SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
29 July 2005
LLOYDS TSB GROUP plc
(Translation of registrant's name into English)
5th Floor
25 Gresham Street
London
EC2V 7HN
United Kingdom
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F..X..Form 40-F.....
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes .....No ..X..
If "Yes" is marked, indicate below the file number
assigned to the registrant in connection with Rule
12g3-2(b): 82- ________
Index to Exhibits
Item
No. 1 Regulatory News Service Announcement, dated 29 July 2005
re: Interim Results
LLOYDS TSB GROUP PLC - RESULTS FOR HALF YEAR TO 30 JUNE 2005
PRESENTATION OF RESULTS
Up to 31 December 2004 the Group prepared its financial statements in accordance
with UK Generally Accepted Accounting Principles (UK GAAP). On 1 January 2005
the Group implemented International Financial Reporting Standards (IFRS). In
this document the 2004 comparative financial information has been restated to
reflect the adoption of those IFRS standards which are required to be applied
retrospectively, but has not been restated to include the additional impacts
arising from first time application of IAS 32 'Financial Instruments: Disclosure
and Presentation', IAS 39 'Financial Instruments: Recognition and Measurement'
and IFRS 4 'Insurance Contracts' (including UK Financial Reporting Standard 27 '
Life Assurance'), which have been implemented with effect from 1 January 2005,
with the opening balance sheet at that date adjusted accordingly. Details of
the impact of implementation of IFRS on comparative information were published
in the Group's 'Transition to IFRS' announcement on 27 May 2005.
The impact of IFRS, and in particular the increased use of fair values, is
likely to lead to greater earnings volatility. In order to provide a more
comparable representation of business performance this volatility has been
separately analysed for the Group's insurance and banking businesses (page 28,
note 3). In addition, other IFRS related adjustments applied with effect from 1
January 2005, for which comparatives are not required to be restated (page 26,
note 2), and the impact on the Group's results of businesses sold in 2004, have
been separately analysed in the Group's results. A reconciliation of this '
comparable' basis of presentation to the statutory profit before tax is shown on
page 1.
For certain aspects of the Group's life assurance businesses additional
financial information has been provided on an 'embedded value' basis, as applied
under UK GAAP in previous reporting periods.
FORWARD LOOKING STATEMENTS
This announcement contains forward looking statements with respect to the
business, strategy and plans of the Lloyds TSB Group, its current goals and
expectations relating to its future financial condition and performance. By
their nature, forward looking statements involve risk and uncertainty because
they relate to events and depend on circumstances that will occur in the future.
The Group's actual future results may differ materially from the results
expressed or implied in these forward looking statements as a result of a
variety of factors, including UK domestic and global economic and business
conditions, risks concerning borrower credit quality, market related risks such
as interest rate risk and exchange rate risk in its banking business and equity
risk in its insurance businesses, changing demographic trends, unexpected
changes to regulation or regulatory actions, changes in customer preferences,
competition and other factors. Please refer to the latest Annual Report on Form
20-F filed with the US Securities and Exchange Commission for a discussion of
such factors.
CONTENTS
Page
Profit before tax by division 1
Assets by division 1
Performance highlights 2
Summary of results 3
Group Chief Executive's statement 4
Group Finance Director's review of financial performance 7
Segmental analysis 9
Divisional performance
- UK Retail Banking 11
- Insurance and Investments 14
- Wholesale and International Banking 18
Consolidated income statement - statutory 20
Consolidated balance sheet - statutory 21
Condensed consolidated cash flow statement - statutory 22
Consolidated statement of changes in equity - statutory 23
Segmental analysis - statutory 24
Notes 26
Contacts for further information 43
LLOYDS TSB GROUP
PROFIT BEFORE TAX BY DIVISION
Half-year to Half-year to
30 June 31 December
2005 2004 2004
GBPm GBPm GBPm
UK Retail Banking
Before provisions for customer redress 830 800 939
Provisions for customer redress - - (100)
830 800 839
Insurance and Investments
Before provisions for customer redress 400 376 423
Provisions for customer redress - - (12)
400 376 411
Wholesale and International Banking 662 582 671
Central group items (page 32, note 6) (169) (153) (197)
Profit before tax - comparable basis 1,723 1,605 1,724
Volatility (page 28, note 3)
- Banking (73) - -
- Insurance 104 (65) 210
- Policyholder tax 46 5 (3)
Other IFRS adjustments applied from 1 January 2005 (page 26, note (124) - -
2)
Loss on sale of businesses (page 40, note 19) - (13) (8)
Trading results of discontinued operations - 36 4
Profit before tax 1,676 1,568 1,927
ASSETS BY DIVISION
30 June 1 January
2005 2005
GBPm GBPm
UK Retail Banking 99,797 96,472
Insurance and Investments 77,071 69,864
Wholesale and International Banking 126,568 123,826
Central group items 1,776 1,835
Total assets 305,212 291,997
Page 1 of 43
LLOYDS TSB GROUP
PERFORMANCE HIGHLIGHTS
Unless otherwise stated, throughout this document our analysis compares the
half-year to 30 June 2005 to the corresponding period in 2004.
Key achievements - comparable basis
- The Group has continued to deliver earnings growth in all divisions.
- Considerable progress in improving returns; increases in both
economic profit and post-tax return on average shareholders' equity.
- Good franchise growth with customer lending during the half up
by 4 per cent to GBP167.6 billion and customer deposits up by 3 per cent to
GBP130.6 billion.
- Strong increase in retail banking quality customer recruitment.
Good levels of customer balance growth in many product areas.
- Substantial increase in life assurance new business weighted
sales and market share. Increased new business contribution and margin, on
an embedded value basis.
- Good progress in delivering the strategy to build an integrated
Wholesale bank. 25 per cent increase in Corporate Markets profit before tax,
and 27 per cent increase in Business Banking profit before tax.
- Costs remain firmly under control. Income growth exceeded cost
growth in each division and at Group level.
- Overall credit quality remains satisfactory.
- Capital ratios remain robust.
- Interim dividend maintained at 10.7p per share.
Results - comparable basis
- Profit before tax increased by GBP118 million, or 7 per cent, to
GBP1,723 million.
- Earnings per share increased by 10 per cent to 22.1p.
- Economic profit increased by 11 per cent to GBP728 million.
- Post-tax return on average shareholders' equity increased to
21.9 per cent, from 21.5 per cent.
- Post-tax return on average risk-weighted assets decreased from
1.92 per cent to 1.88 per cent.
Results - statutory
- Profit before tax increased by GBP108 million, or 7 per cent, to
GBP1,676 million.
- Profit attributable to equity shareholders increased by 9 per
cent to GBP1,192 million.
- Earnings per share increased by 9 per cent to 21.3p.
- Post-tax return on average shareholders' equity increased to
24.7 per cent.
- Total capital ratio 9.6 per cent, tier 1 capital ratio 7.8 per cent.
Page 2 of 43
LLOYDS TSB GROUP
SUMMARY OF RESULTS
Half-year to Half-year to
30 June Increase 31 December
2005 2004 (Decrease) 2004
GBPm GBPm % GBPm
Results - comparable basis (page 26, note 2)
Total income, net of insurance claims 4,831 4,610 5 4,888
Operating expenses 2,597 2,529 3 2,737
Trading surplus 2,234 2,081 7 2,151
Impairment losses on loans and advances 511 476 7 427
Profit before tax 1,723 1,605 7 1,724
Economic profit (page 38, note 16) 728 655 11 694
Earnings per share (pence) (page 39, note 17) 22.1 20.1 10 21.0
Post-tax return on average shareholders' equity (%) 21.9 21.5 22.0
Post-tax return on average risk-weighted assets (%) 1.88 1.92 1.91
Results - statutory
Total income, net of insurance claims 4,925 4,572 8 5,107
Operating expenses 2,579 2,549 1 2,748
Trading surplus 2,346 2,023 16 2,359
Impairment losses on loans and advances 670 442 52 424
Profit before tax 1,676 1,568 7 1,927
Profit attributable to equity shareholders 1,192 1,094 9 1,298
Economic profit (page 38, note 16) 757 623 22 816
Earnings per share (pence) (page 39, note 17) 21.3 19.6 9 23.2
Post-tax return on average shareholders' equity (%) 24.7 20.9 24.2
Shareholder value
Closing market price per share (period-end) 473p 431.75p 473p
Total market value of shareholders' equity GBP26.5bn GBP24.2bn GBP26.5bn
Proposed dividend per share (page 42, note 21) 10.7p 10.7p 23.5p
30 June 1 January Increase
2005 2005 (Decrease)
GBPm GBPm %
Balance sheet
Shareholders' equity 9,475 9,572 (1)
Net assets per share (pence) 167 169 (1)
Total assets 305,212 291,997 5
Loans and advances to customers 167,583 161,162 4
Customer deposits 130,550 126,349 3
Risk asset ratios % %
Total capital 9.6 10.1
Tier 1 capital 7.8 8.2
Page 3 of 43
LLOYDS TSB GROUP
GROUP CHIEF EXECUTIVE'S STATEMENT
During the first half of 2005, the Group's profit before tax, on a comparable
basis, rose by 7 per cent to GBP1,723 million, despite entering a more
challenging period in the economic cycle. The increase reflects the continued
successful unfolding of our organic growth strategy across each of our three
operating divisions, as we build deep, long-lasting relationships within each of
our franchises. In addition to continued earnings momentum, the Group also
improved its return on equity and economic profit.
At the end of 2004, we set out three strategic priorities to guide our future
growth:
- to materially deepen customer relationships
- to improve our efficiency
- to continue to enhance the Group's capabilities and processes to
support faster growth.
We have continued to make good progress on each of these management priorities
and the key achievements over the last six months, which underpin our results,
are summarised below.
To materially deepen customer relationships
In the Retail Bank, we saw a 4 per cent improvement in profit before tax, on a
comparable basis, and we delivered positive jaws with 5 per cent income growth
exceeding cost growth of 2 per cent. We have continued to build on our 'local
markets' programme to bring us closer to the customer and we now have much of
the necessary infrastructure in place. Our early results under this programme
have seen us progress against a number of the key drivers to building stronger
relationships such as enhancing the use of customer data. During the second
half of 2005, we will continue to develop the framework by increasing sales
capacity and effectiveness.
