‘Taxpayers’ money must never again be used to bail out a failing bank’
Lloyds boss says group given £100BILLION state rescue now has ‘zero debt’ Helping families and small firms is its new ‘sole aim’ Fraud scandal payouts may top £100million
NEVER again,’ says Antonio Horta-Osorio, chief executive of Lloyds Banking Group. The Portuguese-born boss is referring to the bail-out of Britain’s banks in 2008.
He could be forgiven for referring to the whole of the last six years, a period which has seen the bank pay out billions in compensation to customers and sell off hundreds of branches.
And amidst it all Horta-Osorio has been lambasted for his eye-watering pay packages – a total of about £38 million – and his private life including an affair which made headlines all round the world. At one point he suffered a breakdown due to exhaustion.
Last week, the 53-year-old may have finally felt it was all worthwhile as the Government sold off its final shares in Lloyds, drawing a line under at least one aspect of the banking crisis. Relieved? ‘Not a moment of relief. I would put it as a moment of pride for all of us. To be able, after a long road and a lot of work, to get £23 billion back to the taxpayer and getting £900million on top of that. It’s a moment of significant pride,’ he says.
Horta-Osorio is well known for his energy. He speaks in excellent English and the words (and the numbers) come thick and fast.
‘Six years ago this bank was in deep difficulty. It had received £100 billion in assistance from the Bank of England. It had £200 billion in net debt and it had £200 billion in toxic assets from the HBOS acquisition. We now have zero debt. We have sold the £200 billion in toxic assets. We have also paid £17 billion in PPI redress. It was a big bill but it was absolutely the right thing to do.
‘We also had to build TSB. It cost us £2 billion and we sold it for less than that so we lost a lot of money. But it was under imposition from the EU and we did it. We are now seen as one of the safest and strongest banks in the world.’
Horta-Osorio’s strategy has been to focus on the core UK business. Lloyds has withdrawn from 24 other countries and now does 97 per cent of its business here. Horta-Osorio repeats and repeats key catchphrases about ‘helping families, small businesses and communities’ and ‘helping Britain prosper’.
His virtue signalling peaks at one point with the effusive claim: ‘Helping the families and small and medium-sized companies of this country is the sole and single purpose of this bank.’
His bank also stands in contrast to Royal Bank of Scotland, where a sale of the Government stake seems as distant as ever. What did Horta-Osorio get right that RBS got wrong? ‘Really, I am not going to comment on other banks,’ he says. But then he keeps going. ‘When you have a big problem, the proper thing to do is to quickly address those issues decisively. I brought in a very strong management team, we presented a new strategy within 100 days and we have relentlessly pursued that.’
Relentless – it sums up the Horta-Osorio style.
Born in Lisbon, he studied business at university and became a banker, with his first work at Citibank’s London office.
He then went to the Spanish banking group Santander, working in his native Portugal and Brazil. In 2006, he returned to London to run Santander UK. He was there when the banking crisis struck. Santander weathered the storm better than many, but Horta-Osorio talks of that time as ‘a dark moment in British history’.
‘I absolutely believe that taxpayers’ money should never ever be used again to bail out a failing bank. If a bank is badly managed, if it takes too many risks, it should fail like any other company.’
Despite his Portuguese birth, Horta-Osorio has secured a British
I brought in a strong team, we presented a strategy and have stuck to it relentlessly
passport and he is currently buying a new home in the UK. So it looks like he is here to stay.
Which is perhaps surprising because Britain has not been the easiest place to be a banker. Horta-Osorio took over at Lloyds in 2011 and within months had exhausted himself with the job and took two months leave; his pay has been the source of constant public anger; and then last year he was exposed as having an affair with an academic, Dr Wendy Piatt.
The bank chief and Dr Piatt, a former adviser to Tony Blair, were photographed together in Singapore where Horta-Osorio was attending a banking conference. He has always insisted that his private life is private. But surely the fact that Lloyds Banking Group has been partly State-owned for so long has put him under closer scrutiny?
