Final Results - Pre-tax Profit Up 20%, Part 2
Lloyds TSB Group PLC
11 February 2000
PART 2
Page 7 of 42
LLOYDS TSB GROUP
CONSOLIDATED PROFIT AND LOSS ACCOUNT
1999 1998
£m £m
Interest receivable:
Interest receivable and similar income arising
from debt securities 430 526
Other interest receivable and similar income 10,084 10,814
Interest payable 5,713 6,892
Write-down of finance lease receivables - 32
Net interest income 4,801 4,416
Other income
Dividend income from equity shares 3 5
Fees and commissions receivable 2,497 2,347
Fees and commissions payable (426) (388)
Dealing profits (before expenses) 215 197
Income from long-term assurance business:
Income before pension provisions 329 379
Pension provision (102) (400)
General insurance premium income 390 335
Other operating income 165 187
3,071 2,662
Total income 7,872 7,078
Operating expenses
Administrative expenses 3,140 3,212
Restructuring provision - 38
Total administrative expenses 3,140 3,250
Depreciation 221 218
Amortisation of goodwill 12 4
Depreciation and amortisation 233 222
Total operating expenses 3,373 3,472
Trading surplus 4,499 3,606
General insurance claims 169 146
Provisions for bad and doubtful debts
Specific 588 535
General - (7)
588 528
Amounts written off fixed asset investments 7 15
Operating profit 3,735 2,917
Income from associated undertakings 12 14
(Loss) profit on sale and closure of businesses
(page 39, note 5) (126) 84
Profit on ordinary activities before tax 3,621 3,015
Tax on profit on ordinary activities 1,101 882
Profit on ordinary activities after tax 2,520 2,133
Minority interests (equity) 6 13
Profit for the year attributable to shareholders 2,514 2,120
Dividends 1,451 1,204
Retained profit 1,063 916
Earnings per share 46.2p 39.3p
Diluted earnings per share 45.3p 38.5p
Page 8 of 42
LLOYDS TSB GROUP
CONSOLIDATED BALANCE SHEET
31 31
December December
1999 1998
£m £m
Assets
Cash and balances at central banks 1,276 1,073
Items in course of collection from banks 1,743 1,728
Treasury bills and other eligible bills 2,065 3,152
Loans and advances to banks 16,963 18,463
Loans and advances to customers 102,628 95,556
Debt securities 14,184 12,428
Equity shares 213 204
Interests in associated undertakings 28 25
Intangible assets 231 216
Tangible fixed assets 1,668 1,634
Own shares 35 21
Other assets 3,613 5,353
Prepayments and accrued income 2,628 2,469
Long-term assurance business attributable
to shareholders 2,274 1,983
149,549 144,305
Long-term assurance assets attributable to
policyholders 26,542 23,692
Total assets 176,091 167,997
Liabilities
Deposits by banks 17,694 17,091
Customer accounts 92,851 89,734
Items in course of transmission to banks 757 800
Debt securities in issue 12,260 11,853
Other liabilities 5,526 8,390
Accruals and deferred income 3,309 3,163
Provisions for liabilities and charges:
Deferred tax 1,459 1,227
Other provisions for liabilities and charges 474 509
Subordinated liabilities:
Undated loan capital 3,294 1,518
Dated loan capital 3,199 2,503
Minority interests (equity) 33 42
Called-up share capital 1,389 1,379
Share premium account 404 101
Revaluation reserve (206) (201)
Merger reserve 343 343
Profit and loss account 6,763 5,853
Shareholders' funds (equity) 8,693 7,475
149,549 144,305
Long-term assurance liabilities to
policyholders 26,542 23,692
Total liabilities 176,091 167,997
Page 9 of 42
LLOYDS TSB GROUP
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
1999 1998
£m £m
Profit attributable to shareholders 2,514 2,120
Currency translation differences on
foreign currency net investments (33) (6)
Total recognised gains and losses
relating to the year 2,481 2,114
HISTORICAL COST PROFITS AND LOSSES
There was no material difference between the results as reported
