NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS
Note 1: Accounting policies
These
condensed consolidated half-year financial statements as at and for
the period to 30 June 2021 have been prepared in accordance with
the Disclosure Guidance and Transparency Rules of the Financial
Conduct Authority (FCA) and with International Accounting Standard
34 (IAS 34), Interim Financial
Reporting as adopted by the United Kingdom and comprise the
results of Lloyds Banking Group plc (the Company) together with its
subsidiaries (the Group). They do not include all of the
information required for full annual financial statements and
should be read in conjunction with the Group’s consolidated
financial statements as at and for the year ended 31 December 2020
which complied with international accounting standards in
conformity with the requirements of the Companies Act 2006, were
prepared in accordance with International Financial Reporting
Standards (IFRS) and were compliant with IFRS adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union.
Copies of the 2020 Annual Report and Accounts are available on the
Group’s website and are available upon request from Investor
Relations, Lloyds Banking Group plc, 25 Gresham Street, London
EC2V 7HN.
The UK
Finance Code for Financial Reporting Disclosure (the Disclosure
Code) sets out disclosure principles together with supporting
guidance in respect of the financial statements of UK banks. The
Group has adopted the Disclosure Code and these condensed
consolidated half-year financial statements have been prepared in
compliance with the Disclosure Code’s principles. Terminology
used in these condensed consolidated half-year financial statements
is consistent with that used in the Group’s 2020 Annual
Report and Accounts.
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 taken into account the continuing uncertainties
affecting the UK economy post-pandemic and their potential effects
upon the Group’s performance and projected funding and
capital position; the impact of further stress scenarios has also
been considered. On this basis, the directors are satisfied that
the Group will maintain adequate levels of funding and capital for
the foreseeable future.
Changes in accounting policy
The
Group adopted the Interest Rate Benchmark Reform Phase 2 amendments
from 1 January 2021. These amendments require that changes to
expected future cash flows that both arise as a direct result of
IBOR Reform and are economically equivalent to the previous cash
flows are accounted for as a change to the effective interest rate
with no adjustment to the asset or liability’s carrying
amount; no immediate gain or loss is recognised. The new
requirements also provide relief from the requirement to
discontinue hedge accounting as a result of amending hedge
documentation if the changes are required solely as a result of the
IBOR Reform. The amendments do not have a material impact on the
Group’s comparatives, which have not been
restated.
Except
for the change above, the Group's accounting policies are
consistent with those applied by the Group in its 2020 Annual
Report and Accounts and there have been no changes in the Group's
methods of computation.
Future accounting developments
Details
of those IFRS pronouncements which will be relevant to the Group
but which will not be effective at 31 December 2021 and which have
not been applied in preparing these condensed consolidated
half-year financial statements are set out in note 20.
Related party transactions
The
Group has had no significant related party transactions during the
half-year to 30 June 2021. Related party transactions for the
half-year to 30 June 2021 are similar in nature to those for the
year ended 31 December 2020. Full details of the Group’s
related party transactions for the year ended 31 December 2020 can
be found in the Group’s 2020 Annual Report and
Accounts.
NOTES TO THE CONDENSED
CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS
(continued)
Note 2: Critical accounting judgements and estimates
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. The Group’s significant
judgements, estimates and assumptions are unchanged compared to
those applied at 31 December 2020, except as detailed
below.
Allowance for expected credit losses
The
Group recognises an allowance for expected credit losses (ECLs) for
loans and advances to customers and banks, other financial assets
held at amortised cost, financial assets measured at fair value
through other comprehensive income and certain loan commitment and
financial guarantee contracts. At 30 June 2021 the Group’s
expected credit loss allowance was £5,058 million (31 December
2020: £6,247 million), of which £4,699 million (31
December 2020: £5,788 million) was in respect of drawn
balances.
The
calculation of the Group’s expected credit loss allowances
and provisions against loan commitments and guarantees under IFRS 9
requires the Group to make a number of judgements, assumptions and
estimates. These are set out in detail in the Group’s 2020
Annual Report and Accounts. The principal changes made in the
period ended 30 June 2021 are as follows:
Base Case and Economic Assumptions
The
Group’s base case economic scenario has been revised in light
of the continuing impact of the coronavirus pandemic in the UK and
globally. The scenario reflects judgements of the net effect of
government-mandated restrictions on economic activity, large-scale
government interventions and behavioural changes by households and
businesses that may persist beyond the rollout of coronavirus
vaccination programmes.
As
large-scale vaccination efforts compete with the emergence of new
viral strains in the UK and globally, there remains considerable
uncertainty about the pace and eventual extent of the post-pandemic
recovery. The Group’s updated base case scenario builds in
three key conditioning assumptions. First, that rising infections
in the UK’s third COVID-19 wave do not lead to a
re-imposition of restrictions. Second, that the rollout of
vaccination programmes among the UK’s trading partners will
reinforce an improving global backdrop. Third, that domestic policy
measures remain accommodative, with monetary policy looking through
a transient rise in inflation.
Conditioned
on these assumptions and taking note of improvements in economic
indicators in the second quarter, the Group’s base case
outlook continues to assume a rise in the unemployment rate as
furlough support ends alongside a deceleration in residential and
commercial property price growth. Risks around this base case
economic view lie in both directions and are partly captured by the
alternative economic scenarios generated. But uncertainties
relating to the key conditioning assumptions, including
epidemiological developments, the efficacy of vaccine rollouts
against emergent strains and the response of the economy in those
circumstances are not specifically captured by these scenarios.
These specific risks have been recognised outside the modelled
scenarios with a central adjustment.
The
Group has incorporated the latest available information at the
reporting date in defining its base case scenario and generating
alternative economic scenarios. The scenarios include forecasts for
key variables in the second quarter of 2021, for which actuals may
have since emerged prior to publication.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 2: Critical accounting judgements and estimates
(continued)
Base case scenario by quarter1
|
First
quarter
2021
|
Second
quarter
2021
|
Third
quarter
2021
|
Fourth
quarter
2021
|
First
quarter
2022
|
Second
quarter
2022
|
Third
quarter
2022
|
Fourth
quarter
2022
|
At 30 June 2021
|
%
|
%
|
%
|
%
|
%
|
%
|
%
|
%
|
|
|
|
|
|
|
|
|
|
Gross domestic product
|
(1.5)
|
|
4.3
|
|
(0.3)
|
|
3.2
|
|
1.5
|
|
0.5
|
|
0.4
|
|
0.4
|
|
UK Bank Rate
|
0.10
|
|
0.10
|
|
0.10
|
|
0.10
|
|
0.10
|
|
0.10
|
|
0.10
|
|
0.10
|
|
Unemployment rate
|
4.8
|
|
5.0
|
|
5.4
|
|
6.6
|
|
6.4
|
|
6.2
|
|
6.1
|
|
5.9
|
|
House price growth
|
6.5
|
|
10.5
|
|
6.8
|
|
5.6
|
|
5.0
|
|
1.7
|
|
0.3
|
|
0.1
|
|
Commercial real estate price growth
|
(2.9)
|
|
1.3
|
|
1.5
|
|
0.4
|
|
(0.3)
|
|
(0.5)
|
|
0.4
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
First
quarter
2020
|
Second
quarter
2020
|
Third
quarter
2020
|
Fourth
quarter
2020
|
First
quarter
2021
|
Second
quarter
2021
|
Third
quarter
2021
|
Fourth
quarter
2021
|
At 31
December 2020
|
%
|
%
|
%
|
%
|
%
|
%
|
%
|
%
|
|
|
|
|
|
|
|
|
|
Gross domestic product
|
(3.0)
|
|
(18.8)
|
|
16.0
|
|
(1.9)
|
|
(3.8)
|
|
5.6
|
|
3.6
|
|
1.5
|
|
UK Bank Rate
|
0.10
|
|
0.10
|
|
0.10
|
|
0.10
|
|
0.10
|
|
0.10
|
|
0.10
|
|
0.10
|
|
Unemployment rate
|
4.0
|
|
4.1
|
|
4.8
|
|
5.0
|
|
5.2
|
|
6.5
|
|
8.0
|
|
7.5
|
|
House price growth
|
2.8
|
|
2.6
|
|
7.2
|
|
5.9
|
|
5.5
|
|
4.7
|
|
(1.6)
|
|
(3.8)
|
|
Commercial real estate price growth
|
(5.0)
|
|
(7.8)
|
|
(7.8)
|
|
(7.0)
|
|
(6.1)
|
|
(2.9)
|
|
(2.2)
|
|
(1.7)
|
|
1
Gross domestic
product presented quarter on quarter, house price growth and
commercial real estate growth presented year on year - i.e. from
the equivalent quarter the previous year. UK Bank Rate is presented
end quarter.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 2: Critical accounting judgements and estimates
(continued)
Scenarios by year
Key
annual assumptions made by the Group are shown below. Gross
domestic product is presented as an annual change, house price
growth and commercial real estate price growth are presented as the
growth in the respective indices within the period. UK Bank Rate
and unemployment rate are averages for the period. The upside, base
case and downside scenarios are weighted at 30 per cent each, with
the severe downside scenario weighted at 10 per cent.
|
2021
|
2022
|
2023
|
2024
|
2025
|
2021–2025 average
|
At 30 June 2021
|
%
|
%
|
%
|
%
|
%
|
%
|
|
|
|
|
|
|
|
Upside
|
|
|
|
|
|
|
Gross domestic product
|
6.1
|
|
5.5
|
|
1.4
|
|
1.4
|
|
1.2
|
|
3.1
|
|
UK Bank Rate
|
0.52
|
|
1.27
|
|
1.09
|
|
1.32
|
|
1.58
|
|
1.16
|
|
Unemployment rate
|
4.7
|
|
4.9
|
|
4.4
|
|
4.2
|
|
4.1
|
|
4.5
|
|
House price growth
|
6.8
|
|
3.4
|
|
4.6
|
|
3.9
|
|
3.4
|
|
4.4
|
|
Commercial real estate price growth
|
9.2
|
|
5.7
|
|
2.4
|
|
0.3
|
|
(0.3)
|
|
3.4
|
|
|
|
|
|
|
|
|
Base case
|
|
|
|
|
|
|
Gross domestic product
|
5.5
|
|
5.5
|
|
1.6
|
|
1.4
|
|
1.2
|
|
3.0
|
|
UK Bank Rate
|
0.10
|
|
0.10
|
|
0.25
|
|
0.50
|
|
0.75
|
|
0.34
|
|
Unemployment rate
|
5.4
|
|
6.1
|
|
5.4
|
|
5.0
|
|
4.8
|
|
5.4
|
|
House price growth
|
5.6
|
|
0.1
|
|
0.1
|
|
0.6
|
|
1.1
|
|
1.5
|
|
Commercial real estate price growth
|
0.4
|
|
1.0
|
|
0.6
|
|
0.3
|
|
0.5
|
|
0.6
|
|
|
|
|
|
|
|
|
Downside
|
|
|
|
|
|
|
Gross domestic product
|
4.8
|
|
4.2
|
|
1.3
|
|
1.4
|
|
1.4
|
|
2.6
|
|
UK Bank Rate
|
0.09
|
|
0.05
|
|
0.06
|
|
0.11
|
|
0.20
|
|
0.10
|
|
Unemployment rate
|
6.0
|
|
7.8
|
|
7.1
|
|
6.5
|
|
6.0
|
|
6.7
|
|
House price growth
|
3.5
|
|
(6.2)
|
|
(7.5)
|
|
(4.9)
|
|
(1.8)
|
|
(3.5)
|
|
Commercial real estate price growth
|
(5.3)
|
|
(5.3)
|
|
(2.8)
|
|
(1.5)
|
|
0.2
|
|
(3.0)
|
|
|
|
|
|
|
|
|
Severe downside
|
|
|
|
|
|
|
Gross domestic product
|
4.1
|
|
3.5
|
|
1.1
|
|
1.4
|
|
1.4
|
|
2.3
|
|
UK Bank Rate
|
0.06
|
|
0.00
|
|
0.01
|
|
0.02
|
|
0.03
|
|
0.02
|
|
Unemployment rate
|
7.0
|
|
9.9
|
|
9.1
|
|
8.3
|
|
7.6
|
|
8.4
|
|
House price growth
|
2.4
|
|
(11.0)
|
|
(13.2)
|
|
(9.6)
|
|
(5.1)
|
|
(7.5)
|
|
Commercial real estate price growth
|
(13.5)
|
|
(13.5)
|
|
(6.9)
|
|
(2.3)
|
|
0.5
|
|
(7.3)
|
|
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 2: Critical accounting judgements and estimates
(continued)
|
2020
|
2021
|
2022
|
2023
|
2024
|
2020–2024 average
|
At 31
December 2020
|
%
|
%
|
%
|
%
|
%
|
%
|
|
|
|
|
|
|
|
Upside
|
|
|
|
|
|
|
Gross domestic product
|
(10.5)
|
|
3.7
|
|
5.7
|
|
1.7
|
|
1.5
|
|
0.3
|
|
UK Bank Rate
|
0.10
|
|
1.14
|
|
1.27
|
|
1.20
|
|
1.21
|
|
0.98
|
|
Unemployment rate
|
4.3
|
|
5.4
|
|
5.4
|
|
5.0
|
|
4.5
|
|
5.0
|
|
House price growth
|
6.3
|
|
(1.4)
|
|
5.2
|
|
6.0
|
|
5.0
|
|
4.2
|
|
Commercial real estate price growth
|
(4.6)
|
|
9.3
|
|
3.9
|
|
2.1
|
|
0.3
|
|
2.1
|
|
|
|
|
|
|
|
|
Base case
|
|
|
|
|
|
|
Gross domestic product
|
(10.5)
|
|
3.0
|
|
6.0
|
|
1.7
|
|
1.4
|
|
0.1
|
|
UK Bank Rate
|
0.10
|
|
0.10
|
|
0.10
|
|
0.21
|
|
0.25
|
|
0.15
|
|
Unemployment rate
|
4.5
|
|
6.8
|
|
6.8
|
|
6.1
|
|
5.5
|
|
5.9
|
|
House price growth
|
5.9
|
|
(3.8)
|
|
0.5
|
|
1.5
|
|
1.5
|
|
1.1
|
|
Commercial real estate price growth
|
(7.0)
|
|
(1.7)
|
|
1.6
|
|
1.1
|
|
0.6
|
|
(1.1)
|
|
|
|
|
|
|
|
|
Downside
|
|
|
|
|
|
|
Gross domestic product
|
(10.6)
|
|
1.7
|
|
5.1
|
|
1.4
|
|
1.4
|
|
(0.4)
|
|
UK Bank Rate
|
0.10
|
|
0.06
|
|
0.02
|
|
0.02
|
|
0.03
|
|
0.05
|
|
Unemployment rate
|
4.6
|
|
7.9
|
|
8.4
|
|
7.8
|
|
7.0
|
|
7.1
|
|
House price growth
|
5.6
|
|
(8.4)
|
|
(6.5)
|
|
(4.7)
|
|
(3.0)
|
|
(3.5)
|
|
Commercial real estate price growth
|
(8.7)
|
|
(10.6)
|
|
(3.2)
|
|
(0.8)
|
|
(0.8)
|
|
(4.9)
|
|
|
|
|
|
|
|
|
Severe downside
|
|
|
|
|
|
|
Gross domestic product
|
(10.8)
|
|
0.3
|
|
4.8
|
|
1.3
|
|
1.2
|
|
(0.8)
|
|
UK Bank Rate
|
0.10
|
|
0.00
|
|
0.00
|
|
0.01
|
|
0.01
|
|
0.02
|
|
Unemployment rate
|
4.8
|
|
9.9
|
|
10.7
|
|
9.8
|
|
8.7
|
|
8.8
|
|
House price growth
|
5.3
|
|
(11.1)
|
|
(12.5)
|
|
(10.7)
|
|
(7.6)
|
|
(7.5)
|
|
Commercial real estate price growth
|
(11.0)
|
|
(21.4)
|
|
(9.8)
|
|
(3.9)
|
|
(0.8)
|
|
(9.7)
|
|
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 2: Critical accounting judgements and estimates
(continued)
The
table below shows the Group’s ECL for the upside, base case,
downside and severe downside scenarios. The stage allocation for an
asset is based on the overall scenario probability-weighted PD and,
hence, the Stage 2 allocation is constant across all the scenarios.
ECL applied through individual assessments and post-model
adjustments is reported flat against each economic scenario,
reflecting the basis on which they are evaluated. Judgements
applied through changes to inputs are reflected in the scenario
sensitivities. It therefore shows the extent to which a higher ECL
allowance has been recognised to take account of multiple economic
scenarios from the probability-weighted view relative to the base
case. The uplift being £388 million compared to
£506 million at 31 December 2020.
|
Probability-
weighted
|
|
Upside
|
|
Base case
|
|
Downside
|
|
Severe
downside
|
At 30 June 2021
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
UK Mortgages
|
905
|
|
|
544
|
|
|
684
|
|
|
1,100
|
|
|
2,064
|
|
Other Retail
|
2,053
|
|
|
1,896
|
|
|
2,009
|
|
|
2,152
|
|
|
2,355
|
|
Commercial Banking
|
1,650
|
|
|
1,395
|
|
|
1,527
|
|
|
1,799
|
|
|
2,340
|
|
Other
|
450
|
|
|
448
|
|
|
450
|
|
|
450
|
|
|
454
|
|
ECL allowance
|
5,058
|
|
|
4,283
|
|
|
4,670
|
|
|
5,501
|
|
|
7,213
|
|
|
Probability-
weighted
|
|
Upside
|
|
Base case
|
|
Downside
|
|
Severe
downside
|
At 31
December 2020
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
UK Mortgages
|
1,027
|
|
|
614
|
|
|
804
|
|
|
1,237
|
|
|
2,306
|
|
Other Retail
|
2,368
|
|
|
2,181
|
|
|
2,310
|
|
|
2,487
|
|
|
2,745
|
|
Commercial Banking
|
2,402
|
|
|
1,910
|
|
|
2,177
|
|
|
2,681
|
|
|
3,718
|
|
Other
|
450
|
|
|
448
|
|
|
450
|
|
|
450
|
|
|
456
|
|
ECL allowance
|
6,247
|
|
|
5,153
|
|
|
5,741
|
|
|
6,855
|
|
|
9,225
|
|
The
impact of changes in the UK unemployment rate and House Price Index
(HPI) have also been assessed. Although such changes would not be
observed in isolation, as economic indicators tend to be correlated
in a coherent scenario, this gives insight into the sensitivity of
the Group’s ECL to gradual changes in these two critical
economic factors. The assessment has been made against the base
case with the reported staging unchanged.
