Moody's warns of possible downgrade after chief takes sick leave

City A.M. Reporter
Moody's said it may cut its ratings for Lloyds, given chief executive Antonio Horta-Osorio being on sick leave may hinder the part state-owned British bank's restructuring plan.

Lloyds shocked investors last week when it said 47-year-old Horta-Osorio was taking a break due to stress-related illness, leaving a potential power vacuum at the top of Britain's biggest retail bank.

Moody's said: "The review has been prompted by the significant upheaval within Lloyds' senior management."

Finance director Tim Tookey, due to leave the bank in February for insurer Resolution, was named interim CEO, adding to worries that the executive shake-up by Horta-Osorio has left Lloyds thin at the top at a time when it faces several headwinds.

Tookey said Horta-Osorio was still expected back at work before Christmas, but his absence comes at a difficult for the bank, as it works on the disposal of some 630 retail bank branches and a broader strategy review that has entailed some 15,000 job cuts and plans to halve Lloyds' international presence.

"Moody's is concerned that the group may face a major challenge in ensuring continuity of leadership, given that the CEO has only been in place since March 2011; and there have been several high-level management changes since his arrival, including the announcement that the current CFO will leave in February 2012," the agency said.

"The situation is exacerbated by the fact that it comes at a time of turbulent conditions in the financial markets and the necessity for Lloyds to execute important tasks, including the EU-mandated sale of branches and the ongoing wind-down of non-core assets," it added.

Moody's has an A2 senior debt rating on Lloyds Banking Group.