New Allocation Methodologies for Funding Costs

RNS Number : 7723Q

Lloyds Banking Group PLC

25 October 2011

 



25 October 2011

NEW allocation METHODOLOGIES for funding costs AND CAPITAL

As part of the alignment of the business decision making framework with our strategic objectives, the Group is enhancing its allocation methodologies for funding costs and capital.

As has been discussed at recent results announcements, our funding transfer pricing arrangements did not result in full recovery of the costs of our successful term wholesale funding programme from divisions and certain costs have therefore been reported in Central items.  To address this, we are now implementing a new approach that ensures that the full cost of funding is reflected in each of our division's results.  At the same time, we have refined the methodology used to allocate the costs and benefits of capital across the Group.  In addition, banking volatility will now be excluded from the margin calculations and the average interest-earning assets have been adjusted to amend the treatment of offset accounts.  As a result average interest-earning assets have decreased slightly.  Together these changes will help drive enhanced commercial behaviours within our business units and ensure that our divisions' reported results better reflect their underlying performance.

The Group's combined businesses and statutory results are unchanged as a result of the new transfer pricing methodologies.  However, the new arrangements will affect the divisional results and the core/non-core analysis and will also result in a modest transfer of interest expense from banking to non-banking activities.

The new methodology is designed to ensure that funding costs are allocated to the divisions and that the allocation is more directly related to the size and behavioural duration of asset portfolios, with a similar approach applied to recognise the value to the business from the Group's growing deposit base.  Although overall Group net interest income (NII) is unchanged, this reallocation has changed the NII mix with a modest increase in banking NII and a commensurate reduction in
non-banking NII.

As a result of these changes, the Group banking net interest margin for the three consecutive six month periods ended 30 June 2010, 31 December 2010 and 30 June 2011 has increased by 12bps, 10bps and 5bps respectively and is now reported as 2.20 per cent, 2.22 per cent and 2.12 per cent respectively.  The underlying drivers of the margin trend are unchanged from those previously shared with the market.  The adjustment for the six months ended 30 June 2011 is smaller than other periods because there was minimal net banking volatility in that period within NII.  All other things being equal, guidance on Group banking net interest margin is adjusted by a similar level to the first half of 2011 movement (5bps) and as a result we now expect Group banking net interest margin to be just above 2.05 per cent for the full year 2011.

The reallocation will also result in a change to NII and margins for the four banking divisions, with consequent effects on their profits or losses before tax.  The core/non-core split will also change as any interest previously unallocated and reported in Central items was treated as core and will now be appropriately split between core and non-core activities.

The revised approaches for funding costs and capital reallocation will be applied going forward and to ensure comparability with previous periods we have restated our divisional results for the
half-years to 30 June 2010, 31 December 2010 and 30 June 2011 and also for the full-year to 31 December 2010.  The restated results, along with the revised core/non-core split, are contained within the attached appendices. 

- END -

For further information:

Investor Relations

Kate O'Neill                                                                            [phone]

Managing Director, Investor Relations

Email: kate.o'[e-mail]

Corporate Affairs

Matthew Young                                                                      [phone]

Director of Corporate Affairs

Email: [e-mail]

FORWARD LOOKING STATEMENTS

This announcement contains forward looking statements with respect to the business, strategy and plans of the Lloyds Banking Group, its current goals and expectations relating to its future financial condition and performance.  Statements that are not historical facts, including statements about the Group or the Group's management's beliefs and expectations, are forward looking statements.  By their nature, forward looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future.  The Group's actual future business, strategy, plans and/or results may differ materially from those expressed or implied in these forward looking statements as a result of a variety of risks, uncertainties and other factors, including, without limitation, UK domestic and global economic and business conditions; the ability to derive cost savings and other benefits, as well as the ability to integrate successfully the acquisition of HBOS; the ability to access sufficient funding to meet the Group's liquidity needs; changes to the Group's credit ratings; risks concerning borrower or counterparty credit quality; instability in the global financial markets; changing demographic and market related trends; changes in customer preferences; changes to regulation, accounting standards or taxation, including changes to regulatory capital or liquidity requirements; the policies and actions of Governmental or regulatory authorities in the UK, the European Union, or jurisdictions outside the UK, including other European countries and the US; the ability to attract and retain senior management and other employees; requirements or limitations imposed on the Group as a result of HM Treasury's investment in the Group; the ability to complete satisfactorily the disposal of certain assets as part of the Group's EU State Aid obligations; the extent of any future impairment charges or write-downs caused by depressed asset valuations; exposure to regulatory scrutiny, legal proceedings or complaints, actions of competitors and other factors. Please refer to the latest Annual Report on Form 20-F filed with the US Securities and Exchange Commission for a discussion of such factors together with examples of forward looking statements.  The forward looking statements contained in this announcement are made as at the date of this announcement, and the Group undertakes no obligation to update any of its forward looking statements.

