SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
(26
October 2016)
LLOYDS BANKING GROUP
plc
(Translation of registrant's name into
English)
5th Floor
25 Gresham Street
London
EC2V 7HN
United Kingdom
(Address
of principal executive offices)
Indicate
by check mark whether the registrant files or will file annual
reports
under
cover Form 20-F or Form 40-F.
Form
20-F..X.. Form 40-F.....
Indicate
by check mark whether the registrant by furnishing the
information
contained
in this Form is also thereby furnishing the information to
the
Commission
pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes
..... No ..X..
If
"Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule
12g3-2(b):
82- ________
Index
to Exhibits
Item
No.
1 Regulatory News Service Announcement, dated 26 October
2016
re:
3rd Quarter
Results
Lloyds
Banking Group plc
Q3 2016
Interim Management Statement
26
October 2016
|
BASIS
OF PRESENTATION
|
|
This
release covers the results of Lloyds Banking Group plc together
with its subsidiaries (the Group) for the nine months ended
30 September 2016.
|
|
Statutory basis:
Statutory information
is set out on page 9. However, a number of factors have had a
significant effect on the comparability of the Group’s
financial position and results. Accordingly, the results are also
presented on an underlying basis.
|
|
Underlying basis:
The statutory results
are adjusted for certain items which are listed below, to allow a
comparison of the Group’s underlying
performance.
–
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 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 nine months ended 30 September 2016 to
the nine months ended 30 September 2015, and the balance sheet
analysis compares the Group balance sheet as at 30 September
2016 to the Group balance sheet as at 31 December
2015.
Alternative performance
measures
:
The Group uses a number
of alternative performance measures, including underlying profit,
in the discussion of its business performance and financial
position. Further information on these measures is set out on page
15.
|
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 interest rates (including low or
negative rates), 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 exit
by the UK from the European Union (EU) and the potential for one or
more other countries to exit the EU or the Eurozone 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 the exit by the UK from the EU, a further possible
referendum on Scottish independence; 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 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, lending companies and digital
innovators and disruptive technologies; 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.
HIGHLIGHTS
FOR THE NINE
MONTHS ENDED 30 SEPTEMBER 2016
|
Robust underlying performance with strong improvement in statutory
profit
●
Underlying profit
of £6.1 billion (2015: £6.4 billion); underlying
return on required equity of 13.6 per cent
●
Total income of
£13.2 billion
– Net
interest income of £8.6 billion, up 1 per cent with improved
margin of 2.72 per cen
– Other income 2 per cent lower at £4.5
billion
●
Operating costs 2
per cent lower at £6.0 billion. Market-leading cost:income
ratio improved to 47.7 per cent with positive operating
jaws
●
Asset quality
remains strong with no deterioration in underlying portfolios.
Asset quality ratio of 14 basis points
●
PPI provision of
£1 billion to cover further operating costs and
redress
●
Statutory profit
before tax of £3.3 billion, more than 50 per cent higher
than in 2015
●
Tangible net assets
per share of 54.9 pence post interim dividend (30 June 2016:
55.0 pence)
|
|
Strong capital generation with balance sheet strength
maintained
●
Common equity tier
1 (CET1) ratio of 14.1 per cent pre dividend (13.4 per cent post
dividend); total capital ratio of 22.1 per cent
●
Net capital
generation of 0.6 percentage points in third quarter
|
|
Our differentiated UK focused business model continues to deliver
for customers and shareholders
●
Helping Britain
prosper through continued support to SMEs, first-time buyers and
growth in consumer finance
●
Cost discipline and
low risk business model providing competitive
advantage
|
|
2016 guidance reaffirmed
●
Net interest margin
for the full year expected to be around 2.70 per cent
●
Full year
cost:income ratio to be lower than 2015 ratio of 49.3 per
cent
●
Asset quality ratio
for the full year expected to be less than 20 basis
points
●
Continue to expect
to generate around 160 basis points of CET1 capital in 2016 pre
dividend
|
GROUP
CHIEF EXECUTIVE’S STATEMENT
In the
first nine months of the year the Group has delivered a robust
underlying performance with a strong improvement in statutory
profit and strong capital generation. Our differentiated, UK
focused, simple, low risk business model continues to deliver and
as a result we are reaffirming our stated 2016
guidance.
Strategic
progress
We
remain focused on delivering on our targets to support people,
businesses and communities as set out in our Helping Britain
Prosper Plan. We are making good progress against our strategic
priorities: creating the best customer experience; becoming simpler
and more efficient; and delivering sustainable growth. In the last
12 months we have grown net lending to SMEs by 4 per cent and have
also grown net lending in both credit card balances and motor
finance while continuing to grow our bulk annuity business. We
remain committed to helping first-time buyers onto the housing
ladder whilst continuing to balance risk and margin considerations
versus volume in mortgages. We also continue to operate the
UK’s largest branch network and the largest digital bank with
12.4 million online users and 7.8 million mobile users of our
top-rated apps.
The
hard work undertaken in the last five years to transform and
simplify the business has allowed the UK government to sell most of
its stake in the Group, returning £17 billion including
dividends on its original £20 billion investment. We
welcome the recent decision to recommence the sale of its
shares.
Well positioned to become the best bank for customers and
shareholders
The
outlook for the UK economy remains uncertain, however the strength
of the recovery in recent years means the UK is well positioned.
The Group’s transformation and successful execution of
strategy, along with its competitive advantages in costs and risk,
also position us well for the future and to achieve our goal of
becoming the best bank for customers and shareholders.
