SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
30
April 2020
LLOYDS BANKING GROUP
plc
(Translation of registrant's name into
English)
5th Floor
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 Form 20-F or Form 40-F.
Form
20-F..X.. Form 40-F
Indicate
by check mark whether the registrant by furnishing the
information
contained
in this Form is also thereby furnishing the information to
the
Commission
pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes
No ..X..
If
"Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule
12g3-2(b):
82- ________
Index
to Exhibits
Item
No.
1 Regulatory News Service Announcement, dated 30 April
2020
re: 2020
Q1 Interim Management Statement
Lloyds
Banking Group plc
Q1 2020
Interim Management Statement
30
April 2020
RESULTS FOR THE THREE MONTHS ENDED 31 MARCH 2020
“The
coronavirus pandemic presents an unprecedented social and economic
challenge which is having a significant impact on people and
businesses in the UK and around the world. The economic outlook is
clearly challenging with the longer-term outcome dependent on the
severity and length of the pandemic and the mitigating impact of
Government and other measures in the UK and across the world.
Throughout this period of uncertainty we will continue to work
closely with Government, regulators and other authorities and use
the strength of our balance sheet and business model to ensure that
we play our part in supporting our customers and the UK
economy.
I would
like to pay tribute to the exemplary dedication being shown by all
our colleagues across the Group providing vital banking services to
those in need, but also in going above and beyond in countless and
often unseen ways to support the most
vulnerable.”
António
Horta-Osório, Group Chief Executive
Supporting customers and colleagues in difficult times
● Actively supporting
retail, small business and commercial customers in the current
environment through a range of flexible propositions and full
support for Government schemes, including Coronavirus Business
Interruption Loan Scheme (CBILS) and Covid Corporate Financing
Facility (CCFF)
● Strong operational
resilience with c.90 per cent of branches remaining open and ATM
availability exceeding 95 per cent
● Multi-channel
distribution model, with the UK’s leading digital bank
enabling the Group to continue to serve customers throughout the
lockdown
Financial performance reflects revised economic
outlook
● Statutory profit
before tax of £74 million, impacted by a significantly
increased impairment charge of £1,430 million given the
revised economic outlook. Statutory return on tangible equity of
5.0 per cent with tangible net assets per share of 57.4
pence
● Solid trading
surplus of £1,988 million, a reduction of 19 per
cent compared to the first three months of 2019, but an increase of
7 per cent on the final quarter of 2019 (decrease of 4 per
cent excluding the bank levy)
- Net income of
£4.0 billion, down 11 per cent, with average interest-earning
banking assets slightly lower at £432 billion, net
interest margin of 2.79 per cent and other income of £1.2
billion, down 21 per cent year on year due to lower levels of
client activity and the absence of 2019 one-off items
- Total costs of
£2.0 billion down 1 per cent, after absorbing
coronavirus-related expenses, driven by continued reductions in
operating costs, down 4 per cent
● The
impairment charge in the quarter increased significantly to
£1,430 million, primarily driven by updates to the
Group’s economic outlook and some charges relating to
existing restructuring cases. Given the economic outlook we will
inevitably be impacted both within the existing book and
potentially in the new lending we are undertaking to support our
customers. However, the Group’s loan portfolio remains robust
and well positioned given its low risk business model
Balance sheet strength maintained with capital, funding and
liquidity remaining strong
● CET1 ratio remains
strong at 14.2 per cent with CCyB reduced to zero, resulting in
increased headroom over regulatory requirements; significant
resources to support customers while absorbing potential credit
losses
● Loans and advances
increased £2.7 billion in the quarter to £443.1 billion,
with increased corporate lending, primarily drawdowns of existing
corporate facilities, partially offset by expected reductions in
the mortgage book along with reductions in credit cards, where
customer activity reduced in March
● Loan to deposit
ratio down 4 percentage points to 103 per cent, largely due to
increased commercial deposits
Outlook
● Given the
significant change in the operating environment and economic
expectations the Group’s previous guidance is no longer
appropriate. The impact of lower rates, lower levels of activity
and higher impairment on the Group’s business will continue
into the second quarter, but remains difficult to quantify given
the significant uncertainty. The Group will update the market once
there is greater clarity
● The longer-term
impact of coronavirus remains unclear but the Group will maintain
its focus on supporting customers and the UK economy while
remaining well positioned to deliver for customers beyond the
crisis
|
INCOME STATEMENT − UNDERLYING BASIS
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
Quarter
|
|
|
|
Quarter
|
|
|
|
|
ended
|
|
ended
|
|
|
|
ended
|
|
|
|
|
31 Mar
|
|
31 Mar
|
|
|
|
31 Dec
|
|
|
|
|
2020
|
|
2019
|
|
Change
|
|
2019
|
|
Change
|
|
|
£m
|
|
£m
|
|
%
|
|
£m
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
2,950
|
|
3,083
|
|
(4)
|
|
3,102
|
|
(5)
|
Other income
|
|
1,226
|
|
1,556
|
|
(21)
|
|
1,267
|
|
(3)
|
Operating lease depreciation
|
|
(224)
|
|
(219)
|
|
(2)
|
|
(236)
|
|
5
|
Net income
|
|
3,952
|
|
4,420
|
|
(11)
|
|
4,133
|
|
(4)
|
Operating costs
|
|
(1,877)
|
|
(1,957)
|
|
4
|
|
(2,058)
|
|
9
|
Remediation
|
|
(87)
|
|
(20)
|
|
|
|
(219)
|
|
60
|
Total costs
|
|
(1,964)
|
|
(1,977)
|
|
1
|
|
(2,277)
|
|
14
|
Trading surplus
|
|
1,988
|
|
2,443
|
|
(19)
|
|
1,856
|
|
7
|
Impairment
|
|
(1,430)
|
|
(275)
|
|
|
|
(341)
|
|
|
Underlying profit
|
|
558
|
|
2,168
|
|
(74)
|
|
1,515
|
|
(63)
|
Restructuring
|
|
(63)
|
|
(126)
|
|
50
|
|
(191)
|
|
67
|
Volatility and other items
|
|
(421)
|
|
(339)
|
|
(24)
|
|
122
|
|
|
Payment protection insurance provision
|
|
–
|
|
(100)
|
|
100
|
|
–
|
|
|
Statutory profit before tax
|
|
74
|
|
1,603
|
|
(95)
|
|
1,446
|
|
(95)
|
Tax credit (expense)
|
|
406
|
|
(403)
|
|
|
|
(427)
|
|
|
Statutory profit after tax
|
|
480
|
|
1,200
|
|
(60)
|
|
1,019
|
|
(53)
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
0.5p
|
|
1.5p
|
|
(67)
|
|
1.3p
|
|
(62)
|
|
|
|
|
|
|
|
|
|
|
|
Banking net interest margin
|
|
2.79%
|
|
2.91%
|
|
(12)bp
|
|
2.85%
|
|
(6)bp
|
Average interest-earning banking assets
|
|
£432bn
|
|
£433bn
|
|
–
|
|
£437bn
|
|
(1)
|
Cost:income ratio
|
|
49.7%
|
|
44.7%
|
|
5.0pp
|
|
55.1%
|
|
(5.4)pp
|
Asset quality ratio
|
|
1.30%
|
|
0.25%
|
|
105bp
|
|
0.30%
|
|
100bp
|
Underlying return on tangible equity
|
|
4.7%
|
|
17.0%
|
|
(12.3)pp
|
|
12.2%
|
|
(7.5)pp
|
Return on tangible equity
|
|
5.0%
|
|
12.5%
|
|
(7.5)pp
|
|
11.0%
|
|
(6.0)pp
|
KEY BALANCE SHEET METRICS
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 Mar
|
|
At 31 Mar
|
|
Change
|
|
At 31 Dec
|
|
Change
|
|
|
2020
|
|
2019
|
|
%
|
|
2019
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to customers1
|
|
£443bn
|
|
£441bn
|
|
1
|
|
£440bn
|
|
1
|
Customer deposits2
|
|
£428bn
|
|
£417bn
|
|
3
|
|
£412bn
|
|
4
|
Loan to deposit ratio
|
|
103%
|
|
106%
|
|
(3)pp
|
|
107%
|
|
(4)pp
|
CET1 ratio3,4
|
|
14.2%
|
|
13.9%
|
|
0.3pp
|
|
13.8%
|
|
0.4pp
|
Transitional MREL ratio3,4
|
|
34.5%
|
|
31.5%
|
|
3.0pp
|
|
32.6%
|
|
1.9pp
|
UK leverage ratio3,4
|
|
5.3%
|
|
5.3%
|
|
–
|
|
5.2%
|
|
0.1pp
|
Risk-weighted assets3
|
|
£209bn
|
|
£208bn
|
|
–
|
|
£203bn
|
|
3
|
Tangible net assets per share
|
|
57.4p
|
|
53.4p
|
|
4.0p
|
|
50.8p
|
|
6.6p
|
|
|
1
|
Excludes
reverse repos of £55.2 billion (31 December 2019: £54.6
billion).
