UK Edition
Lloyds to slash 3,000 jobs and close 200 branches
Lloyds Banking Group is chopping another 3,000 jobs and closing a further 200 branches in a bid to save money and meet customers' increasing enthusiasm for online banking.
Those cuts come on top of 9,000 job losses and 200 branch closures that were announced two years ago.
Combined with the sale of 40 office buildings around the country, the bank expects the plan will cut its annual costs by £400m - savings that could be particularly important if the economy slows down in the wake of the UK's vote to leave the EU, as chief executive Antonio Horta-Osorio expects.
However, the bank stressed that the decision to close the branches was taken before the referendum result, as the number of transactions carried out in branches has fallen by another 15pc compared with last year.
The bank had already seen business investment slow down with firms of all sizes putting big projects on hold, Mr Horta-Osorio said today, and that has continued since the vote.
Households and individual consumers, however, remain confident, with spending levels unaffected by the vote, and mortgage applications taking no discernible hit from the referendum.
"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," said Mr Horta-Osorio.
"The UK enters this slowdown from a position of strength due to the sustainable nature of the economic recovery in recent years, where the UK has been growing at about 2pc with reducing levels of debt."
That was reflected by Lloyds' financial results: its pre-tax profit for the first half of the year more than doubled to £2.5bn.
Its operating costs fell by 3pc while it increased consumer finance lending by 11pc and small business lending by 4pc.
Lloyds hiked its interim dividend from 0.75p a year ago to 0.85p now - but investors and analysts were disappointed as they had anticipated a 1p payout.
The bank has also reduced its guidance on capital generation for the rest of the year - another indicator that the dividend might not grow as fast as previously hoped.
One factor is the fall in sterling since the referendum, which has pushed up the amount of capital Lloyds has to hold against US dollar-denominated assets.
Other costs include an extra £460m of misconduct costs. Of that, £215m relates to problems with the way the bank handled arrears which will result in some customers receiving fee refunds. Another £70m comes from complaints on packaged accounts, while £50m relates to insurance products sold in Germany.
As a result the bank's share price slid by 2.9pc in early trading.
"The fact that the Lloyds share price has retreated by 37pc since spring 2015 – it now languishes below its level at the time of the chief executive's arrival in 2011 – is probably a source of great frustration to management," said analyst Ian Gordon at Investec.
"We see today’s numbers as solid enough. We see Lloyds as oversold," he said, recommending investors buy the shares at today's price of 54.2p per share, as he expects it to rise to 79p.
Mr Gordon remains upbeat on banks overall and believes the figures reported so far this year show limited impact from Brexit. "Over the past two days, Virgin Money, Shawbrook and Metro Bank have all posted record net loan growth in the second quarter of 2016 with strong pipeline guidance, going a long way to rebut the consensual pessimism which engulfed markets in the aftermath of the UK’s ‘Independence Day’ decision."