REG - Lloyds Bank Plc Lloyds Banking Group - 2022 Half-Year Results
27/07/2022 13:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220727:nRSa9324Ta&default-theme=true
RNS Number : 9324T Lloyds Bank PLC 27 July 2022
Lloyds Bank plc
2022 Half-Year Results
27 July 2022
Member of the Lloyds Banking Group
CONTENTS
Page
Review of performance 1
Risk management
Principal risks and uncertainties 4
Credit risk 7
Funding and liquidity risk 20
Capital risk 23
Statutory information
Condensed consolidated half-year financial statements (unaudited) 29
Consolidated income statement 30
Consolidated statement of comprehensive income 31
Consolidated balance sheet 32
Consolidated statement of changes in equity 34
Consolidated cash flow statement 37
Notes to the condensed consolidated half-year financial statements 38
Statement of Directors' responsibilities 77
Independent review report to Lloyds Bank plc 78
Forward looking statements 80
REVIEW OF PERFORMANCE
Principal activities
Lloyds Bank plc (the Bank) and its subsidiary undertakings (the Group) provide
a wide range of banking and financial services through branches and offices in
the UK and in certain locations overseas. The Group's revenue is earned
through interest and fees on a broad range of financial services products
including current accounts, savings, mortgages, credit cards, motor finance
and unsecured loans to personal and business banking customers; and lending,
transactional banking, working capital management and risk management services
to commercial customers.
Income statement
In the half-year to 30 June 2022, the Group recorded a profit before tax of
£3,283 million compared to £3,420 million in the same period in 2021,
representing a reduction of £137 million as higher total income was more than
offset by the impact of a net impairment charge for the period compared to a
net credit in the first six months of 2021. Profit after tax was £2,441
million.
Total income increased by £745 million, or 10 per cent, to £8,052 million in
the half-year to 30 June 2022 compared to £7,307 million in the first six
months of 2021; there was an increase of £713 million in net interest income
and an increase of £32 million in other income.
Net interest income was £6,089 million, an increase of £713 million compared
to £5,376 million in the six months to 30 June 2021. The increased net
interest income was driven by growth in average interest-earning assets and
deposits as well as an improved margin; the net interest margin benefited from
bank base rate increases and deposit growth, offsetting mortgage book margin
impacts and competitive pressures on pricing.
Other income was £32 million higher at £1,963 million in the six months to
30 June 2022 compared to £1,931 million in the same period last year. Net fee
and commission income increased by £58 million to £648 million, compared to
£590 million in the first six months of 2021, due to higher credit and debit
card fees, reflecting increased levels of customer activity, more than
offsetting the impact of reduced levels of commercial banking fees as a result
of fewer significant capital markets transactions and lower levels of
corporate financing. Net trading income was £95 million lower at
£208 million in the six months to 30 June 2022, in part due to the impact of
movements in credit spreads on valuation adjustments. Other operating income
increased by £69 million to £1,107 million compared to £1,038 million in
the six months to 30 June 2021, in part due to improved gains on disposal of
financial assets at fair value through other comprehensive income.
Total operating expenses decreased by £159 million to £4,405 million
compared to £4,564 million in the first six months of 2021. There was an
increase of £93 million in operating costs; the impact of staff salary
increases and higher variable pay was only partly offset by staff number
reductions and there was an increase in IT-related costs, as a result of the
Group's investment programmes. Depreciation charges were £33 million lower
reflecting the ongoing impact of a reduced, but stabilising, Lex fleet size as
a result of industry-wide supply constraints in the new car market. The charge
in respect of regulatory provisions was £252 million lower at £58 million
and largely related to pre-existing programmes. There have been no further
charges relating to HBOS Reading since the end of 2021 and the provision held
continues to reflect the Group's best estimate of its full liability, albeit
significant uncertainties remain.
There was a net impairment charge in the six months to 30 June 2022 of £364
million, compared to a net credit of £677 million in the first six months of
2021, largely reflecting a low charge arising from observed credit performance
and a charge in the first six months of 2022 as a result of revisions to the
Group's economic outlook, compared to a significant credit in the first half
of 2021. The updated outlook includes additional risks from a higher inflation
and interest rate environment of c.£0.4 billion, partially offset by
reductions in COVID-19 related risks of c.£0.3 billion. The latter included a
£200 million release from the Group's central adjustment which addresses
downside risks outside of the base case conditioning assumptions in relation
to coronavirus.
Overall the Group's loan portfolio continues to be well-positioned, reflecting
a prudent through-the-cycle approach to credit risk with high levels of
security. Observed credit performance remains robust and the flow of assets
into arrears, defaults and write-offs remains at low levels. The Group's
expected credit loss (ECL) allowance increased slightly in the first six
months of the year to £4,064 million (31 December 2021: £4,000 million).
This reflects the balance of risks shifting from COVID-19 and potential
related restrictions to those from increased inflationary pressures on
households and businesses.
REVIEW OF PERFORMANCE (continued)
The Group's operations are predominantly UK-based with no direct credit
exposure to Russia or Ukraine. The Group does have credit exposure to
businesses that are impacted, either directly or indirectly, by higher energy
costs or commodity prices, or potential disruption within their supply chains.
Such activity continues to be monitored through prudent risk management.
The Group recognised a tax expense of £842 million in the period compared to
a credit of £288 million in the first six months of 2021; during the
first-half of 2021 the Group had recognised a deferred tax credit in the
income statement of £1,189 million following substantive enactment, in May
2021, of the UK Government's increase in the rate of corporation tax from 19
per cent to 25 per cent with effect from 1 April 2023.
Balance sheet
Total assets were £23,474 million, or 4 per cent, higher at £626,323 million
at 30 June 2022 compared to £602,849 million at 31 December 2021. Cash and
balances at central banks rose by £16,096 million to £70,375 million
reflecting the placement of funds from increased available liquidity.
Financial assets at amortised cost were £9,485 million higher at £499,801
million at 30 June 2022 compared to £490,316 million at 31 December 2021, as
a result of a £4,139 million increase in loans and advances to customers,
net of impairment allowances, £1,839 million in debt securities, and £2,349
million in reverse repurchase agreement balances. The increase in loans and
advances to customers, net of impairment allowances, was driven by continued
growth in the open mortgage book and increases in Corporate and Institutional
lending, partially offset by further reductions in the closed mortgage book
and hedging impacts. Other assets increased £2,488 million due to a
£942 million increase in retirement benefit assets as a result of
accelerated pension contributions in the period and a £381 million increase
in current tax recoverable. Financial assets at fair value through other
comprehensive income were £3,757 million lower at £24,029 million as a
result of sales during the period.
Total liabilities were £23,531 million, or 4 per cent, higher at £585,608
million compared to £562,077 million at 31 December 2021. Customer deposits
increased by £1,555 million to £450,928 million compared to £449,373
million at 31 December 2021, as a result of continued inflows to retail
current and savings accounts offset by a small reduction in commercial
deposits. Repurchase agreements at amortised cost increased £18,047 million
to £48,153 million, as the Group took advantage of favourable funding
opportunities and debt securities in issue increased by £4,499 million
reflecting issuances of commercial paper and certificates of deposit.
Subordinated liabilities decreased by £2,143 million following redemptions
during the period.
Ordinary shareholders' equity decreased £51 million to £36,359 million at 30
June 2022 as retained profit for the period was more than offset by negative
movements in the cash flow hedging reserve.
Capital
The Group's common equity tier 1 (CET1) capital ratio reduced from 16.7 per
cent at 31 December 2021 to 14.1 per cent on 1 January 2022, before increasing
during the period to 15.2 per cent at 30 June 2022. The reduction on 1 January
2022 reflected the impact of regulatory changes, including an increase in
risk-weighted assets as well as other related modelled impacts, in addition to
the reinstatement of the full deduction treatment for intangible software
assets and phased unwind of IFRS 9 transitional relief. The subsequent
increase in the first half of the year reflected profits for the period and a
reduction in risk-weighted assets, partly offset by accelerated pension
contributions made during the first quarter. The total capital ratio reduced
from 23.5 per cent at 31 December 2021 to 20.7 per cent at 30 June 2022,
largely reflecting the reduction in CET1 capital, increase in risk-weighted
assets and completion of the transition to end-point eligibility rules for
regulatory capital on 1 January 2022.
Risk-weighted assets increased from £161.6 billion at 31 December 2021 to
around £178 billion on 1 January 2022, before reducing during the period to
£173.8 billion at 30 June 2022. The increase on 1 January 2022 reflected the
impact of regulatory changes, including the anticipated impact of the
implementation of new CRD IV models to meet revised regulatory standards for
modelled outputs and a new standardised approach for measuring counterparty
credit risk (SA-CCR) following the UK implementation of the remainder of
Capital Requirements Regulation (CRR) 2. The new CRD IV models remain subject
to finalisation and approval by the PRA and therefore uncertainty over the
final impact remains. The subsequent reduction in risk-weighted assets during
the first half of the year was largely driven by optimisation activities and
reductions from retail models reflecting the benign credit performance, partly
offset by the growth in balance sheet lending.
The Group's UK leverage ratio of 5.4 per cent at 30 June 2022 has increased
from 5.3 per cent at 31 December 2021, reflecting a reduction in the exposure
measure, principally related to off-balance sheet items, offset in part by a
reduction in the total tier 1 capital position.
RISK MANAGEMENT
PRINCIPAL RISKS AND UNCERTAINTIES
The significant risks faced by the Group are detailed below. There has been no
change to the definition of these risks from those disclosed in the Group's
2021 Annual Report and Accounts.
The external risks faced by the Group may also impact the success of
delivering against the Group's long-term strategic objectives. They include,
but are not limited to supply chain and socio-economic pressures arising from
the war between Russia and Ukraine and the coronavirus pandemic, which are
contributing to cost of living increases and associated implications for UK
consumers and businesses.
Heightened monitoring is in place across the Group's portfolios to identify
signs of affordability stress. However, there has been no adverse performance
to date and the Group's portfolios remain broadly stable.
Lloyds Banking Group participated in the Bank of England Biennial Exploratory
Scenario on Climate (CBES), with industry level results published in May 2022.
The exercise explored the financial risks posed by climate change, with
projections of climate risks likely to create a drag on institutions'
profitability. Lloyds Banking Group will continue to develop climate scenario
analysis capabilities and improve its climate risk management.
The Group's principal risks and uncertainties are reviewed and reported
regularly to the Board in alignment with Lloyds Banking Group's Enterprise
Risk Management Framework.
Market risk - The risk that the Group's capital or earnings profile is
affected by adverse market rates or prices, in particular interest rates and
credit spreads in the Banking business, interest rates, and credit spreads in
the Group's defined benefit pension schemes.
Credit risk - The risk that parties with whom the Group has contracted fail to
meet their financial obligations (both on and off-balance sheet).
Funding and liquidity risk - Funding risk is defined as the risk that the
Group does not have sufficiently stable and diverse sources of funding or the
funding structure is inefficient. Liquidity risk is defined as the risk that
the Group has insufficient financial resources to meet its commitments as they
fall due, or can only secure them at excessive cost.
Capital risk - The risk that the Group has a sub-optimal quantity or quality
of capital or that capital is inefficiently deployed across the Group.
Change/execution risk - The risk that, in delivering its change agenda, the
Group fails to ensure compliance with laws and regulation, maintain effective
customer service and availability and/or operation within the Group's risk
appetite.
Conduct risk - The risk of customer detriment across the customer lifecycle
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.
Data risk - The risk of the Group failing to effectively govern, manage and
control its data (including data processed by third party suppliers), leading
to unethical decisions, poor customer outcomes, loss of value to the Group and
mistrust.
People risk - The risk that the Group 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 robust control to
ensure all colleague-related requirements are met.
Operational resilience risk - The risk that the Group fails to design
resilience into business operations, underlying infrastructure and controls
(people, process, technology) so that it is able to withstand external or
internal events which could impact the continuation of operations and fails to
respond in a way which meets customer and stakeholder expectations and needs
when the continuity of operations is compromised.
Operational risk - The risk of loss resulting from inadequate or failed
internal processes, people and systems or from external events.
Model risk - The risk of financial loss, regulatory censure, reputational
damage or customer detriment, as a result of deficiencies in the development,
application or ongoing operation of models and rating systems.
PRINCIPAL RISKS AND UNCERTAINTIES (continued)
Regulatory and legal risk - The risk of financial penalties, regulatory
censure, criminal or civil enforcement action or customer detriment as a
result of failure to identify, assess, correctly interpret, comply with, or
manage regulatory and/or legal requirements.
Strategic risk - The risk which results from:
• Incorrect assumptions about internal or external operating environments
• Failure to understand the potential impact of strategic responses and
business plans on existing risk types
• Failure to respond or the inappropriate strategic response to material
changes in the external or internal operating environments
Climate risk - The risk that the Group experiences losses and/or reputational
damage as a result of physical events, transition risk, or as a consequence of
the responses to managing these changes, either directly or through the
Group's customers.
CREDIT RISK
Overview
The outlook for a number of macroeconomic variables for the UK has
deteriorated despite the post-COVID-19 recovery seen early in the year. The
main challenges facing the economy are cost of living pressures and the impact
of the war between Russia and Ukraine, which is aggravating existing
inflationary pressures, higher commodity prices and supply chain issues to the
UK economy.
Whilst not immune, the Group's portfolios are well-positioned, despite rising
inflationary pressures and the Group retains a prudent approach to credit risk
appetite and risk management, with robust LTVs in the secured portfolios.
Despite the external environment, flows of assets into arrears, defaults and
write-off have remained at low levels. However, the Group continues to monitor
the economic environment carefully through a suite of early warning
indicators.
The Group participated fully in UK Government lending schemes, including the
Bounce Back Loan Scheme and the Coronavirus Business Interruption Loan Scheme,
where UK Government guarantees are in place at 100 per cent and 80 per cent,
respectively. These and other support measures mean that true underlying risk
may potentially not be reflected in asset performance so the Group is
carefully monitoring the level of arrears and will continue to review customer
trends and contagion impacts to other lending.
The net impairment charge in the first half of 2022 was £364 million,
compared to a release of £677 million in the first half of 2021, reflecting a
low charge in relation to observed performance and a charge from economic
outlook revisions. The latter includes a release from the Group's central
adjustment which addresses downside risks outside of the base case
conditioning assumptions in relation to COVID-19.
This reporting period also coincided with implementation of CRD IV regulatory
requirements, which resulted in updates to credit risk measurement and
modelling to maintain alignment between IFRS 9 and regulatory definitions of
default. Most notably for UK mortgages, default was previously deemed to have
occurred no later than when a payment was 180 days past due; in line with CRD
IV this has now been reduced to 90 days, as well as including end-of-term
payments on past due interest-only accounts and all non-performing loans.
The Group's ECL allowance on loans and advances to customers remained stable
in the period at £4,059 million (31 December 2021: £3,998 million).
Changes related to CRD IV have not materially impacted total ECL as management
judgements were previously held in lieu of known changes, however some
material movements between stages are observed.
Stage 2 loans and advances to customers increased from £34,884 million to
£43,808 million, and as a percentage of total lending increased by 2.0
percentage points to 10.0 per cent (31 December 2021: 8.0 per cent),
predominantly as a result of the higher proportion of mortgage accounts
reaching the broader CRD IV definition of default introduced on 1 January
2022. Of the total Group Stage 2 loans and advances, 91.9 per cent are up to
date (31 December 2021: 89.0 per cent) with sustained low levels of new to
arrears. Stage 2 coverage reduced to 3.1 per cent (31 December 2021: 3.4 per
cent).
Stage 3 loans and advances increased in the period to £8,060 million (31
December 2021: £6,406 million), and as a percentage of total lending
increased to 1.8 per cent (31 December 2021: 1.5 per cent), also as a result
of UK mortgages being subject to the CRD IV definition of default change.
Stage 3 coverage decreased by 4.3 percentage points to 23.1 per cent
(31 December 2021: 27.4 per cent) largely driven by comparatively better
quality assets moving into Stage 3 through CRD IV changes.
Prudent risk appetite and risk management
• The Group continues to take a prudent and proactive approach to credit
risk management and credit risk appetite, whilst working closely with
customers to help them through cost of living pressures and any deterioration
in broader economic conditions
• Sector, asset and product concentrations within the portfolios are
closely monitored and controlled, with mitigating actions taken where
appropriate. Sector and product risk appetite parameters help manage exposure
to certain higher risk and cyclical sectors, segments and asset classes
• The Group's effective risk management seeks to ensure early
identification and management of customers and counterparties who may be
showing signs of distress
• The Group will continue to work closely with its customers to ensure
that they receive the appropriate level of support, including where repayments
under the UK Government scheme lending fall due
CREDIT RISK (continued)
Impairment charge (credit) by division
Half-year Half-year Change Half-year Change
to 30 Jun 2022 to 30 Jun % to 31 Dec %
£m 2021 2021
£m £m
UK mortgages (64) (175) (63) (98) (35)
Credit cards 273 67 (116)
Loans and overdrafts 241 58 (19)
UK Motor Finance 7 (40) (111)
Other 28 1 (22)
Retail 485 (89) (366)
SME 5 (146) (91)
Corporate and other(1) 72 (439) (181)
Commercial Banking 77 (585) (272)
Other (198) (3) (3)
Total impairment charge (credit) 364 (677) (641)
(1 ) Corporate and other primarily comprises Mid Corporates and Corporate
and Institutional.
Group total expected credit loss allowance
At 30 Jun 2022 At 31 Dec 2021
£m £m
Customer related balances
Drawn 3,834 3,804
Undrawn 225 194
4,059 3,998
Other assets 5 2
Total ECL allowance 4,064 4,000
Movements in Group total expected credit loss allowance
Opening ECL at 31 Write-offs Income Net ECL Closing ECL at 30
Dec 2021 and other(1) statement increase Jun 2022
£m £m charge (credit) (decrease) £m
£m £m
UK mortgages 837 64 (64) - 837
Credit cards 521 (165) 273 108 629
Loans and overdrafts 445 (144) 241 97 542
UK Motor Finance 298 (15) 7 (8) 290
Other 165 (28) 28 - 165
Retail 2,266 (288) 485 197 2,463
SME 255 (11) 5 (6) 249
Corporate and other 1,061 1 72 73 1,134
Commercial Banking 1,316 (10) 77 67 1,383
Central Items 418 (2) (198) (200) 218
Total(2) 4,000 (300) 364 64 4,064
(1 ) Contains adjustments in respect of purchased or originated
credit-impaired financial assets.
(2 ) Total ECL includes £5 million relating to other non
customer-related assets (31 December 2021: £2 million).
CREDIT RISK (continued)
Loans and advances to customers and expected credit loss allowance
At 30 June 2022 Stage 1 Stage 2 Stage 3 POCI Total Stage 2 Stage 3
£m £m £m £m £m as % of as % of
total total
Loans and advances to customers
UK mortgages 266,548 30,106 3,424 10,415 310,493 9.7 1.1
Credit cards 12,484 2,289 280 - 15,053 15.2 1.9
Loans and overdrafts 8,666 1,144 256 - 10,066 11.4 2.5
UK Motor Finance 12,476 1,832 179 - 14,487 12.6 1.2
Other 16,689 2,405 1,280 - 20,374 11.8 6.3
Retail 316,863 37,776 5,419 10,415 370,473 10.2 1.5
SME 26,243 2,783 771 - 29,797 9.3 2.6
Corporate and other 34,542 3,218 1,815 - 39,575 8.1 4.6
Commercial Banking 60,785 6,001 2,586 - 69,372 8.7 3.7
Other(1) (1,129) 31 55 - (1,043)
Total gross lending 376,519 43,808 8,060 10,415 438,802 10.0 1.8
ECL allowance on drawn balances (763) (1,254) (1,615) (202) (3,834)
Net balance sheet carrying value 375,756 42,554 6,445 10,213 434,968
Customer related ECL allowance (drawn and undrawn)
UK mortgages 44 337 254 202 837
Credit cards 172 346 111 - 629
Loans and overdrafts 164 243 135 - 542
UK Motor Finance(2) 105 80 105 - 290
Other 46 65 54 - 165
Retail 531 1,071 659 202 2,463
SME 59 107 83 - 249
Corporate and other 80 182 868 - 1,130
Commercial Banking 139 289 951 - 1,379
Other 207 1 9 - 217
Total 877 1,361 1,619 202 4,059
Customer related ECL allowance (drawn and undrawn) as a percentage of loans
and advances to customers(3)
UK mortgages - 1.1 7.4 1.9 0.3
Credit cards 1.4 15.1 53.6 - 4.2
Loans and overdrafts 1.9 21.2 70.7 - 5.4
UK Motor Finance 0.8 4.4 58.7 - 2.0
Other 0.3 2.7 10.4 - 0.8
Retail 0.2 2.8 14.6 1.9 0.7
SME 0.2 3.8 13.5 - 0.8
Corporate and other 0.2 5.7 47.9 - 2.9
Commercial Banking 0.2 4.8 39.2 - 2.0
Other 3.2 16.4 -
Total 0.2 3.1 23.1 1.9 0.9
(1 ) Contains centralised fair value hedge accounting adjustments.
