DJ EQS-News: 2024 Q1 Interim Management Statement

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EQS-News: Lloyds Banking Group PLC / Key word(s): Interim Report
2024 Q1 Interim Management Statement
2024-04-24 / 08:00 CET/CEST
The issuer is solely responsible for the content of this announcement.


Lloyds Banking Group plc
Q1 2024 Interim Management Statement
24 April 2024




RESULTS FOR THE THREE MONTHS ENDED 31 MARCH 2024
"The Group is continuing to deliver in line with expectations in the first quarter of 2024, with solid net income, cost
discipline and strong asset quality. Our performance provides us with further confidence around our strategic ambitions
and 2024 and 2026 guidance.
Guided by our purpose, we are continuing to support customers and successfully execute against our strategic outcomes,
as highlighted in the third of our strategic seminars last month. This underpins our ambition of higher, more
sustainable returns that will deliver for all of our stakeholders as we continue to Help Britain Prosper."
Charlie Nunn, Group Chief Executive
Financial performance in line with expectations^1
. Statutory profit after tax of GBP1.2 billion (three months to 31 March 2023: GBP1.6 billion) with net income
down 9 per cent on the prior year and operating costs up 11 per cent, partly offset by the benefit of
a lower impairment charge
. Return on tangible equity of 13.3 per cent (three months to 31 March 2023: 19.1 per cent)
. Underlying net interest income of GBP3.2 billion down 10 per cent, with a lower banking net interest
margin, as expected, of 2.95 per cent and average interest-earning banking assets of GBP449.1 billion
. Underlying other income of GBP1.3 billion, 7 per cent higher, driven by continued recovery in customer and
market activity and the benefits of strategic initiatives
. Operating lease depreciation of GBP283 million, up on the prior year reflecting a full quarter of
depreciation from Tusker, alongside growth in fleet size and declines in used car prices; the charge is lower than
the fourth quarter which included an additional c.GBP100 million residual value provision to offset developments in
used car prices
. Operating costs of GBP2.4 billion, up 11 per cent, including c.GBP0.1 billion relating to the sector-wide
change in the charging approach for the Bank of England levy (excluding this levy, operating costs were up 6 per
cent) and elevated severance charges (GBP0.1 billion higher year to date). The Bank of England levy will have a
broadly neutral impact on profit in 2024 with an offsetting benefit recognised through net interest income over the
course of the year
. Remediation costs of GBP25 million (three months to 31 March 2023: GBP19 million), in relation to
pre-existing programmes
. Underlying impairment charge of GBP57 million and asset quality ratio of 6 basis points. Excluding the
impact of improvements to the economic outlook, the asset quality ratio was 23 basis points. The portfolio remains
well-positioned with stable credit trends and strong asset quality
. Loans and advances to customers reduced during the quarter to GBP448.5 billion, primarily due to expected
reductions in UK mortgage balances, given the refinancing of the higher maturities in the fourth quarter of 2023

. Customer deposits of GBP469.2 billion decreased by GBP2.2 billion, with growth in Retail deposits of GBP1.3
billion more than offset by a reduction in Commercial Banking of GBP3.5 billion
. Strong capital generation of 40 basis points, after regulatory headwinds of 6 basis points. CET1 ratio
of 13.9 per cent, ahead of ongoing target of c.13.0 per cent
. Risk-weighted assets of GBP222.8 billion up GBP3.7 billion in the quarter, including a c.GBP1.5 billion
temporary increase that is expected to reverse in the second quarter
. Tangible net assets per share of 51.2 pence, up from 50.8 pence on 31 December 2023, driven by profit for
the period, partly offset by the effects of increased longer-term rates on the cash flow hedge reserve and pension
surplus
. During the quarter, the Group agreed the sale of its in-force bulk annuity portfolio to Rothesay Life
plc, enabling the Insurance, Pensions and Investments division to focus on growing strategically important lines of
business
2024 guidance reaffirmed
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.GBP9.3 billion plus the c.GBP0.1 billion Bank of England levy
. Asset quality ratio of less than 30 basis points
. Return on tangible equity of c.13 per cent
. Capital generation of c.175 basis points^2
. Risk-weighted assets at between GBP220 billion and GBP225 billion
. To pay down to a CET1 ratio of c.13.5 per cent

^1  See the basis of presentation on page 15. 
^2  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
Three
months

Three months      Three months                               ended 
ended             ended                              31 Dec 
31 Mar 2024       31 Mar 2023              Change            2023              Change 
GBPm                GBPm                   %              GBPm                   % 

