REG - HBOS PLC Lloyds Banking Group - 2024 Half-Year Results
25/07/2024 11:15
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240725:nRSY8462Xa&default-theme=true
RNS Number : 8462X HBOS PLC 25 July 2024
HBOS plc
2024 Half-Year Results
25 July 2024
Member of the Lloyds Banking Group
CONTENTS
Financial review (#Section3) 1
Principal risks and uncertainties (#Section4) 2
Statutory information
Condensed consolidated half-year financial statements (unaudited) (#Section5) 3
Condensed consolidated income statement (unaudited) (#Section6) 4
Condensed consolidated statement of comprehensive income (#Section7) 5
(unaudited) (#Section7)
Condensed consolidated balance sheet (unaudited) (#Section8) 6
Condensed consolidated statement of changes in equity (unaudited) (#Section9) 7
Condensed consolidated cash flow statement (unaudited) (#Section10) 9
Notes to the condensed consolidated half-year financial statements (unaudited) 10
(#Section11)
Statement of directors' responsibilities (#Section27) 32
Forward looking statements (#Section28) 33
Contacts (#Section29) 34
FINANCIAL REVIEW
Principal activities
HBOS plc (the Company) and its subsidiaries (together, the Group) provide a
wide range of banking and financial services. The Group's revenue is earned
through interest and fees on a broad range of financial services products
including current and savings accounts, personal loans, credit cards and
mortgages within the retail market and loans and other products to commercial
and corporate customers.
Income statement
The Group's profit before tax for the first half of 2024 was £462 million,
compared to a loss before tax of £33 million for the same period in 2023.
This was due to higher total income and a lower impairment charge, partly
offset by higher operating expenses. Profit after tax was £338 million
(half-year to 30 June 2023: £32 million).
Total income for the period was £2,040 million, an increase of 14 per cent on
the first half of 2023. Net interest income was £1,835 million, compared to
£1,601 million for the same period in 2023. This included the effects of the
mortgage book rolling on to higher rates, which more than offset the impact of
higher deposit and funding costs. Other income of £205 million was
£21 million higher than the first half of 2023, as the impact of increased
net trading income more than offset the impact of changes to commission
arrangements with Scottish Widows.
Operating expenses of £1,573 million were 9 per cent higher than in the first
half of 2023, reflecting planned strategic investment, elevated severance
charges and continued inflationary pressure. It also includes c.£40 million
relating to the sector-wide change in the charging approach for the Bank of
England Levy during the first quarter. The Group recognised remediation costs
of £41 million (half-year to 30 June 2023: £11 million), largely in
relation to pre-existing programmes.
Impairment was a net charge of £5 million compared to a charge of £379
million in the half-year to 30 June 2023. This decrease reflects a larger
credit from improvements to the Group's economic outlook in the period
compared to the prior year (notably in HPI) and changes in methodology. In
addition the reduction also includes the release of judgemental adjustments
for inflation and interest rate risk, and stronger performance in mortgage
portfolios resulting in lower charges. Commercial portfolios have benefited
from a one-off release from loss rates used in the model, while observing a
low charge on new and existing Stage 3 clients.
The Group recognised a tax expense of £124 million in the period, compared to
a tax credit of £65 million in the first half of 2023, reflecting increased
profits.
Balance sheet
Total assets of £327,811 million were £6,272 million higher, or 2 per cent,
compared to £321,539 million at 31 December 2023. Financial assets at
amortised cost were £6,620 million higher at £315,831 million compared to
£309,211 million at 31 December 2023, with increases in balances due from
fellow Lloyds Banking Group undertakings of £4,851 million and loans and
advances to customers of £2,028 million to £294,498 million. The increase
in loans advances to customers was driven by increases in UK mortgages,
partially offset by the securitisation of legacy mortgages.
Total liabilities of £310,518 million were up £6,780 million compared to
£303,738 million at 31 December 2023. This was driven by increases in
balances due to fellow Lloyds Banking Group undertakings of £4,670 million
and an increase in customer deposits of £1,356 million. Customer deposits
increased as a result of inflows into limited withdrawal and fixed savings
products.
Total equity decreased by £508 million from £17,801 million at 31 December
2023 to £17,293 million at 30 June 2024. The movement reflected an interim
dividend of £650 million which was partially offset by attributable profit
for the period.
Capital
Neither the Company nor the Group are regulated from a capital perspective.
Regulatory capital is instead managed in the Company's principal banking
subsidiary, Bank of Scotland plc.
PRINCIPAL RISKS AND UNCERTAINTIES
The most important risks faced by the Group are detailed below. The external
risks faced by the Group may impact the success of delivering against the
Group's long-term strategic objectives. They include, but are not limited to,
macroeconomic uncertainty and elevated interest rates which are contributing
to the cost of living and associated implications for UK consumers and
businesses.
Asset quality remains strong with resilient credit performance throughout the
period. The Group continues to monitor the impacts of the economic environment
carefully through a suite of early warning indicators and governance
arrangements that ensure risk mitigating action plans are in place to support
customers and protect the Group's positions.
The Group is transforming its approach to risk management to support its
strategic ambition and purpose of Helping Britain Prosper. The Group has
reviewed its three lines of defence model and is evolving its accountabilities
with enhanced focus on controls and expertise. This will increase the pace of
decision making, with the intent of improving risk management. The Group has
initially focused on non-financial risks.
The Group has also undertaken a detailed review of its risk categories and
implemented an events-based risk management framework. This has resulted in a
reduction in the number of principal risk types and the simplification of
secondary risk categories. This change better aligns to the Basel Committee on
Banking Supervision's event categories which will benefit the Group for
scenario activities and regulatory reporting.
The Group has 10 principal risks; capital risk, climate risk, compliance risk
(previously regulatory and legal risk), conduct risk, credit risk, economic
crime risk, liquidity risk (previously liquidity and funding risk), market
risk, model risk and operational risk (operational resilience risk has been
removed as a separate risk category as it relates to many of the principal
risk types).
The below principal risk definitions have changed since the Group's 2023
annual report and accounts:
Conduct risk - The risk of our Group activities, behaviours, strategy or
business planning, having an adverse impact on outcomes for customers,
undermining the integrity of the market or distorting competition, which could
lead to regulatory censure, reputational damage or financial loss.
Economic crime risk - The risk that the Group implements ineffective policies,
systems, processes and controls to prevent, detect and respond to the risk of
fraud and/or financial crime resulting in increased losses, regulatory
censure/fines and/or adverse publicity in the UK or other jurisdictions in
which the Group operates.
Liquidity risk - The risk that the Group does not have sufficient financial
resources to meet its commitments when they fall due or can only secure them
at excessive cost.
Model risk - The potential for adverse consequences from model errors or the
inappropriate use of modelled outputs to inform business decisions. Adverse
consequences could lead to a deterioration in the prudential position,
non-compliance with applicable laws and/or regulations, or damage to the
Group's reputation. Model risk can also lead to financial loss, as well as
qualitative limitations such as the imposition of restrictions on business
activities.
Operational risk - The risk of actual or potential impact to the Group
(financial and/or non-financial) resulting from inadequate or failed internal
processes, people, and systems or from external events. Resilience is core to
the management of operational risk within Lloyds Banking Group to ensure that
business processes (including those that are outsourced) can withstand
operational risks and can respond to and meet customer and stakeholder needs
when continuity of operations is compromised.
All other principal risk definitions remain unchanged.
