2024 Half-Year Results - Part 2 of 2

Lloyds Banking Group PLC
25 July 2024
 

 

 

 

 

 

 

 

 

Lloyds Banking Group plc

2024 Half-Year Results

25 July 2024

 

 

 

Part 2 of 2



CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)

 

Note

 

Half-year

to 30 Jun

2024

£m

 

 

Half-year

to 30 Jun

2023

£m

 

 

Half-year

to 31 Dec

2023

£m

 


 

 

 

 

 

 

 

 

 

 

Interest income

 

 

       15,435

 

 

       13,048

 

 

       15,003

 

Interest expense

 

 

        (9,389)

 

 

        (6,250)

 

 

        (8,503)

 

Net interest income

 

 

         6,046

 

 

         6,798

 

 

         6,500

 

Fee and commission income

 

 

         1,458

 

 

         1,426

 

 

         1,500

 

Fee and commission expense

 

 

           (568)

 

 

           (539)

 

 

           (556)

 

Net fee and commission income

4

 

            890

 

 

            887

 

 

            944

 

Net trading income

 

 

       10,758

 

 

         6,161

 

 

       11,888

 

Insurance revenue

 

 

         1,650

 

 

         1,450

 

 

         1,558

 

Insurance service expense

 

 

        (1,339)

 

 

        (1,238)

 

 

        (1,176)

 

Net (expense) income from reinsurance contracts held

 

 

             (23)

 

 

              11

 

 

               (9)

 

Insurance service result

5

 

            288

 

 

            223

 

 

            373

 

Other operating income

 

 

            907

 

 

            826

 

 

            805

 

Other income

 

 

       12,843

 

 

         8,097

 

 

       14,010

 

Total income

 

 

       18,889

 

 

       14,895

 

 

       20,510

 

Net finance expense from insurance, participating investment and reinsurance contracts

5

 

        (6,477)

 

 

        (3,769)

 

 

        (7,915)

 

Movement in third party interests in consolidated funds

 

 

           (802)

 

 

           (332)

 

 

           (777)

 

Change in non-participating investment contracts

 

 

        (2,734)

 

 

        (1,488)

 

 

        (2,495)

 

Net finance expense in respect of insurance and investment contracts

 

 

      (10,013)

 

 

        (5,589)

 

 

      (11,187)

 

Total income, after net finance expense in respect of insurance and investment contracts

 

 

         8,876

 

 

         9,306

 

 

         9,323

 

Operating expenses

6

 

        (5,452)

 

 

        (4,774)

 

 

        (6,049)

 

Impairment (charge) credit

8

 

           (100)

 

 

           (662)

 

 

            359

 

Profit before tax

 

 

         3,324

 

 

         3,870

 

 

         3,633

 

Tax expense

9

 

           (880)

 

 

        (1,006)

 

 

           (979)

 

Profit for the period

 

 

         2,444

 

 

         2,864

 

 

         2,654

 


 

 

 

 

 

 

 

 

 

 

Profit attributable to ordinary shareholders

 

 

         2,145

 

 

         2,572

 

 

         2,361

 

Profit attributable to other equity holders

 

 

            269

 

 

            255

 

 

            272

 

Profit attributable to equity holders

 

 

         2,414

 

 

         2,827

 

 

         2,633

 

Profit attributable to non-controlling interests

 

 

              30

 

 

              37

 

 

              21

 

Profit for the period

 

 

         2,444

 

 

         2,864

 

 

         2,654

 


 

 

 

 

 

 

 

 

 

 

Basic earnings per share

17

 

             3.4p

 

 

             3.9p

 

 

             3.7p

 

Diluted earnings per share

17

 

             3.3p

 

 

             3.8p

 

 

             3.7p

 

The accompanying notes are an integral part of the condensed consolidated half-year financial statements.


CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

 

 

Half-year

to 30 Jun

2024

£m

 

 

Half-year

to 30 Jun

2023

£m

 

 

Half-year

to 31 Dec

2023

£m

 

 

 

 

 

 

 

 

 

 

 

Profit for the period

 

         2,444

 

 

         2,864

 

 

         2,654

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

Items that will not subsequently be reclassified to profit or loss:

 

 

 

 

 

 

 

 

 

Post-retirement defined benefit scheme remeasurements:

 

 

 

 

 

 

 

 

 

Remeasurements before tax

 

           (351)

 

 

           (119)

 

 

        (1,514)

 

Tax

 

              93

 

 

              27

 

 

            401

 

 

 

           (258)

 

 

             (92)

 

 

        (1,113)

 

Movements in revaluation reserve in respect of equity shares held at fair value through other comprehensive income:

 

 

 

 

 

 

 

 

 

Change in fair value

 

              72

 

 

             (48)

 

 

               (6)

 

Tax

 

                -

 

 

                -

 

 

               (3)

 

 

 

              72

 

 

             (48)

 

 

               (9)

 

Gains and losses attributable to own credit risk:

 

 

 

 

 

 

 

 

 

Losses before tax

 

             (86)

 

 

             (85)

 

 

           (149)

 

Tax

 

              24

 

 

              24

 

 

              42

 

 

 

             (62)

 

 

             (61)

 

 

           (107)

 

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

 

            105

 

 

            157

 

 

           (197)

 

Income statement transfers in respect of disposals

 

               (4)

 

 

           (107)

 

 

             (15)

 

Income statement transfers in respect of impairment

 

               (2)

 

 

               (2)

 

 

                -

 

Tax

 

             (27)

 

 

             (13)

 

 

              60

 

 

 

              72

 

 

              35

 

 

           (152)

 

Movements in cash flow hedging reserve:

 

 

 

 

 

 

 

 

 

Effective portion of changes in fair value taken to other comprehensive income

 

        (1,601)

 

 

        (1,644)

 

 

         2,189

 

Net income statement transfers

 

         1,238

 

 

            756

 

 

         1,082

 

Tax

 

            101

 

 

            244

 

 

           (917)

 

 

 

           (262)

 

 

           (644)

 

 

         2,354

 

Movements in foreign currency translation reserve:

 

 

 

 

 

 

 

 

 

Currency translation differences (tax: £nil)

 

             (39)

 

 

             (66)

 

 

              13

 

Transfers to income statement (tax: £nil)

 

                -

 

 

                -

 

 

                -

 

 

 

             (39)

 

 

             (66)

 

 

              13

 

Total other comprehensive (loss) income for the period, net of tax

 

           (477)

 

 

           (876)

 

 

            986

 

Total comprehensive income for the period

 

         1,967

 

 

         1,988

 

 

         3,640

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income attributable to ordinary shareholders

 

         1,668

 

 

         1,696

 

 

         3,347

 

Total comprehensive income attributable to other equity holders

 

            269

 

 

            255

 

 

            272

 

Total comprehensive income attributable to equity holders

 

         1,937

 

 

         1,951

 

 

         3,619

 

Total comprehensive income attributable to non-controlling interests

 

              30

 

 

              37

 

 

              21

 

Total comprehensive income for the period

 

         1,967

 

 

         1,988

 

 

         3,640

 

The accompanying notes are an integral part of the condensed consolidated half-year financial statements.


CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)

 

Note

At 30 Jun

2024

£m

 

 

At 31 Dec

2023

£m

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

Cash and balances at central banks

 

 

       66,808

 

 

       78,110

 

Financial assets at fair value through profit or loss

10

 

      209,139

 

 

      203,318

 

Derivative financial instruments

11

 

       18,983

 

 

       22,356

 

Loans and advances to banks

 

 

         8,454

 

 

       10,764

 

Loans and advances to customers

12

 

      452,408

 

 

      449,745

 

Reverse repurchase agreements

 

 

       49,404

 

 

       38,771

 

Debt securities

 

 

       15,432

 

 

       15,355

 

Financial assets at amortised cost

 

 

      525,698

 

 

      514,635

 

Financial assets at fair value through other comprehensive income

10

 

       27,847

 

 

       27,592

 

Goodwill and other intangible assets

 

 

         8,315

 

 

         8,306

 

Current tax recoverable

 

 

         1,152

 

 

         1,183

 

Deferred tax assets

 

 

         4,995

 

 

         5,185

 

Retirement benefit assets

7

 

         3,379

 

 

         3,624

 

Other assets

 

 

       26,611

 

 

       17,144

 

Total assets

 

 

      892,927

 

 

      881,453

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Deposits from banks

 

 

         5,584

 

 

         6,153

 

Customer deposits

 

 

      474,693

 

 

      471,396

 

Repurchase agreements at amortised cost

 

 

       37,914

 

 

       37,703

 

Financial liabilities at fair value through profit or loss

10

 

       27,056

 

 

       24,914

 

Derivative financial instruments

11

 

       16,647

 

 

       20,149

 

Notes in circulation

 

 

         1,766

 

 

         1,392

 

Debt securities in issue at amortised cost

15

 

       74,760

 

 

       75,592

 

Liabilities arising from insurance and participating investment contracts

5

 

      125,007

 

 

      120,123

 

Liabilities arising from non-participating investment contracts

 

 

       48,280

 

 

       44,978

 

Other liabilities

 

 

       23,544

 

 

       19,026

 

Retirement benefit obligations

7

 

            130

 

 

            136

 

Current tax liabilities

 

 

              47

 

 

              39

 

Deferred tax liabilities

 

 

            146

 

 

            157

 

Provisions

16

 

         1,788

 

 

         2,077

 

Subordinated liabilities

 

 

       10,448

 

 

       10,253

 

Total liabilities

 

 

      847,810

 

 

      834,088

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

Share capital

 

 

         6,252

 

 

         6,358

 

Share premium account

 

 

       18,671

 

 

       18,568

 

Other reserves

 

 

         8,525

 

 

         8,508

 

Retained profits

 

 

         5,511

 

 

         6,790

 

Ordinary shareholders' equity

 

 

       38,959

 

 

       40,224

 

Other equity instruments

 

 

         5,932

 

 

         6,940

 

Total equity excluding non-controlling interests

 

 

       44,891

 

 

       47,164

 

Non-controlling interests

 

 

            226

 

 

            201

 

Total equity

 

 

       45,117

 

 

       47,365

 

Total equity and liabilities

 

 

      892,927

 

 

      881,453

 

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

 

 

 

 

 

 

 

 

 

 

 

Share

capital and

premium

£m

 

 

Other

reserves

£m

 

 

Retained

profits

£m

 

 

Total

£m

 

Other

equity

instruments

£m

 

Non-

controlling

interests

£m

 

 

Total

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2024

 

       24,926

 

 

      8,508

 

 

      6,790

 

 

    40,224

 

 

          6,940

 

 

           201

 

 

    47,365

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the period

 

                -

 

 

             -

 

 

      2,145

 

 

      2,145

 

 

             269

 

 

             30

 

 

      2,444

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Post-retirement defined benefit scheme remeasurements, net of tax

 

                -

 

 

             -

 

 

       (258)

 

 

       (258)

 

 

                 -

 

 

               -

 

 

       (258)

 

Movements in revaluation reserve in respect of financial assets held at fair value through other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities

 

                -

 

 

           72

 

 

             -

 

 

           72

 

 

                 -

 

 

               -

 

 

           72

 

Equity shares

 

                -

 

 

           72

 

 

             -

 

 

           72

 

 

                 -

 

 

               -

 

 

           72

 

Gains and losses attributable to own credit risk, net of tax

 

                -

 

 

             -

 

 

         (62)

 

 

         (62)

 

 

                 -

 

 

               -

 

 

         (62)

 

Movements in cash flow hedging reserve, net of tax

 

                -

 

 

       (262)

 

 

             -

 

 

       (262)

 

 

                 -

 

 

               -

 

 

       (262)

 

Movements in foreign currency translation reserve, net of tax

 

                -

 

 

         (39)

 

 

             -

 

 

         (39)

 

 

                 -

 

 

               -

 

 

         (39)

 

Total other comprehensive loss

 

                -

 

 

       (157)

 

 

       (320)

 

 

       (477)

 

 

                 -

 

 

               -

 

 

       (477)

 

Total comprehensive (loss) income1

 

                -

 

 

       (157)

 

 

      1,825

 

 

      1,668

 

 

             269

 

 

             30

 

 

      1,967

 

Transactions with owners

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

 

                -

 

 

             -

 

 

     (1,169)

 

 

     (1,169)

 

 

                 -

 

 

             (3)

 

 

     (1,172)

 

Distributions on other equity instruments

 

                -

 

 

             -

 

 

             -

 

 

             -

 

 

           (269)

 

 

               -

 

 

       (269)

 

Issue of ordinary shares

 

            171

 

 

             -

 

 

             -

 

 

         171

 

 

                 -

 

 

               -

 

 

         171

 

Share buyback2

 

           (174)

 

 

         174

 

 

     (1,553)

 

 

     (1,553)

 

 

                 -

 

 

               -

 

 

     (1,553)

 

Issue of other equity instruments

 

                -

 

 

             -

 

 

             -

 

 

             -

 

 

                 -

 

 

               -

 

 

             -

 

Repurchases and redemptions of other equity instruments

 

                -

 

 

             -

 

 

       (316)

 

 

       (316)

 

 

        (1,008)

 

 

               -

 

 

     (1,324)

 

Movement in treasury shares

 

                -

 

 

             -

 

 

       (136)

 

 

       (136)

 

 

                 -

 

 

               -

 

 

       (136)

 

Value of employee services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share option schemes

 

                -

 

 

             -

 

 

           24

 

 

           24

 

 

                 -

 

 

               -

 

 

           24

 

Other employee award schemes

 

                -

 

 

             -

 

 

           46

 

 

           46

 

 

                 -

 

 

               -

 

 

           46

 

Changes in non-controlling interests

 

                -

 

 

             -

 

 

             -

 

 

             -

 

 

                 -

 

 

             (2)

 

 

           (2)

 

Total transactions with owners

 

               (3)

 

 

         174

 

 

     (3,104)

 

 

     (2,933)

 

 

        (1,277)

 

 

             (5)

 

 

     (4,215)

 

Realised gains and losses on equity shares held at fair value through other comprehensive income

 

                -

 

 

             -

 

 

             -

 

 

             -

 

 

                 -

 

 

               -

 

 

             -

 

At 30 June 20243

 

       24,923

 

 

      8,525

 

 

      5,511

 

 

    38,959

 

 

          5,932

 

 

           226

 

 

    45,117

 

1    Total comprehensive income attributable to owners of the parent was £1,937 million.

2  Contains a closed period accrual of £630 million.

3  Total equity attributable to owners of the parent was £44,891 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

 

 

 

 

 

 

 

 

 

 

 

