SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
25 July
2024
LLOYDS BANKING GROUP plc
(Translation
of registrant's name into English)
5th Floor
25 Gresham Street
London
EC2V 7HN
United Kingdom
(Address
of principal executive offices)
Indicate
by check mark whether the registrant files or will file annual
reports
under
cover Form 20-F or Form 40-F.
Form
20-F..X.. Form 40-F
Index
to Exhibits
Item
No.
1 Regulatory News Service Announcement, 25 July 2024
re:
2024 Half-Year Results - Part 1 of 2
Lloyds
Banking Group plc
2024
Half-Year Results
25 July
2024
Part 1
of 2
Results for the half-year
|
1
|
Income
statement (underlying basis) and key balance sheet
metrics
|
3
|
Quarterly
information
|
4
|
Balance
sheet analysis
|
5
|
Group results – statutory basis
|
6
|
Group
Chief Executive’s statement
|
7
|
Summary
of Group results
|
9
|
|
|
Divisional results
|
|
Segmental
analysis – underlying basis
|
16
|
Retail
|
18
|
Commercial
Banking
|
20
|
Insurance,
Pensions and Investments
|
22
|
Equity
Investments and Central Items
|
25
|
|
|
Alternative performance measures
|
26
|
|
|
Risk management
|
|
Principal
risks and uncertainties
|
32
|
Capital
risk
|
33
|
Credit
risk
|
38
|
Liquidity
risk
|
50
|
Interest
rate sensitivity
|
54
|
|
|
Statutory information
|
|
Condensed
consolidated half-year financial statements
(unaudited)
|
55
|
Condensed
consolidated income statement (unaudited)
|
56
|
Condensed
consolidated statement of comprehensive income
(unaudited)
|
57
|
Condensed
consolidated balance sheet (unaudited)
|
58
|
Condensed
consolidated statement of changes in equity
(unaudited)
|
59
|
Condensed
consolidated cash flow statement (unaudited)
|
62
|
Notes
to the condensed consolidated half-year financial statements
(unaudited)
|
63
|
|
|
Statement
of directors’ responsibilities
|
99
|
Independent
review report to Lloyds Banking Group plc
|
100
|
Key
dates
|
101
|
Basis
of presentation
|
101
|
Forward-looking
statements
|
102
|
Contacts
|
103
|
Alternative performance measures
The
Group uses a number of alternative performance measures, including
underlying profit, in the description of its business performance
and financial position. These measures are labelled with a
superscript ‘A’ throughout this document, with the
exception of content on pages 1 to 2
and pages 1 to 8
which is, unless otherwise stated, presented on an underlying
basis. Further information on these measures is set out on page
1.
Forward-looking statements
This
news release contains forward-looking statements. For further
details, reference should be made to page 1.
RESULTS FOR THE
HALF-YEAR
“In
the first six months of 2024, the Group delivered robust financial
results with solid income performance and cost discipline alongside
strong capital generation.
2024 is
a key year for our strategic delivery. We continue to deliver on
our strategic transformation, as illustrated in the fourth of our
investor seminars last month. We remain on track to meet our 2024
targeted outcomes. Indeed, our progress to date enables us to
reaffirm 2024 guidance and remain confident in achieving our 2026
strategic objectives and guidance.
Guided
by our purpose, we continue to support customers in reaching their
financial goals and successfully transform our Group. This
underpins our ambition of higher, more sustainable returns that
will deliver for all of our stakeholders as we continue to Help
Britain Prosper.”
Charlie Nunn, Group Chief Executive
Delivering on our purpose driven strategy; on track to meet 2024
and 2026 strategic outcomes
●
Supporting
customers to reach financial goals, by meeting a broad range of
their financial needs
●
Continued strategic
transformation, with c.£3 billion planned investment between
2022 and the end of 2024, enabling delivery of business and
financial benefits
●
Successful
execution demonstrated through four strategic seminars, delivered
over the last twelve months
Robust financial performance, in line with expectations1
●
Statutory profit
after tax of £2.4 billion (half-year to 30 June 2023:
£2.9 billion) with net income down 9 per cent on the prior
year and operating costs up 7 per cent (including Bank of England
Levy), partly offset by a lower impairment charge
●
Return on tangible
equity of 13.5 per cent (half-year to 30 June 2023: 16.6 per
cent)
●
Underlying net
interest income of £6.3 billion, down 10 per cent with a lower
banking net interest margin, as expected, of 2.94 per cent and
average interest-earning banking assets of £449.2
billion
●
Underlying other
income of £2.7 billion, 8 per cent higher, driven by continued
recovery in customer and market activity and the benefit of
strategic initiatives
●
Operating lease
depreciation of £679 million, up on the prior year reflecting
growth in the fleet size, depreciation of higher value vehicles and
declines in used electric car prices
●
Operating costs of
£4.7 billion, up 7 per cent, with cost efficiencies helping to
offset higher ongoing strategic investment, planned elevated
severance charges and continued inflationary pressures, alongside
c.£0.1 billion in the first quarter relating to the
sector-wide change in the charging approach for the Bank of England
Levy (excluding this, operating costs were up 4 per
cent)
●
Remediation costs
of £95 million (half-year to 30 June 2023:
£70 million), largely in relation to pre-existing
programmes
●
Underlying
impairment charge of £101 million and asset quality ratio of 5
basis points. Excluding the impact of improvements to the economic
outlook, the asset quality ratio was 19 basis points. The
portfolio remains well-positioned with resilient credit performance
and strong asset quality
Growth in customer franchise
●
Loans and advances
to customers increased by £2.7 billion during the half-year
period to £452.4 billion, with growth across Retail, including
mortgages and unsecured loans
●
Customer deposits
of £474.7 billion increased by £3.3 billion, with
growth in Retail deposits of £4.9 billion partly offset by a
reduction in Commercial Banking deposits of
£1.6 billion
RESULTS FOR THE HALF-YEAR (continued)
Strong capital generation, in line with expectations, enabling an
increased interim dividend
●
Strong capital
generation of 87 basis points, after regulatory headwinds of 7
basis points
●
CET1 ratio of 14.1
per cent after 48 basis points for ordinary dividend accrual.
Significantly above our ongoing target of c.13.0 per cent by
2026
●
Risk-weighted
assets of £222.0 billion up £2.9 billion in the period,
reflecting lending growth and other movements, partly offset by
effective management of risk-weighted assets
●
Tangible net assets
per share of 49.6 pence, down from 50.8 pence at 31 December 2023
after capital distributions, alongside the impact of increased
longer-term rates on the cash flow hedge reserve and pension
surplus
●
Interim ordinary
dividend of 1.06 pence per share (equivalent to £662 million),
up 15 per cent on the prior year
Reaffirming guidance for 2024
Based
on our current macroeconomic assumptions, for 2024 the Group
continues to expect:
●
Banking net
interest margin of greater than 290 basis points
●
Operating costs of
c.£9.4 billion including the c.£0.1 billion Bank of
England Levy
●
Asset quality ratio
now expected to be less than 20 basis points
●
Return on tangible
equity of c.13 per cent
●
Capital generation
of c.175 basis points2
●
Risk-weighted
assets between £220 billion and £225 billion
●
To pay down to a
CET1 ratio of c.13.5 per cent
Confident in 2026 guidance:
Based
on our current macroeconomic assumptions and confidence in our
strategy, the Group is maintaining its medium-term guidance for
2026:
●
Cost:income ratio
of less than 50 per cent
●
Return on tangible
equity of greater than 15 per cent
●
Capital generation
of greater than 200 basis points2
●
To pay down to a
CET1 ratio of c.13 per cent
1
See the basis of
presentation on page 1.
2
Excluding capital
distributions. Inclusive of ordinary dividends received from the
Insurance business in February of the following year.
INCOME STATEMENT (UNDERLYING BASIS)A AND KEY BALANCE
SHEET METRICS
|
Half-year to
30 Jun
2024
£m
|
|
|
Half-year
to
30 Jun
2023
£m
|
|
|
Change
%
|
|
Half-year
to 31
Dec
2023
£m
|
|
|
Change
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying
net interest income
|
6,338
|
|
|
7,004
|
|
|
(10)
|
|
6,761
|
|
|
(6)
|
Underlying
other income
|
2,734
|
|
|
2,538
|
|
|
8
|
|
2,585
|
|
|
6
|
Operating
lease depreciation
|
(679)
|
|
|
(356)
|
|
|
(91)
|
|
(600)
|
|
|
(13)
|
Net income
|
8,393
|
|
|
9,186
|
|
|
(9)
|
|
8,746
|
|
|
(4)
|
Operating
costs
|
(4,700)
|
|
|
(4,413)
|
|
|
(7)
|
|
(4,727)
|
|
|
1
|
Remediation
|
(95)
|
|
|
(70)
|
|
|
(36)
|
|
(605)
|
|
|
84
|
Total costs
|
(4,795)
|
|
|
(4,483)
|
|
|
(7)
|
|
(5,332)
|
|
|
10
|
Underlying profit before impairment
|
3,598
|
|
|
4,703
|
|
|
(23)
|
|
3,414
|
|
|
5
|
Underlying
impairment (charge) credit
|
(101)
|
|
|
(662)
|
|
|
85
|
|
354
|
|
|
|
Underlying profit
|
3,497
|
|
|
4,041
|
|
|
(13)
|
|
3,768
|
|
|
(7)
|
Restructuring
|
(15)
|
|
|
(25)
|
|
|
40
|
|
(129)
|
|
|
88
|
Volatility
and other items
|
(158)
|
|
|
(146)
|
|
|
(8)
|
|
(6)
|
|
|
|
Statutory profit before tax
|
3,324
|
|
|
3,870
|
|
|
(14)
|
|
3,633
|
|
|
(9)
|
Tax
expense
|
(880)
|
|
|
(1,006)
|
|
|
13
|
|
(979)
|
|
|
10
|
Statutory profit after tax
|
2,444
|
|
|
2,864
|
|
|
(15)
|
|
2,654
|
|
|
(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share
|
3.4p
|
|
|
3.9p
|
|
|
(0.5)p
|
|
3.7p
|
|
|
(0.3)p
|
Dividends
per share – ordinary
|
1.06p
|
|
|
0.92p
|
|
|
15
|
|
1.84p
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banking
net interest marginA
|
2.94%
|
|
|
3.18%
|
|
|
(24)bp
|
|
3.03%
|
|
|
(9)bp
|
Average
interest-earning banking assetsA
|
£449.2bn
|
|
|
£453.8bn
|
|
|
(1)
|
|
£452.9bn
|
|
|
(1)
|
Cost:income
ratioA
|
57.1%
|
|
|
48.8%
|
|
|
8.3pp
|
|
61.0%
|
|
|
(3.9)pp
|
Asset
quality ratioA
|
0.05%
|
|
|
0.29%
|
|
|
(24)bp
|
|
(0.15)%
|
|
|
20bp
|
Return
on tangible equityA
|
13.5%
|
|
|
16.6%
|
|
|
(3.1)pp
|
|
15.3%
|
|
|
(1.8)pp
|
|
At 30 Jun
2024
|
|
|
At 31
Mar
2024
|
|
|
Change
%
|
|
At 31
Dec
2023
|
|
|
Change
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
and advances to customers
|
£452.4bn
|
|
|
£448.5bn
|
|
|
1
|
|
£449.7bn
|
|
|
1
|
Customer
deposits
|
£474.7bn
|
|
|
£469.2bn
|
|
|
1
|
|
£471.4bn
|
|
|
1
|
Loan to
deposit ratioA
|
95%
|
|
|
96%
|
|
|
(1pp)
|
|
95%
|
|
|
|
CET1
ratio
|
14.1%
|
|
|
13.9%
|
|
|
0.2pp
|
|
14.6%
|
|
|
(0.5)pp
|
Pro
forma CET1 ratioA,1
|
14.1%
|
|
|
13.9%
|
|
|
0.2pp
|
|
13.7%
|
|
|
0.4pp
|
UK
leverage ratio
|
5.4%
|
|
|
5.6%
|
|
|
(0.2)pp
|
|
5.8%
|
|
|
(0.4)pp
|
Risk-weighted
assets
|
£222.0bn
|
|
|
£222.8bn
|
|
|
|
|
£219.1bn
|
|
|
1
|
Wholesale
funding
|
£97.6bn
|
|
|
£99.9bn
|
|
|
(2)
|
|
£98.7bn
|
|
|
(1)
|
Liquidity
coverage ratio2
|
144%
|
|
|
143%
|
|
|
1pp
|
|
142%
|
|
|
2pp
|
Net
stable funding ratio3
|
130%
|
|
|
130%
|
|
|
|
|
130%
|
|
|
|
Tangible
net assets per shareA
|
49.6p
|
|
|
51.2p
|
|
|
(1.6)p
|
|
50.8p
|
|
|
(1.2)p
|
1
31 December 2023
reflects both the full impact of the share buyback announced in
respect of 2023 and the ordinary dividend received from the
Insurance business in February 2024, but excludes the impact of the
phased unwind of IFRS 9 relief on 1 January 2024.
2
The liquidity
coverage ratio is calculated as a monthly rolling simple average
over the previous 12 months.
3
Net stable funding
ratio is based on an average of the four previous
quarters
QUARTERLY INFORMATIONA
|
Quarter
Ended
30 Jun
2024
£m
|
|
|
Quarter
ended
31
Mar
2024
£m
|
|
|
Change
%
|
|
|
Quarter
ended
31
Dec
2023
£m
|
|
|
Quarter
ended
30
Sep
2023
£m
|
|
|
Quarter
ended
30
Jun
2023
£m
|
|
|
Quarter
ended
31
Mar
2023
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying
net interest income
|
3,154
|
|
|
3,184
|
|
|
(1)
|
|
|
3,317
|
|
|
3,444
|
|
|
3,469
|
|
|
3,535
|
|
Underlying
other income
|
1,394
|
|
|
1,340
|
|
|
4
|
|
|
1,286
|
|
|
1,299
|
|
|
1,281
|
|
|
1,257
|
|
Operating
lease depreciation
|
(396)
|
|
|
(283)
|
|
|
(40)
|
|
|
(371)
|
|
|
(229)
|
|
|
(216)
|
|
|
(140)
|
|
Net income
|
4,152
|
|
|
4,241
|
|
|
(2)
|
|
|
4,232
|
|
|
4,514
|
|
|
4,534
|
|
|
4,652
|
|
Operating
costs
|
(2,298)
|
|
|
(2,402)
|
|
|
4
|
|
|
(2,486)
|
|
|
(2,241)
|
|
|
(2,243)
|
|
|
(2,170)
|
|
Remediation
|
(70)
|
|
|
(25)
|
|
|
|
|
|
(541)
|
|
|
(64)
|
|
|
(51)
|
|
|
(19)
|
|
Total costs
|
(2,368)
|
|
|
(2,427)
|
|
|
2
|
|
|
(3,027)
|
|
|
(2,305)
|
|
|
(2,294)
|
|
|
(2,189)
|
|
Underlying profit before impairment
|
1,784
|
|
|
1,814
|
|
|
(2)
|
|
|
1,205
|
|
|
2,209
|
|
|
2,240
|
|
|
2,463
|
|
Underlying
impairment (charge) credit
|
(44)
|
|
|
(57)
|
|
|
23
|
|
|
541
|
|
|
(187)
|
|
|
(419)
|
|
|
(243)
|
|
Underlying profit
|
1,740
|
|
|
1,757
|
|
|
(1)
|
|
|
1,746
|
|
|
2,022
|
|
|
1,821
|
|
|
2,220
|
|
Restructuring
|
(3)
|
|
|
(12)
|
|
|
75
|
|
|
(85)
|
|
|
(44)
|
|
|
(13)
|
|
|
(12)
|
|
Volatility
and other items
|
(41)
|
|
|
(117)
|
|
|
65
|
|
|
114
|
|
|
(120)
|
|
|
(198)
|
|
|
52
|
|
Statutory profit before tax
|
1,696
|
|
|
1,628
|
|
|
4
|
|
|
1,775
|
|
|
1,858
|
|
|
1,610
|
|
|
2,260
|
|
Tax
expense
|
(467)
|
|
|
(413)
|
|
|
(13)
|
|
|
(541)
|
|
|
(438)
|
|
|
(387)
|
|
|
(619)
|
|
Statutory profit after tax
|
1,229
|
|
|
1,215
|
|
|
1
|
|
|
1,234
|
|
|
1,420
|
|
|
1,223
|
|
|
1,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share
|
1.7p
|
|
|
1.7p
|
|
|
|
|
|
1.7p
|
|
|
2.0p
|
|
|
1.6p
|
|
|
2.3p
|
|
Banking
net interest marginA
|
2.93%
|
|
|
2.95%
|
|
|
(2)bp
|
|
|
2.98%
|
|
|
3.08%
|
|
|
3.14%
|
|
|
3.22%
|
|
Average
interest-earning banking assetsA
|
£449.4bn
|
|
|
£449.1bn
|
|
|
|
|
|
£452.8bn
|
|
|
£453.0bn
|
|
|
£453.4bn
|
|
|
£454.2bn
|
|
Cost:income
ratioA
|
57.0%
|
|
|
57.2%
|
|
|
(0.2)pp
|
|
|
71.5%
|
|
|
51.1%
|
|
|
50.6%
|
|
|
47.1%
|
|
Asset
quality ratioA
|
0.05%
|
|
|
0.06%
|
|
|
(1)bp
|
|
|
(0.47)%
|
|
|
0.17%
|
|
|
0.36%
|
|
|
0.22%
|
|
Return
on tangible equityA
|
13.6%
|
|
|
13.3%
|
|
|
0.3pp
|
|
|
13.9%
|
|
|
16.9%
|
|
|
13.6%
|
|
|
19.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 Jun
2024
|
|
|
At 31
Mar 2024
|
|
|
Change
%
|
|
|
At 31
Dec 2023
|
|
|
At 30
Sep 2023
|
|
|
At 30
Jun 2023
|
|
|
At 31
Mar 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
and advances to customers1
|
£452.4bn
|
|
|
£448.5bn
|
|
|
1
|
|
|
£449.7bn
|
|
|
£452.1bn
|
|
|
£450.7bn
|
|
|
£452.3bn
|
|
Customer
deposits
|
£474.7bn
|
|
|
£469.2bn
|
|
|
1
|
|
|
£471.4bn
|
|
|
£470.3bn
|
|
|
£469.8bn
|
|
|
£473.1bn
|
|
Loan to
deposit ratioA
|
95%
|
|
|
96%
|
|
|
(1)pp
|
|
|
95%
|
|
|
96%
|
|
|
96%
|
|
|
96%
|
|
CET1
ratio
|
14.1%
|
|
|
13.9%
|
|
|
0.2pp
|
|
|
14.6%
|
|
|
14.6%
|
|
|
14.2%
|
|
|
14.1%
|
|
Pro
forma CET1 ratioA,2
|
14.1%
|
|
|
13.9%
|
|
|
0.2pp
|
|
|
13.7%
|
|
|
14.6%
|
|
|
14.2%
|
|
|
14.1%
|
|
UK
leverage ratio
|
5.4%
|
|
|
5.6%
|
|
|
(0.2)pp
|
|
|
5.8%
|
|
|
5.7%
|
|
|
5.7%
|
|
|
5.6%
|
|
Risk-weighted
assets
|
£222.0bn
|
|
|
£222.8bn
|
|
|
|
|
|
£219.1bn
|
|
|
£217.7bn
|
|
|
£215.3bn
|
|
|
£210.9bn
|
|
Wholesale
funding
|
£97.6bn
|
|
|
£99.9bn
|
|
|
(2)
|
|
|
£98.7bn
|
|
|
£108.5bn
|
|
|
£103.5bn
|
|
|
£101.1bn
|
|
Liquidity
coverage ratio3
|
144%
|
|
|
143%
|
|
|
1pp
|
|
|
142%
|
|
|
142%
|
|
|
142%
|
|
|
143%
|
|
Net
stable funding ratio4
|
130%
|
|
|
130%
|
|
|
|
|
|
130%
|
|
|
130%
|
|
|
130%
|
|
|
129%
|
|
Tangible
net assets per shareA
|
49.6p
|
|
|
51.2p
|
|
|
(1.6)p
|
|
|
50.8p
|
|
|
47.2p
|
|
|
45.7p
|
|
|
49.6p
|
|
1
The increase
between 31 March 2024 and 30 June 2024 is net of the impact of the
securitisation of £0.9 billion of legacy Retail mortgages in
May 2024. The reduction between 30 September 2023 and 31 December
2023 is net of the impact of the securitisation of £2.7
billion of UK Retail unsecured loans.
2
31 December 2023
reflects both the full impact of the share buyback announced in
respect of 2023 and the ordinary dividend received from the
Insurance business in February 2024, but excludes the impact of the
phased unwind of IFRS 9 relief on 1 January 2024.
3
The liquidity
coverage ratio is calculated as a monthly rolling simple average
over the previous 12 months.
4
Net stable funding
ratio is based on an average of the four previous
quarters.
BALANCE SHEET ANALYSIS
|
At 30 Jun
2024
£bn
|
|
|
At 31
Mar
2024
£bn
|
|
|
Change
%
|
|
At 31
Dec
2023
£bn
|
|
|
Change
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK
mortgages1,2
|
306.9
|
|
|
304.6
|
|
|
1
|
|
306.2
|
|
|
|
Credit
cards
|
15.6
|
|
|
15.2
|
|
|
3
|
|
15.1
|
|
|
3
|
UK
Retail unsecured loans
|
8.2
|
|
|
7.6
|
|
|
8
|
|
6.9
|
|
|
19
|
UK
Motor Finance
|
16.2
|
|
|
15.8
|
|
|
3
|
|
15.3
|
|
|
6
|
Overdrafts
|
1.0
|
|
|
1.0
|
|
|
|
|
1.1
|
|
|
(9)
|
Retail
other1,3
|
17.2
|
|
|
16.9
|
|
|
2
|
|
16.6
|
|
|
4
|
Small
and Medium Businesses
|
31.5
|
|
|
32.2
|
|
|
(2)
|
|
33.0
|
|
|
(5)
|
Corporate
and Institutional Banking
|
56.6
|
|
|
55.6
|
|
|
2
|
|
55.6
|
|
|
2
|
Central
Items4
|
(0.8)
|
|
|
(0.4)
|
|
|
|
|
(0.1)
|
|
|
|
Loans and advances to customers
|
452.4
|
|
|
448.5
|
|
|
1
|
|
449.7
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
current accounts
|
101.7
|
|
|
103.1
|
|
|
(1)
|
|
102.7
|
|
|
(1)
|
Retail
savings accounts5
|
201.5
|
|
|
196.4
|
|
|
3
|
|
194.8
|
|
|
3
|
Wealth
|
10.1
|
|
|
10.2
|
|
|
(1)
|
|
10.9
|
|
|
(7)
|
Commercial
Banking
|
161.2
|
|
|
159.3
|
|
|
1
|
|
162.8
|
|
|
(1)
|
Central
Items
|
0.2
|
|
|
0.2
|
|
|
|
|
0.2
|
|
|
|
Customer deposits
|
474.7
|
|
|
469.2
|
|
|
1
|
|
471.4
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
892.9
|
|
|
889.6
|
|
|
|
|
881.5
|
|
|
1
|
Total liabilities
|
847.8
|
|
|
841.8
|
|
|
1
|
|
834.1
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary
shareholders’ equity
|
39.0
|
|
|
40.7
|
|
|
(4)
|
|
40.3
|
|
|
(3)
|
Other
equity instruments
|
5.9
|
|
|
6.9
|
|
|
(14)
|
|
6.9
|
|
|
(14)
|
Non-controlling
interests
|
0.2
|
|
|
0.2
|
|
|
|
|
0.2
|
|
|
|
Total equity
|
45.1
|
|
|
47.8
|
|
|
(6)
|
|
47.4
|
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary
shares in issue, excluding own shares
|
62,458m
|
|
|
63,653m
|
|
|
(2)
|
|
63,508m
|
|
|
(2)
|
1
From the first
quarter of 2024, open mortgage book and closed mortgage book loans
and advances, previously presented separately, are reported
together as UK mortgages; Wealth loans and advances, previously
reported separately, are included within Retail other. The
31 December 2023 comparative is presented on a consistent
basis.
2
The increase
between 31 March 2024 and 30 June 2024 is net of the impact of the
securitisation of £0.9 billion of legacy Retail mortgages in
May 2024.
3
Within loans and
advances, Retail other includes the European and Wealth
businesses.
4
Central Items
includes central fair value hedge accounting
adjustments.
5
From the first
quarter of 2024, Retail relationship savings accounts and Retail
tactical savings accounts, previously reported separately, are
reported together as Retail savings accounts. The 31 December 2023
comparative is presented on a consistent basis.
GROUP RESULTS – STATUTORY BASIS
The
results below are prepared in accordance with the recognition and
measurement principles of International Financial Reporting
Standards (IFRS). The underlying results are shown on page 1.
