2024 Q1 Interim Management Statement
EQS-News: Lloyds Banking Group PLC / Key word(s): Interim Report
2024 Q1 Interim Management Statement
24.04.2024 / 08:00 CET/CEST
The issuer is solely responsible for the content of this announcement.
Lloyds Banking Group plc
Q1 2024 Interim Management Statement
24 April 2024
*RESULTS FOR THE THREE MONTHS ENDED 31 MARCH 2024*
"The Group is continuing to deliver in line with expectations in the first quarter of 2024, with solid net income, cost discipline and strong asset quality. Our performance provides us with further confidence around our strategic ambitions and 2024 and 2026 guidance.
Guided by our purpose, we are continuing to support customers and successfully execute against our strategic outcomes, as highlighted in the third of our strategic seminars last month. 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
*Financial performance in line with expectations**^1*
· Statutory profit after tax of £1.2 billion (three months to 31 March 2023: £1.6 billion) with net income down 9 per cent on the prior year and operating costs up 11 per cent, partly offset by the benefit of a lower impairment charge
· Return on tangible equity of 13.3 per cent (three months to 31 March 2023: 19.1 per cent)
· Underlying net interest income of £3.2 billion down 10 per cent, with a lower banking net interest margin, as expected, of 2.95 per cent and average interest-earning banking assets of £449.1 billion
· Underlying other income of £1.3 billion, 7 per cent higher, driven by continued recovery in customer and market activity and the benefits of strategic initiatives
· Operating lease depreciation of £283 million, up on the prior year reflecting a full quarter of depreciation from Tusker, alongside growth in fleet size and declines in used car prices; the charge is lower than the fourth quarter which included an additional c.£100 million residual value provision to offset developments in used car prices
· Operating costs of £2.4 billion, up 11 per cent, including c.£0.1 billion relating to the sector-wide change in the charging approach for the Bank of England levy (excluding this levy, operating costs were up 6 per cent) and elevated severance charges (£0.1 billion higher year to date). The Bank of England levy will have a broadly neutral impact on profit in 2024 with an offsetting benefit recognised through net interest income over the course of the year
· Remediation costs of £25 million (three months to 31 March 2023: £19 million), in relation to pre-existing programmes
· Underlying impairment charge of £57 million and asset quality ratio of 6 basis points. Excluding the impact of improvements to the economic outlook, the asset quality ratio was 23 basis points. The portfolio remains well-positioned with stable credit trends and strong asset quality
· Loans and advances to customers reduced during the quarter to £448.5 billion, primarily due to expected reductions in UK mortgage balances, given the refinancing of the higher maturities in the fourth quarter of 2023
· Customer deposits of £469.2 billion decreased by £2.2 billion, with growth in Retail deposits of £1.3 billion more than offset by a reduction in Commercial Banking of £3.5 billion
· Strong capital generation of 40 basis points, after regulatory headwinds of 6 basis points. CET1 ratio of 13.9 per cent, ahead of ongoing target of c.13.0 per cent
· Risk-weighted assets of £222.8 billion up £3.7 billion in the quarter, including a c.£1.5 billion temporary increase that is expected to reverse in the second quarter
· Tangible net assets per share of 51.2 pence, up from 50.8 pence on 31 December 2023, driven by profit for the period, partly offset by the effects of increased longer-term rates on the cash flow hedge reserve and pension surplus
· During the quarter, the Group agreed the sale of its in-force bulk annuity portfolio to Rothesay Life plc, enabling the Insurance, Pensions and Investments division to focus on growing strategically important lines of business
*2024 guidance* *reaffirmed*
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.£9.3 billion plus the c.£0.1 billion Bank of England levy
· Asset quality ratio of less than 30 basis points
· Return on tangible equity of c.13 per cent
· Capital generation of c.175 basis points^2
· Risk-weighted assets at between £220 billion and £225 billion
· To pay down to a CET1 ratio of c.13.5 per cent
^1 See the basis of presentation on page 15.
^2 Excluding capital distributions. Inclusive of ordinary dividends received from the Insurance business in February of the following year.
*INCOME STATEMENT (UNDERLYING BASIS)**^A* *AND KEY BALANCE SHEET METRICS*
*Three months ended*
*31 Mar 2024*
*£m* Three months ended
31 Mar 2023
£m *Change*
*%* Three
months
ended
31 Dec
2023
£m *Change*
*%*
Underlying net interest income * ** ** ** ** ** ** ** ** 3,184* 3,535 * ** ** ** ** ** ** ** ** ** ** ** ** (10)* 3,317 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** (4)*
Underlying other income * ** ** ** ** ** ** ** ** 1,340* 1,257 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 7* 1,286 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 4*
Operating lease depreciation * ** ** ** ** ** ** ** ** ** ** (283)* (140) (371) * ** ** ** ** ** ** ** ** ** ** ** ** ** 24*
*Net income* * ** ** ** ** ** ** ** ** 4,241* 4,652 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** (9)* 4,232
Operating costs * ** ** ** ** ** ** ** (2,402)* (2,170) * ** ** ** ** ** ** ** ** ** ** ** ** (11)* (2,486) * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 3*
Remediation * ** ** ** ** ** ** ** ** ** ** ** ** (25)* (19) * ** ** ** ** ** ** ** ** ** ** ** ** (32)* (541) * ** ** ** ** ** ** ** ** ** ** ** ** ** 95*
*Total costs* * ** ** ** ** ** ** ** (2,427)* (2,189) * ** ** ** ** ** ** ** ** ** ** ** ** (11)* (3,027) * ** ** ** ** ** ** ** ** ** ** ** ** ** 20*
*Underlying profit before impairment* * ** ** ** ** ** ** ** ** 1,814* 2,463 * ** ** ** ** ** ** ** ** ** ** ** ** (26)* 1,205 * ** ** ** ** ** ** ** ** ** ** ** ** ** 51*
