Lloyds Banking Group plc — FY2022 Form 20-F
Reporting period: Year ended 31 December 2022; filed 24 February 2023. This is an annual report, not a standalone fourth-quarter filing. The provided text does not give a clear set of Q4-only financial results. Amounts are in pounds sterling unless stated otherwise. Financial statements follow IFRS as issued by the IASB.
Business context and financial performance
Lloyds is a UK-focused provider of retail and commercial banking, insurance, pensions and investments, operating through Retail, Commercial Banking, and Insurance, Pensions and Investments. At year-end, total assets were £877.8bn and the Group employed 59,354 people on a full-time-equivalent basis.
| Metric | FY2022 | FY2021 | Change / context |
|---|---|---|---|
| Net interest income | £13.957bn | £9.366bn | Up 49%; benefited from higher rates, stronger margins and higher average interest-earning assets. |
| Net interest margin | 2.01% | 1.75% | Up 26 basis points. |
| Total income, net of insurance claims and contract-liability changes | £18.209bn | £16.324bn | Up 12%. |
| Statutory profit before tax | £6.928bn | £6.902bn | Broadly unchanged. |
| Profit for the year | £5.555bn | £5.885bn | Down; FY2021 included a deferred-tax remeasurement benefit. |
| Profit attributable to ordinary shareholders / basic EPS | £5.021bn / 7.3p | £5.355bn / 7.5p | Both lower year over year. |
| Operating expenses / cost:income ratio | £9.759bn / 53.6% | £10.800bn / 66.2% | Expenses down 10%; ratio improved. |
| Impairment charge (credit) | £1.522bn charge | £1.378bn credit | Shift reflected a weaker economic outlook; observed credit performance remained relatively resilient. |
| Operating cash flow | £22.011bn | £6.758bn | Cash flow statement reports operating cash provided; bank cash flows are affected by movements in financial assets and liabilities. |
| Cash and cash equivalents at year-end | £95.829bn | £79.194bn | Up £16.635bn. |
Balance sheet, capital and liquidity
| Metric at 31 December | 2022 | 2021 |
|---|---|---|
| Total assets | £877.829bn | £886.525bn |
| Loans and advances to customers | £454.899bn | £448.567bn |
| Customer deposits | £475.331bn | £476.344bn |
| Debt securities in issue | £73.819bn | £71.552bn |
| Subordinated liabilities | £10.730bn | £13.108bn |
| Wholesale funding | £100.3bn | £93.1bn |
| Loan-to-deposit ratio | 96% | 94% |
| Liquidity coverage ratio | 144% | 135% |
| CET1 capital ratio | 15.1% | 17.3% |
| Total capital ratio | 19.7% | 23.6% |
| MREL ratio / UK leverage ratio | 31.7% / 5.6% | 37.2% / 5.8% |
The Group said its CET1 ratio was 14.1% on an adjusted basis after including the announced buyback and insurance dividend impacts, compared with 16.3% at year-end 2021 on the same adjusted basis. The reported CET1 decline principally reflected regulatory changes, higher risk-weighted assets, distributions and pension contributions. Risk-weighted assets increased to £210.9bn from £196.0bn. The Group reported that its NSFR was significantly above the 100% regulatory minimum but did not provide a clear numerical value in the supplied text.
Material changes and segment results
- Underlying profit before tax was £7.448bn, down from £7.536bn. Underlying profit is a non-GAAP measure and is reconciled to statutory profit in the filing.
- Retail underlying profit before tax fell to £4.497bn from £4.832bn, as higher net interest income was more than offset by a swing to impairment charges.
- Commercial Banking underlying profit rose slightly to £1.861bn from £1.844bn; higher income and lower remediation costs were offset in part by impairment charges.
- Insurance, Pensions and Investments underlying profit increased to £391m from £281m, including higher new business income and the Embark acquisition, partly offset by higher costs.
- The statutory income statement was unusually affected by insurance policyholder investment movements: net trading income was a loss of £19.987bn versus a gain of £17.200bn in 2021, substantially offset by changes in insurance and investment contract liabilities. These large gross movements should not be read as equivalent changes in underlying banking revenue.
- Operating expenses fell mainly because regulatory and legal provision charges were lower and 2021 included a significant software write-off; staff costs increased amid inflation and additional colleague payments.
Outlook, management commentary and risks
- Management described the UK outlook as challenging, citing elevated inflation, higher interest rates, the war in Ukraine and cost-of-living pressure. The filing’s 2023 economic outlook anticipated a 1.2% contraction in UK GDP, a 7% decline in house prices and Bank Rate around 4% for most of the year; these are forecasts, not reported outcomes.
- The Group said it expected a mild recession and slower growth across many of its markets, with household deposit growth weakening and SMEs continuing to reduce borrowing. It highlighted customer support and cost-efficiency measures as responses to inflation and economic uncertainty.
- Credit quality was described as strong overall, but the Group’s ECL allowance rose to £4.903bn from £4.042bn. Customer loans in Stage 2 increased to £61.164bn from £34.931bn, partly due to revised mortgage default definitions and the deteriorating outlook. The filing also reports a customer-loan ECL allowance of £4.841bn in certain risk disclosures; the figure differs from total ECL, which includes other exposures.
- Legal and regulatory matters include ongoing HBOS Reading remediation, PPI-related litigation, and motor finance commission complaints. The Group reported £803m of regulatory and legal provisions at year-end; the amount ultimately required could differ materially.
- IFRS 17 was adopted from 1 January 2023. Management estimated a £1.9bn reduction in opening equity at transition and estimated that 2022 pension-product contract modifications could reduce equity by about £1.3bn on an IFRS 17 basis. The filing states these estimates were subject to further work and were not final at filing.
- Climate risks, cyber and operational resilience, data, execution of strategic change, customer conduct, litigation, funding markets and capital requirements were identified as material risks. The filing said climate risks had no material short-term impact on financial statement estimates at 31 December 2022.
Capital returns and other notable items
The Board recommended a final dividend of 1.60p per share, taking the FY2022 ordinary dividend to 2.40p per share, up 20%. It also announced a share buyback of up to £2.0bn, subject to regulatory approval and expected to complete by 31 December 2023; together, the dividend and intended buyback represented capital returns of up to £3.6bn for 2022. The Group completed a separate buyback of about £2.0bn during 2022. After year-end, it acquired vehicle-leasing business Tusker for approximately £300m.
Most important facts for investors to verify
- Use the audited full-year statements for FY2022 and do not treat them as Q4-only results; the supplied filing text does not provide a clear standalone Q4 income statement.
- Reconcile statutory profit, underlying profit and the unusually large insurance-related fair-value movements, including the offsetting liability changes.
- Check CET1 on both reported and adjusted bases, the effect of regulatory changes on risk-weighted assets, and the impact and approval status of the 2023 buyback.
- Review ECL staging, scenario weightings and management adjustments, including the distinction between the £4.903bn total allowance and the £4.841bn customer-loan allowance cited in risk disclosures.
- Monitor the UK economic outlook, deposit pricing, mortgage affordability, commercial property exposures, and any deterioration in arrears or defaults.
- Track outcomes and provision adequacy for HBOS Reading, PPI litigation and motor finance commission complaints, and verify final IFRS 17 transition effects when reported.
The auditors issued unqualified opinions on the FY2022 consolidated financial statements and internal control over financial reporting.