DGAP-News: Lloyds Banking Group PLC / Key word(s): Quarterly / Interim Statement
Lloyds Banking Group PLC: Q1 2021 Interim Management Statement

28.04.2021 / 09:00
The issuer is solely responsible for the content of this announcement.


Lloyds Banking Group plc

Q1 2021 Interim Management Statement

28 April 2021

RESULTS FOR THE THREE MONTHS ENDED 31 MARCH 2021

"The coronavirus pandemic continues to have a significant impact on people, businesses and communities in the UK and around the world. Whilst we are seeing positive signs, notably the progress of the vaccine roll-out and the emergence from lockdown restrictions, the outlook remains uncertain. The Group remains absolutely focused on supporting its customers and Helping Britain Recover from the financial effects of the pandemic.

The long-run transformation of the Group has positioned the business well to address the challenges of the pandemic. We have made a strong start to the year with the quarterly results and on delivering Strategic Review 2021.

It is with both pride and sadness that I will step down as Group Chief Executive later this month. Most importantly, the Group is well placed for sustainable success and the publication of Strategic Review 2021 in February shows that the Group has clear execution outcomes for 2021, underpinned by long-term strategic vision. The Group also has exceptional people. I am very proud of all of our colleagues across the Group, who have again shown their continued dedication and relentless focus on supporting their customers through these challenging times."

António Horta-Osório, Group Chief Executive

"As this is António's last set of results, I would like to take this opportunity to thank him, on behalf of the Board, for his outstanding contribution. Over the last decade he has led the transformation of the business; delivering its purpose of Helping Britain Prosper whilst creating a truly customer focussed business underpinned by strong financial foundations."

Robin Budenberg, Chair

HIGHLIGHTS FOR THE THREE MONTHS ENDED 31 MARCH 2021

Solid financial performance reflects business momentum and improved economic outlook

  • Statutory profit after tax of £1,397 million supported by business momentum and a release of expected credit loss provisions, given the improved economic outlook. Statutory return on tangible equity of 13.9 per cent with tangible net assets per share of 52.4 pence
  • Recovering trading surplus of £1,748 million, a reduction of 12 per cent compared to the first three months of 2020, but an increase of 21 per cent on the final quarter of 2020
    • Net income of £3.7 billion, down 7 per cent year on year (up 2 per cent on the previous quarter), with higher average interest-earning assets of £439 billion, net interest margin of 2.49 per cent and other income of £1.1 billion
    • Total costs of £1.9 billion down 2 per cent, driven by continued operating cost control and lower remediation costs
  • Asset quality remains strong with credit experience benign. Net impairment credit of £323 million in the quarter, driven by a £459 million release given the UK's improved economic outlook. Management judgements in respect of coronavirus retained, now c.£1 billion including the £400 million central overlay taken in the fourth quarter

Balance sheet and capital strength further enhanced

  • Capital build of 54 basis points in the quarter with CET1 ratio of 16.7 per cent, significantly ahead of the ongoing target of c.12.5 per cent, plus a management buffer of c.1 per cent and regulatory requirements of c.11 per cent
  • Loans and advances up £3.3 billion in the quarter to £443.5 billion, including £6.0 billion open mortgage book growth
  • Customer deposits up £11.7 billion in the quarter to £462.4 billion with Retail current accounts up £5.6 billion
  • Loan to deposit ratio of 96 per cent provides a strong liquidity position and significant potential to lend into recovery

Outlook

  • Given the solid financial performance in the first quarter of 2021, the Group is enhancing its guidance for 2021. Based on the Group's current economic assumptions:
    • Net interest margin now expected to be in excess of 245 basis points
    • Operating costs to reduce to c.£7.5 billion
    • Net asset quality ratio now expected to be below 25 basis points
    • Risk-weighted assets in 2021 to be broadly stable on 2020
    • Statutory return on tangible equity now expected to be between 8 and 10 per cent, excluding c.2.5 percentage point benefit from tax rate changes
  • Accruing dividends with intention to resume progressive and sustainable ordinary dividend policy
 

INCOME STATEMENT - UNDERLYING BASIS

Quarter
ended
31 Mar
2021

Quarter
ended
31 Mar
2020

Change

Quarter
ended
31 Dec 2020

Change

£m

£m

£m

Net interest income

2,677 

2,950 

(9)

2,677 

Other income

1,135 

1,226 

(7)

1,066 

Operating lease depreciation

(148)

(224)

34 

(150)

Net income

3,664 

3,952 

(7)

3,593 

Operating costs

(1,851)

(1,877)

(2,028)

Remediation

(65)

(87)

25 

(125)

48 

Total costs

(1,916)

(1,964)

(2,153)

11 

Trading surplus

1,748 

1,988 

(12)

1,440 

21 

Impairment

323 

(1,430)

(128)

Underlying profit

2,071 

558 

1,312 

58 

Restructuring

(173)

(63)

(233)

26 

Volatility and other items

(421)

(202)

Payment protection insurance provision

(85)

Statutory profit before tax

1,898 

74 

792 

Tax (expense) credit

(501)

406 

(112)

Statutory profit after tax

1,397 

480 

680 

Earnings per share

1.8p

0.5p

0.7p

Banking net interest margin

2.49%

2.79%

(30)bp

2.46%

3bp

Average interest-earning banking assets

£439bn

£432bn

£437bn

Cost:income ratio

52.3%

49.7%

2.6pp

59.9%

(7.6)pp

Asset quality ratio

(0.29)%

1.30%

(159)bp

0.11%

(40)bp

Return on tangible equity

13.9%

3.7%

10.2pp

5.9%

8.0pp

 

KEY BALANCE SHEET METRICS

At 31 Mar
2021

At 31 Mar 2020

Change

At 31 Dec 2020

Change

Loans and advances to customers1

£444bn

£443bn

£440bn

Customer deposits2

£462bn

£428bn

£451bn

Loan to deposit ratio

96%

103%

(7)pp

98%

(2)pp

CET1 ratio3

16.7%

14.2%

2.5pp

16.2%

0.5pp

CET1 ratio pre IFRS 9 transitional relief3,4

15.8%

13.9%

1.9pp

15.0%

0.8pp

Transitional MREL ratio3

36.1%

34.5%

1.6pp

36.4%

(0.3)pp

UK leverage ratio3

6.0%

5.3%

0.7pp

5.8%

0.2pp

Risk-weighted assets

£199bn

£209bn

(5)

£203bn

(2)

Wholesale funding

£106bn

£126bn

(16)

£109bn

(4)

Liquidity coverage ratio (12 month average)

134%

138%

(4)pp

136%

(2)pp

Tangible net assets per share

52.4p

57.4p

(5.0)p

52.3p

0.1p

  1. Excludes reverse repos of £52.8 billion (31 March 2020: £55.2 billion; 31 December 2020: £58.6 billion).
  2. Excludes repos of £8.5 billion (31 March 2020: £9.4 billion; 31 December 2020: £9.4 billion).
  3. Incorporating profits for the period that remain subject to formal verification in accordance with the Capital Requirements Regulation.
  4. CET1 ratio pre IFRS 9 transitional relief reflects the full impact of IFRS 9, prior to the application of transitional arrangements for capital that provide relief for the impact of IFRS 9.
 

