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BASIS OF PRESENTATION
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This report covers the results of Lloyds Banking Group plc (the Company) together with its subsidiaries (the Group) for the half-year ended 30 June 2011.
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Statutory basis
Statutory results are set out on pages 88 to 135 and discussed on pages 2 to 4. However, a number of factors have had a significant effect on the comparability of the Group’s financial position and results. As a result, comparison on a statutory basis of the 2011 interim results with 2010 is of reduced benefit.
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Combined businesses basis
In order to provide more meaningful and relevant comparatives, the results of the Group are also presented on a 'combined businesses' basis. The key principles adopted in the preparation of the combined businesses basis of reporting are described below.
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·
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In order to reflect the impact of the acquisition of HBOS, the amortisation of purchased intangible assets has been excluded; and the unwind of acquisition-related fair value adjustments is shown as one line in the combined businesses income statement.
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·
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In order to better present the business performance the following items, not related to acquisition accounting, have also been excluded:
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– integration costs;
– volatility arising in insurance businesses;
– curtailment gains and losses in respect of the Group’s defined benefit pension schemes;
– customer goodwill payments provision;
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– payment protection insurance provision;
– sale costs in respect of the EU mandated retail business disposal; and
– loss on disposal of businesses.
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Unless otherwise stated income statement commentaries throughout this document compare the half-year to 30 June 2011 to the half-year to 30 June 2010, and the balance sheet analysis compares the Group balance sheet as at 30 June 2011 to the Group balance sheet as at 31 December 2010.
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Page
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Summary of results (unaudited)
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1
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Statutory information (IFRS)
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2
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Group performance (unaudited)
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2
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Combined businesses information
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5
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Segmental analysis of profit before tax by division (unaudited)
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5
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Reconciliation of combined businesses profit before tax to statutory (IFRS) (loss) profit before tax for the half-year (unaudited)
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6
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Segmental analysis by division (unaudited)
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7
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Group performance (unaudited)
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10
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Divisional performance (unaudited)
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Retail
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12
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Wholesale
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16
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Commercial
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23
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Wealth and International
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26
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Insurance
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33
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Group Operations
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41
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Central items
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42
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Additional information on a combined businesses basis (unaudited)
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43
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Basis of preparation of combined businesses information
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43
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Banking net interest margin
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46
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Integration costs and benefits
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47
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Impairment charge
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48
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Volatility arising in insurance businesses
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49
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Number of employees (full-time equivalent)
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51
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Risk management
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52
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Risk management approach
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53
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Principal risks and uncertainties
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53
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Statutory information (IFRS)
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87
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Condensed interim financial statements (unaudited)
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Consolidated income statement (unaudited)
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88
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Consolidated statement of comprehensive income (unaudited)
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89
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Consolidated balance sheet (unaudited)
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90
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Consolidated statement of changes in equity (unaudited)
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92
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Consolidated cash flow statement (unaudited)
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95
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Statutory notes (unaudited)
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96
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Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
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Change
since
30 June
2010
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Half-year
to 31 Dec
2010
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|||||||||||||
|
Results
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£m | £m |
%
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£m | ||||||||||||
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Statutory (IFRS)
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||||||||||||||||
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Total income, net of insurance claims
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10,854 | 12,591 | (14 | ) | 12,365 | |||||||||||
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Total operating expenses
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(6,428 | ) | (5,811 | ) | (11 | ) | (10,659 | ) | ||||||||
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Trading surplus
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4,426 | 6,780 | (35 | ) | 1,706 | |||||||||||
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Impairment
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(4,491 | ) | (5,423 | ) | 17 | (5,529 | ) | |||||||||
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(Loss) profit before tax
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(51 | ) | 1,296 | (4,215 | ) | |||||||||||
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Profit (loss) attributable to equity shareholders
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31 | 596 | (3,252 | ) | ||||||||||||
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Earnings (loss) per share
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0.0 | p | 0.9 | p | (4.8 | )p | ||||||||||
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Combined businesses basis (note 1, page 43)
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Total income, net of insurance claims
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10,178 | 12,481 | (18 | ) | 10,963 | |||||||||||
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Operating expenses1
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(5,332 | ) | (5,435 | ) | 2 | (5,493 | ) | |||||||||
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Trading surplus
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4,846 | 6,896 | (30 | ) | 5,470 | |||||||||||
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Impairment
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(5,422 | ) | (6,554 | ) | 17 | (6,627 | ) | |||||||||
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Profit before tax
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1,104 | 1,603 | (31 | ) | 609 | |||||||||||
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1
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Excluding impairment of tangible fixed assets of £150 million in the half-year to 30 June 2010.
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Capital and balance sheet
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As at
30 June
2011
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As at
31 Dec
2010
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Change
since
31 Dec
2010
%
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Statutory (IFRS)
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||||||||||||
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Loans and advances to customers1
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£587.8bn | £592.6bn | (1 | ) | ||||||||
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Customer deposits2
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£399.9bn | £393.6bn | 2 | |||||||||
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Loan to deposit ratio3
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144 | % | 154 | % | ||||||||
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Risk-weighted assets
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£383.3bn | £406.4bn | (6 | ) | ||||||||
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Core tier 1 capital ratio
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10.1 | % | 9.6 | % | ||||||||
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1
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Includes reverse repos of £19.7 billion (31 December 2010: £3.1 billion).
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2
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Includes repos of £5.0 billion (31 December 2010: £11.1 billion).
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3
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Excludes repos of £5.0 billion (31 December 2010: £11.1 billion) and reverse repos of £19.7 billion (31 December 2010: £3.1 billion).
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Half-year
to 30 June
2011
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Half-year
to 30 June
2010
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Half-year
to 31 Dec
2010
|
||||||||||
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£ million
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£ million
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£ million
|
||||||||||
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Interest and similar income
|
13,437 | 14,661 | 14,679 | |||||||||
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Interest and similar expense
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(7,448 | ) | (7,623 | ) | (9,171 | ) | ||||||
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Net interest income
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5,989 | 7,038 | 5,508 | |||||||||
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Fee and commission income
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2,153 | 2,219 | 2,196 | |||||||||
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Fee and commission expense
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(690 | ) | (812 | ) | (870 | ) | ||||||
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Net fee and commission income
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1,463 | 1,407 | 1,326 | |||||||||
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Net trading income
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3,118 | 1,245 | 14,479 | |||||||||
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Insurance premium income
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4,125 | 4,300 | 3,848 | |||||||||
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Other operating income
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1,508 | 1,790 | 2,526 | |||||||||
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Other income
|
10,214 | 8,742 | 22,179 | |||||||||
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Total income
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16,203 | 15,780 | 27,687 | |||||||||
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Insurance claims
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(5,349 | ) | (3,189 | ) | (15,322 | ) | ||||||
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Total income, net of insurance claims
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10,854 | 12,591 | 12,365 | |||||||||
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Payment protection insurance provision
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– | – | (3,200 | ) | ||||||||
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Other operating expenses
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(6,428 | ) | (5,811 | ) | (7,459 | ) | ||||||
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Total operating expenses
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(6,428 | ) | (5,811 | ) | (10,659 | ) | ||||||
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Trading surplus
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4,426 | 6,780 | 1,706 | |||||||||
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Impairment
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(4,491 | ) | (5,423 | ) | (5,529 | ) | ||||||
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Share of results of joint ventures and associates
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14 | (61 | ) | (27 | ) | |||||||
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Loss on disposal of businesses
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– | – | (365 | ) | ||||||||
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(Loss) profit before tax
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(51 | ) | 1,296 | (4,215 | ) | |||||||
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Taxation
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109 | (630 | ) | 955 | ||||||||
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Profit (loss) for the period
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58 | 666 | (3,260 | ) | ||||||||
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Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Half-year
to 31 Dec
2010
|
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£ million
|
£ million
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£ million
|
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Retail
|
2,200 | 2,495 | 2,221 | |||||||||
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Wholesale1
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1,429 | 585 | 2,333 | |||||||||
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Commercial1
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262 | 157 | 182 | |||||||||
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Wealth and International
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(2,080 | ) | (1,609 | ) | (3,215 | ) | ||||||
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Insurance
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543 | 469 | 633 | |||||||||
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Group Operations and Central items:
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Group Operations
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(62 | ) | (56 | ) | (7 | ) | ||||||
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Central items
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(1,188 | ) | (438 | ) | (1,538 | ) | ||||||
| (1,250 | ) | (494 | ) | (1,545 | ) | |||||||
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Profit before tax
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1,104 | 1,603 | 609 | |||||||||
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1
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Given the importance of the Group’s role in the UK’s economic recovery through actively supporting SME lending, the Group is now reporting Commercial separately. Commercial comprises the Group’s SME business and was previously part of Wholesale. Comparatives have been restated accordingly.
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Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Half-year
to 31 Dec
2010
|
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£ million
|
£ million
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£ million
|
||||||||||
|
Profit before tax – combined businesses
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1,104 | 1,603 | 609 | |||||||||
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Integration costs
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(642 | ) | (804 | ) | (849 | ) | ||||||
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Volatility arising in insurance businesses (note 5, page 49)
|
(177 | ) | (199 | ) | 505 | |||||||
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Amortisation of purchased intangibles
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(289 | ) | (323 | ) | (306 | ) | ||||||
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Customer goodwill payments provision
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– | – | (500 | ) | ||||||||
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Pension curtailment gain (loss) (note 4, page 103)
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– | 1,019 | (109 | ) | ||||||||
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Payment protection insurance provision (note 22, page 115)
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– | – | (3,200 | ) | ||||||||
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EU mandated retail business disposal costs
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(47 | ) | – | – | ||||||||
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Loss on disposal of businesses
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– | – | (365 | ) | ||||||||
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(Loss) profit before tax – statutory
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(51 | ) | 1,296 | (4,215 | ) | |||||||
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Retail
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Wholesale
|
Commercial
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Wealth
and Int’l
|
Insurance
|
Group
Operations
and
Central
items
|
Group
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Half-year to 30 June 2011
|
£m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||
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Net interest income
|
4,163 | 1,401 | 649 | 509 | (142 | ) | (202 | ) | 6,378 | |||||||||||||||||||
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Other income
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884 | 1,337 | 218 | 631 | 1,319 | (391 | ) | 3,998 | ||||||||||||||||||||
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Total income
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5,047 | 2,738 | 867 | 1,140 | 1,177 | (593 | ) | 10,376 | ||||||||||||||||||||
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Insurance claims
|
– | – | – | – | (198 | ) | – | (198 | ) | |||||||||||||||||||
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Total income, net of insurance claims
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5,047 | 2,738 | 867 | 1,140 | 979 | (593 | ) | 10,178 | ||||||||||||||||||||
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Operating expenses
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(2,221 | ) | (1,312 | ) | (471 | ) | (792 | ) | (415 | ) | (121 | ) | (5,332 | ) | ||||||||||||||
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Trading surplus
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2,826 | 1,426 | 396 | 348 | 564 | (714 | ) | 4,846 | ||||||||||||||||||||
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Impairment
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(1,173 | ) | (1,557 | ) | (160 | ) | (2,532 | ) | – | – | (5,422 | ) | ||||||||||||||||
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Share of results of joint ventures and associates
|
3 | 9 | – | – | – | – | 12 | |||||||||||||||||||||
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Profit (loss) before tax and fair value unwind
|
1,656 | (122 | ) | 236 | (2,184 | ) | 564 | (714 | ) | (564 | ) | |||||||||||||||||
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Fair value unwind1
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544 | 1,551 | 26 | 104 | (21 | ) | (536 | ) | 1,668 | |||||||||||||||||||
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Profit (loss) before tax
|
2,200 | 1,429 | 262 | (2,080 | ) | 543 | (1,250 | ) | 1,104 | |||||||||||||||||||
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Banking net interest margin2
|
2.26 | % | 1.64 | % | 4.35 | % | 1.47 | % | 2.07 | % | ||||||||||||||||||
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Cost:income ratio3
|
44.0 | % | 47.9 | % | 54.3 | % | 69.5 | % | 42.4 | % | 52.4 | % | ||||||||||||||||
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Impairment as a % of
average advances (annualised)4
|
0.65 | % | 2.02 | % | 1.07 | % | 7.89 | % | 1.77 | % | ||||||||||||||||||
|
Key balance sheet and other items
|
||||||||||||||||||||||||||||
|
As at 30 June 2011
|
£bn
|
£bn
|
£bn
|
£bn
|
£bn
|
£bn
|
£bn
|
|||||||||||||||||||||
|
Loans and advances to customers
|
357.8 | 149.8 | 28.7 | 51.1 | 0.4 | 587.8 | ||||||||||||||||||||||
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Customer deposits
|
242.3 | 85.0 | 32.7 | 38.9 | 1.0 | 399.9 | ||||||||||||||||||||||
|
Risk-weighted assets
|
109.6 | 176.6 | 26.8 | 56.4 | 13.9 | 383.3 | ||||||||||||||||||||||
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1
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The net credit in the first half of 2011 of £1,668 million is mainly attributable to a reduction in the impairment charge of £931 million as losses reflected in the acquisition balance sheet valuations of the lending and securities portfolios have been incurred.
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2
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The calculation basis for banking net interest margins is set out in note 2 on page 46.
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3
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Operating expenses divided by total income net of insurance claims.
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4
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Impairment on loans and advances to customers divided by average loans and advances to customers, excluding reverse repurchase transactions, gross of allowance for impairment losses.
|
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Retail
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Wholesale
|
Commercial
|
Wealth
and Int’l
|
Insurance
|
Group
Operations
and
Central
items
|
Group
|
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Half-year to 30 June 2010
|
£m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||
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Net interest income
|
4,636 | 1,576 | 571 | 596 | (136 | ) | (332 | ) | 6,911 | |||||||||||||||||||
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Other income
|
836 | 1,988 | 227 | 605 | 1,320 | 855 | 5,831 | |||||||||||||||||||||
|
Total income
|
5,472 | 3,564 | 798 | 1,201 | 1,184 | 523 | 12,742 | |||||||||||||||||||||
|
Insurance claims
|
– | – | – | – | (261 | ) | – | (261 | ) | |||||||||||||||||||
|
Total income, net of insurance claims
|
5,472 | 3,564 | 798 | 1,201 | 923 | 523 | 12,481 | |||||||||||||||||||||
|
Costs:
|
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|
Operating expenses
|
(2,233 | ) | (1,401 | ) | (481 | ) | (744 | ) | (423 | ) | (153 | ) | (5,435 | ) | ||||||||||||||
|
Impairment of tangible fixed assets
|
– | (150 | ) | – | – | – | – | (150 | ) | |||||||||||||||||||
| (2,233 | ) | (1,551 | ) | (481 | ) | (744 | ) | (423 | ) | (153 | ) | (5,585 | ) | |||||||||||||||
|
Trading surplus
|
3,239 | 2,013 | 317 | 457 | 500 | 370 | 6,896 | |||||||||||||||||||||
|
Impairment
|
(1,335 | ) | (2,801 | ) | (190 | ) | (2,228 | ) | – | – | (6,554 | ) | ||||||||||||||||
|
Share of results of joint ventures and associates
|
8 | (60 | ) | – | (2 | ) | (10 | ) | 2 | (62 | ) | |||||||||||||||||
|
Profit (loss) before tax and fair value unwind
|
1,912 | (848 | ) | 127 | (1,773 | ) | 490 | 372 | 280 | |||||||||||||||||||
|
Fair value unwind
|
583 | 1,433 | 30 | 164 | (21 | ) | (866 | ) | 1,323 | |||||||||||||||||||
|
Profit (loss) before tax
|
2,495 | 585 | 157 | (1,609 | ) | 469 | (494 | ) | 1,603 | |||||||||||||||||||
|
Banking net interest margin
|
2.44 | % | 1.51 | % | 3.82 | % | 1.65 | % | 2.08 | % | ||||||||||||||||||
|
Cost:income ratio
|
40.8 | % | 39.3 | % | 60.3 | % | 61.9 | % | 45.8 | % | 43.5 | % | ||||||||||||||||
|
Impairment as a % of
average advances (annualised)
|
0.72 | % | 3.11 | % | 1.28 | % | 6.56 | % | 2.01 | % | ||||||||||||||||||
|
Key balance sheet and other items
|
||||||||||||||||||||||||||||
|
As at 30 June 2010
|
£bn
|
£bn
|
£bn
|
£bn
|
£bn
|
£bn
|
£bn
|
|||||||||||||||||||||
|
Loans and advances to customers
|
368.0 | 155.9 | 28.7 | 57.6 | 1.9 | 612.1 | ||||||||||||||||||||||
|
Customer deposits
|
230.7 | 128.4 | 30.8 | 30.3 | 0.2 | 420.4 | ||||||||||||||||||||||
|
Risk-weighted assets
|
106.8 | 251.5 | 29.2 | 59.3 | 16.4 | 463.2 | ||||||||||||||||||||||
|
Retail
|
Wholesale
|
Commercial
|
Wealth
and Int’l
|
Insurance
|
Group
Operations
and
Central
items
|
Group
|
||||||||||||||||||||||
|
Half-year to 31 Dec 2010
|
£m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||
|
Net interest income
|
4,742 | 1,675 | 604 | 580 | (127 | ) | (563 | ) | 6,911 | |||||||||||||||||||
|
Other income
|
771 | 1,691 | 230 | 555 | 1,494 | (408 | ) | 4,333 | ||||||||||||||||||||
|
Total income
|
5,513 | 3,366 | 834 | 1,135 | 1,367 | (971 | ) | 11,244 | ||||||||||||||||||||
|
Insurance claims
|
– | – | – | – | (281 | ) | – | (281 | ) | |||||||||||||||||||
|
Total income, net of insurance claims
|
5,513 | 3,366 | 834 | 1,135 | 1,086 | (971 | ) | 10,963 | ||||||||||||||||||||
|
Operating expenses
|
(2,411 | ) | (1,351 | ) | (511 | ) | (792 | ) | (431 | ) | 3 | (5,493 | ) | |||||||||||||||
|
Trading surplus
|
3,102 | 2,015 | 323 | 343 | 655 | (968 | ) | 5,470 | ||||||||||||||||||||
|
Impairment
|
(1,412 | ) | (1,263 | ) | (192 | ) | (3,760 | ) | – | – | (6,627 | ) | ||||||||||||||||
|
Share of results of joint ventures and associates
|
9 | (35 | ) | – | (6 | ) | – | 3 | (29 | ) | ||||||||||||||||||
|
Profit (loss) before tax and fair value unwind
|
1,699 | 717 | 131 | (3,423 | ) | 655 | (965 | ) | (1,186 | ) | ||||||||||||||||||
|
Fair value unwind
|
522 | 1,616 | 51 | 208 | (22 | ) | (580 | ) | 1,795 | |||||||||||||||||||
|
Profit (loss) before tax
|
2,221 | 2,333 | 182 | (3,215 | ) | 633 | (1,545 | ) | 609 | |||||||||||||||||||
|
Banking net interest margin
|
2.49 | % | 1.54 | % | 3.93 | % | 1.61 | % | 2.12 | % | ||||||||||||||||||
|
Cost:income ratio
|
43.7 | % | 40.1 | % | 61.3 | % | 69.8 | % | 39.7 | % | 50.1 | % | ||||||||||||||||
|
Impairment as a % of
average advances (annualised)
|
0.76 | % | 1.31 | % | 1.19 | % | 11.29 | % | 2.02 | % | ||||||||||||||||||
|
Key balance sheet and other items
|
||||||||||||||||||||||||||||
|
As at 31 December 2010
|
£bn
|
£bn
|
£bn
|
£bn
|
£bn
|
£bn
|
£bn
|
|||||||||||||||||||||
|
Loans and advances to customers
|
363.7 | 144.6 | 28.6 | 55.3 | 0.4 | 592.6 | ||||||||||||||||||||||
|
Customer deposits
|
235.6 | 93.0 | 31.3 | 32.8 | 0.9 | 393.6 | ||||||||||||||||||||||
|
Risk-weighted assets
|
109.3 | 196.1 | 26.6 | 58.7 | 15.7 | 406.4 | ||||||||||||||||||||||
|
·
|
Profit before tax decreased to £2,200 million, compared to £2,495 million in the first half of 2010.
|
|
·
|
Profit before tax and fair value unwind was £1,656 million, a reduction of 13 per cent compared with the first half of 2010, driven by higher funding costs and muted demand for credit.
|
|
·
|
Total income decreased by 8 per cent, driven by lower net interest income, largely as a result of higher funding costs, muted demand for credit, the continued impact from previous de-risking of the lending portfolio with a corresponding reduction in impairments and increased competition for deposits while we continued to reduce our funding gap.
|
|
·
|
Operating expenses reduced by 1 per cent compared with the first half of 2010. However the cost:income ratio increased to 44.0 per cent, as a result of the reduction in income. Operating expenses benefited from cost synergies partly offset by investment in our digital platforms, improvements to complaints handling processes and inflation.
|
|
·
|
The impairment charge reduced to £1,173 million, down by 12 per cent, particularly driven by the reduction in the unsecured charge reflecting the impact of the Group’s prudent risk appetite with improved new business quality and effective portfolio management. Credit performance across the business also continues to be supported by the Group’s risk management processes, a continued subdued UK economic recovery and low interest rates.
|
|
·
|
Customer deposit growth continued during the first half of 2011, with balances increasing by £6.7 billion, or 3 per cent, from 31 December 2010. This growth was largely driven by strong UK tax-free cash Individual Savings Account (ISA) balance growth where Retail achieved growth greater than its share of balances outstanding.
|
|
·
|
Loans and advances to customers decreased by £5.9 billion, or 2 per cent, from 31 December 2010 as customers continued to reduce their personal indebtedness. In particular, customers continued to pay down unsecured debts. In the first half of 2011 gross mortgage lending was £12.9 billion, which was equivalent to a market share of over 20 per cent, as Retail continued to support the housing market and first time buyers.
|
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Change
since
30 June
2010
|
Half-year
to 31 Dec
2010
|
|||||||||||||
| £m | £m |
%
|
£m | |||||||||||||
|
Net interest income
|
4,163 | 4,636 | (10 | ) | 4,742 | |||||||||||
|
Other income
|
884 | 836 | 6 | 771 | ||||||||||||
|
Total income
|
5,047 | 5,472 | (8 | ) | 5,513 | |||||||||||
|
Operating expenses
|
(2,221 | ) | (2,233 | ) | 1 | (2,411 | ) | |||||||||
|
Trading surplus
|
2,826 | 3,239 | (13 | ) | 3,102 | |||||||||||
|
Impairment
|
(1,173 | ) | (1,335 | ) | 12 | (1,412 | ) | |||||||||
|
Share of results of joint ventures and associates
|
3 | 8 | (63 | ) | 9 | |||||||||||
|
Profit before tax and fair value unwind
|
1,656 | 1,912 | (13 | ) | 1,699 | |||||||||||
|
Fair value unwind
|
544 | 583 | (7 | ) | 522 | |||||||||||
|
Profit before tax
|
2,200 | 2,495 | (12 | ) | 2,221 | |||||||||||
|
Banking net interest margin
|
2.26 | % | 2.44 | % | 2.49 | % | ||||||||||
|
Cost:income ratio
|
44.0 | % | 40.8 | % | 43.7 | % | ||||||||||
|
Impairment as a % of average
advances (annualised)
|
0.65 | % | 0.72 | % | 0.76 | % | ||||||||||
|
As at
30 June
2011
|
As at
31 Dec
2010
|
Change
since
31 Dec
2010
|
||||||||||||||
|
£bn
|
£bn
|
%
|
||||||||||||||
|
Loans and advances to customers
|
||||||||||||||||
|
Secured
|
333.1 | 337.3 | (1 | ) | ||||||||||||
|
Unsecured
|
24.7 | 26.4 | (6 | ) | ||||||||||||
| 357.8 | 363.7 | (2 | ) | |||||||||||||
|
Customer deposits
|
||||||||||||||||
|
Savings
|
202.3 | 195.3 | 4 | |||||||||||||
|
Current accounts
|
40.0 | 40.3 | (1 | ) | ||||||||||||
| 242.3 | 235.6 | 3 | ||||||||||||||
|
Total customer balances
|
600.1 | 599.3 | ||||||||||||||
|
Risk-weighted assets
|
109.6 | 109.3 | ||||||||||||||
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Change
since
30 June
2010
|
Half-year
to 31 Dec
2010
|
|||||||||||||||||
| £m | £m |
%
|
£m | |||||||||||||||||
|
Mortgages and Savings
|
2,151 | 2,294 | (6 | ) | 2,445 | |||||||||||||||
|
Consumer Banking
|
2,896 | 3,178 | (9 | ) | 3,068 | |||||||||||||||
|
Total income
|
5,047 | 5,472 | (8 | ) | 5,513 | |||||||||||||||
|
·
|
Profit before tax was £1,429 million compared to a profit before tax of £585 million in the first half of 2010.
|
|
·
|
Loss before tax and fair value unwind was £122 million, an improvement of £726 million mainly reflecting significantly decreased impairments and lower costs, offset by reduced income.
|
|
·
|
Net interest income decreased by 11 per cent to £1,401 million. This largely reflects a lower asset balance sheet. The banking net interest margin improved from 1.51 per cent in the first half of 2010 to 1.64 per cent in the first half of 2011.
|
|
·
|
Other income decreased to £1,337 million, as targeted balance sheet reductions resulted in losses of £670 million on treasury asset sales within Corporate Markets, broadly offset by a related accelerated fair value unwind of £649 million, and a lower level of operating lease asset income in Asset Finance.
|
|
·
|
Operating expenses decreased by 6 per cent to £1,312 million, reflecting reduced levels of operating lease depreciation and further cost savings achieved from the integration programme, partially offset by additional staff related costs in Corporate Markets and continued investment in customer facing resource and systems.
|
|
·
|
Impairment charges decreased significantly to £1,557 million, compared to £2,801 million in the first half of 2010. The total impairment charge is 44 per cent lower than the first half of last year and continues to be driven by the HBOS heritage corporate real estate and real estate related asset portfolios, but with increased impairment on leveraged acquisition finance exposures.
