8th Jun 2007 07:01
Lloyds TSB Group PLC08 June 2007 71/07 8 June 2007 LLOYDS TSB - TRADING UPDATE Lloyds TSB Group plc will be holding discussions with analysts and investorsahead of its close period for the half-year ending 30 June 2007. This statementsets out the information that will be provided at those discussions. Lloyds TSB has continued to make strong progress in the first half of 2007 andexpects to deliver a good trading performance and accelerated profit momentum.We have continued to extend the reach and depth of our customer relationships,achieving good sales growth throughout the organisation, whilst improvingproductivity and efficiency. This has led to revenue growth remaining wellahead of cost growth. In addition, credit quality remains satisfactory. As aresult, we expect to deliver double digit growth in profit before tax, earningsper share and economic profit, before volatility, in the first half of 2007,compared to the first half of 2006. Continued progress in UK Retail Banking The Retail Bank continues to make good progress, with further strong growth inproduct sales, and continued good revenue growth in the first half of 2007. Wecontinue to increase our market share of new current account customers, and havebeen successful in increasing our share of the added value current accountmarket. We have also delivered a good performance in the growing savings andinvestment market, especially in bank savings and bancassurance, althoughconsumer demand for unsecured lending has remained subdued. In mortgages, theGroup has continued to maintain high levels of asset quality by focusing largelyon the prime UK mortgage market. Our overall market share of net new mortgagelending in the first half of 2007 is expected to be broadly in line with ouroutstanding stock position. Good sales growth in Insurance and Investments In Insurance and Investments, we have continued to achieve good levels of salesgrowth in life, pensions and long-term savings, particularly in thebancassurance channel. Sales of protection products have been strong followingthe launch of the Group's new protection platform 'Protection for Life' in thesecond half of 2006. New business margins remain robust. In General Insurance,we have delivered improved home insurance sales and good cost control, althoughthere has been an increase in weather related claims. Good trading momentum in Wholesale and International Banking In Wholesale and International Banking, good trading momentum has beenmaintained with continued strong growth in Corporate Markets and CommercialBanking. In Corporate Markets, we have continued to develop new revenue streamsin areas such as securitisation, structured credit and credit loan trading, andthis has led to increased cross-selling revenues. In Commercial Banking, wehave maintained our market leading share of new business start-ups, as well asincreasing the number of customers switching to Lloyds TSB from other financialservices providers. Revenue growth continues to exceed cost growth despiteincome pressure in the Asset Finance consumer businesses, reflecting lowerlevels of consumer demand and the tightening of credit criteria, and furtherinvestment in our higher growth businesses. Strong Group cost performance The Group's strong cost performance has continued, resulting in a furthersubstantial improvement in the Group's cost:income ratio. The Group's programmeof efficiency improvements is progressing well and we continue to expect todeliver net benefits of approximately £125 million in 2007. Overall credit quality remains satisfactory Overall, Group asset quality remains satisfactory and we expect the Group'simpairment charge as a percentage of average lending for the half-year to belower than in the first half of last year. During the first quarter of 2007, we saw a reduction in the level ofbankruptcies and Individual Voluntary Arrangements (IVAs), compared to thefourth quarter of 2006. The quality of new unsecured lending has continued tobe strong and our arrears and delinquency trends have remained good. Inaddition, the asset quality in our mortgage portfolio has remained excellent.The retail impairment charge for the first half of 2007 is expected to bebroadly flat, compared to the charge in the first half of 2006. In Wholesale, corporate and small business asset quality has remained strongwith no signs of deterioration in the overall quality of our lending. Thequality of business remains good, and the level of corporate provisions isexpected to remain relatively low during 2007, albeit at a higher level thanlast year, largely as a result of lower releases and recoveries. Capital ratios remain robust The Group's capital