Stakeholders of Lloyds TSB Bank - Research Paper Example

Topic: Lloyds TSB Bank (stakeholders)( Gup, B, 1998) Today, there are more people who are in debt than fifty years ago. But this does not mean that it is “a little shameful” for people to be in debt. Being in debt benefits both the lender and the borrower. The lender makes a living by lending money and in return earns interest income. The lenders help the economy to be more vigorous because the borrowers will put up a business. The borrowers use the money to put up a business or two which they believe, based on hindsight or feasibility study, will generate a income. What is more important is not “a person should not be in debt” ,but rather, will the person entering into a formal loan agreement be able to pay the loan installments on time? According to Kidd, Devvy, the average person has a debt of $66,600. He also said that most of the debts came from home mortgages. (Kidd, 2001) In our present business climate, individuals need a bank account to generate MORE sales and net income. Businesses prefer to receive postdated checks and related deposit instruments as replacement for cash. A ₤1,500 check is safer and easier to carry around than to bring its bulky and “highly tempting” cash equivalent. The returned checks act as payment and deposit evidences of business transactions. There are many banking services that makes deposits in banks preferable to stuffing cash in a person’s safe in the home or offices. People, thru the banking system, can now buy and sell products thru the internet. When they are face to face with each other. The bank’s many services do not only include safekeeping of the bank deposits, but the bank also helps the economy by paying interest to the depositors. The bank then lends money to its loan applicants and, in return, receives interest income. The bank borrower can now use the much needed funds to put up a business and hire employees. This cycle of money deposit, money borrowing, business opening, hiring helps the local economy. People, around fifty years ago prefer to carry cash around because the banking system had just been established. But because of the advent of internet banking, business transactions are now changing the entire economy of the world. Credit and debit cards as well as Paypal, and Western Union monetary transactions are now the minimum requirements for a buy and sell transaction to be accomplished. Due to financial difficulty, carrying cash is now very dangerous. People, during the past, prefer to receive “cold” cash as compared to checks because of the fear that such checks may actually have no funds deposited in the bank at the time of bank presentation for payment occurs. But still, most of the ordinary people who do not own business and those with small salaries and wages do not apply for checking accounts. The credit card generates high and compounded interests that the credit card holder has to be burdened with. Inter branch transactions use the credit giro system where non cash documents pass thru a clearing bank. A piece of bank slip or document allows one branch to transfer funds from one bank to another or to and from a person’s personal bank accounts. In the United States, food stamps are given to the unemployed. In the United Kingdom, the giro helps the unemployed person to pay for his basic needs. If wages fell, then the people will have lesser money to deposit in Lloyds bank. The after effect is that there be will lesser money to spend for basic necessities like food, clothing and shelter. Therefore the bank will have to advertise so that more of the residents near a Lloyds bank branch will love to deposit their hard earned money in a bank. The people will cope with the sudden wage decrease by reducing the amount they will spend on unnecessary items. The people will react with the sudden decrease in salaries by applying for a second job to alleviate the loss in income. The bank can cope with the sudden decrease in bank deposits by concentrating on special deposit offerings and services. This will generate cash which the bank will use to loan out to bank loan applicants. The bank can decrease redundant jobs resulting in decreases employee salary expenses. Reduced expenses will result to higher income for Lloyds Bank. The firm’s stakeholders are: Depositors –The depositors are the major stakeholders of Lloyd’s bank of UK. Most depositors deposit their hard earned money in banks that they can trust. The depositors want banks, like Lloyds, that can keep their money safe. Safe enough so that when they return to withdraw their money, they can easily get their money back. Suppliers – Most suppliers of office supplies, office equipments, office furniture and the like scrutinize the companies that they sell to. They prefer to sell to clients, on account, that will be able to pay their debts on time. Investors – present and prospective stock investors prefer to invest in banks, like Lloyd, that are well established. The benchmark for banks to be a good investment alternative is whether the bank generated a net income for the past year or years and the prospective future will bring net income to the banks. Government – The government is interested in the bank, like Lloyds Bank, because the banks are being watched. The banks must put in place all government rules and regulations regarding all banking functions like, deposit and loan applications. Management – The bank management is