A Leader Is Called On to Turn Around Lloyds

Landon Thomas, Jr.|The New York Times

On paper, Winfried F. W. Bischoff — whose most recent job was a brief stint at the helm of the heavily damaged Citigroup — has all the qualities one would expect in an incoming chairman of the equally troubled Lloyds Banking Group , one of Britain’s most storied banking names.

Experienced, collegial and steeped in integrity, he has ties that extend far beyond finance and into government and society at large. In short, he is the very picture of a City of London grandee.

“Win is a real smoothie,” said Andrew Hilton, director of the Center for the Study of Financial Innovation here. “He is one of these people who paid extra for the shine when he came out of the car wash.”

But at a time when the financial sector in Britain, the United States and elsewhere is being pressed to avoid repeating the mistakes of the past, some have been asking whether the talents that make Mr. Bischoff a consummate insider are what is needed to lead Lloyds, and Britain’s other shattered banks, onto a new path.

Sir Winfried Bischoff
Sir Winfried Bischoff

“Win is not seen as a change agent,” said Alison J. Carnwath, a veteran City figure who has worked with Mr. Bischoff. “He is a builder, a consensus guy — someone who can get people to work together. But he is not seen as someone who will effect change.”

Mr. Bischoff was tapped to steer Lloyds toward recovery after the former chief executive, Victor Blank, was ousted last month for arranging an ill-fated takeover of HBOS, a British bank whose troubles hobbled Lloyds.

But Mr. Bischoff has a lot to prove. His brief tenure as the chairman of Citigroup , which he joined in 2000, came to a humiliating end in January, when he was replaced by Richard D. Parsons. Although Mr. Bischoff was always meant to be a caretaker, his lack of influence in Washington and perceptions that he took a largely back seat role in the bank’s daily affairs compromised his effectiveness, as the financial crisis pushed Citigroup toward the abyss.

Now, getting a call for help from his own British government, which owns 43 percent of Lloyds, may provide a chance to secure a measure of redemption after his final tumultuous year at Citigroup.

The question of who should lead the fallen banks that now have governments as their largest shareholder has vexed regulators on both sides of the Atlantic.

At Citigroup, where American taxpayers hold a 36 percent stake, regulators have expressed doubts privately about whether Vikram S. Pandit, the chief executive, has the vision and heft to reinvent the financial behemoth.

And at Bank of America , which also received billions in bailout money, it remains uncertain whether Kenneth D. Lewis, already stripped of his chairman title, commands enough support to continue overseeing his bank’s halting recovery.

An early test of Mr. Bischoff’s leadership is likely to come when the European Commission presses Lloyds to reduce its size, both for competitive reasons and to reduce the risk from banks considered too big to fail.

Mr. Bischoff, 68, declined to comment for this article. But his many friends and supporters here say they believe he will fare better on his home turf of London than he did in the United States.

“Win inspires people, and that should stand him in good stead at Lloyds,” said Ms. Carnwath, who worked with Mr. Bischoff closely when he was at Schroders, which he ran until it was acquired by Citigroup in 2000.

Mr. Bischoff’s clout seemed to qualify him for the role of Citigroup’s interim chief executive in November 2007, when Charles O. Prince III stepped down after billions of dollars of subprime losses mounted on his watch. After Robert E. Rubin, Citigroup’s lead director at the time, declined to take over, the bank turned to Mr. Bischoff, who was then the chairman of Citigroup Europe.

At Citigroup, Mr. Bischoff’s central accomplishment was recognizing immediately the need to raise equity. Within weeks of taking over, he and Mr. Rubin secured $7.5 billion from Abu Dhabi. Early in 2008, Citi tapped the markets again, a decision that, at the time, was not widely supported inside the bank.

“Win does not shirk when the ball goes into the rough,” said Robert Swannell, a senior adviser at Citi Europe. “He recognized early on that there was a need for equity.”

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But the subsequent infighting took its toll on Mr. Bischoff, and his departure was preceded by months of leaks to reporters and unattributed sniping from Citigroup board members.

Although he kept quiet, he was angry and frustrated, associates say. He privately told some of his closest friends that the experience was an undeserved blot on an otherwise distinguished career in finance, which included a long run as the chief executive of Schroders, the venerable London bank.

Despite his handsome shock of white hair, his bespoke suits and handmade Hong Kong shirts initialed WFWB, and a ruddy face that can shade pink, Mr. Bischoff, according to those who know him, belies the stereotype of an aristocratic banker.

“He is not at all the stuffy Brit,” said Richard Roberts, a financial historian and the author of “Schroders: Merchants and Bankers.” “Bischoff was a true internationalist — he rolled up his sleeves and got on with it.”

Urgent tasks

His decision in January 2000 to sell Schroders’ investment banking business to Citigroup for £1.3 billion ($2.1 billion; the firm was valued at about £30 million when he took over) could hardly have been better timed. He had just earned a knighthood, and he cashed out at the top of the market, just months before equities plunged. Beyond the millions he made from his personal stake, he was also awarded a £5 million bonus by the Schroders board.

At Citigroup, Mr. Bischoff received total compensation of $7.4 million in 2007. In 2008, along with other top executives, he received no bonus, though he did receive $146,435 as a payout from an internal Citigroup hedge fund.

Now, as he turns his eyes to Lloyds, he will have to deal with another troubled victim of the financial crisis. Last week, Lloyds reported £4 billion in first-half losses, a legacy of its disastrous merger with HBOS. As chairman, Mr. Bischoff will be paid £700,000 ($1.2 million) a year and will not be eligible for a bonus.

Mr. Bischoff will not formally take over until Sept. 15, but he will quickly have to decide the fate of the chief executive, J. Eric Daniels, also a Citigroup veteran, who has led Lloyds since 2003.

Most urgent, Mr. Bischoff must decide whether he supports a proposal by Mr. Daniels that Lloyds consider opting out of a Treasury plan to insure its troubled assets — and thus escape majority control by the government — by trying to raise as much as £15 billion in a rights issue.

With doubts still manifest about the health of the Lloyds balance sheet, some investors have described the gambit as a premature return to business as usual. And according to a person familiar with Mr. Bischoff’s thinking, he agrees. A stickler for board protocol, Mr. Bischoff has not yet imposed his view on the board, people close to him say. Still, his lack of support for the measure hints at a more realistic view of the bank’s condition than has been expressed by Mr. Daniels — and perhaps the first major disagreement between the two men.

“Clearly the bank has some big strategic decisions to take,” said Richard Lambert, who heads the Confederation of Business Industry, Britain’s main business lobby, and who served recently on a government-backed commission on Britain’s financial competitiveness that Mr. Bischoff led. “But Win is very good at chairing meetings.”

As to whether these meetings will bear fruit, Mr. Lambert could only guess.

“Is he the right person? I hope so — I don’t know. Who can tell?”