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24.04.2024 08:00:48 - EQS-News: 2024 Q1 Interim Management Statement -8-
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
of the following year.
INCOME STATEMENT (UNDERLYING BASIS)^A AND KEY BALANCE SHEET METRICS
Three
months
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)
Average interest-earning
2024 2023 % 2023 At %
Loans and advances to
customers GBP448.5bn GBP452.3bn (1) GBP449.7bn
Risk-weighted assets GBP222.8bn GBP210.9bn 6 GBP219.1bn 2
Tangible net assets per share
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April 24, 2024 02:00 ET (06:00 GMT)
DJ EQS-News: 2024 Q1 Interim Management Statement -2-
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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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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
Average interest-earning
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
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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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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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April 24, 2024 02:00 ET (06:00 GMT)
DJ EQS-News: 2024 Q1 Interim Management Statement -3-
^5 Retail relationship savings accounts and Retail tactical savings accounts, previously reported separately, are now reported together as Retail savings accounts. Comparatives have been 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.
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Net interest income 3,045 3,434 (11) 3,187 (4)
Other income 8,272 5,875 41 12,149 (32)
Total income 11,317 9,309 22 15,336 (26)
Net finance expense in respect of
insurance and investment contracts (6,930) (4,501) (54) (10,609) 35
Total income, after net finance
expense in respect of insurance and
investment contracts 4,387 4,808 (9) 4,727 (7)
Operating expenses (2,703) (2,306) (17) (3,492) 23
Impairment (charge) credit (56) (242) 77 540
Profit before tax 1,628 2,260 (28) 1,775 (8)
Tax expense (413) (619) 33 (541) 24
Profit for the period 1,215 1,641 (26) 1,234 (2)
Profit attributable to ordinary
shareholders 1,069 1,510 (29) 1,093 (2)
Ordinary shares in issue
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REVIEW OF PERFORMANCE^A
The Group's statutory profit before tax for the first three months of 2024 was GBP1,628 million, 28 per cent lower than the same period in 2023. This was due to lower net interest income and higher operating expenses, partly offset by a lower impairment charge. Statutory profit after tax was GBP1,215 million (three months to 31 March 2023: GBP1,641 million).
The Group's underlying profit was GBP1,757 million, a reduction of 21 per cent compared to GBP2,220 million in the first quarter of 2023. Lower underlying net interest income and higher operating costs were partly offset by growth in underlying other income and a lower underlying impairment charge. Underlying profit was up 1 per cent compared to the fourth quarter of 2023, with stable net income and lower operating costs and remediation. There was also a modest impairment charge, whereas the fourth quarter benefited from an impairment credit resulting from a significant write-back.
Net income of GBP4,241 million was down 9 per cent on the first three months of the prior year, 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 was broadly in line with the fourth quarter of 2023.
Underlying net interest income of GBP3,184 million was down 10 per cent on the first three months of 2023, driven by a lower banking net interest margin of 2.95 per cent (three months to 31 March 2023: 3.22 per cent). The lower margin reflects expected 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 in the higher rate environment. Average interest-earning banking assets in the first quarter of 2024 at GBP449.1 billion were 1 per cent lower compared to the first quarter of 2023, significantly due to a modest reduction in the mortgage book, as expected and continued repayments of government-backed lending in the Small and Medium Businesses portfolio. Net interest income in the first three months included non-banking interest expense of GBP105 million (three months to 31 March 2023: GBP76 million), which increased as a result of higher funding costs and growth in the Group's non-banking businesses. Further gradual quarter-on-quarter increases are expected during 2024.
Underlying net interest income was lower than the fourth quarter of 2023 (three months to 31 December 2023: 2.98 per cent) from asset margin compression mainly within UK mortgages, deposit mix headwinds and lower Commercial Banking deposits, partly mitigated by structural hedge earnings. The Group still expects the banking net interest margin for 2024 to be greater than 290 basis points and average interest-earning banking assets to be greater than GBP450 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. The notional balance of the sterling structural hedge was GBP244 billion (31 December 2023: GBP247 billion) with a weighted average duration of approximately three and a half years (31 December 2023: approximately three and a half years). The Group continues to expect a modest reduction in the notional balance during 2024, inclusive of the reduction in the first quarter, with balances stabilising over the course of the year. The Group generated c.GBP1.0 billion of total income from sterling structural hedge balances in the first three months of 2024, representing material growth over the prior year (three months to 31 March 2023: GBP0.8 billion). The Group continues to expect sterling structural hedge earnings in 2024 to be c.GBP0.7 billion higher than in 2023.
Underlying other income in the first quarter of 2024 of GBP1,340 million was 7 per cent higher compared to GBP1,257 million in the first three months of 2023, reflecting growth within Retail and Commercial Banking. Retail was up 17 per cent versus the first three months of 2023, primarily due to improved UK Motor Finance performance, including growth from the acquisition of Tusker. Within Commercial Banking, c.4 per cent growth reflected strong capital markets performance. Insurance, Pensions and Investments underlying other income was broadly stable compared to the first three months of 2023, with favourable market returns 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 quarter recognised within volatility and other items. Versus the fourth quarter of 2023, underlying other income was 4 per cent higher, primarily driven by Commercial Banking.
The Group delivered positive, organic growth in Insurance, Pensions and Investments and Wealth (reported within Retail) assets under administration (AuA), with combined GBP1.4 billion net new money in open book AuA over the period. In total, open book AuA now stand at c.GBP188 billion.
Operating lease depreciation of GBP283 million increased compared to the prior year (three months to 31 March 2023: GBP140 million). This reflects a full quarter of depreciation from Tusker, alongside growth in the fleet size and declines in used car prices. The charge is significantly lower than the fourth quarter of 2023 which included a c.GBP100 million increase in the residual value provision to offset developments in used car prices.
REVIEW OF PERFORMANCE (continued)
Total costs including remediation of GBP2,427 million and operating costs of GBP2,402 million were 11 per cent higher than prior year. This includes a new sector-wide Bank of England levy, replacing the former charging structure (excluding this levy, operating costs were up 6 per cent) and expected elevated severance charges taken early in the year (GBP0.1 billion higher year to date). The annual levy of c.GBP0.1 billion was charged through operating costs in the first quarter and will have a broadly neutral impact on profit in 2024, with an offsetting benefit recognised in net interest income over the course of the year. The Group continues to maintain cost discipline and delivery of cost efficiencies, in the context of inflationary pressures and ongoing strategic investment. The Group's cost:income ratio, including remediation, for the first quarter was 57.2 per cent (54.4 per cent excluding remediation and the Bank of England levy), compared to 47.1 per cent in the prior year. Operating costs in 2024 are still expected to be c.GBP9.3 billion, now plus c.GBP0.1 billion for the new Bank of England levy.