Underlying net interest income 3,184 3,535 (10) 3,317 (4)

Underlying other income 1,340 1,257 7 1,286 4

Operating lease depreciation (283) (140) (371) 24

Net income 4,241 4,652 (9) 4,232

Operating costs (2,402) (2,170) (11) (2,486) 3

Remediation (25) (19) (32) (541) 95

Total costs (2,427) (2,189) (11) (3,027) 20
Underlying profit before
impairment 1,814 2,463 (26) 1,205 51
Underlying impairment (charge)
credit (57) (243) 77 541

Underlying profit 1,757 2,220 (21) 1,746 1

Restructuring (12) (12) (85) 86

Volatility and other items (117) 52 114

Statutory profit before tax 1,628 2,260 (28) 1,775 (8)

Tax expense (413) (619) 33 (541) 24

Statutory profit after tax 1,215 1,641 (26) 1,234 (2)

Earnings per share                       1.7p              2.3p              (0.6)p            1.7p 
Banking net interest margin^A           2.95%             3.22%              (27)bp           2.98%               (3)bp 

Average interest-earning

banking assets^A                     GBP449.1bn          GBP454.2bn                 (1)        GBP452.8bn                 (1) 
Cost:income ratio^A                     57.2%             47.1%              10.1pp           71.5%            (14.3)pp 
Asset quality ratio^A                   0.06%             0.22%              (16)bp         (0.47)% 
Return on tangible equity^A             13.3%             19.1%             (5.8)pp           13.9%             (0.6)pp 
At 31 Mar        At 31 Mar                Change       At 31 Dec                Change 

2024 2023 % 2023 At %
Loans and advances to
customers GBP448.5bn GBP452.3bn (1) GBP449.7bn

Customer deposits                 GBP469.2bn         GBP473.1bn                   (1)        GBP471.4bn 
Loan to deposit ratio^A                96%              96%                                   95%                   1pp 
CET1 ratio                           13.9%            14.1%               (0.2)pp           14.6%               (0.7)pp 
Pro forma CET1 ratio^A,1             13.9%            14.1%               (0.2)pp           13.7%                 0.2pp 
Total capital ratio                  19.0%            19.9%               (0.9)pp           19.8%               (0.8)pp 
MREL ratio                           32.0%            32.1%               (0.1)pp           31.9%                 0.1pp 
UK leverage ratio                     5.6%             5.6%                                  5.8%               (0.2)pp 

Risk-weighted assets GBP222.8bn GBP210.9bn 6 GBP219.1bn 2

Wholesale funding                  GBP99.9bn         GBP101.1bn                   (1)         GBP98.7bn                     1 
Liquidity coverage ratio^2            143%             143%                                  142%                   1pp 
Net stable funding ratio^3            130%             129%                   1pp            130% 

Tangible net assets per share
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^A 51.2p 49.6p 1.6p 50.8p 0.4p
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^A See page 14.

^1^ ^ ^ 31 December 2023 reflects both the full impact of the share buyback announced 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 monthly rolling simple average over the previous 12 months.

^3 Net stable funding ratio is based on an average of the four previous quarters.

QUARTERLY INFORMATION^A

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Quarter           Quarter           Quarter           Quarter           Quarter 
ended             ended             ended             ended             ended 
31 Mar            31 Dec            30 Sep            30 Jun            31 Mar 
2024              2023              2023              2023              2023 
GBPm                GBPm                GBPm                GBPm                GBPm 

Underlying net interest income 3,184 3,317 3,444 3,469 3,535

Underlying other income 1,340 1,286 1,299 1,281 1,257

Operating lease depreciation (283) (371) (229) (216) (140)

Net income 4,241 4,232 4,514 4,534 4,652

Operating costs (2,402) (2,486) (2,241) (2,243) (2,170)

Remediation (25) (541) (64) (51) (19)

Total costs (2,427) (3,027) (2,305) (2,294) (2,189)
Underlying profit before
impairment 1,814 1,205 2,209 2,240 2,463
Underlying impairment (charge)
credit (57) 541 (187) (419) (243)

Underlying profit 1,757 1,746 2,022 1,821 2,220

Restructuring (12) (85) (44) (13) (12)

Volatility and other items (117) 114 (120) (198) 52

Statutory profit before tax 1,628 1,775 1,858 1,610 2,260

Tax expense (413) (541) (438) (387) (619)

Statutory profit after tax 1,215 1,234 1,420 1,223 1,641

Earnings per share                       1.7p              1.7p              2.0p              1.6p              2.3p 
Banking net interest margin^A           2.95%             2.98%             3.08%             3.14%             3.22% 