Summary income statement
|
Half-year
to 30 Jun
2024
£m
|
|
|
Half-year
to 30
Jun
2023
£m
|
|
|
Change
%
|
|
Half-year
to 31
Dec
2023
£m
|
|
|
Change
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
6,046
|
|
|
6,798
|
|
|
(11)
|
|
6,500
|
|
|
(7)
|
Other
income
|
12,843
|
|
|
8,097
|
|
|
59
|
|
14,010
|
|
|
(8)
|
Total income
|
18,889
|
|
|
14,895
|
|
|
27
|
|
20,510
|
|
|
(8)
|
Net
finance expense in respect of insurance and investment
contracts
|
(10,013)
|
|
|
(5,589)
|
|
|
(79)
|
|
(11,187)
|
|
|
10
|
Total income, after net finance expense in respect of insurance and
investment contracts
|
8,876
|
|
|
9,306
|
|
|
(5)
|
|
9,323
|
|
|
(5)
|
Operating
expenses
|
(5,452)
|
|
|
(4,774)
|
|
|
(14)
|
|
(6,049)
|
|
|
10
|
Impairment
(charge) credit
|
(100)
|
|
|
(662)
|
|
|
85
|
|
359
|
|
|
|
Profit before tax
|
3,324
|
|
|
3,870
|
|
|
(14)
|
|
3,633
|
|
|
(9)
|
Tax
expense
|
(880)
|
|
|
(1,006)
|
|
|
13
|
|
(979)
|
|
|
10
|
Profit for the period
|
2,444
|
|
|
2,864
|
|
|
(15)
|
|
2,654
|
|
|
(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
attributable to ordinary shareholders
|
2,145
|
|
|
2,572
|
|
|
(17)
|
|
2,361
|
|
|
(9)
|
Ordinary
shares in issue (weighted-average – basic)
|
63,453m
|
|
|
66,226m
|
|
|
(4)
|
|
63,718m
|
|
|
|
Basic
earnings per share
|
3.4p
|
|
|
3.9p
|
|
|
(0.5)p
|
|
3.7p
|
|
|
(0.3)p
|
Summary balance sheet
|
At 30 Jun
2024
£m
|
|
|
At 31
Mar
2024
£m
|
|
|
Change
%
|
|
At 31
Dec
2023
£m
|
|
|
Change
%
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and balances at central banks
|
66,808
|
|
|
70,990
|
|
|
(6)
|
|
78,110
|
|
|
(14)
|
Financial
assets at fair value through profit or loss
|
209,139
|
|
|
212,435
|
|
|
(2)
|
|
203,318
|
|
|
3
|
Derivative
financial instruments
|
18,983
|
|
|
18,820
|
|
|
1
|
|
22,356
|
|
|
(15)
|
Financial
assets at amortised cost
|
525,698
|
|
|
520,053
|
|
|
1
|
|
514,635
|
|
|
2
|
Financial
assets at fair value through other comprehensive
income
|
27,847
|
|
|
27,206
|
|
|
2
|
|
27,592
|
|
|
1
|
Other
assets
|
44,452
|
|
|
40,129
|
|
|
11
|
|
35,442
|
|
|
25
|
Total assets
|
892,927
|
|
|
889,633
|
|
|
|
|
881,453
|
|
|
1
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
from banks
|
5,584
|
|
|
6,105
|
|
|
(9)
|
|
6,153
|
|
|
(9)
|
Customer
deposits
|
474,693
|
|
|
469,150
|
|
|
1
|
|
471,396
|
|
|
1
|
Repurchase
agreements at amortised cost
|
37,914
|
|
|
37,461
|
|
|
1
|
|
37,703
|
|
|
1
|
Financial
liabilities at fair value through profit or loss
|
27,056
|
|
|
25,837
|
|
|
5
|
|
24,914
|
|
|
9
|
Derivative
financial instruments
|
16,647
|
|
|
16,727
|
|
|
|
|
20,149
|
|
|
(17)
|
Debt
securities in issue at amortised cost
|
74,760
|
|
|
76,569
|
|
|
(2)
|
|
75,592
|
|
|
(1)
|
Liabilities
arising from insurance and participating investment
contracts
|
125,007
|
|
|
124,160
|
|
|
1
|
|
120,123
|
|
|
4
|
Liabilities
arising from non-participating investment contracts
|
48,280
|
|
|
47,274
|
|
|
2
|
|
44,978
|
|
|
7
|
Other
liabilities
|
27,421
|
|
|
27,982
|
|
|
(2)
|
|
22,827
|
|
|
20
|
Subordinated
liabilities
|
10,448
|
|
|
10,577
|
|
|
(1)
|
|
10,253
|
|
|
2
|
Total liabilities
|
847,810
|
|
|
841,842
|
|
|
1
|
|
834,088
|
|
|
2
|
Total equity
|
45,117
|
|
|
47,791
|
|
|
(6)
|
|
47,365
|
|
|
(5)
|
Total equity and liabilities
|
892,927
|
|
|
889,633
|
|
|
|
|
881,453
|
|
|
1
|
GROUP CHIEF
EXECUTIVE’S STATEMENT
We are
now half way through the five year strategy we set out in February
2022. We continue to make strong progress in delivering against our
strategic targets. We are on track to achieve our 2024 outcomes,
including c.£0.7 billion of additional income and c.£1.2
billion of gross cost savings from strategic initiatives and we are
reaffirming our 2024 financial guidance. We also remain confident
in achieving our 2026 strategic outcomes and financial
guidance.
The
Group is performing well and has delivered a robust financial
performance in the first half of the year, with continued business
momentum, cost discipline and strong returns. In addition, the
resilience of our business model and customer franchise, alongside
our measured approach to risk, is demonstrated by our continued
strong asset quality performance. Our performance positions the
Group well for the future, and enables the Board to announce an
interim ordinary dividend of 1.06 pence per share, up 15 per cent
on the first half of 2023.
I am
confident that our strategy remains the right one. As we look ahead
to the UK’s priorities and opportunities, including the new
government emphasis on sustained economic growth, our strong
financials and business model position the Group well to continue
to support our customers, and to help Britain prosper.
Robust financial performance and consistent delivery supporting
higher interim dividend
Statutory
profit after tax was £2.4 billion in the first half of 2024,
down 15 per cent on the prior year with net income down 9 per cent
and operating costs up 7 per cent, partly offset by strong asset
quality contributing to a lower impairment charge. Robust net
income of £8.4 billion included a resilient banking net
interest margin of 2.94 per cent and 8 per cent growth in
underlying other income, offset by higher operating lease
depreciation. Operating costs of £4.7 billion reflected
higher planned strategic investment, elevated severance charges and
inflationary pressures. We continue to see strong asset quality,
with credit performance improving. The impairment charge of
£101 million includes a benefit from improved economic
assumptions. Excluding this, the asset quality ratio was
19 basis points, remaining in line with our enhanced
guidance.
The
Group’s balance sheet grew in the first six months of the
year, with loans and advances to customers increasing by £2.7
billion to £452.4 billion. This reflected growth across
Retail, including mortgages and unsecured loans. Customer deposits
of £474.7 billion also increased in the period, by
£3.3 billion. This included growth in Retail deposits
(including Wealth) of £4.9 billion offsetting a reduction
in Commercial Banking deposits of
£1.6 billion.
The
Group delivered strong capital generation of 87 basis points
and a CET1 ratio of 14.1 per cent after 48 basis points for
ordinary dividend accrual. Given the strength of the capital
generation and CET1 position, the Board has announced an interim
ordinary dividend of 1.06 pence per share, up 15 per cent on the
prior year and equivalent to £662 million. As usual, the
Board will give due consideration at year end to the return of any
surplus capital. In February this year, the Board decided to return
surplus capital through a share buyback programme of up to
£2.0 billion. As at 30 June 2024, the programme had
completed £0.9 billion of the buyback, with c.1.8 billion
ordinary shares purchased.
Delivering on purpose driven strategy, benefitting all
stakeholders
We have
a purpose-driven strategy. Delivering in line with our purpose of
Helping Britain Prosper ensures that we drive outcomes that benefit
all stakeholders. We continue to provide support to our customers
to help them meet their financial needs, including supporting their
savings goals through our strong ISA propositions, attracting an
additional £6 billion of new Cash ISA savings during the
first half of 2024. We also helped over 50,000 small businesses and
charities open a new business current account with us.
Core to
our purpose is our focus on creating new opportunities for future
growth while contributing to an inclusive society and supporting
the transition to a low carbon economy. Our initiatives in building
a more inclusive society include lending over £7 billion to
first time buyers and supporting c.£1.2 billion of funding to
the social housing sector in the first half of the year, whilst
continuing to support over 340 housing associations across the UK.
We continue our partnership with the homelessness charity Crisis
and together we believe we can help to end homelessness.
Importantly, we also continue to progress towards the Group’s
diversity targets for gender, ethnicity and
disability.
To help
build a sustainable future and support the transition to a low
carbon economy we have delivered c.£38 billion1 of cumulative
sustainable financing since 2022. We remain on track to meet our
2024 targets in this area. In the first half we also published our
new sustainable bond framework and have since issued €1
billion of green bonds. We have also launched Buildings Transition
Loans, offering Small and Medium businesses discounted lending for
investing in energy efficient property portfolios.
1
From January 2022
to June 2024: £21.7 billion sustainable finance in Commercial
Banking, £9.1 billion EPC A/B mortgage lending (up to March
2024), £7.6 billion financing for electric vehicles and
plug-in hybrid electric vehicles.
GROUP CHIEF EXECUTIVE’S STATEMENT
(continued)
In the
third year of our five-year strategic transformation, continued
momentum across our strategic initiatives is enabling us to realise
business and financial benefits. As a result, we are on track to
meet our strategic objectives, alongside our financial targets. Our
transformation is supported by c.£3 billion planned investment
between 2022 and the end of 2024.
We have
seen progress across all of our strategic priority areas, alongside
the strategic enablers of people, technology and data. This gives
us confidence that we are on track to deliver c.£0.7 billion
of additional revenues from strategic initiatives and c.£1.2
billion of gross cost savings by the end of 2024. We have started
to demonstrate this successful execution to investors, with two
strategic seminars in 2023 and two in the first half of 2024
focused on our core business areas. Looking further out, we remain
confident in achieving our 2026 strategic and financial outcomes,
including generating an additional c.£1.5 billion revenues per
annum from strategic initiatives.
Driving revenue growth and diversification
The
Group continues to strengthen customer relationships, with a view
to delivering diversified revenue growth across the business. In
the first six months of 2024, we further enhanced our mobile apps,
which now have over 19 million active users, bringing together
products across the Group within dynamic ecosystems. For our mass
affluent customers, we continued the roll out of ‘Lloyds Bank
360’, now reaching c.500,000 customers and we launched both
Ready-Made Pensions and Invest Wise, a bespoke investment product
for those aged between 18 and 25. Through investment in digital
capability and product development, we have seen c.30 per cent
growth in mobile active customers within Small and Medium
Businesses. We were awarded Best Bank for Digitalisation Globally
at the Global Trade Review Awards 2024.
Investing in efficiency and enablers to improve
delivery
Strengthening
cost and capital efficiency is critical. The Group is making strong
progress in utilising technology to improve operating leverage.
Over the first six months of 2024, we accelerated our shift to
Cloud-based technology, surpassing our initial target for
applications on Cloud. We also increased the number of legacy
technology applications decommissioned by 20 per cent, taking our
total decommissioned applications to c.500. In addition, the Cash
Access UK Banking Hub network has doubled this year, providing
continued support to customers in the heart of their communities in
an efficient manner. This is in addition to the expansion of
digital journeys within Small and Medium Businesses, with c.45 per
cent of servicing journeys digitised to date.
Future outlook
We are
progressing well towards our ambition of generating higher, more
sustainable returns for shareholders and are on track to achieve
our 2024 strategic and financial outcomes.
Reaffirming guidance for 2024
Based
on our current macroeconomic assumptions, for 2024 the Group
continues to expect:
●
Banking net
interest margin of greater than 290 basis points
●
Operating costs of
c.£9.4 billion including the c.£0.1 billion Bank of
England Levy
●
Asset quality ratio
now expected to be less than 20 basis points
●
Return on tangible
equity of c.13 per cent
●
Capital generation
of c.175 basis points1
●
Risk-weighted
assets between £220 billion and £225 billion
●
To pay down to a
CET1 ratio of c.13.5 per cent
Confident in 2026 guidance:
Based
on our current macroeconomic assumptions and confidence in our
strategy, the Group is maintaining its medium-term guidance for
2026:
●
Cost:income ratio
of less than 50 per cent
●
Return on tangible
equity of greater than 15 per cent
●
Capital generation
of greater than 200 basis points1
●
To pay down to a
CET1 ratio of c.13 per cent
1
Excluding capital
distributions. Inclusive of ordinary dividends received from the
Insurance business in February of the following year.
SUMMARY OF GROUP RESULTSA
Statutory results
The
Group’s statutory profit before tax for the first half of
2024 was £3,324 million,14 per cent lower than the same period
in 2023. This was due to lower net interest income and higher
operating expenses, partly offset by a lower impairment charge.
Statutory profit after tax was £2,444 million (half-year
to 30 June 2023: £2,864 million).
The
Group’s statutory income statement includes income and
expenses attributable to the policyholders of the Group’s
long-term assurance funds, investors in the Group’s
non-participating investment contracts and third party interests in
consolidated funds. These items materially offset in arriving at
profit before tax but can, depending on market movements, lead to
significant variances on a statutory basis between total income and
net finance expense in respect of insurance and investment
contracts from one period to the next.
Total
income, after net finance expense in respect of insurance and
investment contracts for the period was £8,876 million, a
decrease of 5 per cent on the same period in 2023, primarily
reflecting lower net interest income. Net interest income of
£6,046 million was down 11 per cent compared to the first half
of 2023, driven by lower margins. Other income amounted to
£12,843 million in the half-year to 30 June 2024, compared to
£8,097 million in the same period in 2023. Within other
income, net trading income from the Group’s insurance
activities was £9,820 million in the period compared to
£5,464 million for the half-year 30 June 2023, an
increase of £4,356 million largely reflecting stronger
equity market performance. Outside of the insurance business, there
was improved UK Motor Finance performance, including growth
following the acquisition of Tusker in the first half of 2023 and
an increase in average rental value and continued Commercial
Banking growth. The overall movement in other income is broadly
offset by the £4,424 million increase in net finance expense
in respect of insurance and investment contracts.
Total
operating expenses of £5,452 million were 14 per cent higher
than in the prior year. This reflects higher operating lease
depreciation, due to fleet size growth, the depreciation of higher
value vehicles and declines in used electric car prices,
alongside higher planned strategic investment, elevated
severance charges and continued inflationary pressure. It also
includes c.£0.1 billion relating to the sector-wide change in
the charging approach for the Bank of England Levy during the
first quarter. In the first half of 2024 the Group recognised
remediation costs of £95 million (half-year to
30 June 2023: £70 million), largely in relation to
pre-existing programmes. There have been no further charges
relating to the potential impact of the FCA review into historical
motor finance commission arrangements. An update from the FCA is
currently expected in September.
Impairment
was a net charge of £100 million (half-year to 30 June
2023: £662 million). The decrease reflects a larger
credit from improvements to the Group’s economic outlook in
the period (notably in HPI) and changes in
methodology.
The
Group recognised a tax expense of £880 million in the
period, compared to £1,006 million in the first half of
2023, reflecting decreased profits.
Loans
and advances to customers increased by £2.7 billion in the
year to date to £452.4 billion. This included growth across
most Retail product areas, with £0.7 billion growth in UK
mortgages (net of the impact of the securitisation of
£0.9 billion of legacy mortgages in the second quarter)
and £1.3 billion growth in UK Retail unsecured loans, due
to organic balance growth and lower repayments following a
securitisation in the fourth quarter of 2023. In Commercial
Banking, Small and Medium Business lending decreased by
£1.5 billion including repayments of £0.8 billion of
government-backed lending, partly offset by a
£1.0 billion increase in Corporate and Institutional
Banking balances through strategic growth. Growth of
£3.9 billion in the second quarter was driven by balance
increases across Retail, including £2.3 billion in UK
mortgages (net of £0.9 billion securitisation) and
£1.0 billion in Corporate and Institutional Banking. This
supports a positive trajectory for average interest-earning banking
assets in the second half of 2024.
Customer
deposits stood at £474.7 billion at 30 June 2024, a
healthy increase of £3.3 billion in the year to date and
£5.5 billion in the second quarter. Retail deposits were
up £4.9 billion in the first half with a combined
increase of £5.9 billion across Retail savings and
Wealth, driven by inflows to limited withdrawal and fixed products,
partly offset by £1.0 billion reduction in current account
balances. This was driven by seasonal tax payments and outflows to
savings products, including the Group’s own savings offers,
partly offset by wage inflation. Commercial Banking deposits
reduced by £1.6 billion in the first half (with
£1.9 billion growth in the second quarter). This was
driven by managing for value in Corporate and Institutional
Banking, while within Small and Medium Businesses, growth in
targeted sectors was partly offset by outflows due to business
utilisation.
Total
equity of £45.1 billion at 30 June 2024 decreased from
£47.4 billion at 31 December 2023. The movement reflected
attributable profit for the period, offset by the dividend paid in
May 2024, the redemption of a US Dollar denominated AT1 capital
instrument and the impact of the share buyback programme announced
in February 2024. At 30 June 2024, the programme had completed
£0.9 billion of the buyback, with c.1.8 billion ordinary
shares purchased.
SUMMARY OF GROUP RESULTS (continued)
Underlying results
The
Group’s underlying profit was £3,497 million, a
reduction of 13 per cent compared to £4,041 million in the
first half of 2023. Lower underlying net interest income and higher
operating lease depreciation and operating costs were partly offset
by growth in underlying other income and a lower underlying
impairment charge. Underlying profit in the second quarter was down
by 1 per cent compared to the first quarter of 2024, with lower net
income partly offset by lower operating costs.
Net incomeA
|
Half-year to
30 Jun
2024
£m
|
|
|
Half-year
to 30
Jun
2023
£m
|
|
|
Change
%
|
|
Half-year
to 31
Dec
2023
£m
|
|
|
Change
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying
net interest income
|
6,338
|
|
|
7,004
|
|
|
(10)
|
|
6,761
|
|
|
(6)
|
Underlying
other income
|
2,734
|
|
|
2,538
|
|
|
8
|
|
2,585
|
|
|
6
|
Operating
lease depreciation1
|
(679)
|
|
|
(356)
|
|
|
(91)
|
|
(600)
|
|
|
(13)
|
Net incomeA
|
8,393
|
|
|
9,186
|
|
|
(9)
|
|
8,746
|
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banking
net interest marginA
|
2.94%
|
|
|
3.18%
|
|
|
(24)bp
|
|
3.03%
|
|
|
(9)bp
|
Average
interest-earning banking assetsA
|
£449.2bn
|
|
|
£453.8bn
|
|
|
(1)
|
|
£452.9bn
|
|
|
(1)
|
1
Net of profits on
disposal of operating lease assets of £37 million (half-year
to 30 June 2023: £67 million).
Net
income of £8,393 million was down 9 per cent on the first half
of 2023, driven by lower underlying net interest income and an
increased charge for operating lease depreciation. This was partly
offset by higher underlying other income. Net income in the second
quarter of 2024 is down 2 per cent versus the first
quarter.
Underlying
net interest income of £6,338 million was down 10 per cent on
the first half of 2023, driven by an expected lower banking net
interest margin of 2.94 per cent (half-year to
30 June 2023: 3.18 per cent). The lower margin reflects
anticipated headwinds due to deposit churn and asset margin
compression, particularly in the mortgage book as it refinances in
a lower margin environment. These factors were partially offset by
benefits from higher structural hedge earnings as it refinances in
the higher rate environment. Average interest-earning banking
assets in the first half of 2024 at £449.2 billion were
slightly lower (1 per cent) compared to the first half of 2023.
This was due to a modest reduction in the mortgage book and a
reduction in Commercial Banking lending, including continued
repayments of government-backed lending in Small and Medium
Businesses. Loans and advances to customers increased by £2.7
billion in the first six months of 2024, with £3.9 billion in
the second quarter, which will support expected growth in average
interest-earning banking assets in the second half of 2024. Net
interest income in the first half of the year included non-banking
interest expense of £229 million (half-year to
30 June 2023: £155 million), increasing as a result
of higher funding costs and growth in the Group’s non-banking
businesses.
Underlying
net interest income of £3,154 million in the second quarter of
2024 was slightly lower than the first quarter (three months to 31
March 2024: £3,184 million), with an anticipated continuation
of first quarter trends, including asset margin compression (mainly
within UK mortgages), deposit mix headwinds and lower Commercial
Banking deposits. The Group still expects the banking net interest
margin for 2024 to be greater than 290 basis points and
average interest-earning banking assets to be greater than
£450 billion.
The
Group manages the risk to earnings and capital from movements in
interest rates by hedging the net liabilities which are stable or
less sensitive to movements in rates. The notional balance of the
sterling structural hedge was £242 billion (31 December
2023: £247 billion, 31 March 2024: £244 billion)
with a weighted average duration of approximately three-and-a-half
years (31 December 2023: approximately three-and-a-half
years). The Group continues to expect a modest reduction in the
notional balance during 2024, inclusive of the reduction in the
first half, with balances stabilising over the course of the year.
The Group generated c.£1.9 billion of total income from
sterling structural hedge balances in the first half of 2024,
representing material growth over the prior year (half-year to 30
June 2023: £1.6 billion). The Group expects sterling
structural hedge earnings in 2024 to be slightly over £0.7
billion higher than in 2023.
SUMMARY OF GROUP RESULTS (continued)
Underlying
other income in the first half of 2024 of £2,734 million was 8
per cent higher compared to £2,538 million in the first
half of 2023. Retail was up 14 per cent versus the first half of
2023, primarily due to UK Motor Finance, including growth following
the acquisition of Tusker in the first half of 2023 and an increase
in fleet size and average rental value. Within Commercial Banking,
11 per cent growth was driven by a strong markets performance
due to growth from strategic investment and higher levels of client
activity. Insurance, Pensions and Investments underlying other
income grew by 5 per cent compared to the first half of 2023,
driven by market share gains within general insurance alongside
favourable market returns partly offset by the effects of the
agreed sale (subject to regulatory approval) of the in-force bulk
annuity portfolio (with associated income and costs for the period
recognised within volatility and other items). Excluding the
in-force bulk annuity portfolio, Insurance, Pensions and
Investments was up 9 per cent. In Equity Investments and Central
Items underlying other income was impacted by the timing of exits
in the first half in the Group’s equity investment
businesses. Compared to the first quarter of 2024, underlying other
income was 4 per cent higher in the second quarter, primarily
driven by growth in Retail and Insurance, Pensions and
Investments.
The
Group delivered organic growth in assets under administration (AuA)
in Insurance, Pensions and Investments and Wealth (reported within
Retail), with combined £2.9 billion net new money in open book
AuA over the first half of 2024. In total, open book AuA now stands
at c.£193 billion.
Operating
lease depreciation of £679 million increased compared to the
prior year (half-year to 30 June
2023: £356 million), largely given fleet growth, the
depreciation of higher value vehicles and declines in used electric
car prices. This decline in used electric car prices drove a
c.£100 million additional charge in the second quarter to
reflect future expected residual values.
Total costsA
|
Half-year to
30 Jun
2024
£m
|
|
|
Half-year
to 30
Jun
2023
£m
|
|
|
Change
%
|
|
Half-year
to
31 Dec
2023
£m
|
|
|
Change
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
costsA
|
4,700
|
|
|
4,413
|
|
|
(7)
|
|
4,727
|
|
|
1
|
Remediation
|
95
|
|
|
70
|
|
|
(36)
|
|
605
|
|
|
84
|
Total costsA
|
4,795
|
|
|
4,483
|
|
|
(7)
|
|
5,332
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost:income
ratioA
|
57.1%
|
|
|
48.8%
|
|
|
8.3pp
|
|
61.0%
|
|
|
(3.9)pp
|
Total
costs, including the Bank of England Levy and remediation, of
£4,795 million were 7 per cent higher than the prior year,
with operating costs of £4,700 million up 7 per cent.
Operating costs include c.£0.1 billion relating to the
sector-wide change in the charging approach for the Bank of England
Levy (excluding this Levy, operating costs were up 4 per cent),
taken in the first quarter. The Levy will have a broadly neutral
impact on profit in 2024, with an offsetting benefit recognised in
net interest income over the course of the year. The Group
maintains its cost discipline with cost efficiencies helping to
offset higher ongoing strategic investment, planned elevated
severance charges and continued inflationary pressure. The
Group’s cost:income ratio, including remediation, for the
first half of 2024 was 57.1 per cent compared to 48.8 per
cent in the prior year. Operating costs in 2024 are still expected
to be c.£9.4 billion including c.£0.1 billion for
the new Bank of England Levy.
The
Group recognised remediation costs of £95 million in the first
half (half-year to 30 June 2023: £70 million), largely in
relation to pre-existing programmes. There have been no further
charges relating to the potential impact of the FCA review into
historical motor finance commission arrangements. An update from
the FCA is currently expected in September.
SUMMARY OF GROUP RESULTS (continued)
Underlying impairmentA
|
Half-year to
30 Jun
2024
£m
|
|
|
Half-year
to 30
Jun
2023
£m
|
|
|
Change
%
|
|
Half-year
to 31
Dec
2023
£m
|
|
|
Change
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charges
(credits) pre-updated MES1
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
463
|
|
|
551
|
|
|
16
|
|
513
|
|
|
10
|
Commercial
Banking
|
(28)
|
|
|
108
|
|
|
|
|
(595)
|
|
|
(95)
|
Other
|
(10)
|
|
|
(2)
|
|
|
|
|
(10)
|
|
|
|
|
425
|
|
|
657
|
|
|
35
|
|
(92)
|
|
|
|
Updated
economic outlook
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
(269)
|
|
|
41
|
|
|
|
|
(274)
|
|
|
(2)
|
Commercial
Banking
|
(55)
|
|
|
(36)
|
|
|
53
|
|
12
|
|
|
|
|
(324)
|
|
|
5
|
|
|
|
|
(262)
|
|
|
24
|
Underlying impairment charge (credit)A
|
101
|
|
|
662
|
|
|
85
|
|
(354)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset
quality ratioA
|
0.05%
|
|
|
0.29%
|
|
|
(24)bp
|
|
(0.15)%
|
|
|
20bp
|
Total
underlying expected credit loss allowance
(at end
of period)A
|
3,847
|
|
|
5,419
|
|
|
(29)
|
|
4,337
|
|
|
(11)
|
1
Impairment charges
excluding the impact from updated economic outlook taken each
quarter.
Asset
quality remained strong in the half-year with resilient credit
performance throughout the period. In UK mortgages, further
reductions in new to arrears and flows to default have been
observed in the second quarter. Unsecured Retail portfolios
continue to exhibit stable new to arrears and default trends.
Credit quality remains stable and resilient in Commercial
Banking.
Underlying
impairment was a charge of £101 million (half-year to 30 June
2023: £662 million), resulting in an asset quality ratio
of 5 basis points. The charge is after a £324 million multiple
economic scenarios (MES) credit (half-year to 30 June 2023: £5
million charge), primarily from an improved economic outlook,
notably in HPI and changes in methodology (see below). The
pre-updated MES charge of £425 million (half-year to 30 June
2023: £657 million) is equivalent to an asset quality
ratio of 19 basis points. Compared to the prior year, the pre-MES
charge is lower, benefitting from strong portfolio performance and
the release of judgemental adjustments for inflation and interest
rate risks, given portfolio performance and lower charges in UK
mortgages. Commercial Banking has benefitted from a one-off release
from loss rates used in the model, while observing a low charge on
new and existing Stage 3 clients.
The
underlying expected credit loss (ECL) allowance reduced to
£3.8 billion (31 December 2023: £4.3 billion) in the
period, reflecting releases from improvements to the Group’s
base case scenario. In addition, there has been a further reduction
driven by evolution of the CPI inflation and UK Bank Rate profiles
in the severe downside scenario, reflecting the more balanced role
of a demand and a supply shock in the current environment.
Alongside delaying the point of dispersion of all scenarios from
the base case by a quarter, this contributed to the MES credit in
the second quarter. The uplift from the base case to
probability-weighted ECL remains at £0.5 billion
(31 December 2023: £0.7 billion).
At 30
June 2024, total judgemental adjustments reduced the ECL allowance
by £19 million (31 December 2023: increased the ECL allowance
by £67 million). The reduction in the period is from the
release, or reduced impact, of judgements held in respect of
inflationary and interest rate risks in the Retail portfolios in
the second quarter. This reflects the resilient performance
observed from those customers identified with potentially
heightened affordability risk, as well as inflation and the UK Bank
Rate now stabilising.
Stage 3
assets at £10.2 billion are up slightly in the first
half, driven by UK mortgages (31 December 2023:
£10.1 billion). Write-offs remain low. Stage 2 assets
have reduced in the first half to £45.7 billion
(31 December 2023: £56.5 billion). The reduction is
primarily driven by the transfer of assets from Stage 2 to Stage 1
as a result of improvements in the economic outlook. In Stage 2,
90.4 per cent of loans are up to date (31 December 2023:
91.3 per cent). The Group now expects the asset quality ratio
to be less than 20 basis points in 2024.
