2024 Half-Year Results - Part 2 of 2

Lloyds Banking Group PLC

25 July 2024

 

Lloyds Banking Group plc

2024 Half-Year Results

25 July 2024

Part 2 of 2

STATUTORY INFORMATION

Condensed consolidated half-year financial statements (unaudited)
Condensed consolidated income statement (unaudited)		56
Condensed consolidated statement of comprehensive income (unaudited)		57
Condensed consolidated balance sheet (unaudited)		58
Condensed consolidated statement of changes in equity (unaudited)		59
Condensed consolidated cash flow statement (unaudited)		62
Notes to the condensed consolidated half-year financial statements (unaudited)
1	Basis of preparation and accounting policies	63
2	Critical accounting judgements and key sources of estimation uncertainty	64
3	Segmental analysis	64
4	Net fee and commission income	67
5	Insurance business	67
6	Operating expenses	70
7	Retirement benefit obligations	71
8	Impairment	72
9	Tax	72
10	Fair values of financial assets and liabilities	73
11	Derivative financial instruments	79
12	Loans and advances to customers	80
13	Credit quality of loans and advances to customers	82
14	Allowance for expected credit losses	85
15	Debt securities in issue	93
16	Provisions	94
17	Earnings per share	96
18	Dividends on ordinary shares and share buyback	96
19	Contingent liabilities, commitments and guarantees	96

CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)

	Note		Half-year to 30 Jun 2024 £m			Half-year to 30 Jun 2023 £m			Half-year to 31 Dec 2023 £m
Interest income			15,435			13,048			15,003
Interest expense			(9,389)			(6,250)			(8,503)
Net interest income			6,046			6,798			6,500
Fee and commission income			1,458			1,426			1,500
Fee and commission expense			(568)			(539)			(556)
Net fee and commission income	4		890			887			944
Net trading income			10,758			6,161			11,888
Insurance revenue			1,650			1,450			1,558
Insurance service expense			(1,339)			(1,238)			(1,176)
Net (expense) income from reinsurance contracts held			(23)			11			(9)
Insurance service result	5		288			223			373
Other operating income			907			826			805
Other income			12,843			8,097			14,010
Total income			18,889			14,895			20,510
Net finance expense from insurance, participating investment and reinsurance contracts	5		(6,477)			(3,769)			(7,915)
Movement in third party interests in consolidated funds			(802)			(332)			(777)
Change in non-participating investment contracts			(2,734)			(1,488)			(2,495)
Net finance expense in respect of insurance and investment contracts			(10,013)			(5,589)			(11,187)
Total income, after net finance expense in respect of insurance and investment contracts			8,876			9,306			9,323
Operating expenses	6		(5,452)			(4,774)			(6,049)
Impairment (charge) credit	8		(100)			(662)			359
Profit before tax			3,324			3,870			3,633
Tax expense	9		(880)			(1,006)			(979)
Profit for the period			2,444			2,864			2,654
Profit attributable to ordinary shareholders			2,145			2,572			2,361
Profit attributable to other equity holders			269			255			272
Profit attributable to equity holders			2,414			2,827			2,633
Profit attributable to non-controlling interests			30			37			21
Profit for the period			2,444			2,864			2,654
Basic earnings per share	17		3.4p			3.9p			3.7p
Diluted earnings per share	17		3.3p			3.8p			3.7p

The accompanying notes are an integral part of the condensed consolidated half-year financial statements.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

		Half-year to 30 Jun 2024 £m			Half-year to 30 Jun 2023 £m			Half-year to 31 Dec 2023 £m
Profit for the period		2,444			2,864			2,654
Other comprehensive income
Items that will not subsequently be reclassified to profit or loss:
Post-retirement defined benefit scheme remeasurements:
Remeasurements before tax		(351)			(119)			(1,514)
Tax		93			27			401
		(258)			(92)			(1,113)
Movements in revaluation reserve in respect of equity shares held at fair value through other comprehensive income:
Change in fair value		72			(48)			(6)
Tax		-			-			(3)
		72			(48)			(9)
Gains and losses attributable to own credit risk:
Losses before tax		(86)			(85)			(149)
Tax		24			24			42
		(62)			(61)			(107)
Items that may subsequently be reclassified to profit or loss:
Movements in revaluation reserve in respect of debt securities held at fair value through other comprehensive income:
Change in fair value		105			157			(197)
Income statement transfers in respect of disposals		(4)			(107)			(15)
Income statement transfers in respect of impairment		(2)			(2)			-
Tax		(27)			(13)			60
		72			35			(152)
Movements in cash flow hedging reserve:
Effective portion of changes in fair value taken to other comprehensive income		(1,601)			(1,644)			2,189
Net income statement transfers		1,238			756			1,082
Tax		101			244			(917)
		(262)			(644)			2,354
Movements in foreign currency translation reserve:
Currency translation differences (tax: £nil)		(39)			(66)			13
Transfers to income statement (tax: £nil)		-			-			-
		(39)			(66)			13
Total other comprehensive (loss) income for the period, net of tax		(477)			(876)			986
Total comprehensive income for the period		1,967			1,988			3,640
Total comprehensive income attributable to ordinary shareholders		1,668			1,696			3,347
Total comprehensive income attributable to other equity holders		269			255			272
Total comprehensive income attributable to equity holders		1,937			1,951			3,619
Total comprehensive income attributable to non-controlling interests		30			37			21
Total comprehensive income for the period		1,967			1,988			3,640

The accompanying notes are an integral part of the condensed consolidated half-year financial statements.

CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)

	Note	At 30 Jun 2024 £m				At 31 Dec 2023 £m
Assets
Cash and balances at central banks			66,808			78,110
Financial assets at fair value through profit or loss	10		209,139			203,318
Derivative financial instruments	11		18,983			22,356
Loans and advances to banks			8,454			10,764
Loans and advances to customers	12		452,408			449,745
Reverse repurchase agreements			49,404			38,771
Debt securities			15,432			15,355
Financial assets at amortised cost			525,698			514,635
Financial assets at fair value through other comprehensive income	10		27,847			27,592
Goodwill and other intangible assets			8,315			8,306
Current tax recoverable			1,152			1,183
Deferred tax assets			4,995			5,185
Retirement benefit assets	7		3,379			3,624
Other assets			26,611			17,144
Total assets			892,927			881,453
Liabilities
Deposits from banks			5,584			6,153
Customer deposits			474,693			471,396
Repurchase agreements at amortised cost			37,914			37,703
Financial liabilities at fair value through profit or loss	10		27,056			24,914
Derivative financial instruments	11		16,647			20,149
Notes in circulation			1,766			1,392
Debt securities in issue at amortised cost	15		74,760			75,592
Liabilities arising from insurance and participating investment contracts	5		125,007			120,123
Liabilities arising from non-participating investment contracts			48,280			44,978
Other liabilities			23,544			19,026
Retirement benefit obligations	7		130			136
Current tax liabilities			47			39
Deferred tax liabilities			146			157
Provisions	16		1,788			2,077
Subordinated liabilities			10,448			10,253
Total liabilities			847,810			834,088
Equity
Share capital			6,252			6,358
Share premium account			18,671			18,568
Other reserves			8,525			8,508
Retained profits			5,511			6,790
Ordinary shareholders' equity			38,959			40,224
Other equity instruments			5,932			6,940
Total equity excluding non-controlling interests			44,891			47,164
Non-controlling interests			226			201
Total equity			45,117			47,365
Total equity and liabilities			892,927			881,453

The accompanying notes are an integral part of the condensed consolidated half-year financial statements.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

		Attributable to ordinary shareholders
		Share capital and premium £m			Other reserves £m			Retained profits £m			Total £m		Other equity instruments £m			Non- controlling interests £m				Total £m
At 1 January 2024		24,926			8,508			6,790			40,224			6,940			201			47,365
Comprehensive income
Profit for the period		-			-			2,145			2,145			269			30			2,444
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, net of tax		-			-			(258)			(258)			-			-			(258)
Movements in revaluation reserve in respect of financial assets held at fair value through other comprehensive income, net of tax:
Debt securities		-			72			-			72			-			-			72
Equity shares		-			72			-			72			-			-			72
Gains and losses attributable to own credit risk, net of tax		-			-			(62)			(62)			-			-			(62)
Movements in cash flow hedging reserve, net of tax		-			(262)			-			(262)			-			-			(262)
Movements in foreign currency translation reserve, net of tax		-			(39)			-			(39)			-			-			(39)
Total other comprehensive loss		-			(157)			(320)			(477)			-			-			(477)
Total comprehensive (loss) income1		-			(157)			1,825			1,668			269			30			1,967
Transactions with owners
Dividends		-			-			(1,169)			(1,169)			-			(3)			(1,172)
Distributions on other equity instruments		-			-			-			-			(269)			-			(269)
Issue of ordinary shares		171			-			-			171			-			-			171
Share buyback2		(174)			174			(1,553)			(1,553)			-			-			(1,553)
Issue of other equity instruments		-			-			-			-			-			-			-
Repurchases and redemptions of other equity instruments		-			-			(316)			(316)			(1,008)			-			(1,324)
Movement in treasury shares		-			-			(136)			(136)			-			-			(136)
Value of employee services:
Share option schemes		-			-			24			24			-			-			24
Other employee award schemes		-			-			46			46			-			-			46
Changes in non-controlling interests		-			-			-			-			-			(2)			(2)
Total transactions with owners		(3)			174			(3,104)			(2,933)			(1,277)			(5)			(4,215)
Realised gains and losses on equity shares held at fair value through other comprehensive income		-			-			-			-			-			-			-
At 30 June 20243		24,923			8,525			5,511			38,959			5,932			226			45,117

¹    Total comprehensive income attributable to owners of the parent was £1,937 million.

²  Contains a closed period accrual of £630 million.

³  Total equity attributable to owners of the parent was £44,891 million.

The accompanying notes are an integral part of the condensed consolidated half-year financial statements.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) (continued)

		Attributable to ordinary shareholders
		Share capital and premium £m			Other reserves £m			Retained profits £m			Total £m			Other equity instruments £m			Non- controlling interests £m			Total £m
At 1 January 2023		25,233			6,587			6,550			38,370			5,297			244			43,911
Comprehensive income
Profit for the period		-			-			2,572			2,572			255			37			2,864
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, net of tax		-			-			(92)			(92)			-			-			(92)
Movements in revaluation reserve in respect of financial assets held at fair value through other comprehensive income, net of tax:
Debt securities		-			35			-			35			-			-			35
Equity shares		-			(48)			-			(48)			-			-			(48)
Gains and losses attributable to own credit risk, net of tax		-			-			(61)			(61)			-			-			(61)
Movements in cash flow hedging reserve, net of tax		-			(644)			-			(644)			-			-			(644)
Movements in foreign currency translation reserve, net of tax		-			(66)			-			(66)			-			-			(66)
Total other comprehensive loss		-			(723)			(153)			(876)			-			-			(876)
Total comprehensive (loss) income1		-			(723)			2,419			1,696			255			37			1,988
Transactions with owners
Dividends		-			-			(1,059)			(1,059)			-			(30)			(1,089)
Distributions on other equity instruments		-			-			-			-			(255)			-			(255)
Issue of ordinary shares		115			-			-			115			-			-			115
Share buyback2		(327)			327			(2,020)			(2,020)			-			-			(2,020)
Issue of other equity instruments		-			-			(6)			(6)			1,778			-			1,772
Repurchases and redemptions of other equity instruments		-			-			-			-			(135)			-			(135)
Movement in treasury shares		-			-			101			101			-			-			101
Value of employee services:
Share option schemes		-			-			23			23			-			-			23
Other employee award schemes		-			-			71			71			-			-			71
Changes in non-controlling interests		-			-			-			-			-			-			-
Total transactions with owners		(212)			327			(2,890)			(2,775)			1,388			(30)			(1,417)
Realised gains and losses on equity shares held at fair value through other comprehensive income		-			-			-			-			-			-			-
At 30 June 20233		25,021			6,191			6,079			37,291			6,940			251			44,482

¹    Total comprehensive income attributable to owners of the parent was £1,951 million.

²  Contains a closed period accrual of £419 million.

³    Total equity attributable to owners of the parent was £44,231 million.

