TIDMLLOY
RNS Number : 7077R
Lloyds Banking Group PLC
31 October 2019
Lloyds Banking Group plc
Q3 2019 Interim Management Statement
31 October 2019
GROUP CHIEF EXECUTIVE'S STATEMENT
"In the first nine months of 2019 we have made strong strategic
progress and delivered solid financial performance in a challenging
external environment. I am disappointed that our statutory result
was significantly impacted by the additional PPI charge in the
third quarter, driven by an unprecedented level of PPI information
requests received in August. However, our performance continues to
demonstrate the resilience of our customer franchise and business
model, the strength of our balance sheet and that our strategy is
the right one in this environment.
We will maintain our prudent approach to growth and risk whilst
continuing to focus on reducing costs and investing in the business
to transform the Group for success in a digital world. Although
continued economic uncertainty could further impact the outlook, we
remain well placed to support our customers and to continue to Help
Britain Prosper."
António Horta-Osório, Group Chief Executive
HIGHLIGHTS FOR THE NINE MONTHSED 30 SEPTEMBER 2019
Strong strategic progress and the right strategy in the current environment
* Strategic investment of GBP1.7 billion since launch
of GSR3 in February 2018
* Schroders Personal Wealth launched with ambition of
becoming top 3 financial planning business by end of
2023
* Acquisition of Tesco Bank's GBP3.7 billion UK prime
residential mortgage portfolio
Solid financial performance with statutory result impacted by additional PPI charge
* Statutory profit before tax of GBP2.9 billion
including an additional GBP1.8 billion PPI charge in
the third quarter
* Underlying profit of GBP6.0 billion in a challenging
external environment, with lower net income partly
offset by lower total costs and higher impairment
charges
* Net income of GBP13.0 billion, down 3 per cent, with
slightly lower average interest-earning banking
assets of GBP434 billion, net interest margin of 2.89
per cent and other income of GBP4.4 billion, down 4
per cent
* Total costs of GBP6.0 billion down 5 per cent driven
by reductions in both operating costs and remediation
charges. Market-leading cost:income ratio further
reduced to 46.5 per cent with positive jaws of 2 per
cent
* Credit quality remains strong. Net asset quality
ratio of 29 basis points, including a single large
corporate charge in the third quarter
* Tangible net assets per share of 52.0 pence.
Statutory return on tangible equity reduced to 6.8
per cent significantly driven by the PPI charge with
underlying return on tangible equity remaining strong
at 15.7 per cent
Balance sheet strength maintained with lower Pillar 2A requirement
* Loans and advances up GBP6 billion in the quarter,
with continued growth in targeted segments including
the open mortgage book, benefiting from both the
Tesco mortgage acquisition and organic growth, SME
and Motor Finance
* CET1 capital build of 149 basis points in the first
nine months before PPI charge and 28 basis points
after the charge; CET1 ratio of 13.5 per cent
* Pillar 2A CET1 requirement reduced from 2.7 per cent
to 2.6 per cent. Target CET1 ratio remains c.12.5 per
cent, plus a c.1 per cent management buffer. Given
the Pillar 2A reduction, the headroom above the
regulatory requirements has increased
Outlook
* The resilience of the Group's business model is
reflected in its 2019 guidance:
* Net interest margin of 2.88 per cent, in line with
previous guidance of c.2.90 per cent
