Lloyds Banking Group plc
2024 Half-Year Results
25 July 2024
Part 2 of
2
CONDENSED CONSOLIDATED INCOME
STATEMENT (UNAUDITED)
|
Note
|
|
Half-year
to 30 Jun
2024
£m
|
|
|
Half-year
to 30
Jun
2023
£m
|
|
|
Half-year
to 31
Dec
2023
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
15,435
|
|
|
13,048
|
|
|
15,003
|
|
Interest expense
|
|
|
(9,389)
|
|
|
(6,250)
|
|
|
(8,503)
|
|
Net
interest income
|
|
|
6,046
|
|
|
6,798
|
|
|
6,500
|
|
Fee and commission income
|
|
|
1,458
|
|
|
1,426
|
|
|
1,500
|
|
Fee and commission
expense
|
|
|
(568)
|
|
|
(539)
|
|
|
(556)
|
|
Net fee and commission
income
|
4
|
|
890
|
|
|
887
|
|
|
944
|
|
Net trading income
|
|
|
10,758
|
|
|
6,161
|
|
|
11,888
|
|
Insurance revenue
|
|
|
1,650
|
|
|
1,450
|
|
|
1,558
|
|
Insurance service expense
|
|
|
(1,339)
|
|
|
(1,238)
|
|
|
(1,176)
|
|
Net (expense) income from
reinsurance contracts held
|
|
|
(23)
|
|
|
11
|
|
|
(9)
|
|
Insurance service result
|
5
|
|
288
|
|
|
223
|
|
|
373
|
|
Other operating income
|
|
|
907
|
|
|
826
|
|
|
805
|
|
Other income
|
|
|
12,843
|
|
|
8,097
|
|
|
14,010
|
|
Total income
|
|
|
18,889
|
|
|
14,895
|
|
|
20,510
|
|
Net finance expense from insurance,
participating investment and reinsurance contracts
|
5
|
|
(6,477)
|
|
|
(3,769)
|
|
|
(7,915)
|
|
Movement in third party interests in
consolidated funds
|
|
|
(802)
|
|
|
(332)
|
|
|
(777)
|
|
Change in non-participating
investment contracts
|
|
|
(2,734)
|
|
|
(1,488)
|
|
|
(2,495)
|
|
Net finance expense in respect of
insurance and investment contracts
|
|
|
(10,013)
|
|
|
(5,589)
|
|
|
(11,187)
|
|
Total income, after net finance expense in respect of
insurance and investment contracts
|
|
|
8,876
|
|
|
9,306
|
|
|
9,323
|
|
Operating expenses
|
6
|
|
(5,452)
|
|
|
(4,774)
|
|
|
(6,049)
|
|
Impairment (charge)
credit
|
8
|
|
(100)
|
|
|
(662)
|
|
|
359
|
|
Profit before tax
|
|
|
3,324
|
|
|
3,870
|
|
|
3,633
|
|
Tax expense
|
9
|
|
(880)
|
|
|
(1,006)
|
|
|
(979)
|
|
Profit for the period
|
|
|
2,444
|
|
|
2,864
|
|
|
2,654
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit attributable to ordinary
shareholders
|
|
|
2,145
|
|
|
2,572
|
|
|
2,361
|
|
Profit attributable to other equity
holders
|
|
|
269
|
|
|
255
|
|
|
272
|
|
Profit attributable to equity
holders
|
|
|
2,414
|
|
|
2,827
|
|
|
2,633
|
|
Profit attributable to
non-controlling interests
|
|
|
30
|
|
|
37
|
|
|
21
|
|
Profit for the period
|
|
|
2,444
|
|
|
2,864
|
|
|
2,654
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
17
|
|
3.4p
|
|
|
3.9p
|
|
|
3.7p
|
|
Diluted earnings per
share
|
17
|
|
3.3p
|
|
|
3.8p
|
|
|
3.7p
|
|
The accompanying notes are an
integral part of the condensed consolidated half-year financial
statements.
CONDENSED CONSOLIDATED
STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
|
|
Half-year
to 30 Jun
2024
£m
|
|
|
Half-year
to 30
Jun
2023
£m
|
|
|
Half-year
to 31
Dec
2023
£m
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period
|
|
2,444
|
|
|
2,864
|
|
|
2,654
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
Items that will not subsequently be reclassified to profit or
loss:
|
|
|
|
|
|
|
|
|
|
Post-retirement defined benefit
scheme remeasurements:
|
|
|
|
|
|
|
|
|
|
Remeasurements before tax
|
|
(351)
|
|
|
(119)
|
|
|
(1,514)
|
|
Tax
|
|
93
|
|
|
27
|
|
|
401
|
|
|
|
(258)
|
|
|
(92)
|
|
|
(1,113)
|
|
Movements in revaluation reserve in
respect of equity shares held at fair value through other
comprehensive income:
|
|
|
|
|
|
|
|
|
|
Change in fair value
|
|
72
|
|
|
(48)
|
|
|
(6)
|
|
Tax
|
|
-
|
|
|
-
|
|
|
(3)
|
|
|
|
72
|
|
|
(48)
|
|
|
(9)
|
|
Gains and losses attributable to own
credit risk:
|
|
|
|
|
|
|
|
|
|
Losses before tax
|
|
(86)
|
|
|
(85)
|
|
|
(149)
|
|
Tax
|
|
24
|
|
|
24
|
|
|
42
|
|
|
|
(62)
|
|
|
(61)
|
|
|
(107)
|
|
Items that may subsequently be reclassified to profit or
loss:
|
|
|
|
|
|
|
|
|
|
Movements in revaluation reserve in
respect of debt securities held at fair value through other
comprehensive income:
|
|
|
|
|
|
|
|
|
|
Change in fair value
|
|
105
|
|
|
157
|
|
|
(197)
|
|
Income statement transfers in
respect of disposals
|
|
(4)
|
|
|
(107)
|
|
|
(15)
|
|
Income statement transfers in
respect of impairment
|
|
(2)
|
|
|
(2)
|
|
|
-
|
|
Tax
|
|
(27)
|
|
|
(13)
|
|
|
60
|
|
|
|
72
|
|
|
35
|
|
|
(152)
|
|
Movements in cash flow hedging
reserve:
|
|
|
|
|
|
|
|
|
|
Effective portion of changes in fair
value taken to other comprehensive income
|
|
(1,601)
|
|
|
(1,644)
|
|
|
2,189
|
|
Net income statement
transfers
|
|
1,238
|
|
|
756
|
|
|
1,082
|
|
Tax
|
|
101
|
|
|
244
|
|
|
(917)
|
|
|
|
(262)
|
|
|
(644)
|
|
|
2,354
|
|
Movements in foreign currency
translation reserve:
|
|
|
|
|
|
|
|
|
|
Currency translation differences
(tax: £nil)
|
|
(39)
|
|
|
(66)
|
|
|
13
|
|
Transfers to income statement (tax:
£nil)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
(39)
|
|
|
(66)
|
|
|
13
|
|
Total other comprehensive (loss) income for the period, net of
tax
|
|
(477)
|
|
|
(876)
|
|
|
986
|
|
Total comprehensive income for the period
|
|
1,967
|
|
|
1,988
|
|
|
3,640
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
attributable to ordinary shareholders
|
|
1,668
|
|
|
1,696
|
|
|
3,347
|
|
Total comprehensive income
attributable to other equity holders
|
|
269
|
|
|
255
|
|
|
272
|
|
Total comprehensive income
attributable to equity holders
|
|
1,937
|
|
|
1,951
|
|
|
3,619
|
|
Total comprehensive income
attributable to non-controlling interests
|
|
30
|
|
|
37
|
|
|
21
|
|
Total comprehensive income for
the period
|
|
1,967
|
|
|
1,988
|
|
|
3,640
|
|
The accompanying notes are an
integral part of the condensed consolidated half-year financial
statements.
CONDENSED CONSOLIDATED
BALANCE SHEET (UNAUDITED)
|
Note
|
At 30 Jun
2024
£m
|
|
|
At 31
Dec
2023
£m
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Cash and balances at central
banks
|
|
|
66,808
|
|
|
78,110
|
|
Financial assets at fair value
through profit or loss
|
10
|
|
209,139
|
|
|
203,318
|
|
Derivative financial
instruments
|
11
|
|
18,983
|
|
|
22,356
|
|
Loans and advances to
banks
|
|
|
8,454
|
|
|
10,764
|
|
Loans and advances to
customers
|
12
|
|
452,408
|
|
|
449,745
|
|
Reverse repurchase
agreements
|
|
|
49,404
|
|
|
38,771
|
|
Debt securities
|
|
|
15,432
|
|
|
15,355
|
|
Financial assets at amortised
cost
|
|
|
525,698
|
|
|
514,635
|
|
Financial assets at fair value
through other comprehensive income
|
10
|
|
27,847
|
|
|
27,592
|
|
Goodwill and other intangible
assets
|
|
|
8,315
|
|
|
8,306
|
|
Current tax recoverable
|
|
|
1,152
|
|
|
1,183
|
|
Deferred tax assets
|
|
|
4,995
|
|
|
5,185
|
|
Retirement benefit assets
|
7
|
|
3,379
|
|
|
3,624
|
|
Other assets
|
|
|
26,611
|
|
|
17,144
|
|
Total assets
|
|
|
892,927
|
|
|
881,453
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Deposits from banks
|
|
|
5,584
|
|
|
6,153
|
|
Customer deposits
|
|
|
474,693
|
|
|
471,396
|
|
Repurchase agreements at amortised
cost
|
|
|
37,914
|
|
|
37,703
|
|
Financial liabilities at fair value
through profit or loss
|
10
|
|
27,056
|
|
|
24,914
|
|
Derivative financial
instruments
|
11
|
|
16,647
|
|
|
20,149
|
|
Notes in circulation
|
|
|
1,766
|
|
|
1,392
|
|
Debt securities in issue at
amortised cost
|
15
|
|
74,760
|
|
|
75,592
|
|
Liabilities arising from insurance
and participating investment contracts
|
5
|
|
125,007
|
|
|
120,123
|
|
Liabilities arising from
non-participating investment contracts
|
|
|
48,280
|
|
|
44,978
|
|
Other liabilities
|
|
|
23,544
|
|
|
19,026
|
|
Retirement benefit
obligations
|
7
|
|
130
|
|
|
136
|
|
Current tax liabilities
|
|
|
47
|
|
|
39
|
|
Deferred tax liabilities
|
|
|
146
|
|
|
157
|
|
Provisions
|
16
|
|
1,788
|
|
|
2,077
|
|
Subordinated liabilities
|
|
|
10,448
|
|
|
10,253
|
|
Total liabilities
|
|
|
847,810
|
|
|
834,088
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
Share capital
|
|
|
6,252
|
|
|
6,358
|
|
Share premium account
|
|
|
18,671
|
|
|
18,568
|
|
Other reserves
|
|
|
8,525
|
|
|
8,508
|
|
Retained profits
|
|
|
5,511
|
|
|
6,790
|
|
Ordinary shareholders' equity
|
|
|
38,959
|
|
|
40,224
|
|
Other equity instruments
|
|
|
5,932
|
|
|
6,940
|
|
Total equity excluding non-controlling
interests
|
|
|
44,891
|
|
|
47,164
|
|
Non-controlling interests
|
|
|
226
|
|
|
201
|
|
Total equity
|
|
|
45,117
|
|
|
47,365
|
|
Total equity and liabilities
|
|
|
892,927
|
|
|
881,453
|
|
The accompanying notes are an
integral part of the condensed consolidated half-year financial
statements.
CONDENSED CONSOLIDATED
STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
|
|
Attributable to ordinary
shareholders
|
|
|
|
|
|
|
|
|
|
|
|
Share
capital and
premium
£m
|
|
|
Other
reserves
£m
|
|
|
Retained
profits
£m
|
|
|
Total
£m
|
|
Other
equity
instruments
£m
|
|
Non-
controlling
interests
£m
|
|
|
Total
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2024
|
|
24,926
|
|
|
8,508
|
|
|
6,790
|
|
|
40,224
|
|
|
6,940
|
|
|
201
|
|
|
47,365
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for
the period
|
|
-
|
|
|
-
|
|
|
2,145
|
|
|
2,145
|
|
|
269
|
|
|
30
|
|
|
2,444
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-retirement defined benefit
scheme remeasurements, net of tax
|
|
-
|
|
|
-
|
|
|
(258)
|
|
|
(258)
|
|
|
-
|
|
|
-
|
|
|
(258)
|
|
Movements in revaluation reserve in
respect of financial assets held at fair value through other
comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities
|
|
-
|
|
|
72
|
|
|
-
|
|
|
72
|
|
|
-
|
|
|
-
|
|
|
72
|
|
Equity shares
|
|
-
|
|
|
72
|
|
|
-
|
|
|
72
|
|
|
-
|
|
|
-
|
|
|
72
|
|
Gains and losses attributable to own
credit risk, net of tax
|
|
-
|
|
|
-
|
|
|
(62)
|
|
|
(62)
|
|
|
-
|
|
|
-
|
|
|
(62)
|
|
Movements in cash flow hedging
reserve, net of tax
|
|
-
|
|
|
(262)
|
|
|
-
|
|
|
(262)
|
|
|
-
|
|
|
-
|
|
|
(262)
|
|
Movements in foreign currency
translation reserve, net of tax
|
|
-
|
|
|
(39)
|
|
|
-
|
|
|
(39)
|
|
|
-
|
|
|
-
|
|
|
(39)
|
|
Total other comprehensive
loss
|
|
-
|
|
|
(157)
|
|
|
(320)
|
|
|
(477)
|
|
|
-
|
|
|
-
|
|
|
(477)
|
|
Total comprehensive (loss)
income1
|
|
-
|
|
|
(157)
|
|
|
1,825
|
|
|
1,668
|
|
|
269
|
|
|
30
|
|
|
1,967
|
|
Transactions with owners
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
-
|
|
|
-
|
|
|
(1,169)
|
|
|
(1,169)
|
|
|
-
|
|
|
(3)
|
|
|
(1,172)
|
|
Distributions on other equity
instruments
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(269)
|
|
|
-
|
|
|
(269)
|
|
Issue of ordinary shares
|
|
171
|
|
|
-
|
|
|
-
|
|
|
171
|
|
|
-
|
|
|
-
|
|
|
171
|
|
Share buyback2
|
|
(174)
|
|
|
174
|
|
|
(1,553)
|
|
|
(1,553)
|
|
|
-
|
|
|
-
|
|
|
(1,553)
|
|
Issue of other equity
instruments
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Repurchases and redemptions of other
equity instruments
|
|
-
|
|
|
-
|
|
|
(316)
|
|
|
(316)
|
|
|
(1,008)
|
|
|
-
|
|
|
(1,324)
|
|
Movement in treasury
shares
|
|
-
|
|
|
-
|
|
|
(136)
|
|
|
(136)
|
|
|
-
|
|
|
-
|
|
|
(136)
|
|
Value of employee
services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share option schemes
|
|
-
|
|
|
-
|
|
|
24
|
|
|
24
|
|
|
-
|
|
|
-
|
|
|
24
|
|
Other employee award
schemes
|
|
-
|
|
|
-
|
|
|
46
|
|
|
46
|
|
|
-
|
|
|
-
|
|
|
46
|
|
Changes in non-controlling
interests
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2)
|
|
|
(2)
|
|
Total transactions with owners
|
|
(3)
|
|
|
174
|
|
|
(3,104)
|
|
|
(2,933)
|
|
|
(1,277)
|
|
|
(5)
|
|
|
(4,215)
|
|
Realised gains and losses on equity
shares held at fair value through other comprehensive
income
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
At
30 June 20243
|
|
24,923
|
|
|
8,525
|
|
|
5,511
|
|
|
38,959
|
|
|
5,932
|
|
|
226
|
|
|
45,117
|
|
1 Total
comprehensive income attributable to owners of the parent was
£1,937 million.
2 Contains a closed period accrual of £630
million.
3 Total equity attributable to owners of the parent was
£44,891 million.
The accompanying notes are an
integral part of the condensed consolidated half-year financial
statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(UNAUDITED) (continued)
|
|
Attributable to ordinary shareholders
|
|
|
|
|
|
|
|
|
|
|
|
Share
capital
and
premium
£m
|
|
|
Other
reserves
£m
|
|
|
Retained
profits
£m
|
|
|
Total
£m
|
|
|
Other
equity
instruments
£m
|
|
|
Non-
controlling
interests
£m
|
|
|
Total
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2023
|
|
25,233
|
|
|
6,587
|
|
|
6,550
|
|
|
38,370
|
|
|
5,297
|
|
|
244
|
|
|
43,911
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period
|
|
-
|
|
|
-
|
|
|
2,572
|
|
|
2,572
|
|
|
255
|
|
|
37
|
|
|
2,864
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-retirement defined benefit
scheme remeasurements, net of tax
|
|
-
|
|
|
-
|
|
|
(92)
|
|
|
(92)
|
|
|
-
|
|
|
-
|
|
|
(92)
|
|
Movements in revaluation reserve in
respect of financial assets held at fair value through other
comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities
|
|
-
|
|
|
35
|
|
|
-
|
|
|
35
|
|
|
-
|
|
|
-
|
|
|
35
|
|
Equity shares
|
|
-
|
|
|
(48)
|
|
|
-
|
|
|
(48)
|
|
|
-
|
|
|
-
|
|
|
(48)
|
|
Gains and losses attributable to own
credit risk, net of tax
|
|
-
|
|
|
-
|
|
|
(61)
|
|
|
(61)
|
|
|
-
|
|
|
-
|
|
|
(61)
|
|
Movements in cash flow hedging
reserve, net of tax
|
|
-
|
|
|
(644)
|
|
|
-
|
|
|
(644)
|
|
|
-
|
|
|
-
|
|
|
(644)
|
|
Movements in foreign currency
translation reserve, net of tax
|
|
-
|
|
|
(66)
|
|
|
-
|
|
|
(66)
|
|
|
-
|
|
|
-
|
|
|
(66)
|
|
Total other comprehensive
loss
|
|
-
|
|
|
(723)
|
|
|
(153)
|
|
|
(876)
|
|
|
-
|
|
|
-
|
|
|
(876)
|
|
Total comprehensive (loss)
income1
|
|
-
|
|
|
(723)
|
|
|
2,419
|
|
|
1,696
|
|
|
255
|
|
|
37
|
|
|
1,988
|
|
Transactions with owners
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
-
|
|
|
-
|
|
|
(1,059)
|
|
|
(1,059)
|
|
|
-
|
|
|
(30)
|
|
|
(1,089)
|
|
Distributions on other equity
instruments
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(255)
|
|
|
-
|
|
|
(255)
|
|
Issue of ordinary shares
|
|
115
|
|
|
-
|
|
|
-
|
|
|
115
|
|
|
-
|
|
|
-
|
|
|
115
|
|
Share buyback2
|
|
(327)
|
|
|
327
|
|
|
(2,020)
|
|
|
(2,020)
|
|
|
-
|
|
|
-
|
|
|
(2,020)
|
|
Issue of other equity
instruments
|
|
-
|
|
|
-
|
|
|
(6)
|
|
|
(6)
|
|
|
1,778
|
|
|
-
|
|
|
1,772
|
|
Repurchases and redemptions of other
equity instruments
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(135)
|
|
|
-
|
|
|
(135)
|
|
Movement in treasury
shares
|
|
-
|
|
|
-
|
|
|
101
|
|
|
101
|
|
|
-
|
|
|
-
|
|
|
101
|
|
Value of employee
services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share option schemes
|
|
-
|
|
|
-
|
|
|
23
|
|
|
23
|
|
|
-
|
|
|
-
|
|
|
23
|
|
Other employee award
schemes
|
|
-
|
|
|
-
|
|
|
71
|
|
|
71
|
|
|
-
|
|
|
-
|
|
|
71
|
|
Changes in non-controlling
interests
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Total transactions with owners
|
|
(212)
|
|
|
327
|
|
|
(2,890)
|
|
|
(2,775)
|
|
|
1,388
|
|
|
(30)
|
|
|
(1,417)
|
|
Realised gains and losses on equity
shares held at fair value through other comprehensive
income
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
At 30 June
20233
|
|
25,021
|
|
|
6,191
|
|
|
6,079
|
|
|
37,291
|
|
|
6,940
|
|
|
251
|
|
|
44,482
|
|
1 Total
comprehensive income attributable to owners of the parent was
£1,951 million.
2 Contains a closed period accrual of £419
million.
3 Total equity
attributable to owners of the parent was £44,231
million.
