Lloyds Banking Group plc
Q1 2024
Interim Management Statement
24 April 2024
RESULTS FOR THE THREE MONTHS
ENDED 31 MARCH 2024
"The Group is continuing to deliver
in line with expectations in the first
quarter of 2024, with solid net income, cost discipline and strong
asset quality. Our performance provides us with
further confidence around our strategic ambitions and 2024 and 2026
guidance.
Guided by our purpose, we are
continuing to support customers and successfully execute against
our strategic outcomes, as highlighted in the third of our
strategic seminars last month. This underpins our ambition of
higher, more sustainable returns that will deliver for all of our
stakeholders as we continue to Help Britain Prosper."
Charlie Nunn, Group Chief
Executive
Financial performance in line with
expectations1
• Statutory profit after tax
of £1.2 billion (three months to 31 March
2023: £1.6 billion) with net income down
9 per cent on the prior year and operating
costs up 11 per cent, partly offset by the benefit of a lower impairment charge
• Return on tangible equity of
13.3 per cent (three
months to 31 March 2023: 19.1 per cent)
• Underlying net interest
income of £3.2 billion down 10 per cent, with a lower banking net interest margin,
as expected, of 2.95 per cent and
average interest-earning banking assets of £449.1
billion
• Underlying other income of
£1.3 billion, 7 per
cent higher, driven by continued recovery
in customer and market activity and the benefits
of strategic initiatives
• Operating lease depreciation
of £283 million, up on the prior year reflecting a full quarter of
depreciation from Tusker, alongside growth in fleet size and
declines in used car prices; the charge is lower than the fourth
quarter which included an additional c.£100 million residual value
provision to offset developments in used car prices
• Operating costs of £2.4 billion, up
11 per cent, including c.£0.1 billion relating to the sector-wide change in
the charging approach for the Bank of England levy
(excluding this levy, operating costs were up 6 per cent) and
elevated severance charges (£0.1 billion higher year to date). The
Bank of England levy will have a broadly neutral impact on
profit in 2024 with an offsetting benefit
recognised through net interest income over the course of the
year
• Remediation costs of
£25 million (three months to 31 March 2023:
£19 million), in relation to
pre-existing programmes
• Underlying impairment charge
of £57 million and asset quality ratio of 6 basis points. Excluding
the impact of improvements to the economic outlook, the asset
quality ratio was 23 basis points. The portfolio remains
well-positioned with stable credit trends and strong asset
quality
• Loans and advances to
customers reduced during the quarter to £448.5 billion, primarily due to expected reductions in
UK mortgage balances, given the refinancing of the
higher maturities in the fourth quarter of 2023
• Customer
deposits of £469.2 billion decreased by £2.2 billion, with
growth in Retail deposits of £1.3 billion more than offset by a
reduction in Commercial Banking of
£3.5 billion
• Strong capital
generation of 40 basis points, after regulatory headwinds of
6 basis points. CET1 ratio of 13.9 per cent, ahead of ongoing target of c.13.0 per
cent
• Risk-weighted assets of £222.8 billion up £3.7 billion in the
quarter, including a c.£1.5 billion temporary increase that is
expected to reverse in the second quarter
• Tangible net assets per
share of 51.2 pence, up from 50.8 pence on 31 December 2023, driven by profit for
the period, partly offset by the effects of
increased longer-term rates on the cash flow hedge reserve and
pension surplus
• During the quarter, the
Group agreed the sale of its in-force bulk annuity portfolio to
Rothesay Life plc, enabling the Insurance, Pensions and Investments
division to focus on growing strategically important lines of
business
2024 guidance reaffirmed
Based on our current macroeconomic
assumptions, for 2024 the Group continues to expect:
• Banking net interest margin
of greater than 290 basis points
• Operating costs
of c.£9.3 billion plus the
c.£0.1 billion Bank of England levy
• Asset quality ratio of less
than 30 basis points
• Return on tangible
equity of c.13 per
cent
• Capital
generation of c.175 basis points2
• Risk-weighted assets at
between £220 billion and £225 billion
• To pay down to a CET1 ratio
of c.13.5 per cent
1 See the basis of presentation on page
15.
2 Excluding capital distributions.
Inclusive of ordinary dividends received from the Insurance
business in February of the following year.
INCOME STATEMENT (UNDERLYING
BASIS)A
AND KEY BALANCE
SHEET METRICS
|
|
Three months
ended
31 Mar
2024
£m
|
|
|
Three
months ended
31 Mar
2023
£m
|
|
|
Change
%
|
|
Three
months
ended
31
Dec
2023
£m
|
|
|
Change
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying net interest
income
|
3,184
|
|
|
3,535
|
|
|
(10)
|
|
3,317
|
|
|
(4)
|
|
Underlying other income
|
1,340
|
|
|
1,257
|
|
|
7
|
|
1,286
|
|
|
4
|
|
Operating lease
depreciation
|
(283)
|
|
|
(140)
|
|
|
|
|
(371)
|
|
|
24
|
|
Net
income
|
4,241
|
|
|
4,652
|
|
|
(9)
|
|
4,232
|
|
|
|
|
Operating costs
|
(2,402)
|
|
|
(2,170)
|
|
|
(11)
|
|
(2,486)
|
|
|
3
|
|
Remediation
|
(25)
|
|
|
(19)
|
|
|
(32)
|
|
(541)
|
|
|
95
|
|
Total costs
|
(2,427)
|
|
|
(2,189)
|
|
|
(11)
|
|
(3,027)
|
|
|
20
|
|
Underlying profit before impairment
|
1,814
|
|
|
2,463
|
|
|
(26)
|
|
1,205
|
|
|
51
|
|
Underlying impairment (charge)
credit
|
(57)
|
|
|
(243)
|
|
|
77
|
|
541
|
|
|
|
|
Underlying profit
|
1,757
|
|
|
2,220
|
|
|
(21)
|
|
1,746
|
|
|
1
|
|
Restructuring
|
(12)
|
|
|
(12)
|
|
|
|
|
(85)
|
|
|
86
|
|
Volatility and other
items
|
(117)
|
|
|
52
|
|
|
|
|
114
|
|
|
|
|
Statutory profit before tax
|
1,628
|
|
|
2,260
|
|
|
(28)
|
|
1,775
|
|
|
(8)
|
|
Tax expense
|
(413)
|
|
|
(619)
|
|
|
33
|
|
(541)
|
|
|
24
|
|
Statutory profit after tax
|
1,215
|
|
|
1,641
|
|
|
(26)
|
|
1,234
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
1.7p
|
|
|
2.3p
|
|
|
(0.6)p
|
|
1.7p
|
|
|
|
|
Banking net interest
marginA
|
2.95%
|
|
|
3.22%
|
|
|
(27)bp
|
|
2.98%
|
|
|
(3)bp
|
|
Average interest-earning banking
assetsA
|
£449.1bn
|
|
|
£454.2bn
|
|
|
(1)
|
|
£452.8bn
|
|
|
(1)
|
|
Cost:income
ratioA
|
57.2%
|
|
|
47.1%
|
|
|
10.1pp
|
|
71.5%
|
|
|
(14.3)pp
|
|
Asset quality
ratioA
|
0.06%
|
|
|
0.22%
|
|
|
(16)bp
|
|
(0.47)%
|
|
|
|
|
Return on tangible
equityA
|
13.3%
|
|
|
19.1%
|
|
|
(5.8)pp
|
|
13.9%
|
|
|
(0.6)pp
|
|
|
At 31 Mar
2024
|
|
|
At 31
Mar
2023
|
|
|
Change
%
|
|
At 31
Dec
2023
|
At
|
|
Change
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to
customers
|
£448.5bn
|
|
|
£452.3bn
|
|
|
(1)
|
|
£449.7bn
|
|
|
|
|
Customer deposits
|
£469.2bn
|
|
|
£473.1bn
|
|
|
(1)
|
|
£471.4bn
|
|
|
|
|
Loan to deposit
ratioA
|
96%
|
|
|
96%
|
|
|
|
|
95%
|
|
|
1pp
|
|
CET1 ratio
|
13.9%
|
|
|
14.1%
|
|
|
(0.2)pp
|
|
14.6%
|
|
|
(0.7)pp
|
|
Pro forma CET1
ratioA,1
|
13.9%
|
|
|
14.1%
|
|
|
(0.2)pp
|
|
13.7%
|
|
|
0.2pp
|
|
Total capital ratio
|
19.0%
|
|
|
19.9%
|
|
|
(0.9)pp
|
|
19.8%
|
|
|
(0.8)pp
|
|
MREL ratio
|
32.0%
|
|
|
32.1%
|
|
|
(0.1)pp
|
|
31.9%
|
|
|
0.1pp
|
|
UK leverage ratio
|
5.6%
|
|
|
5.6%
|
|
|
|
|
5.8%
|
|
|
(0.2)pp
|
|
Risk-weighted assets
|
£222.8bn
|
|
|
£210.9bn
|
|
|
6
|
|
£219.1bn
|
|
|
2
|
|
Wholesale funding
|
£99.9bn
|
|
|
£101.1bn
|
|
|
(1)
|
|
£98.7bn
|
|
|
1
|
|
Liquidity coverage
ratio2
|
143%
|
|
|
143%
|
|
|
|
|
142%
|
|
|
1pp
|
|
Net stable funding
ratio3
|
130%
|
|
|
129%
|
|
|
1pp
|
|
130%
|
|
|
|
|
Tangible net assets per
shareA
|
51.2p
|
|
|
49.6p
|
|
|
1.6p
|
|
50.8p
|
|
|
0.4p
|
A See page 14.
