TIDMLLOY
RNS Number : 2534E
Lloyds Banking Group PLC
27 October 2022
Llo yds Banking Group plc
Q3 2022 Interim Management Statement
27 October 2022
RESULTS FOR THE NINE MONTHSED 30 SEPTEMBER 2022
"In February we announced an ambitious new strategy. While the
operating environment has changed significantly since then, our
customer focus remains unchanged. We continue to execute against
our strategic goals, based on our objectives of transforming the
business, while generating a stronger growth trajectory and
enabling the Group to deliver higher, more sustainable returns.
Our income growth, balance sheet momentum and resilient customer
franchise have enabled the Group to deliver a robust financial
performance and strong capital generation, alongside updated
guidance for 2022.
The current environment is concerning for many people and we are
committed to maintaining support for our customers. The Group's
resilient business model and prudent approach to risk position the
Group well to face the current macroeconomic uncertainties while
generating enhanced returns for our shareholders."
Charlie Nunn, Group Chief Executive
Robust financial results with resilient credit performance and
continued business momentum
-- Maintaining support for customers and progressing strategic
priorities with significant strategic investment
-- Supporting the transition to a low carbon economy; announced
new sector-based 2030 emissions reduction targets and a new net
zero ambition for our supply chain in our Net Zero Activity
Update(1)
-- Statutory profit after tax of GBP4.0 billion (nine months to
30 September 2021: GBP5.5 billion), with higher net income more
than offset by impairment charges as a result of the revised
economic outlook (versus a significant write-back in 2021)
-- Robust revenue growth supported by continued recovery in
customer activity and UK Bank Rate changes. Net income of GBP13.0
billion, up 12 per cent; higher net interest and other income and
continued low operating lease depreciation
-- Underlying net interest income up 15 per cent, significantly
driven by a stronger banking net interest margin of 2.84 per cent
year to date (2.98 per cent in the third quarter)
-- Operating costs of GBP6.4 billion, up 6 per cent compared to
the first nine months of 2021, reflecting stable business-as-usual
costs alongside higher planned strategic investment and new
businesses
-- Underlying profit before impairment up 29 per cent to GBP6.5
billion in the period (with GBP2.4 billion in the third quarter),
as a result of robust net income growth
-- Observed asset quality remains strong and the portfolio is
well-positioned in the context of cost of living pressures.
Underlying impairment of GBP1.0 billion (of which GBP0.7 billion
was recognised in the third quarter) reflects a resilient observed
credit performance, but impacted by the weakening economic outlook
and associated scenarios in the third quarter, partially offset by
COVID-19 releases
Continued franchise growth and strong capital generation
-- Loans and advances to customers at GBP456.3 billion were up
GBP7.7 billion in the first nine months and up GBP0.2 billion in
the quarter, with continued growth in the open mortgage book
-- Customer deposits of GBP484.3 billion were up GBP8.0 billion
in the first nine months and GBP6.1 billion in the quarter. Loan to
deposit ratio of 94 per cent continues to provide robust funding
and liquidity and potential for growth
-- Capital generation of 191 basis points(2) in the first nine
months based on robust banking performance and including the
Insurance dividend paid in July 2022
-- CET1 ratio of 15.0 per cent after ordinary dividend and
variable pension contributions, remaining well ahead of the ongoing
target of c.12.5 per cent, plus a management buffer of c.1 per
cent. Commitment to consider excess capital returns as usual at
year-end
Outlook
Given the robust financial performance in the first nine months
of 2022 and incorporating revised macroeconomic forecasts in the
third quarter, the Group is updating its 2022 guidance:
-- Banking net interest margin now expected to be greater than
290 basis points
-- Operating costs expected to be c.GBP8.8 billion
-- Asset quality ratio now expected to be c.30 basis points
-- Return on tangible equity expected to be c.13 per cent
-- Risk-weighted assets at the end of 2022 expected to be
c.GBP210 billion
-- Capital generation now expected to be between 225 and 250
basis points(2)
(1) The Net Zero Activity Update can be found at
www.lloydsbankinggroup.com/investors/esg-information.html.
(2) Excluding regulatory changes on 1 January 2022, ordinary
dividend and variable pension contributions.
INCOME STATEMENT - UNDERLYING BASIS (A) AND KEY BALANCE SHEET
METRICS
Nine Nine Three Three
months months months months
ended ended ended ended
30 Sep 30 Sep 30 Sep 30 Sep
2022 2021 Change 2022 2021 Change
GBPm GBPm % GBPm GBPm %
Underlying net
interest
income 9,529 8,270 15 3,394 2,852 19
Underlying other
income 3,811 3,753 2 1,282 1,336 (4)
Operating lease
depreciation (295) (382) 23 (82) (111) 26
---------------- ---------------- ---------------- ----------------
Net income 13,045 11,641 12 4,594 4,077 13
---------------- ---------------- ---------------- ----------------
Operating costs
(1) (6,436) (6,066) (6) (2,187) (2,013) (9)
Remediation (89) (525) 83 (10) (100) 90
---------------- ---------------- ---------------- ----------------
Total costs (6,525) (6,591) 1 (2,197) (2,113) (4)
---------------- ---------------- ---------------- ----------------
Underlying profit
before
impairment 6,520 5,050 29 2,397 1,964 22
Underlying
impairment
(charge) credit
(1) (1,045) 853 (668) 119
---------------- ---------------- ---------------- ----------------
Underlying profit 5,475 5,903 (7) 1,729 2,083 (17)
Restructuring (1) (69) (34) (22) (24) 8
Volatility and
other
items (237) 65 (199) (30)
Statutory profit
before
tax 5,169 5,934 (13) 1,508 2,029 (26)
Tax expense (1,134) (469) (299) (429) 30
---------------- ---------------- ---------------- ----------------
Statutory profit
after
tax 4,035 5,465 (26) 1,209 1,600 (24)
---------------- ---------------- ---------------- ----------------
Earnings per
share 5.2p 7.1p (1.9)p 1.5p 2.0p (0.5)p
Banking net
interest
margin (A) 2.84% 2.52% 32bp 2.98% 2.55% 43bp
Average
interest-earning
banking assets
(A) GBP451.4bn GBP443.0bn 2 GBP454.9bn GBP447.2bn 2
Cost:income ratio
(A,1) 50.0% 56.6% (6.6)pp 47.8% 51.8% (4.0)pp
Asset quality
ratio
(A,1) 0.30% (0.25)% 0.57% (0.10)%
Return on
tangible equity
(A) 12.9% 17.6% (4.7)pp 11.9% 14.5% (2.6)pp
(1) 2021 comparatives have been presented to reflect the new
costs basis, consistent with the current period. See page 23 .
At 30 At 30 At 31
Sep Jun Change Dec Change
2022 2022 % 2021 %
Loans and
advances to
customers GBP456.3bn GBP456.1bn GBP448.6bn 2
Customer
deposits GBP484.3bn GBP478.2bn 1 GBP476.3bn 2
Loan to
deposit ratio
(A) 94% 95% (1pp) 94%
CET1 ratio 15.0% 14.7% 0.3pp 17.3% (2.3)pp
Pro forma CET1
ratio
(A,1) 15.0% 14.8% 0.2pp 16.3% (1.3)pp
Total capital
ratio 19.4% 19.3% 0.1pp 23.6% (4.2)pp
MREL ratio 32.8% 32.4% 0.4pp 37.2% (4.4)pp
UK leverage
ratio 5.3% 5.3% 5.8% (0.5)pp
Risk-weighted
assets GBP210.8bn GBP209.6bn 1 GBP196.0bn 8
Wholesale
funding GBP98.9bn GBP97.7bn 1 GBP93.1bn 6
Liquidity
coverage
ratio
(2) 146% 142% 4.0pp 135% 11.0pp
Tangible net
assets
per share (A) 49.0p 54.8p (5.8)p 57.5p (8.5)p
(A) See page 25 .
(1) The pro forma CET1 ratio comparative for 30 June 2022
reflects the interim dividend received from Insurance in July 2022.
The 31 December 2021 comparative reflects the dividend received
from Insurance in February 2022 and the full impact of the share
buyback, but prior to the impact of regulatory changes that came
into effect on 1 January 2022.
(2) The liquidity coverage ratio is calculated as a simple
average of month-end observations over the previous 12 months.
