REG - Lloyds Banking Group - Half-year results <Origin Href="QuoteRef">LLOY.L</Origin> - Part 4
06/09/2014 22:42
- Part 4: For the preceding part double click ID:nRSe8094Nc
324 828 61 561
TSB 51 59 14 50
Central items − 2 3
Total impairment charge 758 1,813 58 1,191
Impairment charge as a % of average advances 0.30% 0.69% 0.45%
Total impairment charge comprises:
Half-year to 30 June 2014 Half-year to 30 June 2013 Change since 30 June 2013 Half-year to 31 Dec 2013
£m £m % £m
Loans and advances to customers 756 1,810 58 1,178
Debt securities classified as loans and receivables − 1 −
Available-for-sale financial assets 2 2 − 13
Total impairment charge 758 1,813 58 1,191
1,191
CREDIT RISK PORTFOLIO (continued)
Group impaired loans and provisions
At 30 June 2014 Loans and advances to customers Impaired loans Impaired loans as % Impairment provisions1 Impairment provision as % of impaired loans2
of closing advances
£m £m % £m %
Retail:
Secured 302,930 4,699 1.6 1,353 28.8
Loans and overdrafts 10,425 729 7.0 257 86.0
Other 4,039 337 8.3 67 22.0
317,394 5,765 1.8 1,677 31.6
Commercial Banking:
SME 27,841 1,744 6.3 498 28.6
Other 78,679 2,310 2.9 1,315 56.9
106,520 4,054 3.8 1,813 44.7
Consumer Finance:
Credit Cards 8,834 593 6.7 213 93.8
Asset Finance 6,321 177 2.8 111 62.7
Netherlands 5,118 81 1.6 37 45.7
20,273 851 4.2 361 74.4
Run-off:
Ireland retail 5,610 930 16.6 617 66.3
Ireland commercial real estate 4,365 4,128 94.6 3,193 77.3
Ireland corporate 3,385 2,970 87.7 2,231 75.1
Corporate real estate and other corporate 7,940 5,300 66.8 2,611 49.3
Specialist finance 7,113 848 11.9 437 51.5
Other 2,104 351 16.7 257 73.2
30,517 14,527 47.6 9,346 64.3
TSB 22,652 216 1.0 90 41.7
Reverse repos and other items 7,758
Total gross lending 505,114 25,413 5.0 13,287 54.0
Impairment provisions (13,287)
Fair value adjustments3 (482)
Total Group 491,345
1 Impairment provisions include collective unimpaired provisions.
2 Impairment provisions as a percentage of impaired loans are calculated excluding Retail and Consumer Finance loans in recoveries
(30 June 2014: £430 million in Retail loans and overdrafts, £32 million in Retail other and £366 million in Consumer Finance credit cards).
3 The fair value adjustments relating to loans and advances were those required to reflect the HBOS assets in the Group's consolidated financial records at their fair value and took into account both the expected losses and market liquidity at the date of
acquisition. The unwind relating to future impairment losses requires significant management judgement to determine its timing which includes an assessment of whether the losses incurred in the current period were expected at the date of the acquisition
and assessing whether the remaining losses expected at the date of the acquisition will still be incurred. The element relating to market liquidity unwinds to the income statement over the estimated expected lives of the related assets (until 2014 for
wholesale loans and 2018 for retail loans) although if an asset is written-off or suffers previously unexpected impairment then this element of the fair value will no longer be considered a timing difference (liquidity) but permanent (impairment). The fair
value unwind in respect of impairment losses incurred was £90 million for the period ended 30 June 2014 (30 June 2013: £324 million). The fair value unwind in respect of loans and advances is expected to continue to decrease in future years as fixed-rate
periods on mortgages expire, loans are repaid or
written-off, and will reduce to zero over time.
