REG - Lloyds Bank Plc Lloyds Banking Group - 2022 Q3 Interim Management Statement
27/10/2022 12:15
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RNS Number : 3340E Lloyds Bank PLC 27 October 2022
Lloyds Bank plc
Q3 2022 Interim Management Statement
27 October 2022
Member of the Lloyds Banking Group
REVIEW OF PERFORMANCE
Income statement
In the nine months to 30 September 2022, the Group recorded a profit before
tax of £4,480 million compared to £5,103 million in the same period in
2021, representing a reduction of £623 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 for the first nine months of 2021. Profit after tax
was £3,346 million.
Total income increased by £1,047 million, or 9 per cent, to £12,119 million
in the nine months to 30 September 2022 compared to £11,072 million in the
first nine months of 2021; there was an increase of £1,209 million in net
interest income and a decrease of £162 million in other income.
Net interest income was £9,458 million, an increase of £1,209 million
compared to £8,249 million in the nine months to 30 September 2021. The
increase in net interest income was driven by an improved margin, as a result
of UK Bank Rate increases and continued funding and capital optimisation,
partly offset by mortgage margin reductions. Increased average
interest-earning assets reflecting continued growth in the open mortgage book
also contributed positively.
Other income was £162 million lower at £2,661 million in the nine months to
30 September 2022 compared to £2,823 million in the same period last year.
Net fee and commission income increased by £58 million to £971 million,
compared to £913 million in the first nine months of 2021, due to higher
credit and debit card fees, reflecting increased levels of customer activity,
more than offsetting some reduction from lower levels of corporate financing
activity. Net trading income was £305 million lower at £88 million in the
nine months to 30 September 2022, in part reflecting the change in fair value
of interest rate derivatives and foreign exchange contracts not mitigated by
hedge accounting. Other operating income increased by £85 million to
£1,602 million compared to £1,517 million in the nine months to
30 September 2021, in part due to improved gains on disposal of financial
assets at fair value through other comprehensive income.
Total operating expenses decreased by £131 million to £6,629 million
compared to £6,760 million in the first nine months of 2021. Increased staff
costs reflected salary increases and the impact of a one-off £1,000 cost of
living payment to staff, partly offset by headcount reductions. In addition,
there was an increase in IT-related costs, as a result of the Group's
strategic investment programmes. Depreciation charges were lower reflecting
the continued strength in used car prices. The charge in respect of regulatory
provisions was £346 million lower at £67 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 nine months to 30 September 2022 of
£1,010 million, compared to a net credit of £791 million in the first nine
months of 2021, largely reflecting a low charge arising from observed credit
performance and a charge in the first nine months of 2022 as a result of
updates to the assessment of the economic outlook and associated scenarios,
compared to a significant credit in the first nine months of 2021. The updated
outlook includes elevated risks from a higher inflation and interest rate
environment, offset by a £400 million release of the COVID-19 central
adjustment in the nine months to 30 September 2022.
The Group's loan portfolio continues to be well-positioned, reflecting a
prudent through-the-cycle approach to lending with high levels of security,
also reflected in strong recovery performance. Observed credit performance
remains stable, with very modest evidence of deterioration and the flow of
assets into arrears, defaults and write-offs at low levels and below
pre-pandemic levels. Stage 3 loans and advances have been stable across the
third quarter. Credit card minimum payers and overdraft and revolving credit
facility (RCF) utilisation rates have remained low and in line with recent
trends.
The Group's expected credit loss (ECL) allowance increased in the first nine
months of the year to £4,519 million (31 December 2021: £4,000 million).
This reflects the balance of risks shifting from COVID-19 to increased
inflationary pressures and rising interest rates within the Group's base case
and wider economic scenarios. The deterioration in the economic outlook is now
reflected in variables which credit models better capture. As a result, the
Group's reliance on judgemental overlays for modelling risks in relation to
inflationary pressures has reduced, with these risks now captured more fully
in models.
