REG - Lloyds Banking Group - Half-year results <Origin Href="QuoteRef">LLOY.L</Origin> - Part 6
06/09/2014 22:42
- Part 6: For the preceding part double click ID:nRSe8094Ne
other financial assets at fair value through profit or loss 87
9 Derivative financial instruments 88
10 Loans and advances to customers 89
11 Allowance for impairment losses on loans and receivables 89
12 Securitisations and covered bonds 90
13 Available-for-sale financial assets 91
14 Other assets 91
15 Customer deposits 91
16 Debt securities in issue 92
17 Other liabilities 92
18 Post-retirement defined benefit schemes 93
19 Subordinated liabilities 94
20 Share capital 94
21 Other equity instruments 95
22 Reserves 96
23 Provisions for liabilities and charges 97
24 Contingent liabilities and commitments 100
25 Fair values of financial assets and liabilities 103
26 Related party transactions 112
27 Disposal of a non-controlling interest in TSB Banking Group plc 113
28 Future accounting developments 114
29 Other information 114
CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED INCOME STATEMENT
Half-year to 30 June 2014 Half-year to 30 June 2013 Half-year to 31 Dec 2013
Note £ million £ million £ million
Interest and similar income 9,728 10,751 10,412
Interest and similar expense (4,466) (7,481) (6,344)
Net interest income 5,262 3,270 4,068
Fee and commission income 1,836 2,194 1,925
Fee and commission expense (609) (730) (655)
Net fee and commission income 1,227 1,464 1,270
Net trading income 4,588 11,015 5,452
Insurance premium income 3,492 3,851 4,346
Other operating income (535) 2,472 777
Other income 3 8,772 18,802 11,845
Total income 14,034 22,072 15,913
Insurance claims (6,338) (11,687) (7,820)
Total income, net of insurance claims 7,696 10,385 8,093
Regulatory provisions (1,100) (575) (2,880)
Other operating expenses (5,092) (5,993) (5,874)
Total operating expenses 4 (6,192) (6,568) (8,754)
Trading surplus (deficit) 1,504 3,817 (661)
Impairment 5 (641) (1,683) (1,058)
Profit (loss) before tax 863 2,134 (1,719)
Taxation 6 (164) (556) (661)
Profit (loss) for the period 699 1,578 (2,380)
Profit (loss) attributable to ordinary shareholders 574 1,560 (2,398)
Profit attributable to other equity holders1 91 − −
Profit (loss) attributable to equity holders 665 1,560 (2,398)
Profit attributable to non-controlling interests 34 18 18
Profit (loss) for the period 699 1,578 (2,380)
Basic earnings (loss) per share 7 0.8p 2.2p (3.4)p
Diluted earnings (loss) per share 7 0.8p 2.2p (3.4)p
1 The profit after tax attributable to other equity holders of £91 million (2013: £nil) is offset by a tax credit recorded in reserves of £20 million.
CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Half-year to 30 June 2014 Half-year to 30 June 2013 Half-year to 31 Dec 2013
£ million £ million £ million
Profit (loss) for the period 699 1,578 (2,380)
Other comprehensive income
Items that will not subsequently be reclassified to profit
or loss:
Post-retirement defined benefit scheme remeasurements
(note 18):
Remeasurements before taxation (599) 981 (1,117)
Taxation 120 (226) 254
(479) 755 (863)
Items that may subsequently be reclassified to profit or loss:
Movements in revaluation reserve in respect of available-for-sale financial assets:
Change in fair value 557 (584) (96)
Income statement transfers in respect of disposals (85) (711) 82
Income statement transfers in respect of impairment 2 2 16
Taxation (51) 335 (58)
423 (958) (56)
Movements in cash flow hedging reserve:
Effective portion of changes in fair value 1,008 120 (1,349)
Net income statement transfers (572) (417) (133)
Taxation (86) 71 303
350 (226) (1,179)
Currency translation differences (tax: nil) (1) 25 (31)
Other comprehensive income for the period, net of tax 293 (404) (2,129)
Total comprehensive income for the period 992 1,174 (4,509)
Total comprehensive income attributable to ordinary shareholders 867 1,156 (4,527)
Total comprehensive income attributable to other equity holders 91 − −
Total comprehensive income attributable to equity holders 958 1,156 (4,527)
Total comprehensive income attributable to non-controlling interests 34 18 18
