LBCM half-year news release

Lloyds Bank Corporate Markets plc

2021 Half-Year Results

Member of the Lloyds Banking Group

CONTENTS

REVIEW OF PERFORMANCE

Lloyds Bank Corporate Markets plc (the Bank) and its subsidiaries (the Group) carries out the non-ring fenced banking operations of Lloyds Banking Group (LBG) and provides a wide range of banking and financial services in the UK and overseas. The Group operates as an integrated business across the UK, the Crown Dependencies, the USA, Singapore and Germany and contributes to the financial results of the Commercial Banking Division of LBG.

The Group's strategic purpose as part of LBG is to Help Britain Recover as part of Helping Britain Prosper through operating a responsible business that focuses on delighting our customers and delivering long-term sustainable success.

Principal activities

Supporting a diverse range of customers, the Group provides a broad range of banking products to help them achieve their financial goals. The Group's revenues are earned through the provision of financing and risk management solutions to commercial customers; and current accounts, savings accounts, mortgages, car finance and personal loans in the retail market in our Crown Dependencies businesses.

The target market for these products and services in the UK and internationally is made up of large corporates, financial institutions and retail and commercial customers in the Crown Dependencies, and includes the following product propositions:

- Commercial lending (including fixed rate loans, revolving credit facilities, variable loans and business mortgages)

- Trade and working capital management (including trade services, trade finance, supply chain finance and asset finance)

- Bonds and structured finance (including bonds, structured lending and asset securitisation)

- Risk management (including FX, rates, credit, commodities and liabilities management)

- Retail banking services (including mortgages, personal current accounts, personal loans and motor finance) in the Crown Dependencies

Review of results

During the half-year to 30 June 2021, the Group recorded a profit before tax of £193 million compared to £7 million during the half-year to 30 June 2020, an overall increase of £186 million. The Group has benefited from robust performance in its retail banking and corporate sales businesses but noted that trading performance has been impacted by limited underlying market volatility. Throughout, the Group has continued to support customers and provided financial assistance to the UK economy and the economies in which our customers operate.

The Group has benefitted from an impairment net credit of £47 million (2020: £77 million impairment charge) in the income statement relating to expected credit loss (ECL) driven by the improving economic outlook. The Group's ECL on loans and commitments, calculated under IFRS 9, requires the use of a range of possible future outcomes and more details are contained in Notes 2 and 4.

Regulatory capital adequacy remains strong, with a CET1 ratio of 13.8% (2020: 14.8%); reflecting the stability of the business, and the strength of the client franchise served by the Group. Risk weighted assets have increased by £1,902 million from £16,610 million at 31 December 2020 to £18,512 million at 30 June 2021. This is predominantly as a result of the phasing of the Group's IBOR transition project, is largely temporary and does not represent additional risk taken by the Group.

Total income was £350 million in the first half of 2021 compared to £291 million in the first half of 2020. This predominantly comprises net interest income (NII) of £70 million (£30 million in the half-year to 30 June 2020), net fee and commission income of £117 million (£96 million in the half-year to 30 June 2020) and net trading income of £171 million (£165 million in the half-year to 30 June 2020). This reflects an improving NII position as a result of stable funding costs in 2021 and management action with regard to reducing funding and liquidity risk.

Operating expenses were £204 million, down from £207 million in the half-year to 30 June 2020, a reduction of £3 million as a result of cost control initiatives. Costs consist predominantly of management charges relating to the Intra Group Agreement paid to Lloyds Bank plc, staff costs and other operating expenses. The taxation charge in the period was £60 million (six months to 30 June 2020 £27 million credit) reflecting increased profitability in 2021 and more details are contained in Note 5.

REVIEW OF PERFORMANCE (continued)

Total assets were £10,568 million lower at £81,861 million at 30 June 2021 compared to £92,429 million at 31 December 2020. Cash and balances at central banks which decreased by £3,096 million from £23,369 million at 31 December 2020 to £20,273 million at 30 June 2021 reflecting a lower assessment of the liquidity required should the impact of COVID-19 cause further market distress. Financial assets at fair value through profit or loss were £18,249 million at 30 June 2021 compared to £20,926 million at 31 December 2020 and predominantly consist of reverse repurchase agreements. Derivative financial instruments of £17,288 million at 30 June 2021 decreased by £4,469 million compared to £21,757 million at 31 December 2020 reflecting fair value mark to market movements. Financial assets at amortised cost decreased by £1,623 million from £25,087 million at 31 December 2020 to £23,464 million at 30 June 2021 and consist mainly of loans and advances to customers and banks.

