(Reuters) – Victor Blank is to step down as chairman of Lloyds Banking Group in the next year, following intense criticism of his part-nationalised bank’s purchase of troubled rival HBOS.
This year’s takeover of HBOS has saddled Lloyds with billions of pounds of losses from HBOS’s more risky loan book, forcing the government to provide rescue funds and prompting investors to call for Blank to quit.
Lloyds said on Sunday the decision to retire was Blank’s, and its board was unanimous in wanting him to seek re-election for another three years.
Blank’s decision could avoid a potentially contentious vote at Lloyds’ annual shareholder meeting next month, as he is due to stand for re-election and some investors were likely to reject another full term.
Financial Investments, which manages the government’s stakes in banks, including a 43 percent holding in Lloyds, said it would support Blank’s re-election next month, while acknowledging his decision to step down.
Blank, 66, said he would retire by Lloyds’ 2010 annual shareholder meeting as it was “the right time” to appoint a new chairman. This year’s AGM will be held on June 5, later than usual.
HBOS, Britain’s largest home lender through its Halifax brand, was at risk of collapse last September when Lloyds decided to buy it.
The deal only went ahead after Blank was reassured by Prime Minister Gordon Brown at a cocktail party that the government would waive competition rules to allow the creation of a dominant domestic retail bank.
“What the prime minister said on the night to me was the government would give that support,” Blank said last September.
The deal was sealed in January, and criticism of Blank and his Chief Executive Eric Daniels escalated as Lloyds was hit by rising bad debts as the economy worsened.
HBOS made a 10 billion pound pretax loss last year, after massive losses on corporate and home loans.
That raised concern that problems at HBOS had infected Lloyds, which had avoided the worst of the pitfalls of the credit crisis, and put pressure on the enlarged bank’s capital position, especially with more hefty losses expected this year and next.
The bank had to take taxpayer help to rebuild its capital and insure its toxic assets and investors, including retail investor lobby group the UK Shareholders Association, called for Blank to resign.
The HBOS deal “remains — in the medium term — a unique value-enhancing opportunity,” Blank said in Sunday’s statement.
He became Lloyds chairman in May 2006 and takeover activity has always featured prominently in his career.
As a partner at Clifford Chance he specialised in corporate law and co-wrote a textbook on takeovers and mergers, and then headed finance firm Charterhouse.
He has also served as chairman of retailer GUS and media firm Trinity Mirror and was appointed a senior adviser to U.S. private equity group TPG Capital two years ago.
Lloyds said it had named Lord Leitch as its deputy chairman with immediate effect.
By Steve Slater
(Editing by Will Waterman)