The accompanying notes are an integral part of the condensed consolidated half-year financial statements.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) (continued)

		Attributable to ordinary shareholders
		Share capital and premium £m			Other reserves £m			Retained profits £m			Total £m			Other equity instruments £m			Non- controlling interests £m			Total £m
At 1 July 2023		25,021			6,191			6,079			37,291			6,940			251			44,482
Comprehensive income
Profit for the period		-			-			2,361			2,361			272			21			2,654
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, net of tax		-			-			(1,113)			(1,113)			-			-			(1,113)
Movements in revaluation reserve in respect of financial assets held at fair value through other comprehensive income, net of tax:
Debt securities		-			(152)			-			(152)			-			-			(152)
Equity shares		-			(9)			-			(9)			-			-			(9)
Gains and losses attributable to own credit risk, net of tax		-			-			(107)			(107)			-			-			(107)
Movements in cash flow hedging reserve, net of tax		-			2,354			-			2,354			-			-			2,354
Movements in foreign currency translation reserve, net of tax		-			13			-			13			-			-			13
Total other comprehensive income (loss)		-			2,206			(1,220)			986			-			-			986
Total comprehensive income1		-			2,206			1,141			3,347			272			21			3,640
Transactions with owners
Dividends		-			-			(592)			(592)			-			(71)			(663)
Distributions on other equity instruments		-			-			-			-			(272)			-			(272)
Issue of ordinary shares		16			-			-			16			-			-			16
Share buyback		(111)			111			27			27			-			-			27
Issue of other equity instruments		-			-			-			-			-			-			-
Repurchases and redemptions of other equity instruments		-			-			-			-			-			-			-
Movement in treasury shares		-			-			2			2			-			-			2
Value of employee services:
Share option schemes		-			-			35			35			-			-			35
Other employee award schemes		-			-			98			98			-			-			98
Changes in non-controlling interests		-			-			-			-			-			-			-
Total transactions with owners		(95)			111			(430)			(414)			(272)			(71)			(757)
Realised gains and losses on equity shares held at fair value through other comprehensive income		-			-			-			-			-			-			-
At 31 December 20232		24,926			8,508			6,790			40,224			6,940			201			47,365

¹  Total comprehensive income attributable to owners of the parent was £3,619 million.

²  Total equity attributable to owners of the parent was £47,164 million.

The accompanying notes are an integral part of the condensed consolidated half-year financial statements.

CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

	Half-year to 30 Jun 2024 £m			Half-year to 30 Jun 2023 £m			Half-year to 31 Dec 2023 £m
Cash flows from operating activities
Profit before tax	3,324			3,870			3,633
Adjustments for:
Change in operating assets	(21,509)			(589)			(8,521)
Change in operating liabilities	14,032			10,162			(5,930)
Non-cash and other items	1,671			2,222			3,400
Net tax paid	(398)			(861)			(576)
Net cash (used in) provided by operating activities	(2,880)			14,804			(7,994)
Cash flows from investing activities
Purchase of financial assets	(5,809)			(3,850)			(6,461)
Proceeds from sale and maturity of financial assets	5,269			3,657			1,641
Purchase of fixed assets	(2,884)			(3,378)			(2,077)
Proceeds from sale of fixed assets	642			534			493
Repayment of capital by joint ventures and associates	-			9			(9)
Acquisition of businesses, net of cash acquired	(63)			(28)			(352)
Net cash used in investing activities	(2,845)			(3,056)			(6,765)
Cash flows from financing activities
Dividends paid to ordinary shareholders	(1,169)			(1,059)			(592)
Distributions in respect of other equity instruments	(269)			(255)			(272)
Distributions in respect of non-controlling interests	(3)			(30)			(71)
Interest paid on subordinated liabilities	(350)			(344)			(279)
Proceeds from issue of subordinated liabilities	427			746			671
Proceeds from issue of other equity instruments	-			1,772			-
Proceeds from issue of ordinary shares	170			70			16
Share buyback	(923)			(1,523)			(470)
Repayment of subordinated liabilities	-			(1,162)			(583)
Repurchases and redemptions of other equity instruments	(1,324)			(135)			-
Change in stake of non-controlling interests	(2)			-			-
Net cash used in financing activities	(3,443)			(1,920)			(1,580)
Effects of exchange rate changes on cash and cash equivalents	(17)			(493)			13
Change in cash and cash equivalents	(9,185)			9,335			(16,326)
Cash and cash equivalents at beginning of period	88,838			95,829			105,164
Cash and cash equivalents at end of period	79,653			105,164			88,838

The accompanying notes are an integral part of the condensed consolidated half-year financial statements.

Cash and cash equivalents comprise cash and non-mandatory balances with central banks and amounts due from banks with an original maturity of less than three months. Included within cash and cash equivalents at 30 June 2024 is £35 million (30 June 2023: £45 million; 31 December 2023: £31 million) held within the Group's long-term insurance and investments operations, which is not immediately available for use in the business.

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)

Note 1: Basis of preparation and accounting policies

These condensed consolidated half-year financial statements as at and for the period to 30 June 2024 have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority (FCA) and with International Accounting Standard 34 (IAS 34), Interim Financial Reporting as adopted by the United Kingdom and comprise the results of Lloyds Banking Group plc (the Company) together with its subsidiaries (the Group). They do not include all of the information required for full annual financial statements and should be read in conjunction with the Group's consolidated financial statements as at and for the year ended 31 December 2023 which complied with international accounting standards in conformity with the requirements of the Companies Act 2006 and were prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Copies of the 2023 annual report and accounts are available on the Group's website and are also available upon request from Investor Relations, Lloyds Banking Group plc, 25 Gresham Street, London EC2V 7HN.

The UK Finance Code for Financial Reporting Disclosure (the Disclosure Code) sets out disclosure principles together with supporting guidance in respect of the financial statements of UK banks. The Group has adopted the Disclosure Code and these condensed consolidated half-year financial statements have been prepared in compliance with the Disclosure Code's principles. Terminology used in these condensed consolidated half-year financial statements is consistent with that used in the Group's 2023 annual report and accounts.

The directors consider that it is appropriate to continue to adopt the going concern basis in preparing these condensed consolidated half-year financial statements. In reaching this assessment, the directors have taken into account the uncertainties affecting the UK economy and their potential effects upon the Group's performance and projected funding and capital position; the impact of further stress scenarios has also been considered. On this basis, the directors are satisfied that the Group will maintain adequate levels of funding and capital for the foreseeable future.

The Group's accounting policies are consistent with those applied by the Group in its financial statements for the year ended 31 December 2023 and there have been no changes in the Group's methods of computation.

The IASB has issued a number of minor amendments to IFRSs that are relevant to the Group effective 1 January 2024, including IFRS 16 Lease Liability in a Sale and Leaseback, IAS 1 Non-current Liabilities with Covenants, and IAS 1 Classification of Liabilities as Current or Non-current. These amendments have not had a significant impact on the Group.

