Lloyds pressed over leader 'vacuum'

Lloyds Banking Group is under mounting pressure to provide an update on the leadership vacuum created by the absence of its chief executive, it was claimed today.

Lloyds Banking Group is under mounting pressure to provide an update on the leadership vacuum created by the absence of its chief executive, it was claimed today.

Major institutional shareholders told the Sunday Telegraph that they are concerned at the lack of information provided by the taxpayer-backed bank since Antonio Horta-Osorio left on sick leave two weeks ago.

Lloyds has said it hopes its Portuguese boss will return to his post by the end of the year.

But investors told the newspaper it will be difficult for Mr Horta-Osorio, who is understood to be suffering from fatigue due to overwork, to resume his role even if he returns to full health.

The group’s finance director Tim Tookey is currently in charge but he is due to leave in February to join Friends Provident life assurer Friends Life.

One investor questioned why the bank had not sped up its internal contingency plan as to what it would do if Mr Horta-Osorio is unable to return.

The newspaper believes one of the board, most likely senior independent director Glen Moreno or fellow non-executive David Roberts, would take on the role on a temporary basis until a full-time external replacement is found.

Credit rating agency Moody’s last week put Lloyds’ debt rating under review for a possible downgrade as a result of “significant upheaval” in its senior management, which it fears may disrupt the company’s restructuring plans.

A credit ratings downgrade would be potentially damaging for Lloyds because it could push up its borrowing costs and weaken investor confidence.

UK Financial Investments, which manages the Government’s 40.2% stake in Lloyds, is thought to be supportive of the bank’s approach so far.

One source, however, told the newspaper the board is hoping for the best, but planning for the worst.

The bank last week reported a 21% fall in underlying profits to £644 million in the three months to September 30, after being hit by weaker demand for loans and higher wholesale funding costs.

Lloyds also admitted that some of its medium-term targets may have to be pushed back to beyond 2014, but investors were encouraged by a “significant reduction” in its impairment charge for bad loans.

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