UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
27 JULY 2017
Commission File number 001-15246
LLOYDS BANKING GROUP plc
(Translation of registrant's name into English)
25 Gresham Street
London
EC2V 7HN
United Kingdom
(Address of principal executive offices)
Indicate by
check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form
20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b) (1) ________.
Indicate by
check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b) (7) ________.
This report
on Form 6-K shall be deemed incorporated by reference into the company's Registration Statement on Form F-3 (File Nos. 333-211791
and 333-211791-01) and to be a part thereof from the date on which this report is filed, to the extent not superseded by documents
or reports subsequently filed or furnished.
EXPLANATORY NOTE
This report on Form 6-K contains the interim
report of Lloyds Banking Group plc, which includes the unaudited consolidated interim results for the half-year ended 30 June
2017, and is being incorporated by reference into the Registration Statement with File Nos. 333-211791 and 333-211791-01.
BASIS OF PRESENTATION
|
This report covers the results of Lloyds Banking Group plc (the Company) together with its subsidiaries (the Group) for the half-year ended 30 June 2017.
|
Statutory basis:
Statutory information is set out on pages 2 to 6. However, a number of factors have had a significant effect on the comparability of the Group’s financial position and results. Accordingly, the results are also presented on an underlying basis.
|
Underlying basis:
These results
are adjusted for certain items which are listed below, to allow a comparison of the Group’s underlying performance.
–
losses on redemption of the Enhanced Capital Notes and the volatility in the value of the embedded equity conversion feature;
–
market volatility and asset sales, which includes the effects of certain asset sales, the volatility relating to the Group’s
own debt and hedging arrangements and that arising in the insurance businesses and insurance gross up;
–
the unwind of acquisition-related fair value adjustments and the amortisation of purchased intangible assets;
–
restructuring costs, comprising severance related costs relating to the Simplification programme, the costs of implementing regulatory
reform and ring-fencing, the rationalisation of the non-branch property portfolio and the integration of MBNA; and
–
payment protection insurance and other conduct provisions.
|
Unless otherwise stated, income statement commentaries throughout this document compare the half-year ended 30 June 2017 to the half-year ended 30 June 2016, and the balance sheet analysis compares the Group balance sheet as at 30 June 2017 to the Group balance sheet as at 31 December 2016.
|
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 and plans of Lloyds Banking
Group and its current goals and expectations relating to its future financial condition and performance. Statements that are not
historical facts, including statements about Lloyds Banking Group’s or its directors’ and/or management’s beliefs
and expectations, are forward looking statements. Words such as ‘believes’, ‘anticipates’, ‘estimates’,
‘expects’, ‘intends’, ‘aims’, ‘potential’, ‘will’, ‘would’,
‘could’, ‘considered’, ‘likely’, ‘estimate’ and variations of these words and
similar future or conditional expressions are intended to identify forward looking statements but are not the exclusive means
of identifying 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.
Examples of
such forward looking statements include, but are 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; statements of plans, objectives or goals of Lloyds Banking Group or its management including
in respect of statements about the future business and economic environments in the UK and elsewhere including, but not limited
to, future trends in interest rates, foreign exchange rates, credit and equity market levels and demographic developments; statements
about competition, regulation, disposals and consolidation or technological developments in the financial services industry; and
statements of assumptions underlying such statements.
Factors that
could cause actual business, strategy, plans and/or results (including but not limited to the payment of dividends) to differ
materially from the plans, objectives, expectations, estimates and intentions expressed in such forward looking statements made
by the Group or on its behalf include, but are not limited to: general economic and business conditions in the UK and internationally;
market related trends and developments; fluctuations in interest rates (including low or negative rates), exchange rates, stock
markets and currencies; the ability to access sufficient sources of capital, liquidity and funding when required; changes to the
Group's credit ratings; the ability to derive cost savings and other benefits including, but without limitation as a result of
any acquisitions, disposals and other strategic transactions; changing customer behaviour including consumer spending, saving
and borrowing habits; changes to borrower or counterparty credit quality; instability in the global financial markets, including
Eurozone instability, instability as a result of the exit by the UK from the European Union (EU) and the potential for other countries
to exit the EU or the Eurozone and the impact of any sovereign credit rating downgrade or other sovereign financial issues; technological
changes and risks to the security of IT and operational infrastructure, systems, data and information resulting from increased
threat of cyber and other attacks; natural, pandemic and other disasters, adverse weather and similar contingencies outside the
Group's control; inadequate or failed internal or external processes or systems; acts of war, other acts of hostility, terrorist
acts and responses to those acts, geopolitical, pandemic or other such events; changes in laws, regulations, accounting standards
or taxation, including as a result of the exit by the UK from the EU, or a further possible referendum on Scottish independence;
changes to regulatory capital or liquidity requirements and similar contingencies outside the Group's control; the policies, decisions
and actions of governmental or regulatory authorities or courts in the UK, the EU, the United States or elsewhere including the
implementation and interpretation of key legislation and regulation; the ability to attract and retain senior management and other
employees; actions or omissions by the Group's directors, management or employees including industrial action; changes to the
Group's post-retirement defined benefit scheme obligations; the extent of any future impairment charges or write-downs caused
by, but not limited to, depressed asset valuations, market disruptions and illiquid markets; the value and effectiveness of any
credit protection purchased by the Group; the inability to hedge certain risks economically; the adequacy of loss reserves; the
actions of competitors, including non-bank financial services, lending companies and digital innovators and disruptive technologies;
and exposure to regulatory or competition scrutiny, legal, regulatory or competition proceedings, investigations or complaints.
Please refer
to the latest Annual Report on Form 20-F filed with the US Securities and Exchange Commission for a discussion of certain factors
together with examples of forward looking statements.
Lloyds Banking
Group may also make or disclose written and/or oral forward looking statements in reports filed with or furnished to the US Securities
and Exchange Commission, Lloyds Banking Group annual reviews, half-year announcements, proxy statements, offering circulars, prospectuses,
press releases and other written materials and in oral statements made by the directors, officers or employees of Lloyds Banking
Group 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 the date hereof, and Lloyds Banking Group expressly disclaims any obligation
or undertaking to release publicly any updates or revisions to any forward looking statements contained in this document to reflect
any change in Lloyds Banking Group’s expectations with regard thereto or any change in events, conditions or circumstances
on which any such statement is based.
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.
CONTENTS
|
Page
|
Summary of results
|
1
|
|
|
Statutory information (IFRS)
|
|
Consolidated income statement
|
2
|
Summary consolidated balance sheet
|
3
|
Review of results
|
4
|
|
|
Underlying basis information
|
|
Segmental analysis of profit (loss) before tax by division (unaudited)
|
7
|
Group profit reconciliations
|
8
|
Divisional highlights
|
|
Retail
|
10
|
Commercial Banking
|
12
|
Consumer Finance
|
14
|
Insurance
|
16
|
Run-off and Central items
|
18
|
|
|
Risk management
|
|
Principal risks and uncertainties
|
19
|
Credit risk portfolio
|
20
|
Funding and liquidity management
|
30
|
Capital management
|
35
|
|
|
Statutory information
|
|
Condensed consolidated half-year financial statements (unaudited)
|
|
Consolidated income statement
|
44
|
Consolidated statement of comprehensive income
|
45
|
Consolidated balance sheet
|
46
|
Consolidated statement of changes in equity
|
48
|
Consolidated cash flow statement
|
51
|
Notes
|
52
|
SUMMARY OF RESULTS
|
|
Half-year
to 30 June
2017
|
|
Half-year
to 30 June
2016
|
|
Change
since
30 June
2016
|
|
Half-year
to 31 Dec
2016
|
|
|
£m
|
|
£m
|
|
%
|
|
£m
|
|
|
|
|
|
|
|
|
|
Statutory results (IFRS)
|
|
|
|
|
|
|
|
|
Total income, net of insurance claims
|
|
9,299
|
|
8,320
|
|
12
|
|
8,947
|
Total operating expenses
|
|
(6,202)
|
|
(5,504)
|
|
(13)
|
|
(7,123)
|
Trading surplus
|
|
3,097
|
|
2,816
|
|
10
|
|
1,824
|
Impairment
|
|
(203)
|
|
(362)
|
|
44
|
|
(390)
|
Profit before tax
|
|
2,894
|
|
2,454
|
|
18
|
|
1,434
|
Profit attributable to ordinary shareholders
|
|
1,739
|
|
1,590
|
|
9
|
|
61
|
Basic earnings per share
|
|
2.5p
|
|
2.3p
|
|
9
|
|
0.2p
|
Dividends per share
1
|
|
1.0p
|
|
0.85p
|
|
18
|
|
2.20p
|
|
|
|
|
|
|
|
|
|
Underlying basis (page 7)
|
|
|
|
|
|
|
|
|
Underlying profit
|
|
4,492
|
|
4,161
|
|
8
|
|
3,706
|
|
|
|
|
|
|
|
|
|
1
|
Half-year to 31 December 2016 included a special dividend of 0.5 pence per share.
|
|
|
Capital and balance sheet
|
|
At
30 June
2017
|
|
At
31 Dec
2016
|
|
Change
since
31 Dec
2016
|
|
|
|
|
|
|
%
|
|
|
|
|
|
|
|
Statutory
|
|
|
|
|
|
|
Loans and advances to customers
1
|
|
£453bn
|
|
£450bn
|
|
1
|
Customer deposits
2
|
|
£417bn
|
|
£413bn
|
|
1
|
Loan to deposit ratio
3
|
|
109%
|
|
109%
|
|
−
|
|
|
|
|
|
|
|
Common equity tier 1 ratio
4
|
|
13.5%
|
|
13.4%
|
|
0.1pp
|
Tier 1 capital ratio
4
|
|
16.6%
|
|
16.8%
|
|
(0.2)pp
|
Total capital ratio
4
|
|
20.8%
|
|
21.2%
|
|
(0.4)pp
|
Risk-weighted assets
4
|
|
£218bn
|
|
£215bn
|
|
1
|
|
|
|
|
|
|
|
1
|
Excludes reverse repos of £11.4 billion (31 December 2016: £8.3 billion).
|
2
|
Excludes repos of £1.0 billion (31 December 2016: £2.5 billion).
|
3
|
Loans and advances to customers (excluding reverse repos) divided by customer deposits (excluding repos).
|
4
|
Reported on the transitional basis.
|
STATUTORY INFORMATION (IFRS)
CONSOLIDATED INCOME STATEMENT
|
|
|
|
Half-year
to 30 June
2017
|
|
Half-year
to 30 June
2016
|
|
Half-year
to 31 Dec
2016
|
|
|
|
|
£ million
|
|
£ million
|
|
£ million
|
|
|
|
|
|
|
|
|
|
Interest and similar income
|
|
|
|
7,861
|
|
8,479
|
|
8,141
|
Interest and similar expense
|
|
|
|
(2,659)
|
|
(3,254)
|
|
(4,092)
|
Net interest income
|
|
|
|
5,202
|
|
5,225
|
|
4,049
|
Fee and commission income
|
|
|
|
1,518
|
|
1,502
|
|
1,543
|
Fee and commission expense
|
|
|
|
(670)
|
|
(682)
|
|
(674)
|
Net fee and commission income
|
|
|
|
848
|
|
820
|
|
869
|
Net trading income
|
|
|
|
5,843
|
|
7,180
|
|
11,365
|
Insurance premium income
|
|
|
|
4,099
|
|
4,212
|
|
3,856
|
Other operating income
|
|
|
|
1,283
|
|
993
|
|
1,042
|
Other income
|
|
|
|
12,073
|
|
13,205
|
|
17,132
|
Total income
|
|
|
|
17,275
|
|
18,430
|
|
21,181
|
Insurance claims
|
|
|
|
(7,976)
|
|
(10,110)
|
|
(12,234)
|
Total income, net of insurance claims
|
|
|
|
9,299
|
|
8,320
|
|
8,947
|
Regulatory provisions
|
|
|
|
(1,240)
|
|
(445)
|
|
(1,929)
|
Other operating expenses
|
|
|
|
(4,962)
|
|
(5,059)
|
|
(5,194)
|
Total operating expenses
|
|
|
|
(6,202)
|
|
(5,504)
|
|
(7,123)
|
Trading surplus
|
|
|
|
3,097
|
|
2,816
|
|
1,824
|
Impairment
|
|
|
|
(203)
|
|
(362)
|
|
(390)
|
Profit before tax
|
|
|
|
2,894
|
|
2,454
|
|
1,434
|
Taxation
|
|
|
|
(905)
|
|
(597)
|
|
(1,127)
|
Profit for the period
|
|
|
|
1,989
|
|
1,857
|
|
307
|
|
|
|
|
|
|
|
|
|
Profit attributable to ordinary shareholders
|
|
|
|
1,739
|
|
1,590
|
|
61
|
Profit attributable to other equity holders
|
|
|
|
209
|
|
204
|
|
208
|
Profit attributable to equity holders
|
|
|
|
1,948
|
|
1,794
|
|
269
|
Profit attributable to non-controlling interests
|
|
|
|
41
|
|
63
|
|
38
|
Profit for the period
|
|
|
|
1,989
|
|
1,857
|
|
307
|
SUMMARY CONSOLIDATED BALANCE SHEET
|
|
At
30 June
2017
|
|
At
31 Dec
2016
|
Assets
|
|
£ million
|
|
£ million
|
|
|
|
|
|
Cash and balances at central banks
|
|
50,491
|
|
47,452
|
Trading and other financial assets at fair value through profit or loss
|
|
161,970
|
|
151,174
|
Derivative financial instruments
|
|
30,024
|
|
36,138
|
Loans and receivables:
|
|
|
|
|
Loans and advances to banks
|
|
8,865
|
|
26,902
|
Loans and advances to customers
|
|
464,604
|
|
457,958
|
Debt securities
|
|
3,841
|
|
3,397
|
|
|
477,310
|
|
488,257
|
Available-for-sale financial assets
|
|
51,803
|
|
56,524
|
Other assets
|
|
43,321
|
|
38,248
|
Total assets
|
|
814,919
|
|
817,793
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Deposits from banks
|
|
24,879
|
|
16,384
|
Customer deposits
|
|
417,617
|
|
415,460
|
Trading and other financial liabilities at fair value through profit or loss
|
|
55,671
|
|
54,504
|
Derivative financial instruments
|
|
29,190
|
|
34,924
|
Debt securities in issue
|
|
71,557
|
|
76,314
|
Liabilities arising from insurance and investment contracts
|
|
116,970
|
|
114,502
|
Subordinated liabilities
|
|
18,575
|
|
19,831
|
Other liabilities
|
|
32,114
|
|
37,409
|
Total liabilities
|
|
766,573
|
|
769,328
|
|
|
|
|
|
Shareholders’ equity
|
|
42,513
|
|
42,670
|
Other equity instruments
|
|
5,355
|
|
5,355
|
Non-controlling interests
|
|
478
|
|
440
|
Total equity
|
|
48,346
|
|
48,465
|
Total equity and liabilities
|
|
814,919
|
|
817,793
|
REVIEW OF RESULTS
During the half-year to 30 June 2017, the
Group recorded a profit before tax of £2,894 million compared with a profit before tax in the half-year to 30 June 2016 of
£2,454 million. The results have been affected by a number of one-off items. In March 2016 the Group completed tender offers
and redemptions in respect of its Enhanced Capital Notes (ECNs), resulting in a net loss to the Group of £721 million
and in the half-year to 30 June 2017 the Group has incurred conduct charges of £1,240 million compared to £460 million
in the half year to 30 June 2016. Excluding these items from both periods, the Group recorded a profit before tax of £4,134
million in the half-year to 30 June 2017, an increase of £499 million, or 14 per cent, from £3,635 million in the half-year
to 30 June 2016.
Total income decreased by £1,155 million,
or 6 per cent, to £17,275 million in the half-year to 30 June 2017 compared with £18,430 million in the half-year to
30 June 2016, comprising a £1,132 million decrease in other income and a £23 million decrease in net interest
income.
Net interest income was £5,202 million
in the half-year to 30 June 2017; a decrease of £23 million compared to £5,225 million in the half-year to 30
June 2016. There was an increase of £221 million in the half-year to 30 June 2017 in the amounts payable to unit holders
in those Open-Ended Investment Companies (OEICs) included in the consolidated results of the Group. In the half-year to 30 June
2017, the Group recognised £743 million (half-year to 30 June 2016: £522 million) that was attributable to third
party investors in respect of its consolidated OEICs as a result of positive market movements in the year to date, with gains ranging
from 3.3 per cent to 18.4 per cent in UK and global equity markets and movements ranging from (1.1) per cent to 2.3 per cent in
fixed income indices. The change in population of consolidated OEICs in 2017 compared to 2016 did not have a significant impact
on this figure, contributing a net decrease of £25 million attributable to third party investors. Gains and losses recognised
by the Group that are attributable to third party investors have no impact on the Company’s ordinary shareholders as a compensating
amount is recognised in net interest income, reflecting the amounts payable to the OEIC unitholders. After adjusting for these
amounts payable to unitholders, net interest income was £198 million, or 3 per cent higher. Average interest-earning assets
fell but the net interest margin improved driven by lower deposit and wholesale funding costs which have more than offset reduced
lending rates.
Other income was £1,132 million lower
at £12,073 million in the half-year to 30 June 2017 compared to £13,205 million in the half-year to 30 June 2016. Net
fee and commission income was £28 million or 3 per cent, higher at £848 million compared to £820 million in the
half-year to 30 June 2016 following volume-related increases in fee income in the Cards business and lower levels of fees payable
in the general insurance business. Net trading income decreased by £1,337 million, or 19 per cent, to £5,843 million
in the half-year to 30 June 2017 compared to £7,180 million in the half-year to 30 June 2016; this decrease reflected a reduction
of £1,573 million in gains on policyholder investments held within the insurance business; with reduced gains on debt securities,
partly following the disposal of high-yielding bonds, more than offsetting increased equity income in line with market performance.
Net trading income in the Group’s banking business increased by £236 million to £644 million in the half-year
to 30 June 2017 compared to £408 million in the half-year to 30 June 2016 in part due to an improvement of £128 million
in relation to the net derivative valuation adjustment from a charge of £80 million in the half-year to 30 June 2016
to a credit of £44 million in the half-year to 30 June 2017. Insurance premium income was £113 million,
or 3 per cent, lower at £4,099 million in the half-year to 30 June 2017 compared with £4,212 million in the same period
in 2016; there was a decrease of £55 million in life insurance premiums and a decrease of £58 million in general insurance
premiums following the run-down of closed products. Other operating income was £290 million higher at £1,283 million
in the half-year to 30 June 2017 compared to £993 million in the half-year to 30 June 2016. Other operating income in the
half-year to 30 June 2016 included the loss of £721 million on redemption of the Group’s ECNs but this impact is partly
offset in the half-year to 30 June 2017 by a £258 million reduction in gains on sale of available-for-sale financial assets
and losses of £15 million on liability management actions in the half-year to 30 June 2017 compared to gains of £147
million in the half-year to 30 June 2016.
REVIEW OF RESULTS
(continued)
Insurance claims expense was £2,134
million lower at £7,976 million in the half-year to 30 June 2017 compared to £10,110 million in the half-year to 30
June 2016. The insurance claims expense in respect of life and pensions business was £2,118 million lower at £7,805
million in the half-year to 30 June 2017 compared to £9,923 million in the half-year to 30 June 2016; this decrease was matched
by a similar reduction in net trading income, reflecting the relative performance of policyholder investments. Insurance claims
in respect of general insurance business were £16 million or 9 per cent, lower at £171 million in the half-year
to 30 June 2017 compared to £187 million in the same period in 2016.
Operating expenses increased by £698
million, or 13 per cent to £6,202 million in the half-year to 30 June 2017 compared with £5,504 million in the half-year
to 30 June 2016. A provision of £1,240 million was made in respect of conduct issues in the half-year to 30 June
2017 compared to a charge of £445 million in the same period in 2016. The charge in 2017 includes £700 million in respect
of PPI, reflecting current claim levels, which remain above the Group’s previous provision assumption; the additional provision
will now cover reactive claims of around 9,000 per week through to the end of August 2019. Other conduct provisions of £540 million
cover a number of items including packaged bank accounts and arrears handling. Following a review of the Group’s arrears
handling activities, the Group has put in place a number of actions to improve further its handling of customers in these areas
and the Group is reimbursing mortgage arrears fees. The Group is also currently undertaking a review of the HBOS Reading fraud
and is in the process of paying compensation to the victims of the fraud for economic losses, ex-gratia payments and awards for
distress and inconvenience. A provision of £100 million was taken and reflects the estimated compensation costs for HBOS
Reading.
Excluding all conduct charges from both
years, operating expenses were £97 million, or 2 per cent, lower at £4,962 million in the half-year to 30 June
2017 compared to £5,059 million in the half-year to 30 June 2016. Staff costs were £100 million, or 4 per cent,
lower at £2,362 million in the half-year to 30 June 2017 compared with £2,462 million in the half-year to 30 June
2016; annual pay rises have been offset by the impact of headcount reductions resulting from the Group’s rationalisation
programmes and there has been a reduction in severance costs. Premises and equipment costs were £46 million or 13 per cent,
higher at £399 million in the half-year to 30 June 2017 compared with £353 million in the half-year
to 30 June 2016, in part due to lower profits on sale of tangible assets. Other expenses were £8 million, or 1 per cent,
lower at £1,070 million in the half-year to 30 June 2017 compared to £1,078 million in the half-year to 30 June 2016.
Depreciation and amortisation costs were £35 million, or 3 per cent, lower at £1,131 million in the half-year
to 30 June 2017 compared to £1,166 million in the half-year to 30 June 2016, as higher depreciation on operating lease
assets due to increased balances has been offset by reduced charges on intangible assets following certain intangibles related
to the acquisition of HBOS in 2009 becoming fully amortised.
Impairment losses decreased by £159
million, or 44 per cent, to £203 million in the half-year to 30 June 2017 compared with £362 million in the half-year
to 30 June 2016. Impairment losses in respect of loans and advances to customers were £29 million, or 13 per cent, lower
at £200 million in the half-year to 30 June 2017 compared with £229 million in the half-year to 30 June 2016;
this reflects continuing benign economic conditions and the Group’s conservative approach to risk. There was a charge of
£6 million in the half-year to 30 June 2017, compared to £146 million in the half-year to 30 June 2016, in respect
of the impairment of available-for-sale financial assets.
In the half-year to 30 June 2017, the Group
recorded a tax charge of £905 million compared to a charge of £597 million in the half-year to 30 June 2016, an
effective tax rate of 31 per cent, compared to the standard UK corporation tax rate of 19.25 per cent, principally as a result
of the banking surcharge and restrictions on the deductibility of conduct provisions.
REVIEW OF RESULTS
(continued)
Total assets were £2,874 million lower
at £814,919 million at 30 June 2017 compared to £817,793 million at 31 December 2016. Cash and balances at central
banks were £3,039 million, or 6 per cent, higher at £50,491 million at 30 June 2017 compared to
£47,452 million at 31 December 2016 as the Group takes advantage of opportunities for the placing of surplus funds.
Trading and other financial assets at fair value through profit or loss were £10,796 million, or 7 per cent, higher
at £161,970 million compared to £151,174 million at 31 December 2016 due to positive market movements on
policyholder investments and the inclusion of the Group’s investments in OEICs which are no longer consolidated. However,
loans and advances to banks were £18,037 million, or 67 per cent, lower at £8,865 million compared to
£26,902 million at 31 December 2016 as a result of a number of OEICs no longer being consolidated following a reduction
in the Group’s interest. Loans and advances to customers were £6,646 million higher at £464,604 million
at 30 June 2017 compared to £457,958 million at 31 December 2016; the addition of £7,878 million of lending
following the acquisition of MBNA and a £3,106 million increase in reverse repurchase agreement balances together with the
impact of the reacquisition of a portfolio of mortgages from TSB and growth in Consumer Finance and SME lending have more than
offset reductions in the larger corporate sector, as the Group focuses on optimising capital and returns, and in closed mortgage
books.
Total liabilities were £2,755 million
lower at £766,573 million at 30 June 2017 compared to £769,328 million at 31 December 2016. Deposits from banks
were £8,495 million, or 52 per cent, higher at £24,879 million at 30 June 2017 compared to £16,384 million
at 31 December 2016 as a result of an increase of £9,330 million in repurchase agreements, used as a favourable form of funding.
Customer deposits were £2,157 million higher at £417,617 million compared to £415,460 million at 31 December
2016 as a £1,499 million reduction in repurchase agreement balances and reductions in non-relationship deposit balances were
more than offset by strong inflows from Commercial clients. Debt securities in issue were £4,757 million, or 6 per cent,
lower at £71,557 million at 30 June 2017 compared to £76,314 million at 31 December 2016 following
maturities of some tranches of securitisation notes and covered bonds. Other liabilities were £5,295 million, or 14
per cent, lower at £32,114 million at 30 June 2017 compared to £37,409 million at 31 December 2016 reflecting
the deconsolidation of a number of OEICs.
Total equity was £119 million lower at £48,346 million at 30 June 2017 compared to £48,465 million at 31 December 2016; this reflected,
in particular, negative movements in the Group’s cash flow hedging reserve.
The Group’s transitional common equity
tier 1 capital ratio increased to 13.5 per cent at 30 June 2017 (31 December 2016: 13.4 per cent) reflecting a combination
of profit generation, the receipt of the dividend paid by the Insurance business in February 2017 and a reduction in the deferred
tax asset deducted from capital, offset by the accrual for foreseeable dividends in respect of the first half of 2017, movements
in the defined benefit pension schemes, an increase in the deduction for goodwill and other intangible assets following the acquisition
of MBNA and an increase in risk-weighted assets. The transitional tier 1 capital ratio reduced to 16.6 per cent (31 December 2016:
16.8 per cent) primarily reflecting the annual reduction in the transitional limit applied to grandfathered AT1 capital instruments
and the increase in risk-weighted assets, offset by the increase in common equity tier 1 capital. The total transitional capital
ratio reduced to 20.8 per cent (31 December 2016: 21.2 per cent), largely reflecting amortisation and foreign exchange movements
on tier 2 instruments and the overall increase in risk-weighted assets, partly offset by the transitioning of grandfathered AT1
instruments to tier 2.
Risk-weighted assets increased by £2,341
million, or 1 per cent, to £217,787 million at 30 June 2017, compared to £215,446 million at 31 December 2016, largely
reflecting the acquisition of MBNA and targeted growth in key customer segments, partly offset through active portfolio management,
disposals and other movements.
SEGMENTAL ANALYSIS OF PROFIT BEFORE TAX
BY DIVISION (UNAUDITED)
Underlying basis
|
|
Half-year
to 30 June
2017
|
|
Half-year
to 30 June
2016
|
|
Half-year
to 31 Dec
2016
|
|
|
£ million
|
|
£ million
|
|
£ million
|
|
|
|
|
|
|
|
Retail
|
|
1,598
|
|
1,548
|
|
1,455
|
Commercial Banking
|
|
1,437
|
|
1,236
|
|
1,232
|
Consumer Finance
|
|
759
|
|
690
|
|
593
|
Insurance
|
|
408
|
|
446
|
|
391
|
Other
|
|
290
|
|
241
|
|
35
|
Underlying profit before tax
|
|
4,492
|
|
4,161
|
|
3,706
|
The Group Executive Committee (GEC), which
is the chief operating decision maker for the Group, reviews the Group’s internal reporting based around these segments (which
reflect the Group’s organisational and management structures) in order to assess the Group’s performance and allocate
resources; this reporting is provided on an underlying profit before tax basis. The GEC believes that this basis better represents
the performance of the Group. IFRS 8 requires that the Group present its segmental profit before tax on the basis reviewed by the
chief operating decision maker that is most consistent with the measurement principles used in measuring the Group’s statutory
profit before tax. Accordingly, the Group presents its segmental underlying basis profit before tax in note 2 on page 53
of its financial statements in compliance with IFRS 8
Operating Segments
.
The aggregate total of the underlying basis
segmental results constitutes a non-GAAP measure as defined in the United States Securities and Exchange Commission’s Regulation
G. Management uses the aggregate and segmental underlying profit before tax, both non-GAAP measures, as measures of performance
and believes that they provide important information for investors because they are comparable representations of the Group’s
performance. Profit before tax is the comparable GAAP measure to aggregate underlying profit before tax; the following table sets
out the reconciliation of this non-GAAP measure to its comparable GAAP measure.
GROUP PROFIT RECONCILIATIONS
|
|
Half-year
to 30 June
2017
|
|
Half-year
to 30 June
2016
|
|
Half-year
to 31 Dec
2016
|
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
Underlying profit
|
|
4,492
|
|
4,161
|
|
3,706
|
Volatility and other items
|
|
|
|
|
|
|
Enhanced Capital Notes
|
|
–
|
|
(790)
|
|
–
|
Market volatility and asset sales
|
|
136
|
|
128
|
|
311
|
Amortisation of purchased intangibles
|
|
(38)
|
|
(168)
|
|
(172)
|
Restructuring costs
|
|
(321)
|
|
(307)
|
|
(315)
|
Fair value unwind and other
|
|
(135)
|
|
(110)
|
|
(121)
|
|
|
(358)
|
|
(1,247)
|
|
(297)
|
Payment protection insurance provision
|
|
(700)
|
|
–
|
|
(1,350)
|
Other conduct provisions
|
|
(540)
|
|
(460)
|
|
(625)
|
Profit before tax – statutory
|
|
2,894
|
|
2,454
|
|
1,434
|
Enhanced Capital Notes
The charge of £790 million for Enhanced
Capital Notes in the first half of 2016 represented the write-off of the embedded derivative and premium paid on the redemption
of remaining notes.
Market volatility and asset sales
Market volatility and asset sales of £136
million included positive volatility in the insurance business of £165 million. The credit of £128 million in
the half-year to 30 June 2016 included the gain on sale of Visa Europe of £484 million offset by negative volatility in the
insurance business of £372 million.
The Group’s insurance business has
policyholder liabilities that are supported by substantial holdings of investments. IFRS requires that the changes in both the
value of the liabilities and investments are reflected within the income statement. The value of the liabilities does not move
exactly in line with changes in the value of the investments. As the investments are substantial, movements in their value can
have a significant impact on the profitability of the Group. Management believes that it is appropriate to disclose the division’s
results on the basis of an expected return in addition to results based on the actual return. The impact of the actual return on
these investments differing from the expected return is included within insurance volatility.
Volatility comprises the following:
|
|
Half-year
to 30 June
2017
|
|
Half-year
to 30 June
2016
|
|
Half-year
to 31 Dec
2016
|
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
Insurance volatility
|
|
74
|
|
(328)
|
|
176
|
Policyholder interests volatility
|
|
110
|
|
(10)
|
|
251
|
Total volatility
|
|
184
|
|
(338)
|
|
427
|
Insurance hedging arrangements
|
|
(19)
|
|
(34)
|
|
(146)
|
Total
|
|
165
|
|
(372)
|
|
281
|
Amortisation of purchased intangibles
Amortisation of purchased intangibles was
lower at £38 million (half-year to 30 June 2016: £168 million) as certain intangible assets are now fully amortised.
Restructuring costs
Restructuring costs increased to £321
million and comprised severance costs relating to the Simplification programme, the rationalisation of the non-branch property
portfolio, the integration of MBNA and the work on implementing the
ring-fencing requirements.
GROUP PROFIT RECONCILIATIONS
(continued)
Payment protection insurance (PPI)
There was a charge of £700 million
charge for PPI (half-year to 30 June 2016: £nil) reflecting current claim levels, which remain above the Group’s previous
provision assumption. The additional provision will now cover reactive claims of around 9,000 per week through to the end
of August 2019.
Other conduct provisions
Other conduct provisions of £540 million
(half-year to 30 June 2016: £460 million) cover a number of items including packaged bank accounts and arrears handling.
Following a review of the Group’s arrears handling activities, the Group has put in place a number of actions to improve
further its handling of customers in these areas and the Group is reimbursing mortgage arrears fees. The Group is also currently
undertaking a review of the HBOS Reading fraud and is in the process of paying compensation to the victims of the fraud for economic
losses, ex-gratia payments and awards for distress and inconvenience. A provision of £100 million was taken and reflects
the estimated compensation costs for HBOS Reading.
DIVISIONAL RESULTS
RETAIL
Retail offers a broad range of financial
service products, including current accounts, savings and mortgages, to UK personal customers, including Wealth and small business
customers. It is also a distributor of insurance, and a range of long-term savings and investment products. Its aim is to be the
best bank for customers in the UK, by building deep and enduring relationships that deliver value to customers, as well as providing
them with greater choice and flexibility. It will maintain its multi-brand, multi-channel strategy, continue to simplify the business
and provide more transparent products, helping to improve service levels and reduce conduct risks.