The accompanying notes are an
integral part of the condensed consolidated half-year financial
statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(UNAUDITED) (continued)
|
|
Attributable to ordinary shareholders
|
|
|
|
|
|
|
|
|
|
|
|
Share
capital
and
premium
£m
|
|
|
Other
reserves
£m
|
|
|
Retained
profits
£m
|
|
|
Total
£m
|
|
|
Other
equity
instruments
£m
|
|
|
Non-
controlling
interests
£m
|
|
|
Total
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 July 2023
|
|
25,021
|
|
|
6,191
|
|
|
6,079
|
|
|
37,291
|
|
|
6,940
|
|
|
251
|
|
|
44,482
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period
|
|
-
|
|
|
-
|
|
|
2,361
|
|
|
2,361
|
|
|
272
|
|
|
21
|
|
|
2,654
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-retirement defined benefit
scheme remeasurements, net of tax
|
|
-
|
|
|
-
|
|
|
(1,113)
|
|
|
(1,113)
|
|
|
-
|
|
|
-
|
|
|
(1,113)
|
|
Movements in revaluation reserve in
respect of financial assets held at fair value through other
comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities
|
|
-
|
|
|
(152)
|
|
|
-
|
|
|
(152)
|
|
|
-
|
|
|
-
|
|
|
(152)
|
|
Equity shares
|
|
-
|
|
|
(9)
|
|
|
-
|
|
|
(9)
|
|
|
-
|
|
|
-
|
|
|
(9)
|
|
Gains and losses attributable to own
credit risk, net of tax
|
|
-
|
|
|
-
|
|
|
(107)
|
|
|
(107)
|
|
|
-
|
|
|
-
|
|
|
(107)
|
|
Movements in cash flow hedging
reserve, net of tax
|
|
-
|
|
|
2,354
|
|
|
-
|
|
|
2,354
|
|
|
-
|
|
|
-
|
|
|
2,354
|
|
Movements in foreign currency
translation reserve, net of tax
|
|
-
|
|
|
13
|
|
|
-
|
|
|
13
|
|
|
-
|
|
|
-
|
|
|
13
|
|
Total other comprehensive income
(loss)
|
|
-
|
|
|
2,206
|
|
|
(1,220)
|
|
|
986
|
|
|
-
|
|
|
-
|
|
|
986
|
|
Total comprehensive income1
|
|
-
|
|
|
2,206
|
|
|
1,141
|
|
|
3,347
|
|
|
272
|
|
|
21
|
|
|
3,640
|
|
Transactions with owners
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
-
|
|
|
-
|
|
|
(592)
|
|
|
(592)
|
|
|
-
|
|
|
(71)
|
|
|
(663)
|
|
Distributions on other equity
instruments
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(272)
|
|
|
-
|
|
|
(272)
|
|
Issue of ordinary shares
|
|
16
|
|
|
-
|
|
|
-
|
|
|
16
|
|
|
-
|
|
|
-
|
|
|
16
|
|
Share buyback
|
|
(111)
|
|
|
111
|
|
|
27
|
|
|
27
|
|
|
-
|
|
|
-
|
|
|
27
|
|
Issue of other equity
instruments
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Repurchases and redemptions of other
equity instruments
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Movement in treasury
shares
|
|
-
|
|
|
-
|
|
|
2
|
|
|
2
|
|
|
-
|
|
|
-
|
|
|
2
|
|
Value of employee
services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share option schemes
|
|
-
|
|
|
-
|
|
|
35
|
|
|
35
|
|
|
-
|
|
|
-
|
|
|
35
|
|
Other employee award
schemes
|
|
-
|
|
|
-
|
|
|
98
|
|
|
98
|
|
|
-
|
|
|
-
|
|
|
98
|
|
Changes in non-controlling
interests
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Total transactions with owners
|
|
(95)
|
|
|
111
|
|
|
(430)
|
|
|
(414)
|
|
|
(272)
|
|
|
(71)
|
|
|
(757)
|
|
Realised gains and losses on equity
shares held at fair value through other comprehensive
income
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
At 31 December
20232
|
|
24,926
|
|
|
8,508
|
|
|
6,790
|
|
|
40,224
|
|
|
6,940
|
|
|
201
|
|
|
47,365
|
|
1 Total comprehensive income attributable to owners of
the parent was £3,619 million.
2 Total equity attributable to owners of the parent was
£47,164 million.
The accompanying notes are an
integral part of the condensed consolidated half-year financial
statements.
CONDENSED CONSOLIDATED CASH
FLOW STATEMENT (UNAUDITED)
|
Half-year
to 30 Jun
2024
£m
|
|
|
Half-year
to 30
Jun
2023
£m
|
|
|
Half-year
to 31
Dec
2023
£m
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Profit before tax
|
3,324
|
|
|
3,870
|
|
|
3,633
|
|
Adjustments for:
|
|
|
|
|
|
|
|
|
Change in operating
assets
|
(21,509)
|
|
|
(589)
|
|
|
(8,521)
|
|
Change in operating
liabilities
|
14,032
|
|
|
10,162
|
|
|
(5,930)
|
|
Non-cash and other items
|
1,671
|
|
|
2,222
|
|
|
3,400
|
|
Net tax paid
|
(398)
|
|
|
(861)
|
|
|
(576)
|
|
Net
cash (used in) provided by operating activities
|
(2,880)
|
|
|
14,804
|
|
|
(7,994)
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchase of financial
assets
|
(5,809)
|
|
|
(3,850)
|
|
|
(6,461)
|
|
Proceeds from sale and maturity of
financial assets
|
5,269
|
|
|
3,657
|
|
|
1,641
|
|
Purchase of fixed assets
|
(2,884)
|
|
|
(3,378)
|
|
|
(2,077)
|
|
Proceeds from sale of fixed
assets
|
642
|
|
|
534
|
|
|
493
|
|
Repayment of capital by joint
ventures and associates
|
-
|
|
|
9
|
|
|
(9)
|
|
Acquisition of businesses, net of
cash acquired
|
(63)
|
|
|
(28)
|
|
|
(352)
|
|
Net
cash used in investing activities
|
(2,845)
|
|
|
(3,056)
|
|
|
(6,765)
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Dividends paid to ordinary
shareholders
|
(1,169)
|
|
|
(1,059)
|
|
|
(592)
|
|
Distributions in respect of other
equity instruments
|
(269)
|
|
|
(255)
|
|
|
(272)
|
|
Distributions in respect of
non-controlling interests
|
(3)
|
|
|
(30)
|
|
|
(71)
|
|
Interest paid on subordinated
liabilities
|
(350)
|
|
|
(344)
|
|
|
(279)
|
|
Proceeds from issue of subordinated
liabilities
|
427
|
|
|
746
|
|
|
671
|
|
Proceeds from issue of other equity
instruments
|
-
|
|
|
1,772
|
|
|
-
|
|
Proceeds from issue of ordinary
shares
|
170
|
|
|
70
|
|
|
16
|
|
Share buyback
|
(923)
|
|
|
(1,523)
|
|
|
(470)
|
|
Repayment of subordinated
liabilities
|
-
|
|
|
(1,162)
|
|
|
(583)
|
|
Repurchases and redemptions of other
equity instruments
|
(1,324)
|
|
|
(135)
|
|
|
-
|
|
Change in stake of non-controlling
interests
|
(2)
|
|
|
-
|
|
|
-
|
|
Net
cash used in financing activities
|
(3,443)
|
|
|
(1,920)
|
|
|
(1,580)
|
|
Effects of exchange rate changes on
cash and cash equivalents
|
(17)
|
|
|
(493)
|
|
|
13
|
|
Change in cash and cash
equivalents
|
(9,185)
|
|
|
9,335
|
|
|
(16,326)
|
|
Cash and cash equivalents at
beginning of period
|
88,838
|
|
|
95,829
|
|
|
105,164
|
|
Cash and cash equivalents at end of period
|
79,653
|
|
|
105,164
|
|
|
88,838
|
|
The accompanying notes are an
integral part of the condensed consolidated half-year financial
statements.
Cash and cash equivalents comprise
cash and non-mandatory balances with central banks and amounts due
from banks with an original maturity of less than three months.
Included within cash and cash equivalents at 30 June 2024 is
£35 million (30 June 2023: £45 million; 31 December 2023:
£31 million) held within the Group's long-term insurance and
investments operations, which is not immediately available for use
in the business.
NOTES TO THE CONDENSED
CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS
(UNAUDITED)
Note 1: Basis of preparation and accounting
policies
These condensed consolidated
half-year financial statements as at and for the period to 30 June
2024 have been prepared in accordance with the Disclosure Guidance
and Transparency Rules of the Financial Conduct Authority (FCA) and
with International Accounting Standard 34 (IAS 34), Interim Financial Reporting as adopted
by the United Kingdom and comprise the results of Lloyds Banking
Group plc (the Company) together with its subsidiaries (the Group).
They do not include all of the information required for full annual
financial statements and should be read in conjunction with the
Group's consolidated financial statements as at and for the year
ended 31 December 2023 which complied with international
accounting standards in conformity with the requirements of the
Companies Act 2006 and were prepared in accordance with
International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB). Copies of the 2023
annual report and accounts are available on the Group's website and
are also available upon request from Investor Relations, Lloyds
Banking Group plc, 25 Gresham Street, London
EC2V 7HN.
The UK Finance Code for Financial
Reporting Disclosure (the Disclosure Code) sets out disclosure
principles together with supporting guidance in respect of the
financial statements of UK banks. The Group has adopted the
Disclosure Code and these condensed consolidated half-year
financial statements have been prepared in compliance with the
Disclosure Code's principles. Terminology used in these condensed
consolidated half-year financial statements is consistent with that
used in the Group's 2023 annual report and accounts.
The directors consider that it is
appropriate to continue to adopt the going concern basis in
preparing these condensed consolidated half-year financial
statements. In reaching this assessment, the directors have taken
into account the uncertainties affecting the UK economy and their
potential effects upon the Group's performance and projected
funding and capital position; the impact of further stress
scenarios has also been considered. On this basis, the directors
are satisfied that the Group will maintain adequate levels of
funding and capital for the foreseeable future.
The Group's accounting policies are
consistent with those applied by the Group in its financial
statements for the year ended 31 December 2023 and there have been
no changes in the Group's methods of computation.
The IASB has issued a number of
minor amendments to IFRSs that are relevant to the Group effective
1 January 2024, including IFRS 16 Lease Liability in a Sale and
Leaseback, IAS 1 Non-current Liabilities with
Covenants, and IAS 1 Classification of Liabilities as Current or
Non-current. These amendments have not had a significant
impact on the Group.
Future accounting developments
The IASB has issued Amendments to the Classification and
Measurement of Financial Instruments (IFRS 9 and IFRS 7)
which is effective 1 January 2026 and IFRS 19 Subsidiaries without Public Accountability:
Disclosures which is effective 1 January 2027. Neither
the amendments nor IFRS 19 are expected to have a significant
impact on the Group. The IASB has also issued IFRS 18 Primary Financial Statements which is
effective 1 January 2027. The standard includes no measurement
changes, and the Group is currently assessing the impact of this
standard on its income statement presentation.
Related party transactions
The Group has had no significant
related party transactions during the half-year to 30 June 2024.
Related party transactions for the half-year to 30 June 2024 are
similar in nature to those for the year ended 31 December 2023.
Full details of the Group's related party transactions for the year
ended 31 December 2023 can be found in the Group's 2023 annual
report and accounts.
The financial information contained
in this document does not constitute statutory accounts within the
meaning of section 434 of the Companies Act 2006 (the Act).
The statutory accounts for the year ended 31 December 2023 were
approved by the directors on 21 February 2024 and were delivered to
the Registrar of Companies on 30 March 2024. The auditors' report
on those accounts was unqualified and did not include a statement
under sections 498(2) (accounting records or returns inadequate or
accounts not agreeing with records and returns) or 498(3) (failure
to obtain necessary information and explanations) of the
Act.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 2: Critical accounting judgements and key sources of
estimation uncertainty
The preparation of the Group's
financial statements in accordance with IFRS requires management to
make judgements, estimates and assumptions in applying the
accounting policies that affect the reported amounts of assets,
liabilities, income and expenses. Due to the inherent uncertainty
in making estimates, actual results reported in future periods may
be based upon amounts which differ from these estimates. Estimates,
judgements and assumptions are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances. In preparing the financial statements, the Group has
considered the impact of climate-related risks on its financial
position and performance. While the effects of climate change
represent a source of uncertainty, the Group does not consider
there to be a material impact on its judgements and estimates from
the physical, transition and other climate-related risks in the
short-term.
The Group's significant judgements,
estimates and assumptions are unchanged compared to those disclosed
in note 3 of the Group's 2023 financial statements. Further
information on the critical accounting judgements and key sources
of estimation uncertainty for the allowance for expected credit
losses is set out in note 14.
Note 3: Segmental analysis
Lloyds Banking Group provides a wide
range of banking and financial services in the UK and in certain
locations overseas. The Group Executive Committee (GEC) remains the
"chief operating decision maker" (as defined by IFRS 8
Operating Segments) for
the Group.
The segmental results and
comparatives are presented on an underlying basis, the basis
reviewed by the chief operating decision maker. The underlying
basis is derived from the recognition and measurement principles of
IFRS with the effects of the following excluded in arriving at
underlying profit before tax:
• 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 businesses, 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
For the purposes of the underlying
income statement, operating lease depreciation (net of gains on
disposal of operating lease assets) is shown as an adjustment to
total underlying income.
There has been no change to the
descriptions of these segments as provided in note 4 to the Group's
financial statements for the year ended 31 December
2023.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 3: Segmental analysis (continued)
The table below analyses the Group's
income and profit by segment on an underlying basis and provides a
reconciliation through to certain lines in the Group's statutory
income statement. Total income, after net finance income in respect
of insurance and investment contracts is also analysed between
external and inter-segment income. The Group's full segmental
income statement on an underlying basis is shown on page
16.
Half-year to 30 June 2024
|
Net
interest
income
£m
|
|
|
Other
income,
after net
finance
expense1
£m
|
|
|
Total
income,
after net
finance
expense1,2
£m
|
|
|
Profit
before
tax
£m
|
|
|
External
income
£m
|
|
|
Inter-
segment
income
(expense)
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
4,430
|
|
|
1,148
|
|
|
5,578
|
|
|
1,875
|
|
|
6,566
|
|
|
(988)
|
|
Commercial Banking
|
1,696
|
|
|
947
|
|
|
2,643
|
|
|
1,329
|
|
|
2,088
|
|
|
555
|
|
Insurance, Pensions and
Investments
|
(74)
|
|
|
649
|
|
|
575
|
|
|
119
|
|
|
649
|
|
|
(74)
|
|
Other
|
286
|
|
|
(10)
|
|
|
276
|
|
|
174
|
|
|
(231)
|
|
|
507
|
|
Group
|
6,338
|
|
|
2,734
|
|
|
9,072
|
|
|
3,497
|
|
|
9,072
|
|
|
-
|
|
Reconciling items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance grossing
adjustment
|
8
|
|
|
(112)
|
|
|
(104)
|
|
|
-
|
|
|
|
|
|
|
|
Market volatility and asset
sales
|
(273)
|
|
|
208
|
|
|
(65)
|
|
|
(65)
|
|
|
|
|
|
|
|
Amortisation of purchased
intangibles
|
-
|
|
|
-
|
|
|
-
|
|
|
(41)
|
|
|
|
|
|
|
|
Restructuring
costs3
|
-
|
|
|
-
|
|
|
-
|
|
|
(15)
|
|
|
|
|
|
|
|
Fair value unwind and other
items
|
(27)
|
|
|
-
|
|
|
(27)
|
|
|
(52)
|
|
|
|
|
|
|
|
Group - statutory
|
6,046
|
|
|
2,830
|
|
|
8,876
|
|
|
3,324
|
|
|
|
|
|
|
|
Half-year to 30 June 2023
|
Net
interest
income
£m
|
|
|
Other
income,
after
net
finance
expense1
£m
|
|
|
Total
income,
after
net
finance
expense1,2
£m
|
|
|
Profit
before
tax
£m
|
|
|
External
income
£m
|
|
|
Inter-
segment
income
(expense)
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
5,064
|
|
|
1,006
|
|
|
6,070
|
|
|
2,505
|
|
|
6,429
|
|
|
(359)
|
|
Commercial Banking
|
1,934
|
|
|
856
|
|
|
2,790
|
|
|
1,417
|
|
|
2,296
|
|
|
494
|
|
Insurance, Pensions and
Investments
|
(70)
|
|
|
619
|
|
|
549
|
|
|
91
|
|
|
621
|
|
|
(72)
|
|
Other
|
76
|
|
|
57
|
|
|
133
|
|
|
28
|
|
|
196
|
|
|
(63)
|
|
Group
|
7,004
|
|
|
2,538
|
|
|
9,542
|
|
|
4,041
|
|
|
9,542
|
|
|
-
|
|
Reconciling items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance grossing
adjustment
|
7
|
|
|
(139)
|
|
|
(132)
|
|
|
-
|
|
|
|
|
|
|
|
Market volatility and asset
sales
|
(183)
|
|
|
117
|
|
|
(66)
|
|
|
(63)
|
|
|
|
|
|
|
|
Amortisation of purchased
intangibles
|
-
|
|
|
-
|
|
|
-
|
|
|
(35)
|
|
|
|
|
|
|
|
Restructuring
costs3
|
-
|
|
|
-
|
|
|
-
|
|
|
(25)
|
|
|
|
|
|
|
|
Fair value unwind and other
items
|
(30)
|
|
|
(8)
|
|
|
(38)
|
|
|
(48)
|
|
|
|
|
|
|
|
Group - statutory
|
6,798
|
|
|
2,508
|
|
|
9,306
|
|
|
3,870
|
|
|
|
|
|
|
|
1 Other income and total income, after net finance
expense in respect of insurance and investment
contracts.
2 Total income, after net finance expense does not
include operating lease depreciation which, on a statutory basis,
is included within operating costs.
3 Restructuring costs related to merger, acquisition and
integration costs.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 3: Segmental analysis (continued)
Half-year to 31 December
2023
|
Net
interest
income
£m
|
|
|
Other
income,
after
net
finance
expense1
£m
|
|
|
Total
income,
after
net
finance
expense1,2
£m
|
|
|
Profit
before
tax
£m
|
|
|
External
income
£m
|
|
|
Inter-
segment
income
(expense)
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
4,583
|
|
|
1,153
|
|
|
5,736
|
|
|
1,538
|
|
|
6,374
|
|
|
(638)
|
|
Commercial Banking
|
1,865
|
|
|
835
|
|
|
2,700
|
|
|
1,802
|
|
|
2,274
|
|
|
426
|
|
Insurance, Pensions and
Investments
|
(62)
|
|
|
590
|
|
|
528
|
|
|
99
|
|
|
600
|
|
|
(72)
|
|
Other
|
375
|
|
|
7
|
|
|
382
|
|
|
329
|
|
|
98
|
|
|
284
|
|
Group
|
6,761
|
|
|
2,585
|
|
|
9,346
|
|
|
3,768
|
|
|
9,346
|
|
|
-
|
|
Reconciling items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance grossing
adjustment
|
5
|
|
|
(100)
|
|
|
(95)
|
|
|
-
|
|
|
|
|
|
|
|
Market volatility and asset
sales
|
(240)
|
|
|
334
|
|
|
94
|
|
|
98
|
|
|
|
|
|
|
|
Amortisation of purchased
intangibles
|
-
|
|
|
-
|
|
|
-
|
|
|
(45)
|
|
|
|
|
|
|
|
Restructuring
costs3
|
-
|
|
|
-
|
|
|
-
|
|
|
(129)
|
|
|
|
|
|
|
|
Fair value unwind and other
items
|
(26)
|
|
|
4
|
|
|
(22)
|
|
|
(59)
|
|
|
|
|
|
|
|
Group - statutory
|
6,500
|
|
|
2,823
|
|
|
9,323
|
|
|
3,633
|
|
|
|
|
|
|
|
1 Other income and total income, after net finance
expense in respect of insurance and investment
contracts.
2 Total income, after net finance expense does not
include operating lease depreciation which, on a statutory basis,
is included within operating costs.