COMBINED BUSINESSES SEGMENTAL ANALYSIS - GROUP

APPENDIX

Half-year to 30 June 2011 - As restated

		Retail	Wholesale		Commercial			Wealth  and Int'l	Insurance		Group  Operations			Central  items		Group
		£m		£m		£m		£m		£m		£m		£m		£m
Net interest income		3,870		1,171		634		451		(25)		(29)		306		6,378
Other income		884		1,337		218		631		1,319		23		(414)		3,998
Total income		4,754		2,508		852		1,082		1,294		(6)		(108)		10,376
Insurance claims		-		-		-		-		(198)		-		-		(198)
Total income, net of insurance claims		4,754		2,508		852		1,082		1,096		(6)		(108)		10,178
Operating expenses		(2,221)		(1,312)		(471)		(792)		(415)		(56)		(65)		(5,332)
Trading surplus		2,533		1,196		381		290		681		(62)		(173)		4,846
Impairment		(1,173)		(1,557)		(160)		(2,532)		-		-		-		(5,422)
Share of results of joint ventures and associates		3		9		-		-		-		-		-		12
Profit (loss) before tax and fair value unwind		1,363		(352)		221		(2,242)		681		(62)		(173)		(564)
Fair value unwind		544		1,551		26		104		(21)		-		(536)		1,668
Profit (loss) before tax		1,907		1,199		247		(2,138)		660		(62)		(709)		1,104
Banking net interest margin		2.14%		1.64%		4.27%		1.31%								2.12%
Cost:income ratio1		46.7%		52.3%		55.3%		73.2%		37.9%						52.4%

Half-year to 30 June 2011 - As previously reported

		Retail	Wholesale		Commercial			Wealth  and Int'l	Insurance		Group  Operations			Central  items		Group
		£m		£m		£m		£m		£m		£m		£m		£m
Net interest income		4,163		1,401		649		509		(142)		(29)		(173)		6,378
Other income		884		1,337		218		631		1,319		23		(414)		3,998
Total income		5,047		2,738		867		1,140		1,177		(6)		(587)		10,376
Insurance claims		-		-		-		-		(198)		-		-		(198)
Total income, net of insurance claims		5,047		2,738		867		1,140		979		(6)		(587)		10,178
Operating expenses		(2,221)		(1,312)		(471)		(792)		(415)		(56)		(65)		(5,332)
Trading surplus		2,826		1,426		396		348		564		(62)		(652)		4,846
Impairment		(1,173)		(1,557)		(160)		(2,532)		-		-		-		(5,422)
Share of results of joint ventures and associates		3		9		-		-		-		-		-		12
Profit (loss) before tax and fair value unwind		1,656		(122)		236		(2,184)		564		(62)		(652)		(564)
Fair value unwind		544		1,551		26		104		(21)		-		(536)		1,668
Profit (loss) before tax		2,200		1,429		262		(2,080)		543		(62)		(1,188)		1,104
Banking net interest margin		2.26%		1.64%		4.35%		1.47%								2.07%
Cost:income ratio1		44.0%		47.9%		54.3%		69.5%		42.4%						52.4%

1	Operating expenses divided by total income net of insurance claims.

COMBINED BUSINESSES SEGMENTAL ANALYSIS - GROUP (continued)

APPENDIX

Half-year to 30 June 2010 - As restated

		Retail	Wholesale		Commercial			Wealth  and Int'l		Insurance	Group  Operations			Central  items		Group
		£m		£m		£m		£m		£m		£m		£m		£m
Net interest income		4,357		1,408		557		545		(19)		(31)		94		6,911
Other income		836		1,988		227		605		1,320		15		840		5,831
Total income		5,193		3,396		784		1,150		1,301		(16)		934		12,742
Insurance claims		-		-		-		-		(261)		-		-		(261)
Total income, net of insurance claims		5,193		3,396		784		1,150		1,040		(16)		934		12,481
Costs:
Operating expenses		(2,233)		(1,401)		(481)		(744)		(423)		(36)		(117)		(5,435)
Impairment of tangible fixed assets		-		(150)		-		-		-		-		-		(150)
		(2,233)		(1,551)		(481)		(744)		(423)		(36)		(117)		(5,585)
Trading surplus		2,960		1,845		303		406		617		(52)		817		6,896
Impairment		(1,335)		(2,801)		(190)		(2,228)		-		-		-		(6,554)
Share of results of joint ventures and associates		8		(60)		-		(2)		(10)		1		1		(62)
Profit (loss) before tax and fair value unwind		1,633		(1,016)		113		(1,824)		607		(51)		818		280
Fair value unwind		583		1,433		30		164		(21)		-		(866)		1,323
Profit (loss) before tax		2,216		417		143		(1,660)		586		(51)		(48)		1,603
Banking net interest margin		2.33%		1.61%		3.74%		1.50%								2.20%
Cost:income ratio		43.0%		41.3%		61.4%		64.7%		40.7%						43.5%

