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from Lloyds Banking Group (isin : GB0008706128)

Lloyds Banking Group PLC: 2023 Q3 Interim Management Statement

EQS-News: Lloyds Banking Group PLC / Key word(s): Interim Report
Lloyds Banking Group PLC: 2023 Q3 Interim Management Statement

25.10.2023 / 08:00 CET/CEST
The issuer is solely responsible for the content of this announcement.


Lloyds Banking Group plc

Q3 2023 Interim Management Statement

25 October 2023

 

 

 

 

RESULTS FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2023

"Guided by our purpose, we remain focused on supporting our customers and helping them navigate the uncertain economic environment.

The Group continues to perform well. Robust financial performance and strong capital generation in the first nine months of the year was driven by net income growth, cost discipline and resilient asset quality. This performance allows us to reaffirm our 2023 guidance.

As we set out in the first of our four strategic seminars1 earlier this month, we are successfully executing against our strategic priorities. This supports progress towards our ambition to enable higher, more sustainable returns. Together, it will better position us to deliver for all of our stakeholders as we continue to help Britain prosper."

Charlie Nunn,

Group Chief Executive

Continued robust financial performance and consistent delivery

•  Statutory profit after tax of £4.3 billion (£1.4 billion in the third quarter) with net income of £13.7 billion up 7 per cent. Strong return on tangible equity of 16.6 per cent, 16.9 per cent in the third quarter

•  Underlying net interest income of £10.4 billion up 10 per cent with a net interest margin of 3.15 per cent. Net interest margin of 3.08 per cent in the third quarter, down 6 basis points in the quarter given the expected mortgage and deposit pricing headwinds. Average interest-earning assets of £453.5 billion, stable versus the fourth quarter of 2022

•  Underlying other income of £3.8 billion, 8 per cent higher, reflecting continued recovery of customer activity and ongoing investment in the business as we progress against our strategic initiatives

•  Operating lease depreciation of £585 million, up on the previous year given depreciation of higher value vehicles, growth partly from the Tusker acquisition, lower gains on disposal and recent declines in used electric car prices

•  Operating costs of £6.7 billion, up 5 per cent and in line with expectations. The Group maintains cost discipline in the context of higher planned strategic investment, new business costs and continued inflationary pressures

•  Impairment charge of £0.8 billion and asset quality ratio of 25 basis points, reflecting broadly stable credit trends and resilient asset quality. The portfolio remains well-positioned in the context of the economic environment

•  Loans and advances to customers reduced £2.8 billion to £452.1 billion, including a £2.5 billion legacy portfolio exit in the first quarter. Balances increased by £1.4 billion in the third quarter with growth across a number of businesses, including in the open mortgage book (£0.4 billion) and the unsecured and Corporate and Institutional Banking portfolios

•  Customer deposits of £470.3 billion down £5.0 billion (1.0 per cent), including a £9.4 billion reduction in Retail current accounts, partly offset by a combined £5.2 billion increase in Retail savings and Wealth balances. Deposits increased by £0.5 billion during the third quarter, given growth in Retail savings

•  Strong capital generation of 165 basis points; 129 basis points after CRD IV model changes and phased unwind of IFRS 9 relief

•  Pensions triennial review substantially agreed with an additional contribution of £250 million to be paid by the end of March 2024, and no further contributions in this triennial period

•  Risk-weighted assets of £217.7 billion increased by £6.8 billion, reflecting part of the anticipated impact of CRD IV model updates along with lending and other increases, net of optimisation activity

•  Tangible net assets per share of 47.2 pence, slightly up on the end of 2022; up 1.5 pence in the third quarter, given higher profits, the reduction in share count (c.7 per cent year to date following the completion of the £2 billion share buyback) and movements in the cash flow hedge reserve, partly offset by pensions surplus changes and distributions

•  CET1 ratio of 14.6 per cent remains ahead of ongoing c.12.5 per cent target, plus management buffer of c.1 per cent

2023 guidance reaffirmed, with slightly improved asset quality;

•  Banking net interest margin of greater than 310 basis points

•  Operating costs of c.£9.1 billion

•  Asset quality ratio now expected to be less than 30 basis points

•  Return on tangible equity of greater than 14 per cent

•  Capital generation of c.175 basis points2

1  Event materials available at: https://www.lloydsbankinggroup.com/investors/financial-downloads/event-presentations-webcasts.html.

2  Excluding capital distributions and the impact of the Tusker acquisition. Inclusive of ordinary dividends received from the Insurance business.

