I LAY OUT two voice recorders: one tape, the other digital. Eric Daniels nods in approval.

“Back-up is good,” he smiles. Spoken like a banker, I say. He doesn’t laugh.

Daniels, the American chief executive of Lloyds TSB, has been called overcautious for too long. He sits with his normal, Buddha-like calm, waiting for my first question.

Outside his top-floor City office, the weather is wild. Thuds of wind, buckets of rain - the floor-to-ceiling glass shudders under the storm’s impact.

Inside, Daniels adjusts his navy jacket. He is in bankers’ uniform - blue shirt, contrasting collar, red tie, double-breasted suit. Behind him an antique grandfather clock slowly ticks away. Time really is on his side.

Last month, Lloyds TSB, Britain’s fourth-biggest bank and market leader in current accounts, reported impressive results for 2007. Pretax profits of £3.9 billion showed that Daniels’s relentless focus on old-fash-ioned relationship banking was so far a solid bulwark for tougher times.

His bank’s lack of exposure to the sub-prime crisis, and avoidance of risk, now makes him look the surest hand in the City - not the slowest. Last year, Daniels even offered to rescue Northern Rock, allegedly. Other targets are being lined up. When his rivals have been knocked about, does Daniels now feel vindicated?

“Vindicated is not the word I would use,” he says. “I had a strong conviction - and colleagues shared it - that we were doing the right thing, not pushing the risk envelope, not stretching our capital too far.

“Economies and markets are by nature cyclical, and if you set a prudent policy it gives you much better consistency and much less volatility. At some point I think there will be recognition that those kind of values are worth something . . .”

Daniels, 56, doesn’t do short answers. “I tend to speak in paragraphs, not in one-line headlines,” he says, before adding wryly: “That is deeply unsatisfying for some.”

And he says it all slowly, gently, in a deep, mid-western drawl, like Garrison Keillor reading from a book of banking homilies. It’s not what we are used to from our financial establishment.

In fact, with Lloyds TSB tracing its roots back 240 years - older even than America - Daniels seems implausibly exotic for a British banking boss. His father was German, his mother was Chinese, his wife is Panamanian; his upbringing started in Montana, America’s big-sky country.

After graduating from Massachusetts Institute of Technology, he cut his teeth in Citibank’s Latin American division, working in Panama, Argentina and Chile, all under military juntas. Those, he agrees, were formative experiences.

He spent 25 years at Citibank, including three years in London, then joined Lloyds TSB in 2001 as head of UK retail banking, rising to chief executive in 2003. Whatever drew him here?

“Serendipity had an awful lot to do with my career,” he smiles. And he loves London, and Lloyds TSB’s reputation for doing the right thing. For that, and his adherence to a generous dividend yield, his shareholders are no doubt grateful. It was just a good fit.

Daniels nods. “Lloyds has always had a prudent view, and that fits nicely with my own view.

“Cautious is the wrong adjective. Let’s put it this way: my job is to leave Lloyds in shape to last another 240 years, and that means you are very careful with reputation, with capital, with customers and with the franchise you build.”

Hence you don’t make short-term money by taking more risks, or bribing in customers, or underpaying staff. You wait for the right opportunities, he says. Was Northern Rock one of those opportunities?

Daniels doesn’t blink. “We never comment on transactions.”

But according to reports, Daniels did want Northern Rock last autumn and the government was keen.

Daniels then asked the Bank of England to underwrite the move with £30 billion - to be paid back - so Lloyds TSB wouldn’t put itself at risk while rebuilding the bank.

And the Bank of England refused? “So I’ve read,” he smiles.

Does he understand the Bank’s reaction? He pauses. “I think it was trying to balance multiple pieces as a fairly fast-moving and new situation developed, working out what was state aid, and how that played with Europe. That’s something new.”

Does he think the Bank of England and the government coped well with the crisis?

“It depends on the moment you choose, but by and large it’s an enormously complex set of events, fast moving, a very difficult set of tasks. I wouldn’t throw rocks at anybody.”

But even a leading bank was not going to take on Northern Rock unless it had guaranteed access to liquidity.

“Access to long-term funds was virtually impossible in the third and fourth quarters [of last year]. It was not clear if the short-term markets would dry up as well.”

So how is Lloyds TSB, which also owns Scottish Widows and Cheltenham & Gloucester, going to grow now? Many think Alliance & Leicester and Bradford & Bingley could be targets.

Daniels stays stolid and inscrutable on that one. However, he does point out that Lloyds TSB will continue to grow organically even in a slowing economy.

Shopping may not be on his agenda. “Just because a pair of shoes is cheap, doesn’t necessarily mean you want them.”

But shareholders expect him to grasp opportunities, surely? How can an American with his global experience be painting on such a small canvas here?