Half-year to 30 June 2010 - As previously reported

		Retail	Wholesale		Commercial			Wealth  and Int'l		Insurance	Group  Operations			Central  items		Group
		£m		£m		£m		£m		£m		£m		£m		£m
Net interest income		4,636		1,576		571		596		(136)		(36)		(296)		6,911
Other income		836		1,988		227		605		1,320		15		840		5,831
Total income		5,472		3,564		798		1,201		1,184		(21)		544		12,742
Insurance claims		-		-		-		-		(261)		-		-		(261)
Total income, net of insurance claims		5,472		3,564		798		1,201		923		(21)		544		12,481
Costs:
Operating expenses		(2,233)		(1,401)		(481)		(744)		(423)		(36)		(117)		(5,435)
Impairment of tangible fixed assets		-		(150)		-		-		-		-		-		(150)
		(2,233)		(1,551)		(481)		(744)		(423)		(36)		(117)		(5,585)
Trading surplus		3,239		2,013		317		457		500		(57)		427		6,896
Impairment		(1,335)		(2,801)		(190)		(2,228)		-		-		-		(6,554)
Share of results of joint ventures and associates		8		(60)		-		(2)		(10)		1		1		(62)
Profit (loss) before tax and fair value unwind		1,912		(848)		127		(1,773)		490		(56)		428		280
Fair value unwind		583		1,433		30		164		(21)		-		(866)		1,323
Profit (loss) before tax		2,495		585		157		(1,609)		469		(56)		(438)		1,603
Banking net interest margin		2.44%		1.51%		3.82%		1.65%								2.08%
Cost:income ratio		40.8%		39.3%		60.3%		61.9%		45.8%						43.5%

COMBINED BUSINESSES SEGMENTAL ANALYSIS - GROUP (continued)

APPENDIX

Half-year to 31 December 2010 - As restated

		Retail	Wholesale		Commercial			Wealth  and Int'l		Insurance	Group  Operations			Central  items		Group
		£m		£m		£m		£m		£m		£m		£m		£m
Net interest income		4,291		1,439		570		505		(20)		(30)		156		6,911
Other income		771		1,691		230		555		1,494		34		(442)		4,333
Total income		5,062		3,130		800		1,060		1,474		4		(286)		11,244
Insurance claims		-		-		-		-		(281)		-		-		(281)
Total income, net of insurance claims		5,062		3,130		800		1,060		1,193		4		(286)		10,963
Operating expenses		(2,411)		(1,351)		(511)		(792)		(431)		(7)		10		(5,493)
Trading surplus		2,651		1,779		289		268		762		(3)		(276)		5,470
Impairment		(1,412)		(1,263)		(192)		(3,760)		-		-		-		(6,627)
Share of results of joint ventures and associates		9		(35)		-		(6)		-		2		1		(29)
Profit (loss) before tax and fair value unwind		1,248		481		97		(3,498)		762		(1)		(275)		(1,186)
Fair value unwind		522		1,616		51		208		(22)		-		(580)		1,795
Profit (loss) before tax		1,770		2,097		148		(3,290)		740		(1)		(855)		609
Banking net interest margin		2.29%		1.57%		3.74%		1.41%								2.22%
Cost:income ratio		47.6%		43.2%		63.9%		74.7%		36.1%						50.1%

Half-year to 31 December 2010 - As previously reported

		Retail	Wholesale		Commercial			Wealth  and Int'l		Insurance	Group  Operations			Central  items		Group
		£m		£m		£m		£m		£m		£m		£m		£m
Net interest income		4,742		1,675		604		580		(127)		(36)		(527)		6,911
Other income		771		1,691		230		555		1,494		34		(442)		4,333
Total income		5,513		3,366		834		1,135		1,367		(2)		(969)		11,244
Insurance claims		-		-		-		-		(281)		-		-		(281)
Total income, net of insurance claims		5,513		3,366		834		1,135		1,086		(2)		(969)		10,963
Operating expenses		(2,411)		(1,351)		(511)		(792)		(431)		(7)		10		(5,493)
Trading surplus		3,102		2,015		323		343		655		(9)		(959)		5,470
Impairment		(1,412)		(1,263)		(192)		(3,760)		-		-		-		(6,627)
Share of results of joint ventures and associates		9		(35)		-		(6)		-		2		1		(29)
Profit (loss) before tax and fair value unwind		1,699		717		131		(3,423)		655		(7)		(958)		(1,186)
Fair value unwind		522		1,616		51		208		(22)		-		(580)		1,795
Profit (loss) before tax		2,221		2,333		182		(3,215)		633		(7)		(1,538)		609
Banking net interest margin		2.49%		1.54%		3.93%		1.61%								2.12%
Cost:income ratio		43.7%		40.1%		61.3%		69.8%		39.7%						50.1%

COMBINED BUSINESSES SEGMENTAL ANALYSIS - GROUP (continued)