|
2
|
Excludes
repos of £9.4 billion (31 December 2019: £9.5
billion).
|
3
|
The
CET1, MREL, leverage ratios and risk-weighted assets at 31 December
2019 were reported on a pro forma basis, reflecting the dividend
paid up by the Insurance business in the subsequent first quarter
period.
|
4
|
Incorporating
profits for the period that remain subject to formal verification
in accordance with the Capital Requirements
Regulation.
|
QUARTERLY INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
|
ended
|
|
ended
|
|
ended
|
|
ended
|
|
ended
|
|
|
31 Mar
|
|
31 Dec
|
|
30 Sept
|
|
30 June
|
|
31 Mar
|
|
|
2020
|
|
2019
|
|
2019
|
|
2019
|
|
2019
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
2,950
|
|
3,102
|
|
3,130
|
|
3,062
|
|
3,083
|
Other income
|
|
1,226
|
|
1,267
|
|
1,315
|
|
1,594
|
|
1,556
|
Operating lease depreciation
|
|
(224)
|
|
(236)
|
|
(258)
|
|
(254)
|
|
(219)
|
Net income
|
|
3,952
|
|
4,133
|
|
4,187
|
|
4,402
|
|
4,420
|
Operating costs
|
|
(1,877)
|
|
(2,058)
|
|
(1,911)
|
|
(1,949)
|
|
(1,957)
|
Remediation
|
|
(87)
|
|
(219)
|
|
(83)
|
|
(123)
|
|
(20)
|
Total costs
|
|
(1,964)
|
|
(2,277)
|
|
(1,994)
|
|
(2,072)
|
|
(1,977)
|
Trading surplus
|
|
1,988
|
|
1,856
|
|
2,193
|
|
2,330
|
|
2,443
|
Impairment
|
|
(1,430)
|
|
(341)
|
|
(371)
|
|
(304)
|
|
(275)
|
Underlying profit
|
|
558
|
|
1,515
|
|
1,822
|
|
2,026
|
|
2,168
|
Restructuring
|
|
(63)
|
|
(191)
|
|
(98)
|
|
(56)
|
|
(126)
|
Volatility and other items
|
|
(421)
|
|
122
|
|
126
|
|
(126)
|
|
(339)
|
Payment protection insurance provision
|
|
–
|
|
–
|
|
(1,800)
|
|
(550)
|
|
(100)
|
Statutory profit before tax
|
|
74
|
|
1,446
|
|
50
|
|
1,294
|
|
1,603
|
Tax credit (expense)
|
|
406
|
|
(427)
|
|
(288)
|
|
(269)
|
|
(403)
|
Statutory profit (loss) after tax
|
|
480
|
|
1,019
|
|
(238)
|
|
1,025
|
|
1,200
|
|
|
|
|
|
|
|
|
|
|
|
Banking net interest margin
|
|
2.79%
|
|
2.85%
|
|
2.88%
|
|
2.89%
|
|
2.91%
|
Average interest-earning banking assets
|
|
£432bn
|
|
£437bn
|
|
£435bn
|
|
£433bn
|
|
£433bn
|
|
|
|
|
|
|
|
|
|
|
|
Cost:income ratio
|
|
49.7%
|
|
55.1%
|
|
47.6%
|
|
47.1%
|
|
44.7%
|
|
|
|
|
|
|
|
|
|
|
|
Asset quality ratio
|
|
1.30%
|
|
0.30%
|
|
0.33%
|
|
0.27%
|
|
0.25%
|
Gross asset quality ratio
|
|
1.35%
|
|
0.39%
|
|
0.40%
|
|
0.38%
|
|
0.30%
|
|
|
|
|
|
|
|
|
|
|
|
Underlying return on tangible equity
|
|
4.7%
|
|
12.2%
|
|
14.3%
|
|
15.6%
|
|
17.0%
|
Return on tangible equity
|
|
5.0%
|
|
11.0%
|
|
(2.8)%
|
|
10.5%
|
|
12.5%
|
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to customers1
|
|
£443bn
|
|
£440bn
|
|
£447bn
|
|
£441bn
|
|
£441bn
|
Customer deposits2
|
|
£428bn
|
|
£412bn
|
|
£419bn
|
|
£418bn
|
|
£417bn
|
Loan to deposit ratio
|
|
103%
|
|
107%
|
|
107%
|
|
106%
|
|
106%
|
Risk-weighted assets3
|
|
£209bn
|
|
£203bn
|
|
£209bn
|
|
£207bn
|
|
£208bn
|
Tangible net assets per share
|
|
57.4p
|
|
50.8p
|
|
52.0p
|
|
53.0p
|
|
53.4p
|
|
|
1
|
Excludes
reverse repos.
|
2
|
Excludes
repos.
|
3
|
Risk-weighted
assets at 30 June 2019 and 31 December 2019 are reported on a pro
forma basis reflecting the Insurance dividend paid to the Group in
the subsequent reporting period.
|
BALANCE SHEET ANALYSIS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 Mar
|
|
At 31 Mar
|
|
|
|
At 31 Dec
|
|
|
|
|
|
2020
|
|
2019
|
|
Change
|
|
2019
|
|
Change
|
|
|
|
£bn
|
|
£bn
|
|
%
|
|
£bn
|
|
%
|
|
Loans and advances to customers
|
|
|
|
|
|
|
|
|
|
|
|
Open mortgage book
|
|
268.1
|
|
264.1
|
|
2
|
|
270.1
|
|
(1)
|
|
Closed mortgage book
|
|
17.9
|
|
20.5
|
|
(13)
|
|
18.5
|
|
(3)
|
|
Credit cards
|
|
16.7
|
|
17.7
|
|
(6)
|
|
17.7
|
|
(6)
|
|
UK Retail unsecured loans
|
|
8.6
|
|
8.1
|
|
6
|
|
8.4
|
|
2
|
|
UK Motor Finance
|
|
15.8
|
|
15.3
|
|
3
|
|
15.6
|
|
1
|
|
Overdrafts
|
|
1.2
|
|
1.2
|
|
–
|
|
1.3
|
|
(8)
|
|
Retail other1
|
|
9.3
|
|
8.5
|
|
9
|
|
9.0
|
|
3
|
|
SME2,3
|
|
32.0
|
|
32.1
|
|
–
|
|
32.1
|
|
–
|
|
Mid Corporates3
|
|
4.7
|
|
5.3
|
|
(11)
|
|
5.3
|
|
(11)
|
|
Corporate and Institutional3
|
|
60.9
|
|
59.6
|
|
2
|
|
54.6
|
|
12
|
|
Commercial Banking other3
|
|
4.9
|
|
4.6
|
|
7
|
|
5.2
|
|
(6)
|
|
Wealth
|
|
0.9
|
|
0.9
|
|
–
|
|
0.9
|
|
–
|
|
Central items
|
|
2.1
|
|
2.6
|
|
(19)
|
|
1.7
|
|
24
|
|
Loans and advances to
customers4
|
|
443.1
|
|
440.5
|
|
1
|
|
440.4
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer deposits
|
|
|
|
|
|
|
|
|
|
|
|
Retail current accounts
|
|
79.9
|
|
75.2
|
|
6
|
|
76.9
|
|
4
|
|
Commercial current accounts2,5
|
|
34.5
|
|
33.9
|
|
2
|
|
34.9
|
|
(1)
|
|
Retail relationship savings accounts
|
|
144.1
|
|
144.7
|
|
–
|
|
144.5
|
|
–
|
|
Retail tactical savings accounts
|
|
12.7
|
|
15.6
|
|
(19)
|
|
13.3
|
|
(5)
|
|
Commercial deposits2,6
|
|
142.5
|
|
133.0
|
|
7
|
|
127.6
|
|
12
|
|
Wealth
|
|
13.3
|
|
13.9
|
|
(4)
|
|
13.7
|
|
(3)
|
|
Central items
|
|
1.4
|
|
0.7
|
|
|
|
0.9
|
|
56
|
|
Total customer
deposits7
|
|
428.4
|
|
417.0
|
|
3
|
|
411.8
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
861.7
|
|
818.3
|
|
5
|
|
833.9
|
|
3
|
|
Total liabilities
|
|
809.0
|
|
767.8
|
|
5
|
|
786.1
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity
|
|
46.6
|
|
43.8
|
|
6
|
|
41.7
|
|
12
|
|
Other equity instruments
|
|
5.9
|
|
6.5
|
|
(9)
|
|
5.9
|
|
–
|
|
Non-controlling interests
|
|
0.2
|
|
0.2
|
|
–
|
|
0.2
|
|
–
|
|
Total equity
|
|
52.7
|
|
50.5
|
|
4
|
|
47.8
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares in issue, excluding own shares
|
|
70,411m
|
|
71,165m
|
|
(1)
|
|
70,031m
|
|
1
|
|
|
|
1
|
Primarily
Europe.