STATUTORY INFORMATION
Condensed consolidated half-year financial statements (unaudited)
Condensed consolidated income statement (unaudited) (#Section6) 4
Condensed consolidated statement of comprehensive income (unaudited) 5
(#Section7)
Condensed consolidated balance sheet (unaudited) (#Section8) 6
Condensed consolidated statement of changes in equity (unaudited) (#Section9) 7
Condensed consolidated cash flow statement (unaudited) (#Section10) 9
Notes to the condensed consolidated half-year financial statements (unaudited)
1 Basis of preparation and accounting policies (#Section12) 10
2 Critical accounting judgements and key sources of estimation uncertainty 11
(#Section13)
3 Net fee and commission income (#Section14) 11
4 Operating expenses (#Section15) 11
5 Retirement benefit obligations (#Section16) 12
6 Impairment (#Section17) 13
7 Tax (#Section18) 13
8 Fair values of financial assets and liabilities (#Section19) 13
9 Loans and advances to customers (#Section20) 17
10 Allowance for expected credit losses (#Section21) 20
11 Debt securities in issue (#Section22) 26
12 Provisions (#Section23) 27
13 Dividends on ordinary shares (#Section24) 28
14 Related party transactions (#Section25) 28
15 Contingent liabilities, commitments and guarantees (#Section26) 28
CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)
Note Half-year Half-year
to 30 Jun to 30 Jun
2024 2023
£m £m
Interest income 6,891 5,455
Interest expense (5,056) (3,854)
Net interest income 1,835 1,601
Fee and commission income 334 347
Fee and commission expense (236) (163)
Net fee and commission income 3 98 184
Net trading income (losses) 50 (56)
Other operating income 57 56
Other income 205 184
Total income 2,040 1,785
Operating expenses 4 (1,573) (1,439)
Impairment 6 (5) (379)
Profit (loss) before tax 462 (33)
Tax (expense) credit 7 (124) 65
Profit for the period 338 32
Profit (loss) attributable to ordinary shareholders 239 (56)
Profit attributable to non-controlling interests 99 88
Profit for the period 338 32
The accompanying notes are an integral part of the condensed consolidated
half-year financial statements.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
Half-year Half-year
to 30 Jun to 30 Jun
2024 2023
£m £m
Profit for the period 338 32
Other comprehensive income
Items that will not subsequently be reclassified to profit or loss:
Post-retirement defined benefit scheme remeasurements
Remeasurements before tax (138) (6)
Tax 35 (3)
(103) (9)
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 (4) (5)
Tax - 1
(4) (4)
Movements in cash flow hedging reserve:
Effective portion of changes in fair value taken to other comprehensive income 3 (6)
Net income statement transfers (3) (6)
Tax - 4
- (8)
Total other comprehensive loss for the period, net of tax (107) (21)
Total comprehensive income for the period 231 11
Total comprehensive income (loss) attributable to ordinary shareholders 132 (77)
Total comprehensive income attributable to non-controlling interests 99 88
Total comprehensive income for the period 231 11
The accompanying notes are an integral part of the condensed consolidated
half-year financial statements.
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
Note At 30 Jun At 31 Dec
2024 2023
£m £m
Assets
Cash and balances at central banks 2,383 3,009
Financial assets at fair value through profit or loss 8 298 266
Derivative financial instruments 2,804 2,850
Loans and advances to banks 112 214
Loans and advances to customers 9 294,498 292,470
Debt securities 1,539 1,696
Due from fellow Lloyds Banking Group undertakings 19,682 14,831
Financial assets at amortised cost 315,831 309,211
Financial assets at fair value through other comprehensive income 8 105 108
Goodwill 452 452
Current tax recoverable 1,279 1,087
Deferred tax assets 1,523 1,537
Retirement benefit assets 5 1,197 1,296
Other assets 1,939 1,723
Total assets 327,811 321,539
Liabilities
Deposits from banks 122 179
Customer deposits 163,302 161,946
Repurchase agreements 30,393 30,397
Due to fellow Lloyds Banking Group undertakings 96,817 92,147
Financial liabilities at fair value through profit or loss 8 23 23
Derivative financial instruments 4,087 4,411
Notes in circulation 1,766 1,392
Debt securities in issue at amortised cost 11 9,289 8,610
Other liabilities 1,901 1,626
Retirement benefit obligations 5 78 82
Provisions 12 560 720
Subordinated liabilities 2,180 2,205
Total liabilities 310,518 303,738
Equity
Share capital 3,778 3,778
Share premium account 585 585
Other reserves 11,178 11,182
Retained profits (821) (317)
Ordinary shareholders' equity 14,720 15,228
Non-controlling interests 2,573 2,573
Total equity 17,293 17,801
Total equity and liabilities 327,811 321,539
The accompanying notes are an integral part of the condensed consolidated
half-year financial statements.
(
)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
Attributable to ordinary shareholders Non-
controlling
interests
£m
Share Other Retained Total Total
capital and reserves profits £m £m
premium £m £m
£m
At 1 January 2024 4,363 11,182 (317) 15,228 2,573 17,801
Comprehensive income
Profit for the period - - 239 239 99 338
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, net of tax - - (103) (103) - (103)
Movements in revaluation reserve in respect of debt securities held at fair - (4) - (4) - (4)
value through other comprehensive income, net of tax
Movements in cash flow hedging reserve, net of tax - - - - - -
Total other comprehensive loss - (4) (103) (107) - (107)
Total comprehensive (loss) income(1) - (4) 136 132 99 231
Transactions with owners
Dividends - - (650) (650) - (650)
Distributions to non-controlling interests - - - - (99) (99)
Changes in non-controlling interests - - - - - -
Capital contributions received - - 10 10 - 10
Total transactions with owners - - (640) (640) (99) (739)
At 30 June 2024(2) 4,363 11,178 (821) 14,720 2,573 17,293
(1) Total comprehensive income attributable to owners of the parent was
£132 million.
(2) Total equity attributable to owners of the parent was £14,720 million.
The accompanying notes are an integral part of the condensed consolidated
half-year financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) (continued)
Attributable to ordinary shareholders Non-
controlling
interests
£m
Share Other Retained Total Total
capital and reserves profits £m £m
premium £m £m
£m
At 1 January 2023 4,363 11,173 (337) 15,199 2,223 17,422
Comprehensive income
(Loss) profit for the period - - (56) (56) 88 32
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, net of tax - - (9) (9) - (9)
Movements in revaluation reserve in respect of debt securities held at fair - (4) - (4) - (4)
value through other comprehensive income, net of tax
Movements in cash flow hedging reserve, net of tax - (8) - (8) - (8)
Movements in foreign currency translation reserve, - - - - - -
net of tax
Total other comprehensive loss - (12) (9) (21) - (21)
Total comprehensive (loss) income(1) - (12) (65) (77) 88 11
Transactions with owners
Distributions to non-controlling interests - - - - (88) (88)
Change in non-controlling interests - - - - 350 350
Capital contributions received - - 16 16 - 16
Total transactions with owners - - 16 16 262 278
At 30 June 2023(2) 4,363 11,161 (386) 15,138 2,573 17,711
Comprehensive income
Profit for the period - - 514 514 98 612
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, net of tax - - (472) (472) - (472)
Movements in revaluation reserve in respect of debt securities held at fair - 2 - 2 - 2
value through other comprehensive income, net of tax
Movements in cash flow hedging reserve, net of tax - (3) - (3) - (3)
Movements in foreign currency translation reserve, - 22 - 22 - 22
net of tax
Total other comprehensive income (loss) - 21 (472) (451) - (451)
Total comprehensive income(1) - 21 42 63 98 161
Transactions with owners
Distributions to non-controlling interests - - - - (98) (98)
Changes in non-controlling interests - - - - - -
Capital contributions received - - 27 27 - 27
Total transactions with owners - - 27 27 (98) (71)
At 31 December 2023(2) 4,363 11,182 (317) 15,228 2,573 17,801
(1) Total comprehensive income attributable to owners of the parent for the
half-year to 30 June 2023 was a loss of £77 million (half-year to
31 December 2023: surplus of £63 million).
(2) Total equity attributable to owners of the parent at 30 June 2023 was
£15,138 million (31 December 2023: £15,228 million).
The accompanying notes are an integral part of the condensed consolidated
half-year financial statements.