3 Restructuring costs related to merger, acquisition and
integration costs.
|
Segment loans
and
advances to
customers
|
|
Segment
external
assets
|
|
At 30 Jun
2024
£m
|
|
|
At 31 Dec
2023
£m
|
|
|
At 30 Jun
2024
£m
|
|
|
At 31 Dec
2023
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
365,055
|
|
|
361,181
|
|
|
380,919
|
|
|
376,789
|
|
Commercial Banking
|
88,069
|
|
|
88,606
|
|
|
148,736
|
|
|
150,834
|
|
Insurance, Pensions and
Investments
|
-
|
|
|
-
|
|
|
191,796
|
|
|
184,267
|
|
Other
|
(716)
|
|
|
(42)
|
|
|
171,476
|
|
|
169,563
|
|
Total Group
|
452,408
|
|
|
449,745
|
|
|
892,927
|
|
|
881,453
|
|
|
Segment
customer
deposits
|
|
Segment
external
liabilities
|
|
At 30 Jun
2024
£m
|
|
|
At 31 Dec
2023
£m
|
|
|
At 30 Jun
2024
£m
|
|
|
At 31 Dec
2023
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
313,339
|
|
|
308,441
|
|
|
319,066
|
|
|
313,244
|
|
Commercial Banking
|
161,159
|
|
|
162,752
|
|
|
202,358
|
|
|
204,815
|
|
Insurance, Pensions and
Investments
|
-
|
|
|
-
|
|
|
187,673
|
|
|
179,962
|
|
Other
|
195
|
|
|
203
|
|
|
138,713
|
|
|
136,067
|
|
Total Group
|
474,693
|
|
|
471,396
|
|
|
847,810
|
|
|
834,088
|
|
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 4: Net fee and commission income
|
Half-year
to 30 Jun
2024
£m
|
|
|
Half-year
to 30
Jun
2023
£m
|
|
|
Half-year
to 31
Dec
2023
£m
|
|
|
|
|
|
|
|
|
|
|
Fee and commission
income:
|
|
|
|
|
|
|
|
|
Current accounts
|
314
|
|
|
310
|
|
|
314
|
|
Credit and debit card
fees
|
631
|
|
|
617
|
|
|
647
|
|
Commercial banking and treasury
fees
|
188
|
|
|
166
|
|
|
168
|
|
Unit trust and insurance
broking
|
32
|
|
|
34
|
|
|
35
|
|
Factoring
|
35
|
|
|
39
|
|
|
36
|
|
Other fees and
commissions
|
258
|
|
|
260
|
|
|
300
|
|
Total fee and commission
income
|
1,458
|
|
|
1,426
|
|
|
1,500
|
|
Fee and commission
expense
|
(568)
|
|
|
(539)
|
|
|
(556)
|
|
Net
fee and commission income
|
890
|
|
|
887
|
|
|
944
|
|
Current account and credit and debit
card fees principally arise in Retail; commercial banking, treasury
and factoring fees arise in Commercial Banking; and unit trust and
insurance broking fees arise in Insurance, Pensions and
Investments.
Note 5: Insurance business
|
Half-year
to 30 Jun
2024
£m
|
|
|
Half-year
to 30
Jun
2023
£m
|
|
|
Half-year
to 31
Dec
2023
£m
|
|
|
|
|
|
|
|
|
|
|
Life
|
|
|
|
|
|
|
|
|
Amounts relating to the changes in
liabilities for remaining coverage:
|
|
|
|
|
|
|
|
|
Contractual service margin
recognised for services provided
|
216
|
|
|
160
|
|
|
169
|
|
Change in risk adjustments for
non-financial risk for risk expired
|
27
|
|
|
30
|
|
|
54
|
|
Expected incurred claims and other
insurance services expenses
|
977
|
|
|
955
|
|
|
952
|
|
Charges to funds in respect of
policyholder tax and other
|
68
|
|
|
20
|
|
|
67
|
|
|
1,288
|
|
|
1,165
|
|
|
1,242
|
|
Recovery of insurance acquisition
cash flows
|
56
|
|
|
40
|
|
|
47
|
|
Total life
|
1,344
|
|
|
1,205
|
|
|
1,289
|
|
|
|
|
|
|
|
|
|
|
Non-life
|
|
|
|
|
|
|
|
|
Total non-life
|
306
|
|
|
245
|
|
|
269
|
|
Total insurance revenue
|
1,650
|
|
|
1,450
|
|
|
1,558
|
|
|
|
|
|
|
|
|
|
|
Life
|
|
|
|
|
|
|
|
|
Incurred claims and other directly
attributable expenses
|
(961)
|
|
|
(966)
|
|
|
(931)
|
|
Changes that relate to past service:
adjustment to liabilities for incurred claims
|
3
|
|
|
(1)
|
|
|
1
|
|
Changes that relate to future
service: losses and reversal of losses on onerous
contracts
|
(46)
|
|
|
(26)
|
|
|
84
|
|
Amortisation of insurance
acquisition cash flows
|
(56)
|
|
|
(40)
|
|
|
(48)
|
|
Net impairment loss on insurance
acquisition assets
|
(8)
|
|
|
-
|
|
|
(7)
|
|
Total life
|
(1,068)
|
|
|
(1,033)
|
|
|
(901)
|
|
|
|
|
|
|
|
|
|
|
Non-life
|
|
|
|
|
|
|
|
|
Total non-life
|
(271)
|
|
|
(205)
|
|
|
(275)
|
|
Total insurance service expense
|
(1,339)
|
|
|
(1,238)
|
|
|
(1,176)
|
|
|
|
|
|
|
|
|
|
|
Net
(expense) income from reinsurance contracts held
|
(23)
|
|
|
11
|
|
|
(9)
|
|
|
|
|
|
|
|
|
|
|
Insurance service result
|
288
|
|
|
223
|
|
|
373
|
|
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 5: Insurance business (continued)
|
Half-year to 30 June
2024
|
|
Life
£m
|
|
|
Non-life
£m
|
|
|
Total
£m
|
|
|
|
|
|
|
|
|
|
|
Net
investment return on assets held to back insurance and
participating investment contracts (memorandum
item)1
|
6,482
|
|
|
20
|
|
|
6,502
|
|
|
|
|
|
|
|
|
|
|
Net finance expense from insurance
and participating investment contracts
|
(6,555)
|
|
|
(3)
|
|
|
(6,558)
|
|
Net finance income from reinsurance
contracts held
|
81
|
|
|
-
|
|
|
81
|
|
Net
finance expense from insurance, participating investment and
reinsurance contracts
|
(6,474)
|
|
|
(3)
|
|
|
(6,477)
|
|
|
|
|
|
|
|
|
|
|
|
Half-year
to 30 June 2023
|
|
Life
£m
|
|
|
Non-life
£m
|
|
|
Total
£m
|
|
|
|
|
|
|
|
|
|
|
Net investment return on assets held
to back insurance and participating
investment contracts (memorandum
item)1
|
3,542
|
|
|
28
|
|
|
3,570
|
|
|
|
|
|
|
|
|
|
|
Net finance expense from insurance
and participating investment contracts
|
(3,732)
|
|
|
(39)
|
|
|
(3,771)
|
|
Net finance income from reinsurance
contracts held
|
2
|
|
|
-
|
|
|
2
|
|
Net finance expense from insurance,
participating investment and reinsurance
contracts
|
(3,730)
|
|
|
(39)
|
|
|
(3,769)
|
|
|
|
|
|
|
|
|
|
|
|
Half-year
to 31 December 2023
|
|
Life
£m
|
|
|
Non-life
£m
|
|
|
Total
£m
|
|
|
|
|
|
|
|
|
|
|
Net investment return on assets held
to back insurance and participating investment contracts
(memorandum item)1
|
8,214
|
|
|
7
|
|
|
8,221
|
|
|
|
|
|
|
|
|
|
|
Net finance (expense) income from
insurance and participating investment contracts
|
(7,997)
|
|
|
33
|
|
|
(7,964)
|
|
Net finance income from reinsurance
contracts held
|
49
|
|
|
-
|
|
|
49
|
|
Net finance (expense) income from
insurance, participating investment and reinsurance
contracts
|
(7,948)
|
|
|
33
|
|
|
(7,915)
|
|
1 Net investment return on assets held to back insurance
contracts and participating investment contracts is reported within
net trading income on the face of the Group's income statement;
includes income of £6,951 million (half-year to 30 June 2023:
£3,781 million; half-year to 31 December 2023: £6,419 million)
in respect of unit-linked and with-profit contracts measured
applying the variable fee approach. The assets generating the
investment return held to back insurance contracts and
participating investment contracts are carried at fair value on the
Group's balance sheet.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 5: Insurance business (continued)
At
30 June 2024
|
Present
value
of future
cash flows
£m
|
Risk
adjustment1
£m
|
|
Contractual
service
margin2
£m
|
|
Other
£m
|
|
|
Total
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance contract assets
|
|
2
|
|
|
1
|
|
|
(2)
|
|
|
-
|
|
|
1
|
|
Liabilities arising from insurance
contracts and participating investment
contracts3,4
|
|
(119,421)
|
|
|
(1,139)
|
|
|
(4,467)
|
|
|
-
|
|
|
(125,027)
|
|
Insurance acquisition
assets
|
|
-
|
|
|
-
|
|
|
-
|
|
|
20
|
|
|
20
|
|
Net
liabilities
|
|
(119,419)
|
|
|
(1,138)
|
|
|
(4,469)
|
|
|
20
|
|
|
(125,006)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance contract assets
|
|
-
|
|
|
1
|
|
|
-
|
|
|
-
|
|
|
1
|
|
Liabilities arising from insurance
contracts and participating investment
contracts3,4
|
|
(114,555)
|
|
|
(1,178)
|
|
|
(4,415)
|
|
|
-
|
|
|
(120,148)
|
|
Insurance acquisition
assets
|
|
-
|
|
|
-
|
|
|
-
|
|
|
24
|
|
|
24
|
|
Net liabilities
|
|
(114,555)
|
|
|
(1,177)
|
|
|
(4,415)
|
|
|
24
|
|
|
(120,123)
|
|
1 The movement in the risk adjustment during the
half-year to 30 June 2024 included £34 million, net of reinsurance,
arising on the initial recognition of contracts issued in the
period (half-year to 30 June 2023: £42 million; half-year to 31
December 2023: £44 million).
2 The movement in the contractual service margin during
the half-year to 30 June 2024 included £27 million, net of
reinsurance, arising on the initial recognition of contracts issued
in the period (half-year to 30 June 2023: £56 million; half-year to
31 December 2023: £31 million).
3 Liabilities arising from insurance and participating
investment contracts substantially all relates to liability for
remaining coverage.
4 Excluding insurance acquisition assets.
On 13 March 2024, the Group entered
into a business transfer agreement with Rothesay Life plc for the
sale of the Group's bulk annuity business and to pursue the
transfer of associated business assets and assumed liabilities
under Part VII of the Financial Services and Markets Act 2000. A
reinsurance agreement between the Group and Rothesay Life plc was
signed on 30 April 2024 to materially de-risk the Group's bulk
annuity portfolio. The Part VII process is subject to approval by
the High Court, through a process in which regulators and
policyholders are given the opportunity to object. The Group
currently expects the Part VII to take place in the second half of
2025.
Upon entering into the reinsurance
agreement, the Group derecognised £5.3 billion of financial assets
which represents the reinsurance premium paid and at 30 April 2024
recognised a reinsurance contract asset of £5.3 billion, of which
£0.3 billion contractual service margin was recognised. The
reinsurance contract asset is presented on the Group's balance
sheet within other assets.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 6: Operating expenses
|
Half-year
to 30 Jun
2024
£m
|
|
|
Half-year
to 30
Jun
2023
£m
|
|
|
Half-year
to 31
Dec
2023
£m
|
|
|
|
|
|
|
|
|
|
|
Staff costs:
|
|
|
|
|
|
|
|
|
Salaries and social security
costs
|
1,914
|
|
|
1,695
|
|
|
1,956
|
|
Pensions and other post-retirement
benefit schemes (note 7)
|
276
|
|
|
153
|
|
|
202
|
|
Restructuring and other staff
costs
|
214
|
|
|
185
|
|
|
302
|
|
|
2,404
|
|
|
2,033
|
|
|
2,460
|
|
Premises and equipment
costs1
|
196
|
|
|
179
|
|
|
270
|
|
Depreciation and
amortisation
|
1,705
|
|
|
1,333
|
|
|
1,572
|
|
UK bank levy
|
-
|
|
|
-
|
|
|
150
|
|
Regulatory and legal provisions
(note 16)
|
95
|
|
|
70
|
|
|
605
|
|
Other
|
1,365
|
|
|
1,448
|
|
|
1,272
|
|
Operating expenses before adjustment for:
|
5,765
|
|
|
5,063
|
|
|
6,329
|
|
Amounts attributable to the
acquisition of insurance and participating investment
contracts
|
(88)
|
|
|
(82)
|
|
|
(101)
|
|
Amounts reported within insurance
service expenses
|
(225)
|
|
|
(207)
|
|
|
(179)
|
|
Total operating expenses
|
5,452
|
|
|
4,774
|
|
|
6,049
|
|
1 Net of
profits on disposal of operating lease assets of £37 million
(half-year to 30 June 2023: £67 million; half-year to 31 December
2023: £26 million).
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 7: Retirement benefit obligations
The Group's post-retirement defined
benefit scheme obligations are comprised as follows:
|
At 30 Jun
2024
£m
|
|
|
At 31 Dec
2023
£m
|
|
|
|
|
|
|
|
Defined benefit pension
schemes:
|
|
|
|
|
|
Present value of funded
obligations
|
(28,633)
|
|
|
(30,201)
|
|
Fair value of scheme
assets
|
31,924
|
|
|
33,733
|
|
Net pension scheme asset
|
3,291
|
|
|
3,532
|
|
Other post-retirement
schemes
|
(42)
|
|
|
(44)
|
|
Total amounts recognised in the balance
sheet
|
3,249
|
|
|
3,488
|
|
|
|
|
|
|
|
Recognised on the balance sheet
as:
|
|
|
|
|
|
Retirement benefit assets
|
3,379
|
|
|
3,624
|
|
Retirement benefit
obligations
|
(130)
|
|
|
(136)
|
|
Total amounts recognised in the balance
sheet
|
3,249
|
|
|
3,488
|
|
Movements in the Group's net
post-retirement defined benefit scheme asset during the period were
as follows:
|
£m
|
|
|
|
|
Asset at 1 January 2024
|
3,488
|
|
Income statement credit
|
21
|
|
Employer contributions
|
91
|
|
Remeasurement
|
(351)
|
|
Asset at 30 June 2024
|
3,249
|
|
The charge to the income statement
in respect of pensions and other post-retirement benefit schemes is
comprised as follows:
|
Half-year
to 30 Jun
2024
£m
|
|
|
Half-year
to 30
Jun
2023
£m
|
|
|
Half-year
to 31
Dec
2023
£m
|
|
|
|
|
|
|
|
|
|
|
Defined benefit schemes
|
(21)
|
|
|
(37)
|
|
|
(42)
|
|
Defined contribution
schemes
|
297
|
|
|
190
|
|
|
244
|
|
Total charge to the income statement
|
276
|
|
|
153
|
|
|
202
|
|
The principal assumptions used in
the valuations of the defined benefit pension schemes were as
follows:
|
At 30 Jun
2024
%
|
|
|
At 31 Dec
2023
%
|
|
|
|
|
|
|
|
Discount rate
|
5.18
|
|
|
4.70
|
|
Rate of inflation:
|
|
|
|
|
|
Retail Price Index (RPI)
|
3.08
|
|
|
2.96
|
|
Consumer Price Index
(CPI)
|
2.67
|
|
|
2.47
|
|
Rate of salary increases
|
0.00
|
|
|
0.00
|
|
Weighted-average rate of increase
for pensions in payment
|
2.90
|
|
|
2.73
|
|
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 8: Impairment
|
Half-year
to 30 Jun
2024
£m
|
|
|
Half-year
to 30
Jun
2023
£m
|
|
|
Half-year
to 31
Dec
2023
£m
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to
banks
|
(5)
|
|
|
(3)
|
|
|
(4)
|
|
Loans and advances to
customers
|
161
|
|
|
667
|
|
|
(346)
|
|
Debt securities
|
(3)
|
|
|
2
|
|
|
(1)
|
|
Financial assets held at amortised
cost
|
153
|
|
|
666
|
|
|
(351)
|
|
Financial assets at fair value
through other comprehensive income
|
(2)
|
|
|
(3)
|
|
|
1
|
|
Other assets
|
(8)
|
|
|
(2)
|
|
|
(8)
|
|
Loan commitments and financial
guarantees
|
(43)
|
|
|
1
|
|
|
(1)
|
|
Total impairment charge (credit)
|
100
|
|
|
662
|
|
|
(359)
|
|
There was a £10 million charge in
respect of residual value impairment and voluntary terminations
within the Group's UK Motor Finance business in the current period
(half-year to 30 June 2023: £27 million; half-year to
31 December 2023: £46 million).
Note 9: Tax
In accordance with IAS 34, the
Group's income tax expense for the half-year to 30 June 2024 is
based on the best estimate of the weighted-average annual income
tax rate expected for the full financial year. The tax effects of
one-off items are not included in the weighted-average annual
income tax rate, but are recognised in the relevant
period.
An explanation of the relationship
between tax expense and accounting profit is set out
below:
|
Half-year
to 30 Jun
2024
£m
|
|
|
Half-year
to 30
Jun
2023
£m
|
|
|
Half-year
to 31
Dec
2023
£m
|
|
|
|
|
|
|
|
|
|
|
Profit before tax
|
3,324
|
|
|
3,870
|
|
|
3,633
|
|
UK corporation tax thereon at 25.0
per cent (2023: 23.5 per cent)
|
(831)
|
|
|
(909)
|
|
|
(854)
|
|
Impact of surcharge on banking
profits
|
(83)
|
|
|
(141)
|
|
|
(164)
|
|
Non-deductible costs: conduct
charges
|
4
|
|
|
(2)
|
|
|
(27)
|
|
Non-deductible costs: bank
levy
|
-
|
|
|
-
|
|
|
(35)
|
|
Other non-deductible
costs
|
(39)
|
|
|
(80)
|
|
|
(26)
|
|
Non-taxable income
|
27
|
|
|
27
|
|
|
53
|
|
Tax relief on coupons on other
equity instruments
|
67
|
|
|
60
|
|
|
64
|
|
Tax-exempt gains on
disposals
|
33
|
|
|
27
|
|
|
8
|
|
Tax losses where no deferred tax
recognised
|
(2)
|
|
|
-
|
|
|
(2)
|
|
Remeasurement of deferred tax due to
rate changes
|
3
|
|
|
(8)
|
|
|
(6)
|
|
Differences in overseas tax
rates
|
-
|
|
|
5
|
|
|
1
|
|
Policyholder tax
|
(46)
|
|
|
(37)
|
|
|
(24)
|
|
Deferred tax asset in respect of
life assurance expenses
|
-
|
|
|
64
|
|
|
20
|
|
Adjustments in respect of prior
years
|
(12)
|
|
|
(11)
|
|
|
11
|
|
Tax effect of share of results of
joint ventures
|
(1)
|
|
|
(1)
|
|
|
2
|
|
Tax
expense
|
(880)
|
|
|
(1,006)
|
|
|
(979)
|
|
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 10: Fair values of financial assets and
liabilities
The valuations of financial
instruments have been classified into three levels according to the
quality and reliability of information used to determine those fair
values. Note 21 to the Group's financial statements for the year
ended 31 December 2023 details the definitions of the three
levels in the fair value hierarchy.
Financial instruments classified as
financial assets at fair value through profit or loss, derivative
financial instruments, financial assets at fair value through other
comprehensive income and financial liabilities at fair value
through profit or loss are recognised at fair value.
The Group manages valuation
adjustments for its derivative exposures on a net basis; the Group
determines their fair values on the basis of their net exposures.
In all other cases, fair values of financial assets and liabilities
measured at fair value are determined on the basis of their gross
exposures.
The following tables provide an
analysis of the financial assets and liabilities of the Group that
are carried at fair value in the Group's consolidated balance
sheet, grouped into levels 1 to 3 based on the degree to which the
fair value is observable. There were no significant transfers
between level 1 and level 2 during the period.
Financial assets
|
Level 1
£m
|
|
|
Level 2
£m
|
|
|
Level 3
£m
|
|
|
Total
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
30 June 2024
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets at fair value
through profit or loss:
|
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to
banks
|
-
|
|
|
3,405
|
|
|
-
|
|
|
3,405
|
|
Loans and advances to
customers
|
-
|
|
|
3,152
|
|
|
6,301
|
|
|
9,453
|
|
Reverse repurchase
agreements
|
-
|
|
|
19,816
|
|
|
-
|
|
|
19,816
|
|
Debt securities
|
10,589
|
|
|
24,999
|
|
|
2,286
|
|
|
37,874
|
|
Treasury and other bills
|
12
|
|
|
-
|
|
|
-
|
|
|
12
|
|
Contracts held with
reinsurers
|
-
|
|
|
11,838
|
|
|
-
|
|
|
11,838
|
|
Equity shares
|
125,181
|
|
|
-
|
|
|
1,560
|
|
|
126,741
|
|
Total financial assets at fair value
through profit or loss1
|
135,782
|
|
|
63,210
|
|
|
10,147
|
|
|
209,139
|
|
Financial assets at fair value
through other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities
|
14,059
|
|
|
13,432
|
|
|
51
|
|
|
27,542
|
|
Equity shares
|
-
|
|
|
-
|
|
|
305
|
|
|
305
|
|
Total financial assets at fair value
through other comprehensive income
|
14,059
|
|
|
13,432
|
|
|
356
|
|
|
27,847
|
|
Derivative financial
instruments
|
28
|
|
|
18,603
|
|
|
352
|
|
|
18,983
|
|
Total financial assets carried at fair value
|
149,869
|
|
|
95,245
|
|
|
10,855
|
|
|
255,969
|
|
1 Other financial assets mandatorily at fair value
through profit or loss include assets backing insurance contracts
and investment contracts of £178,559 million.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 10: Fair values of financial assets and
liabilities (continued)
Financial assets
|
Level
1
£m
|
|
|
Level
2
£m
|
|
|
Level
3
£m
|
|
|
Total
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2023
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets at fair value
through profit or loss:
|
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to
banks
|
-
|
|
|
3,127
|
|
|
-
|
|
|
3,127
|
|
Loans and advances to
customers
|
-
|
|
|
2,015
|
|
|
7,890
|
|
|
9,905
|
|
Reverse repurchase
agreements
|
-
|
|
|
17,413
|
|
|
-
|
|
|
17,413
|
|
Debt securities
|
11,611
|
|
|
28,802
|
|
|
2,250
|
|
|
42,663
|
|
Treasury and other bills
|
51
|
|
|
-
|
|
|
-
|
|
|
51
|
|
Contracts held with
reinsurers
|
-
|
|
|
11,424
|
|
|
-
|
|
|
11,424
|
|
Equity shares
|
117,194
|
|
|
-
|
|
|
1,541
|
|
|
118,735
|
|
Total financial assets at fair value
through profit or loss1
|
128,856
|
|
|
62,781
|
|
|
11,681
|
|
|
203,318
|
|
Financial assets at fair value
through other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities
|
15,049
|
|
|
12,259
|
|
|
52
|
|
|
27,360
|
|
Equity shares
|
-
|
|
|
-
|
|
|
232
|
|
|
232
|
|
Total financial assets at fair value
through other comprehensive income
|
15,049
|
|
|
12,259
|
|
|
284
|
|
|
27,592
|
|
Derivative financial
instruments
|
77
|
|
|
21,857
|
|
|
422
|
|
|
22,356
|
|
Total financial assets carried at
fair value
|
143,982
|
|
|
96,897
|
|
|
12,387
|
|
|
253,266
|
|
1 Other financial assets mandatorily at fair value
through profit or loss include assets backing insurance contracts
and investment contracts of £176,475 million.
