Lloyds Bank 6K 2024 Q2 Current report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

25 July 2024

Commission File number 001-35079

LLOYDS BANK plc

(Translation of registrant's name into English)

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 of Form 20-F or Form 40-F.

Form 20-F ☒Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b) (1) ________.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b) (7) ________.

This report on Form 6-K shall be deemed incorporated by reference into the company's Registration Statement on Form F-3 (File No.

333-265452-01) and to be a part thereof from the date on which this report is filed, to the extent not superseded by documents or

reports subsequently filed or furnished.

FORWARD LOOKING STATEMENTS

This document contains certain forward-looking statements within the meaning of Section 21E of the US Securities

Exchange Act of 1934, as amended, and section 27A of the US Securities Act of 1933, as amended, with respect to

the business, strategy, plans and/or results of Lloyds Bank plc together with its subsidiaries (the Lloyds Bank Group)

and its current goals and expectations. Statements that are not historical or current facts, including statements about

the Lloyds Bank Group’s or its directors’ and/or management’s beliefs and expectations, are forward-looking

statements. Words such as, without limitation, ‘believes’, ‘achieves’, ‘anticipates’, ‘estimates’, ‘expects’, ‘targets’,

‘should’, ‘intends’, ‘aims’, ‘projects’, ‘plans’, ‘potential’, ‘will’, ‘would’, ‘could’, ‘considered’, ‘likely’, ‘may’, ‘seek’,

‘estimate’, ‘probability’, ‘goal’, ‘objective’, ‘deliver’, ‘endeavour’, ‘prospects’, ‘optimistic’ and similar expressions or

variations on these expressions are intended to identify forward-looking statements. These statements concern or may

affect future matters, including but not limited to: projections or expectations of the Lloyds Bank Group’s future

financial position, including profit attributable to shareholders, provisions, economic profit, dividends, capital structure,

portfolios, net interest margin, capital ratios, liquidity, risk-weighted assets (RWAs), expenditures or any other financial

items or ratios; litigation, regulatory and governmental investigations; the Lloyds Bank Group’s future financial

performance; the level and extent of future impairments and write-downs; the Lloyds Bank Group’s ESG targets and/or

commitments; statements of plans, objectives or goals of the Lloyds Bank Group or its management and other

statements that are not historical fact and statements of assumptions underlying such statements. By their nature,

forward-looking statements involve risk and uncertainty because they relate to events and depend upon

circumstances that will or may occur in the future. Factors that could cause actual business, strategy, targets, plans

and/or results (including but not limited to the payment of dividends) to differ materially from forward-looking

statements include, but are not limited to: general economic and business conditions in the UK and internationally;

acts of hostility or terrorism and responses to those acts, or other such events; geopolitical unpredictability; the war

between Russia and Ukraine; the conflicts in the Middle East; the tensions between China and Taiwan; political

instability including as a result of any UK general election; market related risks, trends and developments; changes in

client and consumer behaviour and demand; exposure to counterparty risk; the ability to access sufficient sources of

capital, liquidity and funding when required; changes to the Lloyds Bank Group’s or Lloyds Banking Group plc’s credit

ratings; fluctuations in interest rates, inflation, exchange rates, stock markets and currencies; volatility in credit

markets; volatility in the price of the Lloyds Bank Group’s securities; tightening of monetary policy in jurisdictions in

which the Lloyds Bank Group operates; natural pandemic and other disasters; risks concerning borrower and

counterparty credit quality; risks affecting defined benefit pension schemes; changes in laws, regulations, practices

and accounting standards or taxation; changes to regulatory capital or liquidity requirements and similar

contingencies; the policies and actions of governmental or regulatory authorities or courts together with any resulting

impact on the future structure of the Lloyds Bank Group; risks associated with the Lloyds Bank Group’s compliance

with a wide range of laws and regulations; assessment related to resolution planning requirements; risks related to

regulatory actions which may be taken in the event of a bank or Lloyds Bank Group or Lloyds Banking Group failure;

exposure to legal, regulatory or competition proceedings, investigations or complaints; failure to comply with anti-

money laundering, counter terrorist financing, anti-bribery and sanctions regulations; failure to prevent or detect any

illegal or improper activities; operational risks including risks as a result of the failure of third party suppliers; conduct

risk; technological changes and risks to the security of IT and operational infrastructure, systems, data and information

resulting from increased threat of cyber and other attacks; technological failure; inadequate or failed internal or

external processes or systems; risks relating to ESG matters, such as climate change (and achieving climate change

ambitions) and decarbonisation, including the Lloyds Bank Group’s or the Lloyds Banking Group’s ability along with

the government and other stakeholders to measure, manage and mitigate the impacts of climate change effectively,

and human rights issues; the impact of competitive conditions; failure to attract, retain and develop high calibre talent;

the ability to achieve strategic objectives; the ability to derive cost savings and other benefits including, but without

limitation, as a result of any acquisitions, disposals and other strategic transactions; inability to capture accurately the

expected value from acquisitions; and assumptions and estimates that form the basis of the Lloyds Bank Group’s

financial statements. A number of these influences and factors are beyond the Lloyds Bank Group’s control. Please

refer to the latest Annual Report on Form 20-F filed by Lloyds Bank plc with the US Securities and Exchange

Commission (the SEC), which is available on the SEC’s website at www.sec.gov, for a discussion of certain factors

and risks. Lloyds Bank plc may also make or disclose written and/or oral forward-looking statements in other written

materials and in oral statements made by the directors, officers or employees of Lloyds Bank plc to third parties,

including financial analysts. Except as required by any applicable law or regulation, the forward-looking statements

contained in this document are made as of today’s date, and the Lloyds Bank Group expressly disclaims any

obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in

this document whether as a result of new information, future events or otherwise. The information, statements and

opinions contained in this document do not constitute a public offer under any applicable law or an offer to sell any

securities or financial instruments or any advice or recommendation with respect to such securities or financial

instruments.

EXPLANATORY NOTE

This report on Form 6-K contains the interim report of Lloyds Bank plc, which includes the unaudited consolidated results

for the half-year ended 30 June 2024 and is being incorporated by reference into the Registration Statement with File No.

333-265452-01.

Page 1 of 59

FINANCIAL REVIEW

Principal activities

Lloyds Bank plc (the Bank) and its subsidiary undertakings (the Group) provide a wide range of banking and financial

services through branches and offices in the UK and in certain overseas locations. The Group’s revenue is earned

through interest and fees on a broad range of financial services products including current accounts, savings, mortgages,

credit cards, motor finance and unsecured loans to personal and business banking customers; and lending, transactional

banking, working capital management and risk management services to commercial customers.

Income statement

The Group’s profit before tax for the first half of 2024 was £2,818 million, 20 per cent lower than the same period in 2023.

This was due to lower net interest income and higher operating expenses, partly offset by a lower impairment charge.

Profit after tax was £2,007 million (half-year to 30 June 2023: £2,590 million).

Total income for the period was £8,376 million, a decrease of 7 per cent on the same period in 2023, primarily reflecting

lower net interest income. Net interest income of £6,222 million was down 11 per cent compared to the first half of 2023,

driven by lower margins. The lower margin reflects anticipated headwinds due to deposit churn and asset margin

compression, particularly in the mortgage book as it refinances in a lower margin environment. These factors were

partially offset by benefits from higher structural hedge earnings as it refinances in the higher rate environment.

Other income amounted to £2,154 million in the half-year to 30 June 2024 compared to £2,031 million in the same period

in 2023, with improved UK Motor Finance performance, including growth following the acquisition of Tusker in the first

half of 2023 and continued Commercial Banking growth, partially offset by the impact of changes to commission

arrangements with Scottish Widows.

Operating expenses of £5,436 million were 13 per cent higher than in the prior year. This reflects higher operating lease

depreciation, due to fleet size growth, the depreciation of higher value vehicles and declines in used car prices

(particularly in electric vehicles), alongside planned strategic investment, elevated severance charges and continued

inflationary pressure. It also includes c.£100 million relating to the sector-wide change in the approach to the sector-wide

Bank of England supervisory charge levy during the first quarter.

In the first half of 2024 the Group recognised remediation costs of £90 million (half-year to 30 June 2023: £62 million),

largely in relation to pre-existing programmes. There have been no further charges relating to the potential impact of the

FCA review into historical motor finance commission arrangements. An update from the FCA is currently expected in

September.

Impairment was a net charge of £122 million compared to a £681 million charge in the half-year to 30 June 2023. This

decrease reflects a larger credit from improvements to the Group’s economic outlook in the period compared to the prior

year (notably in HPI) and changes in methodology. In addition the reduction also includes the release of judgemental

adjustments for inflation and interest rate risks and stronger performance in UK mortgages resulting in lower charges.

Commercial Banking has benefited from a one-off release from loss rates used in the model, while observing a low

charge on new and existing Stage 3 clients.

The Group recognised a tax expense of £811 million in the period, compared to £940 million in the first half of 2023,

reflecting decreased profits.

Page 2 of 59

FINANCIAL REVIEW (continued)

Balance sheet

Total assets were £2,957 million higher at £608,362 million at 30 June 2024 compared to £605,405 million at

31 December 2023. Financial assets at amortised cost were £9,987 million higher at £498,058 million compared to

£488,071 million at 31 December 2023 with increases in reverse repurchase agreements of £9,522 million and loans and

advances to customers of £2,186 million, partly offset by a reduction in loans and advances to banks of £1,743 million.

The increase in reverse repurchase agreements and the decrease in cash and balances at central banks by

£8,755 million to £49,154 million reflected a change in the mix of liquidity holdings. The increase in loans and advances

to customers included growth across most Retail product areas, in particular UK Retail unsecured loans, due to balance

growth and lower repayments following a securitisation in the fourth quarter of 2023. Other assets increased by

£2,021 million to £13,959 million, driven by higher settlement balances and higher operating lease assets reflecting

continued motor finance growth.

Total liabilities were £3,749 million higher at £568,723 million compared to £564,974 million at 31 December 2023.

Customer deposits at £446,165 million increased by £4,212 million since the end of 2023, driven by inflows to limited

withdrawal and fixed savings products, partly offset by decreases in current account balances. Debt securities in issue at

amortised cost decreased by £3,724 million to £48,725 million at 30 June 2024. Amounts due to fellow Lloyds Banking

Group undertakings increased by £2,236 million to £5,168 million at 30 June 2024. Other liabilities increased by

£2,208 million to £8,468 million, driven by higher settlement balances.

Total equity was £39,639 million at 30 June 2024 compared to £40,431 million at 31 December 2023. The reduction in

total equity was driven by an interim dividend of £2.1 billion, pension revaluations and cash flow hedging reserve

movements, partly offset by the profit for the period.

Capital

The Group’s common equity tier 1 (CET1) capital ratio reduced to 13.6 per cent at 30 June 2024 (31 December 2023:

14.4 per cent). This largely reflected profit for the period, offset by the payment of ordinary dividends during the first half

of the year, the accrual for foreseeable ordinary dividends and an increase in risk-weighted assets.

Risk-weighted assets have increased by £1,389 million to £183,949 million at 30 June 2024 (31 December 2023:

£182,560 million). This incorporates the impact of Retail lending growth, offset by optimisation including capital efficient

securitisation activity, in addition to other movements.

Page 3 of 59

RISK MANAGEMENT

PRINCIPAL RISKS AND UNCERTAINTIES

The most important risks faced by the Group are detailed below. The external risks faced by the Group may impact the

success of delivering against the Group’s long-term strategic objectives. They include, but are not limited to,

macroeconomic uncertainty and elevated interest rates which are contributing to the cost of living and associated

implications for UK consumers and businesses.

Asset quality remains strong with resilient credit performance throughout the period. The Group continues to monitor the

impacts of the economic environment carefully through a suite of early warning indicators and governance arrangements

that ensure risk mitigating action plans are in place to support customers and protect the Group’s positions.

With respect to conduct risk there have been no further charges relating to the potential impact of the FCA review into

historical motor finance commission arrangements. An update from the FCA is currently expected in September.

The Group is transforming its approach to risk management to support its strategic ambition and purpose of Helping

Britain Prosper. The Group has reviewed its three lines of defence model and is evolving its accountabilities with

enhanced focus on controls and expertise. This will increase the pace of decision making, with the intent of improving

risk management. The Group has initially focused on non-financial risks.

The Group has also undertaken a detailed review of its risk categories and implemented an events-based risk

management framework. This has resulted in a reduction in the number of principal risk types and the simplification of

secondary risk categories. This change better aligns to the Basel Committee on Banking Supervision’s event categories

which will benefit the Group for scenario activities and regulatory reporting.

The Group has 10 principal risks; capital risk, climate risk, compliance risk (previously regulatory and legal risk), conduct

risk, credit risk, economic crime risk, liquidity risk (previously liquidity and funding risk), market risk, model risk and

operational risk (operational resilience risk has been removed as a separate risk category as it relates to many of the

principal risk types).

The below principal risk definitions have changed since the Group’s 2023 annual report on Form 20-F:

Conduct risk – The risk of our Group activities, behaviours, strategy or business planning, having an adverse impact on

outcomes for customers, undermining the integrity of the market or distorting competition, which could lead to regulatory

censure, reputational damage or financial loss.

Economic crime risk – The risk that the Group implements ineffective policies, systems, processes and controls to

prevent, detect and respond to the risk of fraud and/or financial crime resulting in increased losses, regulatory censure/

fines and/or adverse publicity in the UK or other jurisdictions in which the Group operates.

Liquidity risk – The risk that the Group does not have sufficient financial resources to meet its commitments when they

fall due or can only secure them at excessive cost.

Model risk – The potential for adverse consequences from model errors or the inappropriate use of modelled outputs to

inform business decisions. Adverse consequences could lead to a deterioration in the prudential position, non-

compliance with applicable laws and/or regulations, or damage to the Group’s reputation. Model risk can also lead to

financial loss, as well as qualitative limitations such as the imposition of restrictions on business activities.

Operational risk – The risk of actual or potential impact to the Group (financial and/or non-financial) resulting from

inadequate or failed internal processes, people, and systems or from external events. Resilience is core to the

management of operational risk within Lloyds Banking Group to ensure that business processes (including those that are

outsourced) can withstand operational risks and can respond to and meet customer and stakeholder needs when

continuity of operations is compromised.

All other principal risk definitions remain unchanged.

Page 4 of 59

CAPITAL RISK

Capital resources

An analysis of the Group’s capital position as at 30 June 2024 is presented in the following table. This reflects the

application of the transitional arrangements for IFRS 9.


	At 30 Jun 2024 £m	At 31 Dec 2023 £m

Common equity tier 1
Shareholders’ equity per balance sheet	34,552	35,355
Adjustment to retained earnings for foreseeable dividends	(1,250)	(490)
Cash flow hedging reserve	3,815	3,554
Other adjustments	(6)	73
	37,111	38,492
less: deductions from common equity tier 1
Goodwill and other intangible assets	(5,608)	(5,531)
Prudent valuation adjustment	(103)	(117)
Removal of defined benefit pension surplus	(2,473)	(2,653)
Deferred tax assets	(3,889)	(3,971)
Common equity tier 1 capital	25,038	26,220
Additional tier 1
Additional tier 1 instruments	5,018	5,018
Total tier 1 capital	30,056	31,238
Tier 2
Tier 2 instruments	5,506	5,747
Eligible provisions	119	417
Total tier 2 capital	5,625	6,164
Total capital resources	35,681	37,402

Risk-weighted assets	183,949	182,560

Common equity tier 1 capital ratio	13.6%	14.4%
Tier 1 capital ratio	16.3%	17.1%
Total capital ratio	19.4%	20.5%

Page 5 of 59

CAPITAL RISK (continued)

Movements in CET1 capital resources

The key movements are set out in the table below.


Common equity tier 1 £m

At 31 December 2023	26,220
Profit for the period	2,007
Movement in foreseeable dividends1	(760)
Dividends paid out on ordinary shares during the year	(2,140)
IFRS 9 transitional adjustment to retained earnings	(141)
Deferred tax asset	83
Goodwill and other intangible assets	(77)
Distributions on other equity instruments	(172)
Other movements	18
At 30 June 2024	25,038

1Reflects the reversal of the brought forward accrual for the interim ordinary dividend at 31 December 2023, net of the accrual

recognised at 30 June 2024.

CET1 capital resources have reduced by £1,182 million during the period, primarily reflecting profit for the period, which

was more than offset by:

•The payment of ordinary dividends during the first half of the year and the accrual for foreseeable ordinary dividends

•Distributions on other equity instruments

•The unwind of IFRS 9 dynamic transitional relief, including the phased reduction on 1 January 2024

Movements in total capital

The Group’s total capital ratio reduced to 19.4 per cent (31 December 2023: 20.5 per cent). This reflected the reduction

in CET1 capital, the reduction in eligible provisions recognised through Tier 2 capital, the impact of interest rates on Tier

2 capital instruments and the increase in risk-weighted assets.

Page 6 of 59

CAPITAL RISK (continued)

Risk-weighted assets


	At 30 Jun 2024 £m	At 31 Dec 2023 £m

Foundation Internal Ratings Based (IRB) Approach	34,955	36,478
Retail IRB Approach	88,587	85,436
Other IRB Approach	6,263	6,126
IRB Approach	129,805	128,040
Standardised (STA) Approach1	18,827	19,021
Credit risk	148,632	147,061
Securitisation	8,440	8,246
Counterparty credit risk	947	875
Credit valuation adjustment risk	331	454
Operational risk	25,305	25,605
Market risk	294	319
Risk-weighted assets	183,949	182,560
of which: threshold risk-weighted assets2	1,070	1,424

1Threshold risk-weighted assets are included within the Standardised (STA) Approach.