Progress against strategic initiatives
Creating the best customer experience
|
·
|
Announced a new approach to overdrafts that is simple,
clear and puts customers in control.
|
|
·
|
Largest UK digital bank with nearly 13 million active online
users including over 8.5 million mobile users.
|
|
·
|
For the third year running, Lloyds Bank’s mobile
banking app has been independently ranked number one in the UK for functionality.
|
|
·
|
Implemented click to call technology enabling customers
to contact the call centre from the Group’s Mobile App without the need for additional ID verification for the majority
of transactions.
|
|
·
|
36 per cent increase in customers receiving their
mortgage offer in less than 14 days, with some offers completed in two working days.
|
|
·
|
Around 90 per cent of new branch savings accounts
opened in less than 30 minutes using new digital process, with appointment times halved.
|
|
·
|
Retail complaint volumes (excluding PPI) were down 24 per
cent in the year to date versus the same period in 2016.
|
Becoming simpler and more efficient
|
·
|
Continued investment in new distribution technology; iPads
introduced in more than 1,800 branches and used for over 5 million transactions since going live.
|
|
·
|
Maintained the UK’s largest branch network with a
21 per cent market share, despite a small number of branch closures.
|
|
·
|
Improving accessibility in rural areas by increasing the
number of mobile branches to 20, with further increases planned in the second half of the year.
|
Delivering sustainable growth
|
·
|
Continued the Group’s commitment to support first-time
buyers, with more than £5 billion lent so far in 2017, on track to meet the target of £10 billion in the year.
|
|
·
|
On track to exceed the Group’s commitment on start-up
businesses with over 63,000 supported in 2017 to date.
|
Financial performance
|
·
|
Underlying profit increased 3 per cent to £1,598
million with improved net interest margin and further cost reductions more than offsetting continued pressure on sources of other
income.
|
|
·
|
Net interest income increased 1 per cent reflecting a 6
basis point improvement in net interest margin partly offset by a reduction in interest-earning banking assets.
|
|
·
|
Other income was 15 per cent lower than the first half
of 2016, driven by changing customer needs.
|
|
·
|
Operating costs decreased 3 per cent to £2,077 million,
driven by further efficiency savings which have more than covered increased investment in the business.
|
|
·
|
Impairment charge decreased 14 per cent to £139 million,
benefiting from higher unsecured debt sales and a benign credit environment. Underlying credit quality remains stable.
|
|
·
|
Loans and advances to customers fell 1 per cent to £295.8
billion. Open book mortgage balances at 30 June were broadly stable compared to the end of 2016 after reflecting the reacquisition
of £1.7 billion of mortgages from TSB in the second quarter.
|
|
·
|
Customer deposits decreased 1 per cent to £269.4
billion, driven by the continued reduction in tactical balances.
|
|
·
|
Risk-weighted assets have remained broadly flat at £55.3
billion.
|
Performance summary
|
|
Half-year
|
|
Half-year
|
|
|
|
Half-year
|
|
|
|
|
to 30 June
|
|
to 30 June
|
|
|
|
to 31 Dec
|
|
|
|
|
2017
|
|
2016
|
|
Change
|
|
2016
|
|
Change
|
|
|
£m
|
|
£m
|
|
%
|
|
£m
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
3,337
|
|
3,296
|
|
1
|
|
3,201
|
|
4
|
Other income
|
|
477
|
|
558
|
|
(15)
|
|
495
|
|
(4)
|
Total income
|
|
3,814
|
|
3,854
|
|
(1)
|
|
3,696
|
|
3
|
Operating lease depreciation
|
|
–
|
|
–
|
|
|
|
–
|
|
|
Net income
|
|
3,814
|
|
3,854
|
|
(1)
|
|
3,696
|
|
3
|
Operating costs
|
|
(2,077)
|
|
(2,144)
|
|
3
|
|
(2,030)
|
|
(2)
|
Impairment
|
|
(139)
|
|
(162)
|
|
14
|
|
(211)
|
|
34
|
Underlying profit
|
|
1,598
|
|
1,548
|
|
3
|
|
1,455
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
Banking net interest margin
|
|
2.29%
|
|
2.23%
|
|
6bp
|
|
2.16%
|
|
13bp
|
Average interest-earning banking assets
|
|
£297.3bn
|
|
£305.0bn
|
|
(3)
|
|
£300.4bn
|
|
(1)
|
Asset quality ratio
|
|
0.09%
|
|
0.11%
|
|
(2)bp
|
|
0.14%
|
|
(5)bp
|
Impaired loans as % of closing advances
|
|
1.5%
|
|
1.4%
|
|
0.1pp
|
|
1.5%
|
|
–
|
Return on risk-weighted assets
|
|
5.83%
|
|
5.70%
|
|
13bp
|
|
5.21%
|
|
62bp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 June
|
|
At 31 Dec
|
|
|
|
|
2017
|
|
2016
|
|
Change
|
|
|
£bn
|
|
£bn
|
|
%
|
|
|
|
|
|
|
|
Loans and advances excluding closed portfolios
|
|
270.6
|
|
271.0
|
|
–
|
Closed portfolios
|
|
25.2
|
|
26.7
|
|
(6)
|
Loans and advances to customers
|
|
295.8
|
|
297.7
|
|
(1)
|
|
|
|
|
|
|
|
Relationship balances
|
|
254.9
|
|
253.8
|
|
|
Tactical balances
|
|
14.5
|
|
17.2
|
|
(16)
|
Customer deposits
|
|
269.4
|
|
271.0
|
|
(1)
|
|
|
|
|
|
|
|
Risk-weighted assets
|
|
55.3
|
|
55.2
|
|
−
|
|
|
|
|
|
|
|
COMMERCIAL BANKING
Commercial Banking has a client-led, low
risk, capital efficient strategy, helping UK-based clients and international clients with a link to the UK. Through its four client
facing divisions – SME, Mid Markets, Global Corporates and Financial Institutions – it provides clients with a range
of products and services such as lending, transactional banking, working capital management, risk management, debt capital markets
services, as well as access to private equity through Lloyds Development Capital.
Progress against strategic initiatives
Commercial Banking continues to meet its
strategic objective of improving returns on risk-weighted assets. In the first half of 2017, Commercial Banking has delivered a
return of 3.11 per cent significantly outperforming the commitment of 2.40 per cent for 2017.
Creating the best customer experience
|
·
|
Awarded Business Bank of the Year at the FDs’ Excellence
Awards for the 13th consecutive year.
|
|
·
|
Helping Britain prosper globally through its newly launched
International Trade Portal which provides clients with access to 110,000 importers, 30,000 suppliers, 25,000 market reports, 20,000
trade shows and live tenders.
|
Becoming simpler and more efficient
|
·
|
Continue to improve the end-to-end journey for clients
by significantly improving the way SMEs open an account with approximately 50 per cent of SME account openings in 2017 using
the new digital signature tool.
|
|
·
|
Increased digital capability; clients can now simply and
quickly place, review and renew their online deposits 24 hours a day which has improved client experiences.
|
Delivering sustainable growth
|
·
|
Participated in over £3.6 billion of financing in
the first half of 2017 to support UK government infrastructure projects.
|
|
·
|
On track to exceed the annual £1 billion Helping
Britain Prosper funding commitment for manufacturing businesses in each year since the commitment was made in 2014. The cumulative
target of £4 billion over four years has been met in the first half of the year, six months ahead of schedule.
|
Financial performance
|
·
|
Underlying profit increased 16 per cent to £1,437
million.
|
|
·
|
Return on risk-weighted assets increased to 3.11 per cent,
up 69 basis points, demonstrating the continued progress in delivering sustainable returns.
|
|
·
|
Income growth of 10 per cent to £2,525 million with
strong growth in Mid Markets and Global Corporates.
|
|
·
|
Net interest income up 9 per cent to £1,425 million,
supported by disciplined deposit pricing and expanded asset margins due to reduced funding costs. Net interest margin improved
by 27 basis points.
|
|
·
|
Other income up 12 per cent led by good franchise growth
including support given to Mid Market and Global Corporate clients with a number of significant refinancing and hedging transactions.
Growth in LDC driven by successful equity exits.
|
|
·
|
Operating lease depreciation reduced due to accelerated
charges in the prior year on certain leasing assets.
|
|
·
|
Operating costs up 2 per cent due to continued investment
in the business including simplifying the end-to-end customer journey. Disciplined management of staff-related costs has supported
positive operating jaws of 10 per cent.
|
|
·
|
Impairment charge of £13 million reflects effective
credit risk management and the continued low interest rate environment. Asset quality ratio remains low at 0.02 per cent.
|
|
·
|
Loans and advances fell 4 per cent to £95.9 billion
mainly due to reductions in Global Corporates. Lending growth in SME has remained at above market growth levels.
|
|
·
|
Deposits increased by 5 per cent to £138.8 billion.
Strong momentum in attracting high quality transactional banking deposits across the franchise that continues to support the balance
sheet strength of the Group.
|
|
·
|
Continued active portfolio management with risk-weighted
assets decreasing £5.2 billion, driven primarily by the reduction in loans and advances.
|
Performance summary
|
|
Half-year
|
|
Half-year
|
|
|
|
Half-year
|
|
|
|
|
to 30 June
|
|
to 30 June
|
|
|
|
to 31 Dec
|
|
|
|
|
2017
|
|
2016
|
|
Change
|
|
2016
|
|
Change
|
|
|
£m
|
|
£m
|
|
%
|
|
£m
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
1,425
|
|
1,306
|
|
9
|
|
1,429
|
|
–
|
Other income
|
|
1,100
|
|
982
|
|
12
|
|
1,005
|
|
9
|
Total income
|
|
2,525
|
|
2,288
|
|
10
|
|
2,434
|
|
4
|
Operating lease depreciation
|
|
(18)
|
|
(52)
|
|
65
|
|
(53)
|
|
66
|
Net income
|
|
2,507
|
|
2,236
|
|
12
|
|
2,381
|
|
5
|
Operating costs
|
|
(1,057)
|
|
(1,035)
|
|
(2)
|
|
(1,098)
|
|
4
|
Impairment (charge) release
|
|
(13)
|
|
35
|
|
|
|
(51)
|
|
75
|
Underlying profit
|
|
1,437
|
|
1,236
|
|
16
|
|
1,232
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
Banking net interest margin
|
|
3.45%
|
|
3.18%
|
|
27bp
|
|
3.33%
|
|
12bp
|
Average interest-earning banking assets
|
|
£84.9bn
|
|
£88.1bn
|
|
(4)
|
|
£89.0bn
|
|
(5)
|
Asset quality ratio
|
|
0.02%
|
|
(0.06)%
|
|
8bp
|
|
0.10%
|
|
(8)bp
|
Impaired loans as % of closing advances
|
|
2.0%
|
|
2.3%
|
|
(0.3)pp
|
|
2.2%
|
|
(0.2)pp
|
Return on risk-weighted assets
|
|
3.11%
|
|
2.42%
|
|
69bp
|
|
2.46%
|
|
65bp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 June
|
|
At 31 Dec
|
|
|
|
|
2017
|
|
2016
|
|
Change
|
|
|
£bn
|
|
£bn
|
|
%
|
|
|
|
|
|
|
|
Loans and advances to customers
|
|
95.9
|
|
100.4
|
|
(4)
|
Customer deposits
|
|
138.8
|
|
132.6
|
|
5
|
Risk-weighted assets
|
|
90.8
|
|
96.0
|
|
(5)
|
|
|
|
|
|
|
|
CONSUMER FINANCE
Consumer Finance comprises the Group’s
consumer lending products, including motor finance, credit cards (including MBNA), unsecured personal loans and its European consumer
business. Its aim is to deliver sustainable growth, within a prudent risk appetite in these markets through its multi-brand, multi-channel
distribution model.
Progress against strategic initiatives
The division continues to make significant
progress against its strategic objectives, and in June, successfully completed the acquisition of the MBNA credit card business
from Bank of America. The acquisition consolidates the Group’s position as Britain’s largest credit card issuer. Customer
assets have grown by £11 billion since the start of the year, primarily driven by £7.9 billion related to MBNA and
continued organic growth.
Creating the best customer experience
|
·
|
Consumer Cards customer complaints reduced 25 per cent
year-on-year, despite continued portfolio growth, as customer concerns are addressed and fixed.
|
|
·
|
Black Horse completed the first phase of its new digital
platform. This enables dealers to clearly present information to customers and submit applications via a tablet.
|
|
·
|
Lex Autolease launched a new website for both business
and personal customers, improving access from mobile devices.
|
|
·
|
Loans introduced upfront eligibility checking for existing
current account customers, and extended the Halifax offer beyond existing customers.
|
Becoming simpler and more efficient
|
·
|
Black Horse has simplified the process for new customers
through the introduction of welcome videos and the issuance of contract information digitally.
|
|
·
|
Lex Autolease has re-platformed its IT infrastructure,
improving IT resilience and doubling performance speed.
|
|
·
|
Bank of Scotland Germany has replaced its IT system with
a modular digital platform that the Group believes will result in an IT cost reduction of c.30 per cent over a five year period.
|
Delivering sustainable growth
|
·
|
Consumer Finance continues to closely monitor the economic
environment to maintain performance within its prudent risk appetite.
|
|
·
|
Continue to tighten lending criteria with increased conservatism
in residual risk management.
|
|
·
|
Lex Autolease has achieved its five year ambition to grow
the fleet by 100,000 vehicles, cementing its position as the UK’s leading motor vehicle leasing company.
|
Financial performance
|
·
|
Underlying profit at £759 million was up 10 per cent
(6 per cent excluding MBNA), mainly driven by higher income and lower impairments. Return on risk-weighted assets remained strong
at 4.36 per cent.
|
|
·
|
Net interest income at £1,041 million was up 5 per
cent from strong asset growth.
|
|
·
|
Other income was up 15 per cent at £755 million,
with continued fleet growth in Lex Autolease. This increase was partly offset by growth in associated operating lease depreciation.
|
|
·
|
Operating costs fell by 1 per cent to £463 million
through continued underlying efficiency savings.
|
|
·
|
Impairment charge down 2 per cent at £125 million
due to debt sales more than offsetting portfolio growth. Underlying asset quality ratio was broadly flat at 1.30 per cent.
|
|
·
|
UK customer assets were up 30 per cent since December 2016,
reflecting the acquisition of MBNA and continued growth in Black Horse, in particular through the partnership with Jaguar Land
Rover.
|
|
·
|
Customer deposits were down 10 per cent since December
2016 to £7.1 billion, in line with the Group’s deposit strategy.
|
Performance summary
|
|
Half-year
|
|
Half-year
|
|
|
|
Half-year
|
|
|
|
|
to 30 June
|
|
to 30 June
|
|
|
|
to 31 Dec
|
|
|
|
|
2017
1
|
|
2016
|
|
Change
|
|
2016
|
|
Change
|
|
|
£m
|
|
£m
|
|
%
|
|
£m
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
1,041
|
|
994
|
|
5
|
|
947
|
|
10
|
Other income
|
|
755
|
|
658
|
|
15
|
|
680
|
|
11
|
Total income
|
|
1,796
|
|
1,652
|
|
9
|
|
1,627
|
|
10
|
Operating lease depreciation
|
|
(449)
|
|
(368)
|
|
(22)
|
|
(407)
|
|
(10)
|
Net income
|
|
1,347
|
|
1,284
|
|
5
|
|
1,220
|
|
10
|
Operating costs
|
|
(463)
|
|
(466)
|
|
1
|
|
(473)
|
|
2
|
Impairment
|
|
(125)
|
|
(128)
|
|
2
|
|
(154)
|
|
19
|
Underlying profit
|
|
759
|
|
690
|
|
10
|
|
593
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
Banking net interest margin
|
|
5.58%
|
|
6.27%
|
|
(69)bp
|
|
5.52%
|
|
6bp
|
Average interest-earning banking assets
|
|
£37.9bn
|
|
£32.9bn
|
|
15
|
|
£34.9bn
|
|
9
|
Asset quality ratio
|
|
0.67%
|
|
0.79%
|
|
(12)bp
|
|
0.88%
|
|
(21)bp
|
Impaired loans as % of closing advances
|
|
1.8%
|
|
2.3%
|
|
(0.5)pp
|
|
2.1%
|
|
(0.3)pp
|
Return on risk-weighted assets
|
|
4.36%
|
|
4.47%
|
|
(11)bp
|
|
3.73%
|
|
63bp
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Includes MBNA with effect from 1 June 2017 (total income £63 million; operating costs £21 million; impairment £14 million).
|
|
|
|
|
At 30 June
|
|
At 31 Dec
|
|
|
|
|
2017
|
|
2016
|
|
Change
|
|
|
£bn
|
|
£bn
|
|
%
|
|
|
|
|
|
|
|
Loans and advances to customers
|
|
45.4
|
|
35.1
|
|
29
|
Operating lease assets
|
|
4.6
|
|
4.1
|
|
12
|
Total customer assets
|
|
50.0
|
|
39.2
|
|
28
|
Of which UK
|
|
42.7
|
|
32.8
|
|
30
|
|
|
|
|
|
|
|
Customer deposits
|
|
7.1
|
|
7.9
|
|
(10)
|
|
|
|
|
|
|
|
Risk-weighted assets
|
|
40.0
|
|
32.1
|
|
25
|
|
|
|
|
|
|
|
INSURANCE
The Insurance division is committed to providing
a range of trusted, value for money protection, general insurance, pension and investment products to meet the needs of its customers.
Scottish Widows, with customer funds under management of £124 billion, together with the general insurance business
help around 9 million customers to protect what they value most and to plan financially for the future.
Progress against strategic initiatives
The Group continues to invest in developing
the Insurance business and seeks to grow in areas where it has competitive advantage and is underrepresented, for the benefit of
both customers and shareholders.
Creating the best customer experience
|
·
|
Awarded ‘Pension Firm of the Year’ (FDs’
Excellence Awards), ‘Pensions Provider of the Year’ (Pensions Age Awards) and ‘Risk Reduction Provider of the
Year’ (UK Pensions Awards).
|
|
·
|
Helped almost 10,000 protection customers at the most difficult
and challenging times of their lives. An improved customer claim journey means that the percentage of new protection claims paid
is one of the highest in the industry.
|
Becoming simpler and more efficient
|
·
|
More than 40 per cent of corporate pension schemes are
now using the digital service for employers, which has significantly reduced processing times.
|
|
·
|
Launched a digital service for employees with workplace
pensions enabling individuals to view their pension value and contribution history, update personal details and access educational
material on pension basics.
|
Delivering sustainable growth
|
·
|
Collaborated with Commercial Banking to source lower risk,
long-maturity assets to match growing annuitant liabilities, providing finance to support two major UK infrastructure projects.
|
|
·
|
Annualised payments to annuity customers in retirement
have reached £1 billion, reflecting robust growth in this business.
|
|
·
|
Sums assured under Scottish Widows Protect have almost
doubled to £4.7 billion since the end of 2016.
|
|
·
|
Continuing the progress made in 2016, five further bulk
annuity transactions were successfully completed in the first half of 2017.
|
|
·
|
Corporate pension, planning and retirement funds under
management increased by 8 per cent to £38 billion reflecting net inflows and positive market movements.
|
|
·
|
Longstanding life, pensions and investment (LP&I) funds
under management remains stable.
|
Financial performance
|
·
|
Underlying profit decreased by 9 per cent to £408 million
as a result of lower bulk annuity transactions and increased investment costs in the first half of 2017. Compared to the second
half of 2016, underlying profit grew by 4 per cent.
|
|
·
|
Life and pensions sales increased by 4 per cent reflecting
growth in corporate pensions, planning and retirement and protection. Excluding bulk annuity deals, sales increased by 25 per
cent.
|
|
·
|
General insurance underwritten new business household premiums
have increased by 3 per cent, driven by the new flexible online offering launched in 2016. However, total underwritten premiums
have decreased by 13 per cent, reflecting the continued competitiveness of the household market and the run off of legacy products.
|
|
·
|
Costs increased to £414 million reflecting higher
investment expenditure with business as usual costs remaining broadly flat.
|
Capital
|
·
|
Paid an interim dividend of £75 million to the Group
in July 2017, bringing total dividends paid since the formation of the Group in 2009, to £7.2 billion.
|
|
·
|
The estimated post interim
dividend Solvency II ratio of 152 per cent (31 December 2016 post dividend position: 147 per cent) represents the shareholder
view of Solvency II surplus. The increase in the ratio primarily reflects in year earnings and favourable market volatility,
partly offset by capital invested in new business.
|
Performance summary
|
|
Half-year
|
|
Half-year
|
|
|
|
Half-year
|
|
|
|
|
to 30 June
|
|
to 30 June
|
|
|
|
to 31 Dec
|
|
|
|
|
2017
|
|
2016
|
|
Change
|
|
2016
|
|
Change
|
|
|
£m
|
|
£m
|
|
%
|
|
£m
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
(50)
|
|
(80)
|
|
38
|
|
(66)
|
|
24
|
Other income
|
|
872
|
|
921
|
|
(5)
|
|
834
|
|
5
|
Total income
|
|
822
|
|
841
|
|
(2)
|
|
768
|
|
7
|
Operating costs
|
|
(414)
|
|
(395)
|
|
(5)
|
|
(377)
|
|
(10)
|
Underlying profit
|
|
408
|
|
446
|
|
(9)
|
|
391
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
Life and pensions sales (PVNBP)
1
|
|
4,984
|
|
4,791
|
|
4
|
|
4,128
|
|
21
|
New business income
|
|
153
|
|
222
|
|
(31)
|
|
159
|
|
(4)
|
General insurance underwritten new GWP
2
|
|
38
|
|
37
|
|
3
|
|
38
|
|
–
|
General insurance underwritten total GWP
2
|
|
370
|
|
424
|
|
(13)
|
|
409
|
|
(10)
|
General insurance combined ratio
|
|
88%
|
|
89%
|
|
(1)pp
|
|
85%
|
|
3pp
|
Solvency II ratio
3
|
|
152%
|
|
144%
|
|
8pp
|
|
147%
|
|
5pp
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Present value of new business premiums.
|
2
|
Gross written premiums.
|
3
|
On a post dividend shareholder basis. The equivalent regulatory view of the ratio (including With Profits funds) is 147 per cent at 30 June 2017 (31 December 2016: 143 per cent).
|
Income by product group
|
|
Half-year to 30 June 2017
|
|
Half-year to 30 June 2016
|
|
|
|
|
New
|
|
Existing
|
|
|
|
New
|
|
Existing
|
|
|
|
Half-year
|
|
|
business
|
|
business
|
|
Total
|
|
business
|
|
business
|
|
Total
|
|
to 31 Dec
|
|
|
income
|
|
income
|
|
income
|
|
income
|
|
income
|
|
income
|
|
2016
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate pensions
|
|
50
|
|
48
|
|
98
|
|
69
|
|
52
|
|
121
|
|
106
|
Bulk annuities
|
|
40
|
|
13
|
|
53
|
|
84
|
|
6
|
|
90
|
|
47
|
Planning and retirement
|
|
46
|
|
45
|
|
91
|
|
58
|
|
47
|
|
105
|
|
99
|
Protection
|
|
10
|
|
10
|
|
20
|
|
8
|
|
9
|
|
17
|
|
19
|
Longstanding LP&I
|
|
7
|
|
220
|
|
227
|
|
3
|
|
223
|
|
226
|
|
223
|
|
|
153
|
|
336
|
|
489
|
|
222
|
|
337
|
|
559
|
|
494
|
Life and pensions experience and other items
|
|
|
|
|
|
191
|
|
|
|
|
|
124
|
|
99
|
General insurance
|
|
|
|
|
|
157
|
|
|
|
|
|
168
|
|
186
|
NII and free asset return
|
|
|
|
|
|
(15)
|
|
|
|
|
|
(10)
|
|
(11)
|
Total income
|
|
|
|
|
|
822
|
|
|
|
|
|
841
|
|
768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Presentation of 2016 income by product group restated to be aligned with 2017 proposition groupings.
|
New business income has decreased by £69
million to £153 million, driven by the timing of bulk annuity transactions and lower income from corporate pensions and planning
and retirement. Existing business income is broadly flat. Compared to the second half of 2016, new business income is stable.
Experience and other items contributed a
net benefit of £191 million (2016: £124 million). This included £170 million from the addition of a new death
benefit to certain legacy pension contracts, aligning terms with other similar products. An equivalent benefit of £184 million
in the first half of 2016 was partly offset by the impact of reforms on activity within the corporate pensions market.
General insurance income net of claims has
decreased by £11 million reflecting the continued competitiveness of the Home market and the run off of legacy products.
RUN-OFF AND CENTRAL ITEMS
RUN-OFF
|
|
Half-year
|
|
Half-year
|
|
|
|
Half-year
|
|
|
|
|
to 30 June
|
|
to 30 June
|
|
|
|
to 31 Dec
|
|
|
|
|
2017
|
|
2016
|
|
Change
|
|
2016
|
|
Change
|
|
|
£m
|
|
£m
|
|
%
|
|
£m
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
(48)
|
|
(59)
|
|
19
|
|
(51)
|
|
6
|
Other income
|
|
45
|
|
78
|
|
(42)
|
|
42
|
|
7
|
Total income
|
|
(3)
|
|
19
|
|
|
|
(9)
|
|
67
|
Operating lease depreciation
|
|
(28)
|
|
(8)
|
|
|
|
(7)
|
|
|
Net income
|
|
(31)
|
|
11
|
|
|
|
(16)
|
|
(94)
|
Operating costs
|
|
(23)
|
|
(38)
|
|
39
|
|
(39)
|
|
41
|
Impairment release
|
|
14
|
|
10
|
|
40
|
|
16
|
|
(13)
|
Underlying loss
|
|
(40)
|
|
(17)
|
|
|
|
(39)
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
At 30 June
|
|
At 31 Dec
|
|
|
|
|
|
2017
|
|
2016
|
|
Change
|
|
|
|
£bn
|
|
£bn
|
|
%
|
|
|
|
|
|
|
|
|
Loans and advances to customers
|
|
9.1
|
|
9.6
|
|
(5)
|
Total assets
|
|
10.7
|
|
11.3
|
|
(5)
|
Risk-weighted assets
|
|
8.1
|
|
8.5
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
·
|
The underlying loss increased to £40 million largely as a result of additional depreciation
charges on certain leasing assets.
|
|
·
|
Total run-off assets have reduced by a further 5 per cent since 31 December 2016.
|
CENTRAL ITEMS
|
|
|
|
|
|
|
|
|
Half-year
|
|
Half-year
|
|
Half-year
|
|
|
|
to 30 June
|
|
to 30 June
|
|
to 31 Dec
|
|
|
|
2017
|
|
2016
|
|
2016
|
|
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
Total income
|
|
319
|
|
221
|
|
109
|
|
Costs
|
|
16
|
|
37
|
|
(35)
|
|
Impairment charge
|
|
(5)
|
|
–
|
|
–
|
|
Underlying profit
|
|
330
|
|
258
|
|
74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
·
|
Central items includes income and expenditure not attributed to divisions, including the costs
of certain central and head office functions.
|
|
·
|
Total income included the gain on sale of the Group’s interest in VocaLink of £146 million
together with gains on sales of liquid assets and other items.
|
RISK MANAGEMENT
PRINCIPAL RISKS AND UNCERTAINTIES
The significant risks faced by the Group
which could impact the success of delivering against the Group’s long-term strategic objectives and through which global
macro-economic conditions, ongoing political uncertainty, regulatory developments and market liquidity dynamics could manifest,
are detailed below. Except where noted, there has been no significant change to the description of these risks or key mitigating
actions disclosed in the Group’s 2016 Annual Report and Accounts, with any quantitative disclosures updated herein.
The Group has already considered many of
the potential implications following the UK’s vote to leave the European Union and continues to manage related developments
to assess, and if possible mitigate any impact to its customers, colleagues and products − as well as all legal, regulatory,
tax, finance and capital implications.
Credit risk
– The risk that
customers and/or other counterparties whom the Group has either lent money to or entered into a financial contract with, or other
counterparties with whom the Group has contracted, fail to meet their financial obligations, resulting in loss to the Group. Adverse
changes in the economic and market environment the Group operates in or the credit quality and/or behaviour of the Group’s
customers and counterparties could reduce the value of the Group’s assets and potentially increase the Group’s write
downs and allowances for impairment losses, adversely impacting profitability.
Conduct risk
– Conduct risk
can arise from the failure to design products and services to ensure they are aligned to customer needs and to design and execute
sales processes to ensure products and services are offered only to those customers who need and will benefit from them. Additionally,
conduct risk can arise from the failure to provide ongoing support and service to customers and to recognise and respond to customer
complaints, providing appropriate rectification in a timely manner. Conduct risk can result from the failure to ensure that colleagues
behave in line with conduct, regulatory and ethical standards. Additionally, market conduct risks exist where actions taken can
disrupt the fair and effective operation of a market in which the Group is active.
Market risk
– The risk that
the Group’s capital or earnings profile is affected by adverse market rates, in particular interest rates and credit spreads
in the Banking business, equity and credit spreads in the Insurance business, and credit spreads in the Group’s Defined Benefit
Pension Schemes.
Operational risk
– The Group
faces significant operational risks, such as risk of cyber and terrorism, which may result in financial loss, disruption of services
to customers, and damage to its reputation. These include the availability, resilience and security of the Group’s core IT
systems and the potential for failings in the Group’s customer processes.
Capital risk
– The risk that
the Group has a sub-optimal quantity or quality of capital or that capital is inefficiently deployed across the Group.
Funding and liquidity risk
–
The risk that the Group has insufficient financial resources to meet its commitments as they fall due, or can only secure them
at excessive cost.
Regulatory and legal risk
–
The risks of changing legislation, regulation (including regulatory changes such as the Second Payment Services Directive and Open
Banking), policies, voluntary codes of practice and their interpretation in the markets in which the Group operates can have a
significant impact on the Group’s operations, business prospects, structure, costs and/or capital requirements and ability
to enforce contractual obligations.
Governance risk
– Against a
background of increased regulatory focus on governance and risk management, the most significant challenges arise from the requirement
to improve the resolvability of the Group and to ring-fence core UK financial services and activities from January 2019, and from
the further development of the UK Financial Conduct Authority’s Senior Managers and Certification Regime.
People risk
– Key people risks
include the risk that the Group fails to maintain organisational skills, capability, resilience and capacity levels in response
to increasing volumes of organisational, political and external market change.
Insurance risk
– Key insurance
risks within the Insurance business are longevity, persistency and property insurance. Longevity risk is expected to increase as
the Group’s presence in the bulk annuity market increases. Longevity is also the key insurance risk in the Group’s
Defined Benefit Pension Schemes.
CREDIT RISK PORTFOLIO
Overview
|
·
|
Asset quality remains strong with portfolios continuing to benefit from the Group’s proactive
approach to risk management, continued low interest rates, and a resilient UK economic environment.
|
|
·
|
Impaired loans as a percentage of closing loans and advances remained stable at 1.8 per cent, with
impaired loans reducing by £202 million to £8,293 million during the period, mainly due to a large disposal in Commercial
Banking during the first quarter and further reductions in Run-off.
|
|
·
|
The impairment charge increased by £23 million to £268 million in the first half.
The increase was driven by lower provision releases and write-backs which more than offset a reduction in gross impairment charges
mainly in Commercial Banking.
|
|
·
|
The asset quality ratio was 12 basis points (half-year to 30 June 2016: 11 basis points) with the
gross asset quality ratio (before releases and write-backs) falling 3 basis points compared with the same period in 2016 and
remaining stable compared with the first quarter of 2017.
|
|
·
|
The Group now expects the asset quality ratio for the year to be less than 20 basis points, including
MBNA.
|
Low risk culture and prudent risk appetite
|
·
|
The Group continues to operate a prudent approach to credit risk, with the portfolios benefiting
from the focus on credit quality at origination and a prudent through the cycle approach to credit risk appetite. The Group’s
portfolios are well positioned against current economic concerns and market volatility.
|
|
·
|
The Group’s credit processes and controls ensure effective risk management, including early
identification and management of customers and counterparties who may be showing signs of distress.
|
|
·
|
The Group has delivered lending growth in key segments without relaxing credit criteria.
|
|
·
|
Sector concentrations within the lending portfolios are closely monitored and controlled, with
mitigating actions taken where appropriate. Sector and product caps limit exposure to certain higher risk and vulnerable sectors
and asset classes:
|
|
-
|
The average indexed LTV of the Retail UK Secured portfolio at 30 June 2017
was 43.0 per cent (31 December 2016: 44.0 per cent). The percentage of closing loans and advances with an indexed LTV greater
than 100 per cent was 0.7 per cent (31 December 2016: 0.7 per cent).
|
|
-
|
Robust indebtedness and affordability controls continue to ensure new unsecured
lending is sustainable for customers.
|
|
-
|
Total UK Direct Real Estate gross lending across the Group was £19.4
billion at 30 June 2017 (31 December 2016: £19.9 billion) and includes Core Commercial Banking lending of £18.1 billion,
£0.5 billion booked in the Islands Commercial business and £0.2 billion within Retail Business Banking (within Retail
Division).
|
|
·
|
Run-off net external assets stood at £10,676 million at 30 June 2017, down from £11,336
million at 31 December 2016. The portfolio represents only 2.0 per cent of the overall Group’s loans and advances (31 December
2016: 2.1 per cent).
|
Impairment charge by division
|
|
Half-year
|
|
Half-year
|
|
|
|
Half-year
|
|
|
to 30 June
|
|
to 30 June
|
|
|
|
to 31 Dec
|
|
|
2017
|
|
2016
|
|
Change
|
|
2016
|
|
|
£m
|
|
£m
|
|
%
|
|
£m
|
Retail:
|
|
|
|
|
|
|
|
|
Secured
|
|
34
|
|
32
|
|
(6)
|
|
72
|
Overdrafts
|
|
94
|
|
120
|
|
22
|
|
121
|
Other
|
|
11
|
|
10
|
|
(10)
|
|
18
|
|
|
139
|
|
162
|
|
14
|
|
211
|
Commercial Banking:
|
|
|
|
|
|
|
|
|
SME
|
|
1
|
|
(5)
|
|
|
|
(2)
|
Other
|
|
12
|
|
(30)
|
|
|
|
53
|
|
|
13
|
|
(35)
|
|
|
|
51
|
Consumer Finance:
|
|
|
|
|
|
|
|
|
Credit Cards
|
|
49
|
|
59
|
|
17
|
|
77
|
Loans
|
|
30
|
|
42
|
|
29
|
|
28
|
UK Motor Finance
|
|
45
|
|
28
|
|
(61)
|
|
47
|
Europe
|
|
1
|
|
(1)
|
|
|
|
2
|
|
|
125
|
|
128
|
|
2
|
|
154
|
Run-off:
|
|
|
|
|
|
|
|
|
Ireland retail
|
|
4
|
|
–
|
|
|
|
(1)
|
Corporate real estate and other corporate
|
|
(7)
|
|
9
|
|
|
|
(8)
|
Specialist finance
|
|
(7)
|
|
(13)
|
|
(46)
|
|
11
|
Other
|
|
(4)
|
|
(6)
|
|
(33)
|
|
(18)
|
|
|
(14)
|
|
(10)
|
|
40
|
|
(16)
|
Central items
|
|
5
|
|
–
|
|
|
|
–
|
Total impairment charge
|
|
268
|
|
245
|
|
(9)
|
|
400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset quality ratio
|
|
0.12%
|
|
0.11%
|
|
1bp
|
|
0.18%
|
Gross asset quality ratio
|
|
0.23%
|
|
0.26%
|
|
(3)bp
|
|
0.29%
|
|
|
|
|
|
|
|
|
|
Total impairment charge comprises:
|
|
|
|
|
|
|
|
|
|
|
Half-year
|
|
Half-year
|
|
|
|
Half-year
|
|
|
to 30 June
|
|
to 30 June
|
|
|
|
to 31 Dec
|
|
|
2017
|
|
2016
|
|
Change
|
|
2016
|
|
|
£m
|
|
£m
|
|
%
|
|
£m
|
|
|
|
|
|
|
|
|
|
Loans and advances to customers
|
|
265
|
|
257
|
|
(3)
|
|
400
|
Debt securities classified as loans and receivables
|
|
(4)
|
|
–
|
|
|
|
–
|
Available-for-sale financial assets
|
|
6
|
|
–
|
|
|
|
–
|
Other credit risk provisions
|
|
1
|
|
(12)
|
|
|
|
–
|
Total impairment charge
|
|
268
|
|
245
|
|
(9)
|
|
400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group impaired loans and provisions
|
|
|
|
|
|
|
|
|
|
Impairment
|
|
|
|
|
|
|
Impaired
|
|
|
|
provisions
|
|
|
Loans and
|
|
|
|
loans as %
|
|
|
|
as % of
|
|
|
advances to
|
|
Impaired
|
|
of closing
|
|
Impairment
|
|
impaired
|
|
|
customers
|
|
loans
|
|
advances
|
|
provisions
1
|
|
loans
2
|
At 30 June 2017
|
|
£m
|
|
£m
|
|
%
|
|
£m
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Retail:
|
|
|
|
|
|
|
|
|
|
|
Secured
|
|
292,602
|
|
4,175
|
|
1.4
|
|
1,514
|
|
36.3
|
Overdrafts
|
|
1,964
|
|
168
|
|
8.6
|
|
84
|
|
80.8
|
Other
|
|
3,002
|
|
69
|
|
2.3
|
|
36
|
|
66.7
|
|
|
297,568
|
|
4,412
|
|
1.5
|
|
1,634
|
|
37.7
|
Commercial Banking:
|
|
|
|
|
|
|
|
|
|
|
SME
|
|
30,387
|
|
898
|
|
3.0
|
|
160
|
|
17.8
|
Other
|
|
66,263
|
|
1,014
|
|
1.5
|
|
581
|
|
57.3
|
|
|
96,650
|
|
1,912
|
|
2.0
|
|
741
|
|
38.8
|
Consumer Finance:
|
|
|
|
|
|
|
|
|
|
|
Credit Cards
|
|
17,634
|
|
413
|
|
2.3
|
|
263
|
|
82.7
|
Loans
|
|
7,967
|
|
259
|
|
3.3
|
|
109
|
|
86.5
|
UK Motor Finance
3
|
|
12,786
|
|
126
|
|
1.0
|
|
139
|
|
110.3
|
Europe
4
|
|
7,198
|
|
43
|
|
0.6
|
|
23
|
|
53.5
|
|
|
45,585
|
|
841
|
|
1.8
|
|
534
|
|
87.1
|
Run-off:
|
|
|
|
|
|
|
|
|
|
|
Ireland retail
|
|
4,472
|
|
138
|
|
3.1
|
|
127
|
|
92.0
|
Corporate real estate and other corporate
|
|
1,151
|
|
885
|
|
76.9
|
|
364
|
|
41.1
|
Specialist finance
|
|
2,958
|
|
24
|
|
0.8
|
|
37
|
|
154.2
|
Other
|
|
1,092
|
|
81
|
|
7.4
|
|
29
|
|
35.8
|
|
|
9,673
|
|
1,128
|
|
11.7
|
|
557
|
|
49.4
|
Reverse repos and other items
5
|
|
18,424
|
|
|
|
|
|
|
|
|
Total gross lending
|
|
467,900
|
|
8,293
|
|
1.8
|
|
3,466
|
|
43.4
|
Impairment provisions
|
|
(3,466)
|
|
|
|
|
|
|
|
|
Fair value adjustments
6
|
|
170
|
|
|
|
|
|
|
|
|
Total Group
|
|
464,604
|
|
|
|
|
|
|
|
|
|
|
1
|
Impairment provisions include collective unidentified impairment provisions.