The Group recognised remediation costs of GBP25 million in the first three months (three months to 31 March 2023: GBP19 million), in relation to pre-existing programmes. There have been no further charges relating to the potential impact of the FCA review into historical motor finance commission arrangements, with the FCA having indicated it will update in September.
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April 24, 2024 02:00 ET (06:00 GMT)
DJ EQS-News: 2024 Q1 Interim Management Statement -4-
Asset quality remains strong with credit performance across portfolios stable in the quarter and remaining broadly at, or favourable to pre-pandemic experience. In UK mortgages, an improvement in new to arrears and flows to default has been observed in the first quarter, following an increase last year primarily driven by legacy variable rate customers. Unsecured Retail portfolios continue to exhibit stable new to arrears and default trends. Alongside, credit quality remains resilient in Commercial Banking.
Underlying impairment was a charge of GBP57 million (three months to 31 March 2023: GBP243 million), resulting in an asset quality ratio of 6 basis points. The charge is after a GBP192 million multiple economic scenarios (MES) credit (three months to 31 March 2023: GBP79 million credit), as a result of the improved economic outlook in the first quarter, notably in HPI. Impairment also reflects a pre-updated MES charge of GBP249 million (three months to 31 March 2023: GBP322 million), equivalent to an asset quality ratio of 23 basis points. Compared to the prior year and quarter, the pre-MES charge has remained stable in Retail. Commercial Banking has benefited from a one-off release from loss rates used in the model, while observing a low charge on new and existing Stage 3 clients.
The underlying expected credit loss (ECL) allowance reduced slightly to GBP4.1 billion in the quarter given releases following updates to the economic outlook and the benefit from loss rates used in the Commercial Banking model (31 December 2023: GBP4.3 billion). Like for like this is higher than reported pre-pandemic levels (31 December 2019: GBP4.2 billion) given it includes a material increase as a result of a weaker economic outlook versus 2019, offset by a GBP0.6 billion decrease on individually assessed Stage 3 cases, the most significant of which exited the portfolio in the fourth quarter of 2023. The uplift from the base case to the probability-weighted ECL continues to be GBP0.6 billion, including the adjusted severe downside scenario to incorporate higher CPI inflation and UK Bank Rate profiles.
Stage 3 assets at GBP10.6 billion are up slightly in the first quarter in both UK mortgages and Commercial Banking portfolios (31 December 2023: GBP10.1 billion). Write-offs remain low. Stage 2 assets have reduced in the first quarter to GBP50.2 billion (31 December 2023: GBP56.5 billion), with 90.7 per cent of Stage 2 loans up to date (31 December 2023: 91.3 per cent). The Group continues to expect the asset quality ratio to be less than 30 basis points in 2024.
Restructuring costs for the first three months of 2024 were GBP12 million (three months to 31 March 2023: GBP12 million) and include costs relating to the integration of Embark and Tusker. Volatility and other items were a net loss of GBP117 million for the first three months (three months to 31 March 2023: net gain of GBP52 million). This comprised GBP71 million negative market volatility, GBP20 million for the amortisation of purchased intangibles (three months to 31 March 2023: GBP18 million) and GBP26 million relating to fair value unwind (three months to 31 March 2023: GBP22 million). Market volatility was substantially driven by rate rises in the quarter causing negative insurance volatility, partly offset by positive impacts from banking volatility.
The return on tangible equity for the first quarter was 13.3 per cent (three months to 31 March 2023: 19.1 per cent). The Group continues to expect the return on tangible equity for 2024 to be c.13 per cent. Tangible net assets per share as at 31 March 2024 were 51.2 pence, up from 50.8 pence at 31 December 2023. The increase was driven by accumulated profit, partly offset by increased longer-term rates impacting the cash flow hedge reserve and pension surplus.
The Group has commenced the share buyback programme announced in February 2024, with c.0.5 billion shares repurchased as at 31 March 2024.
REVIEW OF PERFORMANCE (continued)
Balance sheet
Loans and advances to customers reduced in the first quarter of 2024 to GBP448.5 billion with a GBP1.6 billion reduction in the UK mortgages portfolio following the expected refinancing of the higher maturities in the fourth quarter of 2023, as well as a GBP0.8 billion reduction in Small and Medium Business lending, including repayments of government-backed lending. This was partly offset by growth in UK Retail unsecured loans of GBP0.7 billion, due to organic balance growth and lower repayments following a securitisation in the fourth quarter of 2023, alongside growth in UK Motor Finance and credit cards.
Customer deposits stood at GBP469.2 billion at the end of the first quarter, a decrease of GBP2.2 billion. Retail deposits were up GBP1.3 billion in the quarter with a combined increase of GBP0.9 billion across Retail savings and Wealth, driven by inflows to limited withdrawal and fixed products and a GBP0.4 billion increase in current account balances, benefiting from seasonally lower spend and bank holiday timing impacts (with the latter expected to reverse in the second quarter). This was partly offset by seasonal tax payments and outflows to savings products, including the Group's own savings offers. Growth in Retail was more than offset by a reduction in Commercial Banking deposits of GBP3.5 billion, largely due to Small and Medium Businesses balance reductions.
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 143 per cent (31 December 2023: 142 per cent) and a strong net stable funding ratio of 130 per cent (31 December 2023: 130 per cent). The loan to deposit ratio of 96 per cent, essentially stable compared to 31 December 2023, continues to reflect a robust funding and liquidity position.
Capital
The Group's CET1 capital ratio at 31 March 2024 was 13.9 per cent (31 December 2023: 13.7 per cent pro forma). Capital generation before regulatory headwinds during the first three months was 46 basis points, reflecting robust banking build in the quarter, partially offset by risk-weighted asset increases. The risk-weighted asset increases reflect underlying lending, but also include a temporary increase of c.GBP1.5 billion (equivalent to c.9 basis points) that is expected to reverse in the second quarter. Regulatory headwinds of 6 basis points 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. Capital generation after the impact of these regulatory headwinds was 40 basis points. The Group has accrued a foreseeable ordinary dividend of 22 basis points, based upon a pro-rated amount of the 2023 full year dividend. The Group continues to expect capital generation in 2024 to be c.175 basis points.
Risk-weighted assets increased by GBP3.7 billion to GBP222.8 billion at 31 March 2024 (31 December 2023: GBP219.1 billion). This largely reflected the impact of Retail lending and the temporary increase noted above. The impact from credit and model calibrations was minimal.
In relation to the Retail secured CRD IV models, it is estimated that a GBP5 billion risk-weighted asset increase will be required over 2024 to 2026, noting that this will be subject to final model outcomes. The Group's risk-weighted assets guidance for 2024 remains unchanged at between GBP220 billion and GBP225 billion.
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
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^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 Includes share-based payments and market volatility.