CREDIT RISK PORTFOLIO (continued)
Group impaired loans and provisions (continued)
At 31 December 2013 Loans and advances to customers Impaired loans Impaired loans as % Impairment provisions1 Impairment provision as % of impaired loans2
of closing advances
£m £m % £m %
Retail:
Secured 302,019 5,503 1.8 1,447 26.3
Loans and overdrafts 10,598 819 7.7 285 83.1
Other 4,148 408 9.8 106 28.3
316,765 6,730 2.1 1,838 29.5
Commercial Banking:
SME 27,268 2,194 8.0 623 28.4
Other 83,111 2,853 3.4 1,761 61.7
110,379 5,047 4.6 2,384 47.2
Consumer Finance:
Credit Cards 9,008 639 7.1 226 96.6
Asset Finance 5,061 221 4.4 140 63.3
Netherlands 5,478 86 1.6 45 52.3
19,547 946 4.8 411 76.0
Run-off:
Ireland retail 5,944 1,002 16.9 638 63.7
Ireland commercial real estate 5,512 5,087 92.3 3,775 74.2
Ireland corporate 3,918 3,235 82.6 2,305 71.3
Corporate real estate and other corporate 11,571 8,131 70.3 3,320 40.8
Specialist finance 9,017 1,368 15.2 565 41.3
Other 2,519 486 19.3 372 76.5
38,481 19,309 50.2 10,975 56.8
TSB 23,553 227 1.0 99 43.6
Reverse repos and other items 2,779
Total gross lending 511,504 32,259 6.3 15,707 50.1
Impairment provisions (15,707)
Fair value adjustments (516)
Total Group 495,281
1 Impairment provisions include collective unimpaired provisions.
2 Impairment provisions as a percentage of impaired loans are calculated excluding Retail and Consumer Finance loans in recoveries (31 December 2013: £476 million in Retail loans and overdrafts, £34 million in Retail other and £405 million in Consumer Finance credit cards).
CREDIT RISK PORTFOLIO (continued)
Retail
· The Retail impairment charge was £276 million in the first half of 2014, a decrease of 40 per cent against the first
half of 2013. The decrease was primarily driven by improving performance across Retail and the sale of recoveries assets on
the Loans and Overdrafts portfolios.
· The Retail impairment charge, as an annualised percentage of average loans and advances to customers, decreased to
0.18 per cent in the first half of 2014 from 0.29 per cent in the first half of 2013.
· Retail impaired loans decreased by £965 million to £5,765 million compared with 31 December 2013 and, as a percentage
of closing loans and advances to customers, decreased to 1.8 per cent from 2.1 per cent at 31 December 2013. Impairment
provisions as a percentage of impaired loans (excluding unsecured and Retail Business Banking loans in recoveries)
increased to 31.6 per cent from 29.5 per cent at 31 December 2013.
Secured
· The impairment charge decreased by £94 million, to £94 million compared with the first half of 2013. The impairment
charge as an annualised percentage of average loans and advances to customers, decreased to 0.06 per cent in the first half
of 2014 from 0.13 per cent in the first half of 2013.
· Impairment provisions reduced to £1,353 million at 30 June 2014 compared to £1,447 million at 31 December 2013.
Impaired loans reduced to £4,699 million at 30 June 2014 compared to £5,503 million at 31 December 2013. As a result of
this, impairment provisions as a percentage of impaired loans increased to 28.8 per cent from 26.3 per cent at 31 December
2013.
· The impairment provisions held against secured assets reflect the Group's view of appropriate allowance for incurred
losses. The Group holds appropriate impairment provisions for customers who are experiencing financial difficulty, either
on a forbearance arrangement or who may be able to maintain their repayments only whilst interest rates remain low.
· The value of mortgages greater than three months in arrears (excluding repossessions) decreased by £1,079 million to
£7,514 million at 30 June 2014 compared to £8,593 million at 31 December 2013.
· The average indexed loan to value (LTV) on the mortgage portfolio at 30 June 2014 decreased to 50.4 per cent compared
with 53.3 per cent at 31 December 2013. The average LTV for new mortgages and further advances written in the first half of
2014 was 64.3 per cent compared with 64.0 per cent for 2013 reflecting the Group's participation in the UK government's
Help to Buy scheme.
· The percentage of closing loans and advances with an indexed LTV in excess of 100 per cent decreased to 2.9 per cent
at 30 June 2014, compared with 5.4 per cent at 31 December 2013.
Loans and overdrafts
· The impairment charge decreased by £88 million, to £165 million compared with the first half of 2013. The annualised
impairment charge, as a percentage of average loans and advances to customers, reduced to 3.09 per cent from 4.39 per cent
in the first half of 2013.
· Impaired loans have decreased by £90 million since 31 December 2013 to £729 million at 30 June 2014 which represents
7.0 per cent of closing loans and advances to customers, compared with 7.7 per cent at 31 December 2013.