We continue to see improved results in terms of customer service, with our
customer satisfaction ratings reaching an all time high. Our quality management
programme, which is helping to continuously improve our processing efficiency,
has played a key role in improving our cost position.
Our improved customer satisfaction scores also helped to drive good levels of
new quality customer recruitment. We have maintained strong flows of new
business and are continuing to meet our customers' broader range of needs in key
areas such as consumer lending, mortgages, savings and insurance where we have
seen good customer balance growth. Our market shares in these key product lines
have held steady, despite the highly competitive environment in which we
operate. Our asset quality remains satisfactory.
In Wholesale and International Banking, our core businesses had another good
half-year and the division delivered a 14 per cent improvement in profit before
tax, on a comparable basis. We have successfully begun to implement our new
strategies in both Business Banking and the Corporate Markets franchise, which
will play an important role in our future growth. Whilst the investment in
these strategies led to an increase in costs, we continued to deliver positive
jaws with growth in income of 6 per cent and costs growth held to 5 per cent.
Page 4 of 43
LLOYDS TSB GROUP
In Business Banking, we have seen strong franchise growth and, in addition to
winning a greater share of the 'switchers' market, we maintained our strong
position in business start-ups with a market share of 20 per cent. The growth
in recruitment was accompanied by good growth in both customer lending and
deposits, as customers continued to place more of their business with us.
Our Corporate Markets franchise enjoyed another strong half, with a 25 per cent
improvement in profits underpinned by a 26 per cent improvement in the
cross-sales of products as our relationship development programmes continue to
take hold. Asset quality remains strong, with impairment losses falling year on
year. We have made continued investment in the Corporate Markets franchise, and
this has been rewarded both in terms of the stronger business levels as well as
external recognition. In particular, we were delighted to receive the CBI Best
Corporate Bank Award 2005. We will continue to develop the businesses, to
strengthen our capabilities and services that will allow us to provide a broader
range of solutions for our customers and meet their needs.
In Insurance and Investments our profit before tax, on a comparable basis,
increased by 6 per cent, underpinned by an improvement in our market share in
life, pensions and investments which rose from 4.9 per cent to 6.2 per cent in
the first quarter of 2005. Our life and pensions new business margin also
improved. In our life, pensions and OEIC businesses, on an embedded value
basis, we saw a 7 per cent profit improvement underpinned by a rise in new
business contribution of 32 per cent, as we continue to increase our focus on
the more profitable, more capital efficient business lines.
We continue to make progress in our bancassurance programme, with a 4 per cent
increase in sales, notwithstanding the slowdown in the growth of mortgage
related protection business. Sales of OEICs rose by 29 per cent following the
launch last year of our new simplified product range. Whilst we still have work
to do to continue to improve our overall performance, we have a clear strategy
to deliver profitable growth in this business.
We have seen continued strong growth in our IFA business, with a 41 per cent
improvement in weighted sales in the first half, underpinned by our product and
service developments in pensions and investments. This improved performance led
to an estimated market share of 7.1 per cent in the first quarter of this year,
compared with 5.0 per cent in the first quarter of 2004, cementing Scottish
Widows' success in this market.
Scottish Widows remains strongly capitalised and in addition to the payment of a
GBP200 million dividend to the Group in March 2005, we expect Scottish Widows to
make a further significant repatriation of capital to the Group in the second
half of the year as we improve our capital efficiency.
Our General Insurance business delivered another robust half, with profits up 8
per cent, despite a slowdown in the growth of our retail lending businesses.
The results reflect successful investment in the direct channels, our claims
processes and the claims supply chain.
Page 5 of 43
LLOYDS TSB GROUP
To improve our efficiency
The Group cost:income ratio, on a comparable basis, improved to 53.8 per cent
from 54.9 per cent in the first half of 2004, reflecting the fact that we have
once again delivered positive jaws. The Group has maintained its firm cost
control discipline and the growth in expenses was held to 3 per cent in the
first half of the year. We believe there are good opportunities to drive
further improvements in our cost position and we will be addressing this through
the continued application of our quality programme as well as specific
programmes in areas such as procurement and IT simplification.
To continue to enhance the Group's capabilities and processes to support faster
growth
We believe it is necessary for us to enhance our framework of skills and
competencies to allow us to drive higher rates of growth in a safe and
sustainable manner. In Finance, we are, for example, further embedding the use
of economic profit management disciplines to improve our pricing decisions and
hence our returns. In terms of Risk, we continue to enhance the risk governance
framework throughout the organisation which is leading to a more detailed
assessment of risk across the business portfolio and greater clarity around the
risk/reward trade-offs.
We are committed to building a high performance organisation. In addition to
further strengthening our executive management team, we have put in place
integrated programmes to further raise our performance and to enhance our
capabilities to execute effectively.
Summary
We have a strong franchise and, looking forward, we remain committed to the
execution of our organic growth strategy, based on building ever deeper
relationships with our customers. We are investing in our business unit
strategies, which will provide the necessary platform to sustain our future
growth. Our staff are committed to the delivery of our plans and to serving the
needs of our customers. Our capital position remains robust and we continue to
expect to be beneficiaries of Basel II. Our asset quality is satisfactory and
our broadly based franchise means that we are well positioned to deliver a good
trading performance in the second half of 2005 and beyond.
J Eric Daniels
Group Chief Executive
Page 6 of 43
LLOYDS TSB GROUP
GROUP FINANCE DIRECTOR'S REVIEW OF FINANCIAL PERFORMANCE
Since 1 January 2005, the Group has been using IFRS for financial reporting.
Although IFRS significantly changes the timing of earnings recognition in
financial results, it is important to note that it has no impact on our business
fundamentals and cash flows, the development of our organic growth strategies,
or our capital management policies.
Full details of the retrospective impact of the Group's implementation of IFRS
were published in our 'Transition to IFRS' announcement on 27 May 2005. The
increased use in IFRS of fair values has led to greater volatility in the
earnings of the Group. In order to provide a more comparable representation of
our business performance this earnings volatility, together with other IFRS
related adjustments applied with effect from 1 January 2005 and the impact on
the Group's results of businesses sold in 2004, have been separately analysed to
provide a comparable basis of presentation.
In the first half of 2005 statutory profit before tax was GBP1,676 million, an
increase of GBP108 million, or 7 per cent, compared to GBP1,568 million in the
first half of 2004. Profit attributable to equity shareholders increased by
GBP98 million, or 9 per cent, to GBP1,192 million and earnings per share
increased by 9 per cent to 21.3p.
On a comparable basis, as a result of earnings growth in all divisions, profit
before tax increased by GBP118 million, or 7 per cent, to GBP1,723 million.
Revenue growth of 5 per cent exceeded cost growth of 3 per cent. Earnings per
share increased by 10 per cent to 22.1p and economic profit increased by 11 per
cent to GBP728 million. The post-tax return on average shareholders' equity was
21.9 per cent.
Our strategy to deepen customer relationships has led to an increase in retail
lending, particularly in mortgages, credit cards and personal loans, and is
reflected in a 4 per cent increase in loans and advances to customers to GBP168
billion during the last six months. Total assets increased by 5 per cent to
GBP305 billion. Over the same period, customer deposits increased by GBP4
billion, or 3 per cent, to GBP131 billion, largely as a result of strong growth
in current account credit balances.
Group net interest income, on a comparable basis, increased by GBP151 million,
or 6 per cent, compared with the first half of last year. Good levels of
consumer lending growth led to increases of GBP2.0 billion in average personal
lending and credit card balances and GBP7.7 billion in average mortgage
balances, and customer lending growth in our Business Banking and Corporate
Markets franchises increased average interest-earning assets by GBP4.8 billion.
The net interest margin from our banking businesses (page 32, note 7) decreased
from 2.89 per cent in the first half of 2004 to 2.75 per cent in the first half
of 2005. However, much of this decline took place during the second half of
2004. As anticipated, the rate of margin erosion has slowed significantly with
only a 5 basis point reduction during the first half of 2005. Much of this
erosion has been caused by the impact of lower earnings on the Group's capital
and other interest free liabilities and, excluding this funding impact, the
margin was broadly stable during the first half of 2005.
Page 7 of 43
LLOYDS TSB GROUP
Other income, net of insurance claims, increased by GBP70 million to GBP2,174
million (page 33, note 8). Fees and commissions receivable, on a comparable
basis, increased by 13 per cent to GBP1,623 million as a result of higher income
from the strong volume growth in credit and debit card services, higher
insurance broking commissions, and an increase in fees from large corporate
business and asset based lending, as a result of growing customer transaction
volumes.
Operating expenses continued to be tightly controlled and on a comparable basis
increased by only 3 per cent to GBP2,597 million (page 34, note 10). Significant
improvements continue to be made in processing and operational efficiency and we
have continued to expand our programme of offshoring a number of our processing
and back office operations to India. As a result of this constant focus on
day-to-day operating cost control, the cost:income ratio improved to 53.8 per
cent, from 54.9 per cent in the first half of 2004.
Overall asset quality remains satisfactory. On a comparable basis, impairment
losses on loans and advances increased by 7 per cent to GBP511 million. A
substantial reduction in impairment losses in the corporate franchise was offset
by a 21 per cent rise in the retail banking business, resulting from a
combination of volume related asset growth in personal loan and credit card
lending, the absence of a provision release in the mortgage business which
totalled GBP12 million in the first half of 2004, and an increase in the number
of personal customers experiencing repayment difficulties. Most of our new
retail lending during the half has been to existing customers where we believe
we have a better understanding of an individual customer's total financial
position. On a comparable basis, our impairment charge expressed as a percentage
of average lending improved to 0.63 per cent, compared to 0.68 per cent in the
first half of 2004 (page 35, note 12). On a statutory basis, impaired assets
totalled GBP3,894 million, compared with GBP3,515 million at 1 January 2005,
representing 2.3 per cent of total lending, up from 2.1 per cent at 1 January
2005.
