Interim Results - PART 2

LLOYDS TSB GROUP PLC 30 July 1999 Part 2 RESULTS FOR HALF-YEAR TO 30 JUNE 1999 Wholesale Markets (banking, treasury, large value lease finance, long-term agricultural finance, share registration, venture capital, factoring and invoice discounting, and other related services for major UK and multinational companies, banks and institutions and medium-sized UK businesses) Half-year to Half-year to 30 June 31 December 1999 1998 1998 £m £m £m Net interest income 333 287 322 Other income 251 273 246 Total income 584 560 568 Operating expenses 225 240 266 Trading surplus 359 320 302 Provisions for bad and doubtful debts 24 (6) 1 Amounts written off fixed asset investments 4 3 6 Profit before tax and write-down of finance leases 331 323 295 Write-down of finance leases - 32 - Efficiency ratio 38.5% 42.9% 46.8% Total assets (period-end) £59.2bn £56.3bn £57.4bn Total risk-weighted assets (period-end) £27.1bn £25.9bn £28.2bn Wholesale Markets pre-tax profit increased by £8 million, or 2 per cent, to £331 million. Total income increased by 4 per cent and operating expenses were reduced by 6 per cent as a result of lower costs in both Treasury and Corporate and Institutional Banking. Total assets increased by 5 per cent, reflecting the acquisition in the second half of 1998 of three specialist leasing companies. Risk-weighted assets grew by 5 per cent. Commercial Financial Services' businesses, serving the commercial middle market, continued to perform well. Commercial Banking combined revenue increases with tight cost control and lower provisions to achieve a record first half profit. More favourable market conditions, as interest rates have fallen rapidly since the end of 1998, have resulted in higher income from Treasury sterling money market operations. The Group's activity in the derivatives markets remains focused on straight cash based products. Our factoring and invoice discounting businesses, now concentrated on the Alex Lawrie Factors and Lloyds TSB Commercial Finance brands, have recently been brought together under a single management team and it is our intention to combine the back office administration of the two businesses in the near future. Agricultural Mortgage Corporation continued to expand its activity in the provision of long-term finance to farmers. Our Corporate and Institutional Financial Services businesses, serving the larger corporate market and financial institutions, again achieved a good increase in their trading surplus. Despite strong competition for good quality lending and money transmission business, Corporate and Institutional Banking's continuing focus on quality income growth and cost control ensured that its trading surplus increased, although there was also an increase in bad debt provisions caused by lower releases and recoveries on lending to companies and businesses. Lloyds TSB Leasing further consolidated its position as the largest big ticket leasing company in the UK, and continued to build on the acquisition in September 1998 of three leasing subsidiaries from National Westminster Bank. Lloyds TSB Registrars maintained its market leadership position and continued to perform strongly, particularly following the acquisition in February 1999 of Bank of Scotland's Registrar Services and Investment Trust Savings Scheme administration businesses. On 26 July 1999 the Group announced that it is to withdraw from the global custody and unit trust trusteeship business offered through Lloyds TSB Securities Services and has recommended that its 430 customers transfer their institutional custodial and trustee arrangements to State Street Bank and Trust Company, a wholly owned subsidiary of State Street Corporation. The financial effects of the closure and transfer of business are not expected to be significant. International Banking (banking and financial services overseas in four main areas: The Americas, New Zealand, Europe and Offshore Banking; and Emerging Markets Debt) Half-year to Half-year to 30 June 31 December 1999 1998 1998 £m £m £m Net interest income 359 365 357 Other income 194 176 188 Total income 553 541 545 Operating expenses 280 265 302 Trading surplus 273 276 243 Provisions for bad and doubtful debts 55 83 82 Amounts written off fixed asset investments - - 6 Income from associated undertakings - 1 (1) Profit before tax 218 194 154 Restructuring provision - - 38 Efficiency ratio 50.6% 49.0% 55.4% Total assets (period-end) £17.7bn £15.1bn £17.4bn Total risk-weighted assets (period-end) £11.1bn £9.6bn £10.9bn International Banking pre-tax profit was £24 million higher at £218 million compared with the first half of 1998 and £64 million, or 42 per cent, higher than in the second half. Excluding the Emerging Markets Debt portfolio, pre-tax profit increased by £30 million, or 18 per cent, to £196 million compared with £166 million in the first half of 1998 and by £62 million, or 46 per cent, compared with £134 million in the second half of 1998. Excluding the EMD portfolio, pre-tax profit from International Banking represented 11 per cent of Group pre-tax profit of which 4 per cent related to our New Zealand business, 4 per cent to our Europe and offshore banking operations and 3 per cent to Latin America. Profits from New Zealand in local currency terms increased by 90 per cent, as we begin to see the benefits of the integration of Countrywide Bank and The National Bank of New Zealand. International private banking and the Group's offshore banking operations both showed improvements over the first half of 1998. Our consumer finance business in Brazil, Losango Consumer Finance, continued to be adversely affected by local economic conditions which resulted in significantly reduced consumer demand. Notwithstanding this, Losango made a pre-tax profit of £13 million, compared with a loss of £4 million in the first half of 1998 and a profit of £9 million in the second half of last year. Profits from our Latin American businesses held up well despite difficult local economic conditions, particularly in Argentina and Colombia. The Emerging Markets Debt portfolio contributed £22 million, which included a release of provisions of £15 million following the repayment of debt by certain borrowers. There were no asset sales in the first half of 1999. This compared with a contribution of £28 million in the first half of 1998, which included a release of provisions of £16 million, and a contribution of £20 million in the second half of 1998, which included a release of provisions of £14 million. At the end of June 1999 the Group's provisionable exposure to Emerging Market economies which is included in loans and advances was £1,414 million (December 1998: £1,371 million) against which provisions of £861 million (December 1998: £809 million) were held, giving cover of 61 per cent (December 1998: 59 per cent). Based on secondary market prices, the surplus of market value over net book value of the total Emerging Markets Debt portfolio (including advances, unapplied interest and collateralised bonds held as investments) was more than £600 million (December 1998: £600 million). Central group items (central costs and other unallocated items) Half-year to Half-year to 30 June 31 December 1999 1998 1998 £m £m £m Sale of businesses (page 31 note 5) - 84 - Central costs and other unallocated items (20) (23) (25) (20) 61 (25) INCOME Group net interest income Group net interest income increased by £224 million, or 10 per cent, to £2,364 million. Average interest-earning assets increased by 7 per cent to £123 billion. There was further growth in mortgages and other customer lending in the UK. The net interest margin improved by 7 basis points, to 3.87 per cent, as a 26 basis point increase in the domestic net interest margin to 4.01 per cent (page 21) was offset by a reduction in the international net interest margin (page 22). Half-year to Half-year to 30 June 31 December 1999 1998 1998 £m £m £m Net interest income 2,364 2,140 2,276 Average balances Short-term liquid assets 2,050 3,281 1,609 Loans and advances 116,529 107,587 112,394 Debt securities* 4,553 4,462 5,509 Total interest-earning assets 123,132 115,330 119,512 Financed by: Interest-bearing liabilities 106,471 100,696 103,618 Interest-free liabilities 16,661 14,634 15,894 Average rates (excluding write-down % % % of finance leases) Gross yield on interest-earning assets 8.97 9.81 9.51 Cost of interest-bearing liabilities 5.89 6.89 6.61 Interest spread 3.08 2.92 2.90 Contribution of interest-free liabilities 0.79 0.88 0.88 Net interest margin 