1 31 December
2023 reflects both the full impact of the share buyback announced
in respect of 2023 and the ordinary dividend received from the
Insurance business in February 2024, but excludes the impact of the
phased unwind of IFRS 9 relief on 1 January 2024.
2 The liquidity coverage ratio is
calculated as a monthly rolling simple average over the previous 12
months.
3 Net stable funding ratio is based on
an average of the four previous quarters.
QUARTERLY
INFORMATIONA
|
|
Quarter
ended
31 Mar
2024
£m
|
|
|
Quarter
ended
31
Dec
2023
£m
|
|
|
Quarter
ended
30
Sep
2023
£m
|
|
|
Quarter
ended
30
Jun
2023
£m
|
|
|
Quarter
ended
31
Mar
2023
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying net interest
income
|
3,184
|
|
|
3,317
|
|
|
3,444
|
|
|
3,469
|
|
|
3,535
|
|
|
Underlying other income
|
1,340
|
|
|
1,286
|
|
|
1,299
|
|
|
1,281
|
|
|
1,257
|
|
|
Operating lease
depreciation
|
(283)
|
|
|
(371)
|
|
|
(229)
|
|
|
(216)
|
|
|
(140)
|
|
|
Net
income
|
4,241
|
|
|
4,232
|
|
|
4,514
|
|
|
4,534
|
|
|
4,652
|
|
|
Operating costs
|
(2,402)
|
|
|
(2,486)
|
|
|
(2,241)
|
|
|
(2,243)
|
|
|
(2,170)
|
|
|
Remediation
|
(25)
|
|
|
(541)
|
|
|
(64)
|
|
|
(51)
|
|
|
(19)
|
|
|
Total costs
|
(2,427)
|
|
|
(3,027)
|
|
|
(2,305)
|
|
|
(2,294)
|
|
|
(2,189)
|
|
|
Underlying profit before impairment
|
1,814
|
|
|
1,205
|
|
|
2,209
|
|
|
2,240
|
|
|
2,463
|
|
|
Underlying impairment (charge)
credit
|
(57)
|
|
|
541
|
|
|
(187)
|
|
|
(419)
|
|
|
(243)
|
|
|
Underlying profit
|
1,757
|
|
|
1,746
|
|
|
2,022
|
|
|
1,821
|
|
|
2,220
|
|
|
Restructuring
|
(12)
|
|
|
(85)
|
|
|
(44)
|
|
|
(13)
|
|
|
(12)
|
|
|
Volatility and other
items
|
(117)
|
|
|
114
|
|
|
(120)
|
|
|
(198)
|
|
|
52
|
|
|
Statutory profit before tax
|
1,628
|
|
|
1,775
|
|
|
1,858
|
|
|
1,610
|
|
|
2,260
|
|
|
Tax expense
|
(413)
|
|
|
(541)
|
|
|
(438)
|
|
|
(387)
|
|
|
(619)
|
|
|
Statutory profit after tax
|
1,215
|
|
|
1,234
|
|
|
1,420
|
|
|
1,223
|
|
|
1,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
1.7p
|
|
|
1.7p
|
|
|
2.0p
|
|
|
1.6p
|
|
|
2.3p
|
|
|
Banking net interest
marginA
|
2.95%
|
|
|
2.98%
|
|
|
3.08%
|
|
|
3.14%
|
|
|
3.22%
|
|
|
Average interest-earning banking
assetsA
|
£449.1bn
|
|
|
£452.8bn
|
|
|
£453.0bn
|
|
|
£453.4bn
|
|
|
£454.2bn
|
|
|
Cost:income
ratioA
|
57.2%
|
|
|
71.5%
|
|
|
51.1%
|
|
|
50.6%
|
|
|
47.1%
|
|
|
Asset quality
ratioA
|
0.06%
|
|
|
(0.47)%
|
|
|
0.17%
|
|
|
0.36%
|
|
|
0.22%
|
|
|
Return on tangible
equityA
|
13.3%
|
|
|
13.9%
|
|
|
16.9%
|
|
|
13.6%
|
|
|
19.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 Mar
2024
|
|
|
At 31 Dec
2023
|
|
|
At 30 Sep
2023
|
|
|
At 30 Jun
2023
|
|
|
At 31 Mar
2023
|
|
|
Loans and advances to
customers1
|
£448.5bn
|
|
|
£449.7bn
|
|
|
£452.1bn
|
|
|
£450.7bn
|
|
|
£452.3bn
|
|
|
Customer deposits
|
£469.2bn
|
|
|
£471.4bn
|
|
|
£470.3bn
|
|
|
£469.8bn
|
|
|
£473.1bn
|
|
|
Loan to deposit
ratioA
|
96%
|
|
|
95%
|
|
|
96%
|
|
|
96%
|
|
|
96%
|
|
|
CET1 ratio
|
13.9%
|
|
|
14.6%
|
|
|
14.6%
|
|
|
14.2%
|
|
|
14.1%
|
|
|
Pro forma CET1
ratioA,2
|
13.9%
|
|
|
13.7%
|
|
|
14.6%
|
|
|
14.2%
|
|
|
14.1%
|
|
|
Total capital ratio
|
19.0%
|
|
|
19.8%
|
|
|
19.9%
|
|
|
19.7%
|
|
|
19.9%
|
|
|
MREL ratio
|
32.0%
|
|
|
31.9%
|
|
|
32.6%
|
|
|
31.0%
|
|
|
32.1%
|
|
|
UK leverage ratio
|
5.6%
|
|
|
5.8%
|
|
|
5.7%
|
|
|
5.7%
|
|
|
5.6%
|
|
|
Risk-weighted assets
|
£222.8bn
|
|
|
£219.1bn
|
|
|
£217.7bn
|
|
|
£215.3bn
|
|
|
£210.9bn
|
|
|
Wholesale funding
|
£99.9bn
|
|
|
£98.7bn
|
|
|
£108.5bn
|
|
|
£103.5bn
|
|
|
£101.1bn
|
|
|
Liquidity coverage
ratio3
|
143%
|
|
|
142%
|
|
|
142%
|
|
|
142%
|
|
|
143%
|
|
|
Net stable funding
ratio4
|
130%
|
|
|
130%
|
|
|
130%
|
|
|
130%
|
|
|
129%
|
|
|
Tangible net assets per
shareA
|
51.2p
|
|
|
50.8p
|
|
|
47.2p
|
|
|
45.7p
|
|
|
49.6p
|
|
1 The reduction between 30 September
2023 and 31 December 2023 reflects the impact of the securitisation
of £2.7 billion of UK Retail unsecured loans in the fourth quarter
of 2023.