* Operating costs now expected to be less than GBP7.9
billion, ahead of previous guidance, and cost:income
ratio to be lower than in 2018
* Net asset quality ratio of less than 30 basis points
* Free capital build of c.75 basis points, post the PPI
charge of 121 basis points
* Although continued economic uncertainty could further
impact the outlook, the Group remains well positioned
with the right strategy to continue delivering for
customers and shareholders
INCOME STATEMENT - UNDERLYING BASIS
Nine Nine Three Three
months months months months
ended ended ended ended
30 Sept 30 Sept 30 Sept 30 Sept
2019 2018 Change 2019 2018 Change
GBPm GBPm % GBPm GBPm %
Net interest income 9,275 9,544 (3) 3,130 3,200 (2)
Other income 4,415 4,610 (4) 1,315 1,486 (12)
Operating lease depreciation (731) (731) - (258) (234) (10)
Vocalink gain on sale 50 - - -
-------- -------- -------- --------
Net income 13,009 13,423 (3) 4,187 4,452 (6)
-------- -------- -------- --------
Operating costs (5,817) (6,014) 3 (1,911) (1,990) 4
Remediation (226) (366) 38 (83) (109) 24
-------- -------- -------- --------
Total costs (6,043) (6,380) 5 (1,994) (2,099) 5
Impairment (950) (740) (28) (371) (284) (31)
-------- -------- -------- --------
Underlying profit 6,016 6,303 (5) 1,822 2,069 (12)
Restructuring (280) (612) 54 (98) (235) 58
Volatility and other items (339) (207) (64) 126 (17)
Payment protection insurance provision (2,450) (550) (1,800) -
-------- -------- -------- --------
Statutory profit before tax 2,947 4,934 (40) 50 1,817 (97)
Tax expense(1) (960) (1,194) 20 (288) (394) 27
-------- -------- -------- --------
Statutory profit (loss) after tax(1) 1,987 3,740 (47) (238) 1,423
-------- -------- -------- --------
Earnings (loss) per share 2.2p 4.7p (53) (0.5)p 1.8p
Banking net interest margin 2.89% 2.93% (4)bp 2.88% 2.93% (5)bp
Average interest-earning banking assets GBP434bn GBP436bn - GBP435bn GBP435bn -
Cost:income ratio 46.5% 47.5% (1.0)pp 47.6% 47.1% 0.5pp
Asset quality ratio 0.29% 0.22% 7bp 0.33% 0.25% 8bp
Underlying return on tangible equity 15.7% 16.2% (0.5)pp 14.3% 15.9% (1.6)pp
Return on tangible equity 6.8% 13.0% (6.2)pp (2.8)% 14.8% (17.6)pp
KEY BALANCE SHEET METRICS
At 30 Sept At 30 June Change At 31 Dec Change
2019 2019 % 2018 %
Loans and advances to customers(2) GBP447bn GBP441bn 1 GBP444bn 1
Customer deposits(3) GBP419bn GBP418bn - GBP416bn 1
Loan to deposit ratio 107% 106% 1pp 107% -
Capital build(4) 28bp 70bp 210bp
CET1 ratio pre dividend accrual(5) 14.4% 14.6% (0.2)pp 13.9% 0.5pp
CET1 ratio(5) 13.5% 14.0% (0.5)pp 13.9% (0.4)pp
Transitional MREL ratio(5) 32.5% 32.2% 0.3pp 32.6% (0.1)pp
UK leverage ratio(5) 4.9% 5.1% (0.2)pp 5.6% (0.7)pp
Risk-weighted assets(5) GBP209bn GBP207bn 1 GBP206bn 1
Tangible net assets per share 52.0p 53.0p (1.0)p 53.0p (1.0)p
(1) Comparatives restated to reflect amendments to IAS 12, see basis
of presentation.
(2) Excludes reverse repos of GBP55.6 billion (30 June 2019: GBP54.1
billion; 31 December 2018: GBP40.5 billion).
(3) Excludes repos of GBP1.8 billion (30 June 2019: GBP4.1 billion;
31 December 2018: GBP1.8 billion).
(4) Capital build is reported before accrual for ordinary dividends,
cancellation of remaining share buyback and Tesco mortgage portfolio.
(5) The CET1, MREL and leverage ratios and risk-weighted assets at
30 June 2019 and 31 December 2018 are reported on a pro forma basis,
reflecting the dividend paid up by the Insurance business in the
subsequent reporting period. The CET1 ratios at 31 December 2018
incorporate the effects of the share buyback announced in February
2019 and are reported post dividend accrual.