· Impairment provisions decreased by £28 million, compared with 31 December 2013. This reduction was driven by fewer
assets entering arrears and recoveries assets being written-down to the present value of future expected cash flows.
Impairment provisions as a percentage of impaired loans in collections increased to 86.0 per cent at 30 June 2014 from 83.1
per cent at 31 December 2013.
CREDIT RISK PORTFOLIO (continued)
Retail (continued)
The Retail division's gross loans and advances to customers are analysed in the following table:
At 30 June 2014 At 31 Dec 2013
£m £m
Mainstream 228,554 228,030
Buy to let 51,656 50,346
Specialist1 22,720 23,643
302,930 302,019
Loans 8,232 8,282
Overdrafts 2,193 2,316
Wealth 3,079 3,232
Retail Business Banking 960 916
14,464 14,746
Total 317,394 316,765
1 Specialist lending is closed to new business.
Retail mortgages greater than three months in arrears (excluding repossessions)
Number of cases Total mortgage accounts % Value of loans1 Total mortgage balances %
June 2014 Dec 2013 June 2014 Dec 2013 June 2014 Dec 2013 June 2014 Dec 2013
Cases Cases % % £m £m % %
Mainstream 44,308 50,437 1.9 2.2 4,906 5,683 2.1 2.5
Buy to let 5,759 6,250 1.2 1.4 771 859 1.5 1.7
Specialist 10,686 11,870 6.8 7.3 1,837 2,051 8.1 8.6
Total 60,753 68,557 2.1 2.3 7,514 8,593 2.5 2.8
1 Value of loans represents total book value of mortgages more than three months in arrears.
The stock of repossessions decreased to 2,163 cases at 30 June 2014 compared to 2,179 cases at 31 December 2013.
CREDIT RISK PORTFOLIO (continued)
Retail (continued)
Period end and average LTVs across the Retail mortgage portfolios
At 30 June 2014 Mainstream Buy to let Specialist Total
% % % %
Less than 60% 41.8 27.3 26.2 38.1
60% to 70% 19.6 28.3 19.2 21.2
70% to 80% 19.3 21.1 20.4 19.7
80% to 90% 11.9 12.1 17.2 12.3
90% to 100% 4.7 8.6 10.3 5.8
Greater than 100% 2.7 2.6 6.7 2.9
Total 100.0 100.0 100.0 100.0
Average loan to value:1
Stock of residential mortgages 47.3 63.4 61.8 50.4
New residential lending 64.5 63.6 n/a 64.3
Impaired mortgages 63.0 84.8 75.9 67.9
At 31 December 2013 Mainstream Buy to let Specialist Total
% % % %
Less than 60% 36.4 19.1 20.1 32.3
60% to 70% 16.6 20.7 15.7 17.2
70% to 80% 19.8 26.5 19.3 20.9
80% to 90% 15.2 15.7 20.1 15.6
90% to 100% 7.4 11.6 14.3 8.6
Greater than 100% 4.6 6.4 10.5 5.4
Total 100.0 100.0 100.0 100.0
Average loan to value:1
Stock of residential mortgages 49.9 67.9 66.2 53.3
New residential lending 64.0 64.0 n/a 64.0
Impaired mortgages 67.2 90.4 80.8 72.2
1 Average loan to value is calculated as total loans and advances as a percentage of the total collateral of these loans and advances.
CREDIT RISK PORTFOLIO (continued)
Commercial Banking
· Commercial Banking impairment charge was £29 million in the first half of 2014, substantially lower than £285 million
in the first half of 2013. The material reduction reflects better quality origination, improving economic conditions,
continued low interest rates and provision releases. The impairment charge was also lower compared to £113 million in the
second half of 2013.
· The overall quality of the Commercial Banking portfolio remains good. New business is of good quality and generally
better than the back book average. High market liquidity is leading to some relaxation of credit conditions in the
marketplace, although the Group remains disciplined within its low risk appetite.
· Impairment charge as a percentage of average loans and advances decreased to 0.05 per cent from 0.55 per cent in the
first half of 2013, and improved from 0.21 per cent for the half year to 31 December 2013.
· Impaired loans reduced substantially by 20 per cent to £4,054 million compared with 31 December 2013 mainly due to
disposals and write-offs. As a percentage of closing loans and advances to customers, impaired loans reduced to 3.8 per
cent from 4.6 per cent at 31 December 2013.