Total comprehensive income for the period 992 1,174 (4,509)
CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)
CONSOLIDATED BALANCE SHEET
At At
30 June 31 Dec
2014 2013
Assets Note £ million £ million
Cash and balances at central banks 50,845 49,915
Items in course of collection from banks 1,664 1,007
Trading and other financial assets at fair value through profit or loss 8 147,187 142,683
Derivative financial instruments 9 27,241 33,125
Loans and receivables:
Loans and advances to banks 21,589 25,365
Loans and advances to customers 10 491,345 495,281
Debt securities 1,266 1,355
514,200 522,001
Available-for-sale financial assets 13 50,348 43,976
Investment properties 4,823 4,864
Goodwill 2,016 2,016
Value of in-force business 5,311 5,335
Other intangible assets 2,192 2,279
Tangible fixed assets 7,828 7,570
Current tax recoverable 33 31
Deferred tax assets 4,981 5,104
Retirement benefit assets 18 342 98
Other assets 14 24,929 27,026
Total assets 843,940 847,030
CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)
CONSOLIDATED BALANCE SHEET (continued)
At At
30 June 2014 31 Dec
2013
Equity and liabilities Note £ million £ million
Liabilities
Deposits from banks 11,851 13,982
Customer deposits 15 445,091 441,311
Items in course of transmission to banks 1,468 774
Trading and other financial liabilities at fair value through profit or loss 63,046 43,625
Derivative financial instruments 9 25,285 30,464
Notes in circulation 1,096 1,176
Debt securities in issue 16 77,729 87,102
Liabilities arising from insurance contracts and 84,290 82,777
participating investment contracts
Liabilities arising from non-participating investment contracts 27,322 27,590
Unallocated surplus within insurance businesses 346 391
Other liabilities 17 29,669 40,607
Retirement benefit obligations 18 1,001 1,096
Current tax liabilities 177 147
Deferred tax liabilities 56 3
Other provisions 3,960 4,337
Subordinated liabilities 19 25,675 32,312
Total liabilities 798,062 807,694
Equity
Share capital 20 7,146 7,145
Share premium account 22 17,281 17,279
Other reserves 22 11,249 10,477
Retained profits 22 3,925 4,088
Shareholders' equity 39,601 38,989
Other equity instruments 21 5,329 −
Total equity excluding non-controlling interests 44,930 38,989
Non-controlling interests 948 347
Total equity 45,878 39,336
Total equity and liabilities 843,940 847,030
847,030
CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share capital and premium Other equity instruments Other reserves Retained profits Total Non- Total
controlling
interests
£ million £ million £ million £ million £ million £ million £ million
Balance at 1 January 2014 24,424 − 10,477 4,088 38,989 347 39,336
Comprehensive income
Profit for the period - - − 665 665 34 699
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, net of tax - - - (479) (479) - (479)
Movements in revaluation reserve in respect of available-for-sale financial assets, net of tax - - 423 - 423 - 423
Movements in cash flow hedging reserve, net of tax - - 350 - 350 - 350
Currency translation differences (tax: nil) - - (1) - (1) - (1)
Total other comprehensive income - - 772 (479) 293 - 293
Total comprehensive income - - 772 186 958 34 992
Transactions with owners
Dividends - - − − − (8) (8)
Distributions on other equity instruments, net of tax - - - (71) (71) - (71)
Issue of ordinary shares 3 - - - 3 - 3
Issue of Additional Tier 1 securities (note 21) - 5,329 - - 5,329 - 5,329
Movement in treasury shares - - - (263) (263) - (263)
Value of employee services:
Share option schemes - - - 21 21 - 21
Other employee award schemes - - - 99 99 - 99
Adjustment on sale of non-controlling interest in TSB (note 27) - - − (135) (135) 565 430
Other changes in non-controlling interests - - - - - 10 10
Total transactions with owners 3 5,329 - (349) 4,983 567 5,550
Balance at 30 June 2014 24,427 5,329 11,249 3,925 44,930 948 45,878
45,878
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)
Share capital and premium Other reserves Retained profits Total Non- Total
controlling
interests
£ million £ million £ million £ million £ million £ million
Balance at 1 January 2013 23,914 12,902 5,080 41,896 685 42,581
