The new head of Lloyds Banking Group, António Horta-Osório, announced 15,000 job cuts on Thursday in an attempt to reduce costs and bring the bailed-out bank back to a state of financial health.
Lloyds Banking Group
The day was bleak all in all for banking industry jobs. Unions reported over 840 staff cuts at HSBC to save £9 million. However, the markets welcomed the news of job cuts, pushing Lloyds up nearly 5% to 42p in FTSE 100 early trading. Though it was the biggest riser, its price still falls well below the 73.6p required for the taxpayer to break even.
Unions were furious with Horta-Osório, but the bank head insisted that the cuts were necessary. ‘The bank was loss-making last year,’ the Portuguese-born banker explained. ‘This bank is also reporting an after-tax loss this year.’ Horta-Osório took the helm of Lloyds Banking Group on March 1, 2011.
Nearly 28,000 jobs have already been cut at HBOS due to the repercussions of bank rescues following the 2008 banking crisis. This new round of reductions brings the jobs loss to almost 45,000 since early 2009, when the banking company employed 75,000.
One in eight jobs will be lost during the next three years,’ reported David Fleming, officer of the bank workers’ union Unite. He mentioned that this review was ‘yet another extreme example’ of banks cutting vital jobs to create a ‘mirage of acceptability’ following the banking crisis of 2008. However, Fleming continued, ‘this total failure to take significant action’ to rebuild confidence in the banking sector is ‘deplorable.’
General Secretary of Accord Union Ged Nichols said: ‘[Our union] knows that Lloyds Banking Group employees are extremely concerned…by what [today’s news] might mean for them, their workmates and customer service as a whole.’ Unions expressed concern that the quality of services provided by Lloyds and other banks axing jobs will decline considerably.
Horta-Osório countered that the bank hires 10,000 new staff members every year and that cuts are expected to target middle managers and back-office staff rather than customer service representatives. ‘National attrition and internal deployment,’ the bank head stated, would help achieve the cuts.
Unions also accused HSBC of trying to hide its job cuts reports by stating them on the same day as the Lloyds strategy review had long been scheduled for unveiling.
‘These cuts will generate savings of…£9m for HSBC,’ said Fleming, noting that Stuart Gulliver, the chief executive of HSBC, was due to be paid an equivalent amount as a bonus later this month.
He continued, stating that the individuals being hit by the banks’ job cuts were ‘in no way responsible’ for the crisis of 2008. Despite this, these staff, ‘many of which are low paid,’ are being forced to pay for the recovery.
Fleming added that Unite demanded that ‘HSBC take every possible step’ to avoid further job cuts. The bank should instead ‘focus on retraining and redeployment.’
Lloyds job cuts are part of a larger strategic review whose goal is to achieve a £1.5 billion annual budget reduction by 2014 as well as £2 billion in savings through integration.
The Labour Party presided over a revision of competition rules, allowing Lloyds to rescue the embattled HBOS bank during the 2008 crisis. However, new management is facing pressure from an independent banking commission to sell off branches to foster more competition.
Despite this, Horta-Osório wants to prove that Lloyds can be internally competitive through a return to former branding by acquired companies. The Halifax brand is scheduled to be re-launched in September. Its ‘irreverent’ attitude of the past will be out in full force, and all branches will be open on Saturdays.
‘Our aim is to become the highest-quality bank for customers,’ stated Horta-Osório. With ‘around 30 million customers’ as well as iconic brands including Halifax, Bank of Scotland, Lloyds TSB and Scottish Widows, the bank aims to accomplish this through acquisition and cutting costs.
To achieve its goals, Lloyds will have to spend £2.3 billion in the process of cutting costs. It will also have to remove its business from half of the 30 companies in which it operates by 2014.
Lloyds’s target 2014 equity sits between 12.5% and 14.5%, and the banking giant hopes to begin paying a dividend to stockholders again once the EU ban is lifted in 2012.
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