ratios remain robust and the annualised rate ofrisk-weighted asset growth in the first half of 2007 is expected to be in ourtargeted mid-to-high single digit range. This has been supported by the Group'scontinued move towards an 'origination and distribution' model of balance sheetmanagement. During May 2007, we completed a residential mortgage-backedsecuritisation (RMBS) of £3.1 billion. The capital position of Scottish Widowsremains strong and we repatriated a further £400 million of surplus capital tothe Group during the first quarter of 2007. Wholesale and International Banking restructure We have recently re-aligned the Wholesale and International Bankingorganisational structure to better meet customer needs and improve efficiency.Customers with turnover between £2 million and £15 million per annum have movedfrom Corporate Markets to Business Banking, which has been renamed CommercialBanking. Our asset-backed lending business is now also part of CommercialBanking, thus combining the considerable relationship and product expertisewithin our teams to serve our customers better. The attached appendix sets outhow the 2006 profit before tax analysis, by business unit, would have beenreported under this new reporting structure, which was adopted with effect from1 January 2007. There has been no change to the division's profit before tax in2006 of £1,640 million. Sale of Lloyds TSB Registrars In May 2007, the Group agreed the sale of the business and assets of Lloyds TSBRegistrars to Advent International for a total cash consideration of £550million, subject to completion and other adjustments. Lloyds TSB Registrarscontributed £32 million to Group profit after tax in 2006 and had gross assetsof approximately £85 million as at 31 December 2006. The transaction isexpected to be completed in the second half of 2007 and is subject to regulatoryapproval. Subject to completion and other adjustments, it is expected that aprofit before tax of circa £440 million (tax:£nil) will be recognised in theincome statement of Lloyds TSB Group in the second half of the year ending 31December 2007. Continuing to build our strong customer franchises and delivering on ourfinancial goals Eric Daniels, Group Chief Executive, said "In addition to delivering ourshort-term financial goals, we are continuing to build and enhance our long-termcustomer franchises throughout the Group. By doing so, we believe that we candeliver sustained double digit economic profit growth over time. The Groupremains firmly on track to deliver a good trading performance for the first halfof 2007 and, as we look to the future, we are increasingly confident in theGroup's earnings growth prospects." Trading update webcast details The Group Finance Director's briefing will be available as a live audio webcaston the Investor Relations website at www.investorrelations.lloydstsb.com and arecording will be posted on the website shortly after the briefing. Timetable 2007 interim results announcement 31 July 2007Ex-dividend date 8 August 2007Interim dividend record date 10 August 2007Interim dividend payment date 3 October 2007 All dates are provisional and subject to change. 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. Appendix 1 Wholesale and International Banking Restated profit before tax by business unit 2006 H1 Wholesale and Corporate Commercial International International Markets Banking Asset Finance and other Banking £m £m £m £m £m Net interest income 413 398 275 108 1,194Other income 314 193 153 145 805Total income 727 591 428 253 1,999Operating expenses (271) (349) (250) (202) (1,072)Trading surplus 456 242 178 51 927Impairment losses on loans and 5 (47) (115) (2) (159)advancesProfit before tax 461 195 63 49 768 2006 H2 Wholesale and Corporate Commercial International International Markets Banking Asset Finance and other Banking £m £m £m £m £m Net interest income 393 423 264 111 1,191Other income 507 204 168 143 1,022Total income 900 627 432 254 2,213Operating expenses (344) (378) (258) (212) (1,192)Trading surplus 556 249 174 42 1,021Impairment losses on loans and 13 (46) (124) 8 (149)advancesProfit before tax 569 203 50 50 872 2006 Wholesale and Corporate Commercial International International Markets Banking Asset Finance and other Banking £m £m £m £m £m Net interest income 806 821 539 219 2,385Other income 821 397 321 288 1,827Total income 1,627 1,218 860 507 4,212Operating expenses (615) (727) (508) (414) (2,264)Trading surplus 1,012 491 352 93 1,948Impairment losses on loans and 18 (93) (239) 6 (308)advancesProfit before tax 1,030 398 113 99 1,640 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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