New Lloyds CEO Cuts 15,000 Jobs in Revival Plan

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Lloyds CEOBy Sudip Kar-Gupta and Steve Slater

(Reuters) - Lloyds will axe 15,000 jobs and halve its international presence, a plan its new boss hopes will save 1.5 billion pounds ($2.4 billion) a year by 2014 and return the part-nationalized British bank back to health.

Chief Executive Antonio Horta-Osorio, presenting his overhaul of the bank on Thursday after 122 days in charge, aims to cut through middle management and make the bank simpler and more agile.

"We have to do this. The bank has lost money and is losing money as you saw in Q1 and we have to get this bank back on its feet to support the UK economy and to get it profitable in order to pay taxpayers' money back," he told reporters on a conference call.

The latest cuts for Lloyds, Europe's seventh biggest bank by market value, will add to 27,000 job losses already since the 2008 financial crisis. Lloyds currently employs some 103,000 staff.

The cost of the program will be 2.3 billion pounds, but the savings garnered will allow the bank to invest an extra 2 billion pounds in its core retail banking activities.

Horta-Osorio will cut Lloyds' international presence to fewer than 15 countries by 2014 from 30 now in order to focus more on its core UK retail banking business - where it is market leader and has historically been far more significant than its overseas reach.

Lloyds' overseas presence currently includes operations in Europe, such as Holland, Germany and Spain, both north and south America and Asia. Horta-Osorio, a respected Portuguese banker whom Lloyds poached from rival Santander UK, declined to say which countries Lloyds would leave.

The Unite trade union group attacked the job cuts, but Horta-Osorio said the move was a necessary one. HSBC and banks in Italy, Switzerland and the United States have also announced job cuts this week as regulatory pressures and slow economies weigh heavily.

Lloyds shares rose sharply as analysts and investors welcomed Horta-Osorio's plans. By 1015 GMT the stock was up 8.2 percent at 48.32 pence, the best-performing UK blue-chip stock and lifting its market value to over 33 billion pounds.

"This looks like third time lucky for UK banks' strategy days -- Lloyds has delivered solid targets with some key milestones," said Mike Trippitt, analyst at Oriel Securities.

Trippitt said Lloyds' strategy review compared favorably to other recent strategy days held by rivals HSBC and Barclays, whose targets ended up underwhelming investors.

The plan, which aims to lift margins, cut the ratio of loans to deposits to 130 percent and lower costs to less than 44 percent of income, was realistic but not without risk, investors and analysts said.

"This is still just a wish list of what they want to achieve by 2014 and there's some execution risk involved in this plan," said Royal London Asset Management fund manager Jane Coffey. "There's still a lot of questions with Lloyds, such as their funding costs."

Lloyds said it had repaid 60 billion pounds of liquidity support from the UK government and central bank this year, cutting that support to 37 billion pounds.


Black Horse

Lloyds was one of the world's most profitable banks and a darling of the sector in the 1990s for its dynamic takeover policy, cost efficiency and massive returns, but its growth and strategy stalled after it was blocked by regulators from buying former building society Abbey National in 2001.

Known as the "Black Horse" after its logo, it was landed with billions of pounds of losses after it bought troubled rival HBOS at the height of the credit crisis of 2008, a deal brokered by the Labor government of the time.

Its losses led to it being bailed out and part-nationalized by the government, along with Royal Bank of Scotland, and Britain finished up with a stake of 41 percent in Lloyds and 83 percent in RBS.

As payback for being bailed out by taxpayers, European regulators have ordered Lloyds to sell 630 branches, although a British banking commission has said it might have to sell far more to increase competition.

Lloyds said it was on track to find a buyer for those branches by the end of the year.

Virgin Money, new bank venture NBNK and National Australia Bank UK are likely bidders for those branches, while there has been speculation that the assets may also draw interest from European or Asian banks.

The HBOS deal gave Lloyds the Halifax retail banking business, and CEO Horta-Osorio said Lloyds planned to grow that brand as part of a plan to "revitalize" Lloyds.

Bancassurance, which includes Lloyds' Scottish Widows insurance unit, will also remain a core part of the group and Lloyds said it planned to restart progressive dividend payments once it is allowed to do so. The earliest stage at which it can restart dividends is 2012.

Lloyds shares remain below the 63.1 pence level at which the British taxpayer acquired its stake in the bank, and investors said it and other banks remain vulnerable to more losses from debt-ridden European countries such as Ireland, and to the costs of increasing regulation.

($1=0.626 British Pounds)

(Additional reporting by Tommy Wilkes; Editing by Sophie Walker)


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