Lloyds TSB £12.2 billion take-over of Halifax Bank of Scotland (HBOS) could lead to IT job cuts, offshoring and technology savings, the banks revealed today.

In the acquisition agreement the banks said it would derive cost savings by integrating the technology of both banks, and removing duplication of systems.

"Significant cost savings can be made by combining the networks and back offices of Lloyds TSB and HBOS," the deal agreement said.

The takeover would result in "cost synergies" of over £1 billion by 2011, it stated, or about 10 per cent of the combined cost base.

There will be "elimination of branch duplication" in the retail arm, which will involve integrating the IT platform of both banks. HBOS has 1,100 branches, and Lloyds TSB has 1,900, including 160 of its Cheltenham & Gloucester arm.

Its wholesale division will create a single dealing and trading platform which is expected to generate more savings.

The merged bank will also shave costs from its operations by use 'straight-through-processing' technology, centralising its back-office operations and offshoring jobs. Lloyds TSB already offshores most of its IT functions, with 30 per cent of its IT jobs based in the UK. The bank offshored 210 jobs to Tata Consultancy Services in India last year. In May it announced plans to move a further 450 IT jobs to India.

Last month, HBOS cut IT 90 jobs and said it plans to cull a further 325 from a variety of roles, including back office processing. The bank has around 2,000 IT workers, which includes its IT support service called Computer Call Online.

The deal, which is subject to shareholder agreement, will leave one third of the mortgage and savings markets in charge of the banking group, headed by Lloyds TSB's current chairman and chief executive.

But the government could delay the merger, as the Secretary of State for Business and Enterprise John Hutton announced his intention to issue an intervention notice in the proposed merger of HBOS and Lloyds TSB on public interest grounds to ensure the stability of the UK financial system.

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