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
06 May, 2008
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 06 May, 2008
re: Interim Management Statement
42/08
6 May 2008
LLOYDS TSB RELATIONSHIP BUSINESSES CONTINUE TO DELIVER GOOD GROWTH
Interim management statement - key highlights*
.. The Group continues to deliver good growth in its relationship
banking businesses in a difficult period for financial services companies.
.. Excluding the impact of market dislocation and insurance related
volatility, each division and the Group achieved revenue growth in excess of
cost growth, and a double-digit percentage increase in profit before tax in the
first quarter of 2008.
.. The Group has continued to capture market share in a number of key
areas, whilst improving product margins.
.. The impact of market dislocation on profit before tax in Wholesale
and International Banking was GBP387 million in the first quarter of 2008.
.. The Group has maintained its strong liquidity and funding position.
.. We remain firmly on track to deliver a good performance in the first
half of 2008.
The Group's core banking businesses have continued their growth momentum during
the first quarter of 2008, notwithstanding the continuing difficulties in
financial markets. This serves to demonstrate 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 market turbulence, the impact on the Group
continues to be relatively limited.
Continuing to build our strong customer franchises
We have continued to extend our strong, relationship focused, customer
franchises by acquiring new customers, deepening relationships with existing
customers, and 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 on profit before tax in our
Wholesale and International Banking division has been limited to GBP387 million
in the first quarter of 2008.
In UK Retail Banking we have continued recent performance trends, with strong
revenue momentum and excellent cost management. Insurance and Investments has
delivered a solid performance against the backdrop of a slowdown in the sale of
equity based savings and investment products. In Wholesale and International
Banking our strong liquidity position has led to 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.
*Unless otherwise stated, first quarter 2008 performance comparisons relate to
the equivalent period in 2007 for the Group's continuing businesses.
Despite the significant disruption in financial markets, Lloyds TSB maintains a
strong liquidity and funding position, building on our 'triple A' long-term debt
rating and robust capital ratios.
Continued strong revenue momentum in UK Retail Banking
The Retail Bank has continued to make excellent progress, with further growth in
product sales supporting strong revenue momentum. We continue to make progress
in the acquisition of new current accounts and have also achieved good growth in
customer deposits, especially in bank savings and cash Individual Savings
Accounts. Our Wealth Management business delivered a particularly strong first
quarter with a significant increase in new business flows.
In our mortgage business, we significantly improved our market share of net new
mortgage lending in the first quarter of 2008, whilst maintaining prudent new
business loan-to-value ratios. Recent levels of mortgage allocations continue
to be strong. New business net interest margins have improved considerably as
we benefit from both a market-wide increase in interest spreads and our relative
funding advantage. The Group has continued to maintain high levels of asset
quality by focusing on the prime UK mortgage market.
We have maintained our leadership position in personal loans and credit card
issuance, and have continued to build our transaction focused credit card
business with strong growth in new customers choosing the Lloyds TSB AirMiles
Duo account. The quality of our new unsecured personal lending has remained
strong, reflecting lower levels of arrears and the Group's focus on lending to
existing current account customers where we better understand our customers'
financial position.
Continued progress in Insurance and Investments
In Insurance and Investments, we have continued to achieve growth in the
bancassurance channel, although the level of growth slowed during the first
quarter of 2008 as a result of a switch away from equity based products towards
cash based products, and lower mortgage-related protection sales. Stand-alone
sales of protection products have remained robust. In the IFA channel, sales of
pensions were good. However a significant reduction in the sale of savings and
investment products, largely as a result of the uncertainty caused by proposed
changes to Capital Gains Tax, led to an overall reduction in new business sales.
Scottish Widows continues to make improvements in service and operational
efficiencies and this has led to another excellent cost performance. The
capital position of Scottish Widows remains strong.
In General Insurance, we have delivered improved home insurance sales through
the branch network and strong sales through our increasing corporate partnering
arrangements. Cost control has been good and we expect to achieve notable
profit growth in the business in the first half of 2008, largely reflecting the
expected absence of last year's unusually high weather-related claims.
Strong relationship banking growth in Wholesale and International Banking
The division has continued to make substantial progress in its relationship
banking businesses. Our Corporate and Commercial Banking businesses are in a
strong competitive position and continue to expand their share of our customers'
business. In Commercial Banking, strong growth in business volumes and good
progress in improving operational efficiency have resulted in continued strong
profit growth. In Corporate Markets, further progress has been made in
developing our relationship banking franchise supported by a significant
increase in the demand for corporate lending and a strong cross-selling
performance. Reflecting this, in April 2008, our corporate relationship banking
businesses were awarded the CBI Corporate Bank of the Year Award for the fourth
consecutive year.