|
2
|
Includes
Retail Business Banking.
|
3
|
Commercial
Banking segmentation has been updated to reflect how the business
is managed by the Group.
|
4
|
Excludes
reverse repos.
|
5
|
Primarily
non interest-bearing Commercial Banking current
accounts.
|
6
|
Primarily
Commercial Banking interest-bearing accounts.
|
7
|
Excludes
repos.
|
GROUP CHIEF EXECUTIVE’S STATEMENT
The
coronavirus pandemic presents an unprecedented social and economic
challenge which is having a significant impact on people and
businesses in the UK and around the world. Our financial strength
and business model enables us to play a significant role, together
with Government, regulators and other authorities, in helping the
country manage through this crisis supporting our customers and the
UK economy. In our 250 years of serving the British economy we have
experienced many downturns and several crises and on each occasion
we have worked hard to contribute to the recovery of the economy.
We expect to do exactly the same this time.
Ensuring
an effective service is maintained to personal and business
customers is fundamental and I would like to express my gratitude
to my colleagues across the Group, who have shown exemplary
dedication and professionalism, often in response to
near-impossible demands. I know that many of my colleagues will be
anxious about the health of loved ones and the impact of
coronavirus on their communities, but they nonetheless remain
focused on serving our customers every day. I want to thank each of
them for the remarkable contributions they are making to this
national effort at work, at home and in their
communities.
Support for customers and the real economy
Customers
remain the priority for us through this crisis and we have
implemented a comprehensive range of measures to support our retail
and business customers. Across mortgages, personal and business
loans, credit cards and motor financing, we have already approved
880,000 payment holidays, bringing relief at a time of financial
uncertainty for so many.
For
retail customers these include payment holidays on mortgages,
loans, cards and motor, access to a £500 interest free
overdraft, no fees for missed payments and access to fixed term
accounts without charge. We have also launched a new dedicated
phone line for elderly customers and developed a new process to
allow a trusted person limited access to an account for customers
who can’t get to one of our branches and don’t bank
digitally, while we have also ensured that NHS staff calls are
answered as a priority.
We have
announced significant support for our small business and commercial
customers. Small businesses and Corporates with less than £100
million annual turnover can benefit from our £2 billion
COVID-19 fund which includes fee free lending for new overdrafts or
overdraft limit increases and new or increased invoice discounting
and finance facilities and in certain circumstances, capital
repayment holidays. In addition we fully support the comprehensive
range of support schemes introduced by the UK Government including
the Coronavirus Business Interruption Loan Schemes and the Covid
Corporate Funding facility.
We will
continue to work closely with Government and our regulators
throughout the current period of uncertainty to enable personal and
business customers get the support they need. Providing that
support under the Government schemes does mean we have extended our
lending risk appetite in this area during the crisis, and despite
the protection offered by Government guarantees, there will
inevitably be some additional losses in due course.
Operational resilience
I have
been particularly pleased with how well the Group’s
operational and technology infrastructure has performed under
significant pressure, enabling colleagues to support customers
effectively through all channels and ultimately support the UK
economy. Around 90 per cent of branches have remained open
throughout the coronavirus outbreak and importantly, our digital
banking proposition has remained fully operational throughout.
Whilst we continue to experience high volumes of calls, we are
continuing to improve our quality of service and are enabling more
colleagues to operate remotely. I am grateful to our customers and
colleagues for their collaboration.
GROUP CHIEF EXECUTIVE’S STATEMENT
(continued)
Market commentary and economic projections
The
economic outlook is clearly challenging and uncertain with the
longer-term outcome dependent on the severity and length of the
coronavirus pandemic and the mitigating impact of Government and
other measures in the UK and across the world. Throughout this
period of uncertainty we will continue to work closely with our
customers, colleagues, regulators and the Government to ensure that
we continue to support our customers. We remain committed to being
part of the national solution and putting the Group’s
strength to work in support of the wider economy.
The
success of the Group is inextricably linked to the health of the UK
economy in both the longer term and the nearer term. The
Group’s financial performance in the first quarter is
starting to reflect the emerging current and expected future impact
of the crisis, with recent reductions in base rate and lower levels
of activity having a significant impact on our business. On the
other hand, implementation of various Government and regulatory
measures including the new Term Funding Scheme and the lower
countercyclical capital buffer, are helpful to enable the Group to
increase lending in and support of the real economy.
In
April we also announced the cancellation of dividends. Our decision
on the outstanding 2019 dividend was taken by the Group’s
Board at the specific request of our regulator, the Prudential
Regulation Authority (PRA) and was in line with all other major UK
listed banks. As per our news release, the Board also decided that
until the end of 2020 we will undertake no quarterly or interim
dividend payments, accrual of dividends, or share buybacks on
ordinary shares in order to help us to serve the needs of
businesses and households through the extraordinary challenges
presented by the coronavirus pandemic.
These
are difficult decisions and, while we recognise the disappointment
and frustration this will cause our shareholders, in particular
those relying on dividends for income, we agreed that this is a
prudent and appropriate response to what are exceptional
circumstances. The Board will decide on any future dividend
distributions at year-end 2020.
In
conjunction with this decision and in solidarity with the
communities in which we operate, the whole of the Group Executive
Committee have asked not to be considered for their Group
Performance Share for 2020, meaning that they will give up all of
their bonus entitlement for 2020. In addition no cash bonuses are
payable to senior staff for the rest of 2020.
Strategic positioning and outlook
Over
the last two years we have made significant progress against our
ambitious strategy, while continuing to support our core purpose of
Helping Britain Prosper. It is this purpose which helps to inform
our response to coronavirus. We are using our multi-brand,
multi-channel distribution model with the UK’s largest branch
network and digital bank along with the strategic capabilities
developed to continue to support our customers through this
challenging period.
As
previously indicated given our clear UK focus we will inevitably be
impacted by the nationwide lockdown relating to the coronavirus and
given the significant change in the operating environment and
economic expectations including much lower rates, lower levels of
activity and higher impairments, the Group’s previous
guidance is no longer appropriate. Significant uncertainty remains
and we will update the market once there is greater
clarity.
We will
be tested over the weeks and months ahead but I have great
confidence in the resilience of our business model, the strength of
our balance sheet and most importantly the professionalism and
customer dedication of our staff. We will maintain our relentless
focus on supporting customers and the UK economy going
forward.
