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10. HBOS

• Quarter:
• Screens: 81,000
• Employees: 72,000
• Head of IT: Heather Jackson, director of group services
• Industry: Financial services
• Website: www.hbos.com

HBOS is set to merge with Lloyds TSB to create a banking giant as the financial sector faces difficulties following on from the collapse of Leman Brothers in the US. The merger, which the government is likely to approve will create wide ranging redundancies Just before news of the merger leaked, HBOS said in its most recent trading update that, while it has not been immune to the wider economic and credit conditions, the UK's largest mortgage and savings provider was on track to demonstrate a “resilient performance in 2008”. Not bad for a bank in its tenth year as a listed company.

HBOS reported underlying earnings per share growth of six per cent in 2007, after recording negative fair value adjustments on traded investment securities of £227 million and claims of £135 million arising from that summer’s ?oods. And profit before tax fell by four per cent to £5.5 billion, leading HBOS chairman, Dennis Stevenson to state: “Seemingly overnight, we moved from a scenario where the economic cycle looked set to play out in a relatively benign way, to one where a credit crunch in the US rapidly deteriorated into what is a worldwide liquidity dislocation.”

In the search for a strong capital and liquidity base, the financial services provider is continuing its consolidation project begun last year to save £300 million a year by 2009 and take 12 per cent out of its processing costs, with an increasing emphasis on straight through electronic processing to reduce rework and errors, by 2010. And its efforts to optimise and consolidate its IT infrastructure, after the merger of Halifax and Bank of Scotland that created the top five bank in 2001, seems to be continuing apace.

HBOS group finance director, Mike Ellis reported that the costs of technology, together with accommodation and other shared services (except those borne directly by Group Functions) increased by £96 million (40 per cent) last year, of which £75 million is due to the implementation costs of the cost efficiency programme.

These costs presumably stemmed in part from the stated IT investments in storage and server virtualisation technology it said it would make during 2007 to harness efficiencies, accommodate growth and deliver cost savings. And in terms of its stated goals to use a stronger capital and operational base, it seems to have continued to redirect resources towards its development agenda that focuses on delivering solutions that add value to the business.

In terms of technology achievements, the group said a new telephone service was set up for customers who don’t need investment advice and want to set up a new equity ISA, or top up their existing ISA. It also said sales had risen across its motor brands, with the greater prominence of web-based business being an important factor. “Esure’s state of the art technology and internet infrastructure, together with the strength of its brands, makes us ideally placed to benefit from increasing levels of internet business,” the bank stated.

Citing its core strengths as its existing multi-channel and multi-brand operating model, which include Bank of Scotland and insurance companies, Clerical Medical, Halifax General, AA, Sainsbury’s, Esure and Sheila’s Wheels, HBOS Insurance and Investments arm stated its strategy in 2008 would focus on growing its three life, pensions and investment distribution channels with technology investment to drive further productivity improvements.

Its Treasury division, whose role is to maximise cross-selling opportunities to clients acquired by other divisions, said it would also continue to invest in technology, particularly in relation to internet banking and increased automation between it and the other HBOS divisions.

And like most banks, where it does seem willing to spend money this year is where it is targeted towards increasing its customer communications. In June 2008, it announced it had taken on a bespoke data product that will allow HBOS General Insurance to model the entire UK renewals universe for all their direct mail and door-to-door activity and shape future, more targeted or one-to-one marketing campaigns and strategies.

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