Scaling back: Lloyds plans to cut 3,000 jobs and shut 200 branches by 2017
Lloyds Banking Group plans to cut 3,000 jobs and shut 200 branches as the lender braces itself for a cut in interest rates following the UK’s decision to quit the European Union.
The partly state-backed bank said its cutting programme – which was first announced back in 2014 – is to be extended, with the new cuts coming into effect by the end of 2017.
Lloyds is preparing for a ‘lower for longer interest rate environment’ as the Bank of England is widely expected to cut interest rates from 0.5 per cent to 0.25 per cent next week as the fallout from the Brexit vote intensifies.
Lloyds, which is 9 per cent owned by the taxpayer, is targeting £1.4billion in cost savings by the end of next year.
Banks have been closing branches in great swathes as rising numbers of customers switch to banking online.
However branches still remain a lifeline for customers who have not yet made the switch, or have insufficient internet connection to use banking apps and websites.
The announcement of another 200 branch closures could leave thousands of customers such as these without access to a nearby bank branch – as well as resulting in yet more job cuts for branch staff.
It made the announcement alongside results for the first half of the year, which saw statutory profits more than double to £2.5billion, compared with £1.2billion for the same period last year.
However on an underlying basis, which strips out one-off costs, profits decreased to £4.2billion from £4.4billion.
The company also increased its interim dividend by 13 per cent to 0.85 pence per share.
But shares have turned down in early trading, off 1.6p at 54p, after the lender warned that Brexit could have an adverse impact on its future performance.
It bank said: ‘Given the uncertainty, it is too early to determine the impact on our formal longer term guidance at this stage.
‘However, while the business will remain highly capital generative, it is possible that this capital generation may be somewhat lower in future years than previously guided.’
Lloyds was not forced to earmark more cash to cover PPI mis-selling in the first half, which has significantly boosted its profits. The UK financial watchdog is currently consulting on a deadline for PPI claims.
Boss Antonio Horta-Osorio said the outlook for the UK economy post Brexit is uncertain
The fresh cuts this morning means the total number of jobs losses from its 75,000-strong workforce since 2014 will stand at 12,000 by the end of next year.
Chief executive Antonio Horta-Osorio said: ‘Following the EU referendum the outlook for the UK economy is uncertain and, while the precise impact is dependent upon a number of factors including EU negotiations and political and economic events, a deceleration of growth seems likely.
‘The UK, however, enters this period of uncertainty from a position of strength, following continued private sector deleveraging, significantly improved mortgage affordability and low levels of unemployment.’
Rob MacGregor, national officer at union Unite, said: ‘There is a real danger that customer service will suffer and access to banking for numerous communities will be damaged because of this latest round of savage cuts.
‘Over the coming days and weeks Unite will be in talks with Lloyds to understand the announcement in detail, pressing it for guarantees over compulsory redundancies and warning it against cutting too far too fast.
‘Lloyds should be in no doubt that Unite will oppose all compulsory redundancies and will be doing everything in its power to ensure that those employees who wish to continue working for the banking group do so.’
Lloyds has been one of the hardest hit banks since the UK voted to leave the EU.
The vote came at the end of the bank’s fiscal first half and the likely impact on lending volumes will remain unclear until the third quarter and beyond.
Laith Khalaf, analyst at Hargreaves Lansdown said: ‘Lloyds is one of the stocks that has been hardest hit by the decision to leave the EU because it is so heavily plugged into the UK economy, and the Brexit vote has raised a dust cloud of uncertainty around the future economic prospects for the country.
‘Statutory profits have doubled in the last year, though that’s largely due to the receding shadow of PPI claims.
‘However underlying profit, which gives a better view of the business going forward, was down slightly thanks to lower revenues and slightly higher loan impairment charges.’
He added: ‘Lloyds has set out its stall as a multi-channel bank, but the reality is that demand for banking services is moving online, and so banks must follow where there customers lead, and ultimately that doesn’t bode well for high street branches.
‘Hence the closure of more high street branches and job losses is part and parcel of the technological revolution that is affecting many industries.’
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