The
table below shows the impact on the Group’s ECL in respect of
UK Mortgages resulting from a decrease/increase in loss given
default for a 10 percentage point (pp) increase or decrease in the
UK House Price Index (HPI). The increase/decrease is presented
based on the adjustment phased evenly over the first ten quarters
of the base case scenario.
|
At 30 June 2021
|
|
At 31
December 2020
|
|
10pp increase
in HPI
|
|
10pp decrease
in HPI
|
|
10pp increase
in HPI
|
|
10pp decrease
in HPI
|
|
|
|
|
|
|
|
|
ECL impact, £m
|
(175)
|
|
|
254
|
|
|
(206)
|
|
|
284
|
|
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 2: Critical accounting judgements and estimates
(continued)
The
table below shows the impact on the Group’s ECL resulting
from a 1 percentage point (pp) increase or decrease in the UK
unemployment rate. The increase or decrease is presented based on
the adjustment phased evenly over the first ten quarters of the
base case scenario. An immediate increase or decrease would drive a
more material ECL impact as it would be fully reflected in both 12
month and lifetime PDs.
|
At 30 June 2021
|
|
At 31
December 2020
|
|
1pp increase in
unemployment
|
|
1pp decrease in
unemployment
|
|
1pp increase in
unemployment
|
|
1pp decrease in
unemployment
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
UK Mortgages
|
33
|
|
|
(28)
|
|
|
25
|
|
|
(23)
|
|
Other Retail
|
45
|
|
|
(45)
|
|
|
54
|
|
|
(54)
|
|
Commercial Banking
|
87
|
|
|
(74)
|
|
|
125
|
|
|
(112)
|
|
Other
|
1
|
|
|
(1)
|
|
|
1
|
|
|
(1)
|
|
ECL impact
|
166
|
|
|
(148)
|
|
|
205
|
|
|
(190)
|
|
Application of judgement in adjustments to modelled
ECL
Impairment
models fall within the Group’s Model Risk framework with
model monitoring, periodic validation and back testing performed on
model components (i.e. probability of default, exposure at default
and loss given default). Limitations in the Group’s
impairment models or data inputs may be identified through the
ongoing assessment and validation of the output of the models. In
these circumstances, management make appropriate adjustments to the
Group’s allowance for impairment losses to ensure that the
overall provision adequately reflects all material risks. These
adjustments are determined by considering the particular attributes
of exposures which have not been adequately captured by the
impairment models and range from changes to model inputs and
parameters, at account level, through to more qualitative
post-model overlays.
Judgements
are not typically assessed under each distinct economic scenario
used to generate ECL, but instead are applied on the basis of final
modelled ECL which reflects the probability-weighted view of all
scenarios. All adjustments are reviewed quarterly and are subject
to internal review and challenge, including by the Audit Committee,
to ensure that amounts are appropriately calculated and that there
are specific release criteria within a reasonable
timeframe.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 2: Critical accounting judgements and estimates
(continued)
At 30
June 2021 the coronavirus pandemic and the various support measures
that have been put in place have resulted in an economic
environment which differs significantly from the historical
economic conditions upon which the impairment models have been
built. As a result there is a greater need for management
judgements to be applied, as seen in the elevated levels present
since year end. At 30 June 2021 management judgement resulted in
additional ECL allowances totalling £1,682 million (31
December 2020: £1,383 million). This comprises judgements
added due to COVID-19 and other judgements not directly linked to
COVID-19 but which have increased in size under the current
outlook. The table below analyses total ECL allowance at 30 June
2021 by portfolio, separately identifying the amounts that have
been modelled, those that have been individually assessed and those
arising through the application of management
judgement.
|
Modelled
ECL
|
|
Individually
assessed
|
|
Judgements
due to
COVID-191
|
|
Other
judgements
|
|
Total ECL
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
At 30 June 2021
|
|
|
|
|
|
|
|
|
|
UK Mortgages
|
345
|
|
|
—
|
|
|
73
|
|
|
487
|
|
|
905
|
|
Other Retail
|
1,610
|
|
|
—
|
|
|
405
|
|
|
38
|
|
|
2,053
|
|
Commercial Banking
|
418
|
|
|
953
|
|
|
280
|
|
|
(1)
|
|
|
1,650
|
|
Other
|
50
|
|
|
—
|
|
|
400
|
|
|
—
|
|
|
450
|
|
Total
|
2,423
|
|
|
953
|
|
|
1,158
|
|
|
524
|
|
|
5,058
|
|
|
|
|
|
|
|
|
|
|
|
At 31
December 2020
|
|
|
|
|
|
|
|
|
|
UK Mortgages
|
481
|
|
|
—
|
|
|
36
|
|
|
510
|
|
|
1,027
|
|
Other Retail
|
2,060
|
|
|
—
|
|
|
321
|
|
|
(13)
|
|
|
2,368
|
|
Commercial Banking
|
1,051
|
|
|
1,222
|
|
|
131
|
|
|
(2)
|
|
|
2,402
|
|
Other
|
50
|
|
|
—
|
|
|
400
|
|
|
—
|
|
|
450
|
|
Total
|
3,642
|
|
|
1,222
|
|
|
888
|
|
|
495
|
|
|
6,247
|
|
1
Judgements due to
the impact that COVID-19 and resulting interventions have had on
the Group’s economic outlook and observed loss experience,
which have required additional model limitations to be
addressed.
Central overlay in respect of economic uncertainty
Central overlay in respect of economic uncertainty: £400
million (31 December 2020: £400 million)
The
Group's £400 million central overlay was added at year end in
recognition of the risks to the conditioning assumptions around the
base case scenario being markedly to the downside given the
potential for a material delay in the vaccination programme or
reduction in its effectiveness from further virus mutation and the
corresponding delayed withdrawal of restrictions on social
interaction or introduction of further lockdowns.
Although
the outlook has improved in the first half, the Group still
considers that the conditioning assumptions within the base case
and associated scenarios do not necessarily capture the
unprecedented risks that remain. The vaccine roll out has
progressed well and has supported the planned easing of
restrictions to date, however the increasing infection rate and
hospitalisations from the Delta variant highlight the potential
risk from further virus mutation and the resulting response which
could be needed, potentially impacting on social and economic
activity. The scale of the uncertainty is expected to diminish once
the UK is fully vaccinated and infection levels have been sustained
at low levels, with restrictions reduced and associated Government
support wound down.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 2: Critical accounting judgements and estimates
(continued)
Except
as noted below, the nature of the judgements are consistent with
those applied by the Group in its 2020 Annual Report and Accounts.
The 30 June 2021 allowance has been re-assessed based on latest
economic outlook, data points and modelled result.
Judgements due to COVID-19
|
At
30 June 2021
|
|
At
31
Dec
2020
|
|
£m
|
|
£m
|
|
|
|
|
UK Mortgages
|
73
|
|
|
36
|
|
Other Retail
|
|
|
|
Recognition
of impact of support measures
|
318
|
|
|
218
|
|
Incorporation
of forward-looking LGDs
|
80
|
|
|
86
|
|
Other
|
7
|
|
|
17
|
|
|
405
|
|
|
321
|
|
Commercial Banking
|
|
|
|
Adjustment
to economic variables used as inputs to models
|
171
|
|
|
93
|
|
Key
coronavirus-impacted sectors
|
100
|
|
|
—
|
|
Other
|
9
|
|
|
38
|
|
|
280
|
|
|
131
|
|
|
|
|
|
Other
|
400
|
|
|
400
|
|
Total
|
1,158
|
|
|
888
|
|
Notable
movements from 31 December 2020 include:
UK Mortgages: £73 million (31 December 2020: £36
million)
Judgement
has increased in the period due to an extension of the temporary
suspension of the repossession of properties to support customers
during the pandemic. The amount at 30 June 2021 also incorporates
an adjustment to ensure ECL is at calibrated levels when applied to
the latest balance sheet date.
Other Retail
Recognition of impact of support measures: £318 million (31
December 2020: £218 million)
Government
support and subdued levels of consumer spending are judged to have
temporarily reduced the flow of accounts into arrears and default
and to have improved average credit scores across portfolios. The
adjustment made at year end to reverse these impacts has continued
to grow through 2021 with the passage of time and as average credit
scores improved further.
Commercial Banking
Adjustment to economic variables used as inputs to models:
£171 million (31 December 2020: £93 million)
Further
observed reductions in the rate of corporate insolvencies, used as
an input to Commercial default models, continue to be substituted
with an increase proportionate to that seen in unemployment to
generate a level of predicted defaults. The increase in the
adjustment reflects the larger release which would therefore result
should the metric, still believed unrepresentative of underlying
conditions, be used within the model.
Key coronavirus-impacted sectors: £100 million (31 December
2020: £nil)
At year
end the modelled ECL incorporated an economic outlook containing a
material reduction in corporate profits. This is no longer assumed,
which generates a reduction in modelled ECL and therefore leaves
potential risk on specific underperforming sectors. Judgement has
therefore been raised in place of this to ensure a more targeted
stress on likelihood and severity of loss in these
sectors.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 2: Critical accounting judgements and estimates
(continued)
Other judgements
|
At
30 June
2021
|
|
At
31
Dec
2020
|
|
£m
|
|
£m
|
|
|
|
|
UK Mortgages
|
|
|
|
Adjustment
to modelled forecast parameters
|
140
|
|
|
193
|
|
End-of-term
interest only
|
168
|
|
|
179
|
|
Long-term
defaults
|
74
|
|
|
87
|
|
Other
|
105
|
|
|
51
|
|
|
487
|
|
|
510
|
|
Other Retail
|
|
|
|
Lifetime
extension on revolving products
|
71
|
|
|
81
|
|
Unsecured
non-scored accounts
|
(21)
|
|
|
(72)
|
|
Credit
card LGD alignment
|
(55)
|
|
|
(55)
|
|
Other
|
43
|
|
|
33
|
|
|
38
|
|
|
(13)
|
|
|
|
|
|
Commercial Banking
|
(1)
|
|
|
(2)
|
|
Total
|
524
|
|
|
495
|
|
Notable
movements from 31 December 2020 include:
UK Mortgages
Adjustment to modelled forecast parameters: £140 million (31
December 2020: £193 million)
Adjustments
to the estimated defaults used within the ECL calculation were
introduced at year end following the adoption of new default
forecast models. Work has progressed through the period with
initial model changes identified which reduce the scale of
adjustment required. The scale of the adjustment has also reduced
as the impact of under-sensitivity lessens when applied to the
improved economic outlook.
Other: £105 million (31 December 2020: £51
million)
The
increase in the scale of the judgement reflects additional
adjustment to capture risks relating to fire safety and cladding
uncertainty within assessment of affordability and asset
valuations, not captured by underlying models. The risk is now
deemed sufficiently material to address through judgement, given
that more cases have been assessed as having defective cladding, or
other fire safety issues, together with emerging evidence of higher
arrears and weaker sales values relative to the wider
portfolio.
Other Retail
Unsecured non-scored accounts: £(21) million (31 December
2020: £(72) million)
Due to
a shortcoming in the models, it is not possible to retrieve
relevant credit data for a number of accounts and therefore no
probability of default (PD) is available and no assessment of
whether there has been a significant increase in credit risk (SICR)
can be carried out. Work has progressed during 2021 to resolve this
issue. The reduction therefore reflects that an adjustment is
required on fewer accounts.
NOTES TO THE CONDENSED
CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS
(continued)
Note 3: Segmental analysis
Lloyds
Banking Group provides a wide range of banking and financial
services in the UK and in certain locations overseas. The Group
Executive Committee (GEC) remains the chief operating decision
maker 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 certain asset sales, volatile items, the insurance
grossing adjustment, liability management, restructuring, payment
protection insurance 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 three financial
reporting segments: Retail; Commercial Banking; and Insurance and
Wealth. 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 2020, neither has there
been any change to the Group’s segmental accounting for
internal segment services or derivatives entered into by units for
risk management purposes since 31 December 2020.
The
table below analyses the Group's income and profit by segment on an
underlying basis and provides a reconciliation through to certain
lines in the Group's statutory income statement. Total income, net
of insurance claims is also analysed between external and
inter-segment income. The Group's full segmental income statement
on an underlying basis is shown on page 19.
|
Net interest income
|
|
Other income, net of insurance claims
|
|
Total income, net of insurance claims1
|
|
Profit before tax
|
|
External income
|
|
Inter-segment income (expense)
|
Half-year to 30 June 2021
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying basis
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
4,218
|
|
|
812
|
|
|
5,030
|
|
|
2,335
|
|
|
5,713
|
|
|
(683)
|
|
Commercial Banking
|
1,153
|
|
|
677
|
|
|
1,830
|
|
|
1,388
|
|
|
1,693
|
|
|
137
|
|
Insurance and Wealth
|
36
|
|
|
660
|
|
|
696
|
|
|
89
|
|
|
685
|
|
|
11
|
|
Other
|
11
|
|
|
268
|
|
|
279
|
|
|
253
|
|
|
(256)
|
|
|
535
|
|
Group
|
5,418
|
|
|
2,417
|
|
|
7,835
|
|
|
4,065
|
|
|
7,835
|
|
|
—
|
|
Reconciling items:
|
|
|
|
|
|
|
|
|
|
|
|
Insurance grossing adjustment
|
(938)
|
|
|
1,026
|
|
|
88
|
|
|
—
|
|
|
|
|
|
Market volatility and asset sales
|
(18)
|
|
|
279
|
|
|
261
|
|
|
239
|
|
|
|
|
|
Amortisation of purchased intangibles
|
—
|
|
|
—
|
|
|
—
|
|
|
(35)
|
|
|
|
|
|
Restructuring costs
|
—
|
|
|
(8)
|
|
|
(8)
|
|
|
(255)
|
|
|
|
|
|
Fair value unwind and other items
|
(89)
|
|
|
(8)
|
|
|
(97)
|
|
|
(109)
|
|
|
|
|
|
Group – statutory
|
4,373
|
|
|
3,706
|
|
|
8,079
|
|
|
3,905
|
|
|
|
|
|
1
Total income, net
of insurance claims does not include operating lease depreciation
which, on a statutory basis, is included within operating
costs.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 3: Segmental analysis (continued)
|
Net interest income
|
|
Other income, net of insurance claims
|
|
Total
income, net of insurance claims1
|
|
Profit (loss) before
tax
|
|
External income
|
|
Inter-segment income (expense)
|
Half-year
to 30 June 2020
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying basis
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
4,233
|
|
|
919
|
|
|
5,152
|
|
|
212
|
|
|
6,027
|
|
|
(875)
|
|
Commercial Banking
|
1,222
|
|
|
658
|
|
|
1,880
|
|
|
(668)
|
|
|
1,633
|
|
|
247
|
|
Insurance and Wealth
|
14
|
|
|
853
|
|
|
867
|
|
|
379
|
|
|
857
|
|
|
10
|
|
Other
|
9
|
|
|
31
|
|
|
40
|
|
|
(204)
|
|
|
(578)
|
|
|
618
|
|
Group
|
5,478
|
|
|
2,461
|
|
|
7,939
|
|
|
(281)
|
|
|
7,939
|
|
|
—
|
|
Reconciling items:
|
|
|
|
|
|
|
|
|
|
|
|
Insurance grossing adjustment
|
1,132
|
|
|
(1,018)
|
|
|
114
|
|
|
—
|
|
|
|
|
|
Market volatility and asset sales
|
52
|
|
|
(75)
|
|
|
(23)
|
|
|
(43)
|
|
|
|
|
|
Amortisation of purchased intangibles
|
—
|
|
|
—
|
|
|
—
|
|
|
(34)
|
|
|
|
|
|
Restructuring costs
|
—
|
|
|
(37)
|
|
|
(37)
|
|
|
(133)
|
|
|
|
|
|
Fair value unwind and other items
|
(106)
|
|
|
8
|
|
|
(98)
|
|
|
(111)
|
|
|
|
|
|
Group – statutory
|
6,556
|
|
|
1,339
|
|
|
7,895
|
|
|
(602)
|
|
|
|
|
|
|
Net interest income
|
|
Other income, net of insurance claims
|
|
Total
income, net of insurance claims1
|
|
Profit (loss) before
tax
|
|
External income
|
|
Inter-segment income (expense)
|
Half-year
to 31 December 2020
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying basis
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
4,151
|
|
|
814
|
|
|
4,965
|
|
|
1,779
|
|
|
5,841
|
|
|
(876)
|
|
Commercial Banking
|
1,135
|
|
|
634
|
|
|
1,769
|
|
|
764
|
|
|
1,613
|
|
|
156
|
|
Insurance and Wealth
|
35
|
|
|
397
|
|
|
432
|
|
|
(41)
|
|
|
366
|
|
|
66
|
|
Other
|
(26)
|
|
|
209
|
|
|
183
|
|
|
(28)
|
|
|
(471)
|
|
|
654
|
|
Group
|
5,295
|
|
|
2,054
|
|
|
7,349
|
|
|
2,474
|
|
|
7,349
|
|
|
—
|
|
Reconciling items:
|
|
|
|
|
|
|
|
|
|
|
|
Insurance grossing adjustment
|
(982)
|
|
|
1,045
|
|
|
63
|
|
|
—
|
|
|
|
|
|
Market volatility and asset sales
|
(17)
|
|
|
(38)
|
|
|
(55)
|
|
|
(16)
|
|
|
|
|
|
Amortisation of purchased intangibles
|
—
|
|
|
—
|
|
|
—
|
|
|
(35)
|
|
|
|
|
|
Restructuring costs
|
—
|
|
|
(17)
|
|
|
(17)
|
|
|
(388)
|
|
|
|
|
|
Fair value unwind and other items
|
(103)
|
|
|
(6)
|
|
|
(109)
|
|
|
(122)
|
|
|
|
|
|
Payment protection insurance
|
—
|
|
|
—
|
|
|
—
|
|
|
(85)
|
|
|
|
|
|
Group – statutory
|
4,193
|
|
|
3,038
|
|
|
7,231
|
|
|
1,828
|
|
|
|
|
|
1
Total income, net
of insurance claims does not include operating lease depreciation
which, on a statutory basis, is included within operating
costs.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 3: Segmental analysis (continued)
|
Segment external assets
|
|
Segment customer deposits
|
|
Segment external liabilities
|
|
At
30 June 2021
|
|
At
31 Dec
2020
|
|
At
30 June 2021
|
|
At
31 Dec
2020
|
|
At
30 June 2021
|
|
At
31 Dec
2020
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
369,274
|
|
|
358,766
|
|
|
309,838
|
|
|
290,206
|
|
|
314,829
|
|
|
295,229
|
|
Commercial Banking
|
133,243
|
|
|
142,042
|
|
|
149,229
|
|
|
145,596
|
|
|
186,214
|
|
|
189,302
|
|
Insurance and Wealth
|
192,625
|
|
|
183,348
|
|
|
14,818
|
|
|
14,072
|
|
|
199,756
|
|
|
190,771
|
|
Other
|
184,545
|
|
|
187,113
|
|
|
8,464
|
|
|
10,194
|
|
|
127,002
|
|
|
146,554
|
|
Total Group
|
879,687
|
|
|
871,269
|
|
|
482,349
|
|
|
460,068
|
|
|
827,801
|
|
|
821,856
|
|
Note
4: Net fee and commission income
|
Half-year
to 30 June
2021
|
|
Half-year
to 30 June
2020
|
|
Half-year
to 31 Dec
2020
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
Fee and commission income:
|
|
|
|
|
|
Current
accounts
|
312
|
|
|
307
|
|
|
308
|
|
Credit
and debit card fees
|
384
|
|
|
350
|
|
|
398
|
|
Commercial
banking and treasury fees
|
215
|
|
|
120
|
|
|
154
|
|
Unit
trust and insurance broking
|
58
|
|
|
66
|
|
|
80
|
|
Factoring
|
38
|
|
|
42
|
|
|
34
|
|
Other
fees and commissions
|
287
|
|
|
236
|
|
|
213
|
|
Total fee and commission income
|
1,294
|
|
|
1,121
|
|
|
1,187
|
|
Fee and commission expense
|
(601)
|
|
|
(558)
|
|
|
(590)
|
|
Net fee and commission income
|
693
|
|
|
563
|
|
|
597
|
|
Current
account and credit and debit card fees principally arise in Retail;
commercial banking, treasury and factoring fees arise in Commercial
Banking; and unit trust and insurance broking fees arise in
Insurance and Wealth.
