REG - Lloyds Banking Group - 2021 Full Year Results
24/02/2022 07:00
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RNS Number : 6378C Lloyds Banking Group PLC 24 February 2022
2021 Results
News Release
Lloyds Banking Group plc
24 February 2022
CONTENTS
Page
Results for the full year 1
Income statement - underlying basis 4
Key balance sheet metrics 4
Quarterly information 6
Balance sheet analysis 7
Group results - statutory basis 8
Group Chief Executive's statement 10
Our strategy 14
Summary of Group results 20
Segmental analysis - underlying basis 31
Divisional results
Retail 33
Commercial Banking 36
Insurance and Wealth 38
Equity Investments and Central Items 42
Other financial information
Volatility arising in the insurance business 43
Changes in insurance assumptions and methodology 43
Alternative performance measures 45
Risk management
Credit risk portfolio 52
Funding and liquidity management 65
Capital management 66
Statutory information
Condensed consolidated financial statements 77
Consolidated income statement 77
Consolidated statement of comprehensive income 78
Consolidated balance sheet 79
Consolidated statement of changes in equity 81
Consolidated cash flow statement 83
Notes to the condensed consolidated financial statements 84
Basis of presentation 104
Forward looking statements 104
Contacts 106
Alternative performance measures
The Group uses a number of alternative performance measures, including
underlying profit, in the description of its business performance and
financial position. These measures are labelled with an '(A)' throughout this
document. Further information on these measures is set out on page 33. Unless
otherwise stated, commentary on pages 1 and 2 and on pages 10 to 13 is given
on an underlying basis.
Forward looking statements
This news release contains forward looking statements. For further details,
reference should be made to page 104.
RESULTS FOR THE FULL YEAR
"2021 has been a year of solid financial performance with successful strategic
execution, ongoing investment and continued franchise growth. This has enabled
the Group to deliver on its customer focused ambitions, as set out in
Strategic Review 2021, as well as on Helping Britain Recover during the
pandemic. It has also enabled the Group to offer high levels of capital return
to our shareholders.
Building on our strong foundations, our purpose of Helping Britain Prosper
forms the basis of our new strategy to profitably deliver for all of our
stakeholders. We will look to deepen relationships with our existing
customers, both consumers and businesses of all sizes, and meet more of their
financial needs by making our great products more relevant to them and our
channels simpler and more personalised to use. This will set the Group on a
higher growth trajectory with more diversified revenue streams, while we
retain our strong focus on cost and capital discipline. Enabled by maximising
the potential of our dedicated people, technology and data capabilities, our
strategy represents an exciting new chapter for Lloyds Banking Group.
I am confident that the Group's purpose, customer focus, unique business model
and significant competitive strengths, embodied in our ambitious strategy will
ensure the Group is able to deliver higher, more sustainable long-term returns
and capital generation for our shareholders, whilst meeting the needs of
broader stakeholders."
Charlie Nunn
Group Chief Executive
We are Helping Britain Recover with strong progress made under Strategic
Review 2021
• Strong performance against Helping Britain Recover commitments,
including lending more than £16 billion to over 80,000 first-time homebuyers
(target: £10 billion), supporting over 93,000 start-ups and small
businesses(1) with online support, business advice and business banking
accounts (target: 75,000) and expanding the funding available under the
Group's discounted green finance initiatives from £3 billion to £5 billion
• Significant progress against our customer focused commitments,
including maintaining the Group's record all-channel net promoter score of 69
and increasing net new open book Assets under Administration (AuA) in
Insurance and Wealth by over £7 billion
• Continuing to enhance the Group's digital capabilities, with
mobile app releases nearly double that of prior year and a three-fold increase
in corporate clients onboarded to the Group's new cash management and payments
platform
Solid financial performance with continued business momentum
• Statutory profit before tax of £6.9 billion and statutory profit
after tax of £5.9 billion, benefitting from higher income and a net
impairment credit. Tangible net asset value per share of 57.5 pence, up 5.2
pence per share
• Solid net income of £15.8 billion, up 9 per cent, with underlying
net interest income of £11.2 billion, up 4 per cent, underlying other income
of £5.1 billion, up 12 per cent and a reduction in operating lease
depreciation. Underlying net interest income benefitted from increased average
interest-earning banking assets, up 2 per cent and a strengthened banking net
interest margin of 2.54 per cent
• Sustained cost discipline with operating costs of £7.6 billion,
up 1 per cent compared to the prior year, including the impact of rebuilding
variable pay. Remediation charges of £1,300 million, with £775 million in
the fourth quarter, including £600 million in the quarter for HBOS Reading
• Asset quality remains strong. Net underlying impairment credit of
£1.2 billion, including a net credit of £467 million in the fourth quarter,
benefitting from improvements to the macroeconomic outlook for the UK,
combined with robust observed credit performance
Balance sheet and capital strength further enhanced
• Loans and advances to customers at £448.6 billion, up £8.4
billion versus prior year, driven by strong growth in the open mortgage book
(up £16.0 billion in the year to £293.3 billion)
• Customer deposits up £25.6 billion to £476.3 billion, with
Retail current accounts up 14 per cent to £111.5 billion
• Loan to deposit ratio of 94 per cent, providing robust funding and
liquidity; significant potential to lend into recovery
• Strong pro forma capital build of 210 basis points, with 51 basis
points in the fourth quarter. CET1 ratio of 16.3 per cent (pro forma(2)),
remaining ahead of the ongoing target of c.12.5 per cent, plus a management
buffer of c.1 per cent
• Board has recommended a final ordinary dividend of 1.33 pence per
share, resulting in a total ordinary dividend for 2021 of 2.00 pence per
share, in line with the Group's progressive and sustainable ordinary dividend
policy. The Board has also announced its intention to implement an ordinary
share buyback programme of up to £2.0 billion, given the strong capital
position of the Group
2022 guidance
Based on our current macroeconomic assumptions and the Group's new strategy,
for 2022 the Group now expects:
• Banking net interest margin above 260 basis points
• Operating costs of c.£8.8 billion on the new basis, with the
increase from the 2021 equivalent (£8.3 billion) reflecting stable
business-as-usual costs, incremental investment and new businesses(3)
• Asset quality ratio to be c.20 basis points
• Return on tangible equity of c.10 per cent
• Risk-weighted assets at the end of 2022 to be c.£210 billion
(1 )This figure comprises both for-profit enterprises and
not-for-profit enterprises, such as charities. Not-for-profit enterprises
comprise approximately 10 per cent of this figure.
(2 )The pro forma CET1 ratio as at 31 December 2021 reflects
both the dividend paid up by the Insurance business in the subsequent first
quarter period and the impact of the announced ordinary share buyback
programme.
(3 )From the first quarter of 2022 the Group will include all
restructuring costs, apart from merger, acquisition and integration costs,
within operating costs. Non lending-related fraud costs, currently included
within underlying impairment, will also be reported as part of operating
costs. See page 16. Business-as-usual costs are total operating costs less
strategic investment and new businesses, including Embark and Citra Living.
( )
INCOME STATEMENT − UNDERLYING BASIS(A)
2021 2020 Change
£m £m %
Underlying net interest income 11,163 10,773 4
Underlying other income 5,060 4,515 12
Operating lease depreciation (460) (884) 48
Net income 15,763 14,404 9
Operating costs (7,630) (7,585) (1)
Remediation (1,300) (379)
Total costs (8,930) (7,964) (12)
Underlying profit before impairment 6,833 6,440 6
Underlying impairment credit (charge) 1,207 (4,247)
Underlying profit 8,040 2,193
Restructuring (956) (521) (83)
Volatility and other items (182) (361) 50
Payment protection insurance provision - (85)
Statutory profit before tax 6,902 1,226
Tax (expense) credit (1,017) 161
Statutory profit after tax 5,885 1,387
Earnings per share 7.5p 1.2p 6.3p
Dividends per share - ordinary 2.00p 0.57p 1.43p
Share buyback 2.82p -
Share buyback value £2.0bn -
Banking net interest margin(A) 2.54% 2.52% 2bp
Average interest-earning banking assets(A) £445bn £435bn 2
Cost:income ratio(A) 56.7% 55.3% 1.4pp
Asset quality ratio(A) (0.27%) 0.96%
Return on tangible equity(A) 13.8% 2.3% 11.5pp
KEY BALANCE SHEET METRICS
At 31 Dec 2021 At 31 Dec 2020 Change
%
Loans and advances to customers £449bn £440bn 2
Customer deposits £476bn £451bn 6
Loan to deposit ratio(A) 94% 98% (4pp)
CET1 ratio 17.3% 16.2% 1.1pp
Pro forma CET1 ratio(1,A) 16.3% 16.2% 0.1pp
Transitional MREL ratio 37.2% 36.4% 0.8pp
UK leverage ratio 5.8% 5.8%
Risk-weighted assets £196bn £203bn (3)
Tangible net assets per share(A) 57.5p 52.3p 5.2p
(1 )The pro forma CET1 ratio as at 31 December 2021 reflects
both the dividend paid up by the Insurance business in the subsequent first
quarter period and the impact of the announced ordinary share buyback
programme.
( )
QUARTERLY INFORMATION(A)
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
ended
ended
ended
ended
ended
ended
ended
ended
31 Dec 2021
30 Sep 2021
30 Jun 2021
31 Mar 2021
31 Dec 2020
30 Sep 2020
30 Jun 2020
31 Mar 2020
£m £m £m £m £m £m £m £m
Underlying net interest income 2,893 2,852 2,741 2,677 2,677 2,618 2,528 2,950
Underlying other income 1,307 1,336 1,282 1,135 1,066 988 1,235 1,226
Operating lease depreciation (78) (111) (123) (148) (150) (208) (302) (224)
Net income 4,122 4,077 3,900 3,664 3,593 3,398 3,461 3,952
Operating costs (2,029) (1,871) (1,879) (1,851) (2,028) (1,858) (1,822) (1,877)
Remediation (775) (100) (360) (65) (125) (77) (90) (87)
Total costs (2,804) (1,971) (2,239) (1,916) (2,153) (1,935) (1,912) (1,964)
Underlying profit before impairment 1,318 2,106 1,661 1,748 1,440 1,463 1,549 1,988
Underlying impairment credit (charge) 467 84 333 323 (128) (301) (2,388) (1,430)
Underlying profit (loss) 1,785 2,190 1,994 2,071 1,312 1,162 (839) 558
Restructuring (570) (131) (82) (173) (233) (155) (70) (63)
Volatility and other items (247) (30) 95 - (202) 29 233 (421)
Payment protection insurance provision - - - - (85) - - -
Statutory profit (loss) before tax 968 2,029 2,007 1,898 792 1,036 (676) 74
Tax (expense) credit (548) (429) 461 (501) (112) (348) 215 406
Statutory profit (loss) after tax 420 1,600 2,468 1,397 680 688 (461) 480
Banking net interest margin(A) 2.57% 2.55% 2.51% 2.49% 2.46% 2.42% 2.40% 2.79%
Average interest-earning banking assets(A) £449bn £447bn £442bn £439bn £437bn £436bn £435bn £432bn
Cost:income ratio(A) 68.0% 48.3% 57.4% 52.3% 59.9% 56.9% 55.2% 49.7%
Asset quality ratio(A) (0.41%) (0.07%) (0.30%) (0.29%) 0.11% 0.27% 2.16% 1.30%
Return on tangible equity(A) 2.9% 14.5% 24.4% 13.9% 5.9% 6.0% (6.1%) 3.7%
Loans and advances to customers £449bn £451bn £448bn £444bn £440bn £439bn £440bn £443bn
Customer deposits £476bn £479bn £474bn £462bn £451bn £447bn £441bn £428bn
Loan to deposit ratio(A) 94% 94% 94% 96% 98% 98% 100% 103%
Risk-weighted assets £196bn £201bn £201bn £199bn £203bn £205bn £207bn £209bn
Tangible net assets per share(A) 57.5p 56.6p 55.6p 52.4p 52.3p 52.2p 51.6p 57.4p
( )
( )
BALANCE SHEET ANALYSIS
At 31 Dec At 30 Sep 2021 Change At 30 Jun 2021 Change At 31 Dec 2020 Change
2021
£bn £bn % £bn % £bn %
Loans and advances to customers
Open mortgage book 293.3 292.6 289.9 1 277.3 6
Closed mortgage book 14.2 14.8 (4) 15.3 (7) 16.5 (14)
Credit cards 14.1 13.8 2 13.6 4 14.3 (1)
UK Retail unsecured loans 8.1 8.1 8.0 1 8.0 1
UK Motor Finance 14.0 14.1 (1) 14.4 (3) 14.7 (5)
Overdrafts 1.0 1.0 1.0 0.9 11
Retail other(1) 10.9 10.8 1 10.5 4 10.4 5
SME(2) 39.0 39.8 (2) 40.4 (3) 40.6 (4)
Mid Corporates 3.3 3.7 (11) 3.8 (13) 4.1 (20)
Corporate and Institutional 46.1 46.6 (1) 44.9 3 46.0
Commercial Banking other 3.8 4.4 (14) 3.9 (3) 4.3 (12)
Wealth and Central items 0.8 0.8 2.0 (60) 3.1 (74)
Loans and advances to customers 448.6 450.5 447.7 440.2 2
Customer deposits
Retail current accounts 111.5 109.6 2 107.3 4 97.4 14
Commercial current accounts(2,3) 51.5 50.7 2 49.5 4 47.6 8
Retail relationship savings accounts 164.5 162.6 1 161.3 2 154.1 7
Retail tactical savings accounts 16.8 16.8 16.4 2 14.0 20
Commercial deposits(2,4) 116.0 123.8 (6) 124.5 (7) 122.7 (5)
Wealth and Central items 16.0 15.6 3 15.4 4 14.9 7
Total customer deposits 476.3 479.1 (1) 474.4 450.7 6
Total assets 886.6 882.0 1 879.7 1 871.3 2
Total liabilities 833.4 829.4 827.8 1 821.9 1
Ordinary shareholders' equity 47.1 46.5 1 45.8 3 43.3 9
Other equity instruments 5.9 5.9 5.9 5.9
Non-controlling interests 0.2 0.2 0.2 0.2
Total equity 53.2 52.6 1 51.9 3 49.4 8
Ordinary shares in issue, excluding own shares 70,996m 70,979m 70,956m 70,812m
(1 )Primarily Europe.
(2 )Includes Retail Business Banking.
(3 )Primarily non interest-bearing Commercial Banking current
accounts.
(4 )Primarily Commercial Banking interest-bearing accounts.
( )
GROUP RESULTS - STATUTORY BASIS
The results below are prepared in accordance with the recognition and
measurement principles of International Financial Reporting Standards (IFRSs).
The underlying results are shown on page 4. A reconciliation between the
statutory and underlying results is shown on page 35.
2021 2020 Change
Income statement £m £m %
Net interest income 9,366 10,749 (13)
Other income 28,078 18,418 52
Total income(1) 37,444 29,167 28
Insurance claims(1) (21,120) (14,041) (50)
Total income, net of insurance claims 16,324 15,126 8
Operating expenses (10,800) (9,745) (11)
Impairment credit (charge) 1,378 (4,155)
Profit before tax 6,902 1,226
Tax (expense) credit (1,017) 161
Profit for the year 5,885 1,387
Balance sheet At 31 Dec At 31 Dec Change
2021 2020
£m £m %
Assets
Cash and balances at central banks 76,420 73,257 4
Financial assets at fair value through profit or loss(2) 206,771 191,169 8
Derivative financial instruments 22,051 29,613 (26)
Financial assets at amortised cost 517,156 514,994
Financial assets at fair value through other comprehensive income 28,137 27,603 2
Other assets 35,990 34,633 4
Total assets 886,525 871,269 2
Liabilities
Deposits from banks(3) 7,647 12,698 (40)
Customer deposits(3) 476,344 450,651 6
Financial liabilities at fair value through profit or loss 23,123 22,646 2
Derivative financial instruments 18,060 27,313 (34)
Debt securities in issue 71,552 87,397 (18)
Liabilities arising from insurance and investment contracts 168,463 154,512 9
Other liabilities 55,076 52,378 5
Subordinated liabilities 13,108 14,261 (8)
Total liabilities 833,373 821,856 1
Total equity 53,152 49,413 8
Total equity and liabilities 886,525 871,269 2
(1 )Includes income and expense attributable to the
policyholders of the Group's long-term assurance funds that materially offset
in arriving at profit attributable to equity shareholders. These can,
depending on market movements, lead to significant variances on a statutory
basis in total income and insurance claims from one period to the next.
(2 )Contains assets measured at fair value through profit or
loss arising from contracts held with reinsurers, previously included within
other assets; comparatives have been presented on a consistent basis.
(3 )Repurchase agreements, previously reported within deposits
from banks and customer deposits are now reported within other liabilities;
comparatives have been presented on a consistent basis.
( )
GROUP CHIEF EXECUTIVE'S STATEMENT
2021 was a year of continued delivery for the Group, with successful strategic
execution, ongoing investment and continued franchise growth, enabling the
Group to succeed in its customer focused ambitions set out in the Strategic
Review 2021. This resulted in a solid financial performance, with continued
business momentum and balance sheet growth. Given the Group's performance and
strong capital position, the Board has recommended a final ordinary dividend
of 1.33 pence per share, in line with our progressive and sustainable ordinary
dividend policy and a share buyback of up to £2.0 billion, marking 2021 as a
very strong year of capital return to shareholders.
During 2021 the Group focused on Helping Britain Recover, supporting customers
and communities across the UK as they continued to deal with the pandemic. I
am very proud of the positive impact that the Group was able to make. The
dedication of colleagues and their ongoing support for customers, communities
and businesses across the UK in these unique and challenging times is
impressive. I would like to express my gratitude to all of our colleagues for
their resilience, commitment and hard work throughout 2021.
Since joining the Group in August 2021, I have been impressed by the Group's
purpose-driven culture, real customer focus, its commitment to sustainability
and diversity, as well as its disciplined risk management. Building on the
Group's strong foundations and distinct competitive strengths, we are today
launching our new strategy to deliver for all of our stakeholders, as detailed
below. I very much look forward to working with my colleagues across the Group
to drive our purpose, our growth opportunities and build higher, more
sustainable Group returns and capital generation.
Financial performance
In the context of continued business momentum and balance sheet growth, the
Group has delivered a solid financial performance with statutory profit after
tax of £5.9 billion, significantly higher than 2020. Increased profits
benefitted from higher income and the net underlying impairment credit of
£1.2 billion in 2021 (2020: underlying impairment charge of £4.2 billion),
driven by improvements to the macroeconomic outlook for the UK, combined with
robust observed credit performance. Underlying profit before impairment of
£6.8 billion was up 6 per cent on 2020, with increased average
interest-earning assets, a strengthened banking net interest margin and early
signs of recovery in other income, alongside a reduction in operating lease
depreciation. Cost discipline was sustained, with operating costs of
£7.6 billion, up 1 per cent compared to the prior year, including the impact
of rebuilding variable pay in the context of stronger than expected financial
performance. Remediation charges increased in the year to £1,300 million,
with £775 million in the fourth quarter. The full year remediation charges
relate to a number of pre-existing legacy issues and include a £790 million
charge relating to HBOS Reading which reflects the Group's estimate of its
full liability, albeit significant uncertainties remain. We continue to
support the independent Foskett Panel re-review and Dame Linda Dobbs'
independent review process as we work to bring this matter to a conclusion.
The Group has benefitted from continued balance sheet growth during the year.
Loans and advances to customers were up £8.4 billion versus prior year at
£448.6 billion, driven by strong net growth in the open mortgage book of
£16.0 billion, the strongest in over a decade. Cards balances were down
year-on-year but are showing signs of recovery with balances growing
£0.5 billion in the second half. These were offset by lower SME and Mid
Corporate balances given clients' high levels of liquidity, as well as the
continued reduction in the closed mortgage book. Customer deposits continued
to increase during the year, with significant growth of £25.6 billion since
the end of 2020, including significant growth in retail current accounts and
relationship savings balances, with continued inflows to our trusted brands.
Deposit balances are now up c.£65 billion since the end of 2019.
GROUP CHIEF EXECUTIVE'S STATEMENT (continued)
Strong progress made under Strategic Review 2021
The Group launched Strategic Review 2021 last February with a focus on Helping
Britain Recover and further enhancing our core capabilities. We have invested
c.£0.9 billion to support our strategic initiatives, enabling us to succeed
in our Helping Britain Recover commitments and achieving significant progress
on our 2021 customer focused commitments. Highlights include strengthening our
digital offering and attaining record levels of customer satisfaction, with
the all-channel net promoter score maintained at 69 for the year; supporting
over 93,000 start-ups and small businesses(1), by providing our customers with
online support, business advice and business banking accounts (target:
75,000); expanding the availability of affordable and quality homes by lending
more than £16 billion to over 80,000 first-time buyers (target: £10 billion)
and; expanding the funding available under the Group's discounted green
finance initiatives from £3 billion to £5 billion.
A further priority outlined in Strategic Review 2021 was for the Group to meet
more of its customers' broader financial needs. Good progress was made, with
over £7 billion net new money in Insurance and Wealth open book Assets under
Administration (AuA) over the period (£133 billion as at 31 December 2021).
The Group also completed the acquisition of Embark early in 2022, contributing
c.£37 billion of AuA on behalf of c.354,000 consumer clients. This
acquisition is important as it provides a digital, mass market,
direct-to-consumer proposition, complementing the Group's existing advice
offerings via Schroders Personal Wealth and Cazenove Capital.
The Group completes Strategic Review 2021 in a strong position.
Our strategy
Building on our strong foundations, our purpose of Helping Britain Prosper
forms the basis of our new strategy to profitably deliver for all of our
stakeholders. Core to our purpose and strategy is our focus on building an
inclusive society and supporting the transition to a low carbon economy. This
is where we can make the biggest difference, whilst creating new avenues for
our future growth. It is only by doing right by our customers, colleagues and
communities that we can achieve higher, more sustainable returns for
shareholders.
We have a clear strategic vision to be a UK customer-focused digital leader
and integrated financial services provider, capitalising on new opportunities,
at scale. We will look to deepen relationships with our existing customers,
both consumers and businesses of all sizes, and meet more of their financial
needs by making our great products more relevant to them and our channels
simpler and more personalised to use. This will set the Group on a higher
growth trajectory with more diversified revenue streams while we retain our
strong focus on cost and capital discipline. Enabled through maximising the
potential of our dedicated people, technology and data capabilities, our
strategy represents an exciting new chapter for Lloyds Banking Group.
I am confident that the Group's purpose, customer focus, unique business model
and significant competitive strengths, embodied in our ambitious strategy will
ensure the Group is able to deliver higher, more sustainable long-term returns
and capital generation for our shareholders, whilst meeting the needs of
broader stakeholders.
Outlook
The coronavirus pandemic continues to have a significant impact on the people,
businesses and communities of the UK and around the world. As we look forward
into 2022, we are seeing early recovery and the macroeconomic outlook is
improving, supported by the successful vaccine roll out in the UK. Although
the outlook remains uncertain, particularly with regards to new virus
variants, as well as the impact of inflation on the economy and households, I
am confident that the Group is well-placed to deliver increased returns whilst
Helping Britain Prosper, as embodied in our new strategy. This is reflected in
the new guidance outlined below.
( )
GROUP CHIEF EXECUTIVE'S STATEMENT (continued)
2022 guidance
Reflecting confidence in the Group's business model and new strategy and based
on our current macroeconomic assumptions, the Group now expects:
• Banking net interest margin above 260 basis points
• Operating costs of c.£8.8 billion on the new basis, with the
increase from the 2021 equivalent (£8.3 billion) reflecting stable
business-as-usual costs, incremental investment and new businesses(2)
• Asset quality ratio to be c.20 basis points
• Return on tangible equity of c.10 per cent
• Risk-weighted assets at the end of 2022 to be c.£210 billion
2024 and 2026 guidance
Based on the Group's new strategy, reflecting focus on our growth potential,
improved efficiency and realising the capabilities of our people, technology
and data, the Group expects:
• Return on tangible equity in excess of 10 per cent by 2024 and in
excess of 12 per cent by 2026, as the full benefits of our investment are
realised
• Additional revenues of c.£0.7 billion by 2024 and more than
double that of c.£1.5 billion by 2026
• Business-as-usual costs(2) flat in 2024 versus 2021, while costs
increase only to finance new investment, enabling a cost:income ratio of less
than 50 per cent by 2026
• Asset quality ratio to be less than 30 basis points over 2022 to
2024
• Capital generation of around 150 basis points per annum over 2022
to 2024, improving to 175 to 200 basis points by 2026. We are committed to
returning excess capital to shareholders and expect to pay down to our target
capital ratio by 2024
(1 )This figure comprises both for-profit enterprises and
not-for-profit enterprises, such as charities. Not-for-profit enterprises
comprise approximately 10 per cent of this figure.