SUMMARY OF GROUP RESULTS (continued)
Restructuring, volatility and other items
|
Half-year to
30 Jun
2024
£m
|
|
|
Half-year
to
30 Jun
2023
£m
|
|
|
Change
%
|
|
Half-year
to 31
Dec
2023
£m
|
|
|
Change
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying profit
|
3,497
|
|
|
4,041
|
|
|
(13)
|
|
3,768
|
|
|
(7)
|
Restructuring
|
(15)
|
|
|
(25)
|
|
|
40
|
|
(129)
|
|
|
88
|
Market
volatility and asset sales
|
(65)
|
|
|
(63)
|
|
|
(3)
|
|
98
|
|
|
|
Amortisation
of purchased intangibles
|
(41)
|
|
|
(35)
|
|
|
(17)
|
|
(45)
|
|
|
9
|
Fair
value unwind
|
(52)
|
|
|
(48)
|
|
|
(8)
|
|
(59)
|
|
|
12
|
Volatility and other items
|
(158)
|
|
|
(146)
|
|
|
(8)
|
|
(6)
|
|
|
|
Statutory profit before tax
|
3,324
|
|
|
3,870
|
|
|
(14)
|
|
3,633
|
|
|
(9)
|
Tax
expense
|
(880)
|
|
|
(1,006)
|
|
|
13
|
|
(979)
|
|
|
10
|
Statutory profit after tax
|
2,444
|
|
|
2,864
|
|
|
(15)
|
|
2,654
|
|
|
(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share
|
3.4p
|
|
|
3.9p
|
|
|
(0.5)p
|
|
3.7p
|
|
|
(0.3)p
|
Return
on tangible equityA
|
13.5%
|
|
|
16.6%
|
|
|
(3.1)pp
|
|
15.3%
|
|
|
(1.8)pp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 Jun2024
|
|
|
At 31
Mar2024
|
|
|
Change
%
|
|
At 31
Dec 2023
|
|
|
Change
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible
net assets per shareA
|
49.6p
|
|
|
51.2p
|
|
|
(1.6)p
|
|
50.8p
|
|
|
(1.2)p
|
Restructuring
costs for the first half of 2024 were £15 million (half-year
to 30 June 2023: £25 million) and include costs relating
to the integration of Embark and Tusker. Volatility and other items
were a net loss of £158 million for the first half (half-year
to 30 June 2023: net loss of £146 million). This
comprised £65 million negative market volatility
(half-year to 30 June 2023: £63 million), £41
million for the amortisation of purchased intangibles (half-year to
30 June 2023: £35 million) and £52 million
relating to fair value unwind (half-year to 30 June 2023:
£48 million). Market volatility was substantially driven
by longer-term rate rises in the first six months, causing negative
insurance volatility, partly offset by positive impacts from
banking volatility.
The
return on tangible equity for the first half of 2024 was 13.5 per
cent (half-year to 30 June 2023: 16.6 per cent). The
Group continues to expect the return on tangible equity for 2024 to
be c.13 per cent.
Tangible
net assets per share at 30 June 2024 were 49.6 pence, down 1.2
pence in the first half (31 December 2023: 50.8 pence) and
down 1.6 pence in the second quarter. The reductions resulted from
capital distributions in respect of 2023, including the payment of
the full year ordinary dividend in the second quarter, alongside
increased longer-term rates impacting the cash flow hedge reserve
and pension surplus and the foreign exchange impact on the
redemption of a US Dollar denominated AT1 capital instrument. This
was offset by attributable profit and a reduction in the number of
shares in issue due to the ongoing ordinary share buyback. Tangible
net assets per share at 30 June 2024 was reduced by a further 0.9
pence as a result of an accrual for the ongoing ordinary share
buyback without the corresponding reduction in the number of
shares.
Tax
The
Group recognised a tax expense of £880 million in the first
half of the year (half-year to 30 June 2023:
£1,006 million). The Group expects a medium-term
effective tax rate of around 27 per cent based on the banking
surcharge rate of 3 per cent and the corporation tax rate of 25 per
cent.
SUMMARY OF GROUP RESULTS (continued)
Balance sheet
|
At 30 Jun
2024
|
|
|
At 31
Mar
2024
|
|
|
Change
%
|
|
At 31
Dec
2023
|
|
|
Change
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
and advances to customers
|
£452.4bn
|
|
|
£448.5bn
|
|
|
1
|
|
£449.7bn
|
|
|
1
|
Customer
deposits
|
£474.7bn
|
|
|
£469.2bn
|
|
|
1
|
|
£471.4bn
|
|
|
1
|
Loan to
deposit ratioA
|
95%
|
|
|
96%
|
|
|
(1pp)
|
|
95%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale
funding
|
£97.6bn
|
|
|
£99.9bn
|
|
|
(2)
|
|
£98.7bn
|
|
|
(1)
|
Wholesale
funding <1 year maturity
|
£38.0bn
|
|
|
£39.8bn
|
|
|
(5)
|
|
£35.1bn
|
|
|
8
|
of
which: money market funding <1 year maturity1
|
£20.7bn
|
|
|
£22.7bn
|
|
|
(9)
|
|
£23.8bn
|
|
|
(13)
|
Liquidity
coverage ratio – eligible assets2
|
£136.0bn
|
|
|
£136.4bn
|
|
|
|
|
£136.0bn
|
|
|
|
Liquidity
coverage ratio3
|
144%
|
|
|
143%
|
|
|
1pp
|
|
142%
|
|
|
2pp
|
Net
stable funding ratio4
|
130%
|
|
|
130%
|
|
|
|
|
130%
|
|
|
|
1
Excludes balances
relating to margins of £2.1 billion (31 March 2024: £2.2
billion; 31 December 2023: £2.4 billion).
2
Eligible assets are
calculated as a monthly rolling simple average of month end
observations over the previous 12 months post any liquidity
haircuts.
3
The liquidity
coverage ratio is calculated as a monthly rolling simple average
over the previous 12 months.
4
Net stable funding
ratio is based on an average of the four previous
quarters.
Loans
and advances to customers increased by £2.7 billion in the
year to date to £452.4 billion. This included growth across
most Retail product areas, with £0.7 billion growth in UK
mortgages (net of the impact of the securitisation of
£0.9 billion of legacy mortgages in the second quarter)
and £1.3 billion growth in UK Retail unsecured loans, due
to organic balance growth and lower repayments following a
securitisation in the fourth quarter of 2023. In Commercial
Banking, Small and Medium Business lending decreased by
£1.5 billion including repayments of £0.8 billion of
government-backed lending, partly offset by a
£1.0 billion increase in Corporate and Institutional
Banking balances through strategic growth. Growth of
£3.9 billion in the second quarter was driven by balance
increases across Retail, including £2.3 billion in UK
mortgages (net of £0.9 billion securitisation) and
£1.0 billion in Corporate and Institutional Banking. This
supports a positive trajectory for average interest-earning banking
assets in the second half of 2024.
Customer
deposits stood at £474.7 billion at 30 June 2024, a
healthy increase of £3.3 billion in the year to date and
£5.5 billion in the second quarter. Retail deposits were
up £4.9 billion in the first half with a combined
increase of £5.9 billion across Retail savings and
Wealth, driven by inflows to limited withdrawal and fixed products,
partly offset by £1.0 billion reduction in current account
balances. This was driven by seasonal tax payments and outflows to
savings products, including the Group’s own savings offers,
partly offset by wage inflation. Commercial Banking deposits
reduced by £1.6 billion in the first half (with
£1.9 billion growth in the second quarter). This was
driven by managing for value in Corporate and Institutional
Banking, while within Small and Medium Businesses, growth in
targeted sectors was partly offset by outflows due to business
utilisation.
The
Group has a large, high quality liquid asset portfolio held mainly
in cash and government bonds, with all assets hedged for interest
rate risk. The Group’s liquid assets continue to
significantly exceed regulatory requirements and internal risk
appetite, with a strong, stable liquidity coverage ratio of 144 per
cent (31 December 2023: 142 per cent) and a strong net stable
funding ratio of 130 per cent (31 December 2023: 130 per
cent). The loan to deposit ratio of 95 per cent, stable
compared to 31 December 2023, continues to reflect a robust funding
and liquidity position.
Capital
|
At 30 Jun
2024
|
|
|
At 31
Mar
2024
|
|
|
Change
%
|
|
At 31
Dec
2023
|
|
|
Change
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CET1
ratio
|
14.1%
|
|
|
13.9%
|
|
|
0.2pp
|
|
14.6%
|
|
|
(0.5)pp
|
Pro
forma CET1 ratioA,1
|
14.1%
|
|
|
13.9%
|
|
|
0.2pp
|
|
13.7%
|
|
|
0.4pp
|
UK
leverage ratio
|
5.4%
|
|
|
5.6%
|
|
|
(0.2)pp
|
|
5.8%
|
|
|
(0.4)pp
|
Risk-weighted
assets
|
£222.0bn
|
|
|
£222.8bn
|
|
|
|
|
£219.1bn
|
|
|
1
|
SUMMARY OF GROUP RESULTS (continued)
Capital generation
Pro forma CET1 ratio as at 31 December 20231
|
13.7%
|
|
Banking
build (including impairment charge) (bps)
|
110
|
|
Insurance
dividend (bps)
|
10
|
|
Risk-weighted
assets (bps)
|
(18)
|
|
Other
movements2
(bps)
|
(8)
|
|
Capital generation (bps)
|
94
|
|
Retail
secured CRD IV model updates and phased unwind of IFRS 9
transitional relief (bps)
|
(7)
|
|
Capital generation (post CRD IV and transitional headwinds)
(bps)
|
87
|
|
Ordinary
dividend (bps)
|
(48)
|
|
CET1 ratio as at 30 June 2024
|
14.1%
|
|
1
31 December 2023
reflects both the full impact of the share buyback announced in
respect of 2023 and the ordinary dividend received from the
Insurance business in February 2024, but excludes the impact of the
phased unwind of IFRS 9 relief on 1 January 2024.
2
Includes
share-based payments, market volatility and FX loss on USD AT1
redemption.
The
Group’s CET1 capital ratio at 30 June 2024 was 14.1 per cent
(31 December 2023: 13.7 per cent pro forma). Capital generation
after regulatory headwinds during the first half of the year was
87 basis points (47 basis points in the second quarter). This
reflected robust banking build and the £200 million interim
half-year dividend received from the Insurance business in June,
partially offset by risk-weighted asset increases and other
movements. Other movements include a 15 basis point impact
given the recognition of a foreign exchange translation loss upon
the redemption of a US Dollar denominated AT1 capital instrument in
June. Regulatory headwinds of 7 basis points reflect the
reduction in the transitional factor applied to IFRS 9 dynamic
relief on 1 January 2024 and an adjustment for part of the impact
of the Retail secured CRD IV models. The Group has accrued a
foreseeable ordinary dividend of 48 basis points, inclusive of the
announced interim ordinary dividend of 1.06 pence per share. The
Group continues to expect capital generation in 2024 to be c.175
basis points.
As
mentioned in the Group’s 2023 Full Year Results, there will
be no further deficit contributions made to the Group’s main
defined benefit pension schemes, fixed or variable, for this
triennial period (to 31 December 2025).
Risk-weighted
assets increased by £2.9 billion to £222.0 billion at 30
June 2024 (31 December 2023: £219.1 billion). This
incorporates the impact of Retail lending growth, offset by
optimisation including capital efficient securitisation activity,
in addition to other movements. In the context of the Retail
secured CRD IV models, it is estimated that a
£5 billion risk-weighted asset increase will be required
over 2024 to 2026, inclusive of the additional risk-weighted assets
recognised in the first half of the year, noting that this will be
subject to final model outcomes. The Group’s risk-weighted
assets guidance for 2024 remains unchanged at between
£220 billion and £225 billion.
The
Group’s total regulatory CET1 capital requirement remains at
around 12 per cent. The Board’s view of the ongoing
level of CET1 capital required to grow the business, meet current
and future regulatory requirements and cover economic and business
uncertainties is c.13.0 per cent. This includes a management
buffer of around 1 per cent. In order to manage risks and
distributions in an orderly way, the Board expects to pay down to
the previous target of c.13.5 per cent by the end of 2024
before progressing towards paying down to the current capital
target of c.13.0 per cent by the end of 2026.
Dividend and share buyback
The
Group has a progressive and sustainable ordinary dividend policy
whilst maintaining the flexibility to return further surplus
capital through buybacks or special dividends. The Board has
recommended an interim ordinary dividend of 1.06 pence per
share, an increase of 15 per cent compared to the first half of
2023, in line with the Board’s commitment to capital returns.
The Board intends to pay down to its ongoing capital target of c.13
per cent by the end of 2026.
In
February this year, the Board approved an ordinary share buyback
programme of up to £2.0 billion to return surplus capital in
respect of 2023. This commenced in February 2024 and at 30 June
2024, the programme had completed £0.9 billion of the
buyback, with c.1.8 billion ordinary shares purchased.
DIVISIONAL RESULTS
Segmental analysis - underlying basisA
Half-year to 30 June 2024
|
Retail
£m
|
|
Commercial
Banking
£m
|
Insurance,
Pensions and
Investments
£m
|
|
Equity
Investments
and Central
Items
£m
|
|
|
Group
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying
net interest income
|
4,430
|
|
|
1,696
|
|
|
(74)
|
|
|
286
|
|
|
6,338
|
|
Underlying
other income
|
1,148
|
|
|
947
|
|
|
649
|
|
|
(10)
|
|
|
2,734
|
|
Operating
lease depreciation
|
(677)
|
|
|
(2)
|
|
|
–
|
|
|
–
|
|
|
(679)
|
|
Net income
|
4,901
|
|
|
2,641
|
|
|
575
|
|
|
276
|
|
|
8,393
|
|
Operating
costs
|
(2,778)
|
|
|
(1,363)
|
|
|
(458)
|
|
|
(101)
|
|
|
(4,700)
|
|
Remediation
|
(54)
|
|
|
(32)
|
|
|
(5)
|
|
|
(4)
|
|
|
(95)
|
|
Total costs
|
(2,832)
|
|
|
(1,395)
|
|
|
(463)
|
|
|
(105)
|
|
|
(4,795)
|
|
Underlying profit before impairment
|
2,069
|
|
|
1,246
|
|
|
112
|
|
|
171
|
|
|
3,598
|
|
Underlying
impairment (charge) credit
|
(194)
|
|
|
83
|
|
|
7
|
|
|
3
|
|
|
(101)
|
|
Underlying profit
|
1,875
|
|
|
1,329
|
|
|
119
|
|
|
174
|
|
|
3,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banking
net interest marginA
|
2.49%
|
|
|
4.31%
|
|
|
|
|
|
|
|
|
2.94%
|
|
Average
interest-earning banking assetsA
|
£367.0bn
|
|
|
£82.2bn
|
|
|
–
|
|
|
–
|
|
|
£449.2bn
|
|
Asset
quality ratioA
|
0.11%
|
|
|
(0.17)%
|
|
|
|
|
|
|
|
|
0.05%
|
|
Loans
and advances to customers1
|
£365.1bn
|
|
|
£88.1bn
|
|
|
–
|
|
|
(£0.8bn)
|
|
|
£452.4bn
|
|
Customer
deposits
|
£313.3bn
|
|
|
£161.2bn
|
|
|
–
|
|
|
£0.2bn
|
|
|
£474.7bn
|
|
Risk-weighted
assets
|
£123.3bn
|
|
|
£73.2bn
|
|
|
£0.2bn
|
|
|
£25.3bn
|
|
|
£222.0bn
|
|
Half-year
to 30 June 2023
|
Retail
£m
|
|
Commercial
Banking
£m
|
Insurance,
Pensions
and
Investments
£m
|
|
Equity
Investments
and
Central
Items
£m
|
|
|
Group
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying
net interest income
|
5,064
|
|
|
1,934
|
|
|
(70)
|
|
|
76
|
|
|
7,004
|
|
Underlying
other income
|
1,006
|
|
|
856
|
|
|
619
|
|
|
57
|
|
|
2,538
|
|
Operating
lease depreciation
|
(351)
|
|
|
(5)
|
|
|
–
|
|
|
–
|
|
|
(356)
|
|
Net income
|
5,719
|
|
|
2,785
|
|
|
549
|
|
|
133
|
|
|
9,186
|
|
Operating
costs
|
(2,607)
|
|
|
(1,253)
|
|
|
(451)
|
|
|
(102)
|
|
|
(4,413)
|
|
Remediation
|
(15)
|
|
|
(43)
|
|
|
(8)
|
|
|
(4)
|
|
|
(70)
|
|
Total costs
|
(2,622)
|
|
|
(1,296)
|
|
|
(459)
|
|
|
(106)
|
|
|
(4,483)
|
|
Underlying profit before impairment
|
3,097
|
|
|
1,489
|
|
|
90
|
|
|
27
|
|
|
4,703
|
|
Underlying
impairment (charge) credit
|
(592)
|
|
|
(72)
|
|
|
1
|
|
|
1
|
|
|
(662)
|
|
Underlying profit
|
2,505
|
|
|
1,417
|
|
|
91
|
|
|
28
|
|
|
4,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banking
net interest marginA
|
2.89%
|
|
|
4.70%
|
|
|
|
|
|
|
|
|
3.18%
|
|
Average
interest-earning banking assetsA
|
£364.1bn
|
|
|
£87.8bn
|
|
|
–
|
|
|
£1.9bn
|
|
|
£453.8bn
|
|
Asset
quality ratioA
|
0.33%
|
|
|
0.16%
|
|
|
|
|
|
|
|
|
0.29%
|
|
Loans
and advances to customers1
|
£361.9bn
|
|
|
£92.1bn
|
|
|
–
|
|
|
(£3.3bn)
|
|
|
£450.7bn
|
|
Customer
deposits
|
£305.9bn
|
|
|
£163.6bn
|
|
|
–
|
|
|
£0.3bn
|
|
|
£469.8bn
|
|
Risk-weighted
assets
|
£114.8bn
|
|
|
£75.5bn
|
|
|
£0.2bn
|
|
|
£24.8bn
|
|
|
£215.3bn
|
|
1
Equity Investments
and Central Items includes central fair value hedge accounting
adjustments.
DIVISIONAL RESULTS (continued)
Segmental analysis - underlying basisA
(continued)
Half-year
to 31 December 2023
|
Retail
£m
|
|
Commercial
Banking
£m
|
Insurance,
Pensions
and
Investments
£m
|
|
Equity
Investments
and
Central
Items
£m
|
|
|
Group
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying
net interest income
|
4,583
|
|
|
1,865
|
|
|
(62)
|
|
|
375
|
|
|
6,761
|
|
Underlying
other income
|
1,153
|
|
|
835
|
|
|
590
|
|
|
7
|
|
|
2,585
|
|
Operating
lease depreciation
|
(597)
|
|
|
(3)
|
|
|
–
|
|
|
–
|
|
|
(600)
|
|
Net income
|
5,139
|
|
|
2,697
|
|
|
528
|
|
|
382
|
|
|
8,746
|
|
Operating
costs
|
(2,862)
|
|
|
(1,394)
|
|
|
(429)
|
|
|
(42)
|
|
|
(4,727)
|
|
Remediation
|
(500)
|
|
|
(84)
|
|
|
(6)
|
|
|
(15)
|
|
|
(605)
|
|
Total costs
|
(3,362)
|
|
|
(1,478)
|
|
|
(435)
|
|
|
(57)
|
|
|
(5,332)
|
|
Underlying profit before impairment
|
1,777
|
|
|
1,219
|
|
|
93
|
|
|
325
|
|
|
3,414
|
|
Underlying
impairment (charge) credit
|
(239)
|
|
|
583
|
|
|
6
|
|
|
4
|
|
|
354
|
|
Underlying profit
|
1,538
|
|
|
1,802
|
|
|
99
|
|
|
329
|
|
|
3,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banking
net interest marginA
|
2.58%
|
|
|
4.56%
|
|
|
|
|
|
|
|
|
3.03%
|
|
Average
interest-earning banking assetsA
|
£367.1bn
|
|
|
£85.8bn
|
|
|
–
|
|
|
–
|
|
|
£452.9bn
|
|
Asset
quality ratioA
|
0.13%
|
|
|
(1.25)%
|
|
|
|
|
|
|
|
|
(0.15)%
|
|
Loans
and advances to customers1
|
£361.2bn
|
|
|
£88.6bn
|
|
|
–
|
|
|
(£0.1bn)
|
|
|
£449.7bn
|
|
Customer
deposits
|
£308.4bn
|
|
|
£162.8bn
|
|
|
–
|
|
|
£0.2bn
|
|
|
£471.4bn
|
|
Risk-weighted
assets
|
£119.3bn
|
|
|
£74.2bn
|
|
|
£0.2bn
|
|
|
£25.4bn
|
|
|
£219.1bn
|
|
1
Equity Investments
and Central Items includes central fair value hedge accounting
adjustments.
DIVISIONAL RESULTS (continued)
Retail
Retail
offers a broad range of financial services products to personal
customers, including current accounts, savings, mortgages, credit
cards, unsecured loans, motor finance and leasing solutions. Its
aim is to build enduring relationships that meet more of its
customers’ financial needs and improve their financial
resilience throughout their lifetime, with personalised products
and services. Retail operates the largest digital bank and branch
network in the UK and continues to improve service levels and
reduce conduct risk, whilst working within a prudent risk appetite.
Through strategic investment, alongside increased use of data,
Retail aims to deepen existing and new consumer relationships and
broaden its intermediary offering, to improve customer experience,
operational efficiency and increasingly tailor
propositions.
Strategic progress
●
UK’s largest
digital bank with 22.0 million digitally active users, of which
19.4 million actively use the Group’s mobile
apps, up
4 per cent in year. Mobile messaging service interactions increased
70 per cent versus prior year
●
Introduced dynamic
ecosystems within the mobile apps1, bringing together
products and services such as savings and investments, mortgages
and home insurance into spaces aligned to how customers think about
their finances
●
Digital capability
enhancements, including new eligibility likelihood messaging in
‘Your Credit Score’, the Group’s credit checking
tool which now has over 10 million customer registrations, a new
mobile journey for customers to transfer in their existing ISAs,
and partnering with ApTap to provide a bill management marketplace
for mortgage customers
●
Scaled up the
‘Lloyds Bank 360’ mass affluent proposition to
c.500,000 customers and launched new dedicated remortgage product
for these customers; introduced digital investment advice service
on customer mobile apps
●
Renewed and
expanded partnership with Visa, the Group’s preferred scheme
partner, to further enhance the debit and credit card businesses.
Removed fees on overseas debit card usage for the majority of
packaged bank accounts
●
Cash Access UK
Banking Hub network doubled in size this year, providing continued
support to customers in the heart of their communities. Trial of a
new banking kiosk format as we continue to innovate on
distribution
●
Invested in
technology business Coadjute, whose goal is to modernise and
transform how all parties involved in property transactions
connect, collaborate and communicate, to improve and speed up the
home buying journey
●
On track to meet
2024 sustainability targets, having lent £9.1 billion for
mortgages2
on properties with an EPC rating of B or higher and £7.6
billion for financing and leasing of battery electric and plug-in
hybrid vehicles2
●
Partnered with
iconic British brand Aston Martin as their retail finance provider
for UK vehicle sales
Financial performance
●
Underlying net
interest income 13 per cent lower, reflecting anticipated mortgage
and unsecured lending margin compression, deposit mix headwinds,
partly offset by structural hedge earnings in the higher rate
environment
●
Underlying other
income up 14 per cent, driven by UK Motor Finance, including growth
following the acquisition of Tusker in the first half of 2023 and
an increase in average rental value
●
Operating lease
depreciation charge higher due to fleet growth, the depreciation of
higher value vehicles and declines in used electric car prices, the
latter driving a c.£100 million additional charge in the
second quarter
●
Operating costs up
7 per cent, with cost efficiencies helping to offset ongoing
strategic investment (including planned elevated severance), the
sector-wide Bank of England Levy and inflationary pressure.
Remediation costs of £54 million relate largely to
pre-existing programmes
●
Underlying
impairment charge of £194 million is lower than prior year.
This is due to updated economic scenarios resulting in a £269
million credit (notably an improved HPI outlook), the release of
judgmental adjustments for inflation and interest rate risks and
further improvement in UK mortgages credit performance
●
Loans and advances
to customers up £3.9 billion with growth across most product
areas. £0.7 billion growth in UK mortgages (net of the
securitisation of £0.9 billion legacy mortgages) and
£1.3 billion growth in UK Retail unsecured loans, due to
organic balance growth and lower repayments following a
securitisation in the fourth quarter of 2023
●
Customer deposits
up 2 per cent, including a £6.7 billion increase in savings,
with the higher rate environment driving inflows to fixed and
limited withdrawal products. Current account balances down
£1.0 billion from seasonal tax payments and outflows to
savings including the Groups own offering, partly offset by wage
inflation
●
Risk-weighted
assets up 3 per cent to £123.3 billion, due to higher lending
balances and an adjustment for part of the impact of the Retail
secured CRD IV models, partly offset by the securitisation of
legacy mortgage loans
1
Available to
Halifax, Lloyds Bank and Bank of Scotland customers, dependent on
product holding and mobile operating system.
2
Since 1 January
2022, new mortgage lending on residential property with an Energy
Performance Certificate rating of B or higher at 31 March
2024; and new lending for Black Horse and operating leases for Lex
Autolease and Tusker at 30 June 2024.