and the results that would have been reported on an unmodified
historical cost basis. Accordingly, no note of historical cost
profits and losses has been included.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
1999 1998
£m £m
Profit attributable to shareholders 2,514 2,120
Dividends (1,451) (1,204)
1,063 916
Retained profit
Currency translation differences on
foreign currency net investments (33) (6)
Issue of shares 108 180
Goodwill written back on sale of
businesses (page 39, note 5) 80 131
Net increase in shareholders' funds 1,218 1,221
Shareholders' funds at beginning of year 7,475 6,254
Shareholders' funds at end of year 8,693 7,475
Page 10 of 42
LLOYDS TSB GROUP
CONSOLIDATED CASH FLOW STATEMENT
1999 1998
£m £m
Net cash inflow (outflow) from operating
activities 1,018 (2,580)
Dividends received from associated
undertakings - 3
Returns on investments and servicing of
finance:
Dividends paid to equity minority interests (11) (11)
Interest paid on subordinated liabilities
(loan capital) (270) (294)
Net cash outflow from returns on
investments and servicing of finance (281) (305)
Taxation:
UK corporation tax (670) (687)
Overseas tax (137) (59)
Total taxation (807) (746)
Capital expenditure and financial investment:
Additions to fixed asset investments (23,147) (41,406)
Disposals of fixed asset investments 21,921 42,894
Additions to tangible fixed assets (352) (293)
Disposals of tangible fixed assets 83 129
Capital injection to life fund (220) (175)
Net cash (outflow) inflow from capital
expenditure and financial investment (1,715) 1,149
Acquisitions and disposals:
Acquisition of group undertakings (27) 4
Disposal of group undertakings and
businesses 3 243
Net cash (outflow) inflow from acquisitions
and disposals (24) 247
Equity dividends paid (1,285) (862)
Net cash outflow before financing (3,094) (3,094)
Financing:
Issue of subordinated liabilities (loan
capital) 2,769 256
Issue of ordinary share capital 108 41
Repayments of subordinated liabilities
(loan capital) (228) (501)
Capital element of finance lease rental
payments (3) (5)
Net cash inflow (outflow) from financing 2,646 (209)
Decrease in cash (448) (3,303)
Page 11 of 42
LLOYDS TSB GROUP
PERFORMANCE BY SECTOR
Profit before tax by main businesses
1999 1998 Increase
£m £m %
UK Retail Banking 761 684 11
Mortgages 903 740 22
Insurance and Investments 1,006 948 6
UK Retail Financial Services 2,670 2,372 13
Wholesale Markets 799 729 10
International Banking 434 348 25
Central group items (54) (48)
Pension provision (102) (400)
(Loss) profit on sale and closure of
businesses (126) 84
Write-down of finance leases - (32)
Restructuring provision - (38)
Profit before tax 3,621 3,015 20
1998 figures have been restated to take account of changes in
internal cost allocation and the reclassification of Lloyds UDT
from UK Retail Banking to Wholesale Markets, which already
includes the Group's other asset finance operations.
Page 12 of 42
LLOYDS TSB GROUP
UK Retail Financial Services
Total profit before tax, excluding the impact of pension
provisions and the sale of the new business capability of Abbey
Life, from UK Retail Financial Services, which encompasses UK
Retail Banking, Mortgages, and Insurance and Investments,
increased by £298 million, or 13 per cent, to £2,670 million
from £2,372 million in 1998.
UK Retail Banking and Mortgages
Total profit before tax from UK Retail Banking and Mortgages
rose by £240 million, or 17 per cent, to £1,664 million. Total
income increased by 9 per cent and costs were flat, resulting in
a 19 per cent increase in the trading surplus. Bad debt
provisions increased by £89 million, or 26 per cent, to
£425 million, largely due to some deterioration at the beginning
of 1999 in the personal lending and credit card portfolios.
