How rising star Hornby fell to earth

Published on Thursday 24 March 2011 11:53

AFTER his less than glorious exit from HBOS, it looked to the outside world as if Andy Hornby had landed on his feet at Alliance Boots.

As one of the disgraced bankers in the crisis of 2008, he had secured a plum job as chief executive of a blue chip company where he managed to pick up more or less where he left off - making pots of cash.

A golden hello and pay package in his first year earned him more than 2 million and until Friday it appeared he was one of the victims of the banking scandal who had actually done rather well.

But Friday morning changed all that when he announced he would be leaving. Speculation quickly spread about his reasons, and City analysts suspected a personality clash at the top. His close associates insisted he chose to quit for personal reasons.

Hornby, 44, hinted he wanted to step back from the demands of corporate life. "After an intense last five years as CEO of two major companies, I have decided to take a few months' break and, having discussed it with the board of Alliance Boots, to stand down from my post as group chief executive," he said in a statement.

But some felt that it was an odd change of sentiment less than two years after joining the high street company, particularly as it had returned to form. It pushed through the 1 billion profits barrier for the first time last year and was one of the industry's Christmas winners, with like-for-like sales up nearly 4 per cent in December despite the snow and ice.

Boots was taken private in 2007 when it was acquired by private equity company KKR in an 11.1bn deal. As such, there were far less onerous reporting requirements on the company.

One banking source said on Friday he was not surprised that he had gone, and commented on how Hornby appeared to have taken the banking crisis badly, his gaunt appearance before the Treasury Select Committee in February 2009 indicating he was not coping with the strain.

Just nine months after leaving HBOS he was installed at Boots, but his appointment drew criticism. Margo Macdonald, the independent MSP for the Lothians, said at the time: "His lack of suitability and arrogance meant that he ruined the lives of heaven knows how many people. It's hard to take with equanimity that he should just carry on regardless."

But under his guidance, Boots has expanded abroad, particularly in Turkey and Germany, and also through partnerships with US multinational group Procter & Gamble, and Carrefour.

It is thought the company has more plans for overseas expansion, all of which has added to analysts' bemusement as to the timing of the CEO's departure. Some have commented on how executive chairman Stefano Pessina continues to have a dominant role. The Financial Services Authority inquiry into HBOS is ongoing, but its report is not thought to be imminent. Hornby is not expected to receive any payoff, suggesting the decision was his alone.

The pressures, or other external factors, may have got to him. While he remained out of the City's direct glare - due to Boots' private status - he did not stay out of City minds. Some shareholders are still said to harbour resentment towards all those tarnished by the banking crisis. Jonny Cameron, former head of RBS's global markets business, was banned from taking a job at most regulated firms. It is thought Alliance Boots could return to the stock market when KKR looks for an exit route and some fund managers may object if Hornby were to be in charge at the time.

It was not meant to be like this. The son of a prep school headmaster, Hornby was educated at Oxford and was a star pupil at Harvard where he came top of his class of 800.

His career took off under Archie Norman at Asda from where, in 1999, he joined the Halifax to run its high street business. Under his watch, the public was introduced to "Howard, the singing bank clerk" in a series of adverts that tried to popularise saving.

Hornby's star in the company began to rise quickly, even though there remained an objection to a "retailer" running a British bank.

As he rose through the ranks at HBOS, the City soon had him marked down as a future leader of a FTSE-100 company. His value to the bank was clear when he was awarded a 2.2m golden handcuffs deal to stay on after - ironically - Boots tried to lure him away in 2002 to become its chief executive.

As chief operating officer, he soon found himself in contention with chief financial officer Mark Tucker to succeed Sir James Crosby as chief executive. When Tucker left to join Prudential, Hornby had a clear run and was duly appointed to the top job in 2006.

At first it appeared that he had the world at his feet and one analyst at Dresdner Kleinwort Wasserstein was in no doubt about his potential with the famous declaration that "Andy Hornby is a superstar".

In the early days of the Halifax Bank of Scotland merger it seemed the only way was up. Together they were the biggest mortgage lender and the chief supplier of funds to some of the biggest corporate deals of the time.

A number of big names, including Sir Tom Hunter and Sir Philip Green, were financing property transactions through The Mound and Hornby basked in his role as the money rolled in.

But the bank's strategy was built on sand. As Northern Rock offered ever more fantastic deals to homebuyers, Hornby was warned about the coming crisis in the mortgage market,

Ignoring that advice came back to haunt him. In early 2008 a run on the bank's shares followed a rumour that one of the big British banks was in trouble.

It was three days after the collapse of Bear Stearns in the US and, as HBOS lost 17 per cent of its value in three minutes, Hornby was forced to issue a denial that HBOS had problems. At the time it was seen as decisive action. We all know what happened next.

As the bank's financial problems mounted in the summer and autumn of 2008, it was only the government-inspired forced marriage with Lloyds that saved it from collapse.

Hornby was to take the crisis particularly badly, admitting to the Treasury Select Committee that he had lost a personal fortune as he had invested his bonus payments in HBOS shares.

Hornby looked the most physically drained of the four witnesses who faced the committee that day. He and the others - Sir Tom McKillop, former chairman of RBS, Sir Fred Goodwin, the former RBS chief executive, Lord Stevenson, former chairman of HBOS - offered their apologies in a hearing with all the characteristics of a show trial.

Footage of the four facing their inquisitors was flashed around the world. It added to the public humiliation of a group of senior businessmen who until a few months earlier had been feted for their starring roles in Britain's corporate sector.

Hornby, it has to be said, never quite enjoyed - at least not to anyone's knowledge - the superstar lifestyle of his RBS counterpart.

While Goodwin flew by private jet to visit his outposts overseas and stayed first class at the world's top hotels, Hornby appeared to enjoy simpler pleasures. He often found time at HBOS presentations to talk about the latest performance by Bristol City in the town where he was brought up, and he went to see them as often as he could.

As from this weekend he will have more time to follow them.