Total liabilities of the Group were £78,375 million at 30 June 2021 compared to £88,800 million at 31 December 2020, a decrease of £10,425 million. Deposits from banks were £4,144 million at 30 June 2021 which is £1,457 million lower than £5,601 million at 31 December 2020. Customer deposits decreased by £616 million from £25,497 million at 31 December 2020 to £24,881 million at 30 June 2021. Financial liabilities at fair value through profit or loss at 30 June 2021 of £14,196 million consist predominantly of repurchase agreements and reduced by £1,619 million when compared with the 31 December 2020 balance of £15,815 million. Derivative financial instruments of £14,589 million have decreased by £6,644 million compared to the 31 December 2020 balance of £21,233 million reflecting fair value mark to market movements. Debt securities in issue of £14,273 million has decreased by £1,329 million compared to £15,602 million at 31 December 2020. The decreases in deposits and debt securities in issue noted above reflect reduced overall funding requirements and are reflected in the amount held in cash and balances at central banks.

Total equity at 30 June 2021 was £3,486 million which is a reduction of £143 million compared to £3,629 million at 31 December 2020 including profits in the period less the dividend paid to LBG in the period of £200 million (2020: £700 million).

Capital position at 30 June 2021

The Bank's capital position as at 30 June 2021, applying current IFRS 9 transitional arrangements, is set out in the following section.

REVIEW OF PERFORMANCE (continued)

REVIEW OF PERFORMANCE (continued)

Principal risks and uncertainties

The most significant risks that could impact Group's ability to deliver long-term strategic objectives are outlined below. These principal risks and uncertainties are reviewed and reported to the Board Risk Committee regularly. There has been no change to the list of risks as disclosed in the Group's 2020 Annual Report and Accounts.

The first half of 2021 continued to bring significant uncertainty. The spread of new COVID-19 variants compounded by other factors, such as the UK's exit from the European Union, have the potential to delay economic recovery in the UK and globally. These risks could continue to place pressure on the Group's strategy, business model and performance.

The Group continues to monitor, assess and address risks and their impact on customers, colleagues and strategy. COVID-19 remains a dominant risk theme and an important area of management focus.

· While the macroeconomic environment is improving, the recovery remains uneven across jurisdictions. Vaccine effectiveness and the international community's ability to deliver them to the majority of the populace remain key factors in restricting the spread of the virus and improving global growth prospects

· Aggressive fiscal policies implemented in response to the pandemic have led to elevated government indebtedness in advanced economies and could generate levels of inflation that require a tightening in monetary policy

· Higher interest rates could expose vulnerabilities within highly indebted companies and households as other stimulus measures are simultaneously withdrawn. Higher rate expectations could also impact asset prices that have been supported by very accommodative monetary and fiscal policy

· COVID-19 continues to have an adverse impact on various risks. While improved economic environment resulted in lower impairment levels at the half-year, this remains an area of continued management focus given risks and uncertainties. Linked to this is increased model risk caused by a weakening in established macroeconomic relationships between model inputs and outputs that could reduce the forecasting ability of those models. While underlying model drivers are expected to remain valid in the longer term, impairment provisions still contain an element of judgement. Meanwhile, regulatory scrutiny of model performance and assumptions has increased

· As well as the risks mentioned above, the Group continues to assess and address the impact of data and operational risks. Existing, industry wide, challenges with keeping Know Your Customer (KYC) information relevant and up to date have been exacerbated by COVID-19. Failure to maintain information in accordance with Money Laundering regulations may result in the less effective operation of anti-money laundering controls and consequently in regulatory censure, fines and / or loss of licence

· For colleagues, remote working and other ways of working will remain in place for the foreseeable future to meet current and future customer needs and expectations