1999 1998
£m £m
Net interest income 2,981 2,702
Other income 956 904
Total income 3,937 3,606
Operating expenses 1,848 1,846
Trading surplus 2,089 1,760
Provisions for bad and doubtful debts 425 336
Profit before tax 1,664 1,424
Profit before tax
UK Retail Banking 761 684
Mortgages 903 740
1,664 1,424
Efficiency ratio 46.9% 51.2%
Total assets (year-end) £64.4bn £60.8bn
Total risk-weighted assets (year-end) £40.6bn £38.3bn
Page 13 of 42
LLOYDS TSB GROUP
UK Retail Banking
(the UK retail businesses of Lloyds TSB, providing banking and
financial services to personal and small business customers)
Pre-tax profit from UK Retail Banking rose by £77 million, or 11
per cent, to £761 million.
In June 1999 the national roll-out of the single Lloyds TSB
brand was completed following the enactment of the Lloyds TSB
Act 1998. This brought together over 2,300 former Lloyds and
TSB branches under the Lloyds TSB name and has laid the
foundations for the generation of increased revenue from higher
sales, increased cost effectiveness from a simplified branch
network and the move towards a single IT platform, and material
service enhancements for our customers.
In addition to the move to the single Lloyds TSB brand, we have
continued to develop a number of alternative distribution
channels in order to offer the broadest possible range of access
points for our customers in order to improve service and to
enhance revenue growth. PhoneBank, our telephone banking
operation, is one of the largest in Europe with 1.6 million
customers. It handled some 19 million calls during the year and
was further enhanced with the launch, in March 1999, of
PhoneBank Express, which incorporates leading edge interactive
voice recognition systems. PhoneBank Express now has some
500,000 registered users. Our supermarket banking operation,
branded easibank, continues to expand and we now have 17
branches in ASDA stores or large shopping centres.
Our Internet Banking Service has some 160,000 registered
customers and we anticipate that by the end of the year 2000
some 1 million customers will be registered to use the service.
In addition, in October 1999, we launched a free Internet
Service Provider to give Gold Service customers free internet
access, e-mail, and access to a range of on-line services and
products. In March 1999 we successfully launched a new Internet
Banking Service for business customers.
In March 1999, following a pilot involving more than 800 post
offices, the Group announced an agreement with Post Office
Counters Limited that allows personal customers of Lloyds TSB to
carry out straightforward banking transactions at over 15,500
post offices in England and Wales.
Personal loans and credit card lending increased by 10 per cent
and balances on current accounts and savings and investment
accounts grew by 10 per cent, supported by the launch of a
number of new products. The popularity of the Group's Added
Value accounts continued with Lloyds TSB now the market leader
in this area with 1.4 million accounts in operation. A new
range of credit cards was also successfully launched in the
first half of the year.
Business Banking attracted a substantial number of new
customers, helped by the launch in March 1999 of the new
Internet Banking Service for business customers, and further
consolidated the Group's position as a market leader in the
recruitment of start-up businesses. More than 110,000 new
business customers chose Lloyds TSB during the year. Revenue
growth and profitability has again improved and bad debts
continued at a very low level.
Page 14 of 42
LLOYDS TSB GROUP
Mortgages
(covering the Group's total UK mortgage business through
Cheltenham & Gloucester, Lloyds TSB, Lloyds TSB Scotland and C&G
TeleDirect)
1999 1998
Profit before tax £903m £740m
Efficiency ratio 21.9% 24.5%
Gross new mortgage lending £10.7bn £9.3bn
Market share of gross new mortgage lending 9.4% 10.4%
Net new mortgage lending £2.8bn £2.9bn
Market share of net new mortgage lending 7.5% 11.6%
Mortgages outstanding (year-end) £47.5bn £44.7bn
Market share of mortgages outstanding 9.5% 9.7%
Pre-tax profit from Mortgages increased by £163 million, or 22
per cent, to £903 million.