The Group recognised a tax expense of £1,134 million in the period compared
to £141 million in the first nine months of 2021. During the first nine
months 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.
REVIEW OF PERFORMANCE (continued)
Balance sheet
Total assets were £24,590 million, or 4 per cent, higher at £627,439 million
at 30 September 2022 compared to £602,849 million at 31 December 2021. Cash
and balances at central banks rose by £13,223 million to £67,502 million
reflecting the placement of funds from increased available liquidity.
Financial assets at amortised cost were £14,947 million higher at £505,263
million at 30 September 2022 compared to £490,316 million at 31 December
2021, as a result of a £2,456 million increase in loans and advances to
banks, £4,434 million increase in loans and advances to customers, net of
impairment allowances, £2,780 million in debt securities, and £5,163
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 due to attractive growth opportunities as well as foreign exchange
movements, partially offset by further reductions in the closed mortgage book
and hedging impacts. Other assets increased by £3,772 million mainly due to
a £2,272 million increase in deferred tax assets and a £470 million
increase in current tax recoverable. Financial assets at fair value through
other comprehensive income were £6,787 million lower at £20,999 million as
a result of asset sales during the period.
Total liabilities were £28,395 million, or 5 per cent, higher at £590,472
million compared to £562,077 million at 31 December 2021. Customer deposits
increased by £5,771 million to £455,144 million compared to £449,373
million at 31 December 2021, as a result of continued inflows to Retail
current and savings accounts and Commercial Banking balances. Repurchase
agreements at amortised cost increased £16,255 million to £46,361 million,
as the Group took advantage of favourable funding opportunities and amounts
due to fellow Lloyds Banking Group undertakings were £3,654 million higher at
£5,144 million, also reflecting funding arrangements. Subordinated
liabilities decreased by £2,675 million following redemptions during the
period.
Ordinary shareholders' equity decreased £3,794 million to £32,616 million at
30 September 2022 as retained profit for the period was more than offset by
negative movements in the cash flow hedging reserve as a result of increased
interest rates and adverse defined benefit post-retirement scheme
remeasurements.
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 15.0 per cent at 30 September 2022. The reduction on
1 January 2022 reflected the impact of regulatory changes (as previously
reported), with the subsequent increase during the first nine months of the
year reflecting profits for the period and a reduction in risk-weighted assets
(post 1 January 2022 regulatory changes) partly offset by pension
contributions made to the Group's defined benefit pension schemes and an
accrual for foreseeable ordinary dividends. The total capital ratio reduced
from 23.5 per cent at 31 December 2021 to 20.4 per cent at 30 September
2022, reflecting the reduction in CET capital, increase in risk-weighted
assets, the completion of the transition to end-point eligibility rules for
regulatory capital on 1 January 2022 and movements in rates, partially offset
by sterling depreciation and eligible provisions.
Risk-weighted assets increased from £161.6 billion at 31 December 2021 to
around £178 billion on 1 January 2022, reflecting regulatory changes which
include the anticipated impact of the implementation of new CRD IV models to
meet revised regulatory standards for modelled outputs. Risk-weighted assets
subsequently reduced by £5 billion during the first nine months of the year
to £173.2 billion at 30 September 2022, largely reflecting optimisation
activity and Retail model reductions linked to the resilient underlying credit
performance, partly offset by the growth in balance sheet lending. The new CRD
IV models remain subject to finalisation and approval by the PRA and therefore
the final risk-weighted asset impact remains subject to this.
The Group's UK leverage ratio of 5.2 per cent at 30 September 2022 has reduced
from 5.3 per cent at 31 December 2021, reflecting a reduction in total tier 1
capital, offset in part by a reduction in the exposure measure principally
related to off-balance sheet items.
CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)
Nine Nine
months ended 30 Sep 2022 months ended 30 Sep 2021
£m £m
Net interest income 9,458 8,249
Other income 2,661 2,823
Total income 12,119 11,072
Operating expenses (6,629) (6,760)
Impairment (charge) credit (1,010) 791
Profit before tax 4,480 5,103
Tax expense (1,134) (141)
Profit for the period 3,346 4,962
Profit attributable to ordinary shareholders 3,143 4,645
Profit attributable to other equity holders 177 290
Profit attributable to equity holders 3,320 4,935
Profit attributable to non-controlling interests 26 27
Profit for the period 3,346 4,962
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
At 30 Sep 2022 At 31 Dec 2021
£m £m
Assets
Cash and balances at central banks 67,502 54,279
Financial assets at fair value through profit or loss 1,434 1,798
Derivative financial instruments 5,310 5,511
Loans and advances to banks 6,934 4,478
Loans and advances to customers 435,263 430,829
Reverse repurchase agreements 54,871 49,708
Debt securities 7,342 4,562
Due from fellow Lloyds Banking Group undertakings 853 739
Financial assets at amortised cost 505,263 490,316
Financial assets at fair value through other comprehensive income 20,999 27,786
Other assets 26,931 23,159
Total assets 627,439 602,849
Liabilities
Deposits from banks 4,684 3,363
Customer deposits 455,144 449,373
Repurchase agreements at amortised cost 46,361 30,106
Due to fellow Lloyds Banking Group undertakings 5,144 1,490
Financial liabilities at fair value through profit or loss 5,497 6,537
Derivative financial instruments 6,826 4,643
Debt securities in issue 49,724 48,724
Subordinated liabilities 5,983 8,658
Other liabilities 11,109 9,183
Total liabilities 590,472 562,077
Equity
Ordinary shareholders' equity 32,616 36,410
Other equity instruments 4,268 4,268
Non-controlling interests 83 94
Total equity 36,967 40,772
Total equity and liabilities 627,439 602,849
ADDITIONAL FINANCIAL INFORMATION
1. Basis of presentation
This release covers the results of Lloyds Bank plc (the Bank) together with
its subsidiaries (the Group) for the nine months ended 30 September 2022.
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.
In April 2022, the IFRS Interpretations Committee was asked to consider
whether an entity includes a demand deposit as a component of cash and cash
equivalents in the statement of cash flows when the demand deposit is subject
to contractual restrictions on use agreed with a third party. It concluded
that such amounts should be included within cash and cash equivalents.
Accordingly, 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. This change has increased the Group's cash and cash
equivalents at 1 January 2020 by £1,682 million (to £40,296 million) and
decreased the adjustment for the change in operating assets in 2020 by £974
million (to a reduction of £5,882 million) resulting in an increase in the
Group's cash and cash equivalents at 31 December 2020 of £2,656 million (to
£51,622 million); and decreased the adjustment for the change in operating
assets in 2021 by £114 million (to an increase of £5,174 million) and, as a
result, the Group's cash and cash equivalents at 31 December 2021 increased by
£2,770 million (to £55,960 million). The change had no impact on profit
after tax or total equity.
2. Capital
The Group's Q3 2022 Interim Pillar 3 Report can be found at
www.lloydsbankinggroup.com/investors/financial-downloads.
3. Base case and MES economic assumptions
The Group's base case economic scenario reflects the outlook as of 30
September 2022 and was revised in light of developments in energy pricing,
changes in UK fiscal policy prior to the balance sheet date and a continuing
shift towards a more restrictive monetary policy stance by central banks. The
Group's updated base case scenario was based upon three conditioning
assumptions: first, the war in Ukraine remains 'local', without overtly
involving neighbouring countries, NATO or China; second, the fiscal loosening
implied by the UK Government's 'Growth Plan' of 23 September 2022 would be
offset principally by Government spending cuts; and third, central bank
reaction functions, including of the Bank of England, are focused on
controlling inflation, motivating a more rapid tightening of UK monetary
policy. The Group continues to assume that no further UK COVID-19 national
lockdowns are mandated. Based on these assumptions and incorporating the
macroeconomic information published in the third quarter, the Group's base
case scenario comprises an economic downturn with a rise in the unemployment
rate, declining residential and commercial property prices, and continuing
increases in the UK Bank Rate against a backdrop of elevated inflationary
pressures. Risks to the base case economic view exist in both directions and
are partly captured by the generation of alternative economic scenarios. Each
of the scenarios includes forecasts for key variables as of the third quarter
of 2022, for which data or revisions to history may have since emerged prior
to publication.
