It ain't over 'til it's over, but Lloyds Banking Group plc (NYSE:LYG) CEO Eric Daniels appears to have done it. News outlets including the Financial Times, The Wall Street Journal, The Times of London and The Daily Telegraph report that the 58-year-old American has successfully negotiated himself out of the U.K.'s expensive asset protection scheme and secured European Commission approval for state aid in return for a large capital-raising and the disposal of marginal interests, which will cut Lloyds' share of the mortgage and current account market from about 30% to 25%.
Through a £13 billion-odd ($21.4 billion) stock sale and a roughly £8 billion exchange of debt securities, Daniels has saved himself the indignity of issuing a big tranche of shares to the government to pay for the toxic insurance. That would have increased the state's stake in the bank from an uncomfortable 43.4% to a devastating 60%-plus.
Meanwhile, the EC-mandated disposals of about 200 Lloyds TSB branches in Scotland, the Intelligent Finance online banking unit -- a product of an era when e-commerce was in its infancy -- and the Cheltenham & Gloucester mortgage lender, which Lloyds has already put up for sale, are no great shakes. Of course, Lloyds still has to shift the new shares, and one unnamed investor told the FT the record-breaking size of the issue could renew calls for Daniels' departure, if not now, next year.
But in the meantime, all eyes will turn to 70%-state-owned Royal Bank of Scotland Group plc (NYSE:RBS), which like Lloyds was nearly floored by an ill-advised acquisition and which is awaiting the EC's state aid verdict while seeking agreement with the Treasury to buy less toxic insurance than originally envisaged. - Laura Board
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