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Lloyds Banking Group (LLOY)

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Thursday 27 July, 2017

Lloyds Banking Group

Half-year Report

RNS Number : 2224M
Lloyds Banking Group PLC
27 July 2017
 

Lloyds Banking Group plc

 

2017 Half-Year Results

 

27 July 2017

 



 

 

BASIS OF PRESENTATION

This release covers the results of Lloyds Banking Group plc together with its subsidiaries (the Group) for the half-year ended 30 June 2017.

Statutory basis: Statutory information is set out on pages 50 to 85. However, a number of factors have had a significant effect on the comparability of the Group's financial position and results. Accordingly, the results are also presented on an underlying basis.

Underlying basis: The statutory results are adjusted for certain items which are listed below, to allow a comparison of the Group's underlying performance.

- losses on redemption of the Enhanced Capital Notes and the volatility in the value of the embedded equity conversion feature;

- market volatility and asset sales, which includes the effects of certain asset sales, the volatility relating to the Group's own debt and hedging arrangements and that arising in the insurance businesses and insurance gross up;

- the unwind of acquisition-related fair value adjustments and the amortisation of purchased intangible assets;

- restructuring costs, comprising severance related costs relating to the Simplification programme, the costs of implementing regulatory reform and ring-fencing, the rationalisation of the non-branch property portfolio and the integration of MBNA; and

- payment protection insurance and other conduct provisions.

Unless otherwise stated, income statement commentaries throughout this document compare the half-year ended 30 June 2017 to the half-year ended 30 June 2016, and the balance sheet analysis compares the Group balance sheet as at 30 June 2017 to the Group balance sheet as at 31 December 2016.

MBNA: MBNA's results and balance sheet have been consolidated with effect from 1 June 2017.

Alternative performance measures: The Group uses a number of alternative performance measures, including underlying profit, in the discussion of its business performance and financial position. Further information on these measures is set out on page 89.

 

FORWARD LOOKING STATEMENTS

This document contains certain forward looking statements with respect to the business, strategy and plans of Lloyds Banking Group and its current goals and expectations relating to its future financial condition and performance. Statements that are not historical facts, including statements about Lloyds Banking Group's or its directors' and/or management's beliefs and expectations, are forward looking statements. By their nature, forward looking statements involve risk and uncertainty because they relate to events and depend upon circumstances that will or may occur in the future. Factors that could cause actual business, strategy, plans and/or results (including but not limited to the payment of dividends) to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward looking statements made by the Group or on its behalf include, but are not limited to: general economic and business conditions in the UK and internationally; market related trends and developments; fluctuations in interest rates (including low or negative rates), exchange rates, stock markets and currencies; the ability to access sufficient sources of capital, liquidity and funding when required; changes to the Group's credit ratings; the ability to derive cost savings and other benefits including, but without limitation as a result of any acquisitions, disposals and other strategic transactions; changing customer behaviour including consumer spending, saving and borrowing habits; changes to borrower or counterparty credit quality; instability in the global financial markets, including Eurozone instability, instability as a result of the exit by the UK from the European Union (EU) and the potential for other countries to exit the EU or the Eurozone  and the impact of any sovereign credit rating downgrade or other sovereign financial issues; technological changes and risks to the security of IT and operational infrastructure, systems, data and information resulting  from  increased threat of cyber and other attacks; natural, pandemic and other disasters, adverse weather and similar contingencies outside the Group's control; inadequate or failed internal or external processes or systems; acts of war, other acts of hostility, terrorist acts and responses to those acts, geopolitical, pandemic or other such events; changes in laws, regulations, accounting standards or taxation, including as a result of the exit by the UK from the EU, or a further possible referendum on Scottish independence; changes to regulatory capital or liquidity requirements and similar contingencies outside the Group's control; the policies, decisions and actions of governmental or regulatory authorities or courts in the UK, the EU, the US or elsewhere including the implementation and interpretation of key legislation and regulation; the ability to attract and retain senior management and other employees; actions or omissions by the Group's directors, management or employees including industrial action; changes to the Group's post-retirement defined benefit scheme obligations; the extent of any future impairment charges or write-downs caused by, but not limited to, depressed asset valuations, market disruptions and illiquid markets; the value and effectiveness of any credit protection purchased by the Group; the inability to hedge certain risks economically; the adequacy of loss reserves; the actions of competitors, including non-bank financial services, lending companies and digital innovators and disruptive technologies; and exposure to regulatory or competition scrutiny, legal, regulatory or competition proceedings, investigations or complaints. Please refer to the latest Annual Report on Form 20-F filed with the US Securities and Exchange Commission for a discussion of certain factors together with examples of forward looking statements. Except as required by any applicable law or regulation, the forward looking statements contained in this document are made as of today's date, and Lloyds Banking Group expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward looking statements. The information, statements and opinions contained in this document do not constitute a public offer under any applicable law or an offer to sell any securities or financial instruments or any advice or recommendation with respect to such securities or financial instruments.



 

CONTENTS

 

 

Page 

Key highlights

Consolidated income statement

Balance sheet and key ratios

Summary consolidated balance sheet

Group Chief Executive's statement

Summary of Group results

Underlying basis segmental analysis

11 

Underlying basis quarterly information

12 

 

 

Divisional highlights

 

Retail

13 

Commercial Banking

15 

Consumer Finance

17 

Insurance

19 

Run-off and Central items

21 

 

 

Additional information

 

Reconciliation between statutory and underlying basis results

22 

Banking net interest margin

23 

Volatility arising in the insurance businesses

24 

Number of employees (full-time equivalent)

24 

Tangible net assets per share

25 

Return on tangible equity

25 

 

 

Risk management

 

Principal risks and uncertainties

26 

Credit risk portfolio

27 

Funding and liquidity management

37 

Capital management

42 

 

 

Statutory information

 

Primary statements

50 

Consolidated income statement

51 

Consolidated statement of comprehensive income

52 

Consolidated balance sheet

53 

Consolidated statement of changes in equity

55 

Consolidated cash flow statement

58 

Notes to the consolidated financial statements

59 

 

 

Summary of alternative performance measures

89 

Contacts

90 

 

 

 


RESULTS FOR THE HALF-YEAR

 

'Following the successful transformation of the Group to become a simple, low risk, UK focused retail and commercial bank, we have delivered another strong set of results with increased underlying and statutory profit and strong capital generation, whilst completing the acquisition of MBNA and returning to full private ownership.

 

The UK economy remains resilient following strong employment and GDP growth in recent years together with private sector deleveraging and rising house prices. Inflation is however now rising above disposable income given the recent depreciation in sterling and, while this may affect consumption going forward, the economy should benefit from rising exports and earnings from foreign assets.

 

We have announced that our next strategy update for the period 2018-2020 will accompany the Group's full year results in February 2018, and in preparation for this we have made a number of organisational and senior management changes. The changes are aimed at aligning and strengthening the Group's structure to ensure we meet evolving customer needs and deliver the continuous transformation required of the organisation in the most effective way.

 

Our differentiated UK focused business model continues to deliver, with our cost leadership and lower risk positioning providing competitive advantage. Our strong financial performance and strategic progress continue to position us well for delivering our purpose of Helping Britain Prosper.'

 

António Horta-Osório

Group Chief Executive

 

 

Strong financial performance with improvements in underlying and statutory profit

·     Underlying profit of £4.5 billion, up 8 per cent; underlying return on tangible equity of 16.6 per cent

·     Total income 4 per cent higher at £9.3 billion

-    Net interest income of £5.9 billion, up 2 per cent with improved margin of 2.82 per cent

-    Other income 8 per cent higher at £3.3 billion

·     Operating costs 1 per cent lower at £4.0 billion. Market-leading cost:income ratio improved to 45.8 per cent

·     Asset quality remains strong with impairment charge of £268 million, asset quality ratio stable at 12 basis points

·     Loans and advances increased to £453 billion, including the benefit of the acquisition of MBNA

·     Statutory profit before tax 4 per cent higher at £2.5 billion, despite an additional £1 billion of conduct charges in the second quarter, primarily in respect of PPI

·     Strong capital generation of c.100 basis points reflecting strong underlying performance with common equity tier 1 (CET1) ratio of 14.0 per cent (13.5 per cent post dividend); leverage ratio of 4.9 per cent

·     Tangible net assets per share of 52.4 pence (31 Dec 2016: 54.8 pence) after payment of 2016 final dividend of 2.2 pence per share and a 1.4 pence per share reduction from the acquisition of MBNA

 

2017 guidance for NIM and AQR updated, with all other guidance reaffirmed

·     Net interest margin for the full year now expected to be close to 2.85 per cent, including MBNA

·     Asset quality ratio for the full year now expected to be less than 20 basis points, including MBNA

·     Continue to expect 2017 capital generation at the top end of the 170-200 basis points ongoing guidance range

·     All other longer term guidance remains unchanged

 

Increased interim dividend

·     Interim ordinary dividend of 1.0 pence per share, up 18 per cent, in line with our progressive and sustainable approach to ordinary dividends

 



 

CONSOLIDATED INCOME STATEMENT − UNDERLYING BASIS

 

 

 

Half-year

 

Half-year

 

 

 

Half-year

 

 

 

 

to 30 June

 

to 30 June

 

 

 

to 31 Dec

 

 

 

 

2017

 

2016

 

Change

 

2016

 

Change

 

 

£ million

    

£ million

 

%

 

£ million

 

%

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 5,925

 

 5,782

 

 2

 

 5,653

 

 5

Other income

 

 3,348

 

 3,093

 

 8

 

 2,972

 

 13

Total income

 

 9,273

 

 8,875

 

 4

 

 8,625

 

 8

Operating lease depreciation

 

 (495)

 

 (428)

 

 (16)

 

 (467)

 

 (6)

Net income

 

 8,778

 

 8,447

 

 4

 

 8,158

 

 8

Operating costs

 

 (4,018)

 

 (4,041)

 

 1

 

 (4,052)

 

 1

Impairment

 

 (268)

 

 (245)

 

 (9)

 

 (400)

 

 33

Underlying profit

 

 4,492

 

 4,161

 

 8

 

 3,706

 

 21

 

 

 

 

 

 

 

 

 

 

 

Volatility and other items

 

 (358)

 

 (1,247)

 

 

 

 (297)

 

 

Payment protection insurance provision

 

 (1,050)

 

 -

 

 

 

 (1,000)

 

 

Other conduct provisions

 

 (540)

 

 (460)

 

 

 

 (625)

 

 

Statutory profit before tax

 

 2,544

 

 2,454

 

 4

 

 1,784

 

 43

Taxation

 

 (905)

 

 (597)

 

 

 

 (1,127)

 

 

Profit for the period

 

 1,639

 

 1,857

 

 (12)

 

 657

 

 149

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

2.0p

 

2.3p

 

 (13)

 

0.6p

 

 233

 

 

 

 

 

 

 

 

 

 

 

Banking net interest margin

 

2.82%

 

2.74%

 

8bp

 

2.69%

 

13bp

Average interest-earning banking assets

 

£431bn

 

£437bn

 

(1)

 

£435bn

 

(1)

Cost:income ratio

 

45.8%

 

47.8%

 

(2.0)pp 

 

49.7%

 

(3.9)pp 

Asset quality ratio

 

0.12%

 

0.11%

 

1bp

 

0.18%

 

(6)bp 

Return on risk-weighted assets

 

4.20%

 

3.75%

 

45bp

 

3.35%

 

85bp

Underlying return on tangible equity

 

16.6%

 

15.1%

 

1.5pp

 

13.2%

 

3.4pp

Return on tangible equity

 

8.2%

 

9.7%

 

(1.5)pp 

 

3.6%

 

4.6pp

 

BALANCE SHEET AND KEY RATIOS

 

 

 

At 30 June

 

At 31 Dec

 

Change

 

 

2017

 

2016

 

%

 

 

 

 

 

 

 

Loans and advances to customers1

 

£453bn

 

£450bn

 

1

Customer deposits2

 

£417bn

 

£413bn

 

1

Loan to deposit ratio

 

109%

 

109%

 

-

Total assets

 

£815bn

 

£818bn

 

-

Pro forma common equity tier 1 ratio pre 2017 dividend accrual3

 

14.0%

 

13.8%

 

0.2pp

Pro forma common equity tier 1 ratio3

 

13.5%

 

13.8%

 

(0.3)pp 

Transitional total capital ratio

 

20.8%

 

21.4%

 

(0.6)pp 

Pro forma leverage ratio3

 

4.9%

 

5.0%

 

(0.1)pp 

Risk-weighted assets

 

£218bn

 

£216bn

 

1

Tangible net assets per share4

 

52.4p

 

54.8p

 

(2.4)p 

 

1

Excludes reverse repos of £11.4 billion (31 December 2016: £8.3 billion).

2

Excludes repos of £1.0 billion (31 December 2016: £2.5 billion).

3

The common equity tier 1 and leverage ratios at 30 June 2017 and 31 December 2016 are reported on a pro forma basis, separately reflecting dividends paid by the Insurance business in July 2017 (in relation to 2017 interim earnings) and February 2017 (in relation to 2016 full year earnings).

4

Tangible net assets per share at 30 June 2017 reflected the payment of the final dividend of 2.2 pence per share in May 2017 and a 1.4 pence per share reduction from the acquisition of MBNA.



 

SUMMARY CONSOLIDATED BALANCE SHEET

 

 

 

At 30 June

 

At 31 Dec 

 

 

2017

 

2016 

 

    

£ million

    

£ million 

 

 

 

 

 

Assets

 

 

 

 

Cash and balances at central banks

 

 50,491


 47,452

Trading and other financial assets at fair value through profit or loss

 

 161,970


 151,174

Derivative financial instruments

 

 30,024


 36,138

Loans and receivables

 




Loans and advances to banks

 

 8,865


 26,902

Loans and advances to customers

 

 464,604


 457,958

Debt securities

 

 3,841


 3,397

 

 

 477,310


 488,257

Available-for-sale financial assets

 

 51,803


 56,524

Other assets

 

 43,321


 38,248

Total assets

 

 814,919


 817,793

 

 

 

 

 

Liabilities

 


 

 

Deposits from banks

 

 24,879

 

 16,384

Customer deposits

 

 417,617

 

 415,460

Trading and other financial liabilities at fair value through profit or loss

 

 55,671

 

 54,504

Derivative financial instruments

 

 29,190

 

 34,924

Debt securities in issue

 

 71,557

 

 76,314

Liabilities arising from insurance and investment contracts

 

 116,970

 

 114,502

Subordinated liabilities

 

 18,575

 

 19,831

Other liabilities

 

 32,114

 

 37,059

Total liabilities

 

 766,573

 

 768,978

 

 


 

 

Shareholders' equity

 

 42,513

 

 43,020

Other equity instruments

 

 5,355

 

 5,355

Non-controlling interests

 

 478

 

 440

Total equity

 

 48,346

 

 48,815

Total equity and liabilities

 

 814,919

 

 817,793

 

 



 

GROUP CHIEF EXECUTIVE'S STATEMENT

 

We have delivered another strong financial performance in the first half with increased underlying and statutory profit and strong capital generation. We have returned to full private ownership, completed the acquisition of MBNA and have made good strategic progress. As a simple, low risk, UK focused bank we are well placed to continue to help Britain prosper.

 

Operating environment

The UK economy remains resilient following strong employment and GDP growth in recent years together with private sector deleveraging and rising house prices. Inflation is however now rising above disposable income given the recent depreciation in sterling and, while this may affect consumption going forward, the economy should benefit from rising exports and earnings from foreign assets.