QUARTERLY INFORMATION

Quarter
ended
31 Mar
2021

Quarter
ended
31 Dec
2020

Quarter
ended
30 Sep
2020

Quarter
ended
30 Jun
2020

Quarter
ended
31 Mar
2020

£m

£m

£m

£m

£m

Net interest income

2,677 

2,677 

2,618 

2,528 

2,950 

Other income

1,135 

1,066 

988 

1,235 

1,226 

Operating lease depreciation

(148)

(150)

(208)

(302)

(224)

Net income

3,664 

3,593 

3,398 

3,461 

3,952 

Operating costs

(1,851)

(2,028)

(1,858)

(1,822)

(1,877)

Remediation

(65)

(125)

(77)

(90)

(87)

Total costs

(1,916)

(2,153)

(1,935)

(1,912)

(1,964)

Trading surplus

1,748 

1,440 

1,463 

1,549 

1,988 

Impairment

323 

(128)

(301)

(2,388)

(1,430)

Underlying profit (loss)

2,071 

1,312 

1,162 

(839)

558 

Restructuring

(173)

(233)

(155)

(70)

(63)

Volatility and other items

(202)

29 

233 

(421)

Payment protection insurance provision

(85)

Statutory profit (loss) before tax

1,898 

792 

1,036 

(676)

74 

Tax (expense) credit

(501)

(112)

(348)

215 

406 

Statutory profit (loss) after tax

1,397 

680 

688 

(461)

480 

Banking net interest margin

2.49%

2.46%

2.42%

2.40%

2.79%

Average interest-earning banking assets

£439bn

£437bn

£436bn

£435bn

£432bn

Cost:income ratio

52.3%

59.9%

56.9%

55.2%

49.7%

Asset quality ratio

(0.29)%

0.11%

0.27%

2.16%

1.30%

Gross asset quality ratio

(0.18)%

0.16%

0.28%

2.19%

1.35%

Return on tangible equity1

13.9%

5.9%

6.0%

(6.1)%

3.7%

Loans and advances to customers2

£444bn

£440bn

£439bn

£440bn

£443bn

Customer deposits3

£462bn

£451bn

£447bn

£441bn

£428bn

Loan to deposit ratio

96%

98%

98%

100%

103%

Risk-weighted assets

£199bn

£203bn

£205bn

£207bn

£209bn

Tangible net assets per share

52.4p

52.3p

52.2p

51.6p

57.4p

  1. Revised basis, calculation shown on page 10.
  2. Excludes reverse repos.
  3. Excludes repos.
 

BALANCE SHEET ANALYSIS

At 31 Mar
2021

At 31 Mar 2020

Change

At 31 Dec 2020

Change

£bn

£bn

£bn

Loans and advances to customers

Open mortgage book

283.3 

268.1 

277.3 

Closed mortgage book

15.9 

17.9 

(11)

16.5 

(4)

Credit cards

13.5 

16.7 

(19)

14.3 

(6)

UK Retail unsecured loans

7.8 

8.6 

(9)

8.0 

(3)

UK Motor Finance

14.9 

15.8 

(6)

14.7 

Overdrafts

0.9 

1.2 

(25)

0.9 

Retail other1

10.3 

9.3 

11 

10.4 

(1)

SME2

41.1 

32.0 

28 

40.6 

Mid Corporates

4.0 

4.7 

(15)

4.1 

(2)

Corporate and Institutional

45.6 

60.9 

(25)

46.0 

(1)

Commercial Banking other

4.1 

4.9 

(16)

4.3 

(5)

Wealth

1.0 

0.9 

11 

0.9 

11 

Central items

1.1 

2.1 

(48)

2.2 

(50)

Loans and advances to customers3

443.5 

443.1 

440.2 

Customer deposits

Retail current accounts

103.0 

79.9 

29 

97.4 

Commercial current accounts2,4

47.2 

34.5 

37 

47.6 

(1)

Retail relationship savings accounts

158.2 

144.1 

10 

154.1 

Retail tactical savings accounts

13.8 

12.7 

14.0 

(1)

Commercial deposits2,5

125.5 

142.5 

(12)

122.7 

Wealth

14.1 

13.3 

14.1 

Central items

0.6 

1.4 

(57)

0.8 

(25)

Total customer deposits6

462.4 

428.4 

450.7 

Total assets

869.5 

861.7 

871.3 

Total liabilities

820.0 

809.0 

821.9 

Ordinary shareholders' equity

43.4 

46.6 

(7)

43.3 

Other equity instruments

5.9 

5.9 

5.9 

Non-controlling interests

0.2 

0.2 

0.2 

Total equity

49.5 

52.7 

(6)

49.4 

Ordinary shares in issue, excluding own shares

70,936m

70,411m

70,812m

  1. Primarily Europe.
  2. Includes Retail Business Banking.
  3. Excludes reverse repos.
  4. Primarily non interest-bearing Commercial Banking current accounts.
  5. Primarily Commercial Banking interest-bearing accounts.
  6. Excludes repos.
 

REVIEW OF PERFORMANCE

Solid financial performance reflects business momentum and improved economic outlook

The Group's statutory profit before tax for the first quarter of 2021 was £1,898 million, benefiting from solid business momentum and a net impairment credit as a result of the UK's improved economic outlook. Underlying profit was £2,071 million, compared to £558 million in the first three months of 2020, reflecting both the improved impairment outcome and lower total costs, partially offset by lower net income. Trading surplus is recovering at £1,748 million, down 12 per cent compared to the first three months of 2020, but up 21 per cent on the fourth quarter of 2020.

Net income
Net interest income of £2,677 million was down 9 per cent year on year, impacted by a reduced banking net interest margin of 2.49 per cent, reflecting the lower rate environment. The Group's banking net interest margin was up 3 basis points compared to the fourth quarter of 2020 reflecting the continued optimisation of the Corporate and Institutional book within Commercial Banking, strong customer deposit inflows and funding and capital benefits following the liability management exercise in the fourth quarter of 2020. Relative to the fourth quarter of 2020, lower structural hedge net interest income was largely offset by growth in mortgage volumes at attractive margins.

Average interest-earning banking assets were up 2 per cent compared to the first quarter of 2020 at £439 billion, driven by growth in the open mortgage book and an increase in government-backed lending. This was partially offset by lower balances in credit cards, motor finance and unsecured personal loans, as well as the effects of the continued optimisation of the Corporate and Institutional book within Commercial Banking. Low single-digit percentage growth in average interest-earning assets is now expected in 2021.

The Group manages the risk to its earnings and capital from movements in interest rates centrally by hedging the net liabilities which are stable or less sensitive to movements in rates. As at 31 March 2021 the Group's structural hedge had an approved capacity of £210 billion (in-line with year-end 2020), a nominal balance of £207 billion (31 December 2020: £186 billion) which has increased towards approved capacity and a weighted-average duration of around three-and-a-half years (31 December 2020: around two-and-a-half years). The Group generated £0.5 billion (on a 3 month LIBOR basis) of gross income from the structural hedge balances in the first quarter of 2021 (first quarter of 2020: £0.7 billion, fourth quarter of 2020: £0.5 billion) with emerging benefits from higher market rates seen in the quarter. Following the end of the quarter, the Group's approved structural hedge capacity has been increased to £225 billion, capturing part of the liability growth since the beginning of 2020 and reflecting the Group's continued success in attracting current account balances over the last year.

The Group now expects the net interest margin for 2021 to be in excess of 245 basis points.

Other income of £1,135 million was 7 per cent lower than in the first quarter of 2020 reflecting lower levels of customer activity and new business as a consequence of the coronavirus pandemic, particularly within Retail and Insurance and Wealth. This was in part mitigated by strong performance in the Group's equity investment businesses. In aggregate the Group's other income was up 6 per cent relative to the fourth quarter of 2020, when the Group took a charge in Insurance and Wealth for the annual basis review.

Operating lease depreciation reduced to £148 million (three months to 31 March 2020: £224 million) as a result of the continued impact of a smaller Lex fleet size, combined with a benefit from the more resilient used car price outlook of
c.£30 million.