NOTES TO THE CONDENSED
CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS
(continued)
Note 5: Insurance claims
|
Half-year
to 30 June
2021
|
|
Half-year
to 30 June
2020
|
|
Half-year
to 31 Dec
2020
|
Insurance claims comprise:
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
Life insurance and investment contracts
|
|
|
|
|
|
Claims and surrenders
|
(4,465)
|
|
|
(3,647)
|
|
|
(4,023)
|
|
Change in insurance and participating investment
contracts
|
(4,395)
|
|
|
3,000
|
|
|
(7,590)
|
|
Change in non-participating investment contracts
|
(2,642)
|
|
|
1,574
|
|
|
(3,512)
|
|
|
(11,502)
|
|
|
927
|
|
|
(15,125)
|
|
Reinsurers' share
|
181
|
|
|
167
|
|
|
251
|
|
|
(11,321)
|
|
|
1,094
|
|
|
(14,874)
|
|
Change in unallocated surplus
|
(20)
|
|
|
85
|
|
|
(28)
|
|
Total life insurance and investment contracts
|
(11,341)
|
|
|
1,179
|
|
|
(14,902)
|
|
Non-life insurance
|
|
|
|
|
|
Total non-life insurance claims, net of reinsurance
|
(148)
|
|
|
(156)
|
|
|
(162)
|
|
Total insurance claims
|
(11,489)
|
|
|
1,023
|
|
|
(15,064)
|
|
Note 6: Operating
expenses
|
Half-year
to 30 June
2021
|
|
Half-year
to 30 June
2020
|
|
Half-year
to 31 Dec
2020
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
Salaries and social security costs
|
1,555
|
|
|
1,493
|
|
|
1,479
|
|
Pensions
and other post-retirement benefit schemes (note 14)
|
284
|
|
|
272
|
|
|
294
|
|
Restructuring and other staff costs
|
117
|
|
|
129
|
|
|
168
|
|
|
1,956
|
|
|
1,894
|
|
|
1,941
|
|
Premises and equipment
|
130
|
|
|
237
|
|
|
230
|
|
Other expenses:
|
|
|
|
|
|
IT,
data processing and communications
|
584
|
|
|
474
|
|
|
539
|
|
UK
bank levy
|
—
|
|
|
—
|
|
|
211
|
|
Operations,
marketing and other
|
559
|
|
|
488
|
|
|
531
|
|
|
1,143
|
|
|
962
|
|
|
1,281
|
|
Depreciation and amortisation
|
1,243
|
|
|
1,398
|
|
|
1,334
|
|
Goodwill impairment
|
—
|
|
|
—
|
|
|
4
|
|
Regulatory
provisions (note 15)
|
425
|
|
|
177
|
|
|
287
|
|
Total operating expenses
|
4,897
|
|
|
4,668
|
|
|
5,077
|
|
NOTES TO THE CONDENSED
CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS
(continued)
Note 7: Impairment
|
Half-year
to 30 June
2021
|
|
Half-year
to 30 June
2020
|
|
Half-year
to 31 Dec
2020
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
Impact of transfers between stages
|
145
|
|
|
1,263
|
|
|
206
|
|
Other changes in credit quality
|
(506)
|
|
|
2,111
|
|
|
216
|
|
Additions (repayments)
|
(366)
|
|
|
211
|
|
|
(14)
|
|
Methodology and model changes
|
3
|
|
|
44
|
|
|
108
|
|
Other items
|
1
|
|
|
200
|
|
|
(190)
|
|
|
(868)
|
|
|
2,566
|
|
|
120
|
|
Total impairment (credit) charge
|
(723)
|
|
|
3,829
|
|
|
326
|
|
|
|
|
|
|
|
In respect of:
|
|
|
|
|
|
Loans
and advances to banks
|
(3)
|
|
|
21
|
|
|
(16)
|
|
Loans
and advances to customers
|
(622)
|
|
|
3,464
|
|
|
386
|
|
Debt
securities
|
—
|
|
|
1
|
|
|
—
|
|
Financial assets held at amortised cost
|
(625)
|
|
|
3,486
|
|
|
370
|
|
Other assets
|
2
|
|
|
13
|
|
|
(8)
|
|
Impairment (credit) charge on drawn balances
|
(623)
|
|
|
3,499
|
|
|
362
|
|
Loan commitments and financial guarantees
|
(98)
|
|
|
324
|
|
|
(35)
|
|
Financial assets at fair value through other comprehensive
income
|
(2)
|
|
|
6
|
|
|
(1)
|
|
Total impairment (credit) charge
|
(723)
|
|
|
3,829
|
|
|
326
|
|
Total
impairment includes a release of £41 million (half-year to 30
June 2020: charge of £21 million; half-year to
31 December 2020: charge of £20 million) in respect
of residual value impairment and voluntary terminations within the
Group’s UK Motor Finance business.
The
Group’s impairment charge comprises the
following:
Impact of transfers between stages
The net
impact on the impairment charge of transfers between
stages.
Other changes in credit quality
Changes
in loss allowance as a result of movements in risk parameters that
reflect changes in customer credit quality, but which have not
resulted in a transfer to a different stage. This also contains the
impact on the impairment charge of write-offs and recoveries, where
the related loss allowances are reassessed to reflect the view of
credit quality at the balance sheet date and therefore the ultimate
realisable or recoverable value.
Additions (repayments)
Expected
loss allowances are recognised on origination of new loans or
further drawdowns of existing facilities. Repayments relate to the
reduction of loss allowances resulting from the repayment of
outstanding balances that have been provided against.
Methodology and model changes
Increase
or decrease in impairment charge as a result of adjustments to the
models used for expected credit loss calculations; either as
changes to the model inputs or to the underlying assumptions, as
well as the impact of changing the models used.
Other items
For the
half-year to 30 June 2020 a central adjustment of £200 million
was included to reflect the adjusted severe downside economic
scenario.
NOTES TO THE CONDENSED
CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS
(continued)
Note 8: Tax expense
In
accordance with IAS 34, the Group’s income tax expense for
the half-year to 30 June 2021 is based on the best estimate of the
weighted-average annual income tax rate expected for the full
financial year. The tax effects of one-off items are not included
in the weighted-average annual income tax rate, but are recognised
in the relevant period.
An
explanation of the relationship between tax expense and accounting
profit is set out below:
|
Half-year
to 30 June
2021
|
|
Half-year
to 30 June
2020
|
|
Half-year
to 31 Dec
2020
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
Profit (loss) before tax
|
3,905
|
|
|
(602)
|
|
|
1,828
|
|
UK
corporation tax thereon at 19 per cent (2020: 19 per
cent)
|
(742)
|
|
|
114
|
|
|
(347)
|
|
Impact of surcharge on banking profits
|
(229)
|
|
|
44
|
|
|
(151)
|
|
Non-deductible costs: conduct charges
|
(7)
|
|
|
(11)
|
|
|
(13)
|
|
Non-deductible costs: bank levy
|
—
|
|
|
—
|
|
|
(38)
|
|
Other non-deductible costs
|
(67)
|
|
|
(40)
|
|
|
(34)
|
|
Non-taxable income
|
35
|
|
|
76
|
|
|
(17)
|
|
Tax relief on coupons on other equity instruments
|
40
|
|
|
44
|
|
|
42
|
|
Tax-exempt gains on disposals
|
36
|
|
|
3
|
|
|
78
|
|
Tax losses where no deferred tax recognised
|
(9)
|
|
|
(1)
|
|
|
(57)
|
|
Remeasurement of deferred tax due to rate changes
|
970
|
|
|
354
|
|
|
(4)
|
|
Differences in overseas tax rates
|
(25)
|
|
|
13
|
|
|
2
|
|
Policyholder tax
|
(36)
|
|
|
(23)
|
|
|
(23)
|
|
Policyholder deferred tax asset in respect of life assurance
expenses
|
4
|
|
|
—
|
|
|
49
|
|
Adjustments in respect of prior years
|
(10)
|
|
|
48
|
|
|
56
|
|
Tax effect of share of results of joint ventures
|
—
|
|
|
—
|
|
|
(3)
|
|
Tax (expense) credit
|
(40)
|
|
|
621
|
|
|
(460)
|
|
The
Finance Act 2021, which was substantively enacted on 24 May 2021,
increases the rate of corporation tax from 19 per cent to 25 per
cent with effect from 1 April 2023. The impact of this rate change
is an increase in the Group’s net deferred tax asset as at 30
June 2021 of £786 million, comprising a £970 million
credit included in the income statement and a £184 million
charge included in equity. The tax credit in the half-year to 30
June 2020 included an uplift in deferred tax assets following the
announcement by the UK Government that it would maintain the
corporation tax rate at 19 per cent.
NOTES TO THE CONDENSED
CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS
(continued)
Note 9: Earnings per share
|
Half-year
to 30 June
2021
|
|
Half-year
to 30 June
2020
|
|
Half-year
to 31 Dec
2020
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
Profit (loss) attributable to ordinary shareholders – basic
and diluted
|
3,611
|
|
|
(234)
|
|
|
1,099
|
|
|
Half-year
to 30 June
2021
|
|
Half-year
to 30 June
2020
|
|
Half-year
to 31 Dec
2020
|
|
million
|
|
million
|
|
million
|
|
|
|
|
|
|
Weighted-average number of ordinary shares in issue –
basic
|
70,894
|
|
|
70,434
|
|
|
70,776
|
|
Adjustment for share options and awards
|
854
|
|
|
—
|
|
|
697
|
|
Weighted-average number of ordinary shares in issue –
diluted
|
71,748
|
|
|
70,434
|
|
|
71,473
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
5.1p
|
|
(0.3p)
|
|
1.5p
|
Diluted earnings (loss) per share
|
5.0p
|
|
(0.3p)
|
|
1.5p
|
Note 10: Financial assets
at fair value through profit or loss
|
At
30 June 2021
|
|
At
31 Dec
2020
|
|
£m
|
|
£m
|
|
|
|
|
Trading assets
|
17,772
|
|
|
20,825
|
|
|
|
|
|
Other financial assets at fair value through profit or
loss:
|
|
|
|
Treasury
and other bills
|
18
|
|
|
18
|
|
Loans
and advances to customers
|
10,354
|
|
|
11,244
|
|
Loans
and advances to banks
|
3,656
|
|
|
4,238
|
|
Debt
securities
|
39,021
|
|
|
38,852
|
|
Equity
shares
|
106,768
|
|
|
96,449
|
|
|
159,817
|
|
|
150,801
|
|
Total financial assets at fair value through profit or
loss
|
177,589
|
|
|
171,626
|
|
Included
in the above is £155,583 million (31 December 2020:
£145,905 million) of assets relating to the insurance
businesses.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 11: Derivative financial instruments
|
At 30 June 2021
|
|
At 31
December 2020
|
|
Fair value
of assets
|
|
Fair value
of liabilities
|
|
Fair value
of assets
|
|
Fair value
of liabilities
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
Hedging
|
|
|
|
|
|
|
|
Derivatives designated as fair value hedges
|
123
|
|
|
284
|
|
|
478
|
|
|
256
|
|
Derivatives designated as cash flow hedges
|
59
|
|
|
131
|
|
|
338
|
|
|
428
|
|
|
182
|
|
|
415
|
|
|
816
|
|
|
684
|
|
Trading
|
|
|
|
|
|
|
|
Exchange rate contracts
|
4,780
|
|
|
4,062
|
|
|
6,779
|
|
|
7,414
|
|
Interest rate contracts
|
16,700
|
|
|
12,653
|
|
|
21,644
|
|
|
18,564
|
|
Credit derivatives
|
101
|
|
|
206
|
|
|
108
|
|
|
174
|
|
Equity and other contracts
|
430
|
|
|
615
|
|
|
266
|
|
|
477
|
|
|
22,011
|
|
|
17,536
|
|
|
28,797
|
|
|
26,629
|
|
Total recognised derivative assets/liabilities
|
22,193
|
|
|
17,951
|
|
|
29,613
|
|
|
27,313
|
|
NOTES TO THE CONDENSED
CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS
(continued)
Note 12: Financial assets at amortised cost
Half-year to 30 June 2021
|
Gross carrying amount
|
|
Allowance for expected credit losses
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to banks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2021
|
10,752
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,752
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
Exchange and other adjustments
|
(139)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(139)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Additions (repayments)
|
201
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
201
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
Other changes in credit quality
|
|
|
|
|
|
|
|
|
|
|
(5)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5)
|
|
Credit to the income statement
|
|
|
|
|
|
|
|
|
|
|
(3)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3)
|
|
At 30 June 2021
|
10,814
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,814
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
Allowance for impairment losses
|
(3)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount
|
10,811
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to customers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2021
|
433,943
|
|
|
51,659
|
|
|
6,490
|
|
|
12,511
|
|
|
504,603
|
|
|
1,372
|
|
|
2,145
|
|
|
1,982
|
|
|
261
|
|
|
5,760
|
|
Exchange
and other adjustments1
|
(1,953)
|
|
|
(24)
|
|
|
(80)
|
|
|
51
|
|
|
(2,006)
|
|
|
1
|
|
|
(2)
|
|
|
97
|
|
|
67
|
|
|
163
|
|
Transfers to Stage 1
|
11,183
|
|
|
(11,175)
|
|
|
(8)
|
|
|
|
|
—
|
|
|
362
|
|
|
(360)
|
|
|
(2)
|
|
|
|
|
—
|
|
Transfers to Stage 2
|
(10,922)
|
|
|
11,371
|
|
|
(449)
|
|
|
|
|
—
|
|
|
(66)
|
|
|
158
|
|
|
(92)
|
|
|
|
|
—
|
|
Transfers to Stage 3
|
(334)
|
|
|
(1,229)
|
|
|
1,563
|
|
|
|
|
—
|
|
|
(9)
|
|
|
(175)
|
|
|
184
|
|
|
|
|
—
|
|
Impact of transfers between stages
|
(73)
|
|
|
(1,033)
|
|
|
1,106
|
|
|
|
|
—
|
|
|
(261)
|
|
|
257
|
|
|
164
|
|
|
|
|
160
|
|
|
|
|
|
|
|
|
|
|
|
|
26
|
|
|
(120)
|
|
|
254
|
|
|
|
|
160
|
|
Other changes in credit quality
|
|
|
|
|
|
|
|
|
|
|
(143)
|
|
|
(234)
|
|
|
31
|
|
|
(89)
|
|
|
(435)
|
|
Additions (repayments)
|
9,007
|
|
|
(4,568)
|
|
|
(801)
|
|
|
(663)
|
|
|
2,975
|
|
|
(65)
|
|
|
(176)
|
|
|
(73)
|
|
|
(36)
|
|
|
(350)
|
|
Methodology and model changes
|
|
|
|
|
|
|
|
|
|
|
(5)
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
3
|
|
(Credit) charge to the income statement
|
|
|
|
|
|
|
|
|
|
|
(187)
|
|
|
(522)
|
|
|
212
|
|
|
(125)
|
|
|
(622)
|
|
Advances written off
|
|
|
|
|
(603)
|
|
|
(13)
|
|
|
(616)
|
|
|
|
|
|
|
(603)
|
|
|
(13)
|
|
|
(616)
|
|
Recoveries of advances written off in previous years
|
|
|
|
|
72
|
|
|
—
|
|
|
72
|
|
|
|
|
|
|
72
|
|
|
—
|
|
|
72
|
|
Discount unwind
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(85)
|
|
|
—
|
|
|
(85)
|
|
At 30 June 2021
|
440,924
|
|
|
46,034
|
|
|
6,184
|
|
|
11,886
|
|
|
505,028
|
|
|
1,186
|
|
|
1,621
|
|
|
1,675
|
|
|
190
|
|
|
4,672
|
|
Allowance for impairment losses
|
(1,186)
|
|
|
(1,621)
|
|
|
(1,675)
|
|
|
(190)
|
|
|
(4,672)
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount
|
439,738
|
|
|
44,413
|
|
|
4,509
|
|
|
11,696
|
|
|
500,356
|
|
|
|
|
|
|
|
|
|
|
|
1.
