Lloyds finds property buyers

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The Independent Online

Financial Correspondent

Lloyds Bank is selling repossessed properties in the City at above market value, according to Sir Brian Pitman, its chief executive. It could not sell them at any reasonable price two years ago, he said.

Sir Brian refused to comment on Canary Wharf, which is the subject of a bid from a consortium including its original developer, Paul Reichmann, and Saudi prince al-Waleed bin Talal. Lloyds leads the group of 11 banks which owns the development in London's Docklands and is currently in negotiations over the offer.

In a wide-ranging interview, Sir Brian told the Independent that London was profiting from a massive influx of investment from the Continent, particularly German and Swiss investment banks. He said this was obviously also having an impact on Canary Wharf.

"There is obviously a great interest in the City with Deutsche Bank moving to London, Dresdner moving to London, and other US investment banks moving to London. The most powerful economy in Europe is choosing London as the financial centre of Europe. That is very important," he said.

However, London's transport infrastructure remained "a major problem". Sir Brian said: "Every major city that I know has got difficulties with transportation."

He said that Lloyds had itself relocated more than 2,000 staff to Bristol, to attract good-quality staff by offering a good quality of life.

Sir Brian also said Britain was suffering from a particularly painful transition from being a high-inflation economy to a low-inflation one. The "Holy Grail" of stable prices was worth fighting for.

Sir Brian kicked off a public debate a week ago when he said inflation was rising out of control and indicated that interest rates should rise. This was an obvious gesture of support for the Governor of the Bank of England, Eddie George, in his confrontation with the Chancellor, Kenneth Clarke, over the direction of interest rates.

Sir Brian is a hawk on inflation and warns against any moves to revive the stagnant housing market, such as tax breaks or interest rate cuts, since this would re-ignite general inflation. He also claims that a low- inflation economy will give British banks a fundamentally lower level of bad debts. Instead of the boom-to-bust cycles seen in recent years, with total UK bank bad debts topping pounds 6bn in 1992, a stable low-inflation environment would see minuscule bad debt in comparison.

Asked why he was so hostile to moves to help the housing market when Lloyds had recently bought Cheltenham & Gloucester Building Society, a large mortgage lender, he replied that a short-term boost to housing would in the long term be damaging to C&G since any resulting boom would lead to another bust. He said that if another building society became available at the right price and adding shareholder value, Lloyds would look at it. He warned that the merger between Halifax and Leeds, which will convert to bank status, will create a very tough competitor in the market.

"It will keep us on our toes. Halifax alone was bad enough, and it will be quite a force in the financial services market."

He also warned that job cuts at Lloyds and throughout the banking sector would continue. Sir Brian has long held the view that financial services in Britain are going through the same fundamental shake-out as UK manufacturing suffered in the early 1980s.

That means that 2,000 jobs have gone from Lloyds in the past 12 months, and cuts are likely to continue at that rate in the future, he said.