REG - Lloyds Bank CorpMkts Lloyds Banking Group - 2023 Half-Year Results
13/09/2023 09:30
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RNS Number : 3040M Lloyds Bank Corporate Markets PLC 13 September 2023
Lloyds Bank Corporate Markets plc
2023 Half-Year Results
13 September 2023
CONTENTS
Page
Results for the half-year and review of performance 1
Principal risks and uncertainties (#Section4) 5
Condensed consolidated interim financial statements (#Section5) 10
Consolidated income statement (#Section6) 11
Consolidated statement of comprehensive income (#Section7) 12
Consolidated balance sheet (#Section8) 13
Consolidated statement of changes in equity (#Section9) 15
Consolidated cash flow statement (#Section10) 18
Notes to the condensed consolidated half-year financial statements 19
(#Section11)
Statement of directors' responsibilities (#Section31) 45
Independent review report to Lloyds Bank Corporate Markets plc (#Section32) 46
Forward looking statements (#Section33) 48
LBCM's purpose is Helping Britain Prosper
By connecting the UK and Lloyds Banking Group with the world
RESULTS FOR THE HALF-YEAR
• Solid financial performance against a backdrop of continued
market volatility and inflationary pressures - profit before tax of £213
million (half-year to 30 June 2022 £249 million) and strong CET1 ratio of
14.5 per cent (14.6 per cent at 31 December 2022)
• Continuing to support our customers' needs by providing
product choice in an evolving environment and uncertain economic outlook. We
are mindful of the impact of higher interest rates and inflation on our
customers
• Solid business performance with Markets ending the half-year
in the top three for sterling issuance(1) and deepening foreign exchange
percentage share of wallet; and supporting Lloyds Banking Group (LBG) on
signature transactions
• Strategic investment continues with delivery including the
further roll out of our new cash management and payments platform in the Crown
Dependencies; and continuing to invest in our foreign exchange proposition
including capabilities on the FXall and Bloomberg platforms
Lloyds Bank Corporate Markets plc's (LBCM) strategy continues to be to connect
the UK and LBG with the world through a first-class banking, financing and
risk management proposition, underpinned by excellent customer service. Guided
by our purpose of Helping Britain Prosper, we remain fully focused on
supporting our customers and helping them navigate the current environment.
Part of LBG, LBCM's purpose driven business model supports its customers
(large corporates, financial institutions, commercial customers plus retail
customers in the Crown Dependencies) with a range of products including risk
management, commercial lending, retail banking services, bonds and structured
finance, trade and working capital management and ESG product solutions. All
served via its hubs in the UK, Jersey, Guernsey, Isle of Man, New York USA and
Frankfurt Germany.
(1) Refinitiv Eikon - All International Bonds in GBP, excluding Sovereign,
Supranational and Agency.
REVIEW OF PERFORMANCE
Income statement
For the 6 months to 30 June 2023, total income was £433 million comprising Income statement Half-year to 30 June Half-year to 30 June 2022 Mvmt
net interest income of £96 million, net fee and commission income of £137
million and net trading income of £200 million. Net interest income is down 2023
versus the first half of 2022 despite diligent management of customer returns
as a result of increased funding and structural hedging costs; and also £m £m
includes £23 million of one off income. Net fee and commission income has
improved period on period with strong performance on bond issuances and £m
resilient customer lending. Within net trading income both the financial and
capital markets businesses have delivered a strong performance versus the
comparative period, including writing our first sustainability-linked FX trade
supporting one of our customer's decarbonisation goals; and the issuance of an
inaugural sustainability-linked bond further enhancing our position as a
trusted ESG provider. This positive performance is partially offset by foreign
currency revaluation charges as the US dollar has strengthened against the GB
pound.
Net interest income 96 131 (35)
Fee and commission income 137 107 30
Net trading income 200 234 (34)
Other operating income 0 4 (4)
Total income 433 476 (43)
Operating expenses (238) (216) (22)
Impairment credit (charge) 18 (11) 29
Profit before tax 213 249 (36)
Tax expense (46) (42) (4)
Profit for the period 167 207 (40)
performance is partially offset by foreign currency revaluation charges as the
US dollar has strengthened against the GB pound.
REVIEW OF PERFORMANCE (continued)
Operating expenses for the period were £238 million and predominantly consist
of management charges relating to the intra-group agreement with Lloyds Bank
plc and staff costs. LBCM has maintained its cost discipline in the context of
continued inflationary pressure and higher planned strategic investment in
2023.
An impairment credit of £18 million has been recognised in the period which
is the release of previously charged stage 1 and 2 expected credit loss and is
as a result of an improvement in the forward look economics at half-year
versus the prior period. A tax charge of £46 million was recorded which is up
versus the comparative period as a result of the increase in UK corporation
tax rate in April 2023 plus other movements in the tax computation.
Balance sheet assets
Total assets were £94,272 million at 30 June 2023, an increase of £7,613 Balance sheet assets At At Mvmt
million since 31 December 2022.
30 June 31 Dec
2023 2022 £m
This overall total asset growth is mainly as a result of the increase in
financial assets at fair value through profit or loss which is driven by the £m £m
growth in the reverse repurchase agreement and gilts books in the period.
Financial assets at amortised cost includes loans and advances to banks of
£1,790 million, loans and advance to customers of £18,930 million and
reverse repurchase agreements of £5,474 million. LBCM continues to support
our customers through the provision of sustainable financing with the drawn
value of loans at June 2023 over £1.3 billion (31 December 2022 £1 billion).
The increase in other assets relates to forward settlement balances
Cash and balances at central banks 19,793 19,382 411
Financial assets at fair value through profit or loss 20,603 14,780 5,823
Derivative financial instruments 24,831 24,621 210
Financial assets at amortised cost 26,753 27,424 (671)
Other assets 2,292 452 1,840
Total assets 94,272 86,659 7,613
Financial assets at amortised cost includes loans and advances to banks of
£1,790 million, loans and advances to customers of £18,930 million and
reverse repurchase agreements of £5,474 million. LBCM continues to support
our customers through the provision of sustainable financing with the drawn
value of loans at June 2023 of £1.4 billion (31 December 2022 £1 billion).
The increase in other assets relates to forward settlement balances.
Balance sheet liabilities
Total liabilities were £90,796 million at 30 June 2023, compared to £83,264
million at 31 December 2022.
Balance sheet liabilities At At Mvmt Deposits from customers increased since year end in line with LBCM's strategy
to grow deposits in the Crown Dependencies and development of the short term
30 June 31 Dec interest rates business.
2023 2022 £m
£m £m Financial liabilities at fair value through profit or loss increased due to
repurchase agreements as that business grows while derivative financial
instruments remain broadly in line with December 2022. Debt securities in
issue include commercial paper, certificates of deposit and Euro Medium Term
Notes, and decreased as a result of funding maturities in the period. The
movement in other liabilities relates to forward settlement balances.
Deposits from banks 2,748 2,456 292
Deposits from customers 29,892 29,152 740
Due to fellow LBG undertakings 1,363 1,481 (118)
Financial liabilities at fair value through profit or loss 18,828 12,578 6,250
Derivative financial instruments 20,293 20,070 223
Debt securities in issue 15,268 16,131 (863)
Subordinated liabilities 733 761 (28)
Other liabilities 1,671 635 1,036
Total liabilities 90,796 83,264 7,532
REVIEW OF PERFORMANCE (continued)
Balance sheet equity
Total equity at 30 June 2023 was £3,476 million (31 December 2022 £3,395 Equity At At Mvmt
million) with the movement in retained profits representing profit in the
period after tax, attributable to ordinary shareholders. Total equity includes 30 June 31 Dec
the capital injection of £250 million received from our parent company in
2022. 2023 2022 £m
£m £m
The movement in other reserves of £51 million in the period mainly relates to
the cash flow hedging reserve, representing the fair value movement on the
structural hedge.
Share capital 370 370 0
Other reserves (576) (525) (51)
Retained profits 2,900 2,768 132
Ordinary shareholders' equity 2,694 2,613 81
Other equity instruments 782 782 0
Total equity 3,476 3,395 81
Regulatory capital
The capital position of Lloyds Bank Corporate Markets plc (the Bank) is
presented on an unconsolidated basis
Regulatory capital At At Mvmt The Bank's common equity tier 1 (CET1) capital ratio remained broadly flat at
14.5 per cent (31 December 2022 14.6 per cent). Risk-weighted assets increased
30 June 31 Dec to £21,079 million largely as a result of short term settlement balances at
30 June 2023 which have since cleared; an increase in market risk
2023 2022 risk-weighted assets; plus planned asset growth. The Bank's UK leverage ratio
decreased to 5.0 per cent reflecting an increase in the exposure measure as a
£m £m £m result of balance sheet growth since year end and an increase in off-balance
sheet items.
Common equity tier 1 capital 3,055 2,948 107
Tier 1 capital 3,812 3,705 107
Total capital 4,380 4,285 95
Total risk-weighted assets 21,079 20,195 884
CET1% 14.5 % 14.6 % (0.1)pp
UK leverage ratio 5.0 % 5.4 % (0.4)pp
REVIEW OF PERFORMANCE (continued)
The Bank's capital position as at 30 June 2023, after applying IFRS 9
transitional arrangements, is set out in the following section.
