Eric Daniels to step down from Lloyds

Departing chief says HBOS deal that led to bailout will prove to be good for the bank
Click to follow
The Independent Online

Lloyds' chief executive, Eric Daniels, yesterday said he planned to quit the bank in a year, in a surprise move that came just as the bank's finances finally appeared to be moving in his favour.

There had been rumours that his chairman, Sir Win Bischoff, had been sounding out possible replacements in May, including the former Standard Chartered chief executive Mervyn (now Lord) Davies.

But Mr Daniels had personally given no indication of any inclination of any desire to step down at recent press conferences, and appeared determined to prove his claim that the controversial rescue of HBOS at the height of the financial crisis would ultimately prove to be "a good deal for shareholders" despite the £20bn government bailout it led to.

Yesterday Mr Daniels, who was able to report expectations-beating profits of £1.6bn at the half year, insisted that remained the case. He said: "I think the enlarged Lloyds Banking Group will do very, very well for all of our stakeholders. We have established very good momentum and if you look at the [analysts'] consensus, it is going up and up and up." He continued: "I don't think anyone would have forecast the kind of markets that we have seen but what I'm pleased about is that Lloyds is now in great shape. We returned to profit much sooner than anyone expected. We are one of the 10 largest banking groups in the world and we are in a very strong position."

Mr Daniels said the bank was now "halfway through" the integration of Lloyds and HBOS and that he had decided to quit with a long lead time to give the board time to find a successor. He said he had not thought about what to do next, but added: "I really can't imagine spending the next 10 years or so on a beach."

His chairman, Sir Win Bischoff, paid fulsome tribute to Mr Daniels in a statement to the London Stock Exchange. He said: "I have seen first-hand and value greatly the considerable management, banking and organisational expertise Eric has brought to Lloyds Banking Group as chief executive. On a personal note I shall miss an outstanding colleague, his passion for the group and his commitment to its customers and employees."

Investors, however, were more equivocal, and the shares finished the day up 2.07p at 77.4p. While the timing of the announcement yesterday caught the market by surprise and raised eyebrows, the fact that Mr Daniels is stepping down did not.

Marc Smart, analyst at Citigroup, said: "They say that things happen in threes. John Varley [at Barclays], Stephen Green [HSBC] and now Eric Daniels, who has informed the board of his intention to retire in a year's time.

"I wouldn't read too much into Eric's departure (I don't think it was totally unexpected) although no doubt some questions will be asked about timing. My understanding is that he will turn 60 around the time he is due to retire, and I don't see his decision to leave as being any different to John Varley's who had a predetermined tenure in mind."

Other analysts agreed that the changing of the guard at the other banks would inevitably have led to questions about Mr Daniels given that he would be by a distance the longest-serving head of one of the big UK banks by next year and the only one whose appointment dated from before the credit crunch.

Mr Daniels took over at Lloyds from Peter Ellwood at a time when the bank was facing sharp criticisms over its performance compared to its peers and particularly over the way the acquisition of the life insurer Scottish Widows – at the top of the market – had been handled. He was critical of his predecessor and set about selling a number of assets, while acting to maintain what was by far the sector's most generous dividend.His conservative approach initially drew flak from some parts of the City, with opponents questioning the policy and accusing him of eschewing growth that deals or new ventures could have brought.

As the financial crisis took hold, however, Mr Daniels looked clever until the HBOS deal, which appeared to fly in the face of everything he had been doing. Gordon Brown, the former prime minister, and Sir Victor Blank, the former chairman, arguably bore as much, if not more, responsibility than he did for that, but neither is still in their post today.

The runners and riders tipped to take over

Douglas Flint

HSBC's finance director appears to have his way forward blocked. He's not in the running to become chairman and the ambitious investment-banking chief Stuart Gulliver appears to be next in line should CEO Mike Geoghegan take the top job. HSBC had a good crisis. Stephen Green, its current chairman, is about to become Trade minister at Lloyds' biggest shareholder.

Helen Weir

The former finance director and now head of the key retail bank, she is arguably the only credible internal candidate. Proved herself to be a capable operator, and would provide a handy PR boost, too. She's been a banker for only four years, having joined from Kingfisher, but cannot be ruled out of calculations.

Naguib Kheraj

Most recently seen as chief executive of JP Morgan Cazenove, before the US parent took full control of the company, and a previous finance director of Barclays. Kheraj ticks a lot of boxes, in that he's a big talent and hasn't yet had his charisma-bypass operation. The problem is his investment-banking background and limited retail bank experience would stand as major drawbacks given the sensitivity of the appointment.

Antony Jenkins

The dark horse, at least if Ms Weir gets passed over. Mr Jenkins has led a revival at Barclaycard and Barclays last year promoted him to run a new division: Global Retail Banking (GRB), comprising UK Retail Banking, Barclaycard and the former GRCB Western Europe and Emerging Markets businesses. No real drawbacks to speak of.

The others

Frits Seegers, the former head of retail and commercial banking at Barclays, might hope for a call. He quit on losing half his business to Bob Diamond. Graham Beale at Nationwide is also being mentioned, as is Paul Thurston, head of HSBC's UK bank. Their businesses are, however, much smaller than Lloyds (and Beale might not want it). Lord Davies, former chief executive at Standard Chartered, was talked to in March but probably won't be this time. The bank will also look overseas. Gordon Nixon, chief executive of Royal Bank of Canada, should get a call, but there are others in the US, Canada and Australia.