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LONDON, Oct. 27, 2022 (GLOBE NEWSWIRE) —
Member of Lloyds Banking Group
PERFORMANCE REVIEW
income statement
In the nine months to September 30, 2022, the Group recorded pre-tax profit of £4,480 million compared to £5,103 million in the same period of 2021, representing a reduction of 623 million as the increase in total revenue was more than offset by the impact of a net impairment loss for the period to a net credit for the first nine months of 2021. Profit after tax increased raised to £3,346 million.
Total revenue increased by £1,047 million, or 9%, to £12,119 million in the nine months to September 30, 2022 from £11,072 million in the first nine months of 2021; there was an increase of £1,209 million in net interest income and a decrease of £162 million in other income.
Net interest income was £9,458 million, an increase of £1,209 million from £8,249 million in the nine months to September 30, 2021. financing and capital optimization, partly offset by lower mortgage margins. The increase in average interest-earning assets reflecting continued growth in the open mortgage portfolio also contributed positively.
Other income decreased by £162m to £2,661m in the nine months to September 30, 2022, from £2,823m in the same period last year. Net fee and commission income increased by £58 million to £971 million, from £913 million in the first nine months of 2021, due to higher credit card fees and debit, reflecting increased customer activity levels, more than offsetting some reduction in lower corporate finance activity. Net trading income decreased by £305 million to £88 million in the nine months to September 30, 2022, partly reflecting the change in fair value of interest rate derivatives and forward contracts. foreign exchange not mitigated by hedge accounting. Other operating income increased by £85 million to £1,602 million from £1,517 million in the nine months ended September 30, 2021, partly due to improved gains on disposal of financial assets at fair value through other comprehensive income.
Total operating expenses fell by £131 million to £6,629 million from £6,760 million in the first nine months of 2021. due to workforce reductions. In addition, IT-related costs increased as a result of the Group’s strategic investment programs. Depreciation expense decreased, reflecting the continued strength in used car prices. The regulatory provisions charge decreased from £346m to £67m and is largely related to pre-existing programmes. There have been no further charges related to HBOS Reading since the end of 2021 and the provision held continues to reflect the Group’s best estimate of its total liability, although significant uncertainties remain.
There was a net impairment charge in the nine months to September 30, 2022 of £1,010 million, compared to a net credit of £791 million in the first nine months of 2021, largely reflecting a low load from observed credit performance and a load in the first nine months of 2022 as a result of updates to the economic outlook assessment and associated scenarios, compared to heavy credit in the first nine months months of 2021. The updated outlook includes elevated risks from a higher inflation and interest rate environment, offset by a release of £400m from the COVID-19 central adjustment over the past few months. nine months prior to September 30, 2022.
The Group’s loan portfolio continues to be well positioned, reflecting a cautious all-cycle approach to lending with high levels of security, also reflected by a strong recovery performance. Observed credit performance remains stable, with very modest signs of deterioration and flows of assets in arrears, defaults and write-offs at low levels and below pre-pandemic levels. Stage 3 loans and advances remained stable during the third quarter. Utilization rates for credit card minimum payers and overdrafts and revolving credit facilities (RCFs) remained low and in line with recent trends.
The Group’s expected credit loss (ECL) provision increased in the first nine months of the year to £4,519 million (31 December 2021: £4,000 million). This reflects the balance of risks shifting from COVID-19 to heightened inflationary pressures and rising interest rates in the Group’s base scenario and broader economic scenarios. The deterioration in the economic outlook is now reflected in variables that credit models better capture. As a result, the Group’s reliance on judgment overlays to model risks related to inflationary pressures has decreased, with these risks now being better captured in the models.
The Group recognized a tax charge of £1,134 million during the period, compared to £141 million in the first nine months of 2021. During the first nine months of 2021, the Group recognized a deferred tax credit in the income statement of £1,189 million following the substantial enactment, in May 2021, of the UK government’s increase in the rate of corporation tax from 19% to 25% with effect from 1 April 2023.
PERFORMANCE REVIEW (continued)
Balance sheet
Total assets were £24,590 million, or 4%, higher at £627,439 million at 30 September 2022 compared to £602,849 million at 31 December 2021. Cash and central bank holdings increased by £13,223 million to £67,502 million from increased cash on hand. Financial assets at amortized cost increased by £14,947 million to £505,263 million as of September 30, 2022, from £490,316 million as of December 31, 2021, due to an increase of £2,456 million loans and advances to banks, an increase of £4,434 million in loans and advances to customers, net of provisions for impairment, £2,780 million of debt securities and £5,163 million sterling of reverse repurchase agreement balances. The increase in loans and advances to customers, net of impairment allowances, was driven by the continued growth of the open mortgage portfolio and the increase in corporate and institutional loans due to attractive growth opportunities as well as exchange rate fluctuations, partially offset by further reductions in the mortgage portfolio. closed mortgage portfolio and hedging effects. Other assets increased by £3,772 million primarily due to an increase of £2,272 million in deferred tax assets and an increase of £470 million in recoverable current tax. Financial assets at fair value through other comprehensive income decreased by £6,787 million to £20,999 million due to asset sales during the period.
Total liabilities increased by £28,395 million, or 5%, to £590,472 million from £562,077 million at 31 December 2021. Customer deposits increased by £5,771 million to reach £455,144 million from £449,373 million as a result of continued inflows into retail current and savings accounts and commercial banking balances. Repurchase agreements at amortized cost increased by £16,255 million to £46,361 million as the group took advantage of favorable funding opportunities and amounts due to other Lloyds Banking Group businesses increased by £3,654m to £5,144m, also reflecting funding deals. Subordinated debt decreased by £2,675 million following redemptions during the period.
Ordinary equity decreased by £3,794 million to £32,616 million at 30 September 2022 as retained earnings for the period were more than offset by negative changes in hedging reserve cash flow due to rising interest rates and an unfavorable defined benefit pension plan. remeasurements.
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