TIDM94WP TIDMLLOY
RNS Number : 3340E
Lloyds Bank PLC
27 October 2022
Lloyds Bank plc
Q3 2022 Interim Management Statement
27 October 2022
Member of the Lloyds Banking Group
REVIEW OF PERFORMANCE
Income statement
In the nine months to 30 September 2022, the Group recorded a
profit before tax of GBP4,480 million compared to GBP5,103 million
in the same period in 2021, representing a reduction of GBP623
million as higher total income was more than offset by the impact
of a net impairment charge for the period compared to a net credit
for the first nine months of 2021. Profit after tax was GBP3,346
million.
Total income increased by GBP1,047 million, or 9 per cent, to
GBP12,119 million in the nine months to 30 September 2022 compared
to GBP11,072 million in the first nine months of 2021; there was an
increase of GBP1,209 million in net interest income and a decrease
of GBP162 million in other income.
Net interest income was GBP9,458 million, an increase of
GBP1,209 million compared to GBP8,249 million in the nine months to
30 September 2021. The increase in net interest income was driven
by an improved margin, as a result of UK Bank Rate increases and
continued funding and capital optimisation, partly offset by
mortgage margin reductions. Increased average interest-earning
assets reflecting continued growth in the open mortgage book also
contributed positively.
Other income was GBP162 million lower at GBP2,661 million in the
nine months to 30 September 2022 compared to GBP2,823 million in
the same period last year. Net fee and commission income increased
by GBP58 million to GBP971 million, compared to GBP913 million in
the first nine months of 2021, due to higher credit and debit card
fees, reflecting increased levels of customer activity, more than
offsetting some reduction from lower levels of corporate financing
activity. Net trading income was GBP305 million lower at GBP88
million in the nine months to 30 September 2022, in part reflecting
the change in fair value of interest rate derivatives and foreign
exchange contracts not mitigated by hedge accounting. Other
operating income increased by GBP85 million to GBP1,602 million
compared to GBP1,517 million in the nine months to 30 September
2021, in part due to improved gains on disposal of financial assets
at fair value through other comprehensive income.
Total operating expenses decreased by GBP131 million to GBP6,629
million compared to GBP6,760 million in the first nine months of
2021. Increased staff costs reflected salary increases and the
impact of a one-off GBP1,000 cost of living payment to staff,
partly offset by headcount reductions. In addition, there was an
increase in IT-related costs, as a result of the Group's strategic
investment programmes. Depreciation charges were lower reflecting
the continued strength in used car prices. The charge in respect of
regulatory provisions was GBP346 million lower at GBP67 million and
largely related to pre-existing programmes. There have been no
further charges relating to HBOS Reading since the end of 2021 and
the provision held continues to reflect the Group's best estimate
of its full liability, albeit significant uncertainties remain.
There was a net impairment charge in the nine months to 30
September 2022 of GBP1,010 million, compared to a net credit of
GBP791 million in the first nine months of 2021, largely reflecting
a low charge arising from observed credit performance and a charge
in the first nine months of 2022 as a result of updates to the
assessment of the economic outlook and associated scenarios,
compared to a significant credit in the first nine months of 2021.
The updated outlook includes elevated risks from a higher inflation
and interest rate environment, offset by a GBP400 million release
of the COVID-19 central adjustment in the nine months to 30
September 2022.
The Group's loan portfolio continues to be well-positioned,
reflecting a prudent through-the-cycle approach to lending with
high levels of security, also reflected in strong recovery
performance. Observed credit performance remains stable, with very
modest evidence of deterioration and the flow of assets into
arrears, defaults and write-offs at low levels and below
pre-pandemic levels. Stage 3 loans and advances have been stable
across the third quarter. Credit card minimum payers and overdraft
and revolving credit facility (RCF) utilisation rates have remained
low and in line with recent trends.
The Group's expected credit loss (ECL) allowance increased in
the first nine months of the year to GBP4,519 million (31 December
2021: GBP4,000 million). This reflects the balance of risks
shifting from COVID-19 to increased inflationary pressures and
rising interest rates within the Group's base case and wider
economic scenarios. The deterioration in the economic outlook is
now reflected in variables which credit models better capture. As a
result, the Group's reliance on judgemental overlays for modelling
risks in relation to inflationary pressures has reduced, with these
risks now captured more fully in models.
The Group recognised a tax expense of GBP1,134 million in the
period compared to GBP141 million in the first nine months of 2021.
During the first nine months of 2021 the Group had recognised a
deferred tax credit in the income statement of GBP1,189 million
following substantive enactment, in May 2021, of the UK
Government's increase in the rate of corporation tax from 19 per
cent to 25 per cent with effect from 1 April 2023.