(2 ) UK Motor Finance for Stages 1 and 2 include £94 million relating to
provisions against residual values of vehicles subject to finance leasing
agreements. These provisions are included within the calculation of coverage
ratios.
(3 ) Total and Stage 3 ECL allowances as a percentage of drawn balances
exclude loans in recoveries in Credit cards of £73 million, Loans and
overdrafts of £65 million, Retail other of £761 million, SME of £158
million and Commercial Banking other of £2 million. Other excludes the £200
million ECL central adjustment
CREDIT RISK (continued)
Loans and advances to customers and expected credit loss allowance (continued)
At 31 December 2021 Stage 1 Stage 2 Stage 3 POCI Total Stage 2 Stage 3
£m £m £m £m £m as % of as % of
total total
Loans and advances to customers
UK mortgages 273,629 21,798 1,940 10,977 308,344 7.1 0.6
Credit cards 12,148 2,077 292 - 14,517 14.3 2.0
Loans and overdrafts 8,181 1,105 271 - 9,557 11.6 2.8
UK Motor Finance 12,247 1,828 201 - 14,276 12.8 1.4
Other(1) 16,772 2,007 778 - 19,557 10.3 4.0
Retail 322,977 28,815 3,482 10,977 366,251 7.9 1.0
SME(1) 26,902 2,954 843 - 30,699 9.6 2.7
Corporate and other 32,056 3,081 2,019 - 37,156 8.3 5.4
Commercial Banking 58,958 6,035 2,862 - 67,855 8.9 4.2
Other(2) 431 34 62 - 527 6.5 11.8
Total gross lending 382,366 34,884 6,406 10,977 434,633 8.0 1.5
ECL allowance on drawn balances (909) (1,112) (1,573) (210) (3,804)
Net balance sheet carrying value 381,457 33,772 4,833 10,767 430,829
Customer related ECL allowance (drawn and undrawn)
UK mortgages 49 394 184 210 837
Credit cards 144 249 128 - 521
Loans and overdrafts 136 170 139 - 445
UK Motor Finance(3) 108 74 116 - 298
Other 45 65 55 - 165
Retail 482 952 622 210 2,266
SME 61 104 90 - 255
Corporate and other 63 140 857 - 1,060
Commercial Banking 124 244 947 - 1,315
Other 406 2 9 - 417
Total 1,012 1,198 1,578 210 3,998
Customer related ECL allowance (drawn and undrawn) as a percentage of loans
and advances to customers(4)
UK mortgages - 1.8 9.5 1.9 0.3
Credit cards 1.2 12.0 56.9 - 3.6
Loans and overdrafts 1.7 15.4 67.5 - 4.7
UK Motor Finance 0.9 4.0 57.7 - 2.1
Other 0.3 3.2 13.8 - 0.9
Retail 0.1 3.3 20.9 1.9 0.6
SME 0.2 3.5 12.7 - 0.8
Corporate and other 0.2 4.5 42.5 - 2.9
Commercial Banking 0.2 4.0 34.8 - 1.9
Other 1.4 5.9 14.5 - 3.2
Total 0.3 3.4 27.4 1.9 0.9
(1 ) Restated to reflect migration of certain customers from SME business
within Commercial Banking to Business Banking within Retail.
(2 ) Contains centralised fair value hedge accounting adjustments.
(3 ) UK Motor Finance for Stages 1 and 2 include £95 million relating to
provisions against residual values of vehicles subject to finance leasing
agreements. These provisions are included within the calculation of coverage
ratios.
(4 ) Total and Stage 3 ECL allowances as a percentage of drawn balances
exclude loans in recoveries in Credit cards of £67 million, Loans and
overdrafts of £65 million, Retail other of £379 million, SME of £135
million and Commercial Banking other of £4 million. Other excludes the £400
million ECL central adjustment.
CREDIT RISK (continued)
Stage 2 loans and advances to customers and expected credit loss allowance
Up to date 1 to 30 days Over 30 days Total
past due(2) past due
PD movements Other(1)
At 30 June 2022 Gross ECL(3) Gross ECL(3) Gross ECL(3) Gross ECL(3) Gross ECL(3)
lending £m lending £m lending £m lending £m lending £m
£m £m £m £m £m
UK mortgages 21,618 141 6,241 117 1,549 39 698 40 30,106 337
Credit cards 2,042 257 131 45 87 28 29 16 2,289 346
Loans and overdrafts 735 140 235 42 134 43 40 18 1,144 243
UK Motor Finance 675 24 977 21 143 25 37 10 1,832 80
Other 380 23 1,450 24 396 11 179 7 2,405 65
Retail 25,450 585 9,034 249 2,309 146 983 91 37,776 1,071
SME 2,511 99 126 4 58 2 88 2 2,783 107
Corporate and other 2,979 177 135 3 36 2 68 - 3,218 182
Commercial Banking 5,490 276 261 7 94 4 156 2 6,001 289
Other 16 - 7 1 - - 8 - 31 1
Total 30,956 861 9,302 257 2,403 150 1,147 93 43,808 1,361
At 31 December 2021
UK mortgages 14,845 132 4,133 155 1,433 38 1,387 69 21,798 394
Credit cards 1,755 176 210 42 86 20 26 11 2,077 249
Loans and overdrafts 505 82 448 43 113 30 39 15 1,105 170
UK Motor Finance 581 20 1,089 26 124 19 34 9 1,828 74
Other(4) 586 41 990 15 294 6 137 3 2,007 65
Retail 18,272 451 6,870 281 2,050 113 1,623 107 28,815 952
SME(4) 2,641 96 192 5 41 2 80 1 2,954 104
Corporate and other 2,966 138 69 2 8 - 38 - 3,081 140
Commercial Banking 5,607 234 261 7 49 2 118 1 6,035 244
Other 18 - 6 1 2 - 8 1 34 2
Total 23,897 685 7,137 289 2,101 115 1,749 109 34,884 1,198
(1 ) Includes forbearance, client and product-specific indicators not
reflected within quantitative PD assessments.
(2 ) Includes assets that have triggered PD movements, or other rules,
given that being 1-29 days in arrears in and of itself is not a Stage 2
trigger.
(3 ) Expected credit loss allowance on loans and advances to customers
(drawn and undrawn).
(4 ) Restated to reflect migration of certain customers from SME business
within Commercial Banking to Business Banking within Retail.
CREDIT RISK (continued)
ECL sensitivity to economic assumptions
The measurement of ECL reflects an unbiased probability-weighted range of
possible future economic outcomes. The Group achieves this by generating four
economic scenarios to reflect the range of outcomes; the central scenario
reflects the Group's base case assumptions used for medium-term planning
purposes, an upside and a downside scenario are also selected together with a
severe downside scenario. The base case, upside and downside scenarios carry a
30 per cent weighting; the severe downside is weighted at 10 per cent. These
assumptions can be found in note 2 on page 39 onwards.
The table below shows the Group's ECL for the probability-weighted, upside,
base case, downside and severe downside scenarios, 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 constant across all
the scenarios. In each economic scenario the ECL for individual assessments
and post-model adjustments is constant reflecting the basis on which they are
evaluated.
Probability- Upside Base case Downside Severe
weighted £m £m £m downside
£m £m
UK mortgages 837 462 610 980 2,213
Credit cards 629 546 597 686 804
Other Retail 997 949 981 1,029 1,093
Commercial Banking 1,383 1,194 1,286 1,451 2,040
Other 218 216 218 218 219
At 30 June 2022 4,064 3,367 3,692 4,364 6,369
UK mortgages 837 637 723 967 1,386
Credit cards 521 442 500 569 672
Other Retail 908 844 892 947 1,034
Commercial Banking 1,316 1,182 1,246 1,384 1,728
Other 418 416 418 419 421
At 31 December 2021 4,000 3,521 3,779 4,286 5,241
CREDIT RISK (continued)
Retail
• The Retail portfolio has remained robust and well-positioned despite
pressure on consumer disposable incomes from a rising cost of living. Risk
management has been enhanced since the last financial crisis, with strong
affordability and indebtedness controls for both new and existing lending and
a prudent risk appetite approach. The Retail lending book is concentrated
towards higher income segments who have reduced their debt commitments during
the pandemic and should be better able to withstand the cost of living
challenge
• The Group is closely monitoring the impacts of the rising cost of living
on consumers. Despite no deterioration in credit quality, proactive action has
been taken to increase living cost assumptions in affordability assessments
with more targeted action for those customers deemed to be most at risk
• Despite external pressures, arrears rates remain low and generally below
pre-pandemic levels. New lending credit quality remains strong and performance
is stable
• Contagion impact on Retail lending from the Bounce Back Loan Scheme
(BBLS) is limited. However, small businesses in some cases are under
significant pressure from BBLS repayments alongside external pressures and the
Group continues to monitor this segment closely
• The Retail impairment charge in the first half of 2022 was £485
million, compared to a release of £89 million in the first half of 2021.
Credit performance was favourable year-on-year, adversity is explained by
revisions to the macroeconomic outlook. The first half of 2021 benefitted from
a large release of ECL following the effectiveness of Government interventions
and vaccine rollout, relative to expectations at earlier stages of the
pandemic
• Additional judgements have been raised in the first half of the year to
capture the increased risk of inflation and impact on the cost of living for
retail customers, and additionally for segments of the Retail book that are
considered less resilient to disposable income shocks
• Existing IFRS 9 staging rules and triggers have been maintained across
Retail from the 2021 year end with the exception of mortgages. The change
maintains alignment between IFRS 9 and new regulatory definitions of default.
Default continues to be considered to have occurred when there is evidence
that the customer is experiencing financial difficulty which is likely to
significantly affect their ability to repay the amount due. For mortgages,
this was previously deemed to have occurred no later than when a payment was
180 days past due; in line with CRD IV this has now been reduced to 90 days,
as well as including end-of-term payments on past due interest-only accounts
and all non-performing loans. Overall ECL is not materially impacted as
management judgements were previously held in lieu of these known changes.
However, material movements between stages were observed, with additional
assets in Stage 3 and Stage 2 at the point of implementation, as a result of
the broader definition of default
• Stage 2 loans and advances now comprise 10.2 per cent of the Retail
portfolio (31 December 2021: 7.9 per cent), of which 91.3 per cent are up to
date performing loans (31 December 2021: 87.3 per cent), due to the higher
proportion of mortgage accounts reaching the new CRD IV definition of default.
Stage 2 ECL coverage has also decreased to 2.8 per cent (31 December 2021:
3.3 per cent) as the risk of these accounts is comparatively lower. Stage 2
balances and coverage of Retail products excluding UK mortgages show a general
increasing trend following updates to the macroeconomic outlook, with a lower
impact of CRD IV changes (90 days past due definition already adopted)
• Stage 3 movements are directionally similar to Stage 2. Loans and
advances have increased to 1.5 per cent of total loans and advances (31
December 2021: 1.0 per cent). Stage 3 ECL coverage decreased to 14.6 per cent
(31 December 2021: 20.9 per cent) due to a higher proportion of mortgages
triggering 90 days past due, with lower coverage on average
CREDIT RISK (continued)
Portfolios
UK mortgages
• The UK mortgages portfolio is well-positioned with low arrears and a low
loan-to-value (LTV) profile. The Group has actively improved the quality of
the portfolio over recent years using robust affordability and credit
controls, whilst the balances of higher risk portfolios originated prior to
2008 have continued to reduce
• The housing market remains resilient despite the macroeconomic
uncertainty. However, price growth and activity levels are expected to soften
this year with rises in UK Bank Rate and associated mortgage rates alongside a
household income squeeze weakening consumer confidence
• Total loans and advances increased to £310.5 billion (31 December 2021:
£308.3 billion), with a reduction in average LTV to 40.2 per cent (31
December 2021: 42.1 per cent). The proportion of balances with an LTV greater
than 90 per cent decreased to 0.4 per cent (31 December 2021: 0.5 per cent).
The average LTV of new business decreased to 61.9 per cent (31 December 2021:
63.3 per cent)
• There was an impairment release of £64 million for the first half of
2022 reflecting continued resilient house prices and benign credit
performance. This compares to a net release of £175 million for the first
half of 2021, which included a comparatively greater benefit from house prices
in relation to expectations earlier in the pandemic. Total ECL coverage
remains flat at 0.3 per cent (31 December 2021: 0.3 per cent)
• Stage 2 loans and advances increased to 9.7 per cent of the portfolio
(31 December 2021: 7.1 per cent), and Stage 2 ECL coverage has reduced to 1.1
per cent (31 December 2021: 1.8 per cent). This is largely as a result of the
higher proportion of mortgage accounts reaching the broader CRD IV definition
of default
• Stage 3 ECL coverage decreased to 7.4 per cent (31 December 2021: 9.5
per cent) again largely due to a higher proportion of mortgage accounts
triggering the broader CRD IV definition of default of 90 days past due
(previously 180 days)
Credit cards
• Credit card balances increased to £15.1 billion (31 December 2021:
£14.5 billion) due to increased levels of customer spend but remain below
pre-pandemic levels
• The credit card portfolio is a prime book which has performed well in
recent years, with lower arrears rates compared to the High Street Bank peer
group
• The impairment charge was £273 million for the first half of 2022
compared to a charge of £67 million for the first half of 2021, with overall
ECL coverage increasing to 4.2 per cent (31 December 2021: 3.6 per cent).
These increases are largely due to the updates to the UK's macroeconomic
outlook in addition to precautionary judgements to account for the increased
risk of inflation and impact on the cost of living for Retail customers
• Stage 2 loans and advances have increased to 15.2 per cent of the
portfolio (31 December 2021: 14.3 per cent) and Stage 2 ECL coverage has
increased to 15.1 per cent (31 December 2021: 12.0 per cent), both reflecting
updates to the UK's macroeconomic outlook
• Stage 3 ECL coverage decreased to 53.6 per cent (31 December 2021: 56.9
per cent) due to model parameter updates to account for favourable recoveries
performance
Loans and overdrafts
• Loans and advances for personal current account and the personal loans
portfolios increased to £10.1 billion (31 December 2021: £9.6 billion) with
continued recovery in customer spend and demand for credit
• The impairment charge was £241 million for the first half of 2022,
compared to £58 million for the first half of 2021. These increases are
largely due to the updates to the UK's macroeconomic outlook in addition to
precautionary judgements to account for the increased risk of inflation and
impact on the cost of living for Retail customers
• Stage 2 ECL coverage increased to 21.2 per cent (31 December 2021: 15.4
per cent) and overall ECL coverage increased to 5.4 per cent (31 December
2021: 4.7 per cent), both reflecting updates to the UK's macroeconomic outlook
• Stage 3 ECL coverage increased slightly to 70.7 per cent (31 December
2021: 67.5 per cent)
CREDIT RISK (continued)
UK Motor Finance
• The UK Motor Finance portfolio increased to £14.5 billion (31 December
2021: £14.3 billion) with continued new car supply constraints being offset
by continued strong demand for used vehicles
• There was an impairment charge of £7 million for the first half of 2022
reflecting continued low levels of losses given continued resilient used car
prices. This compares to a net release of £40 million for the first half of
2021, which benefitted from ECL releases as used car prices materially
outperformed expectations set earlier in the pandemic. However, used car
prices have begun to fall from recent high levels with this trend expected to
continue. Overall ECL coverage has decreased to 2.0 per cent (31 December
2021: 2.1 per cent)
• Updates to Residual Value (RV) and Voluntary Termination (VT) risk held
against Personal Contract Purchase (PCP) and Hire Purchase (HP) lending are
included within the impairment charge. Continued resilience in used car prices
and disposal experience, partially driven by global supply issues, has
resulted in broadly flat RV and VT ECL of £94 million (31 December 2021: £95
million)
• Stage 2 ECL coverage increased to 4.4 per cent (31 December 2021: 4.0
per cent) and Stage 3 ECL coverage increased to 58.7 per cent (31 December
2021: 57.7 per cent)
Other
• Other loans and advances increased to £20.4 billion (31 December 2021:
£19.6 billion)
• The impairment charge increased to £28 million for the first half of
2022, compared to £1 million for the first half of 2021, primarily due to
updates to the UK macroeconomic forecast
Retail UK mortgages loans and advances to customers(1)
At 30 Jun 2022 At 31 Dec 2021
£m £m
Mainstream 250,764 248,013
Buy-to-let 51,256 51,111
Specialist 8,473 9,220
Total 310,493 308,344
(1 ) Balances include the impact of HBOS related acquisition adjustments.
( )
CREDIT RISK (continued)
Commercial Banking
• Commercial Banking actively supported its customers throughout the
pandemic, through a range of propositions, including capital repayment
holidays, working capital line increases and financial covenant waivers, as
well as supporting small businesses and corporates through full use of UK
Government schemes
• Although the UK economy recovered during the first quarter of 2022, the
macroeconomic outlook has subsequently deteriorated. The war between Russia
and Ukraine has aggravated inflationary pressures and supply chain disruption,
adding to the cost of living squeeze, with some sectors such as travel,
transportation, retail, leisure and hospitality particularly impacted.