At 30 June 2023 At 31 Dec 2022
Capital resources of the Bank £m £m
Common equity tier 1
Shareholders' equity per balance sheet 2,711 2,650
Cash flow hedging reserve 565 519
Debit valuation adjustment (34) (34)
Other adjustments(1) - 7
3,242 3,142
less: deductions from common equity tier 1
Prudent valuation adjustment (142) (162)
Excess of expected losses over impairment provisions and value adjustments (45) (32)
Common equity tier 1 capital 3,055 2,948
Additional tier 1
Additional tier 1 instruments 757 757
Total tier 1 capital 3,812 3,705
Tier 2
Tier 2 instruments 678 706
Other adjustments (110) (126)
Total tier 2 capital 568 580
Total capital resources 4,380 4,285
Risk-weighted assets 21,079 20,195
Capital and leverage ratios
Common equity tier 1 capital ratio 14.5 % 14.6 %
Tier 1 capital ratio 18.1 % 18.3 %
Total capital ratio 20.8 % 21.2 %
UK leverage ratio 5.0% 5.4 %
(1 ) No relief under the IFRS 9 transitional arrangements for
capital was applied at 30 June 2023. 31 December 2022 comparatives include an
adjustment applied to reserves to reflect the application of the IFRS 9
transitional arrangements for capital.
(1 )
(
)
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks that could impact LBCM's ability to deliver its long-term
strategic objectives and the approach to managing each risk are reviewed and
reported to the Board Risk Committee regularly in alignment with the risk
management framework.
Our enterprise risk management framework
The LBG enterprise risk management framework (ERMF) applies to all legal
entities and is the foundation for the delivery of effective and consistent
risk control. It enables proactive identification, active management and
monitoring of LBCM's risks, which is supported by our One Risk and Control
Self-Assessment approach.
LBCM has adopted the ERMF, supplemented with additional tailored practices set
out to address LBCM-specific requirements. The ERMF and the LBCM risk
management framework applies to LBCM business across all legal entities and
locations.
LBG continues to conduct a detailed review of its ERMF, which may result in a
future reclassification of the principal risks.
LBCM's risk appetite, principles, policies, procedures, controls and reporting
are regularly reviewed and updated to ensure they remain in line with
regulation, law, corporate governance and industry good practice.
Risk appetite is defined within LBCM as the amount and type of risk that it is
prepared to seek, accept or tolerate in delivering its strategy. As a separate
legal group with its own parent Board, LBCM maintains its own risk appetite
which is aligned to the LBG approach but is adjusted to reflect the specific
characteristics of LBCM's balance sheet and portfolio, including its
international presence. The LBCM Board (Board) is responsible for approving
LBCM's risk appetite statement annually. Board-level risk appetite metrics are
supported by sub-Board level metrics and cascaded into more detailed business
metrics and limits.
Regular close monitoring and comprehensive reporting to management and the
Board ensures risk appetite limits are maintained and subject to stress
analysis at a risk type and portfolio level, as appropriate.
Governance is maintained through delegation of authority from the Board down
to subsidiary boards and to individuals. Senior executives are supported by a
committee-based structure which is designed to ensure open challenge and
enable effective Board engagement and decision-making.
The Board and senior management play a vital role in shaping and embedding a
supportive risk culture. Senior leaders set a clear tone from the top and lead
by example reflecting LBG values, encouraging a culture of intellectual
curiosity, innovation and proactive risk management amongst all colleagues.
PRINCIPAL RISKS AND UNCERTAINTIES (continued)
Current thematic and emerging risks
The significant risks encountered by LBCM are detailed below. The external
risks faced by LBCM may also impact the success of delivering against LBCM's
long-term strategic objectives. They include, but are not limited to, the
uncertainties linked to the macroeconomic environment and specifically the
impacts of the war in Ukraine that continue to put a strain on commodity and
energy prices, financial markets volatility, supply chain disruptions, high
interest rates and high inflation which are contributing to the cost of living
challenges and pressures on the UK economy, where LBCM mainly operates.
In addition, LBCM continues to monitor and address current thematic risks that
could have an adverse impact on business model, financial conditions,
operations and its ability to achieve revenue targets. They include, but are
not limited to:
- The extent and rapid pace of regulatory changes and increased
oversight, which could increase costs and prudential resource requirements for
LBCM and result in changes to LBCM's legal and operating structure and create
risks from non-compliance that include censure, fines and removal of business
permissions to operate
- The effectiveness of proprietary models as models are at risk of being
insufficiently predictive due to the limitations of historical data, the
recent extreme market volatility, and the risk of ineffectiveness in
parameterisation, implementation, oversight and monitoring
- Climate risk is the risk that LBCM experiences losses and/or
reputational damage as a result of climate change, either directly or through
its customers. LBCM is aligned with LBG, its parent company, with the goal of
reducing emissions financing by more than 50 per cent by 2030 and achieving
net zero financed emissions by 2050 (refer LBG Half-Year results 2023 and the
LBG environmental sustainability report)
- The complexity of the transition from IBORs to Alternative Risk Free
Reference Rates which could have material adverse impacts such as less liquid
interest rates, increased litigation or disputes and higher operational risks
- The changes to employee expectations following the COVID-19 pandemic
and significant structural and regulatory change across the industry may
adversely impact LBCM by disrupting the recruitment and retention of key
talent
- The discussions between the UK and the EU, continues to create
uncertainty on the future UK legal and regulatory framework with the potential
to affect the LBCM's business model in the EU
PRINCIPAL RISKS AND UNCERTAINTIES (continued)
Principal risks
There have been minor changes to the definition of these risks from those
disclosed in the LBCM's 2022 Annual Report and Accounts.
Capital risk
The risk that an insufficient quantity or quality of capital is held to meet
regulatory requirements or to support business strategy, an inefficient level
of capital is held or that capital is inefficiently deployed across LBCM.
Change & execution risk
The risk that, in delivering its change agenda, LBCM fails to ensure
compliance with laws and regulation, maintain available and effective customer
and colleague services, and/or operate within LBCM's risk appetite.
Conduct risk
The risk of detriment across the customer life cycle including: failures in
product management, distribution and servicing activities; from other risks
materialising, or other activities which could undermine the integrity of the
market or distort competition, leading to unfair customer outcomes, regulatory
censure, reputational damage or financial loss.
Customer harm or detriment is defined as consumer loss, distress or
inconvenience to customers due to breaches of regulatory or internal
requirements or our wider duty to act fairly and reasonably.
The introduction of Consumer Duty has increased regulatory expectations in
relation to customer outcomes for consumers. The direct impact for LBCM,
considering its business and customer base, is limited, however LBCM would
reflect LBG standards where appropriate.
Credit risk
The risk that parties with whom LBCM has contracted fail to meet their
financial obligations (both on and off-balance sheet).
Data risk
The risk of LBCM failing to effectively govern, manage, and control its data,
including data processed by third party suppliers, or failure to drive value
from data; leading to unethical decisions making, poor customer outcomes, loss
of value to LBCM and mistrust.
Funding and liquidity risk
The risk that LBCM does not have sufficiently stable and diverse sources of
funding or that the funding structure is inefficient; and the risk that
financial resources are insufficient to meet commitments as they fall due or
can only be obtained at excessive cost.
Market risk
The risk that LBCM's capital or earnings profile is affected by adverse moves
in market rates, in particular changes and volatility in interest and foreign
exchange rates, inflation rates, commodity prices and credit spreads in the
banking and markets businesses.
Model risk
The risk of financial loss, regulatory censure, reputational damage or
customer detriment from deficiencies in developing, applying and operating
models and rating systems.
Operational resilience risk
The risk that LBCM fails to design resilience into business operations
(including those that are outsourced), underlying infrastructure and controls
(people, property, process and technology) to withstand external or internal
events that could impact the continuity of operations and fails to respond in
a way which meets customers and stakeholder expectations and needs when the
continuity of operations is compromised.
PRINCIPAL RISKS AND UNCERTAINTIES (continued)
Operational risk
The risk of inadequate or failed internal processes, people or systems, or
external events, leading to loss such as cyber-attack, internal and/or
external fraud or financial crime, IT systems failures as well as failure to
ensure compliance with regulation. This includes the provision of services to
LBCM (including people, systems and processes) outsourced to Lloyds Bank plc
via a shared service provision model or by external providers via Lloyds Bank
plc. The Shared Service Model creates internal service provision risk and this
may be elevated in situations where LBCM's priorities are not wholly aligned
with those of the wider Lloyds Banking Group.
People risk
The risk that LBCM fails to provide an appropriate colleague and customer
centric culture, supported by robust reward and wellbeing policies and
processes; effective leadership to manage colleague resources; effective
talent and succession management; and control framework to ensure all
colleague related requirements are met.
Regulatory and legal risk
The risk arising from the failure to identify, assess, correctly interpret or,
comply with regulatory and/or legal requirements, leading to customer
detriment, failure to prevent and/or detect economic crime, financial
penalties, regulatory censure, criminal or civil enforcement action.
