SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
25
October 2017
LLOYDS BANKING GROUP
plc
(Translation of registrant's name into
English)
5th Floor
25 Gresham Street
London
EC2V 7HN
United Kingdom
(Address
of principal executive offices)
Indicate
by check mark whether the registrant files or will file annual
reports
under
cover Form 20-F or Form 40-F.
Form
20-F..X.. Form 40-F
Indicate
by check mark whether the registrant by furnishing the
information
contained
in this Form is also thereby furnishing the information to
the
Commission
pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes
No ..X..
If
"Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-
_______
Index
to Exhibits
Item
No.
1
Regulatory News
Service Announcement, dated 25 October 2017
Lloyds
Banking Group plc
Q3 2017
Interim Management Statement
25
October 2017
HIGHLIGHTS FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2017
Strong financial performance with improved profit and returns on
both an underlying and statutory basis
●
Underlying profit
for the nine months of £6.6 billion, 8 per cent higher than
the previous year, with an underlying return on tangible equity of
16.2 per cent
●
Strong third
quarter with income up 8 per cent driven by organic growth and
MBNA
●
Total income for
the nine months 6 per cent higher with improved net interest income
and other income; net interest margin increased to 2.85 per
cent
●
Positive operating
jaws; market-leading cost:income ratio improved to 45.9 per
cent
●
Asset quality
remains strong with impairment charge of £538 million;
asset quality ratio of 16 basis points
●
Statutory profit
before tax 38 per cent higher at £4.5 billion with return on
tangible equity of 10.5 per cent
●
Strong capital
generation of c.185 basis points with a CET1 ratio of 14.9 per
cent, pre dividend
●
Capital
requirements continue to evolve and seeing some upward
pressure
Our differentiated UK focused business model continues to deliver
with the UK economy remaining resilient; well positioned for future
growth
●
UK’s largest
and top-ranked digital bank; 13.2 million online customers, of
which 9 million active mobile customers
●
MBNA integration
now expected to complete by end of Q1 2019, ahead of
schedule
●
Announced the
acquisition of Zurich’s UK workplace pensions and savings
business
●
Continued lending
growth in targeted segments including the open mortgage
book
●
Improved credit
ratings from Moody’s: Lloyds Bank upgraded to Aa3 and Lloyds
Banking Group upgraded to A3
●
New organisational
structure implemented ahead of announcement of strategic review in
February
Improved financial guidance for capital and net interest margin
with longer term guidance maintained
●
Capital generation
in 2017 now expected to be between 225 and 240 basis points and
will mitigate upward pressure on capital requirements
●
Net interest margin
expected to be stable in the fourth quarter and for the year to be
around 2.85 per cent
●
Asset quality ratio
for the year expected to be less than 20 basis points
|
GROUP CHIEF EXECUTIVE’S STATEMENT
In the
first nine months of the year we have delivered strong financial
performance with increased underlying and statutory profit, a
significant improvement in returns and strong capital generation.
These results highlight the strength of our customer focused,
simple and low risk business model and the benefits of our
competitive advantage in the UK. Asset quality remains strong,
reflecting our prudent approach to risk, while the UK economy
remains resilient.
We
continue to focus on supporting people, businesses and communities,
as set out in our Helping Britain Prosper Plan while making good
progress against our strategic priorities of creating the best
customer experience; becoming simpler and more efficient; and
delivering sustainable growth. We are ahead of schedule with the
integration of MBNA and now expect completion in the first quarter
of 2019. We have also recently announced the acquisition of
Zurich’s UK workplace pensions and savings business which is
in line with the Group’s targeted growth strategy and
accelerates the development of our financial planning and
retirement business. A new organisational structure has also been
implemented ahead of the announcement of our strategic review in
February.
We have
announced improved financial targets for 2017, reflecting the
strong financial performance in the year, and we remain on track to
deliver our longer term guidance.
António
Horta-Osório
Group Chief Executive
CONSOLIDATED INCOME STATEMENT − UNDERLYING BASIS
|
|
Nine
|
|
Nine
|
|
|
|
Three
|
|
Three
|
|
|
|
|
months
|
|
months
|
|
|
|
months
|
|
months
|
|
|
|
|
ended
|
|
ended
|
|
|
|
ended
|
|
ended
|
|
|
|
|
30 Sept
|
|
30 Sept
|
|
|
|
30 Sept
|
|
30 Sept
|
|
|
|
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
|
|
£ million
|
|
£ million
|
|
%
|
|
£ million
|
|
£ million
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
9,117
|
|
8,630
|
|
6
|
|
3,192
|
|
2,848
|
|
12
|
Other income
|
|
4,776
|
|
4,520
|
|
6
|
|
1,428
|
|
1,427
|
|
–
|
Total income
|
|
13,893
|
|
13,150
|
|
6
|
|
4,620
|
|
4,275
|
|
8
|
Operating lease depreciation
|
|
(769)
|
|
(669)
|
|
(15)
|
|
(274)
|
|
(241)
|
|
(14)
|
Net income
|
|
13,124
|
|
12,481
|
|
5
|
|
4,346
|
|
4,034
|
|
8
|
Operating costs
|
|
(6,019)
|
|
(5,959)
|
|
(1)
|
|
(2,001)
|
|
(1,918)
|
|
(4)
|
Impairment
|
|
(538)
|
|
(449)
|
|
(20)
|
|
(270)
|
|
(204)
|
|
(32)
|
Underlying profit
|
|
6,567
|
|
6,073
|
|
8
|
|
2,075
|
|
1,912
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volatility and other items
|
|
(482)
|
|
(1,198)
|
|
|
|
(124)
|
|
49
|
|
|
PPI provision
|
|
(1,050)
|
|
(1,000)
|
|
|
|
–
|
|
(1,000)
|
|
|
Other conduct provisions
|
|
(540)
|
|
(610)
|
|
|
|
–
|
|
(150)
|
|
|
Statutory profit before tax
|
|
4,495
|
|
3,265
|
|
38
|
|
1,951
|
|
811
|
|
141
|
Taxation
|
|
(1,386)
|
|
(1,189)
|
|
|
|
(481)
|
|
(592)
|
|
|
Profit for the period
|
|
3,109
|
|
2,076
|
|
50
|
|
1,470
|
|
219
|
|
571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
3.9p
|
|
2.5p
|
|
56
|
|
1.9p
|
|
0.2p
|
|
850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banking net interest margin
|
|
2.85%
|
|
2.72%
|
|
13bp
|
|
2.90%
|
|
2.69%
|
|
21bp
|
Average interest-earning assets
|
|
£433bn
|
|
£437bn
|
|
(1)
|
|
£438bn
|
|
£436bn
|
|
1
|
Cost:income ratio
|
|
45.9%
|
|
47.7%
|
|
(1.8)pp
|
|
46.0%
|
|
47.5%
|
|
(1.5)pp
|
Asset quality ratio
|
|
0.16%
|
|
0.14%
|
|
2bp
|
|
0.24%
|
|
0.18%
|
|
6bp
|
Return on risk-weighted assets
|
|
4.06%
|
|
3.64%
|
|
42bp
|
|
3.79%
|
|
3.42%
|
|
37bp
|
Underlying return on tangible equity
|
|
16.2%
|
|
14.8%
|
|
1.4pp
|
|
15.6%
|
|
12.3%
|
|
3.3pp
|
Return on tangible equity
|
|
10.5%
|
|
7.6%
|
|
2.9pp
|
|
15.3%
|
|
2.2%
|
|
13.1pp
|
BALANCE SHEET AND KEY RATIOS
|
|
At 30 Sept
|
|
At 30 June
|
|
Change
|
|
At 31 Dec
|
|
Change
|
|
|
2017
|
|
2017
|
|
%
|
|
2016
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to customers
1
|
|
£455bn
|
|
£453bn
|
|
–
|
|
£450bn
|
|
1
|
Customer deposits
2
|
|
£413bn
|
|
£417bn
|
|
(1)
|
|
£413bn
|
|
–
|
Loan to deposit ratio
|
|
110%
|
|
109%
|
|
1pp
|
|
109%
|
|
1pp
|
Total assets
|
|
£811bn
|
|
£815bn
|
|
–
|
|
£818bn
|
|
(1)
|
CET1 ratio pre 2017 dividend accrual
3
|
|
14.9%
|
|
14.0%
|
|
0.9pp
|
|
13.8%
|
|
1.1pp
|
CET1 ratio
3
|
|
14.1%
|
|
13.5%
|
|
0.6pp
|
|
13.8%
|
|
0.3pp
|
Transitional total capital ratio
|
|
21.2%
|
|
20.8%
|
|
0.4pp
|
|
21.4%
|
|
(0.2)pp
|
UK leverage ratio
3,4
|
|
5.4%
|
|
5.2%
|
|
0.2pp
|
|
5.3%
|
|
0.1pp
|
Risk-weighted assets
|
|
£217bn
|
|
£218bn
|
|
–
|
|
£216bn
|
|
1
|
Tangible net assets per share
|
|
53.5p
|
|
52.4p
|
|
1.1p
|
|
54.8p
|
|
(1.3)p
|
1
|
Excludes
reverse repos of £14.1 billion (30 June 2017: £11.4
billion; 31 December 2016:
£8.3 billion).