Because it suits the circumstances, he says. Eventually, Lloyds TSB will reach the stage where it wants to expand through new products, new customers and “perhaps” into new geographical areas.

But there is no point invading Asia when there isn’t the legal infrastructure to support the branch banking and lending at which Lloyds TSB excels. Also, he drawls, “there is no urgency”.

That is the response that infuriates critics, who feel Lloyds TSB should be more aggressive in chasing growth. But it’s part of Daniels’s style. Colleagues say he always listens, he always consults, and he ponders hard before making the right move.

“Eric is not hard-ass, kick-butt, big ego,” says Truett Tate, director of Lloyds TSB wholesale and international banking, and a fellow Citibank alumni. “He is understated, cool and collected. He does see the value of the broader footprint for Lloyds, but he’s a believer in the right step at the right time.”

That ruminative style derives from Daniels’s upbringing. His father was an academic who taught in Montana - his parents met at Berkeley University in California. Daniels’s sister went on to be counsel for the Washington Post, his brother a doctor.

“My parents were immigrants and had enormous desire to see us do well,” he says, “but money was never terribly important. My mother grew up in a traditional Chinese household, where being a learned gentleman is more important than sullying your hands with commerce.”

He took that to Citibank - a company he joined only because it promised travel - and honed his style by globetrotting for the business, adapting to local cultures.

There he developed a thought-through approach to how he wanted to run teams and business models. Colleagues say it is quietly efficient but with ambitious targets set and rigorous measurement imposed.

“He is not a traditional banker, nor a traditional American; that’s where he’s interesting. He’s a businessman,” says Helen Weir, Lloyd TSB’s finance director.

Daniels, who will shortly join BT’s board, even left banking in 2000 to try something “more entrepreneurial”. He launched an internet start-up in Latin America, selling financial products, but it failed after local economies dipped and internet penetration slowed. He paid investors back most of their money, dusted himself down and looked around. Then Lloyds TSB called.

Were the certainties of branch banking a comfort after the shock of a tech crash? He is not saying. But he points to the loyalty of Lloyds TSB’s customer-facing staff - some employees stick 35 years at the same branch, unheard of in America - and it’s clear something in London brought him back to banking.

Those who deal with him are won over by his lack of ego and by his dry humour.

“Eric is unusual,” says Lord Leitch, the financial-services veteran who sits on Lloyds TSB’s board. “He is quiet, unassuming; he doesn’t lead in a conventional way, but he has an awesome intellect and a ruthlessly single-minded focus on delivery. And he elicits immense loyalty from his team.”

In stormy times, these kinds of leaders are valuable. That doesn’t make them great tub-thumpers, or even easy communicators.

Daniels looks noticeably happier when I leave than when I arrive, but he makes the effort, dropping sly jokes on my way out about how he spends his £2.4m pay package: cruising around London in his exquisite 1950s Jaguar XK120, or collecting Persian rugs - Khazak tribal carpets, to be exact.

So how many has he got? “Oh, I can’t tell you that; it’s embarrassing,” he says.

But smaller banks should take note: when he gets buying, he doesn’t stop with one.

ERIC DANIELS’S WORKING DAY

THE Lloyds TSB chief executive wakes at his house in Westminster at 7am. Eric Daniels checks the newspapers in the car on the way to work.

“I get in by 8.15am and have a coffee and orange juice then,” he says. He answers correspondence, then goes into the first of eight meetings. “Some are internal, some out. Twelve people report to me – that’s fine, we run a thin organisation with eight layers.”

He has a sandwich for lunch at his desk. Most nights he attends a work-related function or dinner. Once home, he reads up for the next day’s meetings. “There is a lot of reading in this job. I get to bed pretty late.”

VITAL STATISTICS

Born:August 14, 1951

Marital status:married, with one son

School:College High School, New Jersey

University:Massachusetts Institute of Technology

First job:trainee at Citibank

Pay package:£2.4m

Home:Westminster

Car:silver classic Jaguar XK 120

Favourite book:The 13 Clocks, by James Thurber

Favourite music:“mushy Italian opera and 1960s rock’n’roll”

Favourite film:anything directed by David Lean

Favourite gadget:radio alarm clock

Last holiday:South Africa

DOWNTIME

ERIC DANIELS relaxes by reading detective novels: “Don Winslow, Robert Parker, that kind of thing.”

He also spends as much time as possible with his 17-year-old son. “We went guitar shopping on the Charing Cross Road a couple of weeks ago. He bought an electric guitar. Imagine my joy,” he says. “If he gets his grades up half a notch, I pay for it. It’s bribery in education - always works.”

Daniels also loves fishing. “Fly fishing - my Montana roots - anywhere that has water. And I love buying tribal rugs. I am a dilettante.”