Strategic risk
The risk which results from:
- Incorrect assessments of internal or external operating environments
- Failure to understand the potential impact of strategic responses and
business plans on existing risk types
- Failure to respond appropriately to material changes in the external
or internal operating environments
-
STATUTORY INFORMATION
Page
Condensed consolidated half-year financial statements (unaudited)
Consolidated income statement (#Section6) 11
Consolidated statement of comprehensive income (#Section7) 12
Consolidated balance sheet (#Section8) 13
Consolidated statement of changes in equity (#Section9) 15
Consolidated cash flow statement (#Section10) 18
Notes
1 Basis of preparation and accounting policies (#Section12) 19
2 Critical accounting judgements and key sources of estimation uncertainty 20
(#Section13)
3 Operating expenses (#Section14) 20
4 Impairment (#Section15) 20
5 Tax expense (#Section16) 21
6 Financial assets at fair value through profit or loss (#Section17) 22
7 Financial assets at amortised cost (#Section18) 23
8 Allowance for expected credit losses 25
9 Debt securities in issue (#Section20) 28
10 Other provisions (#Section21) 28
11 Other reserves (#Section22) 29
12 Related party transactions (#Section23) 30
13 Contingent liabilities, commitments and guarantees (#Section24) 31
14 Fair values of financial assets and liabilities (#Section25) 32
15 Interest rate benchmark reform (#Section26) 39
16 Dividends on ordinary shares (#Section27) 39
17 Ultimate parent undertaking (#Section28) 39
18 Events since the balance sheet date (#Section29) 39
19 Other information (#Section30) 39
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
Half-year Half-year
to 30 June to 30 June
2023 2022
Note £m £m
Interest income 1,219 290
Interest expense (1,123) (159)
Net interest income 96 131
Fee and commission income 154 122
Fee and commission expense (17) (15)
Net fee and commission income 137 107
Net trading income 200 234
Other operating income - 4
Other income 337 345
Total income 433 476
Operating expenses 3 (238) (216)
Impairment credit (charge) 4 18 (11)
Profit before tax 213 249
Tax expense 5 (46) (42)
Profit for the period 167 207
Profit attributable to ordinary shareholders 132 190
Profit attributable to other equity holders 35 17
Profit for the period 167 207
The accompanying notes are an integral part of the condensed consolidated
half-year financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
Half-year Half-year
to 30 June to 30 June
2023 2022
Note £m £m
Profit for the period 167 207
Other comprehensive income
Items that may subsequently be reclassified to profit or loss:
Movements in revaluation reserve in respect of debt securities held at fair 11 - 1
value through other comprehensive income, net of tax
Movements in cash flow hedging reserve, net of tax 11 (46) (260)
Movements in foreign currency translation reserve, net of tax 11 (5) 10
Other comprehensive loss for the period, net of tax (51) (249)
Total comprehensive income (loss) for the period 116 (42)
Total comprehensive income (loss) attributable to ordinary shareholders 81 (59)
Total comprehensive income attributable to other equity holders 35 17
Total comprehensive income (loss) for the period 116 (42)
The accompanying notes are an integral part of the condensed consolidated
half-year financial statements.
CONSOLIDATED BALANCE SHEET
At At
30 June 31 Dec
2023 2022
(unaudited) (audited)
Note £m £m
Assets
Cash and balances at central banks 19,793 19,382
Financial assets at fair value through profit or loss 6 20,603 14,780
Derivative financial instruments 24,831 24,621
Loans and advances to banks 1,790 2,117
Loans and advances to customers 18,930 19,127
Reverse repurchase agreements 5,474 5,606
Debt securities 377 305
Due from fellow Lloyds Banking Group undertakings 182 269
Financial assets at amortised cost 7 26,753 27,424
Financial assets at fair value through other comprehensive income 4 6
Property, plant and equipment 51 56
Current tax recoverable 6 5
Deferred tax assets 220 213
Other assets 2,011 172
Total assets 94,272 86,659
Liabilities
Deposits from banks 2,748 2,456
Customer deposits 29,892 29,152
Repurchase agreements - 7
Due to fellow Lloyds Banking Group undertakings 1,363 1,481
Financial liabilities at fair value through profit or loss 18,828 12,578
Derivative financial instruments 20,293 20,070
Debt securities in issue 9 15,268 16,131
Other liabilities 1,642 574
Current tax liabilities 12 28
Deferred tax liabilities - -
Other provisions 10 17 26
Subordinated liabilities 733 761
Total liabilities 90,796 83,264
Equity
Share capital 370 370
Other reserves 11 (576) (525)
Retained profits 2,900 2,768
Ordinary shareholders' equity 2,694 2,613
Other equity instruments 782 782
Total equity 3,476 3,395
Total equity and liabilities 94,272 86,659
The accompanying notes are an integral part of the condensed consolidated
half-year financial statements.
(
)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
Attributable to ordinary shareholders
Share Other Retained Total Other Total
capital reserves profits equity
instruments
£m £m £m £m £m £m
At 1 January 2023 370 (525) 2,768 2,613 782 3,395
Comprehensive (loss) income
Profit for the period - - 132 132 35 167
Other comprehensive (loss) income
Movements in revaluation reserve in respect of debt securities held at fair - - - - - -
value through other comprehensive income, net of tax
Movements in cash flow hedging reserve, net of tax - (46) - (46) - (46)
Movements in foreign currency translation reserve, net of tax - (5) - (5) - (5)
Total other comprehensive (loss) income - (51) - (51) - (51)
Total comprehensive (loss) income - (51) 132 81 35 116
Transactions with owners
Dividends - - - - - -
Distributions on other equity instruments - - - - (35) (35)
Issue of ordinary shares - - - - - -
Total transactions with owners - - - - (35) (35)
At 30 June 2023 370 (576) 2,900 2,694 782 3,476
The accompanying notes are an integral part of the condensed consolidated
half-year financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) (continued)
Attributable to ordinary shareholders
Share Other Retained Total Other Total
capital reserves profits equity
instruments
£m £m £m £m £m £m
At 1 January 2022 120 (64) 2,651 2,707 782 3,489
Comprehensive (loss) income
Profit for the period - - 190 190 17 207
Other comprehensive (loss) income
Movements in revaluation reserve in respect of financial assets held at fair - 1 - 1 - 1
value through other comprehensive income, net of tax
Movements in cash flow hedging reserve, net of tax - (260) - (260) - (260)
Movements in foreign currency translation reserve, net of tax - 10 - 10 - 10
Total other comprehensive (loss) income - (249) - (249) - (249)
Total comprehensive (loss) income - (249) 190 (59) 17 (42)
Transactions with owners
Dividends - - (220) (220) - (220)
Distributions on other equity instruments - - - - (17) (17)
Total transactions with owners - - (220) (220) (17) (237)
At 30 June 2022 120 (313) 2,621 2,428 782 3,210
The accompanying notes are an integral part of the condensed consolidated
half-year financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) (continued)
Attributable to ordinary shareholders
Share Other Retained Total Other Total
capital reserves profits equity
instruments
£m £m £m £m £m £m
At 1 July 2022 120 (313) 2,621 2,428 782 3,210
Comprehensive (loss) income
Profit for the period - - 147 147 26 173
Other comprehensive (loss) income
Movements in revaluation reserve in respect of financial assets held at fair - (1) - (1) - (1)
value through other comprehensive income, net of tax
Movements in cash flow hedging reserve, net of tax - (211) - (211) - (211)
Movements in foreign currency translation reserve, net of tax - - - - - -
Total other comprehensive (loss) income - (212) - (212) - (212)
Total comprehensive (loss) income - (212) 147 (65) 26 (39)
Transactions with owners
Dividends - - - - - -
Distributions on other equity instruments - - - - (26) (26)
Issue of ordinary shares 250 - - 250 - 250
Total transactions with owners 250 - - 250 (26) 224
At 31 December 2022 370 (525) 2,768 2,613 782 3,395
The accompanying notes are an integral part of the condensed consolidated
half-year financial statements.
(
)
CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
Half-year Half-year
to 30 June to 30 June
2023 2022
£m £m
Profit before tax 213 249
Adjustments for:
Change in operating assets (7,913) (6,498)
Change in operating liabilities 7,982 915
Non-cash and other items 508 (606)
Tax paid (52) (26)
Net cash provided by operating activities 738 (5,966)
Cash flows from investing activities
Purchase of financial assets - (27)
Proceeds from sale and maturity of financial assets 3 119
Purchase of fixed assets (1) (1)
Net cash used in investing activities 2 91
Cash flows from financing activities
Dividends paid to ordinary shareholders - (220)
Distributions on other equity instruments (35) (17)
Interest paid on subordinated liabilities (31) (9)
Finance Leases (4) (1)
Proceeds from issue of subordinated liabilities 299 -
Repayment of subordinated liabilities (284) -
Net cash provided by financing activities (55) (247)
Effect of exchange rate changes on cash and cash equivalents (447) 716
Change in cash and cash equivalents 238 (5,406)
Cash and cash equivalents at beginning of period 19,449 23,103
Cash and cash equivalents at end of period 19,687 17,697
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.
