Other required reporting Companies Act 2006 exception reporting Under the Companies Act 2006 we are required to report to you if, in our opinion: – we have not obtained all the information and explanations we require for our audit; or – adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or – certain disclosures of directors’ remuneration specified by law are not made; or – the parent company financial statements and the part of the Directors’ remuneration report to be audited are not in agreement with the accounting records and returns.
Appointment Following the recommendation of the Audit Committee, we were appointed by the members on 21 December 1995 to audit the financial statements for the year ended 31 December 1995 and subsequent financial periods. The period of total uninterrupted engagement is 26 years, covering the years ended 31 December 1995 to 31 December 2020. The audit was tendered in 2014 and we were re-appointed with effect from 1 January 2016. There will be a mandatory rotation for the 2021 audit and we will cease to be auditor of the Group.
Mark Hannam (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London 23 February 2021
Movements in foreign currency translation reserve: Currency translation differences (tax: £nil) 4 (12) (8)
Other comprehensive income for the year, net of tax 110 (1,126) (113)
Financial assets at fair value through profit or loss 16 171,626 160,189
Financial assets at fair value through other comprehensive income 20 27,603 25,092
Financial liabilities at fair value through profit or loss 27 22,646 21,486
Robin Budenberg António Horta-Osório William Chalmers Chair Group Chief Executive Chief Financial Officer
Post-retirement defined benefit scheme remeasurements, net of tax — — 113 113 — — 113
Total other comprehensive income — 52 58 110 — — 110
Movement in treasury shares — — 293 293 — — 293
Value of employee services: Share option schemes — — 48 48 — — 48
Changes in non-controlling interests — — — — — (2) (2)
Movements in revaluation reserve in respect of financial assets held at fair value through other comprehensive income, net of tax: Gains and losses attributable to own credit risk, net of tax — — (306) (306) — — (306)
Redemption of preference shares 3 (3) — — — — —
Issue of other equity instruments (note 42) — — (3) (3) 896 — 893
Value of employee services: Share option schemes — — 71 71 — — 71
Changes in non-controlling interests — — — — — (14) (14)
Realised gains and losses on equity shares held at fair value through other comprehensive income — 2 (2) — — — —
Post-retirement defined benefit scheme remeasurements, net of tax — — 120 120 — — 120
Share of other comprehensive income of associates and joint ventures — — 8 8 — — 8
Movements in revaluation reserve in respect of financial assets held at fair value through other comprehensive income, net of tax: Gains and losses attributable to own credit risk, net of tax — — 389 389 — — 389
Issue of ordinary shares 162 — — 162 — — 162
Issue of other equity instruments — — (5) (5) 1,136 — 1,131
Realised gains and losses on equity shares held at fair value through other comprehensive income — 129 (129) — — — —
Net cash provided by (used in) operating activities 27,171 11,281 (11,107)
Net cash (used in) provided by investing activities (4,000) (2,130) 11,921
Cash and cash equivalents at beginning of year 57,811 55,224 58,708
Note 1: Basis of preparation The consolidated financial statements of Lloyds Banking Group plc and its subsidiary undertakings (the Group) comply with international accounting standards in conformity with the requirements of the Companies Act 2006. The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). IFRS comprises accounting standards prefixed IFRS issued by the International Accounting Standards Board (IASB) and those prefixed IAS issued by the IASB’s predecessor body as well as interpretations issued by the IFRS Interpretations Committee and its predecessor body. On adoption of IFRS 9 in 2018, the Group elected to continue applying hedge accounting under IAS 39. The financial statements are also compliant with IFRS adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. The EU endorsed version of IAS 39 Financial Instruments: Recognition and Measurement relaxes some of the hedge accounting requirements; the Group has not taken advantage of this relaxation, and therefore there is no difference in application to the Group between IFRS as adopted by the EU and IFRS as issued by the IASB.
(A) Consolidation The assets, liabilities and results of Group undertakings (including structured entities) are included in the financial statements on the basis of accounts made up to the reporting date. Group undertakings include subsidiaries, associates and joint ventures. Details of the Group’s subsidiaries and related undertakings are given on pages 349 to 354.
The acquisition method of accounting is used to account for business combinations by the Group. The consideration for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition related costs are expensed as incurred except those relating to the issuance of debt instruments (see (E)(4) below) or share capital (see (P) below). Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair value at the acquisition date.
(2) Joint ventures and associates Joint ventures are joint arrangements over which the Group has joint control with other parties and has rights to the net assets of the arrangements. Joint control is the contractually agreed sharing of control of an arrangement and only exists when decisions about the relevant activities require the unanimous consent of the parties sharing control. Associates are entities over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the entity, but is not control or joint control of those policies, and is generally achieved through holding between 20 per cent and 50 per cent of the voting share capital of the entity.