Underlying impairment (charge) credit * ** ** ** ** ** ** ** ** ** ** ** ** (57)* (243) * ** ** ** ** ** ** ** ** ** ** ** ** ** 77* 541
*Underlying profit* * ** ** ** ** ** ** ** ** 1,757* 2,220 * ** ** ** ** ** ** ** ** ** ** ** ** (21)* 1,746 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 1*
Restructuring * ** ** ** ** ** ** ** ** ** ** ** ** (12)* (12) (85) * ** ** ** ** ** ** ** ** ** ** ** ** ** 86*
Volatility and other items * ** ** ** ** ** ** ** ** ** ** (117)* 52 114
*Statutory profit before tax* * ** ** ** ** ** ** ** ** 1,628* 2,260 * ** ** ** ** ** ** ** ** ** ** ** ** (28)* 1,775 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** (8)*
Tax expense * ** ** ** ** ** ** ** ** ** ** (413)* (619) * ** ** ** ** ** ** ** ** ** ** ** ** ** 33* (541) * ** ** ** ** ** ** ** ** ** ** ** ** ** 24*
*Statutory profit after tax* * ** ** ** ** ** ** ** ** 1,215* 1,641 * ** ** ** ** ** ** ** ** ** ** ** ** (26)* 1,234 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** (2)*
Earnings per share *1.7p* 2.3p *(0.6)p* 1.7p
Banking net interest margin^A *2.95%* 3.22% *(27)bp* 2.98% *(3)bp*
Average interest-earning banking assets^A * ** ** ** £449.1bn* £454.2bn * ** ** ** ** ** ** ** ** ** ** ** ** ** ** (1)* £452.8bn * ** ** ** ** ** ** ** ** ** ** ** ** ** ** (1)*
Cost:income ratio^A *57.2%* 47.1% *10.1pp* 71.5% *(14.3)pp*
Asset quality ratio^A *0.06%* 0.22% *(16)bp* (0.47)%
Return on tangible equity^A *13.3%* 19.1% *(5.8)pp* 13.9% *(0.6)pp*
*At 31 Mar*
*2024* At 31 Mar
2023 *Change*
*%* At 31 Dec
2023 At *Change*
*%*
Loans and advances to customers * ** ** ** £448.5bn* £452.3bn * ** ** ** ** ** ** ** ** ** ** ** ** ** ** (1)* £449.7bn
Customer deposits * ** ** ** £469.2bn* £473.1bn * ** ** ** ** ** ** ** ** ** ** ** ** ** ** (1)* £471.4bn
Loan to deposit ratio^A *96%* 96% 95% *1pp*
CET1 ratio *13.9%* 14.1% *(0.2)pp* 14.6% *(0.7)pp*
Pro forma CET1 ratio^A,1 *13.9%* 14.1% *(0.2)pp* 13.7% *0.2pp*
Total capital ratio *19.0%* 19.9% *(0.9)pp* 19.8% *(0.8)pp*
MREL ratio *32.0%* 32.1% *(0.1)pp* 31.9% *0.1pp*
UK leverage ratio *5.6%* 5.6% 5.8% *(0.2)pp*
Risk-weighted assets * ** ** ** £222.8bn* £210.9bn * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 6* £219.1bn * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 2*
Wholesale funding * ** ** ** ** ** £99.9bn* £101.1bn * ** ** ** ** ** ** ** ** ** ** ** ** ** ** (1)* £98.7bn * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 1*
Liquidity coverage ratio^2 *143%* 143% 142% *1pp*
Net stable funding ratio^3 *130%* 129% *1pp* 130%
Tangible net assets per share^A *51.2p* 49.6p *1.6p* 50.8p *0.4p*
^A See page 14.
^1^ ^ ^ 31 December 2023 reflects both the full impact of the share buyback announced in respect of 2023 and the ordinary dividend received from the Insurance business in February 2024, but excludes the impact of the phased unwind of IFRS 9 relief on 1 January 2024.
^2 The liquidity coverage ratio is calculated as a monthly rolling simple average over the previous 12 months.
^3 Net stable funding ratio is based on an average of the four previous quarters.
*QUARTERLY INFORMATION**^A*
*Quarter*
*ended*
*31 Mar*
*2024*
*£m* Quarter
ended
31 Dec
2023
£m Quarter
ended
30 Sep
2023
£m Quarter
ended
30 Jun
2023
£m Quarter
ended
31 Mar
2023
£m
Underlying net interest income * ** ** ** ** ** ** ** ** 3,184* 3,317 3,444 3,469 3,535
Underlying other income * ** ** ** ** ** ** ** ** 1,340* 1,286 1,299 1,281 1,257
Operating lease depreciation * ** ** ** ** ** ** ** ** ** ** (283)* (371) (229) (216) (140)
*Net income* * ** ** ** ** ** ** ** ** 4,241* 4,232 4,514 4,534 4,652
Operating costs * ** ** ** ** ** ** ** (2,402)* (2,486) (2,241) (2,243) (2,170)
Remediation * ** ** ** ** ** ** ** ** ** ** ** ** (25)* (541) (64) (51) (19)
*Total costs* * ** ** ** ** ** ** ** (2,427)* (3,027) (2,305) (2,294) (2,189)
*Underlying profit before impairment* * ** ** ** ** ** ** ** ** 1,814* 1,205 2,209 2,240 2,463
Underlying impairment (charge) credit * ** ** ** ** ** ** ** ** ** ** ** ** (57)* 541 (187) (419) (243)
*Underlying profit* * ** ** ** ** ** ** ** ** 1,757* 1,746 2,022 1,821 2,220
Restructuring * ** ** ** ** ** ** ** ** ** ** ** ** (12)* (85) (44) (13) (12)
Volatility and other items * ** ** ** ** ** ** ** ** ** ** (117)* 114 (120) (198) 52
*Statutory profit before tax* * ** ** ** ** ** ** ** ** 1,628* 1,775 1,858 1,610 2,260
Tax expense * ** ** ** ** ** ** ** ** ** ** (413)* (541) (438) (387) (619)
*Statutory profit after tax* * ** ** ** ** ** ** ** ** 1,215* 1,234 1,420 1,223 1,641
Earnings per share *1.7p* 1.7p 2.0p 1.6p 2.3p
Banking net interest margin^A *2.95%* 2.98% 3.08% 3.14% 3.22%
Average interest-earning banking assets^A * ** ** ** £449.1bn* £452.8bn £453.0bn £453.4bn £454.2bn
Cost:income ratio^A *57.2%* 71.5% 51.1% 50.6% 47.1%
Asset quality ratio^A *0.06%* (0.47)% 0.17% 0.36% 0.22%
Return on tangible equity^A *13.3%* 13.9% 16.9% 13.6% 19.1% *At 31 Mar 2024* At 31 Dec 2023 At 30 Sep 2023 At 30 Jun 2023 At 31 Mar 2023
Loans and advances to customers^1 * ** ** ** £448.5bn* £449.7bn £452.1bn £450.7bn £452.3bn
Customer deposits * ** ** ** £469.2bn* £471.4bn £470.3bn £469.8bn £473.1bn
Loan to deposit ratio^A *96%* 95% 96% 96% 96%
CET1 ratio *13.9%* 14.6% 14.6% 14.2% 14.1%
Pro forma CET1 ratio^A,2 *13.9%* 13.7% 14.6% 14.2% 14.1%
Total capital ratio *19.0%* 19.8% 19.9% 19.7% 19.9%
MREL ratio *32.0%* 31.9% 32.6% 31.0% 32.1%
UK leverage ratio *5.6%* 5.8% 5.7% 5.7% 5.6%
Risk-weighted assets * ** ** ** £222.8bn* £219.1bn £217.7bn £215.3bn £210.9bn
Wholesale funding * ** ** ** ** ** £99.9bn* £98.7bn £108.5bn £103.5bn £101.1bn
Liquidity coverage ratio^3 *143%* 142% 142% 142% 143%
Net stable funding ratio^4 *130%* 130% 130% 130% 129%
Tangible net assets per share^A *51.2p* 50.8p 47.2p 45.7p 49.6p
^1 The reduction between 30 September 2023 and 31 December 2023 reflects the impact of the securitisation of £2.7 billion of UK Retail unsecured loans in the fourth quarter of 2023.