QUARTERLY INFORMATION (A)
Quarter Quarter
ended ended Quarter Quarter Quarter Quarter Quarter
30 30 ended ended ended ended ended
Sep Jun 31 Mar 31 Dec 30 Sep 30 Jun 31 Mar
2022 2022 2022 2021 2021 2021 2021
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Underlying net
interest
income 3,394 3,190 2,945 2,893 2,852 2,741 2,677
Underlying other
income 1,282 1,268 1,261 1,307 1,336 1,282 1,135
Operating lease
depreciation (82) (119) (94) (78) (111) (123) (148)
------------ ------------ ------------ ------------ ------------ ------------- -------------
Net income 4,594 4,339 4,112 4,122 4,077 3,900 3,664
------------ ------------ ------------ ------------ ------------ ------------- -------------
Operating costs
(1) (2,187) (2,151) (2,098) (2,246) (2,013) (2,008) (2,045)
Remediation (10) (27) (52) (775) (100) (360) (65)
------------ ------------ ------------ ------------ ------------ ------------- -------------
Total costs (2,197) (2,178) (2,150) (3,021) (2,113) (2,368) (2,110)
------------ ------------ ------------ ------------ ------------ ------------- -------------
Underlying profit
before
impairment 2,397 2,161 1,962 1,101 1,964 1,532 1,554
Underlying
impairment
(charge) credit
(1) (668) (200) (177) 532 119 374 360
------------ ------------ ------------ ------------ ------------ ------------- -------------
Underlying profit 1,729 1,961 1,785 1,633 2,083 1,906 1,914
Restructuring (1) (22) (23) (24) (418) (24) 6 (16)
Volatility and
other
items (199) 100 (138) (247) (30) 95 -
Statutory profit
before
tax 1,508 2,038 1,623 968 2,029 2,007 1,898
Tax (expense)
credit (299) (416) (419) (548) (429) 461 (501)
------------ ------------ ------------ ------------ ------------ ------------- -------------
Statutory profit
after
tax 1,209 1,622 1,204 420 1,600 2,468 1,397
------------ ------------ ------------ ------------ ------------ ------------- -------------
Banking net
interest
margin (A) 2.98% 2.87% 2.68% 2.57% 2.55% 2.51% 2.49%
Average
interest-earning
banking assets
(A) GBP454.9bn GBP451.2bn GBP448.0bn GBP449.4bn GBP447.2bn GBP442.2bn GBP439.4bn
Cost:income ratio
(A,1) 47.8% 50.2% 52.3% 73.3% 51.8% 60.7% 57.6%
Asset quality
ratio
(A,1) 0.57% 0.17% 0.16% (0.46)% (0.10)% (0.33)% (0.33)%
Return on
tangible
equity (A) 11.9% 15.6% 10.8% 2.9% 14.5% 24.4% 13.9%
Loans and
advances
to customers GBP456.3bn GBP456.1bn GBP451.8bn GBP448.6bn GBP450.5bn GBP447.7bn GBP443.5bn
Customer deposits GBP484.3bn GBP478.2bn GBP481.1bn GBP476.3bn GBP479.1bn GBP474.4bn GBP462.4bn
Loan to deposit
ratio
(A) 94% 95% 94% 94% 94% 94% 96%
Risk-weighted
assets GBP210.8bn GBP209.6bn GBP210.2bn GBP196.0bn GBP200.7bn GBP200.9bn GBP198.9bn
Tangible net
assets
per share (A) 49.0p 54.8p 56.5p 57.5p 56.6p 55.6p 52.4p
(1) 2021 comparatives have been presented to reflect the new
costs basis, consistent with the current period. See page 23 .
BALANCE SHEET ANALYSIS
At 30 At 30 At 30 At 31
Sep Jun Sep Dec
2022 2022 Change 2021 Change 2021 Change
GBPbn GBPbn % GBPbn % GBPbn %
Loans and
advances
to customers
Open mortgage
book 298.4 296.6 1 292.6 2 293.3 2
Closed mortgage
book 12.3 13.1 (6) 14.8 (17) 14.2 (13)
Credit cards (2) 14.3 14.2 1 13.5 6 13.8 4
UK Retail
unsecured
loans 8.8 8.5 4 8.1 9 8.1 9
UK Motor Finance 14.2 14.2 14.1 1 14.0 1
Overdrafts 1.0 1.0 1.0 1.0
Retail other (1) 13.0 12.5 4 10.8 20 10.9 19
Wealth (2) 1.0 1.0 1.0 1.0
Small and Medium
Businesses
(2) 39.8 41.1 (3) 43.8 (9) 42.5 (6)
Corporate and
Institutional
Banking (2) 57.6 55.7 3 51.0 13 50.0 15
Central items
(2,3) (4.1) (1.8) (0.2) (0.2)
------------- ------------- ------------- -------------
Loans and
advances
to customers 456.3 456.1 450.5 1 448.6 2
------------- ------------- ------------- -------------
Customer
deposits
Retail current
accounts 115.7 113.4 2 109.6 6 111.5 4
Retail
relationship
savings
accounts 165.7 165.8 162.6 2 164.5 1
Retail tactical
savings
accounts 16.2 16.9 (4) 16.8 (4) 16.8 (4)
Wealth (2) 14.9 14.9 15.1 (1) 15.6 (4)
Commercial
Banking
deposits 170.2 166.7 2 174.5 (2) 167.5 2
Central items
(2) 1.6 0.5 0.5 0.4
------------- ------------- ------------- -------------
Total customer
deposits 484.3 478.2 1 479.1 1 476.3 2
------------- ------------- ------------- -------------
Total assets 892.9 890.4 882.0 1 886.6 1
Total
liabilities 846.5 840.3 1 829.4 2 833.4 2
Ordinary
shareholders'
equity 40.0 44.4 (10) 46.5 (14) 47.1 (15)
Other equity
instruments 6.2 5.5 13 5.9 5 5.9 5
Non-controlling
interests 0.2 0.2 0.2 0.2
------------- ------------- ------------- -------------
Total equity 46.4 50.1 (7) 52.6 (12) 53.2 (13)
------------- ------------- ------------- -------------
Ordinary shares
in
issue,
excluding own
shares 67,464m 68,702m (2) 70,979m (5) 70,996m (5)
(1) Primarily Europe.
(2) The portfolios shown reflect the new organisation structure;
comparatives have been presented on a consistent basis. See page 25
.
(3) Includes central fair value hedge accounting adjustments. 30
June 2022 included a GBP200 million ECL central adjustment that was
not allocated to specific portfolios (30 September 2021 and 31
December 2021: GBP400 million). In the third quarter of 2022 this
central adjustment was released.
GROUP RESULTS - STATUTORY BASIS
Summary income statement Nine Nine
months months
ended ended
30 Sep 30 Sep
2022 2021 Change
GBPm GBPm %
Net interest income 11,061 7,073 56
Other income (17,984) 20,012
--------------- ---------------
Total income(1) (6,923) 27,085
Insurance claims(1) 20,181 (14,803)
--------------- ---------------
Total income, net of insurance claims 13,258 12,282 8
Operating expenses (7,033) (7,194) 2
Impairment (charge) credit (1,056) 846
--------------- ---------------
Profit before tax 5,169 5,934 (13)
Tax expense (1,134) (469)
--------------- ---------------
Profit for the period 4,035 5,465 (26)
--------------- ---------------
Profit attributable to ordinary shareholders 3,632 5,064 (28)
Profit attributable to other equity holders 327 321 2
Profit attributable to non-controlling interests 76 80 (5)
--------------- ---------------
Profit for the period 4,035 5,465 (26)
--------------- ---------------
Ordinary shares in issue (weighted-average
- basic) 69,478m 70,919m (2)
Basic earnings per share 5.2p 7.1p (1.9)p
(1) Includes income and expense attributable to the
policyholders of the Group's long-term assurance funds that
materially offset in arriving at profit attributable to equity
shareholders. These can, depending on market movements, lead to
significant variances on a statutory basis in total income and
insurance claims from one period to the next.
Summary balance sheet At 31
At 30 Dec
Sep 2022 2021 Change
GBPm GBPm %
Assets
Cash and balances at central banks 84,841 76,420 11
Financial assets at fair value through profit
or loss 174,235 206,771 (16)
Derivative financial instruments 34,919 22,051 58
Financial assets at amortised cost 536,843 517,156 4
Financial assets at fair value through other
comprehensive income 21,303 28,137 (24)
Other assets 40,781 35,990 13
------------- -------------
Total assets 892,922 886,525 1
------------- -------------
Liabilities
Deposits from banks 9,032 7,647 18
Customer deposits 484,303 476,344 2
Repurchase agreements at amortised cost(1) 46,378 31,125 49
Financial liabilities at fair value through
profit or loss 21,012 23,123 (9)
Derivative financial instruments 33,983 18,060 88
Debt securities in issue 72,448 71,552 1
Liabilities arising from insurance and investment
contracts 142,977 168,463 (15)
Other liabilities 26,174 23,951 9
Subordinated liabilities 10,242 13,108 (22)
------------- -------------
Total liabilities 846,549 833,373 2
------------- -------------
Total equity 46,373 53,152 (13)
------------- -------------
Total equity and liabilities 892,922 886,525 1
------------- -------------
(1) Repurchase agreements at amortised cost, previously included
within other liabilities, are now shown separately; comparatives
have been presented on a consistent basis .
REVIEW OF PERFORMANCE
Robust financial performance with continued business
momentum
Statutory results
The Group's statutory profit before tax for the first nine
months of 2022 was GBP5,169 million, 13 per cent lower than the
same period in 2021. Results benefitted from higher income, more
than offset by the impact of an impairment charge (compared to a
credit in the prior year), including updates to the economic
outlook in the third quarter. Statutory profit after tax was
GBP4,035 million (nine months to 30 September 2021: GBP5,465
million, which included the benefit of a deferred tax
remeasurement). In the third quarter of the year, statutory profit
before tax was GBP1,508 million and statutory profit after tax was
GBP1,209 million, a decrease on the second quarter of 26 per cent
and 25 per cent respectively, again as a result of higher income
more than offset by the impairment charge in light of the
deterioration in the macroeconomic outlook as at 30 September
2022.