Exchange and other
adjustments includes the impact of movements in exchange rates,
derecognising assets as a result of modifications and adjustments
in respect of purchased or originated credit-impaired financial
assets (POCI). Where a POCI asset’s expected credit loss is
less than its expected credit loss on purchase or origination, the
increase in its carrying value is recognised within gross loans,
rather than as a negative impairment allowance.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 12: Financial assets at amortised cost
(continued)
|
Gross carrying amount
|
|
Allowance for expected credit losses
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
Debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2021
|
5,406
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
5,408
|
|
|
1
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
3
|
|
Exchange and other adjustments
|
(47)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(47)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Additions (repayments)
|
(350)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(350)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Charge to the income statement
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
At 30 June 2021
|
5,009
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
5,011
|
|
|
1
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
3
|
|
Allowance for impairment losses
|
(1)
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount
|
5,008
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,008
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets at
amortised cost
|
455,557
|
|
|
44,413
|
|
|
4,509
|
|
|
11,696
|
|
|
516,175
|
|
|
|
|
|
|
|
|
|
|
|
The
total allowance for impairment losses includes £136 million
(31 December 2020: £192 million) in respect of residual value
impairment and voluntary terminations within the Group’s UK
Motor Finance business.
Movements
in UK retail mortgage balances were as follows:
|
Gross carrying amount
|
|
Allowance for expected credit losses
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
UK retail mortgages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2021
|
251,418
|
|
|
29,018
|
|
|
1,859
|
|
|
12,511
|
|
|
294,806
|
|
|
104
|
|
|
468
|
|
|
191
|
|
|
261
|
|
|
1,024
|
|
Exchange
and other adjustments1
|
—
|
|
|
—
|
|
|
—
|
|
|
51
|
|
|
51
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
67
|
|
|
67
|
|
Transfers to Stage 1
|
3,745
|
|
|
(3,742)
|
|
|
(3)
|
|
|
|
|
—
|
|
|
26
|
|
|
(26)
|
|
|
—
|
|
|
|
|
—
|
|
Transfers to Stage 2
|
(6,554)
|
|
|
6,847
|
|
|
(293)
|
|
|
|
|
—
|
|
|
(7)
|
|
|
26
|
|
|
(19)
|
|
|
|
|
—
|
|
Transfers to Stage 3
|
(28)
|
|
|
(666)
|
|
|
694
|
|
|
|
|
—
|
|
|
—
|
|
|
(29)
|
|
|
29
|
|
|
|
|
—
|
|
Impact of transfers between stages
|
(2,837)
|
|
|
2,439
|
|
|
398
|
|
|
|
|
—
|
|
|
(20)
|
|
|
62
|
|
|
26
|
|
|
|
|
68
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
|
33
|
|
|
36
|
|
|
|
|
68
|
|
Other changes in credit quality
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
(65)
|
|
|
(31)
|
|
|
(89)
|
|
|
(172)
|
|
Additions (repayments)
|
13,960
|
|
|
(1,687)
|
|
|
(322)
|
|
|
(663)
|
|
|
11,288
|
|
|
8
|
|
|
(25)
|
|
|
(20)
|
|
|
(36)
|
|
|
(73)
|
|
Charge (credit) to the income statement
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
(57)
|
|
|
(15)
|
|
|
(125)
|
|
|
(177)
|
|
Advances written off
|
|
|
|
|
(16)
|
|
|
(13)
|
|
|
(29)
|
|
|
|
|
|
|
(16)
|
|
|
(13)
|
|
|
(29)
|
|
Recoveries of advances written off in previous years
|
|
|
|
|
5
|
|
|
—
|
|
|
5
|
|
|
|
|
|
|
5
|
|
|
—
|
|
|
5
|
|
Discount unwind
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
—
|
|
|
10
|
|
At 30 June 2021
|
262,541
|
|
|
29,770
|
|
|
1,924
|
|
|
11,886
|
|
|
306,121
|
|
|
124
|
|
|
411
|
|
|
175
|
|
|
190
|
|
|
900
|
|
Allowance for impairment losses
|
(124)
|
|
|
(411)
|
|
|
(175)
|
|
|
(190)
|
|
|
(900)
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount
|
262,417
|
|
|
29,359
|
|
|
1,749
|
|
|
11,696
|
|
|
305,221
|
|
|
|
|
|
|
|
|
|
|
|
1
Exchange and other
adjustments includes the impact of movements in exchange rates,
derecognising assets as a result of modifications and adjustments
in respect of purchased or originated credit-impaired financial
assets. Where a POCI asset’s expected credit loss is less
than its expected credit loss on purchase or origination, the
increase in its carrying value is recognised within gross loans,
rather than as a negative impairment allowance.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 12: Financial assets at amortised cost
(continued)
Movements
in allowance for expected credit losses in respect of undrawn
balances were as follows:
|
|
|
|
|
|
|
|
|
|
|
Allowance for expected credit losses
|
|
|
|
|
|
|
|
|
|
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Undrawn balances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2021
|
|
|
|
|
|
|
|
|
|
|
212
|
|
|
234
|
|
|
13
|
|
|
—
|
|
|
459
|
|
Exchange and other adjustments
|
|
|
|
|
|
|
|
(2)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2)
|
|
Transfers to Stage 1
|
|
|
|
|
|
|
|
|
|
|
63
|
|
|
(63)
|
|
|
—
|
|
|
|
|
—
|
|
Transfers to Stage 2
|
|
|
|
|
|
|
|
|
|
|
(10)
|
|
|
10
|
|
|
—
|
|
|
|
|
—
|
|
Transfers to Stage 3
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
(4)
|
|
|
4
|
|
|
|
|
—
|
|
Impact of transfers between stages
|
|
|
|
|
|
|
|
(50)
|
|
|
35
|
|
|
—
|
|
|
|
|
(15)
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
(22)
|
|
|
4
|
|
|
|
|
(15)
|
|
Other items credited to the income statement
|
|
|
|
|
|
|
|
(41)
|
|
|
(33)
|
|
|
(9)
|
|
|
—
|
|
|
(83)
|
|
Credit to the income statement
|
|
|
|
|
|
|
|
(38)
|
|
|
(55)
|
|
|
(5)
|
|
|
—
|
|
|
(98)
|
|
At 30 June 2021
|
|
|
|
|
|
|
|
|
|
|
172
|
|
|
179
|
|
|
8
|
|
|
—
|
|
|
359
|
|
The
Group's total impairment allowances were as follows:
|
|
|
|
|
|
|
|
|
|
|
Allowance for expected credit losses
|
|
|
|
|
|
|
|
|
|
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In respect of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to banks
|
|
|
|
|
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
Loans and advances to customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK
retail mortgages
|
|
|
|
|
|
|
|
|
|
|
124
|
|
|
411
|
|
|
175
|
|
|
190
|
|
|
900
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
1,062
|
|
|
1,210
|
|
|
1,500
|
|
|
—
|
|
|
3,772
|
|
|
|
|
|
|
|
|
|
|
|
|
1,186
|
|
|
1,621
|
|
|
1,675
|
|
|
190
|
|
|
4,672
|
|
Debt securities
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
3
|
|
Financial assets at amortised cost
|
|
|
|
|
|
|
|
1,190
|
|
|
1,621
|
|
|
1,677
|
|
|
190
|
|
|
4,678
|
|
Other assets
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
|
21
|
|
|
—
|
|
|
21
|
|
Provisions in relation to loan commitments and financial
guarantees
|
|
|
|
172
|
|
|
179
|
|
|
8
|
|
|
—
|
|
|
359
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
1,362
|
|
|
1,800
|
|
|
1,706
|
|
|
190
|
|
|
5,058
|
|
Expected credit loss in respect of financial assets at fair value
through other comprehensive income (memorandum item)
|
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 12: Financial assets at amortised cost
(continued)
Year
ended 31 December 2020
|
Gross carrying amount
|
|
Allowance for expected credit losses
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to banks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2020
|
9,777
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,777
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
Exchange and other adjustments
|
50
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
50
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
Additions (repayments)
|
925
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
925
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Charge to the income statement
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
At 31 December 2020
|
10,752
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,752
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
Allowance for impairment losses
|
(6)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount
|
10,746
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to customers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2020
|
449,975
|
|
|
28,543
|
|
|
6,015
|
|
|
13,714
|
|
|
498,247
|
|
|
675
|
|
|
995
|
|
|
1,447
|
|
|
142
|
|
|
3,259
|
|
Exchange
and other adjustments1
|
1,308
|
|
|
(59)
|
|
|
(422)
|
|
|
(8)
|
|
|
819
|
|
|
—
|
|
|
(1)
|
|
|
54
|
|
|
21
|
|
|
74
|
|
Transfers to Stage 1
|
4,972
|
|
|
(4,956)
|
|
|
(16)
|
|
|
|
|
—
|
|
|
146
|
|
|
(143)
|
|
|
(3)
|
|
|
|
|
—
|
|
Transfers to Stage 2
|
(28,855)
|
|
|
29,467
|
|
|
(612)
|
|
|
|
|
—
|
|
|
(218)
|
|
|
268
|
|
|
(50)
|
|
|
|
|
—
|
|
Transfers to Stage 3
|
(1,633)
|
|
|
(2,031)
|
|
|
3,664
|
|
|
|
|
—
|
|
|
(9)
|
|
|
(156)
|
|
|
165
|
|
|
|
|
—
|
|
Impact of transfers between stages
|
(25,516)
|
|
|
22,480
|
|
|
3,036
|
|
|
|
|
—
|
|
|
(85)
|
|
|
883
|
|
|
569
|
|
|
|
|
1,367
|
|
|
|
|
|
|
|
|
|
|
|
|
(166)
|
|
|
852
|
|
|
681
|
|
|
|
|
1,367
|
|
Other changes in credit quality
|
|
|
|
|
|
|
|
|
|
|
857
|
|
|
(16)
|
|
|
1,196
|
|
|
167
|
|
|
2,204
|
|
Additions (repayments)
|
8,176
|
|
|
695
|
|
|
(802)
|
|
|
(1,156)
|
|
|
6,913
|
|
|
50
|
|
|
145
|
|
|
(38)
|
|
|
(30)
|
|
|
127
|
|
Methodology and model changes
|
|
|
|
|
|
|
|
|
|
|
(44)
|
|
|
170
|
|
|
26
|
|
|
—
|
|
|
152
|
|
Charge to the income statement
|
|
|
|
|
|
|
|
|
|
|
697
|
|
|
1,151
|
|
|
1,865
|
|
|
137
|
|
|
3,850
|
|
Advances written off
|
|
|
|
|
(1,587)
|
|
|
(39)
|
|
|
(1,626)
|
|
|
|
|
|
|
(1,587)
|
|
|
(39)
|
|
|
(1,626)
|
|
Recoveries of advances written off in previous years
|
|
|
|
|
250
|
|
|
—
|
|
|
250
|
|
|
|
|
|
|
250
|
|
|
—
|
|
|
250
|
|
Discount unwind
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(47)
|
|
|
—
|
|
|
(47)
|
|
At 31 December 2020
|
433,943
|
|
|
51,659
|
|
|
6,490
|
|
|
12,511
|
|
|
504,603
|
|
|
1,372
|
|
|
2,145
|
|
|
1,982
|
|
|
261
|
|
|
5,760
|
|
Allowance for impairment losses
|
(1,372)
|
|
|
(2,145)
|
|
|
(1,982)
|
|
|
(261)
|
|
|
(5,760)
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount
|
432,571
|
|
|
49,514
|
|
|
4,508
|
|
|
12,250
|
|
|
498,843
|
|
|
|
|
|
|
|
|
|
|
|
1
Exchange and other
adjustments includes the impact of movements in exchange rates,
derecognising assets as a result of modifications and adjustments
in respect of purchased or originated credit-impaired financial
assets. Where a POCI asset’s expected credit loss is less
than its expected credit loss on purchase or origination, the
increase in its carrying value is recognised within gross loans,
rather than as a negative impairment allowance.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 12: Financial assets at amortised cost
(continued)
|
Gross carrying amount
|
|
Allowance for expected credit losses
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2020
|
5,544
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
5,547
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
Exchange and other adjustments
|
(21)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(21)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Additions (repayments)
|
(117)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(117)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Charge to the income statement
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
Financial assets that have been written off during the
year
|
|
|
|
|
(1)
|
|
|
—
|
|
|
(1)
|
|
|
|
|
|
|
(1)
|
|
|
—
|
|
|
(1)
|
|
At 31 December 2020
|
5,406
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
5,408
|
|
|
1
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
3
|
|
Allowance for impairment losses
|
(1)
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount
|
5,405
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,405
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets at
amortised cost
|
448,722
|
|
|
49,514
|
|
|
4,508
|
|
|
12,250
|
|
|
514,994
|
|
|
|
|
|
|
|
|
|
|
|
Movements
in UK retail mortgage balances were as follows:
|
Gross carrying amount
|
|
Allowance for expected credit losses
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK retail mortgages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2020
|
257,043
|
|
|
16,935
|
|
|
1,506
|
|
|
13,714
|
|
|
289,198
|
|
|
23
|
|
|
281
|
|
|
122
|
|
|
142
|
|
|
568
|
|
Exchange
and other adjustments1
|
—
|
|
|
—
|
|
|
—
|
|
|
(8)
|
|
|
(8)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21
|
|
|
21
|
|
Transfers to Stage 1
|
2,418
|
|
|
(2,414)
|
|
|
(4)
|
|
|
|
|
—
|
|
|
17
|
|
|
(17)
|
|
|
—
|
|
|
|
|
—
|
|
Transfers to Stage 2
|
(16,463)
|
|
|
16,882
|
|
|
(419)
|
|
|
|
|
—
|
|
|
(4)
|
|
|
22
|
|
|
(18)
|
|
|
|
|
—
|
|
Transfers to Stage 3
|
(199)
|
|
|
(974)
|
|
|
1,173
|
|
|
|
|
—
|
|
|
—
|
|
|
(35)
|
|
|
35
|
|
|
|
|
—
|
|
Impact of transfers between stages
|
(14,244)
|
|
|
13,494
|
|
|
750
|
|
|
|
|
—
|
|
|
(15)
|
|
|
198
|
|
|
66
|
|
|
|
|
249
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
|
|
168
|
|
|
83
|
|
|
|
|
249
|
|
Other changes in credit quality
|
|
|
|
|
|
|
|
|
|
|
63
|
|
|
(26)
|
|
|
(23)
|
|
|
167
|
|
|
181
|
|
Additions (repayments)
|
8,619
|
|
|
(1,411)
|
|
|
(375)
|
|
|
(1,156)
|
|
|
5,677
|
|
|
14
|
|
|
(15)
|
|
|
(13)
|
|
|
(30)
|
|
|
(44)
|
|
Methodology and model changes
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
60
|
|
|
24
|
|
|
—
|
|
|
90
|
|
Charge to the income statement
|
|
|
|
|
|
|
|
|
|
|
81
|
|
|
187
|
|
|
71
|
|
|
137
|
|
|
476
|
|
Advances written off
|
|
|
|
|
(37)
|
|
|
(39)
|
|
|
(76)
|
|
|
|
|
|
|
(37)
|
|
|
(39)
|
|
|
(76)
|
|
Recoveries of advances written off in previous years
|
|
|
|
|
15
|
|
|
—
|
|
|
15
|
|
|
|
|
|
|
15
|
|
|
—
|
|
|
15
|
|
Discount unwind
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
—
|
|
|
20
|
|
At 31 December 2020
|
251,418
|
|
|
29,018
|
|
|
1,859
|
|
|
12,511
|
|
|
294,806
|
|
|
104
|
|
|
468
|
|
|
191
|
|
|
261
|
|
|
1,024
|
|
Allowance for impairment losses
|
(104)
|
|
|
(468)
|
|
|
(191)
|
|
|
(261)
|
|
|
(1,024)
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount
|
251,314
|
|
|
28,550
|
|
|
1,668
|
|
|
12,250
|
|
|
293,782
|
|
|
|
|
|
|
|
|
|
|
|
1
Exchange and other
adjustments includes the impact of movements in exchange rates,
derecognising assets as a result of modifications and adjustments
in respect of purchased or originated credit-impaired financial
assets. Where a POCI asset’s expected credit loss is less
than its expected credit loss on purchase or origination, the
increase in its carrying value is recognised within gross loans,
rather than as a negative impairment allowance.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 12: Financial assets at amortised cost
(continued)
Movements
in allowance for expected credit losses in respect of undrawn
balances were as follows:
|
|
|
|
|
|
|
|
|
|
|
Allowance for expected credit losses
|
|
|
|
|
|
|
|
|
|
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Undrawn balances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2020
|
|
|
|
|
|
|
|
|
|
|
95
|
|
|
77
|
|
|
5
|
|
|
—
|
|
|
177
|
|
Exchange and other adjustments
|
|
|
|
|
|
|
|
(6)
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
(7)
|
|
Transfers to Stage 1
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
(19)
|
|
|
—
|
|
|
|
|
—
|
|
Transfers to Stage 2
|
|
|
|
|
|
|
|
|
|
|
(11)
|
|
|
11
|
|
|
—
|
|
|
|
|
—
|
|
Transfers to Stage 3
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
|
(6)
|
|
|
7
|
|
|
|
|
—
|
|
Impact of transfers between stages
|
|
|
|
|
|
|
|
(10)
|
|
|
102
|
|
|
10
|
|
|
|
|
102
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
|
|
88
|
|
|
17
|
|
|
|
|
102
|
|
Other items charged to the income statement
|
|
|
|
|
|
|
|
126
|
|
|
70
|
|
|
(9)
|
|
|
—
|
|
|
187
|
|
Charge to the income statement
|
|
|
|
|
|
|
|
123
|
|
|
158
|
|
|
8
|
|
|
—
|
|
|
289
|
|
At 31 December 2020
|
|
|
|
|
|
|
|
|
|
|
212
|
|
|
234
|
|
|
13
|
|
|
—
|
|
|
459
|
|
The
Group's total impairment allowances were as follows:
|
|
|
|
|
|
|
|
|
|
|
Allowance for expected credit losses
|
|
|
|
|
|
|
|
|
|
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In respect of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to banks
|
|
|
|
|
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
Loans and advances to customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK
retail mortgages
|
|
|
|
|
|
|
|
|
|
|
104
|
|
|
468
|
|
|
191
|
|
|
261
|
|
|
1,024
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
1,268
|
|
|
1,677
|
|
|
1,791
|
|
|
—
|
|
|
4,736
|
|
|
|
|
|
|
|
|
|
|
|
|
1,372
|
|
|
2,145
|
|
|
1,982
|
|
|
261
|
|
|
5,760
|
|
Debt securities
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
3
|
|
Financial assets at amortised cost
|
|
|
|
|
|
|
|
1,379
|
|
|
2,145
|
|
|
1,984
|
|
|
261
|
|
|
5,769
|
|
Other assets
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
|
19
|
|
|
—
|
|
|
19
|
|
Provisions in relation to loan commitments and financial
guarantees
|
|
|
|
212
|
|
|
234
|
|
|
13
|
|
|
—
|
|
|
459
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
1,591
|
|
|
2,379
|
|
|
2,016
|
|
|
261
|
|
|
6,247
|
|
Expected credit loss in respect of financial assets at fair value
through other comprehensive income (memorandum item)
|
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
The
movement tables are compiled by comparing the position at the
reporting date to that at the beginning of the year.
