2024 Q3 Interim Management Statement

Lloyds Banking Group plc

Q3 2024 Interim Management Statement

23 October 2024

RESULTS FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2024

"The Group delivered a robust financial performance in the third quarter of 2024, with growth in income alongside continued cost discipline and strong asset quality. Our performance allows us confidently to reaffirm our 2024 guidance.

As mentioned during our Half-Year 2024 results update, we are making good progress on our strategy and remain on track to deliver higher, more sustainable returns. As ever, we are guided by our purpose of Helping Britain Prosper and continuing to provide support to our customers. The strength of the Group's franchise, alongside our financial performance, enables us to deliver for all stakeholders."

Charlie Nunn, Group Chief Executive

Robust financial performance, in line with expectations¹

• Statutory profit after tax of £3.8 billion (nine months to 30 September 2023: £4.3 billion) with net income down 7 per cent on the prior year and operating costs up 5 per cent (including the Bank of England Levy), partly offset by a lower impairment charge
• Underlying net interest income of £9.6 billion, down 8 per cent with a lower banking net interest margin of 2.94 per cent and average interest-earning banking assets of £449.9 billion. Underlying net interest income of £3.2 billion increased by 2 per cent in the third quarter, with a banking net interest margin of 2.95 per cent, up from 2.93 per cent in the second quarter
• Underlying other income of £4.2 billion, 9 per cent higher than the prior year, driven by strengthening customer and market activity and the benefit of strategic initiatives
• Operating lease depreciation of £994 million, up on the prior year reflecting growth in the fleet size, depreciation of higher value vehicles and declines in used electric car prices. The third quarter charge of £315 million was in line with expectations
• Operating costs of £7.0 billion, up 5 per cent, with cost efficiencies helping to partially offset higher ongoing strategic investment, planned accelerated severance charges and inflationary pressure, 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
• Remediation costs of £124 million (first nine months of 2023: £134 million), largely in relation to pre-existing programmes
• Underlying impairment charge of £273 million in the year to date and asset quality ratio of 9 basis points. Excluding the impact of improvements to the economic outlook, the asset quality ratio was 18 basis points. The portfolio remains well-positioned with resilient credit performance
• Underlying loans and advances to customers increased by £7.3 billion in the year to date, including £4.6 billion in the third quarter, to £457.0 billion. The growth in the year to date includes £7.4 billion across Retail, while Commercial Banking remained broadly stable
• Customer deposits of £475.7 billion increased by £4.3 billion in the year to date, with growth in Retail deposits of £6.6 billion, partly offset by a reduction in Commercial Banking deposits of £2.1 billion. Customer deposits continued to grow in the third quarter, with an increase of £1.0 billion
• Strong capital generation of 132 basis points in the year to date. CET1 ratio of 14.3 per cent, after 71 basis points for the interim ordinary dividend paid and the foreseeable ordinary dividend accrual, significantly above our ongoing target of c.13.0 per cent by 2026
• Risk-weighted assets of £223.3 billion up £4.2 billion in the period, reflecting lending growth and other movements, partly offset by efficient management of risk-weighted assets
• Tangible net assets per share of 52.5 pence, up from 50.8 pence at 31 December 2023

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 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
• See the basis of presentation on page 14.
• 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

^A  See page 14.

¹    31 December 2023 reflects both the full impact of the share buyback 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 simple average of month-end observations over the previous 12 months.

³  The net stable funding ratio is calculated as a simple average of month-end observations over the previous four quarter-ends.

QUARTERLY INFORMATION^A