Here Horta-Osorio is slightly less insistent. It is after all a sensitive subject. Nevertheless he bats away the question. ‘I have been a CEO at banks for 25 years. I have managed banks in four different countries and I have to tell you frankly that the British media is...’ there is a slight pause and for a moment it seems like the insistence might turn to impatience ‘...much more focused on business and banks than in other countries.’
He finishes with a relaxed and mollifying sign-off on the subject. ‘That is fine with me. I am used to different banks and different cultures.’
At the time of the affair he issued an email to staff in which he reiterated that he was entitled to privacy but expressed ‘deep regret’ for any damage done to the bank’s reputation. Horta-Osorio seems keen to talk directly to his entire workforce, as he did last Wednesday when the Government sold its remaining shares in Lloyds. He is clearly proud of this example of his management style. ‘After the Government confirmed they had sold the shares, which was at about 4.45pm, we had the back-up plan. I had installed an online system so I can speak to staff at full-year results and at Christmas.
‘I thought it was the right thing to do to tell everyone immediately the Government told us and before it became public. We did it at five o’clock. We had 30,000 people practically in the room and I congratulated them and said that this was only possible because of the great work they had done.’
Horta-Osorio says that he has never let the Government stake direct his planning.
‘I can tell you two things: we did a strategy which was the right strategy for Lloyds and we did it irrespective of having the Government as a shareholder. I always did what I thought was right for this bank irrespective of any pressures.’
Having faced anger over his pay and a sex scandal, Horta-Osorio is now a fully signed-up member of the British Establishment.
But as a continental by birth, he feels strongly about some of the effects of Brexit, notably the status of EU citizens working in the UK. Here we are in territory where he is comfortable to be heartfelt. ‘This is a very important issue for me personally,’ he says earnestly. ‘We have about 3,500 people, about 5 per cent of our staff, who are EU nationals. I am determined that their rights are quickly cleared up so they do not have any anxiety or uncertainty, for them or their families, and can carry on with their lives here.
‘I have heard some positive signs from Government speeches, but I would like to see those rights clarified as soon as possible – and those of UK citizens in Europe.’
And Horta-Osorio still has other controversial issues to tackle.
The scandal of Payment Protection Insurance has dogged the banking industry for six years and Horta-Osorio has played a major role in how this has been handled. Back in 2011 most banks were planning to contest in the courts claims from customers that they had been missold PPI policies. Horta-Osorio broke ranks. ‘One of our biggest priorities as I joined was to do the right thing for customers. In my opinion the most obvious and emblematic of those issues was PPI.
‘In my previous job managing another bank in the UK [Santander] I had been the only one of the five large banks who had not joined a legal action to delay paying customers. When I joined Lloyds I thought I should remain true to that principle and I dropped the legal action.
‘I was the first bank to drop the legal action and start paying customers. It was done on principle, not on financial calculations. The bill became much bigger than what the regulator thought and what everybody thought. But it was the bill. We should do the right thing regardless of the amount and that is what we did.’
More recently, Lloyds has had to face a scandal entirely of its own – fraud at the Reading branch of HBOS, the bank bought by Lloyds before Horta-Osorio’s tenure and at the height of the financial crisis.
Senior managers at the branch were convicted earlier this year of driving local companies into the arms of a consultancy firm which then asset-stripped the firms, in return for bribes. Six people were jailed earlier this year.
Lloyds is now facing claims from businesses who were destroyed by the fraudsters, including TV celebrity Noel Edmonds who has gone public in his claim that he lost £50 million in the affair.
Lloyds has set aside just £100 million to pay compensation. Horta-Osorio refuses to discuss the specifics. ‘I cannot comment on individual cases.’ But he says the £100million is not a cap on what the bank might pay out.
It seems like Horta-Osorio has spent six years at Lloyds paying bills – to customers, to the Bank of England, to taxpayers. There are still a few more debts to settle, but compared to the billions of pounds of taxpayers’ money and PPI payments, the current crop of payouts are modest.