|
2
|
Impairment provisions as a percentage of impaired loans are calculated excluding Retail and Consumer Finance loans in recoveries
(£64 million in Retail Overdrafts, £15 million in Retail Other, £95 million in Consumer Finance Credit Cards and £133 million in Consumer Finance Loans).
|
3
|
UK Motor Finance comprises the UK motor finance portfolios, principally Black Horse and Lex Autolease.
|
4
|
Europe comprises Netherlands mortgages and German Consumer Finance products.
|
5
|
Includes £6.8 billion of lower risk loans sold by Commercial Banking and Retail to Insurance to back annuitant liabilities.
|
6
|
The Group made adjustments to reflect the HBOS and MBNA loans and advances at fair value on acquisition. At 30 June 2017, the remaining fair value adjustment was £170 million comprising a positive adjustment of £300 million in respect of the MBNA assets and a negative adjustment of £130 million in respect of the HBOS assets. The fair value unwind in respect of impairment losses for the six months ended 30 June 2017 was £42 million (30 June 2016: £27 million). The fair value unwind in respect of loans and advances will reduce to zero over time.
|
|
|
|
|
|
|
|
|
|
|
Impairment
|
|
|
|
|
|
|
Impaired
|
|
|
|
provisions
|
|
|
Loans and
|
|
|
|
loans as %
|
|
|
|
as % of
|
|
|
advances to
|
|
Impaired
|
|
of closing
|
|
Impairment
|
|
impaired
|
|
|
customers
|
|
loans
|
|
advances
|
|
provisions
1
|
|
loans
2
|
At 31 December 2016
|
|
£m
|
|
£m
|
|
%
|
|
£m
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Retail:
|
|
|
|
|
|
|
|
|
|
|
Secured
|
|
294,503
|
|
4,104
|
|
1.4
|
|
1,503
|
|
36.6
|
Overdrafts
|
|
1,952
|
|
179
|
|
9.2
|
|
90
|
|
82.6
|
Other
|
|
3,038
|
|
71
|
|
2.3
|
|
37
|
|
67.3
|
|
|
299,493
|
|
4,354
|
|
1.5
|
|
1,630
|
|
38.2
|
Commercial Banking:
|
|
|
|
|
|
|
|
|
|
|
SME
|
|
29,959
|
|
923
|
|
3.1
|
|
173
|
|
18.7
|
Other
|
|
71,217
|
|
1,256
|
|
1.8
|
|
651
|
|
51.8
|
|
|
101,176
|
|
2,179
|
|
2.2
|
|
824
|
|
37.8
|
Consumer Finance:
|
|
|
|
|
|
|
|
|
|
|
Credit Cards
|
|
9,843
|
|
307
|
|
3.1
|
|
157
|
|
81.8
|
Loans
|
|
7,767
|
|
277
|
|
3.6
|
|
92
|
|
81.4
|
UK Motor Finance
|
|
11,555
|
|
120
|
|
1.0
|
|
127
|
|
105.8
|
Europe
|
|
6,329
|
|
41
|
|
0.6
|
|
20
|
|
48.8
|
|
|
35,494
|
|
745
|
|
2.1
|
|
396
|
|
85.0
|
Run-off:
|
|
|
|
|
|
|
|
|
|
|
Ireland retail
|
|
4,497
|
|
138
|
|
3.1
|
|
133
|
|
96.4
|
Corporate real estate and other corporate
|
|
1,190
|
|
896
|
|
75.3
|
|
399
|
|
44.5
|
Specialist finance
|
|
3,374
|
|
99
|
|
2.9
|
|
111
|
|
112.1
|
Other
|
|
1,198
|
|
84
|
|
7.0
|
|
39
|
|
46.4
|
|
|
10,259
|
|
1,217
|
|
11.9
|
|
682
|
|
56.0
|
Reverse repos and other items
3
|
|
15,249
|
|
|
|
|
|
|
|
|
Total gross lending
|
|
461,671
|
|
8,495
|
|
1.8
|
|
3,532
|
|
43.4
|
Impairment provisions
|
|
(3,532)
|
|
|
|
|
|
|
|
|
Fair value adjustments
|
|
(181)
|
|
|
|
|
|
|
|
|
Total Group
|
|
457,958
|
|
|
|
|
|
|
|
|
|
|
1
|
Impairment provisions include collective unidentified impairment provisions.
|
2
|
Impairment provisions as a percentage of impaired loans are calculated excluding Retail and Consumer Finance loans in recoveries
(£70 million in Retail Overdrafts, £16 million in Retail Other, £115 million in Consumer Finance Credit Cards and £164 million in Consumer Finance Loans).
|
3
|
Includes £6.7 billion of lower risk loans sold by Commercial Banking and Retail to Insurance to back annuitant liabilities.
|
Retail
|
·
|
Loans and advances in Retail contracted by 0.6 per cent to £297,568 million (31 December
2016: £299,493 million), driven by the Secured portfolio.
|
|
·
|
Asset quality remains strong across all portfolios. New business quality is stable with fewer loans
entering arrears, and remains within credit risk appetite.
|
|
·
|
Impaired loans as a percentage of closing advances remained stable at 1.5 per cent.
|
|
·
|
Impairment provisions as a percentage of impaired loans was broadly stable at 37.7 per cent (31
December 2016: 38.2 per cent).
|
|
·
|
The impairment charge decreased to £139 million (half-year to 30 June 2016: £162 million),
mostly due to debt sale write-backs in the Overdrafts portfolio.
|
Secured
|
·
|
Loans and advances reduced by 0.6 per cent on the Secured book to £292,602 million (31 December
2016: £294,503 million), with reductions in both the Mainstream and Buy-to-let portfolios. The closed Specialist portfolio
has continued to run-off, reducing by 5.3 per cent to £16,662 million (31 December 2016: £17,593 million).
|
|
·
|
The value of owner-occupier interest only loans reduced in the first half of 2017 by 4.3 per cent
to £69,505 million (31 December 2016: £72,651 million).
|
|
·
|
The value of mortgages greater than three months in arrears (excluding repossessions) reduced by
2.2 per cent to £5,900 million at 30 June 2017 (31 December 2016: £6,033 million). New business quality
remained stable and flows into arrears improved.
|
|
·
|
Impaired loans as a percentage of closing advances remained stable at 1.4 per cent.
|
|
·
|
Impairment provisions as a percentage of impaired loans remained
stable at 36.3 per cent (31 December 2016: 36.6 per cent), reflecting a continued prudent approach to provisioning.
|
|
·
|
The impairment charge was £34 million (half-year to 30 June 2016: £32 million).
|
|
·
|
The average indexed LTV of the portfolio improved to 43.0 per cent (31 December 2016: 44.0 per
cent). The percentage of loans and advances with an indexed LTV in excess of 100 per cent was unchanged at 0.7 per cent.
|
|
·
|
The average LTV for new mortgages written in the first half of 2017 was stable at 64.0 per cent
(31 December 2016: 64.4 per cent).
|
Overdrafts
|
·
|
Loans and advances increased by 0.6 per cent in the first half of 2017 to £1,964 million
(31 December 2016: £1,952 million).
|
|
·
|
Impaired loans as a percentage of closing advances were 8.6 per cent (31 December 2016: 9.2 per
cent).
|
|
·
|
Impairment provisions as a percentage of impaired loans decreased to 80.8 per cent (31 December
2016: 82.6 per cent).
|
|
·
|
The impairment charge decreased by 21.7 per cent to £94 million (half-year to 30 June 2016:
£120 million), largely due to increased debt sale write-backs and improved underlying performance.
|
Retail secured and unsecured loans and
advances to customers
|
|
|
|
|
|
|
At 30 June
|
|
At 31 Dec
|
|
|
|
2017
|
|
2016
|
|
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
Mainstream
|
|
221,832
|
|
222,450
|
|
Buy-to-let
|
|
54,108
|
|
54,460
|
|
Specialist
1
|
|
16,662
|
|
17,593
|
|
Total secured
|
|
292,602
|
|
294,503
|
|
|
|
|
|
|
|
Overdrafts
|
|
1,964
|
|
1,952
|
|
Wealth
|
|
1,993
|
|
2,034
|
|
Retail Business Banking
|
|
1,009
|
|
1,004
|
|
|
|
4,966
|
|
4,990
|
|
Total
|
|
297,568
|
|
299,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Specialist lending has been closed to new business since 2009.
|
Retail mortgages greater than three months
in arrears (excluding repossessions)
|
|
Number of cases
|
|
Total mortgage
accounts %
|
|
Value of loans
1
|
|
Total mortgage
balances %
|
|
|
June
|
|
Dec
|
|
June
|
|
Dec
|
|
June
|
|
Dec
|
|
June
|
|
Dec
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
Cases
|
|
Cases
|
|
%
|
|
%
|
|
£m
|
|
£m
|
|
%
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainstream
|
|
34,919
|
|
35,254
|
|
1.7
|
|
1.7
|
|
3,809
|
|
3,865
|
|
1.7
|
|
1.7
|
Buy-to-let
|
|
5,106
|
|
5,324
|
|
1.1
|
|
1.1
|
|
633
|
|
660
|
|
1.2
|
|
1.2
|
Specialist
|
|
8,869
|
|
9,078
|
|
7.4
|
|
7.2
|
|
1,458
|
|
1,508
|
|
8.8
|
|
8.6
|
Total
|
|
48,894
|
|
49,656
|
|
1.8
|
|
1.8
|
|
5,900
|
|
6,033
|
|
2.0
|
|
2.0
|
1
|
Value of loans represents total gross book value of mortgages more than three months in arrears.
|
The stock of repossessions decreased to
595 cases at 30 June 2017 compared to 678 cases at 31 December 2016.
Period end and average LTVs across the Retail
mortgage portfolios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainstream
|
|
Buy-to-let
|
|
Specialist
|
|
Total
|
|
Unimpaired
|
|
Impaired
|
|
|
|
%
|
|
%
|
|
%
|
|
%
|
|
%
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 June 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 60%
|
|
58.8
|
|
56.2
|
|
57.7
|
|
58.3
|
|
58.5
|
|
42.4
|
|
60% to 70%
|
|
17.0
|
|
24.0
|
|
17.4
|
|
18.3
|
|
18.3
|
|
17.8
|
|
70% to 80%
|
|
13.6
|
|
13.1
|
|
12.3
|
|
13.4
|
|
13.4
|
|
14.1
|
|
80% to 90%
|
|
8.1
|
|
4.5
|
|
6.9
|
|
7.4
|
|
7.4
|
|
10.4
|
|
90% to 100%
|
|
2.0
|
|
1.6
|
|
2.5
|
|
1.9
|
|
1.9
|
|
6.0
|
|
Greater than 100%
|
|
0.5
|
|
0.6
|
|
3.2
|
|
0.7
|
|
0.5
|
|
9.3
|
|
Total
|
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
|
Outstanding loan value (£m)
|
|
221,832
|
|
54,108
|
|
16,662
|
|
292,602
|
|
288,427
|
|
4,175
|
|
Average loan to value:
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock of residential mortgages
|
|
40.9
|
|
52.4
|
|
47.5
|
|
43.0
|
|
|
|
|
|
New residential lending
|
|
64.7
|
|
60.6
|
|
n/a
|
|
64.0
|
|
|
|
|
|
Impaired mortgages
|
|
50.7
|
|
69.2
|
|
61.4
|
|
54.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainstream
|
|
Buy-to-let
|
|
Specialist
|
|
Total
|
|
Unimpaired
|
|
Impaired
|
|
|
%
|
|
%
|
|
%
|
|
%
|
|
%
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 60%
|
|
56.8
|
|
52.0
|
|
53.8
|
|
55.8
|
|
56.0
|
|
38.3
|
60% to 70%
|
|
17.8
|
|
25.4
|
|
17.8
|
|
19.2
|
|
19.3
|
|
18.4
|
70% to 80%
|
|
14.0
|
|
14.4
|
|
13.6
|
|
14.0
|
|
14.0
|
|
15.3
|
80% to 90%
|
|
8.4
|
|
6.1
|
|
8.6
|
|
8.0
|
|
7.9
|
|
11.9
|
90% to 100%
|
|
2.4
|
|
1.5
|
|
3.1
|
|
2.3
|
|
2.2
|
|
6.8
|
Greater than 100%
|
|
0.6
|
|
0.6
|
|
3.1
|
|
0.7
|
|
0.6
|
|
9.3
|
Total
|
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
Outstanding loan value (£m)
|
|
222,450
|
|
54,460
|
|
17,593
|
|
294,503
|
|
290,399
|
|
4,104
|
Average loan to value:
1
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock of residential mortgages
|
|
41.8
|
|
53.7
|
|
49.2
|
|
44.0
|
|
|
|
|
New residential lending
|
|
65.0
|
|
61.9
|
|
n/a
|
|
64.4
|
|
|
|
|
Impaired mortgages
|
|
51.8
|
|
69.0
|
|
61.9
|
|
55.8
|
|
|
|
|
1
|
Average loan to value is calculated as total gross loans and advances as a percentage of the indexed total collateral of these loans and advances.
|
Commercial Banking
|
·
|
There was a net impairment charge of £13 million compared to a net release of £35 million
in the first half of 2016, primarily driven by a lower level of write-backs and provision releases, which more than offset a reduction
in gross charges. The portfolio continues to benefit from effective risk management, a relatively benign economic environment and
continued low interest rates.
|
|
·
|
Credit quality of the portfolio and new business remains good.
|
|
·
|
Impaired loans reduced by 12.3 per cent to £1,912 million compared with £2,179 million
at 31 December 2016 and as a percentage of loans and advances reduced to 2.0 per cent from 2.2 per cent at 31 December
2016.
|
|
·
|
Impairment provisions reduced to £741 million (31 December 2016: £824 million) and
included collective unidentified impairment provisions of £179 million (31 December 2016: £183 million). Provisions
as a percentage of impaired loans increased from 37.8 per cent to 38.8 per cent during the first half of 2017.
|
|
·
|
The UK faces a number of significant headwinds including the changing UK and global economic outlook
and uncertainty relating to EU exit negotiations which have the ability to impact the Commercial Banking portfolios.
|
|
·
|
Commercial Banking remains disciplined within its low risk appetite approach and credit risks continue
to be effectively managed. It manages and limits exposure to certain sectors and asset classes, and closely monitors credit quality,
sector and single name concentrations.
|
|
·
|
Internal and external key performance indicators continue to be monitored closely to help identify
early signs of any deterioration and portfolios remain subject to ongoing risk mitigation actions as appropriate.
|
|
·
|
Despite the uncertain economic headwinds, the portfolios are well positioned and the Group’s
through the cycle risk appetite approach is expected to remain unchanged. However, portfolios will not be immune and impairments
are likely to increase from their historic low levels, driven predominantly by lower levels of releases and write-backs.
|
Portfolios
|
·
|
The SME Banking portfolio continues to grow within prudent credit risk appetite parameters. Portfolio
credit quality has remained stable or improved across all key metrics.
|
|
·
|
The Mid Markets business remains UK-focused and performance generally reflects the underlying performance
of the UK economy. The first half of 2017 has seen a continuation of relatively benign credit conditions, underpinned by low interest
rates, GDP growth and low unemployment. Lower Sterling values have benefited exporters of goods and services while placing pressure
on margins in businesses reliant on imports for domestic consumption. This has not resulted in material increases in stress across
the bulk of the portfolio, with levels of default and impairment remaining low by historic standards.
|
|
·
|
The Global Corporates business continues to have a predominance of investment grade clients and
is performing well, with limited downgrades occurring in the first half of 2017.
|
|
·
|
The commercial real estate business within the Group’s Mid Markets and Global Corporate portfolio
is focused on clients operating in the UK commercial property market ranging in size from medium-sized private real estate entities
up to publicly listed property companies. Despite political uncertainties and the potential impact of withdrawal from the EU, the
market for UK real estate has continued to be resilient, with appetite from a range of investors. UK real estate continues to offer
attractive yields compared to other asset classes and the fall in Sterling has boosted the attractiveness to foreign investors.
Credit quality remains good with minimal impairments/stressed loans. Recognising this is a cyclical sector, appropriate caps are
in place to control exposure and business propositions continue to be written in line with a prudent, through the cycle risk appetite
with conservative LTVs, strong quality of income and proven management teams.
|
|
·
|
Financial Institutions serves predominantly investment grade counterparties with whom relationships
are either client focused or held to support the Group’s funding, liquidity or general hedging requirements. The portfolio
continues to be prudently managed within the Group’s conservative risk appetite and clearly defined sector strategies.
|
|
·
|
The Group continues to adopt a conservative stance across the Eurozone maintaining close portfolio
scrutiny and oversight particularly given the current macro environment and horizon risks.
|
Consumer Finance
|
·
|
Loans and advances in the Consumer Finance book grew by 28.4 per cent to £45,585 million
(31 December 2016: £35,494 million), mostly due to the acquisition of MBNA.
|
|
·
|
Asset quality remains strong. The quality of new business continues to be good, and remains within
credit risk appetite.
|
|
·
|
Robust indebtedness and affordability controls continue to ensure new lending is sustainable for
customers and the credit quality of the portfolio remains high.
|
|
·
|
Impaired loans grew by 12.9 per cent to £841 million (31 December 2016: £745 million)
largely reflecting the acquisition of MBNA. Impaired loans as a percentage of closing advances improved to 1.8 per cent (31 December
2016: 2.1 per cent) indicating an improvement in overall credit quality.
|
|
·
|
Impairment provisions as a percentage of impaired loans increased to 87.1 per cent (31 December
2016: 85.0 per cent), due to a one-off change relating to the alignment of policy across brands in Loans, and growth in the
UK Motor Finance portfolio coupled with prudent provisioning on residual value exposures.
|
|
·
|
The impairment charge was £125 million (half-year to 30 June 2016: £128 million) with
growth in UK Motor Finance, offset by larger debt sale benefits in both the Cards and Loans portfolios compared to the first half
of 2016.
|
Credit Cards
|
·
|
Loans and advances increased by 79.2 per cent to £17,634 million during the first half of
2017 (31 December 2016: £9,843 million), due to the acquisition of MBNA.
|
|
·
|
Impaired loans increased by 34.5 per cent to £413 million (31 December 2016: £307 million),
reflecting the acquisition of MBNA. Impaired loans as a percentage of closing loans and advances improved to 2.3 per cent (31 December
2016: 3.1 per cent), reflecting the continued sale of debt in recoveries and the good credit quality of the portfolio.
|
|
·
|
Impairment provisions as a percentage of impaired loans remained broadly stable at 82.7 per cent
(31 December 2016: 81.8 per cent).
|
|
·
|
The impairment charge decreased to £49 million (half-year to 30 June 2016: £59 million),
driven by larger debt sale benefits in the first half of 2017 compared to the first half of 2016.
|
Loans
|
·
|
Loans and advances increased by 2.6 per cent to £7,967 million in the first half of 2017
(31 December 2016: £7,767 million) and credit quality remained strong.
|
|
·
|
Impaired loans decreased by 6.5 per cent to £259 million (31 December 2016: £277 million),
largely due to the sale of debt in recoveries. Impaired loans as a percentage of closing loans and advances improved to 3.3 per
cent (31 December 2016: 3.6 per cent).
|
|
·
|
Impairment provisions as a percentage of impaired loans increased to 86.5 per cent (31 December
2016: 81.4 per cent), reflecting a one-off change relating to policy alignment across brands for franchised customers.
|
|
·
|
The impairment charge decreased to £30 million (half-year to 30 June 2016: £42 million),
driven by larger debt sale benefits in the first half of 2017 compared to the first half of 2016.
|
UK Motor Finance
|
·
|
Loans and advances increased by 10.7 per cent to £12,786 million during the first half of
2017 (31 December 2016: £11,555 million), with £583 million (47.4 per cent) of the growth occurring in the Jaguar Land
Rover partnership.
|
|
·
|
Impaired loans increased by 5.0 per cent to £126 million (31 December 2016: £120 million)
driven by book growth. Impaired loans as a percentage of closing loans and advances remained stable at 1.0 per cent.
|
|
·
|
Impairment provisions as a percentage of impaired loans increased to 110.3 per cent (31 December
2016: 105.8 per cent), reflecting continued prudence in provisions against residual value exposures.
|
|
·
|
The impairment charge was £45 million (half-year to 30 June 2016: £28 million),
driven by growth and seasoning in the portfolio.
|
Forbearance
The Group operates a number of schemes to
assist borrowers who are experiencing financial stress. Forbearance policies are disclosed in the Risk Management section of the
Group’s 2016 Annual Report and Accounts, pages 127 to 129.
Retail forbearance
At 30 June 2017, UK Secured loans and advances
currently or recently subject to forbearance improved to 0.6 per cent (31 December 2016: 0.7 per cent) of total UK Secured loans
and advances. Overdrafts loans and advances currently or recently subject to forbearance were 4.1 per cent (31 December 2016: 4.0
per cent) of total overdrafts loans and advances.
|
|
|
|
|
|
|
|
Impairment provisions
|
|
|
Total loans and
|
|
Total forborne loans
|
|
as % of loans and
|
|
|
advances which are
|
|
and advances which are
|
|
advances which are
|
|
|
forborne
|
|
impaired
|
|
forborne
|
|
|
At June
|
|
At Dec
|
|
At June
|
|
At Dec
|
|
At June
|
|
At Dec
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
%
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK Secured lending:
|
|
|
|
|
|
|
|
|
|
|
|
|
Temporary forbearance arrangements
|
|
|
|
|
|
|
|
|
|
|
|
|
Reduced payment arrangements
1
|
|
299
|
|
428
|
|
82
|
|
101
|
|
5.9
|
|
4.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent treatments
|
|
|
|
|
|
|
|
|
|
|
|
|
Repair and term extensions
2
|
|
1,342
|
|
1,668
|
|
93
|
|
116
|
|
4.7
|
|
4.7
|
Total
|
|
1,641
|
|
2,096
|
|
175
|
|
217
|
|
4.9
|
|
4.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Overdrafts
3
:
|
|
80
|
|
78
|
|
69
|
|
61
|
|
46.0
|
|
38.0
|
1
|
Includes customers who had an arrangement to pay less than the contractual amount at 30 June or where an arrangement ended within the previous three months.
|
2
|
Includes capitalisation of arrears and term extensions which commenced during the previous 24 months and where the borrowers remain as customers at 30 June.
|
3
|
Includes temporary treatments where the customer is currently benefiting from change or the treatment has ended within the last six months.
|
Commercial Banking forbearance
At 30 June 2017, £2,321 million (31
December 2016: £2,645 million) of total loans and advances were forborne of which £1,912 million (31 December
2016: £2,179 million) were impaired. Impairment provisions as a percentage of forborne loans and advances increased from
31.2 per cent at 31 December 2016 to 31.9 per cent at 30 June 2017. Unimpaired forborne loans and advances were £409 million
at 30 June 2017 (31 December 2016: £466 million).
The table below sets out the Group’s
largest unimpaired forborne loans and advances to commercial customers (exposures over £5 million) as at 30 June 2017 by
type of forbearance:
|
|
30 June
|
|
31 Dec
|
|
|
2017
|
|
2016
|
|
|
£m
|
|
£m
|
|
|
|
|
|
Type of unimpaired forbearance:
|
|
|
|
|
Exposures > £5m
1
|
|
|
|
|
Covenants
|
|
122
|
|
153
|
Extensions/alterations
|
|
–
|
|
7
|
Multiple
|
|
11
|
|
21
|
|
|
133
|
|
181
|
Exposures < £5m
1
|
|
276
|
|
285
|
Total
|
|
409
|
|
466
|
1
|
Material portfolios only.
|
Consumer Finance forbearance
At 30 June 2017, total loans and advances
currently or recently subject to forbearance as a percentage of total loans and advances had reduced across the major Consumer
Finance portfolios (30 June 2017: 1.3 per cent; 31 December 2016: 1.4 per cent), with decreases in Consumer Credit Cards (including
MBNA) and Loans offset by an increase in UK Motor Finance.
|
|
Total loans and advances which are forborne
|
|
Total forborne loans and advances which are impaired
|
|
Impairment provisions as % of loans and advances which are forborne
|
|
|
30 June
|
|
31 Dec
|
|
30 June
|
|
31 Dec
|
|
30 June
|
|
31 Dec
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
%
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Credit Cards
1
|
|
302
|
|
212
|
|
194
|
|
119
|
|
34.7
|
|
29.0
|
Loans
2
|
|
53
|
|
49
|
|
50
|
|
46
|
|
42.8
|
|
44.4
|
UK Motor Finance Retail
2
|
|
109
|
|
117
|
|
50
|
|
62
|
|
23.2
|
|
27.0
|
1
|
Includes temporary treatments where the customer is currently benefiting from the change or the treatment has ended within the last six months. Permanent changes, such as returning a Card account in arrears to an in-order status, which commenced during the last 24 months for existing customers as at 30 June are also included. 30 June 2017 balances include MBNA (forborne loans; £110 million; impaired loans: £86 million).
|
2
|
Includes temporary treatments where the customer is currently benefiting from the change or the treatment has ended within the last six months. Permanent changes, such as refinancing, for existing customers as at 30 June are also included.
|
FUNDING AND LIQUIDITY MANAGEMENT
During the first half of 2017 the Group
has maintained its strong funding and liquidity position, with a loan to deposit ratio of 109 per cent. The combination of a strong
balance sheet and access to a range of funding markets, including government and central bank schemes, provides the Group with
a broad range of options with respect to funding the balance sheet.
The Group ran a small excess liquidity position
during the first half of 2017 in anticipation of the acquisition of MBNA. Following completion of this acquisition, the excess
liquidity position has reduced, although the Group continues to meet the Liquidity Coverage Ratio (LCR) requirements, with a ratio
in excess of 100 per cent.
Loans and advances to customers were £453.2 billion
compared with £449.7 billion at 31 December 2016. Growth in lending balances was primarily driven by the acquisition of MBNA
in addition to continued growth in lending to Consumer Finance and SME customers. Total customer deposits increased by £3.6
billion to £416.6 billion at 30 June 2017.
Wholesale funding has decreased by £8.5
billion to £102.3 billion; the amount with a residual maturity less than one year fell to £30.4 billion (£35.1
billion at 31 December 2016). The Group’s term funding ratio (wholesale funding with a remaining life of over one year as
a percentage of total wholesale funding) has increased to 70 per cent (31 December 2016: 68 per cent). In the first half
of 2017, the Group drew down £9 billion of funding from the Bank of England’s Term Funding Scheme (TFS), which has
contributed to the lower new issuance volumes seen in the last six months. As at 30 June 2017 the total amount outstanding
under the Funding for Lending Scheme (FLS) was £30.1 billion and under the TFS was £13.5 billion.
The credit ratings and outlook on Lloyds
Bank were unchanged during the first half of 2017, and the median credit rating among the three major credit rating agencies remains
‘A+’.