REVIEW OF PERFORMANCE
Financial performance reflects revised economic
outlook
Statutory
profit before tax for the three months ended 31 March 2020 was
£74 million, 95 per cent lower than in the first quarter of
2019, impacted by a significantly increased impairment charge. The
increased impairment charge was significantly due to changes to the
Group’s IFRS 9 assumptions, given the expected deterioration
in the UK economy as a result of the coronavirus pandemic. The
Group’s statutory return on tangible equity was 5.0
per cent.
In this
challenging external environment the trading surplus for the period
was solid at £1,988 million, a reduction of 19 per
cent compared to the first three months of 2019, but an increase of
7 per cent on the final quarter of 2019 (decrease of
4 per cent excluding the bank levy). The year on year decrease
was driven by a reduction in net income which was partially offset
by lower total costs. Underlying profit was £558 million
compared to £2,168 million in the first three months of
2019, impacted by the higher impairment charges in 2020. The
Group’s underlying return on tangible equity was
4.7 per cent.
Tangible net assets per share at 57.4 pence increased by 6.6 pence
in the first three months of 2020, largely driven by an increase in
the pension asset as credit spreads widened significantly in the
quarter.
Net income
Net
income of £3,952 million was 11 per cent lower than in
the first three months of 2019, with both lower net interest income
and lower other income, reflecting lower interest rates,
competitive asset markets and the slowdown in retail and commercial
markets in March following the coronavirus outbreak, as well as the
non-recurrence of one off items recognised in the first quarter of
2019 and a write-down in the assets of Lloyds Development Capital
(LDC) in 2020.
Net
interest income of £2,950 million was down
4 per cent with reductions in both the banking net
interest margin and average interest-earning banking assets. The
net interest margin reduced by 12 basis points to 2.79 per cent,
with continued pressure from competitive asset markets and reduced
liability spreads. The net interest margin fell by 6 basis
points over the last quarter, with the fourth quarter of 2019
benefiting from an alignment of credit card terms resulting from an
effective interest rate change. Average interest-earning banking
assets reduced by £1.8 billion year on year with growth in the
open mortgage book and targeted segments, including UK motor
finance, more than offset by lower balances in the closed mortgage
book and the effects of the Commercial Banking portfolio
optimisation.
In
March, the Monetary Policy Committee cut the bank base rate twice,
by a combined 65 basis points to 10 basis points, which together
with mix changes in the balance sheet, will adversely impact the
Group’s margin in the coming quarters.
Other
income decreased by 21 per cent to £1,226 million, as
Insurance and Wealth was impacted by general insurance weather
related claims in February and was also lower year on year due to
the £136 million one-off benefit experienced in the first
quarter of 2019 from the change in investment management provider.
Commercial Banking other income was impacted by subdued levels of
client activity given challenging external market conditions,
particularly in large corporate markets. Other income in Retail
included the continuing impact of a lower Lex fleet size and lower
payments revenues in late March following the introduction of
coronavirus-related restrictions. Market conditions have also
impacted valuations in the Group’s private equity business,
LDC by c.£100 million. For comparative purposes, the
Group’s 2019 first
quarter results included a gain of £50 million relating
to the sale of the Group’s interest in Vocalink.
The
Group expects the impact of lower rates, changing balance sheet
mix, fee forbearance and lower levels of customer activity to
continue to affect net interest income and other income into the
second quarter.
REVIEW OF PERFORMANCE (continued)
Total costs
Total
costs of £1,964 million were 1 per cent lower
than in the first three months of 2019 with a reduction in
operating costs more than offsetting increased remediation
charges.
Operating
costs of £1,877 million were 4 per cent lower, despite
continued strategic investment and absorbing some emerging expenses
related to the Group’s response to the coronavirus outbreak.
The Group saw a 6 per cent reduction in business as usual
costs, driven by continued cost discipline and efficiencies gained
through digitalisation and other process improvements. Remediation
charges of £87 million were higher than the
£20 million expensed in the first three months of 2019,
and related to a number of existing programmes, including the
Cranston review.
The
Group’s market-leading cost:income ratio of
49.7 per cent was higher than the first three months of
2019, having been impacted by lower net income in the
period.
Market-leading
efficiency continues to provide competitive advantage and the focus
on cost discipline will continue. The Group will also ensure
strategic investment is targeted appropriately to reflect the new
operating environment. Operating costs will continue to fall in
2020 after absorbing additional coronavirus-related
expenses.
REVIEW OF PERFORMANCE (continued)
Impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
Quarter
|
|
|
|
Quarter
|
|
|
|
|
ended
|
|
ended
|
|
|
|
ended
|
|
|
|
|
31 Mar
|
|
31 Mar
|
|
|
|
31 Dec
|
|
|
|
|
2020
|
|
2019
|
|
Change
|
|
2019
|
|
Change
|
|
|
£m
|
|
£m
|
|
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment charge
|
|
1,430
|
|
275
|
|
|
|
341
|
|
|
Asset quality ratio
|
|
1.30%
|
|
0.25%
|
|
105bp
|
|
0.30%
|
|
100bp
|
Gross asset quality ratio
|
|
1.35%
|
|
0.30%
|
|
105bp
|
|
0.39%
|
|
96bp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 Mar
|
|
At 31 Dec
|
|
|
|
|
|
|
|
|
20201
|
|
20191
|
|
Change
|
|
|
|
|
|
|
%
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stage 3 loans and advances to customers as a % of
total
|
|
|
|
|
|
1.8
|
|
1.8
|
|
–
|
Stage 3 ECL2
allowances as % of Stage 3 drawn
balances
|
|
|
|
|
|
25.0
|
|
22.5
|
|
2.5pp
|
|
|
|
|
|
|
|
|
|
|
|
Total ECL2
allowances as % of drawn
balances
|
|
|
|
|
|
1.0
|
|
0.8
|
|
0.2pp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
Quarter
|
|
|
|
Quarter
|
|
|
|
|
ended
|
|
ended
|
|
|
|
ended
|
|
|
|
|
31 Mar
|
|
31 Mar
|
|
|
|
31 Dec
|
|
|
|
|
2020
|
|
2019
|
|
Change
|
|
2019
|
|
Change
|
|
|
£m
|
|
£m
|
|
%
|
|
£m
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Underlying charges
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
325
|
|
302
|
|
(8)
|
|
222
|
|
(46)
|
Commercial
Banking
|
|
52
|
|
1
|
|
|
|
112
|
|
54
|
Insurance
and Wealth
|
|
1
|
|
(1)
|
|
|
|
(2)
|
|
|
Central
items
|
|
(10)
|
|
(27)
|
|
63
|
|
9
|
|
|
|
|
368
|
|
275
|
|
(34)
|
|
341
|
|
(8)
|
Coronavirus impacted restructuring cases
|
|
218
|
|
–
|
|
|
|
–
|
|
|
Updated economic outlook
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
564
|
|
–
|
|
|
|
–
|
|
|
Commercial
Banking
|
|
280
|
|
–
|
|
|
|
–
|
|
|
|
|
844
|
|
–
|
|
|
|
–
|
|
|
Impairment charge
|
|
1,430
|
|
275
|
|
|
|
341
|
|
|
|
|
1
|
Underlying
basis.
|
2
|
Expected
credit loss.
|
REVIEW OF PERFORMANCE (continued)
The
impairment charge in the quarter increased significantly to
£1,430 million, although the Group’s loan portfolio
remains robust and well positioned. Impairment provisions reflect
the net impact of economic scenarios and Government support
programmes with the increase on prior year primarily driven by
updates to the Group’s economic outlook following the
coronavirus outbreak (£844 million charge, with further
information in Note 3) and coronavirus impacts on existing
restructuring cases (£218 million). Underlying credit quality
remains robust, however increased underlying charges will
inevitably arise from existing and new lending.
Although
market dynamics are challenging a number of sectors and corporate
customers within the Commercial book, particularly within the
Business Support Unit, the corporate portfolio’s diverse
client base and limits are being proactively managed and have
relatively low exposure to the most vulnerable sectors affected by
the coronavirus outbreak. The Group’s management of
concentration risk includes single name and country limits as well
as controls over the Group’s overall exposure to certain
higher risk and vulnerable sectors and asset classes.