Scottish Widows continues to be one of the most strongly capitalised life
assurance companies in the UK. At the end of December 2004, the working capital
ratio of the Scottish Widows Long-Term Fund was 19.0 per cent (page 41, note 20)
and this improved to an estimated 19.5 per cent at the end of June 2005. The
required risk capital margin was covered over 9 times. In March 2005, Scottish
Widows paid a 2004 dividend of GBP200 million to Lloyds TSB reflecting the start
of an expected regular dividend stream. We are continuing to examine
opportunities to improve our capital efficiency and have work in progress that
we believe will allow Scottish Widows, without compromising its strong capital
position, to repatriate further capital to the Group, in excess of GBP500
million in the second half of 2005, in addition to its annual dividend.
Our capital position remains robust. At the end of June 2005, the total capital
ratio was 9.6 per cent and the tier 1 capital ratio was 7.8 per cent. During
the half-year, risk-weighted assets increased by 6 per cent to GBP140 billion,
reflecting good levels of growth in consumer lending and mortgages and strong
growth in our Corporate Markets businesses. We continue to plan for
risk-weighted asset growth of mid-to-high single digits over the next few years,
and expected profit retentions remain sufficient to support this level of
risk-weighted asset growth within our current capital management policy. The
Board has decided to maintain the interim dividend at 10.7p per share.
Helen A Weir
Group Finance Director
Page 8 of 43
LLOYDS TSB GROUP
SEGMENTAL ANALYSIS
Half-year to Life,
30 June 2005 pensions,
OEICs and
asset Wholesale
UK manage Insurance and Central
Retail General -ment and International group
Banking insurance Investments Banking items Total
Comparable basis GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Net interest income 1,612 19 186 205 1,035 (195) 2,657
Other income (page 30, 908 261 6,796 7,057 774 4 8,743
note 4)
Total income (page 30, 2,520 280 6,982 7,262 1,809 (191) 11,400
note 4)
Insurance claims (page 30, - (108) (6,461) (6,569) - - (6,569)
note 4)
Total income, net of
insurance claims 2,520 172 521 693 1,809 (191) 4,831
Operating expenses (1,274) (78) (215) (293) (1,052) 22 (2,597)
Trading surplus 1,246 94 306 400 757 (169) 2,234
(deficit)
Impairment losses on
loans and advances (416) - - - (95) - (511)
Profit (loss) before tax* 830 94 306 400 662 (169) 1,723
Volatility
- Banking - - - - - (73) (73)
- Insurance - 7 97 104 - - 104
- Policyholder tax - - 46 46 - - 46
Other IFRS adjustments (134) - (2) (2) 33 (21) (124)
applied from 1 January
2005
Profit (loss) before tax 696 101 447 548 695 (263) 1,676
Half-year to Life,
30 June 2004 pensions,
OEICs and
asset Wholesale
UK manage Insurance and Central
Retail General -ment and International group
Banking insurance Investments Banking items Total
Comparable basis GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Net interest income 1,602 26 108 134 971 (201) 2,506
Other income (page 30, 794 248 3,369 3,617 741 26 5,178
note 4)
Total income (page 30, 2,396 274 3,477 3,751 1,712 (175) 7,684
note 4)
Insurance claims (page 30, - (115) (2,959) (3,074) - - (3,074)
note 4)
Total income, net of
insurance claims 2,396 159 518 677 1,712 (175) 4,610
Operating expenses (1,252) (72) (229) (301) (998) 22 (2,529)
Trading surplus 1,144 87 289 376 714 (153) 2,081
(deficit)
Impairment losses on
loans and advances (344) - - - (132) - (476)
Profit (loss) before tax* 800 87 289 376 582 (153) 1,605
Volatility
- Insurance - (5) (60) (65) - - (65)
- Policyholder tax - - 5 5 - - 5
Loss on sale of - - - - (13) - (13)
businesses
Trading results of - - - - 36 - 36
discontinued operations
Profit (loss) before tax 800 82 234 316 605 (153) 1,568
*comparable basis
Page 9 of 43
LLOYDS TSB GROUP
SEGMENTAL ANALYSIS (continued)
Half-year to Life,
31 December 2004 pensions,
OEICs and
asset Wholesale
UK manage- Insurance and Central
Retail General ment and International group
Banking insurance Investments Banking items Total
Comparable basis GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Net interest income 1,626 18 131 149 1,015 (206) 2,584
Other income (page 30, 902 248 6,880 7,128 803 19 8,852
note 4)
Total income (page 30, 2,528 266 7,011 7,277 1,818 (187) 11,436
note 4)
Insurance claims (page 30, - (99) (6,449) (6,548) - - (6,548)
note 4)
Total income, net of 2,528 167 562 729 1,818 (187) 4,888
insurance claims
Operating expenses (1,357) (82) (239) (321) (1,049) (10) (2,737)
Trading surplus 1,171 85 323 408 769 (197) 2,151
(deficit)
Impairment losses on (332) - 3 3 (98) - (427)
loans and advances
Profit (loss) before tax* 839 85 326 411 671 (197) 1,724
Volatility
- Insurance - 13 197 210 - - 210
- Policyholder tax - - (3) (3) - - (3)
Loss on sale of - - - - (8) - (8)
businesses
Trading results of - - - - 4 - 4
discontinued operations
Profit (loss) before tax 839 98 520 618 667 (197) 1,927
*comparable basis
Page 10 of 43
LLOYDS TSB GROUP
DIVISIONAL PERFORMANCE
UK RETAIL BANKING
Half-year to Half-year to
30 June 31 December
2005 2004 2004
Comparable basis GBPm GBPm GBPm
Net interest income 1,612 1,602 1,626
Other income 908 794 902
Total income 2,520 2,396 2,528
Operating expenses:
Before provisions for customer redress (1,274) (1,252) (1,257)
Provisions for customer redress - - (100)
(1,274) (1,252) (1,357)
Trading surplus 1,246 1,144 1,171
Impairment losses on loans and advances (416) (344) (332)
Profit before tax* 830 800 839
Profit before tax, before provisions for customer redress* 830 800 939
Cost:income ratio, before provisions for customer redress* 50.6% 52.3% 49.7%
*comparable basis
Key achievements
- Continued earnings momentum. Profit before tax, on a
comparable basis, increased by 4 per cent to GBP830 million.
- Positive jaws continue to be delivered. Income growth of 5 per
cent exceeded cost growth of 2 per cent.
- Good customer balance growth in many product areas. Over the last six
months:
- Group mortgage balances increased by 4 per cent to GBP83.7 billion.
- Credit card balances increased by 3 per cent to GBP7.7 billion.
- Personal loan balances increased by 4 per cent to GBP11.2 billion.
- Customer deposit balances increased by 3 per cent to GBP68.2 billion.
- Good customer franchise growth. 22 per cent increase in quality customer
current account recruitment.
- Asset quality remains satisfactory.
Page 11 of 43
LLOYDS TSB Group
UK Retail Banking (continued)
Profit before tax, on a comparable basis, from UK Retail Banking increased by
GBP30 million, or 4 per cent, to GBP830 million, supported by continued growth
in the Group's consumer lending portfolios, higher than expected general
insurance profit sharing commissions and improved fee income. Total income
increased by 5 per cent whilst cost growth was 2 per cent. Other income
increased by 14 per cent, and represents 36 per cent of total income, compared
with 33 per cent in the first half of 2004.
In the first half of 2005, good levels of growth were achieved in all key
product areas. Personal loan balances outstanding at 30 June 2005 were GBP11.2
billion, an increase of 11 per cent over the last twelve months and card
balances totalled GBP7.7 billion, an increase of 8 per cent. In a slowing
mortgage market, gross new mortgage lending for the Group totalled GBP11.8
billion, compared with GBP13.6 billion in the first half of 2004. Net new
lending totalled GBP3.6 billion resulting in a market share of net new lending
of 8.9 per cent, and mortgage balances outstanding increased by 10 per cent to
GBP83.7 billion. Credit balances on current accounts and savings and investment
accounts increased by 7 per cent. Income and economic profit per customer
continued to improve during the half-year.
Operating expenses remained well controlled throughout the business and, as a
result, increased by only GBP22 million, or 2 per cent, to GBP1,274 million
compared with 5 per cent growth in income during the half-year. We have
continued to rationalise back office operations to improve efficiency. Levels of
customer service and satisfaction have also continued to improve.
Overall asset quality remained satisfactory. Impairment losses on loans and
advances increased by GBP72 million, or 21 per cent, to GBP416 million,
reflecting a combination of volume related asset growth in personal loan and
credit card lending, the absence of a mortgage provision release which in the
first half of 2004 totalled GBP12 million, and an increasing impact from
customers experiencing repayment difficulties. The impairment charge as a
percentage of average lending for personal loans and overdrafts increased to
4.45 per cent, from 4.34 per cent in the first half of 2004, while the charge in
the credit card portfolio increased to 3.74 per cent, from 3.51 per cent in the
first half of 2004. In the mortgages business, the Group continued to experience
a low level of losses, however the absence of a provision release led to an
increase in the mortgage impairment charge to GBP6 million. Overall, the
provisions charge as a percentage of average lending, on a comparable basis, was
0.87 per cent, compared to 0.79 per cent in the first half of 2004.
Cheltenham & Gloucester (C&G) continues to focus on prime lending market
segments. The average indexed loan-to-value ratio on the C&G mortgage portfolio
was 40 per cent (31 December 2004: 41 per cent), and the average loan-to-value
ratio for C&G new mortgages and further advances written during the first half
of 2005 was 64 per cent (2004: 62 per cent). At 30 June 2005, 85 per cent of
C&G mortgage balances had an indexed loan-to-value ratio of less than 80
per cent (31 December 2004: 88 per cent) and only 1 per cent of balances had an
indexed loan-to-value ratio in excess of 95 per cent (31 December 2004: 0.3 per
cent).