2Threshold risk-weighted assets reflect the element of deferred tax assets that are permitted to be risk-weighted instead of being

deducted from CET1 capital.

Risk-weighted assets have increased by £1,389 million to £183,949 million at 30 June 2024 (31 December 2023:

£182,560 million). This incorporates the impact of Retail lending growth, offset by optimisation including capital efficient

securitisation activity, in addition to other movements.

Page 7 of 59

CAPITAL RISK (continued)

Leverage ratio

The table below summarises the component parts of the Group’s leverage ratio.


	At 30 Jun 2024 £m	At 31 Dec 2023 £m

Total tier 1 capital	30,056	31,238

Exposure measure
Statutory balance sheet assets
Derivative financial instruments	2,688	3,165
Securities financing transactions	42,773	32,796
Loans and advances and other assets	562,901	569,444
Total assets	608,362	605,405

Qualifying central bank claims	(48,670)	(57,430)

Derivatives adjustments	(1,350)	(1,737)
Securities financing transactions adjustments	1,519	1,431
Off-balance sheet items	31,940	31,494
Amounts already deducted from Tier 1 capital	(12,013)	(12,060)
Other regulatory adjustments1	(4,856)	(4,950)
Total exposure measure	574,932	562,153

UK leverage ratio	5.2%	5.6%

Leverage exposure measure (including central bank claims)	623,602	619,583
Leverage ratio (including central bank claims)	4.8%	5.0%

1Includes deconsolidation adjustments that relate to the deconsolidation of certain Group entities that fall outside the scope of the

Group’s regulatory capital consolidation and adjustments to exclude lending under the UK Government’s Bounce Back Loan Scheme

(BBLS).

Analysis of leverage movements

The Group’s UK leverage ratio reduced to 5.2 per cent (31 December 2023: 5.6 per cent). This reflected both the

reduction in the total tier 1 capital position and the £12.8 billion increase in the leverage exposure measure, principally

related to the increase in securities financing transactions and other balance sheet movements.

Stress testing

As part of the 2022 Annual Cyclical Scenario stress test run by the Bank of England, the Group’s resilience to a severe

economic shock where the House Price Index (HPI) falls by 31 per cent, Commercial Real Estate (CRE) falls by 45 per

cent, unemployment peaks at 8.5 per cent and the Base Rate peaks at 6 per cent was assessed. The results of this

exercise were published by the Bank of England on 12 July 2023, with the Group comfortably passing the relevant hurdle

rates.

Page 8 of 59

CREDIT RISK

Overview

The Group’s portfolios are well-positioned to benefit from an improved, but still challenging macroeconomic environment.

The Group retains a prudent approach to credit risk appetite and risk management, with strong credit origination criteria

and robust LTVs in the secured portfolios.

Asset quality remains strong with resilient credit performance throughout the period. In UK mortgages, reductions in new

to arrears and flows to default have been observed in the half-year and second quarter. Unsecured portfolios continue to

exhibit stable new to arrears and flow to default trends. Credit quality remains stable and resilient in Commercial

Banking. The Group continues to monitor the impacts of the economic environment carefully through a suite of early

warning indicators and governance arrangements that ensure risk mitigating action plans are in place to support

customers and protect the Group’s positions.

The impairment charge in the first half of 2024 was £122 million, down from a charge of £681 million in the first half of

2023. This is partly as a result of improvements in the Group’s macroeconomic outlook. The Group’s ECL allowance on

loans and advances to customers decreased in the first half to £3,587 million (31 December 2023: £4,007 million).

Group Stage 2 loans and advances to customers reduced to £42,774 million (31 December 2023: £52,973 million) and

as a percentage of total lending to at 9.8 per cent (31 December 2023: 12.1 per cent). This is due to improvements in the

macroeconomic outlook transferring assets back to Stage 1. Of the total Group Stage 2 loans and advances to

customers, 91.5 per cent are up to date (31 December 2023: 92.5 per cent). Stage 2 coverage remains stable at 3.2 per

cent (31 December 2023: 3.1 per cent).

Stage 3 loans and advances to customers have increased slightly to £7,343 million (31 December 2023: £7,131 million),

and as a percentage of total lending to 1.7 per cent (31 December 2023: 1.6 per cent). Stage 3 coverage decreased by

1.2 percentage points to 14.7 per cent (31 December 2023: 15.9 per cent).

Prudent risk appetite and risk management

•The Group continues to take a prudent and proactive approach to credit risk management and credit risk appetite

whilst, in line with the Group’s strategy, supporting clients to grow, as well as working closely with customers to help

them through the impact of higher borrowing costs and higher prices following elevated inflation in recent years

•Sector, asset and product concentrations within the portfolios are closely monitored and controlled, with mitigating

actions taken where appropriate. Sector and product risk appetite parameters help manage exposure to certain higher

risk and cyclical sectors, segments and asset classes

•The Group’s effective risk management seeks to ensure early identification and management of customers and

counterparties who may be showing signs of distress

•The Group will continue to work closely with its customers to ensure that they receive the appropriate level of support,

including but not restricted to embracing the standards outlined in the Mortgage Charter

Page 9 of 59

CREDIT RISK (continued)

Impairment charge (credit) by division


	Half-year to 30 Jun 2024 £m	Half-year to 30 Jun 2023 £m	Change %	Half-year to 31 Dec 2023 £m	Change %

UK mortgages	(119)	191		(242)	(51)
Credit cards	115	197	42	260	56
UK unsecured loans and overdrafts	140	160	13	91	(54)
UK Motor Finance	61	43	(42)	126	52
Other	(3)	1		4
Retail	194	592	67	239	19
Small and Medium Businesses	11	25	56	89	88
Corporate and Institutional Banking	(80)	65		(662)	(88)
Commercial Banking	(69)	90		(573)	(88)
Other	(3)	(1)		(4)	(25)
Total impairment charge (credit)	122	681	82	(338)

Total expected credit loss allowance


	At 30 Jun 2024 £m	At 31 Dec 2023 £m

Customer related balances
Drawn	3,314	3,693
Undrawn	273	314
	3,587	4,007
Other assets	9	14
Total ECL allowance	3,596	4,021

Movements in total expected credit loss allowance


	Opening ECL at 31 Dec 2023 £m	Write-offs and other1 £m	Income statement charge (credit) £m	Net ECL increase (decrease) £m	Closing ECL at 30 Jun 2024 £m


UK mortgages2	1,115	(25)	(119)	(144)	971
Credit cards	810	(225)	115	(110)	700
UK unsecured loans and overdrafts	515	(156)	140	(16)	499
UK Motor Finance	342	(39)	61	22	364
Other	88	(6)	(3)	(9)	79
Retail	2,870	(451)	194	(257)	2,613
Small and Medium Businesses	537	(51)	11	(40)	497
Corporate and Institutional Banking	613	(48)	(80)	(128)	485
Commercial Banking	1,150	(99)	(69)	(168)	982
Other	1	3	(3)	–	1
Total3	4,021	(547)	122	(425)	3,596

1Contains adjustments in respect of purchased or originated credit-impaired financial assets.

2Includes £20 million within write-offs and other relating to the securitisation of £1 billion of legacy Retail mortgages in the second

quarter of 2024.

3Total ECL includes £9 million relating to other non customer-related assets (31 December 2023: £14 million).

Page 10 of 59

CREDIT RISK (continued)

Loans and advances to customers and expected credit loss allowance


At 30 June 2024	Stage 1 £m	Stage 2 £m	Stage 3 £m	POCI £m	Total £m	Stage 2 as % of total	Stage 3 as % of total

Loans and advances to customers
UK mortgages	266,308	29,842	4,542	7,218	307,910	9.7	1.5
Credit cards	13,329	2,601	290	–	16,220	16.0	1.8
UK unsecured loans and overdrafts	8,261	1,213	186	–	9,660	12.6	1.9
UK Motor Finance	14,185	2,288	117	–	16,590	13.8	0.7
Other	16,434	522	163	–	17,119	3.0	1.0
Retail	318,517	36,466	5,298	7,218	367,499	9.9	1.4
Small and Medium Businesses	26,866	3,773	1,323	–	31,962	11.8	4.1
Corporate and Institutional Banking	36,888	2,535	722	–	40,145	6.3	1.8
Commercial Banking	63,754	6,308	2,045	–	72,107	8.7	2.8
Other1	(982)	–	–	–	(982)
Total gross lending	381,289	42,774	7,343	7,218	438,624	9.8	1.7

Customer related ECL allowance (drawn and undrawn)
UK mortgages	87	328	331	225	971
Credit cards	206	361	133	–	700
UK unsecured loans and overdrafts	158	231	110	–	499
UK Motor Finance2	185	112	67	–	364
Other	15	19	45	–	79
Retail	651	1,051	686	225	2,613
Small and Medium Businesses	131	205	161	–	497
Corporate and Institutional Banking	127	120	230	–	477
Commercial Banking	258	325	391	–	974
Other	–	–	–	–	–
Total	909	1,376	1,077	225	3,587

Customer related ECL allowance (drawn and undrawn) as a percentage of loans and advances to customers
	Stage 1 %	Stage 2 %	Stage 3 %	POCI %	Total %

UK mortgages	–	1.1	7.3	3.1	0.3
Credit cards	1.5	13.9	45.9	–	4.3
UK unsecured loans and overdrafts	1.9	19.0	59.1	–	5.2
UK Motor Finance	1.3	4.9	57.3	–	2.2
Other	0.1	3.6	27.6	–	0.5
Retail	0.2	2.9	12.9	3.1	0.7
Small and Medium Businesses	0.5	5.4	12.2	–	1.6
Corporate and Institutional Banking	0.3	4.7	31.9	–	1.2
Commercial Banking	0.4	5.2	19.1	–	1.4
Other		–	–	–
Total	0.2	3.2	14.7	3.1	0.8

1Contains centralised fair value hedge accounting adjustments.

2UK Motor Finance for Stages 1 and 2 include £185 million relating to provisions against residual values of vehicles subject to finance

leasing agreements for Black Horse. These provisions are included within the calculation of coverage ratios.

Page 11 of 59

CREDIT RISK (continued)

Loans and advances to customers and expected credit loss allowance (continued)


At 31 December 2023	Stage 1 £m	Stage 2 £m	Stage 3 £m	POCI £m	Total £m	Stage 2 as % of total	Stage 3 as % of total

Loans and advances to customers
UK mortgages	256,596	38,533	4,337	7,854	307,320	12.5	1.4
Credit cards	12,625	2,908	284	–	15,817	18.4	1.8
UK unsecured loans and overdrafts	7,103	1,187	196	–	8,486	14.0	2.3
UK Motor Finance	13,541	2,027	112	–	15,680	12.9	0.7
Other	15,898	525	144	–	16,567	3.2	0.9
Retail	305,763	45,180	5,073	7,854	363,870	12.4	1.4
Small and Medium Businesses	27,525	4,458	1,530	–	33,513	13.3	4.6
Corporate and Institutional Banking	35,872	3,335	528	–	39,735	8.4	1.3
Commercial Banking	63,397	7,793	2,058	–	73,248	10.6	2.8
Other1	(301)	–	–	–	(301)
Total gross lending	368,859	52,973	7,131	7,854	436,817	12.1	1.6

Customer related ECL allowance (drawn and undrawn)
UK mortgages	169	376	357	213	1,115
Credit cards	234	446	130	–	810
UK unsecured loans and overdrafts	153	244	118	–	515
UK Motor Finance2	188	91	63	–	342
Other	20	21	47	–	88
Retail	764	1,178	715	213	2,870
Small and Medium Businesses	139	231	167	–	537
Corporate and Institutional Banking	135	212	253	–	600
Commercial Banking	274	443	420	–	1,137
Other	–	–	–	–	–
Total	1,038	1,621	1,135	213	4,007

Customer related ECL allowance (drawn and undrawn) as a percentage of loans and advances to customers
	Stage 1 %	Stage 2 %	Stage 3 %	POCI %	Total %

UK mortgages	0.1	1.0	8.2	2.7	0.4
Credit cards	1.9	15.3	45.8	–	5.1
UK unsecured loans and overdrafts	2.2	20.6	60.2	–	6.1
UK Motor Finance	1.4	4.5	56.3	–	2.2
Other	0.1	4.0	32.6	–	0.5
Retail	0.2	2.6	14.1	2.7	0.8
Small and Medium Businesses	0.5	5.2	10.9	–	1.6
Corporate and Institutional Banking	0.4	6.4	47.9	–	1.5
Commercial Banking	0.4	5.7	20.4	–	1.6
Other		–	–	–
Total	0.3	3.1	15.9	2.7	0.9

1Contains centralised fair value hedge accounting adjustments.

2UK Motor Finance for Stages 1 and 2 include £187 million relating to provisions against residual values of vehicles subject to finance

leasing agreements for Black Horse. These provisions are included within the calculation of coverage ratios.

Page 12 of 59

CREDIT RISK (continued)

Stage 2 loans and advances to customers and expected credit loss allowance


	Up to date				1 to 30 days past due2		Over 30 days past due		Total
	PD movements		Other1		1 to 30 days past due2		Over 30 days past due		Total
At 30 June 2024	Gross lending £m	ECL3 £m	Gross lending £m	ECL3 £m	Gross lending £m	ECL3 £m	Gross lending £m	ECL3 £m	Gross lending £m	ECL3 £m

UK mortgages	17,837	109	9,350	131	1,678	48	977	40	29,842	328
Credit cards	2,317	272	151	46	96	27	37	16	2,601	361
UK unsecured loans and overdrafts	715	135	343	47	114	33	41	16	1,213	231
UK Motor Finance	971	44	1,127	31	155	26	35	11	2,288	112
Other	109	3	308	9	59	5	46	2	522	19
Retail	21,949	563	11,279	264	2,102	139	1,136	85	36,466	1,051
Small and Medium Businesses	2,943	171	464	18	229	11	137	5	3,773	205
Corporate and Institutional Banking	2,492	119	19	1	5	–	19	–	2,535	120
Commercial Banking	5,435	290	483	19	234	11	156	5	6,308	325
Total	27,384	853	11,762	283	2,336	150	1,292	90	42,774	1,376

At 31 December 2023
UK mortgages	26,665	146	9,024	133	1,771	52	1,073	45	38,533	376
Credit cards	2,612	345	145	49	115	34	36	18	2,908	446
UK unsecured loans and overdrafts	756	148	279	46	112	34	40	16	1,187	244
UK Motor Finance	735	30	1,120	30	138	21	34	10	2,027	91
Other	125	5	295	7	52	5	53	4	525	21
Retail	30,893	674	10,863	265	2,188	146	1,236	93	45,180	1,178
Small and Medium Businesses	3,455	202	590	17	253	8	160	4	4,458	231
Corporate and Institutional Banking	3,175	208	2	–	27	3	131	1	3,335	212
Commercial Banking	6,630	410	592	17	280	11	291	5	7,793	443
Total	37,523	1,084	11,455	282	2,468	157	1,527	98	52,973	1,621

1Includes forbearance, client and product-specific indicators not reflected within quantitative PD assessments.

2Includes assets that have triggered PD movements, or other rules, given that being 1 to 29 days in arrears in and of itself is not a

Stage 2 trigger.

3Expected credit loss allowance on loans and advances to customers (drawn and undrawn).

Page 13 of 59

CREDIT RISK (continued)

ECL sensitivity to economic assumptions

The measurement of ECL reflects an unbiased probability-weighted range of possible future economic outcomes. The

Group achieves this by generating four economic scenarios to appropriately reflect the range of outcomes; the central

scenario reflects the Group’s base case assumptions used for medium-term planning purposes, an upside and a

downside scenario are also selected together with a severe downside scenario. If the base case moves adversely, it

generates a new, more adverse downside and severe downside which are then incorporated into the ECL. Consistent

with prior years, the base case, upside and downside scenarios carry a 30 per cent weighting; the severe downside is

weighted at 10 per cent. These assumptions can be found in note 12 on page 45 onwards.

The table below shows the Group’s ECL for the probability-weighted, upside, base case, downside and severe downside

scenarios, with the severe downside scenario incorporating adjustments made to CPI inflation and UK Bank Rate paths.