also a stakeholder, because if the bank will generate a decline in its customers and it will generate net loss for the year or years it had been in operation then management will have to ANSWER for the bank’s below par performance. Employees - The bank employees is another major stakeholder. If the bank will generate a loss or losses from its daily operations, there is a possibility that the bank will close up and, in a worse case scenario, or the wage increases of the employees will be put on hold. Creditors – Other institutions that give loans to the bank and the like are interested in the financial condition and results of operations of the bank. The creditors are interested in the ability of the Lloyds bank to pay its obligations when the payment due date knocks on the bank’s doors. Customers buy Lloyd’s banking services because it has been known for its consistently high customer satisfaction grade for many years. The customers use the many banking services such as for paying their monthly dues by depositing cash amount in Lloyds. The cash is then transferred to the Lloyds bank’s creditors. Customers like the many services offered by Lloyds for its customers like safekeeping of bank deposits. The bank is also offering to approve bank loans for its present and prospective investors will ask for. Some of Lloyds bank’s clients prefer to continue using the money market services. These breed of bank clients are excited to see the rise and fall of the stock market and other derivatives. They buy stocks in one or more of Lloyds bank’s money market portfolios. Some bank clients, at the same time in the far future will sell the stocks that they now newly purchased at a lower price. The bank officers can now follow the bank client’s buy and sell educated guess. The bank will now help the bank clients on the technical analysis and forecasting of stocks displayed in the stock market. The bank clients will invest in some stocks sold in the stock market and then sell those stocks when the right higher price will crop up. Another reason why customer prefer Lloyds Bank is because of its highly popular internet banking services. The clients can now transfer funds to major companies in payment of obligations through the use of the internet. The Lloyds bank clients do not have to wait in a long line in order to pay telephone, credit card, light and water and other monthly dues. One of the services of Lloyds Bank is its offshore Fund management service. This special Lloyds banking services can be accessed using the Lloyds bank website. Clients can ask the bank to be informed daily by being e - mailed daily updates of products and services in relation to their money market investments that are managed by Lloyds bank. The daily stock market valuations can be processed by visiting Lloyds bank’s online portfolio service website.(www.Lloydstsb-offshore.com, 2006) But, as in all business forecasting, the future stock market outcome may be higher or lower than the forecasts made by the Lloyds fund management department customer service clients. The bank offers many banking functions like collecting checks from customers, paying checks drawn by customers and keeping current accounts for customers. According to Banking act of 1987, only a business that has paid up capital and undistributed reserves of more than ₤ 5,000,000 can offer banking services. Regular morale, spiritual and business seminars complement the services of Lloyds bank. The employees and management staff of Lloyds bank often attend seminars like the October 1998 Solihull seminar that was attended by 21 Lloyd’s bank directors from the bank’s different regions. The seminar focused on the many successes of the many branches of Lloyds bank to boost the morale of its employees. The bond among the employees were strengthened. The merger of Lloyds bank and TSB was facilitated by Sue Kumaz, Senior Manager, Lloyds bank HR Business Strategy & Change and John Wilson, Senior Consultant, Management Development in Lloyds TSB. Also, the biggest fear was that from the area directors of the many branches of the bank would stick to their old ways of thinking and operating creating a division between Lloyds bank and TSB when the merger would push through. The change in the ownership and management scenario would create a shift in work descriptions. Seminar helps the directors to accept the change in management with ease. This is to lessen the 21 Lloyd’s Bank area directors’ resistance to work environment changes even to the extent of forgetting their old ways of managing. Other complements of Lloyds bank are its present clients. The present clients will advertise by word of mouth the excellent services offered by Lloyds bank, which complements the internet and media advertisements(www.pageconsulting.co.uk). Another facilitator of Lloyds Bank is the well known John Heron, who is the founder and director of the Human Potential Research Project. He is presently the facilitator for management development of Lloyds bank of United Kingdom. John Heron(www.human-inquiry.com, 2006) The seminar specialist, Global leadership for institute development held a seminar entitled “excellence in management & leadership series. The Seminar speakers are three world known business speakers Michael Porter, Malcolm Gladwell, David Allen, Marcus Birmingham and Cokie Roberts. The seminar focuses on the leadership training of the different bank officers and employees. The substitute for the firms products are the products offered by other banks since most bank have almost the same services and perks. “ Interest rate - 4.00% AER* on the first £5000.00 of balances. To qualify, you will need to log on to Internet banking at least 3 times every 3 months and pay in a minimum of £2000 per month. If you pay in less than £1000 per month, you receive 3.75% AER. **Balances over £5000 earn interest of 0.01% AER** Overdraft details - 15.4% EAR standard rate. Overdraft interest rate - 15.4% Subject to approval. 