UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
28 JULY 2016
Commission File number 001-15246
LLOYDS BANKING GROUP plc
(Translation of registrant's name into English)
25 Gresham Street
London
EC2V 7HN
United Kingdom
(Address
of principal executive offices)
Indicate by
check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form
20-F ☒ Form 40-F ☐
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b) (1) ________.
Indicate by
check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b) (7) ________.
This report
on Form 6-K shall be deemed incorporated by reference into the company's Registration Statement on Form F-3 (File Nos. 333-211791
and 333-211791-01) and to be a part thereof from the date on which this report is filed, to the extent not superseded by documents
or reports subsequently filed or furnished.
EXPLANATORY NOTE
This report on Form 6-K contains the interim
report of Lloyds Banking Group plc, which includes the unaudited consolidated interim results for the half-year ended 30 June
2016, and is being incorporated by reference into the Registration Statement with File Nos. 333-211791 and 333-211791-01.
BASIS OF PRESENTATION
|
This report covers the results of Lloyds Banking Group plc (the Company) together with its subsidiaries (the Group) for the half-year ended 30 June 2016.
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Statutory basis:
Statutory information is set out on pages 44 to 93. However, a number of factors have had a significant effect on the comparability of the Group’s financial position and results. Accordingly, the results are also presented on an underlying basis.
|
|
Underlying basis:
These results
are adjusted for certain items which are listed below, to allow a comparison of the Group’s underlying performance.
– losses
on redemption of the Enhanced Capital Notes and the volatility in the value of the embedded equity conversion feature;
– market
volatility and other items, which includes the effects of certain asset sales, the volatility relating to the Group’s own
debt and hedging arrangements as well as that arising in the insurance businesses, insurance gross up, the unwind of acquisition-related
fair value adjustments and the amortisation of purchased intangible assets;
– restructuring
costs, comprising severance related costs relating to the Simplification programme announced in October 2014 and the costs of implementing
regulatory reform and ring fencing;
– TSB
Banking Group plc (TSB) build and dual running costs and the loss relating to the TSB sale in 2015; and
– payment
protection insurance and other conduct provisions.
|
Unless otherwise stated, income statement
commentaries throughout this document compare the half-year ended 30 June 2016 to the half-year ended 30 June 2015, and
the balance sheet analysis compares the Group balance sheet as at 30 June 2016 to the Group balance sheet as at 31 December
2015.
Restatement:
With effect from
1 January 2016 the unsecured personal loans business was transferred from Retail to Consumer Finance and elements of the Group’s
business in the Channel Islands and Isle of Man were transferred from Retail to Commercial Banking. The results for the six months
ended 30 June 2016 and the comparative periods are reported on the new basis.
|
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 and plans of Lloyds Banking
Group and its current goals and expectations relating to its future financial condition and performance. Statements that are not
historical facts, including statements about Lloyds Banking Group’s or its directors’ and/or management’s beliefs
and expectations, are forward looking statements. Words such as ‘believes’, ‘anticipates’, ‘estimates’,
‘expects’, ‘intends’, ‘aims’, ‘potential’, ‘will’, ‘would’,
‘could’, ‘considered’, ‘likely’, ‘estimate’ and variations of these words and
similar future or conditional expressions are intended to identify forward looking statements but are not the exclusive means
of identifying 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.
Examples of
such forward looking statements include, but are 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; statements of plans, objectives or goals of Lloyds Banking Group or its management including
in respect of statements about the future business and economic environments in the UK and elsewhere including, but not limited
to, future trends in interest rates, foreign exchange rates, credit and equity market levels and demographic developments; statements
about competition, regulation, disposals and consolidation or technological developments in the financial services industry; and
statements of assumptions underlying such statements.
Factors that
could cause actual business, strategy, plans and/or results (including but not limited to the payment of dividends) to differ
materially from the plans, objectives, expectations, estimates and intentions expressed in such forward looking statements made
by the Group or on its behalf include, but are not limited to: general economic and business conditions in the UK and internationally;
market related trends and developments; fluctuations in interest rates (including low or negative rates), exchange rates, stock
markets and currencies; the ability to access sufficient sources of capital, liquidity and funding when required; changes to the
Group’s credit ratings; the ability to derive cost savings; changing customer behaviour including consumer spending, saving
and borrowing habits; changes to borrower or counterparty credit quality; instability in the global financial markets, including
Eurozone instability, the exit by the UK from the European Union (EU) and the potential for one or more other countries to exit
the EU or the Eurozone and the impact of any sovereign credit rating downgrade or other sovereign financial issues; technological
changes and risks to cyber security; natural, pandemic and other disasters, adverse weather and similar contingencies outside
the Group’s control; inadequate or failed internal or external processes or systems; acts of war, other acts of hostility,
terrorist acts and responses to those acts, geopolitical, pandemic or other such events; changes in laws, regulations, accounting
standards or taxation, including as a result of an exit by the UK from the EU, a further possible referendum on Scottish independence;
changes to regulatory capital or liquidity requirements and similar contingencies outside the Group’s control; the policies,
decisions and actions of governmental or regulatory authorities or courts in the UK, the EU, the United States or elsewhere including
the implementation and interpretation of key legislation and regulation; the ability to attract and retain senior management and
other employees; requirements or limitations on the Group as a result of HM Treasury’s investment in the Group; actions
or omissions by the Group’s directors, management or employees including industrial action; changes to the Group’s
post-retirement defined benefit scheme obligations; the provision of banking operations services to TSB Banking Group plc;
the extent of any future impairment charges or write-downs caused by, but not limited to, depressed asset valuations, market disruptions
and illiquid markets; the value and effectiveness of any credit protection purchased by the Group; the inability to hedge certain
risks economically; the adequacy of loss reserves; the actions of competitors, including non-bank financial services and lending
companies; and exposure to regulatory or competition scrutiny, legal, regulatory or competition proceedings, investigations or
complaints.
Please refer
to the latest Annual Report on Form 20-F filed with the US Securities and Exchange Commission for a discussion of certain factors
together with examples of forward looking statements.
Lloyds Banking
Group may also make or disclose written and/or oral forward looking statements in reports filed with or furnished to the US Securities
and Exchange Commission, Lloyds Banking Group annual reviews, half-year announcements, proxy statements, offering circulars, prospectuses,
press releases and other written materials and in oral statements made by the directors, officers or employees of Lloyds Banking
Group 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 the date hereof, and Lloyds Banking Group expressly disclaims any obligation
or undertaking to release publicly any updates or revisions to any forward looking statements contained in this document to reflect
any change in Lloyds Banking Group’s expectations with regard thereto or any change in events, conditions or circumstances
on which any such statement is based.
The information,
statements and opinions contained in this document do not constitute a public offer under any applicable law or an offer to sell
any securities or financial instruments or any advice or recommendation with respect to such securities or financial instruments.
CONTENTS
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Page
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Summary of results
|
1
|
|
|
Statutory information (IFRS)
|
|
Consolidated income statement
|
2
|
Summary consolidated balance sheet
|
3
|
Review of results
|
3
|
|
|
Underlying basis information
|
|
Segmental analysis of profit (loss) before tax by division (unaudited)
|
6
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Group profit reconciliations
|
7
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Divisional highlights
|
|
Retail
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10
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Commercial Banking
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12
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Consumer Finance
|
14
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Insurance
|
16
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Other
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18
|
|
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Risk management
|
|
Principal risks and uncertainties
|
19
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Credit risk portfolio
|
20
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Funding and liquidity management
|
31
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Capital management
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36
|
|
|
Statutory information
|
|
Condensed consolidated half-year financial statements (unaudited)
|
|
Consolidated income statement
|
45
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Consolidated statement of comprehensive income
|
46
|
Consolidated balance sheet
|
47
|
Consolidated statement of changes in equity
|
49
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Consolidated cash flow statement
|
52
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Notes
|
53
|
LLOYDS BANKING GROUP PLC
SUMMARY OF RESULTS
|
|
Half-year
to 30 June
2016
|
|
Half-year
to 30 June
2015
|
|
Change
since
30 June
2015
|
|
Half-year
to 31 Dec
2015
|
|
|
£m
|
|
£m
|
|
%
|
|
£m
|
|
|
|
|
|
|
|
|
|
Statutory results (IFRS)
|
|
|
|
|
|
|
|
|
Total income, net of insurance claims
|
|
8,320
|
|
8,807
|
|
(6)
|
|
8,614
|
Total operating expenses
|
|
(5,504)
|
|
(7,453)
|
|
26
|
|
(7,934)
|
Trading surplus
|
|
2,816
|
|
1,354
|
|
|
|
680
|
Impairment
|
|
(362)
|
|
(161)
|
|
|
|
(229)
|
Profit before tax
|
|
2,454
|
|
1,193
|
|
|
|
451
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Profit (loss) attributable to ordinary shareholders
|
|
1,590
|
|
677
|
|
|
|
(211)
|
Basic earnings (loss) per share
|
|
2.3p
|
|
1.0p
|
|
|
|
(0.2)p
|
Dividends per share
1
|
|
0.85p
|
|
0.75p
|
|
13
|
|
2.0p
|
|
|
|
|
|
|
|
|
|
Underlying basis (page 6)
|
|
|
|
|
|
|
|
|
Underlying profit
|
|
4,161
|
|
4,383
|
|
(5)
|
|
3,729
|
|
|
|
|
|
|
|
|
|
1
|
Half-year to 31 December 2015 includes a special dividend of 0.5 pence per share.
|
|
|
Capital and balance sheet
|
|
At
30 June
2016
|
|
At
31 Dec
2015
|
|
Change
since
31 Dec
2015
|
|
|
|
|
|
|
%
|
|
|
|
|
|
|
|
Statutory
|
|
|
|
|
|
|
Loans and advances to customers
|
|
£453bn
|
|
£455bn
|
|
−
|
Customer deposits
|
|
£423bn
|
|
£418bn
|
|
1
|
Loan to deposit ratio
1
|
|
107%
|
|
109%
|
|
(2)pp
|
|
|
|
|
|
|
|
Common equity tier 1 ratio
2
|
|
13.1%
|
|
12.8%
|
|
0.3pp
|
Tier 1 capital ratio
2
|
|
16.4%
|
|
16.4%
|
|
−
|
Total capital ratio
2
|
|
21.8%
|
|
21.5%
|
|
0.3pp
|
Risk-weighted assets
2
|
|
£223bn
|
|
£223bn
|
|
−
|
|
|
|
|
|
|
|
1
|
Loans and advances to customers (excluding reverse repos) divided by customer deposits (excluding repos).
|
2
|
Reported on the transitional basis.
|
LLOYDS BANKING GROUP PLC
STATUTORY INFORMATION (IFRS)
CONSOLIDATED INCOME STATEMENT
|
|
|
|
Half-year
to 30 June
2016
|
|
Half-year
to 30 June
2015
|
|
Half-year
to 31 Dec
2015
|
|
|
|
|
£ million
|
|
£ million
|
|
£ million
|
|
|
|
|
|
|
|
|
|
Interest and similar income
|
|
|
|
8,479
|
|
8,975
|
|
8,640
|
Interest and similar expense
|
|
|
|
(3,254)
|
|
(3,483)
|
|
(2,814)
|
Net interest income
|
|
|
|
5,225
|
|
5,492
|
|
5,826
|
Fee and commission income
|
|
|
|
1,502
|
|
1,598
|
|
1,654
|
Fee and commission expense
|
|
|
|
(682)
|
|
(607)
|
|
(835)
|
Net fee and commission income
|
|
|
|
820
|
|
991
|
|
819
|
Net trading income
|
|
|
|
7,180
|
|
3,018
|
|
696
|
Insurance premium income
|
|
|
|
4,212
|
|
1,414
|
|
3,378
|
Other operating income
|
|
|
|
993
|
|
890
|
|
626
|
Other income
|
|
|
|
13,205
|
|
6,313
|
|
5,519
|
Total income
|
|
|
|
18,430
|
|
11,805
|
|
11,345
|
Insurance claims
|
|
|
|
(10,110)
|
|
(2,998)
|
|
(2,731)
|
Total income, net of insurance claims
|
|
|
|
8,320
|
|
8,807
|
|
8,614
|
Regulatory provisions
|
|
|
|
(445)
|
|
(1,835)
|
|
(3,002)
|
Other operating expenses
|
|
|
|
(5,059)
|
|
(5,618)
|
|
(4,932)
|
Total operating expenses
|
|
|
|
(5,504)
|
|
(7,453)
|
|
(7,934)
|
Trading surplus
|
|
|
|
2,816
|
|
1,354
|
|
680
|
Impairment
|
|
|
|
(362)
|
|
(161)
|
|
(229)
|
Profit before tax
|
|
|
|
2,454
|
|
1,193
|
|
451
|
Taxation
|
|
|
|
(597)
|
|
(268)
|
|
(420)
|
Profit for the period
|
|
|
|
1,857
|
|
925
|
|
31
|
|
|
|
|
|
|
|
|
|
Profit attributable to ordinary shareholders
|
|
|
|
1,590
|
|
677
|
|
(211)
|
Profit attributable to other equity holders
|
|
|
|
204
|
|
197
|
|
197
|
Profit attributable to equity holders
|
|
|
|
1,794
|
|
874
|
|
(14)
|
Profit attributable to non-controlling interests
|
|
|
|
63
|
|
51
|
|
45
|
Profit for the period
|
|
|
|
1,857
|
|
925
|
|
31
|
LLOYDS BANKING GROUP PLC
SUMMARY CONSOLIDATED BALANCE SHEET
|
|
At
30 June
2016
|
|
At
31 Dec
2015
|
Assets
|
|
£ million
|
|
£ million
|
|
|
|
|
|
Cash and balances at central banks
|
|
|
|
|
Trading and other financial assets at fair value through profit or loss
|
|
73,399
|
|
58,417
|
Derivative financial instruments
|
|
146,177
|
|
140,536
|
Loans and receivables:
|
|
47,323
|
|
29,467
|
Loans and advances to customers
|
|
453,033
|
|
455,175
|
Loans and advances to banks
|
|
25,958
|
|
25,117
|
Debt securities
|
|
3,996
|
|
4,191
|
|
|
482,987
|
|
484,483
|
Available-for-sale financial assets
|
|
35,860
|
|
33,032
|
Held-to-maturity investments
|
|
21,500
|
|
19,808
|
Other assets
|
|
40,986
|
|
40,945
|
Total assets
|
|
848,232
|
|
806,688
|
Liabilities
|
|
|
|
|
Deposits from banks
|
|
23,162
|
|
16,925
|
Customer deposits
|
|
423,279
|
|
418,326
|
Trading and other financial liabilities at fair value through profit or loss
|
|
52,094
|
|
51,863
|
Derivative financial instruments
|
|
42,376
|
|
26,301
|
Debt securities in issue
|
|
88,758
|
|
82,056
|
Liabilities arising from insurance and investment contracts
|
|
107,722
|
|
103,071
|
Subordinated liabilities
|
|
22,935
|
|
23,312
|
Other liabilities
|
|
38,968
|
|
37,854
|
Total liabilities
|
|
799,294
|
|
759,708
|
|
|
|
|
|
Shareholders’ equity
|
|
43,151
|
|
41,234
|
Other equity instruments
|
|
5,355
|
|
5,355
|
Non-controlling interests
|
|
432
|
|
391
|
Total equity
|
|
48,938
|
|
46,980
|
Total equity and liabilities
|
|
848,232
|
|
806,688
|
REVIEW OF RESULTS
The Group recorded a profit before tax of
£2,454 million for the half year to 30 June 2016, an increase of £1,261 million compared with the profit
before tax of £1,193 million for the half year to 30 June 2015.
Total income, net of insurance claims, decreased
by £487 million, or 6 per cent, to £8,320 million for the half year to 30 June 2016 from £8,807 million
in the half year to 30 June 2015.
Net interest income decreased by £267 million,
or 5 per cent, to £5,225 million in the half year to 30 June 2016 compared with £5,492 million
in the same period in 2015. This was due in part to an increase of £165 million in the charge within net interest income
for amounts allocated to unit holders in Open-Ended Investment Companies (OEICs), from £357 million in the half year
to 30 June 2015 to £522 million in the half year to 30 June 2016, as a result of higher investment returns
in 2016; there was no significant impact from changes in the population of consolidated OEICs. Excluding this charge from both
periods, and the £192 million net interest income of TSB from the comparative period, net interest income was £90 million,
or 2 per cent, higher at £5,747 million in the half year to 30 June 2016 compared with £5,657 million
in the same period in 2015.
LLOYDS BANKING GROUP PLC
REVIEW OF RESULTS
(continued)
The net interest margin on the Group’s
relationship lending and similar assets improved, offsetting a small reduction in average interest-earning assets, which principally
related to lending outside of the Group’s risk appetite as well as in the mortgages and larger corporate portfolios, only
partly offset by growth in other personal finance and SME lending. The improvement in margin reflected lower deposit and wholesale
funding costs, a one-off credit to net interest income related to the credit card portfolio and the impact of the Enhanced Capital
Note (ECN) redemptions, more than offsetting pressure on asset prices.
Other income increased by £6,892 million
to £13,205 million in the half year to 30 June 2016, compared with £6,313 million in the same period in 2015,
due mainly to a £4,162 million increase in net trading income, reflecting higher income from the insurance businesses
driven by the impact of market conditions on policyholder assets. These market movements, together with the increase in insurance
premium income, were largely offset in the Group’s income statement by a £7,112 million increase in the insurance
claims expense, and the impact on net interest income of amounts allocated to unit holders in Open-Ended Investment Companies.
Insurance premium income was £2,798 million higher at £4,212 million compared with £1,414 million
in the half year to 30 June 2015; underlying premium income of £3,373 million in 2015 having been offset by a charge of £1,959 million
relating to the recapture by a third party insurer of a portfolio of policies previously reassured with the Group. Excluding this
item from the comparable period, the insurance premium income of £4,212 million in the half year to 30 June 2016 was £839
million, or 25 per cent, higher as a result of increased bulk annuity business.
Net fee and commission income was £171
million, or 17 per cent, lower at £820 million in the half year to 30 June 2016 compared with £991 million in the half
year to 30 June 2015, principally as a result of the disposal of TSB and reduced levels of card and current account fees.
Other operating income was £103 million,
or 12 per cent, higher at £993 million in the half year to 30 June 2016 compared with £890 million in the half year
to 30 June 2015. In the half year to 30 June 2016 the Group realised a gain of £484 million arising on the sale of its investment
in Visa Europe Limited, there was a £152 million increase in liability management gains and an improvement in income from
the movement in value of in-force insurance business; together these items more than offset a net loss of £721 million arising
on the Group’s tender offers and redemptions in respect of its ECNs which completed in March 2016. This loss principally
comprised the write-off of the embedded equity conversion feature and premiums paid under the terms of the transaction.
There was a total regulatory
provisions charge of £460 million in the half-year to 30 June 2016 compared to £1,835 million in the same period
in 2015 of which £445 million (half-year to 30 June 2015: £1,835 million) was in expenses and £15 million
(half-year to 30 June 2015: £nil) was recognized within income. No further provision has been taken for PPI, where
complaint levels over the first half of 2016 have been around 8,500 per week on average, broadly in line
with expectations. The Group’s current PPI provision reflects the Group’s interpretation of the Financial Conduct
Authority’s (FCA) consultation paper regarding a potential time bar, the
Plevin
case and the expected conclusion
by mid-2018. The Group awaits the FCA’s final decision however, should the time bar be longer than the proposed two
years or the FCA’s final decision be significantly delayed, then the Group may need to reassess its provision. The
total charge of £460 million related to a range of other conduct issues and included £215 million in respect
of arrears related activities on secured and unsecured retail products, £70 million in respect of complaints
relating to packaged bank accounts and £50 million related to insurance products sold in Germany. In addition
there were a number of smaller additions to existing conduct risk provisions totalling £125 million across all
divisions.
Other operating expenses decreased by £559 million,
or 10 per cent, to £5,059 million in the half year to 30 June 2016 compared with £5,618 million
in the half year to 30 June 2015; although the half year to 30 June 2015 included a charge of £665 million relating
to the disposal of TSB, adjusting for which costs were £106 million, or 2 per cent, higher at £5,059 million in
the half year to 30 June 2016 compared with £4,953 million in the same period in 2015 as savings from the Group’s restructuring
initiatives have been more than offset by the impact of annual pay increases, higher levels of operating lease depreciation following
continued growth in the Lex Autolease business and higher levels of restructuring costs.
LLOYDS BANKING GROUP PLC
REVIEW OF RESULTS
(continued)
Impairment losses increased by £201 million
to £362 million in the half year to 30 June 2016 compared with £161 million in the half year to 30 June 2015.
The impairment charge in respect of loans and receivables was £50 million, or 28 per cent, higher at £229 million in
the half year to 30 June 2016 compared to £179 million in the same period in 2015.
Credit quality remains good and the increased
charge is largely due to a reduction in the level of provision releases and lower write-backs from debt sales. In addition, there
was an impairment charge of £146 million in respect of certain equity investments in the Group’s available-for-sale
portfolio.
The tax charge for the half year to 30 June
2016 was £597 million (half year to 30 June 2015: £268 million), representing an effective tax rate of 24
per cent. The effective tax rate reflects the impact of tax exempt gains and capital losses not previously recognised.
Total assets were £41,544 million
or 5 per cent, higher at £848,232 million at 30 June 2016, compared with £806,688 million
at 31 December 2015. Cash and balances at central banks were £14,982 million, or 26 per cent, higher at £73,399
million compared to £58,417 million at 31 December 2015, as the Group made use of favourable opportunities for the placing
of funds; and derivative assets were £17,856 million, or 61 per cent, higher at £47,323 million compared to £29,467
million at 31 December 2015, as a result of increased market activity at the end of June 2016 and movements in exchange rates.
Loans and advances to customers decreased by £2,142 million from £455,175 million at 31 December 2015
to £453,033 million at 30 June 2016; growth in unsecured personal finance and SME lending was more than offset
by reductions in larger corporate lending, mortgage balances, as the Group concentrates on protecting margin in the current market,
and in the portfolio of lending which is outside of the Group’s risk appetite. Customer deposits increased by £4,953 million
to £423,279 million compared with £418,326 million at 31 December 2015 following growth in corporate and SME
deposits. Shareholders’ equity increased by £1,917 million,
or 5 per cent, from £41,234 million at 31 December 2015 to £43,151 million at 30 June 2016 as a
result of the retained profit for the period of £1,794 million and the positive impact of other reserve movements, in
particular in relation to the cash flow hedging reserve, more than offsetting total dividend payments in the period of £1,427 million.
The Group’s wholesale funding was
£131 billion at 30 June 2016 (31 December 2015: £120 billion) of which 39 per cent (31 December 2015: 32 per cent)
had a maturity of less than one year. The Group’s liquidity position remains satisfactory and the liquidity coverage ratio
was in excess of 100 per cent at 30 June 2016.
The Group's transitional common equity tier
1 capital ratio increased to 13.1 per cent at the end of June 2016 from 12.8 per cent at the end of December
2015 and the transitional total capital ratio increased to 21.8 per cent (31 December 2015: 21.5 per cent).
LLOYDS BANKING GROUP PLC
SEGMENTAL ANALYSIS OF PROFIT (LOSS) BEFORE
TAX BY DIVISION (UNAUDITED)
Underlying basis
|
|
Half-year
to 30 June
2016
|
|
Half-year
to 30 June
2015
|
|
Half-year
to 31 Dec
2015
|
|
|
£ million
|
|
£ million
|
|
£ million
|
|
|
|
|
|
|
|
Retail
|
|
1,548
|
|
1,603
|
|
1,488
|
Commercial Banking
|
|
1,236
|
|
1,212
|
|
1,266
|
Consumer Finance
|
|
690
|
|
756
|
|
625
|
Insurance
|
|
446
|
|
584
|
|
378
|
Other
|
|
241
|
|
228
|
|
(28)
|
Underlying profit before tax
|
|
4,161
|
|
4,383
|
|
3,729
|
The Group Executive Committee (GEC), which
is the chief operating decision maker for the Group, reviews the Group’s internal reporting based around these segments (which
reflect the Group’s organisational and management structures) in order to assess the Group’s performance and allocate
resources; this reporting is provided on an underlying profit before tax basis. The GEC believes that this basis better represents
the performance of the Group. IFRS 8 requires that the Group present its segmental profit before tax on the basis reviewed by the
chief operating decision maker that is most consistent with the measurement principles used in measuring the Group’s statutory
profit before tax. Accordingly, the Group presents its segmental underlying basis profit before tax in note 2 on page 53
of its financial statements in compliance with IFRS 8
Operating Segments
.
The aggregate total of the underlying basis
segmental results constitutes a non-GAAP measure as defined in the United States Securities and Exchange Commission’s Regulation
G. Management uses the aggregate and segmental underlying profit before tax, both non-GAAP measures, as measures of performance
and believes that they provide important information for investors because they are comparable representations of the Group’s
performance. Profit before tax is the comparable GAAP measure to aggregate underlying profit before tax; the following table sets
out the reconciliation of this non-GAAP measure to its comparable GAAP measure.
LLOYDS BANKING GROUP PLC
GROUP PROFIT RECONCILIATIONS
|
|
Half-year
to 30 June
2016
|
|
Half-year
to 30 June
2015
|
|
Half-year
to 31 Dec
2015
|
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
Underlying profit
|
|
4,161
|
|
4,383
|
|
3,729
|
Asset sales
|
|
335
|
|
(52)
|
|
106
|
Enhanced Capital Notes
|
|
(790)
|
|
(390)
|
|
289
|
Liability management
|
|
146
|
|
(6)
|
|
(22)
|
Own debt volatility
|
|
69
|
|
57
|
|
70
|
Other volatile items
|
|
(50)
|
|
36
|
|
(165)
|
Volatility arising in insurance business
|
|
(372)
|
|
18
|
|
(123)
|
Fair value unwind
|
|
(110)
|
|
(77)
|
|
(115)
|
Restructuring and TSB build and dual running costs
|
|
(307)
|
|
(117)
|
|
(138)
|
Charge relating to TSB disposal
|
|
−
|
|
(660)
|
|
−
|
Payment protection insurance provision
|
|
−
|
|
(1,400)
|
|
(2,600)
|
Other conduct provisions
|
|
(460)
|
|
(435)
|
|
(402)
|
Amortisation of purchased intangibles
|
|
(168)
|
|
(164)
|
|
(178)
|
Profit before tax – statutory
|
|
2,454
|
|
1,193
|
|
451
|
Asset sales
Asset sales comprise the gains and losses
on asset disposals (half-year to 30 June 2016: gain of £335 million; half-year to 30 June 2015: loss of £52 million),
principally of assets which were outside of the Group’s risk appetite; the gain in the half-year to 30 June 2016 includes
the gain of £484 million on the sale of the Group’s investment in Visa Europe.
Enhanced Capital Notes
The loss relating to the ECNs in the first
half of 2016 was £790 million, representing the write-off of the embedded derivative and the premium paid on the redemption
of the remaining notes completed in the first quarter of 2016.
Liability management
Gains of £146 million arose in
the half-year to 30 June 2016 (half-year to 30 June 2015: losses of £6 million) on transactions undertaken
as part of the Group’s management of its wholesale funding and capital.
Own debt volatility
Own debt volatility includes a £59 million
gain (half-year to 30 June 2015: gain of £53 million) relating to the change in fair value of the small proportion
of the Group’s wholesale funding which was designated at fair value at inception.
Other volatile items
Other volatile items includes the change
in fair value of interest rate derivatives and foreign exchange hedges in the banking book not mitigated through hedge accounting,
resulting in a gain of £30 million (a gain of £5 million arose in the first half of 2015). Other volatile
items also include a negative net derivative valuation adjustment of £80 million (half-year to 30 June 2015: gain
of £31 million), reflecting movements in the market implied credit risk associated with customer derivative balances.
Volatility relating to the insurance
business
The Group’s statutory profit before
tax is affected by insurance volatility caused by movements in financial markets generating a variance against expected returns,
and policyholder interests volatility, which primarily reflects the gross up of policyholder tax included in the Group tax charge.
Volatility relating to the insurance business reduced the Group’s statutory profit by £372 million in the first
half of 2016; this compares to positive insurance volatility of £18 million in the first half of 2015.
LLOYDS BANKING GROUP PLC
GROUP PROFIT RECONCILIATIONS
(continued)
Volatility comprises the following:
|
|
Half-year
to 30 June
2016
|
|
Half-year
to 30 June
2015
|
|
Half-year
to 31 Dec
2015
|
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
Insurance volatility
|
|
(328)
|
|
(109)
|
|
(194)
|
Policyholder interests volatility
|
|
(10)
|
|
83
|
|
4
|
Total volatility
|
|
(338)
|
|
(26)
|
|
(190)
|
Insurance hedging arrangements
|
|
(34)
|
|
44
|
|
67
|
Total
|
|
(372)
|
|
18
|
|
(123)
|
Insurance volatility
The Group’s insurance business has
policyholder liabilities that are supported by substantial holdings of investments. IFRS requires that the changes in both the
value of the liabilities and investments are reflected within the income statement. The value of the liabilities does not move
exactly in line with changes in the value of the investments. As the investments are substantial, movements in their value can
have a significant impact on the profitability of the Group. Management believes that it is appropriate to disclose the division’s
results on the basis of an expected return in addition to results based on the actual return. The impact of the actual return on
these investments differing from the expected return is included within insurance volatility.
The expected gross investment returns used
to determine the underlying profit of the business are based on prevailing market rates and published research into historical
investment return differentials for the range of assets held. Where appropriate, rates are updated throughout the year to reflect
changing market conditions and changes in the asset mix. The rates used for calculating these expected returns are an average of
the 15 year swap rate over the preceding 12 months and where appropriate, rates are updated throughout the year to reflect
changing market conditions. The negative insurance volatility during the period ended 30 June 2016 of £328 million primarily
reflects a widening of credit spreads and low returns on cash investments.
Policyholder interests volatility
Accounting standards require that tax on
policyholder investment returns should be included in the Group’s tax charge rather than being offset against the related
income. The result is, therefore, to either increase or decrease profit before tax with a related change in the tax charge. Timing
and measurement differences exist between provisions for tax and charges made to policyholders. Consistent with the expected approach
taken in respect of insurance volatility, differences in the expected levels of the policyholder tax provision and policyholder
charges are adjusted through policyholder interests volatility. In the first half of 2016, the statutory results before tax included
a debit to other income which relates to policyholder interests volatility totalling £10 million (first half of 2015:
credit of £83 million) relating to offsetting movements in equity, bond and gilt returns.
Insurance hedging arrangements
The Group purchased put option contracts
in 2016 to protect against deterioration in equity market conditions and the consequent negative impact on the value of in-force
business on the Group balance sheet. These were financed by selling some upside potential from equity market movements. On a mark-to-market
basis a charge of £34 million was recognised in relation to these contracts in the first half of 2016.
LLOYDS BANKING GROUP PLC
GROUP PROFIT RECONCILIATIONS
(continued)
Fair value unwind
The statutory (IFRS) results include the
impact of the acquisition-related fair value adjustments arising from the acquisition of HBOS in 2009; these adjustments affect
a number of line items.
The principal financial effects of the fair
value unwind are to reflect the effective interest rates applicable at the date of acquisition, on assets and liabilities that
were acquired at values that differed from their original book value, and to recognise the reversal of credit and liquidity risk
adjustments as underlying instruments mature or become impaired. Generally, this leads to higher interest expense as the value
of HBOS’s own debt accretes to par and a lower impairment charge reflecting the impact of acquisition balance sheet valuation
adjustments.
Restructuring and TSB costs
Restructuring costs in the half-year to
30 June 2016 were £307 million and included severance related costs of the Simplification programme together with £60 million
relating to work on implementing the ring-fencing requirements. In the half-year to 30 June 2015 Simplification programme
costs were £32 million and TSB build and dual running costs were £85 million.
Payment protection insurance (PPI)
No further provision has been taken for
PPI, where complaint levels over the first half of 2016 have been around 8,500 per week on average, broadly in line with expectations.
The Group’s current PPI provision reflects the Group’s interpretation of the Financial Conduct Authority’s (FCA)
consultation paper regarding a potential time bar, the Plevin case and the expected conclusion by mid-2018. The Group awaits the
FCA’s final decision however, should the time bar be longer than the proposed two years or the FCA’s final decision
be significantly delayed, then the Group may need to reassess its provision.
Other conduct provisions
There was a charge of £460 million
to cover a range of other conduct issues. The charge for the half-year included £215 million in respect of arrears related
activities on secured and unsecured retail products, £70 million in respect of complaints relating to packaged bank
accounts and £50 million related to insurance products sold in Germany. In addition there were a number of smaller additions
to existing conduct risk provisions totalling £125 million across all divisions.
Amortisation of purchased intangibles
A total of £4,650 million of
customer-related intangibles, brands, core deposit intangibles and purchased credit card relationships were recognised on the acquisition
of HBOS in 2009 and these are being amortised over their estimated useful lives, where this has been determined to be finite. This
has resulted in a charge of £168 million in the half-year to 30 June 2016 (half-year to 30 June 2015: £164 million).
The customer-related intangibles include
customer lists and the benefits of customer relationships that generate recurring income. The purchased credit card relationships
represent the benefit of recurring income generated from the portfolio of credit cards purchased and the core deposit intangible
is the benefit derived from a large stable deposit base that has low interest rates.
LLOYDS BANKING GROUP PLC
DIVISIONAL HIGHLIGHTS
RETAIL
Retail offers a broad range of financial
service products, including current accounts, savings and mortgages, to UK personal customers, including Wealth and small business
customers. It is also a distributor of insurance, and a range of long-term savings and investment products. Our aim is to be the
best bank for customers in the UK, by building deep and enduring relationships that deliver value to customers, and by providing
them with greater choice and flexibility. We will maintain our multi-brand and multi-channel strategy and continue to simplify
the business and provide more transparent products, helping to improve service levels and reduce conduct risks.
