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24.04.2024 08:00:30 - dpa-AFX: EQS-News: 2024 Q1 Interim Management Statement (english)
2024 Q1 Interim Management Statement
EQS-News: Lloyds Banking Group PLC / Key word(s): Interim Report
2024 Q1 Interim Management Statement
24.04.2024 / 08:00 CET/CEST
The issuer is solely responsible for the content of this announcement.
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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 expectations1
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
* Asset quality ratio of less than 30 basis points
* Return on tangible equity of c.13 per cent
* Capital generation of c.175 basis points2
* Risk-weighted assets at between £220 billion and £225 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
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 INFORMATIONA
1 The reduction between 30 September 2023 and 31 December 2023 reflects the
impact of the securitisation of £2.7 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
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 £2.7 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.
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.
REVIEW OF PERFORMANCEA
The Group's statutory profit before tax for the first three months of 2024
was £1,628 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 £1,215
million (three months to 31 March 2023: £1,641 million).
The Group's underlying profit was £1,757 million, a reduction of 21 per cent
compared to £2,220 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 £4,241 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 £3,184 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 £449.1
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 £105 million (three months to 31
March 2023: £76 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 £450 billion.
The Group manages the risk to earnings and capital from movements in
interest rates by hedging the net liabilities which are stable or less
sensitive to movements in rates. The notional balance of the sterling
structural hedge was £244 billion (31 December 2023: £247 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.£1.0 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: £0.8 billion). The Group continues to expect sterling structural hedge
earnings in 2024 to be c.£0.7 billion higher than in 2023.
Underlying other income in the first quarter of 2024 of £1,340 million was 7
per cent higher compared to £1,257 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 £1.4 billion net new money in open book AuA over the
period. In total, open book AuA now stand at c.£188 billion.
Operating lease depreciation of £283 million increased compared to the prior
year (three months to 31 March 2023: £140 million). This reflects a full
quarter of depreciation from Tusker, alongsidegrowth 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.£100 million increase in the
residual value provision to offset developments in used car prices.
REVIEW OF PERFORMANCE (continued)
Total costs including remediation of £2,427 million and operating costs of
£2,402 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 (£0.1 billion higher year
to date). The annual levy of c.£0.1 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.£9.3 billion, now plus c.£0.1 billion for the new Bank of England levy.
The Group recognised remediation costs of £25 million in the first three
months (three months to 31 March 2023: £19 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.
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 £57 million (three months to 31 March
2023: £243 million), resulting in an asset quality ratio of 6 basis points.
The charge is after a £192 million multiple economic scenarios (MES) credit
(three months to 31 March 2023: £79 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 £249 million (three months to 31
March 2023: £322 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 £4.1
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: £4.3 billion). Like for like this is higher than reported
pre-pandemic levels (31 December 2019: £4.2 billion) given it includes a
material increase as a result of a weaker economic outlook versus 2019,
offset by a £0.6 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 £0.6 billion, including the adjusted severe downside
scenario to incorporate higher CPI inflation and UK Bank Rate profiles.
Stage 3 assets at £10.6 billion are up slightly in the first quarter in both
UK mortgages and Commercial Banking portfolios (31 December 2023: £10.1
billion). Write-offs remain low. Stage 2 assets have reduced in the first
quarter to £50.2 billion (31 December 2023: £56.5 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 £12 million
(three months to 31 March 2023: £12 million) and include costs relating to
the integration of Embark and Tusker. Volatility and other items were a net
loss of £117 million for the first three months (three months to 31 March
2023: net gain of £52 million). This comprised £71 million negative market
volatility, £20 million for the amortisation of purchased intangibles (three
months to 31 March 2023: £18 million) and £26 million relating to fair value
unwind (three months to 31 March 2023: £22 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
£448.5 billion with a £1.6 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 £0.8 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 £0.7 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 £469.2 billion at the end of the first quarter, a
decrease of £2.2 billion. Retail deposits were up £1.3 billion in the
quarter with a combined increase of £0.9 billion across Retail savings and
Wealth, driven by inflows to limited withdrawal and fixed products and a
£0.4 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 £3.5 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.£1.5 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 £3.7 billion to £222.8 billion at 31 March
2024 (31 December 2023: £219.1 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 £5
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 £220
billion and £225 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
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.
