Hornby to succeed Crosby at HBOS helm

Benny Higgins, 45, will join "as soon as possible", said HBOS, which owns Bank of Scotland and Halifax, but definitely by next summer.

The news wrongfooted the City because when Hornby was appointed chief operating officer last summer, Crosby, 49, had indicated that he would be leading the group for some time.

Crosby said yesterday that he had changed his mind sometime last autumn. He said he was proud of his achievements in presiding over a bank that had doubled its profits to 4.6 billion since being formed from the merger of Halifax and BoS in 2001.

But he added: "There are no hard and fast rules about how long a chief executive should stay in harness. But one should never overstay one's welcome."

Crosby said this was particularly the case when there was obviously a "a star successor alongside one in the team".

HBOS granted shares to Hornby in March 2004 worth almost 4 million at current prices to stop him leaving to take over at a big retailer, believed to have been Boots.

He had joined Halifax as head of its retail division, aged 32, in 1999, from previous high-level posts at industrial group Blue Circle and supermarket giant Asda, and then became head of HBOS's retail division on the merger.

Asked about the apparent abrupt timing of the changeover, Crosby, who will remain as chief executive until next July, said he did not foreshadow events at the time of Hornby's promotion last summer "because, essentially, I had not reached a decision. I did not have a timeframe in mind."

Crosby added that he and his successor were also "delighted to announce that Benny Higgins is joining us from RBS to lead our retail financial services businesses. Benny's track record and unrivalled expertise will be a great asset to the group".

Dennis Stevenson, HBOS's chairman, praised Crosby's "major impact at HBOS. Under his leadership, the size and reach of the group has been transformed.

"In the process, we have delivered very strong financial numbers and shaken up UK banking."

Stevenson said Hornby was the "outstanding candidate" to succeed to the top job. "His track record, which the board has followed from close quarters over a lengthy period of time, is second to none", the chairman said.

Crosby will not receive a payoff for leaving. In 2004, he earned a basic salary of 808,000, and total remuneration, including bonuses, of 1.4m. Hornby earned a basic 598,000 in that year, and 1.07m with bonuses.

Crosby, a former fund manager with Scottish Amicable for ten years who joined Halifax in 1994 and became chief executive in 1999, afterwards getting the top job with HBOS, said he had no new job lined up.

He said he would not become chief executive of a large company, but had an "open mind" about other hopefully "busy and exciting" opportunities. He did not rule out a chairmanship of another group.

Hornby said people who expected radical change at the bank following his appointment would be disappointed. "It will be more of the same," he said.

HBOS's strategy under Crosby has been strong organic growth, with a relatively cautious attitude to acquisitions. Hornby said the "hurdles for acquisitions would remain high because of the potential in the UK business".

Higgins, 45, who has been head of retail banking at RBS for seven years, is understood to have told his bosses at the Royal in the past day or two that he was leaving.

Gordon Pell, executive chairman of RBS's retail markets division, said: "I am sorry to see Benny go, he has played a valuable role in the growth of RBS's retail banking business. Following the realignment of our retail businesses last summer into one division, I had hoped that Benny would continue to play an ongoing role, but he has decided to take up a new challenge and I wish him well."

Shareholders' champion bows out on a high

JAMES Crosby's plans to quit the group in the summer come just a week after HBOS shares hit an all-time high of 993p, after increasing by 17.5 per cent during 2005.

Ian Gordon, analyst at Dresdner Kleinwort Wasserstein, said: "Under James's leadership, HBOS has become a major force in UK banking. HBOS is widely regarded as the consumer champion, but perhaps the real legacy of the Crosby era is that HBOS has now established itself as a shareholder champion."

Crosby, who is a cricket fan and enjoys playing tennis, has not revealed what he plans to do next, but said that it was the "right time" for somebody else to take HBOS forward.

In addition to his role at HBOS, he is also a non-executive director of ITV and the Financial Services Authority. He earned 1.3 million in pay and bonuses from HBOS in 2004. Experts say much of the group's retail success has been down to Crosby, who has managed to win the support of the 22 million customers who bank with HBOS.

He has also pleased the group's army of investors with a share buyback programme, as HBOS chose a strategy of organic growth rather than pursuing a big-money takeover in the way rival Royal Bank of Scotland has done in recent years.

Under his leadership, HBOS has doubled its profits, from just under 2.3 billion in 2001 to nearly 4.6bn in 2004.

