Profit before tax decreased by £855 million, or 20 per cent, to £3,493 million, reflecting the impact of businesses disposed of in 2003 which contributed £1,183 million last year.
2004 was a good year for Lloyds TSB and, in many respects, marks the closing of one chapter and the opening of another. During the past two years, we worked on a three point plan: • to enhance the quality, and decrease the volatility, of our earnings
The Americas. Lloyds TSB Group continues to have offices in Ecuador, Paraguay and Uruguay which provide mainly corporate banking services. In addition, Lloyds TSB Group has private banking and investment operations in the US.
During 2003 improved secondary bond market conditions allowed the Group to sell its remaining portfolio of emerging markets debt securities. Profits on these bond sales, and certain closed foreign exchange positions, in 2003 totalled £295 million.
Concentration risk. The formulation of concentration limits on certain industries and sectors. Group Risk sets sector caps that reflect risk appetite, and monitors exposures to prevent excessive concentration of risk.
Credit quality is supported by specialist units established within the Group businesses to provide, for example: intensive management and control; security perfection, maintenance and retention; expertise in documentation for lending and associated products; sector-specific expertise; and legal services applicable to the particular market place and product range offered by the business.
The financial assets and liabilities referred to above are acquired by way of internal transactions between Group Balance Sheet Management and Financial Markets in London, typically in the form of interest rate swaps and loans or deposits.
Control is exercised primarily through a suitable combination of high level committees/boards. For the life assurance businesses the key control body is the Scottish Widows plc board with the more significant risks also being subject to approval by the Lloyds TSB group executive committee and/or the Lloyds TSB Group board. For the general insurance businesses the key control body is Lloyds TSB Insurance executive committee with the more significant risks again being subject to Lloyds TSB group executive committee and/or Lloyds TSB Group board approval. All Group pension scheme issues are covered by the group asset and liability committee.
The Group applies appropriate new product review processes to provide assurance that risks inherent in new products have been identified and mitigated.
Changes that significantly impact customers or staff are managed as part of an overall change plan managed by the Group’s change management committee. The committee ensures that the aggregate impact of the implementation of change on customers, staff and systems is understood, managed and controlled.
The determination of realistic liabilities of the With-Profits Fund in respect of Scottish Widows includes the value of internal transfers expected to be made from the With-Profits Fund to the Non-Participating Fund of Scottish Widows. These internal transfers include charges on policies where the associated costs are borne by the Non-Participating Fund. The value of the transfers exceeds the value of the costs which, in the case of Scottish Widows, results in the somewhat artificial increase in the With-Profits Insurance Capital Component of over £500 million.
M A van den Bergh 8 weeks £475,000 28 July 2000
Interest income is recognised in the profit and loss account as it accrues, with the exception of interest on non-performing lending which is taken to income either when it is received or when there ceases to be any significant doubt about its ultimate receipt (see e).
Dealing profits include the profits and losses arising both on the purchase and sale of trading instruments and from the year-end revaluation to market value, together with the interest income earned from these instruments and the related funding cost.
6 (Loss) profit before tax on sale of businesses 2004 2003 £m £m
Transfers from other securities 281 – – 281 Securities sold or matured (8,787) (2) (25) (8,764) Adjustments on disposal of businesses (23) – (7) (16) Charge for the year – – 43 (43) Amortisation of premiums and discounts – 14 – 14
Liabilities: Deposits by banks 1,527 1,309 – 672 Debt securities in issue – – 3,272 3,123 Other liabilities and accruals 260 108 31 18
24 Tangible fixed assets Operating Premises Equipment lease assets £m £m £m
Changes in economic assumptions: this represents the effect of changes in the economic assumptions referred to in e.
The breakdown of deposits by banks between the domestic and international offices of the Group is set out below: £m £m
Exchange and other adjustments (26) Adjustments on disposal of assets (23) Charge for the year 146
At 31 December 2004 the provisions held mainly related to past sales of mortgage endowment policies. Mortgage endowments were sold to customers through the branch network of Lloyds TSB Bank, Lloyds TSB Scotland and Cheltenham & Gloucester, and underwritten by life assurance companies within the Group and also by third parties. The principal assumptions that have been made in the calculation of the provision relate to the number of cases that are likely to require redress and the estimated average cost per case. The ultimate cost and timing of the payments remains highly uncertain and will be influenced by external factors beyond the control of management, such as regulatory actions, media interest and the performance of the financial markets. However, it is expected that the majority of the expenditure will be incurred over the next two years.
† These securities constituted interests in European Financial Institution Investments Partnership, an English law general partnership in which the principal partner is Langbourn Holdings Limited, a wholly owned subsidiary of the Group. During 2004 the partnership was dissolved and the capital returned to the partners.
Wherever possible, fair values have been estimated using market prices for instruments held by the Group. Where market prices are not available, fair values have been estimated using quoted values for instruments with characteristics either identical or similar to those of the instruments held by the Group. In certain cases, where no ready markets currently exist, various techniques (such as discounted cash flows, or observations of similar recent market transactions) have been developed to estimate what the approximate fair value of such instruments might be. These estimation techniques are necessarily subjective in nature and involve several assumptions.
For telephone dealing the current rate for both purchases and sales is 0.5%, minimum £20. For full details please contact Lloyds TSB Registrars on: Telephone 0870 850 0852.
Shareholder enquiries The Company’s share register is maintained by Lloyds TSB Registrars, The Causeway, Worthing, West Sussex BN99 6DA. Telephone 0870 600 3990; Please contact them if you have enquiries about your Lloyds TSB shareholding, including those concerning the following matters: • change of name or address