The Group's statutory income statement includes income and
expenses attributable to the policyholders of the Group's long-term
assurance funds. These items materially offset in arriving at
profit attributable to equity shareholders but can, depending on
market movements, lead to significant variances on a statutory
basis between total income and insurance claims from one period to
the next. In the nine months to 30 September 2022, due to
deteriorating market conditions, the Group recognised losses on
policyholder investments within total income which were materially
offset by the corresponding reduction in insurance and investment
contract liabilities, recognised as a decrease in insurance claims
expense and a decrease in the amounts payable to unit holders in
the Group's consolidated open-ended investment companies,
recognised within net interest income.
Total statutory income net of insurance claims for the first
nine months was GBP13,258 million, an increase of 8 per cent on the
first nine months of 2021, reflecting continued recovery in
customer activity and UK Bank Rate changes. The Group has
maintained its focus on cost management, whilst increasing
strategic investment as planned.
Loans and advances to customers are up 2 per cent on 31 December
2021 at GBP456.3 billion, including continued growth of GBP5.1
billion in the open mortgage book (GBP1.8 billion in the third
quarter), alongside higher retail unsecured loan and credit card
balances. Commercial Banking balances increased by GBP4.9 billion
(including GBP0.6 billion in the third quarter) due to attractive
growth opportunities as well as foreign exchange movements in the
Corporate and Institutional Banking portfolio. Customer deposits
have increased by GBP8.0 billion since the end of 2021, to GBP484.3
billion. This included Retail current account growth of GBP4.2
billion and Retail relationship savings growth of GBP1.2 billion,
along with Commercial Banking deposit growth of GBP2.7 billion. In
the nine months to 30 September 2022, due to market conditions, a
reduction was seen in policyholder investments, primarily within
financial assets at fair value through profit or loss. This was
materially offset by a corresponding reduction in the related
insurance and investment contract liabilities.
Total equity reduced during the period as the Group's profits
were more than offset by reductions in the cash flow hedging
reserve due to the rising rate environment, the impact of pension
scheme remeasurements given market conditions and the impact of
in-year distributions, including the share buyback programme that
was announced in February 2022. This programme completed on 11
October 2022, with c.4.5 billion ordinary shares repurchased.
REVIEW OF PERFORMANCE (continued)
Underlying results(A)
The Group's underlying profit for the first nine months of the
year was GBP5,475 million, compared to GBP5,903 million for the
same period in 2021. Growth in net income was more than offset by
an increased impairment charge, largely given the impact of the
updated economic outlook and associated scenarios in the third
quarter versus the underlying impairment credit for the same period
in 2021. Underlying profit before impairment for the period was up
29 per cent to GBP6,520 million, driven by robust net income growth
and lower remediation costs. In the third quarter, underlying
profit before impairment was GBP2,397 million, up 11 per cent on
the second quarter.
Net income of GBP13,045 million was up 12 per cent on the first
nine months of 2021, with higher net interest income and other
income as well as a continued low charge for operating lease
depreciation.
Net interest income of GBP9,529 million was up 15 per cent,
largely driven by a stronger banking net interest margin of 2.84
per cent (nine months to 30 September 2021: 2.52 per cent). The net
interest margin benefitted from the UK Bank Rate increases,
structural hedge earnings from the rising rate environment,
continued funding and capital optimisation and robust balance
growth, partly offset by mortgage margin reductions. In the third
quarter, the net interest margin rose to 2.98 per cent. Average
interest-earning banking assets were up 2 per cent compared to the
first nine months of 2021 at GBP451.4 billion, driven by continued
growth in the open mortgage book. The Group now expects the banking
net interest margin for 2022 to be greater than 290 basis
points.
The Group manages the risk to its earnings and capital from
movements in interest rates by hedging the net liabilities which
are stable or less sensitive to movements in rates. As at 30
September 2022, the Group's structural hedge had an approved
capacity of GBP250 billion (up GBP10 billion on 31 December 2021
and stable compared to 30 June 2022), including some of the
balances from the deposit growth since the start of the coronavirus
pandemic. The Group continues to review recent periods' deposit
growth and its eligibility for the structural hedge. The nominal
balance of the structural hedge was GBP250 billion at 30 September
2022 (31 December 2021: GBP240 billion) with a weighted-average
duration of approximately three-and-a-half years (31 December 2021:
approximately three-and-a-half years). The Group generated GBP1.9
billion of total gross income from structural hedge balances in the
first nine months of 2022, representing material growth over the
same period in 2021 (nine months to 30 September 2021: GBP1.6
billion).
Other income of GBP3,811 million was 2 per cent higher compared
to GBP3,753 million for the first nine months of 2021, reflecting
solid performance across Retail, Commercial Banking, Insurance,
Pensions and Investments (previously Insurance and Wealth) and the
Group's equity investments businesses. This included GBP1,282
million in the third quarter, slightly up on the second
quarter.
Within Retail, other income was up 11 per cent on prior year,
including improved current account and credit card performance.
Commercial Banking was up 3 per cent versus the prior year due to
higher financial markets activity and strong performance in
transaction banking, partly offset by lower levels of corporate
financing. Insurance, Pensions and Investments other income was 6
per cent higher than the prior year. This largely reflected the
impact of increased workplace pension sales and bulk annuity deals
along with the inclusion of Embark income and a benefit from
assumption changes. Growth was partly offset by a decrease in the
general insurance business contribution driven by market
challenges, and particularly storm and subsidence claims.
Assumption changes were GBP119 million including GBP47 million in
the third quarter (nine months to 30 September 2021: GBP33
million). Other income associated with the Group's equity
investments businesses, including Lloyds Development Capital, was
lower after high contributions and releases in 2021.
Operating lease depreciation decreased to GBP295 million (nine
months to 30 September 2021: GBP382 million), reflecting continued
strength in used car prices, combined with the ongoing impact of a
reduced, but stabilising Lex fleet size, given industry-wide supply
constraints in the new car market. Operating lease depreciation
further reduced to GBP82 million in the third quarter, compared to
GBP119 million in the second quarter.
The Group delivered good organic growth in Insurance, Pensions
and Investments and Wealth (within Retail) assets under
administration (AuA), with over GBP6 billion net new money in open
book AuA over the period. In total, open book AuA stand at GBP154
billion.
REVIEW OF PERFORMANCE (continued)
Cost discipline remains a core focus for the Group. The Group's
cost:income ratio was 50.0 per cent compared to 56.6 per cent in
the first nine months of 2021. Total costs of GBP6,525 million were
1 per cent lower than in the first nine months of 2021 (with
GBP2,197 million in the third quarter). Within this, lower
remediation costs (down 83 per cent) were partially offset by
increased operating costs of GBP6,436 million (up 6 per cent),
reflecting higher planned strategic investment and new businesses.
Business-as-usual costs were stable. Operating costs as previously
guided are still expected to be c.GBP8.8 billion for full-year 2022
(2021: GBP8.3 billion).
In the first nine months of 2022 the Group recognised
remediation costs of GBP89 million (GBP10 million in the third
quarter), principally relating to pre-existing programmes and
significantly lower compared to the first nine months of 2021
(GBP525 million). There have been no further charges relating to
HBOS Reading since the year-end and the provision held continues to
reflect the Group's best estimate of its full liability, albeit
significant uncertainties remain.
Impairment was a net charge of GBP1,045 million (including
GBP668 million in the third quarter), compared to a net credit of
GBP853 million for the first nine months of 2021. This reflected an
observed performance charge of GBP532 million in the year to date
(nine months to 30 September 2021: GBP245 million, net of GBP261
million of write-backs), equivalent to an asset quality ratio of 15
basis points and a GBP513 million charge (nine months to 30
September 2021: a credit of GBP1,098 million) from updates to the
assessment of the economic outlook and associated scenarios. The
updated outlook includes elevated risks from a higher inflation and
interest rate environment, offset by a GBP200 million release of
the COVID-19 central adjustment, driving GBP418 million of the
GBP668 million charge in the third quarter. The asset quality ratio
year to date is now 30 basis points.
The Group's loan portfolio continues to be well-positioned,
reflecting a prudent through-the-cycle approach to lending with
high levels of security, also reflected in strong recovery
performance. Observed credit performance remains stable, with very
modest evidence of deterioration and the flow of assets into
arrears, defaults and write-offs at low levels and below
pre-pandemic levels. These help sustain a low observed performance
charge of GBP250 million in the third quarter, higher than earlier
quarters in the year, largely due to fewer write-backs from asset
sales and model-related releases. Stage 3 loans and advances have
been stable across the third quarter (see below). Credit card
minimum payers and overdraft and revolving credit facility (RCF)
utilisation rates have remained low and in line with recent
trends.
The Group's expected credit loss (ECL) allowance has increased
in the first nine months of the year to GBP5.0 billion (31 December
2021: GBP4.5 billion). This reflects the balance of risks shifting
from COVID-19 to increased inflationary pressures and rising
interest rates within the Group's base case and wider economic
scenarios. The deterioration in the economic outlook is now
reflected in variables which credit models better capture. As a
result, the Group's reliance on judgemental overlays for modelling
risks in relation to inflationary pressures has reduced from GBP0.3
billion at the half-year to GBP0.1 billion in the third quarter,
with these risks now captured more fully in models.
