Shares in Lloyds Banking Group jumped over seven percent to the top of the FTSE 100 Thursday after it confirmed the loss of 15,000 jobs over the next two and a half years.
The move is part of a strategic review designed to provide efficiency savings of 1.5 billion pounds ($2.41 billion) a year, bank officials said in a telephone conference with journalists.
Savings would be achieved through asset disposals and the centralization of several core functions including Finance, Risk and HR departments, with the majority of roles to be cut coming at middle management level, although the bank refused to put a figure on the number of roles to be cut in this area.
Lloyds will reinvest 500 million pounds a year of its cost savings back into the business.
“I want to make clear that these are 15,000 roles not people. These will be through natural turnover and recruitment rather than redundancies where possible,” Lloyd’s chief executive Antonio Horta-Osorio said, adding that Lloyds would look to reduce recruitment.
The bank currently recruits around 10,000 employees each year.
Horta-Osorio added staff numbers at its branches would not be affected with the majority of roles cut being in back office functions. The bank also announced it would be refocusing its business on the UK and would be exiting at least 15 of the 30 countries in which it currently operates.
Horta-Osorio refused to say which countries the bank would be exiting stating that the bank still had “teams on the ground” and regulatory matters to resolve before such an announcement could be made. However, he did point out that a number of the 15,000 job cuts would come from the closure of those operations.
Debt to Taxpayer Reduced
Meanwhile, Lloyds said it had repaid 60 billion pounds in central bank bailout loans in the last six months, reducing its debt to the taxpayer to 37 billion pounds, and estimated it would have completely repaid its liabilities by October 2012.
The bank also confirmed that it was pressing ahead with plans to reduce its loan deposit ratio to 120 percent for the core business, while adding that it would reduce its loan deposit ratio for the group from 140 percent to 130 percent by 2014. Non-core asset disposals of 50 percent of the current book would also be achieved by 2014, the bank said, without giving details of what assets it intended to sell.
Horta-Osorio said the bank would focus its attention on the UK economy and on better customer relationship banking rather than asset accumulation. “I think this is the right strategy to create strong and stable returns for our customers and shareholders,” he said.
However, he also stressed that the recovery in the bank’s fortunes would be a slow and long one, pointing out that the bank still faced a difficult task to return to profitability after writing off 3.2 billion pounds in payment protection insurance compensation payments to customers in the first quarter on top of its exposure to the Irish housing market collapse.
Lloyds said its exposure to Ireland meant that it would see more impairments in the future but that there would “not be any surprises from it that we would not see from everybody.”
Meanwhile, Halifax Bank, which Lloyds bought at the height of the financial crisis in 2008, would be reinvigorated and return to providing "no nonsense customer-focused" banking with a new marketing campaign to be launched in September. Halifax’s 650 UK branches would all open on Saturdays from September as part of this strategy the bank said.
Horta-Osorio refused to be drawn on whether there had been any further communication with the Independent Commission on Banking (ICB) saying simply that the bank was “engaging with the ICB and will continue to engage with it in anticipation of the final report in September.”
He also refused to comment on when the government might sell its stake in the bank.
“Our job is to run this bank profitably for our customers and shareholders. When the government decides to sell out is up to the government,” he said.