(D) Revenue recognition (1) Net interest income Interest income and expense are recognised in the income statement using the effective interest method for all interest-bearing financial instruments, except for those classified at fair value through profit or loss. The effective interest method is a method of calculating the amortised cost of a financial asset or liability and of allocating the interest income or interest expense over the expected life of the financial instrument. The effective interest rate is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument to the gross carrying amount of the financial asset (before adjusting for expected credit losses) or to the amortised cost of the financial liability, including early redemption fees, and related penalties, and premiums and discounts that are an integral part of the overall return. In the case of financial assets that are purchased or originated credit-impaired, the effective interest rate is the rate that discounts the estimated future cash flows to the amortised cost of the instrument. Direct incremental transaction costs related to the acquisition, issue or disposal of a financial instrument are also taken into account. Interest income from non-credit impaired financial assets is recognised by applying the effective interest rate to the gross carrying amount of the asset; for credit impaired financial assets, the effective interest rate is applied to the net carrying amount after deducting the allowance for expected credit losses. Impairment policies are set out in (H) below.
(2) Fee and commission income and expense Fees and commissions receivable which are not an integral part of the effective interest rate are recognised as income as the Group fulfils its performance obligations. The Group’s principal performance obligations arising from contracts with customers are in respect of value added current accounts, credit cards and debit cards. These fees are received, and the Group’s provides the service, monthly; the fees are recognised in income on this basis. The Group also receives certain fees in respect of its asset finance business where the performance obligations are typically fulfilled towards the end of the customer contract; these fees are recognised in income on this basis. Where it is unlikely that the loan commitments will be drawn, loan commitment fees are recognised in fee and commission income over the life of the facility, rather than as an adjustment to the effective interest rate for loans expected to be drawn. Incremental costs incurred to generate fee and commission income are charged to fees and commissions expense as they are incurred.
Financial assets are derecognised when the contractual right to receive cash flows from those assets has expired or when the Group has transferred its contractual right to receive the cash flows from the assets and either: substantially all of the risks and rewards of ownership have been transferred; or the Group has neither retained nor transferred substantially all of the risks and rewards, but has transferred control.
O ther inform ation Financial statem ents Lloyds Banking Group Annual Report and Accounts 2020 225
(F) Derivative financial instruments and hedge accounting As permitted by IFRS 9, the Group continues to apply the requirements of IAS 39 to its hedging relationships. All derivatives are recognised at their fair value. Derivatives are carried on the balance sheet as assets when their fair value is positive and as liabilities when their fair value is negative. Refer to note 48(3) (Financial instruments: Financial assets and liabilities carried at fair value) for details of valuation techniques and significant inputs to valuation models.
Changes in the fair value of all derivative instruments, other than those in effective cash flow and net investment hedging relationships, are recognised immediately in the income statement. As noted in (2) and (3) below, the change in fair value of a derivative in an effective cash flow or net investment hedging relationship is allocated between the income statement and other comprehensive income.
Hedge accounting allows one financial instrument, generally a derivative such as a swap, to be designated as a hedge of another financial instrument such as a loan or deposit or a portfolio of such instruments. At the inception of the hedge relationship, formal documentation is drawn up specifying the hedging strategy, the hedged item, the hedging instrument and the methodology that will be used to measure the effectiveness of the hedge relationship in offsetting changes in the fair value or cash flow of the hedged risk. The effectiveness of the hedging relationship is tested both at inception and throughout its life and if at any point it is concluded that it is no longer highly effective in achieving its documented objective, hedge accounting is discontinued. Note 17 provides details of the types of derivatives held by the Group and presents separately those designated in hedge relationships.
Where there is uncertainty arising from interest rate benchmark reform, the Group assumes that the interest rate benchmark on which the hedged cash flows and/or the hedged risk are based, or the interest rate benchmark on which the cash flows of the hedging instrument are based, are not altered as a result of interest rate benchmark reform. The Group does not discontinue a hedging relationship during the period of uncertainty arising from the interest rate benchmark reform solely because the actual results of the hedge are not highly effective.
(G) Offset Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right of offset and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. Cash collateral on exchange traded derivative transactions is presented gross unless the collateral cash flows are always settled net with the derivative cash flows. In certain situations, even though master netting agreements exist, the lack of management intention to settle on a net basis results in the financial assets and liabilities being reported gross on the balance sheet.
In certain circumstances, the Group will renegotiate the original terms of a customer’s loan, either as part of an ongoing customer relationship or in response to adverse changes in the circumstances of the borrower. In the latter circumstances, the loan will remain classified as either Stage 2 or Stage 3 until the credit risk has improved such that it no longer represents a significant increase since origination (for a return to Stage 1), or the loan is no longer credit impaired (for a return to Stage 2). On renegotiation the gross carrying amount of the loan is recalculated as the present value of the renegotiated or modified contractual cash flows, which are discounted at the original effective interest rate. Renegotiation may also lead to the loan and associated allowance being derecognised and a new loan being recognised initially at fair value.