The stage allocation for an asset is based on the overall scenario probability-weighted probability of default and hence

the staging of assets is constant across all the scenarios. In each economic scenario the ECL for individual assessments

is held constant reflecting the basis on which they are evaluated. Judgemental adjustments applied through changes to

model inputs or parameters, or more qualitative post model adjustments, are apportioned across the scenarios in

proportion to modelled ECL where this better reflects the sensitivity of these adjustments to each scenario. The

probability-weighted view shows the extent to which a higher ECL allowance has been recognised to take account of

multiple economic scenarios relative to the base case; the uplift being £464 million compared to £673 million at

31 December 2023.

Total ECL allowance by scenario


Probability- weighted £m		Upside £m	Base case £m	Downside £m	Severe downside £m

UK mortgages	971	387	658	1,190	3,004
Credit cards	700	583	676	772	903
Other Retail	942	855	915	990	1,139
Commercial Banking	982	735	882	1,122	1,606
Other	1	2	1	1	1
At 30 June 2024	3,596	2,562	3,132	4,075	6,653

UK mortgages	1,115	395	670	1,155	4,485
Credit cards	810	600	771	918	1,235
Other Retail	945	850	920	981	1,200
Commercial Banking	1,150	780	986	1,342	2,179
Other	1	1	1	1	1
At 31 December 2023	4,021	2,626	3,348	4,397	9,100

Page 14 of 59

CREDIT RISK (continued)

Retail

•Asset quality remains strong in the Retail portfolio with resilient credit performance throughout the period. There are

signs that affordability pressures are easing as inflation has fallen back and the UK bank rate has settled. However,

lagged impacts from previous interest rate rises and rising unemployment remain potential headwinds

•Robust risk management remains in place, with strong affordability and indebtedness controls for both new and

existing lending and a prudent risk appetite approach

•Lending strategies are under continuous review and have been proactively managed and calibrated to the latest

macroeconomic outlook, with actions taken to enhance both living and housing cost assumptions in affordability

assessments

•In UK mortgages, reductions in new to arrears and flows to default have been observed in the half-year and second

quarter

•Unsecured portfolios continue to exhibit stable new to arrears and flow to default trends with a small increase observed

in flow to default in Motor driven by a normalisation of Voluntary Terminations (VT’s) as used car prices fall from historic

highs

•The Retail impairment charge in the first half of 2024 was £194 million and is materially lower than the charge of

£592 million for the first half of 2023. This is largely due to favourable updates to the Group’s macroeconomic outlook

within the base case and other scenarios, as well as the release of inflationary adjustments, given portfolio

performance

•All existing IFRS 9 staging rules and triggers have been maintained across Retail from the 2023 year end. Retail

customer related ECL allowance as a percentage of drawn loans and advances (coverage) decreased to 0.7 per cent

(31 December 2023: 0.8 per cent)

•Favourable updates to the Group’s macroeconomic outlook have reduced Stage 2 loans and advances to 9.9 per cent

of the Retail portfolio (31 December 2023: 12.4 per cent), of which 91.1 per cent are up to date loans (31 December

2023: 92.4 per cent). Stage 2 ECL coverage increased to 2.9 per cent (31 December 2023: 2.6 per cent)

•Stage 3 loans and advances remain flat at 1.4 per cent of total loans and advances. Retail Stage 3 ECL coverage

decreased to 12.9 per cent (31 December 2023: 14.1 per cent) due to portfolio mix changes; notably because UK

mortgages require comparatively lower coverage in comparison to other Retail products due to security. Stage 3 loans

and advances and Stage 3 coverage for all other Retail products excluding UK mortgages remain broadly stable

UK mortgages

•The UK mortgage portfolio is well positioned with low arrears and a strong loan to value (LTV) profile. The Group has

actively improved the quality of the portfolio over recent years using robust affordability and credit controls, while the

balances of higher risk legacy vintages have continued to reduce

•New to arrears and flows to default have improved in the half-year and second quarter. The Group is proactively

monitoring existing mortgage customers as they reach the end of fixed rate deals with customers’ immediate behaviour

remaining stable

•Total loans and advances increased to £307.9 billion (31 December 2023: £307.3 billion), with a decrease in average

LTV. The proportion of balances with a LTV greater than 90 per cent decreased. The average LTV of new business

increased

•Favourable updates to the Group’s macroeconomic outlook and stronger asset performance resulted in a net

impairment release of £119 million for the first half of 2024 compared to a charge of £191 million for the first half of

2023. Total ECL coverage decreased to 0.3 per cent (31 December 2023: 0.4 per cent)

•Favourable macroeconomic updates also resulted in reductions to Stage 2 loans and advances to 9.7 per cent of the

portfolio (31 December 2023: 12.5 per cent) and Stage 2 ECL coverage rising slightly to 1.1 per cent (31 December

2023: 1.0 per cent)

•Stage 3 loans and advances remain stable at 1.5 per cent of the portfolio (31 December 2023: 1.4 per cent) with

increases in legacy variable rate customers reaching 90 days past due largely offset by legacy mortgage securitisation

activity. Stage 3 ECL coverage decreased to 7.3 per cent (31 December 2023: 8.2 per cent), due to the favourable

macroeconomic outlook

Page 15 of 59

CREDIT RISK (continued)

Credit cards

•Credit cards balances increased to £16.2 billion (31 December 2023: £15.8 billion) due to continued recovery in

customer spend, with no change to acquisition risk appetite

•The credit card portfolio is a prime book, with stable credit performance in the half-year and continued strong

repayment rates

•Impairment charge of £115 million for the first half of 2024, is lower than the charge of £197 million in the first half of

2023, largely due to the release of ECL judgements raised to cover the risk of increased defaults from high inflation

and cost of living pressures, given continued resilient portfolio performance. Total ECL coverage reduced to 4.3 per

cent (31 December 2023: 5.1 per cent)

•Favourable updates to the macroeconomic outlook resulted in a reduction in Stage 2 loans and advances to 16.0 per

cent of the portfolio (31 December 2023: 18.4 per cent), with Stage 2 ECL coverage reducing to 13.9 per cent

(31 December 2023: 15.3 per cent)

•Resilient underlying arrears and default performance has also resulted in stable Stage 3 loans and advances at 1.8 per

cent of the portfolio (31 December 2023: 1.8 per cent). Stage 3 ECL coverage was broadly stable at 45.9 per cent

(31 December 2023: 45.8 per cent)

UK unsecured loans and overdrafts

•Loans and advances for personal current account and the personal loans portfolios increased to £9.7 billion

(31 December 2023: £8.5 billion) largely driven by recovering market demand in loans and natural balance build

following the securitisation of assets at the end of 2023

•Impairment charge of £140 million for the first half of 2024 is modestly below the charge of £160 million for the first half

of 2023 again due to favourable macroeconomic updates and a more resilient underlying performance than previously

anticipated. ECL coverage levels by individual stage all remained broadly stable, with Stage 2 ECL coverage at 19.0

per cent (31 December 2023: 20.6 per cent) and Stage 3 ECL coverage at 59.1 per cent (31 December 2023: 60.2 per

cent)

UK Motor Finance

•The UK Motor Finance portfolio increased to £16.6 billion (31 December 2023: £15.7 billion) driven by stocking and

fleet, partially offset by a softening of Retail demand in the half-year

•Updates to Residual Value (RV) and Voluntary Termination (VT) risk held against Personal Contract Purchase (PCP)

and Hire Purchase (HP) lending are included within the impairment charge1. Recent significant falls in used car prices

have been reflected and absorbed by an existing management judgement within this item. As a result RV and VT

provision reduced to £185 million as at 30 June 2024 (31 December 2023: £187 million)

•Impairment charge of £61 million for the first half of 2024 is higher than a charge of £43 million for the first half of 2023,

which benefitted from more stable used car prices, partially driven by global supply constraints following the pandemic

that have now eased

•ECL coverage levels at a total level and by individual stage remain broadly stable. Total ECL coverage at 2.2 per cent

(31 December 2023: 2.2 per cent), Stage 2 ECL coverage at 4.9 per cent (31 December 2023: 4.5 per cent) and

Stage 3 ECL coverage at 57.3 per cent (31 December 2023: 56.3 per cent)

Other

•Other loans and advances increased to £17.1 billion (31 December 2023: £16.6 billion). Stage 3 loans and advances

remain stable at 1.0 per cent (31 December 2023: 0.9 per cent) and Stage 3 coverage reduced to 27.6 per cent

(31 December 2023: 32.6 per cent)

•There was a net impairment credit of £3 million for the first half of 2024 compared to a charge of £1 million in the first

half of 2023

1The depreciation of operating leases is included separately in the operating lease depreciation charge.

Page 16 of 59

CREDIT RISK (continued)

Commercial Banking

•The Commercial portfolio credit quality remains stable and resilient, benefitting from a focused approach to credit

underwriting and monitoring standards and proactively managing exposures to higher risk and vulnerable sectors

•The Group is cognisant of a number of risks and headwinds associated with the elevated interest rate environment

especially in, but not limited to, sectors reliant upon consumer discretionary spend. Risks include reduced asset

valuation and refinancing risk, a reduction in market liquidity impacting credit supply and pressure on both household

discretionary spending and business margins

•The Group continues to closely monitor credit quality, sector and single name concentrations. Sector and credit risk

appetite continue to be proactively managed to ensure clients are supported in the right way and the Group is

protected

•The Group continues to provide early support to its more vulnerable customers through focused risk management via

its Watchlist and Business Support framework. The Group continues to balance prudent risk appetite with ensuring

support for financially viable clients

Impairment

•There was a net impairment credit of £69 million in the first half of 2024, compared to a net impairment charge of

£90 million in the first half of 2023. Commercial Banking benefitted from a one-off release from loss rates used in the

model, while observing a low charge on new and existing Stage 3 clients

•ECL allowances decreased in the year to £974 million at 30 June 2024 (31 December 2023: £1,137 million). This was

driven by the one-off release noted above, as well as a revised approach to modelling the multiple economic scenarios

and a more favourable outlook across multiple economic indicators

•Stage 2 loans and advances decreased to £6,308 million (31 December 2023: £7,793 million), largely as a result of

improvements in the Group’s macroeconomic outlook, with 93.8 per cent of Stage 2 balances up to date (31 December

2023: 92.7 per cent). Stage 2 as a proportion of total loans and advances to customers decreased to 8.7 per cent

(31 December 2023: 10.6 per cent). Stage 2 ECL coverage was lower at 5.2 per cent (31 December 2023: 5.7 per

cent) with the decrease in coverage largely a result of the change in the forward-looking multiple economic scenarios

•Stage 3 loans and advances were broadly stable at £2,045 million (31 December 2023: £2,058 million) and as a

proportion of total loans and advances to customers, flat at 2.8 per cent (31 December 2023: 2.8 per cent). Stage 3

ECL coverage reduced to 19.1 per cent (31 December 2023: 20.4 per cent)

Page 17 of 59

CREDIT RISK (continued)

Commercial Banking UK Real Estate

•Commercial Banking UK Real Estate committed drawn lending stood at £9.5 billion at May 2024 (net of £3.1 billion

exposures subject to protection through Significant Risk Transfer (SRT) securitisations). This compares to £9.7 billion

at 31 December 2023 (net of £3.6 billion subject to SRT securitisations). In addition there are undrawn lending facilities

of £2.2 billion (31 December 2023: £2.8 billion) to predominantly investment grade rated corporate customers

•The Group classifies Real Estate as exposure which is directly supported by cash flows from property activities (as

opposed to trading activities, such as hotels, care homes and housebuilders). Exposures of £6.6 billion to social

housing providers are also excluded (31 December 2023: £6.7 billion)

•Despite some headwinds, including the impact of elevated interest rates, the portfolio continues to remain well-

positioned and proactively managed with conservative LTVs, good levels of interest cover and appropriate risk

mitigants in place

•Overall performance of the portfolio has remained resilient. The Group has seen improvement within this sector, with a

decrease in cases in its more closely monitored Watchlist category and limited flow into Business Support

•Lending continues to be heavily weighted towards investment real estate (c.90 per cent) rather than development. Of

these investment exposures c.91 per cent have an LTV of less than 70 per cent, with an average LTV of 46 per cent.

The average interest cover ratio was 3.2 times, with 74 per cent having interest cover of above 2 times. In SME, LTV at

origination has been typically limited to c.55 per cent, in the context of prudent repayment cover criteria (including

notional base rate stress)

•The portfolio is well diversified with no speculative commercial development lending (defined as property not pre-sold

or pre-let at a level to fully repay the debt or generate sufficient income to meet the minimum interest cover

requirements). Approximately 49 per cent of exposures relate to commercial real estate, including c.13 per cent

secured by office assets, c.12 per cent by retail assets and c.12 per cent by industrial assets. Approximately 49 per

cent of the portfolio relates to residential

•Recognising this is a cyclical sector, total (gross and net) and asset type quantum caps are in place to control

origination and exposure, including several asset type categories. Focus remains on the UK market and new business

has been written in line with a prudent risk appetite criteria including conservative LTVs, strong quality of income and

proven management teams. Development lending criteria also includes maximum loan to gross development value

and maximum loan to cost, with funding typically only released against completed work, as confirmed by the Group’s

monitoring quantity surveyor

•Use of SRT securitisations also acts as a risk mitigant in this portfolio. Run-off of these is carefully managed

and sequenced

Page 18 of 59

LIQUIDITY RISK

The Group has maintained its strong funding and liquidity position with a loan to deposit ratio of 98 per cent as at

30 June 2024 (31 December 2023: 98 per cent). Total wholesale funding decreased to £66.0 billion as at 30 June 2024

(31 December 2023: £70.4 billion), driven by a reduction in money market funding and covered bond maturities. The

Group maintains access to diverse sources and tenors of funding.

The Group’s liquid assets continue to exceed the regulatory minimum and internal risk appetite, with a liquidity coverage

ratio (LCR)1 of 134 per cent (based on a monthly rolling average over the previous 12 months) as at 30 June 2024

(31 December 2023: 133 per cent). The net stable funding ratio is strong at 125 per cent as at 30 June 2024

(31 December 2023: 125 per cent).

The Group’s credit ratings continue to reflect the strength of its business model and balance sheet. The rating agencies

continue to monitor the impact of economic conditions and elevated rates for the UK banking sector. The strength of the

Group’s management and franchise, along with its robust financial performance, capital and funding position, are

reflected in the Group’s strong ratings.

1Based on a monthly rolling simple average over the previous 12 months.

Lloyds Bank Group funding requirements and sources


	At 30 Jun 2024 £bn	At 31 Dec 2023 £bn	Change %

Lloyds Bank Group funding position
Cash and balances at central banks	49.2	57.9	(15)
Loans and advances to banks	7.1	8.8	(19)
Loans and advances to customers	435.3	433.1	1
Reverse repurchase agreements – non-trading	42.3	32.8	29
Debt securities at amortised cost	12.6	12.5	1
Financial assets at fair value through other comprehensive income	27.5	27.3	1
Other assets1	34.4	33.0	4
Total Lloyds Bank Group assets	608.4	605.4
Less other liabilities1	(16.6)	(12.6)	(32)
Funding requirements	591.8	592.8

Customer deposits	446.2	442.0	1
Wholesale funding2	66.0	70.4	(6)
Repurchase agreements – non-trading	7.7	7.7
Term Funding Scheme with additional incentives for SMEs (TFSME)	30.0	30.0
Deposits from fellow Lloyds Banking Group undertakings	2.3	2.3
Total equity	39.6	40.4	(2)
Funding sources	591.8	592.8

1Other assets and other liabilities include the fair value of derivative assets and liabilities.

2Lloyds Bank Group’s definition of wholesale funding aligns with that used by other international market participants; including bank

deposits, debt securities in issue and subordinated liabilities. Excludes balances relating to margins of £0.4 billion (31 December

2023: £0.6 billion).

Page 19 of 59

FUNDING AND LIQUIDITY RISK (continued)

Reconciliation of Group funding to the balance sheet


At 30 June 2024	Included in funding analysis £bn	Cash collateral received £bn	Fair value and other accounting methods £bn	Balance sheet £bn

Deposits from banks	2.5	0.4	0.1	3.0
Debt securities in issue at amortised cost	55.3	–	(6.6)	48.7
Subordinated liabilities	8.2	–	(1.4)	6.8
Total wholesale funding	66.0	0.4
Customer deposits	442.0	–	4.2	446.2
Total	508.0	0.4

At 31 December 2023
Deposits from banks	2.8	0.6	0.2	3.6
Debt securities in issue at amortised cost	59.3	–	(6.9)	52.4
Subordinated liabilities	8.3	–	(1.4)	6.9
Total wholesale funding	70.4	0.6
Customer deposits	442.0	–	–	442.0
Total	512.4	0.6

Analysis of total wholesale funding by residual maturity


	Up to 1 month £bn	1 to 3 months £bn	3 to 6 months £bn	6 to 9 months £bn	9 to 12 months £bn	1 to 2 years £bn	2 to 5 years £bn	Over five years £bn	Total at 30 Jun 2024 £bn	Total at 31 Dec 2023 £bn

Deposits from banks	1.3	0.4	0.4	0.2	0.2	–	–	–	2.5	2.8
Debt securities in issue:
Senior unsecured notes issued	1.3	0.2	1.9	2.6	1.6	3.1	7.5	12.1	30.3	29.5
Covered bonds	–	–	0.5	2.0	0.1	1.7	6.5	0.9	11.7	14.1
Commercial paper	1.5	2.5	1.5	1.3	0.1	–	–	–	6.9	8.4
Certificates of deposit issued	0.1	0.6	0.4	0.1	0.1	–	–	–	1.3	3.1
Securitisation notes	–	–	–	0.1	–	0.1	4.3	0.6	5.1	4.2
	2.9	3.3	4.3	6.1	1.9	4.9	18.3	13.6	55.3	59.3
Subordinated liabilities	–	–	–	0.6	0.3	0.5	2.2	4.6	8.2	8.3
Total wholesale funding1	4.2	3.7	4.7	6.9	2.4	5.4	20.5	18.2	66.0	70.4

1Excludes balances relating to margins of £0.4 billion (31 December 2023: £0.6 billion).