Financial liabilities
|
Level 1
£m
|
|
|
Level 2
£m
|
|
|
Level 3
£m
|
|
|
Total
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
30 June 2024
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities at fair value
through profit or loss:
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities in issue
|
-
|
|
|
4,897
|
|
|
23
|
|
|
4,920
|
|
Liabilities in respect of securities
sold under repurchase agreements
|
-
|
|
|
20,167
|
|
|
-
|
|
|
20,167
|
|
Short positions in
securities
|
1,920
|
|
|
9
|
|
|
-
|
|
|
1,929
|
|
Other
|
-
|
|
|
40
|
|
|
-
|
|
|
40
|
|
Total financial liabilities at fair
value through profit or loss
|
1,920
|
|
|
25,113
|
|
|
23
|
|
|
27,056
|
|
Derivative financial
instruments
|
28
|
|
|
16,246
|
|
|
373
|
|
|
16,647
|
|
Liabilities arising from
non-participating investment contracts
|
-
|
|
|
48,280
|
|
|
-
|
|
|
48,280
|
|
Total financial liabilities carried at fair
value
|
1,948
|
|
|
89,639
|
|
|
396
|
|
|
91,983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2023
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities at fair value
through profit or loss:
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities in issue
|
-
|
|
|
5,223
|
|
|
42
|
|
|
5,265
|
|
Liabilities in respect of securities
sold under repurchase agreements
|
-
|
|
|
18,057
|
|
|
-
|
|
|
18,057
|
|
Short positions in
securities
|
1,569
|
|
|
5
|
|
|
-
|
|
|
1,574
|
|
Other
|
-
|
|
|
18
|
|
|
-
|
|
|
18
|
|
Total financial liabilities at fair
value through profit or loss
|
1,569
|
|
|
23,303
|
|
|
42
|
|
|
24,914
|
|
Derivative financial
instruments
|
116
|
|
|
19,589
|
|
|
444
|
|
|
20,149
|
|
Liabilities arising from
non-participating investment contracts
|
-
|
|
|
44,978
|
|
|
-
|
|
|
44,978
|
|
Total financial liabilities carried
at fair value
|
1,685
|
|
|
87,870
|
|
|
486
|
|
|
90,041
|
|
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 10: Fair values of financial assets and
liabilities (continued)
Valuation control framework
Key elements of the valuation
control framework include model validation (incorporating pre-trade
and post-trade testing), product implementation review and
independent price verification. The framework covers processes for
all 3 levels in the fair value hierarchy. Formal committees
meet quarterly to discuss and approve valuations in more
judgemental areas.
Transfers into and out of level 3 portfolios
Transfers out of level 3 portfolios
arise when inputs that could have a significant impact on the
instrument's valuation become market observable; conversely,
transfers into the portfolios arise when sources of data cease to
be observable.
Valuation methodology
For level 2 and level 3 portfolios,
there is no significant change to the valuation methodology
(techniques and inputs) disclosed in the Group's financial
statements for the year ended 31 December 2023 applied to these
portfolios.
Movements in level 3 portfolio
The tables below analyse movements
in the level 3 financial assets portfolio.
|
Financial
assets at
fair value
through
profit or
loss
£m
|
|
Financial
assets at
fair value
through
other
comprehensive
income
£m
|
|
|
Derivative
assets
£m
|
|
|
Total
financial
assets
carried at
fair value
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2024
|
11,681
|
|
|
284
|
|
|
422
|
|
|
12,387
|
|
Exchange and other
adjustments
|
2
|
|
|
(1)
|
|
|
-
|
|
|
1
|
|
Gains (losses) recognised in the
income statement within other income
|
55
|
|
|
-
|
|
|
(54)
|
|
|
1
|
|
Gains recognised in other
comprehensive income within the revaluation reserve in respect of
financial assets at fair value through other comprehensive
income
|
-
|
|
|
74
|
|
|
-
|
|
|
74
|
|
Purchases/increases to customer
loans
|
335
|
|
|
-
|
|
|
6
|
|
|
341
|
|
Sales/repayments of customer
loans
|
(1,923)
|
|
|
(1)
|
|
|
(22)
|
|
|
(1,946)
|
|
Transfers into the level 3
portfolio
|
32
|
|
|
-
|
|
|
-
|
|
|
32
|
|
Transfers out of the level 3
portfolio
|
(35)
|
|
|
-
|
|
|
-
|
|
|
(35)
|
|
At
30 June 2024
|
10,147
|
|
|
356
|
|
|
352
|
|
|
10,855
|
|
Gains (losses) recognised in the
income statement, within other income, relating to the change in
fair
value of those assets held at 30
June 2024
|
54
|
|
|
-
|
|
|
(41)
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2023
|
11,304
|
|
|
342
|
|
|
553
|
|
|
12,199
|
|
Exchange and other
adjustments
|
(1)
|
|
|
(2)
|
|
|
(13)
|
|
|
(16)
|
|
Gains (losses) recognised in the
income statement within other income
|
104
|
|
|
4
|
|
|
(53)
|
|
|
55
|
|
Losses recognised in other
comprehensive income
within the revaluation reserve in
respect of financial assets at fair value through other
comprehensive income
|
-
|
|
|
(48)
|
|
|
-
|
|
|
(48)
|
|
Purchases/increases to customer
loans
|
347
|
|
|
-
|
|
|
40
|
|
|
387
|
|
Sales/repayments of customer
loans
|
(475)
|
|
|
(4)
|
|
|
(17)
|
|
|
(496)
|
|
Transfers into the level 3
portfolio
|
139
|
|
|
-
|
|
|
-
|
|
|
139
|
|
Transfers out of the level 3
portfolio
|
(4)
|
|
|
-
|
|
|
(3)
|
|
|
(7)
|
|
At 30 June 2023
|
11,414
|
|
|
292
|
|
|
507
|
|
|
12,213
|
|
Gains (losses) recognised in the
income statement, within other income, relating to the change in
fair
value of those assets held at 30
June 2023
|
79
|
|
|
2
|
|
|
(58)
|
|
|
23
|
|
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 10: Fair values of financial assets and
liabilities (continued)
The tables below analyse movements
in the level 3 financial liabilities portfolio.
|
Financial
liabilities
at fair
value
through
profit or
loss
£m
|
|
|
Derivative
liabilities
£m
|
|
|
Total
financial
liabilities
carried at
fair value
£m
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2024
|
42
|
|
|
444
|
|
|
486
|
|
Exchange and other
adjustments
|
-
|
|
|
-
|
|
|
-
|
|
Losses (gains) recognised in the
income statement within other income
|
2
|
|
|
(43)
|
|
|
(41)
|
|
Additions
|
-
|
|
|
5
|
|
|
5
|
|
Redemptions
|
(2)
|
|
|
(33)
|
|
|
(35)
|
|
Transfers into the level 3
portfolio
|
-
|
|
|
-
|
|
|
-
|
|
Transfers out of the level 3
portfolio
|
(19)
|
|
|
-
|
|
|
(19)
|
|
At
30 June 2024
|
23
|
|
|
373
|
|
|
396
|
|
Losses (gains) recognised in the
income statement, within other income,
relating to the change in fair
value of those liabilities held at 30 June 2024
|
2
|
|
|
(31)
|
|
|
(29)
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2023
|
45
|
|
|
608
|
|
|
653
|
|
Exchange and other
adjustments
|
-
|
|
|
(8)
|
|
|
(8)
|
|
Losses (gains) recognised in the
income statement within other income
|
1
|
|
|
(57)
|
|
|
(56)
|
|
Additions
|
-
|
|
|
31
|
|
|
31
|
|
Redemptions
|
(1)
|
|
|
(36)
|
|
|
(37)
|
|
Transfers into the level 3
portfolio
|
2
|
|
|
-
|
|
|
2
|
|
Transfers out of the level 3
portfolio
|
(1)
|
|
|
-
|
|
|
(1)
|
|
At 30 June 2023
|
46
|
|
|
538
|
|
|
584
|
|
Losses (gains) recognised in the
income statement, within other income,
relating to the change in fair
value of those liabilities held at 30 June 2023
|
1
|
|
|
(58)
|
|
|
(57)
|
|
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 10: Fair values of financial assets and
liabilities (continued)
Sensitivity of level 3 valuations
The tables below set out the
effects of reasonably possible alternative assumptions for
categories of level 3 financial assets and financial
liabilities.
|
|
|
|
|
Effect of
reasonably
possible
alternative
assumptions1
|
At
30 June 2024
|
Valuation
techniques
|
Significant
unobservable inputs2
|
Carrying
value
£m
|
|
Favourable
changes
£m
|
|
Unfavourable
changes
£m
|
|
|
|
|
|
|
|
|
|
|
Financial assets at fair value through profit or
loss
|
|
|
|
|
|
|
Loans and advances to
customers
|
Discounted cash flows
|
Interest rate spreads
(-127bps/+238bps)
|
6,301
|
|
277
|
|
(245)
|
|
Equity and venture capital
investments
|
Market approach
|
Earnings multiple
(1.6/17.8)
|
2,293
|
|
163
|
|
(163)
|
|
|
Underlying asset/net asset value
(incl. property prices)3
|
n/a
|
853
|
|
80
|
|
(95)
|
|
Unlisted equities, debt securities
and property partnerships in the life funds
|
Underlying asset/net asset value
(incl. property prices), broker quotes or discounted cash
flows3
|
n/a
|
297
|
|
2
|
|
(9)
|
|
Other
|
|
|
403
|
|
33
|
|
(33)
|
|
|
|
|
10,147
|
|
|
|
|
|
Financial assets at fair value through other comprehensive
income
|
|
|
|
|
|
|
Asset-backed securities
|
Lead manager or broker
quote/consensus pricing
|
n/a
|
51
|
|
2
|
|
(2)
|
|
Equity and venture capital
investments
|
Underlying asset/net asset value
(incl. property prices)3
|
n/a
|
305
|
|
29
|
|
(29)
|
|
|
|
|
356
|
|
|
|
|
|
Derivative financial assets
|
|
|
|
|
|
|
|
|
Interest rate derivatives
|
Option pricing model
|
Interest rate volatility
(13%/200%)
|
352
|
|
6
|
|
(3)
|
|
Level 3 financial assets carried at fair
value
|
|
10,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities at fair value through profit or
loss
|
23
|
|
1
|
|
(1)
|
|
Derivative financial liabilities
|
|
|
|
|
|
|
|
|
Interest rate derivatives
|
Option pricing model
|
Interest rate volatility
(13%/200%)
|
373
|
|
17
|
|
(18)
|
|
Level 3 financial liabilities carried at fair
value
|
|
396
|
|
|
|
|
|
1 Where the exposure to an unobservable input is managed
on a net basis, only the net impact is shown in the
table.
2 Ranges are shown where appropriate and represent the
highest and lowest inputs used in the level 3
valuations.
3 Underlying asset/net asset values represent fair
value.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 10: Fair values of financial assets and
liabilities (continued)
Sensitivity of level 3 valuations (continued)
|
|
|
|
|
Effect of
reasonably
possible
alternative
assumptions1
|
At 31 December 2023
|
Valuation
techniques
|
Significant
unobservable
inputs2
|
Carrying
value
£m
|
|
Favourable
changes
£m
|
|
Unfavourable changes
£m
|
|
|
|
|
|
|
|
|
|
|
Financial assets at fair value through profit or
loss
|
|
|
|
|
|
|
Loans and advances to
customers
|
Discounted cash flows
|
Interest rate spreads (-50bps/+272bps)
|
7,890
|
|
369
|
|
(351)
|
|
Equity and venture capital
investments
|
Market approach
|
Earnings multiple (1.6/17.8)
|
2,228
|
|
131
|
|
(131)
|
|
|
Underlying asset/net asset value
(incl. property prices)3
|
n/a
|
809
|
|
77
|
|
(99)
|
|
Unlisted equities, debt securities
and property partnerships in the life funds
|
Underlying asset/net asset value
(incl. property prices), broker quotes or discounted cash
flows3
|
n/a
|
309
|
|
7
|
|
(6)
|
|
Other
|
|
|
445
|
|
39
|
|
(41)
|
|
|
|
|
11,681
|
|
|
|
|
|
Financial assets at fair value through other comprehensive
income
|
|
|
|
|
|
|
Asset-backed securities
|
Lead manager or broker
quote/consensus pricing
|
n/a
|
52
|
|
2
|
|
(2)
|
|
Equity and venture capital
investments
|
Underlying asset/net asset value
(incl. property prices)3
|
n/a
|
232
|
|
22
|
|
(22)
|
|
|
|
|
284
|
|
|
|
|
|
Derivative financial assets
|
|
|
|
|
|
|
|
|
Interest rate derivatives
|
Option pricing model
|
Interest rate volatility
(13%/200%)
|
422
|
|
6
|
|
(3)
|
|
Level 3 financial assets carried at
fair value
|
|
12,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities at fair value through profit or
loss
|
42
|
|
1
|
|
(1)
|
|
Derivative financial liabilities
|
|
|
|
|
|
|
|
|
Interest rate derivatives
|
Option pricing model
|
Interest rate volatility
(13%/200%)
|
444
|
|
10
|
|
(7)
|
|
Level 3 financial liabilities
carried at fair value
|
|
486
|
|
|
|
|
|
1 Where the exposure to an unobservable input is managed
on a net basis, only the net impact is shown in the
table.
2 Ranges are shown where appropriate and represent the
highest and lowest inputs used in the level 3
valuations.
3 Underlying asset/net asset values represent fair
value.
Unobservable inputs
Significant unobservable inputs
affecting the valuation of debt securities, unlisted equity
investments and derivatives are unchanged from those described in
the Group's financial statements for the year ended 31 December
2023.
Reasonably possible alternative assumptions
Valuation techniques applied to many
of the Group's level 3 instruments often involve the use of two or
more inputs whose relationship is interdependent. The calculation
of the effect of reasonably possible alternative assumptions
included in the table above reflects such relationships and is
unchanged from that described in note 21 to the Group's financial
statements for the year ended 31 December 2023.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 10: Fair values of financial assets and
liabilities (continued)
The table below summarises the
carrying values of financial assets and liabilities measured at
amortised cost in the Group's consolidated balance sheet. The fair
values presented in the table are at a specific date and may be
significantly different from the amounts which will actually be
paid or received on the maturity or settlement date.
|
At 30 June
2024
|
|
At 31
December 2023
|
|
Carrying
value
£m
|
|
|
Fair
value
£m
|
|
|
Carrying
value
£m
|
|
|
Fair
value
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to
banks
|
8,454
|
|
|
8,454
|
|
|
10,764
|
|
|
10,764
|
|
Loans and advances to
customers
|
452,408
|
|
|
445,987
|
|
|
449,745
|
|
|
439,449
|
|
Reverse repurchase
agreements
|
49,404
|
|
|
49,404
|
|
|
38,771
|
|
|
38,771
|
|
Debt securities
|
15,432
|
|
|
14,753
|
|
|
15,355
|
|
|
15,139
|
|
Financial assets at amortised
cost
|
525,698
|
|
|
518,598
|
|
|
514,635
|
|
|
504,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Deposits from banks
|
5,584
|
|
|
5,578
|
|
|
6,153
|
|
|
6,153
|
|
Customer deposits
|
474,693
|
|
|
475,358
|
|
|
471,396
|
|
|
471,857
|
|
Repurchase agreements at amortised
cost
|
37,914
|
|
|
37,914
|
|
|
37,703
|
|
|
37,703
|
|
Debt securities in issue
|
74,760
|
|
|
75,226
|
|
|
75,592
|
|
|
75,021
|
|
Subordinated liabilities
|
10,448
|
|
|
10,988
|
|
|
10,253
|
|
|
10,345
|
|
The carrying amount of the following
financial instruments is a reasonable approximation of fair value:
cash and balances at central banks, items in the course of
collection from banks, items in course of transmission to banks and
notes in circulation.
Note 11: Derivative financial instruments
|
At 30 June
2024
|
|
At 31
December 2023
|
|
Fair value
of assets
£m
|
|
Fair value
of
liabilities
£m
|
|
|
Fair
value
of
assets
£m
|
|
|
Fair
value
of
liabilities
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading and other
|
|
|
|
|
|
|
|
|
|
|
|
Exchange rate contracts
|
5,118
|
|
|
4,580
|
|
|
6,631
|
|
|
6,222
|
|
Interest rate contracts
|
13,538
|
|
|
11,146
|
|
|
15,116
|
|
|
12,724
|
|
Credit derivatives
|
74
|
|
|
146
|
|
|
51
|
|
|
118
|
|
Equity and other
contracts
|
228
|
|
|
334
|
|
|
455
|
|
|
580
|
|
|
18,958
|
|
|
16,206
|
|
|
22,253
|
|
|
19,644
|
|
Hedging
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as fair value
hedges
|
4
|
|
|
422
|
|
|
83
|
|
|
425
|
|
Derivatives designated as cash flow
hedges
|
21
|
|
|
19
|
|
|
20
|
|
|
80
|
|
|
25
|
|
|
441
|
|
|
103
|
|
|
505
|
|
Total recognised derivative
assets/liabilities
|
18,983
|
|
|
16,647
|
|
|
22,356
|
|
|
20,149
|
|
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 12: Loans and advances to customers
Half-year to 30 June 2024
|
Gross carrying
amount
|
|
Allowance for expected credit
losses
|
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 1 January 2024
|
385,294
|
|
|
53,167
|
|
|
7,147
|
|
|
7,854
|
|
|
453,462
|
|
|
900
|
|
|
1,467
|
|
|
1,137
|
|
|
213
|
|
|
3,717
|
|
Exchange and other
adjustments1
|
(1,219)
|
|
|
(12)
|
|
|
(17)
|
|
|
7
|
|
|
(1,241)
|
|
|
(6)
|
|
|
(6)
|
|
|
10
|
|
|
23
|
|
|
21
|
|
Transfers to Stage 1
|
16,778
|
|
|
(16,708)
|
|
|
(70)
|
|
|
|
|
|
-
|
|
|
276
|
|
|
(271)
|
|
|
(5)
|
|
|
|
|
|
-
|
|
Transfers to Stage 2
|
(11,068)
|
|
|
11,546
|
|
|
(478)
|
|
|
|
|
|
-
|
|
|
(56)
|
|
|
116
|
|
|
(60)
|
|
|
|
|
|
-
|
|
Transfers to Stage 3
|
(508)
|
|
|
(1,728)
|
|
|
2,236
|
|
|
|
|
|
-
|
|
|
(8)
|
|
|
(157)
|
|
|
165
|
|
|
|
|
|
-
|
|
Net change in ECL
due to transfers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(185)
|
|
|
257
|
|
|
169
|
|
|
|
|
|
241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
|
|
|
(55)
|
|
|
269
|
|
|
|
|
|
241
|
|
Impact of transfers between
stages
|
5,202
|
|
|
(6,890)
|
|
|
1,688
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other changes in credit
quality2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(139)
|
|
|
(50)
|
|
|
331
|
|
|
32
|
|
|
174
|
|
Additions and repayments
|
9,424
|
|
|
(3,150)
|
|
|
(828)
|
|
|
(418)
|
|
|
5,028
|
|
|
(9)
|
|
|
(101)
|
|
|
(115)
|
|
|
(29)
|
|
|
(254)
|
|
Charge (credit) to the income
statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(121)
|
|
|
(206)
|
|
|
485
|
|
|
3
|
|
|
161
|
|
Disposals and
derecognition3
|
(449)
|
|
|
(206)
|
|
|
(88)
|
|
|
(219)
|
|
|
(962)
|
|
|
(1)
|
|
|
(4)
|
|
|
(7)
|
|
|
(8)
|
|
|
(20)
|
|
Advances written off
|
|
|
|
|
|
|
(618)
|
|
|
(6)
|
|
|
(624)
|
|
|
|
|
|
|
|
|
(618)
|
|
|
(6)
|
|
|
(624)
|
|
Recoveries of advances written off
in previous years
|
|
|
|
|
|
|
69
|
|
|
-
|
|
|
69
|
|
|
|
|
|
|
|
|
69
|
|
|
-
|
|
|
69
|
|
At
30 June 2024
|
398,252
|
|
|
42,909
|
|
|
7,353
|
|
|
7,218
|
|
|
455,732
|
|
|
772
|
|
|
1,251
|
|
|
1,076
|
|
|
225
|
|
|
3,324
|
|
Allowance for
expected credit losses
|
(772)
|
|
|
(1,251)
|
|
|
(1,076)
|
|
|
(225)
|
|
|
(3,324)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
carrying amount
|
397,480
|
|
|
41,658
|
|
|
6,277
|
|
|
6,993
|
|
|
452,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Drawn ECL coverage4
|
0.2 %
|
|
|
2.9
%
|
|
|
14.6
%
|
|
|
3.1
%
|
|
|
0.7 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Exchange and other adjustments includes the impact of
movements in exchange rates, discount unwind, derecognising assets
as a result of modifications and adjustments in respect of
purchased or originated credit-impaired financial assets (POCI).