Total costs
Total costs of £1,916 million were 2 per cent lower than in the first three months of 2020, driven by continued control of operating costs, down 1 per cent at £1,851 million whilst continuing to prioritise investment in the business.

The Group continues to expect operating costs for 2021 to reduce to c.£7.5 billion including net coronavirus-related costs and compensation headwinds.

REVIEW OF PERFORMANCE (continued)

Remediation charges of £65 million (three months to 31 March 2020: £87 million) were related to pre-existing programmes. As highlighted in the 2020 results, in relation to HBOS Reading, decisions from the independent panel re-review on direct and consequential losses will start to be issued during 2021. This is likely to result in further charges but it is not possible to estimate the potential impact at this stage.

Impairment
The impairment charge in the quarter was a net credit of £323 million, compared to a charge of £1,430 million in the first quarter of 2020. The net credit in the quarter was driven by continued strong asset quality with a low charge of £209 million given the continued benign credit environment and a £459 million release of expected credit loss (ECL) allowances resulting from improvements to the UK's economic outlook. The Group has retained the judgemental overlays applied at year end and has continued to offset modelled releases not deemed reflective of underlying risk. Management judgements in respect of coronavirus of c.£1 billion (31 December 2020: c.£0.9 billion) include a central £400 million overlay (31 December 2020: £400 million), as well as c.£600 million of judgements within the underlying portfolios (31 December 2020: c.£500 million).

The Group's ECL allowance reduced in the quarter from £6.9 billion to £6.2 billion, of which £459 million resulted from improvements to the economic outlook, including the impact of the extension of the Government's Coronavirus Job Retention Scheme. Reductions in Commercial Banking ECL also reflect improved outcomes on restructuring cases, lower flows to default and recent reductions in exposures due to asset optimisation.

The ECL allowance remains high by historical standards and is consistent with the Group's updated macroeconomic projections. It assumes that a large proportion of expected losses will crystallise over the next 12 to 18 months as support measures subside and unemployment increases.

Observed credit performance has remained stable in the quarter, with the flow of assets into arrears, defaults and write-offs remaining at low levels in part due to the continued effectiveness of support schemes, including the Coronavirus Job Retention Scheme and payment holidays extended by the Group which have now largely matured. The Group has maintained judgemental ECL allowances in respect of losses assumed to have been suppressed over the last 12 months by support schemes, given that cumulative losses remain lower than would have ordinarily been anticipated.

The Group's £400 million central overlay was added at year end in recognition of the significant uncertainty with regard to the efficacy of the vaccine, the vaccination rollout, potential virus mutations and economic performance post lockdown restrictions and Government support. Although the base case outlook has improved in the first quarter, the Group still considers these risks to remain and that the conditioning assumptions for the base case and associated scenarios around this do not necessarily capture these unprecedented risks.

Given the benefit recognised in the first quarter of the year, the full year charge is now expected to be materially lower than the guidance set out at year-end. Based on the Group's improved economic assumptions, the net asset quality ratio for 2021 is now expected to be below 25 basis points.

REVIEW OF PERFORMANCE (continued)

Impairment charge

Quarter
ended
31 Mar
2021

Quarter
ended
31 Mar
2020

Change

Quarter
ended
31 Dec 2020

Change

£m

£m

£m

Charges pre-updated multiple economic scenarios1

Retail

321 

325 

383 

16 

Commercial Banking

(111)

52 

41 

Other

(1)

(9)

89 

(6)

83 

209 

368 

43 

418 

50 

Coronavirus impacted restructuring cases2

(73)

218 

(31)

Updated economic outlook:

Retail

(240)

564 

(417)

42 

Commercial Banking

(219)

280 

(42)

Other

200 

(459)

844 

(259)

(77)

Impairment (credit) charge

(323)

1,430 

128 

Asset quality ratio

(0.29)%

1.30%

(159)bp

0.11%

(40)bp

Gross asset quality ratio

(0.18)%

1.35%

(153)bp

0.16%

(34)bp

  1. Charges based on economic assumptions as at 31 December 2019.
  2. Additional (releases)/charges on cases subject to restructuring at the end of 2019, where the coronavirus pandemic is considered to have had a direct effect upon the recovery strategy.

ECL allowance as a percentage of drawn balances

At 31 Mar

20211

At 31 Dec

20201

Change

£m

£m

Stage 2 gross loans and advances to customers

53,626 

60,514 

(11)

Stage 2 loans and advances to customers as % of total

10.7%

12.0%

(1.3)pp

Stage 2 ECL allowances2

2,384 

2,727 

(13)

Stage 2 ECL allowances2 as % of Stage 2 drawn balances

4.4%

4.5%

(0.1)pp

Stage 3 gross loans and advances to customers

8,970 

9,089 

(1)

Stage 3 loans and advances to customers as a % of total

1.8%

1.8%

Stage 3 ECL allowances2

2,348 

2,508 

(6)

Stage 3 ECL allowances2 as % of Stage 3 drawn balances3

27.1%

28.6%

(1.5)pp

Total loans and advances to customers4

502,055 

505,129 

(1)

Total ECL allowance2

6,194 

6,832 

(9)

Total ECL allowances2 as % of drawn balances3

1.2%

1.4%

(0.2)pp

  1. Underlying basis. Refer to basis of presentation on page 19.
  2. Expected credit loss.
  3. Total and Stage 3 ECL allowances as a percentage of drawn balances are calculated excluding loans in recoveries in Retail and Commercial Banking of £321 million (31 December 2020: £317 million). Comparatives restated to reflect exclusion of Commercial Banking recoveries.
  4. Includes reverse repos of £52.8 billion (31 December 2020: £58.6 billion).

REVIEW OF PERFORMANCE (continued)

Statutory profit
Restructuring costs of £173 million, up from £63 million in the first quarter of 2020 but down from £233 million in the fourth quarter of 2020, reflected increased severance and technology research and development costs, as well as slightly higher property transformation costs. Volatility and other items reduced to net nil in the first quarter of 2021 (three months to 31 March 2020: net loss of £421 million) with positive insurance volatility and other gains offsetting fair value unwind and the amortisation of purchased intangibles.

Return on tangible equity for the period was 13.9 per cent (three months to 31 March 2020: 3.7 per cent) and earnings per share were 1.8 pence (three months to 31 March 2020: 0.5 pence), both reflecting the benefit of the impairment credit.

The Group recognised a tax expense of £501 million in the period compared to a credit of £406 million in the first three months of 2020. The prior year credit included an uplift in deferred tax assets following the announcement by the UK Government that it would maintain the corporation tax rate at 19 per cent. On 3 March 2021, the Government announced its intention to increase the rate of corporation tax from 19 per cent to 25 per cent with effect from 1 April 2023. Had this change in corporation tax rate been substantively enacted at 31 March 2021, the impact would have been to recognise a      c.£1 billion deferred tax credit in the income statement and a c.£150 million debit within other comprehensive income, increasing the Group's net deferred tax asset by c.£850 million.

Given the improved outlook for both the net interest margin and asset quality ratio, the statutory return on tangible equity for 2021 is now expected to be between 8 and 10 per cent, excluding a c.2.5 percentage point benefit from tax rate changes.

Balance sheet
Loans and advances to customers were up £3.3 billion in the quarter at £443.5 billion, benefiting from an increase of £6.0 billion in the open mortgage book, more than offsetting lower unsecured Retail, Corporate and Institutional, and closed mortgage book balances. Customer deposits of £462.4 billion were up £11.7 billion in the quarter compared to £450.7 billion at 31 December 2020 and included a further increase in Retail current accounts of £5.6 billion to £103.0 billion. The Group's loan to deposit ratio of 96 per cent provides a strong liquidity position and significant potential to lend into recovery.

