TIDMLLOY
RNS Number : 5823W
Lloyds Banking Group PLC
28 April 2016
Lloyds Banking Group plc
Q1 2016 Interim Management Statement
28 April 2016
HIGHLIGHTS FOR THE THREE MONTHS ENDED 31 MARCH 2016
Robust financial performance with stable underlying profit and
strong underlying returns
-- Underlying profit of GBP2.1 billion with an underlying return
on required equity of 13.8 per cent
-- Positive operating jaws of 1 per cent achieved with lower
operating costs offset by marginally lower income
-- Credit quality remains strong with a 6 per cent reduction in
impairment and an asset quality ratio of 14 basis points
-- Statutory profit before tax of GBP0.7 billion after the
expected GBP0.8 billion charge relating to Enhanced Capital Notes
(ECNs) which were redeemed in the period
-- Strong balance sheet maintained with a CET1 ratio of 13.0 per
cent (pre dividend accrual), after 0.4 per cent impact of ECNs
-- Tangible net assets per share increased to 55.2 pence (31
December 2015: 52.3 pence), driven by underlying profit and reserve
movements
Our differentiated UK focused business model continues to
deliver in a challenging operating environment
-- Cost discipline and low risk business model providing competitive advantage
-- Strong underlying capital generation of c.60 basis points
2016 guidance reaffirmed
-- Net interest margin for the year expected to be around 2.70 per cent
-- Year-on-year reduction in cost:income ratio targeted
-- Asset quality ratio for the year expected to be around 20 basis points
-- Expect to generate around 2 per cent of CET1 capital per annum
GROUP CHIEF EXECUTIVE'S STATEMENT
In the first three months of this year we have continued to make
good progress, delivering a robust financial performance and
maintaining our strong balance sheet. These results demonstrate the
strength of our differentiated, simple, low risk business model and
reflect our ability to actively respond to the challenging
operating environment.
We continue to support and benefit from a resilient UK economy
and remain focused on delivering on our targets to people,
businesses and communities as set out in our updated Helping
Britain Prosper Plan. We have also recently launched our SME
charter to help small businesses grow and to provide access to
funding. In addition, we continue to make good progress in our
strategic initiatives: creating the best customer experience;
becoming simpler and more efficient; and delivering sustainable
growth.
This performance, coupled with our differentiated, capital
generative, business model, underpins our confidence in generating
superior and sustainable returns as we aim to become the best bank
for customers and shareholders.
António Horta-Osório
Group Chief Executive
CONSOLIDATED INCOME STATEMENT AND KEY RATIOS - UNDERLYING
BASIS
Three Three Three
months months months
ended ended ended
31 Mar 31 Mar 31 Dec
2016 2015 Change 2015 Change
GBP million GBP million % GBP million %
Net interest income 2,906 2,829 3 2,904 -
Other income 1,477 1,592 (7) 1,528 (3)
----------- ----------- -----------
Total income 4,383 4,421 (1) 4,432 (1)
----------- ----------- -----------
Operating costs (1,987) (2,020) 2 (2,242) 11
Operating lease
depreciation (193) (183) (5) (201) 4
----------- ----------- -----------
Total costs (2,180) (2,203) 1 (2,443) 11
Impairment (149) (158) 6 (232) 36
----------- ----------- -----------
Underlying profit
excluding TSB 2,054 2,060 - 1,757 17
TSB - 118 -
----------- ----------- -----------
Underlying profit 2,054 2,178 (6) 1,757 17
Enhanced Capital
Notes (790) (65) 268
Market volatility
and other items (334) (128) (29)
Restructuring costs (161) (26) (101)
Payment protection
insurance provisions - - (2,100)
Conduct provisions (115) - (302)
TSB costs - (745) -
Profit (loss) before
tax - statutory 654 1,214 (46) (507)
Taxation (123) (270) 54 (152) 19