2 31 December
2023 reflects both the full impact of the share buyback announced
in respect of 2023 and the ordinary dividend received from the
Insurance business in February 2024, but excludes the impact of the
phased unwind of IFRS 9 relief on 1 January 2024.
3 The liquidity coverage ratio is
calculated as a monthly rolling simple average over the previous 12
months.
4 Net stable funding ratio is based on
an average of the four previous quarters.
BALANCE SHEET
ANALYSIS
|
|
At 31 Mar
2024
£bn
|
|
|
At 31
Mar
2023
£bn
|
|
|
Change
%
|
|
At 31
Dec
2023
£bn
|
|
|
Change
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to customers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK mortgages1
|
304.6
|
|
|
307.5
|
|
|
(1)
|
|
306.2
|
|
|
(1)
|
|
Credit cards
|
15.2
|
|
|
14.4
|
|
|
6
|
|
15.1
|
|
|
1
|
|
UK Retail unsecured
loans2
|
7.6
|
|
|
9.0
|
|
|
(16)
|
|
6.9
|
|
|
10
|
|
UK Motor Finance
|
15.8
|
|
|
14.7
|
|
|
7
|
|
15.3
|
|
|
3
|
|
Overdrafts
|
1.0
|
|
|
1.0
|
|
|
|
|
1.1
|
|
|
(9)
|
|
Retail other1,3
|
16.9
|
|
|
15.1
|
|
|
12
|
|
16.6
|
|
|
2
|
|
Small and Medium
Businesses
|
32.2
|
|
|
36.4
|
|
|
(12)
|
|
33.0
|
|
|
(2)
|
|
Corporate and Institutional
Banking
|
55.6
|
|
|
56.7
|
|
|
(2)
|
|
55.6
|
|
|
|
|
Central Items4
|
(0.4)
|
|
|
(2.5)
|
|
|
84
|
|
(0.1)
|
|
|
|
|
Loans and advances to customers
|
448.5
|
|
|
452.3
|
|
|
(1)
|
|
449.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail current accounts
|
103.1
|
|
|
110.5
|
|
|
(7)
|
|
102.7
|
|
|
|
|
Retail savings
accounts5
|
196.4
|
|
|
183.1
|
|
|
7
|
|
194.8
|
|
|
1
|
|
Wealth
|
10.2
|
|
|
12.9
|
|
|
(21)
|
|
10.9
|
|
|
(6)
|
|
Commercial Banking
|
159.3
|
|
|
166.5
|
|
|
(4)
|
|
162.8
|
|
|
(2)
|
|
Central Items
|
0.2
|
|
|
0.1
|
|
|
|
|
0.2
|
|
|
|
|
Customer deposits
|
469.2
|
|
|
473.1
|
|
|
(1)
|
|
471.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
889.6
|
|
|
885.7
|
|
|
|
|
881.5
|
|
|
1
|
|
Total liabilities
|
841.8
|
|
|
837.8
|
|
|
|
|
834.1
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shareholders'
equity
|
40.7
|
|
|
40.6
|
|
|
|
|
40.3
|
|
|
1
|
|
Other equity instruments
|
6.9
|
|
|
7.1
|
|
|
(3)
|
|
6.9
|
|
|
|
|
Non-controlling interests
|
0.2
|
|
|
0.2
|
|
|
|
|
0.2
|
|
|
|
|
Total equity
|
47.8
|
|
|
47.9
|
|
|
|
|
47.4
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares in issue, excluding
own shares
|
63,653m
|
|
|
66,396m
|
|
|
(4)
|
|
63,508m
|
|
|
|
1 Open mortgage book and closed mortgage book, previously
presented separately, are now reported together as UK mortgages;
Wealth, previously reported separately, is now included within
Retail other. Comparatives have been presented on a consistent
basis.
2 The reduction between 31 March 2023
and 31 December 2023 reflects the impact of the securitisation of
£2.7 billion of UK Retail unsecured loans in the fourth quarter of
2023.
3 Retail other includes the European and
Wealth businesses.
4 Central Items includes central fair
value hedge accounting adjustments.
5 Retail relationship savings accounts
and Retail tactical savings accounts, previously reported
separately, are now reported together as Retail savings accounts.
Comparatives have been presented on a consistent
basis.
GROUP RESULTS - STATUTORY
BASIS
The results below are prepared in
accordance with the recognition and measurement principles of
International Financial Reporting Standards (IFRS). The underlying
results are shown on page 2.
|
Summary income statement
|
Three months
ended
31 Mar 2024
£m
|
|
|
Three
months ended
31 Mar
2023
£m
|
|
|
Change
%
|
|
Three
months
ended
31
Dec
2023
£m
|
|
|
Change
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
3,045
|
|
|
3,434
|
|
|
(11)
|
|
3,187
|
|
|
(4)
|
|
Other income
|
8,272
|
|
|
5,875
|
|
|
41
|
|
12,149
|
|
|
(32)
|
|
Total income
|
11,317
|
|
|
9,309
|
|
|
22
|
|
15,336
|
|
|
(26)
|
|
Net finance expense in respect of
insurance and investment contracts
|
(6,930)
|
|
|
(4,501)
|
|
|
(54)
|
|
(10,609)
|
|
|
35
|
|
Total income, after net finance expense in respect of
insurance and investment contracts
|
4,387
|
|
|
4,808
|
|
|
(9)
|
|
4,727
|
|
|
(7)
|
|
Operating expenses
|
(2,703)
|
|
|
(2,306)
|
|
|
(17)
|
|
(3,492)
|
|
|
23
|
|
Impairment (charge)
credit
|
(56)
|
|
|
(242)
|
|
|
77
|
|
540
|
|
|
|
|
Profit before tax
|
1,628
|
|
|
2,260
|
|
|
(28)
|
|
1,775
|
|
|
(8)
|
|
Tax expense
|
(413)
|
|
|
(619)
|
|
|
33
|
|
(541)
|
|
|
24
|
|
Profit for the period
|
1,215
|
|
|
1,641
|
|
|
(26)
|
|
1,234
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit attributable to ordinary
shareholders
|
1,069
|
|
|
1,510
|
|
|
(29)
|
|
1,093
|
|
|
(2)
|
|
Ordinary shares in issue
(weighted-average - basic)
|
63,906m
|
|
|
66,972m
|
|
|
(5)
|
|
63,502m
|
|
|
1
|
|
Basic earnings per share
|
1.7p
|
|
|
2.3p
|
|
|
(0.6)p
|
|
1.7p
|
|
|
|
The Group's statutory profit before
tax for the first three months of 2024 was £1,628 million, 28 per cent
lower than the same period in 2023. This was due to lower
net interest income and higher operating expenses, partly offset by a lower impairment
charge. Statutory profit after tax was £1,215 million (three months to 31 March 2023:
£1,641 million).
The Group's underlying profit was
£1,757 million, a reduction of 21 per cent compared to £2,220
million in the first quarter of 2023. Lower underlying net interest
income and higher operating costs were partly offset by growth in
underlying other income and a lower underlying impairment charge.
Underlying profit was up 1 per cent compared to the fourth quarter
of 2023, with stable net income and lower operating costs and
remediation. There was also a modest impairment charge, whereas the
fourth quarter benefited from an impairment credit resulting from a
significant write-back.
Net income of £4,241 million was down 9 per
cent on the first three months of the prior year, driven by lower
underlying net interest income and an increased charge for
operating lease depreciation. This was partly offset by higher
underlying other income. Net income was broadly in line with the
fourth quarter of 2023.
