2022 Results
News Release
 
Lloyds Banking Group plc
22 February 2023
 
 
 
 
 
 
 
 

 CONTENTS

	Page
Results for the full-year	1
Income statement - underlying basis and key balance sheet metrics	4
Quarterly information	6
Balance sheet analysis	7
Group results - statutory basis	8
Group Chief Executive's statement	10
Summary of Group results	13
Segmental analysis - underlying basis	23
Divisional results
Retail	24
Commercial Banking	26
Insurance, Pensions and Investments	28
Equity Investments and Central Items	33
Alternative performance measures	34
Risk management
Capital risk	39
Credit risk	46
Funding and liquidity risk	61
Interest rate sensitivity	61
Statutory information
Condensed consolidated financial statements	63
Consolidated income statement	63
Consolidated statement of comprehensive income	64
Consolidated balance sheet	65
Consolidated statement of changes in equity	67
Consolidated cash flow statement	69
Notes to the condensed consolidated financial statements	70
Key dates	82
Basis of presentation	82
Forward looking statements	83
Contacts	84

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. Further information on these measures is set out on page 34. Unless otherwise stated, commentary on pages 1 and 2 and on pages 10 to 12 is given on an underlying basis.
Forward looking statements
This news release contains forward looking statements. For further details, reference should be made to page 83.




RESULTS FOR THE FULL YEAR
"While the operating environment has changed significantly over the last year, the Group has delivered a robust financial performance with strong income growth, continued franchise strength and strong capital generation, enabling increased capital returns for shareholders.
A year ago we announced our ambitious new strategy with the aim of growing our business and deepening relationships with our customers, meeting more of their financial needs. We have made a good start to delivery and remain confident in our ability to deliver for all stakeholders.
We know that the current environment continues to be challenging for many people and have mobilised the organisation to further support our customers. Our purpose-driven strategy is more relevant now than ever before. We remain committed to Helping Britain Prosper and helping the country recover from the current economic uncertainties.
We continue to believe our strategy will create higher, more sustainable returns, as reflected in our enhanced guidance. We are excited about the opportunities ahead."
 Charlie Nunn, Group Chief Executive
Good start to our new strategy with early evidence of delivery
•  Significant additional support for customers and colleagues given cost of living pressure
•  Changing environment supports the strategic business case. Purpose-driven strategy will enable enhanced customer support whilst delivering efficient growth and diversification. Strategic investment of £0.9 billion in 2022
•  Confidence building in strategic financial benefits with early momentum; £0.3 billion of gross cost saves¹
•  New organisational structure, leadership team and operating model implemented to deliver change more effectively
•  Acquisition of Tusker, a vehicle management and leasing company focused on electric and low emissions vehicles, further developing the Group's Motor business and aligned to our sustainability ambitions
•  Supporting the transition to a low carbon economy with new sector-based 2030 emissions reduction targets, a new net zero ambition for our supply chain, alongside launching our first Group climate transition plan²
Robust financial performance and continued business momentum
•  Statutory profit before tax of £6.9 billion (2021: £6.9 billion), with higher net income and lower total costs offset by impairment charges as a result of the revised economic outlook (versus a significant write-back in 2021)
•  Net income of £18.0 billion, up 14 per cent, supported by continued recovery in customer activity and UK Bank Rate changes, alongside continued low operating lease depreciation
•  Underlying net interest income up 18 per cent, primarily driven by a stronger banking net interest margin of 2.94 per cent in the year (3.22 per cent in the fourth quarter) and increased average interest-earning assets
•  Other income of £5.2 billion, 4 per cent higher, building our confidence in growth potential. The fourth quarter included a £0.2 billion benefit from insurance assumption and methodology changes
•  Operating costs of £8.8 billion, up 6 per cent compared to 2021 and in line with guidance, reflecting stable business-as-usual costs despite inflationary pressures, alongside higher planned strategic investment and new business costs. Remediation of £0.3 billion, down 80 per cent in the year
•  Underlying profit before impairment up 46 per cent to £9.0 billion in the year (with £2.4 billion in the fourth quarter), as a result of solid net income growth
•  Asset quality remains strong and the portfolio well-positioned in the context of cost of living pressures. Underlying impairment charge of £1.5 billion (£0.5 billion in the fourth quarter) and an asset quality ratio of 32 basis points reflect strong observed credit performance and a deteriorating economic outlook, partly offset by COVID-19 releases
 
