July 28, 2016: Lloyds Banking Group is set to cut 3,000 jobs and shut 200 branches as it prepares for a cut in interest rates following Britain’s decision to quit the European Union, it said. The bank, which is 9 per cent owned by the government, posted a pre-tax profit of £2.5bn in the six months to June, up from £1.2bn in the same period last year.

The bank will target an extra £400m of cost savings with the removal of branches and jobs by the end of 2017. The latest measures are in addition to Lloyds’ original 2014 plan of £1bn in savings through 9,000 job cuts and 200 branch closures over a period of three years.

António Horta-Osório, chief executive of Lloyds Banking Group, said the use of branches had fallen by 15% year-on-year, faster than had been the case at the time of the previous announcement of cut jobs.

Following the EU referendum, the outlook for the UK economy is uncertain and, while the precise impact is dependent upon a number of factors, including EU negotiations and political and economic events, a deceleration of growth seems likely.

Economists expect the Bank of England to cut interest rates next week.

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IFM Correspondent

June 7, 2016: About 50% of all oil and gas companies in the UK were forced to cut jobs in the past 12 months, says a recent report. The Bank of Scotland/Lloyds Banking Group surveyed 141 companies in the sector. The report further states that a third of the businesses planned to cut jobs further during the year. Since the slump in oil prices, the industry has been facing a tough time. Cuts have been announced by producers, contractors who work alongside producers’ workforces, and by suppliers of specialised skills and equipment, but many of these announcements also include positions that are based overseas. There have also been announced losses – jobs which have gone in low, single digits from smaller companies, self-employed workers whose contracts have dried up, or by the non-replacement of retirees. Since the survey has not picked up these minute details, it has not sought to quantify the UK employment.

The worst hit sectors have been drilling (83% of companies recording jobs lost), marine services (66% have made reductions) and inspection, repair and maintenance companies (70% recording job losses). Further, the study states that the younger generation prefer to look away from the oil and gas industry, thanks to its uncertain nature. Two-fifths (41%) of those surveyed thought that young people would not see the sector as a viable career option, creating a skills gap that is further exacerbated by the cyclical nature of the industry.

It may be recalled that during the 2008 global recession, a number of organisations cut back or stopped their graduate programmes for a couple of years. Stuart White, industry specialist with Bank of Scotland, says, “This trend is a big concern and will automatically mean that there is a gap in the supply of talented men and women coming into the industry. But there are some who believe that concerns surrounding the sector would dissipate once the industry is on an upwards trajectory.”

Silver lining among dark clouds

It has been often noticed that adversities create great ideas. And the same has been true for the oil and gas industry. The industry has faced some severe employment downside, but there are still opportunities which present some potential upside. Though the sector as a whole is reducing its capital spending, many companies have developed strategies to move forward. More than half of all companies surveyed (55%) believed that there are new opportunities despite the current business climate. Amongst all businesses, diversification tops the list of potential new opportunities (51%).

For example, Total, Europe’s third-largest company in deepwater production and liquefied natural gas (LNG), aims to raise $15 billion through asset sales between 2015 and 2017 to spend on projects such as the Laggan/Tormore gas fields west of Shetland, which came on stream in February 2016. Although it cost £3.5 billion ($5 billion) to develop, its use of sub-sea installations instead of platforms keeps operational cost low.

Patrick Pouyanne, chief executive, Total, said, “The opportunities will really come if oil prices remain low over a longer period. Then you will see real opportunities for major companies like Total”.

At the same time, there are opportunities at the other end of the business size scale,particularly for small companies which have developed specialist skills and technologies that cut costs and improve efficiency. The smaller companies want to invest in renewables,though many are unsure about the government’s stand towards the sector.

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October 7, 2013 : Clawing back bonuses from directors could be made easier as the U.K’s accounting regulator has said it may overhaul rules for corporate pay and introduce measures to make it easier to seize executive bonuses. The Financial Reporting Council (FRC) has published a consultation on possible amendments to the UK Corporate Governance Code on executive remuneration, the FRC led by chairman Baroness Hogg, has begun a consultation in the wake of new legislation, the Large and Medium Sized Companies and Groups (Accounts and Reports) Amendment Regulations 2013 which came into effect on October 1.

This comes after the FRC was asked by the government to consult on the code once its legislation on voting and reporting of executive pay remuneration has been finalised. On the “clawback” of executive payments the FRC said it will look at bonus clawback arrangements, executives sitting as non-executives on peer remuneration committees, and steps to take when pay is not agreed by majority vote. The current code is not clear on how boards should respond if they fail to obtain a substantial majority in support of a resolution on remuneration, despite general guidance that the chairman should ensure “effective communication with shareholders”. Regulators and government are contemplating for more than one year on ways to better align remuneration with company performance and hand more power to shareholders.

FRC Chairman Baroness Hogg said “The government’s new legislation underlines the importance of boards and investors engaging on director’s remuneration. The FRC is undertaking this consultation to understand if there is a case for changes to the code”.  “There is no presumption on the FRC’s part as to the outcome. All interested parties will have an opportunity to make their views known before we reach a final decision”

“Institutions have already taken a harder line on clawbacks in recent years, so any changes would be a catch-up with existing good practice” said Carol Shutkever, a lawyer at Herbert Smith LLP.