Page 12 of 43
LLOYDS TSB GROUP
UK Retail Banking (continued)
Within personal loans, key initiatives have been the increased use of
behavioural and risk-based pricing, and leveraging our customer insight
capabilities to enable the Group to deliver more competitive pricing to better
quality customers within our existing customer base. 99 per cent of new
personal loans and 76 per cent of new credit cards sold during the first half of
2005 were to existing customers, where the Group has a better understanding of
an individual customer's total financial position. The retail bank has also
continued to avoid sub-prime lending. Dynamic delinquency measures, on a
rolling 12 month basis, remain in line with our expectations given the slowdown
in consumer spending.
Customers are increasingly choosing to buy through direct channels and continued
investment in our direct channel capabilities has supported good levels of
business growth. Our internet bank now has 3.4 million registered users and, in
the first half of 2005, over 600,000 product sales were achieved through the
internet, an increase of 24 per cent compared to the first half of 2004. Over
218 million transactions were processed through internet banking, an increase of
36 per cent on the first half of 2004. Sales through direct channels now
represent almost half of total sales.
Lloyds TSB remains a leader in the added value current account market, with over
4 million customers. Quality customer current account recruitment increased by
22 per cent, compared with the first half of 2004, whilst customer attrition
levels were flat.
Page 13 of 43
LLOYDS TSB GROUP
INSURANCE AND INVESTMENTS
Half-year to Half-year to
30 June 31 December
2005 2004 2004
Comparable basis GBPm GBPm GBPm
Net interest income 205 134 149
Other income (page 30, note 4) 7,057 3,617 7,128
Total income (page 30, note 4) 7,262 3,751 7,277
Insurance claims (page 30, note 4) (6,569) (3,074) (6,548)
Total income, net of insurance claims 693 677 729
Operating expenses (293) (301) (321)
Trading surplus 400 376 408
Impairment losses on loans and advances - - 3
Profit before tax* 400 376 411
Profit before tax analysis
Life, pensions and OEICs 298 287 320
General insurance 94 87 85
Scottish Widows Investment Partnership 8 2 6
Profit before tax* 400 376 411
Embedded value basis+
Life and pensions
New business contribution 98 74 114
Existing business 101 121 76
Investment earnings - normalised 92 80 87
Profit before tax 291 275 277
OEICs
Profit before tax 23 19 34
Profit before tax (life, pensions and OEICs) 314 294 311
New business margin (life and pensions) 25.8% 24.3% 32.4%
*comparable basis + using the Group's 2004 UK GAAP reporting basis
Key achievements
- Improved profit performance. Profit before tax, on a
comparable basis, increased by 6 per cent to GBP400 million.
- On an embedded value basis, life, pensions and OEICs profit
before tax increased by 7 per cent to GBP314 million.
- Strong sales performance. 25 per cent increase in Scottish
Widows' new business weighted sales, increasing the Group's overall market
share from 4.9 per cent to 6.2 per cent.
- Improved profitability. New business contribution in Scottish
Widows', on an embedded value basis, increased by 32 per cent. Life and
pensions new business margin increased to 25.8 per cent.
- Good progress with Lloyds TSB Insurance's strategy to develop
its manufacturing business and increase focus on direct channels. Direct
sales increased by 19 per cent.
- Strong capital position maintained.
Page 14 of 43
LLOYDS TSB GROUP
Insurance and Investments (continued)
Profit before tax, on a comparable basis, increased by 6 per cent to GBP400
million. Profit before tax from our life, pensions and OEIC businesses increased
by GBP11 million, or 4 per cent, to GBP298 million. The Group's strategy to
improve its returns by focusing on more profitable, less capital intensive,
business whilst constantly seeking to improve process and distribution
efficiency has led to a 32 per cent increase in new business contribution, on an
embedded value basis, to GBP98 million. As a result of this improved capital
efficiency, strong sales of pensions and single premium investments, and
improved returns from less capital efficient products such as stakeholder
pensions, the life and pensions new business margin increased to 25.8 per cent,
from 24.3 per cent in the first half of 2004.
Overall, weighted sales in the first half of 2005 increased by 25 per cent to
GBP443.1 million and as a result the Group's life, pensions and investments
market share in the first quarter increased significantly to an estimated 6.2
per cent, compared with 4.9 per cent in the first quarter of 2004. IFA sales
grew 41 per cent to GBP280.0 million and our estimated market share of the IFA
market improved to 7.1 per cent, from 5.0 per cent in the first quarter of 2004.
IFA sales benefited particularly from improved product and service offerings for
pensions, and savings and investments. Bancassurance sales were 4 per cent
higher at GBP128.2 million, as a 29 per cent increase in weighted sales of OEICs
through the branch network and Lloyds TSB private banking clients was offset by
lower sales of protection products, largely reflecting the slowdown in the rate
of growth in mortgage lending. Our estimated market share through the
bancassurance and direct channels increased to 4.9 per cent, from 4.7 per cent
in the first quarter of 2004.
Half-year to Half-year to
30 June 31 December
2005 2004 2004
GBPm GBPm GBPm
Weighted sales (regular + 1/10 single)
Life and pensions 379.3 305.0 351.7
OEICs 63.8 49.6 36.8
Life, pensions and OEICs 443.1 354.6 388.5
Bancassurance 128.2 123.3 118.3
Independent financial advisers 280.0 198.3 233.3
Direct 34.8 32.7 36.8
Other 0.1 0.3 0.1
Life, pensions and OEICs 443.1 354.6 388.5
Group funds under management GBPbn GBPbn GBPbn
Scottish Widows Investment Partnership 87 77 82
UK Wealth Management 13 11 13
International 14 14 13
114 102 108
Page 15 of 43
LLOYDS TSB GROUP
Insurance and Investments (continued)
Pre-tax profit, on a comparable basis, from Scottish Widows Investment
Partnership (SWIP) increased to GBP8 million, compared with GBP2 million in the
first half of 2004, reflecting improved market performance and increased
revenues from new business. SWIP won GBP2.6 billion of gross new business in the
first half of 2005, an increase of 73 per cent on the first half of 2004, and
its assets under management increased by 13 per cent to GBP87 billion, compared
with the first half of 2004. Overall investment performance in the first half of
2005 has continued to improve.
Page 16 of 43
LLOYDS TSB GROUP
Insurance and Investments (continued)
General insurance
Half-year to Half-year to
30 June 31 December
2005 2004 2004
GBPm GBPm GBPm
Premium income from underwriting
Creditor 64 55 59
Home 220 218 224
Health 8 16 11
Reinsurance premiums (15) (13) (16)
277 276 278
Commissions from insurance broking
Creditor 229 203 239
Home 22 21 24
Health 8 10 10
Other 105 57 108
364 291 381
Distribution commissions paid to banking businesses 370 339 403
Profit before tax, on a comparable basis, from our general insurance operations
increased by GBP7 million, or 8 per cent, to GBP94 million.
In an increasingly competitive home insurance market, continued progress in
improving levels of business retention and higher product margins led to an
increase of GBP2 million in premium income from underwriting home insurance.
Insurance broking commission income increased by GBP73 million reflecting a
GBP26 million increase in income from creditor insurance, as improved sales
through direct channels offset the impact of a slowdown in our mortgage and
consumer lending growth, and a GBP48 million increase in other commissions,
reflecting higher than expected profit sharing income.
Our strategy to increase investment in more cost efficient distribution through
direct channels is starting to create a shift from face-to-face channels towards
direct channels. As a result gross written premiums from new policies sold
through direct channels increased by 19 per cent in the first half of 2005,
reflecting strong growth in levels of new home and motor insurance business.
Claims fell by GBP7 million to GBP108 million, compared to the first half of
2004, and the claims ratio improved to 37 per cent, compared with 40 per cent in
the first half of 2004, reflecting good progress in re-engineering the claims
process and improvements in the cost effectiveness of the claims supply chain,
as well as lower health claims as a result of the transfer of the Group's
private medical insurance business to BUPA during 2004.
Page 17 of 43
LLOYDS TSB GROUP
Wholesale and International Banking
Half-year to Half-year to
30 June 31 December
2005 2004 2004
Comparable basis GBPm GBPm GBPm
Net interest income 1,035 971 1,015
Other income 774 741 803
Total income 1,809 1,712 1,818
Operating expenses (1,052) (998) (1,049)
Trading surplus 757 714 769
Impairment losses on loans and advances (95) (132) (98)
Profit before tax* 662 582 671
Cost:income ratio* 58.2% 58.3% 57.7%
*comparable basis
Key achievements
- Strong profit growth. Profit before tax, on a comparable
basis, increased by 14 per cent to GBP662 million.
- Positive jaws. Income growth of 6 per cent exceeded cost
growth of 5 per cent.
- Good progress in delivering the strategy to build an integrated
wholesale bank.
- 25 per cent increase in Corporate Markets profit before tax.
- Strong levels of franchise growth in Business Banking. 27 per
cent growth in profit before tax.
- Asset quality remains strong.
Wholesale and International Banking profit before tax, on a comparable basis,
increased by GBP80 million, or 14 per cent, to GBP662 million. Income growth of
6 per cent exceeded cost growth of 5 per cent, leading to an improvement in the
cost:income ratio to 58.2 per cent. In addition to a reduction in impairment
losses, there was good income growth in Corporate Markets, Business Banking and
Asset Finance.
Net interest income increased by GBP64 million, or 7 per cent, reflecting higher
income from strong growth in customer lending in Corporate Markets, Business
Banking and Asset Finance and improved margins in Business Banking. Other income
increased by GBP33 million, or 4 per cent, as strong growth in fee income in
relationship businesses and higher levels of cross-selling activity within
Corporate Markets, and the beneficial impact of a number of motor dealership
acquisitions in Asset Finance, was partly offset by a reduction in the level of
venture capital investment realisations. Costs were 5 per cent higher at
GBP1,052 million, reflecting higher staff costs as a result of our increased
investment in people, as we build up our Corporate Markets product capability
and expertise, and the impact of the motor dealership acquisitions within Asset
Finance.