Group funding position
|
|
|
|
|
|
|
|
|
At 30 June
|
|
At 31 Dec
|
|
|
|
|
|
2017
|
|
2016
|
|
Change
|
|
|
|
£bn
|
|
£bn
|
|
%
|
|
|
|
|
|
|
|
|
|
Funding requirement
|
|
|
|
|
|
|
|
Loans and advances to customers
1
|
|
453.2
|
|
449.7
|
|
1
|
|
Loans and advances to banks
2
|
|
6.2
|
|
5.1
|
|
22
|
|
Debt securities
|
|
3.8
|
|
3.4
|
|
12
|
|
Reverse repurchase agreements
|
|
0.7
|
|
0.5
|
|
40
|
|
Available-for-sale financial assets – non-LCR eligible
3
|
|
1.0
|
|
1.9
|
|
(47)
|
|
Cash and balances at central bank – non-LCR eligible
4
|
|
3.8
|
|
4.8
|
|
(21)
|
|
Funded assets
|
|
468.7
|
|
465.4
|
|
1
|
|
Other assets
5
|
|
244.5
|
|
249.9
|
|
(2)
|
|
|
|
713.2
|
|
715.3
|
|
–
|
|
On balance sheet LCR eligible liquidity assets
|
|
|
|
|
|
|
|
Reverse repurchase agreements
|
|
11.5
|
|
8.7
|
|
32
|
|
Cash and balances at central banks
4
|
|
46.7
|
|
42.7
|
|
9
|
|
Available-for-sale financial assets
|
|
50.8
|
|
54.6
|
|
(7)
|
|
Trading and fair value through profit and loss
|
|
(3.2)
|
|
1.8
|
|
|
|
Repurchase agreements
|
|
(4.1)
|
|
(5.3)
|
|
(23)
|
|
|
|
101.7
|
|
102.5
|
|
(1)
|
|
Total Group assets
|
|
814.9
|
|
817.8
|
|
–
|
|
Less: other liabilities
5
|
|
(247.7)
|
|
(245.5)
|
|
1
|
|
Funding requirement
|
|
567.2
|
|
572.3
|
|
(1)
|
|
Funded by
|
|
|
|
|
|
|
|
Customer deposits
6
|
|
416.6
|
|
413.0
|
|
1
|
|
Wholesale funding
7
|
|
102.3
|
|
110.8
|
|
(8)
|
|
|
|
518.9
|
|
523.8
|
|
(1)
|
|
Total equity
|
|
48.3
|
|
48.5
|
|
–
|
|
Total funding
|
|
567.2
|
|
572.3
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Excludes reverse repos of £11.4 billion (31 December 2016: £8.3 billion).
|
2
|
Excludes £1.9 billion (31 December 2016: £20.9 billion) of loans and advances to banks within the Insurance business and £0.8 billion (31 December 2016: £0.9 billion) of reverse repurchase agreements.
|
3
|
Non-LCR eligible liquid assets comprise a diversified pool of highly rated unencumbered collateral (including retained issuance).
|
4
|
Cash and balances at central banks are combined in the Group’s balance sheet.
|
5
|
Other assets and other liabilities primarily include balances in the Group’s Insurance business and the fair value of derivative assets and liabilities.
|
6
|
Excludes repos of £1.0 billion (31 December 2016: £2.5 billion).
|
7
|
The Group’s definition of wholesale funding aligns with that used by other international market participants; including interbank deposits, debt securities in issue and subordinated liabilities.
|
Reconciliation of Group funding to the balance
sheet
|
|
|
|
Repos
|
|
|
|
|
|
|
|
|
and cash
|
|
Fair value
|
|
|
|
|
Included in
|
|
collateral
|
|
and other
|
|
|
|
|
funding
|
|
received by
|
|
accounting
|
|
Balance
|
|
|
analysis
|
|
Insurance
|
|
methods
|
|
sheet
|
At 30 June 2017
|
|
£bn
|
|
£bn
|
|
£bn
|
|
£bn
|
|
|
|
|
|
|
|
|
|
Deposits from banks
|
|
7.0
|
|
17.5
|
|
0.4
|
|
24.9
|
Debt securities in issue
|
|
76.7
|
|
–
|
|
(5.1)
|
|
71.6
|
Subordinated liabilities
|
|
18.6
|
|
–
|
|
–
|
|
18.6
|
Total wholesale funding
|
|
102.3
|
|
17.5
|
|
|
|
|
Customer deposits
|
|
416.6
|
|
1.0
|
|
–
|
|
417.6
|
Total
|
|
518.9
|
|
18.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits from banks
|
|
8.1
|
|
8.0
|
|
0.3
|
|
16.4
|
Debt securities in issue
|
|
83.0
|
|
–
|
|
(6.7)
|
|
76.3
|
Subordinated liabilities
|
|
19.7
|
|
–
|
|
0.1
|
|
19.8
|
Total wholesale funding
|
|
110.8
|
|
8.0
|
|
|
|
|
Customer deposits
|
|
413.0
|
|
2.5
|
|
–
|
|
415.5
|
Total
|
|
523.8
|
|
10.5
|
|
|
|
|
Analysis of 2017 total wholesale funding
by residual maturity
|
|
Less
|
|
|
|
|
|
|
|
Nine
|
|
|
|
|
|
More
|
|
Total
|
|
Total
|
|
|
than
|
|
One to
|
|
Three
|
|
Six to
|
|
months
|
|
One to
|
|
Two to
|
|
than
|
|
at
|
|
at
|
|
|
one
|
|
three
|
|
to six
|
|
nine
|
|
to one
|
|
two
|
|
five
|
|
five
|
|
30 June
|
|
31 Dec
|
|
|
month
|
|
months
|
|
months
|
|
months
|
|
year
|
|
years
|
|
years
|
|
years
|
|
2017
|
|
2016
|
|
|
£bn
|
|
£bn
|
|
£bn
|
|
£bn
|
|
£bn
|
|
£bn
|
|
£bn
|
|
£bn
|
|
£bn
|
|
£bn
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposit from banks
|
|
6.2
|
|
0.7
|
|
0.1
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
7.0
|
|
8.1
|
Debt securities in issue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit
|
|
1.7
|
|
3.4
|
|
2.2
|
|
1.4
|
|
1.3
|
|
–
|
|
–
|
|
–
|
|
10.0
|
|
7.5
|
Commercial paper
|
|
1.8
|
|
1.6
|
|
0.3
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
3.7
|
|
3.2
|
Medium-term notes
1
|
|
0.3
|
|
1.0
|
|
0.2
|
|
1.4
|
|
0.6
|
|
3.8
|
|
12.4
|
|
14.5
|
|
34.2
|
|
36.9
|
Covered bonds
|
|
–
|
|
–
|
|
–
|
|
1.6
|
|
0.7
|
|
2.0
|
|
11.5
|
|
8.8
|
|
24.6
|
|
29.1
|
Securitisation
|
|
0.1
|
|
0.5
|
|
0.8
|
|
0.4
|
|
–
|
|
0.8
|
|
1.3
|
|
0.3
|
|
4.2
|
|
6.3
|
|
|
3.9
|
|
6.5
|
|
3.5
|
|
4.8
|
|
2.6
|
|
6.6
|
|
25.2
|
|
23.6
|
|
76.7
|
|
83.0
|
Subordinated liabilities
|
|
–
|
|
0.4
|
|
–
|
|
0.2
|
|
1.5
|
|
0.8
|
|
3.5
|
|
12.2
|
|
18.6
|
|
19.7
|
Total wholesale funding
2
|
|
10.1
|
|
7.6
|
|
3.6
|
|
5.0
|
|
4.1
|
|
7.4
|
|
28.7
|
|
35.8
|
|
102.3
|
|
110.8
|
Of which issued by Lloyds Banking Group plc
3
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
2.8
|
|
7.3
|
|
10.1
|
|
7.4
|
1
|
At 31 December 2016, medium term notes included £1.4 billion of funding from the National Loan Guarantee Scheme. This matured in May 2017.
|
2
|
The Group’s definition of wholesale funding aligns with that used by other international market participants; including interbank deposits, debt securities in issue and subordinated liabilities.
|
3
|
Consists of medium-term notes (30 June 2017: £5.4 billion, 31 December 2016: £2.5 billion) and subordinated liabilities (30 June 2017: £4.6 billion, 31 December 2016: £4.9 billion). These amounts excluded AT1 securities (30 June 2017: £5.4 billion, 31 December 2016: £5.4 billion).
|
Analysis of 2017 term issuance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
Sterling
|
|
US Dollar
|
|
Euro
|
|
currencies
|
|
Total
|
|
|
|
£bn
|
|
£bn
|
|
£bn
|
|
£bn
|
|
£bn
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitisation
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
Medium-term notes
|
|
–
|
|
2.2
|
|
0.9
|
|
–
|
|
3.1
|
|
Covered bonds
|
|
1.0
|
|
–
|
|
–
|
|
–
|
|
1.0
|
|
Private placements
1
|
|
0.1
|
|
0.2
|
|
0.1
|
|
–
|
|
0.4
|
|
Subordinated liabilities
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
Total issuance
|
|
1.1
|
|
2.4
|
|
1.0
|
|
–
|
|
4.5
|
|
Of which issued by
Lloyds Banking Group plc
2
|
|
–
|
|
2.2
|
|
0.9
|
|
–
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Private placements include structured bonds and term repurchase agreements (repos).
|
2
|
Consists of medium-term notes.
|
Gross term issuance for the first half of
2017 totalled £4.5 billion. The Group continues to maintain a diversified approach to funding markets with trades in public
and private format, secured and unsecured products and a wide range of currencies and markets. For 2017, the Group will continue
to maintain this diversified approach to funding, including capital and funding from the holding company, Lloyds Banking Group
plc, as needed to transition towards final UK Minimum Requirements for Own Funds and Eligible Liabilities (MREL). The maturities
for the FLS and TFS are fully factored into the Group’s funding plan.
Liquidity portfolio
At 30 June 2017, the Banking business had
£122.3 billion of highly liquid unencumbered LCR eligible assets, of which £121.7 billion is LCR level 1 eligible
and £0.6 billion is LCR level 2 eligible. These assets are available to meet cash and collateral outflows and PRA regulatory
requirements. A separate liquidity portfolio to mitigate any insurance liquidity risk is managed within the Insurance business.
LCR eligible liquid assets represent over seven times the Group’s money market funding less than one year maturity (excluding
derivative collateral margins and settlement accounts) and exceed total wholesale funding, and thus provides a substantial buffer
in the event of continued market dislocation.
|
|
At 30 June
|
|
At 31 Dec
|
|
|
|
Average
|
|
Average
|
|
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
|
£bn
|
|
£bn
|
|
%
|
|
£bn
|
|
£bn
|
Level 1
|
|
|
|
|
|
|
|
|
|
|
Cash and central bank reserves
|
|
46.7
|
|
42.7
|
|
9
|
|
53.1
|
|
53.7
|
High quality government/MDB/agency bonds
1
|
|
74.1
|
|
75.3
|
|
(2)
|
|
74.7
|
|
72.4
|
High quality covered bonds
|
|
0.9
|
|
2.3
|
|
(61)
|
|
1.0
|
|
2.4
|
Total
|
|
121.7
|
|
120.3
|
|
1
|
|
128.8
|
|
128.5
|
|
|
|
|
|
|
|
|
|
|
|
Level 2
2
|
|
0.6
|
|
0.5
|
|
20
|
|
0.5
|
|
0.5
|
Total LCR eligible assets
|
|
122.3
|
|
120.8
|
|
1
|
|
129.3
|
|
129.0
|
1
|
Designated multilateral development bank (MDB).
|
2
|
Includes Level 2A and Level 2B.
|
The Banking business also had £102.1
billion of secondary, non-LCR eligible liquidity, the vast majority of which is eligible for use in a range of central bank or
similar facilities and the Group routinely makes use of as part of its normal liquidity management practices. Future use of such
facilities will be based on prudent liquidity management and economic considerations, having regard for external market conditions.
The Group considers diversification across
geography, currency, markets and tenor when assessing appropriate holdings of liquid assets. This liquidity is managed as a single
pool in the centre and is under the control of the function charged with managing the liquidity of the Group. It is available for
deployment at immediate notice, subject to complying with regulatory requirements.
Encumbered assets
The Board and GALCO monitor and manage total
balance sheet encumbrance using a number of risk appetite metrics. At 30 June 2017, the Group had £79.1 billion (31 December
2016: £83.5 billion) of externally encumbered on balance sheet assets with counterparties other than central banks. The decrease
in encumbered assets was primarily driven by a reduction in balances held within the Group’s issuance programmes.
The Group also had £586.5 billion
(31 December 2016: £580.9 billion) of unencumbered on balance sheet assets, and £149.3 billion (31 December 2016:
£153.5 billion) of pre-positioned and encumbered assets held with central banks. The Group encumbers mortgages, unsecured
lending and credit card receivables through the issuance programmes and tradable securities through securities financing activity.
The Group mainly positions mortgage assets at central banks. The 2016 Annual Report and Accounts includes further details on how
the Group classifies assets for encumbrance purposes.
CAPITAL MANAGEMENT
Analysis of capital position
Excluding the capital impact of the acquisition
of MBNA Limited on 1 June 2017, the Group generated around 1.2 per cent of CET1 capital on an adjusted basis (pre dividend) during
the first half of 2017, primarily as a result of:
|
·
|
Strong underlying capital generation of 1.4 per cent, largely driven by underlying profits, offset
by a reduction of (0.6) per cent for conduct charges;
|
|
·
|
Other items, netting to 0.4 per cent, largely representing a pre MBNA reduction in risk-weighted
assets through active portfolio management, disposals, capital efficient securitisation activity, yield curve movements and FX movements,
partly offset by targeted growth in key customer segments.
|
In addition, the Group utilised the CET1
capital retained at 31 December 2016 to cover the acquisition of MBNA.
The combined effect of the capital generated
during the period and the acquisition of MBNA resulted in a pre dividend increase of around 0.4 per cent in the Group’s CET1
ratio from 13.6 per cent adjusted at 31 December 2016 to 14.0 per cent on an adjusted basis. After accruing for foreseeable
dividends the Group’s CET1 ratio reduced by 0.5 per cent to 13.5 per cent on an adjusted basis.
The accrual for foreseeable dividends includes
the declared interim ordinary dividend of 1.0 pence per ordinary share.
The transitional total capital ratio, after
accruing for foreseeable dividends, reduced by 0.4 per cent to 20.8 per cent, largely reflecting amortisation and foreign exchange
movements on tier 2 instruments and the overall increase in risk-weighted assets following the acquisition of MBNA.
In the first quarter of 2017, the Bank of
England communicated indicative non-binding guidance to the Group on meeting the Minimum Requirement for Own Funds and Eligible
Liabilities (MREL), prior to the application of regulatory buffers, as being the higher of:
|
·
|
6 per cent leverage exposure and 20.5 per cent of risk-weighted assets by 1 January 2020
|
|
·
|
6 per cent leverage exposure and 25.1 per cent of risk-weighted assets by 1 January 2022
|
During the first half of 2017 the Group
issued £3.1 billion (sterling equivalent) of senior unsecured securities from Lloyds Banking Group plc which, while
not included in total capital, are eligible to meet MREL. Combined with previous issuances made during 2016 the Group remains well
positioned to meet MREL requirements from 2020 and, as at 30 June 2017, had a transitional MREL ratio of 22.7 per cent.
The leverage ratio, after accruing for foreseeable
dividends remained at 4.9 per cent on an adjusted basis.
An analysis of the Group’s capital
position as at 30 June 2017 is presented in the following section on both a CRD IV transitional arrangements basis and a CRD IV
fully loaded basis.
The table below summarises the consolidated
capital position of the Group.
|
|
|
|
|
|
|
|
|
|
|
Transitional
|
|
Fully loaded
|
|
|
At 30 June
|
|
At 31 Dec
|
|
At 30 June
|
|
At 31 Dec
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Capital resources
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
Common equity tier 1
|
|
|
|
|
|
|
|
|
Shareholders’ equity per balance sheet
|
|
42,513
|
|
42,670
|
|
42,513
|
|
42,670
|
Adjustment to retained earnings for foreseeable dividends
|
|
(1,080)
|
|
(1,568)
|
|
(1,080)
|
|
(1,568)
|
Deconsolidation adjustments
1
|
|
1,688
|
|
1,342
|
|
1,688
|
|
1,342
|
Adjustment for own credit
|
|
119
|
|
87
|
|
119
|
|
87
|
Cash flow hedging reserve
|
|
(1,703)
|
|
(2,136)
|
|
(1,703)
|
|
(2,136)
|
Other adjustments
|
|
(269)
|
|
(276)
|
|
(269)
|
|
(276)
|
|
|
41,268
|
|
40,119
|
|
41,268
|
|
40,119
|
less: deductions from common equity tier 1
|
|
|
|
|
|
|
|
|
Goodwill and other intangible assets
|
|
(2,651)
|
|
(1,623)
|
|
(2,651)
|
|
(1,623)
|
Prudent valuation adjustment
|
|
(636)
|
|
(630)
|
|
(636)
|
|
(630)
|
Excess of expected losses over impairment provisions and value adjustments
|
|
(551)
|
|
(602)
|
|
(551)
|
|
(602)
|
Removal of defined benefit pension surplus
|
|
(320)
|
|
(267)
|
|
(320)
|
|
(267)
|
Securitisation deductions
|
|
(198)
|
|
(217)
|
|
(198)
|
|
(217)
|
Significant investments
1
|
|
(4,279)
|
|
(4,317)
|
|
(4,279)
|
|
(4,317)
|
Deferred tax assets
|
|
(3,313)
|
|
(3,564)
|
|
(3,313)
|
|
(3,564)
|
Common equity tier 1 capital
|
|
29,320
|
|
28,899
|
|
29,320
|
|
28,899
|
Additional tier 1
|
|
|
|
|
|
|
|
|
Other equity instruments
|
|
5,320
|
|
5,320
|
|
5,320
|
|
5,320
|
Preference shares and preferred securities
2
|
|
4,639
|
|
4,998
|
|
–
|
|
–
|
Transitional limit and other adjustments
|
|
(1,884)
|
|
(1,692)
|
|
–
|
|
–
|
|
|
8,075
|
|
8,626
|
|
5,320
|
|
5,320
|
less: deductions from tier 1
|
|
|
|
|
|
|
|
|
Significant investments
1
|
|
(1,292)
|
|
(1,329)
|
|
–
|
|
–
|
Total tier 1 capital
|
|
36,103
|
|
36,196
|
|
34,640
|
|
34,219
|
Tier 2
|
|
|
|
|
|
|
|
|
Other subordinated liabilities
2
|
|
13,936
|
|
14,833
|
|
13,936
|
|
14,833
|
Deconsolidation of instruments issued by insurance entities
1
|
|
(1,721)
|
|
(1,810)
|
|
(1,721)
|
|
(1,810)
|
Adjustments for transitional limit and non-eligible instruments
|
|
1,748
|
|
1,351
|
|
(1,444)
|
|
(1,694)
|
Amortisation and other adjustments
|
|
(3,472)
|
|
(3,447)
|
|
(3,538)
|
|
(3,597)
|
|
|
10,491
|
|
10,927
|
|
7,233
|
|
7,732
|
Eligible provisions
|
|
255
|
|
186
|
|
255
|
|
186
|
less: deductions from tier 2
|
|
|
|
|
|
|
|
|
Significant investments
1
|
|
(1,646)
|
|
(1,571)
|
|
(2,938)
|
|
(2,900)
|
Total capital resources
|
|
45,203
|
|
45,738
|
|
39,190
|
|
39,237
|
|
|
|
|
|
|
|
|
|
Risk-weighted assets
|
|
217,787
|
|
215,446
|
|
217,787
|
|
215,446
|
|
|
|
|
|
|
|
|
|
Common equity tier 1 capital ratio
3
|
|
13.5%
|
|
13.4%
|
|
13.5%
|
|
13.4%
|
Tier 1 capital ratio
|
|
16.6%
|
|
16.8%
|
|
15.9%
|
|
15.9%
|
Total capital ratio
|
|
20.8%
|
|
21.2%
|
|
18.0%
|
|
18.2%
|
1
|
For regulatory capital purposes the Group’s Insurance business is deconsolidated and replaced by the amount of the Group’s investment in the business. A part of this amount is deducted from capital (shown as ‘significant investments’ in the table above) and the remaining amount is risk-weighted, forming part of threshold risk-weighted assets.
|
2
|
Preference shares, preferred securities and other subordinated liabilities are categorised as subordinated liabilities in the balance sheet.
|
3
|
The common equity tier 1 ratio at 30 June 2017 is 13.5 per cent on an adjusted basis upon recognition of the dividend paid by the Insurance business in July 2017 in relation to its 2017 interim earnings. At 31 December 2016 the ratio was 13.6 per cent on an adjusted basis upon recognition of the dividend paid by the Insurance business in February 2017 in relation to its 2016 full year earnings.
|
The key difference between the transitional
capital calculation as at 30 June 2017 and the fully loaded equivalent is primarily related to capital securities that previously
qualified as tier 1 or tier 2 capital, but that do not fully qualify under CRD IV, which can be included in additional tier 1 (AT1)
or tier 2 capital (as applicable) up to specified limits which reduce by 10 per cent per annum until 2022.
The movements in the transitional CET1,
AT1, tier 2 and total capital positions in the period are provided below.
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
Additional
|
|
|
|
Total
|
|
|
equity tier 1
|
|
tier 1
|
|
Tier 2
|
|
capital
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
At 31 December 2016
|
|
28,899
|
|
7,297
|
|
9,542
|
|
45,738
|
Profit attributable to ordinary shareholders
1
|
|
1,397
|
|
–
|
|
–
|
|
1,397
|
Movement in foreseeable dividends
2
|
|
488
|
|
–
|
|
–
|
|
488
|
Dividends paid out on ordinary shares during the year
|
|
(1,568)
|
|
–
|
|
–
|
|
(1,568)
|
Dividend in respect of 2016 earnings received from the Insurance business
1
|
|
500
|
|
–
|
|
–
|
|
500
|
Movement in treasury shares and employee share schemes
|
|
40
|
|
–
|
|
–
|
|
40
|
Pension movements:
|
|
|
|
|
|
|
|
|
Removal of defined benefit pension surplus
|
|
(53)
|
|
–
|
|
–
|
|
(53)
|
Movement through other comprehensive income
|
|
(105)
|
|
–
|
|
–
|
|
(105)
|
Available-for-sale reserve
|
|
98
|
|
–
|
|
–
|
|
98
|
Prudent valuation adjustment
|
|
(6)
|
|
–
|
|
–
|
|
(6)
|
Deferred tax asset
|
|
251
|
|
–
|
|
–
|
|
251
|
Goodwill and other intangible assets
|
|
(1,028)
|
|
–
|
|
–
|
|
(1,028)
|
Excess of expected losses over impairment provisions and value adjustments
|
|
51
|
|
–
|
|
–
|
|
51
|
Significant investments
|
|
38
|
|
37
|
|
(75)
|
|
−
|
Eligible provisions
|
|
–
|
|
–
|
|
69
|
|
69
|
Movements in subordinated debt:
|
|
|
|
|
|
|
|
|
Repurchases, redemptions and other
|
|
–
|
|
(551)
|
|
(436)
|
|
(987)
|
Issuances
|
|
–
|
|
–
|
|
–
|
|
–
|
Other movements
|
|
318
|
|
–
|
|
–
|
|
318
|
At 30 June 2017
|
|
29,320
|
|
6,783
|
|
9,100
|
|
45,203
|
|
|
1
|
Under the regulatory framework, profits made by Insurance are removed from CET1 capital. However, when dividends are paid to the Group by Insurance these are recognised through CET1 capital.
|
2
|
Includes the accrual for foreseeable 2017 ordinary dividends and the reversal of the accrual for foreseeable 2016 dividends which have now been paid.
|
CET1 capital resources have increased by
£421 million in the period, reflecting a combination of profit generation, the receipt of the dividend paid by the Insurance
business in February 2017 and a reduction in the deferred tax asset deducted from capital, offset by the accrual for foreseeable
dividends in respect of the first half of 2017, movements in the defined benefit pension schemes and an increase in the deduction
for goodwill and other intangible assets following the acquisition of MBNA.
AT1 capital resources have reduced by £514
million in the period, primarily reflecting the annual reduction in the transitional limit applied to grandfathered AT1 capital
instruments.
Tier 2 capital resources have reduced by
£442 million in the period largely reflecting the amortisation of dated tier 2 instruments and foreign exchange movements
on subordinated debt, partly offset by the transitioning of grandfathered AT1 instruments to tier 2.
Risk-weighted assets
|
At 30 June
|
|
At 31 Dec
|
|
2017
|
|
2016
|
|
£m
|
|
£m
|
|
|
|
|
Foundation Internal Ratings Based (IRB) Approach
|
61,115
|
|
64,907
|
Retail IRB Approach
|
65,331
|
|
64,970
|
Other IRB Approach
|
18,360
|
|
17,788
|
IRB Approach
|
144,806
|
|
147,665
|
Standardised (STA) Approach
|
24,794
|
|
18,956
|
Credit risk
|
169,600
|
|
166,621
|
Counterparty credit risk
|
7,188
|
|
8,419
|
Contributions to the default fund of a central counterparty
|
419
|
|
340
|
Credit valuation adjustment risk
|
735
|
|
864
|
Operational risk
|
26,222
|
|
25,292
|
Market risk
|
2,930
|
|
3,147
|
Underlying risk-weighted assets
|
207,094
|
|
204,683
|
Threshold risk-weighted assets
1
|
10,693
|
|
10,763
|
Total risk-weighted assets
|
217,787
|
|
215,446
|
|
|
|
|
|
|
|
Risk-weighted asset movement by key driver
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit
|
|
Credit
|
|
|
|
Counterparty
|
|
|
|
|
|
|
|
|
risk
|
|
risk
|
|
Credit
|
|
credit
|
|
Market
|
|
Operational
|
|
|
|
|
IRB
|
|
STA
|
|
risk
2
|
|
risk
3
|
|
risk
|
|
risk
|
|
Total
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total risk-weighted assets at
31 December 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
215,446
|
Less total threshold risk-weighted assets
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,763)
|
Risk-weighted assets as at
31 December 2016
|
|
147,665
|
|
18,956
|
|
166,621
|
|
9,623
|
|
3,147
|
|
25,292
|
|
204,683
|
Asset size
|
|
(1,269)
|
|
(238)
|
|
(1,507)
|
|
(258)
|
|
–
|
|
–
|
|
(1,765)
|
Asset quality
|
|
(539)
|
|
(92)
|
|
(631)
|
|
(661)
|
|
–
|
|
–
|
|
(1,292)
|
Model updates
|
|
57
|
|
–
|
|
57
|
|
–
|
|
–
|
|
–
|
|
57
|
Methodology and policy
|
|
(324)
|
|
(74)
|
|
(398)
|
|
–
|
|
–
|
|
–
|
|
(398)
|
Acquisitions and disposals
|
|
(444)
|
|
6,351
|
|
5,907
|
|
(26)
|
|
–
|
|
930
|
|
6,811
|
Movements in risk levels
(market risk only)
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(217)
|
|
–
|
|
(217)
|
Foreign exchange
|
|
(340)
|
|
(109)
|
|
(449)
|
|
(336)
|
|
–
|
|
–
|
|
(785)
|
Risk-weighted assets at
30 June 2017
|
|
144,806
|
|
24,794
|
|
169,600
|
|
8,342
|
|
2,930
|
|
26,222
|
|
207,094
|
Threshold risk-weighted assets
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,693
|
Total risk-weighted assets as at
30 June 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
217,787
|
|
|
1
|
Threshold risk-weighted assets reflect the element of significant investments and deferred tax assets that are permitted to be
risk-weighted instead of being deducted from CET1 capital. Significant investments primarily arise from investments in the Group’s Insurance business.
|
2
|
Credit risk includes securitisation risk-weighted assets.
|
3
|
Counterparty credit risk includes movements in contributions to the default fund of central counterparties and movements in credit valuation adjustment risk.
|
The risk-weighted assets movement table
provides analysis of the movements in risk-weighted assets in the period by risk type and an insight into the key drivers of these
movements. The key driver analysis is compiled on a monthly basis through the identification and categorisation of risk-weighted
asset movements and is subject to management judgment.
Key movements in credit risk, risk-weighted
assets
|
·
|
Asset size movements. Credit risk-weighted assets decreased by £1.5 billion due to continued
active portfolio management partly offset by targeted growth in key customer segments.
|
|
·
|
Asset quality captures movements due to changes in borrower risk, including changes in the economic
environment. Net reductions of £0.6 billion primarily relate to a net change in credit quality and model calibrations.
|
|
·
|
Methodology and policy reductions of £0.4 billion relate to capital efficient securitisation
activity.
|
|
·
|
Acquisitions and disposals; the acquisition of MBNA increased credit risk-weighted assets by £6.4
billion, partly offset by the disposal of the Group’s interest in a strategic equity investment.
|
|
·
|
Foreign exchange movements reflect the appreciation of Sterling.
|
Counterparty Credit Risk and CVA risk-weighted
asset
reductions of £1.3 billion are driven mainly by yield curve movements (included in asset quality) and foreign
exchange movements.
Market risk, risk
-
weighted assets
reduced by £0.2 billion largely due to a decrease in the exposure to long dated inflation linked gilts and a decrease in
interest rate exposure.
Operational risk, risk-weighted assets
increase of £0.9 billion due to the acquisition of MBNA.
|
|
|
|
|
|
|
Fully loaded
|
Leverage ratio
|
|
At 30 June
|
|
At 31 Dec
|
|
|
2017
|
|
2016
|
|
|
£m
|
|
£m
|
Total tier 1 capital for leverage ratio
|
|
|
|
|
Common equity tier 1 capital
|
|
29,320
|
|
28,899
|
Additional tier 1 capital
|
|
5,320
|
|
5,320
|
Total tier 1 capital
|
|
34,640
|
|
34,219
|
|
|
|
|
|
Exposure measure
|
|
|
|
|
Statutory balance sheet assets
|
|
|
|
|
Derivative financial instruments
|
|
30,024
|
|
36,138
|
Securities financing transactions (SFTs)
|
|
41,477
|
|
42,285
|
Loans and advances and other assets
|
|
743,418
|
|
739,370
|
Total assets
|
|
814,919
|
|
817,793
|
|
|
|
|
|
Deconsolidation adjustments
1
|
|
|
|
|
Derivative financial instruments
|
|
(1,995)
|
|
(2,403)
|
Securities financing transactions (SFTs)
|
|
(122)
|
|
112
|
Loans and advances and other assets
|
|
(138,780)
|
|
(142,990)
|
Total deconsolidation adjustments
|
|
(140,897)
|
|
(145,281)
|
|
|
|
|
|
Derivatives adjustments
|
|
|
|
|
Adjustments for regulatory netting
|
|
(16,198)
|
|
(20,490)
|
Adjustments for cash collateral
|
|
(8,034)
|
|
(8,432)
|
Net written credit protection
|
|
857
|
|
699
|
Regulatory potential future exposure
|
|
12,853
|
|
13,188
|
Total derivatives adjustments
|
|
(10,522)
|
|
(15,035)
|
|
|
|
|
|
SFT adjustments
|
|
(1,014)
|
|
39
|
|
|
|
|
|
Off-balance sheet items
|
|
59,060
|
|
58,685
|
|
|
|
|
|
Regulatory deductions and other adjustments
|
|
(7,239)
|
|
(9,128)
|
|
|
|
|
|
Total exposure measure
|
|
714,307
|
|
707,073
|
|
|
|
|
|
Leverage ratio
2,6
|
|
4.8%
|
|
4.8%
|
|
|
|
|
|
Modified UK leverage exposure measure
3
|
|
667,207
|
|
665,563
|
Average modified UK leverage exposure measure
4
|
|
661,811
|
|
|
|
|
|
|
|
Modified UK leverage ratio
3
|
|
5.2%
|
|
5.1%
|
Average modified UK leverage ratio
5
|
|
5.4%
|
|
|
|
|
1
|
Deconsolidation adjustments relate to the deconsolidation of certain Group entities that fall outside the scope of the Group’s regulatory capital consolidation, being primarily the Group’s Insurance business.
|
2
|
The countercyclical leverage ratio buffer is currently nil.
|
3
|
The Group’s leverage ratio on a modified basis, excluding qualifying central bank claims from the exposure measure in accordance with the rule modification applied to the UK Leverage Ratio Framework by the PRA in 2016.
|
4
|
The average modified UK leverage exposure measure is based on the average of the month end modified exposure measures over the quarter (1 April 2017 to 30 June 2017).
|
5
|
The average modified UK leverage ratio is based on the average of the month end tier 1 capital and modified exposure measures over the quarter (1 April 2017 to 30 June 2017). The average of 5.4 per cent compares to 5.4 per cent at the start and 5.2 per cent at the end of the quarter.
|
6
|
The leverage ratio at 30 June 2017 is 4.9 per cent on an adjusted basis upon recognition of the dividend paid by the Insurance business in July 2017 in relation to its 2017 interim earnings. At 31 December 2016 the ratio was 4.9 per cent on an adjusted basis upon recognition of the dividend paid by the Insurance business in February 2017 in relation to its 2016 full year earnings.
|
Key movements
The leverage total exposure measure increased
by £7.2 billion over the period primarily reflecting an increase in loans and advances and off-balance sheet items following
the acquisition of MBNA and an increase in central bank claims, partly offset by a reduction in available-for-sale financial assets
and reductions in both the derivatives and SFT exposure measures.
The derivatives exposure measure, representing
derivative financial instruments per the balance sheet net of deconsolidation and derivatives adjustments, reduced by £1.2
billion over the period, primarily driven by market movements.
The £2.1 billion reduction in the
SFT exposure measure over the period, representing SFT assets per the balance sheet net of deconsolidation and other SFT adjustments,
reflected reduced trading volumes and an increase in eligible netting adjustments, offset by an increase in customer volumes.
Off-balance sheet items increased by £0.4
billion over the period, primarily reflecting new residential mortgage offers placed in addition to increases in both unconditionally
cancellable credit card commitments, following the acquisition of MBNA, largely offset by a net reduction in securitisation financing
facilities.
The average modified UK leverage ratio of
5.4 per cent over the quarter reflected both a strengthening tier 1 capital position and a small reduction in the modified exposure
measure during the first two months of the quarter, prior to the acquisition of MBNA in June which, along with other movements,
resulted in the reduction of the ratio at the end of the quarter.
Individual capital guidance
The Group receives Pillar 2A Individual
Capital Guidance (ICG) from the PRA. The ICG reflects a point in time estimate by the PRA, which may change over time, of the minimum
amount of capital that is needed in relation to risks not covered by Pillar 1. During the period the Group’s ICG has not
changed and at 30 June 2017 represented 4.5 per cent of risk-weighted assets of which 2.5 per cent has to be covered by CET1 capital.
Stress testing
The Group undertakes a wide ranging programme
of stress testing providing a comprehensive view of the potential impacts arising from the risks to which the Group is exposed.
One of the most important uses of stress testing is to assess the resilience of the operational and strategic plans of the Group
to adverse economic conditions and other key vulnerabilities. As a part of that the Group participates in the UK-wide concurrent
stress test run by the Bank of England.
The last such stress test was undertaken
in 2016 and the Group comfortably exceeded the capital thresholds set by the PRA and was not required to take any action as a result
of this test. The Group has participated again this year, having submitted its results to the Bank of England, and is awaiting
the publication of the results of the test for the industry as a whole.
Regulatory capital developments
The Basel Committee continues to finalise
its reforms to the regulatory capital framework, with the overall aim of addressing excessive variability in risk-weighted assets
modelled by banks without a significant increase in overall capital requirements across the industry. The Committee’s proposed
revisions include changes to the standardised frameworks for credit risk and operational risk, the application of parameter floors
for internal models and the introduction of an aggregate capital floor framework based upon the revised standardised approaches.
The final Basel standards are expected to be published in the second half of 2017, subject to approval from the Group of Governors
and Heads of Supervision. In addition the European Commission published a substantial package of draft reforms in November 2016
aimed at strengthening the resilience of banks across the EU – these reforms, which include revisions to the market risk,
counterparty credit risk and leverage frameworks, are currently under negotiation and expected to be implemented by 2020 at the
earliest.
In the UK the Financial Policy Committee
and Prudential Regulation Authority are currently consulting on revisions to the UK Leverage Ratio Framework, including proposals
to adjust for the impact of excluding qualifying central bank claims from the leverage measure by increasing the minimum leverage
ratio requirement to 3.25 per cent.
In addition the Financial Policy Committee
has increased the UK countercyclical capital buffer rate from 0 per cent to 0.5 per cent with effect from 27 June 2018. The
Committee expects to increase the rate to 1.0 per cent at its November meeting with effect from November 2018.
The Group continues to monitor these developments
very closely, analysing the potential capital impacts to ensure that, through organic capital generation, the Group continues to
maintain a strong capital position that exceeds both the minimum regulatory requirements and the Group’s risk appetite and
is consistent with market expectations.
Half-year Pillar 3 disclosures
The Group will publish a condensed set of
half-year Pillar 3 disclosures in August, prepared in accordance with the revised European Banking Authority (EBA) guidelines on
Pillar 3 disclosure formats and frequency that were issued in December 2016.
A copy of the half-year Pillar 3 Report
will be available to view at www.lloydsbankinggroup.com/investors/financial-performance/other-disclosures.
