Lloyds Banking Group plc
Q3 2024 Interim Management
Statement
23 October 2024
RESULTS FOR THE NINE MONTHS ENDED
30 SEPTEMBER 2024
"The Group delivered a robust
financial performance in the third quarter of 2024, with growth in
income alongside continued cost discipline and strong asset
quality. Our performance allows us confidently to reaffirm our 2024
guidance.
As mentioned during our Half-Year
2024 results update, we are making good progress on our strategy
and remain on track to deliver higher, more sustainable returns. As
ever, we are guided by our purpose of Helping Britain Prosper and
continuing to provide support to our customers. The strength of the
Group's franchise, alongside our financial performance, enables us
to deliver for all stakeholders."
Charlie Nunn, Group Chief
Executive
Robust financial performance, in
line with expectations1
- Statutory profit after tax of £3.8 billion (nine months to 30
September 2023: £4.3 billion) with net income down 7 per cent on
the prior year and operating costs up 5 per cent (including the
Bank of England Levy), partly offset by a lower impairment
charge
- Underlying net interest income of £9.6 billion, down 8 per cent
with a lower banking net interest margin of 2.94 per cent and
average interest-earning banking assets of £449.9 billion.
Underlying net interest income of £3.2 billion increased by 2 per
cent in the third quarter, with a banking net interest margin of
2.95 per cent, up from 2.93 per cent in the second quarter
- Underlying other income of £4.2 billion, 9 per cent higher than
the prior year, driven by strengthening customer and market
activity and the benefit of strategic initiatives
- Operating lease depreciation of £994 million, up on the prior
year reflecting growth in the fleet size, depreciation of higher
value vehicles and declines in used electric car prices. The third
quarter charge of £315 million was in line with expectations
- Operating costs of £7.0 billion, up 5 per cent, with cost
efficiencies helping to partially offset higher ongoing strategic
investment, planned accelerated severance charges and inflationary
pressure, alongside c.£0.1 billion in the first quarter relating to
the sector-wide change in the charging approach for the Bank of
England Levy
- Remediation costs of £124 million (first nine months of 2023:
£134 million), largely in relation to pre-existing
programmes
- Underlying impairment charge of £273 million in the year to
date and asset quality ratio of 9 basis points. Excluding the
impact of improvements to the economic outlook, the asset quality
ratio was 18 basis points. The portfolio remains
well-positioned with resilient credit performance
- Underlying loans and advances to customers increased by £7.3
billion in the year to date, including £4.6 billion in the third
quarter, to £457.0 billion. The growth in the year to date includes
£7.4 billion across Retail, while Commercial Banking remained
broadly stable
- Customer deposits of £475.7 billion increased by £4.3
billion in the year to date, with growth in Retail deposits of
£6.6 billion, partly offset by a reduction in Commercial
Banking deposits of £2.1 billion. Customer deposits continued
to grow in the third quarter, with an increase of £1.0 billion
- Strong capital generation of 132 basis points in the year
to date. CET1 ratio of 14.3 per cent, after 71 basis points for the
interim ordinary dividend paid and the foreseeable ordinary
dividend accrual, significantly above our ongoing target of c.13.0
per cent by 2026
- Risk-weighted assets of £223.3 billion up £4.2 billion in the
period, reflecting lending growth and other movements, partly
offset by efficient management of risk-weighted assets
- Tangible net assets per share of 52.5 pence, up from 50.8 pence
at 31 December 2023
Reaffirming guidance for
2024
Based on our current macroeconomic
assumptions, for 2024 the Group continues to expect:
- Banking net interest margin of greater than 290 basis
points
- Operating costs of c.£9.4 billion, including the c.£0.1 billion
Bank of England Levy
- Asset quality ratio to be less than 20 basis points
- Return on tangible equity of c.13 per cent
- Capital generation of c.175 basis points2
- Risk-weighted assets between £220 billion and £225 billion
- To pay down to a CET1 ratio of c.13.5 per cent
- See the basis of presentation on page 14.
- Excluding capital distributions. Inclusive of ordinary
dividends received from the Insurance business in February of the
following year.
INCOME STATEMENT (UNDERLYING
BASIS)A AND KEY BALANCE SHEET
METRICS
| |
Nine months ended
30 Sep 2024
£m |
|
|
Nine months ended
30 Sep 2023
£m |
|
|
Change
% |
|
Three months ended
30 Sep 2024
£m |
|
|
Three months ended
30 Sep 2023
£m |
|
|
Change
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Underlying net interest income |
9,569 |
|
|
10,448 |
|
|
(8) |
|
3,231 |
|
|
3,444 |
|
|
(6) |
| Underlying other income |
4,164 |
|
|
3,837 |
|
|
9 |
|
1,430 |
|
|
1,299 |
|
|
10 |
| Operating lease depreciation |
(994) |
|
|
(585) |
|
|
(70) |
|
(315) |
|
|
(229) |
|
|
(38) |
| Net income |
12,739 |
|
|
13,700 |
|
|
(7) |
|
4,346 |
|
|
4,514 |
|
|
(4) |
| Operating costs |
(6,992) |
|
|
(6,654) |
|
|
(5) |
|
(2,292) |
|
|
(2,241) |
|
|
(2) |
| Remediation |
(124) |
|
|
(134) |
|
|
7 |
|
(29) |
|
|
(64) |
|
|
55 |
| Total costs |
(7,116) |
|
|
(6,788) |
|
|
(5) |
|
(2,321) |
|
|
(2,305) |
|
|
(1) |
| Underlying profit before impairment |
5,623 |
|
|
6,912 |
|
|
(19) |
|
2,025 |
|
|
2,209 |
|
|
(8) |
| Underlying impairment charge |
(273) |
|
|
(849) |
|
|
68 |
|
(172) |
|
|
(187) |
|
|
8 |
| Underlying profit |
5,350 |
|
|
6,063 |
|
|
(12) |
|
1,853 |
|
|
2,022 |
|
|
(8) |
| Restructuring |
(21) |
|
|
(69) |
|
|
70 |
|
(6) |
|
|
(44) |
|
|
86 |
| Volatility and other items |
(182) |
|
|
(266) |
|
|
32 |
|
(24) |
|
|
(120) |
|
|
80 |
| Statutory profit before tax |
5,147 |
|
|
5,728 |
|
|
(10) |
|
1,823 |
|
|
1,858 |
|
|
(2) |
| Tax expense |
(1,370) |
|
|
(1,444) |
|
|
5 |
|
(490) |
|
|
(438) |
|
|
(12) |
| Statutory profit after tax |
3,777 |
|
|
4,284 |
|
|
(12) |
|
1,333 |
|
|
1,420 |
|
|
(6) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings per share |
5.3p |
|
|
5.9p |
|
|
(0.6)p |
|
1.9p |
|
|
2.0p |
|
|
(0.1)p |
| Banking net interest marginA |
2.94% |
|
|
3.15% |
|
|
(21)bp |
|
2.95% |
|
|
3.08% |
|
|
(13)bp |
| Average interest-earning banking
assetsA |
£449.9bn |
|
|
£453.5bn |
|
|
(1) |
|
£451.1bn |
|
|
£453.0bn |
|
|
|
| Cost:income ratioA |
55.9% |
|
|
49.5% |
|
|
6.4pp |
|
53.4% |
|
|
51.1% |
|
|
2.3pp |
| Asset quality ratioA |
0.09% |
|
|
0.25% |
|
|
(16)bp |
|
0.15% |
|
|
0.17% |
|
|
(2)bp |
| Return on tangible equityA |
14.0% |
|
|
16.6% |
|
|
(2.6)pp |
|
15.2% |
|
|
16.9% |
|
|
(1.7)pp |
| |
At 30 Sep
2024 |
|
|
At 30 Jun
2024 |
|
|
Change
% |
|
|
|
|
At 31 Dec
2023 |
|
|
Change
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Underlying loans and advances to
customersA |
£457.0bn |
|
|
£452.4bn |
|
|
1 |
|
|
|
|
£449.7bn |
|
|
2 |
| Customer deposits |
£475.7bn |
|
|
£474.7bn |
|
|
|
|
|
|
|
£471.4bn |
|
|
1 |
| Loan to deposit ratioA |
96% |
|
|
95% |
|
|
1pp |
|
|
|
|
95% |
|
|
1pp |
| CET1 ratio |
14.3% |
|
|
14.1% |
|
|
0.2pp |
|
|
|
|
14.6% |
|
|
(0.3)pp |
| Pro forma CET1 ratioA,1 |
14.3% |
|
|
14.1% |
|
|
0.2pp |
|
|
|
|
13.7% |
|
|
0.6pp |
| Total capital ratio |
19.0% |
|
|
18.7% |
|
|
0.3pp |
|
|
|
|
19.8% |
|
|
(0.8)pp |
| MREL ratio |
32.2% |
|
|
31.7% |
|
|
0.5pp |
|
|
|
|
31.9% |
|
|
0.3pp |
| UK leverage ratio |
5.5% |
|
|
5.4% |
|
|
0.1pp |
|
|
|
|
5.8% |
|
|
(0.3)pp |
| Risk-weighted assets |
£223.3bn |
|
|
£222.0bn |
|
|
1 |
|
|
|
|
£219.1bn |
|
|
2 |
| Wholesale funding |
£93.3bn |
|
|
£97.6bn |
|
|
(4) |
|
|
|
|
£98.7bn |
|
|
(5) |
| Liquidity coverage ratio2 |
144% |
|
|
144% |
|
|
|
|
|
|
|
142% |
|
|
2pp |
| Net stable funding ratio3 |
129% |
|
|
130% |
|
|
(1)pp |
|
|
|
|
130% |
|
|
(1)pp |
| Tangible net assets per shareA |
52.5p |
|
|
49.6p |
|
|
2.9p |
|
|
|
|
50.8p |
|
|
1.7p |
A See
page 14.