The accompanying notes are an integral part of the condensed consolidated
half-year financial statements.
( )
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS
Note 1: Basis of preparation and accounting policies
These condensed consolidated half-year financial statements as at and for the
period to 30 June 2023 have been prepared in accordance with the Disclosure
Guidance and Transparency Rules of the Financial Conduct Authority (FCA) and
with International Accounting Standard 34 (IAS 34), Interim Financial
Reporting as adopted by the United Kingdom and comprise the results of Lloyds
Bank Corporate Markets plc (the Bank) together with its subsidiaries (the
Group). References within this document to LBCM refer to the Group as defined
here. Lloyds Banking Group plc is the ultimate parent company of LBCM and is
also referred to as LBG in this document. These statements do not include all
of the information required for full annual financial statements and should be
read in conjunction with LBCM's consolidated financial statements as at and
for the year ended 31 December 2022 which complied with international
accounting standards in conformity with the requirements of the Companies Act
2006 and were prepared in accordance with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board
(IASB). Copies of the 2022 Annual Report and Accounts are available at
www.lloydsbankinggroup.com and are also available upon request from Investor
Relations, Lloyds Banking Group plc, 25 Gresham Street, London EC2V 7HN.
The directors consider that it is appropriate to continue to adopt the going
concern basis in preparing these condensed consolidated half-year financial
statements. In reaching this assessment, the directors have taken into account
the uncertainties affecting the UK economy and their potential effects upon
LBCM's performance and projected funding and capital position; the impact of
further stress scenarios has also been considered. On this basis, the
directors are satisfied that LBCM will maintain adequate levels of funding and
capital for the foreseeable future.
LBCM's accounting policies are consistent with those applied by LBCM in its
financial statements for the year ended 31 December 2022 and there have been
no changes in LBCM's methods of computation.
Future accounting developments
The IASB has issued a number of minor amendments to IFRSs effective 1 January
2024, including IFRS 16 Lease liability in a sale and leaseback, IAS 1
Non-current liabilities with covenants, and IAS 1 Classification of
liabilities as current or non-current. These amendments are not expected to
have a significant impact on LBCM and, apart from the amendments relating to
IFRS 16 Lease liability in a sale and leaseback, have not been endorsed for
use in the UK.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 2: Critical accounting judgements and key sources of estimation
uncertainty
The preparation of LBCM's financial statements in accordance with IFRS
requires management to make judgements, estimates and assumptions in applying
the accounting policies that affect the reported amounts of assets,
liabilities, income and expenses. Due to the inherent uncertainty in making
estimates, actual results reported in future periods may be based upon amounts
which differ from these 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. In preparing the financial statements,
LBCM has considered the impact of climate-related risks on its financial
position and performance. While the effects of climate change represent a
source of uncertainty, LBCM does not consider there to be a material impact on
its judgements and estimates from the physical, transition and other
climate-related risks in the short term.
LBCM's significant judgements, estimates and assumptions are unchanged
compared to those applied at 31 December 2022. Further information on the
critical accounting judgements and key sources of estimation uncertainty for
the allowance for expected credit losses is set out in note 8.
Note 3: Operating expenses
Half-year Half-year
to 30 June to 30 June
2023 2022
£m £m
Staff costs:
Salaries (82) (76)
Social security costs (8) (8)
Pensions and other post-retirement benefit schemes (8) (7)
Restructuring costs - (11)
Other staff costs (4) (4)
(102) (106)
Management charges payable (102) (79)
Depreciation and amortisation (5) (9)
Premises and equipment (3) (3)
Communications and data processing (8) (7)
Professional fees (4) (2)
Other operating expenses (14) (10)
Total operating expenses (238) (216)
Note 4: Impairment
Half-year Half-year
to 30 June
to 30 June
2022
2023
£m £m
Loans and advances to banks 2 (1)
Loans and advances to customers 12 (5)
Debt securities (3) -
Impairment credit (charge) on drawn balances 11 (6)
Loan commitments and financial guarantees 7 (5)
Total impairment credit (charge) 18 (11)
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 5: Tax expense
In accordance with IAS 34, LBCM's income tax expense for the half-year to 30
June 2023 is based on the best estimate of the weighted-average annual income
tax rate expected for the full financial year. The tax effects of one-off
items are not included in the weighted-average annual income tax rate, but are
recognised in the relevant period.
An explanation of the relationship between tax expense and accounting profit
is set out below:
Half-year Half-year
to 30 June to 30 June
2023 2022
£m £m
Profit before tax 213 249
UK corporation tax thereon at 23.5 per cent (2022: 19 per cent) (50) (47)
Impact of surcharge on banking profits (2) (7)
Non-deductible costs (10) -
Non-taxable income - 14
Tax relief on coupons on other equity instruments 8 3
Tax losses where no deferred tax recognised - (2)
Differences in overseas tax rates 7 (3)
Other 1 -
Tax expense (46) (42)
Note 6: Financial assets at fair value through profit or loss
At At 31 December
30 June 2022
2023
£m £m
Trading assets 20,064 14,235
Financial assets mandatorily at fair value through profit or loss:
Loans and advances to customers 257 251
Debt securities 282 232
Treasury and other bills - 62
539 545
Total financial assets at fair value through profit or loss 20,603 14,780
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 7: Financial assets at amortised cost
The movement tables are compiled by comparing the position at the reporting
date to that at the beginning of the year.
Transfers between stages are deemed to have taken place at the start of the
reporting period, with all other movements shown in the stage in which the
asset is held at the period end, with the exception of those held within
purchased or originated credit-impaired, which are not transferable.
Additions and repayments comprise new loans originated and repayments of
outstanding balances throughout the reporting period. Loans which are written
off in the period are first transferred to Stage 3 before acquiring a full
allowance and subsequent write-off.
Half-year to 30 June 2023
Gross carrying amount Allowance for expected credit losses
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
£m £m £m £m £m £m £m £m
Loans and advances to banks
At 1 January 2023 2,099 22 - 2,121 2 2 - 4
Exchange and other adjustments(1) (49) - - (49) - - - -
Additions and repayments (280) - - (280) - - - -
Transfers to Stage 1 22 (22) - - 2 (2) - -
Impact of transfers between stages 22 (22) - - (2) - - (2)
Credit to the income statement - (2) - (2)
At 30 June 2023 1,792 - - 1,792 2 - - 2
Allowance for impairment losses (2) - - (2)
Net carrying amount 1,790 - - 1,790
Loans and advances to customers
At 1 January 2023 18,084 1,060 22 19,166 23 15 1 39
Exchange and other adjustments(1) (697) 1 - (696) (1) - - (1)
Additions and repayments 713 (227) - 486 (1) (3) - (4)
Other changes in credit quality (2) (1) - (3)
(3) (4) - (7)
Transfers to Stage 1 701 (701) - - 8 (8) - -
Transfers to Stage 2 (151) 151 - - (1) 1 - -
Transfers to Stage 3 (1) - 1 - - - - -
Impact of transfers between stages 549 (550) 1 - (7) 2 - (5)
Credit to the income statement (3) (9) - (12)
At 30 June 2023 18,649 284 23 18,956 19 6 1 26
Allowance for impairment losses (19) (6) (1) (26)
Net carrying amount(2) 18,630 278 22 18,930
(1 ) Exchange and other adjustments includes the impact of
movements in exchange rates.
(2 ) Stage 3 includes £0.7 million of assets that were
originated credit impaired in the period and recorded at fair value, with no
additional ECL recorded since origination.
( )
( )
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 7: Financial assets at amortised cost (continued)
Gross carrying amount Allowance for expected credit losses
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
£m £m £m £m £m £m £m £m
Debt securities
At 1 January 2023 305 - - 305 - - - -
Exchange and other adjustments(1) (11) - - (11) - - - -
Additions and repayments 98 (12) - 86 - - - -
Transfers to Stage 2 (104) 104 - - - - - -
Impact of transfers between stages (104) 104 - - - 3 - 3
Charge to the income statement - 3 - 3
At 30 June 2023 288 92 - 380 - 3 - 3
Allowance for impairment losses - (3) - (3)
Net carrying amount 288 89 - 377
Reverse repurchase agreements
At 30 June 2023 5,474 - - 5,474
Allowance for impairment losses - - - -
Net carrying amount 5,474 - - 5,474
Due from fellow Lloyds Banking Group undertakings
At 30 June 2023 182 - - 182
Allowance for impairment losses - - - -
Net carrying amount 182 - - 182
Total financial assets at amortised cost 26,364 367 22 26,753
(1) Exchange and other adjustments includes the impact of movements in
exchange rates, discount unwind, and derecognising assets as a result of
modifications.
