Lloyds bank ends long journey out of UK state ownership
London Letter: Treasury books profit of about €580 million on share sales
The UK treasury’s remaining 0.25 per cent of Lloyds bank shares was offloaded through the market on Tuesday. Photograph: Peter Nicholls/Reuters
Lloyds Banking Group has finally shaken off the shackles of UK government ownership, as the treasury disposed of its last remaining shares in the group late on Tuesday.
Formal confirmation of the sale, expected from the government on Wednesday morning will be a sweet moment for Lloyds, and its chief executive António Horta-Osório, who was parachuted in from Santander six years ago to secure the recovery of the bailed-out British bank.
The following January, the treasury was forced to stump up emergency funds that would eventually total more than £20 billion to save the enlarged Lloyds Banking Group from collapse, leaving the taxpayer sitting on a 43 per cent stake.
Portuguese-born Horta-Osório arrived in March 2011 following the departure of the bank’s American chief executive Eric Daniels, and swiftly set about shoring up the business.
Lloyds was the first major bank to act on the scandal over the mis-selling of payment protection insurance (PPI). Just weeks after the new chief executive arrived, he shocked the City by taking a £3.2 billion provision to cover compensation to customers who had bought the virtually worthless policies.
At the time, it was regarded as a huge hit for Lloyds, although its bill has since ballooned to more than £17 billion as the scale of the scandal became clear. Other banks were forced to follow suit and the cost to the industry as a whole has reached more than £40 billion.
Despite its well-publicised problems with PPI, Lloyds has now made an impressive return to financial health. In February, the group reported its best results in a decade, with profits more than doubling to £4.2 billion. Shareholders were rewarded with the promise of a special dividend payment.
As its business and share price have recovered over the past few years, the government has been steadily selling down its stake. The remaining 0.25 per cent of the shares was offloaded through the market on Tuesday.
The treasury has booked a profit of around £500 million (€582 million) on the share sales, which, although welcome, goes nowhere near covering the £3.6 billion cost of financing the bailout funds.
Horta-Osório has also done pretty well out of Lloyds, earning more than £30 million during his six-year tenure. But he has suffered some sticky moments along the road to recovery, not least in November 2011 when the Portuguese chief executive, then just six months into the job, was forced to take a leave of absence through exhaustion.
His departure threw the bank into chaos and alarmed the City, which wondered whether he would ever return. Shares in the bank tumbled.
In the end, Horta-Osório was back at his desk after two months, including a week spent resting at the celebrity rehab clinic, the Priory.
He later explained that he had suffered an insomnia-induced physical collapse – “I would go to bed exhausted but could not get to sleep. I could not switch off . . . I was ending up with just two of three hours’ sleep every night . . . I understand now why they use sleep deprivation to torture prisoners.”
The bank and its then chairman, City grandee Sir Win Bischoff, won praise for the way in which the chief executive’s health problems had been handled. It is still extremely rare for someone heading up such a large company – and one with such large problems – to take extended sick leave at all, let alone return to their post afterwards.
Sick leave hasn’t been the only difficulty of a personal nature for the Lloyds chief executive, who last year hit the tabloid headlines amid allegations of an affair. The married bank boss later wrote to Lloyds’ 75,000 staff, expressing his regret for the bad publicity and to apologise for the damage caused to Lloyds’ reputation.
Horta-Osório weathered that particular storm, despite some calls for his head. But with the sale of the government’s last shares, there will be a renewed focus on his future plans.
He’s regarded as having done an excellent job at Lloyds, particularly when compared with the progress – or lack of it – at bailed-out rival Royal Bank of Scotland, where the treasury still holds a 71 per cent stake.
Speculation in the City is that the Lloyds boss, who is still only in his early 50s, could be induced to jump ship for the Asia-focused banking giant HSBC, which is looking to replace chief executive Stuart Gulliver next year.
Fiona Walsh is business editor of theguardian.com