DIVISIONAL RESULTS (continued)
Retail (continued)
Retail performance summaryA
|
Half-year to
30 Jun
2024
£m
|
|
|
Half-year
to 30
Jun
2023
£m
|
|
|
Change
%
|
|
Half-year
to 31
Dec
2023
£m
|
|
|
Change
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying
net interest income
|
4,430
|
|
|
5,064
|
|
|
(13)
|
|
4,583
|
|
|
(3)
|
Underlying
other income
|
1,148
|
|
|
1,006
|
|
|
14
|
|
1,153
|
|
|
|
Operating
lease depreciation
|
(677)
|
|
|
(351)
|
|
|
(93)
|
|
(597)
|
|
|
(13)
|
Net income
|
4,901
|
|
|
5,719
|
|
|
(14)
|
|
5,139
|
|
|
(5)
|
Operating
costs
|
(2,778)
|
|
|
(2,607)
|
|
|
(7)
|
|
(2,862)
|
|
|
3
|
Remediation
|
(54)
|
|
|
(15)
|
|
|
|
|
(500)
|
|
|
89
|
Total costs
|
(2,832)
|
|
|
(2,622)
|
|
|
(8)
|
|
(3,362)
|
|
|
16
|
Underlying profit before impairment
|
2,069
|
|
|
3,097
|
|
|
(33)
|
|
1,777
|
|
|
16
|
Underlying
impairment
|
(194)
|
|
|
(592)
|
|
|
67
|
|
(239)
|
|
|
19
|
Underlying profit
|
1,875
|
|
|
2,505
|
|
|
(25)
|
|
1,538
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banking
net interest marginA
|
2.49%
|
|
|
2.89%
|
|
|
(40)bp
|
|
2.58%
|
|
|
(9)bp
|
Average
interest-earning banking assetsA
|
£367.0bn
|
|
|
£364.1bn
|
|
|
1
|
|
£367.1bn
|
|
|
|
Asset
quality ratioA
|
0.11%
|
|
|
0.33%
|
|
|
(22)bp
|
|
0.13%
|
|
|
(2)bp
|
|
At 30 Jun
2024
£bn
|
|
|
At 31
Mar
2024
£bn
|
|
|
Change
%
|
|
At 31
Dec
2023
£bn
|
|
|
Change
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK
mortgages1,2
|
306.9
|
|
|
304.6
|
|
|
1
|
|
306.2
|
|
|
|
Credit
cards
|
15.6
|
|
|
15.2
|
|
|
3
|
|
15.1
|
|
|
3
|
UK
Retail unsecured loans
|
8.2
|
|
|
7.6
|
|
|
8
|
|
6.9
|
|
|
19
|
UK
Motor Finance
|
16.2
|
|
|
15.8
|
|
|
3
|
|
15.3
|
|
|
6
|
Overdrafts
|
1.0
|
|
|
1.0
|
|
|
|
|
1.1
|
|
|
(9)
|
Other1,3
|
17.2
|
|
|
16.9
|
|
|
2
|
|
16.6
|
|
|
4
|
Loans and advances to customers
|
365.1
|
|
|
361.1
|
|
|
1
|
|
361.2
|
|
|
1
|
Operating
lease assets4
|
6.9
|
|
|
6.8
|
|
|
1
|
|
6.5
|
|
|
6
|
Total customer assets
|
372.0
|
|
|
367.9
|
|
|
1
|
|
367.7
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
accounts
|
101.7
|
|
|
103.1
|
|
|
(1)
|
|
102.7
|
|
|
(1)
|
Savings
accounts5
|
201.5
|
|
|
196.4
|
|
|
3
|
|
194.8
|
|
|
3
|
Wealth
|
10.1
|
|
|
10.2
|
|
|
(1)
|
|
10.9
|
|
|
(7)
|
Customer deposits
|
313.3
|
|
|
309.7
|
|
|
1
|
|
308.4
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-weighted assets
|
123.3
|
|
|
121.4
|
|
|
2
|
|
119.3
|
|
|
3
|
1
From the first
quarter of 2024, open mortgage book and closed mortgage book loans
and advances, previously presented separately, are reported
together as UK mortgages; Wealth loans and advances, previously
reported separately, are included within Retail other. The
31 December 2023 comparative is presented on a consistent
basis.
2
The increase
between 31 March 2024 and 30 June 2024 is net of the impact of the
securitisation of £0.9 billion of legacy Retail mortgages in
May 2024.
3
Within loans and
advances, Retail other includes the European and Wealth
businesses.
4
Operating lease
assets relate to Lex Autolease and Tusker.
5
From the first
quarter of 2024, Retail relationship savings accounts and Retail
tactical savings accounts, previously reported separately, are
reported together as Retail savings accounts. The 31 December 2023
comparative is presented on a consistent basis.
DIVISIONAL RESULTS (continued)
Commercial Banking
Commercial
Banking serves small and medium businesses and corporate and
institutional clients, providing lending, transactional banking,
working capital management, debt financing and risk management
services whilst connecting the whole Group to clients. Through
investment in digital capability and product development,
Commercial Banking will deliver an enhanced customer experience via
a digital-first model in Small and Medium Businesses and an
expanded client proposition across Commercial Banking, generating
diversified capital efficient growth and supporting customers in
their transition to net zero.
Strategic progress
●
Increased euro and
US Dollar debt capital markets issuance volumes by 61 per cent
versus the first half of 2023, significantly above market increase
of 27 per cent1
●
Winning greater
than 60 per cent of mandates in Global Transaction
Solutions
●
Improved cardholder
proposition for foreign visitors to the UK with the enablement of
local currency card payments and withdrawals, providing guaranteed
costs at the point of transaction
●
Awarded Best Bank
for Digitalisation Globally at the Global Trade Review Awards 2024.
Completed the Group’s first electronic bill of lading
transaction; reducing transaction time, execution risk, costs and
environmental impact
●
Delivered £5.9
billion of sustainable financing2 in first half of
2024. Ranked first in ESG-labelled bond issuance for UK
issuers3
●
Launched
‘Lloyds Bank Market Insights’ bringing together
economics and markets expertise to provide topical and timely
thought leadership to clients
●
Launched new mobile
first instant access savings journey enabling clients to open an
instant access account seamlessly with straight through
processing
●
Successful pilot in
partnership with CoBa, creating client insights by connecting
products and services into one place to establish foreign exchange
requirements
●
Expanded Merchant
Services Clover proposition, offering customers new terminals and
faster settlement through an assisted onboarding
journey
●
Rolled out new
mobile overdraft journey, streamlining the customer experience and
enabling Business Banking customers to digitally apply for an
overdraft facility up to £50,000
●
Launched the
Buildings Transition Loan offering customers discounted lending for
investing in energy efficient property portfolios. Enhancing and
expanding Green Asset Finance and Clean Growth Financing lending
products
●
Hosted the Lilac
Review following the publication of the Disability and Entrepreneur
Report in partnership with Small Business Britain, demonstrating
commitment to drive meaningful change to support disabled-led
businesses
Financial performance
●
Underlying net
interest income of £1,696 million, down 12 per cent on the
prior year, driven by a lower banking net interest margin
reflecting deposit churn and lower average deposit
balances
●
Underlying other
income increased 11 per cent to £947 million, driven by strong
markets performance due to growth from strategic investment and
higher levels of client activity resulting in client franchise
growth
●
Operating costs 9
per cent higher with continued cost efficiencies helping to offset
the sector-wide Bank of England Levy, ongoing strategic investment,
planned elevated severance charges and inflationary pressures.
Remediation charge remains low at £32 million
●
Underlying
impairment credit of £83 million given strong asset quality
and a benefit from a one-off release from loss rates and updated
economic scenarios. Continuing to observe a low charge on new and
existing Stage 3 clients
●
Customer lending 1
per cent lower at £88.1 billion reflecting continued net
repayments within Small and Medium Businesses, including
government-backed lending, partly offset by strategic growth in
Corporate and Institutional Banking
●
Customer deposits 1
per cent lower at £161.2 billion, due to managing for value in
Corporate and Institutional Banking. Within Small and Medium
Businesses, growth in targeted sectors partly offset by outflows
due to business utilisation
●
Risk-weighted
assets decreased to £73.2 billion, demonstrating efficient use
of capital and optimisation activity
1
Refinitiv Eikon;
All international bonds in euro and US Dollar, excluding Sovereign,
supranational and agency issuance.
2
In line with the
Sustainable Financing Framework.
3
Bondradar;
excluding Sovereign, supranational and agency
issuance.
DIVISIONAL RESULTS (continued)
Commercial Banking (continued)
Commercial Banking performance summaryA
|
Half-year to
30 Jun
2024
£m
|
|
|
Half-year
to 30
Jun
2023
£m
|
|
|
Change
%
|
|
Half-year
to 31
Dec
2023
£m
|
|
|
Change
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying
net interest income
|
1,696
|
|
|
1,934
|
|
|
(12)
|
|
1,865
|
|
|
(9)
|
Underlying
other income
|
947
|
|
|
856
|
|
|
11
|
|
835
|
|
|
13
|
Operating
lease depreciation
|
(2)
|
|
|
(5)
|
|
|
60
|
|
(3)
|
|
|
33
|
Net income
|
2,641
|
|
|
2,785
|
|
|
(5)
|
|
2,697
|
|
|
(2)
|
Operating
costs
|
(1,363)
|
|
|
(1,253)
|
|
|
(9)
|
|
(1,394)
|
|
|
2
|
Remediation
|
(32)
|
|
|
(43)
|
|
|
26
|
|
(84)
|
|
|
62
|
Total costs
|
(1,395)
|
|
|
(1,296)
|
|
|
(8)
|
|
(1,478)
|
|
|
6
|
Underlying profit before impairment
|
1,246
|
|
|
1,489
|
|
|
(16)
|
|
1,219
|
|
|
2
|
Underlying
impairment credit (charge)
|
83
|
|
|
(72)
|
|
|
|
|
583
|
|
|
(86)
|
Underlying profit
|
1,329
|
|
|
1,417
|
|
|
(6)
|
|
1,802
|
|
|
(26)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banking
net interest marginA
|
4.31%
|
|
|
4.70%
|
|
|
(39)bp
|
|
4.56%
|
|
|
(25)bp
|
Average
interest-earning banking assetsA
|
£82.2bn
|
|
|
£87.8bn
|
|
|
(6)
|
|
£85.8bn
|
|
|
(4)
|
Asset
quality ratioA
|
(0.17%)
|
|
|
0.16%
|
|
|
|
|
(1.25%)
|
|
|
|
|
At 30 Jun 2024£bn
|
|
|
At 31
Mar 2024
£bn
|
|
|
Change
%
|
|
At 31
Dec 2023
£bn
|
|
|
Change
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Small
and Medium Businesses
|
31.5
|
|
|
32.2
|
|
|
(2)
|
|
33.0
|
|
|
(5)
|
Corporate
and Institutional Banking
|
56.6
|
|
|
55.6
|
|
|
2
|
|
55.6
|
|
|
2
|
Loans and advances to customers
|
88.1
|
|
|
87.8
|
|
|
|
|
88.6
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer deposits
|
161.2
|
|
|
159.3
|
|
|
1
|
|
162.8
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-weighted assets
|
73.2
|
|
|
74.3
|
|
|
(1)
|
|
74.2
|
|
|
(1)
|
DIVISIONAL RESULTS (continued)
Insurance, Pensions and Investments
Insurance,
Pensions and Investments (IP&I) supports over 10 million
customers with assets under administration (AuA)
of £226 billion (excluding Wealth) and annualised
annuity payments of over £0.8 billion. This was articulated
through the investor seminar in March 2024, which highlighted the
significant growth potential in the business and the capacity to
unlock value. The Group continues to invest significantly into
IP&I to develop the business, including the investment
propositions to support the Group’s mass affluent strategy,
innovating intermediary propositions and accelerating the
transition to a low carbon economy. The decision to divest the bulk
annuities business was a key step in refocusing the activities of
IP&I.
Strategic progress
●
Open book AuA of
£177 billion, with 8 per cent growth year-on-year. Net AuA
flows of £2.7 billion, contributing to an increased stock of
deferred profit
●
Workplace pensions
business 5 per cent annual increase in regular contributions to
pensions administered, with £2.6 billion net AuA inflows
in the period, driven by contributions and pension scheme wins,
contributing to 10 per cent AuA growth and over £100 billion
of AuA
●
Launched new
Scottish Widows app to transform the way people save and plan for
their future. Currently there are 1 million digitally
registered customers across the internet and app
platforms
●
Continued to grow
our home insurance presence with digitisation improvements
transforming customer experience. New policies up over 90 per cent
and market share up 5.5 percentage points to 16.2 per cent in the
first quarter of 2024 versus prior year
●
Following the
success of Ready-Made Investments, Ready-Made Pensions launched in
March allowing customers to open a personal pension, supporting
Group mass affluent objectives
●
Market share of
stocks and shares ISA new account openings at 20.1 per cent, second
in market (three months to 31 March 2023: 14.0 per cent,
fourth in market)1
●
Continued momentum
in the protection insurance offering, utilising Retail channels
with take-up rates (as a percentage of mortgage completions)
increasing from 9.1 per cent to 12.1 per cent in the
period
●
Supported 8,400
customers to secure a guaranteed income for life (half-year to 30
June 2023: c.6,000), issuing c.£800 million of annuity
policies (half-year to 30 June 2023: c.£450
million)
●
Agreed the sale of
the in-force bulk annuity portfolio to Rothesay Life plc, enabling
the Division to focus on growing strategically important lines of
business
●
Climate-aware
investment strategy assets increased by £2.2 billion,
cumulatively to £23.9 billion, on track to meet the target of
between £20 billion and £25 billion by 20252
Financial performance
●
Underlying other
income of £649 million, up 5 per cent driven by strong
trading, with higher general insurance income partly offset by
higher claims in the first quarter and the agreed sale (subject to
regulatory approval) of the in-force bulk annuity portfolio, with
associated income and costs for the quarter recognised within
volatility and other items
●
Underlying other
income was up 9 per cent, excluding the in-force bulk annuity
portfolio
●
Operating costs up
2 per cent, with cost efficiencies helping to offset higher ongoing
strategic investment, planned elevated severance charges and
inflationary pressure
●
Contractual service
margin broadly stable in the year at £4.0 billion (after
release to income of £168 million), including
£27 million from new business, reflecting value
generation in workplace pensions and annuities. Balance of deferred
profits (including the risk adjustment) £5.1 billion at
30 June 2024
●
Life and pensions
sales (PVNBP) reduced by 9 per cent driven by the agreed sale
(subject to regulatory approval) of the in-force bulk annuity
portfolio offset by strong performance in the annuities
business
●
Positive
contribution to the Group’s CET1 ratio through the payment of
a £200 million interim dividend to Lloyds Banking Group. This
was supported by a strong capital position with an estimated
Insurance Solvency II ratio of 177 per cent (169 per cent
after interim dividend)
●
Credit asset
portfolio remains strong, rated ‘A-’ on average. Well
diversified, with less than 1.5 per cent of assets backing
annuities being sub-investment grade or unrated. Strong liquidity
position with c.£3 billion cash and cash
equivalents
1
Three months to 31
March 2024. ISA information reflects opening through our direct
channels.
2
Includes a range of
funds with a bias towards investing in companies that are reducing
the carbon intensity of their businesses and/or are developing
climate solutions.
DIVISIONAL RESULTS (continued)
Insurance, Pensions and Investments (continued)
Insurance, Pensions and Investments performance summaryA
|
Half-year to
30 Jun
2024
£m
|
|
|
Half-year
to 30
Jun
2023
£m
|
|
|
Change
%
|
|
Half-year
to 31
Dec
2023
£m
|
|
|
Change
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying
net interest income
|
(74)
|
|
|
(70)
|
|
|
(6)
|
|
(62)
|
|
|
(19)
|
Underlying
other income
|
649
|
|
|
619
|
|
|
5
|
|
590
|
|
|
10
|
Net income
|
575
|
|
|
549
|
|
|
5
|
|
528
|
|
|
9
|
Operating
costs
|
(458)
|
|
|
(451)
|
|
|
(2)
|
|
(429)
|
|
|
(7)
|
Remediation
|
(5)
|
|
|
(8)
|
|
|
38
|
|
(6)
|
|
|
17
|
Total costs
|
(463)
|
|
|
(459)
|
|
|
(1)
|
|
(435)
|
|
|
(6)
|
Underlying profit before impairment
|
112
|
|
|
90
|
|
|
24
|
|
93
|
|
|
20
|
Underlying
impairment
|
7
|
|
|
1
|
|
|
|
|
6
|
|
|
(17)
|
Underlying profit
|
119
|
|
|
91
|
|
|
31
|
|
99
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life
and pensions sales (PVNBP)A,1
|
8,155
|
|
|
8,956
|
|
|
(9)
|
|
8,493
|
|
|
(4)
|
New
business value of insurance and participating investment contracts
recognised in the yearA,2
|
|
|
|
|
|
|
|
|
|
|
|
|
of
which: deferred to contractual service margin
and
risk adjustment
|
61
|
|
|
98
|
|
|
(38)
|
|
75
|
|
|
(19)
|
of
which: losses recognised on initial recognition
|
(10)
|
|
|
(9)
|
|
|
(11)
|
|
(11)
|
|
|
(9)
|
|
51
|
|
|
89
|
|
|
(43)
|
|
64
|
|
|
(20)
|
Assets
under administration (net flows)3
|
£2.7bn
|
|
|
£3.7bn
|
|
|
(27)
|
|
£1.4bn
|
|
|
93
|
General
insurance underwritten new gross written premiumsA
|
95
|
|
|
42
|
|
|
|
|
82
|
|
|
16
|
General
insurance underwritten total gross written premiumsA
|
343
|
|
|
258
|
|
|
33
|
|
321
|
|
|
7
|
General
insurance combined ratio4
|
101%
|
|
|
99%
|
|
|
2pp
|
|
113%
|
|
|
(12)pp
|
|
At 30 Jun 2024
|
|
|
At 31
Mar 2024
|
|
|
Change
%
|
|
At 31
Dec 2023
|
|
|
Change
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance
Solvency II ratio (pre-dividend)5
|
177%
|
|
|
173%
|
|
|
4pp
|
|
186%
|
|
|
(9)pp
|
Total
customer assets under administration
|
£225.9bn
|
|
|
£221.7bn
|
|
|
2
|
|
£213.1bn
|
|
|
6
|
1
Present value of
new business premiums.
2
New business value
represents the value added to the contractual service margin and
risk adjustment at the initial recognition of new contracts, net of
acquisition expenses and any loss component on onerous contracts
(which is recognised directly in the income statement) but does not
include existing business increments.
3
The movement in
asset inflows and outflows driven by business activity (excluding
market movements).
4
General insurance
combined ratio for the first half of 2024 includes £30 million
(half-year to 30 June 2023: £18 million; half-year to
31 December 2023: £33 million) relating to severe weather
event claims (storm, flood, subsidence and freeze). Excluding these
items and reserve releases the ratio was 91 per cent (half-year to
30 June 2023: 98 per cent; half-year to 31 December 2023 96 per
cent).
5
Equivalent
estimated regulatory view of ratio (including With-Profits funds
and post dividend where applicable) was 160 per cent
(31 December 2023: 166 per cent, post February 2024
dividend).
DIVISIONAL RESULTS (continued)
Insurance, Pensions and Investments (continued)
Movement in the contractual service margin (CSM) and risk
adjustment
|
Half-year to 30 June 2024
|
|
Half-year
to 30 June 2023
|
|
Change
|
|
|
CSM
£m
|
|
Risk
adjustment
£m
|
|
|
Total1
£m
|
|
|
CSM
£m
|
|
Risk
adjustment
£m
|
|
|
Total1
£m
|
|
|
Total
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
start of period
|
4,195
|
|
|
1,110
|
|
|
5,305
|
|
|
3,999
|
|
|
1,109
|
|
|
5,108
|
|
|
197
|
|
New
business written in year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
which: workplace and retirement account
|
7
|
|
|
24
|
|
|
31
|
|
|
20
|
|
|
16
|
|
|
36
|
|
|
(5)
|
|
of
which: individual and
bulk
annuities
|
29
|
|
|
8
|
|
|
37
|
|
|
43
|
|
|
24
|
|
|
67
|
|
|
(30)
|
|
of
which: protection
|
(9)
|
|
|
2
|
|
|
(7)
|
|
|
(7)
|
|
|
2
|
|
|
(5)
|
|
|
(2)
|
|
|
27
|
|
|
34
|
|
|
61
|
|
|
56
|
|
|
42
|
|
|
98
|
|
|
(37)
|
|
Release
to income statement
|
(168)
|
|
|
(27)
|
|
|
(195)
|
|
|
(152)
|
|
|
(38)
|
|
|
(190)
|
|
|
(5)
|
|
Other2
|
(35)
|
|
|
(63)
|
|
|
(98)
|
|
|
29
|
|
|
17
|
|
|
46
|
|
|
(144)
|
|
At end of period
|
4,019
|
|
|
1,054
|
|
|
5,073
|
|
|
3,932
|
|
|
1,130
|
|
|
5,062
|
|
|
11
|
|
1
Total deferred
profit is represented by CSM and risk adjustment, both held on the
balance sheet. CSM is released as insurance contract services are
provided; risk adjustment is released as uncertainty within the
calculation of the liabilities diminishes. Amounts are shown net of
reinsurance.
2
For the half-year
to 30 June 2024, Other includes the impact of the Rothesay Life plc
reinsurance contract, relating to the proposed sale of the in-force
bulk annuity portfolio. This is not included in the new business
value.
Volatility arising in the Insurance business
|
Half-year
to
30
Jun
2024
£m
|
|
|
Half-year
to 30
Jun
2023
£m
|
|
|
Half-year
to
31
Dec
2023
£m
|
|
|
|
|
|
|
|
|
|
|
Insurance
volatility
|
(16)
|
|
|
24
|
|
|
174
|
|
Policyholder
interests volatility
|
112
|
|
|
29
|
|
|
87
|
|
Total volatility
|
96
|
|
|
53
|
|
|
261
|
|
Insurance
hedging arrangements
|
(324)
|
|
|
(235)
|
|
|
(187)
|
|
Total1
|
(228)
|
|
|
(182)
|
|
|
74
|
|
1
Total insurance
volatility is included within market volatility and asset sales,
which in total resulted in a loss of £65 million in the
half-year to 30 June 2024 (half-year to 30 June 2023: loss of
£63 million; half-year to 31 December 2023: gain of £98
million). See page 1.
The
Group’s Insurance business has policyholder liabilities that
are supported by substantial holdings of investments. IFRS requires
that changes in both the value of the liabilities and investments
are reflected within the income statement. The value of the
liabilities does not move exactly in line with changes in the value
of the investments. As the investments are substantial, movements
in their value can have a significant impact on the profitability
of the Group. Management believes that it is appropriate to
disclose the division’s results on the basis of an expected
return. The impact of the actual return on these investments
differing from the expected return is included within insurance
volatility. Insurance volatility on business accounted for under
the Variable Fee Approach (largely unit-linked pensions business)
is deferred to the CSM, other than where the risk mitigation option
is applied. Policyholder interests volatility is driven by the
additional management charges made to some life product customers
to cover the extra tax on their products. Underlying profit
therefore includes the expected charge or credit for the year, with
the variance to expectation included in volatility.
During
the first half of 2024 the small loss in the insurance volatility
line was driven by asset value losses from increases to interest
rates, partly offset by increases in equity market levels which
resulted in profit from application of the risk mitigation option,
as permitted under IFRS 17. At a total level there was a larger
loss from hedging arrangements.
The
Group manages its Insurance business exposures to equity, interest
rate, foreign currency exchange rate, inflation and market
movements within the Insurance, Pensions and Investments division.
It does so by balancing the importance of managing the impacts to
both capital and earnings volatility.
DIVISIONAL RESULTS (continued)
Equity Investments and Central Items
|
Half-year to
30 Jun
2024
£m
|
|
|
Half-year
to 30
Jun
2023
£m
|
|
|
Change
%
|
|
Half-year
to 31
Dec
2023
£m
|
|
|
Change
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
276
|
|
|
133
|
|
|
|
|
382
|
|
|
(28)
|
Operating
costs
|
(101)
|
|
|
(102)
|
|
|
1
|
|
(42)
|
|
|
|
Remediation
|
(4)
|
|
|
(4)
|
|
|
|
|
(15)
|
|
|
73
|
Total costs
|
(105)
|
|
|
(106)
|
|
|
1
|
|
(57)
|
|
|
(84)
|
Underlying profit before impairment
|
171
|
|
|
27
|
|
|
|
|
325
|
|
|
(47)
|
Underlying
impairment
|
3
|
|
|
1
|
|
|
|
|
4
|
|
|
(25)
|
Underlying profit
|
174
|
|
|
28
|
|
|
|
|
329
|
|
|
(47)
|
Equity
Investments and Central Items includes the Group’s equity
investments businesses, including Lloyds Development Capital (LDC),
the Group’s share of the Business Growth Fund (BGF) and the
Housing Growth Partnership (HGP), as well as Citra Living. Also
included are income and expenses not attributed to other divisions,
including residual underlying net interest income after transfer
pricing (which includes the recharging to other divisions of the
Group’s external AT1 distributions), in period gains from
gilt sales and the unwind of associated hedging costs.
Net
income for the first half of 2024 was higher compared to the same
period in 2023, with stronger underlying net interest income partly
offset by weaker underlying other income. Underlying net interest
income benefitted from the effect of rising rates on income earned
from the placement of funds raised through the issuance of
structured medium-term notes (offset within underlying other income
by the increased funding costs of the notes) as well as higher
internal recharges to other divisions as a result of increased AT1
distribution costs. Underlying other income was weaker, primarily
as a result of higher funding costs and the timing of exits in
LDC.
Total
costs of £105 million in the first half of 2024 were
stable on the prior year. Underlying impairment was a £3
million credit compared to a £1 million credit in the first
half of 2023.
ALTERNATIVE
PERFORMANCE MEASURES
The
statutory results are supplemented with those presented on an
underlying basis and also with other alternative performance
measures. This is to enable a comprehensive understanding of the
Group and facilitate comparison with peers. The Group Executive
Committee, which is the ‘chief operating decision
maker’ (as defined by IFRS 8 Operating Segments) for the Group,
reviews the Group’s results on an underlying basis in order
to assess performance and allocate resources. Management uses
underlying profit before tax, an alternative performance measure,
as a measure of performance and believes that it provides important
information for investors. This is because it allows for a
comparable representation of the Group’s performance by
removing the impact of items such as volatility caused by market
movements outside the control of management.
In
arriving at underlying profit, statutory profit before tax is
adjusted for the items below, to allow a comparison of the
Group’s underlying performance:
●
Restructuring costs
relating to merger, acquisition and integration
activities
●
Volatility and
other items, which includes the effects of certain asset sales, the
volatility relating to the Group’s hedging arrangements and
that arising in the Insurance business, the unwind of
acquisition-related fair value adjustments and the amortisation of
purchased intangible assets
●
Losses from
insurance and participating investment contract modifications
relating to the enhancement to the Group’s longstanding and
workplace pension business through the addition of a drawdown
feature
The
analysis of lending and expected credit loss (ECL) allowances is
presented on both a statutory and an underlying basis and a
reconciliation between the two is shown on page 1. On a
statutory basis, purchased or originated credit-impaired (POCI)
assets include a fixed pool of mortgages that were purchased as
part of the HBOS acquisition at a deep discount to face value
reflecting credit losses incurred from the point of origination to
the date of acquisition. Over time, these POCI assets will run off
as the loans redeem, pay down or losses crystallise. The underlying
basis assumes that the lending assets acquired as part of a
business combination were originated by the Group and are
classified as either Stage 1, 2 or 3 according to the change in
credit risk over the period since origination. Underlying ECL
allowances have been calculated accordingly. The Group uses the
underlying basis to monitor the creditworthiness of the lending
portfolio and related ECL allowances.
ALTERNATIVE PERFORMANCE MEASURES (continued)
The
Group calculates a number of metrics that are used throughout the
banking and insurance industries on an underlying basis. These
metrics are not necessarily comparable to similarly titled measures
presented by other companies and are not any more authoritative
than measures presented in the financial statements, however
management believes that they are useful in assessing the
performance of the Group and in drawing comparisons between years.
A description of these measures and their calculation, is given
below. Alternative performance measures are used internally in the
Group’s Monthly Management Report.