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April 24, 2024 02:00 ET (06:00 GMT)
DJ EQS-News: 2024 Q1 Interim Management Statement -5-
IMPAIRMENT DETAIL
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Three
months
Charges (credits)
pre-updated MES^1
Retail 303 271 (12) 277 (9)
Commercial Banking (49) 53 (626) (92)
Other (5) (2) (4) 25
249 322 23 (353)
Updated economic outlook
Retail (196) (66) (203) (3)
Commercial Banking 4 (13) 15 73
(192) (79) (188) 2 Underlying impairment
charge (credit)^A 57 243 77 (541)
Asset quality ratio^A 0.06% 0.22% (16)bp (0.47)%
Total underlying expected
credit loss allowance (at
end of period)^A 4,126 5,221 (21) 4,337 (5)
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^1 Impairment charges excluding the impact from updated economic outlook taken each quarter.
ADDITIONAL INFORMATION (continued)
IMPAIRMENT DETAIL (continued)
Loans and advances to customers and expected credit loss allowance (underlying basis)^A
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Loans and advances to customers
UK unsecured
loans and 7,667 1,210 195 9,072 13.3 2.1
overdrafts
Corporate and
Institutional 52,382 2,875 777 56,034 5.1 1.4
Banking
Equity
Investments and (323) - 6 (317)
Central Items^2
carrying value
Customer related ECL allowance (drawn and undrawn)
UK unsecured
loans and 161 233 118 512
overdrafts
Businesses
Corporate and
Institutional 155 138 242 535
Banking
Commercial 296 360 412 1,068
Banking
Equity
Investments and - - 4 4
Central Items
Total 1,028 1,520 1,543 4,091
Customer related ECL allowance (drawn and undrawn) as a percentage of loans and advances to customers^4
UK unsecured
loans and 2.1 19.3 65.9 5.7
overdrafts
Businesses
Corporate and
Institutional 0.3 4.8 31.2 1.0
Banking
Commercial 0.4 5.2 21.9 1.2
Banking
Equity
Investments and - 66.7
Central Items
Total 0.3 3.0 15.1 0.9
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^1^ ^ ^ Retail balances exclude the impact of the HBOS acquisition-related adjustments.
^2^ ^ ^ Contains centralised fair value hedge accounting adjustments.
^3^ ^ ^ UK Motor Finance for Stages 1 and 2 include GBP188 million relating to provisions against residual values of vehicles subject to finance leasing agreements for Black Horse. These provisions are included within the calculation of coverage ratios.
^4^ ^ ^ Total and Stage 3 ECL allowances as a percentage of drawn balances exclude loans in recoveries in Credit cards of GBP22 million, UK unsecured loans and overdrafts of GBP16 million, Small and Medium Businesses of GBP360 million and Corporate and Institutional Banking of GBP1 million.
ADDITIONAL INFORMATION (continued)
IMPAIRMENT DETAIL (continued)
Loans and advances to customers and expected credit loss allowance (underlying basis)^A (continued)
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Loans and advances to customers
UK unsecured
loans and 7,103 1,187 196 8,486 14.0 2.3
overdrafts
Corporate and
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April 24, 2024 02:00 ET (06:00 GMT)
DJ EQS-News: 2024 Q1 Interim Management Statement -6-
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Institutional 52,049 3,529 538 56,116 6.3 1.0
Banking
Equity
Investments and (43) - 6 (37)
Central Items^2
carrying value
Customer related ECL allowance (drawn and undrawn)
UK unsecured
loans and 153 244 118 515
overdrafts
Businesses
Corporate and
Institutional 156 218 253 627
Banking
Commercial 296 449 420 1,165
Banking
Equity
Investments and - - 4 4
Central Items
Total 1,061 1,692 1,539 4,292
Customer related ECL allowance (drawn and undrawn) as a percentage of loans and advances to customers^4
UK unsecured
loans and 2.2 20.6 65.6 6.1
overdrafts
Businesses
Corporate and
Institutional 0.3 6.2 47.0 1.1
Banking
Commercial 0.4 5.6 24.1 1.3
Banking
Equity
Investments and - 66.7
Central Items
Total 0.3 3.0 15.8 0.9
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^1^ ^ ^ Retail balances exclude the impact of the HBOS acquisition-related adjustments.
^2^ ^ ^ Contains centralised fair value hedge accounting adjustments.
^3^ ^ ^ UK Motor Finance for Stages 1 and 2 include GBP187 million relating to provisions against residual values of vehicles subject to finance leasing agreements for Black Horse. These provisions are included within the calculation of coverage ratios.
^4 Total and Stage 3 ECL allowances as a percentage of drawn balances exclude loans in recoveries in Credit cards of GBP21 million, UK unsecured loans and overdrafts of GBP16 million and Small and Medium Businesses of GBP327 million.
ADDITIONAL INFORMATION (continued)
IMPAIRMENT DETAIL (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.
===
===
Base case and MES economic assumptions
The Group's base case scenario is for a slow expansion in GDP and a rise in the unemployment rate alongside modest changes in residential and commercial property prices. Following a reduction in inflationary pressures, UK Bank Rate is expected to be lowered during 2024. 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 first quarter of 2024. Actuals for this period, or restatements of past data, may have since emerged prior to publication. 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.
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.