Future accounting developments

The IASB has issued Amendments to the Classification and Measurement of Financial Instruments (IFRS 9 and IFRS 7) which is effective 1 January 2026 and IFRS 19 Subsidiaries without Public Accountability: Disclosures which is effective 1 January 2027. Neither the amendments nor IFRS 19 are expected to have a significant impact on the Group. The IASB has also issued IFRS 18 Primary Financial Statements which is effective 1 January 2027. The standard includes no measurement changes, and the Group is currently assessing the impact of this standard on its income statement presentation.

Related party transactions

The Group has had no significant related party transactions during the half-year to 30 June 2024. Related party transactions for the half-year to 30 June 2024 are similar in nature to those for the year ended 31 December 2023. Full details of the Group's related party transactions for the year ended 31 December 2023 can be found in the Group's 2023 annual report and accounts.

The financial information contained in this document does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 (the Act). The statutory accounts for the year ended 31 December 2023 were approved by the directors on 21 February 2024 and were delivered to the Registrar of Companies on 30 March 2024. The auditors' report on those accounts was unqualified and did not include a statement under sections 498(2) (accounting records or returns inadequate or accounts not agreeing with records and returns) or 498(3) (failure to obtain necessary information and explanations) of the Act.

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 2: Critical accounting judgements and key sources of estimation uncertainty

The preparation of the Group's financial statements in accordance with IFRS requires management to make judgements, estimates and assumptions in applying the accounting policies that affect the reported amounts of assets, liabilities, income and expenses. Due to the inherent uncertainty in making estimates, actual results reported in future periods may be based upon amounts which differ from these estimates. Estimates, judgements and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In preparing the financial statements, the Group has considered the impact of climate-related risks on its financial position and performance. While the effects of climate change represent a source of uncertainty, the Group does not consider there to be a material impact on its judgements and estimates from the physical, transition and other climate-related risks in the short-term.

The Group's significant judgements, estimates and assumptions are unchanged compared to those disclosed in note 3 of the Group's 2023 financial statements. Further information on the critical accounting judgements and key sources of estimation uncertainty for the allowance for expected credit losses is set out in note 14.

Note 3: Segmental analysis

Lloyds Banking Group provides a wide range of banking and financial services in the UK and in certain locations overseas. The Group Executive Committee (GEC) remains the "chief operating decision maker" (as defined by IFRS 8 Operating Segments) for the Group.

The segmental results and comparatives are presented on an underlying basis, the basis reviewed by the chief operating decision maker. The underlying basis is derived from the recognition and measurement principles of IFRS with the effects of the following excluded in arriving at underlying profit before tax:

•  Restructuring costs relating to merger, acquisition and integration activities

•  Volatility and other items, which includes the effects of certain asset sales, the volatility relating to the Group's hedging arrangements and that arising in the insurance businesses, the unwind of acquisition-related fair value adjustments and the amortisation of purchased intangible assets

•  Losses from insurance and participating investment contract modifications relating to the enhancement to the Group's longstanding and workplace pension business through the addition of a drawdown feature

For the purposes of the underlying income statement, operating lease depreciation (net of gains on disposal of operating lease assets) is shown as an adjustment to total underlying income.

There has been no change to the descriptions of these segments as provided in note 4 to the Group's financial statements for the year ended 31 December 2023.

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 3: Segmental analysis (continued)

The table below analyses the Group's income and profit by segment on an underlying basis and provides a reconciliation through to certain lines in the Group's statutory income statement. Total income, after net finance income in respect of insurance and investment contracts is also analysed between external and inter-segment income. The Group's full segmental income statement on an underlying basis is shown on page 16.

Half-year to 30 June 2024	Net interest income £m			Other income, after net finance expense1 £m			Total income, after net finance expense1,2 £m			Profit before tax £m			External income £m			Inter- segment income (expense) £m
Underlying basis
Retail	4,430			1,148			5,578			1,875			6,566			(988)
Commercial Banking	1,696			947			2,643			1,329			2,088			555
Insurance, Pensions and Investments	(74)			649			575			119			649			(74)
Other	286			(10)			276			174			(231)			507
Group	6,338			2,734			9,072			3,497			9,072			-
Reconciling items:
Insurance grossing adjustment	8			(112)			(104)			-
Market volatility and asset sales	(273)			208			(65)			(65)
Amortisation of purchased intangibles	-			-			-			(41)
Restructuring costs3	-			-			-			(15)
Fair value unwind and other items	(27)			-			(27)			(52)
Group - statutory	6,046			2,830			8,876			3,324

Half-year to 30 June 2023	Net interest income £m			Other income, after net finance expense1 £m			Total income, after net finance expense1,2 £m			Profit before tax £m			External income £m			Inter- segment income (expense) £m
Underlying basis
Retail	5,064			1,006			6,070			2,505			6,429			(359)
Commercial Banking	1,934			856			2,790			1,417			2,296			494
Insurance, Pensions and Investments	(70)			619			549			91			621			(72)
Other	76			57			133			28			196			(63)
Group	7,004			2,538			9,542			4,041			9,542			-
Reconciling items:
Insurance grossing adjustment	7			(139)			(132)			-
Market volatility and asset sales	(183)			117			(66)			(63)
Amortisation of purchased intangibles	-			-			-			(35)
Restructuring costs3	-			-			-			(25)
Fair value unwind and other items	(30)			(8)			(38)			(48)
Group - statutory	6,798			2,508			9,306			3,870

¹  Other income and total income, after net finance expense in respect of insurance and investment contracts.

²  Total income, after net finance expense does not include operating lease depreciation which, on a statutory basis, is included within operating costs.

³  Restructuring costs related to merger, acquisition and integration costs.

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 3: Segmental analysis (continued)

Half-year to 31 December 2023	Net interest income £m			Other income, after net finance expense1 £m			Total income, after net finance expense1,2 £m			Profit before tax £m			External income £m			Inter- segment income (expense) £m
Underlying basis
Retail	4,583			1,153			5,736			1,538			6,374			(638)
Commercial Banking	1,865			835			2,700			1,802			2,274			426
Insurance, Pensions and Investments	(62)			590			528			99			600			(72)
Other	375			7			382			329			98			284
Group	6,761			2,585			9,346			3,768			9,346			-
Reconciling items:
Insurance grossing adjustment	5			(100)			(95)			-
Market volatility and asset sales	(240)			334			94			98
Amortisation of purchased intangibles	-			-			-			(45)
Restructuring costs3	-			-			-			(129)
Fair value unwind and other items	(26)			4			(22)			(59)
Group - statutory	6,500			2,823			9,323			3,633

¹  Other income and total income, after net finance expense in respect of insurance and investment contracts.