APPENDIX

Full-year to 31 December 2010 - As restated

		Retail	Wholesale		Commercial			Wealth  and Int'l		Insurance	Group  Operations			Central  items		Group
		£m		£m		£m		£m		£m		£m		£m		£m
Net interest income		8,648		2,847		1,127		1,050		(39)		(61)		250		13,822
Other income		1,607		3,679		457		1,160		2,814		49		398		10,164
Total income		10,255		6,526		1,584		2,210		2,775		(12)		648		23,986
Insurance claims		-		-		-		-		(542)		-		-		(542)
Total income, net of insurance claims		10,255		6,526		1,584		2,210		2,233		(12)		648		23,444
Costs:
Operating expenses		(4,644)		(2,752)		(992)		(1,536)		(854)		(43)		(107)		(10,928)
Impairment of tangible fixed assets		-		(150)		-		-		-		-		-		(150)
		(4,644)		(2,902)		(992)		(1,536)		(854)		(43)		(107)		(11,078)
Trading surplus		5,611		3,624		592		674		1,379		(55)		541		12,366
Impairment		(2,747)		(4,064)		(382)		(5,988)		-		-		-		(13,181)
Share of results of joint ventures and associates		17		(95)		-		(8)		(10)		3		2		(91)
Profit (loss) before tax and fair value unwind		2,881		(535)		210		(5,322)		1,369		(52)		543		(906)
Fair value unwind		1,105		3,049		81		372		(43)		-		(1,446)		3,118
Profit (loss) before tax		3,986		2,514		291		(4,950)		1,326		(52)		(903)		2,212
Banking net interest margin		2.31%		1.59%		3.74%		1.46%								2.21%
Cost:income ratio		45.3%		42.2%		62.6%		69.5%		38.2%						46.6%

Full-year to 31 December 2010 - As previously reported

		Retail	Wholesale		Commercial			Wealth  and Int'l		Insurance	Group  Operations			Central  items		Group
		£m		£m		£m		£m		£m		£m		£m		£m
Net interest income		9,378		3,251		1,175		1,176		(263)		(72)		(823)		13,822
Other income		1,607		3,679		457		1,160		2,814		49		398		10,164
Total income		10,985		6,930		1,632		2,336		2,551		(23)		(425)		23,986
Insurance claims		-		-		-		-		(542)		-		-		(542)
Total income, net of insurance claims		10,985		6,930		1,632		2,336		2,009		(23)		(425)		23,444
Costs:
Operating expenses		(4,644)		(2,752)		(992)		(1,536)		(854)		(43)		(107)		(10,928)
Impairment of tangible fixed assets		-		(150)		-		-		-		-		-		(150)
		(4,644)		(2,902)		(992)		(1,536)		(854)		(43)		(107)		(11,078)
Trading surplus		6,341		4,028		640		800		1,155		(66)		(532)		12,366
Impairment		(2,747)		(4,064)		(382)		(5,988)		-		-		-		(13,181)
Share of results of joint ventures and associates		17		(95)		-		(8)		(10)		3		2		(91)
Profit (loss) before tax and fair value unwind		3,611		(131)		258		(5,196)		1,145		(63)		(530)		(906)
Fair value unwind		1,105		3,049		81		372		(43)		-		(1,446)		3,118
Profit (loss) before tax		4,716		2,918		339		(4,824)		1,102		(63)		(1,976)		2,212
Banking net interest margin		2.46%		1.52%		3.88%		1.63%								2.10%
Cost:income ratio		42.3%		39.7%		60.8%		65.8%		42.5%						46.6%

COMBINED BUSINESSES SEGMENTAL ANALYSIS - CORE (continued)

APPENDIX

Half-year to 30 June 2011 - As restated

		Retail	Wholesale		Commercial			Wealth  and Int'l	Insurance		Group  Operations			Central  items		Group
		£m		£m		£m		£m		£m		£m		£m		£m
Net interest income		3,688		819		619		186		(30)		(29)		306		5,559
Other income		875		1,608		217		504		1,282		23		(414)		4,095
Total income		4,563		2,427		836		690		1,252		(6)		(108)		9,654
Insurance claims		-		-		-		-		(198)		-		-		(198)
Total income, net of insurance claims		4,563		2,427		836		690		1,054		(6)		(108)		9,456
Operating expenses		(2,218)		(1,093)		(468)		(565)		(395)		(56)		(65)		(4,860)
Trading surplus		2,345		1,334		368		125		659		(62)		(173)		4,596
Impairment		(1,052)		(409)		(160)		(15)		-		-		-		(1,636)
Share of results of joint ventures and associates		2		-		-		1		-		-		-		3
Profit (loss) before tax and fair value unwind		1,295		925		208		111		659		(62)		(173)		2,963
Fair value unwind		420		10		26		4		(21)		-		(536)		(97)
Profit (loss) before tax		1,715		935		234		115		638		(62)		(709)		2,866
Banking net interest margin		2.23%		1.79%		4.39%		4.11%								2.43%
Cost:income ratio1		48.6%		45.0%		56.0%		81.9%		37.5%						51.4%