Share

capital and

premium

£m

 

 

Other

reserves

£m

 

 

Retained

profits

£m

 

 

Total

£m

 

 

Other

equity

instruments

£m

 

 

Non-

controlling

interests

£m

 

 

Total

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2023

 

       25,233

 

 

      6,587

 

 

      6,550

 

 

    38,370

 

 

          5,297

 

 

           244

 

 

    43,911

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the period

 

                -

 

 

             -

 

 

      2,572

 

 

      2,572

 

 

             255

 

 

             37

 

 

      2,864

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Post-retirement defined benefit scheme remeasurements, net of tax

 

                -

 

 

             -

 

 

         (92)

 

 

         (92)

 

 

                 -

 

 

               -

 

 

         (92)

 

Movements in revaluation reserve in respect of financial assets held at fair value through other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities

 

                -

 

 

           35

 

 

             -

 

 

           35

 

 

                 -

 

 

               -

 

 

           35

 

Equity shares

 

                -

 

 

         (48)

 

 

             -

 

 

         (48)

 

 

                 -

 

 

               -

 

 

         (48)

 

Gains and losses attributable to own credit risk, net of tax

 

                -

 

 

             -

 

 

         (61)

 

 

         (61)

 

 

                 -

 

 

               -

 

 

         (61)

 

Movements in cash flow hedging reserve, net of tax

 

                -

 

 

       (644)

 

 

             -

 

 

       (644)

 

 

                 -

 

 

               -

 

 

       (644)

 

Movements in foreign currency translation reserve, net of tax

 

                -

 

 

         (66)

 

 

             -

 

 

         (66)

 

 

                 -

 

 

               -

 

 

         (66)

 

Total other comprehensive loss

 

                -

 

 

       (723)

 

 

       (153)

 

 

       (876)

 

 

                 -

 

 

               -

 

 

       (876)

 

Total comprehensive (loss) income1

 

                -

 

 

       (723)

 

 

      2,419

 

 

      1,696

 

 

             255

 

 

             37

 

 

      1,988

 

Transactions with owners

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

 

                -

 

 

             -

 

 

     (1,059)

 

 

     (1,059)

 

 

                 -

 

 

           (30)

 

 

     (1,089)

 

Distributions on other equity instruments

 

                -

 

 

             -

 

 

             -

 

 

             -

 

 

           (255)

 

 

               -

 

 

       (255)

 

Issue of ordinary shares

 

            115

 

 

             -

 

 

             -

 

 

         115

 

 

                 -

 

 

               -

 

 

         115

 

Share buyback2

 

           (327)

 

 

         327

 

 

     (2,020)

 

 

     (2,020)

 

 

                 -

 

 

               -

 

 

     (2,020)

 

Issue of other equity instruments

 

                -

 

 

             -

 

 

           (6)

 

 

           (6)

 

 

          1,778

 

 

               -

 

 

      1,772

 

Repurchases and redemptions of other equity instruments

 

                -

 

 

             -

 

 

             -

 

 

             -

 

 

           (135)

 

 

               -

 

 

       (135)

 

Movement in treasury shares

 

                -

 

 

             -

 

 

         101

 

 

         101

 

 

                 -

 

 

               -

 

 

         101

 

Value of employee services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share option schemes

 

                -

 

 

             -

 

 

           23

 

 

           23

 

 

                 -

 

 

               -

 

 

           23

 

Other employee award schemes

 

                -

 

 

             -

 

 

           71

 

 

           71

 

 

                 -

 

 

               -

 

 

           71

 

Changes in non-controlling interests

 

                -

 

 

             -

 

 

             -

 

 

             -

 

 

                 -

 

 

               -

 

 

             -

 

Total transactions with owners

 

           (212)

 

 

         327

 

 

     (2,890)

 

 

     (2,775)

 

 

          1,388

 

 

           (30)

 

 

     (1,417)

 

Realised gains and losses on equity shares held at fair value through other comprehensive income

 

                -

 

 

             -

 

 

             -

 

 

             -

 

 

                 -

 

 

               -

 

 

             -

 

At 30 June 20233

 

       25,021

 

 

      6,191

 

 

      6,079

 

 

    37,291

 

 

          6,940

 

 

           251

 

 

    44,482

 

1    Total comprehensive income attributable to owners of the parent was £1,951 million.

2  Contains a closed period accrual of £419 million.

3    Total equity attributable to owners of the parent was £44,231 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

 

 

 

 

 

 

 

 

 

 

 

Share

capital and

premium

£m

 

 

Other

reserves

£m

 

 

Retained

profits

£m

 

 

Total

£m

 

 

Other

equity

instruments

£m

 

 

Non-

controlling

interests

£m

 

 

Total

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 July 2023

 

       25,021

 

 

      6,191

 

 

      6,079

 

 

    37,291

 

 

          6,940

 

 

           251

 

 

    44,482

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the period

 

                -

 

 

             -

 

 

      2,361

 

 

      2,361

 

 

             272

 

 

             21

 

 

      2,654

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Post-retirement defined benefit scheme remeasurements, net of tax

 

                -

 

 

             -

 

 

     (1,113)

 

 

     (1,113)

 

 

                 -

 

 

               -

 

 

     (1,113)

 

Movements in revaluation reserve in respect of financial assets held at fair value through other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities

 

                -

 

 

       (152)

 

 

             -

 

 

       (152)

 

 

                 -

 

 

               -

 

 

       (152)

 

Equity shares

 

                -

 

 

           (9)

 

 

             -

 

 

           (9)

 

 

                 -

 

 

               -

 

 

           (9)

 

Gains and losses attributable to own credit risk, net of tax

 

                -

 

 

             -

 

 

       (107)

 

 

       (107)

 

 

                 -

 

 

               -

 

 

       (107)

 

Movements in cash flow hedging reserve, net of tax

 

                -

 

 

      2,354

 

 

             -

 

 

      2,354

 

 

                 -

 

 

               -

 

 

      2,354

 

Movements in foreign currency translation reserve, net of tax

 

                -

 

 

           13

 

 

             -

 

 

           13

 

 

                 -

 

 

               -

 

 

           13

 

Total other comprehensive income (loss)

 

                -

 

 

      2,206

 

 

     (1,220)

 

 

         986

 

 

                 -

 

 

               -

 

 

         986

 

Total comprehensive income1

 

                -

 

 

      2,206

 

 

      1,141

 

 

      3,347

 

 

             272

 

 

             21

 

 

      3,640

 

Transactions with owners

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

 

                -

 

 

             -

 

 

       (592)

 

 

       (592)

 

 

                 -

 

 

           (71)

 

 

       (663)

 

Distributions on other equity instruments

 

                -

 

 

             -

 

 

             -

 

 

             -

 

 

           (272)

 

 

               -

 

 

       (272)

 

Issue of ordinary shares

 

              16

 

 

             -

 

 

             -

 

 

           16

 

 

                 -

 

 

               -

 

 

           16

 

Share buyback

 

           (111)

 

 

         111 

 

 

           27

 

 

           27

 

 

                 -

 

 

               -

 

 

           27

 

Issue of other equity instruments

 

                -

 

 

             -

 

 

             -

 

 

             -

 

 

                 -

 

 

               -

 

 

             -

 

Repurchases and redemptions of other equity instruments

 

                -

 

 

             -

 

 

             -

 

 

             -

 

 

                 -

 

 

               -

 

 

             -

 

Movement in treasury shares

 

                -

 

 

             -

 

 

             2

 

 

             2

 

 

                 -

 

 

               -

 

 

             2

 

Value of employee services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share option schemes

 

                -

 

 

             -

 

 

           35

 

 

           35

 

 

                 -

 

 

               -

 

 

           35

 

Other employee award schemes

 

                -

 

 

             -

 

 

           98

 

 

           98

 

 

                 -

 

 

               -

 

 

           98

 

Changes in non-controlling interests

 

                -

 

 

             -

 

 

             -

 

 

             -

 

 

                 -

 

 

               -

 

 

             -

 

Total transactions with owners

 

             (95)

 

 

         111 

 

 

       (430)

 

 

       (414)

 

 

           (272)

 

 

           (71)

 

 

       (757)

 

Realised gains and losses on equity shares held at fair value through other comprehensive income

 

                -

 

 

             -

 

 

             -

 

 

             -

 

 

                 -

 

 

               -

 

 

             -

 

At 31 December 20232

 

       24,926

 

 

      8,508

 

 

      6,790

 

 

    40,224

 

 

          6,940

 

 

           201

 

 

    47,365

 

1  Total comprehensive income attributable to owners of the parent was £3,619 million.

2  Total equity attributable to owners of the parent was £47,164 million.

The accompanying notes are an integral part of the condensed consolidated half-year financial statements.


CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

 

Half-year

to 30 Jun

2024

£m

 

 

Half-year

to 30 Jun

2023

£m

 

 

Half-year

to 31 Dec

2023

£m

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Profit before tax

         3,324

 

 

         3,870

 

 

         3,633

 

Adjustments for:

 

 

 

 

 

 

 

 

Change in operating assets

      (21,509)

 

 

           (589)

 

 

        (8,521)

 

Change in operating liabilities

       14,032

 

 

       10,162

 

 

        (5,930)

 

Non-cash and other items

         1,671

 

 

         2,222

 

 

         3,400

 

Net tax paid

           (398)

 

 

           (861)

 

 

           (576)

 

Net cash (used in) provided by operating activities

        (2,880)

 

 

       14,804

 

 

        (7,994)

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchase of financial assets

        (5,809)

 

 

        (3,850)

 

 

        (6,461)

 

Proceeds from sale and maturity of financial assets

         5,269

 

 

         3,657

 

 

         1,641

 

Purchase of fixed assets

        (2,884)

 

 

        (3,378)

 

 

        (2,077)

 

Proceeds from sale of fixed assets

            642

 

 

            534

 

 

            493

 

Repayment of capital by joint ventures and associates

                -

 

 

                9

 

 

               (9)

 

Acquisition of businesses, net of cash acquired

             (63)

 

 

             (28)

 

 

           (352)

 

Net cash used in investing activities

        (2,845)

 

 

        (3,056)

 

 

        (6,765)

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Dividends paid to ordinary shareholders

        (1,169)

 

 

        (1,059)

 

 

           (592)

 

Distributions in respect of other equity instruments

           (269)

 

 

           (255)

 

 

           (272)

 

Distributions in respect of non-controlling interests

               (3)

 

 

             (30)

 

 

             (71)

 

Interest paid on subordinated liabilities

           (350)

 

 

           (344)

 

 

           (279)

 

Proceeds from issue of subordinated liabilities

            427

 

 

            746

 

 

            671

 

Proceeds from issue of other equity instruments

                -

 

 

         1,772

 

 

                -

 

Proceeds from issue of ordinary shares

            170

 

 

              70

 

 

              16

 

Share buyback

           (923)

 

 

        (1,523)

 

 

           (470)

 

Repayment of subordinated liabilities

                -

 

 

        (1,162)

 

 

           (583)

 

Repurchases and redemptions of other equity instruments

        (1,324)

 

 

           (135)

 

 

                -

 

Change in stake of non-controlling interests

               (2)

 

 

                -

 

 

                -

 

Net cash used in financing activities

        (3,443)

 

 

        (1,920)

 

 

        (1,580)

 

Effects of exchange rate changes on cash and cash equivalents

             (17)

 

 

           (493)

 

 

              13

 

Change in cash and cash equivalents

        (9,185)

 

 

         9,335

 

 

      (16,326)

 

Cash and cash equivalents at beginning of period

       88,838

 

 

       95,829

 

 

      105,164

 

Cash and cash equivalents at end of period

       79,653

 

 

      105,164

 

 

       88,838

 

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. Included within cash and cash equivalents at 30 June 2024 is £35 million (30 June 2023: £45 million; 31 December 2023: £31 million) held within the Group's long-term insurance and investments operations, which is not immediately available for use in the business.


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 Lloyds Banking Group 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 Group's website and are also available upon request from Investor Relations, Lloyds Banking Group plc, 25 Gresham Street, London EC2V 7HN.

The UK Finance Code for Financial Reporting Disclosure (the Disclosure Code) sets out disclosure principles together with supporting guidance in respect of the financial statements of UK banks. The Group has adopted the Disclosure Code and these condensed consolidated half-year financial statements have been prepared in compliance with the Disclosure Code's principles. Terminology used in these condensed consolidated half-year financial statements is consistent with that used in the Group's 2023 annual report and accounts.

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.

Related party transactions

The Group has had no significant related party transactions during the half-year to 30 June 2024. Related party transactions for the half-year to 30 June 2024 are similar in nature to those for the year ended 31 December 2023. Full details of the Group's related party transactions for the year ended 31 December 2023 can be found in the Group's 2023 annual report and accounts.

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 21 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 14.


Note 3: Segmental analysis

Lloyds Banking Group provides a wide range of banking and financial services in the UK and in certain locations overseas. The Group Executive Committee (GEC) remains the "chief operating decision maker" (as defined by IFRS 8 Operating Segments) for the Group.

The segmental results and comparatives are presented on an underlying basis, the basis reviewed by the chief operating decision maker. The underlying basis is derived from the recognition and measurement principles of IFRS with the effects of the following excluded in arriving at underlying profit before tax:

•  Restructuring costs relating to merger, acquisition and integration activities

•  Volatility and other items, which includes the effects of certain asset sales, the volatility relating to the Group's hedging arrangements and that arising in the insurance businesses, the unwind of acquisition-related fair value adjustments and the amortisation of purchased intangible assets

•  Losses from insurance and participating investment contract modifications relating to the enhancement to the Group's longstanding and workplace pension business through the addition of a drawdown feature

For the purposes of the underlying income statement, operating lease depreciation (net of gains on disposal of operating lease assets) is shown as an adjustment to total underlying income.

There has been no change to the descriptions of these segments as provided in note 4 to the Group's financial statements for the year ended 31 December 2023.

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 3: Segmental analysis (continued)

The table below analyses the Group's income and profit by segment on an underlying basis and provides a reconciliation through to certain lines in the Group's statutory income statement. Total income, after net finance income in respect of insurance and investment contracts is also analysed between external and inter-segment income. The Group's full segmental income statement on an underlying basis is shown on page 16.