Where a POCI asset's expected credit loss is less than its expected
credit loss on purchase or origination, the increase in its
carrying value is recognised within gross loans, rather than as a
negative impairment allowance.
2 Includes a credit for methodology and model changes of
£65 million, split by Stage as £26 million credit for Stage 1, £31
million credit for Stage 2, £4 million credit for Stage 3 and
£4 million credit for POCI.
3 Relates to the securitisation of legacy Retail
mortgages.
4 Allowance for expected credit losses on loans and
advances to customers as a percentage of gross loans and advances
to customers.
The total allowance for expected
credit losses includes £185 million (31 December 2023: £187
million) in respect of residual value impairment and voluntary
terminations within the Group's UK Motor Finance
business.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 12: Loans and advances to customers
(continued)
Year ended 31 December
2023
|
Gross
carrying amount
|
|
Allowance
for expected credit losses
|
|
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 1 January 2023
|
380,991
|
|
|
61,164
|
|
|
7,640
|
|
|
9,622
|
|
|
459,417
|
|
|
700
|
|
|
1,808
|
|
|
1,757
|
|
|
253
|
|
|
4,518
|
|
Exchange and other
adjustments1
|
1,830
|
|
|
(24)
|
|
|
(6)
|
|
|
18
|
|
|
1,818
|
|
|
(7)
|
|
|
(1)
|
|
|
105
|
|
|
67
|
|
|
164
|
|
Transfers to Stage 1
|
18,991
|
|
|
(18,953)
|
|
|
(38)
|
|
|
|
|
|
-
|
|
|
401
|
|
|
(393)
|
|
|
(8)
|
|
|
|
|
|
-
|
|
Transfers to Stage 2
|
(18,010)
|
|
|
18,592
|
|
|
(582)
|
|
|
|
|
|
-
|
|
|
(53)
|
|
|
121
|
|
|
(68)
|
|
|
|
|
|
-
|
|
Transfers to Stage 3
|
(1,216)
|
|
|
(2,507)
|
|
|
3,723
|
|
|
|
|
|
-
|
|
|
(13)
|
|
|
(223)
|
|
|
236
|
|
|
|
|
|
-
|
|
Net change in ECL
due to transfers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(260)
|
|
|
402
|
|
|
312
|
|
|
|
|
|
454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75
|
|
|
(93)
|
|
|
472
|
|
|
|
|
|
454
|
|
Impact of transfers between
stages
|
(235)
|
|
|
(2,868)
|
|
|
3,103
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other changes in credit
quality2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105
|
|
|
(103)
|
|
|
804
|
|
|
8
|
|
|
814
|
|
Additions and repayments
|
6,393
|
|
|
(4,213)
|
|
|
(2,353)
|
|
|
(1,043)
|
|
|
(1,216)
|
|
|
81
|
|
|
(85)
|
|
|
(862)
|
|
|
(81)
|
|
|
(947)
|
|
Charge (credit) to the income
statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
261
|
|
|
(281)
|
|
|
414
|
|
|
(73)
|
|
|
321
|
|
Disposals and
derecognition3
|
(3,685)
|
|
|
(892)
|
|
|
(122)
|
|
|
(743)
|
|
|
(5,442)
|
|
|
(54)
|
|
|
(59)
|
|
|
(24)
|
|
|
(34)
|
|
|
(171)
|
|
Advances written off
|
|
|
|
|
|
|
(1,231)
|
|
|
-
|
|
|
(1,231)
|
|
|
|
|
|
|
|
|
(1,231)
|
|
|
-
|
|
|
(1,231)
|
|
Recoveries of advances written off
in previous years
|
|
|
|
|
|
|
116
|
|
|
-
|
|
|
116
|
|
|
|
|
|
|
|
|
116
|
|
|
-
|
|
|
116
|
|
At 31 December 2023
|
385,294
|
|
|
53,167
|
|
|
7,147
|
|
|
7,854
|
|
|
453,462
|
|
|
900
|
|
|
1,467
|
|
|
1,137
|
|
|
213
|
|
|
3,717
|
|
Allowance for
expected credit losses
|
(900)
|
|
|
(1,467)
|
|
|
(1,137)
|
|
|
(213)
|
|
|
(3,717)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount
|
384,394
|
|
|
51,700
|
|
|
6,010
|
|
|
7,641
|
|
|
449,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Drawn ECL coverage4
|
0.2
%
|
|
|
2.8
%
|
|
|
15.9 %
|
|
|
2.7
%
|
|
|
0.8
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Exchange and other adjustments includes the impact of
movements in exchange rates, discount unwind, derecognising assets
as a result of modifications and adjustments in respect of
purchased or originated credit-impaired financial assets (POCI).
Where a POCI asset's expected credit loss is less than its expected
credit loss on purchase or origination, the increase in its
carrying value is recognised within gross loans, rather than as a
negative impairment allowance.
2 Includes a charge for methodology and model changes of
£60 million, split by Stage as £96 million charge for Stage 1, £33
million credit for Stage 2, £1 million credit for Stage 3 and £2
million credit for POCI.
3 Relates to the securitisations of legacy Retail
mortgages and Retail unsecured loans.
4 Allowance for expected credit losses on loans and
advances to customers as a percentage of gross loans and advances
to customers.
The movement tables are compiled by
comparing the position at the end of the period to that at the
beginning of the year. Transfers between stages are deemed to have
taken place at the start of the reporting period, with all other
movements shown in the stage in which the asset is held at the end
of the period. Purchased or originated credit-impaired are not
transferable.
Additions and repayments comprise
new loans originated and repayments of outstanding balances
throughout the reporting period.
The Group's impairment charge
comprises impact of transfers between stages, other changes in
credit quality and additions and repayments.
Advances written off have first been
transferred to Stage 3 and then acquired a full allowance through
other changes in credit quality. Recoveries of advances written off
in previous years are shown at the full recovered value, with a
corresponding entry in repayments and release of allowance through
other changes in credit quality.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 13: Credit quality of loans and advances to
customers
|
|
Gross drawn
exposures
|
|
Allowance for expected credit
losses
|
At
30 June 2024
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail - UK mortgages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMS 1-3
|
|
245,910
|
|
|
8,272
|
|
|
-
|
|
|
-
|
|
|
254,182
|
|
|
54
|
|
|
51
|
|
|
-
|
|
|
-
|
|
|
105
|
|
RMS 4-6
|
|
20,300
|
|
|
15,522
|
|
|
-
|
|
|
-
|
|
|
35,822
|
|
|
26
|
|
|
109
|
|
|
-
|
|
|
-
|
|
|
135
|
|
RMS 7-9
|
|
98
|
|
|
2,001
|
|
|
-
|
|
|
-
|
|
|
2,099
|
|
|
1
|
|
|
35
|
|
|
-
|
|
|
-
|
|
|
36
|
|
RMS 10
|
|
-
|
|
|
973
|
|
|
-
|
|
|
-
|
|
|
973
|
|
|
-
|
|
|
23
|
|
|
-
|
|
|
-
|
|
|
23
|
|
RMS 11-13
|
|
-
|
|
|
3,074
|
|
|
-
|
|
|
-
|
|
|
3,074
|
|
|
-
|
|
|
108
|
|
|
-
|
|
|
-
|
|
|
108
|
|
RMS 14
|
|
-
|
|
|
-
|
|
|
4,542
|
|
|
7,218
|
|
|
11,760
|
|
|
-
|
|
|
-
|
|
|
331
|
|
|
225
|
|
|
556
|
|
|
|
266,308
|
|
|
29,842
|
|
|
4,542
|
|
|
7,218
|
|
|
307,910
|
|
|
81
|
|
|
326
|
|
|
331
|
|
|
225
|
|
|
963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail - credit cards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMS 1-3
|
|
4,665
|
|
|
3
|
|
|
-
|
|
|
-
|
|
|
4,668
|
|
|
9
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
9
|
|
RMS 4-6
|
|
7,357
|
|
|
1,185
|
|
|
-
|
|
|
-
|
|
|
8,542
|
|
|
85
|
|
|
56
|
|
|
-
|
|
|
-
|
|
|
141
|
|
RMS 7-9
|
|
1,303
|
|
|
918
|
|
|
-
|
|
|
-
|
|
|
2,221
|
|
|
52
|
|
|
116
|
|
|
-
|
|
|
-
|
|
|
168
|
|
RMS 10
|
|
4
|
|
|
166
|
|
|
-
|
|
|
-
|
|
|
170
|
|
|
-
|
|
|
35
|
|
|
-
|
|
|
-
|
|
|
35
|
|
RMS 11-13
|
|
-
|
|
|
329
|
|
|
-
|
|
|
-
|
|
|
329
|
|
|
-
|
|
|
117
|
|
|
-
|
|
|
-
|
|
|
117
|
|
RMS 14
|
|
-
|
|
|
-
|
|
|
290
|
|
|
-
|
|
|
290
|
|
|
-
|
|
|
-
|
|
|
133
|
|
|
-
|
|
|
133
|
|
|
|
13,329
|
|
|
2,601
|
|
|
290
|
|
|
-
|
|
|
16,220
|
|
|
146
|
|
|
324
|
|
|
133
|
|
|
-
|
|
|
603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail - UK unsecured loans and overdrafts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMS 1-3
|
|
855
|
|
|
1
|
|
|
-
|
|
|
-
|
|
|
856
|
|
|
2
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2
|
|
RMS 4-6
|
|
6,209
|
|
|
437
|
|
|
-
|
|
|
-
|
|
|
6,646
|
|
|
89
|
|
|
27
|
|
|
-
|
|
|
-
|
|
|
116
|
|
RMS 7-9
|
|
1,153
|
|
|
347
|
|
|
-
|
|
|
-
|
|
|
1,500
|
|
|
41
|
|
|
40
|
|
|
-
|
|
|
-
|
|
|
81
|
|
RMS 10
|
|
34
|
|
|
118
|
|
|
-
|
|
|
-
|
|
|
152
|
|
|
3
|
|
|
23
|
|
|
-
|
|
|
-
|
|
|
26
|
|
RMS 11-13
|
|
10
|
|
|
310
|
|
|
-
|
|
|
-
|
|
|
320
|
|
|
1
|
|
|
104
|
|
|
-
|
|
|
-
|
|
|
105
|
|
RMS 14
|
|
-
|
|
|
-
|
|
|
186
|
|
|
-
|
|
|
186
|
|
|
-
|
|
|
-
|
|
|
110
|
|
|
-
|
|
|
110
|
|
|
|
8,261
|
|
|
1,213
|
|
|
186
|
|
|
-
|
|
|
9,660
|
|
|
136
|
|
|
194
|
|
|
110
|
|
|
-
|
|
|
440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail - UK Motor Finance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMS 1-3
|
|
9,978
|
|
|
646
|
|
|
-
|
|
|
-
|
|
|
10,624
|
|
|
132
|
|
|
14
|
|
|
-
|
|
|
-
|
|
|
146
|
|
RMS 4-6
|
|
3,747
|
|
|
1,092
|
|
|
-
|
|
|
-
|
|
|
4,839
|
|
|
46
|
|
|
34
|
|
|
-
|
|
|
-
|
|
|
80
|
|
RMS 7-9
|
|
458
|
|
|
272
|
|
|
-
|
|
|
-
|
|
|
730
|
|
|
4
|
|
|
16
|
|
|
-
|
|
|
-
|
|
|
20
|
|
RMS 10
|
|
-
|
|
|
91
|
|
|
-
|
|
|
-
|
|
|
91
|
|
|
-
|
|
|
11
|
|
|
-
|
|
|
-
|
|
|
11
|
|
RMS 11-13
|
|
2
|
|
|
187
|
|
|
-
|
|
|
-
|
|
|
189
|
|
|
-
|
|
|
37
|
|
|
-
|
|
|
-
|
|
|
37
|
|
RMS 14
|
|
-
|
|
|
-
|
|
|
117
|
|
|
-
|
|
|
117
|
|
|
-
|
|
|
-
|
|
|
67
|
|
|
-
|
|
|
67
|
|
|
|
14,185
|
|
|
2,288
|
|
|
117
|
|
|
-
|
|
|
16,590
|
|
|
182
|
|
|
112
|
|
|
67
|
|
|
-
|
|
|
361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail - other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMS 1-3
|
|
14,153
|
|
|
250
|
|
|
-
|
|
|
-
|
|
|
14,403
|
|
|
3
|
|
|
4
|
|
|
-
|
|
|
-
|
|
|
7
|
|
RMS 4-6
|
|
2,200
|
|
|
167
|
|
|
-
|
|
|
-
|
|
|
2,367
|
|
|
10
|
|
|
10
|
|
|
-
|
|
|
-
|
|
|
20
|
|
RMS 7-9
|
|
-
|
|
|
90
|
|
|
-
|
|
|
-
|
|
|
90
|
|
|
-
|
|
|
5
|
|
|
-
|
|
|
-
|
|
|
5
|
|
RMS 10
|
|
-
|
|
|
5
|
|
|
-
|
|
|
-
|
|
|
5
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
RMS 11-13
|
|
81
|
|
|
10
|
|
|
-
|
|
|
-
|
|
|
91
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
RMS 14
|
|
-
|
|
|
-
|
|
|
163
|
|
|
-
|
|
|
163
|
|
|
-
|
|
|
-
|
|
|
45
|
|
|
-
|
|
|
45
|
|
|
|
16,434
|
|
|
522
|
|
|
163
|
|
|
-
|
|
|
17,119
|
|
|
13
|
|
|
19
|
|
|
45
|
|
|
-
|
|
|
77
|
|
Total Retail
|
|
318,517
|
|
|
36,466
|
|
|
5,298
|
|
|
7,218
|
|
|
367,499
|
|
|
558
|
|
|
975
|
|
|
686
|
|
|
225
|
|
|
2,444
|
|
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 13: Credit quality of loans and advances to
customers (continued)
|
|
Gross drawn
exposures
|
|
Allowance for expected credit
losses
|
At
30 June 2024
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Banking
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMS 1-5
|
|
23,261
|
|
|
6
|
|
|
-
|
|
|
-
|
|
|
23,267
|
|
|
3
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
3
|
|
CMS 6-10
|
|
20,029
|
|
|
63
|
|
|
-
|
|
|
-
|
|
|
20,092
|
|
|
14
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
14
|
|
CMS 11-14
|
|
32,843
|
|
|
2,133
|
|
|
-
|
|
|
-
|
|
|
34,976
|
|
|
127
|
|
|
29
|
|
|
-
|
|
|
-
|
|
|
156
|
|
CMS 15-18
|
|
4,286
|
|
|
3,610
|
|
|
-
|
|
|
-
|
|
|
7,896
|
|
|
70
|
|
|
190
|
|
|
-
|
|
|
-
|
|
|
260
|
|
CMS 19
|
|
32
|
|
|
631
|
|
|
-
|
|
|
-
|
|
|
663
|
|
|
-
|
|
|
57
|
|
|
-
|
|
|
-
|
|
|
57
|
|
CMS 20-23
|
|
-
|
|
|
-
|
|
|
2,055
|
|
|
-
|
|
|
2,055
|
|
|
-
|
|
|
-
|
|
|
390
|
|
|
-
|
|
|
390
|
|
|
|
80,451
|
|
|
6,443
|
|
|
2,055
|
|
|
-
|
|
|
88,949
|
|
|
214
|
|
|
276
|
|
|
390
|
|
|
-
|
|
|
880
|
|
Other1
|
|
(716)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(716)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Total loans and advances to customers
|
|
398,252
|
|
|
42,909
|
|
|
7,353
|
|
|
7,218
|
|
|
455,732
|
|
|
772
|
|
|
1,251
|
|
|
1,076
|
|
|
225
|
|
|
3,324
|
|
1 Gross drawn exposures include centralised fair value
hedge accounting adjustments.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 13: Credit quality of loans and advances to
customers (continued)
|
Gross
drawn exposures
|
|
Allowance
for expected credit losses
|
At 31 December 2023
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail - UK mortgages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMS 1-3
|
226,740
|
|
|
4,137
|
|
|
-
|
|
|
-
|
|
|
230,877
|
|
|
123
|
|
|
37
|
|
|
-
|
|
|
-
|
|
|
160
|
|
RMS 4-6
|
29,637
|
|
|
27,037
|
|
|
-
|
|
|
-
|
|
|
56,674
|
|
|
38
|
|
|
151
|
|
|
-
|
|
|
-
|
|
|
189
|
|
RMS 7-9
|
219
|
|
|
2,713
|
|
|
-
|
|
|
-
|
|
|
2,932
|
|
|
-
|
|
|
37
|
|
|
-
|
|
|
-
|
|
|
37
|
|
RMS 10
|
-
|
|
|
590
|
|
|
-
|
|
|
-
|
|
|
590
|
|
|
-
|
|
|
13
|
|
|
-
|
|
|
-
|
|
|
13
|
|
RMS 11-13
|
-
|
|
|
4,056
|
|
|
-
|
|
|
-
|
|
|
4,056
|
|
|
-
|
|
|
136
|
|
|
-
|
|
|
-
|
|
|
136
|
|
RMS 14
|
-
|
|
|
-
|
|
|
4,337
|
|
|
7,854
|
|
|
12,191
|
|
|
-
|
|
|
-
|
|
|
357
|
|
|
213
|
|
|
570
|
|
|
256,596
|
|
|
38,533
|
|
|
4,337
|
|
|
7,854
|
|
|
307,320
|
|
|
161
|
|
|
374
|
|
|
357
|
|
|
213
|
|
|
1,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail - credit cards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMS 1-3
|
3,906
|
|
|
5
|
|
|
-
|
|
|
-
|
|
|
3,911
|
|
|
9
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
9
|
|
RMS 4-6
|
7,159
|
|
|
1,248
|
|
|
-
|
|
|
-
|
|
|
8,407
|
|
|
91
|
|
|
65
|
|
|
-
|
|
|
-
|
|
|
156
|
|
RMS 7-9
|
1,548
|
|
|
1,069
|
|
|
-
|
|
|
-
|
|
|
2,617
|
|
|
67
|
|
|
145
|
|
|
-
|
|
|
-
|
|
|
212
|
|
RMS 10
|
12
|
|
|
220
|
|
|
-
|
|
|
-
|
|
|
232
|
|
|
1
|
|
|
50
|
|
|
-
|
|
|
-
|
|
|
51
|
|
RMS 11-13
|
-
|
|
|
366
|
|
|
-
|
|
|
-
|
|
|
366
|
|
|
-
|
|
|
141
|
|
|
-
|
|
|
-
|
|
|
141
|
|
RMS 14
|
-
|
|
|
-
|
|
|
284
|
|
|
-
|
|
|
284
|
|
|
-
|
|
|
-
|
|
|
130
|
|
|
-
|
|
|
130
|
|
|
12,625
|
|
|
2,908
|
|
|
284
|
|
|
-
|
|
|
15,817
|
|
|
168
|
|
|
401
|
|
|
130
|
|
|
-
|
|
|
699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail - UK unsecured loans and overdrafts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMS 1-3
|
638
|
|
|
1
|
|
|
-
|
|
|
-
|
|
|
639
|
|
|
1
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1
|
|
RMS 4-6
|
5,152
|
|
|
250
|
|
|
-
|
|
|
-
|
|
|
5,402
|
|
|
83
|
|
|
18
|
|
|
-
|
|
|
-
|
|
|
101
|
|
RMS 7-9
|
1,256
|
|
|
473
|
|
|
-
|
|
|
-
|
|
|
1,729
|
|
|
44
|
|
|
50
|
|
|
-
|
|
|
-
|
|
|
94
|
|
RMS 10
|
43
|
|
|
135
|
|
|
-
|
|
|
-
|
|
|
178
|
|
|
4
|
|
|
27
|
|
|
-
|
|
|
-
|
|
|
31
|
|
RMS 11-13
|
14
|
|
|
328
|
|
|
-
|
|
|
-
|
|
|
342
|
|
|
2
|
|
|
113
|
|
|
-
|
|
|
-
|
|
|
115
|
|
RMS 14
|
-
|
|
|
-
|
|
|
196
|
|
|
-
|
|
|
196
|
|
|
-
|
|
|
-
|
|
|
118
|
|
|
-
|
|
|
118
|
|
|
7,103
|
|
|
1,187
|
|
|
196
|
|
|
-
|
|
|
8,486
|
|
|
134
|
|
|
208
|
|
|
118
|
|
|
-
|
|
|
460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail - UK Motor Finance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMS 1-3
|
9,979
|
|
|
569
|
|
|
-
|
|
|
-
|
|
|
10,548
|
|
|
142
|
|
|
12
|
|
|
-
|
|
|
-
|
|
|
154
|
|
RMS 4-6
|
2,791
|
|
|
998
|
|
|
-
|
|
|
-
|
|
|
3,789
|
|
|
41
|
|
|
29
|
|
|
-
|
|
|
-
|
|
|
70
|
|
RMS 7-9
|
769
|
|
|
228
|
|
|
-
|
|
|
-
|
|
|
997
|
|
|
3
|
|
|
13
|
|
|
-
|
|
|
-
|
|
|
16
|
|
RMS 10
|
-
|
|
|
63
|
|
|
-
|
|
|
-
|
|
|
63
|
|
|
-
|
|
|
7
|
|
|
-
|
|
|
-
|
|
|
7
|
|
RMS 11-13
|
2
|
|
|
169
|
|
|
-
|
|
|
-
|
|
|
171
|
|
|
-
|
|
|
30
|
|
|
-
|
|
|
-
|
|
|
30
|
|
RMS 14
|
-
|
|
|
-
|
|
|
112
|
|
|
-
|
|
|
112
|
|
|
-
|
|
|
-
|
|
|
63
|
|
|
-
|
|
|
63
|
|
|
13,541
|
|
|
2,027
|
|
|
112
|
|
|
-
|
|
|
15,680
|
|
|
186
|
|
|
91
|
|
|
63
|
|
|
-
|
|
|
340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail - other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMS 1-3
|
13,613
|
|
|
240
|
|
|
-
|
|
|
-
|
|
|
13,853
|
|
|
3
|
|
|
4
|
|
|
-
|
|
|
-
|
|
|
7
|
|
RMS 4-6
|
2,197
|
|
|
186
|
|
|
-
|
|
|
-
|
|
|
2,383
|
|
|
16
|
|
|
13
|
|
|
-
|
|
|
-
|
|
|
29
|
|
RMS 7-9
|
-
|
|
|
86
|
|
|
-
|
|
|
-
|
|
|
86
|
|
|
-
|
|
|
4
|
|
|
-
|
|
|
-
|
|
|
4
|
|
RMS 10
|
-
|
|
|
6
|
|
|
-
|
|
|
-
|
|
|
6
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
RMS 11-13
|
88
|
|
|
7
|
|
|
-
|
|
|
-
|
|
|
95
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
RMS 14
|
-
|
|
|
-
|
|
|
144
|
|
|
-
|
|
|
144
|
|
|
-
|
|
|
-
|
|
|
47
|
|
|
-
|
|
|
47
|
|
|
15,898
|
|
|
525
|
|
|
144
|
|
|
-
|
|
|
16,567
|
|
|
19
|
|
|
21
|
|
|
47
|
|
|
-
|
|
|
87
|
|
Total Retail
|
305,763
|
|
|
45,180
|
|
|
5,073
|
|
|
7,854
|
|
|
363,870
|
|
|
668
|
|
|
1,095
|
|
|
715
|
|
|
213
|
|
|
2,691
|
|
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 13: Credit quality of loans and advances to
customers (continued)
|
Gross
drawn exposures
|
|
Allowance
for expected credit losses
|
At 31 December 2023
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Banking
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMS 1-5
|
14,100
|
|
|
7
|
|
|
-
|
|
|
-
|
|
|
14,107
|
|
|
2
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2
|
|
CMS 6-10
|
30,534
|
|
|
124
|
|
|
-
|
|
|
-
|
|
|
30,658
|
|
|
32
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
32
|
|
CMS 11-14
|
31,210
|
|
|
2,927
|
|
|
-
|
|
|
-
|
|
|
34,137
|
|
|
133
|
|
|
59
|
|
|
-
|
|
|
-
|
|
|
192
|
|
CMS 15-18
|
3,719
|
|
|
4,115
|
|
|
-
|
|
|
-
|
|
|
7,834
|
|
|
65
|
|
|
232
|
|
|
-
|
|
|
-
|
|
|
297
|
|
CMS 19
|
11
|
|
|
814
|
|
|
-
|
|
|
-
|
|
|
825
|
|
|
-
|
|
|
81
|
|
|
-
|
|
|
-
|
|
|
81
|
|
CMS 20-23
|
-
|
|
|
-
|
|
|
2,068
|
|
|
-
|
|
|
2,068
|
|
|
-
|
|
|
-
|
|
|
418
|
|
|
-
|
|
|
418
|
|
|
79,574
|
|
|
7,987
|
|
|
2,068
|
|
|
-
|
|
|
89,629
|
|
|
232
|
|
|
372
|
|
|
418
|
|
|
-
|
|
|
1,022
|
|
Other1
|
(43)
|
|
|
-
|
|
|
6
|
|
|
-
|
|
|
(37)
|
|
|
-
|
|
|
-
|
|
|
4
|
|
|
-
|
|
|
4
|
|
Total loans and
advances to
customers
|
385,294
|
|
|
53,167
|
|
|
7,147
|
|
|
7,854
|
|
|
453,462
|
|
|
900
|
|
|
1,467
|
|
|
1,137
|
|
|
213
|
|
|
3,717
|
|
1 Gross drawn exposures include centralised fair value
hedge accounting adjustments.
