Lloyds thinks big with new Scots division

Published on Saturday 12 December 2009 13:31

LLOYDS Banking Group is launching an ambitious big company division for Scotland in a bid to distance itself from the legacy of serial deal-maker Peter Cummings.

&#149 Alasdair Gardner: new approach

The new large corporate division, which includes the business banking units of both Lloyds and HBOS, will target Scottish companies with a turnover of at least 15 million.

It is headed by Alasdair Gardner in Edinburgh, who told Scotland on Sunday that he has "made sure we've learned lessons from what we've been through". He stressed that the bank is now "open for business" to lend to the right companies.

Under the leadership of Cummings, Bank of Scotland Corporate made a number of high-risk loans to businesses and invested large sums in companies in the now-beleaguered commercial property sector.

Lloyds, which saved HBOS from collapse last year, was forced to write off a mammoth 13.4 billion in the first half of this year, as well as 12.4bn in the second half of 2008. It said about 80 per cent of the charge was related to "toxic" HBOS loans.

The group is now 43 per cent owned by the state. Last month Lloyds Banking Group shareholders voted overwhelmingly in favour of a record 13.5bn cash call, which will enable it to avoid the government's costly Asset Protection Scheme. But it emerged recently that the troubled bank had been propped up by a secret 26.5bn loan from the taxpayer.

Gardner said he is not a direct replacement for Cummings or any other directors, as he is filling a new role. He explained that the bank's approach to lending to big business will be very different from before. "We won't have as many problems and we want to have more successes than in the past," he explained.

Some 600 businesses will fall within the new division, totalling at least 15bn in turnover, giving it a market share in Scotland of about 40 per cent. Rival Royal Bank of Scotland is thought to have roughly the same share.

Gardner, who was previously head of energy at BoS Corporate, will lead a team of three area directors and 19 relationship directors located across Scotland to give clients "on the ground" support.

He said: "We are already doing everything possible to help our customers weather the current economic storm. We take the responsibility of supporting businesses very seriously and we fully embrace our role in supporting the recovery of Scotland's economy."

Another fundamental difference with the new structure is that Lloyds will have its credit team and treasury based in Scotland.

He said: "When our guys are going to a meeting with a client to discuss credit, they will take a credit analyst with them. Rather than some ubiquitous credit person that nobody sees and could be based in Timbuktu, these are real people who live and operate within Scotland," he said.

Some 90 per cent plus of Lloyds' credit decisions will be made in Scotland. "It's not about waving the Saltire. It's about the right people making the right decisions in the right locations."

He added that the team has been put in place to be ready to take advantage of opportunities which he expects to start coming through next year.

Lloyds is already starting to see more deals being done, with transactions completed recently reaching more than 45m. Its large corporate "work in progress" book is five times greater than it was three months ago when new business was worth about 100m.

He said: "Clients are utilising the strength of their balance sheets to make acquisitions. Three months ago we didn't think that would happen until well into next year."

Along with RBS, Lloyds has been criticised by businesses and trading bodies for its reluctance to lend to companies despite being bailed out by taxpayers. However, it has recently committed to providing 11bn in additional lending to business during the 12 months to March 2010, with similar support the following year. Lloyds is now contacting all its large customers across Scotland to discuss their funding requirements.

Scotland's largest private company, Murray International Holdings – which has a majority stake in Rangers Football Club – has experienced high-profile financial problems and is a Lloyds client. But Gardner said the firm does not fall under his remit as it is part of a separate entrepreneurial division.