STATUTORY INFORMATION
|
Page
|
Condensed consolidated half-year financial statements (unaudited)
|
|
Consolidated income statement
|
44
|
Consolidated statement of comprehensive income
|
45
|
Consolidated balance sheet
|
46
|
Consolidated statement of changes in equity
|
48
|
Consolidated cash flow statement
|
51
|
|
|
Notes
|
|
1
|
Accounting policies, presentation and estimates
|
52
|
2
|
Segmental analysis
|
53
|
3
|
Operating expenses
|
55
|
4
|
Impairment
|
56
|
5
|
Taxation
|
56
|
6
|
Earnings per share
|
57
|
7
|
Trading and other financial assets at fair value through profit or loss
|
57
|
8
|
Derivative financial instruments
|
57
|
9
|
Loans and advances to customers
|
58
|
10
|
Allowance for impairment losses on loans and receivables
|
58
|
11
|
Acquisition of MBNA
|
59
|
12
|
Debt securities in issue
|
60
|
13
|
Post-retirement defined benefit schemes
|
61
|
14
|
Provisions for liabilities and charges
|
62
|
15
|
Contingent liabilities and commitments
|
64
|
16
|
Fair values of financial assets and liabilities
|
67
|
17
|
Credit quality of loans and advances
|
74
|
18
|
Dividends on ordinary shares
|
75
|
19
|
Events since the balance sheet date
|
75
|
20
|
Future accounting developments
|
75
|
21
|
Condensed consolidating financial information
|
78
|
CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED)
CONSOLIDATED INCOME STATEMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year to
|
|
|
|
Half-year to
|
|
|
|
Half-year to
|
|
|
|
|
|
30 June
|
|
|
|
30 June
|
|
|
|
31 Dec
|
|
|
|
|
|
2017
|
|
|
|
2016
|
|
|
|
2016
|
|
|
Note
|
|
|
£ million
|
|
|
|
£ million
|
|
|
|
£ million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and similar income
|
|
|
|
|
7,861
|
|
|
|
8,479
|
|
|
|
8,141
|
Interest and similar expense
|
|
|
|
|
(2,659)
|
|
|
|
(3,254)
|
|
|
|
(4,092)
|
Net interest income
|
|
|
|
|
5,202
|
|
|
|
5,225
|
|
|
|
4,049
|
Fee and commission income
|
|
|
|
|
1,518
|
|
|
|
1,502
|
|
|
|
1,543
|
Fee and commission expense
|
|
|
|
|
(670)
|
|
|
|
(682)
|
|
|
|
(674)
|
Net fee and commission income
|
|
|
|
|
848
|
|
|
|
820
|
|
|
|
869
|
Net trading income
|
|
|
|
|
5,843
|
|
|
|
7,180
|
|
|
|
11,365
|
Insurance premium income
|
|
|
|
|
4,099
|
|
|
|
4,212
|
|
|
|
3,856
|
Other operating income
|
|
|
|
|
1,283
|
|
|
|
993
|
|
|
|
1,042
|
Other income
|
|
|
|
|
12,073
|
|
|
|
13,205
|
|
|
|
17,132
|
Total income
|
|
|
|
|
17,275
|
|
|
|
18,430
|
|
|
|
21,181
|
Insurance claims
|
|
|
|
|
(7,976)
|
|
|
|
(10,110)
|
|
|
|
(12,234)
|
Total income, net of insurance claims
|
|
|
|
|
9,299
|
|
|
|
8,320
|
|
|
|
8,947
|
Regulatory provisions
|
|
|
|
|
(1,240)
|
|
|
|
(445)
|
|
|
|
(1,929)
|
Other operating expenses
|
|
|
|
|
(4,962)
|
|
|
|
(5,059)
|
|
|
|
(5,194)
|
Total operating expenses
|
|
3
|
|
|
(6,202)
|
|
|
|
(5,504)
|
|
|
|
(7,123)
|
Trading surplus
|
|
|
|
|
3,097
|
|
|
|
2,816
|
|
|
|
1,824
|
Impairment
|
|
4
|
|
|
(203)
|
|
|
|
(362)
|
|
|
|
(390)
|
Profit before tax
|
|
|
|
|
2,894
|
|
|
|
2,454
|
|
|
|
1,434
|
Taxation
|
|
5
|
|
|
(905)
|
|
|
|
(597)
|
|
|
|
(1,127)
|
Profit for the period
|
|
|
|
|
1,989
|
|
|
|
1,857
|
|
|
|
307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit attributable to ordinary shareholders
|
|
|
|
|
1,739
|
|
|
|
1,590
|
|
|
|
61
|
Profit attributable to other equity holders
1
|
|
|
|
|
209
|
|
|
|
204
|
|
|
|
208
|
Profit attributable to equity holders
|
|
|
|
|
1,948
|
|
|
|
1,794
|
|
|
|
269
|
Profit attributable to non-controlling interests
|
|
|
|
|
41
|
|
|
|
63
|
|
|
|
38
|
Profit for the period
|
|
|
|
|
1,989
|
|
|
|
1,857
|
|
|
|
307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
6
|
|
|
2.5p
|
|
|
|
2.3p
|
|
|
|
0.1p
|
Diluted earnings per share
|
|
6
|
|
|
2.5p
|
|
|
|
2.3p
|
|
|
|
0.1p
|
|
|
1
|
The profit after tax attributable to other equity holders of £209 million (half-year to 30 June 2016: £204 million; half-year to 31 December 2016: £208 million) is offset in reserves by a tax credit attributable to ordinary shareholders of £51 million (half-year to 30 June 2016: £41 million; half-year to 31 December 2016: £50 million).
|
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
|
|
|
|
|
|
|
|
|
Half-year to
|
|
Half-year to
|
|
Half-year to
|
|
|
30 June
|
|
30 June
|
|
31 Dec
|
|
|
2017
|
|
2016
|
|
2016
|
|
|
£ million
|
|
£ million
|
|
£ million
|
|
|
|
|
|
|
|
Profit for the period
|
|
1,989
|
|
1,857
|
|
307
|
Other comprehensive income
|
|
|
|
|
|
|
Items that will not subsequently be reclassified to profit or loss:
|
|
|
|
|
|
|
Post-retirement defined benefit scheme remeasurements (note 13):
|
|
|
|
|
|
|
Remeasurements before taxation
|
|
(124)
|
|
(267)
|
|
(1,081)
|
Taxation
|
|
32
|
|
40
|
|
280
|
|
|
(92)
|
|
(227)
|
|
(801)
|
Gains and losses attributable to own credit risk
|
|
|
|
|
|
|
Losses before taxation
|
|
(44)
|
|
–
|
|
–
|
Taxation
|
|
12
|
|
–
|
|
–
|
|
|
(32)
|
|
–
|
|
–
|
Items that may subsequently be reclassified to profit or loss:
|
|
|
|
|
|
|
Movements in revaluation reserve in respect of available-for-sale financial assets:
|
|
|
|
|
|
|
Adjustment on transfer from held-to-maturity portfolio
|
|
–
|
|
–
|
|
1,544
|
Change in fair value
|
|
455
|
|
184
|
|
172
|
Income statement transfers in respect of disposals
|
|
(315)
|
|
(574)
|
|
(1)
|
Income statement transfers in respect of impairment
|
|
6
|
|
146
|
|
27
|
Taxation
|
|
(48)
|
|
152
|
|
(453)
|
|
|
98
|
|
(92)
|
|
1,289
|
Movements in cash flow hedging reserve:
|
|
|
|
|
|
|
Effective portion of changes in fair value
|
|
(267)
|
|
3,040
|
|
(608)
|
Net income statement transfers
|
|
(317)
|
|
(206)
|
|
(351)
|
Taxation
|
|
151
|
|
(752)
|
|
286
|
|
|
(433)
|
|
2,082
|
|
(673)
|
Currency translation differences (tax: nil)
|
|
(7)
|
|
(20)
|
|
16
|
Other comprehensive income for the period, net of tax
|
|
(466)
|
|
1,743
|
|
(169)
|
Total comprehensive income for the period
|
|
1,523
|
|
3,600
|
|
138
|
|
|
|
|
|
|
|
Total comprehensive income attributable to ordinary shareholders
|
|
1,273
|
|
3,333
|
|
(108)
|
Total comprehensive income attributable to other equity holders
|
|
209
|
|
204
|
|
208
|
Total comprehensive income attributable to equity holders
|
|
1,482
|
|
3,537
|
|
100
|
Total comprehensive income attributable to non-controlling interests
|
|
41
|
|
63
|
|
38
|
Total comprehensive income for the period
|
|
1,523
|
|
3,600
|
|
138
|
CONSOLIDATED BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
At 30 June
|
|
At 31 Dec
|
|
|
|
|
2017
|
|
2016
|
|
|
Note
|
|
£ million
|
|
£ million
|
Assets
|
|
|
|
|
|
|
Cash and balances at central banks
|
|
|
|
50,491
|
|
47,452
|
Items in course of collection from banks
|
|
|
|
855
|
|
706
|
Trading and other financial assets at fair value through profit or loss
|
|
7
|
|
161,970
|
|
151,174
|
Derivative financial instruments
|
|
8
|
|
30,024
|
|
36,138
|
Loans and receivables:
|
|
|
|
|
|
|
Loans and advances to banks
|
|
|
|
8,865
|
|
26,902
|
Loans and advances to customers
|
|
9
|
|
464,604
|
|
457,958
|
Debt securities
|
|
|
|
3,841
|
|
3,397
|
|
|
|
|
477,310
|
|
488,257
|
Available-for-sale financial assets
|
|
|
|
51,803
|
|
56,524
|
Goodwill
|
|
|
|
2,299
|
|
2,016
|
Value of in-force business
|
|
|
|
5,153
|
|
5,042
|
Other intangible assets
|
|
|
|
2,536
|
|
1,681
|
Property, plant and equipment
|
|
|
|
12,990
|
|
12,972
|
Current tax recoverable
|
|
|
|
16
|
|
28
|
Deferred tax assets
|
|
|
|
2,422
|
|
2,706
|
Retirement benefit assets
|
|
13
|
|
410
|
|
342
|
Other assets
|
|
|
|
16,640
|
|
12,755
|
Total assets
|
|
|
|
814,919
|
|
817,793
|
CONSOLIDATED BALANCE SHEET
(continued)
|
|
|
|
|
|
|
|
|
|
|
At 30 June
|
|
At 31 Dec
|
|
|
|
|
2017
|
|
2016
|
Equity and liabilities
|
|
Note
|
|
£ million
|
|
£ million
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Deposits from banks
|
|
|
|
24,879
|
|
16,384
|
Customer deposits
|
|
|
|
417,617
|
|
415,460
|
Items in course of transmission to banks
|
|
|
|
944
|
|
548
|
Trading and other financial liabilities at fair value through profit or loss
|
|
|
|
55,671
|
|
54,504
|
Derivative financial instruments
|
|
8
|
|
29,190
|
|
34,924
|
Notes in circulation
|
|
|
|
1,317
|
|
1,402
|
Debt securities in issue
|
|
12
|
|
71,557
|
|
76,314
|
Liabilities arising from insurance contracts and participating investment contracts
|
|
|
|
101,318
|
|
94,390
|
Liabilities arising from non-participating investment contracts
|
|
|
|
15,652
|
|
20,112
|
Other liabilities
|
|
|
|
22,226
|
|
29,193
|
Retirement benefit obligations
|
|
13
|
|
905
|
|
822
|
Current tax liabilities
|
|
|
|
416
|
|
226
|
Other provisions
|
|
|
|
6,306
|
|
5,218
|
Subordinated liabilities
|
|
|
|
18,575
|
|
19,831
|
Total liabilities
|
|
|
|
766,573
|
|
769,328
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
Share capital
|
|
|
|
7,191
|
|
7,146
|
Share premium account
|
|
|
|
17,624
|
|
17,622
|
Other reserves
|
|
|
|
14,310
|
|
14,652
|
Retained profits
|
|
|
|
3,388
|
|
3,250
|
Shareholders’ equity
|
|
|
|
42,513
|
|
42,670
|
Other equity instruments
|
|
|
|
5,355
|
|
5,355
|
Total equity excluding non-controlling interests
|
|
|
|
47,868
|
|
48,025
|
Non-controlling interests
|
|
|
|
478
|
|
440
|
Total equity
|
|
|
|
48,346
|
|
48,465
|
Total equity and liabilities
|
|
|
|
814,919
|
|
817,793
|
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to equity shareholders
|
|
|
|
|
|
|
|
|
Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
capital
|
|
|
|
|
|
|
|
Other
|
|
Non-
|
|
|
|
|
and
|
|
Other
|
|
Retained
|
|
|
|
equity
|
|
controlling
|
|
|
|
|
premium
|
|
reserves
|
|
profits
|
|
Total
|
|
instruments
|
|
interests
|
|
Total
|
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2017
|
|
24,768
|
|
14,652
|
|
3,250
|
|
42,670
|
|
5,355
|
|
440
|
|
48,465
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period
|
|
–
|
|
–
|
|
1,948
|
|
1,948
|
|
–
|
|
41
|
|
1,989
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-retirement defined benefit scheme remeasurements, net of tax
|
|
–
|
|
–
|
|
(92)
|
|
(92)
|
|
–
|
|
–
|
|
(92)
|
Movements in revaluation reserve in respect of
available-for-sale financial assets, net of tax
|
|
–
|
|
98
|
|
–
|
|
98
|
|
–
|
|
–
|
|
98
|
Gains and losses attributable to own credit risk, net of tax
|
|
–
|
|
–
|
|
(32)
|
|
(32)
|
|
–
|
|
–
|
|
(32)
|
Movements in cash flow hedging reserve, net of tax
|
|
–
|
|
(433)
|
|
–
|
|
(433)
|
|
–
|
|
–
|
|
(433)
|
Currency translation differences (tax: nil)
|
|
–
|
|
(7)
|
|
–
|
|
(7)
|
|
–
|
|
–
|
|
(7)
|
Total other comprehensive income
|
|
–
|
|
(342)
|
|
(124)
|
|
(466)
|
|
–
|
|
–
|
|
(466)
|
Total comprehensive income
|
|
–
|
|
(342)
|
|
1,824
|
|
1,482
|
|
–
|
|
41
|
|
1,523
|
Transactions with owners
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
–
|
|
–
|
|
(1,568)
|
|
(1,568)
|
|
–
|
|
–
|
|
(1,568)
|
Distributions on other equity instruments, net of tax
|
|
–
|
|
–
|
|
(158)
|
|
(158)
|
|
–
|
|
–
|
|
(158)
|
Issue of ordinary shares
1
|
|
47
|
|
–
|
|
–
|
|
47
|
|
–
|
|
–
|
|
47
|
Movement in treasury shares
|
|
–
|
|
–
|
|
(154)
|
|
(154)
|
|
–
|
|
–
|
|
(154)
|
Value of employee services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share option schemes
|
|
–
|
|
–
|
|
45
|
|
45
|
|
–
|
|
–
|
|
45
|
Other employee award schemes
|
|
–
|
|
–
|
|
149
|
|
149
|
|
–
|
|
–
|
|
149
|
Changes in non-controlling interests
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(3)
|
|
(3)
|
Total transactions with owners
|
|
47
|
|
–
|
|
(1,686)
|
|
(1,639)
|
|
–
|
|
(3)
|
|
(1,642)
|
Balance at 30 June 2017
|
|
24,815
|
|
14,310
|
|
3,388
|
|
42,513
|
|
5,355
|
|
478
|
|
48,346
|
|
|
1
|
During the half-year to 30 June 2017, 452 million shares were issued in respect of employee share schemes.
|
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to equity shareholders
|
|
|
|
|
|
|
|
|
Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
capital
|
|
|
|
|
|
|
|
Other
|
|
Non-
|
|
|
|
|
and
|
|
Other
|
|
Retained
|
|
|
|
equity
|
|
controlling
|
|
|
|
|
premium
|
|
reserves
|
|
profits
|
|
Total
|
|
instruments
|
|
interests
|
|
Total
|
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2016
|
|
24,558
|
|
12,260
|
|
4,416
|
|
41,234
|
|
5,355
|
|
391
|
|
46,980
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period
|
|
–
|
|
–
|
|
1,794
|
|
1,794
|
|
–
|
|
63
|
|
1,857
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-retirement defined benefit scheme remeasurements, net of tax
|
|
–
|
|
–
|
|
(227)
|
|
(227)
|
|
–
|
|
–
|
|
(227)
|
Movements in revaluation reserve in respect of available-for-sale financial assets, net of tax
|
|
–
|
|
(92)
|
|
–
|
|
(92)
|
|
–
|
|
–
|
|
(92)
|
Movements in cash flow hedging reserve, net of tax
|
|
–
|
|
2,082
|
|
–
|
|
2,082
|
|
–
|
|
–
|
|
2,082
|
Currency translation differences
(tax: nil)
|
|
–
|
|
(20)
|
|
–
|
|
(20)
|
|
–
|
|
–
|
|
(20)
|
Total other comprehensive income
|
|
–
|
|
1,970
|
|
(227)
|
|
1,743
|
|
–
|
|
–
|
|
1,743
|
Total comprehensive income
|
|
–
|
|
1,970
|
|
1,567
|
|
3,537
|
|
–
|
|
63
|
|
3,600
|
Transactions with owners
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
–
|
|
–
|
|
(1,427)
|
|
(1,427)
|
|
–
|
|
(2)
|
|
(1,429)
|
Distributions on other equity instruments, net of tax
|
|
–
|
|
–
|
|
(163)
|
|
(163)
|
|
–
|
|
–
|
|
(163)
|
Movement in treasury shares
|
|
–
|
|
–
|
|
(147)
|
|
(147)
|
|
–
|
|
–
|
|
(147)
|
Value of employee services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share option schemes
|
|
–
|
|
–
|
|
35
|
|
35
|
|
–
|
|
–
|
|
35
|
Other employee award schemes
|
|
–
|
|
–
|
|
82
|
|
82
|
|
–
|
|
–
|
|
82
|
Changes in non-controlling interests
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(20)
|
|
(20)
|
Total transactions with owners
|
|
–
|
|
–
|
|
(1,620)
|
|
(1,620)
|
|
–
|
|
(22)
|
|
(1,642)
|
Balance at 30 June 2016
|
|
24,558
|
|
14,230
|
|
4,363
|
|
43,151
|
|
5,355
|
|
432
|
|
48,938
|
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to equity shareholders
|
|
|
|
|
|
|
|
|
Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
capital
|
|
|
|
|
|
|
|
Other
|
|
Non-
|
|
|
|
|
and
|
|
Other
|
|
Retained
|
|
|
|
equity
|
|
controlling
|
|
|
|
|
premium
|
|
reserves
|
|
profits
|
|
Total
|
|
instruments
|
|
interests
|
|
Total
|
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 July 2016
|
|
24,558
|
|
14,230
|
|
4,363
|
|
43,151
|
|
5,355
|
|
432
|
|
48,938
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period
|
|
–
|
|
–
|
|
269
|
|
269
|
|
–
|
|
38
|
|
307
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-retirement defined benefit scheme remeasurements, net of tax
|
|
–
|
|
–
|
|
(801)
|
|
(801)
|
|
–
|
|
–
|
|
(801)
|
Movements in revaluation reserve in respect of available-for-sale financial assets, net of tax
|
|
–
|
|
1,289
|
|
–
|
|
1,289
|
|
–
|
|
–
|
|
1,289
|
Movements in cash flow hedging reserve, net of tax
|
|
–
|
|
(673)
|
|
–
|
|
(673)
|
|
–
|
|
–
|
|
(673)
|
Currency translation differences
(tax: nil)
|
|
–
|
|
16
|
|
–
|
|
16
|
|
–
|
|
–
|
|
16
|
Total other comprehensive income
|
|
–
|
|
632
|
|
(801)
|
|
(169)
|
|
–
|
|
–
|
|
(169)
|
Total comprehensive income
|
|
–
|
|
632
|
|
(532)
|
|
100
|
|
–
|
|
38
|
|
138
|
Transactions with owners
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
–
|
|
–
|
|
(587)
|
|
(587)
|
|
–
|
|
(27)
|
|
(614)
|
Distributions on other equity instruments, net of tax
|
|
–
|
|
–
|
|
(158)
|
|
(158)
|
|
–
|
|
–
|
|
(158)
|
Redemption of preference shares
|
|
210
|
|
(210)
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
Movement in treasury shares
|
|
–
|
|
–
|
|
(28)
|
|
(28)
|
|
–
|
|
–
|
|
(28)
|
Value of employee services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share option schemes
|
|
–
|
|
–
|
|
106
|
|
106
|
|
–
|
|
–
|
|
106
|
Other employee award schemes
|
|
–
|
|
–
|
|
86
|
|
86
|
|
–
|
|
–
|
|
86
|
Changes in non-controlling interests
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(3)
|
|
(3)
|
Total transactions with owners
|
|
210
|
|
(210)
|
|
(581)
|
|
(581)
|
|
–
|
|
(30)
|
|
(611)
|
Balance at 31 December 2016
|
|
24,768
|
|
14,652
|
|
3,250
|
|
42,670
|
|
5,355
|
|
440
|
|
48,465
|
CONSOLIDATED CASH FLOW STATEMENT
|
|
|
|
|
|
|
|
|
Half-year to
|
|
Half-year to
|
|
Half-year to
|
|
|
30 June
|
|
30 June
|
|
31 Dec
|
|
|
2017
|
|
2016
|
|
2016
|
|
|
£ million
|
|
£ million
|
|
£ million
|
|
|
|
|
|
|
|
Profit before tax
|
|
2,894
|
|
2,454
|
|
1,434
|
Adjustments for:
|
|
|
|
|
|
|
Change in operating assets
|
|
(14,961)
|
|
(18,311)
|
|
6,093
|
Change in operating liabilities
|
|
(769)
|
|
31,794
|
|
(34,453)
|
Non-cash and other items
|
|
8,520
|
|
6,929
|
|
6,956
|
Tax paid
|
|
(367)
|
|
(262)
|
|
(560)
|
Net cash provided by operating activities
|
|
(4,683)
|
|
22,604
|
|
(20,530)
|
Cash flows from investing activities
|
|
|
|
|
|
|
Purchase of financial assets
|
|
(1,847)
|
|
(3,441)
|
|
(1,489)
|
Proceeds from sale and maturity of financial assets
|
|
5,276
|
|
2,729
|
|
3,606
|
Purchase of fixed assets
|
|
(1,960)
|
|
(1,820)
|
|
(1,940)
|
Proceeds from sale of fixed assets
|
|
763
|
|
909
|
|
775
|
Acquisition of businesses, net of cash acquired
|
|
(1,909)
|
|
(6)
|
|
(14)
|
Disposal of businesses, net of cash disposed
|
|
26
|
|
5
|
|
–
|
Net cash used in investing activities
|
|
349
|
|
(1,624)
|
|
938
|
Cash flows from financing activities
|
|
|
|
|
|
|
Dividends paid to ordinary shareholders
|
|
(1,568)
|
|
(1,427)
|
|
(587)
|
Distributions on other equity instruments
|
|
(209)
|
|
(204)
|
|
(208)
|
Dividends paid to non-controlling interests
|
|
–
|
|
(2)
|
|
(27)
|
Interest paid on subordinated liabilities
|
|
(780)
|
|
(946)
|
|
(741)
|
Proceeds from issue of subordinated liabilities
|
|
–
|
|
1,061
|
|
–
|
Repayment of subordinated liabilities
|
|
(636)
|
|
(4,678)
|
|
(3,207)
|
Changes in non-controlling interests
|
|
(3)
|
|
(5)
|
|
(3)
|
Net cash used in financing activities
|
|
(3,196)
|
|
(6,201)
|
|
(4,773)
|
Effects of exchange rate changes on cash and cash equivalents
|
|
–
|
|
15
|
|
6
|
Change in cash and cash equivalents
|
|
(7,530)
|
|
14,794
|
|
(24,359)
|
Cash and cash equivalents at beginning of period
|
|
62,388
|
|
71,953
|
|
86,747
|
Cash and cash equivalents at end of period
|
|
54,858
|
|
86,747
|
|
62,388
|
Cash and cash equivalents comprise cash
and balances at central banks (excluding mandatory deposits) and amounts due from banks with a maturity of less than three months.
Included within cash and cash equivalents at 30 June 2017 is £2,579 million (30 June 2016: £12,613 million;
31 December 2016: £14,475 million) held within the Group’s life funds, which is not immediately available
for use in the business.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
1.
|
Accounting policies, presentation and estimates
|
These condensed consolidated half-year
financial statements as at and for the period to 30 June 2017 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 issued by the International Accounting Standards Board 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 2016 which were prepared in
accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. The 2016
Form 20-F is available on the Group’s website.
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 2016 Annual Report and Accounts where a glossary of terms
can be found.
The directors consider that it is appropriate
to continue to adopt the going concern basis in preparing the condensed consolidated half-year financial statements. In reaching
this assessment, the directors have considered projections for the Group’s capital and funding position and have had regard
to the factors set out in Risk management: principal risks and uncertainties on page 19.
Except as noted below, the accounting policies
are consistent with those applied by the Group in its 2016 Annual Report and Accounts.
With effect from 1 January 2017 the Group
has elected to early adopt the provision in IFRS 9 for gains and losses attributable to changes in own credit risk on financial
liabilities designated at fair value through profit or loss to be presented in other comprehensive income. The impact has been
to increase profit after tax and reduce other comprehensive income by £32 million in the six months to 30 June 2017;
there is no impact on total liabilities or shareholders’ equity. Comparatives have not been restated.
The Group has had no material or unusual
related party transactions during the six months to 30 June 2017. Related party transactions for the six months to 30 June 2017
are similar in nature to those for the year ended 31 December 2016. Full details of the Group’s related party transactions
for the year to 31 December 2016 can be found in the Group’s 2016 Annual Report and Accounts.
Future accounting developments
Details of those IFRS pronouncements which
will be relevant to the Group but which will not be effective at 31 December 2017 and which have not been applied in preparing
these financial statements are set out in note 20.
Critical accounting estimates and judgements
The preparation of the Group’s financial
statements requires management to make judgements, estimates and assumptions that impact the application of accounting policies
and the reported amounts of assets, liabilities, income and expenses. Due to the inherent uncertainty in making estimates, actual
results reported in future periods may include amounts which differ from those 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. There have been no significant changes in the basis upon which estimates
have been determined, compared to that applied at 31 December 2016.
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 for the Group.
The segmental results and comparatives are
presented on an underlying basis, the basis reviewed by the chief operating decision maker. The effects of the redemption of the
Group’s Enhanced Capital Notes, asset sales, volatile items, the insurance grossing adjustment, liability management, restructuring
costs, conduct provisions, the amortisation of purchased intangible assets and the unwind of acquisition-related fair value adjustments
are excluded in arriving at underlying profit.
The Group’s activities are organised
into four financial reporting segments: Retail; Commercial Banking; Consumer Finance and Insurance. 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
2016.
There has been no change to the Group’s
segmental accounting for internal segment services or derivatives entered into by units for risk management purposes since 31 December
2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
income,
|
|
income,
|
|
|
|
|
|
|
|
|
Net
|
|
net of
|
|
net of
|
|
Profit
|
|
|
|
Inter-
|
|
|
interest
|
|
insurance
|
|
insurance
|
|
(loss)
|
|
External
|
|
segment
|
Half-year to 30 June 2017
|
|
income
|
|
claims
|
|
claims
|
|
before tax
|
|
revenue
|
|
revenue
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying basis
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
3,337
|
|
477
|
|
3,814
|
|
1,598
|
|
4,177
|
|
(363)
|
Commercial Banking
|
|
1,425
|
|
1,100
|
|
2,525
|
|
1,437
|
|
1,703
|
|
822
|
Consumer Finance
|
|
1,041
|
|
755
|
|
1,796
|
|
759
|
|
2,082
|
|
(286)
|
Insurance
|
|
(50)
|
|
872
|
|
822
|
|
408
|
|
1,036
|
|
(214)
|
Other
|
|
172
|
|
144
|
|
316
|
|
290
|
|
275
|
|
41
|
Group
|
|
5,925
|
|
3,348
|
|
9,273
|
|
4,492
|
|
9,273
|
|
–
|
Reconciling items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance grossing adjustment
|
|
(608)
|
|
660
|
|
52
|
|
–
|
|
|
|
|
Market volatility and asset sales
1
|
|
20
|
|
96
|
|
116
|
|
136
|
|
|
|
|
Amortisation of purchased intangibles
|
|
–
|
|
–
|
|
–
|
|
(38)
|
|
|
|
|
Restructuring costs
2
|
|
–
|
|
–
|
|
–
|
|
(321)
|
|
|
|
|
Fair value unwind and other items
|
|
(135)
|
|
(7)
|
|
(142)
|
|
(135)
|
|
|
|
|
Payment protection insurance provision
|
|
–
|
|
–
|
|
–
|
|
(700)
|
|
|
|
|
Other conduct provisions
|
|
–
|
|
–
|
|
–
|
|
(540)
|
|
|
|
|
Group − statutory
|
|
5,202
|
|
4,097
|
|
9,299
|
|
2,894
|
|
|
|
|
|
|
1
|
Comprises (i) gains on disposals of assets which are not part of normal business operations (£6 million); (ii) the net effect of banking volatility and net derivative valuation adjustments (losses of £20 million); (iii) volatility relating to the insurance business (gains of £165 million); and (iv) the results of liability management exercises (losses of £15 million).
|
2
|
Comprises severance related costs relating to the Simplification programme, the costs of implementing regulatory reform and
ring-fencing, the rationalisation of the non-branch property portfolio and the integration of MBNA.
|
|
2.
|
Segmental analysis
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
income,
|
|
income,
|
|
|
|
|
|
|
|
|
Net
|
|
net of
|
|
net of
|
|
Profit
|
|
|
|
Inter-
|
|
|
interest
|
|
insurance
|
|
insurance
|
|
(loss)
|
|
External
|
|
segment
|
Half-year to 30 June 2016
|
|
income
|
|
claims
|
|
claims
|
|
before tax
|
|
revenue
|
|
revenue
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying basis
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
3,296
|
|
558
|
|
3,854
|
|
1,548
|
|
4,333
|
|
(479)
|
Commercial Banking
|
|
1,306
|
|
982
|
|
2,288
|
|
1,236
|
|
2,137
|
|
151
|
Consumer Finance
|
|
994
|
|
658
|
|
1,652
|
|
690
|
|
1,942
|
|
(290)
|
Insurance
|
|
(80)
|
|
921
|
|
841
|
|
446
|
|
300
|
|
541
|
Other
|
|
266
|
|
(26)
|
|
240
|
|
241
|
|
163
|
|
77
|
Group
|
|
5,782
|
|
3,093
|
|
8,875
|
|
4,161
|
|
8,875
|
|
–
|
Reconciling items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance grossing adjustment
|
|
(423)
|
|
519
|
|
96
|
|
–
|
|
|
|
|
Enhanced Capital Notes
1
|
|
–
|
|
(790)
|
|
(790)
|
|
(790)
|
|
|
|
|
Market volatility and asset sales
2
|
|
20
|
|
252
|
|
272
|
|
128
|
|
|
|
|
Amortisation of purchased intangibles
|
|
–
|
|
–
|
|
–
|
|
(168)
|
|
|
|
|
Restructuring costs
3
|
|
–
|
|
–
|
|
–
|
|
(307)
|
|
|
|
|
Fair value unwind
|
|
(154)
|
|
36
|
|
(118)
|
|
(110)
|
|
|
|
|
Other conduct provisions
|
|
–
|
|
(15)
|
|
(15)
|
|
(460)
|
|
|
|
|
Group
−
statutory
|
|
5,225
|
|
3,095
|
|
8,320
|
|
2,454
|
|
|
|
|
|
The los
|
1
|
The loss relating to the ECNs was £790 million, representing the write-off of the embedded derivative and the premium paid on redemption of the remaining notes.
|
2
|
Comprises (i) gains on disposals of assets which are not part of normal business operations (£335 million); (ii) the net effect of banking volatility and net derivative valuation adjustments (gains of £19 million); (iii) volatility relating to the insurance business (losses of £372 million); and (iv) the results of liability management exercises (gains of £146 million).
|
3
|
Principally comprises the severance costs related to phase II of the Simplification programme.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
income,
|
|
income,
|
|
|
|
|
|
|
|
|
Net
|
|
net of
|
|
net of
|
|
Profit
|
|
|
|
Inter-
|
|
|
interest
|
|
insurance
|
|
insurance
|
|
(loss)
|
|
External
|
|
segment
|
Half-year to 31 December 2016
|
|
income
|
|
claims
|
|
claims
|
|
before tax
|
|
revenue
|
|
revenue
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying basis
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
3,201
|
|
495
|
|
3,696
|
|
1,455
|
|
4,127
|
|
(431)
|
Commercial Banking
|
|
1,429
|
|
1,005
|
|
2,434
|
|
1,232
|
|
1,531
|
|
903
|
Consumer Finance
|
|
947
|
|
680
|
|
1,627
|
|
593
|
|
1,943
|
|
(316)
|
Insurance
|
|
(66)
|
|
834
|
|
768
|
|
391
|
|
1,011
|
|
(243)
|
Other
|
|
142
|
|
(42)
|
|
100
|
|
35
|
|
13
|
|
87
|
Group
|
|
5,653
|
|
2,972
|
|
8,625
|
|
3,706
|
|
8,625
|
|
–
|
Reconciling items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance grossing adjustment
|
|
(1,475)
|
|
1,591
|
|
116
|
|
–
|
|
|
|
|
Market volatility and asset sales
1
|
|
13
|
|
379
|
|
392
|
|
311
|
|
|
|
|
Amortisation of purchased intangibles
|
|
–
|
|
–
|
|
–
|
|
(172)
|
|
|
|
|
Restructuring costs
|
|
–
|
|
–
|
|
–
|
|
(315)
|
|
|
|
|
Fair value unwind and other items
|
|
(142)
|
|
2
|
|
(140)
|
|
(121)
|
|
|
|
|
Payment protection insurance provision
|
|
–
|
|
–
|
|
–
|
|
(1,350)
|
|
|
|
|
Other conduct provisions
|
|
–
|
|
(46)
|
|
(46)
|
|
(625)
|
|
|
|
|
Group
−
statutory
|
|
4,049
|
|
4,898
|
|
8,947
|
|
1,434
|
|
|
|
|
|
|
1
|
Comprises (i) losses on disposals of assets which are not part of normal business operations (£118 million); (ii) the net effect of banking volatility and net derivative valuation adjustments (gains of £171 million); (iii) volatility relating to the insurance business (gains of £281 million); and (iv) the results of liability management exercises (losses of £23 million).
|
|
2.
|
Segmental analysis
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment external
|
|
Segment customer
|
|
Segment external
|
|
|
assets
|
|
deposits
|
|
liabilities
|
|
|
At 30 June
|
|
At 31 Dec
|
|
At 30 June
|
|
At 31 Dec
|
|
At 30 June
|
|
At 31 Dec
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
297,958
|
|
300,085
|
|
269,405
|
|
271,005
|
|
272,870
|
|
275,006
|
Commercial Banking
|
|
181,962
|
|
188,296
|
|
138,764
|
|
132,628
|
|
226,383
|
|
221,395
|
Consumer Finance
|
|
52,540
|
|
40,992
|
|
7,134
|
|
7,920
|
|
11,028
|
|
12,494
|
Insurance
|
|
149,287
|
|
153,936
|
|
–
|
|
–
|
|
142,529
|
|
146,836
|
Other
|
|
133,172
|
|
134,484
|
|
2,314
|
|
3,907
|
|
113,763
|
|
113,597
|
Total Group
|
|
814,919
|
|
817,793
|
|
417,617
|
|
415,460
|
|
766,573
|
|
796,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year to
|
|
|
|
Half-year to
|
|
|
|
Half-year to
|
|
|
|
30 June
|
|
|
|
30 June
|
|
|
|
31 Dec
|
|
|
|
2017
|
|
|
|
2016
|
|
|
|
2016
|
|
|
|
£ million
|
|
|
|
£ million
|
|
|
|
£ million
|
Administrative expenses
|
|
|
|
|
|
|
|
|
|
|
|
Staff costs:
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and social security costs
|
|
|
1,769
|
|
|
|
1,782
|
|
|
|
1,806
|
Pensions and other post-retirement benefit schemes (note 13)
|
|
|
302
|
|
|
|
268
|
|
|
|
287
|
Restructuring and other staff costs
|
|
|
291
|
|
|
|
412
|
|
|
|
262
|
|
|
|
2,362
|
|
|
|
2,462
|
|
|
|
2,355
|
Premises and equipment
|
|
|
399
|
|
|
|
353
|
|
|
|
319
|
Other expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Communications and data processing
|
|
|
415
|
|
|
|
403
|
|
|
|
445
|
UK bank levy
|
|
|
–
|
|
|
|
–
|
|
|
|
200
|
Other
|
|
|
655
|
|
|
|
675
|
|
|
|
661
|
|
|
|
1,070
|
|
|
|
1,078
|
|
|
|
1,306
|
|
|
|
3,831
|
|
|
|
3,893
|
|
|
|
3,980
|
Depreciation and amortisation
|
|
|
1,131
|
|
|
|
1,166
|
|
|
|
1,214
|
Total operating expenses, excluding regulatory provisions
|
|
|
4,962
|
|
|
|
5,059
|
|
|
|
5,194
|
Regulatory provisions:
|
|
|
|
|
|
|
|
|
|
|
|
Payment protection insurance provision (note 14)
|
|
|
700
|
|
|
|
–
|
|
|
|
1,350
|
Other regulatory provisions
1
(note 14)
|
|
|
540
|
|
|
|
445
|
|
|
|
579
|
|
|
|
1,240
|
|
|
|
445
|
|
|
|
1,929
|
Total operating expenses
|
|
|
6,202
|
|
|
|
5,504
|
|
|
|
7,123
|
|
|
1
|
In addition, regulatory provisions of £15 million in the half-year to 30 June 2016 and £46 million in the half-year to 31 December 2016 were charged against income.