QUARTERLY INFORMATION
Quarter Quarter Quarter Quarter Quarter Quarter Quarter
ended ended ended ended ended ended ended
30 Sept 30 June 31 Mar 31 Dec 30 Sept 30 June 31 Mar
2019 2019 2019 2018 2018 2018 2018
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Net interest income 3,130 3,062 3,083 3,170 3,200 3,173 3,171
Other income 1,315 1,594 1,506 1,400 1,486 1,713 1,411
Operating lease depreciation (258) (254) (219) (225) (234) (245) (252)
Vocalink gain on sale - - 50 - - - -
-------- -------- -------- -------- -------- -------- --------
Net income 4,187 4,402 4,420 4,345 4,452 4,641 4,330
-------- -------- -------- -------- -------- -------- --------
Operating costs (1,911) (1,949) (1,957) (2,151) (1,990) (2,016) (2,008)
Remediation (83) (123) (20) (234) (109) (197) (60)
-------- -------- -------- -------- -------- -------- --------
Total costs (1,994) (2,072) (1,977) (2,385) (2,099) (2,213) (2,068)
Impairment (371) (304) (275) (197) (284) (198) (258)
-------- -------- -------- -------- -------- -------- --------
Underlying profit 1,822 2,026 2,168 1,763 2,069 2,230 2,004
Restructuring (98) (56) (126) (267) (235) (239) (138)
Volatility and other items 126 (126) (339) (270) (17) (16) (174)
Payment protection insurance
provision (1,800) (550) (100) (200) - (460) (90)
-------- -------- -------- -------- -------- -------- --------
Statutory profit before tax 50 1,294 1,603 1,026 1,817 1,515 1,602
Tax expense(1) (288) (269) (403) (260) (394) (369) (431)
-------- -------- -------- -------- -------- -------- --------
Statutory profit (loss) after
tax(1) (238) 1,025 1,200 766 1,423 1,146 1,171
-------- -------- -------- -------- -------- -------- --------
Banking net interest margin 2.88% 2.89% 2.91% 2.92% 2.93% 2.93% 2.93%
Average interest-earning banking GBP435bn GBP433bn GBP433bn GBP436bn GBP435bn GBP436bn GBP437bn
assets
Cost:income ratio 47.6% 47.1% 44.7% 54.9% 47.1% 47.7% 47.8%
Asset quality ratio 0.33% 0.27% 0.25% 0.18% 0.25% 0.18% 0.23%
Gross asset quality ratio 0.40% 0.38% 0.30% 0.30% 0.30% 0.26% 0.27%
Underlying return on tangible
equity 14.3% 15.6% 17.0% 13.6% 15.9% 17.3% 15.4%
Return on tangible equity (2.8)% 10.5% 12.5% 7.8% 14.8% 11.9% 12.3%
Loans and advances to GBP447bn GBP441bn GBP441bn GBP444bn GBP445bn GBP442bn GBP445bn
customers(2)
Customer deposits(3) GBP419bn GBP418bn GBP417bn GBP416bn GBP422bn GBP418bn GBP413bn
Loan to deposit ratio 107% 106% 106% 107% 105% 106% 108%
Risk-weighted assets(4) GBP209bn GBP207bn GBP208bn GBP206bn GBP207bn GBP207bn GBP211bn
Tangible net assets per share 52.0p 53.0p 53.4p 53.0p 51.3p 52.1p 52.3p
(1) Comparatives for 2018 restated to reflect amendments to IAS 12,
see basis of presentation.
(2) Excludes reverse repos.
(3) Excludes repos.
(4) Risk-weighted assets at 30 June 2018 are reported on a pro forma
basis reflecting the sale of the Irish mortgage portfolio.
