TIDM68FF
RNS Number : 7158L
HBOS PLC
03 August 2011
HBOS plc
Half-Year Management Report
For the half-year to 30 June 2011
Member of the Lloyds Banking Group
FORWARD LOOKING STATEMENTS
This announcement contains forward looking statements with
respect to the business, strategy and plans of HBOS plc, its
current goals and expectations relating to its future financial
condition and performance. Statements that are not historical
facts, including statements about the HBOS Group or the HBOS
Group's management's beliefs and expectations, are forward looking
statements. By their nature, forward looking statements involve
risk and uncertainty because they relate to events and depend on
circumstances that will occur in the future. The HBOS Group's
actual future business, strategy, plans and/or results may differ
materially from those expressed or implied in these forward looking
statements as a result of a variety of risks, uncertainties and
other factors, including, without limitation, UK domestic and
global economic and business conditions; the ability to derive cost
savings and other benefits, as well as the ability to integrate the
HBOS Group successfully into the Lloyds Banking Group; the ability
to access sufficient funding to meet the HBOS Group's liquidity
needs; changes to the HBOS plc's or Lloyds Banking Group plc's
credit ratings; risks concerning borrower or counterparty credit
quality; instability in the global financial markets; changing
demographic and market related trends; changes in customer
preferences; changes to regulation, accounting standards or
taxation, including changes to regulatory capital or liquidity
requirements; the policies and actions of governmental or
regulatory authorities in the UK, the European Union, or
jurisdictions outside the UK, including other European countries
and the US; the ability to attract and retain senior management and
other employees; requirements or limitations imposed on the HBOS
Group as a result of HM Treasury's investment in Lloyds Banking
Group plc; the ability to complete satisfactorily the disposal of
certain assets as part of the Lloyds Banking Group's EU state aid
obligations; the extent of any future impairment charges or
write-downs caused by depressed asset valuations; exposure to
regulatory scrutiny, legal proceedings or complaints, actions of
competitors and other factors. Please refer to Lloyds Banking Group
plc's latest Annual Report on Form 20-F filed with the US
Securities and Exchange Commission for a discussion of such factors
together with examples of forward looking statements. The forward
looking statements contained in this announcement are made as at
the date of this announcement, and the HBOS Group undertakes no
obligation to update any of its forward looking statements.
CONTENTS
Page
Financial review 1
Principal risks and uncertainties 3
Condensed interim financial statements (unaudited)
Consolidated income statement 8
Consolidated statement of comprehensive income 9
Consolidated balance sheet 10
Consolidated statement of changes in equity 12
Consolidated cash flow statement 14
Notes 15
Statement of directors' responsibilities 34
Independent review report 35
Contacts 37
FINANCIAL REVIEW
Principal activities
HBOS plc (the Company) and its subsidiaries (together, the
Group) provide a wide range of banking and financial services in
the UK and overseas.
During the first half of 2010, the Group earned revenue through
interest and fees on a broad range of financial services products
including current and savings accounts, personal loans, credit
cards and mortgages within the retail market; loans and capital
market products to commercial, corporate and asset finance
customers; life, pensions and investment products; general
insurance; and private banking and asset management.
Review of results
The consolidated income statement on page 8 shows a loss before
tax of GBP1,977 million and a loss attributable to equity
shareholders of GBP1,602 million for the half-year to 30 June 2011.
The loss before tax of GBP1,977 million compares with a loss before
tax of GBP675 million for the half-year to 30 June 2010. The
increased loss was largely as a result of the GBP1,155 million
provision raised in respect of payment protection insurance (PPI)
claims following the publication on 20 April 2011 of the High
Court's judgment regarding PPI complaints, and subsequent
discussions with the Financial Services Authority.
Net interest income decreased by GBP620 million to GBP4,161
million for the half-year to 30 June 2011, reflecting the Group's
strategy of running-off assets outside its risk appetite. This has
led to a reduction in interest-earning assets, with loans and
advances to customers decreasing by GBP16,189 million since 31
December 2010, after adjusting for a GBP15,953 million increase in
reverse sale and repurchase agreements (reverse repos), and debt
securities held as loans and receivables reducing by GBP9,523
million since 31 December 2010.
Other income increased by GBP295 million from GBP3,420 million
for the half-year to 30 June 2010 to GBP3,715 million for the
half-year to 30 June 2011 mainly due to higher levels of net
trading income arising from increases in the value of assets held
to support insurance and investment contracts, partly offset by a
decrease in other operating income, largely due to losses on the
disposal of treasury assets which were outside of the Group's risk
appetite.
Overall total income decreased by GBP325 million to GBP7,876
million for the half-year to 30 June 2011.
Insurance claims increased by GBP1,296 million from GBP929
million for the half-year to 30 June 2010 to GBP2,225 million for
the half-year to 30 June 2011 mainly as a result of the gains on
assets which are attributable to policyholders within the Group's
insurance businesses.
Operating expenses, excluding the PPI provision, increased by
GBP35 million from GBP2,344 million for the half-year to 30 June
2010 to GBP2,379 million for the half-year to 30 June 2011. This
was mainly due to the non-recurrence of the GBP425 million pension
curtailment gain recorded in 2010, offset by a GBP196 million
reduction in other staff costs, in part due to the closure of the
Group's operations in Ireland in 2010, and a GBP249 million
reduction in depreciation and amortisation following the transfer
of operating lease assets to a fellow Lloyds Banking Group
subsidiary in 2010.
Impairment losses decreased by GBP1,433 million from GBP5,536
million for the half-year to 30 June 2010 to GBP4,103 million for
the half-year to 30 June 2011, reflecting improved credit quality
experience in both retail and wholesale lending, partly offset by
increased impairments in Ireland and Australia.
The taxation credit of GBP387 million reflects the expected
availability of tax relief on losses incurred and the ability to
carry these forward as a deferred tax asset.
FINANCIAL REVIEW (continued)
Total assets have decreased by GBP4,014 million from GBP641,752
million at 31 December 2010 to GBP637,738 million at 30 June 2011
as part of the Group's balance sheet reduction strategy. This has
resulted in debt securities held as loans and receivables
decreasing by GBP9,523 million to GBP14,109 million and
available-for-sale financial assets decreasing by GBP3,941 million
to GBP9,902 million; loans and advances to customers decreased by
GBP16,189 million since 31 December 2010, after adjusting for a
GBP15,953 million increase in reverse repo balances.
Customer deposits increased by GBP2,566 million from GBP216,404
million at 31 December 2010 to GBP218,970 million at 30 June 2011
as a result of successful deposit-raising initiatives, including
continued strong deposit inflows in the Group's Wealth and
International online deposit business, offset by a GBP7,085 million
reduction in funding provided by sale and repurchase agreements
(repos).
Shareholders' equity reduced by GBP585 million to GBP25,275
million at 30 June 2011 as a result of the post-tax losses
incurred, partly offset by increases in the available-for-sale and
cash flow hedging reserves. The Group's total capital ratio was
14.0 per cent (31 December 2010: 14.1 per cent) with a tier 1
capital ratio of 11.4 per cent (31 December 2010: 11.4 per cent)
and a core tier 1 capital ratio of 10.2 per cent (31 December 2010:
10.2 per cent), with reduced capital resources, arising from the
after-tax losses and the increased excess of expected losses over
impairment allowances, being broadly offset by decreases in
risk-weighted assets.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties facing the Group in the
second half of 2011 are:
Economy
The global economic recovery has slowed in the first half of
2011. Sharp increases in the price of oil and other commodities
across the turn of the year, driven by emerging market strength in
2010, have hit consumers' disposable incomes across the world and
led to tighter monetary policy in emerging markets. Earlier fiscal
stimulus in the US economy has now come to an end, and fiscal
tightening is underway across Europe, particularly sharply in the
most highly indebted countries. Current data show that the UK
economy experienced very little underlying growth over the nine
months to the end June 2011. Consumer confidence and spending was
hit by the fall in real disposable incomes.
The Group's central scenario is for modest recovery to continue,
assuming the recent Eurozone agreement on sovereign debt is enacted
quickly and followed up by further measures for Greece. For the UK,
the Group's current projection reflected in our outlook, of 1.5 per
cent Gross Domestic Product (GDP) growth in 2011 and 2.3 per cent
in 2012 is broadly in line with consensus. Households' real
spending growth should begin to improve as the squeeze from high
inflation begins to reduce towards the end of the year. Further
improvements in the corporate failure rate are expected to be only
gradual to end 2012, and to be reversed in later years. Both
residential and commercial property prices are expected to end this
year 2 per cent lower than at the end of 2010, and then rise only
very slowly.