(2 )From the first quarter of 2022 the Group will include all
restructuring costs, apart from merger, acquisition and integration costs,
within operating costs. Non lending-related fraud costs, currently included
within underlying impairment, will also be reported as part of operating
costs. See page 16. Business-as-usual costs are total operating costs less
strategic investment and new businesses, including Embark and Citra Living.
( )
OUR STRATEGY
Lloyds Banking Group is the largest bank and sole integrated provider of
banking, insurance and wealth propositions in the UK. The Group's strong
foundations have created distinctive competitive strengths. It has leading
customer franchises with trusted brands, significant data assets and leading
market shares. Alongside, the Group has a strong balance sheet, disciplined
risk management and an efficient business model, operating at scale with
strong focus on cost discipline.
Our purpose of Helping Britain Prosper drives our business model and strategic
participation choices. The Group's new strategy has a clear vision to be a UK
customer-focused digital leader and integrated financial services provider,
capitalising on new opportunities, at scale. To this end we are embedding
delivery of broader stakeholder outcomes in our strategy and the way we create
value to be a truly purpose-driven organisation.
We will deliver for all our stakeholders by helping build an inclusive society
and supporting the transition to a low carbon economy. Our efforts on the
former will be focused on improving access to quality housing, promoting
financial inclusion and education, enabling regional development and creating
a more inclusive and diverse workforce with ambitious targets. To support the
transition to a low carbon economy, we are reinforcing our prior commitments,
reducing the carbon emissions we finance by more than 50 per cent by 2030, on
the path to net zero by 2050 or sooner, with our own operations being net zero
by 2030 and further sustainability outcomes embedded across business
priorities.
Through our new strategy, we will transform our business, creating higher,
more sustainable value for all stakeholders. We will drive revenue growth and
diversification across all our main businesses, focusing on strengthening cost
and capital efficiency, together with leveraging an enabling platform which
maximises the potential of people, technology and data to support our business
ambitions. These strategic priorities are supported by incremental investment
of c.£3 billion over the next three years, and a total of c.£4 billion over
five years.
Our strategy will enable the Group to deliver higher, more sustainable,
returns and capital generation. The Group is targeting a return on tangible
equity in excess of 10 per cent by 2024 and in excess of 12 per cent by 2026
as the full benefits of our investment are realised. This will be achieved by
additional revenues of c.£0.7 billion by 2024 and more than double that of
c.£1.5 billion by 2026. Our strong focus on cost discipline will ensure that
we keep business-as-usual costs flat in 2024 versus 2021, whilst costs
increase only to finance new investment, enabling a cost-income ratio of less
than 50 per cent by 2026. The increased profitability resulting from the
strategy will support capital generation of around 150 basis points per annum
over 2022 to 2024, improving to 175 to 200 basis points by 2026. We are
committed to returning excess capital to shareholders and paying down to our
target capital ratio by 2024.
Driving revenue growth and diversification
Growth is a core focus of our strategy. Around two-thirds of our £3 billion
strategic investment over the next three years is aligned to growing and
diversifying revenue. We have carefully prioritised opportunities across each
of our businesses to ensure we generate value in the near-term as well as
creating new revenue streams which deliver over the longer-term. There are
four areas of focus:
i) Deepen and innovate in Consumer
We start from a strong position as the largest UK consumer franchise with a
full set of products, leading financial services brands and record levels of
customer satisfaction across our channels. We have 26 million customer
relationships through our iconic and trusted brands, with over 18 million
digitally active users, making us the largest digital bank in the UK. Our
digital customers engage with us nearly once a day on average. Alongside, we
have the largest branch network in the UK, working closely with local
communities and customers. We are the market leader in mortgages, current
accounts, savings and credit cards and a top three home insurance and
workplace pensions provider.
OUR STRATEGY (continued)
Deepen and innovate in Consumer relationships
We serve customers directly through our three strong and trusted relationship
brands - Lloyds, Halifax and Bank of Scotland. Based on our capabilities
versus our current customer engagement, there is significant potential for us
to grow by meeting more of our existing customers' needs. Our relationship-led
business should be the first place that customers in our priority segments
turn to for all of their financial needs across their lifetime.
We aim to increase the depth of our existing relationships by over 5 per cent
by 2024 through providing a more personalised, relevant engagement, and
offering a simple, convenient way for customers who want a more unified
experience, to fulfil more of their needs in one place. As part of this we
will develop a home ecosystem with integrated mortgages, green retrofit
solutions and insurance products supporting our target of £10 billion of
green mortgage lending by 2024. We will continue to help our customers through
all channels and provide support and education to build their financial
resilience and opportunities. In doing so, we aim to increase our digitally
active customers by over 10 per cent by 2024, to greater than 20 million
customers. Our data and analytics capability, and our digital leadership will
deliver personalised engagement, offers, pricing and credit risk decisions.
Payments will be a key anchor to drive greater engagement. Through enhanced
propositions we aim to grow our market share in credit card spend, which is
below our credit card balances share. We will innovate to meet emerging
customer needs, including new direct to consumer leasing and financing
solutions for electric vehicles and charging points.
Innovate and broaden our intermediary propositions
Intermediaries constitute a significant proportion of the market for certain
key products, representing around 40 per cent of our total consumer income
supported by our strong specialist brands, unique to our Group. Whilst we have
a leading proposition and market share in Mortgages, there are opportunities
to significantly leverage our scale to grow in under-represented intermediary
products such as Motor Finance, Home Insurance, Protection, Individual
Pensions and Investments. By making it easier for intermediaries to do
business with us, the Group can deliver high quality products and services to
all customer segments via reliable, low-friction, intermediated customer
journeys. We will look to emulate our success in workplace pensions where we
have grown market share from 10 per cent to 19 per cent since 2017.
We will protect and grow our franchise to maintain our leading intermediary
market shares with our specialist brands and partnerships with major
distributors. In banking, we will drive growth in new propositions such as
embracing embedded finance solutions, a transport offering with more flexible
finance solutions and scaling Citra Living, our private rental housing
business. As part of this, we will provide £8 billion of financing and
leasing for electric vehicles and plug-in hybrid electric vehicles through our
Black Horse and Lex businesses by 2024. In insurance, we will strengthen our
intermediary offering to capture market share as we aim to become a top three
protection provider by 2025. We will build upon Embark's modern digital
platform and contribute towards our target of generating more than £55
billion of new open book net flows in investment and retirement products by
2024, with between £20 billion and £25 billion invested in climate-aware
strategies through Scottish Widows by 2025.
ii) Creating a new mass affluent offering
Mass affluent is an attractive and currently under-served segment. We see a
clear gap in the market for a digital-first, integrated offering combining a
full set of banking, insurance and investment products. This requires being
able to support customers in the accumulation and decumulation stage of their
lives by joining-up services across banking, housing, pensions and
investments. The Group is uniquely placed to do this. It starts with the
largest mass-affluent customer base in the UK of more than two million
customers through its banking relationships and a complete product range at
scale.
We intend to focus on the broader pool of mass affluent customers with income
or wealth above £75,000, with a scale digital wealth offering and integrated
banking solution. We will combine a tailored banking proposition with
investments, protection and advice, leveraging our current leading
capabilities and the Embark platform. We will provide a personalised banking
experience through a convenient and easy-to-use digital first interface,
supported by personal intervention, offering tailored products such as
higher-value mortgages and lending solutions. As part of this, we are
targeting an increase of over £5 billion in total banking balances for our
mass affluent customers by 2024. This offering
OUR STRATEGY (continued)
will be integrated with services meeting investment needs, providing access to
digital-guided advice for simple investment solutions, again supported by
access to human support, if needed. As a result, we are aiming for over £7
billion of incremental net flows into our investment proposition, increasing
to £25 billion by 2026.
iii) Digitising and diversifying our SME business
The Group serves over one million clients across its Business Banking and SME
franchises. It is a top three player across key purpose aligned sectors
including agriculture, real estate and healthcare. With a strong 20 per cent
primary relationship market share of SMEs, we have an important role to play
in driving growth in priority areas and regions, lifting UK productivity,
supporting start-ups, growing quality jobs and supporting our clients on key
issues, including sustainability. We have a significant opportunity to grow
our market share in underpenetrated sectors and to meet more non lending
transactional needs of our clients, especially in fast growing markets where
we are underweight.
To deliver our vision we must further build our digital SME banking
capability. We need to digitise front-to-back to improve client experience and
enable clients to conveniently and quickly meet their needs. This is essential
given changing client expectations, increasing digital engagement and
competition. We aim to grow our digital product origination and fulfilment to
more than 50 per cent of total volumes, with automated lending decisions for
smaller loans improving time-to-cash. For new customers we will provide a
quick and intuitive onboarding experience. Our digital-first offering will be
complemented by sector and product specialists for their more complex needs,
delivering value for our customers and the Group. Alongside digitisation, we
will expand our SME proposition through merchant services, trade, cashflow
lending, and broader, value added services like supporting SME transition to
net zero. We are targeting over 15 per cent income growth in mid-sized SME
transaction banking and working capital and, in addition, aiming for 20 per
cent annual growth in new merchant services clients.
iv) Target our Corporate and Institutional offering
The Group has a well-established, focused and disciplined Corporate and
Institutional franchise, maintaining active relationships with two-thirds of
the FTSE 350. The business has a significant role in delivering our purpose,
including contributing to regional development and transition to net zero. We
have strong core capabilities in cash, debt and risk management products, such
as transaction banking, lending and rate risk management. In addition, our
Corporate and Institutional offering has important synergies with the broader
Group, providing product capabilities such as foreign exchange and rates
management to our Consumer and SME franchises, and generating £0.5 billion of
relationship income from Corporate and Institutional clients' use of the
Group's motor, insurance and pension propositions.
In recent years, we have improved returns and generated material capital for
the Group through disciplined participation and optimisation. Maintaining our
current prudent risk appetite, we can now significantly build on this to grow
in key sectors aligned to our purpose and areas where we have deep capability.
By enhancing our capabilities and sector coverage, there is significant
headroom to grow other income as a proportion of total income by meeting more
of our existing client needs. This is illustrated by our proportion of other
income being 18 percentage points lower than top quartile peers. To enable
this, we will strengthen our offering with product enhancements in transaction
banking, debt financing, and targeted markets investments. We will drive
growth and value from our cash management and payments platform by continuing
to build on the three-fold increase in corporate clients onboarded to the
platform in 2021. Within transaction banking we will also launch a new supply
chain proposition this year. Within debt financing, to meet the needs of our
UK clients we will ensure an expanded US dollar franchise and continue to
invest in our foreign exchange and Rates capabilities, targeting a top-5 GBP
interest rate swaps ranking by 2024. As we fulfil our clients' borrowing
needs, we will increase our balance sheet velocity and capital efficiency
through a scaled originate-to-distribute model.
Our selective participation means that we are not looking to expand into
regions where we do not have sufficient scale, capability or a clear UK link.
Also, we will not participate outside of our core cash, debt and risk
management capabilities. Through this focus, and strengthening our product
capabilities, we aim to grow other operating income by more than 20 per cent
by 2024. Integral to these steps, we will continue to drive our purpose
outcomes by supporting goals such as regional development and building our
leading green financing capability to support more clients with their
transition plans. As a result, sustainable finance will represent 20 per cent
of our corporate lending book by end of 2024, more than double the proportion
today.
OUR STRATEGY (continued)
Strengthen cost and capital efficiency
i) Strengthen cost efficiency
As we invest to grow and diversify our revenue, it is essential to maintain
our disciplined cost approach - a key strength of the Group. These are
important to create capacity for investment and growth, to increase the pace
at which we can change and improve our services, and to further strengthen our
resilience.
One of the key objectives is to lower the cost of technology through
modernising our technology estate, leveraging public and our private cloud,
decommissioning over 15 per cent of legacy applications and adopting a more
agile operating model, while increasing the throughput of change. In doing so,
we aim to achieve a 15 per cent gross reduction in run and change technology
costs by 2024. We will reduce cost to serve through further end-to-end
digitisation of customer journeys, which will drive greater efficiency in
distribution, operations and servicing as we aim to increase customers served
per distribution FTE by more than 10 per cent by 2024. Finally, we will reduce
our central functions and office overheads. The former will be addressed
through automation and process simplification and the latter will benefit from
the move to hybrid ways of working and transformed workspaces, resulting in a
greater than 30 per cent reduction in office footprint by 2024.
ii) Strengthen capital efficiency
The Group's capital efficient business model will be strengthened by strategic
initiatives, continued rigid discipline on pricing and returns, portfolio
management and enhancement of capital efficient capabilities. Our new growth
initiatives reflect disciplined participation choices, focusing on new, less
capital intensive, fee-generating businesses. Building and scaling an
originate-to-distribute model in the Commercial bank and leveraging our
synergies with Scottish Widows will increase balance sheet velocity and
generate higher fee income further enhancing capital efficiency. Alongside, we
will continue to use our economic value framework to assess and optimise
existing portfolios, determine new business pricing and evaluate new strategic
opportunities, helping ensure efficient usage and distribution of capital.
Maximise the potential of people, technology and data
Delivering this strategy will require the Group to build on the capabilities
and new ways-of-working it has developed over the last few years and
accelerate the pace at which it uses digital technologies and data to support
customers. We seek to emulate our success in building the largest UK Retail
digital bank on a larger scale across the Group. Our prior investments in
technology and data provide a strong foundation for delivering on our
strategy.
Our colleagues' expertise and skills are instrumental to our success. It is
our people who offer the most distinctive customer experience, will drive us
to innovate, take thoughtful risk and enable change at greater pace,
delivering for our customers. Going forward, we will need to invest in our
people and how the organisation works to deliver this strategy. This will
include further developing our ways of working and culture to enable greater
empowerment for the teams serving customers and innovating our products, with
clear accountability to drive growth and maintain our disciplined risk
approach. It will also increase collaboration and organisational 'joining-up',
to serve customers better and manage risk across our divisions and functions.
As a result, we are aiming to improve our employee engagement by 2024.
We will enhance our data and technology estate by taking a Group-wide approach
to transforming core functions and capabilities alongside businesses to
deliver value. We seek to continually deliver value and improve resilience as
we progressively modernise and simplify our technology estate, including
rationalising data centres and legacy applications, driving greater adoption
of the cloud and increasing automation. In doing so we are aiming for 20 per
cent of our applications to be on private and public cloud by 2024. As part
of this we will enhance our operating model by embedding modern engineering
practices, with autonomous multi-skilled teams. In doing so we will leverage
data capabilities to support our business strategies across multiple use
cases. We will use data ethically to create insights that deliver better
customer outcomes, strengthen our own risk management process and generate
value for all our stakeholders.
Our new strategy combines focus on our growth potential, improved efficiency
and realising the capabilities of our people, technology and data. It
represents a significant shift for the Group to better achieve our purpose. We
will capitalise on our opportunities to deliver for all of our stakeholders.
SUMMARY OF GROUP RESULTS
Statutory results
The Group's statutory profit before tax for the year was £6,902 million.
Statutory profit after tax was £5,885 million. Both measures benefitted from
higher income and a net impairment credit given the improved macroeconomic
outlook for the UK compared to the prior year. In the fourth quarter of the
year, statutory profit before tax was £968 million and statutory profit after
tax was £420 million, a reduction on the run rate in the first three quarters
of 2021, primarily reflecting increased remediation and restructuring costs.
The Group's statutory income statement includes income and expense
attributable to the policyholders of the Group's long-term assurance funds.
These items materially offset in arriving at profit attributable to equity
shareholders but can, depending on market movements, lead to significant
variances on a statutory basis between total income and insurance claims from
one period to the next. In the year to 31 December 2021, due to strong market
conditions, the Group recognised significant gains on policyholder investments
within total income which were materially offset by the corresponding growth
in insurance and investment contract liabilities, recognised as an increase in
the insurance claims expense and an increase in the amounts payable to unit
holders in the Group's consolidated open-ended investment companies,
recognised within net interest income.
Total statutory income, net of insurance claims for the year was £16,324
million, an increase of 8 per cent on 2020, reflecting strong growth within
the open mortgage book, positive insurance assumption and methodology changes
and strong returns in the Group's equity investments businesses. The Group has
maintained its focus on cost management, whilst continuing to invest in the
business with total statutory operating expenses up 11 per cent on the prior
year. This included the impact of rebuilding variable pay in the context of
continued stronger than expected financial performance within both income and
impairment, as well as the increased remediation and restructuring costs.
The Group's balance sheet reflects continued franchise growth during the year.
Loans and advances to customers are up 2 per cent on the prior year at
£448.6 billion. This was driven by strong growth in open mortgage book net
lending of £16.0 billion in the year, reflecting the strength of the UK
housing market. Customer deposits increased by £25.6 billion in the year to
£476.3 billion, with continued inflows to the Group's trusted brands. This
included Retail current account growth of £14.1 billion, driven by continued
reduced levels of customer spending.
Assets and liabilities associated with the policyholders of the Group's
long-term assurance funds are included in the Group's statutory balance sheet.
These items have no material impact upon the net assets attributable to equity
shareholders but their movements, which depend on market movements, can lead
to significant variances, predominantly in financial assets at fair value
through profit or loss and liabilities arising from insurance and investment
contracts, from one period to the next. In the year to 31 December 2021, due
to strong market conditions, significant growth was seen in policyholder
investments, primarily within financial assets at fair value through profit or
loss. This was materially offset by an increase in the corresponding insurance
and investment contract liabilities.
The Group's CET1 capital ratio increased over the year to 17.3 per cent.
SUMMARY OF GROUP RESULTS (continued)
Underlying results(A)
The Group's underlying profit for 2021 was £8,040 million, compared to an
underlying profit of £2,193 million in 2020, reflecting solid financial
performance alongside the improved macroeconomic outlook for the UK. In
particular, the Group recognised a net underlying impairment credit of
£1,207 million in 2021, compared to a net charge of £4,247 million in
2020. Underlying profit before impairment for the year of £6,833 million is
up 6 per cent against 2020. Within this, net income was higher than in 2020 at
£15,763 million, partly offset by higher total costs, largely driven by
higher remediation charges.
Net income(A)
2021 2020 Change
£m £m %
Underlying net interest income 11,163 10,773 4
Underlying other income 5,060 4,515 12
Operating lease depreciation (460) (884) 48
Net income(A) 15,763 14,404 9
Banking net interest margin(A) 2.54% 2.52% 2bp
Average interest-earning banking assets(A) £444.6bn £435.0bn 2
Net income performance of £15,763 million was solid and 9 per cent higher
than in the prior year, reflecting both increased underlying net interest
income and increased underlying other income in the year, alongside a
reduction in the charge for operating lease depreciation.
Underlying net interest income of £11,163 million was up 4 per cent
year-on-year, benefitting from an increase in average interest-earning banking
assets and a strengthened banking net interest margin of 2.54 per cent, up 2
basis points compared to 2020. Average interest-earning banking assets were up
2 per cent on the prior year at £444.6 billion, driven by strong growth in
the open mortgage book and the benefit of a full year of government-backed
lending business. This was partially offset by increased levels of
optimisation within Commercial Banking, the repayment of revolving credit
facilities provided to support commercial clients during the pandemic and
lower average balances in the closed mortgage book, credit cards, and UK Motor
Finance for 2021. The banking net interest margin in the fourth quarter of
2.57 per cent, up 2 basis points on the third quarter, reflected the positive
impact of improved structural hedge income and lower funding costs. Based on
its current macroeconomic assumptions, particularly including interest rate
assumptions, the Group expects the banking net interest margin in 2022 to be
above 260 basis points.
The Group manages the risk to its earnings and capital from movements in
interest rates centrally by hedging the net liabilities which are stable or
less sensitive to movements in rates. As at 31 December 2021 the Group's
structural hedge had an approved capacity of £240 billion. This represents a
prudent increase from £210 billion at year end 2020 and £185 billion at year
end 2019, on the basis of substantially greater deposit growth since year end
2019 (growth of £65 billion) added to continued review of deposits to assess
their eligibility for the structural hedge. The nominal balance of the
structural hedge was £240 billion at 31 December 2021 (31 December 2020:
£186 billion) with a weighted-average duration of about three-and-a-half
years (31 December 2020: about two-and-a-half years). The Group generated
£2.2 billion of total gross income from the structural hedge balances in the
year (2020: £2.4 billion).
Underlying other income of £5,060 million in 2021 was 12 per cent higher than
in 2020, with £1,307 million in the fourth quarter. The 2021 performance
reflected recovering levels of customer activity, strong returns in the
Group's equity investment businesses (including Lloyds Development Capital)
and a positive impact from assumption and methodology changes in Insurance and
Wealth (largely in the fourth quarter) compared to a negative impact in 2020.
This was partly offset by a reduced Lex fleet size and lower levels of gilt
sales.
( )
SUMMARY OF GROUP RESULTS (continued)
Within Retail, underlying other income was broadly in line with prior year,
with the effects of recovering levels of customer activity and improved
current account performance offset by the continuing impact of a reduced Lex
fleet size due to contraction of the corporate fleet and new vehicle supply
issues. Commercial Banking underlying other income was broadly stable compared
to prior year despite lower income from financial markets. Insurance and
Wealth underlying other income (£1,432 million) was 15 per cent higher than
the prior year (£1,250 million), largely reflecting the impact of £111
million of positive assumption and methodology changes, of which c.£80
million occurred in the fourth quarter. Underlying other income associated
with the Group's equity investments businesses, including Lloyds Development
Capital, was £682 million (2020: £281 million), with £151 million
recognised in the fourth quarter.
Operating lease depreciation reduced to £460 million (2020: £884 million) as
a result of significantly stronger used car prices, combined with the
continued impact of a reduced Lex fleet size given industry wide supply
constraints in the new car market and contraction of the corporate fleet.
Total costs(A)
2021 2020 Change
£m £m %
Operating costs(A) 7,630 7,585 (1)
Remediation 1,300 379
Total costs(A) 8,930 7,964 (12)
Cost:income ratio(A) 56.7% 55.3% 1.4pp
Total costs of £8,930 million were 12 per cent higher than in 2020, driven by
slightly increased operating costs and significantly higher remediation
charges. The Group has maintained its focus on cost management. Operating
costs of £7,630 million, 1 per cent higher than 2020, included the
accelerated rebuild of variable pay in the context of continued stronger than
expected financial performance. The Group's cost:income ratio was 56.7 per
cent.
From the first quarter of 2022 the Group will report all restructuring costs,
with the exception of merger, acquisition and integration costs, within
operating costs. Non lending-related fraud costs, currently included within
underlying impairment, will also be reported as part of operating costs. On
this new basis, based on current macroeconomic assumptions, operating costs
are expected to be c.£8.8 billion in 2022, with the increase from the 2021
equivalent (£8.3 billion) reflecting stable business-as-usual costs,
incremental investment and new businesses. Operating costs on the new basis
are expected to be stable throughout the period 2022 to 2024.
Remediation charges increased significantly to £1,300 million. This includes
the costs in relation to HBOS Reading, the previously announced £91 million
regulatory fine relating to the past communication of historical home
insurance renewals and redress and operational costs in respect of litigation
and other ongoing legacy programmes. During 2021, £790 million has been
recognised in relation to HBOS Reading estimated future awards and operational
costs, of which £600 million was recognised in the fourth quarter. This
reflects the Group's estimate of its full liability and includes the expected
future cost in relation to the independent Foskett Panel re-review,
operational costs in relation to Dame Linda Dobbs' review which is considering
whether the issues relating to HBOS Reading were investigated and
appropriately reported by the Group during the period January 2009 to January
2017 and other programme costs. The final outcome could be significantly
different once the re-review is concluded.