|
2
|
Excludes
repos of £0.7 billion (30 June 2017: £1.0 billion;
31 December 2016: £2.5 billion).
|
3
|
The
CET1 and leverage ratios at 30 June 2017 and 31 December 2016
were reported on a pro forma basis, separately reflecting the
dividends paid by the Insurance business in July 2017 (in relation
to 2017 interim earnings) and February 2017 (in relation to 2016
full year earnings).
|
4
|
Calculated
in accordance with the UK Leverage Ratio Framework. Excludes
qualifying central bank claims.
|
REVIEW OF FINANCIAL PERFORMANCE
Strong financial performance with improved profit and returns on
both an underlying and statutory basis
Underlying
profit in the nine months to 30 September was £6,567 million,
8 per cent higher than the first nine months of 2016 with
higher income, positive operating jaws and strong asset quality.
Underlying profit in the third quarter was very strong at
£2,075 million, 9 per cent higher than the same period in
2016, reflecting a 12 per cent increase in net interest
income.
Statutory
profit before tax of £4,495 million in the nine months was 38
per cent higher driven by increased underlying profit and lower
volatility and other items, which in 2016 included the charge on
redemption of the ECNs. Statutory profit after tax was £3,109
million, an increase of 50 per cent compared with a year ago and
the return on tangible equity improved to 10.5 per cent (2016: 7.6
per cent).
The
Group generated c.185 basis points of CET1 capital in the first
nine months of the year with c.85 basis points generated in the
third quarter. The CET1 ratio at 30 September after accruing for
dividends was 14.1 per cent (31 December 2016: 13.8 per cent
pro forma) and the tangible net assets per share were 53.5
pence.
Total income
|
|
Nine
|
|
Nine
|
|
|
|
Three
|
|
Three
|
|
|
|
|
months
|
|
months
|
|
|
|
months
|
|
months
|
|
|
|
|
ended
|
|
ended
|
|
|
|
ended
|
|
ended
|
|
|
|
|
30 Sept
|
|
30
Sept
|
|
|
|
30 Sept
|
|
30
Sept
|
|
|
|
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
|
|
£ million
|
|
£ million
|
|
%
|
|
£ million
|
|
£ million
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
9,117
|
|
8,630
|
|
6
|
|
3,192
|
|
2,848
|
|
12
|
Other
income
|
|
4,776
|
|
4,520
|
|
6
|
|
1,428
|
|
1,427
|
|
–
|
Total income
|
|
13,893
|
|
13,150
|
|
6
|
|
4,620
|
|
4,275
|
|
8
|
Operating
lease depreciation
1
|
|
(769)
|
|
(669)
|
|
(15)
|
|
(274)
|
|
(241)
|
|
(14)
|
Net income
|
|
13,124
|
|
12,481
|
|
5
|
|
4,346
|
|
4,034
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banking
net interest margin
|
|
2.85%
|
|
2.72%
|
|
13bp
|
|
2.90%
|
|
2.69%
|
|
21bp
|
Average
interest-earning assets
|
|
£433.4bn
|
|
£436.6bn
|
|
(1)
|
|
£438.3bn
|
|
£435.9bn
|
|
1
|
1
|
Net of
gains on disposal of leased assets.
|
Total
income of £13,893 million increased by 6 per cent in the nine
months, with growth in both net interest and other income. Total
income in the third quarter was 8 per cent higher than the prior
year, reflecting strong growth in net interest income, including
£186 million from MBNA, and stable other
income.
Net
interest income was £9,117 million, an increase of 6 per cent
compared with 2016, reflecting a 13 basis point improvement in net
interest margin to 2.85 per cent, partly offset by a 1 per
cent reduction in average interest-earning assets. The improvement
in margin continues to be driven by lower deposit and wholesale
funding costs which more than offset continued pressure on asset
margins. The period also includes a 5 basis point benefit from
MBNA. Average interest-earning assets were 1 per cent lower than in
the same period of 2016, reflecting lower balances in run-off,
global corporates and closed book mortgages. In the third quarter
average interest-earning assets were 2 per cent higher than the
second quarter, driven by the impact of consolidating MBNA and
growth in key lending segments.
The
Group now expects the net interest margin to be stable in the
fourth quarter at around 2.90 per cent and for the full year
net interest margin to be around 2.85 per cent.
The
Group manages the risk to its capital and earnings from movements
in interest rates centrally by hedging liabilities which are stable
or less sensitive to movements in rates. These liabilities include
certain current account and savings balances, together with the
Group’s equity. As at 30 September the Group’s hedge
had a nominal balance of £165 billion (30 June 2017:
£143 billion; 31 December 2016: £111 billion), broadly in
line with the underlying hedgeable balances. The hedge had an
average duration of c.3 years and an earning rate of
approximately 1.3 per cent over LIBOR (nine months to 30 September
2016: 1.6 per cent over LIBOR). The benefit from the hedge in the
first nine months was £1.4 billion over LIBOR (nine
months to 30 September 2016: £1.3 billion).
Other
income was £4,776 million in the first nine months, an
increase of 6 per cent compared with 2016 and included the
£146 million gain on sale of the Group’s interest
in VocaLink recognised in the second quarter. Performance remains
resilient with the increase driven by growth in the Lex Autolease
business and strong performance in Commercial Banking. Other income
in the quarter of £1,428 million was in line with the
same period last year. As previously stated in 2016 given the
economic climate, the Group does not expect to hold all gilts to
maturity. The Group has continued to reduce the size of its gilt
and other available-for-sale liquid asset holdings, and has sold
c.£9 billion so far in 2017, realising gains of £200
million (2016: c.£4 billion, realising gains of
£98 million).