However, as a proportion of the Group's overall lending, exposure to these
sectors remains relatively limited with prudent risk appetite parameters in
place to support customers and protect the Group's positions
• The Group is cognisant of a number of client risks associated with
rising inflationary pressures and the weaker UK economic outlook, including
weakening consumer sentiment, energy, fuel and commodities price inflation,
supply chain disruption, labour markets, credit markets, interest rates and
climate change
• The Group expects the longer term recovery to be slower in a few of the
impacted sectors and anticipates structural changes over time in these, and a
number of other sectors. Sector and credit risk appetite continue to be
proactively managed to ensure the Group is protected and clients are supported
in the right way
• Observed credit quality has been strong and broadly stable in the first
half of 2022, noting that this could still be influenced by increased
liquidity as a result of the significant temporary support provided by the UK
Government in light of the pandemic, which has the potential to distort the
underlying credit risk profile, particularly in the predominantly secured SME
portfolio. Repayments under these schemes commenced in the second half of
2021, with low arrears to date. The level of arrears continues to be carefully
monitored, with early risk mitigating activities taken as appropriate
• Although significant uncertainties remain, with a number of headwinds
and the withdrawal of the Government COVID-19 support measures yet to impact
portfolio performance to date, the Group continues to provide early support to
its more vulnerable customers through focussed risk management via its
Watchlist and Business Support framework. The Group will continue to balance
prudent risk appetite with ensuring support for financially viable clients on
their road to recovery
Impairment
• There was a net impairment charge of £77 million in the first half of
2022, compared to a release of £585 million in the first half of 2021. The
charge was driven by economic outlook revisions offset by an observed
performance release
• ECL allowances increased by £64 million to £1,379 million at 30 June
2022 (31 December 2021: £1,315 million). The ECL provision at 30 June 2022
captures the impact of inflationary pressures and supply chain constraints and
assumes additional losses will emerge as a result of these and as structural
changes emerge in some sectors
• Stage 2 loans and advances decreased marginally by £34 million to
£6,001 million (31 December 2021: £6,035 million), of which 95.8 per cent
are current and up to date. Stage 2 loans as a proportion of total loans and
advances to customers reduced to 8.7 per cent (31 December 2021: 8.9 per
cent). Stage 2 ECL coverage was higher at 4.8 per cent (31 December 2021: 4.0
per cent) with the increase in coverage a direct result of the forward look
multiple economic scenarios
• Stage 3 loans and advances reduced to £2,586 million (31 December 2021:
£2,862 million) and as a proportion of total loans and advances to customers,
reduced to 3.7 per cent (31 December 2021: 4.2 per cent). Stage 3 ECL coverage
increased to 39.2 per cent (31 December 2021: 34.8 per cent) predominantly
driven by net repayments on Stage 3 loans and advances
( )
CREDIT RISK (continued)
Commercial Banking UK Direct Real Estate
• Commercial Banking UK Direct Real Estate gross lending stood at £10.6
billion at 30 June 2022 (net of exposures subject to protection through
Significant Risk Transfer (SRT) securitisations). The Group has a further
£0.7 billion of UK Direct Real Estate exposure in Business Banking within the
Retail division
• The Group classifies Direct Real Estate as exposure which is directly
supported by cash flows from property activities (as opposed to trading
activities, such as hotels, care homes and housebuilders). Exposures of £5.0
billion to social housing providers are also excluded
• Recognising this is a cyclical sector, caps are in place to control
origination and exposure, including a number of asset type categories. Focus
remains on the UK market and new business has been written in line with a
prudent risk appetite with conservative LTVs, strong quality of income and
proven management teams
• Overall performance has remained resilient and although the Group saw
some increase in cases on its closer monitoring Watchlist category, levels of
this remain significantly below that seen during the pandemic. Transfers to
the Group's Business Support Unit have been limited
• Rent collection has largely recovered and stabilised following the
coronavirus pandemic, although challenges remain in some sectors. Despite some
material headwinds, including the inflationary environment and the impact of
rising interest rates, the portfolio is well-positioned and proactively
managed, with appropriate risk mitigants in place:
- CRE exposures continue to be heavily weighted towards investment real
estate (c.90 per cent) over development. Of these investment exposures, c.90
per cent have an LTV of less than 60 per cent, with an average LTV of 39 per
cent
- c.93 per cent of CRE investment exposures have an interest cover ratio of
greater than 2.0 times and in SME, LTV at origination has been typically
limited to c.55 per cent, given prudent repayment cover criteria (including a
notional base rate stress)
- Approximately 48 per cent of CRE exposures relate to commercial real
estate (with no speculative development lending) with the remainder related to
residential real estate. The underlying sub-sector split is diversified with
c.15 per cent of exposures secured by Retail assets and appetite tightened
since 2018
- The Office portfolio is focused on prime locations with strong sponsors
and low LTVs, as well as no speculative commercial development
- Use of SRT securitisations also acts as a risk mitigant in this portfolio,
with run off of these carefully managed and sequenced
- Both investment and development lending is subject to specific credit risk
appetite criteria. Development lending criteria include maximum loan to gross
development value and maximum loan to cost, with funding typically only
released against completed work, as confirmed by the Group's monitoring
quantity surveyor
( )
(
)
FUNDING AND LIQUIDITY RISK
The Group has maintained its robust funding and liquidity position with a loan
to deposit ratio of 96 per cent as at 30 June 2022 (96 per cent as at 31
December 2021). Customer deposits remain elevated despite the uncertainties
that persist around the macroeconomic environment.
The Group's liquid assets continue to exceed the regulatory minimum and
internal risk appetite, with a liquidity coverage ratio (LCR) of 134 per cent
(based on a monthly rolling average over the previous 12 months) as at 30 June
2022.
The Net Stable Funding Ratio (NSFR) was implemented on 1 January 2022. The
Group monitors this metric monthly and is in excess of the regulatory
requirement of 100 per cent.
The Group's credit ratings continue to reflect the strength of the Group's
business model and balance sheet. Over the course of the year, Fitch and
S&P affirmed the Group's ratings. In July, Moody's downgraded the
subordinated ratings for Lloyds Bank plc by one notch based on their Loss
Given Failure methodology. This was a technical and methodological change that
puts us in line with peer issuers. The agencies continue to monitor the impact
of cost of living increases and rising rates for the UK banking sector. The
Group's strong management, franchise and financial performance along with
robust capital and funding position are reflected in the Group's strong
ratings.
Lloyds Bank Group funding requirements and sources
At 30 Jun At 31 Dec Change
2022 2021 %
£bn £bn
Lloyds Bank Group funding position
Loans and advances to customers 435.0 430.8 1
Loans and advances to banks 5.7 4.5 27
Debt securities at amortised cost 6.4 4.6 39
Reverse repurchase agreements - non-trading 52.1 49.7 5
Financial assets at fair value through other comprehensive income 24.0 27.8 (14)
Cash and balances at central banks 70.4 54.3 30
Other assets(1) 32.7 31.1 5
Total Lloyds Bank Group assets 626.3 602.8 4
Less other liabilities(1) (14.9) (16.5) (10)
Funding requirements 611.4 586.3 4
Customer deposits 450.9 449.4
Wholesale funding(2) 70.1 64.9 8
Repurchase agreements - non-trading 18.2 0.1
Term Funding Scheme with additional incentives for SMEs (TFSME) 30.0 30.0
Deposits from fellow Lloyds Banking Group undertakings 1.5 1.1 36
Total equity 40.7 40.8
Funding sources 611.4 586.3 4
(1 ) Other assets and other liabilities include the fair value of
derivative assets and liabilities.
(2 ) Lloyds Bank Group's definition of wholesale funding aligns with that
used by other international market participants; including bank deposits, debt
securities in issue and subordinated liabilities. Excludes balances relating
to margins of £1.0 billion (31 December 2021: £1.3 billion). Includes
significant risk transfer securitisations issued by special purpose vehicles
of £1.6 billion (31 December 2021: £1.7 billion); comparatives have been
presented on a consistent basis.
FUNDING AND LIQUIDITY RISK (continued)
Reconciliation of Group funding to the balance sheet
At 30 June 2022 Included Cash collateral received Fair value Balance
in funding £bn and other sheet
analysis accounting methods £bn
£bn £bn
Deposits from banks 2.7 1.0 0.3 4.0
Debt securities in issue 59.6 - (6.4) 53.2
Subordinated liabilities 7.8 - (1.3) 6.5
Total wholesale funding(1) 70.1 1.0
Customer deposits 450.9 - - 450.9
Total 521.0 1.0
At 31 December 2021
Deposits from banks 1.9 1.4 0.1 3.4
Debt securities in issue 54.1 - (5.4) 48.7
Subordinated liabilities 8.9 - (0.2) 8.7
Total wholesale funding(1) 64.9 1.4
Customer deposits 449.4 - - 449.4
Total 514.3 1.4
(1 ) Includes significant risk transfer securitisations issued by special
purpose vehicles of £1.6 billion (31 December 2021: £1.7 billion);
comparatives have been presented on a consistent basis.
Analysis of total wholesale funding by residual maturity
Less One to Three Six Nine One to Two to More than Total at Total at
30 Jun
31 Dec
than one three to six to nine months two years five years five years
2022
2021
£bn
£bn
month months months months to one £bn £bn £bn
£bn £bn £bn £bn year
£bn
Deposits from banks 2.0 0.7 - - - - - - 2.7 1.9
Debt securities in issue:
Certificates of deposit 1.5 0.5 - - - - - - 2.0 0.3
Commercial paper 5.6 2.3 0.2 - - - - - 8.1 3.6
Medium-term notes - 1.5 1.9 0.8 2.8 6.4 10.7 6.5 30.6 29.4
Covered bonds 0.8 0.9 0.5 2.6 0.9 2.2 5.1 2.2 15.2 17.0
Securitisation 0.5 0.1 0.2 0.5 - 0.1 0.9 1.4 3.7 3.8
8.4 5.3 2.8 3.9 3.7 8.7 16.7 10.1 59.6 54.1
Subordinated liabilities - - - - 0.2 - 2.0 5.6 7.8 8.9
Total wholesale funding(1) 10.4 6.0 2.8 3.9 3.9 8.7 18.7 15.7 70.1 64.9
(1 ) Excludes balances relating to margins of £1.0 billion (31 December
2021: £1.3 billion). Includes significant risk transfer securitisations
issued by special purpose vehicles of £1.6 billion (31 December 2021: £1.7
billion); comparatives have been presented on a consistent basis.
FUNDING AND LIQUIDITY RISK (continued)
Analysis of 2022 term issuance
Sterling US Dollar Euro Other Total
£bn £bn £bn currencies £bn
£bn
Securitisation(1) 0.3 - - - 0.3
Medium-term notes - 0.7 - 1.2 1.9
Covered bonds - - - - -
Private placements - - - - -
Subordinated liabilities - - - - -
Total issuance 0.3 0.7 - 1.2 2.2
(1 ) Includes significant risk transfer securitisations.
Liquidity portfolio
At 30 June 2022, the Group had £121.4 billion of highly liquid unencumbered
LCR eligible assets, based on a monthly rolling average over the previous 12
months post any liquidity haircuts (31 December 2021: £114.7 billion). These
assets are available to meet cash and collateral outflows and regulatory
requirements.
The Group also has a significant amount of non-LCR eligible liquid assets
which are eligible for use in a range of central bank or similar facilities.
Future use of such facilities will be based on prudent liquidity management
and economic considerations, having regard for external market conditions.
LCR eligible assets
Average
2022(1) 2021(2) Change
£bn £bn %
Level 1
Cash and central bank reserves 58.6 50.3 17
High quality government/MDB/agency bonds(3) 58.2 60.6 (4)
High quality covered bonds 2.0 2.3 (13)
Total 118.8 113.2 5
Level 2(4) 2.6 1.5 73
Total LCR eligible assets 121.4 114.7 6
(1 ) Based on 12 months rolling average to 30 June 2022. Eligible assets
are calculated as an average of month-end observations over the previous 12
months post any liquidity haircuts.
(2 ) Based on 12 months rolling average to 31 December 2021. Eligible
assets are calculated as an average of month-end observations over the
previous 12 months post any liquidity haircuts.
(3 ) Designated multilateral development bank (MDB).
(4 ) Includes Level 2A and Level 2B.
( )
(
)
CAPITAL RISK
Analysis of CET1 capital position
The Group's CET1 capital ratio reduced from 16.7 per cent at 31 December 2021
to 14.1 per cent on 1 January 2022, before increasing during the period to
15.2 per cent at 30 June 2022. The reduction on 1 January 2022 reflected the
impact of regulatory changes, including an increase in risk-weighted assets as
well as other related modelled impacts, in addition to the reinstatement of
the full deduction treatment for intangible software assets and phased unwind
of IFRS 9 transitional relief. The subsequent increase in the first half of
the year reflected profits for the period and a reduction in risk-weighted
assets, partly offset by accelerated pension contributions made during the
first quarter.
Risk-weighted assets increased from £161.6 billion at 31 December 2021 to
around £178 billion on 1 January 2022, before reducing during the period to
£173.8 billion at 30 June 2022. The increase on 1 January 2022 reflected the
impact of regulatory changes, including the anticipated impact of the
implementation of new CRD IV models to meet revised regulatory standards for
modelled outputs and a new standardised approach for measuring counterparty
credit risk (SA-CCR) following the UK implementation of the remainder of
Capital Requirements Regulation (CRR) 2. The new CRD IV models remain subject
to finalisation and approval by the PRA and therefore uncertainty over the
final impact remains. The subsequent reduction in risk-weighted assets during
the first half of the year was largely driven by optimisation activities and
reductions from retail models reflecting the benign credit performance, partly
offset by the growth in balance sheet lending.
Total capital requirement
The Group's total capital requirement (TCR) as at 30 June 2022, being the
aggregate of the Group's Pillar 1 and current Pillar 2A capital requirements,
was £20,341 million (31 December 2021: £19,364 million).
Capital resources
An analysis of the Group's actual capital position as at 30 June 2022 is
presented in the following section. The capital position reflects the
application of the transitional arrangements for IFRS 9.
CAPITAL RISK (continued)
The following table summarises the consolidated capital position of the Group.
At 30 Jun At 31 Dec
2022 2021
£m £m
Common equity tier 1
Shareholders' equity per balance sheet 36,359 36,410
Cash flow hedging reserve 3,055 451
Other adjustments (5) 770
39,409 37,631
less: deductions from common equity tier 1
Goodwill and other intangible assets (4,338) (2,870)
Prudent valuation adjustment (128) (159)
Removal of defined benefit pension surplus (4,003) (3,200)
Deferred tax assets (4,484) (4,498)
Common equity tier 1 capital 26,456 26,904
Additional tier 1
Additional tier 1 instruments 4,268 4,949
Total tier 1 capital 30,724 31,853
Tier 2
Tier 2 instruments 5,115 6,322
Other adjustments 81 (266)
Total tier 2 capital 5,196 6,056
Total capital resources(1) 35,920 37,909
Risk-weighted assets 173,784 161,576
Common equity tier 1 capital ratio 15.2% 16.7%
Tier 1 capital ratio 17.7% 19.7%
Total capital ratio 20.7% 23.5%
(1 ) Following the completion of the transition to end-point eligibility
rules on 1 January 2022, legacy tier 1 and tier 2 capital instruments subject
to the original CRR transitional rules have now been fully removed from
regulatory capital. Included in tier 2 capital is a single legacy tier 2
capital instrument of £14 million that remains eligible under the extended
transitional rules of CRR 2. Excluding this instrument, total capital
resources are £35,906 million and the total capital ratio is 20.7 per cent.
CAPITAL RISK (continued)
Movements in capital resources
The key movements are set out in the table below.
Common Additional Tier 2 Total
equity tier 1 £m capital
tier 1 £m £m
£m
At 31 December 2021 26,904 4,949 6,056 37,909
Profit for the period 2,441 - - 2,441
IFRS 9 transitional adjustment to retained earnings (476) - - (476)
Pension deficit contributions (996) - - (996)
Fair value through other comprehensive income reserve 8 - - 8
Prudent valuation adjustment 31 - - 31
Deferred tax asset 14 - - 14
Goodwill and other intangible assets (1,468) - - (1,468)
Movements in other equity, subordinated liabilities, other tier 2 items and - (681) (860) (1,541)
related adjustments
Distributions on other equity instruments (114) - - (114)
Other movements 112 - - 112
At 30 June 2022 26,456 4,268 5,196 35,920
CET1 capital resources have reduced by £448 million during the period,
primarily reflecting:
• The reduction on 1 January 2022 for regulatory changes including the
reinstatement of the full deduction treatment for intangible software assets
in addition to phased and other reductions in IFRS 9 transitional relief
• Accelerated pension deficit contributions (fixed and variable) paid
during the first quarter into the Group's three main defined benefit pension
schemes
• Partially offset by profits for the period
AT1 and Tier 2 capital resources have reduced during the period, primarily
reflecting the removal of legacy capital instruments following the completion
of the transition to end-point eligibility rules for regulatory capital on 1
January 2022. In addition, Tier 2 capital resources have reduced as result of
the impact of movements in rates and regulatory amortisation, partially offset
by sterling depreciation and movements in other adjustments.
( )
CAPITAL RISK (continued)
Risk-weighted assets
At 30 Jun At 31 Dec
2022 2021
£m £m
Foundation Internal Ratings Based (IRB) Approach 37,559 39,548
Retail IRB Approach 80,340 65,435
Other IRB Approach(1) 6,083 7,117
IRB Approach 123,982 112,100
Standardised (STA) Approach(1) 19,972 19,861
Credit risk 143,954 131,961
Securitisation(1) 5,467 5,373
Counterparty credit risk 1,254 1,257
Credit valuation adjustment risk 534 207
Operational risk 22,449 22,575
Market risk 126 203
Risk-weighted assets 173,784 161,576
Of which threshold risk-weighted assets(2) 2,112 2,318
(1 ) Threshold risk-weighted assets are now included within the
Standardised (STA) Approach. In addition securitisation risk-weighted assets
are now shown separately. Comparatives have been presented on a consistent
basis.
(2 ) Threshold risk-weighted assets reflect the element of deferred tax
assets that are permitted to be risk-weighted instead of being deducted from
CET1 capital.
Risk-weighted assets have increased by £12 billion during the first half of
the year, primarily reflecting:
• The increase on 1 January 2022 for regulatory changes, including the
anticipated impact of the implementation of new CRD IV models to meet revised
regulatory standards for modelled outputs and a new standardised approach for
measuring counterparty credit risk (SA-CCR) following the UK implementation of
the remainder of CRR 2
• A subsequent reduction largely reflecting optimisation activities and
reductions from retail models reflecting the benign credit performance, partly
offset by the growth in balance sheet lending
( )
CAPITAL RISK (continued)
Leverage ratio
The table below summarises the component parts of the Group's leverage ratio.
Fully loaded
At 30 Jun At 31 Dec
2022 2021
£m £m
Total tier 1 capital 30,724 31,172
Exposure measure
Statutory balance sheet assets
Derivative financial instruments 5,042 5,511
Securities financing transactions 52,059 49,708
Loans and advances and other assets 569,222 547,630
Total assets 626,323 602,849
Qualifying central bank claims (69,100) (50,824)
Derivatives adjustments (1,996) 185
Securities financing transactions adjustments 2,109 1,321
Off-balance sheet items 34,941 49,349
Amounts already deducted from Tier 1 capital (12,729) (9,994)
Other regulatory adjustments(1) (7,421) (8,236)
Total exposure measure 572,127 584,650
Average exposure measure(2) 572,450
UK leverage ratio 5.4% 5.3%
Average UK leverage ratio(2) 5.3%
Leverage exposure measure (including central bank claims) 641,227 635,474
Leverage ratio (including central bank claims) 4.8% 4.9%
(1 ) Includes deconsolidation adjustments that relate to the
deconsolidation of certain Group entities that fall outside the scope of the
Group's regulatory capital consolidation and adjustments to exclude lending
under the UK Government's Bounce Back Loan Scheme (BBLS).
(2 ) The average UK leverage ratio is based on the average of the month
end tier 1 capital position and average exposure measure over the quarter
(1 April 2022 to 30 June 2022). The average of 5.3 per cent compares to 5.1
per cent at the start and 5.4 per cent at the end of the quarter.
Analysis of leverage movements
The Group's UK leverage ratio increased to 5.4 per cent (31 December 2021: 5.3
per cent), primarily reflecting the £12.5 billion reduction in the leverage
exposure measure, partially offset by the reduction in the total tier 1
capital position. The reduction in the exposure measure largely reflected a
reduction in the measure for off-balance sheet items as a result of
optimisation activity which has resulted in a reduction in the credit
conversion factor applied to residential mortgage offers.
Following a direction received from the PRA during 2020 the Group is permitted
to exclude lending under the UK Government's Bounce Back Loan Scheme (BBLS)
from the leverage exposure measure.
The average UK leverage ratio was 5.3 per cent over the quarter, compared to
5.1 per cent at the start of the quarter, reflecting both the increase in the
total tier 1 capital position across the quarter and the reduction in the
exposure measure.
CAPITAL RISK (continued)
Application of IFRS 9 on a full impact basis for capital and leverage
IFRS 9 full impact
At 30 Jun At 31 Dec
2022 2021
Common equity tier 1 (£m) 26,310 26,253
Transitional tier 1 (£m) 30,578 31,202
Transitional total capital (£m) 35,935 38,039
Total risk-weighted assets (£m) 173,897 161,805
Common equity tier 1 ratio (%) 15.1% 16.2%
Transitional tier 1 ratio (%) 17.6% 19.3%
Transitional total capital ratio (%) 20.7% 23.5%
UK leverage ratio exposure measure (£m) 571,980 584,000
UK leverage ratio (%) 5.3% 5.2%
The Group applies the full extent of the IFRS 9 transitional arrangements for
capital as set out under CRR Article 473a (as amended via the CRR 'Quick Fix'
revisions published in June 2020). Specifically, the Group has opted to apply
both paragraphs 2 and 4 of CRR Article 473a (static and dynamic relief) and in
addition to apply a 100 per cent risk weight to the consequential Standardised
credit risk exposure add-back as permitted under paragraph 7a of the
revisions.