( )
SUMMARY OF GROUP RESULTS (continued)
Underlying impairment(A)
Asset quality remains strong, with sustained low levels of new to arrears
during the year. Underlying impairment was a net credit of £1,207 million in
the year, compared to a net charge of £4,247 million in 2020, largely driven
by improvements to the economic outlook. Within this, a charge of
£557 million (2020: £1,610 million) was incurred before the impact of
economic outlook revisions, primarily split between a charge of £887 million
for Retail and a £324 million net credit for Commercial Banking. The net
credit in Commercial Banking reflects credit quality improvements and lower
cases flowing into default as well as a smaller overall balance sheet. The
overall net credit in the year was driven by a £1,699 million release of
expected credit loss (ECL) allowances, based upon improvements to the
macroeconomic outlook for the UK, £601 million of which was recognised in the
fourth quarter given a stronger economic outlook than previously forecasted.
2021 2020 Change
£m £m %
Charges (releases) pre-updated multiple economic scenarios(1)
Retail 887 1,359 35
Commercial Banking (324) 252
Other (6) (1)
557 1,610 65
Coronavirus impacted restructuring cases(2) (65) 403
Updated economic outlook
Retail (1,172) 1,025
Commercial Banking (527) 809
Other - 400
(1,699) 2,234
Underlying impairment (credit) charge(A) (1,207) 4,247
Asset quality ratio(A) (0.27%) 0.96%
(1 )Charges (releases) based on economic outlook as at 31
December 2019, prior to the impact of the coronavirus pandemic on expected
losses.
(2 )Additional (releases) charges on cases subject to
restructuring at the end of 2019, where the coronavirus pandemic is considered
to have had a direct effect upon the recovery strategy.
Overall the Group's loan portfolio continues to be well-positioned, reflecting
a prudent through-the-cycle approach to credit risk with high levels of
security. The Group's ECL allowance reduced in the year by £2.4 billion to
£4.5 billion following improvements to the economic outlook, although it
remains c.£0.3 billion higher than at the end of 2019 (31 December 2020:
£6.9 billion, 31 December 2019: £4.2 billion). As noted above, observed
credit performance remained robust in the year, with the flow of assets into
arrears, defaults and write-offs remaining at low levels.
The Group's IFRS 9 base case economic scenario used to calculate the ECL
allowance assumes that unemployment will remain close to the reduced level of
c.4.3 per cent observed in the fourth quarter following the end of the
coronavirus job retention scheme. The ECL allowance continues to reflect a
probability-weighted view of future economic scenarios built out from the base
case and its associated conditioning assumptions, with a 30 per cent weighting
applied to base case, upside and downside scenarios and a 10 per cent
weighting to the severe downside. All scenarios have improved since the start
of the year, following the changes made to the base case outlook.
( )
( )
( )
SUMMARY OF GROUP RESULTS (continued)
The management adjustments to address unprecedented conditions and specific
model limitations resulting from the pandemic have reduced by c.£0.1 billion
over the year. Following increases during the first nine months of the year,
c.£0.4 billion has been released in the fourth quarter, which was partially
offset by c.£0.1 billion of this amount now captured in modelled ECL. The
Group continues to retain in total £0.8 billion of net management judgements
in respect of coronavirus (31 December 2020: c.£0.9 billion). £0.4 billion
of this is held within portfolios to reflect the expected base case and
mitigate remaining risks within the base case not captured fully by models. In
addition, the central adjustment introduced in 2020 has also been maintained
at the same level of £0.4 billion to recognise the greater downside risks
outside of the base case conditioning assumptions and the probability-weighted
view of economic scenarios, such as new virus strains emerging. The quantum of
this adjustment is equivalent to a c.15 percentage points higher weighting of
the severe downside scenario (31 December 2020: c.10 percentage point), noting
that the latest severe scenario is more favourable than that held at 31
December 2020.
Stage 2 loans and advances to customers decreased to £41.7 billion (31
December 2020: £60.5 billion), equivalent to 8.3 per cent (31 December 2020:
12.0 per cent) of total loans and advances to customers, as a result of the
improvements in economic outlook. Of these, 86 per cent are up to date (31
December 2020: 89 per cent). Stage 3 loans and advances to customers of £8.7
billion (31 December 2020: £9.1 billion) as a proportion of the portfolio
have remained stable against prior year at 1.7 per cent. Continued low levels
of flows to arrears and default have so far been sustained, post the removal
of government support and payment holidays. The Group's ECL coverage of Stage
2 assets decreased to 3.5 per cent (31 December 2020: 4.5 per cent), again
reflecting the improved economic outlook.
Coverage of Stage 3 assets has decreased to 24.7 per cent (31 December 2020:
28.6 per cent) primarily due to an increase in Stage 3 Retail Bounce Back Loan
Scheme assets which hold zero ECL due to the government guarantee in place,
the improved macroeconomic outlook and a small number of single name releases
in Commercial Banking (including on coronavirus impacted restructuring cases).
On the basis of the Group's updated base case and current underlying
performance the Group expects the 2022 asset quality ratio to be c.20 basis
points.
Restructuring, volatility and other items
2021 2020 Change
£m £m %
Underlying profit(A) 8,040 2,193
Restructuring (956) (521) (83)
Volatility and other items
Market volatility and asset sales 87 (59)
Amortisation of purchased intangibles (70) (69) (1)
Fair value unwind (199) (233) 15
(182) (361) 50
Payment protection insurance provision - (85)
Statutory profit before tax 6,902 1,226
Tax (expense) credit (1,017) 161
Statutory profit after tax 5,885 1,387
Earnings per share 7.5p 1.2p 6.3p
Return on tangible equity(A) 13.8% 2.3% 11.5pp
Further information on the reconciliation of underlying to statutory results
is included on page 35.
( )
( )
SUMMARY OF GROUP RESULTS (continued)
Restructuring
2021 2020 Change
£m £m %
Severance costs (109) (156) 30
Property transformation (123) (146) 16
Technology research and development (155) (61)
Regulatory programmes (60) (42) (43)
Other (57) (46) (24)
Mergers and acquisitions, integration and write-offs (452) (70)
Total restructuring (956) (521) (83)
Restructuring costs of £956 million were 83 per cent higher than in 2020 with
£570 million incurred in the fourth quarter, including a c.£400 million
software write-off as the Group invests in new technology and systems
infrastructure, partly offset by lower property transformation and severance
costs. From the first quarter of 2022 all restructuring costs, with the
exception of merger, acquisition and integration costs, will be reported as
part of the Group's operating costs. Merger, acquisition and integration costs
will continue to be reported after underlying profit.
Volatility and other items reflected a net loss of £182 million in 2021,
comprising £87 million of positive market volatility and asset sales, £70
million of amortisation of purchased intangibles and £199 million of fair
value unwind. Market volatility and asset sales included a benefit of £238
million from positive insurance and banking volatility (driven mainly by
narrowing bond spreads and increased inflation, partly offset by increasing
interest rates), and a loss of £101 million relating to liability management
exercises recognised in the fourth quarter.
Tax
The Group recognised a tax expense of £1,017 million for the year, including
a credit of £954 million arising on the remeasurement of deferred tax assets
following the announcement, and subsequent substantive enactment, by the UK
Government of a corporation tax rate increase from 19 per cent to 25 per cent
on 1 April 2023. The Group expects a medium term effective tax rate of around
27 per cent which includes the effects of both the increase in corporation tax
rate and the expected reduction from 8 per cent to 3 per cent of the rate of
banking surcharge from 1 April 2023. An explanation of the relationship
between the tax expense and the Group's accounting profit for the year is set
out on page 97.
Return on tangible equity(A)
The return on tangible equity for 2021 was 13.8 per cent (2020: 2.3 per cent),
or 11.4 per cent (2020: 1.4 per cent) excluding the remeasurement of deferred
tax assets. Returns benefitted from the net impairment credit in the year.
Earnings per share were 7.5 pence (2020: 1.2 pence).
Subject to the economic outturn and market volatility, the Group expects the
return on tangible equity for 2022 to be c.10 per cent.
SUMMARY OF GROUP RESULTS (continued)
Balance sheet
At 31 Dec 2021 At 31 Dec 2020 Change
%
Loans and advances to customers £448.6bn £440.2bn 2
Customer deposits £476.3bn £450.7bn 6
Loan to deposit ratio(A) 94% 98% (4pp)
Wholesale funding £91.4bn £109.4bn (16)
Wholesale funding <1 year maturity £30.3bn £34.3bn (12)
Of which money-market funding <1 year maturity(1) £16.1bn £21.5bn (25)
Liquidity coverage ratio - eligible assets(2) £140.2bn £141.7bn (1)
Liquidity coverage ratio(3) 135% 136% (1pp)
(1 )Excludes balances relating to margins of £3.8 billion (31
December 2020: £5.3 billion).
(2 )Eligible assets are calculated as an average of month-end
observations over the previous 12 months post any liquidity haircuts.
(3 )The Liquidity coverage ratio is calculated as a simple
average of month end observations over the previous 12 months.
Loans and advances to customers of £448.6 billion increased 2 per cent on the
prior year, driven by strong growth in the open mortgage book of £16.0
billion in the year, reflecting the strength of the UK housing market. Total
customer deposits were up £25.6 billion in the year, to £476.3 billion,
with continued inflows to the Group's trusted brands. This included Retail
current account growth of £14.1 billion in 2021, driven by inflows to trusted
brands and continued reduced levels of customer spending.
The Group has maintained its robust funding and liquidity position with a loan
to deposit ratio of 94 per cent, down 4 percentage points on 2020, largely
driven by increased customer deposits.
The Group continued to access wholesale funding across a variety of currencies
and markets. The Group has made net drawings of £16.3 billion from the Term
Funding Scheme with additional incentives for SMEs (TFSME) in 2021, taking the
total outstanding amount to £30 billion at 31 December 2021. Overall, total
wholesale funding reduced to £91.4 billion at 31 December 2021 (31 December
2020: £109.4 billion) primarily as a result of the growth in customer
deposits and TFSME drawings.
( )
SUMMARY OF GROUP RESULTS (continued)
Capital
At 31 Dec At 31 Dec Change
2021
2020
%
CET1 ratio 17.3% 16.2% 1.1pp
Pro forma CET1 ratio(1,A) 16.3% 16.2% 0.1pp
Transitional total capital ratio 23.6% 23.3% 0.3pp
Transitional MREL ratio 37.2% 36.4% 0.8pp
UK leverage ratio 5.8% 5.8%
Risk-weighted assets £196bn £203bn (3)
Shareholders' equity £47bn £43bn 9
Tangible net assets per share(A) 57.5p 52.3p 5.2p
(1 )The pro forma CET1 ratio as at 31 December 2021 reflects
both the dividend paid up by the Insurance business in the subsequent first
quarter period and the impact of the announced ordinary share buyback
programme.
( )
Capital movements bps
Banking build (pre-underlying impairment credit) 210
Insurance dividend 16
Impairment credit net of IFRS 9 transitional relief release (19)
Risk-weighted assets(1) 58
Fixed pension contributions (41)
Other movements (14)
Pro forma capital build 210
Ordinary dividends (77)
Share buyback accrual (108)
Variable pension contributions(2) (10)
Pro forma net movement in CET1 ratio 15
(1 )Excluding movement in threshold risk-weighted assets.
(2 )Based upon in year shareholder distributions.
The Group's CET1 capital ratio (after announced distributions) increased by 15
basis points over the year to 16.3 per cent on a pro forma basis, compared to
16.2 per cent at 31 December 2020. The strong pro forma capital build of
210 basis points for the year largely reflected banking profitability
(pre-underlying impairment credit) of 210 basis points, with a limited
impairment offset of 19 basis points, being the net impact of IFRS 9
transitional relief reduction and the underlying impairment credit for the
year. The capital build also benefitted from a reduction in risk-weighted
assets equivalent to 58 basis points and 16 basis points for the final
dividend received from the Insurance business in February 2022 (£300
million). These positives offset fixed pension contributions made to the
defined benefit pension schemes of 41 basis points and other movements of 14
basis points which include around 30 basis points for the impact of the equity
provided to Insurance to fund the acquisition of Embark. The pro forma CET1
capital ratio reduced by a further 185 basis points in respect of the full
year ordinary dividend and the announced share buyback programme. In addition,
variable pension contributions of 10 basis points, based upon a proportion of
in year shareholder distributions, were made to the main defined benefit
pension schemes in December.
Excluding the Insurance dividend received in February 2022 and the impact of
the announced ordinary share buyback programme, the Group's CET1 capital ratio
at 31 December 2021 was 17.3 per cent (31 December 2020: 16.2 per cent).
SUMMARY OF GROUP RESULTS (continued)
Risk-weighted assets at £196.0 billion reduced by £6.7 billion during the
year, including £4.7 billion in the fourth quarter. This was driven primarily
by optimisation activity undertaken in Commercial Banking, partially offset by
balance sheet growth in the business. Credit migrations have had a limited
impact on the risk-weighted asset position in part due to the increase in
house prices.
On 1 January 2022 the Group's risk-weighted assets increased to £212 billion
on a pro forma basis, reflecting the impact of regulatory changes that include
the implementation of new CRD IV mortgage, retail unsecured and commercial
banking models and revised counterparty credit risk measurement rules (SA-CCR)
following the UK implementation of the remainder of CRR 2. These were
partially offset by the removal of risk-weighted assets linked to the reversal
of the revised treatment previously applied to intangible software assets and
other movements. The new CRD IV models are subject to finalisation and
approval by the PRA and therefore uncertainty over the final impact remains.
The pro forma CET1 capital ratio on 1 January 2022 reduced by around 230 basis
points to 14.0 per cent, reflecting the above increase in risk-weighted assets
and other related modelled impacts, in addition to the capital impact of the
treatment of intangible software assets and phased reductions in IFRS 9
transitional relief. The full impact of the regulatory changes has been
absorbed through the retention of surplus capital (post announced
distributions) that was held aside for this purpose. The Group's pro forma
CET1 capital ratio after reflecting the regulatory changes remains strong and
above the Group's target capital level and minimum regulatory capital
requirements. The Board remains committed to capital returns and intends to
pay down to its capital target within the course of the current plan by 2024.
The Group's CET1 regulatory minimum capital requirement is currently around 11
per cent.
In December 2021 the Financial Policy Committee (FPC) of the Bank of England
announced that the UK countercyclical capital buffer rate will increase from
nil to 1 per cent in December 2022, with an expectation that it will increase
to 2 per cent in the second quarter of 2023. This would represent an
equivalent increase in the Group's countercyclical capital buffer to 0.9 per
cent in December 2022 and to 1.8 per cent in the second quarter of 2023, based
on the position at 31 December 2021 and reflective of the concentration of
exposures of the Group to the UK market.
The PRA reduced the Group's nominal Pillar 2A CET1 capital requirement during
the year. It was the equivalent of around 2.1 per cent of risk-weighted assets
as at 31 December 2021.
In December 2020 the PRA introduced a reduction to the Group's Pillar 2A
requirement linked to the setting of a 2 per cent UK countercyclical capital
buffer rate under normal conditions (as defined by the FPC). In line with PRA
policy, the reduction is currently fully offset by other regulatory capital
buffers at the CET1 level whilst the UK countercyclical capital buffer rate
remains at nil. This offset is expected to unwind going forward as the UK
countercyclical capital buffer rate increases to 2 per cent in line with the
FPC announcement, effectively allowing the reduction of the PRA requirement to
take effect.
The Board's view of the ongoing level of CET1 capital required to grow the
business, meet current and future regulatory requirements and cover
uncertainties continues to be around 12.5 per cent, plus a management buffer
of around 1 per cent.
SUMMARY OF GROUP RESULTS (continued)
Pensions
During 2021 the valuations of the Group's three main defined benefit pension
schemes were agreed with the scheme trustees. The latest annual update as at
31 December 2020 showed the funding deficit had improved to £6.0 billion from
the £7.3 billion shown at the 31 December 2019 triennial valuation. The
revised deficit included an allowance for the impact of RPI reform as
announced by the Chancellor of the Exchequer in November 2020 which is
currently subject to judicial review in 2022.
Under the agreed recovery plans, the Group will make c.£0.8 billion of fixed
contributions to the pension schemes per annum, plus a further 30 per cent of
in-year capital distributions to ordinary shareholders, up to a limit on total
deficit contributions of £2.0 billion per annum, payable until the 2019
deficit has been removed. A total of £1,064 million of deficit contributions
were paid in 2021. The Group continues to provide security to these pension
schemes, with corporate guarantees and collateral pledged, whilst also making
additional annual contributions for future service and scheme running costs.
The next triennial valuation will take place as at 31 December 2022 with the
outcome to be agreed by 31 March 2024.
Dividend and share buyback
The Group has a progressive and sustainable ordinary dividend policy whilst
maintaining the flexibility to return surplus capital through buybacks or
special dividends.
Given the Group's solid financial performance and strong capital position at
the year end, the Board has recommended a final ordinary dividend of 1.33
pence per share. This is in addition to the interim ordinary dividend of 0.67
pence per share that was announced in the 2021 half year results. The
recommended total ordinary dividend per share for 2021 is therefore 2.00 pence
per share. The Board has also announced its intention to implement an ordinary
share buyback of up to £2.0 billion which will commence as soon as is
practicable and is expected to be completed by 31 December 2022. The Board
intends to return surplus capital by way of a buyback programme given the
amount of surplus capital, the normalisation of ordinary dividends and the
flexibility that a buyback programme offers. Given the total ordinary dividend
of 2.00 pence per share and the intended ordinary share buyback, equivalent to
up to 2.82 pence per share, the total capital return in respect of 2021 will
be up to 4.82 pence per share, equivalent to £3.4 billion.
The Board remains committed to future capital returns. Going forward, the
Board intends to maintain its progressive and sustainable ordinary dividend
policy and due consideration will be given to further excess capital returns
at the end of the year as appropriate. The Board intends to pay down to its
capital target within the course of the current plan, by 2024.
SEGMENTAL ANALYSIS - UNDERLYING BASIS(A)
2021 Retail Commercial Insurance Equity Investments and Central Group
Banking and Wealth Items
£m £m £m £m £m
Underlying net interest income 8,643 2,363 70 87 11,163
Underlying other income 1,736 1,277 1,432 615 5,060
Operating lease depreciation (442) (18) - - (460)
Net income 9,937 3,622 1,502 702 15,763
Operating costs (4,724) (1,857) (956) (93) (7,630)
Remediation (360) (830) (123) 13 (1,300)
Total costs (5,084) (2,687) (1,079) (80) (8,930)
Underlying profit before impairment 4,853 935 423 622 6,833
Underlying impairment credit 285 916 4 2 1,207
Underlying profit 5,138 1,851 427 624 8,040
Banking net interest margin(A) 2.47% 2.99% 2.54%
Average interest-earning banking assets(A) £361.5bn £82.1bn £1.0bn - £444.6bn
Asset quality ratio(A) (0.08%) (1.05%) (0.27%)
Loans and advances to customers(1) £363.7bn £84.1bn £1.0bn (£0.2bn) £448.6bn
Customer deposits £318.0bn £142.3bn £15.6bn £0.4bn £476.3bn
Risk-weighted assets £98.3bn £69.6bn £1.3bn £26.8bn £196.0bn
2020 Retail Commercial Insurance Equity Investments and Central Group
Banking and Wealth Items
£m £m £m £m £m
Underlying net interest income 8,384 2,357 49 (17) 10,773
Underlying other income 1,733 1,292 1,250 240 4,515
Operating lease depreciation (856) (28) - - (884)
Net income 9,261 3,621 1,299 223 14,404
Operating costs (4,761) (1,851) (902) (71) (7,585)
Remediation (125) (210) (50) 6 (379)
Total costs (4,886) (2,061) (952) (65) (7,964)
Underlying profit before impairment 4,375 1,560 347 158 6,440
Underlying impairment charge (2,384) (1,464) (9) (390) (4,247)
Underlying profit (loss) 1,991 96 338 (232) 2,193
Banking net interest margin(A) 2.52% 2.83% 2.52%
Average interest-earning banking assets(A) £345.5bn £88.6bn £0.9bn - £435.0bn
Asset quality ratio(A) 0.69% 1.53% 0.96%
Loans and advances to customers(1) £350.9bn £86.2bn £0.9bn £2.2bn £440.2bn
Customer deposits £290.2bn £145.6bn £14.1bn £0.8bn £450.7bn
Risk-weighted assets £99.0bn £75.0bn £1.3bn £27.4bn £202.7bn
(1 )Equity Investments and Central Items includes a £400
million ECL central adjustment that has not been allocated to specific
portfolios.
( )
DIVISIONAL RESULTS
RETAIL
Retail offers a broad range of financial service products to personal and
business banking customers, including current accounts, savings, mortgages,
credit cards, unsecured loans, motor finance and leasing solutions. Its aim is
to build deep and enduring relationships that meet more of its customers'
financial needs and improve their financial resilience throughout their
lifetime, with personalised products and services. Retail operates the largest
digital bank and branch network in the UK and continues to improve service
levels and reduce conduct risk, whilst working within a prudent risk appetite.
Through investment in our strategic priority areas, alongside increasing use
of data, we will deepen existing consumer relationships and broaden our
intermediary offering, to improve customer experience, operational efficiency
and enable increasingly tailored propositions.
Strategic progress
• Record net promoter score maintained at 69, reflecting the Group's
focus on improving customer experience
• Maintained UK's largest digital bank, with over 18 million
digitally active customers, who log on 26 times per month on average. Over 14
million customers now use the Group's mobile apps
• Continued innovation; first high street bank app to allow
management of third party subscriptions and setting variable contactless
limits. Credit score hub launched, to help and support customers with their
financial wellbeing
• Further modernisation of technology architecture; record mobile
app releases, 180 per cent of previous year and the first high street bank to
give customers the ability to settle credit card balances via open banking,
c.2.8 million uses since launch
• Expanded the availability of affordable and quality homes, with
strong net open mortgage book growth of £16.0 billion. The Group exceeded
its £10 billion target for lending to first-time buyers; more than £16
billion lent to over 80,000 customers
• Supporting families to build money management capabilities;
including launch of children's banking and savings proposition. Delivered new
credit card cashback proposition, rewarding customers for making purchases
• Strengthened current account proposition; Halifax is the most
switched to bank in the UK since the launch of the Current Account Switch
Service
• Supported businesses to recover, adapt, and grow; including launch
of the business banking finance assistance team. Over 93,000 start-ups and
small businesses(1) supported, by providing online support, business advice
and business banking accounts, against the Group's target of 75,000
• Helping the transition to a low carbon economy; now funding over
one in ten registered battery electric cars in the UK. Launched online support
tool aiding transition to electric and hybrid cars, and new electric car
salary sacrifice scheme
Financial performance
• Underlying net interest income 3 per cent higher, benefitting from
mortgage and business banking balance growth, offset by lower unsecured
balances due to reduced levels of activity and demand during the pandemic
• Underlying other income broadly in line with prior year; improved
current account performance offset by market driven reductions in Lex fleet
size. Operating lease depreciation decreased by 48 per cent, as a result of
significantly stronger used car prices and the reduced Lex fleet size
• Operating costs 1 per cent lower, reflecting benefit of efficiency
initiatives offset by increased variable pay costs. Remediation charges
increased to £360 million, driven by pre-existing programmes
• Underlying impairment credit of £285 million in 2021, underpinned
by benign credit environment and strong asset quality given improvements to
the macroeconomic outlook for the UK
• Customer lending increased 4 per cent, driven by strong net open
mortgage book growth of £16.0 billion, partially offset by the continued run
off of the closed mortgage book and lower unsecured balances, the latter
experiencing some recovery in the second half of 2021
• Customer deposits increased 10 per cent with continued inflows to
the Group's trusted brands
• Risk-weighted assets down 1 per cent, reflecting lower operational
risk and lower unsecured balances, offset by the larger mortgage book
(1 )Comprises for-profit and not-for-profit enterprises, such as
charities. Not-for-profit enterprises comprise c.10 per cent of this figure.
Retail performance summary
2021 2020 Change
£m £m %
Underlying net interest income 8,643 8,384 3
Underlying other income 1,736 1,733
Operating lease depreciation (442) (856) 48
Net income 9,937 9,261 7
Operating costs (4,724) (4,761) 1
Remediation (360) (125)
Total costs (5,084) (4,886) (4)
Underlying profit before impairment 4,853 4,375 11
Underlying impairment credit (charge) 285 (2,384)
Underlying profit 5,138 1,991
Banking net interest margin(A) 2.47% 2.52% (5bp)
Average interest-earning banking assets(A) £361.5bn £345.5bn 5
Asset quality ratio(A) (0.08%) 0.69%
At 31 Dec 2021 At 31 Dec 2020 Change
£bn £bn %
Open mortgage book 293.3 277.3 6
Closed mortgage book 14.2 16.5 (14)
Credit cards 14.1 14.3 (1)
UK unsecured loans 8.1 8.0 1
UK Motor Finance 14.0 14.7 (5)
Business Banking 8.1 8.8 (8)
Overdrafts 1.0 0.9 11
Other(1) 10.9 10.4 5
Loans and advances to customers 363.7 350.9 4
Operating lease assets 4.1 3.9 5
Total customer assets 367.8 354.8 4
Current accounts 111.5 97.4 14
Relationship savings(2) 189.7 178.8 6
Tactical savings 16.8 14.0 20
Customer deposits 318.0 290.2 10
Risk-weighted assets 98.3 99.0 (1)
(1 )Primarily Europe.
