Will Lloyds chief enjoy plain sailing or will he jump ship? | Nils Pratley

Lloyds is riding high, but allure of global stage could prove enough to entice António Horta-Osório away from comfortable gig

Lloyds Banking Group’s bad and impaired loans stand at historically low levels. Its net interest margin – the best measure of a bank’s profitability – is the highest in the UK sector, and still rising. It is generating capital faster than expected. The end is in sight on PPI provisions. And the state’s stake has been reduced to 2%, with the last of the shares to be sold in coming weeks. A good moment, then, for chief executive António Horta-Osório to bow out after six years at the helm?

Horta-Osório says he’s happy in his post and there is more to do. Not everybody is convinced by that answer, since six years counts as a long innings for a FTSE 100 chief executive and he’s constantly linked with the vacancy at HSBC. An exit can’t be ruled out. But, actually, committing to a couple more laps of the track at Lloyds is surely a highly attractive prospect. With a 25% share of the UK retail market, the bank is currently playing in a league of its own and can expect to do so for years.

The big danger passed last year, when the Competition and Markets Authority issued a woefully supine report that opted not to impose a structural shake-up on the sector, liberating Halifax from the Lloyds stable. That was the probably the last moment for regulators to be radical.

Under the current set-up, Lloyds’ leadership in UK retail banking is assured as far as the eye can see. It is big in all the main activities – current accounts, mortgages, retail deposits, loans to small businesses – and is filling the only obvious gap by boosting its credit card operation with the addition of the MBNA book.

If Horta-Osório stays, his next three-year plan, due to be unveiled in the autumn, will be the easiest to write. Brexit-related uncertainties are a background worry since Lloyds is a proxy for the performance of the UK economy, but the major restructuring is over. It’s now a matter of deciding how generous to be with shareholders’ dividends while setting the correct rate of investment in digital innovations. There are fine judgments to be made, no doubt, but they are not the existential questions of old.

Maybe Horta-Osório, at the age of 53, pines for a job on the global stage, but running a restructured Lloyds is surely an easier way to earn £5m-ish a year than most of the alternatives.

Proof will be in the pudding for M&S

All the reasons why Marks & Spencer refused to offer an online food delivery service made sense. Very few shoppers use M&S for their weekly shop. The range of foods is much smaller than in a conventional supermarket. M&S doesn’t sell other brands in any great quantity. But here comes the U-turn, or at least the contemplation of a U-turn. As the Guardian reveals, M&S will conduct several online trials in food to see if it can make the economics work.

Chief executive Steve Rowe is right to question the old assumptions, since the online market is only going to increase in size. If the punters are willing to pay for deliveries, the company must give them what they want, especially if the current lack of an online offer is one reason why M&S’s growth in like-for-like food sales has stalled.

All the same, shareholders may need some convincing if M&S declares the experiment to be a success and decides to plunge in further: yet another round of investment in distribution infrastructure is probably not what they want to hear.

AstraZeneca’s Soriot hasn’t yet proved his worth

AstraZeneca keeps getting into a mess over pay. In 2014, almost 40% of shareholders voted against the pay report. Now they’ve done so again, presumably objecting to last year’s £13m pay package for chief executive Pascal Soriot, which inevitably flowed in large part from the flowering of a long-term incentive scheme. Whatever the small print of the scheme says, the rebels have right on their side. Soriot’s reign has been a big improvement on that of his predecessor, David Brennan, but it’s too early to be handing out £13m prizes.

On its own reckoning, AstraZeneca stands at a “pivotal point” as patents on old drugs expire and new medicines start to arrive. The company’s drug pipeline is widely regarded as one of the best in the business, especially in oncology, but promise and hard success are not the same thing. AstraZeneca’s share price is still well below the level at which Pfizer bid in 2014. The big bucks should come only when Soriot can show his strategic overhaul has delivered.

Contributor

Nils Pratley

The GuardianTramp

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