Business Context and Reporting Period
This Form 6-K filing by Lloyds Banking Group plc, dated July 3, 2014, announces a restatement of 2013 segmental financial information. The restatement reflects a reorganisation of the Group's operating structure implemented at the beginning of 2014 to increase focus on core customers and strategically important segments. The filing clarifies that underlying profit and statutory results remain unchanged by these adjustments.
Key Financial Metrics (2013 Full Year)
The following metrics represent the restated 2013 full-year results on an underlying basis:
- Total Underlying Income: £18,805 million
- Total Costs: £9,635 million
- Total Impairment: £3,004 million
- Underlying Profit: £6,166 million
- Group Banking Net Interest Margin: 2.12%
- Group Asset Quality Ratio: 0.57%
- Group Return on Risk-Weighted Assets: 2.14%
- Total Customer Balances: £933.5 billion (Loans: £495.2bn; Deposits: £438.3bn)
- Risk-Weighted Assets: £263.9 billion
Material Changes and Segment Reorganisation
The filing details significant shifts in segmental reporting compared to prior periods:
- Retail: Now incorporates the Wealth business and Retail Business Banking. Consumer credit card business and TSB were transferred out.
- Consumer Finance: A newly created division comprising consumer and corporate credit card businesses and Asset Finance (including Black Horse and Lex Autolease). It absorbed these units from Retail and Commercial Banking.
- Run-off: Established as a separate segment for non-core assets, including the results and gains on sale of St. James's Place and Scottish Widows Investment Partnership.
- TSB Banking Group: Reported as a separate segment while it remains a consolidated entity. Results are presented on a Lloyds Banking Group reporting basis, differing from TSB's standalone prospectus figures.
- Regulatory Costs: Costs such as the Bank Levy and FSCS are now attributed directly to divisions rather than reported in Central items.
Outlook, Risks, and Management Commentary
Management states the reorganisation aims to improve customer relationship management via existing Retail infrastructure and capitalise on growth opportunities in asset-backed lending and credit cards. The filing includes a comprehensive list of forward-looking statement risks, including:
- UK domestic and global economic conditions.
- Ability to access sufficient funding and meet liquidity needs.
- Instability in global financial markets, including Eurozone issues.
- Changes in regulatory capital or liquidity requirements.
- Exposure to regulatory scrutiny and legal proceedings.
- Impact of the Scottish independence referendum on laws and regulation.
The Group undertakes no obligation to update forward-looking statements.
Investor Verification Checklist
- Verify the distinction between Lloyds Banking Group reporting basis for TSB versus TSB's standalone prospectus figures.
- Confirm the impact of the new "Consumer Finance" and "Run-off" segments on future profitability trends.
- Review the attribution of regulatory costs (Bank Levy, FSCS) to specific divisions for margin analysis.
- Assess the asset quality ratio of the new Consumer Finance segment (1.76%) compared to Retail (0.24%).
- Monitor the progress of the "Simplification programme" and cost savings mentioned in the risk factors.