The Irish economy, to which the Group has exposure, is expected
to be only flat in 2011, and will not return to its pre-recession
growth rate.
Downside risks around this scenario remain significant. Further
increases in inflation could damage already weak consumer
confidence, or result in earlier increases in interest rates if
wage growth started to respond. Financial markets may remain
unstable and continue to put extra pressure on other Eurozone
economies outside Greece. A 'double-dip' scenario - a second
shallower recession following closely the one that the economy is
just emerging from - would result in further significant increases
in corporate failures and unemployment during late 2011 and through
2012. In addition, residential and commercial property would suffer
a second period of falling prices, tenant defaults would increase
and central banks would have limited ability to cushion the
downturn.
Liquidity and funding
Liquidity and funding continues to remain a key area of focus
for the Group and the industry as a whole. Like all major banks,
the Group is dependent on confidence in the short and long-term
wholesale funding markets. Should the Group, due to exceptional
circumstances, be unable to continue to source sustainable funding,
its ability to fund its financial obligations could be
impacted.
The combination of right-sizing the Lloyds Banking Group's
balance sheet and continued development of the retail deposit base
has seen the Lloyds Banking Group's wholesale funding requirement
significantly reduce in the past two years. The progress the Lloyds
Banking Group has made to date in diversifying its funding sources
has further strengthened its funding base and that of the
Group.
The second quarter of 2011 has seen funding markets' risk
appetite reduce as a result of escalating European sovereign
concerns. During this period the Lloyds Banking Group has continued
to fund successfully with no material change to the Lloyds Banking
Group's short-term maturity profile. The Group anticipates that
wholesale markets will remain vulnerable to periods of disruption
and to mitigate this risk the Lloyds Banking Group has deliberately
pre-funded much of the year's term funding requirement during the
first half.
PRINCIPAL RISKS AND UNCERTAINTIES (continued)
Lloyds Banking Group has entered into a number of EU state aid
related obligations to achieve reductions in certain parts of its
balance sheet by the end of 2014. These are assumed within the
Lloyds Banking Group's funding plan. The requirement to meet this
deadline may result in the Lloyds Banking Group having to provide
funding to support these asset reductions and/or disposals and may
also result in a lower price being achieved.
Credit risk
The Group achieved a reduction in its impairment charge due to
the stabilisation of the UK economic environment, 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. As a result of this approach, the
credit quality of new lending remains strong.
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. A
dedicated UK-based business support team is in place to manage the
winding down of the Irish book.
As noted above, the Group continues to forecast a modest UK
recovery from recession. In the UK, consumer confidence has been
hit by the fall in real disposable incomes and business confidence
also remains fragile and the downside risks to a weak UK recovery
remain significant. A 'double-dip' scenario remains a key downside
risk and could lead to increased impairments across the Group's UK
portfolios.
Market risk
Market risk is managed within a Board approved framework using a
range of metrics to monitor the Group's profile against its stated
appetite and potential market conditions.
The principal market risks are as follows:
-- 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.
Continuing concerns about the fiscal position in peripheral
Eurozone countries resulted in increased credit spreads in the
areas affected, and fears of contagion affected the Euro and
widened spreads between central bank and interbank rates.
Insurance risk
The major sources of insurance risk are within the insurance
businesses and the staff defined benefit pension schemes.
Insurance risk is inherent in the insurance business and can be
affected by customer behaviour. Insurance risks accepted relate
primarily to mortality, longevity, morbidity, persistency,
expenses, property and unemployment.
PRINCIPAL RISKS AND UNCERTAINTIES (continued)
The primary insurance risk carried by the Group's defined
benefit pension schemes is related to longevity.
Insurance risks typically, and longevity in particular,
crystallise gradually over time. Actuarial assumption setting for
financial reporting and liability management requires expert
judgement as to when evidence of an emerging trend is sufficient to
require an alteration to long-run assumptions.
Legal and regulatory
Legal and regulatory exposure is driven by the significant
volume of current legislation and regulation within the UK and
overseas with which the Group has to comply, along with new or
proposed legislation and regulation which needs to be reviewed,
assessed and embedded into day-to-day operational and business
practices across the Group as a whole. This is particularly the
case in the current market environment, which continues to witness
high levels of government and regulatory intervention in the
banking sector.
Lloyds Banking Group faces increased political and regulatory
scrutiny as a result of its perceived size and systemic importance
following the acquisition of HBOS Group. At the time of the
acquisition, the Office of Fair Trading (OFT) identified some
competition concerns in the UK personal current accounts and
mortgages markets and for SME banking in Scotland. The OFT
reiterated that it would keep these under review and consider
whether to refer any banking markets to the Competition Commission
if it identifies any prevention, restriction or distortion of
competition.
The UK Government appointed an Independent Commission on Banking
(ICB) to review possible structural measures to reform the banking
system and promote stability and competition. The ICB has announced
that it intends to publish its final report on 12 September 2011.
The Government has indicated its support for initial proposals put
forward by the ICB that would require capital ring-fencing of the
retail activities of banks from their investment banking
activities. The Interim Report also referenced a desire to see the
state aid required divestment 'substantially enhanced'. The Lloyds
Banking Group continues to play a constructive role in the debate
and to consult with the ICB. The Treasury Select Committee is also
conducting an examination of competition in retail banking. It is
too early to quantify the potential impact of these developments on
the Group.
In April 2011, the FSA commenced an internal reorganisation as a
first step in a process towards the formal transition of regulatory
and supervisory powers from the FSA to the new Financial Conduct
Authority (FCA) for conduct of business supervision and the
Prudential Regulatory Authority (PRA) for capital and liquidity
supervision in 2012. Until this time the responsibility for
regulating and supervising the activities of the Group will remain
with the FSA. In addition, the European Banking Authority, the
European Insurance and Occupational Pensions Authority and the
European Securities and Markets Authority as new EU Supervisory
Authorities are likely to have greater influence on regulatory
approaches across the EU. These could lead to changes in how the
Group is regulated and supervised on a day-to-day basis.
Evolving capital and liquidity requirements continue to be a
priority for the Group. In September 2010 and further updated in
June 2011, the Basel Committee on Banking Supervision put forward
proposals for a reform package which changes the regulatory capital
and liquidity standards, the definition of 'capital', introduces
new definitions for the calculation of counterparty credit risk and
leverage ratios, additional capital buffers and development of a
global liquidity standard. Implementation of these changes is
expected to be phased in between 2012 and 2018.
PRINCIPAL RISKS AND UNCERTAINTIES (continued)
Other notable regulatory initiatives include the Dodd-Frank Act
in the US (which affects the financial services industry by
addressing, among other issues, systemic risk oversight, bank
capital standards, the liquidation of failing systemically
significant financial institutions, over-the-counter derivatives,
the ability of banking entities to engage in proprietary trading
activities and invest in hedge funds and private equity (these
restrictions are known as the 'Volcker Rule'), consumer and
investor protection, hedge fund registration, securitisation,
investment advisors, shareholder 'say on pay', the role of
credit-rating agencies, and more) and the Foreign Account Tax
Compliance Act (FATCA) which is intended to ensure the US
government can determine the ownership of US assets in foreign
accounts and which will require non-US financial institutions to
enter into disclosure compliance agreements with the US Treasury
and all non-financial non-US entities to report and/or certify
their ownership or be subject to 30 per cent withholding.
The Lloyds Banking Group is currently assessing the impacts of
these regulatory developments which could have a material effect on
the Lloyds Banking Group and will participate in the consultation
and calibration processes to be undertaken by the various
regulatory bodies during 2011. The Insurance division is
progressing its plans to achieve Solvency II compliance. The Lloyds
Banking Group continues to work closely with the regulatory
authorities and industry associations to ensure that it is able to
identify and respond to proposed regulatory changes and mitigate
against risks to the Group.
Customer treatment
Customer treatment and how the Group manages its customer
relationships affects all aspects of the Group's operations and is
closely aligned with achievement of the Group's strategic aim - to
create deep long lasting relationships with its customers. There
remains a high level of scrutiny regarding the treatment of
customers by financial institutions from the press, politicians and
regulatory bodies.
The FSA also continues to carry out thematic reviews on a
variety of issues across the industry as a whole, for example
complaints handling. The Lloyds Banking Group actively engages with
the regulatory authorities and other stakeholders on these key
customer treatment challenges, which includes for example, Payment
Protection Insurance (PPI).