Comprehensive income
Profit for the period - - 1,560 1,560 18 1,578
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, - - 755 755 - 755
net of tax
Movements in revaluation reserve - (958) - (958) − (958)
in respect of available-for-sale financial assets, net of tax
Movements in cash flow hedging reserve, net of tax - (226) - (226) - (226)
Currency translation differences (tax: nil) - 25 - 25 - 25
Total other comprehensive income - (1,159) 755 (404) − (404)
Total comprehensive income - (1,159) 2,315 1,156 18 1,174
Transactions with owners
Dividends - - - - (25) (25)
Issue of ordinary shares 493 - - 493 - 493
Movement in treasury shares - - (361) (361) - (361)
Value of employee services:
Share option schemes - - 34 34 - 34
Other employee award schemes - - 146 146 - 146
Change in non-controlling interests - - - - (355) (355)
Total transactions with owners 493 - (181) 312 (380) (68)
Balance at 30 June 2013 24,407 11,743 7,214 43,364 323 43,687
43,687
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)
Share capital and premium Other reserves Retained profits Total Non- Total
controlling
interests
£ million £ million £ million £ million £ million £ million
Balance at 1 July 2013 24,407 11,743 7,214 43,364 323 43,687
Comprehensive income
(Loss) profit for the period - - (2,398) (2,398) 18 (2,380)
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, - - (863) (863) - (863)
net of tax
Movements in revaluation reserve - (56) - (56) − (56)
in respect of available-for-sale financial assets, net of tax
Movements in cash flow hedging reserve, net of tax - (1,179) - (1,179) - (1,179)
Currency translation differences (tax: nil) - (31) - (31) - (31)
Total other comprehensive income - (1,266) (863) (2,129) − (2,129)
Total comprehensive income - (1,266) (3,261) (4,527) 18 (4,509)
Transactions with owners
Issue of ordinary shares 17 - - 17 - 17
Movement in treasury shares - - (119) (119) - (119)
Value of employee services:
Share option schemes - - 108 108 - 108
Other employee award schemes - - 146 146 - 146
Change in non-controlling interests - - - - 6 6
Total transactions with owners 17 - 135 152 6 158
Balance at 31 December 2013 24,424 10,477 4,088 38,989 347 39,336
39,336
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
CONSOLIDATED CASH FLOW STATEMENT
Half-year to 30 June 2014 Half-year to 30 June 2013 Half-year to 31 Dec 2013
£ million £ million £ million
Profit (loss) before tax 863 2,134 (1,719)
Adjustments for:
Change in operating assets 1,723 6,234 10,883
Change in operating liabilities 3,381 (19,518) (24,752)
Non-cash and other items 1,651 (6,145) 17,376
Tax received (paid) 2 (26) 2
Net cash provided by (used in) operating activities 7,620 (17,321) 1,790
Cash flows from investing activities
Purchase of financial assets (7,363) (25,776) (11,183)
Proceeds from sale and maturity of financial assets 1,685 19,647 1,905
Purchase of fixed assets (1,651) (1,852) (1,130)
Proceeds from sale of fixed assets 725 1,444 646
Acquisition of businesses, net of cash acquired (1) (2) (4)
Disposal of businesses, net of cash disposed 536 (586) 1,282
Net cash used in investing activities (6,069) (7,125) (8,484)
Cash flows from financing activities
Distributions on other equity instruments (91) − −
Dividends paid to non-controlling interests (8) (25) −
Interest paid on subordinated liabilities (1,416) (1,268) (1,183)
Proceeds from issue of subordinated liabilities − 1,500 −
Proceeds from issue of ordinary shares 3 350 −
Repayment of subordinated liabilities (1,240) (1,821) (621)
Change in non-controlling interests 10 2 (2)
Sale of non-controlling interest in TSB 430 − −
Net cash used in financing activities (2,312) (1,262) (1,806)
Effects of exchange rate changes on cash and cash equivalents 4 (12) (41)
Change in cash and cash equivalents (757) (25,720) (8,541)
Cash and cash equivalents at beginning of period 66,797 101,058 75,338
Cash and cash equivalents at end of period 66,040 75,338 66,797
Cash and cash equivalents comprise cash and balances at central banks (excluding mandatory deposits) and amounts due from
banks with a maturity of less than three months.
