HBOS outlines £300m cost cutting plan

HBOS outlines £300m cost cutting plan

UK banking group HBOS says it is looking to make annual cost savings of around £300 million by 2010 by reducing IT system duplication and overhauling procurement processes.

HBOS - which is the UK's fourth-biggest bank - already has the lowest cost income ratio at 40.9% in the first half of 2006. But the bank told investors that it plans to cut costs further to achieve a cost income ratio of around 35% by 2010.

The bank is expected to invest £350m, mainly over 2007 and 2008, to drive the cost cutting programme.

Cost savings will come from the further elimination of over-lapping IT systems used within the bank. HBOS initally consolidated processing systems to run a single, centralised IT function in 2001 when the group was first created by the merger of Bank of Scotland and Halifax. But the bank is now looking to eliminate further duplication.

Under the cost cutting plan, the bank will also increase the amount of procurement done by its head office so it can take advantage of bulk buying. Currently just 40% of total expenditure now goes through a central procurement process, compared with 70% for most large corporate firm.

HBOS says the number of staff it employs will remain at about the same level as today, although numbers will not increase in line with planned growth.

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