At 30 September 2022, the Group has included an adjusted severe downside
scenario to incorporate high CPI inflation and UK Bank Rate profiles and has
adopted this adjusted severe downside scenario in calculating its ECL
allowance. 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 lower inflation rates, easier monetary policy, and
therefore low interest rates. This adjustment is considered to better reflect
the risks around the Group's base case view in a macroeconomic environment in
which supply shocks are the principal concern.
ADDITIONAL FINANCIAL INFORMATION (continued)
3. Base case and MES economic assumptions (continued)
UK economic assumptions - 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.
At 30 September 2022 2022 2023 2024 2025 2026 2022
% % % % % to 2026 average
%
Upside
Gross domestic product 3.6 0.4 1.0 1.5 2.1 1.7
Unemployment rate 3.3 2.8 3.2 3.5 3.8 3.3
House price growth 6.1 (2.7) 7.2 8.5 6.1 5.0
Commercial real estate price growth 8.7 (3.6) 0.1 1.0 1.9 1.6
UK Bank Rate 2.16 5.28 5.17 4.30 4.12 4.20
CPI inflation 9.0 6.1 2.9 3.2 2.6 4.8
Base case
Gross domestic product 3.4 (1.0) 0.4 1.4 2.0 1.2
Unemployment rate 3.7 4.9 5.4 5.5 5.5 5.0
House price growth 5.0 (7.9) (0.5) 2.5 2.3 0.2
Commercial real estate price growth 2.8 (14.4) (2.7) 0.4 1.9 (2.6)
UK Bank Rate 2.06 4.00 3.38 2.56 2.50 2.90
CPI inflation 9.1 6.2 2.5 2.2 1.3 4.2
Downside
Gross domestic product 3.2 (2.3) (0.2) 1.2 1.9 0.8
Unemployment rate 4.1 6.6 7.5 7.3 7.2 6.5
House price growth 3.9 (12.9) (8.9) (5.4) (3.3) (5.5)
Commercial real estate price growth (1.4) (23.0) (6.5) (2.5) (0.2) (7.1)
UK Bank Rate 2.00 2.93 1.76 1.04 1.07 1.76
CPI inflation 9.0 6.0 1.9 1.1 0.0 3.6
Severe downside
Gross domestic product 2.4 (4.5) (0.3) 1.0 1.8 0.0
Unemployment rate 4.9 9.8 10.5 10.0 9.5 8.9
House price growth 2.4 (17.9) (16.6) (10.3) (6.0) (10.0)
Commercial real estate price growth (9.2) (35.7) (13.6) (6.4) (0.7) (14.1)
UK Bank Rate - modelled 1.78 0.91 0.36 0.21 0.23 0.70
UK Bank Rate - adjusted 2.44 7.00 4.88 3.00 2.75 4.01
CPI inflation - modelled 9.1 5.9 1.0 (0.4) (1.9) 2.7
CPI inflation - adjusted 9.9 14.3 9.0 4.1 1.3 7.7
Probability-weighted
Gross domestic product 3.3 (1.3) 0.3 1.4 2.0 1.1
Unemployment rate 3.8 5.3 5.9 5.9 5.9 5.4
House price growth 4.7 (8.8) (2.3) 0.6 0.9 (1.1)
Commercial real estate price growth 2.1 (15.8) (4.1) (1.0) 1.0 (3.8)
UK Bank Rate - modelled 2.04 3.75 3.13 2.39 2.33 2.73
UK Bank Rate - adjusted 2.11 4.36 3.58 2.67 2.58 3.06
CPI inflation - modelled 9.1 6.1 2.3 1.9 1.0 4.1
CPI inflation - adjusted 9.1 6.9 3.1 2.4 1.3 4.6
ADDITIONAL FINANCIAL INFORMATION (continued)
3. Base case and MES economic assumptions (continued)
UK economic assumptions - 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 September 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 (0.1) (0.1) (0.3) (0.4) (0.3) (0.2) (0.1)
Unemployment rate 3.7 3.8 3.7 3.8 4.3 4.7 5.1 5.4
House price growth 11.1 12.5 10.4 5.0 (0.2) (5.8) (8.2) (7.9)
Commercial real estate price growth 18.0 18.0 12.3 2.8 (5.6) (11.8) (13.7) (14.4)
UK Bank Rate 0.75 1.25 2.25 4.00 4.00 4.00 4.00 4.00
CPI inflation 6.2 9.2 10.2 10.7 9.8 6.5 5.2 3.2
4. 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. If the base case moves adversely it generates a new,
more adverse downside and severe downside which are then incorporated into the
ECL. 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 on pages 5 to 7.
