The chief executive of Lloyds Banking Group is preparing a new strategy that will expand its ambitions in property, wealth, commercial and investment banking as he looks to shift the lender into growth mode after years of retrenchment.
Since taking over in August, Charlie Nunn has been plotting his inaugural strategic update, scheduled for February. The former HSBC executive — who succeeded António Horta-Osório after he moved to chair Credit Suisse — has a £4bn war chest as the British economy has rebounded faster than anticipated from the pandemic, freeing up more capital.
Nunn is considering quadrupling the budget of Citra Living, Lloyds’ new private home rental market brand, raising it to an initial £1bn from £250m, people familiar with the deliberations said. The number has not been finalised and could increase further.
Citra is one of a number of measures under consideration intended to diversify Lloyds’ income away from traditional retail banking and lending, which are being squeezed by low interest rates and fintech competition.
Lloyds has dominant market shares in UK mortgages and credit cards, limiting its opportunities to grow organically or make acquisitions. It also has a 19 per cent share of British SME lending, according to its latest annual report.
Nunn plans to shift his focus to building out the commercial bank — specifically larger corporate and institutional clients — as well as currency trading, insurance and wealth management, areas where Lloyds trails domestic rivals.
“Everyone thinks of Lloyds as just this big retail bank, only a large mortgage provider, but it also has great commercial, corporate and insurance arms,” said one person with knowledge of the plans. “It has more client touch points than Amazon, who are as successful as they are because of their cross sell.”
The growth plan would mark a reversal in Lloyds’ strategy after the bank was forced to dramatically scale back its presence in commercial and investment banking after its 2008 government bailout.
Lloyds declined to comment.
The Financial Times previously reported that the bank had set a “strategic challenge” of owning 10,000 residential rental properties by the end of 2025, with a further aim to reach 50,000 by 2030, making it one of the UK’s largest landlords. Hitting the first target means Citra would have a balance sheet worth about £4bn and generate about £300m in additional pre-tax profit.
The quadrupling in funding planned by Nunn marks a far stronger commitment to expanding the business. As recently as October, chief financial officer William Chalmers played down the bank’s ambitions in the area, calling Citra an “exploratory exercise”.
Another plank of Nunn’s strategy will be to build out the UK wealth management business, focusing on digital services for the mass affluent segment, customers such as doctors and lawyers with up to £1m to invest, rather than the ultra-rich, the people familiar with the plans said.
A joint venture with Schroders has posted disappointing growth since it was announced in 2018. Overall wealth and insurance customer net inflows also slowed to £5bn last year from £18bn in 2019. Lloyds is hoping that its existing relationships with 14m UK households will allow it to accelerate customer acquisition.
Financing the net zero transition will be another area of focus. Lloyds has hired a 23-strong ESG investment banking team that includes recruits from industry, such as from miner Rio Tinto.
Nunn — who worked for McKinsey before he became a banker — also wants to see more cross-selling to commercial and corporate clients from the investment bank, particularly in foreign exchange, trade finance and lending.
He wants to “drive growth, responsibly expand risk appetite and geographic borders,” another person familiar said, adding that the strategy is not yet finalised. “He doesn’t just see Lloyds as a UK bank. It has a lot of international clients and it needs to do more to support them abroad.”
Lloyds is considering recruiting a team in New York — the first time it would have a significant presence there for a decade — to help its UK clients invest in US infrastructure projects.
Lloyds’ share price has recovered about 30 per cent this year, but is still down by about a quarter since the start of 2020, before the pandemic and trades at a 30 per cent discount to the book value of its net assets.
