Summary of Group results
OUR STRATEGY
The strategy for the enlarged Group remains to grow the business through developing long-term customer relationships and building our customer franchise. All our businesses are focused on extending the reach and depth of our customer relationships, whilst enhancing product capabilities to build competitive advantage. The prudent Lloyds TSB ‘through the cycle’ approach to risk will apply to the enlarged Group and will be increasingly important as we strive to improve our processing efficiency and make our working capital work harder. Executing the strategy effectively will only be possible if we manage our most valuable resource, our people, well. By successfully delivering these objectives we are likely to achieve our vision of being the best financial services provider in the United Kingdom.
The focus for the Group remains within the UK and our position was significantly strengthened through the acquisition of HBOS in January 2009. The effective integration of the two businesses will be a significant challenge over the next few years, but the combination of the two businesses provides a real opportunity to create the UK’s leading financial services organisation.
During 2008 there were three primary operating divisions: UK Retail Banking; Insurance and Investments; and Wholesale and International Banking. The key product markets in which they participate and relative contribution to the Group is presented below and a more detailed analysis of their strategy, business and performance is outlined within the Business Review. Following the acquisition of HBOS these divisions will be restructured with elements from some existing businesses coming together to form another division. The new Wealth and International division has been created to focus on Wealth Management, Asset Management and International Banking.
Key HIGHLIGHTS
Statutory profit before tax reduced by 80 per cent to £807 million. A resilient underlying business performance was offset by the impact of market dislocation and adverse volatility relating to the Group’s insurance businesses.
A resilient business performance. Profit before tax, on a continuing businesses basis, totalled £2,426 million, a decrease of 35 per cent which reflected the impact of £1,270 million of market dislocation and higher impairment levels.
Robust income performance. Income, excluding market dislocation, grew by nine per cent reflecting strong revenue growth from the Group’s relationship banking businesses. On a statutory basis, income was eight per cent lower at £9,872 million.
Excellent cost management. The Group’s cost:income ratio, excluding market dislocation, improved by 1.1 percentage points to 47.0 per cent.
In a difficult economic environment, asset quality remains satisfactory. Impairment losses increased by 68 per cent to £3,012 million, reflecting the impact of market dislocation, the slowdown in the UK economic environment and the impact of the falling house price index.
Strong liquidity and funding position maintained throughout the recent turbulence in global financial markets.
Robust capital ratios. Adjusting the year end capital ratios for the Government’s recapitalisation of UK banks, completed in January 2009, and the estimated impact of the acquisition of HBOS, the enlarged Lloyds Banking Group’s pro forma core tier 1 capital ratio stands at 6.4 per cent, the tier 1 ratio at 9.8 per cent and the total capital ratio at 12.5 per cent.
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