(
)
CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
Half-year Half-year
to 30 Jun to 30 Jun
2024 2023
£m £m
Cash flows from operating activities
Profit (loss) before tax 462 (33)
Adjustments for:
Change in operating assets (5,643) 681
Change in operating liabilities 6,954 136
Non-cash and other items (266) (122)
Net tax paid (267) (506)
Net cash provided by operating activities 1,240 156
Cash flows from investing activities
Purchase of financial assets (1) (5)
Purchase of fixed assets (128) (76)
Proceeds from sale of fixed assets 7 12
Net cash used in investing activities (122) (69)
Cash flows from financing activities
Dividends paid to ordinary shareholders (650) -
Distributions to non-controlling interests (99) (88)
Interest paid on subordinated liabilities (79) (85)
Proceeds from changes in non-controlling interests - 350
Repayment of subordinated liabilities - (226)
Net cash used in financing activities (828) (49)
Change in cash and cash equivalents 290 38
Cash and cash equivalents at beginning of period 2,126 2,087
Cash and cash equivalents at end of period 2,416 2,125
The accompanying notes are an integral part of the condensed consolidated
half-year financial statements.
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 (UNAUDITED)
Note 1: Basis of preparation and accounting policies
These condensed consolidated half-year financial statements as at and for the
period to 30 June 2024 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 HBOS
plc (the Company) together with its subsidiaries (the Group). They do not
include all of the information required for full annual financial statements
and should be read in conjunction with the Group's consolidated financial
statements as at and for the year ended 31 December 2023 which complied with
international accounting standards in conformity with the requirements of the
Companies Act 2006 and were prepared in accordance with International
Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB). Copies of the 2023 annual report and accounts are
available on the Lloyds Banking Group's website and are also available upon
request from Investor Relations, Lloyds Banking Group plc, 25 Gresham Street,
London EC2V 7HN.
The directors consider that it is appropriate to continue to adopt the going
concern basis in preparing these condensed consolidated half-year financial
statements. In reaching this assessment, the directors have taken into account
the uncertainties affecting the UK economy and their potential effects upon
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.
The Group's accounting policies are consistent with those applied by the Group
in its financial statements for the year ended 31 December 2023 and there have
been no changes in the Group's methods of computation.
The IASB has issued a number of minor amendments to IFRSs that are relevant to
the Group effective 1 January 2024, including IFRS 16 Lease Liability in a
Sale and Leaseback, IAS 1 Non-current Liabilities with Covenants, and IAS 1
Classification of Liabilities as Current or Non-current. These amendments have
not had a significant impact on the Group.
Future accounting developments
The IASB has issued Amendments to the Classification and Measurement of
Financial Instruments (IFRS 9 and IFRS 7) which is effective 1 January 2026
and IFRS 19 Subsidiaries without Public Accountability: Disclosures which is
effective 1 January 2027. Neither the amendments nor IFRS 19 are expected to
have a significant impact on the Group. The IASB has also issued IFRS 18
Primary Financial Statements which is effective 1 January 2027. The standard
includes no measurement changes, and the Group is currently assessing the
impact of this standard on its income statement presentation.
The Company'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 2023 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.
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 2023
were approved by the directors on 29 February 2024 and were delivered to the
Registrar of Companies on 30 March 2024. 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.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 2: Critical accounting judgements and key sources of estimation
uncertainty
The preparation of the Group's financial statements in accordance with IFRS
requires management to make judgements, estimates and assumptions in applying
the accounting policies that affect the reported amounts of assets,
liabilities, income and expenses. Due to the inherent uncertainty in making
estimates, actual results reported in future periods may be based upon amounts
which differ from these estimates. Estimates, judgements and assumptions are
continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be
reasonable under the circumstances. In preparing the financial statements, the
Group has considered the impact of climate-related risks on its financial
position and performance. While the effects of climate change represent a
source of uncertainty, the Group does not consider there to be a material
impact on its judgements and estimates from the physical, transition and other
climate-related risks in the short-term.
The Group's significant judgements, estimates and assumptions are unchanged
compared to those disclosed in note 3 of the Group's 2023 financial
statements. Further information on the critical accounting judgements and key
sources of estimation uncertainty for the allowance for expected credit losses
is set out in note 10.
Note 3: Net fee and commission income
Half-year Half-year
to 30 Jun to 30 Jun
2024 2023
£m £m
Fee and commission income:
Current accounts 97 96
Credit and debit card fees 207 202
Other fees and commissions 30 49
Total fee and commission income 334 347
Fee and commission expense (236) (163)
Net fee and commission income 98 184
Note 4: Operating expenses
Half-year Half-year
to 30 Jun to 30 Jun
2024 2023
£m £m
Staff costs 496 432
Premises and equipment costs 86 94
Depreciation and amortisation 135 133
Amounts payable to fellow Lloyds Banking Group undertakings and other expenses 856 780
Total operating expenses 1,573 1,439
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 5: Retirement benefit obligations
The Group's post-retirement defined benefit scheme obligations are comprised
as follows:
At 30 Jun At 31 Dec
2024 2023
£m £m
Defined benefit pension schemes:
Present value of funded obligations (9,790) (10,342)
Fair value of scheme assets 10,927 11,575
Net pension scheme asset 1,137 1,233
Other post-retirement schemes (18) (19)
Total amounts recognised in the balance sheet 1,119 1,214
Recognised on the balance sheet as:
Retirement benefit assets 1,197 1,296
Retirement benefit obligations (78) (82)
Total amounts recognised in the balance sheet 1,119 1,214
Movements in the Group's net post-retirement defined benefit scheme asset
during the period were as follows:
£m
Asset at 1 January 2024 1,214
Income statement credit 2
Employer contributions 41
Remeasurement (138)
Asset at 30 June 2024 1,119
The principal assumptions used in the valuations of the defined benefit
pension schemes were as follows:
At 30 Jun At 31 Dec
2024 2023
% %
Discount rate 5.18 4.70
Rate of inflation:
Retail Price Index (RPI) 2.95 2.84
Consumer Price Index (CPI) 2.68 2.46
Rate of salary increases 0.00 0.00
Weighted-average rate of increase for pensions in payment 3.10 2.90
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 6: Impairment
Half-year Half-year
to 30 Jun to 30 Jun
2024 2023
£m £m
Loans and advances to customers 18 378
Due from fellow Lloyds Banking Group undertakings (3) -
Financial assets held at amortised cost 15 378
Loan commitments and financial guarantees (10) 1
Total impairment 5 379
Note 7: Tax
In accordance with IAS 34, the Group's income tax (expense) credit for the
half-year to 30 June 2024 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 (loss) is set out below:
Half-year Half-year
to 30 Jun to 30 Jun
2024 2023
£m £m
Profit (loss) before tax 462 (33)
UK corporation tax thereon at 25.0 per cent (2023: 23.5 per cent) (116) 8
Impact of surcharge on banking profits (8) 15
Non-deductible costs: conduct charges 5 (1)
Other non-deductible costs (27) (6)
Non-taxable income 6 -
Tax relief on coupons on other equity instruments 25 21
Tax-exempt gains/(losses) on disposals - 22
Adjustments in respect of prior years (9) 6
Tax (expense) credit (124) 65
Note 8: 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 15 to the Group's financial statements for the year
ended 31 December 2023 details the definitions of the three levels in the
fair value hierarchy.
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 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.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 8: Fair values of financial assets and liabilities (continued)
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 2024
Loans and advances to customers at fair value through profit or loss - 14 284 298
Debt securities at fair value through other comprehensive income 105 - - 105
Derivative financial instruments - 2,804 - 2,804
Total financial assets carried at fair value 105 2,818 284 3,207
At 31 December 2023
Loans and advances to customers at fair value through profit or loss - - 266 266
Debt securities at fair value through other comprehensive income 108 - - 108
Derivative financial instruments - 2,850 - 2,850
Total financial assets carried at fair value 108 2,850 266 3,224
Financial liabilities Level 1 Level 2 Level 3 Total
£m £m £m £m
At 30 June 2024
Debt securities in issue designated at fair value through profit or loss - - 23 23
Derivative financial instruments - 3,944 143 4,087
Total financial liabilities carried at fair value - 3,944 166 4,110
At 31 December 2023
Debt securities in issue designated at fair value through profit or loss - - 23 23
Derivative financial instruments - 4,279 132 4,411
Total financial liabilities carried at fair value - 4,279 155 4,434
Valuation control framework
Key elements of the valuation control framework include model validation
(incorporating pre-trade and post-trade testing), product implementation
review and independent price verification. The framework covers processes for
all 3 levels in the fair value hierarchy. Formal committees meet quarterly to
discuss and approve valuations in more judgemental areas.
