The HBoS job creation scheme
The former bankers trying to keep HBoS independent (ie, Scottish) really ought to know the difference between a job application and a takeover. And they have sent their application to the wrong address anyway.
Sir Peter Burt and Sir George Mathewson, former rivals as heads of Bank of Scotland and Royal Bank of Scotland, have emerged from retirement with the idea they should run HBoS and call off the planned takeover by Lloyds TSB.
The two Scots knights are demanding the resignations of HBoS chairman Lord Stevenson and chief executive Andy Hornby with Burt becoming CEO and Mathewson in the chair.
It is not a takeover therefore, not even a share swap. There is no money going into either the bank or into the pockets of HBoS shareholders.
But if Burt and Matheson had read their newspapers they would know Stevenson and Hornby have resigned already. It was a condition of the UK government underwriting an £11.5bn capital injection for HBoS. The incumbents are simply serving out their notice, probably to be replaced by Lloyds directors.
Had they read the papers they would also have spotted that the £11.5bn injection will make the UK Treasury owner of nearly 60 per cent of HBoS’s shares. The job application should not be to the current chairman but to the chancellor, therefore, and if they did get the jobs, the two knights would become employees of a subsidiary of the government.
But if they do apply to Alistair Darling, their fellow Scot may point out that without the support of Lloyds, HBoS may need a lot more that £11.5bn, and if the extra capital has to come from the state too, it will make the government an even bigger owner of the bank.
He might also confirm reports that as well as bidding £6bn for HBoS, Lloyds is lending it £10bn to shore up its balance sheet. Lloyds stepped in with its rescue when a mauling of HBoS shares by the stockmarket threatened a run by savers. A full run was prevented but HBoS confirms an outflow of retail deposits and Lloyds is presumably taking their place.
Burt and Mathewson have provided no business plan yet but at least there is no hint they expect to take an equity slice for installing themselves and lending their expertise, as Gerry Robinson did with his failed bid for Rentokil or previous bidders did with Sir Terence Conran’s Storehouse.
But Darling might just question the expertise of these banking grandees. It was Burt, 64, who merged his Bank of Scotland with Halifax to produce HBoS and he remained deputy chairman until 2003. Mathewson, 68, was still chairing the equally troubled Royal Bank until 2006. Darling might suggest they carry some of the blame for the problems that hit the two banks in 2007.
The prospect of Scotland’s two great banks becoming government subsidiaries and the shame of their mismanagement is a hard blow to that country, but there is no hint of how the old bankers could restore HBoS’s fortunes, with or without job losses. They cannot match the £1.5bn of synergies that a Lloyds rescue offers.
Like the mooted bid from former HBoS executive Jim Spowart, the Burt-Mathewson proposal is Scotch Mist. It may win them a place in the Scottish Hall of Heroes but it is a non-runner.