Capital
The Group's CET1 capital ratio has increased from 16.2 per cent at 31 December 2020 to 16.7 per cent, reflecting capital build in the quarter of 54 basis points, prior to the impact of the dividend accrual. Banking business capital build (pre impairments credit) of 55 basis points and underlying risk-weighted asset reductions of 31 basis points were partly offset by pension contributions and other movements of 26 basis points. The net impact of the impairments credit and partial release of IFRS 9 transitional relief during the quarter was a 6 basis points reduction which included 5 basis points relating to the phased reduction in static relief. The impact of the dividend accrual in the quarter equated to 5 basis points and is currently based upon a pro-rated amount of the 2020 full year dividend.

As previously noted the Group will update the market on interim dividend payments with the half-year results, subsequent to reviewing the PRA's update on distributions which is expected ahead of the half-year results reporting cycle for the large UK banks. In the interim the Group's dividend accrual has been made on an appropriately prudent basis (as set out above) in accordance with PRA guidance. As previously stated, the Board intends to resume its progressive and sustainable ordinary dividend policy with the dividend at a higher level than 2020.

The PRA is continuing to consult on a proposal to reverse the revised capital treatment of intangible software assets that was implemented in December 2020 via EU capital regulations. Should the PRA proceed with their proposal then the reinstatement of the original requirement to deduct these assets from capital will come into force during the year. This would lead to a c.50 basis points reduction in the Group's CET1 capital ratio (net of a reduction in associated risk-weighted assets) and based on the position at 31 March 2021 the ratio would reduce to 16.2 per cent.

REVIEW OF PERFORMANCE (continued)

Risk-weighted assets reduced by £3.8 billion during the quarter, primarily driven by optimisation activity undertaken in Commercial Banking of around £2.5 billion and foreign exchange and other market impacts of £1.1 billion, alongside limited credit migration and balance sheet growth. The Group continues to expect 2021 risk-weighted assets to be broadly stable on 2020.

The Board's view of the ongoing level of CET1 capital required by the Group to grow the business, meet regulatory requirements and cover uncertainties remains at c.12.5 per cent, plus a management buffer of c.1 per cent. The Group's CET1 capital regulatory requirement is currently c.11 per cent.

The transitional total capital ratio reduced to 23.0 per cent (31 December 2020: 23.3 per cent) and the transitional minimum requirement for own funds and eligible liabilities (MREL) reduced to 36.1 per cent (31 December 2020: 36.4 per cent) reflecting the impact of movements in rates and the annual reduction in transitional limits applied to legacy tier 1 and tier 2 instruments, which more than offset the increase in CET1 capital. The UK leverage ratio increased to 6.0 per cent.

 

ADDITIONAL FINANCIAL INFORMATION

 
  1.                 Banking net interest margin and average interest-earning assets

Quarter
ended
31 Mar
2021

Quarter
ended
31 Mar
2020

Group net interest income - statutory basis (£m)

2,266 

5,185 

Insurance gross up (£m)

352 

(2,265)

Volatility and other items (£m)

59 

30 

Group net interest income - underlying basis (£m)

2,677 

2,950 

Non-banking net interest expense (£m)

26 

44 

Banking net interest income - underlying basis (£m)

2,703 

2,994 

Net loans and advances to customers (£bn)1

443.5 

443.1 

Impairment provision and fair value adjustments (£bn)

5.7 

4.8 

Non-banking items:

Fee-based loans and advances (£bn)

(4.9)

(7.6)

Other non-banking (£bn)

(1.8)

(3.1)

Gross banking loans and advances (£bn)

442.5 

437.2 

Averaging (£bn)

(3.1)

(5.6)

Average interest-earning banking assets (£bn)

439.4 

431.6 

Banking net interest margin (%)

2.49 

2.79 

  1. Excludes reverse repos.
     
 
  1.                 Return on tangible equity

As announced at the full year results, the Group has revised its definition of return on tangible equity. Statutory profit after tax is adjusted to deduct profit attributable to non-controlling interests and other equity holders and is divided by average tangible equity.

Quarter
ended
31 Mar
2021

Quarter
ended
31 Mar
2020

Average ordinary shareholders' equity (£bn)

43.3 

44.1 

Average intangible assets (£bn)

(6.2)

(6.1)

Average tangible equity (£bn)

37.1 

38.0 

Group statutory profit after tax (£m)

1,397 

480 

Less profit attributable to non-controlling interests and other equity holders (£m)

(122)

(132)

Adjusted statutory profit after tax (£m)1

1,275 

348 

Return on tangible equity (%)1

13.9 

3.7 

  1. Revised basis, quarter ended 31 March 2020 restated.
 

ADDITIONAL FINANCIAL INFORMATION (continued)

  1.                 Further impairment detail

The analyses which follow have been presented on an underlying basis. Refer to basis of presentation on page 19.

Impairment charge by division

Quarter
ended
31 Mar
2021

Quarter
ended
31 Mar
2020

Change

Quarter
ended
31 Dec
2020

Change

£m

£m

£m

UK Mortgages

(72)

160 

(146)

51 

Credit cards

28 

349 

92 

Loans and overdrafts

108 

225 

52 

146 

26 

UK Motor Finance

11 

76 

86 

(42)

Other

79 

92 

Retail

81 

889 

(34)

Commercial Banking

(403)

550 

(32)

Insurance and Wealth

(2)

Central Items

(1)

(10)

90 

196 

Total impairment charge

(323)

1,430 

128 

Movements in ECL by division on an underlying basis

ECL at
31 Mar
2021

Net ECL

increase/(decrease)

Write-offs

and other

Income

statement

charge

ECL at
31 Dec
2020

£m

£m

£m

£m

£m

UK Mortgages

1,518 

(87)

(15)

(72)

1,605 

Credit cards

894 

(64)

(92)

28 

958 

Loans and overdrafts

707 

(8)

(116)

108 

715 

UK Motor Finance

503 

(9)

11 

501 

Other

221 

(8)

(14)

229 

Retail

3,843 

(165)

(246)

81 

4,008 

Commercial Banking

1,932 

(470)

(67)

(403)

2,402 

Other

451 

(1)

450 

Total1

6,226 

(634)

(311)

(323)

6,860 

  1. Total ECL includes £32 million relating to other non customer-related assets (31 December 2020: £28 million).

ADDITIONAL FINANCIAL INFORMATION (continued)

Group loans and advances to customers and expected credit loss allowances - underlying basis

Stage 1

Stage 2

Stage 3

Total

Stage 2

as % of

total

Stage 3

as % of

total

At 31 March 2021

£m

£m

£m

£m

Loans and advances to customers

UK Mortgages

260,458 

35,838 

4,428 

300,724 

11.9 

1.5 

Credit cards

10,632 

3,189 

352 

14,173 

22.5 

2.5 

Loans and overdrafts

7,652 

1,439 

324 

9,415 

15.3 

3.4 

UK Motor Finance

12,947 

2,256 

232 

15,435 

14.6 

1.5 

Other

18,170 

1,218 

182 

19,570 

6.2 

0.9 

Retail1

309,859 

43,940 

5,518 

359,317 

12.2 

1.5 

SME

28,063 

3,322 

860 

32,245 

10.3 

2.7 

Other

46,297 

6,331 

2,526 

55,154 

11.5 

4.6 

Commercial Banking

74,360 

9,653 

3,386 

87,399 

11.0 

3.9 

Insurance and Wealth

856 

33 

59 

948 

3.5 

6.2 

Central items2

54,384 

54,391 

Total gross lending

439,459 

53,626 

8,970 

502,055 

10.7 

1.8 

ECL allowance on drawn balances

(1,273)

(2,186)

(2,340)

(5,799)