Transfers into and out of level 3 portfolios
Transfers out of level 3 portfolios arise when inputs that could have a
significant impact on the instrument's valuation become market observable;
conversely, transfers into the portfolios arise when sources of data cease to
be observable.
Valuation methodology
For level 2 and level 3 portfolios, there is no significant change to the
valuation methodology (techniques and inputs) disclosed in the Group's
financial statements for the year ended 31 December 2023 applied to these
portfolios.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 8: 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 Derivative assets Total
assets £m financial
at fair value assets
through carried at
profit or loss fair value
£m £m
At 1 January 2024 266 - 266
Gains recognised in the income statement within other income 30 - 30
Purchases/increases to customer loans 3 - 3
Repayments of customer loans (15) - (15)
At 30 June 2024 284 - 284
Gains recognised in the income statement, within other income, relating 28 - 28
to the change in fair value of those assets held at 30 June 2024
At 1 January 2023 291 - 291
Gains recognised in the income statement within other income 17 - 17
Purchases/increases to customer loans - - -
Repayments of customer loans (8) - (8)
At 30 June 2023 300 - 300
Gains recognised in the income statement, within other income, relating 17 - 17
to the change in fair value of those assets held at 30 June 2023
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 2024 23 132 155
Losses recognised in the income statement within other income 2 23 25
Redemptions (2) (12) (14)
At 30 June 2024 23 143 166
Losses recognised in the income statement, within other income, 2 21 23
relating to the change in fair value of those liabilities held at 30 June 2024
At 1 January 2023 26 150 176
(Gains) losses recognised in the income statement within other income (1) 16 15
Redemptions - (5) (5)
At 30 June 2023 25 161 186
(Gains) losses recognised in the income statement, within other income, (1) 16 15
relating to the change in fair value of those liabilities held at 30 June 2023
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 8: Fair values of financial assets and liabilities (continued)
Sensitivity of level 3 valuations
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 2024 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 284 20 (19)
(+/- 50bps)
Level 3 financial assets carried at fair value 284
Financial liabilities at fair value through profit or loss
Securitisation notes Discounted cash flows Interest rate spreads 23 1 (1)
(+/- 50bps)
Derivative financial liabilities
Shared appreciation rights Market values - property valuation HPI (+/- 1%) 143 13 (12)
Level 3 financial liabilities carried at fair value 166
At 31 December 2023
Financial assets at fair value through profit or loss
Loans and advances to customers Discounted cash flows Interest rate spreads 266 21 (19)
(+/- 50bps)
Level 3 financial assets carried at fair value 266
Financial liabilities at fair value through profit or loss
Securitisation notes Discounted cash flows Interest rate spreads 23 1 (1)
(+/- 50bps)
Derivative financial liabilities
Shared appreciation rights Market values - property valuation HPI (+/- 1%) 132 13 (12)
Level 3 financial liabilities carried at fair value 155
(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 and
derivatives are unchanged from those described in the Group's financial
statements for the year ended 31 December 2023.
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 is unchanged from
that described in note 15 to the Group's financial statements for the year
ended 31 December 2023.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 8: Fair values of financial assets and liabilities (continued)
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 2024 At 31 December 2023
Carrying Fair Carrying Fair
value value value value
£m £m £m £m
Financial assets
Loans and advances to banks 112 112 214 214
Loans and advances to customers 294,498 289,183 292,470 284,115
Debt securities 1,539 1,531 1,696 1,794
Due from fellow Lloyds Banking Group undertakings 19,682 19,682 14,831 14,831
Financial assets at amortised cost 315,831 310,508 309,211 300,954
Financial liabilities
Deposits from banks 122 122 179 179
Customer deposits 163,302 163,657 161,946 162,115
Repurchase agreements 30,393 30,393 30,397 30,397
Due to fellow Lloyds Banking Group undertakings 96,817 96,817 92,147 92,147
Debt securities in issue 9,289 9,327 8,610 8,633
Subordinated liabilities 2,180 2,211 2,205 2,249
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.
Note 9: Loans and advances to customers
Half-year to 30 June 2024
Gross carrying amount Allowance for expected credit losses
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
£m £m £m £m £m £m £m £m
At 1 January 2024 247,818 40,066 6,855 294,739 383 857 1,029 2,269
Exchange and other adjustments (617) - - (617) - (3) 12 9
Transfers to Stage 1 13,424 (13,420) (4) - 156 (153) (3) -
Transfers to Stage 2 (7,397) 7,860 (463) - (23) 69 (46) -
Transfers to Stage 3 (292) (1,394) 1,686 - (4) (99) 103 -
Net change in ECL due to transfers (103) 132 116 145
26 (51) 170 145
Impact of transfers between stages 5,735 (6,954) 1,219 -
Other changes in credit quality (118) (31) 174 25
Additions and repayments 5,730 (1,548) (568) 3,614 (18) (52) (82) (152)
Charge to the income statement (110) (134) 262 18
Disposals and derecognition(1) (490) (266) (219) (975) (1) (5) (27) (33)
Advances written off (356) (356) (356) (356)
Recoveries of advances written off in previous years 56 56 56 56
At 30 June 2024 258,176 31,298 6,987 296,461 272 715 976 1,963
Allowance for ECL (272) (715) (976) (1,963)
Net carrying amount 257,904 30,583 6,011 294,498
Drawn ECL coverage(2) (%) 0.1 2.3 14.0 0.7
(1 ) Relates to the securitisation of legacy retail mortgages.
(2) Allowance for expected credit losses on loans and advances to customers
as a percentage of gross loans and advances to customers.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 9: Loans and advances to customers (continued)
Year ended 31 December 2023
Gross carrying amount Allowance for expected credit losses
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
£m £m £m £m £m £m £m £m
At 1 January 2023 243,873 44,226 7,514 295,613 284 1,132 1,781 3,197
Exchange and other adjustments 640 - - 640 (1) - 114 113
Transfers to Stage 1 12,921 (12,909) (12) - 217 (213) (4) -
Transfers to Stage 2 (12,594) 13,209 (615) - (23) 79 (56) -
Transfers to Stage 3 (702) (2,252) 2,954 - (7) (160) 167 -
Net change in ECL due to transfers (138) 211 241 314
49 (83) 348 314
Impact of transfers between stages (375) (1,952) 2,327 -
Other changes in credit quality 44 (113) 353 284
Additions and repayments 4,993 (1,320) (1,943) 1,730 8 (44) (886) (922)
Charge (credit) to the income statement 101 (240) (185) (324)
Disposals and derecognition(1) (1,313) (888) (447) (2,648) (1) (35) (85) (121)
Advances written off (684) (684) (684) (684)
Recoveries of advances written off in previous years 88 88 88 88
At 31 December 2023 247,818 40,066 6,855 294,739 383 857 1,029 2,269
Allowance for ECL (383) (857) (1,029) (2,269)
Net carrying amount 247,435 39,209 5,826 292,470
Drawn ECL coverage(2) (%) 0.2 2.1 15.0 0.8
(1 ) Relates to the securitisation of legacy retail mortgages.
(2) Allowance for expected credit losses on loans and advances to customers
as a percentage of gross loans and advances to customers.
The movement tables are compiled by comparing the position at the end of the
period 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 end of
the period.
Additions and repayments comprise new loans originated and repayments of
outstanding balances throughout the reporting period.
The Group's impairment charge comprises impact of transfers between stages,
other changes in credit quality and additions and repayments.
Advances written off have first been transferred to Stage 3 and then acquired
a full allowance through other changes in credit quality. Recoveries of
advances written off in previous years are shown at the full recovered value,
with a corresponding entry in repayments and release of allowance through
other changes in credit quality.
