Coronavirus Update

Lloyds Banking Group Plc - Q1 2020 Interim Management Statement

This content has been sourced from: https://www.investegate.co.uk/lloyds-banking-group...

Lloyds Banking Group Plc 

Interim Results

Supporting customers and colleagues in difficult times

  • Actively supporting retail, small business and commercial customers in the current environment through a range of flexible propositions and full support for Government schemes, including Coronavirus Business Interruption Loan Scheme (CBILS) and Covid Corporate Financing Facility (CCFF)
  • Strong operational resilience with c.90 per cent of branches remaining open and ATM availability exceeding 95 per cent
  • Multi-channel distribution model, with the UK's leading digital bank enabling the Group to continue to serve customers throughout the lockdown

Financial performance reflects revised economic outlook

  • Statutory profit before tax of £74 million, impacted by a significantly increased impairment charge of £1,430 million given the revised economic outlook. Statutory return on tangible equity of 5.0 per cent with tangible net assets per share of 57.4 pence
  • Solid trading surplus of £1,988 million, a reduction of 19 per cent compared to the first three months of 2019, but an increase of 7 per cent on the final quarter of 2019 (decrease of 4 per cent excluding the bank levy)
  • Net income of £4.0 billion, down 11 per cent, with average interest-earning banking assets slightly lower at £432 billion, net interest margin of 2.79 per cent and other income of £1.2 billion, down 21 per cent year on year due to lower levels of client activity and the absence of 2019 one-off items
  • Total costs of £2.0 billion down 1 per cent, after absorbing coronavirus-related expenses, driven by continued reductions in operating costs, down 4 per cent
  • The impairment charge in the quarter increased significantly to £1,430 million, primarily driven by updates to the Group's economic outlook and some charges relating to existing restructuring cases. Given the economic outlook we will inevitably be impacted both within the existing book and potentially in the new lending we are undertaking to support our customers. However, the Group's loan portfolio remains robust and well positioned given its low risk business model

Balance sheet strength maintained with capital, funding and liquidity remaining strong

  • CET1 ratio remains strong at 14.2 per cent with CCyB reduced to zero, resulting in increased headroom over regulatory requirements; significant resources to support customers while absorbing potential credit losses
  • Loans and advances increased £2.7 billion in the quarter to £443.1 billion, with increased corporate lending, primarily drawdowns of existing corporate facilities, partially offset by expected reductions in the mortgage book along with reductions in credit cards, where customer activity reduced in March
  • Loan to deposit ratio down 4 percentage points to 103 per cent, largely due to increased commercial deposits

Outlook

  • Given the significant change in the operating environment and economic expectations the Group's previous guidance is no longer appropriate. The impact of lower rates, lower levels of activity and higher impairment on the Group's business will continue into the second quarter, but remains difficult to quantify given the significant uncertainty. The Group will update the market once there is greater clarity
  • The longer-term impact of coronavirus remains unclear but the Group will maintain its focus on supporting customers and the UK economy while remaining well positioned to deliver for customers beyond the crisis