Competition for business increased dramatically during 1999 as
traditional lenders and new entrants to the mortgage market
competed aggressively for market share. In the face of this
aggressive competition, C&G was able to achieve an estimated
market share of net new lending of 7.5 per cent as a result of a
strong performance in the second half of the year, whilst
substantially increasing its profitability. Gross new lending
was £10.7 billion, compared to £9.3 billion a year ago, and net
new lending was £2.8 billion compared to £2.9 billion last year.
C&G continues to benefit from mortgage sales distribution
through the Lloyds TSB branch network, the IFA market and from
the strength of the C&G brand. Once again the provision of a
first class service has been a significant factor with
independent financial advisers awarding C&G its fifth
consecutive 5-star rating in the 1999 Financial Adviser service
awards. Business levels sourced from intermediaries remain
strong.
The sales penetration of mortgages through the branch network
has been particularly successful since C&G joined the Group. In
1996 only 1 in 8 Lloyds Bank customers and 1 in 6 TSB customers,
who took out a mortgage, did so with the Group. Currently the
ratio is 1 in 4. This is a significant indicator of the success
of our mortgage strategy.
Operating expenses continue to be kept under tight control and
the efficiency ratio of the Group's total mortgage business
improved to 21.9 per cent from 24.5 per cent in 1998.
A low arrears position and the beneficial effect of house price
increases have meant that bad debt provisions remained at a low
level. New provisions were offset by releases and recoveries
resulting in a net credit of £3 million for the year, compared
with a charge of £24 million in 1998. The quality of our
mortgage lending remains very satisfactory.
Page 15 of 42
LLOYDS TSB GROUP
Insurance and Investments
(the life, pensions and unit trust businesses of Lloyds TSB
Life, Lloyds TSB Unit Trusts and Abbey Life; general insurance
underwriting and broking; UK private banking and retail
stockbroking; and Hill Samuel Asset Management)
1999 1998
£m £m
Life and pensions (including unit trusts)
Bancassurance 237 264
Abbey Life 158 158
395 422
General insurance 483 421
Total profit from Insurance 878 843
Asset management 18 17
UK private banking and stockbroking 110 88
Total profit before tax and pension provision 1,006 948
Pension provisions 102 400
Profit before tax and pension provisions from Insurance and
Investments increased by 6 per cent to £1,006 million from
£948 million.
In 1998, the results were adversely affected by a further
pension provision of £400 million for redress to past purchasers
of pension policies, which raised the total provisions made for
this purpose to £700 million. During the second
half of 1999, the Financial Services Authority (FSA) published
revised assumptions which have been incorporated into the
calculations of the continuing costs of redress. These revised
FSA guidelines were based on the assumption that the average
life expectancy of pensioners had increased, and lower interest
and inflation rates to be assumed in calculating the cost of
redress. Applying these revised assumptions, the cost of
redress is forecast to increase by £102 million and a further
provision of this amount has been made, increasing the total
provision for this purpose to £802 million. We continually
review the adequacy of this provision and, whilst it is
impossible to be precise, based on the information available at
present we remain satisfied that no further provision is
necessary at this stage. At 31 December 1999 £462 million of
the £802 million provision had been used.
UK Private Banking had another successful year. Income growth
was strong as a result of high levels of new business and
favourable equity markets. £1.6 billion of new funds were
gained during the year and total funds managed and administered
now stand at some £12 billion. Lloyds TSB Stockbrokers, one of
the largest retail stockbrokers in the UK, continued to perform
well as a result of high transaction levels and efficiency
gains.
Hill Samuel Asset Management saw good income growth, again
largely as a result of buoyant equity markets but also from a
number of new external business mandates gained, and has also
assumed responsibility for the investment management of Abbey
Life's 70 funds and unit trusts with funds under management of
approximately £12 billion, previously managed by Abbey Life
Investment Services. Funds under management in Hill Samuel
Asset Management now total approximately £57 billion, up
16 per cent from £49 billion for the combined business at the
end of 1998.