Asset
quality ratio
|
The
underlying impairment charge or credit for the period in respect of
loans and advances to customers, both drawn and undrawn, expressed
as a percentage of average gross loans and advances to customers
for the period. This measure is useful in assessing the credit
quality of the loan book.
|
Banking
net interest margin
|
Banking
net interest income on customer and product balances in the banking
businesses as a percentage of average gross interest-earning
banking assets for the period. This measure is useful in assessing
the profitability of the banking business.
|
Cost:income
ratio
|
Total
costs as a percentage of net income calculated on an underlying
basis. This measure is useful in assessing the profitability of the
Group’s operations before the effects of the underlying
impairment credit or charge.
|
Gross
written premiums
|
Gross
written premiums is a measure of the volume of General Insurance
business written during the period. This measure is useful for
assessing the growth of the General Insurance
business.
|
Life
and pensions sales (present value of new business
premiums)
|
Present
value of regular premiums plus single premiums from new business
written in the current period. This measure is useful for assessing
sales in the Group’s life, pensions and investments insurance
business.
|
Loan to
deposit ratio
|
Loans
and advances to customers divided by customer
deposits.
|
Operating
costs
|
Operating
expenses adjusted to remove the impact of remediation,
restructuring costs, operating lease depreciation, the amortisation
of purchased intangibles, the insurance gross up and other
statutory items.
|
New
business value
|
This
represents the value added to the contractual service margin and
risk adjustment at the initial recognition of new contracts, net of
acquisition expenses (derived from the statutory balance sheet
movements) and any loss component on onerous contracts (which is
recognised directly in the income statement) but does not include
existing business increments.
|
Pro
forma CET1 ratio
|
CET1
ratio adjusted for the effects of the dividend paid up by the
Insurance business in the subsequent quarter and the full impact of
the announced ordinary share buyback programme.
|
Return
on tangible equity
|
Profit
attributable to ordinary shareholders, divided by average tangible
net assets. This measure is useful in providing a consistent basis
with which to measure the Group’s performance.
|
Tangible
net assets per share
|
Net
assets excluding intangible assets such as goodwill and
acquisition-related intangibles divided by the number of ordinary
shares in issue. This measure is useful in assessing shareholder
value.
|
Underlying
profit before impairment
|
Underlying
profit adjusted to remove the underlying impairment credit or
charge. This measure is useful in allowing for a comparable
representation of the Group’s performance before the effects
of the forward-looking underlying impairment credit or
charge.
|
Underlying
profit
|
Statutory
profit before tax adjusted for certain items as detailed above.
This measure allows for a comparable representation of the
Group’s performance by removing the impact of certain items
including volatility caused by market movements outside the control
of management.
|
ALTERNATIVE PERFORMANCE MEASURES
(continued)
Statutory basis
|
|
|
Removal of:
|
|
Underlying basisA
|
|
£m
|
|
|
Volatility
and other
items1,2,3
£m
|
|
|
Insurance
gross up4
£m
|
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year to 30 June 2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
6,046
|
|
|
300
|
|
|
(8)
|
|
|
6,338
|
|
|
Underlying
net interest income
|
Other
income, net of net finance
expense
in respect of insurance
and
investment contracts
|
2,830
|
|
|
(208)
|
|
|
112
|
|
|
2,734
|
|
|
Underlying
other income
|
|
|
|
|
(679)
|
|
|
–
|
|
|
(679)
|
|
|
Operating
lease depreciation
|
Total income, after net finance expense in respect of insurance and
investment contracts
|
8,876
|
|
|
(587)
|
|
|
104
|
|
|
8,393
|
|
|
Net income
|
Operating
expenses5
|
(5,452)
|
|
|
761
|
|
|
(104)
|
|
|
(4,795)
|
|
|
Total
costs5
|
Impairment
charge
|
(100)
|
|
|
(1)
|
|
|
–
|
|
|
(101)
|
|
|
Underlying
impairment charge
|
Profit before tax
|
3,324
|
|
|
173
|
|
|
–
|
|
|
3,497
|
|
|
Underlying profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year
to 30 June 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
6,798
|
|
|
213
|
|
|
(7)
|
|
|
7,004
|
|
|
Underlying
net interest income
|
Other
income, net of net finance expense in respect of insurance and
investment contracts
|
2,508
|
|
|
(109)
|
|
|
139
|
|
|
2,538
|
|
|
Underlying
other income
|
|
|
|
|
(356)
|
|
|
–
|
|
|
(356)
|
|
|
Operating
lease depreciation
|
Total
income, net of net finance expense in respect of insurance and
investment contracts
|
9,306
|
|
|
(252)
|
|
|
132
|
|
|
9,186
|
|
|
Net
income
|
Operating
expenses5
|
(4,774)
|
|
|
423
|
|
|
(132)
|
|
|
(4,483)
|
|
|
Total
costs5
|
Impairment
charge
|
(662)
|
|
|
–
|
|
|
–
|
|
|
(662)
|
|
|
Underlying
impairment charge
|
Profit
before tax
|
3,870
|
|
|
171
|
|
|
–
|
|
|
4,041
|
|
|
Underlying
profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year
to 31 December 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
6,500
|
|
|
266
|
|
|
(5)
|
|
|
6,761
|
|
|
Underlying
net interest income
|
Other
income, net of net finance expense in respect of insurance and
investment contracts
|
2,823
|
|
|
(338)
|
|
|
100
|
|
|
2,585
|
|
|
Underlying
other income
|
|
|
|
|
(600)
|
|
|
–
|
|
|
(600)
|
|
|
Operating
lease depreciation
|
Total
income, net of net finance expense in respect of insurance and
investment contracts
|
9,323
|
|
|
(672)
|
|
|
95
|
|
|
8,746
|
|
|
Net
income
|
Operating
expenses5
|
(6,049)
|
|
|
812
|
|
|
(95)
|
|
|
(5,332)
|
|
|
Total
costs5
|
Impairment
credit
|
359
|
|
|
(5)
|
|
|
–
|
|
|
354
|
|
|
Underlying
impairment credit
|
Profit
before tax
|
3,633
|
|
|
135
|
|
|
–
|
|
|
3,768
|
|
|
Underlying
profit
|
1
In the half-year
ended 30 June 2024 this comprised the effects of market volatility
and asset sales (losses of £65 million); the amortisation of
purchased intangibles (£41 million); restructuring costs
(£15 million); and fair value unwind (losses of
£52 million).
2
In the half-year
ended 30 June 2023 this comprised the effects of market volatility
and asset sales (losses of £63 million); the amortisation of
purchased intangibles (£35 million); restructuring costs
(£25 million); and fair value unwind (losses of
£48 million).
3
In the half-year
ended 31 December 2023 this comprised the effects of market
volatility and asset sales (gains of £98 million); the
amortisation of purchased intangibles (£45 million);
restructuring costs (£129 million); and fair value unwind
(losses of £59 million).
4
The Group’s
insurance businesses’ income statements include income and
expense attributable to the policyholders of the Group’s
long-term assurance funds. These items have no impact in total upon
profit attributable to equity shareholders. To provide a clearer
representation of the underlying trends within the business, these
items are shown net within the underlying results.
5
Statutory operating
expenses includes operating lease depreciation. On an underlying
basis operating lease depreciation is included in net
income.
ALTERNATIVE PERFORMANCE MEASURES (continued)
|
Half-year to
30 Jun
2024
|
|
|
Half-year
to 30
Jun
2023
|
|
|
Half-year
to 31
Dec
2023
|
|
|
|
|
|
|
|
|
|
|
Asset quality ratioA
|
|
|
|
|
|
|
|
|
Underlying impairment (charge) credit (£m)
|
(101)
|
|
|
(662)
|
|
|
354
|
|
Remove
non-customer underlying impairment credit (£m)
|
(17)
|
|
|
(5)
|
|
|
(8)
|
|
Underlying customer related impairment (charge) credit
(£m)
|
(118)
|
|
|
(667)
|
|
|
346
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to customers (£bn)
|
452.4
|
|
|
450.7
|
|
|
449.7
|
|
Add
back:
|
|
|
|
|
|
|
|
|
Expected
credit loss allowance (drawn, statutory basis)
(£bn)
|
3.3
|
|
|
4.7
|
|
|
3.7
|
|
Acquisition
related fair value adjustments (£bn)
|
0.2
|
|
|
0.3
|
|
|
0.3
|
|
Underlying gross loans and advances to customers
(£bn)
|
455.9
|
|
|
455.7
|
|
|
453.7
|
|
Averaging
(£bn)
|
(0.5)
|
|
|
0.4
|
|
|
3.8
|
|
Average underlying gross loans and advances to customers
(£bn)
|
455.4
|
|
|
456.1
|
|
|
457.5
|
|
|
|
|
|
|
|
|
|
|
Asset quality ratioA
|
0.05%
|
|
|
0.29%
|
|
|
(0.15)%
|
|
|
|
|
|
|
|
|
|
|
Banking net interest marginA
|
|
|
|
|
|
|
|
|
Underlying
net interest income (£m)
|
6,338
|
|
|
7,004
|
|
|
6,761
|
|
Remove
non-banking underlying net interest expense (£m)
|
229
|
|
|
155
|
|
|
156
|
|
Banking underlying net interest income (£m)
|
6,567
|
|
|
7,159
|
|
|
6,917
|
|
|
|
|
|
|
|
|
|
|
Underlying
gross loans and advances to customers (£bn)
|
455.9
|
|
|
455.7
|
|
|
453.7
|
|
Adjustment
for non-banking and other items:
|
|
|
|
|
|
|
|
|
Fee-based
loans and advances (£bn)
|
(9.9)
|
|
|
(8.7)
|
|
|
(8.9)
|
|
Other
(£bn)
|
5.3
|
|
|
7.0
|
|
|
4.2
|
|
Interest-earning
banking assets (£bn)
|
451.3
|
|
|
454.0
|
|
|
449.0
|
|
Averaging
(£bn)
|
(2.1)
|
|
|
(0.2)
|
|
|
3.9
|
|
Average interest-earning banking assetsA
(£bn)
|
449.2
|
|
|
453.8
|
|
|
452.9
|
|
|
|
|
|
|
|
|
|
|
Banking net interest marginA
|
2.94%
|
|
|
3.18%
|
|
|
3.03%
|
|
|
|
|
|
|
|
|
|
|
Cost:income ratioA
|
|
|
|
|
|
|
|
|
Operating
costsA
(£m)
|
4,700
|
|
|
4,413
|
|
|
4,727
|
|
Remediation
(£m)
|
95
|
|
|
70
|
|
|
605
|
|
Total costs (£m)
|
4,795
|
|
|
4,483
|
|
|
5,332
|
|
Net income (£m)
|
8,393
|
|
|
9,186
|
|
|
8,746
|
|
|
|
|
|
|
|
|
|
|
Cost:income ratioA
|
57.1%
|
|
|
48.8%
|
|
|
61.0%
|
|
|
|
|
|
|
|
|
|
|
Operating costsA
|
|
|
|
|
|
|
|
|
Operating expenses (£m)
|
5,452
|
|
|
4,774
|
|
|
6,049
|
|
Adjustment
for:
|
|
|
|
|
|
|
|
|
Remediation
(£m)
|
(95)
|
|
|
(70)
|
|
|
(605)
|
|
Restructuring
(£m)
|
(15)
|
|
|
(25)
|
|
|
(129)
|
|
Operating
lease depreciation (£m)
|
(679)
|
|
|
(356)
|
|
|
(600)
|
|
Amortisation
of purchased intangibles (£m)
|
(41)
|
|
|
(35)
|
|
|
(45)
|
|
Insurance
gross up (£m)
|
104
|
|
|
132
|
|
|
95
|
|
Other
statutory items (£m)
|
(26)
|
|
|
(7)
|
|
|
(38)
|
|
Operating costsA
(£m)
|
4,700
|
|
|
4,413
|
|
|
4,727
|
|
ALTERNATIVE PERFORMANCE MEASURES (continued)
|
Half-year to
30 Jun
2024
|
|
|
Half-year
to
30
Jun
2023
|
|
|
Half-year
to 31
Dec
2023
|
|
|
|
|
|
|
|
|
|
|
Return on tangible equityA
|
|
|
|
|
|
|
|
|
Profit attributable to ordinary shareholders (£m)
|
2,145
|
|
|
2,572
|
|
|
2,361
|
|
|
|
|
|
|
|
|
|
|
Average
ordinary shareholders’ equity (£bn)
|
39.9
|
|
|
38.8
|
|
|
38.5
|
|
Remove
average goodwill and other intangible assets
(£bn)
|
(8.0)
|
|
|
(7.6)
|
|
|
(7.9)
|
|
Average tangible equity (£bn)
|
31.9
|
|
|
31.2
|
|
|
30.6
|
|
|
|
|
|
|
|
|
|
|
Return on tangible equityA
|
13.5%
|
|
|
16.6%
|
|
|
15.3%
|
|
|
|
|
|
|
|
|
|
|
Underlying profit before impairmentA
|
|
|
|
|
|
|
|
|
Statutory
profit before tax (£m)
|
3,324
|
|
|
3,870
|
|
|
3,633
|
|
Remove
impairment charge (£m)
|
100
|
|
|
662
|
|
|
(359)
|
|
Remove
volatility and other items including restructuring
(£m)
|
174
|
|
|
171
|
|
|
140
|
|
Underlying profit before impairmentA
(£m)
|
3,598
|
|
|
4,703
|
|
|
3,414
|
|
|
|
|
|
|
|
|
|
|
Life and pensions sales (present value of new business
premiums)A
|
|
|
|
|
|
|
|
|
Total
net earned premiums (£m)
|
5,270
|
|
|
5,147
|
|
|
4,621
|
|
Investment
sales (£m)
|
4,512
|
|
|
5,264
|
|
|
5,351
|
|
Effect
of capitalisation factor (£m)
|
1,898
|
|
|
1,715
|
|
|
1,711
|
|
Effect
of annualisation (£m)
|
350
|
|
|
279
|
|
|
176
|
|
Gross
premiums from existing long-term business (£m)
|
(3,875)
|
|
|
(3,449)
|
|
|
(3,366)
|
|
Life and pensions sales (present value of new business
premiums)A
(£m)
|
8,155
|
|
|
8,956
|
|
|
8,493
|
|
|
|
Half-year to
30 Jun 2024
£m
|
|
|
Half-year
to 30
Jun 2023
£m
|
|
|
Half-year
to 31
Dec 2023
£m
|
|
|
|
|
|
|
|
|
|
|
|
New business value of insurance and participating investment
contracts recognised in the yearA
|
|
|
|
|
|
|
|
|
|
Contractual
service margin
|
|
26
|
|
|
45
|
|
|
47
|
|
Risk
adjustment for non-financial risk
|
|
33
|
|
|
49
|
|
|
37
|
|
Losses
recognised on initial recognition
|
|
(40)
|
|
|
(36)
|
|
|
(35)
|
|
|
|
19
|
|
|
58
|
|
|
49
|
|
Impacts
of reinsurance contracts recognised in the year
|
|
18
|
|
|
14
|
|
|
15
|
|
Increments,
single premiums and transfers received on workplace pension
contracts initially recognised in the year
|
|
10
|
|
|
5
|
|
|
12
|
|
Amounts
relating to contracts modified to add a drawdown feature and
recognised as new contracts
|
|
4
|
|
|
12
|
|
|
(12)
|
|
New business value of insurance and participating investment
contracts recognised in the yearA
|
|
51
|
|
|
89
|
|
|
64
|
|
ALTERNATIVE PERFORMANCE MEASURES (continued)
|
At 30 Jun
2024
|
|
|
At 31
Mar
2024
|
|
|
At 31
Dec
2023
|
|
|
|
|
|
|
|
|
|
|
Loan to deposit ratioA
|
|
|
|
|
|
|
|
|
Loans and advances to customers (£bn)
|
452.4
|
|
|
448.5
|
|
|
449.7
|
|
Customer deposits (£bn)
|
474.7
|
|
|
469.2
|
|
|
471.4
|
|
|
|
|
|
|
|
|
|
|
Loan to deposit ratioA
|
95%
|
|
|
96%
|
|
|
95%
|
|
|
|
|
|
|
|
|
|
|
Pro forma CET1 ratioA
|
|
|
|
|
|
|
|
|
CET1 ratio
|
14.1%
|
|
|
13.9%
|
|
|
14.6%
|
|
Insurance
dividend and share buyback accrual1
|
–%
|
|
|
–%
|
|
|
(0.9)%
|
|
Pro forma CET1 ratioA
|
14.1%
|
|
|
13.9%
|
|
|
13.7%
|
|
|
|
|
|
|
|
|
|
|
Tangible net assets per shareA
|
|
|
|
|
|
|
|
|
Ordinary shareholders’ equity (£m)
|
38,959
|
|
|
40,641
|
|
|
40,224
|
|
Goodwill
and other intangible assets (£m)
|
(8,315)
|
|
|
(8,350)
|
|
|
(8,306)
|
|
Deferred
tax effects and other adjustments (£m)
|
305
|
|
|
325
|
|
|
352
|
|
Tangible net assets (£m)
|
30,949
|
|
|
32,616
|
|
|
32,270
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares in issue, excluding own shares
|
62,458m
|
|
|
63,653m
|
|
|
63,508m
|
|
|
|
|
|
|
|
|
|
|
Tangible net assets per shareA
|
49.6p
|
|
|
51.2p
|
|
|
50.8p
|
|
1
Dividend paid up by
the Insurance business in the subsequent quarter period and the
impact of the announced ordinary share buyback
programmes.
RISK MANAGEMENT
PRINCIPAL RISKS AND UNCERTAINTIES
The
most important risks faced by the Group are detailed below. The
external risks faced by the Group may impact the success of
delivering against the Group’s long-term strategic
objectives. They include, but are not limited to, macroeconomic
uncertainty and elevated interest rates which are contributing to
the cost of living and associated implications for UK consumers and
businesses.
Asset
quality remains strong with resilient credit performance throughout
the period. The Group continues to monitor the impacts of the
economic environment carefully through a suite of early warning
indicators and governance arrangements that ensure risk mitigating
action plans are in place to support customers and protect the
Group’s positions.
With
respect to conduct risk there have been no further charges relating
to the potential impact of the FCA review into historical motor
finance commission arrangements. An update from the FCA is
currently expected in September.
The
Group is transforming its approach to risk management to support
its strategic ambition and purpose of Helping Britain Prosper. The
Group has reviewed its three lines of defence model and is evolving
its accountabilities with enhanced focus on controls and expertise.
This will increase the pace of decision making, with the intent of
improving risk management. The Group has initially focused on
non-financial risks.
The
Group has also undertaken a detailed review of its risk categories
and implemented an events-based risk management framework. This has
resulted in a reduction in the number of principal risk types and
the simplification of secondary risk categories. This change better
aligns to the Basel Committee on Banking Supervision’s event
categories which will benefit the Group for scenario activities and
regulatory reporting.
The
Group has 11 principal risks; capital risk, climate risk,
compliance risk (previously regulatory and legal risk), conduct
risk, credit risk, economic crime risk, insurance underwriting
risk, liquidity risk (previously liquidity and funding risk),
market risk, model risk and operational risk (operational
resilience risk has been removed as a separate risk category as it
relates to many of the principal risk types).
The
below principal risk definitions have changed since the
Group’s 2023 annual report and accounts:
Conduct risk – The risk of our Group activities,
behaviours, strategy or business planning, having an adverse impact
on outcomes for customers, undermining the integrity of the market
or distorting competition, which could lead to regulatory censure,
reputational damage or financial loss.
Economic crime risk – The risk that the Group
implements ineffective policies, systems, processes and controls to
prevent, detect and respond to the risk of fraud and/or financial
crime resulting in increased losses, regulatory censure/fines
and/or adverse publicity in the UK or other jurisdictions in which
the Group operates.
Insurance underwriting risk – The risk of adverse
developments in net liabilities due to: timing, frequency and
severity of claims for insured/underwritten events; customer
behaviour; and expense costs.
Liquidity risk – The risk that the Group does not have
sufficient financial resources to meet its commitments when they
fall due or can only secure them at excessive cost.
Model risk – The potential for adverse consequences
from model errors or the inappropriate use of modelled outputs to
inform business decisions. Adverse consequences could lead to a
deterioration in the prudential position, non-compliance with
applicable laws and/or regulations, or damage to the Group’s
reputation. Model risk can also lead to financial loss, as well as
qualitative limitations such as the imposition of restrictions on
business activities.
Operational risk – The risk of actual or potential
impact to the Group (financial and/or non-financial) resulting from
inadequate or failed internal processes, people, and systems or
from external events. Resilience is core to the management of
operational risk within Lloyds Banking Group to ensure that
business processes (including those that are outsourced) can
withstand operational risks and can respond to and meet customer
and stakeholder needs when continuity of operations is
compromised.
All
other principal risk definitions remain unchanged.
CAPITAL RISK
CET1 target capital ratio
The
Board’s revised view of the ongoing level of CET1 capital
required by the Group to grow the business, meet current and future
regulatory requirements and cover economic and business
uncertainties is c.13.0 per cent which includes a management buffer
of around 1 per cent. This takes into account, amongst other
considerations:
●
The minimum Pillar
1 CET1 capital requirement of 4.5 per cent of risk-weighted
assets
●
The Group’s
Pillar 2A CET1 capital requirement, set by the PRA, which is the
equivalent of around 1.5 per cent of risk-weighted
assets
●
The Group’s
countercyclical capital buffer (CCyB) requirement which is
currently 1.8 per cent of risk-weighted assets
●
The capital
conservation buffer (CCB) requirement of 2.5 per cent of
risk-weighted assets
●
The Ring-Fenced
Bank (RFB) sub-group’s other systemically important
institution (O-SII) buffer of 2.0 per cent of risk-weighted assets,
which equates to 1.7 per cent of risk-weighted assets at Group
level
●
The Group’s
PRA Buffer, set after taking account of the results of any PRA
stress tests and other information, as well as outputs from the
Group’s own internal stress tests. The PRA requires this
buffer to remain confidential
●
The likely
performance of the Group in various potential stress scenarios and
ensuring capital remains resilient in these
●
The economic
outlook for the UK and business outlook for the Group
●
The desire to
maintain a progressive and sustainable ordinary dividend policy in
the context of year to year earnings movements
Minimum requirement for own funds and eligible liabilities
(MREL)
The
Group is not classified as a global systemically important bank
(G-SIB) but is subject to the Bank of England’s MREL
statement of policy (MREL SoP) and must therefore maintain a
minimum level of MREL resources.
Applying
the MREL SoP to current minimum capital requirements at 30 June
2024, the Group’s MREL, excluding regulatory capital and
leverage buffers, is the higher of 2 times Pillar 1 plus 2 times
Pillar 2A, equivalent to 21.3 per cent of risk-weighted assets, or
6.5 per cent of the UK leverage ratio exposure measure. In
addition, CET1 capital cannot be used to meet both MREL and capital
or leverage buffers.
Leverage minimum requirements
The
Group is currently subject to the following minimum requirements
under the UK Leverage Ratio Framework:
●
A minimum tier 1
leverage ratio requirement of 3.25 per cent of the total leverage
exposure measure
●
A countercyclical
leverage buffer (CCLB) which is currently 0.6 per cent of the total
leverage exposure measure
●
An additional
leverage ratio buffer (ALRB) of 0.7 per cent of the total leverage
exposure measure applies to the RFB sub-group, which equates to 0.6
per cent at Group level
At
least 75 per cent of the 3.25 per cent minimum leverage ratio
requirement as well as 100 per cent of all regulatory leverage
buffers must be met with CET1 capital.
Stress testing
The
Group undertakes a wide-ranging programme of stress testing,
providing a comprehensive view of the potential impacts arising
from the risks to which the Group and its key legal entities are
exposed. One of the most important uses of stress testing is to
assess the resilience of the operational and strategic plans of the
Group and its legal entities to adverse economic conditions and
other key vulnerabilities. As part of this programme the Group
participated in the Bank of England 2022 Annual Cyclical Scenario
stress testing exercise. This assessed the Group’s resilience
to a severe economic shock where the House Price Index (HPI) falls
by 31 per cent, Commercial Real Estate (CRE) falls by 45 per cent,
unemployment peaks at 8.5 per cent and the Base Rate peaks at
6 per cent. The results of this exercise were published by the Bank
of England on 12 July 2023. The Bank of England calculated the
Group’s transitional CET1 ratio, after the application of
management actions, as 11.6 per cent and its Tier 1 leverage ratio
as 4.5 per cent, significantly exceeding the hurdle rates of 6.6
per cent and 3.5 per cent, respectively. The Group has provided
data to support the Bank of England 2024 Desk Based Stress Test.
This exercise will test two scenarios with results published on an
aggregate level by the end of 2024. The Group is also participating
in the Bank of England System-Wide Exploratory Scenario. The
aggregate findings of Round 1 were published in June 2024 and the
Group will make a Round 2 submission in July 2024. The Group
continues to internally assess vulnerabilities to adverse economic
conditions.
CAPITAL RISK (continued)
Capital and MREL resources
An
analysis of the Group’s capital position and MREL resources
as at 30 June 2024 is presented in the following table. This
reflects the application of the transitional arrangements for IFRS
9.
|
At 30 Jun
2024
£m
|
|
|
At 31
Dec
20231
£m
|
|
|
|
|
|
|
|
Common equity tier 1: instruments and reserves
|
|
|
|
|
|
Share
capital and share premium account
|
24,923
|
|
|
24,926
|
|
Banking
retained earnings2
|
18,664
|
|
|
19,000
|
|
Banking
other reserves2
|
2,829
|
|
|
3,136
|
|
Adjustment
to retained earnings for foreseeable dividends and share
buyback
|
(1,437)
|
|
|
(1,169)
|
|
|
44,979
|
|
|
45,893
|
|
Common equity tier 1: regulatory adjustments
|
|
|
|
|
|
Cash
flow hedging reserve
|
4,028
|
|
|
3,766
|
|
Goodwill
and other intangible assets
|
(5,794)
|
|
|
(5,731)
|
|
Prudent
valuation adjustment
|
(374)
|
|
|
(417)
|
|
Removal
of defined benefit pension surplus
|
(2,473)
|
|
|
(2,653)
|
|
Significant
investments2
|
(5,088)
|
|
|
(4,975)
|
|
Deferred
tax assets
|
(3,945)
|
|
|
(4,048)
|
|
Other
regulatory adjustments
|
(38)
|
|
|
62
|
|
Common equity tier 1 capital
|
31,295
|
|
|
31,897
|
|
Additional tier 1: instruments
|
|
|
|
|
|
Other
equity instruments
|
5,907
|
|
|
6,915
|
|
|
|
|
|
|
|
Additional tier 1: regulatory adjustments
|
|
|
|
|
|
Significant
investments2
|
(1,100)
|
|
|
(1,100)
|
|
Total tier 1 capital
|
36,102
|
|
|
37,712
|
|
Tier 2: instruments and provisions
|
|
|
|
|
|
Subordinated
liabilities
|
6,260
|
|
|
6,320
|
|
Eligible
provisions
|
67
|
|
|
371
|
|
|
6,327
|
|
|
6,691
|
|
Tier 2: regulatory adjustments
|
|
|
|
|
|
Significant
investments2
|
(964)
|
|
|
(964)
|
|
Total capital resources
|
41,465
|
|
|
43,439
|
|
|
|
|
|
|
|
Ineligible
AT1 and tier 2 instruments3
|
(118)
|
|
|
(139)
|
|
Amortised
portion of eligible tier 2 instruments issued by Lloyds Banking
Group plc
|
1,420
|
|
|
1,113
|
|
Other
eligible liabilities issued by Lloyds Banking Group plc4
|
27,547
|
|
|
25,492
|
|
Total MREL resources
|
70,314
|
|
|
69,905
|
|
|
|
|
|
|
|
Risk-weighted assets
|
222,019
|
|
|
219,130
|
|
|
|
|
|
|
|
Common equity tier 1 capital ratio
|
14.1%
|
|
|
14.6%
|
|
Tier 1 capital ratio
|
16.3%
|
|
|
17.2%
|
|
Total capital ratio
|
18.7%
|
|
|
19.8%
|
|
MREL ratio
|
31.7%
|
|
|
31.9%
|
|
1
Restated for
presentational changes.