|
|
|
|
|
|
|
|
|
|
Half-year to
|
|
Half-year to
|
|
Half-year to
|
|
|
30 June
|
|
30 June
|
|
31 Dec
|
|
|
2017
|
|
2016
|
|
2016
|
|
|
£m
|
|
£m
|
|
£m
|
Impairment losses on loans and receivables:
|
|
|
|
|
|
|
Loans and advances to customers
|
|
200
|
|
229
|
|
363
|
Debt securities classified as loans and receivables
|
|
(4)
|
|
–
|
|
–
|
Impairment losses on loans and receivables (note 10)
|
|
196
|
|
229
|
|
363
|
Impairment of available-for-sale financial assets
|
|
6
|
|
146
|
|
27
|
Other credit risk provisions
|
|
1
|
|
(13)
|
|
–
|
Total impairment charged to the income statement
|
|
203
|
|
362
|
|
390
|
In accordance with IAS 34, the Group’s
income tax expense for the half-year to 30 June 2017 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
|
|
Half-year to
|
|
Half-year to
|
|
|
30 June
|
|
30 June
|
|
31 Dec
|
|
|
2017
|
|
2016
|
|
2016
|
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
Profit before tax
|
|
2,894
|
|
2,454
|
|
1,434
|
|
|
|
|
|
|
|
Tax thereon at UK corporation tax rate of 19.25 per cent
(2016: 20 per cent)
|
|
(557)
|
|
(491)
|
|
(287)
|
Impact of bank surcharge
|
|
(231)
|
|
(59)
|
|
(207)
|
Impact of changes in UK corporation tax rates
|
|
(35)
|
|
(3)
|
|
(198)
|
Disallowed items
1
|
|
(207)
|
|
(122)
|
|
(342)
|
Non-taxable items
|
|
55
|
|
47
|
|
28
|
Overseas tax rate differences
|
|
1
|
|
(6)
|
|
16
|
Gains exempted
|
|
69
|
|
8
|
|
11
|
Policyholder tax
2
|
|
(37)
|
|
(34)
|
|
(207)
|
Tax losses not previously recognised
|
|
9
|
|
49
|
|
10
|
Adjustments in respect of previous years
|
|
26
|
|
10
|
|
54
|
Effect of results of joint ventures and associates
|
|
1
|
|
–
|
|
(1)
|
Other items
|
|
1
|
|
4
|
|
(4)
|
Tax expense
|
|
(905)
|
|
(597)
|
|
(1,127)
|
●
|
|
1
|
The Finance (No.2) Act 2015 introduced restrictions on the tax deductibility of provisions for conduct charges arising on or after 8 July 2015. This has resulted in tax of £170 million (half-year to 30 June 2016: £81 million; half-year to 31 December 2016: £208 million).
|
2
|
In the half-year to 31 December 2016 this included a £231 million write down of the deferred tax asset held within the life business, reflecting the Group’s utilisation estimate which has been restricted by the current economic environment.
|
|
|
|
|
|
|
|
|
|
Half-year to
|
|
Half-year to
|
|
Half-year to
|
|
|
|
30 June
|
|
30 June
|
|
31 Dec
|
|
|
|
2017
|
|
2016
|
|
2016
|
|
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
Profit attributable to ordinary shareholders – basic and diluted
|
|
1,739
|
|
1,590
|
|
61
|
|
Tax credit on distributions to other equity holders
|
|
51
|
|
41
|
|
50
|
|
|
|
1,790
|
|
1,631
|
|
111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year to
|
|
Half-year to
|
|
Half-year to
|
|
|
30 June
|
|
30 June
|
|
31 Dec
|
|
|
2017
|
|
2016
|
|
2016
|
|
|
million
|
|
million
|
|
million
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares in issue – basic
|
|
71,426
|
|
71,175
|
|
71,292
|
Adjustment for share options and awards
|
|
704
|
|
882
|
|
699
|
Weighted average number of ordinary shares in issue – diluted
|
|
72,130
|
|
72,057
|
|
71,991
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
2.5p
|
|
2.3p
|
|
0.1p
|
Diluted earnings per share
|
|
2.5p
|
|
2.3p
|
|
0.1p
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.
|
Trading and other financial assets at fair value through profit or loss
|
|
|
|
|
|
|
|
At
|
|
At
|
|
|
30 June
|
|
31 Dec
|
|
|
2017
|
|
2016
|
|
|
£m
|
|
£m
|
|
|
|
|
|
Trading assets
|
|
43,016
|
|
45,253
|
|
|
|
|
|
Other financial assets at fair value through profit or loss:
|
|
|
|
|
Treasury and other bills
|
|
19
|
|
20
|
Debt securities
|
|
37,065
|
|
38,210
|
Equity shares
|
|
81,870
|
|
67,691
|
|
|
118,954
|
|
105,921
|
Total trading and other financial assets at fair value through profit or loss
|
|
161,970
|
|
151,174
|
|
|
|
|
|
|
|
|
|
Included in the above is £115,178 million
(31 December 2016: £101,888 million) of assets relating to the insurance businesses.
|
8.
|
Derivative financial instruments
|
|
|
|
|
|
|
|
|
|
|
|
30 June 2017
|
|
31 December 2016
|
|
|
Fair value
|
|
Fair value
|
|
Fair value
|
|
Fair value
|
|
|
of assets
|
|
of liabilities
|
|
of assets
|
|
of liabilities
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
Hedging
|
|
|
|
|
|
|
|
|
Derivatives designated as fair value hedges
|
|
1,278
|
|
692
|
|
1,481
|
|
759
|
Derivatives designated as cash flow hedges
|
|
925
|
|
1,136
|
|
1,231
|
|
1,205
|
|
|
2,203
|
|
1,828
|
|
2,712
|
|
1,964
|
Trading
|
|
|
|
|
|
|
|
|
Exchange rate contracts
|
|
6,864
|
|
6,795
|
|
8,860
|
|
8,781
|
Interest rate contracts
|
|
19,723
|
|
19,217
|
|
23,050
|
|
22,352
|
Credit derivatives
|
|
378
|
|
367
|
|
381
|
|
659
|
Equity and other contracts
|
|
856
|
|
983
|
|
1,135
|
|
1,168
|
|
|
27,821
|
|
27,362
|
|
33,426
|
|
32,960
|
Total recognised derivative assets/liabilities
|
|
30,024
|
|
29,190
|
|
36,138
|
|
34,924
|
|
9.
|
Loans and advances to customers
|
|
|
|
|
|
|
|
At 30 June
|
|
At 31 Dec
|
|
|
2017
|
|
2016
|
|
|
£m
|
|
£m
|
|
|
|
|
|
Agriculture, forestry and fishing
|
|
7,509
|
|
7,269
|
Energy and water supply
|
|
1,543
|
|
2,320
|
Manufacturing
|
|
7,529
|
|
7,285
|
Construction
|
|
4,405
|
|
4,535
|
Transport, distribution and hotels
|
|
12,262
|
|
13,320
|
Postal and communications
|
|
2,537
|
|
2,564
|
Property companies
|
|
31,756
|
|
32,192
|
Financial, business and other services
|
|
49,786
|
|
49,197
|
Personal:
|
|
|
|
|
Mortgages
|
|
305,352
|
|
306,682
|
Other
|
|
28,969
|
|
20,761
|
Lease financing
|
|
2,403
|
|
2,628
|
Hire purchase
|
|
12,778
|
|
11,617
|
|
|
466,829
|
|
460,370
|
Allowance for impairment losses on loans and advances to customers (note 10)
|
|
(2,225)
|
|
(2,412)
|
Total loans and advances to customers
|
|
464,604
|
|
457,958
|
Loans and advances to customers include
advances securitised under the Group's securitisation and covered bond programmes (see note 12).
|
10.
|
Allowance for impairment losses on loans and receivables
|
|
|
|
|
|
|
|
|
|
Half-year to
|
|
Half-year to
|
|
Half-year to
|
|
|
30 June
|
|
30 June
|
|
31 Dec
|
|
|
2017
|
|
2016
|
|
2016
|
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
Opening balance
|
|
2,488
|
|
3,130
|
|
2,831
|
Exchange and other adjustments
|
|
91
|
|
19
|
|
50
|
Advances written off
|
|
(818)
|
|
(1,037)
|
|
(1,096)
|
Recoveries of advances written off in previous years
|
|
333
|
|
509
|
|
353
|
Unwinding of discount
|
|
(13)
|
|
(19)
|
|
(13)
|
Charge to the income statement (note 4)
|
|
196
|
|
229
|
|
363
|
Balance at end of period
|
|
2,277
|
|
2,831
|
|
2,488
|
|
|
|
|
|
|
|
In respect of:
|
|
|
|
|
|
|
Loans and advances to customers (note 9)
|
|
2,225
|
|
2,733
|
|
2,412
|
Debt securities
|
|
52
|
|
98
|
|
76
|
Balance at end of period
|
|
2,277
|
|
2,831
|
|
2,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On 1 June 2017, following the receipt of
competition and regulatory approval, the Group acquired 100 per cent of the ordinary share capital of MBNA Limited (MBNA), which
together with its subsidiaries undertakes a UK consumer credit card business, from FIA Jersey Holdings Limited, a wholly-owned
subsidiary of Bank of America. The total fair value of the purchase consideration was £2,016 million, settled in cash.
The table below sets out the fair value
of the identifiable assets and liabilities acquired. The initial accounting for the acquisition has been determined provisionally
because of its complexity and the limited time available between the acquisition date and the preparation of these condensed consolidated
interim financial statements.
|
|
|
|
|
|
|
|
|
Book value
|
|
Provisional
|
|
Fair value
|
|
|
as at 1 June
|
|
fair value
|
|
as at 1 June
|
|
|
2017
|
|
adjustments
|
|
2017
|
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Loans and advances to customers
|
|
7,466
|
|
345
|
|
7,811
|
Available-for-sale financial assets
|
|
16
|
|
–
|
|
16
|
Other intangible assets
|
|
–
|
|
702
|
|
702
|
Other assets
|
|
217
|
|
345
|
|
562
|
Total assets
|
|
7,699
|
|
1,392
|
|
9,091
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Deposits from banks
1
|
|
6,431
|
|
–
|
|
6,431
|
Other liabilities
|
|
115
|
|
184
|
|
299
|
Other provisions
|
|
233
|
|
395
|
|
628
|
Total liabilities
|
|
6,779
|
|
579
|
|
7,358
|
|
|
|
|
|
|
|
Provisional fair value of net assets acquired
|
|
920
|
|
813
|
|
1,733
|
|
|
|
|
|
|
|
Goodwill arising on acquisition
|
|
|
|
|
|
283
|
Total consideration
|
|
|
|
|
|
2,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
●
|
|
1
|
Upon acquisition, the funding of MBNA was assumed by Lloyds Bank plc.
|
The post-acquisition profit before tax of
MBNA covering the period from 1 June 2017 to 30 June 2017, which is included in the Group statutory consolidated income statement
for the half-year to 30 June 2017, is £18 million.
Had the acquisition date of MBNA been 1
January 2017, the Group’s consolidated total income would have been £329 million higher at £17,604 million
and the Group’s consolidated profit before tax would have been £112 million higher at £3,006 million.
|
12.
|
Debt securities in issue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 June 2017
|
|
31 December 2016
|
|
|
At fair value
|
|
|
|
|
|
At fair value
|
|
|
|
|
|
|
through
|
|
At
|
|
|
|
through
|
|
At
|
|
|
|
|
profit or
|
|
amortised
|
|
|
|
profit or
|
|
amortised
|
|
|
|
|
loss
|
|
cost
|
|
Total
|
|
loss
|
|
cost
|
|
Total
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medium-term notes issued
|
|
8,223
|
|
25,741
|
|
33,964
|
|
9,423
|
|
27,182
|
|
36,605
|
Covered bonds
|
|
–
|
|
25,937
|
|
25,937
|
|
–
|
|
30,521
|
|
30,521
|
Certificates of deposit
|
|
–
|
|
10,994
|
|
10,994
|
|
–
|
|
8,077
|
|
8,077
|
Securitisation notes
|
|
–
|
|
5,105
|
|
5,105
|
|
–
|
|
7,253
|
|
7,253
|
Commercial paper
|
|
–
|
|
3,780
|
|
3,780
|
|
–
|
|
3,281
|
|
3,281
|
|
|
8,223
|
|
71,557
|
|
79,780
|
|
9,423
|
|
76,314
|
|
85,737
|
The notes issued by the Group’s securitisation
and covered bond programmes are held by external parties and by subsidiaries of the Group.
Securitisation programmes
At 30 June 2017, external parties held
£5,105 million (31 December 2016: £7,253 million) and the Group’s subsidiaries held £25,244 million
(31 December 2016: £26,435 million) of total securitisation notes in issue of £30,349 million (31 December
2016: £33,688 million). The notes are secured on loans and advances to customers and debt securities classified as loans
and receivables amounting to £49,284 million (31 December 2016: £52,184 million), the majority of which
have been sold by subsidiary companies to bankruptcy remote structured entities. The structured entities are consolidated fully
and all of these loans are retained on the Group's balance sheet.
Covered bond programmes
At 30 June 2017, external parties held
£25,937 million (31 December 2016: £30,521 million) and the Group’s subsidiaries held £700 million
(31 December 2016: £700 million) of total covered bonds in issue of £26,637 million (31 December
2016: £31,221 million). The bonds are secured on certain loans and advances to customers amounting to £33,170 million
(31 December 2016: £35,968 million) that have been assigned to bankruptcy remote limited liability partnerships. These
loans are retained on the Group's balance sheet.
Cash deposits of £5,065 million
(31 December 2016: £9,018 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.
|
13.
|
Post-retirement defined benefit schemes
|
The Group’s post-retirement defined
benefit scheme obligations are comprised as follows:
|
|
|
|
|
|
|
|
|
|
|
At
|
|
At
|
|
|
|
|
30 June
|
|
31 Dec
|
|
|
|
|
2017
|
|
2016
|
|
|
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
Defined benefit pension schemes:
|
|
|
|
|
|
|
- Fair value of scheme assets
|
|
|
|
44,721
|
|
45,578
|
- Present value of funded obligations
|
|
|
|
(44,980)
|
|
(45,822)
|
Net pension scheme liability
|
|
|
|
(259)
|
|
(244)
|
Other post-retirement schemes
|
|
|
|
(236)
|
|
(236)
|
Net retirement benefit liability
|
|
|
|
(495)
|
|
(480)
|
|
|
|
|
|
|
|
Recognised on the balance sheet as:
|
|
|
|
|
|
|
Retirement benefit assets
|
|
|
|
410
|
|
342
|
Retirement benefit obligations
|
|
|
|
(905)
|
|
(822)
|
Net retirement benefit liability
|
|
|
|
(495)
|
|
(480)
|
The movement in the Group’s net post-retirement
defined benefit scheme liability during the period was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
|
|
|
|
|
|
Liability at 1 January 2017
|
|
|
|
|
|
(480)
|
Income statement charge
|
|
|
|
|
|
(181)
|
Employer contributions
|
|
|
|
|
|
290
|
Remeasurement
|
|
|
|
|
|
(124)
|
Liability at 30 June 2017
|
|
|
|
|
|
(495)
|
The charge to the income statement in respect
of pensions and other post-retirement benefit schemes is comprised as follows:
|
|
|
|
|
|
|
|
|
Half-year to
|
|
Half-year to
|
|
Half-year to
|
|
|
30 June
|
|
30 June
|
|
31 Dec
|
|
|
2017
|
|
2016
|
|
2016
|
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
Defined benefit pension schemes
|
|
181
|
|
136
|
|
151
|
Defined contribution schemes
|
|
121
|
|
132
|
|
136
|
Total charge to the income statement
(note 3)
|
|
302
|
|
268
|
|
287
|
The principal assumptions used in the valuations
of the defined benefit pension schemes were as follows:
|
|
|
|
|
|
|
|
|
|
|
At
|
|
At
|
|
|
|
|
30 June
|
|
31 Dec
|
|
|
|
|
2017
|
|
2016
|
|
|
|
|
%
|
|
%
|
|
|
|
|
|
|
|
Discount rate
|
|
|
|
2.71
|
|
2.76
|
Rate of inflation:
|
|
|
|
|
|
|
Retail Prices Index
|
|
|
|
3.18
|
|
3.23
|
Consumer Price Index
|
|
|
|
2.13
|
|
2.18
|
Rate of salary increases
|
|
|
|
0.00
|
|
0.00
|
Weighted-average rate of increase for pensions in payment
|
|
|
|
2.71
|
|
2.74
|
|
14.
|
Provisions for liabilities and charges
|
Payment protection insurance (excluding
MBNA)
The Group increased the provision for PPI
costs by a further £700 million in the half-year to 30 June 2017, bringing the total amount provided to £18,075 million.
The charge in the half-year to 30 June 2017
is largely driven by a potentially higher total volume of complaints and associated operating costs due to higher reactive complaint
volumes received over the past three quarters, which have averaged approximately 9,000 per week.
At 30 June 2017 a provision of £2,647 million
remained unutilised relating to complaints and associated administration costs. The provision is consistent with total expected
complaint volumes of 5.3 million (including complaints falling under the Plevin rules and guidance) with approximately 1.2
million still expected to be received including approximately 9,000 reactive complaints per week through to August 2019. Total
cash payments were £661 million during the half-year to 30 June 2017.
Sensitivities
The Group estimates that it has sold approximately
16 million PPI policies since 2000. These include policies that were not mis-sold and those that have been successfully claimed
upon. Since the commencement of the PPI redress programme in 2011 the Group estimates that it has contacted, settled or provided
for approximately 52 per cent of the policies sold since 2000.
The total amount provided for PPI represents
the Group’s best estimate of the likely future cost. However a number of risks and uncertainties remain in particular with
respect to future volumes. The cost could differ from the Group’s estimates and the assumptions underpinning them, and could
result in a further provision being required. There is significant uncertainty around the impact of the regulatory changes, FCA
media campaign and Claims Management Companies and customer activity.
Key metrics and sensitivities are highlighted
in the table below:
|
|
|
|
Sensitivities
(exclude claims where no PPI policy was held)
|
Actuals to date
|
Anticipated future
2
|
Sensitivity
2,3
|
Customer initiated complaints since origination (m)
1
|
4.1
|
1.2
|
0.1 = £215m
|
Administrative expenses (£m)
|
3,350
|
525
|
1 case = £450
|
|
|
1
|
Sensitivity includes complaint handling costs.
|
2
|
Anticipated future and sensitivities are impacted by a proportion of complaints and re-complaints falling under the
Plevin
rules and guidance in light of the FCA Policy Statement PS 17/3.
|
3
|
Average redress and uphold rates remain stable.
|
Payment protection insurance (MBNA)
With regard to MBNA, as announced in December
2016, the Group’s exposure is capped at £240 million through an indemnity received from Bank of America.
|
14.
|
Provisions for liabilities and charges
(continued)
|
Other provisions for legal actions and
regulatory matters
Packaged bank accounts
In the half-year to 30 June 2017 the Group
has provided an additional £95 million in respect of complaints relating to alleged mis-selling of packaged bank accounts
raising the total amount provided to £600 million. As at 30 June 2017, £182 million of the provision remained
unutilised
.
The total amount provided represents the Group’s best estimate of the likely future cost, however a number
of risks and uncertainties remain in particular with respect to future volumes.
Arrears handling related activities
The Group has provided an additional £155 million
in the half-year to 30 June 2017 (bringing the total provision to £552 million), for the costs of identifying and rectifying
certain arrears management fees and activities. Following a review of the Group’s arrears handling activities, the Group
has put in place a number of actions to improve further its handling of customers in these areas and the Group is reimbursing mortgage
arrears fees to around 590,000 customers. As at 30 June 2017, the unutilised provision was £518 million.
Customer claims in relation to insurance
branch business in Germany
The Group continues to receive claims
in Germany from customers relating to policies issued by Clerical Medical Investment Group Limited (subsequently renamed
Scottish Widows Limited). The German industry-wide issue regarding notification of contractual ‘cooling off’
periods continued to lead to an increasing number of claims in 2016. Up to 31 December 2016 the Group had provided a
total of £639 million, no further amounts have been provided in the half-year to 30 June 2017. The remaining unutilised
provision as at 30 June 2017 was £156 million (31 December 2016: £168 million). The validity of the claims
facing the Group depends upon the facts and circumstances in respect of each claim. As a result the ultimate financial
effect, which could be significantly different from the current provision, will be known only once all relevant claims have
been resolved.
HBOS Reading – customer review
The Group has commenced a review into a
number of customer cases from the former HBOS Impaired Assets Office based in Reading. This review follows the conclusion of a
criminal trial in which a number of individuals, including two former HBOS employees, were convicted of conspiracy to corrupt,
fraudulent trading and associated money laundering offences which occurred prior to the acquisition of HBOS by the Group in 2009.
The review is ongoing, the Group has provided £100 million in the half-year to 30 June 2017 and is in the process of paying
compensation to the victims of the fraud for economic losses, ex-gratia payments and awards for distress and inconvenience.
Other legal actions and regulatory matters
In the course of its business, the Group
is engaged in discussions with the PRA, FCA and other UK and overseas regulators and other governmental authorities on a range
of matters. The Group also receives complaints and claims from customers in connection with its past conduct and, where significant,
provisions are held against the costs expected to be incurred as a result of the conclusions reached. In the half-year to 30 June
2017, the Group charged an additional £190 million in respect of matters across all divisions. At 30 June 2017, the
Group held unutilised provisions totalling £589 million for these other legal actions and regulatory matters.
|
15.
|
Contingent liabilities and commitments
|
Interchange fees
With respect to multi-lateral interchange
fees (MIFs), the Group is not directly involved in the ongoing investigations and litigation (as described below) which involve
card schemes such as Visa and MasterCard. However, the Group is a member of Visa and MasterCard and other card schemes.
|
·
|
The European Commission continues to pursue certain competition investigations into MasterCard
and Visa probing, amongst other things, MIFs paid in respect of cards issued outside the EEA;
|
|
·
|
Litigation continues in the English Courts against both Visa and MasterCard. This litigation has
been brought by several retailers who are seeking damages for allegedly ‘overpaid’ MIFs. From publicly available information,
it is understood these damages claims are running to different timescales with respect to the litigation process. It is also possible
that new claims may be issued.
|
|
·
|
Any ultimate impact on the Group of the above investigations and the litigation against Visa and
MasterCard remains uncertain at this time.
|
Visa Inc completed its acquisition of Visa
Europe on 21 June 2016. The Group’s share of the sale proceeds comprised cash consideration of approximately £330 million
(of which approximately £300 million was received on completion of the sale and £30 million is deferred for three
years) and preferred stock, which the Group measures at fair value. The preferred stock is convertible into Class A Common Stock
of Visa Inc or its equivalent upon the occurrence of certain events. As part of this transaction, the Group and certain other UK
banks also entered into a Loss Sharing Agreement (LSA) with Visa Inc, which clarifies the allocation of liabilities between the
parties should the litigation referred to above result in Visa Inc being liable for damages payable by Visa Europe. The maximum
amount of liability to which the Group may be subject under the LSA is capped at the cash consideration which was received by the
Group at completion. Visa Inc may also have recourse to a general indemnity, previously in place under Visa Europe’s Operating
Regulations, for damages claims concerning inter or intra-regional MIF setting activities.
LIBOR and other trading rates
In July 2014, the Group announced that it
had reached settlements totalling £217 million (at 30 June 2014 exchange rates) to resolve with UK and US federal authorities
legacy issues regarding the manipulation several years ago of Group companies’ submissions to the British Bankers’
Association (BBA) London Interbank Offered Rate (LIBOR) and Sterling Repo Rate. The Group continues to cooperate with various other
government and regulatory authorities, including the Serious Fraud Office, the Swiss Competition Commission, and a number of US
State Attorneys General, in conjunction with their investigations into submissions made by panel members to the bodies that set
LIBOR and various other interbank offered rates.
Certain Group companies, together with other
panel banks, have also been named as defendants in 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 LIBOR and the Australian BBSW
Reference Rate. The lawsuits, which contain broadly similar allegations, allege violations of the Sherman Antitrust Act, the Racketeer
Influenced and Corrupt Organizations Act and the Commodity Exchange Act, as well as various state statutes and common law doctrines.
Certain of the plaintiffs’ claims, including those in connection with USD and JPY LIBOR, have been dismissed by the US Federal
Court for Southern District of New York. Appeals remain possible.
Certain Group companies are also named as
defendants in UK based claims raising LIBOR manipulation allegations.
It is currently not possible to predict
the scope and ultimate outcome on the Group of the various outstanding regulatory investigations not encompassed by the settlements,
any private lawsuits or any related challenges to the interpretation or validity of any of the Group’s contractual arrangements,
including their timing and scale.
|
15.
|
Contingent liabilities and commitments
(continued)
|
UK shareholder litigation
In August 2014, the Group and a number of
former directors were named as defendants in a claim filed in the English High Court by a number of claimants who held shares in
Lloyds TSB Group plc (LTSB) prior to the acquisition of HBOS plc, alleging breaches of duties in relation to information provided
to shareholders in connection with the acquisition and the recapitalisation of LTSB. It is currently not possible to determine
the ultimate impact on the Group (if any), but the Group intends to defend the claim vigorously.
Financial Services Compensation Scheme
Following the default of a number of deposit
takers in 2008, the Financial Services Compensation Scheme (FSCS) borrowed funds from HM Treasury to meet the compensation costs
for customers of those firms. In June 2017, the FSCS announced that following the sale of certain Bradford & Bingley mortgage
assets, the principal balance outstanding on these loans was £4,678 million (31 December 2016: £15,655 million).
Although it is anticipated that the substantial majority of this loan will be repaid from funds the FSCS receives from asset sales,
surplus cash flow or other recoveries in relation to the assets of the firms that defaulted, any shortfall will be funded by deposit-taking
participants, including the Group, of the FSCS. The amount of future levies payable by the Group depends on a number of factors,
principally, the amounts recovered by the FSCS from asset sales.
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 their interpretation of the UK rules, which allow the offset of such losses denies the claim.
If HMRC’s position is found to be correct management estimate that this would result in an increase in current tax liabilities
of approximately £650 million and a reduction in the Group’s deferred tax asset of approximately £350 million.
The Group does not agree with HMRC's position 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 discussion 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.
Residential mortgage repossessions
In August 2014, the Northern Ireland High
Court handed down judgment in favour of the borrowers in relation to three residential mortgage test cases concerning certain aspects
of the Group’s practice with respect to the recalculation of contractual monthly instalments of customers in arrears. The
FCA is actively engaged with the industry in relation to these considerations and has recently published Guidance on the treatment
of customers with mortgage payment shortfalls. The Guidance covers remediation for mortgage customers who may have been affected
by the way firms calculate these customers’ monthly mortgage instalments. The Group is now determining its detailed approach
to implementation of the Guidance and will contact affected customers next year.
Update following the Financial Conduct
Authority’s publication of Policy Statement 17/3
On 2 August 2016, the Financial Conduct
Authority (FCA) published a further consultation paper (CP16/20: Rules and guidance on payment protection insurance complaints:
feedback on CP15/39 and further consultation), following on from the original consultation published in November 2015.
On 2 March 2017 the FCA confirmed that the
deadline by which consumers would need to make their PPI complaints would be 29 August 2019, and new rules with respect to the
UK Supreme Court’s decision in Plevin v Paragon Personal Finance Limited [2014] UKSC 61 would come into force on 29 August
2017.
|
15.
|
Contingent liabilities and commitments
(continued)
|
On 31 May 2017 an application for judicial
review of Policy Statement 17/3 was filed in the High Court of England and Wales, which subject to the Court’s determination
may have an impact on the implementation of the FCA’s rules and guidance in Policy Statement 17/3.
Mortgage arrears handling activities
On 26 May 2016, the Group was informed that
an enforcement team at the FCA had commenced an investigation in connection with the Group’s mortgage arrears handling activities.
This investigation is ongoing and it is currently not possible to make a reliable assessment of the liability, if any, that may
result from the investigation.
Other legal actions and regulatory matters
In addition, during the ordinary course
of 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, investors or other third parties, as well as legal and
regulatory reviews, challenges, investigations and enforcement actions, both in the UK and overseas. All such material matters
are periodically reassessed, with the assistance of external professional advisers where appropriate, to determine the likelihood
of the Group incurring a liability. In those instances where it is concluded that it is more likely than not that a payment will
be made, a provision is established to management's best estimate of the amount required at the relevant balance sheet date. In
some cases it will not be possible to form a view, for example because the facts are unclear or because further time is needed
properly to assess the merits of the case, and no provisions are held in relation to such matters. In these circumstances, specific
disclosure in relation to a contingent liability will be made where material. However 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.
Contingent liabilities and commitments arising
from the banking business
|
|
|
|
|
|
|
At 30 June
|
|
At 31 Dec
|
|
|
2017
|
|
2016
|
|
|
£m
|
|
£m
|
|
|
|
|
|
Contingent liabilities
|
|
|
|
|
Acceptances and endorsements
|
|
29
|
|
21
|
Other:
|
|
|
|
|
Other items serving as direct credit substitutes
|
|
600
|
|
779
|
Performance bonds and other transaction-related contingencies
|
|
2,227
|
|
2,237
|
|
|
2,827
|
|
3,016
|
Total contingent liabilities
|
|
2,856
|
|
3,037
|
|
|
|
|
|
Commitments
|
|
|
|
|
Documentary credits and other short-term trade-related transactions
|
|
1
|
|
–
|
Forward asset purchases and forward deposits placed
|
|
365
|
|
648
|
|
|
|
|
|
Undrawn formal standby facilities, credit lines and other commitments to lend:
|
|
|
|
|
Less than 1 year original maturity:
|
|
|
|
|
Mortgage offers made
|
|
12,014
|
|
10,749
|
Other commitments
|
|
84,432
|
|
62,697
|
|
|
96,446
|
|
73,446
|
1 year or over original maturity
|
|
36,838
|
|
40,074
|
Total commitments
|
|
133,650
|
|
114,168
|
Of the amounts shown above in respect of
undrawn formal standby facilities, credit lines and other commitments to lend, £61,921 million (31 December 2016:
£63,203 million) was irrevocable.
|
16.
|
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 49 to the Group’s 2016 financial statements describes the definitions of the three levels in the fair value hierarchy.
Valuation control framework
Key elements of the valuation control framework,
which covers processes for all levels in the fair value hierarchy including level 3 portfolios, include model validation (incorporating
pre-trade and post-trade testing), product implementation review and independent price verification. 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 consistent sources of data cease to be available.
Valuation methodology
For level 2 and level 3 portfolios, there
is no significant change to what was disclosed in the Group’s 2016 Annual Report and Accounts in respect of the valuation
methodology (techniques and inputs) applied to such portfolios.
The table below summarises the carrying
values of financial assets and liabilities presented on the Group’s 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.
|
|
|
|
|
|
|
|
|
|
|
30 June 2017
|
|
31 December 2016
|
|
|
Carrying
|
|
Fair
|
|
Carrying
|
|
Fair
|
|
|
value
|
|
value
|
|
value
|
|
value
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
Financial assets
|
|
|
|
|
|
|
|
|
Trading and other financial assets at fair value through profit or loss
|
|
161,970
|
|
161,970
|
|
151,174
|
|
151,174
|
Derivative financial instruments
|
|
30,024
|
|
30,024
|
|
36,138
|
|
36,138
|
Loans and receivables:
|
|
|
|
|
|
|
|
|
Loans and advances to banks
|
|
8,865
|
|
8,852
|
|
26,902
|
|
26,812
|
Loans and advances to customers
|
|
464,604
|
|
464,629
|
|
457,958
|
|
457,461
|
Debt securities
|
|
3,841
|
|
3,774
|
|
3,397
|
|
3,303
|
Available-for-sale financial instruments
|
|
51,803
|
|
51,803
|
|
56,524
|
|
56,524
|
Financial liabilities
|
|
|
|
|
|
|
|
|
Deposits from banks
|
|
24,879
|
|
24,855
|
|
16,384
|
|
16,395
|
Customer deposits
|
|
417,617
|
|
418,050
|
|
415,460
|
|
416,490
|
Trading and other financial liabilities at fair value through profit or loss
|
|
55,671
|
|
55,671
|
|
54,504
|
|
54,504
|
Derivative financial instruments
|
|
29,190
|
|
29,190
|
|
34,924
|
|
34,924
|
Debt securities in issue
|
|
71,557
|
|
74,707
|
|
76,314
|
|
79,650
|
Liabilities arising from non-participating investment contracts
|
|
15,652
|
|
15,652
|
|
20,112
|
|
20,112
|
Subordinated liabilities
|
|
18,575
|
|
22,032
|
|
19,831
|
|
22,395
|
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.
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.
|
16.
|
Fair values of financial assets and liabilities
(continued)
|
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.