The Group has policies, procedures and governance arrangements
in place to facilitate the fair treatment of customers. The Group
regularly reviews its product range to ensure that it meets
regulatory requirements and is competitive in the market place.
Nonetheless there is a risk that certain aspects of the Group's
business may be determined by the authorities or the courts as not
being conducted in accordance with applicable laws or regulations,
or with what is fair and reasonable in their opinion. The Group may
also be liable for damages to third parties harmed by the conduct
of its business.
People
The people risk profile is being driven principally by the
factors outlined below:
-- 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.
Failure to manage the related people risks would significantly
impact the Group's ability to deliver against its strategic
objectives.
PRINCIPAL RISKS AND UNCERTAINTIES (continued)
Integration
The integration of the two heritage organisations is now in its
final stages. Lloyds Banking Group's Integration Execution Board,
chaired by the Lloyds Banking Group Operations Director, continues
to oversee the integration process and progress is regularly
reviewed by the Lloyds Banking Group Executive Committee and Lloyds
Banking Group Board. While there continue to be delivery risks to
the remaining elements of the programme, the Group has now
completed more than two years of integration activity and has a
fully functioning governance framework to manage the associated
risks. There is a clear understanding of the remaining deliverables
to ensure the ongoing consistent provision of good quality service
to our customers, together with effective delivery against our
integration objectives.
State funding and state aid
HM Treasury currently holds approximately 40.2 per cent of the
Lloyds Banking Group's ordinary share capital. United Kingdom
Financial Investments Limited (UKFI) as manager of HM Treasury's
shareholding continues to operate in line with the framework
document between UKFI and HM Treasury managing the investment in
the Lloyds Banking Group on a commercial basis without interference
in day-to-day management decisions. There is a risk that a change
in Government priorities could result in the framework agreement
currently in place being replaced leading to interference in the
operations of the Group, although there have been no indications
that the Government intends to change the existing operating
arrangements.
The Lloyds Banking Group is subject to European state aid
obligations in line with the restructuring plan agreed with HM
Treasury and the EU College of Commissioners in November 2009,
which is designed to support the long--term viability of the Lloyds
Banking Group and address any competition distortions arising from
the benefits of state aid. This has placed a number of requirements
on the Lloyds Banking Group including asset reductions in certain
parts of its balance sheet by the end of 2014 and the disposal of
certain portions of its business by the end of November 2013,
including in particular the disposal of some parts of the Group's
retail banking business. The Lloyds Banking Group is working
closely with the EU Commission, HM Treasury and the Monitoring
Trustee appointed by the EU Commission.
CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED INCOME STATEMENT
Half-year Half-year
to 30 June to 30 June
2011 2010
Note GBP million GBP million
Interest and similar income 8,310 9,037
Interest and similar expense (4,149) (4,256)
----------- -----------
Net interest income 4,161 4,781
----------- -----------
Fee and commission income 685 766
Fee and commission expense (438) (569)
----------- -----------
Net fee and commission income 247 197
Net trading income 1,525 278
Insurance premium income 1,635 1,987
Other operating income 308 958
----------- -----------
Other income 2 3,715 3,420
----------- -----------
Total income 7,876 8,201
Insurance claims (2,225) (929)
----------- -----------
Total income, net of insurance claims 5,651 7,272
----------- -----------
Payment protection insurance provision 14 (1,155) -
Other operating expenses (2,379) (2,344)
----------- -----------
Total operating expenses 3 (3,534) (2,344)
----------- -----------
Trading surplus 2,117 4,928
Impairment 4 (4,103) (5,536)
Share of results of joint ventures and
associates 9 (67)
Loss before tax (1,977) (675)
Taxation 5 387 (99)
----------- -----------
Loss for the period (1,590) (774)
----------- -----------
Profit attributable to non-controlling
interests 12 58
Loss attributable to equity shareholders (1,602) (832)
----------- -----------
Loss for the period (1,590) (774)
----------- -----------
CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
(continued)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Half-year Half-year
to 30 June to 30 June
2011 2010
GBP million GBP million
Loss for the period (1,590) (774)
Other comprehensive income
Movements in revaluation reserve in respect of
available-for-sale financial assets:
Change in fair value 153 232
Income statement transfers in respect of
disposals (6) (112)
Income statement transfers in respect of
impairment 509 38
Other income statement transfers 50 -
Taxation (175) (46)
----------- -----------
531 112
Movement in cash flow hedging reserve:
----------- -----------
Effective portion of changes in fair value 459 (413)
Net income statement transfers 290 689
Taxation (207) (77)
----------- -----------
542 199
Currency translation differences (tax: nil) (60) (15)
----------- -----------
Other comprehensive income for the period, net
of tax 1,013 296
----------- -----------
Total comprehensive income for the period (577) (478)
----------- -----------
Total comprehensive income attributable to
non-controlling interests 12 58
Total comprehensive income attributable to equity
shareholders (589) (536)
----------- -----------
Total comprehensive income for the period (577) (478)
----------- -----------
CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
(continued)
CONSOLIDATED BALANCE SHEET
As at As at
30 June 31 December
2011 2010
Note GBP million GBP million
Assets
Cash and balances at central banks 2,406 2,375
Items in course of collection from banks 266 319
Trading and other financial assets at fair
value through profit or loss 6 102,673 103,086
Derivative financial instruments 25,705 30,000
Loans and receivables:
----------- ------------
Loans and advances to banks 77,714 65,170
Loans and advances to customers 7 381,129 381,365
Debt securities 14,109 23,632
----------- ------------
472,952 470,167
Available-for-sale financial assets 9,902 13,843
Investment properties 3,779 3,356
Investments in joint ventures and
associates 423 428
Goodwill 857 850
Value of in-force business 3,221 3,171
Other intangible assets 93 74
Tangible fixed assets 2,638 3,482
Current tax recoverable 179 64
Deferred tax assets 4,437 4,062
Retirement benefit assets 189 152
Other assets 8,018 6,323
----------- ------------
Total assets 637,738 641,752
----------- ------------
CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
(continued)
CONSOLIDATED BALANCE SHEET
As at As at
30 June 31 December
2011 2010
Note GBP million GBP million
Equity and liabilities
Liabilities
Deposits from banks 145,081 143,137
Customer deposits 218,970 216,404
Items in course of transmission to banks 769 251
Trading liabilities 22,584 18,786
Derivative financial instruments 20,572 25,075
Notes in circulation 1,048 1,074
Debt securities in issue 10 92,016 100,760
Liabilities arising from insurance
contracts and participating investment
contracts 39,196 40,076
Liabilities arising from non-participating
investment contracts 35,912 35,136
Unallocated surplus within insurance
businesses 363 321
Other liabilities 16,792 16,561
Retirement benefit obligations 101 100
Current tax liabilities 160 134
Deferred tax liabilities 410 47
Other provisions 1,528 806
Subordinated liabilities 11 16,604 16,674
----------- ------------
Total liabilities 612,106 615,342
Equity
----------- ------------
Share capital 12 3,763 3,763
Share premium account 13 18,655 18,655
Other reserves 13 9,870 8,857
Retained profits 13 (7,013) (5,415)
----------- ------------
Shareholders' equity 25,275 25,860
Non-controlling interests 357 550
----------- ------------
Total equity 25,632 26,410
----------- ------------
Total equity and liabilities 637,738 641,752
----------- ------------
CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
(continued)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity shareholders
----------------------------------------
Share capital Non-
and Other Retained controlling
premium reserves profits Total interests Total
GBP GBP GBP GBP
million million million GBP million GBP million million
Balance at 1
January 2011 22,418 8,857 (5,415) 25,860 550 26,410
Comprehensive
income
(Loss) profit for
the period - - (1,602) (1,602) 12 (1,590)
Other comprehensive
income
------- -------- -------- ----------- ----------- -------
Movements in
revaluation
reserve in respect
of
available-for-sale
financial assets,
net of tax - 531 - 531 - 531
Movements in cash
flow hedging
reserve, net of
tax - 542 - 542 - 542
Currency
translation
differences, net
of tax - (60) - (60) - (60)
------- -------- -------- ----------- ----------- -------
Total other
comprehensive
income - 1,013 - 1,013 - 1,013
------- -------- -------- ----------- ----------- -------
Total comprehensive
income - 1,013 (1,602) (589) 12 (577)
------- -------- -------- ----------- ----------- -------
Transactions with
owners
------- -------- -------- ----------- ----------- -------
Dividends - - - - (8) (8)
Value of employee
services:
Share option
