Fears over job security at banking giants HBOS and Lloyds TSB mounted today after cost-cutting targets from their merger were hiked to more than £1.5bn (€1.89bn).
Lloyds said it now hoped to find an extra £500m (€631m) from the combined cost base after its takeover of HBOS, fuelling concerns of swingeing jobs cuts.
Britain’s biggest trade union Unite urged the banks to “end the speculation” over jobs and offer clarity to worried staff.
Both banks today confirmed their commitment to the deal, despite speculation of potential rival bids from mystery suitors waiting in the wings.
In trading statements also released by both banks today, troubled bank HBOS revealed a further £2.72bn (€3.43bn) hit from the credit crunch, while Lloyds said it had seen a “substantial reduction” in profits since the start of the year.
Lloyds is hoping to deliver annual cost savings of more than £1.5b (€1.89bn) by the end of 2011, compared with its previous estimate that it would be able to save around £1bn (€1.26bn) or 10% of the combined group’s cost base.
It said there would “inevitably be some rationalisation of the combined workforce”, but gave no details on the impact on jobs.
Concerns are growing in Scotland that the merger could see thousands of roles axed in the region.
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.”
The deal also came under pressure over the weekend after it emerged that Scottish Secretary Jim Murphy had talks with Jim Spowart, the founder of HBOS-owned Intelligent Finance, about the possibility of a group putting together an alternative offer for HBOS.
A third potential bidder was also today understood to be looking at HBOS, although again the party has not been named.
Lloyds told shareholders today: “The combination of Lloyds TSB and HBOS, including the required capital raising by both companies, is in the best interests of the company and Lloyds TSB shareholders as a whole.
“The Lloyds TSB board believes the turbulence in current markets has presented a unique opportunity to pursue the acquisition, and unanimously recommends that Lloyds TSB shareholders vote in favour.”
HBOS also said it “reaffirms its confidence in the substantial benefits” of the sale to Lloyds.
The two banks are raising £17bn (€21.47bn) in share sales underwritten by the British government, which will help fund the acquisition and boost their battered balance sheets.
HBOS said writedowns totalled £5.18bn (€6.54bn) in the first nine months of the year – up from £2.47bn (€3.12bn) at the end of June – after suffering increasingly tough conditions amid the global financial crisis.
Lloyds took a further credit crunch writedown of £270m (€341m) in the third quarter.
The bank, which is currently raising up to £5.5bn (€6.95bn) in funds, added today that regulators would require it to raise a total of £7bn (€8.84bn) if the HBOS takeover did not go ahead.
Its takeover of HBOS was given official British government approval on Friday, despite competition concerns raised by the Office of Fair Trading.
Business Secretary Peter Mandelson said the public interest of “preserving the stability of the financial system” outweighed any potential anti-competitive effects.