Lloyds Banking Group PLC / Key word(s): Interim Report
24.04.2024 / 08:00 CET/CEST The issuer is solely responsible for the content of this announcement.
Lloyds Banking Group plc Q1 2024 Interim Management Statement 24 April 2024 RESULTS FOR THE THREE MONTHS ENDED 31 MARCH 2024 "The Group is continuing to deliver in line with expectations in the first quarter of 2024, with solid net income, cost discipline and strong asset quality. Our performance provides us with further confidence around our strategic ambitions and 2024 and 2026 guidance. Guided by our purpose, we are continuing to support customers and successfully execute against our strategic outcomes, as highlighted in the third of our strategic seminars last month. This underpins our ambition of higher, more sustainable returns that will deliver for all of our stakeholders as we continue to Help Britain Prosper." Charlie Nunn, Group Chief Executive Financial performance in line with expectations1 Statutory profit after tax of £1.2 billion (three months to 31 March 2023: £1.6 billion) with net income down 9 per cent on the prior year and operating costs up 11 per cent, partly offset by the benefit of a lower impairment charge Return on tangible equity of 13.3 per cent (three months to 31 March 2023: 19.1 per cent) Underlying net interest income of £3.2 billion down 10 per cent, with a lower banking net interest margin, as expected, of 2.95 per cent and average interest-earning banking assets of £449.1 billion Underlying other income of £1.3 billion, 7 per cent higher, driven by continued recovery in customer and market activity and the benefits of strategic initiatives Operating lease depreciation of £283 million, up on the prior year reflecting a full quarter of depreciation from Tusker, alongside growth in fleet size and declines in used car prices; the charge is lower than the fourth quarter which included an additional c.£100 million residual value provision to offset developments in used car prices Operating costs of £2.4 billion, up 11 per cent, including c.£0.1 billion relating to the sector-wide change in the charging approach for the Bank of England levy (excluding this levy, operating costs were up 6 per cent) and elevated severance charges (£0.1 billion higher year to date). The Bank of England levy will have a broadly neutral impact on profit in 2024 with an offsetting benefit recognised through net interest income over the course of the year Remediation costs of £25 million (three months to 31 March 2023: £19 million), in relation to pre-existing programmes Underlying impairment charge of £57 million and asset quality ratio of 6 basis points. Excluding the impact of improvements to the economic outlook, the asset quality ratio was 23 basis points. The portfolio remains well-positioned with stable credit trends and strong asset quality Loans and advances to customers reduced during the quarter to £448.5 billion, primarily due to expected reductions in UK mortgage balances, given the refinancing of the higher maturities in the fourth quarter of 2023 Customer deposits of £469.2 billion decreased by £2.2 billion, with growth in Retail deposits of £1.3 billion more than offset by a reduction in Commercial Banking of £3.5 billion Strong capital generation of 40 basis points, after regulatory headwinds of 6 basis points. CET1 ratio of 13.9 per cent, ahead of ongoing target of c.13.0 per cent Risk-weighted assets of £222.8 billion up £3.7 billion in the quarter, including a c.£1.5 billion temporary increase that is expected to reverse in the second quarter Tangible net assets per share of 51.2 pence, up from 50.8 pence on 31 December 2023, driven by profit for the period, partly offset by the effects of increased longer-term rates on the cash flow hedge reserve and pension surplus During the quarter, the Group agreed the sale of its in-force bulk annuity portfolio to Rothesay Life plc, enabling the Insurance, Pensions and Investments division to focus on growing strategically important lines of business 2024 guidance reaffirmed Based on our current macroeconomic assumptions, for 2024 the Group continues to expect: Banking net interest margin of greater than 290 basis points Operating costs of c.