Terry Murden: Lloyds needs to prove that it’s business as usual

LLOYDS insists it is business as usual but the rumours about Scottish Widows just won’t go away.The fund management operation, Scottish Widows Investment Partnership (Swip), has axed 23 of its 38 Edinburgh-based equities traders in a change to a lower-risk, computerised strategy.

Apart from raising questions over the decision to put machines in control of billions of pounds of investors’ money, the scaling back of the team sparked more speculation that Lloyds was tidying up Swip or even the whole of Scottish Widows for a sale.

We’ve been here before. Since Lloyds bought Widows in 1999, it has been linked with numerous “buyers” and the subject of at least one flotation rumour. Last year, incoming chief executive Antonio Horta-Osorio announced a group-wide review, prompting more assumptions that a sale was imminent.

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On Friday, when The Scotsman revealed the latest jobs cull, I met one of Lloyds’ senior figures, who assured me that Widows remains a valuable part of the group.

That’s not quite the same as saying there will never be a sale and, of course, everything has its price. Lloyds’ denial didn’t stop more sale talk in some of yesterday’s papers.

The bank is clearly some way off repaying the taxpayers’ 39.75 per cent stake, and further asset disposals cannot be ruled out, particularly if someone is prepared to pay a silly price and at a time when all banks continue to rebuild their balance sheets.

On the positive side, Lloyds appears to be through the worst of its deleveraging, and when Horta-Osorio completed his review, Widows was placed among the core Lloyds businesses. The bank’s first-quarter profits on 1 May are likely to point to a return to profit. It says it is committed to the bancassurance model, although the sale rumours, which began not long after Lloyds bought Widows for what was subsequently seen as a top-of-the-range £7 billion, are unlikely to go away, The tie-up got off to a shaky start, and years of underperformance and staff turnover at Swip have contributed to the continuing whispers.

One option being talked about would be to sell the asset management operation alone. There would be few buyers for the insurance business, while Swip, in spite of its wobbly record, would attract interest.

The issue is clouding Lloyds’ plan to sell a portfolio of assets to the Co-op which is also hitting a few problems. Amid regulatory concerns and the admission by the Co-op boss Peter Marks that a deal might not happen, Lord Levene’s NBNK investment vehicle has re-submitted its offer.

The Co-op board will have to make a decision soon on whether to go ahead, though not this week as some close to the talks were led to believe. However, Lloyds needs to know where it stands by the end of June if it is to meet the deadline set by the European Commission to dispose of the assets by the end of next year.

Something fresh from Tesco?

HOW much did Sir Terry Leahy know when he decided to step down from the helm of Tesco last year?

Successor Philip Clarke has been handed a basket full of problems at Britain’s biggest grocer and is expected to signal some significant changes this week, including a halt to building huge out-of-town stores. Investors may be wary, but he’ll win support from those who want to save the high street.