The Edge

Richard Northedge takes on corporate finance

You can see why Horta-Osario missed the Lloyds results

As soon as Antonio Horta-Osorio went sick from Lloyds Banking Group plc (LON:LLOY) this blog suggested he might never return to the chief executive’s chair. Now investors too are realising that, but the revelation of a £3.9bn loss shows how desperately the bank needs a boss.

Horta-Osario was not present to announce the loss, of course. That job went to the acting CEO who has already handed in his notice. A finance director leaving to join a rival might normally be barred from entering the office but Tim Tookey has been given the top job to do before he goes.

The bank insists Horta-Osario will be back by the December year-end – though the instance is becoming more half-hearted by the day. Why would it be looking for a successor if it did not need one? But if the CEO has had to go absent because of stress now, how will he cope during January when he has to compile figures for the current year?

The results presented by his stand-in suggest the stress can only get worse. Tookey warned that Lloyds will miss its targets, and that its residential property lending – the backbone of a group that includes the Halifax – is fast going into arrears. If Horta-Osario found 2011 too much, 2012 looks a more stressful task still.

Banking is about confidence and investors cannot have confidence in a CEO who has found this pressure overbearing. It leaves no capacity for bigger problems to arise – never mind bigger opportunities to exploit. Returning wounded will give no assurance to anyone. And if Horta-Osario is allowed to read the newspapers as he convalesces, learning that his chairman is drawing up a shortlist of successors will not hasten his recovery.

Whether Horta-Osario returns or not, Lloyds has a problem at the top.



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