===
2024 2024 2024 2024 2025 2025 2025 2025 At 31 March 2024 % % % % % % % %
Gross domestic product 0.3 0.2 0.3 0.3 0.3 0.3 0.4 0.4
Unemployment rate 4.0 4.2 4.4 4.6 4.8 4.8 4.8 4.8
House price growth 1.5 2.1 4.6 1.5 (0.1) 0.1 0.4 0.8
Commercial real estate price
growth (5.4) (5.3) (3.3) (0.5) 0.7 1.1 0.8 0.7
UK Bank Rate 5.25 5.00 4.75 4.50 4.25 4.00 4.00 3.75
CPI inflation 3.3 2.1 1.8 2.4 2.4 2.9 3.0 3.0
===
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)
IMPAIRMENT DETAIL (continued)
Base case and MES economic assumptions (continued)
===
2024-2028
Upside
Gross domestic product 1.1 2.0 1.7 1.6 1.6 1.6
Unemployment rate 3.2 3.0 3.0 2.9 2.9 3.0
House price growth 3.7 6.7 6.5 5.3 4.9 5.4
Commercial real estate price
growth 6.5 4.8 1.4 2.0 2.2 3.4
UK Bank Rate 5.40 5.44 5.25 5.00 5.07 5.23
CPI inflation 2.3 2.9 2.9 2.8 3.0 2.8
Base case
Gross domestic product 0.4 1.2 1.6 1.7 1.7 1.3
Unemployment rate 4.3 4.8 4.8 4.6 4.6 4.6
House price growth 1.5 0.8 0.9 1.6 2.8 1.5
Commercial real estate price
growth (0.5) 0.7 (0.1) 1.6 2.1 0.7
UK Bank Rate 4.88 4.00 3.50 3.06 3.00 3.69
CPI inflation 2.4 2.8 2.4 2.1 2.2 2.4
Downside
Gross domestic product (0.8) (0.4) 1.2 1.7 1.7 0.7
===
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===
Unemployment rate 5.5 7.4 7.7 7.4 7.2 7.1
House price growth 0.0 (5.2) (7.0) (4.8) (1.5) (3.7)
Commercial real estate price
growth (8.1) (5.2) (2.9) (1.0) (0.2) (3.5)
UK Bank Rate 4.29 2.00 1.03 0.48 0.29 1.62
CPI inflation 2.4 2.7 1.8 1.0 1.0 1.8
Severe downside
Gross domestic product (1.8) (1.1) 1.1 1.4 1.5 0.2
Unemployment rate 7.2 10.1 10.3 9.9 9.7 9.4
House price growth (2.2) (12.3) (14.3) (10.9) (6.0) (9.2)
Commercial real estate price
growth (18.0) (11.7) (8.5) (5.0) (2.4) (9.3)
UK Bank Rate - modelled 3.46 0.51 0.11 0.02 0.01 0.82
UK Bank Rate - adjusted^1 6.19 4.56 3.63 3.13 3.00 4.10
CPI inflation - modelled 2.4 2.4 1.0 0.0 (0.1) 1.1
CPI inflation - adjusted^1 7.5 3.5 1.3 1.0 1.8 3.0
Probability-weighted
Gross domestic product 0.0 0.7 1.5 1.6 1.6 1.1
Unemployment rate 4.6 5.6 5.7 5.5 5.4 5.3
House price growth 1.3 (0.6) (1.3) (0.5) 1.2 0.0
Commercial real estate price
growth (2.4) (1.1) (1.3) 0.3 1.0 (0.7)
UK Bank Rate - modelled 4.71 3.48 2.94 2.56 2.51 3.24
UK Bank Rate - adjusted^1 4.99 3.89 3.30 2.88 2.81 3.57
CPI inflation - modelled 2.4 2.8 2.3 1.8 1.9 2.2
CPI inflation - adjusted^1 2.9 2.9 2.3 1.9 2.1 2.4
===
^1 The adjustment to UK Bank Rate and CPI inflation in the severe downside is considered to better reflect the risks around the Group's base case view in an economic environment where supply shocks are the principal concern.
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 unchanged since the year-end, is set out on pages 27 to 32 of the Group's 2023 Full Year Results News Release.
===
Banking net interest margin^A
Loans and advances to customers (GBPbn) 448.5 452.3
Add back:
Adjustment for non-banking and other items:
Return on tangible equity^A
Profit attributable to ordinary shareholders (GBPm) 1,069 1,510
Return on tangible equity^A 13.3% 19.1%
===
KEY DATES
===
===
BASIS OF PRESENTATION
This release covers the results of Lloyds Banking Group plc together with its subsidiaries (the Group) for the three months ended 31 March 2024. Unless otherwise stated, income statement commentaries throughout this document compare the three months ended 31 March 2024 to the three months ended 31 March 2023 and the balance sheet analysis compares the Group balance sheet as at 31 March 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 on page 14. Unless otherwise stated, commentary on page 1 are given on an underlying basis. The Group's Q1 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
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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
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.
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===
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United Kingdom
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EQS News ID: 1887637
End of News EQS News Service
===
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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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April 24, 2024 02:00 ET (06:00 GMT)
DJ EQS-News: 2024 Q1 Interim Management Statement -2-
===
^A 51.2p 49.6p 1.6p 50.8p 0.4p
===
^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
===
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
===
^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
===
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
===
^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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April 24, 2024 02:00 ET (06:00 GMT)
DJ EQS-News: 2024 Q1 Interim Management Statement -3-
^5 Retail relationship savings accounts and Retail tactical savings accounts, previously reported separately, are now reported together as Retail savings accounts. Comparatives have been 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.
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Summary income statement Three Three months months Three months ended ended ended 31 31 Dec 31 Mar 2024 Mar 2023 Change 2023 Change GBPm GBPm % GBPm %
Net interest income 3,045 3,434 (11) 3,187 (4)
Other income 8,272 5,875 41 12,149 (32)
Total income 11,317 9,309 22 15,336 (26)
Net finance expense in respect of
insurance and investment contracts (6,930) (4,501) (54) (10,609) 35
Total income, after net finance
expense in respect of insurance and
investment contracts 4,387 4,808 (9) 4,727 (7)
Operating expenses (2,703) (2,306) (17) (3,492) 23
Impairment (charge) credit (56) (242) 77 540
Profit before tax 1,628 2,260 (28) 1,775 (8)
Tax expense (413) (619) 33 (541) 24
Profit for the period 1,215 1,641 (26) 1,234 (2)
Profit attributable to ordinary
shareholders 1,069 1,510 (29) 1,093 (2)
Ordinary shares in issue
(weighted-average - basic) 63,906m 66,972m (5) 63,502m 1 Basic earnings per share 1.7p 2.3p (0.6)p 1.7p
===
REVIEW OF PERFORMANCE^A
The Group's statutory profit before tax for the first three months of 2024 was GBP1,628 million, 28 per cent lower than the same period in 2023. This was due to lower net interest income and higher operating expenses, partly offset by a lower impairment charge. Statutory profit after tax was GBP1,215 million (three months to 31 March 2023: GBP1,641 million).
The Group's underlying profit was GBP1,757 million, a reduction of 21 per cent compared to GBP2,220 million in the first quarter of 2023. Lower underlying net interest income and higher operating costs were partly offset by growth in underlying other income and a lower underlying impairment charge. Underlying profit was up 1 per cent compared to the fourth quarter of 2023, with stable net income and lower operating costs and remediation. There was also a modest impairment charge, whereas the fourth quarter benefited from an impairment credit resulting from a significant write-back.
Net income of GBP4,241 million was down 9 per cent on the first three months of the prior year, 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 was broadly in line with the fourth quarter of 2023.
Underlying net interest income of GBP3,184 million was down 10 per cent on the first three months of 2023, driven by a lower banking net interest margin of 2.95 per cent (three months to 31 March 2023: 3.22 per cent). The lower margin reflects expected 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 in the higher rate environment. Average interest-earning banking assets in the first quarter of 2024 at GBP449.1 billion were 1 per cent lower compared to the first quarter of 2023, significantly due to a modest reduction in the mortgage book, as expected and continued repayments of government-backed lending in the Small and Medium Businesses portfolio. Net interest income in the first three months included non-banking interest expense of GBP105 million (three months to 31 March 2023: GBP76 million), which increased as a result of higher funding costs and growth in the Group's non-banking businesses. Further gradual quarter-on-quarter increases are expected during 2024.