Half-year to 30 June 2011 - As previously reported

		Retail	Wholesale		Commercial			Wealth  and Int'l	Insurance		Group  Operations			Central  items		Group
		£m		£m		£m		£m		£m		£m		£m		£m
Net interest income		3,959		888		635		221		(148)		(29)		(173)		5,353
Other income		875		1,608		217		504		1,282		23		(414)		4,095
Total income		4,834		2,496		852		725		1,134		(6)		(587)		9,448
Insurance claims		-		-		-		-		(198)		-		-		(198)
Total income, net of insurance claims		4,834		2,496		852		725		936		(6)		(587)		9,250
Operating expenses		(2,218)		(1,093)		(468)		(565)		(395)		(56)		(65)		(4,860)
Trading surplus		2,616		1,403		384		160		541		(62)		(652)		4,390
Impairment		(1,052)		(409)		(160)		(15)		-		-		-		(1,636)
Share of results of joint ventures and associates		2		-		-		1		-		-		-		3
Profit (loss) before tax and fair value unwind		1,566		994		224		146		541		(62)		(652)		2,757
Fair value unwind		420		10		26		4		(21)		-		(536)		(97)
Profit (loss) before tax		1,986		1,004		250		150		520		(62)		(1,188)		2,660
Banking net interest margin		2.34%		1.86%		4.50%		4.50%								2.35%
Cost:income ratio1		45.9%		43.8%		54.9%		77.9%								52.5%

1	Operating expenses divided by total income net of insurance claims.

COMBINED BUSINESSES SEGMENTAL ANALYSIS - CORE (continued)

APPENDIX

Half-year to 30 June 2010 - As restated

		Retail	Wholesale		Commercial			Wealth  and Int'l		Insurance	Group  Operations			Central  items		Group
		£m		£m		£m		£m		£m		£m		£m		£m
Net interest income		4,083		955		536		145		(23)		(31)		94		5,759
Other income		823		1,524		226		503		1,287		15		840		5,218
Total income		4,906		2,479		762		648		1,264		(16)		934		10,977
Insurance claims		-		-		-		-		(261)		-		-		(261)
Total income, net of insurance claims		4,906		2,479		762		648		1,003		(16)		934		10,716
Operating expenses		(2,229)		(1,108)		(477)		(531)		(410)		(36)		(117)		(4,908)
Trading surplus		2,677		1,371		285		117		593		(52)		817		5,808
Impairment		(1,286)		(162)		(189)		(16)		-		-		-		(1,653)
Share of results of joint ventures and associates		8		3		-		(1)		(10)		1		1		2
Profit (loss) before tax and fair value unwind		1,399		1,212		96		100		583		(51)		818		4,157
Fair value unwind		513		9		30		14		(21)		-		(866)		(321)
Profit (loss) before tax		1,912		1,221		126		114		562		(51)		(48)		3,836
Banking net interest margin		2.39%		1.62%		3.88%		3.24%								2.46%
Cost:income ratio		45.4%		44.7%		62.6%		81.9%		40.9%						45.8%

Half-year to 30 June 2010 - As previously reported

		Retail	Wholesale		Commercial			Wealth  and Int'l		Insurance	Group  Operations			Central  items		Group
		£m		£m		£m		£m		£m		£m		£m		£m
Net interest income		4,380		998		551		158		(141)		(36)		(296)		5,614
Other income		823		1,524		226		503		1,287		15		840		5,218
Total income		5,203		2,522		777		661		1,146		(21)		544		10,832
Insurance claims		-		-		-		-		(261)		-		-		(261)
Total income, net of insurance claims		5,203		2,522		777		661		885		(21)		544		10,571
Operating expenses		(2,229)		(1,108)		(477)		(531)		(410)		(36)		(117)		(4,908)
Trading surplus		2,974		1,414		300		130		475		(57)		427		5,663
Impairment		(1,286)		(162)		(189)		(16)		-		-		-		(1,653)
Share of results of joint ventures and associates		8		3		-		(1)		(10)		1		1		2
Profit (loss) before tax and fair value unwind		1,696		1,255		111		113		465		(56)		428		4,012
Fair value unwind		513		9		30		14		(21)		-		(866)		(321)
Profit (loss) before tax		2,209		1,264		141		127		444		(56)		(438)		3,691
Banking net interest margin		2.52%		1.51%		3.97%		3.05%								2.28%
Cost:income ratio		42.8%		43.9%		61.4%		80.3%								46.4%

COMBINED BUSINESSES SEGMENTAL ANALYSIS - CORE (continued)

APPENDIX

Half-year to 31 December 2010 - As restated

		Retail	Wholesale		Commercial			Wealth  and Int'l		Insurance	Group  Operations			Central  items		Group
		£m		£m		£m		£m		£m		£m		£m		£m
Net interest income		4,029		822		552		160		(24)		(30)		156		5,665
Other income		760		1,492		229		487		1,363		34		(442)		3,923
Total income		4,789		2,314		781		647		1,339		4		(286)		9,588
Insurance claims		-		-		-		-		(281)		-		-		(281)
Total income, net of insurance claims		4,789		2,314		781		647		1,058		4		(286)		9,307
Operating expenses		(2,408)		(1,083)		(507)		(578)		(403)		(7)		10		(4,976)
Trading surplus		2,381		1,231		274		69		655		(3)		(276)		4,331
Impairment		(1,343)		(414)		(192)		(10)		-		-		-		(1,959)
Share of results of joint ventures and associates		9		(1)		-		1		-		2		1		12
Profit (loss) before tax and fair value unwind		1,047		816		82		60		655		(1)		(275)		2,384
Fair value unwind		452		15		51		16		(22)		-		(580)		(68)
Profit (loss) before tax		1,499		831		133		76		633		(1)		(855)		2,316
Banking net interest margin		2.35%		1.55%		3.84%		3.38%								2.50%
Cost:income ratio		50.3%		46.8%		64.9%		89.3%		38.1%						53.5%