IMPAIRMENT DETAIL
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
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 £188 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 £22 million, UK unsecured loans and
overdrafts of £16 million, Small and Medium Businesses of £360 million and
Corporate and Institutional Banking of £1 million.
ADDITIONAL INFORMATION (continued)
IMPAIRMENT DETAIL (continued)
Loans and advances to customers and expected credit loss allowance
(underlying basis)A (continued)
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 £187 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 £21 million, UK unsecured loans and
overdrafts of £16 million and Small and Medium Businesses of £327 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.
At 31 First Second Third Fourth First Second Third Fourth March 2024 quart- quarte- quart- quarte- quart- quarte- quart- quarte- er r 2024 er r 2024 er r 2025 er r 2025 2024 % 2024 % 2025 % 2025 % % % % %
Gross 0.3 0.2 0.3 0.3 0.3 0.3 0.4 0.4
Unemployme- 4.0 4.2 4.4 4.6 4.8 4.8 4.8 4.8 nt rate
House 1.5 2.1 4.6 1.5 (0.1) 0.1 0.4 0.8
Commercial (5.4) (5.3) (3.3) (0.5) 0.7 1.1 0.8 0.7
UK Bank 5.25 5.00 4.75 4.50 4.25 4.00 4.00 3.75 Rate
CPI 3.3 2.1 1.8 2.4 2.4 2.9 3.0 3.0 inflation
UK economic assumptions - scenarios by year
Key annualassumptions 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)
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.
Return on tangible equityA 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 statemen
EQS-News: Lloyds Banking Group PLC / Key word(s): Interim Report
2024 Q1 Interim Management Statement
24.04.2024 / 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 expectations1
* Statutory profit after tax of £1.2 billion (three months to 31 March
2023: £1.6 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 £3.2 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 £449.1 billion
* Underlying other income of £1.3 billion, 7 per cent higher, driven by
continued recovery in customer and market activity and the benefits of
strategic initiatives
* Operating lease depreciation of £283 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.£100 million residual
value provision to offset developments in used car prices
* Operating costs of £2.4 billion, up 11 per cent, including c.£0.1
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 (£0.1 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 £25 million (three months to 31 March 2023: £19
million), in relation to pre-existing programmes
* Underlying impairment charge of £57 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 £448.5
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 £469.2 billion decreased by £2.2 billion, with
growth in Retail deposits of £1.3 billion more than offset by a
reduction in Commercial Banking of £3.5 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 £222.8 billion up £3.7 billion in the quarter,
including a c.£1.5 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.£9.3 billion plus the c.£0.1 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 points2
* Risk-weighted assets at between £220 billion and £225 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 Change Three Change %
ended 31 Mar ended 31 Mar % months
2024 £m 2023 £m ended 31
Dec 2023
£m
Underlying 3,184 3,535 (10) 3,317 (4) net interest income Underlying 1,340 1,257 7 1,286 4 other income Operating (283) (140) (371) 24 lease depreciation Net income 4,241 4,652 (9) 4,232 Operating (2,402) (2,170) (11) (2,486) 3 costs Remediation (25) (19) (32) (541) 95 Total costs (2,427) (2,189) (11) (3,027) 20 Underlying 1,814 2,463 (26) 1,205 51 profit before impairment Underlying (57) (243) 77 541 impairment (charge) credit Underlying 1,757 2,220 (21) 1,746 1 profit Restructurin- (12) (12) (85) 86 g Volatility (117) 52 114 and other items Statutory 1,628 2,260 (28) 1,775 (8) profit before tax Tax expense (413) (619) 33 (541) 24 Statutory 1,215 1,641 (26) 1,234 (2) profit after tax
Earnings per 1.7p 2.3p (0.6)p 1.7p
share
Banking net 2.95% 3.22% (27)bp 2.98% (3)bp
interest