Operating costs
|
|
Nine
|
|
Nine
|
|
|
|
Three
|
|
Three
|
|
|
|
|
months
|
|
months
|
|
|
|
months
|
|
months
|
|
|
|
|
ended
|
|
ended
|
|
|
|
ended
|
|
ended
|
|
|
|
|
30 Sept
|
|
30
Sept
|
|
|
|
30 Sept
|
|
30
Sept
|
|
|
|
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
|
|
£ million
|
|
£ million
|
|
%
|
|
£ million
|
|
£ million
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
costs
|
|
6,019
|
|
5,959
|
|
(1)
|
|
2,001
|
|
1,918
|
|
(4)
|
Cost:income
ratio
|
|
45.9%
|
|
47.7%
|
|
(1.8)pp
|
|
46.0%
|
|
47.5%
|
|
(1.5)pp
|
Operating
jaws
|
|
4%
|
|
|
|
|
|
|
|
|
|
|
Simplification
savings annual run-rate
|
|
1,291
|
|
774
|
|
|
|
|
|
|
|
|
Operating
costs were £6,019 million, £60 million higher than 2016
with the increase entirely due to MBNA operating costs of
£69 million for the period. Excluding MBNA, operating
costs were down year-on-year.
The
Group continues to invest significant amounts in developing its
digital capability and further simplifying its processes, and
delivered further efficiency savings through the Simplification
programme in the period. The annual Simplification run-rate savings
achieved by the end of September were £1.3 billion
against a targeted £1.4 billion by the end of the
year.
The
cost:income ratio improved to 45.9 per cent (2016: 47.7 per cent)
with positive operating jaws in the period of 4 per cent. The Group
continues to expect this ratio to be around 45 per cent
exiting 2019, with reductions every year.
Impairment
|
|
Nine
|
|
Nine
|
|
|
|
Three
|
|
Three
|
|
|
|
|
months
|
|
months
|
|
|
|
months
|
|
months
|
|
|
|
|
ended
|
|
ended
|
|
|
|
ended
|
|
ended
|
|
|
|
|
30 Sept
|
|
30 Sept
|
|
|
|
30 Sept
|
|
30 Sept
|
|
|
|
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
|
|
£ million
|
|
£ million
|
|
%
|
|
£ million
|
|
£ million
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment charge
|
|
538
|
|
449
|
|
(20)
|
|
270
|
|
204
|
|
(32)
|
Asset quality ratio
|
|
0.16%
|
|
0.14%
|
|
2bp
|
|
0.24%
|
|
0.18%
|
|
6bp
|
Gross asset quality ratio
|
|
0.26%
|
|
0.26%
|
|
–
|
|
0.31%
|
|
0.27%
|
|
4bp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 Sept
|
|
At 30 June
|
|
|
|
|
|
At 31 Dec
|
|
|
|
|
2017
|
|
2017
|
|
Change
|
|
|
|
2016
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans as a % of closing advances
|
|
1.7%
|
|
1.8%
|
|
(0.1)pp
|
|
|
|
1.8%
|
|
(0.1)pp
|
Provisions as a % of impaired loans
|
|
44.6%
|
|
43.4%
|
|
1.2pp
|
|
|
|
43.4%
|
|
1.2pp
|
Asset
quality remains strong and the loan portfolios are well positioned,
reflecting the Group’s continued prudent approach to credit
risk appetite.
The
asset quality ratio for the nine months increased to 16 basis
points, reflecting the expected lower provision
write-backs
and releases. The gross asset quality ratio remained unchanged at
26 basis points, reflecting strong asset quality and despite a
single large corporate impairment in the third quarter and the
impact of MBNA.
The UK
housing market has been resilient and overall credit performance in
the mortgage book remains stable. The Motor Finance book benefits
from conservative residual values and prudent provisioning with
stable credit performance. The credit card book continued to
perform strongly, with reductions in persistent debt, and
benefiting from a conservative risk appetite. The MBNA portfolio is
performing in line with both the Group’s expectations and the
existing credit card book.
The
Group continues to expect the full year asset quality ratio to be
less than 20 basis points in 2017.
Impaired
loans as a percentage of closing advances improved to 1.7 per cent
compared with June 2017 and provisions as a percentage of impaired
loans increased to 44.6 per cent.
Statutory profit
|
|
Nine
|
|
Nine
|
|
|
|
Three
|
|
Three
|
|
|
|
|
months
|
|
months
|
|
|
|
months
|
|
months
|
|
|
|
|
ended
|
|
ended
|
|
|
|
ended
|
|
ended
|
|
|
|
|
30 Sept
|
|
30
Sept
|
|
|
|
30 Sept
|
|
30
Sept
|
|
|
|
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
|
|
£ million
|
|
£ million
|
|
%
|
|
£ million
|
|
£ million
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying profit
|
|
6,567
|
|
6,073
|
|
8
|
|
2,075
|
|
1,912
|
|
9
|
Volatility
and other items
|
|
|
|
|
|
|
|
|
|
|
|
|
Enhanced Capital
Notes
|
|
–
|
|
(790)
|
|
|
|
–
|
|
–
|
|
|
Market
volatility and asset sales
|
|
256
|
|
393
|
|
|
|
120
|
|
266
|
|
|
Amortisation of
purchased intangibles
|
|
(64)
|
|
(255)
|
|
|
|
(26)
|
|
(87)
|
|
|
Restructuring
costs
|
|
(469)
|
|
(390)
|
|
|
|
(148)
|
|
(83)
|
|
|
Fair
value unwind and other
|
|
(205)
|
|
(156)
|
|
|
|
(70)
|
|
(47)
|
|
|
|
|
(482)
|
|
(1,198)
|
|
|
|
(124)
|
|
49
|
|
|
PPI
provision
|
|
(1,050)
|
|
(1,000)
|
|
|
|
–
|
|
(1,000)
|
|
|
Other
conduct provisions
|
|
(540)
|
|
(610)
|
|
|
|
–
|
|
(150)
|
|
|
Statutory profit before tax
|
|
4,495
|
|
3,265
|
|
38
|
|
1,951
|
|
811
|
|
141
|
Taxation
|
|
(1,386)
|
|
(1,189)
|
|
|
|
(481)
|
|
(592)
|
|
|
Profit for the period
|
|
3,109
|
|
2,076
|
|
50
|
|
1,470
|
|
219
|
|
571
|
Statutory
profit before tax increased 38 per cent to £4,495 million
(2016: £3,265 million) and statutory profit after tax
increased 50 per cent to £3,109 million (2016:
£2,076 million). These increases were driven by increased
underlying profit and lower volatility and other items, which in
2016 included the charge on redemption of the ECNs.
Market
volatility and asset sales of £256 million included positive
insurance volatility of £217 million. The credit of
£393 million in 2016 included the £484 million gain
on sale of the Group’s interest in Visa Europe.
The
amortisation of purchased intangibles was lower at £64 million
(2016: £255 million) as certain intangible assets are now
fully amortised.
Restructuring
costs increased to £469 million (2016: £390 million) and
comprised costs relating to the Simplification programme, the
rationalisation of the non-branch property portfolio,
implementation of the ring-fencing requirements and MBNA
integration costs.
The
charges for PPI and other conduct reflect the provisions taken in
the first half of the year with no additional charges taken in the
third quarter. The outstanding PPI balance sheet provision at the
end of September was £2.3 billion. PPI claim levels
increased as expected in the third quarter following the FCA
advertising campaign, reaching c.16,000 per week and have now
reduced to c.11,000 per week, above our assumed run-rate of c.9,000
per week.