Underlying net interest income was lower than the fourth quarter of 2023 (three months to 31 December 2023: 2.98 per cent) from asset margin compression mainly within UK mortgages, deposit mix headwinds and lower Commercial Banking deposits, partly mitigated by structural hedge earnings. The Group still expects the banking net interest margin for 2024 to be greater than 290 basis points and average interest-earning banking assets to be greater than GBP450 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. The notional balance of the sterling structural hedge was GBP244 billion (31 December 2023: GBP247 billion) with a weighted average duration of approximately three and a half years (31 December 2023: approximately three and a half years). The Group continues to expect a modest reduction in the notional balance during 2024, inclusive of the reduction in the first quarter, with balances stabilising over the course of the year. The Group generated c.GBP1.0 billion of total income from sterling structural hedge balances in the first three months of 2024, representing material growth over the prior year (three months to 31 March 2023: GBP0.8 billion). The Group continues to expect sterling structural hedge earnings in 2024 to be c.GBP0.7 billion higher than in 2023.
Underlying other income in the first quarter of 2024 of GBP1,340 million was 7 per cent higher compared to GBP1,257 million in the first three months of 2023, reflecting growth within Retail and Commercial Banking. Retail was up 17 per cent versus the first three months of 2023, primarily due to improved UK Motor Finance performance, including growth from the acquisition of Tusker. Within Commercial Banking, c.4 per cent growth reflected strong capital markets performance. Insurance, Pensions and Investments underlying other income was broadly stable compared to the first three months of 2023, with favourable market returns 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 quarter recognised within volatility and other items. Versus the fourth quarter of 2023, underlying other income was 4 per cent higher, primarily driven by Commercial Banking.
The Group delivered positive, organic growth in Insurance, Pensions and Investments and Wealth (reported within Retail) assets under administration (AuA), with combined GBP1.4 billion net new money in open book AuA over the period. In total, open book AuA now stand at c.GBP188 billion.
Operating lease depreciation of GBP283 million increased compared to the prior year (three months to 31 March 2023: GBP140 million). This reflects a full quarter of depreciation from Tusker, alongside growth in the fleet size and declines in used car prices. The charge is significantly lower than the fourth quarter of 2023 which included a c.GBP100 million increase in the residual value provision to offset developments in used car prices.
REVIEW OF PERFORMANCE (continued)
Total costs including remediation of GBP2,427 million and operating costs of GBP2,402 million were 11 per cent higher than prior year. This includes a new sector-wide Bank of England levy, replacing the former charging structure (excluding this levy, operating costs were up 6 per cent) and expected elevated severance charges taken early in the year (GBP0.1 billion higher year to date). The annual levy of c.GBP0.1 billion was charged through operating costs in the first quarter and will have a broadly neutral impact on profit in 2024, with an offsetting benefit recognised in net interest income over the course of the year. The Group continues to maintain cost discipline and delivery of cost efficiencies, in the context of inflationary pressures and ongoing strategic investment. The Group's cost:income ratio, including remediation, for the first quarter was 57.2 per cent (54.4 per cent excluding remediation and the Bank of England levy), compared to 47.1 per cent in the prior year. Operating costs in 2024 are still expected to be c.GBP9.3 billion, now plus c.GBP0.1 billion for the new Bank of England levy.
The Group recognised remediation costs of GBP25 million in the first three months (three months to 31 March 2023: GBP19 million), in relation to pre-existing programmes. There have been no further charges relating to the potential impact of the FCA review into historical motor finance commission arrangements, with the FCA having indicated it will update in September.
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April 24, 2024 02:00 ET (06:00 GMT)
DJ EQS-News: 2024 Q1 Interim Management Statement -4-
Asset quality remains strong with credit performance across portfolios stable in the quarter and remaining broadly at, or favourable to pre-pandemic experience. In UK mortgages, an improvement in new to arrears and flows to default has been observed in the first quarter, following an increase last year primarily driven by legacy variable rate customers. Unsecured Retail portfolios continue to exhibit stable new to arrears and default trends. Alongside, credit quality remains resilient in Commercial Banking.
Underlying impairment was a charge of GBP57 million (three months to 31 March 2023: GBP243 million), resulting in an asset quality ratio of 6 basis points. The charge is after a GBP192 million multiple economic scenarios (MES) credit (three months to 31 March 2023: GBP79 million credit), as a result of the improved economic outlook in the first quarter, notably in HPI. Impairment also reflects a pre-updated MES charge of GBP249 million (three months to 31 March 2023: GBP322 million), equivalent to an asset quality ratio of 23 basis points. Compared to the prior year and quarter, the pre-MES charge has remained stable in Retail. Commercial Banking has benefited from a one-off release from loss rates used in the model, while observing a low charge on new and existing Stage 3 clients.
The underlying expected credit loss (ECL) allowance reduced slightly to GBP4.1 billion in the quarter given releases following updates to the economic outlook and the benefit from loss rates used in the Commercial Banking model (31 December 2023: GBP4.3 billion). Like for like this is higher than reported pre-pandemic levels (31 December 2019: GBP4.2 billion) given it includes a material increase as a result of a weaker economic outlook versus 2019, offset by a GBP0.6 billion decrease on individually assessed Stage 3 cases, the most significant of which exited the portfolio in the fourth quarter of 2023. The uplift from the base case to the probability-weighted ECL continues to be GBP0.6 billion, including the adjusted severe downside scenario to incorporate higher CPI inflation and UK Bank Rate profiles.
Stage 3 assets at GBP10.6 billion are up slightly in the first quarter in both UK mortgages and Commercial Banking portfolios (31 December 2023: GBP10.1 billion). Write-offs remain low. Stage 2 assets have reduced in the first quarter to GBP50.2 billion (31 December 2023: GBP56.5 billion), with 90.7 per cent of Stage 2 loans up to date (31 December 2023: 91.3 per cent). The Group continues to expect the asset quality ratio to be less than 30 basis points in 2024.
Restructuring costs for the first three months of 2024 were GBP12 million (three months to 31 March 2023: GBP12 million) and include costs relating to the integration of Embark and Tusker. Volatility and other items were a net loss of GBP117 million for the first three months (three months to 31 March 2023: net gain of GBP52 million). This comprised GBP71 million negative market volatility, GBP20 million for the amortisation of purchased intangibles (three months to 31 March 2023: GBP18 million) and GBP26 million relating to fair value unwind (three months to 31 March 2023: GBP22 million). Market volatility was substantially driven by rate rises in the quarter causing negative insurance volatility, partly offset by positive impacts from banking volatility.
The return on tangible equity for the first quarter was 13.3 per cent (three months to 31 March 2023: 19.1 per cent). The Group continues to expect the return on tangible equity for 2024 to be c.13 per cent. Tangible net assets per share as at 31 March 2024 were 51.2 pence, up from 50.8 pence at 31 December 2023. The increase was driven by accumulated profit, partly offset by increased longer-term rates impacting the cash flow hedge reserve and pension surplus.