1 31
December 2023 reflects both the full impact of the share buyback in
respect of 2023 and the ordinary dividend received from the
Insurance business in February 2024, but excludes the impact of the
phased unwind of IFRS 9 relief on 1 January 2024.
2 The liquidity
coverage ratio is calculated as a simple average of month-end
observations over the previous 12 months.
3 The net stable
funding ratio is calculated as a simple average of month-end
observations over the previous four quarter-ends.
QUARTERLY
INFORMATIONA
| |
Quarter
ended
30 Sep
2024
£m |
|
|
Quarter
ended
30 Jun
2024
£m |
|
|
Change
% |
|
|
Quarter
ended
31 Mar
2024
£m |
|
|
Quarter
ended
31 Dec
2023
£m |
|
|
Quarter
ended
30 Sep
2023
£m |
|
|
Quarter
ended
30 Jun
2023
£m |
|
|
Quarter
ended
31 Mar
2023
£m |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Underlying net interest income |
3,231 |
|
|
3,154 |
|
|
2 |
|
|
3,184 |
|
|
3,317 |
|
|
3,444 |
|
|
3,469 |
|
|
3,535 |
|
| Underlying other income |
1,430 |
|
|
1,394 |
|
|
3 |
|
|
1,340 |
|
|
1,286 |
|
|
1,299 |
|
|
1,281 |
|
|
1,257 |
|
| Operating lease depreciation |
(315) |
|
|
(396) |
|
|
20 |
|
|
(283) |
|
|
(371) |
|
|
(229) |
|
|
(216) |
|
|
(140) |
|
| Net income |
4,346 |
|
|
4,152 |
|
|
5 |
|
|
4,241 |
|
|
4,232 |
|
|
4,514 |
|
|
4,534 |
|
|
4,652 |
|
| Operating costs |
(2,292) |
|
|
(2,298) |
|
|
|
|
|
(2,402) |
|
|
(2,486) |
|
|
(2,241) |
|
|
(2,243) |
|
|
(2,170) |
|
| Remediation |
(29) |
|
|
(70) |
|
|
59 |
|
|
(25) |
|
|
(541) |
|
|
(64) |
|
|
(51) |
|
|
(19) |
|
| Total costs |
(2,321) |
|
|
(2,368) |
|
|
2 |
|
|
(2,427) |
|
|
(3,027) |
|
|
(2,305) |
|
|
(2,294) |
|
|
(2,189) |
|
| Underlying profit before impairment |
2,025 |
|
|
1,784 |
|
|
14 |
|
|
1,814 |
|
|
1,205 |
|
|
2,209 |
|
|
2,240 |
|
|
2,463 |
|
| Underlying impairment (charge) credit |
(172) |
|
|
(44) |
|
|
|
|
|
(57) |
|
|
541 |
|
|
(187) |
|
|
(419) |
|
|
(243) |
|
| Underlying profit |
1,853 |
|
|
1,740 |
|
|
6 |
|
|
1,757 |
|
|
1,746 |
|
|
2,022 |
|
|
1,821 |
|
|
2,220 |
|
| Restructuring |
(6) |
|
|
(3) |
|
|
|
|
|
(12) |
|
|
(85) |
|
|
(44) |
|
|
(13) |
|
|
(12) |
|
| Volatility and other items |
(24) |
|
|
(41) |
|
|
41 |
|
|
(117) |
|
|
114 |
|
|
(120) |
|
|
(198) |
|
|
52 |
|
| Statutory profit before tax |
1,823 |
|
|
1,696 |
|
|
7 |
|
|
1,628 |
|
|
1,775 |
|
|
1,858 |
|
|
1,610 |
|
|
2,260 |
|
| Tax expense |
(490) |
|
|
(467) |
|
|
(5) |
|
|
(413) |
|
|
(541) |
|
|
(438) |
|
|
(387) |
|
|
(619) |
|
| Statutory profit after tax |
1,333 |
|
|
1,229 |
|
|
8 |
|
|
1,215 |
|
|
1,234 |
|
|
1,420 |
|
|
1,223 |
|
|
1,641 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings per share |
1.9p |
|
|
1.7p |
|
|
0.2p |
|
|
1.7p |
|
|
1.7p |
|
|
2.0p |
|
|
1.6p |
|
|
2.3p |
|
| Banking net interest marginA |
2.95% |
|
|
2.93% |
|
|
2bp |
|
|
2.95% |
|
|
2.98% |
|
|
3.08% |
|
|
3.14% |
|
|
3.22% |
|
| Average interest-earning banking
assetsA |
£451.1bn |
|
|
£449.4bn |
|
|
|
|
|
£449.1bn |
|
|
£452.8bn |
|
|
£453.0bn |
|
|
£453.4bn |
|
|
£454.2bn |
|
| Cost:income ratioA |
53.4% |
|
|
57.0% |
|
|
(3.6)pp |
|
|
57.2% |
|
|
71.5% |
|
|
51.1% |
|
|
50.6% |
|
|
47.1% |
|
| Asset quality ratioA |
0.15% |
|
|
0.05% |
|
|
10bp |
|
|
0.06% |
|
|
(0.47)% |
|
|
0.17% |
|
|
0.36% |
|
|
0.22% |
|
| Return on tangible equityA |
15.2% |
|
|
13.6% |
|
|
1.6pp |
|
|
13.3% |
|
|
13.9% |
|
|
16.9% |
|
|
13.6% |
|
|
19.1% |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
At
30 Sep
2024 |
|
|
At
30 Jun
2024 |
|
|
Change
% |
|
|
At
31 Mar 2024 |
|
|
At
31 Dec
2023 |
|
|
At
30 Sep 2023 |
|
|
At
30 Jun 2023 |
|
|
At
31 Mar 2023 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Underlying loans and advances to
customersA,1 |
£457.0bn |
|
|
£452.4bn |
|
|
1 |
|
|
£448.5bn |
|
|
£449.7bn |
|
|
£452.1bn |
|
|
£450.7bn |
|
|
£452.3bn |
|
| Customer deposits |
£475.7bn |
|
|
£474.7bn |
|
|
|
|
|
£469.2bn |
|
|
£471.4bn |
|
|
£470.3bn |
|
|
£469.8bn |
|
|
£473.1bn |
|
| Loan to deposit ratioA |
96% |
|
|
95% |
|
|
1pp |
|
|
96% |
|
|
95% |
|
|
96% |
|
|
96% |
|
|
96% |
|
| CET1 ratio |
14.3% |
|
|
14.1% |
|
|
0.2pp |
|
|
13.9% |
|
|
14.6% |
|
|
14.6% |
|
|
14.2% |
|
|
14.1% |
|
| Pro forma CET1 ratioA,2 |
14.3% |
|
|
14.1% |
|
|
0.2pp |
|
|
13.9% |
|
|
13.7% |
|
|
14.6% |
|
|
14.2% |
|
|
14.1% |
|
| Total capital ratio |
19.0% |
|
|
18.7% |
|
|
0.3pp |
|
|
19.0% |
|
|
19.8% |
|
|
19.9% |
|
|
19.7% |
|
|
19.9% |
|
| MREL ratio |
32.2% |
|
|
31.7% |
|
|
0.5pp |
|
|
32.0% |
|
|
31.9% |
|
|
32.6% |
|
|
31.0% |
|
|
32.1% |
|
| UK leverage ratio |
5.5% |
|
|
5.4% |
|
|
0.1pp |
|
|
5.6% |
|
|
5.8% |
|
|
5.7% |
|
|
5.7% |
|
|
5.6% |
|
| Risk-weighted assets |
£223.3bn |
|
|
£222.0bn |
|
|
1 |
|
|
£222.8bn |
|
|
£219.1bn |
|
|
£217.7bn |
|
|
£215.3bn |
|
|
£210.9bn |
|
| Wholesale funding |
£93.3bn |
|
|
£97.6bn |
|
|
(4) |
|
|
£99.9bn |
|
|
£98.7bn |
|
|
£108.5bn |
|
|
£103.5bn |
|
|
£101.1bn |
|
| Liquidity coverage ratio3 |
144% |
|
|
144% |
|
|
|
|
|
143% |
|
|
142% |
|
|
142% |
|
|
142% |
|
|
143% |
|
| Net stable funding ratio4 |
129% |
|
|
130% |
|
|
(1)pp |
|
|
130% |
|
|
130% |
|
|
130% |
|
|
130% |
|
|
129% |
|
| Tangible net assets per shareA |
52.5p |
|
|
49.6p |
|
|
2.9p |
|
|
51.2p |
|
|
50.8p |
|
|
47.2p |
|
|
45.7p |
|
|
49.6p |
|
1 The increase
between 31 March 2024 and 30 June 2024 is net of the impact of the
securitisation of £0.9 billion of legacy Retail mortgages in May
2024. The reduction between 30 September 2023 and 31 December 2023
is net of the impact of the securitisation of £2.7 billion of UK
Retail unsecured loans.