Net balance sheet carrying value

438,186 

51,440 

6,630 

496,256 

Group ECL allowance (drawn and undrawn)

UK Mortgages

100 

751 

667 

1,518 

49.5 

43.9 

Credit cards

190 

532 

172 

894 

59.5 

19.2 

Loans and overdrafts

210 

334 

163 

707 

47.2 

23.1 

UK Motor Finance3

177 

171 

155 

503 

34.0 

30.8 

Other

51 

117 

53 

221 

52.9 

24.0 

Retail1

728 

1,905 

1,210 

3,843 

49.6 

31.5 

SME

130 

162 

123 

415 

39.0 

29.6 

Other

193 

316 

999 

1,508 

21.0 

66.2 

Commercial Banking

323 

478 

1,122 

1,923 

24.9 

58.3 

Insurance and Wealth

11 

10 

22 

4.5 

45.5 

Central items

400 

406 

1.5 

Total ECL allowance (drawn and undrawn)

1,462 

2,384 

2,348 

6,194 

38.5 

37.9 

Group ECL allowances (drawn and undrawn) as a % of loans and advances to customers4

UK Mortgages

2.1 

15.1 

0.5 

Credit cards

1.8 

16.7 

59.7 

6.3 

Loans and overdrafts

2.7 

23.2 

64.7 

7.6 

UK Motor Finance

1.4 

7.6 

66.8 

3.3 

Other

0.3 

9.6 

40.2 

1.1 

Retail1

0.2 

4.3 

22.7 

1.1 

SME

0.5 

4.9 

16.8 

1.3 

Other

0.4 

5.0 

39.6 

2.7 

Commercial Banking

0.4 

5.0 

34.5 

2.2 

Insurance and Wealth

1.3 

3.0 

16.9 

2.3 

Central items

0.7 

85.7 

0.7 

Total ECL allowances (drawn and undrawn) as a % of loans and advances to customers

0.3 

4.4 

27.1 

1.2 

  1. Retail balances exclude the impact of the HBOS and MBNA acquisition related adjustments.
  2. Includes reverse repos of £52.8 billion.
  3. UK Motor Finance for Stages 1 and 2 include £168 million relating to provisions against residual values of vehicles subject to finance leasing agreements. These provisions are included within the calculation of coverage ratios.
  4. Total and Stage 3 ECL allowances as a percentage of drawn balances exclude loans in recoveries in Retail of £186 million, and in Commercial Banking of £135 million.

ADDITIONAL FINANCIAL INFORMATION (continued)

Stage 1

Stage 2

Stage 3

Total

Stage 2

as % of

total

Stage 3

as % of

total

At 31 December 2020

£m

£m

£m

£m

Loans and advances to customers

UK Mortgages

253,043 

37,882 

4,459 

295,384 

12.8 

1.5 

Credit cards

11,454 

3,264 

339 

15,057 

21.7 

2.3 

Loans and overdrafts

7,710 

1,519 

307 

9,536 

15.9 

3.2 

UK Motor Finance

12,786 

2,216 

199 

15,201 

14.6 

1.3 

Other

17,879 

1,304 

184 

19,367 

6.7 

1.0 

Retail1

302,872 

46,185 

5,488 

354,545 

13.0 

1.5 

SME

27,015 

4,500 

791 

32,306 

13.9 

2.4 

Other

43,543 

9,816 

2,733 

56,092 

17.5 

4.9 

Commercial Banking

70,558 

14,316 

3,524 

88,398 

16.2 

4.0 

Insurance and Wealth

832 

13 

70 

915 

1.4 

7.7 

Central items2

61,264 

61,271 

Total gross lending

435,526 

60,514 

9,089 

505,129 

12.0 

1.8 

ECL allowance on drawn balances

(1,385)

(2,493)

(2,495)

(6,373)

Net balance sheet carrying value

434,141 

58,021 

6,594 

498,756 

Group ECL allowance (drawn and undrawn)

UK Mortgages

110 

798 

697 

1,605 

49.7 

43.4 

Credit cards

250 

548 

160 

958 

57.2 

16.7 

Loans and overdrafts

224 

344 

147 

715 

48.1 

20.6 

UK Motor Finance3

197 

171 

133 

501 

34.1 

26.5 

Other

46 

124 

59 

229 

54.1 

25.8 

Retail1

827 

1,985 

1,196 

4,008 

49.5 

29.8 

SME

142 

234 

126 

502 

46.6 

25.1 

Other

217 

507 

1,169 

1,893 

26.8 

61.8 

Commercial Banking

359 

741 

1,295 

2,395 

30.9 

54.1 

Insurance and Wealth

11 

11 

23 

4.3 

47.8 

Central items

400 

406 

1.5 

Total ECL allowance (drawn and undrawn)

1,597 

2,727 

2,508 

6,832 

39.9 

36.7 

Group ECL allowances (drawn and undrawn) as a % of loans and advances to customers4

UK Mortgages

2.1 

15.6 

0.5 

Credit cards

2.2 

16.8 

58.8 

6.4 

Loans and overdrafts

2.9 

22.6 

64.2 

7.6 

UK Motor Finance

1.5 

7.7 

66.8 

3.3 

Other

0.3 

9.5 

39.3 

1.2 

Retail1

0.3 

4.3 

22.5 

1.1 

SME

0.5 

5.2 

19.1 

1.6 

Other

0.5 

5.2 

42.9 

3.4 

Commercial Banking

0.5 

5.2 

38.2 

2.7 

Insurance and Wealth

1.3 

7.7 

15.7 

2.5 

Central items

0.7 

85.7 

0.7 

Total ECL allowances (drawn and undrawn) as a % of loans and advances to customers

0.4 

4.5 

28.6 

1.4 

  1. Retail balances exclude the impact of the HBOS and MBNA acquisition related adjustments.
  2. Includes reverse repos of £58.6 billion.
  3. UK Motor Finance for Stages 1 and 2 include £192 million relating to provisions against residual values of vehicles subject to finance leasing agreements. These provisions are included within the calculation of coverage ratios.
  4. Total and Stage 3 ECL allowances as a percentage of drawn balances exclude loans in recoveries in Retail of £179 million, and in Commercial Banking of £138 million.

ADDITIONAL FINANCIAL INFORMATION (continued)