3.87 3.80 3.78 *excludes certain treasury assets which are no longer classified as banking assets Note: Payments made under cash gift and discount mortgage schemes are amortised over the early redemption charge period, being a maximum of 5 years. If these incentives had been fully written off as incurred, group and domestic net interest income would have been £16 million higher in the first half of 1999 (1998: first half £29 million higher, second half £31 million higher). The deferred element of the expenditure amounting to £149 million at 30 June 1999 (30 June 1998: £196 million, 31 December 1998: £165 million) is included within prepayments and accrued income in the balance sheet. Domestic net interest income Domestic net interest income increased by £233 million, or 13 per cent, to £2,046 million and represents 87 per cent of total group net interest income. Average interest-earning assets increased by 4 per cent to £103 billion. There was further growth in mortgages and other customer lending. The net interest margin increased by 26 basis points to 4.01 per cent. Despite the continuing competitive pressure on many products, customer lending and deposits continued to grow and there was a further improvement in the mix of our assets as we continue to focus on the retail side of our business. Half-year to Half-year to 30 June 31 December 1999 1998 1998 £m £m £m Net interest income 2,046 1,813 1,968 Average balances Short-term liquid assets 915 1,246 1,153 Loans and advances 99,160 94,371 96,448 Debt securities* 2,844 3,615 3,452 Total interest-earning assets 102,919 99,232 101,053 Financed by: Interest-bearing liabilities 87,862 85,703 86,709 Interest-free liabilities 15,057 13,529 14,344 Average rates (excluding write-down % % % of finance leases) Gross yield on interest-earning assets 7.85 8.83 9.04 Cost of interest-bearing liabilities 4.49 5.88 6.03 Interest spread 3.36 2.95 3.01 Contribution of interest-free liabilities 0.65 0.80 0.85 Net interest margin 4.01 3.75 3.86 *excludes certain treasury assets which are no longer classified as banking assets International net interest income Net interest income from international operations decreased by 3 per cent to £318 million, representing 13 per cent of total group net interest income. The difficult economic conditions in Latin America created a reduction in customer receivables outstanding to £2,850 million at the end of June 1999, compared with £2,939 million at the end of December 1998 and £3,064 million at the end of June 1998. Average interest-earning assets increased by 26 per cent, reflecting the impact of the mortgage portfolio acquired in September 1998 on the purchase of Countrywide Bank in New Zealand, which more than offset the reduced lending volumes in Latin America. As a result of the finer margins earned in Countrywide, where the lending portfolio is predominantly mortgages, the international net interest margin decreased to 3.17 per cent. Half-year to Half-year to 30 June 31 December 1999 1998 1998 £m £m £m Net interest income 318 327 308 Average balances Short-term liquid assets 1,135 2,035 456 Loans and advances 17,369 13,216 15,946 Debt securities 1,709 847 2,057 Total interest-earning assets 20,213 16,098 18,459 Financed by: Interest-bearing liabilities 18,609 14,993 16,909 Interest-free liabilities 1,604 1,105 1,550 Average rates % % % Gross yield on interest-earning assets 14.69 15.85 12.08 Cost of interest-bearing liabilities 12.51 12.62 9.57 Interest spread 2.18 3.23 2.51 Contribution of interest-free liabilities 0.99 0.87 0.80 Net interest margin 3.17 4.10 3.31 Other income Other income increased by £68 million, or 5 per cent, to £1,562 million, excluding the impact of the 1998 pension provision. This represented 40 per cent of total income. Fees and commissions receivable increased by 7 per cent reflecting increased business volumes and strong growth in income from insurance broking. Other UK fees and commissions increased by 2 per cent, helped by a 30 per cent increase in unit trust commissions. International fees and commissions increased in local currency terms but this increase was largely offset by the effect of exchange rate movements. Fees and commissions payable increased by £26 million against the first half of 1998, largely