Management judgements in respect of COVID-19 are now GBP0.1
billion, having reduced by GBP0.2 billion in the third quarter and
compared to GBP0.8 billion at 31 December 2021. Of the GBP0.7
billion reduction since 31 December 2021, GBP0.2 billion is now
captured as expected within ECL portfolio models where previously
distorted data or trends have now normalised. The remaining GBP0.5
billion release drives a net ECL reduction and credit to the
impairment charge, with the bulk relating to the GBP0.4 billion
central adjustment (GBP0.2 billion released in each of the second
and third quarters) and GBP0.1 billion relating to ECL held against
certain Commercial sectors in relation to the specific risk posed
by the virus and potential social restrictions (released to profit
in the first half).
Stage 2 loans and advances increased to GBP64 billion (31
December 2021: GBP42 billion), with 92 per cent up to date. Of the
GBP22 billion increase, GBP15 billion occurred in the third quarter
as a result of the updated economic outlook, largely in UK
mortgages and Commercial Banking. 99 per cent of the increase in
the third quarter related to up to date loans. The increases in
Stage 2 assets during the first half of the year, and in Stage 3
loans in the year to date, are not reflective of observed
deterioration, but driven by changes in credit risk measurement and
modelling associated with CRD IV regulatory requirements(1) since
the end of 2021. Stage 3 loans of GBP11 billion as at 30 September
2022 were stable compared to the second quarter.
On the basis of the Group's updated base case and the
significant change in economic context and associated scenarios
since half-year, the Group now expects the 2022 asset quality ratio
to be c.30 basis points.
(1) As previously outlined, on 1 January 2022 the Group amended
its definition of Stage 3 for UK mortgages, maintaining alignment
between IFRS 9 and regulatory definitions of default. For UK
mortgages, default was previously deemed to have occurred no later
than when a payment was 180 days past due. In line with CRD IV this
definition has now been reduced to 90 days, as well as including
end-of-term payments on past due interest-only accounts and any
non-performing loans. Furthermore, additional assets moved to Stage
2 given the consequential change in approach to the prediction and
modelling of up to date accounts and their likelihood of reaching
the new broader definition of default in the future. Given the
accounts that moved to Stage 2 were up to date with low probability
of default, there was no material ECL impact.
REVIEW OF PERFORMANCE (continued)
Restructuring costs of GBP69 million were higher than in the
first nine months of 2021 (GBP34 million) and included costs
associated with the integration of Embark. Since the first quarter
of 2022 all restructuring costs, with the exception of merger,
acquisition and integration costs, have been reported as part of
the Group's operating costs.
Volatility and other items were a net loss of GBP237 million in
the first nine months of 2022, comprising GBP95 million of negative
market volatility and GBP142 million relating to amortisation of
purchased intangibles and fair value unwind. Market volatility
included negative insurance volatility of GBP144 million due to
rising interest rates and wider bond spreads which was partly
offset by positive banking volatility of GBP74 million. This
compares to gains in the first nine months of 2021 including GBP132
million of positive insurance volatility. In the third quarter,
market volatility included GBP102 million of negative insurance
volatility and GBP35 million of negative banking volatility, again
principally from rising interest rates.
The return on tangible equity for the first nine months of 2022
was 12.9 per cent reflecting the Group's robust financial
performance (nine months to 30 September 2021: 17.6 per cent,
benefitting from a net impairment credit and remeasurement of
deferred tax assets). The Group continues to expect the return on
tangible equity for 2022 to be c.13 per cent.
Capital
The Group's CET1 capital ratio reduced from 16.3 per cent on a
pro forma basis at 31 December 2021 to 15.0 per cent at 30
September 2022. This included a reduction of 230 basis points on 1
January 2022 for regulatory changes (as previously reported),
subsequently offset by strong capital generation of 191 basis
points during the first nine months of this year. Capital
generation reflected banking profitability of 169 basis points,
including a net impairment offset of 31 basis points, plus 16 basis
points for the interim dividend received from the Insurance
business in July 2022 (GBP300 million). The capital generation
further benefitted from a reduction in underlying risk-weighted
assets, post 1 January 2022 regulatory changes, equivalent to 14
basis points and other movements of 23 basis points. This was
offset in part by 31 basis points related to the full 2022 fixed
pension deficit contributions for the Group's defined benefit
pension schemes. Capital generation during the third quarter of 52
basis points was driven by banking profitability of 52 basis points
(including a net impairment offset of 18 basis points) and other
movements of 6 basis points. This was offset by a reduction of 6
basis points from an increase in risk-weighted assets.
The net impairment offset of 31 basis points for the year to
date reflects the impairment charge of 41 basis points, offset by
IFRS 9 dynamic relief of 10 basis points resulting from the
increase in Stage 1 and Stage 2 expected credit losses in the third
quarter. In relation to capital usage, the impact of the interim
ordinary dividend and the foreseeable ordinary dividend accrual at
30 September 2022 equated to 60 basis points.
During the first nine months of the year a total of GBP1.8
billion in pension deficit contributions (both fixed and variable)
has been paid into the Group's three main defined benefit pension
schemes. As previously announced, the fixed contributions for the
year of GBP0.8 billion (equivalent to 31 basis points) were paid in
full in the first quarter. The variable contributions of GBP1.0
billion reflected GBP0.5 billion paid in the first quarter and
GBP0.5 billion in the third quarter (equivalent to 37 basis points
in total). This substantially covers the payment of the agreed
variable pension contributions (c.95 per cent) relating to 30 per
cent of in-year distributions, in accordance with the current
agreement with the Trustees, with a small residual to be paid in
the fourth quarter. The impact of recent volatility has had no
material impact on the funding position of the pension schemes.
The Group now expects capital generation in 2022 of between 225
and 250 basis points. The Group maintains its commitment to
consider the return of excess capital as usual at year-end.
REVIEW OF PERFORMANCE (continued)
Pro forma CET1 ratio as at 31 December 2021 (1) 16.3%
Regulatory change on 1 January 2022 (bps) (230)
Pro forma CET1 ratio as at 1 January 2022 14.0%
Banking build (including impairment charge) (bps) 169
Insurance dividend (bps) 16
Underlying risk-weighted assets (bps) 14
Fixed pension deficit contributions (bps) (31)
Other movements (bps) 23
----------------
Capital generation (bps) 191
----------------
Ordinary dividend (bps) (60)
Variable pension contributions (bps) (37)
----------------
Net movement in CET1 ratio excluding regulatory change
(bps) 94
CET1 ratio as at 30 September 2022 15.0%
----------------
(1) 31 December 2021 ratio reflects the dividend received from
Insurance in February 2022 and the full impact of the share
buyback.
Risk-weighted assets increased by GBP16 billion to GBP212
billion (pro forma) on 1 January 2022, reflecting regulatory
changes which include the anticipated impact of the implementation
of new CRD IV models to meet revised regulatory standards for
modelled outputs. Risk-weighted assets subsequently reduced by GBP1
billion during the first nine months of the year to GBP211 billion
at 30 September 2022, largely reflecting optimisation activity and
Retail model reductions linked to the resilient underlying credit
performance, partly offset by the growth in balance sheet lending
and impact of foreign exchange. The GBP1 billion increase in
risk-weighted assets during the third quarter was largely driven by
the growth in lending and foreign exchange impacts, partially
offset by further optimisation and Retail model reductions. The new
CRD IV models remain subject to finalisation and approval by the
PRA and therefore the final risk-weighted asset impact remains
subject to this.
The Group continues to expect risk-weighted assets at the end of
2022 to be around GBP210 billion.
In October the PRA reduced the Group's Pillar 2A CET1 capital
requirement to around 1.5 per cent of risk-weighted assets
(previously around 2 per cent of risk-weighted assets), with the
Group's regulatory minimum CET1 capital requirement now around 10.5
per cent. The planned increases in the UK countercyclical capital
buffer rate to 1 per cent in December 2022 and to 2 per cent from
July 2023 will lead to an increase in the Group's countercyclical
capital buffer (CCyB), initially to around 0.9 per cent and then to
1.8 per cent, which will be partially offset by the removal of the
0.25 per cent CCyB related element of the PRA buffer. The Board's
view of the ongoing level of CET1 capital required to grow the
business, meet current and future regulatory requirements and cover
uncertainties continues to be around 12.5 per cent, plus a
management buffer of around 1 per cent.
Tangible net assets per share were 49.0 pence, down from 57.5
pence at 31 December 2021, with the favourable impact from profits
more than offset by cash flow hedging reserve movements as a result
of increased interest rates (9.5 pence), pensions remeasurements
(2.2 pence) and the impacts from payment of ordinary dividends (2.2
pence).
FURTHER IMPAIRMENT DETAIL
The analyses which follow have been presented on an underlying
basis. See page 23 .
Underlying impairment(A)
Nine Nine Three Three
months months months months
ended ended ended ended
30 Sep 30 Sep 30 Sep 30 Sep
2022 2021(1) Change 2022 2021(1) Change
GBPm GBPm % GBPm GBPm %
Charges
(credits)
pre-updated
MES (2)
---------------- ----------------- ---------------- ----------------
Retail (3) 520 601 13 235 163 (44)
Commercial
Banking
(3) 1 (354) 8 (21)
Other (3) 11 (2) 7 -
---------------- ----------------- ---------------- ----------------
532 245 250 142
Updated
economic
outlook
---------------- ----------------- ---------------- ----------------
Retail (3) 541 (678) 370 (141)
Commercial
Banking
(3) 372 (420) 248 (120)
Other(3) (400) - (200) -
---------------- ----------------- ---------------- ----------------
513 (1,098) 418 (261)
---------------- ----------------- ---------------- ----------------
Underlying
impairment
charge
(credit)
(A) 1,045 (853) 668 (119)
---------------- ----------------- ---------------- ----------------
Asset
quality
ratio
(A) 0.30% (0.25)% 0.57% (0.10)%
(1) Non lending-related fraud costs, previously reported within
underlying impairment, are now included within operating costs.