Taxation
The tax
charge of £1,386 million represents an effective tax rate of
31 per cent (2016: 36 per cent) which is above the
Group’s medium term expectation of around 27 per cent as a
result of the non-deductibility of conduct provisions.
Return on tangible equity
The
return on tangible equity for the first nine months improved to
10.5 per cent (2016: 7.6 per cent) reflecting the significant
increase in statutory profit after tax in the period. The Group
continues to expect to generate a statutory return on tangible
equity of between 13.5 and 15.0 per cent in 2019, and delivered
statutory returns above this range in the third
quarter.
Balance sheet
|
|
At 30 Sept
|
|
At 30 June
|
|
Change
|
|
At 31 Dec
|
|
Change
|
|
|
2017
|
|
2017
|
|
%
|
|
2016
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to customers
1
|
|
£455bn
|
|
£453bn
|
|
–
|
|
£450bn
|
|
1
|
Customer deposits
2
|
|
£413bn
|
|
£417bn
|
|
(1)
|
|
£413bn
|
|
–
|
Loan to deposit ratio
|
|
110%
|
|
109%
|
|
1pp
|
|
109%
|
|
1pp
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale funding
|
|
£99bn
|
|
£102bn
|
|
(4)
|
|
£111bn
|
|
(11)
|
Wholesale funding <1 year maturity
|
|
£27bn
|
|
£30bn
|
|
(11)
|
|
£35bn
|
|
(23)
|
Of which money-market funding <1 year
maturity
3
|
|
£15bn
|
|
£17bn
|
|
(11)
|
|
£14bn
|
|
9
|
Liquidity coverage ratio – eligible assets
|
|
£119bn
|
|
£122bn
|
|
(3)
|
|
£121bn
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
CET1 ratio pre 2017 dividend accrual
4
|
|
14.9%
|
|
14.0%
|
|
0.9pp
|
|
13.8%
|
|
1.1pp
|
CET1 ratio
4
|
|
14.1%
|
|
13.5%
|
|
0.6pp
|
|
13.8%
|
|
0.3pp
|
UK leverage ratio
4,5
|
|
5.4%
|
|
5.2%
|
|
0.2pp
|
|
5.3%
|
|
0.1pp
|
Dividends per share – ordinary (interim/full
year)
|
|
−
|
|
1.0p
|
|
|
|
2.55p
|
|
|
Dividends per share – special
|
|
−
|
|
−
|
|
|
|
0.50p
|
|
|
Tangible net assets per share
|
|
53.5p
|
|
52.4p
|
|
1.1p
|
|
54.8p
|
|
(1.3)p
|
1
|
Excludes
reverse repos of £14.1 billion (30 June 2017: £11.4
billion; 31 December 2016:
£8.3 billion).
|
2
|
Excludes
repos of £0.7 billion (30 June 2017: £1.0 billion;
31 December 2016: £2.5 billion).
|
3
|
Excludes
balances relating to margins of £3.1 billion (30 June
2017: £2.9 billion; 31 December 2016:
£3.2 billion) and settlement accounts of
£1.2 billion (30 June 2017: £1.2 billion;
31 December 2016: £1.8 billion).
|
4
|
The
CET1 and leverage ratios at 30 June 2017 and 31 December 2016
were reported on a pro forma basis, separately reflecting the
dividends paid by the Insurance business in July 2017 (in relation
to 2017 interim earnings) and February 2017 (in relation to 2016
full year earnings).
|
5
|
Calculated
in accordance with the UK Leverage Ratio Framework. Excludes
qualifying central bank claims.
|
Loans
and advances to customers, at £455 billion, increased by
£2 billion compared to 30 June 2017 and by
£5 billion since the start of the year. The growth on the
quarter was driven by a number of areas, principally open book
mortgage balances, up by £0.8 billion, and UK Motor
Finance, up by £0.6 billion. This was partly offset by
the continued reduction in closed book mortgages and lower run-off
balances. The Group continues to expect open book mortgage balances
at the end of 2017 to be slightly above 2016.
Wholesale
funding was lower at £99 billion (30 June 2017: £102
billion). The Group has continued to draw down the Bank of
England’s term funding scheme with £18 billion
drawn as at 30 September. The Group drew down an additional
£2 billion in October and has now fully utilised its
£20 billion capacity. The Group continues to meet the
Liquidity Coverage Ratio (LCR) requirements, with a ratio in excess
of 100 per cent.
In the
first nine months of 2017 the Group issued £4.1 billion
(sterling equivalent) of senior unsecured securities from Lloyds
Banking Group plc which, while not included in total capital, are
eligible to meet MREL. Combined with previous issuances made during
2016 the Group remains well positioned to meet MREL requirements
from 2020 and, as at 30 September 2017, had a transitional
MREL ratio of 23.7 per cent.
Capital
In the
quarter we have seen improved capital generation and some upward
pressure on capital requirements. Capital generation in the quarter
was strong at c.85 basis points with the CET1 ratio strengthening
to 14.9 per cent pre 2017 dividends. In the quarter c.60 basis
points was from underlying capital generation with c.5 basis
points from movements in risk-weighted assets and c.20 basis points
from market and other movements. As a result of this performance,
the Group now expects to generate between 225 and 240 basis points
of capital this year and continues to expect to generate 170 to 200
basis points per annum on an ongoing basis.
The
Group’s current view of the appropriate level of CET1 capital
required to grow the business, meet regulatory capital requirements
and cover uncertainties is around 13 per cent. Capital requirements
however continue to evolve and during the third quarter the
Prudential Regulation Authority (PRA) has increased the Pillar 2A
CET1 requirement from 2.5 per cent to 3 per cent. The
additional Pillar 2A capital will be held at year end and as a
consequence, while other elements are still uncertain, there is
upward pressure on the Group’s overall capital requirement of
around 13 per cent.
The
Group is awaiting guidance on the PRA Buffer and will provide an
update on capital requirements with the full year results. The
Group however still expects to deliver a progressive and
sustainable ordinary dividend for the full year and the Board will
give due consideration at the year end to the distribution of
surplus capital through the use of special dividends or share buy
backs.
Tangible net assets per share
Tangible
net assets per share increased to 53.5 pence (30 June 2017: 52.4
pence). The increase was due to the Group’s strong financial
performance in the quarter (2.0 pence) and positive reserve
movements (0.1 pence) offset by the payment of the interim
dividend in September. The positive reserve movements were driven
by favourable movements in the defined benefit pension scheme, due
to improved asset returns, more than offsetting the fall in the
cashflow hedge reserve as a result of changes to interest rate
expectations.
IFRS 9
The
Group’s IFRS 9 implementation is nearing completion,
including embedding of the new systems and processes. It is
currently expected that the CET1 capital impact before any
transitional relief will be a reduction of between 10 to 30 basis
points after taking account of any offset against regulatory
expected losses, mainly as a result of additional impairment
provisions. As a consequence, on transition IFRS 9 is not expected
to have a material impact on the Group‘s capital
position.
Credit ratings
At the
end of September the credit rating for Lloyds Bank plc was upgraded
by one notch to Aa3 by Moody’s. This reflected improvements
in asset risk and capital levels combined with an expectation of
improving profitability as conduct charges decrease. The Lloyds
Banking Group plc (HoldCo) rating was also upgraded by one notch to
A3 as a result.
