Blank cheque bounces back in his face

Sir Victor Blank will step down as chairman of Lloyds Banking Group at the bank’s annual meeting in 2010, in an attempt to mollify the bank’s shareholders following the takeover of HBOS, for which he appears to have been the driving force. as mentined before, his chief executive seems to have been less enamoured of the merger, less tainted and has not resigned.

Another bad financial judgement by a lawyer/politician. For all his experience as an M&A specialist, corporate finance advisor and director of RBS and chairman of Lloyds, Blank doesn't seem to have had much of a track record of making credit decisions, which is essentially what the HBOS merger was all about. Contrast that with the successful chairmen of US banks: J.P. Morgan and Bill Harisson at JP Morgan, Walter Wriston at Citi, Amadeo Giannini at BofA and the Barclay, Bevan, Tritton, Tuke, Pease and Williams families who have dominated the board at Barclays over the years.

The most curious comment so far comes from the BBC's Robert Peston, who is either out of his depth in his understanding of the situation, or privy to the most scandalous aspect of the whole affair. The following appeared on the BBC website:

Lloyds' directors do not believe that Sir Victor would have been ousted by shareholders at the forthcoming annual meeting, according to the BBC's business editor, Robert Peston.
However, he believes that UK Financial Investments (UKFI), which manages the government's stake in financial institutions such as Lloyds and the Royal Bank of Scotland, was "acutely aware" of other shareholders' convictions that there had to be a change at the top of Lloyds.
"I am now persuaded that UKFI would have voted its 43% (that's taxpayers' 43%) against him staying on," Mr Peston said.

The FT reports that John Kingman, chief executive of UK Financial Investments, is preparing a strategy to sell the taxpayers’ stake in the bank and speculates that it will get a better price if Sir Victor is not there. In effect, the government is ditching Sir Victor because he had the poor judgement to give in to government pressure to support the HBOS merger.

Eric Daniels told the Treasury Select committee that Lloyds only needed government support because of the HBOS deal. On its own, Lloyds Bank made £800 million last year, 80% down on the year before but still solvent. On the other hand the Chancellor has never said the merger was a bad deal for taxpayers. Lloyds' pre-merger shareholders picked up a large part of the costs of bailing out HBOS that would, without a merger, have fallen on the taxpayer.

One might have expected the original shareholders to oust Sir Victor, but for the government to fail to support their man is shameful in the extreme. They shafted the Lloyds shareholders on the way in, and shafted the man who helped them to do so on the way back out.