As at 30 June 2022, static relief under the transitional arrangements amounted
to £132 million (31 December 2021: £264 million) and dynamic relief
amounted to £14 million (31 December 2021: £387 million) through CET1
capital.
Regulatory capital developments
A consultation on the UK implementation of the remaining Basel III reforms
(also referred to as Basel 3.1), which include significant revisions to the
credit risk, CVA and operational risk framework is expected to be published by
UK regulators in the fourth quarter of 2022. Depending on the level of
application, the new rules could potentially lead to the phased introduction
of a risk-weighted assets output floor for the Group. The final rules are
currently expected to apply from 1 January 2025, with any output floor
expected to be phased in over several years.
Half-year Pillar 3 disclosures
The Group will publish a condensed set of half-year Pillar 3 disclosures in
the second half of August. A copy of the disclosures will be available to view
at: www.lloydsbankinggroup.com/investors/financial-downloads
STATUTORY INFORMATION
Page
Condensed consolidated half-year financial statements (unaudited)
Consolidated income statement 30
Consolidated statement of comprehensive income 31
Consolidated balance sheet 32
Consolidated statement of changes in equity 34
Consolidated cash flow statement 37
Notes
1 Basis of preparation and accounting policies 38
2 Critical accounting judgements and key sources of estimation uncertainty 38
3 Segmental analysis 49
4 Net fee and commission income 50
5 Operating expenses 50
6 Impairment 51
7 Tax expense 52
8 Financial assets at fair value through profit or loss 52
9 Financial assets at amortised cost 53
10 Debt securities in issue 59
11 Retirement benefit obligations 59
12 Other provisions 60
13 Related party transactions 62
14 Contingent liabilities, commitments and guarantees 62
15 Fair values of financial assets and liabilities 65
16 Interest rate benchmark reform 70
17 Credit quality of loans and advances to banks and customers 72
18 Dividends on ordinary shares 76
19 Ultimate parent undertaking 76
20 Other information 76
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
Note Half-year Half-year
to 30 Jun to 30 Jun
2022 2021
£m £m
Interest income 7,124 6,397
Interest expense (1,035) (1,021)
Net interest income 6,089 5,376
Fee and commission income 1,180 1,070
Fee and commission expense (532) (480)
Net fee and commission income 4 648 590
Net trading income 208 303
Other operating income 1,107 1,038
Other income 1,963 1,931
Total income 8,052 7,307
Operating expenses 5 (4,405) (4,564)
Impairment (charge) credit 6 (364) 677
Profit before tax 3,283 3,420
Tax (expense) credit 7 (842) 288
Profit for the period 2,441 3,708
Profit attributable to ordinary shareholders 2,313 3,489
Profit attributable to other equity holders 114 203
Profit attributable to equity holders 2,427 3,692
Profit attributable to non-controlling interests 14 16
Profit for the period 2,441 3,708
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 Jun to 30 Jun
2022 2021
£m £m
Profit for the period 2,441 3,708
Other comprehensive income
Items that will not subsequently be reclassified to profit or loss:
Post-retirement defined benefit scheme remeasurements:
Remeasurements before tax (382) 604
Tax 175 (323)
(207) 281
Movements in revaluation reserve in respect of equity shares held at fair
value through other comprehensive income:
Change in fair value - -
Tax (1) 1
(1) 1
Gains and losses attributable to own credit risk:
Gains (losses) before tax 421 (48)
Tax (127) 22
294 (26)
Items that may subsequently be reclassified to profit or loss:
Movements in revaluation reserve in respect of debt securities held at fair
value through other comprehensive income:
Change in fair value (27) 41
Income statement transfers in respect of disposals 30 59
Income statement transfers in respect of impairment - (2)
Tax 5 (12)
8 86
Movements in cash flow hedging reserve:
Effective portion of changes in fair value taken to other comprehensive income (3,382) (1,074)
Net income statement transfers (182) (275)
Tax 960 349
(2,604) (1,000)
Movements in foreign currency translation reserve:
Currency translation differences (tax: £nil) 38 (7)
Transfers to income statement (tax: £nil) - -
38 (7)
Other comprehensive income for the period, net of tax (2,472) (665)
Total comprehensive income for the period (31) 3,043
Total comprehensive income attributable to ordinary shareholders (159) 2,824
Total comprehensive income attributable to other equity holders 114 203
Total comprehensive income attributable to equity holders (45) 3,027
Total comprehensive income attributable to non-controlling interests 14 16
Total comprehensive income for the period (31) 3,043
CONSOLIDATED BALANCE SHEET (UNAUDITED)
Note At 30 Jun At 31 Dec
2022 2021
£m £m
Assets
Cash and balances at central banks 70,375 54,279
Items in the course of collection from banks 203 147
Financial assets at fair value through profit or loss 8 1,429 1,798
Derivative financial instruments 5,042 5,511
Loans and advances to banks 5,661 4,478
Loans and advances to customers 434,968 430,829
Reverse repurchase agreements 52,057 49,708
Debt securities 6,401 4,562
Due from fellow Lloyds Banking Group undertakings 714 739
Financial assets at amortised cost 9 499,801 490,316
Financial assets at fair value through other comprehensive income 24,029 27,786
Goodwill 470 470
Other intangible assets 4,295 4,144
Current tax recoverable 601 220
Deferred tax assets 4,476 4,048
Retirement benefit assets 11 5,473 4,531
Other assets 10,129 9,599
Total assets 626,323 602,849
CONSOLIDATED BALANCE SHEET (UNAUDITED) (continued)
Note At 30 Jun At 31 Dec
2022 2021
£m £m
Liabilities
Deposits from banks 4,034 3,363
Customer deposits 450,928 449,373
Repurchase agreements at amortised cost 48,153 30,106
Due to fellow Lloyds Banking Group undertakings 1,658 1,490
Items in course of transmission to banks 358 308
Financial liabilities at fair value through profit or loss 5,643 6,537
Derivative financial instruments 5,488 4,643
Notes in circulation 1,269 1,321
Debt securities in issue 10 53,223 48,724
Other liabilities 6,236 5,391
Retirement benefit obligations 11 187 230
Deferred tax liabilities 143 -
Other provisions 12 1,773 1,933
Subordinated liabilities 6,515 8,658
Total liabilities 585,608 562,077
Equity
Share capital 1,574 1,574
Share premium account 600 600
Other reserves 2,842 5,400
Retained profits 31,343 28,836
Ordinary shareholders' equity 36,359 36,410
Other equity instruments 4,268 4,268
Total equity excluding non-controlling interests 40,627 40,678
Non-controlling interests 88 94
Total equity 40,715 40,772
Total equity and liabilities 626,323 602,849
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
Attributable to ordinary shareholders
Share Other Retained Total Other Non- Total
capital and reserves profits £m equity controlling £m
premium £m £m instruments interests
£m £m £m
At 1 January 2022 2,174 5,400 28,836 36,410 4,268 94 40,772
Comprehensive income
Profit for the period - - 2,313 2,313 114 14 2,441
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, net of tax - - (207) (207) - - (207)
Movements in revaluation reserve in respect of financial assets held at fair
value through other comprehensive income, net of tax:
Debt securities - 8 - 8 - - 8
Equity shares - (1) - (1) - - (1)
Gains and losses attributable to own credit risk, net of tax - - 294 294 - - 294
Movements in cash flow hedging reserve, net of tax - (2,604) - (2,604) - - (2,604)
Movements in foreign currency translation reserve, net of tax - 38 - 38 - - 38
Total other comprehensive income - (2,559) 87 (2,472) - - (2,472)
Total comprehensive income(1) - (2,559) 2,400 (159) 114 14 (31)
Transactions with owners
Dividends - - - - - (20) (20)
Distributions on other equity instruments - - - - (114) - (114)
Capital contributions received - - 110 110 - - 110
Return of capital contributions - - (2) (2) - - (2)
Total transactions with owners - - 108 108 (114) (20) (26)
Realised gains and losses on equity shares held at fair value through other - 1 (1) - - - -
comprehensive income
At 30 June 2022(2) 2,174 2,842 31,343 36,359 4,268 88 40,715
(1 ) Total comprehensive income attributable to owners of the parent was
a deficit of £45 million.
(2 ) Total equity attributable to owners of the parent was £40,627
million.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) (continued)
Attributable to ordinary shareholders
Share Other Retained Total Other Non- Total
capital and reserves profits £m equity controlling £m
premium £m £m instruments interests
£m £m £m
At 1 January 2021 2,174 7,181 25,750 35,105 5,935 78 41,118
Comprehensive income
Profit for the period - - 3,489 3,489 203 16 3,708
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, net of tax - - 281 281 - - 281
Movements in revaluation reserve in respect of financial assets held at fair
value through other comprehensive income, net of tax:
Debt securities - 86 - 86 - - 86
Equity shares - 1 - 1 - - 1
Gains and losses attributable to own credit risk, net of tax - - (26) (26) - - (26)
Movements in cash flow hedging reserve, net of tax - (1,000) - (1,000) - - (1,000)
Movements in foreign currency translation reserve, net of tax - (7) - (7) - - (7)
Total other comprehensive income - (920) 255 (665) - - (665)
Total comprehensive income(1) - (920) 3,744 2,824 203 16 3,043
Transactions with owners
Dividends - - (1,000) (1,000) - (3) (1,003)
Distributions on other equity instruments - - - - (203) - (203)
Issue of other equity instruments - - (1) (1) 1,550 - 1,549
Redemptions of other equity instruments - - (9) (9) (1,841) - (1,850)
Capital contributions received - - 78 78 - - 78
Return of capital contributions - - (2) (2) - - (2)
Total transactions with owners - - (934) (934) (494) (3) (1,431)
Realised gains and losses on equity shares held at fair value through other - (1) 1 - - - -
comprehensive income
At 30 June 2021(2) 2,174 6,260 28,561 36,995 5,644 91 42,730
(1 ) Total comprehensive income attributable to owners of the parent was
£3,027 million.
(2 ) Total equity attributable to owners of the parent was £42,639
million.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) (continued)
Attributable to ordinary shareholders
Share Other Retained Total Other Non- Total
capital and reserves profits £m equity controlling £m
premium £m £m instruments interests
£m £m £m
At 1 July 2021 2,174 6,260 28,561 36,995 5,644 91 42,730
Comprehensive income
Profit for the period - - 1,337 1,337 141 16 1,494
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, net of tax - - 781 781 - - 781
Movements in revaluation reserve in respect of financial assets held at fair
value through other comprehensive income, net of tax:
Debt securities - 110 - 110 - - 110
Equity shares - - - - - - -
Gains and losses attributable to own credit risk, net of tax - - (26) (26) - - (26)
Movements in cash flow hedging reserve, net of tax - (958) - (958) - - (958)
Movements in foreign currency translation reserve, net of tax - (12) - (12) - - (12)
Total other comprehensive income - (860) 755 (105) - - (105)
Total comprehensive income(1) - (860) 2,092 1,232 141 16 1,389
Transactions with owners
Dividends - - (1,900) (1,900) - (11) (1,911)
Distributions on other equity instruments - - - - (141) - (141)
Redemptions of other equity instruments - - - - (1,376) - (1,376)
Capital contributions received - - 86 86 - - 86
Return of capital contributions - - (2) (2) - - (2)
Changes in non-controlling interests - - (1) (1) - (2) (3)
Total transactions with owners - - (1,817) (1,817) (1,517) (13) (3,347)
Realised gains and losses on equity shares held at fair value through other - - - - - - -
comprehensive income
At 31 December 2021(2) 2,174 5,400 28,836 36,410 4,268 94 40,772
(1 ) Total comprehensive income attributable to owners of the parent was
£1,373 million.
(2 ) Total equity attributable to owners of the parent was £40,678
million.
( )
(
)
CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
Half-year Half-year
to 30 Jun to 30 Jun
2022 2021(1)
£m £m
Cash flows from operating activities
Profit before tax 3,283 3,420
Adjustments for:
Change in operating assets (13,288) 1,799
Change in operating liabilities 26,163 6,422
Non-cash and other items (1,196) (1,068)
Tax paid (net) (470) (646)
Net cash provided by operating activities 14,492 9,927
Cash flows from investing activities
Purchase of financial assets (2,359) (5,411)
Proceeds from sale and maturity of financial assets 5,191 6,335
Purchase of fixed assets (1,584) (1,509)
Proceeds from sale of fixed assets 431 542
Net cash provided by (used in) investing activities 1,679 (43)
Cash flows from financing activities
Dividends paid to ordinary shareholders - (1,000)
Distributions on other equity instruments (114) (203)
Dividends paid to non-controlling interests (20) (3)
Return of capital contributions (2) (2)
Interest paid on subordinated liabilities (199) (310)
Proceeds from issue of subordinated liabilities - 1,086
Proceeds from issue of other equity instruments - 1,549
Repayment of subordinated liabilities (1,644) (471)
Redemption of other equity instruments - (1,850)
Borrowings from parent company 73 2,459
Repayments of borrowings to parent company - (850)
Interest paid on borrowings from parent company (96) (127)
Net cash (used in) provided by financing activities (2,002) 278
Effects of exchange rate changes on cash and cash equivalents 1 -
Change in cash and cash equivalents 14,170 10,162
Cash and cash equivalents at beginning of period 55,960 51,622
Cash and cash equivalents at end of period 70,130 61,784
(1 ) Restated, see page 38.
Cash and cash equivalents comprise cash and non-mandatory balances with
central banks and amounts due from banks with an original maturity of less
than three months.
(
)
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 2022 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 plc (the Bank) 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 2021 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. Copies of the 2021 Annual Report and Accounts are available
on the Lloyds Banking Group's website and are 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 the 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
the Group'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 the Group will maintain adequate levels of
funding and capital for the foreseeable future.
Changes in accounting policy
Except for the matter referred to below, the Group's accounting policies are
consistent with those applied by the Group in its financial statements for the
year ended 31 December 2021 and there have been no changes in the Group's
methods of computation.
Cash and cash equivalents: Following a decision by the IFRS Interpretations
Committee in April 2022, the Group includes mandatory reserve deposits with
central banks that are held in demand accounts within cash and cash
equivalents disclosed in the cash flow statement, whereas these amounts were
previously excluded from the amount presented in the cash flow statement. This
change increased the Group's cash and cash equivalents at 31 December 2021 by
£2,770 million (to £55,960 million) and at 30 June 2021 by £3,095 million
(to £61,784 million).
Future accounting developments
The IASB has issued a number of minor amendments to IFRSs effective 1 January
2023 (including IAS 1 Presentation of Financial Statements and IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors). These
amendments, which as at 26 July 2022 have not yet been endorsed for use in the
United Kingdom, are not expected to have a significant impact on the Group.
Note 2: Critical accounting judgements and key sources of estimation
uncertainty
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.
The Group's significant judgements, estimates and assumptions are unchanged
compared to those applied at 31 December 2021, except as detailed below.
Allowance for expected credit losses
The Group 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 2022 the Group's expected credit loss allowance was £4,064 million (31
December 2021: £4,000 million), of which £3,839 million (31 December 2021:
£3,806 million) was in respect of drawn balances.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 2: Critical accounting judgements and key sources of estimation
uncertainty (continued)
The calculation of the Group's expected credit loss allowances and provisions
against loan commitments and guarantees under IFRS 9 requires the Group to
make a number of judgements, assumptions and estimates. These are set out in
detail in the Group's financial statements for the year ended 31 December
2021. The principal changes made in the half-year to 30 June 2022 are as
follows:
Base case and MES economic assumptions
The Group's base case economic scenario has been revised in light of the
ongoing war in Ukraine, intensifying global inflation pressures, and a
continuing shift towards a more restrictive monetary policy stance by central
banks. The Group's updated base case scenario has two conditioning
assumptions: first, no further UK COVID-19 national lockdowns are mandated;
and, second, the war in Ukraine remains 'local', i.e. without overtly
involving neighbouring countries, NATO or China.
Based on these assumptions and incorporating the economic data published in
the second quarter, the Group's base case scenario is for a modest rise in the
unemployment rate alongside an easing of residential and commercial property
prices, as the UK Bank Rate continues to be raised in response to persistent
inflationary pressures. Risks around this base case economic view lie in both
directions, and are partly captured by the generation of alternative economic
scenarios. Uncertainties relating to key epidemiological developments, notably
the possibility that a vaccine-resistant strain could emerge, are not
specifically captured by these scenarios. These specific risks are recognised
outside of the modelled scenarios with a central adjustment.
The Group has 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 2022, for which actuals may have since emerged prior to
publication.
The Group's approach to generating alternative economic scenarios is set out
in detail in its financial statements for the year ended 31 December 2021. For
June 2022, the Group has judged it appropriate to include a non-modelled
severe downside scenario to incorporate high CPI inflation and UK Bank Rate
profiles and to adopt this adjusted severe downside scenario to calculate the
Group's ECL. This is because the historic macroeconomic and loan loss data
upon which the scenario model is calibrated imply an association of downside
economic outcomes with easier monetary policy, and therefore low interest
rates. The adjustment is considered to better reflect the risks around the
Group's base case view in an economic environment where supply shocks are the
principal concern.
Scenarios by year
Key annual assumptions made by the Group are shown below. Gross domestic
product 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 within the period.
Unemployment rate and UK Bank Rate are averages for the period. For 31
December 2021, CPI numbers are translations of modelled Retail Price Index
excluding mortgage interest payments (RPIX) estimates, except for the base
case view.
