Significant business progress with strong start to the Group's latest strategic plan
· Successful delivery including Open Banking, the launch of Lloyds Bank Corporate Markets and the planned integration of MBNA and Zurich's UK workplace pensions and savings business
· Strong start to GSR 3 with increased strategic investment, together with a reduction in the underlying cost base
· Continued growth in targeted segments, including SME, consumer finance and financial planning and retirement
Delivering a strong and sustainable financial performance
· Statutory profit after tax of £2.3 billion, up 38 per cent, and return on tangible equity of 12.1 per cent
· Earnings per share increased 45 per cent to 2.9 pence per share reflecting the improved profitability
· Underlying profit increased 7 per cent to £4.2 billion reflecting increased income and lower total costs
· Net income of £9.0 billion, 2 per cent higher reflecting an improved margin of 2.93 per cent, higher average interest earning assets at £436 billion and other income of £3.1 billion following a good second quarter
· Operating costs flat, despite increased investment and inclusion of the MBNA cost base; cost:income ratio further improved to 47.7 per cent (including remediation) and 44.9 per cent (excluding remediation)
· Credit quality remains strong with no deterioration in credit risk indicators; gross asset quality ratio stable at 27 basis points, with increase in net asset quality ratio to 20 basis points reflecting expected lower releases and write-backs
· Strong capital build of 121 basis points, including 25 basis points from the sale of the Irish mortgage portfolio, with pro forma CET1 ratio, pre dividend, of 15.1 per cent
· Group's Pillar 2A CET1 requirement reduced from 3.0 per cent to 2.7 per cent
· Increased interim ordinary dividend of 1.07 pence per share, in line with the Board's progressive and sustainable policy
· Tangible net assets per share increased to 52.1 pence per share
Improved guidance for 2018
· Capital increase now expected to be c.200 basis points, pre dividend
· Net interest margin for the full year now expected to be in line with the first half of 2018
· Asset quality ratio now expected to be less than 25 basis points
CONSOLIDATED INCOME STATEMENT − UNDERLYING BASIS
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
Half-year |
|
Half-year |
|
|
|
Half-year |
|
|
||||||||||
|
|
|
to 30 June |
|
to 30 June |
|
|
|
to 31 Dec |
|
|
||||||||||
|
|
|
2018 |
|
2017 |
|
Change |
|
2017 |
|
Change |
||||||||||
|
|
|
£m |
|
£m |
|
% |
|
£m |
|
% |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Net interest income |
|
6,344 |
|
5,925 |
|
7 |
|
6,395 |
|
(1) |
||||||||||
|
Other income |
|
3,124 |
|
3,348 |
|
(7) |
|
2,857 |
|
9 |
||||||||||
|
Total income |
|
9,468 |
|
9,273 |
|
2 |
|
9,252 |
|
2 |
||||||||||
|
Operating lease depreciation |
|
(497) |
|
(495) |
|
– |
|
(558) |
|
11 |
||||||||||
|
Net income |
|
8,971 |
|
8,778 |
|
2 |
|
8,694 |
|
3 |
||||||||||
|
Operating costs |
|
(4,024) |
|
(4,018) |
|
– |
|
(4,166) |
|
3 |
||||||||||
|
Remediation |
|
(257) |
|
(540) |
|
52 |
|
(325) |
|
21 |
||||||||||
|
Total costs |
|
(4,281) |
|
(4,558) |
|
6 |
|
(4,491) |
|
5 |
||||||||||
|
Impairment |
|
(456) |
|
(268) |
|
(70) |
|
(527) |
|
13 |
||||||||||
|
Underlying profit |
|
4,234 |
|
3,952 |
|
7 |
|
3,676 |
|
15 |
||||||||||
|
Restructuring |
|
(377) |
|
(321) |
|
(17) |
|
(300) |
|
(26) |
||||||||||
|
Volatility and other items |
|
(190) |
|
(37) |
|
|
|
(45) |
|
|
||||||||||
|
Payment protection insurance provision |
|
(550) |
|
(1,050) |
|
48 |
|
(600) |
|
8 |
||||||||||
|
Statutory profit before tax |
|
3,117 |
|
2,544 |
|
23 |
|
2,731 |
|
14 |
||||||||||
|
Tax expense |
|
(850) |
|
(905) |
|
6 |
|
(823) |
|
(3) |
||||||||||
|
Statutory profit after tax |
|
2,267 |
|
1,639 |
|
38 |
|
1,908 |
|
19 |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Earnings per share |
|
2.9p |
|
2.0p |
|
45 |
|
2.4p |
|
21 |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Banking net interest margin |
|
2.93% |
|
2.82% |
|
11bp |
|
2.90% |
|
3bp |
||||||||||
|
Average interest-earning banking assets |
|
£436bn |
|
£431bn |
|
1 |
|
£439bn |
|
(1) |
||||||||||
|
Cost:income ratio including remediation |
|
47.7% |
|
51.9% |
|
(4.2)pp |
|
51.7% |
|
(4.0)pp |
||||||||||
|
Asset quality ratio |
|
0.20% |
|
0.12% |
|
8bp |
|
0.24% |
|
(4)bp |
||||||||||
|
Underlying return on tangible equity |
|
16.3% |
|
14.5% |
|
1.8pp |
|
13.6% |
|
2.7pp |
||||||||||
|
Return on tangible equity |
|
12.1% |
|
8.2% |
|
3.9pp |
|
9.7% |
|
2.4pp |
||||||||||
BALANCE SHEET AND CAPITAL
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
At 30 June |
|
At 1 Jan |
|
|
|
At 31 Dec |
|
|
|||||||||||
|
|
|
2018 |
|
2018 |
|
Change |
|
2017 |
|
Change |
|||||||||||
|
|
|
|
|
(adjusted)1 |
|
% |
|
(reported) |
|
% |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Loans and advances to customers2 |
|
£442bn |
|
£444bn |
|
– |
|
£456bn |
|
(3) |
|||||||||||
|
Customer deposits3 |
|
£418bn |
|
£416bn |
|
– |
|
£416bn |
|
– |
|||||||||||
|
Loan to deposit ratio |
|
106% |
|
107% |
|
(1.1)pp |
|
110% |
|
(4.1)pp |
|||||||||||
|
Pro forma CET1 ratio pre 2018 dividend accrual4 |
|
15.1% |
|
13.9% |
|
1.2pp |
|
13.9% |
|
1.2pp |
|||||||||||
|
Pro forma CET1 ratio4 |
|
14.5% |
|
13.9% |
|
0.6pp |
|
13.9% |
|
0.6pp |
|||||||||||
|
Pro forma transitional MREL ratio4 |
|
29.7% |
|
26.0% |
|
3.7pp |
|
26.0% |
|
3.7pp |
|||||||||||
|
Pro forma UK leverage ratio4 |
|
5.3% |
|
5.4% |
|
(0.1)pp |
|
5.4% |
|
(0.1)pp |
|||||||||||
|
Risk-weighted assets |
|
£211bn |
|
£211bn |
|
– |
|
£211bn |
|
– |
|||||||||||
|
Pro forma risk-weighted assets4 |
|
£207bn |
|
£211bn |
|
(2) |
|
£211bn |
|
(2) |
|||||||||||
|
Tangible net assets per share |
|
52.1p |
|
51.7p |
|
0.4p |
|
53.3p |
|
(1.2)p |
|||||||||||