|
|
·
|
Customer deposits excluding repos decreased 2 per cent, since 31 December 2010, to £81.0 billion as a small increase in deposits in Corporate Markets was more than offset by a decline in more price sensitive deposits in Treasury and Trading.
|
|
·
|
Risk-weighted assets reduced by £19.5 billion to £176.6 billion compared to December 2010, in line with the reduction on the balance sheet.
|
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Change
since
30 June
2010
|
Half-year
to 31 Dec
2010
|
|||||||||||||
| £m | £m |
%
|
£m | |||||||||||||
|
Net interest income
|
1,401 | 1,576 | (11 | ) | 1,675 | |||||||||||
|
Other income
|
1,337 | 1,988 | (33 | ) | 1,691 | |||||||||||
|
Total income
|
2,738 | 3,564 | (23 | ) | 3,366 | |||||||||||
|
Costs:
|
||||||||||||||||
|
Operating expenses
|
(1,312 | ) | (1,401 | ) | 6 | (1,351 | ) | |||||||||
|
Impairment of tangible fixed assets
|
– | (150 | ) | – | ||||||||||||
| (1,312 | ) | (1,551 | ) | 15 | (1,351 | ) | ||||||||||
|
Trading surplus
|
1,426 | 2,013 | (29 | ) | 2,015 | |||||||||||
|
Impairment
|
(1,557 | ) | (2,801 | ) | 44 | (1,263 | ) | |||||||||
|
Share of results of joint ventures and associates
|
9 | (60 | ) | (35 | ) | |||||||||||
|
(Loss) profit before tax and fair value unwind
|
(122 | ) | (848 | ) | 86 | 717 | ||||||||||
|
Fair value unwind
|
1,551 | 1,433 | 8 | 1,616 | ||||||||||||
|
Profit before tax
|
1,429 | 585 | 2,333 | |||||||||||||
|
Corporate Markets
|
(527 | ) | (1,212 | ) | 257 | |||||||||||
|
Treasury and Trading
|
255 | 259 | 169 | |||||||||||||
|
Asset Finance
|
150 | 105 | 291 | |||||||||||||
|
(Loss) profit before tax and fair value unwind
|
(122 | ) | (848 | ) | 717 | |||||||||||
|
Banking net interest margin
|
1.64 | % | 1.51 | % | 1.54 | % | ||||||||||
|
Cost:income ratio
(excl. impairment of tangible fixed assets)
|
47.9 | % | 39.3 | % | 40.1 | % | ||||||||||
|
Impairment as a % of average
advances (annualised)
|
2.02 | % | 3.11 | % | 1.31 | % | ||||||||||
|
Key balance sheet and other items
|
As at
30 June
2011
|
As at
31 Dec
2010
|
Change
since
31 Dec
2010
|
|||||||||||||
|
£bn
|
£bn
|
%
|
||||||||||||||
|
Loans and advances to customers excl reverse repos
|
130.1 | 141.5 | (8 | ) | ||||||||||||
|
Reverse repos
|
19.7 | 3.1 | ||||||||||||||
|
Loans and advances to customers
|
149.8 | 144.6 | 4 | |||||||||||||
|
Loans and advances to banks
|
10.2 | 12.4 | (18 | ) | ||||||||||||
|
Debt securities
|
15.5 | 25.8 | (40 | ) | ||||||||||||
|
Available-for-sale financial assets
|
16.7 | 29.5 | (43 | ) | ||||||||||||
| 192.2 | 212.3 | (9 | ) | |||||||||||||
|
Customer deposits excluding repos
|
81.0 | 82.8 | (2 | ) | ||||||||||||
|
Repos
|
4.0 | 10.2 | ||||||||||||||
|
Customer deposits including repos
|
85.0 | 93.0 | (9 | ) | ||||||||||||
|
Risk-weighted assets
|
176.6 | 196.1 | (10 | ) | ||||||||||||
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Change
since
30 June
2010
|
Half-year
to 31 Dec
2010
|
|||||||||||||
| £m | £m |
%
|
£m | |||||||||||||
|
Net interest income
|
1,076 | 1,170 | (8 | ) | 1,324 | |||||||||||
|
Other income
|
528 | 1,129 | (53 | ) | 885 | |||||||||||
|
Total income
|
1,604 | 2,299 | (30 | ) | 2,209 | |||||||||||
|
Costs:
|
||||||||||||||||
|
Operating expenses
|
(697 | ) | (691 | ) | (1 | ) | (727 | ) | ||||||||
|
Impairment of tangible fixed assets
|
– | (150 | ) | – | ||||||||||||
| (697 | ) | (841 | ) | 17 | (727 | ) | ||||||||||
|
Trading surplus
|
907 | 1,458 | (38 | ) | 1,482 | |||||||||||
|
Impairment
|
(1,442 | ) | (2,609 | ) | 45 | (1,191 | ) | |||||||||
|
Share of results of joint ventures and associates
|
8 | (61 | ) | (34 | ) | |||||||||||
|
(Loss) profit before tax and fair value unwind
|
(527 | ) | (1,212 | ) | 57 | 257 | ||||||||||
|
Cost:income ratio
(excl. impairment of tangible fixed assets)
|
43.5 | % | 30.1 | % | 32.9 | % | ||||||||||
|
Impairment as a % of average advances (annualised)
|
2.00 | % | 3.13 | % | 1.32 | % | ||||||||||
|
As at
30 June
2011
|
As at
31 Dec
2010
|
Change
since
31 Dec
2010
|
||||||||||||||
|
Key balance sheet items
|
£bn
|
£bn
|
%
|
|||||||||||||
|
Loans and advances to customers
|
121.6 | 131.6 | (8 | ) | ||||||||||||
|
Customer deposits
|
63.0 | 61.3 | 3 | |||||||||||||
|
Risk-weighted assets
|
156.7 | 175.5 | (11 | ) | ||||||||||||
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Change
since
30 June
2010
|
Half-year
to 31 Dec
2010
|
|||||||||||||
| £m | £m |
%
|
£m | |||||||||||||
|
Net interest income
|
133 | 188 | (29 | ) | 136 | |||||||||||
|
Other income
|
241 | 167 | 44 | 155 | ||||||||||||
|
Total income
|
374 | 355 | 5 | 291 | ||||||||||||
|
Operating expenses
|
(119 | ) | (96 | ) | (24 | ) | (122 | ) | ||||||||
|
Profit before tax and fair value unwind
|
255 | 259 | (2 | ) | 169 | |||||||||||
|
Cost:income ratio
|
31.8 | % | 27.0 | % | 41.9 | % | ||||||||||
|
As at
30 June
2011
|
As at
31 Dec
2010
|
Change
since
31 Dec
2010
|
||||||||||||||
|
Key balance sheet and other items
|
£bn
|
£bn
|
%
|
|||||||||||||
|
Loans and advances to customers1
|
20.7 | 4.1 | ||||||||||||||
|
Customer deposits2
|
22.0 | 31.7 | (31 | ) | ||||||||||||
|
Risk-weighted assets
|
9.1 | 8.6 | 6 | |||||||||||||
|
1
|
Of which reverse repos represent £19.7 billion (31 December 2010: £3.1 billion).
|
|
2
|
Of which repos represent £4.0 billion (31 December 2010: £10.2 billion).
|
|
Half-year
to 30 June
2011
|
Half- year
to 30 June
2010
|
Change
since
30 June
2010
|
Half-year
to 31 Dec
2010
|
|||||||||||||
| £m | £m |
%
|
£m | |||||||||||||
|
Net interest income
|
192 | 218 | (12 | ) | 215 | |||||||||||
|
Other income
|
568 | 692 | (18 | ) | 651 | |||||||||||
|
Total income
|
760 | 910 | (16 | ) | 866 | |||||||||||
|
Operating expenses
|
(496 | ) | (614 | ) | 19 | (502 | ) | |||||||||
|
Trading surplus
|
264 | 296 | (11 | ) | 364 | |||||||||||
|
Impairment
|
(115 | ) | (192 | ) | 40 | (72 | ) | |||||||||
|
Share of results of joint ventures and associates
|
1 | 1 | (1 | ) | ||||||||||||
|
Profit before tax and fair value unwind
|
150 | 105 | 43 | 291 | ||||||||||||
|
Cost:income ratio
|
65.3 | % | 67.5 | % | 58.0 | % | ||||||||||
|
Impairment as a % of average advances (annualised)
|
2.51 | % | 3.20 | % | 1.37 | % | ||||||||||
|
As at
30 June
2011
|
As at
31 Dec
2010
|
Change
since
31 Dec
2010
|
||||||||||||||
|
Key balance sheet and other items
|
£bn
|
£bn
|
%
|
|||||||||||||
|
Loans and advances to customers
|
7.5 | 8.9 | (16 | ) | ||||||||||||
|
Operating lease assets
|
2.7 | 3.0 | (10 | ) | ||||||||||||
|
Risk-weighted assets
|
10.8 | 12.0 | (10 | ) | ||||||||||||
|
·
|
Profit before tax was £262 million compared to £157 million in the first half of 2010.
|
|
·
|
Profit before tax and fair value unwind was £236 million compared to £127 million in the first half of 2010, driven by higher income and reduced impairments.
|
|
·
|
Net interest income increased by 14 per cent to £649 million, mainly reflecting the growth in deposit balances over the period and the value of attracting and retaining working capital credit balances at attractive margins.
|
|
·
|
Other income decreased by 4 per cent to £218 million which reflects the subdued trading activity in the early part of the year and the greater use of electronic banking facilities by customers.
|
|
·
|
Operating expenses decreased by 2 per cent to £471 million through cost efficiency and a reducing fraud loss exposure from improvements implemented at the end of 2010 in online security.
|
|
·
|
Impairment charges on financial assets have decreased to £160 million compared to £190 million in the first half of 2010. There has been an overall improvement in the credit quality of the portfolio and a reduction in overall defaults as the UK economy has steadied and the continuing programme of process improvements is delivering results.
|
|
·
|
Customer deposits have also increased by 4 per cent since the end of 2010. This increase reflects the ongoing success in the recruitment and retention of customers combined with targeted support in various customer segments especially education and legal.
|
|
·
|
Focus continues on strengthening customer relationships through deepening and understanding individual business requirements. Commercial Finance, the Group’s invoice discounting, factoring and equipment finance business, enjoyed positive net growth of approximately 10 per cent. Commercial has generated in excess of 50,000 referrals for a business insurance product and has grown its foreign exchange and international payments facility for small and medium-sized businesses.
|
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Change
since
30 June
2010
|
Half-year
to 31 Dec
2010
|
|||||||||||||
| £m | £m |
%
|
£m | |||||||||||||
|
Net interest income
|
649 | 571 | 14 | 604 | ||||||||||||
|
Other income
|
218 | 227 | (4 | ) | 230 | |||||||||||
|
Total income
|
867 | 798 | 9 | 834 | ||||||||||||
|
Operating expenses
|
(471 | ) | (481 | ) | 2 | (511 | ) | |||||||||
|
Trading surplus
|
396 | 317 | 25 | 323 | ||||||||||||
|
Impairment
|
(160 | ) | (190 | ) | 16 | (192 | ) | |||||||||
|
Profit before tax and fair value unwind
|
236 | 127 | 86 | 131 | ||||||||||||
|
Fair value unwind
|
26 | 30 | (13 | ) | 51 | |||||||||||
|
Profit before tax
|
262 | 157 | 67 | 182 | ||||||||||||
|
Banking net interest margin
|
4.35 | % | 3.82 | % | 3.93 | % | ||||||||||
|
Cost:income ratio
|
54.3 | % | 60.3 | % | 61.3 | % | ||||||||||
|
Impairment as a % of average advances (annualised)
|
1.07 | % | 1.28 | % | 1.19 | % | ||||||||||
|
As at
30 June
2011
|
As at
31 Dec
2010
|
Change
since
31 Dec
2010
|
||||||||||||||
|
Key balance sheet and other items
|
£bn
|
£bn
|
%
|
|||||||||||||
|
Loans and advances to customers
|
28.7 | 28.6 | ||||||||||||||
|
Customer deposits
|
32.7 | 31.3 | 4 | |||||||||||||
|
Risk-weighted assets
|
26.8 | 26.6 | 1 | |||||||||||||
|
·
|
Loss before tax increased to £2,080 million compared to £1,609 million in the first half of 2010.
|
|
·
|
Loss before tax and fair value unwind increased by £411 million to £2,184 million, compared to £1,773 million in the first half of 2010, due to lower income, higher costs and a higher impairment charge in International.
|
|
·
|
In Wealth, profit before tax decreased by 11 per cent to £139 million and in International the loss before tax increased by 20 per cent to £2,323 million.
|
|
·
|
Net interest income decreased by 15 per cent to £509 million, reflecting lower lending volumes and a 18 basis point reduction in the banking net interest margin, partly offset by the favourable impact of foreign currency movements, particularly the Australian dollar, higher deposit balances and improving deposit margins.
|
|
·
|
Other income increased by 4 per cent to £631 million, with foreign exchange benefits in International and increasing funds under management in the Wealth businesses, partly offset by the non-recurrence of the gains on the sale of non-core businesses in Wealth recognised in the first half of 2010.
|
|
·
|
Operating expenses increased by 6 per cent to £792 million, due to higher regulatory costs in the Wealth businesses, investment in growth in our Wealth businesses and our International on-line deposit taking operation and the effect of foreign currency rates, partly offset by benefits from cost saving initiatives across all businesses.
|
|
·
|
The impairment charge amounted to £2,532 million, compared to £2,228 million in the first half of 2010, reflecting the continued deterioration in real estate values in Ireland and in Australasian property markets to which the Group is exposed.
|
|
·
|
Loans and advances to customers decreased by £4.2 billion, or 8 per cent, to £51.1 billion, reflecting net repayments of £3.7 billion and additional impairment provisions in the International businesses, partly offset by foreign exchange movements of £2.0 billion.
|
|
·
|
Customer deposits increased by £6.1 billion, or 19 per cent, to £38.9 billion, in the main due to continued strong inflows in our Wealth and International on-line deposit business.
|
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Change
since
30 June
2010
|
Half-year
to 31 Dec
2010
|
|||||||||||||
| £m | £m |
%
|
£m | |||||||||||||
|
Net interest income
|
509 | 596 | (15 | ) | 580 | |||||||||||
|
Other income
|
631 | 605 | 4 | 555 | ||||||||||||
|
Total income
|
1,140 | 1,201 | (5 | ) | 1,135 | |||||||||||
|
Operating expenses
|
(792 | ) | (744 | ) | (6 | ) | (792 | ) | ||||||||
|
Trading surplus
|
348 | 457 | (24 | ) | 343 | |||||||||||
|
Impairment
|
(2,532 | ) | (2,228 | ) | (14 | ) | (3,760 | ) | ||||||||
|
Share of results of joint ventures and associates
|
– | (2 | ) | (6 | ) | |||||||||||
|
Loss before tax and fair value unwind
|
(2,184 | ) | (1,773 | ) | (23 | ) | (3,423 | ) | ||||||||
|
Fair value unwind
|
104 | 164 | (37 | ) | 208 | |||||||||||
|
Loss before tax
|
(2,080 | ) | (1,609 | ) | (29 | ) | (3,215 | ) | ||||||||
|
Wealth
|
139 | 156 | (11 | ) | 113 | |||||||||||
|
International
|
(2,323 | ) | (1,929 | ) | (20 | ) | (3,536 | ) | ||||||||
|
Loss before tax and fair value unwind
|
(2,184 | ) | (1,773 | ) | (23 | ) | (3,423 | ) | ||||||||
|
Banking net interest margin
|
1.47 | % | 1.65 | % | 1.61 | % | ||||||||||
|
Cost:income ratio
|
69.5 | % | 61.9 | % | 69.8 | % | ||||||||||
|
Impairment as a % of average advances (annualised)
|
7.89 | % | 6.56 | % | 11.29 | % | ||||||||||
|
As at
30 June
2011
|
As at
31 Dec
2010
|
Change
since
31 Dec
2010
|
||||||||||||||
|
Key balance sheet and other items
|
£bn
|
£bn
|
%
|
|||||||||||||
|
Loans and advances to customers
|
51.1 | 55.3 | (8 | ) | ||||||||||||
|
Customer deposits
|
38.9 | 32.8 | 19 | |||||||||||||
|
Total customer balances
|
90.0 | 88.1 | 2 | |||||||||||||
|
Risk-weighted assets
|
56.4 | 58.7 | (4 | ) | ||||||||||||
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Change
since
30 June
2010
|
Half-year
to 31 Dec
2010
|
|||||||||||||
| £m | £m |
%
|
£m | |||||||||||||
|
Net interest income
|
181 | 161 | 12 | 184 | ||||||||||||
|
Other income
|
500 | 539 | (7 | ) | 479 | |||||||||||
|
Total income
|
681 | 700 | (3 | ) | 663 | |||||||||||
|
Operating expenses
|
(513 | ) | (520 | ) | 1 | (527 | ) | |||||||||
|
Trading surplus
|
168 | 180 | (7 | ) | 136 | |||||||||||
|
Impairment
|
(29 | ) | (23 | ) | (26 | ) | (23 | ) | ||||||||
|
Share of results of joint ventures and associates
|
– | (1 | ) | – | ||||||||||||
|
Profit before tax and fair value unwind
|
139 | 156 | (11 | ) | 113 | |||||||||||
|
Cost:income ratio
|
75.3 | % | 74.3 | % | 79.5 | % | ||||||||||
|
Impairment as a % of average advances (annualised)
|
0.63 | % | 0.49 | % | 0.47 | % | ||||||||||
|
As at
30 June
2011
|
As at
31 Dec
2010
|
Change
since
31 Dec
2010
|
||||||||||||||
|
Key balance sheet and other items
|
£bn
|
£bn
|
%
|
|||||||||||||
|
Loans and advances to customers
|
9.0 | 9.1 | (1 | ) | ||||||||||||
|
Customer deposits
|
27.3 | 26.8 | 2 | |||||||||||||
|
Risk-weighted assets
|
9.3 | 10.4 | (11 | ) | ||||||||||||
|
As at
30 June
2011
|
As at
30 June
2010
|
As at
31 Dec
2010
|
|||||||||||
|
£bn
|
£bn
|
£bn
|
|||||||||||
|
Scottish Widows Investment Partnership (SWIP)
|
|||||||||||||
|
Internal
|
120.7 | 110.9 | 118.2 | ||||||||||
|
External
|
26.7 | 25.5 | 28.0 | ||||||||||
| 147.4 | 136.4 | 146.2 | |||||||||||
|
Other Wealth:
|
|||||||||||||
|
St James’s Place
|
29.1 | 22.4 | 27.0 | ||||||||||
|
Invista Real Estate
|
2.5 | 5.4 | 5.3 | ||||||||||
|
Private and International Banking
|
14.3 | 14.3 | 13.5 | ||||||||||
|
Closing funds under management
|
193.3 | 178.5 | 192.0 | ||||||||||
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Half-year
to 31 Dec
2010
|
|||||||||||
|
£bn
|
£bn
|
£bn
|
|||||||||||
|
Opening funds under management
|
192.0 | 184.1 | 178.5 | ||||||||||
|
Inflows:
|
|||||||||||||
|
SWIP
|
– internal
|
1.0 | 1.1 | 0.9 | |||||||||
|
– external
|
0.7 | 2.0 | 6.9 | ||||||||||
|
Other
|
3.8 | 3.7 | 3.0 | ||||||||||
| 5.5 | 6.8 | 10.8 | |||||||||||
|
Outflows:
|
|||||||||||||
|
SWIP
|
– internal
|
(4.4 | ) | (0.5 | ) | (5.1 | ) | ||||||
|
– external
|
(1.8 | ) | (6.6 | ) | (6.7 | ) | |||||||
|
Other
|
(2.1 | ) | (2.1 | ) | (3.0 | ) | |||||||
| (8.3 | ) | (9.2 | ) | (14.8 | ) | ||||||||
|
Investment return, expenses and commission
|
4.1 | (2.5 | ) | 17.6 | |||||||||
|
Net operating increase (decrease) in funds
|
1.3 | (4.9 | ) | 13.6 | |||||||||
|
Sale of Bank of Scotland Portfolio Management Service
|
– | (0.7 | ) | (0.1 | ) | ||||||||
|
Closing funds under management
|
193.3 | 178.5 | 192.0 | ||||||||||
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Change
since
30 June
2010
|
Half-year
to 31 Dec
2010
|
|||||||||||||
| £m | £m |
%
|
£m | |||||||||||||
|
Net interest income
|
328 | 435 | (25 | ) | 396 | |||||||||||
|
Other income
|
131 | 66 | 98 | 76 | ||||||||||||
|
Total income
|
459 | 501 | (8 | ) | 472 | |||||||||||
|
Operating expenses
|
(279 | ) | (224 | ) | (25 | ) | (265 | ) | ||||||||
|
Trading surplus
|
180 | 277 | (35 | ) | 207 | |||||||||||
|
Impairment
|
(2,503 | ) | (2,205 | ) | (14 | ) | (3,737 | ) | ||||||||
|
Share of results of joint ventures and associates
|
– | (1 | ) | (6 | ) | |||||||||||
|
Loss before tax and fair value unwind
|
(2,323 | ) | (1,929 | ) | (20 | ) | (3,536 | ) | ||||||||
|
Cost:income ratio
|
60.8 | % | 44.7 | % | 56.1 | % | ||||||||||
|
Impairment as a % of average advances (annualised)
|
9.09 | % | 7.54 | % | 13.13 | % | ||||||||||
|
As at
30 June
2011
|
As at
31 Dec
2010
|
Change
since
31 Dec
2010
|
||||||||||||||
|
Key balance sheet and other items
|
£bn
|
£bn
|
%
|
|||||||||||||
|
Loans and advances to customers
|
42.1 | 46.2 | (9 | ) | ||||||||||||
|
Customer deposits
|
11.6 | 6.0 | 93 | |||||||||||||
|
Risk-weighted assets
|
47.1 | 48.3 | (2 | ) | ||||||||||||
|
Impairment charges
|
Loans and advances
to customers
|
|||||||||||||||||||
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Half-year
to 31 Dec
2010
|
As at
30 June
2011
|
As at
31 Dec
2010
|
||||||||||||||||
| £m | £m | £m |
£bn
|
£bn
|
||||||||||||||||
|
Ireland
|
1,779 | 1,557 | 2,707 | 17.7 | 19.6 | |||||||||||||||
|
Australia
|
586 | 454 | 908 | 10.6 | 12.3 | |||||||||||||||
|
Wholesale Europe
|
111 | 145 | 65 | 6.5 | 6.9 | |||||||||||||||
|
Latin America/Middle East
|
23 | 43 | 54 | 0.4 | 0.6 | |||||||||||||||
|
Netherlands
|
4 | 6 | 3 | 6.9 | 6.8 | |||||||||||||||
| 2,503 | 2,205 | 3,737 | 42.1 | 46.2 | ||||||||||||||||
|
·
|
Profit before tax increased by 16 per cent to £543 million, compared to £469 million in the first half of 2010.
|
|
·
|
Profit before tax and fair value unwind increased by 15 per cent to £564 million, although the first half of 2010 included a charge of £70 million in respect of the Group’s decision to cease writing new payment protection insurance (PPI) business. Excluding this charge, profit before tax and fair value unwind was in line with the first half of 2010.
|
|
·
|
Total income, net of insurance claims, increased by £56 million to £979 million. This reflects the non-recurrence of the £70 million charge as detailed above, lower PPI related income, partially offset by the continued change in mix within Life, Pensions and Investments UK (LP&I UK) towards more profitable protection business and improved claims experience within General Insurance (GI).
|
|
·
|
Operating expenses decreased by 2 per cent or £8 million to £415 million due mainly to a continued focus on cost management and delivery of integration synergies.
|
|
·
|
LP&I UK margin increased to 4.2 per cent from 3.5 per cent in 2010. The improved margin reflects the continued focus on value and the strategic choices made in respect of product and channel propositions, in particular the higher proportion of protection business now sold. The Internal Rate of Return (IRR) on new business has continued to increase in the first half of 2011 and is in excess of 16 per cent.
|
|
·
|
LP&I UK sales of £5,595 million (PVNBP) reduced by 9 per cent, partly reflecting the continuing change in mix away from savings products towards more profitable protection business, following the launch of our integrated bancassurance proposition in June 2010. Sales through our Intermediary channel have increased by 17 per cent to £3,407 million reflecting increased sales of Corporate Pensions.
|
|
·
|
General Insurance profits increased by 10 per cent to £214 million primarily due to lower unemployment and freeze claims year-on-year after taking account of continuing lower income resulting from the Group ceasing to write new PPI business in 2010.
|
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Change
since
30 June
2010
|
Half-year
to 31 Dec
2010
|
|||||||||||||
| £m | £m |
%
|
£m | |||||||||||||
|
Net interest income
|
(142 | ) | (136 | ) | (4 | ) | (127 | ) | ||||||||
|
Other income
|
1,319 | 1,320 | 1,494 | |||||||||||||
|
Total income
|
1,177 | 1,184 | (1 | ) | 1,367 | |||||||||||
|
Insurance claims
|
(198 | ) | (261 | ) | 24 | (281 | ) | |||||||||
|
Total income, net of insurance claims
|
979 | 923 | 6 | 1,086 | ||||||||||||
|
Operating expenses
|
(415 | ) | (423 | ) | 2 | (431 | ) | |||||||||
|
Share of results of joint ventures and associates
|
– | (10 | ) | – | ||||||||||||
|
Profit before tax and fair value unwind
|
564 | 490 | 15 | 655 | ||||||||||||
|
Fair value unwind
|
(21 | ) | (21 | ) | (22 | ) | ||||||||||
|
Profit before tax
|
543 | 469 | 16 | 633 | ||||||||||||
|
Profit before tax and fair value unwind by business unit
|
||||||||||||||||
|
Life, Pensions and Investments:
|
||||||||||||||||
|
UK business
|
347 | 273 | 27 | 410 | ||||||||||||
|
European business
|
10 | 19 | (47 | ) | 91 | |||||||||||
|
General Insurance
|
214 | 195 | 10 | 177 | ||||||||||||
|
Other1
|
(7 | ) | 3 | (23 | ) | |||||||||||
|
Profit before tax and fair value unwind
|
564 | 490 | 15 | 655 | ||||||||||||
|
1
|
Includes certain Group and divisional costs and income not allocated to business units, as well as the division’s share of results of joint ventures and associates. The half-year to 30 June 2010 included an accounting gain on disposal of £13 million from the sale of the Group’s joint venture investment in esure.
