Interim Management Statement

RESULTS FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2014

Further strategic progress; supporting and benefiting from the UK economic recovery
· Lending growth in key customer segments, and deposit growth in relationship brands
· Further TSB divestment of 11.5 per cent in the third quarter with shareholding now reduced to 50 per cent
· Run-off assets reduced by £10.6 billion to £22.7 billion and international presence reduced to seven countries
· Capital position further strengthened: fully loaded CET1 ratio of 12.0 per cent (30 June 2014: 11.1 per cent fully loaded; 31 Dec 2013: 10.3 per cent pro forma) and transitional total capital ratio of 21.0 per cent
· Fully loaded Basel III leverage ratio of 4.7 per cent (30 June 2014: 4.5 per cent fully loaded; 31 Dec 2013: 3.8 per cent pro forma)

Substantial increase in underlying profit and returns
· Underlying profit increased 35 per cent to £5,974 million
· Return on risk-weighted assets increased to 3.05 per cent (first nine months of 2013: 2.01 per cent)
· Income of £13,898 million, up 3 per cent excluding St. James's Place effects in 2013
- Net interest income up 11 per cent, driven by margin improvement to 2.44 per cent
- Other income down 8 per cent given disposals and a challenging operating environment
· Underlying costs down 6 per cent and down 3 per cent to £6,907 million including FSCS timing effects
· Impairment charge reduced 59 per cent to £1,017 million; asset quality ratio improved 36 basis points to 0.27 per cent

Statutory profit before tax of £1,614 million; tangible net asset value per share of 51.8p
· Statutory profit before tax of £1,614 million (first nine months of 2013: £1,694 million)
· Additional £900 million provision for PPI in the third quarter
· Statutory profit after tax of £1,392 million (first nine months of 2013: £280 million)
· Tangible net asset value per share increased to 51.8p (30 June 2014: 49.4p, 31 Dec 2013: 48.5p), driven by underlying profitability

Confidence in delivering strong and sustainable returns
· 2014 full year asset quality ratio now expected to be around 30 basis points; guidance previously around 35 basis points for the full year
· Other guidance reconfirmed
- 2014 full year net interest margin expected to be around 2.45 per cent
- Run-off assets expected to be less than £20 billion by the end of 2014
- Full year statutory profit to be significantly ahead of first half

Dividend
· Ongoing discussions with the PRA regarding the resumption of dividends

STRATEGIC UPDATE

KEY MESSAGES
· We are a low cost, low risk, customer focused, UK retail and commercial bank
· The strategy laid out in 2011 is now substantially complete. We have reshaped the Group, strengthened the balance sheet and delivered Simplification savings which have enabled reinvestment for growth
· Customers remain at the heart of our strategy. We will deliver the best customer experience by strengthening our multi brand, multi channel business model
· We will transform our digital capability, providing customers with simpler, seamless interactions across online, mobile and branches, and improving the efficiency of products and services
· We will sustain extensive customer reach through our branch network and telephony, adapting capability to service effectively more complex customer requirements
· The Group is well positioned for sustainable growth. We intend to grow our main retail businesses in line with market, and generate above market growth in areas where we are underrepresented, drawing on Group strengths to deliver competitive advantage
· We will deliver further improvements to our market leading cost position, a source of sustainable competitive advantage for the Group, delivering better value for customers and superior, sustainable returns for our shareholders
· We are issuing new medium-term targets for efficiency, risk and returns:
- Cost:income ratio to exit 2017 at around 45 per cent; targeting reductions in each year
- Simplification run-rate savings of £1 billion per annum by the end of 2017
- Asset quality ratio of around 40 basis points through the economic cycle, and lower than this over the next three years
- Sustainable returns on required equity of around 13.5-15 per cent by the end of the strategic plan period and through the economic cycle
· With the actions we are taking and our differentiated business model and strategic capabilities, the Group will become the best bank for customers, thereby enabling the delivery of superior, sustainable returns to shareholders

Deutsche Bank Buy 0.00 95.00 95.00 Reiterates

Investec Buy 73.51 86.00 86.00 Reiterates

Espirito Santo Execution Noble Sell 73.51 70.00 70.00 Reiterate

Numis Buy 73.76 97.00 97.00 Reiterates

"Magic" 100p in sight for Lloyds?

The recovery of Lloyds Banking Group (LLOY) seems to be on track with the release of better-than-expected third-quarter results. A further cut to its work force by 10% should slash costs, a move which some reckon could make it one of the most efficient banks in Europe.
Underlying profit rose by 41% to £2.2 billion in the third quarter, thanks to a boost to net interest income (up 10% to just over £3 billion), lower impairments and slight reduction to costs. Excluding the impact of its disposal of St. James's Place last year, profit rose by over a half in the first nine months of the year. Despite a larger-than-expected £900 million PPI hit in the third quarter, statutory pre-tax profit rose to £751 million from a £440 million loss last year. Net tangible asset value per share grew to 51.8p.