2 31
December 2023 reflects both the full impact of the share buyback in
respect of 2023 and the ordinary dividend received from the
Insurance business in February 2024, but excludes the impact of the
phased unwind of IFRS 9 relief on 1 January 2024.
3 The liquidity
coverage ratio is calculated as a simple average of month-end
observations over the previous 12 months.
4 The net stable
funding ratio is calculated as a simple average of month-end
observations over the previous four quarter-ends.
BALANCE SHEET ANALYSIS
| |
At 30 Sep 2024
£bn |
|
|
At 30 Jun
2024
£bn |
|
|
Change
% |
|
At 31 Dec
2023
£bn |
|
|
Change
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| UK mortgages1,2 |
310.1 |
|
|
306.9 |
|
|
1 |
|
306.2 |
|
|
1 |
| Credit cards |
15.7 |
|
|
15.6 |
|
|
1 |
|
15.1 |
|
|
4 |
| UK Retail unsecured loans |
8.8 |
|
|
8.2 |
|
|
7 |
|
6.9 |
|
|
28 |
| UK Motor Finance3 |
15.6 |
|
|
16.2 |
|
|
(4) |
|
15.3 |
|
|
2 |
| Overdrafts |
1.1 |
|
|
1.0 |
|
|
10 |
|
1.1 |
|
|
|
| Retail other1,4 |
17.3 |
|
|
17.2 |
|
|
1 |
|
16.6 |
|
|
4 |
| Small and Medium Businesses |
30.7 |
|
|
31.5 |
|
|
(3) |
|
33.0 |
|
|
(7) |
| Corporate and Institutional Banking |
57.2 |
|
|
56.6 |
|
|
1 |
|
55.6 |
|
|
3 |
| Central Items5 |
0.5 |
|
|
(0.8) |
|
|
|
|
(0.1) |
|
|
|
| Underlying loans and advances to
customersA |
457.0 |
|
|
452.4 |
|
|
1 |
|
449.7 |
|
|
2 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Retail current accounts |
100.6 |
|
|
101.7 |
|
|
(1) |
|
102.7 |
|
|
(2) |
| Retail savings accounts6 |
204.3 |
|
|
201.5 |
|
|
1 |
|
194.8 |
|
|
5 |
| Wealth |
10.1 |
|
|
10.1 |
|
|
|
|
10.9 |
|
|
(7) |
| Commercial Banking |
160.7 |
|
|
161.2 |
|
|
|
|
162.8 |
|
|
(1) |
| Central Items |
- |
|
|
0.2 |
|
|
|
|
0.2 |
|
|
|
| Customer deposits |
475.7 |
|
|
474.7 |
|
|
|
|
471.4 |
|
|
1 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Total assets |
900.8 |
|
|
892.9 |
|
|
1 |
|
881.5 |
|
|
2 |
| Total liabilities |
854.4 |
|
|
847.8 |
|
|
1 |
|
834.1 |
|
|
2 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Ordinary shareholders' equity |
40.3 |
|
|
39.0 |
|
|
3 |
|
40.3 |
|
|
|
| Other equity instruments |
5.9 |
|
|
5.9 |
|
|
|
|
6.9 |
|
|
(14) |
| Non-controlling interests |
0.2 |
|
|
0.2 |
|
|
|
|
0.2 |
|
|
|
| Total equity |
46.4 |
|
|
45.1 |
|
|
3 |
|
47.4 |
|
|
(2) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Ordinary shares in issue, excluding own
shares |
61,419m |
|
|
62,458m |
|
|
(2) |
|
63,508m |
|
|
(3) |
1 From the first
quarter of 2024, open mortgage book and closed mortgage book loans
and advances, previously presented separately, are reported
together as UK mortgages; Wealth loans and advances, previously
reported separately, are included within Retail other. The
31 December 2023 comparative is presented on a consistent
basis.
2 The increase
between 31 December 2023 and 30 June 2024 is net of the impact of
the securitisation of £0.9 billion of legacy Retail mortgages in
May 2024.
3 UK Motor Finance
balances on an underlying basisA exclude a finance
lease gross up. See page 14.
4 Within loans and
advances, Retail other includes the European and Wealth
businesses.
5 Central Items
includes central fair value hedge accounting adjustments.
6 From the first
quarter of 2024, Retail relationship savings accounts and Retail
tactical savings accounts, previously reported separately, are
reported together as Retail savings accounts. The 31 December 2023
comparative is presented on a consistent basis.
GROUP RESULTS - STATUTORY
BASIS
The results below are prepared in
accordance with the recognition and measurement principles of
International Financial Reporting Standards (IFRS). The underlying
results are shown on page 2.