----------- ----------- -----------
Profit (loss) for
the period 531 944 (44) (659)
----------- ----------- -----------
Underlying earnings
per share 1.9p 2.3p (0.4)p 1.8p 0.1p
Earnings (loss)
per share 0.6p 1.2p (0.6)p (1.1)p 1.7p
Banking net interest
margin 2.74% 2.60% 14bp 2.64% 10bp
Cost:income ratio 47.4% 47.7% (0.3)pp 53.0% (5.6)pp
Asset quality ratio 0.14% 0.14% - 0.22% (8)bp
Return on risk-weighted
assets 3.70% 3.73% (3)bp 3.12% 58bp
Return on assets 1.01% 1.05% (4)bp 0.86% 15bp
Underlying return
on required equity 13.8% 16.0% (2.2)pp 13.1% 0.7pp
Statutory return
on required equity 4.4% 8.3% (3.9)pp (7.4)% 11.8pp
BALANCE SHEET AND KEY RATIOS
At 31 At 31
Mar Dec Change
2016 2015 %
Loans and advances to customers GBP457bn GBP455bn -
Average interest-earning banking assets(1) GBP438bn GBP439bn -
Customer deposits GBP419bn GBP418bn -
Loan to deposit ratio 109% 109% -
Common equity tier 1 ratio pre dividend accrual(2) 13.0% -
Common equity tier 1 ratio(2,3) 12.8% 13.0% (0.2)pp
Transitional total capital ratio 21.4% 21.5% (0.1)pp
Risk-weighted assets(2) GBP223bn GBP223bn -
Leverage ratio(2,3) 4.7% 4.8% (0.1)pp
Tangible net assets per share 55.2p 52.3p 2.9p
(1) Reported balances are for the first quarter 2016
and fourth quarter 2015.
(2) Reported on a fully loaded basis.
(3) The CET1 and leverage ratios at 31 December 2015
were reported on a pro forma basis, including the
dividend paid by the Insurance business in February
2016 relating to 2015.
REVIEW OF FINANCIAL PERFORMANCE
Overview: robust financial performance with stable underlying
profit and strong underlying returns
Underlying profit of GBP2,054 million was down 6 per cent versus
the prior year, but in line after excluding TSB. A small reduction
in income was offset by lower operating costs and reduced
impairment charges. Statutory profit before tax was GBP654 million
(2015: GBP1,214 million) after the expected charge relating to the
redemption of ECNs in the first quarter of GBP790 million.
The underlying return on required equity was 13.8 per cent
compared with 16.0 per cent in the first three months of 2015. The
reduction largely reflects the disposal of TSB and a higher assumed
underlying tax rate. The statutory return on required equity was
4.4 per cent (2015: 8.3 per cent).
Total loans and advances to customers were GBP457 billion at 31
March 2016, an increase of GBP2 billion since 31 December 2015 with
increased lending to SMEs, other commercial clients and UK consumer
finance customers. Customer deposits at GBP419 billion were GBP1
billion higher than at 31 December 2015.
The common equity tier 1 ratio was 13.0 per cent before accruing
dividends for 2016, with the leverage ratio at 4.7 per cent. The
tangible net asset value per share increased to 55.2 pence (31
December 2015: 52.3 pence).
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Total income
Three Three Three
months months months
ended ended ended
31 Mar 31 Mar 31 Dec
2016 2015 Change 2015 Change
GBP GBP GBP
million million % million %
Net interest income 2,906 2,829 3 2,904 -
Other income 1,477 1,592 (7) 1,528 (3)
---------- ---------- ----------
Total income 4,383 4,421 (1) 4,432 (1)
---------- ----------
Banking net interest
margin 2.74% 2.60% 14bp 2.64% 10bp
Average interest-earning
banking assets GBP438.2bn GBP446.5bn (2) GBP439.2bn -
Average interest-earning
banking assets excluding
run-off GBP427.2bn GBP429.5bn (1) GBP427.8bn -
Total income was GBP4,383 million with increased net interest
income offset by lower other income. Net interest income increased
3 per cent to GBP2,906 million reflecting a further improvement in
net interest margin to 2.74 per cent (2015: 2.60 per cent). The
improved margin more than offset the impact of the 2 per cent
reduction in average interest-earning banking assets, which was
largely due to lower run-off assets.