(2 )Includes Business Banking.
COMMERCIAL BANKING
Commercial Banking serves Small and Medium sized businesses and Corporate and
Institutional clients, providing lending, transactional banking, working
capital management, debt financing and risk management services. Through
investment in digital capability and product development, Commercial Banking
will deliver an enhanced customer experience through a digital first SME model
and expanded client propositions, generating diversified capital-efficient
growth and supporting customers on their transition to net zero.
Strategic progress
• Helping Britain Recover through support from 1,100 business
specialists in communities nationwide to help business customers develop
appropriate recovery plans
• Exceeded the full year target to help expand the availability of
affordable and quality homes, delivering £3.4 billion of new funding support
to the social housing sector, including £2.4 billion that is ESG-related,
benefitting from a new, dedicated sustainability team
• Expanded the funding available under the Group's discounted green
finance initiatives(1) from £3 billion to £5 billion to support businesses
as they transition to a low carbon economy. Delivering more than £6.9 billion
of green and ESG-related finance(2)
• Strengthening the Markets proposition through an enhanced product
offering and improved pricing capabilities; growing the share of foreign
exchange products for core clients and improving sterling rates ranking(3)
• Increased the number of new clients using the Group's merchant
services by more than 15 per cent through targeted investment, providing a
simplified and quicker onboarding service
• Achieved the full year target of a threefold increase in the
number of corporate clients onboarded to the new cash management and payments
platform leveraging improved digital capabilities
• Achieved c.60 per cent growth in SME products originated via
digital compared to the prior year, through increased focus on digital
marketing and improved client journeys
• Enhanced the client experience and proposition, including the
award winning Trade Tracker and with support of fintech partners, the launch
of a digital Invoice Finance Manager solution for SME clients
Financial performance
• Underlying net interest income of £2,363 million, broadly flat on
prior year, reflecting strong portfolio management across both sides of the
balance sheet, with higher asset margins offsetting lower deposit income given
the rate environment
• Underlying other income down 1 per cent at £1,277 million, with
higher levels of corporate financing and transaction banking activity, broadly
offset by financial markets
• Operating costs broadly flat reflecting benefit from efficiency
initiatives offset by increased variable pay costs
• Remediation charges of £830 million, largely driven by HBOS
Reading related costs
• Underlying impairment credit of £916 million, based upon
improvements to the macroeconomic outlook for the UK, improved credit outlook
across Stage 1 and 2 and releases for specific single names in Stage 3. Asset
quality remains strong with underlying charges below pre-coronavirus levels
• Customer lending 2 per cent lower at £84.1 billion due to lower
client activity given high levels of liquidity, repayment of government-backed
lending and continued optimisation of the corporate portfolio, partly offset
by higher targeted lending growth
• Customer deposits 2 per cent lower at £142.3 billion, reflecting
the continued focus on optimising for liquidity
• Risk-weighted assets decreased 7 per cent to £69.6 billion,
driven by increased levels of optimisation in the corporate book, resulting in
improved returns
(1 )Funding provided by Commercial Banking since 2016 under the
Clean Growth Finance Initiative and Commercial Real Estate Green Lending.
(2 )Includes Clean Growth Finance Initiative, Commercial Real
Estate Green Lending, Renewable Energy Financing, Sustainability Linked Loans
and Green/ESG/Social bond facilitation during 2021.
(3 )Combined Tradeweb and Bloomberg GBP IRS ranking.
Commercial Banking performance summary
2021 2020 ( ) Change
£m £m %
Underlying net interest income 2,363 2,357
Underlying other income 1,277 1,292 (1)
Operating lease depreciation (18) (28) 36
Net income 3,622 3,621
Operating costs (1,857) (1,851)
Remediation (830) (210)
Total costs (2,687) (2,061) (30)
Underlying profit before impairment 935 1,560 (40)
Underlying impairment credit (charge) 916 (1,464)
Underlying profit 1,851 96
Banking net interest margin(A) 2.99% 2.83% 16bp
Average interest-earning banking assets(A) £82.1bn £88.6bn (7)
Asset quality ratio(A) (1.05%) 1.53%
At 31 Dec 2021 At 31 Dec 2020 Change
£bn £bn %
SME 30.9 31.8 (3)
Mid Corporates 3.3 4.1 (20)
Corporate and Institutional 46.1 46.0
Other 3.8 4.3 (12)
Loans and advances to customers 84.1 86.2 (2)
SME loans and advances including Retail Business Banking 39.0 40.6 (4)
Customer deposits 142.3 145.6 (2)
Current accounts including Retail Business Banking 51.5 47.6 8
Other customer deposits including Retail Business Banking 116.0 122.7 (5)
Customer deposits including Retail Business Banking 167.5 170.3 (2)
Risk-weighted assets 69.6 75.0 (7)
( )
INSURANCE AND WEALTH
Insurance and Wealth offers insurance, investment and wealth management
products and services. It supports over 10 million customers with Assets under
Administration (AuA) of over £190 billion and annualised annuity payments of
over £1.1 billion. The Group continues to invest significantly in the
development of the business, with the strategic aims of creating a new mass
affluent offering, innovating the Group's intermediary propositions and
accelerating the transition to a low carbon economy.
Strategic Progress
• Completed the acquisition of Embark (in January 2022), which will
enhance the Group's capabilities to address the attractive mass affluent
segment, complementing the Group's Wealth proposition and strengthening the
Group's offering in Retirement, as well as contributing c.£37 billion of AuA
on behalf of c.354,000 consumers
• Progressed the Group's vision to be the preferred financial
partner for personal customers, with over £7 billion net new money in
Insurance and Wealth open book AuA over the period (£133 billion as at 31
December 2021). Total AuA increased by 12 per cent over the period to £193
billion (excluding the contribution of Embark)
• Deepened customer relationships through investing in Schroders
Personal Wealth (SPW) dedicated relationship consultants leading to a 175 per
cent year-on-year increase in referrals, contributing to AuA inflows of £1.2
billion
• Continued to Help Britain Recover and transition to a low carbon
economy with completion of c.£0.8 billion of loan investments, including the
first Sustainability Linked Loan (SLL) in the social housing sector
• Launched the 'Find Your Impact' feature into the Scottish Widows
app, allowing pension scheme members to see the environmental, social and
governance impact of their pension investments
• Continued to collaborate across the Group, with Commercial Banking
relationships contributing to increased Workplace Pensions market share
(estimated at 19 per cent)
• Continued modernisation of the Group's technology architecture,
with over 35 million views of insurance products in the Group's advanced
Single Customer View proposition in December 2021, up from 17 million in
December 2020
• For the sixth consecutive year Scottish Widows has achieved 5
stars in the Financial Service Awards across Pension and Protection and
Investments
Financial performance
• Life, Pensions and Investments (LP&I) sales have risen 19 per
cent (27 per cent excluding Bulk Annuities), with year-on-year increases
across all propositions excluding Bulk Annuities
• Strong Workplace business growth with year-on-year increase in
sales (30 per cent) and AuA (20 per cent), though evolving business mix means
a higher proportion of income recognition is deferred to future years
• Individual Annuities new business income increased 11 per cent
year-on-year, largely driven by increased sales in the Group's open market
offering
• Protection new business income strong, almost doubling
year-on-year, with continued growth in sales across all channels (42 per cent
overall sales growth) and market share increasing a percentage point to 5 per
cent
• General insurance income net of claims decreased, with a reduction
in income driven by evolving business mix and a competitive market ahead of
new regulatory pricing rules which were introduced from January 2022
• Wealth income increased 10 per cent year-on-year, given higher
customer deposits and increased profit contribution from SPW. Stockbroking
maintained the record levels of income seen in 2020, with a 22 per cent
increase in AuA
• Operating costs increased by £54 million (6 per cent
year-on-year) driven by increased investment and variable pay
• Underlying profit rose 26 per cent to £427 million, despite the
£91 million regulatory fine in the first half of 2021
Insurance capital and liquidity
• Estimated Insurance Solvency II ratio of 191 per cent (181 per
cent after proposed dividend), or 169 per cent on a pro forma basis allowing
for the planned Embark acquisition and proposed dividend, up 28 percentage
points from full year 2020 on a pre-dividend basis
• Credit asset portfolio remains strong, rated 'A -' on average,
well diversified and non-cyclical, with less than 1 per cent of assets backing
annuities being sub investment grade or unrated. Strong liquidity position
with c.£3.5 billion cash and cash like assets
• A final dividend of £300 million was paid to Lloyds Banking Group
plc in February 2022
Insurance and Wealth performance summary
2021 2020 Change
£m £m %
Underlying net interest income 70 49 43
Underlying other income 1,432 1,250 15
Net income 1,502 1,299 16
Operating costs (956) (902) (6)
Remediation (123) (50)
Total costs (1,079) (952) (13)
Underlying profit before impairment 423 347 22
Underlying impairment credit (charge) 4 (9)
Underlying profit 427 338 26
Life and pensions sales (PVNBP)(1) 17,289 14,529 19
General insurance underwritten new gross written premiums 87 111 (22)
General insurance underwritten total gross written premiums 655 662 (1)
General insurance combined ratio(2) 101% 85% 16pp
At 31 Dec 2021 At 31 Dec Change
2020
£bn £bn %
Insurance Solvency II ratio (pre-dividend)(3) 191% 151% 40pp
UK Wealth Loans and advances to customers 1.0 0.9 11
UK Wealth Customer deposits 15.6 14.1 11
UK Wealth Risk-weighted assets 1.3 1.3 -
Total customer assets under administration 192.8 171.9 12
(1 )Present value of new business premiums.
(2 )Includes £91 million regulatory fine relating to the way
the Group historically communicated with home insurance customers regarding
their renewals, excluding the fine this ratio was 86 per cent.
(3 )Equivalent estimated regulatory view of ratio (including
With Profits funds and post-dividend) was 169 per cent (31 December 2020:
144 per cent).
Income by product group
2021 2020
New Existing Total New Existing Total
business business business business
£m £m £m £m £m £m
Workplace, planning and retirement 201 110 311 203 124 327
Individual and bulk annuities 79 83 162 166 84 250
Protection 32 20 52 16 21 37
Longstanding LP&I 11 286 297 9 346 355
323 499 822 394 575 969
Life and pensions experience and other items 162 (195)
General insurance 280 309
1,264 1,083
Wealth 238 216
Net income 1,502 1,299
( )
EQUITY INVESTMENTS AND CENTRAL ITEMS
2021 2020 Change
£m £m %
Net income 702 223
Operating costs (93) (71) (31)
Remediation 13 6
Total costs (80) (65) (23)
Underlying profit before impairment 622 158
Underlying impairment credit (charge) 2 (390)
Underlying profit (loss) 624 (232)
Equity Investments and Central Items contains the Group's equity investments
businesses, including Lloyds Development Capital (LDC), the recently
established Citra Living and the Group's share of the Business Growth Fund
(BGF). Also included are income and expenses not attributed to other
divisions, including residual underlying net interest income after transfer
pricing (which includes the central recovery of the Group's distributions on
other equity instruments), in period gains from gilt sales and the unwind of
associated hedging costs.
During 2021, the Group's equity investment businesses, contributed net income
of £573 million compared to £150 million in the prior year with particularly
strong investment performance in LDC in the year, c.£100 million above
typical run rate given attractive exits in the year. LDC continues to build
its investment portfolio with attractive returns and seek opportunities to
further integrate with the Group offering. Net income also included a lower
in-year gain of £29 million on the sale of gilts and other liquid assets,
compared with a £149 million gain on sale of such assets in 2020.
Underlying impairment for the year was a credit of £2 million compared to a
charge of £390 million in 2020. The underlying impairment charge incurred in
2020 included a £400 million ECL central adjustment, that has not been
allocated to specific portfolios, applied in respect of uncertainty in the
economic outlook. This ECL central adjustment has been maintained in 2021.
OTHER FINANCIAL INFORMATION
Volatility arising in the insurance business
Volatility included in the Group's statutory results before tax comprises the
following:
2021 2020
£m £m
Insurance volatility 503 (220)
Policyholder interests volatility 366 (74)
Total volatility 869 (294)
Insurance hedging arrangements (592) 72
Total 277 (222)
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. The impact of the
actual return on these investments differing from the expected return is
included within insurance volatility.
Insurance volatility movements in 2021 were largely driven by positive impacts
from rising global equity markets, narrowing credit spreads and rising
inflation, partially offset by negative impacts from rising interest rates.
Although the Group manages its exposures to equity, interest rate, foreign
currency exchange rate, inflation and market movements within the Insurance
division, it does so by balancing the importance of managing the impacts on
both capital and earnings volatility. For example, equity market movements are
hedged within Insurance on a Solvency II capital basis and whilst this also
reduces the IFRS earnings exposure to equity market movements, the hedge works
to a lesser extent from an IFRS earnings perspective.
Changes in Insurance assumptions and methodology
Demographic and expense assumptions are managed within other operating income
(separately from economic return assumptions which impact Insurance
volatility). The following impacts from assumption and methodology changes are
included within Insurance and Wealth other operating income:
2021 2020
£m £m
Persistency (15) (74)
Mortality, longevity and morbidity 149 52
Expense assumptions (94) (124)
Other 3 (5)
Total assumption changes 43 (151)
Methodology changes 68 91
Total assumption and methodology changes 111 (60)
Key life and pensions assumptions and methodologies are formally updated
through the annual basis review in the fourth quarter of each year, however
assumptions are monitored continuously and updated when necessary. Current
year changes include allowance for the coronavirus impact on mortality rates,
whilst prior year was reflective of the macroeconomic impacts of the pandemic
such as redundancies and furlough. The changes in expense assumptions
primarily reflect reallocation of costs between business lines and future
short-term committed expenditures, including specific projects. Methodology
changes include significant model improvements in 2021 and changes in the
treatment of illiquid assets in 2020.
ALTERNATIVE PERFORMANCE MEASURES
In addition to the statutory basis of presentation, the results are also
presented on an underlying basis. The Group Executive Committee reviews the
Group's results on an underlying basis in order to assess performance and
allocate resources. Management uses underlying profit before tax, an
alternative performance measure, as a measure of performance and believes that
it provides important information for investors because it allows for a
comparable representation of the Group's performance by removing the impact of
certain items, including volatility caused by market movements.
In arriving at underlying profit, statutory profit before tax is adjusted for
the items below, to allow a comparison of the Group's underlying performance:
- Restructuring, including severance costs, property transformation,
technology research and development, regulatory programmes, merger and
acquisition costs and integration costs
- 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 business, the unwind of acquisition-related fair
value adjustments and the amortisation of purchased intangible assets
- Payment protection insurance remediation provisions, excluding
litigation costs
The Group's statutory income statement includes income and expense
attributable to the policyholders of the Group's long-term assurance funds.
These items materially offset in arriving at profit attributable to equity
shareholders but can, depending on market movements, lead to significant
variances on a statutory basis in total income and insurance claims from one
period to the next. The Group nets down this volatility in the underlying
basis presentation in order to improve comparability between periods.
Analysis of lending and expected credit loss (ECL) allowances is presented on
both statutory and underlying bases and a reconciliation between the two is
shown on page 40. On a statutory basis, purchased or originated
credit-impaired (POCI) assets include a fixed pool of mortgages that were
purchased as part of the HBOS acquisition at a deep discount to face value
reflecting credit losses incurred from the point of origination to the date of
acquisition. Over time, these POCI assets will run off as the loans redeem,
pay down or losses crystallise. The underlying basis assumes that the lending
assets acquired as part of a business combination were originated by the Group
and are classified as either Stage 1, 2 or 3 according to the change in credit
risk over the period since origination. Underlying ECL allowances are
calculated accordingly. The Group uses the underlying basis to monitor the
creditworthiness of the lending portfolio and related ECL allowances.
ALTERNATIVE PERFORMANCE MEASURES (continued)
The Group calculates a number of metrics that are used throughout the banking
and insurance industries on an underlying basis. These metrics are not
necessarily comparable to similarly titled measures presented by other
companies and are not any more authoritative than measures presented in the
financial statements, however management believes that they are useful in
assessing the performance of the Group and in drawing comparisons between
years. A description of these measures and their calculation, is given below.
Asset quality ratio The underlying impairment credit or charge for the period in respect of loans
and advances to customers, expressed as a percentage of average gross loans
and advances to customers for the period. This measure is used internally in
the Group's Monthly Management Report and is useful in assessing the credit
quality of the loan book
Banking net interest margin Banking net interest income on customer and product balances in the banking
businesses as a percentage of average gross interest-earning banking assets
for the period. This measure is used internally in the Group's Monthly
Management Report and is useful in assessing the profitability of the banking
business
Cost:income ratio Total costs as a percentage of net income calculated on an underlying basis.
This measure is used internally in the Group's Monthly Management Report and
is helpful in assessing the profitability of the Group's operations before the
effects of the underlying impairment credit or charge
Loan to deposit ratio Loans and advances to customers divided by customer deposits. This measure is
used internally in the Group's Monthly Management Report
Operating costs Operating expenses adjusted to remove the impact of remediation, restructuring
costs, operating lease depreciation, the amortisation of purchased intangibles
and payment protection insurance remediation provisions, excluding litigation
costs, the insurance gross up and other statutory items. This measure is used
internally in the Group's Monthly Management Report. From the first quarter of
2022 the Group will report all restructuring costs, with the exception of
merger, acquisition and integration costs, within operating costs. Non
lending-related fraud costs, currently included within underlying impairment,
will also be reported as part of operating costs. This change is being made to
improve the transparency of the Group's cost reporting
Pro forma CET1 ratio CET1 ratio adjusted for the effects of the dividend paid up by the Insurance
business in the subsequent first quarter period and the impact of the
announced share buyback programme
Return on tangible equity Profit attributable to ordinary shareholders, divided by average tangible net
assets. This measure is used internally in the Group's Monthly Management
Report and is useful in providing a consistent basis with which to measure the
Group's performance
Tangible net assets per share Net assets excluding intangible assets such as goodwill and
acquisition-related intangibles divided by the number of ordinary shares in
issue. This measure is used internally in the Group's Monthly Management
Report and is useful in assessing the capital strength of the Group
Underlying profit before impairment Underlying profit adjusted to remove the underlying impairment credit or
charge. This measure is used internally in the Group's Monthly Management
Report and is useful in allowing for a comparable representation of the
Group's performance before the effects of the forward-looking underlying
impairment credit or charge
Underlying profit Statutory profit adjusted for certain items as detailed above. This measure is
used internally in the Group's Monthly Management Report and allows for a
comparable representation of the Group's performance by removing the impact of
certain items including volatility caused by market movements outside the
control of management
ALTERNATIVE PERFORMANCE MEASURES (continued)
Reconciliation between statutory and underlying basis financial information
Statutory basis Removal of: Underlying basis(A)
Volatility Insurance PPI remediation
and other gross up(3)
items(1,2)
2021 £m £m £m £m £m
Net interest income 9,366 255 1,542 - 11,163 Underlying net interest income
Other income, net of insurance claims 6,958 (139) (1,759) - 5,060 Underlying other income
(460) - - (460) Operating lease depreciation
Total income, net of insurance claims 16,324 (344) (217) - 15,763 Net income
Operating expenses(4) (10,800) 1,653 217 - (8,930) Total costs(4)
Impairment credit 1,378 (171) - - 1,207 Underlying impairment credit
Profit before tax 6,902 1,138 - - 8,040 Underlying profit
2020
Net interest income 10,749 174 (150) - 10,773 Underlying net interest income
Other income, net of insurance claims 4,377 165 (27) - 4,515 Underlying other income
(884) - - (884) Operating lease depreciation
Total income, net of insurance claims 15,126 (545) (177) - 14,404 Net income
Operating expenses(4) (9,745) 1,522 174 85 (7,964) Total costs(4)
Impairment charge (4,155) (95) 3 - (4,247) Underlying impairment charge
Profit before tax 1,226 882 - 85 2,193 Underlying profit
(1 )In 2021 this comprises the effects of market volatility and
asset sales (gain of £87 million); the amortisation of purchased intangibles
(loss of £70 million); restructuring (loss of £956 million, including
severance costs (£109 million), property transformation (£123 million),
technology research and development (£155 million), regulatory programmes
(£60 million), other (£57 million) and merger and acquisition costs,
integration costs and write-offs (£452 million)); and fair value unwind (loss
of £199 million).
(2 )In 2020 this comprises the effects of market volatility and
asset sales (loss of £59 million); the amortisation of purchased intangibles
(loss of £69 million); restructuring (loss of £521 million, including
severance costs (£156 million), property transformation (£146 million),
technology research and development (£61 million), regulatory programmes
(£42 million), other (£46 million) and merger and acquisition costs,
integration costs and write-offs (£70 million)); and fair value unwind (loss
of £233 million).
(3 )The Group's insurance businesses' income statements include
income and expense attributable to the policyholders of the Group's long-term
assurance funds. These items have no impact in total upon profit attributable
to equity shareholders and, to provide a clearer representation of the
underlying trends within the business, these items are shown net within the
underlying results.
(4 )Statutory operating expenses includes operating lease
depreciation. On an underlying basis operating lease depreciation is included
in net income.
( )
ALTERNATIVE PERFORMANCE MEASURES (continued)
2021 2020
Asset quality ratio(A)
Underlying impairment credit (charge) (£m) 1,207 (4,247)
Remove non-customer underlying impairment (£m) (7) 5
Underlying customer related impairment credit (charge) (£m) 1,200 (4,242)
Loans and advances to customers (£bn) 448.6 440.2
Add back expected credit loss allowance (drawn) (£bn) 3.8 5.8
Add back acquisition related fair value adjustments (£bn) 0.4 0.5
Underlying gross loans and advances to customers (£bn) 452.8 446.5
Averaging (£bn) (2.4) (2.4)
Average underlying gross loans and advances to customers (£bn) 450.4 444.1
Asset quality ratio(A) (0.27%) 0.96%
Banking net interest margin(A)
Underlying net interest income (£m) 11,163 10,773
Remove non-banking underlying net interest expense (£m) 108 177
Banking underlying net interest income (£m) 11,271 10,950
Underlying gross loans and advances to customers (£bn) 452.8 446.5
Adjustment for non-banking and other items:
Fee-based loans and advances (£bn) (5.1) (5.1)
Other non-banking and other items (£bn) 1.3 (2.6)
Interest-earning banking assets (£bn) 449.0 438.8
Averaging (£bn) (4.4) (3.8)
Average interest-earning banking assets (£bn)(A) 444.6 435.0
Banking net interest margin(A) 2.54% 2.52%
Cost:income ratio(A)
Total costs (£m) 8,930 7,964
Net income (£m) 15,763 14,404
Cost:income ratio(A) 56.7% 55.3%
Operating costs(A)
Operating expenses (£m) 10,800 9,745
Remove remediation (£m) (1,300) (379)
Remove restructuring (£m) (956) (521)
Remove operating lease depreciation (£m) (460) (884)
Remove amortisation of purchased intangibles (£m) (70) (69)
Remove payment protection insurance provisions, excluding litigation costs - (85)
(£m)
Remove insurance gross up (£m) (217) (174)
Other statutory items (£m) (167) (48)
Operating costs (£m)(A) 7,630 7,585
( )
( )
( )
ALTERNATIVE PERFORMANCE MEASURES (continued)
2021 2020
Return on tangible equity(A)
Profit attributable to ordinary shareholders (£m) 5,355 865
Average shareholders' equity (£bn) 45.2 43.5
Remove average intangible assets (£bn) (6.3) (6.2)
Average tangible equity (£bn) 38.9 37.3
Return on tangible equity(A) 13.8% 2.3%
Underlying profit before impairment(A)
Statutory profit before tax (£m) 6,902 1,226
Add back impairment (credit) charge (£m) (1,378) 4,155
Add back volatility and other items including restructuring (£m) 1,309 977
Insurance gross up (£m) - (3)
Payment protection insurance remediation (£m) - 85
Underlying profit before impairment (£m)(A) 6,833 6,440
At 31 Dec 2021 At 31 Dec 2020
Loan to deposit ratio(A)
Loans and advances to customers (£bn) 448.6 440.2
Customer deposits (£bn) 476.3 450.7
Loan to deposit ratio(A) 94% 98%
Pro forma CET1 ratio(A)
CET1 ratio 17.3% 16.2%
Insurance dividend and share buyback accrual(1) (1.0%)
Pro forma CET1 ratio(A) 16.3%
Tangible net assets per share(A)
Ordinary shareholders' equity (£m) 47,011 43,278
Remove goodwill (£m) (2,320) (2,320)
Remove intangible assets (£m) (4,196) (4,140)
Remove purchased value of in-force business (£m) (197) (221)
Deferred tax effects and other adjustments (£m) 538 459
Tangible net assets (£m) 40,836 37,056
Ordinary shares in issue, excluding own shares 70,996m 70,812m
Tangible net assets per share(A) 57.5p 52.3p
( )
( )
(1 )Dividend paid up by the Insurance business in the subsequent
first quarter period and the impact of the announced ordinary share buyback
programme.
