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Lloyds to axe 9,000 jobs as it confirms plans to shut 150 bank branches Lloyds to axe 200 branches as ‘last in town’ pledge expires
(about 17 hours later)
Lloyds Banking Group is to cut 9,000 jobs over the next three years as part of plans which will see the net closure of 150 branches. The banking industry suffered a bruising day on Tuesday as Lloyds added £900m to payment protection insurance mis-selling provisions and unveiled plans to axe 9,000 jobs.
The group, which is 25 per cent owned by the taxpayer, said it plans to "digitise" the bank, adding that it wants to simplify the business and be more efficient. At the same time, Standard Chartered shares crashed to a five-year low on the back of its second profit warning in five months, while the Swiss bank UBS put £1.2bn aside and admitted it is talking to US watchdogs about alleged foreign exchange rigging.
Meanwhile, third-quarter results showed underlying profits for the business, which includes Halifax and Bank of Scotland, up 41 per cent to £2.2 billion. Amid a climate of banking gloom, unions reacted with fury to Lloyds’ move, with Unite’s national officer Rob MacGregor saying that “the wallets of top executives at Lloyds should not be getting fat by forcing low-paid workers on to the dole”.
Bottom line pre-tax profits were £751 million after taking into account one-off charges including a £900 million increase in provision for payment protection insurance (PPI) scandal. Calling on the bank to pledge no compulsory redundancies, he added: “If there are compulsory redundancies or customer service suffers, then executive pay should be cut.”
It takes the running total of the sum set aside for PPI by Lloyds to £11.32 billion. Lloyds chief executive Antonio Horta-Osorio said the job losses were coming as the bank increasingly “digitises” its business, automating more of its processes and reducing the need for back-office staff.
The job cuts announced by Lloyds represent around 10 per cent of its current workforce of 88,000. It has already slashed more than 30,000 since the start of the financial crisis. Some 200 branch closures – on top of the more than 600 branches lost through the enforced spin-off of TSB – will be made as a growing number of customer chose to do their business online or via their mobile phones.
Chief executive Antonio Horta-Osorio said: "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. Significantly, Lloyds has dropped a pledge that it will keep branches where they are the last in town. The present agreement on this runs out at the end of the year, but the Business Secretary, Vince Cable, said he wants to see it extended beyond that.
"The next phase of our strategy will use these strong foundations as a basis for meeting the rapidly-changing needs of our customers, and sets out how we will grow the business in a way that will deliver increasing and sustainable returns for our shareholders." Lloyds sought to appease its critics by saying that it would at least open up to  50 new branches in places like Scotland, where the number of outlets trading as “Halifax” – used as Lloyds so-called “challenger” brand – remains small.
But Rob MacGregor, national officer of the Unite union, said: "These are deeply unsettling times for Lloyds staff, who, after days of speculation and leaks, face yet another round of job cuts and a future of uncertainty. Mr Horta-Osorio said: “It is very disappointing to have to announce these job losses and branch closures. We closed zero branches in the last three years because that was what we committed to do. We will still have the largest branch network after closing a net 150 branches and we will close fewer branches than our rivals.”
"Job cuts of approximately 10 per cent could have unknown consequences on customer service and will put even more pressure on staff who have helped get the bank back on the right track." The new three-year plan came as Lloyds – still nearly a quarter owned by the taxpayer – revealed that its profits jumped by 41 per cent in the last three months to £2.2bn,  as bad debts fell and the UK economy improved.
PA But the bank was hit again by an unexpectedly high extra £900m charge for miss-selling PPI in the past, which takes the total cost of that scandal for Lloyds to £11.3bn.
It also revealed that PPI complaints were unexpectedly up 3 per cent in the third quarter of the year when compared with the second quarter. If it continues at that pace Lloyds could be forced to add a further £600m by the end of the year, although it said that the signs were that volumes have started to tail off again.
Lloyds is still in discussions with regulators at the Bank of England over when it will be allowed to pay its first dividend since 2008. The bank said those discussions were continuing and that it was confident it would get the go-ahead.
Despite the new strategy and the upbeat noises about a dividend, the City was unimpressed with the shares closing down by 1.22p at 74.12p. A further share sale by the Government is not expected before the general election.
Lloyds did find some supporters. Ian Gordon at Investec, who rates the shares as a buy, called the trading statement “a solid riposte to weekend stress-test noise” referring to the European Banking Authority’s gauging of the financial health of the Continent’s banks.
Analysts at Jefferies, however, rated the shares as underperformers and warned that they did not expect to see a dividend any time in the immediate future.
“We continue to argue that dividend will be a 2016 event and that capital requirements will be higher, thus returns lower, and retain our under-perform rating,” they said.
Mr Horta-Osorio also made a commitment to Lloyds customers that they would continue to enjoy free banking.
He said: “Customers in the UK have got used to and appreciate free banking.
“I do not agree with those in our industry who say free banking inhibits or prevents competition in the current account market. We are absolutely focused on what our customers want.”