Underlying net interest income of
£3,184 million was down 10 per cent on the first three months of 2023, driven by a lower banking net interest margin of
2.95 per cent (three months to
31 March 2023: 3.22 per cent).
The lower margin reflects expected headwinds due
to deposit churn and asset margin compression, particularly in the
mortgage book as it refinances in a lower margin environment. These
factors were partially offset by benefits from higher structural
hedge earnings in the higher rate environment. Average
interest-earning banking assets in the first quarter of 2024 at
£449.1 billion were 1 per cent lower compared to the first quarter of 2023,
significantly due to a modest reduction in the
mortgage book, as expected and continued repayments of
government-backed lending in the Small and Medium Businesses
portfolio. Net interest income in the first
three months included non-banking interest expense of
£105 million (three months to 31 March 2023:
£76 million), which increased as a result of higher funding
costs and growth in the Group's non-banking businesses. Further
gradual quarter-on-quarter increases are expected during
2024.
Underlying net interest income was lower than the fourth quarter of 2023
(three months to 31 December 2023: 2.98 per
cent) from asset margin compression mainly within UK mortgages, deposit mix headwinds and lower Commercial Banking
deposits, partly mitigated by structural hedge earnings. The
Group still expects the banking net interest margin for 2024 to be
greater than 290 basis points and
average interest-earning banking assets to be greater than
£450 billion.
The Group manages the risk to
earnings and capital from movements in interest rates by hedging
the net liabilities which are stable or less sensitive to movements
in rates. The notional balance of the sterling structural hedge was
£244 billion (31 December 2023: £247 billion) with a
weighted average duration of approximately three and a half years
(31 December 2023: approximately three and a half years). The
Group continues to expect a modest reduction in the notional
balance during 2024, inclusive of the reduction in the first
quarter, with balances stabilising over the course of the year. The
Group generated c.£1.0 billion of total income from sterling
structural hedge balances in the first three months of 2024,
representing material growth over the prior year (three months to
31 March 2023: £0.8 billion). The Group
continues to expect sterling structural hedge earnings in 2024 to
be c.£0.7 billion higher than in 2023.
Underlying other income in
the first quarter of 2024 of £1,340 million was 7 per cent
higher compared to £1,257 million in
the first three months of 2023, reflecting growth within Retail and
Commercial Banking. Retail was up
17 per cent versus the first three months
of 2023, primarily due to improved
UK Motor Finance performance, including
growth from the acquisition of Tusker. Within
Commercial Banking, c.4
per cent growth reflected strong capital markets performance. Insurance, Pensions and
Investments underlying other income was broadly stable compared to the
first three months of 2023, with favourable market
returns offset by the effects of the agreed sale (subject to
regulatory approval) of the in-force bulk annuity portfolio with
associated income and costs for the quarter recognised within
volatility and other items. Versus the fourth quarter of
2023, underlying other income was 4 per cent higher, primarily driven by Commercial
Banking.
The Group delivered
positive, organic growth in Insurance,
Pensions and Investments and Wealth (reported within Retail) assets
under administration (AuA), with combined £1.4 billion net new
money in open book AuA over the period. In total, open book AuA now
stand at c.£188 billion.
Operating lease depreciation of £283
million increased compared to the prior year (three months to 31
March 2023: £140 million). This reflects a full quarter
of depreciation from Tusker, alongside growth in the fleet size and
declines in used car prices. The charge is significantly lower than
the fourth quarter of 2023 which included a c.£100 million increase
in the residual value provision to offset developments in used car
prices.
REVIEW OF PERFORMANCE (continued)
Total costs including remediation of
£2,427 million and
operating costs of £2,402 million were
11 per cent higher than
prior year. This includes a new sector-wide Bank of England levy,
replacing the former charging structure (excluding this levy,
operating costs were up 6 per cent) and expected elevated severance
charges taken early in the year (£0.1 billion higher year to date).
The annual levy of c.£0.1 billion was charged through operating
costs in the first quarter and will have a broadly neutral impact
on profit in 2024, with an offsetting benefit recognised in net
interest income over the course of the year. The Group continues to
maintain cost discipline and delivery of cost efficiencies, in the
context of inflationary pressures and ongoing strategic
investment. The Group's cost:income ratio, including
remediation, for the first quarter was 57.2 per cent (54.4 per cent excluding remediation
and the Bank of England levy), compared to 47.1 per cent in the prior year. Operating costs
in 2024 are still expected to be c.£9.3
billion, now plus c.£0.1 billion for the new Bank of
England levy.
The Group recognised remediation
costs of £25 million in the first three
months (three months to 31 March 2023: £19 million), in relation to pre-existing
programmes. There have been no further charges
relating to the potential impact of the FCA review into historical
motor finance commission arrangements, with the FCA having
indicated it will update in September.
Asset quality remains strong with
credit performance across portfolios stable in the quarter and
remaining broadly at, or favourable to pre-pandemic experience. In
UK mortgages, an improvement in new to arrears and flows to default
has been observed in the first quarter, following an increase last
year primarily driven by legacy variable rate customers. Unsecured
Retail portfolios continue to exhibit stable new to arrears and
default trends. Alongside, credit quality remains resilient in
Commercial Banking.
Underlying impairment was a charge
of £57 million (three months to 31 March 2023: £243 million),
resulting in an asset quality ratio of 6 basis points. The charge
is after a £192 million multiple economic scenarios (MES) credit
(three months to 31 March 2023: £79 million credit), as a result of
the improved economic outlook in the first quarter, notably in HPI.
Impairment also reflects a pre-updated MES charge of £249 million
(three months to 31 March 2023: £322 million), equivalent to an
asset quality ratio of 23 basis points. Compared to the prior year
and quarter, the pre-MES charge has remained stable in Retail.
Commercial Banking has 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 underlying expected credit loss
(ECL) allowance reduced slightly to £4.1 billion in the quarter
given releases following updates to the economic outlook and the
benefit from loss rates used in the Commercial Banking model
(31 December 2023: £4.3 billion). Like for like this is higher
than reported pre-pandemic levels (31 December 2019:
£4.2 billion) given it includes a material increase as a
result of a weaker economic outlook versus 2019, offset by a
£0.6 billion decrease on individually assessed Stage 3 cases,
the most significant of which exited the portfolio in the fourth
quarter of 2023. The uplift from the base case to the
probability-weighted ECL continues to be £0.6 billion,
including the adjusted severe downside scenario to incorporate
higher CPI inflation and UK Bank Rate profiles.
Stage 3 assets at
£10.6 billion are up slightly in the first quarter in both UK
mortgages and Commercial Banking portfolios (31 December 2023:
£10.1 billion). Write-offs remain low. Stage 2 assets have
reduced in the first quarter to £50.2 billion (31 December
2023: £56.5 billion), with 90.7 per cent of Stage 2 loans
up to date (31 December 2023: 91.3 per cent). The Group
continues to expect the asset quality ratio to be less than
30 basis points in 2024.
Restructuring costs for the first
three months of 2024 were £12 million
(three months to 31 March 2023: £12 million) and include costs relating to the
integration of Embark and Tusker.
Volatility and other items were a net loss of £117
million for the first three months (three months to 31 March 2023:
net gain of £52 million). This comprised £71 million
negative market volatility, £20 million for the amortisation of
purchased intangibles (three months to 31 March 2023:
£18 million) and £26 million relating to fair value
unwind (three months to 31 March 2023: £22 million). Market
volatility was substantially driven by rate rises in the quarter
causing negative insurance volatility, partly offset by positive
impacts from banking volatility.
The return on tangible equity for
the first quarter was 13.3 per cent (three months to 31 March
2023: 19.1 per cent). The Group continues to expect the
return on tangible equity for 2024 to be c.13 per cent. Tangible
net assets per share as at 31 March 2024 were 51.2 pence, up from
50.8 pence at 31 December 2023. The increase was driven by
accumulated profit, partly offset by increased longer-term rates
impacting the cash flow hedge reserve and pension
surplus.
The Group has commenced the share
buyback programme announced in February 2024, with c.0.5 billion
shares repurchased as at 31 March 2024.
