RESULTS FOR THE HALF-YEAR
“During the first six months of 2021, the Group has delivered a solid financial performance with continued business momentum, bolstered by an improved macroeconomic outlook for the UK. While we are seeing clear progress in the vaccine roll out and emergence from lockdown restrictions, the coronavirus pandemic continues to have a significant impact on the people, businesses and communities of the UK. In this context, the Group remains committed to Helping Britain Recover from the pandemic and delivering for all stakeholders.”
William Chalmers
Interim Group Chief Executive
Solid financial performance with continued business momentum, bolstered by improved macroeconomic outlook
• Good progress on Strategic Review 2021 priorities, including record customer satisfaction scores, improved capabilities in Markets products and a leading payments card spend market share
• Announced today the acquisition of Embark, a fast growing investment and retirement platform business. Embark enhances our capabilities to address the attractive mass market and self-directed Wealth segment, completing the Group's Wealth proposition. Embark will also enable the Group to re-platform its pensions and retirement proposition, significantly strengthening its offering in Retirement, an important growth market
• Statutory profit before tax of £3.9 billion, increased significantly on first half of 2020, benefiting from solid business momentum and a net impairment credit in the period
• Net income of £7.6 billion, up 2 per cent, with increased average interest-earning assets at £441 billion, a strong banking net interest margin of 2.50 per cent and other income of £2.4 billion, alongside a reduction in operating lease depreciation
• Sustained cost discipline with operating costs of £3.7 billion, including the impact of rebuilding variable pay in the context of stronger than expected financial performance
• Remediation charge of £425 million, materially driven by the £91 million regulatory fine relating to the communication of historical insurance renewals, £150 million of redress and operational costs for HBOS Reading, and charges in relation to other ongoing legacy programmes
• Net impairment credit of £656 million, including £333 million in the second quarter, as a result of an £837 million release driven by improvements to the macroeconomic outlook for the UK, combined with robust credit performance. Management judgements in respect of coronavirus retained, now c.£1.2 billion
Balance sheet and capital strength further enhanced
• Loans and advances at £447.7 billion, up £7.5 billion in the period, driven by strong growth of £12.6 billion in the open mortgage book
• Customer deposits of £474.4 billion up £23.7 billion in the period, with continued inflows into the Group's trusted brands, including Retail current accounts which were up £9.9 billion in the period. Resulting loan to deposit ratio of 94 per cent, continues to provide a strong liquidity position and significant potential to lend into recovery
• Strong capital build of 93 basis points in the first half prior to the interim ordinary dividend. Reintroduced a progressive and sustainable ordinary dividend policy, with an interim ordinary dividend of 0.67 pence per share