Page 20 of 59

FUNDING AND LIQUIDITY RISK (continued)

Analysis of term issuance in half-year to 30 June 2024


	Sterling £bn	US Dollar £bn	Euro £bn	Other currencies £bn	Total £bn

Securitisation1	0.9	–	–	–	0.9
Covered bonds	–	–	–	–	–
Senior unsecured notes	–	3.0	0.8	0.5	4.3
Additional tier 1	–	–	–	–	–
Total issuance	0.9	3.0	0.8	0.5	5.2

1Includes significant risk transfer securitisations.

Liquidity portfolio

At 30 June 2024, the Group had £108.4 billion of highly liquid unencumbered LCR eligible assets, based on a monthly

rolling average over the previous 12 months post any liquidity haircuts (31 December 2023: £108.7 billion). These assets

are available to meet cash and collateral outflows and regulatory requirements.

The Group also has a significant amount of non-LCR eligible liquid assets which are eligible for use in a range of central

bank or similar facilities. Future use of such facilities will be based on prudent liquidity management and economic

considerations, having regard for external market conditions.

LCR eligible assets


	Average
	20241 £bn	20231 £bn	Change %

Cash and central bank reserves	52.4	63.3	(17)
High quality government/MDB/agency bonds2	48.1	38.4	25
High quality covered bonds	2.9	2.7	7
Level 1	103.4	104.4	(1)
Level 23	5.0	4.3	16
Total LCR eligible assets	108.4	108.7

1Based on 12 months rolling simple average to 30 June 2024 (2023: 31 December 2023). Eligible assets are calculated as a simple

average of month-end observations over the previous 12 months post any liquidity haircuts.

2Designated multilateral development bank (MDB).

3Includes Level 2A and Level 2B.

Page 21 of 59

STATUTORY INFORMATION


Condensed consolidated half-year financial statements (unaudited)
Condensed consolidated income statement (unaudited)		23
Condensed consolidated statement of comprehensive income (unaudited)		24
Condensed consolidated balance sheet (unaudited)		25
Condensed consolidated statement of changes in equity (unaudited)		26
Condensed consolidated cash flow statement (unaudited)		29

Notes to the condensed consolidated half-year financial statements (unaudited)
1	Basis of preparation and accounting policies	30
2	Critical accounting judgements and key sources of estimation uncertainty	31
3	Segmental analysis	31
4	Net fee and commission income	32
5	Operating expenses	32
6	Retirement benefit obligations	33
7	Impairment	34
8	Tax	34
9	Fair values of financial assets and liabilities	35
10	Loans and advances to customers	40
11	Credit quality of loans and advances to customers	42
12	Allowance for expected credit losses	45
13	Debt securities in issue	53
14	Provisions	54
15	Dividends on ordinary shares	55
16	Related party transactions	56
17	Contingent liabilities, commitments and guarantees	56

Page 22 of 59

CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)


	Note	Half-year to 30 Jun 2024 £m	Half-year to 30 Jun 2023 £m

Interest income		13,980	11,802
Interest expense		(7,758)	(4,793)
Net interest income		6,222	7,009
Fee and commission income		1,186	1,196
Fee and commission expense		(883)	(550)
Net fee and commission income	4	303	646
Net trading income		331	107
Other operating income		1,520	1,278
Other income		2,154	2,031
Total income		8,376	9,040
Operating expenses	5	(5,436)	(4,829)
Impairment	7	(122)	(681)
Profit before tax		2,818	3,530
Tax expense	8	(811)	(940)
Profit for the period		2,007	2,590

Profit attributable to ordinary shareholders		1,824	2,417
Profit attributable to other equity holders		172	161
Profit attributable to equity holders		1,996	2,578
Profit attributable to non-controlling interests		11	12
Profit for the period		2,007	2,590

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

Page 23 of 59

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)


	Half-year to 30 Jun 2024 £m	Half-year to 30 Jun 2023 £m

Profit for the period	2,007	2,590
Other comprehensive income
Items that will not subsequently be reclassified to profit or loss:
Post-retirement defined benefit scheme remeasurements:
Remeasurements before tax	(351)	(119)
Tax	93	27
	(258)	(92)
Gains and losses attributable to own credit risk:
Losses before tax	(86)	(85)
Tax	24	24
	(62)	(61)
Items that may subsequently be reclassified to profit or loss:
Movements in revaluation reserve in respect of debt securities held at fair value through other comprehensive income:
Change in fair value	105	157
Income statement transfers in respect of disposals	(4)	67
Income statement transfers in respect of impairment	(2)	(2)
Tax	(27)	(61)
	72	161
Movements in cash flow hedging reserve:
Effective portion of changes in fair value taken to other comprehensive income	(1,435)	(1,287)
Net income statement transfers	1,072	616
Tax	102	188
	(261)	(483)
Movements in foreign currency translation reserve:
Currency translation differences (tax: £nil)	(39)	(58)
Transfers to income statement (tax: £nil)	–	–
	(39)	(58)
Total other comprehensive loss for the period, net of tax	(548)	(533)
Total comprehensive income for the period	1,459	2,057

Total comprehensive income attributable to ordinary shareholders	1,276	1,884
Total comprehensive income attributable to other equity holders	172	161
Total comprehensive income attributable to equity holders	1,448	2,045
Total comprehensive income attributable to non-controlling interests	11	12
Total comprehensive income for the period	1,459	2,057

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

Page 24 of 59

CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)


	Note	At 30 Jun 2024 £m	At 31 Dec 2023 £m

Assets
Cash and balances at central banks		49,154	57,909
Financial assets at fair value through profit or loss	9	2,265	1,862
Derivative financial instruments		2,688	3,165
Loans and advances to banks		7,067	8,810
Loans and advances to customers	10	435,310	433,124
Reverse repurchase agreements		42,273	32,751
Debt securities		12,619	12,546
Due from fellow Lloyds Banking Group undertakings		789	840
Financial assets at amortised cost		498,058	488,071
Financial assets at fair value through other comprehensive income	9	27,521	27,337
Goodwill and other intangible assets		5,870	5,837
Current tax recoverable		846	1,026
Deferred tax assets		4,622	4,636
Retirement benefit assets	6	3,379	3,624
Other assets		13,959	11,938
Total assets		608,362	605,405

Liabilities
Deposits from banks		2,973	3,557
Customer deposits		446,165	441,953
Repurchase agreements		37,848	37,702
Due to fellow Lloyds Banking Group undertakings		5,168	2,932
Financial liabilities at fair value through profit or loss	9	4,909	5,255
Derivative financial instruments		3,980	4,307
Notes in circulation		1,766	1,392
Debt securities in issue at amortised cost	13	48,725	52,449
Other liabilities		8,468	6,260
Retirement benefit obligations	6	130	136
Current tax liabilities		28	23
Deferred tax liabilities		146	157
Provisions	14	1,653	1,916
Subordinated liabilities		6,764	6,935
Total liabilities		568,723	564,974

Equity
Share capital		1,574	1,574
Share premium account		600	600
Other reserves		2,167	2,395
Retained profits		30,211	30,786
Ordinary shareholders’ equity		34,552	35,355
Other equity instruments		5,018	5,018
Total equity excluding non-controlling interests		39,570	40,373
Non-controlling interests		69	58
Total equity		39,639	40,431
Total equity and liabilities		608,362	605,405

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

Page 25 of 59

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)


	Attributable to ordinary shareholders
	Share capital and premium £m	Other reserves £m	Retained profits £m	Total £m	Other equity instruments £m		Non- controlling interests £m		Total £m

At 1 January 2024	2,174	2,395	30,786	35,355		5,018		58	40,431
Comprehensive income
Profit for the period	–	–	1,824	1,824		172		11	2,007
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, net of tax	–	–	(258)	(258)		–		–	(258)
Movements in revaluation reserve in respect of financial assets held at fair value through other comprehensive income, net of tax:
Debt securities	–	72	–	72		–		–	72
Gains and losses attributable to own credit risk, net of tax	–	–	(62)	(62)		–		–	(62)
Movements in cash flow hedging reserve, net of tax	–	(261)	–	(261)		–		–	(261)
Movements in foreign currency translation reserve, net of tax	–	(39)	–	(39)		–		–	(39)
Total other comprehensive loss	–	(228)	(320)	(548)		–		–	(548)
Total comprehensive (loss) income1	–	(228)	1,504	1,276		172		11	1,459
Transactions with owners
Dividends	–	–	(2,140)	(2,140)		–		–	(2,140)
Distributions on other equity instruments	–	–	–	–		(172)		–	(172)
Issue of other equity instruments	–	–	–	–		–		–	–
Capital contributions received	–	–	61	61		–		–	61
Return of capital contributions	–	–	–	–		–		–	–
Total transactions with owners	–	–	(2,079)	(2,079)		(172)		–	(2,251)
At 30 June 20242	2,174	2,167	30,211	34,552		5,018		69	39,639

1Total comprehensive income attributable to owners of the parent was £1,448 million.

2Total equity attributable to owners of the parent was £39,570 million.

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

Page 26 of 59

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) (continued)


	Attributable to ordinary shareholders
	Share capital and premium £m	Other reserves £m	Retained profits £m	Total £m	Other equity instruments £m	Non- controlling interests £m	Total £m

At 1 January 2023	2,174	743	31,792	34,709	4,268	82	39,059
Comprehensive income
Profit for the period	–	–	2,417	2,417	161	12	2,590
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, net of tax	–	–	(92)	(92)	–	–	(92)
Movements in revaluation reserve in respect of financial assets held at fair value through other comprehensive income, net of tax:
Debt securities	–	161	–	161	–	–	161
Gains and losses attributable to own credit risk, net of tax	–	–	(61)	(61)	–	–	(61)
Movements in cash flow hedging reserve, net of tax	–	(483)	–	(483)	–	–	(483)
Movements in foreign currency translation reserve, net of tax	–	(58)	–	(58)	–	–	(58)
Total other comprehensive loss	–	(380)	(153)	(533)	–	–	(533)
Total comprehensive (loss) income1	–	(380)	2,264	1,884	161	12	2,057
Transactions with owners
Dividends	–	–	(1,900)	(1,900)	–	(30)	(1,930)
Distributions on other equity instruments	–	–	–	–	(161)	–	(161)
Issue of other equity instruments	–	–	(5)	(5)	750	–	745
Capital contributions received	–	–	94	94	–	–	94
Return of capital contributions	–	–	–	–	–	–	–
Total transactions with owners	–	–	(1,811)	(1,811)	589	(30)	(1,252)
At 30 June 20232	2,174	363	32,245	34,782	5,018	64	39,864

1Total comprehensive income attributable to owners of the parent was £2,045 million.

2Total equity attributable to owners of the parent was £39,800 million.

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

Page 27 of 59

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) (continued)


	Attributable to ordinary shareholders
	Share capital and premium £m	Other reserves £m	Retained profits £m	Total £m	Other equity instruments £m	Non- controlling interests £m	Total £m

At 1 July 2023	2,174	363	32,245	34,782	5,018	64	39,864
Comprehensive income
Profit for the period	–	–	2,441	2,441	173	3	2,617
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, net of tax	–	–	(1,113)	(1,113)	–	–	(1,113)
Movements in revaluation reserve in respect of financial assets held at fair value through other comprehensive income, net of tax:
Debt securities	–	(90)	–	(90)	–	–	(90)
Gains and losses attributable to own credit risk, net of tax	–	–	(107)	(107)	–	–	(107)
Movements in cash flow hedging reserve, net of tax	–	2,097	–	2,097	–	–	2,097
Movements in foreign currency translation reserve, net of tax	–	25	–	25	–	–	25
Total other comprehensive income (loss)	–	2,032	(1,220)	812	–	–	812
Total comprehensive income1	–	2,032	1,221	3,253	173	3	3,429
Transactions with owners
Dividends	–	–	(2,800)	(2,800)	–	(9)	(2,809)
Distributions on other equity instruments	–	–	–	–	(173)	–	(173)
Issue of other equity instruments	–	–	–	–	–	–	–
Capital contributions received	–	–	121	121	–	–	121
Return of capital contributions	–	–	(1)	(1)	–	–	(1)
Total transactions with owners	–	–	(2,680)	(2,680)	(173)	(9)	(2,862)
At 31 December 20232	2,174	2,395	30,786	35,355	5,018	58	40,431

1Total comprehensive income attributable to owners of the parent was £3,426 million.

2Total equity attributable to owners of the parent was £40,373 million.

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

Page 28 of 59

CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)


	Half-year to 30 Jun 2024 £m	Half-year to 30 Jun 2023 £m

Cash flows from operating activities
Profit before tax	2,818	3,530
Adjustments for:
Change in operating assets	(11,747)	8,828
Change in operating liabilities	2,077	(1,869)
Non-cash and other items	2,270	1,897
Net tax paid	(415)	(785)
Net cash (used in) provided by operating activities	(4,997)	11,601
Cash flows from investing activities
Purchase of financial assets	(5,800)	(3,847)
Proceeds from sale and maturity of financial assets	5,261	3,654
Purchase of fixed assets	(2,636)	(3,220)
Proceeds from sale of fixed assets	604	506
Net cash used in investing activities	(2,571)	(2,907)
Cash flows from financing activities
Dividends paid to ordinary shareholders	(2,140)	(1,900)
Distributions on other equity instruments	(172)	(161)
Dividends paid to non-controlling interests	–	(30)
Interest paid on subordinated liabilities	(194)	(198)
Proceeds from issue of other equity instruments	–	745
Repayment of subordinated liabilities	–	(265)
Borrowings from parent company	3,168	389
Repayments of borrowings to parent company	(1,001)	(945)
Interest paid on borrowings from parent company	(198)	(214)
Net cash used in financing activities	(537)	(2,579)
Effects of exchange rate changes on cash and cash equivalents	(66)	(70)
Change in cash and cash equivalents	(8,171)	6,045
Cash and cash equivalents at beginning of period	66,538	75,201
Cash and cash equivalents at end of period	58,367	81,246

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

Cash and cash equivalents comprise cash and non-mandatory balances with central banks and amounts due from banks

with an original maturity of less than three months.

Page 29 of 59

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

Note 1: Basis of preparation and accounting policies

These condensed consolidated half-year financial statements as at and for the period to 30 June 2024 have been

prepared in accordance with International Accounting Standard 34 (IAS 34), Interim Financial Reporting as issued by the

International Accounting Standards Board (IASB) and comprise the results of Lloyds Bank plc (the Bank) together with its

subsidiaries (the Group). They do not include all of the information required for full annual financial statements and

should be read in conjunction with the Group’s consolidated financial statements as at and for the year ended

31 December 2023 which were prepared in accordance with International Financial Reporting Standards (IFRS) as

issued by the IASB. Copies of the 2023 annual report on Form 20-F are available on the Lloyds Banking Group’s

website.

The directors consider that it is appropriate to continue to adopt the going concern basis in preparing these condensed

consolidated half-year financial statements. In reaching this assessment, the directors have taken into account the

uncertainties affecting the UK economy and their potential effects upon the Group’s performance and projected funding

and capital position; the impact of further stress scenarios has also been considered. On this basis, the directors are

satisfied that the Group will maintain adequate levels of funding and capital for the foreseeable future.

The Group’s accounting policies are consistent with those applied by the Group in its financial statements for the year

ended 31 December 2023 and there have been no changes in the Group’s methods of computation.

The IASB has issued a number of minor amendments to IFRSs that are relevant to the Group effective 1 January 2024,

including IFRS 16 Lease Liability in a Sale and Leaseback, IAS 1 Non-current Liabilities with Covenants, and IAS 1

Classification of Liabilities as Current or Non-current. These amendments have not had a significant impact on the

Group.

Future accounting developments

The IASB has issued Amendments to the Classification and Measurement of Financial Instruments (IFRS 9 and IFRS 7)

which is effective 1 January 2026 and IFRS 19 Subsidiaries without Public Accountability: Disclosures which is effective

1 January 2027. Neither the amendments nor IFRS 19 are expected to have a significant impact on the Group. The IASB

has also issued IFRS 18 Primary Financial Statements which is effective 1 January 2027. The standard includes no

measurement changes, and the Group is currently assessing the impact of this standard on its income statement

presentation.

Page 30 of 59

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

Note 2: Critical accounting judgements and key sources of estimation uncertainty

The preparation of the Group’s financial statements in accordance with IFRS requires management to make judgements,

estimates and assumptions in applying the accounting policies that affect the reported amounts of assets, liabilities,

income and expenses. Due to the inherent uncertainty in making estimates, actual results reported in future periods may

be based upon amounts which differ from these estimates. Estimates, judgements and assumptions are continually

evaluated and are based on historical experience and other factors, including expectations of future events that are

believed to be reasonable under the circumstances. In preparing the financial statements, the Group has considered the

impact of climate-related risks on its financial position and performance. While the effects of climate change represent a

source of uncertainty, the Group does not consider there to be a material impact on its judgements and estimates from

the physical, transition and other climate-related risks in the short-term.

The Group’s significant judgements, estimates and assumptions are unchanged compared to those disclosed in note 3 of

the Group’s 2023 financial statements. Further information on the critical accounting judgements and key sources of

estimation uncertainty for the allowance for expected credit losses is set out in note 12.

Note 3: Segmental analysis

The Group provides a wide range of banking and financial services in the UK and in certain locations overseas. The

Group Executive Committee (GEC) of Lloyds Bank plc remains the "chief operating decision maker" (as defined by

IFRS 8 Operating Segments) for the Group.