REVIEW OF PERFORMANCE (continued)
Balance sheet
Loans and advances to customers
reduced in the first quarter of 2024 to £448.5 billion with a £1.6 billion
reduction in the UK mortgages portfolio following the expected
refinancing of the higher maturities in the fourth quarter of 2023,
as well as a £0.8 billion reduction in Small and Medium
Business lending, including repayments of government-backed
lending. This was partly offset by growth in UK Retail unsecured
loans of £0.7 billion, due to organic balance growth and lower
repayments following a securitisation in the fourth quarter of
2023, alongside growth in UK Motor Finance and credit
cards.
Customer deposits stood at
£469.2 billion at the end of the first
quarter, a decrease of £2.2 billion.
Retail deposits were up £1.3 billion in the
quarter with a combined increase of £0.9 billion across Retail
savings and Wealth, driven by inflows to limited withdrawal and
fixed products and a £0.4 billion increase in current account
balances, benefiting from seasonally lower spend and bank holiday
timing impacts (with the latter expected to reverse in the second
quarter). This was partly offset by seasonal tax payments and
outflows to savings products, including the Group's own savings
offers. Growth in Retail was more than offset by a reduction in
Commercial Banking deposits of £3.5 billion, largely due to
Small and Medium Businesses balance reductions.
The Group has a large, high quality
liquid asset portfolio held mainly in cash and government bonds,
with all assets hedged for interest rate risk. The Group's liquid
assets continue to significantly exceed regulatory requirements and
internal risk appetite, with a strong, stable liquidity coverage
ratio of 143 per cent (31 December 2023: 142 per cent) and a strong
net stable funding ratio of 130 per cent (31 December 2023:
130 per cent). The loan to deposit ratio of 96 per cent,
essentially stable compared to 31 December 2023, continues to
reflect a robust funding and liquidity position.
The Group's CET1 capital ratio at 31
March 2024 was 13.9 per cent (31 December 2023: 13.7 per cent pro
forma). Capital generation before regulatory headwinds during the
first three months was 46 basis points, reflecting robust
banking build in the quarter, partially offset by risk-weighted
asset increases. The risk-weighted asset increases reflect
underlying lending, but also include a temporary increase of c.£1.5
billion (equivalent to c.9 basis points) that is expected to
reverse in the second quarter. Regulatory headwinds of 6 basis
points reflect the reduction in the transitional factor applied to
IFRS 9 dynamic relief on 1 January 2024 and an adjustment for
part of the impact of the Retail secured CRD IV models.
Capital generation after the impact of these regulatory headwinds
was 40 basis points. The Group has accrued a foreseeable ordinary
dividend of 22 basis points, based upon a pro-rated amount of the
2023 full year dividend. The Group continues to expect capital
generation in 2024 to be c.175 basis points.
Risk-weighted assets increased by
£3.7 billion to £222.8 billion at 31 March 2024
(31 December 2023: £219.1 billion). This largely
reflected the impact of Retail lending and the temporary increase
noted above. The impact from credit and model calibrations was
minimal.
In relation to the Retail secured
CRD IV models, it is estimated that a £5 billion
risk-weighted asset increase will be required over 2024 to 2026,
noting that this will be subject to final model outcomes. The
Group's risk-weighted assets guidance for 2024 remains unchanged at
between £220 billion and £225 billion.
The Group's total regulatory CET1
capital requirement remains at around 12 per cent. The Board's
view of the ongoing level of CET1 capital required to grow the
business, meet current and future regulatory requirements and cover
economic and business uncertainties is c.13.0 per cent. This
includes a management buffer of around 1 per cent. In order to
manage risks and distributions in an orderly way, the Board expects
to pay down to the previous target of c.13.5 per cent by the end of
2024 before progressing towards paying down to the current capital
target of c.13.0 per cent by the end of 2026.
CAPITAL
GENERATION
|
Pro
forma CET1 ratio as at 31 December 20231
|
13.7%
|
|
|
Banking build (including impairment
charge) (bps)
|
57
|
|
|
Risk-weighted assets
(bps)
|
(24)
|
|
|
Other movements2
(bps)
|
13
|
|
|
Capital generation (bps)
|
46
|
|
|
Retail secured CRD IV model updates
and phased unwind of IFRS 9 transitional relief (bps)
|
(6)
|
|
|
Capital generation (post CRD IV and transitional headwinds)
(bps)
|
40
|
|
|
Ordinary dividend (bps)
|
(22)
|
|
|
CET1 ratio as at 31 March 2024
|
13.9%
|
|
1 31 December 2023 reflects both the
full impact of the share buyback announced in respect of 2023 and
the ordinary dividend received from the Insurance business in
February 2024, but excludes the impact of the phased unwind of IFRS
9 relief on 1 January 2024.
2 Includes share-based payments and market
volatility.
IMPAIRMENT
DETAIL
|
|
Three months
ended
31 Mar
2024
£m
|
|
|
Three
months ended
31
Mar 2023
£m
|
|
|
Change
%
|
|
Three
months
ended
31
Dec
2023
£m
|
|
|
Change
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charges (credits) pre-updated
MES1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
303
|
|
|
271
|
|
|
(12)
|
|
277
|
|
|
(9)
|
|
Commercial Banking
|
(49)
|
|
|
53
|
|
|
|
|
(626)
|
|
|
(92)
|
|
Other
|
(5)
|
|
|
(2)
|
|
|
|
|
(4)
|
|
|
25
|
|
|
249
|
|
|
322
|
|
|
23
|
|
(353)
|
|
|
|
|
Updated economic outlook
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
(196)
|
|
|
(66)
|
|
|
|
|
(203)
|
|
|
(3)
|
|
Commercial Banking
|
4
|
|
|
(13)
|
|
|
|
|
15
|
|
|
73
|
|
|
(192)
|
|
|
(79)
|
|
|
|
|
(188)
|
|
|
2
|
|
Underlying impairment charge
(credit)A
|
57
|
|
|
243
|
|
|
77
|
|
(541)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset quality
ratioA
|
0.06%
|
|
|
0.22%
|
|
|
(16)bp
|
|
(0.47)%
|
|
|
|
|
Total underlying expected credit
loss allowance (at end of period)A
|
4,126
|
|
|
5,221
|
|
|
(21)
|
|
4,337
|
|
|
(5)
|
1 Impairment charges excluding the
impact from updated economic outlook taken each
quarter.
