Lloyds Banking Group has hired the HSBC banker Charlie Nunn as its new chief executive, replacing long-time boss António Horta-Osório, who will leave after a decade at the helm.
Nunn, 49, will join Lloyds within the next year after a nine-year career at its high-street rival HSBC, where he was recently appointed global head of personal banking and wealth management.
Nunn’s appointment completes the shake-up at the top of Lloyds, which replaced its finance chief in 2019 and has appointed Robin Budenberg to replace Lord Blackwell as it chairman in January 2021.
Britain’s largest domestic lender has been led by Horta-Osório since 2011, making him the longest-serving chief executive among his UK peers. The Portuguese banker was tasked with bringing the bank back into private hands, following its crisis-era takeover of struggling lender HBOS, and Lloyds’ subsequent £20.3bn government bailout in 2008.
However, Nunn is still likely to deal with the fallout of the HBOS takeover, namely the scandal surrounding HBOS’ Reading branch, where business customers were pushed into failure by employees running a £245m loans scam. While six people were jailed in 2017, including two former staff, Lloyds is still trying to complete a compensation programme and is awaiting the results of an inquiry into issues including whether Lloyds tried to cover up the scandal.
Nunn’s appointment came as a surprise to some City analysts, who had expected Lloyds to choose an internal candidate or someone who previously worked at the lender. However, Andrew Coombs, an equity analyst at Citi, said: “He has strong expertise in wealth and in digital, two areas which Lloyds has made a priority focus area.”
Nunn has held a range of senior roles at HSBC since joining in 2011. He began his career at the accounting firm Accenture, where he worked for 13 years in the US, France, Switzerland and the UK. He then moved to McKinsey, where he was a senior partner for five years.
At Lloyds, Nunn is in line for a maximum pay package of £5.6m. It includes an annual salary of £1.125m and a fixed share bonus of £1.05m, benefits of 4% of salary and pension contributions at 15% of salary, as well as performance-based share bonuses worth up to 140% and 150% of salary.
Nunn will also receive deferred cash and share awards to replace unvested HSBC awards forfeited when he joins Lloyds, as well as a “lost opportunity” bonus to make up for bonuses lost at HSBC.
Lloyds said the Nunn’s maximum pay package would still be 20% lower than what was offered to Horta-Osório. The outgoing boss is in line for a package worth £7m if he reaches all the bank’s targets for 2020. Nunn is still expected to be one of the highest-paid banking bosses in Britain.
Executive pay is a sensitive topic at Lloyds, which faced down an investor revolt over pay for its top bosses in May. The bank reduced Horta-Osório’s pay package for 2019 by 28%, to £4.7m from £6.5m. It also cut pension allowances for executives and raised contributions for all staff after stinging criticism from politicians. Horta-Osório and other executives waived their bonuses for this year because of the coronavirus crisis.
Luke Hildyard, executive director of the High Pay Centre thinktank, said the size of Nunn’s pay package was proof that the banking sector was failing to fix its culture of excessive pay. “Changes in key staff are an absolutely critical test of whether banks are serious about changing the culture of vast internal pay gaps between a handful of senior bankers at the top and the branch staff, cleaners, caterers, security workers and administrators who ensure the organisation can function. This is a real failure of that test.”
He said Lloyds – as one of the biggest names in UK business – should be able to attract high-profile candidates without offering huge pay packets. “It really shouldn’t require a £6m pay package to attract someone to the job, and if it does, it raises questions about whether that individual has the appropriate motivations,” Hildyard added.