Half-year to 30 June 2024	Retail £m	Commercial Banking £m		Other £m	Total £m

Net interest income	4,429		1,636	157	6,222
Other income	837		521	796	2,154
Total income	5,266		2,157	953	8,376
Operating expenses	(3,563)		(1,149)	(724)	(5,436)
Impairment (charge) credit	(195)		69	4	(122)
Profit before tax	1,508		1,077	233	2,818

External income (expense)	6,254		2,829	(707)	8,376
Inter-segment (expense) income	(988)		(672)	1,660	–
Segment income	5,266		2,157	953	8,376


Half-year to 30 June 2023	Retail £m	Commercial Banking £m	Other £m	Total £m

Net interest income	5,063	1,881	65	7,009
Other income	1,005	513	513	2,031
Total income	6,068	2,394	578	9,040
Operating expenses	(3,009)	(1,063)	(757)	(4,829)
Impairment (charge) credit	(592)	(90)	1	(681)
Profit (loss) before tax	2,467	1,241	(178)	3,530

External income (expense)	6,427	2,904	(291)	9,040
Inter-segment (expense) income	(359)	(510)	869	–
Segment income	6,068	2,394	578	9,040

Page 31 of 59

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

Note 3: Segmental analysis (continued)


	Segment external assets		Segment external liabilities
	At 30 Jun 2024 £m	At 31 Dec 2023 £m	At 30 Jun 2024 £m	At 31 Dec 2023 £m

Retail	380,653	376,589	319,063	313,232
Commercial Banking	86,004	90,301	136,393	138,835
Other	141,705	138,515	113,267	112,907
Total Group	608,362	605,405	568,723	564,974

Note 4: Net fee and commission income


	Half-year to 30 Jun 2024 £m	Half-year to 30 Jun 2023 £m

Fee and commission income:
Current accounts	312	308
Credit and debit card fees	629	614
Commercial banking and treasury fees	92	93
Factoring	35	39
Other fees and commissions	118	142
Total fee and commission income	1,186	1,196
Fee and commission expense	(883)	(550)
Net fee and commission income	303	646

Current account and credit and debit card fees principally arise in Retail; commercial banking, treasury and factoring fees

arise in Commercial Banking.

Note 5: Operating expenses


	Half-year to 30 Jun 2024 £m	Half-year to 30 Jun 2023 £m

Staff costs	2,287	1,934
Premises and equipment costs	182	167
Depreciation and amortisation	1,659	1,310
Other	1,308	1,418
Total operating expenses	5,436	4,829

Page 32 of 59

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

Note 6: Retirement benefit obligations

The Group’s post-retirement defined benefit scheme obligations are comprised as follows:


	At 30 Jun 2024 £m	At 31 Dec 2023 £m

Defined benefit pension schemes:
Present value of funded obligations	(28,633)	(30,201)
Fair value of scheme assets	31,924	33,733
Net pension scheme asset	3,291	3,532
Other post-retirement schemes	(42)	(44)
Total amounts recognised in the balance sheet	3,249	3,488

Recognised on the balance sheet as:
Retirement benefit assets	3,379	3,624
Retirement benefit obligations	(130)	(136)
Total amounts recognised in the balance sheet	3,249	3,488

Movements in the Group’s net post-retirement defined benefit scheme asset during the period were as follows:


	£m

Asset at 1 January 2024	3,488
Income statement credit	21
Employer contributions	91
Remeasurement	(351)
Asset at 30 June 2024	3,249

The principal assumptions used in the valuations of the defined benefit pension schemes were as follows:


	At 30 Jun 2024 %	At 31 Dec 2023 %

Discount rate	5.18	4.70
Rate of inflation:
Retail Price Index (RPI)	3.08	2.96
Consumer Price Index (CPI)	2.67	2.47
Rate of salary increases	0.00	0.00
Weighted-average rate of increase for pensions in payment	2.90	2.73

Page 33 of 59

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

Note 7: Impairment


	Half-year to 30 Jun 2024 £m	Half-year to 30 Jun 2023 £m

Loans and advances to banks	(4)	(2)
Loans and advances to customers	169	678
Debt securities	(1)	(1)
Financial assets held at amortised cost	164	675
Financial assets at fair value through other comprehensive income	(2)	(1)
Loan commitments and financial guarantees	(40)	7
Total impairment	122	681

There was a £10 million charge in respect of residual value impairment and voluntary terminations within the Group’s UK

Motor Finance business in the current period (half-year to 30 June 2023: £27 million).

Note 8: Tax

In accordance with IAS 34, the Group’s income tax expense for the half-year to 30 June 2024 is based on the best

estimate of the weighted-average annual income tax rate expected for the full financial year. The tax effects of one-off

items are not included in the weighted-average annual income tax rate, but are recognised in the relevant period.

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


	Half-year to 30 Jun 2024 £m	Half-year to 30 Jun 2023 £m

Profit before tax	2,818	3,530
UK corporation tax thereon at 25.0 per cent (2023: 23.5 per cent)	(704)	(830)
Impact of surcharge on banking profits	(78)	(130)
Non-deductible costs: conduct charges	4	(2)
Other non-deductible costs	(98)	(40)
Non-taxable income	33	1
Tax relief on coupons on other equity instruments	42	38
Tax-exempt gains/(losses) on disposals	–	22
Remeasurement of deferred tax due to rate changes	3	(1)
Differences in overseas tax rates	(3)	(1)
Adjustments in respect of prior years	(10)	3
Tax expense	(811)	(940)

Page 34 of 59

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

Note 9: Fair values of financial assets and liabilities

The valuations of financial instruments have been classified into three levels according to the quality and reliability of

information used to determine those fair values. Note 16 to the Group’s financial statements for the year ended

31 December 2023 details the definitions of the three levels in the fair value hierarchy.

Financial instruments classified as financial assets at fair value through profit or loss, derivative financial instruments,

financial assets at fair value through other comprehensive income and financial liabilities at fair value through profit or

loss are recognised at fair value.

The Group manages valuation adjustments for its derivative exposures on a net basis; the Group determines their fair

values on the basis of their net exposures. In all other cases, fair values of financial assets and liabilities measured at fair

value are determined on the basis of their gross exposures.

The following tables provide an analysis of the financial assets and liabilities of the Group that are carried at fair value in

the Group’s consolidated balance sheet, grouped into levels 1 to 3 based on the degree to which the fair value is

observable. There were no significant transfers between level 1 and level 2 during the period.


Financial assets	Level 1 £m	Level 2 £m	Level 3 £m	Total £m

At 30 June 2024
Financial assets at fair value through profit or loss:
Loans and advances to customers	–	1,784	282	2,066
Equity shares	195	–	4	199
Total financial assets at fair value through profit or loss	195	1,784	286	2,265
Financial assets at fair value through other comprehensive income:
Debt securities	14,038	13,432	51	27,521
Equity shares	–	–	–	–
Total financial assets at fair value through other comprehensive income	14,038	13,432	51	27,521
Derivative financial instruments	–	2,688	–	2,688
Total financial assets carried at fair value	14,233	17,904	337	32,474

At 31 December 2023
Financial assets at fair value through profit or loss:
Loans and advances to customers	–	1,391	266	1,657
Equity shares	201	–	4	205
Total financial assets at fair value through profit or loss	201	1,391	270	1,862
Financial assets at fair value through other comprehensive income:
Debt securities	15,025	12,259	52	27,336
Equity shares	–	–	1	1
Total financial assets at fair value through other comprehensive income	15,025	12,259	53	27,337
Derivative financial instruments	–	3,165	–	3,165
Total financial assets carried at fair value	15,226	16,815	323	32,364

Page 35 of 59

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

Note 9: Fair values of financial assets and liabilities (continued)


Financial liabilities	Level 1 £m	Level 2 £m	Level 3 £m	Total £m

At 30 June 2024
Financial liabilities at fair value through profit or loss	–	4,886	23	4,909
Derivative financial instruments	–	3,832	148	3,980
Total financial liabilities carried at fair value	–	8,718	171	8,889

At 31 December 2023
Financial liabilities at fair value through profit or loss	–	5,232	23	5,255
Derivative financial instruments	–	4,168	139	4,307
Total financial liabilities carried at fair value	–	9,400	162	9,562

Valuation control framework

Key elements of the valuation control framework include model validation (incorporating pre-trade and post-trade

testing), product implementation review and independent price verification. The framework covers processes for all

3 levels in the fair value hierarchy. Formal committees meet quarterly to discuss and approve valuations in more

judgemental areas.

Transfers into and out of level 3 portfolios

Transfers out of level 3 portfolios arise when inputs that could have a significant impact on the instrument’s valuation

become market observable; conversely, transfers into the portfolios arise when sources of data cease to be observable.

Valuation methodology

For level 2 and level 3 portfolios, there is no significant change to the valuation methodology (techniques and inputs)

disclosed in the Group’s financial statements for the year ended 31 December 2023 applied to these portfolios.

Movements in level 3 portfolio

The tables below analyse movements in the level 3 financial assets portfolio.


	Financial assets at fair value through profit or loss £m	Financial assets at fair value through other comprehensive income £m	Total financial assets carried at fair value £m

At 1 January 2024	270	53	323
Exchange and other adjustments	–	(1)	(1)
Gains recognised in the income statement within other income	26	–	26
Purchases/increases to customer loans	6	–	6
Sales/repayments of customer loans	(16)	(1)	(17)
At 30 June 2024	286	51	337
Gains recognised in the income statement, within other income, relating to the change in fair value of those assets held at 30 June 2024	26	–	26


At 1 January 2023	295	52	347
Exchange and other adjustments	–	(2)	(2)
Gains recognised in the income statement within other income	17	4	21
Purchases/increases to customer loans	–	–	–
Sales/repayments of customer loans	(8)	(2)	(10)
At 30 June 2023	304	52	356
Gains recognised in the income statement, within other income, relating to the change in fair value of those assets held at 30 June 2023	17	2	19

Page 36 of 59

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

Note 9: Fair values of financial assets and liabilities (continued)

The tables below analyse movements in the level 3 financial liabilities portfolio.


	Financial liabilities at fair value through profit or loss £m	Derivative liabilities £m	Total financial liabilities carried at fair value £m

At 1 January 2024	23	139	162
Losses recognised in the income statement within other income	2	19	21
Redemptions	(2)	(10)	(12)
At 30 June 2024	23	148	171
Losses (gains) recognised in the income statement, within other income, relating to the change in fair value of those liabilities held at 30 June 2024	2	(21)	(19)

At 1 January 2023	26	163	189
(Gains) losses recognised in the income statement within other income	(1)	13	12
Redemptions	–	(11)	(11)
At 30 June 2023	25	165	190
Gains recognised in the income statement, within other income, relating to the change in fair value of those liabilities held at 30 June 2023	(1)	(16)	(17)

Sensitivity of level 3 valuations

The tables below set out the effects of reasonably possible alternative assumptions for categories of level 3 financial

assets and financial liabilities.


				Effect of reasonably possible alternative assumptions1
At 30 June 2024	Valuation techniques	Significant unobservable inputs2	Carrying value £m	Favourable changes £m	Unfavourable changes £m

Financial assets at fair value through profit or loss
Loans and advances to customers	Discounted cash flows	Interest rate spreads (+/- 50bps)	282	20	(19)
Equity investments			4
			286
Financial assets at fair value through other comprehensive income			51
Level 3 financial assets carried at fair value			337

Financial liabilities at fair value through profit or loss			23	1	(1)
Derivative financial liabilities
Interest rate derivatives	Option pricing model	Interest rate volatility (13%/200%)	14
Shared appreciation rights	Market values – property valuation	HPI (+/- 1%)	134	13	(12)
			148
Level 3 financial liabilities carried at fair value			171

1Where the exposure to an unobservable input is managed on a net basis, only the net impact is shown in the table.

2Ranges are shown where appropriate and represent the highest and lowest inputs used in the level 3 valuations.

Page 37 of 59

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

Note 9: Fair values of financial assets and liabilities (continued)

Sensitivity of level 3 valuations (continued)


				Effect of reasonably possible alternative assumptions1
At 31 December 2023	Valuation techniques	Significant unobservable inputs2	Carrying value £m	Favourable changes £m	Unfavourable changes £m

Financial assets at fair value through profit or loss
Loans and advances to customers	Discounted cash flows	Interest rate spreads (+/- 50bps)	266	21	(19)
Equity investments			4
			270
Financial assets at fair value through other comprehensive income			53
Level 3 financial assets carried at fair value			323

Financial liabilities at fair value through profit or loss			23	1	(1)
Derivative financial liabilities
Interest rate derivatives	Option pricing model	Interest rate volatility (13%/200%)	16
Shared appreciation rights	Market values – property valuation	HPI (+/- 1%)	123	13	(12)
			139
Level 3 financial liabilities carried at fair value			162

1Where the exposure to an unobservable input is managed on a net basis, only the net impact is shown in the table.

2Ranges are shown where appropriate and represent the highest and lowest inputs used in the level 3 valuations.

Unobservable inputs

Significant unobservable inputs affecting the valuation of debt securities and derivatives are unchanged from those

described in the Group’s financial statements for the year ended 31 December 2023.

Reasonably possible alternative assumptions

Valuation techniques applied to many of the Group’s level 3 instruments often involve the use of two or more inputs

whose relationship is interdependent. The calculation of the effect of reasonably possible alternative assumptions

included in the table above reflects such relationships and are unchanged from those described in note 16 to the Group’s

financial statements for the year ended 31 December 2023.

Page 38 of 59

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

Note 9: Fair values of financial assets and liabilities (continued)

The table below summarises the carrying values of financial assets and liabilities measured at amortised cost in the

Group’s consolidated balance sheet. The fair values presented in the table are at a specific date and may be significantly

different from the amounts which will actually be paid or received on the maturity or settlement date.


	At 30 June 2024		At 31 December 2023
	Carrying value £m	Fair value £m	Carrying value £m	Fair value £m

Financial assets
Loans and advances to banks	7,067	7,067	8,810	8,810
Loans and advances to customers	435,310	429,131	433,124	423,183
Reverse repurchase agreements	42,273	42,273	32,751	32,751
Debt securities	12,619	12,110	12,546	12,506
Due from fellow Lloyds Banking Group undertakings	789	789	840	840
Financial assets at amortised cost	498,058	491,370	488,071	478,090

Financial liabilities
Deposits from banks	2,973	2,965	3,557	3,557
Customer deposits	446,165	446,802	441,953	442,391
Repurchase agreements	37,848	37,848	37,702	37,702
Due to fellow Lloyds Banking Group undertakings	5,168	5,168	2,932	2,932
Debt securities in issue	48,725	48,681	52,449	52,243
Subordinated liabilities	6,764	6,880	6,935	7,160

The carrying amount of the following financial instruments is a reasonable approximation of fair value: cash and balances

at central banks, items in the course of collection from banks, items in course of transmission to banks and notes in

circulation.

Page 39 of 59

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

Note 10: Loans and advances to customers

Half-year to 30 June 2024


	Gross carrying amount					Allowance for expected credit losses
	Stage 1 £m	Stage 2 £m	Stage 3 £m	POCI £m	Total £m	Stage 1 £m	Stage 2 £m	Stage 3 £m	POCI £m	Total £m

At 1 January 2024	368,859	52,973	7,131	7,854	436,817	885	1,462	1,133	213	3,693
Exchange and other adjustments1	(1,062)	(13)	(6)	7	(1,074)	(6)	(5)	14	23	26
Transfers to Stage 1	16,753	(16,683)	(70)		–	276	(271)	(5)		–
Transfers to Stage 2	(11,055)	11,533	(478)		–	(56)	116	(60)		–
Transfers to Stage 3	(508)	(1,710)	2,218		–	(8)	(156)	164		–
Net change in ECL due to transfers						(184)	257	169		242
						28	(54)	268		242
Impact of transfers between stages	5,190	(6,860)	1,670		–
Other changes in credit quality2						(136)	(52)	331	32	175
Additions and repayments	8,751	(3,120)	(816)	(418)	4,397	(5)	(99)	(115)	(29)	(248)
Charge (credit) to the income statement						(113)	(205)	484	3	169
Disposals and derecognition3	(449)	(206)	(88)	(219)	(962)	(1)	(4)	(7)	(8)	(20)
Advances written off			(617)	(6)	(623)			(617)	(6)	(623)
Recoveries of advances written off in previous years			69	–	69			69	–	69
At 30 June 2024	381,289	42,774	7,343	7,218	438,624	765	1,248	1,076	225	3,314
Allowance for expected credit losses	(765)	(1,248)	(1,076)	(225)	(3,314)
Net carrying amount	380,524	41,526	6,267	6,993	435,310
Drawn ECL coverage4	0.2%	2.9%	14.7%	3.1%	0.8%

1Exchange and other adjustments includes the impact of movements in exchange rates, discount unwind, derecognising assets as a

result of modifications and adjustments in respect of purchased or originated credit-impaired financial assets (POCI). Where a POCI

asset’s expected credit loss is less than its expected credit loss on purchase or origination, the increase in its carrying value is

recognised within gross loans, rather than as a negative impairment allowance.

2Includes a credit for methodology and model changes of £65 million, split by Stage as £26 million credit for Stage 1, £31 million credit

for Stage 2, £4 million credit for Stage 3 and £4 million credit for POCI.

3Relates to the securitisation of legacy Retail mortgages.

4Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to

customers.

The total allowance for expected credit losses includes £185 million (31 December 2023: £187 million) in respect of

residual value impairment and voluntary terminations within the Group’s UK Motor Finance business.

