One of the biggest jobs in British banking is up for grabs — but who will fill it?
António Horta-Osório on Monday called time on his role at the top of Lloyds Banking Group (LLOY.L), kicking off a race to find a successor. Horta-Osório will step down by June 2021 after a decade in charge of the bank.
His replacement must navigate Brexit, the economic fallout of COVID-19, rock-bottom interest rates, and the continued rapid digitisation of finance. Who is up to the challenge?
“There’s definitely a tendency to hire internal,” Fahed Kunwar, a banks analyst at Redburn, told Yahoo Finance UK. “If you look at RBS and HSBC, their searches went on for quite a while and they ended up going internal. I do think the internal candidate is likely.”
There is a “strong bench of potential candidates within Lloyds,” according to Aman Rakkar and Grace Dargan, banking analysts at Barclays.
Early names in the frame include Horta-Osório’s lieutenant Vim Maru and Lloyds lifer David Oldfield.
Maru is currently head of retail operations at Lloyds, a role he has held since 2017. He worked with Horta-Osorio at Santander (BNC.L) but made the jump when Horta-Osório took charge of Lloyds in 2011.
Oldfield heads the commercial bank. He started at Lloyds on the graduate trainee scheme in 1984 and has held senior positions across several different parts of the bank — a plus for any interview.
Both Maru and Oldfield have been at the forefront of Lloyds’ COVID-19 response. Maru has overseen more than one million payment holidays for customers affected by the pandemic, while Oldfield has funnelled £4bn ($5bn) of support to businesses through government-backed loan schemes and payment holidays.
However, Lloyds investors want an external candidate Kunwar said.
“That’s almost unanimous,” he said. “People think it needs a strategic overhaul.”
Leading external candidates include: Alison Brittain, a Lloyds alumni now running FTSE 100 hotel company Whitbread (WTB.L); former Virgin Money (VMUK.L) chief executive Jayne-Anne Gadhia; and Antony Jenkins, the former chief executive of Barclays (BARC.L) who now runs his own fintech business.
“From Lloyds’ point of view, his experience is perfect,” Kunwar said of Jenkins. However, Jenkins may not want a return to frontline banking after being rather unceremoniously ousted at Barclays.
Another talked about candidate is Stephen Hester. Hester ran RBS (RBS.L) from late 2008 until 2013 when he was pushed out under pressure from the UK Treasury. Since 2014, he has been in charge of FTSE 100 insurance giant RSA (RSA.L) but “friends” told the Financial Times in February he would be “open to a change”.
Hester cut his teeth at Credit Suisse (CS) and spent time in charge of the investment bank in the 1990s. That could work in his favour.
“If you look at who [Lloyds] have hired as chairman and CFO, both are ex-investment bankers,” Kunwar said. “I would imagine growth by acquisition is a potential strategy for them, particularly in the wealth management and insurance space.”
If investment banking experience is required, then John Cryan could be another name in the frame. British-born Cryan ran Deutsche Bank (DBK.DE) from 2015 to 2018 and is well respected.
More “left field” possibilities include Hector Sants, the former head of the UK’s banking regulator, and Andrea Orcel, the former UBS (UBS) investment banking superstar who was lined up to run Santander but had the offer withdrawn after falling out with the board.
Kunwar believes Maru is the front runner, in part due to the difficulty in attracting outside talent at the current moment.
“Right now I can’t see people outside the bank jumping at the chance,” he said. “You don’t know what the loan book is like until you go through a crisis. The truth is the loan book hasn’t been tested for a decade.”
Lloyds set aside £1.4bn in April to deal with a surge in expected losses due to the COVID-19 pandemic and the sum is likely to rise even higher.
Meanwhile, banks have also been told to prepare for a possible no deal Brexit at the end of this year as trade talks stutter. That could cause even more issues.
“You’re going to have to stand and give credibility to a loan book you didn’t write in the first place,” Kunwar said of any external candidate.
“You would be taking quite a big shot in the dark right now.”