Surface Ripples

The Men At The Top: Antonio Horta-Osorio

António Mota de Sousa Horta Osório (to give his full name) was born in Lisbon in January 1964. He is the eldest of four children of António Lino de Sousa Horta Osório, a lawyer and champion table tennis player, whilst his grandfather was a lawyer and politician. His great-grandfather is described as a nobleman, magistrate and jurist. His maternal grandfather was Procurator General of the Republic and President of Portugal’s National Sporting Club.

He graduated in Management and Business Administration from the Catholic University of Portugal in 1987. In the same year, he married and is now a father of two daughters and a son. He also received an MBA from INSEAD - where he was awarded the Henry Ford II Prize – in 1991 and completed an Advanced Management Programme at Harvard Business School in 2003. His educational and academic pedigree is, to say the least, strong!

He was created a Commander of the Order of Civil Merit of Spain by Juan Carlos I in August 1998 and of the Order of the Southern Cross (of which his maternal grandfather was a Knight) in October of the same year.

In June 2009 he was appointed as a non-executive Director to the Court of the Bank of England. He is believed to be close to Mervyn King, making him that rare specimen – a banker favoured by the Governor (according to The Telegraph). This may also give him credibility as he tries to convince the Independent Commission on Banking this year competition is alive and well in the UK banking industry.

He began his career at Citibank in Portugal in 1987, becoming Vice President and Head of Capital Markets until 1990. Concurrent with this, he was an Assistant Professor at the Catholic University. After receiving his MBA from INSEAD In 1991, he moved to Goldman Sachs International Limited, working in New York and London on Corporate Finance activities in Portugal.

In 1993 he moved as CEO to Banco Santander de Negócios Portugal at the invitation of Emilio Botin. From here, a well-documented series of moves saw him climb the Santander management ladder in Brazil and Portugal until he became a non-Executive Director of Abbey in 2004 and then Chief Executive in 2006 of its successor – Santander UK. He also became Director General and a Member of the Direction Committee of Banco Santander in Spain, President of the Administrative Council of Banco Santander Totta and Banco Santander de Negócios Portugal. With the purchase in 2008 of Bradford & Bingley’s savings business and the acquisition of Alliance & Leicester his responsibilities increased again. He cleaned up the businesses, taking them out of the mortgage market before the crisis, enabling Santander to weather the storm. This is the success that set him apart from many of his peers and may have been what attracted Lloyds Banking Group (LBG) to him.

His motto at Santander is described as “Efficiency, service quality, value for money, customer loyalty and a meritocratic environment.”

In 23 years since graduating from university, Horta-Osorio’s career path and success in Abbey and Bradford & Bingley have attracted the approbation and admiration of the markets. His appointment to LBG where he takes over as CEO in March this year may mean a focus on costs and divestments. The sale of the Cheltenham & Gloucester branches may be moved up the agenda, underperforming loans may be sold cut-price as the bank seeks to reduce its loan book. Bad assets will be reviewed and cleared out. After his success at Santander in the UK, Horta-Osorio knows about running large financial organisations, and he will need this for the new LBG.

What did the markets think of the appointment? The share price rose by £1.23billion when his appointment was announced, and other market commentators have been favourably impressed by the charm and political skills of this scion of Portugal’s hereditary, legal and sporting aristocracy.

One colleague at Santander speaks highly of him, describing him as “charming and smooth”. “He has an aura that says, ‘I’m in charge’… We’re very disappointed he’s leaving and would rather he stay,” he said. “People who have worked with him are loyal and filled with pride.”

It wasn’t all good, though. When details of his remuneration at LBG came out in late 2010, it sparked comment from Shadow Chancellor Alan Johnson and Brendan Barber of the TUC. To put it into perspective, his package is (according to LBG) "substantially" less than his maximum potential pay at Santander, where his salary and bonus for 2009 were £3.4million according to The Telegraph. He had to give up 17 years’ of pension benefits, a lot of goodwill and perhaps even a shot at the mantle of global Santander Chief Executive.

Not being a member of the “Botin Dynasty” might, however, have been a deciding factor against him and a contributor to his decision to move to LBG… The Chancellor has said that part of his pay package depends on him boosting business lending, but targets need to be set. Additionally, LBG’s shares must rise to 114p before a £4.3million share incentive plan comes into force. This, according to the Chancellor, will give UK taxpayers a profit of £11billion on their 43% stakeholding. As at time of writing, LBG’s shares are trading at 67p, so there’s a way to go…

Horta-Osório wrote in his INSEAD profile that he “would like to create the best and most successful commercial bank” in the UK. Noone can doubt that he has moved Santander well up the league tables. However, he is described as “a ruthless cost-cutter” - around 10,000 Abbey roles were cut in the three years after Santander’s acquistion. Customer service has been seen as a weak point. Abbey/Santander, have consistently finished at the bottom of the customer service tables. In their favour, though, Santander has also offered the best deals according to The Telegraph.

In the same profile he writes, “Throughout my business life my success has stemmed from my ability to recruit and build high calibre teams, without whom the companies I have led would not be where they are today.” For LBG, this means that Juan Colombás, Head of Risk at Santander UK, is scheduled to join this month as Chief Risk Officer. He replaces Carol Sargent who will leave. Antonio Lorenzo, Santander’s Chief Financial Officer, will join in March as director of its Wealth and International Division, replacing Truett Tate, head of LBG's wholesale banking business.

Commenting on the UK banking scene, Horta-Osorio says, "I wouldn't say bankers are being victimised. I would say that as an industry it has to work hard to improve its credibility." At the time of writing this, the new Chief Executive of Barclays is in front of a select committee defending the industry… Horta-Osorio is optimistic, however, "I think the UK has all conditions to emerge even stronger from this crisis on a relative basis and will continue to be a key competitive advantage of the economy. That does not mean errors don't have to be corrected." The Telegraph November 2010.

The challenge for Horta-Osorio can’t be understated. He needs to shrink LBG (albeit by a modest 5%) to avoid a break-up being forced on him, but at the same time re-shape the organisation into a force that delivers value to its shareholders and a return to the taxpayer. Perhaps expansion overseas will figure on the list of strategies to examine. This would reverse the previous trend of LBG’s contraction into a large UK-oriented bank. Is there the expertise within, though, or will he need to hire more from outside?

Additionally, LBG faces a funding problem over the next two years and will suffer if house prices fall further, as many expect they will.

The press have commented that Horta-Osorio is known to swim with sharks during his holidays. Without knowing where, how often and with which type, I won’t attempt to draw parallels, but he will certainly need his nerves about him over the coming years.

Labels: Career, Financial, Strategy

posted by William Martin @ 18:28