Lloyds CEO Horta-Osorio Will Step Down Next June

(Bloomberg) -- Lloyds Banking Group Plc Chief Executive Officer Antonio Horta-Osorio announced his surprise resignation after a decade at the British lender.

In a leadership overhaul, the bank also tapped former investment banker Robin Budenberg as its new chairman, according to a statement Monday. He replaces Norman Blackwell, who had previously said he would leave the bank before the 2021 annual meeting.

Horta-Osorio's departure at the end of June 2021 means Britain's biggest mortgage lender faces a transition as the economy recovers from Covid-19 and its deepest recession in centuries. The 56-year-old native of Portugal -- the longest-serving bank boss in Britain, and one whose pay package often stoked controversy -- steered Lloyds to profitability and full private ownership after a bailout during the financial crisis.

His exit marks “a serious loss for Lloyds,” said Fahed Kunwar, banks analyst at Redburn. The timing of the move could be interpreted as a sign Lloyds “does not have much room to maneuver” through a waning economic outlook and ultra-low interest rates, he added.

Kunwar said he expected Lloyds to appoint one of its internal candidates, who include Vim Maru, director of retail banking, and David Oldfield, who runs the commercial bank. He said Stephen Hester, former boss of Royal Bank of Scotland Group Plc and current CEO of RSA Insurance Group Plc, would be the most obvious external choice.

The search to replace him will start soon and will consider internal and external candidates, a spokesperson said.

During his tenure, Horta-Osorio cut thousands of jobs and managed a long-running and costly response to a scandal where British banks mis-sold insurance to consumers. He also pushed into wealth management and insurance as a way to diversify a revenue stream heavily dependent on the British economy and mortgage borrowers.

Lloyds booked a provision of 1.4 billion pounds ($1.75 billion) for soured loans in the first quarter as the coronavirus lockdown crushed economic growth and caused the bank to scrap previous targets. Its shares have also suffered as the Bank of England pushed lenders to scrap their dividends amid the pandemic.

The bank will announce a new 3-year strategic plan early next year, as Horta-Osorio's previous plan to invest in technology and reduce costs comes to an end.

The CEO's tenure hasn't been without hiccups. The lender cut his pay by 28% to 4.73 million pounds for last year, after he was previously one of the most highly paid bank chiefs in London. Horta-Osorio's handling of a whistleblower's report also came under scrutiny in the wake of a fraud case that dates back more than a decade.

Lloyds shares rose about 1.3% in London trading, one of the smallest gains in a broad rally by the Bloomberg Europe Banks and Financial Services Index. They're down 49% this year, the worst performance among Britain's five major banks.

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