BALANCE SHEET ANALYSIS
At 30 Sept At 30 June At 30 Sept At 31 Dec
2019 2019 Change 2018 Change 2018 Change
GBPbn GBPbn % GBPbn % GBPbn %
Loans and advances to customers
Open mortgage book 271.0 264.9 2 267.1 1 266.6 2
Closed mortgage book 19.1 19.8 (4) 21.5 (11) 21.2 (10)
Credit cards 17.7 17.7 - 18.5 (4) 18.1 (2)
UK Retail unsecured loans 8.4 8.2 2 7.9 6 7.9 6
UK Motor Finance 15.6 15.5 1 14.4 8 14.6 7
Overdrafts 1.3 1.2 8 1.2 8 1.3 -
Retail other(1) 9.2 9.0 2 8.3 11 8.6 7
SME(2) 32.4 32.3 - 31.8 2 31.8 2
Mid Markets 30.7 30.6 - 30.5 1 31.7 (3)
Global Corporates and Financial
Institutions 33.7 34.7 (3) 34.1 (1) 34.4 (2)
Commercial Banking other 5.2 4.3 21 5.0 4 4.3 21
Wealth 0.9 0.9 - 0.8 13 0.9 -
Central items 2.0 1.9 5 3.5 (43) 3.0 (33)
---------- ---------- ---------- ---------
Loans and advances to
customers(3) 447.2 441.0 1 444.6 1 444.4 1
---------- ---------- ---------- ---------
Customer deposits
Retail current accounts 76.1 76.0 - 74.3 2 73.7 3
Commercial current accounts(2,4) 34.6 34.0 2 33.5 3 34.9 (1)
Retail relationship savings
accounts 144.3 144.4 - 146.0 (1) 145.9 (1)
Retail tactical savings accounts 14.1 15.3 (8) 18.7 (25) 16.8 (16)
Commercial deposits(2,5) 135.8 133.2 2 134.6 1 130.1 4
Wealth 13.6 13.8 (1) 13.7 (1) 14.1 (4)
Central items 0.7 0.9 (22) 0.8 (13) 0.8 (13)
---------- ---------- ---------- ---------
Total customer deposits(6) 419.2 417.6 - 421.6 (1) 416.3 1
---------- ---------- ---------- ---------
Total assets(7) 858.5 822.2 4 829.2 4 797.6 8
Total liabilities(7) 810.4 773.2 5 781.5 4 747.4 8
Shareholders' equity 42.5 43.4 (2) 42.0 1 43.4 (2)
Other equity instruments 5.4 5.4 - 5.4 - 6.5 (17)
Non-controlling interests 0.2 0.2 - 0.3 (33) 0.3 (33)
---------- ---------- ---------- ---------
Total equity 48.1 49.0 (2) 47.7 1 50.2 (4)
---------- ---------- ---------- ---------
Ordinary shares in issue,
excluding own shares 70,007m 70,740m 71,122m 71,149m
(1) Primarily Europe.
(2) Includes Retail Business Banking.
(3) Excludes reverse repos.
(4) Primarily non interest-bearing Commercial Banking current accounts.
(5) Primarily Commercial Banking interest-bearing accounts.
(6) Excludes repos.
(7) The adoption of IFRS 16 on 1 January 2019 resulted in the recognition
of a right-of-use asset of GBP1.7 billion and lease liabilities
of GBP1.8 billion.
REVIEW OF PERFORMANCE
Solid financial performance with statutory result impacted by
additional PPI charge
The Group's statutory profit before tax for the nine months was
GBP2,947 million with good underlying profit offset by an
additional GBP1,800 million payment protection insurance (PPI)
charge in the third quarter.
Given the challenging external environment, underlying profit
was GBP6,016 million compared to GBP6,303 million in the first nine
months of 2018, reflecting lower net income partially offset by
lower total costs and higher impairment charges. The Group's
underlying return on tangible equity remained strong at 15.7 per
cent.
Net income of GBP13,009 million was 3 per cent lower than in the
first nine months of 2018, reflecting lower net interest income and
other income, while operating lease depreciation was stable.