(J) Leases Under IFRS 16, a lessor is required to determine whether a lease is a finance or operating lease. A lessee is not required to make this determination.
(1) As lessor Assets leased to customers are classified as finance leases if the lease agreements transfer substantially all the risks and rewards of ownership to the lessee but not necessarily legal title. All other leases are classified as operating leases. When assets are subject to finance leases, the present value of the lease payments, together with any unguaranteed residual value, is recognised as a receivable, net of allowances for expected credit losses and residual value impairment, within loans and advances to banks and customers. The difference between the gross receivable and the present value of the receivable is recognised as unearned finance lease income. Finance lease income is recognised in interest income over the term of the lease using the net investment method (before tax) so as to give a constant rate of return on the net investment in the leases. Unguaranteed residual values are reviewed regularly to identify any impairment.
(2) As lessee Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Assets and liabilities arising from a lease are initially measured on a present value basis. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or the Group’s incremental borrowing rate appropriate for the right-of-use asset arising from the lease.
The Group’s balance sheet includes the net surplus or deficit, being the difference between the fair value of scheme assets and the discounted value of scheme liabilities at the balance sheet date. Surpluses are only recognised to the extent that they are recoverable through reduced contributions in the future or through refunds from the schemes. In assessing whether a surplus is recoverable, the Group considers (i) its current right to obtain a refund or a reduction in future contributions and (ii) the rights of other parties existing at the balance sheet date. In determining the rights of third parties existing at the balance sheet date, the Group does not anticipate any future acts by other parties.
(L) Taxation Tax expense comprises current and deferred tax. Current and deferred tax are charged or credited in the income statement except to the extent that the tax arises from a transaction or event which is recognised, in the same or a different period, outside the income statement (either in other comprehensive income, directly in equity, or through a business combination), in which case the tax appears in the same statement as the transaction that gave rise to it. The tax consequences of the Group's dividend payments (including distributions on other equity instruments), if any, are charged or credited to the statement in which the profit distributed originally arose.
For the Group’s long-term insurance businesses, the tax expense is analysed between tax that is payable in respect of policyholders’ returns and tax that is payable on the shareholders’ returns. This allocation is based on an assessment of the rates of tax which will be applied to the returns under the current UK tax rules.
O ther inform ation Financial statem ents Lloyds Banking Group Annual Report and Accounts 2020 229
– Insurance and participating investment contracts in the Group’s with-profit funds
– Insurance contracts which are not unit-linked or in the Group’s with-profit funds
(3) Liability adequacy test At each balance sheet date liability adequacy tests are performed to ensure the adequacy of insurance and participating investment contract liabilities net of related deferred cost assets and value of in-force business. In performing these tests current best estimates of discounted future contractual cash flows and claims handling and policy administration expenses, as well as investment income from the assets backing such liabilities, are used. Any deficiency is immediately charged to the income statement, initially by writing off the relevant assets and subsequently by establishing a provision for losses arising from liability adequacy tests.
Assets arising from contract held with reinsurers – Financial risk transferred These contracts are accounted for as financial assets whose value is contractually linked to the fair values of financial assets within the reinsurers’ investment funds. Investment returns (including movements in fair value and investment income) allocated to these contracts are recognised in insurance claims. Deposits and withdrawals are not accounted for through the income statement but are accounted for directly in the balance sheet as adjustments to the assets arising from reinsurance contracts held.
(N) Foreign currency translation Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). Foreign currency transactions are translated into the appropriate functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when recognised in other comprehensive income as qualifying cash flow or net investment hedges. Non-monetary assets that are measured at fair value are translated using the exchange rate at the date that the fair value was determined. Translation differences on equities and similar non-monetary items held at fair value through profit and loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets measured at fair value through other comprehensive income, such as equity shares, are included in the fair value reserve in equity unless the asset is a hedged item in a fair value hedge.
The significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty in these financial statements, which together are deemed critical to the Group’s results and financial position, are as follows: Allowance for expected credit losses
The appropriate lifetime of an exposure to credit risk for the assessment of lifetime losses, notably on revolving products
Lifetime of an exposure A range of approaches, segmented by product type, has been adopted by the Group to estimate a product’s expected life. These include using the full contractual life and taking into account behavioural factors such as early repayments and refinancing. For non-revolving retail assets, the Group has assumed the expected life for each product to be the time taken for all significant losses to be observed. For retail revolving products, the Group has considered the losses beyond the contractual term over which the Group is exposed to credit risk. For commercial overdraft facilities, the average behavioural life has been used. Changes to the assumed expected lives of the Group’s assets could impact the ECL allowance recognised by the Group. The assessment of SICR and corresponding lifetime loss, and the PD, of a financial asset deemed to be Stage 2, or Stage 3, is dependent on its expected life.