Group Stage 2 loans and advances to customers - underlying basis

Up to date

1-30 days

past due2

Over 30 days past due

Total

PD movements

Other1

Gross

lending

ECL3

Gross

lending

ECL3

Gross

lending

ECL3

Gross

lending

ECL3

Gross

lending

ECL3

£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

At 31 March 2021

UK Mortgages

25,319 

317 

4,172 

179 

3,163 

92 

3,184 

163 

35,838 

751 

Credit cards

2,897 

417 

189 

76 

75 

24 

28 

15 

3,189 

532 

Loans and overdrafts

904 

202 

366 

63 

131 

49 

38 

20 

1,439 

334 

UK Motor Finance

765 

62 

1,324 

55 

128 

36 

39 

18 

2,256 

171 

Other

473 

67 

589 

34 

69 

87 

1,218 

117 

Retail

30,358 

1,065 

6,640 

407 

3,566 

210 

3,376 

223 

43,940 

1,905 

SME

3,026 

148 

208 

35 

53 

3,322 

162 

Other

6,055 

307 

100 

60 

116 

6,331 

316 

Commercial Banking

9,081 

455 

308 

11 

95 

169 

9,653 

478 

Insurance and Wealth

19 

11 

33 

Central items

Total

39,458 

1,520 

6,959 

419 

3,663 

219 

3,546 

226 

53,626 

2,384 

At 31 December 2020

UK Mortgages

28,049 

354 

4,067 

189 

2,663 

82 

3,103 

173 

37,882 

798 

Credit cards

2,916 

422 

220 

78 

92 

28 

36 

20 

3,264 

548 

Loans and overdrafts

959 

209 

388 

68 

126 

45 

46 

22 

1,519 

344 

UK Motor Finance

724 

62 

1,321 

55 

132 

37 

39 

17 

2,216 

171 

Other

512 

56 

651 

44 

69 

14 

72 

10 

1,304 

124 

Retail

33,160 

1,103 

6,647 

434 

3,082 

206 

3,296 

242 

46,185 

1,985 

SME

4,229 

219 

150 

40 

81 

4,500 

234 

Other

9,505 

501 

97 

37 

177 

9,816 

507 

Commercial Banking

13,734 

720 

247 

77 

258 

14,316 

741 

Insurance and Wealth

12 

13 

Central items

Total

46,895 

1,823 

6,906 

444 

3,159 

213 

3,554 

247 

60,514 

2,727 

  1. Includes forbearance, client and product-specific indicators not reflected within quantitative PD assessments.
  1. Includes assets that have triggered PD movements, or other rules, given that being 1-29 days in arrears in and of itself is not a Stage 2 trigger.
  2. Expected credit loss allowances on loans and advances to customers (drawn and undrawn).

ADDITIONAL FINANCIAL INFORMATION (continued)

UK economic assumptions - Base case scenario by quarter

Key quarterly assumptions made by the Group are shown below. Gross domestic product is presented quarter on quarter, house price growth and commercial real estate growth is presented year on year.

First

quarter

2021

Second

quarter

2021

Third

quarter

2021

Fourth

quarter

2021

First

quarter

2022

Second

quarter

2022

Third

quarter

2022

Fourth

quarter

2022

Gross domestic product

(1.6)

3.7 

1.5 

1.2 

1.4 

0.9 

0.5 

0.4 

UK Bank Rate

0.10 

0.10 

0.10 

0.10 

0.10 

0.10 

0.10 

0.10 

Unemployment rate

5.2 

5.6 

6.2 

7.0 

6.7 

6.3 

6.0 

5.7 

House price growth

4.9 

6.1 

0.7 

(0.8)

(0.8)

(1.1)

(0.4)

0.5 

Commercial real estate price growth

(4.5)

(1.0)

(1.0)

(1.8)

(0.8)

(0.2)

1.2 

1.9 

UK economic assumptions - Scenarios by year

Key annual assumptions made by the Group are shown below. Gross domestic product is presented as an annual change, house price growth and commercial real estate price growth are presented as the growth in the respective indices within the period. UK Bank Rate and unemployment rate are averages for the period.

At 31 March 2021

2021

2022

2023

2024

2025

2021-2025

Upside

Gross domestic product

5.7 

4.6 

1.4 

1.3 

1.2 

2.8 

UK Bank Rate

0.81 

1.19 

0.98 

1.20 

1.43 

1.12 

Unemployment rate

4.9 

4.9 

4.4 

4.2 

4.1 

4.5 

House price growth

0.8 

4.0 

6.0 

4.3 

3.6 

3.7 

Commercial real estate price growth

9.3 

4.8 

2.3 

(0.4)

(0.4)

3.1 

Base case

Gross domestic product

5.0 

5.0 

1.6 

1.3 

1.3 

2.8 

UK Bank Rate

0.10 

0.10 

0.21 

0.44 

0.69 

0.31 

Unemployment rate

6.0 

6.2 

5.4 

5.0 

4.8 

5.5 

House price growth

(0.8)

0.5 

2.2 

1.7 

1.7 

1.1 

Commercial real estate price growth

(1.8)

1.9 

1.5 

0.8 

0.6 

0.6 

Downside

Gross domestic product

4.5 

4.2 

1.4 

1.1 

1.3 

2.5 

UK Bank Rate

0.12 

0.12 

0.09 

0.17 

0.33 

0.17 

Unemployment rate

6.9 

7.7 

6.9 

6.3 

5.9 

6.8 

House price growth

(4.1)

(6.9)

(5.2)

(3.9)

(2.2)

(4.5)

Commercial real estate price growth

(9.0)

(4.0)

(0.6)

0.0 

0.9 

(2.6)

Severe downside

Gross domestic product

2.8 

3.4 

1.1 

1.3 

1.4 

2.0 

UK Bank Rate

0.03 

0.01 

0.02 

0.03 

0.05 

0.03 

Unemployment rate

8.4 

10.0 

9.0 

8.1 

7.4 

8.6 

House price growth

(5.9)

(11.7)

(10.7)

(7.9)

(4.1)

(8.1)

Commercial real estate price growth

(19.8)

(11.3)

(4.7)

(1.0)

1.1 

(7.5)

ADDITIONAL FINANCIAL INFORMATION (continued)

At 31 December 2020

2020

2021

2022

2023

2024

2020-2024

Upside

Gross domestic product

(10.5)

3.7 

5.7 

1.7 

1.5 

0.3 

UK Bank Rate

0.10 

1.14 

1.27 

1.20 

1.21 

0.98 

Unemployment rate

4.3 

5.4 

5.4 

5.0 

4.5 

5.0 

House price growth

6.3 

(1.4)

5.2 

6.0 

5.0 

4.2 

Commercial real estate price growth

(4.6)

9.3 

3.9 

2.1 

0.3 

2.1 

Base case

Gross domestic product

(10.5)

3.0 

6.0 

1.7 

1.4 

0.1 

UK Bank Rate

0.10 

0.10 

0.10 

0.21 

0.25 

0.15 

Unemployment rate

4.5 

6.8 

6.8 

6.1 

5.5 

5.9 

House price growth

5.9 

(3.8)

0.5 

1.5 

1.5 

1.1 

Commercial real estate price growth

(7.0)

(1.7)

1.6 

1.1 

0.6 

(1.1)

Downside

Gross domestic product

(10.6)

1.7 

5.1 

1.4 

1.4 

(0.4)

UK Bank Rate

0.10 

0.06 

0.02 

0.02 

0.03 

0.05 

Unemployment rate

4.6 

7.9 

8.4 

7.8 

7.0 

7.1 

House price growth

5.6 

(8.4)

(6.5)

(4.7)

(3.0)

(3.5)

Commercial real estate price growth

(8.7)

(10.6)

(3.2)

(0.8)

(0.8)

(4.9)

Severe downside

Gross domestic product

(10.8)

0.3 

4.8 

1.3 

1.2 

(0.8)

UK Bank Rate

0.10 

0.00 

0.00 

0.01 

0.01 

0.02 

Unemployment rate

4.8 

9.9 

10.7 

9.8 

8.7 

8.8 

House price growth

5.3 

(11.1)

(12.5)

(10.7)

(7.6)

(7.5)

Commercial real estate price growth

(11.0)

(21.4)

(9.8)

(3.9)

(0.8)

(9.7)

ADDITIONAL FINANCIAL INFORMATION (continued)

ECL sensitivity to economic assumptions

The measurement of ECL reflects an unbiased probability-weighted range of possible future economic outcomes. The Group achieves this by generating four economic scenarios to reflect the range of outcomes; the central scenario reflects the Group's base case assumptions used for medium-term planning purposes, an upside and a downside scenario are also selected together with a severe downside scenario. The base case, upside and downside scenarios carry a 30 per cent weighting; the severe downside is weighted at 10 per cent.

The table below shows the Group's ECL for the upside, base case, downside and severe downside scenarios. The stage allocation for an asset is based on the overall scenario probability-weighted PD and, hence, the Stage 2 allocation is constant across all the scenarios. ECL applied through individual assessments and post-model adjustments is reported flat against each economic scenario, reflecting the basis on which they are evaluated.

