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Banking

Breakingviews: Odd bet on the black horse

Source: www.breakingviews.comis Europe's leading financial commentary service Eric Daniels , the chief executive of Lloyds TSB, has passed over the opportunity to give the UK bank a radical change of direction. Not only that – he has forced out the one board member who was gunning for change, former finance director Philip Hampton.

Instead, Daniels has made a sort of double-or-quits bet on turning around the bank's long-term savings business, while continuing to pay most of its retained earnings in the form of a whopping dividend. The one change he has made is to sell off the bank's remaining international operations – largely to fund this gamble. All this has the makings of a flawed strategy.

Daniels inherited several big problems at Lloyds. One is that it is short of capital and this puts pressure on earnings to fund growth in its banking and insurance businesses. Another is that it is a mature business in a pretty fully consolidated UK market and this makes it hard to grow at home without also seeing its industry-leading profit margins decline.

Pitiful returns


Eric Daniels

The CEO also inherited a big conundrum: what to do about the bank's large long-term savings business.


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