London - Lloyds will cut 15 000 jobs and halve its
international presence, a plan its new boss hopes will save £1.5bn a
year by 2014 and return the part-nationalised British bank back to health.
CEO Antonio Horta-Osorio presented his overhaul
of the bank on Thursday after about 100 days in charge, and said he aimed to cut
through middle management and make the bank simpler and more agile.
The latest cuts will add to 27 000 job losses already since
the 2008 financial crisis. Lloyds currently employs about 103 000 staff.
The cost of the programme will be £2.3bn, but the
savings garnered will allow the bank to invest an extra £2bn in its
core retail banking activities.
Horta-Osorio will cut Lloyds' international presence to
fewer than 15 countries by 2014 from 30 now to focus more on its core
UK retail banking business - where it is market leader and has historically
been far more significant than its overseas reach.
Lloyds’ overseas presence currently includes operations in
Europe - in countries such as Holland, Germany and Spain - both north and south America, and
Asia. Horta-Osorio, whom Lloyds poached from rival Santander UK, declined to
say which countries Lloyds would leave.
The Unite trade union group attacked the job cut plans, but
Horta-Osorio said the move was a necessary one.
"We must return to profitability as quickly as possible. I
believe we must become leaner, more agile and more responsive to our customers'
needs," he told reporters on a conference call.
Lloyds shares rose sharply as analysts and investors
welcomed Horta-Osorio's plans. In morning trade the stock was up 9.5% at 48.9
pence, the best-performing stock on Britain’s benchmark FTSE 100 index .
“This looks like third time lucky for UK banks’ strategy
days - Lloyds has delivered solid targets with some key milestones,” said Mike
Trippitt, analyst at Oriel Securities.
Trippitt said Lloyds’ strategy review compared favourably to
other recent strategy days held by rivals HSBC and Barclays, whose targets
ended up underwhelming investors.
Retail branch sale
Lloyds was one of the world’s most profitable banks and a
darling of the sector in the 1990s for its dynamic takeover policy, cost
efficiency and massive returns, but its growth and strategy stalled after it
was blocked by regulators from buying former building society Abbey National in
2001.
Known as the “Black Horse” after its logo, it was saddled
with billions of pounds of losses after it bought troubled rival HBOS at the
height of the credit crisis of 2008, a deal brokered by the Labour government
of the time.
Its losses led to it being bailed out and part-nationalised
by the government, along with Royal Bank of Scotland (RBS), and Britain finished up
with a stake of 41% in Lloyds and 83% in RBS.
As payback for being bailed out by taxpayers, European
regulators have ordered Lloyds to sell 630 branches, although a British banking
commission has said it might to have sell far more to increase competition.
Lloyds said it was on track to find a buyer for those assets by the end of the
year.
Virgin Money, new bank venture NBNK and National Australia
Bank UK are likely bidders for those branches, while there has been speculation
that the assets may also draw interest from European or Asian banks.
The HBOS deal gave Lloyds the Halifax retail banking
business, and Horta-Osorio said Lloyds planned to grow that brand as part
of a plan to "revitalise" Lloyds.
Bancassurance, which includes Lloyds' Scottish Widows
insurance unit, will also remain a core part of the group and Lloyds said it
planned to restart progressive dividend payments once it is allowed to do so.
The earliest stage at which it can restart dividends is 2012.
Lloyds shares remain below the 63.1p level at which the
British taxpayer acquired its stake in the bank.
SVM Asset Management head Colin McLean said Lloyds and other
banks remained vulnerable to their exposure to debt-ridden European countries
such as Ireland and to the costs of increasing regulation, and were therefore
stocks to avoid for now.
"There's still not enough clarity on the banking sector and
their capital and funding positions," he said.