Page 16 of 42
LLOYDS TSB GROUP
Insurance and Investments (continued)
Life and pensions (including unit trusts)
1999 1998
£m £m
Profit before tax *:
New business 134 123
Existing business 260 308
Investment earnings 43 36
Unit trusts 138 105
Distribution costs (180) (150)
395 422
* excluding pension provisions
Sales of life, pensions and unit trusts in our bancassurance
businesses rose by 15 per cent, with unit trusts and individual
savings accounts (ISAs) performing strongly. Single premium
ISA/PEP sales were 33 per cent up on 1998 and single
premium unit trust sales increased by 50 per cent.
In Abbey Life, weighted sales were down by 3 per cent. While
sales of life products increased by 19 per cent, the
sales of regular premium pensions and single premium unit trusts
fell back.
Despite the 11 per cent increase in combined weighted sales,
total life and pensions pre-tax profit decreased by £27 million
to £395 million. This was caused by a number of factors largely
relating to 1998 comparative figures. In 1998, the sharp drop
in bond yields and changes in economic conditions led to two
material adjustments. First, the need for a £114 million
provision within Abbey Life for liabilities under certain
guaranteed annuity products written in the mid 1960s to the mid
1980s; and, second, a credit of £123 million as a result of
amended assumptions, including the reduction from 12.5 per cent
to 10 per cent in the risk adjusted discount rate applied to our
long-term assurance businesses. 1998 results also benefited by
£12 million from the harmonisation of actuarial bases following
the merger of the Hill Samuel and Abbey Life long-term assurance
funds. In 1999 the change in the embedded value discount rate
from 12.5 per cent to 10 per cent in 1998 reduced ongoing
profits by some £19 million. Excluding all of these factors the
underlying profit before tax of our bancassurance business
increased by £27 million, or 13 per cent , from
£214 million in 1998 to £241 million in 1999. In Abbey Life
underlying profit before tax in 1999 was £173 million, £14
million lower than underlying profit in 1998.
On 1 February 2000 the Group announced the sale of the new
business capability of Abbey Life to Allied Dunbar for £100
million, of which £20 million is conditional upon the salesforce
achieving agreed sales targets over the next two years. In the
future, Abbey Life will focus on providing an efficient service
to its existing 1.5 million customers and the only new business
that will be undertaken will be in relation to increases to
existing plans. The value of the in-force business, which is
being retained by Lloyds TSB, was £1.2 billion at the end of
December 1999. In 1999 the new business profitability of Abbey
Life was £11 million and the disposal is likely to be earnings
neutral for the Group. A provision of £98 million has been made
in the 1999 accounts for the expected loss on the sale,
including £80 million in respect of goodwill previously written-
off to reserves, and other asset write-offs.