²  Total income, after net finance expense does not include operating lease depreciation which, on a statutory basis, is included within operating costs.

³  Restructuring costs related to merger, acquisition and integration costs.

	Segment loans and advances to customers						Segment external assets
	At 30 Jun 2024 £m			At 31 Dec 2023 £m			At 30 Jun 2024 £m			At 31 Dec 2023 £m
Retail	365,055			361,181			380,919			376,789
Commercial Banking	88,069			88,606			148,736			150,834
Insurance, Pensions and Investments	-			-			191,796			184,267
Other	(716)			(42)			171,476			169,563
Total Group	452,408			449,745			892,927			881,453

	Segment customer deposits						Segment external liabilities
	At 30 Jun 2024 £m			At 31 Dec 2023 £m			At 30 Jun 2024 £m			At 31 Dec 2023 £m
Retail	313,339			308,441			319,066			313,244
Commercial Banking	161,159			162,752			202,358			204,815
Insurance, Pensions and Investments	-			-			187,673			179,962
Other	195			203			138,713			136,067
Total Group	474,693			471,396			847,810			834,088

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 4: Net fee and commission income

	Half-year to 30 Jun 2024 £m			Half-year to 30 Jun 2023 £m			Half-year to 31 Dec 2023 £m
Fee and commission income:
Current accounts	314			310			314
Credit and debit card fees	631			617			647
Commercial banking and treasury fees	188			166			168
Unit trust and insurance broking	32			34			35
Factoring	35			39			36
Other fees and commissions	258			260			300
Total fee and commission income	1,458			1,426			1,500
Fee and commission expense	(568)			(539)			(556)
Net fee and commission income	890			887			944

Current account and credit and debit card fees principally arise in Retail; commercial banking, treasury and factoring fees arise in Commercial Banking; and unit trust and insurance broking fees arise in Insurance, Pensions and Investments.

Note 5: Insurance business

	Half-year to 30 Jun 2024 £m			Half-year to 30 Jun 2023 £m			Half-year to 31 Dec 2023 £m
Life
Amounts relating to the changes in liabilities for remaining coverage:
Contractual service margin recognised for services provided	216			160			169
Change in risk adjustments for non-financial risk for risk expired	27			30			54
Expected incurred claims and other insurance services expenses	977			955			952
Charges to funds in respect of policyholder tax and other	68			20			67
	1,288			1,165			1,242
Recovery of insurance acquisition cash flows	56			40			47
Total life	1,344			1,205			1,289
Non-life
Total non-life	306			245			269
Total insurance revenue	1,650			1,450			1,558
Life
Incurred claims and other directly attributable expenses	(961)			(966)			(931)
Changes that relate to past service: adjustment to liabilities for incurred claims	3			(1)			1
Changes that relate to future service: losses and reversal of losses on onerous contracts	(46)			(26)			84
Amortisation of insurance acquisition cash flows	(56)			(40)			(48)
Net impairment loss on insurance acquisition assets	(8)			-			(7)
Total life	(1,068)			(1,033)			(901)
Non-life
Total non-life	(271)			(205)			(275)
Total insurance service expense	(1,339)			(1,238)			(1,176)
Net (expense) income from reinsurance contracts held	(23)			11			(9)
Insurance service result	288			223			373

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 5: Insurance business (continued)

	Half-year to 30 June 2024
	Life £m			Non-life £m			Total £m
Net investment return on assets held to back insurance and participating investment contracts (memorandum item)1	6,482			20			6,502
Net finance expense from insurance and participating investment contracts	(6,555)			(3)			(6,558)
Net finance income from reinsurance contracts held	81			-			81
Net finance expense from insurance, participating investment and reinsurance contracts	(6,474)			(3)			(6,477)
	Half-year to 30 June 2023
	Life £m			Non-life £m			Total £m
Net investment return on assets held to back insurance and participating investment contracts (memorandum item)1	3,542			28			3,570
Net finance expense from insurance and participating investment contracts	(3,732)			(39)			(3,771)
Net finance income from reinsurance contracts held	2			-			2
Net finance expense from insurance, participating investment and reinsurance contracts	(3,730)			(39)			(3,769)
	Half-year to 31 December 2023
	Life £m			Non-life £m			Total £m
Net investment return on assets held to back insurance and participating investment contracts (memorandum item)1	8,214			7			8,221
Net finance (expense) income from insurance and participating investment contracts	(7,997)			33			(7,964)
Net finance income from reinsurance contracts held	49			-			49
Net finance (expense) income from insurance, participating investment and reinsurance contracts	(7,948)			33			(7,915)

¹  Net investment return on assets held to back insurance contracts and participating investment contracts is reported within net trading income on the face of the Group's income statement; includes income of £6,951 million (half-year to 30 June 2023: £3,781 million; half-year to 31 December 2023: £6,419 million) in respect of unit-linked and with-profit contracts measured applying the variable fee approach. The assets generating the investment return held to back insurance contracts and participating investment contracts are carried at fair value on the Group's balance sheet.

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 5: Insurance business (continued)

At 30 June 2024	Present value of future cash flows £m		Risk adjustment1 £m				Contractual service margin2 £m			Other £m				Total £m
Insurance contract assets		2			1			(2)			-			1
Liabilities arising from insurance contracts and participating investment contracts3,4		(119,421)			(1,139)			(4,467)			-			(125,027)
Insurance acquisition assets		-			-			-			20			20
Net liabilities		(119,419)			(1,138)			(4,469)			20			(125,006)
At 31 December 2023
Insurance contract assets		-			1			-			-			1
Liabilities arising from insurance contracts and participating investment contracts3,4		(114,555)			(1,178)			(4,415)			-			(120,148)
Insurance acquisition assets		-			-			-			24			24
Net liabilities		(114,555)			(1,177)			(4,415)			24			(120,123)

¹  The movement in the risk adjustment during the half-year to 30 June 2024 included £34 million, net of reinsurance, arising on the initial recognition of contracts issued in the period (half-year to 30 June 2023: £42 million; half-year to 31 December 2023: £44 million).