Transfers
between stages are deemed to have taken place at the start of the
reporting period, with all other movements shown in the stage in
which the asset is held at the period end, with the exception of
those held within purchased or originated credit-impaired, which
are not transferable.
Additions
(repayments) comprise new loans originated and repayments of
outstanding balances throughout the reporting period. Loans which
are written off in the period are first transferred to Stage 3
before acquiring a full allowance and subsequent
write-off.
Loans
and advances to customers include advances securitised under the
Group's securitisation and covered bond programmes (see note
13).
NOTES
TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS
(continued)
Note 13: Debt securities in issue
|
At 30 June 2021
|
|
At 31
December 2020
|
|
At fair value through profit or loss
|
|
At
amortised
cost
|
|
Total
|
|
At fair value through profit or loss
|
|
At amortised cost
|
|
Total
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
Medium-term notes issued
|
6,818
|
|
|
40,423
|
|
|
47,241
|
|
|
6,783
|
|
|
42,621
|
|
|
49,404
|
|
Covered bonds
|
—
|
|
|
20,120
|
|
|
20,120
|
|
|
—
|
|
|
23,980
|
|
|
23,980
|
|
Certificates of deposit
|
—
|
|
|
4,225
|
|
|
4,225
|
|
|
—
|
|
|
7,998
|
|
|
7,998
|
|
Securitisation notes
|
38
|
|
|
4,093
|
|
|
4,131
|
|
|
45
|
|
|
4,406
|
|
|
4,451
|
|
Commercial paper
|
—
|
|
|
12,407
|
|
|
12,407
|
|
|
—
|
|
|
8,392
|
|
|
8,392
|
|
|
6,856
|
|
|
81,268
|
|
|
88,124
|
|
|
6,828
|
|
|
87,397
|
|
|
94,225
|
|
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 2021, external parties held £4,131 million (31
December 2020: £4,451 million) and the Group’s
subsidiaries held £27,038 million (31 December 2020:
£27,448 million) of total securitisation notes in issue
of £31,169 million (31 December 2020:
£31,899 million). The notes are secured on loans and
advances to customers and debt securities held at amortised cost
amounting to £33,752 million (31 December 2020:
£34,584 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 2021, external parties held £20,120 million (31
December 2020: £23,980 million) and the Group’s
subsidiaries held none (31 December 2020:
£100 million) of total covered bonds in issue of
£20,120 million (31 December 2020:
£24,080 million). The bonds are secured on certain loans
and advances to customers amounting to £31,698 million
(31 December 2020: £34,960 million) that have been
assigned to bankruptcy remote limited liability partnerships. These
loans are retained on the Group's balance sheet.
Cash
deposits of £4,674 million (31 December 2020:
£3,930 million) which support the debt securities issued
by the structured entities, the term advances related to covered
bonds and other legal obligations are held by the
Group.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 14: Retirement benefit obligations
The
Group’s post-retirement defined benefit scheme obligations
are comprised as follows:
|
At
30 June 2021
|
|
At
31 Dec
2020
|
|
£m
|
|
£m
|
|
|
|
|
Defined benefit pension schemes:
|
|
|
|
Fair
value of scheme assets
|
49,299
|
|
|
51,127
|
|
Present
value of funded obligations
|
(46,297)
|
|
|
(49,549)
|
|
Net pension scheme asset
|
3,002
|
|
|
1,578
|
|
Other post-retirement schemes
|
(102)
|
|
|
(109)
|
|
Net retirement benefit asset
|
2,900
|
|
|
1,469
|
|
|
|
|
|
Recognised on the balance sheet as:
|
|
|
|
Retirement
benefit assets
|
3,134
|
|
|
1,714
|
|
Retirement
benefit obligations
|
(234)
|
|
|
(245)
|
|
Net retirement benefit asset
|
2,900
|
|
|
1,469
|
|
Movements
in the Group’s net post-retirement defined benefit scheme
asset during the period were as follows:
|
£m
|
|
|
Asset
at 1 January 2021
|
1,469
|
|
Income statement charge
|
(122)
|
|
Employer contributions
|
949
|
|
Remeasurement
|
604
|
|
Asset at 30 June 2021
|
2,900
|
|
The
charge to the income statement in respect of pensions and other
post-retirement benefit schemes is comprised as
follows:
|
Half-year
to 30 June
2021
|
|
Half-year
to 30
June
2020
|
|
Half-year
to 31
Dec
2020
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
Defined benefit pension schemes
|
122
|
|
|
121
|
|
|
126
|
|
Defined contribution schemes
|
162
|
|
|
151
|
|
|
168
|
|
Total charge to the income statement
|
284
|
|
|
272
|
|
|
294
|
|
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 14: Retirement benefit obligations
(continued)
The
principal assumptions used in the valuations of the defined benefit
pension schemes were as follows:
|
At
30 June 2021
|
|
At
31 Dec
2020
|
|
%
|
|
%
|
|
|
|
|
Discount rate
|
1.93
|
|
|
1.44
|
|
Rate of inflation:
|
|
|
|
Retail
Price Index
|
3.10
|
|
|
2.80
|
|
Consumer
Price Index
|
2.70
|
|
|
2.41
|
|
Rate of salary increases
|
0.00
|
|
|
0.00
|
|
Weighted-average rate of increase for pensions in
payment
|
2.81
|
|
|
2.61
|
|
Note 15: Other
provisions
Provisions
for financial
commitments
and guarantees
|
|
Regulatory
provisions
|
|
Other
|
|
Total
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
At 1 January 2021
|
459
|
|
|
642
|
|
|
814
|
|
|
1,915
|
|
Exchange and other adjustments
|
(2)
|
|
|
(4)
|
|
|
(10)
|
|
|
(16)
|
|
Provisions applied
|
—
|
|
|
(398)
|
|
|
(152)
|
|
|
(550)
|
|
Charge for the period
|
(98)
|
|
|
425
|
|
|
82
|
|
|
409
|
|
At 30 June 2021
|
359
|
|
|
665
|
|
|
734
|
|
|
1,758
|
|
Regulatory provisions
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 in connection with its past conduct and claims
brought by or on behalf of current and former employees, customers,
investors and other third parties and is subject to legal
proceedings and other legal actions. Where significant, provisions
are held against the costs expected to be incurred in relation to
these matters and matters arising from related internal reviews.
During the half-year to 30 June 2021 the Group charged a further
£425 million in respect of legal actions and other regulatory
matters, including a charge of £91 million for the FCA fine in
relation to General Insurance renewals errors, a charge in respect
of HBOS Reading and charges for other legacy
programmes.
The
unutilised balance at 30 June 2021 was £665 million (31
December 2020: £642 million). The most significant items
are as follows.
Payment protection insurance (excluding MBNA)
The
Group has made provisions for PPI costs over a number of years
totalling £21,960 million. Good progress continues to be made
towards ensuring operational completeness, with the final
validation of information requests and complaints with third
parties at an advanced stage, ahead of an orderly programme close.
At 30 June 2021, a provision of £57 million remained
outstanding (excluding amounts related to MBNA), with total cash
payments of £144 million during the six months to 30 June
2021.
In
addition to the above provision, the Group continues to challenge
PPI litigation cases, with mainly administration costs and some
potential redress recognised within the first half regulatory
provisions.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 15: Other provisions (continued)
Payment protection insurance (MBNA)
As
announced in December 2016, the Group's exposure continues to
remain capped at £240 million under the terms of the MBNA sale
and purchase agreement. No additional charge has been made by MBNA
to its PPI provision in the half-year to 30 June 2021.
HBOS Reading – review
The
Group completed its compensation assessment for those within the
Customer Review in 2019 with more than £109 million of
compensation paid, in addition to £15 million for ex-gratia
payments and £6 million for the reimbursement of legal fees.
The Group is applying the recommendations from Sir Ross
Cranston’s review, issued in December 2019, including a
reassessment of direct and consequential losses by an independent
panel, an extension of debt relief and a wider definition of de
facto directors. Further details of the panel were announced on 3
April 2020 and the panel's full scope and methodology was published
on 7 July 2020. The panel’s stated objective is to consider
cases via a non-legalistic and fair process and to make their
decisions in a generous, fair and common-sense manner. Details of
an appeal process for the further assessments of debt relief and de
facto director status have also been announced.
In 2020
a charge of £159 million was recorded, bringing the lifetime
cost to £435 million, covering both compensation payments and
operational costs.
In the
half-year to 30 June 2021 the Group has continued to make progress
assessing further debt relief and de facto director status claims
and has now completed 99 per cent of preliminary assessments. The
independent panel has also started to issue its first
outcomes.
The
Group has charged £150 million in the half-year to 30
June 2021 for the independent panel and Dame Linda Dobbs review of
the Group’s handling of HBOS Reading between January 2009 and
January 2017. A significant part of this charge relates to the
actual and foreseeable future operational costs of these activities
which are both now expected to extend into 2022, in addition to
awards from the independent panel to date. The first half charge
increases the lifetime cost to £585 million. The panel is
continuing its assessment of awards which could result in further
significant charges over 2021 and 2022 but it is not possible to
reliably estimate the potential impact or timings at this stage.
The Group is committed to implementing Sir Ross's recommendations
in full.
Arrears handling related activities
To date
the Group has provided a total of £1,017 million for arrears
handling activities; the unutilised balance at 30 June 2021 was
£38 million.
Customer claims in relation to insurance branch business in
Germany
The
Group continues to receive claims from customers in Germany
relating to policies issued by Clerical Medical Investment Group
Limited (subsequently renamed Scottish Widows Limited), with
smaller numbers of claims received from customers in Austria and
Italy. The Group provided a further £21 million in the
half-year to 30 June 2021, bringing the total provided to date to
£695 million (31 December 2020: £674 million);
utilisation of the provision was £22 million in the half-year
to 30 June 2021 (year ended 31 December 2020: £28
million); the remaining unutilised provision as at 30 June 2021 was
£92 million (31 December 2020: £93 million). The
ultimate financial effect, which could be significantly different
from the current provision, will be known only once all relevant
claims have been resolved.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 16: Contingent liabilities, commitments and
guarantees
Interchange fees
With
respect to multi-lateral interchange fees (MIFs), the Group is not
involved in the ongoing litigation which involves the card schemes
Visa and Mastercard (as described below). However, the Group is a
member/licensee of Visa and Mastercard and other card schemes. The
litigation in question is as follows:
1
litigation brought
by retailers against both Visa and Mastercard continues in the
English Courts in which retailers are seeking damages on grounds
that Visa and Mastercard’s MIFs breached competition law
(this includes a judgment of the Supreme Court in June 2020
upholding the Court of Appeal's finding in 2018 that historic
interchange arrangements of Mastercard and Visa infringed
competition law); and
2
litigation brought
on behalf of UK consumers in the English Courts against Mastercard,
which the Supreme Court has now confirmed can proceed in the lower
courts.
Any
impact on the Group of the litigation against Visa and Mastercard
remains uncertain at this time, such that it is not practicable for
the Group to provide an estimate of any potential financial effect.
Insofar as Visa is required to pay damages to retailers for
interchange fees set prior to June 2016, contractual arrangements
to allocate liability have been agreed between various UK banks
(including the Group) and Visa Inc, as part of Visa Inc’s
acquisition of Visa Europe in 2016. These arrangements cap the
maximum amount of liability to which the Group may be subject and
this cap is set at the cash consideration received by the Group for
the sale of its stake in Visa Europe to Visa Inc in 2016. In 2016,
the Group received Visa preference stock as part of the
consideration for the sale of its shares in Visa Europe. In 2020,
some of these Visa preference shares were converted into Visa Inc
Class A common stock (in accordance with the provisions of the Visa
Europe sale documentation) and they were subsequently sold by the
Group. The sale had no impact on this contingent
liability.
LIBOR and other trading rates
Certain
Group companies, together with other panel banks, have 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
London Interbank Offered Rate and the Australian BBSW reference
rate. Certain of the plaintiffs' claims have been dismissed by the
US Federal Court for the Southern District of New York (subject to
appeals).
Certain
Group companies are also named as defendants in (i) UK based claims
and; (ii) two Dutch class actions, raising LIBOR manipulation
allegations. A number of the claims against the Group in the UK
relating to the alleged mis-sale of interest rate hedging products
also include allegations of LIBOR manipulation.
The
Swiss Competition Commission concluded its investigation against
Lloyds Bank plc in June 2019.
It is
currently not possible to predict the scope and ultimate outcome on
the Group of 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. As such, it is not
practicable to provide an estimate of any potential financial
effect.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 16: Contingent liabilities, commitments and guarantees
(continued)
Tax authorities
The
Group has an open matter in relation to a claim for group relief of
losses incurred in its former Irish banking subsidiary, which
ceased trading on 31 December 2010. In 2013, HMRC informed the
Group that its interpretation of the UK rules means that the group
relief is not available. In 2020, HMRC concluded their enquiry into
the matter and issued a closure notice. The Group's interpretation
of the UK rules has not changed and hence it has appealed to the
First Tier Tax Tribunal, with a hearing expected in early 2022. If
the final determination of the matter by the judicial process is
that HMRC’s position is correct, management estimate that
this would result in an increase in current tax liabilities of
approximately £835 million (including interest) and a
reduction in the Group’s deferred tax asset of approximately
£330 million. The Group, having taken appropriate advice,
does not consider that this is a case where additional tax will
ultimately fall due.
There
are a number of other open matters on which the Group is in
discussions with HMRC (including the tax treatment of certain costs
arising from the divestment of TSB Banking Group plc), none of
which is expected to have a material impact on the financial
position of the Group.