 

The regulatory environment continues to evolve and there are a number of areas on which we await further clarity including Basel IV, but given the strength of our balance sheet and the capital generative nature of our business model, we are well placed to meet these requirements.

 

Financial performance

The Group has delivered another strong financial performance in the first half of the year. Underlying profit was 8 per cent higher at £4.5 billion with underlying return after tax on tangible equity 1.5 percentage points higher at 16.6 per cent. Income was 4 per cent higher reflecting higher net interest income and other income. Operating costs continue to fall as delivery of the Simplification programme drives further efficiency, and the Group's cost:income ratio fell to 45.8 per cent. Asset quality remains strong and the asset quality ratio remained stable at 12 basis points. Statutory profit before tax increased 4 per cent to £2.5 billion. This was after taking additional provisions for PPI and other conduct related issues which was disappointing. The Group is also currently undertaking a review of the HBOS Reading fraud and is in the process of paying compensation to the victims of the fraud for economic losses, ex-gratia payments and awards for distress and inconvenience. The strong underlying performance has nevertheless enabled the Group to generate approximately 100 basis points of CET1 capital in the period, at the top end of our guided range.

 

Our balance sheet remains strong, with a pre dividend CET1 ratio of 14.0 per cent (13.5 per cent post dividend), a total capital ratio of 20.8 per cent and a leverage ratio of 4.9 per cent. Given the strong capital generation in the first half of the year, the Board has recommended an interim ordinary dividend of 1.0 pence per share, an increase of 18 per cent.

 

Strategic progress

We have continued to make good progress on our strategic priorities in 2017 as we approach the final months of our plan period.

 

Creating the best customer experience

As a customer focused business, we are committed to meeting our customers' evolving needs and preferences through our multi-brand and multi-channel approach. We operate the UK's largest branch network and the largest digital bank with nearly 13 million active online users. We have more than 8.5 million mobile banking users and for the third consecutive year, the Lloyds Bank app has been rated the most feature rich mobile banking app of all the UK major banks.

 

Improvements continue to be made across the business as we transform key customer journeys. In Mortgages, customers can receive an agreement in principle in less than 15 minutes and there has been a 36 per cent increase in customers receiving their mortgage offer in less than 14 days with some offers now in two working days. In account opening and onboarding we have opened 300,000 branch savings accounts in less than 30 minutes with a new streamlined process that has halved appointment times. In Commercial Banking we have delivered a 77 per cent increase in the proportion of SME clients onboarded in less than 30 days, with approximately 50 per cent using digital agreements. In Insurance, a core part of our strategy, we have received a number of industry and consumer awards across our key business propositions.



 

Becoming simpler and more efficient

Cost management continues to be a strategic priority and we remain focused on maintaining competitive advantage through our cost leadership. The Simplification programme is on track to deliver the target of £1.4 billion of annual run-rate savings by the end of 2017, with £1.2 billion of run-rate savings delivered to date. The savings have been delivered through process redesign and automation, improvements in our sourcing arrangements and through organisational changes. These will remain areas of focus as we move into the next phase of our strategy. The Group's market-leading cost:income ratio improved to 45.8 per cent and we continue to expect to exit 2019 with a cost:income ratio of around 45 per cent.

 

Delivering sustainable growth

We are making good progress in growing market share in areas where we are underrepresented. In Consumer Finance we have grown our motor finance and credit card portfolios organically and the acquisition of MBNA allows us to significantly increase our participation in the UK prime credit card market within our prudent risk appetite. In addition, we have continued to grow SME lending ahead of the market and are committed to supporting first-time home buyers where we are still the largest lender. Open book mortgage balances at 30 June were broadly stable compared to the end of 2016, including the reacquisition of a portfolio of mortgages from TSB, and we expect them to grow in the second half of the year. In Insurance, we continue to invest in developing the brand and the business, including our financial planning and retirement capabilities and have also completed five bulk annuity deals in 2017.

 

We remain committed to supporting the people, businesses and communities in the UK through our Helping Britain Prosper Plan. As part of this plan, we have already provided more than £4 billion in funding support to the manufacturing sector, ahead of our original 2014 target. We have also supported more than 63,000 start-ups and helped around 2,500 clients to start exporting this year and we are on track to exceed our 2017 targets in both areas.

 

We have also announced that our next strategy update for the period 2018-2020 will accompany the Group's full year results in February 2018, and in preparation for this we have made a number of organisational and senior management changes. The changes are aimed at aligning and strengthening the Group's structure to ensure we meet evolving customer needs and deliver the continuous transformation required of the organisation in the most effective way.

 

The combination of the progress we have made towards our strategic priorities and our strong financial performance has enabled the Group to be returned to full private ownership with the UK taxpayer receiving approximately £900 million more than the £20.3 billion originally invested.

 

Outlook

Our differentiated UK focused business model continues to deliver with our cost leadership and lower risk positioning providing competitive advantage, and our updated financial targets reflect our confidence in the future prospects of the Group.

 

For the full year, and after including MBNA, net interest margin is now expected to be close to 2.85 per cent and the asset quality ratio is expected to be less than 20 basis points. We continue to expect capital generation for 2017 at the top end of the ongoing 170-200 basis points range and for the cost:income ratio to be lower than in 2016. All other longer term guidance remains unchanged.

 

António Horta-Osório

Group Chief Executive



 

SUMMARY OF GROUP RESULTS

 

Strong financial performance with improvements in underlying and statutory profit

Underlying profit in the first half of 2017 was £4,492 million, 8 per cent higher than in the first half of 2016 with higher total income and lower operating costs offset by a small increase in the impairment charge.

 

Statutory profit before tax in the period was 4 per cent higher at £2,544 million and included charges for PPI and other conduct issues, of which a further £1,040 million was taken in the second quarter. Statutory profit after tax was £1,639 million and the return on tangible equity was 8.2 per cent.

 

The Group's CET1 ratio strengthened to 14.0 per cent on a pro forma basis (31 December 2016: 13.8 per cent pro forma) pre dividends with the Group generating c.100 basis points of CET1 capital in the first half of 2017. Tangible net assets per share at 30 June were 52.4 pence.

 

Total income

 

 

Half-year

 

Half-year

 

 

 

Half-year

 

 

 

 

to 30 June

 

to 30 June

 

 

 

to 31 Dec

 

 

 

 

2017

 

2016

 

Change

 

2016

 

Change

 

 

£ million

 

£ million

 

%

 

£ million

 

%

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 5,925

 

 5,782

 

 2

 

 5,653

 

 5

Other income

 

 3,348

 

 3,093

 

 8

 

 2,972

 

 13

Total income

 

 9,273

 

 8,875

 

 4

 

 8,625

 

 8

Operating lease depreciation1

 

 (495)

 

 (428)

 

 (16)

 

 (467)

 

 (6)

Net income

 

 8,778

 

 8,447

 

 4

 

 8,158

 

 8

 

 

 

 

 

 

 

 

 

 

 

Banking net interest margin

 

2.82%

 

2.74%

 

8bp

 

2.69%

 

13bp

Average interest-earning banking assets

 

£430.9bn

 

£436.9bn

 

 (1)

 

£434.9bn

 

(1)

 

1

Net of gains on disposal of leased assets.

 

Further detail on net interest income is included on page 23.

 

Total income at £9,273 million increased by 4 per cent with growth in both net interest and other income.

 

Net interest income increased to £5,925 million, 2 per cent higher, reflecting an 8 basis point improvement in the net interest margin to 2.82 per cent, partly offset by a 1 per cent reduction in average interest-earning banking assets. The improvement in net interest margin continues to be driven by lower deposit and wholesale funding costs, which have more than offset reduced lending rates, and includes a small uplift from the consolidation of MBNA. Average interest-earning banking assets were 1 per cent lower at £431 billion with continued growth in Consumer Finance offset by some further contraction in the mortgage book and reduced lending to the Global Corporates segment.

 

Given the acquisition of MBNA, the Group now expects growth in both average interest-earning assets and net interest margin in the second half of the year, and expects the full year net interest margin to be close to 2.85 per cent.

 

The Group manages the risk to its capital and earnings from adverse movements in interest rates centrally by hedging liabilities which are deemed to be stable or less sensitive to change in market interest rates. As at 30 June 2017, the balance hedged was c.£143 billion (31 December 2016: £111 billion) with an average duration of c.3 years and an earning rate of approximately 1.4 per cent over LIBOR (half-year to 30 June 2016: 1.3 per cent over LIBOR). In the first half of 2017, the benefit from the structural hedge totalled £0.9 billion over LIBOR (half-year to 30 June 2016: £0.8 billion).

 

Other income was £3,348 million, 8 per cent higher than in the first half of 2016. The improvement reflected a strong performance by Commercial Banking which included income earned from support given to Mid Market and Global Corporate clients with a number of significant refinancing and hedging transactions in the second quarter, further growth in Consumer Finance in relation to the Lex Autolease business, and the gain of £146 million on the sale of the Group's interest in VocaLink.

Operating costs

 

 

Half-year

 

Half-year

 

 

 

Half-year

 

 

 

 

to 30 June

 

to 30 June

 

 

 

to 31 Dec

 

 

 

 

2017

 

2016

 

Change

 

2016

 

Change

 

 

£ million

 

£ million

 

%

 

£ million

 

%

 

 

 

 

 

 

 

 

 

 

 

Operating costs

 

 4,018

 

 4,041

 

 1

 

 4,052

 

 1

Cost:income ratio

 

45.8%

 

47.8%

 

(2.0)pp 

 

49.7%

 

(3.9)pp 

Operating jaws

 

5%

 

 

 

 

 

 

 

 

Simplification savings annual run-rate

 

 1,174

 

 642

 

 

 

 947

 

 

 

Operating costs of £4,018 million were 1 per cent lower reflecting the Group's tight cost control and the benefits of the improvements in efficiency delivered through the Simplification programme. The Group further increased its investment in developing digital capability and improving the branch network to respond to changing customer preferences.

 

The Group has delivered £1.2 billion of run-rate savings to date and remains on track to deliver £1.4 billion of targeted Simplification annual run-rate savings by the end of 2017.

 

The cost:income ratio improved to 45.8 per cent with positive operating jaws in the period of 5 per cent. The Group continues to expect the cost:income ratio for 2017 to be lower than 2016 (48.7 per cent).

 

Impairment

 

 

Half-year

 

Half-year

 

 

 

Half-year

 

 

 

 

to 30 June

 

to 30 June

 

 

 

to 31 Dec

 

 

 

 

2017

 

2016

 

Change

 

2016

 

Change

 

 

£ million

 

£ million

 

%

    

£ million

 

%

 

 

 

 

 

 

 

 

 

 

 

Total impairment charge

 

 268

 

 245

 

 (9)

 

 400

 

 33

Asset quality ratio

 

0.12%

 

0.11%

 

1bp

 

0.18%

 

(6)bp 

Gross asset quality ratio

 

0.23%

 

0.26%

 

(3)bp 

 

0.29%

 

(6)bp 

Impaired loans as a % of closing advances

 

1.8%

 

2.0%

 

(0.2)pp 

 

1.8%

 

-

Provisions as a % of impaired loans

 

43.4%

 

43.5%

 

(0.1)pp 

 

43.4%

 

-

 

Asset quality remains strong and the loan portfolios are well positioned, reflecting the Group's continued prudent through the cycle approach to credit risk appetite.

 

The impairment charge increased by £23 million to £268 million in the first half. Whilst new impairment charges were lower, mainly in Commercial Banking, this was more than offset by a reduced benefit from provision releases and write-backs. The asset quality ratio was 12 basis points (half-year to 30 June 2016: 11 basis points) with the gross asset quality ratio (before releases and write-backs) falling 3 basis points compared with the same period in 2016 and remaining stable compared with the first quarter in 2017.

 

The Group now expects the asset quality ratio for the year to be less than 20 basis points including MBNA.

 

Impaired loans have fallen by £0.2 billion to £8.3 billion (31 December 2016: £8.5 billion) and represent 1.8 per cent of total lending at 30 June 2017. The reduction was mainly due to a large disposal in Commercial Banking during the first quarter and further reductions in Run-off.

 

Provisions as a percentage of impaired loans were unchanged at 43.4 per cent (31 December 2016: 43.4 per cent).



 

Statutory profit

 

 

Half-year 

 

Half-year 

 

 

 

Half-year 

 

 

 

 

to 30 June 

 

to 30 June 

 

 

 

to 31 Dec 

 

 

 

 

2017 

 

2016 

 

Change 

 

2016 

 

Change 

 

   

£ million 

   

£ million 

   

   

£ million 

   

 

 

 

 

 

 

 

 

 

 

 

Underlying profit

 

 4,492 

 

 4,161 

 

 8 

 

 3,706 

 

 21 

Volatility and other items

 

 

 

 

 

 

 

 

 

 

Enhanced Capital Notes

 

 - 

 

 (790) 

 

 

 

 - 

 

 

Market volatility and asset sales

 

 136 

 

 128 

 

 

 

 311 

 

 

Amortisation of purchased intangibles

 

 (38) 

 

 (168) 

 

 

 

 (172) 

 

 

Restructuring costs

 

 (321) 

 

 (307) 

 

 

 

 (315) 

 

 

Fair value unwind and other

 

 (135) 

 

 (110) 

 

 

 

 (121) 

 

 

 

 

 (358) 

 

 (1,247) 

 

 

 

 (297) 

 

 

Payment protection insurance provision

 

 (1,050) 

 

 - 

 

 

 

 (1,000) 

 

 

Other conduct provisions

 

 (540) 

 

 (460) 

 

 

 

 (625) 

 

 

Statutory profit before tax

 

 2,544 

 

 2,454 

 

 4 

 

 1,784 

 

 43 

Taxation

 

 (905) 

 

 (597) 

 

 

 

 (1,127) 

 

 

Profit for the period

 

 1,639 

 

 1,857 

 

 (12) 

 

 657 

 

 149 

 

Further information on the reconciliation of underlying to statutory results is included on page 22.

 

Statutory profit before tax increased 4 per cent to £2,544 million (2016: £2,454 million) driven by the increased underlying profit, partly offset by increased conduct provisions.

 

The charge of £790 million for Enhanced Capital Notes in the first half of 2016 represented the write-off of the embedded derivative and premium paid on the redemption of remaining notes.

 

Market volatility and asset sales of £136 million included positive insurance volatility of £165 million. The credit of £128 million in 2016 included the gain on sale of Visa Europe of £484 million offset by negative insurance volatility of £372 million.

 

Amortisation of purchased intangibles was lower at £38 million (2016: £168 million) as certain intangible assets are now fully amortised. Restructuring costs increased to £321 million and comprised severance costs relating to the Simplification programme, the rationalisation of the non-branch property portfolio, the integration of MBNA and the work on implementing the ring-fencing requirements. The Group anticipates c.£0.2 billion of further implementation costs for the ring-fenced bank between now and the end of 2018, with a total cost of c.£0.5 billion.

 

The £1,050 million charge for PPI includes an additional £700 million provision taken in the second quarter reflecting current claim levels, which remain above the Group's previous provision assumption. The additional provision will now cover reactive claims of around 9,000 per week through to the end of August 2019. Other conduct provisions of £540 million include an additional £340 million in the second quarter. The additional provision covers a number of items including packaged bank accounts and arrears handling. Following a review of the Group's arrears handling activities, the Group has put in place a number of actions to improve further its handling of customers in these areas and the Group is reimbursing mortgage arrears fees. The Group is also currently undertaking a review of the HBOS Reading fraud and is in the process of paying compensation to the victims of the fraud for economic losses, ex-gratia payments and awards for distress and inconvenience. A provision of £100 million was taken in the first quarter and reflects the estimated compensation costs for HBOS Reading.