as a result of higher dealer commissions paid for the introduction of new consumer finance business, higher interchange fees for card services and increased costs associated with a number of new products. Income from long-term assurance business fell by £4 million, excluding the impact of the pension provision, as a result of reduced new business volumes from Abbey Life, the change in the embedded value discount rate from 12.5 per cent to 10 per cent in 1998 and the continuing switch within single premium business from life products to unit trusts and ISAs. The second half of 1998 benefited from the usual year-end full actuarial review. Higher volumes produced a strong increase in general insurance premium income. Other operating income was reduced as a result of lower gains on the realisation of venture capital investments. Half-year to Half-year to 30 June 31 December 1999 1998 1998 £m £m £m Dividend income from equity shares 1 2 3 Fees and commissions receivable: UK current account fees 307 270 309 Other UK fees and commissions 526 516 466 Insurance broking 150 135 161 Card services 127 115 127 International fees and commissions 127 123 125 1,237 1,159 1,188 Fees and commissions payable (214) (188) (200) Dealing profits (before expenses): Foreign exchange trading income 66 56 56 Securities and other gains 41 44 41 107 100 97 Income from long-term assurance business Income before pension provision 161 165 214 Pension provision - (400) - 161 (235) 214 General insurance premium income 190 158 177 Other operating income 80 98 89 Total other income 1,562 1,094 1,568 OPERATING EXPENSES Operating expenses Half-year to Half-year to 30 June 31 December 1999 1998 1998 £m £m £m Administrative expenses: Staff: Salaries and profit sharing 729 749 746 National insurance 63 65 61 Pensions (56) (52) (53) Restructuring 13 20 16 Other staff costs 85 91 93 834 873 863 Premises and equipment: Rent and rates 130 133 134 Hire of equipment 16 17 19 Repairs and maintenance 57 49 49 Other 52 59 50 255 258 252 Other expenses: Communications and external data processing 210 182 190 Advertising and promotion 57 66 62 Professional fees 46 43 62 Other 159 175 186 472 466 500 Administrative expenses 1,561 1,597 1,615 Restructuring provision - - 38 Total administrative expenses 1,561 1,597 1,653 Depreciation 108 109 109 Amortisation of goodwill 6 - 4 Total operating expenses 1,675 1,706 1,766 Efficiency ratio (excluding write-down of finance leases, pension provision and restructuring provision) 42.7% 46.5% 45.0% Total operating expenses were reduced by £31 million, or 2 per cent, compared with the first half of 1998 and, excluding the restructuring provision, were £53 million, or 3 per cent, lower than in the second half. Operating expenses included further expenditure of £24 million in preparation for the Year 2000 and EMU (1998 first half: £50 million, second half: £54 million). The efficiency ratio improved further to 42.7 per cent from 46.5 per cent a year ago and 59 per cent at the time of the merger in 1995. Underlying operating expenses have reduced by a further £19 million bringing total costs saved since the merger of Lloyds Bank and TSB Group and the integration of Lloyds Abbey Life to £370 million. Further cost savings will be made in the second half of the year to ensure achievement of the £400 million per annum cost savings promised by 1999, and we expect reductions to continue in the year 2000. During the first half of 1999 a further £39 million of restructuring costs, arising from the merger of Lloyds Bank and TSB Group and the integration of Lloyds Abbey Life, were charged against the restructuring provisions totalling £500 million made in 1995 and 1996, bringing the total charged to date to £495 million. Number of employees (full-time equivalent) Staff numbers fell by 505 to 76,691 in the first half of the year. Within UK Retail Banking staff numbers decreased by 479 but in Insurance and Investments numbers of staff increased to reflect increased business volumes in the bancassurance business. In Wholesale Markets staff numbers increased as a result of the acquisition of Bank of Scotland's Registrar Services and Investment Trust Savings Scheme administration business and in International Banking there were lower staff numbers in Brazil and New Zealand. Since the merger of Lloyds Bank and TSB Group at the end of 1995, there has been an underlying reduction of 16,021 staff of which 4,823 relate to staff employed in businesses sold and 11,198 to reductions in our ongoing businesses. 