Lloyds Banking Group’s hunt for a new chairman was underway today following the resignation of Victor Blank.
After a board meeting in the City of London yesterday, Blank announced that he would retire from the part-nationalised bank before its annual meeting next year.
Blank – who said it was “the right time for the group to appoint a new chairman” – has faced criticism over Lloyds’ rescue takeover of Halifax Bank of Scotland last year.
Lloyds will be loss-making this year as a result of soaring bad debts at HBOS, but he defended the deal.
He said: “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.”
Alexander P Leitch, who was appointed deputy chairman of Lloyds with immediate effect following the board meeting at Lloyds’ headquarters, said Blank was a “first-class chairman”.
“We are very sad about Sir Victor’s personal decision to retire, although we respect and understand his reasons for it,” he said.
Chief executive Eric Daniels 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.”
Blank’s decision to retire comes amid mounting pressure from investors and doubts over the wisdom of the takeover.
Lloyds was a conservatively run bank known for its strong dividend payouts and risk controls before its fateful decision to rescue ailing HBOS last September.
The combined group is now 43% owned by the British treasury but this stake could rise as high as 77% under the terms of a deal to put £260bn (€292bn) of toxic debts - mostly from HBOS – into a taxpayer-backed insurance scheme.
Blank – who became chairman in May 2006 and earned £669,000 (€753,000) in salary and benefits in 2008 – would have faced a significant protest vote over his reappointment at the company’s annual meeting in Glasgow next month.
He called the HBOS deal a “unique opportunity” when the takeover was announced last September – days after the collapse of US investment bank Lehman Brothers triggered a near-meltdown of the financial system.
Amid fears for the future of several institutions, British Prime Minister Gordon Brown waved aside competition concerns over the deal – creating a “mega-bank” with about 3,000 branches and nearly a third of the UK mortgage market.
Both Blank and Mr Daniels have argued the merits of the deal should be judged over the long term, but mounting losses in the former HBOS have punished the bank’s shares.
Blank’s decision to step down will ease the pressure on Mr Daniels.
The chief executive told MPs in February that had Lloyds TSB had longer to study the HBOS books, the group would have spent “somewhere around three to five times” longer on due diligence.
In a trading update earlier this month, Lloyds said charges on corporate loans turned sour would be more than 50% higher this year – mainly due to reckless lending practices at HBOS.
HBOS’s losses on corporate loans reached £7bn (€7.87bn) last year – meaning the hit from this business alone is likely to be at least £11bn (€12.4bn).