• CET1 ratio of 16.7 per cent after dividend accrual, significantly ahead of both the ongoing target of c.12.5 per cent, plus a management buffer of c.1 per cent and regulatory requirement of c.11 per cent
Outlook
• Given our solid financial performance and the improved UK macroeconomic outlook, the Group is enhancing its guidance for 2021. Based on the Group's current macroeconomic assumptions:
– Net interest margin now expected to be around 250 basis points
– Operating costs now expected to be c.£7.6 billion
– Net asset quality ratio now expected to be below 10 basis points
– Return on tangible equity now expected to be c.10 per cent, excluding the c.2.5 percentage point benefit from tax rate changes
– Risk-weighted assets in 2021 now expected to be below £200 billion
INCOME STATEMENT − UNDERLYING BASIS†
|
|
Half-year to 30 June 2021 |
|
|
Half-year to 30 June 2020 |
|
|
Change |
|
Half-year to 31 Dec 2020 |
|
|
Change |
|||||
|
|
£m |
|
|
£m |
|
|
% |
|
£m |
|
|
% |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Net interest income |
5,418 |
|
|
|
5,478 |
|
|
|
(1) |
|
|
5,295 |
|
|
|
2 |
|
|
Other income |
2,417 |
|
|
|
2,461 |
|
|
|
(2) |
|
|
2,054 |
|
|
|
18 |
|
|
Operating lease depreciation |
(271) |
|
|
|
(526) |
|
|
|
48 |
|
|
(358) |
|
|
|
24 |
|
|
Net income |
7,564 |
|
|
|
7,413 |
|
|
|
2 |
|
|
6,991 |
|
|
|
8 |
|
|
Operating costs |
(3,730) |
|
|
|
(3,699) |
|
|
|
(1) |
|
|
(3,886) |
|
|
|
4 |
|
|
Remediation |
(425) |
|
|
|
(177) |
|
|
|
|
|
(202) |
|
|
|
|
||
|
Total costs |
(4,155) |
|
|
|
(3,876) |
|
|
|
(7) |
|
|
(4,088) |
|
|
|
(2) |
|
|
Underlying profit before impairment |
3,409 |
|
|
|
3,537 |
|
|
|
(4) |
|
|
2,903 |
|
|
|
17 |
|
|
Impairment |
656 |
|
|
|
(3,818) |
|
|
|
|
|
(429) |
|
|
|
|
||
|
Underlying profit (loss) |
4,065 |
|
|
|
(281) |
|
|
|
|
|
2,474 |
|
|
|
64 |
|
|
|
Restructuring |
(255) |
|
|
|
(133) |
|
|
|
(92) |
|
|
(388) |
|
|
|
34 |
|
|
Volatility and other items |
95 |
|
|
|
(188) |
|
|
|
|
|
(173) |
|
|
|
|
||
|
Payment protection insurance provision |
– |
|
|
|
– |
|
|
|
|
|
(85) |
|
|
|
|
||
|
Statutory profit (loss) before tax |
3,905 |
|
|
|
(602) |
|
|
|
|
|
1,828 |
|
|
|
|
||
|
Tax (expense) credit |
(40) |
|
|
|
621 |
|
|
|
|
|
(460) |
|
|
|
91 |
|
|
|
Statutory profit after tax |
3,865 |
|
|
|
19 |
|
|
|
|
|
1,368 |
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Earnings (loss) per share |
5.1p |
|
|
(0.3)p |
|
|
|
|
1.5p |
|
|
|
|||||
|
Dividends per share – ordinary |
0.67p |
|
|
– |
|
|
|
|
0.57p |
|
|
18 |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Banking net interest margin† |
2.50% |
|
|
2.59% |
|
|
(9)bp |
|
2.44% |
|
|
6bp |
|||||
|
Average interest-earning banking assets† |
£441bn |
|
|
£433bn |
|
|
2 |
|
|
£437bn |
|
|
1 |
|
|||
|
Cost:income ratio† |
54.9% |
|
|
52.3% |
|
|
2.6pp |
|
58.5% |
|
|
(3.6)pp |
|||||
|
Asset quality ratio† |
(0.30)% |
|
|
1.73% |
|
|
(203)bp |
|
0.19% |
|
|
(49)bp |
|||||
|
Return on tangible equity1,† |
19.2% |
|
|
(1.3)% |
|
|
20.5pp |
|
5.9% |
|
|
13.3pp |
|||||
KEY BALANCE SHEET METRICS
|
|
At 30 June 2021 |
|
|
At 30 June 2020 |
|
|
Change % |
|
At 31 Dec 2020 |
|
|
Change % |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Loans and advances to customers2 |
