Lloyds to Cut 3,000 Jobs as Lender Braces for Post-Brexit Slowdown -- Update

By Max Colchester 

LONDON-- Lloyds Banking Group PLC on Thursday announced 3,000 job cuts and warned of leaner times ahead as Brexit hits the U.K. economy.

The U.K.'s biggest retail bank said Thursday that "a deceleration of growth seems likely" following Britain's vote to leave the European Union. Faced with a combination of lower interest rates and a move toward online banking, Lloyds presented a plan to cut an extra GBP400 million ($528.9 million) of costs by chopping thousands of jobs, closing some 200 branches and selling off unwanted properties.

So far the bank has yet to see any real impact from Brexit among retail customers, Lloyds Chief Executive António Horta-Osório said. But "It is still early days," he added. Among corporate customers, however, activity had been declining even before last month's vote. Despite the looming slowdown, Lloyds doesn't have any plan to ratchet back lending or cut exposure to the U.K.'s commercial real-estate market, Mr. Horta-Osorio said. The bank will continue to try to gain market share in credit card and auto finance.

Shares in the bank fell 3.5% as investors fretted about uncertainty over future dividend payments. The bank, which is 9% owned by the British government, reported a rise in first-half revenue to GBP18.43 billion, compared with GBP11.35 billion a year ago. Net profit came in at GBP1.59 billion, compared with a loss of GBP211 million in the same period last year. The bank is increasing its interim dividend by 13% to 0.85 pence a share.

"It is possible that this capital generation may be somewhat lower in future years than previously guided," the bank said.

Mr. Horta-Osorio said that he believed the Bank of England would likely cut interest rates by 0.25 percentage point at its next policy meeting. To offset the effects of rate cuts, Lloyds had already embarked on a cost saving drive to deliver GBP1 billion of savings by 2017. This has now been increased. Mr. Horta-Osorio said the cost cuts weren't directly linked to Brexit.

Lloyds continues to deal with a range of regulatory issues. On Thursday it said the Financial Conduct Authority had launched a probe into how the bank handles mortgage arrears. The bank is the U.K.'s largest mortgage lender and has provisioned GBP350 million to deal with the issue.

Write to Max Colchester at [e-mail]

(END) Dow Jones Newswires

July 28, 2016 09:21 ET (13:21 GMT)

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