The improvement in net interest margin was due to improved
deposit pricing and mix, lower wholesale funding costs and a
benefit, as expected, from the recent ECN redemptions. The net
interest margin also included a 5 basis point uplift from a one-off
credit to net interest income relating to the credit cards
portfolio. The Group continues to expect that the net interest
margin for the 2016 full year will be around 2.70 per cent, in line
with the guidance given with the 2015 full year results.
Other income at GBP1,477 million was resilient in the current
market conditions and broadly in line with our historic run rate
and quarterly run rate expectations for 2016. This was 7 per cent
lower than in the first three months of 2015, largely due to lower
insurance income and continued pressure on fees and
commissions.
REVIEW OF FINANCIAL PERFORMANCE (continued)
Costs
Three Three Three
months months months
ended ended ended
31 Mar 31 Mar 31 Dec
2016 2015 Change 2015 Change
GBP GBP GBP
million million % million %
Operating costs 1,987 2,020 2 2,242 11
Cost:income ratio 47.4% 47.7% (0.3)pp 53.0% (5.6)pp
Simplification savings
annual run-rate 495 148 373
Operating costs of GBP1,987 million were 2 per cent lower
compared with the first quarter of 2015 reflecting the acceleration
of savings from Simplification initiatives, partly offset by
increased investment. Phase II of the Simplification programme has
now delivered GBP495 million of annual run-rate savings to date,
ahead of plan and on track to deliver GBP1 billion of
Simplification savings by the end of 2017.
The Group delivered positive operating jaws(1) of 1 per cent
with the cost:income ratio improving to 47.4 per cent from 47.7 per
cent in the first quarter of 2015. The Group continues to target
annual improvements in the cost:income ratio with a target ratio of
around 45 per cent as it exits 2019.
Operating lease depreciation increased 5 per cent to GBP193
million driven by the continued growth in the Lex Autolease
business.
(1) Operating jaws represents the percentage change
in total income less the percentage change in operating
costs.
Impairment
Three Three Three
months months months
ended ended ended
31 Mar 31 Mar 31 Dec
2016 2015 Change 2015 Change
GBP GBP GBP
million million % million %
Impairment charge 149 158 6 232 36
Asset quality ratio 0.14% 0.14% - 0.22% (8)bp
Impaired loans as
a % of closing advances 2.0% 2.8% (0.8)pp 2.1% (0.1)pp
The impairment charge was GBP149 million, 6 per cent lower than
in the first quarter of 2015. The asset quality ratio was 14 basis
points in the quarter, with a 22 basis point gross impairment
charge offset by 8 basis points of releases and writebacks. Credit
quality remains strong with the gross charge slightly better than
expected but, for now, we continue to expect a 2016 full year asset
quality ratio of around 20 basis points.
Impaired loans as a percentage of closing advances reduced to
2.0 per cent from 2.1 per cent at the end of December 2015.