Significant increase in credit risk Performing assets are classified as either Stage 1 or Stage 2. An ECL allowance equivalent to 12 months expected losses is established against assets in Stage 1; assets classified as Stage 2 carry an ECL allowance equivalent to lifetime expected losses. Assets are transferred from Stage 1 to Stage 2 when there has been a significant increase in credit risk (SICR) since initial recognition. Credit impaired assets are transferred to Stage 3 with a lifetime expected losses allowance. The Group uses both quantitative and qualitative indicators to determine whether there has been a SICR for an asset. For Retail, the following tables set out the Retail Master Scale (RMS) grade triggers which result in a SICR for financial assets and the PD boundaries for each RMS grade. Credit cards SICR triggers have been refined in 2020 following a review of sensitivity to changes in economic assumptions, 2019 triggers were previously aligned
Loans and overdrafts SICR grade 5 6 7 8 9 10 11
All financial assets are assumed to have suffered a SICR if they are more than 30 days past due; non-mortgage Retail financial assets are also assumed to have suffered a SICR if they are in arrears on three or more separate occasions in a rolling twelve month period. Financial assets are classified as credit impaired if they are 90 days past due except for UK mortgages where a 180 days backstop is used.
A Stage 3 asset that is no longer credit-impaired is transferred back to Stage 2 as no cure period is applied to Stage 3. If an exposure that is classified as Stage 2 no longer meets the SICR criteria, which in some cases include a minimum cure period, it is moved back to Stage 1.
Generation of Multiple Economic Scenarios (MES) The measurement of expected credit losses is required to reflect an unbiased probability-weighted range of possible future outcomes. The Group considers the choice of approach used to generate the range of economic outcomes to be judgemental, given several methods can be adopted. In addition to a defined base case, as used for planning, the Group’s approach relies on model-generated scenarios, reducing scope for bias in the selection of scenarios and their weightings. The conditioning assumptions underpinning the base case scenario reflect the Group’s best view of future events. Where outcomes materially diverge from the conditioning assumptions adopted, the base case scenario is updated. The base case is therefore central to the range of outcomes created as no alternative conditioning assumptions are factored into the model-generated scenarios.
Conditioned on the above assumptions and despite the recovery in economic activity resuming from the second quarter of 2021, the Group’s base case outlook assumes a rise in the unemployment rate and weakness in residential and commercial property prices. Risks around this base case economic view lie in both directions and are partly captured by the MES generated. But uncertainties relating to the key conditioning assumptions, including epidemiological developments and the efficacy of vaccine rollouts, are not specifically captured by the MES scenarios. These specific risks have been recognised outside the modelled scenarios published below.
O ther inform ation Financial statem ents Lloyds Banking Group Annual Report and Accounts 2020 233
Commercial real estate price growth (5.0) (7.8) (7.8) (7.0) (6.1) (2.9) (2.2) (1.7)
Scenarios by year Key annual assumptions made by the Group are shown below. Gross domestic product is presented as an annual change, house price growth and commercial real estate price growth are presented as the growth in the respective indices within the period. UK Bank Rate and unemployment rate are averages for the period.
Upside Base case Downside Severe downside Upside Base case Downside Severe downside
Commercial real estate price growth 11.0 (2.7) (2.7) (2.7) 8.8 (0.8) (0.8) (0.8)
Commercial real estate price growth (6.9) (9.0) (22.2) (39.9) (1.4) (2.3) (17.9) (31.4)
The table below shows the Group’s ECL for the upside, base case, downside and severe downside scenarios. The stage allocation for an asset is based on the overall scenario probability-weighted PD and, hence, the Stage 2 allocation is constant across all the scenarios. ECL applied through individual assessments and post-model adjustments is reported flat against each economic scenario, reflecting the basis on which they are evaluated. Judgements applied through changes to inputs are reflected in the scenario sensitivities.
Severe downside £m £m £m £m £m £m £m £m £m £m
O ther inform ation Financial statem ents Lloyds Banking Group Annual Report and Accounts 2020 235
The table below shows the impact on the Group’s ECL in respect of UK mortgages resulting from a decrease/increase in loss given default for a 10 percentage point (pp) increase or decrease in the UK House Price Index (HPI). The increase/decrease is presented based on the adjustment phased evenly over the first ten quarters of the base case scenario.
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 (i.e. probability of default, exposure at default and loss given 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 make appropriate adjustments to the Group’s allowance for impairment losses 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 overlays.
Judgements are not typically assessed under each distinct economic scenario used to generate ECL, but instead are applied on the basis of final modelled ECL which reflects the probability weighted view of all scenarios. All adjustments are reviewed quarterly and are subject to internal review and challenge, including by the Audit Committee, to ensure that amounts are appropriately calculated and that there are specific release criteria within a reasonable timeframe.
At 31 December 2019 1 Judgements introduced in 2020 due to the impact that COVID-19 and resulting interventions have had on the Group’s economic outlook and observed loss experience, which have required additional model limitations to be addressed.