2
In accordance with
banking capital regulations, the Group’s Insurance business
is excluded from the scope of the Group’s capital position.
The Group’s investment in the equity and other capital
instruments of the Insurance business are deducted from the
relevant tier of capital (‘Significant investments’),
subject to threshold regulations that allow a portion of the equity
investment to be risk-weighted rather than deducted from capital.
The risk-weighted portion forms part of threshold risk-weighted
assets.
3
Instruments with
less than or equal to one year to maturity or instruments not
issued out of the holding company.
4
Includes senior
unsecured debt.
CAPITAL RISK (continued)
Movements in CET1 capital resources
The key
movements are set out in the table below.
Common
equity tier 1
£m
|
|
|
At 31
December 2023
|
31,897
|
Banking
business profits1
|
2,578
|
Movement
in foreseeable dividend accrual2
|
179
|
Dividends
paid out on ordinary shares during the year
|
(1,169)
|
Adjustment
to reflect full impact of share buyback
|
(2,000)
|
Dividends
received from the Insurance business3
|
450
|
IFRS 9
transitional adjustment to retained earnings
|
(156)
|
Deferred
tax asset
|
103
|
Goodwill
and other intangible assets
|
(63)
|
Significant
investments
|
(113)
|
Movement
in treasury shares and employee share schemes
|
(66)
|
Redemption
of other equity instruments
|
(316)
|
Distributions
on other equity instruments
|
(269)
|
Other
movements
|
240
|
At 30 June 2024
|
31,295
|
1
Under banking
capital regulations, profits made by Insurance are removed from
CET1 capital. However, when dividends are paid to the Group by
Insurance these are recognised through CET1 capital.
2
Reflects the
reversal of the brought forward accrual for the final 2023 ordinary
dividend, net of the accrual for foreseeable 2024 ordinary
dividends.
3
Received in
February 2024 and June 2024.
The
Group’s CET1 capital ratio reduced from 14.6 per cent at
31 December 2023 to 14.1 per cent at 30 June 2024, reflecting
the reduction in CET1 capital resources and the increase in
risk-weighted assets.
CET1
capital resources reduced by £602 million, with banking
business profits for the period and the receipt of the dividends
paid up by the Insurance business more than offset by:
●
The accrual for
foreseeable ordinary dividends in respect of the first half of
2024, inclusive of the announced interim ordinary dividend of 1.06
pence per share, and distributions on other equity
instruments
●
The recognition of
the full capital impact of the ordinary share buyback programme
announced as part of the Group’s 2023 year end results, which
commenced in February 2024
●
The recognition of
a foreign exchange translation loss upon the redemption of a US
Dollar denominated AT1 capital instrument in June 2024
The
full capital impact of the ordinary share buyback programme and the
Insurance dividend received in February 2024 were reflected through
the Group’s pro forma CET1 ratio of 13.7 per cent at 31
December 2023.
Movements in total capital and MREL
The
Group’s total capital ratio reduced to 18.7 per cent at 30
June 2024 (31 December 2023: 19.8 per cent), reflecting the
reduction in CET1 capital, the redemption of the US Dollar AT1
capital instrument, a reduction in Tier 2 capital and the increase
in risk-weighted assets. The reduction in Tier 2 capital reflected
the impact of interest rates and regulatory amortisation on
instruments and a reduction in eligible provisions recognised
through Tier 2 capital, partially offset by a new
issuance.
The
MREL ratio reduced to 31.7 per cent at 30 June 2024 (31 December
2023: 31.9 per cent) reflecting the reduction in total capital
resources and the increase in risk-weighted assets. This was
largely offset by an increase in other eligible liabilities driven
by new issuances, net of calls, the exclusion of instruments
maturing over the next 12 months and the impact of movements in
interest and foreign exchange rates.
CAPITAL RISK (continued)
Risk-weighted assets
|
At 30 Jun
2024
£m
|
|
|
At 31
Dec
2023
£m
|
|
|
|
|
|
|
|
Foundation
Internal Ratings Based (IRB) Approach
|
42,736
|
|
|
44,504
|
|
Retail
IRB Approach
|
88,608
|
|
|
85,459
|
|
Other
IRB Approach1
|
21,412
|
|
|
20,941
|
|
IRB Approach
|
152,756
|
|
|
150,904
|
|
Standardised
(STA) Approach1
|
22,155
|
|
|
22,074
|
|
Credit risk
|
174,911
|
|
|
172,978
|
|
Securitisation
|
9,076
|
|
|
8,958
|
|
Counterparty
credit risk
|
6,355
|
|
|
5,847
|
|
Credit
valuation adjustment risk
|
574
|
|
|
689
|
|
Operational
risk
|
26,330
|
|
|
26,416
|
|
Market
risk
|
4,773
|
|
|
4,242
|
|
Risk-weighted assets
|
222,019
|
|
|
219,130
|
|
of
which: threshold risk-weighted assets2
|
10,535
|
|
|
11,028
|
|
1
Threshold
risk-weighted assets are included within Other IRB Approach and
Standardised (STA) Approach.
2
Threshold
risk-weighted assets reflect the element of significant investments
and deferred tax assets that are permitted to be risk-weighted
instead of being deducted from CET1 capital. Significant
investments primarily arise from investment in the Group’s
Insurance business.
Risk-weighted
assets increased by £2.9 billion to £222.0 billion at 30
June 2024 (31 December 2023: £219.1 billion). This
incorporates the impact of Retail lending growth, offset by
optimisation including capital efficient securitisation activity,
in addition to other movements.
CAPITAL RISK (continued)
Leverage ratio
The
table below summarises the component parts of the Group’s
leverage ratio.
|
At 30 Jun
2024
£m
|
|
|
At 31
Dec
2023
£m
|
|
|
|
|
|
|
|
Total tier 1 capital
|
36,102
|
|
|
37,712
|
|
|
|
|
|
|
|
Exposure measure
|
|
|
|
|
|
Statutory balance sheet assets
|
|
|
|
|
|
Derivative
financial instruments
|
18,983
|
|
|
22,356
|
|
Securities
financing transactions
|
69,220
|
|
|
56,184
|
|
Loans
and advances and other assets
|
804,724
|
|
|
802,913
|
|
Total assets
|
892,927
|
|
|
881,453
|
|
|
|
|
|
|
|
Qualifying
central bank claims
|
(66,321)
|
|
|
(77,625)
|
|
|
|
|
|
|
|
Deconsolidation adjustments1
|
|
|
|
|
|
Derivative
financial instruments
|
945
|
|
|
585
|
|
Loans
and advances and other assets
|
(186,553)
|
|
|
(178,552)
|
|
Total deconsolidation adjustments
|
(185,608)
|
|
|
(177,967)
|
|
|
|
|
|
|
|
Derivatives
adjustments
|
(1,404)
|
|
|
(4,896)
|
|
Securities
financing transactions adjustments
|
2,779
|
|
|
2,262
|
|
Off-balance
sheet items
|
41,273
|
|
|
40,942
|
|
Amounts
already deducted from tier 1 capital
|
(12,457)
|
|
|
(12,523)
|
|
Other
regulatory adjustments2
|
(6,253)
|
|
|
(4,012)
|
|
Total exposure measure
|
664,936
|
|
|
647,634
|
|
|
|
|
|
|
|
UK leverage ratio
|
5.4 %
|
|
|
5.8%
|
|
|
|
|
|
|
|
Leverage exposure measure (including central bank
claims)
|
731,257
|
|
|
725,259
|
|
Leverage ratio (including central bank claims)
|
4.9 %
|
|
|
5.2%
|
|
|
|
|
|
|
|
Total MREL resources
|
70,314
|
|
|
69,905
|
|
MREL leverage ratio
|
10.6 %
|
|
|
10.8%
|
|
1
Deconsolidation
adjustments relate to the deconsolidation of certain Group entities
that fall outside the scope of the Group’s regulatory capital
consolidation, primarily the Group’s Insurance
business.
2
Includes
adjustments to exclude lending under the UK Government’s
Bounce Back Loan Scheme (BBLS).
Analysis of leverage movements
The
Group’s UK leverage ratio reduced to 5.4 per cent (31
December 2023: 5.8 per cent) reflecting both the reduction in the
total tier 1 capital position and the increase in the leverage
exposure measure following increases across securities financing
transactions and other assets (excluding central bank
claims).
Pillar 3 disclosures
The
Group will publish a condensed set of half-year Pillar 3
disclosures in the second half of August. A copy of the disclosures
will be available to view at:
www.lloydsbankinggroup.com/investors/financial-downloads.html.
CREDIT RISK
Overview
The
Group’s portfolios are well-positioned to benefit from an
improved, but still challenging macroeconomic environment. The
Group retains a prudent approach to credit risk appetite and risk
management, with strong credit origination criteria and robust LTVs
in the secured portfolios.
Asset
quality remains strong with resilient credit performance throughout
the period. In UK mortgages, reductions in new to arrears and flows
to default have been observed in the half-year and second quarter.
Unsecured portfolios continue to exhibit stable new to arrears and
flow to default trends. Credit quality remains stable and resilient
in Commercial Banking. The Group continues to monitor the impacts
of the economic environment carefully through a suite of early
warning indicators and governance arrangements that ensure risk
mitigating action plans are in place to support customers and
protect the Group’s positions.
The
underlying impairment charge in the first half of 2024 was
£101 million, down from a charge of £662 million in
the first half of 2023. This is partly as a result of improvements
in the Group’s macroeconomic outlook resulting in a release
of £324 million (half-year to 30 June 2023: a charge of
£5 million). The Group’s underlying ECL allowance on
loans and advances to customers decreased in the first half to
£3,820 million (31 December 2023:
£4,292 million).
Group
Stage 2 loans and advances to customers reduced to £45,697
million (31 December 2023: £56,545 million) and as a
percentage of total lending to 10.0 per cent (31 December 2023:
12.5 per cent). This is due to improvements in the
macroeconomic outlook transferring assets back to Stage 1. Of the
total Group Stage 2 loans and advances to customers, 90.4 per
cent are up to date (31 December 2023: 91.3 per cent).
Stage 2 coverage remains stable at 3.1 per cent (31 December
2023: 3.0 per cent).
Stage 3
loans and advances to customers have increased slightly to
£10,213 million (31 December 2023:
£10,110 million), and stable as a percentage of total
lending at 2.2 per cent (31 December 2023: 2.2 per cent).
Stage 3 coverage decreased by 0.9 percentage points to
14.9 per cent (31 December 2023: 15.8 per
cent).
Prudent risk appetite and risk management
●
The Group continues
to take a prudent and proactive approach to credit risk management
and credit risk appetite whilst, in line with the Group’s
strategy, supporting clients to grow, as well as working closely
with customers to help them through the impact of higher borrowing
costs and higher prices following elevated inflation in recent
years
●
Sector, asset and
product concentrations within the portfolios are closely monitored
and controlled, with mitigating actions taken where appropriate.
Sector and product risk appetite parameters help manage exposure to
certain higher risk and cyclical sectors, segments and asset
classes
●
The Group’s
effective risk management seeks to ensure early identification and
management of customers and counterparties who may be showing signs
of distress
●
The Group will
continue to work closely with its customers to ensure that they
receive the appropriate level of support, including but not
restricted to embracing the standards outlined in the Mortgage
Charter
CREDIT RISK (continued)
Impairment charge (credit) by division – statutory and
underlyingA basis
|
Half-year to
30 Jun
2024
£m
|
|
|
Half-year
to 30
Jun
2023
£m
|
|
|
Change
%
|
|
Half-year
to 31
Dec
2023
£m
|
|
|
Change
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK
mortgages
|
(119)
|
|
|
191
|
|
|
|
|
(242)
|
|
|
(51)
|
Credit
cards
|
115
|
|
|
197
|
|
|
42
|
|
260
|
|
|
56
|
UK
unsecured loans and overdrafts
|
140
|
|
|
160
|
|
|
13
|
|
91
|
|
|
(54)
|
UK
Motor Finance
|
61
|
|
|
43
|
|
|
(42)
|
|
126
|
|
|
52
|
Other
|
(3)
|
|
|
1
|
|
|
|
|
4
|
|
|
|
Retail
|
194
|
|
|
592
|
|
|
67
|
|
239
|
|
|
19
|
Small
and Medium Businesses
|
11
|
|
|
25
|
|
|
56
|
|
89
|
|
|
88
|
Corporate
and Institutional Banking
|
(94)
|
|
|
47
|
|
|
|
|
(672)
|
|
|
(86)
|
Commercial
Banking
|
(83)
|
|
|
72
|
|
|
|
|
(583)
|
|
|
(86)
|
Insurance,
Pensions and Investments
|
(8)
|
|
|
(1)
|
|
|
|
|
(11)
|
|
|
(27)
|
Equity
Investments and Central Items
|
(3)
|
|
|
(1)
|
|
|
|
|
(4)
|
|
|
(25)
|
Total impairment charge (credit)
|
100
|
|
|
662
|
|
|
85
|
|
(359)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance, Pensions and Investments (underlying basis)A
|
(7)
|
|
|
(1)
|
|
|
|
|
(6)
|
|
|
17
|
Total impairment charge (credit) (underlying basis)A
|
101
|
|
|
662
|
|
|
85
|
|
(354)
|
|
|
|
Asset
quality ratioA
|
0.05%
|
|
|
0.29%
|
|
|
(24)bp
|
|
(0.15)%
|
|
|
|
Credit risk balance sheet basis of presentation
The
balance sheet analyses which follow have been presented on two
bases; the statutory basis which is consistent with the
presentation in the Group’s accounts and the underlying basis
which is used for internal management purposes.
A reconciliation between the two bases has been
provided.
In the
following tables, purchased or originated credit-impaired (POCI)
assets include a fixed pool of mortgages that were purchased as
part of the HBOS acquisition at a deep discount to face value
reflecting credit losses incurred from the point of origination to
the date of acquisition. The residual expected credit loss (ECL)
allowance and resulting low coverage ratio on POCI assets reflects
further deterioration in the creditworthiness from the date of
acquisition. Over time, these POCI assets will run off as the loans
redeem, pay down or as loans are written off.
Within
each table, figures that are different on an underlying basis are
shown underneath the statutory basis figures, for UK mortgages,
Retail and the total for the Group. The Group uses the underlying
basis to monitor the creditworthiness of the lending portfolio and
related ECL allowances because it provides a better indication of
the credit performance of the POCI assets purchased as part of the
HBOS acquisition. The underlying basis assumes that the lending
assets acquired as part of a business combination were originated
by the Group and are classified as either Stage 1, 2 or 3 according
to the change in credit risk over the period since origination.
Underlying ECL allowances have been calculated
accordingly.
Total expected credit loss allowance – statutory and
underlyingA basis
|
At 30 Jun
2024
£m
|
|
|
At 31
Dec
2023
£m
|
|
Customer
related balances
|
|
|
|
|
|
Drawn
|
3,324
|
|
|
3,717
|
|
Undrawn
|
279
|
|
|
322
|
|
|
3,603
|
|
|
4,039
|
|
Loans
and advances to banks
|
3
|
|
|
8
|
|
Debt
securities
|
8
|
|
|
11
|
|
Other
assets
|
16
|
|
|
26
|
|
Total expected credit loss allowance
|
3,630
|
|
|
4,084
|
|
Customer related balances (underlying basis)A
|
3,820
|
|
|
4,292
|
|
of which: Drawn
|
3,541
|
|
|
3,970
|
|
Total expected credit loss allowance (underlying basis)A
|
3,847
|
|
|
4,337
|
|
Reconciliation between statutory and underlying bases of gross
loans and advances to customers and expected credit loss allowance
on drawn balances
|
Gross loans and advances to customers
|
|
Expected credit loss allowance on drawn balances
|
|
Stage 1
£m
|
|
|
Stage 2
£m
|
|
|
Stage 3
£m
|
|
|
POCI
£m
|
|
|
Total
£m
|
|
|
Stage 1
£m
|
|
|
Stage 2
£m
|
|
|
Stage 3
£m
|
|
|
POCI
£m
|
|
|
Total
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 June 2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying
basisA
|
400,039
|
|
|
45,697
|
|
|
10,213
|
|
|
–
|
|
|
455,949
|
|
|
773
|
|
|
1,301
|
|
|
1,467
|
|
|
–
|
|
|
3,541
|
|
POCI
assets
|
(1,787)
|
|
|
(2,788)
|
|
|
(2,860)
|
|
|
7,435
|
|
|
–
|
|
|
(1)
|
|
|
(50)
|
|
|
(391)
|
|
|
442
|
|
|
–
|
|
Acquisition
fairvalue adjustment
|
–
|
|
|
–
|
|
|
–
|
|
|
(217)
|
|
|
(217)
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
(217)
|
|
|
(217)
|
|
|
(1,787)
|
|
|
(2,788)
|
|
|
(2,860)
|
|
|
7,218
|
|
|
(217)
|
|
|
(1)
|
|
|
(50)
|
|
|
(391)
|
|
|
225
|
|
|
(217)
|
|
Statutory basis
|
398,252
|
|
|
42,909
|
|
|
7,353
|
|
|
7,218
|
|
|
455,732
|
|
|
772
|
|
|
1,251
|
|
|
1,076
|
|
|
225
|
|
|
3,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31
December 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying
basisA
|
387,060
|
|
|
56,545
|
|
|
10,110
|
|
|
–
|
|
|
453,715
|
|
|
901
|
|
|
1,532
|
|
|
1,537
|
|
|
–
|
|
|
3,970
|
|
POCI
assets
|
(1,766)
|
|
|
(3,378)
|
|
|
(2,963)
|
|
|
8,107
|
|
|
–
|
|
|
(1)
|
|
|
(65)
|
|
|
(400)
|
|
|
466
|
|
|
–
|
|
Acquisition
fairvalue adjustment
|
–
|
|
|
–
|
|
|
–
|
|
|
(253)
|
|
|
(253)
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
(253)
|
|
|
(253)
|
|
|
(1,766)
|
|
|
(3,378)
|
|
|
(2,963)
|
|
|
7,854
|
|
|
(253)
|
|
|
(1)
|
|
|
(65)
|
|
|
(400)
|
|
|
213
|
|
|
(253)
|
|
Statutory
basis
|
385,294
|
|
|
53,167
|
|
|
7,147
|
|
|
7,854
|
|
|
453,462
|
|
|
900
|
|
|
1,467
|
|
|
1,137
|
|
|
213
|
|
|
3,717
|
|
Movements in total expected credit loss (ECL) allowance –
statutory and underlyingA basis
|
Opening
ECL
at
31
Dec
2023
£m
|
|
|
|
Write-offs
and other1
£m
|
|
|
Income
statement
charge
(credit)
£m
|
|
|
|
Net ECL
increase
(decrease)
£m
|
|
|
Closing
ECL at
30 Jun
2024
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK
mortgages2
|
1,115
|
|
|
|
(25)
|
|
|
(119)
|
|
|
|
(144)
|
|
|
971
|
|
Credit
cards
|
810
|
|
|
|
(225)
|
|
|
115
|
|
|
|
(110)
|
|
|
700
|
|
UK
unsecured loans and overdrafts
|
515
|
|
|
|
(156)
|
|
|
140
|
|
|
|
(16)
|
|
|
499
|
|
UK
Motor Finance
|
342
|
|
|
|
(39)
|
|
|
61
|
|
|
|
22
|
|
|
364
|
|
Other
|
88
|
|
|
|
(6)
|
|
|
(3)
|
|
|
|
(9)
|
|
|
79
|
|
Retail
|
2,870
|
|
|
|
(451)
|
|
|
194
|
|
|
|
(257)
|
|
|
2,613
|
|
Small
and Medium Businesses
|
538
|
|
|
|
(52)
|
|
|
11
|
|
|
|
(41)
|
|
|
497
|
|
Corporate
and Institutional Banking
|
644
|
|
|
|
(48)
|
|
|
(94)
|
|
|
|
(142)
|
|
|
502
|
|
Commercial
Banking
|
1,182
|
|
|
|
(100)
|
|
|
(83)
|
|
|
|
(183)
|
|
|
999
|
|
Insurance,
Pensions and Investments
|
26
|
|
|
|
(2)
|
|
|
(8)
|
|
|
|
(10)
|
|
|
16
|
|
Equity
Investments and Central Items
|
6
|
|
|
|
(1)
|
|
|
(3)
|
|
|
|
(4)
|
|
|
2
|
|
Total3
|
4,084
|
|
|
|
(554)
|
|
|
100
|
|
|
|
(454)
|
|
|
3,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK mortgages (underlying basis)A
|
1,368
|
|
|
|
(61)
|
|
|
(119)
|
|
|
|
(180)
|
|
|
1,188
|
|
Retail (underlying basis)A
|
3,123
|
|
|
|
(487)
|
|
|
194
|
|
|
|
(293)
|
|
|
2,830
|
|
Insurance, Pensions and Investments (underlying basis)
|
26
|
|
|
|
(3)
|
|
|
(7)
|
|
|
|
(10)
|
|
|
16
|
|
Total (underlying basis)A
|
4,337
|
|
|
|
(591)
|
|
|
101
|
|
|
|
(490)
|
|
|
3,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
Contains
adjustments in respect of purchased or originated credit-impaired
financial assets.
2
Includes £20
million within write-offs and other relating to the securitisation
of £1 billion of legacy Retail mortgages in the second quarter
of 2024.
3
Total ECL includes
£27 million relating to other non customer-related assets (31
December 2023: £45 million).
CREDIT RISK (continued)
Loans and advances to customers and expected credit loss allowance
– statutory and underlyingA basis
At 30 June 2024
|
Stage 1
£m
|
|
|
Stage 2
£m
|
|
|
Stage 3
£m
|
|
|
POCI
£m
|
|
|
Total
£m
|
|
|
Stage 2
as % of
total
|
|
|
Stage 3
as % of
total
|
|
Loans and advances to customers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK
mortgages
|
266,308
|
|
|
29,842
|
|
|
4,542
|
|
|
7,218
|
|
|
307,910
|
|
|
9.7
|
|
|
1.5
|
|
Credit
cards
|
13,329
|
|
|
2,601
|
|
|
290
|
|
|
–
|
|
|
16,220
|
|
|
16.0
|
|
|
1.8
|
|
UK
unsecured loans and overdrafts
|
8,261
|
|
|
1,213
|
|
|
186
|
|
|
–
|
|
|
9,660
|
|
|
12.6
|
|
|
1.9
|
|
UK
Motor Finance
|
14,185
|
|
|
2,288
|
|
|
117
|
|
|
–
|
|
|
16,590
|
|
|
13.8
|
|
|
0.7
|
|
Other
|
16,434
|
|
|
522
|
|
|
163
|
|
|
–
|
|
|
17,119
|
|
|
3.0
|
|
|
1.0
|
|
Retail
|
318,517
|
|
|
36,466
|
|
|
5,298
|
|
|
7,218
|
|
|
367,499
|
|
|
9.9
|
|
|
1.4
|
|
Small
and Medium Businesses
|
26,866
|
|
|
3,773
|
|
|
1,323
|
|
|
–
|
|
|
31,962
|
|
|
11.8
|
|
|
4.1
|
|
Corporate
and Institutional Banking
|
53,585
|
|
|
2,670
|
|
|
732
|
|
|
–
|
|
|
56,987
|
|
|
4.7
|
|
|
1.3
|
|
Commercial
Banking
|
80,451
|
|
|
6,443
|
|
|
2,055
|
|
|
–
|
|
|
88,949
|
|
|
7.2
|
|
|
2.3
|
|
Equity
Investments and Central Items1
|
(716)
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
(716)
|
|
|
|
|
|
|
|
Total gross lending
|
398,252
|
|
|
42,909
|
|
|
7,353
|
|
|
7,218
|
|
|
455,732
|
|
|
9.4
|
|
|
1.6
|
|
UK mortgages (underlying basis)A,2
|
268,095
|
|
|
32,630
|
|
|
7,402
|
|
|
|
|
|
308,127
|
|
|
10.6
|
|
|
2.4
|
|
Retail (underlying basis)A
|
320,304
|
|
|
39,254
|
|
|
8,158
|
|
|
|
|
|
367,716
|
|
|
10.7
|
|
|
2.2
|
|
Total gross lending (underlying basis)A
|
400,039
|
|
|
45,697
|
|
|
10,213
|
|
|
|
|
|
455,949
|
|
|
10.0
|
|
|
2.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer related ECL allowance (drawn and undrawn)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK
mortgages
|
87
|
|
|
328
|
|
|
331
|
|
|
225
|
|
|
971
|
|
|
|
|
|
|
|
Credit
cards
|
206
|
|
|
361
|
|
|
133
|
|
|
–
|
|
|
700
|
|
|
|
|
|
|
|
UK
unsecured loans and overdrafts
|
158
|
|
|
231
|
|
|
110
|
|
|
–
|
|
|
499
|
|
|
|
|
|
|
|
UK
Motor Finance3
|
185
|
|
|
112
|
|
|
67
|
|
|
–
|
|
|
364
|
|
|
|
|
|
|
|
Other
|
15
|
|
|
19
|
|
|
45
|
|
|
–
|
|
|
79
|
|
|
|
|
|
|
|
Retail
|
651
|
|
|
1,051
|
|
|
686
|
|
|
225
|
|
|
2,613
|
|
|
|
|
|
|
|
Small
and Medium Businesses
|
131
|
|
|
205
|
|
|
161
|
|
|
–
|
|
|
497
|
|
|
|
|
|
|
|
Corporate
and Institutional Banking
|
139
|
|
|
123
|
|
|
231
|
|
|
–
|
|
|
493
|
|
|
|
|
|
|
|
Commercial
Banking
|
270
|
|
|
328
|
|
|
392
|
|
|
–
|
|
|
990
|
|
|
|
|
|
|
|
Equity
Investments and Central Items
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
|
|
|
|
|
Total
|
921
|
|
|
1,379
|
|
|
1,078
|
|
|
225
|
|
|
3,603
|
|
|
|
|
|
|
|
UK mortgages (underlying basis)A,2
|
88
|
|
|
378
|
|
|
722
|
|
|
|
|
|
1,188
|
|
|
|
|
|
|
|
Retail (underlying basis)A
|
652
|
|
|
1,101
|
|
|
1,077
|
|
|
|
|
|
2,830
|
|
|
|
|
|
|
|
Total (underlying basis)A
|
922
|
|
|
1,429
|
|
|
1,469
|
|
|
|
|
|
3,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
related ECL allowance (drawn and undrawn) as a percentage of loans
and advances to customers
|
|
|
Stage 1%
|
|
|
Stage 2%
|
|
|
Stage 3%
|
|
|
POCI%
|
|
|
Total%
|
|
|
Adjusted
Stage 34
%
|
|
|
Adjusted Total4
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK
mortgages
|
–
|
|
|
1.1
|
|
|
7.3
|
|
|
3.1
|
|
|
0.3
|
|
|
|
|
|
|
|
Credit
cards
|
1.5
|
|
|
13.9
|
|
|
45.9
|
|
|
–
|
|
|
4.3
|
|
|
50.0
|
|
|
4.3
|
|
UK
unsecured loans and overdrafts
|
1.9
|
|
|
19.0
|
|
|
59.1
|
|
|
–
|
|
|
5.2
|
|
|
64.7
|
|
|
5.2
|
|
UK
Motor Finance
|
1.3
|
|
|
4.9
|
|
|
57.3
|
|
|
–
|
|
|
2.2
|
|
|
|
|
|
|
|
Other
|
0.1
|
|
|
3.6
|
|
|
27.6
|
|
|
–
|
|
|
0.5
|
|
|
|
|
|
|
|
Retail
|
0.2
|
|
|
2.9
|
|
|
12.9
|
|
|
3.1
|
|
|
0.7
|
|
|
13.0
|
|
|
0.7
|
|
Small
and Medium Businesses
|
0.5
|
|
|
5.4
|
|
|
12.2
|
|
|
–
|
|
|
1.6
|
|
|
16.3
|
|
|
1.6
|
|
Corporate
and Institutional Banking
|
0.3
|
|
|
4.6
|
|
|
31.6
|
|
|
–
|
|
|
0.9
|
|
|
31.6
|
|
|
0.9
|
|
Commercial
Banking
|
0.3
|
|
|
5.1
|
|
|
19.1
|
|
|
–
|
|
|
1.1
|
|
|
22.8
|
|
|
1.1
|
|
Equity
Investments and Central Items
|
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Total
|
0.2
|
|
|
3.2
|
|
|
14.7
|
|
|
3.1
|
|
|
0.8
|
|
|
15.5
|
|
|
0.8
|
|
UK mortgages (underlying basis)A,2
|
–
|
|
|
1.2
|
|
|
9.8
|
|
|
|
|
|
0.4
|
|
|
|
|
|
|
|
Retail (underlying basis)A
|
0.2
|
|
|
2.8
|
|
|
13.2
|
|
|
|
|
|
0.8
|
|
|
13.3
|
|
|
0.8
|
|
Total (underlying basis)A
|
0.2
|
|
|
3.1
|
|
|
14.4
|
|
|
|
|
|
0.8
|
|
|
14.9
|
|
|
0.8
|
|
1
Contains
centralised fair value hedge accounting adjustments.