|
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Change
since
30 June
2010
|
Half-year
to 31 Dec
2010
|
||||||||||||||
| £m | £m |
%
|
£m | ||||||||||||||
|
Net interest income
|
(123 | ) | (116 | ) | (6 | ) | (111 | ) | |||||||||
|
Other income
|
727 | 645 | 13 | 763 | |||||||||||||
|
Total income
|
604 | 529 | 14 | 652 | |||||||||||||
|
Operating expenses
|
(257 | ) | (256 | ) | (242 | ) | |||||||||||
|
Profit before tax and fair value unwind
|
347 | 273 | 27 | 410 | |||||||||||||
|
Profit before tax and fair value unwind by business unit
|
|||||||||||||||||
|
New business profit
|
– insurance business1
|
201 | 166 | 21 | 166 | ||||||||||||
|
– investment business1
|
(33 | ) | (34 | ) | 3 | (31 | ) | ||||||||||
|
Total new business profit
|
168 | 132 | 27 | 135 | |||||||||||||
|
Existing business profit
|
178 | 234 | (24 | ) | 230 | ||||||||||||
|
Experience and assumption changes
|
1 | (93 | ) | 45 | |||||||||||||
|
Profit before tax and fair value unwind
|
347 | 273 | 27 | 410 | |||||||||||||
|
Life, Pensions and Investments sales (PVNBP)
|
5,595 | 6,151 | (9 | ) | 4,165 | ||||||||||||
|
1
|
As required under IFRS, products are split between insurance and investment contracts depending on the level of insurance risk contained. For insurance contracts, the new business profit includes the net present value of profits expected to emerge over the lifetime of the contract, including profits anticipated in periods after the year of sale; for investment contracts the figure reflects the profit in the year of sale only, after allowing for the deferral of initial income and expenses. Consequently the recognition of profit for investment contracts is deferred relative to insurance contracts.
|
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Change
since
30 June
2010
|
Half-year
to 31 Dec
2010
|
|||||||||||||||||||||||||||||
|
Analysis by product
|
UK
|
Europe
|
Total
|
UK
|
Europe
|
Total
|
Total
|
|||||||||||||||||||||||||
| £m | £m | £m | £m | £m | £m |
%
|
£m | |||||||||||||||||||||||||
|
Protection
|
376 | 18 | 394 | 280 | 16 | 296 | 33 | 334 | ||||||||||||||||||||||||
|
Payment protection
|
11 | – | 11 | 54 | – | 54 | (80 | ) | 16 | |||||||||||||||||||||||
|
Savings and investments
|
633 | 99 | 732 | 925 | 112 | 1,037 | (29 | ) | 895 | |||||||||||||||||||||||
|
Individual pensions
|
780 | 51 | 831 | 942 | 52 | 994 | (16 | ) | 753 | |||||||||||||||||||||||
|
Corporate and
other pensions
|
2,350 | – | 2,350 | 1,437 | – | 1,437 | 64 | 1,313 | ||||||||||||||||||||||||
|
Retirement income
|
394 | – | 394 | 536 | – | 536 | (26 | ) | 353 | |||||||||||||||||||||||
|
Managed fund business
|
58 | – | 58 | 70 | – | 70 | (17 | ) | 107 | |||||||||||||||||||||||
|
Life and pensions
|
4,602 | 168 | 4,770 | 4,244 | 180 | 4,424 | 8 | 3,771 | ||||||||||||||||||||||||
|
OEICs
|
993 | – | 993 | 1,907 | – | 1,907 | (48 | ) | 726 | |||||||||||||||||||||||
|
Total
|
5,595 | 168 | 5,763 | 6,151 | 180 | 6,331 | (9 | ) | 4,497 | |||||||||||||||||||||||
|
Analysis by channel
|
||||||||||||||||||||||||||||||||
|
Bancassurance
|
1,850 | – | 1,850 | 2,956 | – | 2,956 | (37 | ) | 1,476 | |||||||||||||||||||||||
|
Intermediary
|
3,407 | 168 | 3,575 | 2,921 | 180 | 3,101 | 15 | 2,776 | ||||||||||||||||||||||||
|
Direct
|
338 | – | 338 | 274 | – | 274 | 23 | 245 | ||||||||||||||||||||||||
|
Total
|
5,595 | 168 | 5,763 | 6,151 | 180 | 6,331 | (9 | ) | 4,497 | |||||||||||||||||||||||
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Half-year
to 31 Dec
2010
|
||||||||||
|
£bn
|
£bn
|
£bn
|
||||||||||
|
Opening funds under management
|
133.1 | 122.1 | 123.2 | |||||||||
|
UK business
|
||||||||||||
|
Premiums
|
5.6 | 6.3 | 4.9 | |||||||||
|
Claims and surrenders
|
(7.5 | ) | (8.1 | ) | (6.8 | ) | ||||||
|
Net outflow of business
|
(1.9 | ) | (1.8 | ) | (1.9 | ) | ||||||
|
Investment return, expenses and commission
|
2.3 | (0.6 | ) | 11.1 | ||||||||
|
Other movements1
|
– | 4.1 | 0.2 | |||||||||
|
Net movement
|
0.4 | 1.7 | 9.4 | |||||||||
|
European business
|
||||||||||||
|
Net movement
|
0.1 | (0.1 | ) | 0.5 | ||||||||
|
Dividends and capital repatriation
|
(0.3 | ) | (0.5 | ) | – | |||||||
|
Closing funds under management
|
133.3 | 123.2 | 133.1 | |||||||||
|
Managed by the Group
|
107.6 | 103.4 | 109.3 | |||||||||
|
Managed by third parties
|
25.7 | 19.8 | 23.8 | |||||||||
|
Closing funds under management
|
133.3 | 123.2 | 133.1 | |||||||||
|
1
|
Other movements in funds under management incorporate alignment changes and the inclusion of managed pension funds.
|
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Change
|
Half-year
to 31 Dec
2010
|
|||||||||||||
| £m | £m |
%
|
£m | |||||||||||||
|
Home insurance
|
||||||||||||||||
|
Underwriting income (net of reinsurance)
|
449 | 455 | (1 | ) | 467 | |||||||||||
|
Commission receivable
|
38 | 35 | 9 | 40 | ||||||||||||
|
Commission payable
|
(67 | ) | (70 | ) | 4 | (65 | ) | |||||||||
| 420 | 420 | 442 | ||||||||||||||
|
Payment protection insurance
|
||||||||||||||||
|
Underwriting income1
|
185 | 292 | (37 | ) | 252 | |||||||||||
|
Commission receivable
|
38 | (23 | ) | 50 | ||||||||||||
|
Commission payable
|
(152 | ) | (134 | ) | (13 | ) | (184 | ) | ||||||||
| 71 | 135 | (47 | ) | 118 | ||||||||||||
|
Other
|
||||||||||||||||
|
Underwriting income (net of reinsurance)
|
2 | 3 | (33 | ) | 3 | |||||||||||
|
Commission receivable
|
13 | 22 | (41 | ) | 28 | |||||||||||
|
Commission payable
|
(2 | ) | (9 | ) | 78 | (6 | ) | |||||||||
|
Other (including investment income)
|
4 | (9 | ) | (25 | ) | |||||||||||
| 17 | 7 | – | ||||||||||||||
|
Net operating income
|
508 | 562 | (10 | ) | 560 | |||||||||||
|
Claims paid on insurance contracts (net of reinsurance)
|
(198 | ) | (261 | ) | 24 | (281 | ) | |||||||||
|
Operating income, net of claims
|
310 | 301 | 3 | 279 | ||||||||||||
|
Operating expenses
|
(96 | ) | (106 | ) | 9 | (102 | ) | |||||||||
|
Profit before tax and fair value unwind
|
214 | 195 | 10 | 177 | ||||||||||||
|
Combined ratio
|
73 | % | 77 | % | 80 | % | ||||||||||
|
1
|
The Group ceased writing new PPI business on 23 July 2010. Underwriting income therefore relates primarily to existing business.
|
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
20101
|
Change
since
30 June
2010
|
Half-year
to 31 Dec
20101
|
|||||||||||||
| £m | £m |
%
|
£m | |||||||||||||
|
Net interest income
|
(29 | ) | (36 | ) | 19 | (36 | ) | |||||||||
|
Other income
|
23 | 15 | 53 | 34 | ||||||||||||
|
Total income
|
(6 | ) | (21 | ) | 71 | (2 | ) | |||||||||
|
Direct costs:
|
||||||||||||||||
|
Information technology
|
(551 | ) | (609 | ) | 10 | (598 | ) | |||||||||
|
Operations
|
(303 | ) | (319 | ) | 5 | (319 | ) | |||||||||
|
Property
|
(467 | ) | (486 | ) | 4 | (483 | ) | |||||||||
|
Procurement
|
(28 | ) | (30 | ) | 7 | (29 | ) | |||||||||
|
Support functions
|
(48 | ) | (52 | ) | 8 | (56 | ) | |||||||||
| (1,397 | ) | (1,496 | ) | 7 | (1,485 | ) | ||||||||||
|
Result before recharges to divisions
|
(1,403 | ) | (1,517 | ) | 8 | (1,487 | ) | |||||||||
|
Total net recharges to divisions
|
1,341 | 1,460 | (8 | ) | 1,478 | |||||||||||
|
Share of results of joint ventures and associates
|
– | 1 | 2 | |||||||||||||
|
Loss before tax
|
(62 | ) | (56 | ) | (11 | ) | (7 | ) | ||||||||
|
1
|
2010 comparative figures have been amended to reflect the impact of centralising operations across the Group as part of the integration programme.
|
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Half-year
to 31 Dec
2010
|
||||||||||
| £m | £m | £m | ||||||||||
|
Net interest expense
|
(173 | ) | (296 | ) | (527 | ) | ||||||
|
Other income
|
(414 | ) | 840 | (442 | ) | |||||||
|
Total income
|
(587 | ) | 544 | (969 | ) | |||||||
|
Operating expenses
|
(65 | ) | (117 | ) | 10 | |||||||
|
Trading surplus
|
(652 | ) | 427 | (959 | ) | |||||||
|
Share of results of joint ventures and associates
|
– | 1 | 1 | |||||||||
|
(Loss) profit before tax and fair value unwind
|
(652 | ) | 428 | (958 | ) | |||||||
|
Fair value unwind
|
(536 | ) | (866 | ) | (580 | ) | ||||||
|
Loss before tax
|
(1,188 | ) | (438 | ) | (1,538 | ) | ||||||
|
1.
|
Basis of preparation of combined businesses information
|
|
·
|
In order to reflect the impact of the acquisition of HBOS, the following adjustments have been made:
|
|
|
–
|
the amortisation of purchased intangible assets has been excluded; and
|
|
|
–
|
the unwind of acquisition-related fair value adjustments is shown as one line in the combined businesses income statement.
|
|
·
|
In order to better present the business performance the following items, not related to acquisition accounting, have also been excluded:
|
|
|
–
|
integration costs;
|
|
|
–
|
insurance and policyholder interests volatility;
|
|
|
–
|
curtailment gains and losses in respect of the Group’s defined benefit pension schemes;
|
|
|
–
|
the customer goodwill payments provision;
|
|
|
–
|
the payment protection insurance provision;
|
|
|
–
|
sale costs in respect of the EU mandated retail business disposal (Project Verde); and
|
|
|
–
|
loss on disposal of businesses.
|
|
1.
|
Basis of preparation of combined businesses information (continued)
|
|
Removal of:
|
||||||||||||||||||||||||
|
Half-year to 30 June 2011
|
Lloyds
Banking
Group
statutory
|
Acquisition
related
items1
|
Volatility
arising in
insurance
businesses
|
Insurance
gross up
|
Fair value
unwind
|
Combined
businesses
|
||||||||||||||||||
| £m | £m | £m | £m | £m | £m | |||||||||||||||||||
|
Net interest income
|
5,989 | – | (10 | ) | 102 | 297 | 6,378 | |||||||||||||||||
|
Other income
|
10,214 | – | 187 | (5,332 | ) | (1,071 | ) | 3,998 | ||||||||||||||||
|
Total income
|
16,203 | – | 177 | (5,230 | ) | (774 | ) | 10,376 | ||||||||||||||||
|
Insurance claims
|
(5,349 | ) | – | – | 5,151 | – | (198 | ) | ||||||||||||||||
|
Total income, net of insurance claims
|
10,854 | – | 177 | (79 | ) | (774 | ) | 10,178 | ||||||||||||||||
|
Operating expenses
|
(6,428 | ) | 978 | – | 79 | 39 | (5,332 | ) | ||||||||||||||||
|
Trading surplus (deficit)
|
4,426 | 978 | 177 | – | (735 | ) | 4,846 | |||||||||||||||||
|
Impairment
|
(4,491 | ) | – | – | – | (931 | ) | (5,422 | ) | |||||||||||||||
|
Share of results of joint ventures and associates
|
14 | – | – | – | (2 | ) | 12 | |||||||||||||||||
|
Fair value unwind
|
– | – | – | 1,668 | 1,668 | |||||||||||||||||||
|
(Loss) profit before tax
|
(51 | ) | 978 | 177 | – | – | 1,104 | |||||||||||||||||
|
1
|
Comprises integration costs (£642 million) and the amortisation of purchased intangibles (£289 million) and EU mandated retail business disposal costs (£47 million).
|
|
Removal of:
|
||||||||||||||||||||||||
|
Half-year to 30 June 2010
|
Lloyds Banking Group
statutory
|
Acquisition
related items
including pension
curtailment
gain1
|
Volatility
arising in
insurance
businesses
|
Insurance
gross up
|
Fair value
unwind
|
Combined
businesses
|
||||||||||||||||||
| £m | £m | £m | £m | £m | £m | |||||||||||||||||||
|
Net interest income
|
7,038 | – | 11 | (321 | ) | 183 | 6,911 | |||||||||||||||||
|
Other income
|
8,742 | – | 188 | (2,686 | ) | (413 | ) | 5,831 | ||||||||||||||||
|
Total income
|
15,780 | – | 199 | (3,007 | ) | (230 | ) | 12,742 | ||||||||||||||||
|
Insurance claims
|
(3,189 | ) | – | – | 2,926 | 2 | (261 | ) | ||||||||||||||||
|
Total income, net of
insurance claims
|
12,591 | – | 199 | (81 | ) | (228 | ) | 12,481 | ||||||||||||||||
|
Costs:
|
||||||||||||||||||||||||
|
Operating expenses
|
(5,609 | ) | 56 | – | 81 | 37 | (5,435 | ) | ||||||||||||||||
|
Impairment of tangible fixed assets
|
(202 | ) | 52 | – | – | – | (150 | ) | ||||||||||||||||
| (5,811 | ) | 108 | – | 81 | 37 | (5,585 | ) | |||||||||||||||||
|
Trading surplus (deficit)
|
6,780 | 108 | 199 | – | (191 | ) | 6,896 | |||||||||||||||||
|
Impairment
|
(5,423 | ) | – | – | – | (1,131 | ) | (6,554 | ) | |||||||||||||||
|
Share of results of joint ventures and associates
|
(61 | ) | – | – | – | (1 | ) | (62 | ) | |||||||||||||||
|
Fair value unwind
|
– | – | – | 1,323 | 1,323 | |||||||||||||||||||
|
Profit before tax
|
1,296 | 108 | 199 | – | – | 1,603 | ||||||||||||||||||
|
1
|
Comprises integration costs (£804 million), the amortisation of purchased intangibles (£323 million) and the pension curtailment gain (£1,019 million).
|
|
1.
|
Basis of preparation of combined businesses information (continued)
|
|
Removal of:
|
||||||||||||||||||||||||||||
|
Half-year to 31 Dec 2010
|
Lloyds
Banking
Group
statutory
|
Acquisition
related
items
including
pension
curtailment
loss1
|
Volatility
arising in
insurance
businesses
|
Insurance
gross up
|
Payment
protection
insurance
provision,
customer goodwill payments provision and loss on
disposal of
businesses2
|
Fair value
unwind
|
Combined
businesses
|
|||||||||||||||||||||
| £m | £m | £m | £m | £m | £m | £m | ||||||||||||||||||||||
|
Net interest income
|
5,508 | – | 15 | 1,270 | – | 118 | 6,911 | |||||||||||||||||||||
|
Other income
|
22,179 | – | (520 | ) | (16,476 | ) | – | (850 | ) | 4,333 | ||||||||||||||||||
|
Total income
|
27,687 | – | (505 | ) | (15,206 | ) | – | (732 | ) | 11,244 | ||||||||||||||||||
|
Insurance claims
|
(15,322 | ) | – | – | 15,041 | – | – | (281 | ) | |||||||||||||||||||
|
Total income, net of insurance claims
|
12,365 | – | (505 | ) | (165 | ) | – | (732 | ) | 10,963 | ||||||||||||||||||
|
Operating expenses
|
(10,659 | ) | 1,264 | – | 165 | 3,700 | 37 | (5,493 | ) | |||||||||||||||||||
|
Trading surplus (deficit)
|
1,706 | 1,264 | (505 | ) | – | 3,700 | (695 | ) | 5,470 | |||||||||||||||||||
|
Impairment
|
(5,529 | ) | – | – | – | – | (1,098 | ) | (6,627 | ) | ||||||||||||||||||
|
Share of results of joint ventures and associates
|
(27 | ) | – | – | – | – | (2 | ) | (29 | ) | ||||||||||||||||||
|
Loss on disposal of businesses
|
(365 | ) | – | – | – | 365 | – | – | ||||||||||||||||||||
|
Fair value unwind
|
– | – | – | – | 1,795 | 1,795 | ||||||||||||||||||||||
|
(Loss) profit before tax
|
(4,215 | ) | 1,264 | (505 | ) | – | 4,065 | – | 609 | |||||||||||||||||||
|
1
|
Comprises integration costs (£849 million), the amortisation of purchased intangibles (£306 million) and the pension curtailment loss (£109 million).
|
|
2
|
Comprises the payment protection insurance provision (£3,200 million), the customer goodwill payments provision (£500 million) and the loss on disposal of businesses (£365 million).
|
|
2.
|
Banking net interest margin
|
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Half-year
to 31 Dec
2010
|
||||||||||
| £m | £m | £m | ||||||||||
|
Banking net interest margin
|
||||||||||||
|
Banking net interest income
|
6,211 | 6,646 | 6,740 | |||||||||
|
Average interest-earning assets
|
604,804 | 644,701 | 630,190 | |||||||||
|
Banking net interest margin
|
2.07 | % | 2.08 | % | 2.12 | % | ||||||
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Half-year
to 31 Dec
2010
|
||||||||||
| £m | £m | £m | ||||||||||
|
Banking net interest income – combined businesses
|
6,211 | 6,646 | 6,740 | |||||||||
|
Insurance division
|
(142 | ) | (136 | ) | (127 | ) | ||||||
|
Other net interest income (including trading activity)
|
309 | 401 | 298 | |||||||||
|
Group net interest income – combined businesses
|
6,378 | 6,911 | 6,911 | |||||||||
|
Fair value unwind
|
(297 | ) | (183 | ) | (118 | ) | ||||||
|
Insurance gross up
|
(102 | ) | 321 | (1,270 | ) | |||||||
|
Volatility arising in insurance businesses
|
10 | (11 | ) | (15 | ) | |||||||
|
Group net interest income – statutory
|
5,989 | 7,038 | 5,508 | |||||||||
|
3.
|
Integration costs and benefits
|
|
2011
|
||||||||||||||||
|
Synergy
run-rate
as at
30 June 2011
|
Allocation of Group Operations run-rate to divisions
|
Run-rate
by market facing division
|
Target
run-rate
by market
facing
division
|
|||||||||||||
| £m | £m | £m | £m | |||||||||||||
|
Retail
|
319 | 346 | 665 | 867 | ||||||||||||
|
Wholesale and Commercial
|
293 | 197 | 490 | 532 | ||||||||||||
|
Wealth and International
|
263 | 30 | 293 | 242 | ||||||||||||
|
Insurance
|
179 | 52 | 231 | 239 | ||||||||||||
|
Group Operations
|
657 | (657 | ) | – | – | |||||||||||
|
Central items
|
39 | 32 | 71 | 120 | ||||||||||||
|
Total
|
1,750 | – | 1,750 | 2,000 | ||||||||||||
|
4.
|
Impairment charge
|
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Half-year
to 31 Dec
2010
|
||||||||||
| £m | £m | £m | ||||||||||
|
Retail:
|
||||||||||||
|
Secured
|
295 | 53 | 239 | |||||||||
|
Unsecured
|
878 | 1,282 | 1,173 | |||||||||
|
Total Retail
|
1,173 | 1,335 | 1,412 | |||||||||
|
Wholesale
|
1,509 | 2,748 | 1,107 | |||||||||
|
Commercial
|
159 | 189 | 182 | |||||||||
|
Wealth and International
|
2,528 | 2,227 | 3,758 | |||||||||
|
Total impairment losses on loans and advances to customers
|
5,369 | 6,499 | 6,459 | |||||||||
|
Loans and advances to banks
|
– | (6 | ) | (7 | ) | |||||||
|
Debt securities classified as loans and receivables
|
17 | 15 | 42 | |||||||||
|
Available-for-sale financial assets
|
32 | 49 | 66 | |||||||||
|
Other credit risk provisions
|
4 | (3 | ) | 67 | ||||||||
|
Total impairment charge
|
5,422 | 6,554 | 6,627 | |||||||||
|
Charge for impairment losses on loans and advances to customers as % of average lending (annualised):
|
||||||||||||
|
Retail:
|
||||||||||||
|
Secured
|
0.18 | % | 0.03 | % | 0.14 | % | ||||||
|
Unsecured
|
6.46 | % | 8.27 | % | 7.94 | % | ||||||
|
Total Retail
|
0.65 | % | 0.72 | % | 0.76 | % | ||||||
|
Wholesale
|
2.02 | % | 3.11 | % | 1.31 | % | ||||||
|
Commercial
|
1.07 | % | 1.28 | % | 1.19 | % | ||||||
|
Wealth and International
|
7.89 | % | 6.56 | % | 11.29 | % | ||||||
|
Total
|
1.77 | % | 2.01 | % | 2.02 | % | ||||||
|
5.
|
Volatility arising in insurance businesses
|
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
|||||||
| £m | £m | |||||||
|
Insurance volatility
|
(69 | ) | (162 | ) | ||||
|
Policyholder interests volatility1
|
(106 | ) | (91 | ) | ||||
|
Total volatility
|
(175 | ) | (253 | ) | ||||
|
Insurance hedging arrangements
|
(2 | ) | 54 | |||||
|
Total
|
(177 | ) | (199 | ) | ||||
|
1
|
Includes volatility relating to the Group’s interest in St James’s Place.
|
|
United Kingdom (Sterling)
|
2011
|
2010
|
2009
|
|||||||||
|
%
|
%
|
%
|
||||||||||
|
Gilt yields (gross)
|
3.99 | 4.45 | 3.74 | |||||||||
|
Equity returns (gross)
|
6.99 | 7.45 | 6.74 | |||||||||
|
Dividend yield
|
3.00 | 3.00 | 3.00 | |||||||||
|
Property return (gross)
|
6.99 | 7.45 | 6.74 | |||||||||
|
Corporate bonds in unit-linked and with-profit funds (gross)
|
4.59 | 5.05 | 4.34 | |||||||||
|
Fixed interest investments backing annuity liabilities (gross)
|
4.78 | 5.30 | 5.72 | |||||||||
|
5.
|
Volatility arising in insurance businesses (continued)
|
|
6.
