SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
10 December 2007
LLOYDS TSB GROUP plc
(Translation of registrant's name into English)
5th Floor
25 Gresham Street
London
EC2V 7HN
United Kingdom
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F..X..Form 40-F.....
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes .....No ..X..
If "Yes" is marked, indicate below the file number
assigned to the registrant in connection with Rule
12g3-2(b): 82- ________
Index to Exhibits
Item
No. 1 Regulatory News Service Announcement, dated 10 December 2007
re: Trading Statement
141/07
10 December 2007
LLOYDS TSB - TRADING UPDATE
Lloyds TSB Group plc will be holding discussions with analysts and investors
ahead of its close period for the year ending 31 December 2007. This statement
sets out the information that will be provided at those discussions.
Eric Daniels, Group Chief Executive, commented:
"The Group's relationship banking businesses have sustained their strong
momentum through one of the most challenging times in global financial markets
for a generation. Our strong underlying performance demonstrates both the
prudence of our business model and the high quality, sustainable nature of our
earnings. Whilst no bank has been immune from the recent turbulence, the
relatively limited impact of the market dislocation on the Group has been more
than offset by the significant profit on the sales of non-core businesses.
The Group remains firmly on track to deliver a good performance for the year,
and good economic profit growth whilst maintaining a robust capital position.
Underlying earnings for 2007 are in line with expectations and we remain
confident in the Group's earnings growth prospects over the next few years."
Continuing to build our strong customer franchises and delivering on our
financial goals
Lloyds TSB's strategy of building strong customer franchises and growing our
business by realising the considerable potential within those franchises
continues to deliver strong results. Within each of our divisions, we have
continued to extend the reach and depth of our customer relationships, achieving
good sales growth, whilst also improving productivity and efficiency. The
underlying performance of the business remains strong with revenue growth
remaining well ahead of cost growth. Like many other financial institutions,
the Group has been affected by the recent market dislocation. However, due to
our lower risk strategy, the impact has been limited to approximately GBP200
million at 31 October 2007. Excluding this impact, and the cost of the
settlement of overdraft claims, the Group expects to deliver underlying results
broadly in line with market expectations. In addition, the Group has achieved
substantial gains on the disposal of non-core businesses.
In UK Retail Banking and Insurance and Investments we have continued the strong
performance trends delivered in the first half of the year, with continued good
revenue momentum. In Wholesale and International Banking we have made further
progress in building our corporate and commercial relationship banking
businesses. However, the division's overall performance has been affected by
the impact of the widespread turbulence in global financial markets.
Over the last few months, despite the significant disruption in global financial
markets, Lloyds TSB has maintained a strong liquidity and funding position,
building on our 'triple A' long-term debt rating and strong balance sheet.
Excellent progress in UK Retail Banking, with continued good revenue momentum
The Retail Bank has continued to make excellent progress, with further strong
growth in product sales and continued good revenue growth. We continue to
increase our market share of new current account customers and have also
delivered a good performance in the growing savings and investment market,
especially in bank savings where we have recently benefited from a significantly
improved rate of deposit growth.
As we indicated at the half-year, our market share of net new mortgage lending
in the four months to 31 October 2007 was below our outstanding stock position,
reflecting our continued focus on writing value-creating business. Recent
levels of mortgage allocations have, however, been strong, and we expect this to
translate into good balance growth as we move into 2008. As a result of our
focus on profitability and the recent marketwide increase in interest spreads,
new business net interest margins have begun to improve. The Group has
continued to maintain high levels of asset quality by focusing largely on the
prime UK mortgage market.
We have maintained our leadership position in personal loans, despite consumer
demand for unsecured lending remaining subdued, and have continued to build our
credit card business with strong customer inflows into the Lloyds TSB AirMiles
Duo account. The quality of our new unsecured personal lending has remained
strong.
Continued strong momentum in Insurance and Investments
In Insurance and Investments, we have continued to achieve good levels of sales
growth in life, pensions and long-term savings, particularly in the
bancassurance channel, with trends remaining similar to those delivered in the
first half of the year. Sales of protection products have been strong following
the successful launch of the Group's new protection platform 'Protection for
Life' in the second half of 2006 and a good performance from the new branch
network creditor insurance protection product. New business product margins
have remained robust.
In General Insurance, we have delivered improved home insurance sales through
the branch network and good cost control although, as we have previously
announced, unusually high weather related claims, in particular reflecting the
severe flooding in the UK in June and July 2007, have resulted in additional
claims costs for the year of approximately GBP110 million (2007 first half:
GBP57 million).
