HBOS is the UK’s largest mortgage and savings provider and the number one provider of new investment products. It provides retail, business and corporate banking, and insurance and investment services through its multi-brand strategy in the UK and internationally. About 72,000 people are employed across the group.
Last year HBOS said it would be investing in only those IT changes that deliver real business value and its main priorities would be to deliver excellent services, allowing the business to grow and bringing technology innovation to the implementation of business strategy. The aim was to drive out additional value from its asset base.
It is now planning a consolidation project that aims to save the organisation £300 million a year by the end of 2009. Over the past couple of years HBOS has concentrated on the technical optimisation and consolidation of its IT infrastructure following the merger of Halifax and Bank of Scotland.
This included working on datacentres, mainframes and midrange systems. It now wants to concentrate on year-on-year cost reductions, even though it believes it has lower operating costs than some of its UK competitors. It plans to cut 12 per cent from its processing costs by 2010.
The bank claims the infrastructure project cost £84m, but has made savings of £60m a year. It included a back-office processing system capable of scaling to support the bank’s different businesses. Of the total cost, £34m went on IT transformation costs, £29m on redundancy payments and relocation packages, and £21m on other restructuring costs.
It will also be turning to virtualisation technology to control costs and has already implemented the technology for its communications networks. It will spend the next 12 months working on storage and applications server virtualisation. It hopes to be able to allocate storage more effectively and with its annual growth in storage running at 62 per cent a year, this could represent a major cost saving.
It would mean that development, pre-production and production environments all share the same storage arrays to increase efficiency.
HBOS has spent significant time and IT resources on getting its regulatory commitments in place. It believes that the simpler software landscape that has emerged from that and its merger and rationalisation work means that the IT function will be freed up to concentrate on a development agenda that focuses on delivering solutions that add value to the business. It is also taking advantage of the group’s scale and capability around the globe as it grows its business in the international arena. The intensive work on its IT infrastructure seems to be paying off. HBOS reported 2006 pre-tax profits of £5.7 billion, a 19 per cent rise over the previous year, and the company said these were driven by cost controls as well as earnings from corporate banking and insurance.
Its share of the mortgage market remained constant at 21 per cent – it is the largest UK lender – and lending increased by 10 per cent to £376.8bn, while customer deposits grew five per cent to £211.9bn.
As with all UK financial services organisations, security and bad debt are constant worries for the bank, and it has said it is concerned about the possible impact of unsecured debt on UK lenders, although it is still optimistic about its credit outlook. It is strengthening and extending its existing controls relating to risk to limit potential losses.
In terms of security it was considering a public key infrastructure (PKI) and secure email last year. It is also working on increasing web security standards as the use of web-based services becomes more widespread.
HBOS is taking advantage of the group‘s scale and capability around the globe as it grows its business in the international arena