 

Taxation

The tax charge was £905 million, representing an effective tax rate of 35.6 per cent. The high effective tax rate largely reflects the restrictions on deductibility of conduct provisions and the banking surcharge.

 

Return on tangible equity

The return on tangible equity was 8.2 per cent with improved underlying profit offset by increased PPI and other conduct provisions. The Group continues to expect to generate a return on tangible equity of between 13.5 and 15.0 per cent in 2019.

Balance sheet

 

 

At 30 June

 

At 31 Dec

 

Change

 

    

2017

    

2016

    

%

 

 

 

 

 

 

 

Loans and advances to customers1

 

£453bn

 

£450bn

 

1

Customer deposits2

 

£417bn

 

£413bn

 

1

Loan to deposit ratio

 

109%

 

109%

 

-

 

 

 

 

 

 

 

Wholesale funding

 

£102bn

 

£111bn

 

 (8)

Wholesale funding <1 year maturity

 

£30bn

 

£35bn

 

(13)

Of which money-market funding <1 year maturity3

 

£17bn

 

£14bn

 

23

Liquidity coverage ratio - eligible assets

 

£122bn

 

£121bn

 

1

 

1

Excludes reverse repos of £11.4 billion (31 December 2016: £8.3 billion).

2

Excludes repos of £1.0 billion (31 December 2016: £2.5 billion).

3

Excludes balances relating to margins of £2.9 billion (31 December 2016: £3.2 billion) and settlement accounts of £1.2 billion (31 December 2016: £1.8 billion).

 

Loans and advances to customers increased to £453 billion compared with £450 billion at 31 December 2016, largely driven by the acquisition of the MBNA credit card portfolio. Lending to Consumer Finance and SME customers continued to grow ahead of the market, increasing by 7 per cent (excluding MBNA) and 1 per cent respectively since 31 December 2016. This was more than offset by reductions in the Global Corporate segment as a result of the Group's continued focus on optimising capital and returns and lower closed book mortgage balances.

 

Open book mortgage balances at 30 June were broadly stable compared to the end of 2016 and include the reacquisition of £1.7 billion of mortgages from TSB in the second quarter. The open mortgage book is expected to grow in the second half of the year and close the year slightly above the 2016 closing position.

 

Capital ratios and risk-weighted assets

 

 

At 30 June

 

At 31 Dec

 

Change

 

    

2017

    

2016

    

%

 

 

 

 

 

 

 

Pro forma common equity tier 1 ratio pre 2017 dividend accrual1

 

14.0%

 

13.8%

 

0.2pp

Pro forma common equity tier 1 ratio1

 

13.5%

 

13.8%

 

(0.3)pp 

Transitional tier 1 capital ratio

 

16.6%

 

17.0%

 

(0.4)pp 

Transitional total capital ratio

 

20.8%

 

21.4%

 

(0.6)pp 

Pro forma leverage ratio1

 

4.9%

 

5.0%

 

(0.1)pp 

Risk-weighted assets

 

£218bn

 

£216bn

 

1

 

 

 

 

 

 

 

Shareholders' equity

 

£43bn

 

£43bn

 

(1)

Tangible net assets per share

 

52.4p

 

54.8p

 

(2.4)p 

 

1

The common equity tier 1 and leverage ratios at 30 June 2017 and 31 December 2016 are reported on a pro forma basis, separately reflecting dividends paid by the Insurance business in July 2017 (in relation to 2017 interim earnings) and February 2017 (in relation to 2016 full year earnings).

 

The Group's CET1 ratio improved to 14.0 per cent on a pro forma basis before accruing for 2017 dividends. The Group continues to be strongly capital generative and generated c.100 basis points of capital in the period. This comprised c.140 basis points of underlying capital generation along with c.40 basis points from a reduction in risk-weighted assets (before MBNA) and other factors, partly offset by c.80 basis points to cover conduct provisions. In addition, the Group utilised the CET1 capital retained at 31 December 2016 to cover the acquisition of MBNA. The Group continues to expect capital generation in 2017 at the upper end of the 170-200 basis points ongoing guidance range.

 

While there remain a number of potential regulatory capital developments (including the introduction of the systemic risk buffer in 2019), the Board's view of the current level of CET1 capital required to grow the business, meet regulatory requirements and cover uncertainties remains unchanged at around 13 per cent.

 

The amount of capital we believe is appropriate to hold is likely to vary from time to time depending on circumstances and the Board will continue to give due consideration, subject to the situation at the time, to the distribution of any surplus capital through the use of special dividends or share buy backs.

 

Risk-weighted assets increased to £218 billion as a result of the acquisition of MBNA and targeted growth in key customer segments, partly offset through active portfolio management, disposals and other movements.

 

The leverage ratio reduced by 0.1 per cent on a pro forma basis to 4.9 per cent, largely reflecting the impact of the acquisition of MBNA on both tier 1 capital and the leverage exposure measure.

 

Tangible net assets per share fell to 52.4 pence (31 December 2016: 54.8 pence), largely reflecting the payment of the 2016 final dividend of 2.2 pence per share during May 2017 and the 1.4 pence per share impact of the MBNA acquisition. 

 

Structural reform (ring-fencing) update

The Group is making good progress with the implementation of its ring-fencing programme, including the non ring-fenced bank, Lloyds Bank Corporate Markets plc (LBCM), and remains on track to meet the legal and regulatory requirements by 1 January 2019. LBCM will primarily comprise Commercial Banking Markets Financing (including loan markets, bonds and asset securitisation), Commercial Banking Financial Markets Products (including elements of FX and rates), the business undertaken by Lloyds Bank International Ltd and the Group's branches in the United States, Singapore and Crown Dependencies.

 

As a simple, UK retail and commercial bank, the impact on the Group is relatively limited and there will be minimal impact for the majority of the Group's retail and commercial customers. Approximately 3 per cent of the Group's loans and advances to customers and approximately 7 per cent of Group's risk-weighted assets will be in the non ring-fenced bank. A conditional banking licence with restrictions has been approved for the non ring-fenced entity and preliminary credit ratings for LBCM have been confirmed by S&P (A-/A-2) and Fitch (A/F1).

 

In addition to the ring-fenced and non ring-fenced banks, the Group will continue to operate its Insurance business as a separate entity and will have a new Equity sub-group which will broadly comprise the LDC business and strategic investments.

 



 

UNDERLYING BASIS - SEGMENTAL ANALYSIS

 

Half-year to 30 June 2017

 

 

 

 

 

 

 

 

 

Run-off and

 

 

 

 

 

 

Commercial

 

Consumer

 

 

 

Central

 

 

 

 

Retail

 

Banking

 

Finance1

 

Insurance

 

items

 

Group

 

  

£m

  

£m

  

£m

  

£m

  

£m

  

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 3,337

 

 1,425

 

 1,041

 

 (50)

 

 172

 

 5,925

Other income

 

 477

 

 1,100

 

 755

 

 872

 

 144

 

 3,348

Total income

 

 3,814

 

 2,525

 

 1,796

 

 822

 

 316

 

 9,273

Operating lease depreciation

 

 -

 

 (18)

 

 (449)

 

 -

 

 (28)

 

 (495)

Net income

 

 3,814

 

 2,507

 

 1,347

 

 822

 

 288

 

 8,778

Operating costs

 

 (2,077)

 

 (1,057)

 

 (463)

 

 (414)

 

 (7)

 

 (4,018)

Impairment

 

 (139)

 

 (13)

 

 (125)

 

 -

 

 9

 

 (268)

Underlying profit

 

 1,598

 

 1,437

 

 759

 

 408

 

 290

 

 4,492

 

 

 

 

 

 

 

 

 

 

 

 

 

Banking net interest margin

 

2.29%

 

3.45%

 

5.58%

 

 

 

 

 

2.82%

Average interest-earning banking assets

 

£297.3bn

 

£84.9bn

 

£37.9bn

 

 

 

£10.8bn

 

£430.9bn

Asset quality ratio

 

0.09%

 

0.02%

 

0.67%

 

 

 

 

 

0.12%

Return on risk-weighted assets

 

5.83%

 

3.11%

 

4.36%

 

 

 

 

 

4.20%

Loans and advances to customers2

 

£295.8bn

 

£95.9bn

 

£45.4bn

 

 

 

£16.1bn

 

£453.2bn

Customer deposits3

 

£269.4bn

 

£138.8bn

 

£7.1bn

 

 

 

£1.3bn

 

£416.6bn

 

Half-year to 30 June 2016

 

 

 

 

 

 

 

 

 

Run off and

 

 

 

 

 

 

Commercial

 

Consumer

 

 

 

Central

 

 

 

 

Retail

 

Banking

 

Finance

 

Insurance

 

items

 

Group

 

  

£m

  

£m

  

£m

  

£m

  

£m

  

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 3,296

 

 1,306

 

 994

 

 (80)

 

 266

 

 5,782

Other income

 

 558

 

 982

 

 658

 

 921

 

 (26)

 

 3,093

Total income

 

 3,854

 

 2,288

 

 1,652

 

 841

 

 240

 

 8,875

Operating lease depreciation

 

 -

 

 (52)

 

 (368)

 

 -

 

 (8)

 

 (428)

Net income

 

 3,854

 

 2,236

 

 1,284

 

 841

 

 232

 

 8,447

Operating costs

 

 (2,144)

 

 (1,035)

 

 (466)

 

 (395)

 

 (1)

 

 (4,041)

Impairment

 

 (162)

 

 35

 

 (128)

 

 -

 

 10

 

 (245)

Underlying profit

 

 1,548

 

 1,236

 

 690

 

 446

 

 241

 

 4,161

 

 

 

 

 

 

 

 

 

 

 

 

 

Banking net interest margin

 

2.23%

 

3.18%

 

6.27%

 

 

 

 

 

2.74%

Average interest-earning banking assets

 

£305.0bn

 

£88.1bn

 

£32.9bn

 

 

 

£10.9bn

 

£436.9bn

Asset quality ratio

 

0.11%

 

(0.06)%

 

0.79%

 

 

 

 

 

0.11%

Return on risk-weighted assets

 

5.70%

 

2.42%

 

4.47%

 

 

 

 

 

3.75%

Loans and advances to customers2

 

£300.5bn

 

£102.0bn

 

£33.7bn

 

 

 

£16.8bn

 

£453.0bn

Customer deposits3

 

£271.3bn

 

£141.4bn

 

£9.1bn

 

 

 

£1.5bn

 

£423.3bn

 

1

Includes MBNA with effect from 1 June 2017.

2

Excludes reverse repos of £11.4 billion (30 June 2016: £nil).

3

Excludes repos of £1.0 billion (30 June 2016: £nil).



 



 

UNDERLYING BASIS - QUARTERLY INFORMATION

 

 

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

 

ended

 

ended

 

ended

 

ended

 

ended

 

 

30 June

 

31 Mar

 

31 Dec

 

30 Sept

 

30 June

 

 

2017

 

2017

 

2016

 

2016

 

2016

 

    

£m

    

£m

    

£m

    

£m

    

£m

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 2,997

 

 2,928

 

 2,805

 

 2,848

 

 2,876

Other income

 

 1,866

 

 1,482

 

 1,545

 

 1,427

 

 1,616

Total income

 

 4,863

 

 4,410

 

 4,350

 

 4,275

 

 4,492

Operating lease depreciation

 

 (263)

 

 (232)

 

 (226)

 

 (241)

 

 (235)

Net income

 

 4,600

 

 4,178

 

 4,124

 

 4,034

 

 4,257

Operating costs

 

 (2,050)

 

 (1,968)

 

 (2,134)

 

 (1,918)

 

 (2,054)

Impairment

 

 (141)

 

 (127)

 

 (196)

 

 (204)

 

 (96)

Underlying profit

 

 2,409

 

 2,083

 

 1,794

 

 1,912

 

 2,107

Market volatility and asset sales

 

 124

 

 12

 

 46

 

 265

 

 331

Amortisation of purchased intangibles

 

 (15)

 

 (23)

 

 (85)

 

 (87)

 

 (84)

Restructuring costs

 

 (164)

 

 (157)

 

 (232)

 

 (83)

 

 (146)

Fair value unwind and other items

 

 (74)

 

 (61)

 

 (75)

 

 (46)

 

 (63)

Payment protection insurance provision

 

 (700)

 

 (350)

 

 -

 

 (1,000)

 

 -

Other conduct provisions

 

 (340)

 

 (200)

 

 (475)

 

 (150)

 

 (345)

Statutory profit before tax

 

 1,240

 

 1,304

 

 973

 

 811

 

 1,800

 

 

 

 

 

 

 

 

 

 

 

Banking net interest margin

 

2.83%

 

2.80%

 

2.68%

 

2.69%

 

2.74%

Average interest-earning
banking assets

 

£431.0bn

 

£430.9bn

 

£434.0bn

 

£435.9bn

 

£435.6bn

Cost:income ratio

 

44.6%

 

47.1%

 

51.7%

 

47.5%

 

48.2%

Asset quality ratio

 

0.13%

 

0.12%

 

0.17%

 

0.18%

 

0.09%

 



 

DIVISIONAL RESULTS

 

RETAIL

Retail offers a broad range of financial service products, including current accounts, savings and mortgages, to UK personal customers, including Wealth and small business customers. It is also a distributor of insurance, and a range of long-term savings and investment products. Its aim is to be the best bank for customers in the UK, by building deep and enduring relationships that deliver value to customers, as well as providing them with greater choice and flexibility. It will maintain its multi-brand, multi-channel strategy, continue to simplify the business and provide more transparent products, helping to improve service levels and reduce conduct risks.

 

Progress against strategic initiatives

Creating the best customer experience

·     Announced a new approach to overdrafts that is simple, clear and puts customers in control.

·     Largest UK digital bank with nearly 13 million active online users including over 8.5 million mobile users.

·     For the third year running, Lloyds Bank's mobile banking app has been independently ranked number one in the UK for functionality.

·     Implemented click to call technology enabling customers to contact the call centre from the Group's Mobile App without the need for additional ID verification for the majority of transactions.

·     36 per cent increase in customers receiving their mortgage offer in less than 14 days, with some offers completed in two working days.

·     Around 90 per cent of new branch savings accounts opened in less than 30 minutes using new digital process, with appointment times halved.

·     Retail complaint volumes (excluding PPI) were down 24 per cent in the year to date versus the same period in 2016.

 

Becoming simpler and more efficient

·     Continued investment in new distribution technology; iPads introduced in more than 1,800 branches and used for over 5 million transactions since going live.

·     Maintained the UK's largest branch network with a 21 per cent market share, despite a small number of branch closures.

·     Improving accessibility in rural areas by increasing the number of mobile branches to 20, with further increases planned in the second half of the year.

 

Delivering sustainable growth

·     Continued the Group's commitment to support first-time buyers, with more than £5 billion lent so far in 2017, on track to meet the target of £10 billion in the year.

·     On track to exceed the Group's commitment on start-up businesses with over 63,000 supported in 2017 to date.

 

Financial performance

·     Underlying profit increased 3 per cent to £1,598 million with improved net interest margin and further cost reductions more than offsetting continued pressure on sources of other income.