REVIEW OF FINANCIAL PERFORMANCE (continued)
Statutory profit
Three Three Three
months months months
ended ended ended
31 Mar 31 Mar 31 Dec
2016 2015 Change 2015 Change
GBP GBP GBP
million million % million %
Underlying profit 2,054 2,178 (6) 1,757 17
Enhanced Capital Notes (790) (65) 268
Market volatility
and other items:
-------- -------- --------
Market volatility
and asset sales (203) 83 123
Fair value unwind (47) (129) (56)
Other items (84) (82) (96)
-------- -------- --------
(334) (128) (29)
Restructuring costs (161) (26) (101)
Payment protection
insurance provision - - (2,100)
Conduct provisions (115) - (302)
TSB costs - (745) -
Profit before tax
- statutory 654 1,214 (46) (507)
Taxation (123) (270) 54 (152) 19
-------- -------- --------
Profit for the period 531 944 (44) (659)
-------- -------- --------
Underlying return
on required equity 13.8% 16.0% (2.2)pp 13.1% 0.7pp
Statutory return on
required equity 4.4% 8.3% (3.9)pp (7.4)% 11.8pp
Further information on the reconciliation of underlying
to statutory results is included on page 8.
Statutory profit before tax was GBP654 million compared with
GBP1,214 million in the first quarter of 2015.
The loss relating to the ECNs in the first quarter was GBP790
million, representing the write-off of the embedded derivative and
the premium paid on redemption of the remaining notes. Market
volatility and asset sales of GBP203 million (2015: positive GBP83
million) was largely due to negative insurance volatility of GBP163
million (2015: positive GBP242 million). Restructuring costs were
GBP161 million and comprise severance related costs incurred to
deliver phase II of the Simplification programme and the costs of
implementing ring-fencing.
There was a charge of GBP115 million in the first three months
to cover retail conduct matters. No further provision has been
taken for PPI, where complaint levels over the three months have
been around 8,500 per week on average, broadly in line with
expectations.
Statutory profit in the first quarter of 2015 included a charge
of GBP745 million comprising GBP660 million relating to the sale of
TSB and GBP85 million of TSB dual running costs.
Taxation
The tax charge for the first three months was GBP123 million
(2015: GBP270 million) representing an effective tax rate of 19 per
cent (2015: 22 per cent). The effective tax rate reflects the
impact of tax exempt gains and capital losses not previously
recognised. The Group continues to expect a medium term effective
tax rate of around 27 per cent.
REVIEW OF FINANCIAL PERFORMANCE (continued)
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Funding, liquidity and capital ratios
At At
31 Mar 31 Dec
2016 2015 Change
%
Wholesale funding GBP125bn GBP120bn 4
Wholesale funding <1 year
maturity GBP46bn GBP38bn 22
Of which money-market funding
<1 year maturity(1) GBP23bn GBP22bn 6
Loan to deposit ratio 109% 109% -
Common equity tier 1 ratio
pre dividend accrual(2) 13.0% -
Common equity tier 1 ratio(2,3) 12.8% 13.0% (0.2)pp
Transitional total capital
ratio 21.4% 21.5% (0.1)pp
Leverage ratio(2,3) 4.7% 4.8% (0.1)pp
Risk-weighted assets(2) GBP223bn GBP223bn -
Shareholders' equity GBP43bn GBP41bn 5
(1) Excludes balances relating to margins of GBP3.1
billion (31 December 2015: GBP2.5 billion) and
settlement accounts of GBP1.4 billion (31 December
2015: GBP1.4 billion).
(2) Reported on a fully loaded basis.
(3) The CET1 and leverage ratios at 31 December 2015
were reported on a pro forma basis, including the
dividend paid by the Insurance business in February
2016 relating to 2015.
Wholesale funding was GBP125 billion (31 December 2015: GBP120
billion) of which 37 per cent (31 December: 32 per cent) had a
maturity of less than one year.
The Group's liquidity position remains strong and the liquidity
coverage ratio was in excess of 100 per cent at 31 March 2016.
Capital
The Group maintained its strong balance sheet with a fully
loaded common equity tier 1 ratio of 13.0 per cent before 2016
accrued dividends and 12.8 per cent after dividends (31 December
2015: 13.0 per cent pro forma). Underlying capital generation in
the quarter was strong at around 60 basis points but was offset by
the charge relating to ECN redemptions and other movements. The
Group continues to expect to generate around 2 per cent of CET 1
capital per annum.
