Lloyds Said to Shuffle Executives Ahead of Strategy Reviewby
Horta-Osorio protege takes role examining group design, costs
Ex-Credit Suisse head of bank research also plotting strategy
Lloyds Banking Group Plc Chief Executive Officer Antonio Horta-Osorio has reshuffled senior jobs at the bank to create a new role to advise on cost control ahead of a strategic update this year, according to people with knowledge of the matter.
Jennifer Tippin, the London-based bank’s former customer services director, will lead group organizational design and cost management and will probably help Lloyds prepare a three-year business plan due to be announced in the third quarter, said the people, who asked not to be identified because the details aren’t public. Carla Antunes da Silva, former head of European banks research at Credit Suisse Group AG, who joined Lloyds about a year ago, will also work on the next strategic update the people said.
Horta-Osorio is looking to protect Britain’s largest consumer bank from record-low interest rates, which place pressure on profit margins, while countering growing competition from new fintech lenders. Lloyds has seen a “fundamental shift” with more products sold digitally than by any other method, he told a panel at the World Economic Forum at Davos, Switzerland on Thursday. “If banks don’t embrace it, I think they’ll be in severe problems in terms of cost structure,” he said.
Tippin was one of three executives personally mentored by the CEO. She reports to Chief People, Legal and Strategy Officer Simon Davies, a former managing partner at law firm Linklaters LLP, who joined the bank last year, said one person with knowledge of the matter. She is replaced in her former customer-services role, which included handling the bank’s response to the payment protection insurance scandal, by Stephen Noakes, who was managing director of retail customer products, the people added.
Simon Kenyon, previously the bank’s wealth director succeeds Noakes, while Kenyon is replaced by Bank of Scotland Managing Director Annette Barnes, said the people. Horta-Osorio is consolidating the managing director posts at Scotland’s oldest lender and Lloyds bank, which will now be led by Robin Bulloch, the people added. A spokeswoman for the bank declined to comment on the changes.
Lloyds is already cutting 12,000 staff and closing 400 branches by the end of 2017 as part of a three-year strategy. The bank still has more branches than any other U.K. lender with 2,148, analysts a JPMorgan Chase & Co. led by Raul Sinha wrote in a note to clients on Friday.
Branches account for as much as 19 percent of Lloyds’s core costs, more than any other bank, meaning further closures could help Horta-Osorio increase profitability, Sinha wrote in the note. Lloyds could boost earnings per share by as much as 8 percent if it closes a third of its branch network, he added. That’s more than the bank’s forecast for a 3 percent uplift in the first year from the acquisition of U.K. credit card business MBNA Ltd., announced last month.
Executives at Lloyds began a war-gaming exercise at a series of off-site meetings in the summer to identify the risks posed to banks from low interest rates and financial technology companies over the next decade, according to people familiar with the matter. The bank is currently targeting a cost-to-income ratio of about 45 percent by 2019 from 47.7 percent, the lowest among major U.K. lenders, in the third quarter.
Speaking at Davos, Horta-Osorio said low interest rates and fintech are the “most important trends that will shape banking over the next 10 years.” With low rates across Europe, “half of the balance sheets of banks, especially retail and commercial banks, are a bit useless because margins are compressed and deposits are not useful, economically speaking.”