The key UK economic assumptions made by the Group averaged over a five-year
period are also shown below. The use of calendar years maintains a
comparability between tables disclosed, noting that comparatives reflect one
calendar year earlier.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 2: Critical accounting judgements and key sources of estimation
uncertainty (continued)
At 30 June 2022 2022 2023 2024 2025 2026 2022
% % % % % to 2026 average
%
Upside
Gross domestic product 3.5 1.2 1.8 1.7 1.7 2.0
Unemployment rate 3.1 2.7 2.9 3.2 3.4 3.1
House price growth 3.2 3.6 9.3 5.9 4.3 5.2
Commercial real estate price growth 9.2 1.8 0.9 (0.9) (0.2) 2.1
UK Bank Rate 1.64 3.12 2.97 2.88 2.78 2.68
CPI inflation 8.6 5.5 2.5 1.9 2.2 4.1
Base case
Gross domestic product 3.3 0.6 1.5 1.6 1.7 1.7
Unemployment rate 3.8 4.2 4.4 4.5 4.5 4.3
House price growth 1.8 (1.4) 3.4 1.2 1.0 1.2
Commercial real estate price growth 1.8 (5.0) (1.6) (1.3) 0.8 (1.1)
UK Bank Rate 1.44 2.25 2.00 2.00 2.00 1.94
CPI inflation 8.6 5.5 2.2 1.3 1.5 3.8
Downside
Gross domestic product 3.0 (0.1) 1.1 1.4 1.7 1.4
Unemployment rate 4.5 6.0 6.3 6.1 5.9 5.8
House price growth (0.1) (7.6) (4.6) (5.1) (3.5) (4.2)
Commercial real estate price growth (4.4) (11.9) (5.5) (3.6) (0.7) (5.3)
UK Bank Rate 1.25 1.23 0.80 0.85 0.95 1.02
CPI inflation 8.7 5.5 1.8 0.6 0.7 3.5
Severe downside
Gross domestic product 1.6 (1.8) 1.0 1.4 1.6 0.8
Unemployment rate 5.8 8.7 8.7 8.3 7.7 7.8
House price growth (1.6) (14.0) (12.3) (10.5) (6.4) (9.1)
Commercial real estate price growth (14.9) (20.9) (11.0) (5.6) 1.0 (10.6)
UK Bank Rate - modelled 0.76 0.18 0.18 0.21 0.24 0.31
UK Bank Rate - adjusted 2.94 4.75 3.00 2.25 2.25 3.04
CPI inflation - modelled 8.6 5.1 0.9 (0.5) (0.5) 2.7
CPI inflation - adjusted 9.8 13.7 4.1 1.7 0.1 5.9
Probability-weighted
Gross domestic product 3.1 0.3 1.5 1.5 1.7 1.6
Unemployment rate 4.0 4.7 5.0 5.0 4.9 4.7
House price growth 1.3 (3.0) 1.2 (0.5) (0.1) (0.2)
Commercial real estate price growth 0.5 (6.6) (3.0) (2.3) 0.1 (2.3)
UK Bank Rate - modelled 1.37 2.00 1.75 1.74 1.75 1.72
UK Bank Rate - adjusted 1.59 2.46 2.03 1.94 1.95 1.99
CPI inflation - modelled 8.6 5.5 2.0 1.1 1.3 3.7
CPI inflation - adjusted 8.8 6.3 2.3 1.3 1.3 4.0
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 2: Critical accounting judgements and key sources of estimation
uncertainty (continued)
At 31 December 2021 2021 2022 2023 2024 2025 2021
% % % % % to 2025 average
%
Upside
Gross domestic product 7.1 4.0 1.4 1.3 1.4 3.0
Unemployment rate 4.4 3.3 3.4 3.5 3.7 3.7
House price growth 10.1 2.6 4.9 4.7 3.6 5.1
Commercial real estate price growth 12.4 5.8 0.7 1.0 (0.6) 3.7
UK Bank Rate 0.14 1.44 1.74 1.82 2.03 1.43
CPI inflation 2.6 5.9 3.3 2.6 3.3 3.5
Base case
Gross domestic product 7.1 3.7 1.5 1.3 1.3 2.9
Unemployment rate 4.5 4.3 4.4 4.4 4.5 4.4
House price growth 9.8 0.0 0.0 0.5 0.7 2.1
Commercial real estate price growth 10.2 (2.2) (1.9) 0.1 0.6 1.2
UK Bank Rate 0.14 0.81 1.00 1.06 1.25 0.85
CPI inflation 2.6 5.9 3.0 1.6 2.0 3.0
Downside
Gross domestic product 7.1 3.4 1.3 1.1 1.2 2.8
Unemployment rate 4.7 5.6 5.9 5.8 5.7 5.6
House price growth 9.2 (4.9) (7.8) (6.6) (4.7) (3.1)
Commercial real estate price growth 8.6 (10.1) (7.0) (3.4) (0.3) (2.6)
UK Bank Rate 0.14 0.45 0.52 0.55 0.69 0.47
CPI inflation 2.6 5.8 2.8 1.3 1.6 2.8
Severe downside
Gross domestic product 6.8 0.9 0.4 1.0 1.4 2.1
Unemployment rate 4.9 7.7 8.5 8.1 7.6 7.3
House price growth 9.1 (7.3) (13.9) (12.5) (8.4) (6.9)
Commercial real estate price growth 5.8 (19.6) (12.1) (5.3) (0.5) (6.8)
UK Bank Rate 0.14 0.04 0.06 0.08 0.09 0.08
CPI inflation 2.6 5.8 2.3 0.5 0.9 2.4
Probability-weighted
Gross domestic product 7.0 3.4 1.3 1.2 1.3 2.8
Unemployment rate 4.6 4.7 5.0 5.0 4.9 4.8
House price growth 9.6 (1.4) (2.3) (1.7) (1.0) 0.6
Commercial real estate price growth 9.9 (3.9) (3.7) (1.2) (0.1) 0.1
UK Bank Rate 0.14 0.82 0.99 1.04 1.20 0.83
CPI inflation 2.6 5.9 2.9 1.7 2.2 3.1
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 2: Critical accounting judgements and key sources of estimation
uncertainty (continued)
Base case scenario by quarter
Key quarterly assumptions made by the Group in the base case scenario are
shown below. Gross domestic product is presented quarter-on-quarter. House
price growth, commercial real estate price growth and CPI inflation are
presented year-on-year i.e from the equivalent quarter in the previous year.
Unemployment rate and UK Bank Rate are presented as at the end of each
quarter.
At 30 June 2022 First Second Third Fourth First Second Third Fourth
quarter quarter quarter quarter quarter quarter quarter quarter
2022 2022 2022 2022 2023 2023 2023 2023
% % % % % % % %
Gross domestic product 0.8 (0.4) 0.1 0.2 0.2 0.2 0.4 0.4
Unemployment rate 3.7 3.8 3.8 3.9 4.0 4.2 4.3 4.3
House price growth 11.1 10.5 6.8 1.8 (2.2) (4.1) (3.7) (1.4)
Commercial real estate price growth 18.0 15.3 9.5 1.8 (4.3) (6.3) (5.3) (5.0)
UK Bank Rate 0.75 1.25 1.75 2.00 2.25 2.25 2.25 2.25
CPI inflation 6.2 9.1 9.3 10.0 9.0 5.4 5.0 2.8
At 31 December 2021 First Second Third Fourth First Second Third Fourth
quarter quarter quarter quarter quarter quarter quarter quarter
2021 2021 2021 2021 2022 2022 2022 2022
% % % % % % % %
Gross domestic product (1.3) 5.4 1.1 0.4 0.1 1.5 0.5 0.3
Unemployment rate 4.9 4.7 4.3 4.3 4.4 4.3 4.3 4.3
House price growth 6.5 8.7 7.4 9.8 8.4 6.1 3.2 0.0
Commercial real estate price growth (2.9) 3.4 7.5 10.2 8.4 5.2 0.9 (2.2)
UK Bank Rate 0.10 0.10 0.10 0.25 0.50 0.75 1.00 1.00
CPI inflation 0.6 2.1 2.8 4.9 5.3 6.5 6.3 5.3
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 2: Critical accounting judgements and key sources of estimation
uncertainty (continued)
ECL sensitivity to economic assumptions
The table below shows the Group's ECL for the upside, base case, downside and
severe downside scenarios. The stage allocation for an asset is based on the
overall scenario probability-weighted PD and, hence, the staging of assets is
constant across all the scenarios. In each economic scenario the ECL for
individual assessments and post-model adjustments is constant, reflecting the
basis on which they are evaluated. Judgements applied through changes to
inputs are reflected in the scenario sensitivities. The probability-weighted
view shows the extent to which a higher ECL allowance has been recognised to
take account of multiple economic scenarios relative to the base case; the
uplift being £372 million compared to £221 million at 31 December 2021.
At 30 June 2022 Probability- Upside Base case Downside Severe
weighted £m £m £m downside
£m £m
UK mortgages 837 462 610 980 2,213
Credit cards 629 546 597 686 804
Other Retail 997 949 981 1,029 1,093
Commercial Banking 1,383 1,194 1,286 1,451 2,040
Other 218 216 218 218 219
ECL allowance 4,064 3,367 3,692 4,364 6,369
At 31 December 2021
UK mortgages 837 637 723 967 1,386
Credit cards 521 442 500 569 672
Other Retail 908 844 892 947 1,034
Commercial Banking 1,316 1,182 1,246 1,384 1,728
Other 418 416 418 419 421
ECL allowance 4,000 3,521 3,779 4,286 5,241
The impact of changes in the UK unemployment rate and House Price Index (HPI)
have also been assessed. Although such changes would not be observed in
isolation, as economic indicators tend to be correlated in a coherent
scenario, this gives insight into the sensitivity of the Group's ECL to
gradual changes in these two critical economic factors. The assessment has
been made against the base case with the reported staging unchanged and is
assessed through the direct impact on modelled ECL only.
The table below shows the impact on the Group's ECL resulting from a 1
percentage point (pp) increase or decrease in the UK unemployment rate. The
increase or decrease is presented based on the adjustment phased evenly over
the first ten quarters of the base case scenario. An immediate increase or
decrease would drive a more material ECL impact as it would be fully reflected
in both 12-month and lifetime PDs.
At 30 June 2022 At 31 December 2021
1pp increase in 1pp decrease in 1pp increase in 1pp decrease in
unemployment unemployment unemployment unemployment
£m £m £m £m
UK mortgages 13 (11) 23 (18)
Credit cards 22 (22) 20 (20)
Other Retail 14 (13) 14 (14)
Commercial Banking 53 (45) 49 (42)
Other 1 (1) 1 (1)
ECL impact 103 (92) 107 (95)
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 2: Critical accounting judgements and key sources of estimation
uncertainty (continued)
The table below shows the impact on the Group's ECL in respect of UK mortgages
resulting from an increase or decrease in loss given default for a 10
percentage point (pp) increase or decrease in the UK House Price Index (HPI).
The increase or decrease is presented based on the adjustment phased evenly
over the first ten quarters of the base case scenario. The increased ECL
sensitivity in the period has resulted from the change in definition of
default and associated model changes. This has resulted in greater univariate
sensitivity of predicted defaults and possession rates to future house price
levels, alongside the direct impact on forecast sale values.
At 30 June 2022 At 31 December 2021
10pp increase 10pp decrease 10pp increase 10pp decrease
in HPI in HPI in HPI in HPI
ECL impact, £m (137) 216 (112) 162
Application of judgement in adjustments to modelled ECL
Impairment models fall within the Group's model risk framework with model
monitoring, periodic validation and back testing performed on model components
(i.e. probability of default, exposure at default and loss given default).
Limitations in the Group's impairment models or data inputs may be identified
through the ongoing assessment and validation of the output of the models. In
these circumstances, management make appropriate adjustments to the Group's
allowance for impairment losses to ensure that the overall provision
adequately reflects all material risks. These adjustments are determined by
considering the particular attributes of exposures which have not been
adequately captured by the impairment models and range from changes to model
inputs and parameters, at account level, through to more qualitative
post-model adjustments.
Judgements are not typically assessed under each distinct economic scenario
used to generate ECL, but instead are applied incrementally to final modelled
ECL which reflects the probability-weighted view of all scenarios. All
adjustments are reviewed quarterly and are subject to internal review and
challenge, including by the Audit Committee, to ensure that amounts are
appropriately calculated and that there are specific release criteria
identified.
The coronavirus pandemic and the various support measures that were put in
place resulted in an economic environment which differed significantly from
the historical economic conditions upon which the impairment models had been
built. As a result there has been a greater need for management judgements to
be applied alongside the use of models. Over the first half of 2022 the
intensifying inflationary pressures within the Group's outlook have created
further risks not present in these historic conditions. Conversely, the direct
impact of the pandemic on both economic and credit performance has appeared to
reduce, resulting in a reduction in judgements required specifically to
capture COVID-19 risks. At 30 June 2022 total management judgement resulted
in additional ECL allowances of £796 million (31 December 2021: £1,278
million). The table below analyses total ECL allowance by portfolio,
separately identifying the amounts that have been modelled, those that have
been individually assessed and those arising through the application of
management judgement.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 2: Critical accounting judgements and key sources of estimation
uncertainty (continued)
Judgements due to:
At 30 June 2022 Modelled Individually COVID-19(1) Inflationary risk Other Total
ECL assessed £m £m £m ECL
£m £m £m
UK mortgages 565 - 39 - 233 837
Credit cards 528 - 18 91 (8) 629
Other Retail 856 - 16 63 62 997
Commercial Banking 390 911 15 116 (49) 1,383
Other 18 - 200 - - 218
Total 2,357 911 288 270 238 4,064
At 31 December 2021
UK mortgages 292 - 67 52 426 837
Credit cards 436 - 94 - (9) 521
Other Retail 801 - 57 - 50 908
Commercial Banking 270 905 155 - (14) 1,316
Other 18 - 400 - - 418
Total 1,817 905 773 52 453 4,000
(1 ) Judgements introduced to address the impact that COVID-19 and
resulting interventions have had on the Group's economic outlook and observed
loss experience, which have required additional model limitations to be
addressed.
Except as noted below, the nature of the judgements is consistent with those
applied by the Group in its financial statements for the year ended 31
December 2021. The 30 June 2022 allowance has been re-assessed based on latest
economic outlook, data points and modelled result.
Judgements due to COVID-19
UK mortgages: £39 million (31 December 2021: £67 million)
These adjustments principally comprise:
Increase in time to repossession: £39 million (31 December 2021: £52
million)
This reflects an adjustment made to allow for an increase in the time assumed
between default and repossession as a result of the Group temporarily
suspending the repossession of properties to support customers during the
pandemic. The reduction in scale of the judgement reflects the lower
sensitivity of the time between default and repossession following the change
in definition of default to align with the CRD IV regulatory definition
adopted from 1 January 2022.
Credit cards: £18 million (31 December 2021: £94 million) and Other Retail:
£16 million (31 December 2021: £57 million)
These adjustments principally comprise:
Recognition of support measures: Credit cards: £18 million (31 December 2021:
£94 million) and Other Retail: £16 million (31 December 2021: £40
million)
Government support and subdued levels of consumer spending were judged to
contribute to a reduced flow of accounts into default. Adjustments to address
reduced default rates have been largely released following convergence between
actual and predicted levels, with predicted levels reducing as a consequence
of an improved economic outturn. Default rates continue to be adjusted for
Motor and Business Banking where defaults remain below predictions, or in the
case of Business Banking, susceptible to the impact of Business Bounce Back
Loans. The remaining adjustment on credit cards is to reverse the benefit of
lower predicted exposures at default due to the current subdued levels of
consumer spending.
( )
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 2: Critical accounting judgements and key sources of estimation
uncertainty (continued)
Commercial Banking: £15 million (31 December 2021: £155 million)
These adjustments principally comprise:
Adjustment to economic variables used as inputs to models: £21 million (31
December 2021: £88 million)
Observed reductions in the rate of UK corporate insolvencies, used as an input
to commercial default models, continue to require judgemental uplifts, to
generate a more appropriate level of predicted defaults. With model outputs
based on the lagged 12 months of observed insolvency data, management believe
that the historically low levels of insolvencies seen during 2021 were
impacted by the pandemic and still do not fully reflect the underlying credit
risk, however the adjustment has reduced significantly as observed levels of
insolvencies have started to normalise and arrears have remained low.
Specific sector risks: £nil (31 December 2021: £80 million)
Judgemental uplifts which previously applied a targeted stress on likelihood
and severity of loss to sectors considered to be exposed to an elevated risk
from COVID-19 have been released. This is because COVID-19 and potential
social restrictions are no longer considered to pose an elevated risk to these
industries. Wider economic risks have now been assessed separately with
similar judgemental adjustments raised to reflect inflationary pressures.
Other: £200 million (31 December 2021: £400 million)
Central adjustment in respect of economic uncertainty
An important element of the methodology used to calculate the Group's ECL
allowance is the determination of a base case economic scenario, predicated on
certain conditioning assumptions, which is then used to derive alternative
economic scenarios using stochastic shocks. The base case represents the
Group's most likely view, however management believes that in the context of
the pandemic, the possibility that the conditioning assumptions are
invalidated remains to the downside. In particular, the possibility that a
future virus mutation has vaccine resistance leading to serious social and
economic disruption. Such a possibility lies outside of the Group's current
methodology because it would invalidate one of the key assumptions behind the
base case forecast. The likelihood and impact of a vaccine resistant mutation
is difficult to estimate with any precision therefore the Group has used
judgement to determine a reasonable estimate of this additional downside risk,
informed by several approaches.
As at 30 June 2022, this adjustment has been reduced from £400 million to
£200 million, reflecting the reduced risk seen through lower levels of
mortality in the UK and globally, while continuing to recognise that the risk
of a vaccine resistant mutation remains. Two further sub-variants of Omicron
classed as variants of concern towards the end of May are now predominant in
the UK and are causing a recent increase in infection and hospitalisations.
The recent increase in COVID-19 infections demonstrates the need to retain
some caution, however COVID-19 is no longer considered to pose the same level
of elevated risk as at 31 December 2021.
One approach used to quantify the amount of the central adjustment of £200
million (31 December 2021: £400 million) is to apply a 5 per cent
re-weighting from the stated upside to the stated severe downside scenario, a
reduced re-weight from 31 December 2021. Another approach is to apply a half
of the impact of the stated univariate sensitivities of unemployment (1
percentage point increase) and HPI (10 percentage point decrease), still
reflecting a more immediate and therefore greater ECL impact than the gradual
increase reflected in those sensitivities.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 2: Critical accounting judgements and key sources of estimation
uncertainty (continued)
Judgements due to inflationary risk
Credit cards: £91 million (31 December 2021: £nil) and Other Retail: £63
million (31 December 2021: £nil)
Inflationary risk on Retail segments: Credit cards: £56 million (31 December
2021: £nil) and Other Retail: £33 million (31 December 2021: £nil)
Although portfolio performance remains strong, and no deterioration in credit
risk has been observed to date due to high inflation and a rising interest
rate environment, management have made an adjustment for customers most
vulnerable to inflationary pressures and interest rate rises which may impact
the ability to maintain repayment commitments. Additional ECL has been raised
for customers with lower income levels and higher indebtedness based on a
higher estimated likelihood of default. Management will monitor customer
performance over time to ensure that this adjustment remains reasonable and
appropriate.
Adjustment to affordability: Credit cards: £35 million (31 December 2021:
£nil) and Other Retail: £30 million (31 December 2021: £nil)
The Group's ECL models for credit cards and personal loan portfolios use
predictions of wage growth to account for future affordability stress. As
rapidly increasing inflation is currently eroding assumed nominal wage growth,
adjustments have been made to the econometric models to account for real,
rather than nominal, income to produce adjusted expected default forecasts.
Management believe that this is an appropriate way to account for the
aggregate inflationary risk in these unsecured portfolios and will continue to
monitor both actual economic and customer outcomes to ensure that this
adjustment remains reasonable and appropriate.
Commercial Banking: £116 million (31 December 2021: £nil)
Sectors at risk: £116 million (31 December 2021: £nil)
Management believe that new risks have emerged for certain sectors due to
impacts from heightened inflationary pressures and rising interest rates
beyond what is captured in the models. An adjustment of £116 million has been
raised to increase ECL for specific commercial sectors deemed most susceptible
to inflationary pressures. Management will continue to closely monitor all
sectors of the economy and revise the sectors in scope of this judgement as
risks and corporate borrower performance evolve.
( )
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 2: Critical accounting judgements and key sources of estimation
uncertainty (continued)
Other judgements
UK mortgages: £233 million (31 December 2021: £426 million)
These adjustments principally comprise:
Long-term defaults: £115 million (31 December 2021: £87 million)
The Group suspended mortgage litigation activity between late-2014 and
mid-2018 as policy changes were implemented for the treatment of amounts in
arrears, interrupting the natural flow of accounts to repossession. Provision
coverage is uplifted to the equivalent levels of those accounts already in
repossession on an estimated shortfall of balances expected to flow to
possession. A further adjustment is made to accounts which have been in
default for more than 24 months, with an arrears balance increase in the last
6 months. These accounts have their probability of possession set to 95 per
cent based on observed historical losses incurred on accounts that were of an
equivalent status. The increase in the judgement reflects a lower modelled
coverage that requires a larger adjustment to reach the same levels.
End-of-term interest-only: £28 million (31 December 2021: £174 million)
The adoption of a definition of default in 2022 for UK mortgages that now
includes interest-only accounts that become 90 days past due has removed the
previous need to adjust for losses associated with interest-only accounts that
have missed their final capital payment. A remaining smaller adjustment has
been maintained to mitigate the risk that the model potentially understates
the credit losses associated with interest-only accounts that have not yet
reached maturity but could potentially miss their final capital payment when
it falls due.
Adjustment for specific segments: £50 million (31 December 2021: £54
million)
The Group monitors risks across specific segments of its portfolios which may
not be fully captured through wider collective models. Judgemental increases
applied to probability of default on forborne accounts (31 December 2021:
£18 million) have been removed as models now include forborne accounts in
Stage 3 assets. There is negligible change to the judgement (31 December 2021:
£36 million) for fire safety and cladding uncertainty. This captures risks
within the assessment of affordability and asset valuations, not captured by
underlying models.