The Group has commenced the share buyback programme announced in February 2024, with c.0.5 billion shares repurchased as at 31 March 2024.
REVIEW OF PERFORMANCE (continued)
Balance sheet
Loans and advances to customers reduced in the first quarter of 2024 to GBP448.5 billion with a GBP1.6 billion reduction in the UK mortgages portfolio following the expected refinancing of the higher maturities in the fourth quarter of 2023, as well as a GBP0.8 billion reduction in Small and Medium Business lending, including repayments of government-backed lending. This was partly offset by growth in UK Retail unsecured loans of GBP0.7 billion, due to organic balance growth and lower repayments following a securitisation in the fourth quarter of 2023, alongside growth in UK Motor Finance and credit cards.
Customer deposits stood at GBP469.2 billion at the end of the first quarter, a decrease of GBP2.2 billion. Retail deposits were up GBP1.3 billion in the quarter with a combined increase of GBP0.9 billion across Retail savings and Wealth, driven by inflows to limited withdrawal and fixed products and a GBP0.4 billion increase in current account balances, benefiting from seasonally lower spend and bank holiday timing impacts (with the latter expected to reverse in the second quarter). This was partly offset by seasonal tax payments and outflows to savings products, including the Group's own savings offers. Growth in Retail was more than offset by a reduction in Commercial Banking deposits of GBP3.5 billion, largely due to Small and Medium Businesses balance reductions.
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 143 per cent (31 December 2023: 142 per cent) and a strong net stable funding ratio of 130 per cent (31 December 2023: 130 per cent). The loan to deposit ratio of 96 per cent, essentially stable compared to 31 December 2023, continues to reflect a robust funding and liquidity position.
Capital
The Group's CET1 capital ratio at 31 March 2024 was 13.9 per cent (31 December 2023: 13.7 per cent pro forma). Capital generation before regulatory headwinds during the first three months was 46 basis points, reflecting robust banking build in the quarter, partially offset by risk-weighted asset increases. The risk-weighted asset increases reflect underlying lending, but also include a temporary increase of c.GBP1.5 billion (equivalent to c.9 basis points) that is expected to reverse in the second quarter. Regulatory headwinds of 6 basis points 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. Capital generation after the impact of these regulatory headwinds was 40 basis points. The Group has accrued a foreseeable ordinary dividend of 22 basis points, based upon a pro-rated amount of the 2023 full year dividend. The Group continues to expect capital generation in 2024 to be c.175 basis points.
Risk-weighted assets increased by GBP3.7 billion to GBP222.8 billion at 31 March 2024 (31 December 2023: GBP219.1 billion). This largely reflected the impact of Retail lending and the temporary increase noted above. The impact from credit and model calibrations was minimal.
In relation to the Retail secured CRD IV models, it is estimated that a GBP5 billion risk-weighted asset increase will be required over 2024 to 2026, noting that this will be subject to final model outcomes. The Group's risk-weighted assets guidance for 2024 remains unchanged at between GBP220 billion and GBP225 billion.
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
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Pro forma CET1 ratio as at 31 December 2023^1 13.7% Banking build (including impairment charge) (bps) 57 Risk-weighted assets (bps) (24) Other movements^2 (bps) 13 Capital generation (bps) 46 Retail secured CRD IV model updates and phased unwind of IFRS 9 transitional relief (bps) (6) Capital generation (post CRD IV and transitional headwinds) (bps) 40 Ordinary dividend (bps) (22) CET1 ratio as at 31 March 2024 13.9%
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^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 Includes share-based payments and market volatility.
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April 24, 2024 02:00 ET (06:00 GMT)
DJ EQS-News: 2024 Q1 Interim Management Statement -5-
IMPAIRMENT DETAIL
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Three
months
Three months Three months ended ended ended 31 Dec 31 Mar 2024 31 Mar 2023 Change 2023 Change GBPm GBPm % GBPm %
Charges (credits)
pre-updated MES^1
Retail 303 271 (12) 277 (9)
Commercial Banking (49) 53 (626) (92)
Other (5) (2) (4) 25
249 322 23 (353)
Updated economic outlook
Retail (196) (66) (203) (3)
Commercial Banking 4 (13) 15 73
(192) (79) (188) 2 Underlying impairment
charge (credit)^A 57 243 77 (541)
Asset quality ratio^A 0.06% 0.22% (16)bp (0.47)%
Total underlying expected
credit loss allowance (at
end of period)^A 4,126 5,221 (21) 4,337 (5)
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^1 Impairment charges excluding the impact from updated economic outlook taken each quarter.
ADDITIONAL INFORMATION (continued)
IMPAIRMENT DETAIL (continued)
Loans and advances to customers and expected credit loss allowance (underlying basis)^A
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Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Total as % of as % of At 31 March 2024 GBPm GBPm GBPm GBPm total total
Loans and advances to customers
261,828 36,476 7,608 305,912 UK mortgages 11.9 2.5 12,729 2,883 308 15,920 Credit cards 18.1 1.9
UK unsecured
loans and 7,667 1,210 195 9,072 13.3 2.1
overdrafts
13,897 2,140 118 16,155 UK Motor Finance 13.2 0.7 16,178 507 149 16,834 Other 3.0 0.9 312,299 43,216 8,378 363,893 Retail^1 11.9 2.3 Small and Medium 27,115 4,087 1,465 32,667 Businesses 12.5 4.5
Corporate and
Institutional 52,382 2,875 777 56,034 5.1 1.4
Banking
Commercial 79,497 6,962 2,242 88,701 Banking 7.8 2.5
Equity
Investments and (323) - 6 (317)
Central Items^2
Total gross 391,473 50,178 10,626 452,277 lending 11.1 2.3 ECL allowance on (1,374) (1,541) (3,779) drawn balances (864) Net balance sheet 390,609 48,804 9,085 448,498
carrying value
Customer related ECL allowance (drawn and undrawn)
UK mortgages 134 406 752 1,292 Credit cards 231 405 144 780
UK unsecured
loans and 161 233 118 512
overdrafts
UK Motor Finance^ 187 349 3 95 67
Other 19 21 46 86 Retail^1 732 1,160 1,127 3,019 Small and Medium 141 222 170 533
Businesses
Corporate and
Institutional 155 138 242 535
Banking
Commercial 296 360 412 1,068
Banking
Equity
Investments and - - 4 4
Central Items
Total 1,028 1,520 1,543 4,091
Customer related ECL allowance (drawn and undrawn) as a percentage of loans and advances to customers^4
UK mortgages 0.1 1.1 9.9 0.4 Credit cards 1.8 14.0 50.3 4.9
UK unsecured
loans and 2.1 19.3 65.9 5.7
overdrafts
UK Motor Finance 1.3 4.4 56.8 2.2 Other 0.1 4.1 30.9 0.5 Retail^1 0.2 2.7 13.5 0.8 Small and Medium 0.5 5.4 15.4 1.6
Businesses
Corporate and
Institutional 0.3 4.8 31.2 1.0
Banking
Commercial 0.4 5.2 21.9 1.2
Banking
Equity
Investments and - 66.7
Central Items
Total 0.3 3.0 15.1 0.9
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^1^ ^ ^ Retail balances exclude the impact of the HBOS acquisition-related adjustments.