1. Accounting policies, presentation and estimates
These condensed consolidated half-year financial statements as at and for the period to 30 June 2014 have been prepared in
accordance with the Disclosure Rules and Transparency Rules of the Financial Conduct Authority (FCA) and with International
Accounting Standard 34 (IAS 34), Interim Financial Reporting as adopted by the European Union and comprise the results of
Lloyds Banking Group plc (the Company) together with its subsidiaries (the Group). They do not include all of the
information required for full annual financial statements and should be read in conjunction with the Group's consolidated
financial statements as at and for the year ended 31 December 2013 which were prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European Union. Copies of the 2013 annual report and accounts are
available on the Group's website and are available upon request from Investor Relations, Lloyds Banking Group plc, 25
Gresham Street, London EC2V 7HN.
The British Bankers' Association's Code for Financial Reporting Disclosure (the Disclosure Code) sets out disclosure
principles together with supporting guidance in respect of the financial statements of UK banks. The Group has adopted the
Disclosure Code and these condensed consolidated half-year financial statements have been prepared in compliance with the
Disclosure Code's principles. Terminology used in these condensed consolidated half-year financial statements is consistent
with that used in the Group's 2013 annual report and accounts where a glossary of terms can be found.
The directors consider that it is appropriate to continue to adopt the going concern basis in preparing the condensed
consolidated half-year financial statements. In reaching this assessment, the directors have considered projections for the
Group's capital and funding position and have had regard to the factors set out in Principal risks and uncertainties:
Funding and liquidity on page 39.
The accounting policies are consistent with those applied by the Group in its 2013 annual report and accounts except as
described below.
On 1 January 2014 the Group adopted the following amendments to standards and interpretations:
Amendments to IAS 32Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities
The amendments to IAS 32 clarify the requirements for offsetting financial instruments and address inconsistencies
identified in applying the offsetting criteria used in the standard.
IFRIC 21Levies
This interpretation clarifies that the obligating event that gives rise to a liability to pay a government levy is the
activity that triggers the payment of the levy as set out in the relevant legislation and that operating in a future
period, irrespective of the difficulties involved in exiting a market, does not create a constructive obligation to pay a
levy.
These changes have not had a significant impact on the Group.
Future accounting developments
Details of those IFRS pronouncements which will be relevant to the Group but which will not be effective at 31 December
2014 and which have not been applied in preparing these condensed consolidated half-year financial statements are set out
in note 28.
Critical accounting estimates and judgements
The preparation of the Group's financial statements requires management to make judgements, estimates and assumptions that
impact the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Due to
the inherent uncertainty in making estimates, actual results reported in future periods may include amounts which differ
from those estimates. Estimates, judgements and assumptions are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to be reasonable under the
circumstances. There have been no significant changes in the basis upon which estimates have been determined, compared to
that applied at 31 December 2013.
2. Segmental analysis
Lloyds Banking Group provides a wide range of banking and financial services in the UK and in certain locations overseas.
The Group Executive Committee (GEC) has been determined to be the chief operating decision maker for the Group. The Group's
operating segments reflect its organisational and management structures. GEC reviews the Group's internal reporting based
around these segments in order to assess performance and allocate resources. This assessment includes a consideration of
each segment's net interest revenue and consequently the total interest income and expense for all reportable segments is
presented on a net basis. The segments are differentiated by the type of products provided, by whether the customers are
individuals or corporate entities and by the geographical location of the customer.
The segmental results and comparatives are presented on an underlying basis, the basis reviewed by the chief operating
decision maker. The effects of asset sales, volatile items, liability management and the unwind of acquisition-related fair
value adjustments are excluded in arriving at underlying profit.