30 June 31 December 1999 1998 UK Retail Banking* 45,894 46,373 Mortgages 3,697 3,694 Insurance and Investments 6,935 6,746 UK Retail Financial Services 56,526 56,813 Wholesale Markets 5,988 5,848 International Banking 13,524 13,870 Other 653 665 Total number of employees (full-time equivalent) 76,691 77,196 *Although the costs of distributing mortgages and insurance through the Lloyds TSB network are allocated to the mortgage and insurance businesses, the number of employees involved in these activities in the network is included under UK Retail Banking. CREDIT QUALITY Charge for bad and doubtful debts Half-year to Half-year to 30 June 31 December 1999 1998 1998 £m £m £m Domestic: UK Retail Banking 232 176 172 Mortgages 4 13 11 Insurance and Investments - - (4) Wholesale Markets 24 (6) 1 Total domestic 260 183 180 International Banking 55 83 82 Total charge 315 266 262 Specific provisions 315 266 269 General provisions - - (7) Total charge 315 266 262 Charge as % of average lending % % % (annualised): Domestic 0.60 0.46 0.43 International 0.75 1.42 1.28 Total charge 0.63 0.59 0.54 The domestic charge for bad and doubtful debts increased to £260 million from £183 million, largely due to some deterioration in the personal lending and credit card portfolios in the first quarter of the year. Provisions overseas decreased to £55 million from £83 million, mainly as a result of a reduced provisions charge from the Losango Consumer Finance business in Brazil. Non-performing loans fell to £1,151 million from £1,193 million in June 1998 and £1,188 million in December 1998 and represented 1.1 per cent of total lending, down from 1.3 per cent in June 1998 and 1.2 per cent in December 1998. Movements in provisions for bad and doubtful debts Half-year to Half-year to Half-year to 30 June 1999 30 June 1998 31 December 1998 Specific General Specific General Specific General £m £m £m £m £m £m At beginning of period 1,792 365 2,123 370 1,787 367 Exchange and other adjustments 38 - (33) (1) 2 1 Adjustments on acquisitions and disposals - - (14) (2) 13 4 Advances written off (342) - (602) - (357) - Recoveries of advances written off in previous years 61 - 47 - 78 - Charge (release) to profit and loss account: New and additional provisions 543 - 466 9 533 2 Releases and recoveries (228) - (200) (9) (264) (9) 315 - 266 - 269 (7) At end of period 1,864 365 1,787 367 1,792 365 2,229 2,154 2,157 Closing provisions as % of lending (excluding unapplied interest) Specific: Domestic 795 (0.9%) 771 (1.0%) 761 (0.9%) International 1,069 (7.0%) 1,016 (9.1%) 1,031 (7.3%) 1,864 (1.8%) 1,787 (1.9%) 1,792 (1.8%) General 365 (0.4%) 367 (0.4%) 365 (0.4%) Total 2,229 (2.2%) 2,154 (2.3%) 2,157 (2.2%) At the end of June 1999 provisions for bad and doubtful debts totalled £2,229 million. This represented 2.2 per cent of total lending. The level of specific provisions increased to £1,864 million. Non-performing lending fell to £1,151 million from £1,188 million in December 1998 as a result of repayments of principal and write-offs in the first half of the year. At the end of the half-year, specific provisions represented over 160 per cent of non-performing loans. CAPITAL RATIOS Risk asset ratios 30 June 31 December 1999 1998 £m £m Capital Tier 1 (page 32, note 8) 8,215 7,280 Tier 2 4,510 4,386 12,725 11,666 Supervisory deductions (2,604) (2,213) Total capital 10,121 9,453 £bn £bn Risk-weighted assets UK Retail Banking 21.6 21.5 Mortgages 23.0 22.5 Insurance and Investments 0.2 0.2 UK Retail Financial Service 44.8 44.2 Wholesale Markets 27.1 28.2 International Banking 11.1 10.9 Total risk-weighted assets 83.0 83.3 Risk asset ratios Total capital 12.2% 11.3% Tier 1 9.9% 8.7% Half-year to Half-year to 30 June 31 December 1999 1998 Post-tax return on average risk-weighted assets 3.19% 2.90% In the first half of 1999 total capital increased by £668 million to £10,121 million. Tier 1 capital rose by £935 million, mainly from retained profits. Tier 2 capital increased by £124 million and supervisory deductions increased