In relation to the UK's exit from the European Union and further to the EU-UK Trade and Cooperation Agreement (TCA) agreed between the UK and EU at the end of 2020, a high level Memorandum of Understanding (MoU) establishing a framework for Financial Services Regulatory Cooperation (to help preserve financial stability, market integrity and the protection of investors and consumers) was due to be agreed by the 31st March 2021 however some EU member states are still due to ratify it. Also, the MoU is not a legally binding arrangement and does not address regulatory equivalence. The Group continues to consider the ongoing impact of the TCA on its customers, colleagues, products and business strategy including the potential legal, regulatory, tax, financial and capital implications. The UK has established a regulatory regime derived from the pre-existing EU regime, although some variations have already been announced. The Group continues to be subject to substantial EU-derived laws, regulation and oversight through its subsidiary in Germany, Lloyds Bank Corporate Markets Wertpapierhandelsbank GmbH, which offers a set of products to meet the current customers' needs in the EU. With LBG, the Group continues to work closely with regulatory authorities and industry bodies to ensure that the Group can identify and respond to the evolving regulatory and legal landscape and meet customers' demands with appropriate products and service offerings.

The Group continues its transition from Interbank Offered Rates (IBORs) to Alternative Risk Free Reference Rates to meet London Interbank Offered Rate (LIBOR) cessation dates that were announced in March 2021. As a result, a number of existing benchmark rates are being discontinued or the basis on which they are calculated is changing, impacting pricing, market risk and valuations. As the nature of some of these changes is still evolving, including the impact of the UK Government's Tough Legacy Legislation, the value of a broad array of financial products, including any LIBOR-based securities, loans and derivatives could be adversely impacted. IBOR changes will have important implications for the Group and its customers by necessitating amendments to existing documents and contracts and thereby creating differentials in

Principal risks and uncertainties (continued)

performance of benchmark rates and financial products which reference them. The Group could incur additional costs as a result of regulatory action if there are concerns with the pace or effectiveness of implementation. The Group is working closely with LBG on the transition away from IBORs, including the mitigation of potential conduct risk to which its customers may be exposed.

Credit risk - The risk that parties with whom the Group has contracted fail to meet their financial obligations (both on and off-balance sheet). Observed or anticipated changes in the economic environment could impact profitability due to an increase in delinquency, defaults, write-downs and/or expected credit losses.

Regulatory and legal risk - The risk arising from the failure to identify, assess, correctly interpret, comply with, or manage regulatory and/or legal requirements, leading to customer detriment, failure to prevent fraud and financial crime, financial penalties, regulatory censure, criminal or civil enforcement action.

Conduct risk - The risk of detriment across the customer lifecycle including: failures in product management, distribution and servicing activities, from other risks materialising, or other activities which could undermine the integrity of the market or distort competition, leading to unfair customer outcomes, regulatory censure, reputational damage or financial loss.

Operational risk - The risk of inadequate or failed internal processes, people, systems or from external events (including cyber-related and fraud and financial crime prevention challenges) leading to loss.

Operational risk: shared services model (SSM) - LBG's chosen ring-fencing operating model introduces risks for the Group in the execution of that model as a shared service recipient.

Key risks include:

- Key reliance on the SSM increases the prominence of internal service provision risk

- Business process risk (i.e. non-adherence to key processes, including those relating to market, operational, capital, credit, fraud and financial crime prevention and funding and liquidity risk)

- Information security and cyber risk including access management, records, data protection and cyber

- IT systems risk

- Reliance on the SSM to operate key controls designed to detect and prevent fraud and financial crime

- Operational risk around business resilience, change activity and sourcing

Operational resilience risk - The risk that the Group fails to design resilience into business operations, underlying infrastructure and controls (people, process, technical) to withstand external or internal events that could impact the continuity of operations or alternatively the failure to respond to events in a way which meets stakeholder expectations and needs when the continuity of operations is compromised.

People risk - The risk that the Group fails to provide an appropriate colleague and customer centric culture, supported by robust reward and wellbeing policies and processes; effective leadership to manage colleague resources; effective talent and succession management; and control framework to ensure all colleague related requirements are met. Failure to meet these conditions would impact the Group's capacity to attract, retain and develop talented colleagues.