Half-year to 31 December 2010 - As previously reported

		Retail	Wholesale		Commercial			Wealth  and Int'l		Insurance	Group  Operations			Central  items		Group
		£m		£m		£m		£m		£m		£m		£m		£m
Net interest income		4,464		882		588		182		(133)		(36)		(527)		5,420
Other income		760		1,492		229		487		1,363		34		(442)		3,923
Total income		5,224		2,374		817		669		1,230		(2)		(969)		9,343
Insurance claims		-		-		-		-		(281)		-		-		(281)
Total income, net of insurance claims		5,224		2,374		817		669		949		(2)		(969)		9,062
Operating expenses		(2,408)		(1,083)		(507)		(578)		(403)		(7)		10		(4,976)
Trading surplus		2,816		1,291		310		91		546		(9)		(959)		4,086
Impairment		(1,343)		(414)		(192)		(10)		-		-		-		(1,959)
Share of results of joint ventures and associates		9		(1)		-		1		-		2		1		12
Profit (loss) before tax and fair value unwind		1,482		876		118		82		546		(7)		(958)		2,139
Fair value unwind		452		15		51		16		(22)		-		(580)		(68)
Profit (loss) before tax		1,934		891		169		98		524		(7)		(1,538)		2,071
Banking net interest margin		2.56%		1.53%		4.06%		3.32%								2.33%
Cost:income ratio		46.1%		45.6%		62.1%		86.4%								54.9%

COMBINED BUSINESSES SEGMENTAL ANALYSIS - CORE (continued)

APPENDIX

Full-year to 31 December 2010 - As restated

		Retail	Wholesale		Commercial			Wealth  and Int'l		Insurance	Group  Operations			Central  items		Group
		£m		£m		£m		£m		£m		£m		£m		£m
Net interest income		8,112		1,777		1,088		305		(47)		(61)		250		11,424
Other income		1,583		3,016		455		990		2,650		49		398		9,141
Total income		9,695		4,793		1,543		1,295		2,603		(12)		648		20,565
Insurance claims		-		-		-		-		(542)		-		-		(542)
Total income, net of insurance claims		9,695		4,793		1,543		1,295		2,061		(12)		648		20,023
Operating expenses		(4,637)		(2,191)		(984)		(1,109)		(813)		(43)		(107)		(9,884)
Trading surplus		5,058		2,602		559		186		1,248		(55)		541		10,139
Impairment		(2,629)		(576)		(381)		(26)		-		-		-		(3,612)
Share of results of joint ventures and associates		17		2		-		-		(10)		3		2		14
Profit (loss) before tax and fair value unwind		2,446		2,028		178		160		1,238		(52)		543		6,541
Fair value unwind		965		24		81		30		(43)		-		(1,446)		(389)
Profit (loss) before tax		3,411		2,052		259		190		1,195		(52)		(903)		6,152
Banking net interest margin		2.37%		1.59%		3.86%		3.31%								2.48%
Cost:income ratio		47.8%		45.7%		63.8%		85.6%		39.4%						49.4%

Full-year to 31 December 2010 - As previously reported

		Retail	Wholesale		Commercial			Wealth  and Int'l		Insurance	Group  Operations			Central  items		Group
		£m		£m		£m		£m		£m		£m		£m		£m
Net interest income		8,844		1,880		1,139		340		(274)		(72)		(823)		11,034
Other income		1,583		3,016		455		990		2,650		49		398		9,141
Total income		10,427		4,896		1,594		1,330		2,376		(23)		(425)		20,175
Insurance claims		-		-		-		-		(542)		-		-		(542)
Total income, net of insurance claims		10,427		4,896		1,594		1,330		1,834		(23)		(425)		19,633
Operating expenses		(4,637)		(2,191)		(984)		(1,109)		(813)		(43)		(107)		(9,884)
Trading surplus		5,790		2,705		610		221		1,021		(66)		(532)		9,749
Impairment		(2,629)		(576)		(381)		(26)		-		-		-		(3,612)
Share of results of joint ventures and associates		17		2		-		-		(10)		3		2		14
Profit (loss) before tax and fair value unwind		3,178		2,131		229		195		1,011		(63)		(530)		6,151
Fair value unwind		965		24		81		30		(43)		-		(1,446)		(389)
Profit (loss) before tax		4,143		2,155		310		225		968		(63)		(1,976)		5,762
Banking net interest margin		2.54%		1.52%		4.02%		3.18%								2.31%
Cost:income ratio		44.5%		44.8%		61.7%		83.4%								50.3%

