SIR Victor Blank yesterday announced that he is stepping down as chairman of Lloyds Banking Group, the first major boardroom casualty of the bank's £7.7 billion takeover of HBOS.
The close friend of Gordon Brown was the key figure in sealing the deal to bring the banks together – a move since seen as a hastily-conceived disaster.
Sir Victor made the announcement ahead of what is set to be a stormy AGM next month – it w
as thought some institutional investors might have voted against his reappointment.
The Scotsman spearheaded a campaign, backed by politicians and business leaders, questioning the wisdom of the deal on competition grounds, the potential for job losses and fears for the Bank of Scotland brand.
The deal was allowed to go through after the government waived competition laws.
Lloyds was a conservatively-run bank known for its strong dividend payouts and risk controls before its fateful decision to rescue HBOS last September.
The combined group is now 43 per cent-owned by the Treasury but this stake could rise as high as 77 per cent under the terms of a deal to put £260 billion of toxic debts – mostly from HBOS – into an insurance scheme backed by the taxpayer.
Last autumn, with the banking sector in turmoil, Sir Victor was told at a City cocktail party by the Prime Minister – that competition rules would be waived to create the Lloyds/HBOS banking behemoth.
One leading fund manager with shares in Lloyds Banking Group said yesterday: "This will be welcomed. There was a growing consensus that it was the right thing for Blank to go.
"He was the architect of an appalling transaction. Ultimately, Lloyds TSB was rushed into this transaction without doing enough due diligence. I think they were blinded by the once-in-a-generation opportunity to get around the competition laws. But it is clear now they did not adequately assess the HBOS risks. Blank is paying the price for that."
In a statement by the bank yesterday, Sir Victor said: "I believe it is the right time for the group to appoint a new chairman. I will continue working until my successor is appointed to ensure the successful integration of the two banks.
"This remains – in the medium term – a unique value-enhancing opportunity."
Lloyds said Lord Leitch, who becomes the bank's senior non-executive director at the forthcoming 5 June AGM in Glasgow, becomes deputy chairman with immediate effect.
Lord Leitch said: "The board was unanimous in wanting Sir Victor Blank to seek re-election as chairman for another three years. We are very sad about Sir Victor's personal decision to retire, although we respect and understand his reasons for it.
"Sir Victor is a first-class chairman and we are delighted that he will continue with us to ensure an orderly succession and continued integration (of the banks]."
Roger Lawson, director of the UK Shareholders Association, which represents the interests of private investors, which had urged its members to vote against Sir Victor's re-election to the board next month, welcomed the move.
"It is absolutely right he should go. He was clearly the main promoter of a deal that many people told him was wrong," Mr Lawson said.
One City banking analyst said: "It is right that he steps down as part of the process of the merged group regaining some credibility with investors."
It is thought Mr Daniels is unlikely to follow his chairman by falling on his sword. "Eric will survive. He is essential to extract the synergy benefits from the takeover," one source said.
The group has said it will make £1.5 billion of cost-saving synergies from the takeover of HBOS by 2011, which it is thought will trigger tens of thousands of redundancies.
One banking executive said: "In the end Blank may have concluded he was becoming a personal and political lightning rod for the HBOS acquisition, and obscuring the eventual benefits from the merger."
Mr Daniels said yesterday: "Victor has played a very important role as our chairman during a period of significant change for our company and at a time when there has been unprecedented volatility in the markets.
"I look forward to continuing to work closely with Victor and to ensuring an orderly transition to an appropriate successor."
The announcement of Sir Victor's forthcoming departure is understood to have come just days after he discussed his position with United Kingdom Financial Investments, the arm's-length agency that oversees the taxpayers' stakes in banks following government bailouts.
UKFI described Sir Victoir as "a distinguished chairman who has guided Lloyds and its board skilfully through an exceptionally challenging period".
One banking analyst said: "A non-executive chairman should not have been leading a takeover deal, but this seems to have been the case with Blank and Lloyds. It was because of his links with New Labour."
Flamboyant high-flier brought down to earthSIR Victor Blank has a contacts book to die for. An urbane City grandee supremely at home in the world of finance, business and media, he is a marked contrast to the more buttoned-up, politically-correct American chief executive of Lloyds Banking Group, Eric Daniels.
The sight of him bouncing out of a tiny red electric car on his way to brief the press on Lloyds TSB's takeover of HBOS was one of the more remarkable of last autumn's financial crisis.
He, rather than Mr Daniels, is seen as the architect of the HBOS acquisition that has laid the new Lloyds Banking Group low after chatting it through with personal friend, Prime Minister Gordon Brown. As such, Sir Victor has had to pay the price.
It will be deeply embarrassing for him, a man with a previously-Teflon like ability to avoid corporate stickiness.
Born in 1942, Blank attended Stockport Grammar School before studying modern history at Oxford University.
His flamboyant character was initially attracted to the Bar, becoming a former partner at prestigious City law firm Clifford-Turner (now Clifford Chance) aged 26. He stayed there between 1969 and 1981.
But the law could not contain him. From the early 1980s to 1997, he was chairman and chief executive of Charterhouse investment bank.
Sir Victor also squeezed in a directorship of Royal Bank of Scotland from 1985 to 1993, and the chairmanship of retailer GUS from 2000 to 2006.
He was also chairman of newspaper group Trinity Mirror from 1999 to 2006, after which he joined Lloyds TSB.
Sir Victor's links with New Labour run deep. His relationship with Peter Mandelson goes back to the 1970s and a meeting athis old Oxford college. He is also a close friend of Tony Blair and Gordon and Sarah Brown.
WELL AHEADCURRENT and former heads of Britain's biggest banks are enjoying salaries far in excess of other leading chief executives, according to new research.
The annual take-home pay of some senior bankers is larger now than it was before the credit crunch triggered the run on Northern Rock in September 2007.
According to a Dispatches programme to be screened tonight on Channel 4, the basic pay of leading bankers has defied the economic downturn.
The programme reveals that the average salaries of the country's leading bankers continued to rise between 2006-7 and 2007-8 – just when the banking sector was plunged into turmoil.
In 2006, the basic pay of Sir Fred Goodwin, the Royal Bank of Scotland's former chief executive, was £1.19 million, rising to £1.29m in 2007 and £1.297m last year.
In 2004, Sir Fred was also guaranteed a bonus of 200 per cent of his £900,000 salary and was entitled to 365 days of paid sick leave.
The bank's new chief executive, Stephen Hester, earns a basic salary of £1.2m.
Dispatches also claims that Eric Daniels, the American chief executive of Lloyds Banking Group, was entitled to £33,000 a year for his son's school fees.
Andy Hornby, the former chief executive of HBOS, took home a basic salary of £787,000 in 2006, rising to £940,000 in 2007 and £1.025m last year.
The programme also makes the extraordinary claim that former Northern Rock chief executive Adam Applegarth had a member of staff stand behind his Aston Martin in the company car park to prevent people walking behind it.
