Lloyds hit as chief goes on sick leave

The UK’s biggest mortgage lender said António Horta-Osório may be on sick leave until the end of the year, knocking 4.4 per cent off its shares, already dented by turmoil in the Eurozone. A hastily-convened board meeting decided he will be temporarily replaced by Tim Tookey, Lloyds’ outgoing finance director.

Since becoming chief executive in March, the 47-year-old Portuguese-born banker with a “legendary appetite for micromanagement” has embarked on a cost-cutting exercise which will result in 15,000 job losses.

“Following medical advice António Horta-Osório is taking a temporary leave of absence from his duties as group chief executive,” said the bank. “António is expected to return to his position before the end of the year.”

The temporary appointment of Mr Tookey, who is leaving in February to join Friends Life, failed to appease investors. Shares in Lloyds, which posts a third-quarter trading update next week, dropped 1.36p to 29.2p. They have more than halved since March.

“If Mr Horta-Osório does not return within the planned timescale then Lloyds could be left in a challenging position with regard to the shape of its senior executive management team,” said analysts at stockbrokers Shore Capital.

The group employs around 15,000 people in Yorkshire, with about 6,000 of these in Halifax. It employs around 104,000 staff across the globe.

Since joining from Santander UK, Mr Horta-Osório has initiated a strategic review, aimed at cutting costs by £1.5bn a year by 2014, trimming its international presence and revitalising Halifax.

He has also steered the bank through a changing regulatory landscape, including the Government-appointed Independent Commission on Banking. Lloyds is also trying to sell more than 630 branches, dubbed Project Verde. In May, the bank made a £3.2bn provision for mis-sold payment protection insurance, which pushed it to a loss.

Mr Horta-Osório has also revamped its management team, with former retail banking head Helen Weir and insurance head Archie Kane stepping down.

He failed to appear before a committee of MPs on Tuesday. A source said: “It’s extreme fatigue due to over-work. He’s thrown himself at the job.”

Cavendish Asset Management fund manager Paul Mumford, who holds Lloyds shares, said news of Mr Horta-Osório’s sick leave was disappointing for shareholders. “He’s got Lloyds back on the right track,” he said.

The bank is some 40 per cent owned by the Government after its takeover of Halifax Bank of Scotland led to a state bail-out.

“We are sympathetic to the demands placed on a modern banking chief executive,” said analyst Bruce Packard at stockbrokers Seymour Pierce.

“Lloyds has £295bn of wholesale funding (of which half matures in less than one year) and total assets of £978.9bn, which quite understandably would cause anyone stress in the current capital market conditions.”

Mr Horta-Osório was handed an £8.3m ‘golden hello’ on joining Lloyds earlier this year. He earns a basic salary of £1.061m, and his maximum potential bonus for 2011 is 225 per cent of his basic salary, around £2.4m.

Lloyds is understood to be due to hold a board meeting next week to discuss Project Verde, with the Co-op, NBNK and Sun Capital remaining the only contenders.

“We’re still on track for 2013 to complete the entire process and by the end of the year to announce which option we’re going to go with,” said a spokeswoman.