(
)
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 10: Allowance for expected credit losses
The calculation of the Group's allowance for expected credit loss allowances
requires the Group to make a number of judgements, assumptions and estimates.
These are set out in full in note 18 to the Group's financial statements for
the year ended 31 December 2023, with the most significant set out below.
The table below analyses total ECL allowance, separately identifying the
amounts that have been modelled, those that have been individually assessed
and those arising through the application of judgemental adjustment.
Judgemental
adjustments due to:
Modelled Individually Inflationary and interest rate risk Other Total
ECL assessed £m £m ECL
£m £m £m
At 30 June 2024 1,790 146 31 115 2,082
At 31 December 2023 2,059 167 144 33 2,403
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, such as probability of 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 applies appropriate judgemental adjustments to the ECL 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.
During 2022 and 2023 the intensifying inflationary pressures, alongside rising
interest rates created further risks not deemed to be fully captured by ECL
models which required judgemental adjustments to be added. Through the first
half of 2024 these risks have largely subsided with inflation back at two per
cent and the UK Bank rate now believed to have peaked. The portfolio has
proven resilient to higher rates and inflation. As a result, the judgements
held in respect of inflationary and interest rate risks are significantly
reduced to £31 million (31 December 2023: £144 million). Other judgements
continue to be applied for broader data and model limitations, both increasing
and decreasing ECL.
Judgemental adjustments due to inflationary and interest rate risk
Inflationary and interest rate pressures: £31 million (31 December 2023:
£144 million)
The Group's ECL models for UK mortgages use UK Bank Rate as a driver of
predicted defaults and were largely believed to have captured the stretch on
customers due to increased interest rates. However, the combination of
inflationary pressures with sharp increases to interest rates over 2023 were
believed to create further risk not potentially captured by ECL models. Modest
increases in new to arrears and defaults emerged in 2023, mainly driven by
variable rate customers, who experienced sudden material increases in their
monthly payment. Given interest rates have stabilised, inflation has reduced
and experience through the first half of 2024 has been benign, this risk has
reduced. A lower judgemental uplift in ECL continues to be taken in segments
of the mortgages portfolio, either where inflation is expected to present a
more material risk, or where segments within the model do not recognise UK
Bank Rate as a material driver of predicted defaults.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 10: Allowance for expected credit losses (continued)
Other judgemental adjustments
These adjustments principally comprise:
Increase in time to repossession: £122 million (31 December 2023: £126
million)
The UK mortgage portfolio currently contains a larger number of customers that
have been in default for a longer period than would typically be expected
following pauses in litigation activity both before and during COVID-19. There
is a risk that the probability of possession (PPD), and therefore ECL on these
accounts is understated given this component of the model may not reflect the
full impact of customers remaining in default for an extended period.
Adjustments for this risk have been in place for several years, although the
approach has been refined in the first half of 2024. The updated approach
continues to target accounts that have been in default for more than 24 months
with an arrears balance increase in the last six months. These accounts now
have their PPD increased to a level based on equivalent observed performance
graduated by their time in default. The change in approach has resulted in a
similar level of adjustment, but now provides a mechanism which will see the
adjustment naturally release as this backlog reduces.
Adjustment for single point of loss model limitation: £47 million (31
December 2023: £nil)
The current UK mortgages ECL model estimates customer level losses using a
'single point of loss' (SPOL) calculation, with predicted timings of defaults
and subsequent repossession using average time periods. This simplification is
continually assessed for any potential over or understatement of ECL compared
to a more sophisticated 'multiple points of loss' (MPOL) modelling technique.
To date, this has not shown any material difference for which an adjustment
would be required. Management have been developing a new ECL model which will
address this limitation, anticipated to be formally adopted later this year.
However, the development activity is now suitably progressed to be leveraged
in the ongoing assessment of the scale of the SPOL model simplification. This
assessment indicated that the MES update in the second quarter of the year had
increased the impact of the simplification up to a scale that required
mitigation through a judgemental adjustment. This adjustment is expected to be
released upon the final adoption of the new ECL model once it has completed
appropriate internal model governance activities.
Lifetime extension on revolving products: £26 million (31 December 2023: £53
million)
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 ECL models were developed, to a more
representative lifetime. Incremental defaults beyond year three are calculated
through the extrapolation of the default trajectory observed throughout the
three years and beyond. The judgemental adjustment has reduced slightly for
credit cards in the period following refinement to the discounting methodology
applied.
Adjustments to loss given defaults (LGDs): £(63) million (31 December 2023:
£(64) million)
A number of adjustments continue to be made to the loss given default
assumptions used within unsecured and motor credit models. For unsecured
portfolios, the adjustments reflect the impact of changes in collection debt
sale strategy on the Group's LGD models, incorporating up to date customer
performance and forward flow debt sale pricing. For UK Motor Finance, the
adjustment captures the latest outlook on used car prices.
Following review and monitoring on the loss given default approach for
commercial exposures, ECL requires an adjustment to mitigate limitations
identified in the approach which are causing loss given defaults 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. These temporary adjustments will be addressed through future model
development.
Corporate insolvency rates: £(35) million (31 December 2023: £(47) million)
The volume of UK corporate insolvencies has continued to remain well above
December 2019 levels, revealing a marked misalignment between observed UK
corporate insolvencies and the Group's credit performance which has been
better than this. This dislocation gives rise to uncertainty over the drivers
of observed trends and the appropriateness of the Group's Commercial Banking
model response which uses observed UK corporate insolvencies data to anchor
future loss estimates to. Given the Group's asset quality remains strong with
low new defaults, a negative adjustment is applied by using the long-term
average rate. The slightly greater negative adjustment in the period reflects
the widening gap between the increasing industry level and the long-term
average rate used.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 10: Allowance for expected credit losses (continued)
Base case and MES economic assumptions
The Group's base case economic scenario as at 30 June 2024 has been updated to
reflect ongoing geopolitical and economic developments, as the slow reduction
of inflationary pressures brings into view a shift to less restrictive
monetary policies globally. The Group's updated base case scenario has three
conditioning assumptions: first, the wars in Ukraine and the Middle East
remain geographically contained; second, the UK's post-election economic
policies retain the framework of the inflation target and fiscal rules, while
allowing for an increase in both current and capital public spending; and
third, the outcome of the US election broadly maintains economic policy
continuity, including an unchanged position for the Federal Reserve.
Based on these assumptions and incorporating the economic data published in
the second quarter of 2024, the Group's base case scenario is for a gradual
expansion of economic activity and a slight rise in the unemployment rate,
alongside modest changes in residential and commercial property prices.
Following a gradual reduction in inflationary pressures, UK Bank Rate is
expected to be lowered twice during 2024. Risks around this base case economic
view lie in both directions and are largely captured by the generation of
alternative economic scenarios.
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 2024, for which actuals may have since emerged prior to
publication. The Group's base case economic scenario predated the results of
the UK General Election and, as such, information that has become available
since the election has not been included.
The Group's approach to generating alternative economic scenarios is set out
in detail in note 18 to the financial statements for the year ended 31
December 2023. 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. A small refinement was made to the
Group's approach during the first half of 2024, with alternative economic
scenarios now dispersing from the base case after the balance sheet date. This
is one quarter later than previously adopted reflecting the use of a base case
that is now set closer to the reporting date than at the onset of IFRS 9. As a
result, all scenarios include the same forecasted level for key variables in
the second quarter of 2024, for which actuals may have since emerged prior to
publication.
For June 2024, the Group continues to judge it appropriate to include a
non-modelled severe downside scenario for Group ECL calculations. The scenario
is now generated as a simple average of a fully modelled severe scenario,
better representing shocks to demand, and a scenario with higher paths for UK
Bank Rate and CPI inflation, as a representation of shocks to supply. The
combined 'adjusted' scenario used in ECL modelling is considered to better
reflect the risks around the Group's base case view in an economic environment
where demand and supply shocks are more balanced.
Scenarios by year
The key UK economic assumptions made by the Group are shown in the following
tables across a number of measures explained below.