marginA
Average £449.1bn £454.2bn (1) £452.8bn (1)
interest-ear-
ning banking
assetsA
Cost:income 57.2% 47.1% 10.1pp 71.5% (14.3)pp
ratioA
Asset 0.06% 0.22% (16)bp (0.47)%
quality
ratioA
Return on 13.3% 19.1% (5.8)pp 13.9% (0.6)pp
tangible
equityA
At 31 Mar At 31 Mar Change At 31 Dec A- Change
2024 2023 % 2023 t %
Loans and £448.5bn £452.3bn (1) £449.7bn advances to customers Customer deposits £469.2bn £473.1bn (1) £471.4bn Loan to deposit 96% 96% 95% 1pp ratioA CET1 ratio 13.9% 14.1% (0.2)pp 14.6% (0.7)pp Pro forma CET1 13.9% 14.1% (0.2)pp 13.7% 0.2pp ratioA,1 Total capital 19.0% 19.9% (0.9)pp 19.8% (0.8)pp ratio 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 £222.8bn £210.9bn 6 £219.1bn 2 assets Wholesale funding £99.9bn £101.1bn (1) £98.7bn 1 Liquidity 143% 143% 142% 1pp coverage ratio2 Net stable 130% 129% 1pp 130% funding ratio3 Tangible net 51.2p 49.6p 1.6p 50.8p 0.4p assets per shareA
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 INFORMATIONA
Quarter Quarter Quarter Quarter Quarter
ended 31 ended 31 ended 30 ended 30 ended 31
Mar 2024 Dec 2023 Sep 2023 Jun 2023 Mar 2023
£m £m £m £m £m
Underlying net 3,184 3,317 3,444 3,469 3,535 interest income Underlying 1,340 1,286 1,299 1,281 1,257 other income Operating (283) (371) (229) (216) (140) lease depreciation Net income 4,241 4,232 4,514 4,534 4,652 Operating (2,402) (2,486) (2,241) (2,243) (2,170) costs Remediation (25) (541) (64) (51) (19) Total costs (2,427) (3,027) (2,305) (2,294) (2,189) Underlying 1,814 1,205 2,209 2,240 2,463 profit before impairment Underlying (57) 541 (187) (419) (243) impairment (charge) credit Underlying 1,757 1,746 2,022 1,821 2,220 profit Restructuring (12) (85) (44) (13) (12) Volatility and (117) 114 (120) (198) 52 other items Statutory 1,628 1,775 1,858 1,610 2,260 profit before tax Tax expense (413) (541) (438) (387) (619) Statutory 1,215 1,234 1,420 1,223 1,641 profit after tax
Earnings per 1.7p 1.7p 2.0p 1.6p 2.3p share Banking net 2.95% 2.98% 3.08% 3.14% 3.22% interest marginA Average £449.1bn £452.8bn £453.0bn £453.4bn £454.2bn interest-earni- ng banking assetsA Cost:income 57.2% 71.5% 51.1% 50.6% 47.1% ratioA Asset quality 0.06% (0.47)% 0.17% 0.36% 0.22% ratioA Return on 13.3% 13.9% 16.9% 13.6% 19.1% tangible equityA
At 31 Mar At 31 Dec At 30 Sep At 30 Jun At 31 Mar
2024 2023 2023 2023 2023
Loans and £448.5bn £449.7bn £452.1bn £450.7bn £452.3bn
advances to
customers1
Customer £469.2bn £471.4bn £470.3bn £469.8bn £473.1bn
deposits
Loan to 96% 95% 96% 96% 96%
deposit ratioA
CET1 ratio 13.9% 14.6% 14.6% 14.2% 14.1%
Pro forma CET1 13.9% 13.7% 14.6% 14.2% 14.1%
ratioA,2
Total capital 19.0% 19.8% 19.9% 19.7% 19.9%
ratio
MREL ratio 32.0% 31.9% 32.6% 31.0% 32.1%
UK leverage 5.6% 5.8% 5.7% 5.7% 5.6%
ratio
Risk-weighted £222.8bn £219.1bn £217.7bn £215.3bn £210.9bn
assets
Wholesale £99.9bn £98.7bn £108.5bn £103.5bn £101.1bn
funding
Liquidity 143% 142% 142% 142% 143%
coverage
ratio3
Net stable 130% 130% 130% 130% 129%
funding ratio4
Tangible net 51.2p 50.8p 47.2p 45.7p 49.6p
assets per
shareA
1 The reduction between 30 September 2023 and 31 December 2023 reflects the
impact of the securitisation of £2.7 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 Chan- At 31 Dec Chan-
2024 £bn 2023 £bn ge % 2023 £bn ge %
Loans and advances to customers UK mortgages1 304.6 307.5 (1) 306.2 (1) Credit cards 15.2 14.4 6 15.1 1 UK Retail unsecured 7.6 9.0 (16) 6.9 10 loans2 UK Motor Finance 15.8 14.7 7 15.3 3 Overdrafts 1.0 1.0 1.1 (9) Retail other1,3 16.9 15.1 12 16.6 2 Small and Medium 32.2 36.4 (12) 33.0 (2) Businesses Corporate and 55.6 56.7 (2) 55.6 Institutional Banking Central Items4 (0.4) (2.5) 84 (0.1) Loans and advances to 448.5 452.3 (1) 449.7 customers
Customer deposits Retail current accounts 103.1 110.5 (7) 102.7 Retail savings accounts5 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' 40.7 40.6 40.3 1 equity 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, 63,653m 66,396m (4) 63,508m excluding own shares
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 £2.7 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.
