Two thousand jobs will be lost as a result of the £28 billion merger between UK high street banks Bank of Scotland and Halifax. Information technology casualties are likely to be high as the banks unveiled plans to consolidate processing systems and run a single, centralised IT function.
The agreement creates the UK's fifth largest bank. In a clear indication of who holds the whip hand, the chairman and chief executive posts at the new holding company HBOS will be filled by Halifax alumni, Dennis Stevenson and James Crosby. Bank of Scotland's Peter Burt will be executive deputy chairman and will oversee the integration of the two organisations.
The HBOS corporate headquarters, and corporate and business banking units will be in Edinburgh. Retail, and long-term savings and insurance in Halifax. Treasury will be based in London.
Both Bank of Scotland and Halifax will remain as separate authorised institutions and will continue to trade under their current brand names.
The two banks expect to generate total net revenue and cost synergies of at least £620 million per annum, within three years, of which cost savings are expected to amount to at least £305 million.
Information technology has been pinpointeed as a key area for cutting fat. The two banks says IT savings will result from the creation of a single IT function to support the combined organisation and the elimination of common development costs. "Significant savings will be achieved from combining processing systems," say the banks in a statement. "The removal of duplicated central costs will be achieved by consolidating functions with a high degree of overlap."
In the retail arena, the banks believe there are opportunities to achieve "sizeable savings" in the operating and processing infrastructure supporting the physical and direct distribution of retail products.