Lloyds TSB eyes deals as bank posts record profits

Lloyds TSB, already one of the biggest banking groups in the world, yesterday said it was looking for more multi-billion pound acquisitions to add to its growing empire.

Its shares leapt more than 4 per cent to 873p as the group announced a 30 per cent rise in its dividend and record profits of pounds 3.2bn in 1997, a rise of more than a quarter from the previous year.

However, the bank faces a threat of strike action from BIFU, the finance union which represent three quarters of its staff, over impending mass job cuts and a new wage structure.

BIFU, the finance union, predicted that 10,000 jobs would be lost and more than 650 branches would close as Lloyds integrates its banking network with TSB. The union also believes that the bank's new wage deal will leave a fifth of the bank's staff without a pay rise this year.

Lloyds TSB has closed 153 bank branches last year with the loss of 3,300 staff. Overall the company cut 4,426 jobs during 1997. The bank is determined to continue its huge cost cutting program to fight off the threat of growing competition from anybody from supermarket chains to Richard Branson's Virgin group who have set up their own low cost banking operations.

Lloyds TSB indicated it had billions at its disposal to launch a major acquisition. Sir Brian Pitman, the group's chairman said: "We are rapidly building up excess capital which we would prefer to use to make an acquisition. We are generating more than pounds 1bn in surplus funds. There are lots of opportunities coming up over the next few years."

Lloyds TSB indicated that any purchase was likely to be within the UK financial services sector. Chief executive Peter Ellwood said: "We have already looked at a number of companies, including a number of insurance companies."

The bank said yesterday that is was unlikely to launch a share buyback or give money back to shareholders until it has exhausted its acquisition possibilities. That is likely to be at least 18 months away.

Mr Ellwood admitted that the entrance of the supermarkets into the banking market was a real threat. "I use the example of petrol. Within a few years the supermarket gained a 25 per cent share of the petrol market. At the moment are lending figures have gone up. However, in the long term, banking margins will come under pressure."

The group has already cut costs by pounds 220m since tying up its pounds 15bn merger with TSB. It plans to slash at least another pounds 180m of costs over the next two years by integrating the two branch networks. The merger has been sanctioned by the House of Lords, but is still being considered by the House of Commons, a process likely to take several months. But the bill is understood to face opposition from several Tory MP's, including Alan Clark. A TSB Hill Samuel action group has been formed amid concerns that TSB will have to surrender a pounds 1bn pension surplus to Lloyds.

If the cost-cutting is allowed to proceed it would lead to a swathe of high street closures around the country amongst the groups 2,600 branch network. The group is also considering rebranding all its sites with the Lloyds-TSB name.

Lloyds TSB kicked off the banking results season in style, with its retail banking profits rising 16 per cent to pounds 832m and mortgage earnings up one- third to pounds 693m. But the growth in the number of mortgages at the bank has slowed in recent months. Mr Ellwood admitted that intense price competition from building societies who have decided to retain their mutual status and give customers cheaper deals has contributed to sales falling away.

Outlook, page 25

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Recruitment Genius: Experienced Financial Advisers and Paraplanners

Negotiable: Recruitment Genius: This extremely successful and well-established...

Guru Careers: FX Trader / Risk Manager

Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...

Guru Careers: Investment Writer / Stock Picker

Competitive (Freelance) : Guru Careers: An Investment Writer / Stock Picker is...

Day In a Page

How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

How to stop an asteroid hitting Earth

Would people cooperate to face a global peril?
Just one day to find €1.6bn: Greece edges nearer euro exit

One day to find €1.6bn

Greece is edging inexorably towards an exit from the euro
New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

'Iron Man' augmented reality technology could become reality

Holographic projections would provide extra information on objects in a person's visual field in real time
Sugary drinks 'are killing 184,000 adults around the world every year'

Sugary drinks are killing 184,000 adults around the world every year

The drinks that should be eliminated from people's diets
Pride of Place: Historians map out untold LGBT histories of locations throughout UK

Historians map out untold LGBT histories

Public are being asked to help improve the map
Lionel, Patti, Burt and The Who rock Glasto

Lionel, Patti, Burt and The Who rock Glasto

This was the year of 24-carat Golden Oldies
Paris Fashion Week

Paris Fashion Week

Thom Browne's scarecrows offer a rare beacon in commercial offerings
A year of the caliphate:

Isis, a year of the caliphate

Who can defeat the so-called 'Islamic State' – and how?
Marks and Spencer: Can a new team of designers put the spark back into the high-street brand?

Marks and Spencer

Can a new team of designers put the spark back into the high-street brand?
'We haven't invaded France': Italy's Prime Minister 'reclaims' Europe's highest peak

'We haven't invaded France'

Italy's Prime Minister 'reclaims' Europe's highest peak
Isis in Kobani: Why we ignore the worst of the massacres

Why do we ignore the worst of the massacres?

The West’s determination not to offend its Sunni allies helps Isis and puts us all at risk, says Patrick Cockburn
7/7 bombings 10 years on: Four emergency workers who saved lives recall the shocking day that 52 people were killed

Remembering 7/7 ten years on

Four emergency workers recall their memories of that day – and reveal how it's affected them ever since
Humans: Are the scientists developing robots in danger of replicating the hit Channel 4 drama?

They’re here to help

We want robots to do our drudge work, and to look enough like us for comfort. But are the scientists developing artificial intelligence in danger of replicating the TV drama Humans?
Time to lay these myths about the Deep South to rest

Time to lay these myths about the Deep South to rest

'Heritage' is a loaded word in the Dixie, but the Charleston killings show how dangerous it is to cling to a deadly past, says Rupert Cornwell
What exactly does 'one' mean? Court of Appeal passes judgement on thorny mathematical issue

What exactly does 'one' mean?

Court of Appeal passes judgement on thorny mathematical issue