Note 14: Allowance for expected credit
losses
The calculation of the Group's
allowance for expected credit loss allowances requires the Group to
make a number of judgements, assumptions and estimates. These are
set out in full in note 24 to the Group's financial statements for
the year ended 31 December 2023, with the most significant set
out below.
The table below analyses total ECL
allowance by portfolio, separately identifying the amounts that
have been modelled, those that have been individually assessed and
those arising through the application of judgemental
adjustments.
|
|
|
|
|
|
|
Judgemental
adjustments due
to:
|
|
|
|
At
30 June 2024
|
Modelled
ECL
£m
|
|
Individually
assessed
£m
|
|
Inflationary
and interest rate
risk
£m
|
|
Other
£m
|
|
|
Total
ECL
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK mortgages
|
806
|
|
|
-
|
|
|
23
|
|
|
142
|
|
|
971
|
|
Credit cards
|
679
|
|
|
-
|
|
|
6
|
|
|
15
|
|
|
700
|
|
Other Retail
|
878
|
|
|
-
|
|
|
6
|
|
|
58
|
|
|
942
|
|
Commercial Banking
|
992
|
|
|
322
|
|
|
-
|
|
|
(315)
|
|
|
999
|
|
Other
|
18
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
18
|
|
Total
|
3,373
|
|
|
322
|
|
|
35
|
|
|
(100)
|
|
|
3,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK mortgages
|
991
|
|
|
-
|
|
|
61
|
|
|
63
|
|
|
1,115
|
|
Credit cards
|
703
|
|
|
-
|
|
|
92
|
|
|
15
|
|
|
810
|
|
Other Retail
|
866
|
|
|
-
|
|
|
33
|
|
|
46
|
|
|
945
|
|
Commercial Banking
|
1,124
|
|
|
340
|
|
|
-
|
|
|
(282)
|
|
|
1,182
|
|
Other
|
32
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
32
|
|
Total
|
3,716
|
|
|
340
|
|
|
186
|
|
|
(158)
|
|
|
4,084
|
|
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 14: Allowance for expected credit losses
(continued)
Application of judgement in adjustments to modelled
ECL
Impairment models fall within the
Group's model risk framework with model monitoring, periodic
validation and back testing performed on model components, such as
probability of default. Limitations in the Group's impairment
models or data inputs may be identified through the ongoing
assessment and validation of the output of the models. In these
circumstances, management applies appropriate judgemental
adjustments to the ECL to ensure that the overall provision
adequately reflects all material risks. These adjustments are
determined by considering the particular attributes of exposures
which have not been adequately captured by the impairment models
and range from changes to model inputs and parameters, at account
level, through to more qualitative post-model
adjustments.
During 2022 and 2023 the
intensifying inflationary pressures, alongside rising interest
rates created further risks not deemed to be fully captured by ECL
models which required judgemental adjustments to be added. Through
the first half of 2024 these risks have largely subsided with
inflation back at two per cent and the UK Bank rate now believed to
have peaked. The portfolio has proven resilient to higher rates and
inflation. As a result, the judgements held in respect of
inflationary and interest rate risks are significantly reduced to
£35 million (31 December 2023: £186 million). Other
judgements continue to be applied for broader data and model
limitations, both increasing and decreasing ECL.
Judgemental adjustments due to inflationary and interest rate
risk
UK
mortgages: £23 million (31 December 2023: £61
million)
The Group's ECL models for UK
mortgages use UK Bank Rate as a driver of predicted defaults and
were largely believed to have captured the stretch on customers due
to increased interest rates. However, the combination of
inflationary pressures with sharp increases to interest rates over
2023 were believed to create further risk not potentially captured
by ECL models. Modest increases in new to arrears and defaults
emerged in 2023, mainly driven by variable rate customers, who
experienced sudden material increases in their monthly payment.
Given interest rates have stabilised, inflation has reduced and
experience through the first half of 2024 has been benign, this
risk has reduced. A lower judgemental uplift in ECL continues to be
taken in segments of the mortgages portfolio, either where
inflation is expected to present a more material risk, or where
segments within the model do not recognise UK Bank Rate as a
material driver of predicted defaults.
Credit cards: £6 million (31 December 2023: £92 million) and
Other Retail: £6 million (31 December 2023:
£33 million)
The Group's ECL models for credit
cards and personal loan portfolios use predictions of wage growth
to account for future affordability stress. As elevated inflation
eroded nominal wage growth, adjustments were introduced to the
econometric models to account for real, rather than nominal, income
to produce adjusted predicted defaults. This impact is heavily
reduced at 30 June 2024 given the model has moved into a period of
low inflation, which naturally reduces the scale of adjustments in
the period. Alongside these portfolio-wide in-model adjustments
management had previously made an additional uplift to ECL for
customers with lower income levels and higher indebtedness. This
specific post-model adjustment has been released in the first half
of 2024 given the improved environment and no evidence of greater
deterioration in performance of this segment.
Other judgemental adjustments
UK
mortgages: £142 million (31 December 2023: £63
million)
These adjustments principally
comprise:
Increase in time to repossession: £98 million (31 December
2023: £106 million)
The UK mortgage portfolio currently
contains a larger number of customers that have been in default for
a longer period than would typically be expected following pauses
in litigation activity both before and during COVID-19. There is a
risk that the probability of possession (PPD), and therefore ECL on
these accounts is understated given this component of the model may
not reflect the full impact of customers remaining in default for
an extended period. Adjustments for this risk have been in place
for several years, although the approach has been refined in the
first half of 2024. The updated approach continues to target
accounts that have been in default for more than 24 months with an
arrears balance increase in the last six months. These accounts now
have their PPD increased to a level based on equivalent observed
performance graduated by their time in default. The change in
approach has resulted in a similar level of adjustment, but now
provides a mechanism which will see the adjustment naturally
release as this backlog reduces.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 14: Allowance for expected credit losses
(continued)
Adjustment for single point of loss model limitation: £46
million (31 December 2023: £nil)
The current UK mortgages ECL model
estimates customer level losses using a 'single point of loss'
(SPOL) calculation, with predicted timings of defaults and
subsequent repossession using average time periods. This
simplification is continually assessed for any potential over or
understatement of ECL compared to a more sophisticated 'multiple
points of loss' (MPOL) modelling technique. To date, this has not
shown any material difference for which an adjustment would be
required. Management have been developing a new ECL model which
will address this limitation, anticipated to be formally adopted
later this year. However, the development activity is now suitably
progressed to be leveraged in the ongoing assessment of the scale
of the SPOL model simplification. This assessment indicated that
the MES update in the second quarter of the year had increased the
impact of the simplification up to a scale that required mitigation
through a judgemental adjustment. This adjustment is expected to be
released upon the final adoption of the new ECL model once it has
completed appropriate internal model governance
activities.
Credit cards: £15 million (31 December 2023: £15 million) and
Other Retail: £58 million (31 December 2023:
£46 million)
These adjustments principally
comprise:
Lifetime extension on revolving products: Credit cards: £60
million (31 December 2023: £67 million) and Other Retail: £10
million (31 December 2023: £10 million)
An adjustment is required to extend
the lifetime used for Stage 2 exposures on Retail revolving
products from a three-year modelled lifetime, which reflected the
outcome data available when the ECL models were developed, to a
more representative lifetime. Incremental defaults beyond year
three are calculated through the extrapolation of the default
trajectory observed throughout the three years and beyond. The
judgemental adjustment has reduced slightly for credit cards in the
period following refinement to the discounting methodology
applied.
Adjustments to loss given defaults (LGDs): Credit cards: £(50)
million (31 December 2023: £(50) million) and Other Retail: £18
million (31 December 2023: £37 million)
A number of adjustments continue to
be made to the loss given default assumptions used within unsecured
and motor credit models. For unsecured portfolios, the adjustments
reflect the impact of changes in collection debt sale strategy on
the Group's LGD models, incorporating up to date customer
performance and forward flow debt sale pricing. For UK Motor
Finance, the adjustment captures the latest outlook on used car
prices.
Commercial Banking: £(315) million (31 December 2023: £(282)
million)
These adjustments principally
comprise:
Commercial Real Estate (CRE) price reduction: £54 million (31
December 2023: £67 million)
The material fall in CRE prices seen
in late 2022 moved out of the model assumptions used to assess ECL
in 2023. Given the model uses future changes in the metric as a
driver of defaults and loss rates there is a continued risk that
the model benefit that arises does not reflect the residual risk
caused by the sustained low level of prices still apparent.
Management therefore considers it appropriate to judgementally
reinstate the CRE price drop within the ECL model assumptions given
the materially reduced level in CRE prices could still trigger
additional defaults. Within this adjustment management has refined
the potential impact on loss rates through capturing updated
valuations as well as stressing valuations on specific sectors
where evidence suggests valuations may lag achievable levels,
notably in cases of stressed sale.
Corporate insolvency rates: £(304) million (31 December 2023:
£(292) million)
The volume of UK corporate
insolvencies has continued to remain well above December 2019
levels, revealing a marked misalignment between observed UK
corporate insolvencies and the Group's credit performance which has
been better than this. This dislocation gives rise to uncertainty
over the drivers of observed trends and the appropriateness of the
Group's Commercial Banking model response which uses observed UK
corporate insolvencies data to anchor future loss estimates to.
Given the Group's asset quality remains strong with low new
defaults, a negative adjustment is applied by using the long-term
average rate. The slightly greater negative adjustment in the
period reflects the widening gap between the increasing industry
level and the long-term average rate used.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 14: Allowance for expected credit losses
(continued)
Adjustments for loss given defaults (LGDs): £(90) million (31
December 2023: £(105) million)
Following review and monitoring on
the loss given default approach for commercial exposures, ECL
requires an adjustment to mitigate limitations identified in the
approach which are causing loss given defaults to be inflated.
These include the benefit from amortisation of exposures relative
to collateral values at default and a move to an exposure-weighted
approach being adopted. These temporary adjustments will be
addressed through future model development.
Base case and MES economic assumptions
The Group's base case economic
scenario as at 30 June 2024 has been updated to reflect ongoing
geopolitical and economic developments, as the slow reduction of
inflationary pressures brings into view a shift to less restrictive
monetary policies globally. The Group's updated base case scenario
has three conditioning assumptions: first, the wars in Ukraine and
the Middle East remain geographically contained; second, the UK's
post-election economic policies retain the framework of the
inflation target and fiscal rules, while allowing for an increase
in both current and capital public spending; and third, the outcome
of the US election broadly maintains economic policy continuity,
including an unchanged position for the Federal Reserve.
Based on these assumptions and
incorporating the economic data published in the second quarter of
2024, the Group's base case scenario is for a gradual expansion of
economic activity and a slight rise in the unemployment rate,
alongside modest changes in residential and commercial property
prices. Following a gradual reduction in inflationary pressures, UK
Bank Rate is expected to be lowered twice during 2024. Risks around
this base case economic view lie in both directions and are largely
captured by the generation of alternative economic
scenarios.
The Group has taken into account the
latest available information at the reporting date in defining its
base case scenario and generating alternative economic scenarios.
The scenarios include forecasts for key variables in the second
quarter of 2024, for which actuals may have since emerged prior to
publication. The Group's base case economic scenario predated the
results of the UK General Election and, as such, information that
has become available since the election has not been
included.
The Group's approach to generating
alternative economic scenarios is set out in detail in note 24 to
the financial statements for the year ended 31 December 2023. The
Group has taken into account the latest available information at
the reporting date in defining its base case scenario and
generating alternative economic scenarios. A small refinement was
made to the Group's approach during the first half of 2024, with
alternative economic scenarios now dispersing from the base case
after the balance sheet date. This is one quarter later than
previously adopted reflecting the use of a base case that is now
set closer to the reporting date than at the onset of IFRS 9. As a
result, all scenarios include the same forecasted level for key
variables in the second quarter of 2024, for which actuals may have
since emerged prior to publication.
For June 2024, the Group continues
to judge it appropriate to include a non-modelled severe downside
scenario for Group ECL calculations. The scenario is now generated
as a simple average of a fully modelled severe scenario, better
representing shocks to demand, and a scenario with higher paths for
UK Bank Rate and CPI inflation, as a representation of shocks to
supply. The combined 'adjusted' scenario used in ECL modelling is
considered to better reflect the risks around the Group's base case
view in an economic environment where demand and supply shocks are
more balanced.
Scenarios by year
The key UK economic assumptions made
by the Group are shown in the following tables across a number of
measures explained below.
Annual assumptions
Gross domestic product (GDP) growth
and Consumer Price Index (CPI) inflation are presented as an annual
change, house price growth and commercial real estate price growth
are presented as the growth in the respective indices over each
year. Unemployment rate and UK Bank Rate are averages over the
year.