The
Group’s outlook and IFRS 9 base case economic scenario used
to calculate expected credit loss (ECL) has been updated since the
year end through post model adjustments (further detail in Note 3).
Reflecting these post model adjustments, which take into account
the Group’s best estimate of the impact of the coronavirus
outbreak on the Group’s customer and client base, an
additional impairment charge of £844 million has been taken in
the quarter. The Group’s ECL allowance continues to reflect a
probability-weighted view of future economic scenarios including a
30 per cent weighting of base case, upside and downside and a 10
per cent weighting of severe downside, although all scenarios have
deteriorated significantly since the 2019 year end.
The
Group’s net asset quality ratio was 130 basis points in the
quarter, compared with 25 basis points in the first three months of
2019, driven by increases in the ECL. The Group’s ECL
provision stock has increased by over £1 billion to
£5.2 billion, further building balance sheet
resilience.
Significant
uncertainty remains. Although the existing book and new lending,
including Government supported lending, will inevitably experience
losses, partially offset by applicable Government guarantees, the
extent of the impairment charge will depend on the severity and the
duration of the economic shock experienced in the UK.
Statutory profit
Restructuring
costs of £63 million were down 50 per cent compared to the
first three months of 2019 mainly driven by the completion of the
MBNA integration and lower severance costs relating to the
Group’s strategic investment plans. The latter was in part
due to the deferral of redundancy programmes given the coronavirus
pandemic.
Volatility
and other items of £421 million included
£387 million of negative insurance volatility, largely
driven by falling equity markets and widening corporate bond credit
spreads. The first three months of 2019 included the one-off charge
for exiting the Standard Life Aberdeen investment management
agreement.
No
further provision has been taken for PPI in the first quarter. Good
progress has been made with the review of PPI information requests
received and the conversion rate remains low and consistent with
the provision assumption of around 10 per cent, although
operations have been impacted by the coronavirus pandemic in recent
weeks. The unutilised provision at 31 March 2020 was £1,018
million.
The
Group recognised a tax credit of £406 million in the period,
primarily as a result of lower statutory profits and an uplift in
deferred tax assets following the announcement by the Government
that it would maintain the corporation tax rate at 19 per
cent, which was substantively enacted on 17 March 2020. This is
consistent with guidance given at full
year results.
REVIEW OF PERFORMANCE (continued)
Balance sheet growth across business lines
|
|
|
|
|
|
|
|
|
At 31 Mar
|
|
At 31 Dec
|
|
Change
|
|
|
2020
|
|
2019
|
|
%
|
|
|
|
|
|
|
|
Loans and advances to customers1
|
|
£443bn
|
|
£440bn
|
|
1
|
Customer deposits2
|
|
£428bn
|
|
£412bn
|
|
4
|
Loan to deposit ratio
|
|
103%
|
|
107%
|
|
(4)pp
|
|
|
|
|
|
|
|
Wholesale funding3
|
|
£126bn
|
|
£124bn
|
|
1
|
Wholesale funding <1 year maturity3
|
|
£39bn
|
|
£39bn
|
|
(2)
|
Of which money-market funding <1 year
maturity3
|
|
£25bn
|
|
£24bn
|
|
5
|
Liquidity coverage ratio - eligible assets4
|
|
£132bn
|
|
£131bn
|
|
–
|
Liquidity coverage ratio5
|
|
138%
|
|
137%
|
|
1pp
|
|
|
1
|
Excludes
reverse repos of £55.2 billion (31 December 2019: £54.6
billion).
|
2
|
Excludes
repos of £9.4 billion (31 December 2019: £9.5
billion).
|
3
|
Excludes
balances relating to margins of £7.3 billion (31 December
2019: £4.2 billion).
|
4
|
Eligible
assets are calculated as a simple average of month end observations
over the previous 12 months.
|
5
|
The
Liquidity coverage ratio is calculated as a simple average of month
end observations over the previous 12 months.
|
Loans
and advances increased £2.7 billion in the quarter to
£443.1 billion (31 December 2019: £440.4 billion), with
increased corporate lending, primarily drawdowns of existing
corporate facilities, partially offset by expected reductions in
the mortgage book along with reductions in credit cards, where
customer activity reduced in March
Commercial
Banking has continued to optimise its portfolio in challenging
market conditions, maintaining a focus on risk-weighted asset
reduction and addressing low risk-adjusted returning client
relationships. However, balances across the Commercial Banking
portfolio increased in the first quarter as clients drew down facilities in response to
the coronavirus outbreak, although the pace of drawdowns has eased
since the quarter end. Around 50 per cent of revolving credit
facilities in Commercial Banking are now drawn, compared to just
under 40 per cent at the start of the year, an increase in lending
of £6 billion. The Group has low exposure to the most
vulnerable sectors and is working closely with clients to support
them through the crisis.
The Group continues to optimise funding and target current account
balance growth, with Retail current accounts up 4 per cent
over the last three months at £79.9 billion (31 December 2019:
£76.9 billion) partly due to lower levels of customer
spending. The Group’s loan to deposit ratio has fallen 4
percentage points since year end to 103 per cent, largely due to
increased deposits within Commercial Banking, in part reflecting
increases in client drawdowns at the end
of March.
Given
the current environment the Group is granting payment holidays of
up to three months across a range of retail products and as at 24
April 2020, c.400,000 mortgage payment holidays had been granted.
The average LTV of these payment holiday balances is 50 per cent,
compared to the total book average LTV of 44 per cent. In addition,
payment holidays have also been granted across all consumer finance
and unsecured products including c.85,000 in motor finance,
c.175,000 in personal loans and c.220,000 on credit
cards. Within the corporate
sector, the Group has supported £410 million in CBILS
loans to SMEs and increased support for business clients through
the Group’s £2 billion COVID-19 fund, offering
c.37,000 fee-free overdrafts, capital repayment holidays and
working capital increases to clients. The Group has also introduced
payments holidays and simplified claims processing for Insurance
customers.
The
Group continues to recognise interest income for the duration of
payment holidays and in the absence of other credit risk
indicators, the granting of a coronavirus-related payment holiday
does not result in a transfer between stages for the purposes of
IFRS 9.
REVIEW OF PERFORMANCE (continued)
Support
measures in place as at 24 April 2020
|
|
|
|
|
Retail
|
|
|
|
|
Payment holidays granted
|
|
|
|
|
Mortgages
|
|
|
|
404k
|
Average LTV
|
|
|
|
50%
|
UK
Retail unsecured loans
|
|
|
|
174k
|
UK
Motor Finance
|
|
|
|
83k
|
Credit
cards
|
|
|
|
219k
|
|
|
|
|
|
Commercial Banking
|
|
|
|
|
Clients supported to access Coronavirus Business
Interruption
Loan Scheme (CBILS)
|
|
£410m
|
|
3.0k
|
New overdraft requests with no arrangement fee
|
|
|
|
12.9k
|
Capital repayment holidays granted
|
|
|
|
24.1k
|
Funding and liquidity
The
Group has maintained its strong funding and liquidity position with
a stable liquidity coverage ratio (LCR) of 138 per cent. In
addition to its sizable liquid asset buffer averaging
£132 billion over the last 12 months, the Group has a
significant amount of pre-positioned collateral eligible for use in
a range of central bank facilities, including the Bank of
England’s Contingent Term Repo Facility and the Term Funding
Scheme, with additional incentives for SMEs, both recently made
available in response to the pandemic.
The
Group is committed to supporting its customers in financial
distress and with increased liquidity needs during the coronavirus
pandemic.
The
Group continues to access wholesale funding markets across
currencies and investors to maintain a stable and diverse source of
funds. Despite more challenging funding conditions, with a widening
in credit spreads, the Group has seen strong demand in a number of
public issuances, and completed c.£3.5 billion of funding in
the first quarter of 2020 and c.£6.9 billion of funding
year to date, including issuance in early April, across the
Group.
