Consolidation in the financial services sector hit the UK today
as Lloyds TSB agreed to acquire troubled bank HBOS.
IT cuts are inevitable as the banks have significant overlapping
businesses in retail and corporate banking.
Following a
fortnight of high drama on Wall Street, which saw US financial
service giants on the brink of collapse, the UK entered the fray
when the government brokered a rescue for troubled HBOS.
Part of
the £12.2bn deal is targeted savings of £1bn per year. IT
savings will contribute to the savings as the combined bank closes
processing units and call centres. The banks will also seek to make
savings by integrating other aspects of their IT.
"Lloyds TSB estimates that a combination with HBOS will lead to
an additional contribution to earnings before tax from cost
synergies significantly in excess of £1bn per year by 2011," said a
company
statement.
Bob McDowall, analyst at Towergroup, said there is significant
overlap between the IT systems of both banks, and the merged bank
will have to select which systems to move forward with.
"Both have core banking infrastructures which have legacy
systems built on them. The challenge is how long will they run them
in parallel and when will they select which one to move two," added
McDowall. "Core banking integration will take time."
He said systems that deal with mortgages from HBOS will be
easier to integrate because there is no overlap.
He said over time there could be as many as 50,000 jobs cut from
the combined workforce of about 135,000.