Capital risk - The risk that the Group has a sub-optimal quantity or quality of capital or that capital is inefficiently deployed across the Group.

Funding and liquidity risk - The risk that the Group does not have sufficiently stable and diverse sources of funding or financial resources are insufficient to meet commitments as they fall due.

Principal risks and uncertainties (continued)

Governance risk - The risk that the Group's organisational infrastructure fails to provide robust oversight of decision making and the control mechanisms to ensure strategies and management instructions are implemented effectively. Against a background of increased regulatory focus on governance and risk management, the most significant challenges arise from the continuing evolution of the Senior Managers and Certification Regime, including incorporating senior manager function allocation for financial risks arising from climate change.

Market risk - The risk that the Group's capital or earnings profile is affected by adverse market rates, in particular changes and volatility in interest and foreign exchange rates, inflation rates, commodity prices and credit spreads through activity in the banking and markets businesses.

Model risk - The risk of financial loss, regulatory censure, reputational damage or customer detriment from deficiencies in developing, applying and operating models and rating systems.

Climate change risk - The risk that the Group experiences losses and /or reputational damage as a result of climate change, either directly or through impact on its customers. These losses may be realised from physical events, the required adaptation in transitioning to a lower carbon economy, or as a consequence of the responses to managing these changes.

Data risk - The risk of the Group failing effectively to govern, manage, and control its data (including data processed by third party suppliers) leading to unethical decisions, poor customer outcomes, loss of value to the Group and mistrust.

Change/execution risk - The risk that, the Group does not deliver its change agenda successfully, leading to a failure to: maintain effective customer service and availability; deliver against strategic objectives; ensure compliance with laws and regulation; and/or otherwise operate within the Group's risk appetite.

Strategic risk - The risk which results from incorrect assumptions about internal or external operating environments; failure to respond or the Group's inappropriate strategic response to material changes in the external or internal operating environments; and/or failure to understand the potential impact.

STATUTORY INFORMATION

CONSOLIDATED INCOME STATEMENT (UNAUDITED)

1 Restated - see note 1

The accompanying notes are an integral part of the condensed consolidated half-year financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

CONSOLIDATED BALANCE SHEET

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

1 Restated - see note 1

Cash and cash equivalents comprise cash and balances at central banks (excluding mandatory deposits) and amounts due from banks with a maturity of less than three months.

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS

1. Accounting policies

These condensed consolidated half-year financial statements as at and for the 6 month period to 30 June 2021 have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority (FCA) and with International Accounting Standard 34 (IAS 34), Interim Financial Reporting as adopted by the United Kingdom and comprise the results of Lloyds Bank Corporate Markets plc (the Bank) together with its subsidiaries (the Group). They do not include all of the information required for full annual financial statements and should be read in conjunction with the Group's consolidated financial statements as at and for the year ended 31 December 2020 which complied with international accounting standards in conformity with the requirements of the Companies Act 2006, were prepared in accordance with International Financial Reporting Standards (IFRS) and were compliant with IFRS adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. Copies of the 2020 Annual Report and Accounts are available on the Group's website and are available upon request from Investor Relations, Lloyds Banking Group plc, 25 Gresham Street, London EC2V 7HN.

The directors consider that it is appropriate to continue to adopt the going concern basis in preparing the condensed consolidated half-year financial statements. In reaching this assessment, the directors have taken into account the continuing uncertainties affecting the UK economy post-pandemic and their potential effects upon the Group's performance and projected funding and capital position; the impact of further stress scenarios has also been considered. On this basis, the directors are satisfied that the Group will maintain adequate levels of funding and capital for the foreseeable future.

As disclosed in the 2020 Annual Review and Accounts, the Group reassessed the treatment of interest income and expense on certain derivative instruments to better reflect the economic substance of the hedging arrangement by recording derivative interest in the same income statement line item as the interest on the hedged item. The result of which is that in the income statement, the 2020 comparative numbers have been restated to reflect a £29 million reclassification between net interest income (increased) and other income (decreased). This reclassification between lines within total income has no impact on overall total income reported or profit for the period.

