Lloyds Banking Group
plc
2024 Half-Year Results
25 July 2024
Part 1
of 2
CONTENTS
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
7 to 8 which is, unless
otherwise stated, presented on an underlying basis. Further
information on these measures is set out on page
26.
Forward-looking statements
This news release contains
forward-looking statements. For further details, reference should
be made to page 102.
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
101.
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
|
A See page 26.
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 3.
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.
|
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.
|
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 Jun
2024
|
|
|
At 31
Mar
2024
|
|
|
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.
|
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.
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 28.
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 40. 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.
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.
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.
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
|
|
CREDIT RISK (continued)
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 fair
value 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 fair
value 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 85
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
•
UK mortgages
• 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
•
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.
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