^2^ ^ ^ 31 December 2023 reflects both the full impact of the share buyback announced in respect of 2023 and the ordinary dividend received from the Insurance business in February 2024, but excludes the impact of the phased unwind of IFRS 9 relief on 1 January 2024.
^3 The liquidity coverage ratio is calculated as a monthly rolling simple average over the previous 12 months.
^4 Net stable funding ratio is based on an average of the four previous quarters.
*BALANCE SHEET ANALYSIS*
*At 31 Mar 2024*
*£bn* At 31 Mar
2023
£bn *Change*
*%* At 31 Dec
2023
£bn *Change*
*%*
*Loans and advances to customers*
UK mortgages^1 * ** ** ** ** ** ** ** ** 304.6* 307.5 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** (1)* 306.2 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** (1)*
Credit cards * ** ** ** ** ** ** ** ** ** ** 15.2* 14.4 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 6* 15.1 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 1*
UK Retail unsecured loans^2 * ** ** ** ** ** ** ** ** ** ** ** ** 7.6* 9.0 * ** ** ** ** ** ** ** ** ** ** ** ** (16)* 6.9 * ** ** ** ** ** ** ** ** ** ** ** ** ** 10*
UK Motor Finance * ** ** ** ** ** ** ** ** ** ** 15.8* 14.7 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 7* 15.3 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 3*
Overdrafts * ** ** ** ** ** ** ** ** ** ** ** ** 1.0* 1.0 1.1 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** (9)*
Retail other^1,3 * ** ** ** ** ** ** ** ** ** ** 16.9* 15.1 * ** ** ** ** ** ** ** ** ** ** ** ** ** 12* 16.6 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 2*
Small and Medium Businesses * ** ** ** ** ** ** ** ** ** ** 32.2* 36.4 * ** ** ** ** ** ** ** ** ** ** ** ** (12)* 33.0 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** (2)*
Corporate and Institutional Banking * ** ** ** ** ** ** ** ** ** ** 55.6* 56.7 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** (2)* 55.6
Central Items*^4* * ** ** ** ** ** ** ** ** ** ** ** (0.4)* (2.5) * ** ** ** ** ** ** ** ** ** ** ** ** ** 84* (0.1) * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** *
*Loans and advances to customers* * ** ** ** ** ** ** ** ** 448.5* 452.3 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** (1)* 449.7
*Customer deposits*
Retail current accounts * ** ** ** ** ** ** ** ** 103.1* 110.5 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** (7)* 102.7
Retail savings accounts^5 * ** ** ** ** ** ** ** ** 196.4* 183.1 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 7* 194.8 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 1*
Wealth * ** ** ** ** ** ** ** ** ** ** 10.2* 12.9 * ** ** ** ** ** ** ** ** ** ** ** ** (21)* 10.9 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** (6)*
Commercial Banking * ** ** ** ** ** ** ** ** 159.3* 166.5 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** (4)* 162.8 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** (2)*
Central Items * ** ** ** ** ** ** ** ** ** ** ** ** 0.2* 0.1 0.2
*Customer deposits* * ** ** ** ** ** ** ** ** 469.2* 473.1 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** (1)* 471.4
*Total assets* * ** ** ** ** ** ** ** ** 889.6* 885.7 881.5 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 1*
*Total liabilities* * ** ** ** ** ** ** ** ** 841.8* 837.8 834.1 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 1*
Ordinary shareholders' equity * ** ** ** ** ** ** ** ** ** ** 40.7* 40.6 40.3 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 1*
Other equity instruments * ** ** ** ** ** ** ** ** ** ** ** ** 6.9* 7.1 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** (3)* 6.9
Non-controlling interests * ** ** ** ** ** ** ** ** ** ** ** ** 0.2* 0.2 0.2
*Total equity* * ** ** ** ** ** ** ** ** ** ** 47.8* 47.9 47.4 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 1*
Ordinary shares in issue, excluding own shares *63,653m* 66,396m * ** ** ** ** ** ** ** ** ** ** ** ** ** ** (4)* 63,508m
^1 Open mortgage book and closed mortgage book, previously presented separately, are now reported together as UK mortgages; Wealth, previously reported separately, is now included within Retail other. Comparatives have been presented on a consistent basis.
^2 The reduction between 31 March 2023 and 31 December 2023 reflects the impact of the securitisation of £2.7 billion of UK Retail unsecured loans in the fourth quarter of 2023.
^3 Retail other includes the European and Wealth businesses.
^4 Central Items includes central fair value hedge accounting adjustments.
^5 Retail relationship savings accounts and Retail tactical savings accounts, previously reported separately, are now reported together as Retail savings accounts. Comparatives have been presented on a consistent basis.
