Lloyds Banking Group plc

2021 Half-Year Results

29 July 2021

RESULTS FOR THE HALF-YEAR

"During the first six months of 2021, the Group has delivered a solid financial performance with continued business momentum, bolstered by an improved macroeconomic outlook for the UK. While we are seeing clear progress in the vaccine roll out and emergence from lockdown restrictions, the coronavirus pandemic continues to have a significant impact on the people, businesses and communities of the UK. In this context, the Group remains committed to Helping Britain Recover from the pandemic and delivering for all stakeholders."

William Chalmers
Interim Group Chief Executive

Solid financial performance with continued business momentum, bolstered by improved macroeconomic outlook

• Good progress on Strategic Review 2021 priorities, including record customer satisfaction scores, improved capabilities in Markets products and a leading payments card spend market share
• Announced today the acquisition of Embark, a fast growing investment and retirement platform business. Embark enhances our capabilities to address the attractive mass market and self-directed Wealth segment, completing the Group's Wealth proposition. Embark will also enable the Group to re-platform its pensions and retirement proposition, significantly strengthening its offering in Retirement, an important growth market
• Statutory profit before tax of £3.9 billion, increased significantly on first half of 2020, benefiting from solid business momentum and a net impairment credit in the period
• Net income of £7.6 billion, up 2 per cent, with increased average interest-earning assets at £441 billion, a strong banking net interest margin of 2.50 per cent and other income of £2.4 billion, alongside a reduction in operating lease depreciation
• Sustained cost discipline with operating costs of £3.7 billion, including the impact of rebuilding variable pay in the context of stronger than expected financial performance
• Remediation charge of £425 million, materially driven by the £91 million regulatory fine relating to the communication of historical insurance renewals, £150 million of redress and operational costs for HBOS Reading, and charges in relation to other ongoing legacy programmes
• Net impairment credit of £656 million, including £333 million in the second quarter, as a result of an £837 million release driven by improvements to the macroeconomic outlook for the UK, combined with robust credit performance. Management judgements in respect of coronavirus retained, now c.£1.2 billion

Balance sheet and capital strength further enhanced

• Loans and advances at £447.7 billion, up £7.5 billion in the period, driven by strong growth of £12.6 billion in the open mortgage book
• Customer deposits of £474.4 billion up £23.7 billion in the period, with continued inflows into the Group's trusted brands, including Retail current accounts which were up £9.9 billion in the period. Resulting loan to deposit ratio of 94 per cent, continues to provide a strong liquidity position and significant potential to lend into recovery
• Strong capital build of 93 basis points in the first half prior to the interim ordinary dividend. Reintroduced a progressive and sustainable ordinary dividend policy, with an interim ordinary dividend of 0.67 pence per share
• CET1 ratio of 16.7 per cent after dividend accrual, significantly ahead of both the ongoing target of c.12.5 per cent, plus a management buffer of c.1 per cent and regulatory requirement of c.11 per cent

Outlook

•  Net interest margin now expected to be around 250 basis points
•  Operating costs now expected to be c.£7.6 billion
•  Net asset quality ratio now expected to be below 10 basis points
•  Return on tangible equity now expected to be c.10 per cent, excluding     the c.2.5 percentage point benefit from tax rate changes
•  Risk-weighted assets in 2021 now expected to be below £200 billion

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