By Ian Fraser
Published: Sunday Herald
Date: 2 November 2008
Lloyds TSB’s most senior Scottish-based executive has talked up the merits of the London bank’s planned takeover of HBOS, a deal which on Friday was greenlighted by the business secretary Lord Mandelson, despite concerns it will recreate a banking oligopoly and lead to thousands of job losses.
Speaking exclusively to the Sunday Herald, Archie Kane, chief executive of life insurer Scottish Widows and a main board director at Lloyds TSB, launched a rearguard action to reassure Scots who are concerned that the English bank might pursue a “slash and burn” approach to its new Scottish-based subsidiary if a deal completes in mid-January.
Lloyds TSB on Friday threatened to sue the Scotsman newspaper after it ran a front page story in which it alleged that Eric Daniels, Lloyd’s chief executive had said he was “indifferent” to the 300-year heritage of the Bank of Scotland, an allegation refuted by Daniels.
In an apparent shot across the bows of media critics, the bank demanded that the newspaper publish a front page correction or face legal action for defamation. Kane insisted that the American is not “indifferent” to the heritage of the Bank of Scotland and that what Daniels said was that he was “indifferent to the heritage” of individual executives working within the two merging banks — meaning that he doesn’t mind whether they are currently employed by Lloyds TSB or HBOS.
Kane said: “The fact is that we as an organisation are extremely attentive to our Scottish heritage, we understand it, and we certainly understand the sensitivities.” He said that Lloyds is “very focused” on Scotland, a fact that was manifested in the bank’s willingness to meet first minister Alex Salmond to discuss details of the deal last week. Kane said the bank had “taken on a lot of input” from Salmond.
However it became clear who is the dominant partner in the shotgun wedding between Lloyds and HBOS on Thursday when Daniels unveiled his new top management line-up. In this, only one of HBOS’s seven executive directors was given a berth in the enlarged entity.
Jo Dawson, director of retail distribution at HBOS, will become “wealth and international” director, while Harry Baines, currently group company secretary and general counsel at HBOS, will perform the same role in the merged bank. Neither role is at board level. The other six HBOS executive directors will all have to take early retirement or seek alternative employment. Kane said that every executive director of HBOS and Lloyds TSB had been interviewed for the 11 top jobs.
In Lloyds’ September 18 takeover announcement, the English bank made certain pledges including that the Mound will be used as it “Scottish headquarters”, that it will continue to print Bank of Scotland bank notes and that the management focus is to keep jobs in Scotland. Asked if these would be honoured, Kane said: “We have every intention of continuing to fulfill those commitments.”
Kane was unable to confirm that the merged banks’ asset management, insurance and life and pensions businesses will be run from Edinburgh. He said: “A lot of that stuff is going to be fleshed out at the EGM on 19 November.” He said that the two banks between them employ 24,000 people in Scotland but would not comment on how many are likely to lose their jobs following the proposed merger. There have been suggestions this could be between 5,000 and 7,000.
At the EGM on November 19, shareholders will also be asked whether they wish to accept a £17bn government recapitalization and whether they wish a takeover of HBOS to go ahead. A circular providing details will be issued to shareholders this week.
Colin McLean, chief executive of SVM Asset Management, said he believes that Lloyds is being premature in announcing executive positions. “They’re jumping the gun with that. Shareholders in the two banks have not yet even seen the final terms.” McLean also stressed that, given statements from chancellor Alistair Darling suggesting that HBOS would qualify for a government bail-out even if it remains independent, HBOS may still have an independent future. “It would be important to find a new board, which is essentially what has happened at RBS,” said McLean.
Alex Neil said: “Yesterday the Scottish Parliament gave a clear indication that they do not want this merger to go ahead, as MSPs realise how damaging it will be in terms of loss of jobs, decision making, competition and damage to the wider economy across Scotland. Labour has made a disastrous decision in pushing ahead with the merger. The announcement [from Mandelson, clearing the merger and saying it would not be referred to the Competition Commission] also raises questions about Gordon Brown’s commitment to keeping banking jobs in Scotland in general and in Fife in particular.”