A Bank CEO who won't sell a product to his customers? Surely not

I like this Lloyds Bank CEO. Last Friday Lloyds announced its full year results for 2014 and Spanish CEO António Horta Osório spent an hour and half presenting the results and taking questions from analysts (the full video is worth watching if you are interested in the stock).

Lots of technical stuff and the usual questions from analysts trying to forecast the unknown. But there were two very insightful responses to questions on strategy. The first was about its UK focus.

Question 4: Arturo de Frias Marques, Santander Arturo de Frias Marques from Santander. First of all, congratulations to you and the team for a truly remarkable turnaround ...  as you show us in this chart on market sales which I found really interesting, that you have already very high market shares in some of the key markets, current accounts, mortgages, SMEs. You also said you did not want to grow in large corporates. Of course you can grow a lot in home insurance, in credit cards, in Consumer Finance etc. But the biggest books you already have 20 per cent plus market share. So there is a limit to the growth you can achieve there. Knowing that the transformation is pretty much done, could you share with us your thoughts in terms of non UK growth, inorganic growth, international expansion in the medium term?

And I thought 'here we go'. After six years of turnaround the bank has finally put the financial crisis behind it and the pressure starts coming to repeat the mistakes of the past. Horta-Osório, however, wasn't having a bar of it:

We have no plans of expanding internationally, we have no plans of doing anything besides where we are ... Very simple, 95 per cent in UK for the next three years. We are going to continue and deepen because I think when you do well you should deepen instead of diversifying and continue to do well in what we have been doing well in and we are not complacent at all. We will continue relentlessly to pursue these goals. [My emphasis]

That's music to my ears. Our investment thesis is that Lloyds can become the CBA of the UK. It doesn't need to buy anything or expand internationally to do it. All it needs to do is keep getting its already low costs down and focusing on what can be a very profitable home market.

But there was more to come. And it was something you won't hear from CBA. Fahed Kunwar from Redburn asked the following:

A lot of the European Retail Banks are talking about a move from retail customers and some small corporate customers, moving from deposits into AUM [assets under management] and other types of saving products. Now you are probably [the] pre-eminent bancassurance model definitely in the UK and I know there are near term headwinds to OOI [owner occupier insurance], but going forward, is that happening in the UK and, if not, why do you think it won't happen in the UK going forward?

Horta-Osório's answer shocked me, accustomed as I am to bank CEOs flogging their customers any product they can:

We will develop that of course and it is a major opportunity. But relating to the European context and the move to direct our customers towards those products, I think we are going to be careful ... we want absolutely to be the best bank for customers, so we have to think what is the best interest of the customers? And I personally have some doubts that in the lowest interest rate environment of the last century, it is a good idea to move clients into fixed income products that will be exposed to rising interest rates which I think are inevitable, the question is when ... I would be very careful in trying to push our customers to fixed income products in this point of the cycle. [My emphasis]

A bank CEO who doesn't want to sell a product because he thinks it could be bad for his customers? I thought I'd never see the day.

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