Commercial Banking: £131 million This adjustment principally comprises: Adjustment to economic variables used as inputs to models: £93 million
UK mortgages: £510 million (2019: £183 million) These adjustments principally comprise: Adjustment to modelled forecast parameters: £193 million (2019: £nil)
Adjustments have been required to the estimated defaults used within the ECL calculation for UK mortgages following the adoption of new default forecast models. Forecast models which predict quarterly defaults based on several economic variables have been developed using the response from the previous recession, as per usual modelling best practice. However, management believe further adjustments are necessary when the results of these models have been benchmarked to observed levels, given the atypical nature of the current economic outlook. These were derived using historical observed default rates under previous downturn conditions to ensure that the resulting forecast best reflected management’s view given the current economic outlook. The adjustment to forward-looking parameters prior to their use in ECL calculations ensures that all downstream account level calculations reflect the Group’s best view of credit losses in respect of the economic scenarios stated. As such this in-model adjustment is reflected within all scenarios, assessment of staging and in subsequent assessment of all post-model adjustments.
The Group suspended mortgage litigation activity between late 2014 and mid 2018 as changes were implemented to the treatment of amounts in arrears, interrupting the natural flow of accounts to possession. An adjustment is made to ensure adequate provision coverage considering the resulting build-up of accounts in long term default. Coverage is uplifted to the equivalent levels of those accounts already in repossession on an estimated shortfall of balances expected to flow to possession. A further adjustment is made to mitigate for the risk that credit model provision understates the probability of possession for accounts which have been in default for more than 24 months, with an arrears balance increase in the last 6 months. These accounts have their probability of possession set to 95 per cent based on observed historical losses incurred on accounts that were of an equivalent status. The increase in judgement in 2020 is primarily driven by an increase in the stock of long-term defaults following COVID-19 related litigation suspension.
Other Retail: £(13) million (2019: £(10) million) These adjustments principally comprise: Lifetime extension on revolving products: £81 million (2019: £36 million)
Unsecured revolving products use a model lifetime definition of three years based on historic data which shows that substantially all accounts resolve in this time. An adjustment is made to extend the lifetime used for Stage 2 exposures to six years by adding incremental probability of default through the extrapolation of the default trajectory observed throughout the three years and beyond. The resulting additional ECL allowance is added to Stage 2 accounts proportionate to the modelled three year PD. The increase in the judgement in 2020 is driven by growth in Stage 2 assets and their coverage, rather than any change to the lifetime assumption.
At 31 December 2020, the Group recognised a value of in-force business asset of £5,396 million (2019: £5,311 million) and an acquired value of in-force business asset of £221 million (2019: £247 million).
The value of in-force business asset represents the estimated present value of future profits expected to arise from the portfolio of in-force life insurance and participating investment contracts. The valuation of this asset requires assumptions to be made about future economic and operating conditions which are inherently uncertain and changes could significantly affect the value attributed to this asset. The methodology used to value this asset and the key assumptions that have been made in determining the carrying value of the value of in-force business asset at 31 December 2020 are set out in note 23.
At 31 December 2020, the Group carried total liabilities arising from insurance contracts and participating investment contracts of £116,060 million (2019: £111,449 million). Elements of the valuations of liabilities arising from insurance contracts and participating investment contracts require management to estimate future investment returns, future mortality rates and future expenses. These estimates are subject to significant uncertainty. The methodology used to value these liabilities and the key assumptions that have been made in determining their carrying value are set out in note 30.
Estimation of income taxes includes the assessment of recoverability of deferred tax assets. Deferred tax assets are only recognised to the extent that they are considered more likely than not to be recoverable based on existing tax laws and forecasts of future taxable profits against which the underlying tax deductions can be utilised. The Group has recognised a deferred tax asset of £4,064 million (2019: £3,611 million) in respect of trading losses carried forward. Substantially all of these losses have arisen in Bank of Scotland plc and Lloyds Bank plc, and they will be utilised as taxable profits arise in those legal entities in future periods.
O ther inform ation Financial statem ents Lloyds Banking Group Annual Report and Accounts 2020 239 materially affect the timing of recovery and the value of these losses ultimately realised by the Group. The value of the deferred tax asset in respect of tax losses increased by £420 million in 2020 as a result of the change in UK tax rates (see note 35).
The impact of legal decisions that may be relevant to claims received Key estimates: The number of future complaints
Key estimates: Interest rate spreads, earning multiples and interest rate volatility
Key judgements: Assessing future trading conditions that could affect the Group’s business operations
At 31 December 2020, the carrying value of the Group’s other intangible assets was £4,140 million (2019: £3,808 million), including capitalised software enhancements of £3,309 million (2019: £2,907 million) and brands of £380 million (2019: £380 million).