 

INCOME STATEMENT - UNDERLYING BASISA AND KEY BALANCE SHEET METRICS

 Nine
months
ended
30 Sep
2023
£m
  Nine
months
ended
30 Sep
2022
£m
  Change
%
 Three
months
ended
30 Sep
2023
£m
  Three
months
ended
30 Sep
2022
£m
  Change
%
                
Underlying net interest income       10,448           9,529                10          3,444           3,394                  1
Underlying other income1         3,837           3,538                  8          1,299           1,171                11
Operating lease depreciation           (585)             (295)               (98)            (229)               (82)   
Net income       13,700         12,772                  7          4,514           4,483                  1
Operating costs1        (6,654)          (6,316)                 (5)         (2,241)          (2,145)                 (4)
Remediation           (134)               (89)               (51)              (64)               (10)   
Total costs        (6,788)          (6,405)                 (6)         (2,305)          (2,155)                 (7)
Underlying profit before impairment         6,912           6,367                  9          2,209           2,328                 (5)
Underlying impairment charge           (849)          (1,045)                19            (187)             (668)                72
Underlying profit         6,063           5,322                14          2,022           1,660                22
Restructuring             (69)               (69)                 (44)               (22)   
Volatility and other items1           (266)          (1,528)                83            (120)          (1,062)                89
Statutory profit before tax1         5,728           3,725                54          1,858              576   
Tax expense1        (1,444)             (784)               (84)            (438)               (82)   
Statutory profit after tax1         4,284           2,941                46          1,420              494   
                
Earnings per share15.9p  3.7p  2.2p 2.0p  0.6p  1.4p
Banking net interest marginA3.15%  2.84%  31bp 3.08%  2.98%  10bp
Average interest-earning banking assetsA    £453.5bn       £451.4bn        £453.0bn       £454.9bn   
Cost:income ratioA,149.5%  50.1%  (0.6)pp 51.1%  48.1%  3.0pp
Asset quality ratioA0.25%  0.30%  (5)bp 0.17%  0.57%  (40)bp
Return on tangible equityA,116.6%  9.6%  7.0pp 16.9%  4.2%  12.7pp

 

 

 At 30 Sep
2023
  At 30 Sep
2022
  Change
%
    At 31 Dec
2022
  Change
%
                
Loans and advances to customers    £452.1bn       £456.3bn                 (1)         £454.9bn                 (1)
Customer deposits    £470.3bn       £484.3bn                 (3)         £475.3bn                 (1)
Loan to deposit ratioA96%  94%  2pp    96%   
CET1 ratio14.6%  15.0%  (0.4)pp    15.1%  (0.5)pp
Pro forma CET1 ratioA,214.6%  15.0%  (0.4)pp    14.1%  0.5pp
Total capital ratio19.9%  19.4%  0.5pp    19.7%  0.2pp
MREL ratio32.6%  32.8%  (0.2)pp    31.7%  0.9pp
UK leverage ratio5.7%  5.3%  0.4pp    5.6%  0.1pp
Risk-weighted assets    £217.7bn       £210.8bn                  3         £210.9bn                  3
Wholesale funding    £108.5bn         £98.9bn                10         £100.3bn                  8
Liquidity coverage ratio3142%  146%  (4)pp    144%  (2)pp
Net stable funding ratio4130%          130%   
Tangible net assets per shareA,147.2p  44.5p  2.7p    46.5p  0.7p

A  See page 15.

1  2022 comparatives have been restated to reflect the impact of IFRS 17. See page 16.

2    31 December 2022 reflects the interim ordinary dividend received from the Insurance business in February 2023 and the full impact of the announced share buyback, but excludes the impact of the phased unwind of IFRS 9 relief on 1 January 2023.

3  The liquidity coverage ratio is calculated as a monthly rolling simple average over the previous 12 months.

4  Net stable funding ratio is based on an average of the four previous quarters.

 

QUARTERLY INFORMATIONA

 Quarter
ended
30 Sep
2023
£m
  Quarter
ended
30 Jun
2023
£m
 Change
%
  Quarter
ended
31 Mar
2023
£m
  Quarter
ended
31 Dec
2022
£m
  Quarter
ended
30 Sep
2022
£m
  Quarter
ended
30 Jun
2022
£m
  Quarter
ended
31 Mar
2022
£m
 
                        
Underlying net interest income     3,444       3,469            (1)       3,535       3,643       3,394       3,190       2,945 
Underlying other income1     1,299       1,281              1       1,257       1,128       1,171       1,185       1,182 
Operating lease depreciation      (229)        (216)            (6)        (140)          (78)          (82)        (119)          (94) 
Net income     4,514       4,534          4,652       4,693       4,483       4,256       4,033 
Operating costs1   (2,241)     (2,243)        (2,170)     (2,356)     (2,145)     (2,112)     (2,059) 
Remediation        (64)          (51)          (25)          (19)        (166)          (10)          (27)          (52) 
Total costs   (2,305)     (2,294)        (2,189)     (2,522)     (2,155)     (2,139)     (2,111) 
Underlying profit before impairment     2,209       2,240            (1)       2,463       2,171       2,328       2,117       1,922 
Underlying impairment charge      (187)        (419)        
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