It has been an odd year for Lloyds TSB. Takeover rumours have followed it everywhere, with suitors supposed to include everyone from Wells Fargo and Citibank to Dutch performers ABN Amro and Spanish bank BBVA. It has also had consistent bad press for its poor customer service, and the retail bank is still in trouble, reporting a three per cent fall in profits to £1.68 billion, and a £50 million increase in provisions for claims by disgruntled customers.

"“Our market shares are either stable or growing in most of our key product lines”"

Eric Daniels, CEO, Lloyds TSB Group

But at the beginning of the year it surprised everyone with an increase in profits to £3.47bn, instead of the expected fall, although it was hit by an increase in its bad and doubtful debts, which now amount to £1bn. Its success seems to be driven by its insurance and investments division, which made £908m, and its wholesale and international banking unit, which increased profits to £1.5bn. It is in the middle of phase two of a three-phase transformation programme to build growth, which was started by chief executive Eric Daniels, who joined the bank in 2003. “Our market shares are either stable or growing in most of our key product lines,” said Daniels when the annual results were published. “Most importantly our customer relationship programmes are being effectively implemented and we are delivering higher revenues per customer in our retail and corporate banking business.”

In IT, Lloyds TSB has replaced its long-serving group IT director, Igor Andronov, with Darryl West, who joined the bank as CTO in March last year. Andronov had been working on a transformation programme to redesign IT processes and align IT more closely with the business. Most of the infrastructure work was completed last year, and IT had driven down its cost base.

At the end of last year the bank announced an increase in outsourcing to India, with a five-year contract with Xansa to provide further backoffice processes, which it hoped would lead to more effective, personalised customer services. IT provides about 80 business services to the group, and last year was supporting more than 400 applications. The initial transformation programme is due to finish in 2007, although Andronov had said IT would be looking at ongoing improvements to service levels after the initial phase had been completed.