The Lloyds Bank results are out this morning: Profits in the third quarter are up an impressive 41%, but Britain’s second-biggest bank is laying off 9,000 employees and closing 150 branches.
The business model might well be improving, but that’s at the expense of the company being viciously streamlined. It is aiming to make savings of £1 billion ($US1.61 billion) per year by 2017.
Even for a business of Lloyds’ size, those sorts of reductions are never painless. There’s not yet any indication of where the axe will fall, but given the bank’s commitment to boosting its IT services, that department is probably relatively safe. Many of the layoffs will almost certainly be in increasingly unused physical bank branches.
This isn’t the first round of massive job cuts at the bank, either. In 2011, it announced its intention to cut 15,000 jobs by the end of this year.
Lloyds’ share price is down about 2% Tuesday morning, but analysts aren’t sounding distressed. In a note titled “Carry On Cutting,” Investec analyst Ian Gordon notes the driving force for the layoffs:
The main news sits in the strategic update with 9,000 job cuts intended to drive an improvement in the cost: income ratio to 45% by 2017. We await further details later, but this would appear to represent a small improvement against our existing forecasts.
Some think that the cuts are an indication of inefficiency at the bank. This from Jakub Lichwa at Daiwa Capital Markets:
The bank announced further 9,000 job cuts in and 150 branch closures over the next 3 years indicating cost pressure and ineffectiveness of its branch network.
Others, like Mike Van Dulken at Accendo Markets, don’t mention the job cuts but are very happy with the overall direction of the bank:
No surprises the markets did not react well to the mis-selling front with PPI totaling another £900 million, however once these cobwebs are all out the cupboard what will hold this company back? Confident of returning to a dividend in 2014 with the company’s third quarter profits rising an astonishing 41%! … This company could be soon offering everything; growth and income which investors are waiting for. Could this be the catalyst to push the shares towards the magic 100p mark?
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