*GROUP RESULTS - STATUTORY BASIS*
The results below are prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRS). The underlying results are shown on page 2.
*Summary income statement* *Three months ended*
*31 Mar** **2024*
*£m* Three months ended
31 Mar 2023
£m *Change*
*%* Three
months
ended
31 Dec
2023
£m *Change*
*%*
Net interest income * ** ** ** ** ** ** ** ** 3,045* 3,434 * ** ** ** ** ** ** ** ** ** ** ** ** ** (11)* 3,187 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** (4)*
Other income * ** ** ** ** ** ** ** ** 8,272* 5,875 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 41* 12,149 * ** ** ** ** ** ** ** ** ** ** ** ** ** (32)*
*Total income* * ** ** ** ** ** ** 11,317* 9,309 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 22* 15,336 * ** ** ** ** ** ** ** ** ** ** ** ** ** (26)*
Net finance expense in respect of insurance and investment contracts * ** ** ** ** ** ** ** (6,930)* (4,501) * ** ** ** ** ** ** ** ** ** ** ** ** ** (54)* (10,609) * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 35*
*Total income, after net finance expense in respect of insurance and investment contracts* * ** ** ** ** ** ** ** ** 4,387* 4,808 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** (9)* 4,727 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** (7)*
Operating expenses * ** ** ** ** ** ** ** (2,703)* (2,306) * ** ** ** ** ** ** ** ** ** ** ** ** ** (17)* (3,492) * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 23*
Impairment (charge) credit * ** ** ** ** ** ** ** ** ** ** ** ** (56)* (242) * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 77* 540
*Profit before tax* * ** ** ** ** ** ** ** ** 1,628* 2,260 * ** ** ** ** ** ** ** ** ** ** ** ** ** (28)* 1,775 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** (8)*
Tax expense * ** ** ** ** ** ** ** ** ** ** (413)* (619) * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 33* (541) * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 24*
*Profit for the period* * ** ** ** ** ** ** ** ** 1,215* 1,641 * ** ** ** ** ** ** ** ** ** ** ** ** ** (26)* 1,234 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** (2)*
Profit attributable to ordinary shareholders * ** ** ** ** ** ** ** ** 1,069* 1,510 * ** ** ** ** ** ** ** ** ** ** ** ** ** (29)* 1,093 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** (2)*
Ordinary shares in issue (weighted-average - basic) *63,906m* 66,972m * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** (5)* 63,502m * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 1*
Basic earnings per share *1.7p* 2.3p *(0.6)p* 1.7p
*REVIEW OF PERFORMANCE**^A*
The Group's statutory profit before tax for the first three months of 2024 was £1,628 million, 28 per cent lower than the same period in 2023. This was due to lower net interest income and higher operating expenses, partly offset by a lower impairment charge. Statutory profit after tax was £1,215 million (three months to 31 March 2023: £1,641 million).
The Group's underlying profit was £1,757 million, a reduction of 21 per cent compared to £2,220 million in the first quarter of 2023. Lower underlying net interest income and higher operating costs were partly offset by growth in underlying other income and a lower underlying impairment charge. Underlying profit was up 1 per cent compared to the fourth quarter of 2023, with stable net income and lower operating costs and remediation. There was also a modest impairment charge, whereas the fourth quarter benefited from an impairment credit resulting from a significant write-back.
Net income of £4,241 million was down 9 per cent on the first three months of the prior year, driven by lower underlying net interest income and an increased charge for operating lease depreciation. This was partly offset by higher underlying other income. Net income was broadly in line with the fourth quarter of 2023.
Underlying net interest income of £3,184 million was down 10 per cent on the first three months of 2023, driven by a lower banking net interest margin of 2.95 per cent (three months to 31 March 2023: 3.22 per cent). The lower margin reflects expected headwinds due to deposit churn and asset margin compression, particularly in the mortgage book as it refinances in a lower margin environment. These factors were partially offset by benefits from higher structural hedge earnings in the higher rate environment. Average interest-earning banking assets in the first quarter of 2024 at £449.1 billion were 1 per cent lower compared to the first quarter of 2023, significantly due to a modest reduction in the mortgage book, as expected and continued repayments of government-backed lending in the Small and Medium Businesses portfolio. Net interest income in the first three months included non-banking interest expense of £105 million (three months to 31 March 2023: £76 million), which increased as a result of higher funding costs and growth in the Group's non-banking businesses. Further gradual quarter-on-quarter increases are expected during 2024.
Underlying net interest income was lower than the fourth quarter of 2023 (three months to 31 December 2023: 2.98 per cent) from asset margin compression mainly within UK mortgages, deposit mix headwinds and lower Commercial Banking deposits, partly mitigated by structural hedge earnings. The Group still expects the banking net interest margin for 2024 to be greater than 290 basis points and average interest-earning banking assets to be greater than £450 billion.
The Group manages the risk to earnings and capital from movements in interest rates by hedging the net liabilities which are stable or less sensitive to movements in rates. The notional balance of the sterling structural hedge was £244 billion (31 December 2023: £247 billion) with a weighted average duration of approximately three and a half years (31 December 2023: approximately three and a half years). The Group continues to expect a modest reduction in the notional balance during 2024, inclusive of the reduction in the first quarter, with balances stabilising over the course of the year. The Group generated c.£1.0 billion of total income from sterling structural hedge balances in the first three months of 2024, representing material growth over the prior year (three months to 31 March 2023: £0.8 billion). The Group continues to expect sterling structural hedge earnings in 2024 to be c.£0.7 billion higher than in 2023.
Underlying other income in the first quarter of 2024 of £1,340 million was 7 per cent higher compared to £1,257 million in the first three months of 2023, reflecting growth within Retail and Commercial Banking. Retail was up 17 per cent versus the first three months of 2023, primarily due to improved UK Motor Finance performance, including growth from the acquisition of Tusker. Within Commercial Banking, c.4 per cent growth reflected strong capital markets performance. Insurance, Pensions and Investments underlying other income was broadly stable compared to the first three months of 2023, with favourable market returns offset by the effects of the agreed sale (subject to regulatory approval) of the in-force bulk annuity portfolio with associated income and costs for the quarter recognised within volatility and other items. Versus the fourth quarter of 2023, underlying other income was 4 per cent higher, primarily driven by Commercial Banking.