The division has limited exposure to assets affected by current market
uncertainties. However, in Wholesale and International Banking profit before
tax was reduced by GBP387 million during the first quarter of 2008 as a result
of the impact of market dislocation. This principally reflects mark-to-market
adjustments on assets in our trading portfolio.
US sub-prime mortgage Asset Backed Securities (ABS) and ABS Collateralised Debt
Obligations (CDOs)
Lloyds TSB continues to have no direct exposure to US sub-prime mortgage Asset
Backed Securities and limited indirect exposure through ABS CDOs. During the
first quarter of 2008, the market value of our holdings in ABS CDOs was written
down by GBP5 million, leaving a residual investment of GBP125 million net of
hedges.
The Group's residual investment of GBP125 million is stated net of credit
default swap (CDS) protection totalling GBP406 million purchased from a 'triple
A' rated monoline financial guarantor. At 31 March 2008, the underlying assets
supported by this protection had fallen in value, leaving a reliance on the CDS
protection totalling GBP187 million. During the quarter, the Group has written
down the value of this protection by GBP58 million. In addition, at 31 March
2008, the Group had GBP1,972 million of ABS CDOs which are fully cash
collaterised by major global financial institutions. During April 2008, this
exposure reduced by GBP566 million, or 29 per cent, following the sale, at cost,
of an ABS CDO.
Structured Investment Vehicle (SIV) Capital Notes
During the first quarter of 2008, the Group wrote down the value of its SIV
assets by a total of GBP46 million, leaving a residual exposure to SIV Capital
Notes at 31 March 2008 totalling GBP35 million. Additionally, at 31 March 2008
the Group had commercial paper back-up liquidity facilities totalling GBP182
million, of which GBP115 million had been drawn. All of these liquidity lines
are senior facilities.
Trading portfolio
In the first quarter of 2008, Corporate Markets saw a reduction in profit before
tax of approximately GBP278 million as a result of the impact of mark-to-market
adjustments in the Group's trading portfolio, reflecting the market-wide
repricing of liquidity and, to a lesser extent, credit. At 31 March 2008, the
trading portfolio contained GBP200 million of indirect exposure to US sub-prime
mortgages and ABS CDOs.
Available-for-sale assets
At 31 March 2008, the Group's portfolio of available-for-sale assets totalled
GBP23.2 billion. A significant proportion of these assets (GBP7.9 billion)
related to the ABS in Cancara, our hybrid Asset Backed Commercial Paper conduit.
Over 99 per cent of these ABS remain 'triple A' rated by both Moody's and
Standard & Poor's. Cancara, which is fully consolidated in the Group's
accounts, comprises GBP7.9 billion ABS and GBP3.9 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. Cancara
has continued to fund itself satisfactorily without having to utilise the
Group's liquidity backstop facility.
The balance of the Group's available-for-sale assets includes GBP3.1 billion
Student Loan ABS, predominantly guaranteed by the US Government, GBP7.4 billion
Government bond and short-dated bank commercial paper and certificates of
deposit and GBP4.8 billion major bank senior paper and high quality ABS. These
available-for-sale assets are intended to be held to maturity and as a result,
under IFRS, they are marked-to-market through reserves. During the first
quarter of 2008, a net GBP740 million reserves adjustment has been made to
reflect the fact that, whilst not currently impaired, there has been a reduction
in the market value of these assets. This adjustment has no impact on the
Group's capital ratios.
The attached appendix shows the credit market positions in Corporate Markets, at
31 March 2008, on both a gross and net basis.
Valuation of financial instruments
Trading securities, other financial assets and liabilities at fair value through
profit or loss, derivatives and available-for-sale financial assets are stated
at fair value. The fair value of these financial instruments is the amount for
which an asset could be exchanged or a liability settled between willing parties
in arm's length transactions. The fair values of financial instruments are
determined by reference to observable market prices where these are available
and the market is active. Where market prices are not available or are
unreliable because of poor liquidity, fair values are determined using valuation
techniques including cash flow models which, to the extent possible, use
observable market parameters. Within our Wholesale and International Banking
business, exposure to assets held at fair value through profit or loss valued
using unobservable market inputs totalled GBP1.3 billion, at 31 March 2008, of
which GBP0.7 billion related to the Lloyds TSB Development Capital portfolio of
investments.
Strong Group cost performance
The Group's strong cost performance has continued, resulting in a further
improvement in the Group's underlying cost:income ratio. The Group's programme
of efficiency improvements is progressing well and we remain on track to deliver
net benefits of circa GBP250 million in 2008.