schemes - - 4 4 - 4
Change in
non-controlling
interests - - - - (197) (197)
------- -------- -------- ----------- ----------- -------
Total transactions
with owners - - 4 4 (205) (201)
------- -------- -------- ----------- ----------- -------
Balance at 30 June
2011 22,418 9,870 (7,013) 25,275 357 25,632
------- -------- -------- ----------- ----------- -------
CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
(continued)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)
Attributable to equity shareholders
----------------------------------------
Share capital Non-
and Other Retained controlling
premium reserves profits Total interests Total
GBP GBP GBP GBP
million million million GBP million GBP million million
Balance at 1
January 2010 19,819 8,137 (3,071) 24,885 1,271 26,156
Comprehensive
income
(Loss) profit for
the period - - (832) (832) 58 (774)
Other comprehensive
income
------- -------- -------- ----------- ----------- -------
Movements in
revaluation
reserve in respect
of
available-for-sale
financial assets,
net of tax - 112 - 112 - 112
Movements in cash
flow hedging
reserve, net of
tax - 199 - 199 - 199
Currency
translation
differences, net
of tax - (15) - (15) - (15)
------- -------- -------- ----------- ----------- -------
Total other
comprehensive
income - 296 - 296 - 296
------- -------- -------- ----------- ----------- -------
Total comprehensive
income - 296 (832) (536) 58 (478)
------- -------- -------- ----------- ----------- -------
Transactions with
owners
------- -------- -------- ----------- ----------- -------
Dividends - - - - (6) (6)
Issue of ordinary
shares 1,125 - - 1,125 - 1,125
Value of employee
services:
Share option
schemes - - 3 3 - 3
Change in
non-controlling
interests - - - - (740) (740)
------- -------- -------- ----------- ----------- -------
Total transactions
with owners 1,125 - 3 1,128 (746) 382
------- -------- -------- ----------- ----------- -------
Balance at 30 June
2010 20,944 8,433 (3,900) 25,477 583 26,060
Comprehensive
income
Loss for the period - - (1,519) (1,519) (22) (1,541)
Other comprehensive
income
------- -------- -------- ----------- ----------- -------
Movements in
revaluation
reserve in respect
of
available-for-sale
financial assets,
net of tax - 389 - 389 - 389
Movements in cash
flow hedging
reserve, net of
tax - 224 - 224 - 224
Currency
translation
differences, net
of tax - (189) - (189) - (189)
------- -------- -------- ----------- ----------- -------
Total other
comprehensive
income - 424 - 424 - 424
------- -------- -------- ----------- ----------- -------
Total comprehensive
income - 424 (1,519) (1,095) (22) (1,117)
------- -------- -------- ----------- ----------- -------
Transactions with
owners
------- -------- -------- ----------- ----------- -------
Dividends - - - - (18) (18)
Issue of ordinary
shares 1,474 - - 1,474 - 1,474
Value of
employee
services:
Share option
schemes - - 4 4 - 4
Change in
non-controlling
interests - - - - 7 7
Total transactions
with owners 1,474 - 4 1,478 (11) 1,467
------- -------- -------- ----------- ----------- -------
Balance at 31
December 2010 22,418 8,857 (5,415) 25,860 550 26,410
------- -------- -------- ----------- ----------- -------
CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
(continued)
CONSOLIDATED CASH FLOW STATEMENT
Half-year Half-year
to 30 June to 30 June
2011 2010(1)
GBP million GBP million
Loss before tax (1,977) (675)
Adjustments for:
Change in operating assets 1,865 35,576
Change in operating liabilities (3,564) (38,461)
Non-cash and other items (379) 2,067
Tax paid (66) (43)
----------- -----------
Net cash used in operating activities (4,121) (1,536)
Cash flows from investing activities
----------- -----------
Purchase of financial assets (3,867) (563)
Proceeds from sale and maturity of financial
assets 8,046 4,413
Purchase of fixed assets (372) (524)
Proceeds from sale of fixed assets 916 711
Acquisition of businesses, net of cash acquired (59) (39)
Disposal of businesses, net of cash disposed 238 247
----------- -----------
Net cash provided by investing activities 4,902 4,245
Cash flows from financing activities
----------- -----------
Dividends paid to non-controlling interests (8) (6)
Interest paid on subordinated liabilities (405) (485)
Repayment of subordinated liabilities (92) -
Change in non-controlling interests (12) -
----------- -----------
Net cash used in financing activities (517) (491)
Effects of exchange rate changes on cash and
cash equivalents 2 41
----------- -----------
Change in cash and cash equivalents 266 2,259
Cash and cash equivalents at beginning of period 9,543 9,084
----------- -----------
Cash and cash equivalents at end of period 9,809 11,343
----------- -----------
(1) The cash flow statement for the half-year to 30 June 2010 has been
restated to exclude balances with its parent undertaking and fellow
subsidiary undertakings from cash and cash equivalents.
Cash and cash equivalents comprise cash and balances at central
banks (excluding mandatory deposits) and amounts due from banks
with a maturity of less than three months.
NOTES
Page
1 Accounting policies, presentation and estimates 16
2 Other income 18
3 Operating expenses 19
4 Impairment 19
5 Taxation 20
Trading and other financial assets at fair value through
6 profit or loss 20
7 Loans and advances to customers 21
8 Allowance for impairment losses on loans and receivables 21
9 Securitisations and covered bonds 22
10 Debt securities in issue 23
11 Subordinated liabilities 23
12 Share capital 23
13 Reserves 24
14 Payment protection insurance 25
15 Contingent liabilities and commitments 26
16 Capital ratios 29
17 Related party transactions 30
18 Future accounting developments 31
19 Events after the balance sheet date 33
20 Ultimate parent undertaking 33
21 Other information 33
1. Accounting policies, presentation and estimates
These condensed consolidated interim financial statements as at
and for the half-year to 30 June 2011 have been prepared in
accordance with the Disclosure and Transparency Rules of the
Financial Services Authority (FSA) and with International
Accounting Standard 34 (IAS 34), Interim Financial Reporting as
adopted by the European Union. They do not include all of the
information required for full annual financial statements and
should be read in conjunction with the Group's consolidated
financial statements as at and for the year ended 31 December 2010
which were prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union. Copies
of the 2010 annual report and accounts are available on the Lloyds
Banking Group's website and are available upon request from Group
Secretariat, Lloyds Banking Group plc, 25 Gresham Street, London
EC2V 7HN.
The directors consider that it is appropriate to continue to
adopt the going concern basis in preparing the condensed interim
financial statements. In reaching this assessment, the directors
have considered projections for the Group's capital and funding
position and have had regard to the factors set out in Principal
risks and uncertainties: Liquidity and funding on pages 3 and
4.
Accounting policies
The accounting policies are consistent with those applied by the
Group in its 2010 annual report and accounts.
In accordance with IAS 34, the Group's income tax expense for
the half-year to 30 June 2011 is based on the best estimate of the
weighted-average annual income tax rate expected for the full
financial year. This best estimate takes into account the reduction
in the main rate of corporation tax from 28 per cent to 26 per cent
that was effective from 1 April 2011 but does not take into account
the impact of the further reduction to 25 per cent which was
substantively enacted on 5 July 2011 and will be effective from 1
April 2012.
In accordance with IAS 19 Employee Benefits and the Group's
normal practice, the valuation of the Group's pension schemes will
be formally updated at the year end. No valuation adjustment has
therefore been made at 30 June 2011.
Critical accounting estimates and judgements
The preparation of the Group's financial statements requires
management to make judgements, estimates and assumptions that
impact the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. Due to the
inherent uncertainty in making estimates, actual results reported
in future periods may be based upon amounts which differ from those
estimates. Estimates, judgements and assumptions are continually
evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be
reasonable under the circumstances. Save for the estimates detailed
below, there have been no significant changes in the basis upon
which estimates have been determined, compared to that applied at
31 December 2010.
1. Accounting policies, presentation and estimates
(continued)
Payment protection insurance
The Group has recognised a provision of GBP1,155 million in
respect of payment protection insurance (PPI) policies as a result
of discussions with the FSA and a judgment handed down by the UK
High Court (see note 14 for more information). The provision
represents management's best estimate of the anticipated costs of
related customer contact and/or redress, including administration
expenses. However, there are still a number of uncertainties as to
the eventual costs from any such contact and/or redress given the
inherent difficulties of assessing the impact of detailed
implementation of the FSA Policy Statement of 10 August 2010 for
all PPI complaints, uncertainties around the ultimate emergence
period for complaints, the availability of supporting evidence and
the activities of claims management companies, all of which will
significantly affect complaints volumes, uphold rates and redress
costs.