£448bn |
|
|
£440bn |
|
|
2 |
|
|
£440bn |
|
|
2 |
|
|
Customer deposits3 |
£474bn |
|
|
£441bn |
|
|
8 |
|
|
£451bn |
|
|
5 |
|
|
Loan to deposit ratio† |
94% |
|
|
100% |
|
|
(6)pp |
|
98% |
|
|
(4)pp |
||
|
CET1 ratio |
16.7% |
|
|
14.6% |
|
|
2.1pp |
|
16.2% |
|
|
0.5pp |
||
|
CET1 ratio pre IFRS 9 transitional relief and software4 |
15.5% |
|
|
13.4% |
|
|
2.1pp |
|
14.5% |
|
|
1.0pp |
||
|
Transitional MREL ratio |
36.3% |
|
|
36.8% |
|
|
(0.5)pp |
|
36.4% |
|
|
(0.1)pp |
||
|
UK leverage ratio |
5.8% |
|
|
5.4% |
|
|
0.4pp |
|
5.8% |
|
|
– |
||
|
Risk-weighted assets |
£201bn |
|
|
£207bn |
|
|
(3) |
|
|
£203bn |
|
|
(1) |
|
|
Tangible net assets per share† |
55.6p |
|
|
51.6p |
|
|
4.0p |
|
52.3p |
|
|
3.3p |
||
1 Revised basis, calculation shown on page 31.
2 Excludes reverse repos of £52.7 billion (30 June 2020: £61.1 billion; 31 December 2020: £58.6 billion).
3 Excludes repos of £7.9 billion (30 June 2020: £12.3 billion; 31 December 2020 £9.4 billion).
4 CET1 ratio 'pre IFRS 9 transitional relief and software' reflects the full impact of IFRS 9, prior to the application of the transitional relief arrangements and the reversal of the beneficial treatment currently applied to intangible software assets.
QUARTERLY INFORMATION†
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
||||||
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Net interest income |
2,741 |
|
|
|
2,677 |
|
|
|
2,677 |
|
|
|
2,618 |
|
|
|
2,528 |
|
|
|
2,950 |
|
|
|
Other income |
1,282 |
|
|
|
1,135 |
|
|
|
1,066 |
|
|
|
988 |
|
|
|
1,235 |
|
|
|
1,226 |
|
|
|
Operating lease depreciation |
(123) |
|
|
|
(148) |
|
|
|
(150) |
|
|
|
(208) |
|
|
|
(302) |
|
|
|
(224) |
|
|
|
Net income |
3,900 |
|
|
|
3,664 |
|
|
|
3,593 |
|
|
|
3,398 |
|
|
|
3,461 |
|
|
|
3,952 |
|
|
|
Operating costs |
(1,879) |
|
|
|
(1,851) |
|
|
|
(2,028) |
|
|
|
(1,858) |
|
|
|
(1,822) |
|
|
|
(1,877) |
|
|
|
Remediation |
(360) |
|
|
|
(65) |
|
|
|
(125) |
|
|
|
(77) |
|
|
|
(90) |
|
|
|
(87) |
|
|
|
Total costs |
(2,239) |
|
|
|
(1,916) |
|
|
|
(2,153) |
|
|
|
(1,935) |
|
|
|
(1,912) |
|
|
|
(1,964) |
|
|
|
Underlying profit before impairment |
1,661 |
|
|
|
1,748 |
|
|
|
1,440 |
|
|
|
1,463 |
|
|
|
1,549 |
|
|
|
1,988 |
|
|
|
Impairment |
333 |
|
|
|
323 |
|
|
|
(128) |
|
|
|
(301) |
|
|
|
(2,388) |
|
|
|
(1,430) |
|
|
|
Underlying profit (loss) |
1,994 |
|
|
|
2,071 |
|
|
|
1,312 |
|
|
|
1,162 |
|
|
|
(839) |
|
|
|
558 |
|
|
|
Restructuring |
(82) |
|
|
|
(173) |
|
|
|
(233) |
|
|
|
(155) |
|
|
|
(70) |
|
|
|
(63) |
|
|
|
Volatility and other items |
95 |
|
|
|
– |
|
|
|
(202) |
|
|
|
29 |
|
|
|
233 |
|
|
|
(421) |
|
|
|
Payment protection insurance provision |
