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Hornby’s committee boasts derailed?

This week, former HBOS chief executive Andy Hornby argued he tried to save HBOS by putting the brakes on mortgage lending and share buy-back from the very beginning of his tenure.

But a quick look through Hornby’s statements to the stockmarket over this time paints a very different picture.

He told the Treasury Select Committee on Tuesday: “I became the chief executive in September 2006 and the set of actions that were taken in the next 18 months tried to minimise our risk position. The first thing we did was to stop share-buyback promos, I was extremely keen that we pulled back and went cap in hand back to shareholders. I also pulled back further on our mortgage share, which fell from 14 per cent net lending in 2007 to 8 per cent in 2008.

“We also recognised the wholesale markets were getting a lot more difficult and we had already considerably extended the longevity of our wholesale funding.”

Strange then, at the start of his tenure in December 2006, Hornby said to shareholders: “In 2007, we expect to continue generating surplus capital, despite anticipating higher asset growth. As in previous years, this surplus will be returned to share-holders through a share buy-back programme, set initially at up to £500m.”

And, if we then go forward to mid 2007, HBOS’s drop in share to 8 per cent was followed suddenly by departure of Benny Higgins, who had headed HBOS’s retail banking division. At the time many reported this as proof of disagreement with Hornby over the way the mortgage business was being run.

HBOS blamed a flawed retention strategy on its slump to 8 per cent of market share, with no mention of Hornby’s alleged slowdown plan. Higgins was shown the door by August and intriguingly, the mortgage retail division was then immediately split between retail distribution, which was run by the bank’s then head of insurance, Jo Dawson, and retail products, under Dan Watkins.

Dawson has also been much-publicised this week after it was revealed that the group risk director under Crosby, Paul Moore the man at the centre of the storm, accused her of being unqualified as a risk director and was just a personal choice of Crosby. Hornby admitted Dawson had no “formal” risk qualifications.

HBOS was also quoted to have said in mid 2007 it would push to regain ground in reaction to the slump. It said it was confident that the fine-tuning of its then product range would enable it to increase its share back up to between 15 and 20 per cent of net lending during the second half of 2007.

It was also looking to its corporate banking, which was fuelled by the wholesale market, to “add incremental and sustainable value”.

Even as late as February 2008, Hornby told shareholders about the bank having “enjoyed” the rise in net share of mortgage lending to 22 per cent in the second half of 2007.

Hornby appeared as the innocent victim in this week’s Committee meeting, and his predecessor Sir James Crosby has become the fall guy.

It remains to be seen how his ‘weren’t me, guv’ plea goes down with the UK, and the shareholders he boasted to so readily as recently as one year ago.

One thing is for certain: the HBOS saga will continue to run and the lynch mobs will keep their torches burning for some time yet.

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