David Prosser: Daniels to quit Lloyds before the verdict on his tenure arrives

In all normal times, the takeover of HBOS would have been blocked on competition grounds; might the Government yet unpick the deal?

And then there was one. The announcement that Eric Daniels is to stand down from Lloyds Banking Group once it has appointed a successor will leave HSBC's Michael Geoghegan as the lone Big Four survivor of the credit crisis. Fitting, given that HSBC is the UK bank that emerged from the crunch with the most credit (or, more accurately, having seen its reputation the least tarnished).

In many ways, it is remarkable Mr Daniels has survived as long as he has. His cautious leadership of the bank saw Lloyds head into the credit crunch in remarkably good shape, only for the takeover of HBOS to catapult it straight into the path of the financial crisis juggernaut. Whatever the long-term outcome of that deal, or the political pressure Lloyds came under to do it, it became painfully obvious, almost overnight, that Mr Daniels had not fully recognised the extent of the liabilities he was taking on.

Shareholders suffered huge losses as a direct result and the clamour for Mr Daniels' departure began. Rather than the chief executive's head, however, shareholders got the decapitation of Lloyds' chairman, Victor Blank. That sacrifice, and some better news from the bank over the following year, bought Mr Daniels some time.

The doubts have never quite gone away, however. Four months ago, it emerged that Sir Win Bischoff, the new chairman, had quietly sounded out Lord Davies, the former Standard Chartered boss who enjoyed a stint in government under Gordon Brown, about replacing Mr Daniels. His rejection of such overtures seems only to have delayed the inevitable.

Indeed, few in the City expect Sir Win himself to stick around for an extended period. He will see installing Lloyds' next chief executive as one of the central challenges for his watch at the bank.

So how will history judge Mr Daniels' stewardship of Lloyds? The short answer is his reputation will stand or fall on how well the HBOS deal pans out.

There are reasons to be positive. The disastrous losses to which HBOS initially exposed the group shocked investors, but also peaked early. Lower than expected impairments from the second half of 2009 onwards have enabled Lloyds to return to the black more quickly than most analysts expected. The combined retail operations are now throwing off cash – helped by the exploitation of fat margins in the lending market, of which the Bank of England complained yesterday – and unlike its rivals, Lloyds has no underperforming investment bank business to drag it down. Those healthy revenues ought to enable Lloyds to get on apace with shrinking the size of its balance sheet, helped in the task by the European Union's ban on it paying dividends before 2012.

There is good reason to think, in other words, that some short-term difficulties notwithstanding, Mr Daniels' opportunistic instincts in snaffling HBOS two years ago may pay off. And yet, a large and very black cloud looms. In all normal circumstances, Lloyds would never have got clearance from the competition authorities for this deal. What if the Government-appointed Independent Commission on Banking, due to report its initial findings this very Friday, suggests that the takeover should be unpicked in the name of making the high street more competitive?

It is not such an outlandish idea. This is an inquiry with twin objectives: to investigate the structure of banking and to study competition in the sector. Any radical proposals on the former already seem unlikely to fly, so if Sir John Vickers' inquiry is to make a splash, it is the latter question that looks more promising.

Moreover, while Lloyds may think it has had assurances from official sources that its HBOS takeover would not be hindered by the competition authorities, what the former prime minister may or may not have promised the bank's former chairman is irrelevant in today's political climate.

Finally, one other thought. The calls for a high-profile external appointment at Lloyds began within hours of Mr Daniels' announcement yesterday. And the names of some excellent candidates are already being mentioned. However, the bank should not feel obliged to pick a box-office name just for the sake of doing so. In Helen Weir and Mark Fisher, it has two internal candidates with strong claims to the job. Both know the bank and its retail operations inside out.

Lloyds is not a bank in need of an industry hotshot who will rip up all that has gone before, but an institution where a process of transformation has now been going on for two years. That job needs completing and consolidating, rather than renewing.



No sign of a flight from the City yet

Here's an unhelpful piece of research for those doom-mongers who claim the competitiveness of the City of London is being steadily eroded by regulatory reform and higher taxes. Rather than fleeing London as fast as they can, global bankers and other finance industry professionals seem to rather like it here in the UK: they've just voted the City the world's most important financial centre for the third year running.

The research, based on a poll of thousands of financial services professionals around the world conducted by The Z/Yen Group, puts London in the top spot with a very slender lead over New York. There have been some changes over the five years in which the poll has been conducted annually – most notably the rise of Hong Kong and Singapore – but they are not related to regulation or tax, at least not directly. Given the growing importance of Asia to the global economy, it's hardly surprising these cities are rising up the rankings, along with Shanghai and Shenzhen, a little further behind.

What of cities such as Zurich and Geneva, to which all our City stars are allegedly rushing in the face of attacks on their wealth? Perceptions of the attractions of both these Swiss centres have barely changed – in fact, both have slipped down a place in the rankings. So much for the mass exodus.

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