Despite every effort, significant change, and hard work, Lloyds Banking Group (including HBOS and Halifax banks) is still far from recovery.
Earlier this year, Lloyds Banking Group (LBG) confirmed that 9,000 jobs would be lost, and 150 branches would close, over the next three years. Coming on top of 43,000 job losses since 2008, these latest cuts represents about 10% of the Group’s workforce. Further to those losses, LBG is still feeling the burden of the PPI mis-selling scandal. Compensation and fines from PPI mis-selling have already cost LBG £11.3bn so far (including £2.5bn in administration costs), with other fines reaching in excess of £200m. However, LBG recently announced that it is setting aside yet more money for PPI claims, this time an extra £900m.
This comes after relatively good news for LBG. Following the sale of TSB, and the creation of the new bank, figures show that the sale was beneficial for both TSB and Lloyds. Additionally, with improved and increased revenue, less toxic debt (most of which is now held by TSB), and similar corporate burdens, LBG was given a vote of confidence earlier this year. The government announced the sale of part of the 39% government held stake in LBG, thus indicating a degree of government confidence in the banking giant, and reducing the stake in Lloyds held by the taxpayer. After the two sales over the last two years, the public’s stake in Lloyds is now 25%.
In the wake of such positive news, CEO Antonio Horta Osorio, senior LBG executives and managers, and commentators are overall confident in the bank’s performance and future, despite the announcements the other month. Also, they are set to stand by promises made previously.
With such job losses and branch closures forthcoming, though, there are fears that branch closures will affect Lloyd’s customers if local or rural branches are closed. Following the LBG announcement, it was later revealed that Vince Cable, the Business, Innovations & Skills Secretary, intended to write to the major UK banks demanding that they re-affirm their commitment to previous promised to keep the “the last branch in town” open. An agreement between the major banks and the British Banking Association (BBA) to that end expires at the end of 2014. Lloyds has already stated that they willing to examine a new, similar commitment to keep existing rural branches open. Despite that, banking sources state that the policy and agreement of not closing branches in smaller towns and cities is the nearest alternative branch is over one mile away is in need of rethinking.
Although the biggest change both seen, and being planned for, is online banking, LBG does not want to lose out on branches in the High Street. Although embracing online banking enthusiastically, and seeing a huge trend toward it, LBG is aware that some matters, and demographics (such as the elderly), need face to face banking. LBG online services and systems are incredibly advanced and secure, even offering banking via Skype.
For high street banks, the customer service and loyalty generated by a physical presence will do wonders for profits, investment, balance sheet, stability and growth. Whilst benefiting senior executives and shareholders alike, such returns will also give dividends to customers too, and ultimately the taxpayer, by being able to divest the public shares in LBG soon.
With this in mind, closing many branches (particularly rural or smaller ones) is seemingly unlikely. What is more likely is a smarter, more efficient allocation and placing of staff, opening hours, and branches. Not all customers will benefit; but most will. The money set aside for the fines, etc will not affect LBG’s bottom line (sic) customers. In LBG, Lloyds has shown recovery, and success; that will continue, as long as there is confidence in LBG. That should be the case, given its performance, and redress of prior consumer issues.