Movements in allowance for expected credit losses in respect of undrawn
balances were as follows:
Allowance for expected credit losses
Stage 1 Stage 2 Stage 3 Total
£m £m £m £m
Undrawn balances
At 1 January 2023 11 7 - 18
Exchange and other adjustments(1) 1 - - 1
Transfers to Stage 1 4 (4) - -
Impact of transfers between stages (3) - - (3)
1 (4) - (3)
Other changes in credit quality (2) (2) - (4)
Credit to the income statement (1) (6) - (7)
At 30 June 2023 11 1 - 12
(1) Exchange and other adjustments includes the impact of movements in
exchange rates, discount unwind, and derecognising assets as a result of
modifications.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 7: Financial assets at amortised cost (continued)
LBCM's total impairment allowances were as follows:
Allowance for expected credit losses
Stage 1 Stage 2 Stage 3 Total
£m £m £m £m
In respect of:
Loans and advances to banks 2 - - 2
Loans and advances to customers 19 6 1 26
Debt securities - 3 - 3
Financial assets at amortised cost 21 9 1 31
Provisions in relation to loan commitments and financial guarantees 11 1 - 12
Total 32 10 1 43
Year ended 31 December 2022
Gross carrying amount Allowance for expected credit losses
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
£m £m £m £m £m £m £m £m
Loans and advances to banks
At 1 January 2022 2,355 - - 2,355 1 - - 1
Exchange and other adjustments(1) 132 - - 132 - - - -
Additions and repayments (388) 22 - (366) 1 2 - 3
Charge to the income statement 1 2 - 3
At 31 December 2022 2,099 22 - 2,121 2 2 - 4
Allowance for impairment losses (2) (2) - (4)
Net carrying amount 2,097 20 - 2,117
(1. ) Exchange and other adjustments includes the impact of
movements in exchange rates, discount unwind, and derecognising assets as a
result of modifications.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 7: Financial assets at amortised cost (continued)
Gross carrying amount Allowance for expected credit losses
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
£m £m £m £m £m £m £m £m
Loans and advances to customers
At 1 January 2022 17,366 47 29 17,442 7 2 1 10
Exchange and other adjustments(1) 1,183 (10) - 1,173 - (1) (1) (2)
Additions and repayments (293) 867 (22) 552 13 11 - 24
Other changes in credit quality 3 - 2 5
16 11 2 29
Transfers to Stage 1 1 (1) - - - - -
Transfers to Stage 2 (157) 157 - - - - -
Transfers to Stage 3 (16) - 16 - - - -
Impact of transfers between stages (172) 156 16 - 3 - 3
Charge to the income statement 16 14 2 32
Advances written off (1) (1) (1) (1)
At 31 December 2022 18,084 1,060 22 19,166 23 15 1 39
Allowance for impairment losses (23) (15) (1) (39)
Net carrying amount 18,061 1,045 21 19,127
( )
Debt securities
At 1 January 2022 229 - - 229
Exchange and other adjustments(1) 12 - - 12
Additions and repayments 64 - - 64
At 31 December 2022 305 - - 305
Allowance for impairment losses - - - -
Net carrying amount 305 - - 305
Reverse repurchase agreements
At 31 December 2022 5,606 - - 5,606
Allowance for impairment losses - - - -
Net carrying amount 5,606 - - 5,606
Due from fellow Lloyds Banking Group undertakings
At 31 December 2022 269 - - 269
Allowance for impairment losses - - - -
Net carrying amount 269 - - 269
Total financial assets at amortised cost 26,338 1,065 21 27,424
(1) Exchange and other adjustments includes the impact of movements in
exchange rates, discount unwind, and derecognising assets as a result of
modifications.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 7: Financial assets at amortised cost (continued)
Movements in allowance for expected credit losses in respect of undrawn
balances were as follows:
Allowance for expected credit losses
Stage 1 Stage 2 Stage 3 Total
£m £m £m £m
Undrawn balances
At 1 January 2022 6 - - 6
Exchange and other adjustments(1) 1 - - 1
Transfers to Stage 1 - - - -
Transfers to Stage 2 - - - -
Transfers to Stage 3 - - - -
Impact of transfers between stages - 4 - 4
- 4 - 4
Other changes in credit quality 4 3 - 7
Credit to the income statement 4 7 - 11
At 31 December 2022 11 7 - 18
(1) Exchange and other adjustments includes the impact of movements in
exchange rates, discount unwind, and derecognising assets as a result of
modifications.
LBCM's total impairment allowances were as follows:
Allowance for expected credit losses
Stage 1 Stage 2 Stage 3 Total
£m £m £m £m
In respect of:
Loans and advances to banks 2 2 - 4
Loans and advances to customers 23 15 1 39
Financial assets at amortised cost 25 17 1 43
Provisions in relation to loan commitments and financial guarantees 11 7 - 18
At 31 December 2022 36 24 1 61
( )
(
)
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 8: Allowance for expected credit losses
Allowance for expected credit losses
LBCM recognises an allowance for expected credit losses (ECLs) for loans and
advances to customers and banks, other financial assets held at amortised
cost, financial assets measured at fair value through other comprehensive
income and certain loan commitment and financial guarantee contracts. At 30
June 2023, LBCM's expected credit loss allowance was £43 million (31 December
2022: £61 million), of which £31 million (31 December 2022: £43 million)
was in respect of drawn balances.
The calculation of LBCM's ECLs and provisions against loan commitments and
guarantees under IFRS 9 requires LBCM to make a number of judgements,
assumptions and estimates. These are set out in detail in the LBCM's 2022
Annual Report and Accounts. The principal changes made in the period ended 30
June 2023 are as follows:
Base case and MES economic assumptions
LBCM's updated base case scenario has three conditioning assumptions: first,
the war in Ukraine remains contained within its borders; second, the financial
stress emerging from some weak bank/insurer business models in the context of
rising bond yields does not become systemic; and third, the Bank of England
will continue to tighten policy until it is clear that inflation is returning
to target.
Based on these assumptions and incorporating the economic data published in
the second quarter of 2023, LBCM's base case scenario is for a slow expansion
of economic activity alongside a gradual rise in the unemployment rate.
Increases in UK Bank Rate in response to persistent inflationary pressures
trigger further declines in residential and commercial property prices. Risks
around this base case economic view lie in both directions and are largely
captured by the generation of alternative economic scenarios.
LBCM has taken into account 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 second
quarter of 2023, for which actuals may have since emerged prior to
publication.
LBCM's approach to generating alternative economic scenarios is set out in
detail in note 14 to the financial statements for the year ended 31 December
2022. For June 2023, LBCM continues to judge it appropriate to include a
non-modelled severe downside scenario for LBCM ECL calculations. This adjusted
scenario is considered to better reflect the risks around LBCM's base case
view in an economic environment where past supply shocks continue to unwind
slowly.
Scenarios by year
The key UK economic assumptions made by LBCM are shown in the following tables
across a number of measures explained below.
Annual assumptions
Gross domestic product (GDP) and Consumer Price Index (CPI) inflation are
presented as an annual change, house price growth and commercial real estate
price growth are presented as the growth in the respective indices over each
year. Unemployment rate and UK Bank Rate are averages over the year.
Five-year average
The five-year average reflects the average annual growth rate, or level, over
the five-year period. It includes movements within the current reporting year,
such that the position as of 30 June 2023 covers the five years 2023 to 2027.