2
UK mortgages
balances on an underlying basisA exclude the impact
of the HBOS acquisition-related adjustments.
3
UK Motor Finance
for Stages 1 and 2 include £185 million relating to provisions
against residual values of vehicles subject to finance leasing
agreements for Black Horse. These provisions are included within
the calculation of coverage ratios.
4
Adjusted Stage 3
and Total ECL allowances as a percentage of drawn balances exclude
loans in recoveries in Credit cards of £24 million, UK
unsecured loans and overdrafts of £16 million, Small and
Medium Businesses of £337 million and Corporate and
Institutional Banking of £1 million.
CREDIT RISK (continued)
Loans and advances to customers and expected credit loss allowance
– statutory and underlyingA basis
At 31
December 2023
|
Stage
1
£m
|
|
|
Stage
2
£m
|
|
|
Stage
3
£m
|
|
|
POCI
£m
|
|
|
Total
£m
|
|
|
Stage
2
as %
of
total
|
|
|
Stage
3
as %
of
total
|
|
Loans
and advances to customers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK
mortgages
|
256,596
|
|
|
38,533
|
|
|
4,337
|
|
|
7,854
|
|
|
307,320
|
|
|
12.5
|
|
|
1.4
|
|
Credit
cards
|
12,625
|
|
|
2,908
|
|
|
284
|
|
|
–
|
|
|
15,817
|
|
|
18.4
|
|
|
1.8
|
|
UK
unsecured loans and overdrafts
|
7,103
|
|
|
1,187
|
|
|
196
|
|
|
–
|
|
|
8,486
|
|
|
14.0
|
|
|
2.3
|
|
UK
Motor Finance
|
13,541
|
|
|
2,027
|
|
|
112
|
|
|
–
|
|
|
15,680
|
|
|
12.9
|
|
|
0.7
|
|
Other
|
15,898
|
|
|
525
|
|
|
144
|
|
|
–
|
|
|
16,567
|
|
|
3.2
|
|
|
0.9
|
|
Retail
|
305,763
|
|
|
45,180
|
|
|
5,073
|
|
|
7,854
|
|
|
363,870
|
|
|
12.4
|
|
|
1.4
|
|
Small
and Medium Businesses
|
27,525
|
|
|
4,458
|
|
|
1,530
|
|
|
–
|
|
|
33,513
|
|
|
13.3
|
|
|
4.6
|
|
Corporate
and Institutional Banking
|
52,049
|
|
|
3,529
|
|
|
538
|
|
|
–
|
|
|
56,116
|
|
|
6.3
|
|
|
1.0
|
|
Commercial
Banking
|
79,574
|
|
|
7,987
|
|
|
2,068
|
|
|
–
|
|
|
89,629
|
|
|
8.9
|
|
|
2.3
|
|
Equity
Investments and Central Items1
|
(43)
|
|
|
–
|
|
|
6
|
|
|
–
|
|
|
(37)
|
|
|
|
|
|
|
|
Total
gross lending
|
385,294
|
|
|
53,167
|
|
|
7,147
|
|
|
7,854
|
|
|
453,462
|
|
|
11.7
|
|
|
1.6
|
|
UK mortgages (underlying basis)A,2
|
258,362
|
|
|
41,911
|
|
|
7,300
|
|
|
|
|
|
307,573
|
|
|
13.6
|
|
|
2.4
|
|
Retail (underlying basis)A
|
307,529
|
|
|
48,558
|
|
|
8,036
|
|
|
|
|
|
364,123
|
|
|
13.3
|
|
|
2.2
|
|
Total gross lending (underlying basis)A
|
387,060
|
|
|
56,545
|
|
|
10,110
|
|
|
|
|
|
453,715
|
|
|
12.5
|
|
|
2.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
related ECL allowance (drawn and undrawn)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK
mortgages
|
169
|
|
|
376
|
|
|
357
|
|
|
213
|
|
|
1,115
|
|
|
|
|
|
|
|
Credit
cards
|
234
|
|
|
446
|
|
|
130
|
|
|
–
|
|
|
810
|
|
|
|
|
|
|
|
UK
unsecured loans and overdrafts
|
153
|
|
|
244
|
|
|
118
|
|
|
–
|
|
|
515
|
|
|
|
|
|
|
|
UK
Motor Finance3
|
188
|
|
|
91
|
|
|
63
|
|
|
–
|
|
|
342
|
|
|
|
|
|
|
|
Other
|
20
|
|
|
21
|
|
|
47
|
|
|
–
|
|
|
88
|
|
|
|
|
|
|
|
Retail
|
764
|
|
|
1,178
|
|
|
715
|
|
|
213
|
|
|
2,870
|
|
|
|
|
|
|
|
Small
and Medium Businesses
|
140
|
|
|
231
|
|
|
167
|
|
|
–
|
|
|
538
|
|
|
|
|
|
|
|
Corporate
and Institutional Banking
|
156
|
|
|
218
|
|
|
253
|
|
|
–
|
|
|
627
|
|
|
|
|
|
|
|
Commercial
Banking
|
296
|
|
|
449
|
|
|
420
|
|
|
–
|
|
|
1,165
|
|
|
|
|
|
|
|
Equity
Investments and Central Items
|
–
|
|
|
–
|
|
|
4
|
|
|
–
|
|
|
4
|
|
|
|
|
|
|
|
Total
|
1,060
|
|
|
1,627
|
|
|
1,139
|
|
|
213
|
|
|
4,039
|
|
|
|
|
|
|
|
UK mortgages (underlying basis)A,2
|
170
|
|
|
441
|
|
|
757
|
|
|
|
|
|
1,368
|
|
|
|
|
|
|
|
Retail (underlying basis)A
|
765
|
|
|
1,243
|
|
|
1,115
|
|
|
|
|
|
3,123
|
|
|
|
|
|
|
|
Total gross lending (underlying basis)A
|
1,061
|
|
|
1,692
|
|
|
1,539
|
|
|
|
|
|
4,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
related ECL allowance (drawn and undrawn) as a percentage of loans
and advances to customers
|
|
|
Stage
1%
|
|
|
Stage
2%
|
|
|
Stage
3%
|
|
|
POCI%
|
|
|
Total%
|
|
|
Adjusted
Stage
34
%
|
|
|
Adjusted
Total4
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK
mortgages
|
0.1
|
|
|
1.0
|
|
|
8.2
|
|
|
2.7
|
|
|
0.4
|
|
|
|
|
|
|
|
Credit
cards
|
1.9
|
|
|
15.3
|
|
|
45.8
|
|
|
–
|
|
|
5.1
|
|
|
49.4
|
|
|
5.1
|
|
UK
unsecured loans and overdrafts
|
2.2
|
|
|
20.6
|
|
|
60.2
|
|
|
–
|
|
|
6.1
|
|
|
65.6
|
|
|
6.1
|
|
UK
Motor Finance
|
1.4
|
|
|
4.5
|
|
|
56.3
|
|
|
–
|
|
|
2.2
|
|
|
|
|
|
|
|
Other
|
0.1
|
|
|
4.0
|
|
|
32.6
|
|
|
–
|
|
|
0.5
|
|
|
|
|
|
|
|
Retail
|
0.2
|
|
|
2.6
|
|
|
14.1
|
|
|
2.7
|
|
|
0.8
|
|
|
14.2
|
|
|
0.8
|
|
Small
and Medium Businesses
|
0.5
|
|
|
5.2
|
|
|
10.9
|
|
|
–
|
|
|
1.6
|
|
|
13.9
|
|
|
1.6
|
|
Corporate
and Institutional Banking
|
0.3
|
|
|
6.2
|
|
|
47.0
|
|
|
–
|
|
|
1.1
|
|
|
47.0
|
|
|
1.1
|
|
Commercial
Banking
|
0.4
|
|
|
5.6
|
|
|
20.3
|
|
|
–
|
|
|
1.3
|
|
|
24.1
|
|
|
1.3
|
|
Equity
Investments and Central Items
|
|
|
|
–
|
|
|
66.7
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Total
|
0.3
|
|
|
3.1
|
|
|
15.9
|
|
|
2.7
|
|
|
0.9
|
|
|
16.8
|
|
|
0.9
|
|
UK mortgages (underlying basis)A,2
|
0.1
|
|
|
1.1
|
|
|
10.4
|
|
|
|
|
|
0.4
|
|
|
|
|
|
|
|
Retail (underlying basis)A
|
0.2
|
|
|
2.6
|
|
|
13.9
|
|
|
|
|
|
0.9
|
|
|
13.9
|
|
|
0.9
|
|
Total gross lending (underlying basis)A
|
0.3
|
|
|
3.0
|
|
|
15.2
|
|
|
|
|
|
0.9
|
|
|
15.8
|
|
|
0.9
|
|
1
Contains
centralised fair value hedge accounting adjustments.
2
UK mortgages
balances on an underlying basisA exclude the impact
of the HBOS acquisition-related adjustments.
3
UK Motor Finance
for Stages 1 and 2 include £187 million relating to provisions
against residual values of vehicles subject to finance leasing
agreements for Black Horse. These provisions are included within
the calculation of coverage ratios.
4
Adjusted Stage 3
and Total ECL allowances as a percentage of drawn balances exclude
loans in recoveries in Credit cards of £21 million, UK
unsecured loans and overdrafts of £16 million, Small and
Medium Businesses of £327 million.
CREDIT RISK (continued)
Stage 2 loans and advances to customers and expected credit loss
allowance – statutory and underlyingA basis
|
Up to date
|
|
1 to 30 days
past due2
|
|
Over 30 days
past due
|
|
Total
|
|
PD movements
|
|
Other1
|
|
|
|
At 30 June 2024
|
Gross
lending
£m
|
|
|
ECL3
£m
|
|
|
Gross
lending
£m
|
|
|
ECL3
£m
|
|
|
Gross
lending
£m
|
|
|
ECL3
£m
|
|
|
Gross
lending
£m
|
|
|
ECL3
£m
|
|
|
Gross
lending
£m
|
|
|
ECL3
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK
mortgages
|
17,837
|
|
|
109
|
|
|
9,350
|
|
|
131
|
|
|
1,678
|
|
|
48
|
|
|
977
|
|
|
40
|
|
|
29,842
|
|
|
328
|
|
Credit
cards
|
2,317
|
|
|
272
|
|
|
151
|
|
|
46
|
|
|
96
|
|
|
27
|
|
|
37
|
|
|
16
|
|
|
2,601
|
|
|
361
|
|
UK
unsecured loans and overdrafts
|
715
|
|
|
135
|
|
|
343
|
|
|
47
|
|
|
114
|
|
|
33
|
|
|
41
|
|
|
16
|
|
|
1,213
|
|
|
231
|
|
UK
Motor Finance
|
971
|
|
|
44
|
|
|
1,127
|
|
|
31
|
|
|
155
|
|
|
26
|
|
|
35
|
|
|
11
|
|
|
2,288
|
|
|
112
|
|
Other
|
109
|
|
|
3
|
|
|
308
|
|
|
9
|
|
|
59
|
|
|
5
|
|
|
46
|
|
|
2
|
|
|
522
|
|
|
19
|
|
Retail
|
21,949
|
|
|
563
|
|
|
11,279
|
|
|
264
|
|
|
2,102
|
|
|
139
|
|
|
1,136
|
|
|
85
|
|
|
36,466
|
|
|
1,051
|
|
Small
and Medium Businesses
|
2,943
|
|
|
171
|
|
|
464
|
|
|
18
|
|
|
229
|
|
|
11
|
|
|
137
|
|
|
5
|
|
|
3,773
|
|
|
205
|
|
Corporate
and Institutional Banking
|
2,615
|
|
|
122
|
|
|
30
|
|
|
1
|
|
|
6
|
|
|
–
|
|
|
19
|
|
|
–
|
|
|
2,670
|
|
|
123
|
|
Commercial
Banking
|
5,558
|
|
|
293
|
|
|
494
|
|
|
19
|
|
|
235
|
|
|
11
|
|
|
156
|
|
|
5
|
|
|
6,443
|
|
|
328
|
|
Total
|
27,507
|
|
|
856
|
|
|
11,773
|
|
|
283
|
|
|
2,337
|
|
|
150
|
|
|
1,292
|
|
|
90
|
|
|
42,909
|
|
|
1,379
|
|
UK mortgages (underlying basis)A
|
18,966
|
|
|
117
|
|
|
10,261
|
|
|
149
|
|
|
2,100
|
|
|
58
|
|
|
1,303
|
|
|
54
|
|
|
32,630
|
|
|
378
|
|
Retail
(underlying basis)A
|
23,078
|
|
|
571
|
|
|
12,190
|
|
|
282
|
|
|
2,524
|
|
|
149
|
|
|
1,462
|
|
|
99
|
|
|
39,254
|
|
|
1,101
|
|
Total
(underlying basis)A
|
28,636
|
|
|
864
|
|
|
12,684
|
|
|
301
|
|
|
2,759
|
|
|
160
|
|
|
1,618
|
|
|
104
|
|
|
45,697
|
|
|
1,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31
December 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK
mortgages
|
26,665
|
|
|
146
|
|
|
9,024
|
|
|
133
|
|
|
1,771
|
|
|
52
|
|
|
1,073
|
|
|
45
|
|
|
38,533
|
|
|
376
|
|
Credit
cards
|
2,612
|
|
|
345
|
|
|
145
|
|
|
49
|
|
|
115
|
|
|
34
|
|
|
36
|
|
|
18
|
|
|
2,908
|
|
|
446
|
|
UK
unsecured loans and overdrafts
|
756
|
|
|
148
|
|
|
279
|
|
|
46
|
|
|
112
|
|
|
34
|
|
|
40
|
|
|
16
|
|
|
1,187
|
|
|
244
|
|
UK
Motor Finance
|
735
|
|
|
30
|
|
|
1,120
|
|
|
30
|
|
|
138
|
|
|
21
|
|
|
34
|
|
|
10
|
|
|
2,027
|
|
|
91
|
|
Other
|
125
|
|
|
5
|
|
|
295
|
|
|
7
|
|
|
52
|
|
|
5
|
|
|
53
|
|
|
4
|
|
|
525
|
|
|
21
|
|
Retail
|
30,893
|
|
|
674
|
|
|
10,863
|
|
|
265
|
|
|
2,188
|
|
|
146
|
|
|
1,236
|
|
|
93
|
|
|
45,180
|
|
|
1,178
|
|
Small
and Medium Businesses
|
3,455
|
|
|
202
|
|
|
590
|
|
|
17
|
|
|
253
|
|
|
8
|
|
|
160
|
|
|
4
|
|
|
4,458
|
|
|
231
|
|
Corporate
and Institutional Banking
|
3,356
|
|
|
214
|
|
|
14
|
|
|
–
|
|
|
28
|
|
|
3
|
|
|
131
|
|
|
1
|
|
|
3,529
|
|
|
218
|
|
Commercial
Banking
|
6,811
|
|
|
416
|
|
|
604
|
|
|
17
|
|
|
281
|
|
|
11
|
|
|
291
|
|
|
5
|
|
|
7,987
|
|
|
449
|
|
Total
|
37,704
|
|
|
1,090
|
|
|
11,467
|
|
|
282
|
|
|
2,469
|
|
|
157
|
|
|
1,527
|
|
|
98
|
|
|
53,167
|
|
|
1,627
|
|
UK mortgages (underlying basis)A
|
28,126
|
|
|
157
|
|
|
9,990
|
|
|
156
|
|
|
2,297
|
|
|
64
|
|
|
1,498
|
|
|
64
|
|
|
41,911
|
|
|
441
|
|
Retail
(underlying basis)A
|
32,354
|
|
|
685
|
|
|
11,829
|
|
|
288
|
|
|
2,714
|
|
|
158
|
|
|
1,661
|
|
|
112
|
|
|
48,558
|
|
|
1,243
|
|
Total
(underlying basis)A
|
39,165
|
|
|
1,101
|
|
|
12,433
|
|
|
305
|
|
|
2,995
|
|
|
169
|
|
|
1,952
|
|
|
117
|
|
|
56,545
|
|
|
1,692
|
|
1 Includes forbearance, client and product-specific
indicators not reflected within quantitative PD
assessments.
2 Includes assets that have triggered PD movements, or
other rules, given that being 1 to 29 days in arrears in and of
itself is not a Stage 2 trigger.
3 Expected credit loss allowance on loans and advances
to customers (drawn and undrawn).
CREDIT RISK (continued)
ECL sensitivity to economic assumptions
The
measurement of ECL reflects an unbiased probability-weighted range
of possible future economic outcomes. The Group achieves this by
generating four economic scenarios to appropriately reflect the
range of outcomes; the central scenario reflects the Group’s
base case assumptions used for medium-term planning purposes, an
upside and a downside scenario are also selected together with a
severe downside scenario. If the base case moves adversely, it
generates a new, more adverse downside and severe downside which
are then incorporated into the ECL. Consistent with prior years,
the base case, upside and downside scenarios carry a 30 per cent
weighting; the severe downside is weighted at 10 per cent. These
assumptions can be found in note 14 on page 1
onwards.
The
table below shows the Group’s ECL for the
probability-weighted, upside, base case, downside and severe
downside scenarios, with the severe downside scenario incorporating
adjustments made to CPI inflation and UK Bank Rate paths. The stage
allocation for an asset is based on the overall scenario
probability-weighted probability of default and hence the staging
of assets is constant across all the scenarios. In each economic
scenario the ECL for individual assessments is held constant
reflecting the basis on which they are evaluated. Judgemental
adjustments applied through changes to model inputs or parameters,
or more qualitative post model adjustments, are apportioned across
the scenarios in proportion to modelled ECL where this better
reflects the sensitivity of these adjustments to each scenario. The
probability-weighted view shows the extent to which a higher ECL
allowance has been recognised to take account of multiple economic
scenarios relative to the base case; the uplift being
£468 million compared to £678 million at
31 December 2023.
Total ECL allowance by scenario – statutory and
underlyingA basis
|
Probability-
weighted
£m
|
|
|
Upside
£m
|
|
|
Base
case
£m
|
|
|
Downside
£m
|
|
|
Severe
downside
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK
mortgages
|
|
971
|
|
|
387
|
|
|
658
|
|
|
1,190
|
|
|
3,004
|
|
Credit
cards
|
|
700
|
|
|
583
|
|
|
676
|
|
|
772
|
|
|
903
|
|
Other
Retail
|
|
942
|
|
|
855
|
|
|
915
|
|
|
990
|
|
|
1,139
|
|
Commercial
Banking
|
|
999
|
|
|
746
|
|
|
895
|
|
|
1,143
|
|
|
1,641
|
|
Other
|
|
18
|
|
|
16
|
|
|
18
|
|
|
19
|
|
|
21
|
|
At 30 June 2024
|
|
3,630
|
|
|
2,587
|
|
|
3,162
|
|
|
4,114
|
|
|
6,708
|
|
UK mortgages (underlying basis)A
|
|
1,188
|
|
|
604
|
|
|
876
|
|
|
1,407
|
|
|
3,222
|
|
Total (underlying basis)A
|
|
3,847
|
|
|
2,804
|
|
|
3,380
|
|
|
4,331
|
|
|
6,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK
mortgages
|
|
1,115
|
|
|
395
|
|
|
670
|
|
|
1,155
|
|
|
4,485
|
|
Credit
cards
|
|
810
|
|
|
600
|
|
|
771
|
|
|
918
|
|
|
1,235
|
|
Other
Retail
|
|
945
|
|
|
850
|
|
|
920
|
|
|
981
|
|
|
1,200
|
|
Commercial
Banking
|
|
1,182
|
|
|
793
|
|
|
1,013
|
|
|
1,383
|
|
|
2,250
|
|
Other
|
|
32
|
|
|
32
|
|
|
32
|
|
|
32
|
|
|
32
|
|
At 31
December 2023
|
|
4,084
|
|
|
2,670
|
|
|
3,406
|
|
|
4,469
|
|
|
9,202
|
|
UK mortgages (underlying basis)A
|
|
1,368
|
|
|
650
|
|
|
930
|
|
|
1,400
|
|
|
4,738
|
|
Total (underlying basis)A
|
|
4,337
|
|
|
2,925
|
|
|
3,666
|
|
|
4,714
|
|
|
9,455
|
|
CREDIT RISK (continued)
Retail
●
Asset quality
remains strong in the Retail portfolio with resilient credit
performance throughout the period. There are signs that
affordability pressures are easing as inflation has fallen back and
the UK bank rate has settled. However, lagged impacts from previous
interest rate rises and rising unemployment remain potential
headwinds
●
Robust risk
management remains in place, with strong affordability and
indebtedness controls for both new and existing lending and a
prudent risk appetite approach
●
Lending strategies
are under continuous review and have been proactively managed and
calibrated to the latest macroeconomic outlook, with actions taken
to enhance both living and housing cost assumptions in
affordability assessments
●
In UK mortgages,
reductions in new to arrears and flows to default have been
observed in the half-year and second quarter
●
Unsecured
portfolios continue to exhibit stable new to arrears and flow to
default trends with a small increase observed in flow to default in
Motor driven by a normalisation of Voluntary Terminations
(VT’s) as used car prices fall from historic
highs
●
The Retail
impairment charge in the first half of 2024 was £194 million
and is materially lower than the charge of £592 million
for the first half of 2023. This is largely due to favourable
updates to the Group’s macroeconomic outlook within the base
case and other scenarios, driving a £269 million release
compared to a charge of £41 million in the first half of 2023,
as well as the release of inflationary adjustments, given portfolio
performance
●
All existing IFRS 9
staging rules and triggers have been maintained across Retail from
the 2023 year end. Retail customer related ECL allowance as a
percentage of drawn loans and advances (coverage) decreased to 0.8
per cent (31 December 2023: 0.9 per cent)
●
Favourable updates
to the Group’s macroeconomic outlook have reduced Stage 2
loans and advances to 10.7 per cent of the Retail portfolio (31
December 2023: 13.3 per cent), of which 89.8 per cent are up
to date loans (31 December 2023: 91.0 per cent). Stage 2 ECL
coverage increased to 2.8 per cent (31 December 2023: 2.6 per
cent)
●
Stage 3 loans and
advances remain flat at 2.2 per cent of total loans and
advances. Retail Stage 3 ECL coverage decreased to 13.3 per cent
(31 December 2023: 13.9 per cent) due to portfolio mix
changes; notably because UK mortgages require comparatively lower
coverage in comparison to other Retail products due to security.
Stage 3 loans and advances and Stage 3 coverage for all other
Retail products excluding UK mortgages remain broadly
stable
●
The UK mortgage
portfolio is well positioned with low arrears and a strong loan to
value (LTV) profile. The Group has actively improved the quality of
the portfolio over recent years using robust affordability and
credit controls, while the balances of higher risk legacy vintages
have continued to reduce
●
New to arrears and
flows to default have improved in the half-year and second quarter.