The leverage ratio reduced to 4.7 per cent primarily reflecting
the increase in balance sheet assets.
STATUTORY CONSOLIDATED INCOME STATEMENT AND BALANCE SHEET
(UNAUDITED)
Three Three
months months
ended ended
31 Mar 31 Mar
Income statement 2016 2015
GBP million GBP million
Net interest income 2,761 2,263
Other income, net of insurance claims 612 2,280
----------- -----------
Total income, net of insurance claims 3,373 4,543
Total operating expenses (2,586) (3,185)
Impairment (133) (144)
----------- -----------
Profit before tax 654 1,214
Taxation (123) (270)
----------- -----------
Profit for the period 531 944
----------- -----------
Profit attributable to ordinary shareholders 405 814
Profit attributable to other equity
holders 101 99
----------- -----------
Profit attributable to equity holders 506 913
Profit attributable to non-controlling
interests 25 31
----------- -----------
Profit for the period 531 944
----------- -----------
At 31 At 31
Mar Dec
Balance sheet 2016 2015
GBP million GBP million
Assets
Cash and balances at central banks 60,712 58,417
Trading and other financial assets
at fair value through profit or loss 141,763 140,536
Derivative financial instruments 35,357 29,467
Loans and receivables 486,510 484,483
Available-for-sale financial assets 35,443 33,032
Held-to-maturity investments 21,449 19,808
Other assets 42,864 40,945
----------- -----------
Total assets 824,098 806,688
----------- -----------
Liabilities
Deposits from banks 19,049 16,925
Customer deposits 418,963 418,326
Trading and other financial liabilities
at fair value through profit or loss 49,998 51,863
Derivative financial instruments 33,043 26,301
Debt securities in issue 88,084 82,056
Liabilities arising from insurance
and investment contracts 104,320 103,071
Subordinated liabilities 22,119 23,312
Other liabilities 39,485 37,854
------- -------
Total liabilities 775,061 759,708
------- -------
Shareholders' equity 43,268 41,234
Other equity instruments 5,355 5,355
Non-controlling interests 414 391
------- -------
Total equity 49,037 46,980
------- -------
Total equity and liabilities 824,098 806,688
------- -------
NOTES
1. Reconciliation between statutory and underlying basis results
The tables below set out a reconciliation from the statutory
results to the underlying basis results.
Removal of:
Market
Lloyds volatility PPI
Three months Banking and Insurance and other
to 31 March Group other Restructuring gross conduct Underlying
2016 statutory items(1) ECNs(2) costs(3) up provisions basis
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Net interest
income 2,761 69 - - 76 - 2,906
Other income,
net of
insurance
claims 612 189 790 - (114) - 1,477
----------- ------- -----------
Total income 3,373 258 790 - (38) - 4,383
Operating
expenses(4) (2,586) 92 - 161 38 115 (2,180)
Impairment (133) (16) - - - - (149)
-------
Profit
before
tax 654 334 790 161 - 115 2,054
---------- ----------- ------- ------------- --------- ----------- ----------
Removal of:
------------------------------------------------------
Market
Lloyds volatility
Three months Banking and Insurance
to 31 March Group other Restructuring gross Underlying
2015 statutory items(5) ECNs(6) costs(3) TSB(7) up basis
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Net interest
income 2,263 100 - - (192) 658 2,829
Other income,
net of
insurance
claims 2,280 (31) 65 - (36) (686) 1,592
----------- -------
Total income 4,543 69 65 - (228) (28) 4,421
Operating
expenses(4) (3,185) 92 - 26 836 28 (2,203)
Impairment (144) (33) - - 19 - (158)
TSB - - - - 118 - 118
---------- ----------- ------- ------------- ------ --------- ----------
Profit before
tax 1,214 128 65 26 745 - 2,178
---------- ----------- ------- ------------- ------ --------- ----------
(1) Comprises the effects of asset sales (loss of GBP1
million), volatile items (loss of GBP38 million),
liability management activities (loss of GBP1 million),
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volatility arising in the insurance businesses
(loss of GBP163 million), the fair value unwind
(loss of GBP47 million) and the amortisation of
purchased intangibles (GBP84 million).