Overall credit quality remains satisfactory
Overall Group asset quality remains satisfactory. In the Retail Bank, arrears
and delinquency trends in both the secured and unsecured lending portfolios have
remained satisfactory. As we have previously indicated, the retail impairment
charge in the first half of 2008 is not expected to be significantly different
from that in the first half of 2007.
In Wholesale and International Banking, corporate and small business asset
quality has also remained strong. The underlying level of new corporate
provisions, excluding the impact of market dislocation, is expected to remain at
a relatively low level during the first half of 2008, albeit higher than in the
first half of last year.
Insurance volatility
In the first quarter of 2008, high levels of volatility in fixed income markets
and lower equity markets contributed to adverse volatility of GBP474 million
relating to the insurance business, excluding policyholder interests volatility.
This reflects a reduction in the market consistent valuation of the annuity
portfolio, driven by the continued widening of corporate bond spreads, and lower
expected future shareholder income from contracts where the underlying
policyholder investments are in equities.
Robust capital ratios and strong liquidity and funding position
The Group's capital ratios remain robust and the rate of risk-weighted asset
growth in 2008 is expected to be consistent with our previously indicated high
single digit, low double-digit range. Throughout the ongoing market turbulence,
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 conduit, Cancara. In
addition, retail and corporate deposit inflows remain strong and the Group
continues to benefit from its strong credit ratings and diversity of funding
sources.
Eric Daniels, Group Chief Executive, commented:
"Despite the more challenging market conditions, the Group remains firmly on
track to deliver a good performance for the first half of 2008, excluding the
impact of market dislocation and insurance related volatility. Our strong
liquidity and funding capability have ensured that the Group has continued to
raise wholesale funding at market leading rates. This gives the Group a
competitive advantage and has enabled our corporate and retail relationship
banking businesses to achieve strong levels of business growth in the first
quarter of the year, capturing market share in a number of key areas whilst
improving product margins. Our strategy and focus remains on continuing to
build strong customer relationships, whilst improving the efficiency and
effectiveness of our operations.
Excluding the impact of market dislocation and insurance related volatility,
each division and the Group delivered double-digit profit before tax growth in
the first quarter of 2008. By focusing on our core strengths and continuing to
capture the growth opportunities within our relationship businesses, we expect
to continue to deliver good levels of growth with high returns."
Interim Management Statement webcast details
The Acting Group Finance Director's briefing will be available as a live audio
webcast, at 9.30 a.m., on the Investor Relations website at
www.investorrelations.lloydstsb.com and a recording will be posted on the
website shortly after the briefing.
Timetable
2008 interim results announcement 30 July 2008
Ex dividend date 6 August 2008
Interim dividend record date 8 August 2008
Interim dividend payment date 1 October 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 Relations
Kirsty Clay +44 (0) 20 7356 1517
Head of Media Relations
E-mail: kirsty.clay@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, exposure to legal proceedings or complaints, 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.
Appendix
Credit market positions in Corporate Markets
Lloyds TSB's high quality business model means that the Group has relatively
limited exposure to assets affected by current financial market turbulence. The
following table shows credit market positions in Corporate Markets, on both a
gross and net basis.
Credit Market Positions 31 December 2007 31 March 2008 Write-down
2008Q1
Net Gross Net Gross
Exposure Exposure Exposure Exposure
GBPm GBPm GBPm GBPm GBPm
US sub-prime ABS-direct - - - - -
ABS CDOs
- unhedged 130 130 125 125 5
- monoline hedged - 470 - 406 58
- major global bank cash collateralised - 1,861 - 1,972 -
Structured investment vehicles
- capital notes 78 78 35 35 43
- liquidity backup facilities 370 370 182 182 3
Trading portfolio
- ABS trading book 474 474 399 399 75
- secondary loan trading 665 863 594 933 47
- other assets 3,895 3,895 3,715 3,715 156
387
Available-for-sale assets 31 December 2007 31 March 2008 Reserves
adjustment
2008Q1
GBPbn GBPbn GBPm
Cancara (Over 99% AAA/Aaa) 8.3 7.9 423
- US sub-prime - nil
- Alt-A - GBP456 million (100% AAA/Aaa)
- CMBS - GBP1,256 million (100% AAA/Aaa)
Student Loan ABS 3.2 3.1 214
- US Government guaranteed
Treasury assets 4.6 7.4 -
- Government bond and short-dated bank commercial paper
Other assets 4.1 4.8 103
- Major bank senior paper and high quality ABS
Total - Group 20.2 23.2 740
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: 06 May, 2008