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Moody’s mulls Lloyds downgrade over CEO departure

Moody’s Investors Service is considering downgrading Lloyds TSB Bank following the departure of CEO António Horta-Osório.

Mr Horta-Osório recently stepped down for a temporary leave of absence for personal health reasons, with the bank stating that he is expected back in six to eight weeks.

Moody’s said its decision was influenced by the fact that Mr Horta-Osório had only been in his position since March of this year, with several high-level changes to the company’s management team already taking place since his arrival. Among these changes is the pending departure of the current CFO in February 2012.

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According the ratings agency, the fact that these changes come at a turbulent time in the market, when Lloyds must complete important tasks including the EU-mandated sale of branches and the continued winding down of core assets, only serves to exacerbate the situation.

Moody’s’ review will focus on the ability of the board to quickly stabilise the senior management team and the efficacy of any new senior leadership arrangements.

A spokesperson for Lloyds Banking group said: “We note the rationale for the review of our ratings. Lloyds believes it has acted quickly and appropriately following the request of the CEO, António Horta-Osório, for a short leave of absence.

“We will be working with Moody’s to assure them of the efficacy of our interim management arrangements and our ability to deliver on our strategic aims.

“The Group has continued to make good progress on reducing risk, improving its funding profile and strengthening its balance sheet.

As we highlighted in our Q3 2011 management statement, the resilience of our underlying trading performance highlights the progress we are making as well as the strength and flexibility of our strategy and the confidence in our management’s ability to execute it.”

Although the announcement comes just a day after Lloyd’s Q3 interim statement, which revealed that the bank had made a loss of £3.9bn in the first nine months of the year, Moody’s has confirmed this had no bearing on its decision.