Credit cards: £(8) million (31 December 2021: £(9) million) and Other
Retail: £62 million (31 December 2021: £50 million)
These adjustments principally comprise:
Lifetime extension on revolving products: Credit cards: £57 million (31
December 2021: £41 million) and Other Retail: £9 million (31 December 2021:
£5 million)
As per the Group's financial statements for the year ended 31 December 2021,
an adjustment is required to extend the lifetime used for Stage 2 exposures on
Retail revolving products from a three year modelled lifetime, which reflected
the outcome data available when the model was developed. Previously this was
deemed to be six years by increasing default probabilities through the
extrapolation of the default trajectory observed throughout the three years
and beyond. During 2022, work was undertaken to reassess the expected lifetime
for these assets, concluding in an extension of the expected lifetime from six
to ten years, resulting in an increase to this adjustment.
Adjustments to loss given defaults (LGDs): Credit cards: £(63) million (31
December 2021: £(37) million) and Other Retail: £45 million (31 December
2021: £26 million)
A number of adjustments have been made to the loss given default assumptions
used within unsecured and motor credit models. These include judgements held
previously, notably in relation to the alignment of MBNA credit card cure
rates as collection strategies harmonise. Alongside this, new adjustments have
also been raised to capture recent improvements in observed cure rates offset
by updates to recovery cost assumptions. These adjustments will be released
once incorporated into models through future recalibration which is pending
model development.
Commercial Banking: £(49) million (31 December 2021: £(14) million)
Adjustments to loss given defaults (LGDs): £(49) million (31 December 2021:
£(14) million)
The modelling approach for loss given default for commercial exposures has
been reviewed and management believe that it is necessary to adjust ECL to
mitigate limitations identified in the approach which are causing loss given
default to be inflated. These include the benefit from amortisation of
exposures relative to collateral values at default and a move to an
exposure-weighted approach being adopted. The latter driving the increase in
this judgement at 30 June 2022. These temporary adjustments will be addressed
through future model development therefore removing the need to judgementally
adjust.
(
)
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 3: Segmental analysis
The Group provides a wide range of banking and financial services in the UK
and in certain locations overseas. The Group Executive Committee (GEC) of
Lloyds Bank plc remains the chief operating decision maker for the Group.
The Group's activities are organised into two financial reporting segments:
Retail and Commercial Banking. There has been no change to the descriptions of
these segments as provided in note 4 to the Group's financial statements for
the year ended 31 December 2021, neither has there been any change to the
Group's segmental accounting for internal segment services or derivatives
entered into by units for risk management purposes since 31 December 2021.
In the half-year to 30 June 2022:
• The Group has reviewed and updated its methodology for liquidity
transfer pricing between segments
• Certain customer relationships have been migrated from the SME business
within Commercial Banking to Business Banking within Retail
Comparatives have been presented on a consistent basis in respect of the above
changes.
Half-year to 30 June 2022 Retail Commercial Other Total
£m Banking £m £m
£m
Net interest income 4,819 1,109 161 6,089
Other income 956 347 660 1,963
Total income 5,775 1,456 821 8,052
Costs (3,024) (871) (510) (4,405)
Impairment (charge) credit (314) (77) 27 (364)
Profit before tax 2,437 508 338 3,283
External income 6,004 1,316 732 8,052
Inter-segment income (expense) (229) 140 89 -
Segment income 5,775 1,456 821 8,052
Half-year to 30 June 2021(1) Retail Commercial Other Total
£m Banking £m £m
£m
Net interest income 4,392 930 54 5,376
Other income 830 377 724 1,931
Total income 5,222 1,307 778 7,307
Costs (2,963) (943) (658) (4,564)
Impairment credit 89 585 3 677
Profit before tax 2,348 949 123 3,420
External income 5,721 1,280 306 7,307
Inter-segment income (expense) (499) 27 472 -
Segment income 5,222 1,307 778 7,307
(1 ) Restated, see page 49.
( )
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 3: Segmental analysis (continued)
Segment Segment
external assets external liabilities
At 30 Jun At 31 Dec At 30 Jun At 31 Dec
2022 2021(1) 2022 2021(1)
£m £m £m £m
Retail 376,473 372,152 326,049 323,118
Commercial Banking 81,403 77,045 120,995 119,077
Other 168,447 153,652 138,564 119,882
Total 626,323 602,849 585,608 562,077
(1 ) Restated, see page 49.
( )
(
)
Note 4: Net fee and commission income
Half-year Half-year
to 30 Jun to 30 Jun
2022 2021
£m £m
Fee and commission income:
Current accounts 328 310
Credit and debit card fees 558 381
Commercial banking and treasury fees 117 167
Factoring 41 38
Other fees and commissions 136 174
Total fee and commission income 1,180 1,070
Fee and commission expense (532) (480)
Net fee and commission income 648 590
Current account and credit and debit card fees principally arise in Retail;
commercial banking, treasury and factoring fees arise in Commercial Banking.
Note 5: Operating expenses
Half-year Half-year
to 30 Jun to 30 Jun
2022 2021
£m £m
Staff costs 1,907 1,868
Premises and equipment costs 126 112
Other expenses 1,185 1,364
Depreciation and amortisation 1,187 1,220
Total operating expenses 4,405 4,564
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 6: Impairment
Half-year Half-year
to 30 Jun to 30 Jun
2022 2021
£m £m
Impact of transfers between stages 419 152
Other changes in credit quality 15 (473)
Additions and repayments (76) (359)
Methodology and model changes 2 3
Other items 4 -
(55) (829)
Total impairment charge (credit) 364 (677)
In respect of:
Loans and advances to banks 1 (3)
Loans and advances to customers 329 (594)
Debt securities 2 -
Financial assets held at amortised cost 332 (597)
Impairment charge (credit) on drawn balances 332 (597)
Loan commitments and financial guarantees 32 (78)
Financial assets at fair value through other comprehensive income - (2)
Total impairment charge (credit) 364 (677)
There was no charge in respect of in respect of residual value impairment and
voluntary terminations within the Group's UK Motor Finance business (half-year
to 30 June 2021: release of £41 million).
The Group's impairment charge comprises the following:
Impact of transfers between stages
The net impact on the impairment charge of transfers between stages.
Other changes in credit quality
Changes in loss allowance as a result of movements in risk parameters that
reflect changes in customer credit quality, but which have not resulted in a
transfer to a different stage. This also contains the impact on the impairment
charge of write-offs and recoveries, where the related loss allowances are
reassessed to reflect the view of credit quality at the balance sheet date and
therefore the ultimate realisable or recoverable value.
Additions and repayments
Expected loss allowances are recognised on origination of new loans or further
drawdowns of existing facilities. Repayments relate to the reduction of loss
allowances resulting from the repayment of outstanding balances that have been
provided against.
Methodology and model changes
Increase or decrease in impairment charge as a result of adjustments to the
models used for expected credit loss calculations; either as changes to the
model inputs or to the underlying assumptions, as well as the impact of
changing the models used.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 7: Tax expense
In accordance with IAS 34, the Group's income tax expense for the half-year to
30 June 2022 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) credit and accounting
profit is set out below:
Half-year Half-year
to 30 Jun to 30 Jun
2022 2021
£m £m
Profit before tax 3,283 3,420
UK corporation tax thereon at 19 per cent (2021: 19 per cent) (624) (650)
Impact of surcharge on banking profits (168) (212)
Non-deductible costs: conduct charges (4) (7)
Other non-deductible costs (3) (40)
Non-taxable income 35 12
Tax relief on coupons on other equity instruments - 39
Tax-exempt gains on disposals - 2
Tax losses where no deferred tax recognised (4) (5)
Remeasurement of deferred tax due to rate changes (16) 1,189
Differences in overseas tax rates (44) (19)
Adjustments in respect of prior years (14) (21)
Tax (expense) credit (842) 288
Note 8: Financial assets at fair value through profit or loss
At 30 Jun At 31 Dec
2022 2021
£m £m
Financial assets mandatorily at fair value through profit or loss:
Loans and advances to customers 1,188 1,559
Equity shares 241 239
1,429 1,798
Total financial assets at fair value through profit or loss 1,429 1,798
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 9: Financial assets at amortised cost
Half-year to 30 June 2022
Gross carrying amount Allowance for expected credit losses
Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
£m £m £m £m £m £m £m £m £m £m
Loans and advances to banks
At 1 January 2022 4,478 - - - 4,478 - - - - -
Exchange and other adjustments 383 - - - 383 - - - - -
Other changes in credit quality 1 - - 1
Additions and repayments 801 - - - 801 - - - - -
Charge to the income statement 1 - - - 1
At 30 June 2022 5,662 - - - 5,662 1 - - - 1
Allowance for impairment losses (1) - - - (1)
Net carrying amount 5,661 - - - 5,661
Loans and advances to customers
At 1 January 2022 382,366 34,884 6,406 10,977 434,633 909 1,112 1,573 210 3,804
Exchange and other adjustments(1) (953) 11 (21) 30 (933) 1 - 21 53 75
Transfers to Stage 1 8,511 (8,472) (39) - 173 (166) (7) -
Transfers to Stage 2 (21,699) 21,981 (282) - (46) 101 (55) -
Transfers to Stage 3 (579) (2,279) 2,858 - (2) (74) 76 -
Impact of transfers between stages (13,767) 11,230 2,537 - (129) 352 178 401
(4) 213 192 401
Other changes in credit quality (173) (19) 206 (8) 6
Additions and repayments 8,873 (2,317) (507) (573) 5,476 32 (33) (67) (12) (80)
Methodology and model changes (2) (19) 45 (22) 2
Charge (credit) to the income statement (147) 142 376 (42) 329
Advances written off (426) (19) (445) (426) (19) (445)
Recoveries of advances written off in previous years 71 - 71 71 - 71
At 30 June 2022 376,519 43,808 8,060 10,415 438,802 763 1,254 1,615 202 3,834
Allowance for impairment losses (763) (1,254) (1,615) (202) (3,834)
Net carrying amount 375,756 42,554 6,445 10,213 434,968
(1 ) Exchange and other adjustments includes the impact of movements in
exchange rates, discount unwind, derecognising assets as a result of
modifications and adjustments in respect of purchased or originated
credit-impaired financial assets (POCI). Where a POCI asset's expected credit
loss is less than its expected credit loss on purchase or origination, the
increase in its carrying value is recognised within gross loans, rather than
as a negative impairment allowance.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 9: Financial assets at amortised cost (continued)
Gross carrying amount Allowance for expected credit losses
Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
£m £m £m £m £m £m £m £m £m £m
Reverse repurchase agreements
At 30 June 2022 52,057 - - - 52,057
Allowance for impairment losses - - - - -
Net carrying amount 52,057 - - - 52,057
Debt securities
At 1 January 2022 4,554 9 1 - 4,564 1 - 1 - 2
Exchange and other adjustments 175 - - - 175 - - - - -
Transfers to Stage 1 9 (9) - - - - - -
Impact of transfers between stages 9 (9) - - - - - -
- - - -
Other changes in credit quality 1 - - - 1
Additions and repayments 1,666 - - - 1,666 1 - - - 1
Charge to the income statement 2 - - - 2
At 30 June 2022 6,404 1 - 6,405 3 - 1 - 4
Allowance for impairment losses (3) - (1) - (4)
Net carrying amount 6,401 - - - 6,401
Due from fellow Lloyds Banking Group undertakings
At 30 June 2022 714 - - - 714
Allowance for impairment losses - - - - -
Net carrying amount 714 - - - 714
Total financial assets at amortised cost 440,589 42,554 6,445 10,213 499,801
The total allowance for impairment losses includes £94 million (31 December
2021: £95 million) in respect of residual value impairment and voluntary
terminations within the Group's UK Motor Finance business.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 9: 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 POCI Total
£m £m £m £m £m
Undrawn balances
At 1 January 2022 103 86 5 - 194
Exchange and other adjustments (1) 1 (1) - (1)
Transfers to Stage 1 23 (23) - -
Transfers to Stage 2 (5) 5 - -
Transfers to Stage 3 - (2) 2 -
Impact of transfers between stages (18) 37 (1) 18
- 17 1 18
Other items taken to the income statement 12 3 (1) - 14
Charge to the income statement 12 20 - - 32
At 30 June 2022 114 107 4 - 225
The Group's total impairment allowances at 30 June 2022 were as follows:
Allowance for expected credit losses
Stage 1 Stage 2 Stage 3 POCI Total
£m £m £m £m £m
In respect of:
Loans and advances to banks 1 - - - 1
Loans and advances to customers 763 1,254 1,615 202 3,834
Debt securities 3 - 1 - 4
Financial assets at amortised cost 767 1,254 1,616 202 3,839
Provisions in relation to loan commitments and financial guarantees 114 107 4 - 225
Total 881 1,361 1,620 202 4,064
Expected credit loss in respect of financial assets at fair value through 3 - - - 3
other comprehensive income (memorandum item)
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 9: Financial assets at amortised cost (continued)
Year ended 31 December 2021
Gross carrying amount Allowance for expected credit losses
Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
£m £m £m £m £m £m £m £m £m £m
Loans and advances to banks
At 1 January 2021 4,328 - - - 4,328 4 - - - 4
Exchange and other adjustments 15 - - - 15 - - - - -
Additions and repayments 135 - - - 135 (1) - - - (1)
Other changes in credit quality (3) - - - (3)
Credit to the income statement (4) - - - (4)
At 31 December 2021 4,478 - - - 4,478 - - - - -
Allowance for impairment losses - - - - -
Net carrying amount 4,478 - - - 4,478
Loans and advances to customers
At 1 January 2021 361,161 51,280 6,443 12,511 431,395 1,347 2,125 1,968 261 5,701
Exchange and other adjustments(1) (2,518) (31) (82) 68 (2,563) (2) (5) 5 121 119
Transfers to Stage 1 18,662 (18,623) (39) - 562 (551) (11) -
Transfers to Stage 2 (11,995) 12,709 (714) - (48) 155 (107) -
Transfers to Stage 3 (872) (1,818) 2,690 - (13) (220) 233 -
Impact of transfers between stages 5,795 (7,732) 1,937 - (426) 193 221 (12)
75 (423) 336 (12)
Other changes in credit quality (239) (256) 254 (48) (289)
Additions and repayments 17,928 (8,633) (994) (1,565) 6,736 (209) (344) (98) (87) (738)
Methodology and model changes (63) 15 6 - (42)
(Credit) charge to the income statement (436) (1,008) 498 (135) (1,081)
Advances written off (1,057) (37) (1,094) (1,057) (37) (1,094)
Recoveries of advances written off in previous years 159 - 159 159 - 159
At 31 December 2021 382,366 34,884 6,406 10,977 434,633 909 1,112 1,573 210 3,804
Allowance for impairment losses (909) (1,112) (1,573) (210) (3,804)
Net carrying amount 381,457 33,772 4,833 10,767 430,829
(1 ) Exchange and other adjustments includes the impact of movements in
exchange rates, discount unwind, derecognising assets as a result of
modifications and adjustments in respect of purchased or originated
credit-impaired financial assets (POCI). Where a POCI asset's expected credit
loss is less than its expected credit loss on purchase or origination, the
increase in its carrying value is recognised within gross loans, rather than
as a negative impairment allowance.
( )
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 9: Financial assets at amortised cost (continued)
( )
Gross carrying amount Allowance for expected credit losses
Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
£m £m £m £m £m £m £m £m £m £m
Reverse repurchase agreements
At 31 December 2021 49,708 - - - 49,708
Allowance for impairment losses - - - - -
Net carrying amount 49,708 - - - 49,708
Debt securities
At 1 January 2021 5,137 - 1 - 5,138 - - 1 - 1
Exchange and other adjustments (20) - - - (20) 1 - - - 1
Transfers to Stage 2 (6) 6 - - - - - - - -
Impact of transfers between stages (6) 6 - - - - - - - -
Additions and repayments (557) 3 - - (554) - - - - -
At 31 December 2021 4,554 9 1 - 4,564 1 - 1 - 2
Allowance for impairment losses (1) - (1) - (2)
Net carrying amount 4,553 9 - - 4,562
Due from fellow Lloyds Banking Group undertakings
At 31 December 2021 739 - - - 739
Allowance for impairment losses - - - - -
Net carrying amount 739 - - - 739
Total financial assets at amortised cost 440,935 33,781 4,833 10,767 490,316
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 9: 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 POCI Total
£m £m £m £m £m
Undrawn balances
At 1 January 2021 191 221 14 - 426
Exchange and other adjustments 1 (2) - - (1)
Transfers to Stage 1 73 (73) - -
Transfers to Stage 2 (8) 8 - -
Transfers to Stage 3 (1) (6) 7 -
Impact of transfers between stages (65) 20 (4) (49)
(1) (51) 3 (49)
Other items taken to the income statement (88) (82) (12) - (182)
Credit to the income statement (89) (133) (9) - (231)
At 31 December 2021 103 86 5 - 194
The Group's total impairment allowances at 31 December 2021 were as follows:
Allowance for expected credit losses
Stage 1 Stage 2 Stage 3 POCI Total
£m £m £m £m £m
In respect of:
Loans and advances to banks - - - - -
Loans and advances to customers 909 1,112 1,573 210 3,804
Debt securities 1 - 1 - 2
Financial assets at amortised cost 910 1,112 1,574 210 3,806
Provisions in relation to loan commitments and financial guarantees 103 86 5 - 194
Total 1,013 1,198 1,579 210 4,000
Expected credit loss in respect of financial assets at fair value through 3 - - - 3
other comprehensive income (memorandum item)
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.
Loans and advances to customers include advances securitised under the Group's
securitisation and covered bond programmes (see note 10).
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 10: Debt securities in issue
At 30 June 2022 At 31 December 2021
At At Total At At Total
fair value amortised £m fair value amortised £m
through cost through cost
profit £m profit £m
or loss or loss
£m £m
Medium-term notes issued 5,614 24,507 30,121 6,504 23,820 30,324
Covered bonds - 15,280 15,280 - 17,407 17,407
Certificates of deposit - 2,027 2,027 - 290 290
Securitisation notes 29 3,574 3,603 33 3,672 3,705
Commercial paper - 7,835 7,835 - 3,535 3,535
5,643 53,223 58,866 6,537 48,724 55,261
The notes issued by the Group's securitisation and covered bond programmes are
held by external parties and by subsidiaries of the Group.
Securitisation programmes
At 30 June 2022, external parties held £3,603 million (31 December 2021:
£3,705 million) of the Group's securitisation notes in issue; these notes,
together with those held internally, are secured on loans and advances to
customers and debt securities held at amortised cost amounting to £30,134
million (31 December 2021: £30,965 million), the majority of which have been
sold by subsidiary companies to bankruptcy remote structured entities. The
structured entities are consolidated fully and all of these loans are retained
on the Group's balance sheet.
Covered bond programmes
At 30 June 2022, external parties held £15,280 million (31 December 2021:
£17,407 million) of the Group's covered bonds in issue; these bonds,
together with those held internally, are secured on certain loans and advances
to customers amounting to £31,345 million (31 December 2021: £36,729
million) that have been assigned to bankruptcy remote limited liability
partnerships. These loans are retained on the Group's balance sheet.
Cash deposits of £3,936 million (31 December 2021: £3,455 million) which
support the debt securities issued by the structured entities, the term
advances related to covered bonds and other legal obligations are held by the
Group.