| Summary income statement |
Nine months
ended
30 Sep
2024
£m |
|
|
Nine months ended
30 Sep
2023
£m |
|
|
Change
% |
| |
|
|
|
|
|
|
|
| Net interest income |
9,125 |
|
|
10,111 |
|
|
(10) |
| Other income |
17,771 |
|
|
9,958 |
|
|
78 |
| Total income |
26,896 |
|
|
20,069 |
|
|
34 |
| Net finance expense in respect of insurance and
investment contracts |
(13,419) |
|
|
(6,167) |
|
|
|
| Total income, after net finance expense in
respect of insurance and investment contracts |
13,477 |
|
|
13,902 |
|
|
(3) |
| Operating expenses |
(8,058) |
|
|
(7,331) |
|
|
(10) |
| Impairment charge |
(272) |
|
|
(843) |
|
|
68 |
| Profit before tax |
5,147 |
|
|
5,728 |
|
|
(10) |
| Tax expense |
(1,370) |
|
|
(1,444) |
|
|
5 |
| Profit for the period |
3,777 |
|
|
4,284 |
|
|
(12) |
| |
|
|
|
|
|
|
|
| Profit attributable to ordinary
shareholders |
3,355 |
|
|
3,840 |
|
|
(13) |
| Ordinary shares in issue (weighted-average -
basic) |
62,948m |
|
|
65,446m |
|
|
(4) |
| Basic earnings per share |
5.3p |
|
|
5.9p |
|
|
(0.6)p |
| Summary balance sheet |
At 30 Sep
2024
£m |
|
|
At 30 Jun
2024
£m |
|
|
Change
% |
|
At 31 Dec
2023
£m |
|
|
Change
% |
| Assets |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash and balances at central banks |
59,055 |
|
|
66,808 |
|
|
(12) |
|
78,110 |
|
|
(24) |
| Financial assets at fair value through profit
or loss |
214,056 |
|
|
209,139 |
|
|
2 |
|
203,318 |
|
|
5 |
| Derivative financial instruments |
19,975 |
|
|
18,983 |
|
|
5 |
|
22,356 |
|
|
(11) |
| Financial assets at amortised cost |
529,907 |
|
|
525,698 |
|
|
1 |
|
514,635 |
|
|
3 |
| Financial assets at fair value through other
comprehensive income |
32,706 |
|
|
27,847 |
|
|
17 |
|
27,592 |
|
|
19 |
| Other assets |
45,143 |
|
|
44,452 |
|
|
2 |
|
35,442 |
|
|
27 |
| Total assets |
900,842 |
|
|
892,927 |
|
|
1 |
|
881,453 |
|
|
2 |
| Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
| Deposits from banks |
5,876 |
|
|
5,584 |
|
|
5 |
|
6,153 |
|
|
(5) |
| Customer deposits |
475,737 |
|
|
474,693 |
|
|
|
|
471,396 |
|
|
1 |
| Repurchase agreements at amortised cost |
41,382 |
|
|
37,914 |
|
|
9 |
|
37,703 |
|
|
10 |
| Financial liabilities at fair value through
profit or loss |
28,657 |
|
|
27,056 |
|
|
6 |
|
24,914 |
|
|
15 |
| Derivative financial instruments |
16,772 |
|
|
16,647 |
|
|
1 |
|
20,149 |
|
|
(17) |
| Debt securities in issue at amortised cost |
70,805 |
|
|
74,760 |
|
|
(5) |
|
75,592 |
|
|
(6) |
| Liabilities arising from insurance and
participating investment contracts |
120,961 |
|
|
125,007 |
|
|
(3) |
|
120,123 |
|
|
1 |
| Liabilities arising from non-participating
investment contracts |
49,725 |
|
|
48,280 |
|
|
3 |
|
44,978 |
|
|
11 |
| Other liabilities |
33,646 |
|
|
27,421 |
|
|
23 |
|
22,827 |
|
|
47 |
| Subordinated liabilities |
10,860 |
|
|
10,448 |
|
|
4 |
|
10,253 |
|
|
6 |
| Total liabilities |
854,421 |
|
|
847,810 |
|
|
1 |
|
834,088 |
|
|
2 |
| Total equity |
46,421 |
|
|
45,117 |
|
|
3 |
|
47,365 |
|
|
(2) |
| Total equity and liabilities |
900,842 |
|
|
892,927 |
|
|
1 |
|
881,453 |
|
|
2 |
REVIEW OF
PERFORMANCEA
Income statement (underlying
basis)A
The Group's statutory profit before
tax for the first nine months of 2024 was £5,147 million, 10 per
cent lower than the same period in 2023. This was driven by lower
net interest income and higher operating expenses, partly offset by
a lower impairment charge. Statutory profit before tax of
£1,823 million for the third quarter was up 7 per cent versus
the second quarter of 2024.
The Group's underlying profit was
£5,350 million in the first nine months of 2024, a reduction
of 12 per cent compared to £6,063 million in the prior year.
Underlying profit of £1,853 million in the third quarter was up 6
per cent compared to the second quarter of 2024, with higher net
income partly offset by a higher impairment charge.
Net income of £12,739 million was
down 7 per cent on the first nine months of 2023, driven by lower
underlying net interest income and an increased charge for
operating lease depreciation. This was partly offset by higher
underlying other income. Net income in the third quarter of 2024 is
up 5 per cent versus the second quarter, with growth across
underlying net interest income and underlying other income.
Underlying net interest income of
£9,569 million was down 8 per cent on the first nine months of
2023, driven by a lower banking net interest margin of
2.94 per cent (nine months to 30 September 2023:
3.15 per cent), in line with expectations. The lower margin
reflected anticipated headwinds due to deposit churn and asset
margin compression, particularly in the mortgage book as it
refinances in a lower margin environment. These factors were
partially offset by benefits from higher structural hedge earnings
as balances are reinvested in the higher rate environment. Average
interest-earning banking assets in the first nine months of 2024 at
£449.9 billion were slightly lower (1 per cent) compared to
the first nine months of 2023. This was due to a modest reduction
in the average mortgage book balance and a reduction in average
Commercial Banking lending, which included the effects of continued
repayments of government-backed lending in Small and Medium
Businesses and lower lending to banks. Underlying net interest
income in the first nine months included non-banking interest
expense of £347 million (nine months to 30 September
2023: £231 million), increasing as a result of higher funding
costs and growth in the Group's non-banking businesses.
Underlying net interest income of
£3,231 million in the third quarter of 2024 was higher than in the
second quarter (three months to 30 June 2024: £3,154 million).
Growth in structural hedge earnings more than offset the impact
from the continuation of headwinds in respect of deposit churn and
asset margin compression, resulting in a slight increase in banking
net interest margin to 2.95 per cent in the third quarter (three
months to 30 June 2024: 2.93 per cent). Average interest earning
banking assets were £451.1 billion, up on the second quarter with
growth in mortgage lending. These developments support the delivery
of full year 2024 guidance with the Group still expecting the
banking net interest margin for 2024 to be greater than
290 basis points and average interest-earning banking assets
to be greater than £450 billion.
The Group manages the risk to
earnings and capital from movements in interest rates by hedging
the net liabilities which are stable or less sensitive to movements
in rates. At the end of the third quarter, the notional balance of
the sterling structural hedge was maintained at £242 billion
(31 December 2023: £247 billion, 30 June 2024: £242 billion)
with a weighted average duration of approximately three-and-a-half
years (31 December 2023: approximately three-and-a-half
years). This is in line with the balance at the end of the second
quarter, given increasing stability in deposit flows. The Group
generated £3.0 billion of total income from sterling structural
hedge balances in the first nine months of 2024, representing
material growth over the prior year (nine months to 30 September
2023: £2.5 billion). The Group expects sterling
structural hedge earnings in 2024 to be over £0.7 billion higher
than in 2023 (full year 2023: £3.4 billion).
Underlying other income in the first
nine months of 2024 of £4,164 million grew by 9 per cent compared
to £3,837 million in the first nine months of 2023. Retail was
up 12 per cent versus the first nine months of 2023, primarily due
to UK Motor Finance, reflecting growth following the acquisition of
Tusker in the first quarter of 2023, increased fleet size and
higher average rental value. Within Commercial Banking, 9
per cent growth was driven by strong markets performance given
strategic investment and higher levels of client activity.
Insurance, Pensions and Investments underlying other income grew by
7 per cent compared to the first nine months of 2023, driven
by market share gains within general insurance alongside favourable
market returns, partly offset by the effects of the agreed sale
(subject to regulatory approval) of the in-force bulk annuity
portfolio (with associated income and costs for the period
recognised within volatility and other items). Excluding the
in-force bulk annuity portfolio, Insurance, Pensions and
Investments was up 12 per cent. In Equity Investments and Central
Items, underlying other income in the year to date was adversely
impacted by the timing of exits in the Group's equity investment
businesses. Compared to the second quarter of 2024, underlying
other income was 3 per cent higher in the third quarter,
primarily driven by growth in Retail and the Group's equity
investment businesses.
REVIEW OF PERFORMANCE (continued)
The Group delivered organic growth in
assets under administration (AuA) in Insurance, Pensions and
Investments and Wealth (reported within Retail), with combined £3.9
billion net new money in open book AuA over the first nine months
of 2024. In total, open book AuA stand at c.£197 billion at 30
September 2024.
Operating lease depreciation of £994
million increased compared to the prior year (nine months to 30
September 2023: £585 million), largely as a result of
fleet growth, the depreciation of higher value vehicles and
declines in used electric car prices. This includes the c.£100
million additional charge taken in the second quarter to reflect
future expected residual values. The charge in the third quarter
was £315 million, consistent with expectations, given used car
prices have performed in line with assumptions since the second
quarter.