Progress against strategic initiatives
|
·
|
Largest digital bank in the UK with over 12 million active online users including 7 million mobile
users.
|
|
·
|
Continued to attract new customers through positive switching activity, particularly through the
Halifax challenger brand which has attracted more than 1 in 5 customers switching in the first half of 2016.
|
|
·
|
Continued to improve our customer proposition including the launch of Android Pay and our announced
support for the proposed Pay by Bank app.
|
|
·
|
Leading the way on the Government’s drive for improved financial inclusion by providing 1
in 3 basic bank accounts to disadvantaged and low income customers. January also saw the launch of the new Basic Bank Account,
improving access to banking within the UK in line with industry changes.
|
|
·
|
We remain committed to supporting first-time buyers and continue to be the largest lender to this
customer group. Retail continues to be a leading supporter of the UK government’s Help to Buy scheme, with lending of £4.1
billion under the mortgage guarantee element of the scheme to date.
|
|
·
|
On track to help 100,000 start-up businesses get off the ground in 2016. Continuing to improve
our proposition to small business customers, launching a range of new to market products and services.
|
|
·
|
Continued to expand the use of Remote Advice (Video Interview) expansion across Mortgages, Wealth
and Retail Business Banking.
|
|
−
|
In March, Halifax became one of the first high street banks to offer Video Mortgage Interviews
for customers from the comfort of their own home.
|
|
o
|
So far over 1,000 interviews have taken place, with record customer satisfaction levels, 98 per
cent of customers rated the service as Excellent or Good, NPS average of 78 per cent.
|
Financial performance
|
·
|
Underlying profit decreased 3 per cent to £1,548 million, with lower net interest income
and a slightly higher impairment charge partially offset by a reduction in operating costs.
|
|
·
|
Net interest income has decreased 2 per cent driven in part by a reduction in balances as we focus
on protecting margins.
|
|
·
|
Other income in line with 2015.
|
|
·
|
Total costs decreased 2 per cent to £2,144 million as efficiency savings more than covered
a 20 per cent increase in investment. Staff numbers have reduced by 5 per cent in the 12 months to June 2016.
|
|
·
|
Impairment increased by £28 million to £162 million.
|
|
·
|
Loans and advances to customers fell 2 per cent to £300.5 billion in the first half of 2016,
with the open mortgage book (excluding specialist mortgage book and Intelligent Finance) reducing 1 per cent reflecting actions
to protect the net interest margin in a highly competitive low growth environment.
|
|
·
|
Customer deposits decreased 1 per cent to £271.3 billion, driven by a reduction in tactical
balances.
|
|
·
|
Risk-weighted assets increased by £0.6 billion to £55.2 billion.
|
LLOYDS BANKING GROUP PLC
RETAIL
(continued)
|
|
Half-year
to 30 June
2016
|
|
Half-year
to 30 June
2015
1
|
|
Change
|
|
Half-year
to 31 Dec
2015
1
|
|
Change
|
|
|
£m
|
|
£m
|
|
%
|
|
£m
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
3,296
|
|
3,364
|
|
(2)
|
|
3,300
|
|
−
|
Other income
|
|
558
|
|
554
|
|
1
|
|
561
|
|
(1)
|
Total income
|
|
3,854
|
|
3,918
|
|
(2)
|
|
3,861
|
|
−
|
Operating costs
|
|
(2,144)
|
|
(2,181)
|
|
2
|
|
(2,158)
|
|
1
|
Operating lease depreciation
|
|
−
|
|
−
|
|
|
|
−
|
|
|
Impairment
|
|
(162)
|
|
(134)
|
|
(21)
|
|
(215)
|
|
25
|
Underlying profit
|
|
1,548
|
|
1,603
|
|
(3)
|
|
1,488
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
Banking net interest margin
|
|
2.23%
|
|
2.25%
|
|
(2)bp
|
|
2.20%
|
|
3bp
|
Average interest-earning banking assets
|
|
£305.0bn
|
|
£307.4bn
|
|
(1)
|
|
£306.6bn
|
|
(1)
|
Asset quality ratio
|
|
0.11%
|
|
0.09%
|
|
2bp
|
|
0.14%
|
|
(3)bp
|
Return on risk-weighted assets
|
|
5.70%
|
|
5.94%
|
|
(24)bp
|
|
5.50%
|
|
20bp
|
Return on assets
|
|
1.02%
|
|
1.05%
|
|
(3)bp
|
|
0.96%
|
|
6bp
|
|
|
|
|
|
|
|
|
|
|
|
Key balance sheet items
|
|
At 30 June
2016
|
|
At 31 Dec
2015
1
|
|
Change
|
|
|
£bn
|
|
£bn
|
|
%
|
|
|
|
|
|
|
|
Loans and advances excluding closed portfolios
|
|
272.0
|
|
275.5
|
|
(1)
|
Closed portfolios
|
|
28.5
|
|
30.1
|
|
(5)
|
Loans and advances to customers
|
|
300.5
|
|
305.6
|
|
(2)
|
Relationship balances
|
|
249.9
|
|
249.3
|
|
|
Tactical balances
|
|
21.4
|
|
24.4
|
|
(12)
|
Customer deposits
|
|
271.3
|
|
273.7
|
|
(1)
|
Total customer balances
|
|
571.8
|
|
579.3
|
|
(1)
|
|
|
|
|
|
|
|
Risk-weighted assets
|
|
55.2
|
|
54.6
|
|
1
|
|
|
|
|
|
|
|
1
|
Restated. See basis of presentation on the inside front cover.
|
|
|
|
|
LLOYDS
BANKING GROUP PLC
COMMERCIAL BANKING
Commercial Banking has been supporting British
business for over 250 years. It has a client-led, low risk, capital efficient strategy, helping UK-based clients and international
clients with a link to the UK. Through our four client facing divisions – SME, Mid Markets, Global Corporates and Financial
Institutions – we provide clients with a range of products and services such as lending, transactional banking, working capital
management, risk management, debt capital markets services, as well as access to private equity through Lloyds Development Capital.
Progress against strategic initiatives
|
·
|
Good progress against strategic initiatives has delivered underlying profit growth and increased
returns.
|
|
·
|
Remain committed to supporting SME and Mid Market companies in the UK, increasing lending by £2
billion
year-on-year and providing UK Manufacturers with over £500 million of funding support in 2016.
|
|
·
|
The Financial Institution franchise has delivered solid income growth across a wide product set.
|
|
·
|
Strengthened the balance sheet in Global Corporates through disciplined capital usage and strong
deposit growth.
|
|
·
|
Reduced onboarding times and enhanced client analytics, allowing relationship managers to spend
more time with clients and offer better quality support.
|
|
·
|
Continued to help Britain prosper, facilitating over £7.9 billion of financing in the
first half of 2016 to support UK government infrastructure projects, including the construction of the Beatrice Offshore Wind Farm
that is expected to power more than 470,000 homes, create c.5,000 new jobs and provide significant long-term economic benefits
to the UK.
|
|
·
|
Awarded Business Bank of the Year at the FD’s excellence Awards for the 12th consecutive
year.
|
Financial performance
|
·
|
Underlying profit up 2 per cent to £1,236 million reflecting our low risk business model
and the strategy to manage clients through the cycle.
|
|
·
|
Stable income performance. Net interest income up 3 per cent, supported by high quality deposit
growth and reduced funding costs leading to 33 basis points improvement in net interest margin.
|
|
·
|
Other income decrease largely driven by lower capital market volumes.
|
|
·
|
Operating costs down 2 per cent reflecting dynamic cost management through headcount rationalisation,
supported by efficiency initiatives.
|
|
·
|
Operating lease charges increased due to accelerated depreciation on a small number of assets.
|
|
·
|
Impairments release of £35 million reflects active risk management with a number of write-backs
and releases.
|
|
·
|
Maintained lending to customers whilst reducing risk-weighted assets, with SME growth continuing
to outperform the market and increases in Mid Markets.
|
|
·
|
Continued capital optimisation, with risk-weighted assets decreasing £1.4 billion reflecting
asset reductions partly offset by foreign exchange movements. Our disciplined approach to capital and credit management has been
recognised through the award of Credit Portfolio Manager of the year at the 2016 Risk Awards.
|
|
·
|
Deposits increased 7 per cent with a 9 per cent increase in Global Transaction Banking balances
since December 2015 and 12 per cent since June 2015. Momentum has continued in attracting high quality deposits in SME, Global
Corporates and Financial Institutions, improving the balance sheet strength of the Group.
|
|
·
|
Return on risk-weighted assets of 2.42 per cent increased 11 basis points, demonstrating the continued
progress in delivering sustainable returns.
|
LLOYDS BANKING GROUP PLC
COMMERCIAL BANKING
(continued)
|
|
Half-year
to 30 June
2016
|
|
Half-year
to 30 June
2015
1
|
|
Change
|
|
Half-year
to 31 Dec
2015
1
|
|
Change
|
|
|
£m
|
|
£m
|
|
%
|
|
£m
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
1,306
|
|
1,266
|
|
3
|
|
1,310
|
|
−
|
Other income
|
|
982
|
|
1,027
|
|
(4)
|
|
1,045
|
|
(6)
|
Total income
|
|
2,288
|
|
2,293
|
|
−
|
|
2,355
|
|
(3)
|
Operating costs
|
|
(1,035)
|
|
(1,059)
|
|
2
|
|
(1,103)
|
|
6
|
Operating lease depreciation
|
|
(52)
|
|
(14)
|
|
|
|
(16)
|
|
|
Impairment release/(charge)
|
|
35
|
|
(8)
|
|
|
|
30
|
|
17
|
Underlying profit
|
|
1,236
|
|
1,212
|
|
2
|
|
1,266
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
Banking net interest margin
|
|
3.18%
|
|
2.85%
|
|
33bp
|
|
3.10%
|
|
8bp
|
Average interest-earning banking assets
|
|
£88.1bn
|
|
£91.1bn
|
|
(3)
|
|
£88.9bn
|
|
(1)
|
Asset quality ratio
|
|
(0.06)%
|
|
0.04%
|
|
(10)bp
|
|
(0.02)%
|
|
(4)bp
|
Return on risk-weighted assets
|
|
2.42%
|
|
2.31%
|
|
11bp
|
|
2.43%
|
|
(1)bp
|
Return on assets
|
|
1.31%
|
|
1.08%
|
|
23bp
|
|
1.38%
|
|
(7)bp
|
|
|
|
|
|
|
|
|
|
|
|
Key balance sheet items
|
|
At 30 June
2016
|
|
At 31 Dec
2015
1
|
|
Change
|
|
|
£bn
|
|
£bn
|
|
%
|
|
|
|
|
|
|
|
SME
|
|
30.0
|
|
29.2
|
|
3
|
Other
|
|
72.0
|
|
72.8
|
|
(1)
|
Loans and advances to customers
|
|
102.0
|
|
102.0
|
|
|
Customer deposits
|
|
141.4
|
|
131.9
|
|
7
|
Total customer balances
|
|
243.4
|
|
233.9
|
|
4
|
|
|
|
|
|
|
|
Risk-weighted assets
|
|
101.8
|
|
103.2
|
|
(1)
|
|
|
|
|
|
|
|
1
|
Restated. See basis of presentation on the inside front cover.
|
|
|
|
|
LLOYDS BANKING GROUP PLC
CONSUMER FINANCE
From 1 January 2016, Consumer Finance comprises
motor finance, credit cards, unsecured personal loans and European mortgages and deposit taking. This brings together all consumer
lending products to enable better and more coordinated focus on these underrepresented markets. Our aim is to deliver sustainable
growth within risk appetite through building digital capability and continuing to create innovative propositions, underpinned by
improvements to customer experience.
Progress against strategic initiatives
|
·
|
Creating the best customer experience
|
|
–
|
Black Horse recognised with several industry awards for the innovative new funding platform Sign-IT,
which reduced processing time for new motor loans by 30 per cent while increasing security and customer protection, improving new
customer net promoter scores by 14 per cent year-on-year.
|
|
–
|
Credit Cards delivered over 60 process improvements to the customer journey in the first six months
of 2016 and a 30 per cent reduction in complaints compared to the same period two years ago with net promoter scores more than
doubling.
|
|
–
|
Within Loans, the Flexible and Clarity Loan products were awarded 5 stars by Defaqto for quality
and customer satisfaction for the fourth and fifth consecutive years respectively.
|
|
–
|
6,000 Lex Autolease customers now using new online vehicle servicing tool allowing choice of service
provider and reviews of customer feedback.
|
|
·
|
Becoming simpler and more efficient
|
|
–
|
Reduced the variants of terms and conditions by c.90 per cent for 8 million credit card customers.
|
|
–
|
Lex Autolease have simplified their end of contract remarketing operation allowing a reduction
in the number of operating sites and employees.
|
|
–
|
Black Horse reduced the processing time for onboarding new dealers from 22 days to 6 days.
|
|
·
|
Delivering sustainable growth
|
|
–
|
Black Horse delivered increased market share with lending balance growth of 30 per cent year-on-year
to over £10 billion through continued focus on lower risk new business.
|
|
–
|
Lex Autolease fleet growth of over 25,000 units or 8 per cent year-on-year.
|
|
–
|
4 per cent growth in Consumer Credit Cards balances driven by an 8 per cent increase in retail
spend and balance on new accounts up 5 per cent. There has been a 9 per cent increase in spend in Commercial Cards.
|
|
–
|
4 per cent year-on-year reduction in loans balances although new lending has increased 9 per
cent, including a 41 per cent increase through the digital channel reflecting changing customer behaviour and investment in digital
capability. The digital channel now accounts for 62 per cent of all new loans written.
|
Financial performance
|
·
|
Underlying profit of £690 million was down 9 per cent driven by lower debt sale
benefits year-on-year.
|
|
·
|
Net interest income down 1 per cent to £994 million with net interest margin down 69
basis points to 6.27 per cent. Strong volume driven growth in high quality new business in Black Horse was partially offset by
repayment of historic higher margin business. Cards benefited from a one-off credit in the first quarter but continued negative
Euribor trends and a lower year-on-year balance in Loans led to an overall decline in margin.
|
|
·
|
Other operating income down 3 per cent to £658 million due to market-wide reduction
in credit card interchange fees, more than offsetting the benefit of continued Lex Autolease fleet growth.
|
|
·
|
Operating costs down 8 per cent to £466 million with continued investment more than
offset by efficiency savings.
|
|
·
|
Impairment charge up 88 per cent to £128 million, but broadly flat year-on-year
excluding debt sale benefits. Flat underlying impairment charge despite book growth reflects the sustained credit quality of new
business and close management of risk appetite.
|
|
·
|
UK Customer Assets increased 11 per cent year-on-year and 5 per cent since December 2015 driven
by growth in Black Horse and Lex Autolease, with £4.8 billion of the three year £6 billion growth target
delivered.
|
|
·
|
Customer deposits reduced by 20 per cent year-on-year and 18 per cent since December 2015
to £9.1 billion driven by re-pricing activity in response to continued weak Euribor rates and the Group’s balance
sheet funding strategy.
|
|
·
|
Return on risk-weighted assets decreased 20 basis points year-on-year to 4.47 per cent broadly
consistent with profit trends.
|
LLOYDS BANKING GROUP PLC
CONSUMER FINANCE
(continued)
|
|
Half-year
to 30 June
2016
|
|
Half-year
to 30 June
2015
1
|
|
Change
|
|
Half-year
to 31 Dec
2015
1
|
|
Change
|
|
|
£m
|
|
£m
|
|
%
|
|
£m
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
994
|
|
1,005
|
|
(1)
|
|
949
|
|
5
|
Other income
|
|
658
|
|
678
|
|
(3)
|
|
681
|
|
(3)
|
Total income
|
|
1,652
|
|
1,683
|
|
(2)
|
|
1,630
|
|
1
|
Operating costs
|
|
(466)
|
|
(506)
|
|
8
|
|
(471)
|
|
1
|
Operating lease depreciation
|
|
(368)
|
|
(353)
|
|
(4)
|
|
(367)
|
|
−
|
Impairment
|
|
(128)
|
|
(68)
|
|
(88)
|
|
(167)
|
|
23
|
Underlying profit
|
|
690
|
|
756
|
|
(9)
|
|
625
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
Banking net interest margin
|
|
6.27%
|
|
6.96%
|
|
(69)bp
|
|
6.29%
|
|
(2)bp
|
Average interest-earning banking assets
|
|
£32.9bn
|
|
£29.9bn
|
|
10
|
|
£31.1bn
|
|
6
|
Asset quality ratio
|
|
0.79%
|
|
0.47%
|
|
32bp
|
|
1.06%
|
|
(27)bp
|
Impaired loans as a % of closing advances
|
|
2.3%
|
|
3.4%
|
|
(1.1)pp
|
|
2.9%
|
|
(0.6)pp
|
Return on risk-weighted assets
|
|
4.47%
|
|
4.67%
|
|
(20)bp
|
|
3.87%
|
|
60bp
|
Return on assets
|
|
3.66%
|
|
4.46%
|
|
(80)bp
|
|
3.49%
|
|
17bp
|
|
|
|
|
|
|
|
|
|
|
|
Key balance sheet items
|
|
At 30 June
2016
|
|
At 31 Dec
2015
1
|
|
Change
|
|
|
£bn
|
|
£bn
|
|
%
|
|
|
|
|
|
|
|
Loans and advances to customers
|
|
33.7
|
|
31.5
|
|
7
|
Of which UK
|
|
27.9
|
|
26.6
|
|
5
|
Operating lease assets
|
|
3.7
|
|
3.5
|
|
6
|
Total customer assets
|
|
37.4
|
|
35.0
|
|
7
|
Of which UK
|
|
31.6
|
|
30.0
|
|
5
|
Customer deposits
|
|
9.1
|
|
11.1
|
|
(18)
|
Total customer balances
|
|
46.5
|
|
46.1
|
|
1
|
|
|
|
|
|
|
|
Risk-weighted assets
|
|
31.1
|
|
30.7
|
|
1
|
|
|
|
|
|
|
|
1
|
Restated. See basis of presentation on the inside front cover.
|
|
|
LLOYDS BANKING GROUP PLC
INSURANCE
The Insurance division is committed to providing
a range of trusted and value for money protection, pension and investment products to meet the needs of our customers. Scottish
Widows is helping almost six million customers protect what they value most and plan financially for the future. In addition, the
general insurance business is protecting the homes, belongings, cars and businesses of over three million customers.
Progress against strategic initiatives
|
·
|
Continued to support corporate customers in de-risking their balance sheets, with the successful
completion of a further three bulk annuity transactions. This takes the combined external deal size to over £1.25 billion
since our entry into this market at the end of 2015.
|
|
·
|
Continued to leverage Group capabilities to source attractive, low risk, higher yielding assets
to back our annuity liabilities. Total assets acquired to date are £6 billion.
|
|
·
|
Introduced an online transfer tool which enables customers to consolidate their workplace pension
assets. This, together with the support already provided through the Scottish Widows ‘5 Steps to Retirement’ website,
now enables all pensions customers to make informed choices and to take control of their retirement plans.
|
|
·
|
Provided more than £500 million of life assurance and critical illness cover to individuals
and businesses across the UK through ‘Scottish Widows Protect’ which was launched into the intermediary channel at
the end of 2015.
|
|
·
|
Helped more than 14,000 customers who were impacted by the storms and floods in the first half
of 2016.
|
|
·
|
Strengthened our general insurance position with the launch in June of a flexible online home insurance
offering which allows customers to tailor policies to their individual needs.
|
|
·
|
Supported development of the UK Government’s Flood Re scheme, launched in April 2016, which
enables customers in high flood risk areas to secure affordable home insurance.
|
|
·
|
Responding to the recent FCA thematic review and recognising the Group’s significant base
of longstanding Life, Pensions and Investment (LP&I) customers, a dedicated business unit has been created to support this
customer group.
|
Financial performance
|
·
|
Underlying profit decreased by 24 per cent, to £446 million, with increased new business
income, driven by the bulk transactions, more than offset by adverse economics and weather related claims. The 18 per cent
increase relative to the second half of 2015 primarily reflects bulk annuity activity.
|
|
·
|
Costs increased by 7 per cent to £395 million, reflecting significant investment spend and
a £29 million levy associated with the Flood Re scheme.
|
|
·
|
Life and pensions sales (PVNBP) increased by 32 per cent reflecting three bulk annuity deals secured
in the first half, increased momentum on both Planning and Retirement and Protection and a stable performance from Corporate Pensions.
Including the internal With-Profits fund bulk annuity transaction which boosted 2015, PVNBP decreased by 18 per cent.
|
|
·
|
General Insurance Gross Written Premiums (GWP)
decreased by 1 per cent, reflecting the competitive
Home market and the run off of legacy products which has been partly offset by continued growth in Motor.
|
Capital
|
·
|
The estimated Solvency II ratio of 144 per cent (1 January 2016 post dividend position: 151 per
cent) represents the shareholder view of Solvency II surplus, and is aligned to the way in which capital is managed within the
Insurance division. The reduction in the ratio primarily reflects adverse market volatility following the EU referendum and the
capital invested in our successful external bulk annuity business.
|
LLOYDS BANKING GROUP PLC
INSURANCE
(continued)
Performance summary
|
|
Half-year
to 30 June
2016
|
|
Half-year
to 30 June
2015
|
|
Change
|
|
Half-year
to 31 Dec
2015
|
|
Change
|
|
|
£m
|
|
£m
|
|
%
|
|
£m
|
|
%
|
Net interest income
|
|
(80)
|
|
(73)
|
|
(10)
|
|
(90)
|
|
11
|
Other income
|
|
921
|
|
1,025
|
|
(10)
|
|
802
|
|
15
|
Total income
|
|
841
|
|
952
|
|
(12)
|
|
712
|
|
18
|
Operating costs
|
|
(395)
|
|
(368)
|
|
(7)
|
|
(334)
|
|
(18)
|
Underlying profit
|
|
446
|
|
584
|
|
(24)
|
|
378
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
Life and pensions sales (PVNBP)
1
|
|
4,791
|
|
5,837
|
|
(18)
|
|
3,623
|
|
32
|
General Insurance total GWP
2
|
|
555
|
|
561
|
|
(1)
|
|
587
|
|
(5)
|
General Insurance combined ratio
|
|
89%
|
|
73%
|
|
16pp
|
|
83%
|
|
6pp
|
Solvency II ratio
|
|
144%
|
|
n/a
|
|
|
|
151%
|
|
(7pp)
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Present value of new business premiums relating to With-Profits fund annuity transfer sales were £2,386 million in 2015 and £243 million in 2016.
|
2
|
Gross written premiums.
|
Profit by product group
|
|
Half-year to 30 June 2016
|
|
|
|
|
|
|
New
business
income
|
|
Existing
business
income
|
|
Total
income
|
|
Half-year
to 30 June
2015
|
|
Half-year
to 31 Dec
2015
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Corporate pensions
|
|
69
|
|
67
|
|
136
|
|
164
|
|
151
|
Bulk annuities
|
|
84
|
|
6
|
|
90
|
|
98
|
|
27
|
Planning and retirement
|
|
58
|
|
47
|
|
105
|
|
69
|
|
65
|
Protection
|
|
8
|
|
17
|
|
25
|
|
27
|
|
22
|
Longstanding LP&I
|
|
3
|
|
200
|
|
203
|
|
223
|
|
253
|
|
|
222
|
|
337
|
|
559
|
|
581
|
|
518
|
Life and pensions experience and
other items
|
|
|
|
|
|
124
|
|
151
|
|
84
|
General insurance
|
|
|
|
|
|
168
|
|
192
|
|
131
|
NII and free asset return
|
|
|
|
|
|
(10)
|
|
28
|
|
(21)
|
Total costs
|
|
|
|
|
|
(395)
|
|
(368)
|
|
(334)
|
Underlying profit
|
|
|
|
|
|
446
|
|
584
|
|
378
|
|
|
|
|
|
|
|
|
|
|
|
Presentation of profit by product group revised to reflect updated business units within Insurance. Full 2015 comparatives can be found on the Lloyds Banking Group Investor Relations website.
|
Life and pensions new and existing business
income has decreased by £22 million with an increase in new business income of £18 million more than offset by
a reduction in existing business income. The increase in new business income was driven by securing three bulk transactions in
the first half of 2016, growth in Planning and retirement and Protection and a stable performance in Corporate pensions. This has
more than offset lower income from the transfer of With-Profits fund annuities. Existing business income has decreased by £40
million, primarily driven by a reduction in the expected rate of return used to calculate life and pensions income.
There was a net benefit of £124 million
in the first half of 2016 as a result of experience and other items. This included a £184 million benefit following the addition
of a new death benefit to legacy pension contracts to align terms with other pensions products, partly offset by the effect of
recent reforms on activity within the pensions market. The net benefit of £151 million in the first half of 2015 primarily
reflected the significant benefits arising from the acquisition of a portfolio of low risk higher yielding assets to match long
duration liabilities and benefits from changes to longevity assumptions.
General Insurance income net of claims has
fallen by £24 million with income growth being more than offset by higher claims as a result of adverse weather in the first
half of 2016. Excluding weather related claims income has increased 5 per cent.
LLOYDS BANKING GROUP PLC
RUN-OFF AND CENTRAL ITEMS
RUN-OFF
|
Half-year
to 30 June
2016
|
|
Half-year
to 30 June
2015
|
|
Change
|
|
Half-year
to 31 Dec
2015
|
|
Change
|
|
|
£m
|
|
£m
|
|
%
|
|
£m
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
(59)
|
|
(19)
|
|
|
|
(69)
|
|
14
|
Other income
|
|
78
|
|
105
|
|
(26)
|
|
40
|
|
95
|
Total income
|
|
19
|
|
86
|
|
(78)
|
|
(29)
|
|
|
Operating costs
|
|
(38)
|
|
(74)
|
|
49
|
|
(76)
|
|
50
|
Operating lease depreciation
|
|
(8)
|
|
(7)
|
|
(14)
|
|
(7)
|
|
−
|
Impairment
|
|
10
|
|
32
|
|
(69)
|
|
(40)
|
|
|
Underlying (loss) profit
|
|
(17)
|
|
37
|
|
|
|
(152)
|
|
(89)
|
|
|
|
|
|
|
|
|
|
At
30 June
2016
|
|
At
31 Dec
2015
|
|
Change
|
|
|
£bn
|
|
£bn
|
|
%
|
|
|
|
|
|
|
|
Loans and advances to customers
|
|
10.4
|
|
10.3
|
|
1
|
Total assets
|
|
12.2
|
|
12.2
|
|
−
|
Risk-weighted assets
|
|
9.6
|
|
10.2
|
|
(6)
|
|
|
|
|
|
|
|
|
·
|
Run-off represents around 2 per cent of the Group’s loans and advances to customers
and less than 5 per cent of risk-weighted assets.
|
|
·
|
The lower income and costs reflect the reduction in the run-off portfolio.
|
CENTRAL ITEMS
|
Half-year
to 30 June
2016
|
|
Half-year
to 30 June
2015
|
|
Half-year
to 31 Dec
2015
|
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
Total income
|
|
221
|
|
36
|
|
140
|
Costs
|
|
37
|
|
38
|
|
(19)
|
Impairment
|
|
−
|
|
(1)
|
|
3
|
Underlying profit
|
|
258
|
|
73
|
|
124
|
|
|
|
|
|
|
|
|
·
|
Central items includes income and expenditure not attributed
to divisions, including the costs of certain central and head office functions.
|
|
·
|
Total income has increased largely due to the under recovery
of funding and capital related costs from divisions in the first half of 2015.
|
LLOYDS BANKING GROUP PLC
RISK MANAGEMENT
PRINCIPAL RISKS AND UNCERTAINTIES
The most significant risks faced by the
Group which could impact the success of delivering against the Group’s long-term strategic objectives and through which global
macro-economic, regulatory developments and market liquidity dynamics could manifest, are detailed below. Except where noted, there
has been no significant change to the description of these risks or key mitigating actions disclosed in the Group’s 2015
Annual Report and Accounts, with any quantitative disclosures updated herein.
The Group has already considered many of
the potential implications following the UK’s vote to leave the European Union and will now develop this work in greater
detail to assess the impact to its customers, colleagues and products − as well as all legal, regulatory, tax, finance and
capital implications.
Credit risk
– The risk that
customers to whom the Group has lent money or other counterparties with whom the Group has contracted, fail to meet their financial
obligations, resulting in loss to the Group. Adverse changes in the economic and market environment or the credit quality of the
Group’s counterparties and customers could reduce asset values and potentially increase write-downs and allowances for impairment
losses, thereby adversely impacting profitability.
Conduct risk
– The Group faces
significant potential conduct risks, including selling products which do not meet customer needs, failing to deal with complaints
effectively and exhibiting behaviours which do not meet market or regulatory standards.
Market risk
– The risk that
the Group’s capital or earnings profile is affected by adverse market movements, in particular interest rates and credit
spreads in the Banking business, equity and credit spreads in the Insurance business, and credit spreads in the Group’s Defined
Benefit Pension Schemes.
Operational risk
– Significant
operational risks which may result in financial loss, disruption or damage to the reputation of the Group, including the availability,
resilience and security of core IT systems and the potential for failings in customer processes.
Capital risk
– The risk that
the Group has a sub-optimal amount or quality of capital or that capital is inefficiently deployed across the Group.
Funding and liquidity risk
–
The risk that the Group has insufficient financial resources to meet its commitments as they fall due, or can only secure them
at excessive cost.
Regulatory and legal risk
–
The risks of changing legislation, regulation, policies, voluntary codes of practice and their interpretation in the markets in
which the Group operates can have a significant impact on the Group, including its operations, business prospects, structure, costs
and/or capital requirements and ability to enforce contractual obligations.
Governance risk
– Against a
background of increased regulatory focus on governance and risk management, the most significant challenges arise from the embedding
of the Senior Managers and Certification Regime (SM&CR) and the requirement to ring-fence core UK financial services and activities
from January 2019.
People risk
– Key people risks
include the risk that the Group fails to lead responsibly in an increasingly competitive marketplace, particularly with the introduction
of the SM&CR in 2016. This may dissuade capable individuals from taking up senior positions within the industry.
Insurance risk –
Key insurance
risks within the Insurance business are longevity, persistency and property insurance. Longevity risk is increasing following entry
into the bulk annuity market at the end of 2015. Longevity is also the key insurance risk in the Group’s Defined Benefit
Pension Schemes.
LLOYDS BANKING GROUP PLC
CREDIT RISK PORTFOLIO
Overview
|
·
|
Asset quality remains strong with portfolios continuing to benefit from the Group’s effective
risk management and the continued low interest rates.
|
|
·
|
The impairment charge for the first half of 2016 was £245 million, 37 per cent higher than
the first half of 2015. Gross charges remained broadly flat with the increase largely due to a reduction in the level of provision
releases and lower write-backs from debt sales.
|
|
·
|
The asset quality ratio was 11 basis points in the first half of 2016 compared with 9 basis points
in the first half of 2015, and the gross asset quality ratio (excluding releases and write-backs) was stable at 26 basis points
compared with 25 basis points for the half year to 30 June 2015.
|
|
·
|
Impaired loans as a percentage of closing loans and advances reduced to 2.0 per cent at 30 June
2016, from 2.1 per cent at 31 December 2015, with impaired loans reducing by £277 million to £9,313 million during
the period, mainly due to continued reductions in the Commercial Banking and Consumer Finance portfolios.
|
|
·
|
The Group now expects the asset quality ratio for the 2016 full year to be less than 20 basis points.
|
Low risk culture and prudent risk appetite
|
·
|
The Group continues to conservatively manage its book, with the portfolios benefiting from the
focus on credit at origination and a prudent through the cycle approach to credit risk appetite. The changing global economic outlook
has created uncertainty and market volatility and raised credit and economic concerns. The Group’s portfolios are well positioned
against this uncertainty. The Group continues to carefully review external conditions, taking mitigating actions as required to
manage its risk accordingly.
|
|
·
|
The Group is delivering sustainable lending growth by maintaining its lower risk origination discipline
and underwriting standards despite terms and conditions in some of the Group’s markets being impacted by increased competition
and uncertainty in some sectors.
|
|
·
|
Sector concentrations within the lending portfolios are closely monitored and controlled, with
mitigating actions taken where appropriate. Sector and product caps limit exposure to certain higher risk sectors and asset classes.
|
|
·
|
The average indexed LTV of the Retail mortgages portfolio at 30 June 2016 was 43.2 per cent (31
December 2015: 46.1 per cent). The percentage of closing loans and advances with an indexed LTV greater than 100 per cent was 0.9
per cent (31 December 2015: 1.1 per cent).
|
|
·
|
The Group continues with its low risk approach to its UK Direct Real Estate sector. Gross drawn
UK real estate lending has reduced by c.55 per cent from £43.9 billion in December 2010 to £19.8 billion at 30 June
2016, including core Commercial Banking lending of £18.9 billion. There is also a further £0.5 billion booked
in the Islands commercial business. The Group’s significantly reduced legacy Run-off direct real estate portfolio has continued
to fall to £0.9 billion at 30 June 2016, and now represents a very modest element of the total UK Direct Real Estate lending
portfolio. This element is performing acceptably and is impaired as appropriate. Overseas direct real estate lending is now de
minimis.
|
|
·
|
The Group’s credit processes and controls ensure effective risk management, including early
identification and management of potential concern customers and counterparties. Our approach of through the cycle origination
has helped ensure our portfolios enter this period of uncertainty in a strong position.
|
|
·
|
Run-off net external assets stood at £12,158 million during the first half of 2016. The portfolio
represents only 2.3 per cent of the overall Group’s loans and advances (31 December 2015: 2.3 per cent).
|
LLOYDS BANKING GROUP PLC
CREDIT RISK PORTFOLIO
(continued)
Impairment charge by division
|
|
Half-year
to 30 June
2016
|
|
Half-year
to 30 June
2015
1
|
|
Change
since
30 June
2015
|
|
Half-year
to 31 Dec
2015
1
|
|
|
£m
|
|
£m
|
|
%
|
|
£m
|
Retail:
|
|
|
|
|
|
|
|
|
Secured
|
|
32
|
|
49
|
|
35
|
|
49
|
Overdrafts
|
|
120
|
|
74
|
|
(62)
|
|
155
|
Other
|
|
10
|
|
11
|
|
9
|
|
11
|
|
|
162
|
|
134
|
|
(21)
|
|
215
|
Commercial Banking:
|
|
|
|
|
|
|
|
|
SME
|
|
(5)
|
|
(4)
|
|
25
|
|
(18)
|
Other
|
|
(30)
|
|
12
|
|
|
|
(12)
|
|
|
(35)
|
|
8
|
|
|
|
(30)
|
Consumer Finance:
|
|
|
|
|
|
|
|
|
Credit Cards
|
|
59
|
|
21
|
|
|
|
108
|
Loans
|
|
42
|
|
28
|
|
(50)
|
|
55
|
UK Motor Finance
2
|
|
28
|
|
21
|
|
(33)
|
|
1
|
Europe
3
|
|
(1)
|
|
(2)
|
|
(50)
|
|
3
|
|
|
128
|
|
68
|
|
(88)
|
|
167
|
Run-off:
|
|
|
|
|
|
|
|
|
Ireland retail
|
|
−
|
|
(2)
|
|
|
|
(3)
|
Ireland corporate and CRE
|
|
(7)
|
|
75
|
|
|
|
(3)
|
Corporate real estate and other corporate
|
|
9
|
|
(52)
|
|
|
|
73
|
Specialist finance
|
|
(13)
|
|
(25)
|
|
(48)
|
|
(20)
|
Other
|
|
1
|
|
(28)
|
|
|
|
(7)
|
|
|
(10)
|
|
(32)
|
|
(69)
|
|
40
|
Central items
|
|
−
|
|
1
|
|
|
|
(3)
|
Total impairment charge
|
|
245
|
|
179
|
|
(37)
|
|
389
|
|
|
|
|
|
|
|
|
|
Asset quality ratio
|
|
0.11%
|
|
0.09%
|
|
2bp
|
|
0.19%
|
Gross asset quality ratio
|
|
0.26%
|
|
0.25%
|
|
1bp
|
|
0.31%
|
|
|
|
|
|
|
|
|
|
1
|
Restated. See basis of presentation on the inside front cover.
|
2
|
UK Motor Finance comprises the UK motor finance portfolios, principally Black Horse and Lex Autolease.
|
3
|
Europe comprises Netherlands mortgages and German Consumer Finance products.