Comparatives have been presented on a consistent basis.
(2) Impairment charges absent the impact from updated economic
outlook, thus reflecting observed movements in credit quality.
Coronavirus impacted restructuring cases, previously disclosed
separately, are now reported within charges pre-updated MES
(multiple economic scenarios); comparatives have been presented on
a consistent basis.
(3) Impairment charges for Retail, Commercial Banking and Other
reflect the new organisation structure; comparatives have been
presented on a consistent basis. See page 25 .
Total expected credit loss allowance
Underlying basis(A)
At 31
At 30 At 30 Dec
Sep 2022 Jun 2022 2021
GBPm GBPm GBPm
Customer related balances
---------------- ---------------- ----------------
Drawn 4,685 4,247 4,277
Undrawn 286 236 200
---------------- ---------------- ----------------
4,971 4,483 4,477
Loans and advances to banks 7 4 1
Debt securities 6 4 3
Other assets 33 23 18
---------------- ---------------- ----------------
Total ECL allowance 5,017 4,514 4,499
---------------- ---------------- ----------------
FURTHER IMPAIRMENT DETAIL (continued)
Loans and advances to customers and expected credit loss
allowance - underlying basis(A)
Stage Stage
2 3
Stage Stage Stage as % as %
At 30 September 1 2 3 Total of of
2022 GBPm GBPm GBPm GBPm total total
Loans and advances to customers
UK mortgages 259,541 46,153 6,613 312,307 14.8 2.1
Credit cards 12,018 2,526 292 14,836 17.0 2.0
Loans and
overdrafts 8,723 1,339 255 10,317 13.0 2.5
UK Motor
Finance 12,335 1,949 169 14,453 13.5 1.2
Other 13,294 650 158 14,102 4.6 1.1
---------------- ---------------- ---------------- ---------------- --------------- ---------------
Retail (1) 305,911 52,617 7,487 366,015 14.4 2.0
---------------- ---------------- ---------------- ---------------- --------------- ---------------
Small and
Medium
Businesses 31,783 6,266 2,279 40,328 15.5 5.7
Corporate and
Institutional
Banking 52,001 5,029 1,650 58,680 8.6 2.8
---------------- ---------------- ---------------- ---------------- --------------- ---------------
Commercial
Banking 83,784 11,295 3,929 99,008 11.4 4.0
Equity
Investments
and
Central Items
(2) (4,010) - 6 (4,004)
---------------- ---------------- ---------------- ---------------- --------------- ---------------
Total gross
lending 385,685 63,912 11,422 461,019 13.9 2.5
--------------- ---------------
ECL allowance
on drawn
balances (632) (1,847) (2,206) (4,685)
---------------- ---------------- ---------------- ----------------
Net balance
sheet carrying
value 385,053 62,065 9,216 456,334
---------------- ---------------- ---------------- ----------------
Customer related ECL allowance (drawn and undrawn)
UK mortgages 48 705 823 1,576
Credit cards 182 382 118 682
Loans and
overdrafts 175 273 138 586
UK Motor
Finance (3) 107 85 93 285
Other 15 18 48 81
---------------- ---------------- ---------------- ----------------
Retail (1) 527 1,463 1,220 3,210
---------------- ---------------- ---------------- ----------------
Small and
Medium
Businesses 104 292 153 549
Corporate and
Institutional
Banking 133 243 832 1,208
---------------- ---------------- ---------------- ----------------
Commercial
Banking 237 535 985 1,757
Equity
Investments
and
Central Items - - 4 4
---------------- ---------------- ---------------- ----------------
Total 764 1,998 2,209 4,971
---------------- ---------------- ---------------- ----------------
Customer related ECL allowance (drawn and undrawn) as a percentage
of loans and advances to customers (4)
UK mortgages - 1.5 12.4 0.5
Credit cards 1.5 15.1 54.4 4.6
Loans and
overdrafts 2.0 20.4 72.6 5.7
UK Motor
Finance 0.9 4.4 55.0 2.0
Other 0.1 2.8 30.4 0.6
---------------- ---------------- ---------------- ----------------
Retail (1) 0.2 2.8 16.6 0.9
---------------- ---------------- ---------------- ----------------
Small and
Medium
Businesses 0.3 4.7 13.0 1.4
Corporate and
Institutional
Banking 0.3 4.8 50.5 2.1
---------------- ---------------- ---------------- ----------------
Commercial
Banking 0.3 4.7 34.9 1.8
Equity
Investments
and
Central Items - 66.7
---------------- ---------------- ---------------- ----------------
Total 0.2 3.1 21.7 1.1
---------------- ---------------- ---------------- ----------------
(1) Retail balances exclude the impact of the HBOS
acquisition-related adjustments.
(2) Contains centralised fair value hedge accounting
adjustments.
(3) UK Motor Finance for Stages 1 and 2 include GBP93 million
relating to provisions against residual values of vehicles subject
to finance leasing agreements. These provisions are included within
the calculation of coverage ratios.
(4) Total and Stage 3 ECL allowances as a percentage of drawn
balances exclude loans in recoveries in Credit cards of GBP75
million, Loans and overdrafts of GBP65 million, Small and Medium
Businesses of GBP1,104 million and Corporate and Institutional
Banking of GBP1 million.
FURTHER IMPAIRMENT DETAIL (continued)
Loans and advances to customers and expected credit loss
allowance - underlying basis(A) (continued)
Stage Stage
2 3
Stage Stage Stage as % as %
1 2 3 Total of of
At 30 June 2022 GBPm GBPm GBPm GBPm total total
Loans and advances to customers
UK mortgages 268,568 35,555 6,764 310,887 11.4 2.2
Credit cards
(1) 12,186 2,289 280 14,755 15.5 1.9
Loans and
overdrafts 8,666 1,144 256 10,066 11.4 2.5
UK Motor
Finance 12,476 1,832 179 14,487 12.6 1.2
Other (1) 12,711 626 150 13,487 4.6 1.1
---------------- ---------------- ---------------- --------------- --------------- ---------------
Retail (2) 314,607 41,446 7,629 363,682 11.4 2.1
---------------- ---------------- ---------------- --------------- --------------- ---------------
Small and
Medium
Businesses
(1) 34,310 5,053 2,147 41,510 12.2 5.2
Corporate and
Institutional
Banking (1) 52,129 2,910 1,653 56,692 5.1 2.9
---------------- ---------------- ---------------- --------------- --------------- ---------------
Commercial
Banking 86,439 7,963 3,800 98,202 8.1 3.9
Equity
Investments
and
Central Items
(3) (1,549) 1 6 (1,542)
---------------- ---------------- ---------------- --------------- --------------- ---------------
Total gross
lending 399,497 49,410 11,435 460,342 10.7 2.5
--------------- ---------------
ECL allowance
on drawn
balances (776) (1,389) (2,082) (4,247)
---------------- ---------------- ---------------- ---------------
Net balance
sheet carrying
value 398,721 48,021 9,353 456,095
---------------- ---------------- ---------------- ---------------
Customer related ECL allowance (drawn and undrawn)
UK mortgages 45 470 716 1,231
Credit cards
(1) 172 346 111 629
Loans and
overdrafts 164 243 135 542
UK Motor
Finance (4) 105 80 105 290
Other (1) 14 16 48 78
---------------- ---------------- ---------------- ---------------
Retail (2) 500 1,155 1,115 2,770
---------------- ---------------- ---------------- ---------------
Small and
Medium
Businesses
(1) 106 177 153 436
Corporate and
Institutional
Banking (1) 93 166 814 1,073
---------------- ---------------- ---------------- ---------------
Commercial
Banking 199 343 967 1,509
Equity
Investments
and
Central Items 200 - 4 204
---------------- ---------------- ---------------- ---------------
Total 899 1,498 2,086 4,483
---------------- ---------------- ---------------- ---------------
Customer related ECL allowance (drawn and undrawn) as a percentage
of loans and advances to customers (5)
UK mortgages - 1.3 10.6 0.4
Credit cards
(1) 1.4 15.1 53.6 4.3
Loans and
overdrafts 1.9 21.2 70.7 5.4
UK Motor
Finance 0.8 4.4 58.7 2.0
Other (1) 0.1 2.6 32.0 0.6
---------------- ---------------- ---------------- ---------------
Retail (2) 0.2 2.8 14.9 0.8
---------------- ---------------- ---------------- ---------------
Small and
Medium
Businesses
(1) 0.3 3.5 12.5 1.1
Corporate and
Institutional
Banking (1) 0.2 5.7 49.3 1.9
---------------- ---------------- ---------------- ---------------
Commercial
Banking 0.2 4.3 33.6 1.6
Equity
Investments
and
Central Items
(6) - 66.7
---------------- ---------------- ---------------- ---------------
Total 0.2 3.0 20.1 1.0
---------------- ---------------- ---------------- ---------------
(1) Reflects the new organisation structure. See page 25 .