Net interest income of GBP9,275 million was down 3 per cent with
both net interest margin and average interest-earning banking
assets slightly lower. Net interest margin reduced to 2.89 per cent
for the period, and to 2.88 per cent in the third quarter, with the
benefit of lower deposit costs, higher current account balances and
a small benefit from aligning MBNA credit card terms to other
brands across the Group more than offset by continued pressure on
asset margins. Average interest-earning banking assets reduced by
GBP1.9 billion year on year with growth in targeted segments more
than offset by lower balances in the closed mortgage book and the
sale of the Irish mortgage portfolio in the first half of 2018.
Other income decreased by 4 per cent to GBP4,415 million due to
lower Commercial Banking income driven by more subdued levels of
client activity in the markets business given challenging external
conditions, lower Retail income predominately driven by lower Lex
Autolease volumes, and lower gilt sales. Insurance and Wealth
continued to perform well reflecting growth in workplace pensions
new business in the first half and higher general insurance income
whilst also benefiting from assumption changes and the one-off
benefit from the planned change in investment management provider
taken in the first half of 2019.
Total costs of GBP6,043 million were 5 per cent lower than in
the first nine months of 2018 driven by continued reductions in
both operating costs and remediation charges. Operating costs of
GBP5,817 million were 3 per cent lower with a 6 per cent reduction
in business as usual costs(1) , largely driven by increased
efficiency from digitalisation and process improvements, in
parallel with strategic investment of GBP0.8 billion in the
business, up 24 per cent compared to the first nine months of 2018.
Remediation charges of GBP226 million were significantly lower than
the GBP366 million in the first nine months of 2018 and included
additional charges of GBP83 million in the third quarter of 2019
relating to a number of items across existing programmes. The
Group's market-leading cost:income ratio continues to provide a
competitive advantage and further strengthened to 46.5 per cent
with positive jaws of 2 per cent. As a result of the Group's
continued focus on efficiency, operating costs (which exclude
remediation) are now expected to be less than GBP7.9 billion for
the full year 2019, ahead of previous guidance and the cost:income
ratio (which includes remediation) is expected to be lower than in
2018.
Credit quality remains strong with a net asset quality ratio of
29 basis points and a gross asset quality ratio of 36 basis points,
compared with 22 basis points and 28 basis points respectively in
the first nine months of 2018. The impairment charge increased to
GBP950 million, with the increase primarily driven by a single
large corporate charge in the third quarter and lower used car
prices. The underlying asset quality ratio has remained low in
recent quarters and the Group continues to expect a net asset
quality ratio of less than 30 basis points in 2019.
The Group's outlook and IFRS 9 base case economic scenario used
to calculate expected credit loss have remained broadly stable in
the quarter and throughout 2019 and reflect an orderly exit of the
UK from the European Union.
(1) 2018 business as usual costs have been adjusted to a comparable
basis after the implementation of IFRS 16 in 2019. On an unadjusted
basis business as usual costs reduced 10 per cent on prior year.
REVIEW OF PERFORMANCE (continued)
Restructuring costs of GBP280 million were down 54 per cent,
primarily reflecting lower severance costs relating to the Group's
strategic investment plans and the completion of both the
integration of MBNA and the ring-fencing programme, which were
partially offset by costs associated with establishing the
Schroders Personal Wealth joint venture.
Volatility and other items of GBP339 million included adverse
movements in banking volatility as well as the one-off charge for
exiting the Standard Life Aberdeen investment management agreement
taken in the first half of 2019.
The PPI provision charge of GBP2,450 million included an
additional charge of GBP1,800 million in the quarter, reflecting
the significant increase in PPI information requests (PIRs) leading
up to the deadline for submission of claims on 29 August 2019, a
PPI provision linked to the Official Receiver and associated
administration costs. The assessment of PIR volumes is now complete
and the third quarter charge reflects this and the most recent data
in terms of quality, which remains low, averaging around 10 per
cent. Taking this additional charge into account, the unutilised
provision relating to PIRs, complaints and associated
administration costs stood at GBP2,324 million at the end of the
third quarter.