Industry groups can offer their views on the changes, the FRC said. If changes to the code are proposed there will be a further consultation early in the New Year, with the new rules coming into effect from October 1, 2014.

Lloyds directors face the heat

Earlier in February 2013, “The Telegraph” reported that directors of Lloyds Banking Group would face cut in their pay as a result of its spiralling payment protection insurance (PPI) mis-selling provisions. The Lloyds board chaired by Sir Win Bischoff, decided to reduce the bonuses of 13 former directors and senior managers for a second time, the decision would impact its stalwarts including ex-Chief Executive, Eric Daniels, Helen Weir, former Retail Banking Chief whose bonuses were cut by 25 percent. Lloyds Bank became the first British bank since the 2008 financial crisis to exercise a “clawback” option on its executives. The 2012 clawbacks were based on £ 3.2bn of PPI mis-selling provisions booked in 2011.

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July 09, 2013 : Shares of Lloyds Banking Group jumped to 2 ½ year high on Monday as overseas investors stepped up their interest in buying part of the bank, with media reports suggesting many investors interested in acquiring  half the government’s stake. Mervyn Davies, former chief executive of Standard Chartered is talking to others about forming a consortium to be an “anchor” or corner stone investor in part nationalized Lloyds which the government is planning to sell. Davies is a partner at U.S. private equity firm Corsair Capital. A source from the electronic media reported that a Corsair led consortium of sovereign wealth funds and financial firms could buy up to 10 billion pounds of Lloyds, or half the government’s stake. The U.K government has been receiving a number of responses and enquiries about the sale including enquiries from overseas investors. Media reports said the Corsair led consortium could buy up to 10 billion pounds or ($ 14.9 billion) of Lloyds or half the government’s stake of 39 percent.

Britain is keen to start selling its 20 billion pound holding in Lloyds this year, and top investment banks of the world will pitch for the job of handling the sale by a Treasury deadline on Monday.

Earlier Britain’s finance minister George Osborne had given the nod for selling of the government stake at Lloyds Banking Group, while the method of sell off is still under consideration, UK Financial Investments (UKFI) will shortlist banks to handle it and narrow down the choices in a later stage. Experts in the industry suggest that one method may be to offer large blocks of shares to professional, institutional buyers, or even, sovereign wealth or private equity funds. Some of the biggest names in international banking were eager to take part; banking majors such as HSBC, Barclays, UBS and Credit Suisse are some of the banks which would be interested to buy the government holding of Lloyds Banking Group.

Lloyd’s shares went up by 2.8 percent at 66.4 pence, after hitting 66.6 p, their highest level since February 2011 and comfortably above the 61.2p level which the government considers as the breakeven price.

Gary Greenwood an analyst at Shore capital said “Given the shares are trading at a premium to what the government paid and the capital position seems to be where it needs to be and the signs of improvement in the UK economy, everything seems to be moving in the right direction he said”.

The potential privatization of the banks is likely to be highly contentious, as local politicians and analysts continue to battle over what to do with British tax payer’s stakes. Lawmakers in Britain suggest the shares to be sold directly to the retail customers to allow them to benefit from any potential increase in the firms future share prices. A similar process in the 1980’s led many British tax payers to buy shares in former state owned companies like the energy utility British Gas.

Investigation on RBS sell off ruled out

Decision on the selloff of the 81 percent tax payer owned Royal Bank of Scotland could be delayed as the government has ruled out a broad investigation into whether RBS should be broken up or sold off in smaller components to induce more competition in the banking sector. The parliamentary commission on banking standards has called for a wide ranging review of the structure of RBS, the government is against splitting the bank into smaller components as it feels it would be an additional burden on the exchequer, it also felt it would cause disruptions to its creditors and customers, thwarting much of the good work that the bank has done in the recent past.

While George Osborne has ruled out the splitting up of RBS into “multiple entities” the bank has to hive of its excess branches, failing which it could be disqualified from the European rules of state aid which requires them sell 631 branches.

Labour party pushes for safety of tax payers

The Labour party is demanding the government to explain its stand on the safety of tax payers and also demand that they get maximum out of the deal from any sale of stakes in Britain’s bailed out banks, the party has tabled amendments to the banking reform bill, which is to be debated in the parliament on Monday. If the bill is passed in the parliament the Treasury would be obliged to chalk out a plan which will protect the interests of the tax payer before any sale went ahead. The party is vehemently challenging the government to ensure the interest of the tax payer’s are met in case of sale of banks. The amendments are likely to be implemented before any selloff, particularly in the case of Lloyds. Labour is hoping to put pressure on the government to explain the rationale for any sale. The party has demanded that top High Street banks should be forced to sell off hundreds of branches in a “root and branch” reform of the industry, Shadow Chancellor, Ed Balls told the BBC that the government was “foot dragging” on the issue. The party is of the opinion that the sold off branches should be used to create “challenger’ banks to increase lending and competition among banks. The labour is insisting on creating a more competitive banking system as it feels the present is concentrating on banking “short term trade profits and not focusing on the long term”

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