The Group is proactively monitoring existing mortgage customers as
they reach the end of fixed rate deals with customers’
immediate behaviour remaining stable
●
Total loans and
advances increased to £308.1 billion (31 December 2023:
£307.6 billion), with a decrease in average LTV to 43.0 per
cent (31 December 2023: 43.6 per cent). The proportion of balances
with a LTV greater than 90 per cent decreased to 1.4 per cent
(31 December 2023: 2.9 per cent). The average LTV of new
business increased to 62.9 per cent (31 December 2023:
61.7 per cent)
●
Favourable updates
to the Group’s macroeconomic outlook and stronger asset
performance resulted in a net impairment release of £119
million for the first half of 2024 compared to a charge of
£191 million for the first half of 2023. Total ECL
coverage remains stable at 0.4 per cent (31 December
2023: 0.4 per cent)
●
Favourable
macroeconomic updates also resulted in reductions to Stage 2 loans
and advances to 10.6 per cent of the portfolio (31 December 2023:
13.6 per cent) and Stage 2 ECL coverage rising slightly to
1.2 per cent (31 December 2023: 1.1 per
cent)
●
Stage 3 loans and
advances remain stable at 2.4 per cent of the portfolio (31
December 2023: 2.4 per cent) with increases in legacy variable rate
customers reaching 90 days past due largely offset by legacy
mortgage securitisation activity. Stage 3 ECL coverage decreased to
9.8 per cent (31 December 2023: 10.4 per cent), due to the
favourable macroeconomic outlook
CREDIT RISK (continued)
Period end and average LTVs across the Retail UK mortgage portfolio
– underlying basisA
At 30 June 2024
|
Mainstream
%
|
|
|
Buy-to-let
%
|
|
|
Specialist
%
|
|
|
Total
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less
than 60 per cent
|
|
57.1
|
|
|
69.8
|
|
|
86.6
|
|
|
59.4
|
|
60 per
cent to 70 per cent
|
|
17.2
|
|
|
21.0
|
|
|
7.7
|
|
|
17.7
|
|
70 per
cent to 80 per cent
|
|
13.4
|
|
|
9.0
|
|
|
2.3
|
|
|
12.6
|
|
80 per
cent to 90 per cent
|
|
10.7
|
|
|
0.1
|
|
|
1.2
|
|
|
8.9
|
|
90 per
cent to 100 per cent
|
|
1.5
|
|
|
0.0
|
|
|
1.0
|
|
|
1.3
|
|
Greater
than 100 per cent
|
|
0.1
|
|
|
0.1
|
|
|
1.2
|
|
|
0.1
|
|
Total
|
|
100.0
|
|
|
100.0
|
|
|
100.0
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK
mortgages loans and advances to customers (£m)
|
|
255,935
|
|
|
47,989
|
|
|
4,203
|
|
|
308,127
|
|
Average
loan to value1:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
of residential mortgages
|
|
42.5
|
|
|
47.1
|
|
|
34.1
|
|
|
43.0
|
|
New
residential lending in the period
|
|
64.0
|
|
|
55.4
|
|
|
n/a
|
|
|
62.9
|
|
At 31
December 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
Less
than 60 per cent
|
|
55.3
|
|
|
66.9
|
|
|
84.8
|
|
|
57.7
|
|
60 per
cent to 70 per cent
|
|
17.6
|
|
|
21.8
|
|
|
9.2
|
|
|
18.1
|
|
70 per
cent to 80 per cent
|
|
14.3
|
|
|
10.8
|
|
|
2.4
|
|
|
13.5
|
|
80 per
cent to 90 per cent
|
|
9.4
|
|
|
0.4
|
|
|
1.2
|
|
|
7.8
|
|
90 per
cent to 100 per cent
|
|
3.3
|
|
|
0.0
|
|
|
1.1
|
|
|
2.8
|
|
Greater
than 100 per cent
|
|
0.1
|
|
|
0.1
|
|
|
1.3
|
|
|
0.1
|
|
Total
|
|
100.0
|
|
|
100.0
|
|
|
100.0
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK
mortgages loans and advances to customers (£m)
|
|
254,539
|
|
|
47,609
|
|
|
5,425
|
|
|
307,573
|
|
Average
loan to value1:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
of residential mortgages
|
|
43.1
|
|
|
48.1
|
|
|
35.0
|
|
|
43.6
|
|
New
residential lending in the year
|
|
62.5
|
|
|
51.6
|
|
|
n/a
|
|
|
61.7
|
|
1 Average loan to value is calculated as total loans
and advances as a percentage of the total indexed collateral of
these loans and advances; the balances exclude the impact of HBOS
acquisition adjustments.
UK mortgages greater than three months in arrears, excluding
repossessions – underlying basisA
|
Number of cases
|
|
Proportion of total
|
|
Value of loans1
|
|
Proportion of total
|
|
At 30 Jun
2024
Cases
|
|
|
At 31
Dec
2023
Cases
|
|
|
At 30 Jun
2024
%
|
|
|
At 31
Dec
2023
%
|
|
|
At 30 Jun
2024
£m
|
|
|
At 31
Dec
2023
£m
|
|
|
At 30 Jun
2024
%
|
|
|
At 31
Dec
2023
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainstream
|
22,900
|
|
|
23,123
|
|
|
1.3
|
|
|
1.3
|
|
|
3,163
|
|
|
3,094
|
|
|
1.2
|
|
|
1.2
|
|
Buy-to-let
|
5,058
|
|
|
5,037
|
|
|
1.4
|
|
|
1.4
|
|
|
725
|
|
|
692
|
|
|
1.5
|
|
|
1.5
|
|
Specialist
|
4,085
|
|
|
4,726
|
|
|
11.4
|
|
|
10.5
|
|
|
699
|
|
|
806
|
|
|
16.4
|
|
|
14.7
|
|
Total
|
32,043
|
|
|
32,886
|
|
|
1.5
|
|
|
1.5
|
|
|
4,587
|
|
|
4,592
|
|
|
1.5
|
|
|
1.5
|
|
1 Value of loans represents gross book value excluding
the impact of HBOS acquisition adjustments of mortgages more than
three months in arrears. These accounts are a subset of total Stage
3 given the exclusion of accounts in possession and those meeting
other Stage 3 criteria.
CREDIT RISK (continued)
Credit cards
●
Credit cards
balances increased to £16.2 billion (31 December 2023:
£15.8 billion) due to continued recovery in customer spend,
with no change to acquisition risk appetite
●
The credit card
portfolio is a prime book, with stable credit performance in the
half-year and continued strong repayment rates
●
Impairment charge
of £115 million for the first half of 2024, is lower than the
charge of £197 million in the first half of 2023, largely due
to the release of ECL judgements raised to cover the risk of
increased defaults from high inflation and cost of living
pressures, given continued resilient portfolio performance. Total
ECL coverage reduced to 4.3 per cent (31 December 2023:
5.1 per cent)
●
Favourable updates
to the macroeconomic outlook resulted in a reduction in Stage 2
loans and advances to 16.0 per cent of the portfolio (31 December
2023: 18.4 per cent), with Stage 2 ECL coverage reducing to 13.9
per cent (31 December 2023: 15.3 per cent)
●
Resilient
underlying arrears and default performance has also resulted in
stable Stage 3 loans and advances at 1.8 per cent of the
portfolio (31 December 2023: 1.8 per cent). Stage 3 ECL coverage is
broadly stable at 50.0 per cent (31 December 2023: 49.4
per cent)
UK unsecured loans and overdrafts
●
Loans and advances
for personal current account and the personal loans portfolios
increased to £9.7 billion (31 December 2023:
£8.5 billion) largely driven by recovering market demand
in loans and natural balance build following the securitisation of
assets at the end of 2023
●
Impairment charge
of £140 million for the first half of 2024 is modestly below
the charge of £160 million for the first half of 2023 again
due to favourable macroeconomic updates and a more resilient
underlying performance than previously anticipated. ECL coverage
levels by individual stage all remain broadly stable, with Stage 2
ECL coverage at 19.0 per cent (31 December 2023: 20.6 per cent) and
Stage 3 ECL coverage at 64.7 per cent (31 December 2023: 65.6 per
cent)
UK Motor Finance
●
The UK Motor
Finance portfolio increased to £16.6 billion (31 December
2023: £15.7 billion) driven by stocking and fleet, partially
offset by a softening of Retail demand in the
half-year
●
Updates to Residual
Value (RV) and Voluntary Termination (VT) risk held against
Personal Contract Purchase (PCP) and Hire Purchase (HP) lending are
included within the impairment charge1. Recent significant
falls in used car prices have been reflected and absorbed by an
existing management judgement within this item. As a result RV and
VT provision reduced to £185 million as at 30 June 2024
(31 December 2023: £187 million)
●
Impairment charge
of £61 million for the first half of 2024 is higher than a
charge of £43 million for the first half of 2023, which
benefitted from more stable used car prices, partially driven by
global supply constraints following the pandemic that have now
eased
●
ECL coverage levels
at a total level and by individual stage remain broadly stable.
Total ECL coverage at 2.2 per cent (31 December 2023: 2.2 per
cent), Stage 2 ECL coverage at 4.9 per cent (31 December 2023:
4.5 per cent) and Stage 3 ECL coverage at 57.3 per cent
(31 December 2023: 56.3 per cent)
Other
●
Other loans and
advances increased to £17.1 billion (31 December 2023:
£16.6 billion). Stage 3 loans and advances remain stable at
1.0 per cent (31 December 2023: 0.9 per cent) and Stage 3
coverage reduced to 27.6 per cent (31 December 2023: 32.6
per cent)
●
There was a net
impairment credit of £3 million for the first half of 2024
compared to a charge of £1 million in the first half of
2023
1 The depreciation of operating leases is included
separately in the operating lease depreciation charge.
CREDIT RISK (continued)
Commercial Banking
●
The Commercial
portfolio credit quality remains stable and resilient, benefitting
from a focused approach to credit underwriting and monitoring
standards and proactively managing exposures to higher risk and
vulnerable sectors
●
The Group is
cognisant of a number of risks and headwinds associated with the
elevated interest rate environment especially in, but not limited
to, sectors reliant upon consumer discretionary spend. Risks
include reduced asset valuation and refinancing risk, a reduction
in market liquidity impacting credit supply and pressure on both
household discretionary spending and business margins
●
The Group continues
to closely monitor credit quality, sector and single name
concentrations. Sector and credit risk appetite continue to be
proactively managed to ensure clients are supported in the right
way and the Group is protected
●
The Group continues
to provide early support to its more vulnerable customers through
focused risk management via its Watchlist and Business Support
framework. The Group continues to balance prudent risk appetite
with ensuring support for financially viable clients
Impairment
●
There was a net
impairment credit of £83 million in the first half of 2024,
compared to a net impairment charge of £72 million in the
first half of 2023. Commercial Banking has benefitted from a
one-off release from loss rates used in the model, while observing
a low charge on new and existing Stage 3 clients
●
ECL allowances
decreased in the year to £990 million at 30 June 2024 (31
December 2023: £1,165 million). This was driven by the one-off
release noted above, as well as a revised approach to modelling the
multiple economic scenarios and a more favourable outlook across
multiple economic indicators
●
Stage 2 loans and
advances decreased to £6,443 million (31 December
2023: £7,987 million), largely as a result of improvements in
the Group’s macroeconomic outlook, with 93.9 per cent of
Stage 2 balances up to date (31 December 2023: 92.8 per cent).
Stage 2 as a proportion of total loans and advances to customers
decreased to 7.2 per cent (31 December 2023: 8.9 per cent).
Stage 2 ECL coverage was lower at 5.1 per cent
(31 December 2023: 5.6 per cent) with the decrease in coverage
largely a result of the change in the forward-looking multiple
economic scenarios
●
Stage 3 loans and
advances were broadly stable at £2,055 million
(31 December 2023: £2,068 million) and as a proportion of
total loans and advances to customers, flat at 2.3 per cent
(31 December 2023: 2.3 per cent). Stage 3 ECL coverage reduced
to 22.8 per cent (31 December 2023: 24.1 per cent)
CREDIT RISK (continued)
Commercial Banking UK Real Estate
●
Commercial Banking
UK Real Estate committed drawn lending stood at £9.7 billion
at May 2024 (net of £3.1 billion exposures subject to
protection through Significant Risk Transfer (SRT)
securitisations). This compares to £10.0 billion at 31
December 2023 (net of £3.6 billion subject to SRT
securitisations). In addition there are undrawn lending facilities
of £3.4 billion (31 December 2023: £3.6 billion) to
predominantly investment grade rated corporate
customers
●
The Group
classifies Real Estate as exposure which is directly supported by
cash flows from property activities (as opposed to trading
activities, such as hotels, care homes and housebuilders).
Exposures of £6.8 billion to social housing providers are also
excluded (31 December 2023: £7.0 billion)
●
Despite some
headwinds, including the impact of elevated interest rates, the
portfolio continues to remain well-positioned and proactively
managed with conservative LTVs, good levels of interest cover and
appropriate risk mitigants in place
●
Overall performance
of the portfolio has remained resilient. The Group has seen
improvement within this sector, with a decrease in cases in its
more closely monitored Watchlist category and limited flow into
Business Support
●
Lending continues
to be heavily weighted towards investment real estate (c.90 per
cent) rather than development. Of these investment exposures c.90
per cent have an LTV of less than 70 per cent, with an average
LTV of 46 per cent. The average interest cover ratio was 3.2 times,
with 74 per cent having interest cover of above 2 times. In SME,
LTV at origination has been typically limited to c.55 per cent, in
the context of prudent repayment cover criteria (including notional
base rate stress)
●
The portfolio is
well diversified with no speculative commercial development lending
(defined as property not pre-sold or pre-let at a level to fully
repay the debt or generate sufficient income to meet the minimum
interest cover requirements). Approximately 49 per cent of
exposures relate to commercial real estate, including c.13 per cent
secured by office assets, c.12 per cent by retail assets and c.12
per cent by industrial assets. Approximately 49 per cent of the
portfolio relates to residential
●
Recognising this is
a cyclical sector, total (gross and net) and asset type quantum
caps are in place to control origination and exposure, including
several asset type categories. Focus remains on the UK market and
new business has been written in line with a prudent risk appetite
criteria including conservative LTVs, strong quality of income and
proven management teams. Development lending criteria also includes
maximum loan to gross development value and maximum loan to cost,
with funding typically only released against completed work, as
confirmed by the Group’s monitoring quantity
surveyor
●
Use of SRT
securitisations also acts as a risk mitigant in this portfolio.
Run-off of these is carefully managed
and sequenced
LIQUIDITY RISK
The
Group has maintained its strong funding and liquidity position with
a loan to deposit ratio of 95 per cent as at 30 June 2024 (31
December 2023: 95 per cent). Total wholesale funding remained
broadly stable at £97.6 billion as at 30 June 2024
(31 December 2023: £98.7 billion). The Group maintains
access to diverse sources and tenors of funding.
The
Group’s liquid assets continue to exceed the regulatory
minimum and internal risk appetite, with a liquidity coverage ratio
(LCR)1 of
144 per cent as at 30 June 2024 (31 December 2023: 142 per cent)
calculated on a Group consolidated basis based on the PRA rulebook.
All assets within the liquid asset portfolio are hedged for
interest rate risk. Following the implementation of structural
reform, liquidity risk is managed at a legal entity level with the
Group consolidated LCR representing the composite of the
Ring-Fenced Bank and Non-Ring-Fenced Bank entities.
LCR
eligible assets1 have remained stable
at £136.0 billion (31 December 2023: £136.0 billion). In
addition to the Group’s reported LCR eligible assets, the
Group maintains borrowing capacity at central banks which averaged
£78 billion in the 12 months to 30 June 2024. The net
stable funding ratio remains strong at 130 per cent as at 30 June
2024 (31 December 2023: 130 per cent).
During
the first half of 2024, the Group accessed wholesale funding across
a range of currencies and markets with term issuance volumes
totalling £8.0 billion. The Group expects full year wholesale
issuance of less than £15.0 billion for 2024. The total
outstanding amount of drawings from the TFSME has remained stable
at £30.0 billion at 30 June 2024 (31 December 2023:
£30.0 billion), with maturities in 2025, 2027 and beyond.
The repayment of TFSME has been factored into the Group’s
funding plans.
The
Group’s credit ratings continue to reflect the strength of
its business model and balance sheet. The rating agencies continue
to monitor the impact of economic conditions and elevated rates for
the UK banking sector. The strength of the Group’s management
and franchise, along with its robust financial performance, capital
and funding position, are
reflected
in the Group’s strong ratings.
1 Based on a monthly rolling simple average over the
previous 12 months.
LIQUIDITY RISK (continued)
Group funding requirements and sources
|
At 30 Jun
2024£
bn
|
|
|
At 31
Dec
2023
£bn
|
|
|
Change
%
|
|
|
|
|
|
|
|
|
Group funding position
|
|
|
|
|
|
|
|
Cash
and balances at central banks
|
66.8
|
|
|
78.1
|
|
|
(14)
|
Loans
and advances to banks1
|
8.5
|
|
|
10.7
|
|
|
(21)
|
Loans
and advances to customers
|
452.4
|
|
|
449.7
|
|
|
1
|
Reverse
repurchase agreements – non-trading
|
49.4
|
|
|
38.8
|
|
|
27
|
Debt
securities at amortised cost
|
15.4
|
|
|
15.4
|
|
|
|
Financial
assets at fair value through other comprehensive
income
|
27.8
|
|
|
27.6
|
|
|
1
|
Other
assets2
|
272.6
|
|
|
261.2
|
|
|
4
|
Total Group assets
|
892.9
|
|
|
881.5
|
|
|
1
|
Less
other liabilities2
|
(237.6)
|
|
|
(226.3)
|
|
|
(5)
|
Funding requirements
|
655.3
|
|
|
655.2
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale
funding3
|
97.6
|
|
|
98.7
|
|
|
(1)
|
Customer
deposits
|
474.7
|
|
|
471.4
|
|
|
1
|
Repurchase
agreements – non-trading
|
7.9
|
|
|
7.7
|
|
|
3
|
Term
Funding Scheme with additional incentives for SMEs
(TFSME)
|
30.0
|
|
|
30.0
|
|
|
|
Total
equity
|
45.1
|
|
|
47.4
|
|
|
(5)
|
Funding sources
|
655.3
|
|
|
655.2
|
|
|
|
1 31 December 2023 excludes £0.1 billion of loans
and advances to banks within the Insurance business.
2 Other assets and other liabilities primarily include
balances in the Group’s Insurance business and the fair value
of derivative assets and liabilities.
3 The Group’s definition of wholesale funding
aligns with that used by other international market participants;
including bank deposits, debt securities in issue and subordinated
liabilities. Excludes balances relating to margins of £2.1
billion (31 December 2023: £2.4 billion).
Reconciliation of Group funding to the balance sheet
At 30 June 2024
|
Included
in funding
analysis
£bn
|
|
|
Cash
collateral
received
£bn
|
|
Fair value
and other
accounting
methods
£bn
|
|
|
Balance
sheet
£bn
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
from banks
|
3.3
|
|
|
2.5
|
|
|
(0.2)
|
|
|
5.6
|
|
Debt
securities in issue
|
81.6
|
|
|
–
|
|
|
(6.8)
|
|
|
74.8
|
|
Subordinated
liabilities
|
12.7
|
|
|
–
|
|
|
(2.3)
|
|
|
10.4
|
|
Total wholesale funding
|
97.6
|
|
|
2.5
|
|
|
|
|
|
|
|
Customer
deposits
|
474.7
|
|
|
–
|
|
|
–
|
|
|
474.7
|
|
Total
|
572.3
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31
December 2023
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
from banks
|
3.7
|
|
|
2.9
|
|
|
(0.4)
|
|
|
6.2
|
|
Debt
securities in issue
|
82.9
|
|
|
–
|
|
|
(7.3)
|
|
|
75.6
|
|
Subordinated
liabilities
|
12.1
|
|
|
–
|
|
|
(1.8)
|
|
|
10.3
|
|
Total
wholesale funding
|
98.7
|
|
|
2.9
|
|
|
|
|
|
|
|
Customer
deposits
|
471.4
|
|
|
–
|
|
|
–
|
|
|
471.4
|
|
Total
|
570.1
|
|
|
2.9
|
|
|
|
|
|
|
|
LIQUIDITY RISK (continued)
Analysis of total wholesale funding by residual
maturity
Up to 1
month
£bn
|
|
1 to 3
months
£bn
|
|
3 to 6
months
£bn
|
|
6 to 9
months
£bn
|
|
9 to 12
months
£bn
|
|
1 to 2
years
£bn
|
|
2 to 5
years
£bn
|
|
Over
five
years
£bn
|
|
Total at
30 Jun
2024
£bn
|
|
Total
at
31
Dec
2023
£bn
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
from banks
|
1.6
|
|
|
0.6
|
|
|
0.5
|
|
|
0.3
|
|
|
0.3
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
3.3
|
|
|
3.7
|
|
Debt
securities in issue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior
unsecured notes issued
|
1.9
|
|
|
0.4
|
|
|
2.1
|
|
|
5.4
|
|
|
3.1
|
|
|
4.9
|
|
|
16.9
|
|
|
12.6
|
|
|
47.3
|
|
|
44.5
|
|
Covered
bonds
|
–
|
|
|
–
|
|
|
0.5
|
|
|
2.0
|
|
|
0.1
|
|
|
1.6
|
|
|
6.6
|
|
|
0.9
|
|
|
11.7
|
|
|
14.1
|
|
Commercial
paper
|
1.9
|
|
|
3.1
|
|
|
2.7
|
|
|
1.8
|
|
|
1.1
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
10.6
|
|
|
12.3
|
|
Certificates
of deposit issued
|
0.5
|
|
|
1.5
|
|
|
1.9
|
|
|
1.5
|
|
|
1.4
|
|
|
0.1
|
|
|
–
|
|
|
–
|
|
|
6.9
|
|
|
7.8
|
|
Securitisation
notes
|
–
|
|
|
–
|
|
|
–
|
|
|
0.1
|
|
|
–
|
|
|
0.1
|
|
|
4.3
|
|
|
0.6
|
|
|
5.1
|
|
|
4.2
|
|
|
4.3
|
|
|
5.0
|
|
|
7.2
|
|
|
10.8
|
|
|
5.7
|
|
|
6.7
|
|
|
27.8
|
|
|
14.1
|
|
|
81.6
|
|
|
82.9
|
|
Subordinated
liabilities
|
–
|
|
|
–
|
|
|
0.8
|
|
|
0.6
|
|
|
0.3
|
|
|
2.3
|
|
|
2.4
|
|
|
6.3
|
|
|
12.7
|
|
|
12.1
|
|
Total wholesale funding1
|
5.9
|
|
|
5.6
|
|
|
8.5
|
|
|
11.7
|
|
|
6.3
|
|
|
9.0
|
|
|
30.2
|
|
|
20.4
|
|
|
97.6
|
|
|
98.7
|
|
1 Excludes balances relating to margins of £2.1
billion (31 December 2023: £2.4 billion).
Analysis of term issuance in half-year to 30 June 2024
|
Sterling
£bn
|
|
|
US Dollar
£bn
|
|
|
Euro
£bn
|
|
|
Other
currencies
£bn
|
|
|
Total
£bn
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitisation1
|
0.9
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
0.9
|
|
Covered
bonds
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
Senior
unsecured notes
|
0.5
|
|
|
4.3
|
|
|
1.4
|
|
|
0.5
|
|
|
6.7
|
|
Subordinated
liabilities
|
–
|
|
|
–
|
|
|
0.4
|
|
|
–
|
|
|
0.4
|
|
Additional
tier 1
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
Total issuance
|
1.4
|
|
|
4.3
|
|
|
1.8
|
|
|
0.5
|
|
|
8.0
|
|
1 Includes significant risk transfer
securitisations.
LIQUIDITY RISK (continued)
Liquidity portfolio
At 30
June 2024, the banking business had £136.0 billion of highly
liquid unencumbered LCR eligible assets, based on a monthly rolling
average over the previous 12 months post any liquidity haircuts (31
December 2023: £136.0 billion). This comprises £130.4
billion LCR level 1 eligible assets (31 December 2023: £131.3
billion) and £5.6 billion LCR level 2 eligible assets (31
December 2023: £4.7 billion). These assets are available to
meet cash and collateral outflows and regulatory requirements. The
Insurance business manages a separate liquidity portfolio to
mitigate insurance liquidity risk.
The
banking business also has a significant amount of non-LCR eligible
liquid assets which are eligible for use in a range of central bank
or similar facilities. Future use of such facilities will be based
on prudent liquidity management and economic considerations, having
regard for external market conditions.
LCR eligible assets
|
Average
|
|
|
|
20241
£bn
|
|
|
20231
£bn
|
|
|
Change
%
|
|
|
|
|
|
|
|
|
Cash
and central bank reserves
|
72.2
|
|
|
83.9
|
|
|
(14)
|
High
quality government/MDB/agency bonds2
|
55.2
|
|
|
44.7
|
|
|
23
|
High
quality covered bonds
|
3.0
|
|
|
2.7
|
|
|
11
|
Level
1
|
130.4
|
|
|
131.3
|
|
|
(1)
|
Level
23
|
5.6
|
|
|
4.7
|
|
|
19
|
Total LCR eligible assets
|
136.0
|
|
|
136.0
|
|
|
|
1 Based on 12 months rolling simple average to 30 June
2024 (2023: 31 December 2023). Eligible assets are calculated as a
simple average of month-end observations over the previous 12
months post any liquidity haircuts.
2 Designated multilateral development bank
(MDB).
3 Includes Level 2A and Level 2B.
|
At 30 Jun
2024
%
|
|
|
At 31
Mar
2024
%
|
|
|
At 31
Dec
2023
%
|
|
|
|
|
|
|
|
|
|
|
Liquidity
coverage ratio1
|
144
|
|
|
143
|
|
|
142
|
|
Net
stable funding ratio2
|
130
|
|
|
130
|
|
|
130
|
|
1 The liquidity coverage ratio and its components are
calculated as simple averages of month-end observations over the
previous 12 months.
2 Net stable funding ratio is based on an average of
the four previous quarters.
Encumbered assets
The
Board and Group Asset and Liability Committee (GALCO) monitor and
manage total balance sheet encumbrance, including via a defined
risk appetite. At 30 June 2024, the Group had £32.3 billion
(31 December 2023: £38.0 billion) of externally encumbered
on-balance sheet assets with counterparties other than central
banks. The decrease in encumbered on-balance sheet assets was
primarily driven by a reduction in secured funding. The Group also
had £727.5 billion (31 December 2023: £704.5
billion) of unencumbered on-balance sheet assets, and £133.2
billion (31 December 2023: £139.0 billion) of
pre-positioned and encumbered assets held with central banks. The
decrease in the latter was primarily driven by monthly redemptions
to the prepositioned collateral pools. Primarily, the Group
encumbers mortgages, unsecured lending, credit card receivables and
car loans through the issuance programmes and tradable securities
through securities financing activity. The Group mainly
pre-positions mortgage assets at central banks.
INTEREST RATE SENSITIVITY
The
Group manages the risk to its earnings and capital from movements
in interest rates centrally by hedging the net liabilities which
are stable or less sensitive to movements in rates. As at 30 June
2024, the Group’s sterling structural hedge had a notional
balance of £242 billion (a reduction from £247 billion at
31 December 2023).
Illustrative cumulative impact of parallel shifts in interest rate
curve1
The
table below shows the banking book net interest income sensitivity
to an instantaneous parallel shift in interest rates. Sensitivities
reflect shifts in the interest rate curve. The actual impact will
also depend on the prevailing regulatory and competitive
environment at the time. This sensitivity is illustrative and does
not reflect new business margin implications and/or pricing actions
today or in future periods, other than as outlined. The sensitivity
is greater on downward parallel shifts due to pricing lags on
deposit accounts.
The
following assumptions have been applied:
●
Instantaneous
parallel shift in interest rate curve, including UK Bank
Rate
●
Balance sheet
remains constant
●
Illustrative 50 per
cent pass-through on deposits and 100 per cent pass-through on
assets, which could be different in practice
|
Year 1
£m
|
|
|
Year 2
£m
|
|
|
Year 3
£m
|
|
|
|
|
|
|
|
|
|
|
+50
basis points
|
c.225
|
|
|
c.375
|
|
|
c.625
|
|
+25
basis points
|
c.125
|
|
|
c.200
|
|
|
c.300
|
|
-25
basis points
|
(c.150)
|
|
|
(c.200)
|
|
|
(c.300)
|
|
-50
basis points
|
(c.300)
|
|
|
(c.375)
|
|
|
(c.600)
|
|
1 Sensitivity based on modelled impact on banking book
net interest income, including the future impact of structural
hedge maturities. Annual impacts are presented for illustrative
purposes only and are based on a number of assumptions which are
subject to change. Year 1 reflects the 12 months from the 30 June
2024 balance sheet position.
Signatures
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
LLOYDS
BANKING GROUP plc
(Registrant)
By: Douglas
Radcliffe
Name: Douglas
Radcliffe
Title: Group
Investor Relations Director
Date:
25 July 2024
Lloyds Banking (PK) (USOTC:LLOBF)
過去 株価チャート
から 6 2024 まで 7 2024
Lloyds Banking (PK) (USOTC:LLOBF)
過去 株価チャート
から 7 2023 まで 7 2024