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. Where material, such matters are periodically
reassessed, with the assistance of external professional advisers
where appropriate, to determine the likelihood of the Group
incurring a liability. 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 to properly
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. Where there is a
contingent liability related to an existing provision the relevant
disclosures are included within note 15.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 16: Contingent liabilities, commitments and guarantees
(continued)
Contingent liabilities, commitments and guarantees arising from the
banking business
|
At
30 June 2021
|
|
At
31 Dec
2020
|
|
£m
|
|
£m
|
|
|
|
|
Contingent liabilities
|
|
|
|
Acceptances and endorsements
|
157
|
|
|
131
|
|
Other:
|
|
|
|
Other
items serving as direct credit substitutes
|
513
|
|
|
317
|
|
Performance
bonds, including letters of credit, and other transaction-related
contingencies
|
1,994
|
|
|
2,105
|
|
|
2,507
|
|
|
2,422
|
|
Total contingent liabilities
|
2,664
|
|
|
2,553
|
|
|
|
|
|
Commitments and guarantees
|
|
|
|
Documentary credits and other short-term trade-related
transactions
|
1
|
|
|
1
|
|
Forward asset purchases and forward deposits placed
|
74
|
|
|
127
|
|
|
|
|
|
Undrawn formal standby facilities, credit lines and other
commitments to lend:
|
|
|
|
Less than 1 year original maturity:
|
|
|
|
Mortgage
offers made
|
16,740
|
|
|
20,179
|
|
Other
commitments and guarantees
|
89,944
|
|
|
89,269
|
|
|
106,684
|
|
|
109,448
|
|
1 year or over original maturity
|
33,642
|
|
|
38,299
|
|
Total commitments and guarantees
|
140,401
|
|
|
147,875
|
|
Of the
amounts shown above in respect of undrawn formal standby
facilities, credit lines and other commitments to lend,
£66,731 million (31 December 2020: £73,962 million)
was irrevocable.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 17: 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 48 to the Group’s 2020
financial statements details 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 sources of data cease to be observable.
Valuation methodology
For
level 2 and level 3 portfolios, there is no significant change to
the valuation methodology (techniques and inputs) disclosed in the
Group’s 2020 Annual Report and Accounts applied to these
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.
|
At 30 June 2021
|
|
At 31
December 2020
|
|
Carrying
value
|
|
Fair
value
|
|
Carrying
value
|
|
Fair
value
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
Financial assets
|
|
|
|
|
|
|
|
Loans and advances to banks
|
10,811
|
|
|
10,812
|
|
|
10,746
|
|
|
10,745
|
|
Loans and advances to customers
|
500,356
|
|
|
501,187
|
|
|
498,843
|
|
|
498,255
|
|
Debt securities
|
5,008
|
|
|
5,001
|
|
|
5,405
|
|
|
5,398
|
|
Financial assets at amortised cost
|
516,175
|
|
|
517,000
|
|
|
514,994
|
|
|
514,398
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
Deposits from banks
|
20,655
|
|
|
20,656
|
|
|
31,465
|
|
|
31,468
|
|
Customer deposits
|
482,349
|
|
|
482,513
|
|
|
460,068
|
|
|
460,338
|
|
Debt securities in issue
|
81,268
|
|
|
85,363
|
|
|
87,397
|
|
|
93,152
|
|
Liabilities arising from non-participating investment
contracts
|
42,031
|
|
|
42,031
|
|
|
38,452
|
|
|
38,452
|
|
Subordinated liabilities
|
13,527
|
|
|
15,628
|
|
|
14,261
|
|
|
16,410
|
|
Financial
instruments classified as financial assets at fair value through
profit or loss, derivative financial instruments, financial assets
at fair value through other comprehensive income, assets arising
from contracts held with reinsurers and financial liabilities at
fair value through profit or loss are recognised at fair
value.
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. Fair
values have not been disclosed for discretionary participating
investment contracts. There is currently no agreed definition of
fair valuation for discretionary participation features applied
under IFRS and therefore the range of possible fair values of these
contracts cannot be measured reliably.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 17: Fair values of financial assets and liabilities
(continued)
The
Group manages valuation adjustments for its derivative exposures on
a net basis; the Group determines their fair values on the basis of
their net exposures. In all other cases, fair values of financial
assets and liabilities measured at fair value are determined on the
basis of their gross exposures.
The
following tables provide an analysis of the financial assets and
liabilities of the Group that are carried at fair value in the
Group’s consolidated balance sheet, grouped into levels 1 to
3 based on the degree to which the fair value is observable. There
were no significant transfers between level 1 and level 2 during
the period.
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Financial assets
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
At 30 June 2021
|
|
|
|
|
|
|
|
Financial assets at fair value through profit or loss:
|
|
|
|
|
|
|
|
Loans
and advances to customers
|
—
|
|
|
12,676
|
|
|
9,844
|
|
|
22,520
|
|
Loans
and advances to banks
|
—
|
|
|
3,818
|
|
|
—
|
|
|
3,818
|
|
Debt
securities
|
16,427
|
|
|
26,330
|
|
|
1,708
|
|
|
44,465
|
|
Treasury
and other bills
|
18
|
|
|
—
|
|
|
—
|
|
|
18
|
|
Equity
shares
|
104,960
|
|
|
100
|
|
|
1,708
|
|
|
106,768
|
|
Financial assets at fair value through profit or loss
|
121,405
|
|
|
42,924
|
|
|
13,260
|
|
|
177,589
|
|
Assets arising from contracts held with reinsurers
|
—
|
|
|
19,102
|
|
|
—
|
|
|
19,102
|
|
Total financial assets at fair value through profit or
loss
|
121,405
|
|
|
62,026
|
|
|
13,260
|
|
|
196,691
|
|
Financial assets at fair value through other comprehensive
income:
|
|
|
|
|
|
|
|
Debt
securities
|
12,609
|
|
|
13,205
|
|
|
167
|
|
|
25,981
|
|
Treasury
and other bills
|
25
|
|
|
—
|
|
|
—
|
|
|
25
|
|
Equity
shares
|
—
|
|
|
—
|
|
|
207
|
|
|
207
|
|
Total financial assets at fair value through other comprehensive
income
|
12,634
|
|
|
13,205
|
|
|
374
|
|
|
26,213
|
|
Derivative financial instruments
|
33
|
|
|
21,092
|
|
|
1,068
|
|
|
22,193
|
|
Total financial assets carried at fair value
|
134,072
|
|
|
96,323
|
|
|
14,702
|
|
|
245,097
|
|
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 17: Fair values of financial assets and liabilities
(continued)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Financial assets
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
At 31
December 2020
|
|
|
|
|
|
|
|
Financial assets at fair value through profit or loss:
|
|
|
|
|
|
|
|
Loans
and advances to customers
|
—
|
|
|
12,508
|
|
|
11,501
|
|
|
24,009
|
|
Loans
and advances to banks
|
—
|
|
|
4,467
|
|
|
—
|
|
|
4,467
|
|
Debt
securities
|
20,376
|
|
|
24,353
|
|
|
1,954
|
|
|
46,683
|
|
Treasury
and other bills
|
18
|
|
|
—
|
|
|
—
|
|
|
18
|
|
Equity
shares
|
94,687
|
|
|
171
|
|
|
1,591
|
|
|
96,449
|
|
Financial assets at fair value through profit or loss
|
115,081
|
|
|
41,499
|
|
|
15,046
|
|
|
171,626
|
|
Assets arising from contracts held with reinsurers
|
—
|
|
|
19,543
|
|
|
—
|
|
|
19,543
|
|
Total financial assets at fair value through profit or
loss
|
115,081
|
|
|
61,042
|
|
|
15,046
|
|
|
191,169
|
|
Financial assets at fair value through other comprehensive
income:
|
|
|
|
|
|
|
|
Debt
securities
|
14,784
|
|
|
12,437
|
|
|
180
|
|
|
27,401
|
|
Treasury
and other bills
|
36
|
|
|
—
|
|
|
—
|
|
|
36
|
|
Equity
shares
|
—
|
|
|
—
|
|
|
166
|
|
|
166
|
|
Total financial assets at fair value through other comprehensive
income
|
14,820
|
|
|
12,437
|
|
|
346
|
|
|
27,603
|
|
Derivative financial instruments
|
60
|
|
|
28,572
|
|
|
981
|
|
|
29,613
|
|
Total financial assets carried at fair value
|
129,961
|
|
|
102,051
|
|
|
16,373
|
|
|
248,385
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Financial liabilities
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
At 30 June 2021
|
|
|
|
|
|
|
|
Financial liabilities at fair value through profit or
loss:
|
|
|
|
|
|
|
|
Liabilities
designated at fair value through profit or loss
|
—
|
|
|
6,818
|
|
|
39
|
|
|
6,857
|
|
Trading
liabilities
|
1,072
|
|
|
13,125
|
|
|
—
|
|
|
14,197
|
|
Total financial liabilities at fair value through profit or
loss
|
1,072
|
|
|
19,943
|
|
|
39
|
|
|
21,054
|
|
Derivative financial instruments
|
56
|
|
|
16,626
|
|
|
1,269
|
|
|
17,951
|
|
Total financial liabilities carried at fair value
|
1,128
|
|
|
36,569
|
|
|
1,308
|
|
|
39,005
|
|
|
|
|
|
|
|
|
|
At 31
December 2020
|
|
|
|
|
|
|
|
Financial liabilities at fair value through profit or
loss:
|
|
|
|
|
|
|
|
Liabilities
designated at fair value through profit or loss
|
—
|
|
|
6,783
|
|
|
45
|
|
|
6,828
|
|
Trading
liabilities
|
778
|
|
|
15,040
|
|
|
—
|
|
|
15,818
|
|
Total financial liabilities at fair value through profit or
loss
|
778
|
|
|
21,823
|
|
|
45
|
|
|
22,646
|
|
Derivative financial instruments
|
56
|
|
|
25,883
|
|
|
1,374
|
|
|
27,313
|
|
Total financial liabilities carried at fair value
|
834
|
|
|
47,706
|
|
|
1,419
|
|
|
49,959
|
|
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 17: 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.
|
Financial assets at fair value through profit or loss
|
|
Financial assets at fair value through other comprehensive
income
|
|
Derivative assets
|
|
Total financial assets carried at fair value
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
At 1
January 2021
|
15,046
|
|
|
346
|
|
|
981
|
|
|
16,373
|
|
Exchange and other adjustments
|
(16)
|
|
|
(7)
|
|
|
3
|
|
|
(20)
|
|
Losses recognised in the income statement within other
income
|
(135)
|
|
|
—
|
|
|
(154)
|
|
|
(289)
|
|
Gains recognised in other comprehensive income within the
revaluation reserve in respect of financial assets at fair value
through other comprehensive income
|
—
|
|
|
43
|
|
|
—
|
|
|
43
|
|
Purchases/increases to customer loans
|
644
|
|
|
—
|
|
|
302
|
|
|
946
|
|
Sales/repayments of customer loans
|
(1,520)
|
|
|
(8)
|
|
|
(64)
|
|
|
(1,592)
|
|
Transfers into the level 3 portfolio
|
19
|
|
|
—
|
|
|
—
|
|
|
19
|
|
Transfers out of the level 3 portfolio
|
(778)
|
|
|
—
|
|
|
—
|
|
|
(778)
|
|
At 30 June 2021
|
13,260
|
|
|
374
|
|
|
1,068
|
|
|
14,702
|
|
Losses
recognised in the income statement, within other income, relating
to the change in fair value of those assets held at 30 June
2021
|
(187)
|
|
|
—
|
|
|
(156)
|
|
|
(343)
|
|
|
|
|
|
|
|
|
|
At 1
January 2020
|
14,908
|
|
|
408
|
|
|
863
|
|
|
16,179
|
|
Exchange and other adjustments
|
106
|
|
|
11
|
|
|
19
|
|
|
136
|
|
Gains recognised in the income statement within other
income
|
135
|
|
|
—
|
|
|
124
|
|
|
259
|
|
Losses recognised in other comprehensive income within the
revaluation reserve in respect of financial assets at fair value
through other comprehensive income
|
—
|
|
|
(67)
|
|
|
—
|
|
|
(67)
|
|
Purchases/increases to customer loans
|
851
|
|
|
—
|
|
|
2
|
|
|
853
|
|
Sales/repayments of customer loans
|
(839)
|
|
|
(7)
|
|
|
(81)
|
|
|
(927)
|
|
Transfers into the level 3 portfolio
|
73
|
|
|
—
|
|
|
41
|
|
|
114
|
|
Transfers out of the level 3 portfolio
|
(247)
|
|
|
—
|
|
|
(84)
|
|
|
(331)
|
|
At 30
June 2020
|
14,987
|
|
|
345
|
|
|
884
|
|
|
16,216
|
|
Gains
recognised in the income statement, within other income, relating
to the change in fair value of those assets held at 30 June
2020
|
141
|
|
|
—
|
|
|
132
|
|
|
273
|
|
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 17: Fair values of financial assets and liabilities
(continued)
The
tables below analyse movements in the level 3 financial liabilities
portfolio.
|
Financial liabilities at fair value through profit or
loss
|
|
Derivative liabilities
|
|
Total
financial liabilities carried at
fair value
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
At 1
January 2021
|
45
|
|
|
1,374
|
|
|
1,419
|
|
Exchange and other adjustments
|
—
|
|
|
3
|
|
|
3
|
|
Gains recognised in the income statement within other
income
|
(2)
|
|
|
(247)
|
|
|
(249)
|
|
Additions
|
1
|
|
|
201
|
|
|
202
|
|
Redemptions
|
(5)
|
|
|
(19)
|
|
|
(24)
|
|
Transfers into the level 3 portfolio
|
—
|
|
|
—
|
|
|
—
|
|
Transfers out of the level 3 portfolio
|
—
|
|
|
(43)
|
|
|
(43)
|
|
At 30 June 2021
|
39
|
|
|
1,269
|
|
|
1,308
|
|
Gains
recognised in the income statement, within other income, relating
to the change in fair value of those liabilities held at 30 June
2021
|
(2)
|
|
|
(244)
|
|
|
(246)
|
|
|
|
|
|
|
|
At 1
January 2020
|
48
|
|
|
1,367
|
|
|
1,415
|
|
Exchange and other adjustments
|
—
|
|
|
20
|
|
|
20
|
|
Losses recognised in the income statement within other
income
|
1
|
|
|
194
|
|
|
195
|
|
Additions
|
—
|
|
|
2
|
|
|
2
|
|
Redemptions
|
(2)
|
|
|
(8)
|
|
|
(10)
|
|
Transfers into the level 3 portfolio
|
—
|
|
|
51
|
|
|
51
|
|
Transfers out of the level 3 portfolio
|
—
|
|
|
(159)
|
|
|
(159)
|
|
At 30
June 2020
|
47
|
|
|
1,467
|
|
|
1,514
|
|
Losses
recognised in the income statement, within other income, relating
to the change in fair value of those liabilities held at 30 June
2020
|
—
|
|
|
195
|
|
|
195
|
|
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 17: 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 2021
|
|
|
|
|
Effect of reasonably
possible alternative
assumptions2
|
|
Valuation techniques
|
Significant unobservable inputs1
|
Carrying value
|
Favourable changes
|
Unfavourable
changes
|
|
|
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
Financial assets at fair value through profit or loss
|
|
|
|
|
Loans and advances to customers
|
Discounted cash flows
|
Interest
rate spreads (-50bps/+191bps)
|
9,844
|
|
514
|
|
(498)
|
|
Equity and venture capital investments
|
Market approach
|
Earnings
multiple (0.3/14.4)
|
1,682
|
|
143
|
|
(143)
|
|
Equity and venture capital investments
|
Underlying
asset/net asset value
(incl.
property prices)3
|
n/a
|
795
|
|
111
|
|
(123)
|
|
Unlisted equities, debt securities and property partnerships in the
life funds
|
Underlying
asset/net asset value
(incl.
property prices)3
|
n/a
|
743
|
|
7
|
|
(21)
|
|
Other
|
|
|
196
|
|
9
|
|
(9)
|
|
|
|
|
13,260
|
|
|
|
Financial assets at fair value through other comprehensive
income
|
|
374
|
|
|
|
Derivative financial assets
|
|
|
|
|
|
Interest rate derivatives
|
Option pricing model
|
Interest
rate volatility (8%/124%)
|
1,068
|
|
6
|
|
(14)
|
|
|
|
|
1,068
|
|
|
|
Level 3 financial assets carried at fair value
|
|
14,702
|
|
|
|
|
|
|
|
|
|
Financial liabilities at fair value through profit or
loss
|
39
|
|
|
|
Derivative financial liabilities
|
|
|
|
|
|
Interest rate derivatives
|
Option pricing model
|
Interest
rate volatility (8%/124%)
|
1,269
|
|
—
|
|
—
|
|
|
|
|
1,269
|
|
|
|
Level 3 financial liabilities carried at fair value
|
|
1,308
|
|
|
|
1
Ranges are shown
where appropriate and represent the highest and lowest inputs used
in the level 3 valuations.
2
Where the exposure
to an unobservable input is managed on a net basis, only the net
impact is shown in the table.