|
Number of employees (full-time equivalent)
|
|
As at
30 June
2011
|
As at
31 Dec
2010
|
|||||||
|
Retail
|
54,714 | 53,839 | ||||||
|
Wholesale
|
11,376 | 12,067 | ||||||
|
Commercial
|
6,110 | 6,034 | ||||||
|
Wealth and International
|
8,307 | 8,348 | ||||||
|
Insurance
|
9,433 | 9,764 | ||||||
|
Group Operations
|
19,564 | 18,465 | ||||||
|
Central items
|
2,841 | 2,881 | ||||||
| 112,345 | 111,398 | |||||||
|
Agency staff (full-time equivalent)
|
(8,486 | ) | (7,168 | ) | ||||
|
Total number of employees (full-time equivalent)
|
103,859 | 104,230 | ||||||
|
Page
|
|
|
Risk management approach
|
53
|
|
Principal risks and uncertainties
|
53
|
|
Economy
|
53
|
|
Liquidity and funding
|
55
|
|
Credit risk
|
60
|
|
Market risk
|
83
|
|
Insurance risk
|
83
|
|
Legal and regulatory
|
84
|
|
Customer treatment
|
85
|
|
People
|
85
|
|
Integration
|
86
|
|
State funding and state aid
|
86
|
|
As at
30 June 2011
|
As at
31 Dec
2010
|
Change
|
||||||||||
|
£bn
|
£bn
|
%
|
||||||||||
|
Funding Requirement
|
||||||||||||
|
Loans and advances to customers1
|
568.1 | 589.5 | (4 | ) | ||||||||
|
Loans and advances to banks2
|
9.0 | 10.5 | (14 | ) | ||||||||
|
Debt securities
|
15.5 | 25.7 | (40 | ) | ||||||||
|
Available-for-sale financial assets – secondary3
|
16.2 | 25.7 | (37 | ) | ||||||||
|
Cash balances4
|
3.2 | 3.6 | (11 | ) | ||||||||
|
Funded assets
|
612.0 | 655.0 | (7 | ) | ||||||||
|
On balance sheet primary liquidity assets5
|
||||||||||||
|
Reverse repos
|
23.3 | 7.3 | ||||||||||
|
Balances at central banks – primary4
|
52.0 | 34.5 | 51 | |||||||||
|
Available-for-sale financial assets – primary
|
16.6 | 17.3 | (4 | ) | ||||||||
|
Held to maturity
|
7.8 | 7.9 | (1 | ) | ||||||||
|
Trading and other financial assets
|
1.2 | – | ||||||||||
| 100.9 | 67.0 | 51 | ||||||||||
|
Other assets6
|
266.1 | 270.5 | (2 | ) | ||||||||
|
Total Group assets
|
979.0 | 992.5 | (1 | ) | ||||||||
|
Less: Other liabilities6
|
(228.6 | ) | (232.3 | ) | ||||||||
|
Funding requirement
|
750.4 | 760.2 | (1 | ) | ||||||||
|
Funded by
|
||||||||||||
|
Customer deposits7
|
394.9 | 382.5 | 3 | |||||||||
|
Wholesale funding
|
295.6 | 298.0 | (1 | ) | ||||||||
|
Group funding
|
690.5 | 680.5 | 1 | |||||||||
|
Repos
|
14.4 | 35.1 | (59 | ) | ||||||||
|
Total equity
|
45.5 | 44.6 | (2 | ) | ||||||||
|
Total funding
|
750.4 | 760.2 | (1 | ) | ||||||||
|
1
|
Excludes £19.7 billion (31 December 2010: £3.1 billion) of reverse repos.
|
|
2
|
Excludes £15.3 billion (31 December 2010: £15.6 billion) of loans and advances to banks within the insurance businesses and £3.9 billion (31 December 2010: £4.2 billion) of reverse repos.
|
|
3
|
Secondary liquidity assets comprise a diversified pool of highly rated unencumbered collateral (including retained issuance).
|
|
4
|
Cash balances and Balances at central banks – primary are combined in the Group's balance sheet.
|
|
5
|
Primary liquidity assets are FSA eligible liquid assets including UK Gilts, US Treasuries, Euro AAA government debt and unencumbered cash balances held at central banks.
|
|
6
|
Other assets and other liabilities primarily include balances in the Group's insurance businesses and the fair value of derivative assets and liabilities.
|
|
7
|
Excluding repos of £5.0 billion (31 December 2010: £11.1 billion).
|
|
As at
30 June
2011
|
As at
30 June
2011
|
As at
31 Dec
2010
|
As at
31 Dec
2010
|
|||||||||||||
|
£bn
|
%
|
£bn
|
%
|
|||||||||||||
|
Deposits from banks1
|
21.9 | 3.2 | 26.4 | 3.9 | ||||||||||||
|
Debt securities in issue:1
|
||||||||||||||||
|
Certificates of deposit
|
46.4 | 6.7 | 42.4 | 6.2 | ||||||||||||
|
Commercial paper
|
27.3 | 4.0 | 32.5 | 4.8 | ||||||||||||
|
Medium-term notes2
|
86.6 | 12.5 | 87.7 | 12.9 | ||||||||||||
|
Covered bonds
|
39.1 | 5.6 | 32.1 | 4.7 | ||||||||||||
|
Securitisation
|
37.1 | 5.4 | 39.0 | 5.7 | ||||||||||||
| 236.5 | 34.2 | 233.7 | 34.3 | |||||||||||||
|
Subordinated liabilities1
|
37.2 | 5.4 | 37.9 | 5.6 | ||||||||||||
|
Total wholesale funding3
|
295.6 | 42.8 | 298.0 | 43.8 | ||||||||||||
|
Customer deposits
|
394.9 | 57.2 | 382.5 | 56.2 | ||||||||||||
|
Total Group funding4
|
690.5 | 100.0 | 680.5 | 100.0 | ||||||||||||
|
1
|
A reconciliation to the Group’s balance sheet is provided on page 59.
|
|
2
|
Medium term notes include £37.1 billion of funding from the Credit Guarantee scheme.
|
|
3
|
The Group’s definition of wholesale funding aligns with that used by other international market participants; including interbank deposits, debt securities in issue and subordinated liabilities.
|
|
4
|
Excluding repos and total equity.
|
|
As at
30 June 2011
|
As at
30 June
2011
|
As at
31 Dec
2010
|
As at
31 Dec
2010
|
|||||||||||||
|
£bn
|
%
|
£bn
|
%
|
|||||||||||||
|
Less than one year
|
151.7 | 51.3 | 148.6 | 49.9 | ||||||||||||
|
One to two years
|
29.4 | 9.9 | 46.8 | 15.7 | ||||||||||||
|
Two to five years
|
60.6 | 20.5 | 52.3 | 17.6 | ||||||||||||
|
More than five years
|
53.9 | 18.3 | 50.3 | 16.8 | ||||||||||||
|
Total wholesale funding
|
295.6 | 100.0 | 298.0 | 100.0 | ||||||||||||
|
Sterling
|
US Dollar
|
Euro
|
Other
currencies
|
Total
|
|||||||||||||||||
|
£bn
|
£bn
|
£bn
|
£bn
|
£bn
|
|||||||||||||||||
|
Covered bonds
|
1.3 | – | 2.2 | – | 3.5 | ||||||||||||||||
|
Securitisation
|
1.3 | 2.1 | 1.7 | 0.2 | 5.3 | ||||||||||||||||
|
Medium-term notes
|
0.2 | 4.3 | 2.6 | 2.5 | 9.6 | ||||||||||||||||
|
Private placements1
|
2.5 | 0.4 | 3.5 | 0.4 | 6.8 | ||||||||||||||||
|
Total Issuance
|
5.3 | 6.8 | 10.0 | 3.1 | 25.2 | ||||||||||||||||
|
1
|
Private placements include structured bonds and term repos.
|
|
As at
30 June
2011
|
As at
31 Dec
2010
|
|||||||
|
£bn
|
£bn
|
|||||||
|
Primary liquidity1
|
100.9 | 97.5 | ||||||
|
Secondary liquidity2
|
117.5 | 62.4 | ||||||
|
Total
|
218.4 | 159.9 | ||||||
|
1
|
Primary liquidity is defined as FSA eligible liquid assets (UK Gilts, US Treasuries, Euro AAA government debt; unencumbered cash balances held at central banks).
|
|
2
|
Secondary liquidity comprises a diversified pool of highly rated unencumbered collateral (including retained issuance).
|
|
As at 30 June 2011
|
||||||||||||||||
|
Included in
funding
analysis
(above)
|
Repos
|
Fair value
and other
accounting
methods
|
Balance
sheet
|
|||||||||||||
|
£bn
|
£bn
|
£bn
|
£bn
|
|||||||||||||
|
Deposits from banks
|
21.9 | 9.4 | – | 31.3 | ||||||||||||
|
Debt securities in issue
|
236.5 | – | (5.3 | ) | 231.2 | |||||||||||
|
Subordinated liabilities
|
37.2 | – | (1.6 | ) | 35.6 | |||||||||||
|
Total wholesale funding
|
295.6 | 9.4 | ||||||||||||||
|
Customer deposits
|
394.9 | 5.0 | – | 399.9 | ||||||||||||
|
Total
|
690.5 | 14.4 | ||||||||||||||
|
As at 31 December 2010
|
||||||||||||||||
|
Included in
funding
analysis
(above)
|
Repos
|
Fair value
and other
accounting
methods
|
Balance
sheet
|
|||||||||||||
|
£bn
|
£bn
|
£bn
|
£bn
|
|||||||||||||
|
Deposits from banks
|
26.4 | 24.0 | – | 50.4 | ||||||||||||
|
Debt securities in issue
|
233.7 | – | (4.8 | ) | 228.9 | |||||||||||
|
Subordinated liabilities
|
37.9 | – | (1.7 | ) | 36.2 | |||||||||||
|
Total wholesale funding
|
298.0 | 24.0 | ||||||||||||||
|
Customer deposits
|
382.5 | 11.1 | – | 393.6 | ||||||||||||
|
Total
|
680.5 | 35.1 | ||||||||||||||
|
As at 30 June 2011
|
Loans and
advances
to
customers
|
Impaired loans
|
Impaired
loans
as a % of closing
advances
|
Impairment provisions1
|
Impairment
provisions
as a % of impaired
loans
|
|||||||||||||||
| £m | £m |
%
|
£m |
%
|
||||||||||||||||
|
Retail
|
362,441 | 9,390 | 2.6 | 3,003 | 32.0 | |||||||||||||||
|
Wholesale
|
143,983 | 29,249 | 20.3 | 12,811 | 43.8 | |||||||||||||||
|
Commercial
|
29,694 | 2,993 | 10.1 | 933 | 31.2 | |||||||||||||||
|
Wealth and International
|
64,119 | 23,836 | 37.2 | 12,824 | 53.8 | |||||||||||||||
|
Hedging and other items
|
20,176 | – | – | – | – | |||||||||||||||
| 620,413 | 65,468 | 10.6 | 29,571 | 45.2 | ||||||||||||||||
|
Impairment provisions
|
(29,571 | ) | ||||||||||||||||||
|
Fair value adjustments
|
(2,999 | ) | ||||||||||||||||||
|
Total Group
|
587,843 | |||||||||||||||||||
|
As at 31 December 2010
|
||||||||||||||||||||
|
Retail
|
368,981 | 9,750 | 2.6 | 3,096 | 31.8 | |||||||||||||||
|
Wholesale
|
158,002 | 31,658 | 20.0 | 14,863 | 46.9 | |||||||||||||||
|
Commercial
|
29,649 | 2,856 | 9.6 | 992 | 34.7 | |||||||||||||||
|
Wealth and International
|
66,368 | 20,342 | 30.7 | 10,684 | 52.5 | |||||||||||||||
|
Hedging and other items
|
3,378 | – | – | – | – | |||||||||||||||
| 626,378 | 64,606 | 10.3 | 29,635 | 45.9 | ||||||||||||||||
|
Impairment provisions
|
(29,635 | ) | ||||||||||||||||||
|
Fair value adjustments
|
(4,146 | ) | ||||||||||||||||||
|
Total Group
|
592,597 | |||||||||||||||||||
|
1
|
Impairment provisions include collective unimpaired provisions.
|
|
Total impairment charge
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Change
|
Half-year
to 31 Dec
2010
|
||||||||||||
| £m | £m |
%
|
£m | |||||||||||||
|
Retail
|
1,173 | 1,335 | 12 | 1,412 | ||||||||||||
|
Wholesale
|
1,557 | 2,801 | 44 | 1,263 | ||||||||||||
|
Commercial
|
160 | 190 | 16 | 192 | ||||||||||||
|
Wealth and International
|
2,532 | 2,228 | (14 | ) | 3,760 | |||||||||||
|
Total impairment charge
|
5,422 | 6,554 | 17 | 6,627 | ||||||||||||
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Change
|
Half-year
to 31 Dec
2010
|
|||||||||||||
| £m | £m |
%
|
£m | |||||||||||||
|
Total impairment losses on loans and advances to customers
|
5,369 | 6,499 | 17 | 6,459 | ||||||||||||
|
Loans and advances to banks
|
– | (6 | ) | (7 | ) | |||||||||||
|
Debt securities classified as loans and receivables
|
17 | 15 | (13 | ) | 42 | |||||||||||
|
Available-for-sale financial assets
|
32 | 49 | 35 | 66 | ||||||||||||
|
Other credit risk provisions
|
4 | (3 | ) | 67 | ||||||||||||
|
Total impairment charge
|
5,422 | 6,554 | 17 | 6,627 | ||||||||||||
|
·
|
The Group achieved a reduction in its impairment charge in the first half of 2011 to £5,422 million (from £6,554 million in the first half of 2010 and £6,627 million in the second half of 2010), due to the stabilisation of the UK economic environment (including UK corporate real estate prices), together with continued low UK interest rates and effective portfolio management.
|
|
·
|
Prudent, ‘through the cycle’ credit policies and procedures are in place throughout the Group, focusing on development of enduring client relationships. As a result of this approach, the credit quality of new lending remains strong. Very little new origination took place outside the UK.
|
|
·
|
The Group’s current level of impairment is being managed successfully in the current challenging economic environment by the Wholesale business support units and Retail collection and recovery units.
|
|
·
|
The Group’s exposure to Ireland is being closely managed. In the first half, we have taken additional provisions in Ireland due to further falls in the commercial real estate market as previously anticipated. We believe that further vulnerability exists. A dedicated UK-based business support team is in place to manage the winding down of the Irish book.
|
|
As at 30 June 2011
|
Direct
sovereign
|
Banking
groups
|
Asset-
backed
securities
|
Total
|
||||||||||||
| £m | £m | £m | £m | |||||||||||||
|
Belgium
|
87 | 318 | – | 405 | ||||||||||||
|
Greece
|
– | – | 70 | 70 | ||||||||||||
|
Ireland
|
– | 366 | 373 | 739 | ||||||||||||
|
Italy
|
35 | 1,780 | 48 | 1,863 | ||||||||||||
|
Portugal
|
– | 241 | 424 | 665 | ||||||||||||
|
Spain
|
67 | 2,136 | 450 | 2,653 | ||||||||||||
|
Total
|
189 | 4,841 | 1,365 | 6,395 | ||||||||||||
|
As at 30 June 2011
|
Fixed and
floating rate notes
|
Covered
bonds
|
Money
market,
short-term
and other
exposures
|
Derivatives
|
Total
|
|||||||||||||||
| £m | £m | £m | £m | £m | ||||||||||||||||
|
Belgium
|
242 | – | 77 | (1 | ) | 318 | ||||||||||||||
|
Greece
|
– | – | – | – | – | |||||||||||||||
|
Ireland
|
– | 145 | 220 | 1 | 366 | |||||||||||||||
|
Italy
|
216 | – | 1,542 | 22 | 1,780 | |||||||||||||||
|
Portugal
|
– | 150 | 90 | 1 | 241 | |||||||||||||||
|
Spain
|
163 | 1,584 | 370 | 19 | 2,136 | |||||||||||||||
|
Total
|
621 | 1,879 | 2,299 | 42 | 4,841 | |||||||||||||||
|
·
|
Italy – approximately 90 per cent of the exposure is to institutions rated at least A-.
|
|
·
|
Spain – approximately 80 per cent of the exposure is to institutions rated at least A-.
|
|
As at 30 June 2011
|
Loans and receivables
|
Available-
for-sale
financial
assets
|
Weighted
average
maturity
|
|||||||||||||||||
|
Current
carrying value
|
Fair
value
|
Current carrying
value
|
Total
carrying
value
|
Years
|
||||||||||||||||
| £m | £m | £m | £m | |||||||||||||||||
|
Belgium
|
– | – | – | – | – | |||||||||||||||
|
Greece
|
36 | 23 | 34 | 70 | 6 | |||||||||||||||
|
Ireland
|
170 | 135 | 203 | 373 | 8 | |||||||||||||||
|
Italy
|
33 | 36 | 15 | 48 | 2 | |||||||||||||||
|
Portugal
|
232 | 194 | 192 | 424 | 9 | |||||||||||||||
|
Spain
|
246 | 208 | 204 | 450 | 8 | |||||||||||||||
|
Total
|
717 | 596 | 648 | 1,365 | 8 | |||||||||||||||
|
As at 30 June 2011
|
Financial assets held for trading
|
Assets
held by
Insurance businesses
|
Total
|
|||||||||
| £m | £m | £m | ||||||||||
|
Belgium
|
1 | 477 | 478 | |||||||||
|
Greece
|
– | – | – | |||||||||
|
Ireland
|
3 | 79 | 82 | |||||||||
|
Italy
|
221 | 143 | 364 | |||||||||
|
Portugal
|
21 | – | 21 | |||||||||
|
Spain
|
149 | 211 | 360 | |||||||||
|
Total
|
395 | 910 | 1,305 | |||||||||
|
Corporate exposures
|
Retail exposures
|
|||||||||||||||||||||||
|
As at 30 June 2011
|
Loans and
advances
to
customers
|
Impairment
provisions
|
Net
exposure
|
Loans and
advances
to
customers
|
Impairment
provisions
|
Net
exposure
|
||||||||||||||||||
| £m | £m | £m | £m | £m | £m | |||||||||||||||||||
|
Belgium
|
563 | 7 | 556 | – | – | – | ||||||||||||||||||
|
Greece
|
773 | – | 773 | – | – | – | ||||||||||||||||||
|
Ireland
|
17,210 | 7,958 | 9,252 | 7,920 | 886 | 7,034 | ||||||||||||||||||
|
Italy
|
173 | 1 | 172 | – | – | – | ||||||||||||||||||
|
Portugal
|
146 | – | 146 | 10 | – | 10 | ||||||||||||||||||
|
Spain
|
2,050 | 124 | 1,926 | 1,835 | 30 | 1,805 | ||||||||||||||||||
|
Total
|
20,915 | 8,090 | 12,825 | 9,765 | 916 | 8,849 | ||||||||||||||||||
|
As at 30 June 2011
|
Loans and
advances to
customers
|
Impaired
loans
|
Impaired
loans as
a % of
closing loans and
advances
|
Impairment
provisions1
|
Impairment
provisions
as a % of
impaired
loans
|
|||||||||||||||
| £m | £m |
%
|
£m |
%
|
||||||||||||||||
|
Secured
|
336,446 | 6,695 | 2.0 | 1,697 | 25.3 | |||||||||||||||
|
Unsecured
|
25,995 | 2,695 | 10.4 | 1,306 | 48.5 | |||||||||||||||
|
Total gross lending
|
362,441 | 9,390 | 2.6 | 3,003 | 32.0 | |||||||||||||||
|
Impairment provisions
|
(3,003 | ) | ||||||||||||||||||
|
Fair value adjustments
|
(1,642 | ) | ||||||||||||||||||
|
Total Retail
|
357,796 | |||||||||||||||||||
|
As at 31 December 2010
|
||||||||||||||||||||
|
Secured
|
341,069 | 6,769 | 2.0 | 1,589 | 23.5 | |||||||||||||||
|
Unsecured
|
27,912 | 2,981 | 10.7 | 1,507 | 50.6 | |||||||||||||||
|
Total gross lending
|
368,981 | 9,750 | 2.6 | 3,096 | 31.8 | |||||||||||||||
|
Impairment provisions
|
(3,096 | ) | ||||||||||||||||||
|
Fair value adjustments
|
(2,154 | ) | ||||||||||||||||||
|
Total Retail
|
363,731 | |||||||||||||||||||
|
1
|
Impairment provisions include collective unimpaired provisions.
|
|
As at
30 June
2011
|
As at
31 Dec
2010
|
|||||||
| £m | £m | |||||||
|
Secured
|
||||||||
|
Mainstream
|
260,805 | 265,368 | ||||||
|
Buy to let
|
47,272 | 46,356 | ||||||
|
Specialist
|
28,369 | 29,345 | ||||||
| 336,446 | 341,069 | |||||||
|
Unsecured
|
||||||||
|
Credit cards
|
10,543 | 11,207 | ||||||
|
Personal loans
|
12,915 | 13,881 | ||||||
|
Bank accounts
|
2,537 | 2,624 | ||||||
|
Others, including joint ventures
|
– | 200 | ||||||
| 25,995 | 27,912 | |||||||
|
Total Retail gross lending
|
362,441 | 368,981 | ||||||
|
·
|
The Retail impairment charge was £1,173 million, a decrease of £239 million, or 17 per cent, from the second half of 2010 and a decrease of £162 million, or 12 per cent, from the first half of 2010.
|
|
·
|
The decrease in the Retail impairment charge was driven by the unsecured portfolio as a result of the improved quality of new business and effective portfolio management. The Retail impairment charge for loans and advances to customers, as a percentage of average loans and advances to customers, decreased to 0.65 per cent from 0.76 per cent in the second half of 2010.
|
|
·
|
Average loan-to-value on new mortgage lending in the first half of the year was 61.3 per cent (60.9 per cent for 2010) whilst the average indexed loan-to-value on the mortgage portfolio was 55.6 per cent (55.6 per cent at 31 December 2010).
|
|
·
|
The overall assets entering arrears in the first half of 2011, compared to the second half of 2010, was lower in both unsecured and secured lending.
|
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Change
|
Half-year
to 31 Dec
2010
|
|||||||||||||
| £m | £m |
%
|
£m | |||||||||||||
|
Secured
|
295 | 53 | 239 | |||||||||||||
|
Unsecured
|
878 | 1,282 | 1,173 | |||||||||||||
|
Total impairment charge
|
1,173 | 1,335 | 12 | 1,412 | ||||||||||||
|
Greater than three months in arrears (excluding repossessions)
|
Number of cases
|
Total mortgage
accounts %
|
Value of debt1
|
Total mortgage
balances %
|
||||||||||||||||||||||||||||
|
30 June
2011
|
31 Dec
2010
|
30 June
2011
|
31 Dec
2010
|
30 June
2011
|
31 Dec
2010
|
30 June
2011
|
31 Dec
2010
|
|||||||||||||||||||||||||
|
Cases
|
Cases
|
%
|
%
|
£ | m | £ | m |
%
|
%
|
|||||||||||||||||||||||
|
Mainstream
|
53,890 | 55,675 | 2.0 | 2.1 | 6,056 | 6,247 | 2.3 | 2.4 | ||||||||||||||||||||||||
|
Buy to let
|
7,839 | 7,577 | 1.8 | 1.8 | 1,163 | 1,157 | 2.5 | 2.5 | ||||||||||||||||||||||||
|
Specialist
|
13,693 | 12,582 | 7.2 | 6.4 | 2,416 | 2,262 | 8.5 | 7.7 | ||||||||||||||||||||||||
|
Total
|
75,422 | 75,834 | 2.3 | 2.3 | 9,635 | 9,666 | 2.9 | 2.8 | ||||||||||||||||||||||||
|
1
|
Value of debt represents total book value of mortgages in arrears but not repossessed.
|
|
As at 30 June 2011
|
Mainstream
|
Buy to let
|
Specialist1
|
Total
|
||||||||||||
|
%
|
%
|
%
|
%
|
|||||||||||||
|
Less than 60%
|
33.0 | 12.0 | 14.4 | 28.4 | ||||||||||||
|
60% to 70%
|
12.4 | 12.2 | 9.6 | 12.1 | ||||||||||||
|
70% to 80%
|
17.1 | 24.1 | 17.0 | 18.1 | ||||||||||||
|
80% to 90%
|
15.5 | 17.5 | 20.4 | 16.2 | ||||||||||||
|
90% to 100%
|
11.4 | 17.8 | 19.2 | 13.0 | ||||||||||||
|
Greater than 100%
|
10.6 | 16.4 | 19.4 | 12.2 | ||||||||||||
|
Total
|
100.0 | 100.0 | 100.0 | 100.0 | ||||||||||||
|
Average loan-to-value:
|
||||||||||||||||
|
Stock of residential mortgages
|
51.9 | 74.5 | 72.6 | 55.6 | ||||||||||||
|
New residential lending
|
60.4 | 66.1 | n/a | 61.3 | ||||||||||||
|
Impaired mortgages
|
72.3 | 99.4 | 87.0 | 78.4 | ||||||||||||
|
As at 31 December 2010
|
Mainstream
|
Buy to let
|
Specialist1
|
Total
|
||||||||||||
|
%
|
%
|
%
|
%
|
|||||||||||||
|
Less than 60%
|
33.0 | 11.4 | 14.0 | 28.5 | ||||||||||||
|
60% to 70%
|
12.1 | 11.1 | 9.4 | 11.7 | ||||||||||||
|
70% to 80%
|
16.1 | 21.9 | 15.9 | 16.8 | ||||||||||||
|
80% to 90%
|
15.3 | 18.0 | 21.3 | 16.2 | ||||||||||||
|
90% to 100%
|
11.9 | 19.1 | 20.0 | 13.6 | ||||||||||||
|
Greater than 100%
|
11.6 | 18.5 | 19.4 | 13.2 | ||||||||||||
|
Total
|
100.0 | 100.0 | 100.0 | 100.0 | ||||||||||||
|
Average loan-to-value:
|
||||||||||||||||
|
Stock of residential mortgages
|
51.9 | 75.6 | 72.9 | 55.6 | ||||||||||||
|
New residential lending
|
60.0 | 66.5 | n/a | 60.9 | ||||||||||||
|
Impaired mortgages
|
72.3 | 97.8 | 87.3 | 78.0 | ||||||||||||
|
1
|
Specialist lending is closed to new business and is in run-off.
