“The coronavirus pandemic continues to have a significant impact on people, businesses and communities in the UK and around the world. Whilst we are seeing positive signs, notably the progress of the vaccine roll-out and the emergence from lockdown restrictions, the outlook remains uncertain. The Group remains absolutely focused on supporting its customers and Helping Britain Recover from the financial effects of the pandemic.
The long-run transformation of the Group has positioned the business well to address the challenges of the pandemic. We have made a strong start to the year with the quarterly results and on delivering Strategic Review 2021.
It is with both pride and sadness that I will step down as Group Chief Executive later this month. Most importantly, the Group is well placed for sustainable success and the publication of Strategic Review 2021 in February shows that the Group has clear execution outcomes for 2021, underpinned by long-term strategic vision. The Group also has exceptional people. I am very proud of all of our colleagues across the Group, who have again shown their continued dedication and relentless focus on supporting their customers through these challenging times.”
António Horta-Osório, Group Chief Executive
“As this is António's last set of results, I would like to take this opportunity to thank him, on behalf of the Board, for his outstanding contribution. Over the last decade he has led the transformation of the business; delivering its purpose of Helping Britain Prosper whilst creating a truly customer focussed business underpinned by strong financial foundations.”
Robin Budenberg, Chair
|
|
|
|
|
|
HIGHLIGHTS FOR THE THREE MONTHS ENDED 31 MARCH 2021 Solid financial performance reflects business momentum and improved economic outlook • Statutory profit after tax of £1,397 million supported by business momentum and a release of expected credit loss provisions, given the improved economic outlook. Statutory return on tangible equity of 13.9 per cent with tangible net assets per share of 52.4 pence • Recovering trading surplus of £1,748 million, a reduction of 12 per cent compared to the first three months of 2020, but an increase of 21 per cent on the final quarter of 2020 – Net income of £3.7 billion, down 7 per cent year on year (up 2 per cent on the previous quarter), with higher average interest-earning assets of £439 billion, net interest margin of 2.49 per cent and other income of £1.1 billion – Total costs of £1.9 billion down 2 per cent, driven by continued operating cost control and lower remediation costs • Asset quality remains strong with credit experience benign. Net impairment credit of £323 million in the quarter, driven by a £459 million release given the UK's improved economic outlook. Management judgements in respect of coronavirus retained, now c.£1 billion including the £400 million central overlay taken in the fourth quarter Balance sheet and capital strength further enhanced • Capital build of 54 basis points in the quarter with CET1 ratio of 16.7 per cent, significantly ahead of the ongoing target of c.12.5 per cent, plus a management buffer of c.1 per cent and regulatory requirements of c.11 per cent • Loans and advances up £3.3 billion in the quarter to £443.5 billion, including £6.0 billion open mortgage book growth • Customer deposits up £11.7 billion in the quarter to £462.4 billion with Retail current accounts up £5.6 billion • Loan to deposit ratio of 96 per cent provides a strong liquidity position and significant potential to lend into recovery Outlook • Given the solid financial performance in the first quarter of 2021, the Group is enhancing its guidance for 2021. Based on the Group's current economic assumptions: – Net interest margin now expected to be in excess of 245 basis points – Operating costs to reduce to c.£7.5 billion – Net asset quality ratio now expected to be below 25 basis points – Risk-weighted assets in 2021 to be broadly stable on 2020 – Statutory return on tangible equity now expected to be between 8 and 10 per cent, excluding c.2.5 percentage point benefit from tax rate changes – Accruing dividends with intention to resume progressive and sustainable ordinary dividend policy |