The provision requires significant judgement by management in
determining appropriate assumptions, which include the level of
complaints, uphold rates, proactive contact and response rates,
Financial Ombudsman Service referral and uphold rates as well as
redress costs for each of the many different populations of
customers identified by the Group in its analyses used to determine
the best estimate of the anticipated costs of redress. If the level
of complaints had been one percentage point higher (lower) than
estimated for all policies open within the last six years then the
provision made in 2011 would have increased (decreased) by
approximately GBP40 million. However, it should be noted that there
are a large number of inter-dependent assumptions under-pinning the
provision; the above sensitivity assumes that all assumptions,
other than the level of complaints, remain constant.
The Group will re-evaluate the assumptions underlying its
analysis at each reporting date as more information becomes
available. As noted above, there is inherent uncertainty in making
estimates; actual results in future periods may differ from the
amount provided.
New accounting pronouncements
The Group has adopted the following new standards and amendments
to standards which became effective for financial years beginning
on or after 1 January 2011. None of these standards or amendments
to standards have had a material impact on these condensed interim
financial statements.
(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.
1. Accounting policies, presentation and
estimates(continued)
(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 17.
The ultimate parent undertaking, Lloyds Banking Group plc,
produces consolidated accounts which set out the basis of the
segments through which it manages performance and allocates
resources across the consolidated Lloyds Banking Group.
2. Other income
Half-year Half-year
to 30 June to 30 June
2011 2010
GBPm GBPm
Fee and commission income:
----------- -----------
Current account fees 184 125
Credit and debit card fees 96 112
Other fees and commissions 405 529
----------- -----------
685 766
Fee and commission expense (438) (569)
----------- -----------
Net fee and commission income 247 197
Net trading income 1,525 278
Insurance premium income 1,635 1,987
Gains on capital transactions(1) - 103
Other 308 855
----------- -----------
Other operating income 308 958
Total other income 3,715 3,420
----------- -----------
(1) During 2010, as part of the Lloyds Banking Group's management of
capital, the Group exchanged certain existing subordinated debt
securities for new securities and ordinary shares. These exchanges
resulted in a gain on extinguishment of the existing liabilities
of GBP103 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.
3. Operating expenses
Half-year Half-year
to 30 June to 30 June
2011 2010(1)
GBPm GBPm
Administrative expenses:
Staff costs excluding pension curtailment gain 1,202 1,398
Pension curtailment gain(2) - (425)
----------- -----------
Total staff costs 1,202 973
Premises and equipment 259 236
Other expenses 626 607
----------- -----------
2,087 1,816
Depreciation and amortisation 227 476
Impairment of tangible fixed assets 65 52
----------- -----------
Total operating expenses, excluding payment
protection insurance provision 2,379 2,344
Payment protection insurance provision (note
14) 1,155 -
Total operating expenses 3,534 2,344
----------- -----------
(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, all future increases to pensionable salary
are capped each year at the lower of: the 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 GBP425 million recognised in the income statement in the
half-year to 30 June 2010.
4. Impairment
Half-year Half-year
to 30 June to 30 June
2011 2010
GBPm GBPm
Impairment losses on loans and receivables:
----------- -----------
Loans and advances to customers 4,048 5,551
Debt securities classified as loans and
receivables 24 (58)
----------- -----------
Impairment losses on loans and receivables (note
8) 4,072 5,493
Impairment of available-for-sale financial assets 32 43
Other credit risk provisions (1) -
----------- -----------
Total impairment charged to the income statement 4,103 5,536
----------- -----------
5. Taxation
A reconciliation of the tax credit (charge) that would result
from applying the standard UK corporation tax rate to the loss
before tax to the actual tax credit is given below:
Half-year Half-year
to 30 June to 30 June
2011 2010
GBPm GBPm
Loss before tax (1,977) (675)
----------- -----------
Tax credit thereon at UK corporation tax rate of
26.5 per cent (half-year to
30 June 2010: 28 per cent) 524 189
Factors affecting credit:
UK corporation tax rate change (154) -
Disallowed and non-taxable items 41 94
Overseas tax rate differences 2 (244)
Gains exempted or covered by capital losses 27 13
Policyholder interests 61 7
Tax losses where no deferred tax recognised (119) (89)
Adjustments in respect of previous periods 4 (32)
Effect of profit (loss) in joint ventures and
associates 3 (19)
Other items (2) (18)
----------- -----------
Tax credit (charge) 387 (99)
----------- -----------
On 23 March 2011, the Government announced that the corporation
tax rate applicable from 1 April 2011 would be 26 per cent. This
change passed into legislation on 29 March 2011. The enacted
reduction in the main rate of corporation tax from 28 per cent to
27 per cent with effect from 1 April 2011 had been incorporated in
the Group's deferred tax calculations as at 31 December 2010. The
additional change in the main rate of corporation tax from 27 per
cent to 26 per cent has resulted in a further reduction in the
Group's net deferred tax asset at 30 June 2011 of GBP159 million,
comprising the GBP154 million charge included in the income
statement and a GBP5 million charge included in equity.
The proposed further reductions in the rate of corporation tax
by 1 per cent per annum to 23 per cent by 1 April 2014 are expected
to be enacted separately each year starting in the second half of
2011. The effect of these further changes upon the Group's deferred
tax balances and leasing business cannot be reliably quantified at
this stage.
6. Trading and other financial assets at fair value through
profit or loss
As at As at
30 June 31 December
2011 2010
GBPm GBPm
Trading assets 22,763 23,751
Other financial assets at fair value through
profit or loss:
-------- ------------
Debt securities 19,102 18,560
Equity shares 60,808 60,775
-------- ------------
79,910 79,335
-------- ------------
Total trading and other financial assets at fair
value through profit or loss 102,673 103,086
-------- ------------
Included in the above is GBP79,508 million (31 December 2010:
GBP81,013 million) relating to the insurance businesses.
7. Loans and advances to customers
As at As at
30 June 31 December
2011 2010
GBPm GBPm
Agriculture, forestry and fishing 709 602
Energy and water supply 1,597 1,145
Manufacturing 3,944 3,881
Construction 7,726 6,983
Transport, distribution and hotels 22,692 23,232
Postal and communications 800 1,032
Property companies 49,466 58,092
Financial, business and other services 43,325 32,029
Personal:
Mortgages 246,200 246,690
Other 13,834 16,974
Lease financing 4,319 4,458
Hire purchase 1,129 1,358
Due from fellow Group undertakings 10,530 10,205
Total loans and advances to customers before
allowance for impairment losses 406,271 406,681
Allowance for impairment losses on loans and
advances (note 8) (25,142) (25,316)
-------- ------------
Total loans and advances to customers 381,129 381,365
-------- ------------
Loans and advances to customers include advances securitised
under the Group's securitisation and covered bond programmes.
Further details are given in note 9.
8. Allowance for impairment losses on loans and receivables
Half-year Year to
to 30 June 31 December
2011 2010
GBPm GBPm
Balance at 1 January 26,607 23,272
Exchange and other adjustments 380 411
Disposal of subsidiary undertakings - (149)
Advances written off (4,619) (7,376)
Recoveries of advances written off in previous
years 12 57
Unwinding of discount (98) (375)
----------- ------------
Charge for the half-year to 30 June (note 4) 4,072 5,493
Charge for the half-year to 31 December - 5,274
----------- ------------
Charge to the income statement 4,072 10,767
Balance at end of period 26,354 26,607
----------- ------------
In respect of:
Loans and advances to customers (note 7) 25,142 25,316
Debt securities 1,212 1,291
----------- ------------
Balance at end of period 26,354 26,607
----------- ------------
9. Securitisations and covered bonds
The Group's principal securitisation and covered bond
programmes, together with the balances of the loans subject to
these arrangements and the carrying value of the notes in issue,
are listed in the table below.