Page 18 of 43
LLOYDS TSB GROUP
Wholesale and International Banking (continued)
The charge for impairment losses on loans and advances decreased by GBP37
million to GBP95 million, as a result of a decrease in provisions from the
corporate lending portfolio, partially offset by higher charges in the Asset
Finance business.
In Corporate Markets, profit before tax grew by 25 per cent, from GBP319 million
in the first half of 2004, to GBP399 million, driven by a combination of higher
income and a reduction in impairment losses. Income increased by GBP35 million,
or 5 per cent. Customer relationships continue to be deepened, and the business
strategy to create an integrated regional sales structure, bringing together
product specialists with relationship managers, has continued to generate
positive results. Cross-selling income increased by 26 per cent, including a 28
per cent increase in Financial Markets cross-selling income to GBP48 million in
the first half of 2005.
Profit before tax in Business Banking grew by GBP21 million, or 27 per cent, to
GBP98 million reflecting good growth in customer income and tight control of
costs. Customer deposits rose by 6 per cent to GBP11.2 billion and customer
lending increased by 11 per cent to GBP7.7 billion. Business Banking continued
to develop and grow its customer franchise, with net customer recruitment of
some 10,000 during the first half of 2005, reflecting a share of 20 per cent in
the start-up market. Over 8,500 customers transferred their banking arrangements
to the Group from other banking providers.
Profit before tax in Asset Finance decreased by 9 per cent to GBP107 million,
largely reflecting higher impairment losses, which offset the continued
development of the motor and leisure, and contract hire businesses. In the
personal and retail finance business, new business volumes have increased by
some 8 per cent, and market share increased. Lloyds TSB Commercial Finance has
continued to grow strongly with a 19 per cent market share, measured by client
numbers, and the motor and leisure business continues to be the largest
independent lender in the UK motor and leisure point of sale market with a
market share of 19 per cent.
In International Banking, profit before tax decreased by GBP19 million, or 27
per cent, to GBP51 million, a key component of which was lower earnings on
retained capital following the repatriation of offshore capital to the Group.
Page 19 of 43
LLOYDS TSB GROUP
CONSOLIDATED INCOME STATEMENT - STATUTORY (unaudited)
Half-year to Half-year to Half-year to
30 June 30 June 31 December
2005 2004 2004
GBPm GBPm GBPm
Interest income 6,040 4,907 5,800
Interest expense (3,289) (2,389) (3,208)
Net interest income 2,751 2,518 2,592
Fees and commissions income 1,474 1,448 1,606
Fees and commissions expense (397) (424) (420)
Net fees and commissions income 1,077 1,024 1,186
Net trading income 3,536 816 4,220
Insurance premium income 2,210 2,843 3,227
Other operating income 519 445 430
Other income 7,342 5,128 9,063
Total income 10,093 7,646 11,655
Insurance claims (5,168) (3,074) (6,548)
Total income, net of insurance claims 4,925 4,572 5,107
Operating expenses
Administrative expenses (2,255) (2,230) (2,429)
Depreciation (324) (319) (319)
Total operating expenses (2,579) (2,549) (2,748)
Trading surplus 2,346 2,023 2,359
Impairment losses on loans and advances (670) (442) (424)
Operating profit 1,676 1,581 1,935
Loss on sale of businesses - (13) (8)
Profit before tax 1,676 1,568 1,927
Taxation (472) (442) (594)
Profit for the period 1,204 1,126 1,333
Profit attributable to minority interests 12 32 35
Profit attributable to equity shareholders 1,192 1,094 1,298
Profit for the period 1,204 1,126 1,333
Basic earnings per share 21.3p 19.6p 23.2p
Diluted earnings per share 21.1p 19.5p 23.0p
Proposed dividend per share 10.7p 10.7p 23.5p
Proposed dividend GBP599m GBP599m GBP1,315m
Page 20 of 43
LLOYDS TSB Group
CONSOLIDATED BALANCE SHEET - STATUTORY (unaudited)
30 June 1 January 31 December 30 June
2005 2005 2004 2004
GBPm GBPm GBPm GBPm
Assets
Cash and balances at central banks 943 1,078 1,078 892
Items in course of collection from banks 1,716 1,462 1,462 1,879
Treasury bills and other eligible bills 92 142
Trading securities and other financial
assets at fair value through profit or
loss 57,363 56,853
Derivative financial instruments 10,438 9,263
Loans and advances to banks 36,090 31,851 31,848 34,305
Loans and advances to customers 167,583 161,162 155,318 142,209
Debt securities 43,485 44,007
Equity shares 27,323 25,362
Available-for-sale financial assets 13,693 14,593
Investment property 3,906 3,776 3,776 3,501
Interests in joint ventures 49 53 53 53
Goodwill 2,472 2,469 2,469 2,507
Value of in-force business 2,016 1,890 2,913 2,955
Intangible assets 25 28 28 43
Fixed assets 4,185 4,180 4,180 4,062
Other assets 4,733 3,339 8,960 8,370
Total assets 305,212 291,997 282,985 270,287
Equity and liabilities
Deposits from banks 33,946 39,723 39,723 37,569
Customer accounts 130,550 126,349 119,811 116,357
Items in course of transmission to banks 725 631 631 765
Derivative financial instruments and
other trading liabilities 10,467 10,334
Liabilities to customers under
investment contracts 19,049 16,361
Debt securities in issue 35,810 28,728 28,770 28,564
Insurance contract liabilities 37,594 36,725 52,289 49,349
Unallocated surplus within insurance 524 426 1,362 410
businesses
Other liabilities 11,107 8,496 14,866 13,171
Retirement benefit obligations 3,010 3,075 3,075 3,116
Deferred tax liabilities 222 15 214 12
Other provisions for liabilities and charges 315 270 211 153
Subordinated liabilities 12,067 11,211 10,252 9,783
Total liabilities 295,386 282,344 271,204 259,249
Equity
Share capital 1,400 1,399 1,419 1,419
Share premium account 1,162 1,145 1,145 1,144
Other reserves 372 371 343 343
Retained profits 6,541 6,657 8,243 7,512
Shareholders' equity 9,475 9,572 11,150 10,418
Minority interests 351 81 631 620
Total equity 9,826 9,653 11,781 11,038
Total equity and liabilities 305,212 291,997 282,985 270,287
Page 21 of 43
LLOYDS TSB GROUP
CONDENSED CONSOLIDATED CASH FLOW STATEMENT - STATUTORY (unaudited)
Half-year to Half-year to
30 June 31 December
2005 2004 2004
GBPm GBPm GBPm
Net cash from operating activities 1,108 (176) 2,218
Cash flows from investing activities
Purchase of fixed asset investments (6,113) (3,975)
Proceeds from sale and maturity of fixed asset investments 6,161 3,571
Purchase of available-for-sale investments (4,528)
Proceeds from sale and maturity of available-for-sale investments 5,859
Purchase of fixed assets (645) (735) (830)
Proceeds from sale of fixed assets 360 391 307
Acquisition of businesses, net of cash acquired (23) (9) (7)
Disposal of businesses, net of cash disposed - 17 (42)
Net cash generated by (used in) investing activities 1,023 (288) (976)
Cash flows from financing activities
Dividends paid to equity shareholders (1,315) (1,314) (599)
Dividends paid to minority interests (16) (31) (37)
Proceeds from issue of subordinated liabilities 802 - 699
Proceeds from issue of ordinary share capital and transactions in
own shares held in respect of employee share schemes 18 10 1
Repayment of subordinated liabilities (loan capital) - (500) (264)
Minority investment in subsidiaries 274 - -
Repayment of minority investment in subsidiaries - (148) (3)
Net cash used in financing activities (237) (1,983) (203)
Change in cash and cash equivalents 1,894 (2,447) 1,039
Cash and cash equivalents at beginning of period 3,555 4,963 2,516
Cash and cash equivalents at end of period 5,449 2,516 3,555
Cash and cash equivalents comprise cash and balances at central banks (excluding
mandatory deposits) and amounts due from banks repayable on demand, excluding
balances held in the long-term insurance and investment funds.