ADDITIONAL INFORMATION (continued)
IMPAIRMENT DETAIL (continued)
Loans and advances to customers and expected credit loss
allowance (underlying basis)A
|
At
31 March 2024
|
Stage 1
£m
|
|
|
Stage 2
£m
|
|
|
Stage 3
£m
|
|
|
Total
£m
|
|
|
Stage 2
as % of
total
|
|
|
Stage 3
as % of
total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to customers
|
|
UK mortgages
|
261,828
|
|
|
36,476
|
|
|
7,608
|
|
|
305,912
|
|
|
11.9
|
|
|
2.5
|
|
|
Credit cards
|
12,729
|
|
|
2,883
|
|
|
308
|
|
|
15,920
|
|
|
18.1
|
|
|
1.9
|
|
|
UK unsecured loans and
overdrafts
|
7,667
|
|
|
1,210
|
|
|
195
|
|
|
9,072
|
|
|
13.3
|
|
|
2.1
|
|
|
UK Motor Finance
|
13,897
|
|
|
2,140
|
|
|
118
|
|
|
16,155
|
|
|
13.2
|
|
|
0.7
|
|
|
Other
|
16,178
|
|
|
507
|
|
|
149
|
|
|
16,834
|
|
|
3.0
|
|
|
0.9
|
|
|
Retail1
|
312,299
|
|
|
43,216
|
|
|
8,378
|
|
|
363,893
|
|
|
11.9
|
|
|
2.3
|
|
|
Small and Medium
Businesses
|
27,115
|
|
|
4,087
|
|
|
1,465
|
|
|
32,667
|
|
|
12.5
|
|
|
4.5
|
|
|
Corporate and Institutional
Banking
|
52,382
|
|
|
2,875
|
|
|
777
|
|
|
56,034
|
|
|
5.1
|
|
|
1.4
|
|
|
Commercial Banking
|
79,497
|
|
|
6,962
|
|
|
2,242
|
|
|
88,701
|
|
|
7.8
|
|
|
2.5
|
|
|
Equity Investments and Central
Items2
|
(323)
|
|
|
-
|
|
|
6
|
|
|
(317)
|
|
|
|
|
|
|
|
|
Total gross lending
|
391,473
|
|
|
50,178
|
|
|
10,626
|
|
|
452,277
|
|
|
11.1
|
|
|
2.3
|
|
|
ECL allowance on drawn
balances
|
(864)
|
|
|
(1,374)
|
|
|
(1,541)
|
|
|
(3,779)
|
|
|
|
|
|
|
|
|
Net
balance sheet carrying value
|
390,609
|
|
|
48,804
|
|
|
9,085
|
|
|
448,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer related ECL allowance (drawn and
undrawn)
|
|
UK mortgages
|
134
|
|
|
406
|
|
|
752
|
|
|
1,292
|
|
|
|
|
|
|
|
|
Credit cards
|
231
|
|
|
405
|
|
|
144
|
|
|
780
|
|
|
|
|
|
|
|
|
UK unsecured loans and
overdrafts
|
161
|
|
|
233
|
|
|
118
|
|
|
512
|
|
|
|
|
|
|
|
|
UK Motor
Finance3
|
187
|
|
|
95
|
|
|
67
|
|
|
349
|
|
|
|
|
|
|
|
|
Other
|
19
|
|
|
21
|
|
|
46
|
|
|
86
|
|
|
|
|
|
|
|
|
Retail1
|
732
|
|
|
1,160
|
|
|
1,127
|
|
|
3,019
|
|
|
|
|
|
|
|
|
Small and Medium
Businesses
|
141
|
|
|
222
|
|
|
170
|
|
|
533
|
|
|
|
|
|
|
|
|
Corporate and Institutional
Banking
|
155
|
|
|
138
|
|
|
242
|
|
|
535
|
|
|
|
|
|
|
|
|
Commercial Banking
|
296
|
|
|
360
|
|
|
412
|
|
|
1,068
|
|
|
|
|
|
|
|
|
Equity Investments and Central
Items
|
-
|
|
|
-
|
|
|
4
|
|
|
4
|
|
|
|
|
|
|
|
|
Total
|
1,028
|
|
|
1,520
|
|
|
1,543
|
|
|
4,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer related ECL allowance (drawn and undrawn) as a
percentage of loans and advances to
customers4
|
|
UK mortgages
|
0.1
|
|
|
1.1
|
|
|
9.9
|
|
|
0.4
|
|
|
|
|
|
|
|
|
Credit cards
|
1.8
|
|
|
14.0
|
|
|
50.3
|
|
|
4.9
|
|
|
|
|
|
|
|
|
UK unsecured loans and
overdrafts
|
2.1
|
|
|
19.3
|
|
|
65.9
|
|
|
5.7
|
|
|
|
|
|
|
|
|
UK Motor Finance
|
1.3
|
|
|
4.4
|
|
|
56.8
|
|
|
2.2
|
|
|
|
|
|
|
|
|
Other
|
0.1
|
|
|
4.1
|
|
|
30.9
|
|
|
0.5
|
|
|
|
|
|
|
|
|
Retail1
|
0.2
|
|
|
2.7
|
|
|
13.5
|
|
|
0.8
|
|
|
|
|
|
|
|
|
Small and Medium
Businesses
|
0.5
|
|
|
5.4
|
|
|
15.4
|
|
|
1.6
|
|
|
|
|
|
|
|
|
Corporate and Institutional
Banking
|
0.3
|
|
|
4.8
|
|
|
31.2
|
|
|
1.0
|
|
|
|
|
|
|
|
|
Commercial Banking
|
0.4
|
|
|
5.2
|
|
|
21.9
|
|
|
1.2
|
|
|
|
|
|
|
|
|
Equity Investments and Central
Items
|
|
|
|
-
|
|
|
66.7
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
0.3
|
|
|
3.0
|
|
|
15.1
|
|
|
0.9
|
|
|
|
|
|
|
|
1 Retail
balances exclude the impact of the HBOS
acquisition-related adjustments.
2 Contains
centralised fair value hedge accounting adjustments.
3 UK Motor
Finance for Stages 1 and 2 include £188 million relating to
provisions against residual values of vehicles subject to finance
leasing agreements for Black Horse. 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 £22 million, UK
unsecured loans and overdrafts of £16 million, Small and Medium
Businesses of £360 million and Corporate and Institutional Banking
of £1 million.
ADDITIONAL INFORMATION (continued)
IMPAIRMENT DETAIL (continued)
Loans and advances to customers and expected credit loss
allowance (underlying basis)A (continued)
|
At 31 December 2023
|
Stage
1
£m
|
|
|
Stage
2
£m
|
|
|
Stage
3
£m
|
|
|
Total
£m
|
|
|
Stage
2
as %
of
total
|
|
|
Stage
3
as %
of
total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to
customers
|
|
UK mortgages
|
258,362
|
|
|
41,911
|
|
|
7,300
|
|
|
307,573
|
|
|
13.6
|
|
|
2.4
|
|
|
Credit cards
|
12,625
|
|
|
2,908
|
|
|
284
|
|
|
15,817
|
|
|
18.4
|
|
|
1.8
|
|
|
UK unsecured loans and
overdrafts
|
7,103
|
|
|
1,187
|
|
|
196
|
|
|
8,486
|
|
|
14.0
|
|
|
2.3
|
|
|
UK Motor Finance
|
13,541
|
|
|
2,027
|
|
|
112
|
|
|
15,680
|
|
|
12.9
|
|
|
0.7
|
|
|
Other
|
15,898
|
|
|
525
|
|
|
144
|
|
|
16,567
|
|
|
3.2
|
|
|
0.9
|
|
|
Retail1
|
307,529
|
|
|
48,558
|
|
|
8,036
|
|
|
364,123
|
|
|
13.3
|
|
|
2.2
|
|
|
Small and Medium
Businesses
|
27,525
|
|
|
4,458
|
|
|
1,530
|
|
|
33,513
|
|
|
13.3
|
|
|
4.6
|
|
|
Corporate and Institutional
Banking
|
52,049
|
|
|
