27th May 2005 07:01
Lloyds TSB Group PLC27 May 2005 106/05 27 May 2005 INTERNATIONAL FINANCIAL REPORTING STANDARDS Lloyds TSB Group plc has today published its transition document reflecting thekey impacts of the anticipated financial changes arising from the introductionof International Financial Reporting Standards (IFRS) and the Group'simplementation of Financial Reporting Standard 27 - 'Life Assurance'. No change to business strategies, economic value and capital management policies From 1 January 2005, the Group has been using IFRS as its primary financialreporting framework. Although the move to IFRS significantly changes the timingof earnings recognition in financial results, it is important to note that thereis no IFRS impact on business fundamentals and cash flows, the development ofour organic growth strategies, or the Group's capital management policies.Whilst IFRS implementation is likely to result in greater earnings volatility inthe future, the Group will endeavour to ensure that comparable underlyingbusiness performance and trends are clearly identified on an ongoing basis. 2004 earnings restatement In accordance with the requirements of IFRS, revised results for 2004 includeonly those adjustments for standards implemented with effect from 1 January 2004(i.e. they exclude adjustments for standards which have been implemented witheffect from 1 January 2005). The key changes to the 2004 profit and loss account arising as a result of IFRSare: • Profit before tax increased by £2 million to £3,495 million. • Profit attributable to shareholders decreased by £29 million, or 1 per cent, to £2,392 million. • Earnings per share decreased by 1 per cent to 42.8 pence. The changes to earnings reflect the accounting treatment of goodwill, leasing,employee share option schemes and certain aspects relating to the Group'sinsurance businesses. Opening balance sheet - 1 January 2005 The key changes as a result of adopting IFRS and FRS27, compared with theGroup's balance sheet on 31 December 2004 under UK GAAP, are: • Shareholders' equity reduced by £405 million to £9,572 million. • Total assets increased by £12,154 million to £291,997 million. • Total capital ratio increased to 10.1 per cent (UK GAAP: 10.0 per cent); tier 1 capital ratio decreased to 8.2 per cent (UK GAAP: 8.9 per cent). The most significant changes to the Group's balance sheet reflect changes inlife assurance and dividend accounting; and the grossing up of certain lending,deposit and derivative balances. 2005 impact The effect of the full implementation of IFRS and FRS27 on the Group's 2005earnings will depend upon a number of factors such as business mix, rate ofgrowth and market conditions. The increased use in IFRS of fair values islikely to lead to greater volatility, particularly in the results of the Group'slife assurance businesses. Excluding this volatility, the application ofeffective interest rates, the reclassification of certain securities from equityto debt, and the impact of discounting on levels of loan loss impairment, islikely to result in some reduction in profits. Current indications are that the overall impact, excluding the volatilityintroduced by the requirements of IFRS and FRS 27, will be to reduce the Group'sreported earnings per share, compared with those that would have been reportedunder UK GAAP, by approximately 6 per cent. Excluding goodwill amortisation,earnings per share (before volatility) are expected to reduce by approximately 7per cent. Profit before tax (before volatility) is expected to beapproximately 8 per cent lower, additionally reflecting the inclusion of couponpayments on preferred securities now being treated as an interest expense ratherthan minority interests. This likely reduction in earnings in 2005 is almostentirely due to changes in the timing of income and expense recognition in theGroup's financial statements. Lloyds TSB will today brief analysts and investors on its implementation ofIFRS, and consequent restatement of its 2004 results. The briefing willcommence at 10.30 a.m. and the slides and audio presentation will besimultaneously available on the Group's Investor Relations website:www.investorrelations.lloydstsb.co.uk. The slides that accompany thepresentation will be available to download from 9.30a.m. Lloyds TSB will report externally under IFRS in its 2005 interim results due tobe announced on 29 July 2005. For further information:- Investor RelationsMichael Oliver +44 (0) 20 7356 2167Director of Investor RelationsE-mail: [email protected] MediaMary Walsh +44 (0) 20 7356 2121Director of Corporate RelationsE-mail: [email protected] FORWARD LOOKING STATEMENTS This announcement contains forward looking statements with respect to thebusiness, strategy and plans of the Lloyds TSB Group and its current goals andexpectations relating to its future financial condition and performance.Statements that are not historical facts, including statements about Lloyds TSBGroup's or management's beliefs and expectations, are forward lookingstatements. By their nature, forward looking statements involve risk anduncertainty because they relate to events and depend on circumstances that willoccur in the future. Lloyds TSB Group's actual future results may differmaterially from the results expressed or implied in these forward lookingstatements as a result of a variety of factors, including UK domestic and globaleconomic and business conditions, risks concerning borrower credit quality,market related risks such as interest rate risk and exchange rate risk in itsbanking businesses and equity risk in its insurance businesses, inherent risksregarding changing demographic developments, catastrophic weather and similarcontingencies outside Lloyds TSB Group's control, any adverse experience ininherent operational risks, any unexpected developments in regulation orregulatory actions, changes in customer preferences, competition, industryconsolidation, acquisitions and other factors. For more information on theseand other factors, please refer to Lloyds TSB Group's Annual Report on Form 20-Ffiled with the US Securities and Exchange Commission and to any subsequentreports furnished by Lloyds TSB Group to the US Securities and ExchangeCommission or to the London Stock Exchange. The forward looking statementscontained in this announcement are made as of the date hereof, and Lloyds TSBGroup undertakes no obligation to update any of its forward looking statements. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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