|
|
|
|
|
INCOME STATEMENT − UNDERLYING BASIS
|
|
Quarter |
|
|
Quarter |
|
|
Change |
|
Quarter |
|
|
Change |
|||||
|
|
£m |
|
|
£m |
|
|
% |
|
£m |
|
|
% |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Net interest income |
2,677 |
|
|
|
2,950 |
|
|
|
(9) |
|
|
2,677 |
|
|
|
– |
|
|
Other income |
1,135 |
|
|
|
1,226 |
|
|
|
(7) |
|
|
1,066 |
|
|
|
6 |
|
|
Operating lease depreciation |
(148) |
|
|
|
(224) |
|
|
|
34 |
|
|
(150) |
|
|
|
1 |
|
|
Net income |
3,664 |
|
|
|
3,952 |
|
|
|
(7) |
|
|
3,593 |
|
|
|
2 |
|
|
Operating costs |
(1,851) |
|
|
|
(1,877) |
|
|
|
1 |
|
|
(2,028) |
|
|
|
9 |
|
|
Remediation |
(65) |
|
|
|
(87) |
|
|
|
25 |
|
|
(125) |
|
|
|
48 |
|
|
Total costs |
(1,916) |
|
|
|
(1,964) |
|
|
|
2 |
|
|
(2,153) |
|
|
|
11 |
|
|
Trading surplus |
1,748 |
|
|
|
1,988 |
|
|
|
(12) |
|
|
1,440 |
|
|
|
21 |
|
|
Impairment |
323 |
|
|
|
(1,430) |
|
|
|
|
|
(128) |
|
|
|
|
||
|
Underlying profit |
2,071 |
|
|
|
558 |
|
|
|
|
|
1,312 |
|
|
|
58 |
|
|
|
Restructuring |
(173) |
|
|
|
(63) |
|
|
|
|
|
(233) |
|
|
|
26 |
|
|
|
Volatility and other items |
– |
|
|
|
(421) |
|
|
|
|
|
(202) |
|
|
|
|
||
|
Payment protection insurance provision |
– |
|
|
|
– |
|
|
|
|
|
(85) |
|
|
|
|
||
|
Statutory profit before tax |
1,898 |
|
|
|
74 |
|
|
|
|
|
792 |
|
|
|
|
||
|
Tax (expense) credit |
(501) |
|
|
|
406 |
|
|
|
|
|
(112) |
|
|
|
|
||
|
Statutory profit after tax |
1,397 |
|
|
|
480 |
|
|
|
|
|
680 |
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Earnings per share |
1.8p |
|
|
0.5p |
|
|
|
|
0.7p |
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Banking net interest margin |
2.49% |
|
|
2.79% |
|
|
(30)bp |
|
2.46% |
|
|
3bp |
|||||
|
Average interest-earning banking assets |
£439bn |
|
|
£432bn |
|
|
2 |
|
|
£437bn |
|
|
1 |
|
|||
|
Cost:income ratio |
52.3% |
|
|
49.7% |
|
|
2.6pp |
|
59.9% |
|
|
(7.6)pp |
|||||
|
Asset quality ratio |
(0.29)% |
|
|
1.30% |
|
|
(159)bp |
|
0.11% |
|
|
(40)bp |
|||||
|
Return on tangible equity |
13.9% |
|
|
3.7% |
|
|
10.2pp |
|
5.9% |
|
|
8.0pp |
|||||
KEY BALANCE SHEET METRICS
|
|
At 31 Mar |
|
At 31 Mar 2020 |
|
Change % |
|
At 31 Dec 2020 |
|
Change % |
||
|
|
|
|
|
|
|
|
|
|
|
||
|
Loans and advances to customers1 |
£444bn |
|
£443bn |
|
– |
|
|
£440bn |
|
1 |
|
|
Customer deposits2 |
£462bn |
|
£428bn |
|
8 |
|
|
£451bn |
|
3 |
|
|
Loan to deposit ratio |
96% |
|
103% |
|
(7)pp |
|
98% |
|
(2)pp |
||
|
CET1 ratio3 |
16.7% |
|
14.2% |
|
2.5pp |
|
16.2% |
|
0.5pp |
||
|
CET1 ratio pre IFRS 9 transitional relief3,4 |
15.8% |
|
13.9% |
|
1.9pp |
|
15.0% |
|
0.8pp |
||
|
Transitional MREL ratio3 |
36.1% |
|
34.5% |
|
1.6pp |
|
36.4% |
|
(0.3)pp |
||
|
UK leverage ratio3 |
6.0% |
|
5.3% |
|
0.7pp |
|
5.8% |
|
0.2pp |
||
|
Risk-weighted assets |
£199bn |
|
£209bn |
|
(5) |
|
|
£203bn |
|
(2) |
|
|
Wholesale funding |
£106bn |
|
£126bn |
|
(16) |
|
|
£109bn |
|
(4) |
|
|
Liquidity coverage ratio (12 month average) |
134% |
|
138% |
|
(4)pp |
|
136% |
|
(2)pp |
||
|
Tangible net assets per share |
52.4p |
|
57.4p |
|
(5.0)p |
|
52.3p |
|
0.1p |
||
1 Excludes reverse repos of £52.8 billion (31 March 2020: £55.2 billion; 31 December 2020: £58.6 billion).
2 Excludes repos of £8.5 billion (31 March 2020: £9.4 billion; 31 December 2020: £9.4 billion).
3 Incorporating profits for the period that remain subject to formal verification in accordance with the Capital Requirements Regulation.