Five-year average
The five-year average reflects the
average annual growth rate, or level, over the five-year period. It
includes movements within the current reporting year, such that the
position as of 30 June 2024 covers the five years 2024 to 2028. The
inclusion of the reporting year within the five-year period
reflects the need to predict variables which remain unpublished at
the reporting date and recognises that credit models utilise both
level and annual changes. The use of calendar years maintains a
comparability between the annual assumptions presented.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 14: Allowance for expected credit losses
(continued)
At
30 June 2024
|
2024
%
|
2025
%
|
2026
%
|
2027
%
|
2028
%
|
2024
to 2028
average
%
|
|
|
|
|
|
|
|
Upside
|
|
|
|
|
|
|
Gross domestic product
growth
|
1.1
|
2.3
|
1.7
|
1.5
|
1.4
|
1.6
|
Unemployment rate
|
4.1
|
3.2
|
3.0
|
2.9
|
2.9
|
3.2
|
House price growth
|
2.2
|
5.0
|
7.3
|
6.0
|
5.2
|
5.1
|
Commercial real estate price
growth
|
2.2
|
8.7
|
2.4
|
2.8
|
1.2
|
3.4
|
UK Bank Rate
|
5.17
|
5.30
|
5.17
|
5.33
|
5.55
|
5.31
|
CPI inflation
|
2.5
|
2.5
|
2.4
|
2.7
|
2.9
|
2.6
|
|
|
|
|
|
|
|
Base case
|
|
|
|
|
|
|
Gross domestic product
growth
|
0.8
|
1.2
|
1.6
|
1.6
|
1.6
|
1.3
|
Unemployment rate
|
4.5
|
4.8
|
4.8
|
4.6
|
4.6
|
4.7
|
House price growth
|
1.2
|
1.4
|
1.0
|
1.4
|
2.4
|
1.5
|
Commercial real estate price
growth
|
(1.6)
|
1.2
|
0.0
|
1.9
|
1.0
|
0.5
|
UK Bank Rate
|
5.06
|
4.19
|
3.63
|
3.50
|
3.50
|
3.98
|
CPI inflation
|
2.5
|
2.5
|
2.1
|
2.1
|
2.2
|
2.3
|
|
|
|
|
|
|
|
Downside
|
|
|
|
|
|
|
Gross domestic product
growth
|
0.6
|
(0.5)
|
0.8
|
1.5
|
1.6
|
0.8
|
Unemployment rate
|
4.9
|
6.9
|
7.5
|
7.4
|
7.2
|
6.7
|
House price growth
|
0.6
|
(1.8)
|
(6.5)
|
(5.4)
|
(2.3)
|
(3.1)
|
Commercial real estate price
growth
|
(4.7)
|
(6.7)
|
(4.1)
|
(0.8)
|
(1.3)
|
(3.5)
|
UK Bank Rate
|
4.97
|
2.77
|
1.38
|
0.89
|
0.63
|
2.13
|
CPI inflation
|
2.5
|
2.4
|
1.8
|
1.4
|
1.2
|
1.9
|
|
|
|
|
|
|
|
Severe downside
|
|
|
|
|
|
|
Gross domestic product
growth
|
0.1
|
(2.2)
|
0.4
|
1.2
|
1.5
|
0.2
|
Unemployment rate
|
5.5
|
9.4
|
10.2
|
10.1
|
9.8
|
9.0
|
House price growth
|
(0.7)
|
(4.8)
|
(13.9)
|
(11.8)
|
(7.6)
|
(7.9)
|
Commercial real estate price
growth
|
(9.1)
|
(15.1)
|
(8.6)
|
(5.3)
|
(4.7)
|
(8.6)
|
UK Bank Rate - modelled
|
4.81
|
1.12
|
0.16
|
0.05
|
0.02
|
1.23
|
UK Bank Rate -
adjusted1
|
5.09
|
3.22
|
2.33
|
2.02
|
1.79
|
2.89
|
CPI inflation - modelled
|
2.6
|
2.4
|
1.3
|
0.5
|
0.1
|
1.4
|
CPI inflation -
adjusted1
|
2.9
|
3.2
|
1.6
|
0.9
|
1.0
|
1.9
|
|
|
|
|
|
|
|
Probability-weighted
|
|
|
|
|
|
|
Gross domestic product
growth
|
0.8
|
0.7
|
1.3
|
1.5
|
1.5
|
1.2
|
Unemployment rate
|
4.6
|
5.4
|
5.6
|
5.5
|
5.4
|
5.3
|
House price growth
|
1.1
|
0.9
|
(0.9)
|
(0.6)
|
0.8
|
0.3
|
Commercial real estate price
growth
|
(2.1)
|
(0.5)
|
(1.3)
|
0.6
|
(0.2)
|
(0.7)
|
UK Bank Rate - modelled
|
5.04
|
3.79
|
3.07
|
2.92
|
2.90
|
3.55
|
UK Bank Rate -
adjusted1
|
5.07
|
4.00
|
3.29
|
3.12
|
3.08
|
3.71
|
CPI inflation - modelled
|
2.5
|
2.5
|
2.1
|
1.9
|
1.9
|
2.2
|
CPI inflation -
adjusted1
|
2.6
|
2.6
|
2.1
|
1.9
|
2.0
|
2.2
|
1 The adjustment to UK Bank Rate and CPI inflation in the
severe downside is considered to better reflect the risks to the
Group's base case view in an economic environment where the risks
of supply and demand shocks are seen as more balanced.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 14: Allowance for expected credit losses
(continued)
At 31 December 2023
|
2023
%
|
2024
%
|
2025
%
|
2026
%
|
2027
%
|
2023
to 2027
average
%
|
|
|
|
|
|
|
|
Upside
|
|
|
|
|
|
|
Gross domestic product
growth
|
0.3
|
1.5
|
1.7
|
1.7
|
1.9
|
1.4
|
Unemployment rate
|
4.0
|
3.3
|
3.1
|
3.1
|
3.1
|
3.3
|
House price growth
|
1.9
|
0.8
|
6.9
|
7.2
|
6.8
|
4.7
|
Commercial real estate price
growth
|
(3.9)
|
9.0
|
3.8
|
1.3
|
1.3
|
2.2
|
UK Bank Rate
|
4.94
|
5.72
|
5.61
|
5.38
|
5.18
|
5.37
|
CPI inflation
|
7.3
|
2.7
|
3.1
|
3.2
|
3.1
|
3.9
|
|
|
|
|
|
|
|
Base case
|
|
|
|
|
|
|
Gross domestic product
growth
|
0.3
|
0.5
|
1.2
|
1.7
|
1.9
|
1.1
|
Unemployment rate
|
4.2
|
4.9
|
5.2
|
5.2
|
5.0
|
4.9
|
House price growth
|
1.4
|
(2.2)
|
0.5
|
1.6
|
3.5
|
1.0
|
Commercial real estate price
growth
|
(5.1)
|
(0.2)
|
0.1
|
0.0
|
0.8
|
(0.9)
|
UK Bank Rate
|
4.94
|
4.88
|
4.00
|
3.50
|
3.06
|
4.08
|
CPI inflation
|
7.3
|
2.7
|
2.9
|
2.5
|
2.2
|
3.5
|
|
|
|
|
|
|
|
Downside
|
|
|
|
|
|
|
Gross domestic product
growth
|
0.2
|
(1.0)
|
(0.1)
|
1.5
|
2.0
|
0.5
|
Unemployment rate
|
4.3
|
6.5
|
7.8
|
7.9
|
7.6
|
6.8
|
House price growth
|
1.3
|
(4.5)
|
(6.0)
|
(5.6)
|
(1.7)
|
(3.4)
|
Commercial real estate price
growth
|
(6.0)
|
(8.7)
|
(4.0)
|
(2.1)
|
(1.2)
|
(4.4)
|
UK Bank Rate
|
4.94
|
3.95
|
1.96
|
1.13
|
0.55
|
2.51
|
CPI inflation
|
7.3
|
2.8
|
2.7
|
1.8
|
1.1
|
3.2
|
|
|
|
|
|
|
|
Severe downside
|
|
|
|
|
|
|
Gross domestic product
growth
|
0.1
|
(2.3)
|
(0.5)
|
1.3
|
1.8
|
0.1
|
Unemployment rate
|
4.5
|
8.7
|
10.4
|
10.5
|
10.1
|
8.8
|
House price growth
|
0.6
|
(7.6)
|
(13.3)
|
(12.7)
|
(7.5)
|
(8.2)
|
Commercial real estate price
growth
|
(7.7)
|
(19.5)
|
(10.6)
|
(7.7)
|
(5.2)
|
(10.3)
|
UK Bank Rate - modelled
|
4.94
|
2.75
|
0.49
|
0.13
|
0.03
|
1.67
|
UK Bank Rate -
adjusted1
|
4.94
|
6.56
|
4.56
|
3.63
|
3.13
|
4.56
|
CPI inflation - modelled
|
7.3
|
2.7
|
2.2
|
0.9
|
(0.2)
|
2.6
|
CPI inflation -
adjusted1
|
7.6
|
7.5
|
3.5
|
1.3
|
1.0
|
4.2
|
|
|
|
|
|
|
|
Probability-weighted
|
|
|
|
|
|
|
Gross domestic product
growth
|
0.3
|
0.1
|
0.8
|
1.6
|
1.9
|
0.9
|
Unemployment rate
|
4.2
|
5.3
|
5.9
|
5.9
|
5.7
|
5.4
|
House price growth
|
1.4
|
(2.5)
|
(0.9)
|
(0.3)
|
1.8
|
(0.1)
|
Commercial real estate price
growth
|
(5.3)
|
(1.9)
|
(1.1)
|
(1.0)
|
(0.2)
|
(1.9)
|
UK Bank Rate - modelled
|
4.94
|
4.64
|
3.52
|
3.02
|
2.64
|
3.75
|
UK Bank Rate -
adjusted1
|
4.94
|
5.02
|
3.93
|
3.37
|
2.95
|
4.04
|
CPI inflation - modelled
|
7.3
|
2.7
|
2.8
|
2.3
|
1.9
|
3.4
|
CPI inflation -
adjusted1
|
7.4
|
3.2
|
3.0
|
2.4
|
2.0
|
3.6
|
1 The adjustment to UK Bank Rate and CPI inflation in the
severe downside was considered to better reflect the risks to the
Group's base case view in an economic environment where supply
shocks were the principal concern.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 14: Allowance for expected credit losses
(continued)
Base case scenario by quarter
Gross domestic product growth is
presented quarter-on-quarter. House price growth, commercial real
estate price growth and CPI inflation are presented year-on-year,
i.e. from the equivalent quarter in the previous year. Unemployment
rate and UK Bank Rate are presented as at the end of each
quarter.
At
30 June 2024
|
First
quarter
2024
%
|
Second
quarter
2024
%
|
Third
quarter
2024
%
|
Fourth
quarter
2024
%
|
First
quarter
2025
%
|
Second
quarter
2025
%
|
Third
quarter
2025
%
|
Fourth
quarter
2025
%
|
|
|
|
|
|
|
|
|
|
Gross domestic product
growth
|
0.6
|
0.4
|
0.3
|
0.2
|
0.3
|
0.3
|
0.4
|
0.4
|
Unemployment rate
|
4.3
|
4.5
|
4.6
|
4.7
|
4.8
|
4.9
|
4.9
|
4.8
|
House price growth
|
0.4
|
1.0
|
3.8
|
1.2
|
0.9
|
1.3
|
1.3
|
1.4
|
Commercial real estate price
growth
|
(5.3)
|
(5.3)
|
(3.5)
|
(1.6)
|
(0.9)
|
0.2
|
(0.2)
|
1.2
|
UK Bank Rate
|
5.25
|
5.25
|
5.00
|
4.75
|
4.50
|
4.25
|
4.00
|
4.00
|
CPI inflation
|
3.5
|
2.1
|
2.0
|
2.5
|
2.2
|
2.7
|
2.6
|
2.4
|
At 31 December 2023
|
First
quarter
2023
%
|
Second
quarter
2023
%
|
Third
quarter
2023
%
|
Fourth
quarter
2023
%
|
First
quarter
2024
%
|
Second
quarter
2024
%
|
Third
quarter
2024
%
|
Fourth
quarter
2024
%
|
|
|
|
|
|
|
|
|
|
Gross domestic product
growth
|
0.3
|
0.0
|
(0.1)
|
0.0
|
0.1
|
0.2
|
0.3
|
0.3
|
Unemployment rate
|
3.9
|
4.2
|
4.2
|
4.3
|
4.5
|
4.8
|
5.0
|
5.2
|
House price growth
|
1.6
|
(2.6)
|
(4.5)
|
1.4
|
(1.1)
|
(1.5)
|
0.5
|
(2.2)
|
Commercial real estate price
growth
|
(18.8)
|
(21.2)
|
(18.2)
|
(5.1)
|
(4.1)
|
(3.8)
|
(2.2)
|
(0.2)
|
UK Bank Rate
|
4.25
|
5.00
|
5.25
|
5.25
|
5.25
|
5.00
|
4.75
|
4.50
|
CPI inflation
|
10.2
|
8.4
|
6.7
|
4.0
|
3.8
|
2.1
|
2.3
|
2.8
|
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 14: Allowance for expected credit losses
(continued)
ECL sensitivity to economic assumptions
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 PD 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.
At
30 June 2024
|
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
|
|
ECL
allowance
|
|
3,630
|
|
|
2,587
|
|
|
3,162
|
|
|
4,114
|
|
|
6,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
ECL allowance
|
|
4,084
|
|
|
2,670
|
|
|
3,406
|
|
|
4,469
|
|
|
9,202
|
|
The sensitivity of ECL to isolated
changes in the UK unemployment rate and House Price Index (HPI) has
been assessed on a univariate basis. Although such changes would
not be observed in isolation, as economic indicators tend to be
correlated in a coherent scenario, this gives insight into the
sensitivity of the Group's ECL to gradual changes in these two
critical economic factors. The assessment has been made against the
base case with staging held flat to the reported
probability-weighted view and is assessed through the direct impact
on modelled ECL and therefore only includes judgemental adjustments
applied within the model.
The table below shows the impact on
the Group's ECL resulting from a 1 percentage point (pp) increase
or decrease in the UK unemployment rate. The increase or decrease
is presented based on the adjustment phased evenly over the first
10 quarters of the base case scenario. A more immediate increase or
decrease would drive a more material ECL impact as it would be
fully reflected in both 12-month and lifetime probability of
defaults.
|
At 30 June
2024
|
|
At 31
December 2023
|
1pp increase
in
unemployment
£m
|
|
1pp decrease
in
unemployment
£m
|
|
|
1pp
increase in
unemployment
£m
|
|
|
1pp
decrease in
unemployment
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK mortgages
|
22
|
|
|
(17)
|
|
|
33
|
|
|
(32)
|
|
Credit cards
|
34
|
|
|
(34)
|
|
|
38
|
|
|
(38)
|
|
Other Retail
|
16
|
|
|
(16)
|
|
|
19
|
|
|
(19)
|
|
Commercial Banking
|
73
|
|
|
(67)
|
|
|
88
|
|
|
(83)
|
|
ECL
impact
|
145
|
|
|
(134)
|
|
|
178
|
|
|
(172)
|
|
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 14: Allowance for expected credit losses
(continued)
The table below shows the impact on
the Group's ECL in respect of UK mortgages resulting from an
increase or decrease in loss given default for a 10 percentage
point (pp) increase or decrease in the UK HPI. The increase or
decrease is presented based on the adjustment phased evenly over
the first 10 quarters of the base case scenario.
|
At 30 June
2024
|
|
At 31
December 2023
|
|
10pp
increase
in HPI
£m
|
|
|
10pp
decrease
in HPI
£m
|
|
|
10pp
increase
in
HPI
£m
|
|
|
10pp
decrease
in
HPI
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ECL
impact
|
(164)
|
|
|
245
|
|
|
(201)
|
|
|
305
|
|
Note 15: Debt securities in issue
|
At 30 June
2024
|
|
At 31
December 2023
|
|
At
fair value
through
profit
or loss
£m
|
|
|
At
amortised
cost
£m
|
|
|
Total
£m
|
|
|
At
fair
value
through
profit
or
loss
£m
|
|
|
At
amortised
cost
£m
|
|
|
Total
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior unsecured notes
issued
|
4,897
|
|
|
40,380
|
|
|
45,277
|
|
|
5,242
|
|
|
37,038
|
|
|
42,280
|
|
Covered bonds
|
-
|
|
|
11,804
|
|
|
11,804
|
|
|
-
|
|
|
14,243
|
|
|
14,243
|
|
Commercial paper
|
-
|
|
|
10,555
|
|
|
10,555
|
|
|
-
|
|
|
12,041
|
|
|
12,041
|
|
Certificates of deposit
issued
|
-
|
|
|
7,056
|
|
|
7,056
|
|
|
-
|
|
|
8,059
|
|
|
8,059
|
|
Securitisation notes
|
23
|
|
|
4,965
|
|
|
4,988
|
|
|
23
|
|
|
4,211
|
|
|
4,234
|
|
|
4,920
|
|
|
74,760
|
|
|
79,680
|
|
|
5,265
|
|
|
75,592
|
|
|
80,857
|
|
Covered bonds and securitisation programmes
At 30 June 2024, the bonds held by
external parties and those held internally, were secured on certain
loans and advances to customers amounting to £28,529 million (31
December 2023: £27,019 million) which have been assigned to
bankruptcy remote limited liability partnerships to provide
security for issues of covered bonds by the Group. The Group
retains all of the risks and rewards associated with these loans
and the partnerships are consolidated fully with the loans retained
on the Group's balance sheet and the related covered bonds in issue
included within debt securities in issue at amortised
cost.
At 30 June 2024, the Group's
securitisation notes in issue held by external parties includes £23
million at fair value through profit or loss (31 December 2023: £23
million). Those notes held internally, are secured on loans and
advances to customers amounting to £28,454 million (31
December 2023: £30,716 million), the majority of which have been
sold by subsidiary companies to bankruptcy remote structured
entities. As the structured entities are funded by the issue of
debt on terms whereby the majority of the risks and rewards of the
portfolio are retained by the subsidiary, the structured entities
are consolidated fully and all of these loans are retained on the
Group's balance sheet, with the related notes in issue included
within debt securities in issue at amortised cost.
Cash deposits of £4,067 million (31
December 2023: £3,794 million) which support the debt securities
issued by the structured entities, the term advances related to
covered bonds and other legal obligations, are held by the
Group.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 16: Provisions
Provisions
for
financial
commitments
and
guarantees
£m1
|
|
|
Regulatory
and legal
provisions
£m
|
|
|
Other
£m
|
|
|
Total
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2024
|
322
|
|
|
1,105
|
|
|
650
|
|
|
2,077
|
|
Exchange and other
adjustments
|
-
|
|
|
(2)
|
|
|
(2)
|
|
|
(4)
|
|
Provisions applied
|
-
|
|
|
(216)
|
|
|
(263)
|
|
|
(479)
|
|
(Credit) charge for the
period
|
(43)
|
|
|
95
|
|
|
142
|
|
|
194
|
|
At
30 June 2024
|
279
|
|
|
982
|
|
|
527
|
|
|
1,788
|
|
1 In respect of loans and advances to
customers.
Regulatory and legal provisions
In the course of its business, the
Group is engaged on a regular basis in discussions with UK and
overseas regulators and other governmental authorities on a range
of matters, including legal and regulatory reviews and, from time
to time, enforcement investigations (including in relation to
compliance with applicable laws and regulations, such as those
relating to prudential regulation, consumer protection, investment
advice, business conduct, systems and controls, environmental,
competition/anti-trust, tax, anti-bribery, anti-money laundering
and sanctions). Any matters discussed or identified during such
discussions and inquiries may result in, among other things,
further inquiry or investigation, other action being taken by
governmental and/or regulatory authorities, increased costs being
incurred by the Group, remediation of systems and controls, public
or private censure, restriction of the Group's business activities
and/or fines. The Group also receives complaints in connection with
its past conduct and claims brought by or on behalf of current and
former employees, customers (including their appointed
representatives), investors and other third parties and is subject
to legal proceedings and other legal actions from time to time. Any
events or circumstances disclosed could have a material adverse
effect on the Group's financial position, operations or cash flows.
Provisions are held where the Group can reliably estimate a
probable outflow of economic resources. The ultimate liability of
the Group may be significantly more, or less, than the amount of
any provision recognised. If the Group is unable to determine a
reliable estimate, a contingent liability is disclosed. The
recognition of a provision does not amount to an admission of
liability or wrongdoing on the part of the Group. During the
half-year to 30 June 2024 the Group charged a further £95 million
in respect of legal actions and other regulatory matters and the
unutilised balance at 30 June 2024 was £982 million
(31 December 2023: £1,105 million). The most significant
items are outlined below.
Motor commission review
The Group recognised a £450 million
provision in the fourth quarter of 2023 for the potential impact of
the FCA review into historical motor finance commission
arrangements and sales announced in January 2024.
As disclosed in previous periods,
the Group continues to receive a number of court claims and
complaints in respect of motor finance commissions and is actively
engaging with the FOS in its assessment of these complaints. On 10
January 2024, the FOS issued its Final Decision on a complaint
relating to the Group, as well as decisions relating to other
industry participants. On 11 January 2024, the FCA announced a
section 166 review of historical motor finance commission
arrangements and sales and plans to communicate a decision on next
steps in the third quarter of 2024 on the basis of the evidence
collated in the review. The FCA has indicated that such steps could
include establishing an industry-wide consumer redress scheme
and/or applying to the Financial Markets Test Case Scheme, to help
resolve any contested legal issues of general
importance.
Following the FCA Motor Market
Review in March 2019, the FCA issued a policy statement in July
2020 prohibiting the use of discretionary commission models from 28
January 2021, which the Group adhered to. The Group continues to
believe that its historical practices were compliant with the law
and regulations in place at that time.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 16: Provisions (continued)
As noted above, in response to both
the FOS decisions and the FCA announcement the Group recognised a
charge of £450 million in the fourth
quarter of 2023. This includes estimates for operational and legal
costs, including litigation costs, together with estimates for
potential awards, based on various scenarios using a range of
assumptions, including for example, commission models, commission
rates, applicable time periods (between 2007 and 2021), response
rates and uphold rates. Costs and awards could arise in the event
that the FCA concludes there has been misconduct and customer loss
that requires remediation, or from adverse litigation decisions.
However, while the FCA review is progressing there is significant
uncertainty as to the extent of misconduct and customer loss, if
any, the nature and extent of any remediation action, if required,
and its timing. The ultimate financial impact could therefore
materially differ from the amount provided, both higher or lower.
The Group welcomes the FCA intervention through an independent
section 166 review and is engaging with the FCA as part of the
review.
HBOS Reading - review
The Group continues to apply the
recommendations from Sir Ross Cranston's review, issued in December
2019, including a reassessment of direct and consequential losses
by an independent panel (the Foskett Panel), an extension of debt
relief and a wider definition of de facto directors. The Foskett
Panel's full scope and methodology was published on 7 July 2020.
The Foskett Panel's stated objective is to consider cases via a
non-legalistic and fair process and to make its decisions in a
generous, fair and common sense manner, assessing claims against an
expanded definition of the fraud and on a lower evidential
basis.