REVIEW OF PERFORMANCE (continued)
Balance sheet
Total assets were GBP24,590 million, or 4 per cent, higher at
GBP627,439 million at 30 September 2022 compared to GBP602,849
million at 31 December 2021. Cash and balances at central banks
rose by GBP13,223 million to GBP67,502 million reflecting the
placement of funds from increased available liquidity. Financial
assets at amortised cost were GBP14,947 million higher at
GBP505,263 million at 30 September 2022 compared to GBP490,316
million at 31 December 2021, as a result of a GBP2,456 million
increase in loans and advances to banks, GBP4,434 million increase
in loans and advances to customers, net of impairment allowances,
GBP2,780 million in debt securities, and GBP5,163 million in
reverse repurchase agreement balances. The increase in loans and
advances to customers, net of impairment allowances, was driven by
continued growth in the open mortgage book and increases in
Corporate and Institutional lending due to attractive growth
opportunities as well as foreign exchange movements, partially
offset by further reductions in the closed mortgage book and
hedging impacts. Other assets increased by GBP3,772 million mainly
due to a GBP2,272 million increase in deferred tax assets and a
GBP470 million increase in current tax recoverable. Financial
assets at fair value through other comprehensive income were
GBP6,787 million lower at GBP20,999 million as a result of asset
sales during the period.
Total liabilities were GBP28,395 million, or 5 per cent, higher
at GBP590,472 million compared to GBP562,077 million at 31 December
2021. Customer deposits increased by GBP5,771 million to GBP455,144
million compared to GBP449,373 million at 31 December 2021, as a
result of continued inflows to Retail current and savings accounts
and Commercial Banking balances. Repurchase agreements at amortised
cost increased GBP16,255 million to GBP46,361 million, as the Group
took advantage of favourable funding opportunities and amounts due
to fellow Lloyds Banking Group undertakings were GBP3,654 million
higher at GBP5,144 million, also reflecting funding arrangements.
Subordinated liabilities decreased by GBP2,675 million following
redemptions during the period.
Ordinary shareholders' equity decreased GBP3,794 million to
GBP32,616 million at 30 September 2022 as retained profit for the
period was more than offset by negative movements in the cash flow
hedging reserve as a result of increased interest rates and adverse
defined benefit post-retirement scheme remeasurements.
Capital
The Group's common equity tier 1 (CET1) capital ratio reduced
from 16.7 per cent at 31 December 2021 to 14.1 per cent on 1
January 2022, before increasing during the period to 15.0 per cent
at 30 September 2022. The reduction on 1 January 2022 reflected the
impact of regulatory changes (as previously reported), with the
subsequent increase during the first nine months of the year
reflecting profits for the period and a reduction in risk-weighted
assets (post 1 January 2022 regulatory changes) partly offset by
pension contributions made to the Group's defined benefit pension
schemes and an accrual for foreseeable ordinary dividends. The
total capital ratio reduced from 23.5 per cent at 31 December 2021
to 20.4 per cent at 30 September 2022, reflecting the reduction in
CET capital, increase in risk-weighted assets, the completion of
the transition to end-point eligibility rules for regulatory
capital on 1 January 2022 and movements in rates, partially offset
by sterling depreciation and eligible provisions.
Risk-weighted assets increased from GBP161.6 billion at 31
December 2021 to around GBP178 billion on 1 January 2022,
reflecting regulatory changes which include the anticipated impact
of the implementation of new CRD IV models to meet revised
regulatory standards for modelled outputs. Risk-weighted assets
subsequently reduced by GBP5 billion during the first nine months
of the year to GBP173.2 billion at 30 September 2022, largely
reflecting optimisation activity and Retail model reductions linked
to the resilient underlying credit performance, partly offset by
the growth in balance sheet lending. The new CRD IV models remain
subject to finalisation and approval by the PRA and therefore the
final risk-weighted asset impact remains subject to this.
The Group's UK leverage ratio of 5.2 per cent at 30 September
2022 has reduced from 5.3 per cent at 31 December 2021, reflecting
a reduction in total tier 1 capital, offset in part by a reduction
in the exposure measure principally related to off-balance sheet
items.
CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)
Nine Nine
months months
ended ended
30 Sep 30 Sep
2022 2021
GBPm GBPm
Net interest income 9,458 8,249
Other income 2,661 2,823
--------------- ---------------
Total income 12,119 11,072
Operating expenses (6,629) (6,760)
Impairment (charge) credit (1,010) 791
--------------- ---------------
Profit before tax 4,480 5,103
Tax expense (1,134) (141)
--------------- ---------------
Profit for the period 3,346 4,962
--------------- ---------------
Profit attributable to ordinary shareholders 3,143 4,645
Profit attributable to other equity holders 177 290
--------------- ---------------
Profit attributable to equity holders 3,320 4,935
Profit attributable to non-controlling interests 26 27
--------------- ---------------
Profit for the period 3,346 4,962
--------------- ---------------
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
At 30 At 31
Sep 2022 Dec 2021
GBPm GBPm
Assets
Cash and balances at central banks 67,502 54,279
Financial assets at fair value through profit or
loss 1,434 1,798
Derivative financial instruments 5,310 5,511
--------------- ---------------
Loans and advances to banks 6,934 4,478
Loans and advances to customers 435,263 430,829
Reverse repurchase agreements 54,871 49,708
Debt securities 7,342 4,562
Due from fellow Lloyds Banking Group undertakings 853 739
--------------- ---------------
Financial assets at amortised cost 505,263 490,316
Financial assets at fair value through other comprehensive
income 20,999 27,786
Other assets 26,931 23,159
--------------- ---------------
Total assets 627,439 602,849
--------------- ---------------
Liabilities
Deposits from banks 4,684 3,363
Customer deposits 455,144 449,373
Repurchase agreements at amortised cost 46,361 30,106
Due to fellow Lloyds Banking Group undertakings 5,144 1,490
Financial liabilities at fair value through profit
or loss 5,497 6,537
Derivative financial instruments 6,826 4,643
Debt securities in issue 49,724 48,724
Subordinated liabilities 5,983 8,658
Other liabilities 11,109 9,183
--------------- ---------------
Total liabilities 590,472 562,077
--------------- ---------------
Equity
Ordinary shareholders' equity 32,616 36,410
Other equity instruments 4,268 4,268
Non-controlling interests 83 94
--------------- ---------------
Total equity 36,967 40,772
--------------- ---------------
Total equity and liabilities 627,439 602,849
--------------- ---------------
ADDITIONAL FINANCIAL INFORMATION
1. Basis of presentation
This release covers the results of Lloyds Bank plc (the Bank)
together with its subsidiaries (the Group) for the nine months
ended 30 September 2022.
Changes in accounting policy
Except for the matter referred to below, the Group's accounting
policies are consistent with those applied by the Group in its
financial statements for the year ended 31 December 2021 and there
have been no changes in the Group's methods of computation.
In April 2022, the IFRS Interpretations Committee was asked to
consider whether an entity includes a demand deposit as a component
of cash and cash equivalents in the statement of cash flows when
the demand deposit is subject to contractual restrictions on use
agreed with a third party. It concluded that such amounts should be
included within cash and cash equivalents. Accordingly, the Group
includes mandatory reserve deposits with central banks that are
held in demand accounts within cash and cash equivalents disclosed
in the cash flow statement. This change has increased the Group's
cash and cash equivalents at 1 January 2020 by GBP1,682 million (to
GBP40,296 million) and decreased the adjustment for the change in
operating assets in 2020 by GBP974 million (to a reduction of
GBP5,882 million) resulting in an increase in the Group's cash and
cash equivalents at 31 December 2020 of GBP2,656 million (to
GBP51,622 million); and decreased the adjustment for the change in
operating assets in 2021 by GBP114 million (to an increase of
GBP5,174 million) and, as a result, the Group's cash and cash
equivalents at 31 December 2021 increased by GBP2,770 million (to
GBP55,960 million). The change had no impact on profit after tax or
total equity.
2. Capital
The Group's Q3 2022 Interim Pillar 3 Report can be found at
www.lloydsbankinggroup.com/investors/financial-downloads.
3. Base case and MES economic assumptions
The Group's base case economic scenario reflects the outlook as
of 30 September 2022 and was revised in light of developments in
energy pricing, changes in UK fiscal policy prior to the balance
sheet date and a continuing shift towards a more restrictive
monetary policy stance by central banks. The Group's updated base
case scenario was based upon three conditioning assumptions: first,
the war in Ukraine remains 'local', without overtly involving
neighbouring countries, NATO or China; second, the fiscal loosening
implied by the UK Government's 'Growth Plan' of 23 September 2022
would be offset principally by Government spending cuts; and third,
central bank reaction functions, including of the Bank of England,
are focused on controlling inflation, motivating a more rapid
tightening of UK monetary policy. The Group continues to assume
that no further UK COVID-19 national lockdowns are mandated. Based
on these assumptions and incorporating the macroeconomic
information published in the third quarter, the Group's base case
scenario comprises an economic downturn with a rise in the
unemployment rate, declining residential and commercial property
prices, and continuing increases in the UK Bank Rate against a
backdrop of elevated inflationary pressures. Risks to the base case
economic view exist in both directions and are partly captured by
the generation of alternative economic scenarios. Each of the
scenarios includes forecasts for key variables as of the third
quarter of 2022, for which data or revisions to history may have
since emerged prior to publication.
At 30 September 2022, the Group has included an adjusted severe
downside scenario to incorporate high CPI inflation and UK Bank
Rate profiles and has adopted this adjusted severe downside
scenario in calculating its ECL allowance. This is because the
historic macroeconomic and loan loss data upon which the scenario
model is calibrated imply an association of downside economic
outcomes with lower inflation rates, easier monetary policy, and
therefore low interest rates. This adjustment is considered to
better reflect the risks around the Group's base case view in a
macroeconomic environment in which supply shocks are the principal
concern.
ADDITIONAL FINANCIAL INFORMATION (continued)
3. Base case and MES economic assumptions (continued)
UK economic assumptions - Scenarios by year
Key annual assumptions made by the Group are shown below. Gross
domestic product and Consumer Price Index (CPI) inflation are
presented as an annual change, house price growth and commercial
real estate price growth are presented as the growth in the
respective indices within the period. Unemployment rate and UK Bank
Rate are averages for the period.