4 CET1 ratio pre IFRS 9 transitional relief reflects the full impact of IFRS 9, prior to the application of transitional arrangements for capital that provide relief for the impact of IFRS 9.
QUARTERLY INFORMATION
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|||||
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Net interest income |
2,677 |
|
|
|
2,677 |
|
|
|
2,618 |
|
|
|
2,528 |
|
|
|
2,950 |
|
|
|
Other income |
1,135 |
|
|
|
1,066 |
|
|
|
988 |
|
|
|
1,235 |
|
|
|
1,226 |
|
|
|
Operating lease depreciation |
(148) |
|
|
|
(150) |
|
|
|
(208) |
|
|
|
(302) |
|
|
|
(224) |
|
|
|
Net income |
3,664 |
|
|
|
3,593 |
|
|
|
3,398 |
|
|
|
3,461 |
|
|
|
3,952 |
|
|
|
Operating costs |
(1,851) |
|
|
|
(2,028) |
|
|
|
(1,858) |
|
|
|
(1,822) |
|
|
|
(1,877) |
|
|
|
Remediation |
(65) |
|
|
|
(125) |
|
|
|
(77) |
|
|
|
(90) |
|
|
|
(87) |
|
|
|
Total costs |
(1,916) |
|
|
|
(2,153) |
|
|
|
(1,935) |
|
|
|
(1,912) |
|
|
|
(1,964) |
|
|
|
Trading surplus |
1,748 |
|
|
|
1,440 |
|
|
|
1,463 |
|
|
|
1,549 |
|
|
|
1,988 |
|
|
|
Impairment |
323 |
|
|
|
(128) |
|
|
|
(301) |
|
|
|
(2,388) |
|
|
|
(1,430) |
|
|
|
Underlying profit (loss) |
2,071 |
|
|
|
1,312 |
|
|
|
1,162 |
|
|
|
(839) |
|
|
|
558 |
|
|
|
Restructuring |
(173) |
|
|
|
(233) |
|
|
|
(155) |
|
|
|
(70) |
|
|
|
(63) |
|
|
|
Volatility and other items |
– |
|
|
|
(202) |
|
|
|
29 |
|
|
|
233 |
|
|
|
(421) |
|
|
|
Payment protection insurance provision |
– |
|
|
|
(85) |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
Statutory profit (loss) before tax |
1,898 |
|
|
|
792 |
|
|
|
1,036 |
|
|
|
(676) |
|
|
|
74 |
|
|
|
Tax (expense) credit |
(501) |
|
|
|
(112) |
|
|
|
(348) |
|
|
|
215 |
|
|
|
406 |
|
|
|
Statutory profit (loss) after tax |
1,397 |
|
|
|
680 |
|
|
|
688 |
|
|
|
(461) |
|
|
|
480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Banking net interest margin |
2.49% |
|
|
2.46% |
|
|
2.42% |
|
|
2.40% |
|
|
2.79% |
|
|||||
|
Average interest-earning banking assets |
£439bn |
|
|
£437bn |
|
|
£436bn |
|
|
£435bn |
|
|
£432bn |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Cost:income ratio |
52.3% |
|
|
59.9% |
|
|
56.9% |
|
|
55.2% |
|
|
49.7% |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Asset quality ratio |
(0.29)% |
|
|
0.11% |
|
|
0.27% |
|
|
2.16% |
|
|
1.30% |
|
|||||
|
Gross asset quality ratio |
(0.18)% |
|
|
0.16% |
|
|
0.28% |
|
|
2.19% |
|
|
1.35% |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Return on tangible equity1 |
13.9% |
|
|
5.9% |
|
|
6.0% |
|
|
(6.1)% |
|
|
3.7% |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Loans and advances to customers2 |