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.
Summary income Three Three Change Three Chan-
statement months months % months ge %
ended 31 ended 31 ended 31
Mar 2024 Mar 2023 Dec 2023
£m £m £m
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 (6,930) (4,501) (54) (10,609) 35 in respect of insurance and investment contracts Total income, after 4,387 4,808 (9) 4,727 (7) net finance expense in respect of insurance and investment contracts Operating expenses (2,703) (2,306) (17) (3,492) 23 Impairment (charge) (56) (242) 77 540 credit 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 1,069 1,510 (29) 1,093 (2) to ordinary shareholders Ordinary shares in 63,906m 66,972m (5) 63,502m 1 issue (weighted-average - basic) Basic earnings per 1.7p 2.3p (0.6)p 1.7p share
REVIEW OF PERFORMANCEA
The Group's statutory profit before tax for the first three months of 2024
was £1,628 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 £1,215
million (three months to 31 March 2023: £1,641 million).
The Group's underlying profit was £1,757 million, a reduction of 21 per cent
compared to £2,220 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 £4,241 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 £3,184 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 £449.1
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 £105 million (three months to 31
March 2023: £76 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 £450 billion.
The Group manages the risk to earnings and capital from movements in
interest rates by hedging the net liabilities which are stable or less
sensitive to movements in rates. The notional balance of the sterling
structural hedge was £244 billion (31 December 2023: £247 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.£1.0 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: £0.8 billion). The Group continues to expect sterling structural hedge
earnings in 2024 to be c.£0.7 billion higher than in 2023.
Underlying other income in the first quarter of 2024 of £1,340 million was 7
per cent higher compared to £1,257 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 £1.4 billion net new money in open book AuA over the
period. In total, open book AuA now stand at c.£188 billion.
Operating lease depreciation of £283 million increased compared to the prior
year (three months to 31 March 2023: £140 million). This reflects a full
quarter of depreciation from Tusker, alongsidegrowth 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.£100 million increase in the
residual value provision to offset developments in used car prices.
REVIEW OF PERFORMANCE (continued)
Total costs including remediation of £2,427 million and operating costs of
£2,402 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 (£0.1 billion higher year
to date). The annual levy of c.£0.1 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.£9.3 billion, now plus c.£0.1 billion for the new Bank of England levy.
The Group recognised remediation costs of £25 million in the first three
months (three months to 31 March 2023: £19 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.
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 £57 million (three months to 31 March
2023: £243 million), resulting in an asset quality ratio of 6 basis points.
The charge is after a £192 million multiple economic scenarios (MES) credit
(three months to 31 March 2023: £79 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 £249 million (three months to 31
March 2023: £322 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 £4.1
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: £4.3 billion). Like for like this is higher than reported
pre-pandemic levels (31 December 2019: £4.2 billion) given it includes a
material increase as a result of a weaker economic outlook versus 2019,
offset by a £0.6 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 £0.6 billion, including the adjusted severe downside
scenario to incorporate higher CPI inflation and UK Bank Rate profiles.
