholders, who asked not to be named, said Lloyds clearly had no suitable successors internally and urgently needed to draw up a list of possible external candidates.

Chris Ratcliffe | Bloomberg via Getty Images

One of the shareholders is putting pressure on Norman Blackwell, Lloyds chairman, to engage over the issue, which was brought into sharper focus following revelations about Mr Horta-Osório's private life.

"What happened over the summer has highlighted the keyman risk in Lloyds," one of the investors said. "The chairman needs to do more to address that."

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Mr Horta-Osório, who joined Lloyds in 2011 from the UK subsidiary of Spain's Banco Santander, last month expressed "deep regret" to staff after the Sun newspaper reported that he had conducted an affair while on a business trip.

In a memo, the 52-year-old told staff that he was "as committed as ever to leading the group forward". An internal probe found he had not breached the bank's expenses policy.

A headhunter who has worked closely with Lloyds said: "I am a little surprised that they haven't done more in terms of backing up the CEO. When you think of Norman [Blackwell]'s principal risk right now, this is it by a mile."

Earlier this year, the Brexit referendum also suggested a possible tension between the chairman, who was keen for Britain to leave the EU for reasons of sovereignty, and the Portuguese-born chief executive, who is an ardent Europhile. Since the Brexit vote, the bank's share price has fallen almost a fifth, which may hamper its recovery and delay the government's sale of its remaining stake.

"Yes, they did have very different views on Brexit, but they each respected the other's views and the chairman has been very supportive of him through his recent personal issues," a bank executive said.

Lloyds, which is 9 percent owned by the taxpayer, said its chairman and the board regularly discussed succession plans for its CEO and top executives, and involve investors.

Martin Gilbert, chief executive of Aberdeen Asset Management, a top 15 shareholder in Lloyds, said he hoped Mr Horta-Osório would stay in the job for years, adding: "He's the outstanding CEO in the sector."

Insiders said potential internal CEO candidates included Andrew Bester, head of commercial banking, and George Culmer, finance director — but some investors were sceptical they fitted the bill. Alison Brittain, former head of Lloyds' retail bank, was seen as a likely successor, but she left last year to run leisure group Whitbread.

Lord Blackwell said: "I am pleased that Antonio is committed to continuing to lead the business and deliver on our strategic ambitions. He and his leadership team have been instrumental in restoring the group to financial health and they are focused on delivering the next stage of strategy."

Some investors played down the issue. One top 25 investor said the relatively simple nature of running Lloyds, now that it had returned to profitability, restarted dividend payments, and almost all of the government's stake had been sold, meant "personnel is somewhat less relevant".