Page 40 of 59

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

Note 10: Loans and advances to customers (continued)

Year ended 31 December 2023


	Gross carrying amount					Allowance for expected credit losses
	Stage 1 £m	Stage 2 £m	Stage 3 £m	POCI £m	Total £m	Stage 1 £m	Stage 2 £m	Stage 3 £m	POCI £m	Total £m

At 1 January 2023	362,766	60,103	7,611	9,622	440,102	678	1,792	1,752	253	4,475
Exchange and other adjustments1	2,432	(8)	(8)	18	2,434	(8)	(1)	106	67	164
Transfers to Stage 1	18,355	(18,317)	(38)		–	393	(385)	(8)		–
Transfers to Stage 2	(17,963)	18,545	(582)		–	(53)	121	(68)		–
Transfers to Stage 3	(1,214)	(2,507)	3,721		–	(13)	(223)	236		–
Net change in ECL due to transfers						(254)	401	312		459
						73	(86)	472		459
Impact of transfers between stages	(822)	(2,279)	3,101		–
Other changes in credit quality2						106	(103)	802	8	813
Additions and repayments	8,168	(3,951)	(2,338)	(1,043)	836	90	(81)	(862)	(81)	(934)
Charge (credit) to the income statement						269	(270)	412	(73)	338
Disposals and derecognition3	(3,685)	(892)	(122)	(743)	(5,442)	(54)	(59)	(24)	(34)	(171)
Advances written off			(1,229)	–	(1,229)			(1,229)	–	(1,229)
Recoveries of advances written off in previous years			116	–	116			116	–	116
At 31 December 2023	368,859	52,973	7,131	7,854	436,817	885	1,462	1,133	213	3,693
Allowance for expected credit losses	(885)	(1,462)	(1,133)	(213)	(3,693)
Net carrying amount	367,974	51,511	5,998	7,641	433,124
Drawn ECL coverage4	0.2%	2.8%	15.9%	2.7%	0.8%

1Exchange and other adjustments includes the impact of movements in exchange rates, discount unwind, derecognising assets as a

result of modifications and adjustments in respect of purchased or originated credit-impaired financial assets (POCI). Where a POCI

asset’s expected credit loss is less than its expected credit loss on purchase or origination, the increase in its carrying value is

recognised within gross loans, rather than as a negative impairment allowance.

2Includes a charge for methodology and model changes of £60 million, split by Stage as £96 million charge for Stage 1, £33 million

credit for Stage 2, £1 million credit for Stage 3 and £2 million credit for POCI.

3Relates to the securitisations of legacy Retail mortgages and Retail unsecured loans.

4Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to

customers.

The movement tables are compiled by comparing the position at the end of the period to that at the beginning of the year.

Transfers between stages are deemed to have taken place at the start of the reporting period, with all other movements

shown in the stage in which the asset is held at the end of the period. Purchased or originated credit-impaired are not

transferable.

Additions and repayments comprise new loans originated and repayments of outstanding balances throughout the

reporting period.

The Group’s impairment charge comprises impact of transfers between stages, other changes in credit quality and

additions and repayments.

Advances written off have first been transferred to Stage 3 and then acquired a full allowance through other changes in

credit quality. Recoveries of advances written off in previous years are shown at the full recovered value, with a

corresponding entry in repayments and release of allowance through other changes in credit quality.

Page 41 of 59

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

Note 11: Credit quality of loans and advances to customers


	Gross drawn exposures					Allowance for expected credit losses
At 30 June 2024	Stage 1 £m	Stage 2 £m	Stage 3 £m	POCI £m	Total £m	Stage 1 £m	Stage 2 £m	Stage 3 £m	POCI £m	Total £m

Retail – UK mortgages
RMS 1–3	245,910	8,272	–	–	254,182	54	51	–	–	105
RMS 4–6	20,300	15,522	–	–	35,822	26	109	–	–	135
RMS 7–9	98	2,001	–	–	2,099	1	35	–	–	36
RMS 10	–	973	–	–	973	–	23	–	–	23
RMS 11–13	–	3,074	–	–	3,074	–	108	–	–	108
RMS 14	–	–	4,542	7,218	11,760	–	–	331	225	556
	266,308	29,842	4,542	7,218	307,910	81	326	331	225	963

Retail – credit cards
RMS 1–3	4,665	3	–	–	4,668	9	–	–	–	9
RMS 4–6	7,357	1,185	–	–	8,542	85	56	–	–	141
RMS 7–9	1,303	918	–	–	2,221	52	116	–	–	168
RMS 10	4	166	–	–	170	–	35	–	–	35
RMS 11–13	–	329	–	–	329	–	117	–	–	117
RMS 14	–	–	290	–	290	–	–	133	–	133
	13,329	2,601	290	–	16,220	146	324	133	–	603

Retail – UK unsecured loans and overdrafts
RMS 1–3	855	1	–	–	856	2	–	–	–	2
RMS 4–6	6,209	437	–	–	6,646	89	27	–	–	116
RMS 7–9	1,153	347	–	–	1,500	41	40	–	–	81
RMS 10	34	118	–	–	152	3	23	–	–	26
RMS 11–13	10	310	–	–	320	1	104	–	–	105
RMS 14	–	–	186	–	186	–	–	110	–	110
	8,261	1,213	186	–	9,660	136	194	110	–	440

Retail – UK Motor Finance
RMS 1–3	9,978	646	–	–	10,624	132	14	–	–	146
RMS 4–6	3,747	1,092	–	–	4,839	46	34	–	–	80
RMS 7–9	458	272	–	–	730	4	16	–	–	20
RMS 10	–	91	–	–	91	–	11	–	–	11
RMS 11–13	2	187	–	–	189	–	37	–	–	37
RMS 14	–	–	117	–	117	–	–	67	–	67
	14,185	2,288	117	–	16,590	182	112	67	–	361

Retail – other
RMS 1–3	14,153	250	–	–	14,403	3	4	–	–	7
RMS 4–6	2,200	167	–	–	2,367	10	10	–	–	20
RMS 7–9	–	90	–	–	90	–	5	–	–	5
RMS 10	–	5	–	–	5	–	–	–	–	–
RMS 11–13	81	10	–	–	91	–	–	–	–	–
RMS 14	–	–	163	–	163	–	–	45	–	45
	16,434	522	163	–	17,119	13	19	45	–	77
Total Retail	318,517	36,466	5,298	7,218	367,499	558	975	686	225	2,444

Page 42 of 59

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

Note 11: Credit quality of loans and advances to customers (continued)


	Gross drawn exposures					Allowance for expected credit losses
At 30 June 2024	Stage 1 £m	Stage 2 £m	Stage 3 £m	POCI £m	Total £m	Stage 1 £m	Stage 2 £m	Stage 3 £m	POCI £m	Total £m

Commercial Banking
CMS 1–5	13,625	–	–	–	13,625	1	–	–	–	1
CMS 6–10	13,731	59	–	–	13,790	12	–	–	–	12
CMS 11–14	32,113	2,020	–	–	34,133	125	28	–	–	153
CMS 15–18	4,255	3,601	–	–	7,856	69	188	–	–	257
CMS 19	30	628	–	–	658	–	57	–	–	57
CMS 20–23		–	2,045	–	2,045	–	–	390	–	390
	63,754	6,308	2,045	–	72,107	207	273	390	–	870
Other1	(982)	–	–	–	(982)	–	–	–	–	–
Total loans and advances to customers	381,289	42,774	7,343	7,218	438,624	765	1,248	1,076	225	3,314

1Gross drawn exposures include centralised fair value hedge accounting adjustments.

Page 43 of 59

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

Note 11: Credit quality of loans and advances to customers (continued)


	Gross drawn exposures					Allowance for expected credit losses
At 31 December 2023	Stage 1 £m	Stage 2 £m	Stage 3 £m	POCI £m	Total £m	Stage 1 £m	Stage 2 £m	Stage 3 £m	POCI £m	Total £m

Retail – UK mortgages
RMS 1–3	226,740	4,137	–	–	230,877	123	37	–	–	160
RMS 4–6	29,637	27,037	–	–	56,674	38	151	–	–	189
RMS 7–9	219	2,713	–	–	2,932	–	37	–	–	37
RMS 10	–	590	–	–	590	–	13	–	–	13
RMS 11–13	–	4,056	–	–	4,056	–	136	–	–	136
RMS 14	–	–	4,337	7,854	12,191	–	–	357	213	570
	256,596	38,533	4,337	7,854	307,320	161	374	357	213	1,105

Retail – credit cards
RMS 1–3	3,906	5	–	–	3,911	9	–	–	–	9
RMS 4–6	7,159	1,248	–	–	8,407	91	65	–	–	156
RMS 7–9	1,548	1,069	–	–	2,617	67	145	–	–	212
RMS 10	12	220	–	–	232	1	50	–	–	51
RMS 11–13	–	366	–	–	366	–	141	–	–	141
RMS 14	–	–	284	–	284	–	–	130	–	130
	12,625	2,908	284	–	15,817	168	401	130	–	699

Retail – UK unsecured loans and overdrafts
RMS 1–3	638	1	–	–	639	1	–	–	–	1
RMS 4–6	5,152	250	–	–	5,402	83	18	–	–	101
RMS 7–9	1,256	473	–	–	1,729	44	50	–	–	94
RMS 10	43	135	–	–	178	4	27	–	–	31
RMS 11–13	14	328	–	–	342	2	113	–	–	115
RMS 14	–	–	196	–	196	–	–	118	–	118
	7,103	1,187	196	–	8,486	134	208	118	–	460

Retail – UK Motor Finance
RMS 1–3	9,979	569	–	–	10,548	142	12	–	–	154
RMS 4–6	2,791	998	–	–	3,789	41	29	–	–	70
RMS 7–9	769	228	–	–	997	3	13	–	–	16
RMS 10	–	63	–	–	63	–	7	–	–	7
RMS 11–13	2	169	–	–	171	–	30	–	–	30
RMS 14	–	–	112	–	112	–	–	63	–	63
	13,541	2,027	112	–	15,680	186	91	63	–	340

Retail – other
RMS 1–3	13,613	240	–	–	13,853	3	4	–	–	7
RMS 4–6	2,197	186	–	–	2,383	16	13	–	–	29
RMS 7–9	–	86	–	–	86	–	4	–	–	4
RMS 10	–	6	–	–	6	–	–	–	–	–
RMS 11–13	88	7	–	–	95	–	–	–	–	–
RMS 14	–	–	144	–	144	–	–	47	–	47
	15,898	525	144	–	16,567	19	21	47	–	87
Total Retail	305,763	45,180	5,073	7,854	363,870	668	1,095	715	213	2,691

Page 44 of 59

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

Note 11: Credit quality of loans and advances to customers (continued)


	Gross drawn exposures					Allowance for expected credit losses
At 31 December 2023	Stage 1 £m	Stage 2 £m	Stage 3 £m	POCI £m	Total £m	Stage 1 £m	Stage 2 £m	Stage 3 £m	POCI £m	Total £m

Commercial Banking
CMS 1–5	12,145	–	–	–	12,145	2	–	–	–	2
CMS 6–10	17,259	121	–	–	17,380	23	–	–	–	23
CMS 11–14	30,366	2,793	–	–	33,159	129	57	–	–	186
CMS 15–18	3,618	4,070	–	–	7,688	63	229	–	–	292
CMS 19	9	809	–	–	818	–	81	–	–	81
CMS 20–23	–	–	2,058	–	2,058	–	–	418	–	418
	63,397	7,793	2,058	–	73,248	217	367	418	–	1,002
Other1	(301)	–	–	–	(301)	–	–	–	–	–
Total loans and advances to customers	368,859	52,973	7,131	7,854	436,817	885	1,462	1,133	213	3,693

1Gross drawn exposures include centralised fair value hedge accounting adjustments.

Note 12: Allowance for expected credit losses

The calculation of the Group’s allowance for expected credit loss allowances requires the Group to make a number of

judgements, assumptions and estimates. These are set out in full in note 19 to the Group’s financial statements for the

year ended 31 December 2023, with the most significant set out below.

The table below analyses total ECL allowance by portfolio, separately identifying the amounts that have been modelled,

those that have been individually assessed and those arising through the application of judgemental adjustments.


				Judgemental adjustments due to:
At 30 June 2024	Modelled ECL £m	Individually assessed £m	Inflationary and interest rate risk £m		Other £m	Total ECL £m

UK mortgages	806	–		23	142	971
Credit cards	679	–		6	15	700
Other Retail	878	–		6	58	942
Commercial Banking	968	322		–	(308)	982
Other	1	–		–	–	1
Total	3,332	322		35	(93)	3,596

At 31 December 2023
UK mortgages	991	–		61	63	1,115
Credit cards	703	–		92	15	810
Other Retail	867	–		32	46	945
Commercial Banking	1,090	340		–	(280)	1,150
Other	1	–		–	–	1
Total	3,652	340		185	(156)	4,021

Page 45 of 59

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

Note 12: Allowance for expected credit losses (continued)

Application of judgement in adjustments to modelled ECL

Impairment models fall within the Group’s model risk framework with model monitoring, periodic validation and back

testing performed on model components, such as probability of default. Limitations in the Group’s impairment models or

data inputs may be identified through the ongoing assessment and validation of the output of the models. In these

circumstances, management applies appropriate judgemental adjustments to the ECL to ensure that the overall provision

adequately reflects all material risks. These adjustments are determined by considering the particular attributes of

exposures which have not been adequately captured by the impairment models and range from changes to model inputs

and parameters, at account level, through to more qualitative post-model adjustments.

During 2022 and 2023 the intensifying inflationary pressures, alongside rising interest rates created further risks not

deemed to be fully captured by ECL models which required judgemental adjustments to be added. Through the first half

of 2024 these risks have largely subsided with inflation back at two per cent and the UK Bank rate now believed to have

peaked. The portfolio has proven resilient to higher rates and inflation. As a result, the judgements held in respect of

inflationary and interest rate risks are significantly reduced to £35 million (31 December 2023: £185 million). Other

judgements continue to be applied for broader data and model limitations, both increasing and decreasing ECL.

Judgemental adjustments due to inflationary and interest rate risk

UK mortgages: £23 million (31 December 2023: £61 million)

The Group’s ECL models for UK mortgages use UK Bank Rate as a driver of predicted defaults and were largely

believed to have captured the stretch on customers due to increased interest rates. However, the combination of

inflationary pressures with sharp increases to interest rates over 2023 were believed to create further risk not potentially

captured by ECL models. Modest increases in new to arrears and defaults emerged in 2023, mainly driven by variable

rate customers, who experienced sudden material increases in their monthly payment. Given interest rates have

stabilised, inflation has reduced and experience through the first half of 2024 has been benign, this risk has reduced. A

lower judgemental uplift in ECL continues to be taken in segments of the mortgages portfolio, either where inflation is

expected to present a more material risk, or where segments within the model do not recognise UK Bank Rate as a

material driver of predicted defaults.

Credit cards: £6 million (31 December 2023: £92 million) and Other Retail: £6 million (31 December 2023:

£32 million)

The Group’s ECL models for credit cards and personal loan portfolios use predictions of wage growth to account for

future affordability stress. As elevated inflation eroded nominal wage growth, adjustments were introduced to the

econometric models to account for real, rather than nominal, income to produce adjusted predicted defaults. This impact

is heavily reduced at 30 June 2024 given the model has moved into a period of low inflation, which naturally reduces the

scale of adjustments in the period. Alongside these portfolio-wide in-model adjustments management had previously

made an additional uplift to ECL for customers with lower income levels and higher indebtedness. This specific post-

model adjustment has been released in the first half of 2024 given the improved environment and no evidence of greater

deterioration in performance of this segment.

Other judgemental adjustments

UK mortgages: £142 million (31 December 2023: £63 million)

These adjustments principally comprise:

Increase in time to repossession: £98 million (31 December 2023: £106 million)

The UK mortgage portfolio currently contains a larger number of customers that have been in default for a longer period

than would typically be expected following pauses in litigation activity both before and during COVID-19. There is a risk

that the probability of possession (PPD), and therefore ECL on these accounts is understated given this component of

the model may not reflect the full impact of customers remaining in default for an extended period. Adjustments for this

risk have been in place for several years, although the approach has been refined in the first half of 2024. The updated

approach continues to target accounts that have been in default for more than 24 months with an arrears balance

increase in the last six months. These accounts now have their PPD increased to a level based on equivalent observed

performance graduated by their time in default. The change in approach has resulted in a similar level of adjustment, but

now provides a mechanism which will see the adjustment naturally release as this backlog reduces.

Page 46 of 59

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

Note 12: Allowance for expected credit losses (continued)

Adjustment for single point of loss model limitation: £46 million (31 December 2023: £nil)

The current UK mortgages ECL model estimates customer level losses using a ‘single point of loss’ (SPOL) calculation,

with predicted timings of defaults and subsequent repossession using average time periods. This simplification is

continually assessed for any potential over or understatement of ECL compared to a more sophisticated ‘multiple points

of loss’ (MPOL) modelling technique. To date, this has not shown any material difference for which an adjustment would

be required. Management have been developing a new ECL model which will address this limitation, anticipated to be

formally adopted later this year. However, the development activity is now suitably progressed to be leveraged in the

ongoing assessment of the scale of the SPOL model simplification. This assessment indicated that the MES update in

the second quarter of the year had increased the impact of the simplification up to a scale that required mitigation

through a judgemental adjustment. This adjustment is expected to be released upon the final adoption of the new ECL

model once it has completed appropriate internal model governance activities.

