HBoS jobs fears after Lloyds TSB aims for £1.5 billion cost cuts

Published on Monday 3 November 2008 08:55

FEARS were growing today that more than 40,000 jobs could be at risk after Lloyds TSB said it wanted to make £1.5 billion of cost savings by 2011 following its proposed takeover of HBoS - £500 million more than initial estimates.

And Edinburgh-based HBoS also today announced a further 2.72 billion hit as a result of the financial services crisis.

Britain's biggest trade union Unite urged the banks to "end the speculation" over jobs and offer clarity to worried staff.

SNP Central Scotland MSP Alex Neil weighed into the debate accusing Lloyds TSB of publishing a "false" prospectus for its takeover.

The Scottish Parliament finance committee member accused Lloyds of not telling the full story on jobs or where the new corporate headquarters would be.

Lloyds said its shareholders will vote on the takeover at the SECC in Glasgow on November 19.

But Mr Neil, an economist, said that the company has not given enough information in its prospectus. He said: "This is a dishonest prospectus to shareholders, it doesn't tell the full story on jobs and it omits a crucial piece of information on where the corporate headquarters of the merged entity will be.

"For a takeover of this magnitude, putting at risk around 40,000 jobs, the stability of the Scottish economy and the Scottish banking system this prospectus is misleading and unacceptable.

"It would appear that alternative bids may be put on the table which will be better deals for Scotland.

"I only hope shareholders will not be hoodwinked into voting for this takeover which will be bad for Scotland, bad for shareholders, bad for customers and which will jack up unemployment by up to 40,000 people across Britain."

He also said that an "excellent" bid for HBoS is in the offing from an unnamed foreign-based company that does not have a major high street presence in the UK - which means less jobs would be at risk.

He said that the bid could lead to it maintaining its head office in Edinburgh.

Derek Simpson, Unite joint general secretary, said: "It is completely unacceptable for the banks to continue fuelling speculation while leaving their worried staff in the dark.

"It is now time to start thinking about the human consequences of this takeover."

Both banks today released gloomy trading update. HBoS said that writedowns for the first nine months of the year now totalled 5.18bn following increasingly tough conditions in the financial services sector.

The update comes amid speculation that a further two bids for HBoS are in the offing, including one from a foreign suitor.

But both HBoS and Lloyds TSB today insisted that their tie-up is on track.

Lloyds also said profits had seen a "substantial reduction" since the start of the year.

HBoS said it is operating in "difficult" market conditions, with profitability impacted by higher impairments, negative fair value adjustments to the Treasury Portfolio, the sale of BankWest and short term fluctuations in investment returns.

In an interim management statement, it said: "While the credit environment will remain challenging, HBoS's robust capital position, to be further enhanced by the injection of capital and liquidity facilitated by the UK Government, reinforces the Group to meet such challenges."

"HBoS's strong brands and leadership positions in UK retail banking, its multi-brand approach and distribution strength in the insurance and investment markets and more selective approach to corporate and international markets, offer good growth opportunities when the current cycle turns.

"These opportunities will be further advanced as HBoS joins the enlarged Lloyds TSB Group in January 2009, subject to shareholder and regulatory approvals."

In a letter to shareholders, Lloyds TSB chairman Sir Victor Blank said: "The Lloyds TSB board of directors has long recognised the attractions of a combination of Lloyds TSB and HBoS.

"The acquisition of HBoS represents a compelling opportunity to accelerate Lloyds TSB's strategy and create the UK's leading financial services group."