He oversaw HBOS downfall – now Hornby's running Boots

Published on Monday 8 June 2009 22:02

THE man in charge of HBOS when the bank faced collapse last autumn has been confirmed as the new chief executive of high street giant Alliance Boots.

Andy Hornby will return to the business frontline at the beginning of next month – less than nine months after the bank was saved from nationalisation through a takeover by Lloyds TSB.

Last night questions were raised about his suitability for such a high-profile post in the wake of the HBOS debacle.

Margo Macdonald, the independent MSP for the Lothians, was scathing about the move.

She said: "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."

The former HBOS chief executive was at the helm of the bank for more than two years and presided over its near collapse.

Once described as a Harvard prodigy, Mr Hornby was one of the so-called "masters of the universe" who appeared before a committee of MPs at Westminster in February to explain his part in the bank's demise.

As banking chief, he earned 1.9 million at HBOS during 2007, but the salary for his new job has not been disclosed.

Mr Hornby, who worked for supermarket Asda before joining the Halifax in 1999, was originally approached to head Boots in 2003 but stayed with the bank. In his new role, he will report to the company's executive chairman, Stefano Pessina, who took the group private with buy-out firm Kohlberg Kravis Roberts for 11.1 billion in 2007.

Roger Lawson, from the UK Shareholders' Association, said it was inevitable Mr Hornby would move on to a new post at some stage and it was wrong to hold him solely responsible for the bank's problems.

"I'm very critical of what he did at HBOS but there were other people there supporting what he did. It was very wise for him to return to the retail sector. It would be outrageous if he went to the banking sector."

Mr Pessina said Mr Hornby's appointment would allow him to devote more time and energy to developing the business.

"Andy's wealth of retail and marketing experience will be an invaluable asset for the company," he said.

Although Mr Hornby will focus on the day-to-day running of Boots, the appointment comes a month after Mr Pessina floated the possible idea of Boots moving into personal banking, following the lead of retailers such as supermarket giant Tesco.

Mr Hornby, who was educated at Oxford and Harvard, is also on the board of Home Retail Group, which owns Argos and Homebase.

He became chief executive of HBOS in 2006, but the bank was vulnerable because of its reliance on wholesale money markets, which convulsed in the wake of Lehman Brothers' collapse last autumn.

Mr Hornby led HBOS up to the end of last year when the company posted losses of 11 billion – before being swallowed up by rivals Lloyds TSB.

He had been the youngest ever boss of a main UK bank when he became HBOS chief executive three years ago.

Lloyds is first bank to start repaying taxpayers' bail-out cash

LLOYDS Banking Group became the first of Britain's part-nationalised banks to start repaying the government yesterday, after raising 4 billion in a rights issue.

The banking giant, which took over Edinburgh-based HBOS, used the cash to buy back preference shares owned by the government that were costing it 480 million a year in interest and preventing it from paying dividends. Along with 2.3bn raised in the rights issue from private investors – 1.7bn came directly from the government – Lloyds is giving the government 300 million from its reserves.

The government owns 43 per cent of Lloyds, but if its other shareholders had rejected the rights issue, this could have hit 65 per cent when the preference shares were converted to ordinary shares.

Lloyds is also set to return 295m to its shareholders after shares not initially taken up in its latest cash call were sold at a premium of more than 50 per cent yesterday. About 13 per cent of its shareholders opted not to buy the shares on offer, but these were sold in the market by investment bankers at 60p, a premium of 56 per cent to that offered to its existing shareholders.

This means that hundreds of thousands of small shareholders who did not take part is the rights issue can expect a small windfall.