Lloyds Banking Group is to reduce its office space by 20% over the next two years, as working from home becomes a permanent lifestyle change.
The decision was taken after 77% of Lloyds’ 68,000 employees said they wanted to work from home for three or more days a week in the future. The bank’s chief financial officer, William Chalmers, said it would make sure offices offered more space for teamwork rather than areas where staff sit at their desks alone.
A number of City institutions have announced similar plans as they adapt to hybrid working. HSBC is reducing its office footprint by nearly 40% as part of cost cuts designed to capitalise on the success of remote working. Metro Bank also confirmed it was in the process of cutting its office space by roughly a third and planned to place staff in some of its branches.
Lloyds’ chief executive, António Horta-Osório, said hybrid working could attract a broader pool of talent, including younger workers, who want a “better way of combining their personal preferences with their work obligations”.
The announcement came as Lloyds revealed a 72% drop in annual pre-tax profits to £1.2bn for 2020, after it was forced to put aside £4.2bn to protect itself from a potential jump in defaults linked to the Covid crisis. Profits were also hit by lower interest rates, which reduced revenue.
Lloyds still paid its outgoing boss £3.4m in 2020, however, despite waiving a bonus worth as much as £1.8m in light of the pandemic. That is the chief executive’s lowest payout since 2012, when he earned a similar sum.
Seventeen Lloyds bankers earned more than €1m (£860,000) last year, despite staff bonuses having been cancelled in December. Bankers shared a bonus pot worth £310m in 2019.
Lloyds unexpectedly announced on Wednesday that it would pay each permanent staff member £400 worth of shares that will vest in three years’ time. The bank said it was in recognition of their work in 2020 and would ensure staff had a “personal interest in the longer-term success of the group”.
Chalmers said formal bonuses were likely to restart this year as the economy recovered from the pandemic. “Our performance unfortunately fell short of our required targets for bonus payouts during the course of 2020,” he said.
“But it’s important to note that we expect that to turn around during the course of 2021 … That would be consistent with us resuming bonus payments and we very much look forward to doing so.”
Lloyds also announced that it was resuming dividend payments, with plans to pay shareholders a combined £404m at 0.57p per share. The Bank of England lifted a ban on paying dividends in December, which was imposed last year and designed to give banks a larger cash cushion to weather the Covid crisis.
The lender, which is preparing for a change in leadership, confirmed that the HSBC banker Charlie Nunn would take over as chief executive on 16 August, three and a half months after Horta-Osório formally steps down on 30 April. Chalmers will act as chief executive in the interim.