Abbey turns to the headhunters

BANKING group Abbey National will appoint headhunters this week to find a replacement for chief executive Ian Harley, who quit last week. Several internal candidates, including newly appointed finance director Stephen Hester, are interested in the job, but the search is on for an outsider to head Britain's second biggest mortgage bank.

Names in the frame include Barclays' deputy chief executive John Stewart, Royal Bank of Scotland head of retail banking Gordon Pell, Northern Rock chief executive Adam Applegarth, and Eric Daniels, head of retail banking at Lloyds TSB.

One industry source suggested Peter Birch would be interested in returning to the role he vacated to Harley on his retirement in 1998. Birch is a director of investment bank Rothschild and chairman of property group British Land. He would be a temporary choice to get Abbey back on course and also to deter opportunistic bidders.

Abbey, which is seen as even more vulnerable to takeover following Harley's departure, has been linked with National Australia Bank and Bank of Ireland, though no bid activity is thought to be imminent.

The bank's fragile position will be underlined this week when it reports a big slump in half-year profits due to problems in its junk bonds business. Analysts expect profits of about £700m, from £1.1bn in the same period last year. But Abbey is expected to offer a small increase in the interim payout to shareholders, despite fears that Harley's departure could have meant a dividend cut.