Lloyds swings the axe again ahead of rights issue pricing

Hundreds of jobs cut but investors back bond issue
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Lloyds Banking Group has cut another 810 jobs just a day before the pricing of the rights issue aimed at securing the group's future.

Lloyds, which has already axed 12,500 roles since its shotgun wedding with HBoS, said the cuts were being made as a result of the decision by life insurer Equitable Life not to renew its management contract with the bank when it comes to a close in 2011.

HCL Technologies, the Indian company that will assume the Equitable contract, will retain only 100 of the 340 staff that Lloyds, through Halifax Life and Pensions, had employed on the contract.

A further 570 people, who had been employed at the bank's processing centre in Aylesbury, will also lose their jobs after Lloyds conducted a review of its other life insurance and pensions operations and decided to relocate them.

John Van Der Wielen, managing director of Halifax Life, said: "We will be working through a two-year programme that will see life, pensions and investments relocate from Aylesbury by the end of 2011. This will allow us to manage our exit in a phased fashion and work closely with the local government bodies to ensure colleagues achieve the best possible outcome based on the options available."

Lloyds said it had consulted the main unions, Unite and Accord, before announcing the plans. However, the latter described the cuts as a "body blow". Unions have become increasingly angry at the steep rise in job cuts being made by part-state-owned banks, given the amount of taxpayers' cash that has been spent on propping them up.

Lloyds will receive another £5.7bn in taxpayers' funds as part of the £13.5bn rights issue which will provide it with sufficient capital to meet stress tests demanded by the Financial Services Authority and avoid the Government's asset protection scheme. The cash is in addition to £14.5bn received from the Government at the height of the financial crisis.

The rights issue price will be at a discount of between 38 and 42 per cent of the theoretical ex-rights price. Yesterday the shares closed at 90.64p, up 3.32p. Estimates suggest a price of about 36p is the likely outcome of pricing deliberations which were continuing late into last night. The issue, which is fully underwritten, will raise £13.5bn.

Lloyds shares were boosted after the bank said investors had over-subscribed to its bond plan by £4bn. The bonds are a new type of financial instrument which are known as contingent capital or "CoCo" bonds.

The company said it had received offers from holders of existing bonds to exchange £12.51bn worth into the new bonds, of which it had accepted £8.5bn. The Coco bonds will be converted into new Lloyds Banking Group shares if its solvency ratios – a measure of a bank's financial strength – fall below a certain level.