"No surprises the markets did not react well to the miss-selling front with PPI totalling another £900 million," said James Abbott, a trader at Accendo Market. "However, once these cobwebs are all out the cupboard what will hold this company back?"

Deutsche Bank Buy 73.50 73.50 95.00 97.00 Reiterates

(Reuters) - British bank Lloyds has taken another 900 million pound charge to compensate customers mis-sold loan insurance, delivering a further blow to the lender which only narrowly passed European health checks on the sector's finances.

The new charge announced on Tuesday took the bank's total cost to cover the mis-selling of payment protection insurance (PPI) to 11.3 billion pounds, more than any other bank and close to half of the total bill for the industry.

The policies were meant to cover repayments if customers fell ill or lost their jobs but were often sold to people who did not need them or would be ineligible to claim.

Analysts at Citi said they expected Lloyds Banking Group Plc to set aside another 1 billion pounds for PPI compensation next year and Lloyds Finance Director George Culmer told reporters on a conference call he could not rule out further increases.

Culmer said complaints about PPI had risen by "about 2 or 3 percent" in the third quarter from the previous three months, although he said they were still down 18 percent on the year.

Lloyds said that, if it were to see a similar level of complaints in the fourth quarter as in the third, the required provision would increase again by 600 million pounds. However, Culmer said complaints had fallen by about 8 percent in the first three weeks of October.

"It's certainly reassuring to see that it's started to fall again," he said.

The new mis-selling charge comes two days after the bank, 25 percent-owned by the British government, only narrowly passed a test set by regulators to assess whether banks have enough capital to weather another economic crash.

Lloyds, which was the worst performing British bank in the European stress tests, faces a further test by the Bank of England (BoE) in December which will measure its resilience against scenarios including a 35 percent decline in house prices and a rise in interest rates to 6 percent.

The result of that test will be key to whether the bank is cleared by Britain's financial regulator to pay its first dividend since it was rescued by a 20.5 billion pound government bailout during the financial crisis of 2007-2009.

"Whilst we do not see failure as having capital-raising implications, we no longer expect Lloyds to pay a 2014 dividend," said Macquarie analyst Ed Firth.

Culmer said he expected Lloyds to pass the BoE stress test and remained confident the bank would be cleared to pay a "modest" dividend for 2014.

"The discussions look at earnings, they look at capital and they look at stress tests. We consider ourselves to be in a good position with regards those three criteria as we go into those discussions," Culmer said.

Exane BNP Paribas Outperform 76.38 - 115.00 Reiterates

Nice to see 16 bob again!

Mitzy if your on and don't mind can you change the chart in the header to a monthly one please?

another day in the 16 bob range, along with barc nicely up.,.

Thanks Mitzy.

Cheers Harry.

Yep thanks Mitzy.

LLOYDS BANKING GROUP EXCEEDS PRA STRESS TEST THRESHOLD

UKFI Announce Trading Plan in Lloyds Banking Group

Intention to sell shares in Lloyds Banking Group plc through a trading plan

UKFI today announces that it intends to sell part of Her Majesty's Treasury's ("HMT") shareholding in Lloyds Banking Group plc (the "Company") over the next six months through a pre-arranged trading plan that will be managed by Morgan Stanley & Co. International plc ("Morgan Stanley").

Under the trading plan, Morgan Stanley will have full discretion to effect a measured and orderly sell down of shares in the Company on behalf of HMT.

Following the publication of the Bank of England stress tests yesterday, the trading plan has been entered into today; however, it is possible that sales may not commence until the New Year. The trading plan will terminate no later than 30 June 2015. HMT has instructed Morgan Stanley that up to but no more than 15% of the aggregate total trading volume in the Company is to be sold over the duration of the trading plan. The number of shares sold under the trading plan will depend on market conditions, among other factors. As with all disposals, delivering value for money for the taxpayer is a key consideration and shares will not be sold below the average price per share that the previous government paid for them.

HMT currently owns 17.8 billion ordinary shares in the Company, which represents 24.9% of the issued ordinary share capital of the Company.

J.P. Morgan Cazenove is acting as Privatisation Strategy Adviser to UKFI. Freshfields Bruckhaus Deringer LLP is acting as Legal Counsel to UKFI in respect of English and US law.

"As with all disposals, delivering value for money for the taxpayer is a key consideration and shares will not be sold below the average price per share that the previous government paid for them."

Can you remind us what that average is boys and gals?

73.6p.

Break Even

Thanks Skinny, call it 74 with the spread.

Just another piece of silver to prop up George's economics.

If it is worth buying then it must be reasonable to keep "nationalise" and the future profits could be ploughed back into the public purse, rather than Cameron's friends, city fraudsters and Morgan Stan.