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 1,163 463 734 1,375 3,914
Credit cards 682 594 649 742 866
Other Retail 952 903 937 984 1,048
Commercial Banking 1,721 1,339 1,544 1,857 2,985
Other 1 1 1 1 1
At 30 September 2022 4,519 3,300 3,865 4,959 8,814
UK mortgages 837 637 723 967 1,386
Credit cards(1) 521 442 500 569 672
Other Retail(1) 825 760 811 863 950
Commercial Banking(1) 1,416 1,281 1,343 1,486 1,833
Other(1) 401 401 402 401 400
At 31 December 2021 4,000 3,521 3,779 4,286 5,241
(1) Reflects the new organisation structure, with Business Banking and
Commercial Cards moving from Retail to Commercial Banking and Wealth moving
from Other to Retail.
(
)
ADDITIONAL FINANCIAL INFORMATION (continued)
5. Loans and advances to customers and expected credit loss allowance
At 30 September 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 257,915 40,575 3,411 9,993 311,894 13.0 1.1
Credit cards 12,018 2,526 292 - 14,836 17.0 2.0
Loans and overdrafts 8,723 1,339 255 - 10,317 13.0 2.5
UK Motor Finance 12,335 1,949 169 - 14,453 13.5 1.2
Other 13,294 650 158 - 14,102 4.6 1.1
Retail 304,285 47,039 4,285 9,993 365,602 12.9 1.2
Small and Medium Businesses 31,783 6,266 2,279 - 40,328 15.5 5.7
Corporate and Institutional Banking 31,692 4,727 1,626 - 38,045 12.4 4.3
Commercial Banking 63,475 10,993 3,905 - 78,373 14.0 5.0
Other(1) (4,471) - - - (4,471)
Total gross lending 363,289 58,032 8,190 9,993 439,504 13.2 1.9
ECL allowance on drawn balances (610) (1,654) (1,672) (305) (4,241)
Net balance sheet carrying value 362,679 56,378 6,518 9,688 435,263
Customer related ECL allowance (drawn and undrawn)
UK mortgages 48 516 294 305 1,163
Credit cards 182 382 118 - 682
Loans and overdrafts 175 273 138 - 586
UK Motor Finance(2) 107 85 93 - 285
Other 15 18 48 - 81
Retail 527 1,274 691 305 2,797
Small and Medium Businesses 104 292 153 - 549
Corporate and Institutional Banking 99 233 832 - 1,164
Commercial Banking 203 525 985 - 1,713
Other - - - - -
Total 730 1,799 1,676 305 4,510
Customer related ECL allowance (drawn and undrawn) as a percentage of loans
and advances to customers(3)
UK mortgages - 1.3 8.6 3.1 0.4
Credit cards 1.5 15.1 54.4 - 4.6
Loans and overdrafts 2.0 20.4 72.6 - 5.7
UK Motor Finance 0.9 4.4 55.0 - 2.0
Other 0.1 2.8 30.4 - 0.6
Retail 0.2 2.7 16.7 3.1 0.8
Small and Medium Businesses 0.3 4.7 13.0 - 1.4
Corporate and Institutional Banking 0.3 4.9 51.2 - 3.1
Commercial Banking 0.3 4.8 35.2 - 2.2
Other - - -
Total 0.2 3.1 24.1 3.1 1.0
(1) Contains centralised fair value hedge accounting adjustments.