|
Total impairment charge comprises:
|
|
Half-year
to 30 June
2016
|
|
Half-year
to 30 June
2015
|
|
Change
since
30 June
2015
|
|
Half-year
to 31 Dec
2015
|
|
|
£m
|
|
£m
|
|
%
|
|
£m
|
|
|
|
|
|
|
|
|
|
Loans and advances to customers
|
|
257
|
|
198
|
|
(30)
|
|
423
|
Debt securities classified as loans and receivables
|
|
−
|
|
(2)
|
|
|
|
−
|
Available-for-sale financial assets
|
|
−
|
|
−
|
|
|
|
4
|
Other credit risk provisions
|
|
(12)
|
|
(17)
|
|
(29)
|
|
(38)
|
Total impairment charge
|
|
245
|
|
179
|
|
(37)
|
|
389
|
LLOYDS BANKING GROUP PLC
CREDIT RISK PORTFOLIO
(continued)
Group impaired loans and provisions
At 30 June 2016
|
|
Loans and
advances to
customers
|
Impaired
loans
|
Impaired
loans as %
of closing
advances
|
Impairment provisions
1
|
Impairment
provisions
as % of
impaired
loans
2
|
|
|
£m
|
£m
|
%
|
£m
|
|
%
|
Retail:
|
|
|
|
|
|
|
|
|
|
|
Secured
|
|
297,350
|
|
3,909
|
|
1.3
|
|
1,442
|
|
36.9
|
Overdrafts
|
|
1,957
|
|
182
|
|
9.3
|
|
84
|
|
80.8
|
Other
|
|
3,023
|
|
76
|
|
2.5
|
|
35
|
|
70.0
|
|
|
302,330
|
|
4,167
|
|
1.4
|
|
1,561
|
|
38.4
|
Commercial Banking:
|
|
|
|
|
|
|
|
|
|
|
SME
|
|
30,143
|
|
1,036
|
|
3.4
|
|
188
|
|
18.1
|
Other
|
|
72,617
|
|
1,317
|
|
1.8
|
|
609
|
|
46.2
|
|
|
102,760
|
|
2,353
|
|
2.3
|
|
797
|
|
33.9
|
Consumer Finance:
|
|
|
|
|
|
|
|
|
|
|
Credit Cards
|
|
9,561
|
|
330
|
|
3.5
|
|
148
|
|
81.3
|
Loans
|
|
7,745
|
|
298
|
|
3.8
|
|
92
|
|
82.9
|
UK Motor Finance
3
|
|
10,892
|
|
109
|
|
1.0
|
|
101
|
|
92.7
|
Europe
4
|
|
5,874
|
|
40
|
|
0.7
|
|
21
|
|
52.5
|
|
|
34,072
|
|
777
|
|
2.3
|
|
362
|
|
81.9
|
Run-off:
|
|
|
|
|
|
|
|
|
|
|
Ireland retail
|
|
4,472
|
|
146
|
|
3.3
|
|
135
|
|
92.5
|
Ireland corporate and CRE
|
|
23
|
|
2
|
|
8.7
|
|
−
|
|
|
Corporate real estate and other corporate
|
|
1,693
|
|
1,381
|
|
81.6
|
|
734
|
|
53.1
|
Specialist finance
|
|
4,023
|
|
383
|
|
9.5
|
|
187
|
|
48.8
|
Other
|
|
1,284
|
|
104
|
|
8.1
|
|
80
|
|
76.9
|
|
|
11,495
|
|
2,016
|
|
17.5
|
|
1,136
|
|
56.3
|
Reverse repos and other items
5
|
|
6,473
|
|
−
|
|
|
|
−
|
|
|
Total gross lending
|
|
457,130
|
|
9,313
|
|
2.0
|
|
3,856
|
|
43.5
|
Impairment provisions
|
|
(3,856)
|
|
|
|
|
|
|
|
|
Fair value adjustments
6
|
|
(241)
|
|
|
|
|
|
|
|
|
Total Group
|
|
453,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Impairment provisions include collective unidentified impairment provisions.
|
2
|
Impairment provisions as a percentage of impaired loans are calculated excluding Retail and Consumer Finance loans in recoveries
(£78 million in Retail Overdrafts, £26 million in Retail Other, £148 million in Consumer Finance Credit Cards and £187 million in Consumer Finance Loans).
|
3
|
UK Motor Finance comprises the UK motor finance portfolios, principally Black Horse and Lex Autolease.
|
4
|
Europe comprises Netherlands mortgages and German Consumer Finance products.
|
5
|
Includes £6.1 billion of lower risk loans sold by Commercial Banking and Retail to Insurance to back annuitant liabilities.
|
6
|
The fair value adjustments relating to loans and advances were those required to reflect the HBOS assets in the Group’s consolidated financial records at their fair value and took into account both the expected losses and market liquidity at the date of acquisition. The unwind relating to future impairment losses requires significant management judgement to determine its timing which includes an assessment of whether the losses incurred in the current period were expected at the date of acquisition and assessing whether the remaining losses expected at date of the acquisition will still be incurred. The element relating to market liquidity unwinds to the income statement over the estimated expected lives of the related assets, although if an asset is written-off or suffers previously unexpected impairment then this element of the fair value will no longer be considered a timing difference (liquidity) but permanent (impairment). The fair value unwind in respect of impairment losses incurred was £27 million for the period ended 30 June 2016 (30 June 2015: £37 million). The fair value unwind in respect of loans and advances is expected to continue to decrease in future years as fixed-rate periods on mortgages expire, loans are repaid or written-off, and will reduce to zero over time.
|
|
|
LLOYDS BANKING GROUP PLC
CREDIT RISK PORTFOLIO
(continued)
Group impaired loans and provisions
(continued)
At 31 December 2015
1
|
|
Loans and
advances to
customers
|
Impaired
loans
|
Impaired
loans as %
of closing
advances
|
Impairment provisions
2
|
Impairment
provisions
as % of
impaired
loans
3
|
|
|
£m
|
£m
|
%
|
£m
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Retail:
|
|
|
|
|
|
|
|
|
|
|
Secured
|
|
302,413
|
|
3,818
|
|
1.3
|
|
1,431
|
|
37.5
|
Overdrafts
|
|
2,028
|
|
211
|
|
10.4
|
|
95
|
|
78.5
|
Other
|
|
3,059
|
|
83
|
|
2.7
|
|
38
|
|
69.1
|
|
|
307,500
|
|
4,112
|
|
1.3
|
|
1,564
|
|
39.2
|
Commercial Banking:
|
|
|
|
|
|
|
|
|
|
|
SME
|
|
29,393
|
|
1,149
|
|
3.9
|
|
213
|
|
18.5
|
Other
|
|
73,689
|
|
1,394
|
|
1.9
|
|
878
|
|
63.0
|
|
|
103,082
|
|
2,543
|
|
2.5
|
|
1,091
|
|
42.9
|
Consumer Finance:
|
|
|
|
|
|
|
|
|
|
|
Credit Cards
|
|
9,425
|
|
366
|
|
3.9
|
|
153
|
|
81.8
|
Loans
|
|
7,889
|
|
367
|
|
4.7
|
|
102
|
|
83.6
|
UK Motor Finance
4
|
|
9,582
|
|
134
|
|
1.4
|
|
90
|
|
67.2
|
Europe
5
|
|
4,931
|
|
43
|
|
0.9
|
|
22
|
|
51.2
|
|
|
31,827
|
|
910
|
|
2.9
|
|
367
|
|
75.5
|
Run-off:
|
|
|
|
|
|
|
|
|
|
|
Ireland retail
|
|
4,040
|
|
132
|
|
3.3
|
|
120
|
|
90.9
|
Ireland corporate and CRE
|
|
37
|
|
5
|
|
13.5
|
|
−
|
|
|
Corporate real estate and other corporate
|
|
1,873
|
|
1,410
|
|
75.3
|
|
745
|
|
52.8
|
Specialist finance
|
|
4,190
|
|
361
|
|
8.6
|
|
189
|
|
52.4
|
Other
|
|
1,282
|
|
117
|
|
9.1
|
|
96
|
|
82.1
|
|
|
11,422
|
|
2,025
|
|
17.7
|
|
1,150
|
|
56.8
|
Reverse repos and other items
6
|
|
5,798
|
|
|
|
|
|
|
|
|
Total gross lending
|
|
459,629
|
|
9,590
|
|
2.1
|
|
4,172
|
|
46.1
|
Impairment provisions
|
|
(4,172)
|
|
|
|
|
|
|
|
|
Fair value adjustments
|
|
(282)
|
|
|
|
|
|
|
|
|
Total Group
|
|
455,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Restated. See basis of presentation on the inside front cover.
|
2
|
Impairment provisions include collective unidentified impairment provisions.
|
3
|
Impairment provisions as a percentage of impaired loans are calculated excluding Retail and Consumer Finance loans in recoveries
(£90 million in Retail Overdrafts, £28 million in Retail Other, £179 million in Consumer Finance Credit Cards and £245 million in Consumer Finance Loans).
|
4
|
UK Motor Finance comprises the UK motor finance portfolios, principally Black Horse and Lex Autolease.
|
5
|
Europe comprises Netherlands mortgages and German Consumer Finance products.
|
6
|
Includes £5.7 billion of lower risk loans sold by Commercial Banking and Retail to Insurance to back annuitant liabilities.
|
|
|
LLOYDS BANKING GROUP PLC
CREDIT RISK PORTFOLIO
(continued)
Retail
|
·
|
The impairment charge was £162 million in the first half of 2016, an increase of 21 per cent
against the first half of 2015.
|
|
·
|
The asset quality ratio increased to 0.11 per cent in the first half of 2016 compared to 0.09 per
cent in the first half of 2015.
|
|
·
|
Impaired loans increased by £55 million in the first half of 2016 to £4,167 million
which represented 1.4 per cent of closing loans and advances to customers (31 December 2015: 1.3 per cent).
|
|
·
|
Impairment provisions as a percentage of impaired loans decreased to 38.4 per cent from 39.2 per
cent at the end of 2015.
|
Secured
|
·
|
The impairment charge reduced by £17 million in the first half of 2016.
|
|
·
|
Loans and advances reduced by 1.7 per cent on the Secured book to £297 billion,
with reductions in both the Mainstream and Buy-to-let portfolios. The closed Specialist portfolio has continued to run-off, reducing
by 5.1 per cent to £19 billion.
|
|
·
|
Impaired loans increased by £91 million to £3,909 million in the first half
of 2016. Impairment provisions as a percentage of impaired loans decreased to 36.9 per cent from 37.5 per cent at 31 December
2015.
|
|
·
|
The value of mortgages greater than three months in arrears (excluding repossessions) decreased
by £19 million to £5,886 million at 30 June 2016 (31 December 2015: £5,905 million).
|
|
·
|
The average indexed LTV of the mortgages portfolio at 30 June 2016 decreased to 43.2 per cent compared
with 46.1 per cent at 31 December 2015. The percentage of closing loans and advances with an indexed LTV in excess of 100
per cent decreased to 0.9 per cent at 30 June 2016, compared with 1.1 per cent at 31 December 2015.
|
|
·
|
The average LTV for new mortgages written in the first half of 2016 was 64.3 per cent compared
with 64.7 per cent for 2015.
|
|
·
|
On the Buy-to-let book, new business quality remains strong with affordability assessments based
on stressed rates.
|
Overdrafts
|
·
|
The impairment charge was £120 million
in the first half of 2016, an increase of 62 per cent against the first half of 2015.
|
|
·
|
Impaired loans reduced by £29 million
in the first half of 2016 to £182 million representing 9.3 per cent of closing loans and advances to customers, compared
with 10.4 per cent at 31 December 2015.
|
Retail secured and unsecured loans and advances to customers
|
|
At 30 June
2016
|
|
At 31 Dec
2015
1
|
|
|
£m
|
|
£m
|
|
|
|
|
|
Mainstream
|
|
223,887
|
|
227,267
|
Buy-to-let
|
|
54,914
|
|
55,598
|
Specialist
2
|
|
18,549
|
|
19,548
|
|
|
297,350
|
|
302,413
|
|
|
|
|
|
Overdrafts
|
|
1,957
|
|
2,028
|
Wealth
|
|
2,138
|
|
2,164
|
Retail Business Banking
|
|
885
|
|
895
|
|
|
4,980
|
|
5,087
|
Total
|
|
302,330
|
|
307,500
|
|
|
|
|
|
1
|
Restated. See basis of presentation on the inside front cover.
|
2
|
Specialist lending has been closed to new business since 2009.
|
|
|
LLOYDS BANKING GROUP PLC
CREDIT RISK PORTFOLIO
(continued)
Retail
(continued)
Retail mortgages greater than three months
in arrears (excluding repossessions)
|
|
Number of cases
|
|
Total mortgage accounts %
|
|
Value of loans
1
|
|
Total mortgage balances %
|
|
June
2016
|
|
Dec
2015
|
June
2016
|
|
Dec
2015
|
June
2016
|
|
Dec
2015
|
June
2016
|
|
Dec
2015
|
|
|
Cases
|
|
Cases
|
|
%
|
|
%
|
|
£m
|
|
£m
|
|
%
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainstream
|
|
34,686
|
|
34,850
|
|
1.6
|
|
1.6
|
|
3,778
|
|
3,803
|
|
1.7
|
|
1.7
|
Buy-to-let
|
|
5,181
|
|
5,021
|
|
1.1
|
|
1.0
|
|
649
|
|
626
|
|
1.2
|
|
1.1
|
Specialist
|
|
8,797
|
|
8,777
|
|
6.7
|
|
6.4
|
|
1,459
|
|
1,476
|
|
7.9
|
|
7.6
|
Total
|
|
48,664
|
|
48,648
|
|
1.8
|
|
1.7
|
|
5,886
|
|
5,905
|
|
2.0
|
|
2.0
|
|
|
1
|
Value of loans represents total gross book value of mortgages more than three months in arrears.
|
The stock of repossessions decreased to
599 cases at 30 June 2016 compared to 654 cases at 31 December 2015.
Period end and average LTVs across the
Retail mortgage portfolios
At 30 June 2016
|
|
Mainstream
|
|
Buy-to-let
|
|
Specialist
|
|
Total
|
|
Unimpaired
|
|
Impaired
|
|
|
%
|
|
%
|
|
%
|
|
%
|
|
%
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 60%
|
|
59.1
|
|
55.3
|
|
54.1
|
|
58.1
|
|
58.3
|
|
38.7
|
60% to 70%
|
|
18.6
|
|
24.9
|
|
17.3
|
|
19.7
|
|
19.6
|
|
18.4
|
70% to 80%
|
|
13.2
|
|
11.4
|
|
13.6
|
|
12.9
|
|
12.9
|
|
15.0
|
80% to 90%
|
|
6.8
|
|
6.3
|
|
8.5
|
|
6.8
|
|
6.8
|
|
11.3
|
90% to 100%
|
|
1.6
|
|
1.3
|
|
2.8
|
|
1.6
|
|
1.6
|
|
6.7
|
Greater than 100%
|
|
0.7
|
|
0.8
|
|
3.7
|
|
0.9
|
|
0.8
|
|
9.9
|
Total
|
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
Outstanding loan value (£m)
|
|
223,887
|
|
54,914
|
|
18,549
|
|
297,350
|
|
293,441
|
|
3,909
|
Average loan to value:
1
|
|
|
|
|
|
|
|
|
|
|
|
|
Total book
|
|
41.0
|
|
52.7
|
|
49.2
|
|
43.2
|
|
|
|
|
New lending
|
|
64.8
|
|
62.3
|
|
n/a
|
|
64.3
|
|
|
|
|
Impaired
|
|
51.3
|
|
69.6
|
|
62.5
|
|
55.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2015
|
|
Mainstream
|
|
Buy-to-let
|
|
Specialist
|
|
Total
|
|
Unimpaired
|
|
Impaired
|
|
|
%
|
|
%
|
|
%
|
|
%
|
|
%
|
|
%
|
Less than 60%
|
|
52.2
|
|
45.4
|
|
43.7
|
|
50.4
|
|
50.7
|
|
30.9
|
60% to 70%
|
|
19.1
|
|
26.8
|
|
19.7
|
|
20.6
|
|
20.6
|
|
17.5
|
70% to 80%
|
|
15.5
|
|
15.0
|
|
15.5
|
|
15.4
|
|
15.4
|
|
16.9
|
80% to 90%
|
|
9.0
|
|
8.0
|
|
11.6
|
|
9.0
|
|
8.9
|
|
13.3
|
90% to 100%
|
|
3.2
|
|
3.9
|
|
5.5
|
|
3.5
|
|
3.4
|
|
9.5
|
Greater than 100%
|
|
1.0
|
|
0.9
|
|
4.0
|
|
1.1
|
|
1.0
|
|
11.9
|
Total
|
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
Outstanding loan value (£m)
|
|
227,267
|
|
55,598
|
|
19,548
|
|
302,413
|
|
298,595
|
|
3,818
|
Average loan to value:
1
|
|
|
|
|
|
|
|
|
|
|
|
|
Total book
|
|
43.6
|
|
56.3
|
|
53.3
|
|
46.1
|
|
|
|
|
New lending
|
|
65.2
|
|
63.0
|
|
n/a
|
|
64.7
|
|
|
|
|
Impaired
|
|
55.6
|
|
74.6
|
|
66.8
|
|
60.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Average loan to value is calculated as total gross loans and advances as a percentage of the indexed total collateral of these loans and advances.
|
|
|
LLOYDS BANKING GROUP PLC
CREDIT RISK PORTFOLIO
(continued)
Commercial Banking
|
·
|
There was a net impairment release of £35 million in the first half of 2016, compared to
a charge of £8 million in the first half of 2015, primarily driven by write-backs and provision releases. The portfolio continues
to benefit from effective risk management and the continued low interest rate environment.
|
|
·
|
The credit quality of the portfolio and new business remains good.
|
|
·
|
Impaired loans reduced by 7.5 per cent to £2,353 million at 30 June 2016 compared
with £2,543 million at 31 December 2015 and as a percentage of closing loans and advances reduced to 2.3 per cent
from 2.5 per cent at 31 December 2015.
|
|
·
|
Impairment provisions reduced to £797 million at 30 June 2016 (31 December 2015: £1,091
million) and includes collective unidentified impairment provisions of £197 million (31 December 2015: £229 million).
Provisions as a percentage of impaired loans reduced from 42.9 per cent to 33.9 per cent during the first half of 2016, heavily
influenced by the net movement of two material cases with different coverage levels that has lowered the portfolio average.
|
|
·
|
The Group remains disciplined within its low risk appetite approach. Given the quality of the portfolios,
the approach to the management of credit and our robust pre and ongoing post EU referendum preparations and mitigating actions,
the portfolios are well positioned to face the uncertain economic outlook.
|
|
·
|
The Group manages and limits exposure to certain sectors and asset classes, and closely monitors
credit quality, sector and single name concentrations. This together with our conservative through the cycle risk appetite approach
means our portfolios are well positioned.
|
SME
|
·
|
The SME Banking portfolio continues to grow within prudent credit risk appetite parameters.
|
|
·
|
As a result of the Group’s customer driven relationship management, net lending has increased
4 per cent since June 2015. This also reflects the Group’s commitment to the UK economy.
|
|
·
|
Portfolio credit quality has remained stable or improved across all key metrics.
|
|
·
|
There was a net impairment release of £5 million in the first half of 2016 compared to a
net release of £4 million in the same period during 2015.
|
Other Commercial Banking
|
·
|
Other Commercial Banking comprises £72,617 million of gross loans and advances to customers
in Mid Markets, Global Corporates and Financial Institutions.
|
|
·
|
The Mid Markets portfolio remains UK focused and dependent primarily on the performance of the
domestic economy. Whilst a small element of our portfolio, the oil and gas sector has remained under review during the first half
of 2016 given the lower oil prices, but no material concerns have been identified to date.
|
|
·
|
The Global Corporates portfolio continues to be predominantly investment grade and continues to
perform well, with limited downgrades occurring through the first half. We continue to monitor the portfolio closely following
the outcome of the EU referendum and the ongoing volatility in commodity prices including in the oil and gas sector.
|
|
·
|
The real estate business within the Group’s Mid Markets and Global Corporate portfolio is
focused on clients operating in the UK commercial property market ranging in size from medium sized private real estate entities
up to publicly listed property companies. The market for UK real estate has been buoyant and credit quality remains good with minimal
impairments/stressed loans. All asset classes have attracted investment but apprehension, both pre and post the EU referendum result,
has created uncertainties around the performance of the sector. Recognising this is a cyclical sector, appropriate caps are in
place to control exposure and business propositions continue to be written in line with prudent risk appetite with conservative
LTV, strong quality of income and proven management teams.
|
LLOYDS BANKING GROUP PLC
CREDIT RISK PORTFOLIO
(continued)
Commercial Banking
(continued)
Other Commercial Banking
(continued)
|
·
|
The Financial Institutions portfolio continued to perform well in the first half of 2016 with no
material deterioration in credit quality. Overall limits have been relatively stable as we continue to prudently manage the portfolio
within our conservative risk appetite and clearly defined sector strategies.
|
|
·
|
Financial Institutions serves predominantly investment grade counterparties with whom relationships
are either client focused or held to support the Group’s funding, liquidity or general hedging requirements.
|
|
·
|
The Group continues to adopt a conservative stance across the Eurozone maintaining close portfolio
scrutiny and oversight particularly given the current macro environment and horizon risks.
|
Commercial Banking UK Direct Real Estate
|
·
|
The Group classifies Direct Real Estate as exposure which is directly supported by cash flows from
property activities (as opposed to trading activities, such as hotels, care homes and housebuilders).
|
|
·
|
Commercial Banking saw some growth in its UK Direct Real Estate core portfolio during the first
half of 2016 with business continuing to be written within conservative risk appetite parameters. Excluding £0.5 billion
in the Islands Commercial business, core Commercial Banking UK Direct Real Estate gross lending stood at £18.9 billion at
30 June 2016.
|
|
·
|
Approximately 75 per cent of loans and advances to UK Direct Real Estate relate to commercial real
estate with the remainder relating to residential real estate. The portfolio continues to be heavily weighted towards investment
real estate (c.90 per cent) over development.
|
|
·
|
Focus remains on the UK market, on good quality customers, with a proven track record in Real Estate
and where cash flows are robust.
|
|
·
|
Origination is highly selective with new business written in line with prudent risk appetite with
conservative LTV and strong quality of income. Debt service capability and cash flow are key, with the underlying asset valuation
seen as the second way out. Transactions must meet maximum LTV and minimum interest cover criteria under our credit policy.
|
|
·
|
For the majority of business, LTVs are lower than policy maximums and in SME Banking, variable
interest rate business originated must pass a debt service capability requirement which factors in a rise in policy interest rates.
|
|
·
|
The Group does not lend to development projects without planning permission being in place and
does not lend to start ups, nor hold subordinated debt.
|
|
·
|
The LTV profile of the UK Direct Real Estate portfolio in Commercial Banking continues to improve,
with over 85 per cent of the >£5 million exposures having an LTV of 70 per cent or less.
|
LLOYDS BANKING GROUP PLC
CREDIT RISK PORTFOLIO
(continued)
Consumer Finance
|
·
|
Loans and advances increased by £2,245 million to £34,072 million during the first
half of 2016, with 58 per cent (£1,310 million) relating to the UK Motor Finance portfolio.
|
|
·
|
Impaired loans decreased by £133 million in the first half of 2016, with reductions across
all portfolios. Impaired loans as a percentage of closing loans and advances improved to 2.3 per cent (31 December 2015: 2.9
per cent).
|
|
·
|
The impairment charge was £128 million in the first half of 2016, an increase of 88 per cent
against the first half of 2015. The increase was mostly driven by the Credit cards portfolio. The asset quality ratio was 0.79
per cent in the first half of 2016 (30 June 2015: 0.47 per cent)
|
|
·
|
Impairment provisions as a percentage of impaired loans increased to 81.9 per cent (31 December
2015: 75.5 per cent), largely due to the UK Motor Finance book.
|
Credit cards
|
·
|
Loans and advances increased by £136 million to £9,561 million during the first half
of 2016, with continued franchised new business growth.
|
|
·
|
Impaired loans decreased by £36 million in the first half of 2016. Impaired loans as a percentage
of closing loans and advances improved to 3.5 per cent (31 December 2015: 3.9 per cent).
|
|
·
|
The impairment charge was £59 million in the first half of 2016, reflecting lower debt sale
benefits in the first half of 2016 compared to the first half of 2015. Sustained credit quality of new business and close management
of risk appetite continues as the business grows.
|
Loans
|
·
|
Loans and advances reduced by £144 million to £7,745 million (31 December 2015:
£7,889 million).
|
|
·
|
Impaired loans decreased by £69 million in the first half of 2016. Impaired loans as a percentage
of closing loans and advances improved to 3.8 per cent (31 December 2015: 4.7 per cent).
|
|
·
|
The impairment charge was £42 million in the first half of 2016, broadly flat year-on-year
excluding the benefits seen in the first half of 2015 relating to a one off increase in recoveries valuations.
|
UK Motor Finance
|
·
|
Loans and advances increased by £1,310 million to £10,892 million during the first
half of 2016, with 18 per cent of growth within the Jaguar Land Rover business.
|
|
·
|
Impaired loans decreased by £25 million in the first half of 2016, mostly driven by a review
of impaired balances on the Lex Autolease book.
|
|
·
|
The impairment charge increased by £7 million in the first half of 2016, in line with book
growth.
|
Run-off
|
·
|
The Ireland retail portfolio has increased from £4,040 million at 31 December 2015 to
£4,472 million at 30 June 2016 due to the foreign exchange impact of sterling weakening, partly offset by capital repayments.
|
|
·
|
The Corporate real estate and other corporate portfolio has continued to reduce in line with expectations.
Net loans and advances reduced by £169 million, from £1,128 million at 31 December 2015 to £959 million
at 30 June 2016.
|
|
·
|
Net loans and advances for the Specialist finance asset based run-off portfolio stood at £3,836
million at 30 June 2016 (gross £4,023 million), and include Ship Finance, Aircraft Finance and Infrastructure, with around
half of the remaining lending in the lower risk leasing sector. Including the reducing Treasury Asset legacy investment portfolio,
and operating leases, total net external assets reduced to £5,273 million at 30 June 2016 (gross £5,459 million).
|
LLOYDS BANKING GROUP PLC
CREDIT RISK PORTFOLIO
(continued)
Forbearance
The Group operates a number of schemes to
assist borrowers who are experiencing financial stress. Forbearance policies are disclosed in the Risk Management section of the
Group’s 2015 Annual Report and Accounts, pages 124 to 126.
Retail forbearance
At 30 June 2016, UK secured loans and advances
currently or recently subject to forbearance were 0.8 per cent (31 December 2015: 1.0 per cent) of total UK secured loans
and advances. The reduction in forbearance is due to the overall improvement of credit quality in the portfolio.
At 30 June 2016, overdrafts currently or
recently subject to forbearance were 3.9 per cent (31 December 2015: 4.3 per cent) of total overdrafts loans and
advances.
|
|
Total loans and advances which are forborne
1
|
|
Total forborne loans and advances which are impaired
1
|
|
Impairment provisions as % of loans and advances which are forborne
1
|
|
|
At June
2016
|
|
At Dec
2015
|
|
At June
2016
|
|
At Dec
2015
|
|
At June
2016
|
|
At Dec
2015
|
UK secured:
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
%
|
|
%
|
Temporary forbearance arrangements
|
|
|
|
|
|
|
|
|
|
|
|
|
Reduced payment arrangements
|
|
333
|
|
414
|
|
39
|
|
41
|
|
6.0
|
|
4.2
|
Permanent treatments
|
|
|
|
|
|
|
|
|
|
|
|
|
Repair and term extensions
|
|
2,180
|
|
2,688
|
|
139
|
|
132
|
|
4.7
|
|
4.2
|
Total
|
|
2,513
|
|
3,102
|
|
178
|
|
173
|
|
4.9
|
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Overdrafts:
|
|
76
|
|
87
|
|
59
|
|
63
|
|
37.4
|
|
35.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Includes accounts where the customer is currently benefiting from a forbearance treatment or the treatment has recently ended.
|
Commercial Banking forbearance
At 30 June 2016, £3,223 million
(31 December 2015: £3,529 million) of total loans and advances were forborne of which £2,353 million (December
2015: £2,543 million) were impaired. Impairment provisions as a percentage of forborne loans and advances decreased from
30.9 per cent at 31 December 2015 to 24.7 per cent at 30 June 2016.
Unimpaired forborne loans and advances were
£870 million at 30 June 2016 (31 December 2015: £986 million). The table below sets out the Group’s
largest unimpaired forborne loans and advances to commercial customers (exposures over £5 million) as at 30 June 2016
by type of forbearance:
|
|
30 June
2016
|
|
31 Dec
2015
|
Type of unimpaired forbearance:
|
|
£m
|
|
£m
|
Exposures > £5m
1
|
|
|
|
|
Covenants
|
|
324
|
|
310
|
Extensions/alterations
|
|
248
|
|
350
|
Multiple
|
|
6
|
|
9
|
|
|
578
|
|
669
|
Exposures < £5m
1
|
|
292
|
|
317
|
Total
|
|
870
|
|
986
|
|
|
|
|
|
1
|
Material portfolios only.
|
|
|
LLOYDS BANKING GROUP PLC
CREDIT RISK PORTFOLIO
(continued)
Consumer Finance forbearance
At 30 June 2016, loans and advances currently
or recently subject to forbearance as a percentage of total loans and advances had reduced on the Consumer Credit Cards (30 June
2016: 2.2 per cent; 31 December 2015: 2.4 per cent) and Loans portfolios (30 June 2016: 0.7 per cent; 31 December
2015: 0.8 per cent). UK Motor Finance Retail loans and advances currently or recently subject to forbearance as a percentage
of total loans and advances is stable at 1.4 per cent (31 December 2015: 1.4 per cent).
|
|
Total loans and advances which are forborne
1
|
|
Total forborne loans and advances which are impaired
1
|
|
Impairment provision as % of loans and advances which are forborne
1
|
|
|
30 June
2016
|
|
31 Dec
2015
|
|
30 June
2016
|
|
31 Dec
2015
|
|
30 June
2016
|
|
31 Dec
2015
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
%
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Credit Cards
|
|
202
|
|
225
|
|
111
|
|
120
|
|
27.8
|
|
26.8
|
UK Motor Finance Retail
|
|
111
|
|
100
|
|
57
|
|
51
|
|
23.6
|
|
25.5
|
Loans
|
|
51
|
|
60
|
|
47
|
|
56
|
|
48.5
|
|
47.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Includes accounts where the customer is currently benefiting from a forbearance treatment or the treatment has recently ended.
|
Run-off forbearance
Ireland retail
At 30 June 2016, £159 million
or 3.6 per cent (31 December 2015: £169 million or 4.2 per cent) of Irish retail secured loans and advances were
subject to current or recent forbearance. Of this amount £22 million (31 December 2015: £26 million) were impaired.
Ireland commercial real estate and corporate
The Irish Wholesale book (which contained
the Commercial Real Estate portfolio), is now effectively exited following completion of the divestment announced on 30 July 2015.
Run-off Corporate real estate, other
corporate and Specialist Finance
At 30 June 2016, £1,770 million
(31 December 2015: £1,780 million) of total loans and advances were forborne of which £1,764 million (31 December
2015: £1,771 million) were impaired. Impairment provisions as a percentage of forborne loans and advances decreased from
52.5 per cent at 31 December 2015 to 52.0 per cent at 30 June 2016.
Unimpaired forborne loans and advances were
£6 million at 30 June 2016 (December 2015: £9 million).
LLOYDS BANKING GROUP PLC
FUNDING AND LIQUIDITY MANAGEMENT
During the first half of 2016, the Group
has maintained its strong funding and liquidity position, with a loan to deposit ratio of 107 per cent, LCR eligible liquid
assets exceed total wholesale funding and are broadly six times the level of Money Market funding less than one year to maturity
at 30 June 2016. The Group has a diverse funding platform which includes a strong customer deposit base along with wholesale funding
comprised of a range of secured and unsecured funding products.
Total funded assets reduced by £2.8 billion
to £468.4 billion with loans and advances to customers, reducing by £2.2 billion. Other assets has increased
by £23.1 billion to £257.3 billion due to movements in derivative assets and is offset by a similar movement in other
liabilities. Total customer deposits increased by £5.0 billion to £423.3 billion at 30 June 2016, largely
due to the continued momentum in attracting high quality deposits in SME, Global Corporates and Financial Institutions.
Wholesale funding has increased by £10.7 billion
to £130.6 billion, with the volume with a residual maturity less than one year increasing to £51.4 billion
(£37.9 billion at 31 December 2015). Deposits from banks have increased by £5.2 billion largely due to an increase
in cash margin received from bank counterparties following recent market movements. With the change in deposits from banks and
a relative increase in term wholesale funding maturing within the next 12 months, the Group’s term funding ratio (wholesale
funding with a remaining life of over one year as a percentage of total wholesale funding) reduced to 61 per cent (68 per cent
at 31 December 2015).
During 2016, the Group’s term issuance
costs have remained broadly in line with other post-crisis years and significantly lower than levels seen during the economic downturn.
The Group’s overall cost of wholesale funding has reduced as more expensive funding raised in previous years mature. The
Group’s market capacity for term funding is considered across the planning horizon as part of the funding plan and the Group
expects term funding requirements to remain stable.
In 2015, Standard and Poor’s (S&P),
Moody’s and Fitch completed their exceptional reviews of Lloyds Bank's ratings following the UK implementation of the EU
Bank Recovery and Resolution Directive. In all cases, the major agencies removed or reduced their expectations of government support
and recognised the support provided by subordinated debt buffers to senior creditors. Following the June 2016 EU referendum vote,
Moody’s revised Lloyds Bank’s rating outlook to Stable from Positive whilst S&P revised the outlook to Negative
from Stable. Lloyds Bank's median rating across these agencies remains ‘A+’.
The LCR became the Pillar 1 standard for
liquidity in the UK in October 2015. The Group’s LCR ratio already exceeds regulatory requirements and is greater than 100
per cent. In addition, the Group has a robust and well governed reporting framework in place for both regulatory reporting and
internal management information. The Net Stable Funding Ratio (NSFR) is due to become a minimum standard from January 2018. The
Group continues to monitor and expects to meet the requirements once these are confirmed by the PRA.
The combination of a strong balance sheet
and access to a wide range of funding markets, including government and central bank schemes, provides the Group with a broad range
of options with respect to funding the balance sheet.
