12th Dec 2005 07:01
Lloyds TSB Group PLC12 December 2005 230/05 12 December 2005 LLOYDS TSB - TRADING UPDATE Lloyds TSB Group plc will shortly be meeting analysts ahead of its close periodfor the year ending 31 December 2005. This announcement sets out theinformation that will be provided at those meetings. On a comparable basis under International Financial Reporting Standards*, LloydsTSB expects to deliver a satisfactory trading performance for the year. TheGroup has continued to make good progress in the delivery of its organic growthstrategies. Further good progress has been made in the growth of customerassets and liabilities and, in the second half of 2005 to date, the group netinterest margin has been broadly stable. This, combined with continued strongcost control, means that the Group expects to deliver revenue growth in excessof cost growth in each division. The Group's impairment charge, as a percentageof average lending, is expected to be broadly consistent with the charge of 0.63 per cent experienced in the first half of 2005. Strong credit quality in ourbusiness and corporate lending portfolios has continued to be offset, asexpected, by higher impairment levels in the unsecured consumer lendingportfolios. Overall, the Group expects to be in line with market expectations**. The retail bank has continued to make progress in quality customer recruitmentand customer lending and deposit growth. Mortgage lending has remained strongwith asset quality remaining robust. However, against the backdrop of slowergrowth in consumer lending, the retail bank has experienced lower levels ofgrowth in unsecured consumer lending, together with some further deteriorationin credit quality as more customers, with higher levels of indebtedness, haveexperienced repayment difficulties. This will lead to an increase in the levelof UK Retail Banking impairment provisions as a percentage of average lending,on a comparable basis, for the second half of 2005. Scottish Widows has continued to make good progress in both the bancassuranceand independent financial adviser channels. Bancassurance volumes, particularlyunit trust/OEIC sales, have increased significantly in comparison with 2004 andcontinued high levels of growth have been experienced through independentfinancial advisers, particularly in the sale of investment and pension products.The life and pensions new business margin remains robust, reflecting furtherimprovements in efficiency. Scottish Widows continues to be one of the moststrongly capitalised life assurance companies in the UK and we intend torepatriate £800 million of surplus capital from Scottish Widows to the Group bythe end of the year. This is in addition to the £200 million dividend paid tothe Group in March 2005, which reflected the start of an expected regular annualdividend stream. In General Insurance good levels of profit growth have continued, reflectingimproved customer retention and continued increases in internet and telephonysales as well as further improvements in efficiency, particularly in the claimsprocess. In Wholesale and International Banking we continue to make excellent progress.In Business Banking and Corporate Markets in particular, we are achievingsignificant gains through product and relationship cross-sell and new customeracquisition. Business Banking has maintained its market leadership position inthe recruitment of start-up customers, and remains a net gainer in therecruitment of customers from other banks. Overall asset quality remains verygood, with levels of impairment provisions expected to remain low for the year. The Group's capital ratios remain robust and, as anticipated, the rate ofrisk-weighted asset growth in the second half of 2005 is expected to be slowerthan the rate of growth in the first half. In the first 10 months of 2005, the strong performance of equity markets hascontributed to positive volatility relating to the insurance business of £306million. This has been partly offset by adverse banking volatility, reflectingthe adoption in IFRS of fair values for the Group's derivative portfolios, of£79 million. Following the publication of revised annuitant mortality assumption tables bythe actuarial profession's Mortality Committee, the Group is in the process ofreviewing the annuitant mortality assumptions used in its life assurancebusinesses. While these tables are not mandatory for 2005 year-end reportingpurposes, it is likely that the Group will strengthen its mortality relatedreserves during 2005. In addition, following the introduction of time-barring,the Group is also in the process of reviewing the estimated cost of redresspayments to customers, principally relating to past sales of mortgage endowmentpolicies. This is expected to lead to an increased provision for customerredress in the Group's 2005 accounts. The combined impact of these two items,which will be evenly split, is expected to be a charge of circa £300 million. Eric Daniels, Group Chief Executive, said "We are continuing to make goodprogress against our objective to deliver sustained earnings growth,particularly against the backdrop of the slower consumer environment in the UK.The Group has also taken the opportunity to strengthen its reserves forannuitant mortality and customer redress provisions. We have delivered good revenue growth throughout the Group, strong cost controlhas been maintained, and overall credit quality continues to remainsatisfactory. As a result, the Group is on track to deliver a tradingperformance for 2005 which is in line with market expectations." * Excluding the impact of prospective accounting changes relating to the implementation of IFRS. For more information see the Group's 2005 half-year results statement. ** On 9 December 2005, the consensus of analysts' forecasts for profit before tax, excluding volatility, on a full IFRS basis for the year ending 31 December 2005 was £3,315 million. 2005 Results Timetable Preliminary results announcement: Friday, 24 February 2006Ex dividend date: Wednesday, 8 March 2006Dividend record date: Friday, 10 March 2006Dividend payment date: Wednesday, 3 May 2006 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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