( )
RISK MANAGEMENT
CREDIT RISK PORTFOLIO
Overview
• Performance across the Group's lending portfolios has been robust,
driven in part by the successful public policy interventions to address the
financial impacts of COVID-19, including government-backed lending schemes and
payment holidays, which have limited the increase in unemployment and helped
keep credit defaults and business failures low
• Portfolios have also benefitted from the Group's proactive risk
management and prudent credit risk appetite, with robust cashflow criteria and
LTVs in the Group's secured portfolios
• However, looking forward some portfolio deterioration may be
expected, especially considering the withdrawal of government COVID-19 support
measures and effects from a number of downside risks, including higher
inflation and rising interest rates
• Repayments under the government-backed lending schemes began in
the second half of 2021, with arrears levels being carefully monitored,
alongside continued review of customer trends and indicators to ensure early
signs of customer distress are quickly identified
• The Group continues to hold appropriate expected credit loss (ECL)
allowances in light of the uncertainties and to protect against downside risks
• The net underlying impairment credit in 2021 was £1,207 million,
compared to an underlying charge of £4,247 million in 2020. The full-year
credit resulted from a £1,699 million release of expected credit loss
allowances based upon improvements to the macroeconomic outlook for the UK,
combined with robust observed credit performance, with a low run rate
impairment charge of £557 million
• As a result, the Group's customer related ECL allowances reduced
in the period from £6,832 million to £4,477 million. Reductions in
Commercial Banking ECL allowances also reflected improved outcomes on
restructuring cases, reduction in Stage 2 exposures and lower flows to default
• Stage 2 loans and advances to customers reduced from £60,514
million to £41,710 million and as a percentage of total lending reduced by
3.7 percentage points to 8.3 per cent (31 December 2020: 12.0 per cent),
predominantly reflecting the improvement in the Group's forward-looking
macroeconomic assumptions. Of these, 86.5 per cent were up to date (31
December 2020: 88.9 per cent). Stage 2 coverage reduced to 3.5 per cent (31
December 2020: 4.5 per cent)
• Stage 3 loans and advances to customers reduced in the period to
£8,694 million (31 December 2020: £9,089 million) and as a percentage of
total lending reduced to 1.7 per cent (31 December 2020: 1.8 per cent). Stage
3 coverage reduced by 3.9 percentage points to 24.7 per cent (31 December
2020: 28.6 per cent), largely driven by an increase in Retail BBLS assets
which hold zero ECL allowances due to the UK Government guarantee in place,
the improved macroeconomic outlook, and a small number of single name releases
in Commercial Banking, including coronavirus impacted restructuring cases
Prudent risk appetite and risk management
• The Group continues to take a prudent approach to credit risk and
has a through-the-cycle credit risk appetite, while working closely with
customers to help and support them through and recover from the crisis
• Sector and asset class concentrations within the portfolios are
closely monitored and controlled, with mitigating actions taken where
appropriate. Sector and product caps and policies limit exposure to certain
higher risk and vulnerable sectors and asset classes
• The Group's effective risk management seeks to ensure early
identification and management of customers and counterparties who may be
showing signs of distress
• The Group will continue to work closely with its customers
throughout the recovery to ensure they receive the appropriate level of
support, including where repayments under the UK Government scheme lending
fall due
CREDIT RISK PORTFOLIO (continued)
Statutory impairment (credit) charge by division
Loans and Loans and advances to banks Financial Other Undrawn 2021
advances to assets at balances
customers fair value
through other
comprehensive
income
2020
£m £m £m £m £m £m £m
Retail (315) - - - (140) (455) 2,384
Commercial Banking (794) (5) (3) - (117) (919) 1,369
Insurance and Wealth (4) - - 2 - (2) 12
Equity Investments and Central Items (3) - 1 - - (2) 390
Total impairment (credit) charge (1,116) (5) (2) 2 (257) (1,378) 4,155
Underlying impairment (credit) charge(A) by division
Loans and Loans and advances to banks Financial Other Undrawn 2021
advances to assets at balances
customers fair value
through other
comprehensive
income
2020
£m £m £m £m £m £m £m
Retail (145) - - - (140) (285) 2,384
Commercial Banking (791) (5) (3) - (117) (916) 1,464
Insurance and Wealth (4) - - - - (4) 9
Equity Investments and Central Items (3) - 1 - - (2) 390
Total underlying impairment (credit) charge(A) (943) (5) (2) - (257) (1,207) 4,247
Asset quality ratio(A) (0.27%) 0.96%
CREDIT RISK PORTFOLIO (continued)
Total expected credit loss allowance
Statutory basis Underlying basis(A)
At 31 Dec 2021 At 31 Dec 2020 At 31 Dec 2021 At 31 Dec 2020
£m £m £m £m
Customer related
Drawn 3,820 5,760 4,277 6,373
Undrawn 200 459 200 459
4,020 6,219 4,477 6,832
Other assets 22 28 22 28
Total ECL allowance 4,042 6,247 4,499 6,860
Reconciliation between statutory and underlying bases of gross loans and
advances to customers and reverse repurchase agreements and expected credit
loss allowance on drawn balances
Gross loans and advances to customers and reverse repurchase agreements Expected credit loss allowance on drawn balances
Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
£m £m £m £m £m £m £m £m £m £m
At 31 December 2021
Underlying basis(A) 453,636 41,710 8,694 - 504,040 919 1,377 1,981 - 4,277
POCI assets (2,392) (6,781) (2,251) 11,424 - (1) (259) (397) 657 -
Acquisition fair value adjustment 13 2 - (447) (432) (3) (4) (3) (447) (457)
(2,379) (6,779) (2,251) 10,977 (432) (4) (263) (400) 210 (457)
Statutory basis 451,257 34,931 6,443 10,977 503,608 915 1,114 1,581 210 3,820
At 31 December 2020
Underlying basis(A) 435,526 60,514 9,089 - 505,129 1,385 2,493 2,495 - 6,373
POCI assets (1,625) (8,864) (2,600) 13,089 - (3) (330) (506) 839 -
Acquisition fair value adjustment 42 9 1 (578) (526) (10) (18) (7) (578) (613)
(1,583) (8,855) (2,599) 12,511 (526) (13) (348) (513) 261 (613)
Statutory basis 433,943 51,659 6,490 12,511 504,603 1,372 2,145 1,982 261 5,760
CREDIT RISK PORTFOLIO (continued)
Movements in total expected credit loss allowance - statutory basis
Opening ECL at 31 Dec 2020 Write-offs Income Net ECL Closing ECL at 31 Dec 2021
and other(1) statement decrease
charge (credit)
£m £m £m £m £m
UK mortgages 1,027 83 (273) (190) 837
Credit cards 923 (353) (49) (402) 521
Loans and overdrafts 715 (309) 39 (270) 445
UK Motor Finance 501 (52) (151) (203) 298
Other 229 (43) (21) (64) 165
Retail 3,395 (674) (455) (1,129) 2,266
SME 502 (10) (237) (247) 255
Corporate and other(2) 1,900 (140) (682) (822) 1,078
Commercial Banking 2,402 (150) (919) (1,069) 1,333
Insurance and Wealth 42 (5) (2) (7) 35
Equity Investments and Central items 408 2 (2) - 408
Total(3) 6,247 (827) (1,378) (2,205) 4,042
(1 )Contains adjustments in respect of purchased or originated
credit-impaired financial assets.
(2 )Corporate and other primarily comprises Mid Corporates and
Corporate and Institutional.
(3 )Total ECL includes £22 million relating to other non
customer-related assets (31 December 2020: £28 million).
Movements in total expected credit loss allowance - underlying basis(A)
Opening ECL at 31 Dec 2020 Write-offs Income Net ECL Closing ECL at 31 Dec 2021
and other statement decrease
charge (credit)
£m £m £m £m £m
UK mortgages 1,605 (48) (273) (321) 1,284
Credit cards 958 (378) (49) (427) 531
Loans and overdrafts 715 (479) 209 (270) 445
UK Motor Finance 501 (52) (151) (203) 298
Other 229 (43) (21) (64) 165
Retail 4,008 (1,000) (285) (1,285) 2,723
SME 502 (10) (237) (247) 255
Corporate and other(1) 1,900 (143) (679) (822) 1,078
Commercial Banking 2,402 (153) (916) (1,069) 1,333
Insurance and Wealth 42 (3) (4) (7) 35
Equity Investments and Central items 408 2 (2) - 408
Total(2) 6,860 (1,154) (1,207) (2,361) 4,499
(1 )Corporate and other primarily comprises Mid Corporates and
Corporate and Institutional.
(2 )Total ECL includes £22 million relating to other non
customer-related assets (31 December 2020: £28 million).
CREDIT RISK PORTFOLIO (continued)
Loans and advances to customers and reverse repurchase agreements and expected
credit loss allowance - statutory basis
Stage 1 Stage 2 Stage 3 POCI Total Stage 2 Stage 3
as % of as % of
total total
At 31 December 2021 £m £m £m £m £m
Loans and advances to customers and reverse repurchase agreements
UK mortgages 273,629 21,798 1,940 10,977 308,344 7.1 0.6
Credit cards 12,148 2,077 292 - 14,517 14.3 2.0
Loans and overdrafts 8,181 1,105 271 - 9,557 11.6 2.8
UK Motor Finance 12,247 1,828 201 - 14,276 12.8 1.4
Other 16,414 1,959 778 - 19,151 10.2 4.1
Retail 322,619 28,767 3,482 10,977 365,845 7.9 1.0
SME 27,260 3,002 843 - 31,105 9.7 2.7
Corporate and other 49,115 3,128 2,049 - 54,292 5.8 3.8
Commercial Banking 76,375 6,130 2,892 - 85,397 7.2 3.4
Insurance and Wealth 898 34 62 - 994 3.4 6.2
Equity Investments and Central Items(1) 51,365 - 7 - 51,372 - -
Total gross lending 451,257 34,931 6,443 10,977 503,608 6.9 1.3
ECL allowance on drawn balances (915) (1,114) (1,581) (210) (3,820)
Net balance sheet carrying value 450,342 33,817 4,862 10,767 499,788
Customer related ECL allowance (drawn and undrawn)
UK mortgages 49 394 184 210 837
Credit cards 144 249 128 - 521
Loans and overdrafts 136 170 139 - 445
UK Motor Finance(2) 108 74 116 - 298
Other 45 65 55 - 165
Retail 482 952 622 210 2,266
SME 61 104 90 - 255
Corporate and other 76 142 858 - 1,076
Commercial Banking 137 246 948 - 1,331
Insurance and Wealth 5 2 10 - 17
Equity Investments and Central Items 400 - 6 - 406
Total 1,024 1,200 1,586 210 4,020
Customer related ECL allowance (drawn and undrawn) as a percentage of loans
and advances to customers and reverse repurchase agreements(3)
UK mortgages - 1.8 9.5 1.9 0.3
Credit cards 1.2 12.0 56.9 - 3.6
Loans and overdrafts 1.7 15.4 67.5 - 4.7
UK Motor Finance 0.9 4.0 57.7 - 2.1
Other 0.3 3.3 13.8 - 0.9
Retail 0.1 3.3 20.9 1.9 0.6
SME 0.2 3.5 12.7 - 0.8
Corporate and other 0.2 4.5 42.0 - 2.0
Commercial Banking 0.2 4.0 34.4 - 1.6
Insurance and Wealth 0.6 5.9 16.1 - 1.7
Equity Investments and Central Items 0.8 - 85.7 - 0.8
Total 0.2 3.4 27.4 1.9 0.8
(1 )Equity Investments and Central Items includes reverse repos
of £51.2 billion.
(2 )UK Motor Finance for Stages 1 and 2 include £95 million
relating to provisions against residual values of vehicles subject to finance
leasing agreements. These provisions are included within the calculation of
coverage ratios.
(3 )Total and Stage 3 ECL allowance as a percentage of drawn
balances exclude loans in recoveries in credit cards of £67 million, loans
and overdrafts of £65 million, Retail other of £379 million, SME of £135
million and Corporate and other of £4 million.
CREDIT RISK PORTFOLIO (continued)
Loans and advances to customers and reverse repurchase agreements and expected
credit loss allowance - statutory basis (continued)
Stage 1 Stage 2 Stage 3 POCI Total Stage 2 Stage 3
as % of as % of
total total
At 31 December 2020 £m £m £m £m £m
Loans and advances to customers and reverse repurchase agreements
UK mortgages 251,418 29,018 1,859 12,511 294,806 9.8 0.6
Credit cards 11,496 3,273 340 - 15,109 21.7 2.3
Loans and overdrafts 7,710 1,519 307 - 9,536 15.9 3.2
UK Motor Finance 12,786 2,216 199 - 15,201 14.6 1.3
Other 17,879 1,304 184 - 19,367 6.7 1.0
Retail 301,289 37,330 2,889 12,511 354,019 10.5 0.8
SME 27,015 4,500 791 - 32,306 13.9 2.4
Corporate and other 43,543 9,816 2,733 - 56,092 17.5 4.9
Commercial Banking 70,558 14,316 3,524 - 88,398 16.2 4.0
Insurance and Wealth 832 13 70 - 915 1.4 7.7
Equity Investments and Central Items(1) 61,264 - 7 - 61,271 - -
Total gross lending 433,943 51,659 6,490 12,511 504,603 10.2 1.3
ECL allowance on drawn balances (1,372) (2,145) (1,982) (261) (5,760)
Net balance sheet carrying value 432,571 49,514 4,508 12,250 498,843
Customer related ECL allowance (drawn and undrawn)
UK mortgages 107 468 191 261 1,027
Credit cards 240 530 153 - 923
Loans and overdrafts 224 344 147 - 715
UK Motor Finance(2) 197 171 133 - 501
Other 46 124 59 - 229
Retail 814 1,637 683 261 3,395
SME 142 234 126 - 502
Corporate and other 217 507 1,169 - 1,893
Commercial Banking 359 741 1,295 - 2,395
Insurance and Wealth 11 1 11 - 23
Equity Investments and Central Items 400 - 6 - 406
Total 1,584 2,379 1,995 261 6,219
Customer related ECL allowance (drawn and undrawn) as a percentage of loans
and advances to customers and reverse repurchase agreements(3)
UK mortgages - 1.6 10.3 2.1 0.3
Credit cards 2.1 16.2 56.0 - 6.1
Loans and overdrafts 2.9 22.6 64.2 - 7.6
UK Motor Finance 1.5 7.7 66.8 - 3.3
Other 0.3 9.5 39.3 - 1.2
Retail 0.3 4.4 25.2 2.1 1.0
SME 0.5 5.2 19.1 - 1.6
Corporate and other 0.5 5.2 42.9 - 3.4
Commercial Banking 0.5 5.2 38.2 - 2.7
Insurance and Wealth 1.3 7.7 15.7 - 2.5
Equity Investments and Central Items 0.7 - 85.7 - 0.7
Total 0.4 4.6 32.3 2.1 1.2
(1 )Equity Investments and Central Items includes reverse repos
of £58.6 billion.
(2 )UK Motor Finance for Stages 1 and 2 include £192 million
relating to provisions against residual values of vehicles subject to finance
leasing agreements. These provisions are included within the calculation of
coverage ratios.
(3 )Total and Stage 3 ECL allowance as a percentage of drawn
balances exclude loans in recoveries in credit cards of £67 million, loans
and overdrafts of £78 million, Retail other of £34 million, SME of £132
million and Corporate and other of £6 million.
( )
( )
CREDIT RISK PORTFOLIO (continued)
Loans and advances to customers and reverse repurchase agreements and expected
credit loss allowance - underlying basis(A)
Stage 1 Stage 2 Stage 3 Total Stage 2 Stage 3
as % of as % of
total total
At 31 December 2021 £m £m £m £m
Loans and advances to customers and reverse repurchase agreements
UK mortgages 276,021 28,579 4,191 308,791 9.3 1.4
Credit cards 12,135 2,075 292 14,502 14.3 2.0
Loans and overdrafts 8,181 1,105 271 9,557 11.6 2.8
UK Motor Finance 12,247 1,828 201 14,276 12.8 1.4
Other 16,414 1,959 778 19,151 10.2 4.1
Retail(1) 324,998 35,546 5,733 366,277 9.7 1.6
SME 27,260 3,002 843 31,105 9.7 2.7
Corporate and other 49,115 3,128 2,049 54,292 5.8 3.8
Commercial Banking 76,375 6,130 2,892 85,397 7.2 3.4
Insurance and Wealth 898 34 62 994 3.4 6.2
Equity Investments and Central Items(2) 51,365 - 7 51,372 - -
Total gross lending 453,636 41,710 8,694 504,040 8.3 1.7
ECL allowance on drawn balances (919) (1,377) (1,981) (4,277)
Net balance sheet carrying value 452,717 40,333 6,713 499,763
Customer related ECL allowance (drawn and undrawn)
UK mortgages 50 653 581 1,284
Credit cards 147 253 131 531
Loans and overdrafts 136 170 139 445
UK Motor Finance(3) 108 74 116 298
Other 45 65 55 165
Retail(1) 486 1,215 1,022 2,723
SME 61 104 90 255
Corporate and other 76 142 858 1,076
Commercial Banking 137 246 948 1,331
Insurance and Wealth 5 2 10 17
Equity Investments and Central Items 400 - 6 406
Total 1,028 1,463 1,986 4,477
Customer related ECL allowance (drawn and undrawn) as a percentage of loans
and advances to customers and reverse repurchase agreements(4)
UK mortgages - 2.3 13.9 0.4
Credit cards 1.2 12.2 58.2 3.7
Loans and overdrafts 1.7 15.4 67.5 4.7
UK Motor Finance 0.9 4.0 57.7 2.1
Other 0.3 3.3 13.8 0.9
Retail(1) 0.1 3.4 19.6 0.7
SME 0.2 3.5 12.7 0.8
Corporate and other 0.2 4.5 42.0 2.0
Commercial Banking 0.2 4.0 34.4 1.6
Insurance and Wealth 0.6 5.9 16.1 1.7
Equity Investments and Central Items 0.8 - 85.7 0.8
Total 0.2 3.5 24.7 0.9
(1 )Retail balances exclude the impact of the HBOS and MBNA
acquisition related adjustments.
(2 )Equity Investments and Central Items includes reverse repos
of £51.2 billion.
(3 )UK Motor Finance for Stages 1 and 2 include £95 million
relating to provisions against residual values of vehicles subject to finance
leasing agreements. These provisions are included within the calculation of
coverage ratios.
(4 )Total and Stage 3 ECL allowance as a percentage of drawn
balances exclude loans in recoveries in credit cards of £67 million, loans
and overdrafts of £65 million, Retail other of £379 million, SME of £135
million and Corporate and other of £4 million.
CREDIT RISK PORTFOLIO (continued)
Loans and advances to customers and reverse repurchase agreements and expected
credit loss allowance - underlying basis(A) (continued)
Stage 1 Stage 2 Stage 3 Total Stage 2 Stage 3
as % of as % of
total total
At 31 December 2020 £m £m £m £m
Loans and advances to customers and reverse repurchase agreements
UK mortgages 253,043 37,882 4,459 295,384 12.8 1.5
Credit cards 11,454 3,264 339 15,057 21.7 2.3
Loans and overdrafts 7,710 1,519 307 9,536 15.9 3.2
UK Motor Finance 12,786 2,216 199 15,201 14.6 1.3
Other 17,879 1,304 184 19,367 6.7 1.0
Retail(1) 302,872 46,185 5,488 354,545 13.0 1.5
SME 27,015 4,500 791 32,306 13.9 2.4
Corporate and other 43,543 9,816 2,733 56,092 17.5 4.9
Commercial Banking 70,558 14,316 3,524 88,398 16.2 4.0
Insurance and Wealth 832 13 70 915 1.4 7.7
Equity Investments and Central Items(2) 61,264 - 7 61,271 - -
Total gross lending 435,526 60,514 9,089 505,129 12.0 1.8
ECL allowance on drawn balances (1,385) (2,493) (2,495) (6,373)
Net balance sheet carrying value 434,141 58,021 6,594 498,756
Customer related ECL allowance (drawn and undrawn)
UK mortgages 110 798 697 1,605
Credit cards 250 548 160 958
Loans and overdrafts 224 344 147 715
UK Motor Finance(3) 197 171 133 501
Other 46 124 59 229
Retail(1) 827 1,985 1,196 4,008
SME 142 234 126 502
Corporate and other 217 507 1,169 1,893
Commercial Banking 359 741 1,295 2,395
Insurance and Wealth 11 1 11 23
Equity Investments and Central Items 400 - 6 406
Total 1,597 2,727 2,508 6,832
Customer related ECL allowance (drawn and undrawn) as a percentage of loans
and advances to customers and reverse repurchase agreements(4)
UK mortgages - 2.1 15.6 0.5
Credit cards 2.2 16.8 58.8 6.4
Loans and overdrafts 2.9 22.6 64.2 7.6
UK Motor Finance 1.5 7.7 66.8 3.3
Other 0.3 9.5 39.3 1.2
Retail(1) 0.3 4.3 22.5 1.1
SME 0.5 5.2 19.1 1.6
Corporate and other 0.5 5.2 42.9 3.4
Commercial Banking 0.5 5.2 38.2 2.7
Insurance and Wealth 1.3 7.7 15.7 2.5
Equity Investments and Central Items 0.7 - 85.7 0.7
Total 0.4 4.5 28.6 1.4
(1 )Retail balances exclude the impact of the HBOS and MBNA
acquisition related adjustments.
(2 )Equity Investments and Central Items includes reverse repos
of £58.6 billion.
(3 )UK Motor Finance for Stages 1 and 2 include £192 million
relating to provisions against residual values of vehicles subject to finance
leasing agreements. These provisions are included within the calculation of
coverage ratios.
(4 )Total and Stage 3 ECL allowance as a percentage of drawn
balances exclude loans in recoveries in credit cards of £67 million, loans
and overdrafts of £78 million, Retail other of £34 million, SME of £132
million and Corporate and other of £6 million.
CREDIT RISK PORTFOLIO (continued)
Stage 2 loans and advances to customers and expected credit loss allowance -
statutory basis
Up to date 1-30 days Over 30 days Total
past due(2) past due
PD movements Other(1)
Gross ECL(3) Gross ECL(3) Gross ECL(3) Gross ECL(3) Gross ECL(3)
lending lending lending lending lending
£m £m £m £m £m £m £m £m £m £m
At 31 December 2021
UK mortgages 14,845 132 4,133 155 1,433 38 1,387 69 21,798 394
Credit cards 1,755 176 210 42 86 20 26 11 2,077 249
Loans and overdrafts 505 82 448 43 113 30 39 15 1,105 170
UK Motor Finance 581 20 1,089 26 124 19 34 9 1,828 74
Other 538 41 990 15 294 6 137 3 1,959 65
Retail 18,224 451 6,870 281 2,050 113 1,623 107 28,767 952
SME 2,689 96 192 5 41 2 80 1 3,002 104
Corporate and other 2,998 139 79 3 10 - 41 - 3,128 142
Commercial Banking 5,687 235 271 8 51 2 121 1 6,130 246
Insurance and Wealth 18 - 6 1 2 - 8 1 34 2
Equity Investments and Central Items - - - - - - - - - -
Total 23,929 686 7,147 290 2,103 115 1,752 109 34,931 1,200
At 31 December 2020
UK mortgages 22,569 215 3,078 131 1,648 43 1,723 79 29,018 468
Credit cards 2,924 408 220 76 93 27 36 19 3,273 530
Loans and overdrafts 959 209 388 68 126 45 46 22 1,519 344
UK Motor Finance 724 62 1,321 55 132 37 39 17 2,216 171
Other 512 56 651 44 69 14 72 10 1,304 124
Retail 27,688 950 5,658 374 2,068 166 1,916 147 37,330 1,637
SME 4,229 219 150 6 40 5 81 4 4,500 234
Corporate and other 9,505 501 97 3 37 2 177 1 9,816 507
Commercial Banking 13,734 720 247 9 77 7 258 5 14,316 741
Insurance and Wealth 1 - 12 1 - - - - 13 1
Equity Investments and Central Items - - - - - - - - - -
Total 41,423 1,670 5,917 384 2,145 173 2,174 152 51,659 2,379
(1 )Includes forbearance, client and product-specific indicators
not reflected within quantitative PD assessments.
