Lloyds Banking Group has reported an impressive turnaround in profit in its latest full-year financial report, driven in part by cost savings achieved through consolidation of its IT.
The group, which is 41 percent owned by the taxpayer, reported pre-tax profit for the year to 31 December 2010 of £2.2 billion, up from a £6.3 billion loss in 2009.
Lloyds has been running an integration programme to integrate Lloyds TSB with HBOS (Halifax Bank of Scotland) following the merger of the two companies in January 2009. The total costs of integration so far has reached £2.75 billion, with £1.65 billion incurred in 2010 relating to IT, business costs of implementation and redundancies.
But the group said that the integration programme was ‘on track’, having resulted in the anticipated cost savings of £1.4 billion last year.
“We achieved savings across a wide range of group activities, including implementing improved processes which are now being used on a harmonised basis across the group, and driving savings in property and procurement,” Lloyds’ chief executive J Eric Daniels said in the 2010 results.
“As part of the integration, we have also commenced the implementation of a number of major system changes, which will complete in 2011.”
The group also expects to meet its target to deliver £2 billion of cost savings, which includes operating efficiencies, by the end of this year – especially after the company finishes rolling out its single IT platform.
Lloyds finished building the software for its ‘Integrated IT Platform’ in the first half of last year, and implemented most of it after extensive testing by the end of 2010. It is currently live and operational for most Lloyds TSB processes and transactions.
Among its migration projects, Lloyds is hoping to complete the rollout of the Lloyds TSB counter system across Halifax and Bank of Scotland branches by July. It is also migrating HBOS ATMs and rolling out the group’s mortgage sales platform to mortgage sales advisers in order to have a single mortgage sales platform.
“Product and channel systems are being integrated and harmonised where required, and this will continue through the first half of 2011 in parallel with a detailed and rigorous programme of testing in preparation for customer data migration from HBOS systems to the single IT platform by the end of 2011,” the group said.
However, Lloyds said that to date, a large part of its cost savings are being driven by a reduction in jobs, mostly through natural turnover, voluntary redundancy and re-deployment. The group has cut out 26,000 roles in just two years.