STATUTORY CONSOLIDATED INCOME STATEMENT AND BALANCE SHEET
(UNAUDITED)
|
|
Nine
|
|
Nine
|
|
|
months
|
|
months
|
|
|
ended
|
|
ended
|
|
|
30 Sept
|
|
30 Sept
|
|
|
2017
|
|
2016
|
Income statement
|
|
£ million
|
|
£ million
|
|
|
|
|
|
Net interest income
|
|
8,206
|
|
6,857
|
Other income, net of insurance claims
|
|
5,794
|
|
5,995
|
Total income, net of insurance claims
|
|
14,000
|
|
12,852
|
Total operating expenses
|
|
(9,051)
|
|
(9,041)
|
Impairment
|
|
(454)
|
|
(546)
|
Profit before tax
|
|
4,495
|
|
3,265
|
Taxation
|
|
(1,386)
|
|
(1,189)
|
Profit for the period
|
|
3,109
|
|
2,076
|
|
|
|
|
|
Profit attributable to ordinary shareholders
|
|
2,752
|
|
1,693
|
Profit attributable to other equity holders
1
|
|
312
|
|
307
|
Profit attributable to equity holders
|
|
3,064
|
|
2,000
|
Profit attributable to non-controlling interests
|
|
45
|
|
76
|
Profit for the period
|
|
3,109
|
|
2,076
|
|
|
At 30 Sept
|
|
At 31 Dec
|
|
|
2017
|
|
2016
|
Balance sheet
|
|
£ million
|
|
£ million
|
|
|
|
|
|
Assets
|
|
|
|
|
Cash and balances at central banks
|
|
49,771
|
|
47,452
|
Trading and other financial assets at fair value through profit or
loss
|
|
161,685
|
|
151,174
|
Derivative financial instruments
|
|
27,143
|
|
36,138
|
Loans and receivables
|
|
480,339
|
|
488,257
|
Available-for-sale financial assets
|
|
47,127
|
|
56,524
|
Other assets
|
|
44,897
|
|
38,248
|
Total assets
|
|
810,962
|
|
817,793
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Deposits from banks
|
|
28,808
|
|
16,384
|
Customer deposits
|
|
413,948
|
|
415,460
|
Trading and other financial liabilities at fair value through
profit or loss
|
|
54,722
|
|
54,504
|
Derivative financial instruments
|
|
27,660
|
|
34,924
|
Debt securities in issue
|
|
70,143
|
|
76,314
|
Liabilities arising from insurance and investment
contracts
|
|
116,507
|
|
114,502
|
Subordinated liabilities
|
|
18,020
|
|
19,831
|
Other liabilities
|
|
31,952
|
|
37,059
|
Total liabilities
|
|
761,760
|
|
768,978
|
|
|
|
|
|
Shareholders’ equity
|
|
43,379
|
|
43,020
|
Other equity instruments
|
|
5,355
|
|
5,355
|
Non-controlling interests
|
|
468
|
|
440
|
Total equity
|
|
49,202
|
|
48,815
|
Total equity and liabilities
|
|
810,962
|
|
817,793
|
1
|
The
profit after tax attributable to other equity holders of
£312 million (nine months to 30 September 2016: £307
million) is offset in reserves by a tax credit attributable to
ordinary shareholders of £75 million (nine months to 30
September 2016: £61 million).
|
NOTES
1.
Summary
of movements in total equity
|
|
Shareholders’equity
|
|
Otherequityinstruments
|
|
Non-controllinginterests
|
|
Totalequity
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2017
|
|
43,020
|
|
5,355
|
|
440
|
|
48,815
|
|
|
|
|
|
|
|
|
|
Profit for the period
|
|
3,064
|
|
–
|
|
45
|
|
3,109
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
Post-retirement defined benefit pension schemeremeasurements, net
of tax
|
|
343
|
|
–
|
|
–
|
|
343
|
Movements in revaluation reserve in respect ofavailable-for-sale
financial assets, net of tax
|
|
57
|
|
–
|
|
–
|
|
57
|
Gains and losses attributable to own credit risk, net of
tax
|
|
(25)
|
|
–
|
|
–
|
|
(25)
|
Movements in cash flow hedging reserve, net of tax
|
|
(767)
|
|
–
|
|
–
|
|
(767)
|
Currency translation differences and other
|
|
(19)
|
|
–
|
|
–
|
|
(19)
|
Total other comprehensive income
|
|
(411)
|
|
–
|
|
–
|
|
(411)
|
Total comprehensive income
|
|
2,653
|
|
–
|
|
45
|
|
2,698
|
|
|
|
|
|
|
|
|
|
Transactions with owners
|
|
|
|
|
|
|
|
|
Dividends
|
|
(2,288)
|
|
–
|
|
(26)
|
|
(2,314)
|
Distributions on other equity instruments, net of tax
|
|
(237)
|
|
–
|
|
–
|
|
(237)
|
Issue of ordinary shares
|
|
56
|
|
–
|
|
–
|
|
56
|
Treasury shares and employee award schemes
|
|
175
|
|
–
|
|
–
|
|
175
|
Changes in non-controlling interests
|
|
–
|
|
–
|
|
9
|
|
9
|
Total transactions with owners
|
|
(2,294)
|
|
–
|
|
(17)
|
|
(2,311)
|
|
|
|
|
|
|
|
|
|
Balance at 30 September 2017
|
|
43,379
|
|
5,355
|
|
468
|
|
49,202
|
|
|
|
|
|
|
|
|
|
Balance at 1 July 2017
|
|
42,513
|
|
5,355
|
|
478
|
|
48,346
|
|
|
|
|
|
|
|
|
|
Profit for the period
|
|
1,466
|
|
–
|
|
4
|
|
1,470
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
Post-retirement defined benefit pension schemeremeasurements, net
of tax
|
|
435
|
|
–
|
|
–
|
|
435
|
Movements in revaluation reserve in respect ofavailable-for-sale
financial assets, net of tax
|
|
(41)
|
|
–
|
|
–
|
|
(41)
|
Gains and losses attributable to own credit risk, net of
tax
|
|
7
|
|
–
|
|
–
|
|
7
|
Movements in cash flow hedging reserve, net of tax
|
|
(334)
|
|
–
|
|
–
|
|
(334)
|
Currency translation differences and other
|
|
(12)
|
|
–
|
|
–
|
|
(12)
|
Total other comprehensive income
|
|
55
|
|
–
|
|
–
|
|
55
|
Total comprehensive income
|
|
1,521
|
|
–
|
|
4
|
|
1,525
|
|
|
|
|
|
|
|
|
|
Transactions with owners
|
|
|
|
|
|
|
|
|
Dividends
|
|
(720)
|
|
–
|
|
(26)
|
|
(746)
|
Distributions on other equity instruments, net of tax
|
|
(79)
|
|
–
|
|
–
|
|
(79)
|
Issue of ordinary shares
|
|
9
|
|
–
|
|
–
|
|
9
|
Treasury shares and employee award schemes
|
|
135
|
|
–
|
|
–
|
|
135
|
Changes in non-controlling interests
|
|
–
|
|
–
|
|
12
|
|
12
|
Total transactions with owners
|
|
(655)
|
|
–
|
|
(14)
|
|
(669)
|
|
|
|
|
|
|
|
|
|
Balance at 30 September 2017
|
|
43,379
|
|
5,355
|
|
468
|
|
49,202
|
2.