(2) Comprises the change in fair value of the equity
conversion feature of the ECNs (loss of GBP69 million)
and the loss on the completion of the tender offers
and redemptions in respect of the ECNs (GBP721
million).
(3) Principally comprises the severance related costs
related to phase II of the Simplification programme.
(4) On an underlying basis, this is described as total
costs.
(5) Comprises the effects of asset sales (loss of GBP5
million), volatile items (loss of GBP150 million),
liability management (loss of GBP4 million), volatility
arising in the insurance business (gain of GBP242
million), the fair value unwind (loss of GBP129
million) and the amortisation of purchased intangibles
(GBP82 million).
(6) Comprises the change in fair value of the equity
conversion feature of the ECNs (loss of GBP65 million).
(7) Comprises the underlying results of TSB, dual running
and build costs and the charge related to the disposal
of TSB.
NOTES (continued)
2. Summary of movements in total equity
Other Non-
Shareholders' equity controlling Total
equity instruments interests equity
GBPm GBPm GBPm GBPm
Balance at 1 January
2016 41,234 5,355 391 46,980
Movements in the period:
Profit for the period 506 - 25 531
Defined benefit pension
scheme remeasurements 186 - - 186
AFS revaluation reserve 53 - - 53
Cash flow hedging reserve 1,333 - - 1,333
Distributions on other
equity instruments, net
of tax (81) - - (81)
Treasury shares and employee
award schemes 48 - - 48
Other movements (11) - (2) (13)
Balance at 31 March 2016 43,268 5,355 414 49,037
------------- ------------ ------------ -------
3. Quarterly underlying basis information
Quarter Quarter Quarter Quarter Quarter
ended ended ended ended ended
31 31 30 30 31
Mar Dec Sept June Mar
2016 2015 2015 2015 2015
GBPm GBPm GBPm GBPm GBPm
Net interest income 2,906 2,904 2,863 2,886 2,829
Other income 1,477 1,528 1,374 1,661 1,592
---------- ---------- ---------- ---------- ----------
Total income 4,383 4,432 4,237 4,547 4,421
----------
Operating costs (1,987) (2,242) (1,919) (2,130) (2,020)
Operating lease
depreciation (193) (201) (189) (191) (183)
---------- ---------- ---------- ---------- ----------
Total costs (2,180) (2,443) (2,108) (2,321) (2,203)
Impairment (149) (232) (157) (21) (158)
---------- ---------- ---------- ---------- ----------
Underlying profit
excluding TSB 2,054 1,757 1,972 2,205 2,060
TSB - - - - 118
---------- ---------- ---------- ---------- ----------
Underlying profit 2,054 1,757 1,972 2,205 2,178
Enhanced Capital
Notes (790) 268 21 (325) (65)
Market volatility
and other items (334) (29) (398) (60) (128)
Restructuring costs (161) (101) (37) (6) (26)
TSB costs - - - - (745)
Conduct provisions (115) (2,402) (600) (1,835) -
---------- ----------
Statutory profit
(loss) before tax 654 (507) 958 (21) 1,214
---------- ---------- ---------- ---------- ----------
Banking net interest
margin 2.74% 2.64% 2.64% 2.65% 2.60%
Average interest-earning
banking assets GBP438.2bn GBP439.2bn GBP438.7bn GBP443.2bn GBP446.5bn
Cost:income ratio 47.4% 53.0% 47.4% 48.9% 47.7%
Asset quality ratio 0.14% 0.22% 0.15% 0.03% 0.14%
Return on risk-weighted
assets(1) 3.70% 3.12% 3.47% 3.84% 3.73%
Return on assets(1) 1.01% 0.86% 0.95% 1.06% 1.05%
(1) Based on underlying profit.