3
Underlying
asset/net asset values represent fair value.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 17: Fair values of financial assets and liabilities
(continued)
|
|
|
At 31
December 2020
|
|
|
|
|
Effect
of reasonably
possible
alternative
assumptions2
|
|
Valuation
techniques
|
Significant
unobservable inputs1
|
Carrying value
|
Favourable changes
|
Unfavourable changes
|
|
|
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
Financial assets at fair value through profit or loss
|
|
|
|
Loans and advances to customers
|
Discounted cash flows
|
Interest
rate spreads (-50bps/+215bps)
|
11,501
|
|
528
|
|
(651)
|
|
Equity and venture capital investments
|
Market approach
|
Earnings
multiple (1.0/15.2)
|
1,905
|
|
72
|
|
(72)
|
|
Equity and venture capital investments
|
Underlying
asset/net asset value
(incl.
property prices)3
|
n/a
|
634
|
|
91
|
|
(121)
|
|
Unlisted equities, debt securities and property partnerships in the
life funds
|
Underlying
asset/net asset value
(incl.
property prices)3
|
n/a
|
780
|
|
6
|
|
(34)
|
|
Other
|
|
|
226
|
|
10
|
|
(10)
|
|
|
|
|
15,046
|
|
|
|
Financial assets at fair value through other comprehensive
income
|
|
346
|
|
|
|
Derivative financial assets
|
|
|
|
|
|
Interest rate derivatives
|
Option pricing model
|
Interest
rate volatility (13%/128%)
|
981
|
|
8
|
|
(6)
|
|
|
|
|
981
|
|
|
|
Level 3
financial assets carried at fair value
|
|
16,373
|
|
|
|
|
|
|
|
|
|
Financial liabilities at fair value through profit or
loss
|
45
|
|
|
|
Derivative financial liabilities
|
|
|
|
|
|
Interest rate derivatives
|
Option pricing model
|
Interest
rate volatility (13%/128%)
|
1,374
|
|
—
|
|
—
|
|
|
|
|
1,374
|
|
|
|
Level 3
financial liabilities carried at fair value
|
|
1,419
|
|
|
|
1
Ranges are shown
where appropriate and represent the highest and lowest inputs used
in the level 3 valuations.
2
Where the exposure
to an unobservable input is managed on a net basis, only the net
impact is shown in the table.
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 2020 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 note 48 to the Group’s 2020 financial
statements.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 18: Credit quality of loans and advances to banks and
customers
Gross drawn exposures and expected credit loss
allowances
|
Drawn exposures
|
|
Expected credit loss allowance
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 June 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to banks:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMS 1-10
|
10,804
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,804
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
CMS 11-14
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
CMS 15-18
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
CMS 19
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
CMS 20-23
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,814
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,814
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail - UK Mortgages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMS 1-6
|
262,472
|
|
|
22,374
|
|
|
—
|
|
|
—
|
|
|
284,846
|
|
|
123
|
|
|
234
|
|
|
—
|
|
|
—
|
|
|
357
|
|
RMS 7-9
|
69
|
|
|
4,022
|
|
|
—
|
|
|
—
|
|
|
4,091
|
|
|
1
|
|
|
59
|
|
|
—
|
|
|
—
|
|
|
60
|
|
RMS 10
|
—
|
|
|
918
|
|
|
—
|
|
|
—
|
|
|
918
|
|
|
—
|
|
|
23
|
|
|
—
|
|
|
—
|
|
|
23
|
|
RMS 11-13
|
—
|
|
|
2,456
|
|
|
—
|
|
|
—
|
|
|
2,456
|
|
|
—
|
|
|
95
|
|
|
—
|
|
|
—
|
|
|
95
|
|
RMS 14
|
—
|
|
|
—
|
|
|
1,924
|
|
|
11,886
|
|
|
13,810
|
|
|
—
|
|
|
—
|
|
|
175
|
|
|
190
|
|
|
365
|
|
|
262,541
|
|
|
29,770
|
|
|
1,924
|
|
|
11,886
|
|
|
306,121
|
|
|
124
|
|
|
411
|
|
|
175
|
|
|
190
|
|
|
900
|
|
Retail - credit cards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMS 1-6
|
9,032
|
|
|
1,124
|
|
|
—
|
|
|
—
|
|
|
10,156
|
|
|
61
|
|
|
46
|
|
|
—
|
|
|
—
|
|
|
107
|
|
RMS 7-9
|
1,720
|
|
|
1,028
|
|
|
—
|
|
|
—
|
|
|
2,748
|
|
|
60
|
|
|
115
|
|
|
—
|
|
|
—
|
|
|
175
|
|
RMS 10
|
150
|
|
|
317
|
|
|
—
|
|
|
—
|
|
|
467
|
|
|
6
|
|
|
60
|
|
|
—
|
|
|
—
|
|
|
66
|
|
RMS 11-13
|
54
|
|
|
467
|
|
|
—
|
|
|
—
|
|
|
521
|
|
|
—
|
|
|
169
|
|
|
—
|
|
|
—
|
|
|
169
|
|
RMS 14
|
—
|
|
|
—
|
|
|
323
|
|
|
—
|
|
|
323
|
|
|
—
|
|
|
—
|
|
|
140
|
|
|
—
|
|
|
140
|
|
|
10,956
|
|
|
2,936
|
|
|
323
|
|
|
—
|
|
|
14,215
|
|
|
127
|
|
|
390
|
|
|
140
|
|
|
—
|
|
|
657
|
|
Retail - loans and overdrafts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMS 1-6
|
5,991
|
|
|
398
|
|
|
—
|
|
|
—
|
|
|
6,389
|
|
|
73
|
|
|
19
|
|
|
—
|
|
|
—
|
|
|
92
|
|
RMS 7-9
|
1,707
|
|
|
519
|
|
|
—
|
|
|
—
|
|
|
2,226
|
|
|
74
|
|
|
60
|
|
|
—
|
|
|
—
|
|
|
134
|
|
RMS 10
|
63
|
|
|
143
|
|
|
—
|
|
|
—
|
|
|
206
|
|
|
6
|
|
|
29
|
|
|
—
|
|
|
—
|
|
|
35
|
|
RMS 11-13
|
21
|
|
|
353
|
|
|
—
|
|
|
—
|
|
|
374
|
|
|
3
|
|
|
134
|
|
|
—
|
|
|
—
|
|
|
137
|
|
RMS 14
|
—
|
|
|
—
|
|
|
312
|
|
|
—
|
|
|
312
|
|
|
—
|
|
|
—
|
|
|
151
|
|
|
—
|
|
|
151
|
|
|
7,782
|
|
|
1,413
|
|
|
312
|
|
|
—
|
|
|
9,507
|
|
|
156
|
|
|
242
|
|
|
151
|
|
|
—
|
|
|
549
|
|
Retail - UK Motor Finance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMS 1-6
|
11,638
|
|
|
1,464
|
|
|
—
|
|
|
—
|
|
|
13,102
|
|
|
142
|
|
|
36
|
|
|
—
|
|
|
—
|
|
|
178
|
|
RMS 7-9
|
687
|
|
|
490
|
|
|
—
|
|
|
—
|
|
|
1,177
|
|
|
7
|
|
|
29
|
|
|
—
|
|
|
—
|
|
|
36
|
|
RMS 10
|
—
|
|
|
134
|
|
|
—
|
|
|
—
|
|
|
134
|
|
|
—
|
|
|
19
|
|
|
—
|
|
|
—
|
|
|
19
|
|
RMS 11-13
|
22
|
|
|
184
|
|
|
—
|
|
|
—
|
|
|
206
|
|
|
—
|
|
|
45
|
|
|
—
|
|
|
—
|
|
|
45
|
|
RMS 14
|
—
|
|
|
—
|
|
|
233
|
|
|
—
|
|
|
233
|
|
|
—
|
|
|
—
|
|
|
152
|
|
|
—
|
|
|
152
|
|
|
12,347
|
|
|
2,272
|
|
|
233
|
|
|
—
|
|
|
14,852
|
|
|
149
|
|
|
129
|
|
|
152
|
|
|
—
|
|
|
430
|
|
Retail - other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMS 1-6
|
15,661
|
|
|
485
|
|
|
—
|
|
|
—
|
|
|
16,146
|
|
|
25
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
40
|
|
RMS 7-9
|
1,982
|
|
|
357
|
|
|
—
|
|
|
—
|
|
|
2,339
|
|
|
6
|
|
|
43
|
|
|
—
|
|
|
—
|
|
|
49
|
|
RMS 10
|
—
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
RMS 11-13
|
431
|
|
|
356
|
|
|
—
|
|
|
—
|
|
|
787
|
|
|
—
|
|
|
29
|
|
|
—
|
|
|
—
|
|
|
29
|
|
RMS 14
|
—
|
|
|
—
|
|
|
244
|
|
|
—
|
|
|
244
|
|
|
—
|
|
|
—
|
|
|
54
|
|
|
—
|
|
|
54
|
|
|
18,074
|
|
|
1,203
|
|
|
244
|
|
|
—
|
|
|
19,521
|
|
|
31
|
|
|
87
|
|
|
54
|
|
|
—
|
|
|
172
|
|
Total Retail
|
311,700
|
|
|
37,594
|
|
|
3,036
|
|
|
11,886
|
|
|
364,216
|
|
|
587
|
|
|
1,259
|
|
|
672
|
|
|
190
|
|
|
2,708
|
|
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 18: Credit quality of loans and advances to banks and
customers (continued)
Gross drawn exposures and expected credit loss allowances
(continued)
|
Drawn exposures
|
|
Expected credit loss allowance
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 June 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Banking
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMS 1-10
|
38,828
|
|
|
133
|
|
|
—
|
|
|
—
|
|
|
38,961
|
|
|
28
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
30
|
|
CMS 11-14
|
32,404
|
|
|
3,461
|
|
|
—
|
|
|
—
|
|
|
35,865
|
|
|
118
|
|
|
51
|
|
|
—
|
|
|
—
|
|
|
169
|
|
CMS 15-18
|
3,012
|
|
|
4,203
|
|
|
—
|
|
|
—
|
|
|
7,215
|
|
|
44
|
|
|
237
|
|
|
—
|
|
|
—
|
|
|
281
|
|
CMS 19
|
—
|
|
|
607
|
|
|
—
|
|
|
—
|
|
|
607
|
|
|
—
|
|
|
71
|
|
|
—
|
|
|
—
|
|
|
71
|
|
CMS 20-23
|
—
|
|
|
—
|
|
|
3,078
|
|
|
—
|
|
|
3,078
|
|
|
—
|
|
|
—
|
|
|
987
|
|
|
—
|
|
|
987
|
|
|
74,244
|
|
|
8,404
|
|
|
3,078
|
|
|
—
|
|
|
85,726
|
|
|
190
|
|
|
361
|
|
|
987
|
|
|
—
|
|
|
1,538
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMS 1-6
|
877
|
|
|
36
|
|
|
—
|
|
|
—
|
|
|
913
|
|
|
9
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
10
|
|
RMS 7-9
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
RMS 10
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
RMS 11-13
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
RMS 14
|
—
|
|
|
—
|
|
|
70
|
|
|
—
|
|
|
70
|
|
|
—
|
|
|
—
|
|
|
16
|
|
|
—
|
|
|
16
|
|
|
877
|
|
|
36
|
|
|
70
|
|
|
—
|
|
|
983
|
|
|
9
|
|
|
1
|
|
|
16
|
|
|
—
|
|
|
26
|
|
CMS 1-10
|
54,098
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
54,098
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
CMS 11-14
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
CMS 15-18
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
CMS 19
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
CMS 20-23
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
54,103
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
54,103
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Central overlay
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
400
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
400
|
|
Total loans and advances to customers
|
440,924
|
|
|
46,034
|
|
|
6,184
|
|
|
11,886
|
|
|
505,028
|
|
|
1,186
|
|
|
1,621
|
|
|
1,675
|
|
|
190
|
|
|
4,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In respect of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
311,700
|
|
|
37,594
|
|
|
3,036
|
|
|
11,886
|
|
|
364,216
|
|
|
587
|
|
|
1,259
|
|
|
672
|
|
|
190
|
|
|
2,708
|
|
Commercial Banking
|
74,244
|
|
|
8,404
|
|
|
3,078
|
|
|
—
|
|
|
85,726
|
|
|
190
|
|
|
361
|
|
|
987
|
|
|
—
|
|
|
1,538
|
|
Other1
|
54,980
|
|
|
36
|
|
|
70
|
|
|
—
|
|
|
55,086
|
|
|
409
|
|
|
1
|
|
|
16
|
|
|
—
|
|
|
426
|
|
Total loans and advances to customers
|
440,924
|
|
|
46,034
|
|
|
6,184
|
|
|
11,886
|
|
|
505,028
|
|
|
1,186
|
|
|
1,621
|
|
|
1,675
|
|
|
190
|
|
|
4,672
|
|
1
Principally
comprises reverse repurchase agreement balances.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 18: Credit quality of loans and advances to banks and
customers (continued)
Gross drawn exposures and expected credit loss
allowances
|
Drawn exposures
|
|
Expected credit loss allowance
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31
December 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to banks:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMS 1-10
|
10,670
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,670
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
CMS 11-14
|
82
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
82
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
CMS 15-18
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
CMS 19
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
CMS 20-23
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,752
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,752
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail - UK Mortgages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMS 1-6
|
251,372
|
|
|
21,010
|
|
|
—
|
|
|
—
|
|
|
272,382
|
|
|
103
|
|
|
247
|
|
|
—
|
|
|
—
|
|
|
350
|
|
RMS 7-9
|
46
|
|
|
4,030
|
|
|
—
|
|
|
—
|
|
|
4,076
|
|
|
1
|
|
|
66
|
|
|
—
|
|
|
—
|
|
|
67
|
|
RMS 10
|
—
|
|
|
907
|
|
|
—
|
|
|
—
|
|
|
907
|
|
|
—
|
|
|
25
|
|
|
—
|
|
|
—
|
|
|
25
|
|
RMS 11-13
|
—
|
|
|
3,071
|
|
|
—
|
|
|
—
|
|
|
3,071
|
|
|
—
|
|
|
130
|
|
|
—
|
|
|
—
|
|
|
130
|
|
RMS 14
|
—
|
|
|
—
|
|
|
1,859
|
|
|
12,511
|
|
|
14,370
|
|
|
—
|
|
|
—
|
|
|
191
|
|
|
261
|
|
|
452
|
|
|
251,418
|
|
|
29,018
|
|
|
1,859
|
|
|
12,511
|
|
|
294,806
|
|
|
104
|
|
|
468
|
|
|
191
|
|
|
261
|
|
|
1,024
|
|
Retail - credit cards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMS 1-6
|
9,619
|
|
|
1,284
|
|
|
—
|
|
|
—
|
|
|
10,903
|
|
|
75
|
|
|
57
|
|
|
—
|
|
|
—
|
|
|
132
|
|
RMS 7-9
|
1,603
|
|
|
1,137
|
|
|
—
|
|
|
—
|
|
|
2,740
|
|
|
66
|
|
|
138
|
|
|
—
|
|
|
—
|
|
|
204
|
|
RMS 10
|
274
|
|
|
343
|
|
|
—
|
|
|
—
|
|
|
617
|
|
|
14
|
|
|
70
|
|
|
—
|
|
|
—
|
|
|
84
|
|
RMS 11-13
|
—
|
|
|
509
|
|
|
—
|
|
|
—
|
|
|
509
|
|
|
—
|
|
|
193
|
|
|
—
|
|
|
—
|
|
|
193
|
|
RMS 14
|
—
|
|
|
—
|
|
|
340
|
|
|
—
|
|
|
340
|
|
|
—
|
|
|
—
|
|
|
153
|
|
|
—
|
|
|
153
|
|
|
11,496
|
|
|
3,273
|
|
|
340
|
|
|
—
|
|
|
15,109
|
|
|
155
|
|
|
458
|
|
|
153
|
|
|
—
|
|
|
766
|
|
Retail - loans and overdrafts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMS 1-6
|
5,559
|
|
|
291
|
|
|
—
|
|
|
—
|
|
|
5,850
|
|
|
80
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
95
|
|
RMS 7-9
|
1,990
|
|
|
580
|
|
|
—
|
|
|
—
|
|
|
2,570
|
|
|
99
|
|
|
66
|
|
|
—
|
|
|
—
|
|
|
165
|
|
RMS 10
|
116
|
|
|
181
|
|
|
—
|
|
|
—
|
|
|
297
|
|
|
13
|
|
|
36
|
|
|
—
|
|
|
—
|
|
|
49
|
|
RMS 11-13
|
45
|
|
|
467
|
|
|
—
|
|
|
—
|
|
|
512
|
|
|
9
|
|
|
178
|
|
|
—
|
|
|
—
|
|
|
187
|
|
RMS 14
|
—
|
|
|
—
|
|
|
307
|
|
|
—
|
|
|
307
|
|
|
—
|
|
|
—
|
|
|
147
|
|
|
—
|
|
|
147
|
|
|
7,710
|
|
|
1,519
|
|
|
307
|
|
|
—
|
|
|
9,536
|
|
|
201
|
|
|
295
|
|
|
147
|
|
|
—
|
|
|
643
|
|
Retail - UK Motor Finance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMS 1-6
|
12,035
|
|
|
1,396
|
|
|
—
|
|
|
—
|
|
|
13,431
|
|
|
187
|
|
|
46
|
|
|
—
|
|
|
—
|
|
|
233
|
|
RMS 7-9
|
738
|
|
|
456
|
|
|
—
|
|
|
—
|
|
|
1,194
|
|
|
7
|
|
|
33
|
|
|
—
|
|
|
—
|
|
|
40
|
|
RMS 10
|
—
|
|
|
171
|
|
|
—
|
|
|
—
|
|
|
171
|
|
|
—
|
|
|
30
|
|
|
—
|
|
|
—
|
|
|
30
|
|
RMS 11-13
|
13
|
|
|
193
|
|
|
—
|
|
|
—
|
|
|
206
|
|
|
—
|
|
|
62
|
|
|
—
|
|
|
—
|
|
|
62
|
|
RMS 14
|
—
|
|
|
—
|
|
|
199
|
|
|
—
|
|
|
199
|
|
|
—
|
|
|
—
|
|
|
133
|
|
|
—
|
|
|
133
|
|
|
12,786
|
|
|
2,216
|
|
|
199
|
|
|
—
|
|
|
15,201
|
|
|
194
|
|
|
171
|
|
|
133
|
|
|
—
|
|
|
498
|
|
Retail - other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMS 1-6
|
14,952
|
|
|
482
|
|
|
—
|
|
|
—
|
|
|
15,434
|
|
|
19
|
|
|
19
|
|
|
—
|
|
|
—
|
|
|
38
|
|
RMS 7-9
|
2,418
|
|
|
334
|
|
|
—
|
|
|
—
|
|
|
2,752
|
|
|
11
|
|
|
39
|
|
|
—
|
|
|
—
|
|
|
50
|
|
RMS 10
|
—
|
|
|
21
|
|
|
—
|
|
|
—
|
|
|
21
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
RMS 11-13
|
509
|
|
|
467
|
|
|
—
|
|
|
—
|
|
|
976
|
|
|
—
|
|
|
40
|
|
|
—
|
|
|
—
|
|
|
40
|
|
RMS 14
|
—
|
|
|
—
|
|
|
184
|
|
|
—
|
|
|
184
|
|
|
—
|
|
|
—
|
|
|
59
|
|
|
—
|
|
|
59
|
|
|
17,879
|
|
|
1,304
|
|
|
184
|
|
|
—
|
|
|
19,367
|
|
|
30
|
|
|
99
|
|
|
59
|
|
|
—
|
|
|
188
|
|
Total Retail
|
301,289
|
|
|
37,330
|
|
|
2,889
|
|
|
12,511
|
|
|
354,019
|
|
|
684
|
|
|
1,491
|
|
|
683
|
|
|
261
|
|
|
3,119
|
|
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 18: Credit quality of loans and advances to banks and
customers (continued)
Gross drawn exposures and expected credit loss allowances
(continued)
|
Drawn exposures
|
|
Expected credit loss allowance
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
Total
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31
December 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Banking
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMS 1-10
|
35,072
|
|
|
191
|
|
|
—
|
|
|
—
|
|
|
35,263
|
|
|
42
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
44
|
|
CMS 11-14
|
30,821
|
|
|
6,971
|
|
|
—
|
|
|
—
|
|
|
37,792
|
|
|
141
|
|
|
109
|
|
|
—
|
|
|
—
|
|
|
250
|
|
CMS 15-18
|
4,665
|
|
|
6,469
|
|
|
—
|
|
|
—
|
|
|
11,134
|
|
|
96
|
|
|
398
|
|
|
—
|
|
|
—
|
|
|
494
|
|
CMS 19
|
—
|
|
|
685
|
|
|
—
|
|
|
—
|
|
|
685
|
|
|
—
|
|
|
144
|
|
|
—
|
|
|
—
|
|
|
144
|
|
CMS 20-23
|
—
|
|
|
—
|
|
|
3,524
|
|
|
—
|
|
|
3,524
|
|
|
—
|
|
|
—
|
|
|
1,282
|
|
|
—
|
|
|
1,282
|
|
|
70,558
|
|
|
14,316
|
|
|
3,524
|
|
|
—
|
|
|
88,398
|
|
|
279
|
|
|
653
|
|
|
1,282
|
|
|
—
|
|
|
2,214
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMS 1-6
|
871
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
884
|
|
|
9
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
10
|
|
RMS 7-9
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
RMS 10
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
RMS 11-13
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
RMS 14
|
—
|
|
|
—
|
|
|
67
|
|
|
—
|
|
|
67
|
|
|
—
|
|
|
—
|
|
|
17
|
|
|
—
|
|
|
17
|
|
|
871
|
|
|
13
|
|
|
67
|
|
|
—
|
|
|
951
|
|
|
9
|
|
|
1
|
|
|
17
|
|
|
—
|
|
|
27
|
|
CMS 1-10
|
60,985
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
60,985
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
CMS 11-14
|
238
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
238
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
CMS 15-18
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
CMS 19
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
CMS 20-23
|
—
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
61,225
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
61,235
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Central overlay
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
400
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
400
|
|
Total loans and advances to customers
|
433,943
|
|
|
51,659
|
|
|
6,490
|
|
|
12,511
|
|
|
504,603
|
|
|
1,372
|
|
|
2,145
|
|
|
1,982
|
|
|
261
|
|
|
5,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In respect of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
301,289
|
|
|
37,330
|
|
|
2,889
|
|
|
12,511
|
|
|
354,019
|
|
|
684
|
|
|
1,491
|
|
|
683
|
|
|
261
|
|
|
3,119
|
|
Commercial Banking
|
70,558
|
|
|
14,316
|
|
|
3,524
|
|
|
—
|
|
|
88,398
|
|
|
279
|
|
|
653
|
|
|
1,282
|
|
|
—
|
|
|
2,214
|
|
Other1
|
62,096
|
|
|
13
|
|
|
77
|
|
|
—
|
|
|
62,186
|
|
|
409
|
|
|
1
|
|
|
17
|
|
|
—
|
|
|
427
|
|
Total loans and advances to customers
|
433,943
|
|
|
51,659
|
|
|
6,490
|
|
|
12,511
|
|
|
504,603
|
|
|
1,372
|
|
|
2,145
|
|
|
1,982
|
|
|
261
|
|
|
5,760
|
|
1
Principally
comprises reverse repurchase agreement balances.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (continued)
Note 19: Dividends on ordinary shares
An
interim dividend for 2021 of 0.67 pence per ordinary share will be
paid on 13 September 2021. The total amount of this dividend is
£473 million.