Half-year to 30 June 2024

Net

interest

income

£m

 

 

Other

income,

after net

finance

expense1

£m

 

 

Total

income,

after net

finance

expense1,2

£m

 

 

Profit

before

tax

£m

 

 

External

income

£m

 

 

Inter-

segment

income

(expense)

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underlying basis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

         4,430

 

 

         1,148

 

 

         5,578

 

 

         1,875

 

 

         6,566

 

 

           (988)

 

Commercial Banking

         1,696

 

 

            947

 

 

         2,643

 

 

         1,329

 

 

         2,088

 

 

            555

 

Insurance, Pensions and Investments

             (74)

 

 

            649

 

 

            575

 

 

            119

 

 

            649

 

 

             (74)

 

Other

            286

 

 

             (10)

 

 

            276

 

 

            174

 

 

           (231)

 

 

            507

 

Group

         6,338

 

 

         2,734

 

 

         9,072

 

 

         3,497

 

 

         9,072

 

 

                -

 

Reconciling items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance grossing adjustment

                8

 

 

           (112)

 

 

           (104)

 

 

                -

 

 

 

 

 

 

 

Market volatility and asset sales

           (273)

 

 

            208

 

 

             (65)

 

 

             (65)

 

 

 

 

 

 

 

Amortisation of purchased intangibles

                -

 

 

                -

 

 

                -

 

 

             (41)

 

 

 

 

 

 

 

Restructuring costs3

                -

 

 

                -

 

 

                -

 

 

             (15)

 

 

 

 

 

 

 

Fair value unwind and other items

             (27)

 

 

                -

 

 

             (27)

 

 

             (52)

 

 

 

 

 

 

 

Group - statutory

         6,046

 

 

         2,830

 

 

         8,876

 

 

         3,324

 

 

 

 

 

 

 

 

Half-year to 30 June 2023

Net

interest

income

£m

 

 

Other

income,

after net

finance

expense1

£m

 

 

Total

income,

after net

finance

expense1,2

£m

 

 

Profit

before

tax

£m

 

 

External

income

£m

 

 

Inter-

segment

income

(expense)

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underlying basis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

         5,064

 

 

         1,006

 

 

         6,070

 

 

         2,505

 

 

         6,429

 

 

           (359)

 

Commercial Banking

         1,934

 

 

            856

 

 

         2,790

 

 

         1,417

 

 

         2,296

 

 

            494

 

Insurance, Pensions and Investments

             (70)

 

 

            619

 

 

            549

 

 

              91

 

 

            621

 

 

             (72)

 

Other

              76

 

 

              57

 

 

            133

 

 

              28

 

 

            196

 

 

             (63)

 

Group

         7,004

 

 

         2,538

 

 

         9,542

 

 

         4,041

 

 

         9,542

 

 

                -

 

Reconciling items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance grossing adjustment

                7

 

 

           (139)

 

 

           (132)

 

 

                -

 

 

 

 

 

 

 

Market volatility and asset sales

           (183)

 

 

            117

 

 

             (66)

 

 

             (63)

 

 

 

 

 

 

 

Amortisation of purchased intangibles

                -

 

 

                -

 

 

                -

 

 

             (35)

 

 

 

 

 

 

 

Restructuring costs3

                -

 

 

                -

 

 

                -

 

 

             (25)

 

 

 

 

 

 

 

Fair value unwind and other items

             (30)

 

 

               (8)

 

 

             (38)

 

 

             (48)

 

 

 

 

 

 

 

Group - statutory

         6,798

 

 

         2,508

 

 

         9,306

 

 

         3,870

 

 

 

 

 

 

 

1  Other income and total income, after net finance expense in respect of insurance and investment contracts.

2  Total income, after net finance expense does not include operating lease depreciation which, on a statutory basis, is included within operating costs.

3  Restructuring costs related to merger, acquisition and integration costs.

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 3: Segmental analysis (continued)

Half-year to 31 December 2023

Net

interest

income

£m

 

 

Other

income,

after net

finance

expense1

£m

 

 

Total

income,

after net

finance

expense1,2

£m

 

 

Profit

before

tax

£m

 

 

External

income

£m

 

 

Inter-

segment

income

(expense)

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underlying basis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

         4,583

 

 

         1,153

 

 

         5,736

 

 

         1,538

 

 

         6,374

 

 

           (638)

 

Commercial Banking

         1,865

 

 

            835

 

 

         2,700

 

 

         1,802

 

 

         2,274

 

 

            426

 

Insurance, Pensions and Investments

             (62)

 

 

            590

 

 

            528

 

 

              99

 

 

            600

 

 

             (72)

 

Other

            375

 

 

                7

 

 

            382

 

 

            329

 

 

              98

 

 

            284

 

Group

         6,761

 

 

         2,585

 

 

         9,346

 

 

         3,768

 

 

         9,346

 

 

                -

 

Reconciling items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance grossing adjustment

                5

 

 

           (100)

 

 

             (95)

 

 

                -

 

 

 

 

 

 

 

Market volatility and asset sales

           (240)

 

 

            334

 

 

              94

 

 

              98

 

 

 

 

 

 

 

Amortisation of purchased intangibles

                -

 

 

                -

 

 

                -

 

 

             (45)

 

 

 

 

 

 

 

Restructuring costs3

                -

 

 

                -

 

 

                -

 

 

           (129)

 

 

 

 

 

 

 

Fair value unwind and other items

             (26)

 

 

                4

 

 

             (22)

 

 

             (59)

 

 

 

 

 

 

 

Group - statutory

         6,500

 

 

         2,823

 

 

         9,323

 

 

         3,633

 

 

 

 

 

 

 

1  Other income and total income, after net finance expense in respect of insurance and investment contracts.

2  Total income, after net finance expense does not include operating lease depreciation which, on a statutory basis, is included within operating costs.

3  Restructuring costs related to merger, acquisition and integration costs.

 

Segment loans and

advances to customers

 

Segment

external assets

 

At 30 Jun

2024

£m

 

 

At 31 Dec 2023

£m

 

 

At 30 Jun

2024

£m

 

 

At 31 Dec 2023

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

      365,055

 

 

      361,181

 

 

      380,919

 

 

      376,789

 

Commercial Banking

       88,069

 

 

       88,606

 

 

      148,736

 

 

      150,834

 

Insurance, Pensions and Investments

                -

 

 

                -

 

 

      191,796

 

 

      184,267

 

Other

           (716)

 

 

             (42)

 

 

      171,476

 

 

      169,563

 

Total Group

      452,408

 

 

      449,745

 

 

      892,927

 

 

      881,453

 

 

 

Segment

customer deposits

 

Segment

external liabilities

 

At 30 Jun

2024

£m

 

 

At 31 Dec 2023

£m

 

 

At 30 Jun

2024

£m

 

 

At 31 Dec 2023

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

      313,339

 

 

      308,441

 

 

      319,066

 

 

      313,244

 

Commercial Banking

      161,159

 

 

      162,752

 

 

      202,358

 

 

      204,815

 

Insurance, Pensions and Investments

                -

 

 

                -

 

 

      187,673

 

 

      179,962

 

Other

            195

 

 

            203

 

 

      138,713

 

 

      136,067

 

Total Group

      474,693

 

 

      471,396

 

 

      847,810

 

 

      834,088

 

 


NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 4: Net fee and commission income

 

Half-year

to 30 Jun

2024

£m

 

 

Half-year

to 30 Jun

2023

£m

 

 

Half-year

to 31 Dec

2023

£m

 

 

 

 

 

 

 

 

 

 

Fee and commission income:

 

 

 

 

 

 

 

 

Current accounts

            314

 

 

            310

 

 

            314

 

Credit and debit card fees

            631

 

 

            617

 

 

            647

 

Commercial banking and treasury fees

            188

 

 

            166

 

 

            168

 

Unit trust and insurance broking

              32

 

 

              34

 

 

              35

 

Factoring

              35

 

 

              39

 

 

              36

 

Other fees and commissions

            258

 

 

            260

 

 

            300

 

Total fee and commission income

         1,458

 

 

         1,426

 

 

         1,500

 

Fee and commission expense

           (568)

 

 

           (539)

 

 

           (556)

 

Net fee and commission income

            890

 

 

            887

 

 

            944

 

Current account and credit and debit card fees principally arise in Retail; commercial banking, treasury and factoring fees arise in Commercial Banking; and unit trust and insurance broking fees arise in Insurance, Pensions and Investments.


Note 5: Insurance business

 

Half-year

to 30 Jun

2024

£m

 

 

Half-year

to 30 Jun

2023

£m

 

 

Half-year

to 31 Dec

2023

£m

 

 

 

 

 

 

 

 

 

 

Life

 

 

 

 

 

 

 

 

Amounts relating to the changes in liabilities for remaining coverage:

 

 

 

 

 

 

 

 

Contractual service margin recognised for services provided

            216

 

 

            160

 

 

            169

 

Change in risk adjustments for non-financial risk for risk expired

              27

 

 

              30

 

 

              54

 

Expected incurred claims and other insurance services expenses

            977

 

 

            955

 

 

            952

 

Charges to funds in respect of policyholder tax and other

              68

 

 

              20

 

 

              67

 

 

         1,288

 

 

         1,165

 

 

         1,242

 

Recovery of insurance acquisition cash flows

              56

 

 

              40

 

 

              47

 

Total life

         1,344

 

 

         1,205

 

 

         1,289

 

 

 

 

 

 

 

 

 

 

Non-life

 

 

 

 

 

 

 

 

Total non-life

            306

 

 

            245

 

 

            269

 

Total insurance revenue

         1,650

 

 

         1,450

 

 

         1,558

 

 

 

 

 

 

 

 

 

 

Life

 

 

 

 

 

 

 

 

Incurred claims and other directly attributable expenses

           (961)

 

 

           (966)

 

 

           (931)

 

Changes that relate to past service: adjustment to liabilities for incurred claims

                3

 

 

               (1)

 

 

                1

 

Changes that relate to future service: losses and reversal of losses on onerous contracts

             (46)

 

 

             (26)

 

 

              84

 

Amortisation of insurance acquisition cash flows

             (56)

 

 

             (40)

 

 

             (48)

 

Net impairment loss on insurance acquisition assets

               (8)

 

 

                -

 

 

               (7)

 

Total life

        (1,068)

 

 

        (1,033)

 

 

           (901)

 

 

 

 

 

 

 

 

 

 

Non-life

 

 

 

 

 

 

 

 

Total non-life

           (271)

 

 

           (205)

 

 

           (275)

 

Total insurance service expense

        (1,339)

 

 

        (1,238)

 

 

        (1,176)

 

 

 

 

 

 

 

 

 

 

Net (expense) income from reinsurance contracts held

             (23)

 

 

              11

 

 

               (9)

 

 

 

 

 

 

 

 

 

 

Insurance service result

            288

 

 

            223

 

 

            373

 

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 5: Insurance business (continued)

 

Half-year to 30 June 2024

 

Life

£m

 

 

Non-life

£m

 

 

Total

£m

 

 

 

 

 

 

 

 

 

 

Net investment return on assets held to back insurance and participating investment contracts (memorandum item)1

         6,482

 

 

              20

 

 

         6,502

 

 

 

 

 

 

 

 

 

 

Net finance expense from insurance and participating investment contracts

        (6,555)

 

 

               (3)

 

 

        (6,558)

 

Net finance income from reinsurance contracts held

              81

 

 

                -

 

 

              81

 

Net finance expense from insurance, participating investment and reinsurance contracts

        (6,474)

 

 

               (3)

 

 

        (6,477)

 

 

 

 

 

 

 

 

 

 

 

Half-year to 30 June 2023

 

Life

£m

 

 

Non-life

£m

 

 

Total

£m

 

 

 

 

 

 

 

 

 

 

Net investment return on assets held to back insurance and participating

investment contracts (memorandum item)1

         3,542

 

 

              28

 

 

         3,570

 

 

 

 

 

 

 

 

 

 

Net finance expense from insurance and participating investment contracts

        (3,732)

 

 

             (39)

 

 

        (3,771)

 

Net finance income from reinsurance contracts held

                2

 

 

                -

 

 

                2

 

Net finance expense from insurance, participating investment and reinsurance

contracts

        (3,730)

 

 

             (39)

 

 

        (3,769)

 


 

 

 

 

 

 

 

 

 

Half-year to 31 December 2023

 

Life

£m

 

 

Non-life

£m

 

 

Total

£m

 

 

 

 

 

 

 

 

 

 

Net investment return on assets held to back insurance and participating investment contracts (memorandum item)1

         8,214

 

 

                7

 

 

         8,221

 

 

 

 

 

 

 

 

 

 

Net finance (expense) income from insurance and participating investment contracts

        (7,997)

 

 

              33

 

 

        (7,964)

 

Net finance income from reinsurance contracts held

              49

 

 

                -

 

 

              49

 

Net finance (expense) income from insurance, participating investment and reinsurance

contracts

        (7,948)

 

 

              33

 

 

        (7,915)

 

1  Net investment return on assets held to back insurance contracts and participating investment contracts is reported within net trading income on the face of the Group's income statement; includes income of £6,951 million (half-year to 30 June 2023: £3,781 million; half-year to 31 December 2023: £6,419 million) in respect of unit-linked and with-profit contracts measured applying the variable fee approach. The assets generating the investment return held to back insurance contracts and participating investment contracts are carried at fair value on the Group's balance sheet.

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 5: Insurance business (continued)

At 30 June 2024

Present value

of future

cash flows

£m

Risk

adjustment1

£m

 

Contractual

service

margin2

£m

 

Other

£m

 

 

Total

£m

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance contract assets

 

                2

 

 

                1

 

 

               (2)

 

 

                -

 

 

                1

 

Liabilities arising from insurance contracts and participating investment contracts3,4

 

    (119,421)

 

 

        (1,139)

 

 

        (4,467)

 

 

                -

 

 

    (125,027)

 

Insurance acquisition assets

 

                -

 

 

                -

 

 

                -

 

 

              20

 

 

              20

 

Net liabilities

 

    (119,419)

 

 

        (1,138)

 

 

        (4,469)

 

 

              20

 

 

    (125,006)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance contract assets

 

                -

 

 

                1

 

 

                -

 

 

                -

 

 

                1

 

Liabilities arising from insurance contracts and participating investment contracts3,4

 

    (114,555)

 

 

        (1,178)

 

 

        (4,415)

 

 

                -

 

 

    (120,148)

 

Insurance acquisition assets

 

                -

 

 

                -

 

 

                -

 

 

              24

 

 

              24

 

Net liabilities

 

    (114,555)

 

 

        (1,177)

 

 

        (4,415)

 

 

              24

 

 

    (120,123)

 

1  The movement in the risk adjustment during the half-year to 30 June 2024 included £34 million, net of reinsurance, arising on the initial recognition of contracts issued in the period (half-year to 30 June 2023: £42 million; half-year to 31 December 2023: £44 million).

