LLOYDS has announced plans to slash 15,000 jobs over the next three years in one of the biggest banking payroll cuts in living memory.
The announcement formed part of a highly anticipated strategic review that saw investors pile into the bank’s shares, sending its stock soaring to close up 9.73 per cent.
The lion’s share of the job cuts will come from paring down the bank’s middle management, with chief executive Antonio Horta-Osório promising “a much flatter organisation” in which “all the control functions are in one place”.
In effect, this means that functions like the bank’s treasury and human resources will be condensed into central divisions rather than duplicated across different parts of the bank.
The job cuts are intended to contribute to annual savings of £1.5bn from 2014, furthering Horta-Osório’s reputation as a ruthless cost-cutter. But he expressed little satisfaction at having to embark upon the mass lay-offs.
“I do regret that we have to do this. I would much prefer to be able to put this bank on its feet without 15,000 job reductions,” he said. “We will manage this very sensitively.”
He also said that the number refers to “jobs, not people”, suggesting that many could be cut through attrition while some employees made redundant could be re-hired into other roles.
The job losses include a withdrawal from 15 of the 30 countries in which Lloyds currently has a presence, with its banks in the Netherlands, Dubai and Spain likely to face the chop.
Horta-Osório said that the overhaul is essential to “get this bank back on its feet again”.
That means concentrating on its domestic UK bank, he added, claiming that Lloyds’ fate is “inextricably linked” with that of the British economy.
The bank also re-jigged many of its financial targets and said that the Halifax brand will be dramatically relaunched in the autumn so as to “compete head-on with Nationwide, Santander and Lloyds TSB”.
“I strongly believe you should have internal competition to avoid complacency,” Horta-Osório said.
LLOYDS STRATEGIC REVIEW | KEY POINTS
• The bank established a return on equity target of 12.5-14.5 per cent by 2014.
• It cut its net interest margin target from 2.5 per cent, widely considered to be unrealistic, to 2.15-2.3 per cent.
• Its loan-to-deposit ratio target was cut from 140 per cent to 130 per cent.
• Horta-Osório denied rumours that the bank could sell Scottish Widows Investment Partnership, saying the insurance and asset management arm is “core” to the group.
• He also designated Halifax as a core brand, and announced plans to relaunch it as a “challenger” to both Lloyds TSB and his old charge, Santander UK.
• The bank did not deny it has plans to sell its 60 per cent stake in St James’ Place but said it is currently “very happy with that business”.
• Despite having appointed former CEO Eric Daniels as an adviser to the board, the bank revealed that it has not yet called on him for help.