LLOYDS BANKING GROUP PLC
FUNDING AND LIQUIDITY MANAGEMENT
(continued)
Group funding position
|
|
At 30 June
2016
|
|
At 31 Dec
2015
|
|
Change
|
|
|
£bn
|
|
£bn
|
|
%
|
Funding requirement
|
|
|
|
|
|
|
Loans and advances to customers
|
|
453.0
|
|
455.2
|
|
−
|
Loans and advances to banks
1
|
|
4.3
|
|
3.4
|
|
26
|
Debt securities
|
|
4.0
|
|
4.2
|
|
(5)
|
Reverse repurchase agreements
|
|
0.9
|
|
1.0
|
|
(10)
|
Available-for-sale financial assets – non-LCR eligible
2
|
|
1.7
|
|
2.7
|
|
(37)
|
Cash and balances at central bank – non-LCR eligible
3
|
|
4.5
|
|
4.7
|
|
(4)
|
Funded assets
|
|
468.4
|
|
471.2
|
|
(1)
|
Other assets
4
|
|
257.3
|
|
234.2
|
|
10
|
|
|
725.7
|
|
705.4
|
|
3
|
On balance sheet LCR eligible liquidity assets
|
|
|
|
|
|
|
Cash and balances at central banks
3
|
|
68.9
|
|
53.7
|
|
28
|
Available-for-sale financial assets
|
|
34.2
|
|
30.3
|
|
13
|
Held-to-maturity financial assets
|
|
21.5
|
|
19.8
|
|
9
|
Trading and fair value through profit and loss
|
|
5.9
|
|
3.0
|
|
97
|
Repurchase agreements
|
|
(8.0)
|
|
(5.5)
|
|
45
|
|
|
122.5
|
|
101.3
|
|
21
|
Total Group assets
|
|
848.2
|
|
806.7
|
|
5
|
Less: other liabilities
4
|
|
(245.4)
|
|
(221.5)
|
|
11
|
Funding requirement
|
|
602.8
|
|
585.2
|
|
3
|
Funded by
|
|
|
|
|
|
|
Customer deposits
|
|
423.3
|
|
418.3
|
|
1
|
Wholesale funding
5
|
|
130.6
|
|
119.9
|
|
9
|
|
|
553.9
|
|
538.2
|
|
3
|
Total equity
|
|
48.9
|
|
47.0
|
|
4
|
Total funding
|
|
602.8
|
|
585.2
|
|
3
|
|
|
|
|
|
|
|
1
|
Excludes £20.8 billion (31 December 2015: £20.8 billion) of loans and advances to banks within the Insurance business and £0.9 billion (31 December 2015: £0.9 billion) of reverse repurchase agreements.
|
2
|
Non-LCR eligible liquid assets comprise a diversified pool of highly rated unencumbered collateral (including retained issuance).
|
3
|
Cash and balances at central banks are combined in the Group's balance sheet.
|
4
|
Other assets and other liabilities primarily include balances in the Group's Insurance business and the fair value of derivative assets and liabilities.
|
5
|
The Group’s definition of wholesale funding aligns with that used by other international market participants; including interbank deposits, debt securities in issue and subordinated liabilities.
|
|
|
LLOYDS BANKING GROUP PLC
FUNDING AND LIQUIDITY MANAGEMENT
(continued)
Reconciliation of Group funding to the
balance sheet
At 30 June 2016
|
|
Included in
funding
analysis
|
|
Repos
and cash
collateral
received by
Insurance
|
|
Fair value
and other
accounting
methods
|
|
Balance
sheet
|
|
|
£bn
|
|
£bn
|
|
£bn
|
|
£bn
|
|
|
|
|
|
|
|
|
|
Deposits from banks
|
|
13.7
|
|
9.2
|
|
0.3
|
|
23.2
|
Debt securities in issue
|
|
95.0
|
|
−
|
|
(6.2)
|
|
88.8
|
Subordinated liabilities
|
|
21.9
|
|
−
|
|
1.0
|
|
22.9
|
Total wholesale funding
|
|
130.6
|
|
9.2
|
|
|
|
|
Customer deposits
|
|
423.3
|
|
−
|
|
−
|
|
423.3
|
Total
|
|
553.9
|
|
9.2
|
|
|
|
|
At 31 December 2015
|
|
Included in
funding
analysis
|
|
Repos
and cash
collateral
received by
Insurance
|
|
Fair value
and other
accounting
methods
|
|
Balance
sheet
|
|
|
£bn
|
|
£bn
|
|
£bn
|
|
£bn
|
|
|
|
|
|
|
|
|
|
Deposits from banks
|
|
8.5
|
|
8.4
|
|
−
|
|
16.9
|
Debt securities in issue
|
|
88.1
|
|
−
|
|
(6.0)
|
|
82.1
|
Subordinated liabilities
|
|
23.3
|
|
−
|
|
−
|
|
23.3
|
Total wholesale funding
|
|
119.9
|
|
8.4
|
|
|
|
|
Customer deposits
|
|
418.3
|
|
−
|
|
−
|
|
418.3
|
Total
|
|
538.2
|
|
8.4
|
|
|
|
|
Analysis of 2016 total wholesale funding
by residual maturity
|
|
Less
than
one
month
|
One to
three
months
|
Three
to six
months
|
Six to
nine
months
|
Nine
months
to one
year
|
One to
two
years
|
Two to
five
years
|
More
than
five
years
|
Total
at
30 June
2016
|
Total
at
31 Dec
2015
|
|
|
£bn
|
|
£bn
|
|
£bn
|
|
£bn
|
|
£bn
|
|
£bn
|
|
£bn
|
|
£bn
|
|
£bn
|
|
£bn
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits from banks
|
|
11.0
|
|
1.3
|
|
0.8
|
|
0.2
|
|
0.4
|
|
−
|
|
−
|
|
−
|
|
13.7
|
|
8.5
|
Debt securities in issue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit
|
|
0.8
|
|
3.6
|
|
4.1
|
|
1.9
|
|
0.8
|
|
−
|
|
−
|
|
−
|
|
11.2
|
|
10.6
|
Commercial paper
|
|
2.9
|
|
3.2
|
|
0.9
|
|
0.1
|
|
−
|
|
−
|
|
−
|
|
−
|
|
7.1
|
|
6.6
|
Medium-term notes
1
|
|
0.2
|
|
0.8
|
|
0.5
|
|
1.5
|
|
2.8
|
|
5.0
|
|
14.7
|
|
14.5
|
|
40.0
|
|
37.6
|
Covered bonds
|
|
1.2
|
|
−
|
|
0.5
|
|
4.7
|
|
1.0
|
|
2.1
|
|
9.2
|
|
11.4
|
|
30.1
|
|
25.8
|
Securitisation
|
|
0.2
|
|
−
|
|
0.3
|
|
1.6
|
|
0.4
|
|
1.9
|
|
1.9
|
|
0.3
|
|
6.6
|
|
7.5
|
|
|
5.3
|
|
7.6
|
|
6.3
|
|
9.8
|
|
5.0
|
|
9.0
|
|
25.8
|
|
26.2
|
|
95.0
|
|
88.1
|
Subordinated liabilities
|
|
−
|
|
0.1
|
|
3.0
|
|
0.5
|
|
0.1
|
|
2.0
|
|
4.1
|
|
12.1
|
|
21.9
|
|
23.3
|
Total wholesale funding
2
|
|
16.3
|
|
9.0
|
|
10.1
|
|
10.5
|
|
5.5
|
|
11.0
|
|
29.9
|
|
38.3
|
|
130.6
|
|
119.9
|
Of which issued by Lloyds Banking Group plc
3
|
|
−
|
|
−
|
|
0.3
|
|
−
|
|
−
|
|
−
|
|
−
|
|
4.5
|
|
4.8
|
|
3.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Medium-term notes include funding from the National Loan Guarantee Scheme (30 June 2016: £1.4 billion; 31 December 2015: £1.4 billion).
|
2
|
The Group’s definition of wholesale funding aligns with that used by other international market participants; including interbank deposits, debt securities in issue and subordinated liabilities.
|
3
|
Only consists of subordinated liabilities.
|
|
|
LLOYDS BANKING GROUP PLC
FUNDING AND LIQUIDITY MANAGEMENT
(continued)
Analysis of 2016 term issuance
|
|
Sterling
|
|
US Dollar
|
|
Euro
|
|
Other
currencies
|
|
Total
|
|
|
£bn
|
|
£bn
|
|
£bn
|
|
£bn
|
|
£bn
|
|
|
|
|
|
|
|
|
|
|
|
Securitisation
|
|
−
|
|
0.4
|
|
−
|
|
−
|
|
0.4
|
Medium-term notes
|
|
−
|
|
0.9
|
|
−
|
|
−
|
|
0.9
|
Covered bonds
|
|
1.2
|
|
−
|
|
2.4
|
|
−
|
|
3.6
|
Private placements
|
|
0.1
|
|
0.8
|
|
0.7
|
|
−
|
|
1.6
|
Subordinated liabilities
|
|
−
|
|
1.0
|
|
−
|
|
−
|
|
1.0
|
Total issuance
|
|
1.3
|
|
3.1
|
|
3.1
|
|
−
|
|
7.5
|
Of which issued by Lloyds Banking Group plc
1
|
|
−
|
|
1.0
|
|
−
|
|
−
|
|
1.0
|
|
|
1
|
Only consists of subordinated liabilities issued.
|
Term issuance during the first half of 2016
has totalled £7.5 billion. The Group continued to maintain a diversified approach to markets with trades in public and
private format, secured and unsecured products and a wide range of currencies and markets. The Group will continue to maintain
this diversified approach to funding, including any capital requirements and a proportion of the Group’s annual funding from
the holding company, Lloyds Banking Group plc, during transition towards final UK Minimum Requirements for own funds and Eligible
Liabilities (MREL) requirements. Continued use of the UK government’s Funding for Lending Scheme (FLS) has further underlined
the Group’s support to the UK economic recovery and the Group remains committed to passing the benefits of this funding on
to its customers. During the first half of 2016, the Group drew down £1.0 billion under the FLS, bringing total drawings
under the FLS to £33.1 billion. The maturities for the FLS are factored into the Group’s funding plans.
Liquidity portfolio
At 30 June 2016, the Banking business had
£142.2 billion of highly liquid unencumbered LCR eligible assets of which £141.3 billion is LCR level 1 eligible
and £0.9 billion is LCR level 2 eligible. These are available to meet cash and collateral outflows and PRA regulatory requirements.
A separate liquidity portfolio is held by the Insurance business. LCR eligible liquid assets represent broadly six times the Group’s
money-market funding less than one year maturity (excluding derivative collateral margins and settlement accounts) and exceeds
total wholesale funding, and thus provides a substantial buffer in the event of market dislocation.
LCR eligible liquid assets
|
|
At 30 June
2016
|
|
At 31 Dec
2015
|
|
Change
|
|
Average
2016
|
|
Average
2015
1
|
|
|
£bn
|
|
£bn
|
|
%
|
|
£bn
|
|
£bn
|
Level 1
|
|
|
|
|
|
|
|
|
|
|
Cash and central bank reserves
|
|
68.9
|
|
53.7
|
|
28
|
|
61.7
|
|
57.2
|
High quality government/
MDB bonds
2
|
|
69.8
|
|
65.8
|
|
6
|
|
68.7
|
|
63.0
|
High quality covered bonds
|
|
2.6
|
|
3.4
|
|
(24)
|
|
2.9
|
|
3.3
|
Total
|
|
141.3
|
|
122.9
|
|
15
|
|
133.3
|
|
123.5
|
|
|
|
|
|
|
|
|
|
|
|
Level 2
3
|
|
0.9
|
|
0.5
|
|
80
|
|
0.8
|
|
0.7
|
Total LCR eligible assets
|
|
142.2
|
|
123.4
|
|
15
|
|
134.1
|
|
124.2
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Average for 2015 includes the fourth quarter of 2015 only.
|
2
|
Designated multilateral development bank (MDB).
|
3
|
Includes Level 2A and Level 2B.
|
|
|
LLOYDS BANKING GROUP PLC
FUNDING AND LIQUIDITY MANAGEMENT
(continued)
The Banking business also had £114.3 billion
of non-LCR eligible collateral, the vast majority of which is eligible for use in a range of central bank or similar facilities.
Future use of such facilities will be based on prudent liquidity management and economic considerations, having regard for external
market conditions.
The Group considers diversification across
geography, currency, markets and tenor when assessing appropriate holdings of liquid assets. This liquidity is managed as a single
pool in the centre and is under the control of the function charged with managing the liquidity of the Group. It is available for
deployment at immediate notice, subject to complying with regulatory requirements, and is a key component of the Group’s
liquidity management process.
Encumbered assets
The Board and Group Asset & Liability
Committee monitor and manage total balance sheet encumbrance via a number of risk appetite metrics. At 30 June 2016, the Group
had £85.3 billion (31 December 2015: £77.4 billion) of externally encumbered on balance sheet assets with
counterparties other than central banks. The increase in encumbered on balance sheet assets was caused by repo activities. The
Group also had £593.6 billion (31 December 2015: £573.7 billion) of unencumbered on balance sheet assets,
and £169.3 billion (31 December 2015: £155.6 billion) of pre-positioned unencumbered and encumbered assets
held with central banks. Primarily the Group encumbers mortgages, unsecured lending and credit card receivables through the issuance
programmes and tradable securities through securities financing activity. The Group mainly positions mortgage assets at central
banks. Refer to the 2015 Annual Report and Accounts for further details on how the Group classifies assets for encumbrance purposes.
CAPITAL MANAGEMENT
The Group maintained its strong capital
position during the first half of 2016 with a fully loaded CET1 ratio, after accruing for foreseeable dividends, of 13.0 per cent
(31 December 2015: 13.0 per cent pro forma). The accrual for foreseeable dividends includes the announced interim dividend of 0.85
pence per ordinary share. The fully loaded CET1 ratio before accruing for dividends in respect of the first half of 2016 increased
0.5 percentage points from 13.0 per cent pro forma to 13.5 per cent.
|
·
|
The leverage ratio after accruing for dividends in respect of the first half of 2016 reduced 0.1
percentage points to 4.7 per cent
|
|
·
|
The transitional total capital ratio after accruing for dividends in respect of the first half
of 2016 increased 0.3 percentage points to 21.8 per cent
|
A ‘fully loaded’ ratio means
a ratio that fully takes into account regulatory requirements that are to be phased in during future periods, and that therefore
are not currently applicable. A ‘transitional’ ratio takes into account these requirements as and when they become
applicable.
Dividends
In line with its progressive and sustainable
dividend policy, the Group has increased its interim ordinary dividend by 0.10 pence to 0.85 pence per share. We expect ordinary
dividends to increase over the medium term to a dividend payout ratio of at least 50 per cent of sustainable earnings.
Capital position at 30 June 2016
The Group’s capital position as at
30 June 2016 is presented in the following section applying CRD IV transitional arrangements, as implemented in the UK by the PRA,
and also on a fully loaded CRD IV basis.
LLOYDS BANKING GROUP PLC
CAPITAL MANAGEMENT
(continued)
|
Transitional
|
|
Fully loaded
|
Capital resources
|
At 30 June
2016
|
|
At 31 Dec
2015
1
|
|
At 30 June
2016
|
|
At 31 Dec
2015
1
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
Common equity tier 1
|
|
|
|
|
|
|
|
Shareholders’ equity per balance sheet
|
43,151
|
|
41,234
|
|
43,151
|
|
41,234
|
Adjustment to retained earnings for foreseeable dividends
|
(911)
|
|
(1,427)
|
|
(911)
|
|
(1,427)
|
Deconsolidation of insurance entities
1
|
1,307
|
|
578
|
|
1,307
|
|
578
|
Adjustment for own credit
|
25
|
|
67
|
|
25
|
|
67
|
Cash flow hedging reserve
|
(2,809)
|
|
(727)
|
|
(2,809)
|
|
(727)
|
Other adjustments
|
(487)
|
|
72
|
|
(487)
|
|
72
|
|
40,276
|
|
39,797
|
|
40,276
|
|
39,797
|
less: deductions from common equity tier 1
|
|
|
|
|
|
|
|
Goodwill and other intangible assets
|
(1,627)
|
|
(1,719)
|
|
(1,627)
|
|
(1,719)
|
Excess of expected losses over impairment provisions and value adjustments
|
−
|
|
(270)
|
|
−
|
|
(270)
|
Removal of defined benefit pension surplus
|
(818)
|
|
(721)
|
|
(818)
|
|
(721)
|
Securitisation deductions
|
(220)
|
|
(169)
|
|
(220)
|
|
(169)
|
Significant investments
1
|
(4,287)
|
|
(4,500)
|
|
(4,429)
|
|
(4,529)
|
Deferred tax assets
|
(4,213)
|
|
(3,874)
|
|
(4,264)
|
|
(3,884)
|
Common equity tier 1 capital
|
29,111
|
|
28,544
|
|
28,918
|
|
28,505
|
|
|
|
|
|
|
|
|
Additional tier 1
|
|
|
|
|
|
|
|
Other equity instruments
|
5,355
|
|
5,355
|
|
5,355
|
|
5,355
|
Preference shares and preferred securities
2
|
5,423
|
|
4,728
|
|
−
|
|
−
|
Transitional limit and other adjustments
|
(2,152)
|
|
(906)
|
|
−
|
|
−
|
|
8,626
|
|
9,177
|
|
5,355
|
|
5,355
|
less: deductions from tier 1
|
|
|
|
|
|
|
|
Significant investments
1
|
(1,288)
|
|
(1,177)
|
|
−
|
|
−
|
Total tier 1 capital
|
36,449
|
|
36,544
|
|
34,273
|
|
33,860
|
|
|
|
|
|
|
|
|
Tier 2
|
|
|
|
|
|
|
|
Other subordinated liabilities
2
|
17,512
|
|
18,584
|
|
17,512
|
|
18,584
|
Deconsolidation of instruments issued by insurance entities
1
|
(1,831)
|
|
(1,665)
|
|
(1,831)
|
|
(1,665)
|
Adjustments for transitional limit and
non-eligible instruments
|
1,709
|
|
(52)
|
|
(1,493)
|
|
(3,066)
|
Amortisation and other adjustments
|
(3,773)
|
|
(3,880)
|
|
(4,305)
|
|
(4,885)
|
|
13,617
|
|
12,987
|
|
9,883
|
|
8,968
|
Eligible provisions
|
114
|
|
221
|
|
114
|
|
221
|
less: deductions from tier 2
|
|
|
|
|
|
|
|
Significant investments
1
|
(1,509)
|
|
(1,756)
|
|
(2,797)
|
|
(2,933)
|
Total capital resources
|
48,671
|
|
47,996
|
|
41,473
|
|
40,116
|
|
|
|
|
|
|
|
|
Risk-weighted assets
|
222,778
|
|
222,845
|
|
222,297
|
|
222,747
|
|
|
|
|
|
|
|
|
Common equity tier 1 capital ratio
|
13.1%
|
|
12.8%
|
|
13.0%
|
|
12.8%
|
Tier 1 capital ratio
|
16.4%
|
|
16.4%
|
|
15.4%
|
|
15.2%
|
Total capital ratio
|
21.8%
|
|
21.5%
|
|
18.7%
|
|
18.0%
|
|
|
|
|
|
|
|
|
1
|
For regulatory capital purposes, the Group’s Insurance business is deconsolidated and replaced by the amount of the Group’s investment in the business. A part of this amount is deducted from capital (shown as ‘significant investments’ in the table above) and the remaining amount is risk-weighted, forming part of threshold risk-weighted assets. The presentation of the deconsolidation of the Group’s insurance entities has been amended at June 2016 with comparative figures restated accordingly.
|
2
|
Preference shares, preferred securities and other subordinated liabilities are categorised as subordinated liabilities in the balance sheet.
|
|
|
LLOYDS BANKING GROUP PLC
CAPITAL MANAGEMENT
(continued)
The key differences between the transitional
capital calculation as at 30 June 2016 and the fully loaded equivalent are as follows:
|
·
|
Capital securities that previously qualified as tier 1 or tier 2 capital, but do not fully qualify
under CRD IV, can be included in tier 1 or tier 2 capital (as applicable) up to specified limits which reduce by 10 per cent
per annum until 2022.
|
|
·
|
The significant investment deduction from additional tier 1 (AT1) will gradually transition to
tier 2.
|
The movements in the transitional CET1,
AT1, tier 2 and total capital positions in the period are provided below.
|
|
Common
Equity Tier 1
|
|
Additional
Tier 1
|
|
Tier 2
|
|
Total
capital
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
At 31 December 2015
|
|
28,544
|
|
8,000
|
|
11,452
|
|
47,996
|
Profit attributable to ordinary shareholders
1
|
|
1,800
|
|
|
|
|
|
1,800
|
Movement in foreseeable dividends
2
|
|
516
|
|
|
|
|
|
516
|
Dividends paid out on ordinary shares
during the year
|
|
(1,427)
|
|
|
|
|
|
(1,427)
|
Dividends received from Insurance business
|
|
500
|
|
|
|
|
|
500
|
Movement in treasury shares and employee share schemes
|
|
(30)
|
|
|
|
|
|
(30)
|
Pension movements:
|
|
|
|
|
|
|
|
|
Removal of defined benefit pension surplus
|
|
(97)
|
|
|
|
|
|
(97)
|
Movement through other comprehensive income
|
|
(44)
|
|
|
|
|
|
(44)
|
Available-for-sale reserve
|
|
(93)
|
|
|
|
|
|
(93)
|
Prudent valuation adjustment
|
|
(372)
|
|
|
|
|
|
(372)
|
Deferred tax asset
|
|
(339)
|
|
|
|
|
|
(339)
|
Goodwill and other intangible assets
|
|
92
|
|
|
|
|
|
92
|
Excess of expected losses over impairment provisions and value adjustments
|
|
270
|
|
|
|
|
|
270
|
Significant investments
|
|
213
|
|
(111)
|
|
247
|
|
349
|
Eligible provisions
|
|
|
|
|
|
(107)
|
|
(107)
|
Subordinated debt movements:
|
|
|
|
|
|
|
|
|
Repurchases, redemptions and other
|
|
|
|
(551)
|
|
(486)
|
|
(1,037)
|
Issuances
|
|
|
|
|
|
1,116
|
|
1,116
|
Other movements
|
|
(422)
|
|
|
|
|
|
(422)
|
At 30 June 2016
|
|
29,111
|
|
7,338
|
|
12,222
|
|
48,671
|
|
|
|
|
|
|
|
|
|
1
|
Under the regulatory framework, profits made by Insurance are removed from CET1 capital. However, when dividends are paid to the Group by Insurance these are recognised through CET1 capital.
|
2
|
Includes the accrual for foreseeable 2016 ordinary dividends and the reversal of the accrual for foreseeable 2015 dividends which have now been paid.
|
CET1 capital resources have increased by
£567 million in the period, mainly driven by profit generation, the receipt of the dividend paid by the Insurance business
in February 2016 and a reduction in both the excess of expected losses over impairment provisions and value adjustments and the
deduction for significant investments. This was partially offset by the accrual for foreseeable dividends in respect of the first
half of 2016 and increases in the defined benefit pension surplus, prudent valuation adjustment and deferred tax asset deduction.
AT1 capital resources have reduced by £662 million
in the period, primarily reflecting the annual reduction in the transitional limit applied to grandfathered AT1 capital instruments
and an increase in the significant investments deduction.
LLOYDS BANKING GROUP PLC
CAPITAL MANAGEMENT
(continued)
Tier 2 capital resources have increased
by £770 million in the period largely reflecting the issuance of a new dated tier 2 instrument, foreign exchange movements,
the transitioning of grandfathered AT1 instruments to tier 2 and a decrease in the significant investments deduction. This was
partially offset by calls and redemptions, including the redemption of all remaining series of Enhanced Capital Notes (ECNs) under
the Regulatory Call Right, the amortisation of dated tier 2 instruments and a reduction in eligible provisions.
The redemption of the remaining series of
ECNs followed the decision of the Court of Appeal in December 2015 that a Capital Disqualification Event (CDE) in relation to the
ECNs had occurred. The Group subsequently exercised its option to redeem them in the first quarter of 2016. In June 2016 the Supreme
Court confirmed the decision of the Court of Appeal.
LLOYDS BANKING GROUP PLC
CAPITAL MANAGEMENT
(continued)
Risk-weighted assets
|
|
At 30 June
2016
|
|
At 31 Dec
2015
|
|
|
£m
|
|
£m
|
|
|
|
|
|
Foundation Internal Ratings Based (IRB) Approach
|
|
68,753
|
|
68,990
|
Retail IRB Approach
|
|
64,387
|
|
63,912
|
Other IRB Approach
|
|
18,274
|
|
18,661
|
IRB Approach
|
|
151,414
|
|
151,563
|
Standardised (STA) Approach
|
|
20,268
|
|
20,443
|
Credit risk
|
|
171,682
|
|
172,006
|
Counterparty credit risk
|
|
9,159
|
|
7,981
|
Contributions to the default fund of a central counterparty
|
|
466
|
|
488
|
Credit valuation adjustment risk
|
|
1,101
|
|
1,684
|
Operational risk
|
|
26,123
|
|
26,123
|
Market risk
|
|
2,922
|
|
3,775
|
Underlying risk-weighted assets
|
|
211,453
|
|
212,057
|
|
|
|
|
|
Threshold risk-weighted assets
1
|
|
11,325
|
|
10,788
|
Transitional risk-weighted assets
|
|
222,778
|
|
222,845
|
Movement to fully loaded risk-weighted assets
2
|
|
(481)
|
|
(98)
|
Fully loaded risk-weighted assets
|
|
222,297
|
|
222,747
|
Risk-weighted asset movement by key driver
|
Credit
risk
IRB
|
Credit
risk
STA
|
Credit
risk
|
Counterparty
credit
risk
3
|
Market
risk
|
Operational risk
|
Total
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
|
Fully loaded risk-weighted assets as at 31 December 2015
|
|
|
|
|
|
|
222,747
|
Less total threshold
risk-weighted assets
1,2
|
|
|
|
|
|
|
(10,690)
|
Risk-weighted assets
at 31 December 2015
|
151,563
|
20,443
|
172,006
|
10,153
|
3,775
|
26,123
|
212,057
|
Asset size
|
(1,940)
|
(831)
|
(2,771)
|
(1,220)
|
(137)
|
−
|
(4,128)
|
Acquisitions and disposals
|
(1,686)
|
−
|
(1,686)
|
38
|
−
|
−
|
(1,648)
|
Model updates
|
3,229
|
(28)
|
3,201
|
99
|
(418)
|
−
|
2,882
|
Methodology and policy
|
(327)
|
121
|
(206)
|
−
|
−
|
−
|
(206)
|
Asset quality
|
(1,931)
|
143
|
(1,788)
|
1,203
|
(64)
|
−
|
(649)
|
Movement in risk levels
|
−
|
−
|
−
|
−
|
(215)
|
−
|
(215)
|
Foreign exchange movements
|
2,506
|
420
|
2,926
|
453
|
(19)
|
−
|
3,360
|
Risk-weighted assets as at 30 June 2016
|
151,414
|
20,268
|
171,682
|
10,726
|
2,922
|
26,123
|
211,453
|
Threshold risk-weighted assets
1
|
|
|
|
|
|
|
11,325
|
Transitional risk-weighted assets as at 30 June 2016
|
|
|
|
|
|
|
222,778
|
Movement to fully loaded
risk-weighted assets
2
|
|
|
|
|
|
|
(481)
|
Fully loaded risk-weighted assets as at 30 June 2016
|
|
|
|
|
|
|
222,297
|
|
|
|
|
|
|
|
|
1
|
Threshold risk-weighted assets reflect the element of significant investments and deferred tax assets that are permitted to be
risk-weighted instead of being deducted from CET1 capital. Significant investments primarily arise from investment in the Group’s Insurance business.
|
2
|
Differences may arise between transitional and fully loaded threshold risk-weighted assets where deferred tax assets reliant on future profitability and arising from temporary timing differences and significant investments exceed the fully loaded threshold limit, resulting in an increase in amounts deducted from CET1 capital rather than being risk-weighted.
|
3
|
Counterparty credit risk includes movements in contributions to the default fund of central counterparties and movements in credit valuation adjustment risk.
|
|
|
LLOYDS BANKING GROUP PLC
CAPITAL MANAGEMENT
(continued)
The risk-weighted assets movement table
provides analysis of the reduction in risk-weighted assets in the period by risk type and an insight into the key drivers of the
movements. The key driver analysis is compiled on a monthly basis through the identification and categorisation of risk-weighted
asset movements and is subject to management judgment.
Movements in
credit risk-weighted assets
in the six months to 30 June 2016 were driven by the following:
|
·
|
Asset size movements include risk-weighted asset movements arising from new lending and asset run-off.
During the six months to 30 June, credit risk-weighted assets assessed on both Standardised and Internal Ratings Based approaches
decreased by £2.8 billion primarily due to repayments and exits, partly offset by growth in targeted customer segments.
|
|
·
|
Disposal of the Group’s interest in Visa Europe and further disposals within the run-off
business reduced credit risk weighted assets by £1.7 billion.
|
|
·
|
Model update increases of £3.2 billion were mainly driven by a change in the approach for
the Retail Buy-to-let mortgage portfolio and other small model refinements.
|
|
·
|
Methodology and policy movements include changes due to refinements in the application of regulatory
policy.
|
|
·
|
Asset quality movements capture movements in the assessed quality of assets due to changes in borrower
risk, including changes in the economic environment. Net reductions in credit risk-weighted assets of £1.8 billion primarily
relate to model calibrations and a net change in credit quality, partially offset by increases in valuation of centrally held strategic
equity investments.
|
|
·
|
Foreign exchange movements reflect the depreciation of Sterling which has contributed to a £2.9
billion increase in credit risk-weighted assets of which £2.3 billion arose in the final week of June following the outcome
of the EU referendum.
|
Counterparty credit risk
and
CVA
risk
increases of £0.6 billion are principally driven by yield curve and foreign exchange movements of which £0.9
billion arose in the final week of June following the outcome of the EU referendum, partially offset by increased capital relief
from CVA related hedges.
Market risk
weighted assets reduced
by £0.9 billion due to a reduction in the Value-at-Risk multiplier and active portfolio management.
LLOYDS BANKING GROUP PLC
CAPITAL MANAGEMENT
(continued)
|
|
Fully loaded
|
Leverage ratio
|
|
At 30 June
2016
|
|
At 31 Dec
2015
|
|
|
£m
|
|
£m
|
Total tier 1 capital for leverage ratio
|
|
|
|
|
Common equity tier 1 capital
|
|
28,918
|
|
28,505
|
Additional tier 1 capital
|
|
5,355
|
|
5,355
|
Total tier 1 capital
|
|
34,273
|
|
33,860
|
|
|
|
|
|
Exposure measure
|
|
|
|
|
|
|
|
|
|
Statutory balance sheet assets
|
|
|
|
|
Derivative financial instruments
|
|
47,323
|
|
29,467
|
Securities financing transactions (SFTs)
|
|
36,884
|
|
34,136
|
Loans and advances and other assets
|
|
764,025
|
|
743,085
|
Total assets
|
|
848,232
|
|
806,688
|
|
|
|
|
|
Deconsolidation adjustments
1
|
|
|
|
|
Derivative financial instruments
|
|
(2,829)
|
|
(1,510)
|
Securities financing transactions (SFTs)
|
|
(301)
|
|
(441)
|
Loans and advances and other assets
|
|
(137,291)
|
|
(133,975)
|
Total deconsolidation adjustments
|
|
(140,421)
|
|
(135,926)
|
|
|
|
|
|
Derivatives adjustments
|
|
|
|
|
Adjustments for regulatory netting
|
|
(25,796)
|
|
(16,419)
|
Adjustments for cash collateral
|
|
(11,540)
|
|
(6,464)
|
Net written credit protection
|
|
699
|
|
682
|
Regulatory potential future exposure
|
|
13,050
|
|
12,966
|
Total derivatives adjustments
|
|
(23,587)
|
|
(9,235)
|
|
|
|
|
|
SFT adjustments
|
|
440
|
|
3,361
|
|
|
|
|
|
Off-balance sheet items
|
|
59,873
|
|
56,424
|
|
|
|
|
|
Regulatory deductions and other adjustments
|
|
(10,627)
|
|
(9,112)
|
|
|
|
|
|
Total exposure
|
|
733,910
|
|
712,200
|
|
|
|
|
|
Leverage ratio
2
|
|
4.7%
|
|
4.8%
|
Average leverage ratio
3
|
|
4.8%
|
|
|
Average leverage ratio exposure measure
4
|
|
722,250
|
|
|
|
|
1
|
Deconsolidation adjustments predominantly reflect the deconsolidation of assets related to Group subsidiaries that fall outside the scope of the Group’s regulatory capital consolidation (primarily the Group’s Insurance entities).
|
2
|
The countercyclical leverage ratio buffer is currently nil.
|
3
|
The average leverage ratio is based on the average of the month end tier 1 capital and exposure measures over the quarter (1 April 2016 to 30 June 2016). The average of 4.8 per cent compares to 4.7 per cent at the start and end of the quarter.
|
4
|
The average leverage ratio exposure measure is based on the average of the month end exposure measures over the quarter (1 April 2016 to 30 June 2016).
|
Key movements
The Group’s fully loaded leverage
ratio reduced by 0.1 per cent to 4.7 per cent largely reflecting the increase in balance sheet assets arising from market movements
and cash collateral inflows following the outcome of the EU referendum. The impact of the increase in the exposure measure was
partially offset by the increase in tier 1 capital over the period.
The derivatives exposure measure, representing
derivative financial instruments per the balance sheet net of deconsolidation and derivatives adjustments, increased by £2.2
billion over the period primarily reflecting market movements following the outcome of the EU referendum and trading activity.
LLOYDS BANKING GROUP PLC
CAPITAL MANAGEMENT
(continued)
The increase in SFT assets over the period,
reflecting increased trading volumes, was offset by the reduction in SFT adjustments reflecting both the recognition of additional
eligible netting adjustments and a reduction in the counterparty credit risk add-on.
Off-balance sheet items increased by £3.4 billion
reflecting a change in the profile and subsequent classification of commercial off-balance sheet items and an increase in new residential
mortgage offers placed.
The average leverage ratio of 4.8 per cent
over the quarter reflected a strengthening tier 1 capital position and an overall reduction in balance sheet assets which was subsequently
reversed at the end of the quarter following the outcome of the EU referendum.
Individual capital guidance
The Group receives Individual Capital Guidance
(ICG) from the PRA. The ICG reflects a point in time estimate by the PRA, which may change over time, of the amount of capital
that is needed in relation to risks not covered by Pillar 1. During the period the Group’s ICG has not changed and at 30
June 2016 represented 4.6 per cent of risk-weighted assets of which 2.6 per cent had to be covered by CET1 capital.
Stress testing
The Group undertakes a wide ranging programme
of stress testing providing a comprehensive view of the potential impacts arising from the risks to which the Group is exposed.
One of the most important uses of stress testing is to assess the resilience of the operational and strategic plans of the Group
to adverse economic conditions and other key vulnerabilities. As a part of that the Group participates in the UK-wide concurrent
stress test run by the Bank of England. In 2015 the Group comfortably exceeded the capital thresholds set by the regulator and
was not required to take any action as a result of the test. The Group has participated again this year, having submitted its results
to the Bank of England, and is awaiting the publication of the results of the test for the industry as a whole. The Group has also
participated in the EU-wide stress test coordinated by the EBA, the results of which are expected to be published on 29 July
2016.
Regulatory capital developments
The Basel Committee is continuing with its
work on revisions to the standardised risk-weighted asset frameworks for credit risk and operational risk and the credit valuation
adjustment risk framework. In addition the Committee has proposed a series of constraints on the use of internal model approaches
including the removal of the option to apply the IRB Approach for certain low default portfolios and the application of model-parameter
floors. The Committee is also considering the design and calibration of a new capital floor framework based upon the revised standardised
approaches. The Committee has stated that its overall aim is to address excessive variability in risk weighted assets modelled
by banks and not to increase significantly overall capital requirements. Final Basel standards are expected to be published in
the second half of 2016.
In December 2015, as a part of the development
of the bail-in resolution strategy framework, the Bank of England published a consultation on its approach to setting the minimum
requirement for own funds and eligible liabilities (MREL) to apply from 1 January 2020. In the second half of the year it is expected
that this will be finalised and that the Bank of England will indicate to each bank their prospective requirements.
The Group continues to monitor these developments
very closely, analysing the potential capital impacts to ensure that, through organic capital generation, the Group continues to
maintain a strong capital position that exceeds both the minimum regulatory requirements and the Group’s risk appetite and
is consistent with market expectations.