2022
to 2026
2022 2023 2024 2025 2026 average
At 30 September 2022 % % % % % %
Upside
Gross domestic product 3.6 0.4 1.0 1.5 2.1 1.7
Unemployment rate 3.3 2.8 3.2 3.5 3.8 3.3
House price growth 6.1 (2.7) 7.2 8.5 6.1 5.0
Commercial real estate
price growth 8.7 (3.6) 0.1 1.0 1.9 1.6
UK Bank Rate 2.16 5.28 5.17 4.30 4.12 4.20
CPI inflation 9.0 6.1 2.9 3.2 2.6 4.8
Base case
Gross domestic product 3.4 (1.0) 0.4 1.4 2.0 1.2
Unemployment rate 3.7 4.9 5.4 5.5 5.5 5.0
House price growth 5.0 (7.9) (0.5) 2.5 2.3 0.2
Commercial real estate
price growth 2.8 (14.4) (2.7) 0.4 1.9 (2.6)
UK Bank Rate 2.06 4.00 3.38 2.56 2.50 2.90
CPI inflation 9.1 6.2 2.5 2.2 1.3 4.2
Downside
Gross domestic product 3.2 (2.3) (0.2) 1.2 1.9 0.8
Unemployment rate 4.1 6.6 7.5 7.3 7.2 6.5
House price growth 3.9 (12.9) (8.9) (5.4) (3.3) (5.5)
Commercial real estate
price growth (1.4) (23.0) (6.5) (2.5) (0.2) (7.1)
UK Bank Rate 2.00 2.93 1.76 1.04 1.07 1.76
CPI inflation 9.0 6.0 1.9 1.1 0.0 3.6
Severe downside
Gross domestic product 2.4 (4.5) (0.3) 1.0 1.8 0.0
Unemployment rate 4.9 9.8 10.5 10.0 9.5 8.9
House price growth 2.4 (17.9) (16.6) (10.3) (6.0) (10.0)
Commercial real estate
price growth (9.2) (35.7) (13.6) (6.4) (0.7) (14.1)
UK Bank Rate -
modelled 1.78 0.91 0.36 0.21 0.23 0.70
UK Bank Rate -
adjusted 2.44 7.00 4.88 3.00 2.75 4.01
CPI inflation -
modelled 9.1 5.9 1.0 (0.4) (1.9) 2.7
CPI inflation -
adjusted 9.9 14.3 9.0 4.1 1.3 7.7
Probability-weighted
Gross domestic product 3.3 (1.3) 0.3 1.4 2.0 1.1
Unemployment rate 3.8 5.3 5.9 5.9 5.9 5.4
House price growth 4.7 (8.8) (2.3) 0.6 0.9 (1.1)
Commercial real estate
price growth 2.1 (15.8) (4.1) (1.0) 1.0 (3.8)
UK Bank Rate -
modelled 2.04 3.75 3.13 2.39 2.33 2.73
UK Bank Rate -
adjusted 2.11 4.36 3.58 2.67 2.58 3.06
CPI inflation -
modelled 9.1 6.1 2.3 1.9 1.0 4.1
CPI inflation -
adjusted 9.1 6.9 3.1 2.4 1.3 4.6
ADDITIONAL FINANCIAL INFORMATION (continued)
3. Base case and MES economic assumptions (continued)
UK economic assumptions - Base case scenario by quarter
Key quarterly assumptions made by the Group in the base case
scenario are shown below. Gross domestic product is presented
quarter-on-quarter. House price growth, commercial real estate
price growth and CPI inflation are presented year-on-year, i.e from
the equivalent quarter in the previous year. Unemployment rate and
UK Bank Rate are presented as at the end of each quarter.
First Second Third Fourth First Second Third Fourth
quarter quarter quarter quarter quarter quarter quarter quarter
2022 2022 2022 2022 2023 2023 2023 2023
At 30 September 2022 % % % % % % % %
Gross domestic product 0.8 (0.1) (0.1) (0.3) (0.4) (0.3) (0.2) (0.1)
Unemployment rate 3.7 3.8 3.7 3.8 4.3 4.7 5.1 5.4
House price growth 11.1 12.5 10.4 5.0 (0.2) (5.8) (8.2) (7.9)
Commercial real estate
price growth 18.0 18.0 12.3 2.8 (5.6) (11.8) (13.7) (14.4)
UK Bank Rate 0.75 1.25 2.25 4.00 4.00 4.00 4.00 4.00
CPI inflation 6.2 9.2 10.2 10.7 9.8 6.5 5.2 3.2
4. ECL sensitivity to economic assumptions
The measurement of ECL reflects an unbiased probability-weighted
range of possible future economic outcomes. The Group achieves this
by generating four economic scenarios to reflect the range of
outcomes; the central scenario reflects the Group's base case
assumptions used for medium-term planning purposes, an upside and a
downside scenario are also selected together with a severe downside
scenario. If the base case moves adversely it generates a new, more
adverse downside and severe downside which are then incorporated
into the ECL. The base case, upside and downside scenarios carry a
30 per cent weighting; the severe downside is weighted at 10 per
cent. These assumptions can be found on pages 5 to 7.
