As he unveiled his strategic review, Lloyds TSB chief executive AntÃ³nio Horta-OsÃ³rio said “This bank is losing money. We have to get this bank supporting the UK economy, we have to get this bank profitable and we have to repay taxpayer support.”
Indeed, as 41% of the bank is owned by the UK taxpayer, it is imperative that Lloyds are expeditiously proactive in their approach to getting back on track - they owe as much to the British public.
Although the strategy wasn’t as detailed as many of us would have liked, its sentiments are simple - Lloyds TSB needs to boost its revenues at the same time as dramatically slashing its costs. The targets are formidable - they include cutting costs by a further £1.5 billion per year and increasing revenue per investment customer by 50%+ by 2014.
The strategy will involve Lloyds TSB reshaping its business portfolio to fit its assets, capabilities and risk appetite - which, it appears, will be decidedly more conservative than under the previous strategy. Disciplined controls are to be put in place - there will be none of the wild gambling that led to the financial crisis.
Now Lloyds’ analysts and traders will seek out only the safest bets to stake the taxpayers’ money on - they must be assiduous in this quest, which will take time and strenuous effort. But investment strategy is a bank’s core competency, its main money spinner, so it’s crucial to train their focus on this area.
Lloyds TSB’s other initiatives include investing in being the “best bank for personal customers” by delivering “a simple, efficient and fair customer experience” and aiming to become the “best through-the-cycle partner” for businesses large and small.
This is exactly what a bank nearly half-owned by the Government should be doing - supporting the people, and giving the best possible opportunities to businesses - lending prudently and offering sage financial advice, especially to SMEs. Good old fashioned banking; another core competency where Lloyds is looking to raise its game.
These strategies will require major funding. The struggling bank needs to save billions before it starts pulling its weight for the UK taxpayer. Announcing that it will shed 15000 jobs internationally - as part of a strategy to focus its international efforts only on UK expatriates and organisations with strong existing UK ties - is just the start of the cost cutting.
Further to this, Lloyds will reduce the number of agreed suppliers from 17000 to less than 10000. On the face of it, this looks to be an unfavourable turn for the outsourcing industry - but I believe there are many positives to be taken from it.
Lloyds TSB, as witnessed through its work with the NOA, has long been a forerunner in managing outsourcing contracts and is fully aware that doing more business with fewer companies is a real opportunity to forge stronger working relationships with key partners.
Outsourcing could well be key to fulfilling Lloyds’ desire to “redesign processes,” “increase productivity,” “reduce complexity and costs” and create “digital distribution channels” - this is core work for many BPO and ITO providers who bring experience, expertise and technology to the table.
In order to make Lloyds TSB “leaner and more agile” we may also see a drive for innovation in outsourcing contracts. In my opinion, collaborating with the right partners, and trusting them to innovate, will let Lloyds TSB focus on its bread and butter: investing and lending wisely.