Shares in Lloyds TSB tumbled 5 per cent yesterday after the bank outlined 3,000 job losses, higher provisions for bad debt and admitted to being frustrated in its strategic ambitions in Europe.
Some 5,000 staff in back and head office posts are going, although Lloyds is recruiting 2,000 branch and call centre staff as part of plans to accelerate the transfer of telephone call handling from branches.
Peter Ellwood, the chief executive, said the hirings would address the bank's "disappointing" standard of customer service. "We've got to make sure that people are highly competent, not just at answering the phone, but at maturing the call," he said.
Unifi, the banking union, voiced concern at the lack of detail surrounding the proposals. Lloyds, which employs 81,400 people, has not ruled out compulsory redundancies.
Pre-tax profits fell 8 per cent to £3.55bn last year as bad debt provisions climbed 38 per cent to £747m, including £100m of provisions for the Argentina crisis. A £30m hit was attributable to a company thought to be linked to the collapse of Enron. Falling stock markets hit investments at Scottish Widows to the tune of £648m.
Mr Ellwood warned of "some issues" in Lloyds' wholesale operations, which include corporate lending, that would see bad debt provisions rise higher still this year. Any fall in consumer confidence could jeopardise the health of the UK economy, he also warned.
The core UK retail banking operation saw profits slide by some 18 per cent, to £633m. While mortgage profits grew, market share declined as customers switched to rivals upon the expiry of fixed-rate deals. Overall, group revenue rose 10 per cent to £9.54bn.
Lloyds shares fell 40.5p to 734.5p amid concerns that renewed investment in the business would increase costs when the scope for return was uncertain. The bank gained favour among investors in the 1990s by growing profits in the mature UK retail banking sector through aggressive cost cuts.
Mr Ellwood, who was thwarted in a bid for Abbey National last year, claimed there was still growth to be had in the UK, but said he was less confident of achieving a cross-border deal. Last year, the former chairman Sir Brian Pitman, now an adviser to Morgan Stanley, paraded Lloyds's ambitions for a merger of equals in Europe.
"Parochialism is too strong a word, but there is nationalism," Mr Ellwood said. "A deal] is not going to happen as soon as we would have hoped."
Wealth management, another alternative source of growth for the group, was "slowing down", Mr Ellwood admitted.
"Earnings look to be pretty dull over the next 12 to 24 months," said one analyst.Reuse content