²  The movement in the contractual service margin during the half-year to 30 June 2024 included £27 million, net of reinsurance, arising on the initial recognition of contracts issued in the period (half-year to 30 June 2023: £56 million; half-year to 31 December 2023: £31 million).

³  Liabilities arising from insurance and participating investment contracts substantially all relates to liability for remaining coverage.

⁴  Excluding insurance acquisition assets.

On 13 March 2024, the Group entered into a business transfer agreement with Rothesay Life plc for the sale of the Group's bulk annuity business and to pursue the transfer of associated business assets and assumed liabilities under Part VII of the Financial Services and Markets Act 2000. A reinsurance agreement between the Group and Rothesay Life plc was signed on 30 April 2024 to materially de-risk the Group's bulk annuity portfolio. The Part VII process is subject to approval by the High Court, through a process in which regulators and policyholders are given the opportunity to object. The Group currently expects the Part VII to take place in the second half of 2025.

Upon entering into the reinsurance agreement, the Group derecognised £5.3 billion of financial assets which represents the reinsurance premium paid and at 30 April 2024 recognised a reinsurance contract asset of £5.3 billion, of which £0.3 billion contractual service margin was recognised. The reinsurance contract asset is presented on the Group's balance sheet within other assets.

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 6: Operating expenses

	Half-year to 30 Jun 2024 £m			Half-year to 30 Jun 2023 £m			Half-year to 31 Dec 2023 £m
Staff costs:
Salaries and social security costs	1,914			1,695			1,956
Pensions and other post-retirement benefit schemes (note 7)	276			153			202
Restructuring and other staff costs	214			185			302
	2,404			2,033			2,460
Premises and equipment costs1	196			179			270
Depreciation and amortisation	1,705			1,333			1,572
UK bank levy	-			-			150
Regulatory and legal provisions (note 16)	95			70			605
Other	1,365			1,448			1,272
Operating expenses before adjustment for:	5,765			5,063			6,329
Amounts attributable to the acquisition of insurance and participating investment contracts	(88)			(82)			(101)
Amounts reported within insurance service expenses	(225)			(207)			(179)
Total operating expenses	5,452			4,774			6,049

¹    Net of profits on disposal of operating lease assets of £37 million (half-year to 30 June 2023: £67 million; half-year to 31 December 2023: £26 million).

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 7: Retirement benefit obligations

The Group's post-retirement defined benefit scheme obligations are comprised as follows:

	At 30 Jun 2024 £m			At 31 Dec 2023 £m
Defined benefit pension schemes:
Present value of funded obligations	(28,633)			(30,201)
Fair value of scheme assets	31,924			33,733
Net pension scheme asset	3,291			3,532
Other post-retirement schemes	(42)			(44)
Total amounts recognised in the balance sheet	3,249			3,488
Recognised on the balance sheet as:
Retirement benefit assets	3,379			3,624
Retirement benefit obligations	(130)			(136)
Total amounts recognised in the balance sheet	3,249			3,488

Movements in the Group's net post-retirement defined benefit scheme asset during the period were as follows:

	£m
Asset at 1 January 2024	3,488
Income statement credit	21
Employer contributions	91
Remeasurement	(351)
Asset at 30 June 2024	3,249

The charge to the income statement in respect of pensions and other post-retirement benefit schemes is comprised as follows:

	Half-year to 30 Jun 2024 £m			Half-year to 30 Jun 2023 £m			Half-year to 31 Dec 2023 £m
Defined benefit schemes	(21)			(37)			(42)
Defined contribution schemes	297			190			244
Total charge to the income statement	276			153			202

The principal assumptions used in the valuations of the defined benefit pension schemes were as follows:

	At 30 Jun 2024 %			At 31 Dec 2023 %
Discount rate	5.18			4.70
Rate of inflation:
Retail Price Index (RPI)	3.08			2.96
Consumer Price Index (CPI)	2.67			2.47
Rate of salary increases	0.00			0.00
Weighted-average rate of increase for pensions in payment	2.90			2.73

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 8: Impairment

	Half-year to 30 Jun 2024 £m			Half-year to 30 Jun 2023 £m			Half-year to 31 Dec 2023 £m
Loans and advances to banks	(5)			(3)			(4)
Loans and advances to customers	161			667			(346)
Debt securities	(3)			2			(1)
Financial assets held at amortised cost	153			666			(351)
Financial assets at fair value through other comprehensive income	(2)			(3)			1
Other assets	(8)			(2)			(8)
Loan commitments and financial guarantees	(43)			1			(1)
Total impairment charge (credit)	100			662			(359)

There was a £10 million charge in respect of residual value impairment and voluntary terminations within the Group's UK Motor Finance business in the current period (half-year to 30 June 2023: £27 million; half-year to 31 December 2023: £46 million).

Note 9: Tax

In accordance with IAS 34, the Group's income tax expense for the half-year to 30 June 2024 is based on the best estimate of the weighted-average annual income tax rate expected for the full financial year. The tax effects of one-off items are not included in the weighted-average annual income tax rate, but are recognised in the relevant period.

An explanation of the relationship between tax expense and accounting profit is set out below:

	Half-year to 30 Jun 2024 £m			Half-year to 30 Jun 2023 £m			Half-year to 31 Dec 2023 £m
Profit before tax	3,324			3,870			3,633
UK corporation tax thereon at 25.0 per cent (2023: 23.5 per cent)	(831)			(909)			(854)
Impact of surcharge on banking profits	(83)			(141)			(164)
Non-deductible costs: conduct charges	4			(2)			(27)
Non-deductible costs: bank levy	-			-			(35)
Other non-deductible costs	(39)			(80)			(26)
Non-taxable income	27			27			53
Tax relief on coupons on other equity instruments	67			60			64
Tax-exempt gains on disposals	33			27			8
Tax losses where no deferred tax recognised	(2)			-			(2)
Remeasurement of deferred tax due to rate changes	3			(8)			(6)
Differences in overseas tax rates	-			5			1
Policyholder tax	(46)			(37)			(24)
Deferred tax asset in respect of life assurance expenses	-			64			20
Adjustments in respect of prior years	(12)			(11)			11
Tax effect of share of results of joint ventures	(1)			(1)			2
Tax expense	(880)			(1,006)			(979)

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 10: Fair values of financial assets and liabilities

The valuations of financial instruments have been classified into three levels according to the quality and reliability of information used to determine those fair values. Note 21 to the Group's financial statements for the year ended 31 December 2023 details the definitions of the three levels in the fair value hierarchy.