£444bn |
|
|
£440bn |
|
|
£439bn |
|
|
£440bn |
|
|
£443bn |
|
|||||
|
Customer deposits3 |
£462bn |
|
|
£451bn |
|
|
£447bn |
|
|
£441bn |
|
|
£428bn |
|
|||||
|
Loan to deposit ratio |
96% |
|
|
98% |
|
|
98% |
|
|
100% |
|
|
103% |
|
|||||
|
Risk-weighted assets |
£199bn |
|
|
£203bn |
|
|
£205bn |
|
|
£207bn |
|
|
£209bn |
|
|||||
|
Tangible net assets per share |
52.4p |
|
|
52.3p |
|
|
52.2p |
|
|
51.6p |
|
|
57.4p |
|
|||||
1 Revised basis, calculation shown on page 10.
2 Excludes reverse repos.
3 Excludes repos.
BALANCE SHEET ANALYSIS
|
|
At 31 Mar |
|
At 31 Mar 2020 |
|
Change |
|
At 31 Dec 2020 |
|
Change |
|||||
|
|
£bn |
|
£bn |
|
% |
|
£bn |
|
% |
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Loans and advances to customers |
|
|
|
|
|
|
|
|
|
|||||
|
Open mortgage book |
283.3 |
|
|
268.1 |
|
|
6 |
|
|
277.3 |
|
|
2 |
|
|
Closed mortgage book |
15.9 |
|
|
17.9 |
|
|
(11) |
|
|
16.5 |
|
|
(4) |
|
|
Credit cards |
13.5 |
|
|
16.7 |
|
|
(19) |
|
|
14.3 |
|
|
(6) |
|
|
UK Retail unsecured loans |
7.8 |
|
|
8.6 |
|
|
(9) |
|
|
8.0 |
|
|
(3) |
|
|
UK Motor Finance |
14.9 |
|
|
15.8 |
|
|
(6) |
|
|
14.7 |
|
|
1 |
|
|
Overdrafts |
0.9 |
|
|
1.2 |
|
|
(25) |
|
|
0.9 |
|
|
– |
|
|
Retail other1 |
10.3 |
|
|
9.3 |
|
|
11 |
|
|
10.4 |
|
|
(1) |
|
|
SME2 |
41.1 |
|
|
32.0 |
|
|
28 |
|
|
40.6 |
|
|
1 |
|
|
Mid Corporates |
4.0 |
|
|
4.7 |
|
|
(15) |
|
|
4.1 |
|
|
(2) |
|
|
Corporate and Institutional |
45.6 |
|
|
60.9 |
|
|
(25) |
|
|
46.0 |
|
|
(1) |
|
|
Commercial Banking other |
4.1 |
|
|
4.9 |
|
|
(16) |
|
|
4.3 |
|
|
(5) |
|
|
Wealth |
1.0 |
|
|
0.9 |
|
|
11 |
|
|
0.9 |
|
|
11 |
|
|
Central items |
1.1 |
|
|
2.1 |
|
|
(48) |
|
|
2.2 |
|
|
(50) |
|
|
Loans and advances to customers3 |
443.5 |
|
|
443.1 |
|
|
– |
|
|
440.2 |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Customer deposits |
|
|
|
|
|
|
|
|
|
|||||
|
Retail current accounts |
103.0 |
|
|
79.9 |
|
|
29 |
|
|
97.4 |
|
|
6 |
|
|
Commercial current accounts2,4 |
47.2 |
|
|
34.5 |
|
|
37 |
|
|
47.6 |
|
|
(1) |
|
|
Retail relationship savings accounts |
158.2 |
|
|
144.1 |
|
|
10 |
|
|
154.1 |
|
|
3 |
|
|
Retail tactical savings accounts |
13.8 |
|
|
12.7 |
|
|
9 |
|
|
14.0 |
|
|
(1) |
|
|
Commercial deposits2,5 |
125.5 |
|
|
142.5 |
|
|
(12) |
|
|
122.7 |
|
|
2 |
|
|
Wealth |
14.1 |
|
|
13.3 |
|
|
6 |
|
|
14.1 |
|
|
– |
|
|
Central items |
0.6 |
|
|
1.4 |
|
|
(57) |
|
|
0.8 |
|
|
(25) |
|
|
Total customer deposits6 |
462.4 |
|
|
428.4 |
|
|
8 |
|
|
450.7 |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Total assets |
869.5 |
|
|
861.7 |
|
|
1 |
|
|
871.3 |
|
|
– |
|
|
Total liabilities |
820.0 |
|
|
809.0 |
|
|
1 |
|
|
821.9 |
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Ordinary shareholders' equity |
43.4 |
|
|
46.6 |
|
|
(7) |
|
|
43.3 |
|
|
– |
|
|
Other equity instruments |
5.9 |
|
|
5.9 |
|
|
– |
|
|
5.9 |
|
|
– |
|
|
Non-controlling interests |
0.2 |
|
|
0.2 |
|
|
– |
|
|
0.2 |
|
|
– |
|
|
Total equity |
49.5 |
|
|
52.7 |
|
|
(6) |
|
|
49.4 |
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Ordinary shares in issue, excluding own shares |
70,936m |
|
70,411m |
|
1 |
|
|
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.