Probability-

weighted

Upside

Base case

Downside

Severe

downside

Underlying basis

£m

£m

£m

£m

£m

UK Mortgages

1,518 

1,088 

1,285 

1,736 

2,854 

Other Retail

2,325 

2,145 

2,266 

2,442 

2,697 

Commercial Banking

1,932 

1,572 

1,777 

2,124 

2,898 

Other

451 

451 

451 

451 

451 

At 31 March 2021

6,226 

5,256 

5,779 

6,753 

8,900 

UK Mortgages

1,605 

1,192 

1,382 

1,815 

2,884 

Other Retail

2,403 

2,216 

2,345 

2,522 

2,780 

Commercial Banking

2,402 

1,910 

2,177 

2,681 

3,718 

Other

450 

448 

450 

450 

456 

At 31 December 2020

6,860 

5,766 

6,354 

7,468 

9,838 

Application of judgement in adjustments to modelled ECL allowances

Judgements are not typically assessed under each distinct economic scenario used to generate ECL, but instead are applied on the basis of final modelled ECL which reflects the probability weighted view of all scenarios. All adjustments are assessed quarterly and are subject to internal review and challenge, including by the Audit Committee, to ensure that amounts are appropriately calculated and that there are specific release criteria within a reasonable timeframe.

The coronavirus pandemic and the various support measures that have been put in place have resulted in an economic environment which differs significantly from the historical economic conditions upon which the impairment models have been built. As a result, there is a need for management judgement to be applied, as seen in the elevated levels present since year end.

Given continued macroeconomic uncertainties, the Group has retained the judgemental overlays applied at year end for coronavirus and other unrelated model limitations. Management judgements in respect of coronavirus of c.£1 billion (31 December 2020: c.£0.9 billion) include the central £400 million overlay (31 December 2020: £400 million) in respect of risks around base case conditioning assumptions which are not sufficiently captured by the Group's approach to multiple economic scenarios, as well as c.£600 million of judgements within the underlying portfolios (31 December 2020: c.£500 million).

 

ADDITIONAL FINANCIAL INFORMATION (continued)

Commercial Banking lending in key coronavirus-impacted sectors1

At 31 March 2021

At 31 December 2020

Drawn

Undrawn

Drawn and undrawn

Drawn as a % of Group loans and advances

Drawn

Undrawn

Drawn and undrawn

Drawn as a % of Group loans and advances

£bn

£bn

£bn

£bn

£bn

£bn

Retail non-food

2.1 

1.6 

3.7 

0.4

2.1 

1.7 

3.8 

0.4

Automotive dealerships2

2.0 

1.7 

3.7 

0.4

1.8 

2.0 

3.8 

0.4

Oil and gas

1.1 

2.5 

3.6 

0.2

1.1 

2.7 

3.8 

0.2

Construction

0.7 

1.5 

2.2 

0.1

0.8 

1.7 

2.5 

0.2

Passenger transport

1.4 

0.8 

2.2 

0.3

1.1 

1.1 

2.2 

0.2

Hotels

1.6 

0.3 

1.9 

0.4

1.8 

0.3 

2.1 

0.4

Leisure

0.5 

0.7 

1.2 

0.1

0.6 

0.7 

1.3 

0.1

Restaurants and bars

0.6 

0.4 

1.0 

0.1

0.6 

0.5 

1.1 

0.1

Total

10.0 

9.5 

19.5 

2.0

9.9 

10.7 

20.6 

2.0

  1. Lending classified using ONS Standard Industrial Classification codes at legal entity level; drawn balances exclude c.£1 billion lending under the Coronavirus Business Interruption Loan Scheme and the Bounce Back Loan Scheme.
  2. Automotive dealerships includes Black Horse Motor Wholesale lending (within Retail).
 

Support measures

Retail payment holiday characteristics1

Mortgages

Cards

Loans

Motor

Total

000s

£bn

000s

£bn

000s

£bn

000s

£bn

000s

£bn

Total payment holidays granted

491

61.6 

341

1.7 

304

2.4 

161

2.2 

1,297

68.0 

First payment holiday still in force

0.9 

10

0.0 

0.1 

0.1 

29

1.1 

Matured payment holidays - repaying

443

55.4 

282

1.4 

259

2.1 

139

1.8 

1,123

60.7 

Matured payment holidays - extended

15

2.0 

0.0 

14

0.1 

0.1 

43

2.3 

Matured payment holidays - missed payment

27

3.3 

41

0.2 

24

0.2 

11

0.2 

103

3.9 

As a percentage of total matured

Matured payment holidays - repaying

91%

91%

85%

85%

87%

87%

89%

86%

89%

91%

Matured payment holidays - extended

3%

3%

3%

3%

5%

5%

4%

5%

3%

3%

Matured payment holidays - missed payment

6%

5%

12%

12%

8%

8%

7%

9%

8%

6%

  1. Data as at 31 March 2021. Analysis of mortgage payment holidays excludes St James Place, Intelligent Finance and Tesco; motor finance payment holidays excludes Lex Autolease. Total payment holidays granted are equal to the sum of first payment holiday still in force and matured payment holidays. Charged-off balances are included within missed payments. Totals and percentages calculated using unrounded numbers.

Government-backed loan scheme approvals and value1

000s

£bn

Coronavirus Business Interruption Loan Scheme

10.5

2.5

Bounce Back Loan Scheme

343.3

9.7

Coronavirus Large Business Interruption Loan Scheme

0.1

0.7

Total

353.9

12.9

  1. Data as at 2 April 2021.
 

BASIS OF PRESENTATION

This release covers the results of Lloyds Banking Group plc together with its subsidiaries (the Group) for the three months ended 31 March 2021.

Statutory basis: Statutory profit / loss before tax and statutory profit after tax are included within this document. However, a number of factors have had a significant effect on the comparability of the Group's financial position and results. Accordingly, the results are also presented on an underlying basis.

Underlying basis: The statutory results are adjusted for certain items which are listed below, to allow a comparison of the Group's underlying performance

  1. Restructuring, including severance-related costs, property transformation, technology research and development, regulatory programmes and merger, acquisition and integration costs
  2. Volatility and other items, which includes the effects of certain asset sales, the volatility relating to the Group's hedging arrangements and that arising in the insurance businesses, the unwind of acquisition-related fair value adjustments and the amortisation of purchased intangible assets
  3. Payment protection insurance provisions

Analyses of lending and ECL allowances are presented on an underlying basis. On a statutory basis, purchased or originated credit-impaired (POCI) assets include a fixed pool of mortgages that were purchased as part of the HBOS acquisition at a deep discount to face value reflecting credit losses incurred from the point of origination to the date of acquisition. Over time, these POCI assets will run off as the loans redeem, pay down or losses will be crystallised. The underlying basis assumes that the lending assets acquired as part of a business combination were originated by the Group and are classified as either Stage 1, 2 or 3 according to the change in credit risk over the period since origination. Underlying ECL allowances have been calculated accordingly. The Group uses the underlying basis to monitor the creditworthiness of the lending portfolio and related ECL allowances.

On a statutory basis, reverse repurchase and repurchase transaction balances are accounted for as loans and advances to customers and as customer deposits, respectively. However, as such balances do not form part of the core lending and deposit-taking business of the Group they are excluded when reporting loans and advances to customers and customer deposits on an underlying basis.

Unless otherwise stated, income statement commentaries throughout this document compare the three months to 31 March 2021 to the three months to 31 March 2020 and the balance sheet analysis compares the Group balance sheet as at 31 March 2021 to the Group balance sheet as at 31 December 2020.

Alternative performance measures: The Group uses a number of alternative performance measures, including underlying profit, in the discussion of its business performance and financial position. There have been no changes to the definitions used by the Group; further information on these measures is set out on page 348 of the Group's 2020 Annual Report and Accounts.