· Impairment provisions reduced to £1,813 million (December 2013: £2,384 million) and includes collective unimpaired
provisions of £403 million (December 2013: £436 million).
· Impairment provisions as a percentage of impaired loans decreased to 44.7 per cent compared to 47.2 per cent at 31
December driven by the successful execution of exit strategies on a few heavily provided for connections and lower coverage
on newly impaired connections.
SME (business customers with turnover from £1 million to £25 million)
· Net impairment charge has reduced to £5 million in the first half of 2014 compared to £72 million in the same period
during 2013.
· The portfolio continues to grow within prudent credit risk appetite parameters. As a result of the Group's customer
driven relationship management, net lending has increased 5 per cent since June 2013. This also reflects the Group's
commitment to the UK economy and the Funding for Lending Scheme. Portfolio credit quality has remained stable or improved
across all key metrics.
Other Commercial Banking
· The £78.7 billion of gross loans and advances to customers of the other Commercial Banking comprises different
coverage segments (Mid Markets, Global Corporates and Financial Institutions).
Mid Markets (business customers with turnover of £25 million to £750 million, includes social housing book)
· Net impairment charge has reduced to £56 million in the first half of 2014 compared to £151 million in the same
period during 2013.
· Overall credit quality has remained stable during 2014.
· The real estate business within the Group's Mid Markets franchise is focused predominantly upon unquoted private real
estate portfolios. Credit quality continues to improve and the number of new impaired connections is minimal. Increased
liquidity is being seen in the market but new business propositions continue to be written under robust policy parameters.
Concerns around tenant default have reduced in the current environment, however the Group remains aware of the risks
associated with tenant default.
CREDIT RISK PORTFOLIO (continued)
Commercial Banking (continued)
Global Corporate (operates across UK, Europe and North America and serves major corporates)
· Net impairment releases of £41 million in the first half of 2014 compares favourably with the impairment charge of
£47 million in the same period during 2013.
· The portfolio related to trading companies continues to be predominantly investment grade focused; the overall
portfolio asset quality remains good; and corporate balance sheets generally remain conservatively structured following a
period of de-leveraging through the downturn.
· The real estate business within the Group's Global Corporate portfolio is focused on the larger end of the UK
property market with a bias to the quoted publicly listed and funds sector. Portfolio credit quality remains good being
underpinned by seasoned management teams with proven asset management skills.
Financial Institutions (UK and International Finance Systems)
· Predominantly Investment Grade counterparties with whom relationships are either client focused or held to support
the Group's funding, liquidity or general hedging requirements.
· Net impairment charge in Financial Institutions was £9 million compared to £15 million in the same period during
2013.
· Overall, portfolio credit quality remains good and the outlook is stable. Trading exposures continue to be
predominantly short-term and/or collateralised with inter bank activity mainly undertaken with strong investment grade
counterparties.
· Notwithstanding the fact that the general improvement in market conditions across the Eurozone appear to have
stabilised, the Group continues to adopt a conservative stance maintaining close portfolio scrutiny and oversight. Detailed
contingency plans are in place and exposures to financial institutions domiciled in peripheral Eurozone countries remain
modest and managed within tight risk parameters.
· The majority of funding and risk management activity is transacted with investment grade counterparties including
Sovereign central banks and much of it is on a collateralised basis, such as repos and swaps facing a Central Counterparty
(CCP). Bilateral derivative transactions with Financial Institution counterparties are typically collateralised under a
credit support annex in conjunction with the ISDA Master Agreement. The Group continues to consolidate its counterparty
risk via CCPs as part of an ongoing move to reduce bilateral counterparty risk by clearing standardised derivative
contracts.
CREDIT RISK PORTFOLIO (continued)
Consumer Finance
· The total Consumer Finance impairment charge was £78 million in the first half of 2014, a decrease of 56 per cent
against the first half of 2013. The decrease was driven by both a continued underlying improvement of portfolio quality and
the sale of recoveries assets in the Credit Cards and Asset Finance portfolios.
· The Consumer Finance impairment charge as an annualised percentage of average loans and advances to customers
decreased to 0.78 per cent in the first half of 2014 from 1.84 per cent in the first half of 2013.
· Total impaired loans as a percentage of closing loans and advances to customers decreased to 4.2 per cent (£851
million) at 30 June 2014 compared to 4.8 per cent (£946 million) at 31 December 2013.