3,529
|
|
|
538
|
|
|
56,116
|
|
|
6.3
|
|
|
1.0
|
|
|
Commercial Banking
|
79,574
|
|
|
7,987
|
|
|
2,068
|
|
|
89,629
|
|
|
8.9
|
|
|
2.3
|
|
|
Equity Investments and Central
Items2
|
(43)
|
|
|
-
|
|
|
6
|
|
|
(37)
|
|
|
|
|
|
|
|
|
Total gross lending
|
387,060
|
|
|
56,545
|
|
|
10,110
|
|
|
453,715
|
|
|
12.5
|
|
|
2.2
|
|
|
ECL allowance on drawn
balances
|
(901)
|
|
|
(1,532)
|
|
|
(1,537)
|
|
|
(3,970)
|
|
|
|
|
|
|
|
|
Net balance sheet carrying
value
|
386,159
|
|
|
55,013
|
|
|
8,573
|
|
|
449,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer related ECL allowance
(drawn and undrawn)
|
|
UK mortgages
|
170
|
|
|
441
|
|
|
757
|
|
|
1,368
|
|
|
|
|
|
|
|
|
Credit cards
|
234
|
|
|
446
|
|
|
130
|
|
|
810
|
|
|
|
|
|
|
|
|
UK unsecured loans and
overdrafts
|
153
|
|
|
244
|
|
|
118
|
|
|
515
|
|
|
|
|
|
|
|
|
UK Motor
Finance3
|
188
|
|
|
91
|
|
|
63
|
|
|
342
|
|
|
|
|
|
|
|
|
Other
|
20
|
|
|
21
|
|
|
47
|
|
|
88
|
|
|
|
|
|
|
|
|
Retail1
|
765
|
|
|
1,243
|
|
|
1,115
|
|
|
3,123
|
|
|
|
|
|
|
|
|
Small and Medium
Businesses
|
140
|
|
|
231
|
|
|
167
|
|
|
538
|
|
|
|
|
|
|
|
|
Corporate and Institutional
Banking
|
156
|
|
|
218
|
|
|
253
|
|
|
627
|
|
|
|
|
|
|
|
|
Commercial Banking
|
296
|
|
|
449
|
|
|
420
|
|
|
1,165
|
|
|
|
|
|
|
|
|
Equity Investments and Central
Items
|
-
|
|
|
-
|
|
|
4
|
|
|
4
|
|
|
|
|
|
|
|
|
Total
|
1,061
|
|
|
1,692
|
|
|
1,539
|
|
|
4,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer related ECL allowance
(drawn and undrawn) as a percentage of loans and advances to
customers4
|
|
UK mortgages
|
0.1
|
|
|
1.1
|
|
|
10.4
|
|
|
0.4
|
|
|
|
|
|
|
|
|
Credit cards
|
1.9
|
|
|
15.3
|
|
|
49.4
|
|
|
5.1
|
|
|
|
|
|
|
|
|
UK unsecured loans and
overdrafts
|
2.2
|
|
|
20.6
|
|
|
65.6
|
|
|
6.1
|
|
|
|
|
|
|
|
|
UK Motor Finance
|
1.4
|
|
|
4.5
|
|
|
56.3
|
|
|
2.2
|
|
|
|
|
|
|
|
|
Other
|
0.1
|
|
|
4.0
|
|
|
32.6
|
|
|
0.5
|
|
|
|
|
|
|
|
|
Retail1
|
0.2
|
|
|
2.6
|
|
|
13.9
|
|
|
0.9
|
|
|
|
|
|
|
|
|
Small and Medium
Businesses
|
0.5
|
|
|
5.2
|
|
|
13.9
|
|
|
1.6
|
|
|
|
|
|
|
|
|
Corporate and Institutional
Banking
|
0.3
|
|
|
6.2
|
|
|
47.0
|
|
|
1.1
|
|
|
|
|
|
|
|
|
Commercial Banking
|
0.4
|
|
|
5.6
|
|
|
24.1
|
|
|
1.3
|
|
|
|
|
|
|
|
|
Equity Investments and Central
Items
|
|
|
|
-
|
|
|
66.7
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
0.3
|
|
|
3.0
|
|
|
15.8
|
|
|
0.9
|
|
|
|
|
|
|
|
1 Retail
balances exclude the impact of the HBOS acquisition-related
adjustments.
2 Contains
centralised fair value hedge accounting adjustments.
3 UK Motor
Finance for Stages 1 and 2 include £187 million relating to
provisions against residual values of vehicles subject to finance
leasing agreements for Black Horse. 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
£21 million, UK unsecured loans and overdrafts of £16 million
and Small and Medium Businesses of £327 million.
ADDITIONAL INFORMATION (continued)
IMPAIRMENT DETAIL (continued)
Total ECL allowance by scenario (underlying
basis)A
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 Consumer Price Index (CPI)
inflation and UK Bank Rate paths.
|
Underlying basisA
|
Probability-
weighted
£m
|
|
|
Upside
£m
|
|
|
Base case
£m
|
|
|
Downside
£m
|
|
|
Severe
downside
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
31 March 2024
|
|
4,126
|
|
|
2,837
|
|
|
3,512
|
|
|
4,504
|
|
|
8,702
|
|
|
At 31 December 2023
|
|
4,337
|
|
|
2,925
|
|
|
3,666
|
|
|
4,714
|
|
|
9,455
|
|
Base case and MES economic assumptions
The Group's base case scenario is
for a slow expansion in GDP and a rise in the unemployment rate
alongside modest changes in residential and commercial property
prices. Following a reduction in inflationary pressures, UK Bank
Rate is expected to be lowered 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 as of the first
quarter of 2024. Actuals for this period, or restatements of past
data, may have since emerged prior to publication.
The Group's approach to generating alternative
economic scenarios is set out in detail in note 24 to the financial
statements for the year ended 31 December 2023.
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
31 March 2024
|
First
quarter
2024
%
|
Second
quarter
2024
%
|
Third
quarter
2024
%
|
Fourth
quarter
2024
%
|
First
quarter
2025
%
|
Second
quarter
2025
%
|
Third
quarter
2025
%
|
Fourth
quarter
2025
%
|
|
|
|
|
|
|
|
|
|
|
|
Gross domestic product
|
0.3
|
0.2
|
0.3
|
0.3
|
0.3
|
0.3
|
0.4
|
0.4
|
|
Unemployment rate
|
4.0
|
4.2
|
4.4
|
4.6
|
4.8
|
4.8
|
4.8
|
4.8
|
|
House price growth
|
1.5
|
2.1
|
4.6
|
1.5
|
(0.1)
|
0.1
|
0.4
|
0.8
|
|
Commercial real estate price
growth
|
(5.4)
|
(5.3)
|
(3.3)
|
(0.5)
|
0.7
|
1.1
|
0.8
|
0.7
|
|
UK Bank Rate
|
5.25
|
5.00
|
4.75
|
4.50
|
4.25
|
4.00
|
4.00
|
3.75
|
|
CPI inflation
|
3.3
|
2.1
|
1.8
|
2.4
|
2.4
|
2.9
|
3.0
|
3.0
|
UK
economic assumptions - scenarios by year
Key annual assumptions made by the
Group are shown below. Gross domestic product and 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.