António
Horta-Osório,
Group Chief
Executive
CONSOLIDATED INCOME STATEMENT − UNDERLYING BASIS
|
|
|
Nine months ended 30 Sept 2016
|
|
Nine months ended 30 Sept 2015
|
|
Change
|
|
Three months ended 30 Sept 2016
|
|
Three months ended 30 Sept 2015
|
|
Change
|
|
|
|
£ million
|
|
£ million
|
|
%
|
|
£ million
|
|
£ million
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
8,630
|
|
8,578
|
|
1
|
|
2,848
|
|
2,863
|
|
(1)
|
|
Other
income
|
|
4,520
|
|
4,627
|
|
(2)
|
|
1,427
|
|
1,374
|
|
4
|
|
Total income
|
|
13,150
|
|
13,205
|
|
−
|
|
4,275
|
|
4,237
|
|
1
|
|
Operating
costs
|
|
(5,959)
|
|
(6,069)
|
|
2
|
|
(1,918)
|
|
(1,919)
|
|
−
|
|
Operating
lease depreciation
|
|
(669)
|
|
(563)
|
|
(19)
|
|
(241)
|
|
(189)
|
|
(28)
|
|
Impairment
|
|
(449)
|
|
(336)
|
|
(34)
|
|
(204)
|
|
(157)
|
|
(30)
|
|
TSB
|
|
−
|
|
118
|
|
|
|
−
|
|
−
|
|
|
|
Underlying profit
|
|
6,073
|
|
6,355
|
|
(4)
|
|
1,912
|
|
1,972
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volatility
and other items
|
|
(1,198)
|
|
(1,769)
|
|
|
|
49
|
|
(414)
|
|
|
|
Payment
protection insurance provision
|
|
(1,000)
|
|
(1,900)
|
|
|
|
(1,000)
|
|
(500)
|
|
|
|
Other
conduct provisions
|
|
(610)
|
|
(535)
|
|
|
|
(150)
|
|
(100)
|
|
|
|
Statutory profit before tax
|
|
3,265
|
|
2,151
|
|
52
|
|
811
|
|
958
|
|
(15)
|
|
Taxation
|
|
(1,189)
|
|
(536)
|
|
|
|
(592)
|
|
(268)
|
|
|
|
Profit for the period
|
|
2,076
|
|
1,615
|
|
29
|
|
219
|
|
690
|
|
(68)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share
|
|
2.5p
|
|
1.8p
|
|
0.7p
|
|
0.2p
|
|
0.8p
|
|
(0.6)p
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banking
net interest margin
|
|
2.72%
|
|
2.63%
|
|
9bp
|
|
2.69%
|
|
2.64%
|
|
5bp
|
|
Average
interest-earning banking assets
|
|
£437bn
|
|
£443bn
|
|
(1)
|
|
£436bn
|
|
£439bn
|
|
(1)
|
|
Cost:income
ratio
|
|
47.7%
|
|
48.0%
|
|
(0.3)pp
|
|
47.5%
|
|
47.4%
|
|
0.1pp
|
|
Asset
quality ratio
|
|
0.14%
|
|
0.11%
|
|
3bp
|
|
0.18%
|
|
0.15%
|
|
3bp
|
|
Return
on risk-weighted assets
|
|
3.64%
|
|
3.67%
|
|
(3)bp
|
|
3.42%
|
|
3.47%
|
|
(5)bp
|
|
Underlying
return on required equity
|
|
13.6%
|
|
15.7%
|
|
(2.1)pp
|
|
12.7%
|
|
14.8%
|
|
(2.1)pp
|
|
Statutory
return on required equity
|
|
5.9%
|
|
4.4%
|
|
1.5pp
|
|
1.3%
|
|
6.0%
|
|
(4.7)pp
|
BALANCE SHEET AND KEY RATIOS
|
|
|
At
30 Sept
2016
|
|
At
30 June
2016
|
|
Change %
|
|
At
31 Dec
2015
|
|
Change %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
and advances to customers
1
|
|
£452bn
|
|
£453bn
|
|
−
|
|
£455bn
|
|
(1)
|
|
Customer
deposits
2
|
|
£424bn
|
|
£423bn
|
|
−
|
|
£418bn
|
|
1
|
|
Loan to
deposit ratio
|
|
106%
|
|
107%
|
|
(1)pp
|
|
109%
|
|
(3)pp
|
|
Total
assets
|
|
£840bn
|
|
£848bn
|
|
(1)
|
|
£807bn
|
|
4
|
|
Common
equity tier 1 ratio pre dividend
3
|
|
14.1%
|
|
13.5%
|
|
0.6pp
|
|
|
|
|
|
Common
equity tier 1 ratio
3,4,5
|
|
13.4%
|
|
13.0%
|
|
0.4pp
|
|
13.0%
|
|
0.4pp
|
|
Transitional
total capital ratio
|
|
22.1%
|
|
21.8%
|
|
0.3pp
|
|
21.5%
|
|
0.6pp
|
|
Risk-weighted
assets
3
|
|
£222bn
|
|
£222bn
|
|
−
|
|
£223bn
|
|
−
|
|
Leverage
ratio
3,4
|
|
4.8%
|
|
4.7%
|
|
0.1pp
|
|
4.8%
|
|
−
|
|
Tangible
net assets per share
|
|
54.9p
|
|
55.0p
|
|
(0.1)p
|
|
52.3p
|
|
2.6p
|
|
1
|
Excludes
reverse repos of £5.1 billion (30 June 2016: £nil;
31 December 2015: £nil).
|
|
2
|
Excludes
repos of £0.8 billion (30 June 2016: £nil;
31 December 2015: £nil).
|
|
3
|
Reported
on a fully loaded basis.
|
|
4
|
The
common equity tier 1 and leverage ratios at 31 December 2015
are reported on a pro forma basis, including the dividend paid by
the Insurance business in February 2016 relating to
2015.
|
|
5
|
After
allowing for total 2016 foreseeable dividends of 2.55 pence on
a pro rata basis. The actual final dividend payment will be
assessed by the Board at the end of the year.
|
REVIEW OF FINANCIAL PERFORMANCE
Overview: robust underlying performance with strong improvement in
statutory profit
The
Group’s underlying profit was £6,073 million,
4 per cent lower than in the first nine months of 2015, with
marginally lower income and increases in the impairment charge and
operating lease depreciation partially offset by lower operating
costs. The underlying return on required equity was 13.6 per
cent compared with 15.7 per cent in the same period of
2015.
Statutory
profit before tax was £3,265 million (2015: £2,151
million), an increase of more than 50 per cent after a
£1 billion charge relating to PPI in the third quarter.
The statutory return on required equity improved to 5.9 per
cent compared with 4.4 per cent in the same period of
2015.
Loans
and advances to customers were 1 percent lower at £452 billion
(31 December 2015: £455 billion) with continued growth in the
UK Consumer Finance business and lending to SME and Mid Markets
clients offset by reductions in closed portfolios and mortgages,
where the Group continues to focus on margin rather than volume.
Customer deposits at £424 billion were 1 per cent
higher than at 31 December 2015.
The
common equity tier 1 (CET1) ratio at 30 September 2016 was
14.1 per cent pre dividend and 13.4 per cent post
dividend (31 December 2015: 13.0 per cent). The Group
generated around 110 basis points of capital pre dividends in the
nine months to 30 September 2016. The tangible net asset value
per share was broadly stable at 54.9 pence (30 June 2016:
55.0 pence), having paid the interim dividend of
0.85 pence per share in September.
Total income
|
|
|
Nine months ended 30 Sept 2016
|
|
Nine months ended 30 Sept 2015
|
|
Change
|
|
Three months ended 30 Sept 2016
|
|
Three months ended 30 Sept 2015
|
|
Change
|
|
|
|
£ million
|
|
£ million
|
|
%
|
|
£ million
|
|
£ million
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
8,630
|
|
8,578
|
|
1
|
|
2,848
|
|
2,863
|
|
(1)
|
|
Other
income
|
|
4,520
|
|
4,627
|
|
(2)
|
|
1,427
|
|
1,374
|
|
4
|
|
Total income
|
|
13,150
|
|
13,205
|
|
−
|
|
4,275
|
|
4,237
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banking
net interest margin
|
|
2.72%
|
|
2.63%
|
|
9bp
|
|
2.69%
|
|
2.64%
|
|
5bp
|
|
Average
interest-earning banking assets
|
|
£436.6bn
|
|
£442.8bn
|
|
(1)
|
|
£435.9bn
|
|
£438.7bn
|
|
(1)
|
Total
income was marginally lower at £13,150 million, with increased
net interest income more than offset by lower other
income.
