Lloyds Banking Group said it would step up its cost-cutting plans to help to offset a more testing economic environment caused by Britain’s vote to quit the EU.
Britain’s largest retail bank aims to save £400m (€477.5m) by the end of 2017 by axing a further 3,000 jobs and closing an additional 200 branches to protect its earnings and dividends against the effects of lower-for-longer interest rates.
Lloyds, rescued in a £20.5bn UK taxpayer bailout during the financial crisis, is the first major British bank to report results since the referendum and is the most exposed to any downturn in the British economy.
Chief executive Antonio Horta-Osório is searching for ways to prop up Lloyds’ dividend, one of its key attractions, and sustain profit growth in its main UK consumer and commercial lending market, still reeling from the Brexit result on June 24.
“While the business will remain highly capital generative, it is possible that this capital generation may be somewhat lower in future years than previously guided,” the bank said.
So far this year, Lloyds has already said it would cut about 4,000 positions from its 75,000-strong workforce and has closed nearly 100 branches this year. The bank also said it would look to streamline its non-branch property portfolio by around 30 percent by the end of 2018.
“Lloyds remains a no growth bank,” Ian Gordon, an analyst at Investec, said. “Its revenue outlook is flattish, hence its costs need to fall faster.” Lloyds’ shares were down by over 3.5% at one stage, partly in response to its cautious tone on future capital generation and its impact on dividends.
Britain’s vote to leave the EU came at the end of the bank’s fiscal first half, so the impact on lending volumes will not become clear until the third quarter.
Mr Horta-Osorio said the bank’s strategy to grow revenues in a low rate environment would involve expanding in car finance, credit cards and insurance. Finance director George Culmer declined to comment on speculation that Lloyds would make a bid for MBNA, Bank of America’s credit card business.
Lloyds reported a forecast-beating first-half statutory pretax profit of £2.45bn in the six months to June 30, double the sum achieved in the same period last year.
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