Lord Leitch emerged as a strong candidate to succeed Sir Victor Blank as chairman of Lloyds Banking Group yesterday after being elevated to deputy chairman.

Already lined up to become senior independent director at Lloyds next month, Lord Leitch has the necessary banking and political experience, having previously headed Zurich Financial Services and acted a government adviser on several subjects.

The search for a new chairman will get under way today after the surprise resignation of Sir Victor, with sources at the bank insisting that no decisions had been made on his successor.

Sir Victor, who was under pressure to quit the group after orchestrating its disastrous takeover of HBOS last year, is to leave by June 2010.

The City grandee and former Trinity Mirror chairman had faced the potential embarrassment of seeing UKFI, the government body that oversees the taxpayer's 43.4 per cent stake in Lloyds, voting against his re-election at the group's annual meeting in June.

Initially, it had been assumed that UKFI would automatically back Sir Victor because his takeover of HBOS was done at the personal bidding of Gordon Brown.

In a statement Sir Victor said: “I believe it is the right time for the group to appoint a new chairman. I will continue working until my successor is appointed to ensure the successful integration of the two banks.”

He reaffirmed his belief that the HBOS deal — responsible for corporate loan losses of £13.5 billion at Lloyds this year — would eventually prove a winner and said that it “remains, in the medium term, a unique value-enhancing opportunity”.

Such a job would have been highly attractive in the past, but headhunters said that Lloyds' woes and the public scrutiny that is guaranteed to Sir Victor's successor in the present harsh political and economic climate could leave people reluctant to put themselves forward.

Candidates could include Gerry Grimstone, the former privatisation guru and chairman of Standard Life, the insurance group, and Lord Davies of Abersoch, the former Standard Chartered chief now working as a government minister.

Amid the banking crisis, critics have questioned whether those leading Britain's banks were qualified to do the job.

Sir Tom McKillop, who ran Royal Bank of Scotland, was among several forced to admit that he possessed no formal banking qualifications.

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