Credit cards: £15 million (31 December 2023: £15 million) and Other Retail: £58 million (31 December 2023:

£46 million)

These adjustments principally comprise:

Lifetime extension on revolving products: Credit cards: £60 million (31 December 2023: £67 million) and Other Retail:

£10 million (31 December 2023: £10 million)

An adjustment is required to extend the lifetime used for Stage 2 exposures on Retail revolving products from a three-

year modelled lifetime, which reflected the outcome data available when the ECL models were developed, to a more

representative lifetime. Incremental defaults beyond year three are calculated through the extrapolation of the default

trajectory observed throughout the three years and beyond. The judgemental adjustment has reduced slightly for credit

cards in the period following refinement to the discounting methodology applied.

Adjustments to loss given defaults (LGDs): Credit cards: £(50) million (31 December 2023: £(50) million) and Other

Retail: £18 million (31 December 2023: £37 million)

A number of adjustments continue to be made to the loss given default assumptions used within unsecured and motor

credit models. For unsecured portfolios, the adjustments reflect the impact of changes in collection debt sale strategy on

the Group’s LGD models, incorporating up to date customer performance and forward flow debt sale pricing. For UK

Motor Finance, the adjustment captures the latest outlook on used car prices.

Commercial Banking: £(308) million (31 December 2023: £(280) million)

These adjustments principally comprise:

Commercial Real Estate (CRE) price reduction: £53 million (31 December 2023: £65 million)

The material fall in CRE prices seen in late 2022 moved out of the model assumptions used to assess ECL in 2023.

Given the model uses future changes in the metric as a driver of defaults and loss rates there is a continued risk that the

model benefit that arises does not reflect the residual risk caused by the sustained low level of prices still apparent.

Management therefore considers it appropriate to judgementally reinstate the CRE price drop within the ECL model

assumptions given the materially reduced level in CRE prices could still trigger additional defaults. Within this adjustment

management has refined the potential impact on loss rates through capturing updated valuations as well as stressing

valuations on specific sectors where evidence suggests valuations may lag achievable levels, notably in cases of

stressed sale.

Corporate insolvency rates: £(297) million (31 December 2023: £(287) million)

The volume of UK corporate insolvencies has continued to remain well above December 2019 levels, revealing a marked

misalignment between observed UK corporate insolvencies and the Group’s credit performance which has been better

than this. This dislocation gives rise to uncertainty over the drivers of observed trends and the appropriateness of the

Group’s Commercial Banking model response which uses observed UK corporate insolvencies data to anchor future loss

estimates to. Given the Group’s asset quality remains strong with low new defaults, a negative adjustment is applied by

using the long-term average rate. The slightly greater negative adjustment in the period reflects the widening gap

between the increasing industry level and the long-term average rate used.

Page 47 of 59

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

Note 12: Allowance for expected credit losses (continued)

Adjustments for loss given defaults (LGDs): £(90) million (31 December 2023: £(105) million)

Following review and monitoring on the loss given default approach for commercial exposures, ECL requires an

adjustment to mitigate limitations identified in the approach which are causing loss given defaults to be inflated. These

include the benefit from amortisation of exposures relative to collateral values at default and a move to an exposure-

weighted approach being adopted. These temporary adjustments will be addressed through future model development.

Base case and MES economic assumptions

The Group’s base case economic scenario as at 30 June 2024 has been updated to reflect ongoing geopolitical and

economic developments, as the slow reduction of inflationary pressures brings into view a shift to less restrictive

monetary policies globally. The Group’s updated base case scenario has three conditioning assumptions: first, the wars

in Ukraine and the Middle East remain geographically contained; second, the UK’s post-election economic policies retain

the framework of the inflation target and fiscal rules, while allowing for an increase in both current and capital public

spending; and third, the outcome of the US election broadly maintains economic policy continuity, including an

unchanged position for the Federal Reserve.

Based on these assumptions and incorporating the economic data published in the second quarter of 2024, the Group’s

base case scenario is for a gradual expansion of economic activity and a slight rise in the unemployment rate, alongside

modest changes in residential and commercial property prices. Following a gradual reduction in inflationary pressures,

UK Bank Rate is expected to be lowered twice during 2024. Risks around this base case economic view lie in both

directions and are largely captured by the generation of alternative economic scenarios.

The Group has taken into account the latest available information at the reporting date in defining its base case scenario

and generating alternative economic scenarios. The scenarios include forecasts for key variables in the second quarter

of 2024, for which actuals may have since emerged prior to publication. The Group’s base case economic scenario

predated the results of the UK General Election and, as such, information that has become available since the election

has not been included.

The Group’s approach to generating alternative economic scenarios is set out in detail in note 19 in the Group's 2023

annual report on Form 20-F. The Group has taken into account the latest available information at the reporting date in

defining its base case scenario and generating alternative economic scenarios. A small refinement was made to the

Group’s approach during the first half of 2024, with alternative economic scenarios now dispersing from the base case

after the balance sheet date. This is one quarter later than previously adopted reflecting the use of a base case that is

now set closer to the reporting date than at the onset of IFRS 9. As a result, all scenarios include the same forecasted

level for key variables in the second quarter of 2024, for which actuals may have since emerged prior to publication.

For June 2024, the Group continues to judge it appropriate to include a non-modelled severe downside scenario for

Group ECL calculations. The scenario is now generated as a simple average of a fully modelled severe scenario, better

representing shocks to demand, and a scenario with higher paths for UK Bank Rate and CPI inflation, as a

representation of shocks to supply. The combined ‘adjusted’ scenario used in ECL modelling is considered to better

reflect the risks around the Group’s base case view in an economic environment where demand and supply shocks are

more balanced.

Scenarios by year

The key UK economic assumptions made by the Group are shown in the following tables across a number of measures

explained below.

Annual assumptions

Gross domestic product (GDP) growth and Consumer Price Index (CPI) inflation are presented as an annual change,

house price growth and commercial real estate price growth are presented as the growth in the respective indices over

each year. Unemployment rate and UK Bank Rate are averages over the year.

Five-year average

The five-year average reflects the average annual growth rate, or level, over the five-year period. It includes movements

within the current reporting year, such that the position as of 30 June 2024 covers the five years 2024 to 2028. The

inclusion of the reporting year within the five-year period reflects the need to predict variables which remain unpublished

at the reporting date and recognises that credit models utilise both level and annual changes. The use of calendar years

maintains a comparability between the annual assumptions presented.

Page 48 of 59

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

Note 12: Allowance for expected credit losses (continued)


At 30 June 2024	2024 %	2025 %	2026 %	2027 %	2028 %	2024 to 2028 average %

Upside
Gross domestic product growth	1.1	2.3	1.7	1.5	1.4	1.6
Unemployment rate	4.1	3.2	3.0	2.9	2.9	3.2
House price growth	2.2	5.0	7.3	6.0	5.2	5.1
Commercial real estate price growth	2.2	8.7	2.4	2.8	1.2	3.4
UK Bank Rate	5.17	5.30	5.17	5.33	5.55	5.31
CPI inflation	2.5	2.5	2.4	2.7	2.9	2.6

Base case
Gross domestic product growth	0.8	1.2	1.6	1.6	1.6	1.3
Unemployment rate	4.5	4.8	4.8	4.6	4.6	4.7
House price growth	1.2	1.4	1.0	1.4	2.4	1.5
Commercial real estate price growth	(1.6)	1.2	0.0	1.9	1.0	0.5
UK Bank Rate	5.06	4.19	3.63	3.50	3.50	3.98
CPI inflation	2.5	2.5	2.1	2.1	2.2	2.3

Downside
Gross domestic product growth	0.6	(0.5)	0.8	1.5	1.6	0.8
Unemployment rate	4.9	6.9	7.5	7.4	7.2	6.7
House price growth	0.6	(1.8)	(6.5)	(5.4)	(2.3)	(3.1)
Commercial real estate price growth	(4.7)	(6.7)	(4.1)	(0.8)	(1.3)	(3.5)
UK Bank Rate	4.97	2.77	1.38	0.89	0.63	2.13
CPI inflation	2.5	2.4	1.8	1.4	1.2	1.9

Severe downside
Gross domestic product growth	0.1	(2.2)	0.4	1.2	1.5	0.2
Unemployment rate	5.5	9.4	10.2	10.1	9.8	9.0
House price growth	(0.7)	(4.8)	(13.9)	(11.8)	(7.6)	(7.9)
Commercial real estate price growth	(9.1)	(15.1)	(8.6)	(5.3)	(4.7)	(8.6)
UK Bank Rate – modelled	4.81	1.12	0.16	0.05	0.02	1.23
UK Bank Rate – adjusted1	5.09	3.22	2.33	2.02	1.79	2.89
CPI inflation – modelled	2.6	2.4	1.3	0.5	0.1	1.4
CPI inflation – adjusted1	2.9	3.2	1.6	0.9	1.0	1.9

Probability-weighted
Gross domestic product growth	0.8	0.7	1.3	1.5	1.5	1.2
Unemployment rate	4.6	5.4	5.6	5.5	5.4	5.3
House price growth	1.1	0.9	(0.9)	(0.6)	0.8	0.3
Commercial real estate price growth	(2.1)	(0.5)	(1.3)	0.6	(0.2)	(0.7)
UK Bank Rate – modelled	5.04	3.79	3.07	2.92	2.90	3.55
UK Bank Rate – adjusted1	5.07	4.00	3.29	3.12	3.08	3.71
CPI inflation – modelled	2.5	2.5	2.1	1.9	1.9	2.2
CPI inflation – adjusted1	2.6	2.6	2.1	1.9	2.0	2.2

1The adjustment to UK Bank Rate and CPI inflation in the severe downside is considered to better reflect the risks to the Group’s base

case view in an economic environment where the risks of supply and demand shocks are seen as more balanced.

Page 49 of 59

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

Note 12: Allowance for expected credit losses (continued)


At 31 December 2023	2023 %	2024 %	2025 %	2026 %	2027 %	2023 to 2027 average %

Upside
Gross domestic product growth	0.3	1.5	1.7	1.7	1.9	1.4
Unemployment rate	4.0	3.3	3.1	3.1	3.1	3.3
House price growth	1.9	0.8	6.9	7.2	6.8	4.7
Commercial real estate price growth	(3.9)	9.0	3.8	1.3	1.3	2.2
UK Bank Rate	4.94	5.72	5.61	5.38	5.18	5.37
CPI inflation	7.3	2.7	3.1	3.2	3.1	3.9

Base case
Gross domestic product growth	0.3	0.5	1.2	1.7	1.9	1.1
Unemployment rate	4.2	4.9	5.2	5.2	5.0	4.9
House price growth	1.4	(2.2)	0.5	1.6	3.5	1.0
Commercial real estate price growth	(5.1)	(0.2)	0.1	0.0	0.8	(0.9)
UK Bank Rate	4.94	4.88	4.00	3.50	3.06	4.08
CPI inflation	7.3	2.7	2.9	2.5	2.2	3.5

Downside
Gross domestic product growth	0.2	(1.0)	(0.1)	1.5	2.0	0.5
Unemployment rate	4.3	6.5	7.8	7.9	7.6	6.8
House price growth	1.3	(4.5)	(6.0)	(5.6)	(1.7)	(3.4)
Commercial real estate price growth	(6.0)	(8.7)	(4.0)	(2.1)	(1.2)	(4.4)
UK Bank Rate	4.94	3.95	1.96	1.13	0.55	2.51
CPI inflation	7.3	2.8	2.7	1.8	1.1	3.2

Severe downside
Gross domestic product growth	0.1	(2.3)	(0.5)	1.3	1.8	0.1
Unemployment rate	4.5	8.7	10.4	10.5	10.1	8.8
House price growth	0.6	(7.6)	(13.3)	(12.7)	(7.5)	(8.2)
Commercial real estate price growth	(7.7)	(19.5)	(10.6)	(7.7)	(5.2)	(10.3)
UK Bank Rate – modelled	4.94	2.75	0.49	0.13	0.03	1.67
UK Bank Rate – adjusted1	4.94	6.56	4.56	3.63	3.13	4.56
CPI inflation – modelled	7.3	2.7	2.2	0.9	(0.2)	2.6
CPI inflation – adjusted1	7.6	7.5	3.5	1.3	1.0	4.2

Probability-weighted
Gross domestic product growth	0.3	0.1	0.8	1.6	1.9	0.9
Unemployment rate	4.2	5.3	5.9	5.9	5.7	5.4
House price growth	1.4	(2.5)	(0.9)	(0.3)	1.8	(0.1)
Commercial real estate price growth	(5.3)	(1.9)	(1.1)	(1.0)	(0.2)	(1.9)
UK Bank Rate – modelled	4.94	4.64	3.52	3.02	2.64	3.75
UK Bank Rate – adjusted1	4.94	5.02	3.93	3.37	2.95	4.04
CPI inflation – modelled	7.3	2.7	2.8	2.3	1.9	3.4
CPI inflation – adjusted1	7.4	3.2	3.0	2.4	2.0	3.6

1The adjustment to UK Bank Rate and CPI inflation in the severe downside was considered to better reflect the risks to the Group’s

base case view in an economic environment where supply shocks were the principal concern.

Page 50 of 59

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

Note 12: Allowance for expected credit losses (continued)

Base case scenario by quarter

Gross domestic product growth is presented quarter-on-quarter. House price growth, commercial real estate price growth

and CPI inflation are presented year-on-year, i.e. from the equivalent quarter in the previous year. Unemployment rate

and UK Bank Rate are presented as at the end of each quarter.


At 30 June 2024	First quarter 2024 %	Second quarter 2024 %	Third quarter 2024 %	Fourth quarter 2024 %	First quarter 2025 %	Second quarter 2025 %	Third quarter 2025 %	Fourth quarter 2025 %

Gross domestic product growth	0.6	0.4	0.3	0.2	0.3	0.3	0.4	0.4
Unemployment rate	4.3	4.5	4.6	4.7	4.8	4.9	4.9	4.8
House price growth	0.4	1.0	3.8	1.2	0.9	1.3	1.3	1.4
Commercial real estate price growth	(5.3)	(5.3)	(3.5)	(1.6)	(0.9)	0.2	(0.2)	1.2
UK Bank Rate	5.25	5.25	5.00	4.75	4.50	4.25	4.00	4.00
CPI inflation	3.5	2.1	2.0	2.5	2.2	2.7	2.6	2.4


At 31 December 2023	First quarter 2023 %	Second quarter 2023 %	Third quarter 2023 %	Fourth quarter 2023 %	First quarter 2024 %	Second quarter 2024 %	Third quarter 2024 %	Fourth quarter 2024 %

Gross domestic product growth	0.3	0.0	(0.1)	0.0	0.1	0.2	0.3	0.3
Unemployment rate	3.9	4.2	4.2	4.3	4.5	4.8	5.0	5.2
House price growth	1.6	(2.6)	(4.5)	1.4	(1.1)	(1.5)	0.5	(2.2)
Commercial real estate price growth	(18.8)	(21.2)	(18.2)	(5.1)	(4.1)	(3.8)	(2.2)	(0.2)
UK Bank Rate	4.25	5.00	5.25	5.25	5.25	5.00	4.75	4.50
CPI inflation	10.2	8.4	6.7	4.0	3.8	2.1	2.3	2.8

Page 51 of 59

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

Note 12: Allowance for expected credit losses (continued)

ECL sensitivity to economic assumptions

The table below shows the Group’s ECL for the probability-weighted, upside, base case, downside and severe downside

scenarios, with the severe downside scenario incorporating adjustments made to CPI inflation and UK Bank Rate paths.

The stage allocation for an asset is based on the overall scenario probability-weighted PD and hence the staging of

assets is constant across all the scenarios. In each economic scenario the ECL for individual assessments is held

constant reflecting the basis on which they are evaluated. Judgemental adjustments applied through changes to model

inputs or parameters, or more qualitative post model adjustments, are apportioned across the scenarios in proportion to

modelled ECL where this better reflects the sensitivity of these adjustments to each scenario. The probability-weighted

view shows the extent to which a higher ECL allowance has been recognised to take account of multiple economic

scenarios relative to the base case; the uplift being £464 million for 30 June 2024 and £673 million at 31 December

2023.


At 30 June 2024	Probability- weighted £m	Upside £m	Base case £m	Downside £m	Severe downside £m

UK mortgages	971	387	658	1,190	3,004
Credit cards	700	583	676	772	903
Other Retail	942	855	915	990	1,139
Commercial Banking	982	735	882	1,122	1,606
Other	1	2	1	1	1
ECL allowance	3,596	2,562	3,132	4,075	6,653

At 31 December 2023
UK mortgages	1,115	395	670	1,155	4,485
Credit cards	810	600	771	918	1,235
Other Retail	945	850	920	981	1,200
Commercial Banking	1,150	780	986	1,342	2,179
Other	1	1	1	1	1
ECL allowance	4,021	2,626	3,348	4,397	9,100

The sensitivity of ECL to isolated changes in the UK unemployment rate and House Price Index (HPI) has been

assessed on a univariate basis. Although such changes would not be observed in isolation, as economic indicators tend

to be correlated in a coherent scenario, this gives insight into the sensitivity of the Group’s ECL to gradual changes in

these two critical economic factors. The assessment has been made against the base case with staging held flat to the

reported probability-weighted view and is assessed through the direct impact on modelled ECL and therefore only

includes judgemental adjustments applied within the model.