Average interest-earning

banking assets^A                     GBP449.1bn          GBP452.8bn          GBP453.0bn          GBP453.4bn          GBP454.2bn 
Cost:income ratio^A                     57.2%             71.5%             51.1%             50.6%             47.1% 
Asset quality ratio^A                   0.06%           (0.47)%             0.17%             0.36%             0.22% 
Return on tangible equity^A             13.3%             13.9%             16.9%             13.6%             19.1% 

At 31 Mar At 31 Dec At 30 Sep At 30 Jun At 31 Mar 2024 2023 2023 2023 2023
Loans and advances to customers

^1                                   GBP448.5bn          GBP449.7bn          GBP452.1bn          GBP450.7bn          GBP452.3bn 
Customer deposits                    GBP469.2bn          GBP471.4bn          GBP470.3bn          GBP469.8bn          GBP473.1bn 
Loan to deposit ratio^A                   96%               95%               96%               96%               96% 
CET1 ratio                              13.9%             14.6%             14.6%             14.2%             14.1% 
Pro forma CET1 ratio^A,2                13.9%             13.7%             14.6%             14.2%             14.1% 
Total capital ratio                     19.0%             19.8%             19.9%             19.7%             19.9% 
MREL ratio                              32.0%             31.9%             32.6%             31.0%             32.1% 
UK leverage ratio                        5.6%              5.8%              5.7%              5.7%              5.6% 
Risk-weighted assets                 GBP222.8bn          GBP219.1bn          GBP217.7bn          GBP215.3bn          GBP210.9bn 

Wholesale funding                     GBP99.9bn           GBP98.7bn          GBP108.5bn          GBP103.5bn          GBP101.1bn 
Liquidity coverage ratio^3               143%              142%              142%              142%              143% 
Net stable funding ratio^4               130%              130%              130%              130%              129% 
Tangible net assets per share^A         51.2p             50.8p             47.2p             45.7p             49.6p 

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^1 The reduction between 30 September 2023 and 31 December 2023 reflects the impact of the securitisation of GBP2.7 billion of UK Retail unsecured loans in the fourth quarter of 2023.

^2^ ^ ^ 31 December 2023 reflects both the full impact of the share buyback announced 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 monthly rolling simple average over the previous 12 months.

^4 Net stable funding ratio is based on an average of the four previous quarters.

BALANCE SHEET ANALYSIS

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At 31 Mar        At 31 Mar                          At 31 Dec 
2024             2023              Change           2023                 Change 
GBPbn              GBPbn                   %            GBPbn                      % 

Loans and advances to customers

UK mortgages^1 304.6 307.5 (1) 306.2 (1)

Credit cards 15.2 14.4 6 15.1 1

UK Retail unsecured loans^2 7.6 9.0 (16) 6.9 10

UK Motor Finance 15.8 14.7 7 15.3 3

Overdrafts 1.0 1.0 1.1 (9)

Retail other^1,3 16.9 15.1 12 16.6 2

Small and Medium Businesses 32.2 36.4 (12) 33.0 (2)
Corporate and Institutional
Banking 55.6 56.7 (2) 55.6

Central Items^4 (0.4) (2.5) 84 (0.1)

Loans and advances to customers 448.5 452.3 (1) 449.7

Customer deposits

Retail current accounts 103.1 110.5 (7) 102.7

Retail savings accounts^5 196.4 183.1 7 194.8 1

Wealth 10.2 12.9 (21) 10.9 (6)

Commercial Banking 159.3 166.5 (4) 162.8 (2)

Central Items 0.2 0.1 0.2

Customer deposits 469.2 473.1 (1) 471.4


Total assets 889.6 885.7 881.5 1

Total liabilities 841.8 837.8 834.1 1


Ordinary shareholders' equity 40.7 40.6 40.3 1

Other equity instruments 6.9 7.1 (3) 6.9

Non-controlling interests 0.2 0.2 0.2

Total equity 47.8 47.9 47.4 1

Ordinary shares in issue,
excluding own shares 63,653m 66,396m (4) 63,508m
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^1 Open mortgage book and closed mortgage book, previously presented separately, are now reported together as UK mortgages; Wealth, previously reported separately, is now included within Retail other. Comparatives have been presented on a consistent basis.

^2 The reduction between 31 March 2023 and 31 December 2023 reflects the impact of the securitisation of GBP2.7 billion of UK Retail unsecured loans in the fourth quarter of 2023.

^3 Retail other includes the European and Wealth businesses.

^4 Central Items includes central fair value hedge accounting adjustments.

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