The table below shows the Group's ECL for the
probability-weighted, upside, base case, downside and severe
downside scenarios, the severe downside scenario incorporating
adjustments made to CPI inflation and UK Bank Rate paths. The stage
allocation for an asset is based on the overall scenario
probability-weighted PD and hence the staging of assets is constant
across all the scenarios. In each economic scenario the ECL for
individual assessments and post-model adjustments is constant
reflecting the basis on which they are evaluated.
Probability- Base Severe
weighted Upside case Downside downside
GBPm GBPm GBPm GBPm GBPm
UK mortgages 1,163 463 734 1,375 3,914
Credit cards 682 594 649 742 866
Other Retail 952 903 937 984 1,048
Commercial
Banking 1,721 1,339 1,544 1,857 2,985
Other 1 1 1 1 1
---------------- ---------------- ---------------- ---------------- ----------------
At 30
September
2022 4,519 3,300 3,865 4,959 8,814
---------------- ---------------- ---------------- ---------------- ----------------
UK mortgages 837 637 723 967 1,386
Credit cards
(1) 521 442 500 569 672
Other Retail
(1) 825 760 811 863 950
Commercial
Banking (1) 1,416 1,281 1,343 1,486 1,833
Other (1) 401 401 402 401 400
---------------- ---------------- ---------------- ---------------- ----------------
At 31
December
2021 4,000 3,521 3,779 4,286 5,241
---------------- ---------------- ---------------- ---------------- ----------------
(1) Reflects the new organisation structure, with Business
Banking and Commercial Cards moving from Retail to Commercial
Banking and Wealth moving from Other to Retail.
ADDITIONAL FINANCIAL INFORMATION (continued)
5. Loans and advances to customers and expected credit loss allowance
Stage Stage
2 3
Stage Stage Stage as % as %
At 30 September 1 2 3 POCI Total of of
2022 GBPm GBPm GBPm GBPm GBPm total total
Loans and advances to customers
UK mortgages 257,915 40,575 3,411 9,993 311,894 13.0 1.1
Credit cards 12,018 2,526 292 - 14,836 17.0 2.0
Loans and
overdrafts 8,723 1,339 255 - 10,317 13.0 2.5
UK Motor
Finance 12,335 1,949 169 - 14,453 13.5 1.2
Other 13,294 650 158 - 14,102 4.6 1.1
--------------- --------------- --------------- --------------- --------------- -----------
Retail 304,285 47,039 4,285 9,993 365,602 12.9 1.2
--------------- --------------- --------------- --------------- --------------- ----------- --------
Small and
Medium
Businesses 31,783 6,266 2,279 - 40,328 15.5 5.7
Corporate and
Institutional
Banking 31,692 4,727 1,626 - 38,045 12.4 4.3
--------------- --------------- --------------- --------------- --------------- -----------
Commercial
Banking 63,475 10,993 3,905 - 78,373 14.0 5.0
Other(1) (4,471) - - - (4,471)
--------------- --------------- --------------- --------------- --------------- ----------- --------
Total gross
lending 363,289 58,032 8,190 9,993 439,504 13.2 1.9
----------- --------
ECL allowance
on drawn
balances (610) (1,654) (1,672) (305) (4,241)
--------------- --------------- --------------- --------------- ---------------
Net balance
sheet
carrying value 362,679 56,378 6,518 9,688 435,263
--------------- --------------- --------------- --------------- ---------------
Customer related ECL allowance (drawn and undrawn)
UK mortgages 48 516 294 305 1,163
Credit cards 182 382 118 - 682
Loans and
overdrafts 175 273 138 - 586
UK Motor
Finance(2) 107 85 93 - 285
Other 15 18 48 - 81
--------------- --------------- --------------- --------------- ---------------
Retail 527 1,274 691 305 2,797
--------------- --------------- --------------- --------------- ---------------
Small and
Medium
Businesses 104 292 153 - 549
Corporate and
Institutional
Banking 99 233 832 - 1,164
--------------- --------------- --------------- --------------- ---------------
Commercial
Banking 203 525 985 - 1,713
Other - - - - -
--------------- --------------- --------------- --------------- ---------------
Total 730 1,799 1,676 305 4,510
--------------- --------------- --------------- --------------- ---------------
Customer related ECL allowance (drawn and undrawn) as a percentage
of loans and advances to customers(3)
UK mortgages - 1.3 8.6 3.1 0.4
Credit cards 1.5 15.1 54.4 - 4.6
Loans and
overdrafts 2.0 20.4 72.6 - 5.7
UK Motor
Finance 0.9 4.4 55.0 - 2.0
Other 0.1 2.8 30.4 - 0.6
--------------- --------------- --------------- --------------- ---------------
Retail 0.2 2.7 16.7 3.1 0.8
--------------- --------------- --------------- --------------- ---------------
Small and
Medium
Businesses 0.3 4.7 13.0 - 1.4
Corporate and
Institutional
Banking 0.3 4.9 51.2 - 3.1
--------------- --------------- --------------- --------------- ---------------
Commercial
Banking 0.3 4.8 35.2 - 2.2
Other - - -
--------------- --------------- --------------- --------------- ---------------
Total 0.2 3.1 24.1 3.1 1.0
--------------- --------------- --------------- --------------- ---------------
(1) Contains centralised fair value hedge accounting adjustments.