(2) UK Motor Finance for Stages 1 and 2 include £93 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 £75 million, Loans and
overdrafts of £65 million, Small and Medium Businesses of £1,104 million and
Corporate and Institutional Banking of £1 million.
ADDITIONAL FINANCIAL INFORMATION (continued)
5. 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(1) 11,918 2,077 292 - 14,287 14.5 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) 11,198 593 169 - 11,960 5.0 1.4
Retail 317,173 27,401 2,873 10,977 358,424 7.6 0.8
Small and Medium Businesses(1) 36,134 4,992 1,747 - 42,873 11.6 4.1
Corporate and Institutional Banking(1) 29,526 2,491 1,786 - 33,803 7.4 5.3
Commercial Banking 65,660 7,483 3,533 - 76,676 9.8 4.6
Other(2) (467) - - - (467) - -
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(1) 144 249 128 - 521
Loans and overdrafts 136 170 139 - 445
UK Motor Finance(3) 108 74 116 - 298
Other(1) 15 15 52 - 82
Retail 452 902 619 210 2,183
Small and Medium Businesses(1) 104 176 179 - 459
Corporate and Institutional Banking(1) 56 120 780 - 956
Commercial Banking 160 296 959 - 1,415
Other 400 - - - 400
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) 1.2 12.0 56.9 - 3.7
Loans and overdrafts 1.7 15.4 67.5 - 4.7
UK Motor Finance 0.9 4.0 57.7 - 2.1
Other(1) 0.1 2.5 30.8 - 0.7
Retail 0.1 3.3 22.6 1.9 0.6
Small and Medium Businesses(1) 0.3 3.5 14.5 - 1.1
Corporate and Institutional Banking(1) 0.2 4.8 43.7 - 2.8
Commercial Banking 0.2 4.0 31.8 - 1.9
Other(5) - - - - -
Total 0.3 3.4 27.4 1.9 0.9
(1) Reflects the new organisation structure, with Business Banking and
Commercial Cards moving from Retail to Commercial Banking and Wealth moving
from Other to 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, Small and Medium Businesses of £515 million and
Corporate and Institutional Banking of £3 million.
(5) Other excludes the £400 million ECL central adjustment.
ADDITIONAL FINANCIAL INFORMATION (continued)
6. 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 September 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 31,885 195 6,331 159 1,599 82 760 80 40,575 516
Credit cards 2,275 291 132 47 90 28 29 16 2,526 382
Loans and overdrafts 943 169 232 45 121 39 43 20 1,339 273
UK Motor Finance 854 27 927 23 136 25 32 10 1,949 85
Other 166 4 394 8 54 4 36 2 650 18
Retail 36,123 686 8,016 282 2,000 178 900 128 47,039 1,274
Small and Medium Businesses 4,408 246 1,235 26 399 13 224 7 6,266 292
Corporate and Institutional Banking 4,612 233 18 - 10 - 87 - 4,727 233
Commercial Banking 9,020 479 1,253 26 409 13 311 7 10,993 525
Total 45,143 1,165 9,269 308 2,409 191 1,211 135 58,032 1,799
At 31 December 2021
UK mortgages 14,845 132 4,133 155 1,433 38 1,387 69 21,798 394
Credit cards(4) 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) 194 4 306 7 44 2 49 2 593 15
Retail 17,880 414 6,186 273 1,800 109 1,535 106 27,401 902
Small and Medium Businesses(4) 3,570 153 936 14 297 6 189 3 4,992 176
Corporate and Institutional Banking(4) 2,447 118 15 2 4 - 25 - 2,491 120
Commercial Banking 6,017 271 951 16 301 6 214 3 7,483 296
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) Reflects the new organisation structure, with Business Banking and
Commercial Cards moving from Retail to Commercial Banking and Wealth moving
from Other to Retail.