As at 31 December
As at 30 June 2011 2010
---------------------- ----------------------
Gross Gross
assets Notes in assets Notes in
securitised issue securitised issue
GBPm GBPm GBPm GBPm
Securitisation programmes
------------ -------- ------------ --------
UK residential mortgages 97,635 77,653 102,801 83,367
US residential
mortgage-backed
securities 6,543 6,553 7,197 7,221
Irish residential
mortgages 6,154 6,348 6,061 6,191
Credit card receivables 6,747 4,931 7,372 3,856
Dutch residential
mortgages 4,411 4,310 4,551 4,415
Personal loans - - 3,012 2,011
Commercial loans 664 632 667 633
Motor vehicle loans 1,081 1,140 926 975
------------ ------------
123,235 101,567 132,587 108,669
------------ ------------
Less held by the Group (71,194) (78,686)
-------- --------
Total securitisation
programmes (note 10) 30,373 29,983
-------- --------
Covered bond programmes
Residential
mortgage-backed 47,292 38,190 55,032 44,271
Social housing
loan-backed 3,331 2,400 3,377 2,400
------------ -------- ------------ --------
50,623 40,590 58,409 46,671
------------ ------------
Less held by the Group (10,500) (17,239)
-------- --------
Total covered bond
programmes (note 10) 30,090 29,432
-------- --------
Total securitisation and covered bond
programmes 60,463 59,415
-------- --------
Securitisation programmes
Loans and advances to customers and debt securities classified
as loans and receivables include loans securitised under the
Group's securitisation programmes, the majority of which have been
sold by subsidiary companies to bankruptcy remote special purpose
entities (SPEs). As the SPEs are funded by the issue of debt on
terms whereby the majority of the risks and rewards of the
portfolio are retained by the subsidiary, the SPEs are consolidated
fully and all of these loans are retained on the Group's balance
sheet, with the related notes in issue included within debt
securities in issue. In addition to the SPEs detailed above, the
Group sponsors two conduit programmes, Grampian and Landale.
Covered bond programmes
Certain loans and advances to customers have been assigned to
bankruptcy remote limited liability partnerships to provide
security to issues of covered bonds by the Group. The Group retains
all of the risks and rewards associated with these loans and the
partnerships are consolidated fully with the loans retained on the
Group's balance sheet and the related covered bonds in issue
included within debt securities in issue.
Cash deposits of GBP30,060 million (31 December 2010: GBP25,139
million) held by the Group are restricted in use to repayment of
the debt securities issued by the SPEs, the term advances relating
to covered bonds and other legal obligations.
10. Debt securities in issue
As at As at
30 June 31 December
2011 2010
GBPm GBPm
Medium-term notes issued 19,193 24,426
Covered bonds (note 9) 30,090 29,432
Certificates of deposit 1,020 3,062
Securitisation notes (note 9) 30,373 29,983
Commercial paper 9,836 11,320
-------- ------------
90,512 98,223
Amounts due to fellow Group undertakings 1,504 2,537
Total debt securities in issue 92,016 100,760
-------- ------------
11. Subordinated liabilities
The movement in subordinated liabilities during the period was
as follows:
GBPm
At 1 January 2011 16,674
Repurchases and redemptions during the period (92)
Foreign exchange and other movements 22
------
At 30 June 2011 16,604
------
12. Share capital
Ordinary share capital in issue is as follows:
Number
of shares
Ordinary shares of 25 pence each (millions) GBPm
At 1 January and 30 June 2011 15,053 3,763
----------- -----
13. Reserves
Other reserves
-----------------------------------
Cash Merger
Share Available- flow and Retained
premium for-sale hedging other Total profits
GBPm GBPm GBPm GBPm GBPm GBPm
---------- ------- -------
At 1 January
2011 18,655 (894) (417) 10,168 8,857 (5,415)
Loss for the
period - - - - - (1,602)
Value of employee
services - - - - - 4
Change in fair
value of
available-for-sale
assets (net of
tax) - 152 - - 152 -
Change in fair
value of hedging
derivatives
(net of tax) - - 325 - 325 -
Transfers to
income statement
(net of tax) - 379 217 - 596 -
Exchange and
other adjustments - - - (60) (60) -
---------- ------- ------- -----
At 30 June 2011 18,655 (363) 125 10,108 9,870 (7,013)
-------- ---------- ------- ------- ----- --------
14. Payment protection insurance
There has been extensive scrutiny of the Payment Protection
Insurance (PPI) market in recent years.
In October 2010, the UK Competition Commission confirmed its
decision to prohibit the active sale of PPI by a distributor to a
customer within seven days of a sale of credit. This followed the
completion of its formal investigation into the supply of PPI
services (other than store card PPI) to non-business customers in
the UK in January 2009 and a referral of the proposed prohibition
to the Competition Appeal Tribunal. The Competition Commission
consulted on the wording of a draft Order to implement its findings
from October 2010, and published the final Order on 24 March 2011
which became effective on 6 April 2011. Following an earlier
decision to stop selling single premium PPI products, the Group
ceased to offer PPI products to its customers in July 2010.
On 29 September 2009 the FSA announced that several firms had
agreed to carry out reviews of past sales of single premium loan
protection insurance. Lloyds Banking Group agreed in principle that
it would undertake a review in relation to sales of single premium
loan protection insurance made through its branch network since 1
July 2007. That review will now form part of the ongoing PPI work
referred to below.
On 1 July 2008, the Financial Ombudsman Service (FOS) referred
concerns regarding the handling of PPI complaints to the Financial
Services Authority (FSA) as an issue of wider implication. On 29
September 2009 and 9 March 2010, the FSA issued consultation papers
on PPI complaints handling. The FSA published its Policy Statement
on 10 August 2010, setting out evidential provisions and guidance
on the fair assessment of a complaint and the calculation of
redress, as well as a requirement for firms to reassess
historically rejected complaints which had to be implemented by 1
December 2010.
On 8 October 2010, the British Bankers' Association (BBA), the
principal trade association for the UK banking and financial
services sector, filed an application for permission to seek
judicial review against the FSA and the FOS. The BBA sought an
order quashing the FSA Policy Statement and an order quashing the
decision of the FOS to determine PPI sales in accordance with the
guidance published on its website in November 2008.
The Judicial Review hearing was held in late January 2011 and on
20 April 2011 judgment was handed down by the High Court dismissing
the BBA's application. On 9 May 2011, the BBA confirmed that the
banks and the BBA did not intend to appeal the judgment.
Since publication of the judgment, the Group has been in
discussions with the FSA with a view to seeking clarity around the
detailed implementation of the Policy Statement. As a result, and
given the initial analysis that the Group has conducted of
compliance with applicable sales standards, which is continuing,
the Group has concluded that there are certain circumstances where
customer contact and/or redress will be appropriate. Accordingly
the Group has made a provision in its income statement for the
half-year to 30 June 2011 of GBP1,155 million in respect of the
anticipated costs of such contact and/or redress, including
administration expenses. There are still a number of uncertainties
as to the eventual costs from any such contact and/or redress given
the inherent difficulties of assessing the impact of detailed
implementation of the Policy Statement for all PPI complaints,
uncertainties around the ultimate emergence period for complaints,
the availability of supporting evidence and the activities of
claims management companies, all of which will significantly affect
complaints volumes, uphold rates and redress costs.
15. Contingent liabilities and commitments
Interchange fees
The European Commission has adopted a formal decision finding
that an infringement of European Commission competition laws has
arisen from arrangements whereby MasterCard issuers charged a
uniform fallback interchange fee in respect of cross-border
transactions in relation to the use of a MasterCard or Maestro
branded payment card. The European Commission has required that the
fee be reduced to zero for relevant cross-border transactions
within the European Economic Area. This decision has been appealed
to the General Court of the European Union (the General Court).
Lloyds TSB Bank plc and Bank of Scotland plc (along with certain
other MasterCard issuers) have successfully applied to intervene in
the appeal in support of MasterCard's position that the
arrangements for the charging of a uniform fallback interchange fee
are compatible with European Union competition laws. The OFT has
also intervened in the General Court appeal supporting the European
Commission position. An oral hearing took place on 8 July 2011 but
judgment is not expected for six to twelve months. MasterCard has
reached an understanding with the European Commission on a new
methodology for calculating intra-European Economic Area
multi-lateral interchange fees on an interim basis pending the
outcome of the appeal.
Meanwhile, the European Commission is pursuing an investigation
with a view to deciding whether arrangements adopted by Visa for
the levying of uniform fallback interchange fees in respect of
cross-border payment transactions also infringe European Union
competition laws. In this regard Visa reached an agreement with the
European Commission to reduce the level of interchange for
cross-border debit card transactions to the interim levels agreed
by MasterCard. The UK's OFT has also commenced similar
investigations relating to the interchange fees in respect of
domestic transactions in relation to both the MasterCard and Visa
payment schemes. The ultimate impact of the investigations on the
Group can only be known at the conclusion of these investigations
and any relevant appeal proceedings.