·     Net interest income increased 1 per cent reflecting a 6 basis point improvement in net interest margin partly offset by a reduction in interest-earning banking assets.

·     Other income was 15 per cent lower than the first half of 2016, driven by changing customer needs.

·     Operating costs decreased 3 per cent to £2,077 million, driven by further efficiency savings which have more than covered increased investment in the business.

·     Impairment charge decreased 14 per cent to £139 million, benefiting from higher unsecured debt sales and a benign credit environment. Underlying credit quality remains stable.

·     Loans and advances to customers fell 1 per cent to £295.8 billion. Open book mortgage balances at 30 June were broadly stable compared to the end of 2016 after reflecting the reacquisition of £1.7 billion of mortgages from TSB in the second quarter.

·     Customer deposits decreased 1 per cent to £269.4 billion, driven by the continued reduction in tactical balances.



 

·     Risk-weighted assets have remained broadly flat at £55.3 billion.

Performance summary

 

 

Half-year

 

Half-year

 

 

 

Half-year

 

 

 

 

to 30 June

 

to 30 June

 

 

 

to 31 Dec

 

 

 

 

2017

 

2016

 

Change

 

2016

 

Change

 

 

£m

 

£m

 

%

 

£m

 

%

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 3,337

 

 3,296

 

 1

 

 3,201

 

 4

Other income

 

 477

 

 558

 

 (15)

 

 495

 

 (4)

Total income

 

 3,814

 

 3,854

 

 (1)

 

 3,696

 

 3

Operating lease depreciation

 

 -

 

 -

 

 

 

 -

 

 

Net income

 

 3,814

 

 3,854

 

 (1)

 

 3,696

 

 3

Operating costs

 

 (2,077)

 

 (2,144)

 

 3

 

 (2,030)

 

 (2)

Impairment

 

 (139)

 

 (162)

 

 14

 

 (211)

 

 34

Underlying profit

 

 1,598

 

 1,548

 

 3

 

 1,455

 

 10

 

 

 

 

 

 

 

 

 

 

 

Banking net interest margin

 

2.29%

 

2.23%

 

6bp

 

2.16%

 

13bp

Average interest-earning banking assets

 

£297.3bn

 

£305.0bn

 

(3)

 

£300.4bn

 

(1)

Asset quality ratio

 

0.09%

 

0.11%

 

(2)bp

 

0.14%

 

(5)bp 

Impaired loans as % of closing advances

 

1.5%

 

1.4%

 

0.1pp

 

1.5%

 

-

Return on risk-weighted assets

 

5.83%

 

5.70%

 

13bp

 

5.21%

 

62bp

 

 

 

At 30 June

 

At 31 Dec

 

 

 

 

2017

 

2016

 

Change

 

 

£bn

 

£bn

 

%

 

 

 

 

 

 

 

Loans and advances excluding closed portfolios

 

 270.6

 

 271.0

 

-

Closed portfolios

 

 25.2

 

 26.7

 

 (6)

Loans and advances to customers

 

 295.8

 

 297.7

 

 (1)

 

 

 

 

 

 

 

Relationship balances

 

 254.9

 

 253.8

 

 

Tactical balances

 

 14.5

 

 17.2

 

 (16)

Customer deposits

 

 269.4

 

 271.0

 

 (1)

 

 

 

 

 

 

 

Risk-weighted assets

 

 55.3

 

 55.2

 

 

 



 

COMMERCIAL BANKING

Commercial Banking has a client-led, low risk, capital efficient strategy, helping UK-based clients and international clients with a link to the UK. Through its four client facing divisions - SME, Mid Markets, Global Corporates and Financial Institutions - it provides clients with a range of products and services such as lending, transactional banking, working capital management, risk management, debt capital markets services, as well as access to private equity through Lloyds Development Capital.

 

Progress against strategic initiatives

Commercial Banking continues to meet its strategic objective of improving returns on risk-weighted assets. In the first half of 2017, Commercial Banking has delivered a return of 3.11 per cent significantly outperforming the commitment of 2.40 per cent for 2017.

 

Creating the best customer experience

·     Awarded Business Bank of the Year at the FDs' Excellence Awards for the 13th consecutive year.

·     Helping Britain prosper globally through its newly launched International Trade Portal which provides clients with access to 110,000 importers, 30,000 suppliers, 25,000 market reports, 20,000 trade shows and live tenders.

 

Becoming simpler and more efficient

·     Continue to improve the end-to-end journey for clients by significantly improving the way SMEs open an account with approximately 50 per cent of SME account openings in 2017 using the new digital signature tool.

·     Increased digital capability; clients can now simply and quickly place, review and renew their online deposits 24 hours a day which has improved client experiences.

 

Delivering sustainable growth

·     Participated in over £3.6 billion of financing in the first half of 2017 to support UK government infrastructure projects.

·     On track to exceed the annual £1 billion Helping Britain Prosper funding commitment for manufacturing businesses in each year since the commitment was made in 2014. The cumulative target of £4 billion over four years has been met in the first half of the year, six months ahead of schedule.

 

Financial performance

·     Underlying profit increased 16 per cent to £1,437 million.

·     Return on risk-weighted assets increased to 3.11 per cent, up 69 basis points, demonstrating the continued progress in delivering sustainable returns.

·     Income growth of 10 per cent to £2,525 million with strong growth in Mid Markets and Global Corporates.

·     Net interest income up 9 per cent to £1,425 million, supported by disciplined deposit pricing and expanded asset margins due to reduced funding costs. Net interest margin improved by 27 basis points.

·     Other income up 12 per cent led by good franchise growth including support given to Mid Market and Global Corporate clients with a number of significant refinancing and hedging transactions. Growth in LDC driven by successful equity exits.

·     Operating lease depreciation reduced due to accelerated charges in the prior year on certain leasing assets.

·     Operating costs up 2 per cent due to continued investment in the business including simplifying the end-to-end customer journey. Disciplined management of staff-related costs has supported positive operating jaws of 10 per cent.

·     Impairment charge of £13 million reflects effective credit risk management and the continued low interest rate environment. Asset quality ratio remains low at 0.02 per cent.

·     Loans and advances fell 4 per cent to £95.9 billion mainly due to reductions in Global Corporates. Lending growth in SME has remained at above market growth levels.

·     Deposits increased by 5 per cent to £138.8 billion. Strong momentum in attracting high quality transactional banking deposits across the franchise that continues to support the balance sheet strength of the Group.

·     Continued active portfolio management with risk-weighted assets decreasing £5.2 billion, driven primarily by the reduction in loans and advances.



 

Performance summary

 

 

Half-year

 

Half-year

 

 

 

Half-year

 

 

 

 

to 30 June

 

to 30 June

 

 

 

to 31 Dec

 

 

 

 

2017

 

2016

 

Change

 

2016

 

Change

 

 

£m

 

£m

 

%

 

£m

 

%

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 1,425

 

 1,306

 

 9

 

 1,429

 

-

Other income

 

 1,100

 

 982

 

 12

 

 1,005

 

 9

Total income

 

 2,525

 

 2,288

 

 10

 

 2,434

 

 4

Operating lease depreciation

 

 (18)

 

 (52)

 

 65

 

 (53)

 

 66

Net income

 

 2,507

 

 2,236

 

 12

 

 2,381

 

 5

Operating costs

 

 (1,057)

 

 (1,035)

 

 (2)

 

 (1,098)

 

 4

Impairment (charge) release

 

 (13)

 

 35

 

 

 

 (51)

 

 75

Underlying profit

 

 1,437

 

 1,236

 

 16

 

 1,232

 

 17

 

 

 

 

 

 

 

 

 

 

 

Banking net interest margin

 

3.45%

 

3.18%

 

27bp

 

3.33%

 

12bp

Average interest-earning banking assets

 

£84.9bn

 

£88.1bn

 

(4)

 

£89.0bn

 

(5)

Asset quality ratio

 

0.02%

 

(0.06)%

 

8bp

 

0.10%

 

(8)bp 

Impaired loans as % of closing advances

 

2.0%

 

2.3%

 

(0.3)pp 

 

2.2%

 

(0.2)pp 

Return on risk-weighted assets

 

3.11%

 

2.42%

 

69bp

 

2.46%

 

65bp

 

 

 

At 30 June

 

At 31 Dec

 

 

 

 

2017

 

2016

 

Change

 

 

£bn

 

£bn

 

%

 

 

 

 

 

 

 

Loans and advances to customers

 

 95.9

 

 100.4

 

 (4)

Customer deposits

 

 138.8

 

 132.6

 

 5

Risk-weighted assets

 

 90.8

 

 96.0

 

 (5)

 



 

CONSUMER FINANCE

Consumer Finance comprises the Group's consumer lending products, including motor finance, credit cards (including MBNA), unsecured personal loans and its European consumer business. Its aim is to deliver sustainable growth, within a prudent risk appetite in these markets through its multi-brand, multi-channel distribution model.

 

Progress against strategic initiatives

The division continues to make significant progress against its strategic objectives, and in June, successfully completed the acquisition of the MBNA credit card business from Bank of America. The acquisition consolidates the Group's position as Britain's largest credit card issuer. Customer assets have grown by £11 billion since the start of the year, primarily driven by £7.9 billion related to MBNA and continued organic growth.

 

Creating the best customer experience

·     Consumer Cards customer complaints reduced 25 per cent year-on-year, despite continued portfolio growth, as customer concerns are addressed and fixed.

·     Black Horse completed the first phase of its new digital platform. This enables dealers to clearly present information to customers and submit applications via a tablet.

·     Lex Autolease launched a new website for both business and personal customers, improving access from mobile devices.

·     Loans introduced upfront eligibility checking for existing current account customers, and extended the Halifax offer beyond existing customers.

 

Becoming simpler and more efficient

·     Black Horse has simplified the process for new customers through the introduction of welcome videos and the issuance of contract information digitally.

·     Lex Autolease has re-platformed its IT infrastructure, improving IT resilience and doubling performance speed.

·     Bank of Scotland Germany has replaced its IT system with a modular digital platform that will result in an IT cost reduction of c.30 per cent over a five year period.

 

Delivering sustainable growth

·     Consumer Finance continues to closely monitor the economic environment to maintain performance within its prudent risk appetite.

·     Continue to tighten lending criteria with increased conservatism in residual risk management.

·     Lex Autolease has achieved its five year ambition to grow the fleet by 100,000 vehicles, cementing its position as the UK's leading motor vehicle leasing company.

 

Financial performance

·     Underlying profit at £759 million was up 10 per cent (6 per cent excluding MBNA), mainly driven by higher income and lower impairments. Return on risk-weighted assets remained strong at 4.36 per cent.

·     Net interest income at £1,041 million was up 5 per cent from strong asset growth.

·     Other income was up 15 per cent at £755 million, with continued fleet growth in Lex Autolease. This increase was partly offset by growth in associated operating lease depreciation.

·     Operating costs fell by 1 per cent to £463 million through continued underlying efficiency savings.

·     Impairment charge down 2 per cent at £125 million due to debt sales more than offsetting portfolio growth. Underlying asset quality ratio was broadly flat at 1.30 per cent.

·     UK customer assets were up 30 per cent since December 2016, reflecting the acquisition of MBNA and continued growth in Black Horse, in particular through the partnership with Jaguar Land Rover.

·     Customer deposits were down 10 per cent since December 2016 to £7.1 billion, in line with the Group's deposit strategy.



 

Performance summary

 

 

Half-year

 

Half-year

 

 

 

Half-year

 

 

 

 

to 30 June

 

to 30 June

 

 

 

to 31 Dec

 

 

 

 

20171

 

2016

 

Change

 

2016

 

Change

 

 

£m

 

£m

 

%

 

£m

 

%

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 1,041

 

 994

 

 5

 

 947

 

 10

Other income

 

 755

 

 658

 

 15

 

 680

 

 11

Total income

 

 1,796

 

 1,652

 

 9

 

 1,627

 

 10

Operating lease depreciation

 

 (449)

 

 (368)

 

 (22)

 

 (407)

 

 (10)

Net income

 

 1,347

 

 1,284

 

 5

 

 1,220

 

 10

Operating costs

 

 (463)

 

 (466)

 

 1

 

 (473)

 

 2

Impairment

 

 (125)

 

 (128)

 

 2

 

 (154)

 

 19

Underlying profit

 

 759

 

 690

 

 10

 

 593

 

 28

 

 

 

 

 

 

 

 

 

 

 

Banking net interest margin

 

5.58%

 

6.27%

 

(69)bp 

 

5.52%

 

6bp

Average interest-earning banking assets

 

£37.9bn

 

£32.9bn

 

15

 

£34.9bn

 

9

Asset quality ratio

 

0.67%

 

0.79%

 

(12)bp 

 

0.88%

 

(21)bp 

Impaired loans as % of closing advances

 

1.8%

 

2.3%

 

(0.5)pp 

 

2.1%

 

(0.3)pp 

Return on risk-weighted assets

 

4.36%

 

4.47%

 

(11)bp 

 

3.73%

 

63bp

 

1

Includes MBNA with effect from 1 June 2017 (total income £63 million; operating costs £21 million; impairment £14 million).

 

 

 

At 30 June

 

At 31 Dec

 

 

 

 

2017

 

2016

 

Change

 

 

£bn

 

£bn

 

%

 

 

 

 

 

 

 

Loans and advances to customers

 

 45.4

 

 35.1

 

29

Operating lease assets

 

 4.6

 

 4.1

 

 12

Total customer assets

 

 50.0

 

 39.2

 

 28

Of which UK

 

 42.7

 

 32.8

 

 30

 

 

 

 

 

 

 

Customer deposits

 

 7.1

 

 7.9

 

 (10)

 

 

 

 

 

 

 

Risk-weighted assets

 

 40.0

 

 32.1

 

 25

 



 

INSURANCE

The Insurance division is committed to providing a range of trusted, value for money protection, general insurance, pension and investment products to meet the needs of its customers. Scottish Widows, with customer funds under management of £124 billion, together with the general insurance business help around 9 million customers to protect what they value most and to plan financially for the future.

 

Progress against strategic initiatives

The Group continues to invest in developing the Insurance business and seeks to grow in areas where it has competitive advantage and is underrepresented, for the benefit of both customers and shareholders.

 

Creating the best customer experience

·     Awarded 'Pension Firm of the Year' (FDs' Excellence Awards), 'Pensions Provider of the Year' (Pensions Age Awards) and 'Risk Reduction Provider of the Year' (UK Pensions Awards).

·     Helped almost 10,000 protection customers at the most difficult and challenging times of their lives. An improved customer claim journey means that the percentage of new protection claims paid is one of the highest in the industry.

 

Becoming simpler and more efficient

·     More than 40 per cent of corporate pension schemes are now using the digital service for employers, which has significantly reduced processing times.

·     Launched a digital service for employees with workplace pensions enabling individuals to view their pension value and contribution history, update personal details and access educational material on pension basics.

 

Delivering sustainable growth

·     Collaborated with Commercial Banking to source lower risk, long-maturity assets to match growing annuitant liabilities, providing finance to support two major UK infrastructure projects.

·     Annualised payments to annuity customers in retirement have reached £1 billion, reflecting robust growth in this business. 

·     Sums assured under Scottish Widows Protect have almost doubled to £4.7 billion since the end of 2016.

·     Continuing the progress made in 2016, five further bulk annuity transactions were successfully completed in the first half of 2017.

·     Corporate pension, planning and retirement funds under management increased by 8 per cent to £38 billion reflecting net inflows and positive market movements. 