^2^ ^ ^ Contains centralised fair value hedge accounting adjustments.
^3^ ^ ^ UK Motor Finance for Stages 1 and 2 include GBP188 million relating to provisions against residual values of vehicles subject to finance leasing agreements for Black Horse. These provisions are included within the calculation of coverage ratios.
^4^ ^ ^ Total and Stage 3 ECL allowances as a percentage of drawn balances exclude loans in recoveries in Credit cards of GBP22 million, UK unsecured loans and overdrafts of GBP16 million, Small and Medium Businesses of GBP360 million and Corporate and Institutional Banking of GBP1 million.
ADDITIONAL INFORMATION (continued)
IMPAIRMENT DETAIL (continued)
Loans and advances to customers and expected credit loss allowance (underlying basis)^A (continued)
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Stage 2 Stage 3 At 31 December Stage 1 Stage 2 Stage 3 Total as % of as % of 2023 GBPm GBPm GBPm GBPm total total
Loans and advances to customers
258,362 41,911 7,300 307,573 UK mortgages 13.6 2.4 12,625 2,908 284 15,817 Credit cards 18.4 1.8
UK unsecured
loans and 7,103 1,187 196 8,486 14.0 2.3
overdrafts
13,541 2,027 112 15,680 UK Motor Finance 12.9 0.7 15,898 525 144 16,567 Other 3.2 0.9 307,529 48,558 8,036 364,123 Retail^1 13.3 2.2 Small and Medium 27,525 4,458 1,530 33,513 Businesses 13.3 4.6
Corporate and
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April 24, 2024 02:00 ET (06:00 GMT)
DJ EQS-News: 2024 Q1 Interim Management Statement -6-
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Institutional 52,049 3,529 538 56,116 6.3 1.0
Banking
Commercial 79,574 7,987 2,068 89,629 Banking 8.9 2.3
Equity
Investments and (43) - 6 (37)
Central Items^2
Total gross 387,060 56,545 10,110 453,715 lending 12.5 2.2 ECL allowance on (1,532) (1,537) (3,970) drawn balances (901) Net balance sheet 386,159 55,013 8,573 449,745
carrying value
Customer related ECL allowance (drawn and undrawn)
UK mortgages 170 441 757 1,368 Credit cards 234 446 130 810
UK unsecured
loans and 153 244 118 515
overdrafts
UK Motor Finance^ 188 342 3 91 63
Other 20 21 47 88 Retail^1 765 1,243 1,115 3,123 Small and Medium 140 231 167 538
Businesses
Corporate and
Institutional 156 218 253 627
Banking
Commercial 296 449 420 1,165
Banking
Equity
Investments and - - 4 4
Central Items
Total 1,061 1,692 1,539 4,292
Customer related ECL allowance (drawn and undrawn) as a percentage of loans and advances to customers^4
UK mortgages 0.1 1.1 10.4 0.4 Credit cards 1.9 15.3 49.4 5.1
UK unsecured
loans and 2.2 20.6 65.6 6.1
overdrafts
UK Motor Finance 1.4 4.5 56.3 2.2 Other 0.1 4.0 32.6 0.5 Retail^1 0.2 2.6 13.9 0.9 Small and Medium 0.5 5.2 13.9 1.6
Businesses
Corporate and
Institutional 0.3 6.2 47.0 1.1
Banking
Commercial 0.4 5.6 24.1 1.3
Banking
Equity
Investments and - 66.7
Central Items
Total 0.3 3.0 15.8 0.9
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^1^ ^ ^ Retail balances exclude the impact of the HBOS acquisition-related adjustments.
^2^ ^ ^ Contains centralised fair value hedge accounting adjustments.
^3^ ^ ^ UK Motor Finance for Stages 1 and 2 include GBP187 million relating to provisions against residual values of vehicles subject to finance leasing agreements for Black Horse. These provisions are included within the calculation of coverage ratios.
^4 Total and Stage 3 ECL allowances as a percentage of drawn balances exclude loans in recoveries in Credit cards of GBP21 million, UK unsecured loans and overdrafts of GBP16 million and Small and Medium Businesses of GBP327 million.
ADDITIONAL INFORMATION (continued)
IMPAIRMENT DETAIL (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.
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Probability- Severe weighted Upside Base case Downside downside Underlying basis^A GBPm GBPm GBPm GBPm GBPm
At 31 March 2024 4,126 2,837 3,512 4,504 8,702 At 31 December 2023 4,337 2,925 3,666 4,714 9,455
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Base case and MES economic assumptions
The Group's base case scenario is for a slow expansion in GDP and a rise in the unemployment rate alongside modest changes in residential and commercial property prices. Following a reduction in inflationary pressures, UK Bank Rate is expected to be lowered during 2024. 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 first quarter of 2024. Actuals for this period, or restatements of past data, may have since emerged prior to publication. 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.
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.