(2 )Includes assets that have triggered PD movements, or other
rules, given that being 1-29 days in arrears in and of itself is not a Stage 2
trigger.
(3 )Expected credit loss allowance on loans and advances to
customers (drawn and undrawn).
CREDIT RISK PORTFOLIO (continued)
Stage 2 loans and advances to customers and expected credit loss allowance -
underlying basis(A)
Up to date 1-30 days Over 30 days past due Total
past due(2)
PD movements Other(1)
Gross ECL(3) Gross ECL(3) Gross ECL(3) Gross ECL(3) Gross ECL(3)
lending lending lending lending lending
£m £m £m £m £m £m £m £m £m £m
At 31 December 2021
UK mortgages 17,917 226 6,053 222 2,270 73 2,339 132 28,579 653
Credit cards 1,754 179 209 41 86 21 26 12 2,075 253
Loans and overdrafts 505 82 448 43 113 30 39 15 1,105 170
UK Motor Finance 581 20 1,089 26 124 19 34 9 1,828 74
Other 538 41 990 15 294 6 137 3 1,959 65
Retail 21,295 548 8,789 347 2,887 149 2,575 171 35,546 1,215
SME 2,689 96 192 5 41 2 80 1 3,002 104
Corporate and other 2,998 139 79 3 10 - 41 - 3,128 142
Commercial Banking 5,687 235 271 8 51 2 121 1 6,130 246
Insurance and Wealth 18 - 6 1 2 - 8 1 34 2
Equity Investments and Central Items - - - - - - - - - -
Total 27,000 783 9,066 356 2,940 151 2,704 173 41,710 1,463
At 31 December 2020
UK mortgages 28,049 354 4,067 189 2,663 82 3,103 173 37,882 798
Credit cards 2,916 422 220 78 92 28 36 20 3,264 548
Loans and overdrafts 959 209 388 68 126 45 46 22 1,519 344
UK Motor Finance 724 62 1,321 55 132 37 39 17 2,216 171
Other 512 56 651 44 69 14 72 10 1,304 124
Retail 33,160 1,103 6,647 434 3,082 206 3,296 242 46,185 1,985
SME 4,229 219 150 6 40 5 81 4 4,500 234
Corporate and other 9,505 501 97 3 37 2 177 1 9,816 507
Commercial Banking 13,734 720 247 9 77 7 258 5 14,316 741
Insurance and Wealth 1 - 12 1 - - - - 13 1
Equity Investments and Central Items - - - - - - - - - -
Total 46,895 1,823 6,906 444 3,159 213 3,554 247 60,514 2,727
(1 )Includes forbearance, client and product-specific indicators
not reflected within quantitative PD assessments.
(2 )Includes assets that have triggered PD movements, or other
rules, given that being 1-29 days in arrears in and of itself is not a Stage 2
trigger.
(3 )Expected credit loss allowance on loans and advances to
customers (drawn and undrawn).
CREDIT RISK PORTFOLIO (continued)
ECL sensitivity to economic assumptions
The measurement of ECL reflects an unbiased probability-weighted range of
possible future economic outcomes. The Group achieves this by generating four
economic scenarios to reflect the range of outcomes; the central scenario
reflects the Group's base case assumptions used for medium-term planning
purposes, an upside and a downside scenario are also selected together with a
severe downside scenario. The base case, upside and downside scenarios carry a
30 per cent weighting; the severe downside is weighted at 10 per cent. These
assumptions can be found in note 2 on page 86 onwards.
The table below shows the Group's ECL for the upside, base case, downside and
severe downside scenarios. The stage allocation for an asset is based on the
overall scenario probability-weighted PD and hence the staging of assets is
constant across all the scenarios. In each economic scenario the ECL for
individual assessments and post-model adjustments is constant reflecting the
basis on which they are evaluated. The probability-weighted view shows the
extent to which a higher ECL allowance has been recognised to take account of
multiple economic scenarios relative to the base case; the uplift being
£223 million compared to £506 million at 31 December 2020 on a statutory
basis. The scale of the impact has returned to 2019 levels as the base case
outlook has recovered and corresponding downside scenarios no longer reach
increased levels of stress.
Probability- Upside Base case Downside Severe
weighted downside
£m £m £m £m £m
Statutory basis
UK mortgages 837 637 723 967 1,386
Credit cards 521 442 500 569 672
Other Retail 908 844 892 947 1,034
Commercial Banking 1,333 1,196 1,261 1,403 1,753
Other 443 441 443 444 446
At 31 December 2021 4,042 3,560 3,819 4,330 5,291
UK mortgages 1,027 614 804 1,237 2,306
Credit cards 923 809 889 997 1,147
Other Retail 1,445 1,372 1,421 1,490 1,598
Commercial Banking 2,402 1,910 2,177 2,681 3,718
Other 450 448 450 450 456
At 31 December 2020 6,247 5,153 5,741 6,855 9,225
CREDIT RISK PORTFOLIO (continued)
Probability- Upside Base case Downside Severe
weighted downside
£m £m £m £m £m
Underlying basis(A)
UK mortgages 1,284 1,084 1,170 1,414 1,833
Credit cards 531 453 511 579 682
Other Retail 908 844 892 947 1,034
Commercial Banking 1,333 1,196 1,261 1,403 1,753
Other 443 441 443 444 446
At 31 December 2021 4,499 4,018 4,277 4,787 5,748
UK mortgages 1,605 1,192 1,382 1,815 2,884
Credit cards 958 844 924 1,032 1,182
Other Retail 1,445 1,372 1,421 1,490 1,598
Commercial Banking 2,402 1,910 2,177 2,681 3,718
Other 450 448 450 450 456
At 31 December 2020 6,860 5,766 6,354 7,468 9,838
FUNDING AND LIQUIDITY MANAGEMENT
The Group has maintained its robust funding and liquidity position with the
loan to deposit ratio falling to 94 per cent (98 per cent as at 31 December
2020), largely driven by increased customer deposits.
Ahead of the closure of the Term Funding Scheme with additional incentives for
SMEs (TFSME) in October 2021, the Group drew additional funds taking the total
amount outstanding to £30 billion as at 31 December 2021. Overall, total
wholesale funding has reduced to £91.4 billion as at 31 December 2021 (31
December 2020: £109.4 billion).
The Group's liquidity coverage ratio (LCR) was 135 per cent (based on a
monthly rolling average over the previous 12 months) as at 31 December 2021
(31 December 2020: 136 per cent) calculated on a Group consolidated basis
based on the EU Delegated Act. Following the implementation of structural
reform, liquidity risk is managed at a legal entity level with the Group
consolidated LCR representing the composite of the Ring-Fenced Bank and Non
Ring-Fenced Bank entities.
The Group's credit ratings continue to reflect the resilience of the Group's
business model and the strength of the balance sheet. Over the course of June
and July, Moody's, S&P and Fitch all returned the outlook on the Group's
credit ratings to Stable, from Negative. This reflected better underlying
economic expectations for the UK, as well as the Group's prudent provisioning
driving their belief that the Group is well positioned to benefit from the
macroeconomic recovery and successfully navigate any potential tail risks from
the pandemic. In May, Fitch downgraded Lloyds Banking Group and subsequently
Scottish Widows by one notch. In July, Moody's issued a number of ratings
changes for UK banks, including a one notch upgrade to the Senior and
Subordinated ratings for Lloyds Banking Group and Subordinated ratings for
Lloyds Bank.
CAPITAL MANAGEMENT
Analysis of capital position
The Group's CET1 capital ratio (after announced distributions) increased by 15
basis points over the year to 16.3 per cent on a pro forma basis (31 December
2020: 16.2 per cent), reflecting a strong pro forma capital build of 210 basis
points for the year, offset by 185 basis points in respect of the full year
ordinary dividend and the announced ordinary share buyback programme and a
further 10 basis points for variable pension contributions made to the Group's
main defined benefit pensions schemes in December.
The pro forma capital build of 210 basis points included the following:
• Banking profitability (pre-underlying impairment credit) of 210
basis points, with a limited impairment offset of 19 basis points, being the
net impact of IFRS 9 transitional relief reduction (including 5 basis points
for the phased reduction of static relief) and the impairment credit for the
year
• A further 16 basis points for the £300 million final dividend
received from the Insurance business in February 2022 in respect of its full
year 2021 results
• A reduction in risk-weighted assets generating an increase
equivalent to 58 basis points
• Offset by fixed pension contributions made to the defined benefit
pension schemes of 41 basis points and other movements of 14 basis points
which includes around 30 basis points for the impact of the equity provided to
Insurance to fund the acquisition of Embark
Excluding the Insurance dividend received in February 2022 and the impact of
the announced ordinary share buyback programme, the Group's CET1 capital ratio
at 31 December 2021 was 17.3 per cent (31 December 2020: 16.2 per cent).
The capital impact of 77 basis points for the full year ordinary dividend of
£1,420 million reflects both the interim ordinary dividend of 0.67 pence per
share paid in September 2021 and an accrual for foreseeable ordinary dividends
representing the recommended final ordinary dividend for 2021 of 1.33 pence
per share.
The pro forma CET1 capital ratio includes an accrual of £2.0 billion for the
full amount of the announced ordinary share buyback programme, equivalent to
2.82 pence per share and a reduction of 108 basis points. The buyback will
commence as soon as is practicable and the full impact will be accrued for
through the Group's actual capital position upon announcement.
The Group continues to apply the revised IFRS 9 transitional arrangements for
capital which provide for temporary capital relief for the increase in
accounting impairment provisions following the initial implementation of IFRS
9 ('static' relief) and subsequent relief for any increases in Stage 1 and
Stage 2 expected credit losses since 1 January 2020 ('dynamic' relief). The
transitional arrangements do not cover Stage 3 expected credit losses. The
total CET1 capital relief recognised at 31 December 2021 amounted to 40 basis
points.
On 1 January 2022, the pro forma CET1 capital ratio reduced by around 230
basis points to 14.0 per cent, reflecting the following:
• An increase in risk-weighted assets to £212 billion on a pro
forma basis, in addition to other related modelled impacts on CET1 capital,
following the implementation of new CRD IV mortgage, retail unsecured and
commercial banking models to meet revised regulatory standards for modelled
outputs and the UK implementation of the remainder of CRR 2 which includes a
new standardised approach for measuring counterparty credit risk (SA-CCR).
These were partially offset by the removal of risk-weighted assets linked to
the reversal of the revised treatment that had previously been applied to
intangible software assets and other movements. The new CRD IV models are
subject to finalisation and approval by the PRA and therefore uncertainty over
the final impact remains
• An increase in intangible software assets deducted from CET1
capital following the reversal of the revised treatment
• A reduction in IFRS 9 relief reflecting both phasing under the
transitional arrangements and the impact of the new CRD IV models. The
remaining relief on 1 January 2022 amounted to around 10 basis points
CAPITAL MANAGEMENT (continued)
During 2021, the transitional total capital ratio increased to 23.6 per cent
(31 December 2020: 23.3 per cent) largely reflecting the increase in CET1
capital, the issuance of a new tier 2 capital instrument and the reduction in
risk-weighted assets. This was offset in part by the reduction in transitional
limits applied to legacy tier 1 and tier 2 capital instruments, the impact of
movements in rates and regulatory amortisation and the net outcome of the
revised regulatory classification and exchange and tender offer exercises
applied to the Group's legacy preference shares.
The Group's transitional minimum requirement for own funds and eligible
liabilities (MREL) ratio increased to 37.2 per cent (31 December 2020: 36.4
per cent), largely reflecting the reduction in risk-weighted assets, offset in
part by a reduction in other eligible liabilities.
The UK leverage ratio remained at 5.8 per cent (31 December 2020: 5.8 per
cent) as the reduction in the fully loaded total tier 1 capital position was
offset by the reduction in the leverage exposure measure, the latter primarily
reflecting movements in securities financing transactions and off-balance
sheet items, net of increased balance sheet lending.
Target capital ratio
The Board's view of the ongoing level of CET1 capital required by the Group to
grow the business, meet current and future regulatory requirements and cover
uncertainties continues to be around 12.5 per cent plus a management buffer of
around 1 per cent. This takes into account, amongst other things:
• The minimum Pillar 1 CET1 capital requirement of 4.5 per cent of
risk-weighted assets
• The Group's Pillar 2A capital requirement set by the PRA. During
the year the PRA reduced the Group's nominal Pillar 2A capital requirement, of
which the minimum amount to be met by CET1 capital was the equivalent of
around 2.1 per cent of risk-weighted assets as at 31 December 2021. During
2022, the PRA will revert to setting a variable amount for the Group's Pillar
2A capital requirement (being a set percentage of risk-weighted assets), with
fixed add-ons for certain risk types. In line with PRA policy, the Group's
Pillar 2A capital requirement includes a reduction linked to the setting of a
2 per cent UK countercyclical capital buffer (CCyB) rate under normal
conditions, as defined by the Financial Policy Committee (FPC) of the Bank of
England. This reduction is currently fully offset by other regulatory capital
buffers at the CET1 capital level whilst the UK CCyB rate remains at nil and
will be expected to unwind going forward as and when the UK CCyB rate
increases to 2 per cent
• The Group's current CCyB requirement is around zero per cent of
risk-weighted assets. In December 2021 the FPC announced that the UK CCyB rate
will increase from nil to 1 per cent in December 2022, with an expectation
that it will increase to 2 per cent in Q2 2023. This would represent an
equivalent increase in the Group's CCyB to 0.9 per cent in December 2022 and
to 1.8 per cent in Q2 2023, based upon the position of the Group at 31
December 2021 and reflective of the concentration of Group exposures to the UK
market
• The capital conservation buffer (CCB) requirement of 2.5 per cent
of risk-weighted assets
• The RFB sub-group's other systemically important institution
(O-SII) buffer (formerly referred to as the systemic risk buffer) of 2.0 per
cent of risk-weighted assets, which equates to 1.7 per cent of risk-weighted
assets at Group level. The FPC is proposing to amend the O-SII buffer
framework in order to change the metric for determining the buffer rate from
total assets to the UK leverage exposure measure
• The Group's PRA Buffer, which the PRA sets after taking account of
the results of any PRA stress tests and other information, as well as outputs
from the Group's own internal stress tests. The PRA requires this buffer to
remain confidential
• The desire to maintain a progressive and sustainable ordinary
dividend policy in the context of year to year earnings movements
Capital resources
An analysis of the Group's capital position as at 31 December 2021 is
presented in the following section on both a transitional arrangements basis
and a fully loaded basis in respect of legacy capital securities that were
subject to grandfathering provisions prior to 1 January 2022. In addition the
Group's capital position under both bases reflects the application of the
separate transitional arrangements for IFRS 9. The following table summarises
the consolidated capital position of the Group.
CAPITAL MANAGEMENT (continued)
Transitional Fully loaded
At 31 Dec 2021 At 31 Dec 2020 At 31 Dec 2021 At 31 Dec 2020
£m £m £m £m
Common equity tier 1
Shareholders' equity per balance sheet 47,011 43,278 47,011 43,278
Adjustment to retained earnings for foreseeable dividends (947) (404) (947) (404)
Deconsolidation adjustments(1) 2,486 2,333 2,486 2,333
Adjustment for own credit 133 81 133 81
Cash flow hedging reserve 457 (1,629) 457 (1,629)
Other adjustments(2) 414 1,721 414 1,721
49,554 45,380 49,554 45,380
less: deductions from common equity tier 1
Goodwill and other intangible assets (3,026) (3,120) (3,026) (3,120)
Prudent valuation adjustment (457) (445) (457) (445)
Excess of expected losses over impairment provisions and value adjustments - - - -
Removal of defined benefit pension surplus (3,200) (1,322) (3,200) (1,322)
Significant investments(1) (4,573) (4,109) (4,573) (4,109)
Deferred tax assets (4,483) (3,562) (4,483) (3,562)
Common equity tier 1 capital 33,815 32,822 33,815 32,822
Additional tier 1
Other equity instruments 5,879 5,881 5,879 5,881
Preference shares and preferred securities(3) 2,149 2,705 - -
Transitional limit and other adjustments (1,598) (1,604) - -
6,430 6,982 5,879 5,881
less: deductions from tier 1
Significant investments(1) (1,100) (1,138) (1,100) -
Total tier 1 capital 39,145 38,666 38,594 38,703
Tier 2
Other subordinated liabilities(3) 10,959 11,556 10,959 11,556
Deconsolidation of instruments issued by insurance entities(1) (1,753) (1,892) (1,753) (1,892)
Adjustments for transitional limit and non-eligible instruments 735 1,474 (722) (1,346)
Amortisation and other adjustments (1,791) (1,694) (1,791) (1,694)
8,150 9,444 6,693 6,624
less: deductions from tier 2
Significant investments(1) (961) (942) (961) (2,080)
Total capital resources 46,334 47,168 44,326 43,247
Risk-weighted assets 195,967 202,747 195,967 202,747
Common equity tier 1 capital ratio 17.3% 16.2% 17.3% 16.2%
Tier 1 capital ratio 20.0% 19.1% 19.7% 19.1%
Total capital ratio 23.6% 23.3% 22.6% 21.3%
(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
(via 'significant investments' in the table above) and the remaining amount is
risk-weighted, forming part of threshold risk-weighted assets.
(2 )Includes an adjustment applied to reserves to reflect the
application of the IFRS 9 transitional arrangements for capital.
(3 )Preference shares, preferred securities and other
subordinated liabilities reported as subordinated liabilities in the balance
sheet.
CAPITAL MANAGEMENT (continued)
Minimum requirement for own funds and eligible liabilities (MREL)
The Group is not classified as a global systemically important bank (G-SIB)
but is subject to the Bank of England's MREL statement of policy (MREL SoP)
and must therefore maintain a minimum level of MREL resources.
Applying the MREL SoP to minimum capital requirements at 31 December 2021, the
Group's transitional MREL, excluding regulatory capital and leverage buffers,
is the higher of 2 times Pillar 1 plus Pillar 2A, equivalent to 19.7 per cent
of risk-weighted assets, or 6.5 per cent of the UK leverage ratio exposure
measure.
On 1 January 2022 the Group's MREL, excluding regulatory capital and leverage
buffers, increased to the higher of 2 times Pillar 1 plus 2 times Pillar 2A,
equivalent to 23.5 per cent of risk-weighted assets as based upon minimum
capital requirements at 31 December 2021, or 6.5 per cent of the UK leverage
ratio exposure measure.
In addition, CET1 capital cannot be used to meet both MREL and capital or
leverage buffers.
The Bank of England completed a review of its existing approach to setting
MREL in December 2021 and has published a revised approach which became
effective and binding on the Group from 1 January 2022. There has been no
change to the basis for determining the Group's MREL.
An analysis of the Group's current transitional MREL resources is provided in
the table below.
Transitional(1)
At 31 Dec 2021 At 31 Dec 2020
£m £m
Total capital resources (transitional basis) 46,334 47,168
Ineligible AT1 and tier 2 instruments(2) (163) (582)
Amortised portion of eligible tier 2 instruments issued by Lloyds Banking 713 194
Group plc
Other eligible liabilities issued by Lloyds Banking Group plc(3) 26,070 26,946
Total MREL resources(1) 72,954 73,726
Risk-weighted assets 195,967 202,747
MREL ratio 37.2% 36.4%
Leverage exposure measure 664,362 666,070
MREL leverage ratio 11.0% 11.1%
(1 )Until 2022, externally issued regulatory capital in
operating entities can count towards the Group's MREL resources to the extent
that such capital would count towards the Group's consolidated capital
resources.
(2 )Instruments with less than or equal to one year to maturity
or governed under non-UK law without a contractual bail-in clause.
(3 )Includes senior unsecured debt.
( )
CAPITAL MANAGEMENT (continued)
Risk-weighted assets
Credit risk Credit risk Credit risk Counterparty Market Operational Total
IRB STA total(1) credit risk(2) risk risk
£m £m £m £m £m £m £m
Total risk-weighted assets at 31 December 2020 202,747
Less threshold risk-weighted assets(3) (11,927)
Risk-weighted assets at 31 December 2020 133,407 23,596 157,003 6,745 2,207 24,865 190,820
Asset size (3,258) (737) (3,995) (380) - - (4,375)
Asset quality 841 (242) 599 (124) - - 475
Model updates - - - - 483 - 483
Methodology and policy (1,109) (1,919) (3,028) - (1) - (3,029)
Acquisitions and disposals - - - - - - -
Movements in risk levels (market risk only) - - - - 464 - 464
Foreign exchange movements (154) (59) (213) (177) - - (390)
Other - - - - - (840) (840)
Risk-weighted assets at 31 December 2021 129,727 20,639 150,366 6,064 3,153 24,025 183,608
Threshold risk-weighted assets(3) 12,359
Risk-weighted assets at 31 December 2021 195,967
(1 )Credit risk includes securitisation risk-weighted assets.
(2 )Counterparty credit risk includes movements in contributions
to the default funds of central counterparties and movements in credit
valuation adjustment risk.
(3 )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 investments in the Group's Insurance
business.
The risk-weighted assets movement table provides analysis of the movement in
risk-weighted assets in the period by risk type and an insight into the key
drivers of the movements.
Credit risk, risk-weighted assets:
• Asset size reduction of £4.0 billion predominantly reflects
increased levels of optimisation in Commercial Banking and lower unsecured
balances, partially offset by increased mortgage lending
• Asset quality increase of £0.6 billion reflects the impact of
retail model calibrations with limited credit migration in part due to the
benefit of House Price Index increases
• Methodology and policy changes of £3.0 billion include reductions
in risk-weighted assets through securitisation activity, other optimisation
activity and enhanced identification of SME exposures
Counterparty credit risk, risk-weighted assets: reduced by £0.7 billion
predominantly due to movements in market rates during the period.
Market risk, risk-weighted assets: increased by £1.0 billion driven by an
increase in IBOR transition related Risks Not in VaR (RNIVs), capital
multiplier increases due to IBOR related activities and increased market
volatility in the fourth quarter resulting in backtesting overshoots.
Operational risk, risk-weighted assets: reduced by £0.8 billion due to a
reduction in 3 year average income levels.
CAPITAL MANAGEMENT (continued)
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 and its key legal entities are exposed. One of the most important
uses of stress testing is to assess the resilience of the operational and
strategic plans of the Group and its legal entities to adverse economic
conditions and other key vulnerabilities. As part of this programme, the Group
conducts a macroeconomic stress test of the Group's operating plan in the
second half of the year to assess whether the Group's capital position is
resilient to a further severe economic shock, over and above the stress
experienced during the pandemic.
The Group also participates in stress tests run by the Bank of England which
published the results of the most recent exercise in December 2021, showing
that the Group had passed the stress test. The Bank of England calculated the
Group's CET1 capital ratio after the application of management actions to be
7.8 per cent, against the reference rate of 7.7 per cent, meaning the Group
was not required by the regulator to undertake any capital actions. This shows
the Group's resilience to a severe economic shock in addition to what had been
experienced over 2020, as House Price Index (HPI) and Commercial Real Estate
(CRE) values fell a further 33 per cent and unemployment peaked at 11.9 per
cent in the Bank of England's theoretical stress scenario.
The Group participated in Part I of the Bank of England's Climate Biennial
Exploratory Stress test in 2021 and will leverage the experience gained
through that exercise to further embed climate risk into risk management and
stress testing activities.