Note 11: Retirement benefit obligations
The Group's post-retirement defined benefit scheme obligations are comprised
as follows:
At 30 Jun At 31 Dec
2022 2021
£m £m
Defined benefit pension schemes:
Fair value of scheme assets 39,365 51,534
Present value of funded obligations (33,992) (47,130)
Net pension scheme asset 5,373 4,404
Other post-retirement schemes (87) (103)
Net retirement benefit asset 5,286 4,301
Recognised on the balance sheet as:
Retirement benefit assets 5,473 4,531
Retirement benefit obligations (187) (230)
Net retirement benefit asset 5,286 4,301
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 11: Retirement benefit obligations (continued)
Movements in the Group's net post-retirement defined benefit scheme asset
during the period were as follows:
£m
Asset at 1 January 2022 4,301
Income statement charge (68)
Employer contributions 1,434
Remeasurement (382)
Exchange and other adjustments 1
Asset at 30 June 2022 5,286
The principal assumptions used in the valuations of the defined benefit
pension schemes were as follows:
At 30 Jun At 31 Dec
2022 2021
% %
Discount rate 3.80 1.94
Rate of inflation:
Retail Price Index 3.10 3.21
Consumer Price Index 2.77 2.92
Rate of salary increases 0.00 0.00
Weighted-average rate of increase for pensions in payment 2.82 2.88
Note 12: Other provisions
Provisions Regulatory Other Total
for financial and legal £m £m
commitments provisions
and guarantees £m
£m
At 1 January 2022 194 1,054 685 1,933
Exchange and other adjustments (1) - 69 68
Provisions applied - (225) (153) (378)
Charge for the period 32 58 60 150
At 30 June 2022 225 887 661 1,773
Regulatory and legal provisions
In the course of its business, the Group is engaged in discussions with the
PRA, FCA and other UK and overseas regulators and other governmental
authorities on a range of matters. The Group also receives complaints in
connection with its past conduct and claims brought by or on behalf of current
and former employees, customers, investors and other third parties and is
subject to legal proceedings and other legal actions. Where significant,
provisions are held against the costs expected to be incurred in relation to
these matters and matters arising from related internal reviews. During the
half-year to 30 June 2022 the Group charged a further £58 million in respect
of legal actions and other regulatory matters.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 12: Other provisions (continued)
The unutilised balance at 30 June 2022 was £887 million (31 December 2021:
£1,054 million). The most significant items are as follows:
HBOS Reading - review
The Group continues to apply the recommendations from Sir Ross Cranston's
review, issued in December 2019, including a reassessment of direct and
consequential losses by an independent panel (the Foskett Panel), an extension
of debt relief and a wider definition of de facto directors. The appeal
process for the further assessment of debt relief and de facto director status
is now nearing completion. Further details of the Foskett Panel were announced
on 3 April 2020 and the Foskett Panel's full scope and methodology was
published on 7 July 2020. The Foskett Panel's stated objective is to consider
cases via a non-legalistic and fair process and to make their decisions in a
generous, fair and common sense manner, assessing claims against an expanded
definition of the fraud and on a lower evidential basis.
Following the emergence of the first outcomes of the Foskett Panel through
2021, the Group charged a further £790 million in the year ended 31 December
2021, of which £600 million was recognised in the fourth quarter. This
included operational costs in relation to Dame Linda Dobbs's review, which is
considering whether the issues relating to HBOS Reading were investigated and
appropriately reported by the Group during the period from January 2009 to
January 2017, and other programme costs. A significant proportion of the
fourth quarter charge related to the estimated future awards from the Foskett
Panel. To date the Foskett Panel has shared outcomes on a limited subset of
the total population which covers a wide range of businesses and different
claim characteristics. The estimated awards provision recognised is therefore
materially dependent on the assumption that the limited number of awards to
date are representative of the full population of cases.
Following the provision taken for the independent review of compensation for
customers of HBOS Reading, the Lloyds Banking Group's Remuneration Committee
has undertaken its review of whether performance adjustments are required in
light of the shortcomings identified by Sir Ross Cranston in relation to the
original review of customer compensation overseen by Professor Griggs. Taking
into account prior actions taken, including the voluntary withdrawal of the
former Group Chief Executive and former Chief Operating Officer from the 2019
GPS awards as a result of the overall performance of the Group and the issues
faced during 2019, including publication of the Cranston report, the
Remuneration Committee has determined that the Group's performance adjustment
requirements have been met in respect of the Executive Directors in office at
the relevant time.
In June 2022 the Foskett Panel announced an alternative option, in the form of
a fixed sum award, which could be accepted as an alternative to participation
in the full re-review process, to support earlier resolution of claims for
those deemed by the Foskett Panel to be victims of the fraud. The estimated
awards provision recognised at 31 December 2021 remains the Group's best
estimate of the cost to conclude the process. With the alternative process
only recently commenced and no experience of overall participation, alongside
previously stated existing uncertainties, there is a risk that the final
outcome could be significantly different from the current provision once the
re-review is concluded by the Foskett Panel. There is no confirmed timeline
for the completion of the Foskett Panel re-review process. The Group is
committed to implementing Sir Ross's recommendations in full.
Payment protection insurance
The Group has incurred costs for PPI over a number of years totalling £21,906
million. Good progress continues to be made towards ensuring operational
completeness, ahead of an orderly programme close. In addition to the above,
the Group continues to challenge PPI litigation cases, with mainly legal fees
and operational costs associated with litigation activity recognised within
regulatory and legal provisions. PPI litigation remains inherently uncertain,
with a number of key court judgments due to be delivered in the second half of
2022.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 13: 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 30 Jun At 31 Dec
2022 2021
£m £m
Assets, included within:
Financial assets at amortised cost: due from fellow Lloyds Banking Group 714 739
undertakings
Derivative financial instruments 1,036 634
1,750 1,373
Liabilities, included within:
Due to fellow Lloyds Banking Group undertakings 1,658 1,490
Derivative financial instruments 1,122 939
Debt securities in issue 19,039 17,961
Subordinated liabilities 5,588 5,176
27,407 25,566
During the half-year to 30 June 2022 the Group earned £3 million (half-year
to 30 June 2021: £3 million) of interest income and incurred £270 million
(half-year to 30 June 2021: £242 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 2022 are similar
in nature to those for the year ended 31 December 2021.
Note 14: Contingent liabilities, commitments and guarantees
Interchange fees
With respect to multi-lateral interchange fees (MIFs), the Lloyds Banking
Group is not involved in the ongoing or threatened litigation which involves
the card schemes Visa and Mastercard (as described below). However, the Group
is a member/licensee of Visa and Mastercard and other card schemes. The
litigation in question is as follows:
• Litigation brought by or on behalf of retailers against both Visa and
Mastercard in the English Courts, in which retailers are seeking damages on
grounds that Visa and Mastercard's MIFs breached competition law (this
includes a judgment of the Supreme Court in June 2020 upholding the Court of
Appeal's finding in 2018 that certain historic interchange arrangements of
Mastercard and Visa infringed competition law)
• Litigation brought on behalf of UK consumers in the English Courts
against Mastercard
Any impact on the Group of the litigation against Visa and Mastercard remains
uncertain at this time, such that it is not practicable for the Group to
provide an estimate of any potential financial effect. Insofar as Visa is
required to pay damages to retailers for interchange fees set prior to June
2016, contractual arrangements to allocate liability have been agreed between
various UK banks (including the Lloyds Banking Group) and Visa Inc, as part of
Visa Inc's acquisition of Visa Europe in 2016. These arrangements cap the
maximum amount of liability to which the Lloyds Banking Group may be subject
and this cap is set at the cash consideration received by the Lloyds Banking
Group for the sale of its stake in Visa Europe to Visa Inc in 2016. In 2016,
the Lloyds Banking Group received Visa preference shares as part of the
consideration for the sale of its shares in Visa Europe. A release assessment
is carried out by Visa on certain anniversaries of the sale (in line with the
Visa Europe sale documentation) and as a result, some Visa preference shares
may be converted into Visa Inc Class A common stock. Any such release and any
subsequent sale of Visa common stock does not impact the contingent liability.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 14: Contingent liabilities, commitments and guarantees (continued)
LIBOR and other trading rates
Certain Group companies, together with other panel banks, have been named as
defendants in ongoing private lawsuits, including purported class action
suits, in the US in connection with their roles as panel banks contributing to
the setting of US Dollar, Japanese Yen and Sterling London Interbank Offered
Rate and the Australian BBSW reference rate.
Certain Group companies are also named as defendants in (i) UK-based claims;
and (ii) two Dutch class actions, raising LIBOR manipulation allegations. A
number of claims against the Group in the UK relating to the alleged mis-sale
of interest rate hedging products also include allegations of LIBOR
manipulation.
It is currently not possible to predict the scope and ultimate outcome on the
Group of any private lawsuits or any related challenges to the interpretation
or validity of any of the Group's contractual arrangements, including their
timing and scale. As such, it is not practicable to provide an estimate of any
potential financial effect.
Tax authorities
The Group has an open matter in relation to a claim for group relief of losses
incurred in its former Irish banking subsidiary, which ceased trading on 31
December 2010. In 2013, HMRC informed the Group that its interpretation of the
UK rules means that the group relief is not available. In 2020, HMRC concluded
their enquiry into the matter and issued a closure notice. The Group's
interpretation of the UK rules has not changed and hence it has appealed to
the First Tier Tax Tribunal, with a hearing expected in 2023. If the final
determination of the matter by the judicial process is that HMRC's position is
correct, management estimate that this would result in an increase in current
tax liabilities of approximately £750 million (including interest) and a
reduction in the Group's deferred tax asset of approximately £305 million.
The Group, having taken appropriate advice, does not consider that this is a
case where additional tax will ultimately fall due.
There are a number of other open matters on which the Group is in discussions
with HMRC (including the tax treatment of certain costs arising from the
divestment of TSB Banking Group plc), none of which is expected to have a
material impact on the financial position of the Group.
Other legal actions and regulatory matters
In addition, during the ordinary course of business the Group is subject to
other complaints and threatened or actual legal proceedings (including class
or group action claims) brought by or on behalf of current or former
employees, customers, investors or other third parties, as well as legal and
regulatory reviews, challenges, investigations and enforcement actions, which
could relate to a number of issues, including financial, environmental or
other regulatory matters, both in the UK and overseas. Where material, such
matters are periodically reassessed, with the assistance of external
professional advisers where appropriate, to determine the likelihood of the
Group incurring a liability. In those instances where it is concluded that it
is more likely than not that a payment will be made, a provision is
established based on management's best estimate of the amount required at the
relevant balance sheet date. In some cases it will not be possible to form a
view, for example because the facts are unclear or because further time is
needed to assess properly the merits of the case, and no provisions are held
in relation to such matters. In these circumstances, specific disclosure in
relation to a contingent liability will be made where material. However, the
Group does not currently expect the final outcome of any such case to have a
material adverse effect on its financial position, operations or cash flows.
Where there is a contingent liability related to an existing provision the
relevant disclosures are included within note 12.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 14: Contingent liabilities, commitments and guarantees (continued)
Contingent liabilities, commitments and guarantees arising from the banking
business
At 30 Jun At 31 Dec
2022 2021
£m £m
Contingent liabilities
Acceptances and endorsements 415 21
Other:
Other items serving as direct credit substitutes 559 433
Performance bonds, including letters of credit, and other transaction-related 1,961 1,886
contingencies
2,520 2,319
Total contingent liabilities 2,935 2,340
Commitments and guarantees
Forward asset purchases and forward deposits placed 75 60
Undrawn formal standby facilities, credit lines and other commitments to lend:
Less than 1 year original maturity:
Mortgage offers made 20,002 17,757
Other commitments and guarantees 78,256 79,830
98,258 97,587
1 year or over original maturity 29,617 30,037
Total commitments and guarantees 127,950 127,684
Of the amounts shown above in respect of undrawn formal standby facilities,
credit lines and other commitments to lend, £57,585 million (31 December
2021: £55,690 million) was irrevocable.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 15: 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 41 to the Group's financial statements for the year
ended 31 December 2021 details the definitions of the three levels in the fair
value hierarchy.
Valuation control framework
Key elements of the valuation control framework, which covers processes for
all levels in the fair value hierarchy including level 3 portfolios, include
model validation (incorporating pre-trade and post-trade testing), product
implementation review and independent price verification. 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 the Group's
financial statements for the year ended 31 December 2021 applied to these
portfolios.
The table below summarises the carrying values of financial assets and
liabilities measured at amortised cost in the Group'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 2022 At 31 December 2021
Carrying Fair Carrying Fair
value value value value
£m £m £m £m
Financial assets
Loans and advances to banks 5,661 5,661 4,478 4,478
Loans and advances to customers 434,968 438,255 430,829 434,280
Reverse repurchase agreements 52,057 52,057 49,708 49,708
Debt securities 6,401 6,286 4,562 4,615
Due from fellow Lloyds Banking Group undertakings 714 714 739 739
Financial assets at amortised cost 499,801 502,973 490,316 493,820
Financial liabilities
Deposits from banks 4,034 4,036 3,363 3,364
Customer deposits 450,928 450,940 449,373 449,455
Repurchase agreements at amortised cost 48,153 48,153 30,106 30,106
Due to fellow Lloyds Banking Group undertakings 1,658 1,658 1,490 1,490
Debt securities in issue 53,223 53,378 48,724 50,683
Subordinated liabilities 6,515 6,921 8,658 9,363
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 the following financial instruments is a reasonable
approximation of fair value: cash and balances at central banks, items in the
course of collection from banks, items in course of transmission to banks and
notes in circulation.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 15: Fair values of financial assets and liabilities (continued)
The Group manages valuation adjustments for its derivative exposures on a net
basis; the Group 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 the Group that are carried at fair value in the Group'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.
Financial assets Level 1 Level 2 Level 3 Total
£m £m £m £m
At 30 June 2022
Financial assets at fair value through profit or loss:
Loans and advances to customers - 827 361 1,188
Equity shares 237 - 4 241
Total financial assets at fair value through profit or loss 237 827 365 1,429
Financial assets at fair value through other comprehensive income:
Debt securities 10,933 13,041 54 24,028
Equity shares - - 1 1
Total financial assets at fair value through other comprehensive income 10,933 13,041 55 24,029
Derivative financial instruments - 5,041 1 5,042
Total financial assets carried at fair value 11,170 18,909 421 30,500
At 31 December 2021
Financial assets at fair value through profit or loss
Loans and advances to customers - 1,164 395 1,559
Equity shares 235 - 4 239
Total financial assets at fair value through profit or loss 235 1,164 399 1,798
Financial assets at fair value through other comprehensive income:
Debt securities 15,239 12,491 55 27,785
Equity shares - - 1 1
Total financial assets at fair value through other comprehensive income 15,239 12,491 56 27,786
Derivative financial instruments - 5,495 16 5,511
Total financial assets carried at fair value 15,474 19,150 471 35,095
Financial liabilities Level 1 Level 2 Level 3 Total
£m £m £m £m
At 30 June 2022
Financial liabilities at fair value through profit or loss - 5,614 29 5,643
Derivative financial instruments - 5,314 174 5,488
Total financial liabilities carried at fair value - 10,928 203 11,131
At 31 December 2021
Financial liabilities at fair value through profit or loss - 6,504 33 6,537
Derivative financial instruments - 4,436 207 4,643
Total financial liabilities carried at fair value - 10,940 240 11,180
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 15: Fair values of financial assets and liabilities (continued)
Movements in level 3 portfolio
The tables below analyse movements in the level 3 financial assets portfolio.
Financial Financial Derivative assets Total
assets at assets at £m financial
fair value fair value assets
through through other carried at
profit or loss comprehensive fair value
£m income £m
£m
At 1 January 2022 399 56 16 471
Exchange and other adjustments - 1 - 1
Losses recognised in the income statement within other income (4) - (3) (7)
Losses recognised in other comprehensive income within the revaluation reserve - - - -
in respect of financial assets at fair value through other comprehensive
income
Purchases/increases to customer loans - - - -
Sales/repayments of customer loans (30) (2) - (32)
Transfers into the level 3 portfolio - - - -
Transfers out of the level 3 portfolio - - (12) (12)
At 30 June 2022 365 55 1 421
Losses recognised in the income statement, within other income, relating to (5) - - (5)
the change in fair value of those assets held at 30 June 2022
At 1 January 2021 1,511 65 14 1,590
Exchange and other adjustments (15) (3) - (18)
Losses recognised in the income statement within other income (49) - (2) (51)
Losses recognised in other comprehensive income within the revaluation reserve - (4) - (4)
in respect of financial assets at fair value through other comprehensive
income
Purchases/increases to customer loans 18 - - 18
Sales/repayments of customer loans (374) (2) - (376)
Transfers into the level 3 portfolio 4 - - 4
Transfers out of the level 3 portfolio (653) - - (653)
At 30 June 2021 442 56 12 510
Losses recognised in the income statement, within other income, relating to (60) - (2) (62)
the change in fair value of those assets held at 30 June 2021
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 15: Fair values of financial assets and liabilities (continued)
The tables below analyse movements in the level 3 financial liabilities
portfolio.
Financial Derivative liabilities Total
liabilities £m financial
at fair value liabilities
through carried at
profit or loss fair value
£m £m
At 1 January 2022 33 207 240
Gains recognised in the income statement within other income (2) (22) (24)
Redemptions (2) (11) (13)
At 30 June 2022 29 174 203
Gains recognised in the income statement, within other income, relating to the (2) (5) (7)
change in fair value of those liabilities held at 30 June 2022
At 1 January 2021 45 319 364
Gains recognised in the income statement within other income (2) (55) (57)
Redemptions (5) (19) (24)
At 30 June 2021 38 245 283
Gains recognised in the income statement, within other income, relating to the - - -
change in fair value of those liabilities held at 30 June 2021
The tables below set out the effects of reasonably possible alternative
assumptions for categories of level 3 financial assets and financial
liabilities.
Effect of reasonably
possible alternative
assumptions(1)
At 30 June 2022 Valuation Significant unobservable inputs(2) Carrying value Favourable changes Unfavourable
techniques £m £m changes
£m
Financial assets at fair value through profit or loss
Loans and advances to customers Discounted cash flows Interest rate spreads 361 29 (27)
(+/- 50bps)
Other 4
365
Financial assets at fair value through other comprehensive income 55
Derivative financial assets 1
Level 3 financial assets carried at fair value 421
Financial liabilities at fair value through profit or loss 29
Derivative financial liabilities
Interest rate derivatives Option pricing model Interest rate volatility (11%/147%) 3
Shared appreciation rights Market values - property valuation HPI (+/- 1%) 171
174
Level 3 financial liabilities carried at fair value 203
(1 ) Where the exposure to an unobservable input is managed on a net
basis, only the net impact is shown in the table.
(2 ) Ranges are shown where appropriate and represent the highest and
lowest inputs used in the level 3 valuations.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 15: Fair values of financial assets and liabilities (continued)
Effect of reasonably
possible alternative
assumptions(1)
At 31 December 2021 Valuation Significant Carrying value Favourable changes Unfavourable changes
techniques unobservable inputs(2) £m £m £m
Financial assets at fair value through profit or loss
Loans and advances to customers Discounted cash flows Interest rate spreads 395 32 (30)
(+/- 50bps)
Other 4
399
Financial assets at fair value through other comprehensive income 56
Derivative financial assets 16
Level 3 financial assets carried at fair value 471
Financial liabilities at fair value through profit or loss 33
Derivative financial liabilities
Interest rate derivatives Option pricing model Interest rate volatility (13%/168%) 31
Shared appreciation rights Market values - property valuation HPI (+/- 1%) 176
207
Level 3 financial liabilities carried at fair value 240
(1 ) Where the exposure to an unobservable input is managed on a net
basis, only the net impact is shown in the table.
(2 ) Ranges are shown where appropriate and represent the highest and
lowest inputs used in the level 3 valuations.
Unobservable inputs
Significant unobservable inputs affecting the valuation of debt securities,
unlisted equity investments and derivatives are unchanged from those described
in the Group's financial statements for the year ended 31 December 2021.
Reasonably possible alternative assumptions
Valuation techniques applied to many of the Group'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 note 41 to the Group's financial statements for the year
ended 31 December 2021.
(
)
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 16: Interest rate benchmark reform
During 2022, the Group continues to manage the transition to alternative
benchmark rates under its Group-wide IBOR transition programme. During 2021,
the Group transitioned substantially all of its non-US Dollar LIBOR products
and continues to work with customers to transition a small number of remaining
contracts that either have yet to transition or have defaulted to the relevant
synthetic LIBOR benchmark in the interim.