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First Second Third Fourth First Second Third Fourth quarter quarter quarter quarter quarter quarter quarter quarter
2024 2024 2024 2024 2025 2025 2025 2025 At 31 March 2024 % % % % % % % %
Gross domestic product 0.3 0.2 0.3 0.3 0.3 0.3 0.4 0.4
Unemployment rate 4.0 4.2 4.4 4.6 4.8 4.8 4.8 4.8
House price growth 1.5 2.1 4.6 1.5 (0.1) 0.1 0.4 0.8
Commercial real estate price
growth (5.4) (5.3) (3.3) (0.5) 0.7 1.1 0.8 0.7
UK Bank Rate 5.25 5.00 4.75 4.50 4.25 4.00 4.00 3.75
CPI inflation 3.3 2.1 1.8 2.4 2.4 2.9 3.0 3.0
===
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)
IMPAIRMENT DETAIL (continued)
Base case and MES economic assumptions (continued)
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2024-2028
2024 2025 2026 2027 2028 average At 31 March 2024 % % % % % %
Upside
Gross domestic product 1.1 2.0 1.7 1.6 1.6 1.6
Unemployment rate 3.2 3.0 3.0 2.9 2.9 3.0
House price growth 3.7 6.7 6.5 5.3 4.9 5.4
Commercial real estate price
growth 6.5 4.8 1.4 2.0 2.2 3.4
UK Bank Rate 5.40 5.44 5.25 5.00 5.07 5.23
CPI inflation 2.3 2.9 2.9 2.8 3.0 2.8
Base case
Gross domestic product 0.4 1.2 1.6 1.7 1.7 1.3
Unemployment rate 4.3 4.8 4.8 4.6 4.6 4.6
House price growth 1.5 0.8 0.9 1.6 2.8 1.5
Commercial real estate price
growth (0.5) 0.7 (0.1) 1.6 2.1 0.7
UK Bank Rate 4.88 4.00 3.50 3.06 3.00 3.69
CPI inflation 2.4 2.8 2.4 2.1 2.2 2.4
Downside
Gross domestic product (0.8) (0.4) 1.2 1.7 1.7 0.7
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April 24, 2024 02:00 ET (06:00 GMT)
DJ EQS-News: 2024 Q1 Interim Management Statement -7-
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Unemployment rate 5.5 7.4 7.7 7.4 7.2 7.1
House price growth 0.0 (5.2) (7.0) (4.8) (1.5) (3.7)
Commercial real estate price
growth (8.1) (5.2) (2.9) (1.0) (0.2) (3.5)
UK Bank Rate 4.29 2.00 1.03 0.48 0.29 1.62
CPI inflation 2.4 2.7 1.8 1.0 1.0 1.8
Severe downside
Gross domestic product (1.8) (1.1) 1.1 1.4 1.5 0.2
Unemployment rate 7.2 10.1 10.3 9.9 9.7 9.4
House price growth (2.2) (12.3) (14.3) (10.9) (6.0) (9.2)
Commercial real estate price
growth (18.0) (11.7) (8.5) (5.0) (2.4) (9.3)
UK Bank Rate - modelled 3.46 0.51 0.11 0.02 0.01 0.82
UK Bank Rate - adjusted^1 6.19 4.56 3.63 3.13 3.00 4.10
CPI inflation - modelled 2.4 2.4 1.0 0.0 (0.1) 1.1
CPI inflation - adjusted^1 7.5 3.5 1.3 1.0 1.8 3.0
Probability-weighted
Gross domestic product 0.0 0.7 1.5 1.6 1.6 1.1
Unemployment rate 4.6 5.6 5.7 5.5 5.4 5.3
House price growth 1.3 (0.6) (1.3) (0.5) 1.2 0.0
Commercial real estate price
growth (2.4) (1.1) (1.3) 0.3 1.0 (0.7)
UK Bank Rate - modelled 4.71 3.48 2.94 2.56 2.51 3.24
UK Bank Rate - adjusted^1 4.99 3.89 3.30 2.88 2.81 3.57
CPI inflation - modelled 2.4 2.8 2.3 1.8 1.9 2.2
CPI inflation - adjusted^1 2.9 2.9 2.3 1.9 2.1 2.4
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^1 The adjustment to UK Bank Rate and CPI inflation in the severe downside is considered to better reflect the risks around the Group's base case view in an economic environment where supply shocks are the principal concern.
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 unchanged since the year-end, is set out on pages 27 to 32 of the Group's 2023 Full Year Results News Release.
===
Three months ended Three months ended 31 Mar 2024 31 Mar 2023
Banking net interest margin^A
Underlying net interest income (GBPm) 3,184 3,535 Remove non-banking underlying net interest expense (GBPm) 105 76 Banking underlying net interest income (GBPm) 3,289 3,611
Loans and advances to customers (GBPbn) 448.5 452.3
Add back:
Expected credit loss allowance (drawn) (GBPbn) 3.6 4.5 Acquisition related fair value adjustments (GBPbn) 0.2 0.3 Underlying gross loans and advances to customers (GBPbn) 452.3 457.1
Adjustment for non-banking and other items:
Fee-based loans and advances (GBPbn) (9.7) (7.8) Other (GBPbn) 6.8 5.7 Interest-earning banking assets (GBPbn) 449.4 455.0 Averaging (GBPbn) (0.3) (0.8) Average interest-earning banking assets^A (GBPbn) 449.1 454.2
Banking net interest margin^A 2.95% 3.22% Three months ended Three months ended 31 Mar 2024 31 Mar 2023
Return on tangible equity^A
Profit attributable to ordinary shareholders (GBPm) 1,069 1,510
Average ordinary shareholders' equity (GBPbn) 40.4 39.5 Remove average goodwill and other intangible assets (GBPbn) (8.0) (7.5) Average tangible equity (GBPbn) 32.4 32.0
Return on tangible equity^A 13.3% 19.1%
===
KEY DATES
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Final date for joining or leaving the final 2023 dividend reinvestment plan 29 April 2024 Annual general meeting 16 May 2024 Final 2023 dividend paid 21 May 2024 Group strategy update: Business & Commercial Banking 27 June 2024 2024 Half-year results 25 July 2024 Q3 2024 Interim Management Statement 23 October 2024
===
BASIS OF PRESENTATION
This release covers the results of Lloyds Banking Group plc together with its subsidiaries (the Group) for the three months ended 31 March 2024. Unless otherwise stated, income statement commentaries throughout this document compare the three months ended 31 March 2024 to the three months ended 31 March 2023 and the balance sheet analysis compares the Group balance sheet as at 31 March 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 on page 14. Unless otherwise stated, commentary on page 1 are given on an underlying basis. The Group's Q1 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
(MORE TO FOLLOW) Dow Jones Newswires
April 24, 2024 02:00 ET (06:00 GMT)
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
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.
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2024-04-24 CET/CEST Dissemination of a Corporate News, transmitted by EQS News - a service of EQS Group AG. The issuer is solely responsible for the content of this announcement. The EQS Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. Archive at www.eqs-news.com
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Language: English Company: Lloyds Banking Group PLC
Gresham Street
EC2V 7HN London
United Kingdom
Phone: 020 7626 1500 Internet: www.lloydsbankinggroup.com ISIN: GB0008706128 WKN: 871784 Listed: Regulated Unofficial Market in Berlin, Dusseldorf, Frankfurt, Hamburg, Hanover, Munich, Stuttgart,
Tradegate Exchange; London, BX, SIX
EQS News ID: 1887637
End of News EQS News Service
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1887637 2024-04-24 CET/CEST
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END) Dow Jones Newswires
April 24, 2024 02:00 ET (06:00 GMT)
| Name | WKN | Börse | Kurs | Datum/Zeit | Diff. | Diff. % | Geld | Brief | Erster | Schluss | |
|---|---|---|---|---|---|---|---|---|---|---|---|
 |
LLOYDS BKG ADR/4 LS -,25 | 766625 | Frankfurt | 2,500 | 07.06.24 09:06:19 | ±0,000 | ±0,00% | 0,000 | 0,000 | 2,500 | 2,500 |
|
LLOYDS BKG GRP LS-,10 | 871784 | Frankfurt | 0,640 | 07.06.24 08:02:37 | +0,005 | +0,79% | 0,000 | 0,000 | 0,640 | 0,640 |
