Combined HBOS and Lloyds TSB IT to take big hit

Lloyds TSB's takeover of HBOS will lead to massive cuts in the technology infrastructure and IT workforce of both banks, it emerged today.

Lloyds TSB's takeover of HBOS will lead to massive cuts in the technology infrastructure and IT workforce of both banks, it emerged today.

IT, call centres and back office work in the retail banking division will bare the brunt of the cuts,an announcement by Lloydsreveals.

Lloyds TSB agreed to takeover HBOS in a deal worth £12.2bn. It originally targeted £1bn savings through removing duplication in the two organisations. It now expects savings of £1.5bn.

"Following this detailed review, Lloyds TSB believes that through the implementation of cost synergies and other operational efficiencies it will deliver total pre-tax annual cost savings greater than £1.5bn," it said in a statement.

Most of the savings will come in the retail banking division, where Lloyds TSB plans 21 initiatives to cut annual costs by £790m by 2011.

Lloyds also plans to cut branches and call centres and the underlyingIT that supports these functions. The merged bank will integrate the processing capabilities and IT platforms, said a Lloyds TSB statement.

Ralph Silva, analyst at TowerGroup, said the banks will make massive savings bynot having to run two separate core banking systems.

Both banks have invested heavily in IT infrastructures that can take on increasing amounts of business. "Each of the banks could probably deal with the entire customer base of the combined banks because they were so over-built."

He predicted that two-thirds of staff and IT could disappear from one of the banks.

"We expect them to keep one-third of the staff and IT of one of the banks and add it to the other," said Silva.

Silva believes it is likely that the merged bank will use the Lloyds TSB IT infrastructure. "Both have good IT systems, but Lloyds TSB is more advanced," he said.

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