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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