Financial instruments classified as financial assets at fair value through profit or loss, derivative financial instruments, financial assets at fair value through other comprehensive income and financial liabilities at fair value through profit or loss are recognised at fair value.

The Group manages valuation adjustments for its derivative exposures on a net basis; the Group determines their fair values on the basis of their net exposures. In all other cases, fair values of financial assets and liabilities measured at fair value are determined on the basis of their gross exposures.

The following tables provide an analysis of the financial assets and liabilities of the Group that are carried at fair value in the Group's consolidated balance sheet, grouped into levels 1 to 3 based on the degree to which the fair value is observable. There were no significant transfers between level 1 and level 2 during the period.

Financial assets	Level 1 £m			Level 2 £m			Level 3 £m			Total £m
At 30 June 2024
Financial assets at fair value through profit or loss:
Loans and advances to banks	-			3,405			-			3,405
Loans and advances to customers	-			3,152			6,301			9,453
Reverse repurchase agreements	-			19,816			-			19,816
Debt securities	10,589			24,999			2,286			37,874
Treasury and other bills	12			-			-			12
Contracts held with reinsurers	-			11,838			-			11,838
Equity shares	125,181			-			1,560			126,741
Total financial assets at fair value through profit or loss1	135,782			63,210			10,147			209,139
Financial assets at fair value through other comprehensive income:
Debt securities	14,059			13,432			51			27,542
Equity shares	-			-			305			305
Total financial assets at fair value through other comprehensive income	14,059			13,432			356			27,847
Derivative financial instruments	28			18,603			352			18,983
Total financial assets carried at fair value	149,869			95,245			10,855			255,969

¹  Other financial assets mandatorily at fair value through profit or loss include assets backing insurance contracts and investment contracts of £178,559 million.

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 10: Fair values of financial assets and liabilities (continued)

Financial assets	Level 1 £m			Level 2 £m			Level 3 £m			Total £m
At 31 December 2023
Financial assets at fair value through profit or loss:
Loans and advances to banks	-			3,127			-			3,127
Loans and advances to customers	-			2,015			7,890			9,905
Reverse repurchase agreements	-			17,413			-			17,413
Debt securities	11,611			28,802			2,250			42,663
Treasury and other bills	51			-			-			51
Contracts held with reinsurers	-			11,424			-			11,424
Equity shares	117,194			-			1,541			118,735
Total financial assets at fair value through profit or loss1	128,856			62,781			11,681			203,318
Financial assets at fair value through other comprehensive income:
Debt securities	15,049			12,259			52			27,360
Equity shares	-			-			232			232
Total financial assets at fair value through other comprehensive income	15,049			12,259			284			27,592
Derivative financial instruments	77			21,857			422			22,356
Total financial assets carried at fair value	143,982			96,897			12,387			253,266

¹  Other financial assets mandatorily at fair value through profit or loss include assets backing insurance contracts and investment contracts of £176,475 million.

Financial liabilities	Level 1 £m			Level 2 £m			Level 3 £m			Total £m
At 30 June 2024
Financial liabilities at fair value through profit or loss:
Debt securities in issue	-			4,897			23			4,920
Liabilities in respect of securities sold under repurchase agreements	-			20,167			-			20,167
Short positions in securities	1,920			9			-			1,929
Other	-			40			-			40
Total financial liabilities at fair value through profit or loss	1,920			25,113			23			27,056
Derivative financial instruments	28			16,246			373			16,647
Liabilities arising from non-participating investment contracts	-			48,280			-			48,280
Total financial liabilities carried at fair value	1,948			89,639			396			91,983
At 31 December 2023
Financial liabilities at fair value through profit or loss:
Debt securities in issue	-			5,223			42			5,265
Liabilities in respect of securities sold under repurchase agreements	-			18,057			-			18,057
Short positions in securities	1,569			5			-			1,574
Other	-			18			-			18
Total financial liabilities at fair value through profit or loss	1,569			23,303			42			24,914
Derivative financial instruments	116			19,589			444			20,149
Liabilities arising from non-participating investment contracts	-			44,978			-			44,978
Total financial liabilities carried at fair value	1,685			87,870			486			90,041

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 10: Fair values of financial assets and liabilities (continued)

Valuation control framework

Key elements of the valuation control framework include model validation (incorporating pre-trade and post-trade testing), product implementation review and independent price verification. The framework covers processes for all 3 levels in the fair value hierarchy. Formal committees meet quarterly to discuss and approve valuations in more judgemental areas.

Transfers into and out of level 3 portfolios

Transfers out of level 3 portfolios arise when inputs that could have a significant impact on the instrument's valuation become market observable; conversely, transfers into the portfolios arise when sources of data cease to be observable.

Valuation methodology

For level 2 and level 3 portfolios, there is no significant change to the valuation methodology (techniques and inputs) disclosed in the Group's financial statements for the year ended 31 December 2023 applied to these portfolios.

Movements in level 3 portfolio

The tables below analyse movements in the level 3 financial assets portfolio.

	Financial assets at fair value through profit or loss £m		Financial assets at fair value through other comprehensive income £m				Derivative assets £m			Total financial assets carried at fair value £m
At 1 January 2024	11,681			284			422			12,387
Exchange and other adjustments	2			(1)			-			1
Gains (losses) recognised in the income statement within other income	55			-			(54)			1
Gains recognised in other comprehensive income within the revaluation reserve in respect of financial assets at fair value through other comprehensive income	-			74			-			74
Purchases/increases to customer loans	335			-			6			341
Sales/repayments of customer loans	(1,923)			(1)			(22)			(1,946)
Transfers into the level 3 portfolio	32			-			-			32
Transfers out of the level 3 portfolio	(35)			-			-			(35)
At 30 June 2024	10,147			356			352			10,855
Gains (losses) recognised in the income statement, within other income, relating to the change in fair value of those assets held at 30 June 2024	54			-			(41)			13
At 1 January 2023	11,304			342			553			12,199
Exchange and other adjustments	(1)			(2)			(13)			(16)
Gains (losses) recognised in the income statement within other income	104			4			(53)			55
Losses recognised in other comprehensive income within the revaluation reserve in respect of financial assets at fair value through other comprehensive income	-			(48)			-			(48)
Purchases/increases to customer loans	347			-			40			387
Sales/repayments of customer loans	(475)			(4)			(17)			(496)
Transfers into the level 3 portfolio	139			-			-			139
Transfers out of the level 3 portfolio	(4)			-			(3)			(7)
At 30 June 2023	11,414			292			507			12,213
Gains (losses) recognised in the income statement, within other income, relating to the change in fair value of those assets held at 30 June 2023	79			2			(58)			23

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 10: Fair values of financial assets and liabilities (continued)

The tables below analyse movements in the level 3 financial liabilities portfolio.

