David Prosser: A new man in charge at Lloyds Banking Group?

Outlook Sir Win Bischoff, chairman of Lloyds Banking Group, has been quietly sounding out Lord Davies, the former trade minister, about a rather delicate matter. Would Lord Davies, who prior to his move into public office in the latter stages of the last government enjoyed a successful stint running Standard Chartered Bank, like to be considered as a candidate for the chief executive's job at Lloyds, Sir Win wanted to know.

Lord Davies would certainly be an obvious contender for the position. There are not too many people around with experience of running a major bank who can also say their reputations have not been sullied by the financial crisis. He is one such individual. And having spent the past couple of years in Whitehall, Lord Davies is well-placed to navigate the tricky matter of having the Government as your largest shareholder (the taxpayer, via UK Financial Investments, owns 41 per cent of Lloyds).

Just one problem. Lloyds insists there is no vacancy at the top. Eric Daniels, the bank's current chief executive, has no plans to go anywhere for a while yet. And though there was some pressure on him to stand down when the shocking state of HBOS's finances was revealed in the aftermath of Lloyds' purchase of it, that campaign has dissipated recently. Not least because the bank, as its trading statement revealed earlier this month, appears to be recovering more quickly than many had expected, and is even likely to make a profit this year.

What, then, should we make of the conversation between Sir Win and Lord Davies (who is, by the way, understood to have said "thanks, but no thanks")? Well, in one sense, it would be strange if the two men had not talked. They are old friends and Lord Davies is presumably now in the market for some sort of gainful employment, having had his last contract terminated by an ungrateful electorate.

Also, Mr Daniels will not stay on at Lloyds forever. He will no doubt be keen to stick around to get some of the credit when the HBOS deal starts delivering more than a string of bad debts – as it surely one day will, given the combined operation's dominance in large parts of the retail banking sector – but it's difficult to imagine him still running the show in, say, three years' time. Lloyds is sensible to think about succession planning.

That said, the approach to Lord Davies will heighten speculation that Mr Daniels is to go sooner than people expect. And remember that the political masters of UKFI have just changed colour. The Liberal Democrats' Vince Cable, in particular, has been among Lloyds' harshest critics. Could it be that the bank's succession planning has taken on new urgency since the formation of our coalition Government a week ago?

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