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Lloyds ‘aligned’ with Corbyn’s City demands, says boss Horta-Osorio

Iain Withers
Antonio Horta-Osorio's strategy for Lloyds includes a £3bn investment plan - © 2015 Bloomberg Finance LP

Lloyds chief Antonio Horta-Osorio has defended the lender from Labour leader Jeremy Corbyn’s broadside against banks for their claimed “destructive” dominance over the UK economy.

He said Britain’s biggest high street lender was “very focussed on helping the real economy” after ditching its riskier investment bank and most of its overseas divisions, making it “completely aligned” with Mr Corbyn’s vision for Britain’s banks.

Mr Horta Osorio today unveiled a new three-year strategy to further cut costs and overhaul Lloyds for “success in a digital world”, alongside a 41pc jump in net profits to £5.3bn and a £3.2bn bonanza for shareholders.

However the improved profits still missed City expectations, in part due to a further £600m hit for meeting mis-selling payment protection insurance (PPI) claims.

Mr Horta Osorio – whose overall pay packet rose 11pc to £6.4m last year – said he “got” Mr Corbyn’s arguments.

In a speech yesterday the Labour leader pledged to take “decisive action” to make financiers “the servants of industry” if he becomes prime minister.

“The biggest thing I got from what [Corbyn] said is that he’s very focussed on helping the real economy and this is exactly what Lloyds is all about,” Mr Horta-Osorio said.

“We have deliberately positioned this bank in the UK, the UK is 97pc of our activity and what we do is exactly the real economy.

“We don’t do investment banking, we sold asset management, we sold international private banking.

“What we do is support families and businesses and communities in this country… I think we are completely aligned.”

Lloyds has coughed up billions of pounds in misconduct costs since the financial crisis but is still paying a price for past misdeeds, raising its provisions for PPI claims today to £1.6bn in the fourth quarter.

It is also facing a £60m lawsuit related to fraud at its HBOS Reading branch from TV presenter Noel Edmonds, and is separately defending a £600m claim brought by shareholders who claim they lost out when the lender bought ailing HBOS at the height of the financial crisis. The bank denies, and is vigorously defending against, both claims.

Lloyds

Mr Horta-Osorio said it had been a “landmark year” for Lloyds after it returned to private ownership after the Government sold the last of its 2008 bailout stake for a small profit last May.

Its profit figure missed analyst expectations of £5.7bn, but still allowed the bank to raise its dividend by 20pc to 3.05p per share and announce a share buyback of up to £1bn – equating to a total return to investors of up to £3.2bn.

Analysts at UBS said Lloyds’s plans implied earnings upgrades and further capital returns. “We expect a steady stream of buybacks and think Lloyds is attractively valued,” the Swiss bank said in a note. Lloyds shares were up more than 3pc at 70p by early afternoon trading.

Mr Horta-Osorio’s much-anticipated three-year strategy for Lloyds includes a £3bn investment plan to beef up its digital banking services and its wealth and insurance business.

The lender is targeting reaching 50 million online banking customers by 2020. It will invest in cloud technology, artificial intelligence and analytics to crunch customer data in order to offer “personalised” services it says consumers have come to expect from using “Amazon or Netflix”.

Lloyds will invest in areas including digital banking – which could mean fewer branches Credit: Peter Nicholls/Reuters

Lloyds’ wealth and insurance division, which includes Scottish Widows, hit headlines last week when it pulled £109bn of assets from rival Standard Life Aberdeen. This followed last year’s acquisition of Zurich's UK workplace pensions and savings business.

Mr Horta-Osorio plans to bulk this business up further by more than £50bn and add more than one million new pension customers by 2020.

Lloyds is understood to have been in talks with Standard Life Aberdeen to combine their respective insurance businesses to create a £300bn subsidiary of the bank – as first reported by Sky News – but these collapsed prior to Lloyds taking back its assets.

Mr Horta-Osorio said his “strong preference” was to strike up another partnership with a “great external asset management firm”.

“I can tell you what we are doing, we are launching the contest. We have had a lot of interest, it’s £110bn, it’s a lot of money,” he said.

He played down Lloyds’ appetite for big M&A deals. “We want to grow where we are under-represented,” he said. “If there are small opportunities that will help us we’ll look at them but our plans are basically about organic growth.”

Asked if he would stay at Lloyds to see out the three-year strategy to 2020, Mr Horta-Osorio said: “I’m very happy in this bank… I’m absolutely committed to seeing this plan arrive and get delivered.”

Noel Edmonds is preparing a £60m lawsuit against Lloyds Credit: Jonathan Brady/PA Wire

Antonio Lorenzo, who runs Lloyds’ insurance, said there was “great potential for future growth” for the wealth and insurance division. “We are under-represented in that market and we have great brands. We see a big part of the population that is under-prepared for their retirement and the advice gap is growing.”

Lloyds also plans to reduce its operating costs to less than £8bn, improve profitability and generate more capital annually over the three year period.

The bank declined to comment on whether the further cost-cutting would involve branch closures beyond the 49 announced in December or redundancies on top of the 930 revealed last month. It said it remains “committed to being the number one for branch share” in the UK.

Lloyds is also targeting increasing net lending to small businesses by more than £6bn by 2020.

Lloyds said it would publish its gender pay gap ahead of the statutory deadline of April 4.

Mr Horta-Osorio said the firm was committed to “removing the blockages for senior women” to remain and rise up the ranks at the bank. Last year 34pc of senior roles were taken up by women, up from 29pc four years ago. The bank has a 40pc target for 2020.

Last week the bank set a target to increase the number of black, Asian and minority ethnic (BAME) staff working in its top 7,000 roles to 8pc by 2020, up from 5.6pc today.