Rummaging in the skip of assets bequeathed him by Eric Daniels, António Horta-Osório, the Lloyds chief executive, has found a hidden gem. Why, it’s the Halifax, that mysterious business which remains Britain’s biggest mortgage lender.
There is logic in Mr Horta-Osório’s desire to make Halifax, with its “irreverent” marketing and its new Saturday opening hours, “a leading challenger brand”. It did, after all, perform well during the recent Isa season despite lacking a market leading product. The danger, though, is that Halifax takes away business from Lloyds itself. Meanwhile, in seeking to make the Black Horse a leading wealth management provider, Mr Horta-Osório has set a target no British retail bank has yet met.
It’s tempting to conclude that the ultimate success or failure of Mr Horta-Osório’s strategic review will be in whether it saves Lloyds from being obliged by either the Independent Commission on Banking or the Competition Commission to make further divestments other than those already imposed by the EU.
Ultimately, while the changes announced yesterday may help, true growth at the bank will only come when the economy itself revives.
An unpopular euro rollover
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For days, aside from the Greek parliamentary vote, the other major Hellenic issue gripping markets has been France’s proposals aimed at tempting private holders of Greek bonds into rolling over their exposure into new 30 year securities and zero-coupon AAA bonds. To date most questions on the scheme have concerned whether, if enacted, it can escape being judged as a default or an event triggering insurance payouts. However, with French and German banks last night seemingly ready to sign up to the package, it is odd that there have been rather fewer questions on whether such a restructuring would actually ease Greece’s debt burden.
So it was helpful for Citi to publish analysis yesterday revealing that the plan could actually raise Greek nominal debt. That is not encouraging when the Greek Government has been tested to the limits trying to get even the latest austerity measures through. All roads still point to a default.
Unintended consequences
So, did the earth move for you? The US Federal Reserve’s latest $600 billion asset purchase scheme, QE2, ended last night with a fourth successive day of gains on Wall Street, much of which was probably due to traditional end-of-quarter “window dressing” by fund managers.
QE2 has had mixed success. In the purest sense, it has achieved the policy objectives sought, as James Bullard, the St Louis Federal Reserve Bank president, observed last night. These include a rise in share prices, a weaker dollar, a decline in real interest rates and higher inflation expectations.
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But it also led to rocketing inflation in other countries, chiefly Brazil, while some other benefits that might have been hoped for remain as elusive as ever. US growth slowed during the first quarter of 2011, US house prices continue to fall, business investment remains patchy and the US jobless rate remains unacceptably high.
Mr Bullard says that QE2’s impact may not be felt in the real economy for up to a year. Until then, the conclusion must be that it staved off deflation, but only at the cost of stoking speculative bubbles elsewhere around the world.
Going off the rails already
Just weeks after the Government pledged that Sir Roy McNulty’s proposals to improve the efficiency of Britain’s railways would “feed into” its planned reforms of the industry, one already looks to have been decisively rejected.
Merseyside Integrated Transport Authority concluded yesterday that, despite spending £1.5 million on a campaign to take control of the tracks as well as the trains in its region, it did not want to do so after all.
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It may well be that at the first whiff of protest from transport unions, most notably Bob Crow’s RMT, the Labour-controlled authority has backed down from a confrontation.
But it is to be hoped that, with Sir Roy flagging possible savings of up to 30 per cent from such an integration, the Department for Transport will show more stomach to confront Mr Crow and his colleagues on this issue than have the burghers of Merseyside.
Raise a glass to a laudable aim
The Ethical Investment Advisory Group, the Church of England’s investment adviser, is giving its policy on alcohol more bite, urging the Church to avoid companies that derive 5 per cent of their turnover from alcohol sales, down from 25 per cent at present. As a result, the Church may disinvest from some supermarkets. It’s a laudable aim. But whoever came up with this policy must have been at the communion wine if they think the multiples will ever disclose such commercially sensitive information.