Lloyds expected to commit itself to Halifax

The group-wide strategy is tipped to include the possible sell-offs of the Scottish Widows insurance business and the St James’s Place wealth management division.

Lloyds has always maintained that Halifax was a key component in its decision to buy Halifax Bank of Scotland (HBOS) at the height of the banking crisis.

Amid tens of thousands of job losses since the takeover in January 2009, the Halifax operation has remained relatively unscathed as Lloyds is keen to expand the brand’s strong credentials in mortgage lending and retail banking.

Lloyds, which was part-nationalised following the HBOS takeover, has been considering a range of possible asset sales and restructuring moves.

Mr Horta-Osorio has been working on the review since taking up office earlier this year.

The company has appointed management consultancy firm McKinsey and other advisers to work on the business plan.

The review comes on top of Lloyds’ ongoing plan to sell 600 retail bank branches – a disposal that was forced on it by European regulators as the price of the HBOS acquisition.

The Independent Commission on Banking suggested in an interim report last month that Lloyds might have to sell significantly more branches on top of the 600 already earmarked for sale to boost competition.

Lloyds has said the recommendation could delay or complicate its sale programme, although the ICB is not due to make its final recommendations until September.

Analysts believe the sale of the 600 branches, dubbed “Project Verde”, could interest Virgin Money, retailer Tesco’s finance arm, new bank venture NBNK and overseas lenders such as National Australia Bank, the owner of Yorkshire Bank and Clydesdale Bank. A poll last month showed that most analysts and investors expect Mr Horta-Osorio to try to sell Scottish Widows and the stake in St James’s Place.

Lloyds may also consider plans to set up a separate division to house non-core assets.

Lloyds was saddled with billions of pounds of losses after it bought troubled rival HBOS at the height of the credit crisis of 2008, a deal brokered by the Labour Government.

The taxpayer owns around 40.6 per cent of Lloyds after its bailout of the bank.

Last week Lloyds said it expects to pick a buyer for the 600 branches it has to sell by the end of the year, despite the threat from the ICB that it may be ordered to sell more.

At its annual general meeting last week, where eight per cent of shareholders voted against the bank’s executive pay packages, Mr Horta-Osorio said: “We are contacting potential buyers.”

Chairman Win Bischoff said the company is making good progress on the sale.

“The bank is proceeding with Project Verde with full speed and we hope to identify a potential purchaser by the end of 2011, ” Mr Bischoff said.

It has been suggested that the recent appointment of Toby Strauss, Aviva’s UK life chief executive, as Lloyds’ group director for insurance may mean Lloyds will keep Scottish Widows.

But analysts said a sale of Scottish Widows would still leave Lloyds with a sizeable insurance business through its Halifax, Lloyds TSB, Bank of Scotland and Clerical Medical brands.

In a separate move yesterday Lloyds’ Bank of Scotland division received a £3.5m fine from the Financial Services Authority regulator for failures in how it handled certain customer complaints.

The Financial Services Authority added it had also secured £17m in compensation for customers, following complaints about the company’s retail investment products.

Between July 2007 and October 2009, Bank of Scotland received 2,592 complaints about its sales of the Collective Investment Plan, Personal Investment Plan, Guaranteed Growth Bond, ISA Investor and Guaranteed Investment Plan, the Financial Services Authority said.

The regulator said Bank of Scotland had wrongly rejected a significant number of these complaints.

“This fine reflects Bank of Scotland’s serious failure to treat vulnerable customers fairly,” said Tracey McDermott, the regulator’s acting director of enforcement and financial crime.

Mis-selling bill put bank in red

THE taxpayer-backed Lloyds Banking Group slumped back into the red this month after revealing a shock £3.2bn charge to cover claims for mis-sold payment protection insurance (PPI).

PPI is designed to ensure borrowers can keep up with loan repayments in the event of an accident, sickness or unemployment.

Britain’s biggest lender reported pre-tax losses of £3.47bn in the first three months of the year, compared with £721m profits a year earlier.

The charge to cover millions of mis-sold PPI policies was far greater than the City had expected. PPI policies were designed to cover loan repayments if a person lost their job or fell ill.