Investors to let Lloyds bosses stay in the hot seat

By Sean Farrell, Financial editor
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The Independent Online

Lloyds Banking Group shareholders are prepared to let the bank's embattled management stay in their jobs, despite last week's announcement of losses caused by its acquisition of Halifax Bank of Scotland (HBOS).

Pressure has mounted on Sir Victor Blank, Lloyds' chairman, and Eric Daniels, his chief executive, since Friday's statement shocked investors with £11bn of losses from HBOS's corporate bank and investments in toxic securities.

Lloyds shares fell 8.4 per cent yesterday as fears persisted that it may need more capital, forcing it closer to nationalisation. The shares had already fallen by nearly a third on Friday. Moody's cut Lloyds' senior debt rating by three notches to A1. The agency said the increased risks within HBOS would weaken Lloyds' profitability and capital.

A significant institutional shareholder in Lloyds said: "I don't see any reason to clamour for change at this stage. The people who have created the problem have now left the bank. There is an element of [Lloyds] being able to blame all the bad stuff on the HBOS guys, but if it goes too far they endanger their own position."

Last Wednesday, at the Treasury Select Committee, Mr Daniels had said Lloyds had found nothing unexpected in HBOS since buying the bank last month. But he admitted to the committee that Lloyds had not checked the HBOS books as thoroughly as it would have liked before the deal.

Another significant shareholder said: "Should any heads roll? I can't think that is going to help the situation ... there isn't a wide gene pool out there of suitable unemployed bankers."

The Government already owns 43 per cent of Lloyds. Desperate to stop a run on the bank's shares, it gave its strongest indications yet it did not want to nationalise the bank. "There's no active consideration being given to nationalisation," a spokesman for Gordon Brown said.