by £391 million, resulting from growth in the insurance business. Since the end of the half-year Tier 2 capital has increased by a further £1.8 billion as the Group started to raise the necessary capital required for the proposed purchase of Scottish Widows. Risk-weighted assets decreased slightly to £83.0 billion and the post-tax return on average risk-weighted assets, a key measure of efficient use of capital, improved to 3.19 per cent, from 2.42 per cent in the first half of 1998 and 2.90 per cent in the second half of 1998. At the end of June 1999 the risk asset ratios further improved to 12.2 per cent for total capital and to 9.9 per cent for tier 1 capital. BALANCE SHEET INFORMATION Total assets Total assets increased by £5 billion, or 3 per cent, from the end of 1998 (page 7) and loans and advances to customers increased by £4 billion. There was further growth in mortgage lending and other customer lending. 30 June 30 June 31 December 1999 1998 1998 £m £m £m Deposits - customer accounts Sterling: Non-interest bearing current accounts 6,199 5,737 5,710 Interest bearing current accounts 16,618 15,822 15,418 Savings and investment accounts 40,741 38,830 40,838 Other customer deposits 17,080 16,883 15,329 Total sterling 80,638 77,272 77,295 Currency 13,861 10,826 12,439 Total deposits - customer accounts 94,499 88,098 89,734 Loans and advances to customers Domestic: Agriculture, forestry and fishing 2,101 2,072 2,052 Manufacturing 3,142 3,017 2,987 Construction 764 608 671 Transport, distribution and hotels 3,422 3,260 3,308 Property companies 2,242 2,144 2,304 Financial, business and other services 6,361 6,480 5,029 Personal : mortgages 45,755 43,290 44,660 : other 9,763 8,989 9,570 Lease financing 8,460 5,715 8,445 Hire purchase 3,741 3,651 3,701 Other 1,553 1,457 1,577 Total domestic 87,304 80,683 84,304 International: Latin America 2,850 3,064 2,939 New Zealand 7,921 4,681 7,310 Rest of the world 3,822 2,816 3,207 Total international 14,593 10,561 13,456 101,897 91,244 97,760 Provisions for bad and doubtful debts* (2,168) (2,090) (2,099) Interest held in suspense* (109) (121) (105) Total loans and advances to customers 99,620 89,033 95,556 * Figures exclude provisions and interest held in suspense relating to loans and advances to banks NOTES 1. Accounting policies and presentation Accounting policies are unchanged from 1998. 2. Economic profit In pursuit of our aim to maximise shareholder value, we use a system of value based management as a framework to identify and measure value in order to help us to make better business decisions. Accounting profit is of limited use as a measure of value creation and performance as it ignores the cost of the equity capital that has to be invested to generate the profit. We choose economic profit as a measure of performance because it captures both growth in investment and return. Economic profit represents the difference between the earnings on the equity invested in a business and the cost of the equity. Our calculation of economic profit uses average equity for the half-year and is based on a cost of equity of 9 per cent (1998: 10 per cent). Economic profit instils a rigorous financial discipline in determining investment decisions throughout the Group. It enables us to evaluate alternative strategies objectively, with a clear understanding of the value created by each strategy, and then to select the strategy which creates the greatest value. 3. Earnings per share Half-year to Half-year to 30 June 31 December 1999 1998 1998 Basic Profit attributable to shareholders £1,315m £924m £1,196m Weighted average number of ordinary shares in issue 5,429m 5,383m 5,417m Earnings per share 24.2p 17.2p 22.1p Fully diluted Profit attributable to shareholders £1,315m £924m £1,196m Weighted average number of ordinary shares in issue 5,544m 5,515m 5,499m Earnings per share 23.7p 16.8p 21.7p 4. Tax The effective rate of tax was 29 per cent (1998 first half: 27 per cent). 