(
)
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 Group) and its current goals and expectations. Statements
that are not historical or current facts, including statements about the
Group's or its directors' and/or management's beliefs and expectations, are
forward looking statements. Words such as, without limitation, 'believes',
'achieves', 'anticipates', 'estimates', 'expects', 'targets', 'should',
'intends', 'aims', 'projects', 'plans', 'potential', 'will', 'would', 'could',
'considered', 'likely', 'may', 'seek', 'estimate', 'probability', 'goal',
'objective', 'deliver', 'endeavour', 'prospects', 'optimistic' and similar
expressions or variations on these expressions are intended to identify
forward looking statements. These statements concern or may affect future
matters, including but not limited to: projections or expectations of the
Group's future financial position, including profit attributable to
shareholders, provisions, economic profit, dividends, capital structure,
portfolios, net interest margin, capital ratios, liquidity, risk-weighted
assets (RWAs), expenditures or any other financial items or ratios;
litigation, regulatory and governmental investigations; the Group's future
financial performance; the level and extent of future impairments and
write-downs; the Group's ESG targets and/or commitments; statements of plans,
objectives or goals of the Group or its management and other statements that
are not historical fact; expectations about the impact of COVID-19; and
statements of assumptions underlying such statements. By their nature, forward
looking statements involve risk and uncertainty because they relate to events
and depend upon circumstances that will or may occur in the future. Factors
that could cause actual business, strategy, plans and/or results (including
but not limited to the payment of dividends) to differ materially from forward
looking statements include, but are not limited to: general economic and
business conditions in the UK and internationally; market related risks,
trends and developments; risks concerning borrower and counterparty credit
quality; fluctuations in interest rates, inflation, exchange rates, stock
markets and currencies; volatility in credit markets; volatility in the price
of the Group's securities; changes in consumer behaviour; any impact of the
transition from IBORs to alternative reference rates; the ability to access
sufficient sources of capital, liquidity and funding when required; changes to
the Group's 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 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; the tensions between China and Taiwan; risks
relating to sustainability and climate change (and achieving climate change
ambitions), including the Group's and/or Lloyds Banking Group plc's ability
along with the government and other stakeholders to measure, manage and
mitigate the impacts of climate change effectively; changes in laws,
regulations, practices and accounting standards or taxation; changes to
regulatory capital or liquidity requirements and similar contingencies;
assessment related to resolution planning requirements; the policies and
actions of governmental or regulatory authorities or courts together with any
resulting impact on the future structure of the Group; failure to comply with
anti-money laundering, counter terrorist financing, anti-bribery and sanctions
regulations; failure to prevent or detect any illegal or improper activities;
projected employee numbers and key person risk; increased labour costs;
assumptions and estimates that form the basis of the 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 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
Banking Group plc may also make or disclose written and/or oral
forward-looking statements in other written materials and in oral statements
made by the directors, officers or employees of Lloyds Banking Group plc to
third parties, including financial analysts. Except as required by any
applicable law or regulation, the forward-looking statements contained in this
document are made as of today's date, and the Group expressly disclaims any
obligation or undertaking to release publicly any updates or revisions to any
forward looking statements contained in this document whether as a result of
new information, future events or otherwise. The information, statements and
opinions contained in this document do not constitute a public offer under any
applicable law or an offer to sell any securities or financial instruments or
any advice or recommendation with respect to such securities or financial
instruments.
CONTACTS
For further information please contact:
INVESTORS AND ANALYSTS
Douglas Radcliffe
Group Investor Relations Director
020 7356 1571
douglas.radcliffe@lloydsbanking.com
Edward Sands
Director of Investor Relations
020 7356 1585
edward.sands@lloydsbanking.com
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
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