NOTES (continued)
4. Transitional capital ratios and fully loaded leverage disclosures
At 31 At 31
Mar Dec
2016 2015
Capital resources GBP million GBP million
Common equity tier 1
Shareholders' equity per balance
sheet 43,268 41,234
Deconsolidation of insurance entities (636) (1,199)
Other adjustments (3,982) (2,015)
Deductions from common equity tier
1 (9,874) (9,476)
----------- -----------
Common equity tier 1 capital 28,776 28,544
----------- -----------
Additional tier 1 instruments 8,626 9,177
Deductions from tier 1 (1,313) (1,177)
----------- -----------
Total tier 1 capital 36,089 36,544
----------- -----------
Tier 2 instruments and eligible provisions 13,267 13,208
Deductions from tier 2 (1,540) (1,756)
----------- -----------
Total capital resources 47,816 47,996
----------- -----------
Risk-weighted assets
Foundation IRB Approach 69,249 68,990
Retail IRB Approach 63,220 63,912
Other IRB Approach 19,505 18,661
----------- -----------
IRB Approach 151,974 151,563
Standardised Approach 21,117 20,443
Contributions to the default fund
of a central counterparty 581 488
----------- -----------
Credit risk 173,672 172,494
Counterparty credit risk 8,451 7,981
Credit valuation adjustment risk 1,087 1,684
Operational risk 26,123 26,123
Market risk 3,241 3,775
----------- -----------
Underlying risk-weighted assets 212,574 212,057
----------- -----------
Threshold risk-weighted assets 11,349 10,788
----------- -----------
Total risk-weighted assets 223,923 222,845
----------- -----------
Leverage
Total tier 1 capital (fully loaded) 33,869 33,860
----------- -----------
Statutory balance sheet assets 824,098 806,688
Deconsolidation and other adjustments (160,865) (150,912)
Off-balance sheet items 56,890 56,424
----------- -----------
Total exposure measure 720,123 712,200
----------- -----------
Ratios
Transitional common equity tier 1
capital ratio 12.9% 12.8%
Transitional tier 1 capital ratio 16.1% 16.4%
Transitional total capital ratio 21.4% 21.5%
Leverage ratio(1) 4.7% 4.8%
Average leverage ratio(2) 4.7%
Average leverage exposure measure(3) 718,775
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(1) The countercyclical leverage ratio buffer is currently
nil.
(2) The average leverage ratio is based on the average
of the month end tier 1 capital and exposure measures
over the quarter. The average of 4.7 per cent over
the quarter compared to 4.8 per cent and 4.7 per
cent at the start and end of the quarter respectively
reflects both the impact of the ECN losses recognised
during the quarter and the increase in balance
sheet assets.
(3) The average leverage exposure measure is based
on the average of the month end exposure measures
over the quarter.
BASIS OF PRESENTATION
This release covers the results of Lloyds Banking
Group plc together with its subsidiaries (the Group)
for the three months ended 31 March 2016.
Statutory basis: Statutory information is set out
on page 7. However, a number of factors have had
a significant effect on the comparability of the
Group's financial position and results. As a result,
comparison on a statutory basis of the 2016 results
with 2015 is of limited benefit.
Underlying basis: In order to present a more meaningful
view of business performance, the results are presented
on an underlying basis excluding items that in
management's view would distort the comparison
of performance between periods. Based on this principle
the following items are excluded from underlying
profit:
* losses on redemption of the Enhanced Capital Notes
and the volatility in the value of the embedded
equity conversion feature;
* market volatility and other items, which includes the
effects of certain asset sales, the volatility
relating to the Group's own debt and hedging
arrangements as well as that arising in the insurance
businesses, insurance gross up, the unwind of
acquisition-related fair value adjustments and the
amortisation of purchased intangible assets;
* restructuring costs, comprising severance related
costs relating to the Simplification programme
announced in October 2014 and the costs of
implementing regulatory reform and ring fencing;
* TSB build and dual running costs and the loss
relating to the TSB sale in 2015; and
* payment protection insurance and other conduct
provisions.
