Consolidation in the financial services sector hit the UK today as Lloyds TSB agreed to acquire troubled bank...
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.