– |
|
|
|
– |
|
|
|
(85) |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
Statutory profit (loss) before tax |
2,007 |
|
|
|
1,898 |
|
|
|
792 |
|
|
|
1,036 |
|
|
|
(676) |
|
|
|
74 |
|
|
|
Tax credit (expense) |
461 |
|
|
|
(501) |
|
|
|
(112) |
|
|
|
(348) |
|
|
|
215 |
|
|
|
406 |
|
|
|
Statutory profit (loss) after tax |
2,468 |
|
|
|
1,397 |
|
|
|
680 |
|
|
|
688 |
|
|
|
(461) |
|
|
|
480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Banking net interest margin† |
2.51% |
|
|
2.49% |
|
|
2.46% |
|
|
2.42% |
|
|
2.40% |
|
|
2.79% |
|
||||||
|
Average interest-earning banking assets† |
£442bn |
|
|
£439bn |
|
|
£437bn |
|
|
£436bn |
|
|
£435bn |
|
|
£432bn |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Cost:income ratio† |
57.4% |
|
|
52.3% |
|
|
59.9% |
|
|
56.9% |
|
|
55.2% |
|
|
49.7% |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Asset quality ratio† |
(0.30)% |
|
|
(0.29)% |
|
|
0.11% |
|
|
0.27% |
|
|
2.16% |
|
|
1.30% |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Return on tangible equity1,† |
24.4% |
|
|
13.9% |
|
|
5.9% |
|
|
6.0% |
|
|
(6.1%) |
|
|
3.7% |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Loans and advances to customers2 |
£448bn |
|
|
£444bn |
|
|
£440bn |
|
|
£439bn |
|
|
£440bn |
|
|
£443bn |
|
||||||
|
Customer deposits3 |
£474bn |
|
|
£462bn |
|
|
£451bn |
|
|
£447bn |
|
|
£441bn |
|
|
£428bn |
|
||||||
|
Loan to deposit ratio† |
94% |
|
|
96% |
|
|
98% |
|
|
98% |
|
|
100% |
|
|
103% |
|
||||||
|
Risk-weighted assets |
£201bn |
|
|
£199bn |
|
|
£203bn |
|
|
£205bn |
|
|
£207bn |
|
|
£209bn |
|
||||||
|
Tangible net assets per share† |
55.6p |
|
|
52.4p |
|
|
52.3p |
|
|
52.2p |
|
|
51.6p |
|
|
57.4p |
|
||||||
1 Revised basis, calculation shown on page 31.
2 Excludes reverse repos.
3 Excludes repos.
BALANCE SHEET ANALYSIS
|
|
At 30 June 2021 |
|
At 31 Mar 2021 |
|
Change |
|
At 30 June 2020 |
|
Change |
|
At 31 Dec 2020 |
|
Change |
|||||||
|
|
£bn |
|
£bn |
|
% |
|
£bn |
|
% |
|
£bn |
|
% |
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Loans and advances to customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Open mortgage book |
289.9 |
|
|
283.3 |
|
|
2 |
|
|
267.1 |
|
|
9 |
|
|
277.3 |
|
|
5 |
|
|
Closed mortgage book |
15.3 |
|
|
15.9 |
|
|
(4) |
|
|
17.5 |
|
|
(13) |
|
|
16.5 |
|
|
(7) |
|
|
Credit cards |
13.6 |
|
|
13.5 |
|
|
1 |
|
|
15.2 |
|
|
(11) |
|
|
14.3 |
|
|
(5) |
|
|
UK Retail unsecured loans |
8.0 |
|
|
7.8 |
|
|
3 |
|
|
8.2 |
|
|
(2) |
|
|
8.0 |
|
|
– |
|
|
UK Motor Finance |
14.4 |
|
|
14.9 |
|
|
(3) |
|
|
15.3 |
|
|
(6) |
|
|
14.7 |
|
|
(2) |
|
|
Overdrafts |
1.0 |
|
|
0.9 |
|
|
11 |
|
|
1.0 |