Total costs, including remediation,
of £7,116 million were 5 per cent higher than the prior year, with
operating costs of £6,992 million up 5 per cent. Operating
costs include accelerated severance charges and c.£0.1 billion
relating to the sector-wide change in the charging approach for the
Bank of England Levy taken in the first quarter (excluding the
Levy, operating costs were up 4 per cent). The Group maintains its
cost discipline with cost efficiencies helping to offset higher
ongoing strategic investment, planned accelerated severance charges
and inflationary pressure. The Group's cost:income ratio for the
first nine months of 2024 was 55.9 per cent compared to
49.5 per cent in the prior year, and 53.4 per cent in the
third quarter. Operating costs in 2024 are still expected to be
c.£9.4 billion, including c.£0.1 billion for the new Bank of
England Levy.
The Group recognised remediation
costs of £124 million in the first nine months (nine months to 30
September 2023: £134 million), largely in relation to
pre-existing programmes, with no further charges in respect of the
FCA review of historical motor finance commission arrangements. The
FCA confirmed in September 2024 its intention to set out next steps
in its review in May 2025, including its assessment of the outcome
of the Judicial Review and Court of Appeal decisions involving
other market participants; the Group will assess the impact, if
any, of these decisions.
Asset quality remains strong with
resilient credit performance in the quarter. Underlying impairment
in the year to date was a charge of £273 million (nine months to 30
September 2023: £849 million), resulting in an asset quality
ratio of 9 basis points. The charge reflects a £324 million
multiple economic scenarios (MES) credit (nine months to
30 September 2023: £69 million credit) from an improved
economic outlook in the first half of the year, notably house price
growth and through changes to the severe downside scenario
methodology. The charge in the third quarter of £172 million
includes a one-off debt sale write back of £77 million in Retail.
No MES impact has been recognised for changes to the Group's
macroeconomic assumptions in the third quarter, of which only the
outlook for house price growth shows any meaningful revision.
The nine months to 30 September
pre-updated MES charge of £597 million (nine months to 30 September
2023: £918 million) is equivalent to an asset quality ratio of
18 basis points. Compared to the prior year, the pre-updated MES
charge in the nine months to 30 September 2024 was lower,
benefitting from strong portfolio performance, the debt sale in the
third quarter and a one-off release in Commercial Banking from loss
rates used in the model in the first half. The Group continues to
expect the asset quality ratio to be less than 20 basis points
in 2024.
Restructuring costs for the first
nine months of 2024 were £21 million (nine months to 30 September
2023: £69 million) and include costs relating to the
integration of Embark and Tusker. Volatility and other items were a
net loss of £182 million for the year to date (nine months to
30 September 2023: net loss of £266 million). This included
£61 million for the amortisation of purchased intangibles (nine
months to 30 September 2023: £53 million) and £79 million
relating to fair value unwind (nine months to 30 September 2023:
£68 million). Alongside, negative market volatility of £41
million (nine months to 30 September 2023: £145 million) was
substantially driven by longer-term rate rises in the period,
causing negative insurance volatility, partly offset by positive
impacts from banking volatility. There was positive market
volatility of £24 million in the third quarter, in part driven by
rate reversals.
The return on tangible equity for the
first nine months of 2024 was 14.0 per cent (nine months to 30
September 2023: 16.6 per cent), with 15.2 per cent in the
third quarter. The Group continues to expect the return on tangible
equity for 2024 to be c.13 per cent.
Tangible net assets per share at 30
September 2024 was 52.5 pence, up 1.7 pence in the first nine
months (31 December 2023: 50.8 pence). The increase
resulted from attributable profit and cash flow hedge reserve
movements. This was partly offset by capital distributions, foreign
exchange impact on the redemption of a US Dollar denominated AT1
capital instrument and a lower pension surplus from negative market
impacts. Tangible net assets per share was up 2.9 pence in the
third quarter, benefitting from attributable profit, cash flow
hedge reserve movements and the unwind of an accrual for the
ordinary share buyback in the second quarter, partly offset by
capital distributions. The Group continued the share buyback
announced in February 2024, with c.2.8 billion shares repurchased
as at 30 September 2024.
REVIEW OF PERFORMANCE (continued)
Balance sheet
Underlying loans and advances to
customers increased by £7.3 billion in the year to date to £457.0
billion. This included £3.9 billion growth in UK mortgages (£4.8
billion growth excluding the impact of the securitisation of
£0.9 billion of legacy mortgages in the second quarter),
£1.9 billion growth in UK Retail unsecured loans due to
organic balance growth and lower repayments following a
securitisation in the fourth quarter of 2023, alongside a £0.6
billion increase in credit card balances and growth in other Retail
lending (principally in the European retail business). In
Commercial Banking, Small and Medium Business lending decreased by
£2.3 billion, including repayments of £1.2 billion of
government-backed lending, partly offset by a £1.6 billion
increase in Corporate and Institutional Banking balances, including
infrastructure lending. Growth of £4.6 billion in underlying
loans and advances to customers in the third quarter was driven by
balance increases across Retail, including £3.2 billion in UK
mortgages and £0.6 billion in Corporate and Institutional
Banking. This supports a positive trajectory for average
interest-earning banking assets in the fourth quarter of 2024, in
line with guidance for the full year.
The underlying expected credit loss
(ECL) allowance reduced to £3.8 billion (31 December 2023: £4.3
billion) in the period, reflecting releases from improvements to
the Group's base case scenario. The uplift from the base case to
probability-weighted ECL remains at £0.5 billion (31 December
2023: £0.7 billion). The ECL was stable in the third
quarter.
Customer deposits of
£475.7 billion increased by £4.3 billion in the year to date
including £1.0 billion in the third quarter. Retail deposits
were up £6.6 billion in the first nine months with a combined
increase of £8.7 billion across Retail savings and Wealth,
driven by inflows to limited withdrawal and fixed term deposits,
partly offset by a £2.1 billion reduction in current account
balances (significantly lower than the prior year, as expected).
Retail current account balances reduced by £1.1 billion in the
third quarter, lower than the £1.4 billion reduction in the second
quarter and slightly better than expectations. Modestly lower
levels of deposit churn were observed within savings and between
savings and current accounts, versus the second quarter as
expected. Commercial Banking deposits reduced by £2.1 billion
in the first nine months, but were broadly stable in the third
quarter, reflecting an expected significant outflow, managing for
value and foreign exchange impacts, alongside growth in target
sectors.
The Group has a large, high quality
liquid asset portfolio held mainly in cash and government bonds,
with all assets hedged for interest rate risk. The Group's liquid
assets continue to significantly exceed regulatory requirements and
internal risk appetite, with a strong, stable liquidity coverage
ratio of 144 per cent (31 December 2023: 142 per cent) and a strong
net stable funding ratio of 129 per cent (31 December 2023:
130 per cent). The loan to deposit ratio of 96 per cent,
broadly stable compared to 31 December 2023 and 30 June 2024,
continues to reflect a robust funding and liquidity position.
Capital
The Group's CET1 capital ratio at 30
September 2024 was 14.3 per cent (31 December 2023: 13.7 per cent
pro forma). Capital generation after regulatory headwinds during
the first nine months of the year was 132 basis points,
including 45 basis points in the third quarter. This reflects
robust banking build and the £200 million interim half-year
dividend received from the Insurance business, partially offset by
risk-weighted asset increases and other movements, including 15
basis points relating to the foreign exchange translation loss
following the US Dollar AT1 capital instrument redemption in June.
Regulatory headwinds of 9 basis points in the year to date
reflect the reduction in the transitional factor applied to
IFRS 9 dynamic relief on 1 January 2024 and an adjustment for
part of the impact of the Retail secured CRD IV models. The
impact of the interim ordinary dividend paid and the foreseeable
ordinary dividend accrual equated to 71 basis points. The Group
continues to expect capital generation in 2024 to be c.175 basis
points.
As mentioned in the Group's 2023 Full
Year Results, there will be no further deficit contributions made
to the Group's main defined benefit pension schemes, fixed or
variable, for this triennial period (to 31 December 2025).
Risk-weighted assets increased by
£4.2 billion in the year to date to £223.3 billion at 30 September
2024 (31 December 2023: £219.1 billion) reflecting the impact
of lending growth, Retail secured CRD IV model updates and other
movements, partly offset by optimisation including capital
efficient securitisation activity. In the third quarter,
risk-weighted assets increased by £1.3 billion primarily driven by
lending growth and CRD IV model updates, again partly offset by
optimisation activity. In the context of the Retail secured
CRD IV models, it is estimated that a £5 billion
risk-weighted asset increase will be required over 2024 to 2026,
inclusive of the additional £0.8 billion risk-weighted assets
recognised in the first nine months of 2024. The total increase
will be subject to final model outcomes. The Group's risk-weighted
assets guidance for 2024 remains unchanged at between
£220 billion and £225 billion.
