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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