Capital: Capital and leverage ratios reported as at 31 March 2021 incorporate profits for the period that remain subject to formal verification in accordance with the Capital Requirements Regulation. The Q1 2021 Interim Pillar 3 Report can be found at: https://www.lloydsbankinggroup.com/investors/financial-downloads/

 

FORWARD LOOKING STATEMENTS

This document contains certain forward looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934, as amended, and section 27A of the US Securities Act of 1933, as amended, with respect to the business, strategy, plans and/or results of Lloyds Banking Group plc together with its subsidiaries (the Group) and its current goals and expectations relating to its future financial condition and performance. Statements that are not historical or current facts, including statements about the Group's or its directors' and/or management's beliefs and expectations, are forward looking statements. Words such as 'believes', 'achieves', 'anticipates', 'estimates', 'expects', 'targets', 'should', 'intends', 'aims', 'projects', 'plans', 'potential', 'will', 'would', 'could', 'considered', 'likely', 'may', 'seek', 'estimate' and variations of these words and similar future or conditional expressions are intended to identify forward looking statements but are not the exclusive means of identifying such statements. Examples of such forward looking statements include, but are not limited to, statements or guidance relating to: projections or expectations of the Group's future financial position including profit attributable to shareholders, provisions, economic profit, dividends, capital structure, portfolios, net interest margin, capital ratios, liquidity, risk-weighted assets (RWAs), expenditures or any other financial items or ratios; litigation, regulatory and governmental investigations; the Group's future financial performance; the level and extent of future impairments and write-downs; statements of plans, objectives or goals of the Group or its management including in respect of statements about the future business and economic environments in the UK and elsewhere including, but not limited to, future trends in interest rates, foreign exchange rates, credit and equity market levels and demographic developments; statements about competition, regulation, disposals and consolidation or technological developments in the financial services industry; and statements of assumptions underlying such statements. By their nature, forward looking statements involve risk and uncertainty because they relate to events and depend upon circumstances that will or may occur in the future. Factors that could cause actual business, strategy, plans and/or results (including but not limited to the payment of dividends) to differ materially from forward looking statements made by the Group or on its behalf include, but are not limited to: general economic and business conditions in the UK and internationally; market related trends and developments; fluctuations in interest rates, inflation, exchange rates, stock markets and currencies; any impact of the transition from IBORs to alternative reference rates; the ability to access sufficient sources of capital, liquidity and funding when required; changes to the Group's credit ratings; the ability to derive cost savings and other benefits including, but without limitation, as a result of any acquisitions, disposals and other strategic transactions; potential changes in dividend policy; the ability to achieve strategic objectives; the Group's ESG targets and/or commitments; changing customer behaviour including consumer spending, saving and borrowing habits; changes to borrower or counterparty credit quality impacting the recoverability and value of balance sheet assets; concentration of financial exposure; management and monitoring of conduct risk; exposure to counterparty risk (including but not limited to third parties conducting illegal activities without the Group's knowledge); instability in the global financial markets, including Eurozone instability, instability as a result of uncertainty surrounding the exit by the UK from the European Union (EU) and the EU-UK Trade and Cooperation Agreement, instability as a result of the potential for other countries to exit the EU or the Eurozone, and the impact of any sovereign credit rating downgrade or other sovereign financial issues; political instability including as a result of any UK general election and any further possible referendum on Scottish independence; technological changes and risks to the security of IT and operational infrastructure, systems, data and information resulting from increased threat of cyber and other attacks; natural, pandemic (including but not limited to the COVID-19 pandemic) and other disasters, adverse weather and similar contingencies outside the Group's control; inadequate or failed internal or external processes or systems; acts of war, other acts of hostility, terrorist acts and responses to those acts, or other such events; geopolitical unpredictability; risks relating to sustainability and climate change, including the Group's ability along with the government and other stakeholders to manage and mitigate the impacts of climate change effectively; changes in laws, regulations, practices and accounting standards or taxation, including as a result of the UK's exit from the EU; changes to regulatory capital or liquidity requirements (including regulatory measures to restrict distributions to address potential capital and liquidity stress) and similar contingencies outside the Group's control; the policies, decisions and actions of governmental or regulatory authorities or courts in the UK, the EU, the US or elsewhere including the implementation and interpretation of key laws, legislation and regulation together with any resulting impact on the future structure of the Group; the ability to attract and retain senior management and other employees and meet its diversity objectives; actions or omissions by the Group's directors, management or employees including industrial action; changes in the Group's ability to develop sustainable finance products and the Group's capacity to measure the climate impact from its financing activity, which may affect the Group's ability to achieve its climate ambition; changes to the Group's post-retirement defined benefit scheme obligations; the extent of any future impairment charges or write-downs caused by, but not limited to, depressed asset valuations, market disruptions and illiquid markets; the value and effectiveness of any credit protection purchased by the Group; the inability to hedge certain risks economically; the adequacy of loss reserves; the actions of competitors, including non-bank financial services, lending companies and digital innovators and disruptive technologies; and exposure to regulatory or competition scrutiny, legal, regulatory or competition proceedings, investigations or complaints. Please refer to the latest Annual Report on Form 20-F filed by Lloyds Banking Group plc with the US Securities and Exchange Commission (the SEC), which is available on the SEC's website at www.sec.gov, for a discussion of certain factors and risks. Lloyds Banking Group plc may also make or disclose written and/or oral forward looking statements in reports filed with or furnished to the SEC, Lloyds Banking Group plc annual reviews, half-year announcements, proxy statements, offering circulars, prospectuses, press releases and other written materials and in oral statements made by the directors, officers or employees of Lloyds Banking Group plc to third parties, including financial analysts. Except as required by any applicable law or regulation, the forward looking statements contained in this document are made as of today's date, and the Group expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward looking statements contained in this document to reflect any change in the Group's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. The information, statements and opinions contained in this document do not constitute a public offer under any applicable law or an offer to sell any securities or financial instruments or any advice or recommendation with respect to such securities or financial instruments.

 

CONTACTS

For further information please contact:

INVESTORS AND ANALYSTS
Douglas Radcliffe

Group Investor Relations Director

020 7356 1571

douglas.radcliffe@lloydsbanking.com

Edward Sands

Director of Investor Relations

020 7356 1585

edward.sands@lloydsbanking.com

Eileen Khoo

Director of Investor Relations

07385 376435

eileen.khoo@lloydsbanking.com

Nora Thoden

Director of Investor Relations - ESG

020 7356 2334

nora.thoden@lloydsbanking.com


CORPORATE AFFAIRS
Grant Ringshaw

External Relations Director

020 7356 2362

grant.ringshaw@lloydsbanking.com

Matt Smith

Head of Media Relations

020 7356 3522

matt.smith@lloydsbanking.com

Copies of this interim management statement may be obtained from:

Investor Relations, Lloyds Banking Group plc, 25 Gresham Street, London EC2V 7HN

The statement can also be found on the Group's website - www.lloydsbankinggroup.com

Registered office: Lloyds Banking Group plc, The Mound, Edinburgh, EH1 1YZ

Registered in Scotland No. 95000

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.



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Language: English
Company: Lloyds Banking Group PLC
Gresham Street
EC2V 7HN London
United Kingdom
Phone: 020 7626 1500
Internet: www.lloydsbankinggroup.com
ISIN: GB0008706128
WKN: 871784
Listed: Regulated Unofficial Market in Berlin, Dusseldorf, Frankfurt, Hamburg, Hanover, Munich, Stuttgart, Tradegate Exchange; London, BX, SIX
EQS News ID: 1189630

 
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1189630  28.04.2021 

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