Lloyds Bank: mission accomplished

Lloyds has reported strong results. Could this be the time for the man who masterminded its turnaround to move on? Ben Judge reports.

Lloyds has reported strong results. Could this be the time for the man who masterminded its turnaround to move on? Ben Judge reports.

"More than eight years after receiving one of the largest bailouts of the global financial crisis, Lloyds Banking Group appears to be back as a steady UK retail bank," says Emma Dunkley in the Financial Times. In February, the firm posted annual profits of £4.2bn, more than double what it made in 2015 and the biggest increase for ten years.

Last week, it reported a 99% increase in pre-tax profits for the first quarter of 2017 up £1.3bn compared with £645m in the same period a year ago. What's more, Lloyds is now almost entirely back in private hands, after the taxpayer invested £20.3bn to take a 43% stake in the wake of the 2008 crisis. At the time of writing, the state's shareholder was down to just 0.89%, and that's expected to drop to zero any time now. "Such is its return to normality that a number of investors and analysts are even hailing the lender as boring'."

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Much of this is down to chief executive Antnio Horta-Osrio, who took over in January 2011, says the Financial Times' Lex column. Apart from a single "misstep" over PPI compensation claims, which admittedly may cost £17bn, Horta-Osrio "has not put a foot wrong professionally" in weaning the bank off wholesale funding and slimming its portfolio. As a result, Lloyds is a "relatively simple, profitable, UK-focused bank".

The turnaround has become Horta-Osrio's great claim to fame, and gives him the chance to get "a job with more international glitz" something he is said to be keen on. However, that might not be a bad thing. Perhaps the bank will need a different kind of boss for "the unglamorous task of grinding out profits in Brexit-obsessed Britain".

"Horta-Osrio says he's happy in his post and there is more to do," says Nils Pratley in The Guardian. But "not everybody is convinced" by that statement. After all, six years is a "long innings for a FTSE 100 chief executive" and he is "constantly linked with the vacancy at HSBC". Still, while an exit can't be ruled out, "a couple more laps of the track at Lloyds is surely a highly attractive prospect".

The major restructuring is over, the bank is "playing in a league of its own", and its "leadership in UK retail banking is assured". If he stays, Horta-Osrio's next three-year plan should just be a matter of "deciding how generous to be with shareholders' dividends while setting the correct rate of investment in digital innovations". He may pine for a job on the global stage, but "running a restructured Lloyds is surely an easier way to earn £5m-ish a year than most of the alternatives".

Will tough competition choke Just Eat?

Just Eat, the online takeaway service, saw revenues rise by 46% to £118.9m in the three months to the end of March. Order numbers rose by 17% to 24 million. However, this was not enough to satisfy investors' expectations, and its shares slid by 5%.

That's no surprise, says Leila Abboud on Bloomberg Gadfly. The firm is now facing increased competition from the likes of Uber and Deliveroo. And its expansion into Australia and Canada, driven by "expensive acquisitions", will provide additional challenges.

So it looks increasingly unfortunate that chief executive David Buttress had to step down in February due to urgent family matters. Worse still, chairman John Hughes, who was filling in for Buttress as he looked for a new one, has taken medical leave. Paul Harrison, the company's chief financial officer, who only joined Just Eat in September, and board member Andrew Griffith will take their places.

Investors could be forgiven for taking fright at this, given that the firm's ability to confound doubters so far has largely been down to strong management. "A company can't be blamed when life happens [but] the understudies are taking over at a delicate time."

City talk

If Jes Staley of Barclays loses his job for trying to unmask a whistleblower, as he yet may, "he'll deserve no sympathy", says Nils Pratley in The Guardian. Still, one can feel for him in his latest bit of bother. Staley backed his brother-in-law, Jorge Nitzan, in a dispute he was having with KKR, the private-equity giant. KKR took offence, accused Staley of acting against the interests of one of the bank's customers, and issued a "pompous statement", implying that it will withhold business from Barclays. "Sorry, chaps, but Staley was under no obligation to help KKR" and the Barclays' board "would be entitled to tell the private-equity tycoons to take their business elsewhere if they feel differently". If Staley is is to be ousted, "let it be for the right reason".

AstraZeneca's motto is "What science can do". The answer: "lose you a bucketload of money", says Alistair Osborne in The Times. Chief executive Pascal Soriot could have accepted a £55 per share bid from Pfizer three years ago. But "he told the US raider to get lost" and "returned to the lab", with the goal of finding new drugs that could double sales by 2023. That worked well for Soriot: he's since pocketed £24m, including £13.4m last year. Yet sales are static and the shares trade at £47. This "cannot go on for ever", so it's good that Soriot thinks 2017 will be a "pivotal year" for the company. Get things wrong and it could certainly prove pivotal for him.

"PPI, short for payment protection insurance, now appears to have become shorthand for any egregious or extortionate product," says Matthew Vincent in the FT. So when Taylor Wimpey announced that it will pay £130m to compensate people who bought leasehold houses with onerous ground rents that could double every ten years, how were these contracts described? That's right. "The PPI of the housebuilding industry."

Ben Judge

Ben studied modern languages at London University's Queen Mary College. After dabbling unhappily in local government finance for a while, he went to work for The Scotsman newspaper in Edinburgh. The launch of the paper's website, scotsman.com, in the early years of the dotcom craze, saw Ben move online to manage the Business and Motors channels before becoming deputy editor with responsibility for all aspects of online production for The Scotsman, Scotland on Sunday and the Edinburgh Evening News websites, along with the papers' Edinburgh Festivals website.

Ben joined MoneyWeek as website editor in 2008, just as the Great Financial Crisis was brewing. He has written extensively for the website and magazine, with a particular emphasis on alternative finance and fintech, including blockchain and bitcoin. As an early adopter of bitcoin, Ben bought when the price was under $200, but went on to spend it all on foolish fripperies.