He said yesterday: "Good succession planning is the key to sustaining strong business performance. In appointing Andy, the board has chosen the best person for the job."

Higgins adds new chapter to colourful career

BENNY Higgins's defection from Royal Bank of Scotland to head up rival HBOS's retail businesses came as a complete surprise yesterday. But is it the latest stage of a career that has seen many twists and turns along the way?

Higgins has been involved in financial services for more than 20 years, initially working his way up the managerial ladder at Edinburgh-based life and pensions giant Standard Life, culminating in his appointment in 1996 as deputy general manager of sales.

He was largely viewed as bright enough to be considered an heir apparent for Scott Bell, Standard's group managing director at that time. But the capital's financial world was rocked to its core by his sudden resignation in June 1997, just 16 months after his promotion. Details concerning the reason remain sketchy. Although the official line was "personal reasons", it is believed he received no compensation or pay-off.

This inevitably led to rumour-mongering among the financial community that Higgins had left Standard over alleged misconduct. A former employee of the company who is now a senior figure in the Edinburgh finance industry said at the time: "Benny's position was untenable, especially as Standard Life has a reputation for a Calvinist attitude."

But Higgins, who spent 14 years at Standard, laughed off the rumours as "bizarre and scurrilous". He added then: "They were news to me, but it is quite gratifying in its own way to be the subject of so much gossip."

Many of the high and mighty in the Edinburgh financial services family believed that would be the last seen of the man destined for the top at Europe's largest mutual insurer. "He will never work in this town again," commented a member of the financial elite - however, as the saying goes, you cannot keep a good man down, and just two months after leaving the company, he landed on his feet with a role at RBS as retail banking director.

RBS said it had not been concerned about Higgins's exit from his previous job, saying it was "fully aware of all the circumstances of his departure from Standard Life".

Part of Higgins's responsibilities over the past seven years with RBS included leading the successful integration of NatWest, seen as one of the largest mergers in UK banking. Yesterday, the RBS executive chairman, retail markets, Gordon Pell, graciously said of the poaching: "I am sorry to see Benny go. I had hoped he would continue to play an ongoing role, but I wish him well."

ALISTAIR MCARTHUR

Quiet man steps effortlessly into top role

SURPRISINGLY, for a salesman of genius, it is quiet competence rather than prodigious flash that distinguishes Andy Hornby, who is to become Europe's youngest banking chief executive.

Those who have encountered Hornby, 38, at first hand find yesterday's pledges of continuity and no sweeping changes in accord with their experience of a man whose style is conciliatory to the point of blandness.

"My sense of Andy is of someone whose skills are exceptional and are very broadly based, but with a strong focus on operational and costs side," said one City banking analyst.

"There is nothing surprising or sinister about this appointment at this stage; he has been in the frame for the succession for months and it was really only a question of timing. The market won't bother about his age and experience. The key skills of motivating a big organisation are there already."

His route to the top has been as unconventional as it has been rapid, embodying the UK banking industry's belated discovery that selling techniques honed in other retail businesses could stir up the indifferent service culture of high street banking.

A graduate in English from Oxford, Hornby was top of his Harvard MBA class, working briefly as a consultant before joining Asda in 1996.

In his three years at the supermarket giant, he was corporate developmen10,865.34t director, retail managing director and managing director of George, the company's clothing business. Appointed to Asda's management board in 1999, he was poached by Halifax - before the merger with Bank of Scotland in 2001 - to head its distribution operation, despite his lack of banking experience.

The logic of this bold appointment soon became apparent as Hornby warmed to the task of injecting retail priorities into the bank's branch network and direct telephone business. "Whether it is a bank or a supermarket," he said "the keys to being successful in a competitive world are the same."

As HBOS's retail banking chief, it was Hornby who masterminded the strategy of presenting value-for-money products to customers, not to mention the advertising campaign fronted by Howard, the ingeniously irritating singing bank manager.

Shifting to this more customer-friendly register paid off to the tune of one million new bank account customers and 1.2 million new credit card accounts in 2004, despite the increasing competitiveness of the market.

Such retailing genius attracted predators, greatly to his advantage. Last year, he received shares worth about 2.2 million as part of a long-term bonus awarded in 2002 after an approach to join Boots as chief executive.

This was in addition to his salary, which last year hit 1.8m. Promoted to chief operating officer in July 2005, he has ever since been the obvious choice as successor to James Crosby. In tune with his entire career, it just happened earlier than most expected.

COLIN DONALD

BUSINESS CORRESPONDENT