2024 Half-Year Results

  
Lloyds Banking Group plc
2024 Half-Year Results
25 July 2024
 
 
 
Part 1 of 2



CONTENTS

Results for the half-year	1
Income statement (underlying basis) and key balance sheet metrics	3
Quarterly information	4
Balance sheet analysis	5
Group results - statutory basis	6
Group Chief Executive's statement	7
Summary of Group results	9
Divisional results
Segmental analysis - underlying basis	16
Retail	18
Commercial Banking	20
Insurance, Pensions and Investments	22
Equity Investments and Central Items	25
Alternative performance measures	26
Risk management
Principal risks and uncertainties	32
Capital risk	33
Credit risk	38
Liquidity risk	50
Interest rate sensitivity	54
Statutory information
Condensed consolidated half-year financial statements (unaudited)	55
Condensed consolidated income statement (unaudited)	56
Condensed consolidated statement of comprehensive income (unaudited)	57
Condensed consolidated balance sheet (unaudited)	58
Condensed consolidated statement of changes in equity (unaudited)	59
Condensed consolidated cash flow statement (unaudited)	62
Notes to the condensed consolidated half-year financial statements (unaudited)	63
Statement of directors' responsibilities	99
Independent review report to Lloyds Banking Group plc	100
Key dates	101
Basis of presentation	101
Forward-looking statements	102
Contacts	103

Alternative performance measures
The Group uses a number of alternative performance measures, including underlying profit, in the description of its business performance and financial position. These measures are labelled with a superscript 'A' throughout this document, with the exception of content on pages 1 to 2 and pages 7 to 8 which is, unless otherwise stated, presented on an underlying basis. Further information on these measures is set out on page 26.
Forward-looking statements
This news release contains forward-looking statements. For further details, reference should be made to page 102.



RESULTS FOR THE HALF-YEAR
"In the first six months of 2024, the Group delivered robust financial results with solid income performance and cost discipline alongside strong capital generation.
2024 is a key year for our strategic delivery. We continue to deliver on our strategic transformation, as illustrated in the fourth of our investor seminars last month. We remain on track to meet our 2024 targeted outcomes. Indeed, our progress to date enables us to reaffirm 2024 guidance and remain confident in achieving our 2026 strategic objectives and guidance.
Guided by our purpose, we continue to support customers in reaching their financial goals and successfully transform our Group. This underpins our ambition of higher, more sustainable returns that will deliver for all of our stakeholders as we continue to Help Britain Prosper."
Charlie Nunn, Group Chief Executive
Delivering on our purpose driven strategy; on track to meet 2024 and 2026 strategic outcomes
•  Supporting customers to reach financial goals, by meeting a broad range of their financial needs
•  Continued strategic transformation, with c.£3 billion planned investment between 2022 and the end of 2024, enabling delivery of business and financial benefits
•  Successful execution demonstrated through four strategic seminars, delivered over the last twelve months
Robust financial performance, in line with expectations¹
•  Statutory profit after tax of £2.4 billion (half-year to 30 June 2023: £2.9 billion) with net income down 9 per cent on the prior year and operating costs up 7 per cent (including Bank of England Levy), partly offset by a lower impairment charge
•  Return on tangible equity of 13.5 per cent (half-year to 30 June 2023: 16.6 per cent)
•  Underlying net interest income of £6.3 billion, down 10 per cent with a lower banking net interest margin, as expected, of 2.94 per cent and average interest-earning banking assets of £449.2 billion
•  Underlying other income of £2.7 billion, 8 per cent higher, driven by continued recovery in customer and market activity and the benefit of strategic initiatives
•  Operating lease depreciation of £679 million, up on the prior year reflecting growth in the fleet size, depreciation of higher value vehicles and declines in used electric car prices
•  Operating costs of £4.7 billion, up 7 per cent, with cost efficiencies helping to offset higher ongoing strategic investment, planned elevated severance charges and continued inflationary pressures, alongside c.£0.1 billion in the first quarter relating to the sector-wide change in the charging approach for the Bank of England Levy (excluding this, operating costs were up 4 per cent)
•  Remediation costs of £95 million (half-year to 30 June 2023: £70 million), largely in relation to pre-existing programmes
•  Underlying impairment charge of £101 million and asset quality ratio of 5 basis points. Excluding the impact of improvements to the economic outlook, the asset quality ratio was 19 basis points. The portfolio remains well-positioned with resilient credit performance and strong asset quality
Growth in customer franchise
•  Loans and advances to customers increased by £2.7 billion during the half-year period to £452.4 billion, with growth across Retail, including mortgages and unsecured loans
•  Customer deposits of £474.7 billion increased by £3.3 billion, with growth in Retail deposits of £4.9 billion partly offset by a reduction in Commercial Banking deposits of £1.6 billion
RESULTS FOR THE HALF-YEAR (continued)
Strong capital generation, in line with expectations, enabling an increased interim dividend
•  Strong capital generation of 87 basis points, after regulatory headwinds of 7 basis points
•  CET1 ratio of 14.1 per cent after 48 basis points for ordinary dividend accrual. Significantly above our ongoing target of c.13.0 per cent by 2026
•  Risk-weighted assets of £222.0 billion up £2.9 billion in the period, reflecting lending growth and other movements, partly offset by effective management of risk-weighted assets
•  Tangible net assets per share of 49.6 pence, down from 50.8 pence at 31 December 2023 after capital distributions, alongside the impact of increased longer-term rates on the cash flow hedge reserve and pension surplus
•  Interim ordinary dividend of 1.06 pence per share (equivalent to £662 million), up 15 per cent on the prior year
Reaffirming guidance for 2024
Based on our current macroeconomic assumptions, for 2024 the Group continues to expect:
•  Banking net interest margin of greater than 290 basis points
•  Operating costs of c.£9.4 billion including the c.£0.1 billion Bank of England Levy
•  Asset quality ratio now expected to be less than 20 basis points
•  Return on tangible equity of c.13 per cent
•  Capital generation of c.175 basis points²
•  Risk-weighted assets between £220 billion and £225 billion
•  To pay down to a CET1 ratio of c.13.5 per cent
Confident in 2026 guidance:
Based on our current macroeconomic assumptions and confidence in our strategy, the Group is maintaining its medium-term guidance for 2026:
•  Cost:income ratio of less than 50 per cent
•  Return on tangible equity of greater than 15 per cent
•  Capital generation of greater than 200 basis points²
•  To pay down to a CET1 ratio of c.13 per cent
¹  See the basis of presentation on page 101.
²  Excluding capital distributions. Inclusive of ordinary dividends received from the Insurance business in February of the following year.
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