António Horta-Osório, CEO, Lloyds Banking Group on conquering company challenges

Antonio Horta-Osorio Lloyds

Since joining Lloyds Banking Group in 2011, three years after its taxpayer bailout, António Horta-Osório has steered the financial giant into calmer, more prosperous waters. Here, he explains his ethos

A wet, Tupperware sky lingers over Lloyds Banking Group’s central London HQ on the morning Director meets up with its chief executive, António Horta-Osório. But the 51-year-old Portuguese’s outlook, when it comes to the recent progress and future potential of the organisation he helms, could not be brighter.

Four-and-a-half years after Horta-Osório arrived at Lloyds with a to-do list that would stretch from the room in which we are sat to his native city Lisbon, the banking giant resumed paying dividends for the first time in six years in February, and recently paid an interim dividend of 0.75p a share (around £535m) and reported a 38 per cent jump in statutory profits for the first half of 2015.

It’s certainly a career apex for the man whose professional journey has taken him from Portugal to London via New York and Brazil – an international background being necessary, he believes, in order to glean a nuanced global perspective.

“Working in different countries, different cultures, and different continents gives you an idea of things being relative in life,” he says. “Everywhere is different, ideas are debatable, and so you shouldn’t take anything for granted. Flexibility will get you from here to there more quickly. It helps you weigh up the facts and the merits of a case without bias.”

Early in his career, while vice-president and head of capital markets at Citibank, Horta-Osório also served as an assistant professor at the Catholic University of Portugal. “I ended up teaching for 13 years while also working,” he says.

“I did it for two reasons: firstly, to keep updated with the latest financial theories and so on, and secondly, I wanted to run an investment bank, and to hire the best students for myself. Some of my best students still work with me in some capacity.”

Changing the culture

Horta-Osório’s belief in recruiting the right talent remains the foundation of his entire approach. “When I arrived here, we had to change the whole culture in terms of having a much greater focus on customers, simplicity and co-operation – it was a massive exercise – and to change a culture, you need people who all believe in the new direction,” he says.

“A team needs to think collectively better than one person does; a team should debate how best to get from A to Z, but not debate as to whether Z is the correct destination. My main mission was to build a great team capable of putting this bank on track in terms of returning to being a retail and commercial bank, and fulfilling its mission to support the UK economy and its communities.”

The personnel overhaul complete, Horta-Osório set about instilling his vision for Lloyds’ future. “The bank had challenges when I arrived that were not only huge but simultaneous,” he says. “Out of a £600bn loan portfolio, a third – £200bn – was toxic assets from the HBOS acquisition, and this made investors uncomfortable. Connected with that – these problems are always connected – we had £300bn of wholesale debt; only two thirds of our loans were financed by deposits.

Half of those were short-term money market funds with two-month average maturity, and this was just before the sovereign debt contagion in December 2011. If you have £150bn of short-term debt, and on the other side of the balance sheet £200bn of toxic assets, the temptation for investors with doubts about the bank to flee is very, very big.”

Are those problems now solved? “The £200bn of toxic assets were down to £17bn at the end of last year,” he says. “The short-term wholesale funding of the £150bn was down to £20bn. The £300bn of wholesale debt? We have now only £116bn, and we have on the other side of the balance sheet around £100bn of liquid assets. So our net debt is basically zero, and we have the highest capital ratios of any major bank in the UK. Toxic assets are no longer an issue.”

Another key part of Horta-Osório’s strategy was to become more of a UK-focused retail and commercial bank. “The bank was in 30 countries, so not completely focused on the UK economy, and with small positions that diverted resources when we thought we should concentrate all our resources on supporting the UK economy,” he says. “Now, we’re in just six, and over 95 per cent of the Group’s assets are now in the UK.”

Major upheaval has affected the domestic financial services industry at large recently, thanks to reforms to the UK banking sector under the Banking Reform Act, which came into force in March. The government dubbed the reforms “the biggest in a generation”.

Did he welcome the shake-up being imposed from the outside? “For me, the big challenge when it comes to regulation and reform is how to ensure that the credit flow to the economy is not disturbed, while minimising the probability of banks ever needing taxpayers’ money again,” he says.

“That comes down to four pillars: stronger supervision and regulation; higher capital requirements; higher liquidity requirements; and better recovery and resolution mechanisms if the banks get into trouble. So improving regulation is necessary but not enough.”

“That’s why I have publicly defended the ringfencing between investment banking and retail banking – so if an investment bank gets into trouble, it does not contaminate the deposits in the retail bank – instead of, for example, even higher capital requirements that would impact the flow of credit to the UK economy.”

Supporting the economy

It’s no secret that the reforms in question were made in response to a global crisis which shook public confidence in the banking sector. How has Horta-Osório gone about rebuilding that trust? His approach, he says, has been manifold. “Supporting communities, helping the UK economy, helping people by providing loans for houses, supporting SMEs, encouraging them to entrust us with their deposits – all this is about trust and part of our Helping Britain Prosper Plan.”

“We’re spreading our basic principles – customer focus; working together; keeping things simple – right through the bank, so that all our staff, around 76,000, are focused on the same values and working in a way that gets trust back from customers. It’s a long process – reputation takes a lifetime to build but can be lost overnight. We’ll have to do the right thing for a long time before people realise this bank is back to its roots, and back to being what any retail and commercial bank should be about.”

Add to all this the merging of HBOS’ and Lloyds’ systems, the float and sale of TSB and the fulfilling of ambitious diversity targets (he plans for 40 per cent of the Group’s senior directors to be female by 2020), and Horta-Osório’s spell at Lloyds has been eventful, to say the least. His favourite project to date, though, is one that relates to his ardent belief in fostering young talent. “Lloyds Scholars is a very dear project to me,” he says.

“The world went through the Industrial Revolution in the 18th century, we’re now going through the Digital Revolution, and the skills required for the future are very different than those required in the past. The idea is to help young people develop themselves regardless of their origins and financial capacity. We give scholarships for tuition and living expenses. They do community work. We provide a mentor, give them summer training, and if they are good we offer them a job.”

So what is Horta-Osório planning for the next stage of his tenure? “We plan to continue to use a third of the cost savings from our simplification drive to invest for the future. Improving customer experience is also ongoing, including digitalising the bank – we continue to build our digital division, which is part of the Group Executive Committee.

We are under-represented in certain areas: consumer card balances, we have only15 per cent market share; car finance, only 13 per cent market share; home insurance, 15 per cent. So we can expand in these specific areas, continue to increase our lending to SMEs, and also grow more broadly in line with the UK economy, while helping Britain prosper. Those are our plans for the 2015-2017 period.”

António Horta-Osório will be taking part in a panel discussion, The Future of Banking: How to win back trust in a changing world, at the IoD Annual Convention on 6 October. To book tickets, go to

To find out more about the banking giant, visit

About author

Nick Scott

Nick Scott

A former editor-in-chief of The Rake and deputy editor of the Australian edition of GQ, Nick has had features published in titles including Esquire, The Guardian, Observer Sport Monthly and Rolling Stone Australia and is a contributing editor to Director magazine. He has interviewed celebrities including Hugh Jackman, Daniel Craig and Elle Macpherson, as well as business people including Sir Richard Branson, Charles Middleton and Nick Giles and Michael Hayman MBE.

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