The
Group’s credit ratings continue to reflect its robust balance
sheet, solid underlying profitability and bail-in capital position.
In March, Fitch revised the outlooks on all the Group’s rated
entities, alongside the majority of other UK banks, to Negative,
citing concerns around the coronavirus pandemic. In addition, Fitch
upgraded the Senior Unsecured rating of Lloyds Bank Corporate
Markets to A+. In April, S&P revised the outlook on the
Group’s banking entities, alongside the majority of other
large UK banks, to Negative, citing the potential earnings
pressures arising from the economic and market impact of the
coronavirus pandemic. The Negative outlooks that Moody’s
assigned on Lloyds Banking Group plc and Lloyds Bank plc (due to
concern relating to the UK’s exit from the European Union)
remain in place.
REVIEW OF PERFORMANCE (continued)
Capital management
|
|
|
|
|
|
|
|
|
At 31 Mar
|
|
At 31 Dec
|
|
Change
|
|
|
2020
|
|
2019
|
|
%
|
|
|
|
|
|
|
|
CET1 ratio1,2
|
|
14.2%
|
|
13.8%
|
|
0.4pp
|
Transitional total capital ratio1,2
|
|
21.9%
|
|
21.5%
|
|
0.4pp
|
Transitional MREL ratio1,2
|
|
34.5%
|
|
32.6%
|
|
1.9pp
|
UK leverage ratio1,2
|
|
5.3%
|
|
5.2%
|
|
0.1pp
|
Risk-weighted assets1
|
|
£209bn
|
|
£203bn
|
|
3
|
|
|
|
|
|
|
|
Shareholders' equity
|
|
£47bn
|
|
£42bn
|
|
12
|
Tangible net assets per share
|
|
57.4p
|
|
50.8p
|
|
6.6p
|
|
|
1
|
The
CET1, transitional total capital, MREL and leverage ratios and
risk-weighted assets at 31 December 2019 were reported on a pro
forma basis, reflecting the dividend paid up by the Insurance
business in the subsequent first quarter period.
|
2
|
Incorporating
profits for the period that remain subject to formal verification
in accordance with the Capital Requirements
Regulation.
|
The Group’s CET1 capital ratio increased by 45 basis points
to 14.2 per cent post reversal of the final 2019 dividend. A
summary of the CET1 capital build is set out in the table
below.
|
|
|
|
|
|
|
Pro forma CET1 ratio at 31 December 2019
|
|
|
|
|
|
13.8%
|
Banking business underlying capital build
excluding impairment charge (bps)
|
|
|
|
|
|
56
|
Impairment charge (bps)
|
|
|
|
|
|
(56)
|
Banking business underlying capital build (bps)
|
|
|
|
|
|
–
|
RWA movements (bps)
|
|
|
|
|
|
(29)
|
Other movements (bps)
|
|
|
|
|
|
(9)
|
Reversal of FY 2019 ordinary dividend accrual (bps)
|
|
|
|
|
|
83
|
CET1 ratio at 31 March 2020
|
|
|
|
|
|
14.2%
|
The Group’s underlying capital build before impairment charge
of 56 basis points was offset by the impairment charge in the
quarter.
Risk-weighted assets have increased by £5.3 billion as a
result of the full implementation of the new securitisation
framework (£2.3 billion); foreign currency impacts (c.£1
billion); Counterparty credit risk and credit valuation adjustments
(c.£1 billion); and retail increases (c.£1 billion).
Optimisation activity undertaken in Commercial Banking prior to the
coronavirus pandemic has been largely offset by drawdowns by
corporate customers towards the end of the quarter. Going forward,
risk-weighted assets will continue to be affected by credit
migration and any potential increases in the balance
sheet.
Following the decision by the PRA to reduce the UK countercyclical
capital buffer rate to zero, the Group’s headroom over
regulatory requirements has increased.
The
transitional total capital ratio increased to 21.9 per cent (31
December 2019: 21.5 per cent on a pro forma basis) and the
Group’s transitional minimum
requirement for own funds and eligible liabilities (MREL), which
came into force on 1 January 2020, is 34.5 per cent (31
December 2019: 32.6 per cent on a pro forma basis). The UK leverage
ratio increased to 5.3 per cent.
Tangible net assets per share at 57.4 pence increased by 6.6 pence
in the first three months of 2020, largely driven by an increase in
the pension net asset as credit spreads widened significantly in
the quarter. Since the period end credit spreads have started to
narrow, reversing some of the impact on the pension surplus and the
volatility charge.
REVIEW OF PERFORMANCE (continued)
Dividend
On 31
March, the Group also announced the cancellation of its ordinary
dividends. The decision on the final 2019 ordinary dividend was
taken by the Board at the specific request of the regulator, the
Prudential Regulation Authority (PRA), and was in line with all
other major UK listed banks. The Board also decided that until the
end of 2020 the Group will undertake no quarterly or interim
dividend payments, accrual of dividends, or share buybacks on
ordinary shares. This will help the Group to further serve the
needs of businesses and households through the extraordinary
challenges presented by the coronavirus crisis.
These
are difficult decisions and while the Group recognises the
disappointment and frustration this will cause shareholders, in
particular those relying on dividends for income, this is a prudent
and appropriate response to exceptional circumstances. The Board
will decide on any future dividend distributions at year end
2020.
Outlook
Given
the Group’s clear UK focus, its performance is inextricably
linked to the health of the UK economy and the Group will
inevitably be impacted by the nationwide lockdown related to
coronavirus which has already started to have a significant impact
on the UK economy.
The
longer-term financial impact of coronavirus is not yet clear and
given the significant change in the operating environment and
economic expectations, the Group’s previous guidance is no
longer appropriate. The impact of lower rates and lower levels of
activity on the Group’s business will continue into the
second quarter, but remains difficult to quantify given the
significant uncertainty. We expect the Group will also experience
further impairments, both in existing and new lending books,
particularly if economic expectations deteriorate further from the
base case. The Group will update the market once there is
greater clarity of the impact of coronavirus on the UK economy and
any actions that the Group can take to mitigate them.
Throughout
the coming months, the Group will work with its customers,
colleagues, regulators and the Government to ensure that it
continues to support its customers and delivers on its core purpose
of Helping Britain Prosper.
The
Group is learning from the crisis. Going forward the Group will
further enhance customer service to ensure it continues to offer
leading propositions in the new operating environment, increasingly
tailor its product range to meet customers’ evolving
post-crisis needs and further build cost advantage through new ways
of working.
ADDITIONAL FINANCIAL INFORMATION
1.
Banking
net interest margin and average interest-earning banking
assets
|
|
|
|
|
|
|
Quarter
|
|
Quarter
|
|
|
ended
|
|
ended
|
|
|
31 Mar
|
|
31 Mar
|
|
|
2020
|
|
2019
|
|
|
|
|
|
Group net interest income – statutory basis
(£m)
|
|
5,185
|
|
2,113
|
Insurance gross up (£m)
|
|
(2,265)
|
|
878
|
Volatility and other items (£m)
|
|
30
|
|
92
|
Group net interest income – underlying basis
(£m)
|
|
2,950
|
|
3,083
|
Non-banking net interest expense (£m)
|
|
44
|
|
22
|
Banking net interest income – underlying basis
(£m)
|
|
2,994
|
|
3,105
|
|
|
|
|
|
Net loans and advances to customers
(£bn)1
|
|
443.1
|
|
440.5
|
Impairment provision and fair value adjustments
(£bn)
|
|
4.8
|
|
4.0
|
Non-banking items:
|
|
|
|
|
Fee-based
loans and advances (£bn)
|
|
(7.6)
|
|
(6.9)
|
Other
non-banking (£bn)
|
|
(3.1)
|
|
(3.4)
|
Gross banking loans and advances (£bn)
|
|
437.2
|
|
434.2
|
Averaging (£bn)
|
|
(5.6)
|
|
(0.8)
|
Average interest-earning banking assets (£bn)
|
|
431.6
|
|
433.4
|
|
|
|
|
|
Banking net interest margin (%)
|
|
2.79
|
|
2.91
|
|
|
1
|
Excludes
reverse repos.
|
2.
