DJ EQS-News: 2024 Q1 Interim Management Statement
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EQS-News: Lloyds Banking Group PLC / Key word(s): Interim Report
2024 Q1 Interim Management Statement
2024-04-24 / 08:00 CET/CEST
The issuer is solely responsible for the content of this announcement.
Lloyds Banking Group plc
Q1 2024 Interim Management Statement
24 April 2024
RESULTS FOR THE THREE MONTHS ENDED 31 MARCH 2024
"The Group is continuing to deliver in line with expectations in the first quarter of 2024, with solid net income, cost
discipline and strong asset quality. Our performance provides us with further confidence around our strategic ambitions
and 2024 and 2026 guidance.
Guided by our purpose, we are continuing to support customers and successfully execute against our strategic outcomes,
as highlighted in the third of our strategic seminars last month. This underpins our ambition of higher, more
sustainable returns that will deliver for all of our stakeholders as we continue to Help Britain Prosper."
Charlie Nunn, Group Chief Executive
Financial performance in line with expectations^1
. Statutory profit after tax of GBP1.2 billion (three months to 31 March 2023: GBP1.6 billion) with net income
down 9 per cent on the prior year and operating costs up 11 per cent, partly offset by the benefit of
a lower impairment charge
. Return on tangible equity of 13.3 per cent (three months to 31 March 2023: 19.1 per cent)
. Underlying net interest income of GBP3.2 billion down 10 per cent, with a lower banking net interest
margin, as expected, of 2.95 per cent and average interest-earning banking assets of GBP449.1 billion
. Underlying other income of GBP1.3 billion, 7 per cent higher, driven by continued recovery in customer and
market activity and the benefits of strategic initiatives
. Operating lease depreciation of GBP283 million, up on the prior year reflecting a full quarter of
depreciation from Tusker, alongside growth in fleet size and declines in used car prices; the charge is lower than
the fourth quarter which included an additional c.GBP100 million residual value provision to offset developments in
used car prices
. Operating costs of GBP2.4 billion, up 11 per cent, including c.GBP0.1 billion relating to the sector-wide
change in the charging approach for the Bank of England levy (excluding this levy, operating costs were up 6 per
cent) and elevated severance charges (GBP0.1 billion higher year to date). The Bank of England levy will have a
broadly neutral impact on profit in 2024 with an offsetting benefit recognised through net interest income over the
course of the year
. Remediation costs of GBP25 million (three months to 31 March 2023: GBP19 million), in relation to
pre-existing programmes
. Underlying impairment charge of GBP57 million and asset quality ratio of 6 basis points. Excluding the
impact of improvements to the economic outlook, the asset quality ratio was 23 basis points. The portfolio remains
well-positioned with stable credit trends and strong asset quality
. Loans and advances to customers reduced during the quarter to GBP448.5 billion, primarily due to expected
reductions in UK mortgage balances, given the refinancing of the higher maturities in the fourth quarter of 2023
. Customer deposits of GBP469.2 billion decreased by GBP2.2 billion, with growth in Retail deposits of GBP1.3
billion more than offset by a reduction in Commercial Banking of GBP3.5 billion
. Strong capital generation of 40 basis points, after regulatory headwinds of 6 basis points. CET1 ratio
of 13.9 per cent, ahead of ongoing target of c.13.0 per cent
. Risk-weighted assets of GBP222.8 billion up GBP3.7 billion in the quarter, including a c.GBP1.5 billion
temporary increase that is expected to reverse in the second quarter
. Tangible net assets per share of 51.2 pence, up from 50.8 pence on 31 December 2023, driven by profit for
the period, partly offset by the effects of increased longer-term rates on the cash flow hedge reserve and pension
surplus
. During the quarter, the Group agreed the sale of its in-force bulk annuity portfolio to Rothesay Life
plc, enabling the Insurance, Pensions and Investments division to focus on growing strategically important lines of
business
2024 guidance reaffirmed
Based on our current macroeconomic assumptions, for 2024 the Group continues to expect:
. Banking net interest margin of greater than 290 basis points
. Operating costs of c.GBP9.3 billion plus the c.GBP0.1 billion Bank of England levy
. Asset quality ratio of less than 30 basis points
. Return on tangible equity of c.13 per cent
. Capital generation of c.175 basis points^2
. Risk-weighted assets at between GBP220 billion and GBP225 billion
. To pay down to a CET1 ratio of c.13.5 per cent
^1 See the basis of presentation on page 15.
^2 Excluding capital distributions. Inclusive of ordinary dividends received from the Insurance business in February
of the following year.
