Lloyds stress boss to return, Co-op wins branch auction

Antonio Horta-Osorio is to return to work as chief executive of Lloyds Banking Group, six weeks after he stood aside on medical advice after suffering extreme fatigue and stress.

The bank also announced that Co-operative Group, which owns the Co-op Bank and Smile, had won the £1.5 billion auction for the 632 Lloyds and Cheltenham & Gloucester branches which it had been ordered to sell off by the European regulators.

The decision to allow Horta-Osorio to return, made by the Lloyds board under chairman Sir Win Bischoff at a meeting today, came as a major surprise to many in the City. It had been thought his standing had been so severely damaged he might never return.

Bischoff said: "This was a unanimous decision and he returns with the full confidence of the board. All of us believe he continues to be the best man for the job as he was when we appointed him last year." Bischoff put his own position on the line, saying that if Horta-Osorio had a relapse, "I would have to consider my own position as chairman very carefully".

As part of his return, Horta-Osorio has agreed - on his own initiative, according to Lloyds - "to restructure and reduce his direct reporting lines in order to strengthen the accountabilities of his senior management team. This is designed to provide the most appropriate environment to maximise the senior management's contribution as the Group enters the next stage of its transformation."

Lloyds said its board has "completed a rigorous process, including obtaining independent medical advice, to assess Antonio's ability to return and effectively lead the group. The independent medical advice has concluded that he has made a full recovery."

It said that he would return to work on January 9. The bank has taken independent medical advice, and Bischoff said his illness was "very, very, very unlikely" to return.

Horta-Osorio did not take part in the Project Verde decision that saw Co-op Bank win the two-horse race to buy 600-plus Lloyds branches. The loser is Lord Levene's specially created vehicle NBNK, which had looked at bidding for both the Lloyds branches and Northern Rock.

Lloyds said today that the deal with Co-op, which it hopes will be agreed by the end of March 2012 "carried less execution risk." It did not reveal a price but it is almost certainly well below book value. Horta-Osorio was given an £8.3 million joining package including an annual salary of £1 million, as well as a guaranteed bonus of £2.3 million this year.