The CEO of Lloyds takes a leave of absence, exhausted by overwork.
In a shock announcement to the stock market this morning, Lloyds Banking Group (LSE: LLOY) revealed that its chief executive is standing down.
Bank stress-testing
The good news is that António Horta-Osório's absence will be merely temporary. Following medical advice, the Lloyds CEO is 'taking a temporary leave of absence from his duties due to illness'.
Lloyds' board of directors met this morning and later confirmed that Tim Tookey, the bank's chief financial officer, will also take on the role of interim chief executive until Horta-Osório's return.
Portuguese-born Horta-Osório -- who took the helm of Lloyds eight months ago -- is suffering from 'fatigue due to overwork', according to the company. In medical circles, I suspect this is often described as 'executive stress'.
Horta-Osório is expected to be on leave for six to eight weeks. Thus, if all goes well, he could be back at the helm by the end of 2011. Of course, we wish him a speedy return to health.
A tough task
As I write, Lloyds shares have slumped 4.5% to 29.2p, valuing the bank at £20 billion. Clearly, even the temporary loss of a talented and much-admired banker has spooked Lloyds' investors, who may worry about how tough conditions are within the bank.
Given public ill-will towards bankers, it would be easy to criticise Horta-Osório for feeling over-worked. After all, he does receive a base salary exceeding £1 million a year, plus generous pension contributions, bonuses, share grants and other incentives.
Then again, since he took over in March, Horta-Osório -- previously at Santander UK -- has had one of the toughest jobs in corporate Britain.
On one hand, he has millions of private shareholders who have lost billions as Lloyds shares collapsed in the global financial crash. On the other, he has publicity-conscious government ministers watching over the taxpayer's 41% stake in Lloyds, the result of cash bailouts totalling £17.4 billion.
What's more, Horta-Osório has cleared out the Lloyds board, carrying out a clean sweep of the executive team which he inherited. Indeed, Mr Tookey (his temporary replacement) will be leaving Lloyds next February for insurer Friends Provident, now owned by Resolution (LSE: RSL).
In addition, the worn-out chief executive has rolled out plans to axe another 15,000 jobs and exit 15 countries. He must also sell off 632 Lloyds branches to satisfy European Commission rules on state aid, known as 'Project Verde'. His ultimate goal is to cut Lloyds' yearly costs by £1.5 billion by 2014.
Lastly, the Lloyds share price is down more than half (57%) in 2011, which would depress any hard-working, ambitious CEO!
What next?
The big worry for Lloyds shareholders is whether Horta-Osório will ever come back. If not, then Lloyds will suffer a 'leadership vacuum' that will surely put its share price under further pressure.
In the meantime, Lloyds will issue an interim management statement covering the third quarter of 2011 on Tuesday, 8 November. Thus, we'll find out how the 'Black Horse bank' is getting on in a week.
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