Job cuts likely at London Scottish

Jobs are under threat at London Scottish Mortgages following its parent company’s decision to wind up its lending arms.

The lender has been consulting with staff about redundancies since January, although it declines to comment on how many jobs will be affected by the move.

Last week London Scottish Bank revealed plans to substantially cut its lending volumes, particularly from LSM and its unsecured consumer credit division, with a view to closing them in due course. It has already scrapped new second charge lending.

But the reduction in lending is not expected to have a widespread impact on brokers.

Ray Boulger, senior technical manager at John Charcol, says: “We never had any cases that were so bad that we had to go to London Scottish.”

The closures are expected to help plug LSB’s £12.7m funding shortfall.

In its full-year results statement last week, the bank revealed it has struggled to meet its minimum capital requirements since late 2007, after impairment charges on its unsecured loans increased by £22m last year. It also revealed pre-tax losses of £5.6m for the 12 months to October 31 2007, compared with a 16.5m profit in 2005/06.

The bank says it will now concentrate on developing its debt collection division, Robinson Way, which saw a 57% increase in profits last year to £13.9m. Peter Cordrey, chairman of LSB, says: “Although 2007 was a difficult year for the group, the development and growth of Robinson Way’s successful debt collection business continued.

“In future, the group’s strategy will focus on the further development and growth of Robinson Way while reducing the capital employed in its lending divisions.”

He adds: “We are working with advisers to examine ways to redress the shortfall in our regulatory capital.”

LSB also says its trading performance was poor in Q1 of its new financial year, which started on November 1. Its pre-tax losses were £3.8m.