Continued franchise growth and increased capital returns
•  Loans and advances to customers at £454.9 billion were up £6.3 billion in the year, with continued growth in the open mortgage book
•  Customer deposits of £475.3 billion down £1.0 billion in 2022, with Retail current account growth of £2.5 billion more than offset by reductions in Commercial Banking deposits. Loan to deposit ratio of 96 per cent continues to provide robust funding and liquidity and potential for growth
•  Strong pro forma capital generation of 245 basis points³ in the year, based on robust banking performance
•  Pro forma CET1 ratio of 14.1 per cent⁴ after capital distributions and further pension contributions, remaining ahead of the ongoing target of c.12.5 per cent, plus a management buffer of c.1 per cent
•  The Board has recommended a final ordinary dividend of 1.60 pence per share, resulting in a total ordinary dividend for 2022 of 2.40 pence per share, up 20 per cent on prior year, and in line with the Group's progressive and sustainable ordinary dividend policy
•  Given the Group's strong capital position, the Board has also announced its intention to implement an ordinary share buyback programme of up to £2.0 billion
•  Total capital returns in respect of 2022 of up to £3.6 billion, are equivalent to more than 10 per cent⁵ of the Group's market capitalisation value
2023 Guidance
Based on our current macroeconomic assumptions, for 2023 the Group expects:
•  Banking net interest margin to be greater than 305 basis points
•  Operating costs to be c.£9.1 billion
•  Asset quality ratio to be c.30 basis points
•  Return on tangible equity to be c.13 per cent
•  Capital generation to be c.175 basis points⁶
2024 and 2026 guidance
Based on the expected macroeconomic environment, the Group's strategy and investment and reflecting our growth potential, efficiency and the capabilities of our people, technology and data, the Group has enhanced its medium and longer-term guidance:
•  Operating costs now expected to be c.£9.2 billion in 2024, with a cost:income ratio of less than 50 per cent by 2026
•  Asset quality ratio now expected to be c.30 basis points in 2024
•  Return on tangible equity now expected to be c.13 per cent in 2024 and greater than 15 per cent by 2026
•  Additional revenues from strategic initiatives of c.£0.7 billion by 2024 and c.£1.5 billion by 2026
•  Risk-weighted assets to be between £220 billion and £225 billion at the end of 2024
•  Capital generation now expected to be c.175 basis points in 2024, increasing to greater than 200 basis points by 2026⁶
•  The Group will maintain its progressive and sustainable ordinary dividend policy, whilst the Board expects to pay down to its target CET1 ratio by the end of 2024
Although the macroeconomic outlook remains uncertain, our people, business model and financial strength ensure that we can continue to support our customers and Help Britain Prosper. Our purpose-driven strategy is more relevant now than ever before and our experience in the last year reinforces our belief that successful strategic delivery will create a more sustainable business and deliver increased shareholder returns in the medium to longer-term.

¹  Includes savings from both business-as-usual and strategic initiatives.
²    Published in our Environmental Sustainability Report 2022 which can be found at www.lloydsbankinggroup.com/investors/esg-information.html.
³  Excluding regulatory changes on 1 January 2022, ordinary dividends, variable pension contributions and the impact of the announced ordinary share buyback programme. Inclusive of the dividend received from the Insurance business in February 2023.
⁴  31 December 2022 reflects the dividend received from Insurance in February 2023 and the full impact of the announced share buyback, but excludes the impact of the phased unwind of IFRS 9 relief on 1 January 2023.
⁵  Market capitalisation as at 17 February 2023.
⁶  Excluding capital distributions. Inclusive of dividends received from the Insurance business.

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