REVIEW OF PERFORMANCE (continued)
The PRA recently published its second
policy statement on implementing Basel 3.1 in the UK. The final
regulations, which will introduce substantial revisions to the
approaches for calculating risk-weighted assets, will apply from
1 January 2026. The Group now expects the impact of Basel
3.1 implementation to be modestly positive.
The PRA provided an update to the
Group's Pillar 2A CET1 capital requirement during the third
quarter, with the requirement remaining at around 1.5 per cent of
risk-weighted assets. The Group's total regulatory CET1 capital
requirement remains at around 12 per cent. The Board's view of
the ongoing level of CET1 capital required to grow the business,
meet current and future regulatory requirements and cover economic
and business uncertainties is c.13.0 per cent. This includes a
management buffer of around 1 per cent. In order to manage
risks and distributions in an orderly way, the Board expects to pay
down to the previous target of c.13.5 per cent by the end of
2024, before progressing towards paying down to the current capital
target of c.13.0 per cent by the end of 2026.
ADDITIONAL INFORMATION
Capital generation
| Pro forma CET1 ratio as at 31 December
20231 |
13.7% |
|
| Banking build (bps)2 |
166 |
|
| Insurance dividend (bps) |
10 |
|
| Risk-weighted assets (bps) |
(23) |
|
| Other movements (bps)3 |
(12) |
|
| Capital generation (bps) |
141 |
|
| Retail secured CRD IV model updates and phased
unwind of IFRS 9 transitional relief (bps) |
(9) |
|
| Capital generation (post CRD IV and
transitional headwinds) (bps) |
132 |
|
| Ordinary dividend (bps) |
(71) |
|
| CET1 ratio as at 30 September 2024 |
14.3% |
|
1 31 December 2023
reflects both the full impact of the share buyback in respect of
2023 and the ordinary dividend received from the Insurance business
in February 2024, but excludes the impact of the phased unwind of
IFRS 9 relief on 1 January 2024.
2 Includes
impairment charge.
3 Includes
share-based payments, market volatility and FX loss on USD AT1
redemption.
Underlying impairmentA
| |
Nine months ended
30 Sep 2024
£m |
|
|
Nine months ended
30 Sep 2023
£m |
|
|
Change
% |
|
Three months ended
30 Sep 2024
£m |
|
|
Three months ended
30 Sep
2023
£m |
|
|
Change
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Charges (credits) pre-updated
MES1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Retail |
592 |
|
|
787 |
|
|
25 |
|
129 |
|
|
236 |
|
|
45 |
| Commercial Banking |
16 |
|
|
139 |
|
|
88 |
|
44 |
|
|
31 |
|
|
(42) |
| Other |
(11) |
|
|
(8) |
|
|
38 |
|
(1) |
|
|
(6) |
|
|
(83) |
| |
597 |
|
|
918 |
|
|
35 |
|
172 |
|
|
261 |
|
|
34 |
| Updated economic outlook |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Retail |
(269) |
|
|
(30) |
|
|
|
|
- |
|
|
(71) |
|
|
|
| Commercial Banking |
(55) |
|
|
(39) |
|
|
41 |
|
- |
|
|
(3) |
|
|
|
| |
(324) |
|
|
(69) |
|
|
|
|
- |
|
|
(74) |
|
|
|
| Underlying impairment
chargeA |
273 |
|
|
849 |
|
|
68 |
|
172 |
|
|
187 |
|
|
8 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Asset quality ratioA |
0.09% |
|
|
0.25% |
|
|
(16)bp |
|
0.15% |
|
|
0.17% |
|
|
(2)bp |
| Total underlying expected credit loss allowance
(at end of period)A |
3,838 |
|
|
5,389 |
|
|
(29) |
|
|
|
|
|
|
|
|
1 Impairment charges
excluding the impact from updated economic outlook taken each
quarter.
ADDITIONAL INFORMATION (continued)
Loans and advances to customers and expected credit loss
allowance (underlying basis)A
| At 30 September 2024 |
Stage 1
£m |
|
|
Stage 2
£m |
|
|
Stage 3
£m |
|
|
Total
£m |
|
|
Stage 2
as % of
total |
|
|
Stage 3
as % of
total |
|
| Loans and advances to customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| UK mortgages1 |
272,969 |
|
|
30,946 |
|
|
7,311 |
|
|
311,226 |
|
|
9.9 |
|
|
2.3 |
|
| Credit cards |
13,429 |
|
|
2,620 |
|
|
262 |
|
|
16,311 |
|
|
16.1 |
|
|
1.6 |
|
| UK unsecured loans and overdrafts |
8,839 |
|
|
1,374 |
|
|
173 |
|
|
10,386 |
|
|
13.2 |
|
|
1.7 |
|
| UK Motor Finance2 |
13,484 |
|
|
2,314 |
|
|
119 |
|
|
15,917 |
|
|
14.5 |
|
|
0.7 |
|
| Other |
16,702 |
|
|
513 |
|
|
150 |
|
|
17,365 |
|
|
3.0 |
|
|
0.9 |
|
| Retail |
325,423 |
|
|
37,767 |
|
|
8,015 |
|
|
371,205 |
|
|
10.2 |
|
|
2.2 |
|
| Small and Medium Businesses |
26,393 |
|
|
3,430 |
|
|
1,303 |
|
|
31,126 |
|
|
11.0 |
|
|
4.2 |
|
| Corporate and Institutional Banking |
54,599 |
|
|
2,398 |
|
|
645 |
|
|
57,642 |
|
|
4.2 |
|
|
1.1 |
|
| Commercial Banking |
80,992 |
|
|
5,828 |
|
|
1,948 |
|
|
88,768 |
|
|
6.6 |
|
|
2.2 |
|
| Equity Investments and Central
Items3 |
532 |
|
|
- |
|
|
- |
|
|
532 |
|
|
- |
|
|
- |
|
| Total gross lending |
406,947 |
|
|
43,595 |
|
|
9,963 |
|
|
460,505 |
|
|
9.5 |
|
|
2.2 |
|
| ECL allowance on drawn balances |
(773) |
|
|
(1,274) |
|
|
(1,488) |
|
|
(3,535) |
|
|
|
|
|
|
|
| Net balance sheet carrying value |
406,174 |
|
|
42,321 |
|
|
8,475 |
|
|
456,970 |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Customer related ECL allowance
(drawn and undrawn) |
|
|
|
|
|
|
|
|
|
|
| UK mortgages1 |
87 |
|
|
366 |
|
|
720 |
|
|
1,173 |
|
|
|
|
|
|
|
| Credit cards |
207 |
|
|
351 |
|
|
129 |
|
|
687 |
|
|
|
|
|
|
|
| UK unsecured loans and overdrafts |
170 |
|
|
242 |
|
|
111 |
|
|
523 |
|
|
|
|
|
|
|
| UK Motor Finance4 |
169 |
|
|
105 |
|
|
68 |
|
|
342 |
|
|
|
|
|
|
|
| Other |
15 |
|
|
18 |
|
|
42 |
|
|
75 |
|
|
|
|
|
|
|
| Retail |
648 |
|
|
1,082 |
|
|
1,070 |
|
|
2,800 |
|
|
|
|
|
|
|
| Small and Medium Businesses |
138 |
|
|
190 |
|
|
160 |
|
|
488 |
|
|
|
|
|
|
|
| Corporate and Institutional Banking |
137 |
|
|
128 |
|
|
260 |
|
|
525 |
|
|
|
|
|
|
|
| Commercial Banking |
275 |
|
|
318 |
|
|
420 |
|
|
1,013 |
|
|
|
|
|
|
|
| Equity Investments and Central Items |
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
| Total |
923 |
|
|
1,400 |
|
|
1,490 |
|
|
3,813 |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Customer related ECL allowance
(drawn and undrawn) as a percentage of loans and advances to
customers5 |
|
| |
Stage 1
% |
|
|
Stage 2
% |
|
|
Stage 3
% |
|
|
Total
% |
|
|
|
|
|
|
|
| UK mortgages |
- |
|
|
1.2 |
|
|
9.8 |
|
|
0.4 |
|
|
|
|
|
|
|
| Credit cards |
1.5 |
|
|
13.4 |
|
|
49.2 |
|
|
4.2 |
|
|
|
|
|
|
|
| UK unsecured loans and overdrafts |
1.9 |
|
|
17.6 |
|
|
64.2 |
|
|
5.0 |
|
|
|
|
|
|
|
| UK Motor Finance |
1.3 |
|
|
4.5 |
|
|
57.1 |
|
|
2.1 |
|
|
|
|
|
|
|
| Other |
0.1 |
|
|
3.5 |
|
|
28.0 |
|
|
0.4 |
|
|
|
|
|
|
|
| Retail |
0.2 |
|
|
2.9 |
|
|
13.3 |
|
|
0.8 |
|
|
|
|
|
|
|
| Small and Medium Businesses |
0.5 |
|
|
5.5 |
|
|
16.5 |
|
|
1.6 |
|
|
|
|
|
|
|
| Corporate and Institutional Banking |
0.3 |
|
|
5.3 |
|
|
40.4 |
|
|
0.9 |
|
|
|
|
|
|
|
| Commercial Banking |
0.3 |
|
|
5.5 |
|
|
26.1 |
|
|
1.1 |
|
|
|
|
|
|
|
| Equity Investments and Central Items |
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
| Total |
0.2 |
|
|
3.2 |
|
|
15.5 |
|
|
0.8 |
|
|
|
|
|
|
|
1 UK
mortgages balances on an underlying basisA exclude
the impact of the HBOS acquisition-related adjustments.
