Lloyds crisis is bad news for all of us

by Ed Bowsher on 21 November 2011  |  0 comments
Tweet

Lloyds Bank is in crisis mode as it struggles to keep a top level management team in place.

Lloyds Bank is having a lot of problems at the moment.   The Bank’s CEO, Antonio Horta-Osorio, is on sick leave due to stress. He’s not going to return until January at the earliest.  The finance director is providing temporary cover for him, but the FD is due to leave the company in February to take up a new job elsewhere.

And today we learned that a high profile hire from the Royal Bank of Scotland has changed his mind and won’t be joining Lloyds after all. Lloyds said in July that it had recruited Nathan Bostock from RBS to run its wholesale banking division, but Bostock has now pulled out.

It’s all rather odd. It suggests that all is not well at Lloyds HQ.

That’s certainly what the stock market thinks as the share price has fallen 5% today to 23p. A month ago the share price was 35p.

Why does it matter?

This is bad news for all of us because effectively we’re all shareholders in Lloyds. The government owns 43% of the bank and one day it will hope to sell its stake, hopefully for a profit. The money could go towards paying off the national debt.

Trouble is, the government won’t make a profit on its investment unless it can sell its stake for at least 74p a share. If the government sold its stake at the current share price, it would make a loss of around 15 billion pounds!

Now I’m not suggesting that the management crisis is the only reason why the Lloyds share price is so low. The Eurozone crisis will have contributed too.

But still, it’s a bit disturbing that a new hire doesn’t want to come. Especially when the current CEO is on sick leave. It could be a long time before the share price gets back up to 74p.

More:  Get the best bank account