Net
interest income grew by 1 per cent to £8,630 million,
reflecting the improvement in net interest margin to 2.72 per cent
(2015: 2.63 per cent). The net interest margin continues to benefit
from lower deposit and wholesale funding costs which have more than
offset the pressure on asset pricing. The net interest margin of
2.69 per cent in the third quarter was higher than the same
period last year, but slightly lower than the second quarter
(2.74 per cent), partly reflecting the base rate change in
early August. The Group continues to expect that the net interest
margin for the 2016 full year will be around 2.70 per
cent.
Other
income for the first nine months was £4,520 million, 2 per
cent lower than in the same period last year. Other income in the
third quarter at £1,427 million, was up 4 per cent
on the previous year, although down on the second quarter due to
insurance. The Group now expects other income for the year to be
around £6 billion.
REVIEW OF FINANCIAL PERFORMANCE
(continued)
Costs
|
|
|
Nine months ended 30 Sept 2016
|
|
Nine months ended 30 Sept 2015
|
|
Change
|
|
Three months ended 30 Sept 2016
|
|
Three months ended 30 Sept 2015
|
|
Change
|
|
|
|
£ million
|
|
£ million
|
|
%
|
|
£ million
|
|
£ million
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
costs
|
|
5,959
|
|
6,069
|
|
2
|
|
1,918
|
|
1,919
|
|
−
|
|
Cost:income
ratio
|
|
47.7%
|
|
48.0%
|
|
(0.3)pp
|
|
47.5%
|
|
47.4%
|
|
0.1pp
|
|
Operating
jaws
|
|
0.5%
|
|
0.3%
|
|
0.2pp
|
|
|
|
|
|
|
|
Simplification
savings annual run rate
|
|
774
|
|
291
|
|
|
|
|
|
|
|
|
The
Group continues to focus on cost management and delivering
efficiency savings as we simplify the business. Operating costs
were £5,959 million in the period, 2 per cent lower than
in the first nine months of 2015, contributing to positive
operating jaws of 0.5 per cent and an improved cost:income
ratio of 47.7 per cent.
The
Simplification programme has delivered £774 million of
annual run-rate savings to date and the Group remains on track to
deliver the revised target of £1.4 billion of savings by
the end of 2017.
Operating
lease depreciation increased by 19 per cent to
£669 million, driven by the continued growth in the
Lex Autolease business and additional charges related to
certain leasing assets in Commercial Banking.
The
Group continues to expect the full year cost:income ratio to be
lower than the 2015 ratio of 49.3 per cent.
Impairment
|
|
|
Nine months ended 30 Sept 2016
|
|
Nine months ended 30 Sept 2015
|
|
Change
|
|
Three months ended 30 Sept 2016
|
|
Three months ended 30 Sept 2015
|
|
Change
|
|
|
|
£ million
|
|
£ million
|
|
%
|
|
£ million
|
|
£ million
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment
charge
|
|
449
|
|
336
|
|
(34)
|
|
204
|
|
157
|
|
(30)
|
|
Asset
quality ratio
|
|
0.14%
|
|
0.11%
|
|
3bp
|
|
0.18%
|
|
0.15%
|
|
3bp
|
|
Gross
asset quality ratio
|
|
0.26%
|
|
0.25%
|
|
1bp
|
|
0.27%
|
|
0.24%
|
|
3bp
|
|
|
|
At
30 Sept
2016
|
|
At
30
June
2016
|
|
Change
|
|
|
|
At
31
Dec
2015
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired
loans as a % of advances
|
|
2.0
|
|
2.0
|
|
−
|
|
|
|
2.1
|
|
(0.1)pp
|
The
credit quality of the Group’s lending portfolios remains
strong. The impairment charge of £449 million increased from
£336 million in the same period last year, but this was
due to the expected lower level of releases and write-backs in the
period rather than a deterioration in the underlying portfolios.
The asset quality ratio was 14 basis points in the nine months to
30 September 2016 compared to 11 basis points in the same
period in 2015. On a gross basis, before releases and write-backs,
the asset quality ratio has remained stable at 26 basis
points.
In line
with previous guidance, the Group expects the asset quality ratio
for the full year to be less than 20 basis points.
Impaired
loans as a percentage of closing advances were 2.0 per cent
compared with 2.1 per cent at 31 December
2015.
REVIEW OF FINANCIAL PERFORMANCE
(continued)
Statutory profit
|
|
|
Nine months ended 30 Sept 2016
|
|
Nine months ended 30 Sept 2015
|
|
Change
|
|
Three months ended 30 Sept 2016
|
|
Three months ended 30 Sept 2015
|
|
Change
|
|
|
|
£ million
|
|
£ million
|
|
%
|
|
£ million
|
|
£ million
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying profit
|
|
6,073
|
|
6,355
|
|
(4)
|
|
1,912
|
|
1,972
|
|
(3)
|
|
Volatility
and other items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enhanced
Capital Notes
|
|
(790)
|
|
(369)
|
|
|
|
−
|
|
21
|
|
|
|
Market
volatility and asset sales
|
|
393
|
|
(204)
|
|
|
|
266
|
|
(257)
|
|
|
|
Fair
value unwind
|
|
(156)
|
|
(136)
|
|
|
|
(47)
|
|
(59)
|
|
|
|
Amortisation
of purchased intangibles
|
|
(255)
|
|
(246)
|
|
|
|
(87)
|
|
(82)
|
|
|
|
Restructuring
costs
|
|
(390)
|
|
(69)
|
|
|
|
(83)
|
|
(37)
|
|
|
|
TSB
costs
|
|
−
|
|
(745)
|
|
|
|
−
|
|
−
|
|
|
|
|
|
(1,198)
|
|
(1,769)
|
|
|
|
49
|
|
(414)
|
|
|
|
Payment
protection insurance provision
|
|
(1,000)
|
|
(1,900)
|
|
|
|
(1,000)
|
|
(500)
|
|
|
|
Other
conduct provisions
|
|
(610)
|
|
(535)
|
|
|
|
(150)
|
|
(100)
|
|
|
|
Statutory profit before tax
|
|
3,265
|
|
2,151
|
|
52
|
|
811
|
|
958
|
|
(15)
|
|
Taxation
|
|
(1,189)
|
|
(536)
|
|
|
|
(592)
|
|
(268)
|
|
|
|
Profit for the period
|
|
2,076
|
|
1,615
|
|
29
|
|
219
|
|
690
|
|
(68)
|
Further
information on the reconciliation of underlying to statutory
results is included on page 11.