·     Longstanding life, pensions and investment (LP&I) funds under management remains stable.

 

Financial performance

·     Underlying profit decreased by 9 per cent to £408 million as a result of lower bulk annuity transactions and increased investment costs in the first half of 2017. Compared to the second half of 2016, underlying profit grew by 4 per cent.

·     Life and pensions sales increased by 4 per cent reflecting growth in corporate pensions, planning and retirement and protection. Excluding bulk annuity deals, sales increased by 25 per cent. 

·     General insurance underwritten new business household premiums have increased by 3 per cent, driven by the new flexible online offering launched in 2016. However, total underwritten premiums have decreased by 13 per cent, reflecting the continued competitiveness of the household market and the run off of legacy products.

·     Costs increased to £414 million reflecting higher investment expenditure with business as usual costs remaining broadly flat.

 

Capital

·     Paid an interim dividend of £75 million to the Group in July 2017, bringing total dividends paid since the formation of the Group in 2009, to £7.2 billion.

·     The estimated post interim dividend Solvency II ratio of 152 per cent (31 December 2016 post dividend position: 147 per cent) represents the shareholder view of Solvency II surplus. The increase in the ratio primarily reflects in year earnings and favourable market volatility, partly offset by capital invested in new business. 

   

Performance summary

 

 

Half-year

 

Half-year

 

 

 

Half-year

 

 

 

 

to 30 June

 

to 30 June

 

 

 

to 31 Dec

 

 

 

 

2017

 

2016

 

Change

 

2016

 

Change

 

 

£m

 

£m

 

%

 

£m

 

%

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 (50)

 

 (80)

 

 38

 

 (66)

 

 24

Other income

 

 872

 

 921

 

 (5)

 

 834

 

 5

Total income

 

 822

 

 841

 

 (2)

 

 768

 

 7

Operating costs

 

 (414)

 

 (395)

 

 (5)

 

 (377)

 

 (10)

Underlying profit

 

 408

 

 446

 

 (9)

 

 391

 

 4

 

 

 

 

 

 

 

 

 

 

 

Life and pensions sales (PVNBP)1

 

 4,984

 

 4,791

 

 4

 

 4,128

 

 21

New business income

 

 153

 

 222

 

 (31)

 

 159

 

 (4)

General insurance underwritten new GWP2

 

 38

 

 37

 

 3

 

 38

 

-

General insurance underwritten total GWP2

 

 370

 

 424

 

 (13)

 

 409

 

 (10)

General insurance combined ratio

 

88%

 

89%

 

(1)pp 

 

85%

 

3pp

Solvency II ratio3


152%


144%


8pp

 

147%


5pp

 

1

Present value of new business premiums.

2

Gross written premiums.

3

On a post dividend shareholder basis. The equivalent regulatory view of the ratio (including With Profits funds) is 147 per cent at 30 June 2017 (31 December 2016: 143 per cent).

 

Income by product group

 

 

Half-year to 30 June 2017

 

Half-year to 30 June 2016

 

 

 

  

New

  

Existing

  

 

  

New

  

Existing

  

 

 

Half-year

 

 

business

 

business

 

Total

 

business

 

business

 

Total

 

to 31 Dec

 

 

income

 

income

 

income

 

income

 

income

 

income

 

2016

 

    

£m

    

£m

    

£m

    

£m

    

£m

    

£m

 

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate pensions

 

 50

 

 48

 

 98

 

 69

 

 52

 

 121

 

 106

Bulk annuities

 

 40

 

 13

 

 53

 

 84

 

 6

 

 90

 

 47

Planning and retirement

 

 46

 

 45

 

 91

 

 58

 

 47

 

 105

 

 99

Protection

 

 10

 

 10

 

 20

 

 8

 

 9

 

 17

 

 19

Longstanding LP&I

 

 7

 

 220

 

 227

 

 3

 

 223

 

 226

 

 223

 

 

 153

 

 336

 

 489

 

 222

 

 337

 

 559

 

 494

Life and pensions experience and other items

 

 

 

 

 

 191

 

 

 

 

 

 124

 

 99

General insurance

 

 

 

 

 

 157

 

 

 

 

 

 168

 

 186

NII and free asset return

 

 

 

 

 

 (15)

 

 

 

 

 

 (10)

 

 (11)

Total income

 

 

 

 

 

 822

 

 

 

 

 

 841

 

 768

 

Presentation of 2016 income by product group restated to be aligned with 2017 proposition groupings.

 

New business income has decreased by £69 million to £153 million, driven by the timing of bulk annuity transactions and lower income from corporate pensions and planning and retirement. Existing business income is broadly flat. Compared to the second half of 2016, new business income is stable.

 

Experience and other items contributed a net benefit of £191 million (2016: £124 million). This included £170 million from the addition of a new death benefit to certain legacy pension contracts, aligning terms with other similar products. An equivalent benefit of £184 million in the first half of 2016 was partly offset by the impact of reforms on activity within the corporate pensions market.

 

General insurance income net of claims has decreased by £11 million reflecting the continued competitiveness of the Home market and the run off of legacy products.



 

RUN-OFF AND CENTRAL ITEMS

 

RUN-OFF


 

Half-year

 

Half-year

 

 

 

Half-year

 

 


 

to 30 June

 

to 30 June

 

 

 

to 31 Dec

 

 

 

 

2017

 

2016

 

Change

 

2016

 

Change

 

 

£m

 

£m

 

%

 

£m

 

%












Net interest income

 

(48)

 

 (59)

 

 19

 

 (51)

 

 6

Other income

 

45

 

 78

 

 (42)

 

 42

 

 7

Total income

 

 (3)

 

 19

 

 

 

 (9)

 

 67 

Operating lease depreciation

 

(28)

 

 (8)

 

 

 

 (7)

 

 

Net income

 

(31)

 

11

 

 

 

(16)

 

 (94)

Operating costs

 

 (23)

 

 (38)

 

 39

 

 (39)

 

 41

Impairment release

 

 14

 

 10

 

 40

 

 16

 

 (13)

Underlying loss

 

 (40)

 

 (17)

 

 

 

 (39)

 

 (3)

 

 

 

 

 

 

 

 

 

 

 

At 30 June

 

At 31 Dec

 

 

 

 

 

 

2017

 

2016

 

Change

 

 

 

 

£bn

    

£bn

    

%

 

 

 

 

 

 

 

 

 

 

 

Loans and advances to customers

 

9.1

 

 9.6

 

 (5)

 

 

Total assets

 

10.7

 

 11.3

 

 (5)

 

 

Risk-weighted assets

 

8.1

 

 8.5

 

 (5)

 

 

·     The underlying loss increased to £40 million largely as a result of additional depreciation charges on certain leasing assets.

·     Total run-off assets have reduced by a further 5 per cent since 31 December 2016.

 

 

CENTRAL ITEMS








 

 

 

Half-year

 

Half-year

 

Half-year

 

 

 

 

to 30 June

 

to 30 June

 

to 31 Dec

 

 

 

 

2017

 

2016

 

2016

 

 

 

   

£m

   

£m

   

£m

 

 

 

 

 

 

 

 

 

 

 

Total income

 

319

 

 221

 

 109

 

 

Costs

 

16

 

 37

 

 (35)

 

 

Impairment charge

 

 (5)

 

 -

 

 -

 

 

Underlying profit

 

 330

 

 258

 

 74

 

 

·     Central items includes income and expenditure not attributed to divisions, including the costs of certain central and head office functions.

·     Total income included the gain on sale of the Group's interest in VocaLink of £146 million together with gains on sales of liquid assets and other items.



 

ADDITIONAL INFORMATION

 

1.             Reconciliation between statutory and underlying basis results

 

The tables below set out the reconciliation from the statutory results to the underlying basis results, the principles of which are set out on the inside front cover.

 

 

 

 

 

Removal of:

 

 

 

 

Lloyds

 

 

 

 

 

 

 

 

 

 

 

 

Banking

 

Volatility

 

 

 

 

 

Other

 

 

 

 

Group

 

and other

 

Insurance

 

 

 

conduct

 

Underlying

 

 

statutory

 

items1,4

 

gross up2

 

PPI

 

provisions

 

basis

Half-year to 30 June 2017

 

£m

 

£m

 

£m

 

£m

 

£m

 

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 5,202

 

 115

 

 608

 

 -

 

 -

 

 5,925

Other income, net of insurance claims

 

 4,097

 

 (89)

 

 (660)

 

 -

 

 -

 

 3,348

Total income

 

 9,299

 

 26

 

 (52)

 

 -

 

 -

 

 9,273

Operating lease depreciation

 

 

 

 (495)

 

 -

 

 -

 

 -

 

 (495)

Net income

 

 9,299

 

 (469)

 

 (52)

 

 -

 

 -

 

 8,778

Operating expenses3

 

 (6,552)

 

 892

 

 52

 

 1,050

 

 540

 

 (4,018)

Impairment

 

 (203)

 

 (65)

 

 -

 

 -

 

 -

 

 (268)

Profit before tax

 

 2,544

 

 358

 

 -

 

 1,050

 

 540

 

 4,492

 

 

 

 

 

 

 

 

 

 

 

 

 

Half-year to 30 June 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 5,225

 

 134

 

 423

 

 -

 

 -

 

 5,782

Other income, net of insurance claims

 

 3,095

 

 502

 

 (519)

 

 -

 

 15

 

 3,093

Total income

 

 8,320

 

 636

 

 (96)

 

 -

 

 15

 

 8,875

Operating lease depreciation

 

 

 

 (428)

 

 -

 

 -

 

 -

 

 (428)

Net income

 

 8,320

 

 208

 

 (96)

 

 -

 

 15

 

 8,447

Operating expenses3

 

 (5,504)

 

 922

 

 96

 

 -

 

 445

 

 (4,041)

Impairment

 

 (362)

 

 117

 

 -

 

 -

 

 -

 

 (245)

Profit before tax

 

 2,454

 

 1,247

 

 -

 

 -

 

 460

 

 4,161

 

1

Half-year to 30 June 2017 comprises the effects of asset sales (gains of £6 million); volatile items (gains of £145 million); liability management (losses of £15 million); the amortisation of purchased intangibles (£38 million); restructuring costs (£321 million, comprising severance costs relating to the Simplification programme, the rationalisation of the non-branch property portfolio, the work on implementing the ring-fencing requirements and the integration of MBNA); and the fair value unwind and other items (losses of £135 million).

2

The Group's insurance businesses' income statements include income and expenditure which are attributable to the policyholders of the Group's long-term assurance funds. These items have no impact in total upon the profit attributable to equity shareholders and, in order to provide a clearer representation of the underlying trends within the business, these items are shown net within the underlying results.

3

The statutory basis figure is the aggregate of operating costs and operating lease depreciation.

4

Half-year to 30 June 2016 comprises the write-off of the ECN embedded derivative and premium paid on redemption of the remaining notes (losses of £790 million); the effects of asset sales (gains of £335 million); volatile items (losses of £353 million); liability management (gains of £146 million); the amortisation of purchased intangibles (£168 million); restructuring costs (£307 million, principally comprising the severance related costs under phase II of the Simplification programme); and the fair value unwind (losses of £110 million).

 



 

2.         Banking net interest margin

 

The net interest margin is calculated by dividing underlying banking net interest income by average interest-earning banking assets.

 

Non-banking net interest income largely comprises subordinated debt costs incurred by the Insurance business. Non-banking assets largely comprise fee based loans and advances within Commercial Banking and loans sold by Commercial Banking and Retail to Insurance to back annuitant liabilities.

 

The table below shows the reconciliation between statutory net interest income and underlying banking net interest.

 

 

 

Half-year

 

Half-year

 

Half-year

 

 

to 30 June

 

to 30 June

 

to 31 Dec

 

 

2017

 

2016

 

2016

 

  

£m

   

£m

 

£m

 

 

 

 

 

 

 

Group net interest income - statutory basis

 

 5,202

 

 5,225

 

 4,049

Insurance gross up

 

 608

 

 423

 

 1,475

Volatility and other items

 

 115

 

 134

 

 129

Group net interest income - underlying basis

 

 5,925

 

 5,782

 

 5,653

Non-banking net interest expense

 

 96

 

 173

 

 218

Banking net interest income - underlying basis

 

 6,021

 

 5,955

 

 5,871

 

 

 

 

 

 

 

Average interest-earning banking assets

 

£430.9bn

 

£436.9bn

 

£434.9bn

 

 

 

 

 

 

 

Banking net interest margin

 

2.82%

 

2.74%

 

2.69%

 

The table below shows a reconciliation between net loans and advances to customers and average interest-earning banking assets.

 

 

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

 

ended

 

ended

 

ended

 

ended

 

ended

 

 

30 Jun

 

31 Mar

 

31 Dec

 

30 Sept

 

30 Jun

 

 

2017

 

2017

 

2016

 

2016

 

2016

 

 

£bn

 

£bn

 

£bn

 

£bn

 

£bn

 

 

 

 

 

 

 

 

 

 

 

Net loans and advances to customers

 

 453.2

 

 444.7

 

 449.7

 

 451.7

 

 453.0

Impairment provision and fair value adjustments

 

 3.3

 

 3.6

 

 3.7

 

 3.8

 

 4.1

Non-banking items:

 

 

 

 

 

 

 

 

 

 

Fee based loans and advances

 

 (7.4)

 

 (8.5)

 

 (9.4)

 

 (8.7)

 

 (9.1)

Sale of assets to Insurance

 

 (6.8)

 

 (6.6)

 

 (6.7)

 

 (6.2)

 

 (6.1)

Other non-banking

 

 (4.2)

 

 (3.4)

 

 (5.0)

 

 (5.5)

 

 (4.9)

Gross banking loans and advances

 

 438.1

 

 429.8

 

 432.3

 

 435.1

 

 437.0

Averaging

 

 (7.1)

 

 1.1

 

 1.7

 

 0.8

 

 (1.4)

Average interest-earning banking assets (qtr)

 

 431.0

 

 430.9

 

 434.0

 

 435.9

 

 435.6

Average interest-earning banking assets (year to date)

 

 430.9

 

 430.9

 

 435.9

 

 436.6

 

 436.9

 



 

3.         Volatility arising in insurance businesses

 

Volatility included in the Group's statutory results before tax comprises the following:

 

 

 

Half-year 

 

Half-year 

 

Half-year 

 

 

to 30 June 

 

to 30 June 

 

to 31 Dec 

 

 

2017 

 

2016 

 

2016 

 

    

£m 

    

£m 

 

£m 

 

 

 

 

 

 

 

Insurance volatility

 

 74 

 

 (328) 

 

 176 

Policyholder interests volatility

 

 110 

 

 (10) 

 

 251 

Total volatility

 

 184 

 

 (338) 

 

 427 

Insurance hedging arrangements

 

 (19) 

 

 (34) 

 

 (146) 

Total

 

 165 

 

 (372) 

 

 281 

 

The Group's insurance business has policyholder liabilities that are supported by substantial holdings of investments. IFRS requires that the changes in both the value of the liabilities and investments are reflected within the income statement. The value of the liabilities does not move exactly in line with changes in the value of the investments. As the investments are substantial, movements in their value can have a significant impact on the profitability of the Group. Management believes that it is appropriate to disclose the division's results on the basis of an expected return in addition to results based on the actual return. The impact of the actual return on these investments differing from the expected return is included within insurance volatility.

