Lloyds TSB, one of the biggest UK clearing banks, has reported earnings of £3.62bn for 1999, its best ever figure.

It has also announced plans to cut a further 3,000 jobs from its workforce this year.

The bank says this will come from centralising computer operations, the use of internet technology and cutting the number of branches.

Chief Executive Peter Ellwood said, "Competition in the financial services market is now so fierce that we must continuously drive to improve our operating efficiency whilst continuing to grow our revenues."

Unions were shocked by the job losses. A spokesman for the main finance union, Unifi, said: "This comes as a complete surprise. We will be seeking urgent talks to ensure there are no compulsory redundancies."

Plans for internet banking

Lloyds says it will launch a stand-alone internet bank in Europe, and will expand its UK online banking services.

The new bank, which will initially be launched in Spain, aims to have 1 million customers within 3 to 4 years.

Lloyds also hopes to have 1 million UK internet banking customers by the end of the year, up from the current figure of 160,000.

Lloyds will pay a dividend of 26.6 pence to investors, an increase of 20%.

The company says it has made savings of £417m from its merger with TSB and Abbey Life, and is now looking for further acquisitions.

Last year, it acquired mutual insurance company Scottish Widows.

Banks under pressure

Lloyds TSB kicks off the reporting season for UK banks. The sector has been depressed recently, with the share price of most banks falling.

Its shares fell to 644p in early trading on the London Stock Market on Friday, down 42.5p. The shares have been trading as high as 900p in the past year.

The likely takeover of another major High Street bank, NatWest, by its smaller rival, Royal Bank of Scotland, is a sign of the growing pace of consolidation in the sector.

That merger could lead to around 18,000 job losses.

Internet banking is one of the main threats to traditional banks, as it is involves much lower costs than running a large branch network.

Prudential, the UK's largest insurer, has had a huge success in launching Egg, its internet banking operation.