Statutory
profit before tax was £3,265 million, an increase of more than
50 per cent on the same period last year
(£2,151 million).
Market
volatility and asset sales of £393 million (2015: negative
£204 million) included the gain on sale of the Group’s
interest in Visa Europe of £484 million, negative insurance
volatility of £157 million (2015: negative £316 million)
and accounting volatility relating to hedging and liability
management.
Restructuring
costs were £390 million compared to £69 million in 2015
and included £293 million relating to the Simplification
programme and £97 million relating to work on
implementing the ring-fencing requirements.
Statutory
profit in the first nine months of 2015 included a charge of
£745 million for TSB costs, comprising £660 million
relating to the sale of TSB and £85 million of TSB
dual-running costs.
A
provision of £1 billion was taken in the period for PPI
to cover further operating costs and redress, including impact of
proposed June 2019 deadline. A further provision of
£150 million was taken in the third quarter to cover
other conduct issues, including £100 million in respect
of packaged bank accounts.
Taxation
The tax
charge for the first nine months of 2016 was £1,189 million
(2015: £536 million), representing an effective tax rate of 36
per cent (2015: 25 per cent). The higher effective tax rate
reflects the impact of the change in corporation tax rates on the
net deferred tax asset, the banking surcharge and restrictions on
the deductibility of conduct provisions.
The
Group continues to expect a medium term effective tax rate of
around 27 per cent.
REVIEW OF FINANCIAL PERFORMANCE
(continued)
Balance sheet
|
|
|
At
30 Sept
2016
|
|
At
30 June
2016
|
|
Change %
|
|
At
31 Dec
2015
|
|
Change %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
and advances to customers
1
|
|
£452bn
|
|
£453bn
|
|
−
|
|
£455bn
|
|
(1)
|
|
Customer
deposits
2
|
|
£424bn
|
|
£423bn
|
|
−
|
|
£418bn
|
|
1
|
|
Loan to
deposit ratio
|
|
106%
|
|
107%
|
|
(1)pp
|
|
109%
|
|
(3)pp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale
funding
|
|
£125bn
|
|
£131bn
|
|
(4)
|
|
£120bn
|
|
4
|
|
Wholesale
funding <1 year maturity
|
|
£45bn
|
|
£51bn
|
|
(12)
|
|
£38bn
|
|
19
|
|
Of which money-market funding <1 year maturity
3
|
|
£19bn
|
|
£24bn
|
|
(21)
|
|
£22bn
|
|
(13)
|
|
Liquidity
coverage ratio – eligible assets
|
|
£140bn
|
|
£142bn
|
|
(2)
|
|
£123bn
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
equity tier 1 capital ratio pre dividend
4
|
|
14.1%
|
|
13.5%
|
|
0.6pp
|
|
|
|
|
|
Common
equity tier 1 capital ratio
4,5,6
|
|
13.4%
|
|
13.0%
|
|
0.4pp
|
|
13.0%
|
|
0.4pp
|
|
Leverage
ratio
4,5
|
|
4.8%
|
|
4.7%
|
|
0.1pp
|
|
4.8%
|
|
−
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible
net assets per share
|
|
54.9p
|
|
55.0p
|
|
(0.1)p
|
|
52.3p
|
|
2.6p
|
|
1
|
Excludes
reverse repos of £5.1 billion (30 June 2016: £nil;
31 December 2015: £nil).
|
|
2
|
Excludes
repos of £0.8 billion (30 June 2015: £nil; 31
December 2015: £nil).
|
|
3
|
Excludes
balances relating to margins of £4.9 billion
(30 June 2016: £6.8 billion; 31 December 2015:
£2.5 billion) and settlement accounts of
£2.0 billion (30 June 2016: £1.4 billion;
31 December 2015: £1.4 billion).
|
|
4
|
Reported
on a fully loaded basis.
|
|
5
|
The
common equity tier 1 and leverage ratios at 31 December 2015
are reported on a pro forma basis, including the dividend paid by
the Insurance business in February 2016 relating to
2015.
|
|
6
|
After
allowing for total 2016 foreseeable dividends of 2.55 pence on
a pro rata basis. The actual final dividend payment will be
assessed by the Board at the end of the year.
|
Loans
and advances to customers were 1 per cent lower at
£452 billion compared with 31 December 2015. There was
continued strong growth in the UK Consumer Finance business and
increased lending to SME and Mid Markets clients. This was offset
by a reduction in mortgage balances as a result of the
Group’s decision to protect margins rather than focusing on
market share in a low growth market, and a reduction in portfolios
closed to new business.
Deposits
were £424 billion, 1 per cent higher compared with
£418 billion at 31 December 2015, primarily
reflecting continued success in attracting high quality balances
from commercial clients. Wholesale funding was £125 billion
(30 June 2016: £131 billion), of which 36 per cent (30
June 2016: 39 per cent) had a maturity of less than one year. The
Group intends to participate fully in the Bank of England’s
Term Funding Scheme in line with future funding needs.
The
Group’s liquidity position remains strong and the liquidity
coverage ratio was in excess of 100 per cent at 30 September
2016. The CET1 ratio at 30 September 2016 was 14.1 per cent
before allowing for 2016 foreseeable dividends; 13.4 per cent after
allowing for dividends.
Capital
generation in the third quarter was strong at 60 basis points, with
50 basis points of underlying capital generation, 60 basis points
from market movements and 10 basis points from other items, offset
by a 60 basis point impact from conduct.
Market
movements in the third quarter of 60 basis points included a 20
basis point adverse impact from movements in the defined benefit
pension schemes driven by the impact of credit spreads. The schemes
moved from a net surplus of £430 million to a net deficit of
£740 million in the quarter. This was more than offset by an
80 basis point favourable impact arising from changing our approach
to how we hold gilts in the Group’s liquidity portfolio. In
the current low interest rate environment, we have decided it is no
longer appropriate to commit to holding gilts to maturity. As a
result, the Group has reclassified the £20 billion of gilts
within the liquidity portfolio as ‘available-for-sale’
(previously classified as
‘held-to-maturity’).
REVIEW OF FINANCIAL PERFORMANCE
(continued)
For the
year-to-date, the Group has generated 110 basis points of capital
with 160 basis points of underlying capital generation, 20 basis
points from market movements and 10 basis points from other items,
offset by 80 basis points relating to conduct. The positive impact
of market movements was driven by the favourable impact in the year
on
held-to-maturity
gilts, largely offset by market driven movements in pensions and
risk-weighted assets.
The
Group continues to expect to generate around 160 basis points
of capital (pre dividend) in the year.
During
the third quarter the Prudential Regulation Authority reduced the
Pillar 2A component of the Group’s Individual Capital
Guidance from 4.6 per cent to 4.5 per cent of risk-weighted
assets, of which 2.5 per cent has to be covered by CET1
capital.