Page 22 of 43
LLOYDS TSB GROUP
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY - STATUTORY (unaudited)
Attributable to equity shareholders
Share capital Other Retained Minority
and premium reserves profits interests Total
GBPm GBPm GBPm GBPm GBPm
Balance at 1 January 2004 2,554 343 7,747 782 11,426
Currency translation differences - - (15) (15) (30)
Profit for the period - - 1,094 32 1,126
Total recognised income for the - - 1,079 17 1,096
period
Dividends - - (1,314) (31) (1,345)
Purchase/sale of treasury shares - - (5) - (5)
Employee share option schemes:
- value of employee services - - 5 - 5
- proceeds from shares issued 9 - - - 9
Changes in minority interests - - - (148) (148)
Balance at 30 June 2004 2,563 343 7,512 620 11,038
Currency translation differences - - 3 16 19
Profit for the period - - 1,298 35 1,333
Total recognised income for the - - 1,301 51 1,352
period
Dividends - - (599) (37) (636)
Purchase/sale of treasury shares - - 15 - 15
Employee share option schemes:
- value of employee services - - 14 - 14
- proceeds from shares issued 1 - - - 1
Changes in minority interests - - - (3) (3)
Balance at 31 December 2004 2,564 343 8,243 631 11,781
Adjustments on transition to IAS (20) 28 (1,586) (550) (2,128)
32, IAS 39 and IFRS 4
Restated balance at 1 January 2005 2,544 371 6,657 81 9,653
Movement in available-for-sale
investments, net of tax - 1 - - 1
Currency translation differences - - 14 - 14
Net income recognised directly in
equity - 1 14 - 15
Profit for the period - - 1,192 12 1,204
Total recognised income for the
period - 1 1,206 12 1,219
Dividends - - (1,315) (16) (1,331)
Purchase/sale of treasury shares - - (19) - (19)
Employee share option schemes:
- value of employee services - - 12 - 12
- proceeds from shares issued 18 - - - 18
Changes in minority interests - - - 274 274
Balance at 30 June 2005 2,562 372 6,541 351 9,826
Page 23 of 43
LLOYDS TSB GROUP
SEGMENTAL ANALYSIS - STATUTORY (unaudited)
Half-year to Life,
30 June 2005 pensions,
OEICs and
asset Wholesale
UK manage- Insurance and Central
Retail General ment and International group
Banking insurance Investments Banking items Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Net interest income 1,730 10 184 194 1,084 (257) 2,751
Other income 815 277 5,519 5,796 759 (28) 7,342
Total income 2,545 287 5,703 5,990 1,843 (285) 10,093
Insurance claims - (108) (5,060) (5,168) - - (5,168)
Total income, net of
insurance claims 2,545 179 643 822 1,843 (285) 4,925
Operating expenses (1,281) (78) (196) (274) (1,046) 22 (2,579)
Trading surplus
(deficit) 1,264 101 447 548 797 (263) 2,346
Impairment losses on
loans and advances (568) - - - (102) - (670)
Profit (loss) before tax 696 101 447 548 695 (263) 1,676
Half-year to Life,
30 June 2004 pensions,
OEICs and
asset Wholesale
UK manage- Insurance and Central
Retail General ment and International group
Banking insurance Investments Banking items Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Net interest income 1,602 26 108 134 983 (201) 2,518
Other income 794 243 3,314 3,557 751 26 5,128
Total income 2,396 269 3,422 3,691 1,734 (175) 7,646
Insurance claims - (115) (2,959) (3,074) - - (3,074)
Total income, net of
insurance claims 2,396 154 463 617 1,734 (175) 4,572
Operating expenses (1,252) (72) (229) (301) (1,018) 22 (2,549)
Trading surplus
(deficit) 1,144 82 234 316 716 (153) 2,023
Impairment losses on
loans and advances (344) - - - (98) - (442)
Loss on sale of
businesses - - - - (13) - (13)
Profit (loss) before tax 800 82 234 316 605 (153) 1,568
Page 24 of 43
LLOYDS TSB GROUP
SEGMENTAL ANALYSIS - STATUTORY (unaudited) (continued)
Half-year to Life,
31 December 2004 pensions,
OEICs and
asset Wholesale
UK manage- Insurance and Central
Retail General ment and International group
Banking insurance Investments Banking items Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Net interest income 1,626 18 131 149 1,023 (206) 2,592
Other income 902 261 7,074 7,335 807 19 9,063
Total income 2,528 279 7,205 7,484 1,830 (187) 11,655
Insurance claims - (99) (6,449) (6,548) - - (6,548)
Total income, net of 2,528 180 756 936 1,830 (187) 5,107
insurance claims
Operating expenses (1,357) (82) (239) (321) (1,060) (10) (2,748)
Trading surplus
(deficit) 1,171 98 517 615 770 (197) 2,359
Impairment losses on
loans and advances (332) - 3 3 (95) - (424)
Loss on sale of
businesses - - - - (8) - (8)
Profit (loss) before tax 839 98 520 618 667 (197) 1,927
Page 25 of 43
LLOYDS TSB GROUP
NOTES
1. Accounting policies and presentation
The accounting polices adopted by the Group in the preparation of its
2005 summarised half-year results and those which the Group currently expects to
adopt in its annual accounts for the year ending 31 December 2005 are disclosed
in the Group's 'Transition to IFRS' document published on 27 May 2005. Although
the Group does not currently expect the amendments to IAS 19 (Actuarial Gains
and Losses, Group Plans and Disclosures) or IAS 39 (The Fair Value Option) to
have a material impact on the Group's results, further standards and
interpretations may be issued that could be applicable for financial years
ending in 2005 or later, but with the option for earlier adoption. The Group's
first annual IFRS statements may, therefore, be prepared in accordance with
different accounting policies to those used in this document. IFRS is also
being applied in the EU and other countries for the first time and practice on
which to draw in applying the standards is still developing. Consequently, the
financial information in this document may change.
Comparative information for 2004 has been restated to take into account the
requirements of all of the standards except for IAS 32, IAS 39 and IFRS 4
(including FRS 27). In accordance with the requirements of IFRS, these
standards have been implemented with effect from 1 January 2005 and the opening
balance sheet at this date has been adjusted accordingly.
The Group has reviewed the valuation of its pension schemes and has concluded
that no adjustment is required at 30 June 2005. In accordance with IAS 19 the
valuations will be formally updated at the year-end.
2. Impact of IFRS adjustments
From 1 January 2005, the Group has been using IFRS for financial
reporting. Although the move to IFRS, together with the Group's implementation
of FRS 27, significantly changes the timing of earnings recognition in financial
results, it is important to note that there is no impact on business
fundamentals and cash flows, the development of our organic growth strategies,
or the Group's capital management policies. Full details of the impact of the
Group's implementation of IFRS, including the impact of the implementation of
FRS 27, were published in the Group's 'Transition to IFRS' announcement on 27
May 2005. Copies of this announcement are available on the Group's website at
www.lloydstsb.com/investorrelations.
The impact of IFRS, and in particular the increased use in IFRS of
fair values, is likely to lead to greater volatility in the earnings of the
Group. In order to provide a more comparable representation of the business
performance of the Group this volatility has been separately analysed for the
Group's insurance and banking businesses (page 28, note 3). In addition, other
IFRS related adjustments applied with effect from 1 January 2005, for which
comparatives are not required to be restated, and the impact on the Group's
results of businesses sold in 2004, have been separately analysed in the Group's
results. A reconciliation of this 'comparable' basis of presentation to the
Group's profit before tax is shown below.
Page 26 of 43
LLOYDS TSB GROUP
2. Impact of IFRS adjustments (continued)
Half-year to Other
30 June 2005 Volatility IFRS related
Comparable adjustments Statutory
basis applied from basis
1 January 2005
GBPm GBPm GBPm GBPm
Net interest income 2,657 (38) 132 2,751
Other income 8,743 115 (1,516) 7,342
Total income 11,400 77 (1,384) 10,093
Insurance claims (6,569) - 1,401 (5,168)
Total income, net of insurance claims 4,831 77 17 4,925
Operating expenses (2,597) - 18 (2,579)
Trading surplus 2,234 77 35 2,346
Impairment losses on loans and advances (511) - (159) (670)
Profit (loss) before tax 1,723 77 (124) 1,676
Taxation (453) (42) 23 (472)
Profit (loss) for the period 1,270 35 (101) 1,204
Profit (loss) attributable to minority interests 33 - (21) 12
Profit (loss) attributable to equity
shareholders 1,237 35 (80) 1,192
Profit (loss) for the period 1,270 35 (101) 1,204
Earnings per share 22.1p 0.6p (1.4)p 21.3p
In the reconciliation above, no adjustment has been made to show the volatility
element of policyholder income and insurance claims as, with the exception of
policyholder tax, which is included in volatility, these offset each other.
The effect of the implementation of the IFRS related standards applied with
effect from 1 January 2005 on the Group's earnings in the first half of 2005,
excluding the impact of volatility, has been to reduce profit before tax by
GBP124 million, or 7 per cent, and earnings per share by 6 per cent. This
reduction in earnings largely reflects the application of effective interest
rates, the reclassification of certain securities from equity to debt, and the
impact of discounting on levels of loan loss impairment. There has also been a
significant reduction in other income, with a corresponding decrease in
insurance claims, as a result of the impact of IFRS 4 on the accounting
treatment of certain insurance products. A reconciliation of the GBP124 million
reduction in profit before tax is provided below:
Page 27 of 43
LLOYDS TSB GROUP
2. Impact of IFRS adjustments (continued)
Other IFRS adjustments applied Lloyds TSB
from 1 January 2005 Develop- Debt/equity
Effective ment re-
Impair- interest Capital classification
ment rate Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
Net interest income 42 127 (11) (21) (5) 132
Other income - (155) 38 - (1,399) (1,516)
Total income 42 (28) 27 (21) (1,404) (1,384)
Insurance claims - - - - 1,401 1,401
Total income, net of insurance 42 (28) 27 (21) (3) 17
claims
Operating expenses 6 - - - 12 18
Trading surplus 48 (28) 27 (21) 9 35
Impairment losses on loans and
advances (159) - - - - (159)
Profit before tax (111) (28) 27 (21) 9 (124)
Current indications remain that the overall impact, excluding the volatility
introduced by the requirements of IFRS and FRS 27, will be to reduce the Group's
reported earnings per share in 2005, compared with those that would have been
reported under UK GAAP, by approximately 6 per cent. Excluding goodwill
amortisation, earnings per share (before volatility) is expected to reduce by
approximately 7 per cent. Profit before tax (before volatility) is expected to
be approximately 8 per cent lower, additionally reflecting the inclusion of
coupon payments on preferred securities now being treated as an interest expense
rather than minority interests. This likely reduction in earnings in 2005 is
almost entirely due to changes in the timing of income and expense recognition
in the Group's financial statements.
3. Volatility
Insurance volatility
Changes in market variables such as the performance of equity markets and the
level of interest rates, which are beyond the control of management, can result
in significant volatility in the profitability of the Group's insurance
businesses. As in previous years, in order to provide a clearer representation
of the underlying performance of the life and pensions and general insurance
businesses, the effect of these changes is separately analysed within insurance
volatility. Following the implementation of the requirements of IFRS and FRS
27, insurance volatility is principally comprised of the elements described
below.
The Group's insurance businesses have substantial holdings of investments which
are accounted for at fair value with changes being reflected within the income
statement. The difference between the actual return on these investments and
the expected return based upon economic assumptions made at the beginning of the
year is included within insurance volatility. In addition, the calculation of
the value of in-force business makes assumptions about future investment
returns; to the extent that actual experience is different the effect is also
included within insurance volatility.