In June 2022, the Foskett Panel
announced an alternative option, in the form of a fixed sum award
which could be accepted as an alternative to participation in the
full re-review process, to support earlier resolution of claims for
those deemed by the Foskett Panel to be victims of the fraud. Over
95 per cent of the population have now had decisions via this new
process. The provision is unchanged in the first half of 2024.
Notwithstanding the settled claims and the increase in outcomes
which builds confidence in the full estimated cost, uncertainties
remain and the final outcome could be different from the current
provision once the re-review is concluded by the Foskett Panel.
There is no confirmed timeline for the completion of the Foskett
Panel re-review process nor the review by Dame Linda Dobbs. The
Group is committed to implementing Sir Ross Cranston's
recommendations in full.
Payment protection insurance (PPI)
The Group has incurred costs for PPI
over a number of years totalling £21,960 million. The Group
continues to challenge PPI litigation cases, with mainly legal fees
and operational costs associated with litigation activity
recognised within regulatory and legal provisions.
Customer claims in relation to insurance branch business in
Germany
The Group continues to receive
claims from customers in Germany relating to policies issued by
Clerical Medical Investment Group Limited (subsequently renamed
Scottish Widows Limited), with smaller numbers of claims received
from customers in Austria and Italy. The total provision made to 30
June 2024, was £709 million (31 December 2023:
£709 million) with £5 million utilisation of the provision
during the period, leaving an unutilised provision at 30 June 2024
of £69 million. The ultimate financial effect, which could be
significantly different from the current provision, will be known
only once all relevant claims have been resolved.
Other
The Group carries provisions of £146
million (31 December 2023: £137 million) in respect of
dilapidations, rent reviews and other property-related
matters.
Provisions are also made for staff
and other costs related to Group restructuring initiatives at the
point at which the Group becomes committed to the expenditure; at
30 June 2024 provisions of £204 million (31 December 2023:
£245 million) were held.
The Group carries provisions of £33
million (31 December 2023: £46 million) for indemnities and other
matters relating to legacy business disposals in prior years.
Whilst there remains significant uncertainty as to the timing of
the utilisation of the provisions, the Group expects the majority
of the remaining provisions to have been utilised by 31 December
2028.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 17: Earnings per share
|
Half-year
to 30 Jun
2024
£m
|
|
|
Half-year
to 30
Jun
2023
£m
|
|
|
Half-year
to 31
Dec
2023
£m
|
|
|
|
|
|
|
|
|
|
|
Profit attributable to ordinary
shareholders - basic and diluted
|
2,145
|
|
|
2,572
|
|
|
2,361
|
|
|
Half-year
to 30 Jun
2024
million
|
|
|
Half-year
to 30
Jun
2023
million
|
|
|
Half-year
to 31
Dec
2023
million
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary
shares in issue - basic
|
63,453
|
|
|
66,226
|
|
|
63,718
|
|
Adjustment for share options and
awards
|
600
|
|
|
882
|
|
|
716
|
|
Weighted average number of ordinary
shares in issue - diluted
|
64,053
|
|
|
67,108
|
|
|
64,434
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
3.4p
|
|
|
3.9p
|
|
|
3.7p
|
|
Diluted earnings per
share
|
3.3p
|
|
|
3.8p
|
|
|
3.7p
|
|
Note 18: Dividends on ordinary shares and share
buyback
An interim dividend for 2024 of 1.06
pence per ordinary share (half-year to 30 June 2023: 0.92 pence per
ordinary share) will be paid on 10 September 2024. The total
amount of this dividend is £662 million, before the impact of any
further cancellations of shares purchased under the Group's buyback
programme (half-year to 30 June 2023: £592 million, following
cancellations of shares under the Group's buyback programme up to
the record date, was paid to shareholders).
On 21 May 2024, a final dividend in
respect of 2023 of 1.84 pence per ordinary share, totalling £1,169
million, following cancellations of shares under the Group's
buyback programme up to the record date, was paid to
shareholders.
Shareholders who have joined the
dividend reinvestment plan will automatically receive ordinary
shares instead of the cash dividend. Key dates for the payment of
the recommended dividend are outlined on page 101.
On 23 February 2024 the Group
commenced an ordinary share buyback programme to purchase
outstanding ordinary shares. As at 30 June 2024, the Group has
purchased c.1.8 billion ordinary shares under the programme, for a
total consideration of £918 million.
Note 19: Contingent liabilities, commitments and
guarantees
Contingent liabilities, commitments and guarantees arising
from the banking business
At 30 June 2024 contingent
liabilities, such as performance bonds and letters of credit,
arising from the banking business were £2,696 million (31
December 2023: £2,849 million).
The contingent liabilities of the
Group arise in the normal course of its banking business and it is
not practicable to quantify their future financial effect. Total
commitments and guarantees were £150,396 million (31 December 2023:
£143,319 million), of which in respect of undrawn formal standby
facilities, credit lines and other commitments to lend,
£81,041 million (31 December 2023: £75,080 million) was
irrevocable.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 19: Contingent liabilities, commitments and
guarantees (continued)
Interchange fees
With respect to multi-lateral
interchange fees (MIFs), the Group is not a party in the ongoing or
threatened litigation which involves the card schemes Visa and
Mastercard (as described below). However, the Group is a
member/licensee of Visa and Mastercard and other card schemes. The
litigation in question is as follows:
• Litigation brought by or on
behalf of retailers against both Visa and Mastercard in the English
Courts, in which retailers are seeking damages on grounds that Visa
and Mastercard's MIFs breached competition law (this includes a
judgment of the Supreme Court in June 2020 upholding the Court of
Appeal's finding in 2018 that certain historic interchange
arrangements of Mastercard and Visa infringed competition
law)
• Litigation brought on behalf
of UK consumers in the English Courts against Mastercard
Any impact on the Group of the
litigation against Visa and Mastercard remains uncertain at this
time, such that it is not practicable for the Group to provide an
estimate of any potential financial effect. Insofar as Visa is
required to pay damages to retailers for interchange fees set prior
to June 2016, contractual arrangements to allocate liability have
been agreed between various UK banks (including the Group) and Visa
Inc, as part of Visa Inc's acquisition of Visa Europe in 2016.
These arrangements cap the maximum amount of liability to which the
Group may be subject and this cap is set at the cash consideration
received by the Group for the sale of its stake in Visa Europe to
Visa Inc in 2016. In 2016, the Group received Visa preference
shares as part of the consideration for the sale of its shares in
Visa Europe. A release assessment is carried out by Visa on certain
anniversaries of the sale (in line with the Visa Europe sale
documentation) and as a result, some Visa preference shares may be
converted into Visa Inc Class A common stock from time to time. Any
such release and any subsequent sale of Visa common stock does not
impact the contingent liability.
LIBOR and other trading rates
Certain Group companies, together
with other panel banks, have been named as defendants in ongoing
private lawsuits, including purported class action suits, in the US
in connection with their roles as panel banks contributing to the
setting of US Dollar, Japanese Yen and Sterling London Interbank
Offered Rate.
Certain Group companies are also
named as defendants in (i) UK-based claims, and (ii) two Dutch
class actions, raising LIBOR manipulation allegations. A number of
claims against the Group in the UK relating to the alleged mis-sale
of interest rate hedging products also include allegations of LIBOR
manipulation.
It is currently not possible to
predict the scope and ultimate outcome on the Group of any private
lawsuits or ongoing related challenges to the interpretation or
validity of any of the Group's contractual arrangements, including
their timing and scale. As such, it is not practicable to provide
an estimate of any potential financial effect.
Tax
authorities
The Group has an open matter in
relation to a claim for group relief of losses incurred in its
former Irish banking subsidiary, which ceased trading on 31
December 2010. In 2013, HMRC informed the Group that its
interpretation of the UK rules means that the group relief is not
available. In 2020, HMRC concluded its enquiry into the matter and
issued a closure notice. The Group's interpretation of the UK rules
has not changed and hence it appealed to the First Tier Tax
Tribunal, with a hearing having taken place in May 2023. If the
final determination of the matter by the judicial process is that
HMRC's position is correct, management believes that this would
result in an increase in current tax liabilities of approximately
£950 million (including interest) and a reduction in the
Group's deferred tax asset of approximately £275 million. The
Group, following conclusion of the hearing and having taken
appropriate advice, does not consider that this is a case where
additional tax will ultimately fall due.
There are a number of other open
matters on which the Group is in discussions with HMRC (including
the tax treatment of certain costs arising from the divestment of
TSB Banking Group plc), none of which is expected to have a
material impact on the financial position of the Group.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED) (continued)
Note 19: Contingent liabilities, commitments and
guarantees (continued)
FCA
investigation into the Group's anti-money laundering control
framework
As previously disclosed, the FCA has
opened an investigation into the Group's compliance with domestic
UK money laundering regulations and the FCA's rules and Principles
for Businesses, with a focus on aspects of its anti-money
laundering control framework. The Group continues to co-operate
with the investigation. It is not currently possible to estimate
the potential financial impact to the Group.
Arena litigation claims
The Group is facing claims alleging
breach of duty and/or mandate in the context of an underlying
external fraud matter involving Arena Television. The Group intends
to contest the claims. It is not possible to estimate with
certainty the potential financial impact (if any) to the
Group.
Other legal actions and regulatory matters
In addition, in the course of its
business the Group is subject to other complaints and threatened or
actual legal proceedings (including class or group action claims)
brought by or on behalf of current or former employees, customers
(including their appointed representatives), investors or other
third parties, as well as legal and regulatory reviews, enquiries
and examinations, requests for information, audits, challenges,
investigations and enforcement actions, which could relate to a
number of issues. This includes matters in relation to compliance
with applicable laws and regulations, such as those relating to
prudential regulation, consumer protection, investment advice,
business conduct, systems and controls, environmental,
competition/anti-trust, tax, anti-bribery, anti-money laundering
and sanctions, some of which may be beyond the Group's control,
both in the UK and overseas. Where material, such matters are
periodically reassessed, with the assistance of external
professional advisers where appropriate, to determine the
likelihood of the Group incurring a liability. The Group does not
currently expect the final outcome of any such case to have a
material adverse effect on its financial position, operations or
cash flows. Where there is a contingent liability related to an
existing provision the relevant disclosures are included within
note 16.
STATEMENT OF DIRECTORS'
RESPONSIBILITIES
The directors listed below (being
all the directors of Lloyds Banking Group plc) confirm that to the
best of their knowledge these condensed consolidated half-year
financial statements have been prepared in accordance with UK
adopted International Accounting Standard 34, Interim Financial Reporting, and that
the half-year management report herein includes a fair review of
the information required by DTR 4.2.7R and DTR 4.2.8R,
namely:
• an indication of important
events that have occurred during the six months ended 30 June 2024
and their impact on the condensed consolidated half-year financial
statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
• material related party
transactions in the six months ended 30 June 2024 and any material
changes in the related party transactions described in the last
annual report.
Signed on behalf of the Board
by
Charlie Nunn
Group Chief Executive
24 July 2024
Lloyds Banking Group plc Board of
Directors:
Executive directors:
Charlie Nunn (Group Chief Executive)
William Chalmers (Chief Financial Officer)
Non-executive directors:
Sir Robin Budenberg CBE (Chair)
Sarah Legg
Amanda Mackenzie LVO OBE
Harmeen Mehta
Cathy Turner
Scott Wheway
Catherine Woods
INDEPENDENT REVIEW REPORT TO
LLOYDS BANKING GROUP PLC
Conclusion
We have been engaged by Lloyds
Banking Group plc and its subsidiaries (the Group) to review the
condensed consolidated set of financial statements in the
half-yearly financial report for the six months ended 30 June 2024
which comprises the condensed consolidated income statement, the
condensed consolidated statement of comprehensive income, the
condensed consolidated balance sheet, the condensed consolidated
statement of changes in equity, the condensed consolidated cash
flow statement and related notes 1 to 19.
Based on our review, nothing has
come to our attention that causes us to believe that the condensed
consolidated set of financial statements in the half-yearly
financial report for the six months ended 30 June 2024 is not
prepared, in all material respects, in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and United Kingdom adopted
International Accounting Standard (IAS) 34.
Basis for conclusion
We conducted our review in
accordance with International Standard on Review Engagements (UK)
2410 "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council for use in the United Kingdom (ISRE (UK) 2410). A
review of interim financial information consists of making
inquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK) and consequently does not enable us to obtain assurance that
we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 1, the annual
financial statements of the Group will be prepared in accordance
with United Kingdom adopted international accounting standards. The
condensed consolidated set of financial statements included in this
half-yearly financial report have been prepared in accordance with
United Kingdom adopted IAS 34, "Interim Financial
Reporting".
Conclusion relating to going concern
Based on our review procedures,
which are less extensive than those performed in an audit as
described in the basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors
have inappropriately adopted the going concern basis of accounting
or that the directors have identified material uncertainties
relating to going concern that are not appropriately
disclosed.
This conclusion is based on the
review procedures performed in accordance with ISRE (UK) 2410,
however future events or conditions may cause the Group to cease to
continue as a going concern.
Responsibilities of the directors
The directors are responsible for
preparing the half-yearly financial report in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
In preparing the half-yearly
financial report, the directors are responsible for assessing the
Group's ability to continue as a going concern, disclosing as
applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic
alternative but to do so.
Auditor's responsibilities for the review of the financial
information
In reviewing the half-yearly
financial report, we are responsible for expressing to the Group a
conclusion on the condensed consolidated set of financial
statements in the half-yearly financial report. Our conclusion,
including our conclusions relating to going concern, are based on
procedures that are less extensive than audit procedures, as
described in the basis for conclusion paragraph of this
report.
Use of our report
This report is made solely to the
Group in accordance with ISRE (UK) 2410. Our work has been
undertaken so that we might state to the Group those matters we are
required to state to it in an independent review report and for no
other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Group, for
our review work, for this report, or for the conclusions we have
formed.
Deloitte LLP
Statutory Auditor
London, England
24 July 2024
KEY DATES
Shares quoted ex-dividend for 2024
interim dividend
|
1 August
2024
|
Record date for 2024 interim
dividend
|
2 August
2024
|
Final date for joining or leaving
the interim 2024 dividend reinvestment plan
|
19 August
2024
|
Interim 2024 dividend
paid
|
10
September 2024
|
Q3 2024 Interim Management
Statement
|
23
October 2024
|
BASIS OF
PRESENTATION
This release covers the results of
Lloyds Banking Group plc together with its subsidiaries (the Group)
for the six months ended 30 June 2024. Unless otherwise stated,
income statement commentaries throughout this document compare the
six months ended 30 June 2024 to the six months ended 30 June 2023
and the balance sheet analysis compares the Group balance sheet as
at 30 June 2024 to the Group balance sheet as at 31 December
2023. The Group uses a number of alternative performance measures,
including underlying profit, in the discussion of its business
performance and financial position. These measures are labelled
with a superscript 'A' throughout this document. Further
information on these measures is set out on page
26. Unless otherwise
stated, commentary on pages 1
to 2 and pages 7
to 8 is given on an underlying basis. 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.
FORWARD-LOOKING
STATEMENTS
This document contains certain
forward-looking statements within the meaning of Section 21E of the
US Securities Exchange Act of 1934, as amended, and section 27A of
the US Securities Act of 1933, as amended, with respect to the
business, strategy, plans and/or results of Lloyds Banking Group
plc together with its subsidiaries (the Group) and its current
goals and expectations. Statements that are not historical or
current facts, including statements about the Group's or its
directors' and/or management's beliefs and expectations, are
forward-looking statements. Words such as, without limitation,
'believes', 'achieves', 'anticipates', 'estimates', 'expects',
'targets', 'should', 'intends', 'aims', 'projects', 'plans',
'potential', 'will', 'would', 'could', 'considered', 'likely',
'may', 'seek', 'estimate', 'probability', 'goal', 'objective',
'deliver', 'endeavour', 'prospects', 'optimistic' and similar
expressions or variations on these expressions are intended to
identify forward-looking statements. These statements concern or
may affect future matters, including but not limited to:
projections or expectations of the Group's future financial
position, including profit attributable to shareholders,
provisions, economic profit, dividends, capital structure,
portfolios, net interest margin, capital ratios, liquidity,
risk-weighted assets (RWAs), expenditures or any other financial
items or ratios; litigation, regulatory and governmental
investigations; the Group's future financial performance; the level
and extent of future impairments and write-downs; the Group's ESG
targets and/or commitments; statements of plans, objectives or
goals of the Group or its management and other statements that are
not historical fact and statements of assumptions underlying such
statements. By their nature, forward-looking statements involve
risk and uncertainty because they relate to events and depend upon
circumstances that will or may occur in the future. Factors that
could cause actual business, strategy, targets, plans and/or
results (including but not limited to the payment of dividends) to
differ materially from forward-looking statements include, but are
not limited to: general economic and business conditions in the UK
and internationally; acts of hostility or terrorism and responses
to those acts, or other such events; geopolitical unpredictability;
the war between Russia and Ukraine; the conflicts in the Middle
East; the tensions between China and Taiwan; political instability
including as a result of any UK general election; market related
risks, trends and developments; changes in client and consumer
behaviour and demand; exposure to counterparty risk; the ability to
access sufficient sources of capital, liquidity and funding when
required; changes to the Group's credit ratings; fluctuations in
interest rates, inflation, exchange rates, stock markets and
currencies; volatility in credit markets; volatility in the price
of the Group's securities; tightening of monetary policy in
jurisdictions in which the Group operates; natural pandemic and
other disasters; risks concerning borrower and counterparty credit
quality; risks affecting insurance business and defined benefit
pension schemes; changes in laws, regulations, practices and
accounting standards or taxation; changes to regulatory capital or
liquidity requirements and similar contingencies; the policies and
actions of governmental or regulatory authorities or courts
together with any resulting impact on the future structure of the
Group; risks associated with the Group's compliance with a wide
range of laws and regulations; assessment related to resolution
planning requirements; risks related to regulatory actions which
may be taken in the event of a bank or Group failure; exposure to
legal, regulatory or competition proceedings, investigations or
complaints; failure to comply with anti-money laundering, counter
terrorist financing, anti-bribery and sanctions regulations;
failure to prevent or detect any illegal or improper activities;
operational risks including risks as a result of the failure of
third party suppliers; conduct risk; technological changes and
risks to the security of IT and operational infrastructure,
systems, data and information resulting from increased threat of
cyber and other attacks; technological failure; inadequate or
failed internal or external processes or systems; risks relating to
ESG matters, such as climate change (and achieving climate change
ambitions) and decarbonisation, including the Group's ability along
with the government and other stakeholders to measure, manage and
mitigate the impacts of climate change effectively, and human
rights issues; the impact of competitive conditions; failure to
attract, retain and develop high calibre talent; the ability to
achieve strategic objectives; the ability to derive cost savings
and other benefits including, but without limitation, as a result
of any acquisitions, disposals and other strategic transactions;
inability to capture accurately the expected value from
acquisitions; assumptions and estimates that form the basis of the
Group's financial statements; and potential changes in dividend
policy. A number of these influences and factors are beyond the
Group's control. Please refer to the latest Annual Report on Form
20-F filed by Lloyds Banking Group plc with the US Securities and
Exchange Commission (the SEC), which is available on the SEC's
website at www.sec.gov, for a discussion of certain factors and
risks. Lloyds Banking Group plc may also make or disclose written
and/or oral forward-looking statements in other written materials
and in oral statements made by the directors, officers or employees
of Lloyds Banking Group plc to third parties, including financial
analysts. Except as required by any applicable law or regulation,
the forward-looking statements contained in this document are made
as of today's date, and the Group expressly disclaims any
obligation or undertaking to release publicly any updates or
revisions to any forward-looking statements contained in this
document whether as a result of new information, future events or
otherwise. The information, statements and opinions contained in
this document do not constitute a public offer under any applicable
law or an offer to sell any securities or financial instruments or
any advice or recommendation with respect to such securities or
financial instruments.
CONTACTS
For
further information please contact:
INVESTORS AND
ANALYSTS
Douglas
Radcliffe
Group
Investor Relations Director
020 7356
1571
douglas.radcliffe@lloydsbanking.com
Nora
Thoden
Director
of Investor Relations - ESG
020 7356
2334
nora.thoden@lloydsbanking.com
Tom
Grantham
Investor
Relations Senior Manager
07851
440 091
thomas.grantham@lloydsbanking.com
Sarah
Robson
Investor
Relations Senior Manager
07494
513 983
sarah.robson2@lloydsbanking.com
CORPORATE
AFFAIRS
Grant
Ringshaw
External
Relations Director
020 7356
2362
grant.ringshaw@lloydsbanking.com
Matt
Smith
Head of
Media Relations
07788
352 487
matt.smith@lloydsbanking.com
Copies
of this News Release may be obtained from:
Investor
Relations, Lloyds Banking Group plc, 25 Gresham Street,
London EC2V 7HN
The
statement can also be found on the Group's website -
www.lloydsbankinggroup.com
Registered office: Lloyds Banking Group plc, The Mound,
Edinburgh, EH1 1YZ
Registered in Scotland No. SC095000