The table below shows the impact on the Group’s ECL resulting from a 1 percentage point (pp) increase or decrease in

the UK unemployment rate. The increase or decrease is presented based on the adjustment phased evenly over the first

10 quarters of the base case scenario. A more immediate increase or decrease would drive a more material ECL impact

as it would be fully reflected in both 12-month and lifetime probability of defaults.


	At 30 June 2024			At 31 December 2023
1pp increase in unemployment £m		1pp decrease in unemployment £m		1pp increase in unemployment £m	1pp decrease in unemployment £m

UK mortgages	22		(17)	33	(32)
Credit cards	34		(34)	38	(38)
Other Retail	16		(16)	19	(19)
Commercial Banking	71		(66)	87	(81)
ECL impact	143		(133)	177	(170)

Page 52 of 59

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

Note 12: Allowance for expected credit losses (continued)

The table below shows the impact on the Group’s ECL in respect of UK mortgages resulting from an increase or

decrease in loss given default for a 10 percentage point (pp) increase or decrease in the UK HPI. The increase or

decrease is presented based on the adjustment phased evenly over the first 10 quarters of the base case scenario.


	At 30 June 2024		At 31 December 2023
	10pp increase in HPI £m	10pp decrease in HPI £m	10pp increase in HPI £m	10pp decrease in HPI £m

ECL impact	(164)	245	(201)	305

Note 13: Debt securities in issue


	At 30 June 2024			At 31 December 2023
	At fair value through profit or loss £m	At amortised cost £m	Total £m	At fair value through profit or loss £m	At amortised cost £m	Total £m

Senior unsecured notes issued	4,886	23,685	28,571	5,232	22,642	27,874
Covered bonds	–	11,849	11,849	–	14,318	14,318
Commercial paper	–	6,908	6,908	–	8,182	8,182
Securitisation notes	23	4,965	4,988	23	4,211	4,234
Certificates of deposit issued	–	1,318	1,318	–	3,096	3,096
	4,909	48,725	53,634	5,255	52,449	57,704

Covered bonds and securitisation programmes

At 30 June 2024, the bonds held by external parties and those held internally, were secured on certain loans and

advances to customers amounting to £28,529 million (31 December 2023: £27,019 million) which have been assigned to

bankruptcy remote limited liability partnerships to provide security for issues of covered bonds by the Group. The Group

retains all of the risks and rewards associated with these loans and the partnerships are consolidated fully with the loans

retained on the Group’s balance sheet and the related covered bonds in issue included within debt securities in issue at

amortised cost.

At 30 June 2024, the Group’s securitisation notes in issue held by external parties includes £23 million at fair value

through profit or loss (31 December 2023: £23 million). Those notes held internally, are secured on loans and advances

to customers amounting to £27,945 million (31 December 2023: £30,190 million), the majority of which have been sold

by subsidiary companies to bankruptcy remote structured entities. As the structured entities are funded by the issue of

debt on terms whereby the majority of the risks and rewards of the portfolio are retained by the subsidiary, the structured

entities are consolidated fully and all of these loans are retained on the Group’s balance sheet, with the related notes in

issue included within debt securities in issue at amortised cost.

Cash deposits of £3,955 million (31 December 2023: £3,678 million) which support the debt securities issued by the

structured entities, the term advances related to covered bonds and other legal obligations, are held by the Group.

Page 53 of 59

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

Note 14: Provisions


Provisions for financial commitments and guarantees1 £m		Regulatory and legal provisions £m	Other £m	Total £m

At 1 January 2024	314	1,014	588	1,916
Exchange and other adjustments	(1)	–	(2)	(3)
Provisions applied	–	(206)	(254)	(460)
(Credit) charge for the period	(40)	90	150	200
At 30 June 2024	273	898	482	1,653

1In respect of loans and advances to customers.

Regulatory and legal provisions

In the course of its business, the Group is engaged on a regular basis in discussions with UK and overseas regulators

and other governmental authorities on a range of matters, including legal and regulatory reviews and, from time to time,

enforcement investigations (including in relation to compliance with applicable laws and regulations, such as those

relating to prudential regulation, consumer protection, investment advice, business conduct, systems and controls,

environmental, competition/anti-trust, tax, anti-bribery, anti-money laundering and sanctions). Any matters discussed or

identified during such discussions and inquiries may result in, among other things, further inquiry or investigation, other

action being taken by governmental and/or regulatory authorities, increased costs being incurred by the Group,

remediation of systems and controls, public or private censure, restriction of the Group’s business activities and/or fines.

The Group also receives complaints in connection with its past conduct and claims brought by or on behalf of current and

former employees, customers (including their appointed representatives), investors and other third parties and is subject

to legal proceedings and other legal actions from time to time. Any events or circumstances disclosed could have a

material adverse effect on the Group’s financial position, operations or cash flows. Provisions are held where the Group

can reliably estimate a probable outflow of economic resources. The ultimate liability of the Group may be significantly

more, or less, than the amount of any provision recognised. If the Group is unable to determine a reliable estimate, a

contingent liability is disclosed. The recognition of a provision does not amount to an admission of liability or wrongdoing

on the part of the Group. During the half-year to 30 June 2024 the Group charged a further £90 million in respect of legal

actions and other regulatory matters and the unutilised balance at 30 June 2024 was £898 million (31 December 2023:

£1,014 million). The most significant items are outlined below.

Motor commission review

The Group recognised a £450 million provision in the fourth quarter of 2023 for the potential impact of the FCA review

into historical motor finance commission arrangements and sales announced in January 2024.

As disclosed in previous periods, the Group continues to receive a number of court claims and complaints in respect of

motor finance commissions and is actively engaging with the FOS in its assessment of these complaints. On 10 January

2024, the FOS issued its Final Decision on a complaint relating to the Group, as well as decisions relating to other

industry participants. On 11 January 2024, the FCA announced a section 166 review of historical motor finance

commission arrangements and sales and plans to communicate a decision on next steps in the third quarter of 2024 on

the basis of the evidence collated in the review. The FCA has indicated that such steps could include establishing an

industry-wide consumer redress scheme and/or applying to the Financial Markets Test Case Scheme, to help resolve any

contested legal issues of general importance.

Following the FCA Motor Market Review in March 2019, the FCA issued a policy statement in July 2020 prohibiting the

use of discretionary commission models from 28 January 2021, which the Group adhered to. The Group continues to

believe that its historical practices were compliant with the law and regulations in place at that time.

Page 54 of 59

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

Note 14: Provisions (continued)

As noted above, in response to both the FOS decisions and the FCA announcement the Group recognised a charge of

£450 million in the fourth quarter of 2023. This includes estimates for operational and legal costs, including litigation

costs, together with estimates for potential awards, based on various scenarios using a range of assumptions, including

for example, commission models, commission rates, applicable time periods (between 2007 and 2021), response rates

and uphold rates. Costs and awards could arise in the event that the FCA concludes there has been misconduct and

customer loss that requires remediation, or from adverse litigation decisions. However, while the FCA review is

progressing there is significant uncertainty as to the extent of misconduct and customer loss, if any, the nature and extent

of any remediation action, if required, and its timing. The ultimate financial impact could therefore materially differ from

the amount provided, both higher or lower. The Group welcomes the FCA intervention through an independent section

166 review and is engaging with the FCA as part of the review.

HBOS Reading – review

The Group continues to apply the recommendations from Sir Ross Cranston’s review, issued in December 2019,

including a reassessment of direct and consequential losses by an independent panel (the Foskett Panel), an extension

of debt relief and a wider definition of de facto directors. The Foskett Panel’s full scope and methodology was published

on 7 July 2020. The Foskett Panel’s stated objective is to consider cases via a non-legalistic and fair process and to

make its decisions in a generous, fair and common sense manner, assessing claims against an expanded definition of

the fraud and on a lower evidential basis.

In June 2022, the Foskett Panel announced an alternative option, in the form of a fixed sum award which could be

accepted as an alternative to participation in the full re-review process, to support earlier resolution of claims for those

deemed by the Foskett Panel to be victims of the fraud. Over 95 per cent of the population have now had decisions via

this new process. The provision is unchanged in the first half of 2024. Notwithstanding the settled claims and the

increase in outcomes which builds confidence in the full estimated cost, uncertainties remain and the final outcome could

be different from the current provision once the re-review is concluded by the Foskett Panel. There is no confirmed

timeline for the completion of the Foskett Panel re-review process nor the review by Dame Linda Dobbs. The Group is

committed to implementing Sir Ross Cranston’s recommendations in full.

Payment protection insurance (PPI)

The Group has incurred costs for PPI over a number of years totalling £21,906 million. The Group continues to challenge

PPI litigation cases, with mainly legal fees and operational costs associated with litigation activity recognised within

regulatory and legal provisions.

Other

The Group carries provisions of £144 million (31 December 2023: £137 million) in respect of dilapidations, rent reviews

and other property-related matters.

Provisions are also made for staff and other costs related to Group restructuring initiatives at the point at which the

Group becomes committed to the expenditure; at 30 June 2024 provisions of £198 million (31 December 2023:

£240 million) were held.

The Group carries provisions of £33 million (31 December 2023: £46 million) for indemnities and other matters relating to

legacy business disposals in prior years. Whilst there remains significant uncertainty as to the timing of the utilisation of

the provisions, the Group expects the majority of the remaining provisions to have been utilised by 31 December 2028.

Note 15: Dividends on ordinary shares

The Bank paid dividends of £490 million on 25 March 2024 and £1,650 million on 16 May 2024 (£1,900 million was paid

during the half-year to 30 June 2023).

Page 55 of 59

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

Note 16: Related party transactions

Balances and transactions with fellow Lloyds Banking Group undertakings

The Bank and its subsidiaries have balances due to and from the Bank’s parent company, Lloyds Banking Group plc, and

fellow Group undertakings. These are included on the balance sheet as follows:


	At 30 Jun 2024 £m	At 31 Dec 2023 £m

Assets, included within:
Financial assets at fair value through profit or loss	–	1
Derivative financial instruments	1,149	1,137
Financial assets at amortised cost: due from fellow Lloyds Banking Group undertakings	789	840

Liabilities, included within:
Due to fellow Lloyds Banking Group undertakings	5,168	2,932
Derivative financial instruments	892	953
Debt securities in issue at amortised cost	19,922	18,131
Subordinated liabilities	6,926	6,919

During the half-year to 30 June 2024 the Group earned £7 million (half-year to 30 June 2023: £7 million) of interest

income and incurred £684 million (half-year to 30 June 2023: £475 million) of interest expense and recognised net fee

and commission expense of £367 million (half year to 30 June 2023: £46 million) on balances and transactions with

Lloyds Banking Group plc and fellow Group undertakings. The increase in net fee and commission expense is primarily

due to the impact of changes to commission arrangements with Scottish Widows.

Other related party transactions

Other related party transactions for the half-year to 30 June 2024 are similar in nature to those for the year ended

31 December 2023.

Note 17: Contingent liabilities, commitments and guarantees

Contingent liabilities, commitments and guarantees arising from the banking business

At 30 June 2024 contingent liabilities, such as performance bonds and letters of credit, arising from the banking business

were £2,606 million (31 December 2023: £2,755 million).

The contingent liabilities of the Group arise in the normal course of its banking business and it is not practicable to

quantify their future financial effect. Total commitments and guarantees were £130,744 million (31 December 2023:

£122,733 million), of which in respect of undrawn formal standby facilities, credit lines and other commitments to lend,

£60,638 million (31 December 2023: £53,722 million) was irrevocable.

Interchange fees

With respect to multi-lateral interchange fees (MIFs), the Lloyds Banking Group is not a party in the ongoing or

threatened litigation which involves the card schemes Visa and Mastercard (as described below). However, the Group is

a member/licensee of Visa and Mastercard and other card schemes. The litigation in question is as follows:

•Litigation brought by or on behalf of retailers against both Visa and Mastercard in the English Courts, in which retailers

are seeking damages on grounds that Visa and Mastercard’s MIFs breached competition law (this includes a judgment

of the Supreme Court in June 2020 upholding the Court of Appeal’s finding in 2018 that certain historic interchange

arrangements of Mastercard and Visa infringed competition law)

•Litigation brought on behalf of UK consumers in the English Courts against Mastercard

Page 56 of 59

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

Note 17: Contingent liabilities, commitments and guarantees (continued)

Any impact on the Group of the litigation against Visa and Mastercard remains uncertain at this time, such that it is not

practicable for the Group to provide an estimate of any potential financial effect. Insofar as Visa is required to pay

damages to retailers for interchange fees set prior to June 2016, contractual arrangements to allocate liability have been

agreed between various UK banks (including the Lloyds Banking Group) and Visa Inc, as part of Visa Inc’s acquisition of

Visa Europe in 2016. These arrangements cap the maximum amount of liability to which the Lloyds Banking Group may

be subject and this cap is set at the cash consideration received by the Lloyds Banking Group for the sale of its stake in

Visa Europe to Visa Inc in 2016. In 2016, the Lloyds Banking Group received Visa preference shares as part of the

consideration for the sale of its shares in Visa Europe. A release assessment is carried out by Visa on certain

anniversaries of the sale (in line with the Visa Europe sale documentation) and as a result, some Visa preference shares

may be converted into Visa Inc Class A common stock from time to time. Any such release and any subsequent sale of

Visa common stock does not impact the contingent liability.

LIBOR and other trading rates

Certain Lloyds Banking Group companies, together with other panel banks, have been named as defendants in ongoing

private lawsuits, including purported class action suits, in the US in connection with their roles as panel banks

contributing to the setting of US Dollar, Japanese Yen and Sterling London Interbank Offered Rate.

Certain Lloyds Banking Group companies are also named as defendants in (i) UK-based claims, and (ii) two Dutch class

actions, raising LIBOR manipulation allegations. A number of claims against the Lloyds Banking Group in the UK relating

to the alleged mis-sale of interest rate hedging products also include allegations of LIBOR manipulation.

It is currently not possible to predict the scope and ultimate outcome on the Lloyds Banking Group of any private lawsuits

or ongoing related challenges to the interpretation or validity of any of the Lloyds Banking Group’s contractual

arrangements, including their timing and scale. As such, it is not practicable to provide an estimate of any potential

financial effect.

Tax authorities

The Group has an open matter in relation to a claim for group relief of losses incurred in its former Irish banking

subsidiary, which ceased trading on 31 December 2010. In 2013, HMRC informed the Group that its interpretation of the

UK rules means that the group relief is not available. In 2020, HMRC concluded its enquiry into the matter and issued a

closure notice. The Group’s interpretation of the UK rules has not changed and hence it appealed to the First Tier Tax

Tribunal, with a hearing having taken place in May 2023. If the final determination of the matter by the judicial process is

that HMRC’s position is correct, management believes that this would result in an increase in current tax liabilities of

approximately £830 million (including interest) and a reduction in the Group’s deferred tax asset of approximately

£275 million. The Group, following conclusion of the hearing and having taken appropriate advice, does not consider that

this is a case where additional tax will ultimately fall due.

There are a number of other open matters on which the Group is in discussions with HMRC (including the tax treatment

of certain costs arising from the divestment of TSB Banking Group plc), none of which is expected to have a material

impact on the financial position of the Group.

FCA investigation into the Group’s anti-money laundering control framework

As previously disclosed, the FCA has opened an investigation into the Group’s compliance with domestic UK money

laundering regulations and the FCA’s rules and Principles for Businesses, with a focus on aspects of its anti-money

laundering control framework. The Group continues to co-operate with the investigation. It is not currently possible to

estimate the potential financial impact to the Group.

Arena litigation claims

The Group is facing claims alleging breach of duty and/or mandate in the context of an underlying external fraud matter

involving Arena Television. The Group intends to contest the claims. It is not possible to estimate with certainty the

potential financial impact (if any) to the Group.

Page 57 of 59

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

Note 17: Contingent liabilities, commitments and guarantees (continued)

Other legal actions and regulatory matters

In addition, in the course of its business the Group is subject to other complaints and threatened or actual legal

proceedings (including class or group action claims) brought by or on behalf of current or former employees, customers

(including their appointed representatives), investors or other third parties, as well as legal and regulatory reviews,

enquiries and examinations, requests for information, audits, challenges, investigations and enforcement actions, which

could relate to a number of issues. This includes matters in relation to compliance with applicable laws and regulations,

such as those relating to prudential regulation, consumer protection, investment advice, business conduct, systems and

controls, environmental, competition/anti-trust, tax, anti-bribery, anti-money laundering and sanctions, some of which may

be beyond the Group’s control, both in the UK and overseas. Where material, such matters are periodically reassessed,

with the assistance of external professional advisers where appropriate, to determine the likelihood of the Group

incurring a liability. The Group does not currently expect the final outcome of any such case to have a material adverse

effect on its financial position, operations or cash flows. Where there is a contingent liability related to an existing

provision the relevant disclosures are included within note 14.

Page 58 of 59

SIGNATURE

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 authorised.


	LLOYDS BANK plc

	By:		/s/ William Chalmers
	Name:		William Chalmers
	Title:		Chief Financial Officer
	Dated:		25 July 2024

Page 59 of 59

Lloyds Bank (LLOY) 6-K2024 Q2 Current report (foreign)