Page 17 of 42
LLOYDS TSB GROUP
Insurance and Investments (continued)
1999 1998
£m £m
Total new business premium income and
unit trust sales:
Regular premiums 129.4 143.5
Single premiums 796.7 730.3
Unit trusts 1,677.2 1,206.3
Weighted sales (regular + 1/10 single) 448.0 403.0
Bancassurance
Regular premiums:
Life - mortgage related 31.4 31.2
- non-mortgage related 9.8 9.7
Pensions 28.2 35.8
Health 4.9 4.1
Total regular premiums 74.3 80.8
Single premiums:
Life 329.6 398.7
Annuities 101.7 86.6
Pensions 79.3 49.8
Total single premiums 510.6 535.1
External unit trust sales:
Regular payments 76.7 71.5
Single amounts 1,531.5 1,018.8
Total external unit trust sales 1,608.2 1,090.3
Abbey Life
Regular premiums:
Life - mortgage related 9.3 7.4
- non-mortgage related 12.5 12.3
Pensions 32.1 41.4
Health 1.2 1.6
Total regular premiums 55.1 62.7
Single premiums:
Life 47.0 26.2
Annuities 108.9 101.3
Pensions 130.2 67.7
Total single premiums 286.1 195.2
External unit trust sales:
Regular payments 2.4 1.6
Single amounts 66.6 114.4
Total external unit trust sales 69.0 116.0
Total life funds under management 26,542 23,692
Page 18 of 42
LLOYDS TSB GROUP
Insurance and Investments (continued)
General Insurance
1999 1998
£m £m
Premium income from underwriting
Creditor 136 110
Home 203 178
Health 55 49
Other 1 2
Re-insurance premiums (5) (4)
390 335
Commissions from insurance broking
Creditor 175 137
Home 35 38
Health 21 24
Other 96 97
327 296
Profit before tax 483 421
Pre-tax profit from general insurance operations, comprising
underwriting and broking, rose by £62 million, or 15
per cent, to £483 million, mainly as a result of continued
strong revenue growth and a good claims experience.
Income from creditor insurance increased by 26 per cent,
reflecting higher personal sector loan values as well as higher
sales of business loan protection.
Sales of regular premium household insurance policies by
branches increased by 53 per cent and direct sales of household
insurance policies increased by 34 per cent. The overall
increase in sales, together with renewal business, produced a 10
per cent increase in commission income from broking and a 16 per
cent increase in earned premium income from underwriting. The
Group is the leading distributor of personal lines insurance in
the United Kingdom. Investment income increased by 18 per cent
to £72 million, mainly due to good returns in the
equity markets.
The overall claims ratio was 42.8 per cent compared with 43.1
per cent in 1998.
Page 19 of 42
LLOYDS TSB GROUP
Wholesale Markets
(banking, treasury, large value lease finance, long-term
agricultural finance, share registration, venture capital,
factoring and invoice discounting, and other related services
for major UK and multinational companies, banks and financial
institutions, and medium-sized UK businesses; and Lloyds UDT)
1999 1998
£m £m
Net interest income 1,020 941
Other income 417 438
Total income 1,437 1,379
Operating expenses 555 610
Trading surplus 882 769
Provisions for bad and doubtful debts 76 31
Amounts written off fixed asset
investments 7 9
Profit before tax, loss on closure and
write-down of finance leases 799 729
Write-down of finance leases - 32
Provision for closure of Lloyds TSB
Securities Services 28 -
Efficiency ratio 38.6% 44.2%
Total assets (year-end) £64.7bn £63.1bn
Total risk-weighted assets (year-end) £32.8bn £33.9bn
Wholesale Markets pre-tax profit increased by £70 million, or 10
per cent, to £799 million. Total revenue increased by 4 per
cent and operating expenses were reduced by 9 per cent as a
result of lower costs in both Treasury and Corporate and
Institutional Banking. Provisions for bad and doubtful debts
increased by £45 million to £76 million, largely as a result of
higher provisions in our asset finance business, Lloyds UDT.
Total assets increased by 3 per cent and risk-weighted assets
fell by 3 per cent.
Commercial Financial Services' businesses, serving the
commercial middle market, continued to perform well. Commercial
Banking combined revenue increases with tight cost control and
lower provisions to achieve a record profit.
More favourable market conditions have resulted in higher income
from Treasury sterling money market operations. The Group's
activity in the derivatives markets remains focused on straight
cash based products.
Our factoring and invoice discounting businesses, now
concentrated on the Alex Lawrie Factors and Lloyds TSB
Commercial Finance brands, have been brought together with
Lloyds UDT and Lloyds Bowmaker Commercial Finance to create a
single Asset Finance unit. Agricultural Mortgage Corporation
continued to expand its activity in the provision of long-term
finance to farmers.