INCOME STATEMENT (UNDERLYING BASIS)^A AND KEY BALANCE SHEET METRICS
Three
months
Three months Three months ended
ended ended 31 Dec
31 Mar 2024 31 Mar 2023 Change 2023 Change
GBPm GBPm % GBPm %
Underlying net interest income 3,184 3,535 (10) 3,317 (4)
Underlying other income 1,340 1,257 7 1,286 4
Operating lease depreciation (283) (140) (371) 24
Net income 4,241 4,652 (9) 4,232
Operating costs (2,402) (2,170) (11) (2,486) 3
Remediation (25) (19) (32) (541) 95
Total costs (2,427) (2,189) (11) (3,027) 20
Underlying profit before
impairment 1,814 2,463 (26) 1,205 51
Underlying impairment (charge)
credit (57) (243) 77 541
Underlying profit 1,757 2,220 (21) 1,746 1
Restructuring (12) (12) (85) 86
Volatility and other items (117) 52 114
Statutory profit before tax 1,628 2,260 (28) 1,775 (8)
Tax expense (413) (619) 33 (541) 24
Statutory profit after tax 1,215 1,641 (26) 1,234 (2)
Earnings per share 1.7p 2.3p (0.6)p 1.7p
Banking net interest margin^A 2.95% 3.22% (27)bp 2.98% (3)bp
Average interest-earning
banking assets^A GBP449.1bn GBP454.2bn (1) GBP452.8bn (1)
Cost:income ratio^A 57.2% 47.1% 10.1pp 71.5% (14.3)pp
Asset quality ratio^A 0.06% 0.22% (16)bp (0.47)%
Return on tangible equity^A 13.3% 19.1% (5.8)pp 13.9% (0.6)pp
At 31 Mar At 31 Mar Change At 31 Dec Change
2024 2023 % 2023 At %
Loans and advances to
customers GBP448.5bn GBP452.3bn (1) GBP449.7bn
Customer deposits GBP469.2bn GBP473.1bn (1) GBP471.4bn
Loan to deposit ratio^A 96% 96% 95% 1pp
CET1 ratio 13.9% 14.1% (0.2)pp 14.6% (0.7)pp
Pro forma CET1 ratio^A,1 13.9% 14.1% (0.2)pp 13.7% 0.2pp
Total capital ratio 19.0% 19.9% (0.9)pp 19.8% (0.8)pp
MREL ratio 32.0% 32.1% (0.1)pp 31.9% 0.1pp
UK leverage ratio 5.6% 5.6% 5.8% (0.2)pp
Risk-weighted assets GBP222.8bn GBP210.9bn 6 GBP219.1bn 2
Wholesale funding GBP99.9bn GBP101.1bn (1) GBP98.7bn 1
Liquidity coverage ratio^2 143% 143% 142% 1pp
Net stable funding ratio^3 130% 129% 1pp 130%
Tangible net assets per share
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(MORE TO FOLLOW) Dow Jones Newswires
April 24, 2024 02:00 ET (06:00 GMT)
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^A 51.2p 49.6p 1.6p 50.8p 0.4p
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^A See page 14.
^1^ ^ ^ 31 December 2023 reflects both the full impact of the share buyback announced in respect of 2023 and the ordinary dividend received from the Insurance business in February 2024, but excludes the impact of the phased unwind of IFRS 9 relief on 1 January 2024.
^2 The liquidity coverage ratio is calculated as a monthly rolling simple average over the previous 12 months.
^3 Net stable funding ratio is based on an average of the four previous quarters.