Page 28 of 43
LLOYDS TSB GROUP
3. Volatility (continued)
Insurance volatility (continued)
The main assumptions used in the calculation of the value of in-force business
at 30 June 2005 were as follows:
30 June 30 June 31 December
2005 2004 2004
% % %
Risk-adjusted discount rate (net of tax) 7.08 7.77 7.40
Return on equities (gross of tax) 6.83 7.69 7.17
Return on fixed interest securities (gross of tax) 4.23 5.09 4.57
Expenses inflation 3.59 3.90 3.76
Changes in stock market performance also affect the realistic valuation of the
guarantees and options embedded within products written in the Scottish Widows
with-profits fund, which following the implementation of FRS 27 is now reflected
in the Group's balance sheet. Fluctuations in this valuation caused by
market-related movements are also included within insurance volatility.
During the first half of 2005, profit before tax included positive insurance
volatility of GBP104 million.
Banking volatility
In accordance with IFRS, it is the Group's policy to recognise all derivatives
at fair value. The banking businesses manage their interest rate and other
market risks primarily through the use of intra-Group derivatives, with the
resulting net positions managed centrally using external derivatives. IFRS does
not, however, permit the intra-Group derivatives to be used in a hedge
relationship for reporting purposes. Although fair value accounting can have a
significant impact on reported earnings, it does not impact on the business
fundamentals or cash flows of the businesses. The Group has, therefore,
implemented an internal pricing structure that allows divisions to transfer to
central group items the volatility associated with marking to market derivatives
held for risk management purposes. This 'banking volatility' is the difference
between the result that would be recognised on an accrual accounting basis for
derivatives held for risk management purposes and their mark to market value.
The Group has set up a central hedging function to reduce the impact of this
volatility by establishing, where possible, accounting hedge relationships for
the external derivatives.
During the first half of 2005, profit before tax included a negative
banking volatility of GBP73 million.
Page 29 of 43
LLOYDS TSB GROUP
3. Volatility (continued)
Policyholder tax volatility
Under IFRS, tax on policyholder investment returns is included in the Group's
tax charge rather than being offset against the related income. This has the
effect of increasing or decreasing profit before tax with a corresponding change
in the tax charge; there is no impact on earnings. In order to provide a
clearer representation of the underlying performance of the Group's life and
pensions businesses, and because the policyholder tax amount is likely to be
volatile, the impact upon pre-tax profit has been separately identified within
volatility.
During the first half of 2005, profit before tax included positive policyholder
tax volatility of GBP46 million.
4. Policyholder grossing adjustments
IFRS requires line-by-line consolidation for all items of income and expenditure
and, as a result, the Group can no longer report the results and balances of its
life assurance businesses as single line items. These items have therefore been
allocated to individual lines in the Group's income statement and balance sheet.
As a result, in the income statement premiums receivable from policyholders
and the returns on policyholder investments are now shown within total income,
and a deduction is included for the related insurance claims expense. Whilst
this represents a significant presentational change, there is no material impact
upon the Group's profitability. The following tables show the impact on the
comparable profit and loss account of these policyholder grossing adjustments:
Insurance and Investments
Half-year to 30 June 2005
Comparable Policyholder gross-up Comparable
basis basis*
GBPm GBPm GBPm
Net interest income 205 159 46
Other income 7,057 6,312 745
Insurance claims (6,569) (6,461) (108)
Total income, net of insurance claims 693 10 683
Operating expenses (293) - (293)
Profit before tax 400 10 390
*comparable basis, excluding policyholder grossing adjustment
Page 30 of 43
LLOYDS TSB GROUP
4. Policyholder grossing adjustments (continued)
Half-year to 31 December 2004
Comparable Policyholder Comparable basis*
basis gross-up
GBPm GBPm GBPm
Net interest income 149 104 45
Other income 7,128 6,378 750
Insurance claims (6,548) (6,449) (99)
Total income, net of insurance claims 729 33 696
Operating expenses (321) (27) (294)
Impairment losses 3 - 3
Profit before tax 411 6 405
*comparable basis, excluding policyholder grossing adjustment
Half-year to 30 June 2004
Comparable Policyholder Comparable basis*
basis gross-up
GBPm GBPm GBPm
Net interest income 134 85 49
Other income 3,617 2,892 725
Insurance claims (3,074) (2,959) (115)
Total income, net of insurance claims 677 18 659
Operating expenses (301) (10) (291)
Profit before tax 376 8 368
*comparable basis, excluding policyholder grossing adjustment
5. Mortgage lending
Half-year to Half-year to
30 June 31 December
2005 2004 2004
GBPm GBPm GBPm
Gross new mortgage lending GBP11.8bn GBP13.6bn GBP12.7bn
Market share of gross new mortgage lending 9.4% 9.4% 8.7%
Net new mortgage lending GBP3.6bn GBP5.5bn GBP3.8bn
Market share of net new mortgage lending 8.9% 10.4% 7.9%
Mortgages outstanding (period-end)* GBP83.7bn GBP76.3bn GBP80.1bn
Market share of mortgages outstanding 9.1% 9.2% 9.1%
*excluding the effect of IFRS related adjustments
Page 31 of 43
LLOYDS TSB GROUP
6. Central group items*
Half-year to Half-year to
30 June 31 December
2005 2004 2004
GBPm GBPm GBPm
Lloyds TSB Foundations (17) (16) (15)
Funding cost of acquisitions less earnings on capital (168) (150) (167)
Central costs and other unallocated items 16 13 (15)
(169) (153) (197)
*comparable basis
The four Lloyds TSB Foundations support registered charities throughout the UK
that enable people, particularly disabled and disadvantaged, to play a fuller
role in society. The Foundations receive 1 per cent of the Lloyds TSB Group's
pre-tax profit after adjusting for gains and losses on the disposal of
businesses and pre-tax minority interests, averaged over three years, instead of
the dividend on their shareholdings. In the first half of 2005, GBP17 million
was accrued for payment to registered charities.
7. Group net interest income
Half-year to Half-year to
30 June 31 December
2005 2004 2004
Statutory basis GBPm GBPm GBPm
Net interest income 2,751 2,518 2,592
Average interest-earning assets, excluding reverse repos 195,975 174,490 183,236
Net interest margin 2.83% 2.90% 2.81%
Banking margin - comparable basis*
Net interest income 2,474 2,391 2,456
Average interest-earning assets, excluding reverse repos 181,305 166,244 174,586
Net interest margin 2.75% 2.89% 2.80%
*As a result of the implementation of IFRS, the Group's net interest income
includes certain amounts attributable to policyholders, in addition to the
interest earnings on shareholders' funds held in the Group's insurance
businesses. In order to maintain the comparability of the Group's banking net
interest margin these amounts, together with the related average
interest-earning assets, have been excluded from the comparable basis
calculation.
Page 32 of 43
LLOYDS TSB GROUP
8. Other income
Half-year to Half-year to
30 June 31 December
2005 2004 2004
Comparable basis GBPm GBPm GBPm
Fees and commissions receivable:
UK current account fees 358 312 325
Other UK fees and commissions 573 537 550
Insurance broking 364 291 381
Card services 267 234 281
International fees and commissions 61 67 64
1,623 1,441 1,601
Fees and commissions payable (436) (423) (419)
Net fees and commissions income 1,187 1,018 1,182
Net trading income (note 9) 3,454 873 4,013
Insurance premium income 3,630 2,843 3,227
Other operating income 472 444 430
Total other income* 8,743 5,178 8,852
Insurance claims (6,569) (3,074) (6,548)
Total other income, net of insurance claims* 2,174 2,104 2,304
Volatility
- Banking (35) - -
- Insurance 104 (65) 210
- Policyholder tax 46 5 (3)
Other IFRS adjustments applied from 1 January 2005 (115) - -
Discontinued operations - 10 4
Total other income, net of insurance claims 2,174 2,054 2,515
*comparable basis
9. Net trading income
Half-year to Half-year to
30 June 31 December
2005 2004 2004
Comparable basis GBPm GBPm GBPm
In respect of insurance products:
Securities and other gains 3,340 754 3,897
In respect of banking products:
Foreign exchange income 76 83 88
Securities and other gains 38 36 28
114 119 116
Net trading income 3,454 873 4,013
Page 33 of 43
LLOYDS TSB GROUP
10. Operating expenses
Half-year to Half-year to
30 June 31 December
2005 2004 2004
Comparable basis GBPm GBPm GBPm
Administrative expenses:
Staff:
Salaries 1,014 955 1,006
National insurance 78 68 74
Pensions 144 149 158
Other staff costs 134 124 156
1,370 1,296 1,394
Premises and equipment:
Rent and rates 145 146 147
Hire of equipment 6 9 7
Repairs and maintenance 70 63 65
Other 62 69 61
283 287 280
Other expenses:
Communications and external data processing 220 215 231
Advertising and promotion 112 109 96
Professional fees 97 104 118
Provisions for customer redress - - 112
Other 191 200 187
620 628 744
Administrative expenses 2,273 2,211 2,418
Depreciation 324 318 319
Total operating expenses - comparable basis 2,597 2,529 2,737
Discontinued operations - 20 11
Other IFRS adjustments applied from 1 January 2005 (18) - -
Total operating expenses 2,579 2,549 2,748
Cost:income ratio - comparable basis* 53.8% 54.9% 53.7%
Cost:income ratio* 52.4% 55.8% 53.8%
*total operating expenses divided by total income, net of insurance claims. The
cost:income ratio on a comparable basis also excludes the provisions for
customer redress in the second half of 2004
Page 34 of 43
LLOYDS TSB GROUP
11. Number of employees (full-time equivalent)
30 June 31 December
2005 2004 2004
UK Retail Banking 35,135 36,112 35,517
Insurance and Investments 5,782 5,594 5,541
Wholesale and International Banking 19,108 18,325 18,777
