Lloyds Banking Group plc — FY2023 Form 20-F summary
Reporting period: Fiscal year ended 31 December 2023. The filing was submitted on 22 February 2024. This is an annual report, not a standalone Q4 report. Financial statements use IFRS as issued by the IASB and are presented in pounds sterling. Comparatives for 2022 were restated for IFRS 17 and presentation changes, so year-on-year comparisons require care.
Financial performance and position
| Metric | 2023 | 2022 |
|---|---|---|
| Net interest income | £13.298bn | £12.922bn |
| Net interest margin | 2.11% | 2.01% |
| Total income after insurance and investment contract finance items | £18.629bn | £15.541bn |
| Operating expenses | £10.823bn | £9.237bn |
| Impairment charge | £303m | £1.522bn |
| Statutory profit before tax | £7.503bn | £4.782bn |
| Profit for the year | £5.518bn | £3.923bn |
| Profit attributable to ordinary shareholders | £4.933bn | £3.389bn |
| Earnings per share | 7.6p | 4.9p |
| Underlying profit before tax | £7.809bn | £7.028bn |
| Cost:income ratio | 58.1% | 59.4% |
Statutory other income swung from a loss of £18.268bn in 2022 to a gain of £22.107bn in 2023, largely reflecting market movements in insurance policyholder investments and the corresponding insurance-contract finance entries. These items substantially offset one another and make headline income volatile. The 2022 result also included an exceptional IFRS 17 charge for pension-contract modifications. Underlying profit is a non-GAAP measure; the filing reconciles it to statutory profit before tax.
Net interest income increased 3%, as stronger margins and structural hedge earnings outweighed lower average interest-earning assets. The 10-basis-point NIM improvement reflected higher rates and hedge income, partly offset by deposit mix and mortgage margin pressure. Expenses rose 17%, including planned investment, inflation, severance, new business costs and higher vehicle depreciation. Lower impairment reflected a significant commercial-client debt repayment and a more favourable economic outlook; the benefit was partly offset by charges in retail portfolios.
| Balance sheet and funding | 31 December 2023 | 31 December 2022 |
|---|---|---|
| Total assets | £881.453bn | £873.394bn |
| Loans and advances to customers | £449.745bn | £454.899bn |
| Customer deposits | £471.396bn | £475.331bn |
| Debt securities in issue at amortised cost | £75.592bn | £73.819bn |
| Subordinated liabilities | £10.253bn | £10.730bn |
| Cash and central-bank balances | £78.110bn | £91.388bn |
Loans to customers were broadly stable excluding £5.2bn of securitisations. Customer deposits declined £3.9bn, with lower current-account balances partly offset by growth in savings and wealth balances. Total wholesale funding was £98.7bn, down from £100.3bn.
Operating cash flow was £6.810bn, versus £22.011bn in 2022; investing cash flow was an outflow of £9.821bn and financing cash flow an outflow of £3.500bn. Cash and cash equivalents fell £6.991bn to £88.838bn. These cash-flow measures can be affected by banking balance-sheet movements and should not be read like industrial-company free cash flow.
- Capital: CET1 ratio 14.6% (15.1% in 2022); adjusted CET1 ratio 13.7% after specified insurance-dividend and buyback impacts. Tier 1 ratio 17.2%, total capital ratio 19.8%, MREL ratio 31.9%, and UK leverage ratio 5.8%.
- Risk-weighted assets: £219.1bn, up from £210.9bn. Retail secured model updates added about £5bn; a further increase of about £5bn is estimated over 2024–2026, subject to final model outcomes.
- Liquidity: Loan-to-deposit ratio 95% (96%); rolling 12-month average LCR 142% (144%); NSFR 130% (unchanged). LCR-eligible assets averaged £136.0bn.
- Credit quality: Customer-related ECL allowance was £4.039bn, down from £4.841bn. Stage 2 lending was 11.7% of total lending (13.3%); Stage 3 was 1.6% (1.7%).
Material changes and business performance
- Underlying profit before tax rose 11%, while statutory profit before tax rose 57%; the statutory comparison is particularly affected by IFRS 17 restatement and insurance-market volatility.
- Retail underlying profit before tax fell to £4.043bn from £4.497bn, reflecting mortgage and unsecured lending margin pressure, higher costs and motor-finance remediation. Commercial Banking profit increased to £3.219bn from £1.861bn, supported by higher rates and an impairment credit. Insurance, Pensions and Investments returned to £190m profit from a £62m loss.
- The Group acquired Tusker, a vehicle management and leasing business, in February 2023. Used-car price declines contributed to higher motor-finance residual-value provisions and operating lease depreciation.
- Equity increased to £47.365bn from £43.911bn, reflecting earnings and other movements, partly offset by dividends and buybacks. The prior-year buyback completed in August 2023, repurchasing about 4.386bn shares.
Outlook, risks and unusual items
- Management’s UK outlook: 2024 GDP growth expected to remain subdued; unemployment may rise by about 1 percentage point; house prices may fall around 2%; inflation is expected to move closer to 2%; and the Bank of England may begin reducing Bank Rate. Management highlights uncertainty, including geopolitical escalation and the delayed effects of mortgage refinancing at higher rates. These are expectations, not guarantees.
- Capital returns: The Board recommended a final dividend of 1.84p per share, taking the 2023 total to 2.76p, up 15%. It also announced an intended buyback of up to £2.0bn, subject to PRA authority, expected to complete by 31 December 2024. The stated total capital return for 2023 is up to £3.8bn; the final dividend remained subject to shareholder approval when filed.
- Motor finance commission: The Group recognised a £450m provision following FCA and Financial Ombudsman developments concerning historical commission arrangements. The FCA review’s conclusions, potential redress and timing remain uncertain; the ultimate cost may be materially higher or lower. The filing also reports £675m of total remediation and regulatory/legal provisions charged in 2023.
- Other legal and regulatory matters: The Group faces ordinary-course litigation, investigations and customer remediation matters, including the ongoing HBOS Reading review, PPI-related litigation and an FCA investigation into aspects of anti-money-laundering controls. Provisions and outcomes are uncertain; the filing does not quantify a clear total potential exposure for all contingencies.
- Economic and operating risks: The UK-focused business is exposed to subdued growth, inflation, high rates, deposit competition, mortgage refinancing pressure, property values, credit deterioration, used-car prices, cyber and fraud threats, supplier and operational resilience, model risk, and complex regulatory change. Change and execution risk and model risk were rated elevated.
- Climate: The Group targets a reduction of more than 50% in financed emissions by 2030 and net zero by 2050 or sooner. It reports substantial external dependencies and methodology limitations. Climate-related ECL estimates were below materiality thresholds, so no ECL adjustment was made at year-end.
- Audit and controls: Deloitte issued unqualified opinions on the IFRS financial statements and internal control over financial reporting. The filing reports effective disclosure controls and financial reporting controls.
Key facts for investors to verify
- Separate recurring banking performance from IFRS 17 effects, insurance investment volatility and other items excluded from underlying profit.
- Track the FCA motor-finance review and whether the £450m provision proves sufficient.
- Confirm PRA approval, execution and capital impact of the proposed £2bn buyback, and approval/payment of the final dividend.
- Monitor CET1 headroom, the forecast £5bn further model-related RWA increase, and the adjusted versus reported CET1 figures.
- Assess deposit pricing, mortgage margins and refinancing-related arrears alongside the Group’s impairment assumptions and UK economic outlook.
- Review cash-flow movements in the context of banking balance-sheet changes, and verify liquidity and wholesale funding trends.