Interbank offered rate setting investigations
Several government agencies in the UK, US and overseas,
including the US Commodity Futures Trading Commission, the US SEC,
the US Department of Justice and the FSA as well as the European
Commission, are conducting investigations into submissions made by
panel members to the bodies that set various interbank offered
rates. The Group, and/or its subsidiaries, were (at the relevant
time) and remain members of various panels that submit data to
these bodies. The Group has received requests from some government
agencies for information and is co-operating with their
investigations. In addition, recently the Group has been named in
private purported class action suits in the US with regard to the
setting of London interbank offered rates (LIBOR) by members of the
LIBOR setting panel. It is currently not possible to predict the
scope and ultimate outcome of the various regulatory investigations
or purported private class action suits, including the timing and
scale of the potential impact of any investigations and class
action suits on the Group.
Financial Services Compensation Scheme (FSCS)
The FSCS is the UK's independent statutory compensation fund for
customers of authorised financial services firms and pays
compensation if a firm is unable to pay claims against it. The FSCS
is funded by levies on the industry (and recoveries and borrowings
where appropriate). The levies raised comprise both management
expenses levies and, where necessary, compensation levies on
authorised firms.
Following the default of a number of deposit takers in 2008, the
FSCS borrowed funds from HM Treasury to meet the compensation costs
for customers of those firms. The borrowings with HM Treasury,
which total circa GBP20 billion, are on an interest-only basis
until 31 March 2012 and the FSCS and HM Treasury are currently
discussing the terms for refinancing these borrowings to take
effect from 1 April 2012.
15. Contingent liabilities and commitments (continued)
Whilst it is expected that the substantial majority of the
principal will be repaid from funds the FSCS receives from asset
sales, surplus cash flow or other recoveries in relation to the
assets of the firms that defaulted, to the extent that there
remains a shortfall, the FSCS will raise compensation levies on all
deposit-taking participants. The amount of any future compensation
levies also depends on a number of factors including the level of
protected deposits and the population of deposit-taking
participants and will be determined at a later date. As such,
although the Group's share of such compensation levies could be
material, the Group has not recognised a provision in respect of
them in these financial statements.
Litigation in relation to insurance branch business in
Germany
Clerical Medical Investment Group Limited is subject to claims
in the German courts, relating to a number of aspects of
with-profits policies issued by Clerical Medical but sold by
independent intermediaries in Germany, principally during the late
1990s and early 2000s. Where appropriate the Group is defending the
claims and any subsequent appeals, including appeals to the Federal
Court of Justice. It is not currently practicable to reliably
estimate the potential financial effects, which could be material,
as these can only be known after the final determination of the
proceedings, the timing of which remains uncertain.
FSA investigation into Bank of Scotland
As previously disclosed, in 2009 the FSA commenced a supervisory
review into HBOS. The supervisory review has now been superseded as
the FSA has commenced enforcement proceedings against Bank of
Scotland plc in relation to its Corporate division pre 2009. The
proceedings are ongoing and the Group is co-operating fully. It is
too early to predict the outcome or estimate reliably any potential
financial effects of the enforcement proceedings but they are not
currently expected to be material.
Other legal actions and regulatory matters
In the course of its business, the Group is engaged in
discussions with the FSA in relation to a range of conduct of
business matters, including complaints handling, packaged bank
accounts, product terms and sales processes. The Group is keen to
ensure that any regulatory concerns regarding the Group's
processes, product governance, sales processes or contract terms
are understood and addressed. The ultimate impact on the Group of
these discussions can only be known at the conclusion of such
discussions.
In addition, during the ordinary course of business the Group is
subject to other threatened and actual legal proceedings (which may
include class action lawsuits brought on behalf of customers,
shareholders or other third parties), regulatory investigations,
regulatory challenges and enforcement actions, both in the UK and
overseas. All such material matters are periodically reassessed,
with the assistance of external professional advisers where
appropriate, to determine the likelihood of the Group incurring a
liability. In those instances where it is concluded that it is more
likely than not that a payment will be made, a provision is
established to management's best estimate of the amount required to
settle the obligation at the relevant balance sheet date. In some
cases it will not be possible to form a view, either because the
facts are unclear or because further time is needed properly to
assess the merits of the case and no provisions are held against
such matters. However the Group does not currently expect the final
outcome of any such case to have a material adverse effect on its
financial position.
15. Contingent liabilities and commitments (continued)
Contingent liabilities and commitments arising from the banking
business
As at As at
30 June 31 December
2011 2010
GBPm GBPm
Contingent liabilities
Acceptances and endorsements 3 1
Other:
-------- ------------
Other items serving as direct credit substitutes 124 103
Performance bonds and other transaction-related
contingencies 625 568
-------- ------------
749 671
-------- ------------
Total contingent liabilities 752 672
-------- ------------
Commitments
Documentary credits and other short-term
trade-related transactions 14 2
Undrawn formal standby facilities, credit lines
and other commitments to lend:
Less than 1 year original maturity:
-------- ------------
Mortgage offers made 7,971 6,875
Other commitments 30,727 32,144
-------- ------------
38,698 39,019
1 year or over original maturity 10,107 17,323
-------- ------------
Total commitments 48,819 56,344
-------- ------------
16. Capital ratios
As at As at
30 June 31 December
Capital resources 2011 2010
GBPm GBPm
Core tier 1
Shareholders' equity 25,275 25,860
Regulatory adjustments:
Non-controlling interests 71 280
Regulatory post-retirement benefit adjustments (140) (583)
Available-for-sale revaluation reserve 363 894
Cash flow hedging reserve (125) 417
Other items (62) -
25,382 26,868
Less: deductions from core tier 1
Goodwill and other intangible assets (960) (949)
Excess of expected losses over impairment allowances
at 50 per cent (576) -
Securitisation positions at 50 per cent (117) (132)
Core tier 1 capital 23,729 25,787
Preferred securities 3,040 3,057
Less: deductions from tier 1
Material holdings in financial companies at 50
per cent (154) (25)
Total tier 1 capital 26,615 28,819
-------- ------------
Tier 2
Available-for-sale revaluation reserve in respect
of equities 339 343
Undated subordinated debt 739 731
Eligible provisions 1,473 1,776
Dated subordinated debt 9,654 9,550
Less: deductions from tier 2
Excess of expected losses over impairment allowances
at 50 per cent (576) -
Securitisation positions at 50 per cent (117) (132)
Material holdings in financial companies at 50
per cent (154) (25)
-------- ------------
Total tier 2 capital 11,358 12,243
-------- ------------
Supervisory deductions
Unconsolidated investments - life (4,513) (4,344)
Unconsolidated investments - other (628) (1,091)
-------- ------------
Total supervisory deductions (5,141) (5,435)
-------- ------------
Total capital resources 32,832 35,627
-------- ------------
Risk-weighted assets 233,704 252,613
-------- ------------
Core tier 1 capital ratio 10.2% 10.2%
Tier 1 capital ratio 11.4% 11.4%
Total capital ratio 14.0% 14.1%
17. Related party transactions
Balances and transactions with Lloyds Banking Group plc and
fellow Group undertakings
The Company and its subsidiaries have balances due to and from
the Company's ultimate parent company, Lloyds Banking Group plc,
and fellow subsidiaries. These are included on the balance sheet as
follows:
As at As at
30 June 31 December
2011 2010
GBPm GBPm
Assets
Derivative financial instruments 1,196 1,437
Loans and advances to banks 67,898 55,053
Loans and advances to customers 10,530 10,205
Other 5,758 4,241
Liabilities
Deposits from banks 138,911 131,133
Customer deposits 17,905 16,489
Derivative financial instruments 1,766 1,853
Other 9,244 5,831
Subordinated liabilities 290 312
During the half-year to 30 June 2011 the Group earned GBP399
million of interest income and incurred GBP891 million of interest
expense on balances and transactions with Lloyds Banking Group plc
and fellow Group undertakings.
UK Government
In January 2009, the UK Government through HM Treasury became a
related party of Lloyds Banking Group plc, the Company's ultimate
parent company, following its subscription for ordinary shares
issued under a placing and open offer. As at 30 June 2011, HM
Treasury held a 40.2 per cent (31 December 2010: 40.6 per cent)
interest in Lloyds Banking Group plc's ordinary share capital and
consequently HM Treasury remained a related party of Lloyds Banking
Group plc, and therefore of the Group, during the half-year to 30
June 2011.
From 1 January 2011, in accordance with IAS 24 (Revised), UK
Government-controlled entities became related parties of the Group.
