Lloyds Bank announces plans to cut 9,000 jobs
Bank to close 150 branches and cut £1billion in costs by 2017
While branches “will continue to play an important role,” the bank will cut about 150 outlets over the next three years, it said
Lloyds, Britain’s largest mortgage lender, said third-quarter profit rose 41 per cent, beating analyst estimates, as it announced a three-year plan to cut about 9,000 jobs to revamp its business.
Pretax profit before one-time items rose to £2.16 billion from £1.5 billion in the year- earlier period. That beat the £2.07 billion average estimate of seven analysts surveyed by Bloomberg.
Lloyds chief executive Antonio Horta-Osorio announced a plan to close some 150 branches and cut £1 billion in costs by 2017 as more customers switch to online banking.
His push to return the lender to full private ownership and resume dividend payments was hurt as the lender today set aside an additional £900 million to cover the cost of compensating clients wrongly sold payment protection insurance, adding to a rising legal bill.
“Over the last three years, the successful delivery of our strategy has ensured that we have become a safe, highly efficient, UK-focused retail and commercial bank,” Mr Horta- Osorio said. “The next phase of our strategy will use these strong foundations as a basis for meeting the rapidly-changing needs of our customers.”
The stock has declined about 4.5 per cent this year, though it’s still above the 61 pence at which the government says it would break even on its £20 billion bailout. The government sold a £4.2 billion stake in Lloyds in March, leaving it with 25 per cent ownership of the bank.
Royal Bank of Scotland, which was also bailed out, is up 6.2 per cent this year.
Lloyds cut its impairment charges by 59 per cent to £1.2 billion in the first nine months, with £259 million set aside in the third quarter.
The bank has set aside more than £11 billion pounds for PPI provisions, the largest bill among Britain’s five largest lenders.
The net interest margin, the difference between income and lending, widened to 2.5 per cent in the third quarter from 2.2 per cent a year earlier.
Total assets were little changed at £856.4 billion at the end of September, while the fully loaded common equity Tier 1 ratio, a measure of financial strength, was 12 per cent, up from 10.3 per cent at the end of 2013.
While the bank has benefited from strengthening economies in the UK and Ireland, boosting housing demand, it’s seeking ways to cut costs as customers increasingly use online banking.
The bank, which has about 88,000 full-time employees according to its website, has eliminated more than 37,000 jobs since its government bailout in 2008, data compiled by Bloomberg shows.
Branch transactions are falling 10 per cent a year, according to the British Bankers’ Association.
At that rate, Britain’s six largest banks may have to trim the country’s 8,000-strong branch network by as much as 75 per cent in the next decade, Deutsche Bank has estimated.
Under its three-year plan, Lloyds targets about 45 per cent in cost-to-income ratio by the end of 2017, while investing some £1 billion in digital technology. While branches “will continue to play an important role,” the bank will cut about 150 outlets, it said.
The bank said it expects its net interest margin to be around 2.45 per cent in the full year, with the statutory profit seen to be “significantly ahead” of the first half.
Lloyds is in “ongoing discussions” with regulators over a return to dividend payments, according to the statement. Lloyds chief financial officer George Culmer said he “remains hopeful” the bank can pay a dividend for its 2014 financial year.
Mr Culmer said he “would expect to pass” the Prudential Regulation Authority stress test later this year, helping bolster the chances of paying a dividend.