(2) Retail balances exclude the impact of the HBOS
acquisition-related adjustments.
(3) Contains centralised fair value hedge accounting
adjustments.
(4) UK Motor Finance for Stages 1 and 2 include GBP94 million
relating to provisions against residual values of vehicles subject
to finance leasing agreements. These provisions are included within
the calculation of coverage ratios.
(5) Total and Stage 3 ECL allowances as a percentage of drawn
balances exclude loans in recoveries in Credit cards of GBP73
million, Loans and overdrafts of GBP65 million, Small and Medium
Businesses of GBP921 million and Corporate and Institutional
Banking of GBP1 million.
(6) Equity Investments and Central Items excludes the GBP200 million ECL central adjustment.
FURTHER IMPAIRMENT DETAIL (continued)
Loans and advances to customers and expected credit loss
allowance - underlying basis(A) (continued)
Stage Stage
2 3
Stage Stage Stage as % as %
At 31 December 1 2 3 Total of of
2021 GBPm GBPm GBPm GBPm total total
Loans and advances to customers
UK mortgages 276,021 28,579 4,191 308,791 9.3 1.4
Credit cards
(1) 11,905 2,075 292 14,272 14.5 2.0
Loans and
overdrafts 8,181 1,105 271 9,557 11.6 2.8
UK Motor
Finance 12,247 1,828 201 14,276 12.8 1.4
Other (1) 11,198 593 169 11,960 5.0 1.4
---------------- ---------------- ---------------- --------------- ---------------- ---------------
Retail (2) 319,552 34,180 5,124 358,856 9.5 1.4
---------------- ---------------- ---------------- --------------- ---------------- ---------------
Small and
Medium
Businesses
(1) 36,134 4,992 1,747 42,873 11.6 4.1
Corporate and
Institutional
Banking (1) 46,585 2,538 1,816 50,939 5.0 3.6
---------------- ---------------- ---------------- --------------- ---------------- ---------------
Commercial
Banking 82,719 7,530 3,563 93,812 8.0 3.8
Equity
Investments
and
Central Items
(3) 144 - 7 151 - 4.6
---------------- ---------------- ---------------- --------------- ---------------- ---------------
Total gross
lending 402,415 41,710 8,694 452,819 9.2 1.9
---------------- ---------------
ECL allowance
on drawn
balances (919) (1,377) (1,981) (4,277)
---------------- ---------------- ---------------- ---------------
Net balance
sheet carrying
value 401,496 40,333 6,713 448,542
---------------- ---------------- ---------------- ---------------
Customer related ECL allowance (drawn and undrawn)
UK mortgages 50 653 581 1,284
Credit cards
(1) 147 253 131 531
Loans and
overdrafts 136 170 139 445
UK Motor
Finance (4) 108 74 116 298
Other (1) 15 15 52 82
---------------- ---------------- ---------------- ---------------
Retail (2) 456 1,165 1,019 2,640
---------------- ---------------- ---------------- ---------------
Small and
Medium
Businesses
(1) 104 176 179 459
Corporate and
Institutional
Banking (1) 68 122 782 972
---------------- ---------------- ---------------- ---------------
Commercial
Banking 172 298 961 1,431
Equity
Investments
and
Central Items 400 - 6 406
---------------- ---------------- ---------------- ---------------
Total 1,028 1,463 1,986 4,477
---------------- ---------------- ---------------- ---------------
Customer related ECL allowance (drawn and undrawn) as a percentage
of loans and advances to customers (5)
UK mortgages - 2.3 13.9 0.4
Credit cards
(1) 1.2 12.2 58.2 3.7
Loans and
overdrafts 1.7 15.4 67.5 4.7
UK Motor
Finance 0.9 4.0 57.7 2.1
Other (1) 0.1 2.5 30.8 0.7
---------------- ---------------- ---------------- ---------------
Retail (2) 0.1 3.4 20.4 0.7
---------------- ---------------- ---------------- ---------------
Small and
Medium
Businesses
(1) 0.3 3.5 14.5 1.1
Corporate and
Institutional
Banking (1) 0.1 4.8 43.1 1.9
---------------- ---------------- ---------------- ---------------
Commercial
Banking 0.2 4.0 31.6 1.5
Equity
Investments
and
Central Items
(6) - - 85.7 4.0
---------------- ---------------- ---------------- ---------------
Total 0.3 3.5 24.7 1.0
---------------- ---------------- ---------------- ---------------
(1) Reflects the new organisation structure. See page 25 .
(2) Retail balances exclude the impact of the HBOS and MBNA
acquisition-related adjustments.
(3) Contains centralised fair value hedge accounting
adjustments.
(4) UK Motor Finance for Stages 1 and 2 include GBP95 million
relating to provisions against residual values of vehicles subject
to finance leasing agreements. These provisions are included within
the calculation of coverage ratios.
(5) Total and Stage 3 ECL allowances as a percentage of drawn
balances exclude loans in recoveries in Credit cards of GBP67
million, Loans and overdrafts of GBP65 million, Small and Medium
Businesses of GBP515 million and Corporate and Institutional
Banking of GBP3 million.
(6) Equity Investments and Central Items excludes the GBP400 million ECL central adjustment.
FURTHER IMPAIRMENT DETAIL (continued)
Stage 2 loans and advances to customers and expected credit loss
allowance - underlying basis(A)
Up to date
---------------------------------------------- ---------- ---------- ----------
1 to 30 Over 30
days days
PD movements Other(1) past due(2) past due Total
---------------------- ---------------------- ---------------------- ---------------------- ------------------------
Gross Gross Gross Gross Gross
At 30 September lending ECL(3) lending ECL(3) lending ECL(3) lending ECL(3) lending ECL(3)
2022 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
UK mortgages 34,716 257 7,915 213 2,349 118 1,173 117 46,153 705
Credit cards 2,275 291 132 47 90 28 29 16 2,526 382
Loans and
overdrafts 943 169 232 45 121 39 43 20 1,339 273
UK Motor
Finance 854 27 927 23 136 25 32 10 1,949 85
Other 166 4 394 8 54 4 36 2 650 18
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Retail 38,954 748 9,600 336 2,750 214 1,313 165 52,617 1,463
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Small and
Medium
Businesses 4,408 246 1,235 26 399 13 224 7 6,266 292
Corporate
and
Institutional
Banking 4,856 242 39 - 14 - 120 1 5,029 243
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Commercial
Banking 9,264 488 1,274 26 413 13 344 8 11,295 535
Equity
Investments
and Central
Items - - - - - - - - - -
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total 48,218 1,236 10,874 362 3,163 227 1,657 173 63,912 1,998
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
At 30 June 2022
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
UK mortgages 24,356 193 7,836 161 2,290 60 1,073 56 35,555 470
Credit cards
(4) 2,042 257 131 45 87 28 29 16 2,289 346
Loans and
overdrafts 735 140 235 42 134 43 40 18 1,144 243
UK Motor
Finance 675 24 977 21 143 25 37 10 1,832 80
Other (4) 169 3 354 7 54 3 49 3 626 16
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Retail 27,977 617 9,533 276 2,708 159 1,228 103 41,446 1,155
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Small and
Medium
Businesses
(4) 3,146 139 1,257 22 413 10 237 6 5,053 177
Corporate
and
Institutional
Banking (4) 2,672 160 123 3 26 3 89 - 2,910 166
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Commercial
Banking 5,818 299 1,380 25 439 13 326 6 7,963 343
Equity
Investments
and Central
Items - - 1 - - - - - 1 -
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total 33,795 916 10,914 301 3,147 172 1,554 109 49,410 1,498
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
At 31 December
2021
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
UK mortgages 17,917 226 6,053 222 2,270 73 2,339 132 28,579 653
Credit cards
(4) 1,754 179 209 41 86 21 26 12 2,075 253
Loans and
overdrafts 505 82 448 43 113 30 39 15 1,105 170
UK Motor
Finance 581 20 1,089 26 124 19 34 9 1,828 74
Other (4) 194 4 306 7 44 2 49 2 593 15
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Retail 20,951 511 8,105 339 2,637 145 2,487 170 34,180 1,165
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Small and
Medium
Businesses
(4) 3,570 153 936 14 297 6 189 3 4,992 176
Corporate
and
Institutional
Banking (4) 2,479 119 25 3 6 - 28 - 2,538 122
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Commercial
Banking 6,049 272 961 17 303 6 217 3 7,530 298
Equity
Investments
and Central
Items - - - - - - - - - -
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total 27,000 783 9,066 356 2,940 151 2,704 173 41,710 1,463
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(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 1-29 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).
(4) Reflects the new organisation structure. See page 25 .
FURTHER IMPAIRMENT DETAIL (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 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. 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 on pages 19 and 18.
The table below shows the Group's ECL for the
probability-weighted, upside, base case, downside and severe
downside scenarios, 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 PD and hence the staging of assets is constant
across all the scenarios. In each economic scenario the ECL for
individual assessments and post-model adjustments is constant
reflecting the basis on which they are evaluated.
