MercoPress. South Atlantic News Agency

Lloyds Bank prepares for change of chairman

The new Lloyds Bank CEO Lord Leitch,

Sir Victor Blank is to step down as chairman of Lloyds Banking Group by June 2010. Following a meeting with the board, Sir Victor said it was “the right time for the Group to appoint a new chairman”. Lord Leitch, who has been appointed deputy chairman, said the board was “very sad” at the decision.

Sir Victor and Lloyds' chief executive, Eric Daniels, have faced criticism for their decision last year to buy HBOS, the troubled owner of Halifax. The UK Treasury owns 43% of Lloyds.

Sir Victor confirmed he was stepping down just before he went inside Lloyds' headquarters in the City of London on Sunday.

He told BBC business correspondent Joe Lynam that he “still had lots to do” and denied he was being forced to resign under pressure from shareholders.

In a statement released after the meeting, he said he would continue working until a successor was appointed “to ensure the successful integration of the two banks”.

“This remains - in the medium term - a unique value-enhancing opportunity,” he added.

Mr Daniels said Sir Victor had played a very important role “during a period of significant change for our company and at a time when there has been unprecedented volatility in the markets”.

HBOS made a loss in 2008 of almost £11bn. But Lloyds TSB, as it was called, made a profit of £807m last year, albeit an 80% drop on the previous year.

The two banks together are expected to be in loss this year.

The government earlier this year agreed to insure £260bn of the bank's toxic loans, and to potentially raise its stake in the bank to 65% following the HBOS losses.

The deal was part of the Treasury's taxpayer-backed Asset Protection Scheme to insure banks' riskiest assets against further losses resulting from the credit crisis.

Lloyds' directors do not believe that Sir Victor would have been ousted by shareholders at the forthcoming annual meeting, according to the BBC's business editor, Robert Peston.

However, he believes that UK Financial Investments (UKFI), which manages the government's stake in financial institutions such as Lloyds and the Royal Bank of Scotland, was “acutely aware” of other shareholders' convictions that there had to be a change at the top of Lloyds.

”I am now persuaded that UKFI would have voted its 43% (that's taxpayers' 43%) against him staying on,“ Mr Peston said.

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,“ he said in a statement.

”Sir Victor is a first-class chairman and we are delighted that he will continue with us to ensure an orderly succession and the continued integration.”

Lloyds last month announced it is to cut 985 jobs at a business offering car finance over the next two years, the first major job losses from the merger.

The government backed the Lloyds takeover of HBOS last September, bypassing normal competition rules to avoid the collapse of the Halifax owner.

Shares in the bank have dropped by 27% so far this year, closing at 89 pence on Friday.

Lloyds controls about 25% of British customers' personal bank accounts and about 28% of the mortgage market.

Lloyd’s £ 260 billion toxic assets came 83% from HBOS and 17% from the books of Lloyds TSB. Of that sum, £ 151 billion are in corporate and commercial loans while residential mortgages, £ 74 billion. (BBC).-