2  The movement in the contractual service margin during the half-year to 30 June 2024 included £27 million, net of reinsurance, arising on the initial recognition of contracts issued in the period (half-year to 30 June 2023: £56 million; half-year to 31 December 2023: £31 million).

3  Liabilities arising from insurance and participating investment contracts substantially all relates to liability for remaining coverage.

4  Excluding insurance acquisition assets.

On 13 March 2024, the Group entered into a business transfer agreement with Rothesay Life plc for the sale of the Group's bulk annuity business and to pursue the transfer of associated business assets and assumed liabilities under Part VII of the Financial Services and Markets Act 2000. A reinsurance agreement between the Group and Rothesay Life plc was signed on 30 April 2024 to materially de-risk the Group's bulk annuity portfolio. The Part VII process is subject to approval by the High Court, through a process in which regulators and policyholders are given the opportunity to object. The Group currently expects the Part VII to take place in the second half of 2025.

Upon entering into the reinsurance agreement, the Group derecognised £5.3 billion of financial assets which represents the reinsurance premium paid and at 30 April 2024 recognised a reinsurance contract asset of £5.3 billion, of which £0.3 billion contractual service margin was recognised. The reinsurance contract asset is presented on the Group's balance sheet within other assets.


NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 6: Operating expenses

 

Half-year

to 30 Jun

2024

£m

 

 

Half-year

to 30 Jun

2023

£m

 

 

Half-year

to 31 Dec

2023

£m

 

 

 

 

 

 

 

 

 

 

Staff costs:

 

 

 

 

 

 

 

 

Salaries and social security costs

         1,914

 

 

         1,695

 

 

         1,956

 

Pensions and other post-retirement benefit schemes (note 7)

            276

 

 

            153

 

 

            202

 

Restructuring and other staff costs

            214

 

 

            185

 

 

            302

 

 

         2,404

 

 

         2,033

 

 

         2,460

 

Premises and equipment costs1

            196

 

 

            179

 

 

            270

 

Depreciation and amortisation

         1,705

 

 

         1,333

 

 

         1,572

 

UK bank levy

                -

 

 

                -

 

 

            150

 

Regulatory and legal provisions (note 16)

              95

 

 

              70

 

 

            605

 

Other

         1,365

 

 

         1,448

 

 

         1,272

 

Operating expenses before adjustment for:

         5,765

 

 

         5,063

 

 

         6,329

 

Amounts attributable to the acquisition of insurance and participating investment contracts

             (88)

 

 

             (82)

 

 

           (101)

 

Amounts reported within insurance service expenses

           (225)

 

 

           (207)

 

 

           (179)

 

Total operating expenses

         5,452

 

 

         4,774

 

 

         6,049

 

1    Net of profits on disposal of operating lease assets of £37 million (half-year to 30 June 2023: £67 million; half-year to 31 December 2023: £26 million).


NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 7: Retirement benefit obligations

The Group's post-retirement defined benefit scheme obligations are comprised as follows:

 

At 30 Jun

2024

£m

 

 

At 31 Dec 2023

£m

 

 

 

 

 

 

 

Defined benefit pension schemes:

 

 

 

 

 

Present value of funded obligations

      (28,633)

 

 

      (30,201)

 

Fair value of scheme assets

       31,924

 

 

       33,733

 

Net pension scheme asset

         3,291

 

 

         3,532

 

Other post-retirement schemes

             (42)

 

 

             (44)

 

Total amounts recognised in the balance sheet

         3,249

 

 

         3,488

 

 

 

 

 

 

 

Recognised on the balance sheet as:

 

 

 

 

 

Retirement benefit assets

         3,379

 

 

         3,624

 

Retirement benefit obligations

           (130)

 

 

           (136)

 

Total amounts recognised in the balance sheet

         3,249

 

 

         3,488

 

Movements in the Group's net post-retirement defined benefit scheme asset during the period were as follows:

 

£m

 

 

 

 

Asset at 1 January 2024

         3,488

 

Income statement credit

              21

 

Employer contributions

              91

 

Remeasurement

           (351)

 

Asset at 30 June 2024

         3,249

 

The charge to the income statement in respect of pensions and other post-retirement benefit schemes is comprised as follows:

 

Half-year

to 30 Jun

2024

£m

 

 

Half-year

to 30 Jun

2023

£m

 

 

Half-year

to 31 Dec

2023

£m

 

 

 

 

 

 

 

 

 

 

Defined benefit schemes

             (21)

 

 

             (37)

 

 

             (42)

 

Defined contribution schemes

            297

 

 

            190

 

 

            244

 

Total charge to the income statement

            276

 

 

            153

 

 

            202

 

The principal assumptions used in the valuations of the defined benefit pension schemes were as follows:

 

At 30 Jun

2024

%

 

 

At 31 Dec 2023

%

 

 

 

 

 

 

 

Discount rate

           5.18

 

 

           4.70

 

Rate of inflation:

 

 

 

 

 

Retail Price Index (RPI)

           3.08

 

 

           2.96

 

Consumer Price Index (CPI)

           2.67

 

 

           2.47

 

Rate of salary increases

           0.00

 

 

           0.00

 

Weighted-average rate of increase for pensions in payment

           2.90

 

 

           2.73

 

 


NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 8: Impairment

 

Half-year

to 30 Jun

2024

£m

 

 

Half-year

to 30 Jun

2023

£m

 

 

Half-year

to 31 Dec

2023

£m

 

 

 

 

 

 

 

 

 

 

Loans and advances to banks

               (5)

 

 

               (3)

 

 

               (4)

 

Loans and advances to customers

            161

 

 

            667

 

 

           (346)

 

Debt securities

               (3)

 

 

                2

 

 

               (1)

 

Financial assets held at amortised cost

            153

 

 

            666

 

 

           (351)

 

Financial assets at fair value through other comprehensive income

               (2)

 

 

               (3)

 

 

                1

 

Other assets

               (8)

 

 

               (2)

 

 

               (8)

 

Loan commitments and financial guarantees

             (43)

 

 

                1

 

 

               (1)

 

Total impairment charge (credit)

            100

 

 

            662

 

 

           (359)

 

There was a £10 million charge in respect of residual value impairment and voluntary terminations within the Group's UK Motor Finance business in the current period (half-year to 30 June 2023: £27 million; half-year to 31 December 2023: £46 million).


Note 9: Tax

In accordance with IAS 34, the Group's income tax expense 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 and accounting profit is set out below:

 

Half-year

to 30 Jun

2024

£m

 

 

Half-year

to 30 Jun

2023

£m

 

 

Half-year

to 31 Dec

2023

£m

 

 

 

 

 

 

 

 

 

 

Profit before tax

         3,324

 

 

         3,870

 

 

         3,633

 

UK corporation tax thereon at 25.0 per cent (2023: 23.5 per cent)

           (831)

 

 

           (909)

 

 

           (854)

 

Impact of surcharge on banking profits

             (83)

 

 

           (141)

 

 

           (164)

 

Non-deductible costs: conduct charges

                4

 

 

               (2)

 

 

             (27)

 

Non-deductible costs: bank levy

                -

 

 

                -

 

 

             (35)

 

Other non-deductible costs

             (39)

 

 

             (80)

 

 

             (26)

 

Non-taxable income

              27

 

 

              27

 

 

              53

 

Tax relief on coupons on other equity instruments

              67

 

 

              60

 

 

              64

 

Tax-exempt gains on disposals

              33

 

 

              27

 

 

                8

 

Tax losses where no deferred tax recognised

               (2)

 

 

                -

 

 

               (2)

 

Remeasurement of deferred tax due to rate changes

                3

 

 

               (8)

 

 

               (6)

 

Differences in overseas tax rates

                -

 

 

                5

 

 

                1

 

Policyholder tax

             (46)

 

 

             (37)

 

 

             (24)

 

Deferred tax asset in respect of life assurance expenses

                -

 

 

              64

 

 

              20

 

Adjustments in respect of prior years

             (12)

 

 

             (11)

 

 

              11

 

Tax effect of share of results of joint ventures

               (1)

 

 

               (1)

 

 

                2

 

Tax expense

           (880)

 

 

        (1,006)

 

 

           (979)

 

 


NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 10: 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 21 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.

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

£m

 

 

Level 2

£m

 

 

Level 3

£m

 

 

Total

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 June 2024

 

 

 

 

 

 

 

 

 

 

 

Financial assets at fair value through profit or loss:

 

 

 

 

 

 

 

 

 

 

 

Loans and advances to banks

                -

 

 

         3,405

 

 

                -

 

 

         3,405

 

Loans and advances to customers

                -

 

 

         3,152

 

 

         6,301

 

 

         9,453

 

Reverse repurchase agreements

                -

 

 

       19,816

 

 

                -

 

 

       19,816

 

Debt securities

       10,589

 

 

       24,999

 

 

         2,286

 

 

       37,874

 

Treasury and other bills

              12

 

 

                -

 

 

                -

 

 

              12

 

Contracts held with reinsurers

                -

 

 

       11,838

 

 

                -

 

 

       11,838

 

Equity shares

      125,181

 

 

                -

 

 

         1,560

 

 

      126,741

 

Total financial assets at fair value through profit or loss1

      135,782

 

 

       63,210

 

 

       10,147

 

 

      209,139

 

Financial assets at fair value through other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

Debt securities

       14,059

 

 

       13,432

 

 

              51

 

 

       27,542

 

Equity shares

                -

 

 

                -

 

 

            305

 

 

            305

 

Total financial assets at fair value through other comprehensive income

       14,059

 

 

       13,432

 

 

            356

 

 

       27,847

 

Derivative financial instruments

              28

 

 

       18,603

 

 

            352

 

 

       18,983

 

Total financial assets carried at fair value

      149,869

 

 

       95,245

 

 

       10,855

 

 

      255,969

 

1  Other financial assets mandatorily at fair value through profit or loss include assets backing insurance contracts and investment contracts of £178,559 million.

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 10: Fair values of financial assets and liabilities (continued)

Financial assets

Level 1

£m

 

 

Level 2

£m

 

 

Level 3

£m

 

 

Total

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2023

 

 

 

 

 

 

 

 

 

 

 

Financial assets at fair value through profit or loss:

 

 

 

 

 

 

 

 

 

 

 

Loans and advances to banks

                -

 

 

         3,127

 

 

                -

 

 

         3,127

 

Loans and advances to customers

                -

 

 

         2,015

 

 

         7,890

 

 

         9,905

 

Reverse repurchase agreements

                -

 

 

       17,413

 

 

                -

 

 

       17,413

 

Debt securities

       11,611 

 

 

       28,802

 

 

         2,250

 

 

       42,663

 

Treasury and other bills

              51

 

 

                -

 

 

                -

 

 

              51

 

Contracts held with reinsurers

                -

 

 

       11,424

 

 

                -

 

 

       11,424

 

Equity shares

      117,194

 

 

                -

 

 

         1,541

 

 

      118,735

 

Total financial assets at fair value through profit or loss1

      128,856

 

 

       62,781

 

 

       11,681

 

 

      203,318

 

Financial assets at fair value through other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

Debt securities

       15,049

 

 

       12,259

 

 

              52

 

 

       27,360

 

Equity shares

                -

 

 

                -

 

 

            232

 

 

            232

 

Total financial assets at fair value through other comprehensive income

       15,049

 

 

       12,259

 

 

            284

 

 

       27,592

 

Derivative financial instruments

              77

 

 

       21,857

 

 

            422

 

 

       22,356

 

Total financial assets carried at fair value

      143,982

 

 

       96,897

 

 

       12,387

 

 

      253,266

 

1  Other financial assets mandatorily at fair value through profit or loss include assets backing insurance contracts and investment contracts of £176,475 million.

Financial liabilities

Level 1

£m

 

 

Level 2

£m

 

 

Level 3

£m

 

 

Total

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 June 2024

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities at fair value through profit or loss:

 

 

 

 

 

 

 

 

 

 

 

Debt securities in issue

                -

 

 

         4,897

 

 

              23

 

 

         4,920

 

Liabilities in respect of securities sold under repurchase agreements

                -

 

 

       20,167

 

 

                -

 

 

       20,167

 

Short positions in securities

         1,920

 

 

                9

 

 

                -

 

 

         1,929

 

Other

                -

 

 

              40

 

 

                -

 

 

              40

 

Total financial liabilities at fair value through profit or loss

         1,920

 

 

       25,113

 

 

              23

 

 

       27,056

 

Derivative financial instruments

              28

 

 

       16,246

 

 

            373

 

 

       16,647

 

Liabilities arising from non-participating investment contracts

                -

 

 

       48,280

 

 

                -

 

 

       48,280

 

Total financial liabilities carried at fair value

         1,948

 

 

       89,639

 

 

            396

 

 

       91,983

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2023

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities at fair value through profit or loss:

 

 

 

 

 

 

 

 

 

 

 

Debt securities in issue

                -

 

 

         5,223

 

 

              42

 

 

         5,265

 

Liabilities in respect of securities sold under repurchase agreements

                -

 

 

       18,057

 

 

                -

 

 

       18,057

 

Short positions in securities

         1,569

 

 

                5

 

 

                -

 

 

         1,574

 

Other

                -

 

 

              18

 

 

                -

 

 

              18

 

Total financial liabilities at fair value through profit or loss

         1,569

 

 

       23,303

 

 

              42

 

 

       24,914

 

Derivative financial instruments

            116

 

 

       19,589

 

 

            444

 

 

       20,149

 

Liabilities arising from non-participating investment contracts

                -

 

 

       44,978

 

 

                -

 

 

       44,978

 

Total financial liabilities carried at fair value

         1,685

 

 

       87,870

 

 

            486

 

 

       90,041

 

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 10: Fair values of financial assets and liabilities (continued)

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.

Movements in level 3 portfolio

The tables below analyse movements in the level 3 financial assets portfolio.