	Financial liabilities at fair value through profit or loss £m			Derivative liabilities £m			Total financial liabilities carried at fair value £m
At 1 January 2024	42			444			486
Exchange and other adjustments	-			-			-
Losses (gains) recognised in the income statement within other income	2			(43)			(41)
Additions	-			5			5
Redemptions	(2)			(33)			(35)
Transfers into the level 3 portfolio	-			-			-
Transfers out of the level 3 portfolio	(19)			-			(19)
At 30 June 2024	23			373			396
Losses (gains) recognised in the income statement, within other income, relating to the change in fair value of those liabilities held at 30 June 2024	2			(31)			(29)
At 1 January 2023	45			608			653
Exchange and other adjustments	-			(8)			(8)
Losses (gains) recognised in the income statement within other income	1			(57)			(56)
Additions	-			31			31
Redemptions	(1)			(36)			(37)
Transfers into the level 3 portfolio	2			-			2
Transfers out of the level 3 portfolio	(1)			-			(1)
At 30 June 2023	46			538			584
Losses (gains) recognised in the income statement, within other income, relating to the change in fair value of those liabilities held at 30 June 2023	1			(58)			(57)

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 10: Fair values of financial assets and liabilities (continued)

Sensitivity of level 3 valuations

The tables below set out the effects of reasonably possible alternative assumptions for categories of level 3 financial assets and financial liabilities.

					Effect of reasonably possible alternative assumptions1
At 30 June 2024	Valuation techniques	Significant unobservable inputs2	Carrying value £m		Favourable changes £m		Unfavourable changes £m
Financial assets at fair value through profit or loss
Loans and advances to customers	Discounted cash flows	Interest rate spreads (-127bps/+238bps)	6,301		277		(245)
Equity and venture capital investments	Market approach	Earnings multiple (1.6/17.8)	2,293		163		(163)
	Underlying asset/net asset value (incl. property prices)3	n/a	853		80		(95)
Unlisted equities, debt securities and property partnerships in the life funds	Underlying asset/net asset value (incl. property prices), broker quotes or discounted cash flows3	n/a	297		2		(9)
Other			403		33		(33)
			10,147
Financial assets at fair value through other comprehensive income
Asset-backed securities	Lead manager or broker quote/consensus pricing	n/a	51		2		(2)
Equity and venture capital investments	Underlying asset/net asset value (incl. property prices)3	n/a	305		29		(29)
			356
Derivative financial assets
Interest rate derivatives	Option pricing model	Interest rate volatility (13%/200%)	352		6		(3)
Level 3 financial assets carried at fair value			10,855
Financial liabilities at fair value through profit or loss			23		1		(1)
Derivative financial liabilities
Interest rate derivatives	Option pricing model	Interest rate volatility (13%/200%)	373		17		(18)
Level 3 financial liabilities carried at fair value			396

¹  Where the exposure to an unobservable input is managed on a net basis, only the net impact is shown in the table.

²  Ranges are shown where appropriate and represent the highest and lowest inputs used in the level 3 valuations.

³  Underlying asset/net asset values represent fair value.

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 10: Fair values of financial assets and liabilities (continued)

Sensitivity of level 3 valuations (continued)

					Effect of reasonably possible alternative assumptions1
At 31 December 2023	Valuation techniques	Significant unobservable inputs2	Carrying value £m		Favourable changes £m		Unfavourable changes £m
Financial assets at fair value through profit or loss
Loans and advances to customers	Discounted cash flows	Interest rate spreads (-50bps/+272bps)	7,890		369		(351)
Equity and venture capital investments	Market approach	Earnings multiple (1.6/17.8)	2,228		131		(131)
	Underlying asset/net asset value (incl. property prices)3	n/a	809		77		(99)
Unlisted equities, debt securities and property partnerships in the life funds	Underlying asset/net asset value (incl. property prices), broker quotes or discounted cash flows3	n/a	309		7		(6)
Other			445		39		(41)
			11,681
Financial assets at fair value through other comprehensive income
Asset-backed securities	Lead manager or broker quote/consensus pricing	n/a	52		2		(2)
Equity and venture capital investments	Underlying asset/net asset value (incl. property prices)3	n/a	232		22		(22)
			284
Derivative financial assets
Interest rate derivatives	Option pricing model	Interest rate volatility (13%/200%)	422		6		(3)
Level 3 financial assets carried at fair value			12,387
Financial liabilities at fair value through profit or loss			42		1		(1)
Derivative financial liabilities
Interest rate derivatives	Option pricing model	Interest rate volatility (13%/200%)	444		10		(7)
Level 3 financial liabilities carried at fair value			486

¹  Where the exposure to an unobservable input is managed on a net basis, only the net impact is shown in the table.

²  Ranges are shown where appropriate and represent the highest and lowest inputs used in the level 3 valuations.

³  Underlying asset/net asset values represent fair value.

Unobservable inputs

Significant unobservable inputs affecting the valuation of debt securities, unlisted equity investments and derivatives are unchanged from those described in the Group's financial statements for the year ended 31 December 2023.

Reasonably possible alternative assumptions

Valuation techniques applied to many of the Group's level 3 instruments often involve the use of two or more inputs whose relationship is interdependent. The calculation of the effect of reasonably possible alternative assumptions included in the table above reflects such relationships and is unchanged from that described in note 21 to the Group's financial statements for the year ended 31 December 2023.

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 10: Fair values of financial assets and liabilities (continued)

The table below summarises the carrying values of financial assets and liabilities measured at amortised cost in the Group's consolidated balance sheet. The fair values presented in the table are at a specific date and may be significantly different from the amounts which will actually be paid or received on the maturity or settlement date.

	At 30 June 2024						At 31 December 2023
	Carrying value £m			Fair value £m			Carrying value £m			Fair value £m
Financial assets
Loans and advances to banks	8,454			8,454			10,764			10,764
Loans and advances to customers	452,408			445,987			449,745			439,449