Lloyds/HBOS: the shotgun wedding years in the making
Why Daniels’ transformational deal was waiting to happen
That appetite had been lost, quite spectacularly, following Lloyds’ ghastly exposure to Latin American debt in the 1980s. That culminated in a £715 million loss in 1989 (well over £1 billion in today’s money), still regarded as the biggest loss in UK banking history, notwithstanding RBS’s recent efforts to top it. That disaster prompted a renewed focus in the 1990s on good old-fashioned domestic banking under Sir Brian Pitman, which saw Lloyds build up a solid UK empire through its merger with TSB and its acquisitions of the Cheltenham & Gloucester building society and the life insurance and fund management group Scottish Widows.
By the early 2000s, Lloyds TSB’s scope for further local expansion appeared to have hit the buffers. In July 2001, the government ruled that its proposed £18.2 billion takeover of Abbey National, which would have created the UK’s second-largest bank, was against the public interest. That left Lloyds TSB’s frustrated chief executive, Peter Ellwood, to resume a search for a European partner that had involved fruitless discussions with Deutsche Bank and others.
Enter, in 2003, Eric Daniels, whose 25-year stint at Citibank had included spells in Panama, Chile, San Francisco and Brussels before he settled at Lloyds TSB.