Reconciliation
between statutory and underlying basis results
The
tables below set out the reconciliation from the statutory results
to the underlying basis results.
|
|
|
|
Removal of:
|
|
|
|
|
|
|
|
Volatility
|
|
|
|
|
|
Other
|
|
|
|
|
Statutory
|
|
and other
|
|
Insurance
|
|
|
|
conduct
|
|
Underlying
|
|
|
basis
|
|
items
1,2
|
|
gross up
3
|
|
PPI
|
|
provisions
|
|
basis
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
Nine months to 30 September 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
8,206
|
|
175
|
|
736
|
|
–
|
|
–
|
|
9,117
|
Other income, net of insurance claims
|
|
5,794
|
|
(209)
|
|
(809)
|
|
–
|
|
–
|
|
4,776
|
Total income
|
|
14,000
|
|
(34)
|
|
(73)
|
|
–
|
|
–
|
|
13,893
|
Operating lease depreciation
|
|
|
|
(769)
|
|
–
|
|
–
|
|
–
|
|
(769)
|
Net income
|
|
14,000
|
|
(803)
|
|
(73)
|
|
–
|
|
–
|
|
13,124
|
Operating expenses
4
|
|
(9,051)
|
|
1,369
|
|
73
|
|
1,050
|
|
540
|
|
(6,019)
|
Impairment
|
|
(454)
|
|
(84)
|
|
–
|
|
–
|
|
–
|
|
(538)
|
Profit before tax
|
|
4,495
|
|
482
|
|
–
|
|
1,050
|
|
540
|
|
6,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months to 30 September 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
6,857
|
|
200
|
|
1,573
|
|
–
|
|
–
|
|
8,630
|
Other income, net of insurance claims
|
|
5,995
|
|
211
|
|
(1,701)
|
|
–
|
|
15
|
|
4,520
|
Total income
|
|
12,852
|
|
411
|
|
(128)
|
|
–
|
|
15
|
|
13,150
|
Operating lease depreciation
|
|
|
|
(669)
|
|
–
|
|
–
|
|
–
|
|
(669)
|
Net income
|
|
12,852
|
|
(258)
|
|
(128)
|
|
–
|
|
15
|
|
12,481
|
Operating expenses
4
|
|
(9,041)
|
|
1,359
|
|
128
|
|
1,000
|
|
595
|
|
(5,959)
|
Impairment
|
|
(546)
|
|
97
|
|
–
|
|
–
|
|
–
|
|
(449)
|
Profit before tax
|
|
3,265
|
|
1,198
|
|
–
|
|
1,000
|
|
610
|
|
6,073
|
1
|
Nine
months to 30 September 2017 comprises the effects of asset sales
(gains of £50 million); volatile items (gains of
£221 million); liability management (losses of
£15 million); the amortisation of purchased intangibles
(£64 million); restructuring costs
(£469 million, comprising severance costs relating to the
Simplification programme, the rationalisation of the non-branch
property portfolio, the work on implementing the ring-fencing
requirements and the integration of MBNA); and the fair value
unwind and other items (losses of
£205 million).
|
2
|
Nine
months to 30 September 2016 comprises the write-off of the ECN
embedded derivative and premium paid on redemption of the remaining
notes in the first quarter (loss of £790 million); the
effects of asset sales (gain of £290 million); volatile
items (loss of £30 million); liability management (gain
of £133 million); the fair value unwind (loss of
£156 million); the amortisation of purchased intangibles
(£255 million); and restructuring costs
(£390 million, principally comprising the severance
related costs related to phase II of the Simplification
programme).
|
3
|
The
Group’s insurance businesses’ income statements include
income and expenditure which are attributable to the policyholders
of the Group’s long-term assurance funds. These items have no
impact in total upon the profit attributable to equity shareholders
and, in order to provide a clearer representation of the underlying
trends within the business, these items are shown net within the
underlying results.
|
4
|
The
statutory basis figure is the aggregate of operating costs and
operating lease depreciation.
|
3.
Banking
net interest margin
|
|
Nine
|
|
Nine
|
|
|
months
|
|
months
|
|
|
ended
|
|
ended
|
|
|
30 Sept
|
|
30 Sept
|
|
|
2017
|
|
2016
|
|
|
£m
|
|
£m
|
|
|
|
|
|
Group net interest income – statutory basis
|
|
8,206
|
|
6,857
|
Insurance gross up
|
|
736
|
|
1,573
|
Volatility and other items
|
|
175
|
|
200
|
Group net interest income – underlying basis
|
|
9,117
|
|
8,630
|
Non-banking net interest expense
|
|
106
|
|
272
|
Banking net interest income – underlying basis
|
|
9,223
|
|
8,902
|
|
|
|
|
|
Average interest-earning assets
|
|
£433.4bn
|
|
£436.6bn
|
|
|
|
|
|
Banking net interest margin
|
|
2.85%
|
|
2.72%
|
4.
Return
on tangible equity
|
|
Nine
|
|
Nine
|
|
|
months
|
|
months
|
|
|
ended
|
|
ended
|
|
|
30 Sept
|
|
30 Sept
|
|
|
2017
|
|
2016
|
|
|
£bn
|
|
£bn
|
Underlying return on tangible equity
|
|
|
|
|
Average shareholders' equity
|
|
43.3
|
|
42.7
|
Average intangible assets
|
|
(4.4)
|
|
(3.9)
|
Average tangible equity
|
|
38.9
|
|
38.8
|
|
|
|
|
|
Underlying profit after tax (£m)
|
|
4,831
|
|
4,420
|
Add back amortisation of intangible assets (post tax)
(£m)
|
|
160
|
|
181
|
Less profit attributable to other equity holders
(£m)
|
|
(237)
|
|
(246)
|
Less profit attributable to non-controlling interests
(£m)
|
|
(45)
|
|
(76)
|
Adjusted underlying profit after tax
|
|
4,709
|
|
4,279
|
|
|
|
|
|
Underlying return on tangible equity
|
|
16.2%
|
|
14.8%
|
|
|
|
|
|
Statutory return on tangible equity
|
|
|
|
|
Group statutory profit after tax (£m)
|
|
3,109
|
|
2,076
|
Add back amortisation of intangible assets (post tax)
(£m)
|
|
160
|
|
181
|
Add back amortisation of purchased intangible assets (post tax)
(£m)
|
|
68
|
|
260
|
Less profit attributable to other equity holders
(£m)
|
|
(237)
|
|
(246)
|
Less profit attributable to non-controlling interests
(£m)
|
|
(45)
|
|
(76)
|
Adjusted statutory profit after tax
|
|
3,055
|
|
2,195
|
|
|
|
|
|
Statutory return on tangible equity
|
|
10.5%
|
|
7.6%
|
5.