The 2020 comparative cashflow statement has been restated to correct the treatment of non-cash item movements on the net cash provided by operating activities and reallocation of purchases and sales on financial assets from operating activities to investing activities. These corrections have no impact on the closing cash positions but the following impact on the underlying lines within the cashflow statement; net cash provided by operating activities decreases by £594 million from £11,603 million to £11,009 million with a corresponding £123 million increase on net cash used in investing activities to £107 million and £471 million increase on foreign exchange on cash and cash equivalents to £473 million.

Changes in accounting policy

The Group adopted the Interest Rate Benchmark Reform Phase 2 amendments from 1 January 2021. These amendments require that changes to expected future cash flows that both arise as a direct result of IBOR Reform and are economically equivalent to the previous cash flows are accounted for as a change to the effective interest rate with no adjustment to the asset or liability's carrying amount; no immediate gain or loss is recognised. The new requirements also provide relief from the requirement to discontinue hedge accounting as a result of amending hedge documentation if the changes are required solely as a result of the IBOR Reform. The amendments do not have a material impact on the Group's comparatives, which have not been restated.

Except for the change above, the Group's accounting policies are consistent with those applied by the Group in its 2020 Annual Report and Accounts and there have been no changes in the Group's methods of computation.

Future accounting developments

The IASB has issued a number of minor amendments to IFRSs effective 1 January 2022 and in later years (including IFRS 9 Financial Instruments and IAS 37 Provisions, Contingent Liabilities and Contingent Assets). These amendments are not expected to have a significant impact on the Group. 

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)

2. Critical accounting judgements and estimates

The preparation of the Group's financial statements requires management to make judgements, estimates and assumptions that impact the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Due to the inherent uncertainty in making estimates, actual results reported in future periods may include amounts which differ from those estimates. Estimates, judgements and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group's significant judgements, estimates and assumptions are unchanged, compared to those applied at 31 December 2020, except as detailed below.

Allowance for expected credit losses

The Group recognises an allowance for expected credit losses (ECLs) for loans and advances to customers and banks, other financial assets held at amortised cost, financial assets measured at fair value through other comprehensive income and certain loan commitment and financial guarantee contracts. At 30 June 2021, the Group's expected credit loss allowance was £33 million (31 December 2020: £83 million), of which £22 million (31 December 2020: £50 million) was in respect of drawn balances.

The calculation of the Group's expected credit loss allowances and provisions against loan commitments and guarantees under IFRS 9 requires the Group to make a number of judgements, assumptions and estimates. These are set out in detail in the Group's 2020 Annual Report and Accounts. The principal changes made in the period ended 30 June 2021 are as follows:

Base Case and Economic Assumptions

The Group's base case economic scenario has been revised in light of the continuing impact of the coronavirus pandemic in the UK and globally. The scenario reflects judgements of the net effect of government-mandated restrictions on economic activity, large-scale government interventions, and behavioural changes by households and businesses that may persist beyond the rollout of coronavirus vaccination programmes.

As large-scale vaccination efforts compete with the emergence of new viral strains in the UK and globally, there remains considerable uncertainty about the pace and eventual extent of the post-pandemic recovery. The Group's updated base case scenario builds in three key conditioning assumptions. First, that rising infections in the UK's third COVID-19 wave do not lead to a re-imposition of restrictions. Second, that the rollout of vaccination programmes among the UK's trading partners will reinforce an improving global backdrop. Third, that domestic policy measures remain accommodative, with monetary policy looking through a transient rise in inflation.

Conditioned on these assumptions and taking note of improvements in economic indicators in the second quarter, the Group's base case outlook continues to assume a rise in the unemployment rate as furlough support ends alongside a deceleration in commercial property price growth. Risks around this base case economic view lie in both directions and are partly captured by the alternative economic scenarios generated. But uncertainties relating to the key conditioning assumptions, including epidemiological developments, the efficacy of vaccine rollouts against emergent strains and the response of the economy in those circumstances, are not specifically captured by these scenarios. These specific risks have been recognised outside the modelled scenarios with a central adjustment.