ADDITIONAL INFORMATION (continued)
IMPAIRMENT DETAIL (continued)
Base case and MES economic assumptions
(continued)
|
At
31 March 2024
|
2024
%
|
2025
%
|
2026
%
|
2027
%
|
2028
%
|
2024-2028
average
%
|
|
|
|
|
|
|
|
|
|
Upside
|
|
|
|
|
|
|
|
Gross domestic product
|
1.1
|
2.0
|
1.7
|
1.6
|
1.6
|
1.6
|
|
Unemployment rate
|
3.2
|
3.0
|
3.0
|
2.9
|
2.9
|
3.0
|
|
House price growth
|
3.7
|
6.7
|
6.5
|
5.3
|
4.9
|
5.4
|
|
Commercial real estate price
growth
|
6.5
|
4.8
|
1.4
|
2.0
|
2.2
|
3.4
|
|
UK Bank Rate
|
5.40
|
5.44
|
5.25
|
5.00
|
5.07
|
5.23
|
|
CPI inflation
|
2.3
|
2.9
|
2.9
|
2.8
|
3.0
|
2.8
|
|
|
|
|
|
|
|
|
|
Base case
|
|
|
|
|
|
|
|
Gross domestic product
|
0.4
|
1.2
|
1.6
|
1.7
|
1.7
|
1.3
|
|
Unemployment rate
|
4.3
|
4.8
|
4.8
|
4.6
|
4.6
|
4.6
|
|
House price growth
|
1.5
|
0.8
|
0.9
|
1.6
|
2.8
|
1.5
|
|
Commercial real estate price
growth
|
(0.5)
|
0.7
|
(0.1)
|
1.6
|
2.1
|
0.7
|
|
UK Bank Rate
|
4.88
|
4.00
|
3.50
|
3.06
|
3.00
|
3.69
|
|
CPI inflation
|
2.4
|
2.8
|
2.4
|
2.1
|
2.2
|
2.4
|
|
|
|
|
|
|
|
|
|
Downside
|
|
|
|
|
|
|
|
Gross domestic product
|
(0.8)
|
(0.4)
|
1.2
|
1.7
|
1.7
|
0.7
|
|
Unemployment rate
|
5.5
|
7.4
|
7.7
|
7.4
|
7.2
|
7.1
|
|
House price growth
|
0.0
|
(5.2)
|
(7.0)
|
(4.8)
|
(1.5)
|
(3.7)
|
|
Commercial real estate price
growth
|
(8.1)
|
(5.2)
|
(2.9)
|
(1.0)
|
(0.2)
|
(3.5)
|
|
UK Bank Rate
|
4.29
|
2.00
|
1.03
|
0.48
|
0.29
|
1.62
|
|
CPI inflation
|
2.4
|
2.7
|
1.8
|
1.0
|
1.0
|
1.8
|
|
|
|
|
|
|
|
|
|
Severe downside
|
|
|
|
|
|
|
|
Gross domestic product
|
(1.8)
|
(1.1)
|
1.1
|
1.4
|
1.5
|
0.2
|
|
Unemployment rate
|
7.2
|
10.1
|
10.3
|
9.9
|
9.7
|
9.4
|
|
House price growth
|
(2.2)
|
(12.3)
|
(14.3)
|
(10.9)
|
(6.0)
|
(9.2)
|
|
Commercial real estate price
growth
|
(18.0)
|
(11.7)
|
(8.5)
|
(5.0)
|
(2.4)
|
(9.3)
|
|
UK Bank Rate - modelled
|
3.46
|
0.51
|
0.11
|
0.02
|
0.01
|
0.82
|
|
UK Bank Rate -
adjusted1
|
6.19
|
4.56
|
3.63
|
3.13
|
3.00
|
4.10
|
|
CPI inflation - modelled
|
2.4
|
2.4
|
1.0
|
0.0
|
(0.1)
|
1.1
|
|
CPI inflation -
adjusted1
|
7.5
|
3.5
|
1.3
|
1.0
|
1.8
|
3.0
|
|
|
|
|
|
|
|
|
|
Probability-weighted
|
|
|
|
|
|
|
|
Gross domestic product
|
0.0
|
0.7
|
1.5
|
1.6
|
1.6
|
1.1
|
|
Unemployment rate
|
4.6
|
5.6
|
5.7
|
5.5
|
5.4
|
5.3
|
|
House price growth
|
1.3
|
(0.6)
|
(1.3)
|
(0.5)
|
1.2
|
0.0
|
|
Commercial real estate price
growth
|
(2.4)
|
(1.1)
|
(1.3)
|
0.3
|
1.0
|
(0.7)
|
|
UK Bank Rate - modelled
|
4.71
|
3.48
|
2.94
|
2.56
|
2.51
|
3.24
|
|
UK Bank Rate -
adjusted1
|
4.99
|
3.89
|
3.30
|
2.88
|
2.81
|
3.57
|
|
CPI inflation - modelled
|
2.4
|
2.8
|
2.3
|
1.8
|
1.9
|
2.2
|
|
CPI inflation -
adjusted1
|
2.9
|
2.9
|
2.3
|
1.9
|
2.1
|
2.4
|
1 The adjustment to UK Bank Rate and CPI
inflation in the severe downside is considered to better reflect
the risks around the Group's base case view in an economic
environment where supply shocks are the principal
concern.
ALTERNATIVE PERFORMANCE
MEASURES
The statutory results are
supplemented with a number of metrics that are used throughout the
banking and insurance industries on an underlying basis. A
description of these measures and their calculation, which remain
unchanged since the year-end, is set out on pages 27 to 32 of the
Group's 2023 Full Year Results News Release.
|
|
Three months
ended
31 Mar 2024
|
|
|
Three
months ended
31 Mar
2023
|
|
|
|
|
|
|
|
|
|
Banking net interest marginA
|
|
|
|
|
|
|
Underlying net interest income
(£m)
|
3,184
|
|
|
3,535
|
|
|
Remove non-banking underlying net
interest expense (£m)
|
105
|
|
|
76
|
|
|
Banking underlying net interest income (£m)
|
3,289
|
|
|
3,611
|
|
|
|
|
|
|
|
|
|
Loans and advances to customers
(£bn)
|
448.5
|
|
|
452.3
|
|
|
Add back:
|
|
|
|
|
|
|
Expected credit loss allowance
(drawn) (£bn)
|
3.6
|
|
|
4.5
|
|
|
Acquisition related fair value
adjustments (£bn)
|
0.2
|
|
|
0.3
|
|
|
Underlying gross loans and advances
to customers (£bn)
|
452.3
|
|
|
457.1
|
|
|
Adjustment for non-banking and other
items:
|
|
|
|
|
|
|
Fee-based loans and advances
(£bn)
|
(9.7)
|
|
|
(7.8)
|
|
|
Other (£bn)
|
6.8
|
|
|
5.7
|
|
|
Interest-earning banking assets
(£bn)
|
449.4
|
|
|
455.0
|
|
|
Averaging (£bn)
|
(0.3)
|
|
|
(0.8)
|
|
|
Average interest-earning banking assetsA
(£bn)
|
449.1
|
|
|
454.2
|
|
|
|
|
|
|
|
|
|
Banking net interest marginA
|
2.95%
|
|
|
3.22%
|
|
|
|
Three months
ended
31 Mar 2024
|
|
|
Three
months ended
31 Mar
2023
|
|
|
|
|
|
|
|
|
|
Return on tangible equityA
|
|
|
|
|
|
|
Profit attributable to ordinary shareholders
(£m)
|
1,069
|
|
|
1,510
|
|
|
|
|
|
|
|
|
|
Average ordinary shareholders'
equity (£bn)
|
40.4
|
|
|
39.5
|
|
|
Remove average goodwill and other
intangible assets (£bn)
|
(8.0)
|
|
|
(7.5)
|
|
|
Average tangible equity (£bn)
|
32.4
|
|
|
32.0
|
|
|
|
|
|
|
|
|
|
Return on tangible equityA
|
13.3%
|
|
|
19.1%
|
|
KEY DATES
|
Final date for joining or leaving
the final 2023 dividend reinvestment plan
|
29 April
2024
|
|
Annual general meeting
|
16 May
2024
|
|
Final 2023 dividend paid
|
21 May
2024
|
|
Group strategy update: Business
& Commercial Banking
|
27 June
2024
|
|
2024 Half-year results
|
25 July
2024
|
|
Q3 2024 Interim Management
Statement
|
23 October
2024
|
BASIS OF
PRESENTATION
This release covers the results of
Lloyds Banking Group plc together with its subsidiaries (the Group)
for the three months ended 31 March 2024. Unless otherwise stated, income
statement commentaries throughout this document compare the
three months ended 31
March 2024 to the three months ended
31 March 2023 and the balance sheet
analysis compares the Group balance sheet as at 31
March 2024 to the Group balance sheet as at 31 December
2023. The Group uses a number of alternative performance measures,
including underlying profit, in the discussion of its business
performance and financial position. These measures are labelled
with a superscript 'A' throughout this document. Further
information on these measures is set out on page
14. Unless otherwise
stated, commentary on page 1
are given on an underlying basis. The Group's Q1 2024 Interim Pillar 3 disclosures can be
found at:
www.lloydsbankinggroup.com/investors/financial-downloads.html.
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 Banking Group
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 affecting insurance business and 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
Group's control. Please refer to the latest Annual Report on Form
20-F filed by Lloyds Banking Group plc with the US Securities and
Exchange Commission (the SEC), which is available on the SEC's
website at www.sec.gov, for a discussion of certain factors and
risks. Lloyds Banking Group plc may also make or disclose written
and/or oral forward-looking statements in other written materials
and in oral statements made by the directors, officers or employees
of Lloyds Banking Group plc to third parties, including financial
analysts. Except as required by any applicable law or regulation,
the forward-looking statements contained in this document are made
as of today's date, and the Group expressly disclaims any
obligation or undertaking to release publicly any updates or
revisions to any forward-looking statements contained in this
document whether as a result of new information, future events or
otherwise. The information, statements and opinions contained in
this document do not constitute a public offer under any applicable
law or an offer to sell any securities or financial instruments or
any advice or recommendation with respect to such securities or
financial instruments.
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: Lloyds Banking Group plc, The Mound,
Edinburgh, EH1 1YZ
Registered in Scotland No. SC095000