Return
on tangible equity
|
|
|
|
|
|
|
Quarter
|
|
Quarter
|
|
|
ended
|
|
ended
|
|
|
31 Mar
|
|
31 Mar
|
|
|
2020
|
|
2019
|
|
|
|
|
|
Average shareholders' equity (£bn)
|
|
44.1
|
|
43.6
|
Average intangible assets (£bn)
|
|
(6.1)
|
|
(5.8)
|
Average tangible equity (£bn)
|
|
38.0
|
|
37.8
|
|
|
|
|
|
Underlying profit after tax (£m)
|
|
468
|
|
1,636
|
Add back amortisation of intangible assets (post tax)
(£m)
|
|
105
|
|
88
|
Less profit attributable to non-controlling interests and other
equity holders (£m)
|
|
(132)
|
|
(137)
|
Adjusted underlying profit after tax (£m)
|
|
441
|
|
1,587
|
|
|
|
|
|
Underlying return on tangible equity (%)
|
|
4.7
|
|
17.0
|
|
|
|
|
|
Group statutory profit after tax (£m)
|
|
480
|
|
1,200
|
Add back amortisation of intangible assets (post tax)
(£m)
|
|
105
|
|
88
|
Add back amortisation of purchased intangible assets (post tax)
(£m)
|
|
17
|
|
18
|
Less profit attributable to non-controlling interests and other
equity holders (£m)
|
|
(132)
|
|
(137)
|
Adjusted statutory profit after tax (£m)
|
|
470
|
|
1,169
|
|
|
|
|
|
Statutory return on tangible equity (%)
|
|
5.0
|
|
12.5
|
ADDITIONAL FINANCIAL INFORMATION (continued)
3.
Further
impairment detail
The key
UK economic assumptions made by the Group, averaged over a
five-year period, used to calibrate the impairment overlay in the
first quarter are shown below:
|
|
|
|
|
|
|
|
|
|
|
Base case
|
|
Upside
|
|
Downside
|
|
Severe
downside
|
|
|
%
|
|
%
|
|
%
|
|
%
|
|
|
|
|
|
|
|
|
|
At 31 March 2020
|
|
|
|
|
|
|
|
|
GDP
|
|
0.9
|
|
1.2
|
|
0.4
|
|
(0.1)
|
Interest rate
|
|
0.24
|
|
0.88
|
|
0.08
|
|
0.02
|
Unemployment rate
|
|
5.0
|
|
4.7
|
|
6.5
|
|
7.6
|
House price growth
|
|
1.4
|
|
4.7
|
|
(3.7)
|
|
(8.8)
|
Commercial real estate price growth
|
|
(0.3)
|
|
1.0
|
|
(4.8)
|
|
(7.2)
|
|
|
|
|
|
|
|
|
|
At 31 December 2019
|
|
|
|
|
|
|
|
|
GDP
|
|
1.3
|
|
1.6
|
|
1.1
|
|
0.4
|
Interest rate
|
|
1.25
|
|
2.04
|
|
0.49
|
|
0.11
|
Unemployment rate
|
|
4.3
|
|
3.9
|
|
5.8
|
|
7.2
|
House price growth
|
|
1.3
|
|
5.0
|
|
(2.6)
|
|
(7.1)
|
Commercial real estate price growth
|
|
(0.2)
|
|
1.8
|
|
(3.8)
|
|
(7.1)
|
Scenarios by year:
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2021
|
|
2022
|
|
2020-22
|
|
|
%
|
|
%
|
|
%
|
|
%
|
Base Case
|
|
|
|
|
|
|
|
|
GDP
|
|
(5.0)
|
|
3.0
|
|
3.5
|
|
1.2
|
Interest rate
|
|
0.10
|
|
0.25
|
|
0.25
|
|
0.20
|
Unemployment rate
|
|
5.9
|
|
5.4
|
|
4.7
|
|
5.3
|
House price growth
|
|
(5.0)
|
|
2.0
|
|
2.5
|
|
(0.7)
|
Commercial real estate price growth
|
|
(15.0)
|
|
5.0
|
|
5.0
|
|
(6.3)
|
|
|
|
|
|
|
|
|
|
Upside
|
|
|
|
|
|
|
|
|
GDP
|
|
(5.0)
|
|
3.8
|
|
3.7
|
|
2.2
|
Interest rate
|
|
0.26
|
|
1.03
|
|
1.08
|
|
0.79
|
Unemployment rate
|
|
5.9
|
|
5.0
|
|
4.3
|
|
5.0
|
House price growth
|
|
(2.2)
|
|
6.8
|
|
6.8
|
|
11.6
|
Commercial real estate price growth
|
|
(11.9)
|
|
8.9
|
|
6.0
|
|
1.7
|
|
|
|
|
|
|
|
|
|
Downside
|
|
|
|
|
|
|
|
|
GDP
|
|
(6.5)
|
|
1.8
|
|
3.6
|
|
(1.4)
|
Interest rate
|
|
0.00
|
|
0.03
|
|
0.06
|
|
0.03
|
Unemployment rate
|
|
6.3
|
|
6.7
|
|
6.4
|
|
6.5
|
House price growth
|
|
(7.6)
|
|
(4.1)
|
|
(5.3)
|
|
(16.1)
|
Commercial real estate price growth
|
|
(26.6)
|
|
(3.3)
|
|
2.1
|
|
(27.5)
|
|
|
|
|
|
|
|
|
|
Severe downside
|
|
|
|
|
|
|
|
|
GDP
|
|
(7.8)
|
|
(0.1)
|
|
3.1
|
|
(5.1)
|
Interest rate
|
|
0.00
|
|
0.00
|
|
0.00
|
|
0.00
|
Unemployment rate
|
|
6.7
|
|
8.0
|
|
8.0
|
|
7.6
|
House price growth
|
|
(10.0)
|
|
(10.9)
|
|
(12.9)
|
|
(30.2)
|
Commercial real estate price growth
|
|
(39.2)
|
|
(5.7)
|
|
3.8
|
|
(40.5)
|
ADDITIONAL FINANCIAL INFORMATION (continued)
The
following table shows the extent to which a higher ECL allowance
has been recognised to take account of forward looking information
from the weighted multiple economic scenarios. The Group’s
probability-weighted ECL allowance continues to reflect a 30 per
cent weighting of base case, upside and downside and a 10 per cent
weighting of severe downside.
