If successful, the Lloyds TSB bid would create the second-largest banking group in Britain with three quarters of UK current accounts. The offer is conditional on approval from the Abbey board and regulators. Abbey is currently seeking regulatory approval for a proposed merger with Bank of Scotland.

Lloyds TSB says it has developed an integration plan which is focused on maintaining and growing the combined revenue base, whilst delivering substantial cost savings and lowering unit costs. Nine thousand jobs could be lost if the deal is agreed, as Lloyds TSB consolidates the branch network and back office administration and IT departments of the combined operations.

On completion of the proposed transaction, most business and product groups and head office functions of Lloyds TSB and Abbey National will be combined. The branch network will remain separate for two years, while the integration of systems and administrative functions is completed.

Lloyds TSB estimates that, in the fourth financial year (2005) following completion of the transaction, the combination of central functions will deliver savings of £165 million, the integration of retail banking networks and systems will deliver savings of £250 million and the combination of other businesses will deliver savings of £235 million.

Lloyds TSB believes that the estimated cost savings will arise from the following key areas:
* head office and retail headquarter integrations; IT consolidation, including the merger of personal banking systems, data centres and networks; combining central operations including mailing, bulk processing, clearings and administration; purchasing benefits through the larger scale of the combined operations; and combining central functions;
* combining the operations, systems and administration in support of retail banking and mortgages, including the integration of customer service centres; back offices; processing centres; telephone centres; and e-commerce operations and systems;
* closing branches; and
* combining the operations, systems and support functions of Lloyds TSB's and Abbey National's respective life, pensions, investments, general insurance, asset finance and wealth management businesses

Lloyds TSB is currently rolling out the Delivering One Bank (DOB) programme, which standardises the Lloyds Bank and TSB back office processes and migrates the Lloyds Bank personal customers onto the online real-time TSB system. The DOB programme will be completed in the second half of this year.

DOB was designed to be able to support substantial acquisitions, says Lloyds/TSB. It supports multiple products and brands and is scalable to the volumes required by Abbey National's business, says the bank. Other supporting systems, including mortgages, will also be combined.

Lloyds TSB's bid for Abbey overshadowed the disposal of Glasgow-based Aitken Campbell to Charles Schwab and TD Waterhouse. The two companies say the £60 million acquisition will form the basis for a new joint venture to provide market making services to stockbrokers throughout the UK.

Abbey today also announced the initiation of a £2 million contract with PeopleSoft to install e-procurment software at dektops across its head office. Full roll out to over 1000 locations in the UK is expected to commence in Q2 2001.