£1.5bn savings plan turns Lloyds' merger eye on IT

As Lloyds TSB steams ahead with plans for an acquisition of HBOS, the two banks have revealed how they plan to slash billions from their combined overheads - with IT in the firing line.

Despite having what it claims will be one of the lowest cost-to-income ratios in the financial services industry, Lloyds TSB sent a circular to shareholders announcing that the combined Lloyds TSB-HBOS is aiming for £1.5bn in pre-tax savings annually by the end of 2011.

UK retail banking will be the area expected to see the most cost-cutting activity, with £790m of annual savings predicted. Among the measures the bank hopes will help it achieve its fat-trimming goal are "optimising the efficiency of the combined retail distribution infrastructure, including branch network, call centre operations and associated management and support functions" and "integrating the processing capabilities and information technology platforms of Lloyds TSB and HBOS".

In wholesale and international banking, where Lloyds TSB-HBOS is gunning for £430m in annual savings, cost saving measures will include "integrating the processing capabilities and information technology platforms".

As well as cost savings, the acquisition will bring changes to IT management.

Chris Wiscarson, currently Lloyds TSB's director of group IT & operations, will take up a new role as group integration director following the completion of the acquisition.

While there's no candidate in the frame for the soon-to-be-vacated director of IT position, a Lloyds TSB spokeswoman said Wiscarson's replacement will be announced soon. She declined to confirm whether that replacement is likely to come from the banks' own ranks or will be an external appointment.

Job losses are also on the cards post-acquisition.

"Whilst Lloyds TSB believes that the combination with HBOS will generally provide enhanced opportunities for employees, there will inevitably be some rationalisation of the combined workforce as a result of these initiatives and consultation will take place with, among others, the recognised trade unions in respect of how this can best be achieved," the circular said.

The spokeswoman added: "We haven't put any figures on job losses. Any number would be speculation and wouldn't be helpful to staff."

Asked whether the IT function could be subject to job losses, she said it is "too early to talk about specifics".