 

Financial

assets at

fair value

through

profit or loss

£m

 

Financial

assets at

fair value

through other

comprehensive

income

£m

 

 

Derivative

assets

£m

 

 

Total

financial

assets

carried at

fair value

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2024

              11,681

 

 

                   284

 

 

                   422

 

 

              12,387

 

Exchange and other adjustments

                       2

 

 

                     (1)

 

 

                       -

 

 

                       1

 

Gains (losses) recognised in the income statement within other income

                     55

 

 

                       -

 

 

                   (54)

 

 

                       1

 

Gains recognised in other comprehensive income within the revaluation reserve in respect of financial assets at fair value through other comprehensive income

                       -

 

 

                     74

 

 

                       -

 

 

                     74

 

Purchases/increases to customer loans

                   335

 

 

                       -

 

 

                       6

 

 

                   341

 

Sales/repayments of customer loans

               (1,923)

 

 

                     (1)

 

 

                   (22)

 

 

               (1,946)

 

Transfers into the level 3 portfolio

                     32

 

 

                       -

 

 

                       -

 

 

                     32

 

Transfers out of the level 3 portfolio

                   (35)

 

 

                       -

 

 

                       -

 

 

                   (35)

 

At 30 June 2024

              10,147

 

 

                   356

 

 

                   352

 

 

              10,855

 

Gains (losses) recognised in the income statement, within other income, relating to the change in fair

value of those assets held at 30 June 2024

                     54

 

 

                       -

 

 

                   (41)

 

 

                     13

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2023

              11,304

 

 

                   342

 

 

                   553

 

 

              12,199

 

Exchange and other adjustments

                     (1)

 

 

                     (2)

 

 

                   (13)

 

 

                   (16)

 

Gains (losses) recognised in the income statement within other income

                   104

 

 

                       4

 

 

                   (53)

 

 

                     55

 

Losses recognised in other comprehensive income

within the revaluation reserve in respect of financial assets at fair value through other comprehensive income

                       -

 

 

                   (48)

 

 

                       -

 

 

                   (48)

 

Purchases/increases to customer loans

                   347

 

 

                       -

 

 

                     40

 

 

                   387

 

Sales/repayments of customer loans

                 (475)

 

 

                     (4)

 

 

                   (17)

 

 

                 (496)

 

Transfers into the level 3 portfolio

                   139

 

 

                       -

 

 

                       -

 

 

                   139

 

Transfers out of the level 3 portfolio

                     (4)

 

 

                       -

 

 

                     (3)

 

 

                     (7)

 

At 30 June 2023

              11,414

 

 

                   292

 

 

                   507

 

 

              12,213

 

Gains (losses) recognised in the income statement, within other income, relating to the change in fair

value of those assets held at 30 June 2023

                     79

 

 

                       2

 

 

                   (58)

 

 

                     23

 

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 10: Fair values of financial assets and liabilities (continued)

The tables below analyse movements in the level 3 financial liabilities portfolio.

 

Financial

liabilities

at fair value

through

profit or loss

£m

 

 

Derivative

liabilities

£m

 

 

Total

financial

liabilities

carried at

fair value

£m

 

 

 

 

 

 

 

 

 

 

                     42

 

 

                   444

 

 

                   486

 

                       -

 

 

                       -

 

 

                       -

 

                       2

 

 

                   (43)

 

 

                   (41)

 

                       -

 

 

                       5

 

 

                       5

 

                     (2)

 

 

                   (33)

 

 

                   (35)

 

                       -

 

 

                       -

 

 

                       -

 

                   (19)

 

 

                       -

 

 

                   (19)

 

                     23

 

 

                   373

 

 

                   396

 

Losses (gains) recognised in the income statement, within other income,

relating to the change in fair value of those liabilities held at 30 June 2024

                       2

 

 

                   (31)

 

 

                   (29)

 

 

 

 

 

 

 

 

 

 

                     45

 

 

                   608

 

 

                   653

 

                       -

 

 

                     (8)

 

 

                     (8)

 

                       1

 

 

                   (57)

 

 

                   (56)

 

                       -

 

 

                     31

 

 

                     31

 

                     (1)

 

 

                   (36)

 

 

                   (37)

 

                       2

 

 

                       -

 

 

                       2

 

                     (1)

 

 

                       -

 

 

                     (1)

 

                     46

 

 

                   538

 

 

                   584

 

Losses (gains) recognised in the income statement, within other income,

relating to the change in fair value of those liabilities held at 30 June 2023

                       1

 

 

                   (58)

 

 

                   (57)

 

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 10: 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

assumptions1

At 30 June 2024

Valuation

techniques

Significant

unobservable inputs2

Carrying value

£m

 

Favourable changes

£m

 

Unfavourable

changes

£m

 

 

 

 

 

 

 

 

 

 

Financial assets at fair value through profit or loss

 

 

 

 

 

 

Loans and advances to customers

Discounted cash flows

Interest rate spreads

(-127bps/+238bps)

         6,301

 

                  277

 

                (245)

 

Equity and venture capital investments

Market approach

Earnings multiple

(1.6/17.8)

         2,293

 

                  163

 

                (163)

 

 

Underlying asset/net asset value (incl. property prices)3

n/a

            853

 

                    80

 

                  (95)

 

Unlisted equities, debt securities and property partnerships in the life funds

Underlying asset/net asset value (incl. property prices), broker quotes or discounted cash flows3

n/a

            297

 

                      2

 

                    (9)

 

Other

 

 

            403

 

                    33

 

                  (33)

 

 

 

 

       10,147

 

 

 

 

 

Financial assets at fair value through other comprehensive income

 

 

 

 

 

 

Asset-backed securities

Lead manager or broker quote/consensus pricing

n/a

              51

 

                      2

 

                    (2)

 

Equity and venture capital investments

Underlying asset/net asset value (incl. property prices)3

n/a

            305

 

                    29

 

                  (29)

 

 

 

 

            356

 

 

 

 

 

Derivative financial assets

 

 

 

 

 

 

 

 

Interest rate derivatives

Option pricing model

Interest rate volatility

(13%/200%)

            352

 

                      6

 

                    (3)

 

Level 3 financial assets carried at fair value

 

       10,855

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities at fair value through profit or loss

              23

 

                      1

 

                    (1)

 

Derivative financial liabilities

 

 

 

 

 

 

 

 

Interest rate derivatives

Option pricing model

Interest rate volatility

(13%/200%)

            373

 

                    17

 

                  (18)

 

Level 3 financial liabilities carried at fair value

 

            396

 

 

 

 

 

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.

3  Underlying asset/net asset values represent fair value.

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 10: Fair values of financial assets and liabilities (continued)

Sensitivity of level 3 valuations (continued)

 

 

 

 

 

Effect of reasonably

possible alternative

assumptions1

At 31 December 2023

Valuation

techniques

Significant

unobservable inputs2

Carrying value

£m

 

Favourable changes

£m

 

Unfavourable changes

£m

 

 

 

 

 

 

 

 

 

 

Financial assets at fair value through profit or loss

 

 

 

 

 

 

Loans and advances to customers

Discounted cash flows

Interest rate spreads (-50bps/+272bps)

      7,890

 

                  369

 

                (351)

 

Equity and venture capital investments

Market approach

Earnings multiple (1.6/17.8)

      2,228

 

                  131

 

                (131)

 

 

Underlying asset/net asset value (incl. property prices)3

n/a

         809

 

                    77

 

                  (99)

 

Unlisted equities, debt securities and property partnerships in the life funds

Underlying asset/net asset value (incl. property prices), broker quotes or discounted cash flows3

n/a

         309

 

                      7

 

                    (6)

 

Other

 

 

         445

 

                    39

 

                  (41)

 

 

 

 

    11,681

 

 

 

 

 

Financial assets at fair value through other comprehensive income

 

 

 

 

 

 

Asset-backed securities

Lead manager or broker quote/consensus pricing

n/a

           52

 

                      2

 

                    (2)

 

Equity and venture capital investments

Underlying asset/net asset value (incl. property prices)3

n/a

         232

 

                    22

 

                  (22)

 

 

 

 

         284

 

 

 

 

 

Derivative financial assets

 

 

 

 

 

 

 

 

Interest rate derivatives

Option pricing model

Interest rate volatility (13%/200%)

         422

 

                      6

 

                    (3)

 

Level 3 financial assets carried at fair value

 

    12,387

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities at fair value through profit or loss

           42

 

                      1

 

                    (1)

 

Derivative financial liabilities

 

 

 

 

 

 

 

 

Interest rate derivatives

Option pricing model

Interest rate volatility (13%/200%)

         444

 

                    10

 

                    (7)

 

Level 3 financial liabilities carried at fair value

 

         486

 

 

 

 

 

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.

3  Underlying asset/net asset values represent fair value.

Unobservable inputs

Significant unobservable inputs affecting the valuation of debt securities, unlisted equity investments and derivatives are unchanged from those described in the Group's financial statements for the year ended 31 December 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 21 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 10: 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

value

£m

 

 

Fair

value

£m

 

 

Carrying

value

£m

 

 

Fair

value

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

Loans and advances to banks

         8,454

 

 

         8,454

 

 

       10,764

 

 

       10,764

 

Loans and advances to customers

      452,408

 

 

      445,987

 

 

      449,745

 

 

      439,449

 

Reverse repurchase agreements

       49,404

 

 

       49,404

 

 

       38,771

 

 

       38,771

 

Debt securities

       15,432

 

 

       14,753

 

 

       15,355

 

 

       15,139

 

Financial assets at amortised cost

      525,698

 

 

      518,598

 

 

      514,635

 

 

      504,123

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

Deposits from banks

         5,584

 

 

         5,578

 

 

         6,153

 

 

         6,153

 

Customer deposits

      474,693

 

 

      475,358

 

 

      471,396

 

 

      471,857

 

Repurchase agreements at amortised cost

       37,914

 

 

       37,914

 

 

       37,703

 

 

       37,703

 

Debt securities in issue

       74,760

 

 

       75,226

 

 

       75,592

 

 

       75,021

 

Subordinated liabilities

       10,448

 

 

       10,988

 

 

       10,253

 

 

       10,345

 

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 11: Derivative financial instruments

 

At 30 June 2024

 

At 31 December 2023

 

Fair value

of assets

£m

 

Fair value

of liabilities

£m

 

 

Fair value

of assets

£m

 

 

Fair value

of liabilities

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

Trading and other

 

 

 

 

 

 

 

 

 

 

 

Exchange rate contracts

         5,118

 

 

         4,580

 

 

         6,631

 

 

         6,222

 

Interest rate contracts

       13,538

 

 

       11,146

 

 

       15,116

 

 

       12,724

 

Credit derivatives

              74

 

 

            146

 

 

              51

 

 

            118

 

Equity and other contracts

            228

 

 

            334

 

 

            455

 

 

            580

 

 

       18,958

 

 

       16,206

 

 

       22,253

 

 

       19,644

 

Hedging

 

 

 

 

 

 

 

 

 

 

 

Derivatives designated as fair value hedges

                4

 

 

            422

 

 

              83

 

 

            425

 

Derivatives designated as cash flow hedges

              21

 

 

              19

 

 

              20

 

 

              80

 

 

              25

 

 

            441

 

 

            103

 

 

            505

 

Total recognised derivative assets/liabilities

       18,983

 

 

       16,647

 

 

       22,356

 

 

       20,149

 

 


NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 12: Loans and advances to customers

Half-year to 30 June 2024

 

Gross carrying amount

 

Allowance for expected credit losses

Stage 1

£m

 

Stage 2

£m

 

Stage 3

£m

 

 

POCI

£m

 

 

Total

£m

 

Stage 1

£m

 

Stage 2

£m

 

Stage 3

£m

 

 

POCI

£m

 

 

Total

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 At 1 January 2024

              385,294             

 

 

53,167

 

 

   7,147

 

 

   7,854

 

 

              453,462             

 

 

      900

 

 

   1,467

 

 

   1,137

 

 

      213

 

 

   3,717

 

Exchange and other adjustments1

  (1,219)

 

 

      (12)

 

 

      (17)

 

 

          7

 

 

  (1,241)

 

 

        (6)

 

 

        (6)

 

 

        10

 

 

        23

 

 

        21

 

Transfers to Stage 1

16,778

 

 

                (16,708)

 

 

      (70)

 

 

 

 

 

          -

 

 

      276

 

 

    (271)

 

 

        (5)

 

 

 

 

 

          -

 

Transfers to Stage 2

                (11,068)

 

 

11,546

 

 

    (478)

 

 

 

 

 

          -

 

 

      (56)

 

 

      116

 

 

      (60)

 

 

 

 

 

          -

 

Transfers to Stage 3

    (508)

 

 

  (1,728)

 

 

   2,236

 

 

 

 

 

          -

 

 

        (8)

 

 

    (157)

 

 

      165

 

 

 

 

 

          -

 

Net change in ECL

due to transfers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    (185)

 

 

      257

 

 

      169

 

 

 

 

 

      241

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

        27

 

 

      (55)

 

 

      269

 

 

 

 

 

      241

 

Impact of transfers between stages

   5,202

 

 

  (6,890)

 

 

   1,688

 

 

 

 

 

          -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other changes in credit quality2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    (139)

 

 

      (50)

 

 

      331

 

 

        32

 

 

      174

 

Additions and repayments

   9,424

 

 

  (3,150)

 

 

    (828)

 

 

    (418)

 

 

   5,028

 

 

        (9)

 

 

    (101)

 

 

    (115)

 

 

      (29)

 

 

    (254)

 

Charge (credit) to the income statement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    (121)

 

 

    (206)

 

 

      485

 

 

          3

 

 

      161

 

Disposals and derecognition3

    (449)

 

 

    (206)

 

 

      (88)

 

 

    (219)

 

 

    (962)

 

 

        (1)

 

 

        (4)

 

 

        (7)

 

 

        (8)

 

 

      (20)

 

Advances written off

 

 

 

 

 

 

    (618)

 

 

        (6)

 

 

    (624)

 

 

 

 

 

 

 

 

    (618)

 

 

        (6)

 

 

    (624)

 

Recoveries of advances written off in previous years

 

 

 

 

 

 

        69

 

 

          -

 

 

        69

 

 

 

 

 

 

 

 

        69

 

 

          -

 

 

        69

 

At 30 June 2024

              398,252     

 

 

42,909

 

 

   7,353

 

 

   7,218

 

 

              455,732             

 

 

      772

 

 

   1,251

 

 

   1,076

 

 

      225

 

 

   3,324

 

Allowance for

expected credit losses

    (772)

 

 

  (1,251)

 

 

  (1,076)

 

 

    (225)

 

 

  (3,324)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net carrying amount

              397,480       

 

 

41,658

 

 

   6,277

 

 

   6,993

 

 

              452,408             

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Drawn ECL coverage4

     0.2      %

 

 

   2.9  %

 

 

14.6  %

 

 

  3.1 %

 

 

     0.7      %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1  Exchange and other adjustments includes the impact of movements in exchange rates, discount unwind, derecognising assets as a result of modifications and adjustments in respect of purchased or originated credit-impaired financial assets (POCI). Where a POCI asset's expected credit loss is less than its expected credit loss on purchase or origination, the increase in its carrying value is recognised within gross loans, rather than as a negative impairment allowance.