 

 

4.         Number of employees (full-time equivalent)

 

 

 

 

At 30 June

 

At 31 Dec

 

 

 

2017

 

2016

 

 

 

 

 

 

 

Retail

 

29,109 

 

 29,926

 

Commercial Banking

 

5,567 

 

 5,755

 

Consumer Finance1

 

5,524 

 

 3,425

 

Insurance

 

1,870 

 

 1,939

 

Group operations and other

 

30,824 

 

 30,843

 

 

 

72,894 

 

 71,888

 

Agency staff, interns and scholars

 

(2,639)

 

 (1,455)

 

Total number of employees

 

70,255

 

 70,433



 

 

1

Includes MBNA at 30 June 2017.

 



 

5.         Tangible net assets per share

 

The table below sets out a reconciliation of the Group's shareholders' equity to its tangible net assets.

 

 

 

At 30 June

 

At 31 Dec

 

 

2017

 

2016

 

 

£m

 

£m

 

 

 

 

 

Shareholders' equity

 

42,513

 

43,020

Goodwill

 

(2,299)

 

(2,016)

Intangible assets

 

(2,536)

 

(1,681)

Purchased value of in-force business

 

(323)

 

(340)

Other, including deferred tax effects

 

 283

 

170

Tangible net assets

 

 37,638

 

39,153

 

 

 

 

 

Ordinary shares in issue, excluding Own shares

 

71,871m

 

71,413m

Tangible net assets per share

 

52.4p

 

54.8p

 

 

6.         Return on tangible equity

 

The Group's return on tangible equity is calculated as follows:

 

 

 

Half-year

 

Half-year

 

Half-year

 

 

to 30 June

 

to 30 June

 

to 31 Dec

 

 

2017

 

2016

 

2016

 

    

£bn

    

£bn

 

£bn

Underlying return on tangible equity







Average shareholders' equity


43.3

 

42.6

 

43.1

Average intangible assets


(4.2)

 

(4.0)

 

(3.9)

Average tangible equity


39.1

 

38.6

 

39.2

 


 

 

 

 

 

Underlying profit after tax (£m)


3,301

 

3,032

 

2,700

Add back amortisation of intangible assets (post tax) (£m)


108

 

86

 

89

Less profit attributable to other equity holders (£m)


(158)

 

(163)

 

(158)

Less profit attributable to non-controlling interests (£m)


(41)

 

(63)

 

(38)

Adjusted underlying profit after tax (£m)


3,210

 

2,892

 

2,593

 


 

 

 

 

 

Underlying return on tangible equity


16.6%

 

15.1%

 

13.2%

 


 

 

 

 

 

Statutory return on tangible equity


 

 

 

 

 

Group statutory profit after tax (£m)


1,639

 

1,857

 

657

Add back amortisation of intangible assets (post tax) (£m)


108

 

86

 

89

Add back amortisation of purchased intangible assets
(post tax) (£m)


45

 

148

 

151

Less profit attributable to other equity holders (£m)


(158)

 

(163)

 

(158)

Less profit attributable to non-controlling interests (£m)


(41)

 

(63)

 

(38)

Adjusted statutory profit after tax (£m)


1,593

 

1,865

 

701

 


 

 

 

 

 

Statutory return on tangible equity


8.2%

 

9.7%

 

3.6%

 



 

RISK MANAGEMENT

PRINCIPAL RISKS AND UNCERTAINTIES

 

The significant risks faced by the Group which could impact the success of delivering against the Group's long-term strategic objectives and through which global macro-economic conditions, ongoing political uncertainty, regulatory developments and market liquidity dynamics could manifest, are detailed below. Except where noted, there has been no significant change to the description of these risks or key mitigating actions disclosed in the Group's 2016 Annual Report and Accounts, with any quantitative disclosures updated herein.

 

The Group has already considered many of the potential implications following the UK's vote to leave the European Union and  continues to manage related developments to assess, and if possible mitigate any impact to its customers, colleagues and products − as well as all legal, regulatory, tax, finance and capital implications.

 

Credit risk - The risk that customers and/or other counterparties whom the Group has either lent money to or entered into a financial contract with, or other counterparties with whom the Group has contracted, fail to meet their financial obligations, resulting in loss to the Group. Adverse changes in the economic and market environment the Group operates in or the credit quality and/or behaviour of the Group's customers and counterparties could reduce the value of the Group's assets and potentially increase the Group's write downs and allowances for impairment losses, adversely impacting profitability.

 

Conduct risk - Conduct risk can arise from the failure to design products and services to ensure they are aligned to customer needs and to design and execute sales processes to ensure products and services are offered only to those customers who need and will benefit from them. Additionally, the failure to provide ongoing support and service to customers and to recognise and respond to customer complaints, providing appropriate rectification in a timely manner. Conduct risk can result from the failure to ensure that colleagues behave in line with conduct, regulatory and ethical standards. Additionally, market conduct risks exist where actions taken can disrupt the fair and effective operation of a market in which the Group is active.

 

Market risk - The risk that the Group's capital or earnings profile is affected by adverse market rates, in particular interest rates and credit spreads in the Banking business, equity and credit spreads in the Insurance business, and credit spreads in the Group's Defined Benefit Pension Schemes.

 

Operational risk - The Group faces significant operational risks, such as risk of cyber and terrorism, which may result in financial loss, disruption of services to customers, and damage to its reputation. These include the availability, resilience and security of the Group's core IT systems and the potential for failings in the Group's customer processes.

 

Capital risk - The risk that the Group has a sub-optimal quantity or quality of capital or that capital is inefficiently deployed across the Group.

 

Funding and liquidity risk - The risk that the Group has insufficient financial resources to meet its commitments as they fall due, or can only secure them at excessive cost.

 

Regulatory and legal risk - The risks of changing legislation, regulation (including regulatory changes such as the Second Payment Services Directive and Open Banking), policies, voluntary codes of practice and their interpretation in the markets in which the Group operates can have a significant impact on the Group's operations, business prospects, structure, costs and/or capital requirements and ability to enforce contractual obligations.

 

Governance risk - Against a background of increased regulatory focus on governance and risk management, the most significant challenges arise from the requirement to improve the resolvability of the Group and to ring-fence core UK financial services and activities from January 2019, and from the further development of the Senior Managers and Certification Regime.

 

People risk - Key people risks include the risk that the Group fails to maintain organisational skills, capability, resilience and capacity levels in response to increasing volumes of organisational, political and external market change.

 

Insurance risk - Key insurance risks within the Insurance business are longevity, persistency and property insurance. Longevity risk is expected to increase as the Group's presence in the bulk annuity market increases. Longevity is also the key insurance risk in the Group's Defined Benefit Pension Schemes.

CREDIT RISK PORTFOLIO

 

Overview

·     Asset quality remains strong with portfolios continuing to benefit from the Group's proactive approach to risk management, continued low interest rates, and a resilient UK economic environment.

·     Impaired loans as a percentage of closing loans and advances remained stable at 1.8 per cent, with impaired loans reducing by £202 million to £8,293 million during the period, mainly due to a large disposal in Commercial Banking during the first quarter and further reductions in Run-off.

·     The impairment charge increased by £23 million to £268 million in the first half. The increase was driven by lower provision releases and write-backs which more than offset a reduction in gross impairment charges mainly in Commercial Banking.

·     The asset quality ratio was 12 basis points (half-year to 30 June 2016: 11 basis points) with the gross asset quality ratio (before releases and write-backs) falling 3 basis points compared with the same period in 2016 and remaining stable compared with the first quarter of 2017.

·     The Group now expects the asset quality ratio for the year to be less than 20 basis points, including MBNA.

 

Low risk culture and prudent risk appetite

·     The Group continues to operate a prudent approach to credit risk, with the portfolios benefiting from the focus on credit quality at origination and a prudent through the cycle approach to credit risk appetite. The Group's portfolios are well positioned against current economic concerns and market volatility.

·     The Group's credit processes and controls ensure effective risk management, including early identification and management of customers and counterparties who may be showing signs of distress.

·     The Group has delivered lending growth in key segments without relaxing credit criteria.

·     Sector concentrations within the lending portfolios are closely monitored and controlled, with mitigating actions taken where appropriate. Sector and product caps limit exposure to certain higher risk and vulnerable sectors and asset classes:

-      The average indexed LTV of the Retail UK Secured portfolio at 30 June 2017 was 43.0 per cent (31 December 2016: 44.0 per cent). The percentage of closing loans and advances with an indexed LTV greater than 100 per cent was 0.7 per cent (31 December 2016: 0.7 per cent).

-      Robust indebtedness and affordability controls continue to ensure new unsecured lending is sustainable for customers.

-      Total UK Direct Real Estate gross lending across the Group was £19.4 billion at 30 June 2017 (31 December 2016: £19.9 billion) and includes Core Commercial Banking lending of £18.1 billion, £0.5 billion booked in the Islands Commercial business and £0.2 billion within Retail Business Banking (within Retail Division).

·     Run-off net external assets stood at £10,676 million at 30 June 2017, down from £11,336 million at 31 December 2016. The portfolio represents only 2.0 per cent of the overall Group's loans and advances (31 December 2016: 2.1 per cent).



 

Impairment charge by division

 

 

Half-year 

 

Half-year 

 

 

 

Half-year 

 

 

to 30 June 

 

to 30 June 

 

 

 

to 31 Dec 

 

 

2017 

 

2016 

 

Change 

 

2016 

 

    

£m 

    

£m 

    

    

£m 

Retail:

 

 

 

 

 

 

 

 

Secured

 

 34 

 

 32 

 

 (6) 

 

 72 

Overdrafts

 

 94 

 

 120 

 

 22 

 

 121 

Other

 

 11 

 

 10 

 

 (10) 

 

 18 

 

 

 139 

 

 162 

 

 14 

 

 211 

Commercial Banking:

 

 

 

 

 

 

 

 

SME

 

 1 

 

 (5) 

 

 

 

 (2) 

Other

 

 12 

 

 (30) 

 

 

 

 53 

 

 

 13 

 

 (35) 

 

 

 

 51 

Consumer Finance:

 

 

 

 

 

 

 

 

Credit Cards

 

 49 

 

 59 

 

 17 

 

 77 

Loans

 

 30 

 

 42 

 

 29 

 

 28 

UK Motor Finance

 

 45 

 

 28 

 

 (61) 

 

 47 

Europe

 

 1 

 

 (1) 

 

 

 

 2 

 

 

 125 

 

 128 

 

 2 

 

 154 

Run-off:

 

 

 

 

 

 

 

 

Ireland retail

 

 4 

 

 - 

 

 

 

 (1) 

Corporate real estate and other corporate

 

 (7) 

 

 9 

 

 

 

 (8) 

Specialist finance

 

 (7) 

 

 (13) 

 

 (46)

 

 11 

Other

 

 (4) 

 

 (6) 

 

 (33)

 

 (18) 

 

 

 (14) 

 

 (10) 

 

 40  

 

 (16) 

Central items

 

 5 

 

 - 

 

 

 

 - 

Total impairment charge

 

 268 

 

 245 

 

 (9) 

 

 400 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset quality ratio

 

0.12% 

 

0.11% 

 

1bp

 

0.18% 

Gross asset quality ratio

 

0.23% 

 

0.26% 

 

(3)bp 

 

0.29% 

 

Total impairment charge comprises:










 

 

 

Half-year

 

Half-year

 

 

 

Half-year

 

 

 

 

to 30 June

 

to 30 June

 

 

 

to 31 Dec

 

 

 

 

2017

 

2016

 

Change

 

2016

 

 

 

    

£m

    

£m

    

%

    

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans and advances to customers

 

 265

 

 257

 

(3)

 

 400

 

 

Debt securities classified as loans and receivables

 

 (4)

 

 -

 

 

 

 -

 

 

Available-for-sale financial assets

 

 6

 

 -

 

 

 

 -

 

 

Other credit risk provisions

 

 1

 

 (12)

 

 

 

 -

 

 

Total impairment charge

 

 268

 

245

 

(9)

 

 400

 

 



 

Group impaired loans and provisions

 

 

 

 

 

 

 

 

 

 

Impairment 

 

 

 

 

 

 

Impaired 

 

 

 

provisions

 

 

Loans and 

 

 

 

loans as % 

 

 

 

as % of 

 

 

advances to 

 

Impaired 

 

of closing 

 

Impairment 

 

impaired 

 

 

customers 

 

loans 

 

advances 

 

provisions1 

 

loans2 

At 30 June 2017

    

£m 

   

£m 

   

   

£m 

   

 

 

 

 

 

 

 

 

 

 

 

Retail:

 

 

 

 

 

 

 

 

 

 

Secured

 

 292,602 

 

 4,175 

 

 1.4 

 

 1,514 

 

 36.3 

Overdrafts

 

 1,964 

 

 168 

 

 8.6 

 

 84 

 

 80.8 

Other

 

 3,002 

 

 69 

 

 2.3 

 

 36 

 

 66.7 

 

 

 297,568 

 

 4,412 

 

 1.5 

 

 1,634 

 

 37.7 

Commercial Banking:

 

 

 

 

 

 

 

 

 

 

SME

 

 30,387 

 

 898 

 

 3.0 

 

 160 

 

 17.8 

Other

 

 66,263 

 

 1,014 

 

 1.5 

 

 581 

 

 57.3 

 

 

 96,650 

 

 1,912 

 

 2.0 

 

 741 

 

 38.8 

Consumer Finance:

 

 

 

 

 

 

 

 

 

 

Credit Cards

 

 17,634 

 

 413 

 

 2.3 

 

 263 

 

 82.7 

Loans

 

 7,967 

 

 259 

 

 3.3 

 

 109 

 

 86.5 

UK Motor Finance3

 

 12,786 

 

 126 

 

 1.0 

 

 139 

 

 110.3 

Europe4

 

 7,198 

 

 43 

 

 0.6 

 

 23 

 

 53.5 

 

 

 45,585 

 

 841 

 

 1.8 

 

 534 

 

 87.1 

Run-off:

 

 

 

 

 

 

 

 

 

 

Ireland retail

 

 4,472 

 

 138 

 

 3.1 

 

 127 

 

 92.0 

Corporate real estate and other corporate

 

 1,151 

 

 885 

 

 76.9 

 

 364 

 

 41.1 

Specialist finance

 

 2,958 

 

 24 

 

 0.8 

 

 37 

 

 154.2 

Other

 

 1,092 

 

 81 

 

 7.4 

 

 29 

 

 35.8 

 

 

 9,673 

 

 1,128 

 

 11.7 

 

 557 

 

 49.4 

Reverse repos and other items5

 

 18,424 

 

 

 

 

 

 

 

 

Total gross lending

 

 467,900 

 

 8,293 

 

 1.8 

 

 3,466 

 

 43.4 

Impairment provisions

 

 (3,466) 

 

 

 

 

 

 

 

 

Fair value adjustments6

 

 170 

 

 

 

 

 

 

 

 

Total Group

 

 464,604 

 

 

 

 

 

 

 

 

 



1

Impairment provisions include collective unidentified impairment provisions.

2

Impairment provisions as a percentage of impaired loans are calculated excluding Retail and Consumer Finance loans in recoveries
(£64 million in Retail Overdrafts, £15 million in Retail Other, £95 million in Consumer Finance Credit Cards and £133 million in Consumer Finance Loans).

3

UK Motor Finance comprises the UK motor finance portfolios, principally Black Horse and Lex Autolease.

4

Europe comprises Netherlands mortgages and German Consumer Finance products.

5

Includes £6.8 billion of lower risk loans sold by Commercial Banking and Retail to Insurance to back annuitant liabilities.