US Dollar LIBOR transition is expected to take place in the next year as these
settings are expected to cease immediately after 30 June 2023. The majority of
the Group's exposures are expected to transition through industry-led
transition programmes managed by the London Clearing House or through the
International Swaps and Derivatives Association (ISDA) protocol. Other
contracts (primarily loans) maturing after June 2023 will be managed through
the Group's existing processes, either transitioning to an alternative
benchmark rate or allowed to fallback under existing contract protocols or
through US legislation.
At 30 June 2022, the Group had the following significant exposures impacted by
interest rate benchmark reform which have yet to transition to the replacement
benchmark rate:
At 30 June 2022 Sterling US Dollar Other(1) Total
LIBOR LIBOR £m £m
£m £m
Non-derivative financial assets
Financial assets at fair value through profit or loss - - - -
Loans and advances to banks - 1,586 - 1,586
Loans and advances to customers 886 1,275 5 2,166
Financial assets at amortised cost 886 2,861 5 3,752
886 2,861 5 3,752
Non-derivative financial liabilities
Financial liabilities at fair value through profit or loss - 103 - 103
Debt securities in issue - 3,888 321 4,209
- 3,991 321 4,312
Derivative notional/contract amount
Interest rate 1,411 118,296 796 120,503
Cross currency - 19,997 958 20,955
1,411 138,293 1,754 141,458
(1 ) Balances within Other include Canadian Dollar Offered Rate for which
a cessation announcement, effective after 28 June 2024, was published on 16
May 2022.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 16: Interest rate benchmark reform (continued)
At 31 December 2021 Sterling LIBOR US Dollar LIBOR Other Total
£m £m £m £m
Non-derivative financial assets
Financial assets at fair value through profit or loss 131 172 - 303
Loans and advances to banks - 3,252 - 3,252
Loans and advances to customers 3,419 2,549 - 5,968
Financial assets at amortised cost 3,419 5,801 - 9,220
3,550 5,973 - 9,523
Non-derivative financial liabilities
Financial liabilities at fair value through profit or loss - 100 3 103
Debt securities in issue(1) - 3,548 26 3,574
- 3,648 29 3,677
Derivative notional/contract amount
Interest rate 4,271 120,797 - 125,068
Cross currency - 22,663 - 22,663
4,271 143,460 - 147,731
(1 ) Includes capital related issuances of £3,494 million held by Lloyds
Banking Group plc.
As at 30 June 2022, the LIBOR balances in the above table relate to contracts
that have not transitioned to an alternative benchmark rate. In the case of
Sterling LIBOR, this includes contracts that will have both cash flows and
valuations determined on a synthetic LIBOR basis during 2022 as well as
contracts referencing panel bank LIBOR that have not yet had an interest rate
reset in 2022.
Of the £138,293 million of USD derivative notional balances as at 30 June
2022, £36,277 million relate to contracts with their final LIBOR fixing prior
to LIBOR cessation and £80,137 million relate to contracts settled through
the London Clearing House. Of the remaining £21,879 million, £21,780 million
are fallback-eligible.
By 31 December 2021, the Group had transitioned its Sterling, Euro, Japanese
Yen and Swiss Franc LIBOR hedge accounting models to risk-free rates. The
Group plans to complete the transition of its USD LIBOR hedge accounting
models ahead of the 30 June 2023 cessation date.
(
)
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 17: Credit quality of loans and advances to banks and customers
Gross drawn exposures and expected credit loss allowance
Drawn exposures Expected credit loss allowance
At 30 June 2022 Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
£m £m £m £m £m £m £m £m £m £m
Loans and advances to banks:
CMS 1-10 5,659 - - - 5,659 1 - - - 1
CMS 11-14 3 - - - 3 - - - - -
CMS 15-18 - - - - - - - - - -
CMS 19 - - - - - - - - - -
CMS 20-23 - - - - - - - - - -
5,662 - - - 5,662 1 - - - 1
Loans and advances to customers:
Retail - UK mortgages
RMS 1-6 266,547 25,096 - - 291,643 44 205 - - 249
RMS 7-9 1 2,499 - - 2,500 - 50 - - 50
RMS 10 - 786 - - 786 - 20 - - 20
RMS 11-13 - 1,725 - - 1,725 - 62 - - 62
RMS 14 - - 3,424 10,415 13,839 - - 254 202 456
266,548 30,106 3,424 10,415 310,493 44 337 254 202 837
Retail - credit cards
RMS 1-6 11,572 1,156 - - 12,728 83 59 - - 142
RMS 7-9 912 750 - - 1,662 34 107 - - 141
RMS 10 - 123 - - 123 - 31 - - 31
RMS 11-13 - 260 - - 260 - 114 - - 114
RMS 14 - - 280 - 280 - - 111 - 111
12,484 2,289 280 - 15,053 117 311 111 - 539
Retail - loans and overdrafts
RMS 1-6 7,317 337 - - 7,654 90 21 - - 111
RMS 7-9 1,306 385 - - 1,691 56 54 - - 110
RMS 10 32 116 - - 148 3 27 - - 30
RMS 11-13 11 306 - - 317 1 116 - - 117
RMS 14 - - 256 - 256 - - 135 - 135
8,666 1,144 256 - 10,066 150 218 135 - 503
Retail - UK Motor Finance
RMS 1-6 11,864 1,204 - - 13,068 99 22 - - 121
RMS 7-9 610 366 - - 976 5 14 - - 19
RMS 10 - 86 - - 86 - 9 - - 9
RMS 11-13 2 176 - - 178 - 35 - - 35
RMS 14 - - 179 - 179 - - 105 - 105
12,476 1,832 179 - 14,487 104 80 105 - 289
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 17: Credit quality of loans and advances to banks and customers
(continued)
Gross drawn exposures and expected credit loss allowance (continued)
Drawn exposures Expected credit loss allowance
At 30 June 2022 Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
£m £m £m £m £m £m £m £m £m £m
Retail - other
RMS 1-6 15,673 1,085 - - 16,758 15 12 - - 27
RMS 7-9 899 725 - - 1,624 12 12 - - 24
RMS 10 - 2 - - 2 - - - - -
RMS 11-13 117 593 - - 710 - 34 - - 34
RMS 14 - - 1,280 - 1,280 - - 54 - 54
16,689 2,405 1,280 - 20,374 27 58 54 - 139
Total Retail 316,863 37,776 5,419 10,415 370,473 442 1,004 659 202 2,307
Commercial Banking
CMS 1-10 29,433 608 - - 30,041 20 11 - - 31
CMS 11-14 30,339 2,332 - - 32,671 85 54 - - 139
CMS 15-18 1,013 2,857 - - 3,870 11 167 - - 178
CMS 19 - 204 - - 204 - 18 - - 18
CMS 20-23 - - 2,586 - 2,586 - - 948 - 948
60,785 6,001 2,586 - 69,372 116 250 948 - 1,314
Other(1)
RMS 1-6 945 31 - - 976 5 - - - 5
RMS 7-9 - - - - - - - - - -
RMS 10 - - - - - - - - - -
RMS 11-13 - - - - - - - - - -
RMS 14 - - 55 - 55 - - 8 - 8
945 31 55 - 1,031 5 - 8 - 13
CMS 1-10 (1,809) - - - (1,809) - - - - -
CMS 11-14 (260) - - - (260) - - - - -
CMS 15-18 (1) - - - (1) - - - - -
CMS 19 (4) - - - (4) - - - - -
CMS 20-23 - - - - - - - - - -
(2,074) - - - (2,074) - - - - -
Central adjustment - - - - - 200 - - - 200
Total loans and advances to customers 376,519 43,808 8,060 10,415 438,802 763 1,254 1,615 202 3,834
In respect of:
Retail 316,863 37,776 5,419 10,415 370,473 442 1,004 659 202 2,307
Commercial Banking 60,785 6,001 2,586 - 69,372 116 250 948 - 1,314
Other(1) (1,129) 31 55 - (1,043) 205 - 8 - 213
Total loans and advances to customers 376,519 43,808 8,060 10,415 438,802 763 1,254 1,615 202 3,834
(1 ) Includes centralised fair value hedge accounting adjustments.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 17: Credit quality of loans and advances to banks and customers
(continued)
Gross drawn exposures and expected credit loss allowance (continued)
Drawn exposures Expected credit loss allowance
At 31 December 2021 Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
£m £m £m £m £m £m £m £m £m £m
Loans and advances to banks:
CMS 1-10 4,476 - - - 4,476 - - - - -
CMS 11-14 2 - - - 2 - - - - -
CMS 15-18 - - - - - - - - - -
CMS 19 - - - - - - - - - -
CMS 20-23 - - - - - - - - - -
4,478 - - - 4,478 - - - - -
Loans and advances to customers:
Retail - UK mortgages
RMS 1-6 273,620 18,073 - - 291,693 48 250 - - 298
RMS 7-9 9 2,258 - - 2,267 - 64 - - 64
RMS 10 - 355 - - 355 - 15 - - 15
RMS 11-13 - 1,112 - - 1,112 - 65 - - 65
RMS 14 - - 1,940 10,977 12,917 - - 184 210 394
273,629 21,798 1,940 10,977 308,344 48 394 184 210 836
Retail - credit cards
RMS 1-6 11,252 1,107 - - 12,359 67 43 - - 110
RMS 7-9 896 623 - - 1,519 29 71 - - 100
RMS 10 - 112 - - 112 - 22 - - 22
RMS 11-13 - 235 - - 235 - 82 - - 82
RMS 14 - - 292 - 292 - - 128 - 128
12,148 2,077 292 - 14,517 96 218 128 - 442
Retail - loans and overdrafts
RMS 1-6 7,220 501 - - 7,721 84 23 - - 107
RMS 7-9 938 286 - - 1,224 39 33 - - 72
RMS 10 18 74 - - 92 2 14 - - 16
RMS 11-13 5 244 - - 249 1 83 - - 84
RMS 14 - - 271 - 271 - - 139 - 139
8,181 1,105 271 - 9,557 126 153 139 - 418
Retail - UK Motor Finance
RMS 1-6 11,662 1,309 - - 12,971 101 25 - - 126
RMS 7-9 583 298 - - 881 5 15 - - 20
RMS 10 - 69 - - 69 - 7 - - 7
RMS 11-13 2 152 - - 154 - 27 - - 27
RMS 14 - - 201 - 201 - - 116 - 116
12,247 1,828 201 - 14,276 106 74 116 - 296
( )
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 17: Credit quality of loans and advances to banks and customers
(continued)
Gross drawn exposures and expected credit loss allowance (continued)
Drawn exposures Expected credit loss allowance
At 31 December 2021 Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
£m £m £m £m £m £m £m £m £m £m
Retail - other(1)
RMS 1-6 15,330 777 - - 16,107 21 10 - - 31
RMS 7-9 1,265 616 - - 1,881 5 27 - - 32
RMS 10 - 2 - - 2 - - - - -
RMS 11-13 177 612 - - 789 - 21 - - 21
RMS 14 - - 778 - 778 - - 55 - 55
16,772 2,007 778 - 19,557 26 58 55 - 139
Total Retail 322,977 28,815 3,482 10,977 366,251 402 897 622 210 2,131
Commercial Banking(1)
CMS 1-10 28,471 186 - - 28,657 18 1 - - 19
CMS 11-14 29,728 3,292 - - 33,020 75 75 - - 150
CMS 15-18 759 2,304 - - 3,063 9 119 - - 128
CMS 19 - 253 - - 253 - 18 - - 18
CMS 20-23 - - 2,862 - 2,862 - - 942 - 942
58,958 6,035 2,862 - 67,855 102 213 942 - 1,257
Other(2)
RMS 1-6 898 34 - - 932 5 2 - - 7
RMS 7-9 - - - - - - - - - -
RMS 10 - - - - - - - - - -
RMS 11-13 - - - - - - - - - -
RMS 14 - - 62 - 62 - - 9 - 9
898 34 62 - 994 5 2 9 - 16
CMS 1-10 (469) - - - (469) - - - - -
CMS 11-14 - - - - - - - - - -
CMS 15-18 - - - - - - - - - -
CMS 19 2 - - - 2 - - - - -
CMS 20-23 - - - - - - - - - -
(467) - - - (467) - - - - -
Central adjustment - - - - - 400 - - - 400
Total loans and 382,366 34,884 6,406 10,977 434,633 909 1,112 1,573 210 3,804
advances to
customers
In respect of:
Retail 322,977 28,815 3,482 10,977 366,251 402 897 622 210 2,131
Commercial Banking 58,958 6,035 2,862 - 67,855 102 213 942 - 1,257
Other(2) 431 34 62 - 527 405 2 9 - 416
Total loans and 382,366 34,884 6,406 10,977 434,633 909 1,112 1,573 210 3,804
advances to
customers
(1 ) Restated, see page 49.
(2 ) Includes centralised fair value hedge accounting adjustments.
( )
(
)
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)
Note 18: Dividends on ordinary shares
The Bank has not paid any dividends in the half-year to 30 June 2022.
The Bank paid dividends of £1,000 million on 19 May 2021 and £1,900 million
on 27 October 2021.
Note 19: 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 2021 and copies
may be obtained from Investor Relations, Lloyds Banking Group plc, 25 Gresham
Street, London EC2V 7HN and are available for download from
www.lloydsbankinggroup.com.
Note 20: Other information
The financial information contained in this document does not constitute
statutory accounts within the meaning of section 434 of the Companies Act 2006
(the Act). The statutory accounts for the year ended 31 December 2021 were
approved by the Directors on 8 March 2022 and were delivered to the Registrar
of Companies on 2 April 2022. 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 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 2022 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 2022
and any material changes in the related party transactions described in the
last annual report.
Signed on behalf of the Board by
Charlie Nunn
Chief Executive
26 July 2022
Lloyds Bank plc Board of Directors:
Executive Directors:
Charlie Nunn (Chief Executive)
William Chalmers (Chief Financial Officer)
Non-Executive Directors:
Robin Budenberg CBE (Chair)
Alan Dickinson (Deputy Chair)
Sarah Bentley
Brendan Gilligan
Nigel Hinshelwood
Sarah Legg
Lord Lupton CBE
Amanda Mackenzie OBE
Harmeen Mehta
Catherine Woods
INDEPENDENT REVIEW REPORT TO LLOYDS BANK PLC
Conclusion
We have been engaged by Lloyds Bank plc and its subsidiaries (the 'Group') to
review the condensed consolidated set of financial statements in the
half-yearly financial report for the six months ended 30 June 2022, 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 20.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed consolidated set of financial statements in the
half-yearly financial report for the six months ended 30 June 2022 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. 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 consolidated 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), however future events or conditions may cause the Group 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
company 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 consolidated set of
financial statements 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 Group 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 Group, for our review work, for this report, or for the conclusions
we have formed.
Deloitte LLP
Statutory Auditor
London, England
26 July 2022
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 plc together with its
subsidiaries (the Lloyds Bank Group) and its current goals and expectations.
Statements that are not historical or current facts, including statements
about the Lloyds Bank 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 Lloyds Bank 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 Lloyds
Bank Group's future financial performance; the level and extent of future
impairments and write-downs; the Lloyds Bank Group's ESG targets and/or
commitments; statements of plans, objectives or goals of the Lloyds Bank Group
or its management and other statements that are not historical fact;
expectations about the impact of COVID-19; and statements of assumptions
underlying such statements. By their nature, forward looking statements
involve risk and uncertainty because they relate to events and depend upon
circumstances that will or may occur in the future. Factors that could cause
actual business, strategy, plans and/or results (including but not limited to
the payment of dividends) to differ materially from forward looking statements
include, but are not limited to: general economic and business conditions in
the UK and internationally; market related risks, trends and developments;
risks concerning borrower and counterparty credit quality; fluctuations in
interest rates, inflation, exchange rates, stock markets and currencies;
volatility in credit markets; volatility in the price of the Lloyds Bank
Group's securities; any impact of the transition from IBORs to alternative
reference rates; the ability to access sufficient sources of capital,
liquidity and funding when required; changes to the Lloyds Bank Group's or
Lloyds Banking Group plc's credit ratings; the ability to derive cost savings
and other benefits including, but without limitation, as a result of any
acquisitions, disposals and other strategic transactions; inability to capture
accurately the expected value from acquisitions; potential changes in dividend
policy; the ability to achieve strategic objectives; insurance risks;
management and monitoring of conduct risk; exposure to counterparty risk;
credit rating risk; tightening of monetary policy in jurisdictions in which
the Lloyds Bank Group operates; instability in the global financial markets,
including within the Eurozone, and as a result of ongoing uncertainty
following the exit by the UK from the European Union (EU) and the effects of
the EU-UK Trade and Cooperation Agreement; political instability including as
a result of any UK general election and any further possible referendum on
Scottish independence; operational risks; conduct risk; technological changes
and risks to the security of IT and operational infrastructure, systems, data
and information resulting from increased threat of cyber and other attacks;
natural pandemic (including but not limited to the COVID-19 pandemic) and
other disasters; inadequate or failed internal or external processes or
systems; acts of hostility or terrorism and responses to those acts, or other
such events; geopolitical unpredictability; the war between Russia and
Ukraine; risks relating to sustainability and climate change (and achieving
climate change ambitions), including the Lloyds Bank Group's or the Lloyds
Banking Group's ability along with the government and other stakeholders to
measure, manage and mitigate the impacts of climate change effectively;
changes in laws, regulations, practices and accounting standards or taxation;
changes to regulatory capital or liquidity requirements and similar
contingencies; assessment related to resolution planning requirements; the
policies and actions of governmental or regulatory authorities or courts
together with any resulting impact on the future structure of the Lloyds Bank
Group; failure to comply with anti-money laundering, counter terrorist
financing, anti-bribery and sanctions regulations; failure to prevent or
detect any illegal or improper activities; projected employee numbers and key
person risk; increased labour costs; assumptions and estimates that form the
basis of the Lloyds Bank Group's financial statements; the impact of
competitive conditions; and exposure to legal, regulatory or competition
proceedings, investigations or complaints. A number of these influences and
factors are beyond the Lloyds Bank Group's control. Please refer to the latest
Annual Report on Form 20-F filed by Lloyds Bank 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 Bank 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 Bank 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 Lloyds Bank Group expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward
looking statements contained in this document whether as a result of new
information, future events or otherwise. The information, statements and
opinions contained in this document do not constitute a public offer under any
applicable law or an offer to sell any securities or financial instruments or
any advice or recommendation with respect to such securities or financial
instruments.
CONTACTS
For further information please contact:
INVESTORS AND ANALYSTS
Douglas Radcliffe
Group Investor Relations Director
020 7356 1571
douglas.radcliffe@lloydsbanking.com
Edward Sands
Director of Investor Relations
020 7356 1585
edward.sands@lloydsbanking.com
Nora Thoden
Director of Investor Relations - ESG
020 7356 2334
nora.thoden@lloydsbanking.com
CORPORATE AFFAIRS
Grant Ringshaw
External Relations Director
020 7356 2362
grant.ringshaw@lloydsbanking.com
Matt Smith
Head of Media Relations
020 7356 3522
matt.smith@lloydsbanking.com
Copies of this News Release may be obtained from:
Investor Relations, Lloyds Banking Group plc, 25 Gresham Street, London EC2V
7HN
The statement can also be found on the Group's website -
www.lloydsbankinggroup.com
Registered office: Lloyds Bank plc, 25 Gresham Street, London EC2V 7HN
Registered in England No. 2065
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR KZGZNLNZGZZGRecent news on Lloyds Banking
See all newsREG - Lloyds Banking Group - Transaction in Own Shares
AnnouncementREG - Official List - Official List Notice
AnnouncementREG - Stock Exch Notice - Admission to Trading - 28/08/2025
AnnouncementREG - Lloyds Banking Group - Transaction in Own Shares
AnnouncementREG - Lloyds Banking Group - Transaction in Own Shares
Announcement