The Group delivered positive, organic growth in Insurance, Pensions and Investments and Wealth (reported within Retail) assets under administration (AuA), with combined £1.4 billion net new money in open book AuA over the period. In total, open book AuA now stand at c.£188 billion.
Operating lease depreciation of £283 million increased compared to the prior year (three months to 31 March 2023: £140 million). This reflects a full quarter of depreciation from Tusker, alongside growth in the fleet size and declines in used car prices. The charge is significantly lower than the fourth quarter of 2023 which included a c.£100 million increase in the residual value provision to offset developments in used car prices.
*REVIEW OF PERFORMANCE* (continued)
Total costs including remediation of £2,427 million and operating costs of £2,402 million were 11 per cent higher than prior year. This includes a new sector-wide Bank of England levy, replacing the former charging structure (excluding this levy, operating costs were up 6 per cent) and expected elevated severance charges taken early in the year (£0.1 billion higher year to date). The annual levy of c.£0.1 billion was charged through operating costs in the first quarter and will have a broadly neutral impact on profit in 2024, with an offsetting benefit recognised in net interest income over the course of the year. The Group continues to maintain cost discipline and delivery of cost efficiencies, in the context of inflationary pressures and ongoing strategic investment. The Group's cost:income ratio, including remediation, for the first quarter was 57.2 per cent (54.4 per cent excluding remediation and the Bank of England levy), compared to 47.1 per cent in the prior year. Operating costs in 2024 are still expected to be c.£9.3 billion, now plus c.£0.1 billion for the new Bank of England levy.
The Group recognised remediation costs of £25 million in the first three months (three months to 31 March 2023: £19 million), in relation to pre-existing programmes. There have been no further charges relating to the potential impact of the FCA review into historical motor finance commission arrangements, with the FCA having indicated it will update in September.
Asset quality remains strong with credit performance across portfolios stable in the quarter and remaining broadly at, or favourable to pre-pandemic experience. In UK mortgages, an improvement in new to arrears and flows to default has been observed in the first quarter, following an increase last year primarily driven by legacy variable rate customers. Unsecured Retail portfolios continue to exhibit stable new to arrears and default trends. Alongside, credit quality remains resilient in Commercial Banking.
Underlying impairment was a charge of £57 million (three months to 31 March 2023: £243 million), resulting in an asset quality ratio of 6 basis points. The charge is after a £192 million multiple economic scenarios (MES) credit (three months to 31 March 2023: £79 million credit), as a result of the improved economic outlook in the first quarter, notably in HPI. Impairment also reflects a pre-updated MES charge of £249 million (three months to 31 March 2023: £322 million), equivalent to an asset quality ratio of 23 basis points. Compared to the prior year and quarter, the pre-MES charge has remained stable in Retail. Commercial Banking has benefited from a one-off release from loss rates used in the model, while observing a low charge on new and existing Stage 3 clients.
The underlying expected credit loss (ECL) allowance reduced slightly to £4.1 billion in the quarter given releases following updates to the economic outlook and the benefit from loss rates used in the Commercial Banking model (31 December 2023: £4.3 billion). Like for like this is higher than reported pre-pandemic levels (31 December 2019: £4.2 billion) given it includes a material increase as a result of a weaker economic outlook versus 2019, offset by a £0.6 billion decrease on individually assessed Stage 3 cases, the most significant of which exited the portfolio in the fourth quarter of 2023. The uplift from the base case to the probability-weighted ECL continues to be £0.6 billion, including the adjusted severe downside scenario to incorporate higher CPI inflation and UK Bank Rate profiles.
Stage 3 assets at £10.6 billion are up slightly in the first quarter in both UK mortgages and Commercial Banking portfolios (31 December 2023: £10.1 billion). Write-offs remain low. Stage 2 assets have reduced in the first quarter to £50.2 billion (31 December 2023: £56.5 billion), with 90.7 per cent of Stage 2 loans up to date (31 December 2023: 91.3 per cent). The Group continues to expect the asset quality ratio to be less than 30 basis points in 2024.
Restructuring costs for the first three months of 2024 were £12 million (three months to 31 March 2023: £12 million) and include costs relating to the integration of Embark and Tusker. Volatility and other items were a net loss of £117 million for the first three months (three months to 31 March 2023: net gain of £52 million). This comprised £71 million negative market volatility, £20 million for the amortisation of purchased intangibles (three months to 31 March 2023: £18 million) and £26 million relating to fair value unwind (three months to 31 March 2023: £22 million). Market volatility was substantially driven by rate rises in the quarter causing negative insurance volatility, partly offset by positive impacts from banking volatility.
The return on tangible equity for the first quarter was 13.3 per cent (three months to 31 March 2023: 19.1 per cent). The Group continues to expect the return on tangible equity for 2024 to be c.13 per cent. Tangible net assets per share as at 31 March 2024 were 51.2 pence, up from 50.8 pence at 31 December 2023. The increase was driven by accumulated profit, partly offset by increased longer-term rates impacting the cash flow hedge reserve and pension surplus.
The Group has commenced the share buyback programme announced in February 2024, with c.0.5 billion shares repurchased as at 31 March 2024.
*REVIEW OF PERFORMANCE* (continued)
*Balance sheet*
Loans and advances to customers reduced in the first quarter of 2024 to £448.5 billion with a £1.6 billion reduction in the UK mortgages portfolio following the expected refinancing of the higher maturities in the fourth quarter of 2023, as well as a £0.8 billion reduction in Small and Medium Business lending, including repayments of government-backed lending. This was partly offset by growth in UK Retail unsecured loans of £0.7 billion, due to organic balance growth and lower repayments following a securitisation in the fourth quarter of 2023, alongside growth in UK Motor Finance and credit cards.
Customer deposits stood at £469.2 billion at the end of the first quarter, a decrease of £2.2 billion. Retail deposits were up £1.3 billion in the quarter with a combined increase of £0.9 billion across Retail savings and Wealth, driven by inflows to limited withdrawal and fixed products and a £0.4 billion increase in current account balances, benefiting from seasonally lower spend and bank holiday timing impacts (with the latter expected to reverse in the second quarter). This was partly offset by seasonal tax payments and outflows to savings products, including the Group's own savings offers. Growth in Retail was more than offset by a reduction in Commercial Banking deposits of £3.5 billion, largely due to Small and Medium Businesses balance reductions.