Half-year Pillar 3 disclosures
The Group has published a condensed set
of Pillar 3 disclosures at half year, prepared in accordance with European Banking Authority (EBA) guidelines on Pillar 3 disclosure
frequency. The disclosures can be found on the Group’s website – www.lloydsbankinggroup.com
LLOYDS BANKING GROUP PLC
STATUTORY INFORMATION
|
Page
|
Condensed consolidated half-year financial statements (unaudited)
|
|
Consolidated income statement
|
45
|
Consolidated statement of comprehensive income
|
46
|
Consolidated balance sheet
|
47
|
Consolidated statement of changes in equity
|
49
|
Consolidated cash flow statement
|
52
|
|
|
Notes
|
|
1
|
Accounting policies, presentation and estimates
|
53
|
2
|
Segmental analysis
|
53
|
3
|
Operating expenses
|
57
|
4
|
Impairment
|
57
|
5
|
Taxation
|
58
|
6
|
Earnings per share
|
59
|
7
|
Trading and other financial assets at fair value through profit or loss
|
59
|
8
|
Derivative financial instruments
|
60
|
9
|
Loans and advances to customers
|
60
|
10
|
Allowance for impairment losses on loans and receivables
|
61
|
11
|
Debt securities in issue
|
61
|
12
|
Post-retirement defined benefit schemes
|
62
|
13
|
Provisions for liabilities and charges
|
63
|
14
|
Contingent liabilities and commitments
|
66
|
15
|
Fair values of financial assets and liabilities
|
70
|
16
|
Credit quality of loans and advances
|
77
|
17
|
Related party transactions
|
78
|
18
|
Dividends on ordinary shares
|
79
|
19
|
Future accounting developments
|
80
|
20
|
Condensed consolidating financial information
|
82
|
|
|
|
LLOYDS BANKING GROUP PLC
CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED)
CONSOLIDATED INCOME STATEMENT
|
|
|
|
Half-year to
30 June
2006
|
|
Half-year to
30 June
2015
|
|
Half-year to
31 Dec
2015
|
|
|
Note
|
|
£ million
|
|
£ million
|
|
£ million
|
|
|
|
|
|
|
|
|
|
Interest and similar income
|
|
|
|
8,479
|
|
8,975
|
|
8,640
|
Interest and similar expense
|
|
|
|
(3,254)
|
|
(3,483)
|
|
(2,814)
|
Net interest income
|
|
|
|
5,225
|
|
5,492
|
|
5,826
|
Fee and commission income
|
|
|
|
1,502
|
|
1,598
|
|
1,654
|
Fee and commission expense
|
|
|
|
(682)
|
|
(607)
|
|
(835)
|
Net fee and commission income
|
|
|
|
820
|
|
991
|
|
819
|
Net trading income
|
|
|
|
7,180
|
|
3,018
|
|
696
|
Insurance premium income
|
|
|
|
4,212
|
|
1,414
|
|
3,378
|
Other operating income
|
|
|
|
993
|
|
890
|
|
626
|
Other income
|
|
|
|
13,205
|
|
6,313
|
|
5,519
|
Total income
|
|
|
|
18,430
|
|
11,805
|
|
11,345
|
Insurance claims
|
|
|
|
(10,110)
|
|
(2,998)
|
|
(2,731)
|
Total income, net of insurance claims
|
|
|
|
8,320
|
|
8,807
|
|
8,614
|
Regulatory provisions
|
|
|
|
(445)
|
|
(1,835)
|
|
(3,002)
|
Other operating expenses
|
|
|
|
(5,059)
|
|
(5,618)
|
|
(4,932)
|
Total operating expenses
|
|
3
|
|
(5,504)
|
|
(7,453)
|
|
(7,934)
|
Trading surplus
|
|
|
|
2,816
|
|
1,354
|
|
680
|
Impairment
|
|
4
|
|
(362)
|
|
(161)
|
|
(229)
|
Profit before tax
|
|
|
|
2,454
|
|
1,193
|
|
451
|
Taxation
|
|
5
|
|
(597)
|
|
(268)
|
|
(420)
|
Profit for the period
|
|
|
|
1,857
|
|
925
|
|
31
|
|
|
|
|
|
|
|
|
|
Profit attributable to ordinary shareholders
|
|
|
|
1,590
|
|
677
|
|
(211)
|
Profit attributable to other equity holders
1
|
|
|
|
204
|
|
197
|
|
197
|
Profit attributable to equity holders
|
|
|
|
1,794
|
|
874
|
|
(14)
|
Profit attributable to non-controlling interests
|
|
|
|
63
|
|
51
|
|
45
|
Profit for the period
|
|
|
|
1,857
|
|
925
|
|
31
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
|
6
|
|
2.3p
|
|
1.0p
|
|
(0.2)p
|
Diluted earnings (loss) per share
|
|
6
|
|
2.3p
|
|
1.0p
|
|
(0.2)p
|
|
|
|
|
|
|
|
|
|
1
|
The profit after tax attributable to other equity holders of £204 million (half-year to 30 June 2015: £197 million; half-year to 31 December 2015: £197 million) is offset in reserves by a tax credit attributable to ordinary shareholders of £41 million (half-year to 30 June 2015: £40 million; half-year to 31 December 2015: £40 million).
|
|
|
LLOYDS BANKING GROUP PLC
CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED)
(continued)
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
|
|
Half-year to
30 June
2016
|
|
Half-year to
30 June
2015
|
|
Half-year to
31 Dec
2015
|
|
|
£ million
|
|
£ million
|
|
£ million
|
|
|
|
|
|
|
|
Profit for the period
|
|
1,857
|
|
925
|
|
31
|
Other comprehensive income
|
|
|
|
|
|
|
Items that will not subsequently be reclassified to profit or loss:
|
|
|
|
|
|
|
Post-retirement defined benefit scheme remeasurements (note 12):
|
|
|
|
|
|
|
Remeasurements before taxation
|
|
(267)
|
|
(302)
|
|
28
|
Taxation
|
|
40
|
|
60
|
|
(1)
|
|
|
(227)
|
|
(242)
|
|
27
|
Items that may subsequently be reclassified to profit or loss:
|
|
|
|
|
|
|
Movements in revaluation reserve in respect of available-for-sale financial assets:
|
|
|
|
|
|
|
Change in fair value
|
|
184
|
|
(16)
|
|
(302)
|
Income statement transfers in respect of disposals
|
|
(574)
|
|
(49)
|
|
(2)
|
Income statement transfers in respect of impairment
|
|
146
|
|
−
|
|
4
|
Taxation
|
|
152
|
|
(2)
|
|
(4)
|
|
|
(92)
|
|
(67)
|
|
(304)
|
Movements in cash flow hedging reserve:
|
|
|
|
|
|
|
Effective portion of changes in fair value
|
|
3,040
|
|
(404)
|
|
941
|
Net income statement transfers
|
|
(206)
|
|
(481)
|
|
(475)
|
Taxation
|
|
(752)
|
|
175
|
|
(168)
|
|
|
2,082
|
|
(710)
|
|
298
|
Currency translation differences (tax: nil)
|
|
(20)
|
|
27
|
|
(69)
|
Other comprehensive income for the period, net of tax
|
|
1,743
|
|
(992)
|
|
(48)
|
Total comprehensive income for the period
|
|
3,600
|
|
(67)
|
|
(17)
|
|
|
|
|
|
|
|
Total comprehensive income attributable to ordinary shareholders
|
|
3,333
|
|
(315)
|
|
(259)
|
Total comprehensive income attributable to other equity holders
|
|
204
|
|
197
|
|
197
|
Total comprehensive income attributable to equity holders
|
|
3,537
|
|
(118)
|
|
(62)
|
Total comprehensive income attributable to non-controlling interests
|
|
63
|
|
51
|
|
45
|
Total comprehensive income for the period
|
|
3,600
|
|
(67)
|
|
(17)
|
LLOYDS BANKING GROUP PLC
CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED)
(continued)
CONSOLIDATED BALANCE SHEET
|
|
|
|
At
30 June
2016
|
|
At
31 Dec
2015
|
Assets
|
|
Note
|
|
£ million
|
|
£ million
|
|
|
|
|
|
|
|
Cash and balances at central banks
|
|
|
|
73,399
|
|
58,417
|
Items in course of collection from banks
|
|
|
|
904
|
|
697
|
Trading and other financial assets at fair value through profit or loss
|
|
7
|
|
146,177
|
|
140,536
|
Derivative financial instruments
|
|
8
|
|
47,323
|
|
29,467
|
Loans and receivables:
|
|
|
|
|
|
|
Loans and advances to banks
|
|
|
|
25,958
|
|
25,117
|
Loans and advances to customers
|
|
9
|
|
453,033
|
|
455,175
|
Debt securities
|
|
|
|
3,996
|
|
4,191
|
|
|
|
|
482,987
|
|
484,483
|
Available-for-sale financial assets
|
|
|
|
35,860
|
|
33,032
|
Held-to-maturity investments
|
|
|
|
21,500
|
|
19,808
|
Goodwill
|
|
|
|
2,016
|
|
2,016
|
Value of in-force business
|
|
|
|
4,749
|
|
4,596
|
Other intangible assets
|
|
|
|
1,719
|
|
1,838
|
Property, plant and equipment
|
|
|
|
12,940
|
|
12,979
|
Current tax recoverable
|
|
|
|
33
|
|
44
|
Deferred tax assets
|
|
|
|
3,383
|
|
4,010
|
Retirement benefit assets
|
|
12
|
|
1,022
|
|
901
|
Other assets
|
|
|
|
14,220
|
|
13,864
|
Total assets
|
|
|
|
848,232
|
|
806,688
|
LLOYDS BANKING GROUP PLC
CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED)
(continued)
CONSOLIDATED BALANCE SHEET
(continued)
|
|
|
|
At
30 June
2016
|
|
At
31 Dec
2015
|
Equity and liabilities
|
|
Note
|
|
£ million
|
|
£ million
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Deposits from banks
|
|
|
|
23,162
|
|
16,925
|
Customer deposits
|
|
|
|
423,279
|
|
418,326
|
Items in course of transmission to banks
|
|
|
|
780
|
|
717
|
Trading and other financial liabilities at fair value through profit or loss
|
|
|
|
52,094
|
|
51,863
|
Derivative financial instruments
|
|
8
|
|
42,376
|
|
26,301
|
Notes in circulation
|
|
|
|
1,090
|
|
1,112
|
Debt securities in issue
|
|
11
|
|
88,758
|
|
82,056
|
Liabilities arising from insurance contracts and
participating investment contracts
|
|
|
|
88,369
|
|
80,294
|
Liabilities arising from non-participating investment contracts
|
|
|
|
19,353
|
|
22,777
|
Other liabilities
|
|
|
|
31,641
|
|
29,661
|
Retirement benefit obligations
|
|
12
|
|
592
|
|
365
|
Current tax liabilities
|
|
|
|
483
|
|
279
|
Deferred tax liabilities
|
|
|
|
36
|
|
33
|
Other provisions
|
|
|
|
4,346
|
|
5,687
|
Subordinated liabilities
|
|
|
|
22,935
|
|
23,312
|
Total liabilities
|
|
|
|
799,294
|
|
759,708
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
Share capital
|
|
|
|
7,146
|
|
7,146
|
Share premium account
|
|
|
|
17,412
|
|
17,412
|
Other reserves
|
|
|
|
14,230
|
|
12,260
|
Retained profits
|
|
|
|
4,363
|
|
4,416
|
Shareholders’ equity
|
|
|
|
43,151
|
|
41,234
|
Other equity instruments
|
|
|
|
5,355
|
|
5,355
|
Total equity excluding non-controlling interests
|
|
|
|
48,506
|
|
46,589
|
Non-controlling interests
|
|
|
|
432
|
|
391
|
Total equity
|
|
|
|
48,938
|
|
46,980
|
Total equity and liabilities
|
|
|
|
848,232
|
|
806,688
|
LLOYDS BANKING GROUP PLC
CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED)
(continued)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
|
|
Attributable to equity shareholders
|
|
|
|
|
|
|
|
Share
capital
and
premium
|
|
Other
reserves
|
|
Retained
profits
|
|
Total
|
Other
equity
instruments
|
|
Non-
controlling
interests
|
|
Total
|
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2016
|
|
24,558
|
|
12,260
|
|
4,416
|
|
41,234
|
|
5,355
|
|
391
|
|
46,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period
|
|
–
|
|
−
|
|
1,794
|
|
1,794
|
|
–
|
|
63
|
|
1,857
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-retirement defined benefit scheme remeasurements, net of tax
|
|
–
|
|
–
|
|
(227)
|
|
(227)
|
|
–
|
|
–
|
|
(227)
|
Movements in revaluation reserve in respect of available-for-sale financial assets, net of tax
|
|
–
|
|
(92)
|
|
–
|
|
(92)
|
|
–
|
|
–
|
|
(92)
|
Movements in cash flow hedging reserve, net of tax
|
|
–
|
|
2,082
|
|
–
|
|
2,082
|
|
–
|
|
–
|
|
2,082
|
Currency translation differences (tax: nil)
|
|
–
|
|
(20)
|
|
–
|
|
(20)
|
|
–
|
|
–
|
|
(20)
|
Total other comprehensive income
|
|
–
|
|
1,970
|
|
(227)
|
|
1,743
|
|
–
|
|
–
|
|
1,743
|
Total comprehensive income
|
|
–
|
|
1,970
|
|
1,567
|
|
3,537
|
|
–
|
|
63
|
|
3,600
|
Transactions with owners
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends (note 18)
|
|
–
|
|
−
|
|
(1,427)
|
|
(1,427)
|
|
–
|
|
(2)
|
|
(1,429)
|
Distributions on other equity instruments, net of tax
|
|
–
|
|
–
|
|
(163)
|
|
(163)
|
|
–
|
|
–
|
|
(163)
|
Movement in treasury shares
|
|
–
|
|
–
|
|
(147)
|
|
(147)
|
|
–
|
|
–
|
|
(147)
|
Value of employee services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share option s chemes
|
|
–
|
|
–
|
|
35
|
|
35
|
|
–
|
|
–
|
|
35
|
Other employee award schemes
|
|
–
|
|
–
|
|
82
|
|
82
|
|
–
|
|
–
|
|
82
|
Changes in non-controlling interests
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(20)
|
|
(20)
|
Total transactions with owners
|
|
–
|
|
–
|
|
(1,620)
|
|
(1,620)
|
|
–
|
|
(22)
|
|
(1,642)
|
Balance at 30 June 2016
|
|
24,558
|
|
14,230
|
|
4,363
|
|
43,151
|
|
5,355
|
|
432
|
|
48,938
|
LLOYDS BANKING GROUP PLC
CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED)
(continued)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(continued)
|
|
Attributable to equity shareholders
|
|
|
|
|
|
|
|
Share
capital
and
premium
|
|
Other
reserves
|
|
Retained
profits
|
|
Total
|
Other
equity
instruments
|
|
Non-
controlling
interests
|
|
Total
|
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2015
|
|
24,427
|
|
13,216
|
|
5,692
|
|
43,335
|
|
5,355
|
|
1,213
|
|
49,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period
|
|
–
|
|
−
|
|
874
|
|
874
|
|
–
|
|
51
|
|
925
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-retirement defined benefit scheme remeasurements, net of tax
|
|
–
|
|
–
|
|
(242)
|
|
(242)
|
|
–
|
|
–
|
|
(242)
|
Movements in revaluation reserve in respect of available-for-sale financial assets, net of tax
|
|
–
|
|
(67)
|
|
–
|
|
(67)
|
|
–
|
|
–
|
|
(67)
|
Movements in cash flow hedging reserve, net of tax
|
|
–
|
|
(710)
|
|
–
|
|
(710)
|
|
–
|
|
–
|
|
(710)
|
Currency translation differences (tax: nil)
|
|
–
|
|
27
|
|
–
|
|
27
|
|
–
|
|
–
|
|
27
|
Total other comprehensive income
|
|
–
|
|
(750)
|
|
(242)
|
|
(992)
|
|
–
|
|
–
|
|
(992)
|
Total comprehensive
income
|
|
–
|
|
(750)
|
|
632
|
|
(118)
|
|
–
|
|
51
|
|
(67)
|
Transactions with owners
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends (note 18)
|
|
–
|
|
−
|
|
(535)
|
|
(535)
|
|
–
|
|
(10)
|
|
(545)
|
Distributions on other equity instruments, net of tax
|
|
–
|
|
–
|
|
(157)
|
|
(157)
|
|
–
|
|
–
|
|
(157)
|
Redemption of preference shares
|
|
11
|
|
(11)
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
Movement in treasury shares
|
|
–
|
|
–
|
|
(479)
|
|
(479)
|
|
–
|
|
–
|
|
(479)
|
Value of employee services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share option schemes
|
|
–
|
|
–
|
|
60
|
|
60
|
|
–
|
|
–
|
|
60
|
Other employee award schemes
|
|
–
|
|
–
|
|
150
|
|
150
|
|
–
|
|
–
|
|
150
|
Adjustment on sale of interest in TSB Banking Group plc (TSB)
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(825)
|
|
(825)
|
Other changes in
non-controlling interests
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
1
|
|
1
|
Total transactions with owners
|
|
11
|
|
(11)
|
|
(961)
|
|
(961)
|
|
–
|
|
(834)
|
|
(1,795)
|
Balance at 30 June 2015
|
|
24,438
|
|
12,455
|
|
5,363
|
|
42,256
|
|
5,355
|
|
430
|
|
48,041
|
LLOYDS BANKING GROUP PLC
CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED)
(continued)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(continued)
|
|
Attributable to equity shareholders
|
|
|
|
|
|
|
|
Share
capital
and
premium
|
|
Other
reserves
|
|
Retained
profits
|
|
Total
|
Other
equity
instruments
|
|
Non-
controlling
interests
|
|
Total
|
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 July 2015
|
|
24,438
|
|
12,455
|
|
5,363
|
|
42,256
|
|
5,355
|
|
430
|
|
48,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) profit for the period
|
|
−
|
|
−
|
|
(14)
|
|
(14)
|
|
−
|
|
45
|
|
31
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-retirement defined benefit scheme remeasurements, net of tax
|
|
−
|
|
−
|
|
27
|
|
27
|
|
−
|
|
−
|
|
27
|
Movements in revaluation reserve in respect of available-for-sale financial assets, net of tax
|
|
−
|
|
(304)
|
|
−
|
|
(304)
|
|
−
|
|
−
|
|
(304)
|
Movements in cash flow hedging reserve, net of tax
|
|
−
|
|
298
|
|
−
|
|
298
|
|
−
|
|
−
|
|
298
|
Currency translation differences (tax: nil)
|
|
−
|
|
(69)
|
|
−
|
|
(69)
|
|
−
|
|
−
|
|
(69)
|
Total other comprehensive income
|
|
−
|
|
(75)
|
|
27
|
|
(48)
|
|
−
|
|
−
|
|
(48)
|
Total comprehensive
income
|
|
−
|
|
(75)
|
|
13
|
|
(62)
|
|
−
|
|
45
|
|
(17)
|
Transactions with owners
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends (note 18)
|
|
−
|
|
−
|
|
(535)
|
|
(535)
|
|
−
|
|
(42)
|
|
(577)
|
Distributions on other equity instruments, net of tax
|
|
−
|
|
−
|
|
(157)
|
|
(157)
|
|
−
|
|
−
|
|
(157)
|
Redemption of preference shares
|
|
120
|
|
(120)
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
Movement in treasury shares
|
|
−
|
|
−
|
|
(337)
|
|
(337)
|
|
−
|
|
−
|
|
(337)
|
Value of employee services:
|
|
|
|
|
|
|
|
|
|
−
|
|
−
|
|
|
Share option schemes
|
|
−
|
|
−
|
|
47
|
|
47
|
|
−
|
|
−
|
|
47
|
Other employee award schemes
|
|
−
|
|
−
|
|
22
|
|
22
|
|
−
|
|
−
|
|
22
|
Changes in non-controlling interests
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
(42)
|
|
(42)
|
Total transactions with owners
|
|
120
|
|
(120)
|
|
(960)
|
|
(960)
|
|
−
|
|
(84)
|
|
(1,044)
|
Balance at 31 December 2015
|
|
24,558
|
|
12,260
|
|
4,416
|
|
41,234
|
|
5,355
|
|
391
|
|
46,980
|
LLOYDS BANKING GROUP PLC
CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL
STATEMENTS (UNAUDITED)
(continued)
CONSOLIDATED CASH FLOW STATEMENT
|
|
Half-year to
30 June
2016
|
|
Half-year to
30 June
2015
|
|
Half-year to
31 Dec
2015
|
|
|
£ million
|
|
£ million
|
|
£ million
|
|
|
|
|
|
|
|
Profit before tax
|
|
2,454
|
|
1,193
|
|
451
|
Adjustments for:
|
|
|
|
|
|
|
Change in operating assets
|
|
(18,311)
|
|
26,512
|
|
8,188
|
Change in operating liabilities
|
|
31,794
|
|
81
|
|
(12,066)
|
Non-cash and other items
|
|
6,929
|
|
(6,417)
|
|
(1,391)
|
Tax paid
|
|
(262)
|
|
(49)
|
|
(130)
|
Net cash provided by operating activities
|
|
22,604
|
|
21,320
|
|
(4,948)
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
Purchase of financial assets
|
|
(3,441)
|
|
(12,358)
|
|
(6,996)
|
Proceeds from sale and maturity of financial assets
|
|
2,729
|
|
14,838
|
|
7,162
|
Purchase of fixed assets
|
|
(1,820)
|
|
(1,564)
|
|
(1,853)
|
Proceeds from sale of fixed assets
|
|
909
|
|
526
|
|
1,011
|
Acquisition of businesses, net of cash acquired
|
|
(6)
|
|
−
|
|
(5)
|
Disposal of businesses, net of cash disposed
|
|
5
|
|
(4,282)
|
|
211
|
Net cash used in investing activities
|
|
(1,624)
|
|
(2,840)
|
|
(470)
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
Dividends paid to ordinary shareholders
|
|
(1,427)
|
|
(535)
|
|
(535)
|
Distributions on other equity instruments
|
|
(204)
|
|
(197)
|
|
(197)
|
Dividends paid to non-controlling interests
|
|
(2)
|
|
(10)
|
|
(42)
|
Interest paid on subordinated liabilities
|
|
(946)
|
|
(1,250)
|
|
(590)
|
Proceeds from issue of subordinated liabilities
|
|
1,061
|
|
−
|
|
338
|
Repayment of subordinated liabilities
|
|
(4,678)
|
|
(2,068)
|
|
(1,131)
|
Changes in non-controlling interests
|
|
(5)
|
|
1
|
|
(42)
|
Net cash used in financing activities
|
|
(6,201)
|
|
(4,059)
|
|
(2,199)
|
Effects of exchange rate changes on cash and cash equivalents
|
|
15
|
|
(2)
|
|
4
|
Change in cash and cash equivalents
|
|
14,794
|
|
14,419
|
|
(7,613)
|
Cash and cash equivalents at beginning of period
|
|
71,953
|
|
65,147
|
|
79,566
|
Cash and cash equivalents at end of period
|
|
86,747
|
|
79,566
|
|
71,953
|
Cash and cash equivalents comprise cash
and balances at central banks (excluding mandatory deposits) and amounts due from banks with a maturity of less than three months.
Included within cash and cash equivalents at 30 June 2016 is £12,613 million (30 June 2015: £11,377 million;
31 December 2015: £13,545 million) held within the Group’s life funds, which is not immediately available for
use in the business.
LLOYDS BANKING
GROUP PLC
|
1.
|
Accounting policies, presentation and estimates
|
These condensed consolidated half-year financial
statements as at and for the period to 30 June 2016 have been prepared in accordance with the Disclosure Rules and Transparency
Rules of the Financial Conduct Authority (FCA) and with International Accounting Standard 34 (IAS 34),
Interim Financial Reporting
as issued by the International Accounting Standards Board and comprise the results of Lloyds Banking Group plc (the Company) together
with its subsidiaries (the Group). They do not include all of the information required for full annual financial statements and
should be read in conjunction with the Group’s consolidated financial statements as at and for the year ended 31 December
2015 which were prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board. Copies of the 2015 Annual Report and Accounts are available on the Group’s website and are available upon
request from Investor Relations, Lloyds Banking Group plc, 25 Gresham Street, London EC2V 7HN.
The British Bankers’ Association’s
Code for Financial Reporting Disclosure (the Disclosure Code) sets out disclosure principles together with supporting guidance
in respect of the financial statements of UK banks. The Group has adopted the Disclosure Code and these condensed consolidated
half-year financial statements have been prepared in compliance with the Disclosure Code’s principles. Terminology used in
these condensed consolidated half-year financial statements is consistent with that used in the Group’s 2015 Annual Report
and Accounts where a glossary of terms can be found.
The directors consider that it is appropriate
to continue to adopt the going concern basis in preparing the condensed consolidated half-year financial statements. In reaching
this assessment, the directors have considered projections for the Group’s capital and funding position and have had regard
to the factors set out in Principal risks and uncertainties: Funding and liquidity on page 31.
The accounting policies are consistent with
those applied by the Group in its 2015 Annual Report and Accounts.
Future accounting developments
Details of those IFRS pronouncements which
will be relevant to the Group but which will not be effective at 31 December 2016 and which have not been applied in preparing
these financial statements are set out in note 19.
Critical accounting estimates and
judgements
The preparation of the Group’s financial
statements requires management to make judgements, estimates and assumptions that impact the application of accounting policies
and the reported amounts of assets, liabilities, income and expenses. Due to the inherent uncertainty in making estimates, actual
results reported in future periods may include amounts which differ from those estimates. Estimates, judgements and assumptions
are continually evaluated and are based on historical experience and other factors, including expectations of future events that
are believed to be reasonable under the circumstances. There have been no significant changes in the basis upon which estimates
have been determined, compared to that applied at 31 December 2015.
Lloyds Banking Group provides a wide range
of banking and financial services in the UK and in certain locations overseas. The Group Executive Committee (GEC) remains the
chief operating decision maker for the Group.
The segmental results and comparatives are
presented on an underlying basis, the basis reviewed by the chief operating decision maker. The effects of the redemption of the
Group’s Enhanced Capital Notes, asset sales, volatile items, the insurance grossing adjustment, liability management, restructuring
costs, TSB dual-running costs, the charge relating to the TSB disposal, conduct provisions, the amortisation of purchased intangible
assets and the unwind of acquisition-related fair value adjustments are excluded in arriving at underlying profit.
LLOYDS BANKING
GROUP PLC
|
2.
|
Segmental analysis
(continued)
|
The Group’s activities are organised
into four financial reporting segments: Retail; Commercial Banking; Consumer Finance and Insurance. The Group’s unsecured
personal lending portfolio, previously part of Retail, is now managed by Consumer Finance and elements of the Group’s business
in the Channel Islands and Isle of Man were transferred from Retail to Commercial Banking; comparatives have been restated accordingly.
There has been no other change to the descriptions of these segments as provided in note 4 to the Group’s financial statements
for the year ended 31 December 2015.
There has been no change to the Group’s
segmental accounting for internal segment services or derivatives entered into by units for risk management purposes since 31 December
2015.
Half-year to 30 June 2016
|
|
Net
interest
income
|
|
Other
income,
net of
insurance
claims
|
Total
income,
net of
insurance
claims
|
Profit
(loss)
before tax
|
|
External
revenue
|
|
Inter-
segment
revenue
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying basis
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
3,296
|
|
558
|
|
3,854
|
|
1,548
|
|
4,333
|
|
(479)
|
Commercial Banking
|
|
1,306
|
|
982
|
|
2,288
|
|
1,236
|
|
2,137
|
|
151
|
Consumer Finance
|
|
994
|
|
658
|
|
1,652
|
|
690
|
|
1,942
|
|
(290)
|
Insurance
|
|
(80)
|
|
921
|
|
841
|
|
446
|
|
300
|
|
541
|
Other
|
|
266
|
|
(26)
|
|
240
|
|
241
|
|
163
|
|
77
|
Group
|
|
5,782
|
|
3,093
|
|
8,875
|
|
4,161
|
|
8,875
|
|
−
|
Reconciling items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance grossing adjustment
|
|
(423)
|
|
519
|
|
96
|
|
−
|
|
|
|
|
Enhanced Capital Notes
1
|
|
−
|
|
(790)
|
|
(790)
|
|
(790)
|
|
|
|
|
Asset sales, volatile items and liability management
2
|
|
20
|
|
624
|
|
644
|
|
5000
|
|
|
|
|
Volatility relating to the insurance business
|
|
−
|
|
(372)
|
|
(372)
|
|
(372)
|
|
|
|
|
Restructuring costs
3
|
|
−
|
|
−
|
|
−
|
|
(307)
|
|
|
|
|
Other conduct provisions
|
|
−
|
|
(15)
|
|
(15)
|
|
(460)
|
|
|
|
|
Amortisation of purchased intangibles
|
|
−
|
|
−
|
|
−
|
|
(168)
|
|
|
|
|
Fair value unwind
|
|
(154)
|
|
36
|
|
(118)
|
|
(110)
|
|
|
|
|
Group – statutory
|
|
5,225
|
|
3,095
|
|
8,320
|
|
2,454
|
|
|
|
|
|
|
1
|
The loss relating to the ECNs was £790 million, representing the write-off of the embedded derivative and the premium paid on redemption of the remaining notes.
|
2
|
Comprises (i) gains on disposals of assets which are not part of normal business operations (£335 million); (ii) the net effect of banking volatility and net derivative valuation adjustments (gains of £19 million); and (iii) the results of liability management exercises (gains of £146 million).
|
3
|
Principally comprises the severance costs related to phase II of the Simplification programme.
|
|
|
LLOYDS BANKING GROUP PLC
|
2.
|
Segmental analysis
(continued)
|
Half-year to 30 June 2015
|
|
Net
interest
income
|
|
Other
income,
net of
insurance
claims
|
Total
income,
net of
insurance
claims
|
Profit
(loss)
before tax
|
|
External
revenue
|
|
Inter-
segment
revenue
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
Underlying basis
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
1
|
|
3,364
|
|
554
|
|
3,918
|
|
1,603
|
|
4,194
|
|
(276)
|
Commercial Banking
1
|
|
1,266
|
|
1,027
|
|
2,293
|
|
1,212
|
|
1,850
|
|
443
|
Consumer Finance
1
|
|
1,005
|
|
678
|
|
1,683
|
|
756
|
|
1,889
|
|
(206)
|
Insurance
|
|
(73)
|
|
1,025
|
|
952
|
|
584
|
|
1,241
|
|
(289)
|
Other
|
|
153
|
|
(31)
|
|
122
|
|
228
|
|
(206)
|
|
328
|
Group
|
|
5,715
|
|
3,253
|
|
8,968
|
|
4,383
|
|
8,968
|
|
−
|
Reconciling items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance grossing adjustment
|
|
(241)
|
|
287
|
|
46
|
|
−
|
|
|
|
|
TSB income
|
|
192
|
|
31
|
|
223
|
|
−
|
|
|
|
|
Enhanced Capital Notes
|
|
−
|
|
(390)
|
|
(390)
|
|
(390)
|
|
|
|
|
Asset sales, volatile items and liability management
2
|
|
26
|
|
6
|
|
32
|
|
35
|
|
|
|
|
Volatility relating to the insurance business
|
|
−
|
|
18
|
|
18
|
|
18
|
|
|
|
|
Restructuring costs
|
|
−
|
|
−
|
|
−
|
|
(32)
|
|
|
|
|
TSB build and dual-running costs
|
|
−
|
|
−
|
|
−
|
|
(85)
|
|
|
|
|
Charge relating to the TSB disposal
|
|
−
|
|
5
|
|
5
|
|
(660)
|
|
|
|
|
Payment protection insurance provision
|
|
−
|
|
−
|
|
−
|
|
(1,400)
|
|
|
|
|
Other conduct provisions
|
|
−
|
|
−
|
|
−
|
|
(435)
|
|
|
|
|
Amortisation of purchased intangibles
|
|
−
|
|
−
|
|
−
|
|
(164)
|
|
|
|
|
Fair value unwind
|
|
(200)
|
|
105
|
|
(95)
|
|
(77)
|
|
|
|
|
Group – statutory
|
|
5,492
|
|
3,315
|
|
8,807
|
|
1,193
|
|
|
|
|
1
|
Restated, see page 54.
|
2
|
Comprises (i) losses on disposals of assets which are not part of normal business operations (£52 million); (ii) the net effect of banking volatility and net derivative valuation adjustments (gains of £93 million); and (iii) the results of liability management exercises (losses of £6 million).
|
|
|
LLOYDS BANKING GROUP PLC
|
2.
|
Segmental analysis
(continued)
|
Half-year to 31 December 2015
|
|
Net
interest
income
|
|
Other
income,
net of
insurance
claims
|
Total
income,
net of
insurance
claims
|
Profit
(loss)
before tax
|
|
External
revenue
|
|
Inter-
segment
revenue
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
Underlying basis
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
1
|
|
3,300
|
|
561
|
|
3,861
|
|
1,488
|
|
4,351
|
|
(490)
|
Commercial Banking
1
|
|
1,310
|
|
1,045
|
|
2,355
|
|
1,266
|
|
1,786
|
|
569
|
Consumer Finance
1
|
|
949
|
|
681
|
|
1,630
|
|
625
|
|
1,883
|
|
(253)
|
Insurance
|
|
(90)
|
|
802
|
|
712
|
|
378
|
|
824
|
|
(112)
|
Other
|
|
298
|
|
(187)
|
|
111
|
|
(28)
|
|
(175)
|
|
286
|
Group
|
|
5,767
|
|
2,902
|
|
8,669
|
|
3,729
|
|
8,669
|
|
–
|
Reconciling items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance grossing adjustment
|
|
203
|
|
(161)
|
|
42
|
|
–
|
|
|
|
|
Enhanced Capital Notes
|
|
−
|
|
289
|
|
289
|
|
289
|
|
|
|
|
Asset sales, volatile items and liability management
2
|
|
2
|
|
(113)
|
|
(111)
|
|
(11)
|
|
|
|
|
Volatility relating to the insurance business
|
|
–
|
|
(123)
|
|
(123)
|
|
(123)
|
|
|
|
|
Restructuring costs
|
|
–
|
|
−
|
|
−
|
|
(138)
|
|
|
|
|
Payment protection insurance provision
|
|
–
|
|
–
|
|
–
|
|
(2,600)
|
|
|
|
|
Other conduct provisions
|
|
–
|
|
–
|
|
–
|
|
(402)
|
|
|
|
|
Amortisation of purchased intangibles
|
|
–
|
|
–
|
|
–
|
|
(178)
|
|
|
|
|
Fair value unwind
|
|
(146)
|
|
(6)
|
|
(152)
|
|
(115)
|
|
|
|
|
Group – statutory
|
|
5,826
|
|
2,788
|
|
8,614
|
|
451
|
|
|
|
|
|
|
1
|
Restated, see page 54.
|
2
|
Comprises (i) gains on disposals of assets which are not part of normal business operations (£106 million); (ii) the net effect of banking volatility and net derivative valuation adjustments (losses of £95 million); and (iii) the results of liability management exercises (losses of £22 million).
|
|
|
Segment external
assets
|
|
Segment customer
deposits
|
|
Segment external
liabilities
|
|
|
At
30 June
2016
|
|
At
31 Dec
2015
|
|
At
30 June
2016
|
|
At
31 Dec
2015
|
|
At
30 June
2016
|
|
At
31 Dec
2015
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
1
|
|
302,851
|
|
307,887
|
|
271,293
|
|
273,719
|
|
276,001
|
|
278,933
|
Commercial Banking
1
|
|
201,259
|
|
178,838
|
|
141,426
|
|
131,998
|
|
249,367
|
|
226,106
|
Consumer Finance
1
|
|
39,176
|
|
36,501
|
|
9,086
|
|
11,082
|
|
13,964
|
|
15,462
|
Insurance
|
|
147,718
|
|
143,217
|
|
−
|
|
−
|
|
141,318
|
|
137,233
|
Other
|
|
157,228
|
|
140,245
|
|
1,474
|
|
1,527
|
|
118,644
|
|
101,974
|
Total Group
|
|
848,232
|
|
806,688
|
|
423,279
|
|
418,326
|
|
799,294
|
|
759,708
|
LLOYDS BANKING GROUP PLC
|
|
Half-year to
30 June
2016
|
|
Half-year to
30 June
2015
|
|
Half-year to
31 Dec
2015
|
|
|
£m
|
|
£m
|
|
£m
|
Administrative expenses
|
|
|
|
|
|
|
Staff costs:
|
|
|
|
|
|
|
Salaries and social security costs
|
|
1,782
|
|
1,859
|
|
1,707
|
Pensions and other post-retirement benefit schemes
|
|
268
|
|
278
|
|
270
|
Restructuring and other staff costs
|
|
412
|
|
273
|
|
290
|
|
|
2,462
|
|
2,410
|
|
2,267
|
Premises and equipment
|
|
353
|
|
360
|
|
355
|
Other expenses:
|
|
|
|
|
|
|
Communications and data processing
|
|
403
|
|
436
|
|
457
|
UK bank levy
|
|
−
|
|
−
|
|
270
|
TSB disposal
|
|
−
|
|
665
|
|
−
|
Other
|
|
675
|
|
740
|
|
478
|
|
|
1,078
|
|
1,841
|
|
1,205
|
|
|
3,893
|
|
4,611
|
|
3,827
|
Depreciation and amortisation
|
|
1,166
|
|
1,007
|
|
1,105
|
Total operating expenses, excluding regulatory provisions
|
|
5,059
|
|
5,618
|
|
4,932
|
Regulatory provisions:
|
|
|
|
|
|
|
Payment protection insurance provision (note 13)
|
|
−
|
|
1,400
|
|
2,600
|
Other regulatory provisions
1
(note 13)
|
|
445
|
|
435
|
|
402
|
|
|
445
|
|
1,835
|
|
3,002
|
Total operating expenses
|
|
5,504
|
|
7,453
|
|
7,934
|
|
|
1
|
In addition, regulatory provisions of £15 million (half-year to 30 June 2015: £nil; half-year to 31 December 2015: £nil) have been charged against income.
|
|
|
Half-year to
30 June
2016
|
|
Half-year to
30 June
2015
|
|
Half-year to
31 Dec
2015
|
|
|
£m
|
|
£m
|
|
£m
|
Impairment losses on loans and receivables:
|
|
|
|
|
|
|
Loans and advances to customers
|
|
229
|
|
181
|
|
262
|
Debt securities classified as loans and receivables
|
|
−
|
|
(2)
|
|
−
|
Impairment losses on loans and receivables (note 10)
|
|
229
|
|
179
|
|
262
|
Impairment of available-for-sale financial assets
|
|
146
|
|
−
|
|
4
|
Other credit risk provisions
|
|
(13)
|
|
(18)
|
|
(37)
|
Total impairment charged to the income statement
|
|
362
|
|
161
|
|
229
|
LLOYDS BANKING GROUP PLC
A reconciliation of the tax charge that
would result from applying the standard UK corporation tax rate to the profit before tax, to the actual tax charge, is given below:
|
|
Half-year to
30 June
2016
|
|
Half-year to
30 June
2015
|
|
Half-year to
31 Dec
2015
|
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
Profit before tax
|
|
2,454
|
|
1,193
|
|
451
|
|
|
|
|
|
|
|
Tax charge thereon at UK corporation tax rate of 20 per cent
(2015: 20.25 per cent)
|
|
(491)
|
|
(242)
|
|
(91)
|
Factors affecting tax charge:
|
|
|
|
|
|
|
Impact of bank surcharge
|
|
(59)
|
|
−
|
|
−
|
Differences in UK tax rates
|
|
(3)
|
|
7
|
|
(34)
|
Disallowed items
|
|
(122)
|
|
(99)
|
|
(531)
|
Non-taxable items
|
|
47
|
|
46
|
|
116
|
Overseas tax rate differences
|
|
(6)
|
|
(8)
|
|
4
|
Gains exempted or covered by capital losses
|
|
8
|
|
47
|
|
20
|
Policyholder tax
|
|
(34)
|
|
(39)
|
|
42
|
Tax losses not previously recognised
|
|
49
|
|
−
|
|
42
|
Adjustments in respect of previous years
|
|
10
|
|
21
|
|
12
|
Effect of results of joint ventures and associates
|
|
−
|
|
−
|
|
(1)
|
Other items
|
|
4
|
|
(1)
|
|
1
|
Tax charge
|
|
(597)
|
|
(268)
|
|
(420)
|
In accordance with IAS 34, the Group’s
income tax expense for the half-year to 30 June 2016 is based on the best estimate of the weighted-average annual income tax rate
expected for the full financial year. The tax effects of one-off items are not included in the weighted-average annual income tax
rate, but are recognised in the relevant period.