(2) UK Motor Finance for Stages 1 and 2 include GBP93 million
relating to provisions against residual values of vehicles subject
to finance leasing agreements. These provisions are included within
the calculation of coverage ratios.
(3) Total and Stage 3 ECL allowances as a percentage of drawn
balances exclude loans in recoveries in Credit cards of GBP75
million, Loans and overdrafts of GBP65 million, Small and Medium
Businesses of GBP1,104 million and Corporate and Institutional
Banking of GBP1 million.
ADDITIONAL FINANCIAL INFORMATION (continued)
5. Loans and advances to customers and expected credit loss allowance (continued)
Stage Stage
2 3
Stage Stage Stage as % as %
At 31 December 1 2 3 POCI Total of of
2021 GBPm GBPm GBPm GBPm GBPm total total
Loans and
advances
to customers
-------------- --------------- --------------- --------------- -------------- ----------- --------
UK mortgages 273,629 21,798 1,940 10,977 308,344 7.1 0.6
Credit
cards(1) 11,918 2,077 292 - 14,287 14.5 2.0
Loans and
overdrafts 8,181 1,105 271 - 9,557 11.6 2.8
UK Motor
Finance 12,247 1,828 201 - 14,276 12.8 1.4
Other(1) 11,198 593 169 - 11,960 5.0 1.4
-------------- --------------- --------------- --------------- -------------- -----------
Retail 317,173 27,401 2,873 10,977 358,424 7.6 0.8
-------------- --------------- --------------- --------------- -------------- ----------- --------
Small and
Medium
Businesses(1) 36,134 4,992 1,747 - 42,873 11.6 4.1
Corporate and
Institutional
Banking(1) 29,526 2,491 1,786 - 33,803 7.4 5.3
-------------- --------------- --------------- --------------- -------------- -----------
Commercial
Banking 65,660 7,483 3,533 - 76,676 9.8 4.6
Other(2) (467) - - - (467) - -
-------------- --------------- --------------- --------------- -------------- ----------- --------
Total gross
lending 382,366 34,884 6,406 10,977 434,633 8.0 1.5
----------- --------
ECL allowance
on drawn
balances (909) (1,112) (1,573) (210) (3,804)
-------------- --------------- --------------- --------------- --------------
Net balance
sheet carrying
value 381,457 33,772 4,833 10,767 430,829
-------------- --------------- --------------- --------------- --------------
Customer related ECL allowance (drawn and undrawn)
UK mortgages 49 394 184 210 837
Credit
cards(1) 144 249 128 - 521
Loans and
overdrafts 136 170 139 - 445
UK Motor
Finance(3) 108 74 116 - 298
Other(1) 15 15 52 - 82
-------------- --------------- --------------- --------------- --------------
Retail 452 902 619 210 2,183
-------------- --------------- --------------- --------------- --------------
Small and
Medium
Businesses(1) 104 176 179 - 459
Corporate and
Institutional
Banking(1) 56 120 780 - 956
-------------- --------------- --------------- --------------- --------------
Commercial
Banking 160 296 959 - 1,415
Other 400 - - - 400
-------------- --------------- --------------- --------------- --------------
Total 1,012 1,198 1,578 210 3,998
-------------- --------------- --------------- --------------- --------------
Customer related ECL allowance (drawn and undrawn) as a percentage
of loans and advances to customers(4)
UK mortgages - 1.8 9.5 1.9 0.3
Credit
cards(1) 1.2 12.0 56.9 - 3.7
Loans and
overdrafts 1.7 15.4 67.5 - 4.7
UK Motor
Finance 0.9 4.0 57.7 - 2.1
Other(1) 0.1 2.5 30.8 - 0.7
-------------- --------------- --------------- --------------- --------------
Retail 0.1 3.3 22.6 1.9 0.6
-------------- --------------- --------------- --------------- --------------
Small and
Medium
Businesses(1) 0.3 3.5 14.5 - 1.1
Corporate and
Institutional
Banking(1) 0.2 4.8 43.7 - 2.8
-------------- --------------- --------------- --------------- --------------
Commercial
Banking 0.2 4.0 31.8 - 1.9
Other(5) - - - - -
-------------- --------------- --------------- --------------- --------------
Total 0.3 3.4 27.4 1.9 0.9
-------------- --------------- --------------- --------------- --------------
(1) Reflects the new organisation structure, with Business
Banking and Commercial Cards moving from Retail to Commercial
Banking and Wealth moving from Other to Retail.