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 changes. The use
of calendar years maintains a comparability between the annual assumptions
presented.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 8: Allowance for expected credit losses (continued)
At 30 June 2023 2023 2024 2025 2026 2027 2023-2027 average Start to peak % Start to trough %
% % % % % %
Upside
UK Gross domestic product 0.8 1.6 0.9 1.5 2.0 1.3 7.7 0.1
UK Unemployment rate 3.3 2.7 3.0 3.4 3.3 3.1 3.9 2.6
UK Commercial real estate price growth 2.3 6.5 1.8 2.4 3.8 3.4 17.9 (1.2)
UK Bank Rate 5.39 7.00 6.57 5.76 5.63 6.07 7.19 4.25
US Gross domestic product 1.6 2.9 2.8 1.2 0.6 1.7 8.7 0.3
US Unemployment rate 3.6 3.7 3.1 3.1 3.6 3.4 3.8 3.0
Base case
UK Gross domestic product 0.2 0.3 0.7 1.5 2.1 0.9 5.6 0.0
UK Unemployment rate 4.1 4.7 5.2 5.3 5.0 4.9 5.3 3.9
UK Commercial real estate price growth (3.9) (0.2) (0.3) 1.2 3.8 0.1 0.4 (5.3)
UK Bank Rate 5.06 5.44 4.63 3.69 3.50 4.46 5.50 3.50
US Gross domestic product 1.0 0.7 1.8 1.7 1.6 1.3 6.7 (0.1)
US Unemployment rate 3.7 4.6 4.5 4.4 4.4 4.3 4.7 3.5
Downside
UK Gross domestic product (0.6) (1.5) 0.4 1.4 2.1 0.4 2.5 (2.3)
UK Unemployment rate 4.9 7.1 7.7 7.6 7.1 6.9 7.8 3.9
UK Commercial real estate price growth (9.2) (7.0) (3.7) (1.4) 2.2 (3.9) (1.2) (19.9)
UK Bank Rate 4.73 3.67 2.37 1.30 1.04 2.62 5.10 1.03
US Gross domestic product 0.5 (1.3) 0.4 1.6 2.2 0.7 3.4 (1.7)
US Unemployment rate 3.8 5.6 6.5 6.6 6.3 5.8 6.6 3.5
Severe downside
UK Gross domestic product (1.5) (2.8) 0.3 1.2 1.8 (0.2) 0.1 (4.5)
UK Bank Rate - modelled 4.26 1.73 0.48 0.08 0.04 1.32 5.00 0.03
UK Bank Rate - adjusted 5.69 7.00 4.94 3.88 3.50 5.00 7.25 3.50
UK Unemployment rate 6.1 9.8 10.4 10.1 9.5 9.2 10.4 3.9
UK Commercial real estate price growth (17.5) (16.5) (9.0) (6.1) (0.4) (10.1) (1.2) (41.5)
US Gross domestic product (0.1) (3.7) (1.3) 1.5 2.9 (0.1) 0.3 (6.0)
US Unemployment rate 4.0 6.9 8.9 9.3 8.7 7.6 9.3 3.5
Probability-weighted
UK Gross domestic product 0.0 (0.2) 0.6 1.4 2.0 0.8 4.7 (0.4)
UK Bank Rate - modelled 4.98 5.00 4.12 3.23 3.05 4.08 5.41 3.05
UK Bank Rate - adjusted 5.12 5.53 4.56 3.61 3.40 4.45 5.66 3.40
UK Unemployment rate 4.3 5.3 5.8 5.9 5.5 5.4 5.9 3.9
UK Commercial real estate price growth (5.0) (1.9) (1.5) 0.1 2.9 (1.1) (1.2) (9.1)
US Gross domestic product 0.9 0.3 1.4 1.5 1.6 1.1 5.6 (0.3)
US Unemployment rate 3.7 4.8 5.1 5.2 5.2 4.8 5.2 3.5
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 8: Allowance for expected credit losses (continued)
At 31 December 2022 2022 2023 2024 2025 2026 2022-2026 average Start to peak % Start to trough
% % % % % % %
Upside
UK Gross domestic product 4.1 0.1 1.1 1.7 2.1 1.8 6.5 0.4
UK Unemployment rate 3.5 2.8 3.0 3.3 3.4 3.2 3.8 2.8
UK Commercial real estate price growth (9.4) 8.5 3.5 2.6 2.3 1.3 7.2 (9.4)
UK Bank Rate 1.94 4.95 4.98 4.63 4.58 4.22 5.39 0.75
US Gross domestic product 1.9 1.9 3.2 1.5 0.1 1.7 6.8 (0.6)
US Unemployment rate 3.7 3.9 3.1 2.9 3.4 3.4 4.0 2.8
Base case
UK Gross domestic product 4.0 (1.2) 0.5 1.6 2.1 1.4 4.3 (1.1)
UK Unemployment rate 3.7 4.5 5.1 5.3 5.1 4.8 5.3 3.6
UK Commercial real estate price growth (11.8) (3.3) 0.9 2.8 3.1 (1.2) 7.2 (14.8)
UK Bank Rate 1.94 4.0 3.38 3.0 3.0 3.06 4 0.75
US Gross domestic product 1.8 0.4 1.4 1.4 1.2 1.2 4.7 (0.6)
US Unemployment rate 3.7 4.4 4.5 4.5 4.4 4.3 4.6 3.5
Downside
UK Gross domestic product 3.9 (3) (0.5) 1.4 2.1 0.8 1.2 (3.6)
UK Unemployment rate 3.8 6.3 7.5 7.6 7.2 6.5 7.7 3.6
UK Commercial real estate price growth (13.9) (15) (3.7) 0.4 1.4 (6.4) 7.2 (29.6)
UK Bank Rate 1.94 2.93 1.39 0.98 1.04 1.65 3.62 0.75
US Gross domestic product 1.7 (0.9) (0.6) 0.9 2.0 0.6 1.9 (1.8)
US Unemployment rate 3.7 4.9 6.2 6.5 6.0 5.5 6.6 3.5
Severe downside
UK Gross domestic product 3.7 (5.2) (1) 1.3 2.1 0.1 0.7 (6.4)
UK Bank Rate - modelled 1.94 1.41 0.2 0.13 0.14 0.76 3.5 0.12
UK Bank Rate - adjusted 2.44 7.0 4.88 3.31 3.25 4.18 7.0 0.75
UK Unemployment rate 4.1 9.0 10.7 10.4 9.7 8.8 10.7 3.6
UK Commercial real estate price growth (17.3) (28.8) (9.9) (1.3) 3.2 (11.6) 7.2 (47.8)
US Gross domestic product 1.7 (2.5) (3.1) 0.2 2.8 (0.2) 0.1 (6.4)
US Unemployment rate 3.7 5.7 8.4 9.3 8.3 7.1 9.4 3.5
Probability-weighted
UK Gross domestic product 4.0 (1.8) 0.2 1.5 2.1 1.2 3.4 (1.8)
UK Bank Rate - modelled 1.94 3.7 2.94 2.59 2.6 2.76 3.89 0.75
UK Bank Rate - adjusted 1.99 4.26 3.41 2.91 2.91 3.1 4.31 0.75
UK Unemployment rate 3.7 5.0 5.8 5.9 5.7 5.2 5.9 3.6
UK Commercial real estate price growth (12.3) (5.8) (0.8) 1.6 2.3 (3.1) 7.2 (18.6)
US Gross domestic product 1.8 0.2 0.9 1.2 1.3 1.1 3.8 (0.6)
US Unemployment rate 3.7 4.5 5.0 5.1 5.0 4.7 5.1 3.5
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 8: Allowance for expected credit losses (continued)
ECL sensitivity to economic assumptions
The table below shows LBCM's ECL for the probability-weighted, upside, base
case, downside and severe downside scenarios, with the severe downside
scenario incorporating adjustments made to CPI inflation and UK Bank Rate
paths. The stage allocation for an asset is based on the overall scenario
probability-weighted PD and hence the staging of assets is typically constant
across all the scenarios. In each economic scenario the ECL for individual
assessments is held constant reflecting the basis on which they are evaluated.
Probability- Upside Base case Downside Severe
weighted downside
£m £m £m £m £m
At 30 June 2023 43 22 33 54 102
At 31 December 2022 61 25 39 74 199
Note 9: Debt securities in issue
At At 31 December 2022
30 June 2023
£m £m
Medium-term notes issued 3,436 3,403
Certificates of deposit issued 5,272 5,618
Commercial paper 4,115 3,700
Amounts due to fellow Group undertakings 2,445 3,410
Total debt securities in issue 15,268 16,131
Note 10: Other provisions
Provisions Other Total
for financial
commitments
and guarantees
£m £m £m
At 1 January 2023 18 8 26
Exchange and other adjustments 1 (1) -
Provisions applied - (2) (2)
Release for the period (7) - (7)
At 30 June 2023 12 5 17
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 11: Other reserves
At At 31 December 2022
30 June
2023
£m £m
Other reserves comprise:
Revaluation reserve in respect of debt securities held at fair value through (2) (2)
other comprehensive income
Cash flow hedging reserve (565) (519)
Foreign currency translation reserve (9) (4)
Total other reserves (576) (525)
At At 31 December 2022
30 June 2023
£m £m
Revaluation reserve in respect of debt securities held at fair value through
other comprehensive income
Opening balance as at 1 January (2) (2)
Change in fair value - -
Income statement transfers in respect of disposals - -
At period end (2) (2)
At At 31 December 2022
30 June 2023
£m £m
Cash flow hedging reserve
Opening balance as at 1 January (519) (48)
Change in fair value of hedging derivatives (241) (711)
Deferred tax 67 197
(174) (514)
Net income statement transfers 177 59
Deferred tax (49) (16)
128 43
At period end (565) (519)
At At 31 December 2022
30 June 2023
£m £m
Foreign currency translation reserve
Opening balance as at 1 January (4) (14)
Currency translation differences arising in the year (5) 10
At period end (9) (4)
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 12: Related party transactions
Balances and transactions with fellow Lloyds Banking Group undertakings
The Bank and its subsidiaries have balances due to and from the Bank's parent
company, Lloyds Banking Group plc, and fellow Group undertakings. These are
included on the balance sheet as follows:
At At
30 June 31 Dec
2023 2022
£m £m
Assets, included within:
Financial assets at amortised cost: due from fellow Lloyds Banking Group 182 269
undertakings
Financial assets at fair value through profit or loss 19 22
Derivative financial instruments 3,898 3,397
4,099 3,688
Liabilities, included within:
Due to fellow Lloyds Banking Group undertakings 1,363 1,481
Financial liabilities at fair value through profit or loss - 2
Derivative financial instruments 2,924 2,662
Debt securities in issue 2,445 3,410
Subordinated liabilities 747 761
7,479 8,316
Other equity instruments: 782 782
Additional tier 1 instruments 782 782
During the half-year to 30 June 2023 LBCM earned £4 million (half-year to 30
June 2022: £1 million) of interest income and incurred £110 million
(half-year to 30 June 2022: £46 million) of interest expense on balances and
transactions with Lloyds Banking Group plc and fellow Group undertakings.
Other related party transactions
Other related party transactions for the half-year to 30 June 2023 are similar
in nature to those for the year ended 31 December 2022.