Scottish Widows has no exposure to US sub-prime Asset Backed Securities either
directly or indirectly through Collateralised Debt Obligations. The Group holds
GBP23 million of short-dated Structured Investment Vehicle (SIV) commercial
paper through Scottish Widows.
Wholesale and International Banking impacted by turbulence in global financial
markets
The division has continued to make substantial progress in its relationship
banking businesses. In Commercial Banking, strong growth in business volumes,
further customer franchise improvements and good progress in improving
operational efficiency have resulted in continued strong profit growth. In
Corporate Markets, further good progress has been made in developing our
relationship banking franchise supported by a strong cross-selling performance.
The division has limited exposure to assets affected by current capital market
uncertainties:
US sub-prime Asset Backed Securities (ABS) and ABS Collateralised Debt
Obligations (CDOs)
Lloyds TSB has no direct exposure to US sub-prime Asset Backed Securities and
limited indirect exposure through ABS CDOs. During the four month period to 31
October 2007, the market value of our holdings in ABS CDOs reduced and, as a
result, the Group has written down their value by a total of GBP89 million,
leaving a residual investment of GBP130 million net of hedges. The write-down
largely reflects junior tranches of CDOs which have been written down to the
expected interest payments to be received before the end of 2008.
Structured Investment Vehicle (SIV) Capital Notes
At 30 June 2007 the Group's exposure to SIV Capital Notes totalled GBP100
million. During the four month period to 31 October 2007 the Group wrote down
the value of these assets by GBP22 million, leaving a residual exposure at 31
October 2007 totalling GBP78 million. Additionally, at 31 October 2007 the Group
had undrawn commercial paper back up liquidity facilities totalling GBP377
million, of which GBP89 million has subsequently been drawn. All of these
liquidity lines are senior facilities.
Cancara
The Group's exposure to Cancara, our hybrid Asset Backed Commercial Paper
conduit, through an undrawn liquidity backstop facility was GBP11.8 billion at
31 October 2007. Cancara, which is fully consolidated in the Group's accounts,
comprises GBP8.4 billion ABS and GBP3.4 billion client receivables transactions
and is managed in a very conservative manner, which is demonstrated by the
quality and ratings stability of its underlying asset portfolio. The ABS bonds
in Cancara are 100 per cent Aaa/AAA rated by Moody's and Standard & Poor's
respectively, and there is no exposure either directly or indirectly to
sub-prime US residential mortgages within the ABS portfolio. At 31 October 2007
the client receivables portfolio included GBP116 million US sub-prime mortgage
exposure. Since its inception in 2002, there has been no default on any asset
within Cancara, and no bond in Cancara has ever suffered a rating downgrade.
In the four months to 31 October 2007, Corporate Markets also saw a reduction in
profit before tax of approximately GBP90 million as a result of the impact of
mark-to-market adjustments in the Group's trading portfolio, to reflect the
marketwide repricing of liquidity and, to a lesser extent, credit. At 31
October 2007 the trading portfolio contained GBP181 million of indirect exposure
to US sub-prime mortgages and ABS CDOs. This super senior exposure is protected
by note subordination.
Strong Group cost performance
The Group's strong cost performance has continued, resulting in a further
improvement in the Group's cost:income ratio. The Group's programme of
efficiency improvements is progressing well and we now expect to deliver net
benefits of circa GBP140 million, exceeding the previously indicated net
benefits of approximately GBP125 million per annum in 2007.
Overall credit quality remains satisfactory
Overall Group asset quality remains satisfactory. In the Retail Bank, our
arrears and delinquency trends have remained good, with further reductions in
the number of bankruptcies and Individual Voluntary Arrangements in the third
quarter of the year. The asset quality in our mortgage portfolio has continued
to be excellent. As we have previously indicated, the retail impairment charge
in 2007 is expected to be no higher than that in 2006.
In Wholesale, corporate and small business asset quality has also remained
strong. The underlying level of new corporate provisions is expected to remain
at a relatively low level during 2007, albeit higher than last year. The
impairment charge has been impacted by lower releases and recoveries, and the
GBP28 million provision in the first half of 2007 reflecting the impact of the
2007 Finance Act on the division's leasing business.
Insurance volatility
In the first 10 months of 2007, high levels of volatility in equity and fixed
income markets contributed to an adverse volatility relating to the insurance
business, excluding policyholder interests volatility, of GBP86 million.
