Key personnel have also been decided. All it needs now is for Lloyds’ shareholders to agree the deal later this month, followed by HBOS shareholders in December, and it is full steam ahead.
It was inevitable that Lloyds’ executives would dominate the new board but the level of that dominance came as a bit of a shock, with none of the top jobs going to HBOS’s executives. It was announced that HBOS chief executive Andy Hornby would step down without severance pay but it has emerged since that he will stay on for a period in a consultancy role. This has attracted some criticism, particularly his reputed £60,000 a month salary. However, it seems an eminently sensible move. Lloyds has said his role will be “to assist with integration-related matters” and there will be plenty of them. People who know the businesses inside out are best equipped to advise on such issues.
The new head of mortgages of the combined group is a role I am sure many of us have a particular interest in. Will newly appointed head of retail Helen Weir select someone from Lloyds or HBOS? Both have strong candidates and an announcement is expected before the end of the year.
It would be a shame to chuck out some of the expertise that Lloyds is acquiring as part of the deal. HBOS did not get to where it did – the biggest lender in the country – without having a good grasp of the markets and an understanding of the intermediary’s role and requirements. HBOS has some extremely skilled and knowledgeable staff in this area who still have a lot to offer.
Whoever gets the top mortgage job has quite a task on their hands, maybe not on the scale of Barack Obama but a job all the same. A balance will have to be maintained between the strengths of Lloyds and HBOS to ensure the combined entity moves forward in 2009 and beyond. We know some of the extent of the task ahead of the new group, as it needs to raise £17bn from the Government once the takeover goes through. Lloyds TSB chairman Sir Victor Blank has said the merger will deliver annual cost savings greater than £1.5bn. It looks as though there is much pain to come.
However, there is some reason for hope. In its interim management statement, Lloyds said its business continues to trade well, with market share of net new lending in the third quarter reaching 31 per cent.
HBOS stressed that its multi-brand strategy works well, concluding: “HBOS’ strong brands and leadership positions in UK retail banking, its multi-brand approach and distribution strength in the insurance and investment markets and more selective approach to corporate and international markets, offer good growth opportunities when the current cycle turns. These opportunities will be further advanced as HBOS joins the enlarged Lloyds TSB Group.”
Surely it makes sense to draw on the strengths of the brands and keep them doing what they do well? It is too early to say what distribution, products and pricing will be like although there are early fears that competition will suffer and there will be less choice for consumers. Time will tell.
It will be a real task to bring together the businesses but there are good people within both banks who are more than capable of doing so, if they are given the opportunity.
Mark Harris is managing director of Savills Private Finance