The Finance (No. 2) Act 2015 introduced
an additional surcharge of 8 per cent on banking profits from 1 January 2016.
On 16 March 2016, the Government announced
a reduction in the corporation tax rate applicable from 1 April 2020 to 17 per cent and a further restriction to the amount
of banks’ profits that can be offset by carried forward losses for the purposes of calculating corporation tax liabilities
from 50 per cent to 25 per cent. The proposed reduction in the rate of corporation tax and the further bank loss relief
restriction are expected to be enacted, and accounted for, in the second half of 2016.
LLOYDS BANKING GROUP PLC
|
|
Half-year to
30 June
2016
|
|
Half-year to
30 June
2015
|
|
Half-year to
31 Dec
2015
|
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
Profit attributable to ordinary shareholders – basic and diluted
|
|
1,590
|
|
677
|
|
(211)
|
Tax credit on distributions to other equity holders
|
|
41
|
|
40
|
|
40
|
|
|
1,631
|
|
717
|
|
(171)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half-year to
30 June
2016
|
|
Half-year to
30 June
2015
|
|
Half-year to
31 Dec
2015
|
|
|
million
|
|
million
|
|
million
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares in issue – basic
|
|
71,175
|
|
71,349
|
|
71,196
|
Adjustment for share options and awards
|
|
882
|
|
1,114
|
|
1,023
|
Weighted average number of ordinary shares in issue – diluted
|
|
72,057
|
|
72,463
|
|
72,219
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
2.3p
|
|
1.0p
|
|
(0.2)p
|
Diluted earnings per share
|
|
2.3p
|
|
1.0p
|
|
(0.2)p
|
|
|
|
|
|
|
|
|
7.
|
Trading and other financial assets at fair value through
profit or loss
|
|
|
At
30 June
2016
|
|
At
31 Dec
2015
|
|
|
£m
|
|
£m
|
|
|
|
|
|
Trading assets
|
|
45,032
|
|
42,661
|
|
|
|
|
|
Other financial assets at fair value through profit or loss:
|
|
|
|
|
Treasury and other bills
|
|
64
|
|
74
|
Debt securities
|
|
39,101
|
|
37,330
|
Equity shares
|
|
61,980
|
|
60,471
|
|
|
101,145
|
|
97,875
|
Total trading and other financial assets at fair value through profit or loss
|
|
146,177
|
|
140,536
|
Included in the above is £95,168 million
(31 December 2015: £90,492 million) of assets relating to the insurance businesses.
LLOYDS BANKING GROUP PLC
|
8.
|
Derivative financial instruments
|
|
|
30 June 2016
|
|
31 December 2015
|
|
|
Fair value
of assets
|
Fair value
of liabilities
|
|
Fair value
of assets
|
|
Fair value
of liabilities
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
Hedging
|
|
|
|
|
|
|
|
|
Derivatives designated as fair value hedges
|
|
2,103
|
|
956
|
|
1,624
|
|
831
|
Derivatives designated as cash flow hedges
|
|
1,743
|
|
2,093
|
|
1,062
|
|
1,606
|
|
|
3,846
|
|
3,049
|
|
2,686
|
|
2,437
|
Trading and other
|
|
|
|
|
|
|
|
|
Exchange rate contracts
|
|
13,525
|
|
9,458
|
|
7,188
|
|
6,081
|
Interest rate contracts
|
|
28,517
|
|
27,367
|
|
17,458
|
|
16,231
|
Credit derivatives
|
|
456
|
|
1,587
|
|
295
|
|
407
|
Embedded equity conversion feature
|
|
−
|
|
−
|
|
545
|
|
−
|
Equity and other contracts
|
|
979
|
|
915
|
|
1,295
|
|
1,145
|
|
|
43,477
|
|
39,327
|
|
26,781
|
|
23,864
|
Total recognised derivative assets/liabilities
|
|
47,323
|
|
42,376
|
|
29,467
|
|
26,301
|
|
9.
|
Loans and advances to customers
|
|
|
At
30 June
2016
|
|
At
31 Dec
2015
|
|
|
£m
|
|
£m
|
|
|
|
|
|
Agriculture, forestry and fishing
|
|
7,047
|
|
6,924
|
Energy and water supply
|
|
3,129
|
|
3,247
|
Manufacturing
|
|
6,394
|
|
5,953
|
Construction
|
|
5,736
|
|
4,952
|
Transport, distribution and hotels
|
|
13,272
|
|
13,526
|
Postal and communications
|
|
2,581
|
|
2,563
|
Property companies
|
|
32,213
|
|
32,228
|
Financial, business and other services
|
|
41,959
|
|
43,072
|
Personal:
|
|
|
|
|
Mortgages
|
|
309,338
|
|
312,877
|
Other
|
|
20,443
|
|
20,579
|
Lease financing
|
|
2,792
|
|
2,751
|
Hire purchase
|
|
10,862
|
|
9,536
|
|
|
455,766
|
|
458,208
|
Allowance for impairment losses on loans and advances to customers (note 10)
|
|
(2,733)
|
|
(3,033)
|
Total loans and advances to customers
|
|
453,033
|
|
455,175
|
Loans and advances to customers include
advances securitised under the Group's securitisation and covered bond programmes.
LLOYDS BANKING GROUP PLC
|
10.
|
Allowance for impairment losses on loans and receivables
|
|
|
Half-year to
30 June
2016
|
|
Half-year to
30 June
2015
|
|
Half-year to
31 Dec
2015
|
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
Opening balance
|
|
3,130
|
|
6,540
|
|
5,477
|
Exchange and other adjustments
|
|
19
|
|
(300)
|
|
54
|
Adjustment on disposal of businesses
|
|
−
|
|
(82)
|
|
−
|
Advances written off
|
|
(1,037)
|
|
(1,323)
|
|
(3,333)
|
Recoveries of advances written off in previous years
|
|
509
|
|
491
|
|
698
|
Unwinding of discount
|
|
(19)
|
|
(28)
|
|
(28)
|
Charge to the income statement (note 4)
|
|
229
|
|
179
|
|
262
|
Balance at end of period
|
|
2,831
|
|
5,477
|
|
3,130
|
|
|
|
|
|
|
|
In respect of:
|
|
|
|
|
|
|
Loans and advances to customers (note 9)
|
|
2,733
|
|
5,350
|
|
3,033
|
Debt securities
|
|
98
|
|
127
|
|
97
|
Balance at end of period
|
|
2,831
|
|
5,477
|
|
3,130
|
|
11.
|
Debt securities in issue
|
|
30 June 2016
|
|
31 December 2015
|
|
At fair value
through
profit or
loss
|
At
amortised
cost
|
|
Total
|
At fair value
through
profit or
loss
|
|
At
amortised
cost
|
|
Total
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medium-term notes issued
|
|
9,443
|
|
31,074
|
|
40,517
|
|
7,878
|
|
29,329
|
|
37,207
|
Covered bonds
|
|
−
|
|
31,873
|
|
31,873
|
|
−
|
|
27,200
|
|
27,200
|
Certificates of deposit
|
|
−
|
|
11,592
|
|
11,592
|
|
−
|
|
11,101
|
|
11,101
|
Securitisation notes
|
|
−
|
|
7,091
|
|
7,091
|
|
−
|
|
7,763
|
|
7,763
|
Commercial paper
|
|
−
|
|
7,128
|
|
7,128
|
|
−
|
|
6,663
|
|
6,663
|
|
|
9,443
|
|
88,758
|
|
98,201
|
|
7,878
|
|
82,056
|
|
89,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes issued by the Group’s securitisation
and covered bond programmes are held by external parties and by subsidiaries of the Group.
Securitisation programmes
At 30 June 2016, external parties held £7,091 million
(31 December 2015: £7,763 million) and the Group’s subsidiaries held £27,804 million (31 December
2015: £29,303 million) of total securitisation notes in issue of £34,895 million (31 December 2015:
£37,066 million). The notes are secured on loans and advances to customers and debt securities classified as loans and
receivables amounting to £56,336 million (31 December 2015: £58,090 million), the majority of which
have been sold by subsidiary companies to bankruptcy remote structured entities. The structured entities are consolidated fully
and all of these loans are retained on the Group's balance sheet.
Covered bond programmes
At 30 June 2016, external parties held £31,873 million
(31 December 2015: £27,200 million) and the Group’s subsidiaries held £3,601 million (31 December
2015: £4,197 million) of total covered bonds in issue of £35,474 million (31 December 2015: £31,397 million).
The bonds are secured on certain loans and advances to customers that have been assigned to bankruptcy remote limited liability
partnerships. These loans are retained on the Group's balance sheet.
Cash deposits of £8,783 million (31
December 2015: £8,383 million) which support the debt securities issued by the structured entities, the term advances related
to covered bonds and other legal obligations are held by the Group.
LLOYDS BANKING GROUP PLC
|
12.
|
Post-retirement defined benefit schemes
|
The Group’s
post-retirement defined benefit scheme obligations are comprised as follows:
|
|
At
30 June
2016
|
|
At
31 Dec
2015
|
|
|
£m
|
|
£m
|
Defined benefit pension schemes:
|
|
|
|
|
- Fair value of scheme assets
|
|
43,752
|
|
37,639
|
- Present value of funded obligations
|
|
(43,117)
|
|
(36,903)
|
Net pension scheme asset
|
|
635
|
|
736
|
Other post-retirement schemes
|
|
(205)
|
|
(200)
|
Net retirement benefit asset
|
|
430
|
|
536
|
|
|
|
|
|
Recognised on the balance sheet as:
|
|
|
|
|
Retirement benefit assets
|
|
1,022
|
|
901
|
Retirement benefit obligations
|
|
(592)
|
|
(365)
|
Net retirement benefit asset
|
|
430
|
|
536
|
The movement in the Group’s net post-retirement
defined benefit scheme asset during the period was as follows:
|
|
£m
|
|
|
|
At 1 January 2016
|
|
536
|
Exchange and other adjustments
|
|
−
|
Income statement charge
|
|
(136)
|
Employer contributions
|
|
297
|
Remeasurement
|
|
(267)
|
At 30 June 2016
|
|
430
|
The charge to the income statement in respect
of pensions and other post-retirement benefit schemes is comprised as follows:
|
|
Half-year to
30 June
2016
|
|
Half-year to
30 June
2015
|
|
Half-year to
31 Dec
2015
|
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
Defined benefit pension schemes – current service cost
|
|
136
|
|
154
|
|
161
|
Defined contribution schemes
|
|
132
|
|
124
|
|
109
|
Total charge to the income statement
(note 3)
|
|
268
|
|
278
|
|
270
|
The principal assumptions used in the valuations
of the defined benefit pension scheme were as follows:
|
|
At
30 June
2016
|
|
At
31 Dec
2015
|
|
|
%
|
|
%
|
|
|
|
|
|
Discount rate
|
|
2.80
|
|
3.87
|
Rate of inflation:
|
|
|
|
|
Retail Prices Index
|
|
2.73
|
|
2.99
|
Consumer Price Index
|
|
1.73
|
|
1.99
|
Rate of salary increases
|
|
0.00
|
|
0.00
|
Weighted-average rate of increase for pensions in payment
|
|
2.44
|
|
2.58
|
LLOYDS BANKING GROUP PLC
|
13.
|
Provisions for liabilities and charges
|
Payment protection insurance
The Group has made provisions totalling
£16,025 million since 2010 against the costs of paying redress to customers in respect of past sales of PPI policies, including
the related administrative expenses.
No additional charge has been made in the
first half of 2016.
As at 30 June 2016, £1,950 million
or 12 per cent of the total provision remained unutilised relating predominantly to reactive complaints and associated administration
costs.
Total cash payments were £1,508 million
in the first half of 2016 which included remediation. The re-review of previously handled cases is now complete.
On 26 November 2015, the Financial Conduct
Authority (FCA) published a consultation paper (CP15/39: Rules and guidance on payment protection insurance complaints) proposing
(i) the introduction of a deadline by which consumers would need to make their PPI complaints including an FCA led communications
campaign, and (ii) rules and guidance about how firms should handle PPI complaints in light of the Supreme Court’s decision
in
Plevin v Paragon Personal Finance Limited
[2014] UKSC 61
(Plevin)
. The Group awaits the FCA’s final
decision and should the time bar be longer than the proposed two years or the FCA’s final decision be significantly delayed,
then the Group may need to reassess its provision.
In 2015, the Group increased the total expected
reactive complaints to 4.7 million (including complaints falling under the
Plevin
rules and guidance) in light of the FCA
proposals, equivalent to approximately 10,000 complaints per week through to a time bar of mid-2018. There is no change in the
total expected reactive complaints, with approximately 1.1 million still to be received.
The volume of complaints during the first
half of 2016 was marginally lower than the prior year, at around 8,500 per week; this is broadly in line with the Group’s
expectations.
Monthly complaint trends could vary significantly,
given they are likely to be impacted by a number of factors including seasonality, the potential impact of the FCA’s proposed
communication campaign as well as changes in the regulation of Claims Management Companies (CMCs).
The provision includes an estimate to cover
redress that would be payable under the FCA’s proposed new rules and guidance in light of
Plevin
.
Quarter
|
|
Average monthly
reactive
(including Plevin)
complaint volume*
|
|
Quarter-on-quarter
%
|
|
Year-on-year
%
|
Q1 2014
|
|
42,259
|
|
13%
|
|
(31%)
|
Q2 2014
|
|
39,426
|
|
(7%)
|
|
(27%)
|
Q3 2014
|
|
40,624
|
|
3%
|
|
(18%)
|
Q4 2014
|
|
35,910
|
|
(12%)
|
|
(4%)
|
Q1 2015
|
|
37,791
|
|
5%
|
|
(11%)
|
Q2 2015
|
|
36,957
|
|
(2%)
|
|
(6%)
|
Q3 2015
|
|
37,586
|
|
2%
|
|
(7%)
|
Q4 2015
|
|
33,998
|
|
(10%)
|
|
(5%)
|
Q1 2016
|
|
37,293
|
|
10%
|
|
(1%)
|
Q2 2016
|
|
37,222
|
|
(0%)
|
|
1%
|
*Net complaints – i.e. exclude claims
where no PPI policy was held
LLOYDS BANKING GROUP PLC
|
13.
|
Provisions for liabilities and charges
(continued)
|
Sensitivities
The Group estimates that it has sold approximately
16 million policies since 2000. These include policies that were not mis-sold. Since the commencement of the PPI redress programme
in 2011 the Group estimates that it has contacted, settled or provided for 49 per cent of the policies sold since 2000, covering
both customer-initiated complaints and actual and PBR mailings undertaken by the Group.
The total amount provided for PPI represents
the Group’s best estimate of the likely future cost. However a number of risks and uncertainties remain in particular with
respect to future volumes. The cost could differ materially from the Group’s estimates and the assumptions underpinning them,
and could result in a further provision being required. There is significant uncertainty around the impact of the proposed FCA
media campaign, CMC and customer activity and the deadline for PPI complaints may be later than originally expected.
Key metrics and sensitivities are highlighted
in the table below:
Sensitivities
1
|
|
To date
unless noted
|
|
Future
|
|
Sensitivity
|
|
|
|
|
|
|
|
Customer initiated complaints since origination (m)
2
|
|
3.6
|
|
1.1
|
|
0.1 = £180m
|
Average uphold rate per policy
3
|
|
74%
|
|
89%
|
|
1% = £35m
|
Average redress per upheld policy4
|
|
£1,700
|
|
£1,250
|
|
£100 = £145m
|
Administrative expenses (£m)
|
|
3,005
|
|
450
|
|
1 case = £400
|
|
|
|
|
|
|
|
1
|
All sensitivities exclude claims where no PPI policy was held.
|
2
|
Sensitivity includes complaint handling costs. Future volume includes complaints falling into the
Plevin
rules and guidance. As a result, the sensitivity per 100,000 complaints includes cases where the average redress would be lower than historical trends.
|
3
|
The percentage of complaints where the Group finds in favour of the customer excluding PBR. The 74 per cent uphold rate per policy is based on the six months to 30 June 2016. Future uphold rate and sensitivities are influenced by a proportion of complaints falling under the
Plevin
rules and guidance which would otherwise be defended. As a result, the future uphold rate is higher than historical trends.
|
4
|
The amount that is paid in redress in relation to a policy found to have been mis-sold, comprising, where applicable, the refund of premium, compound interest charged and interest at 8 per cent per annum. Actuals are based on the six months to 30 June 2016. Future average redress is influenced by expected compensation payments for complaints falling under the
Plevin
rules and guidance, which have lower average redress than non
Plevin
cases.
|
Other regulatory provisions
Customer claims in relation to insurance
branch business in Germany
The Group continues to receive claims in
Germany from customers relating to policies issued by Clerical Medical Investment Group Limited (subsequently renamed Scottish
Widows Limited). The Group recognised provisions totalling £545 million during the period to 31 December 2015.
The German industry-wide issue regarding
notification of contractual ‘cooling off’ periods has continued to lead to an increasing number of claims in 2016.
Accordingly a provision increase of £50 million was recognised in the half-year to 30 June 2016 giving a total provision
of £595 million; the remaining unutilised provision as at 30 June 2016 is £143 million (31 December
2015: £124 million).
The validity of the claims facing the Group
depends upon the facts and circumstances in respect of each claim. As a result the ultimate financial effect, which could be significantly
different from the current provision, will be known only once all relevant claims have been resolved.
LLOYDS BANKING GROUP PLC
|
13.
|
Provisions for liabilities and charges
(continued)
|
Interest rate hedging products
In June 2012, a number of banks, including
the Group, reached agreement with the FSA (now FCA) to carry out a review of sales made since 1 December 2001 of interest rate
hedging products (IRHP) to certain small and medium-sized businesses. As at 30 June 2016 the Group had identified 1,739 sales
of IRHPs to customers within scope of the agreement with the FCA which have opted in and are being reviewed and, where appropriate,
redressed. The Group agreed that it would provide redress to any in-scope customers where appropriate. The Group continues to review
the remaining cases within the scope of the agreement with the FCA and has met all of the regulator’s requirements to date.
By the end of 2015, the Group had charged
a total of £720 million in respect of redress and related administration costs for in-scope customers. An additional
£10 million has been provided in the half-year to 30 June 2016 raising the total amount provided to £730 million.
As at 30 June 2016, the Group has utilised £701 million (31 December 2015: £652 million), with £29 million
(31 December 2015: £68 million) of the provision remaining.
Arrears handling related activities
Following a review of the Group’s
secured and unsecured arrears handling activities, the Group has put in place a number of actions to further improve its handling
of customers in these areas. As a result, the Group has provided an additional £215 million in the first half of 2016
(bringing the total provision to £351 million), for the costs of identifying and rectifying certain arrears management
fees and activities. As at 30 June 2016, the unutilised provision was £346 million (31 December 2015: £136 million).
Other legal actions and regulatory matters
In the course of its business, the Group
is engaged in discussions with the PRA, FCA and other UK and overseas regulators and other governmental authorities on a range
of matters. The Group also receives complaints and claims from customers in connection with its past conduct and, where significant,
provisions are held against the costs expected to be incurred as a result of the conclusions reached. In the half-year to 30 June
2016, the Group charged an additional £119 million in respect of matters within the Retail division and £66 million
in respect of the Commercial Banking, Consumer Finance and Insurance divisions.
At 30 June 2016, provisions for other legal
actions and regulatory matters of £627 million (31 December 2015: £677 million) remained unutilised, principally
in relation to the sale of bancassurance products and packaged bank accounts and other Retail provisions.
LLOYDS BANKING GROUP PLC
|
14.
|
Contingent liabilities and commitments
|
Interchange fees
With respect to multi-lateral interchange
fees (MIFs), the Group is not directly involved in the on-going investigations and litigation (as described below) which involve
card schemes such as Visa and MasterCard. However, the Group is a member of Visa and MasterCard and other card schemes.
|
−
|
The European Commission continues to pursue certain competition investigations into MasterCard
and Visa probing, amongst other things, MIFs paid in respect of cards issued outside the EEA;
|
|
−
|
Litigation continues in the English Courts against both Visa and MasterCard. This litigation has
been brought by several retailers who are seeking damages for allegedly ‘overpaid’ MIFs. From publicly available information,
it is understood these damages claims are running to different timescales with respect to the litigation process. It is also possible
that new claims may be issued. Judgment in the Sainsbury’s v MasterCard case was handed down on 14 July 2016. Sainsbury’s
is entitled to recover approximately £69 million (plus interest) in damages from MasterCard. It is unclear whether MasterCard
will seek to appeal the judgment. However, the judgment considers a number of important matters that are likely to influence the
conduct of ongoing (and future) litigation in relation to both Visa and MasterCard.
|
|
−
|
Any ultimate impact on the Group of the above investigations and the litigation against Visa and
MasterCard remains uncertain at this time.
|
Visa Inc completed its acquisition of Visa
Europe on 21 June 2016. The Group’s share of the sale proceeds comprised cash consideration of approximately £330 million
(of which approximately £300 million was received on completion of the sale and £30 million is deferred for three
years) and preferred stock, which the Group measures at fair value. The preferred stock is convertible into Class A Common Stock
of Visa Inc or its equivalent upon the occurrence of certain events. As part of this transaction, the Group and certain other UK
banks also entered into a Loss Sharing Agreement (LSA) with Visa Inc, which clarifies the allocation of liabilities between the
parties should the litigation referred to above result in Visa Inc being liable for damages payable by Visa Europe. Visa Inc only
has recourse to the LSA once more than €1 billion of losses relating to UK domestic MIFs have arisen or once the total value
of the preferred stock issued by Visa to certain UK banks on completion has been reduced to zero. This would be effected by a downward
adjustment to the conversion ratio. In determining the fair value of the preferred stock, the Group includes adjustments for both
the stock’s illiquidity and the potential for changes in the conversion ratio. The maximum amount of liability to which the
Group may be subject under the LSA is capped at the cash consideration which was received by the Group at completion. Visa Inc
may also have recourse to a general indemnity, currently in place under Visa Europe’s Operating Regulations, for damages
claims concerning inter or intra-regional MIF setting activities.
LIBOR and other trading rates
In July 2014, the Group announced that it
had reached settlements totalling £217 million (at 30 June 2014 exchange rates) to resolve with UK and US federal authorities
legacy issues regarding the manipulation several years ago of Group companies’ submissions to the British Bankers’
Association (BBA) London Interbank Offered Rate (LIBOR) and Sterling Repo Rate. The Group continues to cooperate with various other
government and regulatory authorities, including the Serious Fraud Office, the Swiss Competition Commission, and a number of US
State Attorneys General, in conjunction with their investigations into submissions made by panel members to the bodies that set
LIBOR and various other interbank offered rates.
Certain Group companies, together with other
panel banks, have also been named as defendants in private lawsuits, including purported class action suits, in the US in connection
with their roles as panel banks contributing to the setting of US Dollar, Japanese Yen and Sterling LIBOR. The lawsuits, which
contain broadly similar allegations, allege violations of the Sherman Antitrust Act, the Racketeer Influenced and Corrupt Organizations
Act and the Commodity Exchange Act, as well as various state statutes and common law doctrines. Certain of the plaintiffs’
claims, including those asserted under US anti-trust laws, have been dismissed by the US Federal Court for Southern District of
New York (the District Court). The New York Federal Court of Appeal overturned the District Court’s dismissal of plaintiffs’
antitrust claims in May 2016. The anti-trust claims have now been revived. An application to dismiss these claims for lack of personal
jurisdiction will be made following the positive November 2015 decision which dismissed OTC and exchange-based plaintiffs’
claims against the Group for lack of personal jurisdiction.
LLOYDS BANKING GROUP PLC
|
14.
|
Contingent liabilities and commitments
(continued)
|
Certain Group companies are also named as
defendants in UK based claims raising LIBOR manipulation allegations in connection with interest rate hedging products.
It is currently not possible to predict
the scope and ultimate outcome on the Group of the various outstanding regulatory investigations not encompassed by the settlements,
any private lawsuits or any related challenges to the interpretation or validity of any of the Group’s contractual arrangements,
including their timing and scale.
UK shareholder litigation
In August 2014, the Group and a number of
former directors were named as defendants in a claim filed in the English High Court by a number of claimants who held shares in
Lloyds TSB Group plc (LTSB) prior to the acquisition of HBOS plc, alleging breaches of duties in relation to information provided
to shareholders in connection with the acquisition and the recapitalisation of LTSB. It is currently not possible to determine
the ultimate impact on the Group (if any), but the Group intends to defend the claim vigorously.
Financial Services Compensation Scheme
The Financial Services Compensation Scheme
(FSCS) is the UK’s independent statutory compensation fund of last resort for customers of authorised financial services
firms and pays compensation if a firm is unable or likely to be unable to pay claims against it. The FSCS is funded by levies on
the authorised financial services industry. Each deposit-taking institution contributes towards the FSCS levies in proportion to
their share of total protected deposits on 31 December of the year preceding the scheme year, which runs from 1 April to 31 March.
Following the default of a number of deposit
takers in 2008, the FSCS borrowed funds from HM Treasury to meet the compensation costs for customers of those firms. At 31 March
2016, the end of the latest FSCS scheme year for which it has published accounts, the principal balance outstanding on these loans
was £15,655 million (31 March 2015: £15,797 million). Although it is anticipated that the substantial majority
of this loan will be repaid from funds the FSCS receives from asset sales, surplus cash flow or other recoveries in relation to
the assets of the firms that defaulted, any shortfall will be funded by deposit-taking participants of the FSCS. The amount of
future levies payable by the Group depends on a number of factors including the amounts recovered by the FSCS from asset sales,
the Group’s participation in the deposit-taking market at 31 December, the level of protected deposits and the population
of deposit-taking participants.
Tax authorities
The Group provides for potential tax liabilities
that may arise on the basis of the amounts expected to be paid to tax authorities including open matters where Her Majesty's Revenue
and Customs (HMRC) adopt a different interpretation and application of tax law. The Group has an open matter in relation to a claim
for group relief of losses incurred in its former Irish banking subsidiary, which ceased trading on 31 December 2010. In 2013 HMRC
informed the Group that their interpretation of the UK rules, permitting the offset of such losses, denies the claim; if HMRC’s
position is found to be correct management estimate that this would result in an increase in current tax liabilities of approximately
£600 million and a reduction in the Group’s deferred tax asset of approximately £400 million. The Group
does not agree with HMRC's position and, having taken appropriate advice, does not consider that this is a case where additional
tax will ultimately fall due. There are a number of other open matters on which the Group is in discussion with HMRC; none of these
is expected to have a material impact on the financial position of the Group.
Residential mortgage repossessions
In August 2014, the Northern Ireland High
Court handed down judgment in favour of the borrowers in relation to three residential mortgage test cases, concerning certain
aspects of the Group’s practice with respect to the recalculation of contractual monthly instalments of customers in arrears.
The FCA is actively engaged with the industry in relation to these considerations. The Group will respond as appropriate to this
and any investigations, proceedings, or regulatory action that may in due course be instigated as a result of these issues.
LLOYDS BANKING GROUP PLC
|
14.
|
Contingent liabilities and commitments
(continued)
|
The Financial Conduct Authority’s
announcement on time-barring for PPI complaints and Plevin v Paragon Personal Finance Limited
On 26 November 2015 the FCA issued a Consultation
Paper on the introduction of a deadline by which consumers would need to make their PPI complaints or else lose their right to
have them assessed by firms or the Financial Ombudsman Service, and proposed rules and guidance concerning the handling of PPI
complaints in light of the Supreme Court’s decision in
Plevin v Paragon Personal Finance Limited
[2014] UKSC 61 (
Plevin
).
The next step is for the FCA to issue a policy statement. The Financial Ombudsman Service is also considering the implications
of
Plevin
for PPI complaints. The implications of potential time-barring and the
Plevin
decision in terms of the
scope of any court proceedings or regulatory action remain uncertain.
Mortgage arrears handling activities
On 26 May 2016, the Group was informed that
an enforcement team at the FCA had commenced an investigation in connection with the Group’s mortgage arrears handling activities.
This investigation is ongoing and it is currently not possible to make a reliable assessment of the liability, if any, that may
result from the investigation.
Other legal actions and regulatory
matters
In addition, during the ordinary course
of business the Group is subject to other complaints and threatened or actual legal proceedings (including class or group action
claims) brought by or on behalf of current or former employees, customers, investors or other third parties, as well as legal and
regulatory reviews, challenges, investigations and enforcement actions, both in the UK and overseas. All such material matters
are periodically reassessed, with the assistance of external professional advisers where appropriate, to determine the likelihood
of the Group incurring a liability. In those instances where it is concluded that it is more likely than not that a payment will
be made, a provision is established to management's best estimate of the amount required at the relevant balance sheet date. In
some cases it will not be possible to form a view, for example because the facts are unclear or because further time is needed
properly to assess the merits of the case, and no provisions are held in relation to such matters. However the Group does not currently
expect the final outcome of any such case to have a material adverse effect on its financial position, operations or cash flows.
LLOYDS BANKING GROUP PLC
|
14.
|
Contingent liabilities and commitments
(continued)
|
Contingent liabilities and commitments
arising from the banking business
|
|
At
30 June
2016
|
|
At
31 Dec
2015
|
|
|
£m
|
|
£m
|
Contingent liabilities
|
|
|
|
|
Acceptances and endorsements
|
|
130
|
|
52
|
Other:
|
|
|
|
|
Other items serving as direct credit substitutes
|
|
516
|
|
458
|
Performance bonds and other transaction-related contingencies
|
|
2,007
|
|
2,123
|
|
|
2,523
|
|
2,581
|
Total contingent liabilities
|
|
2,653
|
|
2,633
|
|
|
|
|
|
Commitments
|
|
|
|
|
Documentary credits and other short-term trade-related transactions
|
|
−
|
|
−
|
Forward asset purchases and forward deposits placed
|
|
772
|
|
421
|
|
|
|
|
|
Undrawn formal standby facilities, credit lines and other commitments to lend:
|
|
|
|
|
Less than 1 year original maturity:
|
|
|
|
|
Mortgage offers made
|
|
10,490
|
|
9,995
|
Other commitments
|
|
63,295
|
|
57,809
|
|
|
73,785
|
|
67,804
|
1 year or over original maturity
|
|
39,553
|
|
44,691
|
Total commitments
|
|
114,110
|
|
112,916
|
Of the amounts shown above in respect of
undrawn formal standby facilities, credit lines and other commitments to lend, £62,358 million (31 December 2015:
£63,086 million) was irrevocable.
LLOYDS BANKING GROUP PLC
|
15.
|
Fair values of financial assets and liabilities
|
The valuations of financial instruments
have been classified into three levels according to the quality and reliability of information used to determine those fair values.
Note 50 to the Group’s 2015 financial statements describes the definitions of the three levels in the fair value hierarchy.
Valuation control framework
Key elements of the valuation control framework,
which covers processes for all levels in the fair value hierarchy including level 3 portfolios, include model validation (incorporating
pre-trade and post-trade testing), product implementation review and independent price verification. Formal committees meet quarterly
to discuss and approve valuations in more judgemental areas.
Transfers into and out of level 3 portfolios
Transfers out of level 3 portfolios
arise when inputs that could have a significant impact on the instrument’s valuation become market observable; conversely,
transfers into the portfolios arise when consistent sources of data cease to be available.
Valuation methodology
For level 2 and level 3 portfolios, there
is no significant change to what was disclosed in the Group’s 2015 Annual Report and Accounts in respect of the valuation
methodology (techniques and inputs) applied to such portfolios.
The table below summarises the carrying
values of financial assets and liabilities presented on the Group’s balance sheet. The fair values presented in the table
are at a specific date and may be significantly different from the amounts which will actually be paid or received on the maturity
or settlement date.
|
|
30 June 2016
|
|
31 December 2015
|
|
|
Carrying
value
|
|
Fair
value
|
|
Carrying
value
|
|
Fair
value
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
Financial assets
|
|
|
|
|
|
|
|
|
Trading and other financial assets at fair value through profit or loss
|
|
146,177
|
|
146,177
|
|
140,536
|
|
140,536
|
Derivative financial instruments
|
|
47,323
|
|
47,323
|
|
29,467
|
|
29,467
|
Loans and receivables:
|
|
|
|
|
|
|
|
|
Loans and advances to banks
|
|
25,958
|
|
25,979
|
|
25,117
|
|
25,130
|
Loans and advances to customers
|
|
453,033
|
|
453,520
|
|
455,175
|
|
454,797
|
Debt securities
|
|
3,996
|
|
3,882
|
|
4,191
|
|
4,107
|
Available-for-sale financial instruments
|
|
35,860
|
|
35,860
|
|
33,032
|
|
33,032
|
Held-to-maturity investments
|
|
21,500
|
|
22,804
|
|
19,808
|
|
19,851
|
Financial liabilities
|
|
|
|
|
|
|
|
|
Deposits from banks
|
|
23,162
|
|
23,177
|
|
16,925
|
|
16,934
|
Customer deposits
|
|
423,279
|
|
423,824
|
|
418,326
|
|
418,512
|
Trading and other financial liabilities at fair value through profit or loss
|
|
52,094
|
|
52,094
|
|
51,863
|
|
51,863
|
Derivative financial instruments
|
|
42,376
|
|
42,376
|
|
26,301
|
|
26,301
|
Debt securities in issue
|
|
88,758
|
|
91,402
|
|
82,056
|
|
85,093
|
Liabilities arising from non-participating investment contracts
|
|
19,353
|
|
19,353
|
|
22,777
|
|
22,777
|
Subordinated liabilities
|
|
22,935
|
|
24,412
|
|
23,312
|
|
26,818
|
The carrying amount of the following financial
instruments is a reasonable approximation of fair value: cash and balances at central banks, items in the course of collection
from banks, items in course of transmission to banks and notes in circulation.