5. Profit before tax on sale of businesses Half-year to Half-year to 30 June 31 December 1999 1998 1998 £m £m £m Profit on sale of International Factors Limited (tax: nil) - 158 - Profit on sale of Universal Credit Limited (tax: nil) - 24 - Profit on sale of TSB Factors Limited (tax: nil) - 3 - Loss on sale of Black Horse Agencies Group (after charging goodwill of £131 million previously written off to reserves) (tax: nil) - (101) - - 84 - 6. Year 2000 Lloyds TSB Group recognises the far-reaching implications of the Year 2000 problem and the Group's policy is to ensure that our systems and business processes are Year 2000 ready by September 1999. As at the end of June 1999, all UK customer facing IT systems had been fully tested and we are confident that they are ready for Year 2000. In addition, our worldwide IT systems were 99.8 per cent fully tested and we expect to be 100 per cent compliant by the end of September 1999. The programme is co-ordinated centrally under an executive director and each business unit is responsible for identifying and resolving any problems in its own operations. Progress is monitored by a central team and regular reports are made to the Group board. We are also working with our customers, counterparties, suppliers and other members of the financial services community to minimise the impact on the Group should they fail to address adequately the Year 2000 issues. In addition we are working closely with regulators responsible for the markets in which we operate to minimise systemic risk. Significant activity is under way to establish Year 2000 Business Continuity plans. Our objective is to ensure that we are able to mitigate risk and that we have identified continuity plans which can be invoked in the event that any systemic threats materialise. The Group is confident that the comprehensive programme it has initiated will ensure the continued progress of the Group's systems, processes and infrastructure through and beyond the century date change. Costs incurred to the end of June 1999 are £148 million and we anticipate that the total cost will be in the region of £160 million. 7. Dividend The interim dividend for 1999 will be 8.1 p per share (1998: 6.7p), an increase of 21 per cent. Shareholders who have already joined the dividend reinvestment plan will automatically receive shares instead of the cash dividend. Shareholders who have not joined the plan and wish to do so may obtain an application form from Lloyds TSB Registrars, The Causeway, Worthing, West Sussex, BN99 6DA (telephone 01903 502541). Key dates for the payment of the interim dividend are: Shares quoted ex-dividend. Shares purchased before this date qualify for the dividend 9 August Record date. Shareholders on the register on this date are entitled to the dividend 13 August Final date for joining or leaving the dividend reinvestment plan 15 September Dividend paid 13 October 8. Review of interim profits The interim profits in 1999 were reviewed and reported upon, without qualification, by the Company's auditors, PricewaterhouseCoopers, in accordance with the conditions set out in the Financial Services Authority's Guide to Banking Supervisory Policy (chapter CA Definition of Capital, section 5) thereby enabling the retained profit to be included in tier 1 capital shown on page 28. 9. Other information The results for the half-year ended 30 June 1999 were approved by the directors on 29 July 1999. Statutory accounts for the year ended 31 December 1998 were delivered to the registrar of companies. The auditors' report on these accounts was unqualified and did not include a statement under sections 237(2) (accounting records or returns inadequate or accounts not agreeing with records and returns) or 237(3) (failure to obtain necessary information and explanations) of the Companies Act 1985. Results for the year ending 31 December 1999 will be announced on 11 February 2000. CONTACTS For further information please contact:- Kent Atkinson Group Finance Director Lloyds TSB Group plc 0171 356 1436 Michael Oliver Director of Investor Relations Lloyds TSB Group plc 0171 356 2167 Geraldine Davies Director of Corporate Communications Lloyds TSB Group plc 0171 356 2078 Copies of this news release may be obtained from Investor Relations, Lloyds TSB Group plc, 71 Lombard Street, London EC3P 3BS (telephone 0171 356 1273). A summary will appear as an advertisement in The Times and The Scotsman on 31 July 1999. The full news release can also be found on the Internet at http://www.lloydstsbgroup.co.uk.

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