(2) Contains centralised fair value hedge accounting adjustments.
(3) UK Motor Finance for Stages 1 and 2 include GBP95 million
relating to provisions against residual values of vehicles subject
to finance leasing agreements. These provisions are included within
the calculation of coverage ratios.
(4) Total and Stage 3 ECL allowances as a percentage of drawn
balances exclude loans in recoveries in Credit cards of GBP67
million, Loans and overdrafts of GBP65 million, Small and Medium
Businesses of GBP515 million and Corporate and Institutional
Banking of GBP3 million.
(5) Other excludes the GBP400 million ECL central adjustment.
ADDITIONAL FINANCIAL INFORMATION (continued)
6. Stage 2 loans and advances to customers and expected credit loss allowance
Up to date
---------------------------------------------------
1 to 30 Over 30
days days
PD movements Other(1) past due(2) past due Total
------------------------ -------------------------
Gross Gross Gross Gross Gross
At 30 September lending ECL(3) lending ECL(3) lending ECL(3) lending ECL(3) lending ECL(3)
2022 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
UK mortgages 31,885 195 6,331 159 1,599 82 760 80 40,575 516
Credit cards 2,275 291 132 47 90 28 29 16 2,526 382
Loans and
overdrafts 943 169 232 45 121 39 43 20 1,339 273
UK Motor
Finance 854 27 927 23 136 25 32 10 1,949 85
Other 166 4 394 8 54 4 36 2 650 18
---------- ------------ ----------- ------------ ------------ ------------ ----------- ------------ ----------
Retail 36,123 686 8,016 282 2,000 178 900 128 47,039 1,274
---------- ------------ ----------- ------------ ------------ ------------ ----------- ------------ ---------- -----------
Small and
Medium
Businesses 4,408 246 1,235 26 399 13 224 7 6,266 292
Corporate
and
Institutional
Banking 4,612 233 18 - 10 - 87 - 4,727 233
---------- ------------ ----------- ------------ ------------ ------------ ----------- ------------ ----------
Commercial
Banking 9,020 479 1,253 26 409 13 311 7 10,993 525
Total 45,143 1,165 9,269 308 2,409 191 1,211 135 58,032 1,799
---------- ------------ ----------- ------------ ------------ ------------ ----------- ------------ ---------- -----------
At 31 December
2021
------------ ----------- ------------ ------------ ------------ ----------- ------------ ---------- -----------
UK mortgages 14,845 132 4,133 155 1,433 38 1,387 69 21,798 394
Credit
cards(4) 1,755 176 210 42 86 20 26 11 2,077 249
Loans and
overdrafts 505 82 448 43 113 30 39 15 1,105 170
UK Motor
Finance 581 20 1,089 26 124 19 34 9 1,828 74
Other(4) 194 4 306 7 44 2 49 2 593 15
---------- ------------ ----------- ------------ ------------ ------------ ----------- ------------ ----------
Retail 17,880 414 6,186 273 1,800 109 1,535 106 27,401 902
---------- ------------ ----------- ------------ ------------ ------------ ----------- ------------ ---------- -----------
Small and
Medium
Businesses(4) 3,570 153 936 14 297 6 189 3 4,992 176
Corporate
and
Institutional
Banking(4) 2,447 118 15 2 4 - 25 - 2,491 120
---------- ------------ ----------- ------------ ------------ ------------ ----------- ------------ ----------
Commercial
Banking 6,017 271 951 16 301 6 214 3 7,483 296
Total 23,897 685 7,137 289 2,101 115 1,749 109 34,884 1,198
---------- ------------ ----------- ------------ ------------ ------------ ----------- ------------ ---------- -----------
(1) Includes forbearance, client and product-specific indicators
not reflected within quantitative PD assessments.
(2) Includes assets that have triggered PD movements, or other
rules, given that being 1-29 days in arrears in and of itself is
not a Stage 2 trigger.
(3) Expected credit loss allowance on loans and advances to customers (drawn and undrawn).
(4) Reflects the new organisation structure, with Business
Banking and Commercial Cards moving from Retail to Commercial
Banking and Wealth moving from Other to Retail.
FORWARD LOOKING STATEMENTS
This document contains certain forward-looking statements within
the meaning of Section 21E of the US Securities Exchange Act of
1934, as amended, and section 27A of the US Securities Act of 1933,
as amended, with respect to the business, strategy, plans and/or
results of Lloyds Bank plc together with its subsidiaries (the
Group) and its current goals and expectations. Statements that are
not historical or current facts, including statements about the
Group's or its directors' and/or management's beliefs and
expectations, are forward looking statements. Words such as,
without limitation, 'believes', 'achieves', 'anticipates',
'estimates', 'expects', 'targets', 'should', 'intends', 'aims',
'projects', 'plans', 'potential', 'will', 'would', 'could',
'considered', 'likely', 'may', 'seek', 'estimate', 'probability',
'goal', 'objective', 'deliver', 'endeavour', 'prospects',
'optimistic' and similar expressions or variations on these
expressions are intended to identify forward looking statements.