The Group has a large, high quality liquid asset portfolio held mainly in cash and government bonds, with all assets hedged for interest rate risk. The Group's liquid assets continue to significantly exceed regulatory requirements and internal risk appetite, with a strong, stable liquidity coverage ratio of 143 per cent (31 December 2023: 142 per cent) and a strong net stable funding ratio of 130 per cent (31 December 2023: 130 per cent). The loan to deposit ratio of 96 per cent, essentially stable compared to 31 December 2023, continues to reflect a robust funding and liquidity position.
*Capital*
The Group's CET1 capital ratio at 31 March 2024 was 13.9 per cent (31 December 2023: 13.7 per cent pro forma). Capital generation before regulatory headwinds during the first three months was 46 basis points, reflecting robust banking build in the quarter, partially offset by risk-weighted asset increases. The risk-weighted asset increases reflect underlying lending, but also include a temporary increase of c.£1.5 billion (equivalent to c.9 basis points) that is expected to reverse in the second quarter. Regulatory headwinds of 6 basis points reflect the reduction in the transitional factor applied to IFRS 9 dynamic relief on 1 January 2024 and an adjustment for part of the impact of the Retail secured CRD IV models. Capital generation after the impact of these regulatory headwinds was 40 basis points. The Group has accrued a foreseeable ordinary dividend of 22 basis points, based upon a pro-rated amount of the 2023 full year dividend. The Group continues to expect capital generation in 2024 to be c.175 basis points.
Risk-weighted assets increased by £3.7 billion to £222.8 billion at 31 March 2024 (31 December 2023: £219.1 billion). This largely reflected the impact of Retail lending and the temporary increase noted above. The impact from credit and model calibrations was minimal.
In relation to the Retail secured CRD IV models, it is estimated that a £5 billion risk-weighted asset increase will be required over 2024 to 2026, noting that this will be subject to final model outcomes. The Group's risk-weighted assets guidance for 2024 remains unchanged at between £220 billion and £225 billion.
The Group's total regulatory CET1 capital requirement remains at around 12 per cent. The Board's view of the ongoing level of CET1 capital required to grow the business, meet current and future regulatory requirements and cover economic and business uncertainties is c.13.0 per cent. This includes a management buffer of around 1 per cent. In order to manage risks and distributions in an orderly way, the Board expects to pay down to the previous target of c.13.5 per cent by the end of 2024 before progressing towards paying down to the current capital target of c.13.0 per cent by the end of 2026.
*ADDITIONAL INFORMATION*
*CAPITAL GENERATION*
*Pro forma CET1 ratio as at 31 December 2023**^1* *13.7%*
Banking build (including impairment charge) (bps) 57
Risk-weighted assets (bps) (24)
Other movements^2 (bps) 13
*Capital generation (bps)* * ** ** ** ** ** ** ** ** ** ** ** ** ** 46*
Retail secured CRD IV model updates and phased unwind of IFRS 9 transitional relief (bps) (6)
*Capital generation (post CRD IV and transitional headwinds) (bps)* * ** ** ** ** ** ** ** ** ** ** ** ** ** 40*
Ordinary dividend (bps) (22)
*CET1 ratio as at 31 March 2024* *13.9%*
^1 31 December 2023 reflects both the full impact of the share buyback announced in respect of 2023 and the ordinary dividend received from the Insurance business in February 2024, but excludes the impact of the phased unwind of IFRS 9 relief on 1 January 2024.
^2 Includes share-based payments and market volatility.
* *
*IMPAIRMENT DETAIL*
*Three months ended*
* **31 Mar 2024*
*£m* Three months ended31 Mar 2023
£m *Change*
*%* Three
months
ended
31 Dec
2023
£m *Change*
*%*
Charges (credits) pre-updated MES^1
Retail * ** ** ** ** ** ** ** ** ** ** ** 303* 271 * ** ** ** ** ** ** ** ** ** ** ** ** ** (12)* 277 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** (9)*
Commercial Banking * ** ** ** ** ** ** ** ** ** ** ** ** (49)* 53 (626) * ** ** ** ** ** ** ** ** ** ** ** ** (92)*
Other * ** ** ** ** ** ** ** ** ** ** ** ** ** ** (5)* (2) (4) * ** ** ** ** ** ** ** ** ** ** ** ** ** 25* * ** ** ** ** ** ** ** ** ** ** ** 249* 322 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 23* (353)
Updated economic outlook
Retail * ** ** ** ** ** ** ** ** ** ** (196)* (66) (203) * ** ** ** ** ** ** ** ** ** ** ** ** ** ** (3)*
Commercial Banking * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 4* (13) 15 * ** ** ** ** ** ** ** ** ** ** ** ** ** 73* * ** ** ** ** ** ** ** ** ** ** (192)* (79) (188) * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 2*
Underlying impairment charge (credit)^A * ** ** ** ** ** ** ** ** ** ** ** ** ** 57* 243 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 77* (541)
Asset quality ratio^A *0.06%* 0.22% *(16)bp* (0.47)%
Total underlying expected credit loss allowance (at end of period)^A * ** ** ** ** ** ** ** ** 4,126* 5,221 * ** ** ** ** ** ** ** ** ** ** ** ** ** (21)* 4,337 * ** ** ** ** ** ** ** ** ** ** ** ** ** ** (5)*
^1 Impairment charges excluding the impact from updated economic outlook taken each quarter.