Probability- Base Severe
Underlying weighted Upside case Downside downside
basis (A) GBPm GBPm GBPm GBPm GBPm
UK mortgages 1,576 877 1,147 1,788 4,327
Credit cards 682 594 649 742 866
Other Retail 952 903 937 984 1,048
Commercial
Banking 1,768 1,365 1,580 1,909 3,117
Other 39 39 39 39 39
--------------- --------------- --------------- --------------- ---------------
At 30
September
2022 5,017 3,778 4,352 5,462 9,397
--------------- --------------- --------------- --------------- ---------------
UK mortgages 1,231 856 1,004 1,374 2,607
Credit
cards(1) 629 546 597 686 804
Other Retail
(1) 910 863 895 941 1,004
Commercial
Banking (1) 1,515 1,316 1,413 1,587 2,200
Other (1) 229 229 229 229 229
--------------- --------------- --------------- --------------- ---------------
At 30 June
2022 4,514 3,810 4,138 4,817 6,844
--------------- --------------- --------------- --------------- ---------------
UK mortgages 1,284 1,084 1,170 1,414 1,833
Credit
cards(1) 531 453 511 579 682
Other Retail
(1) 825 760 811 863 950
Commercial
Banking (1) 1,433 1,295 1,358 1,505 1,859
Other (1) 426 426 427 426 424
--------------- --------------- --------------- --------------- ---------------
At 31
December
2021 4,499 4,018 4,277 4,787 5,748
--------------- --------------- --------------- --------------- ---------------
(1) Reflects the new organisation structure. See page 25 .
FURTHER IMPAIRMENT DETAIL (continued)
Base case and MES economic assumptions
The Group's base case economic scenario reflects the outlook as
of 30 September 2022 and was revised in light of developments in
energy pricing, changes in UK fiscal policy prior to the balance
sheet date and a continuing shift towards a more restrictive
monetary policy stance by central banks. The Group's updated base
case scenario was based upon three conditioning assumptions: first,
the war in Ukraine remains 'local', without overtly involving
neighbouring countries, NATO or China; second, the fiscal loosening
implied by the UK Government's 'Growth Plan' of 23 September 2022
would be offset principally by Government spending cuts; and third,
central bank reaction functions, including of the Bank of England,
are focused on controlling inflation, motivating a more rapid
tightening of UK monetary policy. The Group continues to assume
that no further UK COVID-19 national lockdowns are mandated. Based
on these assumptions and incorporating the macroeconomic
information published in the third quarter, the Group's base case
scenario comprises an economic downturn with a rise in the
unemployment rate, declining residential and commercial property
prices, and continuing increases in the UK Bank Rate against a
backdrop of elevated inflationary pressures. Risks to the base case
economic view exist in both directions and are partly captured by
the generation of alternative economic scenarios. Each of the
scenarios includes forecasts for key variables as of the third
quarter of 2022, for which data or revisions to history may have
since emerged prior to publication.
At 30 September 2022, the Group has included an adjusted severe
downside scenario to incorporate high CPI inflation and UK Bank
Rate profiles and has adopted this adjusted severe downside
scenario in calculating its ECL allowance. This is because the
historic macroeconomic and loan loss data upon which the scenario
model is calibrated imply an association of downside economic
outcomes with lower inflation rates, easier monetary policy, and
therefore low interest rates. This adjustment is considered to
better reflect the risks around the Group's base case view in a
macroeconomic environment in which supply shocks are the principal
concern.
UK economic assumptions - base case scenario by quarter
Key quarterly assumptions made by the Group in the base case
scenario are shown below. Gross domestic product is presented
quarter-on-quarter. House price growth, commercial real estate
price growth and CPI inflation are presented year-on-year, i.e from
the equivalent quarter in the previous year. Unemployment rate and
UK Bank Rate are presented as at the end of each quarter.
First Second Third Fourth First Second Third Fourth
quarter quarter quarter quarter quarter quarter quarter quarter
2022 2022 2022 2022 2023 2023 2023 2023
At 30 September 2022 % % % % % % % %
Gross domestic product 0.8 (0.1) (0.1) (0.3) (0.4) (0.3) (0.2) (0.1)
Unemployment rate 3.7 3.8 3.7 3.8 4.3 4.7 5.1 5.4
House price growth 11.1 12.5 10.4 5.0 (0.2) (5.8) (8.2) (7.9)
Commercial real estate
price growth 18.0 18.0 12.3 2.8 (5.6) (11.8) (13.7) (14.4)
UK Bank Rate 0.75 1.25 2.25 4.00 4.00 4.00 4.00 4.00
CPI inflation 6.2 9.2 10.2 10.7 9.8 6.5 5.2 3.2
FURTHER IMPAIRMENT DETAIL (continued)
UK economic assumptions - scenarios by year
Key annual assumptions made by the Group are shown below. Gross
domestic product and Consumer Price Index (CPI) inflation are
presented as an annual change, house price growth and commercial
real estate price growth are presented as the growth in the
respective indices within the period. Unemployment rate and UK Bank
Rate are averages for the period.
2022
to 2026
2022 2023 2024 2025 2026 average
At 30 September 2022 % % % % % %
Upside
Gross domestic product 3.6 0.4 1.0 1.5 2.1 1.7
Unemployment rate 3.3 2.8 3.2 3.5 3.8 3.3
House price growth 6.1 (2.7) 7.2 8.5 6.1 5.0
Commercial real estate
price growth 8.7 (3.6) 0.1 1.0 1.9 1.6
UK Bank Rate 2.16 5.28 5.17 4.30 4.12 4.20
CPI inflation 9.0 6.1 2.9 3.2 2.6 4.8
Base case
Gross domestic product 3.4 (1.0) 0.4 1.4 2.0 1.2
Unemployment rate 3.7 4.9 5.4 5.5 5.5 5.0
House price growth 5.0 (7.9) (0.5) 2.5 2.3 0.2
Commercial real estate
price growth 2.8 (14.4) (2.7) 0.4 1.9 (2.6)
UK Bank Rate 2.06 4.00 3.38 2.56 2.50 2.90
CPI inflation 9.1 6.2 2.5 2.2 1.3 4.2
Downside
Gross domestic product 3.2 (2.3) (0.2) 1.2 1.9 0.8
Unemployment rate 4.1 6.6 7.5 7.3 7.2 6.5
House price growth 3.9 (12.9) (8.9) (5.4) (3.3) (5.5)
Commercial real estate
price growth (1.4) (23.0) (6.5) (2.5) (0.2) (7.1)
UK Bank Rate 2.00 2.93 1.76 1.04 1.07 1.76
CPI inflation 9.0 6.0 1.9 1.1 0.0 3.6
Severe downside
Gross domestic product 2.4 (4.5) (0.3) 1.0 1.8 0.0
Unemployment rate 4.9 9.8 10.5 10.0 9.5 8.9
House price growth 2.4 (17.9) (16.6) (10.3) (6.0) (10.0)
Commercial real estate
price growth (9.2) (35.7) (13.6) (6.4) (0.7) (14.1)
UK Bank Rate -
modelled 1.78 0.91 0.36 0.21 0.23 0.70
UK Bank Rate -
adjusted 2.44 7.00 4.88 3.00 2.75 4.01
CPI inflation -
modelled 9.1 5.9 1.0 (0.4) (1.9) 2.7
CPI inflation -
adjusted 9.9 14.3 9.0 4.1 1.3 7.7
Probability-weighted
Gross domestic product 3.3 (1.3) 0.3 1.4 2.0 1.1
Unemployment rate 3.8 5.3 5.9 5.9 5.9 5.4
House price growth 4.7 (8.8) (2.3) 0.6 0.9 (1.1)
Commercial real estate
price growth 2.1 (15.8) (4.1) (1.0) 1.0 (3.8)
UK Bank Rate -
modelled 2.04 3.75 3.13 2.39 2.33 2.73
UK Bank Rate -
adjusted 2.11 4.36 3.58 2.67 2.58 3.06
CPI inflation -
modelled 9.1 6.1 2.3 1.9 1.0 4.1
CPI inflation -
adjusted 9.1 6.9 3.1 2.4 1.3 4.6
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 September 2022, the Group's structural hedge had an
approved capacity of GBP 250 billion (up GBP10 billion on 31
December 2021 and stable compared to 30 June 2022).
Illustrative cumulative impact of parallel shifts in interest
rate curve(1)
The table below shows the banking book net interest income
sensitivity to an instantaneous parallel increase in interest
rates. Sensitivities reflect shifts in the interest rate curve. The
marginal reduction in Year 1 sensitivity compared to the year-end
and half-year has been driven by structural hedge maturity
reinvestment. 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 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 Year Year
1 2 3
GBPm GBPm GBPm
+100bps c.625 c.1,025 c.1,450
+50bps c.300 c.525 c.725
+25bps c.150 c.250 c.350
(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 September 2022
balance sheet position.
ALTERNATIVE PERFORMANCE MEASURES
In addition to the statutory basis of presentation, the results
are also presented on an underlying basis. The Group Executive
Committee, which is the chief operating decision maker 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 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
As announced at the 2021 full-year, in the first quarter of 2022
the Group adopted a new basis for cost reporting, including all
restructuring costs, with the exception of merger, acquisition and
integration costs, within operating costs. Non lending-related
fraud costs, previously included within underlying impairment, are
also now reported as part of operating costs. This has not impacted
the statutory impairment charge. Comparatives have been presented
on a consistent basis.
The analysis of lending and expected credit loss (ECL)
allowances is presented on an underlying basis. 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.