In determining the estimated useful life of capitalised software enhancements, management consider the product's lifecycle and the Group's technology strategy; assets are reviewed annually to assess whether there is any indication of impairment and to confirm that the remaining estimated useful life is still appropriate. For the year ended 31 December 2020, the amortisation charge was £590 million and at 31 December 2020, the weighted-average remaining estimated useful life of the Group’s capitalised software enhancements was 4.9 years (2019: 4.7 years). If the Group reduced by one year the estimated useful life of those assets with a remaining estimated useful life of more than two years at 31 December 2020, the 2021 amortisation charge would be approximately £175 million higher.
Brands arising from the acquisition of Bank of Scotland in 2009 are recognised on the Group's balance sheet and have been determined to have an indefinite useful life. The carrying value at 31 December 2020 was £380 million (2019: £380 million). The recoverable amount has been based on a value-in-use calculation. The calculation uses post-tax projections of the income generated by the brands, a discount rate of 9.31 per cent and a future growth rate of 2.5 per cent . Management estimates that if the growth rate were decreased by 1 per cent there would have been an impairment charge of £50 million.
The segmental results and comparatives are presented on an underlying basis, the basis reviewed by the chief operating decision maker. The effects of the following are excluded in arriving at underlying profit: – market volatility and asset sales, including the effects of certain asset sales, the volatility relating to the Group’s own debt and hedging arrangements and that arising in the insurance businesses; – the unwind of acquisition-related fair value adjustments and the amortisation of purchased intangible assets; – restructuring costs, principally comprising severance costs, the costs of integrating newly acquired businesses, the costs of regulatory reform and the rationalisation of the property portfolio; and
Income and expenditure not attributed to these financial reporting segments, including the costs of certain central and head office functions and the Group’s private equity business, Lloyds Development Capital, is disclosed as Other.
Inter-segment services are generally recharged at cost, although some attract a margin. In particular a profit margin is charged on the internal commission arrangements between the UK branch and other distribution networks and the insurance product manufacturing businesses within the Group. Inter-segment lending and deposits are generally entered into at market rates, except that non-interest bearing balances are priced at a rate that reflects the external yield that could be earned on such funds.
Total underlying income, net of insurance claims 10,117 3,649 1,299 223 15,288
Analysis of segment underlying other income, net of insurance claims: Credit and debit card fees 517 231 — — 748
Gains less losses on disposal of financial assets at fair value through other comprehensive income — — — 149 149
Banking Insurance and Wealth Other Underlying basis total £m £m £m £m £m
Other income, net of insurance claims 2,019 1,417 2,021 275 5,732
Analysis of segment underlying other income, net of insurance claims: Credit and debit card fees 652 330 — — 982
Segment other income, net of insurance claims 2,019 1,417 2,021 275 5,732
Other segment items reflected in income statement above: Movement in value of in-force business — — 825 — 825
Other income, net of insurance claims 2,102 1,665 1,865 378 6,010
Segment underlying income, net of insurance claims 11,533 4,650 1,988 553 18,724
Other segment items reflected in income statement above: Movement in value of in-force business — — (55) — (55)
Non-income statement segment items: Investments in joint ventures and associates at end of year 4 — — 87 91 1 Restated, see page 240. 2 Net of profits on disposal of operating lease assets of £60 million.
Reconciliation of underlying basis to statutory results The underlying basis is the basis on which financial information is presented to the chief operating decision maker which excludes certain items included in the statutory results. The table below reconciles the statutory results to the underlying basis.
Other income, net of insurance claims 4,377 165 (27) — 4,515
Total income, net of insurance claims 15,126 339 (177) — 15,288
Total income, net of insurance claims 18,359 (47) (203) — 18,109
Other income, net of insurance claims 5,230 107 673 — 6,010
1 In the year ended 31 December 2020 this comprises the effects of asset sales (losses of £14 million); volatility and other items (losses of £45 million); the amortisation of purchased intangibles (£69 million); restructuring (£521 million, including severance costs, property transformation, technology research and development, regulatory programmes and merger, acquisition and integration costs); and the fair value unwind (losses of £233 million).
6 Comprises the effects of asset sales (loss of £145 million); volatility and other items (gains of £95 million); the amortisation of purchased intangibles (£108 million); restructuring costs (£879 million, comprising severance related costs, the rationalisation of the non-branch property portfolio, the work on implementing the ring-fencing requirements and the integration of MBNA and Zurich’s UK workplace pensions and savings business); and the fair value unwind and other items (losses of £319 million).