|
|
As at 30 June 2011
|
Balance
|
Impaired
loans
|
Impaired
loans as a % of closing advances
|
Impairment provisions1
|
Impairment
provisions
as a % of
impaired
loans
|
|||||||||||||||
| £m | £m |
%
|
£m |
%
|
||||||||||||||||
|
Corporate Markets
|
||||||||||||||||||||
|
Corporate
|
73,760 | 5,750 | 7.8 | 3,252 | 56.6 | |||||||||||||||
|
Corporate Real Estate BSU
|
23,673 | 16,212 | 68.5 | 6,263 | 38.6 | |||||||||||||||
|
Wholesale Equity
|
140 | 114 | 81.4 | 110 | 96.5 | |||||||||||||||
|
Wholesale Markets
|
36,843 | 5,561 | 15.1 | 2,177 | 39.1 |
|
Total Corporate Markets
|
134,416 | 27,637 | 20.6 | 11,802 | 42.7 | |||||||||||||||
|
Treasury and Trading
|
1,021 | – | – | – | – | |||||||||||||||
|
Asset Finance
|
8,546 | 1,612 | 18.9 | 1,009 | 62.6 | |||||||||||||||
|
Total Wholesale
|
143,983 | 29,249 | 20.3 | 12,811 | 43.8 | |||||||||||||||
|
Reverse repos
|
19,690 | |||||||||||||||||||
|
Impairment provisions
|
(12,811 | ) | ||||||||||||||||||
|
Fair value adjustments
|
(1,094 | ) | ||||||||||||||||||
|
Loans and advances to customers
|
149,768 | |||||||||||||||||||
|
Loans and advances to banks
|
10,193 | |||||||||||||||||||
|
Debt securities2
|
15,524 | |||||||||||||||||||
|
Available-for-sale financial assets3
|
16,655 | |||||||||||||||||||
|
As at 31 December 2010
|
||||||||||||||||||||
|
Corporate Markets
|
|
Corporate4
|
80,670 | 6,635 | 8.2 | 3,629 | 54.7 | |||||||||||||||
|
Corporate Real Estate BSU
|
26,151 | 17,518 | 67.0 | 8,092 | 46.2 | |||||||||||||||
|
Wholesale Equity
|
140 | 108 | 77.1 | 107 | 99.1 | |||||||||||||||
|
Wholesale Markets
|
40,042 | 5,718 | 14.3 | 1,992 | 34.8 |
|
Total Corporate Markets
|
147,003 | 29,979 | 20.4 | 13,820 | 46.1 | |||||||||||||||
|
Treasury and Trading
|
1,050 | – | – | – | – | |||||||||||||||
|
Asset Finance
|
9,949 | 1,679 | 16.9 | 1,043 | 62.1 | |||||||||||||||
|
Total Wholesale
|
158,002 | 31,658 | 20.0 | 14,863 | 46.9 | |||||||||||||||
|
Reverse repos
|
3,096 | |||||||||||||||||||
|
Impairment provisions
|
(14,863 | ) | ||||||||||||||||||
|
Fair value adjustments
|
(1,562 | ) | ||||||||||||||||||
|
Loans and advances to customers
|
144,673 | |||||||||||||||||||
|
Loans and advances to banks
|
12,401 | |||||||||||||||||||
|
Debt securities
|
25,779 | |||||||||||||||||||
|
Available-for-sale financial assets
|
29,458 |
|
1
|
Impairment provisions include collective unimpaired provisions.
|
|
2
|
Of which Wholesale Markets is £15,026 million, Wholesale Equity £339 million, Treasury and Trading £150 million, Asset Finance £7 million, and Corporate £2 million.
|
|
3
|
Of which Wholesale Markets is £11,585 million, Wholesale Equity £1,916 million, Treasury and Trading £3,129 million and Corporate £25 million.
|
|
4
|
2010 figures for Corporate have been restated for transfers to Commercial.
|
|
·
|
Impairment losses have fallen significantly over the last 12 months to £1,557 million in the first half of 2011 from £2,801 million for the first half of 2010. Impairments in the second half of 2010 were lower at £1,263 million reflecting the benefit of a number of writebacks due to asset disposals and impairment releases in that period.
|
|
·
|
The decrease in the underlying impairment charge in the first half of 2011 reflects stabilising UK economic conditions (including UK corporate real estate prices), together with the continuing low interest rate environment but offset by higher charges in leveraged finance.
|
|
·
|
Compared to the first half of 2010, the reduction has been driven primarily by lower impairments experienced in corporate real estate and real estate related portfolios.
|
|
·
|
Since the onset of the Greek debt crisis, the Group has proactively managed down banking and trading book exposures to peripheral Eurozone countries. Divestment strategy was focused on balance sheet reduction and disposing of higher risk positions.
|
|
·
|
A robust credit risk management and control framework is in place across the combined portfolios and a prudent risk appetite approach (based on Lloyds TSB’s model) has been embedded across the division. Significant resources have been deployed into the Business Support Units focused on key and vulnerable obligors and asset classes.
|
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Change
|
Half-year
to 31 Dec
2010
|
|||||||||||||
| £m | £m |
%
|
£m | |||||||||||||
|
Corporate Markets
|
1,442 | 2,609 | 45 | 1,191 | ||||||||||||
|
Asset Finance
|
115 | 192 | 40 | 72 | ||||||||||||
|
Total impairment charge
|
1,557 | 2,801 | 44 | 1,263 | ||||||||||||
|
Balance
|
Impaired
loans
|
Impaired
loans as a
% of
closing
advances
|
Impairment
provisions1
|
Impairment
provisions
as a % of
impaired
loans
|
||||||||||||||||
| £m | £m |
%
|
£m |
%
|
||||||||||||||||
|
Commercial
|
29,694 | 2,993 | 10.1 | 933 | 31.2 | |||||||||||||||
|
Impairment provisions
|
(933 | ) | ||||||||||||||||||
|
Fair value adjustments
|
(77 | ) | ||||||||||||||||||
|
Loans and advances to customers
|
28,684 | |||||||||||||||||||
|
As at 31 December 2010
|
||||||||||||||||||||
|
Commercial2
|
29,649 | 2,856 | 9.6 | 992 | 34.7 | |||||||||||||||
|
Impairment provisions
|
(992 | ) | ||||||||||||||||||
|
Fair value adjustments
|
(103 | ) | ||||||||||||||||||
|
Loans and advances to customers
|
28,554 | |||||||||||||||||||
|
1
|
Impairment provisions include collective unimpaired provisions.
|
|
2
|
2010 figures have been restated for transfers from Corporate.
|
|
·
|
Impairment losses have fallen over the last 12 months to £160 million in the first half of 2011 from £190 million for the first half of 2010, and from £192 million in the second half of 2010.
|
|
·
|
The decrease in impairments in the first half of 2011 reflects a stabilising although uncertain UK economic environment, together with the continuing low interest rate environment.
|
|
·
|
Portfolio metrics including delinquencies and assets under close monitoring, whilst improving through supportive management actions, remain above benign levels, although there has been a reduction in the level of flows into Business Support.
|
|
·
|
Commercial continue to operate rigorous processes to enhance control and monitoring activities which play a crucial role in identifying customers showing early signs of financial distress and bringing them into Commercial’s support model.
|
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Change
|
Half-year
to 31 Dec
2010
|
|||||||||||||
| £m | £m |
%
|
£m | |||||||||||||
|
Total impairment charge
|
160 | 190 | 16 | 192 | ||||||||||||
|
As at 30 June 2011
|
Loans and
advances
to
customers
|
Impaired
loans
|
Impaired
loans
as a % of
closing advances
|
Impairment provisions1
|
Impairment provisions
as a % of
impaired
loans
|
|||||||||||||||
| £m | £m |
%
|
£m |
%
|
||||||||||||||||
|
Wealth
|
9,226 | 434 | 4.7 | 125 | 28.8 | |||||||||||||||
|
International
|
||||||||||||||||||||
|
Ireland
|
27,574 | 17,672 | 64.1 | 9,858 | 55.8 | |||||||||||||||
|
Australia
|
12,915 | 4,540 | 35.2 | 2,295 | 50.6 | |||||||||||||||
|
Wholesale Europe
|
6,956 | 952 | 13.7 | 429 | 45.1 | |||||||||||||||
|
Other
|
7,448 | 238 | 3.2 | 117 | 49.2 |
| 54,893 | 23,402 | 42.6 | 12,699 | 54.3 | ||||||||||||||||
|
Wealth and International
|
64,119 | 23,836 | 37.2 | 12,824 | 53.8 | |||||||||||||||
|
Impairment provisions
|
(12,824 | ) | ||||||||||||||||||
|
Fair value adjustments
|
(186 | ) | ||||||||||||||||||
|
Total
|
51,109 | |||||||||||||||||||
|
As at 31 December 2010
|
||||||||||||||||||||
|
Wealth
|
9,472 | 353 | 3.7 | 116 | 32.9 | |||||||||||||||
|
International
|
|
Ireland
|
27,428 | 14,445 | 52.7 | 7,763 | 53.7 | |||||||||||||||
|
Australia
|
14,587 | 4,187 | 28.7 | 2,208 | 52.7 | |||||||||||||||
|
Wholesale Europe
|
7,322 | 1,007 | 13.8 | 420 | 41.7 | |||||||||||||||
|
Other
|
7,559 | 350 | 4.6 | 177 | 50.6 |
| 56,896 | 19,989 | 35.1 | 10,568 | 52.9 | ||||||||||||||||
|
Wealth and International
|
66,368 | 20,342 | 30.7 | 10,684 | 52.5 | |||||||||||||||
|
Impairment provisions
|
(10,684 | ) | ||||||||||||||||||
|
Fair value adjustments
|
(327 | ) | ||||||||||||||||||
|
Total
|
55,357 |
|
1
|
Impairment provisions include collective unimpaired provisions.
|
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Change
|
Half-year
to 31 Dec
2010
|
|||||||||||||
| £m | £m |
%
|
£m | |||||||||||||
|
Wealth
|
29 | 23 | (26 | ) | 23 | |||||||||||
|
International
|
||||||||||||||||
|
Ireland
|
1,779 | 1,557 | (14 | ) | 2,707 | |||||||||||
|
Australia
|
586 | 454 | (29 | ) | 908 | |||||||||||
|
Wholesale Europe
|
111 | 145 | 23 | 65 | ||||||||||||
|
Other International
|
27 | 49 | 45 | 57 |
| 2,503 | 2,205 | (14 | ) | 3,737 | ||||||||||||
|
Total impairment charge
|
2,532 | 2,228 | (14 | ) | 3,760 |
|
·
|
Impairment charges have fallen significantly compared to the second half of 2010. However material losses continue to be incurred due to further provisioning requirements in portfolios in Ireland and Australasia.
|
|
·
|
The Group's Irish portfolio has continued to deteriorate with a further 11 per cent of the portfolio being classified as impaired in the period.
|
|
·
|
Impairment coverage has increased in Ireland due to further falls in the commercial real estate market as previously anticipated. The Group believes that further vulnerability exists.
|
|
·
|
A dedicated UK-based Business Support Unit credit team is now in place to manage the wind down of the Irish book; however the Irish market is extremely illiquid with limited opportunities for disposals in the short term.
|
|
·
|
The Group's portfolio in Australasia is exposed to real estate concentrations in specific regions where market conditions remain challenging and asset valuations continue to decline.
|
|
As at 30 June 2011
|
As at 31 December 2010
|
|||||||||||||||||||||||
|
Gross
loans
|
Impaired
loans
|
Provisions
|
Gross
loans
|
Impaired
loans
|
Provisions
|
|||||||||||||||||||
| £m | £m | £m | £m | £m | £m | |||||||||||||||||||
|
Commercial Real Estate
|
11,869 | 10,831 | 5,943 | 11,685 | 9,232 | 4,791 | ||||||||||||||||||
|
Corporate
|
7,785 | 5,597 | 3,029 | 8,070 | 4,343 | 2,356 | ||||||||||||||||||
|
Retail
|
7,920 | 1,244 | 886 | 7,673 | 870 | 616 | ||||||||||||||||||
|
Total
|
27,574 | 17,672 | 9,858 | 27,428 | 14,445 | 7,763 | ||||||||||||||||||
|
·
|
There is a risk to the Group’s banking income arising from the level of interest rates and the margin of interbank rates over central bank rates. A further banking risk arises from competitive pressures on product terms in existing loans and deposits, which sometimes restrict the Group in its ability to change interest rates applying to customers in response to changes in interbank and central bank rates.
|
|
·
|
The main equity market risks arise in the life assurance companies and staff pension schemes. Credit spread risk arises in the life assurance companies, pension schemes and banking businesses. Equity market movements and changes in credit spreads impact the Group’s results.
|
|
·
|
The scale and pace of organisational, legislative, and regulatory change
|
|
·
|
Integration and other strategic initiatives
|
|
·
|
The implementation of EU State Aid requirements
|
|
·
|
The Independent Commission on Banking’s (ICB) proposals for banking reform.
|
|
Page
|
||
|
Condensed interim financial statements (unaudited)
|
||
|
Consolidated income statement (unaudited)
|
88
|
|
|
Consolidated statement of comprehensive income (unaudited)
|
89
|
|
|
Consolidated balance sheet (unaudited)
|
90
|
|
|
Consolidated statement of changes in equity (unaudited)
|
92
|
|
|
Consolidated cash flow statement (unaudited)
|
95
|
|
|
Notes (unaudited)
|
||
|
1
|
Accounting policies, presentation and estimates
|
96
|
|
2
|
Segmental analysis
|
98
|
|
3
|
Other income
|
102
|
|
4
|
Operating expenses
|
103
|
|
5
|
Impairment
|
104
|
|
6
|
Loss on disposal of businesses
|
104
|
|
7
|
Taxation
|
105
|
|
8
|
Earnings per share
|
106
|
|
9
|
Trading and other financial assets at fair value through profit or loss
|
106
|
|
10
|
Derivative financial instruments
|
107
|
|
11
|
Loans and advances to customers
|
108
|
|
12
|
Allowance for impairment losses on loans and receivables
|
108
|
|
13
|
Securitisations and covered bonds
|
109
|
|
14
|
Debt securities classified as loans and receivables
|
110
|
|
15
|
Available-for-sale financial assets
|
110
|
|
16
|
Credit market exposures
|
111
|
|
17
|
Customer deposits
|
113
|
|
18
|
Debt securities in issue
|
113
|
|
19
|
Subordinated liabilities
|
114
|
|
20
|
Share capital
|
114
|
|
21
|
Reserves
|
115
|
|
22
|
Payment protection insurance
|
115
|
|
23
|
Contingent liabilities and commitments
|
116
|
|
24
|
Capital ratios
|
120
|
|
25
|
Related party transactions
|
123
|
|
26
|
Future accounting developments
|
124
|
|
27
|
Events after the balance sheet date
|
125
|
|
28
|
Condensed consolidating financial information
|
125
|
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Half-year
to 31 Dec
2010
|
||||||||||||||
|
Note
|
£ million
|
£ million
|
£ million
|
|||||||||||||
|
Interest and similar income
|
13,437 | 14,661 | 14,679 | |||||||||||||
|
Interest and similar expense
|
(7,448 | ) | (7,623 | ) | (9,171 | ) | ||||||||||
|
Net interest income
|
5,989 | 7,038 | 5,508 | |||||||||||||
|
Fee and commission income
|
2,153 | 2,219 | 2,196 | |||||||||||||
|
Fee and commission expense
|
(690 | ) | (812 | ) | (870 | ) | ||||||||||
|
Net fee and commission income
|
1,463 | 1,407 | 1,326 | |||||||||||||
|
Net trading income
|
3,118 | 1,245 | 14,479 | |||||||||||||
|
Insurance premium income
|
4,125 | 4,300 | 3,848 | |||||||||||||
|
Other operating income
|
1,508 | 1,790 | 2,526 | |||||||||||||
|
Other income
|
3 | 10,214 | 8,742 | 22,179 | ||||||||||||
|
Total income
|
16,203 | 15,780 | 27,687 | |||||||||||||
|
Insurance claims
|
(5,349 | ) | (3,189 | ) | (15,322 | ) | ||||||||||
|
Total income, net of insurance claims
|
10,854 | 12,591 | 12,365 | |||||||||||||
|
Payment protection insurance provision
|
– | – | (3,200 | ) | ||||||||||||
|
Other operating expenses
|
(6,428 | ) | (5,811 | ) | (7,459 | ) | ||||||||||
|
Total operating expenses
|
4 | (6,428 | ) | (5,811 | ) | (10,659 | ) | |||||||||
|
Trading surplus
|
4,426 | 6,780 | 1,706 | |||||||||||||
|
Impairment
|
5 | (4,491 | ) | (5,423 | ) | (5,529 | ) | |||||||||
|
Share of results of joint ventures and associates
|
14 | (61 | ) | (27 | ) | |||||||||||
|
Loss on disposal of businesses
|
6 | – | – | (365 | ) | |||||||||||
|
(Loss) profit before tax
|
(51 | ) | 1,296 | (4,215 | ) | |||||||||||
|
Taxation
|
7 | 109 | (630 | ) | 955 | |||||||||||
|
Profit (loss) for the period
|
58 | 666 | (3,260 | ) | ||||||||||||
|
Profit (loss) attributable to non-controlling interests
|
27 | 70 | (8 | ) | ||||||||||||
|
Profit (loss) attributable to equity shareholders
|
31 | 596 | (3,252 | ) | ||||||||||||
|
Profit (loss) for the period
|
58 | 666 | (3,260 | ) | ||||||||||||
|
Basic earnings (loss) per share
|
8 | 0.0 | p | 0.9 | p | (4.8 | )p | |||||||||
|
Diluted earnings (loss) per share
|
8 | 0.0 | p | 0.9 | p | (4.8 | )p | |||||||||
|
Dividend per share for the period
|
– | – | – | |||||||||||||
|
Dividend for the period
|
– | – | – | |||||||||||||
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Half-year
to 31 Dec
2010
|
||||||||||
|
£ million
|
£ million
|
£ million
|
||||||||||
|
Profit (loss) for the period
|
58 | 666 | (3,260 | ) | ||||||||
|
Other comprehensive income:
|
||||||||||||
|
Movements in revaluation reserve in respect of available-for-sale financial assets:
|
||||||||||||
|
Change in fair value
|
437 | 1,255 | (24 | ) | ||||||||
|
Income statement transfers in respect of disposals
|
52 | (147 | ) | (252 | ) | |||||||
|
Income statement transfers in respect of impairment
|
29 | 36 | 78 | |||||||||
|
Other income statement transfers
|
25 | (185 | ) | 75 | ||||||||
|
Taxation
|
(123 | ) | (357 | ) | 14 |
| 420 | 602 | (109 | ) | |||||||||
|
Movement in cash flow hedging reserve:
|
|
Effective portion of changes in fair value
|
516 | (535 | ) | (513 | ) | |||||||
|
Net income statement transfers
|
103 | 312 | 620 | |||||||||
|
Taxation
|
(176 | ) | 73 | (43 | ) |
| 443 | (150 | ) | 64 | |||||||||
|
Currency translation differences:
|
|
Currency translation differences, before tax
|
(77 | ) | 95 | (224 | ) | |||||||
|
Taxation
|
– | (1 | ) | 1 |
| (77 | ) | 94 | (223 | ) | ||||||||
|
Other comprehensive income for the period, net of tax
|
786 | 546 | (268 | ) | ||||||||
|
Total comprehensive income for the period
|
844 | 1,212 | (3,528 | ) | ||||||||
|
Total comprehensive income attributable to non-controlling interests
|
25 | 67 | (10 | ) | ||||||||
|
Total comprehensive income attributable to equity shareholders
|
819 | 1,145 | (3,518 | ) | ||||||||
|
Total comprehensive income for the period
|
844 | 1,212 | (3,528 | ) |
|
As at
30 June
2011
|
As at
31 December
2010
|
|||||||||||
|
Assets
|
Note
|
£ million
|
£ million
|
|||||||||
|
Cash and balances at central banks
|
55,240 | 38,115 | ||||||||||
|
Items in course of collection from banks
|
1,392 | 1,368 | ||||||||||
|
Trading and other financial assets at fair value through profit or loss
|
9 | 155,181 | 156,191 | |||||||||
|
Derivative financial instruments
|
10 | 45,256 | 50,777 | |||||||||
|
Loans and receivables:
|
||||||||||||
|
Loans and advances to banks
|
28,170 | 30,272 | ||||||||||
|
Loans and advances to customers
|
11 | 587,843 | 592,597 | |||||||||
|
Debt securities
|
14 | 15,521 | 25,735 |
| 631,534 | 648,604 | |||||||||||
|
Available-for-sale financial assets
|
15 | 32,793 | 42,955 | |||||||||
|
Held-to-maturity investments
|
7,842 | 7,905 | ||||||||||
|
Investment properties
|
6,441 | 5,997 | ||||||||||
|
Investments in joint ventures and associates
|
427 | 429 | ||||||||||
|
Goodwill
|
2,016 | 2,016 | ||||||||||
|
Value of in-force business
|
7,482 | 7,367 | ||||||||||
|
Other intangible assets
|
3,257 | 3,496 | ||||||||||
|
Tangible fixed assets
|
7,874 | 8,190 | ||||||||||
|
Current tax recoverable
|
558 | 621 | ||||||||||
|
Deferred tax assets
|
5,122 | 5,028 | ||||||||||
|
Retirement benefit assets
|
845 | 736 | ||||||||||
|
Other assets
|
15,691 | 12,643 | ||||||||||
|
Total assets
|
978,951 | 992,438 |
|
As at
30 June
2011
|
As at
31 December
2010
|
|||||||||||
|
Equity and liabilities
|
Note
|
£ million
|
£ million
|
|||||||||
|
Liabilities
|
||||||||||||
|
Deposits from banks
|
31,294 | 50,363 | ||||||||||
|
Customer deposits
|
17 | 399,919 | 393,633 | |||||||||
|
Items in course of transmission to banks
|
1,312 | 802 | ||||||||||
|
Trading and other financial liabilities at fair value through profit or loss
|
27,290 | 26,762 | ||||||||||
|
Derivative financial instruments
|
10 | 36,049 | 42,158 | |||||||||
|
Notes in circulation
|
1,048 | 1,074 | ||||||||||
|
Debt securities in issue
|
18 | 231,194 | 228,866 | |||||||||
|
Liabilities arising from insurance contracts and
participating investment contracts
|
80,274 | 80,729 | ||||||||||
|
Liabilities arising from non-participating investment contracts
|
52,823 | 51,363 | ||||||||||
|
Unallocated surplus within insurance businesses
|
649 | 643 | ||||||||||
|
Other liabilities
|
30,899 | 29,696 | ||||||||||
|
Retirement benefit obligations
|
400 | 423 | ||||||||||
|
Current tax liabilities
|
105 | 149 | ||||||||||
|
Deferred tax liabilities
|
412 | 247 | ||||||||||
|
Other provisions
|
4,152 | 4,732 | ||||||||||
|
Subordinated liabilities
|
19 | 35,585 | 36,232 | |||||||||
|
Total liabilities
|
933,405 | 947,872 | ||||||||||
|
Equity
|
||||||||||||
|
Share capital
|
20 | 6,881 | 6,815 | |||||||||
|
Share premium account
|
21 | 16,541 | 16,291 | |||||||||
|
Other reserves
|
21 | 12,363 | 11,575 | |||||||||
|
Retained profits
|
21 | 9,124 | 9,044 |
|
Shareholders’ equity
|
44,909 | 43,725 | ||||||||||
|
Non-controlling interests
|
637 | 841 | ||||||||||
|
Total equity
|
45,546 | 44,566 | ||||||||||
|
Total equity and liabilities
|
978,951 | 992,438 |
|
Attributable to equity shareholders
|
||||||||||||||||||||||||
|
Share capital
and premium
|
Other
reserves
|
Retained
profits
|
Total
|
Non-
controlling
interests
|
Total
|
|||||||||||||||||||
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
|||||||||||||||||||
|
Balance at 1 January 2011
|
23,106 | 11,575 | 9,044 | 43,725 | 841 | 44,566 | ||||||||||||||||||
|
Comprehensive income
|
||||||||||||||||||||||||
|
Profit for the period
|
– | – | 31 | 31 | 27 | 58 | ||||||||||||||||||
|
Other comprehensive income
|
||||||||||||||||||||||||
|
Movements in revaluation reserve in respect of available-for-sale financial assets, net of tax
|
– | 422 | – | 422 | (2 | ) | 420 | |||||||||||||||||
|
Movements in cash flow hedging reserve, net of tax
|
– | 443 | – | 443 | – | 443 | ||||||||||||||||||
|
Currency translation differences, net of tax
|
– | (77 | ) | – | (77 | ) | – | (77 | ) |
|
Total other comprehensive income
|
– | 788 | – | 788 | (2 | ) | 786 | |||||||||||||||||
|
Total comprehensive income
|
– | 788 | 31 | 819 | 25 | 844 | ||||||||||||||||||
|
Transactions with owners
|
|
Dividends
|
– | – | – | – | (22 | ) | (22 | ) | ||||||||||||||||
|
Issue of ordinary shares
|
316 | – | – | 316 | – | 316 | ||||||||||||||||||
|
Movement in treasury shares
|
– | – | (282 | ) | (282 | ) | – | (282 | ) | |||||||||||||||
|
Value of employee services:
|
||||||||||||||||||||||||
|
Share option schemes
|
– | – | 146 | 146 | – | 146 | ||||||||||||||||||
|
Other employee award schemes
|
– | – | 185 | 185 | – | 185 | ||||||||||||||||||
|
Change in non-controlling interests
|
– | – | – | – | (207 | ) | (207 | ) |
|
Total transactions with owners
|
316 | – | 49 | 365 | (229 | ) | 136 | |||||||||||||||||
|
Balance at 30 June 2011
|
23,422 | 12,363 | 9,124 | 44,909 | 637 | 45,546 |
|
Attributable to equity shareholders
|
||||||||||||||||||||||||
|
Share capital
and premium
|
Other
reserves
|
Retained
profits
|
Total
|
Non-
controlling
interests
|
Total
|
|||||||||||||||||||
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
|||||||||||||||||||
|
Balance at 1 January 2010
|
24,944 | 7,217 | 11,117 | 43,278 | 829 | 44,107 | ||||||||||||||||||
|
Comprehensive income
|
||||||||||||||||||||||||
|
Profit for the period
|
– | – | 596 | 596 | 70 | 666 | ||||||||||||||||||
|
Other comprehensive income
|
||||||||||||||||||||||||
|
Movements in revaluation reserve in respect of available-for-sale financial assets, net of tax
|
– | 605 | – | 605 | (3 | ) | 602 | |||||||||||||||||
|
Movements in cash flow hedging reserve, net of tax
|
– | (150 | ) | – | (150 | ) | – | (150 | ) | |||||||||||||||
|
Currency translation differences, net of tax
|
– | 94 | – | 94 | – | 94 |
|
Total other comprehensive income
|
– | 549 | – | 549 | (3 | ) | 546 | |||||||||||||||||
|
Total comprehensive income
|
– | 549 | 596 | 1,145 | 67 | 1,212 | ||||||||||||||||||
|
Transactions with owners
|
|
Dividends
|
– | – | – | – | (8 | ) | (8 | ) | ||||||||||||||||
|
Issue of ordinary shares
|
2,237 | – | – | 2,237 | – | 2,237 | ||||||||||||||||||
|
Redemption of preference shares
|
11 | (11 | ) | – | – | – | – | |||||||||||||||||
|
Movement in treasury shares
|
– | – | 22 | 22 | – | 22 | ||||||||||||||||||
|
Value of employee services:
|
||||||||||||||||||||||||
|
Share option schemes
|
– | – | 64 | 64 | – | 64 | ||||||||||||||||||
|
Other employee award schemes
|
– | – | 27 | 27 | – | 27 | ||||||||||||||||||
|
Change in non-controlling interests
|
– | – | – | – | (5 | ) | (5 | ) |
|
Total transactions with owners
|
2,248 | (11 | ) | 113 | 2,350 | (13 | ) | 2,337 | ||||||||||||||||
|
Balance at 30 June 2010
|
27,192 | 7,755 | 11,826 | 46,773 | 883 | 47,656 |
|
Attributable to equity shareholders
|
||||||||||||||||||||||||
|
Share capital
and premium
|
Other
reserves
|
Retained
profits
|
Total
|
Non-
controlling
interests
|
Total
|
|||||||||||||||||||
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
|||||||||||||||||||
|
Balance at 1 July 2010
|
27,192 | 7,755 | 11,826 | 46,773 | 883 | 47,656 | ||||||||||||||||||
|
Comprehensive income
|
||||||||||||||||||||||||
|
Loss for the period
|
– | – | (3,252 | ) | (3,252 | ) | (8 | ) | (3,260 | ) | ||||||||||||||
|
Other comprehensive income
|
||||||||||||||||||||||||
|
Movements in revaluation reserve in respect of available-for-sale financial assets, net of tax
|
– | (107 | ) | – | (107 | ) | (2 | ) | (109 | ) | ||||||||||||||
|
Movements in cash flow hedging reserve, net of tax
|
– | 64 | – | 64 | – | 64 | ||||||||||||||||||
|
Currency translation differences, net of tax
|
– | (223 | ) | – | (223 | ) | – | (223 | ) | |||||||||||||||
|
Total other comprehensive income
|
– | (266 | ) | – | (266 | ) | (2 | ) | (268 | ) |
|
Total comprehensive income
|
– | (266 | ) | (3,252 | ) | (3,518 | ) | (10 | ) | (3,528 | ) | |||||||||||||
|
Transactions with owners
|
|
Dividends
|
– | – | – | – | (39 | ) | (39 | ) | ||||||||||||||||
|
Cancellation of deferred shares
|
(4,086 | ) | 4,086 | – | – | – | – | |||||||||||||||||
|
Movement in treasury shares
|
– | – | (2 | ) | (2 | ) | – | (2 | ) | |||||||||||||||
|
Value of employee services:
|
||||||||||||||||||||||||
|
Share option schemes
|
– | – | 90 | 90 | – | 90 | ||||||||||||||||||
|
Other employee award schemes
|
– | – | 382 | 382 | – | 382 | ||||||||||||||||||
|
Change in non-controlling interests
|
– | – | – | – | 7 | 7 |
|
Total transactions with owners
|
(4,086 | ) | 4,086 | 470 | 470 | (32 | ) | 438 | ||||||||||||||||
|
Balance at 31 December 2010
|
23,106 | 11,575 | 9,044 | 43,725 | 841 | 44,566 |
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Half-year
to 31 Dec
2010
|
||||||||||
|
£ million
|
£ million
|
£ million
|
||||||||||
|
(Loss) profit before tax
|
(51 | ) | 1,296 | (4,215 | ) | |||||||
|
Adjustments for:
|
||||||||||||
|
Change in operating assets
|
19,532 | 11,662 | 20,198 | |||||||||
|
Change in operating liabilities
|
(12,712 | ) | (3,538 | ) | (42,145 | ) | ||||||
|
Non-cash and other items
|
2,243 | 2,286 | 12,087 | |||||||||
|
Tax (paid) received
|
(74 | ) | (141 | ) | 473 | |||||||
|
Net cash provided by (used in) operating activities
|
8,938 | 11,565 | (13,602 | ) | ||||||||
|
Cash flows from investing activities
|
||||||||||||
|
Purchase of financial assets
|
(14,196 | ) | (17,521 | ) | (29,369 | ) | ||||||
|
Proceeds from sale and maturity of financial assets
|
24,390 | 18,555 | 27,444 | |||||||||
|
Purchase of fixed assets
|
(1,354 | ) | (1,059 | ) | (2,157 | ) | ||||||
|
Proceeds from sale of fixed assets
|
713 | 928 | 426 | |||||||||
|
Acquisition of businesses, net of cash acquired
|
(8 | ) | (7 | ) | (66 | ) | ||||||
|
Disposal of businesses, net of cash disposed
|
238 | 239 | 189 |
|
Net cash provided by (used in) investing activities
|
9,783 | 1,135 | (3,533 | ) | ||||||||
|
Cash flows from financing activities
|
|
Dividends paid to non-controlling interests
|
(22 | ) | (8 | ) | (39 | ) | ||||||
|
Interest paid on subordinated liabilities
|
(1,230 | ) | (1,047 | ) | (895 | ) | ||||||
|
Proceeds from issue of subordinated liabilities
|
– | 1,968 | 1,269 | |||||||||
|
Repayment of subordinated liabilities
|
(924 | ) | – | (684 | ) | |||||||
|
Change in non-controlling interests
|
(10 | ) | (5 | ) | 7 |
|
Net cash (used in) provided by financing activities
|
(2,186 | ) | 908 | (342 | ) | |||||||
|
Effects of exchange rate changes on cash and cash equivalents
|
10 | 181 | 298 | |||||||||
|
Change in cash and cash equivalents
|
16,545 | 13,789 | (17,179 | ) | ||||||||
|
Cash and cash equivalents at beginning of period
|
62,300 | 65,690 | 79,479 | |||||||||
|
Cash and cash equivalents at end of period
|
78,845 | 79,479 | 62,300 |
|
(i)
|
Amendment to IAS 32 Financial Instruments: Presentation – ‘Classification of Rights Issues’. Requires rights issues denominated in a currency other than the functional currency of the issuer to be classified as equity regardless of the currency in which the exercise price is denominated.