Balance sheet strength maintained with lower Pillar 2A
requirement
Loans and advances to customers increased by GBP6.2 billion to
GBP447.2 billion in the third quarter with growth in targeted
segments, including the open mortgage book, SME and Motor Finance,
offset by reductions in the closed mortgage book and Global
Corporates and Financial Institutions. The open mortgage book grew
by GBP6.1 billion driven by the GBP3.7 billion Tesco mortgage
acquisition and GBP2.4 billion of organic book growth as the Group
took advantage of market pricing in the third quarter and
benefitted from a strong application pipeline. The Group now
expects its open mortgage book at the end of 2019, including the
Tesco mortgage acquisition, to be ahead of the 2018 year-end
balance.
The Group continues to optimise funding and target current
account balance growth, with Retail current accounts up 3 per cent
over the last nine months at GBP76.1 billion (31 December 2018:
GBP73.7 billion). The loan to deposit ratio was flat at 107 per
cent.
Tangible net assets per share reduced by 1.0 pence in the first
nine months of 2019 to 52.0 pence mainly due to the impact of the
additional PPI charge on the Group's statutory profit for the
period.
The Group's CET1 capital build amounted to 149 basis points
before PPI and to 28 basis points after the in-year PPI charge
equivalent to 121 basis points. Underlying capital build of 148
basis points, along with other movements of 12 basis points
(reflecting market movements and the continued optimisation of
Commercial Banking risk-weighted assets, net of additional pension
contributions), was partly offset by the 11 basis points impact of
IFRS 16. The Group's capital position also benefitted by 34 basis
points as a result of the cancellation of the remaining c.GBP650
million of the 2019 buyback programme, as announced in September
2019. The Group used 9 basis points of capital for the acquisition
of the Tesco mortgage portfolio.
As a result, in the first nine months of the year, the CET1
capital ratio increased to 14.4 per cent pre dividend accrual.
After accruing 91 basis points for the ordinary dividend, the CET1
ratio at 13.5 per cent remains in line with the Board's target.
Given the PPI charge in the third quarter, equivalent to 88
basis points, the Group now expects, assuming no unforeseen events,
free capital build of around 75 basis points in 2019. The Group
continues to target a progressive and sustainable ordinary dividend
and in line with normal practice, the Board will give due
consideration to the return of any surplus capital at the year
end.
REVIEW OF PERFORMANCE (continued)
The Group recently received notification from the Prudential
Regulation Authority (PRA) that its Pillar 2A CET1 requirement has
reduced from 2.7 per cent to 2.6 per cent. The Board's view of the
current level of capital required by the Group to grow the
business, meet regulatory requirements and cover uncertainties
remains unchanged at c.12.5 per cent, plus a c.1 per cent
management buffer. The headroom to regulatory requirements has
therefore increased. As previously reported, the Group's CET1
capital target reduced during 2019 and is now 50 basis points lower
than prior year.
The Group remains well positioned to meet its minimum
requirement for own funds and eligible liabilities (MREL) from 2020
and as at 30 September 2019, had a transitional MREL ratio of 32.5
per cent. The UK leverage ratio remains strong at 4.9 per cent.
Risk-weighted assets have increased by GBP3 billion over the
period driven primarily by the implementation of IFRS 16, mortgage
model updates and the acquisition of the Tesco mortgage portfolio,
offset in part through further optimisation of the Commercial
Banking portfolio.
Outlook
In the first nine months of 2019 the Group made strong strategic
progress and delivered a solid financial performance in a
challenging external environment. The Group's performance continues
to demonstrate the resilience of its customer franchise and
business model, the strength of its balance sheet and that its
strategy remains the right one in the current environment.
The Group will maintain its prudent approach to growth and risk
whilst continuing to focus on reducing costs and investing to
transform the business for success in a digital world. Although
continued economic uncertainty could further impact the outlook,
the Group remains well placed to support its customers and to
continue to Help Britain Prosper.
