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New Lloyds CEO cuts 15,000 jobs in revival plan

A Lloyds Banking Group sign is pictured outside a branch of the bank in central London, on June 30, 2011.

Carl Court/AFP/Getty Images/Carl Court/AFP/Getty Images

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

Chief executive officer Antonio Horta-Osorio presented his overhaul of the bank on Thursday after about 100 days in charge and said he aimed to cut through middle management and make the bank simpler and more agile.

The latest cuts will add to 27,000 job losses already since the 2008 financial crisis. Lloyds currently employs some 103,000 staff.

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

Mr. 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. Mr. Horta-Osorio, whom Lloyds poached from rival Santander UK, declined to say which countries Lloyds would leave.

The Unite trade union group attacked the job cut plans, but Mr. Horta-Osorio said the move was a necessary one.

"We must return to profitability as quickly as possible. I believe we must become leaner, more agile and more responsive to our customers' needs," he told reporters on a conference call.

Lloyds shares rose sharply as analysts and investors welcomed Mr. Horta-Osorio's plans. By early this morning, the stock was up 9.5 per cent at £0.48, the best-performing stock on Britain's benchmark FTSE 100 index.

"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.

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

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 saddled 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 Labour 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 per cent in Lloyds and 83 per cent 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 to have sell far more to increase competition.

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

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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 Mr. 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 £0.63 level at which the British taxpayer acquired its stake in the bank.

SVM Asset Management head Colin McLean said Lloyds and other banks remained vulnerable to their exposure to debt-ridden European countries such as Ireland, and to the costs of increasing regulation, and were therefore stocks to avoid for now.

"There's still not enough clarity on the banking sector and their capital and funding positions," he said.

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