Management charges payable to Lloyds Bank plc of £102 million (half-year to
30 June 2022: £79 million) have been incurred in the period, see note 3.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 13: Contingent liabilities, commitments and guarantees
Legal actions and regulatory matters
During the ordinary course of business LBCM is subject to 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 LBCM 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, LBCM 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.
Contingent liabilities, commitments and guarantees arising from the banking
business
At 30 June 2023 total contingent liabilities were £95 million (31 December
2022: £86 million). Total commitments and guarantees were £18,992 million
(31 December 2022: £17,174 million) of which £18,522 million (31 December
2022: £16,619 million) was irrevocable.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 14: Fair values of financial assets and liabilities
The valuations of financial instruments have been classified into three levels
according to the quality and reliability of information used to determine
those fair values. Note 34 to LBCM's financial statements for the year ended
31 December 2022 details the definitions of the three levels in the fair
value hierarchy.
Valuation control framework
Key elements of the valuation control framework include model validation
(incorporating pre-trade and post-trade testing), product implementation
review and independent price verification. The framework covers processes for
all 3 levels in the fair value hierarchy. Formal committees meet quarterly to
discuss and approve valuations in more judgemental areas.
Transfers into and out of level 3 portfolios
Transfers out of level 3 portfolios arise when inputs that could have a
significant impact on the instrument's valuation become market observable;
conversely, transfers into the portfolios arise when sources of data cease to
be observable.
Valuation methodology
For level 2 and level 3 portfolios, there is no significant change to the
valuation methodology (techniques and inputs) disclosed in LBCM's financial
statements for the year ended 31 December 2022 applied to these portfolios.
The table below summarises the carrying values of financial assets and
liabilities measured at amortised cost in LBCM's consolidated balance sheet.
The fair values presented in the table are at a specific date and may be
significantly different from the amounts which will actually be paid or
received on the maturity or settlement date.
At 30 June 2023 At 31 December 2022
Carrying Fair Carrying Fair
value value value value
£m £m £m £m
Financial assets
Loans and advances to banks 1,790 1,790 2,117 2,117
Loans and advances to customers 18,930 18,880 19,127 19,237
Reverse repurchase agreements 5,474 5,474 5,606 5,606
Debt securities 377 371 305 305
Due from fellow Lloyds Banking Group undertakings 182 182 269 269
Financial assets at amortised cost 26,753 26,697 27,424 27,534
Financial liabilities
Deposits from banks 2,748 2,748 2,456 2,456
Customer deposits 29,892 29,935 29,152 29,224
Repurchase agreements - - 7 7
Due to fellow Lloyds Banking Group undertakings 1,363 1,363 1,481 1,481
Debt securities in issue 15,268 15,123 16,131 15,970
Subordinated liabilities 733 733 761 761
Financial instruments classified as financial assets at fair value through
profit or loss, derivative financial instruments, financial assets at fair
value through other comprehensive income and financial liabilities at fair
value through profit or loss are recognised at fair value.
The carrying amount of cash and balances at central banks is a reasonable
approximation of fair value.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 14: Fair values of financial assets and liabilities (continued)
LBCM manages valuation adjustments for its derivative exposures on a net
basis; LBCM determines their fair values on the basis of their net exposures.
In all other cases, fair values of financial assets and liabilities measured
at fair value are determined on the basis of their gross exposures.
The following tables provide an analysis of the financial assets and
liabilities of LBCM that are carried at fair value in LBCM's consolidated
balance sheet, grouped into levels 1 to 3 based on the degree to which the
fair value is observable. There were no significant transfers between level 1
and level 2 during the period.
Level 1 Level 2 Level 3 Total
Financial assets £m £m £m £m
At 30 June 2023
Financial assets at fair value through profit or loss:
Loans and advances to banks - 90 - 90
Loans and advances to customers - 16,277 2 16,279
Debt securities 3,474 612 148 4,234
Treasury and other bills - - - -
Total financial assets at fair value through profit or loss 3,474 16,979 150 20,603
Financial assets at fair value through other comprehensive income:
Debt securities - - 4 4
Total financial assets at fair value through other comprehensive income - - 4 4
Derivative financial instruments 25 24,291 515 24,831
Total financial assets carried at fair value 3,499 41,270 669 45,438
At 31 December 2022
Financial assets at fair value through profit or loss
Loans and advances to banks - 16 - 16
Loans and advances to customers - 12,015 2 12,017
Debt securities 2,182 347 156 2,685
Treasury and other bills 62 - - 62
Total financial assets at fair value through profit or loss 2,244 12,378 158 14,780
Financial assets at fair value through other comprehensive income:
Debt securities - - 6 6
Total financial assets at fair value through other comprehensive income - - 6 6
Derivative financial instruments 6 24,050 565 24,621
Total financial assets carried at fair value 2,250 36,428 729 39,407
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 14: Fair values of financial assets and liabilities (continued)
Level 1 Level 2 Level 3 Total
Financial liabilities £m £m £m £m
At 30 June 2023
Financial liabilities at fair value through profit or loss:
Liabilities designated at fair value through profit or loss - 25 - 25
Trading liabilities 1,648 17,155 - 18,803
Total financial liabilities at fair value through profit or loss 1,648 17,180 - 18,828
Derivative financial instruments 13 19,863 417 20,293
Total financial liabilities carried at fair value 1,661 37,043 417 39,121
At 31 December 2022
Financial liabilities at fair value through profit or loss:
Trading liabilities 1,504 11,074 - 12,578
Total financial liabilities at fair value through profit or loss 1,504 11,074 - 12,578
Derivative financial instruments 8 19,568 494 20,070
Total financial liabilities carried at fair value 1,512 30,642 494 32,648
Movements in level 3 portfolio
The tables below analyse movements in the level 3 financial assets portfolio.
Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Derivative assets Total financial assets carried at fair value
£m £m £m £m
At 1 January 2023 158 6 565 729
Exchange and other adjustments (8) - (12) (20)
(Losses) gains recognised in the income statement within other income (8) - (55) (63)
Gains recognised in other comprehensive income within the revaluation reserve - - - -
in respect of financial assets at fair value through other comprehensive
income
Purchases/increases 8 - 40 48
Sales/repayments - (2) (20) (22)
Transfers into the level 3 portfolio - - - -
Transfers out of the level 3 portfolio - - (3) (3)
At 30 June 2023 150 4 515 669
Losses recognised in the income statement, within other income, relating to (8) - (58) (66)
the change in fair value of those assets held at 30 June 2023
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 14: Fair values of financial assets and liabilities (continued)
Financial Financial Derivative assets Total financial assets carried at fair value
assets at fair value through profit or loss assets at fair value through other comprehensive income
£m £m £m £m
At 1 January 2022 190 15 729 934
Exchange and other adjustments - - 21 21
(Losses) gains recognised in the income statement within other income (21) - 133 112
Gains recognised in other comprehensive income within the revaluation reserve - 1 - 1
in respect of financial assets at fair value through other comprehensive
income
Purchases/increases - - 41 41
Sales/repayments - (4) (9) (13)
Transfers into the level 3 portfolio - - - -
Transfers out of the level 3 portfolio - - (291) (291)
At 30 June 2022 169 12 624 805
(Losses) gains recognised in the income statement, within other income, (21) - 254 233
relating to the change in fair value of those assets held at 30 June 2022
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 14: Fair values of financial assets and liabilities (continued)
The tables below analyse movements in the level 3 financial liabilities
portfolio.
Financial liabilities at fair value through profit or loss Derivative liabilities Total
financial liabilities carried at
fair value
£m £m £m
At 1 January 2023 - 494 494
Exchange and other adjustments - (8) (8)
Gains recognised in the income statement within other income - (71) (71)
Purchases/increases - 31 31
Sales/repayments - (29) (29)
Transfers into the level 3 portfolio - - -
Transfers out of the level 3 portfolio - - -
At 30 June 2023 - 417 417
Gains recognised in the income statement, within other income, relating to the - (74) (74)
change in fair value of those liabilities held at 30 June 2023
At 1 January 2022 - 926 926
Exchange and other adjustments - 17 17
Gains recognised in the income statement within other income - (12) (12)
Purchases/increases - 37 37
Sales/repayments - (2) (2)
Transfers into the level 3 portfolio - - -
Transfers out of the level 3 portfolio - (284) (284)
At 30 June 2022 - 682 682
Gains recognised in the income statement, within other income, relating to the - (28) (28)
change in fair value of those liabilities held at 30 June 2022
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 14: Fair values of financial assets and liabilities (continued)
The tables below set out the effects of reasonably possible alternative
assumptions for categories of level 3 financial assets and financial
liabilities.
At 30 June 2023
Effect of reasonably
possible alternative
assumptions(2)
Valuation techniques Significant unobservable inputs(1) Carrying value Favourable changes Unfavourable
changes
£m £m £m
Financial assets at fair value through profit or loss
Loans and advances to customers Comparable pricing Spread (-/+19bps) 2 - -
Debt securities Discounted cash flows Credit spreads (discount factor) and inflation volatility (-/+6bps) 148 11 (11)
150 11 (11)
Financial assets at fair value through other comprehensive income
Debt securities Comparable pricing Spread (-/+0bps) 4 - -
4 - -
Derivative financial assets
Interest rate derivatives Option pricing model Interest rate volatility (15.0-189.6bps) 515 3 (7)
515 3 (7)
Level 3 financial assets carried at fair value 669 14 (18)
Derivative financial liabilities
Interest rate derivatives Option pricing model Interest rate volatility (15.0-189.6bps) 417 17 (13)
417 17 (13)
Level 3 financial liabilities carried at fair value 417 17 (13)
(1 ) Ranges are shown where appropriate and represent the highest
and lowest inputs used in the level 3 valuations.