Stage 3 assets at £10.6 billion are up slightly in the first quarter in both
UK mortgages and Commercial Banking portfolios (31 December 2023: £10.1
billion). Write-offs remain low. Stage 2 assets have reduced in the first
quarter to £50.2 billion (31 December 2023: £56.5 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 £12 million
(three months to 31 March 2023: £12 million) and include costs relating to
the integration of Embark and Tusker. Volatility and other items were a net
loss of £117 million for the first three months (three months to 31 March
2023: net gain of £52 million). This comprised £71 million negative market
volatility, £20 million for the amortisation of purchased intangibles (three
months to 31 March 2023: £18 million) and £26 million relating to fair value
unwind (three months to 31 March 2023: £22 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
£448.5 billion with a £1.6 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 £0.8 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 £0.7 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 £469.2 billion at the end of the first quarter, a
decrease of £2.2 billion. Retail deposits were up £1.3 billion in the
quarter with a combined increase of £0.9 billion across Retail savings and
Wealth, driven by inflows to limited withdrawal and fixed products and a
£0.4 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 £3.5 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.£1.5 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 £3.7 billion to £222.8 billion at 31 March
2024 (31 December 2023: £219.1 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 £5
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 £220
billion and £225 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
Pro forma CET1 ratio as at 31 December 20231 13.7-
%
Banking build (including impairment charge) (bps) 57
Risk-weighted assets (bps) (24)
Other movements2 (bps) 13
Capital generation (bps) 46
Retail secured CRD IV model updates and phased unwind of IFRS 9 (6)
transitional relief (bps)
Capital generation (post CRD IV and transitional headwinds) 40
(bps)
Ordinary dividend (bps) (22)
CET1 ratio as at 31 March 2024 13.9-
%
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.
IMPAIRMENT DETAIL
Three Three Change Three Chan-
months months % months ge %
ended 31 ended 31 ended 31
Mar 2024 £m Mar 2023 £m Dec 2023 £m
Charges (credits)
pre-updated MES1
Retail 303 271 (12) 277 (9)
Commercial (49) 53 (626) (92)
Banking
Other (5) (2) (4) 25
249 322 23 (353)
Updated economic
outlook
Retail (196) (66) (203) (3)
Commercial 4 (13) 15 73
Banking
(192) (79) (188) 2
Underlying 57 243 77 (541)
impairment charge
(credit)A
Asset quality 0.06% 0.22% (16)bp (0.47)% ratioA Total underlying 4,126 5,221 (21) 4,337 (5) expected credit loss allowance (at end of period)A
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
At 31 March 2024 Stage 1 Stage 2 Stage 3 Total Stage 2 Stage 3
£m £m £m £m as % of as % of
total total
Loans and advances to customers UK mortgages 261,828 36,476 7,608 305,912 11.9 2.5 Credit cards 12,729 2,883 308 15,920 18.1 1.9 UK unsecured 7,667 1,210 195 9,072 13.3 2.1 loans and overdrafts UK Motor Finance 13,897 2,140 118 16,155 13.2 0.7 Other 16,178 507 149 16,834 3.0 0.9 Retail1 312,299 43,216 8,378 363,893 11.9 2.3 Small and Medium 27,115 4,087 1,465 32,667 12.5 4.5 Businesses Corporate and 52,382 2,875 777 56,034 5.1 1.4 Institutional Banking Commercial 79,497 6,962 2,242 88,701 7.8 2.5 Banking Equity (323) - 6 (317) Investments and Central Items2 Total gross 391,473 50,178 10,626 452,277 11.1 2.3 lending ECL allowance on (864) (1,374) (1,541) (3,779) drawn balances 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 161 233 118 512 loans and overdrafts UK Motor Finance3 187 95 67 349 Other 19 21 46 86 Retail1 732 1,160 1,127 3,019 Small and Medium 141 222 170 533 Businesses Corporate and 155 138 242 535 Institutional Banking Commercial 296 360 412 1,068 Banking Equity - - 4 4 Investments and 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 customers4 UK mortgages 0.1 1.1 9.9 0.4 Credit cards 1.8 14.0 50.3 4.9 UK unsecured 2.1 19.3 65.9 5.7 loans and overdrafts UK Motor Finance 1.3 4.4 56.8 2.2 Other 0.1 4.1 30.9 0.5 Retail1 0.2 2.7 13.5 0.8 Small and Medium 0.5 5.4 15.4 1.6 Businesses Corporate and 0.3 4.8 31.2 1.0 Institutional Banking Commercial 0.4 5.2 21.9 1.2 Banking Equity - 66.7 Investments and Central Items Total 0.3 3.0 15.1 0.9
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 £188 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 £22 million, UK unsecured loans and
overdrafts of £16 million, Small and Medium Businesses of £360 million and
Corporate and Institutional Banking of £1 million.