6

The Group made adjustments to reflect the HBOS and MBNA loans and advances at fair value on acquisition. At 30 June 2017, the remaining fair value adjustment was £170 million comprising a positive adjustment of £300 million in respect of the MBNA assets and a negative adjustment of £130 million in respect of the HBOS assets. The fair value unwind in respect of impairment losses for the six months ended 30 June 2017 was £42 million (30 June 2016: £27 million). The fair value unwind in respect of loans and advances will reduce to zero over time.

 



 


 


 


 


 



Impairment 

 

 


 


 

Impaired 

 



provisions

 

 

Loans and 

 



loans as % 

 



as % of 

 

 

advances to 


Impaired 


of closing 

 

Impairment 


impaired 

 

 

customers 


loans 


advances 


provisions


loans

At 31 December 2016

    

£m 

    

£m 

    

    

£m 

    

 











Retail:

 

 

 

 

 


 

 

 


Secured

 

 294,503 

 

 4,104 

 

 1.4 

 

 1,503 

 

 36.6 

Overdrafts

 

 1,952 

 

 179 

 

 9.2 

 

 90 

 

 82.6 

Other

 

 3,038 

 

 71 

 

 2.3 

 

 37 

 

 67.3 

 

 

 299,493 

 

 4,354 

 

 1.5 

 

 1,630 

 

 38.2 

Commercial Banking:

 

 

 

 

 


 

 

 


SME

 

 29,959 

 

 923 

 

 3.1 

 

 173 

 

 18.7 

Other

 

 71,217 

 

 1,256 

 

 1.8 

 

 651 

 

 51.8 

 

 

 101,176 

 

 2,179 

 

 2.2 

 

 824 

 

 37.8 

Consumer Finance:

 

 

 

 

 


 

 

 


Credit Cards

 

 9,843 

 

 307 

 

 3.1 

 

 157 

 

 81.8 

Loans

 

 7,767 

 

 277 

 

 3.6 

 

 92 

 

 81.4 

UK Motor Finance

 

 11,555 

 

 120 

 

 1.0 

 

 127 

 

 105.8 

Europe

 

 6,329 

 

 41 

 

 0.6 

 

 20 

 

 48.8 

 

 

 35,494 

 

 745 

 

 2.1 

 

 396 

 

 85.0 

Run-off:

 

 

 

 

 


 

 

 


Ireland retail

 

 4,497 

 

 138 

 

 3.1 

 

 133 

 

 96.4 

Corporate real estate and other corporate

 

 1,190 

 

 896 

 

 75.3 

 

 399 

 

 44.5 

Specialist finance

 

 3,374 

 

 99 

 

 2.9 

 

 111 

 

 112.1 

Other

 

 1,198 

 

 84 

 

 7.0 

 

 39 

 

 46.4 

 

 

 10,259 

 

 1,217 

 

 11.9 

 

 682 

 

 56.0 

Reverse repos and other items3

 

 15,249 

 

 

 


 

 

 


Total gross lending

 

 461,671 

 

 8,495 

 

 1.8 

 

 3,532 

 

 43.4 

Impairment provisions

 

 (3,532) 

 

 

 


 

 

 


Fair value adjustments

 

 (181) 

 

 

 


 

 

 


Total Group

 

 457,958 

 

 

 


 

 

 


 



1

Impairment provisions include collective unidentified impairment provisions.

2

Impairment provisions as a percentage of impaired loans are calculated excluding Retail and Consumer Finance loans in recoveries
(£70 million in Retail Overdrafts, £16 million in Retail Other, £115 million in Consumer Finance Credit Cards and £164 million in Consumer Finance Loans).

3

Includes £6.7 billion of lower risk loans sold by Commercial Banking and Retail to Insurance to back annuitant liabilities.

 



 

Retail

·     Loans and advances in Retail contracted by 0.6 per cent to £297,568 million (31 December 2016: £299,493 million), driven by the Secured portfolio.

·     Asset quality remains strong across all portfolios. New business quality is stable with fewer loans entering arrears, and remains within credit risk appetite.

·     Impaired loans as a percentage of closing advances remained stable at 1.5 per cent.

·     Impairment provisions as a percentage of impaired loans was broadly stable at 37.7 per cent (31 December 2016: 38.2 per cent).

·     The impairment charge decreased to £139 million (half-year to 30 June 2016: £162 million), mostly due to debt sale write-backs in the Overdrafts portfolio.

 

Secured

·     Loans and advances reduced by 0.6 per cent on the Secured book to £292,602 million (31 December 2016: £294,503 million), with reductions in both the Mainstream and Buy-to-let portfolios. The closed Specialist portfolio has continued to run-off, reducing by 5.3 per cent to £16,662 million (31 December 2016: £17,593 million).

·     The value of owner-occupier interest only loans reduced in the first half of 2017 by 4.3 per cent to £69,505 million (31 December 2016: £72,651 million).

·     The value of mortgages greater than three months in arrears (excluding repossessions) reduced by 2.2 per cent to £5,900 million at 30 June 2017 (31 December 2016: £6,033 million). New business quality remained stable and flows into arrears improved. 

·     Impaired loans as a percentage of closing advances remained stable at 1.4 per cent.

·     Impairment provisions as a percentage of impaired loans remained stable at 36.3 per cent (31 December 2016: 36.6 per cent), reflecting a continued prudent approach to provisioning.

·     The impairment charge was £34 million (half-year to 30 June 2016: £32 million).

·     The average indexed LTV of the portfolio improved to 43.0 per cent (31 December 2016: 44.0 per cent). The percentage of loans and advances with an indexed LTV in excess of 100 per cent was unchanged at 0.7 per cent.

·     The average LTV for new mortgages written in the first half of 2017 was stable at 64.0 per cent (31 December 2016: 64.4 per cent).

 

Overdrafts

·     Loans and advances increased by 0.6 per cent in the first half of 2017 to £1,964 million (31 December 2016: £1,952 million).

·     Impaired loans as a percentage of closing advances were 8.6 per cent (31 December 2016: 9.2 per cent).

·     Impairment provisions as a percentage of impaired loans decreased to 80.8 per cent (31 December 2016: 82.6 per cent).

·     The impairment charge decreased by 21.7 per cent to £94 million (half-year to 30 June 2016: £120 million), largely due to increased debt sale write-backs and improved underlying performance.

 

Retail secured and unsecured loans and advances to customers






 

 

At 30 June

 

At 31 Dec

 

 

 

2017

 

2016

 

 

    

£m

    

£m

 

 

 

 

 

 

 

Mainstream

 

221,832

 

222,450

 

Buy-to-let

 

54,108

 

54,460

 

Specialist1

 

16,662

 

17,593

 

Total secured

 

292,602

 

294,503

 

 

 

 

 

 

 

Overdrafts

 

1,964

 

1,952

 

Wealth

 

1,993

 

2,034

 

Retail Business Banking

 

1,009

 

1,004

 

 

 

4,966

 

4,990

 

Total

 

297,568

 

299,493

 

 



1

Specialist lending has been closed to new business since 2009.

Retail mortgages greater than three months in arrears (excluding repossessions)

 

 

 

Number of cases

 

Total mortgage 
accounts %

 

Value of loans1

 

 Total mortgage 
balances %

 

    

June

    

Dec

    

June

    

Dec

    

June

    

Dec

    

June

    

Dec

 

 

2017

 

2016

 

2017

 

2016

 

2017

 

2016

 

2017

 

2016

 

    

Cases

    

Cases

    

%

    

%

    

£m

    

£m

    

%

    

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mainstream

 

 34,919

 

 35,254

 

 1.7

 

 1.7

 

 3,809

 

 3,865

 

 1.7

 

 1.7

Buy-to-let

 

 5,106

 

 5,324

 

 1.1

 

 1.1

 

 633

 

 660

 

 1.2

 

 1.2

Specialist

 

 8,869

 

 9,078

 

 7.4

 

 7.2

 

 1,458

 

 1,508

 

 8.8

 

 8.6

Total

 

 48,894

 

 49,656

 

 1.8

 

 1.8

 

 5,900

 

 6,033

 

 2.0

 

 2.0

 

1

Value of loans represents total gross book value of mortgages more than three months in arrears.

 

The stock of repossessions decreased to 595 cases at 30 June 2017 compared to 678 cases at 31 December 2016.

 

Period end and average LTVs across the Retail mortgage portfolios

 














 

 

Mainstream

 

Buy-to-let

 

Specialist

 

Total

 

Unimpaired

 

Impaired

 

 

 

%

 

%

 

%

 

%

 

%

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 June 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

Less than 60%

 

 58.8

 

 56.2

 

 57.7

 

 58.3

 

 58.5

 

 42.4

 

60% to 70%

 

 17.0

 

 24.0

 

 17.4

 

 18.3

 

 18.3

 

 17.8

 

70% to 80%

 

 13.6

 

 13.1

 

 12.3

 

 13.4

 

 13.4

 

 14.1

 

80% to 90%

 

 8.1

 

 4.5

 

 6.9

 

 7.4

 

 7.4

 

 10.4

 

90% to 100%

 

 2.0

 

 1.6

 

 2.5

 

 1.9

 

 1.9

 

 6.0

 

Greater than 100%

 

 0.5

 

 0.6

 

 3.2

 

 0.7

 

 0.5

 

 9.3

 

Total

 

 100.0

 

 100.0

 

 100.0

 

 100.0

 

 100.0

 

 100.0

 

Outstanding loan value (£m)

 

 221,832

 

 54,108

 

 16,662

 

 292,602

 

 288,427

 

 4,175

 

Average loan to value:1

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock of residential mortgages

 

 40.9

 

 52.4

 

 47.5

 

 43.0

 

 

 

 

 

New residential lending

 

 64.7

 

 60.6

 

n/a

 

 64.0

 

 

 

 

 

Impaired mortgages

 

 50.7

 

 69.2

 

 61.4

 

 54.9

 

 

 

 

 

 

 

 

Mainstream

 

Buy-to-let

 

Specialist

 

Total

 

Unimpaired

 

Impaired

 

 

%

 

%

 

%

 

%

 

%

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2016

 

 

 

 

 

 

 

 

 

 

 

 

Less than 60%

 

 56.8

 

 52.0

 

 53.8

 

 55.8

 

 56.0

 

 38.3

60% to 70%

 

 17.8

 

 25.4

 

 17.8

 

 19.2

 

 19.3

 

 18.4

70% to 80%

 

 14.0

 

 14.4

 

 13.6

 

 14.0

 

 14.0

 

 15.3

80% to 90%

 

 8.4

 

 6.1

 

 8.6

 

 8.0

 

 7.9

 

 11.9

90% to 100%

 

 2.4

 

 1.5

 

 3.1

 

 2.3

 

 2.2

 

 6.8

Greater than 100%

 

 0.6

 

 0.6

 

 3.1

 

 0.7

 

 0.6

 

 9.3

Total

 

 100.0

 

 100.0

 

 100.0

 

 100.0

 

 100.0

 

 100.0

Outstanding loan value (£m)

 

 222,450

 

 54,460

 

 17,593

 

 294,503

 

 290,399

 

 4,104

Average loan to value:1

 

 

 

 

 

 

 

 

 

 

 

 

Stock of residential mortgages

 

 41.8

 

 53.7

 

 49.2

 

 44.0

 

 

 

 

New residential lending

 

 65.0

 

 61.9

 

n/a

 

 64.4

 

 

 

 

Impaired mortgages

 

 51.8

 

 69.0

 

 61.9

 

 55.8

 

 

 

 

 

1

Average loan to value is calculated as total gross loans and advances as a percentage of the indexed total collateral of these loans and advances.



 

Commercial Banking

·     There was a net impairment charge of £13 million compared to a net release of £35 million in the first half of 2016, primarily driven by a lower level of write-backs and provision releases, which more than offset a reduction in gross charges. The portfolio continues to benefit from effective risk management, a relatively benign economic environment and continued low interest rates.

·     Credit quality of the portfolio and new business remains good.

·     Impaired loans reduced by 12.3 per cent to £1,912 million compared with £2,179 million at 31 December 2016 and as a percentage of loans and advances reduced to 2.0 per cent from 2.2 per cent at 31 December 2016.

·     Impairment provisions reduced to £741 million (31 December 2016: £824 million) and included collective unidentified impairment provisions of £179 million (31 December 2016: £183 million). Provisions as a percentage of impaired loans increased from 37.8 per cent to 38.8 per cent during the first half of 2017.

·     The UK faces a number of significant headwinds including the changing UK and global economic outlook and uncertainty relating to EU exit negotiations which have the ability to impact the Commercial Banking portfolios.

·     Commercial Banking remains disciplined within its low risk appetite approach and credit risks continue to be effectively managed. It manages and limits exposure to certain sectors and asset classes, and closely monitors credit quality, sector and single name concentrations.

·     Internal and external key performance indicators continue to be monitored closely to help identify early signs of any deterioration and portfolios remain subject to ongoing risk mitigation actions as appropriate.

·     Despite the uncertain economic headwinds, the portfolios are well positioned and the Group's through the cycle risk appetite approach is expected to remain unchanged. However, portfolios will not be immune and impairments are likely to increase from their historic low levels, driven predominantly by lower levels of releases and write-backs.

 

Portfolios

·     The SME Banking portfolio continues to grow within prudent credit risk appetite parameters. Portfolio credit quality has remained stable or improved across all key metrics.

·     The Mid Markets business remains UK-focused and performance generally reflects the underlying performance of the UK economy. The first half of 2017 has seen a continuation of relatively benign credit conditions, underpinned by low interest rates, GDP growth and low unemployment. Lower Sterling values have benefited exporters of goods and services while placing pressure on margins in businesses reliant on imports for domestic consumption. This has not resulted in material increases in stress across the bulk of the portfolio, with levels of default and impairment remaining low by historic standards.

·     The Global Corporates business continues to have a predominance of investment grade clients and is performing well, with limited downgrades occurring in the first half of 2017.

·     The commercial real estate business within the Group's Mid Markets and Global Corporate portfolio is focused on clients operating in the UK commercial property market ranging in size from medium-sized private real estate entities up to publicly listed property companies. Despite political uncertainties and the potential impact of withdrawal from the EU, the market for UK real estate has continued to be resilient, with appetite from a range of investors. UK real estate continues to offer attractive yields compared to other asset classes and the fall in Sterling has boosted the attractiveness to foreign investors. Credit quality remains good with minimal impairments/stressed loans. Recognising this is a cyclical sector, appropriate caps are in place to control exposure and business propositions continue to be written in line with a prudent, through the cycle risk appetite with conservative LTVs, strong quality of income and proven management teams.

·     Financial Institutions serves predominantly investment grade counterparties with whom relationships are either client focused or held to support the Group's funding, liquidity or general hedging requirements. The portfolio continues to be prudently managed within the Group's conservative risk appetite and clearly defined sector strategies.

·     The Group continues to adopt a conservative stance across the Eurozone maintaining close portfolio scrutiny and oversight particularly given the current macro environment and horizon risks.



 

Consumer Finance

·     Loans and advances in the Consumer Finance book grew by 28.4 per cent to £45,585 million (31 December 2016: £35,494 million), mostly due to the acquisition of MBNA.

·     Asset quality remains strong. The quality of new business continues to be good, and remains within credit risk appetite. 

·     Robust indebtedness and affordability controls continue to ensure new lending is sustainable for customers and the credit quality of the portfolio remains high.