*ADDITIONAL INFORMATION* (continued)
*IMPAIRMENT DETAIL* (continued)
*Loans and advances to customers and expected credit loss allowance (underlying basis)**^A*
*At 31 March 2024* *Stage 1*
*£m* *Stage 2*
*£m* *Stage 3*
*£m* *Total*
*£m* *Stage 2*
*as % of*
*total* *Stage 3*
*as % of*
*total*
* *
*Loans and advances to customers*
UK mortgages * ** ** ** ** ** 261,828* * ** ** ** ** ** ** 36,476* * ** ** ** ** ** ** ** ** 7,608* * ** ** ** ** ** 305,912* * ** ** ** ** ** ** ** 11.9* * ** ** ** ** ** 2.5** ** ** ** *
Credit cards * ** ** ** ** ** ** 12,729* * ** ** ** ** ** ** ** ** 2,883* * ** ** ** ** ** ** ** ** ** ** ** 308* * ** ** ** ** ** ** 15,920* * ** ** ** ** ** ** ** 18.1* * ** ** ** ** ** 1.9** ** ** ** *
UK unsecured loans and overdrafts * ** ** ** ** ** ** ** ** 7,667* * ** ** ** ** ** ** ** ** 1,210* * ** ** ** ** ** ** ** ** ** ** ** 195* * ** ** ** ** ** ** ** ** 9,072* * ** ** ** ** ** ** ** 13.3* * ** ** ** ** ** 2.1** ** ** ** *
UK Motor Finance * ** ** ** ** ** ** 13,897* * ** ** ** ** ** ** ** ** 2,140* * ** ** ** ** ** ** ** ** ** ** ** 118* * ** ** ** ** ** ** 16,155* * ** ** ** ** ** ** ** 13.2* * ** ** ** ** ** 0.7** ** ** ** *
Other * ** ** ** ** ** ** 16,178* * ** ** ** ** ** ** ** ** ** ** ** 507* * ** ** ** ** ** ** ** ** ** ** ** 149* * ** ** ** ** ** ** 16,834* * ** ** ** ** ** 3.0** ** ** ** * * ** ** ** ** ** 0.9** ** ** ** *
Retail^1 * ** ** ** ** ** 312,299* * ** ** ** ** ** ** 43,216* * ** ** ** ** ** ** ** ** 8,378* * ** ** ** ** ** 363,893* * ** ** ** ** ** ** ** 11.9* * ** ** ** ** ** 2.3** ** ** ** *
Small and Medium Businesses * ** ** ** ** ** ** 27,115* * ** ** ** ** ** ** ** ** 4,087* * ** ** ** ** ** ** ** ** 1,465* * ** ** ** ** ** ** 32,667* * ** ** ** ** ** ** ** 12.5* * ** ** ** ** ** 4.5** ** ** ** *
Corporate and Institutional Banking * ** ** ** ** ** ** 52,382* * ** ** ** ** ** ** ** ** 2,875* * ** ** ** ** ** ** ** ** ** ** ** 777* * ** ** ** ** ** ** 56,034* * ** ** ** ** ** 5.1** ** ** ** * * ** ** ** ** ** 1.4** ** ** ** *
Commercial Banking * ** ** ** ** ** ** 79,497* * ** ** ** ** ** ** ** ** 6,962* * ** ** ** ** ** ** ** ** 2,242* * ** ** ** ** ** ** 88,701* * ** ** ** ** ** 7.8** ** ** ** * * ** ** ** ** ** 2.5** ** ** ** *
Equity Investments and Central Items^2 * ** ** ** ** ** ** ** ** ** ** (323)* * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** -* * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 6* * ** ** ** ** ** ** ** ** ** ** (317)*
*Total gross lending* * ** ** ** ** ** 391,473* * ** ** ** ** ** ** 50,178* * ** ** ** ** ** ** 10,626* * ** ** ** ** ** 452,277* * ** ** ** ** ** ** ** 11.1* * ** ** ** ** ** 2.3** ** ** ** *
ECL allowance on drawn balances * ** ** ** ** ** ** ** ** ** ** (864)* * ** ** ** ** ** ** ** (1,374)* * ** ** ** ** ** ** ** (1,541)* * ** ** ** ** ** ** ** (3,779)*
*Net balance sheet carrying value* * ** ** ** ** ** 390,609* * ** ** ** ** ** ** 48,804* * ** ** ** ** ** ** ** ** 9,085* * ** ** ** ** ** 448,498*
* *
*Customer related ECL allowance (drawn and undrawn)*
UK mortgages * ** ** ** ** ** ** ** ** ** ** ** 134* * ** ** ** ** ** ** ** ** ** ** ** 406* * ** ** ** ** ** ** ** ** ** ** ** 752* * ** ** ** ** ** ** ** ** 1,292*
Credit cards * ** ** ** ** ** ** ** ** ** ** ** 231* * ** ** ** ** ** ** ** ** ** ** ** 405* * ** ** ** ** ** ** ** ** ** ** ** 144* * ** ** ** ** ** ** ** ** ** ** ** 780*
UK unsecured loans and overdrafts * ** ** ** ** ** ** ** ** ** ** ** 161* * ** ** ** ** ** ** ** ** ** ** ** 233* * ** ** ** ** ** ** ** ** ** ** ** 118* * ** ** ** ** ** ** ** ** ** ** ** 512*
UK Motor Finance^3 * ** ** ** ** ** ** ** ** ** ** ** 187* * ** ** ** ** ** ** ** ** ** ** ** ** ** 95* * ** ** ** ** ** ** ** ** ** ** ** ** ** 67* * ** ** ** ** ** ** ** ** ** ** ** 349*
Other * ** ** ** ** ** ** ** ** ** ** ** ** ** 19* * ** ** ** ** ** ** ** ** ** ** ** ** ** 21* * ** ** ** ** ** ** ** ** ** ** ** ** ** 46* * ** ** ** ** ** ** ** ** ** ** ** ** ** 86*
Retail^1 * ** ** ** ** ** ** ** ** ** ** ** 732* * ** ** ** ** ** ** ** ** 1,160* * ** ** ** ** ** ** ** ** 1,127* * ** ** ** ** ** ** ** ** 3,019*
Small and Medium Businesses * ** ** ** ** ** ** ** ** ** ** ** 141* * ** ** ** ** ** ** ** ** ** ** ** 222* * ** ** ** ** ** ** ** ** ** ** ** 170* * ** ** ** ** ** ** ** ** ** ** ** 533*
Corporate and Institutional Banking * ** ** ** ** ** ** ** ** ** ** ** 155* * ** ** ** ** ** ** ** ** ** ** ** 138* * ** ** ** ** ** ** ** ** ** ** ** 242* * ** ** ** ** ** ** ** ** ** ** ** 535*
Commercial Banking * ** ** ** ** ** ** ** ** ** ** ** 296* * ** ** ** ** ** ** ** ** ** ** ** 360* * ** ** ** ** ** ** ** ** ** ** ** 412* * ** ** ** ** ** ** ** ** 1,068*