Financial
assets
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
At 30 June 2017
|
|
|
|
|
|
|
|
|
Trading and other financial assets at fair value through profit or loss:
|
|
|
|
|
|
|
|
|
Loans and advances to customers
|
|
–
|
|
27,839
|
|
–
|
|
27,839
|
Loans and advances to banks
|
|
–
|
|
1,446
|
|
–
|
|
1,446
|
Debt securities
|
|
25,768
|
|
22,897
|
|
2,126
|
|
50,791
|
Equity shares
|
|
80,252
|
|
31
|
|
1,592
|
|
81,875
|
Treasury and other bills
|
|
19
|
|
–
|
|
–
|
|
19
|
Total trading and other financial assets at fair value through profit or loss
|
|
106,039
|
|
52,213
|
|
3,718
|
|
161,970
|
Available-for-sale financial assets:
|
|
|
|
|
|
|
|
|
Debt securities
|
|
44,717
|
|
5,865
|
|
114
|
|
50,696
|
Equity shares
|
|
527
|
|
34
|
|
546
|
|
1,107
|
Total available-for-sale financial assets
|
|
45,244
|
|
5,899
|
|
660
|
|
51,803
|
Derivative financial instruments
|
|
123
|
|
28,789
|
|
1,112
|
|
30,024
|
Total financial assets carried at fair value
|
|
151,406
|
|
86,901
|
|
5,490
|
|
243,797
|
|
|
|
|
|
|
|
|
|
At 31 December 2016
|
|
|
|
|
|
|
|
|
Trading and other financial assets at fair value
|
|
|
|
|
|
|
|
|
through profit or loss:
|
|
|
|
|
|
|
|
|
Loans and advances to customers
|
|
–
|
|
30,473
|
|
–
|
|
30,473
|
Loans and advances to banks
|
|
–
|
|
2,606
|
|
–
|
|
2,606
|
Debt securities
|
|
25,075
|
|
23,010
|
|
2,293
|
|
50,378
|
Equity shares
|
|
66,147
|
|
37
|
|
1,513
|
|
67,697
|
Treasury and other bills
|
|
20
|
|
–
|
|
–
|
|
20
|
Total trading and other financial assets at fair value through profit or loss
|
|
91,242
|
|
56,126
|
|
3,806
|
|
151,174
|
Available-for-sale financial assets:
|
|
|
|
|
|
|
|
|
Debt securities
|
|
48,649
|
|
6,529
|
|
133
|
|
55,311
|
Equity shares
|
|
435
|
|
17
|
|
761
|
|
1,213
|
Total available-for-sale financial assets
|
|
49,084
|
|
6,546
|
|
894
|
|
56,524
|
Derivative financial instruments
|
|
270
|
|
34,469
|
|
1,399
|
|
36,138
|
Total financial assets carried at fair value
|
|
140,596
|
|
97,141
|
|
6,099
|
|
243,836
|
|
16.
|
Fair values of financial assets and liabilities
(continued)
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
At 30 June 2017
|
|
|
|
|
|
|
|
|
Trading and other financial liabilities at fair value through profit or loss:
|
|
|
|
|
|
|
|
|
Liabilities held at fair value through profit or loss
|
|
–
|
|
8,223
|
|
–
|
|
8,223
|
Trading liabilities
|
|
2,375
|
|
45,073
|
|
–
|
|
47,448
|
Total trading and other financial liabilities at fair value through profit or loss
|
|
2,375
|
|
53,296
|
|
–
|
|
55,671
|
Derivative financial instruments
|
|
360
|
|
28,070
|
|
760
|
|
29,190
|
Total financial liabilities carried at fair value
|
|
2,735
|
|
81,366
|
|
760
|
|
84,861
|
|
|
|
|
|
|
|
|
|
At 31 December 2016
|
|
|
|
|
|
|
|
|
Trading and other financial liabilities at fair value
|
|
|
|
|
|
|
|
|
through profit or loss:
|
|
|
|
|
|
|
|
|
Liabilities held at fair value through profit or loss
|
|
–
|
|
9,423
|
|
2
|
|
9,425
|
Trading liabilities
|
|
2,417
|
|
42,662
|
|
–
|
|
45,079
|
Total trading and other financial liabilities at fair value through profit or loss
|
|
2,417
|
|
52,085
|
|
2
|
|
54,504
|
Derivative financial instruments
|
|
358
|
|
33,606
|
|
960
|
|
34,924
|
Total financial liabilities carried at fair value
|
|
2,775
|
|
85,691
|
|
962
|
|
89,428
|
Financial guarantees are recognised at fair
value on initial recognition and are classified as level 3; the balance is not material.
|
16.
|
Fair values of financial assets and liabilities
(continued)
|
Movements in level 3 portfolio
The tables below analyse movements in the
level 3 financial assets portfolio.
|
|
|
|
|
|
|
|
|
|
|
|
Trading
|
|
|
|
|
|
|
|
|
and other
|
|
|
|
|
|
Total
|
|
|
financial
|
|
Available-
|
|
|
|
financial
|
|
|
assets at fair
|
|
for-sale
|
|
|
|
assets
|
|
|
value through
|
|
financial
|
|
Derivative
|
|
carried at
|
|
|
profit or loss
|
|
assets
|
|
assets
|
|
fair value
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
At 1 January 2017
|
|
3,806
|
|
894
|
|
1,399
|
|
6,099
|
Exchange and other adjustments
|
|
(4)
|
|
(15)
|
|
18
|
|
(1)
|
Gains (losses) recognised in the income statement within other income
|
|
11
|
|
–
|
|
(226)
|
|
(215)
|
Gains (losses) recognised in other comprehensive income within the revaluation reserve in respect of available-for-sale financial assets
|
|
–
|
|
(199)
|
|
–
|
|
(199)
|
Purchases
|
|
303
|
|
24
|
|
5
|
|
332
|
Sales
|
|
(331)
|
|
(23)
|
|
(40)
|
|
(394)
|
Transfers into the level 3 portfolio
|
|
56
|
|
–
|
|
–
|
|
56
|
Transfers out of the level 3 portfolio
|
|
(123)
|
|
(21)
|
|
(44)
|
|
(188)
|
At 30 June 2017
|
|
3,718
|
|
660
|
|
1,112
|
|
5,490
|
Gains (losses) recognised in the income statement within other income relating to those assets held at
30 June 2017
|
|
234
|
|
–
|
|
(227)
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading
|
|
|
|
|
|
|
|
|
and other
|
|
|
|
|
|
Total
|
|
|
financial
|
|
Available-
|
|
|
|
financial
|
|
|
assets at fair
|
|
for-sale
|
|
|
|
assets
|
|
|
value through
|
|
financial
|
|
Derivative
|
|
carried at
|
|
|
profit or loss
|
|
assets
|
|
assets
|
|
fair value
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
At 1 January 2016
|
|
5,116
|
|
684
|
|
1,469
|
|
7,269
|
Exchange and other adjustments
|
|
6
|
|
1
|
|
61
|
|
68
|
Gains recognised in the income statement within other income
|
|
317
|
|
–
|
|
478
|
|
795
|
Gains recognised in other comprehensive income within the revaluation reserve in respect of available-for-sale financial assets
|
|
–
|
|
248
|
|
–
|
|
248
|
Purchases
|
|
335
|
|
204
|
|
6
|
|
545
|
Sales
|
|
(2,031)
|
|
(494)
|
|
(35)
|
|
(2,560)
|
Derecognised pursuant to tender offers and redemptions in respect of Enhanced Capital Notes
|
|
–
|
|
–
|
|
(476)
|
|
(476)
|
Transfers into the level 3 portfolio
|
|
187
|
|
136
|
|
45
|
|
368
|
Transfers out of the level 3 portfolio
|
|
(159)
|
|
–
|
|
(3)
|
|
(162)
|
At 30 June 2016
|
|
3,771
|
|
779
|
|
1,545
|
|
6,095
|
Gains recognised in the income statement within other income relating to those assets held at 30 June 2016
|
|
373
|
|
–
|
|
635
|
|
1,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16.
|
Fair values of financial assets and liabilities
(continued)
|
The tables below analyse movements in the
level 3 financial liabilities portfolio.
|
|
|
|
|
|
|
|
|
Trading
|
|
|
|
|
|
|
and other
|
|
|
|
|
|
|
financial
|
|
|
|
Total
|
|
|
liabilities at
|
|
|
|
financial
|
|
|
fair value
|
|
|
|
liabilities
|
|
|
through
|
|
Derivative
|
|
carried at
|
|
|
profit or loss
|
|
liabilities
|
|
fair value
|
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
At 1 January 2017
|
|
2
|
|
960
|
|
962
|
Exchange and other adjustments
|
|
–
|
|
14
|
|
14
|
Gains recognised in the income statement within other income
|
|
(2)
|
|
(207)
|
|
(209)
|
Additions
|
|
–
|
|
19
|
|
19
|
Redemptions
|
|
–
|
|
(26)
|
|
(26)
|
Transfers into the level 3 portfolio
|
|
–
|
|
–
|
|
–
|
Transfers out of the level 3 portfolio
|
|
–
|
|
–
|
|
–
|
At 30 June 2017
|
|
–
|
|
760
|
|
760
|
Gains recognised in the income statement within other income relating to those liabilities held at 30 June 2017
|
|
–
|
|
(209)
|
|
(209)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading
|
|
|
|
|
|
|
and other
|
|
|
|
|
|
|
financial
|
|
|
|
Total
|
|
|
liabilities at
|
|
|
|
financial
|
|
|
fair value
|
|
|
|
liabilities
|
|
|
through
|
|
Derivative
|
|
carried at
|
|
|
profit or loss
|
|
liabilities
|
|
fair value
|
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
At 1 January 2016
|
|
1
|
|
723
|
|
724
|
Exchange and other adjustments
|
|
–
|
|
43
|
|
43
|
Losses recognised in the income statement within other income
|
|
1
|
|
606
|
|
607
|
Additions
|
|
–
|
|
10
|
|
10
|
Redemptions
|
|
–
|
|
(52)
|
|
(52)
|
At 30 June 2016
|
|
2
|
|
1,330
|
|
1,332
|
Losses recognised in the income statement within other income relating to those liabilities held at 30 June 2016
|
|
1
|
|
592
|
|
593
|
|
|
|
|
|
|
|
|
16.
|
Fair values of financial assets and liabilities
(continued)
|
The tables below set out the effects of
reasonably possible alternative assumptions for categories of level 3 financial assets and financial liabilities which have an
aggregated carrying value greater than £500 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 June 2017
|
|
|
|
|
|
|
|
|
Effect of reasonably
|
|
|
|
|
|
|
|
|
possible alternative
|
|
|
|
|
|
|
|
|
assumptions
1
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Valuation
|
unobservable
|
|
|
|
Carrying
|
|
Favourable
|
|
Unfavourable
|
|
technique(s)
|
inputs
|
|
Range
2
|
|
value
|
|
changes
|
|
changes
|
|
|
|
|
|
|
£m
|
|
£m
|
|
£m
|
Trading and other financial assets at fair value through profit or loss:
|
|
|
|
|
|
|
|
|
Equity and venture capital investments
|
Market approach
|
Earnings multiple
|
|
0.9/18.0
|
|
2,136
|
|
69
|
|
(69)
|
Unlisted equities and debt securities, property partnerships in the life funds
|
Underlying asset/net asset value (incl. property prices)
3
|
n/a
|
|
n/a
|
|
1,458
|
|
−
|
|
(84)
|
Other
|
|
|
|
|
|
124
|
|
|
|
|
|
|
|
|
|
|
3,718
|
|
|
|
|
Available-for-sale financial assets
|
|
|
|
|
660
|
|
52
|
|
(52)
|
Derivative financial assets:
|
|
|
|
|
|
|
|
|
|
|
Interest rate derivatives
|
Option pricing model
|
Interest rate volatility
|
|
0%/136%
|
|
1,112
|
|
11
|
|
(4)
|
|
|
|
|
|
|
1,112
|
|
|
|
|
Financial assets carried at fair value
|
|
|
|
|
5,490
|
|
|
|
|
Trading and other financial liabilities at fair value through profit or loss
|
|
|
|
−
|
|
−
|
|
−
|
Derivative financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
Interest rate derivatives
|
Option pricing model
|
Interest rate volatility
|
|
0%/136%
|
|
760
|
|
−
|
|
−
|
|
|
|
|
|
|
760
|
|
|
|
|
Financial liabilities carried at fair value
|
|
|
|
|
760
|
|
|
|
|
|
|
1
|
Where the exposure to an unobservable input is managed on a net basis, only the net impact is shown in the table.
|
2
|
The range represents the highest and lowest inputs used in the level 3 valuations.
|
3
|
Underlying asset/net asset values represent fair value.
|
|
16.
|
Fair values of financial assets and liabilities
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2016
|
|
|
|
|
|
|
|
|
Effect of reasonably
|
|
|
|
|
|
|
|
|
possible alternative
|
|
|
|
|
|
|
|
|
assumptions
1
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Valuation
|
unobservable
|
|
|
|
Carrying
|
|
Favourable
|
|
Unfavourable
|
|
technique(s)
|
inputs
|
|
Range
2
|
|
value
|
|
changes
|
|
changes
|
|
|
|
|
|
|
£m
|
|
£m
|
|
£m
|
Trading and other financial assets at fair value through profit or loss:
|
|
|
|
|
|
|
|
|
Equity and venture capital investments
|
Market approach
|
Earnings multiple
|
|
0.9/10.0
|
|
2,163
|
|
63
|
|
(68)
|
Unlisted equities and debt securities, property partnerships in the life funds
|
Underlying asset/net asset value (incl. property prices)
3
|
n/a
|
|
n/a
|
|
1,501
|
|
−
|
|
(32)
|
Other
|
|
|
|
|
|
142
|
|
|
|
|
|
|
|
|
|
|
3,806
|
|
|
|
|
Available-for-sale financial assets
|
|
|
|
|
894
|
|
48
|
|
(53)
|
Derivative financial assets:
|
|
|
|
|
|
|
|
|
|
|
Interest rate derivatives
|
Option pricing model
|
Interest rate volatility
|
|
0%/115%
|
|
1,399
|
|
(3)
|
|
(19)
|
|
|
|
|
|
|
1,399
|
|
|
|
|
Financial assets carried at fair value
|
|
|
|
|
6,099
|
|
|
|
|
Trading and other financial liabilities at fair value through profit or loss
|
|
|
|
2
|
|
−
|
|
−
|
Derivative financial liabilities:
|
|
|
|
|
|
|
|
|
|
Interest rate derivatives
|
Option pricing model
|
Interest rate volatility
|
|
0%/115%
|
|
960
|
|
−
|
|
−
|
|
|
|
|
|
|
960
|
|
|
|
|
Financial liabilities carried at fair value
|
|
|
|
|
962
|
|
|
|
|
1
|
Where the exposure to an unobservable input is managed on a net basis, only the net impact is shown in the table.
|
2
|
The range represents 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
2016 financial statements.
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 are unchanged
from those described in the Group’s 2016 financial statements.
|
17.
|
Credit quality of loans and advances
|
The table below sets out those loans
that are (i) neither past due nor impaired, (ii) past due but not impaired, (iii) impaired, not requiring a provision and
(iv) impaired requiring a provision.
The disclosures in the table below are produced
under the underlying basis used for the Group’s segmental reporting. The Group believes that, for reporting periods following
a significant acquisition such as the acquisition of HBOS in 2009, this underlying basis, which includes the allowance for loan
losses at the acquisition date on a gross basis, more fairly reflects the underlying provisioning status of the loans.
The analysis of lending between retail and
commercial has been prepared based upon the type of exposure and not the business segment in which the exposure is recorded. Included
within retail are exposures to personal customers and small businesses, whilst included within commercial are exposures to corporate
customers and other large institutions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Designated
|
|
|
|
|
|
|
|
|
|
|
|
|
at fair value
|
|
|
|
|
Customers
|
|
through
|
|
|
|
|
Retail –
|
|
Retail –
|
|
|
|
|
|
profit or
|
Loans and advances
|
|
Banks
|
|
mortgages
|
|
other
|
|
Commercial
|
|
Total
|
|
loss
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
At 30 June 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Good quality
|
|
8,749
|
|
294,700
|
|
41,668
|
|
72,008
|
|
|
|
29,243
|
Satisfactory quality
|
|
45
|
|
836
|
|
5,530
|
|
29,887
|
|
|
|
42
|
Lower quality
|
|
34
|
|
38
|
|
482
|
|
6,144
|
|
|
|
–
|
Below standard, but not impaired
|
|
−
|
|
163
|
|
655
|
|
346
|
|
|
|
–
|
Neither past due nor impaired
1
|
|
8,828
|
|
295,737
|
|
48,335
|
|
108,385
|
|
452,457
|
|
29,285
|
0-30 days
|
|
8
|
|
3,065
|
|
311
|
|
166
|
|
3,542
|
|
–
|
30-60 days
|
|
–
|
|
1,334
|
|
95
|
|
67
|
|
1,496
|
|
–
|
60-90 days
|
|
–
|
|
863
|
|
8
|
|
34
|
|
905
|
|
–
|
90-180 days
|
|
–
|
|
1,143
|
|
5
|
|
14
|
|
1,162
|
|
–
|
Over 180 days
|
|
–
|
|
–
|
|
16
|
|
29
|
|
45
|
|
–
|
Past due but not impaired
2
|
|
8
|
|
6,405
|
|
435
|
|
310
|
|
7,150
|
|
–
|
Impaired – no provision required
|
|
29
|
|
821
|
|
319
|
|
761
|
|
1,901
|
|
−
|
– provision held
|
|
–
|
|
3,636
|
|
1,080
|
|
1,676
|
|
6,392
|
|
−
|
Gross lending
|
|
8,865
|
|
306,599
|
|
50,169
|
|
111,132
|
|
467,900
|
|
29,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Good quality
|
|
26,745
|
|
295,286
|
|
34,195
|
|
72,083
|
|
|
|
33,049
|
Satisfactory quality
|
|
87
|
|
814
|
|
4,479
|
|
30,433
|
|
|
|
30
|
Lower quality
|
|
3
|
|
39
|
|
387
|
|
6,433
|
|
|
|
–
|
Below standard, but not impaired
|
|
53
|
|
164
|
|
417
|
|
415
|
|
|
|
–
|
Neither past due nor impaired
1
|
|
26,888
|
|
296,303
|
|
39,478
|
|
109,364
|
|
445,145
|
|
33,079
|
0-30 days
|
|
14
|
|
3,547
|
|
285
|
|
157
|
|
3,989
|
|
–
|
30-60 days
|
|
–
|
|
1,573
|
|
75
|
|
37
|
|
1,685
|
|
–
|
60-90 days
|
|
–
|
|
985
|
|
2
|
|
74
|
|
1,061
|
|
–
|
90-180 days
|
|
–
|
|
1,235
|
|
6
|
|
14
|
|
1,255
|
|
–
|
Over 180 days
|
|
–
|
|
–
|
|
18
|
|
23
|
|
41
|
|
–
|
Past due but not impaired
2
|
|
14
|
|
7,340
|
|
386
|
|
305
|
|
8,031
|
|
–
|
Impaired – no provision required
|
|
–
|
|
784
|
|
392
|
|
689
|
|
1,865
|
|
–
|
– provision held
|
|
–
|
|
3,536
|
|
1,038
|
|
2,056
|
|
6,630
|
|
–
|
Gross lending
|
|
26,902
|
|
307,963
|
|
41,294
|
|
112,414
|
|
461,671
|
|
33,079
|
|
|
1
|
The definitions of good quality, satisfactory quality, lower quality and below standard, but not impaired applying to retail and commercial are not the same, reflecting the different characteristics of these exposures and the way they are managed internally, and consequently totals are not provided. Commercial lending has been classified using internal probability of default rating models mapped so that they are comparable to external credit ratings. Good quality lending comprises the lower assessed default probabilities, with other classifications reflecting progressively higher default risk. Classifications of retail lending incorporate expected recovery levels for mortgages, as well as probabilities of default assessed using internal rating models.
|
2
|
A financial asset is ‘past due’ if a counterparty has failed to make a payment when contractually due.
|
|
18.
|
Dividends on ordinary shares
|
An interim dividend for 2017 of 1.0 pence
per ordinary share (half-year to 30 June 2016: 0.85 pence) will be paid on 27 September 2017. The total amount of
this dividend is £720 million (half-year to 30 June 2016: £607 million).
Shareholders who have already joined the
dividend reinvestment plan will automatically receive shares instead of the cash dividend. Key dates for the payment of the dividends
are:
|
|
Shares quoted ex-dividend
|
10 August 2017
|
|
|
Record date
|
11 August 2017
|
|
|
Final date for joining or leaving the dividend reinvestment plan
|
30 August 2017
|
|
|
Interim dividend paid
|
27 September 2017
|
On 16 May 2017, a final dividend in
respect of 2016 of 1.7 pence per share, totalling £1,212 million, and a special dividend of 0.5 pence per
share, totalling £356 million, were paid to shareholders.
|
19.
|
Events since the balance sheet date
|
At the annual general meeting on 11 May
2017, the Company’s shareholders approved the redesignation of the 80,921,051 limited voting ordinary shares of 10 pence
each that the Company had in issue as ordinary shares of 10 pence each. The redesignation took effect on 1 July 2017 and the
redesignated shares now rank equally with the existing issued ordinary shares of the Company. There is no impact on the Company’s
total share capital in issue or equity.
|
20.
|
Future accounting developments
|
The following pronouncements are not applicable
for the year ending 31 December 2017 and have not been applied in preparing these interim financial statements. Save as disclosed
below, the impact of these accounting changes is still being assessed by the Group and reliable estimates cannot be made at this
stage.
IFRS 9 Financial Instruments
IFRS 9 replaces IAS 39 ‘Financial
Instruments: Recognition and Measurement’ and is effective for annual periods beginning on or after 1 January 2018.
The Group has an established IFRS 9 programme
to ensure a high quality implementation in compliance with the standard and additional regulatory guidance that has been issued.
The programme involves Finance and Risk functions across the Group with Divisional and Group steering committees providing oversight.
The key responsibilities of the programme include defining IFRS 9 methodology and accounting policy, development of Expected Credit
Loss (‘ECL’) models, identifying and implementing data and system requirements, and establishing an appropriate operating
model and governance framework.
The programme is progressing in line with
delivery plans and is currently completing credit risk model development and embedding the IFRS 9 operating model into the business.
All core models are expected to be operational by September 2017 and outputs will be reviewed and validated ahead of implementation.
|
20.
|
Future accounting developments
(continued)
|
Classification and Measurement
IFRS 9 requires financial assets to be classified
into one of three measurement categories, fair value through profit or loss, fair value through other comprehensive income or amortised
cost. Financial assets will be measured at amortised cost if they are held within a business model the objective of which is to
hold financial assets in order to collect contractual cash flows, and their contractual cash flows represent solely payments of
principal and interest. Financial assets will be measured at fair value through other comprehensive income if they are held within
a business model the objective of which is achieved by both collecting contractual cash flows and selling financial assets and
their contractual cash flows represent solely payments of principal and interest. Financial assets not meeting either of these
two business models; and all equity instruments (unless designated at inception to fair value through other comprehensive income);
and all derivatives are measured at fair value through profit or loss. An entity may, at initial recognition, designate a financial
asset as measured at fair value through profit or loss if doing so eliminates or significantly reduces an accounting mismatch.
The Group has undertaken an assessment of
the classification and measurement of financial assets and, whilst certain portfolios will need to be reclassified, including from
amortised cost to fair value through profit or loss, the overall impact on the Group is not expected to be significant.
IFRS 9 retains most of the existing requirements
for financial liabilities. However, for financial liabilities designated at fair value through profit or loss, gains or losses
attributable to changes in own credit risk may be presented in other comprehensive income. The Group has elected to early adopt
this presentation of gains and losses on financial liabilities from 1 January 2017.
Impairment
The IFRS 9 impairment model will be applicable
to all financial assets at amortised cost, debt instruments measured at fair value through other comprehensive income, lease receivables,
loan commitments and financial guarantees not measured at fair value through profit or loss.
IFRS 9 replaces the existing ‘incurred
loss’ impairment approach with an expected credit loss model, resulting in earlier recognition of credit losses compared
with IAS 39. Expected credit losses are the unbiased probability weighted average credit losses determined by evaluating a range
of possible outcomes and future economic conditions.
The ECL model has three stages. Entities
are required to recognise a 12 month expected loss allowance on initial recognition (stage 1) and a lifetime expected loss allowance
when there has been a significant increase in credit risk since initial recognition (stage 2). Stage 3 requires objective evidence
that an asset is credit-impaired, which is similar to the guidance on incurred losses in IAS 39.
IFRS 9 requires the use of more forward
looking information including reasonable and supportable forecasts of future economic conditions. The need to consider a range
of economic scenarios and how they could impact the loss allowance is a subjective feature of the IFRS 9 ECL model. The Group has
developed the capability to model a number of economic scenarios and capture the impact on credit losses to ensure the overall
ECL reflects an appropriate distribution of economic outcomes.
For all material portfolios, IFRS 9 ECL
calculation will leverage the systems, data and methodology used to calculate regulatory ‘expected losses’. The definition
of default for IFRS 9 purposes will be aligned to the Basel definition of default to ensure consistency across the Group. IFRS
9 models will use three key input parameters for the computation of expected loss, being probability of default (‘PD’),
loss given default (‘LGD’) and exposure at default (‘EAD’). However, given the conservatism inherent in
the regulatory expected losses calculation and some differences in the period over which risk parameters are measured, some adjustments
to these components have been made to ensure compliance with IFRS 9.
|
20.
|
Future accounting developments
(continued)
|
The new impairment requirements will result
in an increase in the Group’s balance sheet provisions for credit losses and may have a negative impact on the Group’s
regulatory capital position. The extent of any increase in provisions will depend upon a number factors including the composition
of the Group’s lending portfolios and forecast economic conditions at the date of implementation. It is not possible to conclude
on the capital impact as the interaction with IFRS 9 and the capital rules, including possible transitional arrangements,
is still being finalised.
Whilst the Group is still running and testing
the new credit risk models, it is not possible to provide a reliable estimate of the increase in impairment provisions on 1 January
2018. The ongoing impact on the financial results will only become clearer after running the IFRS 9 models over a period of time
and under different economic environments, however, it could result in impairment charges being more volatile when compared to
the current IAS 39 impairment model, due to the forward looking nature of expected credit losses.
Hedge Accounting
The hedge accounting requirements of IFRS
9 are more closely aligned with risk management practices and follow a more principle-based approach than IAS 39. The standard
does not address macro hedge accounting, which is being considered in a separate IASB project. There is an option to retain the
existing IAS 39 hedge accounting requirements until the IASB completes its project on macro hedging. The Group expects to continue
applying IAS 39 hedge accounting in accordance with this accounting policy choice.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 replaces IAS 18 ‘Revenue’
and IAS 11 ‘Construction Contracts’ and is effective for annual periods beginning on or after 1 January 2018.
The core principle of IFRS 15 is that revenue
reflects the transfer of goods or services to customers in an amount that reflects the consideration to which an entity expects
to be entitled. The recognition of such revenue is in accordance with five steps to: identify the contract; identify the performance
obligations; determine the transaction price; allocate the transaction price to the performance obligations; and recognise revenue
when the performance obligations are satisfied.
Revenue relating to financial instruments,
leases and insurance contracts are out of scope, however, the Group does recognise fee income that is within scope, for example
on added value accounts, interchange and service fees, certain mortgage fees, factoring and commitment fees. A substantial proportion
of the current revenue recognition policy for fee and commission income is not expected to change. The standard is therefore not
expected to have a significant impact on the Group’s profitability.
Upon transition, any adjustments can be
recognised either retrospectively to each prior reporting period presented, or retrospectively with the cumulative effect of initially
applying the standard recognised at the date of initial application as an adjustment to the opening balance retained earnings.
The Group anticipates adopting the second approach to transition.
IFRS 16 Leases
IFRS 16 replaces IAS 17 ‘Leases’
and is effective for annual periods beginning on or after 1 January 2019.
IFRS 16 requires lessees to recognise a
right of use asset and a liability for future payments arising from a lease contract. Lessees will recognise a finance charge on
the liability and a depreciation charge on the asset which could affect the timing of the recognition of expenses on leased assets.
This change will mainly impact the properties that the Group currently accounts for as operating leases. Finance systems will need
to be changed to reflect the new accounting rules and disclosures. Lessor accounting requirements remain aligned to the current
approach under IAS 17.
|
20.
|
Future accounting developments
(continued)
|
IFRS 17 Insurance Contracts
IFRS 17 replaces IFRS 4 ‘Insurance
Contracts’ and is effective for annual periods beginning on or after 1 January 2021.
IFRS 17 requires insurance contracts and
participating investment contracts to be measured on the balance sheet as the total of the fulfilment cash flows and the contractual
service margin. Changes to estimates of future cash flows from one reporting date to another are recognised either as an amount
in profit or loss or as an adjustment to the expected profit for providing insurance coverage, depending on the type of change
and the reason for it. The effects of some changes in discount rates can either be recognised in profit or loss or in other comprehensive
income as an accounting policy choice. The risk adjustment is released to profit and loss as an insurer’s risk reduces. Profits
which are currently recognised through a Value in Force asset, will no longer be recognised at inception of an insurance contract.
Instead, the expected profit for providing insurance coverage is recognised in profit or loss over time as the insurance coverage
is provided.
The standard will have a significant impact
on the accounting for the insurance and participating investment contracts issued by the Insurance Division.
Minor amendments to other accounting standards
The IASB has issued a number of minor amendments
to IFRSs effective 1 January 2018 (including IFRS 2 Share-based Payment and IAS 40 Investment Property) and IFRIC 23 Uncertainty
over Income Tax Treatments effective 1 January 2019. These revised requirements are not expected to have a significant impact on
the Group.
|
21.
|
Condensed consolidating financial information
|
Lloyds Bank plc (Lloyds Bank) is a wholly
owned subsidiary of the Company and intends to offer and sell certain securities in the US from time to time utilising a registration
statement on Form F-3 filed with the SEC by the Company. This will be accompanied by a full and unconditional guarantee by the
Company.