Annual assumptions
Gross domestic product (GDP) growth and Consumer Price Index (CPI) inflation
are presented as an annual change, house price growth and commercial real
estate price growth are presented as the growth in the respective indices over
each year. Unemployment rate and UK Bank Rate are averages over the year.
Five-year average
The five-year average reflects the average annual growth rate, or level, over
the five-year period. It includes movements within the current reporting year,
such that the position as of 30 June 2024 covers the five years 2024 to 2028.
The inclusion of the reporting year within the five-year period reflects the
need to predict variables which remain unpublished at the reporting date and
recognises that credit models utilise both level and annual changes. The use
of calendar years maintains a comparability between the annual assumptions
presented.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 10: Allowance for expected credit losses (continued)
At 30 June 2024 2024 2025 2026 2027 2028 2024
% % % % % to 2028 average
%
Upside
Gross domestic product growth 1.1 2.3 1.7 1.5 1.4 1.6
Unemployment rate 4.1 3.2 3.0 2.9 2.9 3.2
House price growth 2.2 5.0 7.3 6.0 5.2 5.1
Commercial real estate price growth 2.2 8.7 2.4 2.8 1.2 3.4
UK Bank Rate 5.17 5.30 5.17 5.33 5.55 5.31
CPI inflation 2.5 2.5 2.4 2.7 2.9 2.6
Base case
Gross domestic product growth 0.8 1.2 1.6 1.6 1.6 1.3
Unemployment rate 4.5 4.8 4.8 4.6 4.6 4.7
House price growth 1.2 1.4 1.0 1.4 2.4 1.5
Commercial real estate price growth (1.6) 1.2 0.0 1.9 1.0 0.5
UK Bank Rate 5.06 4.19 3.63 3.50 3.50 3.98
CPI inflation 2.5 2.5 2.1 2.1 2.2 2.3
Downside
Gross domestic product growth 0.6 (0.5) 0.8 1.5 1.6 0.8
Unemployment rate 4.9 6.9 7.5 7.4 7.2 6.7
House price growth 0.6 (1.8) (6.5) (5.4) (2.3) (3.1)
Commercial real estate price growth (4.7) (6.7) (4.1) (0.8) (1.3) (3.5)
UK Bank Rate 4.97 2.77 1.38 0.89 0.63 2.13
CPI inflation 2.5 2.4 1.8 1.4 1.2 1.9
Severe downside
Gross domestic product growth 0.1 (2.2) 0.4 1.2 1.5 0.2
Unemployment rate 5.5 9.4 10.2 10.1 9.8 9.0
House price growth (0.7) (4.8) (13.9) (11.8) (7.6) (7.9)
Commercial real estate price growth (9.1) (15.1) (8.6) (5.3) (4.7) (8.6)
UK Bank Rate - modelled 4.81 1.12 0.16 0.05 0.02 1.23
UK Bank Rate - adjusted(1) 5.09 3.22 2.33 2.02 1.79 2.89
CPI inflation - modelled 2.6 2.4 1.3 0.5 0.1 1.4
CPI inflation - adjusted(1) 2.9 3.2 1.6 0.9 1.0 1.9
Probability-weighted
Gross domestic product growth 0.8 0.7 1.3 1.5 1.5 1.2
Unemployment rate 4.6 5.4 5.6 5.5 5.4 5.3
House price growth 1.1 0.9 (0.9) (0.6) 0.8 0.3
Commercial real estate price growth (2.1) (0.5) (1.3) 0.6 (0.2) (0.7)
UK Bank Rate - modelled 5.04 3.79 3.07 2.92 2.90 3.55
UK Bank Rate - adjusted(1) 5.07 4.00 3.29 3.12 3.08 3.71
CPI inflation - modelled 2.5 2.5 2.1 1.9 1.9 2.2
CPI inflation - adjusted(1) 2.6 2.6 2.1 1.9 2.0 2.2
(1) The adjustment to UK Bank Rate and CPI inflation in the severe downside
is considered to better reflect the risks to the Group's base case view in an
economic environment where the risks of supply and demand shocks are seen as
more balanced.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 10: Allowance for expected credit losses (continued)
At 31 December 2023 2023 2024 2025 2026 2027 2023
% % % % % to 2027 average
%
Upside
Gross domestic product growth 0.3 1.5 1.7 1.7 1.9 1.4
Unemployment rate 4.0 3.3 3.1 3.1 3.1 3.3
House price growth 1.9 0.8 6.9 7.2 6.8 4.7
Commercial real estate price growth (3.9) 9.0 3.8 1.3 1.3 2.2
UK Bank Rate 4.94 5.72 5.61 5.38 5.18 5.37
CPI inflation 7.3 2.7 3.1 3.2 3.1 3.9
Base case
Gross domestic product growth 0.3 0.5 1.2 1.7 1.9 1.1
Unemployment rate 4.2 4.9 5.2 5.2 5.0 4.9
House price growth 1.4 (2.2) 0.5 1.6 3.5 1.0
Commercial real estate price growth (5.1) (0.2) 0.1 0.0 0.8 (0.9)
UK Bank Rate 4.94 4.88 4.00 3.50 3.06 4.08
CPI inflation 7.3 2.7 2.9 2.5 2.2 3.5
Downside
Gross domestic product growth 0.2 (1.0) (0.1) 1.5 2.0 0.5
Unemployment rate 4.3 6.5 7.8 7.9 7.6 6.8
House price growth 1.3 (4.5) (6.0) (5.6) (1.7) (3.4)
Commercial real estate price growth (6.0) (8.7) (4.0) (2.1) (1.2) (4.4)
UK Bank Rate 4.94 3.95 1.96 1.13 0.55 2.51
CPI inflation 7.3 2.8 2.7 1.8 1.1 3.2
Severe downside
Gross domestic product growth 0.1 (2.3) (0.5) 1.3 1.8 0.1
Unemployment rate 4.5 8.7 10.4 10.5 10.1 8.8
House price growth 0.6 (7.6) (13.3) (12.7) (7.5) (8.2)
Commercial real estate price growth (7.7) (19.5) (10.6) (7.7) (5.2) (10.3)
UK Bank Rate - modelled 4.94 2.75 0.49 0.13 0.03 1.67
UK Bank Rate - adjusted(1) 4.94 6.56 4.56 3.63 3.13 4.56
CPI inflation - modelled 7.3 2.7 2.2 0.9 (0.2) 2.6
CPI inflation - adjusted(1) 7.6 7.5 3.5 1.3 1.0 4.2
Probability-weighted
Gross domestic product growth 0.3 0.1 0.8 1.6 1.9 0.9
Unemployment rate 4.2 5.3 5.9 5.9 5.7 5.4
House price growth 1.4 (2.5) (0.9) (0.3) 1.8 (0.1)
Commercial real estate price growth (5.3) (1.9) (1.1) (1.0) (0.2) (1.9)
UK Bank Rate - modelled 4.94 4.64 3.52 3.02 2.64 3.75
UK Bank Rate - adjusted(1) 4.94 5.02 3.93 3.37 2.95 4.04
CPI inflation - modelled 7.3 2.7 2.8 2.3 1.9 3.4
CPI inflation - adjusted(1) 7.4 3.2 3.0 2.4 2.0 3.6
(1) The adjustment to UK Bank Rate and CPI inflation in the severe downside
was considered to better reflect the risks to the Group's base case view in an
economic environment where supply shocks were the principal concern.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 10: Allowance for expected credit losses (continued)
Base case scenario by quarter
Gross domestic product growth 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 2024 First Second Third Fourth First Second Third Fourth
quarter quarter quarter quarter quarter quarter quarter quarter
2024 2024 2024 2024 2025 2025 2025 2025
% % % % % % % %
Gross domestic product growth 0.6 0.4 0.3 0.2 0.3 0.3 0.4 0.4
Unemployment rate 4.3 4.5 4.6 4.7 4.8 4.9 4.9 4.8
House price growth 0.4 1.0 3.8 1.2 0.9 1.3 1.3 1.4
Commercial real estate price growth (5.3) (5.3) (3.5) (1.6) (0.9) 0.2 (0.2) 1.2
UK Bank Rate 5.25 5.25 5.00 4.75 4.50 4.25 4.00 4.00
CPI inflation 3.5 2.1 2.0 2.5 2.2 2.7 2.6 2.4
At 31 December 2023 First Second Third Fourth First Second Third Fourth
quarter quarter quarter quarter quarter quarter quarter quarter
2023 2023 2023 2023 2024 2024 2024 2024
% % % % % % % %
Gross domestic product growth 0.3 0.0 (0.1) 0.0 0.1 0.2 0.3 0.3
Unemployment rate 3.9 4.2 4.2 4.3 4.5 4.8 5.0 5.2
House price growth 1.6 (2.6) (4.5) 1.4 (1.1) (1.5) 0.5 (2.2)
Commercial real estate price growth (18.8) (21.2) (18.2) (5.1) (4.1) (3.8) (2.2) (0.2)
UK Bank Rate 4.25 5.00 5.25 5.25 5.25 5.00 4.75 4.50
CPI inflation 10.2 8.4 6.7 4.0 3.8 2.1 2.3 2.8
ECL sensitivity to economic assumptions
The table below shows the Group's ECL for the probability-weighted, upside,
base case, downside and severe downside scenarios, with the severe downside
scenario incorporating adjustments made to CPI inflation and UK Bank Rate
paths. The stage allocation for an asset is based on the overall scenario
probability-weighted PD and hence the staging of assets is constant across all
the scenarios. In each economic scenario the ECL for individual assessments is
held constant reflecting the basis on which they are evaluated. Judgemental
adjustments applied through changes to model inputs or parameters, or more
qualitative post model adjustments, are apportioned across the scenarios in
proportion to modelled ECL where this better reflects the sensitivity of these
adjustments to each scenario. 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 £313
million compared to £457 million at 31 December 2023.