Tangible
net asset value (TNAV) was 54.9 pence per share at 30 September
2016 compared with 52.3 pence at 31 December 2015. The
increase of 2.6 pence, or 5.5 pence before dividend payments, is
primarily driven by strong statutory profit and positive reserve
movements. TNAV per share was broadly stable compared with 30 June
2016 (55.0 pence), but up 0.8 pence before dividend
payments.
STATUTORY CONSOLIDATED INCOME STATEMENT AND BALANCE SHEET
(UNAUDITED)
|
Income statement
|
|
Nine months
ended
30 Sept
2016
|
|
Nine months
ended
30
Sept
2015
|
|
|
|
£ million
|
|
£ million
|
|
|
|
|
|
|
|
Net
interest income
|
|
6,857
|
|
9,016
|
|
Other
income, net of insurance claims
|
|
5,995
|
|
3,646
|
|
Total income, net of insurance claims
|
|
12,852
|
|
12,662
|
|
Total
operating expenses
|
|
(9,041)
|
|
(10,312)
|
|
Impairment
|
|
(546)
|
|
(199)
|
|
Profit before tax
|
|
3,265
|
|
2,151
|
|
Taxation
|
|
(1,189)
|
|
(536)
|
|
Profit for the period
|
|
2,076
|
|
1,615
|
|
|
|
|
|
|
|
Profit
attributable to ordinary shareholders
|
|
1,693
|
|
1,246
|
|
Profit
attributable to other equity holders
|
|
307
|
|
295
|
|
Profit attributable to equity holders
|
|
2,000
|
|
1,541
|
|
Profit
attributable to non-controlling interests
|
|
76
|
|
74
|
|
Profit for the period
|
|
2,076
|
|
1,615
|
|
Balance sheet
|
|
At 30 Sept 2016
|
|
At
31 Dec 2015
|
|
|
|
£ million
|
|
£ million
|
|
Assets
|
|
|
|
|
|
Cash
and balances at central banks
|
|
70,090
|
|
58,417
|
|
Trading
and other financial assets at fair value through profit or
loss
|
|
161,995
|
|
140,536
|
|
Derivative
financial instruments
|
|
41,975
|
|
29,467
|
|
Loans
and receivables
|
|
467,551
|
|
484,483
|
|
Available-for-sale
financial assets
|
|
57,619
|
|
33,032
|
|
Held-to-maturity
investments
|
|
−
|
|
19,808
|
|
Other
assets
|
|
40,979
|
|
40,945
|
|
Total assets
|
|
840,209
|
|
806,688
|
|
Liabilities
|
|
|
|
|
|
Deposits
from banks
|
|
18,937
|
|
16,925
|
|
Customer
deposits
|
|
425,245
|
|
418,326
|
|
Trading
and other financial liabilities at fair value through profit or
loss
|
|
53,603
|
|
51,863
|
|
Derivative
financial instruments
|
|
40,103
|
|
26,301
|
|
Debt
securities in issue
|
|
85,925
|
|
82,056
|
|
Liabilities
arising from insurance and investment contracts
|
|
114,321
|
|
103,071
|
|
Subordinated
liabilities
|
|
23,214
|
|
23,312
|
|
Other
liabilities
|
|
30,014
|
|
37,854
|
|
0B0B0B
Total
liabilities
|
|
791,362
|
|
759,708
|
|
1B1B1B
Shareholders’ equity
|
|
43,072
|
|
41,234
|
|
2B2B2B
Other equity instruments
|
|
5,355
|
|
5,355
|
|
3B3B3B
Non-controlling interests
|
|
420
|
|
391
|
|
4B4B4B
Total equity
|
|
48,847
|
|
46,980
|
|
5B5B5B
Total equity and
liabilities
|
|
840,209
|
|
806,688
|
NOTES
1.
Summary
of movements in total equity
|
|
Shareholders’
equity
|
|
Other
equity
instruments
|
|
Non-
controlling
interests
|
|
Total
equity
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2016
|
41,234
|
|
5,355
|
|
391
|
|
46,980
|
|
|
|
|
|
|
|
|
|
|
Profit
for the period
|
2,000
|
|
−
|
|
76
|
|
2,076
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
Post-retirement
defined benefit pension scheme remeasurements
|
(1,508)
|
|
−
|
|
−
|
|
(1,508)
|
|
Movements
in revaluation reserve in respect of available-for-sale (AFS)
assets
|
1,411
|
|
−
|
|
−
|
|
1,411
|
|
Cash
flow hedging reserve
|
2,940
|
|
−
|
|
−
|
|
2,940
|
|
Reserve
movements, gross of tax
|
2,843
|
|
−
|
|
−
|
|
2,843
|
|
Deferred
tax on reserve movements
|
(766)
|
|
−
|
|
−
|
|
(766)
|
|
Reserve
movements, net of tax
|
2,077
|
|
−
|
|
−
|
|
2,077
|
|
Currency
translation differences (tax: nil)
|
(31)
|
|
−
|
|
−
|
|
(31)
|
|
Total other comprehensive income
|
2,046
|
|
−
|
|
−
|
|
2,046
|
|
|
|
|
|
|
|
|
|
|
Transactions with owners
|
|
|
|
|
|
|
|
|
Dividends
|
(2,034)
|
|
−
|
|
(26)
|
|
(2,060)
|
|
Distributions
on other equity instruments, net of tax
|
(246)
|
|
−
|
|
−
|
|
(246)
|
|
Treasury
shares and employee award schemes
|
72
|
|
−
|
|
−
|
|
72
|
|
Changes
in non-controlling interests
|
−
|
|
−
|
|
(21)
|
|
(21)
|
|
Total transactions with owners
|
(2,208)
|
|
−
|
|
(47)
|
|
(2,255)
|
|
|
|
|
|
|
|
|
|
|
Balance at 30 September 2016
|
43,072
|
|
5,355
|
|
420
|
|
48,847
|
|
Balance at 1 July 2016
|
43,151
|
|
5,355
|
|
432
|
|
48,938
|
|
|
|
|
|
|
|
|
|
|
Profit
for the period
|
206
|
|
−
|
|
13
|
|
219
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
Post-retirement
defined benefit pension scheme remeasurements
|
(1,241)
|
|
−
|
|
−
|
|
(1,241)
|
|
Movements
in revaluation reserve in respect of available-for-sale (AFS)
assets
|
1,655
|
|
−
|
|
−
|
|
1,655
|
|
Cash
flow hedging reserve
|
106
|
|
−
|
|
−
|
|
106
|
|
Reserve
movements, gross of tax
|
520
|
|
−
|
|
−
|
|
520
|
|
Deferred
tax on reserve movements
|
(206)
|
|
−
|
|
−
|
|
(206)
|
|
Reserve
movements, net of tax
|
314
|
|
−
|
|
−
|
|
314
|
|
Currency
translation differences (tax: nil)
|
(11)
|
|
−
|
|
−
|
|
(11)
|
|
Total other comprehensive income
|
303
|
|
−
|
|
−
|
|
303
|
|
|
|
|
|
|
|
|
|
|
Transactions with owners
|
|
|
|
|
|
|
|
|
Dividends
|
(607)
|
|
−
|
|
(24)
|
|
(631)
|
|
Distributions
on other equity instruments, net of tax
|
(83)
|
|
−
|
|
−
|
|
(83)
|
|
Treasury
shares and employee award schemes
|
102
|
|
−
|
|
−
|
|
102
|
|
Changes
in non-controlling interests
|
−
|
|
−
|
|
(1)
|
|
(1)
|
|
Total transactions with owners
|
(588)
|
|
−
|
|
(25)
|
|
(613)
|
|
|
|
|
|
|
|
|
|
|
Balance at 30 September 2016
|
43,072
|
|
5,355
|
|
420
|
|
48,847
|
NOTES
(continued)
2.
