Bank of Scotland plc: 2023 Half-Year Results

Bank of Scotland plc

2023 Half-Year Results

26 July 2023

Member of the Lloyds Banking Group

CONTENTS

FINANCIAL REVIEW

Principal activities

Bank of Scotland plc (the Bank) and its subsidiaries (together, the Group) provide a wide range of banking and financial services. The Group's revenue is earned through interest and fees on a broad range of financial services products including current and savings accounts, personal loans, credit cards and mortgages within the retail market and loans and other products to commercial and corporate customers.
 

Income statement

The Group made a loss before tax for the half-year to 30 June 2023 of £112 million, compared to a profit before tax of £1,157 million for the same period in 2022, as a result of lower net interest income and a higher impairment charge. Loss after tax was £31 million (half-year to 30 June 2022: profit after tax of £843 million).

Total income for the half-year to 30 June 2023 was £1,751 million, a decrease of 33 per cent on the first half of 2022. Net interest income was £1,565 million, compared to £2,472 million for the same period in 2022. This was impacted by higher funding costs on intra-group borrowing which more than offset the benefits from UK Bank Rate increases and effects of average interest-earning asset growth.

Other income of £186 million was 16 per cent higher than the first half of 2022, driven by increases in both net fee and commission income and other operating income. Net fee and commission income for the period was £175 million compared to £143 million in the first half of 2022, reflecting improved credit and debit card performance. Other operating income in the period of £56 million was up £27 million.

Operating expenses of £1,485 million were 2 per cent higher than in the first half of 2022, due to higher depreciation given increased strategic investment, partly offset by lower staff costs. The Group recognised remediation costs of £11 million (half-year to 30 June 2022: £2 million). There have been no further charges relating to HBOS Reading and the provision held continues to reflect the Group's best estimate of its full liability, albeit uncertainties remain.

The impairment charge was £378 million compared with a £18 million charge in the half-year to 30 June 2022. The increase reflects the expected credit loss (ECL) allowance build from Stage 1 loans rolling forward into a more adverse economic outlook, as well as increased flows to default primarily in legacy variable rate mortgage portfolios and the inclusion of MBNA limited following the transfer from Lloyds Bank plc in November 2022. This increase was partly offset by a lower charge from economic outlook revisions. The Group's ECL allowance increased to £3,401 million, compared to £3,327 million at 31 December 2022 resulting from the Stage 3 increases in the mortgages and commercial portfolios alongside low levels of write offs in the period. Asset quality remains resilient with only modest deterioration to date from a low base, with credit performance similar, or remaining favourable, to pre-pandemic experience.

The Group recognised a tax credit of £81 million in the period, compared to an expense of £314 million in the first half of 2022.
 

Balance sheet

The Group's balance sheet has remained broadly stable compared to 31 December 2022. Total assets of £320,026 million were down £215 million compared to £320,241 million at 31 December 2022. Financial assets at amortised cost were £562 million lower at £308,100 million compared to £308,662 million at 31 December 2022 with debt securities £1,957 million higher, offset by a reduction in balances due from fellow Lloyds Banking Group undertakings of £358 million and loans and advances to customers of £2,172 million to £290,244 million. The reduction in loans and advances to customers was largely as a result of the exit of £2.5 billion of legacy mortgage loans.

Total liabilities of £303,746 million were down £449 million compared to £304,195 million at 31 December 2022 driven by a reduction in customer deposits of £3,951 million in the period to £162,412 million. The reduction in the first half included a decrease in current account balances from tax payments, higher spend and a more competitive market, partly offset by growth in savings balances. This was partially offset by increases in balances due to fellow Lloyds Banking Group undertakings of £2,094 million and debt securities in issue of £1,455 million.

Total equity increased by £234 million from £16,046 million at 31 December 2022 to £16,280 million at 30 June 2023.

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CONTACTS

For further information please contact:

INVESTORS AND ANALYSTS

Douglas Radcliffe

Group Investor Relations Director

020 7356 1571

douglas.radcliffe@lloydsbanking.com

Edward Sands

Director of Investor Relations

020 7356 1585

edward.sands@lloydsbanking.com

Nora Thoden

Director of Investor Relations - ESG

020 7356 2334

nora.thoden@lloydsbanking.com

CORPORATE AFFAIRS

Grant Ringshaw

External Relations Director

020 7356 2362

grant.ringshaw@lloydsbanking.com

Matt Smith

Head of Media Relations

020 7356 3522

matt.smith@lloydsbanking.com

Copies of this News Release may be obtained from:

Investor Relations, Lloyds Banking Group plc, 25 Gresham Street, London EC2V 7HN

The statement can also be found on the Group's website - www.lloydsbankinggroup.com

Registered office: Bank of Scotland plc, The Mound, Edinburgh EH1 1YZ

Registered in Scotland No. SC327000

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