Unless otherwise stated, income statement commentaries
throughout this document compare the three months
ended 31 March 2016 to the three months ended 31
March 2015, and the balance sheet analysis compares
the Group balance sheet as at 31 March 2016 to
the Group balance sheet as at 31 December 2015.
----------------------------------------------------------------------------------------------------------------------
FORWARD LOOKING STATEMENTS
This document contains certain forward looking statements with
respect to the business, strategy and plans of Lloyds Banking Group
and its current goals and expectations relating to its future
financial condition and performance. Statements that are not
historical facts, including statements about Lloyds Banking Group's
or its directors' and/or 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 upon circumstances that will or may occur in the
future. Factors that could cause actual business, strategy, plans
and/or results (including but not limited to the payment of
dividends) to differ materially from the plans, objectives,
expectations, estimates and intentions expressed in such forward
looking statements made by the Group or on its behalf include, but
are not limited to: general economic and business conditions in the
UK and internationally; market related trends and developments;
fluctuations in exchange rates, stock markets and currencies; the
ability to access sufficient sources of capital, liquidity and
funding when required; changes to the Group's credit ratings; the
ability to derive cost savings; changing customer behaviour
including consumer spending, saving and borrowing habits; changes
to borrower or counterparty credit quality; instability in the
global financial markets, including Eurozone instability, the
potential for one or more countries to exit the Eurozone or
European Union (EU) (including the UK as a result of a referendum
on its EU membership) and the impact of any sovereign credit rating
downgrade or other sovereign financial issues; technological
changes and risks to cyber security; natural, pandemic and other
disasters, adverse weather and similar contingencies outside the
Group's control; inadequate or failed internal or external
processes or systems; acts of war, other acts of hostility,
terrorist acts and responses to those acts, geopolitical, pandemic
or other such events; changes in laws, regulations, accounting
standards or taxation, including as a result of further Scottish
devolution; changes to regulatory capital or liquidity requirements
and similar contingencies outside the Group's control; the
policies, decisions and actions of governmental or regulatory
authorities or courts in the UK, the EU, the US or elsewhere
including the implementation and interpretation of key legislation
and regulation; 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; actions
or omissions by the Group's directors, management or employees
including industrial action; changes to the Group's post-retirement
defined benefit scheme obligations; the provision of banking
operations services to TSB Banking Group plc; the extent of any
future impairment charges or write-downs caused by, but not limited
to, depressed asset valuations, market disruptions and illiquid
markets; the value and effectiveness of any credit protection
purchased by the Group; the inability to hedge certain risks
economically; the adequacy of loss reserves; the actions of
competitors, including non-bank financial services and lending
companies; and exposure to regulatory or competition scrutiny,
legal, regulatory or competition proceedings, investigations or
complaints. Please refer to the latest Annual Report on Form 20-F
filed with the US Securities and Exchange Commission for a
discussion of certain factors together with examples of forward
looking statements. 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 Lloyds Banking Group
expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to any forward looking
statements. 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@finance.lloydsbanking.com
Mike Butters
Director of Investor Relations
020 7356 1187
mike.butters@finance.lloydsbanking.com
Andrew Downey
Director of Investor Relations
020 7356 2334
andrew.downey@finance.lloydsbanking.com
CORPORATE AFFAIRS
Ed Petter
Group Media Relations Director
020 8936 5655
ed.petter@lloydsbanking.com
Matt Smith
Head of Corporate Media
020 7356 3522
matt.smith@lloydsbanking.com
Copies of this interim management statement 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. SC95000
This information is provided by RNS
The company news service from the London Stock Exchange
END
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