ADDITIONAL INFORMATION (continued)
IMPAIRMENT DETAIL (continued)
Loans and advances to customers and expected credit loss allowance
(underlying basis)A (continued)
At 31 December Stage 1 Stage 2 Stage 3 Total Stage 2 Stage 3
2023 £m £m £m £m as % of as % of
total total
Loans and advances to customers UK mortgages 258,362 41,911 7,300 307,573 13.6 2.4 Credit cards 12,625 2,908 284 15,817 18.4 1.8 UK unsecured 7,103 1,187 196 8,486 14.0 2.3 loans and overdrafts UK Motor Finance 13,541 2,027 112 15,680 12.9 0.7 Other 15,898 525 144 16,567 3.2 0.9 Retail1 307,529 48,558 8,036 364,123 13.3 2.2 Small and Medium 27,525 4,458 1,530 33,513 13.3 4.6 Businesses Corporate and 52,049 3,529 538 56,116 6.3 1.0 Institutional Banking Commercial 79,574 7,987 2,068 89,629 8.9 2.3 Banking Equity (43) - 6 (37) Investments and Central Items2 Total gross 387,060 56,545 10,110 453,715 12.5 2.2 lending ECL allowance on (901) (1,532) (1,537) (3,970) drawn balances 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 153 244 118 515 loans and overdrafts UK Motor Finance3 188 91 63 342 Other 20 21 47 88 Retail1 765 1,243 1,115 3,123 Small and Medium 140 231 167 538 Businesses Corporate and 156 218 253 627 Institutional Banking Commercial 296 449 420 1,165 Banking Equity - - 4 4 Investments and 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 customers4 UK mortgages 0.1 1.1 10.4 0.4 Credit cards 1.9 15.3 49.4 5.1 UK unsecured 2.2 20.6 65.6 6.1 loans and overdrafts UK Motor Finance 1.4 4.5 56.3 2.2 Other 0.1 4.0 32.6 0.5 Retail1 0.2 2.6 13.9 0.9 Small and Medium 0.5 5.2 13.9 1.6 Businesses Corporate and 0.3 6.2 47.0 1.1 Institutional Banking Commercial 0.4 5.6 24.1 1.3 Banking Equity - 66.7 Investments and Central Items Total 0.3 3.0 15.8 0.9
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 £187 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 £21 million, UK unsecured loans and
overdrafts of £16 million and Small and Medium Businesses of £327 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.
Underlying Probabilitywe- Upsid- Base Downsid- Severe basisA ighted £m e £m case £m e £m downside £m
At 31 March 4,126 2,837 3,512 4,504 8,702 2024 At 31 4,337 2,925 3,666 4,714 9,455 December 2023
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.