|
|
(ii)
|
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments. Clarifies that when an entity renegotiates the terms of its debt with the result that the liability is extinguished by the debtor issuing its own equity instruments to the creditor, a gain or loss is recognised in the income statement representing the difference between the carrying value of the financial liability and the fair value of the equity instruments issued; the fair value of the financial liability is used to measure the gain or loss where the fair value of the equity instruments cannot be reliably measured.
|
|
(iii)
|
Improvements to IFRSs (issued May 2010). Sets out minor amendments to IFRS standards as part of the annual improvements process.
|
|
(iv)
|
Amendment to IFRIC 14 Prepayments of a Minimum Funding Requirement. Applies when an entity is subject to minimum funding requirements and makes an early payment of contributions to cover those requirements and permits such an entity to treat the benefit of such an early payment as an asset.
|
|
(v)
|
IAS 24 Related Party Disclosures (Revised). Simplifies the definition of a related party and provides a partial exemption from the requirement to disclose transactions and outstanding balances with the government and government-related entities. The Group has taken advantage of this exemption which requires the Group to provide details of only significant transactions with the government and government-related entities. Details of related party transactions are disclosed in note 25 on page 123.
|
|
Half-year to 30 June 2011
|
Net
interest
income
|
Other
income
|
Total
income
|
Profit (loss)
before
tax
|
External
revenue
|
Inter-
segment
revenue
|
||||||||||||||||||
| £m | £m | £m | £m | £m | £m | |||||||||||||||||||
|
Retail
|
4,163 | 884 | 5,047 | 2,200 | 6,359 | (1,312 | ) | |||||||||||||||||
|
Wholesale
|
1,401 | 1,337 | 2,738 | 1,429 | 1,512 | 1,226 | ||||||||||||||||||
|
Commercial
|
649 | 218 | 867 | 262 | 675 | 192 | ||||||||||||||||||
|
Wealth and International
|
509 | 631 | 1,140 | (2,080 | ) | 1,092 | 48 | |||||||||||||||||
|
Insurance
|
(142 | ) | 1,319 | 1,177 | 543 | 1,635 | (458 | ) | ||||||||||||||||
|
Other
|
(202 | ) | (391 | ) | (593 | ) | (1,250 | ) | (897 | ) | 304 | |||||||||||||
|
Group –
combined businesses basis
|
6,378 | 3,998 | 10,376 | 1,104 | 10,376 | – | ||||||||||||||||||
|
Insurance grossing adjustment
|
(102 | ) | 5,332 | 5,230 | – | |||||||||||||||||||
|
Integration costs
|
– | – | – | (642 | ) | |||||||||||||||||||
|
Volatility arising in insurance businesses
|
10 | (187 | ) | (177 | ) | (177 | ) | |||||||||||||||||
|
Fair value unwind
|
(297 | ) | 1,071 | 774 | – | |||||||||||||||||||
|
Amortisation of purchased intangibles
|
– | – | – | (289 | ) | |||||||||||||||||||
|
EU mandated retail business disposal costs
|
– | – | – | (47 | ) | |||||||||||||||||||
|
Group – statutory
|
5,989 | 10,214 | 16,203 | (51 | ) | |||||||||||||||||||
|
Segment external assets
|
As at
30 June
2011
|
As at
31 Dec
20101
|
||||||
| £m | £m | |||||||
|
Retail
|
362,840 | 369,170 | ||||||
|
Wholesale2
|
319,146 | 327,055 | ||||||
|
Commercial2
|
28,902 | 28,938 | ||||||
|
Wealth and International
|
82,538 | 85,508 | ||||||
|
Insurance
|
144,078 | 143,300 | ||||||
|
Other
|
41,447 | 38,467 | ||||||
|
Total Group
|
978,951 | 992,438 | ||||||
|
Segment customer deposits
|
||||||||
|
Retail
|
242,342 | 235,591 | ||||||
|
Wholesale2
|
84,999 | 92,951 | ||||||
|
Commercial2
|
32,702 | 31,311 | ||||||
|
Wealth and International
|
38,906 | 32,784 | ||||||
|
Other
|
970 | 996 | ||||||
|
Total Group
|
399,919 | 393,633 | ||||||
|
1
|
Segment total assets as at 31 December 2010 have been restated to reflect the reclassification of certain central adjustments.
|
|
2
|
As explained on page 98, the Group’s Commercial business is now reviewed as a separate segment to Wholesale; comparative figures have been restated accordingly.
|
|
Segment external liabilities
|
As at
30 June
2011
|
|||
| £m | ||||
|
Retail
|
279,178 | |||
|
Wholesale
|
250,811 | |||
|
Commercial
|
33,303 | |||
|
Wealth and International
|
73,106 | |||
|
Insurance
|
132,738 | |||
|
Other
|
164,269 | |||
|
Total Group
|
933,405 | |||
|
Half-year to 30 June 2010
|
Net
interest
income
|
Other
income
|
Total
income
|
Profit (loss)
before tax
|
External
revenue
|
Inter-
segment
revenue
|
||||||||||||||||||
| £m | £m | £m | £m | £m | £m | |||||||||||||||||||
|
Retail
|
4,636 | 836 | 5,472 | 2,495 | 7,208 | (1,736 | ) | |||||||||||||||||
|
Wholesale1
|
1,576 | 1,988 | 3,564 | 585 | 1,484 | 2,080 | ||||||||||||||||||
|
Commercial1
|
571 | 227 | 798 | 157 | 790 | 8 | ||||||||||||||||||
|
Wealth and International
|
596 | 605 | 1,201 | (1,609 | ) | 1,617 | (416 | ) | ||||||||||||||||
|
Insurance
|
(136 | ) | 1,320 | 1,184 | 469 | 1,454 | (270 | ) | ||||||||||||||||
|
Other
|
(332 | ) | 855 | 523 | (494 | ) | 189 | 334 | ||||||||||||||||
|
Group – combined businesses basis
|
6,911 | 5,831 | 12,742 | 1,603 | 12,742 | – | ||||||||||||||||||
|
Insurance grossing adjustment
|
321 | 2,686 | 3,007 | – | ||||||||||||||||||||
|
Integration costs
|
– | – | – | (804 | ) | |||||||||||||||||||
|
Volatility arising in insurance businesses
|
(11 | ) | (188 | ) | (199 | ) | (199 | ) | ||||||||||||||||
|
Fair value unwind
|
(183 | ) | 413 | 230 | – | |||||||||||||||||||
|
Amortisation of purchased intangibles
|
– | – | – | (323 | ) | |||||||||||||||||||
|
Pension curtailment gain
|
– | – | – | 1,019 | ||||||||||||||||||||
|
Group – statutory
|
7,038 | 8,742 | 15,780 | 1,296 | ||||||||||||||||||||
|
1
|
As explained on page 98, the Group’s Commercial business is now reviewed as a separate segment to Wholesale; comparative figures have been restated accordingly.
|
|
Half-year to 31 December 2010
|
Net
interest
income
|
Other
income
|
Total
income
|
Profit (loss) before tax
|
External
Revenue
|
Inter-
segment
revenue
|
||||||||||||||||||
| £m | £m | £m | £m | £m | £m | |||||||||||||||||||
|
Retail
|
4,742 | 771 | 5,513 | 2,221 | 6,395 | (882 | ) | |||||||||||||||||
|
Wholesale1
|
1,675 | 1,691 | 3,366 | 2,333 | 1,107 | 2,259 | ||||||||||||||||||
|
Commercial1
|
604 | 230 | 834 | 182 | 588 | 246 | ||||||||||||||||||
|
Wealth and International
|
580 | 555 | 1,135 | (3,215 | ) | 1,383 | (248 | ) | ||||||||||||||||
|
Insurance
|
(127 | ) | 1,494 | 1,367 | 633 | 1,726 | (359 | ) | ||||||||||||||||
|
Other
|
(563 | ) | (408 | ) | (971 | ) | (1,545 | ) | 45 | (1,016 | ) | |||||||||||||
|
Group – combined businesses basis
|
6,911 | 4,333 | 11,244 | 609 | 11,244 | – | ||||||||||||||||||
|
Insurance grossing adjustment
|
(1,270 | ) | 16,476 | 15,206 | – | |||||||||||||||||||
|
Integration costs
|
– | – | – | (849 | ) | |||||||||||||||||||
|
Volatility arising in insurance businesses
|
(15 | ) | 520 | 505 | 505 | |||||||||||||||||||
|
Fair value unwind
|
(118 | ) | 850 | 732 | – | |||||||||||||||||||
|
Amortisation of purchased intangibles
|
– | – | – | (306 | ) | |||||||||||||||||||
|
Pension curtailment loss
|
– | – | – | (109 | ) | |||||||||||||||||||
|
Customer goodwill payments provision
|
– | – | – | (500 | ) | |||||||||||||||||||
|
Loss on disposal of businesses
|
– | – | – | (365 | ) | |||||||||||||||||||
|
Payment protection insurance provision
|
– | – | – | (3,200 | ) | |||||||||||||||||||
|
Group – statutory
|
5,508 | 22,179 | 27,687 | (4,215 | ) | |||||||||||||||||||
|
1
|
As explained on page 98, the Group’s Commercial business is now reviewed as a separate segment to Wholesale; comparative figures have been restated accordingly.
|
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Half-year
to 31 Dec
2010
|
||||||||||
| £m | £m | £m | ||||||||||
|
Fee and commission income:
|
||||||||||||
|
Current account fees
|
530 | 506 | 580 | |||||||||
|
Credit and debit card fees
|
402 | 407 | 405 | |||||||||
|
Other fees and commissions
|
1,221 | 1,306 | 1,211 |
| 2,153 | 2,219 | 2,196 | ||||||||||
|
Fee and commission expense
|
(690 | ) | (812 | ) | (870 | ) | ||||||
|
Net fee and commission income
|
1,463 | 1,407 | 1,326 | |||||||||
|
Net trading income
|
3,118 | 1,245 | 14,479 | |||||||||
|
Insurance premium income
|
4,125 | 4,300 | 3,848 |
|
Gains on capital transactions1
|
– | 423 | – | |||||||||
|
Other
|
1,508 | 1,367 | 2,526 |
|
Other operating income
|
1,508 | 1,790 | 2,526 | |||||||||
|
Total other income
|
10,214 | 8,742 | 22,179 |
|
1
|
During 2010, as part of the Group's management of capital, the Group exchanged certain existing subordinated debt securities for new subordinated debt securities and ordinary shares. These exchanges resulted in a gain on extinguishment of the existing liabilities of £423 million in the half-year to 30 June 2010, being the difference between the carrying amount of the securities extinguished and the fair value of the new securities issued together with related fees and costs.
|
|
4.
|
Operating expenses
|
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
20101
|
Half-year
to 31 Dec
20101
|
|||||||||||
| £m | £m | £m | |||||||||||
|
Administrative expenses
|
|||||||||||||
|
Staff costs:
|
|||||||||||||
|
Salaries
|
2,294 | 2,139 | 2,181 | ||||||||||
|
Social security costs
|
214 | 192 | 204 | ||||||||||
|
Pensions and other post-retirement benefit schemes:
|
|||||||||||||
|
Net curtailment (gains) losses2
|
– | (1,019) | 109 | ||||||||||
|
Other
|
209 | 347 | 281 | ||||||||||
| 209 | (672) | 390 | |||||||||||
|
Restructuring costs
|
15 | 70 | 49 | ||||||||||
|
Other staff costs
|
439 | 563 | 506 | ||||||||||
| 3,171 | 2,292 | 3,330 | |||||||||||
|
Premises and equipment:
|
|||||||||||||
|
Rent and rates
|
282 | 312 | 290 | ||||||||||
|
Hire of equipment
|
11 | 11 | 7 | ||||||||||
|
Repairs and maintenance
|
93 | 97 | 102 | ||||||||||
|
Other
|
146 | 149 | 209 | ||||||||||
| 532 | 569 | 608 | |||||||||||
|
Other expenses:
|
|||||||||||||
|
Communications and data processing
|
530 | 575 | 551 | ||||||||||
|
Advertising and promotion
|
210 | 172 | 190 | ||||||||||
|
Professional fees
|
327 | 257 | 485 | ||||||||||
|
Customer goodwill payments provision
|
– | – | 500 | ||||||||||
|
Other
|
489 | 524 | 583 | ||||||||||
| 1,556 | 1,528 | 2,309 | ||||||||||
| 5,259 | 4,389 | 6,247 | ||||||||||
|
Depreciation and amortisation
|
1,104 | 1,220 | 1,212 | |||||||||
|
Impairment of tangible fixed assets3
|
65 | 202 | – | |||||||||
|
Total operating expenses, excluding payment protection insurance provision
|
6,428 | 5,811 | 7,459 | |||||||||
|
Payment protection insurance provision (note 22)
|
– | – | 3,200 | |||||||||
|
Total operating expenses
|
6,428 | 5,811 | 10,659 |
|
1
|
During 2011, the Group has reviewed the analysis of certain cost items and as a result has reclassified some items of expenditure; comparatives for 2010 have been restated accordingly.
|
|
2
|
Following changes by the Group to the terms of its UK defined benefit pension schemes in the half-year to 30 June 2010, all future increases to pensionable salary are capped each year at the lower of: Retail Prices Index inflation; each employee’s actual percentage increase in pay; and 2 per cent of pensionable pay. These changes led to a curtailment gain of £1,019 million recognised in the income statement in the half-year to 30 June 2010.
During the second half of 2010 there was a change in commutation factors in certain defined benefit schemes; this led to a curtailment loss of £109 million recognised in the income statement in the half-year to 31 December 2010.
|
|
3
|
£65 million (half-year to 30 June 2010: £52 million) of the impairment of tangible fixed assets related to integration activities.
|
|
5.
|
Impairment
|
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Half-year
to 31 Dec
2010
|
||||||||||
| £m | £m | £m | ||||||||||
|
Impairment losses on loans and receivables:
|
||||||||||||
|
Loans and advances to banks
|
– | (6 | ) | (7 | ) | |||||||
|
Loans and advances to customers
|
4,441 | 5,378 | 5,349 | |||||||||
|
Debt securities classified as loans and receivables
|
16 | 9 | 48 | |||||||||
|
Impairment losses on loans and receivables (note 12)
|
4,457 | 5,381 | 5,390 | |||||||||
|
Impairment of available-for-sale financial assets
|
32 | 45 | 61 | |||||||||
|
Other credit risk provisions
|
2 | (3 | ) | 78 | ||||||||
|
Total impairment charged to the income statement
|
4,491 | 5,423 | 5,529 | |||||||||
|
6.
|
Loss on disposal of businesses
|
|
7.
|
Taxation
|
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Half-year
to 31 Dec
2010
|
||||||||||
| £m | £m | £m | ||||||||||
|
(Loss) profit before tax
|
(51 | ) | 1,296 | (4,215 | ) | |||||||
|
Tax credit (charge) thereon at UK corporation tax rate of 26.5 per cent (2010: 28 per cent)
|
14 | (363 | ) | 1,180 | ||||||||
|
Factors affecting tax charge:
|
||||||||||||
|
UK corporation tax rate change
|
(191 | ) | – | (169 | ) | |||||||
|
Disallowed and non-taxable items
|
34 | 131 | (126 | ) | ||||||||
|
Overseas tax rate differences
|
15 | (267 | ) | 401 | ||||||||
|
Gains exempted or covered by capital losses
|
51 | 22 | 43 | |||||||||
|
Policyholder interests
|
99 | (8 | ) | (219 | ) | |||||||
|
Tax losses where deferred tax not previously recognised
|
148 | (123 | ) | (364 | ) | |||||||
|
Adjustments in respect of previous years
|
(63 | ) | 32 | 186 | ||||||||
|
Effect of profit (loss) in joint ventures and associates
|
4 | (17 | ) | (8 | ) | |||||||
|
Other items
|
(2 | ) | (37 | ) | 31 | |||||||
|
Tax credit (charge)
|
109 | (630 | ) | 955 | ||||||||
|
8.
|
Earnings (loss) per share
|
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Half–year
to 31 Dec
2010
|
||||||||||
|
Basic
|
||||||||||||
|
Profit (loss) attributable to equity shareholders
|
£31 | m | £596 | m | £(3,252 | )m | ||||||
|
Weighted average number of ordinary shares in issue
|
68,220 | m | 66,151 | m | 68,067 | m | ||||||
|
Earnings (loss) per share
|
0.0 | p | 0.9 | p | (4.8 | )p | ||||||
|
Fully diluted
|
||||||||||||
|
Profit (loss) attributable to equity shareholders
|
£31 | m | £596 | m | £(3,252 | )m | ||||||
|
Weighted average number of ordinary shares in issue
|
68,908 | m | 66,425 | m | 68,067 | m | ||||||
|
Earnings (loss) per share
|
0.0 | p | 0.9 | p | (4.8 | )p | ||||||
|
9.
|
Trading and other financial assets at fair value through profit or loss
|
|
As at
30 June
2011
|
As at
31 Dec
2010
|
|||||||
| £m | £m | |||||||
|
Trading assets
|
22,291 | 23,707 | ||||||
|
Other financial assets at fair value through profit or loss:
|
||||||||
|
Loans and advances to customers
|
121 | 325 | ||||||
|
Debt securities
|
41,369 | 41,946 | ||||||
|
Equity shares
|
91,400 | 90,213 | ||||||
| 132,890 | 132,484 | |||||||
|
Total trading and other financial assets at fair value through profit or loss
|
155,181 | 156,191 | ||||||
|
10.
|
Derivative financial instruments
|
|
As at 30 June 2011
|
As at 31 December 2010
|
|||||||||||||||
|
Fair value
of assets
|
Fair value
of liabilities
|
Fair value
of assets
|
Fair value
of liabilities
|
|||||||||||||
| £m | £m | £m | £m | |||||||||||||
|
Hedging
|
||||||||||||||||
|
Derivatives designated as fair value hedges
|
5,046 | 834 | 4,972 | 1,235 | ||||||||||||
|
Derivatives designated as cash flow hedges
|
2,455 | 2,766 | 2,432 | 3,163 | ||||||||||||
|
Derivatives designated as net investment hedges
|
2 | – | 2 | – | ||||||||||||
| 7,503 | 3,600 | 7,406 | 4,398 | |||||||||||||
|
Trading and other
|
||||||||||||||||
|
Exchange rate contracts
|
7,993 | 3,861 | 8,811 | 4,551 | ||||||||||||
|
Interest rate contracts
|
26,516 | 26,876 | 31,131 | 31,670 | ||||||||||||
|
Credit derivatives
|
110 | 124 | 256 | 207 | ||||||||||||
|
Embedded equity conversion feature
|
941 | – | 1,177 | – | ||||||||||||
|
Equity and other contracts
|
2,193 | 1,588 | 1,996 | 1,332 | ||||||||||||
| 37,753 | 32,449 | 43,371 | 37,760 | |||||||||||||
|
Total recognised derivative assets/liabilities
|
45,256 | 36,049 | 50,777 | 42,158 | ||||||||||||
|
11.