Reconciliation
between statutory and underlying basis results
The
tables below set out a reconciliation from the statutory results to
the underlying basis results, the principles of which are set out
on the inside front cover.
|
|
|
|
|
Removal of:
|
|
|
|
Nine months to 30 September 2016
|
|
Lloyds Banking Group statutory
|
|
Volatility
and other
items
1
|
|
Insurance gross up
2
|
|
PPI
|
|
Other conduct provisions
|
|
Underlying
basis
|
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
6,857
|
|
200
|
|
1,573
|
|
−
|
|
−
|
|
8,630
|
|
Other
income, net of insurance claims
|
|
5,995
|
|
211
|
|
(1,701)
|
|
−
|
|
15
|
|
4,520
|
|
Total income
|
|
12,852
|
|
411
|
|
(128)
|
|
−
|
|
15
|
|
13,150
|
|
Operating
expenses
3
|
|
(9,041)
|
|
690
|
|
128
|
|
1,000
|
|
595
|
|
(6,628)
|
|
Impairment
|
|
(546)
|
|
97
|
|
−
|
|
−
|
|
−
|
|
(449)
|
|
Profit before tax
|
|
3,265
|
|
1,198
|
|
−
|
|
1,000
|
|
610
|
|
6,073
|
|
|
|
|
|
Removal
of:
|
|
|
|
Nine
months to 30 September 2015
|
|
Lloyds Banking Group statutory
|
|
Volatility
and
other
items
4
|
|
TSB
5
|
|
Insurance gross
up
2
|
|
PPI
|
|
Other conduct provisions
|
|
Underlying
basis
|
|
|
|
£m
|
|
£m
|
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
9,016
|
|
257
|
|
(192)
|
|
(503)
|
|
−
|
|
−
|
|
8,578
|
|
Other
income, net of insurance claims
|
|
3,646
|
|
577
|
|
(31)
|
|
435
|
|
−
|
|
−
|
|
4,627
|
|
Total
income
|
|
12,662
|
|
834
|
|
(223)
|
|
(68)
|
|
−
|
|
−
|
|
13,205
|
|
Operating
expenses
3
|
|
(10,312)
|
|
1,091
|
|
86
|
|
68
|
|
1,900
|
|
535
|
|
(6,632)
|
|
Impairment
|
|
(199)
|
|
(156)
|
|
19
|
|
−
|
|
−
|
|
−
|
|
(336)
|
|
TSB
|
|
−
|
|
−
|
|
118
|
|
−
|
|
−
|
|
−
|
|
118
|
|
Profit
before tax
|
|
2,151
|
|
1,769
|
|
−
|
|
−
|
|
1,900
|
|
535
|
|
6,355
|
|
1
|
Comprises
the write-off of the ECN embedded derivative and premium paid on
redemption of the remaining notes in the first quarter (loss of
£790 million); the effects of asset sales (gain of
£290 million); volatile items (loss of
£30 million); liability management (gain of
£133 million); the fair value unwind (loss of
£156 million); the amortisation of purchased intangibles
(£255 million); and restructuring costs
(£390 million, principally comprising the severance
related costs related to phase II of the Simplification
programme).
|
|
2
|
The
Group’s insurance businesses’ income statements include
income and expenditure which are attributable to the policyholders
of the Group’s long-term assurance funds. These items have no
impact in total upon the profit attributable to equity shareholders
and, in order to provide a clearer representation of the underlying
trends within the business, these items are shown net within the
underlying results.
|
|
3
|
The
underlying basis figure is the aggregate of operating costs and
operating lease depreciation.
|
|
4
|
Market
movements on the ECN embedded derivative (loss of
£369 million); the effects of asset sales (loss of
£2 million), volatile items (loss of
£196 million), liability management (loss of
£6 million), the fair value unwind (loss of
£136 million); the amortisation of purchased intangibles
(£246 million); restructuring costs
(£69 million); and TSB costs
(£745 million).
|
|
5
|
Comprises
the underlying results of TSB.
|
NOTES
(continued)
3.
Banking
net interest margin
A
reconciliation of banking net interest income to Group net interest
income showing the items that are excluded in determining banking
net interest income follows:
|
|
|
Nine
months
to 30 Sept
2016
|
|
Nine
months
to
30 Sept
2015
|
|
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
Banking
net interest income – underlying basis
|
|
8,902
|
|
8,702
|
|
Insurance
division
|
|
(113)
|
|
(117)
|
|
Other
net interest income (including trading activity)
|
|
(159)
|
|
(7)
|
|
Net interest income – underlying basis
|
|
8,630
|
|
8,578
|
|
Market
volatility and other items
|
|
(200)
|
|
(257)
|
|
TSB
|
|
−
|
|
192
|
|
Insurance
gross up
|
|
(1,573)
|
|
503
|
|
Group net interest income – statutory
|
|
6,857
|
|
9,016
|
Non-banking
assets largely relate to fee based loans and advances within
Commercial Banking and loans sold by Commercial Banking and Retail
to Insurance to back annuitant liabilities. Other non-banking
includes pooling arrangements where interest is received from or
paid to customers based on the net of their lending and deposit
balances but these balances cannot be netted on the Group balance
sheet.
4.