Leverage ratio
The Group is currently subject to the following minimum requirements under the
UK Leverage Ratio Framework:
• a minimum leverage ratio requirement of 3.25 per cent of the total
leverage exposure measure
• a countercyclical leverage buffer (CCLB) which is currently zero
per cent of the total leverage exposure measure, reflecting the current UK
CCyB rate of nil. Following the FPC's announcements on the planned increase of
the UK CCyB rate, the Group's CCLB would be expected to increase to 0.3 per
cent in December 2022 and 0.6 per cent in Q2 2023, based upon the position of
the Group at 31 December 2021
• an additional leverage ratio buffer (ALRB) of 0.7 per cent of the
total leverage exposure measure applies to the RFB sub-group, which equates to
0.6 per cent at Group level
At least 75 per cent of the 3.25 per cent minimum leverage ratio requirement
as well as 100 per cent of all regulatory leverage buffers must be met with
CET1 capital.
( )
CAPITAL MANAGEMENT (continued)
The table below summarises the component parts of the Group's leverage ratio.
Fully loaded
At 31 Dec 2021 At 31 Dec 2020
£m £m
Total tier 1 capital for leverage ratio
Common equity tier 1 capital 33,815 32,822
Additional tier 1 capital 4,779 5,881
Total tier 1 capital 38,594 38,703
Exposure measure
Statutory balance sheet assets
Derivative financial instruments 22,051 29,613
Securities financing transactions 69,673 74,322
Loans and advances and other assets 794,801 767,334
Total assets 886,525 871,269
Qualifying central bank claims (72,741) (67,093)
Deconsolidation adjustments(1)
Derivative financial instruments (166) (1,549)
Loans and advances and other assets (186,965) (171,183)
Total deconsolidation adjustments (187,131) (172,732)
Derivatives adjustments
Adjustments for regulatory netting (9,605) (12,444)
Adjustments for cash collateral (4,713) (12,679)
Net written credit protection 268 455
Regulatory potential future exposure 10,544 12,535
Total derivatives adjustments (3,506) (12,133)
Securities financing transactions adjustments 1,946 1,713
Off-balance sheet items 57,496 60,882
Regulatory deductions and other adjustments(2) (18,227) (15,836)
Total exposure measure 664,362 666,070
Average exposure measure(3) 675,412
UK leverage ratio 5.8% 5.8%
Average UK leverage ratio(3) 5.8%
(1 )Deconsolidation adjustments relate to the deconsolidation of
certain Group entities that fall outside the scope of the Group's regulatory
capital consolidation, primarily the Group's Insurance business.
(2 )Includes adjustments to exclude lending under the UK
Government's Bounce Back Loan Scheme (BBLS) and the netting of regular-way
purchases and sales awaiting settlement in accordance with CRR Article 500d.
(3 )The average UK leverage ratio is based on the average of the
month end tier 1 capital position and average exposure measure over the
quarter (1 October 2021 to 31 December 2021). The average of 5.8 per cent
compares to 5.8 per cent at the start and 5.8 per cent at the end of the
quarter.
( )
CAPITAL MANAGEMENT (continued)
Application of IFRS 9 on a full impact basis for capital and leverage
IFRS 9 full impact
At 31 Dec 2021 At 31 Dec 2020
Common equity tier 1 (£m) 33,033 30,341
Transitional tier 1 (£m) 38,363 36,185
Transitional total capital (£m) 46,336 46,052
Total risk-weighted assets (£m) 195,874 201,800
Common equity tier 1 ratio (%) 16.9% 15.0%
Transitional tier 1 ratio (%) 19.6% 17.9%
Transitional total capital ratio (%) 23.7% 22.8%
UK leverage ratio exposure measure (£m) 663,580 663,590
UK leverage ratio (%) 5.7% 5.5%
The Group applies the full extent of the IFRS 9 transitional arrangements for
capital as set out under CRR Article 473a (as amended via the CRR 'Quick Fix'
revisions published in June 2020). Specifically, the Group has opted to apply
both paragraphs 2 and 4 of CRR Article 473a (static and dynamic relief) and in
addition to apply a 100 per cent risk weight to the consequential Standardised
credit risk exposure add-back as permitted under paragraph 7a of the
revisions.
As at 31 December 2021, static relief under the transitional arrangements
amounted to £353 million (31 December 2020: £616 million) and dynamic
relief amounted to £428 million (31 December 2020: £1,865 million) through
CET1 capital.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
2021 2020
Note £m £m
Interest income 13,258 14,306
Interest expense (3,892) (3,557)
Net interest income 9,366 10,749
Fee and commission income 2,608 2,308
Fee and commission expense (1,185) (1,148)
Net fee and commission income 1,423 1,160
Net trading income 17,200 7,220
Insurance premium income 8,283 8,615
Other operating income 1,172 1,423
Other income 28,078 18,418
Total income 37,444 29,167
Insurance claims (21,120) (14,041)
Total income, net of insurance claims 16,324 15,126
Operating expenses (10,800) (9,745)
Impairment credit (charge) 1,378 (4,155)
Profit before tax 6,902 1,226
Tax (expense) credit 3 (1,017) 161
Profit for the year 5,885 1,387
Profit attributable to ordinary shareholders 5,355 865
Profit attributable to other equity holders 429 453
Profit attributable to equity holders 5,784 1,318
Profit attributable to non-controlling interests 101 69
Profit for the year 5,885 1,387
Basic earnings per share 4 7.5p 1.2p
Diluted earnings per share 4 7.5p 1.2p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2021 2020
£m £m
Profit for the year 5,885 1,387
Other comprehensive income
Items that will not subsequently be reclassified to profit or loss:
Post-retirement defined benefit scheme remeasurements:
Remeasurements before tax 1,720 138
Tax (658) (25)
1,062 113
Movements in revaluation reserve in respect of equity shares held at fair
value through other comprehensive income:
Change in fair value 61 (50)
Tax (4) (16)
57 (66)
Gains and losses attributable to own credit risk:
Losses before tax (86) (75)
Tax 34 20
(52) (55)
Items that may subsequently be reclassified to profit or loss:
Movements in revaluation reserve in respect of debt securities held at fair
value through other comprehensive income:
Change in fair value 133 46
Income statement transfers in respect of disposals 2 (149)
Income statement transfers in respect of impairment (2) 5
Tax (25) 74
108 (24)
Movements in cash flow hedging reserve:
Effective portion of changes in fair value taken to other comprehensive income (2,279) 730
Net income statement transfers (621) (496)
Tax 814 (109)
(2,086) 125
Movements in foreign currency translation reserve:
Currency translation differences (tax: £nil) (39) 4
Transfers to income statement (tax: £nil) - 13
(39) 17
Total other comprehensive income for the year, net of tax (950) 110
Total comprehensive income for the year 4,935 1,497
Total comprehensive income attributable to ordinary shareholders 4,405 975
Total comprehensive income attributable to other equity holders 429 453
Total comprehensive income attributable to equity holders 4,834 1,428
Total comprehensive income attributable to non-controlling interests 101 69
Total comprehensive income for the year 4,935 1,497
CONSOLIDATED BALANCE SHEET
At 31 Dec At 31 Dec
2021 2020
£m £m
Assets
Cash and balances at central banks 76,420 73,257
Items in the course of collection from banks 147 299
Financial assets at fair value through profit or loss(1) 206,771 191,169
Derivative financial instruments 22,051 29,613
Loans and advances to banks(1) 7,001 8,060
Loans and advances to customers(1) 448,567 440,200
Reverse repurchase agreements(1) 54,753 61,329
Debt securities 6,835 5,405
Financial assets at amortised cost 517,156 514,994
Financial assets at fair value through other comprehensive income 28,137 27,603
Investments in joint ventures and associates 352 296
Goodwill 2,320 2,320
Value of in-force business 5,514 5,617
Other intangible assets 4,196 4,140
Current tax recoverable 363 660
Deferred tax assets 3,118 2,741
Retirement benefit assets 4,531 1,714
Other assets(1) 15,449 16,846
Total assets 886,525 871,269
(1 )See note 1 regarding changes to presentation.
CONSOLIDATED BALANCE SHEET (continued)
At 31 Dec At 31 Dec
2021 2020
£m £m
Liabilities
Deposits from banks(1) 7,647 12,698
Customer deposits(1) 476,344 450,651
Repurchase agreements at amortised cost(1) 31,125 28,184
Items in course of transmission to banks 316 306
Financial liabilities at fair value through profit or loss 23,123 22,646
Derivative financial instruments 18,060 27,313
Notes in circulation 1,321 1,305
Debt securities in issue 71,552 87,397
Liabilities arising from insurance contracts and participating investment 123,423 116,060
contracts
Liabilities arising from non-participating investment contracts 45,040 38,452
Other liabilities 19,947 20,347
Retirement benefit obligations 230 245
Current tax liabilities 6 31
Deferred tax liabilities 39 45
Other provisions 2,092 1,915
Subordinated liabilities 13,108 14,261
Total liabilities 833,373 821,856
Equity
Share capital 7,102 7,084
Share premium account 18,479 17,863
Other reserves 11,189 13,747
Retained profits 10,241 4,584
Ordinary shareholders' equity 47,011 43,278
Other equity instruments 5,906 5,906
Total equity excluding non-controlling interests 52,917 49,184
Non-controlling interests 235 229
Total equity 53,152 49,413
Total equity and liabilities 886,525 871,269
(1 )See note 1 regarding changes to presentation.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to ordinary shareholders
Share Other Retained Total Other Non- Total
capital and reserves profits equity controlling
premium instruments interests
£m £m £m £m £m £m £m
At 1 January 2021 24,947 13,747 4,584 43,278 5,906 229 49,413
Comprehensive income
Profit for the year - - 5,355 5,355 429 101 5,885
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, net of tax - - 1,062 1,062 - - 1,062
Movements in revaluation reserve in respect of financial assets held at fair
value through other comprehensive income, net of tax:
Debt securities - 108 - 108 - - 108
Equity shares - 57 - 57 - - 57
Gains and losses attributable to own credit risk, net of tax - - (52) (52) - - (52)
Movements in cash flow hedging reserve, net of tax - (2,086) - (2,086) - - (2,086)
Movements in foreign currency translation reserve, net of tax - (39) - (39) - - (39)
Total other comprehensive income - (1,960) 1,010 (950) - - (950)
Total comprehensive income(1) - (1,960) 6,365 4,405 429 101 4,935
Transactions with owners
Dividends - - (877) (877) - (93) (970)
Distributions on other equity instruments - - - - (429) - (429)
Issue of ordinary shares 37 - - 37 - - 37
Redemption of preference shares 597 (597) - - - - -
Movement in treasury shares - - (13) (13) - - (13)
Value of employee services:
Share option schemes - - 51 51 - - 51
Other employee award schemes - - 131 131 - - 131
Changes in non-controlling interests - - (1) (1) - (2) (3)
Total transactions with owners 634 (597) (709) (672) (429) (95) (1,196)
Realised gains and losses on equity shares held at fair value through other - (1) 1 - - - -
comprehensive income
At 31 December 2021 25,581 11,189 10,241 47,011 5,906 235 53,152
(1 )Total comprehensive income attributable to owners of the
parent was £4,834 million (2020: £1,428 million).
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)
Attributable to ordinary shareholders
Share Other Retained Total Other Non- Total
capital and reserves profits equity controlling
premium instruments interests
£m £m £m £m £m £m £m
At 1 January 2020 24,756 13,695 3,246 41,697 5,906 203 47,806
Comprehensive income
Profit for the year - - 865 865 453 69 1,387
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, net of tax - - 113 113 - - 113
Movements in revaluation reserve in respect of financial assets held at fair
value through other comprehensive income, net of tax:
Debt securities - (24) - (24) - - (24)
Equity shares - (66) - (66) - - (66)
Gains and losses attributable to own credit risk, net of tax - - (55) (55) - - (55)
Movements in cash flow hedging reserve, net of tax - 125 - 125 - - 125
Movements in foreign currency translation reserve, net of tax - 17 - 17 - - 17
Total other comprehensive income - 52 58 110 - - 110
Total comprehensive income - 52 923 975 453 69 1,497
Transactions with owners
Dividends - - - - - (41) (41)
Distributions on other equity instruments - - - - (453) - (453)
Issue of ordinary shares 191 - - 191 - - 191
Movement in treasury shares - - 293 293 - - 293
Value of employee services:
Share option schemes - - 48 48 - - 48
Other employee award schemes - - 74 74 - - 74
Changes in non-controlling interests - - - - - (2) (2)
Total transactions with owners 191 - 415 606 (453) (43) 110
Realised gains and losses on equity shares held at fair value through other - - - - - - -
comprehensive income
At 31 December 2020 24,947 13,747 4,584 43,278 5,906 229 49,413
( )
CONSOLIDATED CASH FLOW STATEMENT
2021 2020
£m £m
Profit before tax 6,902 1,226
Adjustments for:
Change in operating assets (10,502) (18,650)
Change in operating liabilities 4,954 35,737
Non-cash and other items 6,063 9,594
Tax paid (net) (796) (736)
Net cash provided by operating activities 6,621 27,171
Cash flows from investing activities
Purchase of financial assets (8,984) (8,589)
Proceeds from sale and maturity of financial assets 8,287 6,347
Purchase of fixed assets (3,228) (2,901)
Proceeds from sale of fixed assets 1,437 1,146
Acquisition of businesses, net of cash acquired (57) (3)
Net cash used in investing activities (2,545) (4,000)
Cash flows from financing activities
Dividends paid to ordinary shareholders (877) -
Distributions on other equity instruments (429) (453)
Dividends paid to non-controlling interests (93) (41)
Interest paid on subordinated liabilities (1,303) (1,095)
Proceeds from issue of subordinated liabilities 499 -
Proceeds from issue of ordinary shares 25 144
Repayment of subordinated liabilities (1,056) (3,874)
Net cash used in financing activities (3,234) (5,319)
Effects of exchange rate changes on cash and cash equivalents 70 (196)
Change in cash and cash equivalents 912 17,656
Cash and cash equivalents at beginning of year 75,467 57,811
Cash and cash equivalents at end of year 76,379 75,467
Cash and cash equivalents comprise cash and non-mandatory balances with
central banks and amounts due from banks with a maturity of less than three
months. Included within cash and cash equivalents at 31 December 2021 is
£76 million (31 December 2020: £84 million) held within the Group's
long-term insurance and investments businesses, which is not immediately
available for use in the business.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting policies and presentation
These condensed consolidated financial statements as at and for the year to 31
December 2021 have been prepared in accordance with the Listing Rules of the
Financial Conduct Authority (FCA) relating to Preliminary Announcements 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. Copies of the 2021 Annual
Report and Accounts will be available on the Group's website and upon request
from Investor Relations, Lloyds Banking Group plc, 25 Gresham Street, London
EC2V 7HN.
The accounting policies are consistent with those applied by the Group in its
2020 Annual Report and Accounts. The Group's accounting policies are set out
in full in the 2021 Annual Report and Accounts.
In 2021, the Group has adopted the Interest Rate Benchmark Reform Phase 2
amendments issued by the IASB. These amendments require that changes to
expected future cash flows that both arise as a direct result of IBOR Reform
and are economically equivalent to the previous cash flows are accounted for
as a change to the effective interest rate with no adjustment to the asset's
or liability's carrying value; no immediate gain or loss is recognised. The
new requirements also provide relief from the requirements to discontinue
hedge accounting as a result of amending hedge documentation if the changes
are required solely as a result of IBOR Reform. The amendments do not have a
material impact on the Group's comparatives, which have not been restated.
The following changes have been made to the presentation of the Group's assets
and liabilities on the face of the balance sheet:
- Assets arising from reinsurance contracts held are included within
financial assets at fair value through profit or loss and other assets
- Property, plant and equipment is included in other assets
- Reverse repurchase agreements with banks and customers are shown
separately from loans and advances to banks and loans and advances to
customers respectively; and repurchase agreements with banks and customers are
shown separately from deposits from banks and customer deposits respectively
There has been no change in the basis of accounting for any of the underlying
transactions. Comparatives have been presented on a consistent basis for all
of the above.
The Directors consider that it is appropriate to continue to adopt the going
concern basis in preparing the financial statements. In reaching this
assessment, the Directors have considered the implications of the short-term
impacts of the COVID-19 pandemic and climate change upon the Group's
performance and projected funding and capital position. The Directors have
also taken into account the impact of further stress scenarios.
2. Critical accounting judgements and key sources of
estimation uncertainty
The critical accounting judgements and key sources of estimation uncertainty
made by management in applying the Group's accounting policies are set out in
full in the Group's 2021 Annual Report and Accounts. Those affecting the
Group's recognition and measurement of allowances for expected credit losses
are set out below.
Generation of multiple economic scenarios
The estimate of expected credit losses is required to be based on an unbiased
expectation of future economic scenarios. The approach used to generate the
range of future economic scenarios depends on the methodology and judgements
adopted. The Group's approach is to start from a defined base case scenario,
used for planning purposes, and to generate alternative economic scenarios
around this base case. The base case scenario is a conditional forecast
underpinned by a number of conditioning assumptions that reflect the Group's
best view of key future developments. If circumstances appear likely to
materially deviate from the conditioning assumptions, then the base case
scenario is updated.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. Critical accounting judgements and key sources of
estimation uncertainty (continued)
The base case scenario is central to a range of future economic scenarios
generated by simulation of an economic model, for which the same conditioning
assumptions apply as in the base case scenario. These scenarios are ranked by
using estimated relationships with industry-wide historical loss data. With
the base case already pre-defined, three other scenarios are identified as
averages of constituent scenarios located around the 15th, 75th and 95th
percentiles of the distribution. The full distribution is therefore summarised
by a practical number of scenarios to run through ECL models representing an
upside, the base case, and a downside scenario weighted at 30 per cent each,
together with a severe downside scenario weighted at 10 per cent. The scenario
weights represent the distribution of economic scenarios and not subjective
views on likelihood. The inclusion of a severe downside scenario with a
smaller weighting ensures that the non-linearity of losses in the tail of the
distribution is adequately captured. The Group does not apply any reversion
techniques within scenario generation, noting that data after the five-year
forecast period shown has a relatively immaterial effect on the ECL provision.
A forum under the chairmanship of the Chief Economist meets at least quarterly
to review and, if appropriate, recommend changes to the method by which
economic scenarios are generated, for approval by the Chief Financial Officer
and Chief Risk Officer. While no material changes were made to the model in
2021, the forum identified the need to consider an alternative approach to
address interest rate risks not captured within the downside scenarios. The
forum recommended that a non-modelled severe downside scenario was evaluated
for potential incremental losses. This resulted in a management adjustment for
UK mortgages which exhibited a sufficient uplift in ECL in a high rate
scenario.
Base case and MES economic assumptions
The Group's base case economic scenario has been revised in light of the
continuing impact of the coronavirus pandemic, intensifying global inflation
pressures, and a shift towards a more restrictive stance of monetary policy by
central banks. The Group's updated base case scenario built in three key
conditioning assumptions. First, the current wave of coronavirus infections
does not lead to a re-imposition of lockdown restrictions in the UK, although
greater household caution is expected amid increased hospitalisation rates.
Second, the rise in wholesale energy prices is passed on to consumers through
a 50 per cent increase in retail energy prices in April 2022. Third, inflation
expectations rise in response to increasing headline inflation but
subsequently revert to levels consistent with the Bank of England's 2 per cent
inflation target.
Based on these assumptions and incorporating the improved economic data in the
fourth quarter, the Group's base case outlook is for a modest rise in the
unemployment rate alongside a deceleration in residential and commercial
property price growth, as the UK Bank Rate is raised in response to increasing
inflationary pressures. Risks around this base case economic view lie in both
directions and are partly captured by the generation of alternative economic
scenarios described above. Uncertainties relating to key epidemiological
developments, notably the possibility that a vaccine-resistant strain could
emerge, are not specifically captured by these scenarios. These specific risks
are recognised outside of the modelled scenarios with a central adjustment.
The Group has accommodated the latest available information at the reporting
date in defining its base case scenario and generating alternative economic
scenarios. The scenarios include forecasts for key variables in the fourth
quarter of 2021, for which actuals may have since emerged prior to
publication.
Scenarios by year
Key annual assumptions made by the Group are shown below. Gross domestic
product is presented as an annual change, house price growth and commercial
real estate price growth are presented as the growth in the respective indices
within the period. UK Bank Rate and unemployment rate are averages for the
period.
The key UK economic assumptions made by the Group averaged over a five-year
period are also shown below. The five-year period reflects movements within
the current reporting year such that 31 December 2021 reflects the five years
2021 to 2025. The prior year comparative data has been re-presented to align
to the equivalent period, 2020 to 2024. The inclusion of the reporting year
within the five-year period reflects the need to predict variables which
remain unpublished at the reporting date, and recognises that credit models
utilise both level and annual change in calculating ECL. The use of calendar
years also maintains a comparability between tables disclosed.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. Critical accounting judgements and key sources of
estimation uncertainty (continued)
2021 2022 2023 2024 2025 2021-2025 average
At 31 December 2021 % % % % % %
Upside
Gross domestic product 7.1 4.0 1.4 1.3 1.4 3.0
UK Bank Rate 0.14 1.44 1.74 1.82 2.03 1.43
Unemployment rate 4.4 3.3 3.4 3.5 3.7 3.7
House price growth 10.1 2.6 4.9 4.7 3.6 5.1
Commercial real estate price growth 12.4 5.8 0.7 1.0 (0.6) 3.7
Base case
Gross domestic product 7.1 3.7 1.5 1.3 1.3 2.9
UK Bank Rate 0.14 0.81 1.00 1.06 1.25 0.85
Unemployment rate 4.5 4.3 4.4 4.4 4.5 4.4
House price growth 9.8 0.0 0.0 0.5 0.7 2.1
Commercial real estate price growth 10.2 (2.2) (1.9) 0.1 0.6 1.2
Downside
Gross domestic product 7.1 3.4 1.3 1.1 1.2 2.8
UK Bank Rate 0.14 0.45 0.52 0.55 0.69 0.47
Unemployment rate 4.7 5.6 5.9 5.8 5.7 5.6
House price growth 9.2 (4.9) (7.8) (6.6) (4.7) (3.1)
Commercial real estate price growth 8.6 (10.1) (7.0) (3.4) (0.3) (2.6)
Severe downside
Gross domestic product 6.8 0.9 0.4 1.0 1.4 2.1
UK Bank Rate 0.14 0.04 0.06 0.08 0.09 0.08
Unemployment rate 4.9 7.7 8.5 8.1 7.6 7.3
House price growth 9.1 (7.3) (13.9) (12.5) (8.4) (6.9)
Commercial real estate price growth 5.8 (19.6) (12.1) (5.3) (0.5) (6.8)
Probability-weighted
Gross domestic product 7.0 3.4 1.3 1.2 1.3 2.8
UK Bank Rate 0.14 0.82 0.99 1.04 1.20 0.83
Unemployment rate 4.6 4.7 5.0 5.0 4.9 4.8
House price growth 9.6 (1.4) (2.3) (1.7) (1.0) 0.6
Commercial real estate price growth 9.9 (3.9) (3.7) (1.2) (0.1) 0.1
Base case scenario by quarter(1) First Second Third Fourth First Second Third Fourth
quarter quarter quarter quarter quarter quarter quarter quarter
2021 2021 2021 2021 2022 2022 2022 2022
At 31 December 2021 % % % % % % % %
Gross domestic product (1.3) 5.4 1.1 0.4 0.1 1.5 0.5 0.3
UK Bank Rate 0.10 0.10 0.10 0.25 0.50 0.75 1.00 1.00
Unemployment rate 4.9 4.7 4.3 4.3 4.4 4.3 4.3 4.3
House price growth 6.5 8.7 7.4 9.8 8.4 6.1 3.2 (0.0)
Commercial real estate price growth (2.9) 3.4 7.5 10.2 8.4 5.2 0.9 (2.2)
(1 )Gross domestic product presented quarter-on-quarter, house
price growth and commercial real estate growth presented year-on-year - i.e.
from the equivalent quarter the previous year. UK Bank Rate and unemployment
rate are presented as at end of quarter.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. Critical accounting judgements and key sources of
estimation uncertainty (continued)
2020 2021 2022 2023 2024 2020-2024 average
At 31 December 2020 % % % % % %
Upside
Gross domestic product (10.5) 3.7 5.7 1.7 1.5 0.3
UK Bank Rate 0.10 1.14 1.27 1.20 1.21 0.98
Unemployment rate 4.3 5.4 5.4 5.0 4.5 5.0
House price growth 6.3 (1.4) 5.2 6.0 5.0 4.2
Commercial real estate price growth (4.6) 9.3 3.9 2.1 0.3 2.1
Base case
Gross domestic product (10.5) 3.0 6.0 1.7 1.4 0.1
UK Bank Rate 0.10 0.10 0.10 0.21 0.25 0.15
Unemployment rate 4.5 6.8 6.8 6.1 5.5 5.9
House price growth 5.9 (3.8) 0.5 1.5 1.5 1.1
Commercial real estate price growth (7.0) (1.7) 1.6 1.1 0.6 (1.1)
Downside
Gross domestic product (10.6) 1.7 5.1 1.4 1.4 (0.4)
UK Bank Rate 0.10 0.06 0.02 0.02 0.03 0.05
Unemployment rate 4.6 7.9 8.4 7.8 7.0 7.1
House price growth 5.6 (8.4) (6.5) (4.7) (3.0) (3.5)
Commercial real estate price growth (8.7) (10.6) (3.2) (0.8) (0.8) (4.9)
Severe downside
Gross domestic product (10.8) 0.3 4.8 1.3 1.2 (0.8)
UK Bank Rate 0.10 0.00 0.00 0.01 0.01 0.02
Unemployment rate 4.8 9.9 10.7 9.8 8.7 8.8
House price growth 5.3 (11.1) (12.5) (10.7) (7.6) (7.5)
Commercial real estate price growth (11.0) (21.4) (9.8) (3.9) (0.8) (9.7)
Probability-weighted
Gross domestic product (10.6) 2.6 5.5 1.6 1.4 (0.1)
UK Bank Rate 0.10 0.39 0.42 0.43 0.45 0.36
Unemployment rate 4.5 7.0 7.3 6.7 6.0 6.3
House price growth 5.9 (5.2) (1.5) (0.2) 0.3 (0.2)
Commercial real estate price growth (7.2) (3.0) (0.3) 0.3 (0.1) (2.1)
Base case scenario by quarter(1) First Second Third Fourth First Second Third Fourth
quarter quarter quarter quarter quarter quarter quarter quarter
2020 2020 2020 2020 2021 2021 2021 2021
At 31 December 2020 % % % % % % % %
Gross domestic product (3.0) (18.8) 16.0 (1.9) (3.8) 5.6 3.6 1.5
UK Bank Rate 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10
Unemployment rate 4.0 4.1 4.8 5.0 5.2 6.5 8.0 7.5
House price growth 2.8 2.6 7.2 5.9 5.5 4.7 (1.6) (3.8)
Commercial real estate price growth (5.0) (7.8) (7.8) (7.0) (6.1) (2.9) (2.2) (1.7)
(1 )Gross domestic product presented quarter-on-quarter, house
price growth and commercial real estate growth presented year-on-year - i.e.
from the equivalent quarter the previous year. UK Bank Rate and unemployment
rate are presented as at end of quarter.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. Critical accounting judgements and key sources of
estimation uncertainty (continued)
ECL sensitivity to economic assumptions
The table below shows the Group's ECL for the upside, base case, downside and
severe downside scenarios. The stage allocation for an asset is based on the
overall scenario probability-weighted PD and, hence, the staging of assets is
constant across all the scenarios. In each economic scenario the ECL for
individual assessments and post-model adjustments is constant reflecting the
basis on which they are evaluated. Judgements applied through changes to
inputs are reflected in the scenario sensitivities. The probability-weighted
view shows the extent to which a higher ECL allowance has been recognised to
take account of multiple economic scenarios relative to the base case; the
uplift being £223 million compared to £506 million at 31 December 2020.