At 31 First Second Third Fourth First Second Third Fourth March 2024 quart- quarte- quart- quarte- quart- quarte- quart- quarte- er r 2024 er r 2024 er r 2025 er r 2025 2024 % 2024 % 2025 % 2025 % % % % %
Gross 0.3 0.2 0.3 0.3 0.3 0.3 0.4 0.4
domestic product
Unemployme- 4.0 4.2 4.4 4.6 4.8 4.8 4.8 4.8 nt rate
House 1.5 2.1 4.6 1.5 (0.1) 0.1 0.4 0.8
price growth
Commercial (5.4) (5.3) (3.3) (0.5) 0.7 1.1 0.8 0.7
real estate price growth
UK Bank 5.25 5.00 4.75 4.50 4.25 4.00 4.00 3.75 Rate
CPI 3.3 2.1 1.8 2.4 2.4 2.9 3.0 3.0 inflation
UK economic assumptions - scenarios by year
Key annualassumptions 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)
At 31 March 2024 2024 % 2025 % 2026 % 2027 % 2028 2024-2028
% average %
Upside
Gross domestic 1.1 2.0 1.7 1.6 1.6 1.6
product
Unemployment 3.2 3.0 3.0 2.9 2.9 3.0
rate
House price 3.7 6.7 6.5 5.3 4.9 5.4
growth
Commercial real 6.5 4.8 1.4 2.0 2.2 3.4
estate price
growth
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 0.4 1.2 1.6 1.7 1.7 1.3
product
Unemployment 4.3 4.8 4.8 4.6 4.6 4.6
rate
House price 1.5 0.8 0.9 1.6 2.8 1.5
growth
Commercial real (0.5) 0.7 (0.1) 1.6 2.1 0.7
estate price
growth
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 (0.8) (0.4) 1.2 1.7 1.7 0.7
product
Unemployment 5.5 7.4 7.7 7.4 7.2 7.1
rate
House price 0.0 (5.2) (7.0) (4.8) (1.5) (3.7)
growth
Commercial real (8.1) (5.2) (2.9) (1.0) (0.2) (3.5)
estate price
growth
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 (1.8) (1.1) 1.1 1.4 1.5 0.2
product
Unemployment 7.2 10.1 10.3 9.9 9.7 9.4
rate
House price (2.2) (12.3) (14.3) (10.9) (6.0) (9.2)
growth
Commercial real (18.0) (11.7) (8.5) (5.0) (2.4) (9.3)
estate price
growth
UK Bank Rate - 3.46 0.51 0.11 0.02 0.01 0.82
modelled
UK Bank Rate - 6.19 4.56 3.63 3.13 3.00 4.10
adjusted1
CPI inflation - 2.4 2.4 1.0 0.0 (0.1) 1.1
modelled
CPI inflation - 7.5 3.5 1.3 1.0 1.8 3.0
adjusted1
Probability-weig-
hted
Gross domestic 0.0 0.7 1.5 1.6 1.6 1.1
product
Unemployment 4.6 5.6 5.7 5.5 5.4 5.3
rate
House price 1.3 (0.6) (1.3) (0.5) 1.2 0.0
growth
Commercial real (2.4) (1.1) (1.3) 0.3 1.0 (0.7)
estate price
growth
UK Bank Rate - 4.71 3.48 2.94 2.56 2.51 3.24
modelled
UK Bank Rate - 4.99 3.89 3.30 2.88 2.81 3.57
adjusted1
CPI inflation - 2.4 2.8 2.3 1.8 1.9 2.2
modelled
CPI inflation - 2.9 2.9 2.3 1.9 2.1 2.4
adjusted1
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 Three months
ended 31 Mar ended 31 Mar
2024 2023
Banking net interest marginA Underlying net interest income 3,184 3,535 (£m) Remove non-banking underlying 105 76 net interest expense (£m) Banking underlying net 3,289 3,611 interest income (£m)
Loans and advances to 448.5 452.3 customers (£bn) Add back: Expected credit loss allowance 3.6 4.5 (drawn) (£bn) Acquisition related fair value 0.2 0.3 adjustments (£bn) Underlying gross loans and 452.3 457.1 advances to customers (£bn) Adjustment for non-banking and other items: Fee-based loans and advances (9.7) (7.8) (£bn) Other (£bn) 6.8 5.7 Interest-earning banking 449.4 455.0 assets (£bn) Averaging (£bn) (0.3) (0.8) Average interest-earning 449.1 454.2 banking assetsA (£bn)
Banking net interest marginA 2.95% 3.22%
Three months Three months
ended 31 Mar ended 31 Mar
2024 2023
Return on tangible equityA Profit attributable to ordinary 1,069 1,510 shareholders (£m)
Average ordinary shareholders' 40.4 39.5 equity (£bn) Remove average goodwill and (8.0) (7.5) other intangible assets (£bn) Average tangible equity (£bn) 32.4 32.0
Return on tangible equityA 13.3% 19.1%
KEY DATES
Final date for joining or leaving the final 2023 29 April
dividend reinvestment plan 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 statemen
| Name | WKN | Börse | Kurs | Datum/Zeit | Diff. | Diff. % | Geld | Brief | Erster | Schluss | |
|---|---|---|---|---|---|---|---|---|---|---|---|
 |
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 |