2  Includes a credit for methodology and model changes of £65 million, split by Stage as £26 million credit for Stage 1, £31 million credit for Stage 2, £4 million credit for Stage 3 and £4 million credit for POCI.

3  Relates to the securitisation of legacy Retail mortgages.

4  Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers.

The total allowance for expected credit losses includes £185 million (31 December 2023: £187 million) in respect of residual value impairment and voluntary terminations within the Group's UK Motor Finance business.

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 12: Loans and advances to customers (continued)

Year ended 31 December 2023

 

Gross carrying amount

 

Allowance for expected credit losses

 

Stage 1

£m

 

 

Stage 2

£m

 

 

Stage 3

£m

 

 

POCI

£m

 

 

Total

£m

 

 

Stage 1

£m

 

 

Stage 2

£m

 

 

Stage 3

£m

 

 

POCI

£m

 

 

Total

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2023

              380,991             

 

 

61,164

 

 

   7,640

 

 

   9,622

 

 

              459,417             

 

 

      700

 

 

   1,808

 

 

   1,757

 

 

      253

 

 

   4,518

 

Exchange and other adjustments1

   1,830

 

 

      (24)

 

 

        (6)

 

 

        18

 

 

   1,818

 

 

        (7)

 

 

        (1)

 

 

      105

 

 

        67

 

 

      164

 

Transfers to Stage 1

18,991

 

 

                (18,953)

 

 

      (38)

 

 

 

 

 

          -

 

 

      401

 

 

    (393)

 

 

        (8)

 

 

 

 

 

          -

 

Transfers to Stage 2

                (18,010)

 

 

18,592

 

 

    (582)

 

 

 

 

 

          -

 

 

      (53)

 

 

      121

 

 

      (68)

 

 

 

 

 

          -

 

Transfers to Stage 3

  (1,216)

 

 

  (2,507)

 

 

   3,723

 

 

 

 

 

          -

 

 

      (13)

 

 

    (223)

 

 

      236

 

 

 

 

 

          -

 

Net change in ECL

due to transfers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    (260)

 

 

      402

 

 

      312

 

 

 

 

 

      454

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

        75

 

 

      (93)

 

 

      472

 

 

 

 

 

      454

 

Impact of transfers between stages

    (235)

 

 

  (2,868)

 

 

   3,103

 

 

 

 

 

          -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other changes in credit quality2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      105

 

 

    (103)

 

 

      804

 

 

          8

 

 

      814

 

Additions and repayments

   6,393

 

 

  (4,213)

 

 

  (2,353)

 

 

  (1,043)

 

 

  (1,216)

 

 

        81

 

 

      (85)

 

 

    (862)

 

 

      (81)

 

 

    (947)

 

Charge (credit) to the income statement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      261

 

 

    (281)

 

 

      414

 

 

      (73)

 

 

      321

 

Disposals and derecognition3

  (3,685)

 

 

    (892)

 

 

    (122)

 

 

    (743)

 

 

  (5,442)

 

 

      (54)

 

 

      (59)

 

 

      (24)

 

 

      (34)

 

 

    (171)

 

Advances written off

 

 

 

 

 

 

  (1,231)

 

 

          -

 

 

  (1,231)

 

 

 

 

 

 

 

 

  (1,231)

 

 

          -

 

 

  (1,231)

 

Recoveries of advances written off in previous years

 

 

 

 

 

 

      116

 

 

          -

 

 

      116

 

 

 

 

 

 

 

 

      116

 

 

          -

 

 

      116

 

At 31 December 2023

              385,294             

 

 

53,167

 

 

   7,147

 

 

   7,854

 

 

              453,462             

 

 

      900

 

 

   1,467

 

 

   1,137

 

 

      213

 

 

   3,717

 

Allowance for

expected credit losses

    (900)

 

 

  (1,467)

 

 

  (1,137)

 

 

    (213)

 

 

  (3,717)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net carrying amount

              384,394             

 

 

51,700

 

 

   6,010

 

 

   7,641

 

 

              449,745             

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Drawn ECL coverage4

     0.2      %

 

 

     2.8      %

 

 

       15.9       %

 

 

     2.7     %

 

 

     0.8      %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1  Exchange and other adjustments includes the impact of movements in exchange rates, discount unwind, derecognising assets as a result of modifications and adjustments in respect of purchased or originated credit-impaired financial assets (POCI). Where a POCI asset's expected credit loss is less than its expected credit loss on purchase or origination, the increase in its carrying value is recognised within gross loans, rather than as a negative impairment allowance.

2  Includes a charge for methodology and model changes of £60 million, split by Stage as £96 million charge for Stage 1, £33 million credit for Stage 2, £1 million credit for Stage 3 and £2 million credit for POCI.

3  Relates to the securitisations of legacy Retail mortgages and Retail unsecured loans.

4  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. Purchased or originated credit-impaired are not transferable.

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 13: Credit quality of loans and advances to customers

 

 

Gross drawn exposures

 

Allowance for expected credit losses

At 30 June 2024

Stage 1

£m

 

Stage 2

£m

 

Stage 3

£m

 

 

POCI

£m

 

 

Total

£m

 

Stage 1

£m

 

Stage 2

£m

 

Stage 3

£m

 

 

POCI

£m

 

 

Total

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail - UK mortgages

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RMS 1-3

 

              245,910             

 

 

   8,272

 

 

          -

 

 

          -

 

 

              254,182             

 

 

        54

 

 

        51

 

 

          -

 

 

          -

 

 

      105

 

RMS 4-6

 

20,300

 

 

15,522

 

 

          -

 

 

          -

 

 

35,822

 

 

        26

 

 

      109

 

 

          -

 

 

          -

 

 

      135

 

RMS 7-9

 

        98

 

 

   2,001

 

 

          -

 

 

          -

 

 

   2,099

 

 

          1

 

 

        35

 

 

          -

 

 

          -

 

 

        36

 

RMS 10

 

          -

 

 

      973

 

 

          -

 

 

          -

 

 

      973

 

 

          -

 

 

        23

 

 

          -

 

 

          -

 

 

        23

 

RMS 11-13

 

          -

 

 

   3,074

 

 

          -

 

 

          -

 

 

   3,074

 

 

          -

 

 

      108

 

 

          -

 

 

          -

 

 

      108

 

RMS 14

 

          -

 

 

          -

 

 

   4,542

 

 

   7,218

 

 

11,760

 

 

          -

 

 

          -

 

 

      331

 

 

      225

 

 

      556

 

 

 

              266,308             

 

 

29,842

 

 

   4,542

 

 

   7,218

 

 

              307,910             

 

 

        81

 

 

      326

 

 

      331

 

 

      225

 

 

      963

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail - credit cards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RMS 1-3

 

   4,665

 

 

          3

 

 

          -

 

 

          -

 

 

   4,668

 

 

          9

 

 

          -

 

 

          -

 

 

          -

 

 

          9

 

RMS 4-6

 

   7,357

 

 

   1,185

 

 

          -

 

 

          -

 

 

   8,542

 

 

        85

 

 

        56

 

 

          -

 

 

          -

 

 

      141

 

RMS 7-9

 

   1,303

 

 

      918

 

 

          -

 

 

          -

 

 

   2,221

 

 

        52

 

 

      116

 

 

          -

 

 

          -

 

 

      168

 

RMS 10

 

          4

 

 

      166

 

 

          -

 

 

          -

 

 

      170

 

 

          -

 

 

        35

 

 

          -

 

 

          -

 

 

        35

 

RMS 11-13

 

          -

 

 

      329

 

 

          -

 

 

          -

 

 

      329

 

 

          -

 

 

      117

 

 

          -

 

 

          -

 

 

      117

 

RMS 14

 

          -

 

 

          -

 

 

      290

 

 

          -

 

 

      290

 

 

          -

 

 

          -

 

 

      133

 

 

          -

 

 

      133

 

 

 

13,329

 

 

   2,601

 

 

      290

 

 

          -

 

 

16,220

 

 

      146

 

 

      324

 

 

      133

 

 

          -

 

 

      603

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail - UK unsecured loans and overdrafts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RMS 1-3

 

      855

 

 

          1

 

 

          -

 

 

          -

 

 

      856

 

 

          2

 

 

          -

 

 

          -

 

 

          -

 

 

          2

 

RMS 4-6

 

   6,209

 

 

      437

 

 

          -

 

 

          -

 

 

   6,646

 

 

        89

 

 

        27

 

 

          -

 

 

          -

 

 

      116

 

RMS 7-9

 

   1,153

 

 

      347

 

 

          -

 

 

          -

 

 

   1,500

 

 

        41

 

 

        40

 

 

          -

 

 

          -

 

 

        81

 

RMS 10

 

        34

 

 

      118

 

 

          -

 

 

          -

 

 

      152

 

 

          3

 

 

        23

 

 

          -

 

 

          -

 

 

        26

 

RMS 11-13

 

        10

 

 

      310

 

 

          -

 

 

          -

 

 

      320

 

 

          1

 

 

      104

 

 

          -

 

 

          -

 

 

      105

 

RMS 14

 

          -

 

 

          -

 

 

      186

 

 

          -

 

 

      186

 

 

          -

 

 

          -

 

 

      110

 

 

          -

 

 

      110

 

 

 

   8,261

 

 

   1,213

 

 

      186

 

 

          -

 

 

   9,660

 

 

      136

 

 

      194

 

 

      110

 

 

          -

 

 

      440

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail - UK Motor Finance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RMS 1-3

 

   9,978

 

 

      646

 

 

          -

 

 

          -

 

 

10,624

 

 

      132

 

 

        14

 

 

          -

 

 

          -

 

 

      146

 

RMS 4-6

 

   3,747

 

 

   1,092

 

 

          -

 

 

          -

 

 

   4,839

 

 

        46

 

 

        34

 

 

          -

 

 

          -

 

 

        80

 

RMS 7-9

 

      458

 

 

      272

 

 

          -

 

 

          -

 

 

      730

 

 

          4

 

 

        16

 

 

          -

 

 

          -

 

 

        20

 

RMS 10

 

          -

 

 

        91

 

 

          -

 

 

          -

 

 

        91

 

 

          -

 

 

        11

 

 

          -

 

 

          -

 

 

        11

 

RMS 11-13

 

          2

 

 

      187

 

 

          -

 

 

          -

 

 

      189

 

 

          -

 

 

        37

 

 

          -

 

 

          -

 

 

        37

 

RMS 14

 

          -

 

 

          -

 

 

      117

 

 

          -

 

 

      117

 

 

          -

 

 

          -

 

 

        67

 

 

          -

 

 

        67

 

 

 

14,185

 

 

   2,288

 

 

      117

 

 

          -

 

 

16,590

 

 

      182

 

 

      112

 

 

        67

 

 

          -

 

 

      361

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail - other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RMS 1-3

 

14,153

 

 

      250

 

 

          -

 

 

          -

 

 

14,403

 

 

          3

 

 

          4

 

 

          -

 

 

          -

 

 

          7

 

RMS 4-6

 

   2,200

 

 

      167

 

 

          -

 

 

          -

 

 

   2,367

 

 

        10

 

 

        10

 

 

          -

 

 

          -

 

 

        20

 

RMS 7-9

 

          -

 

 

        90

 

 

          -

 

 

          -

 

 

        90

 

 

          -

 

 

          5

 

 

          -

 

 

          -

 

 

          5

 

RMS 10

 

          -

 

 

          5

 

 

          -

 

 

          -

 

 

          5

 

 

          -

 

 

          -

 

 

          -

 

 

          -

 

 

          -

 

RMS 11-13

 

        81

 

 

        10

 

 

          -

 

 

          -

 

 

        91

 

 

          -

 

 

          -

 

 

          -

 

 

          -

 

 

          -

 

RMS 14

 

          -

 

 

          -

 

 

      163

 

 

          -

 

 

      163

 

 

          -

 

 

          -

 

 

        45

 

 

          -

 

 

        45

 

 

 

16,434

 

 

      522

 

 

      163

 

 

          -

 

 

17,119

 

 

        13

 

 

        19

 

 

        45

 

 

          -

 

 

        77

 

Total Retail

 

              318,517             

 

 

36,466

 

 

   5,298

 

 

   7,218

 

 

              367,499             

 

 

      558

 

 

      975

 

 

      686

 

 

      225

 

 

   2,444

 

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 13: Credit quality of loans and advances to customers (continued)

 

 

Gross drawn exposures

 

Allowance for expected credit losses

At 30 June 2024

Stage 1

£m

 

Stage 2

£m

 

Stage 3

£m

 

 

POCI

£m

 

 

Total

£m

 

Stage 1

£m

 

Stage 2

£m

 

Stage 3

£m

 

 

POCI

£m

 

 

Total

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Banking

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CMS 1-5

 

23,261

 

 

          6

 

 

          -

 

 

          -

 

 

23,267

 

 

          3

 

 

          -

 

 

          -

 

 

          -

 

 

          3

 

CMS 6-10

 

20,029

 

 

        63

 

 

          -

 

 

          -

 

 

20,092

 

 

        14

 

 

          -

 

 

          -

 

 

          -

 

 

        14

 

CMS 11-14

 

32,843

 

 

   2,133

 

 

          -

 

 

          -

 

 

34,976

 

 

      127

 

 

        29

 

 

          -

 

 

          -

 

 

      156

 

CMS 15-18

 

   4,286

 

 

   3,610

 

 

          -

 

 

          -

 

 

   7,896

 

 

        70

 

 

      190

 

 

          -

 

 

          -

 

 

      260

 

CMS 19

 

        32

 

 

      631

 

 

          -

 

 

          -

 

 

      663

 

 

          -

 

 

        57

 

 

          -

 

 

          -

 

 

        57

 

CMS 20-23

 

          -

 

 

          -

 

 

   2,055

 

 

          -

 

 

   2,055

 

 

          -

 

 

          -

 

 

      390

 

 

          -

 

 

      390

 

 

 

80,451

 

 

   6,443

 

 

   2,055

 

 

          -

 

 

88,949

 

 

      214

 

 

      276

 

 

      390

 

 

          -

 

 

      880

 

Other1

 

    (716)

 

 

          -

 

 

          -

 

 

          -

 

 

    (716)

 

 

          -

 

 

          -

 

 

          -

 

 

          -

 

 

          -

 

Total loans and advances to customers

 

              398,252             

 

 

42,909

 

 

   7,353

 

 

   7,218

 

 

              455,732             

 

 

      772

 

 

   1,251

 

 

   1,076

 

 

      225

 

 

   3,324

 