ECL allowance Probability- Upside Base case Downside Severe
weighted £m £m £m downside
£m £m
At 30 June 2024 2,082 1,419 1,769 2,359 4,176
At 31 December 2023 2,403 1,513 1,946 2,551 6,007
The sensitivity of ECL to isolated changes in the UK unemployment rate and
House Price Index (HPI) has been assessed on a univariate basis. 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 staging held flat to the
reported probability-weighted view and is assessed through the direct impact
on modelled ECL and therefore only includes judgemental adjustments applied
within the model.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 10: Allowance for expected credit losses (continued)
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 10 quarters of the base case scenario. A more immediate increase or
decrease would drive a more material ECL impact as it would be fully reflected
in both 12-month and lifetime probability of defaults.
At 30 June 2024 At 31 December 2023
1pp increase in 1pp decrease in 1pp increase in 1pp decrease in
unemployment unemployment unemployment unemployment
£m £m £m £m
ECL impact 60 (54) 65 (64)
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 HPI. The increase or
decrease is presented based on the adjustment phased evenly over the first 10
quarters of the base case scenario.
At 30 June 2024 At 31 December 2023
10pp increase 10pp decrease 10pp increase 10pp decrease
in HPI in HPI in HPI in HPI
£m £m £m £m
ECL impact (149) 222 (182) 275
Note 11: Debt securities in issue
At 30 June 2024 At 31 December 2023
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
Senior unsecured notes issued - 6,003 6,003 - 6,022 6,022
Securitisation notes 23 2,775 2,798 23 2,083 2,106
Covered bonds - 511 511 - 505 505
23 9,289 9,312 23 8,610 8,633
Covered bonds and securitisation programmes
At 30 June 2024, the bonds held by external parties and those held internally,
were secured on certain loans and advances to customers amounting to £831
million (31 December 2023: £824 million) which have been assigned to
bankruptcy remote limited liability partnerships to provide security for
issues of covered bonds by the Group. The Group retains all of the risks and
rewards associated with these loans and the partnerships are consolidated
fully with the loans retained on the Group's balance sheet and the related
covered bonds in issue included within debt securities in issue at amortised
cost.
At 30 June 2024, the Group's securitisation notes in issue held by external
parties includes £23 million at fair value through profit or loss (31
December 2023: £23 million). Those notes held internally, are secured on
loans and advances to customers amounting to £27,512 million (31 December
2023: £29,649 million), the majority of which have been sold by subsidiary
companies to bankruptcy remote structured entities. As the structured entities
are funded by the issue of debt on terms whereby the majority of the risks and
rewards of the portfolio are retained by the subsidiary, the structured
entities are consolidated fully and all of these loans are retained on the
Group's balance sheet, with the related notes in issue included within debt
securities in issue at amortised cost.
Cash deposits of £1,444 million (31 December 2023: £1,277 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.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 12: Provisions
Provisions Regulatory and legal Other Total
for financial provisions £m £m
commitments £m
and guarantees(1)
£m
At 1 January 2024 128 426 166 720
Exchange and other adjustments (1) - - (1)
Provisions applied - (145) (86) (231)
(Credit) charge for the period (10) 41 41 72
At 30 June 2024 117 322 121 560
(1) In respect of loans and advances to customers.
Regulatory and legal provisions
In the course of its business, the Group is engaged on a regular basis in
discussions with UK and overseas regulators and other governmental authorities
on a range of matters, including legal and regulatory reviews and, from time
to time, enforcement investigations (including in relation to compliance with
applicable laws and regulations, such as those relating to prudential
regulation, consumer protection, investment advice, business conduct, systems
and controls, environmental, competition/anti-trust, tax, anti-bribery,
anti-money laundering and sanctions). Any matters discussed or identified
during such discussions and inquiries may result in, among other things,
further inquiry or investigation, other action being taken by governmental
and/or regulatory authorities, increased costs being incurred by the Group,
remediation of systems and controls, public or private censure, restriction of
the Group's business activities and/or fines. The Group also receives
complaints in connection with its past conduct and claims brought by or on
behalf of current and former employees, customers (including their appointed
representatives), investors and other third parties and is subject to legal
proceedings and other legal actions from time to time. Any events or
circumstances disclosed could have a material adverse effect on the Group's
financial position, operations or cash flows. Provisions are held where the
Group can reliably estimate a probable outflow of economic resources. The
ultimate liability of the Group may be significantly more, or less, than the
amount of any provision recognised. If the Group is unable to determine a
reliable estimate, a contingent liability is disclosed. The recognition of a
provision does not amount to an admission of liability or wrongdoing on the
part of the Group. During the half-year to 30 June 2024 the Group charged a
further £41 million in respect of legal actions and other regulatory matters
and the unutilised balance at 30 June 2024 was £322 million (31 December
2023: £426 million). The most significant items are outlined below.
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 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 its decisions in a generous, fair and common sense manner,
assessing claims against an expanded definition of the fraud and on a lower
evidential basis.
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. Over
95 per cent of the population have now had decisions via this new process. The
provision is unchanged in the first half of 2024. Notwithstanding the settled
claims and the increase in outcomes which builds confidence in the full
estimated cost, uncertainties remain and the final outcome could be 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 nor the review by Dame Linda Dobbs. The Group is committed
to implementing Sir Ross Cranston's recommendations in full.
Payment protection insurance (PPI)
The Group has incurred costs for PPI over a number of years totalling £6,356
million. 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.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 13: Dividends on ordinary shares
The Company paid a dividend of £650 million on 16 May 2024 (no dividend was
paid during the half-year to 30 June 2023).
Note 14: Related party transactions
Balances and transactions with fellow Lloyds Banking Group undertakings
The Company and its subsidiaries have balances due to and from the Company's
ultimate parent company, Lloyds Banking Group plc, and fellow Lloyds Banking
Group undertakings. These are included on the balance sheet as follows:
At 30 Jun At 31 Dec
2024 2023
£m £m
Assets, included within:
Derivative financial instruments 2,459 2,334
Financial assets at amortised cost: due from fellow Lloyds Banking Group 19,682 14,831
undertakings
Liabilities, included within:
Due to fellow Lloyds Banking Group undertakings 96,817 92,147
Derivative financial instruments 3,696 3,969
Debt securities in issue 5,365 5,371
Subordinated liabilities 1,503 1,503
During the half-year to 30 June 2024 the Group earned £488 million (half-year
to 30 June 2023: £268 million) of interest income and incurred £2,732
million (half-year to 30 June 2023: £2,383 million) of interest expense and
recognised net fee and commissions expense of £66 million (half year to 30
June 2023: net fee and commission income £10 million) on balances and
transactions with Lloyds Banking Group plc and fellow Lloyds Banking Group
undertakings. The increase in net fee and commission expense is primarily due
to the impact of changes to commission arrangements with Scottish Widows.
