Pitman the hitman sees more consolidation

Business Profile: Banking guru forecasts UK mergers but dismisses the fad for foreign acquisitions

Sir Brian Pitman has a huge reputation in the world of banking. He came to be known as "Pitman the hitman" and "Brian the bruiser" in the course of the 49 years he spent at Lloyds TSB – a business he built up from a middle-ranking lender to the biggest high street bank in the land.

In person, it is only his imposing physique – Sir Brian was a rugby player at school – which seems to justify the fearsome reputation. From his Gloucestershire burr to his solicitous manner, it is hard to see how anyone could have come up with the famous quote that Sir Brian is a "charming thug".

Seemingly Sir Brian, who at the age of 70 has taken a senior advisory role at Morgan Stanley, has been the victim of some misleading publicity. This is reinforced by what he does in his spare time – he is an ardent music lover and used to play the trombone in a jazz band. Playing the trombone well, he says "makes you into a good kisser" because you have to have to have strong lips.

Yet those who know Sir Brian well and have worked with him say the "charming thug" description is not far off the mark. He could not have propelled Lloyds so far ahead of its peers if he had not possessed a very determined, if not ruthless, streak.

It is an achievement which Sir Brian's successor, Peter Ellwood, has struggled to maintain. The bank, knocked from the number one spot by the merger of Royal Bank of Scotland with NatWest, is casting around for a strategy after its bold attempt to buy Abbey National was blocked by the Competition Commission last year. Mr Ellwood has been forced to fall back on talking vaguely about a deal with a European bank.

Sir Brian is careful not to pass judgement on the management style of Mr Ellwood – "different people are needed for different challenges" he says. His reticence is impressive given that his Lloyds share options were worth £35m at their peak and, under Mr Ellwood, have come down to about £9m.

Supporters of Mr Ellwood say he has been dealt a rather unfair hand by Sir Brian, who left Lloyds so cut to the bone in terms of costs and so focused on retail banking that there were not many obvious ways to develop it.

Unsurprisingly, this is not a view Sir Brian subscribes to. He thinks there is plenty of room for more cost-cutting because there is still "too much money, physical facilities and people" in UK banks as well as this country's other major industries.

Sir Brian believes the Competition Commission ruling on the Lloyds-Abbey deal has killed off any other major UK banking mergers, but adds: "We will see further consolidation among the smaller players or alternatively attrition of numbers. We are going to see this because if you can't achieve levels of productivity customers demand, you won't be around."

Despite the enthusiasm many banking chief executives have for them, Sir Brian believes deals with foreign banks seem to be a long way away. Sir Brian says only part of the problem is that they do not lead to massive synergies. "Banks are strong national symbols, a bit like airlines. The idea that you would be allowed to go and buy the national bank of Australia – you wouldn't be allowed to do it."

Sir Brian's ambivalence about banking fads extends to other areas too, such as the importance of the internet.

Despite taking his first job in banking not long after the Second World War ended, Sir Brian embraces modernisation. But he held the purse strings tight at Lloyds, investing only relatively modest sums such as £200m in developing the bank's internet technology, despite analysts telling him the figure should have been more like £2bn.

Given Sir Brian's antipathy to analysts' more convoluted theories and his decision to keep Lloyds out of investment banking, it is ironic that he has joined Morgan Stanley to help the company advise clients on deals they might want to do or ways they might want to raise capital.

He says that just before he joined, on 1 September last year, friends asked him if he had gone mad. They said: "Investment banks are in trouble, they will all be down in the mouth."

It is apparently not true. "They are very, very positive, even though they know they are not going to get much of a bonus this year," Sir Brian says. He likes the work because lots of the young people at Morgan Stanley, "who do not hide their light under a bushel", bounce ideas off him, using his years of experience as a chief executive to gauge how their ideas will go down with clients.

Sir Brian joined Lloyds in 1952 as a very junior banker, before working his way up to the role of chief executive in 1983. He held this role for 14 years – much longer than most FTSE 100 chiefs, whom, Sir Brian points out, "have a life of less than four years". He stood down to become Lloyds' non-executive chairman – a role associates say was "non-executive" in name only. He juggled that with being chairman of the retailer Next.

When Sir Brian joined Lloyds he had completed A-levels at Cheltenham Grammar School but decided not to go to university. He had already briefly been a clerk at Cheltenham & Gloucester – a business he was years later to take over and fold into Lloyds. Another major deal completed during Sir Brian's reign was the acquisition of TSB in 1995, one of the largest banking mergers of the time.

It is widely accepted that Sir Brian was the first person to run a high street bank like a business, whittling away costs and giving the sector's clubby world a wake-up call that they needed to start producing a reasonable return on capital. In the mid-1980s Lloyds sacked 15 per cent of its workforce – a move that shocked the market at the time but was, two years later, followed by the other big banks.

Sir Brian was also regarded as controversial for saying that banks should stick to what they were good at. While rivals such as Barclays and NatWest were in the post-Big Bang years buying up brokerages and plunging into investment banking, Sir Brian kept Lloyds on the straight and narrow. He built a huge retail bank that focused on straightforward things such as current accounts, loans, savings and mortgages.

The result was a doubling of shareholder value every three years and a business with one of the most impressive cost-income ratios in the FTSE 100.

If he had not been a banker, Sir Brian says he would have liked to be barrister. But banking has given him, Sir Brian believes, "an insight into the world which is quite unique. As a banker you have the privilege of meeting the leaders of the world – I have met most presidents of the US and I have sat in meetings where we have decided whether we were going to save Mexico".

Such grand stuff is a long way from what Sir Brian made Lloyds famous for. But his enthusiasm for the sector is also what inspired another epithet about him – "the cult of Sir Brian".

SIR BRIAN PITMAN STATEMENT OF ACCOUNT

Position: Former chief executive of Lloyds TSB. Now a senior adviser to Morgan Stanley, director of Carlton Communications, Tomkins, The Carphone Warehouse.

Pay: Morgan Stanley salary is undisclosed.

Education: Cheltenham Grammar School.

Career Record: Joined Lloyds in 1952, became chief executive of Lloyds in 1983 and group chief executive of Lloyds TSB in 1995. Appointed chairman in 1997 and retired from the bank in April 2001. Chairman of Next from 1998 to 2002. Knighted (1994) for services to banking

Interests: Member of the MCC and Gloucestershire County Cricket club, Yorkshire County Cricket club and St George's Hill Golf Club. He also likes listening to all types of music.