Equity Investments and Central Items * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** -* * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** -* * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 4* * ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 4*
*Total* * ** ** ** ** ** ** ** ** 1,028* * ** ** ** ** ** ** ** ** 1,520* * ** ** ** ** ** ** ** ** 1,543* * ** ** ** ** ** ** ** ** 4,091*
* *
*Customer related ECL allowance (drawn and undrawn) as a percentage of loans and advances to customers**^4*
UK mortgages * ** ** ** ** ** 0.1** ** ** ** * * ** ** ** ** ** 1.1** ** ** ** * * ** ** ** ** ** 9.9** ** ** ** * * ** ** ** ** ** 0.4** ** ** ** *
Credit cards * ** ** ** ** ** 1.8** ** ** ** * * ** ** ** ** ** ** ** 14.0* * ** ** ** ** ** ** ** 50.3* * ** ** ** ** ** 4.9** ** ** ** *
UK unsecured loans and overdrafts * ** ** ** ** ** 2.1** ** ** ** * * ** ** ** ** ** ** ** 19.3* * ** ** ** ** ** ** ** 65.9* * ** ** ** ** ** 5.7** ** ** ** *
UK Motor Finance * ** ** ** ** ** 1.3** ** ** ** * * ** ** ** ** ** 4.4** ** ** ** * * ** ** ** ** ** ** ** 56.8* * ** ** ** ** ** 2.2** ** ** ** *
Other * ** ** ** ** ** 0.1** ** ** ** * * ** ** ** ** ** 4.1** ** ** ** * * ** ** ** ** ** ** ** 30.9* * ** ** ** ** ** 0.5** ** ** ** *
Retail^1 * ** ** ** ** ** 0.2** ** ** ** * * ** ** ** ** ** 2.7** ** ** ** * * ** ** ** ** ** ** ** 13.5* * ** ** ** ** ** 0.8** ** ** ** *
Small and Medium Businesses * ** ** ** ** ** 0.5** ** ** ** * * ** ** ** ** ** 5.4** ** ** ** * * ** ** ** ** ** ** ** 15.4* * ** ** ** ** ** 1.6** ** ** ** *
Corporate and Institutional Banking * ** ** ** ** ** 0.3** ** ** ** * * ** ** ** ** ** 4.8** ** ** ** * * ** ** ** ** ** ** ** 31.2* * ** ** ** ** ** 1.0** ** ** ** *
Commercial Banking * ** ** ** ** ** 0.4** ** ** ** * * ** ** ** ** ** 5.2** ** ** ** * * ** ** ** ** ** ** ** 21.9* * ** ** ** ** ** 1.2** ** ** ** *
Equity Investments and Central Items * ** ** -** ** ** ** ** ** ** ** ** ** * * ** ** ** ** ** ** ** 66.7*
*Total* * ** ** ** ** ** 0.3** ** ** ** * * ** ** ** ** ** 3.0** ** ** ** * * ** ** ** ** ** ** ** 15.1* * ** ** ** ** ** 0.9** ** ** ** *
^1^ ^ ^ Retail balances exclude the impact of the HBOS acquisition-related adjustments.
^2^ ^ ^ Contains centralised fair value hedge accounting adjustments.
^3^ ^ ^ UK Motor Finance for Stages 1 and 2 include £188 million relating to provisions against residual values of vehicles subject to finance leasing agreements for Black Horse. These provisions are included within the calculation of coverage ratios.
^4^ ^ ^ Total and Stage 3 ECL allowances as a percentage of drawn balances exclude loans in recoveries in Credit cards of £22 million, UK unsecured loans and overdrafts of £16 million, Small and Medium Businesses of £360 million and Corporate and Institutional Banking of £1 million.
*ADDITIONAL INFORMATION* (continued)
*IMPAIRMENT DETAIL* (continued)
*Loans and advances to customers and expected credit loss allowance (underlying basis)**^A* (continued)
At 31 December 2023 Stage 1
£m Stage 2
£m Stage 3
£m Total
£m Stage 2
as % of
total Stage 3
as % of
total
Loans and advances to customers
UK mortgages 258,362 41,911 7,300 307,573 13.6 2.4
Credit cards 12,625 2,908 284 15,817 18.4 1.8
UK unsecured loans and overdrafts 7,103 1,187 196 8,486 14.0 2.3
UK Motor Finance 13,541 2,027 112 15,680 12.9 0.7
Other 15,898 525 144 16,567 3.2 0.9
Retail^1 307,529 48,558 8,036 364,123 13.3 2.2
Small and Medium Businesses 27,525 4,458 1,530 33,513 13.3 4.6
Corporate and Institutional Banking 52,049 3,529 538 56,116 6.3 1.0
Commercial Banking 79,574 7,987 2,068 89,629 8.9 2.3
Equity Investments and Central Items^2 (43) - 6 (37)
Total gross lending 387,060 56,545 10,110 453,715 12.5 2.2
ECL allowance on drawn balances (901) (1,532) (1,537) (3,970)
Net balance sheet carrying value 386,159 55,013 8,573 449,745
Customer related ECL allowance (drawn and undrawn)
UK mortgages 170 441 757 1,368
Credit cards 234 446 130 810
UK unsecured loans and overdrafts 153 244 118 515
UK Motor Finance^3 188 91 63 342
Other 20 21 47 88
Retail^1 765 1,243 1,115 3,123
Small and Medium Businesses 140 231 167 538
Corporate and Institutional Banking 156 218 253 627
Commercial Banking 296 449 420 1,165
Equity Investments and Central Items - - 4 4
Total 1,061 1,692 1,539 4,292
Customer related ECL allowance (drawn and undrawn) as a percentage of loans and advances to customers^4
UK mortgages 0.1 1.1 10.4 0.4
Credit cards 1.9 15.3 49.4 5.1
UK unsecured loans and overdrafts 2.2 20.6 65.6 6.1
UK Motor Finance 1.4 4.5 56.3 2.2
Other 0.1 4.0 32.6 0.5
Retail^1 0.2 2.6 13.9 0.9
Small and Medium Businesses 0.5 5.2 13.9 1.6
Corporate and Institutional Banking 0.3 6.2 47.0 1.1
Commercial Banking 0.4 5.6 