Credit Cards
· The total Cards impairment charge was £69 million in the first half of 2014, a decrease of 50 per cent against the
first half of 2013. The decrease was primarily driven by both a continued underlying improvement of portfolio quality and
the sale of recoveries assets on the consumer credit cards portfolio.
· The Credit Cards impairment charge as an annualised percentage of average loans and advances to customers decreased
to 1.58 per cent in the first half of 2014 from 3.14 per cent in the first half of 2013.
· Total impaired loans decreased to £593 million at 30 June 2014 compared to £639 million at 31 December 2013.
Asset Finance
· The total Asset Finance impairment charge was £8 million in the first half of 2014, a decrease of 75 per cent against
the first half of 2013. The decrease was primarily driven by both a continued underlying improvement of portfolio quality
and the sale of recoveries assets.
· The Asset Finance impairment charge as an annualised percentage of average loans and advances to customers decreased
to 0.26 per cent in the first half of 2014 from 1.33 per cent in the first half of 2013.
· Total impaired loans decreased to £177 million at 30 June 2014 compared to £221 million at 31 December 2013.
Netherlands
· The total Netherlands impairment charge was £1 million in the first half of 2014, a decrease of 86 per cent against
the first half of 2013.
· Total impaired loans decreased to £81 million at 30 June 2014 compared to £86 million at 31 December 2013.
CREDIT RISK PORTFOLIO (continued)
Run-off
· Run-off impairment charge was £324 million in the first half of 2014, substantially lower than £828 million in the
first half of 2013. The material reduction reflects continued proactive management and deleveraging.
· The impairment charge as a percentage of average loans and advances decreased to 1.85 per cent from 2.55 per cent in
the first half of 2013, and materially improved from 2.12 for the half year to 31 December 2013.
· Impaired loans reduced substantially by 25 per cent to £14,527 million compared with 31 December 2013, mainly due to
disposals and write-offs. As a percentage of closing loans and advances to customers, impaired loans reduced to 47.6 per
cent from 50.2 per cent at 31 December 2013.
· Impairment provisions as a percentage of impaired loans increased to 64.3 per cent compared to 56.8 per cent at 31
December driven by continued deterioration in Ireland commercial real estate. Net exposure in Ireland wholesale has fallen
to £2.3 billion (31 December 2013: £3.4 billion).
Ireland
· The Group continues to reduce its exposure to Ireland with gross loans and advances reducing by £2,014 million during
the first half of 2014 mainly due to disposals, write-offs and net repayments.
· Total impaired loans decreased by £1,296 million, or 14 per cent to £8,028 million compared with £9,324 million at 31
December 2013. The reduction is driven primarily by commercial real estate and corporate loans.
· The most significant contribution to impaired loans in Ireland is the Commercial Real Estate portfolio. 94.6 per cent
of the portfolio is now impaired compared to 92.3 per cent at 31 December 2013. The impairment coverage ratio has increased
to 77.3 per cent from 74.2 per cent at 31 December 2013 reflecting continued portfolio deterioration and price pressure.
· In the Irish retail mortgage portfolio the average indexed loan to value (LTV) at 30 June 2014 decreased to 99.1 per
cent compared with 102.3 per cent at 31 December 2013. The percentage of closing loans and advances with an indexed LTV in
excess of 100 per cent decreased to 51.1 per cent at 30 June 2014, compared with 53.8 per cent at 31 December 2013.
Corporate real estate and other corporate
· Loans and advances to customers include the run-off Corporate Real Estate Business Support Unit (BSU) portfolio. This
portfolio predominantly consists of UK real estate loans together with other Corporate loans relating to real estate
sectors, supported by trading activities (such as hotels, housebuilders and care homes) which are managed by specialist
teams. These assets have been the subject of frequent review, and have been impaired to appropriate levels.
· The impairment charge in the first half of 2014 reduced to £92 million compared to £317 million in the same period to
2013 reflecting lower gross charges on a reduced portfolio, some improvement in real estate market conditions in the
regions and the continuing proactive management enabling a number of write-backs on previously impaired loans.
· The portfolio continues to reduce significantly ahead of expectations (35 per cent reduction in net book value for
the first six months of 2014, compared to 24 per cent in the same period last year). Consensual asset sales by customers,
loan sales and asset disposals totalled £2.5 billion (net book value) compared with £3.6 billion at 30 June 2013.