Quarterly
underlying basis information
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
|
ended
|
|
ended
|
|
ended
|
|
ended
|
|
ended
|
|
|
30 Sept
|
|
30 June
|
|
31 Mar
|
|
31 Dec
|
|
30 Sept
|
|
|
2017
|
|
2017
|
|
2017
|
|
2016
|
|
2016
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
3,192
|
|
2,997
|
|
2,928
|
|
2,805
|
|
2,848
|
Other income
|
|
1,428
|
|
1,866
|
|
1,482
|
|
1,545
|
|
1,427
|
Total income
|
|
4,620
|
|
4,863
|
|
4,410
|
|
4,350
|
|
4,275
|
Operating lease depreciation
|
|
(274)
|
|
(263)
|
|
(232)
|
|
(226)
|
|
(241)
|
Net income
|
|
4,346
|
|
4,600
|
|
4,178
|
|
4,124
|
|
4,034
|
Operating costs
|
|
(2,001)
|
|
(2,050)
|
|
(1,968)
|
|
(2,134)
|
|
(1,918)
|
Impairment
|
|
(270)
|
|
(141)
|
|
(127)
|
|
(196)
|
|
(204)
|
Underlying profit
|
|
2,075
|
|
2,409
|
|
2,083
|
|
1,794
|
|
1,912
|
Market volatility and asset sales
|
|
120
|
|
124
|
|
12
|
|
46
|
|
265
|
Amortisation of purchased intangibles
|
|
(26)
|
|
(15)
|
|
(23)
|
|
(85)
|
|
(87)
|
Restructuring costs
|
|
(148)
|
|
(164)
|
|
(157)
|
|
(232)
|
|
(83)
|
Fair value unwind and other items
|
|
(70)
|
|
(74)
|
|
(61)
|
|
(75)
|
|
(46)
|
PPI provision
|
|
–
|
|
(700)
|
|
(350)
|
|
–
|
|
(1,000)
|
Other conduct provisions
|
|
–
|
|
(340)
|
|
(200)
|
|
(475)
|
|
(150)
|
Statutory profit before tax
|
|
1,951
|
|
1,240
|
|
1,304
|
|
973
|
|
811
|
|
|
|
|
|
|
|
|
|
|
|
Banking net interest margin
|
|
2.90%
|
|
2.83%
|
|
2.80%
|
|
2.68%
|
|
2.69%
|
Average interest-earning assets
|
|
£438.3bn
|
|
£431.0bn
|
|
£430.9bn
|
|
£434.0bn
|
|
£435.9bn
|
Cost:income ratio
|
|
46.0%
|
|
44.6%
|
|
47.1%
|
|
51.7%
|
|
47.5%
|
Asset quality ratio
|
|
0.24%
|
|
0.13%
|
|
0.12%
|
|
0.17%
|
|
0.18%
|
6.
Tangible
net assets per share
The
table below shows the reconciliation between the Group’s
shareholders’ equity and its tangible net
assets.
|
|
At 30 Sept
|
|
At 30 June
|
|
At 31 Dec
|
|
|
2017
|
|
2017
|
|
2016
|
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
Shareholders’
equity
|
|
43,379
|
|
42,513
|
|
43,020
|
Goodwill
|
|
(2,299)
|
|
(2,299)
|
|
(2,016)
|
Intangible
assets
|
|
(2,599)
|
|
(2,536)
|
|
(1,681)
|
Purchased
value of in-force business
|
|
(314)
|
|
(323)
|
|
(340)
|
Other,
including deferred tax effects
|
|
277
|
|
283
|
|
170
|
Tangible net assets
|
|
38,444
|
|
37,638
|
|
39,153
|
|
|
|
|
|
|
|
Ordinary
shares in issue, excluding Own shares
|
|
71,920m
|
|
71,871m
|
|
71,413m
|
Tangible
net assets per share
|
|
53.5p
|
|
52.4p
|
|
54.8p
|
CAPITAL
AND LEVERAGE DISCLOSURES
|
|
Transitional
|
|
Fully loaded
|
|
|
At 30 Sept
|
|
At 31 Dec
|
|
At 30 Sept
|
|
At 31 Dec
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Capital resources
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
Common equity tier 1
|
|
|
|
|
|
|
|
|
Shareholders’ equity per balance sheet
|
|
43,379
|
|
43,020
|
|
43,379
|
|
43,020
|
Deconsolidation adjustments
1
|
|
1,561
|
|
1,342
|
|
1,561
|
|
1,342
|
Other
adjustments
|
|
(2,414)
|
|
(3,893)
|
|
(2,414)
|
|
(3,893)
|
Deductions from common equity tier 1
|
|
(12,007)
|
|
(11,185)
|
|
(12,007)
|
|
(11,185)
|
Common equity tier 1 capital
|
|
30,519
|
|
29,284
|
|
30,519
|
|
29,284
|
|
|
|
|
|
|
|
|
|
Additional tier 1 instruments
|
|
8,075
|
|
8,626
|
|
5,320
|
|
5,320
|
Deductions from tier 1
|
|
(1,291)
|
|
(1,329)
|
|
–
|
|
–
|
Total tier 1 capital
|
|
37,303
|
|
36,581
|
|
35,839
|
|
34,604
|
|
|
|
|
|
|
|
|
|
Tier 2 instruments and eligible provisions
|
|
10,342
|
|
11,113
|
|
7,307
|
|
7,918
|
Deductions from tier 2
|
|
(1,635)
|
|
(1,571)
|
|
(2,926)
|
|
(2,900)
|
Total capital resources
|
|
46,010
|
|
46,123
|
|
40,220
|
|
39,622
|
|
|
|
|
|
|
|
|
|
Total risk-weighted assets
|
|
217,014
|
|
215,534
|
|
217,014
|
|
215,534
|
|
|
|
|
|
|
|
|
|
Leverage
2
|
|
|
|
|
|
|
|
|
Statutory balance sheet assets
|
|
|
|
|
|
810,962
|
|
817,793
|
Deconsolidation, qualifying central bank claims and other
adjustments
1
|
|
|
|
|
|
(205,077)
|
|
(210,880)
|
Off-balance sheet items
|
|
|
|
|
|
57,860
|
|
58,685
|
Total exposure measure
|
|
|
|
|
|
663,745
|
|
665,598
|
Average exposure measure
5
|
|
|
|
|
|
666,666
|
|
|
|
|
|
|
|
|
|
|
|
CRD IV exposure measure
3
|
|
|
|
|
|
709,976
|
|
707,108
|
|
|
|
|
|
|
|
|
|
Ratios
|
|
|
|
|
|
|
|
|
Common equity tier 1 capital ratio
|
|
14.1%
|
|
13.6%
|
|
14.1%
|
|
13.6%
|
Tier 1 capital ratio
|
|
17.2%
|
|
17.0%
|
|
16.5%
|
|
16.1%
|
Total capital ratio
|
|
21.2%
|
|
21.4%
|
|
18.5%
|
|
18.4%
|
UK leverage ratio
4
|
|
|
|
|
|
5.4%
|
|
5.2%
|
Average UK leverage ratio
5
|
|
|
|
|
|
5.3%
|
|
|
CRD IV leverage ratio
|
|
|
|
|
|
5.0%
|
|
4.9%
|
1
|
Deconsolidation
adjustments relate to the deconsolidation of certain Group entities
for regulatory capital and leverage purposes, being primarily the
Group’s Insurance business.
|
2
|
Calculated
in accordance with the UK Leverage Ratio Framework which requires
qualifying central bank claims to be excluded from the leverage
exposure measure.
|
3
|
Calculated
in accordance with CRD IV rules which include central bank claims
within the leverage exposure measure.
|
4
|
The
countercyclical leverage buffer is currently nil.
|
5
|
The
average UK leverage ratio is based on the average of the month end
tier 1 capital and exposure measures over the quarter (1 July
2017 to 30 September 2017). The average of 5.3 per cent
compares to 5.2 per cent at the start and 5.4 per cent at
the end of the quarter, primarily reflecting a strengthening of the
tier 1 capital position over the quarter.
|
OTHER MATTERS
Ring-fencing programme
Good progress continues to be made with the implementation of the
Group’s ring-fencing programme, including the creation of the
non-ring-fenced bank, Lloyds Bank Corporate Markets (LBCM). As
previously indicated, as a simple, UK retail and commercial bank,
the impact on the Group is relatively limited and there will be
minimal impact for the majority of the Group’s retail and
commercial customers.