24 hour support? - Yes 24 hour telephone support for account queries and lost or stolen cards. For Internet banking queries you can use their online help facility 24/7 or telephone during these times: 7.00am til 10.00pm Mon To Fri + 8.00am til 6.00pm Sat and Sun . Other Information - If you pay in £500 - £1000 a month, you are eligible for the Lloyds TSB Classic account (interest 0.10% ) Commission free travel money A Visa debit card Hassle free transfer when you move your account to LLoyds TSB. You can bank online or by telephone. Current Special Promotion - Lloyds TSB are also offering you £50.00 deposited into your account when your online account is opened” Lloyds Bank also offers other services like issuance of credit cards and approval of personal loan to members. Home building insurance is also another service offered by Lloyds Bank. Another service offered by Lloyds Bank is Home contents insurance. Calamities covered by insurance usually cover accident, life, In case of fires, floods, and other fortuitous events, we show u Lloyd’s Bank also offers travel insurance coverage for its many various clients. Many bank clients are offered free car insurance for loans. Car insurance is another special service offered by the clients. The bank client’s officers must offer car insurance to its clients that have applied for a personal car loan.(www.compare-best-online-current-account.co.uk, 2006) The many services offered by Lloyds bank is also generally offered by other banks in United Kingdom. Therefore it is how the bank pampers its clients that increases or decreases the bank’s market share. The things that likely will cause shifts in the demand curves are: Economy – when the economy goes up, then bank services that the bank clients will ask For will also increase. This is because there is plenty of money to spend and receive. Wages – when salaries and wages of people are big, then the people can deposit more money into the bank. Business results – when there is a business net income, then the business will invest more money and spend more money using the banking services of Lloyds Bank. Government regulation – Some government regulations have an effect in the number of transactions that the bank will process. Saturated market – The number of banks allowed by the government to operate may reduce the bank’s clients. This is true because, now, the bank customers can choose which bank from many available banks offering almost the same services at lower service fee rates for loans and higher interest rates for deposits. The financial statement in exhibit A below shows in detail why Lloyds Bank generated a net profit for the year 2002 to 2004. The Revenue of Lloyds bank last for the year ended 2004 and presented to the public in 2005 shows that Revenue was ₤15,707.5. Operating income was at ₤8,990.1 that resulted to an operating margin of 57.2%. Non operating expenses amounted to ₤12,165.4. Therefore, Lloyds bank is making it good with its many services. Since Lloyds bank has been in the banking business since it was founded in 1765 by John Taylor and Sampson Lloyd in Birmingham, England. It has been merged with TSB to form Lloyds TSB needs.( www.Lloydstsb.com, 2006) BIBLIOGRAPHY Gup, B.,Bank Failures in the Major Trading Countries of the World: Causes and Remedies, Quorum Books, Westport, CT., 1998 Kidd, D., June 25, 2001, The financial World WWW.Lloydstsb.com, (http://www.lloydstsb.com/about_ltsb/lloyds_bank.asp, Feb 21, 2006) www.Lloydstsb-offshore.com, (http://www.lloydstsb-offshore.com/Products+-+Services/Offshore+Funds/, Feb 20, 2006) www.Lloydstsb-offshore.com (http://www.lloydstsb-offshore.com/Products+-+Services/Offshore+Funds/, Feb 20, 2006) www.human-inquiry.com, (www.human-inquiry.com/jhcvpubl.htm, Feb 20, 2006) www.human-inquiry.com(http://www.compare-best-online-current- account.co.uk/lloyds_tsb.htm?OVRAW=lloyds%20bank&OVKEY=lloyds%20tsb%20uk&OVMTC=advanced, feb 20, 2006) www.hoovers.com (http://www.hoovers.com/lloyds-tsb/--ID__90253,period__A--/freeuk-co-fin-income.xhtml, feb 20, 2006) Top of Form Annual Income Statement All amounts in millions of except per share amounts. Bottom of Form View: Annual | Quarterly Dec 04 Dec 03 Dec 02 Revenue 15,707.5 15,567.8 15,944.6 Cost of Goods Sold -- -- -- Gross Profit -- -- -- Gross Profit Margin -- -- -- SG&A Expense -- -- -- Depreciation & Amortization -- -- -- Operating Income 8,990.1 8,445.2 7,786.3 Operating Margin 57.2% 54.2% 48.8% Nonoperating Income -- -- -- Nonoperating Expenses 12,165.4 12,030.4 13,558.0 Income Before Taxes 3,475.7 4,360.6 2,386.6 Income Taxes 999.1 1,027.9 578.4 Net Income After Taxes 2,476.7 3,332.8 1,808.2 Continuing Operations 2,409.2 3,263.0 1,745.9 Discontinued Operations 0.0 0.0 0.0 Total Operations 2,409.2 3,263.0 1,745.9 Total Net Income 2,409.2 3,263.0 1,759.0 Net Profit Margin 15.3% 21.0% 11.0% (http://www.hoovers.com/lloyds-tsb/--ID__90253,period__A--/freeuk-co-fin-income.xhtml) Read More