These statements concern or may affect future matters, including
but not limited to: projections or expectations of the Group's
future financial position, including profit attributable to
shareholders, provisions, economic profit, dividends, capital
structure, portfolios, net interest margin, capital ratios,
liquidity, risk-weighted assets (RWAs), expenditures or any other
financial items or ratios; litigation, regulatory and governmental
investigations; the Group's future financial performance; the level
and extent of future impairments and write-downs; the Group's ESG
targets and/or commitments; statements of plans, objectives or
goals of the Group or its management and other statements that are
not historical fact; expectations about the impact of COVID-19; and
statements of assumptions underlying such 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 forward
looking statements include, but are not limited to: general
economic and business conditions in the UK and internationally;
market related risks, trends and developments; risks concerning
borrower and counterparty credit quality; fluctuations in interest
rates, inflation, exchange rates, stock markets and currencies;
volatility in credit markets; volatility in the price of the
Group's securities; changes in consumer behaviour; any impact of
the transition from IBORs to alternative reference rates; the
ability to access sufficient sources of capital, liquidity and
funding when required; changes to the Group's or Lloyds Banking
Group plc'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;
inability to capture accurately the expected value from
acquisitions; potential changes in dividend policy; the ability to
achieve strategic objectives; insurance risks; management and
monitoring of conduct risk; exposure to counterparty risk; credit
rating risk; tightening of monetary policy in jurisdictions in
which the Group operates; instability in the global financial
markets, including within the Eurozone, and as a result of ongoing
uncertainty following the exit by the UK from the European Union
(EU) and the effects of the EU-UK Trade and Cooperation Agreement;
political instability including as a result of any UK general
election and any further possible referendum on Scottish
independence; operational risks; conduct risk; 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
(including but not limited to the COVID-19 pandemic) and other
disasters; inadequate or failed internal or external processes or
systems; acts of hostility or terrorism and responses to those
acts, or other such events; geopolitical unpredictability; the war
between Russia and Ukraine; the tensions between China and Taiwan;
risks relating to sustainability and climate change (and achieving
climate change ambitions), including the Group's and/or Lloyds
Banking Group plc's ability along with the government and other
stakeholders to measure, manage and mitigate the impacts of climate
change effectively; changes in laws, regulations, practices and
accounting standards or taxation; changes to regulatory capital or
liquidity requirements and similar contingencies; assessment
related to resolution planning requirements; the policies and
actions of governmental or regulatory authorities or courts
together with any resulting impact on the future structure of the
Group; failure to comply with anti-money laundering, counter
terrorist financing, anti-bribery and sanctions regulations;
failure to prevent or detect any illegal or improper activities;
projected employee numbers and key person risk; increased labour
costs; assumptions and estimates that form the basis of the Group's
financial statements; the impact of competitive conditions; and
exposure to legal, regulatory or competition proceedings,
investigations or complaints. A number of these influences and
factors are beyond the Group's control. Please refer to the latest
Annual Report on Form 20-F filed by Lloyds Bank plc with the US
Securities and Exchange Commission (the SEC), which is available on
the SEC's website at www.sec.gov, for a discussion of certain
factors and risks. Lloyds Banking Group plc may also make or
disclose written and/or oral forward-looking statements in other
written materials and in oral statements made by the directors,
officers or employees of Lloyds Banking Group plc to third parties,
including financial analysts. 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 the Group expressly disclaims any
obligation or undertaking to release publicly any updates or
revisions to any forward looking statements contained in this
document whether as a result of new information, future events or
otherwise. The information, statements and opinions contained in
this document do not constitute a public offer under any applicable
law or an offer to sell any securities or financial instruments or
any advice or recommendation with respect to such securities or
financial instruments.
CONTACTS
For further information please contact:
INVESTORS AND ANALYSTS
Douglas Radcliffe
Group Investor Relations Director
020 7356 1571
douglas.radcliffe@lloydsbanking.com
Edward Sands
Director of Investor Relations
020 7356 1585
edward.sands@lloydsbanking.com
Nora Thoden
Director of Investor Relations - ESG
020 7356 2334
nora.thoden@lloydsbanking.com
CORPORATE AFFAIRS
Grant Ringshaw
External Relations Director
020 7356 2362
grant.ringshaw@lloydsbanking.com
Matt Smith
Head of Media Relations
020 7356 3522
matt.smith@lloydsbanking.com
Copies of this News Release may be obtained from:
Investor Relations, Lloyds Banking Group plc, 25 Gresham Street,
London EC2V 7HN
The statement can also be found on the Group's website -
www.lloydsbankinggroup.com
Registered office: Lloyds Bank plc, 25 Gresham Street, London
EC2V 7HN
Registered in England No. 2065
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END
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