Capital ratios remain robust
The Group's capital ratios remain robust and the rate of risk-weighted asset
growth in 2007 is expected to be at the upper end of our previously indicated
mid-to-high single digit range. The capital position of Scottish Widows remains
strong and we expect to repatriate more than GBP1.8 billion of surplus capital
to the Group during 2007 (2007 first half: GBP0.6 billion), bringing the total
capital repatriation from Scottish Widows to the Group to in excess of GBP3.6
billion over the last three years. On 5 December 2007 Standard & Poor's
announced that it has placed its Scottish Widows debt rating on positive
outlook.
Maintaining a strong liquidity and funding position
Throughout the recent liquidity crisis, Lloyds TSB has maintained a strong
liquidity position for both the Group's funding requirements, which are
supported by the Group's strong and stable retail and corporate deposit base,
and those of its sponsored conduit, Cancara. In addition, retail and corporate
deposit inflows have been strong and the Group continues to benefit from its
strong credit ratings and diversity of funding sources.
Settlement of claims relating to overdraft fees
Along with many other UK banks, during the year the Group has experienced a
number of customer claims for the repayment of overdraft fees. On 27 July,
several banks, together with the Office of Fair Trading (OFT), asked the High
Court of England and Wales to clarify the legal position regarding personal
current account fees. It is unclear how long the case will last but, pending
resolution, the Financial Services Authority has agreed subject to certain
conditions that the handling of customer complaints on this issue can be
suspended. The first half results included a charge of GBP36 million relating
to the settlement of claims during the first half of the year, together with
related costs. During the second half of the year the Group expects a similar
charge.
Profit on sale of businesses
In May 2007, Lloyds TSB Group agreed the sale of the business and assets of
Lloyds TSB Registrars to Advent International for a total cash consideration of
GBP550 million, subject to completion and other adjustments. The transaction
completed on 30 September 2007 following regulatory approval and, subject to
completion adjustments, the Group expects to report a profit before tax on the
sale of this business of approximately GBP400 million (tax: nil) in the second
half of 2007.
In July 2007, Lloyds TSB Group announced that it had reached an agreement to
sell its subsidiary, Abbey Life Assurance Company Limited (Abbey Life) to
Deutsche Bank AG. This transaction was also completed at the end of September
2007 following receipt of regulatory approval, and the Group expects to report a
profit before tax on the sale of this business of approximately GBP275 million
(tax: nil) in the second half of 2007. In addition, a pre-sale dividend of
GBP175 million was paid to the Group in June 2007.
The effect of these sales will be modest earnings dilution in the fourth quarter
of 2007 of approximately GBP20 million after tax. The substantial profits
achieved on the sales of these non-core businesses have further strengthened the
Group's capital ratios and improved capital flexibility.
Trading update webcast details
The Group Finance Director's briefing will be available as a live audio webcast
on the Investor Relations website at www.investorrelations.lloydstsb.com and a
recording will be posted on the website shortly after the briefing.
Timetable
2007 results announcement 22 February 2008
Ex dividend date 5 March 2008
Dividend record date 7 March 2008
Dividend payment date 7 May 2008
All dates are provisional and subject to change.
For further information:-
Investor Relations
Michael Oliver +44 (0) 20 7356 2167
Director of Investor Relations
E-mail: michael.oliver@ltsb-finance.co.uk
Douglas Radcliffe +44 (0) 20 7356 1571
Senior Manager, Investor Relations
E-mail: douglas.radcliffe@ltsb-finance.co.uk
Media
Mary Walsh +44 (0) 20 7356 2121
Director of Corporate Relations
E-mail: mary.walsh@lloydstsb.co.uk
FORWARD LOOKING STATEMENTS
This announcement contains forward looking statements with respect to the
business, strategy and plans of the Lloyds TSB Group, its current goals and
expectations relating to its future financial condition and performance. By
their nature, forward looking statements involve risk and uncertainty because
they relate to events and depend on circumstances that will occur in the future.
The Group's actual future results may differ materially from the results
expressed or implied in these forward looking statements as a result of a
variety of factors, including UK domestic and global economic and business
conditions, risks concerning borrower credit quality, market related risks such
as interest rate risk and exchange rate risk in its banking business and equity
risk in its insurance businesses, changing demographic trends, unexpected
changes to regulation, the policies and actions of governmental and regulatory
authorities in the UK or jurisdictions outside the UK, including other European
countries and the US, changes in customer preferences, competition and other
factors. Please refer to the latest Annual Report on Form 20-F filed with the
US Securities and Exchange Commission for a discussion of such factors. The
forward looking statements contained in this announcement are made as at the
date of this announcement, and the Group undertakes no obligation to update any
of its forward looking statements.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LLOYDS TSB GROUP plc
(Registrant)
By: M D Oliver
Name: M D Oliver
Title: Director of Investor Relations
Date: 10 December 2007