|
Loans and advances to customers
|
|
As at
30 June
2011
|
As at
31 Dec
2010
|
|||||||||||
| £m | £m | |||||||||||
|
Agriculture, forestry and fishing
|
5,674 | 5,558 | ||||||||||
|
Energy and water supply
|
3,850 | 3,576 | ||||||||||
|
Manufacturing
|
11,925 | 11,495 | ||||||||||
|
Construction
|
9,369 | 7,904 | ||||||||||
|
Transport, distribution and hotels
|
33,752 | 34,176 | ||||||||||
|
Postal and communications
|
1,554 | 1,908 | ||||||||||
|
Property companies
|
70,239 | 78,263 | ||||||||||
|
Financial, business and other services
|
69,942 | 59,363 | ||||||||||
|
Personal:
|
||||||||||||
|
Mortgages
|
353,724 | 356,261 | ||||||||||
|
Other
|
32,452 | 36,967 | ||||||||||
|
Lease financing
|
8,145 | 8,291 | ||||||||||
|
Hire purchase
|
6,420 | 7,208 | ||||||||||
| 607,046 | 610,970 | |||||||||||
|
Allowance for impairment losses on loans and advances (note 12)
|
(19,203 | ) | (18,373 | ) | ||||||||
|
Total loans and advances to customers
|
587,843 | 592,597 | ||||||||||
|
12.
|
Allowance for impairment losses on loans and receivables
|
|
Half-year
to 30 June
2011
|
Half-year
to 30 June
2010
|
Half-year
to 31 Dec
2010
|
||||||||||
| £m | £m | £m | ||||||||||
|
Opening balance
|
18,951 | 15,380 | 17,216 | |||||||||
|
Exchange and other adjustments
|
693 | (97 | ) | 209 | ||||||||
|
Advances written off
|
(4,555 | ) | (3,406 | ) | (3,719 | ) | ||||||
|
Recoveries of advances written off in previous years
|
123 | 86 | 130 | |||||||||
|
Unwinding of discount
|
(112 | ) | (128 | ) | (275 | ) | ||||||
|
Charge to the income statement (note 5)
|
4,457 | 5,381 | 5,390 | |||||||||
|
Balance at end of period
|
19,557 | 17,216 | 18,951 | |||||||||
|
In respect of:
|
||||||||||||
|
Loans and advances to banks
|
14 | 94 | 20 | |||||||||
|
Loans and advances to customers (note 11)
|
19,203 | 16,688 | 18,373 | |||||||||
|
Debt securities (note 14)
|
340 | 434 | 558 | |||||||||
|
Balance at end of period
|
19,557 | 17,216 | 18,951 | |||||||||
|
13.
|
Securitisations and covered bonds
|
|
As at 30 June 2011
|
As at 31 December 2010
|
|||||||||||||||
|
Gross
assets
securitised
|
Notes in
issue
|
Gross
assets
securitised
|
Notes in
issue
|
|||||||||||||
|
Securitisation programmes
|
£m | £m | £m | £m | ||||||||||||
|
UK residential mortgages
|
138,443 | 105,003 | 146,200 | 114,428 | ||||||||||||
|
Commercial loans
|
12,456 | 9,925 | 11,860 | 8,936 | ||||||||||||
|
Irish residential mortgages
|
6,067 | 6,348 | 6,007 | 6,191 | ||||||||||||
|
Credit card receivables
|
6,661 | 4,931 | 7,327 | 3,856 | ||||||||||||
|
Dutch residential mortgages
|
4,308 | 4,211 | 4,526 | 4,316 | ||||||||||||
|
Personal loans
|
– | – | 3,012 | 2,011 | ||||||||||||
|
PPP/PFI and project finance loans
|
802 | 115 | 776 | 110 | ||||||||||||
|
Motor vehicle loans
|
1,628 | 1,697 | 926 | 975 | ||||||||||||
| 170,365 | 132,230 | 180,634 | 140,823 | |||||||||||||
|
Less held by the Group
|
(93,664 | ) | (100,081 | ) | ||||||||||||
|
Total securitisation programmes (note 18)
|
38,566 | 40,742 | ||||||||||||||
|
Covered bond programmes
|
||||||||||||||||
|
Residential mortgage-backed
|
89,085 | 65,566 | 93,651 | 73,458 | ||||||||||||
|
Social housing loan-backed
|
3,220 | 2,192 | 3,317 | 2,181 | ||||||||||||
| 92,305 | 67,758 | 96,968 | 75,639 | |||||||||||||
|
Less held by the Group
|
(28,504 | ) | (43,489 | ) | ||||||||||||
|
Total covered bond programmes (note 18)
|
39,254 | 32,150 | ||||||||||||||
|
Total securitisation and covered bond programmes
|
77,820 | 72,892 | ||||||||||||||
|
14.
|
Debt securities classified as loans and receivables
|
|
As at
30 June
2011
|
As at
31 Dec
2010
|
|||||||||||
|
£m
|
£m | |||||||||||
|
Asset-backed securities:
|
||||||||||||
|
Mortgage-backed securities
|
8,282 | 11,650 | ||||||||||
|
Other asset-backed securities
|
6,659 | 12,827 | ||||||||||
|
Corporate and other debt securities
|
920 | 1,816 | ||||||||||
| 15,861 | 26,293 | |||||||||||
|
Allowance for impairment losses (note 12)
|
(340 | ) | (558 | ) | ||||||||
|
Total
|
15,521 | 25,735 | ||||||||||
|
15.
|
Available-for-sale financial assets
|
|
As at
30 June
2011
|
As at
31 Dec
2010
|
|||||||||||
| £m | £m | |||||||||||
|
Asset-backed securities
|
4,869 | 9,512 | ||||||||||
|
Other debt securities:
|
||||||||||||
|
Bank and building society certificates of deposit
|
552 | 407 | ||||||||||
|
Government securities
|
15,789 | 12,552 | ||||||||||
|
Other public sector securities
|
37 | 29 | ||||||||||
|
Corporate and other debt securities
|
7,180 | 12,132 | ||||||||||
| 23,558 | 25,120 | |||||||||||
|
Equity shares
|
2,012 | 2,255 | ||||||||||
|
Treasury bills and other bills
|
2,354 | 6,068 | ||||||||||
|
Total
|
32,793 | 42,955 | ||||||||||
|
16.
|
Credit market exposures
|
|
Loans and
receivables
|
Available-
for-sale
|
Fair value
through
profit
or loss
|
Net exposure
at 30 June
2011
|
Net exposure
at 31 Dec
2010
|
||||||||||||||||
| £m | £m | £m | £m | £m | ||||||||||||||||
|
Mortgage-backed securities
|
||||||||||||||||||||
|
US residential
|
4,125 | – | – | 4,125 | 4,242 | |||||||||||||||
|
Non-US residential
|
2,594 | 2,508 | 92 | 5,194 | 7,898 | |||||||||||||||
|
Commercial
|
1,456 | 798 | – | 2,254 | 3,516 | |||||||||||||||
| 8,175 | 3,306 | 92 | 11,573 | 15,656 | ||||||||||||||||
|
Collateralised debt obligations
|
1,644 | 531 | 141 | 2,316 | 5,180 | |||||||||||||||
|
Federal family education loan programme student loans (FFELP)
|
4,026 | 150 | – | 4,176 | 7,777 | |||||||||||||||
|
Personal sector
|
654 | 463 | – | 1,117 | 3,967 | |||||||||||||||
|
Other asset-backed securities
|
285 | 383 | 12 | 680 | 1,035 | |||||||||||||||
|
Total uncovered asset-backed securities
|
14,784 | 4,833 | 245 | 19,862 | 33,615 | |||||||||||||||
|
Negative basis1
|
– | 36 | 169 | 205 | 1,109 | |||||||||||||||
|
Total Wholesale asset-backed securities
|
14,784 | 4,869 | 414 | 20,067 | 34,724 | |||||||||||||||
|
Direct
|
10,921 | 1,850 | 414 | 13,185 | 22,296 | |||||||||||||||
|
Conduits
|
3,863 | 3,019 | – | 6,882 | 12,428 | |||||||||||||||
|
Total Wholesale asset-backed securities
|
14,784 | 4,869 | 414 | 20,067 | 34,724 | |||||||||||||||
|
1
|
Negative basis means bonds held with separate matching credit default swap (CDS) protection.
|
|
16.
|
Credit market exposures (continued)
|
|
Asset class
|
Net
exposure
|
AAA
|
AA
|
A |
BBB
|
BB
|
B |
Below
B
|
||||||||||||||||||||||||
| £m | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||||||
|
Mortgage-backed securities
|
||||||||||||||||||||||||||||||||
|
US residential
|
||||||||||||||||||||||||||||||||
|
Prime
|
789 | 238 | 403 | 88 | 47 | 11 | 2 | – | ||||||||||||||||||||||||
|
Alt-A
|
3,336 | 1,587 | 767 | 585 | 311 | 72 | 14 | – | ||||||||||||||||||||||||
|
Sub-prime
|
– | – | – | – | – | – | – | – | ||||||||||||||||||||||||
| 4,125 | 1,825 | 1,170 | 673 | 358 | 83 | 16 | – | |||||||||||||||||||||||||
|
Non-US residential
|
5,194 | 3,004 | 949 | 1,116 | 54 | 71 | – | – | ||||||||||||||||||||||||
|
Commercial
|
2,254 | 137 | 786 | 835 | 405 | 86 | – | 5 | ||||||||||||||||||||||||
| 11,573 | 4,966 | 2,905 | 2,624 | 817 | 240 | 16 | 5 | |||||||||||||||||||||||||
|
Collateralised debt obligations
|
2,316 | 437 | 689 | 530 | 224 | 256 | 148 | 32 | ||||||||||||||||||||||||
|
FFELP
|
4,176 | 4,072 | – | 46 | 40 | 18 | – | – | ||||||||||||||||||||||||
|
Personal sector
|
1,117 | 805 | 12 | 238 | 62 | – | – | – | ||||||||||||||||||||||||
|
Other asset-backed securities
|
680 | 63 | 42 | 253 | 83 | 238 | – | 1 | ||||||||||||||||||||||||
|
Total uncovered asset-backed securities
|
19,862 | 10,343 | 3,648 | 3,691 | 1,226 | 752 | 164 | 38 | ||||||||||||||||||||||||
|
Negative basis2
|
||||||||||||||||||||||||||||||||
|
Monolines
|
169 | – | 169 | – | – | – | – | – | ||||||||||||||||||||||||
|
Banks
|
36 | 36 | – | – | – | – | – | – | ||||||||||||||||||||||||
| 205 | 36 | 169 | – | – | – | – | – | |||||||||||||||||||||||||
|
Total as at 30 June 2011
|
20,067 | 10,379 | 3,817 | 3,691 | 1,226 | 752 | 164 | 38 | ||||||||||||||||||||||||
|
Total as at 31 Dec 2010
|
34,724 | 20,805 | 7,310 | 3,713 | 1,764 | 763 | 147 | 222 | ||||||||||||||||||||||||
|
1
|
Collateralised loan obligations.
|
|
2
|
The external credit rating is based on the bond ignoring the benefit of the CDS.
|
|
17.
|
Customer deposits
|
|
As at
30 June
2011
|
As at
31 Dec
2010
|
|||||||||||
| £m | £m | |||||||||||
|
Sterling:
|
||||||||||||
|
Non-interest bearing current accounts
|
20,370 | 21,516 | ||||||||||
|
Interest bearing current accounts
|
73,388 | 73,859 | ||||||||||
|
Savings and investment accounts
|
223,498 | 215,733 | ||||||||||
|
Other customer deposits
|
49,184 | 50,414 | ||||||||||
|
Total sterling
|
366,440 | 361,522 | ||||||||||
|
Currency
|
33,479 | 32,111 | ||||||||||
|
Total
|
399,919 | 393,633 | ||||||||||
|
18.
|
Debt securities in issue
|
|
As at 30 June 2011
|
As at 31 December 2010
|
|||||||||||||||||||||||
|
At fair value
through
profit or
loss
|
At
amortised
cost
|
Total
|
At fair value
through profit or loss
|
At
amortised
cost
|
Total
|
|||||||||||||||||||
| £m | £m | £m | £m | £m | £m | |||||||||||||||||||
|
Medium-term notes issued
|
7,485 | 77,445 | 84,930 | 6,665 | 80,975 | 87,640 | ||||||||||||||||||
|
Covered bonds (note 13)
|
– | 39,254 | 39,254 | – | 32,150 | 32,150 | ||||||||||||||||||
|
Certificates of deposit
|
– | 46,580 | 46,580 | – | 42,276 | 42,276 | ||||||||||||||||||
|
Securitisation notes (note 13)
|
– | 38,566 | 38,566 | – | 40,742 | 40,742 | ||||||||||||||||||
|
Commercial paper
|
– | 29,349 | 29,349 | – | 32,723 | 32,723 | ||||||||||||||||||
| 7,485 | 231,194 | 238,679 | 6,665 | 228,866 | 235,531 | |||||||||||||||||||
|
19.
|
Subordinated liabilities
|
|
As at
30 June
2011
|
As at
31 Dec
2010
|
|||||||
| £m | £m | |||||||
|
Preference shares
|
1,109 | 1,165 | ||||||
|
Preferred securities
|
4,614 | 4,538 | ||||||
|
Undated subordinated liabilities
|
2,048 | 2,002 | ||||||
|
Enhanced capital notes
|
9,174 | 9,235 | ||||||
|
Dated subordinated liabilities
|
18,640 | 19,292 | ||||||
|
Total subordinated liabilities
|
35,585 | 36,232 | ||||||
| £m | ||||
|
At 1 January 2011
|
36,232 | |||
|
Repurchases and redemptions during the period
|
(924 | ) | ||
|
Foreign exchange and other movements
|
277 | |||
|
At 30 June 2011
|
35,585 |
|
20.
|
Share capital
|
|
Number of
shares
|
||||||||
|
(million)
|
£m | |||||||
|
Ordinary shares of 10p each
|
||||||||
|
At 1 January 2011
|
68,074 | 6,807 | ||||||
|
Issued in the period
|
652 | 66 | ||||||
|
At 30 June 2011
|
68,726 | 6,873 | ||||||
|
Limited voting ordinary shares of 10p each
|
||||||||
|
At 1 January and 30 June 2011
|
81 | 8 | ||||||
|
Total share capital
|
6,881 | |||||||
|
21.
|
Reserves
|
|
Other reserves
|
||||||||||||||||||||||||
|
Share
premium
|
Available
for-sale
|
Cash flow
hedging
|
Merger
and other
|
Total
|
Retained
profits
|
|||||||||||||||||||
| £m | £m | £m | £m | £m | £m | |||||||||||||||||||
|
At 1 January 2011
|
16,291 | (285 | ) | (391 | ) | 12,251 | 11,575 | 9,044 | ||||||||||||||||
|
Issue of ordinary shares
|
250 | – | – | – | – | – | ||||||||||||||||||
|
Profit for the period
|
– | – | – | – | – | 31 | ||||||||||||||||||
|
Movement in treasury shares
|
– | – | – | – | – | (282 | ) | |||||||||||||||||
|
Value of employee
services
|
– | – | – | – | – | 331 | ||||||||||||||||||
|
Change in fair value of available-for-sale assets (net of tax)
|
– | 374 | – | – | 374 | – | ||||||||||||||||||
|
Change in fair value of hedging derivatives
(net of tax)
|
– | – | 364 | – | 364 | – | ||||||||||||||||||
|
Transfers to income statement (net of tax)
|
– | 48 | 79 | – | 127 | – | ||||||||||||||||||
|
Exchange and other
|
– | – | – | (77 | ) | (77 | ) | – | ||||||||||||||||
|
At 30 June 2011
|
16,541 | 137 | 52 | 12,174 | 12,363 | 9,124 | ||||||||||||||||||
|
22.
|
Payment protection insurance
|
|
22.
|
Payment protection insurance (continued)
|
|
23.
|
Contingent liabilities and commitments
|
|
23.
|
Contingent liabilities and commitments (continued)
|
|
23.
|
Contingent liabilities and commitments (continued)
|
|
23.
|
Contingent liabilities and commitments (continued)
|
|
As at
30 June
2011
|
As at
31 Dec
2010
|
|||||||
| £m | £m | |||||||
|
Contingent liabilities
|
||||||||
|
Acceptances and endorsements
|
55 | 48 | ||||||
|
Other:
|
||||||||
|
Other items serving as direct credit substitutes
|
1,297 | 1,319 | ||||||
|
Performance bonds and other transaction-related contingencies
|
2,762 | 2,812 | ||||||
| 4,059 | 4,131 | |||||||
|
Total contingent liabilities
|
4,114 | 4,179 | ||||||
|
Commitments
|
||||||||
|
Documentary credits and other short-term trade-related transactions
|
172 | 255 | ||||||
|
Forward asset purchases and forward deposits placed
|
716 | 887 | ||||||
|
Undrawn formal standby facilities, credit lines and other commitments to lend:
|
||||||||
|
Less than 1 year original maturity:
|
||||||||
|
Mortgage offers made
|
9,360 | 8,113 | ||||||
|
Other commitments
|
58,146 | 60,528 | ||||||
| 67,506 | 68,641 | |||||||
|
1 year or over original maturity
|
41,518 | 47,515 | ||||||
|
Total commitments
|
109,912 | 117,298 | ||||||
|
24.
|
Capital ratios
|
|
Capital resources
|
As at
30 June
2011
|
As at
31 Dec
2010
|
||||||
| £m | £m | |||||||
|
Core tier 1
|
||||||||
|
Shareholders’ equity
|
44,909 | 43,725 | ||||||
|
Regulatory adjustments:
|
||||||||
|
Non-controlling interests
|
110 | 317 | ||||||
|
Regulatory post-retirement benefit adjustments
|
(625 | ) | (1,052 | ) | ||||
|
Available-for-sale revaluation reserve
|
(137 | ) | 285 | |||||
|
Cash flow hedging reserve
|
(52 | ) | 391 | |||||
|
Other items
|
(208 | ) | (11 | ) | ||||
| 43,997 | 43,655 | |||||||
|
Less: deductions from core tier 1
|
||||||||
|
Goodwill and other intangible assets
|
(4,295 | ) | (4,406 | ) | ||||
|
Excess of expected losses over impairment allowances at 50 per cent
|
(627 | ) | – | |||||
|
Securitisation positions at 50 per cent
|
(191 | ) | (214 | ) | ||||
|
Core tier 1 capital
|
38,884 | 39,035 | ||||||
|
Preference share capital1
|
1,545 | 1,507 | ||||||
|
Preferred securities1
|
4,365 | 4,338 | ||||||
|
Less: deductions from tier 1
|
||||||||
|
Material holdings in financial companies at 50 per cent
|
(233 | ) | (69 | ) | ||||
|
Total tier 1 capital
|
44,561 | 44,811 | ||||||
|
Tier 2
|
||||||||
|
Available-for-sale revaluation reserve in respect of equities
|
308 | 462 | ||||||
|
Undated subordinated debt
|
1,951 | 1,968 | ||||||
|
Eligible provisions
|
1,506 | 2,468 | ||||||
|
Dated subordinated debt
|
22,806 | 22,547 | ||||||
|
Less: deductions from tier 2
|
||||||||
|
Excess of expected losses over impairment allowances at 50 per cent
|
(627 | ) | – | |||||
|
Securitisation positions at 50 per cent
|
(191 | ) | (214 | ) | ||||
|
Material holdings in financial companies at 50 per cent
|
(233 | ) | (69 | ) | ||||
|
Total tier 2 capital
|
25,520 | 27,162 | ||||||
|
Supervisory deductions
|
||||||||
|
Unconsolidated investments – life
|
(10,113 | ) | (10,042 | ) | ||||
|
Unconsolidated investments – general insurance and other
|
(2,308 | ) | (3,070 | ) | ||||
|
Total supervisory deductions
|
(12,421 | ) | (13,112 | ) | ||||
|
Total capital resources
|
57,660 | 58,861 | ||||||
|
Risk-weighted assets
|
383,267 | 406,372 | ||||||
|
Core tier 1 capital ratio
|
10.1 | % | 9.6 | % | ||||
|
Tier 1 capital ratio
|
11.6 | % | 11.0 | % | ||||
|
Total capital ratio
|
15.0 | % | 14.5 | % | ||||
|
1
|
Covered by grandfathering provisions issued by FSA.
|
|
24.
|
Capital ratios (continued)
|
|
Core tier 1
|
Total
|
|||||||
| £m | £m | |||||||
|
At 1 January 2011
|
39,035 | 58,861 | ||||||
|
Profit attributable to ordinary shareholders
|
31 | 31 | ||||||
|
Decrease in regulatory post-retirement benefit adjustments
|
427 | 427 | ||||||
|
Decrease in goodwill and intangible assets deductions
|
111 | 111 | ||||||
|
Increase in excess of expected losses over impairment losses
|
(627 | ) | (1,254 | ) | ||||
|
Increase in material holding deduction
|
– | (328 | ) | |||||
|
Decrease in eligible provisions
|
– | (962 | ) | |||||
|
Decrease in supervisory deductions from total capital
|
– | 691 | ||||||
|
Other movements
|
(93 | ) | 83 | |||||
|
At 30 June 2011
|
38,884 | 57,660 | ||||||
|
24.
|
Capital ratios (continued)
|
|
Risk-weighted assets
|
As at
30 June
2011
|
As at
31 Dec
2010
|
||||||
| £m | £m | |||||||
|
Divisional analysis of risk-weighted assets:
|
||||||||
|
Retail
|
109,624 | 109,254 | ||||||
|
Wholesale1
|
176,581 | 196,164 | ||||||
|
Commercial1
|
26,798 | 26,552 | ||||||
|
Wealth and International
|
56,351 | 58,714 | ||||||
|
Group Operations and Central items
|
13,913 | 15,688 | ||||||
| 383,267 | 406,372 | |||||||
|
Risk type analysis of risk-weighted assets:
|
||||||||
|
Foundation IRB
|
98,468 | 114,490 | ||||||
|
Retail IRB
|
106,522 | 105,475 | ||||||
|
Other IRB
|
6,628 | 14,483 | ||||||
|
Advanced approach
|
211,618 | 234,448 | ||||||
|
Standardised approach
|
124,125 | 124,492 | ||||||
|
Credit risk
|
335,743 | 358,940 | ||||||
|
Operational risk
|
31,650 | 31,650 | ||||||
|
Market and counterparty risk
|
15,874 | 15,782 | ||||||
|
Total risk-weighted assets
|
383,267 | 406,372 | ||||||
|
1
|
As explained on page 98, the Group’s Commercial business is now reviewed as a separate segment to Wholesale; comparative figures have been restated accordingly.
|
|
25.
|
Related party transactions
|
|
26.
|
Future accounting developments
|
|
(i)
|
Amendments to IFRS 7 Financial Instruments Disclosures – Transfers of Financial Assets. Requires additional disclosures in respect of risk exposures arising from transferred financial assets.
|
|
(ii)
|
Amendments to IAS 12 Income Taxes – Deferred Tax: Recovery of Underlying Assets. Introduces a rebuttable presumption that investment property measured at fair value is recovered entirely through sale and that deferred tax in respect of such investment property is recognised on that basis.
|
|
(i)
|
IFRS 9 Financial Instruments. Replaces those parts of IAS 39 Financial Instruments: Recognition and Measurement relating to the classification, measurement and derecognition of financial assets and liabilities. Requires financial assets to be classified into two measurement categories, fair value and amortised cost, on the basis of the objectives of the entity’s business model for managing its financial assets and the contractual cash flow characteristics of the instrument. The available-for-sale financial asset and held-to-maturity investment categories in the existing IAS 39 will be eliminated. The requirements for financial liabilities and derecognition are broadly unchanged from IAS 39.
|
|
|
IFRS 9 is the initial stage of the project to replace IAS 39. Future stages are expected to result in amendments to IFRS 9 to deal with changes to impairment of financial assets measured at amortised cost and hedge accounting. Although the effective date of IFRS 9 is currently annual periods beginning on or after 1 January 2013, the IASB has not yet finalised the replacement of IAS 39 and is expected to propose changing the effective date of IFRS 9 to annual periods beginning on or after 1 January 2015 to facilitate the adoption of the entire replacement of IAS 39. Until all stages of the replacement project are complete, it is not possible to determine the overall impact on the financial statements of the replacement of IAS 39.
|
|
(ii)
|
Amendments to IAS 1 Presentation of Financial Statements – Presentation of Items of Other Comprehensive Income. Requires entities to group items presented in other comprehensive income on the basis of whether they are potentially reclassified to profit or loss subsequently.
|
|
(iii)
|
IFRS 10 Consolidated Financial Statements. Supersedes IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation – Special Purpose Entities and establishes principles for the preparation of consolidated financial statements when an entity controls one or more entities.
|
|
(iv)
|
IFRS 11 Joint Arrangements. Supersedes IAS 31 Interests in Joint Ventures and SIC-13 Jointly Controlled Entities – Non-Monetary Contributions by Venturers and establishes principles for financial reporting by parties to a joint arrangement.
|
|
(v)
|
IFRS 12 Disclosure of Interests in Other Entities. Requires an entity to disclose information that enables users of financial statements to evaluate the nature of, and risks associated with, its interests in other entities and the effects of those interests on its financial position, financial performance and cash flows.
|
|
(vi)
|
IFRS 13 Fair Value Measurement. The standard defines fair value, sets out a framework for measuring fair value and requires disclosures about fair value measurements and applies to IFRSs that require or permit fair value measurements or disclosures about fair value measurements.
|
|
26.
|
Future accounting developments (continued)
|
|
(vii)
|
Amendment to IAS 27 Separate Financial Statements. Contains accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity presents separate financial statements. The standard no longer deals with consolidated financial statements which are dealt with in IFRS 10.
|
|
(viii)
|
Amendment to IAS 28 Investments in Associates and Joint Ventures. Prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures.
|
|
(ix)
|
IAS 19 Employee Benefits (Revised). Prescribes the accounting and disclosure by employers for employee benefits. Actuarial gains and losses (remeasurements) in respect of defined benefit pension schemes are no longer deferred using the corridor approach and are recognised immediately in other comprehensive income.
|
|
27.
|
Events after the balance sheet date
|
|
28.
|
Condensed consolidating financial information
|
|
·
|
The Company on a stand-alone basis as guarantor;
|
|
·
|
LTSB Bank on a stand-alone basis as issuer;
|
|
·
|
Non-guarantor subsidiaries of the Company and non-guarantor subsidiaries of LTSB Bank on a combined basis (Subsidiaries);
|
|
·
|
Consolidation adjustments; and
|
|
·
|
Lloyds Banking Group’s consolidated amounts (the Group)
|
|
28.