1  Gross drawn exposures include centralised fair value hedge accounting adjustments.

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 13: Credit quality of loans and advances to customers (continued)

 

Gross drawn exposures

 

Allowance for expected credit losses

At 31 December 2023

Stage 1

£m

 

 

Stage 2

£m

 

 

Stage 3

£m

 

 

POCI

£m

 

 

Total

£m

 

 

Stage 1

£m

 

 

Stage 2

£m

 

 

Stage 3

£m

 

 

POCI

£m

 

 

Total

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail - UK mortgages

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RMS 1-3

              226,740             

 

 

   4,137

 

 

          -

 

 

          -

 

 

              230,877             

 

 

      123

 

 

        37

 

 

          -

 

 

          -

 

 

      160

 

RMS 4-6

29,637

 

 

27,037

 

 

          -

 

 

          -

 

 

56,674

 

 

        38

 

 

      151

 

 

          -

 

 

          -

 

 

      189

 

RMS 7-9

      219

 

 

   2,713

 

 

          -

 

 

          -

 

 

   2,932

 

 

          -

 

 

        37

 

 

          -

 

 

          -

 

 

        37

 

RMS 10

          -

 

 

      590

 

 

          -

 

 

          -

 

 

      590

 

 

          -

 

 

        13

 

 

          -

 

 

          -

 

 

        13

 

RMS 11-13

          -

 

 

   4,056

 

 

          -

 

 

          -

 

 

   4,056

 

 

          -

 

 

      136

 

 

          -

 

 

          -

 

 

      136

 

RMS 14

          -

 

 

          -

 

 

   4,337

 

 

   7,854

 

 

12,191

 

 

          -

 

 

          -

 

 

      357

 

 

      213

 

 

      570

 

 

              256,596             

 

 

38,533

 

 

   4,337

 

 

   7,854

 

 

              307,320             

 

 

      161

 

 

      374

 

 

      357

 

 

      213

 

 

   1,105

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail - credit cards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RMS 1-3

   3,906

 

 

          5

 

 

          -

 

 

          -

 

 

   3,911

 

 

          9

 

 

          -

 

 

          -

 

 

          -

 

 

          9

 

RMS 4-6

   7,159

 

 

   1,248

 

 

          -

 

 

          -

 

 

   8,407

 

 

        91

 

 

        65

 

 

          -

 

 

          -

 

 

      156

 

RMS 7-9

   1,548

 

 

   1,069

 

 

          -

 

 

          -

 

 

   2,617

 

 

        67

 

 

      145

 

 

          -

 

 

          -

 

 

      212

 

RMS 10

        12

 

 

      220

 

 

          -

 

 

          -

 

 

      232

 

 

          1

 

 

        50

 

 

          -

 

 

          -

 

 

        51

 

RMS 11-13

          -

 

 

      366

 

 

          -

 

 

          -

 

 

      366

 

 

          -

 

 

      141

 

 

          -

 

 

          -

 

 

      141

 

RMS 14

          -

 

 

          -

 

 

      284

 

 

          -

 

 

      284

 

 

          -

 

 

          -

 

 

      130

 

 

          -

 

 

      130

 

 

12,625

 

 

   2,908

 

 

      284

 

 

          -

 

 

15,817

 

 

      168

 

 

      401

 

 

      130

 

 

          -

 

 

      699

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail - UK unsecured loans and overdrafts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RMS 1-3

      638

 

 

          1

 

 

          -

 

 

          -

 

 

      639

 

 

          1

 

 

          -

 

 

          -

 

 

          -

 

 

          1

 

RMS 4-6

   5,152

 

 

      250

 

 

          -

 

 

          -

 

 

   5,402

 

 

        83

 

 

        18

 

 

          -

 

 

          -

 

 

      101

 

RMS 7-9

   1,256

 

 

      473

 

 

          -

 

 

          -

 

 

   1,729

 

 

        44

 

 

        50

 

 

          -

 

 

          -

 

 

        94

 

RMS 10

        43

 

 

      135

 

 

          -

 

 

          -

 

 

      178

 

 

          4

 

 

        27

 

 

          -

 

 

          -

 

 

        31

 

RMS 11-13

        14

 

 

      328

 

 

          -

 

 

          -

 

 

      342

 

 

          2

 

 

      113

 

 

          -

 

 

          -

 

 

      115

 

RMS 14

          -

 

 

          -

 

 

      196

 

 

          -

 

 

      196

 

 

          -

 

 

          -

 

 

      118

 

 

          -

 

 

      118

 

 

   7,103

 

 

   1,187

 

 

      196

 

 

          -

 

 

   8,486

 

 

      134

 

 

      208

 

 

      118

 

 

          -

 

 

      460

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail - UK Motor Finance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RMS 1-3

   9,979

 

 

      569

 

 

          -

 

 

          -

 

 

10,548

 

 

      142

 

 

        12

 

 

          -

 

 

          -

 

 

      154

 

RMS 4-6

   2,791

 

 

      998

 

 

          -

 

 

          -

 

 

   3,789

 

 

        41

 

 

        29

 

 

          -

 

 

          -

 

 

        70

 

RMS 7-9

      769

 

 

      228

 

 

          -

 

 

          -

 

 

      997

 

 

          3

 

 

        13

 

 

          -

 

 

          -

 

 

        16

 

RMS 10

          -

 

 

        63

 

 

          -

 

 

          -

 

 

        63

 

 

          -

 

 

          7

 

 

          -

 

 

          -

 

 

          7

 

RMS 11-13

          2

 

 

      169

 

 

          -

 

 

          -

 

 

      171

 

 

          -

 

 

        30

 

 

          -

 

 

          -

 

 

        30

 

RMS 14

          -

 

 

          -

 

 

      112

 

 

          -

 

 

      112

 

 

          -

 

 

          -

 

 

        63

 

 

          -

 

 

        63

 

 

13,541

 

 

   2,027

 

 

      112

 

 

          -

 

 

15,680

 

 

      186

 

 

        91

 

 

        63

 

 

          -

 

 

      340

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail - other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RMS 1-3

13,613

 

 

      240

 

 

          -

 

 

          -

 

 

13,853

 

 

          3

 

 

          4

 

 

          -

 

 

          -

 

 

          7

 

RMS 4-6

   2,197

 

 

      186

 

 

          -

 

 

          -

 

 

   2,383

 

 

        16

 

 

        13

 

 

          -

 

 

          -

 

 

        29

 

RMS 7-9

          -

 

 

        86

 

 

          -

 

 

          -

 

 

        86

 

 

          -

 

 

          4

 

 

          -

 

 

          -

 

 

          4

 

RMS 10

          -

 

 

          6

 

 

          -

 

 

          -

 

 

          6

 

 

          -

 

 

          -

 

 

          -

 

 

          -

 

 

          -

 

RMS 11-13

        88

 

 

          7

 

 

          -

 

 

          -

 

 

        95

 

 

          -

 

 

          -

 

 

          -

 

 

          -

 

 

          -

 

RMS 14

          -

 

 

          -

 

 

      144

 

 

          -

 

 

      144

 

 

          -

 

 

          -

 

 

        47

 

 

          -

 

 

        47

 

 

15,898

 

 

      525

 

 

      144

 

 

          -

 

 

16,567

 

 

        19

 

 

        21

 

 

        47

 

 

          -

 

 

        87

 

Total Retail

              305,763             

 

 

45,180

 

 

   5,073

 

 

   7,854

 

 

              363,870             

 

 

      668

 

 

   1,095

 

 

      715

 

 

      213

 

 

   2,691

 

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 13: Credit quality of loans and advances to customers (continued)

 

Gross drawn exposures

 

Allowance for expected credit losses

At 31 December 2023

Stage 1

£m

 

 

Stage 2

£m

 

 

Stage 3

£m

 

 

POCI

£m

 

 

Total

£m

 

 

Stage 1

£m

 

 

Stage 2

£m

 

 

Stage 3

£m

 

 

POCI

£m

 

 

Total

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Banking

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CMS 1-5

14,100

 

 

          7

 

 

          -

 

 

          -

 

 

14,107

 

 

          2

 

 

          -

 

 

          -

 

 

          -

 

 

          2

 

CMS 6-10

30,534

 

 

      124

 

 

          -

 

 

          -

 

 

30,658

 

 

        32

 

 

          -

 

 

          -

 

 

          -

 

 

        32

 

CMS 11-14

31,210

 

 

   2,927

 

 

          -

 

 

          -

 

 

34,137

 

 

      133

 

 

        59

 

 

          -

 

 

          -

 

 

      192

 

CMS 15-18

   3,719

 

 

   4,115

 

 

          -

 

 

          -

 

 

   7,834

 

 

        65

 

 

      232

 

 

          -

 

 

          -

 

 

      297

 

CMS 19

        11

 

 

      814

 

 

          -

 

 

          -

 

 

      825

 

 

          -

 

 

        81

 

 

          -

 

 

          -

 

 

        81

 

CMS 20-23

          -

 

 

          -

 

 

   2,068

 

 

          -

 

 

   2,068

 

 

          -

 

 

          -

 

 

      418

 

 

          -

 

 

      418

 

 

79,574

 

 

   7,987

 

 

   2,068

 

 

          -

 

 

89,629

 

 

      232

 

 

      372

 

 

      418

 

 

          -

 

 

   1,022

 

Other1

      (43)

 

 

          -

 

 

          6

 

 

          -

 

 

      (37)

 

 

          -

 

 

          -

 

 

          4

 

 

          -

 

 

          4

 

Total loans and

advances to

customers

              385,294             

 

 

53,167

 

 

   7,147

 

 

   7,854

 

 

              453,462             

 

 

      900

 

 

   1,467

 

 

   1,137

 

 

      213

 

 

   3,717

 

1  Gross drawn exposures include centralised fair value hedge accounting adjustments.


Note 14: 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 24 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 by portfolio, separately identifying the amounts that have been modelled, those that have been individually assessed and those arising through the application of judgemental adjustments.

 

 

 

 

 

 

 

Judgemental

adjustments due to:

 

 

 

At 30 June 2024

Modelled

ECL

£m

 

Individually

assessed

£m

 

Inflationary

and interest rate risk

£m

 

Other

£m

 

 

Total

ECL

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

UK mortgages

            806

 

 

                -

 

 

              23

 

 

            142

 

 

            971

 

Credit cards

            679

 

 

                -

 

 

                6

 

 

              15

 

 

            700

 

Other Retail

            878

 

 

                -

 

 

                6

 

 

              58

 

 

            942

 

Commercial Banking

            992

 

 

            322

 

 

                -

 

 

           (315)

 

 

            999

 

Other

              18

 

 

                -

 

 

                -

 

 

                -

 

 

              18

 

Total

         3,373

 

 

            322

 

 

              35

 

 

           (100)

 

 

         3,630

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

UK mortgages

            991

 

 

                -

 

 

              61

 

 

              63

 

 

         1,115

 

Credit cards

            703

 

 

                -

 

 

              92

 

 

              15

 

 

            810

 

Other Retail

            866

 

 

                -

 

 

              33

 

 

              46

 

 

            945

 

Commercial Banking

         1,124

 

 

            340

 

 

                -

 

 

           (282)

 

 

         1,182

 

Other

              32

 

 

                -

 

 

                -

 

 

                -

 

 

              32

 

Total

         3,716

 

 

            340

 

 

            186

 

 

           (158)

 

 

         4,084

 

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 14: Allowance for expected credit losses (continued)

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 £35 million (31 December 2023: £186 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

UK mortgages: £23 million (31 December 2023: £61 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.

Credit cards: £6 million (31 December 2023: £92 million) and Other Retail: £6 million (31 December 2023: £33 million)

The Group's ECL models for credit cards and personal loan portfolios use predictions of wage growth to account for future affordability stress. As elevated inflation eroded nominal wage growth, adjustments were introduced to the econometric models to account for real, rather than nominal, income to produce adjusted predicted defaults. This impact is heavily reduced at 30 June 2024 given the model has moved into a period of low inflation, which naturally reduces the scale of adjustments in the period. Alongside these portfolio-wide in-model adjustments management had previously made an additional uplift to ECL for customers with lower income levels and higher indebtedness. This specific post-model adjustment has been released in the first half of 2024 given the improved environment and no evidence of greater deterioration in performance of this segment.

Other judgemental adjustments

UK mortgages: £142 million (31 December 2023: £63 million)

These adjustments principally comprise:

Increase in time to repossession: £98 million (31 December 2023: £106 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.

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 14: Allowance for expected credit losses (continued)

Adjustment for single point of loss model limitation: £46 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.

Credit cards: £15 million (31 December 2023: £15 million) and Other Retail: £58 million (31 December 2023: £46 million)

These adjustments principally comprise:

Lifetime extension on revolving products: Credit cards: £60 million (31 December 2023: £67 million) and Other Retail: £10 million (31 December 2023: £10 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): Credit cards: £(50) million (31 December 2023: £(50) million) and Other Retail: £18 million (31 December 2023: £37 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.

Commercial Banking: £(315) million (31 December 2023: £(282) million)

These adjustments principally comprise:

Commercial Real Estate (CRE) price reduction: £54 million (31 December 2023: £67 million)

The material fall in CRE prices seen in late 2022 moved out of the model assumptions used to assess ECL in 2023. Given the model uses future changes in the metric as a driver of defaults and loss rates there is a continued risk that the model benefit that arises does not reflect the residual risk caused by the sustained low level of prices still apparent. Management therefore considers it appropriate to judgementally reinstate the CRE price drop within the ECL model assumptions given the materially reduced level in CRE prices could still trigger additional defaults. Within this adjustment management has refined the potential impact on loss rates through capturing updated valuations as well as stressing valuations on specific sectors where evidence suggests valuations may lag achievable levels, notably in cases of stressed sale.

Corporate insolvency rates: £(304) million (31 December 2023: £(292) 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 14: Allowance for expected credit losses (continued)

Adjustments for loss given defaults (LGDs): £(90) million (31 December 2023: £(105) million)

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.

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 24 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 14: 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 - adjusted1

               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 - adjusted1

                 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 - adjusted1

               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 - adjusted1

                 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 14: 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 - adjusted1

               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 - adjusted1

                 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 - adjusted1

               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 - adjusted1

                 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 14: 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

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 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

quarter

2023

%

Second

quarter

2023

%

Third

quarter

2023

%

Fourth

quarter

2023

%

First

quarter

2024

%

Second

quarter

2024

%

Third

quarter

2024

%

Fourth

quarter

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

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 14: Allowance for expected credit losses (continued)

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 £468 million compared to £678 million at 31 December 2023.