Probability- Upside Base case Downside Severe
weighted downside
£m £m £m £m £m
At 31 December 2021
UK mortgages 837 637 723 967 1,386
Credit cards 521 442 500 569 672
Other Retail 908 844 892 947 1,034
Commercial Banking 1,333 1,196 1,261 1,403 1,753
Other 443 441 443 444 446
ECL allowance 4,042 3,560 3,819 4,330 5,291
At 31 December 2020
UK mortgages 1,027 614 804 1,237 2,306
Credit cards 923 809 889 997 1,147
Other Retail 1,445 1,372 1,421 1,490 1,598
Commercial Banking 2,402 1,910 2,177 2,681 3,718
Other 450 448 450 450 456
ECL allowance 6,247 5,153 5,741 6,855 9,225
The impact of changes in the UK unemployment rate and House Price Index (HPI)
have also been assessed. Although such changes would not be observed in
isolation, as economic indicators tend to be correlated in a coherent
scenario, this gives insight into the sensitivity of the Group's ECL to
gradual changes in these two critical economic factors. The assessment has
been made against the base case with the reported staging unchanged.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. Critical accounting judgements and key sources of
estimation uncertainty (continued)
The table below shows the impact on the Group's ECL resulting from a 1
percentage point (pp) increase or decrease in the UK unemployment rate. The
increase or decrease is presented based on the adjustment phased evenly over
the first 10 quarters of the base case scenario. An immediate increase or
decrease would drive a more material ECL impact as it would be fully reflected
in both 12-month and lifetime PDs.
At 31 December 2021 At 31 December 2020
1pp increase in 1pp decrease in 1pp increase in 1pp decrease in
unemployment unemployment unemployment unemployment
£m £m £m £m
UK mortgages 23 (18) 25 (23)
Credit cards 20 (20) 31 (31)
Other Retail 14 (14) 23 (23)
Commercial Banking 49 (42) 125 (112)
Other 1 (1) 1 (1)
ECL impact 107 (95) 205 (190)
The table below shows the impact on the Group's ECL in respect of UK mortgages
of an increase or decrease in loss given default for a 10 percentage point
(pp) increase or decrease in the UK House Price Index (HPI). The increase or
decrease is presented based on the adjustment phased evenly over the first 10
quarters of the base case scenario.
At 31 December 2021 At 31 December 2020
10pp increase 10pp decrease 10pp increase 10pp decrease
in HPI in HPI in HPI in HPI
ECL impact, £m (112) 162 (206) 284
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. Critical accounting judgements and key sources of
estimation uncertainty (continued)
Application of judgement in adjustments to modelled ECL
Impairment models fall within the Group's model risk framework with model
monitoring, periodic validation and back testing performed on model components
(i.e. probability of default, exposure at default and loss given default).
Limitations in the Group's impairment models or data inputs may be identified
through the ongoing assessment and validation of the output of the models. In
these circumstances, management make appropriate adjustments to the Group's
allowance for impairment losses to ensure that the overall provision
adequately reflects all material risks. These adjustments are determined by
considering the particular attributes of exposures which have not been
adequately captured by the impairment models and range from changes to model
inputs and parameters, at account level, through to more qualitative
post-model adjustments.
Judgements are not typically assessed under each distinct economic scenario
used to generate ECL, but instead are applied on the basis of final modelled
ECL which reflects the probability-weighted view of all scenarios. All
adjustments are reviewed quarterly and are subject to internal review and
challenge, including by the Audit Committee, to ensure that amounts are
appropriately calculated and that there are specific release criteria
identified.
The coronavirus pandemic and the various support measures that have been put
in place have resulted in an economic environment which differs significantly
from the historical economic conditions upon which the impairment models have
been built. As a result there has been a greater need for management
judgements to be applied alongside the use of models. At 31 December 2021
management judgement resulted in additional ECL allowances totalling £1,284
million (2020: £1,383 million). This comprises judgements added due to
COVID-19 and other judgements not directly linked to COVID-19 but which have
increased in size during the pandemic. The table below analyses total ECL
allowance by portfolio, separately identifying the amounts that have been
modelled, those that have been individually assessed and those arising through
the application of management judgement.
Modelled Individually Judgements Other Total ECL
ECL assessed due to judgements
COVID-19(1)
£m £m £m £m £m
At 31 December 2021
UK mortgages 292 - 67 478 837
Credit cards 436 - 94 (9) 521
Other Retail 801 - 57 50 908
Commercial Banking 281 905 161 (14) 1,333
Other 43 - 400 - 443
Total 1,853 905 779 505 4,042
At 31 December 2020
UK mortgages 481 - 36 510 1,027
Credit cards 851 - 128 (56) 923
Other Retail 1,209 - 193 43 1,445
Commercial Banking 1,051 1,222 131 (2) 2,402
Other 50 - 400 - 450
Total 3,642 1,222 888 495 6,247
(1 )Judgements introduced to address the impact that COVID-19
and resulting interventions have had on the Group's economic outlook and
observed loss experience, which have required additional model limitations to
be addressed.
( )
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. Tax expense
The UK corporation tax rate for the year was 19.0 per cent (2020: 19.0 per
cent). An explanation of the relationship between tax (expense) credit and
accounting profit is set out below.
2021 2020
£m £m
Profit before tax 6,902 1,226
UK corporation tax thereon (1,311) (233)
Impact of surcharge on banking profits (439) (107)
Non-deductible costs: conduct charges (185) (24)
Non-deductible costs: bank levy (22) (38)
Other non-deductible costs (83) (74)
Non-taxable income 40 59
Tax relief on coupons on other equity instruments 81 86
Tax-exempt gains on disposals 140 81
Tax losses where no deferred tax recognised (1) (58)
Remeasurement of deferred tax due to rate changes 954 350
Differences in overseas tax rates (19) 15
Policyholder tax (63) (46)
Policyholder deferred tax asset in respect of life assurance expenses (69) 49
Adjustments in respect of prior years (40) 104
Tax effect of share of results of joint ventures - (3)
Tax (expense) credit (1,017) 161
4. Earnings per share
2021 2020
£m £m
Profit attributable to ordinary shareholders - basic and diluted 5,355 865
2021 2020
million million
Weighted-average number of ordinary shares in issue - basic 70,937 70,606
Adjustment for share options and awards 848 650
Weighted-average number of ordinary shares in issue - diluted 71,785 71,256
Basic earnings per share 7.5p 1.2p
Diluted earnings per share 7.5p 1.2p
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Provisions for liabilities and charges
Regulatory and legal provisions
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 in
connection with its past conduct and claims brought by or on behalf of current
and former employees, customers, investors and other third parties and is
subject to legal proceedings and other legal actions. Where significant,
provisions are held against the costs expected to be incurred in relation to
these matters and matters arising from related internal reviews. During the
year ended 31 December 2021 the Group charged a further £1,300 million in
respect of legal actions and other regulatory matters, including a charge in
respect of HBOS Reading, a charge of £91 million for the FCA fine in relation
to the past communication of historical home insurance renewals and charges
for other legacy programmes.
The unutilised balance at 31 December 2021 was £1,156 million (31 December
2020: £642 million). The most significant items are as follows.
HBOS Reading - review
The Group completed its compensation assessment for those within the Customer
Review in 2019 with more than £109 million of compensation paid, in addition
to £15 million for ex-gratia payments and £6 million for the reimbursement
of legal fees. The Group is now applying the recommendations from Sir Ross
Cranston's review, issued in December 2019, including a reassessment of direct
and consequential losses by an independent panel (the Foskett Panel), an
extension of debt relief and a wider definition of de facto directors. The
appeal process for the further assessment of debt relief and de facto director
status is now nearing completion. Further details of the Foskett Panel were
announced on 3 April 2020 and the Foskett Panel's full scope and methodology
was published on 7 July 2020. The Foskett Panel's stated objective is to
consider cases via a non-legalistic and fair process and to make their
decisions in a generous, fair and common sense manner, assessing claims
against an expanded definition of the fraud and on a lower evidential basis.
Following the emergence of the first outcomes of the Foskett Panel through
2021, the Group has charged a further £790 million in the year ended 31
December 2021, of which £600 million was recognised in the fourth quarter.
This includes operational costs in relation to Dame Linda Dobbs' review, which
is considering whether the issues relating to HBOS Reading were investigated
and appropriately reported by the Group during the period from January 2009 to
January 2017, and other programme costs. A significant proportion of the
fourth quarter charge relates to the estimated future awards from the Foskett
Panel. To date the Foskett Panel has shared outcomes on a limited subset of
the total population which covers a wide range of businesses and different
claim characteristics. The estimated awards provision recognised is therefore
materially dependent on the assumption that the limited number of awards to
date are representative of the full population of cases. The 2021 charge
increases the lifetime cost to £1,225 million. The final outcome could be
significantly different from the current provision once the re-review is
concluded by the Foskett Panel. There is no confirmed timeline for the
completion of the Foskett Panel re-review process. The Group is committed to
implementing Sir Ross's recommendations in full.
Payment protection insurance
The Group has made provisions for PPI costs over a number of years totalling
£21,960 million. Good progress continues to be made towards ensuring
operational completeness, ahead of an orderly programme close. At 31 December
2021, a provision of £22 million remained outstanding (excluding amounts
related to MBNA), with total cash payments of £179 million during the year.
In addition to the above provision, the Group continues to challenge PPI
litigation cases, with mainly legal fees and operational costs associated with
litigation activity recognised within regulatory and legal provisions,
including a charge in the fourth quarter. PPI litigation remains inherently
uncertain, with a number of key Court judgments due to be delivered in 2022.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Provisions for liabilities and charges (continued)
Arrears handling related activities
To date the Group has provided a total of £1,026 million for arrears handling
activities. The unutilised balance at 31 December 2021 was £26 million.
Customer claims in relation to insurance branch business in Germany
The Group continues to receive claims from customers in Germany relating to
policies issued by Clerical Medical Investment Group Limited (subsequently
renamed Scottish Widows Limited), with smaller numbers of claims received from
customers in Austria and Italy. The Group provided a further £21 million in
the year to 31 December 2021, bringing the total provided to date to £695
million. Utilisation of the provision was £29 million in the year to 31
December 2021. The remaining unutilised provision as at 31 December 2021 was
£85 million. The ultimate financial effect, which could be significantly
different from the current provision, will be known only once all relevant
claims have been resolved.
6. Contingent liabilities and commitments
Interchange fees
With respect to multi-lateral interchange fees (MIFs), the Group is not
involved in the ongoing litigation which involves the card schemes Visa and
Mastercard (as described below). However, the Group is a member/licensee of
Visa and Mastercard and other card schemes. The litigation in question is as
follows:
• Litigation brought by retailers against both Visa and Mastercard
continues in the English Courts, in which retailers are seeking damages on
grounds that Visa and Mastercard's MIFs breached competition law (this
includes a judgment of the Supreme Court in June 2020 upholding the Court of
Appeal's finding in 2018 that historic interchange arrangements of Mastercard
and Visa infringed competition law)
• Litigation brought on behalf of UK consumers in the English Courts
against Mastercard
Any impact on the Group of the litigation against Visa and Mastercard remains
uncertain at this time, such that it is not practicable for the Group to
provide an estimate of any potential financial effect. Insofar as Visa is
required to pay damages to retailers for interchange fees set prior to June
2016, contractual arrangements to allocate liability have been agreed between
various UK banks (including the Group) and Visa Inc, as part of Visa Inc's
acquisition of Visa Europe in 2016. These arrangements cap the maximum amount
of liability to which the Group may be subject and this cap is set at the cash
consideration received by the Group for the sale of its stake in Visa Europe
to Visa Inc in 2016. In 2016, the Group received Visa preference shares as
part of the consideration for the sale of its shares in Visa Europe. In 2020,
some of these Visa preference shares were converted into Visa Inc Class A
common stock (in accordance with the provisions of the Visa Europe sale
documentation) and they were subsequently sold by the Group. The sale has no
impact on this contingent liability.
LIBOR and other trading rates
Certain Group companies, together with other panel banks, have been named as
defendants in ongoing 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 London Interbank Offered
Rate and the Australian BBSW reference rate.
Certain Group companies are also named as defendants in (i) UK-based claims;
and (ii) two Dutch class actions, raising LIBOR manipulation allegations. A
number of the claims against the Group in the UK relating to the alleged
mis-sale of interest rate hedging products also include allegations of LIBOR
manipulation.
It is currently not possible to predict the scope and ultimate outcome on the
Group of 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. As such, it is not practicable to provide an estimate of any
potential financial effect.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. Contingent liabilities and commitments (continued)
Tax authorities
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 its interpretation of the
UK rules means that the group relief is not available. In 2020, HMRC concluded
their enquiry into the matter and issued a closure notice. The Group's
interpretation of the UK rules has not changed and hence it has appealed to
the First Tier Tax Tribunal, with a hearing expected in 2022. If the final
determination of the matter by the judicial process is that HMRC's position is
correct, management estimate that this would result in an increase in current
tax liabilities of approximately £840 million (including interest) and a
reduction in the Group's deferred tax asset of approximately £330 million.
The Group, 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 discussions
with HMRC (including the tax treatment of certain costs arising from the
divestment of TSB Banking Group plc), none of which is expected to have a
material impact on the financial position of the Group.
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, which
could relate to a number of issues, including financial, environmental or
other regulatory matters, both in the UK and overseas. Where material, such
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 based on 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 to assess properly the merits of the case, and no provisions are held
in relation to such matters. In these circumstances, specific disclosure in
relation to a contingent liability will be made where material. 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.
Where there is a contingent liability related to an existing provision the
relevant disclosures are included within note 5.
7. Dividends on ordinary shares and share buyback
Dividends on ordinary shares
The Board has recommended a final ordinary dividend, which is subject to
approval by the shareholders at the Annual General Meeting on 12 May 2022, of
1.33 pence per share (2020: 0.57 pence per share) totalling £947 million.
These condensed consolidated financial statements do not reflect the
recommended dividend.
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 recommended dividend are:
Shares quoted ex-dividend 7 April 2022
Record date 8 April 2022
Final date for joining or leaving the dividend reinvestment plan 27 April 2022
Dividend paid 19 May 2022
Share buyback
The Board has announced its intention to implement an ordinary share buyback
of up to £2.0 billion. This represents the return to shareholders of capital
surplus to that required to provide capacity to grow the business, meet
current and future regulatory requirements and cover uncertainties. The share
buyback programme will commence as soon as is practicable and is expected to
be completed, subject to continued authority from the PRA, by 31 December
2022.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. Other information
The financial information contained in this document does not constitute
statutory accounts within the meaning of section 434 of the Companies Act 2006
(the Act). The statutory accounts for the year ended 31 December 2021 will be
published on the Group's website and will be delivered to the Registrar of
Companies in accordance with section 441 of the Act. The report of the auditor
on those accounts was unqualified, did not draw attention to any matters by
way of emphasis and did not include a statement under sections 498(2) or
498(3) of the Act. The statutory accounts for the year ended 31 December 2020
have been filed with the Registrar of Companies.
BASIS OF PRESENTATION
This news release covers the results of Lloyds Banking Group plc together with
its subsidiaries (the Group) for the year ended 31 December 2021. Unless
otherwise stated, income statement commentaries throughout this document
compare the year ended 31 December 2021 to the year ended 31 December 2020,
and the balance sheet analysis compares the Group balance sheet as at 31
December 2021 to the Group balance sheet as at 31 December 2020. The Group
uses a number of alternative performance measures, including underlying
profit, in the discussion of its business performance and financial position.
These measures are labelled with an '(A)' throughout this document. Further
information on these measures is set out on page 33. Unless otherwise stated,
commentary on pages 1 and 2 and pages 7 to 13 is given on an underlying basis.
The 2021 Annual Report and Accounts and Pillar 3 Report can be found at:
https://www.lloydsbankinggroup.com/investors/financial-downloads/
(https://www.lloydsbankinggroup.com/investors/financial-downloads.html)
FORWARD LOOKING STATEMENTS
This document contains certain forward-looking statements within the meaning
of Section 21E of the US Securities Exchange Act of 1934, as amended, and
section 27A of the US Securities Act of 1933, as amended, with respect to
Lloyds Banking Group plc together with its subsidiaries (the Group) and its
current goals and expectations. Statements that are not historical or current
facts, including statements about the Group's or its directors' and/or
management's beliefs and expectations, are forward looking statements. Words
such as, without limitation, 'believes', 'achieves', 'anticipates',
'estimates', 'expects', 'targets', 'should', 'intends', 'aims', 'projects',
'plans', 'potential', 'will', 'would', 'could', 'considered', 'likely', 'may',
'seek', 'estimate', 'probability', 'goal', 'objective', 'deliver',
'endeavour', 'prospects', 'optimistic' and similar expressions or variations
on these expressions are intended to identify forward looking statements.
These statements concern or may affect future matters, including but not
limited to: projections or expectations of the Group's future financial
position, including profit attributable to shareholders, provisions, economic
profit, dividends, capital structure, portfolios, net interest margin, capital
ratios, liquidity, risk-weighted assets (RWAs), expenditures or any other
financial items or ratios; litigation, regulatory and governmental
investigations; the Group's future financial performance; the level and extent
of future impairments and write-downs; the Group's ESG targets and/or
commitments; statements of plans, objectives or goals of the Group or its
management and other statements that are not historical fact; expectations
about the impact of COVID-19; 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 include, but
are not limited to: general economic and business conditions in the UK and
internationally; market related risks, trends and developments; risks
concerning borrower and counterparty credit quality; fluctuations in interest
rates, inflation, exchange rates, stock markets and currencies; volatility in
credit markets; volatility in the price of our securities; 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; inability to capture accurately
the expected value from acquisitions; potential changes in dividend policy;
the ability to achieve strategic objectives; insurance risks; management and
monitoring of conduct risk; exposure to counterparty risk; credit rating risk;
tightening of monetary policy in jurisdictions in which the Group operates;
instability in the global financial markets, including within the Eurozone,
and as a result of ongoing uncertainty following the exit by the UK from the
European Union (EU) and the effects of the EU-UK Trade and Cooperation
Agreement; political instability including as a result of any UK general
election and any further possible referendum on Scottish independence;
operational risks; conduct risk; technological changes and risks to the
security of IT and operational infrastructure, systems, data and information
resulting from increased threat of cyber and other attacks; natural pandemic
(including but not limited to the COVID-19 pandemic) and other disasters;
inadequate or failed internal or external processes or systems; acts of
hostility or terrorism and responses to those acts, or other such events;
geopolitical unpredictability; risks relating to sustainability and climate
change (and achieving climate change ambitions), including the Group's ability
along with the government and other stakeholders to measure, manage and
mitigate the impacts of climate change effectively; changes in laws,
regulations, practices and accounting standards or taxation; changes to
regulatory capital or liquidity requirements and similar contingencies;
assessment related to resolution planning requirements; the policies and
actions of governmental or regulatory authorities or courts together with any
resulting impact on the future structure of the Group; failure to comply with
anti-money laundering, counter terrorist financing, anti-bribery and sanctions
regulations; failure to prevent or detect any illegal or improper activities;
projected employee numbers and key person risk; increased labour costs;
assumptions and estimates that form the basis of our financial statements; the
impact of competitive conditions; and exposure to legal, regulatory or
competition proceedings, investigations or complaints. A number of these
influences and factors are beyond the Group's control. Please refer to the
latest Annual Report on Form 20-F filed by Lloyds Banking Group plc with the
US Securities and Exchange Commission (the SEC), which is available on the
SEC's website at www.sec.gov, for a discussion of certain factors and risks.
Lloyds Banking Group plc may also make or disclose written and/or oral
forward-looking statements in other written materials and in oral statements
made by the directors, officers or employees of Lloyds Banking Group plc to
third parties, including financial analysts. Except as required by any
applicable law or regulation, the forward-looking statements contained in this
document are made as of today's date, and the Group expressly disclaims any
obligation or undertaking to release publicly any updates or revisions to any
forward looking statements contained in this document whether as a result of
new information, future events or otherwise. The information, statements and
opinions contained in this document do not constitute a public offer under any
applicable law or an offer to sell any securities or financial instruments or
any advice or recommendation with respect to such securities or financial
instruments.
CONTACTS
For further information please contact:
INVESTORS AND ANALYSTS
Douglas Radcliffe
Group Investor Relations Director
020 7356 1571
douglas.radcliffe@lloydsbanking.com
Edward Sands
Director of Investor Relations
020 7356 1585
edward.sands@lloydsbanking.com
Eileen Khoo
Director of Investor Relations
07385 376435
eileen.khoo@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 News Release may be obtained from:
Investor Relations, Lloyds Banking Group plc, 25 Gresham Street, London EC2V
7HN
The statement can also be found on the Group's website -
www.lloydsbankinggroup.com
Registered office: Lloyds Banking Group plc, The Mound, Edinburgh, EH1 1YZ
Registered in Scotland No. SC095000
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