In addition, during the half-year to 30 June 2024 the Group incurred
expenditure of £39 million (half-year ended 30 June 2023: £26 million) on
behalf of fellow Lloyds Banking Group undertakings which was recharged to
those undertakings; and fellow Lloyds Banking Group undertakings incurred
expenditure of £681 million (half-year ended 30 June 2023: £605 million) on
behalf of the Group which has been recharged to the Group.
Other related party transactions
Other related party transactions for the half-year to 30 June 2024 are similar
in nature to those for the year ended 31 December 2023.
Note 15: Contingent liabilities, commitments and guarantees
Contingent liabilities, commitments and guarantees
At 30 June 2024 contingent liabilities, such as performance bonds and letters
of credit, arising from the banking business were £104 million (31 December
2023: £109 million).
The contingent liabilities of the Group arise in the normal course of its
banking business and it is not practicable to quantify their future financial
effect. Total commitments and guarantees were £67,070 million (31 December
2023: £60,718 million), of which in respect of undrawn formal standby
facilities, credit lines and other commitments to lend, £19,139 million
(2023: £13,967 million) was irrevocable.
Interchange fees
With respect to multi-lateral interchange fees (MIFs), the Lloyds Banking
Group is not a party 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
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 15: Contingent liabilities, commitments and guarantees (continued)
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 from time to time. Any
such release and any subsequent sale of Visa common stock does not impact the
contingent liability.
LIBOR and other trading rates
Certain Lloyds Banking 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.
Certain Lloyds Banking 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 Lloyds Banking 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
Lloyds Banking Group of any private lawsuits or ongoing related challenges to
the interpretation or validity of any of the Lloyds Banking 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
its enquiry into the matter and issued a closure notice. The Group's
interpretation of the UK rules has not changed and hence it appealed to the
First Tier Tax Tribunal, with a hearing having taken place in May 2023. If the
final determination of the matter by the judicial process is that HMRC's
position is correct, management believes that this would result in an increase
in current tax liabilities of the Group of approximately £410 million
(including interest). The Group, following conclusion of the hearing and
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, none of which is expected to have a material impact on the
financial position of the Group.
FCA investigation into the Lloyds Banking Group's anti-money laundering
control framework
As previously disclosed, the FCA has opened an investigation into the Lloyds
Banking Group's compliance with domestic UK money laundering regulations and
the FCA's rules and Principles for Businesses, with a focus on aspects of its
anti-money laundering control framework. The Lloyds Banking Group continues to
co-operate with the investigation. It is not currently possible to estimate
the potential financial impact to the Lloyds Banking Group.
Arena litigation claims
The Group is facing claims alleging breach of duty and/or mandate in the
context of an underlying external fraud matter involving Arena Television. The
Group intends to contest the claims. It is not possible to estimate with
certainty the potential financial impact (if any) to the Group.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 15: Contingent liabilities, commitments and guarantees (continued)
Other legal actions and regulatory matters
In addition, in the course of its 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 (including their appointed representatives), investors or other
third parties, as well as legal and regulatory reviews, enquiries and
examinations, requests for information, audits, challenges, investigations and
enforcement actions, which could relate to a number of issues. This includes
matters in relation to compliance with applicable laws and regulations, such
as those relating to prudential regulation, consumer protection, investment
advice, business conduct, systems and controls, environmental,
competition/anti-trust, tax, anti-bribery, anti-money laundering and
sanctions, some of which may be beyond the Group's control, 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. 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.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors listed below (being all the directors of HBOS 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 2024 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 2024
and any material changes in the related party transactions described in the
last annual report.
Signed on behalf of the Board by
Charlie Nunn
Group Chief Executive
24 July 2024
HBOS plc Board of Directors:
Executive directors:
Charlie Nunn (Group Chief Executive)
William Chalmers (Chief Financial Officer)
Non-executive directors:
Sir Robin Budenberg CBE (Chair)
Sarah Legg
Amanda Mackenzie LVO OBE
Harmeen Mehta
Cathy Turner
Scott Wheway
Catherine Woods
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 HBOS 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 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, targets, 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; acts of hostility or terrorism and responses to
those acts, or other such events; geopolitical unpredictability; the war
between Russia and Ukraine; the conflicts in the Middle East; the tensions
between China and Taiwan; political instability including as a result of any
UK general election; market related risks, trends and developments; changes in
client and consumer behaviour and demand; exposure to counterparty risk; the
ability to access sufficient sources of capital, liquidity and funding when
required; changes to the Group's credit ratings; fluctuations in interest
rates, inflation, exchange rates, stock markets and currencies; volatility in
credit markets; volatility in the price of the Group's securities; tightening
of monetary policy in jurisdictions in which the Group operates; natural
pandemic and other disasters; risks concerning borrower and counterparty
credit quality; risks defined benefit pension schemes; changes in laws,
regulations, practices and accounting standards or taxation; changes to
regulatory capital or liquidity requirements and similar contingencies; the
policies and actions of governmental or regulatory authorities or courts
together with any resulting impact on the future structure of the Group; risks
associated with the Group's compliance with a wide range of laws and
regulations; assessment related to resolution planning requirements; risks
related to regulatory actions which may be taken in the event of a bank or
Group failure; exposure to legal, regulatory or competition proceedings,
investigations or complaints; failure to comply with anti-money laundering,
counter terrorist financing, anti-bribery and sanctions regulations; failure
to prevent or detect any illegal or improper activities; operational risks
including risks as a result of the failure of third party suppliers; conduct
risk; technological changes and risks to the security of IT and operational
infrastructure, systems, data and information resulting from increased threat
of cyber and other attacks; technological failure; inadequate or failed
internal or external processes or systems; risks relating to ESG matters, such
as climate change (and achieving climate change ambitions) and
decarbonisation, including the Group's ability along with the government and
other stakeholders to measure, manage and mitigate the impacts of climate
change effectively, and human rights issues; the impact of competitive
conditions; failure to attract, retain and develop high calibre talent; the
ability to achieve strategic objectives; the ability to derive cost savings
and other benefits including, but without limitation, as a result of any
acquisitions, disposals and other strategic transactions; inability to capture
accurately the expected value from acquisitions; assumptions and estimates
that form the basis of the Group's financial statements; and potential changes
in dividend policy. A number of these influences and factors are beyond the
control of the Group or any of the Group's immediate or ultimate parent
entities (if applicable). 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
Nora Thoden
Director of Investor Relations - ESG
020 7356 2334
nora.thoden@lloydsbanking.com
Tom Grantham
Investor Relations Senior Manager
07851 440 091
thomas.grantham@lloydsbanking.com
Sarah Robson
Investor Relations Senior Manager
07494 513 983
sarah.robson2@lloydsbanking.com
CORPORATE AFFAIRS
Grant Ringshaw
External Relations Director
020 7356 2362
grant.ringshaw@lloydsbanking.com
Matt Smith
Head of Media Relations
07788 352 487
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: HBOS plc, The Mound, Edinburgh EH1 1YZ
Registered in Scotland No. SC218813
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 RAMLTMTBTMMIRecent news on Lloyds Banking
See all newsREG - Lloyds Banking Group - Transaction in Own Shares
AnnouncementREG - Lloyds Banking Group - Transaction in Own Shares
AnnouncementREG - Lloyds Banking Group - Transaction in Own Shares
AnnouncementREG - Canary Wharf Fin II - Annual Financial Report
AnnouncementREG - Lloyds Banking Group - Transaction in Own Shares
Announcement