2 UK Motor Finance
balances on an underlying basisA exclude a finance
lease gross up. See page 14.
3 Contains central
fair value hedge accounting adjustments.
4 UK Motor Finance
includes £170 million relating to provisions against residual
values of vehicles subject to finance leases.
5 Stage 3 and Total
exclude loans in recoveries in Small and Medium Businesses of £336
million and Corporate and Institutional Banking of £1 million.
ADDITIONAL INFORMATION (continued)
Total ECL allowance by scenario
(underlying basis)A
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 Consumer Price Index (CPI)
inflation and UK Bank Rate paths. No MES impact has been recognised
in the ECL amounts below for changes to the Group's macroeconomic
assumptions in the third quarter, of which only the outlook for
house price growth shows any meaningful revision.
| Underlying basisA |
Probability-
weighted
£m |
|
|
Upside
£m |
|
|
Base case
£m |
|
|
Downside
£m |
|
|
Severe
downside
£m |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At 30 September 2024 |
|
3,838 |
|
|
2,806 |
|
|
3,380 |
|
|
4,320 |
|
|
6,865 |
|
| At 30 June 2024 |
|
3,847 |
|
|
2,804 |
|
|
3,380 |
|
|
4,331 |
|
|
6,926 |
|
| At 31 December 2023 |
|
4,337 |
|
|
2,925 |
|
|
3,666 |
|
|
4,714 |
|
|
9,455 |
|
Base case and MES economic assumptions
The Group's base case scenario is for
a slow expansion in GDP and a modest rise in the unemployment rate
alongside small gains in residential and commercial property
prices. Following a reduction in inflationary pressures, cuts in UK
Bank Rate are expected to continue during 2024 and 2025. Risks
around this base case economic view lie in both directions and are
largely captured by the generation of alternative economic
scenarios.
The Group has taken into account the
latest available information at the reporting date in defining its
base case scenario and generating alternative economic scenarios.
The scenarios include forecasts for key variables as of the third
quarter of 2024. Actuals for this period, or restatements of past
data, may have since emerged prior to publication and have not been
included, including specifically in the Quarterly National Accounts
release of 30 September 2024. The Group's approach to generating
alternative economic scenarios is set out in detail in note 24 to
the financial statements for the year ended 31 December 2023. For
September 2024, the Group continues to judge it appropriate to
include a non-modelled severe downside scenario for ECL
calculations as explained in note 14 of the Group's 2024 Half-Year
news release.
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.
| At 30 September 2024 |
First
quarter
2024
% |
Second
quarter
2024
% |
Third
quarter
2024
% |
Fourth
quarter
2024
% |
First
quarter
2025
% |
Second
quarter
2025
% |
Third
quarter
2025
% |
Fourth
quarter
2025
% |
| |
|
|
|
|
|
|
|
|
| Gross domestic product growth |
0.7 |
0.6 |
0.3 |
0.3 |
0.3 |
0.3 |
0.4 |
0.4 |
| Unemployment rate |
4.3 |
4.2 |
4.3 |
4.5 |
4.6 |
4.7 |
4.8 |
4.8 |
| House price growth |
0.4 |
1.8 |
5.3 |
3.1 |
3.2 |
3.6 |
2.4 |
2.0 |
| Commercial real estate price growth |
(5.3) |
(4.7) |
(2.5) |
0.3 |
1.4 |
1.9 |
1.6 |
1.7 |
| UK Bank Rate |
5.25 |
5.25 |
5.00 |
4.75 |
4.50 |
4.25 |
4.00 |
4.00 |
| CPI inflation |
3.5 |
2.1 |
2.1 |
2.7 |
2.4 |
2.9 |
2.7 |
2.3 |
UK economic assumptions - scenarios by year
Key annual assumptions made by the
Group are shown below. Gross domestic product and 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.
ADDITIONAL INFORMATION (continued)
Base case and MES economic
assumptions (continued)
| At 30 September
2024 |
2024
% |
2025
% |
2026
% |
2027
% |
2028
% |
2024-2028
average
% |
| |
|
|
|
|
|
|
| Upside |
|
|
|
|
|
|
| Gross domestic product growth |
1.2 |
2.4 |
1.9 |
1.5 |
1.4 |
1.7 |
| Unemployment rate |
4.2 |
3.3 |
2.8 |
2.7 |
2.8 |
3.1 |
| House price growth |
3.5 |
4.6 |
7.1 |
6.4 |
5.1 |
5.3 |
| Commercial real estate price growth |
1.6 |
9.0 |
4.2 |
1.8 |
0.7 |
3.4 |
| UK Bank Rate |
5.06 |
5.08 |
5.16 |
5.34 |
5.58 |
5.24 |
| CPI inflation |
2.6 |
2.7 |
2.4 |
2.8 |
2.8 |
2.7 |
| |
|
|
|
|
|
|
| Base case |
|
|
|
|
|
|
| Gross domestic product growth |
1.1 |
1.3 |
1.5 |
1.5 |
1.5 |
1.4 |
| Unemployment rate |
4.3 |
4.7 |
4.7 |
4.5 |
4.5 |
4.5 |
| House price growth |
3.1 |
2.0 |
1.0 |
1.5 |
2.1 |
2.0 |
| Commercial real estate price growth |
0.3 |
1.7 |
2.1 |
0.7 |
0.3 |
1.0 |
| UK Bank Rate |
5.06 |
4.19 |
3.63 |
3.50 |
3.50 |
3.98 |
| CPI inflation |
2.6 |
2.6 |
2.1 |
2.2 |
2.1 |
2.3 |
| |
|
|
|
|
|
|
| Downside |
|
|
|
|
|
|
| Gross domestic product growth |
1.0 |
(0.3) |
0.4 |
1.3 |
1.5 |
0.8 |
| Unemployment rate |
4.4 |
6.5 |
7.3 |
7.3 |
7.1 |
6.5 |
| House price growth |
2.9 |
(0.2) |
(6.1) |
(5.8) |
(2.9) |
(2.5) |
| Commercial real estate price growth |
(0.7) |
(6.2) |
(1.7) |
(1.9) |
(1.9) |
(2.5) |
| UK Bank Rate |
5.06 |
3.11 |
1.48 |
0.96 |
0.65 |
2.25 |
| CPI inflation |
2.6 |
2.6 |
1.9 |
1.5 |
1.1 |
2.0 |
| |
|
|
|
|
|
|
| Severe downside |
|
|
|
|
|
|
| Gross domestic product growth |
0.9 |
(2.0) |
(0.1) |
1.1 |
1.4 |
0.2 |
| Unemployment rate |
4.6 |
8.6 |
9.9 |
9.9 |
9.7 |
8.5 |
| House price growth |
2.3 |
(2.5) |
(13.5) |
(12.6) |
(8.3) |
(7.1) |
| Commercial real estate price growth |
(2.7) |
(16.5) |
(6.5) |
(6.5) |
(5.1) |
(7.6) |
| UK Bank Rate - modelled |
5.06 |
1.83 |
0.23 |
0.06 |
0.02 |
1.44 |
| UK Bank Rate - adjusted1 |
5.13 |
3.67 |
2.55 |
2.16 |
1.88 |
3.08 |
| CPI inflation - modelled |
2.6 |
2.6 |
1.5 |
0.7 |
0.1 |
1.5 |
| CPI inflation - adjusted1 |
2.6 |
3.5 |
1.8 |
1.3 |
0.9 |
2.0 |
| |
|
|
|
|
|
|
| Probability-weighted |
|
|
|
|
|
|
| Gross domestic product growth |
1.1 |
0.8 |
1.1 |
1.4 |
1.4 |
1.2 |
| Unemployment rate |
4.3 |
5.2 |
5.4 |
5.3 |
5.3 |
5.1 |
| House price growth |
3.1 |
1.7 |
(0.7) |
(0.6) |
0.5 |
0.8 |
| Commercial real estate price growth |
0.1 |
(0.3) |
0.7 |
(0.5) |
(0.8) |
(0.1) |
| UK Bank Rate - modelled |
5.06 |
3.90 |
3.10 |
2.95 |
2.92 |
3.59 |
| UK Bank Rate - adjusted1 |
5.07 |
4.08 |
3.33 |
3.15 |
3.11 |
3.75 |
| CPI inflation - modelled |
2.6 |
2.6 |
2.0 |
2.0 |
1.8 |
2.2 |
| CPI inflation - adjusted1 |
2.6 |
2.7 |
2.1 |
2.1 |
1.9 |
2.3 |
1 The adjustment to
UK Bank Rate and CPI inflation in the severe downside is considered
to better reflect the risks to the Group's base case view in an
economic environment where the risks of supply and demand shocks
are seen as more balanced.