Loans and advances to banks 0.24 0.78 0.84 203 514 565
Interest income on financial assets held at amortised cost 2.35 2.89 2.87 14,004 16,426 15,709
Financial assets at fair value through other comprehensive income 1.10 1.64 1.98 302 435 640
Interest expense: Deposits from banks, excluding liabilities under sale and repurchase transactions 0.84 0.86 1.39 (113) (96) (117)
Customer deposits, excluding liabilities under sale and repurchase transactions 0.32 0.59 0.53 (1,091) (2,015) (1,812)
Liabilities under sale and repurchase agreements 0.36 1.12 0.96 (117) (301) (245)
Interest expense on liabilities held at amortised cost 0.74 0.98 0.79 (3,732) (4,859) (3,797)
Net interest income 10,749 10,180 13,396 1 Includes £10 million (2019: £26 million; 2018: £31 million) of interest income on liabilities with negative interest rates and £47 million (2019: £45 million; 2018: £46 million) in respect of interest income on finance leases.
3 Where a collective investment vehicle is consolidated the interests of parties other than the Group are reported in other liabilities and the movement in these interests in interest expense. 4 Includes £24 million (2019: £119 million; 2018: £10 million) of interest expense on assets with negative interest rates.
Net income arising on assets and liabilities mandatorily held at fair value through profit or loss: Financial instruments held for trading 724 120 (8)
Net expense arising on assets and liabilities designated at fair value through profit or loss (117) (214) (156)
O ther inform ation Financial statem ents Lloyds Banking Group Annual Report and Accounts 2020 247
Gains less losses on disposal of financial assets at fair value through other comprehensive income (note 40) 149 196 275
Share of results of joint ventures and associates (note 21) (13) 6 9
Depreciation and amortisation: Depreciation of property, plant and equipment (note 25) 2,046 2,064 1,852
Amortisation of acquired value of in-force non-participating investment contracts (note 23) 26 30 40
Performance-based awards expensed in 2020 include cash awards amounting to £12 million (2019: £89 million; 2018: £137 million).
O ther inform ation Financial statem ents Lloyds Banking Group Annual Report and Accounts 2020 249
Fees payable for the audit of the Company’s current year annual report 1.7 1.5 1.5
Total fees payable to the Company’s auditors by the Group 29.2 26.9 26.7
Audit fees payable in respect of the statutory audit of Group entities totalled £24.1 million (2019: £21.7 million; 2018: £20.6 million) and non-audit fees, as defined by the Financial Reporting Council’s Ethical Guidance totalled £5.1 million (2019: £5.2 million; 2018: £6.1 million).
Reviews of the financial position of corporate and other borrowers 1.4 0.2 0.4
Average headcount The average number of persons on a headcount basis employed by the Group during the year was as follows: Note 11: Operating expenses continued
In respect of: Loans and advances to banks 5 — — — 5
Financial assets at fair value through other comprehensive income (1) — — — (1)
O ther inform ation Financial statem ents Lloyds Banking Group Annual Report and Accounts 2020 251
In respect of: Loans and advances to banks 1 — — — 1
The Group’s impairment charge comprises the following items: Transfers between stages The net impact on the impairment charge of transfers between stages.
(A) Analysis of tax credit (expense) for the year £m £m £m
Foreign tax: Current tax on profit for the year (27) (70) (34)
The tax credit (expense) is made up as follows: £m £m £m
(B) Factors affecting the tax credit (expense) for the year The UK corporation tax rate for the year was 19.0 per cent (2019: 19.0 per cent; 2018: 19.0 per cent). An explanation of the relationship between tax credit (expense) and accounting profit is set out below.
Remeasurement of deferred tax due to rate changes 350 (6) 32
Policyholder deferred tax asset in respect of life assurance expenses 49 (53) 73
In 2020, the Group submitted claims to HMRC to accelerate tax deductions in respect of certain capitalised software enhancement costs incurred in 2018 and 2019. The Group has recognised a net prior year tax impact of £nil in respect of these claims, being a current tax credit of £215 million in respect of the reduced cash tax liability for those years, a deferred tax charge of £261 million in respect of the future amortisation of those costs, plus a deferred tax credit of £46 million in respect of tax losses carried forward. No other items included in the net prior year tax adjustments credit of £104 million were of individual significance.
O ther inform ation Financial statem ents Lloyds Banking Group Annual Report and Accounts 2020 253
Note 16: Financial assets at fair value through profit or loss These assets are comprised as follows: Trading assets
Weighted-average number of ordinary shares in issue – diluted 71,256 71,285 72,279
There were 647 million anti-dilutive share options and awards excluded from the calculation of diluted earnings per share (2019: 24 million; 2018: none).
Derivatives designated as fair value hedges: Derivatives designated as cash flow hedges: Total derivative assets/liabilities – hedging 547,576 816 684 619,812 1,236 1,105
The Group holds derivatives as part of the following strategies: – Customer driven, where derivatives are held as part of the provision of risk management products to Group customers; – To manage and hedge the Group’s interest rate and foreign exchange risk arising from normal banking business. The hedge accounting strategy adopted by the Group is to utilise a combination of fair value and cash flow hedge approaches as described in note 51; and
– Exchange rate related contracts include forward foreign exchange contracts, currency swaps and options. A forward foreign exchange contract is an agreement to buy or sell a specified amount of foreign currency on a specified future date at an agreed rate. Currency swaps generally involve the exchange of interest payment obligations denominated in different currencies; the exchange of principal can be notional or actual. A currency option gives the buyer, on payment of a premium, the right, but not the obligation, to sell specified amounts of currency at agreed rates of exchange on or before a specified future date.