ADDITIONAL FINANCIAL INFORMATION
1. Banking net interest margin and average interest-earning banking assets
Nine Nine
months months
ended ended
30 Sept 30 Sept
2019 2018
Group net interest income - statutory basis (GBPm) 7,425 9,138
Insurance gross up (GBPm) 1,559 267
Volatility and other items (GBPm) 291 139
------- -------
Group net interest income - underlying basis (GBPm) 9,275 9,544
Non-banking net interest expense (GBPm)(1) 103 19
------- -------
Banking net interest income - underlying basis (GBPm) 9,378 9,563
------- -------
Net loans and advances to customers (GBPbn)(2) 447.2 444.6
Impairment provision and fair value adjustments (GBPbn) 4.1 4.0
Non-banking items:
Fee-based loans and advances (GBPbn) (7.0) (6.3)
Other non-banking (GBPbn) (3.5) (5.9)
------- -------
Gross banking loans and advances (GBPbn) 440.8 436.4
Averaging (GBPbn)(3) (6.8) (0.5)
------- -------
Average interest-earning banking assets (GBPbn) 434.0 435.9
------- -------
Banking net interest margin (%) 2.89 2.93
(1) Nine months ended 30 September 2019 includes impact from the implementation
of IFRS 16.
(2) Excludes reverse repos.
(3) 2019 includes a GBP3.6 billion impact from the Tesco mortgage portfolio
acquisition.
2. Return on tangible equity
Nine Nine
months months
ended ended
30 Sept 30 Sept
2019 2018
Average shareholders' equity (GBPbn) 43.3 42.9
Average intangible assets (GBPbn) (5.9) (5.4)
------- -------
Average tangible equity (GBPbn) 37.4 37.5
------- -------
Underlying profit after tax (GBPm)(1) 4,543 4,725
Add back amortisation of intangible assets (post tax) (GBPm) 269 219
Less profit attributable to non-controlling interests and other equity holders (GBPm)(1) (415) (392)
------- -------
Adjusted underlying profit after tax (GBPm) 4,397 4,552
------- -------
Underlying return on tangible equity (%) 15.7 16.2
Group statutory profit after tax (GBPm)(1) 1,987 3,740
Add back amortisation of intangible assets (post tax) (GBPm) 269 219
Add back amortisation of purchased intangible assets (post tax) (GBPm) 56 83
Less profit attributable to non-controlling interests and other equity holders (GBPm)(1) (415) (392)
------- -------
Adjusted statutory profit after tax (GBPm) 1,897 3,650
------- -------
Statutory return on tangible equity (%) 6.8 13.0
(1) Comparatives restated to reflect amendments to IAS 12, see basis
of presentation.
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 2019.
IFRS 16 and IAS 12: The Group adopted IFRS 16 Leases from 1 January 2019 and as permitted
elected to apply the standard retrospectively with the cumulative effect of initial application
being recognised at that date; comparative information has not been restated. The Group has
implemented the amendments to IAS 12 Income Taxes with effect from 1 January 2019 and as a
result tax relief on distributions on other equity instruments, previously recognised in equity,
is now reported within tax expense. Comparatives have been restated.
Statutory basis: Statutory profit before tax and statutory profit after tax are included on
pages 2 and 3. However, a number of factors have had a significant effect on the comparability
of the Group's financial position and results. Accordingly, the results are also presented
on an underlying basis.
Underlying basis: The statutory results are adjusted for certain items which are listed below,
to allow a comparison of the Group's underlying performance.
* restructuring, including severance-related costs, the
rationalisation of the non-branch property portfolio,
the establishment of the Schroders strategic
partnership, the integration of MBNA and Zurich's UK
workplace pensions and savings business;
* volatility and other items, which includes the
effects of certain asset sales, the volatility
relating to the Group's hedging arrangements and that
arising in the insurance businesses, insurance gross
up, the unwind of acquisition-related fair value
adjustments and the amortisation of purchased
intangible assets;
* payment protection insurance provisions.
