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LLoyds Bank

 

UK’s largest domestic bank Lloyds cuts jobs and pivots towards digital 

In a recent development, Lloyds, the UK’s largest domestic bank, has announced plans to cut close to 1,600 positions within its branch network. The move, unveiled on Thursday, is part of a broader strategy aimed at expanding the Lloyds online presence. 

The UK-based firm said it was adapting to a change in customer habits, noting that over 21 million of its 26 million clients now prefer to access its services digitally. 

However, the impending job cuts are expected to spark worries among the 8% of Lloyds' customers – about 2 million people – who rely on visiting physical branches to manage their accounts. 

The Lloyds share price responded positively to the news and was up 1.6% in morning trading on Friday.  

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Lloyds job cuts part of broader cost-cutting trend 

These staff reductions reflect a broader trend among banks striving to trim expenses in response to challenging economic conditions and competitive pressures. Despite the banking industry's robust profits in the past year, the need to tighten budgets remains a priority. 

Lloyds' rival, investment and retail bank Barclays, also slashed thousands of jobs last year, with the majority concentrated in the bank's back-office support division. 

As part of its restructuring efforts, Lloyds intends to establish 830 new positions in an enlarged “relationship growth” team. This team will focus on comprehending customers' financial objectives and delivering services through various channels, including branches, video meetings, and telephone interactions, according to a Reuters report citing a spokesperson from Lloyds. 

The net outcome of these changes will lead to a loss of about 769 roles, as specified by the spokesperson. 

Lloyds job cuts will mostly affect senior positions, spokesperson says 

Lloyds has announced plans to shut down approximately 114 branches within the current year, reducing its network to 1,061 locations. The proposed staff reductions will primarily target higher-level positions in branches, while retaining entry-level roles, according to the spokesperson. 

According to the staff union, they are optimistic that the majority of these job cuts will occur through voluntary redundancy, where workers opt to depart in exchange for compensation, though it is likely to be offered only in some cases.  

The latest job cuts are notably separate from an earlier round of reductions. In November, Lloyds revealed its intentions to slash close to 3,000 positions across its broader business operations —excluding branch staff. These reductions are set to primarily affect middle-management positions, including analysts and product management roles. The bank also announced the creation of new jobs in parallel, which will ultimately lead to a net increase of 120 positions in its workforce. 

These job cuts form a critical component of the bank’s ambitious £3 billion restructuring plan announced under the leadership of Lloyds Chief Executive Charlie Nunn in early 2022. The strategy aims to expand Lloyds’ digital banking capabilities, bulk up its corporate banking and wealth management divisions, and strengthen Lloyds' position as a property owner in the UK. 

FCA probe into UK auto lenders may lead to heavy compensation payouts for Lloyds 

This latest round of restructuring comes amid growing investor concerns that Lloyds may face large payouts, possibly in the hundreds of millions of pounds, to compensate customers who may have overpaid for motor finance services between 2007 and 2021.  

The UK’s Financial Conduct Authority initiated a launched of the market earlier in the month, and analysts at RBC estimated that this could ultimately cost Lloyds, a major player in the market through its subsidiary Black Horse, as much as £2 billion ($2.6 billion).  

in a separate note cited by Reuters on Wednesday, Jefferies analysts estimated a potential bill of £1.8 billion for Lloyds due to the probe. 

A Black Horse spokesperson said: "We are currently reviewing the FOS decision and will work collaboratively with the FCA on their upcoming review." 

At the time of writing on Friday, the Lloyds share price was up close to 1.6% on the day, trading around the 42.19p mark. The bank’s performance year-to-date has seen its stock fall by over 11.5%. 

The UK benchmark FTSE 100 index, where Lloyds is a constituent, has also fallen year-to-date, dipping by 1.52%. The “Footsie”, as it is widely known, is on track for a 2% gain this week. 

UK banks will also be watching the Bank of England’s interest rate announcement next Thursday. As outlined by Markets.com Chief Market Analyst Neil Wilson, UK interest rates are likely to remain on hold for the time being, with the BoE “in no rush to cut”:  

“The Bank of England is expected to keep rates on hold but investors are watching for a change in messaging from the Monetary Policy Committee. Markets have dialled back expectations for rate cuts in 2024 to around 100bps from 150bps amid some pretty tough talk from the Old Lady. The UK’s services sector moved further into growth in January, reducing pressure on the BoE to cut and suggesting the pessimistic consensus for the UK economy may be too gloomy. [...] 

CPI inflation rose to 4.0% in December from 3.9%, underscoring the sense that the BoE won’t be in a rush to cut”. 

When considering shares for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.     

Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice. 

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