City veteran said the bank’s performance is ‘well on track’ ahead of government sell-off
Sir Win Bischoff said Lloyds Banking Group was “on track” for recovery as he announced he would step down as chairman before next year’s annual general meeting.
The search for a successor for the 72-year old City veteran will be led by a senior Lloyds director and is beginning just days before this year’s annual meeting, which takes place on Thursday.
Bischoff’s departure from a role he took on in September in 2009 has been the subject of speculation for many months although he now looks likely to leave before the sale of the government’s 39% stake.
“Lloyds Banking Group has, over the past four years, made significant progress in its goal to become a strong, efficient, UK-focused retail and commercial bank. Whilst clearly some challenges remain, the performance of the group is well on track. Indeed, in many areas, it is ahead of plan. This gives me every confidence in the future success of the group and it is therefore a good time to start the search for my successor,” Bischoff said.
Anthony Watson, the former fund manager and senior independent director, will lead the search for the new chairman, who will need to give investors enough confidence in the bank to buy shares during any stock market flotation.
In a surprise move in March, the government signalled its determination to privatise Lloyds by linking a bonus for its chief executive, António Horta-Osório, to selling off a stake in the bank at a price above 61p. This is considerably lower than the 73p that the City had previously assumed would be the price targeted by the government.
Bischoff was a key figure at the investment bank Schroders when it was sold to the US bank Citigroup in 2000. He ended up running the entire bank in the fall out of the 2007 credit crunch but left Citi in 2009 after the bank reported a $18.5bn (£12bn) loss.
He was named chairman of Lloyds after the HBOS rescue, which led to the departure of Sir Victor Blank, who had chaired Lloyds during the 2008 crisis. In 2001, Bischoff replaced the Lloyds chief executive, Eric Daniels, with Horta-Osório.
Speculation about Bischoff’s successor is already swirling around Paul Tucker, deputy governor of the Bank of England.
Waitrose lawyers looking at deal details after Ocado looking at tie-up with Morrisons
Ocado has dropped 8% on concerns about the effect of its proposed tie-up with Morrisons on its existing deal with Waitrose.
As the Guardian reported on Friday, lawyers for Waitrose are poring over its deal with Ocado to see if any move by the online grocer to help Morrisons set up a website would constitute breach of contract.
The news followed a protest vote by shareholders at Ocado’s annual meeting on Friday over board pay packages, including a 30% salary rise for chief executive Tim Steiner.
Ocado’s shares – which have been up sharply in recent days in antipation of the Morrisons deal – are currently down 18.2p at 206.4p. Analyst Clive Black at Shore Capital repeated his sell recommendation, saying:
The business seems to be evolving from an aspiration to be a proprietary retailer into a landlord of its two customer fulfilment centres and licensee of its kit to third parties. Whilst a notable potential change in strategy, it could be argued that it signals an admission of defeat by Ocado; so the introduction of Plan B.
We believe that Ocado is playing with fire in speaking to another British supermarket group, as it tries to utilise its substantially greater fulfilment capacity, because the group’s umbilical cord to Waitrose may be cut sooner than we anticipated and Ocado cannot exist as a commercial entity without Waitrose in our view.
Whilst Ocado states that any agreement with Morrison’s would not be a conflict with Waitrose, we see the mood of [Waitrose chief executive Mark Price] as being deadly serious. As such, Ocado may have irreparably polluted a commercial relationship upon which it is dependent and it must lead to a greater chance of a break in 2017 in our view. Additionally, Waitrose’s understandably forthright stance means that the prospect of Morrison and Waitrose brands simultaneously utilising Ocado’s fulfilment centres and vans is low. As such, the extent of a tie-up between Morrison and Ocado needs to be pencilled down, along with it the financial extent.
The strong appreciation of Ocado’s shares makes the stock more attractive for investors to bank gains and effectively short to our minds. Aside from now uber-stratospheric valuation multiples, the stock does not offer the prospect of a dividend anytime soon either, unlike all of its UK listed food retailers. Whilst we pride ourselves on taking reasonably long-term and strategic views of companies and industries, the time horizon for Ocado to be meaningfully profitable so that it pays a dividend to its shareholders is very extended; in fact it probably remains decades away, if ever. Now, many investors commendably operate on multi-decade timescales, but again, we believe that this is not applicable in Ocado’s case because it is selling multi-temperature foodstuffs where margin expansion potential is structurally low.
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BYRG (“Company”) to update Management Discussion, and Analysis with Release of Primer: Management, Discussion, and Analysis in Upcoming Financial Update
BYRG management will issue a Primer for MD&A of BYRG in the following days as updates come out.