Further details on the programme are available on the Group’s
website at
www.lloydsbankinggroup.com/ringfencing
.
This includes details of the Group structure, the court process for
the transfer of relevant business to LBCM and, from early December,
details of how a
nyone who thinks the Group’s
implementation of ring-fencing changes may negatively affect them
has the right to participate in the court process.
Pillar 3
The
European Banking Authority published revised guidelines on Pillar 3
disclosure formats and frequency in December 2016. The guidelines
require specific disclosures to be published on a quarterly basis
which the Group has provided through a separate report (‘Q3
2017 Interim Pillar 3 Report’), a copy of which is located at
www.lloydsbankinggroup.com/investors/financial-performance/other-disclosures
APPENDIX
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
|
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
|
Operating
costs as a percentage of net income calculated on an underlying
basis
|
Gross
asset quality ratio
|
The
underlying impairment charge for the period (on an annualised
basis) in respect of loans and advances to customers before
releases and write-backs, expressed as a percentage of average
gross loans and advances to customers for the period
|
Impaired
loans as a percentage of closing advances
|
Impaired
loans and advances to customers adjusted to exclude Retail and
Consumer Finance loans in recoveries, expressed as a percentage of
closing gross loans and advances to customers
|
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
|
Operating
jaws
|
The
difference between the period on period percentage change in net
income and the period on period change in operating costs
calculated on an underlying basis
|
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 add back amortisation of intangible
assets, and 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
|
Statutory
profit adjusted for certain items as detailed in the Basis of
Presentation
|
Underlying
return on tangible equity
|
Underlying
profit after tax at the standard UK corporation tax rate adjusted
to add back amortisation of intangible assets, and to deduct profit
attributable to non-controlling interests and other equity holders,
divided by average tangible net assets
|
|
BASIS OF PRESENTATION
|
This
release covers the results of Lloyds Banking Group plc together
with its subsidiaries (the Group) for the nine months ended
30 September 2017.
|
Statutory basis:
Statutory information
is set out on page 9. However, a number of factors have had a
significant effect on the comparability of the Group’s
financial position and results. Accordingly, the results are also
presented on an underlying basis.
|
Underlying basis:
The statutory results
are adjusted for certain items which are listed below, to allow a
comparison of the Group’s underlying
performance.
-
losses on
redemption of the Enhanced Capital Notes and the volatility in the
value of the embedded equity conversion feature;
-
market volatility and asset sales, which includes the effects of
certain asset sales, the volatility relating to the Group’s
own debt and hedging arrangements and that arising in the insurance
businesses and insurance gross up;
-
the unwind of
acquisition-related fair value adjustments and the amortisation of
purchased intangible assets;
-
restructuring costs, comprising severance related costs relating to
the Simplification programme, the costs of implementing regulatory
reform and ring-fencing, the rationalisation of the non-branch
property portfolio and the integration of MBNA; and
-
payment protection
insurance and other conduct provisions.
|
Unless
otherwise stated, income statement commentaries throughout this
document compare the nine months ended 30 September 2017 to
the nine months ended 30 September 2016, and the balance sheet
analysis compares the Group balance sheet as at 30 September
2017 to the Group balance sheet as at 31 December
2016.
MBNA:
MBNA’s results and balance
sheet have been consolidated with effect from 1 June
2017.
Alternative performance measures:
The
Group uses a number of alternative performance measures, including
underlying profit, in the discussion of its business performance
and financial position on pages 1 to 8. Further information on
these measures is set out on page 16.
|
FORWARD LOOKING STATEMENTS
This
document contains certain forward looking statements with respect
to the business, strategy and plans of Lloyds Banking Group and its
current goals and expectations relating to its future financial
condition and performance. Statements that are not historical
facts, including statements about Lloyds Banking Group's or its
directors' and/or management's beliefs and expectations, are
forward looking statements. 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 the plans, objectives,
expectations, estimates and intentions expressed in such forward
looking statements made by the Group or on its behalf include, but
are not limited to: general economic and business conditions in the
UK and internationally; market related trends and developments;
fluctuations in interest rates (including low or negative rates),
exchange rates, stock markets and currencies; the ability to access
sufficient sources of capital, liquidity and funding when required;
changes to the Group's credit ratings; the ability to derive cost
savings and other benefits including, but without limitation as a
result of any acquisitions, disposals and other strategic
transactions; changing customer behaviour including consumer
spending, saving and borrowing habits; changes to borrower or
counterparty credit quality; instability in the global financial
markets, including Eurozone instability, instability as a result of
the exit by the UK from the European Union (EU) and the potential
for other countries to exit the EU or the Eurozone and the impact
of any sovereign credit rating downgrade or other sovereign
financial issues; technological changes and risks to the security
of IT and operational infrastructure, systems, data and information
resulting from increased threat of cyber and other attacks;
natural, pandemic and other disasters, adverse weather and similar
contingencies outside the Group's control; inadequate or failed
internal or external processes or systems; acts of war, other acts
of hostility, terrorist acts and responses to those acts,
geopolitical, pandemic or other such events; changes in laws,
regulations, accounting standards or taxation, including as a
result of the exit by the UK from the EU, or a further possible
referendum on Scottish independence; changes to regulatory capital
or liquidity requirements and similar contingencies outside the
Group's control; the policies, decisions and actions of
governmental or regulatory authorities or courts in the UK, the EU,
the US or elsewhere including the implementation and interpretation
of key legislation and regulation together with any resulting
impact on the future structure of the Group; the ability to attract
and retain seniormanagement and other employees; actions or
omissions by the Group's directors, management or employees
including industrial action; changes to the Group's post-retirement
defined benefit scheme obligations; the extent of any future
impairment charges or write-downs caused by, but not limited to,
depressed asset valuations, market disruptions and illiquid
markets; the value and effectiveness of any credit protection
purchased by the Group; the inability to hedge certain risks
economically; the adequacy of loss reserves; the actions of
competitors, including non-bank financial services, lending
companies and digital innovators and disruptive technologies; and
exposure to regulatory or competition scrutiny, legal, regulatory
or competition proceedings, investigations or complaints. Please
refer to the latest Annual Report on Form 20-F filed with the US
Securities and Exchange Commission for a discussion of certain
factors together with examples of forward looking statements.
Except as required by any applicablelaw or regulation, the forward
looking statements contained in this document are made as of
today's date, and Lloyds Banking Group expressly disclaims any
obligation or undertaking to release publicly any updates or
revisions to any forward looking statements. The information,
statements and opinions contained in this document do not
constitute a public offer under any applicable law or an offer to
sell any securities or financial instruments or any advice or
recommendation with respect to such securities or financial
instruments.
CONTACTS
For
further information please contact:
INVESTORS AND ANALYSTS
Douglas
Radcliffe
Group
Investor Relations Director
020
7356 1571
douglas.radcliffe@lloydsbanking.com
Edward
Sands
Director
of Investor Relations
020
7356 1585
edward.sands@lloydsbanking.com
CORPORATE AFFAIRS
Fiona
Laffan
Group
Corporate Communications Director
020
7356 2081
fiona.laffan@lloydsbanking.com
Copies
of this interim management statement 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
Signatures
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
LLOYDS
BANKING GROUP plc
(Registrant)
By: Douglas
Radcliffe
Name: Douglas
Radcliffe
Title: Group
Investor Relations Director
Date:
25 October 2017
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