LLOYDS BANKING GROUP PLC
|
15.
|
Fair values of financial assets and liabilities
(continued)
|
The Group manages valuation adjustments
for its derivative exposures on a net basis; the Group determines their fair values on the basis of their net exposures. In all
other cases, fair values of financial assets and liabilities measured at fair value are determined on the basis of their gross
exposures.
The following tables provide an analysis
of the financial assets and liabilities of the Group that are carried at fair value in the Group’s consolidated balance sheet,
grouped into levels 1 to 3 based on the degree to which the fair value is observable.
Financial
assets
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
At 30 June 2016
|
|
|
|
|
|
|
|
|
Trading and other financial assets at fair value
through profit or loss:
|
|
|
|
|
|
|
|
|
Loans and advances to customers
|
|
−
|
|
33,625
|
|
−
|
|
33,625
|
Loans and advances to banks
|
|
−
|
|
2,387
|
|
−
|
|
2,387
|
Debt securities
|
|
22,796
|
|
23,055
|
|
2,263
|
|
48,114
|
Equity shares
|
|
60,445
|
|
34
|
|
1,508
|
|
61,987
|
Treasury and other bills
|
|
64
|
|
−
|
|
−
|
|
64
|
Total trading and other financial assets at fair value through profit or loss
|
|
83,305
|
|
59,101
|
|
3,771
|
|
146,177
|
Available-for-sale financial assets:
|
|
|
|
|
|
|
|
|
Debt securities
|
|
27,210
|
|
7,406
|
|
50
|
|
34,666
|
Equity shares
|
|
451
|
|
14
|
|
729
|
|
1,194
|
Total available-for-sale financial assets
|
|
27,661
|
|
7,420
|
|
779
|
|
35,860
|
Derivative financial instruments
|
|
63
|
|
45,715
|
|
1,545
|
|
47,323
|
Total financial assets carried at fair value
|
|
111,029
|
|
112,236
|
|
6,095
|
|
229,360
|
|
|
|
|
|
|
|
|
|
At 31 December 2015
|
|
|
|
|
|
|
|
|
Trading and other financial assets at fair value
through profit or loss:
|
|
|
|
|
|
|
|
|
Loans and advances to customers
|
|
−
|
|
30,109
|
|
−
|
|
30,109
|
Loans and advances to banks
|
|
−
|
|
3,065
|
|
−
|
|
3,065
|
Debt securities
|
|
20,919
|
|
22,504
|
|
3,389
|
|
46,812
|
Equity shares
|
|
58,457
|
|
292
|
|
1,727
|
|
60,476
|
Treasury and other bills
|
|
74
|
|
−
|
|
−
|
|
74
|
Total trading and other financial assets at fair value through profit or loss
|
|
79,450
|
|
55,970
|
|
5,116
|
|
140,536
|
Available-for-sale financial assets:
|
|
|
|
|
|
|
|
|
Debt securities
|
|
25,266
|
|
6,518
|
|
55
|
|
31,839
|
Equity shares
|
|
43
|
|
521
|
|
629
|
|
1,193
|
Total available-for-sale financial assets
|
|
25,309
|
|
7,039
|
|
684
|
|
33,032
|
Derivative financial instruments
|
|
43
|
|
27,955
|
|
1,469
|
|
29,467
|
Total financial assets carried at fair value
|
|
104,802
|
|
90,964
|
|
7,269
|
|
203,035
|
LLOYDS BANKING GROUP PLC
|
15.
|
Fair values of financial assets and liabilities
(continued)
|
Financial liabilities
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
At 30 June 2016
|
|
|
|
|
|
|
|
|
Trading and other financial liabilities at fair value
through profit or loss:
|
|
|
|
|
|
|
|
|
Liabilities held at fair value through profit or loss
|
|
−
|
|
9,443
|
|
2
|
|
9,445
|
Trading liabilities
|
|
2,687
|
|
39,962
|
|
−
|
|
42,649
|
Total trading and other financial liabilities at fair value through profit or loss
|
|
2,687
|
|
49,405
|
|
2
|
|
52,094
|
Derivative financial instruments
|
|
97
|
|
40,949
|
|
1,330
|
|
42,376
|
Total financial liabilities carried at fair value
|
|
2,784
|
|
90,354
|
|
1,332
|
|
94,470
|
|
|
|
|
|
|
|
|
|
At 31 December 2015
|
|
|
|
|
|
|
|
|
Trading and other financial liabilities at fair value
through profit or loss:
|
|
|
|
|
|
|
|
|
Liabilities held at fair value through profit or loss
|
|
−
|
|
7,878
|
|
1
|
|
7,879
|
Trading liabilities
|
|
4,153
|
|
39,831
|
|
−
|
|
43,984
|
Total trading and other financial liabilities at fair value through profit or loss
|
|
4,153
|
|
47,709
|
|
1
|
|
51,863
|
Derivative financial instruments
|
|
41
|
|
25,537
|
|
723
|
|
26,301
|
Total financial liabilities carried at fair value
|
|
4,194
|
|
73,246
|
|
724
|
|
78,164
|
Financial guarantees are recognised at fair
value on initial recognition and are classified as level 3; the balance is not material.
LLOYDS BANKING GROUP PLC
|
15.
|
Fair values of financial assets and liabilities
(continued)
|
Movements in level 3 portfolio
The tables below analyse movements in the
level 3 financial assets portfolio.
|
Trading
and other
financial
assets at fair
value through
profit or loss
|
|
Available-
for-sale
financial
assets
|
|
Derivative
assets
|
|
Total
financial
assets
carried at
fair value
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
At 1 January 2016
|
|
5,116
|
|
684
|
|
1,469
|
|
7,269
|
Exchange and other adjustments
|
|
6
|
|
1
|
|
61
|
|
68
|
Gains recognised in the income statement within other income
|
|
317
|
|
−
|
|
478
|
|
795
|
Gains recognised in other comprehensive income within the revaluation reserve in respect of available-for-sale financial assets
|
|
−
|
|
248
|
|
−
|
|
248
|
Purchases
|
|
335
|
|
204
|
|
6
|
|
545
|
Sales
|
|
(2,031)
|
|
(494)
|
|
(35)
|
|
(2,560)
|
Derecognised pursuant to tender offers and redemptions in respect of Enhanced Capital Notes
|
|
−
|
|
−
|
|
(476)
|
|
(476)
|
Transfers into the level 3 portfolio
|
|
187
|
|
136
|
|
45
|
|
368
|
Transfers out of the level 3 portfolio
|
|
(159)
|
|
−
|
|
(3)
|
|
(162)
|
At 30 June 2016
|
|
3,771
|
|
779
|
|
1,545
|
|
6,095
|
Gains recognised in the income statement within other income relating to those assets held at 30 June 2016
|
|
373
|
|
−
|
|
635
|
|
1,008
|
|
Trading
and other
financial
assets at fair
value through
profit or loss
|
|
Available-
for-sale
financial
assets
|
|
Derivative
assets
|
|
Total
financial
assets
carried at
fair value
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
At 1 January 2015
|
|
5,104
|
|
270
|
|
2,771
|
|
8,145
|
Exchange and other adjustments
|
|
(1)
|
|
−
|
|
(44)
|
|
(45)
|
Losses recognised in the income statement within other income
|
|
(61)
|
|
−
|
|
(534)
|
|
(595)
|
Gains recognised in other comprehensive income within the revaluation reserve in respect of available-for-sale financial assets
|
|
−
|
|
1
|
|
−
|
|
1
|
Purchases
|
|
785
|
|
38
|
|
182
|
|
1,005
|
Sales
|
|
(649)
|
|
(6)
|
|
(105)
|
|
(760)
|
Transfers into the level 3 portfolio
|
|
20
|
|
−
|
|
−
|
|
20
|
Transfers out of the level 3 portfolio
|
|
(48)
|
|
−
|
|
(37)
|
|
(85)
|
At 30 June 2015
|
|
5,150
|
|
303
|
|
2,233
|
|
7,686
|
Losses recognised in the income statement within other income relating to those assets held at
30 June 2015
|
|
(39)
|
|
−
|
|
(533)
|
|
(572)
|
|
|
|
|
|
|
|
|
|
LLOYDS BANKING GROUP PLC
|
15.
|
Fair values of financial assets and liabilities
(continued)
|
The tables below analyse movements in the
level 3 financial liabilities portfolio.
|
Trading and
other financial
liabilities
at fair value
through profit
or loss
|
|
Derivative
liabilities
|
|
Total
financial
liabilities
carried at
fair value
|
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
At 1 January 2016
|
|
1
|
|
723
|
|
724
|
Exchange and other adjustments
|
|
−
|
|
43
|
|
43
|
Losses recognised in the income statement within other income
|
|
1
|
|
606
|
|
607
|
Additions
|
|
−
|
|
10
|
|
10
|
Redemptions
|
|
−
|
|
(52)
|
|
(52)
|
Transfers into the level 3 portfolio
|
|
−
|
|
−
|
|
−
|
Transfers out of the level 3 portfolio
|
|
−
|
|
−
|
|
−
|
At 30 June 2016
|
|
2
|
|
1,330
|
|
1,332
|
Losses recognised in the income statement within other income relating to those liabilities held at 30 June 2016
|
|
1
|
|
592
|
|
593
|
|
|
|
|
|
|
|
Trading and
other financial
liabilities
at fair value
through profit
or loss
|
|
Derivative
liabilities
|
|
Total
financial
liabilities
carried at
fair value
|
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
At 1 January 2015
|
|
5
|
|
1,456
|
|
1,461
|
Exchange and other adjustments
|
|
−
|
|
(33)
|
|
(33)
|
Gains recognised in the income statement within other income
|
|
−
|
|
(100)
|
|
(100)
|
Additions
|
|
−
|
|
124
|
|
124
|
Redemptions
|
|
(4)
|
|
(102)
|
|
(106)
|
Transfers into the level 3 portfolio
|
|
−
|
|
−
|
|
−
|
Transfers out of the level 3 portfolio
|
|
−
|
|
(12)
|
|
(12)
|
At 30 June 2015
|
|
1
|
|
1,333
|
|
1,334
|
Gains recognised in the income statement within other income relating to those liabilities held at 30 June 2015
|
|
−
|
|
(100)
|
|
(100)
|
LLOYDS BANKING GROUP PLC
|
15.
|
Fair values of financial assets and liabilities
(continued)
|
The tables below set out the effects of
reasonably possible alternative assumptions for categories of level 3 financial assets and financial liabilities which have an
aggregated carrying value greater than £500 million.
|
|
|
|
|
|
At 30 June 2016
|
|
|
|
|
|
|
|
|
Effect of reasonably possible alternative assumptions
1
|
|
Valuation technique(s)
|
Significant unobservable inputs
|
|
Range
2
|
|
Carrying
value
|
|
Favourable
changes
|
Unfavourable
changes
|
|
|
|
|
|
|
£m
|
|
£m
|
|
£m
|
Trading and other financial assets at fair value through profit or loss:
|
|
|
|
|
|
Equity and venture capital investments
|
Market approach
|
Earnings multiple
|
|
0.3/16.6
|
|
2,280
|
|
73
|
|
(80)
|
Unlisted equities and debt securities, property partnerships in the life funds
|
Underlying
asset/net asset value (incl. property prices)
3
|
n/a
|
|
n/a
|
|
1,310
|
|
−
|
|
(21)
|
Other
|
|
|
|
|
|
181
|
|
|
|
|
|
|
|
|
|
|
3,771
|
|
|
|
|
Available for sale financial assets
|
|
|
|
|
779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial assets:
|
|
|
|
|
|
|
|
|
|
Interest rate
derivatives
|
Option pricing model
|
Interest rate
volatility
|
|
2%/115%
|
|
1,545
|
|
17
|
|
(24)
|
|
|
|
|
|
|
1,545
|
|
|
|
|
Financial assets carried at fair value
|
|
|
|
6,095
|
|
|
|
|
|
|
|
|
|
|
Trading and other financial liabilities at fair value through profit or loss
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial liabilities:
|
|
|
|
|
|
|
|
|
|
Interest rate derivatives
|
Option pricing model
|
Interest rate
volatility
|
2%/115%
|
|
1,330
|
|
|
|
|
|
|
|
|
|
1,330
|
|
|
|
|
Financial liabilities carried at fair value
|
|
|
|
1,332
|
|
|
|
|
|
|
1
|
Where the exposure to an unobservable input is managed on a net basis, only the net impact is shown in the table.
|
2
|
The range represents the highest and lowest inputs used in the level 3 valuations.
|
3
|
Underlying asset/net asset values represent fair value.
|
LLOYDS BANKING GROUP PLC
|
15.
|
Fair values of financial assets and liabilities
(continued)
|
|
|
|
|
|
|
At 31 December 2015
|
|
|
|
|
|
|
|
|
Effect of reasonably possible alternative assumptions
1
|
|
Valuation technique(s)
|
Significant unobservable inputs
|
|
Range
2
|
|
Carrying
value
|
|
Favourable
changes
|
Unfavourable
changes
|
|
|
|
|
|
|
£m
|
|
£m
|
|
£m
|
Trading and other financial assets at fair value through profit or loss:
|
|
|
|
|
|
Equity and venture capital investments
|
Market approach
|
Earnings multiple
|
|
1.0/17.5
|
|
2,279
|
|
72
|
|
(72)
|
Unlisted equities and debt securities, property partnerships in the life funds
|
Underlying
asset/net asset value (incl. property prices)
3
|
n/a
|
|
n/a
|
|
2,538
|
|
−
|
|
(48)
|
Other
|
|
|
|
|
|
299
|
|
|
|
|
|
|
|
|
|
|
5,116
|
|
|
|
|
Available for sale financial assets
|
|
|
|
|
684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial assets:
|
|
|
|
|
|
|
|
|
|
Embedded equity conversion feature
|
Lead manager or broker quote
|
Equity conversion feature spread
|
171/386
|
|
545
|
|
14
|
|
(14)
|
Interest rate
derivatives
|
Option pricing model
|
Interest rate
volatility
|
|
1%/63%
|
|
924
|
|
20
|
|
(19)
|
|
|
|
|
|
|
1,469
|
|
|
|
|
Financial assets carried at fair value
|
|
|
|
7,269
|
|
|
|
|
|
|
|
|
|
|
Trading and other financial liabilities at fair value through profit or loss
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial liabilities:
|
|
|
|
|
|
|
|
|
|
Interest rate derivatives
|
Option pricing model
|
Interest rate
volatility
|
1%/63%
|
|
723
|
|
|
|
|
|
|
|
|
|
723
|
|
|
|
|
Financial liabilities carried at fair value
|
|
|
|
724
|
|
|
|
|
|
|
1
|
Where the exposure to an unobservable input is managed on a net basis, only the net impact is shown in the table.
|
2
|
The range represents the highest and lowest inputs used in the level 3 valuations.
|
3
|
Underlying asset/net asset values represent fair value.
|
Unobservable
inputs
Significant unobservable inputs affecting
the valuation of debt securities, unlisted equity investments and derivatives are unchanged from those described in the Group’s
2015 financial statements.
Reasonably possible alternative assumptions
Valuation techniques applied to many of
the Group’s level 3 instruments often involve the use of two or more inputs whose relationship is interdependent. The calculation
of the effect of reasonably possible alternative assumptions included in the table above reflects such relationships and are unchanged
from those described in the Group’s 2015 financial statements.
LLOYDS BANKING GROUP PLC
|
16.
|
Credit quality of loans and advances
|
The table below sets out those loans that
are (i) neither past due nor impaired, (ii) past due but not impaired,
(iii) impaired, not requiring a provision and (iv) impaired requiring a provision.
The disclosures in the table below are produced
under the underlying basis used for the Group’s segmental reporting. The Group believes that, for reporting periods following
a significant acquisition such as the acquisition of HBOS in 2009, this underlying basis, which includes the allowance for loan
losses at the acquisition date on a gross basis, more fairly reflects the underlying provisioning status of the loans.
The analysis of lending between retail and
commercial has been prepared based upon the type of exposure and not the business segment in which the exposure is recorded. Included
within retail are exposures to personal customers and small businesses, whilst included within commercial are exposures to corporate
customers and other large institutions.
Loans and advances
|
|
Banks
|
|
Customers
|
|
Designated
at fair value
through
profit or
loss
|
Retail –
mortgages
|
|
Retail –
other
|
|
Commercial
|
|
Total
|
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 June 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Good quality
|
|
25,547
|
|
297,474
|
|
34,830
|
|
63,285
|
|
|
|
35,934
|
Satisfactory quality
|
|
305
|
|
975
|
|
4,384
|
|
30,716
|
|
|
|
78
|
Lower quality
|
|
6
|
|
38
|
|
443
|
|
6,002
|
|
|
|
−
|
Below standard, but not impaired
|
|
22
|
|
146
|
|
355
|
|
407
|
|
|
|
−
|
Neither past due nor impaired
1
|
|
25,880
|
|
298,633
|
|
40,012
|
|
100,410
|
|
439,055
|
|
36,012
|
0-30 days
|
|
78
|
|
3,839
|
|
313
|
|
228
|
|
4,380
|
|
−
|
30-60 days
|
|
−
|
|
1,638
|
|
79
|
|
56
|
|
1,773
|
|
−
|
60-90 days
|
|
−
|
|
1,056
|
|
7
|
|
43
|
|
1,106
|
|
−
|
90-180 days
|
|
−
|
|
1,286
|
|
11
|
|
43
|
|
1,340
|
|
−
|
Over 180 days
|
|
−
|
|
−
|
|
25
|
|
138
|
|
163
|
|
−
|
Past due but not impaired
2
|
|
78
|
|
7,819
|
|
435
|
|
508
|
|
8,762
|
|
−
|
Impaired
|
– no provision required
|
|
−
|
|
786
|
|
442
|
|
980
|
|
2,208
|
|
−
|
|
– provision held
|
|
−
|
|
3,468
|
|
977
|
|
2,660
|
|
7,105
|
|
−
|
Gross lending
|
|
25,958
|
|
310,706
|
|
41,866
|
|
104,558
|
|
457,130
|
|
36,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Good quality
|
|
24,670
|
|
301,403
|
|
33,589
|
|
63,453
|
|
|
|
33,156
|
Satisfactory quality
|
|
311
|
|
527
|
|
4,448
|
|
28,899
|
|
|
|
15
|
Lower quality
|
|
4
|
|
27
|
|
476
|
|
7,210
|
|
|
|
3
|
Below standard, but not impaired
|
|
21
|
|
106
|
|
373
|
|
439
|
|
|
|
−
|
Neither past due nor impaired
1
|
|
25,006
|
|
302,063
|
|
38,886
|
|
100,001
|
|
440,950
|
|
33,174
|
0-30 days
|
|
111
|
|
4,066
|
|
276
|
|
248
|
|
4,590
|
|
−
|
30-60 days
|
|
−
|
|
1,732
|
|
81
|
|
100
|
|
1,913
|
|
−
|
60-90 days
|
|
−
|
|
1,065
|
|
9
|
|
52
|
|
1,126
|
|
−
|
90-180 days
|
|
−
|
|
1,370
|
|
8
|
|
19
|
|
1,397
|
|
−
|
Over 180 days
|
|
−
|
|
−
|
|
19
|
|
44
|
|
63
|
|
−
|
Past due but not impaired
2
|
|
111
|
|
8,233
|
|
393
|
|
463
|
|
9,089
|
|
−
|
Impaired
|
– no provision required
|
|
−
|
|
732
|
|
690
|
|
1,092
|
|
2,514
|
|
−
|
|
– provision held
|
|
−
|
|
3,269
|
|
911
|
|
2,896
|
|
7,076
|
|
−
|
Gross lending
|
|
25,117
|
|
314,297
|
|
40,880
|
|
104,452
|
|
459,629
|
|
33,174
|
|
|
1
|
The definitions of good quality, satisfactory quality, lower quality and below standard, but not impaired applying to retail and commercial are not the same, reflecting the different characteristics of these exposures and the way they are managed internally, and consequently totals are not provided. Commercial lending has been classified using internal probability of default rating models mapped so that they are comparable to external credit ratings. Good quality lending comprises the lower assessed default probabilities, with other classifications reflecting progressively higher default risk. Classifications of retail lending incorporate expected recovery levels for mortgages, as well as probabilities of default assessed using internal rating models.
|
2
|
A financial asset is ‘past due’ if a counterparty has failed to make a payment when contractually due.
|
LLOYDS BANKING GROUP PLC
|
17.
|
Related party transactions
|
UK government
In January 2009, the UK government through
HM Treasury became a related party of the Company following its subscription for ordinary shares issued under a placing and open
offer. As at 30 June 2016, HM Treasury held an interest of 9.1 per cent in the Company’s ordinary share capital, with
its interest having fallen below 20 per cent on 11 May 2015. As a consequence of HM Treasury no longer being considered to
have a significant influence, it ceased to be a related party of the Company for IAS 24 purposes at that date.
In accordance with IAS 24, UK government-controlled
entities were related parties of the Group until 11 May 2015. The Group also regarded the Bank of England and entities controlled
by the UK government, including The Royal Bank of Scotland Group plc (RBS), NRAM plc and Bradford & Bingley plc, as related
parties.
The Group has participated in a number of
schemes operated by the UK government and central banks and made available to eligible banks and building societies.
National Loan Guarantee Scheme
The Group participates in the UK government’s
National Loan Guarantee Scheme, providing eligible UK businesses with discounted funding based on the Group’s existing lending
criteria. Eligible businesses who have taken up the funding benefit from a 1 per cent discount on their funding rate for a pre-agreed
period of time.
Funding for Lending
The Funding for Lending Scheme represents
a further source of cost effective secured term funding available to the Group. The initiative supports a broad range of UK based
customers, focussing primarily on providing small businesses with cheaper finance to invest and grow. In November 2015, the Bank
of England announced that the deadline for banks to draw down their borrowing allowance would be extended for a further two years
until 31 January 2018. At 30 June 2016, the Group had drawn down £33.1 billion (31 December 2015: £32.1 billion)
under the Scheme.
Enterprise Finance Guarantee Scheme
The Group participates in the Enterprise
Finance Guarantee Scheme which supports viable businesses with access to lending where they would otherwise be refused a loan due
to a lack of lending security. The Department for Business, Innovation and Skills provides the lender with a guarantee of up to
75 per cent of the capital of each loan subject to the eligibility of the customer. As at 30 June 2016, the Group had offered
6,647 loans to customers, worth over £568 million. Under the most recent renewal of the terms of the scheme, Lloyds
Bank plc and Bank of Scotland plc, on behalf of the Group, contracted with The Secretary of State for Business, Innovation and
Skills.
Help to Buy
The Help to Buy Scheme is a scheme promoted
by the UK government and is aimed to encourage participating lenders to make mortgage loans available to customers who require
higher loan-to-value mortgages. Halifax and Lloyds are currently participating in the Scheme whereby customers borrow between 90
per cent and 95 per cent of the purchase price. In return for the payment of a commercial fee, HM Treasury has agreed to provide
a guarantee to the lender to cover a proportion of any loss made by the lender. £3,383 million of outstanding loans
at 30 June 2016 (31 December 2015: £3,133 million) had been advanced under this scheme.
Business Growth Fund
The Group has invested £222 million
(31 December 2015: £176 million) in the Business Growth Fund (under which an agreement was entered into with RBS
amongst others) and, as at 30 June 2016, carries the investment at a fair value of £216 million (31 December 2015:
£170 million).
Big Society Capital
The Group has invested £38 million
(31 December 2015: £36 million) in the Big Society Capital Fund under which an agreement was entered into with RBS amongst
others and, as at 30 June 2016, carries the investment at a fair value of £37 million (31 December 2015: £33 million).
LLOYDS BANKING GROUP PLC
|
17.
|
Related party transactions
(continued)
|
Housing Growth Partnership
The Group has invested £11 million
(31 December 2015: £4 million) and has committed to invest up to a further £39 million into the Housing Growth
Partnership under which an agreement was entered into with the Homes and Communities Agency.
Central bank facilities
In the ordinary course of business, the
Group may from time to time access market-wide facilities provided by central banks.
Other government-related entities
Other than the transactions referred to
above, there were no significant transactions with the UK government and UK government-controlled entities (including UK government-controlled
banks) during the year that were not made in the ordinary course of business or that were unusual in their nature or conditions.
Other related party transactions
Other related party transactions for the
half-year to 30 June 2016 are similar in nature to those for the year ended 31 December 2015.
|
18.
|
Dividends on ordinary shares
|
An interim dividend for 2016 of 0.85 pence
per ordinary share (half-year to 30 June 2015: 0.75 pence) will be paid on 28 September 2016. The total amount of this
dividend is £607 million (half-year to 30 June 2015: £535 million).
Shareholders who have already joined the
dividend reinvestment plan will automatically receive shares instead of the cash dividend. Key dates for the payment of the dividends
Shares quoted ex-dividend
|
11 August 2016
|
|
|
Record date
|
12 August 2016
|
|
|
Final date for joining or leaving the dividend reinvestment plan
|
2 September 2016
|
|
|
Interim dividend paid
|
28 September 2016
|
On 17 May 2016, a final dividend in respect
of 2015 of 1.5 pence per share, totalling £1,070 million, and a special dividend of 0.5 pence per share, totalling
£357 million, were paid to shareholders.
LLOYDS BANKING GROUP PLC
|
19.
|
Future accounting developments
|
The following pronouncements are not applicable
for the year ending 31 December 2016 and have not been applied in preparing these financial statements. Save as disclosed below,
the full impact of these accounting changes is being assessed by the Group. As at 27 July 2016, these pronouncements are awaiting
EU endorsement.
IFRS 9
Financial Instruments
IFRS 9 replaces IAS 39 Financial Instruments:
Recognition and Measurement
Classification and Measurement
IFRS 9 requires financial assets to be classified
into one of three measurement categories, fair value through profit or loss, fair value through other comprehensive income and
amortised cost, on the basis of the objectives of the entity’s business model for managing its financial assets and the contractual
cash flow characteristics of the instruments.
The Group has undertaken an assessment to
determine the potential impact of changes in classification and measurement of financial assets. The adoption of IFRS 9 is unlikely
to result in a significant change to current asset measurement bases, however, the final impact will be dependent on the facts
and circumstances that exist on 1 January 2018.
IFRS 9 retains most of the existing requirements
for financial liabilities. However, for financial liabilities designated at fair value through profit or loss, gains or losses
attributable to changes in own credit risk may be presented in other comprehensive income. This change is expected to be immaterial
to the Group.
Impairment
IFRS 9 also replaces the existing ‘incurred
loss’ impairment approach with an expected credit loss approach, resulting in earlier recognition of credit losses. The IFRS
9 impairment model has three stages. Entities are required to recognise a 12 month expected loss allowance on initial recognition
(stage 1) and a lifetime expected loss allowance when there has been a significant increase in credit risk (stage 2). The assessment
of whether a significant increase in credit risk has occurred is a key aspect of the IFRS 9 methodology and involves quantitative
and qualitative measures and therefore requires considerable management judgement. Stage 3 requires objective evidence that an
asset is credit-impaired, which is similar to the guidance on incurred losses in IAS 39. Loan commitments and financial guarantees
not measured at fair value through profit or loss are also in scope.
IFRS 9 requires the use of more forward
looking information including reasonable and supportable forecasts of future economic conditions. The need to consider multiple
economic scenarios and how they could impact the loss allowance is a subjective feature of the IFRS 9 impairment model. The final
methodology for multiple economic scenarios is still under development, however, economic scenarios are likely to consider the
Group’s five year operating plan and stress testing scenarios. Appropriate governance and oversight will be established around
the process. It is important that the linkage between expected credit losses, economic scenarios, and stress testing is understood
and transparent.
These changes may result in a material increase
in the Group’s balance sheet provisions for credit losses and may therefore negatively impact the Group's regulatory capital
position. The extent of any increase in provisions will depend upon, amongst other things, the composition of the Group’s
lending portfolios and forecast economic conditions at the date of implementation. The requirement to transfer assets between stages
and to incorporate forward looking data into the expected credit loss calculation, including multiple economic scenarios, is likely
to result in impairment charges being more volatile when compared to the current IAS 39 impairment model.
Hedge Accounting
The hedge accounting requirements of IFRS
9 are more closely aligned with risk management practices and follow a more principle-based approach than IAS 39, however, there
is an option to maintain the existing IAS 39 hedge accounting rules until the IASB completes its project on macro hedging. The
Group currently expects to continue applying IAS 39 hedge accounting in accordance with this accounting policy choice.
LLOYDS BANKING GROUP PLC
|
19.
|
Future accounting developments
(continued)
|
Transition
IFRS 9 is effective for annual periods beginning
on or after 1 January 2018 with no requirement to restate prior periods. If comparative periods are not restated, at the date of
initial application, any difference between the carrying amount of financial assets and the change in loss allowance shall be recognised
in opening retained earnings.
IFRS 9 implementation programme
The Group has an established IFRS 9 programme
to ensure a high quality implementation in compliance with the standard and regulatory guidance. The programme involves Finance
and Risk functions across the Group with Divisional and Group steering committees providing oversight. The key responsibilities
of the programme include defining IFRS 9 methodology and accounting policy, development of expected loss models, identifying data
and system requirements, and establishing an appropriate operating model and governance framework.
Impairment methodologies have been documented
and, in addition to IFRS 9, assessed against the expectations of the Basel Committee on Banking Supervision paper ‘Guidance
on Credit Risk and Accounting for Expected Credit Losses’, and the Global Public Policy Committee paper ‘The implementation
of IFRS 9 impairment requirements by banks’.
The build phase of the programme is underway
for the core credit risk models. Systems, processes and model testing will take place in 2017 to embed the changes, enhance business
readiness and help improve the understanding of the new impairment models. The programme is progressing in line with its delivery
plans.
For all material portfolios, IFRS 9 expected
credit loss calculation will leverage the systems, data and models used to calculate regulatory expected credit losses. IFRS 9
expected credit loss models will use the three key input parameters for the computation of expected loss: probability of default;
loss given default; and exposure at default.
However, given the conservatism inherent
in the regulatory expected losses calculation, a number of adjustments to these components must be made to ensure compliance with
IFRS 9 requirements.
IFRS 9 models differ from the regulatory
models in a number of conceptual ways, for example stage 2 assets under IFRS 9, for which there has been a significant increase
in credit risk, carry a lifetime expected loss amount; whereas regulatory models generate 12 month expected losses for non-defaulted
loans, even though they may have experienced a significant increase in credit risk. In addition, different assets are in scope
for each reporting base. As a result, the size of the regulatory expected losses should not be taken as a proxy for the size of
the loss allowance under IFRS 9.
IFRS 15
Revenue from Contracts with Customers
IFRS 15 replaces IAS 18 Revenue and IAS
11 Construction Contracts. Financial instruments, leases and insurance contracts are out of scope and so this standard is not currently
expected to have a significant impact on the Group’s profitability.
IFRS 15 is effective for annual periods
beginning on or after 1 January 2018.
IFRS 16
Leases
On 13 January 2016 the IASB issued IFRS
16 to replace IAS 17 Leases. IFRS 16 requires lessees to recognise a right of use asset and a liability for future payments arising
from a lease contract. Lessor accounting requirements remain aligned to the current approach under IAS 17.
IFRS 16 is effective for annual periods
beginning on or after 1 January 2019.
LLOYDS BANKING GROUP PLC
|
19.
|
Future accounting developments
(continued)
|
Amendments to IAS 7 Statement of Cash Flows,
IAS 12 Income Taxes and IFRS 2 Share-based Payment
During 2016, the IASB has issued amendments
to IAS 7
Statement of Cash Flows
which require additional disclosure about an entity’s financing activities, IAS 12
Income Taxes
which clarify when a deferred tax asset should be recognised for unrealised losses and IFRS 2 Share-based Payment
which provide guidance on accounting for cash and certain
net-settled schemes. These revised requirements, which are effective for annual periods beginning on or after 1 January 2017 for
IAS 7 and IAS 12 and 1 January 2018 for IFRS 2, are not expected to have a significant impact on the Group.
|
20.
|
Condensed consolidating financial information
|
Lloyds Bank plc (Lloyds Bank) is a wholly
owned subsidiary of the Company and intends to offer and sell certain securities in the US from time to time utilising a registration
statement on Form F-3 filed with the SEC by the Company. This will be accompanied by a full and unconditional guarantee by the
Company.
Lloyds Bank intends to utilise an exception
provided in Rule 3-10 of Regulation S-X which allows it to not file its financial statements with the SEC. In accordance with the
requirements to qualify for the exception, presented below is condensed consolidating financial information for:
|
·
|
The Company on a stand-alone basis as guarantor;
|
|
·
|
Lloyds Bank on a stand-alone basis as issuer;
|
|
·
|
Non-guarantor subsidiaries of the Company and non-guarantor subsidiaries of Lloyds Bank on a combined
basis (Subsidiaries);
|
|
·
|
Consolidation adjustments; and
|
|
·
|
Lloyds Banking Group’s consolidated amounts (the Group).
|
Under IAS 27, the Company and Lloyds Bank
account for investments in their subsidiary undertakings at cost less impairment. Rule 3-10 of Regulation S-X requires a company
to account for its investments in subsidiary undertakings using the equity method, which would increase/(decrease) the result for
the period of the Company and Lloyds Bank in the information below by £(111) million and £(1,309) million,
respectively, for the half-year to 30 June 2016; £641 million and £448 million for the half-year to
30 June 2015; and £(678) million and £(10,696) million for the half-year to 31 December 2015. The
net assets of the Company and Lloyds Bank in the information below would also be increased (decreased) by £5,926 million
and £(8,106) million, respectively, at 30 June 2016; and £4,143 million and £(7,366) million
at 31 December 2015.