Page 20 of 42
LLOYDS TSB GROUP
Wholesale Markets (continued)
Our Corporate and Institutional Financial Services businesses,
serving the larger corporate market and financial institutions,
achieved record results. Despite strong competition for good
quality lending and money transmission business, Corporate and
Institutional Banking's continuing focus on quality income
growth and cost control ensured another increase in its trading
surplus, although there was also an increase in bad debt
provisions caused by lower releases and recoveries on lending to
companies and businesses. Lloyds TSB Leasing further
consolidated its position as the largest big ticket leasing
company in the UK, and continued to build on the acquisition in
September 1998 of three leasing subsidiaries from National
Westminster Bank. Lloyds TSB Registrars maintained its market
leadership position and continued to perform strongly,
particularly following the acquisition in February 1999 of Bank
of Scotland's Registrar Services and Investment Trust Savings
Scheme administration businesses.
In July 1999 the Group announced that it is to withdraw from the
global custody and unit trust trusteeship business offered
through Lloyds TSB Securities Services and has recommended that
customers transfer their institutional custodial and trustee
arrangements to State Street Bank and Trust Company, a wholly
owned subsidiary of State Street Corporation. As a consequence,
the business of Lloyds TSB Securities Services will be run down
and closed over the next twelve months. A provision of £28
million has been made for the expected operating losses to be
incurred until the date of closure.
International Banking
(banking and financial services overseas in four main areas: The
Americas, New Zealand, Europe and Offshore Banking; and
Emerging Markets Debt)
1999 1998
£m £m
Net interest income 715 722
Other income 367 364
Total income 1,082 1,086
Operating expenses 561 567
Trading surplus 521 519
Provisions for bad and doubtful debts 87 165
Amounts written off fixed asset
investments - 6
Profit before tax 434 348
Restructuring provision - 38
Efficiency ratio 51.8% 52.2%
Total assets (year-end) £17.2bn £17.4bn
Total risk-weighted assets (year-end) £10.7bn £10.9bn
Page 21 of 42
LLOYDS TSB GROUP
International Banking (continued)
International Banking pre-tax profit was £86 million higher at
£434 million compared with 1998. Excluding the Emerging Markets
Debt portfolio, pre-tax profit increased by £86 million, or 29
per cent, to £386 million compared with £300 million in 1998.
Excluding the EMD portfolio, pre-tax profit from International
Banking represented 11 per cent of group pre-tax profit of which
4 per cent related to our New Zealand business, 5 per cent to
our Europe and offshore banking operations and 2 per cent to
Latin America.
Profits from New Zealand in local currency terms increased by 41
per cent, as we have started to see the benefits of the
successful integration of Countrywide Bank and The National Bank
of New Zealand. International private banking and the Group's
offshore banking operations both showed improvements over 1998.
Our consumer finance business in Brazil, Losango Consumer
Finance, notwithstanding significantly reduced consumer demand,
made a pre-tax profit of £31 million, compared with a profit of
£5 million in 1998. Profits from our other Latin American
businesses held up well despite difficult economic conditions.
The Emerging Markets Debt portfolio contributed £48 million,
which included a release of provisions of £32 million following
the repayment of debt by certain borrowers. This compared with
a contribution of £48 million in 1998, which included a release
of provisions of £30 million.
At the end of December 1999 the Group's provisionable exposure
to Emerging Market economies which is included in loans and
advances was £1,328 million (1998: £1,371 million) against which
provisions of £799 million (1998: £809 million) were held,
giving cover of 60 per cent (1998: 59 per cent). Based on
secondary market prices, the surplus of market value over net
book value of the total Emerging Markets Debt portfolio
(including advances, unapplied interest and collateralised bonds
held as investments) was more than £700 million (1998:
£600 million).
Central group items
(central costs and other unallocated items)
1999 1998
£m £m
Payment to Lloyds TSB Foundations (31) (27)
Central costs and other unallocated items (23) (21)
(54) (48)
Page 22 of 42
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