Specialist Finance
· Gross loans and advances to customers include the Run-off Acquisition Finance (leverage lending) which is classified
as Run-off since it is outside the Group's risk appetite, and the Run-off Asset Based Finance portfolios (which mainly
include Ship Finance, Aircraft Finance, Infrastructure and Rail Capital). Total gross loans and advances reduced by £1.9
billion, from £9.0 billion to £7.1 billion at 30 June 2014 mainly due to disposals of £1.6 billion (net book value).
· The Run-off Acquisition Finance (leverage lending) portfolio totalled £518 million (net £374 million) as at 30 June
2014. Impairment charges in this portfolio continue to decline significantly, reflecting further material reductions in the
size of the portfolio and stabilising market conditions.
· Ship Finance gross drawn lending (excluding leasing) totalled £525 million (net £492 million) as at 30 June 2014.
Impairment charges are running at significantly lower levels to those experienced in 2013 as the portfolio has continued to
reduce through strategic disposals in 2014 which have materially de-risked the residual portfolio.
CREDIT RISK PORTFOLIO (continued)
Forbearance
The Group operates a number of schemes to assist borrowers who are experiencing financial stress. Forbearance policies are
disclosed in Note 54 of the Group's 2013 Annual Report and Accounts, pages 340 to 345.
Retail forbearance
At 30 June 2014, UK retail secured loans and advances currently or recently subject to forbearance were 1.7 per cent (31
December 2013: 2.0 per cent) of total UK retail secured loans and advances. Further analysis of the forborne loan balances
is set out below.
At 30 June 2014, unsecured retail loans and advances currently or recently subject to forbearance were 1.7 per cent (31
December 2013: 1.8 per cent) of total unsecured retail loans and advances. Further analysis of the forborne loan balances
is set out below.
UK retail lending
Total loans and advances which are currently or recently forborne Total current and recent forborne loans and advances which are impaired1 Impairment provisions as % of loans and advances which are currently or recently forborne
At June 2014 At Dec 2013 At June 2014 At Dec 2013 At June 2014 At Dec 2013
£m £m £m £m % %
UK secured lending:
Temporary forbearance arrangements
Reduced contractual monthly payment2 294 957 90 221 8.0 4.1
Reduced payment arrangements3 1,085 1,336 166 157 2.7 3.2
1,379 2,293 256 378 3.8 3.6
Permanent treatments
Repair and term extensions4 3,858 3,860 212 296 3.2 3.4
Total 5,237 6,153 468 674 3.3 3.5
UK unsecured lending:
Loans and overdrafts5 174 191 157 169 43.9 45.8
1 £4,769 million of current and recent forborne secured loans and advances were not impaired at 30 June 2014 (31 December 2013: £5,479 million). £17 million of current and recent forborne loans and overdrafts were not impaired at 30 June 2014 (31 December: £22 million).
2 Includes temporary interest only arrangements and short-term payment holidays granted in collections where the customer is currently benefitting from the treatment and where the concession has ended within the previous six months (temporary interest only) and previous 12 months (short-term payment holidays).
3 Includes customers who had an arrangement to pay less than the contractual amount at 30 June 2014 or where an arrangement ended within the previous three months.
4 Includes capitalisation of arrears and term extensions which commenced during the previous 24 months and who remain as customers at 30 June 2014.
5 Includes temporary treatments where the customer is currently benefiting from the change or the treatment has ended within the previous six months. Permanent changes which commenced during the last 24 months for existing customers as at 30 June 2014 are also included.
CREDIT RISK PORTFOLIO (continued)
Commercial Banking forbearance
A number of options are available to the Group where a customer is facing financial difficulty.
The forbearance strategy in respect of Commercial Banking customers is designed to support the customer and protect the
Group; early identification, control and monitoring are key to the success of the process. The granting of a concession is
dependent on individual facts and circumstances. Concessions may be provided to help the customer with their day to day
liquidity and working capital. The Group may also grant forbearance when it believes that there is a realistic prospect of
the customer continuing to be able to repay all facilities in full. The most significant factor in determining whether the
Group treats a commercial customer as forborne is the granting of a concession to an obligor who is in financial
difficulty.
At 30 June 2014 £6,157 million (December 2013: £7,479 million) of total loans and advances were forborne of which £4,054
million (December 2013: £5,047 million) were impaired. The coverage ratio for forborne loans decreased from 31.8 per cent
at 31 December 2013 to 29.4 per cent at 30 June 2014.