|
|
|
|
|
|
|
|
|
|
|
|
|
Probability-
|
|
|
|
|
|
|
|
Severe
|
|
|
weighted
|
|
Upside
|
|
Base case
|
|
Downside
|
|
downside
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
Underlying basis
|
|
|
|
|
|
|
|
|
|
|
UK Mortgages
|
|
1,345
|
|
1,025
|
|
1,211
|
|
1,457
|
|
2,372
|
Other Retail
|
|
1,987
|
|
1,870
|
|
1,947
|
|
2,046
|
|
2,284
|
Commercial Banking
|
|
1,826
|
|
1,646
|
|
1,731
|
|
1,940
|
|
2,308
|
Other
|
|
40
|
|
40
|
|
40
|
|
40
|
|
40
|
At 31 March 2020
|
|
5,198
|
|
4,581
|
|
4,929
|
|
5,483
|
|
7,004
|
|
|
|
|
|
|
|
|
|
|
|
Underlying basis
|
|
|
|
|
|
|
|
|
|
|
UK Mortgages
|
|
1,216
|
|
964
|
|
1,111
|
|
1,300
|
|
2,036
|
Other Retail
|
|
1,580
|
|
1,502
|
|
1,551
|
|
1,623
|
|
1,771
|
Commercial Banking
|
|
1,315
|
|
1,211
|
|
1,258
|
|
1,382
|
|
1,597
|
Other
|
|
50
|
|
50
|
|
50
|
|
50
|
|
50
|
At 31 December 2019
|
|
4,161
|
|
3,727
|
|
3,970
|
|
4,355
|
|
5,454
|
The
March 2020 post model adjustment in respect of updated economic
outlook has been applied as a proportionate increase under each
scenario. The additional losses added to the severe scenario are
therefore greater than those added to the upside.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of which -
|
|
|
|
|
|
|
|
|
Net AQR
|
|
coronavirus
|
|
Of which
|
|
Net AQR
|
|
|
|
|
Q1 2020
|
|
ECL
|
|
underlying
|
|
Q1 2019
|
|
Increase
|
|
|
bps
|
|
bps
|
|
bps
|
|
bps
|
|
bps
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
104
|
|
66
|
|
38
|
|
36
|
|
68
|
Mortgages
|
|
22
|
|
24
|
|
(2)
|
|
–
|
|
22
|
Other
|
|
531
|
|
287
|
|
244
|
|
228
|
|
303
|
Commercial Banking
|
|
232
|
|
210
|
|
22
|
|
1
|
|
231
|
Total
|
|
130
|
|
97
|
|
33
|
|
25
|
|
105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mar 2020
|
|
Net ECL
|
|
Write-offs
|
|
P&L
|
|
Dec 2019
|
|
|
ECL
|
|
increase
|
|
and other
|
|
charge
|
|
ECL
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
3,332
|
|
536
|
|
(353)
|
|
889
|
|
2,796
|
Mortgages
|
|
1,345
|
|
129
|
|
(31)
|
|
160
|
|
1,216
|
Other
|
|
1,987
|
|
407
|
|
(322)
|
|
729
|
|
1,580
|
Commercial Banking
|
|
1,826
|
|
511
|
|
(39)
|
|
550
|
|
1,315
|
Other
|
|
40
|
|
(10)
|
|
(1)
|
|
(9)
|
|
50
|
Total
|
|
5,198
|
|
1,037
|
|
(393)
|
|
1,430
|
|
4,161
|
|
|
|
|
|
|
|
|
|
|
|
Coverage
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
1.03%
|
|
|
|
|
|
|
|
0.83%
|
Stage
3
|
|
25.0%
|
|
|
|
|
|
|
|
22.5%
|
ADDITIONAL FINANCIAL INFORMATION (continued)
4.
Lending
within Commercial Banking to key coronavirus-impacted
sectors1
|
|
|
|
|
|
|
Drawn
|
|
Undrawn
|
|
|
£bn
|
|
£bn
|
|
|
|
|
|
Retail non-food
|
|
2.6
|
|
1.2
|
Automotive dealerships
|
|
2.3
|
|
1.3
|
Oil and gas
|
|
1.3
|
|
2.2
|
Construction
|
|
1.2
|
|
1.6
|
Hotels
|
|
1.8
|
|
0.3
|
Passenger transport
|
|
1.2
|
|
0.5
|
Leisure
|
|
0.8
|
|
0.5
|
Restaurants and bars
|
|
0.7
|
|
0.5
|
|
|
1
|
Lending
classified using ONS SIC codes at legal entity level.
|
|
BASIS OF PRESENTATION
|
This
release covers the results of Lloyds Banking Group plc together
with its subsidiaries (the Group) for the three months ended
31 March 2020.
|
Statutory basis: Statutory profit before
tax and statutory profit after tax are included on pages 2 and 3.
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: The statutory results
are adjusted for certain items which are listed below, to allow a
comparison of the Group’s underlying
performance.
- restructuring,
including severance-related costs, the rationalisation of the
non-branch property portfolio, the establishment of the Schroders
partnership, the integration of MBNA and Zurich’s UK
workplace pensions and savings business;
- volatility and
other items, which includes the effects of certain asset sales, the
volatility relating to the Group’s hedging arrangements and
that arising in the insurance businesses, insurance gross up, the
unwind of acquisition-related fair value adjustments and the
amortisation of purchased intangible assets;
-payment protection
insurance provisions.
|
Unless
otherwise stated, income statement commentaries throughout this
document compare the three months ended 31 March 2020 to the
three months ended 31 March 2019, and the balance sheet
analysis compares the Group balance sheet as at 31 March 2020
to the Group balance sheet as at 31 December
2019.
|
Alternative performance measures: The
Group uses a number of alternative performance measures, including
underlying profit, in the discussion of its business performance
and financial position. There have been no changes to the
definitions used by the Group; further information on these
measures is set out on page 331 of the Group’s 2019 Annual
Report and Accounts.
Capital: Capital and leverage ratios
reported as at 31 March 2020 incorporate profits for the quarter
that remain subject to formal verification in accordance with the
Capital Requirements Regulation. The Q1 2020 Interim Pillar 3
Report can be found at: http://www.lloydsbankinggroup.com/investors/financial-performance/
|
FORWARD LOOKING STATEMENTS
This
document contains certain forward looking statements within the meaning of Section 21E of the US
Securities Exchange Act of 1934, as amended, and section 27A of the
US Securities Act of 1933, as amended, with respect to the
business, strategy, plans and/or results of Lloyds Banking Group
plc together with its subsidiaries (the Group) and its current
goals and expectations relating to its future financial condition
and performance. Statements that are not historical facts,
including statements about the 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. 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 the 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. By their nature, forward
looking statements involve risk and uncertainty because they relate
to events and depend upon circumstances that will or may occur in
the future. Factors that could cause actual business, strategy,
plans and/or results (including but not limited to the payment of
dividends) to differ materially from 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, inflation, exchange rates, stock
markets and currencies; any impact of the transition from IBORs to
alternative reference rates; 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 and other benefits including, but without limitation as a
result of any acquisitions, disposals and other strategic
transactions; the ability to achieve strategic objectives; changing
customer behaviour including consumer spending, saving and
borrowing habits; changes to borrower or counterparty credit
quality; concentration of financial exposure; management and
monitoring of conduct risk; instability in the global financial
markets, including Eurozone instability, instability as a result of
uncertainty surrounding the exit by the UK from the European Union
(EU) and as a result of such exit and the potential for other
countries to exit the EU or the Eurozone and the impact of any
sovereign credit rating downgrade or other sovereign financial
issues; political instability including as a result of any UK
general election; technological changes and risks to the security
of IT and operational infrastructure, systems, data and information
resulting from increased threat of cyber and other attacks;
natural, pandemic (including but not limited to the coronavirus
disease (COVID-19) outbreak) 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; risks
relating to climate change; changes in laws, regulations, practices
and accounting standards or taxation, including as a result of the
exit by the UK from the EU, or 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 US or
elsewhere including the implementation and interpretation of key
legislation and regulation together with any resulting impact on
the future structure of the Group; the ability to attract and
retain senior management and other employees and meet its diversity
objectives; 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
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, lending
companies and digital innovators and disruptive technologies; 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 by Lloyds
Banking Group plc with the US Securities and Exchange Commission
for a discussion of certain factors and risks 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 today's date, and the Group expressly disclaims any
obligation or undertaking to release publicly any updates or
revisions to any forward looking statements contained in this
document to reflect any change in the 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.
For
further information please contact:
INVESTORS AND ANALYSTS
Douglas
Radcliffe
Group
Investor Relations Director
020
7356 1571
douglas.radcliffe@lloydsbanking.com
Edward
Sands
Director
of Investor Relations
020
7356 1585
edward.sands@lloydsbanking.com
Nora
Thoden
Director
of Investor Relations – ESG
020
7356 2334
nora.thoden@lloydsbanking.com
CORPORATE AFFAIRS
Grant
Ringshaw
External
Relations Director
020
7356 2362
grant.ringshaw@lloydsbanking.com
Matt
Smith
Head of
Media Relations
020
7356 3522
matt.smith@lloydsbanking.com
Copies
of this interim management statement may be obtained
from:
Investor
Relations, Lloyds Banking Group plc, 25 Gresham Street,
London EC2V 7HN
The
statement can also be found on the Group’s website –
www.lloydsbankinggroup.com
Registered
office: Lloyds Banking Group plc, The Mound, Edinburgh, EH1
1YZ
Registered
in Scotland No. 95000
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 authorized.
LLOYDS
BANKING GROUP plc
(Registrant)
By: Douglas
Radcliffe
Name: Douglas
Radcliffe
Title: Group
Investor Relations Director
Date: 30
April 2020
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