Unless otherwise stated, income statement commentaries throughout this document compare the
nine months ended 30 September 2019 to the nine months ended 30 September 2018, and the balance
sheet analysis compares the Group balance sheet as at 30 September 2019 to the Group balance
sheet as at 31 December 2018.
Alternative performance measures: The Group uses a number of alternative performance measures,
including underlying profit, in the discussion of its business performance and financial position.
There have been no changes to the definitions used by the Group; further information on these
measures is set out on page 112 of the Group's 2019 Half-Year Results News Release.
Capital: The Q3 2019 Interim Pillar 3 Report can be found at:
http://www.lloydsbankinggroup.com/investors/financial-performance/
FORWARD LOOKING STATEMENTS
This document contains certain forward looking statements with
respect to the business, strategy, plans and/or results of the
Group and its current goals and expectations relating to its future
financial condition and performance. Statements that are not
historical facts, including statements about the Group's or its
directors' and/or management's beliefs and expectations, are
forward looking statements. By their nature, forward looking
statements involve risk and uncertainty because they relate to
events and depend upon circumstances that will or may occur in the
future. Factors that could cause actual business, strategy, plans
and/or results (including but not limited to the payment of
dividends) to differ materially from forward looking statements
made by the Group or on its behalf include, but are not limited to:
general economic and business conditions in the UK and
internationally; market related trends and developments;
fluctuations in interest rates, inflation, exchange rates, stock
markets and currencies; 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 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; the
ability to achieve strategic objectives; changing customer
behaviour including consumer spending, saving and borrowing habits;
changes to borrower or counterparty credit quality; concentration
of financial exposure; management and monitoring of conduct risk;
instability in the global financial markets, including Eurozone
instability, instability as a result of uncertainty surrounding the
exit by the UK from the European Union (EU) and as a result of such
exit and the potential for other countries to exit the EU or the
Eurozone and the impact of any sovereign credit rating downgrade or
other sovereign financial issues; political instability including
as a result of any UK general election; technological changes and
risks to the security of IT and operational infrastructure,
systems, data and information resulting from increased threat of
cyber and other attacks; natural, pandemic and other disasters,
adverse weather and similar contingencies outside the Group's
control; inadequate or failed internal or external processes or
systems; acts of war, other acts of hostility, terrorist acts and
responses to those acts, geopolitical, pandemic or other such
events; risks relating to climate change; changes in laws,
regulations, practices and accounting standards or taxation,
including as a result of the exit by the UK from the EU, or a
further possible referendum on Scottish independence; changes to
regulatory capital or liquidity requirements and similar
contingencies outside the Group's control; the policies, decisions
and actions of governmental or regulatory authorities or courts in
the UK, the EU, the US or elsewhere including the implementation
and interpretation of key legislation and regulation together with
any resulting impact on the future structure of the Group; the
ability to attract and retain senior management and other employees
and meet its diversity objectives; actions or omissions by the
Group's directors, management or employees including industrial
action; changes to the Group's post-retirement defined benefit
scheme obligations; the extent of any future impairment charges or
write-downs caused by, but not limited to, depressed asset
valuations, market disruptions and illiquid markets; the value and
effectiveness of any credit protection purchased by the Group; the
inability to hedge certain risks economically; the adequacy of loss
reserves; the actions of competitors, including non-bank financial
services, lending companies and digital innovators and disruptive
technologies; and exposure to regulatory or competition scrutiny,
legal, regulatory or competition proceedings, investigations or
complaints. Please refer to the latest Annual Report on Form 20-F
filed with the US Securities and Exchange Commission for a
discussion of certain factors and risks together with examples of
forward looking statements. Except as required by any applicable
law or regulation, the forward looking statements contained in this
document are made as of today's date, and the Group expressly
disclaims any obligation or undertaking to release publicly any
updates or revisions to any forward looking statements contained in
this document to reflect any change in the Group's expectations
with regard thereto or any change in events, conditions or
circumstances on which any such statement is based. 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
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 interim management statement 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. 95000
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
TSTFMMFGGGNGLZZ
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