|
|
– |
|
|
0.9 |
|
|
11 |
|
|
Retail other1 |
10.5 |
|
|
10.3 |
|
|
2 |
|
|
9.7 |
|
|
8 |
|
|
10.4 |
|
|
1 |
|
|
SME2 |
40.4 |
|
|
41.1 |
|
|
(2) |
|
|
38.4 |
|
|
5 |
|
|
40.6 |
|
|
– |
|
|
Mid Corporates |
3.8 |
|
|
4.0 |
|
|
(5) |
|
|
4.6 |
|
|
(17) |
|
|
4.1 |
|
|
(7) |
|
|
Corporate and Institutional |
44.9 |
|
|
45.6 |
|
|
(2) |
|
|
55.0 |
|
|
(18) |
|
|
46.0 |
|
|
(2) |
|
|
Commercial Banking other |
3.9 |
|
|
4.1 |
|
|
(5) |
|
|
5.0 |
|
|
(22) |
|
|
4.3 |
|
|
(9) |
|
|
Wealth |
1.0 |
|
|
1.0 |
|
|
– |
|
|
0.9 |
|
|
11 |
|
|
0.9 |
|
|
11 |
|
|
Central items |
1.0 |
|
|
1.1 |
|
|
(9) |
|
|
2.5 |
|
|
(60) |
|
|
2.2 |
|
|
(55) |
|
|
Loans and advances to customers3 |
447.7 |
|
|
443.5 |
|
|
1 |
|
|
440.4 |
|
|
2 |
|
|
440.2 |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Customer deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Retail current accounts |
107.3 |
|
|
103.0 |
|
|
4 |
|
|
87.5 |
|
|
23 |
|
|
97.4 |
|
|
10 |
|
|
Commercial current accounts2,4 |
49.5 |
|
|
47.2 |
|
|
5 |
|
|
44.2 |
|
|
12 |
|
|
47.6 |
|
|
4 |
|
|
Retail relationship savings accounts |
161.3 |
|
|
158.2 |
|
|
2 |
|
|
148.5 |
|
|
9 |
|
|
154.1 |
|
|
5 |
|
|
Retail tactical savings accounts |
16.4 |
|
|
13.8 |
|
|
19 |
|
|
12.7 |
|
|
29 |
|
|
14.0 |
|
|
17 |
|
|
Commercial deposits2,5 |
124.5 |
|
|
125.5 |
|
|
(1) |
|
|
133.8 |
|
|
(7) |
|
|
122.7 |
|
|
1 |
|
|
Wealth |
14.8 |
|
|
14.1 |
|
|
5 |
|
|
13.5 |
|
|
10 |
|
|
14.1 |
|
|
5 |
|
|
Central items |
0.6 |
|
|
0.6 |
|
|
– |
|
|
0.9 |
|
|
(33) |
|
|
0.8 |
|
|
(25) |
|
|
Total customer deposits6 |
474.4 |
|
|
462.4 |
|
|
3 |
|
|
441.1 |
|
|
8 |
|
|
450.7 |
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Total assets |
879.7 |
|
|
869.5 |
|
|
1 |
|
873.0 |
|
|
1 |
|
|
871.3 |
|
|
1 |
|
|
|
Total liabilities |
827.8 |
|
|
820.0 |
|
|
1 |
|
824.1 |
|
|
– |
|
|
821.9 |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Ordinary shareholders' equity |
45.8 |
|
|
43.4 |
|
|
6 |
|
|
42.8 |
|
|
7 |
|
|
43.3 |
|
|
6 |
|
|
Other equity instruments |
5.9 |
|
|
5.9 |
|
|
– |
|
|
5.9 |
|
|
– |
|
|
5.9 |
|
|
– |
|
|
Non-controlling interests |
0.2 |
|
|
0.2 |
|
|
– |
|
|
0.2 |
|
|
– |
|
|
0.2 |
|
|
– |
|
|
Total equity |
51.9 |
|
|
49.5 |
|
|
5 |
|
|
48.9 |
|
|
6 |
|
|
49.4 |
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Ordinary shares in issue, excluding own shares |
70,956m |
|
70,936m |
|
– |
|
|
70,735m |
|
– |
|
|
70,812m |
|
– |
|
||||
1 Primarily Europe.
2 Includes Retail Business Banking.
3 Excludes reverse repos.
4 Primarily non-interest-bearing Commercial Banking current accounts.
5 Primarily Commercial Banking interest-bearing accounts.
6 Excludes repos.