COMBINED BUSINESSES SEGMENTAL ANALYSIS - NON-CORE (continued)

APPENDIX

Half-year to 30 June 2011 - As restated

		Retail	Wholesale		Commercial			Wealth  and Int'l	Insurance		Group  Operations			Central  items		Group
		£m		£m		£m		£m		£m		£m		£m		£m
Net interest income		182		352		15		265		5						819
Other income		9		(271)		1		127		37						(97)
Total income		191		81		16		392		42						722
Insurance claims		-		-		-		-		-						-
Total income, net of insurance claims		191		81		16		392		42						722
Operating expenses		(3)		(219)		(3)		(227)		(20)						(472)
Trading surplus		188		(138)		13		165		22						250
Impairment		(121)		(1,148)		-		(2,517)		-						(3,786)
Share of results of joint ventures and associates		1		9		-		(1)		-						9
Profit (loss) before tax and fair value unwind		68		(1,277)		13		(2,353)		22						(3,527)
Fair value unwind		124		1,541		-		100		-						1,765
Profit (loss) before tax		192		264		13		(2,253)		22						(1,762)
Banking net interest margin		1.19%		1.47%		2.01%		0.88%								1.20%

Half-year to 30 June 2011 - As previously reported

		Retail	Wholesale		Commercial			Wealth  and Int'l	Insurance		Group  Operations			Central  items		Group
		£m		£m		£m		£m		£m		£m		£m		£m
Net interest income		204		513		14		288		6						1,025
Other income		9		(271)		1		127		37						(97)
Total income		213		242		15		415		43						928
Insurance claims		-		-		-		-		-						-
Total income, net of insurance claims		213		242		15		415		43						928
Operating expenses		(3)		(219)		(3)		(227)		(20)						(472)
Trading surplus		210		23		12		188		23						456
Impairment		(121)		(1,148)		-		(2,517)		-						(3,786)
Share of results of joint ventures and associates		1		9		-		(1)		-						9
Profit (loss) before tax and fair value unwind		90		(1,116)		12		(2,330)		23						(3,321)
Fair value unwind		124		1,541		-		100		-						1,765
Profit (loss) before tax		214		425		12		(2,230)		23						(1,556)
Banking net interest margin		1.36%		1.36%		1.76%		1.01%								1.23%

COMBINED BUSINESSES SEGMENTAL ANALYSIS - NON-CORE (continued)

APPENDIX

Half-year to 30 June 2010 - As restated

		Retail	Wholesale		Commercial			Wealth  and Int'l		Insurance	Group  Operations			Central  items		Group
		£m		£m		£m		£m		£m		£m		£m		£m
Net interest income		274		453		21		400		4						1,152
Other income		13		464		1		102		33						613
Total income		287		917		22		502		37						1,765
Insurance claims		-		-		-		-		-						-
Total income, net of insurance claims		287		917		22		502		37						1,765
Costs:
Operating expenses		(4)		(293)		(4)		(213)		(13)						(527)
Impairment of tangible fixed assets		-		(150)		-		-		-						(150)
		(4)		(443)		(4)		(213)		(13)						(677)
Trading surplus		283		474		18		289		24						1,088
Impairment		(49)		(2,639)		(1)		(2,212)		-						(4,901)
Share of results of joint ventures and associates		-		(63)		-		(1)		-						(64)
Profit (loss) before tax and fair value unwind		234		(2,228)		17		(1,924)		24						(3,877)
Fair value unwind		70		1,424		-		150		-						1,644
Profit (loss) before tax		304		(804)		17		(1,774)		24						(2,233)
Banking net interest margin		1.65%		1.61%		1.98%		1.25%								1.49%

Half-year to 30 June 2010 - As previously reported

		Retail	Wholesale		Commercial			Wealth  and Int'l		Insurance	Group  Operations			Central  items		Group
		£m		£m		£m		£m		£m		£m		£m		£m
Net interest income		256		578		20		438		5						1,297
Other income		13		464		1		102		33						613
Total income		269		1,042		21		540		38						1,910
Insurance claims		-		-		-		-		-						-
Total income, net of insurance claims		269		1,042		21		540		38						1,910
Costs:
Operating expenses		(4)		(293)		(4)		(213)		(13)						(527)
Impairment of tangible fixed assets		-		(150)		-		-		-						(150)
		(4)		(443)		(4)		(213)		(13)						(677)
Trading surplus		265		599		17		327		25						1,233
Impairment		(49)		(2,639)		(1)		(2,212)		-						(4,901)
Share of results of joint ventures and associates		-		(63)		-		(1)		-						(64)
Profit (loss) before tax and fair value unwind		216		(2,103)		16		(1,886)		25						(3,732)
Fair value unwind		70		1,424		-		150		-						1,644
Profit (loss) before tax		286		(679)		16		(1,736)		25						(2,088)
Banking net interest margin		1.57%		1.51%		1.85%		1.44%								1.50%