Following a reorganisation, the Group's activities are now organised into six financial reporting segments: Retail;
Commercial Banking; Consumer Finance; Insurance; TSB; and Run-off and Central items. The most significant changes to the
segmental structure are:
· The Wealth business has been integrated into the Retail division;
· The Consumer Finance division now includes credit cards, asset finance and the European online deposits businesses;
the Retail and Commercial Banking credit cards businesses have transferred into Consumer Finance;
· TSB now operates as a standalone listed entity following the IPO;
· Run-off manages the remaining portfolio of assets which are outside of the Group's risk appetite.
Comparative figures have been restated for all of these changes. The Group's underlying profit and statutory results are
unchanged as a result of these restatements.
Retail offers a broad range of financial service products, including current accounts, savings, personal loans and
mortgages, in the UK to retail customers, and now incorporates wealth and small business customers. It is also a
distributor of insurance, protection and credit cards, and through Wealth, a range of long-term savings and investment
products. Retail has continued to make progress in delivering its customer-led, multi-brand and multi-channel strategy to
be the best bank for customers in the UK with a primary focus on meeting the needs of customers through investment in
service, products and distribution.
Commercial Banking is client led, focusing on SME, Mid Markets, Global Corporates and Financial Institution clients
providing products across Lending, Global Transaction Banking, Financial Markets and Debt Capital Markets and private
equity financing through Lloyds Development Capital.
The Consumer Finance division comprises the Group's consumer and corporate Credit Card businesses, along with the Black
Horse motor financing and Lex Autolease car leasing businesses in Asset Finance. The Group's European deposits and Dutch
retail mortgage businesses are managed within Asset Finance.
Insurance is a core part of Lloyds Banking Group and is focused on four key markets: Corporate Pensions, Protection,
Retirement and Home Insurance, to enable customers to protect themselves today and prepare for a secure financial future.
TSB is a separately listed multi-channel retail banking business with branches in England, Wales and Scotland; it has a
digital distribution platform and four telephony contact centres. It serves retail and small business customers; providing
a full range of retail banking products.
2. Segmental analysis (continued)
Run-off includes certain assets previously classified as outside of the Group's risk appetite and the results and gains on
sale relating to businesses disposed in 2013 and 2014. Central items include income and expenditure not recharged to
divisions, including the costs of certain central and head office functions. Central items also includes the costs of
managing the Group's technology platforms, branch and head office property estate, operations (including payments, banking
operations and collections) and sourcing, the costs of which are predominantly recharged to the other divisions. It also
reflects other items not recharged to the divisions.
Inter-segment services are generally recharged at cost, with the exception of the internal commission arrangements between
the UK branch and other distribution networks and the insurance product manufacturing businesses within the Group, where a
profit margin is also charged. Inter-segment lending and deposits are generally entered into at market rates, except that
non-interest bearing balances are priced at a rate that reflects the external yield that could be earned on such funds.
For the majority of those derivative contracts entered into by business units for risk management purposes, the business
unit recognises the net interest income or expense on an accrual accounting basis and transfers the remainder of the
movement in the fair value of the derivative to the central group segment where the resulting accounting volatility is
managed where possible through the establishment of hedge accounting relationships. Any change in fair value of the hedged
instrument attributable to the hedged risk is also recorded within the central group segment. This allocation of the fair
value of the derivative and change in fair value of the hedged instrument attributable to the hedged risk avoids accounting
asymmetry in segmental results and leads to accounting volatility in the central group segment where it is managed.
2. Segmental analysis (continued)
Half-year to 30 June 2014 Net Other Total Profit External Inter-
interest income, net of insurance claims income, (loss) revenue segment
income net of before tax revenue
insurance
claims
£m £m £m £m £m £m
Underlying basis
Retail 3,493 700 4,193 1,710 4,497 (304)
Commercial Banking 1,234 984 2,218 1,156 1,785 433
Consumer Finance 645 675 1,320 534 1,377 (57)
Insurance (64) 854 790 461 859 (69)
TSB 400 72 472 226 451 21
Run-off and Central items 96 163 259 (268) 283 (24)
Group 5,804 3,448 9,252 3,819 9,252 -
Reconciling items:
Insurance grossing adjustment (239) 314 75 -
Asset sales, volatile items and liability management1 10 (1,135)
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