Underlying
return on required equity
The
Group’s underlying return on required equity for the nine
months ended 30 September 2016 was 13.6 per cent (nine
months of 2015: 15.7 per cent). Required equity is the amount
of shareholders’ equity and non-controlling interests
required to achieve a CET1 ratio of 12.0 per cent after
allowing for regulatory adjustments and deductions.
|
|
|
Nine
months
to 30 Sept
2016
|
|
Nine
months
to
30 Sept
2015
|
|
|
|
|
|
|
|
Average
CET1 ratio
|
|
13.0%
|
|
13.3%
|
|
Required
CET1 ratio
|
|
12.0%
|
|
12.0%
|
|
|
|
|
|
|
|
Average
shareholders’ equity (£bn)
|
|
42.7
|
|
43.2
|
|
Average
non-controlling interests (£bn)
|
|
0.4
|
|
0.6
|
|
Excess
equity based on 12 per cent requirement
(£bn)
|
|
(2.2)
|
|
(2.9)
|
|
Required
equity (£bn)
|
|
40.9
|
|
40.9
|
|
|
|
|
|
|
|
Adjusted
underlying earnings attributable to ordinary shareholders
(£m)
|
|
4,160
|
|
4,804
|
|
|
|
|
|
|
|
Underlying
return on required equity
|
|
13.6%
|
|
15.7%
|
NOTES
(continued)
5.
Quarterly
underlying basis information
|
Group
|
|
Quarter ended 30 Sept 2016
|
|
Quarter ended 30 June 2016
|
|
Quarter ended 31 Mar 2016
|
|
Quarter ended 31 Dec 2015
|
|
Quarter ended 30 Sept 2015
|
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
2,848
|
|
2,876
|
|
2,906
|
|
2,904
|
|
2,863
|
|
Other
income
|
|
1,427
|
|
1,616
|
|
1,477
|
|
1,528
|
|
1,374
|
|
Total income
|
|
4,275
|
|
4,492
|
|
4,383
|
|
4,432
|
|
4,237
|
|
Operating
costs
|
|
(1,918)
|
|
(2,054)
|
|
(1,987)
|
|
(2,242)
|
|
(1,919)
|
|
Operating
lease depreciation
|
|
(241)
|
|
(235)
|
|
(193)
|
|
(201)
|
|
(189)
|
|
Impairment
|
|
(204)
|
|
(96)
|
|
(149)
|
|
(232)
|
|
(157)
|
|
Underlying profit
|
|
1,912
|
|
2,107
|
|
2,054
|
|
1,757
|
|
1,972
|
|
Enhanced
Capital Notes
|
|
−
|
|
−
|
|
(790)
|
|
268
|
|
21
|
|
Market
volatility and other items
|
|
132
|
|
184
|
|
(334)
|
|
(29)
|
|
(398)
|
|
Restructuring
costs
|
|
(83)
|
|
(146)
|
|
(161)
|
|
(101)
|
|
(37)
|
|
Conduct
provisions
|
|
(1,150)
|
|
(345)
|
|
(115)
|
|
(2,402)
|
|
(600)
|
|
Statutory profit (loss) before tax
|
|
811
|
|
1,800
|
|
654
|
|
(507)
|
|
958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banking
net interest margin
|
|
2.69%
|
|
2.74%
|
|
2.74%
|
|
2.64%
|
|
2.64%
|
|
Average
interest-earning banking assets
|
|
£435.9bn
|
|
£435.6bn
|
|
£438.2bn
|
|
£439.2bn
|
|
£438.7bn
|
|
Cost:income
ratio
|
|
47.5%
|
|
48.2%
|
|
47.4%
|
|
53.0%
|
|
47.4%
|
|
Asset
quality ratio
|
|
0.18%
|
|
0.09%
|
|
0.14%
|
|
0.22%
|
|
0.15%
|
|
Return
on risk-weighted assets
|
|
3.42%
|
|
3.79%
|
|
3.70%
|
|
3.12%
|
|
3.47%
|
6.
Tangible
net assets per share
The
table below sets out a reconciliation of the Group’s
shareholders’ equity to its tangible net assets.
|
|
|
At 30 Sept
2016
|
|
At 30
June
2016
|
|
At 31
Dec
2015
|
|
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
Shareholders’
equity
|
|
43,072
|
|
43,151
|
|
41,234
|
|
Goodwill
|
|
(2,016)
|
|
(2,016)
|
|
(2,016)
|
|
Intangible
assets
|
|
(1,689)
|
|
(1,719)
|
|
(1,838)
|
|
Purchased
value of in-force business
|
|
(349)
|
|
(358)
|
|
(377)
|
|
Other,
including deferred tax effects
|
|
196
|
|
213
|
|
264
|
|
Tangible net assets
|
|
39,214
|
|
39,271
|
|
37,267
|
|
|
|
|
|
|
|
|
|
Ordinary
shares in issue, excluding Own shares
|
|
71,387m
|
|
71,349m
|
|
71,263m
|
|
Tangible
net assets per share
|
|
54.9p
|
|
55.0p
|
|
52.3p
|
NOTES
(continued)
7.
Capital
and leverage disclosures
|
|
|
Transitional
|
|
Fully loaded position
|
|
|
|
At 30 Sept
2016
|
|
At
31 Dec
2015
1
|
|
At 30 Sept
2016
|
|
At
31 Dec
2015
1
|
|
Capital resources
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
Common
equity tier 1
|
|
|
|
|
|
|
|
|
|
Shareholders’
equity per balance sheet
|
|
43,072
|
|
41,234
|
|
43,072
|
|
41,234
|
|
Deconsolidation
adjustments
1
|
|
1,421
|
|
1,119
|
|
1,421
|
|
1,119
|
|
Other
adjustments
1
|
|
(4,497)
|
|
(2,556)
|
|
(4,497)
|
|
(2,556)
|
|
Deductions
from common equity tier 1
1
|
|
(10,068)
|
|
(11,253)
|
|
(10,111)
|
|
(11,292)
|
|
Common equity tier 1 capital
|
|
29,928
|
|
28,544
|
|
29,885
|
|
28,505
|
|
Additional
tier 1 instruments
|
|
8,626
|
|
9,177
|
|
5,320
|
|
5,355
|
|
Deductions
from tier 1
|
|
(1,331)
|
|
(1,177)
|
|
−
|
|
−
|
|
Total tier 1 capital
|
|
37,223
|
|
36,544
|
|
35,205
|
|
33,860
|
|
Tier 2
instruments and eligible provisions
|
|
13,580
|
|
13,208
|
|
9,731
|
|
9,189
|
|
Deductions
from tier 2
|
|
(1,564)
|
|
(1,756)
|
|
(2,895)
|
|
(2,933)
|
|
Total capital resources
|
|
49,239
|
|
47,996
|
|
42,041
|
|
40,116
|
|
Risk-weighted assets
|
|
|
|
|
|
|
|
|
|
Foundation
IRB Approach
|
|
67,897
|
|
68,990
|
|
67,897
|
|
68,990
|
|
Retail
IRB Approach
|
|
65,594
|
|
63,912
|
|
65,594
|
|
63,912
|
|
Other
IRB Approach
|
|
17,460
|
|
18,661
|
|
17,460
|
|
18,661
|
|
IRB Approach
|
|
150,951
|
|
151,563
|
|
150,951
|
|
151,563
|
|
Standardised
Approach
|
|
20,167
|
|
20,443
|
|
20,167
|
|
20,443
|
|
Credit risk
|
|
171,118
|
|
172,006
|
|
171,118
|
|
172,006
|
|
Counterparty
credit risk
|
|
9,526
|
|
7,981
|
|
9,526
|
|
7,981
|
|
Contributions
to the default fund of a central counterparty
|
|
351
|
|
488
|
|
351
|
|
488
|
|
Credit
valuation adjustment risk
|
|
1,028
|
|
1,684
|
|
1,028
|
|
1,684
|
|
Operational
risk
|
|
26,123
|
|
26,123
|
|
26,123
|
|
26,123
|
|
Market
risk
|
|
2,929
|
|
3,775
|
|
2,929
|
|
3,775
|
|
Underlying risk-weighted assets
|
|
211,075
|
|
212,057
|
|
211,075
|
|
212,057
|
|
Threshold
risk-weighted assets
|
|
11,316
|
|
10,788
|
|
11,207
|
|
10,690
|
|
Total risk-weighted assets
|
|
222,391
|
|
222,845
|
|
222,282
|
|
222,747
|
|
Leverage
|
|
|
|
|
|
|
|
|
|
Statutory
balance sheet assets
|
|
|
|
|
|
840,209
|
|
806,688
|
|
Deconsolidation
and other adjustments
1
|
|
|
|
|
|
(167,261)
|
|
(150,912)
|
|
Off-balance
sheet items
|
|
|
|
|
|
59,464
|
|
56,424
|
|
Total exposure measure
|
|
|
|
|
|
