HBOS plans major IT consolidation project in bid to save £300m a year

HBOS is planning to save £300m a year by the end of 2009 in a three-year project to consolidate its IT systems.

HBOS is planning to save £300m a year by the end of 2009 in a three-year project to consolidate its IT systems.

The bank achieved major efficiencies when it consolidated its IT infrastructure following the merger of Halifax and Bank of Scotland in 2001.

However, group finance director Phil Hodkinson said the focus on the merger had meant that HBOS had not delivered the routine, year-on-year cost reductions that all large organisations must make.

For example, only 40% of HBOS's procurement goes through a central organisation, compared with 70% or more at some leading firms.

Hodkinson said, "We have not had a chance to automate spend management in all parts of the business."

The bank will use the latest IT consolidation project to ensure that its operating costs remain lower than those of its competitors.

According to the bank's own figures, HBOS already has lower operating costs than its UK rivals, with a cost-income ratio of 40.9%, but the organisation aims to reduce that ratio to 35% by 2010.

The bank plans to cut 12% from the processing costs of its UK business by 2010.

Post-merger IT consolidation pays off

HBOS spent £84m on an IT consolidation project in 2004-2005 to achieve cost savings of £60m a year.

It included the development of back-office processing systems capable of scaling to support the bank's different businesses. Automated front-office sales systems were also deployed to improve productivity.

Of the £84m invested in the project, £34m went on IT transformation costs, £29m on redundancy payments and relocation packages, and £21m was spent on other restructuring costs.

The project enabled the bank to grow its net operating income by 19% in 2004-2005 while underlying operating expenses grew by 8%.


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