(2 ) Where the exposure to an unobservable input is managed on a
net basis, only the net impact is shown in the table.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 14: Fair values of financial assets and liabilities (continued)
At 31 December 2022
Effect of reasonably
possible alternative
assumptions(2)
Valuation Significant unobservable inputs(1) Carrying value Favourable changes Unfavourable changes
techniques
£m £m £m
Financial assets at fair value through profit or loss
Loans and advances to customers Comparable pricing Spread (-/+20bps) 2 - -
Debt securities Discounted cash flows Credit spreads (discount factor) and inflation volatility (-/+6bps) 156 10 (10)
158 10 (10)
Financial assets at fair value through other comprehensive income
Debt securities Comparable pricing Spread (-/+0bps) 6 - -
6 - -
Derivative financial assets
Interest rate derivatives Option pricing model Interest rate volatility (17.1-104.9bps) 565 9 (7)
565 9 (7)
Level 3 financial assets carried at fair value 729 19 (17)
Derivative financial liabilities
Interest rate derivatives Option pricing model Interest rate volatility (17.1-104.9bps) 494 17 (19)
494 17 (19)
Level 3 financial liabilities carried at fair value 494 17 (19)
(1 ) Ranges are shown where appropriate and represent the highest
and lowest inputs used in the level 3 valuations.
(2 ) Where the exposure to an unobservable input is managed on a
net basis, only the net impact is shown in the table.
Unobservable inputs
Significant unobservable inputs affecting the valuation of debt securities,
unlisted equity investments and derivatives are unchanged from those described
in LBCM's financial statements for the year ended 31 December 2022.
Reasonably possible alternative assumptions
Valuation techniques applied to many of the LBCM's level 3 instruments often
involve the use of two or more inputs whose relationship is interdependent.
The calculation of the effect of reasonably possible alternative assumptions
included in the table above reflects such relationships and are unchanged from
those described in LBCM's financial statements for the year ended 31 December
2022.
(
)
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 15: Interest rate benchmark reform
LBCM continues to manage the transition to alternative benchmark rates under
the LBG-wide IBOR transition programme. Following the successful completion of
industry events, including the two London Clearing House USD derivatives
transition events in the second quarter, LBCM has transitioned the substantial
majority of its LIBOR products, with most of the remainder being USD uncleared
derivatives that are due to transition under the ISDA protocol. We continue to
work with customers to transition a small number of remaining contracts that
are not subject to the above events and either have yet to transition or have
defaulted to the relevant synthetic LIBOR benchmark in the interim.
While the volume of outstanding transactions impacted by IBOR benchmark
reforms continues to reduce, LBCM does not expect material changes to its risk
management approach.
Note 16: Dividends on ordinary shares
The Bank did not pay a dividend in the period to 30 June 2023 (2022: £220
million).
Note 17: Ultimate parent undertaking
The Bank's ultimate parent undertaking and controlling party is Lloyds Banking
Group plc which is incorporated in Scotland. Lloyds Banking Group plc has
published consolidated accounts for the year to 31 December 2022 and half-year
results for the six month period to 30 June 2023, and copies may be obtained
from Investor Relations, Lloyds Banking Group, 25 Gresham Street, London EC2V
7HN and available for download from www.lloydsbankinggroup.com.
Note 18: Events since the balance sheet date
There are no events since the balance sheet date to disclose.
Note 19: 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 2022 were
approved by the directors on 21 March 2023 and were delivered to the Registrar
of Companies on 16 May 2023. The auditors' report on those accounts was
unqualified and did not include a statement under sections 498(2) (accounting
records or returns inadequate or accounts not agreeing with records and
returns) or 498(3) (failure to obtain necessary information and explanations)
of the Act.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors listed below (being all the directors of Lloyds Bank Corporate
Markets plc) confirm that to the best of their knowledge these condensed
consolidated half-year financial statements have been prepared in accordance
with UK adopted International Accounting Standard 34, Interim Financial
Reporting, and that the half-year management report herein includes a fair
review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:
• an indication of important events that have occurred during the
six months ended 30 June 2023 and their impact on the condensed consolidated
half-year financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
• material related party transactions in the six months ended 30
June 2023 and any material changes in the related party transactions described
in the last annual report.
Signed on behalf of the Board by
Carla Antunes da Silva
Chief Executive Officer
12 September 2023
Lloyds Bank Corporate Markets plc Board of directors:
Carla Antunes da Silva (Executive director and Chief Executive Officer)
Mark Basten (Non-executive director)
Julienne Daglish (Executive director and Chief Financial Officer)
Eve Henrikson (Non-executive director)
Cecile Hilary (Non-executive director)
Lord Lupton CBE (Non-executive director and Chair)
Andrew McIntyre (Non-executive director)
John Owen (Non-executive director)
Rose St Louis (Non-executive director)
Changes to the composition of the Board since 1 January 2023 up to the date of
this report are shown below:
Carla Antunes da Silva (appointed 1 February 2023)
Mark Basten (appointed 9 February 2023)
Eduardo Stock da Cunha (resigned 31 January 2023)
INDEPENDENT REVIEW REPORT TO LLOYDS BANK CORPORATE MARKETS PLC
Conclusion
We have been engaged by the Bank to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2023 which comprises the consolidated income statement, the consolidated
statement of comprehensive income, the consolidated balance sheet, the
consolidated statement of changes in equity, the consolidated cash flow
statement and related notes 1 to 19.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2023 is not prepared, in all
material respects, in accordance with United Kingdom adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" issued by the Financial Reporting
Council for use in the United Kingdom (ISRE (UK) 2410). A review of interim
financial information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the Group will be
prepared in accordance with United Kingdom adopted international accounting
standards. The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with United
Kingdom adopted International Accounting Standard 34, "Interim Financial
Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
this ISRE (UK) 2410; however future events or conditions may cause the entity
to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the Group's ability to continue as a going concern, disclosing
as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the Bank
or to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly financial report, we are responsible for
expressing to the Group a conclusion on the condensed set of financial
statement in the half-yearly financial report. Our conclusion, including our
Conclusions Relating to Going Concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the Group in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim Financial
Information Performed by the Independent Auditor of the Entity" issued by the
Financial Reporting Council. Our work has been undertaken so that we might
state to the Bank those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other
than the Bank, for our review work, for this report, or for the conclusions we
have formed.
Deloitte LLP
Statutory Auditor
London, England
12 September 2023
FORWARD LOOKING STATEMENTS
This document contains certain forward looking statements within the meaning
of Section 21E of the US Securities Exchange Act of 1934, as amended, and
section 27A of the US Securities Act of 1933, as amended, with respect to the
business, strategy, plans and/or results of Lloyds Bank Corporate Markets 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; political
instability including as a result of any UK general election and any further
possible referendum on Scottish independence; acts of hostility or terrorism
and responses to those acts, or other such events; geopolitical
unpredictability; the war between Russia and Ukraine; the tensions between
China and Taiwan; market related risks, trends and developments; exposure to
counterparty risk; instability in the global financial markets, including
within the Eurozone, and as a result of the exit by the UK from the European
Union (EU) and the effects of the EU-UK Trade and Cooperation Agreement; the
ability to access sufficient sources of capital, liquidity and funding when
required; changes to the Group's credit ratings; fluctuations in interest
rates, inflation, exchange rates, stock markets and currencies; volatility in
credit markets; volatility in the price of the Group's securities; tightening
of monetary policy in jurisdictions in which the Group operates; natural
pandemic (including but not limited to the COVID-19 pandemic) and other
disasters; risks concerning borrower and counterparty credit quality; risks
related to the uncertainty surrounding the integrity and continued existence
of reference rates; changes in laws, regulations, practices and accounting
standards or taxation; changes to regulatory capital or liquidity requirements
and similar contingencies; the policies and actions of governmental or
regulatory authorities or courts together with any resulting impact on the
future structure of the Group; risks associated with the Group's compliance
with a wide range of laws and regulations; assessment related to resolution
planning requirements; risks related to regulatory actions which may be taken
in the event of a bank or Group failure; exposure to legal, regulatory or
competition proceedings, investigations or complaints; 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;
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; technological
failure; inadequate or failed internal or external processes or systems; risks
relating to ESG matters, such as 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, and human rights issues; the impact of competitive conditions;
failure to attract, retain and develop high calibre talent; the ability to
achieve strategic objectives; 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; assumptions and estimates that form the
basis of the Group's financial statements; and potential changes in dividend
policy. A number of these influences and factors are beyond the control of the
Group or Lloyds Banking Group plc. Please refer to the Base Prospectus for the
Group's Euro Medium Term Note Programme and 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.
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