Three ideas for Lloyds Bank's new boss

The Black Horse needs whipping into shape. A change at the top provides a great opportunity, says Matthew Lynn.

António Horta-Osório did a decent enough job as chief executive of Lloyds Bank. But whether shareholders will be all that sorry to see him leave office is open to question. The bank is back on a stable footing, but it has hardly been making a fortune for investors. Over the last five years the shares have plunged from 80p to 30p and while much of that was lost during the Covid-19 crisis, the price was still at 60p before any of us had heard of Wuhan. With the dividend now scrapped for this year in response to the epidemic, it has hardly been a great asset to own. After all that, shareholders might well feel it is time for a change. 

Safe and dull is not good enough

Whoever takes on the job will inherit a leading position in the UK’s retail finance market. Including the Halifax and Bank of Scotland brands, Lloyds has 22 million current accounts, making it the largest in the UK, and it is also the biggest mortgage lender, with a quarter of the market for home loans. There is a problem, however. All Horta-Osório has really managed to do in his decade in charge is get the group back to where it was before the crash – a safe, steady but dull retail bank. That isn’t going to be good enough for the 2020s. Retail banking needs radical reinvention. Here are three ideas for his successor. 

First, Lloyds needs to keep closing branches. Ignore the campaigners who try to keep them open and brush aside the lobbyists who argue cash needs to be protected. It is not the job of a bank to save the high street, or to keep a system of payment alive after it has become technologically obsolete. After the Covid-19 crisis, local branches are going to be more irrelevant than ever. Apart from collecting cash from small businesses – and even the smallest of them are rapidly embracing contactless cards – a bank branch doesn’t have much to do anymore. And in a world where cash is dying out, cash machines are increasingly irrelevant. But the branch network is still a huge cost. The best companies don’t simply react to change, but get ahead of it. Lloyds can only do that by closing branches quickly. 

Next, work out how to respond to technology. Traditional retail banks are under assault from every direction. App-based start-ups are providing far simpler, better-designed current accounts. Fintech companies are chipping away at once-lucrative lines of business such as currency transfers and small-business lending (insurance will be next). The technology giants are increasingly moving into finance. Amazon has launched a current account, Apple and Google have payment systems and Facebook has even tried to launch its own currency. The start-ups have agility on their side and the tech giants have a mass of customer data, and deploy it brilliantly. A traditional retail bank has some residual strengths, such as a customer base, a payment system and lots of relationships. It has to figure out how best to use them. 

Time for a rebranding

Finally, it needs to reinvent its brand. All the high-street banks spend a fortune on marketing and Lloyds is no exception. Sure, it has a lot of name recognition, but there is not much in the way of affection, or respect, and customers are only loyal because it is usually a hassle to switch account. Decades of mis-selling products and sneaky charges have trashed the trust between banks and their customers and, apart from paying out billions in compensation, not much has been done to fix that. A brand needs to stand for something solid. It could be trust, or innovation, or value – or something else entirely. But the bank needs to work out what it is, and how to make it happen. 

Over the next few weeks there will be lots of speculation about who will replace Horta-Osório. The name doesn’t matter as much as whether he or she will be willing to push for a radical change of direction. If Lloyds makes an ambitious choice, it might be able to reinvent a tired business model – and set an example that the rest of the banking industry can follow. 

Recommended

Key dates for 2023: here are the dates you need to know when it comes to your money in 2023
Personal finance

Key dates for 2023: here are the dates you need to know when it comes to your money in 2023

There is no shortage of important dates to be aware of next year – which are likely to affect your financial health. We run through the key dates in 2…
6 Dec 2022
What is a recession and how will it affect you?
UK Economy

What is a recession and how will it affect you?

The UK economy is heading towards a recession, according to economists. But what is a recession, and what does it mean for your money?
6 Dec 2022
Investment scams are infiltrating Facebook and Instagram
Investment strategy

Investment scams are infiltrating Facebook and Instagram

Research from Which? found hundreds of investment ads on Facebook and Instagram that could be misleading investors into potential investment scams.
6 Dec 2022
Is it a good time to buy an annuity as rates hit a 14-year high?
Pensions

Is it a good time to buy an annuity as rates hit a 14-year high?

Average annual annuity income has risen by nearly £1,000 since the start of the year. We look at whether now is a good time to buy an annuity.
6 Dec 2022

Most Popular

Is it cheaper to leave the heating on low all day?
Personal finance

Is it cheaper to leave the heating on low all day?

The weather is getting colder and energy bills are rising, but is it really cheaper to leave the heating on low all day or should you only turn it on …
1 Dec 2022
Radiator vs electric heater – which is cheaper?
Personal finance

Radiator vs electric heater – which is cheaper?

We compare the costs, pros and cons of radiators and electric heaters and see which one will help keep your energy bill as low as possible.
28 Nov 2022
State pension errors – why tens of thousands of mothers could be missing out on millions in state pension payments
State pensions

State pension errors – why tens of thousands of mothers could be missing out on millions in state pension payments

LCP launches Mothers Missing Millions campaign amid DWP state pension errors.
3 Dec 2022