The Group calculates a number of metrics that are used
throughout the banking and insurance industries on an underlying
basis. A description of these measures and their calculation, which
remain unchanged since the year-end, is set out on pages 27 to 31
of the Group's 2022 Half-Year Results News Release.
ALTERNATIVE PERFORMANCE MEASURES (continued)
Nine Nine
months months
ended ended
30 Sep 30 Sep
2022 2021
Banking net interest margin(A)
Underlying net interest income (GBPm) 9,529 8,270
Remove non-banking underlying net interest expense
(GBPm) 69 86
---------------- ----------------
Banking underlying net interest income (GBPm) 9,598 8,356
---------------- ----------------
Statutory net loans and advances to customers (GBPbn) 456.3 450.5
Add back expected credit loss allowance (drawn) (GBPbn) 4.3 4.4
Acquisition related fair value adjustments (GBPbn) 0.4 0.4
---------------- ----------------
Underlying gross loans and advances to customers
(GBPbn) 461.0 455.3
Adjustment for non-banking and other items:
Fee-based loans and advances (GBPbn) (8.1) (5.4)
Other non-banking and other items (GBPbn) 4.4 0.9
---------------- ----------------
Interest-earning banking assets (GBPbn) 457.3 450.8
Averaging (GBPbn) (5.9) (7.8)
---------------- ----------------
Average interest-earning banking assets (GBPbn)(A) 451.4 443.0
---------------- ----------------
Banking net interest margin(A) 2.84% 2.52%
Nine Nine
months months
ended ended
30 Sep 30 Sep
2022 2021
Return on tangible equity(A)
Profit attributable to ordinary shareholders (GBPm) 3,632 5,064
Average shareholders' equity (GBPbn) 44.4 44.7
Remove average intangible assets (GBPbn) (6.6) (6.3)
---------------- ----------------
Average tangible equity (GBPbn) 37.8 38.4
---------------- ----------------
Return on tangible equity(A) 12.9% 17.6%
BASIS OF PRESENTATION
This news release covers the results of Lloyds Banking Group plc
together with its subsidiaries (the Group) for the nine months to
30 September 2022. Unless otherwise stated, income statement
commentaries throughout this document compare the nine months to 30
September 2022 to the nine months to 30 September 2021, and the
balance sheet analysis compares the Group balance sheet as at 30
September 2022 to the Group balance sheet as at 31 December 2021.
The Group uses a number of alternative performance measures,
including underlying profit, in the discussion of its business
performance and financial position. These measures are labelled
with a superscript 'A' throughout this document. Further
information on these measures is set out on page 23 . Unless
otherwise stated, commentary on page 1 is given on an underlying
basis. The Q3 2022 Interim Pillar 3 Report can be found at
www.lloydsbankinggroup.com/investors/financial-downloads .
Operating cost comparatives have been presented to reflect the
new costs basis, consistent with the current period. See page 23
.
Segmental information: On 1 July 2022 the Group adopted a new
organisation structure, aligned to our strategic objectives and our
existing three customer-facing divisions. Disclosure will continue
to be based on these three divisions, reflecting the basis on which
management runs the Group. To reflect the new organisation
structure, the Group migrated certain business units between these
divisions, with Business Banking and Commercial Cards moving from
Retail to Commercial Banking and Wealth moving from Insurance,
Pensions and Investments (previously Insurance and Wealth) to
Retail; comparatives have been represented accordingly. Total Group
figures are unaffected by these changes.
FORWARD LOOKING STATEMENTS
This document contains certain forward-looking statements within
the meaning of Section 21E of the US Securities Exchange Act of
1934, as amended, and section 27A of the US Securities Act of 1933,
as amended, with respect to Lloyds Banking Group plc together with
its subsidiaries (the Group) and its current goals and
expectations. Statements that are not historical or current facts,
including statements about the Group's or its directors' and/or
management's beliefs and expectations, are forward looking
statements. Words such as, without limitation, 'believes',
'achieves', 'anticipates', 'estimates', 'expects', 'targets',
'should', 'intends', 'aims', 'projects', 'plans', 'potential',
'will', 'would', 'could', 'considered', 'likely', 'may', 'seek',
'estimate', 'probability', 'goal', 'objective', 'deliver',
'endeavour', 'prospects', 'optimistic' and similar expressions or
variations on these expressions are intended to identify forward
looking statements. These statements concern or may affect future
matters, including but not limited to: projections or expectations
of the Group's future financial position, including profit
attributable to shareholders, provisions, economic profit,
dividends, capital structure, portfolios, net interest margin,
capital ratios, liquidity, risk-weighted assets (RWAs),
expenditures or any other financial items or ratios; litigation,
regulatory and governmental investigations; the Group's future
financial performance; the level and extent of future impairments
and write-downs; the Group's ESG targets and/or commitments;
statements of plans, objectives or goals of the Group or its
management and other statements that are not historical fact;
expectations about the impact of COVID-19; and statements of
assumptions underlying such statements. By their nature, forward
looking statements involve risk and uncertainty because they relate
to events and depend upon circumstances that will or may occur in
the future. Factors that could cause actual business, strategy,
plans and/or results (including but not limited to the payment of
dividends) to differ materially from forward looking statements
include, but are not limited to: general economic and business
conditions in the UK and internationally; market related risks,
trends and developments; risks concerning borrower and counterparty
credit quality; fluctuations in interest rates, inflation, exchange
rates, stock markets and currencies; volatility in credit markets;
volatility in the price of the Group's securities; changes in
consumer behaviour; any impact of the transition from IBORs to
alternative reference rates; the ability to access sufficient
sources of capital, liquidity and funding when required; changes to
the Group's credit ratings; the ability to derive cost savings and
other benefits including, but without limitation, as a result of
any acquisitions, disposals and other strategic transactions;
inability to capture accurately the expected value from
acquisitions; potential changes in dividend policy; the ability to
achieve strategic objectives; insurance risks; management and
monitoring of conduct risk; exposure to counterparty risk; credit
rating risk; tightening of monetary policy in jurisdictions in
which the Group operates; instability in the global financial
markets, including within the Eurozone, and as a result of ongoing
uncertainty following the exit by the UK from the European Union
(EU) and the effects of the EU-UK Trade and Cooperation Agreement;
political instability including as a result of any UK general
election and any further possible referendum on Scottish
independence; operational risks; conduct risk; technological
changes and risks to the security of IT and operational
infrastructure, systems, data and information resulting from
increased threat of cyber and other attacks; natural pandemic
(including but not limited to the COVID-19 pandemic) and other
disasters; inadequate or failed internal or external processes or
systems; acts of hostility or terrorism and responses to those
acts, or other such events; geopolitical unpredictability; the war
between Russia and Ukraine; the tensions between China and Taiwan;
risks relating to sustainability and climate change (and achieving
climate change ambitions), including the Group's ability along with
the government and other stakeholders to measure, manage and
mitigate the impacts of climate change effectively; changes in
laws, regulations, practices and accounting standards or taxation;
changes to regulatory capital or liquidity requirements and similar
contingencies; assessment related to resolution planning
requirements; the policies and actions of governmental or
regulatory authorities or courts together with any resulting impact
on the future structure of the Group; failure to comply with
anti-money laundering, counter terrorist financing, anti-bribery
and sanctions regulations; failure to prevent or detect any illegal
or improper activities; projected employee numbers and key person
risk; increased labour costs; assumptions and estimates that form
the basis of the Group's financial statements; the impact of
competitive conditions; and exposure to legal, regulatory or
competition proceedings, investigations or complaints. A number of
these influences and factors are beyond the Group's control. Please
refer to the latest Annual Report on Form 20-F filed by Lloyds
Banking Group plc with the US Securities and Exchange Commission
(the SEC), which is available on the SEC's website at www.sec.gov ,
for a discussion of certain factors and risks. Lloyds Banking Group
plc may also make or disclose written and/or oral forward-looking
statements in other written materials and in oral statements made
by the directors, officers or employees of Lloyds Banking Group plc
to third parties, including financial analysts. Except as required
by any applicable law or regulation, the forward-looking statements
contained in this document are made as of today's date, and the
Group expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to any forward looking statements
contained in this document whether as a result of new information,
future events or otherwise. The information, statements and
opinions contained in this document do not constitute a public
offer under any applicable law or an offer to sell any securities
or financial instruments or any advice or recommendation with
respect to such securities or financial instruments.
CONTACTS
For further information please contact:
INVESTORS AND ANALYSTS
Douglas Radcliffe
Group Investor Relations Director
020 7356 1571
douglas.radcliffe@lloydsbanking.com
Edward Sands
Director of Investor Relations
020 7356 1585
edward.sands@lloydsbanking.com
Nora Thoden
Director of Investor Relations - ESG
020 7356 2334
nora.thoden@lloydsbanking.com
CORPORATE AFFAIRS
Grant Ringshaw
External Relations Director
020 7356 2362
grant.ringshaw@lloydsbanking.com
Matt Smith
Head of Media Relations
020 7356 3522
matt.smith@lloydsbanking.com
Copies of this News Release may be obtained from:
Investor Relations, Lloyds Banking Group plc, 25 Gresham Street,
London EC2V 7HN
The statement can also be found on the Group's website -
www.lloydsbankinggroup.com
Registered office: Lloyds Banking Group plc, The Mound,
Edinburgh, EH1 1YZ
Registered in Scotland No. SC095000
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END
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