Why would Lloyds boast about culling risk controls?

Here's a very odd story, that we must surely assume comes from Lloyds itself. 

Lloyds cuts risk management roles in bid to ‘move at greater pace’ 

Bank’s risk assessment method blocking change, internal review concludes ... internal risk structures were acting as a “blocker” to change ... The changes will help the bank in “resetting our approach to risk and controls” and enable Lloyds to “move at greater pace”, according to an internal memo seen by the Financial Times. Mr Nunn [CEO] has been ramping up the pace of change at the bank after setting out a turnaround plan in February 2022.

Well.  First of all, whoever this Charlie Nunn is, waiting more than two years before "ramping up the pace of change" sounds to me like being asleep on the job: a classic "re-launch" so beloved of failing governments and managements of all kinds.  FFS, he became CEO in August 2021!  I'm no revolutionary, but the longest I ever waited in a new managerial job before making changes at pace was about 3 months, and that delay (for such it was) was for a very specific tactical reason.  Ordinarily, it's Machiavelli's dictum that should rule: make your big changes straight away.  Two years is, frankly, pathetic.  (And check Nunn's salary!)

Secondly, what sort of caricature BSD does he wish to be seen as, ostentatiously axing risk management posts?  I'm not really asleep at my desk, I'm a BSD!  Get out of the road, you risk managers!  We'd be making so much more money if it wasn't for you!  Yeah, right.  Two years.

Thirdly, properly construed, the one facet of financial** risk management that can only with difficulty be a positive contributor to doing good business, is credit risk management.  There's only ever bad news in credit: the best that can happen is that counterparty performs its side of the deal!  Which we kinda assumed in the first place, right?  And nobody ever pays you more than you billed them for, and says - hey, keep the change. 

Otherwise, financial risk management should be viewed as potentially a big positive contributor to doing good business.  It is good business you want to do, right?  Or is it a quick speculative buck: book the 'profits' today, grab the bonus and run away?  I start to wonder.

Finally, the joke is, "The shake-up will see 45 jobs removed from these risk teams, equivalent to around 1.5pc of the 3,600 people who work in risk jobs for Lloyds."  In other words, it's trivial, cheeseparing stuff anyway.  

ND 

(PS, I have never been a risk manager, in case you were wondering.  But I have worked with some brilliant ones.  Only in a dysfunctional organisation does RM stymie good business.)

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** There are loads of non-financial risks that fall into the same baleful category: 'operational risk' (- the catchall for a lot of shit-that-can-happen); and reputational risk, political risk etc etc etc. 

Baking results - when is a one-off provision not a one-off?

Interesting to see the most of the UK bank's half year results this week;

Pick of the bunch is RBS, whose underlying profits came in much higher than expected. The Bank has over a long period done a good job of selling down its Real Estate debts. However, in the long-term the more of less closing of its investment bank make it a much less appealing business. It's grip on UK SME business and personal business is strong and will remain so, enabling it to retain a core income. This maybe under-threat as its new CEO is very keen on retail banking and credit cards - but still, no one in the Treasury can argue it is a risky bank anymore. Shame the resulting value of the bank is about 50% of what was paid to bail it out. Somehow I doubt future Chancellor's are going to want to put that write down into the books - making it tricky to see the end of state aid.

Barclays has many similarities to RBS, for a longtime the bank was far superior in coping with the crisis, but the last two years have seen the end of that. It's new CEO also is looking at closing down the investment bank and pushing up retail banking - if all the Banks have the same strategy this may prove good for customers, but not for shareholders. It's results are underwhelming, but provisions are low suggesting little systemic risk.

Lloyds is the average of the bunch. Like the other banks it is keen to show off underlying profits, less keen to highlight the one-offs' that drag its profit down. The PPI mis-selling provisions keeps going up, there are huge fines for various pieces of LIBOR fixing and market abuse. All in all over £1 billion.

All the banks play the standard accounting trick of including these items as one-off. But there they are, year after year, going up and up and up. PPI Provisions have increased for over 2 years, they are hardly one-off's.

No wonder the shareprices lag the markets and are at 50% of where they were in 2007/8. One day perhaps all the bad news will be in the public domain, but the various CEO's have been saying the end of the road is in sight for seven years - I think there will still be two or three to run and then we will be into the next recession in any event!

PPI - everyone has bashed a banker

LLoyds have announced some interesting full year results today. Firstly they have added another £1.8 billion to the PPI provsion, which brings the total allocated to just shy of £10 billion.

£10 billion - that was a big rip off. I still can't believe that banks ever meant to do this in any coherent way. Yes to ripping off their customers, but no to doing so illegally. The nature of the FCA changing the rules post-hoc is worrying. In this case there is a lot upside - people get money back from Banks who they hate and the economy gets a small boost from the spending. Even management consultants get big contracts from banks to help distribute this and a large army of people have been gainfully employed in this industry.

At home, it has even made me stop ever using my landline as it is bombarded by those annoying PPI calls about 15 times a day. I am now ready for wireless 4G!

However, what about the next crisis. You see interest rates are about to go up and I worry that not only won't people be able to pay, but they are going to blame the banks for lending to them. Now that the State has stepped in to say 'mis-selling' this possibly has no end. Smart people might even complain the rates were set by Libor....

Lloyds is the largest lending of residential mortgages too - how big will the provision in the accounts have to be for the next 'scandal'; especially if Red Ed the populist is in charge next year.