The table below sets out the Group's largest unimpaired forborne loans and advances to commercial customers (exposures over
£5 million) as at 30 June 2014 by type of forbearance, together with a breakdown on which exposures are classified as
Direct Real Estate:
At 30 June 2014 Direct Real Estate Other industry sector Total
£m £m £m
Type of unimpaired forbearance:
UK1 exposures > £5 million
Covenants 101 1,000 1,101
Extensions 7 316 323
Multiple − 272 272
108 1,588 1,696
Exposures < £5 million and other non-UK1 407
Total 2,103
At 31 December 2013
Type of unimpaired forbearance:
UK1 exposures > £5 million
Covenants 527 488 1,015
Extensions 69 254 323
Multiple − 316 316
596 1,058 1,654
Exposures < £5 million and other non-UK1 778
Total 2,432
1 Based on location of the office recording the transaction.
As part of the Group's ongoing review and refinement of forbearance reporting, exposures below £5 million were subject to
more granular review which led to a reduction in the level of forbearance reported. Previously, all lower quality
unimpaired core exposures under £5 million were reported as forborne.
CREDIT RISK PORTFOLIO (continued)
Consumer Finance forbearance
At 30 June 2014, Consumer Credit Cards loans and advances currently or recently subject to forbearance were 3.0 per cent
(31 December 2013: 3.7 per cent) of total Consumer Credit Cards loans and advances. At 30 June 2014, Asset Finance retail
loans and advances on open portfolios currently subject to forbearance were 1.3 per cent (31 December 2013: 2.1 per cent)
of total Asset Finance retail loans and advances.
Analysis of the forborne loan balances
Total loans and advances which are forborne Total forborne loans and advances which are impaired1 Impairment provisions as % of loans and advances which are forborne
30 June 2014 31 Dec 2013 30 June 2014 31 Dec 2013 30 June 2014 31 Dec 2013
£m £m £m £m % %
Consumer Credit Cards2 258 326 137 188 26.7 21.9
Asset Finance3 81 105 65 85 24.1 28.1
1 £137 million of forborne loans and advances (Consumer Credit Cards: £121 million, Asset Finance: £16 million) were not impaired at 30 June 2014 (31 December 2013: Consumer Credit Cards: £138 million, Asset Finance: £20 million).
2 Includes temporary treatments where the customer is currently benefitting from the change or the treatment has ended within the last six months. Permanent changes which commenced during the last 24 months for existing customers as at 30 June 2014 are also included.
3 Includes retail accounts that are currently on a forbearance treatment and capitalisation of arrears which commenced during the previous 12 months.
CREDIT RISK PORTFOLIO (continued)
Run-off forbearance
Ireland commercial real estate and corporate
All loans and advances in Ireland commercial real estate and corporate are treated as forborne (30 June 2014: £7,750
million, 31 December 2013: £9,430 million). At 30 June 2014, £7,098 million (December 2013: £8,322 million) were impaired.
The coverage ratio increased from 64.5 per cent at 31 December 2013 to 70.0 per cent at 30 June 2014.
Secured retail lending - Ireland
At 30 June 2014, Irish secured loans and advances currently or recently subject to forbearance were 11.9 per cent (31
December 2013: 12.2 per cent) of total Irish retail secured loans and advances. Further analysis of the forborne loan
balances is set out below:
Total loans and advances which are currently or recently forborne Total current and recent forborne loans and advances which are impaired1 Impairment provisions as % of loans and advances which are currently or recently forborne
30 June 31 Dec 30 June 31 Dec 30 June 31 Dec
2014 2013 2014 2013 2014 2013
Ireland Secured lending: £m £m £m £m % %
Temporary forbearance arrangements
Reduced payment arrangements2 223 254 203 227 50.3 49.8
Permanent treatments
Repair and term extensions3 445 473 85 102 15.5 14.4
Total 668 727 288 329 27.2 26.7
1 £380 million of current and recent forborne loans and advances were not impaired at 30 June 2014 (31 December 2013: £398 million).
2 Includes customers who had an arrangement to pay less than the contractual amount at 30 June 2014 or where an arrangement ended within the previous three months.
3 Includes capitalisation of arrears and term extensions which commenced during the previous 24 months and remaining as customers at 30 June 2014.
Corporate real estate, other corporate and Specialist Finance
At 30 June 2014, £6,292 million (December 2013:
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