The Group has incorporated the latest available information at the reporting date in defining its base case scenario and generating alternative economic scenarios. The scenarios include forecasts for key variables in the second quarter of 2021, for which actuals may have since emerged prior to publication.

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)

2. Critical accounting judgements and estimates (continued)

Scenarios by year

Key annual assumptions made by the Group are shown below. Gross domestic product is presented as an annual change and commercial real estate price growth is presented as the growth in the respective index within the period. UK Bank Rate and unemployment rates are averages for the period. The upside, base case and downside scenarios are weighted at 30 per cent each, with the severe downside scenario weighted at 10 per cent.

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)

2. Critical accounting judgements and estimates (continued)

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)

2. Critical accounting judgements and estimates (continued)

The table below shows the Group's ECL for the upside, base case, downside and severe downside scenarios. The stage allocation for an asset is based on the overall scenario probability-weighted PD and, hence, the Stage 2 allocation is constant across all the scenarios. ECL applied through individual assessments and post-model adjustments is reported flat against each economic scenario, reflecting the basis on which they are evaluated. Judgements applied through changes to inputs are reflected in the scenario sensitivities. It therefore shows the extent to which a higher ECL allowance has been recognised to take account of multiple economic scenarios from the probability-weighted view relative to the base case. The uplift being £3 million compared to £12 million at 31 December 2020.

Application of judgement in adjustments to modelled ECL

Impairment models fall within the Group's Model Risk framework as reported in note 3 of the 2020 Annual Report and Accounts.

At 30 June 2021, the coronavirus pandemic and the various support measures that have been put in place have resulted in an economic environment which differs significantly from the historical economic conditions upon which the impairment models have been built. As a result, there is a greater need for management judgements to be applied as seen in the elevated levels present since year end. At 30 June 2021 management judgement resulted in additional ECL allowances totalling £23 million (2020: £50 million). The table below analyses total ECL allowance at 30 June 2021 between modelled, those that have been individually assessed and those arising through the application of management judgement.

1 Judgements due to the impact that COVID-19 and resulting interventions have had on the Group's economic outlook and observed loss experience, which have required additional model limitations to be addressed.

Post-model adjustments have been raised to reflect uncertainty in the near term economic outlook and limitations in the models in dealing with this uncertainty but the impact on staging of assets has not been reflected.

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)

2. Critical accounting judgements and estimates (continued)

Adjustment to PD models: £13 million

This is principally comprised of an adjustment to PD models reliant on GDP inputs. The credit models used to estimate US and Financial Institution defaults use GDP as a Key Input. Given the volatility seen in quarterly GDP, the resulting anticipated recovery from the extraordinary low levels is judged to understate predicted defaults. Management used an alternative approach in generating PDs and adjusted ECL to reflect equivalent movements seen in core models not reliant on GDP. In addition, the 30 June 2021 figure also incorporates the use of unemployment trends to replace the use of corporate insolvency data.

Economic impacts not captured by models: £10 million

A further management adjustment to increase ECL by £10 million is incorporated to reflect the additional uncertainty of economic forecasts. This qualitative overlay is a management judgement to ensure the overall provision adequately reflects the current material risks; considering the range of the quarterly provision release, review of trends and provision coverage.

3. Operating expenses

4. Impairment

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)

5. Taxation

In accordance with IAS 34, the Group's income tax expense for the half-year to 30 June 2021 is based on the best estimate of the weighted-average annual income tax rate expected for the full financial year. The tax effects of one-off items are not included in the weighted-average annual income tax rate, but are recognised in the relevant period.

An explanation of the relationship between tax (expense)/credit and accounting profit is set out below:

The Finance Act 2021, which was substantively enacted on 24 May 2021, increases the rate of corporation tax from 19 per cent to 25 per cent with effect from 1 April 2023. The impact of this rate change is an increase in the Group's net deferred tax liability as at 30 June 2021 of £3 million, comprising a £1 million charge included in the income statement and a £2 million charge included in equity.

6. Financial assets at fair value through profit or loss

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)

7. Financial assets at amortised cost

Period ended 30 June 2021

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (continued)

7. Financial assets at amortised cost (continued)