At 30 June 2024

Probability-

weighted

£m

 

 

Upside

£m

 

 

Base case

£m

 

 

Downside

£m

 

 

Severe

downside

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

UK mortgages

 

            971

 

 

            387

 

 

            658

 

 

         1,190

 

 

         3,004

 

Credit cards

 

            700

 

 

            583

 

 

            676

 

 

            772

 

 

            903

 

Other Retail

 

            942

 

 

            855

 

 

            915

 

 

            990

 

 

         1,139

 

Commercial Banking

 

            999

 

 

            746

 

 

            895

 

 

         1,143

 

 

         1,641

 

Other

 

              18

 

 

              16

 

 

              18

 

 

              19

 

 

              21

 

ECL allowance

 

         3,630

 

 

         2,587

 

 

         3,162

 

 

         4,114

 

 

         6,708

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

UK mortgages

 

         1,115

 

 

            395

 

 

            670

 

 

         1,155

 

 

         4,485

 

Credit cards

 

            810

 

 

            600

 

 

            771

 

 

            918

 

 

         1,235

 

Other Retail

 

            945

 

 

            850

 

 

            920

 

 

            981

 

 

         1,200

 

Commercial Banking

 

         1,182

 

 

            793

 

 

         1,013

 

 

         1,383

 

 

         2,250

 

Other

 

              32

 

 

              32

 

 

              32

 

 

              32

 

 

              32

 

ECL allowance

 

         4,084

 

 

         2,670

 

 

         3,406

 

 

         4,469

 

 

         9,202

 

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.

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

unemployment

£m

 

1pp decrease in

unemployment

£m

 

 

1pp increase in

unemployment

£m

 

 

1pp decrease in

unemployment

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

UK mortgages

                     22

 

 

                   (17)

 

 

                     33

 

 

                   (32)

 

Credit cards

                     34

 

 

                   (34)

 

 

                     38

 

 

                   (38)

 

Other Retail

                     16

 

 

                   (16)

 

 

                     19

 

 

                   (19)

 

Commercial Banking

                     73

 

 

                   (67)

 

 

                     88

 

 

                   (83)

 

ECL impact

                   145

 

 

                 (134)

 

 

                   178

 

 

                 (172)

 

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 14: Allowance for expected credit losses (continued)

The table below shows the impact on the Group's ECL in respect of UK mortgages resulting from an increase or decrease in loss given default for a 10 percentage point (pp) increase or decrease in the UK 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

in HPI

£m

 

 

10pp decrease

in HPI

£m

 

 

10pp increase

in HPI

£m

 

 

10pp decrease

in HPI

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

ECL impact

           (164)

 

 

            245

 

 

           (201)

 

 

            305

 

 


Note 15: Debt securities in issue

 

At 30 June 2024

 

At 31 December 2023

 

At

fair value

through

profit

or loss

£m

 

 

At

amortised

cost

£m

 

 

Total

£m

 

 

At

fair value

through

profit

or loss

£m

 

 

At

amortised cost

£m

 

 

Total

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior unsecured notes issued

         4,897

 

 

       40,380

 

 

       45,277

 

 

         5,242

 

 

       37,038

 

 

       42,280

 

Covered bonds

                -

 

 

       11,804

 

 

       11,804

 

 

                -

 

 

       14,243

 

 

       14,243

 

Commercial paper

                -

 

 

       10,555

 

 

       10,555

 

 

                -

 

 

       12,041

 

 

       12,041

 

Certificates of deposit issued

                -

 

 

         7,056

 

 

         7,056

 

 

                -

 

 

         8,059

 

 

         8,059

 

Securitisation notes

              23

 

 

         4,965

 

 

         4,988

 

 

              23

 

 

         4,211

 

 

         4,234

 

 

         4,920

 

 

       74,760

 

 

       79,680

 

 

         5,265

 

 

       75,592

 

 

       80,857

 

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 £28,529 million (31 December 2023: £27,019 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 £28,454 million (31 December 2023: £30,716 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 £4,067 million (31 December 2023: £3,794 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 16: Provisions

Provisions

for financial

commitments

and guarantees

£m1

 

 

Regulatory

and legal

provisions

£m

 

 

Other

£m

 

 

Total

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2024

            322

 

 

         1,105

 

 

            650

 

 

         2,077

 

Exchange and other adjustments

                -

 

 

               (2)

 

 

               (2)

 

 

               (4)

 

Provisions applied

                -

 

 

           (216)

 

 

           (263)

 

 

           (479)

 

(Credit) charge for the period

             (43)

 

 

              95

 

 

            142

 

 

            194

 

At 30 June 2024

            279

 

 

            982

 

 

            527

 

 

         1,788

 

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 £95 million in respect of legal actions and other regulatory matters and the unutilised balance at 30 June 2024 was £982 million (31 December 2023: £1,105 million). The most significant items are outlined below.

Motor commission review

The Group recognised a £450 million provision in the fourth quarter of 2023 for the potential impact of the FCA review into historical motor finance commission arrangements and sales announced in January 2024.

As disclosed in previous periods, the Group continues to receive a number of court claims and complaints in respect of motor finance commissions and is actively engaging with the FOS in its assessment of these complaints. On 10 January 2024, the FOS issued its Final Decision on a complaint relating to the Group, as well as decisions relating to other industry participants. On 11 January 2024, the FCA announced a section 166 review of historical motor finance commission arrangements and sales and plans to communicate a decision on next steps in the third quarter of 2024 on the basis of the evidence collated in the review. The FCA has indicated that such steps could include establishing an industry-wide consumer redress scheme and/or applying to the Financial Markets Test Case Scheme, to help resolve any contested legal issues of general importance.

Following the FCA Motor Market Review in March 2019, the FCA issued a policy statement in July 2020 prohibiting the use of discretionary commission models from 28 January 2021, which the Group adhered to. The Group continues to believe that its historical practices were compliant with the law and regulations in place at that time.

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 16: Provisions (continued)

As noted above, in response to both the FOS decisions and the FCA announcement the Group recognised a charge of £450 million in the fourth quarter of 2023. This includes estimates for operational and legal costs, including litigation costs, together with estimates for potential awards, based on various scenarios using a range of assumptions, including for example, commission models, commission rates, applicable time periods (between 2007 and 2021), response rates and uphold rates. Costs and awards could arise in the event that the FCA concludes there has been misconduct and customer loss that requires remediation, or from adverse litigation decisions. However, while the FCA review is progressing there is significant uncertainty as to the extent of misconduct and customer loss, if any, the nature and extent of any remediation action, if required, and its timing. The ultimate financial impact could therefore materially differ from the amount provided, both higher or lower. The Group welcomes the FCA intervention through an independent section 166 review and is engaging with the FCA as part of the review.

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 £21,960 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.

Customer claims in relation to insurance branch business in Germany

The Group continues to receive claims from customers in Germany relating to policies issued by Clerical Medical Investment Group Limited (subsequently renamed Scottish Widows Limited), with smaller numbers of claims received from customers in Austria and Italy. The total provision made to 30 June 2024, was £709 million (31 December 2023: £709 million) with £5 million utilisation of the provision during the period, leaving an unutilised provision at 30 June 2024 of £69 million. The ultimate financial effect, which could be significantly different from the current provision, will be known only once all relevant claims have been resolved.

Other

The Group carries provisions of £146 million (31 December 2023: £137 million) in respect of dilapidations, rent reviews and other property-related matters.

Provisions are also made for staff and other costs related to Group restructuring initiatives at the point at which the Group becomes committed to the expenditure; at 30 June 2024 provisions of £204 million (31 December 2023: £245 million) were held.

The Group carries provisions of £33 million (31 December 2023: £46 million) for indemnities and other matters relating to legacy business disposals in prior years. Whilst there remains significant uncertainty as to the timing of the utilisation of the provisions, the Group expects the majority of the remaining provisions to have been utilised by 31 December 2028.


NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 17: Earnings per share

 

Half-year

to 30 Jun

2024

£m

 

 

Half-year

to 30 Jun

2023

£m

 

 

Half-year

to 31 Dec

2023

£m

 

 

 

 

 

 

 

 

 

 

Profit attributable to ordinary shareholders - basic and diluted

         2,145

 

 

         2,572

 

 

         2,361

 

 

 

Half-year

to 30 Jun

2024

million

 

 

Half-year

to 30 Jun

2023

million

 

 

Half-year

to 31 Dec

2023

million

 

 

 

 

 

 

 

 

 

 

Weighted average number of ordinary shares in issue - basic

       63,453

 

 

       66,226

 

 

       63,718

 

Adjustment for share options and awards

            600

 

 

            882

 

 

            716

 

Weighted average number of ordinary shares in issue - diluted

       64,053

 

 

       67,108

 

 

       64,434

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

             3.4p

 

 

             3.9p

 

 

             3.7p

 

Diluted earnings per share

             3.3p

 

 

             3.8p

 

 

             3.7p

 

 


Note 18: Dividends on ordinary shares and share buyback

An interim dividend for 2024 of 1.06 pence per ordinary share (half-year to 30 June 2023: 0.92 pence per ordinary share) will be paid on 10 September 2024. The total amount of this dividend is £662 million, before the impact of any further cancellations of shares purchased under the Group's buyback programme (half-year to 30 June 2023: £592 million, following cancellations of shares under the Group's buyback programme up to the record date, was paid to shareholders).

On 21 May 2024, a final dividend in respect of 2023 of 1.84 pence per ordinary share, totalling £1,169 million, following cancellations of shares under the Group's buyback programme up to the record date, was paid to shareholders.

Shareholders who have joined the dividend reinvestment plan will automatically receive ordinary shares instead of the cash dividend. Key dates for the payment of the recommended dividend are outlined on page 101.

On 23 February 2024 the Group commenced an ordinary share buyback programme to purchase outstanding ordinary shares. As at 30 June 2024, the Group has purchased c.1.8 billion ordinary shares under the programme, for a total consideration of £918 million.


Note 19: Contingent liabilities, commitments and guarantees

Contingent liabilities, commitments and guarantees arising from the banking business

At 30 June 2024 contingent liabilities, such as performance bonds and letters of credit, arising from the banking business were £2,696 million (31 December 2023: £2,849 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 £150,396 million (31 December 2023: £143,319 million), of which in respect of undrawn formal standby facilities, credit lines and other commitments to lend, £81,041 million (31 December 2023: £75,080 million) was irrevocable.

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 19: Contingent liabilities, commitments and guarantees (continued)

Interchange fees

With respect to multi-lateral interchange fees (MIFs), the 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

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 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 Group may be subject and this cap is set at the cash consideration received by the Group for the sale of its stake in Visa Europe to Visa Inc in 2016. In 2016, the 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 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 Group companies are also named as defendants in (i) UK-based claims, and (ii) two Dutch class actions, raising LIBOR manipulation allegations. A number of claims against the Group in the UK relating to the alleged mis-sale of interest rate hedging products also include allegations of LIBOR manipulation.

It is currently not possible to predict the scope and ultimate outcome on the Group of any private lawsuits or ongoing related challenges to the interpretation or validity of any of the Group's contractual arrangements, including their timing and scale. As such, it is not practicable to provide an estimate of any potential financial effect.

Tax authorities

The Group has an open matter in relation to a claim for group relief of losses incurred in its former Irish banking subsidiary, which ceased trading on 31 December 2010. In 2013, HMRC informed the Group that its interpretation of the UK rules means that the group relief is not available. In 2020, HMRC concluded 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 approximately £950 million (including interest) and a reduction in the Group's deferred tax asset of approximately £275 million. 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 (including the tax treatment of certain costs arising from the divestment of TSB Banking Group plc), none of which is expected to have a material impact on the financial position of the Group.

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 19: Contingent liabilities, commitments and guarantees (continued)

FCA investigation into the Group's anti-money laundering control framework

As previously disclosed, the FCA has opened an investigation into the 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 Group continues to co-operate with the investigation. It is not currently possible to estimate the potential financial impact to the 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.

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 16.


STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors listed below (being all the directors of Lloyds Banking Group 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

 

Lloyds Banking Group 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


INDEPENDENT REVIEW REPORT TO LLOYDS BANKING GROUP PLC

Conclusion

We have been engaged by Lloyds Banking Group plc and its subsidiaries (the Group) to review the condensed consolidated set of financial statements in the half-yearly financial report for the six months ended 30 June 2024 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and related notes 1 to 19.

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated set of financial statements in the half-yearly financial report for the six months ended 30 June 2024 is not prepared, in all material respects, in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority and United Kingdom adopted International Accounting Standard (IAS) 34.

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council for use in the United Kingdom (ISRE (UK) 2410). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As disclosed in note 1, the annual financial statements of the Group will be prepared in accordance with United Kingdom adopted international accounting standards. The condensed consolidated set of financial statements included in this half-yearly financial report have been prepared in accordance with United Kingdom adopted IAS 34, "Interim Financial Reporting".

Conclusion relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the basis for conclusion section of this report, nothing has come to our attention to suggest that the directors have inappropriately adopted the going concern basis of accounting or that the directors have identified material uncertainties relating to going concern that are not appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410, however future events or conditions may cause the Group to cease to continue as a going concern.

Responsibilities of the directors

The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

In preparing the half-yearly financial report, the directors are responsible for assessing the Group's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the review of the financial information

In reviewing the half-yearly financial report, we are responsible for expressing to the Group a conclusion on the condensed consolidated set of financial statements in the half-yearly financial report. Our conclusion, including our conclusions relating to going concern, are based on procedures that are less extensive than audit procedures, as described in the basis for conclusion paragraph of this report.

Use of our report

This report is made solely to the Group in accordance with ISRE (UK) 2410. Our work has been undertaken so that we might state to the Group those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Group, for our review work, for this report, or for the conclusions we have formed.

Deloitte LLP

Statutory Auditor

London, England

24 July 2024


KEY DATES

Shares quoted ex-dividend for 2024 interim dividend

1 August 2024

Record date for 2024 interim dividend

2 August 2024

Final date for joining or leaving the interim 2024 dividend reinvestment plan

19 August 2024

Interim 2024 dividend paid

10 September 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 six months ended 30 June 2024. Unless otherwise stated, income statement commentaries throughout this document compare the six months ended 30 June 2024 to the six months ended 30 June 2023 and the balance sheet analysis compares the Group balance sheet as at 30 June 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 26. Unless otherwise stated, commentary on pages 1 to 2 and pages 7 to 8 is given on an underlying basis. The Group will publish a condensed set of half-year Pillar 3 disclosures in the second half of August. A copy of the disclosures will be available to view at: www.lloydsbankinggroup.com/investors/financial-downloads.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

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