QUARTERLY INFORMATION^A
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Quarter Quarter Quarter Quarter Quarter
ended ended ended ended ended
31 Mar 31 Dec 30 Sep 30 Jun 31 Mar
2024 2023 2023 2023 2023
GBPm GBPm GBPm GBPm GBPm
Underlying net interest income 3,184 3,317 3,444 3,469 3,535
Underlying other income 1,340 1,286 1,299 1,281 1,257
Operating lease depreciation (283) (371) (229) (216) (140)
Net income 4,241 4,232 4,514 4,534 4,652
Operating costs (2,402) (2,486) (2,241) (2,243) (2,170)
Remediation (25) (541) (64) (51) (19)
Total costs (2,427) (3,027) (2,305) (2,294) (2,189)
Underlying profit before
impairment 1,814 1,205 2,209 2,240 2,463
Underlying impairment (charge)
credit (57) 541 (187) (419) (243)
Underlying profit 1,757 1,746 2,022 1,821 2,220
Restructuring (12) (85) (44) (13) (12)
Volatility and other items (117) 114 (120) (198) 52
Statutory profit before tax 1,628 1,775 1,858 1,610 2,260
Tax expense (413) (541) (438) (387) (619)
Statutory profit after tax 1,215 1,234 1,420 1,223 1,641
Earnings per share 1.7p 1.7p 2.0p 1.6p 2.3p
Banking net interest margin^A 2.95% 2.98% 3.08% 3.14% 3.22%
Average interest-earning
banking assets^A GBP449.1bn GBP452.8bn GBP453.0bn GBP453.4bn GBP454.2bn
Cost:income ratio^A 57.2% 71.5% 51.1% 50.6% 47.1%
Asset quality ratio^A 0.06% (0.47)% 0.17% 0.36% 0.22%
Return on tangible equity^A 13.3% 13.9% 16.9% 13.6% 19.1%
At 31 Mar At 31 Dec At 30 Sep At 30 Jun At 31 Mar
2024 2023 2023 2023 2023
Loans and advances to customers
^1 GBP448.5bn GBP449.7bn GBP452.1bn GBP450.7bn GBP452.3bn
Customer deposits GBP469.2bn GBP471.4bn GBP470.3bn GBP469.8bn GBP473.1bn
Loan to deposit ratio^A 96% 95% 96% 96% 96%
CET1 ratio 13.9% 14.6% 14.6% 14.2% 14.1%
Pro forma CET1 ratio^A,2 13.9% 13.7% 14.6% 14.2% 14.1%
Total capital ratio 19.0% 19.8% 19.9% 19.7% 19.9%
MREL ratio 32.0% 31.9% 32.6% 31.0% 32.1%
UK leverage ratio 5.6% 5.8% 5.7% 5.7% 5.6%
Risk-weighted assets GBP222.8bn GBP219.1bn GBP217.7bn GBP215.3bn GBP210.9bn
Wholesale funding GBP99.9bn GBP98.7bn GBP108.5bn GBP103.5bn GBP101.1bn
Liquidity coverage ratio^3 143% 142% 142% 142% 143%
Net stable funding ratio^4 130% 130% 130% 130% 129%
Tangible net assets per share^A 51.2p 50.8p 47.2p 45.7p 49.6p
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^1 The reduction between 30 September 2023 and 31 December 2023 reflects the impact of the securitisation of GBP2.7 billion of UK Retail unsecured loans in the fourth quarter of 2023.
^2^ ^ ^ 31 December 2023 reflects both the full impact of the share buyback announced in respect of 2023 and the ordinary dividend received from the Insurance business in February 2024, but excludes the impact of the phased unwind of IFRS 9 relief on 1 January 2024.
^3 The liquidity coverage ratio is calculated as a monthly rolling simple average over the previous 12 months.
^4 Net stable funding ratio is based on an average of the four previous quarters.
BALANCE SHEET ANALYSIS
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At 31 Mar At 31 Mar At 31 Dec
2024 2023 Change 2023 Change
GBPbn GBPbn % GBPbn %
Loans and advances to customers
UK mortgages^1 304.6 307.5 (1) 306.2 (1)
Credit cards 15.2 14.4 6 15.1 1
UK Retail unsecured loans^2 7.6 9.0 (16) 6.9 10
UK Motor Finance 15.8 14.7 7 15.3 3
Overdrafts 1.0 1.0 1.1 (9)
Retail other^1,3 16.9 15.1 12 16.6 2
Small and Medium Businesses 32.2 36.4 (12) 33.0 (2)
Corporate and Institutional
Banking 55.6 56.7 (2) 55.6
Central Items^4 (0.4) (2.5) 84 (0.1)
Loans and advances to customers 448.5 452.3 (1) 449.7
Customer deposits
Retail current accounts 103.1 110.5 (7) 102.7
Retail savings accounts^5 196.4 183.1 7 194.8 1
Wealth 10.2 12.9 (21) 10.9 (6)
Commercial Banking 159.3 166.5 (4) 162.8 (2)
Central Items 0.2 0.1 0.2
Customer deposits 469.2 473.1 (1) 471.4
Total assets 889.6 885.7 881.5 1
Total liabilities 841.8 837.8 834.1 1
Ordinary shareholders' equity 40.7 40.6 40.3 1
Other equity instruments 6.9 7.1 (3) 6.9
Non-controlling interests 0.2 0.2 0.2
Total equity 47.8 47.9 47.4 1
Ordinary shares in issue,
excluding own shares 63,653m 66,396m (4) 63,508m
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^1 Open mortgage book and closed mortgage book, previously presented separately, are now reported together as UK mortgages; Wealth, previously reported separately, is now included within Retail other. Comparatives have been presented on a consistent basis.
^2 The reduction between 31 March 2023 and 31 December 2023 reflects the impact of the securitisation of GBP2.7 billion of UK Retail unsecured loans in the fourth quarter of 2023.
^3 Retail other includes the European and Wealth businesses.
^4 Central Items includes central fair value hedge accounting adjustments.
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