Other, largely IT and Operations 9,580 10,427 10,150
Continuing operations 69,605 70,458 69,985
Discontinued operations - 1,363 -
Total number of employees (full-time equivalent) 69,605 71,821 69,985
12. Impairment losses for loans and advances
Half-year to Half-year to
30 June 31 December
2005 2004 2004
Comparable basis GBPm GBPm GBPm
UK Retail Banking
Personal loans/overdrafts 269 236 237
Credit cards 141 120 122
Mortgages 6 (12) (27)
416 344 332
Insurance and Investments - - (3)
Wholesale and International Banking 95 132 98
Total charge - comparable basis 511 476 427
Discontinued operations - (34) (3)
Other IFRS adjustments applied from 1 January 2005 159 - -
Total charge 670 442 424
% % %
Charge as % of average lending:
Personal loans/overdrafts 4.45 4.34 4.07
Credit cards 3.74 3.51 3.32
Mortgages 0.02 (0.03) (0.07)
UK Retail Banking 0.87 0.79 0.71
Insurance and Investments - - (0.01)
Wholesale and International Banking 0.31 0.52 0.34
Total charge - comparable basis 0.63 0.68 0.56
Discontinued operations - (19.92) (2.69)
Other IFRS adjustments applied from 1 January 2005 0.19 - -
Total charge 0.80 0.63 0.55
Page 35 of 43
LLOYDS TSB GROUP
13. Capital ratios
30 June 1 January
2005 2005
GBPm GBPm
Capital
Tier 1 10,873 10,793
Tier 2 9,184 8,767
20,057 19,560
Supervisory deductions (6,658) (6,242)
Total capital 13,399 13,318
Risk-weighted assets GBPbn GBPbn
UK Retail Banking 59.3 57.2
Insurance and Investments 2.2 1.9
Wholesale and International Banking 76.7 71.0
Central group items 1.7 1.7
Total risk-weighted assets 139.9 131.8
Risk asset ratios
Total capital 9.6% 10.1%
Tier 1 7.8% 8.2%
Half-year to Half-year to
30 June 31 December
2005 2004 2004
% % %
Post-tax return on average risk-weighted assets 1.79 1.86 2.10
Post-tax return on average risk-weighted assets* 1.88 1.92 1.91
*comparable basis
Page 36 of 43
LLOYDS TSB GROUP
14. Balance sheet information
30 June 1 January
2005 2005
GBPm GBPm
Deposits - customer accounts
Sterling:
Non-interest bearing current accounts 3,547 3,300
Interest bearing current accounts 37,100 35,863
Savings and investment accounts 59,315 57,255
Other customer deposits 18,455 17,058
Total sterling 118,417 113,476
Currency 12,133 12,873
Total deposits - customer accounts 130,550 126,349
Loans and advances to customers
Domestic:
Agriculture, forestry and fishing 2,191 2,083
Manufacturing 5,001 4,622
Construction 2,463 2,147
Transport, distribution and hotels 7,358 7,063
Property companies 7,095 5,943
Financial, business and other services 16,937 16,862
Personal : mortgages 83,950 80,282
: other 23,390 22,841
Lease financing 6,266 6,227
Hire purchase 4,980 4,828
Other 5,597 5,930
Total domestic 165,228 158,828
International:
Latin America 153 125
United States of America 1,989 2,028
Europe 1,704 1,583
Rest of the world 624 516
Total international 4,470 4,252
169,698 163,080
Impairment provisions for loans and advances (2,115) (1,918)
Total loans and advances to customers 167,583 161,162
Page 37 of 43
LLOYDS TSB GROUP
15. Movements in subordinated liabilities
GBPm
Balance at 1 January 2004 10,454
Matured/repaid in the period (500)
Other (171)
Balance at 30 June 2004 9,783
Issued in the period 699
Matured/repaid in the period (264)
Other 34
Balance at 31 December 2004 10,252
Adjustments on transition to IAS 32, IAS 39 and IFRS 4 959
Restated balance at 1 January 2005 11,211
Issued in the period 802
Other 54
Balance at 30 June 2005 12,067
16. Economic profit
Half-year to Half-year to
30 June 31 December
2005 2004 2004
Statutory basis GBPm GBPm GBPm
Average shareholders' equity 9,741 10,531 10,656
Profit attributable to equity shareholders 1,192 1,094 1,298
Less: notional charge (435) (471) (482)
Economic profit 757 623 816
Comparable basis
Average shareholders' equity 11,399 10,531 10,656
Profit attributable to equity shareholders 1,237 1,126 1,176
Less: notional charge (509) (471) (482)
Economic profit 728 655 694
Economic profit represents the difference between the earnings on the equity
invested in a business and the cost of the equity. The notional charge has been
calculated by multiplying average shareholders' equity by the cost of equity
used by the Group of 9 per cent (2004 first half: 9 per cent).
Page 38 of 43
LLOYDS TSB GROUP
17. Earnings per share
Half-year to Half-year to
30 June 31 December
2005 2004 2004
Comparable basis
Basic
Profit attributable to equity shareholders GBP1,237m GBP1,126m GBP1,176m
Weighted average number of ordinary shares in issue 5,592m 5,589m 5,591m
Earnings per share 22.1p 20.1p 21.0p
Statutory basis
Basic
Profit attributable to equity shareholders GBP1,192m GBP1,094m GBP1,298m
Weighted average number of ordinary shares in issue 5,592m 5,589m 5,591m
Earnings per share 21.3p 19.6p 23.2p
Fully diluted
Profit attributable to equity shareholders GBP1,192m GBP1,094m GBP1,298m
Weighted average number of ordinary shares in issue 5,637m 5,624m 5,626m
Earnings per share 21.1p 19.5p 23.0p
Page 39 of 43
LLOYDS TSB GROUP
18. Tax
The effective rate of tax was unchanged at 28.2 per cent compared to the first
half of 2004, and lower than the standard UK corporation tax rate of 30 per
cent.
A reconciliation of the charge that would result from applying the standard UK
corporation tax rate to profit before tax to the tax charge, is given below:
Half-year to Half-year to
30 June 31 December
2005 2004 2004
GBPm GBPm GBPm
Profit before tax 1,676 1,568 1,927
Tax charge thereon at UK corporation tax rate of 30% 503 470 578
Factors affecting charge:
Disallowed and non-taxable items 12 10 (9)
Overseas tax rate differences (4) (3) (11)
Net tax effect of disposals and unrealised gains (18) (6) (6)
Tax deductible coupons on non-equity minority interests - (6) (6)
Life companies tax accounting (14) (19) 42
Other items (7) (4) 6
Tax charge 472 442 594
The reduction in the effective rate from life companies tax accounting
was 0.8 per cent. Under IFRS, the Group's life companies include the value of
insurance contracts within profit before tax on a net basis. The tax charge
does not, therefore, include an amount attributable to the value of the life
companies' in-force business. The impact of this on the effective tax rate is
partly offset by the inclusion of policyholder tax within the Group's tax
charge.
19. Loss on sale of businesses
During the first half of 2004, the Group disposed of its businesses in
Panama and Guatemala and recognised a goodwill write-off related to the disposal
of its businesses in Colombia; during the second half of 2004 the Group disposed
of its businesses in Colombia, Argentina and Honduras.
Half-year to Half-year to
30 June 31 December
2005 2004 2004
GBPm GBPm GBPm
Colombia - (10) (11)
Argentina - - 1
Panama, Guatemala and Honduras - (3) 2
- (13) (8)
Page 40 of 43
LLOYDS TSB GROUP
20. Scottish Widows - realistic balance sheet information
Financial Services Authority (FSA) returns for large with-profits companies now
include realistic balance sheet information. The information included in FSA
returns concentrates on the position of the with-profits fund. However, under
the Scottish Widows demutualisation structure, which was court approved, the
fund is underpinned by certain assets outside the with-profits fund and it is
more appropriate to consider the long-term fund position as a whole to measure
the realistic capital position of Scottish Widows. Estimated positions at 30
June 2005 are shown below, together with the actual position at 31 December
2004.
30 June 2005 (estimated) With-profits fund Long-term fund
GBPbn GBPbn
Available assets, including support account 19.6 22.9
Realistic value of liabilities (18.5) (18.4)
Working capital for fund 1.1 4.5
Working capital ratio 5.5% 19.5%
Risk capital margin cover 2.5 times 9.4 times
31 December 2004 With-profits fund Long-term fund
GBPbn GBPbn
Available assets, including support account 19.1 22.0
Realistic value of liabilities (18.1) (17.8)
Working capital for fund 1.0 4.2
Working capital ratio 5.1% 19.0%
Risk capital margin cover 2.4 times 9.3 times
Page 41 of 43
LLOYDS TSB GROUP
21. Dividend
An interim dividend for 2005 of 10.7p per share (2004: 10.7p) will be paid on 5
October 2005.
Shareholders who have already joined the dividend reinvestment plan will
automatically receive shares instead of the cash dividend. Key dates for the
payment of the dividend are:
Shares quoted ex-dividend 10 August
Record date 12 August
Final date for joining or leaving the dividend reinvestment plan 7 September
Interim dividend paid 5 October
22. Other information
Results for the half-year ended 30 June 2005 were approved by the
directors on 28 July 2005.
The financial information included in this news release does not
constitute statutory accounts within the meaning of section 240 of the Companies
Act 1985. Statutory accounts for the year ended 31 December 2004 were
delivered to the registrar of companies. The auditors' report on these accounts
was unqualified and did not include a statement under sections 237(2)
(accounting records or returns inadequate or accounts not agreeing with records
and returns) or 237(3) (failure to obtain necessary information and
explanations) of the Companies Act 1985.
Page 42 of 43
CONTACTS
For further information please contact:-
Michael Oliver
Director of Investor Relations
Lloyds TSB Group plc
020 7356 2167
E-mail: michael.oliver@ltsb-finance.co.uk
Mary Walsh
Director of Corporate Relations
Lloyds TSB Group plc
020 7356 2121
E-mail: mary.walsh@lloydstsb.co.uk
Copies of this news release may be obtained from Investor Relations, Lloyds TSB
Group plc, 25 Gresham Street, London EC2V 7HN. The full news release can also
be found on the Group's website - www.lloydstsb.com.
A copy of the Group's corporate responsibility report may be obtained by writing
to Corporate Responsibility, Lloyds TSB Group plc, 25 Gresham Street, London
EC2V 7HN. This information together with the Group's code of business conduct
is also available on the Group's website.
Page 43 of 43
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LLOYDS TSB GROUP plc
(Registrant)
By: M D Oliver
Name: M D Oliver
Title: Director of Investor Relations
Date: 29 July 2005