Lloyds Banking Group's chief executive Antonio Horta-Osorio has fallen ill and is taking a break, leaving a power vacuum of his own making at the top of Britain's biggest retail bank.
News that the 47-year old was sick came so suddenly today that his replacement, financial director Tim Tookey, was not named until hours later. Tookey is due to depart himself early next year as part of a wholesale board clear-out that has taken place under Horta-Osorio, who took over in March.
"Following medical advice Antnio Horta-Osrio is taking a temporary leave of absence from his duties as group chief executive. Antnio is expected to return to his position before the end of the year," the bank said.
A source familiar with the matter said his illness was the result of "fatigue".
Lloyds shares were down by almost 7% this afternoon, making the stock the worst performer on Britain's FTSE index, as investors absorbed news that a bank rescued by the state after the 2008 crisis has lost its energetic playmaker just as renewed financial turmoil threatens the industry.
Horta-Osorio, who has embarked on a plan to cut 15,000 jobs to put the bank back on track, was described recently by one employee as "intense and scary".
Colleagues say he is obsessive about detail, but is cool under pressure and shows few signs of stress. "He spends a lot of time visiting the branches and offices," said another employee who did not want to be named. "He's not one of those chief executives who's holed up in Gresham Street (Lloyds' London headquarters)."
Lloyds' shareholders in the main approve of what Horta-Osorio had done so far at Lloyds, which is some 40% owned by the British government following a state-led bailout during the 2008 credit crisis.
Horta-Osorio took over as chief executive eight months ago after joining the group from Spanish-owned rival Santander UK at the end of last year. His job cutting programme is part of a restructuring that will halve Lloyds' international presence and sell off some 630 retail bank branches.
His tenure has also seen the departure of Lloyds executives who were associated with the previous management under former CEO Eric Daniels. In September, Lloyds announced that Tookey would leave after February 2012, while former Lloyds retail banking head Helen Weir and insurance head Archie Kane have also stepped down.
In return, Horta-Osorio has brought over from Santander former colleagues such as Nathan Bostock, who is seen as a potential new finance director, dealmaker Toby Rougier and retail bank specialist Alison Brittain.
A source with knowledge of the matter said that Horta-Osorio's workload had brought on his illness. "He's been suffering from fatigue due to over-work," the source said.
Horta-Osorio's strategy update, announced in June, stated that he planned to have cut costs by some £1.5 billion sterling a year by 2014, and boost the bank's performance by cutting through middle management to make it more agile.
Horta-Osorio aims to cut Lloyds' international presence to fewer than 15 countries from 30 now in order to focus more on domestic retail banking, where it is market leader and has historically been far more significant than its presence overseas.
Lloyds has also said it intends to decide by the end of the year on either a sale or spin-off of the 630 branches which it has been ordered to sell by regulators as payback for a state rescue package during the credit crisis.
Horta-Osorio started his career at CitiBank in Portugal, where he became head of capital market for Portugal. He worked for Goldman Sachs for two years in New York and London, focusing on corporate finance activities in Portugal. He joined Santander in 1993, and ran operations in Portugal and Brazil before arriving in Britain, just after squeezing in an advanced management programme at Harvard, an eight-week intensive course for senior managers.
The UK government ended up with stakes of around 40% in Lloyds and 83% in Royal Bank of Scotland after rescuing both during the original banking crisis with taxpayer bailouts, and RBS has also been told to sell off a host of assets.
Lloyds was one of the world's most profitable banks in the 1990s but its growth strategy stalled after it was blocked by regulators from buying former building society Abbey National in 2001. Instead it went on to buy troubled rival HBOS at the height of the 2008 credit crisis in a deal brokered by the Labour government of the time.
However, the acquisition gave it a legacy of bad debts that has undermined the business, and its shares have consistently traded well below the 63.1 pence average price at which the British taxpayer acquired its stake in the bank.