£9.3 billion plus the c.£0.1 billion Bank of England levy Asset quality ratio of less than 30 basis points Return on tangible equity of c.13 per cent Capital generation of c.175 basis points2 Risk-weighted assets at between £220 billion and £225 billion To pay down to a CET1 ratio of c.13.5 per cent 1 See the basis of presentation on page 15. 2 Excluding capital distributions. Inclusive of ordinary dividends received from the Insurance business in February of the following year. INCOME STATEMENT (UNDERLYING BASIS)A AND KEY BALANCE SHEET METRICS
Three months ended 31 Mar 2024 £m
Three months ended 31 Mar 2023 £m
Change %
Three months ended 31 Dec 2023 £m
Change %
Underlying net interest income
3,184
3,535
(10)
3,317
(4)
Underlying other income
1,340
1,257
7
1,286
4
Operating lease depreciation
(283)
(140)
(371)
24
Net income
4,241
4,652
(9)
4,232
Operating costs
(2,402)
(2,170)
(11)
(2,486)
3
Remediation
(25)
(19)
(32)
(541)
95
Total costs
(2,427)
(2,189)
(11)
(3,027)
20
Underlying profit before impairment
1,814
2,463
(26)
1,205
51
Underlying impairment (charge) credit
(57)
(243)
77
541
Underlying profit
1,757
2,220
(21)
1,746
1
Restructuring
(12)
(12)
(85)
86
Volatility and other items
(117)
52
114
Statutory profit before tax
1,628
2,260
(28)
1,775
(8)
Tax expense
(413)
(619)
33
(541)
24
Statutory profit after tax
1,215
1,641
(26)
1,234
(2)
Earnings per share
1.7p
2.3p
(0.6)p
1.7p
Banking net interest marginA
2.95%
3.22%
(27)bp
2.98%
(3)bp
Average interest-earning banking assetsA
£449.1bn
£454.2bn
(1)
£452.8bn
(1)
Cost:income ratioA
57.2%
47.1%
10.1pp
71.5%
(14.3)pp
Asset quality ratioA
0.06%
0.22%
(16)bp
(0.47)%
Return on tangible equityA
13.3%
19.1%
(5.8)pp
13.9%
(0.6)pp
At 31 Mar 2024
At 31 Mar 2023
Change %
At 31 Dec 2023
At
Change %
Loans and advances to customers
£448.5bn
£452.3bn
(1)
£449.7bn
Customer deposits
£469.2bn
£473.1bn
(1)
£471.4bn
Loan to deposit ratioA
96%
96%
95%
1pp
CET1 ratio
13.9%
14.1%
(0.2)pp
14.6%
(0.7)pp
Pro forma CET1 ratioA,1
13.9%
14.1%
(0.2)pp
13.7%
0.2pp
Total capital ratio
19.0%
19.9%
(0.9)pp
19.8%
(0.8)pp
MREL ratio
32.0%
32.1%
(0.1)pp
31.9%
0.1pp
UK leverage ratio
5.6%
5.6%
5.8%
(0.2)pp
Risk-weighted assets
£222.8bn
£210.9bn
6
£219.1bn
2
Wholesale funding
£99.9bn
£101.1bn
(1)
£98.7bn
1
Liquidity coverage ratio2
143%
143%
142%
1pp
Net stable funding ratio3
130%
129%
1pp
130%
Tangible net assets per shareA
51.2p
49.6p
1.6p
50.8p
0.4p
A See page 14. 1 31 December 2023 reflects both the full impact of the share buyback announced in respect of 2023 and the ordinary dividend received from the Insurance business in February 2024, but excludes the impact of the phased unwind of IFRS 9 relief on 1 January 2024. 2 The liquidity coverage ratio is calculated as a monthly rolling simple average over the previous 12 months. 3 Net stable funding ratio is based on an average of the four previous quarters. QUARTERLY INFORMATIONA
Quarter ended 31 Mar 2024 £m
Quarter ended 31 Dec 2023 £m
Quarter ended 30 Sep 2023 £m
Quarter ended 30 Jun 2023 £m
Quarter ended 31 Mar 2023 £m
Underlying net interest income
3,184
3,317
3,444
3,469
3,535
Underlying other income
1,340
1,286
1,299
1,281
1,257
Operating lease depreciation
(283)
(371)
(229)
(216)
(140)
Net income
4,241
4,232
4,514
4,534
4,652
Operating costs
(2,402)
(2,486)
(2,241)
(2,243)
(2,170)
Remediation
(25)
(541)
(64)
(51)
(19)
Total costs
(2,427)
(3,027)
(2,305)
(2,294)
(2,189)
Underlying profit before impairment
1,814
1,205
2,209
2,240
2,463
Underlying impairment (charge) credit
(57)
541
(187)
(419)
(243)
Underlying profit
1,757
1,746
2,022
1,821
2,220
Restructuring
(12)
(85)
(44)
(13)
(12)
Volatility and other items
(117)
114
(120)
(198)
52
Statutory profit before tax
1,628
1,775
1,858
1,610
2,260
Tax expense
(413)
(541)
(438)
(387)
(619)
Statutory profit after tax
1,215
1,234
1,420
1,223
1,641
Earnings per share
1.7p
1.7p
2.0p
1.6p
2.3p
Banking net interest marginA
2.95%
2.98%
3.08%
3.14%
3.22%
Average interest-earning banking assetsA
£449.1bn
£452.8bn