The Group regards the Bank of England and banks controlled by the
UK Government, comprising The Royal Bank of Scotland Group plc,
Northern Rock plc, Northern Rock (Asset Management) plc and
Bradford & Bingley plc, as related parties.
Since 31 December 2010, the Group has had the following
significant transactions with the UK Government or UK
Government-related entities:
Government and central bank facilities
During the half-year to 30 June 2011, the Lloyds Banking Group
has participated in HM Treasury's Credit Guarantee Scheme and the
Bank of England's UK Special Liquidity Scheme. HM Treasury's Credit
Guarantee Scheme charges a commercial fee for the guarantee of new
short and medium-term debt issuance; the fee payable to HM Treasury
on guaranteed issues is based on a per annum rate of 50 basis
points plus the median five-year credit default swap spread.
Further details of the UK Special Liquidity Scheme, including the
fees payable to the Bank of England by participants, are available
on the Bank of England's website.
17. Related party transactions (continued)
At 30 June 2011 the Lloyds Banking Group had GBP37,096 million
of debt issued under the aforementioned schemes (31 December 2010:
GBP94,925 million). The facilities have various maturity dates, the
last of which is in the fourth quarter of 2012. During the
half-year to 30 June 2011, the Lloyds Banking Group repaid
GBP57,829 million under the aforementioned schemes.
Lending commitments
The formal lending commitments entered into in connection with
the Lloyds Banking Group's proposed participation in the Government
Asset Protection Scheme have now expired and in February 2011,
Lloyds Banking Group plc (together with Barclays, Royal Bank of
Scotland, HSBC and Santander) announced, as part of the 'Project
Merlin' agreement with HM Treasury, its capacity and willingness to
increase business lending (including to small and medium-sized
enterprises) during 2011.
Business Growth Fund
In May 2011 the Group agreed, together with The Royal Bank of
Scotland plc (and three other non-related parties), to subscribe
for shares in the Business Growth Fund plc which is the company
created to fulfil the role of the Business Growth Fund as set out
in the British Bankers' Association's Business Taskforce Report of
October 2010.
Other government-related entities
Other than the transactions referred to above, there were no
other significant transactions with the UK Government and UK
Government-controlled entities (including UK Government-controlled
banks) during the period that were not made in the ordinary course
of business or that were unusual in their nature or conditions.
Other related party transactions
Except as noted above, other related party transactions for the
half-year to 30 June 2011 are similar in nature to those for the
year ended 31 December 2010.
18. Future accounting developments
The following pronouncements will be relevant to the Group but
are not applicable for the year ending 31 December 2011 and have
not been applied in preparing these condensed interim financial
statements. The full impact of these accounting changes is
currently being assessed by the Group.
Effective for the Group for the year ending 31 December 2012
(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.
Effective for the Group for the year ending 31 December 2013
(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.
18. Future accounting developments (continued)
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.
(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.
As at 3 August 2011, all of these pronouncements were awaiting
EU endorsement.
19. Events after the balance sheet date
Bank levy
The Finance (No. 3) Bill 2011, which included the legislation in
respect of the Bank Levy, received Royal Assent on 19 July 2011.
Under the legislation, the Lloyds Banking Group will only become
liable to pay the Bank Levy at 31 December 2011 and, as a result,
the Lloyds Banking Group has not accrued for this cost during the
first half of 2011. The Lloyds Banking Group expects that the cost
of the Bank Levy for 2011 will be approximately GBP260 million.
Restructuring of Lloyds Banking Group's insurance entities
On 1 July 2011, the Lloyds Banking Group completed a
restructuring of the legal ownership of its insurance businesses,
as a result of which the Group's subsidiary, HBOS Insurance &
Investment Group Limited, sold its wholly owned life, pensions and
general insurance subsidiaries to Lloyds TSB General Insurance
Holdings Limited and Scottish Widows Financial Services Holdings
Limited, which are also wholly owned by Lloyds TSB Bank plc. The
transactions, which will be accounted for in the second half of the
year, resulted in a consolidated loss on disposal of approximately
GBP1.6 billion.
20. Ultimate parent undertaking
HBOS plc's ultimate parent undertaking and controlling party is
Lloyds Banking Group plc which is incorporated in Scotland. Lloyds
Banking Group plc has published consolidated accounts for the year
to 31 December 2010, and copies may be obtained from Group
Secretariat, Lloyds Banking Group, 25 Gresham Street, London EC2V
7HN or downloaded via www.lloydsbankinggroup.com.
21. Other information
The financial information included in these condensed interim
financial statements does not constitute statutory accounts within
the meaning of section 434 of the Companies Act 2006. Statutory
accounts for the year ended 31 December 2010 were approved by the
directors on 24 February 2011 and were delivered to the Registrar
of Companies following publication on 30 March 2011. The auditors'
report on those accounts was unqualified and did not include a
statement under sections 498(2) (accounting records or returns
inadequate or accounts not agreeing with records and returns) or
498(3) (failure to obtain necessary information and explanations)
of the Companies Act 2006.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors listed below (being all the directors of HBOS plc)
confirm that to the best of their knowledge these condensed
consolidated interim financial statements have been prepared in
accordance with International Accounting Standard 34, Interim
Financial Reporting, as adopted by the European Union, and that the
interim management report herein includes a fair review of the
information required by DTR 4.2.7R and DTR 4.2.8R, namely:
-- an indication of important events that have occurred during
the six months ended 30 June 2011 and their impact on the condensed
interim financial statements, and a description of the principal
risks and uncertainties for the remaining six months of the
financial year; and
-- material related party transactions in the six months ended
30 June 2011 and any material changes in the related party
transactions described in the last annual report.
Signed on behalf of the board by
Antonio Horta-Osorio
Group Chief Executive
3 August 2011
HBOS plc board of directors:
Sir Winfried Bischoff (Chairman)
Antonio Horta-Osorio (Chief Executive)
Tim J W Tookey (Finance Director)
Sir Julian Horn-Smith
Anita Frew
Lord Leitch
Glen R Moreno
David L Roberts
T Timothy Ryan, Jr
Martin A Scicluna
G Truett Tate
Anthony Watson
INDEPENDENT REVIEW REPORT TO HBOS PLC
Introduction
We have been engaged by the Company to review the condensed
consolidated interim financial statements in the half-year
management report for the six months ended 30 June 2011, which
comprises the consolidated income statement, consolidated statement
of comprehensive income, consolidated balance sheet, consolidated
statement of changes in equity, consolidated cash flow statement
and related notes. We have read the other information contained in
the half-year management report and considered whether it contains
any apparent misstatements or material inconsistencies with the
information in the condensed consolidated interim financial
statements.
Directors' responsibilities
The half-year management report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-year management report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Services Authority.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards as adopted by the European Union. The condensed
consolidated interim financial statements included in the half-year
management report have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed consolidated interim financial statements in the
half-year management report based on our review. This report,
including the conclusion, has been prepared for and only for the
Company for the purpose of the Disclosure and Transparency Rules of
the Financial Services Authority and for no other purpose. We do
not, in producing this report, accept or assume responsibility for
any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
INDEPENDENT REVIEW REPORT TO HBOS PLC (continued)
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed consolidated interim
financial statements in the half-year management report for the six
months ended 30 June 2011 are not prepared, in all material
respects, in accordance with International Accounting Standard 34
as adopted by the European Union and the Disclosure and
Transparency Rules of the United Kingdom's Financial Services
Authority.
PricewaterhouseCoopers LLP
Chartered Accountants
London
3 August 2011
Notes:
a) The maintenance and integrity of the Lloyds Banking Group plc
website is the responsibility of the directors; the work carried
out by the auditors does not involve consideration of these matters
and, accordingly, the auditors accept no responsibility for any
changes that may have occurred to the financial statements since
they were initially presented on the website.
b) Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
CONTACTS
For further information please contact:
INVESTORS AND ANALYSTS
Kate O'Neill
Managing Director, Investor Relations
020 7356 3520
kate.o'neill@ltsb-finance.co.uk
Charles King
Director of Investor Relations
020 7356 3537
charles.king@ltsb-finance.co.uk
CORPORATE AFFAIRS
Matthew Young
Director of Corporate Affairs
020 7356 2231
matt.young@lloydsbanking.com
Ed Petter Head of Corporate Communications
020 8936 5655
ed.petter@lloydsbanking.com
Registered office: HBOS plc, The Mound, Edinburgh EH1 1YZ
Registered in Scotland no. SC218813
This information is provided by RNS
The company news service from the London Stock Exchange
END
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