|
Condensed consolidating financial information (continued)
|
|
For the half-year ended 30 June 2011
|
Company
|
LTSB Bank
|
Subsidiaries
|
Consolidation
adjustments
|
Group
|
|||||||||||||||
| £m | £m | £m | £m | £m | ||||||||||||||||
|
Net interest (expense) income
|
(7 | ) | 1,722 | 4,842 | (568 | ) | 5,989 | |||||||||||||
|
Other income
|
(286 | ) | 4,496 | 8,356 | (2,352 | ) | 10,214 | |||||||||||||
|
Total income
|
(293 | ) | 6,218 | 13,198 | (2,920 | ) | 16,203 | |||||||||||||
|
Insurance claims
|
– | – | (5,349 | ) | – | (5,349 | ) | |||||||||||||
|
Total income, net of insurance claims
|
(293 | ) | 6,218 | 7,849 | (2,920 | ) | 10,854 | |||||||||||||
|
Operating expenses
|
(21 | ) | (3,338 | ) | (3,219 | ) | 150 | (6,428 | ) | |||||||||||
|
Trading surplus
|
(314 | ) | 2,880 | 4,630 | (2,770 | ) | 4,426 | |||||||||||||
|
Impairment
|
– | (1,579 | ) | (4,246 | ) | 1,334 | (4,491 | ) | ||||||||||||
|
Share of results of joint ventures and associates
|
– | – | 9 | 5 | 14 | |||||||||||||||
|
(Loss) profit before tax
|
(314 | ) | 1,301 | 393 | (1,431 | ) | (51 | ) | ||||||||||||
|
Taxation
|
88 | 236 | (188 | ) | (27 | ) | 109 | |||||||||||||
|
(Loss) profit for the period
|
(226 | ) | 1,537 | 205 | (1,458 | ) | 58 | |||||||||||||
|
For the half-year ended 30 June 2010
|
Company
|
LTSB Bank
|
Subsidiaries
|
Consolidation
adjustments
|
Group
|
|||||||||||||||
| £m | £m | £m | £m | £m | ||||||||||||||||
|
Net interest (expense) income
|
(48 | ) | 2,070 | 5,276 | (260 | ) | 7,038 | |||||||||||||
|
Other income
|
(9 | ) | 2,097 | 6,884 | (230 | ) | 8,742 | |||||||||||||
|
Total income
|
(57 | ) | 4,167 | 12,160 | (490 | ) | 15,780 | |||||||||||||
|
Insurance claims
|
– | – | (3,189 | ) | – | (3,189 | ) | |||||||||||||
|
Total income, net of insurance claims
|
(57 | ) | 4,167 | 8,971 | (490 | ) | 12,591 | |||||||||||||
|
Operating expenses
|
(19 | ) | (2,442 | ) | (3,354 | ) | 4 | (5,811 | ) | |||||||||||
|
Trading surplus
|
(76 | ) | 1,725 | 5,617 | (486 | ) | 6,780 | |||||||||||||
|
Impairment
|
– | (1,328 | ) | (5,755 | ) | 1,660 | (5,423 | ) | ||||||||||||
|
Share of results of joint ventures and associates
|
– | – | (61 | ) | – | (61 | ) | |||||||||||||
|
(Loss) profit before tax
|
(76 | ) | 397 | (199 | ) | 1,174 | 1,296 | |||||||||||||
|
Taxation
|
(100 | ) | 77 | (174 | ) | (433 | ) | (630 | ) | |||||||||||
|
(Loss) profit for the period
|
(176 | ) | 474 | (373 | ) | 741 | 666 | |||||||||||||
|
28.
|
Condensed consolidating financial information (continued)
|
|
For the half-year ended
31 December 2010
|
Company
|
LTSB Bank
|
Subsidiaries
|
Consolidation
adjustments
|
Group
|
|||||||||||||||
| £m | £m | £m | £m | £m | ||||||||||||||||
|
Net interest (expense) income
|
(43 | ) | 1,766 | 4,263 | (478 | ) | 5,508 | |||||||||||||
|
Other income
|
(823 | ) | 1,578 | 21,050 | 374 | 22,179 | ||||||||||||||
|
Total income
|
(866 | ) | 3,344 | 25,313 | (104 | ) | 27,687 | |||||||||||||
|
Insurance claims
|
– | – | (15,348 | ) | 26 | (15,322 | ) | |||||||||||||
|
Total income, net of insurance claims
|
(866 | ) | 3,344 | 9,965 | (78 | ) | 12,365 | |||||||||||||
|
Operating expenses
|
(19 | ) | (4,800 | ) | (5,953 | ) | 113 | (10,659 | ) | |||||||||||
|
Trading surplus
|
(885 | ) | (1,456 | ) | 4,012 | 35 | 1,706 | |||||||||||||
|
Impairment
|
– | (1,127 | ) | (5,508 | ) | 1,106 | (5,529 | ) | ||||||||||||
|
Share of results of joint ventures and associates
|
– | – | (31 | ) | 4 | (27 | ) | |||||||||||||
|
Loss on sale of businesses
|
– | – | 8 | (373 | ) | (365 | ) | |||||||||||||
|
(Loss) profit before tax
|
(885 | ) | (2,583 | ) | (1,519 | ) | 772 | (4,215 | ) | |||||||||||
|
Taxation
|
262 | 646 | 183 | (136 | ) | 955 | ||||||||||||||
|
(Loss) profit for the period
|
(623 | ) | (1,937 | ) | (1,336 | ) | 636 | (3,260 | ) | |||||||||||
|
28.
|
Condensed consolidating financial information (continued)
|
|
At 30 June 2011
|
Company
|
LTSB Bank
|
Subsidiaries
|
Consolidation
adjustments
|
Group
|
|||||||||||||||
| £m | £m | £m | £m | £m | ||||||||||||||||
|
Assets
|
||||||||||||||||||||
|
Cash and balances at central banks
|
– | 52,730 | 2,510 | – | 55,240 | |||||||||||||||
|
Items in course of collection from banks
|
– | 1,047 | 345 | – | 1,392 | |||||||||||||||
|
Trading and other financial assets at fair value through profit or loss
|
– | 5,170 | 150,382 | (371 | ) | 155,181 | ||||||||||||||
|
Derivative financial instruments
|
1,462 | 21,358 | 27,965 | (5,529 | ) | 45,256 | ||||||||||||||
|
Loans and receivables:
|
||||||||||||||||||||
|
Loans and advances to banks
|
– | 163,291 | 179,259 | (314,380 | ) | 28,170 | ||||||||||||||
|
Loans and advances to customers
|
6,164 | 250,778 | 413,970 | (83,069 | ) | 587,843 | ||||||||||||||
|
Debt securities
|
– | 638 | 36,055 | (21,172 | ) | 15,521 | ||||||||||||||
| 6,164 | 414,707 | 629,284 | (418,621 | ) | 631,534 | |||||||||||||||
|
Available-for-sale financial assets
|
3,199 | 21,046 | 16,718 | (8,170 | ) | 32,793 | ||||||||||||||
|
Held-to-maturity investments
|
– | 7,842 | – | – | 7,842 | |||||||||||||||
|
Investment properties
|
– | – | 6,441 | – | 6,441 | |||||||||||||||
|
Investments in joint ventures and associates
|
– | 6 | 421 | – | 427 | |||||||||||||||
|
Goodwill
|
– | – | 2,872 | (856 | ) | 2,016 | ||||||||||||||
|
Value of in-force business
|
– | – | 6,146 | 1,336 | 7,482 | |||||||||||||||
|
Other intangible assets
|
– | 146 | 246 | 2,865 | 3,257 | |||||||||||||||
|
Tangible fixed assets
|
– | 1,600 | 6,230 | 44 | 7,874 | |||||||||||||||
|
Current tax recoverable
|
99 | 834 | 541 | (916 | ) | 558 | ||||||||||||||
|
Deferred tax assets
|
3 | 3,403 | 4,608 | (2,892 | ) | 5,122 | ||||||||||||||
|
Retirement benefit assets
|
– | 584 | 189 | 72 | 845 | |||||||||||||||
|
Investment in subsidiary undertakings
|
38,194 | 40,033 | – | (78,227 | ) | – | ||||||||||||||
|
Other assets
|
969 | 2,021 | 14,208 | (1,507 | ) | 15,691 | ||||||||||||||
|
Total assets
|
50,090 | 572,527 | 869,106 | (512,772 | ) | 978,951 | ||||||||||||||
|
28.
|
Condensed consolidating financial information (continued)
|
|
At 30 June 2011
|
Company
|
LTSB Bank
|
Subsidiaries
|
Consolidation
adjustments
|
Group
|
|||||||||||||||
| £m | £m | £m | £m | £m | ||||||||||||||||
|
Equity and liabilities
|
||||||||||||||||||||
|
Liabilities
|
||||||||||||||||||||
|
Deposits from banks
|
– | 120,947 | 231,633 | (321,286 | ) | 31,294 | ||||||||||||||
|
Customer deposits
|
7,843 | 231,079 | 234,186 | (73,189 | ) | 399,919 | ||||||||||||||
|
Items in course of transmission to banks
|
– | 505 | 807 | – | 1,312 | |||||||||||||||
|
Trading and other financial liabilities at fair value through profit or loss
|
– | 12,445 | 14,845 | – | 27,290 | |||||||||||||||
|
Derivative financial instruments
|
– | 19,171 | 22,354 | (5,476 | ) | 36,049 | ||||||||||||||
|
Notes in circulation
|
– | – | 1,048 | – | 1,048 | |||||||||||||||
|
Debt securities in issue
|
532 | 127,330 | 124,416 | (21,084 | ) | 231,194 | ||||||||||||||
|
Liabilities arising from insurance contracts and participating investment contracts
|
– | – | 80,290 | (16 | ) | 80,274 | ||||||||||||||
|
Liabilities arising from non-participating investment contracts
|
– | – | 52,823 | – | 52,823 | |||||||||||||||
|
Unallocated surplus within insurance businesses
|
– | – | 649 | – | 649 | |||||||||||||||
|
Other liabilities
|
62 | 4,758 | 27,855 | (1,776 | ) | 30,899 | ||||||||||||||
|
Retirement benefit obligations
|
– | 307 | 236 | (143 | ) | 400 | ||||||||||||||
|
Current tax liabilities
|
– | 24 | 1,029 | (948 | ) | 105 | ||||||||||||||
|
Deferred tax liabilities
|
– | 2 | 1,326 | (916 | ) | 412 | ||||||||||||||
|
Other provisions
|
– | 2,362 | 1,732 | 58 | 4,152 | |||||||||||||||
|
Subordinated liabilities
|
4,255 | 14,787 | 30,770 | (14,227 | ) | 35,585 | ||||||||||||||
|
Total liabilities
|
12,692 | 533,717 | 825,999 | (439,003 | ) | 933,405 | ||||||||||||||
|
Equity
|
||||||||||||||||||||
|
Shareholders’ equity
|
37,398 | 38,810 | 42,458 | (73,757 | ) | 44,909 | ||||||||||||||
|
Minority interests
|
– | – | 649 | (12 | ) | 637 | ||||||||||||||
|
Total equity
|
37,398 | 38,810 | 43,107 | (73,769 | ) | 45,546 | ||||||||||||||
|
Total equity and liabilities
|
50,090 | 572,527 | 869,106 | (512,772 | ) | 978,951 | ||||||||||||||
|
28.
|
Condensed consolidating financial information (continued)
|
|
At 31 December 2010
|
Company
|
LTSB Bank
|
Subsidiaries
|
Consolidation adjustments
|
Group
|
|||||||||||||||
| £m | £m | £m | £m | £m | ||||||||||||||||
|
Assets
|
||||||||||||||||||||
|
Cash and balances at central banks
|
– | 35,585 | 2,530 | – | 38,115 | |||||||||||||||
|
Items in course of collection from banks
|
– | 997 | 371 | – | 1,368 | |||||||||||||||
|
Trading and other financial assets at fair value through profit or loss
|
– | 4,587 | 151,710 | (106 | ) | 156,191 | ||||||||||||||
|
Derivative financial instruments
|
1,664 | 21,322 | 31,739 | (3,948 | ) | 50,777 | ||||||||||||||
|
Loans and receivables:
|
||||||||||||||||||||
|
Loans and advances to banks
|
– | 152,596 | 159,888 | (282,212 | ) | 30,272 | ||||||||||||||
|
Loans and advances to customers
|
5,821 | 251,173 | 415,914 | (80,311 | ) | 592,597 | ||||||||||||||
|
Debt securities
|
– | 1,479 | 48,676 | (24,420 | ) | 25,735 | ||||||||||||||
| 5,821 | 405,248 | 624,478 | (386,943 | ) | 648,604 | |||||||||||||||
|
Available-for-sale financial assets
|
3,103 | 24,951 | 23,050 | (8,149 | ) | 42,955 | ||||||||||||||
|
Held-to-maturity investments
|
– | 7,905 | – | – | 7,905 | |||||||||||||||
|
Investment properties
|
– | – | 5,997 | – | 5,997 | |||||||||||||||
|
Investments in joint ventures and associates
|
– | 6 | 429 | (6 | ) | 429 | ||||||||||||||
|
Goodwill
|
– | – | 2,864 | (848 | ) | 2,016 | ||||||||||||||
|
Value of in-force business
|
– | – | 6,020 | 1,347 | 7,367 | |||||||||||||||
|
Other intangible assets
|
– | 118 | 224 | 3,154 | 3,496 | |||||||||||||||
|
Tangible fixed assets
|
– | 1,531 | 7,519 | (860 | ) | 8,190 | ||||||||||||||
|
Current tax recoverable
|
109 | 828 | 394 | (710 | ) | 621 | ||||||||||||||
|
Deferred tax assets
|
6 | 3,233 | 4,586 | (2,797 | ) | 5,028 | ||||||||||||||
|
Retirement benefit assets
|
– | 530 | 152 | 54 | 736 | |||||||||||||||
|
Investment in subsidiary undertakings
|
38,194 | 40,155 | – | (78,349 | ) | – | ||||||||||||||
|
Other assets
|
1,040 | 1,243 | 11,582 | (1,222 | ) | 12,643 | ||||||||||||||
|
Total assets
|
49,937 | 548,239 | 873,645 | (479,383 | ) | 992,438 | ||||||||||||||
|
28.
|
Condensed consolidating financial information (continued)
|
|
At 31 December 2010
|
Company
|
LTSB Bank
|
Subsidiaries
|
Consolidation adjustments
|
Group
|
|||||||||||||||
| £m | £m | £m | £m | £m | ||||||||||||||||
|
Equity and liabilities
|
||||||||||||||||||||
|
Liabilities
|
||||||||||||||||||||
|
Deposits from banks
|
– | 118,337 | 220,725 | (288,699 | ) | 50,363 | ||||||||||||||
|
Customer deposits
|
7,988 | 223,812 | 232,106 | (70,273 | ) | 393,633 | ||||||||||||||
|
Items in course of transmission to banks
|
– | 506 | 296 | – | 802 | |||||||||||||||
|
Trading and other financial liabilities at fair value through profit or loss
|
– | 11,268 | 15,494 | – | 26,762 | |||||||||||||||
|
Derivative financial instruments
|
– | 20,260 | 26,154 | (4,256 | ) | 42,158 | ||||||||||||||
|
Notes in circulation
|
– | – | 1,074 | – | 1,074 | |||||||||||||||
|
Debt securities in issue
|
549 | 115,122 | 137,591 | (24,396 | ) | 228,866 | ||||||||||||||
|
Liabilities arising from insurance contracts and participating investment contracts
|
– | – | 80,750 | (21 | ) | 80,729 | ||||||||||||||
|
Liabilities arising from non-participating investment contracts
|
– | – | 51,363 | – | 51,363 | |||||||||||||||
|
Unallocated surplus within insurance businesses
|
– | – | 643 | – | 643 | |||||||||||||||
|
Other liabilities
|
65 | 3,800 | 26,976 | (1,145 | ) | 29,696 | ||||||||||||||
|
Retirement benefit obligations
|
– | 292 | 207 | (76 | ) | 423 | ||||||||||||||
|
Current tax liabilities
|
– | 19 | 867 | (737 | ) | 149 | ||||||||||||||
|
Deferred tax liabilities
|
– | – | 940 | (693 | ) | 247 | ||||||||||||||
|
Other provisions
|
– | 2,189 | 2,445 | 98 | 4,732 | |||||||||||||||
|
Subordinated liabilities
|
4,074 | 15,574 | 30,870 | (14,286 | ) | 36,232 | ||||||||||||||
|
Total liabilities
|
12,676 | 511,179 | 828,501 | (404,484 | ) | 947,872 | ||||||||||||||
|
Equity
|
||||||||||||||||||||
|
Shareholders’ equity
|
37,261 | 37,060 | 44,303 | (74,899 | ) | 43,725 | ||||||||||||||
|
Non-controlling interests
|
– | – | 841 | – | 841 | |||||||||||||||
|
Total equity
|
37,261 | 37,060 | 45,144 | (74,899 | ) | 44,566 | ||||||||||||||
|
Total equity and liabilities
|
49,937 | 548,239 | 873,645 | (479,383 | ) | 992,438 | ||||||||||||||
|
28.
|
Condensed consolidating financial information (continued)
|
|
For the half-year ended 30 June 2011
|
Company
|
LTSB Bank
|
Subsidiaries
|
Consolidation adjustments
|
Group
|
|||||||||||||||
| £m | £m | £m | £m | £m | ||||||||||||||||
|
Net cash provided by (used in) operating activities
|
479 | 14,020 | (5,074 | ) | (487 | ) | 8,938 | |||||||||||||
|
Purchase of financial assets
|
– | (8,395 | ) | (5,801 | ) | – | (14,196 | ) | ||||||||||||
|
Proceeds from sale and maturity of financial assets
|
– | 12,272 | 12,118 | – | 24,390 | |||||||||||||||
|
Purchase of fixed assets
|
– | (317 | ) | (1,037 | ) | – | (1,354 | ) | ||||||||||||
|
Proceeds from sale of fixed assets
|
– | 27 | 686 | – | 713 | |||||||||||||||
|
Acquisition of businesses, net of cash disposed
|
– | – | (8 | ) | – | (8 | ) | |||||||||||||
|
Disposal of businesses, net of cash disposed
|
– | – | 238 | – | 238 | |||||||||||||||
|
Net cash provided by investing activities
|
– | 3,587 | 6,196 | – | 9,783 | |||||||||||||||
|
Dividends paid to non-controlling interests
|
– | – | (22 | ) | – | (22 | ) | |||||||||||||
|
Interest paid on subordinated liabilities
|
– | (405 | ) | (833 | ) | 8 | (1,230 | ) | ||||||||||||
|
Repayment of subordinated liabilities
|
– | (832 | ) | (92 | ) | – | (924 | ) | ||||||||||||
|
Change in non-controlling interests
|
– | – | (10 | ) | – | (10 | ) | |||||||||||||
|
Net cash (used in) provided by financing activities
|
– | (1,237 | ) | (957 | ) | 8 | (2,186 | ) | ||||||||||||
|
Effects of exchange rate changes on cash and cash equivalents
|
– | 9 | 1 | – | 10 | |||||||||||||||
|
Change in cash and cash equivalents
|
479 | 16,379 | 166 | (479 | ) | 16,545 | ||||||||||||||
|
Cash and cash equivalents at beginning of period
|
375 | 40,389 | 21,911 | (375 | ) | 62,300 | ||||||||||||||
|
Cash and cash equivalents at end of period
|
854 | 56,768 | 22,077 | (854 | ) | 78,845 | ||||||||||||||
|
28.
|
Condensed consolidating financial information (continued)
|
|
For the half-year ended 30 June 2010
|
Company
|
LTSB Bank
|
Subsidiaries
|
Consolidation adjustments
|
Group
|
|||||||||||||||
| £m | £m | £m | £m | £m | ||||||||||||||||
|
Net cash provided by (used in) operating activities
|
(822 | ) | 16,538 | (4,805 | ) | 654 | 11,565 | |||||||||||||
|
Purchase of financial assets
|
– | (8,771 | ) | (8,750 | ) | – | (17,521 | ) | ||||||||||||
|
Proceeds from sale and maturity of financial assets
|
– | 4,692 | 13,863 | – | 18,555 | |||||||||||||||
|
Purchase of fixed assets
|
– | (117 | ) | (942 | ) | – | (1,059 | ) | ||||||||||||
|
Proceeds from sale of fixed assets
|
– | 5 | 923 | – | 928 | |||||||||||||||
|
Additional capital injections to subsidiaries
|
– | (39 | ) | – | 39 | – | ||||||||||||||
|
Capital repayments by subsidiaries
|
850 | – | – | (850 | ) | – | ||||||||||||||
|
Acquisition of businesses, net of cash acquired
|
– | – | (7 | ) | – | (7 | ) | |||||||||||||
|
Disposal of businesses, net of cash disposed
|
– | – | 239 | – | 239 | |||||||||||||||
|
Capital lending to subsidiaries
|
(876 | ) | – | – | 876 | – | ||||||||||||||
|
Net cash (used in) provided by investing activities
|
(26 | ) | (4,230 | ) | 5,326 | 65 | 1,135 | |||||||||||||
|
Dividends paid to non-controlling interests
|
– | – | (8 | ) | – | (8 | ) | |||||||||||||
|
Proceeds from issue of debt securities
|
– | – | – | – | – | |||||||||||||||
|
Repayment of debt securities in issue
|
(350 | ) | – | – | 350 | – | ||||||||||||||
|
Interest paid on subordinated liabilities
|
– | (499 | ) | (677 | ) | 129 | (1,047 | ) | ||||||||||||
|
Proceeds from issue of subordinated liabilities
|
– | 1,968 | – | – | 1,968 | |||||||||||||||
|
Change in non-controlling interests
|
– | – | (5 | ) | – | (5 | ) | |||||||||||||
|
Net cash (used in) provided by financing activities
|
(350 | ) | 1,469 | (690 | ) | 479 | 908 | |||||||||||||
|
Effects of exchange rate changes on cash and cash equivalents
|
– | 14 | 167 | – | 181 | |||||||||||||||
|
Change in cash and cash equivalents
|
(1,198 | ) | 13,791 | (2 | ) | 1,198 | 13,789 | |||||||||||||
|
Cash and cash equivalents at beginning of period
|
2,837 | 42,207 | 23,483 | (2,837 | ) | 65,690 | ||||||||||||||
|
Cash and cash equivalents at end of period
|
1,639 | 55,998 | 23,481 | (1,639 | ) | 79,479 | ||||||||||||||
|
28.
|
Condensed consolidating financial information (continued)
|
|
For the half-year ended
31 December 2010
|
Company
|
LTSB Bank
|
Subsidiaries
|
Consolidation adjustments
|
Group
|
|||||||||||||||
| £m | £m | £m | £m | £m | ||||||||||||||||
|
Net cash provided by (used in) operating activities
|
(1,264 | ) | (1,808 | ) | (7,660 | ) | (2,870 | ) | (13,602 | ) | ||||||||||
|
Purchase of financial assets
|
– | (23,868 | ) | (10,076 | ) | 4,575 | (29,369 | ) | ||||||||||||
|
Proceeds from sale and maturity of financial assets
|
– | 10,139 | 18,090 | (785 | ) | 27,444 | ||||||||||||||
|
Purchase of fixed assets
|
– | (458 | ) | (1,699 | ) | – | (2,157 | ) | ||||||||||||
|
Proceeds from sale of fixed assets
|
– | 2 | 424 | – | 426 | |||||||||||||||
|
Additional capital injections to subsidiaries
|
– | (180 | ) | – | 180 | – | ||||||||||||||
|
Acquisition of businesses, net of cash acquired
|
– | – | (84 | ) | 18 | (66 | ) | |||||||||||||
|
Disposal of businesses, net of cash disposed
|
– | 18 | 189 | (18 | ) | 189 | ||||||||||||||
|
Capital lending to subsidiaries
|
(549 | ) | – | – | 549 | – | ||||||||||||||
|
Net cash (used in) provided by investing activities
|
(549 | ) | (14,347 | ) | 6,844 | 4,519 | (3,533 | ) | ||||||||||||
|
Dividends paid to non-controlling interests
|
– | – | (39 | ) | – | (39 | ) | |||||||||||||
|
Proceeds from issue of debt securities
|
549 | – | – | (549 | ) | – | ||||||||||||||
|
Interest paid on subordinated liabilities
|
– | (373 | ) | (686 | ) | 164 | (895 | ) | ||||||||||||
|
Proceeds from issue of subordinated liabilities
|
– | 1,269 | – | – | 1,269 | |||||||||||||||
|
Repayment of subordinated liabilities
|
– | (353 | ) | (331 | ) | – | (684 | ) | ||||||||||||
|
Change in non-controlling interests
|
– | – | 7 | – | 7 | |||||||||||||||
|
Net cash (used in) provided by financing activities
|
549 | 543 | (1,049 | ) | (385 | ) | (342 | ) | ||||||||||||
|
Effects of exchange rate changes on cash and cash equivalents
|
– | 3 | 295 | – | 298 | |||||||||||||||
|
Change in cash and cash equivalents
|
(1,264 | ) | (15,609 | ) | (1,570 | ) | 1,264 | (17,179 | ) | |||||||||||
|
Cash and cash equivalents at beginning of period
|
1,639 | 55,998 | 23,481 | (1,639 | ) | 79,479 | ||||||||||||||
|
Cash and cash equivalents at end of period
|
375 | 40,389 | 21,911 | (375 | ) | 62,300 | ||||||||||||||
| LLOYDS BANKING GROUP plc | ||||
|
By:
|
/s/ T Tookey
|
|||
| Name: | Tim J.W. Tookey | |||
| Title: | Group Finance Director | |||
| Dated: | 12 August 2011 | |||