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Banks

UPDATE 6-Lloyds grabs Santander's UK head as its new CEO

* Antonio Horta-Osorio to join Lloyds in early 2011

* Departure is a possible blow to Santander UK’s IPO plans

* Also raises questions over Santander succession plans

* Santander shares down 3.5 percent, Lloyds up 2.7 percent

(Adds Botin confirmation, updates shares, salary details)

By Sudip Kar-Gupta and Judy MacInnes

LONDON/MADRID, Nov 3 (Reuters) - British bank Lloyds LLOY.L poached Antonio Horta-Osorio, head of Santander's SAN.MC fast-growing British division, to be its next chief executive in a coup that deals a blow to its Spanish rival.

Lloyds, Europe’s fourth biggest bank by value despite a government bailout, said Horta-Osorio will join the company early next year and replace Eric Daniels as CEO of the part-nationalised lender on March 1.

Horta-Osorio had been seen as a likely successor to Santander chief executive Alfredo Saenz. Another candidate, Ana Patricia Botin, daughter of chairman Emilio Botin, will now replace Horta-Osorio as head of the British unit.

One of the 46-year-old Portuguese banker’s key tasks will be to defend Lloyds, Britain’s biggest retail bank, in the face of a government enquiry into whether the country’s top banks should be broken up.

“I am intending to take the bank to the next stage of its development, realising its full potential,” Horta-Osorio told reporters.

Analysts and fund managers said that while the appointment was a big catch for Lloyds, it was a blow to Santander.

“It is a great hire for Lloyds, the jury is out for what it means for Santander ... this won’t faze them but it is an irritation. They have a deep bench of management, that has always been a strength,” said Mediobanca analyst Chris Wheeler.

Santander UK said it would announce its new chief executive in due course.

Santander shares closed trade down 3.5 percent, while Lloyds closed up 2.7 percent, recovering from losses on Tuesday when concerns over losses from problem loans and tougher competition overshadowed an upbeat trading statement. [ID:nLDE6A00YY]

“I think it’s a pretty good appointment. Lloyds needed somebody new to head it up,” said Cavendish Asset Management fund manager Paul Mumford, who holds around 4.7 million Lloyds shares.

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Reuters Insider item on new Lloyds CEO:

link.reuters.com/wex43q

Breakingviews column [ID:nLDE6A20P0]

Breakingviews column on Botin [ID:nLDE6A21TE]

Newsmaker on Horta-Osorio [ID:LDE6A20N1]

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BOTIN’S FIRM GRIP ON SANTANDER

Analysts said Horta-Osorio’s departure could affect a planned flotation of Santander UK, which comprises the historic Abbey and Alliance & Leicester brands, expected to raise at least 3 billion pounds ($4.8 billion). [ID:nLDE68G19G]

Horta-Osorio said his decision to quit Santander for Lloyds had “nothing to do with negatives” at Santander and would not affect the planned Santander UK initial public offering (IPO).

“Santander has been aware well before about this offer at Lloyds ... when Santander announced they would proceed with the IPO last week, they were fully aware of the situation,” he said.

Lloyds was saddled with billions of pounds of losses after buying troubled rival HBOS at the height of the credit crisis in a rescue deal brokered by the Labour government of the time. The state subsequently took a 41 percent stake after spiralling bad loans forced the bank to accept a taxpayer-funded bailout.

The British government welcomed the appointment of Horta-Osorio and said it hoped he would drive more lending to small businesses at Lloyds, a key factor to help the economy recover from the credit crunch. [ID:nLDE6A21BW]

Horta-Osorio has taken a cut in base salary to about 1 million pounds, but he could earn over 8 million pounds in cash and long-term awards for next year if he hits all his performance targets.

He will also be compensated for loss of cash, shares and pension benefits due to his resignation from Santander. He was paid about 3.5 million pounds by the Spanish bank last year.

Analysts said Horta-Osorio, often seen as a future CEO of Santander, may have felt thwarted in his ambitions at Santander, especially with Ana Patricia Botin, who chairs the Santander-controlled Spanish bank Banesto BTO.MC, seen as a candidate to replace her father as chairman.

Ana Patricia Botin already has experience of living and working overseas. A former Harvard graduate, she worked for JP Morgan JPM.N in the United States for several years during the 1980s before returning to Spain in 1988 to work for Santander. ($1=.6233 Pound) (Additional reporting by Steve Slater, Elisabeth O'Leary and Sonya Dowsett; Editing by Dan Lalor and Louise Heavens)

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