·     Impaired loans grew by 12.9 per cent to £841 million (31 December 2016: £745 million) largely reflecting the acquisition of MBNA. Impaired loans as a percentage of closing advances improved to 1.8 per cent (31 December 2016: 2.1 per cent) indicating an improvement in overall credit quality.

·     Impairment provisions as a percentage of impaired loans increased to 87.1 per cent (31 December 2016: 85.0 per cent), due to a one-off change relating to the alignment of policy across brands in Loans, and growth in the UK Motor Finance portfolio coupled with prudent provisioning on residual value exposures.

·     The impairment charge was £125 million (half-year to 30 June 2016: £128 million) with growth in UK Motor Finance, offset by larger debt sale benefits in both the Cards and Loans portfolios compared to the first half of 2016.

 

Credit Cards

·     Loans and advances increased by 79.2 per cent to £17,634 million during the first half of 2017 (31 December 2016: £9,843 million), due to the acquisition of MBNA.

·     Impaired loans increased by 34.5 per cent to £413 million (31 December 2016: £307 million), reflecting the acquisition of MBNA. Impaired loans as a percentage of closing loans and advances improved to 2.3 per cent (31 December 2016: 3.1 per cent), reflecting the continued sale of debt in recoveries and the good credit quality of the portfolio.

·     Impairment provisions as a percentage of impaired loans remained broadly stable at 82.7 per cent (31 December 2016: 81.8 per cent).

·     The impairment charge decreased to £49 million (half-year to 30 June 2016: £59 million), driven by larger debt sale benefits in the first half of 2017 compared to the first half of 2016.

 

Loans

·     Loans and advances increased by 2.6 per cent to £7,967 million in the first half of 2017 (31 December 2016: £7,767 million) and credit quality remained strong.

·     Impaired loans decreased by 6.5 per cent to £259 million (31 December 2016: £277 million), largely due to the sale of debt in recoveries. Impaired loans as a percentage of closing loans and advances improved to 3.3 per cent (31 December 2016: 3.6 per cent).

·     Impairment provisions as a percentage of impaired loans increased to 86.5 per cent (31 December 2016: 81.4 per cent), reflecting a one-off change relating to policy alignment across brands for franchised customers.

·     The impairment charge decreased to £30 million (half-year to 30 June 2016: £42 million), driven by larger debt sale benefits in the first half of 2017 compared to the first half of 2016.

 

UK Motor Finance

·     Loans and advances increased by 10.7 per cent to £12,786 million during the first half of 2017 (31 December 2016: £11,555 million), with £583 million (47.4 per cent) of the growth occurring in the Jaguar Land Rover partnership.

·     Impaired loans increased by 5.0 per cent to £126 million (31 December 2016: £120 million) driven by book growth. Impaired loans as a percentage of closing loans and advances remained stable at 1.0 per cent. 

·     Impairment provisions as a percentage of impaired loans increased to 110.3 per cent (31 December 2016: 105.8 per cent), reflecting continued prudence in provisions against residual value exposures.

·     The impairment charge was £45 million (half-year to 30 June 2016: £28 million), driven by growth and seasoning in the portfolio.



 

Forbearance

 

The Group operates a number of schemes to assist borrowers who are experiencing financial stress. Forbearance policies are disclosed in the Risk Management section of the Group's 2016 Annual Report and Accounts, pages 127 to 129.

 

Retail forbearance

At 30 June 2017, UK Secured loans and advances currently or recently subject to forbearance improved to 0.6 per cent (31 December 2016: 0.7 per cent) of total UK Secured loans and advances. Overdrafts loans and advances currently or recently subject to forbearance were 4.1 per cent (31 December 2016: 4.0 per cent) of total overdrafts loans and advances.

 

 

 

 

 

 

 

 

Impairment provisions

 

 

Total loans and

 

Total forborne loans

 

as % of loans and

 

 

advances which are

 

and advances which are

 

advances which are

 

 

forborne

 

impaired

 

forborne

 

 

At June

 

At Dec

 

At June

 

At Dec

 

At June

 

At Dec

 

 

2017

 

2016

 

2017

 

2016

 

2017

 

2016

 

    

£m

    

£m

   

£m

   

£m

   

%

    

%

 

 

 

 

 

 

 

 

 

 

 

 

 

UK Secured lending:

 

 

 

 

 

 

 

 

 

 

 

 

Temporary forbearance arrangements

 

 

 

 

 

 

 

 

 

 

 

 

Reduced payment arrangements1

 

 299

 

 428

 

 82

 

 101

 

 5.9

 

 4.9

 

 

 

 

 

 

 

 

 

 

 

 

 

Permanent treatments

 

 

 

 

 

 

 

 

 

 

 

 

Repair and term extensions2

 

 1,342

 

 1,668

 

 93

 

 116

 

 4.7

 

 4.7

Total

 

 1,641

 

 2,096

 

 175

 

 217

 

 4.9

 

 4.7

 

 

 

 

 

 

 

 

 

 

 

 

 

Overdrafts3:

 

 80

 

 78

 

 69

 

 61

 

 46.0

 

 38.0

 

1

Includes customers who had an arrangement to pay less than the contractual amount at 30 June or where an arrangement ended within the previous three months.

2

Includes capitalisation of arrears and term extensions which commenced during the previous 24 months and where the borrowers remain as customers at 30 June.

3

Includes temporary treatments where the customer is currently benefiting from change or the treatment has ended within the last six months.

 

Commercial Banking forbearance

At 30 June 2017, £2,321 million (31 December 2016: £2,645 million) of total loans and advances were forborne of which £1,912 million (31 December 2016: £2,179 million) were impaired. Impairment provisions as a percentage of forborne loans and advances increased from 31.2 per cent at 31 December 2016 to 31.9 per cent at 30 June 2017. Unimpaired forborne loans and advances were £409 million at 30 June 2017 (31 December 2016: £466 million).

 

The table below sets out the Group's largest unimpaired forborne loans and advances to commercial customers (exposures over £5 million) as at 30 June 2017 by type of forbearance:

 

 

30 June 

 

31 Dec 

 

 

2017 

 

2016 

 

   

£m 

   

£m 

 

 

 

 

 

Type of unimpaired forbearance:

 

 

 

 

Exposures > £5m1

 

 

 

 

Covenants

 

 122 

 

 153 

Extensions/alterations

 

 - 

 

 7 

Multiple

 

 11 

 

 21 

 

 

 133 

 

 181 

Exposures < £5m1

 

 276 

 

 285 

Total

 

 409 

 

 466 

 

1

Material portfolios only.



 

Consumer Finance forbearance

At 30 June 2017, total loans and advances currently or recently subject to forbearance as a percentage of total loans and advances had reduced across the major Consumer Finance portfolios (30 June 2017: 1.3 per cent; 31 December 2016: 1.4 per cent), with decreases in Consumer Credit Cards (including MBNA) and Loans offset by an increase in UK Motor Finance.

 

 

 

Total loans and advances which are forborne

 

Total forborne loans and advances which are impaired

 

Impairment provisions as % of loans and advances which are forborne

 

 

30 June

 

31 Dec

 

30 June

 

31 Dec

 

30 June

 

31 Dec

 

 

2017

 

2016

 

2017

 

2016

 

2017

 

2016

 

 

£m

 

£m

 

£m

 

£m

 

%

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Credit Cards1

 

 302

 

212

 

 194

 

119

 

 34.7

 

29.0

Loans2

 

 53

 

49

 

 50

 

46

 

 42.8

 

44.4

UK Motor Finance Retail2

 

 109

 

117

 

 50

 

62

 

 23.2

 

27.0

 

1

Includes temporary treatments where the customer is currently benefiting from the change or the treatment has ended within the last six months. Permanent changes, such as returning a Card account in arrears to an in-order status, which commenced during the last 24 months for existing customers as at 30 June are also included. 30 June 2017 balances include MBNA (forborne loans; £110 million; impaired loans: £86 million).

2

Includes temporary treatments where the customer is currently benefiting from the change or the treatment has ended within the last six months. Permanent changes, such as refinancing, for existing customers as at 30 June are also included.

 



 

FUNDING AND LIQUIDITY MANAGEMENT

 

During the first half of 2017 the Group has maintained its strong funding and liquidity position, with a loan to deposit ratio of 109 per cent. The combination of a strong balance sheet and access to a range of funding markets, including government and central bank schemes, provides the Group with a broad range of options with respect to funding the balance sheet.

 

The Group ran a small excess liquidity position during the first half of 2017 in anticipation of the acquisition of MBNA. Following completion of this acquisition, the excess liquidity position has reduced, although the Group continues to meet the Liquidity Coverage Ratio (LCR) requirements, with a ratio in excess of 100 per cent.

 

Loans and advances to customers were £453.2 billion compared with £449.7 billion at 31 December 2016. Growth in lending balances was primarily driven by the acquisition of MBNA in addition to continued growth in lending to Consumer Finance and SME customers. Total customer deposits increased by £3.6 billion to £416.6 billion at 30 June 2017.

 

Wholesale funding has decreased by £8.5 billion to £102.3 billion; the amount with a residual maturity less than one year fell to £30.4 billion (£35.1 billion at 31 December 2016). The Group's term funding ratio (wholesale funding with a remaining life of over one year as a percentage of total wholesale funding) has increased to 70 per cent (31 December 2016: 68 per cent). In the first half of 2017, the Group drew down £9 billion of funding from the Bank of England's Term Funding Scheme (TFS), which has contributed to the lower new issuance volumes seen in the last six months. As at 30 June 2017 the total amount outstanding under the Funding for Lending Scheme (FLS) was £30.1 billion and under the TFS was £13.5 billion.

 

The credit ratings and outlook on Lloyds Bank were unchanged during the first half of 2017, and the median credit rating among the three major credit rating agencies remains 'A+'.

 



 

Group funding position








 

 

At 30 June 

 

At 31 Dec 

 

 

 

 

 

2017 

 

2016 

 

Change 

 

 

    

£bn 

    

£bn 

    

 

 

 

 

 

 

 

 

 

Funding requirement

 

 

 

 

 

 

 

Loans and advances to customers1

 

 453.2 

 

 449.7 

 

 1 

 

Loans and advances to banks2

 

 6.2 

 

 5.1 

 

 22 

 

Debt securities

 

 3.8 

 

 3.4 

 

 12 

 

Reverse repurchase agreements

 

 0.7 

 

 0.5 

 

 40 

 

Available-for-sale financial assets - non-LCR eligible3

 

 1.0 

 

 1.9 

 

 (47) 

 

Cash and balances at central bank - non-LCR eligible4

 

 3.8 

 

 4.8 

 

 (21) 

 

Funded assets

 

 468.7 

 

 465.4 

 

 1 

 

Other assets5

 

 244.5 

 

 249.9 

 

 (2) 

 

 

 

 713.2 

 

 715.3 

 

-

 

On balance sheet LCR eligible liquidity assets

 

 

 

 

 

 

 

Reverse repurchase agreements

 

 11.5 

 

 8.7 

 

 32 

 

Cash and balances at central banks4

 

 46.7 

 

 42.7 

 

 9 

 

Available-for-sale financial assets

 

 50.8 

 

 54.6 

 

 (7) 

 

Trading and fair value through profit and loss

 

 (3.2) 

 

 1.8 

 

 

 

Repurchase agreements

 

 (4.1) 

 

 (5.3) 

 

 (23) 

 

 

 

 101.7 

 

 102.5 

 

 (1) 

 

Total Group assets

 

 814.9 

 

 817.8 

 

-

 

Less: other liabilities5

 

 (247.7) 

 

 (245.2) 

 

 1 

 

Funding requirement

 

 567.2 

 

 572.6 

 

 (1) 

 

Funded by

 

 

 

 

 

 

 

Customer deposits6

 

 416.6 

 

 413.0 

 

 1 

 

Wholesale funding7

 

 102.3 

 

 110.8 

 

 (8) 

 

 

 

 518.9 

 

 523.8 

 

 (1) 

 

Total equity

 

 48.3 

 

 48.8 

 

 (1) 

 

Total funding

 

 567.2 

 

 572.6 

 

 (1) 

 

 

1

Excludes reverse repos of £11.4 billion (31 December 2016: £8.3 billion).

2

Excludes £1.9 billion (31 December 2016: £20.9 billion) of loans and advances to banks within the Insurance business and £0.8 billion (31 December 2016: £0.9 billion) of reverse repurchase agreements.

3

Non-LCR eligible liquid assets comprise a diversified pool of highly rated unencumbered collateral (including retained issuance).

4

Cash and balances at central banks are combined in the Group's balance sheet.

5

Other assets and other liabilities primarily include balances in the Group's Insurance business and the fair value of derivative assets and liabilities.

6

Excludes repos of £1.0 billion (31 December 2016: £2.5 billion).

7

The Group's definition of wholesale funding aligns with that used by other international market participants; including interbank deposits, debt securities in issue and subordinated liabilities.

 



 

Reconciliation of Group funding to the balance sheet

 

 

 

 

Repos

 

 

 

 

 

 

 

 

and cash

 

Fair value

 

 

 

 

Included in

 

collateral

 

and other

 

 

 

 

funding

 

received by

 

accounting

 

Balance

 

 

analysis

 

Insurance

 

methods

 

sheet

At 30 June 2017

    

£bn

    

£bn

    

£bn

    

£bn

 

 

 

 

 

 

 

 

 

Deposits from banks

 

 7.0

 

 17.5

 

 0.4

 

 24.9

Debt securities in issue

 

 76.7

 

 -

 

 (5.1)

 

 71.6

Subordinated liabilities

 

 18.6

 

 -

 

 -

 

 18.6

Total wholesale funding

 

 102.3

 

 17.5

 

 

 

 

Customer deposits

 

 416.6

 

 1.0

 

 -

 

 417.6

Total

 

 518.9

 

 18.5

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2016

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits from banks

 

 8.1

 

 8.0

 

 0.3

 

 16.4

Debt securities in issue

 

 83.0

 

 -

 

 (6.7)

 

 76.3

Subordinated liabilities

 

 19.7

 

 -

 

 0.1

 

 19.8

Total wholesale funding

 

 110.8

 

 8.0

 

 

 

 

Customer deposits

 

 413.0

 

 2.5

 

 -

 

 415.5

Total

 

 523.8

 

 10.5

 

 

 

 

 

Analysis of 2017 total wholesale funding by residual maturity

 

 

 

Less 

 

 

 

 

 

 

 

Nine 

 

 

 

 

 

More 

 

Total 

 

Total 

 

 

than 

 

One to 

 

Three 

 

Six to 

 

months 

 

One to 

 

Two to 

 

than 

 

at 

 

at 

 

 

one 

 

three 

 

to six 

 

nine 

 

to one 

 

two 

 

five 

 

five 

 

30 June 

 

31 Dec 

 

 

month 

 

months 

 

months 

 

months 

 

year 

 

years 

 

years 

 

years 

 

2017 

 

2016 

 

  

£bn 

  

£bn 

  

£bn 

  

£bn 

  

£bn 

  

£bn 

  

£bn 

  

£bn 

  

£bn 

  

£bn 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposit from banks

 

 6.2 

 

 0.7 

 

 0.1 

 

 - 

 

 - 

 

 - 

 

 - 

 

 - 

 

 7.0 

 

 8.1 

Debt securities in issue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certificates of deposit

 

 1.7 

 

 3.4 

 

 2.2 

 

 1.4 

 

 1.3 

 

 - 

 

 - 

 

 - 

 

 10.0 

 

 7.5 

Commercial paper

 

 1.8 

 

 1.6