It is time for us to finish our interview and say goodbye, but there is one last question. Is Horta-Osorio thinking of saying farewell to Lloyds? Rumours are now circling that he is ready for a new challenge and may take the helm at HSBC, whose chief executive Stuart Gulliver is leaving next year. ‘I am very happy at Lloyds,’ says Horta-Osorio. ‘The fact we got taxpayers’ money back and more is one of many milestones. I have much more to do. My job is never done.’
He talks of preparing a new strategic plan for the bank ready for early next year. It won’t be a major shift, he says. ‘Like in football when you have a winning team with a winning strategy, you don’t change it. Of course, we will adjust our strategy to meet the changing needs of customers... but you should not expect big changes.’
Like in football, when you have a winning team... you don’t change it. So no big changes
While others shut branches, Metro has amassed a million accounts
ALTHOUGH chief executive Antonio Horta-Osorio has undoubtedly done a super job turning the Lloyds banking giant into a profitable, dividend-paying company, the recovery has come at a high price.
The branch network has been culled – by a woodcutter on steroids – as have staff numbers. Payment Protection Insurance mis-selling continues to cost the bank a small fortune in compensation bills – £17billion and rising – while the bad smell from the past mis-selling of other financial products (complicated plans linked to the stock market) still lingers.
Of course, I love the advertising Lloyds is now employing to demonstrate the bank has stood by our side for more than 250 years. Indeed, a series of posters boasting about its prowess currently line one of the underpasses into London’s Westminster Tube station. They draw in viewers as if they were works of Banksy. I, for one, was temporarily mesmerised.
Yet they are only adverts, marketing messages. The fact remains that the bank’s commitment to customer service has improved little under Horta-Osorio’s watch.
If you don’t believe me, check out Fairer Finance’s website. It ranks financial companies according to how good and transparent their products are – and how helpful they are when customers complain.
Apart from mortgages, where it gets a bronze rating (Yorkshire gets gold), the bank does not get a look in, though its offshoot Halifax fares better. There are a host of other providers doing things better than Lloyds. Well done Mr HortaOsorio for saving one of Britain’s most iconic brands. But it would be nice if you were to take the next step and rid the bank of some of its nastier practices. Poor complaints handling, not listening to customers.
May I suggest you spend today reading Vernon Hill’s book, Fans! Not Customers. While you have been lopping dead wood, Hill’s Metro Bank has amassed one million accounts by making fans out of customers. No adverts. It just provides such a good customer experience that account holders recommend the bank.
IT IS difficult to defend the fund management industry when those entrusted to look after our hardearned money are the only ones reaping rich rewards. After details emerged of the £35million bonus pot that key employees of investment houses Aberdeen and Standard Life will gorge on once the two marry, we now discover that M&G boss Anne Richards was paid £3.9million for just seven months’ work last year.
While Ms Richards may be good at her work, her bounty sticks in the craw when you review the pretty raw deal some of M&G’s loyal fund investors are receiving.
For example, the £3.2billion M&G Recovery fund has delivered an overall return of just short of 39 per cent over the past five years. This compares with a peer group average of 83 per cent and a return from the FTSE All Share of 77 per cent. Woeful.
The fund’s ongoing charge is 0.9 per cent, equivalent to £2.9 million of annual revenue for M&G. A nice earner for hapless performance – although less than Richards’ remuneration for seven months’ hard graft. No wonder American giant Vanguard, renowned for nononsense, low-cost investment management, sees an opportunity to become the investment equivalent of Lidl here in the UK.
YORKSHIRE Building Society may be cutting branches but it offers some of the best deals in the mortgage forest.
Last month’s lowest ever priced mortgage – 0.89 per cent and still available – has now been followed by a best-buy offer targeted at first-time buyers. It is priced at 3.25 per cent, fixed for the first two years, and may seem expensive compared to the previous 0.89 per cent deal but borrowers only require a five per cent deposit. It comes with a £995 fee – such costs are now par for the course – although the mutual is dangling a conker before borrowers with a £250 cashback upon completion.
Given the continued difficulties first-time buyers are experiencing getting their feet on the housing ladder – despite the launch of Government initiatives such as the Help to Buy Isa and the Lifetime Isa – the woodcutter deserves to be praised on this occasion. Other lenders should adopt its friendliness to aspiring home buyers.