COMBINED BUSINESSES SEGMENTAL ANALYSIS - NON-CORE (continued)

APPENDIX

Half-year to 31 December 2010 - As restated

		Retail	Wholesale		Commercial			Wealth  and Int'l		Insurance	Group  Operations			Central  items		Group
		£m		£m		£m		£m		£m		£m		£m		£m
Net interest income		262		617		18		345		4						1,246
Other income		11		199		1		68		131						410
Total income		273		816		19		413		135						1,656
Insurance claims		-		-		-		-		-						-
Total income, net of insurance claims		273		816		19		413		135						1,656
Operating expenses		(3)		(268)		(4)		(214)		(28)						(517)
Trading surplus		270		548		15		199		107						1,139
Impairment		(69)		(849)		-		(3,750)		-						(4,668)
Share of results of joint ventures and associates		-		(34)		-		(7)		-						(41)
Profit (loss) before tax and fair value unwind		201		(335)		15		(3,558)		107						(3,570)
Fair value unwind		70		1,601		-		192		-						1,863
Profit (loss) before tax		271		1,266		15		(3,366)		107						(1,707)
Banking net interest margin		1.63%		1.59%		1.97%		1.10%								1.43%

Half-year to 31 December 2010 - As previously reported

		Retail	Wholesale		Commercial			Wealth  and Int'l		Insurance	Group  Operations			Central  items		Group
		£m		£m		£m		£m		£m		£m		£m		£m
Net interest income		278		793		16		398		6						1,491
Other income		11		199		1		68		131						410
Total income		289		992		17		466		137						1,901
Insurance claims		-		-		-		-		-						-
Total income, net of insurance claims		289		992		17		466		137						1,901
Operating expenses		(3)		(268)		(4)		(214)		(28)						(517)
Trading surplus		286		724		13		252		109						1,384
Impairment		(69)		(849)		-		(3,750)		-						(4,668)
Share of results of joint ventures and associates		-		(34)		-		(7)		-						(41)
Profit (loss) before tax and fair value unwind		217		(159)		13		(3,505)		109						(3,325)
Fair value unwind		70		1,601		-		192		-						1,863
Profit (loss) before tax		287		1,442		13		(3,313)		109						(1,462)
Banking net interest margin		1.75%		1.56%		1.88%		1.34%								1.52%

COMBINED BUSINESSES SEGMENTAL ANALYSIS - NON-CORE (continued)

APPENDIX

Full-year to 31 December 2010 - As restated

		Retail	Wholesale		Commercial			Wealth  and Int'l		Insurance	Group  Operations			Central  items		Group
		£m		£m		£m		£m		£m		£m		£m		£m
Net interest income		536		1,070		39		745		8						2,398
Other income		24		663		2		170		164						1,023
Total income		560		1,733		41		915		172						3,421
Insurance claims		-		-		-		-		-						-
Total income, net of insurance claims		560		1,733		41		915		172						3,421
Costs:
Operating expenses		(7)		(561)		(8)		(427)		(41)						(1,044)
Impairment of tangible fixed assets		-		(150)		-		-		-						(150)
		(7)		(711)		(8)		(427)		(41)						(1,194)
Trading surplus		553		1,022		33		488		131						2,227
Impairment		(118)		(3,488)		(1)		(5,962)		-						(9,569)
Share of results of joint ventures and associates		-		(97)		-		(8)		-						(105)
Profit (loss) before tax and fair value unwind		435		(2,563)		32		(5,482)		131						(7,447)
Fair value unwind		140		3,025		-		342		-						3,507
Profit (loss) before tax		575		462		32		(5,140)		131						(3,940)
Banking net interest margin		1.64%		1.60%		1.97%		1.18%								1.46%

Full-year to 31 December 2010 - As previously reported

		Retail	Wholesale		Commercial			Wealth  and Int'l		Insurance	Group  Operations			Central  items		Group
		£m		£m		£m		£m		£m		£m		£m		£m
Net interest income		534		1,371		36		836		11						2,788
Other income		24		663		2		170		164						1,023
Total income		558		2,034		38		1,006		175						3,811
Insurance claims		-		-		-		-		-						-
Total income, net of insurance claims		558		2,034		38		1,006		175						3,811
Costs:
Operating expenses		(7)		(561)		(8)		(427)		(41)						(1,044)
Impairment of tangible fixed assets		-		(150)		-		-		-						(150)
		(7)		(711)		(8)		(427)		(41)						(1,194)
Trading surplus		551		1,323		30		579		134						2,617
Impairment		(118)		(3,488)		(1)		(5,962)		-						(9,569)
Share of results of joint ventures and associates		-		(97)		-		(8)		-						(105)
Profit (loss) before tax and fair value unwind		433		(2,262)		29		(5,391)		134						(7,057)
Fair value unwind		140		3,025		-		342		-						3,507
Profit (loss) before tax		573		763		29		(5,049)		134						(3,550)
Banking net interest margin		1.66%		1.53%		1.87%		1.39%								1.51%

 

END

 

 

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