Lloyds TSB/HBOS deal targets IT cost savings

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The takeover of Halifax Bank of Scotland (HBOS) announced by Lloyds TSB this week includes plans to rationalise IT infrastructure and jobs and move more technology offshore.

The IT plans revealed in details of the deal agreement released yesterday are expected to contribute to the delivery of £1 billion in cost savings, equivalent to more than 10 per cent of the newly-enlarged organisation’s earnings before tax by 2011.

Lloyds TSB said that by eliminating duplication across various business divisions, including its retail branch network, wealth, insurance and wholesale arms, it would also rationalise and integrate common IT platforms.

Consolidation of its underlying IT infrastructure will include data centres and networks. And in operations, it said it would improve productivity through improvements in branch efficiency using new electronic straight-through-processing (STP) transactional systems and the centralisation and combination of back-office operations and offshoring.

The acquiring bank is no stranger to the offshore outsourcing of IT, having axed 250 jobs and closed some of its branches only last month.

Lloyds already employs around 2,500 staff in India as part of an ongoing programme to cut the cost of its UK-based back-office processing operations by working with a range of offshore providers, including Xansa and Tata Consultancy Services.

HBOS has also already taken steps to cut its IT costs in response to the increasingly unstable global economy, cutting 90 jobs from its group IT department last month too. The bank employs around 2,000 staff in its IT group.

Lloyds TSB currently has 1,900 branches, including 160 from its previous acquisition of Cheltenham & Gloucester, while HBOS has 1,100. The deal would make the combined banking group the dominant mortgage and savings operator, with a one-third share of the market.

Sir Victor Blank, of Lloyds TSB chairman stated: “This will be a unique opportunity to accelerate and extend our strategy and create the UK’s leading financial services group.”

But the deal is still subject to shareholder agreement and John Hutton, the Secretary of State for Business and Enterprise has said he will issue an intervention notice to scrutinise the deal in the interests of maintaining UK financial market stability.

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