ALTERNATIVE PERFORMANCE
MEASURES
The statutory results are
supplemented with a number of metrics that are used throughout the
banking and insurance industries on an underlying basis. A
description of these measures and their calculation, which remain
materially unchanged since the year-end, is set out on pages 27 to
32 of the Group's 2023 Full Year Results News Release.
| |
Nine months ended
30 Sep 2024 |
|
|
Nine months ended
30 Sep 2023 |
|
| |
|
|
|
|
|
| Banking net interest
marginA |
|
|
|
|
|
| Underlying net interest income (£m) |
9,569 |
|
|
10,448 |
|
| Remove non-banking underlying net interest
expense (£m) |
347 |
|
|
231 |
|
| Banking underlying net interest income
(£m) |
9,916 |
|
|
10,679 |
|
| |
|
|
|
|
|
| Loans and advances to customers (£bn) |
457.9 |
|
|
452.1 |
|
| Remove finance lease gross
up1 (£bn) |
(0.9) |
|
|
- |
|
| Underlying loans and advances to
customersA (£bn) |
457.0 |
|
|
452.1 |
|
| Add back: |
|
|
|
|
|
| Expected credit loss allowance (drawn)
(£bn) |
3.3 |
|
|
4.7 |
|
| Acquisition related fair value adjustments
(£bn) |
0.2 |
|
|
0.3 |
|
| Underlying gross loans and advances to
customers (£bn) |
460.5 |
|
|
457.1 |
|
| Adjustment for non-banking and other
items: |
|
|
|
|
|
| Fee-based loans and advances (£bn) |
(10.1) |
|
|
(8.6) |
|
| Other (£bn) |
2.8 |
|
|
6.0 |
|
| Interest-earning banking assets (£bn) |
453.2 |
|
|
454.5 |
|
| Averaging (£bn) |
(3.3) |
|
|
(1.0) |
|
| Average interest-earning banking
assetsA (£bn) |
449.9 |
|
|
453.5 |
|
| |
|
|
|
|
|
| Banking net interest
marginA |
2.94% |
|
|
3.15% |
|
1 The finance lease
gross up represents a statutory accounting adjustment required
under IFRS 9 to recognise a continuing involvement asset following
the partial derecognition of a component of the Group's finance
lease book via a securitisation in the third quarter of 2024.
| |
Nine months ended
30 Sep 2024 |
|
|
Nine months ended
30 Sep 2023 |
|
| Return on tangible
equityA |
|
|
|
|
|
| Profit attributable to ordinary shareholders
(£m) |
3,355 |
|
|
3,840 |
|
| |
|
|
|
|
|
| Average ordinary shareholders' equity
(£bn) |
40.0 |
|
|
38.5 |
|
| Remove average goodwill and other intangible
assets (£bn) |
(8.0) |
|
|
(7.6) |
|
| Average tangible equity (£bn) |
32.0 |
|
|
30.9 |
|
| |
|
|
|
|
|
| Return on tangible
equityA |
14.0% |
|
|
16.6% |
|
BASIS OF PRESENTATION
This release covers the results of
Lloyds Banking Group plc together with its subsidiaries (the Group)
for the nine months ended 30 September 2024. Unless otherwise
stated, income statement commentaries throughout this document
compare the nine months ended 30 September 2024 to the nine months
ended 30 September 2023 and the balance sheet analysis compares the
Group balance sheet as at 30 September 2024 to the Group balance
sheet as at 31 December 2023. The Group uses a number of
alternative performance measures, including underlying profit, in
the discussion of its business performance and financial position.
These measures are labelled with a superscript 'A' throughout this
document. Further information on these measures is set out above.
Unless otherwise stated, commentary on page 1 is given on
an underlying basis. The Group's Q3 2024 Interim Pillar 3
Disclosures can be found at:
www.lloydsbankinggroup.com/investors/financial-downloads.html.
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 Banking Group
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 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, targets, 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; acts of hostility or terrorism and responses
to those acts, or other such events; geopolitical unpredictability;
the war between Russia and Ukraine; the conflicts in the Middle
East; the tensions between China and Taiwan; political instability
including as a result of any UK general election; market related
risks, trends and developments; changes in client and consumer
behaviour and demand; exposure to counterparty risk; the ability to
access sufficient sources of capital, liquidity and funding when
required; changes to the Group's credit ratings; fluctuations in
interest rates, inflation, exchange rates, stock markets and
currencies; volatility in credit markets; volatility in the price
of the Group's securities; tightening of monetary policy in
jurisdictions in which the Group operates; natural pandemic and
other disasters; risks concerning borrower and counterparty credit
quality; risks affecting insurance business and defined benefit
pension schemes; changes in laws, regulations, practices and
accounting standards or taxation; changes to regulatory capital or
liquidity requirements and similar contingencies; the policies and
actions of governmental or regulatory authorities or courts
together with any resulting impact on the future structure of the
Group; risks associated with the Group's compliance with a wide
range of laws and regulations; assessment related to resolution
planning requirements; risks related to regulatory actions which
may be taken in the event of a bank or Group failure; exposure to
legal, regulatory or competition proceedings, investigations or
complaints; 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;
operational risks including risks as a result of the failure of
third party suppliers; 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; technological failure; inadequate or
failed internal or external processes or systems; risks relating to
ESG matters, such as climate change (and achieving climate change
ambitions) and decarbonisation, including the Group's ability along
with the government and other stakeholders to measure, manage and
mitigate the impacts of climate change effectively, and human
rights issues; the impact of competitive conditions; failure to
attract, retain and develop high calibre talent; the ability to
achieve strategic objectives; 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; assumptions and estimates that form the basis of the
Group's financial statements; and potential changes in dividend
policy. 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 Banking Group 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
Nora Thoden
Director of Investor Relations -
ESG
020 7356 2334
nora.thoden@lloydsbanking.com
Tom Grantham
Investor Relations Senior Manager
07851 440 091
thomas.grantham@lloydsbanking.com
Sarah Robson
Investor Relations Senior Manager
07494 513 983
sarah.robson2@lloydsbanking.com
CORPORATE AFFAIRS
Grant Ringshaw
External Relations Director
020 7356 2362
grant.ringshaw@lloydsbanking.com
Matt Smith
Head of Media Relations
07788 352 487
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 Banking
Group plc, The Mound, Edinburgh, EH1 1YZ
Registered in Scotland No.
SC095000
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