Lloyds Bank intends to utilise an exception
provided in Rule 3-10 of Regulation S-X which allows it to not file its financial statements with the SEC. In accordance with the
requirements to qualify for the exception, presented below is condensed consolidating financial information for:
|
·
|
The Company on a stand-alone basis as guarantor;
|
|
·
|
Lloyds Bank on a stand-alone basis as issuer;
|
|
·
|
Non-guarantor subsidiaries of the Company and non-guarantor subsidiaries of Lloyds Bank on a combined
basis (Subsidiaries);
|
|
·
|
Consolidation adjustments; and
|
|
·
|
Lloyds Banking Group’s consolidated amounts (the Group).
|
Under IAS 27, the Company and Lloyds Bank
account for investments in their subsidiary undertakings at cost less impairment. Rule 3-10 of Regulation S-X requires a company
to account for its investments in subsidiary undertakings using the equity method, which would increase/(decrease) the result for
the period of the Company and Lloyds Bank in the information below by £357 million and £(658) million, respectively,
for the half-year to 30 June 2017; £(111) million and £(1,309) million for the half-year to 30 June
2016; and £(961) million and £458 million for the half-year to 31 December 2016. The net assets of the
Company and Lloyds Bank in the information below would also be increased (decreased) by £4,515 million and £(9,208) million,
respectively, at 30 June 2017; and £4,780 million and £(8,268) million at 31 December 2016.
|
21.
|
Condensed consolidating financial information
(continued)
|
Income statements
For the half-year ended 30 June 2017
|
|
Company
|
|
Lloyds
Bank
|
Subsidiaries
|
Consolidation
adjustments
|
|
Group
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Net interest (expense) income
|
|
(58)
|
|
2,822
|
|
2,510
|
|
(72)
|
|
5,202
|
Other income
|
|
1,671
|
|
4,159
|
|
11,660
|
|
(5,417)
|
|
12,073
|
Total income
|
|
1,613
|
|
6,981
|
|
14,170
|
|
(5,489)
|
|
17,275
|
Insurance claims
|
|
−
|
|
−
|
|
(7,976)
|
|
−
|
|
(7,976)
|
Total income, net of insurance claims
|
1,613
|
|
6,981
|
|
6,194
|
|
(5,489)
|
|
9,299
|
Operating expenses
|
|
(14)
|
|
(3,930)
|
|
(3,160)
|
|
902
|
|
(6,202)
|
Trading surplus
|
|
1,599
|
|
3,051
|
|
3,034
|
|
(4,587)
|
|
3,097
|
Impairment
|
|
−
|
|
(142)
|
|
(62)
|
|
1
|
|
(203)
|
Profit (loss) before tax
|
|
1,599
|
|
2,909
|
|
2,972
|
|
(4,586)
|
|
2,894
|
Taxation
|
|
(8)
|
|
(250)
|
|
(683)
|
|
36
|
|
(905)
|
Profit (loss) for the period
|
|
1,591
|
|
2,659
|
|
2,289
|
|
(4,550)
|
|
1,989
|
For the half-year ended 30 June 2016
|
|
Company
|
|
Lloyds Bank
|
Subsidiaries
|
Consolidation
adjustments
|
|
Group
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Net interest (expense) income
|
|
112
|
|
2,274
|
|
2,960
|
|
(121)
|
|
5,225
|
Other income
|
|
2,095
|
|
3,091
|
|
13,707
|
|
(5,688)
|
|
13,205
|
Total income
|
|
2,207
|
|
5,365
|
|
16,667
|
|
(5,809)
|
|
18,430
|
Insurance claims
|
|
−
|
|
−
|
|
(10,110)
|
|
−
|
|
(10,110)
|
Total income, net of insurance claims
|
2,207
|
|
5,365
|
|
6,557
|
|
(5,809)
|
|
8,320
|
Operating expenses
|
|
(10)
|
|
(3,113)
|
|
(3,035)
|
|
654
|
|
(5,504)
|
Trading surplus
|
|
2,197
|
|
2,252
|
|
3,522
|
|
(5,155)
|
|
2,816
|
Impairment
|
|
−
|
|
(364)
|
|
(25)
|
|
27
|
|
(362)
|
Profit (loss) before tax
|
|
2,197
|
|
1,888
|
|
3,497
|
|
(5,128)
|
|
2,454
|
Taxation
|
|
(292)
|
|
108
|
|
(636)
|
|
223
|
|
(597)
|
Profit (loss) for the period
|
|
1,905
|
|
1,996
|
|
2,861
|
|
(4,905)
|
|
1,857
|
For the half-year ended
31 December 2016
|
|
Company
|
|
Lloyds Bank
|
Subsidiaries
|
Consolidation
adjustments
|
|
Group
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Net interest (expense) income
|
|
(46)
|
|
2,609
|
|
1,701
|
|
(215)
|
|
4,049
|
Other income
|
|
1,523
|
|
2,398
|
|
16,642
|
|
(3,431)
|
|
17,132
|
Total income
|
|
1,477
|
|
5,007
|
|
18,343
|
|
(3,646)
|
|
21,181
|
Insurance claims
|
|
−
|
|
−
|
|
(12,234)
|
|
−
|
|
(12,234)
|
Total income, net of insurance claims
|
1,477
|
|
5,007
|
|
6,109
|
|
(3,646)
|
|
8,947
|
Operating expenses
|
|
(211)
|
|
(4,609)
|
|
(3,345)
|
|
1,042
|
|
(7,123)
|
Trading surplus
|
|
1,266
|
|
398
|
|
2,764
|
|
(2,604)
|
|
1,824
|
Impairment
|
|
−
|
|
(256)
|
|
(214)
|
|
80
|
|
(390)
|
Profit (loss) before tax
|
|
1,266
|
|
142
|
|
2,550
|
|
(2,524)
|
|
1,434
|
Taxation
|
|
(36)
|
|
(185)
|
|
(1,179)
|
|
273
|
|
(1,127)
|
Profit (loss) for the period
|
|
1,230
|
|
(43)
|
|
1,371
|
|
(2,251)
|
|
307
|
|
21.
|
Condensed consolidating financial information
(continued)
|
Consolidated statements of comprehensive
income
Half-year ended 30 June 2017
|
|
Company
|
|
Lloyds
Bank
|
Subsidiaries
|
Consolidation
adjustments
|
|
Group
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Profit (loss) for the period
|
|
1,591
|
|
2,659
|
|
2,289
|
|
(4,550)
|
|
1,989
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
Items that will not subsequently be reclassified to profit or loss:
|
|
|
|
|
|
|
|
|
|
|
Post-retirement defined benefit scheme remeasurements:
|
|
|
|
|
|
|
|
|
|
|
Remeasurements before taxation
|
|
−
|
|
(99)
|
|
(25)
|
|
−
|
|
(124)
|
Taxation
|
|
−
|
|
27
|
|
5
|
|
−
|
|
32
|
|
|
−
|
|
(72)
|
|
(20)
|
|
−
|
|
(92)
|
Gains and losses attributable to own credit risk
|
|
|
|
|
|
|
|
|
|
|
Gains and (losses) before taxation
|
|
−
|
|
(44)
|
|
−
|
|
−
|
|
(44)
|
Taxation
|
|
−
|
|
12
|
|
−
|
|
−
|
|
12
|
|
|
−
|
|
(32)
|
|
−
|
|
−
|
|
(32)
|
Items that may subsequently be reclassified to profit or loss:
|
|
|
|
|
|
|
|
|
|
|
Movements in revaluation reserve in respect of available-for-sale financial assets:
|
|
|
|
|
|
|
|
|
|
|
Change in fair value
|
|
−
|
|
426
|
|
23
|
|
6
|
|
455
|
Income statement transfers in respect of disposals
|
|
−
|
|
(202)
|
|
(113)
|
|
−
|
|
(315)
|
Income statement transfers in respect of impairment
|
|
−
|
|
−
|
|
9
|
|
(3)
|
|
6
|
Taxation
|
|
−
|
|
(59)
|
|
11
|
|
−
|
|
(48)
|
|
|
−
|
|
165
|
|
(70)
|
|
3
|
|
98
|
Movements in cash flow hedging reserve:
|
|
|
|
|
|
|
|
|
|
|
Effective portion of changes in fair value
|
|
−
|
|
(65)
|
|
(56)
|
|
(146)
|
|
(267)
|
Net income statement transfers
|
|
−
|
|
(196)
|
|
16
|
|
(137)
|
|
(317)
|
Taxation
|
|
−
|
|
68
|
|
10
|
|
73
|
|
151
|
|
|
−
|
|
(193)
|
|
(30)
|
|
(210)
|
|
(433)
|
Currency translation differences
(tax: nil)
|
|
−
|
|
(4)
|
|
10
|
|
(13)
|
|
(7)
|
Other comprehensive income for the period, net of tax
|
|
−
|
|
(136)
|
|
(110)
|
|
(220)
|
|
(466)
|
Total comprehensive income for the period
|
|
1,591
|
|
2,523
|
|
2,179
|
|
(4,770)
|
|
1,523
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income attributable to ordinary shareholders
|
|
1,382
|
|
2,386
|
|
2,077
|
|
(4,572)
|
|
1,273
|
Total comprehensive income attributable to other equity holders
|
|
209
|
|
137
|
|
10
|
|
(147)
|
|
209
|
Total comprehensive income attributable to equity holders
|
|
1,591
|
|
2,523
|
|
2,087
|
|
(4,719)
|
|
1,482
|
Total comprehensive income attributable to non-controlling interests
|
|
−
|
|
−
|
|
92
|
|
(51)
|
|
41
|
Total comprehensive income for the period
|
|
1,591
|
|
2,523
|
|
2,179
|
|
(4,770)
|
|
1,523
|
|
21.
|
Condensed consolidating financial information
(continued)
|
Consolidated statements of comprehensive
income
(continued)
Half-year ended 30 June 2016
|
|
Company
|
|
Lloyds Bank
|
Subsidiaries
|
Consolidation
adjustments
|
|
Group
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Profit (loss) for the period
|
|
1,905
|
|
1,996
|
|
2,861
|
|
(4,905)
|
|
1,857
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
Items that will not subsequently be reclassified to profit or loss:
|
|
|
|
|
|
|
|
|
|
|
Post-retirement defined benefit scheme remeasurements
|
|
|
|
|
|
|
|
|
|
|
Remeasurements before taxation
|
|
−
|
|
134
|
|
(401)
|
|
−
|
|
(267)
|
Taxation
|
|
−
|
|
(36)
|
|
76
|
|
−
|
|
40
|
|
|
−
|
|
98
|
|
(325)
|
|
−
|
|
(227)
|
Items that may subsequently be reclassified to profit or loss:
|
|
|
|
|
|
|
|
|
|
|
Movements in revaluation reserve in respect of available-for-sale financial assets:
|
|
|
|
|
|
|
|
|
|
|
Change in fair value
|
|
−
|
|
104
|
|
77
|
|
3
|
|
184
|
Income statement transfers in respect of disposals
|
|
−
|
|
(525)
|
|
(49)
|
|
−
|
|
(574)
|
Income statement transfers in respect of impairment
|
|
−
|
|
145
|
|
1
|
|
−
|
|
146
|
Taxation
|
|
−
|
|
173
|
|
(21)
|
|
−
|
|
152
|
|
|
−
|
|
(103)
|
|
8
|
|
3
|
|
(92)
|
Movements in cash flow hedging reserve:
|
|
|
|
|
|
|
|
|
|
|
Effective portion of changes in fair value
|
|
−
|
|
1,617
|
|
303
|
|
1,120
|
|
3,040
|
Net income statement transfers
|
|
−
|
|
(118)
|
|
(166)
|
|
78
|
|
(206)
|
Taxation
|
|
−
|
|
(405)
|
|
(37)
|
|
(310)
|
|
(752)
|
|
|
−
|
|
1,094
|
|
100
|
|
888
|
|
2,082
|
Currency translation differences (tax: nil)
|
|
−
|
|
13
|
|
(41)
|
|
8
|
|
(20)
|
Other comprehensive income for the period, net of tax
|
|
−
|
|
1,102
|
|
(258)
|
|
899
|
|
1,743
|
Total comprehensive income for the period
|
|
1,905
|
|
3,098
|
|
2,603
|
|
(4,006)
|
|
3,600
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income attributable to ordinary shareholders
|
|
1,701
|
|
3,097
|
|
2,489
|
|
(3,954)
|
|
3,333
|
Total comprehensive income attributable to other equity holders
|
|
204
|
|
1
|
|
51
|
|
(52)
|
|
204
|
Total comprehensive income attributable to equity holders
|
|
1,905
|
|
3,098
|
|
2,540
|
|
(4,006)
|
|
3,537
|
Total comprehensive income attributable to non-controlling interests
|
|
−
|
|
−
|
|
63
|
|
−
|
|
63
|
Total comprehensive income for the period
|
|
1,905
|
|
3,098
|
|
2,603
|
|
(4,006)
|
|
3,600
|
|
21.
|
Condensed consolidating financial information
(continued)
|
Consolidated statements of comprehensive
income
(continued)
Half-year ended 31 December 2016
|
|
Company
|
|
Lloyds Bank
|
|
Subsidiaries
|
Consolidation
adjustments
|
|
Group
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Profit (loss) for the period
|
|
1,230
|
|
(43)
|
|
1,371
|
|
(2,251)
|
|
307
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
Items that will not subsequently be reclassified to profit or loss:
|
|
|
|
|
|
|
|
|
|
|
Post-retirement defined benefit scheme remeasurements
|
|
|
|
|
|
|
|
|
|
|
Remeasurements before taxation
|
|
−
|
|
(816)
|
|
(265)
|
|
−
|
|
(1,081)
|
Taxation
|
|
−
|
|
220
|
|
60
|
|
−
|
|
280
|
|
|
−
|
|
(596)
|
|
(205)
|
|
−
|
|
(801)
|
Items that may subsequently be reclassified to profit or loss:
|
|
|
|
|
|
|
|
|
|
|
Movements in revaluation reserve in respect of available-for-sale financial assets:
|
|
|
|
|
|
|
|
|
|
|
Adjustment on transfer from
held-to-maturity portfolio
|
|
−
|
|
1,544
|
|
−
|
|
−
|
|
1,544
|
Change in fair value
|
|
−
|
|
164
|
|
7
|
|
1
|
|
172
|
Income statement transfers in respect of disposals
|
|
−
|
|
18
|
|
(19)
|
|
−
|
|
(1)
|
Income statement transfers in respect of impairment
|
|
−
|
|
27
|
|
−
|
|
−
|
|
27
|
Taxation
|
|
−
|
|
(442)
|
|
(11)
|
|
−
|
|
(453)
|
|
|
−
|
|
1,311
|
|
(23)
|
|
1
|
|
1,289
|
Movements in cash flow hedging reserve:
|
|
|
|
|
|
|
|
|
|
|
Effective net portion of changes in fair value
|
|
−
|
|
(327)
|
|
(178)
|
|
(103)
|
|
(608)
|
Net income statement transfers
|
|
−
|
|
(123)
|
|
(67)
|
|
(161)
|
|
(351)
|
Taxation
|
|
−
|
|
147
|
|
66
|
|
73
|
|
286
|
|
|
−
|
|
(303)
|
|
(179)
|
|
(191)
|
|
(673)
|
Currency translation differences (tax: nil)
|
|
−
|
|
6
|
|
85
|
|
(75)
|
|
16
|
Other comprehensive income for the period, net of tax
|
|
−
|
|
418
|
|
(322)
|
|
(265)
|
|
(169)
|
Total comprehensive income for the period
|
|
1,230
|
|
375
|
|
1,049
|
|
(2,516)
|
|
138
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income attributable to ordinary shareholders
|
|
1,022
|
|
257
|
|
961
|
|
(2,348)
|
|
(108)
|
Total comprehensive income attributable to other equity holders
|
|
208
|
|
118
|
|
50
|
|
(168)
|
|
208
|
Total comprehensive income attributable to equity holders
|
|
1,230
|
|
375
|
|
1,011
|
|
(2,516)
|
|
100
|
Total comprehensive income attributable to non-controlling interests
|
|
−
|
|
−
|
|
38
|
|
−
|
|
38
|
Total comprehensive income for the period
|
|
1,230
|
|
375
|
|
1,049
|
|
(2,516)
|
|
138
|
|
21.
|
Condensed consolidating financial information
(continued)
|
Balance sheets
At 30 June 2017
|
|
Company
|
|
Lloyds
Bank
|
Subsidiaries
|
Consolidation
adjustments
|
|
Group
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Cash and balances at central banks
|
|
–
|
|
47,950
|
|
2,541
|
|
–
|
|
50,491
|
Items in course of collection from banks
|
|
–
|
|
562
|
|
293
|
|
–
|
|
855
|
Trading and other financial assets at fair value through profit or loss
|
|
–
|
|
45,310
|
|
124,824
|
|
(8,164)
|
|
161,970
|
Derivative financial instruments
|
|
332
|
|
30,766
|
|
15,993
|
|
(17,067)
|
|
30,024
|
Loans and receivables:
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to banks
|
|
–
|
|
4,054
|
|
4,786
|
|
25
|
|
8,865
|
Loans and advances to customers
|
|
–
|
|
159,638
|
|
297,790
|
|
7,176
|
|
464,604
|
Debt securities
|
|
–
|
|
3,313
|
|
483
|
|
45
|
|
3,841
|
Due from fellow Lloyds Banking Group undertakings
|
|
10,979
|
|
193,916
|
|
138,510
|
|
(343,405)
|
|
−
|
|
|
10,979
|
|
360,921
|
|
441,569
|
|
(336,159)
|
|
477,310
|
Available-for-sale financial assets
|
|
–
|
|
51,398
|
|
1,872
|
|
(1,467)
|
|
51,803
|
Goodwill
|
|
–
|
|
−
|
|
2,343
|
|
(44)
|
|
2,299
|
Value of in-force business
|
|
–
|
|
−
|
|
4,888
|
|
265
|
|
5,153
|
Other intangible assets
|
|
–
|
|
1,081
|
|
327
|
|
1,128
|
|
2,536
|
Property, plant and equipment
|
|
–
|
|
3,539
|
|
9,460
|
|
(9)
|
|
12,990
|
Current tax recoverable
|
|
829
|
|
389
|
|
(32)
|
|
(1,170)
|
|
16
|
Deferred tax assets
|
|
12
|
|
2,151
|
|
2,308
|
|
(2,049)
|
|
2,422
|
Retirement benefit assets
|
|
–
|
|
320
|
|
88
|
|
2
|
|
410
|
Investment in subsidiary undertakings, including assets held for sale
|
|
44,333
|
|
40,542
|
|
−
|
|
(84,875)
|
|
−
|
Other assets
|
|
1,079
|
|
3,554
|
|
12,591
|
|
(584)
|
|
16,640
|
Total assets
|
|
57,564
|
|
588,483
|
|
619,065
|
|
(450,193)
|
|
814,919
|
|
21.
|
Condensed consolidating financial information
(continued)
|
Balance sheets
(continued)
At 30 June 2017
|
|
Company
|
|
Lloyds
Bank
|
Subsidiaries
|
Consolidation
adjustments
|
|
Group
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Equity and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
Deposits from banks
|
|
−
|
|
7,586
|
|
17,295
|
|
(2)
|
|
24,879
|
Customer deposits
|
|
−
|
|
219,124
|
|
198,600
|
|
(107)
|
|
417,617
|
Due to fellow Lloyds Banking Group undertakings
|
3,860
|
|
128,723
|
|
189,835
|
|
(322,418)
|
|
−
|
Items in course of transmission to banks
|
−
|
|
411
|
|
533
|
|
−
|
|
944
|
Trading and other financial liabilities at fair value through profit or loss
|
|
−
|
|
56,005
|
|
182
|
|
(516)
|
|
55,671
|
Derivative financial instruments
|
|
124
|
|
32,019
|
|
14,114
|
|
(17,067)
|
|
29,190
|
Notes in circulation
|
|
−
|
|
−
|
|
1,317
|
|
−
|
|
1,317
|
Debt securities in issue
|
|
5,458
|
|
68,559
|
|
16,806
|
|
(19,266)
|
|
71,557
|
Liabilities arising from insurance contracts and participating investment contracts
|
−
|
|
−
|
|
101,338
|
|
(20)
|
|
101,318
|
Liabilities arising from non-participating investment contracts
|
|
−
|
|
−
|
|
15,652
|
|
−
|
|
15,652
|
Other liabilities
|
|
623
|
|
4,384
|
|
19,320
|
|
(2,101)
|
|
22,226
|
Retirement benefit obligations
|
|
−
|
|
447
|
|
344
|
|
114
|
|
905
|
Current tax liabilities
|
|
−
|
|
4
|
|
1,840
|
|
(1,428)
|
|
416
|
Deferred tax liabilities
|
|
−
|
|
−
|
|
886
|
|
(886)
|
|
−
|
Other provisions
|
|
−
|
|
2,924
|
|
2,957
|
|
425
|
|
6,306
|
Subordinated liabilities
|
|
4,146
|
|
9,555
|
|
9,757
|
|
(4,883)
|
|
18,575
|
Total liabilities
|
|
14,211
|
|
529,741
|
|
590,776
|
|
(368,155)
|
|
766,573
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity
|
|
37,998
|
|
55,525
|
|
26,006
|
|
(77,016)
|
|
42,513
|
Other equity instruments
|
|
5,355
|
|
3,217
|
|
305
|
|
(3,522)
|
|
5,355
|
Total equity excluding non-controlling interests
|
|
43,353
|
|
58,742
|
|
26,311
|
|
(80,538)
|
|
47,868
|
Non-controlling interests
|
|
−
|
|
−
|
|
1,978
|
|
(1,500)
|
|
478
|
Total equity
|
|
43,353
|
|
58,742
|
|
28,289
|
|
(82,038)
|
|
48,346
|
|
|
|
|
|
|
|
|
|
|
|
Total equity and liabilities
|
|
57,564
|
|
588,483
|
|
619,065
|
|
(450,193)
|
|
814,919
|
|
21.
|
Condensed consolidating financial information
(continued)
|
Balance sheets
(continued)
At 31 December 2016
|
|
Company
|
|
Lloyds Bank
|
Subsidiaries
|
Consolidation adjustments
|
|
Group
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Cash and balances at central banks
|
|
−
|
|
44,595
|
|
2,857
|
|
−
|
|
47,452
|
Items in course of collection from banks
|
|
−
|
|
512
|
|
194
|
|
−
|
|
706
|
Trading and other financial assets at fair value through profit or loss
|
|
−
|
|
48,309
|
|
112,154
|
|
(9,289)
|
|
151,174
|
Derivative financial instruments
|
|
461
|
|
36,714
|
|
18,737
|
|
(19,774)
|
|
36,138
|
Loans and receivables:
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to banks
|
|
−
|
|
4,379
|
|
22,498
|
|
25
|
|
26,902
|
Loans and advances to customers
|
|
−
|
|
161,161
|
|
290,036
|
|
6,761
|
|
457,958
|
Debt securities
|
|
−
|
|
2,818
|
|
528
|
|
51
|
|
3,397
|
Due from fellow Lloyds Banking Group undertakings
|
|
7,021
|
|
152,260
|
|
104,314
|
|
(263,595)
|
|
−
|
|
|
7,021
|
|
320,618
|
|
417,376
|
|
(256,758)
|
|
488,257
|
Available-for-sale financial assets
|
|
−
|
|
55,122
|
|
3,274
|
|
(1,872)
|
|
56,524
|
Goodwill
|
|
−
|
|
−
|
|
2,343
|
|
(327)
|
|
2,016
|
Value of in-force business
|
|
−
|
|
−
|
|
4,761
|
|
281
|
|
5,042
|
Other intangible assets
|
|
−
|
|
893
|
|
314
|
|
474
|
|
1,681
|
Property, plant and equipment
|
|
−
|
|
3,644
|
|
9,263
|
|
65
|
|
12,972
|
Current tax recoverable
|
|
465
|
|
420
|
|
26
|
|
(883)
|
|
28
|
Deferred tax assets
|
|
38
|
|
2,286
|
|
1,503
|
|
(1,121)
|
|
2,706
|
Retirement benefit assets
|
|
−
|
|
254
|
|
86
|
|
2
|
|
342
|
Investment in subsidiary undertakings, including assets held for sale
|
|
44,188
|
|
38,757
|
|
−
|
|
(82,945)
|
|
−
|
Other assets
|
|
959
|
|
1,168
|
|
11,613
|
|
(985)
|
|
12,755
|
Total assets
|
|
53,132
|
|
553,292
|
|
584,501
|
|
(373,132)
|
|
817,793
|
|
21.
|
Condensed consolidating financial information
(continued)
|
Balance sheets
(continued)
At 31 December 2016
|
|
Company
|
|
Lloyds Bank
|
Subsidiaries
|
Consolidation adjustments
|
|
Group
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Equity and liabilities
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
Deposits from banks
|
|
−
|
|
9,450
|
|
6,936
|
|
(2)
|
|
16,384
|
Customer deposits
|
|
−
|
|
213,135
|
|
202,433
|
|
(108)
|
|
415,460
|
Due to fellow Lloyds Banking Group undertakings
|
2,690
|
|
86,803
|
|
149,152
|
|
(238,645)
|
|
−
|
Items in course of transmission to banks
|
−
|
|
292
|
|
256
|
|
−
|
|
548
|
Trading and other financial liabilities at fair value through profit or loss
|
|
−
|
|
55,776
|
|
945
|
|
(2,217)
|
|
54,504
|
Derivative financial instruments
|
|
−
|
|
38,591
|
|
16,107
|
|
(19,774)
|
|
34,924
|
Notes in circulation
|
|
−
|
|
−
|
|
1,402
|
|
−
|
|
1,402
|
Debt securities in issue
|
|
2,455
|
|
74,366
|
|
22,336
|
|
(22,843)
|
|
76,314
|
Liabilities arising from insurance contracts and participating investment contracts
|
−
|
|
−
|
|
94,409
|
|
(19)
|
|
94,390
|
Liabilities arising from non-participating investment contracts
|
|
−
|
|
−
|
|
20,112
|
|
−
|
|
20,112
|
Other liabilities
|
|
413
|
|
3,295
|
|
27,668
|
|
(2,183)
|
|
29,193
|
Retirement benefit obligations
|
|
−
|
|
399
|
|
420
|
|
3
|
|
822
|
Current tax liabilities
|
|
−
|
|
3
|
|
1,390
|
|
(1,167)
|
|
226
|
Deferred tax liabilities
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
Other provisions
|
|
−
|
|
2,833
|
|
2,355
|
|
30
|
|
5,218
|
Subordinated liabilities
|
|
4,329
|
|
10,575
|
|
10,648
|
|
(5,721)
|
|
19,831
|
Total liabilities
|
|
9,887
|
|
495,518
|
|
556,569
|
|
(292,646)
|
|
769,328
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity
|
|
37,890
|
|
54,557
|
|
25,687
|
|
(75,464)
|
|
42,670
|
Other equity instruments
|
|
5,355
|
|
3,217
|
|
305
|
|
(3,522)
|
|
5,355
|
Total equity excluding non-controlling interests
|
|
43,245
|
|
57,774
|
|
25,992
|
|
(78,986)
|
|
48,025
|
Non-controlling interests
|
|
−
|
|
−
|
|
1,940
|
|
(1,500)
|
|
440
|
Total equity
|
|
43,245
|
|
57,774
|
|
27,932
|
|
(80,486)
|
|
48,465
|
Total equity and liabilities
|
|
53,132
|
|
553,292
|
|
584,501
|
|
(373,132)
|
|
817,793
|
|
21.
|
Condensed consolidating financial information
(continued)
|
Cash flow statements
For the half-year ended 30 June 2017
|
|
Company
|
|
Lloyds
Bank
|
Subsidiaries
|
Consolidation adjustments
|
|
Group
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
4,447
|
|
(936)
|
|
(6,562)
|
|
(1,632)
|
|
(4,683)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
Purchase of financial assets
|
|
−
|
|
(1,646)
|
|
(201)
|
|
−
|
|
(1,847)
|
Proceeds from sale and maturity of financial assets
|
|
−
|
|
4,128
|
|
1,148
|
|
−
|
|
5,276
|
Purchase of fixed assets
|
|
−
|
|
(552)
|
|
(1,408)
|
|
−
|
|
(1,960)
|
Proceeds from sale of fixed assets
|
|
−
|
|
6
|
|
757
|
|
−
|
|
763
|
Dividends received from subsidiaries
|
|
1,600
|
|
2,807
|
|
−
|
|
(4,407)
|
|
−
|
Distributions on other equity instruments received
|
|
146
|
|
51
|
|
−
|
|
(197)
|
|
−
|
Capital lending to Lloyds Bank
|
|
3,477
|
|
−
|
|
−
|
|
(3,477)
|
|
−
|
Capital repayments by Lloyds Bank
|
|
(7,626)
|
|
−
|
|
−
|
|
7,626
|
|
−
|
Return of capital contribution
|
|
74
|
|
−
|
|
−
|
|
(74)
|
|
−
|
Acquisition of businesses, net of cash acquired
|
|
−
|
|
(2,026)
|
|
−
|
|
117
|
|
(1,909)
|
Disposal of businesses, net of cash disposed
|
|
−
|
|
−
|
|
26
|
|
−
|
|
26
|
Net cash provided by investing activities
|
|
(2,329)
|
|
2,768
|
|
322
|
|
(412)
|
|
349
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Dividends paid to ordinary shareholders
|
|
(1,568)
|
|
(1,600)
|
|
(2,807)
|
|
4,407
|
|
(1,568)
|
Distributions on other equity instruments
|
|
(209)
|
|
(137)
|
|
(60)
|
|
197
|
|
(209)
|
Interest paid on subordinated liabilities
|
|
(127)
|
|
(394)
|
|
(761)
|
|
502
|
|
(780)
|
Repayment of subordinated liabilities
|
|
−
|
|
(675)
|
|
(760)
|
|
799
|
|
(636)
|
Return of capital contribution
|
|
−
|
|
(74)
|
|
−
|
|
74
|
|
−
|
Capital borrowing from the Company
|
|
−
|
|
(3,477)
|
|
−
|
|
3,477
|
|
−
|
Capital repayments to the Company
|
|
−
|
|
7,626
|
|
−
|
|
(7,626)
|
|
−
|
Change in non-controlling interests
|
|
−
|
|
−
|
|
(3)
|
|
−
|
|
(3)
|
Net cash (used in) provided by financing activities
|
|
(1,904)
|
|
1,269
|
|
(4,391)
|
|
1,830
|
|
(3,196)
|
Effects of exchange rate changes on cash and cash equivalents
|
|
−
|
|
(1)
|
|
1
|
|
−
|
|
−
|
Change in cash and cash equivalents
|
|
214
|
|
3,100
|
|
(10,630)
|
|
(214)
|
|
(7,530)
|
Cash and cash equivalents at beginning of period
|
|
42
|
|
45,266
|
|
17,122
|
|
(42)
|
|
62,388
|
Cash and cash equivalents at end of period
|
|
256
|
|
48,366
|
|
6,492
|
|
(256)
|
|
54,858
|
|
21.
|
Condensed consolidating financial information
(continued)
|
Cash flow statements
(continued)
For the half-year ended 30 June 2016
|
|
Company
|
|
Lloyds
Bank
|
Subsidiaries
|
Consolidation adjustments
|
|
Group
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
(8,980)
|
|
27,973
|
|
6,915
|
|
(3,304)
|
|
22,604
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
Purchase of financial assets
|
|
–
|
|
(3,190)
|
|
(251)
|
|
−
|
|
(3,441)
|
Proceeds from sale and maturity of financial assets
|
|
–
|
|
1,917
|
|
1,479
|
|
(667)
|
|
2,729
|
Purchase of fixed assets
|
|
–
|
|
(574)
|
|
(1,246)
|
|
−
|
|
(1,820)
|
Proceeds from sale of fixed assets
|
|
–
|
|
12
|
|
897
|
|
−
|
|
909
|
Additional capital injections to subsidiaries
|
|
(3,217)
|
|
−
|
|
–
|
|
3,217
|
|
–
|
Capital repayments by subsidiaries
|
|
13,059
|
|
−
|
|
–
|
|
(13,059)
|
|
–
|
Acquisition of businesses, net of cash acquired
|
|
–
|
|
−
|
|
(6)
|
|
−
|
|
(6)
|
Disposal of businesses, net of cash disposed
|
|
–
|
|
−
|
|
5
|
|
−
|
|
5
|
Dividends received from subsidiaries
|
|
2,430
|
|
2,555
|
|
−
|
|
(4,985)
|
|
−
|
Distributions on other equity instruments received
|
|
1
|
|
51
|
|
−
|
|
(52)
|
|
−
|
Return of capital contribution
|
|
405
|
|
−
|
|
−
|
|
(405)
|
|
−
|
Capital lending to subsidiaries
|
|
(2,753)
|
|
−
|
|
−
|
|
2,753
|
|
−
|
Net cash provided by investing activities
|
|
9,925
|
|
771
|
|
878
|
|
(13,198)
|
|
(1,624)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Dividends paid to ordinary shareholders
|
|
(1,427)
|
|
(2,430)
|
|
(2,555)
|
|
4,985
|
|
(1,427)
|
Distributions on other equity instruments
|
|
(204)
|
|
(1)
|
|
(51)
|
|
52
|
|
(204)
|
Dividends paid to non-controlling interests
|
|
−
|
|
–
|
|
(2)
|
|
−
|
|
(2)
|
Interest paid on subordinated liabilities
|
|
(99)
|
|
(930)
|
|
(545)
|
|
628
|
|
(946)
|
Issue of other equity instruments
|
|
−
|
|
3,217
|
|
−
|
|
(3,217)
|
|
−
|
Proceeds from issue of subordinated liabilities
|
|
1,061
|
|
2,753
|
|
−
|
|
(2,753)
|
|
1,061
|
Repayment of subordinated liabilities
|
|
–
|
|
(11,921)
|
|
(4,298)
|
|
11,541
|
|
(4,678)
|
Capital contribution received
|
|
–
|
|
–
|
|
−
|
|
−
|
|
−
|
Capital repayments to the Company
|
|
–
|
|
(3,387)
|
|
(1,198)
|
|
4,585
|
|
−
|
Change in non-controlling interests
|
|
–
|
|
–
|
|
(5)
|
|
−
|
|
(5)
|
Return of capital contribution
|
|
−
|
|
(405)
|
|
−
|
|
405
|
|
−
|
Net cash (used in) provided by financing activities
|
|
(669)
|
|
(13,104)
|
|
(8,654)
|
|
16,226
|
|
(6,201)
|
Effects of exchange rate changes on cash and cash equivalents
|
|
–
|
|
1
|
|
14
|
|
−
|
|
15
|
Change in cash and cash equivalents
|
|
276
|
|
15,641
|
|
(847)
|
|
(276)
|
|
14,794
|
Cash and cash equivalents at beginning of period
|
|
24
|
|
55,852
|
|
16,101
|
|
(24)
|
|
71,953
|
Cash and cash equivalents at end of period
|
|
300
|
|
71,493
|
|
15,254
|
|
(300)
|
|
86,747
|
|
21.
|
Condensed consolidating financial information
(continued)
|
Cash flow statements
(continued)
For the half-year ended
31 December 2016
|
|
Company
|
|
Lloyds Bank
|
Subsidiaries
|
Consolidation adjustments
|
|
Group
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
1,926
|
|
(27,396)
|
|
4,216
|
|
724
|
|
(20,530)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
Dividends received from subsidiaries
|
|
1,329
|
|
1,328
|
|
−
|
|
(2,657)
|
|
−
|
Distributions on other equity instruments received
|
|
118
|
|
50
|
|
−
|
|
(168)
|
|
−
|
Return of capital contributions
|
|
36
|
|
−
|
|
−
|
|
(36)
|
|
−
|
Purchase of financial assets
|
|
−
|
|
(1,474)
|
|
(71)
|
|
56
|
|
(1,489)
|
Proceeds from sale and maturity of financial assets
|
|
−
|
|
4,512
|
|
871
|
|
(1,777)
|
|
3,606
|
Purchase of fixed assets
|
|
−
|
|
(548)
|
|
(1,392)
|
|
−
|
|
(1,940)
|
Proceeds from sale of fixed assets
|
|
−
|
|
7
|
|
768
|
|
−
|
|
775
|
Additional capital lending to subsidiaries
|
|
(2,225)
|
|
−
|
|
−
|
|
2,225
|
|
−
|
Capital repayments by subsidiaries
|
|
107
|
|
−
|
|
−
|
|
(107)
|
|
−
|
Additional capital injections to subsidiaries
|
|
(305)
|
|
(309)
|
|
−
|
|
614
|
|
−
|
Acquisition of businesses, net of cash acquired
|
|
−
|
|
−
|
|
(14)
|
|
−
|
|
(14)
|
Disposal of businesses, net of cash disposed
|
|
−
|
|
231
|
|
−
|
|
(231)
|
|
−
|
Net cash (used in) provided by investing activities
|
|
(940)
|
|
3,797
|
|
162
|
|
(2,081)
|
|
938
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Dividends paid to ordinary shareholders
|
|
(587)
|
|
(610)
|
|
(2,047)
|
|
2,657
|
|
(587)
|
Distributions on other equity instruments
|
|
(208)
|
|
(118)
|
|
(50)
|
|
168
|
|
(208)
|
Dividends paid to non-controlling interests
|
|
−
|
|
−
|
|
(27)
|
|
−
|
|
(27)
|
Interest paid on subordinated liabilities
|
|
(130)
|
|
(586)
|
|
(348)
|
|
323
|
|
(741)
|
Proceeds from issue of subordinated liabilities
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
Repayment of subordinated liabilities
|
|
(319)
|
|
(1,279)
|
|
(654)
|
|
(955)
|
|
(3,207)
|
Proceeds from issue of other equity instruments
|
|
−
|
|
−
|
|
305
|
|
(305)
|
|
−
|
Capital contributions received
|
|
−
|
|
−
|
|
309
|
|
(309)
|
|
−
|
Return of capital contributions
|
|
−
|
|
(36)
|
|
−
|
|
36
|
|
−
|
Capital borrowing from the Company
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
Capital repayments to the Company
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
Changes in non-controlling interests
|
|
−
|
|
−
|
|
(3)
|
|
−
|
|
(3)
|
Net cash provided by (used in) financing activities
|
|
(1,244)
|
|
(2,629)
|
|
(2,515)
|
|
1,615
|
|
(4,773)
|
Effects of exchange rate changes on cash and cash equivalents
|
|
−
|
|
1
|
|
5
|
|
−
|
|
6
|
Change in cash and cash equivalents
|
|
(258)
|
|
(26,227)
|
|
1,868
|
|
258
|
|
(24,359)
|
Cash and cash equivalents at beginning of period
|
|
300
|
|
71,493
|
|
15,254
|
|
(300)
|
|
86,747
|
Cash and cash equivalents at end of period
|
|
42
|
|
45,266
|
|
17,122
|
|
(42)
|
|
62,388
|
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorised.
|
|
|
|
|
LLOYDS BANKING GROUP plc
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ G Culmer
|
|
|
Name:
|
George Culmer
|
|
|
Title:
|
Chief Financial Officer
|
|
|
|
|
|
|
Dated:
|
27 July 2017
|
|
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