Strong financial performance with improved profit and returns on both an underlying and statutory basis
· Underlying profit for the nine months of £6.6 billion, 8 per cent higher than the previous year, with an underlying return on tangible equity of 16.2 per cent
· Strong third quarter with income up 8 per cent driven by organic growth and MBNA
· Total income for the nine months 6 per cent higher with improved net interest income and other income; net interest margin increased to 2.85 per cent
· Positive operating jaws; market-leading cost:income ratio improved to 45.9 per cent
· Asset quality remains strong with impairment charge of £538 million; asset quality ratio of 16 basis points
· Statutory profit before tax 38 per cent higher at £4.5 billion with return on tangible equity of 10.5 per cent
· Strong capital generation of c.185 basis points with a CET1 ratio of 14.9 per cent, pre dividend
· Capital requirements continue to evolve and seeing some upward pressure
Our differentiated UK focused business model continues to deliver with the UK economy remaining resilient; well positioned for future growth
· UK's largest and top-ranked digital bank; 13.2 million online customers, of which 9 million active mobile customers
· MBNA integration now expected to complete by end of Q1 2019, ahead of schedule
· Announced the acquisition of Zurich's UK workplace pensions and savings business
· Continued lending growth in targeted segments including the open mortgage book
· Improved credit ratings from Moody's: Lloyds Bank upgraded to Aa3 and Lloyds Banking Group upgraded to A3
· New organisational structure implemented ahead of announcement of strategic review in February
Improved financial guidance for capital and net interest margin with longer term guidance maintained
· Capital generation in 2017 now expected to be between 225 and 240 basis points and will mitigate upward pressure on capital requirements
· Net interest margin expected to be stable in the fourth quarter and for the year to be around 2.85 per cent
· Asset quality ratio for the year expected to be less than 20 basis points
GROUP CHIEF EXECUTIVE'S STATEMENT
In the first nine months of the year we have delivered strong financial performance with increased underlying and statutory profit, a significant improvement in returns and strong capital generation. These results highlight the strength of our customer focused, simple and low risk business model and the benefits of our competitive advantage in the UK. Asset quality remains strong, reflecting our prudent approach to risk, while the UK economy remains resilient.
We continue to focus on supporting people, businesses and communities, as set out in our Helping Britain Prosper Plan while making good progress against our strategic priorities of creating the best customer experience; becoming simpler and more efficient; and delivering sustainable growth. We are ahead of schedule with the integration of MBNA and now expect completion in the first quarter of 2019. We have also recently announced the acquisition of Zurich's UK workplace pensions and savings business which is in line with the Group's targeted growth strategy and accelerates the development of our financial planning and retirement business. A new organisational structure has also been implemented ahead of the announcement of our strategic review in February.
We have announced improved financial targets for 2017, reflecting the strong financial performance in the year, and we remain on track to deliver our longer term guidance.
António Horta-Osório
Group Chief Executive