The
Group did not pay any dividends during 2020 following a specific
request of the regulator, the PRA, in line with all other major UK
listed banks, as a result of the developing coronavirus
crisis.
On 25
May 2021, a final dividend in respect of 2020 of 0.57 pence per
share, totalling £404 million, the maximum allowable under PRA
guidelines, was paid to shareholders.
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 recommended dividend are:
Shares quoted ex-dividend
|
5 August 2021
|
|
|
Record date
|
6 August 2021
|
|
|
Final date for joining or leaving the dividend reinvestment
plan
|
20 August 2021
|
|
|
Dividend paid
|
13 September 2021
|
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR
FINANCIAL STATEMENTS (continued)
Note 20: Future accounting developments
The
following pronouncements are not applicable for the year ending 31
December 2021 and have not been applied in preparing these
condensed consolidated half-year 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.
With
the exception of IFRS 17 Insurance
Contracts and certain other minor amendments, as at 28 July
2021 these pronouncements have been endorsed for use in the United
Kingdom.
IFRS 17 Insurance Contracts
IFRS 17
replaces IFRS 4 Insurance
Contracts and is effective for annual periods beginning on
or after 1 January 2023.
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
Group.
The
Group's IFRS 17 project is progressing to plan. Work has focused on
interpreting the requirements of the standard, developing
methodologies and accounting policies, and implementing the changes
required to reporting and other systems. The development of the
Group's data warehousing and actuarial liability calculation
processes required for IFRS 17 reporting continues to progress,
with a schedule of testing and business readiness activity due to
run from later this year into 2022, ahead of full implementation
from 1 January 2023.
Minor amendments to other accounting standards
The
IASB has issued a number of minor amendments to IFRSs effective 1
January 2022 and in later years (including IFRS 9 Financial Instruments and IAS 37
Provisions, Contingent Liabilities
and Contingent Assets). These amendments are not expected to
have a significant impact on the Group.
Note 21: Other information
The
financial information contained in this document does not
constitute statutory accounts within the meaning of section 434 of
the Companies Act 2006 (the Act). The statutory accounts for the
year ended 31 December 2020 were approved by the directors on 23
February 2021 and were delivered to the Registrar of Companies on
28 April 2021. The auditors’ report on those accounts was
unqualified and did not include a statement under sections 498(2)
(accounting records or returns inadequate or accounts not agreeing
with records and returns) or 498(3) (failure to obtain necessary
information and explanations) of the Act.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The
directors listed below (being all the directors of Lloyds Banking
Group plc) confirm that to the best of their knowledge these
condensed consolidated half-year financial statements have been
prepared in accordance with UK adopted International Accounting
Standard 34, Interim Financial
Reporting, and that the half-year management report herein
includes a fair review of the information required by DTR 4.2.7R
and DTR 4.2.8R, namely:
1
an indication of
important events that have occurred during the six months ended 30
June 2021 and their impact on the condensed consolidated half-year
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
2
material related
party transactions in the six months ended 30 June 2021 and any
material changes in the related party transactions described in the
last annual report.
Signed
on behalf of the Board by
William
Chalmers
Interim
Group Chief Executive
28 July
2021
Lloyds
Banking Group plc Board of directors:
Executive director:
William
Chalmers (Interim Group Chief
Executive and Chief Financial Officer)
Non-executive directors:
Robin
Budenberg CBE (Chair)
Alan
Dickinson (Deputy
Chair)
Sarah
Legg
Lord
Lupton CBE
Amanda
Mackenzie OBE
Nicholas
Prettejohn
Stuart
Sinclair
Catherine
Woods
INDEPENDENT REVIEW REPORT TO LLOYDS BANKING GROUP
PLC
We have
been engaged by the company to review the condensed set of
financial statements in the half-yearly financial report for the
six months ended 30 June 2021 which comprises the consolidated
income statement, the consolidated statement of comprehensive
income, the consolidated balance sheet, the consolidated statement
of changes in equity, the consolidated cash flow statement and
related notes 1 to 21. We have read the other information contained
in the half-yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial
statements.
Directors’ responsibilities
The
half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for
preparing the half-yearly financial report in accordance with the
Disclosure Guidance and Transparency Rules of the United
Kingdom’s Financial Conduct Authority.
The
annual financial statements of the Group will be prepared in
accordance with International Financial Reporting Standards as
adopted by the United Kingdom. Accordingly, the condensed set of
financial statements included in this half-yearly financial report
has been prepared in accordance with UK adopted International
Accounting Standard 34, “Interim Financial
Reporting”.
Our responsibility
Our
responsibility is to express to the Company a conclusion on the
condensed set of financial statements in the half-yearly financial
report based on our review.
Scope of review
We
conducted our review in accordance with International Standard on
Review Engagements (UK and Ireland) 2410 “Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity” issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based
on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the
half-yearly financial report for the six months ended 30 June 2021
is not prepared, in all material respects, in accordance with UK
adopted International Accounting Standard 34 and the Disclosure
Guidance and Transparency Rules of the United Kingdom’s
Financial Conduct Authority.
Use of our report
This
report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
“Review of Interim Financial Information Performed by the
Independent Auditor of the Entity” issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review
work, for this report, or for the conclusions we have
formed.
Deloitte LLP
Statutory
Auditor
London,
England
28 July
2021
FORWARD LOOKING STATEMENTS
This
document contains certain forward looking statements within the
meaning of Section 21E of the US Securities Exchange Act of 1934,
as amended, and section 27A of the US Securities Act of 1933, as
amended, with respect to the business, strategy, plans and/or
results of Lloyds Banking Group plc together with its subsidiaries
(the Group) and its current goals and expectations relating to its
future financial condition and performance. Statements that are not
historical or current facts, including statements about the Group's
or its directors' and/or management's beliefs and expectations, are
forward looking statements. Words such as ‘believes’,
‘achieves’, ‘anticipates’,
‘estimates’, ‘expects’,
‘targets’, ‘should’, ‘intends’,
‘aims’, ‘projects’, ‘plans’,
‘potential’, ‘will’, ‘would’,
‘could’, ‘considered’,
‘likely’, ‘may’, ‘seek’,
‘estimate’, ‘probability’,
‘goal’, ‘objective’,
‘endeavour’, ‘prospects’,
‘optimistic’ 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. Examples of such forward looking statements
include, but are not limited to, statements or guidance relating
to: projections or expectations of the Group’s future
financial position including profit attributable to shareholders,
provisions, economic profit, dividends, capital structure,
portfolios, net interest margin, capital ratios, liquidity,
risk-weighted assets (RWAs), expenditures or any other financial
items or ratios; litigation, regulatory and governmental
investigations; the Group’s future financial performance; the
level and extent of future impairments and write-downs; the
Group’s ESG targets and/or commitments; statements of plans,
objectives or goals of the Group or its management 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. By their
nature, forward looking statements involve risk and uncertainty
because they relate to events and depend upon circumstances that
will or may occur in the future. Factors that could cause actual
business, strategy, plans and/or results (including but not limited
to the payment of dividends) to differ materially from forward
looking statements 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, inflation, exchange rates, stock
markets and currencies; any impact of the transition from IBORs to
alternative reference rates; the ability to access sufficient
sources of capital, liquidity and funding when required; changes to
the Group’s credit ratings; the ability to derive cost
savings and other benefits including, but without limitation, as a
result of any acquisitions, disposals and other strategic
transactions; potential changes in dividend policy; the ability to
achieve strategic objectives; changing customer behaviour including
consumer spending, saving and borrowing habits; changes to borrower
or counterparty credit quality impacting the recoverability and
value of balance sheet assets; concentration of financial exposure;
management and monitoring of conduct risk; exposure to counterparty
risk (including but not limited to third parties conducting illegal
activities without the Group’s knowledge); instability in the
global financial markets, including Eurozone instability,
instability as a result of uncertainty surrounding the exit by the
UK from the European Union (EU) and the EU-UK Trade and Cooperation
Agreement, instability as a result of 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; political instability including as a result of any UK
general election and any further possible referendum on Scottish
independence; technological changes and risks to the security of IT
and operational infrastructure, systems, data and information
resulting from increased threat of cyber and other attacks;
natural, pandemic (including but not limited to the COVID-19
pandemic) and other disasters, 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, or other such events; geopolitical unpredictability; risks
relating to sustainability and climate change, including the
Group’s ability along with the government and other
stakeholders to manage and mitigate the impacts of climate change
effectively; changes in laws, regulations, practices and accounting
standards or taxation, including as a result of the UK’s exit
from the EU; changes to regulatory capital or liquidity
requirements (including regulatory measures to restrict
distributions to address potential capital and liquidity stress)
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 US or elsewhere
including the implementation and interpretation of key laws,
legislation and regulation together with any resulting impact on
the future structure of the Group; the ability to attract and
retain senior management and other employees and meet its diversity
objectives; actions or omissions by the Group's directors,
management or employees including industrial action; changes in the
Group’s ability to develop sustainable finance products and
the Group’s capacity to measure the ESG impact from its
financing activity, which may affect the Group’s ability to
achieve its climate ambition; 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 by Lloyds
Banking Group plc with the US Securities and Exchange Commission
(the SEC), which is available on the SEC’s website at
www.sec.gov, for a discussion of certain factors and risks. Lloyds
Banking Group plc may also make or disclose written and/or oral
forward looking statements in reports filed with or furnished to
the SEC, Lloyds Banking Group plc 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 plc to third parties, including financial analysts. Except as
required by any applicable law or regulation, the forward looking
statements contained in this document are made as of today's date,
and the Group expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward looking
statements contained in this document to reflect any change in the
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.
SUMMARY OF ALTERNATIVE PERFORMANCE MEASURES
The
Group calculates a number of metrics that are used throughout the
banking and insurance industries on an underlying basis. A
description of these measures and their calculation is set out
below.
Asset quality ratio
|
The underlying impairment charge for the period (on an annualised
basis) in respect of loans and advances to customers after releases
and write-backs, expressed as a percentage of average gross loans
and advances to customers for the period
|
Average interest-earning banking assets
|
Gross loans and advances to customers adjusted to remove fee-based
and other non-banking balances, averaged over the
period.
|
Banking net interest margin
|
Banking net interest income on customer and product balances in the
banking businesses as a percentage of average gross banking
interest-earning assets for the period
|
Cost:income ratio
|
Total costs as a percentage of net income calculated on an
underlying basis
|
Loan to deposit ratio
|
Loans and advances to customers net of allowance for impairment
losses and excluding reverse repurchase agreements divided by
customer deposits excluding repurchase agreements on an underlying
basis
|
Present value of new business premium
|
The total single premium sales received in the period (on an
annualised basis) plus the discounted value of premiums expected to
be received over the term of the new regular premium
contracts
|
Return on risk-weighted assets
|
Underlying profit before tax divided by average risk-weighted
assets
|
Return on tangible equity
|
Statutory profit after tax adjusted to deduct profit attributable
to non-controlling interests and other equity holders, divided by
average tangible net assets
|
Tangible net assets per share
|
Net assets excluding intangible assets such as goodwill and
acquisition-related intangibles divided by the weighted average
number of ordinary shares in issue
|
Underlying profit before impairment
|
Underlying profit adjusted to remove the underlying impairment
charge
|
Underlying, or 'above the line' profit
|
Statutory profit before tax adjusted for certain items as detailed
in the Basis of Presentation
|
CONTACTS
For
further information please contact:
INVESTORS AND ANALYSTS
Douglas
Radcliffe
Group
Investor Relations Director
020
7356 1571
douglas.radcliffe@lloydsbanking.com
Edward
Sands
Director
of Investor Relations
020
7356 1585
edward.sands@lloydsbanking.com
Eileen
Khoo
Director
of Investor Relations
07385
376435
eileen.khoo@lloydsbanking.com
Nora
Thoden
Director
of Investor Relations - ESG
020
7356 2334
nora.thoden@lloydsbanking.com
CORPORATE AFFAIRS
Grant
Ringshaw
External
Relations Director
020
7356 2362
grant.ringshaw@lloydsbanking.com
Matt
Smith
Head of
Media Relations
020
7356 3522
matt.smith@lloydsbanking.com
Copies
of this News Release may be obtained from:
Investor
Relations, Lloyds Banking Group plc, 25 Gresham Street,
London EC2V 7HN
The
statement can also be found on the Group’s website –
www.lloydsbankinggroup.com
Registered
office: Lloyds Banking Group plc, The Mound, Edinburgh, EH1
1YZ
Registered
in Scotland No. 95000