732,412
|
|
712,200
|
|
Ratios
|
|
|
|
|
|
|
|
|
|
Common
equity tier 1 capital ratio
|
|
13.5%
|
|
12.8%
|
|
13.4%
|
|
12.8%
|
|
Tier 1
capital ratio
|
|
16.7%
|
|
16.4%
|
|
15.8%
|
|
15.2%
|
|
Total
capital ratio
|
|
22.1%
|
|
21.5%
|
|
18.9%
|
|
18.0%
|
|
Leverage
ratio
2
|
|
|
|
|
|
4.8%
|
|
4.8%
|
|
Average
leverage ratio
3
|
|
|
|
|
|
4.7%
|
|
|
|
Average
leverage exposure measure
4
|
|
|
|
|
|
732,106
|
|
|
|
1
|
Deconsolidation
adjustments relate to the deconsolidation of certain Group entities
for regulatory capital and leverage purposes, being primarily the
Group’s Insurance business. The presentation of the
deconsolidation adjustments through common equity tier 1 capital
has been amended during 2016 with comparative figures restated
accordingly across deconsolidation adjustments, other adjustments
and deductions.
|
|
2
|
The
countercyclical leverage ratio buffer is currently
nil.
|
|
3
|
The
average leverage ratio is based on the average of the month end
tier 1 capital and exposure measures over the quarter (1 July 2016
to 30 September 2016). The average of 4.7 per cent compares to
4.7 per cent at the start of the quarter and 4.8 per cent
at the end of the quarter. The ratio increased towards the end of
the quarter as a result of an increase in tier 1
capital.
|
|
4
|
The
average leverage exposure measure is based on the average of the
month end exposure measures over the quarter (1 July 2016 to 30
September 2016).
|
NOTES
(continued)
8.
Modified
leverage ratio
The
Group’s leverage ratio on a modified basis, excluding
qualifying central bank claims from the leverage exposure measure,
is 5.3 per cent. This follows the recent rule modification
implemented by the Prudential Regulation Authority to the UK
Leverage Ratio Framework as a result of recommendations made by the
Financial Policy Committee.
The
Financial Policy Committee has indicated that it intends to
recalibrate the UK framework in 2017 in order to adjust for the
impact of the rule modification, thereby ensuring that levels of
capital currently required to meet leverage ratio minimums are
maintained. The modified leverage ratio should therefore be
considered in the context of the proposed
recalibration.
9.
Summary
of alternative performance measures
The
Group calculates a number of metrics that are used throughout the
banking and insurance industries on an underlying basis. A
description of these measures and their calculation is set out
below.
|
Asset
quality ratio
|
The
underlying impairment charge for the period (on an annualised
basis) in respect of loans and advances to customers after releases
and recoveries expressed as a percentage of average gross loans and
advances to customers for the period
|
|
Banking
net interest margin
|
Banking
net interest income on customer and product balances in the banking
businesses as a percentage of average gross banking
interest-earning assets for the period
|
|
Cost:income
ratio
|
Operating
costs as a percentage of total income net of insurance claims less
operating lease depreciation calculated on an underlying
basis
|
|
Gross
asset quality ratio
|
The
underlying impairment charge for the period (on an annualised
basis) in respect of loans and advances to customers before
releases and recoveries expressed as a percentage of average gross
loans and advances to customers for the period
|
|
Impaired
loans as a percentage of advances
|
Impaired
loans and advances to customers adjusted to exclude Retail and
Consumer Finance loans in recoveries expressed as a percentage of
closing gross loans and advances to customers
|
|
Loan to
deposit ratio
|
The
ratio of loans and advances to customers net of allowance for
impairment losses and excluding reverse repurchase agreements
divided by customer deposits excluding repurchase
agreements
|
|
Operating
Jaws
|
The
difference between the period on period percentage change in total
income net of insurance claims less operating lease depreciation
and the period on period change in operating costs calculated on an
underlying basis
|
|
Required
equity
|
The
amount of shareholders’ equity and non-controlling interests
required to achieve a common equity tier 1 ratio of 12.0 per cent
after allowing for regulatory adjustments and
deductions
|
|
Return
on assets
|
Underlying
profit before tax divided by average total assets for the
period
|
|
Return
on required equity
|
Statutory
profit after tax adjusted to reflect the notional earnings on any
excess or shortfall in equity less the post-tax profit attributable
to other equity holders divided by the average required equity for
the period
|
|
Return
on risk-weighted assets
|
Underlying
profit before tax divided by average risk-weighted
assets
|
|
Tangible
net assets per share
|
Net
assets excluding intangible assets such as goodwill and
acquisition-related intangibles divided by the weighted average
number of ordinary shares in issue
|
|
Underlying
profit
|
Statutory
profit adjusted for certain items as detailed in the Basis of
Preparation
|
|
Underlying
return on required equity
|
Underlying
profit after tax at the standard UK corporation tax rate adjusted
to reflect the banking tax surcharge and the notional earnings on
any excess or shortfall in equity less the post-tax profit
attributable to other equity holders divided by the average
required equity for the period
|
CONTACTS
For
further information please contact:
INVESTORS AND ANALYSTS
Douglas
Radcliffe
Group
Investor Relations Director
020
7356 1571
douglas.radcliffe@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
Signatures
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
LLOYDS
BANKING GROUP plc
(Registrant)
By: Douglas
Radcliffe
Name: Douglas
Radcliffe
Title: Group
Investor Relations Director
Date:
26 October 2016
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