Lloyds’ branch closure tight-rope: Antonio Horta Osorio’s balancing act

Tim Wallace
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Antonio Horta Osorio has not cut branches for the past three years
Lloyds is chopping 150 branches over the next three years, so it seems an odd time to claim the bank in fact values the traditional high street sites more than the other lenders.
But that is exactly what chief executive Antonio Horta Osorio says he is doing. It is a fine line to tread, and will take some explaining to any villagers who fear the last branch in their town is about to close down.
Here is Horta Osorio’s logic.
Lloyds Banking Group, with 2,249 branches, has more than anyone else.
By contrast, RBS group has around 2,000, and Barclays about 1,550.
And despite Lloyds’ plan to trim that number, Horta Osorio argues that other banks are cutting faster, leaving his firm with a bigger share of branches on the high street.
“By closing less than the others, by going behind the curve if you want, we will minimise the loss of customers and revenue in the overall market,” Horta Osorio said yesterday.
“Around 75 per cent of our customers use the branch at least once every three months. We want to keep that presence, we like the convenience.”
That is far less than consumers used branches than in the past – over-the- counter transaction volumes have fallen by nine per cent per year for each of the past four years.
Essentially, it is a fine balancing act. Branches are expensive, so the City loves closures and cost cutting. That in turn drives up the share price, making it more likely the taxpayer will get its money back when the bank is fully privatised – a key goal for Horta Osorio.
On the other hand, customers still value branches, particularly older customers. Those are especially important, largely because they are particularly wealthy.
If Lloyds keeps them on side by retaining more branches than the other banks, then it hopes to win favour with a very valuable section of the population.
If other banks slash their networks – a recent Deutsche Bank study argued the optimum size for a national branch network is just 800 sites – then Lloyds thinks it can pick up a lot of rich customers.
It might not be as trendy as replacing old branches with new apps, but it certainly plays to Lloyds’ strengths with an enormous physical footprint.
There are other reasons, too, why the chief executive is so sure Lloyds can support this large and expensive network of branches.
He wants to cut costs in the group to 45 per cent of revenues – currently, the ratio stands at 49.7 per cent. But crucially, he does not expect to get there by slashing costs.
Instead, Horta Osorio expects to improve that position through revenue growth.
“We have finished the strengthening and the reshaping of the bank, and we are completely ready to take advantage of the growth in the UK economy,” he said.
Not everything is going perfectly for Lloyds. Its share price is below the bailout price and could delay its privatisation. And it was the worst UK performer in Europe’s stress tests, which could delay its resumption of dividend payments.
But the bank has been turned around from the crisis just in time to take advantage of any economic boom.


■ The old three year plan promised no net branch closures, and no closure of the last branch in any given town.
■ The new plan will cut 200 branches, open 50 new ones, and has no promise on the last branch in town.
■ The old plan cut 15,000 staff, but re-training meant only seven per cent were compulsory redundancies.
■ The new plan will cut 9,000 jobs.

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