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The Horta-Osório effect

Mortgage brokers hope Lloyds Banking Group’s appointment of former Santander UK chief executive António Horta-Osório and some of his top executives will bring a more favourable attitude towards intermediaries.

Horta-Osório has raided the Spanish bank on three separate occasions since taking over as chief executive of state-backed Lloyds on March 1.

The process began in January when it emerged ex-Santander executive director of risk Juan Colombas had agreed to become Lloyds chief risk officer.

The hiring of Santander chief financial officer Antonio Lorenzo as Lloyds head of wealth management and international and Santander executive director for retail distribution and intermediaries Alison Brittain as group director of Lloyds TSB and Bank of Scotland followed in March.

Santander is known for its intermediary-focused lending strategy, with around 80 per cent of its mortgage lending written through intermediaries. Lloyds, on the other hand, previously admitted its distribution strategy could see a slight increase in direct sales over the next couple of years.

Former Lloyds sales director of mortgages Nigel Stockton told Money Marketing in September he believed the bank’s share of lending through intermediaries, currently 60 per cent, could fall to around 50 per cent.

His successor, Mike Jones, dismissed those claims in January and said the share would only dip slightly under 60 per cent.

Jones says the new appointments at Lloyds and its streamlining of the broker brands shows the commitment the firm has to intermediaries.

Last month, Lloyds announced the closure of Cheltenham & Gloucester for Intermediaries, with the brand to be used solely for direct lending. Halifax and BM Solutions are now the lender’s only intermediary brands.

Jones says: “The changes ensure our business is in the best possible shape to support intermediaries.

“Our key brands, Halifax and BM Solutions, are operating in clear markets with revitalised product ranges and the feedback we are getting shows brokers recognise the energy we are showing in this market.”

Lloyds’ appointment of a chief executive from a lender with a dominant intermediary-focused distribution strategy has led brokers to speculate whether a similar strategy will be adopted at Lloyds.

John Charcol senior technical manager Ray Boulger sees the appointment as encouraging.

He says: “Lloyds Banking Group has been getting less intermediary-friendly over the past year or two. Its lending has declined and therefore it has less need to use intermediaries.

“It has been one of the worst culprits on dual pricing so the arrival of a chief executive from a lender that does 80 per cent of its business through intermediaries can only be good news.”

But he says the same restrictions that hampered lending under the tenure of Eric Daniels might dog Horta-Osório. Lloyds confirmed last week that its mortgage lending for 2011 would be roughly the same as in 2010.

Boulger says: “I suspect the share of lending Lloyds does through inter-mediaries will creep up. Whether that is down to the new chief executive or would happen anyway is debatable.”

Chadney Bulgin mortgage partner Jonathan Clark sees Horta-Osório’s appointment as good news. He says: “Lloyds needs a shot in the arm and maybe this will be it.”

Alexander Hall chief operating officer Andy Pratt says Lloyds simplified its intermediary brands to the benefit of intermediaries.

He says: “Brokers are looking forward to the simplicity that will come out of the newly steam-lined Lloyds. I am sure this drove the decision to close C&G for Intermediaries. Why do you need more than one brand for the intermediary side?”

Santander, which entered the UK market in November 2004, had a relatively low profile until it bought Abbey National in November 2004, Alliance & Leicester in October 2008 and the branches of Bradford & Bingley in September 2008. It is now one of the major lenders in the UK market.

Pratt says: “Santander saw the strength of the UK broker market, in terms of bringing in volume, and embraced it. I do not think Lloyds will follow to the same extent but it is moving in the right direction.”

Abacus Financial director Matthew Fleming-Duffy cannot envisage Lloyds adopting Santander’s distribution strategy with the same vigour because of the limited amount it has to lend.

He says: “It comes down to how much it has got to lend and how exposed it was to the credit crunch.”

Simplicity Financial Services principal Chris Downham says: “Lloyds will probably try to say it is loyal to intermediaries but, in reality, it is not that loyal. It has got a lot of dual branding and has been cutting down the lending routes open to intermediaries.”


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