Abbey National yesterday named Luqman Arnold, previously president of the Swiss bank UBS, as its new chief executive and in the process put an end to its month-long pursuit by Bank of Ireland.
The Irish bank announced it "would not proceed with its proposal" for Abbey, after the UK's sixth-largest bank addressed one of its weakest areas – not having a chief executive since Ian Harley stood down in July.
Mr Arnold, who left UBS last December after falling out with its chairman, Marcel Ospel, starts his new job on Monday and will be paid a basic annual salary of £675,000, plus share options of up to four times his salary. He can also earn an annual bonus of up to 70 per cent of his basic pay if certain performance targets are hit.
Abbey insisted its new chief executive would not receive a "golden hello" or have a "golden parachute" if the bank attracted another bid in the next few months which threatens its independence and Mr Arnold's job.
But Mr Arnold is on a 24-month contract, which would guarantee a generous pay-off if Abbey were to be bought.
Lord Burns, chairman of Abbey and the person who has been leading the search for a new chief executive, said he approached Mr Arnold a few days before being contacted by Bank of Ireland about a possible merger.
Candidates who went for but failed to clinch the chief executive position are thought to include Stephen Hester, Abbey's finance director. Lord Burns said he had the "highest regard" for Mr Hester. City sources said Mr Hester, a dynamic individual who has impressed investors, could clash with his new boss, but the two had a constructive relationship when they both worked at Credit Suisse First Boston in the 1990s.
Mr Arnold has also pipped John Stewart, deputy chief executive of Barclays, and Eric Daniels, head of retail banking at Lloyds TSB, to the post. Gordon Pell, who heads up Coutts, was thought to be a likely candidate but is thought to be waiting for the top job at Lloyds to come up when Peter Ellwood retires next year.
Mr Arnold said the possibility of Abbey entering negotiations with Bank of Ireland "didn't really affect my thinking" about whether he would accept the job because he did not think Bank of Ireland would easily persuade Abbey to enter talks.
Shareholders generally reacted positively to the appointment. One major institutional shareholder said: "I am pleasantly surprised. I think Abbey has done well to get him as he is quite an operator."
The one area of concern is whether Mr Arnold, who has worked for a host of investment banks in his 30 years in the industry, has the expertise to refocus Abbey on its core businesses of mortgages and savings.
Lord Burns rejected the idea that Abbey's restructuring programme would involve it going "back to basics", saying: "It is not an expression I care for at all. We will be moving the business forward."
Mr Arnold, 52, said he realised Abbey's shareholders wanted to see the bank sort out its problems in wholesale banking and other areas quickly and to start to rebuild its share price. "We have to demonstrate to shareholders that we can extract all the value we can out of the business," he said.
Abbey is remaining tight-lipped about the details of its restructuring plan but will give more information in a statement at the end of November. Mr Arnold, who has a reputation for cutting costs and managing risk, is expected to sell off any businesses he regards as non-core, which could include the consumer credit arm, First National.
Abbey's shares fell 9 per cent to 623.5p as Bank of Ireland withdrew its indicative offer.
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