LLOYDS BANKING GROUP PLC
|
20.
|
Condensed consolidating financial information
(continued)
|
Income statements
For the half-year ended 30 June 2016
|
|
Company
|
|
Lloyds
Bank
|
Subsidiaries
|
Consolidation
adjustments
|
|
Group
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Net interest (expense) income
|
|
112
|
|
2,274
|
|
2,960
|
|
(121)
|
|
5,225
|
Other income
|
|
2,095
|
|
3,091
|
|
13,707
|
|
(5,688)
|
|
13,205
|
Total income
|
|
2,207
|
|
5,365
|
|
16,667
|
|
(5,809)
|
|
18,430
|
Insurance claims
|
|
−
|
|
−
|
|
(10,110)
|
|
−
|
|
(10,110)
|
Total income, net of insurance claims
|
2,207
|
|
5,365
|
|
6,557
|
|
(5,809)
|
|
8,320
|
Operating expenses
|
|
(10)
|
|
(3,113)
|
|
(3,035)
|
|
654
|
|
(5,504)
|
Trading surplus
|
|
2,197
|
|
2,252
|
|
3,522
|
|
(5,155)
|
|
2,816
|
Impairment
|
|
−
|
|
(364)
|
|
(25)
|
|
27
|
|
(362)
|
Profit (loss) before tax
|
|
2,197
|
|
1,888
|
|
3,497
|
|
(5,128)
|
|
2,454
|
Taxation
|
|
(292)
|
|
108
|
|
(636)
|
|
223
|
|
(597)
|
Profit (loss) for the period
|
|
1,905
|
|
1,996
|
|
2,861
|
|
(4,905)
|
|
1,857
|
|
|
|
|
|
|
|
|
|
For the half-year ended 30 June 2015
|
|
Company
|
|
Lloyds Bank
|
Subsidiaries
|
Consolidation
adjustments
|
|
Group
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Net interest (expense) income
|
|
142
|
|
2,025
|
|
3,497
|
|
(172)
|
|
5,492
|
Other income
|
|
63
|
|
2,460
|
|
5,602
|
|
(1,812)
|
|
6,313
|
Total income
|
|
205
|
|
4,485
|
|
9,099
|
|
(1,984)
|
|
11,805
|
Insurance claims
|
|
−
|
|
−
|
|
(2,998)
|
|
−
|
|
(2,998)
|
Total income, net of insurance claims
|
205
|
|
4,485
|
|
6,101
|
|
(1,984)
|
|
8,807
|
Operating expenses
|
|
(12)
|
|
(3,897)
|
|
(3,438)
|
|
(106)
|
|
(7,453)
|
Trading surplus
|
|
193
|
|
588
|
|
2,663
|
|
(2,090)
|
|
1,354
|
Impairment
|
|
−
|
|
(65)
|
|
(133)
|
|
37
|
|
(161)
|
(Loss) profit before tax
|
|
193
|
|
523
|
|
2,530
|
|
(2,053)
|
|
1,193
|
Taxation
|
|
40
|
|
64
|
|
(514)
|
|
142
|
|
(268)
|
(Loss) profit for the period
|
|
233
|
|
587
|
|
2,016
|
|
(1,911)
|
|
925
|
|
|
|
|
|
|
|
|
|
For the half-year ended
31 December 2015
|
|
Company
|
|
Lloyds Bank
|
Subsidiaries
|
Consolidation
adjustments
|
|
Group
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Net interest (expense) income
|
|
134
|
|
2,145
|
|
3,632
|
|
(85)
|
|
5,826
|
Other income
|
|
920
|
|
13,597
|
|
4,433
|
|
(13,431)
|
|
5,519
|
Total income
|
|
1,054
|
|
15,742
|
|
8,065
|
|
(13,516)
|
|
11,345
|
Insurance claims
|
|
−
|
|
−
|
|
(2,731)
|
|
−
|
|
(2,731)
|
Total income, net of insurance claims
|
1,054
|
|
15,742
|
|
5,334
|
|
(13,516)
|
|
8,614
|
Operating expenses
|
|
(278)
|
|
(5,097)
|
|
(3,510)
|
|
951
|
|
(7,934)
|
Trading surplus
|
|
776
|
|
10,645
|
|
1,824
|
|
(12,565)
|
|
680
|
Impairment
|
|
−
|
|
(200)
|
|
(89)
|
|
60
|
|
(229)
|
Profit (loss) before tax
|
|
776
|
|
10,445
|
|
1,735
|
|
(12,505)
|
|
451
|
Taxation
|
|
(112)
|
|
(121)
|
|
(289)
|
|
102
|
|
(420)
|
Profit (loss) for the period
|
|
664
|
|
10,324
|
|
1,446
|
|
(12,403)
|
|
31
|
LLOYDS BANKING GROUP PLC
|
20.
|
Condensed consolidating financial information
(continued)
|
Consolidated statement of comprehensive
income
Half-year ended 30 June 2016
|
|
Company
|
|
Lloyds Bank
|
Subsidiaries
|
Consolidation
adjustments
|
|
Group
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Profit (loss) for the period
|
|
1,905
|
|
1,996
|
|
2,861
|
|
(4,905)
|
|
1,857
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
Items that will not subsequently be reclassified to profit or loss:
|
|
|
|
|
|
|
|
|
|
|
Post-retirement defined benefit scheme remeasurements (note 19):
|
|
|
|
|
|
|
|
|
|
|
Remeasurements before taxation
|
|
−
|
|
134
|
|
(401)
|
|
−
|
|
(267)
|
Taxation
|
|
−
|
|
(36)
|
|
76
|
|
−
|
|
40
|
|
|
−
|
|
98
|
|
(325)
|
|
−
|
|
(227)
|
Items that may subsequently be reclassified to profit or loss:
|
|
|
|
|
|
|
|
|
|
|
Movements in revaluation reserve in respect of available-for-sale financial assets:
|
|
|
|
|
|
|
|
|
|
|
Change in fair value
|
|
−
|
|
104
|
|
77
|
|
3
|
|
184
|
Income statement transfers in respect of disposals
|
|
−
|
|
(525)
|
|
(49)
|
|
−
|
|
(574)
|
Income statement transfers in respect of impairment
|
|
−
|
|
145
|
|
1
|
|
−
|
|
146
|
Taxation
|
|
−
|
|
173
|
|
(21)
|
|
−
|
|
152
|
|
|
−
|
|
(103)
|
|
8
|
|
3
|
|
(92)
|
Movements in cash flow hedging reserve:
|
|
|
|
|
|
|
|
|
|
|
Effective portion of changes in fair value
|
|
−
|
|
1,617
|
|
303
|
|
1,120
|
|
3,040
|
Net income statement transfers
|
|
−
|
|
(118)
|
|
(166)
|
|
78
|
|
(206)
|
Taxation
|
|
−
|
|
(405)
|
|
(37)
|
|
(310)
|
|
(752)
|
|
|
−
|
|
1,094
|
|
100
|
|
888
|
|
2,082
|
Currency translation differences (tax: nil)
|
|
−
|
|
13
|
|
(41)
|
|
8
|
|
(20)
|
Other comprehensive income for the period, net of tax
|
|
−
|
|
1,102
|
|
(258)
|
|
899
|
|
1,743
|
Total comprehensive income for the period
|
|
1,905
|
|
3,098
|
|
2,603
|
|
(4,006)
|
|
3,600
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income attributable to ordinary shareholders
|
|
1,701
|
|
3,097
|
|
2,489
|
|
(3,954)
|
|
3,333
|
Total comprehensive income attributable to other equity holders
|
|
204
|
|
1
|
|
51
|
|
(52)
|
|
204
|
Total comprehensive income attributable to equity holders
|
|
1,905
|
|
3,098
|
|
2,540
|
|
(4,006)
|
|
3,537
|
Total comprehensive income attributable to non-controlling interests
|
|
−
|
|
−
|
|
63
|
|
−
|
|
63
|
Total comprehensive income for the period
|
|
1,905
|
|
3,098
|
|
2,603
|
|
(4,006)
|
|
3,600
|
LLOYDS BANKING GROUP PLC
|
20.
|
Condensed consolidating financial information
(continued)
|
Consolidated statement of comprehensive
income
(continued)
Half-year ended 30 June 2015
|
|
Company
|
|
Lloyds Bank
|
|
Subsidiaries
|
Consolidation
adjustments
|
|
Group
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Profit (loss) for the period
|
|
233
|
|
587
|
|
2,016
|
|
(1,911)
|
|
925
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
Items that will not subsequently be reclassified to profit or loss:
|
|
|
|
|
|
|
|
|
|
|
Post-retirement defined benefit scheme remeasurements (note 19):
|
|
|
|
|
|
|
|
|
|
|
Remeasurements before taxation
|
|
−
|
|
(111)
|
|
(191)
|
|
−
|
|
(302)
|
Taxation
|
|
−
|
|
22
|
|
38
|
|
−
|
|
60
|
|
|
−
|
|
(89)
|
|
(153)
|
|
−
|
|
(242)
|
Items that may subsequently be reclassified to profit or loss:
|
|
|
|
|
|
|
|
|
|
|
Movements in revaluation reserve in respect of available-for-sale financial assets:
|
|
|
|
|
|
|
|
|
|
|
Change in fair value
|
|
−
|
|
(7)
|
|
(21)
|
|
12
|
|
(16)
|
Income statement transfers in respect of disposals
|
|
−
|
|
(15)
|
|
(34)
|
|
−
|
|
(49)
|
Income statement transfers in respect of impairment
|
|
−
|
|
−
|
|
9
|
|
(9)
|
|
−
|
Taxation
|
|
−
|
|
(2)
|
|
2
|
|
(2)
|
|
(2)
|
|
|
−
|
|
(24)
|
|
(44)
|
|
1
|
|
(67)
|
Movements in cash flow hedging reserve:
|
|
|
|
|
|
|
|
|
|
|
Effective portion of changes in fair value
|
|
−
|
|
(308)
|
|
156
|
|
(252)
|
|
(404)
|
Net income statement transfers
|
|
−
|
|
(239)
|
|
(322)
|
|
80
|
|
(481)
|
Taxation
|
|
−
|
|
109
|
|
33
|
|
33
|
|
175
|
|
|
−
|
|
(438)
|
|
(133)
|
|
(139)
|
|
(710)
|
Currency translation differences
(tax: nil)
|
|
−
|
|
(12)
|
|
44
|
|
(5)
|
|
27
|
Other comprehensive income for the period, net of tax
|
|
−
|
|
(563)
|
|
(286)
|
|
(143)
|
|
(992)
|
Total comprehensive income for the period
|
|
233
|
|
24
|
|
1,730
|
|
(2,054)
|
|
(67)
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income attributable to ordinary shareholders
|
|
36
|
|
24
|
|
1,679
|
|
(2,054)
|
|
(315)
|
Total comprehensive income attributable to other equity holders
|
|
197
|
|
−
|
|
−
|
|
−
|
|
197
|
Total comprehensive income attributable to equity holders
|
|
233
|
|
24
|
|
1,679
|
|
(2,054)
|
|
(118)
|
Total comprehensive income attributable to non-controlling interests
|
|
−
|
|
−
|
|
51
|
|
−
|
|
51
|
Total comprehensive income for the period
|
|
233
|
|
24
|
|
1,730
|
|
(2,054)
|
|
(67)
|
LLOYDS BANKING GROUP PLC
|
20.
|
Condensed consolidating financial information
(continued)
|
Consolidated statement of comprehensive
income
(continued)
Half-year ended 31 December 2015
|
|
Company
|
|
Lloyds Bank
|
|
Subsidiaries
|
Consolidation
adjustments
|
|
Group
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Profit (loss) for the period
|
|
664
|
|
10,324
|
|
1,446
|
|
(12,403)
|
|
31
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
Items that will not subsequently be reclassified to profit or loss:
|
|
|
|
|
|
|
|
|
|
|
Post-retirement defined benefit scheme remeasurements (note 19):
|
|
|
|
|
|
|
|
|
|
|
Remeasurements before taxation
|
|
−
|
|
142
|
|
(114)
|
|
−
|
|
28
|
Taxation
|
|
−
|
|
(23)
|
|
22
|
|
−
|
|
(1)
|
|
|
−
|
|
119
|
|
(92)
|
|
−
|
|
27
|
Items that may subsequently be reclassified to profit or loss:
|
|
|
|
|
|
|
|
|
|
|
Movements in revaluation reserve in respect of available-for-sale financial assets:
|
|
|
|
|
|
|
|
|
|
|
Change in fair value
|
|
−
|
|
(293)
|
|
(6)
|
|
(3)
|
|
(302)
|
Income statement transfers in respect of disposals
|
|
−
|
|
1
|
|
(3)
|
|
−
|
|
(2)
|
Income statement transfers in respect of impairment
|
|
−
|
|
1
|
|
29
|
|
(26)
|
|
4
|
Taxation
|
|
−
|
|
(15)
|
|
−
|
|
11
|
|
(4)
|
|
|
−
|
|
(306)
|
|
20
|
|
(18)
|
|
(304)
|
Movements in cash flow hedging reserve:
|
|
|
|
|
|
|
|
|
|
|
Effective net portion of changes in fair value
|
|
−
|
|
602
|
|
27
|
|
312
|
|
941
|
Net income statement transfers
|
|
−
|
|
(182)
|
|
(235)
|
|
(58)
|
|
(475)
|
Taxation
|
|
−
|
|
(185)
|
|
26
|
|
(9)
|
|
(168)
|
|
|
−
|
|
235
|
|
(182)
|
|
245
|
|
298
|
Currency translation differences (tax: nil)
|
|
−
|
|
(1)
|
|
8
|
|
(76)
|
|
(69)
|
Other comprehensive income for the period, net of tax
|
|
−
|
|
47
|
|
(246)
|
|
151
|
|
(48)
|
Total comprehensive income for the period
|
|
664
|
|
10,371
|
|
1,200
|
|
(12,252)
|
|
(17)
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income attributable to ordinary shareholders
|
|
467
|
|
10,371
|
|
1,155
|
|
(12,252)
|
|
(259)
|
Total comprehensive income attributable to other equity holders
|
|
197
|
|
−
|
|
−
|
|
−
|
|
197
|
Total comprehensive income attributable to equity holders
|
|
664
|
|
10,371
|
|
1,155
|
|
(12,252)
|
|
(62)
|
Total comprehensive income attributable to non-controlling interests
|
|
−
|
|
−
|
|
45
|
|
−
|
|
45
|
Total comprehensive income for the period
|
|
664
|
|
10,371
|
|
1,200
|
|
(12,252)
|
|
(17)
|
LLOYDS BANKING GROUP PLC
|
20.
|
Condensed consolidating financial information
(continued)
|
Balance sheets
At 30 June 2016
|
|
Company
|
|
Lloyds
Bank
|
Subsidiaries
|
Consolidation
adjustments
|
|
Group
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Cash and balances at central banks
|
|
–
|
|
71,005
|
|
2,394
|
|
–
|
|
73,399
|
Items in course of collection from banks
|
|
–
|
|
634
|
|
270
|
|
–
|
|
904
|
Trading and other financial assets at fair value through profit or loss
|
|
–
|
|
51,268
|
|
106,383
|
|
(11,474)
|
|
146,177
|
Derivative financial instruments
|
|
484
|
|
49,667
|
|
24,963
|
|
(27,791)
|
|
47,323
|
Loans and receivables:
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to banks
|
|
–
|
|
3,277
|
|
22,656
|
|
25
|
|
25,958
|
Loans and advances to customers
|
|
–
|
|
156,075
|
|
290,725
|
|
6,233
|
|
453,033
|
Debt securities
|
|
–
|
|
2,719
|
|
1,204
|
|
73
|
|
3,996
|
Due from fellow Lloyds Banking Group undertakings
|
|
3,969
|
|
130,946
|
|
91,480
|
|
(226,395)
|
|
−
|
|
|
3,969
|
|
293,017
|
|
406,065
|
|
(220,064)
|
|
482,987
|
Available-for-sale financial assets
|
|
–
|
|
35,990
|
|
3,958
|
|
(4,088)
|
|
35,860
|
Held-to-maturity investments
|
|
–
|
|
21,500
|
|
–
|
|
–
|
|
21,500
|
Goodwill
|
|
–
|
|
–
|
|
2,343
|
|
(327)
|
|
2,016
|
Value of in-force business
|
|
–
|
|
–
|
|
4,450
|
|
299
|
|
4,749
|
Other intangible assets
|
|
–
|
|
763
|
|
311
|
|
645
|
|
1,719
|
Property, plant and equipment
|
|
–
|
|
3,657
|
|
9,213
|
|
70
|
|
12,940
|
Current tax recoverable
|
|
150
|
|
350
|
|
30
|
|
(497)
|
|
33
|
Deferred tax assets
|
|
22
|
|
3,198
|
|
1,825
|
|
(1,662)
|
|
3,383
|
Retirement benefit assets
|
|
–
|
|
666
|
|
352
|
|
4
|
|
1,022
|
Investment in subsidiary undertakings
|
|
43,740
|
|
39,241
|
|
−
|
|
(82,981)
|
|
−
|
Other assets
|
|
1,039
|
|
2,578
|
|
11,597
|
|
(994)
|
|
14,220
|
Total assets
|
|
49,404
|
|
573,534
|
|
574,154
|
|
(348,860)
|
|
848,232
|
LLOYDS BANKING GROUP PLC
|
20.
|
Condensed consolidating financial information
(continued)
|
Balance sheets
(continued)
At 30 June 2016
|
|
Company
|
|
Lloyds
Bank
|
Subsidiaries
|
Consolidation
adjustments
|
|
Group
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Equity and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
Deposits from banks
|
|
–
|
|
19,012
|
|
4,152
|
|
(2)
|
|
23,162
|
Customer deposits
|
|
−
|
|
215,141
|
|
208,289
|
|
(151)
|
|
423,279
|
Due to fellow Lloyds Banking Group undertakings
|
1,912
|
|
72,473
|
|
128,332
|
|
(202,717)
|
|
−
|
Items in course of transmission to banks
|
–
|
|
368
|
|
412
|
|
−
|
|
780
|
Trading and other financial liabilities at fair value through profit or loss
|
|
–
|
|
54,848
|
|
2,477
|
|
(5,231)
|
|
52,094
|
Derivative financial instruments
|
|
35
|
|
49,520
|
|
20,612
|
|
(27,791)
|
|
42,376
|
Notes in circulation
|
|
–
|
|
−
|
|
1,090
|
|
−
|
|
1,090
|
Debt securities in issue
|
|
−
|
|
84,696
|
|
28,512
|
|
(24,450)
|
|
88,758
|
Liabilities arising from insurance contracts and participating investment contracts
|
–
|
|
–
|
|
88,386
|
|
(17)
|
|
88,369
|
Liabilities arising from non-participating investment contracts
|
|
–
|
|
–
|
|
19,353
|
|
−
|
|
19,353
|
Other liabilities
|
|
394
|
|
4,791
|
|
28,684
|
|
(2,228)
|
|
31,641
|
Retirement benefit obligations
|
|
–
|
|
151
|
|
479
|
|
(38)
|
|
592
|
Current tax liabilities
|
|
−
|
|
5
|
|
1,483
|
|
(1,005)
|
|
483
|
Deferred tax liabilities
|
|
–
|
|
−
|
|
36
|
|
−
|
|
36
|
Other provisions
|
|
–
|
|
2,362
|
|
1,954
|
|
30
|
|
4,346
|
Subordinated liabilities
|
|
4,483
|
|
12,217
|
|
11,118
|
|
(4,883)
|
|
22,935
|
Total liabilities
|
|
6,824
|
|
515,584
|
|
545,369
|
|
(268,483)
|
|
799,294
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity
|
|
37,225
|
|
54,733
|
|
26,853
|
|
(75,660)
|
|
43,151
|
Other equity instruments
|
|
5,355
|
|
3,217
|
|
1,500
|
|
(4,717)
|
|
5,355
|
Total equity excluding non-controlling interests
|
|
42,580
|
|
57,950
|
|
28,353
|
|
(80,377)
|
|
48,506
|
Non-controlling interests
|
|
−
|
|
−
|
|
432
|
|
−
|
|
432
|
Total equity
|
|
42,580
|
|
57,950
|
|
28,785
|
|
(80,377)
|
|
48,938
|
|
|
|
|
|
|
|
|
|
|
|
Total equity and liabilities
|
|
49,404
|
|
573,534
|
|
574,154
|
|
(348,860)
|
|
848,232
|
LLOYDS BANKING GROUP PLC
|
20.
|
Condensed consolidating financial information
(continued)
|
Balance sheets
(continued)
At 31 December 2015
|
|
Company
|
|
Lloyds Bank
|
Subsidiaries
|
Consolidation adjustments
|
|
Group
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Cash and balances at central banks
|
|
−
|
|
55,919
|
|
2,498
|
|
−
|
|
58,417
|
Items in course of collection from banks
|
|
−
|
|
518
|
|
179
|
|
−
|
|
697
|
Trading and other financial assets at fair value through profit or loss
|
|
−
|
|
52,064
|
|
103,789
|
|
(15,317)
|
|
140,536
|
Derivative financial instruments
|
|
590
|
|
30,992
|
|
17,363
|
|
(19,478)
|
|
29,467
|
Loans and receivables:
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to banks
|
|
−
|
|
2,625
|
|
22,467
|
|
25
|
|
25,117
|
Loans and advances to customers
|
|
−
|
|
158,117
|
|
291,529
|
|
5,529
|
|
455,175
|
Debt securities
|
|
−
|
|
2,865
|
|
1,247
|
|
79
|
|
4,191
|
Due from fellow Lloyds Banking Group undertakings
|
|
14,054
|
|
132,199
|
|
88,957
|
|
(235,210)
|
|
−
|
|
|
14,054
|
|
295,806
|
|
404,200
|
|
(229,577)
|
|
484,483
|
Available-for-sale financial assets
|
|
−
|
|
32,476
|
|
4,835
|
|
(4,279)
|
|
33,032
|
Held-to-maturity investments
|
|
−
|
|
19,808
|
|
−
|
|
−
|
|
19,808
|
Goodwill
|
|
−
|
|
−
|
|
2,343
|
|
(327)
|
|
2,016
|
Value of in-force business
|
|
−
|
|
−
|
|
4,280
|
|
316
|
|
4,596
|
Other intangible assets
|
|
−
|
|
720
|
|
303
|
|
815
|
|
1,838
|
Property, plant and equipment
|
|
−
|
|
3,522
|
|
9,389
|
|
68
|
|
12,979
|
Current tax recoverable
|
|
32
|
|
250
|
|
21
|
|
(259)
|
|
44
|
Deferred tax assets
|
|
51
|
|
3,490
|
|
2,777
|
|
(2,308)
|
|
4,010
|
Retirement benefit assets
|
|
−
|
|
402
|
|
675
|
|
(176)
|
|
901
|
Investment in subsidiary undertakings
|
|
40,785
|
|
39,241
|
|
−
|
|
(80,026)
|
|
−
|
Other assets
|
|
909
|
|
916
|
|
13,028
|
|
(989)
|
|
13,864
|
Total assets
|
|
56,421
|
|
536,124
|
|
565,680
|
|
(351,537)
|
|
806,688
|
LLOYDS BANKING GROUP PLC
|
20.
|
Condensed consolidating financial information
(continued)
|
Balance sheets
(continued)
At 31 December 2015
|
|
Company
|
|
Lloyds Bank
|
Subsidiaries
|
Consolidation adjustments
|
|
Group
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Equity and liabilities
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
Deposits from banks
|
|
−
|
|
13,614
|
|
3,313
|
|
(2)
|
|
16,925
|
Customer deposits
|
|
−
|
|
205,717
|
|
212,798
|
|
(189)
|
|
418,326
|
Due to fellow Lloyds Banking Group undertakings
|
10,516
|
|
70,656
|
|
122,031
|
|
(203,203)
|
|
−
|
Items in course of transmission to banks
|
−
|
|
326
|
|
391
|
|
−
|
|
717
|
Trading and other financial liabilities at fair value through profit or loss
|
|
−
|
|
56,332
|
|
5,043
|
|
(9,512)
|
|
51,863
|
Derivative financial instruments
|
|
−
|
|
31,040
|
|
14,739
|
|
(19,478)
|
|
26,301
|
Notes in circulation
|
|
−
|
|
−
|
|
1,112
|
|
−
|
|
1,112
|
Debt securities in issue
|
|
−
|
|
78,430
|
|
27,504
|
|
(23,878)
|
|
82,056
|
Liabilities arising from insurance contracts and participating investment contracts
|
−
|
|
−
|
|
80,316
|
|
(22)
|
|
80,294
|
Liabilities arising from non-participating investment contracts
|
|
−
|
|
−
|
|
22,777
|
|
−
|
|
22,777
|
Other liabilities
|
|
394
|
|
2,988
|
|
28,340
|
|
(2,061)
|
|
29,661
|
Retirement benefit obligations
|
|
−
|
|
148
|
|
255
|
|
(38)
|
|
365
|
Current tax liabilities
|
|
−
|
|
−
|
|
807
|
|
(528)
|
|
279
|
Deferred tax liabilities
|
|
−
|
|
−
|
|
1,053
|
|
(1,020)
|
|
33
|
Other provisions
|
|
−
|
|
3,421
|
|
2,236
|
|
30
|
|
5,687
|
Subordinated liabilities
|
|
3,065
|
|
19,124
|
|
14,106
|
|
(12,983)
|
|
23,312
|
Total liabilities
|
|
13,975
|
|
481,796
|
|
536,821
|
|
(272,884)
|
|
759,708
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity
|
|
37,091
|
|
54,328
|
|
26,968
|
|
(77,153)
|
|
41,234
|
Other equity instruments
|
|
5,355
|
|
−
|
|
1,500
|
|
(1,500)
|
|
5,355
|
Total equity excluding non-controlling interests
|
|
42,446
|
|
54,328
|
|
28,468
|
|
(78,653)
|
|
46,589
|
Non-controlling interests
|
|
−
|
|
−
|
|
391
|
|
−
|
|
391
|
Total equity
|
|
42,446
|
|
54,328
|
|
28,859
|
|
(78,653)
|
|
46,980
|
Total equity and liabilities
|
|
56,421
|
|
536,124
|
|
565,680
|
|
(351,537)
|
|
806,688
|
LLOYDS BANKING GROUP PLC
|
20.
|
Condensed consolidating financial information
(continued)
|
Cash flow statements
For the half-year ended 30 June 2016
|
|
Company
|
|
Lloyds
Bank
|
Subsidiaries
|
Consolidation adjustments
|
|
Group
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
(8,980)
|
|
27,973
|
|
6,915
|
|
(3,304)
|
|
22,604
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
Purchase of financial assets
|
|
–
|
|
(3,190)
|
|
(251)
|
|
−
|
|
(3,441)
|
Proceeds from sale and maturity of financial assets
|
|
–
|
|
1,917
|
|
1,479
|
|
(667)
|
|
2,729
|
Purchase of fixed assets
|
|
–
|
|
(574)
|
|
(1,246)
|
|
−
|
|
(1,820)
|
Proceeds from sale of fixed assets
|
|
–
|
|
12
|
|
897
|
|
−
|
|
909
|
Additional capital injections to subsidiaries
|
|
(3,217)
|
|
−
|
|
–
|
|
3,217
|
|
–
|
Capital repayments by subsidiaries
|
|
13,059
|
|
−
|
|
–
|
|
(13,059)
|
|
–
|
Acquisition of businesses, net of cash disposed
|
|
–
|
|
−
|
|
(6)
|
|
−
|
|
(6)
|
Disposal of businesses, net of cash disposed
|
|
–
|
|
−
|
|
5
|
|
−
|
|
5
|
Dividends received from subsidiaries
|
|
2,431
|
|
2,606
|
|
−
|
|
(5,037)
|
|
−
|
Return of capital contribution
|
|
405
|
|
−
|
|
−
|
|
(405)
|
|
−
|
Capital lending to subsidiaries
|
|
(2,753)
|
|
−
|
|
−
|
|
2,753
|
|
−
|
Net cash provided by investing activities
|
|
9,925
|
|
771
|
|
878
|
|
(13,198)
|
|
(1,624)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Dividends paid to ordinary shareholders
|
|
(1,427)
|
|
(2,430)
|
|
(2,555)
|
|
4,985
|
|
(1,427)
|
Distributions on other equity instruments
|
|
(204)
|
|
(1)
|
|
(51)
|
|
52
|
|
(204)
|
Dividends paid to non-controlling interests
|
|
−
|
|
–
|
|
(2)
|
|
−
|
|
(2)
|
Interest paid on subordinated liabilities
|
|
(99)
|
|
(930)
|
|
(545)
|
|
628
|
|
(946)
|
Issue of other equity instruments
|
|
−
|
|
3,217
|
|
−
|
|
(3,217)
|
|
−
|
Proceeds from issue of subordinated liabilities
|
|
1,061
|
|
2,753
|
|
−
|
|
(2,753)
|
|
1,061
|
Repayment of subordinated liabilities
|
|
–
|
|
(11,921)
|
|
(4,298)
|
|
11,541
|
|
(4,678)
|
Capital contribution received
|
|
–
|
|
–
|
|
−
|
|
−
|
|
−
|
Capital repayments to the Company
|
|
–
|
|
(3,387)
|
|
(1,198)
|
|
4,585
|
|
−
|
Change in non-controlling interests
|
|
–
|
|
–
|
|
(5)
|
|
−
|
|
(5)
|
Return of capital contribution
|
|
−
|
|
(405)
|
|
−
|
|
405
|
|
−
|
Net cash (used in) provided by financing activities
|
|
(669)
|
|
(13,104)
|
|
(8,654)
|
|
16,226
|
|
(6,201)
|
Effects of exchange rate changes on cash and cash equivalents
|
|
–
|
|
1
|
|
14
|
|
−
|
|
15
|
Change in cash and cash equivalents
|
|
276
|
|
15,641
|
|
(847)
|
|
(276)
|
|
14,794
|
Cash and cash equivalents at beginning of period
|
|
24
|
|
55,852
|
|
16,101
|
|
(24)
|
|
71,953
|
Cash and cash equivalents at end of period
|
|
300
|
|
71,493
|
|
15,254
|
|
(300)
|
|
86,747
|
LLOYDS BANKING GROUP PLC
|
20.
|
Condensed consolidating financial information
(continued)
|
Cash flow statements
(continued)
For the half-year ended 30 June 2015
|
|
Company
|
|
Lloyds
Bank
|
Subsidiaries
|
Consolidation adjustments
|
|
Group
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
(265)
|
|
21,719
|
|
(3,204)
|
|
3,070
|
|
21,320
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
Purchase of financial assets
|
|
–
|
|
(5,159)
|
|
(8,046)
|
|
847
|
|
(12,358)
|
Proceeds from sale and maturity of financial assets
|
|
–
|
|
6,241
|
|
8,597
|
|
–
|
|
14,838
|
Purchase of fixed assets
|
|
–
|
|
(567)
|
|
(997)
|
|
–
|
|
(1,564)
|
Proceeds from sale of fixed assets
|
|
–
|
|
35
|
|
491
|
|
–
|
|
526
|
Dividends received from subsidiaries
|
|
540
|
|
659
|
|
–
|
|
(1,199)
|
|
–
|
Additional capital injections to subsidiaries
|
|
–
|
|
(64)
|
|
–
|
|
64
|
|
−
|
Capital lending to Lloyds Bank
|
|
(38)
|
|
–
|
|
–
|
|
38
|
|
−
|
Capital repayments by Lloyds Bank
|
|
41
|
|
–
|
|
–
|
|
(41)
|
|
–
|
Return of capital contribution
|
|
431
|
|
–
|
|
–
|
|
(431)
|
|
−
|
Disposal of businesses, net of cash disposed
|
|
–
|
|
170
|
|
11
|
|
(4,463)
|
|
(4,282)
|
Net cash provided by investing activities
|
|
974
|
|
1,315
|
|
56
|
|
(5,185)
|
|
(2,840)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Dividends paid to ordinary shareholders
|
|
(535)
|
|
(540)
|
|
(659)
|
|
1,199
|
|
(535)
|
Distributions on other equity instruments
|
|
(197)
|
|
–
|
|
–
|
|
–
|
|
(197)
|
Dividends paid to non-controlling interests
|
|
–
|
|
–
|
|
(10)
|
|
–
|
|
(10)
|
Interest paid on subordinated liabilities
|
|
(64)
|
|
(907)
|
|
(912)
|
|
633
|
|
(1,250)
|
Repayment of subordinated liabilities
|
|
–
|
|
(1,087)
|
|
(981)
|
|
–
|
|
(2,068)
|
Capital contribution received
|
|
–
|
|
–
|
|
64
|
|
(64)
|
|
−
|
Return of capital contribution
|
|
–
|
|
(431)
|
|
–
|
|
431
|
|
−
|
Capital borrowing from the Company
|
|
–
|
|
38
|
|
–
|
|
(38)
|
|
–
|
Capital repayments to the Company
|
|
–
|
|
(41)
|
|
–
|
|
41
|
|
–
|
Change in non-controlling interests
|
|
–
|
|
–
|
|
1
|
|
–
|
|
1
|
Net cash (used in) provided by financing activities
|
|
(796)
|
|
(2,968)
|
|
(2,497)
|
|
2,202
|
|
(4,059)
|
Effects of exchange rate changes on cash and cash equivalents
|
|
–
|
|
(1)
|
|
(1)
|
|
–
|
|
(2)
|
Change in cash and cash equivalents
|
|
(87)
|
|
20,065
|
|
(5,646)
|
|
87
|
|
14,419
|
Cash and cash equivalents at beginning of period
|
|
195
|
|
42,972
|
|
22,175
|
|
(195)
|
|
65,147
|
Cash and cash equivalents at end of period
|
|
108
|
|
63,037
|
|
16,529
|
|
(108)
|
|
79,566
|
LLOYDS BANKING GROUP PLC
|
20.
|
Condensed consolidating financial information
(continued)
|
Cash flow statements
(continued)
For the half-year ended
31 December 2015
|
|
Company
|
|
Lloyds Bank
|
Subsidiaries
|
Consolidation adjustments
|
|
Group
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
(1,275)
|
|
(13,595)
|
|
10,676
|
|
(754)
|
|
(4,948)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
Dividends received from subsidiaries
|
|
540
|
|
12,161
|
|
−
|
|
(12,701)
|
|
−
|
Return of capital contributions
|
|
169
|
|
−
|
|
−
|
|
(169)
|
|
−
|
Purchase of financial assets
|
|
−
|
|
(2,744)
|
|
(5,547)
|
|
1,295
|
|
(6,996)
|
Proceeds from sale and maturity of financial assets
|
|
−
|
|
814
|
|
6,348
|
|
−
|
|
7,162
|
Purchase of fixed assets
|
|
−
|
|
(712)
|
|
(1,141)
|
|
−
|
|
(1,853)
|
Proceeds from sale of fixed assets
|
|
−
|
|
26
|
|
985
|
|
−
|
|
1,011
|
Purchase of other equity instruments issued by subsidiaries
|
|
−
|
|
(1,500)
|
|
−
|
|
1,500
|
|
−
|
Additional capital lending to Lloyds Bank
|
|
(1,119)
|
|
−
|
|
−
|
|
1,119
|
|
−
|
Capital repayments by Lloyds Bank
|
|
1,114
|
|
−
|
|
−
|
|
(1,114)
|
|
−
|
Acquisition of businesses, net of cash acquired
|
|
−
|
|
−
|
|
(5)
|
|
−
|
|
(5)
|
Disposal of businesses, net of cash disposed
|
|
−
|
|
680
|
|
111
|
|
(580)
|
|
211
|
Net cash (used in) provided by investing activities
|
|
704
|
|
8,725
|
|
751
|
|
(10,650)
|
|
(470)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Dividends paid to ordinary shareholders
|
|
(535)
|
|
(540)
|
|
(12,161)
|
|
12,701
|
|
(535)
|
Distributions on other equity instruments
|
|
(197)
|
|
−
|
|
−
|
|
−
|
|
(197)
|
Dividends paid to non-controlling interests
|
|
−
|
|
−
|
|
(42)
|
|
−
|
|
(42)
|
Interest paid on subordinated liabilities
|
|
(65)
|
|
(848)
|
|
(44)
|
|
367
|
|
(590)
|
Proceeds from issue of subordinated liabilities
|
|
1,436
|
|
−
|
|
−
|
|
(1,098)
|
|
338
|
Proceeds from issue of other equity instruments
|
|
−
|
|
−
|
|
1,500
|
|
(1,500)
|
|
−
|
Repayment of subordinated liabilities
|
|
(152)
|
|
(764)
|
|
(1,170)
|
|
955
|
|
(1,131)
|
Capital contributions received
|
|
−
|
|
−
|
|
101
|
|
(101)
|
|
−
|
Changes in non-controlling interests
|
|
−
|
|
−
|
|
(42)
|
|
−
|
|
(42)
|
Return of capital contributions
|
|
−
|
|
(169)
|
|
−
|
|
169
|
|
−
|
Capital borrowing from the Company
|
|
−
|
|
1,119
|
|
−
|
|
(1,119)
|
|
−
|
Capital repayments to the Company
|
|
−
|
|
(1,114)
|
|
−
|
|
1,114
|
|
−
|
Net cash provided by (used in) financing activities
|
|
487
|
|
(2,316)
|
|
(11,858)
|
|
11,488
|
|
(2,199)
|
Effects of exchange rate changes on cash and cash equivalents
|
|
−
|
|
1
|
|
3
|
|
−
|
|
4
|
Change in cash and cash equivalents
|
|
(84)
|
|
(7,185)
|
|
(428)
|
|
84
|
|
(7,613)
|
Cash and cash equivalents at beginning of period
|
|
108
|
|
63,037
|
|
16,529
|
|
(108)
|
|
79,566
|
Cash and cash equivalents at end of period
|
|
24
|
|
55,852
|
|
16,101
|
|
(24)
|
|
71,953
|
LLOYDS BANKING GROUP PLC
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorised.
|
LLOYDS BANKING GROUP plc
|
|
|
|
|
By:
|
/s/ G Culmer
|
|
Name:
|
George Culmer
|
|
Title:
|
Chief Financial Officer
|
|
|
|
|
Dated:
|
28 July 2016
|
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