£453.0bn
£453.4bn
£454.2bn
Cost:income ratioA
57.2%
71.5%
51.1%
50.6%
47.1%
Asset quality ratioA
0.06%
(0.47)%
0.17%
0.36%
0.22%
Return on tangible equityA
13.3%
13.9%
16.9%
13.6%
19.1%
At 31 Mar 2024
At 31 Dec 2023
At 30 Sep 2023
At 30 Jun 2023
At 31 Mar 2023
Loans and advances to customers1
£448.5bn
£449.7bn
£452.1bn
£450.7bn
£452.3bn
Customer deposits
£469.2bn
£471.4bn
£470.3bn
£469.8bn
£473.1bn
Loan to deposit ratioA
96%
95%
96%
96%
96%
CET1 ratio
13.9%
14.6%
14.6%
14.2%
14.1%
Pro forma CET1 ratioA,2
13.9%
13.7%
14.6%
14.2%
14.1%
Total capital ratio
19.0%
19.8%
19.9%
19.7%
19.9%
MREL ratio
32.0%
31.9%
32.6%
31.0%
32.1%
UK leverage ratio
5.6%
5.8%
5.7%
5.7%
5.6%
Risk-weighted assets
£222.8bn
£219.1bn
£217.7bn
£215.3bn
£210.9bn
Wholesale funding
£99.9bn
£98.7bn
£108.5bn
£103.5bn
£101.1bn
Liquidity coverage ratio3
143%
142%
142%
142%
143%
Net stable funding ratio4
130%
130%
130%
130%
129%
Tangible net assets per shareA
51.2p
50.8p
47.2p
45.7p
49.6p
1 The reduction between 30 September 2023 and 31 December 2023 reflects the impact of the securitisation of £2.7 billion of UK Retail unsecured loans in the fourth quarter of 2023. 2 31 December 2023 reflects both the full impact of the share buyback announced in respect of 2023 and the ordinary dividend received from the Insurance business in February 2024, but excludes the impact of the phased unwind of IFRS 9 relief on 1 January 2024. 3 The liquidity coverage ratio is calculated as a monthly rolling simple average over the previous 12 months. 4 Net stable funding ratio is based on an average of the four previous quarters. BALANCE SHEET ANALYSIS
At 31 Mar 2024 £bn
At 31 Mar 2023 £bn
Change %
At 31 Dec 2023 £bn
Change %
Loans and advances to customers
UK mortgages1
304.6
307.5
(1)
306.2
(1)
Credit cards
15.2
14.4
6
15.1
1
UK Retail unsecured loans2
7.6
9.0
(16)
6.9
10
UK Motor Finance
15.8
14.7
7
15.3
3
Overdrafts
1.0
1.0
1.1
(9)
Retail other1,3
16.9
15.1
12
16.6
2
Small and Medium Businesses
32.2
36.4
(12)
33.0
(2)
Corporate and Institutional Banking
55.6
56.7
(2)
55.6
Central Items4
(0.4)
(2.5)
84
(0.1)
Loans and advances to customers
448.5
452.3
(1)
449.7
Customer deposits
Retail current accounts
103.1
110.5
(7)
102.7
Retail savings accounts5
196.4
183.1
7
194.8
1
Wealth
10.2
12.9
(21)
10.9
(6)
Commercial Banking
159.3
166.5
(4)
162.8
(2)
Central Items
0.2
0.1
0.2
Customer deposits
469.2
473.1
(1)
471.4
Total assets
889.6
885.7
881.5
1
Total liabilities
841.8
837.8
834.1
1
Ordinary shareholders' equity
40.7
40.6
40.3
1
Other equity instruments
6.9
7.1
(3)
6.9
Non-controlling interests
0.2
0.2
0.2
Total equity
47.8
47.9
47.4
1
Ordinary shares in issue, excluding own shares
63,653m
66,396m
(4)
63,508m
1 Open mortgage book and closed mortgage book, previously presented separately, are now reported together as UK mortgages; Wealth, previously reported separately, is now included within Retail other. Comparatives have been presented on a consistent basis. 2 The reduction between 31 March 2023 and 31 December 2023 reflects the impact of the securitisation of £2.7 billion of UK Retail unsecured loans in the fourth quarter of 2023. 3 Retail other includes the European and Wealth businesses. 4 Central Items includes central fair value hedge accounting adjustments. 5 Retail relationship savings accounts and Retail tactical savings accounts, previously reported separately, are now reported together as Retail savings accounts. Comparatives have been presented on a consistent basis. GROUP RESULTS - STATUTORY BASIS The results below are prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRS). The underlying results are shown on page 2.
Summary income statement
Three months ended 31 Mar 2024 £m
Three months ended 31 Mar 2023 £m
Change %
Three months ended 31 Dec 2023 £m
Change %
Net interest income
3,045
3,434
(11)
3,187
(4)
Other income
8,272
5,875
41
12,149
(32)
Total income
11,317
9,309
22
15,336
(26)
Net finance expense in respect of insurance and investment contracts
(6,930)
(4,501)
(54)
(10,609)
35
Total income, after net finance expense in
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