Lloyds slashes branch network

Lloyds Banking Group has taken an axe to its branch network and announced thousands of job cuts under plans to sideline its traditional over-the-counter service.

The lender, which is 25% owned by the taxpayer, is to close 200 sites over the next three years and slash 9,000 posts across the business as part of its "digitisation" strategy.

Back office processing workers will be among those facing the chop in addition to branch staff as their jobs are replaced by computers at the group, which includes Halifax and Bank of Scotland as well as Lloyds Bank.

Lloyds Banking Group is to axe another 9,000 jobs and close 200 branches

Lloyds Banking Group is to axe another 9,000 jobs and close 200 branches

The closures spell an end to its three-year-old commitment to be the "last bank in town" and represent around a tenth of its network of 2,000 sites - the largest among the high street banking groups.

Business Secretary Vince Cable is to write to Lloyds and its rivals urging them to think again and revive the pledge. It was part of the banking code until 2008 but Lloyds today became the last bank to ditch the commitment.

He said: " The announcement by Lloyds today highlighted the changing nature of the banking world - more and more people are accessing services online.

"This trend is inevitable as consumer patterns change but as banks continue to modernise, we must ensure that people in rural and smaller communities in particular continue to have access to the banking services they need.

"One of the most effective solutions is the post office network - which many people can already use to access their bank account at over 11,500 branches, but awareness of this service is low. So I am suggesting that banks and the post office work more closely together to ensure a long-term solution to financial access can be found using existing networks, in a sustainable way.

"In addition, I will be writing to all the major banks to ask them how they plan to ensure that the banking needs of vulnerable consumers are met. I will also be asking them to think carefully about the best approach to any 'last branches' until that plan is in place."

Labour also called for local banking services to be protected.

The announcement of the closures and job cuts came as Lloyds announced a 41% rise in underlying profits for the third quarter to £2.2 billion and said it remained confident in its plans for a resumption of dividend payments after six years.

But it was also hit by a £900 million increase in provision for the payment protection insurance (PPI) mis-selling scandal.

The group says it is shaking up the way it deals with customers because of the changing way they do their banking.

Chief executive Antonio Horta-Osorio said that in future half of counter transactions would be carried out through self-service or digital means, adding: "Our customers want to interact with us in that way."

Lloyds will invest in remote advice services for customers while they will increasingly be expected to use online banking or self-service facilities within branches instead of dealing with staff face-to-face.

The group is also working on "screenless counters" which will have staff on hand to help customers with transactions they are carrying out themselves.

It has around 25 million retail and business customers, with 10 million now banking online and five million using mobile banking services. The group saw a 9% fall in branch use last year while mobile banking increased 38%.

The bank's profit performance for the quarter was better than some analysts expected, with Mr Horta-Osorio saying it was "well positioned to continue to support and benefit from UK economic growth".

Bottom line pre-tax profits were £751 million, after taking into account one-off costs including the additional PPI provision.

Mr Horta-Osorio said: "Over the last three years the successful delivery of our strategy has ensured that we have become a safe, highly efficient, UK-focused retail and commercial bank.

"The next phase of our strategy will use these strong foundations as a basis for meeting the rapidly changing needs of our customers."

Finance director George Culmer said of the pledge to keep branches open: "That was a specific commitment we made over the last planned period. We won't be able to commit to that going forward."

Lloyds said the move would see a net closure of 150 branches. Mr Culmer said Halifax branch numbers would be maintained and the division would add sites in Scotland where it currently has only three.

The group said more than 90% of Lloyds and Bank of Scotland customers would continue to have a "useable branch" within five miles of their home. It will target closures in town centres with more than one branch.

The job cuts represent around 10% of the current workforce of 88,000.

Mr Culmer said: "It is regrettable but this is about changing customer needs. We will work very, very hard to make sure that we lessen the impact as much as we possibly can on our people."

Lloyds said its new strategy would see £1 billion invested in digital technology over the three-year period. The group is also targeting £1 billion cost savings by the end of 2017.

Rob MacGregor, national officer of the Unite union, said: "Job cuts of approximately 10% could have unknown consequences on customer service and will put even more pressure on staff who have helped get the bank back on the right track.

"The wallets of top executives at Lloyds should not be getting fat by forcing low-paid workers on to the dole. If there are compulsory redundancies or customer service suffers then executive pay should be cut."

Shares fell 2%. Shore Capital analyst Gary Greenwood said: "Overall, this is another decent set of results from Lloyds, and while the new strategic targets are not a big surprise, they should be welcomed.

"That said, uncertainty around the UK economic recovery, a slowing housing market and a looming review into competition in the UK retail banking space is casting renewed clouds of uncertainty over the stock."

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