O ther inform ation Financial statem ents Lloyds Banking Group Annual Report and Accounts 2020 255
O ther inform ation Financial statem ents Lloyds Banking Group Annual Report and Accounts 2020 257
Fixed rate bonds3 21,354 — 660 — 405 Cash flow hedges
Customer deposits4 — (31) 5 1 Included within loans and advances to customers. 2 Included within debt securities in issue. 3 Included within financial assets at fair value through other comprehensive income. 4 Included within customer deposits. 5 Included within cash and balances at central banks.
The accumulated amount of fair value hedge adjustments remaining in the balance sheet for hedged items that have ceased to be adjusted for hedging gains and losses is a liability of £761 million (fixed rate issuance liability of £761 million, fixed rate bonds and mortgages £nil) (2019: liability of £692 million (fixed rate issuance liability of £721 million, fixed rate bonds asset of £29 million and fixed rate mortgages of £nil)).
Gains and losses arising from hedge accounting are summarised as follows: Gain (loss) recognised in other comprehensive income £m
Income statement line item that includes reclassified amountAt 31 December 2019
There was a gain of £6 million (2019: gain of £101 million) reclassified from the cash flow hedging reserve for which hedge accounting had previously been used but for which the hedged future cash flows are no longer expected to occur.
Recoveries of advances written off in previous years 250 — 250 250 — 250
Exchange and other adjustments (21) — — — (21) — — — — —
Additions (repayments) (117) — — — (117) — — — — —
Exchange and other adjustments1 — — — (8) (8) — — — 21 21
Impact of transfers between stages (14,244) 13,494 750 — (15) 198 66 249
Recoveries of advances written off in previous years 15 — 15 15 — 15
Discount unwind 20 — 20 1 Exchange and other adjustments includes the impact of movements in exchange rates, derecognising assets as a result of modifications and adjustments in respect of purchased or originated creditimpaired financial assets.
Loans and advances to customers: Financial assets at amortised cost 1,379 2,145 1,984 261 5,769
Recoveries of advances written off in previous years 397 28 425 397 28 425
Total financial assets at amortised cost 464,619 27,548 4,568 13,572 510,307 1 Exchange and other adjustments includes the impact of movements in exchange rates, derecognising assets as a result of modifications and adjustments in respect of purchased or originated creditimpaired financial assets.
Discount unwind 24 — 24 1 Exchange and other adjustments includes the impact of movements in exchange rates, derecognising assets as a result of modifications and adjustments in respect of purchased or originated creditimpaired financial assets.
Stage 1 Stage 2 Stage 3 POCI Total £m £m £m £m £m
In respect of: Loans and advances to banks 2 — — — 2
Loans and advances to customers: Debt securities — — 3 — 3
Expected credit loss in respect of financial assets as fair value through other comprehensive income (memorandum item) — — — — —
O ther inform ation Financial statem ents Lloyds Banking Group Annual Report and Accounts 2020 265
Total financial assets at fair value through other comprehensive income 27,603 25,092
Gross investment in finance leases, receivable: Not later than 1 year 314 490
Later than 1 year and not later than 2 years 187 347
Later than 3 years and not later than 4 years 199 145
Later than 4 years and not later than 5 years 88 171
Equipment leased to customers under finance leases primarily relates to structured financing transactions to fund the purchase of aircraft, ships and other large individual value items. There was an allowance for uncollectable finance lease receivables included in the allowance for impairment losses of £22 million (2019: £12 million).
Note 21: Investments in joint ventures and associates The Group's share of results of, and investments in, equity accounted joint ventures and associates comprises: Joint ventures Associates Total £m £m £m £m £m £m £m £m £m
Share of income statement amounts: Impairment — — — — — — — — —
Share of post-tax results (6) 7 9 (7) (1) — (13) 6 9
Share of balance sheet amounts: Share of net assets at 31 December 279 293 17 11 296 304
O ther inform ation Financial statem ents Lloyds Banking Group Annual Report and Accounts 2020 267 measures and available industry information. New business cash flows beyond the three-year period have been extrapolated using a steady 2 per cent growth rate which does not exceed the long-term average growth rate for the life assurance market. Management believes that any reasonably possible change in the key assumptions above would not cause the recoverable amount of the goodwill relating to Scottish Widows to fall below its balance sheet carrying value.
The recoverable amount of the goodwill relating to Motor Finance has also been based on a value-in-use calculation using pre-tax cash flow projections based on financial budgets and plans approved by management covering a four-year period and a discount rate of 14 per cent. The cash flows beyond the four-year period are extrapolated using a growth rate of 0.5 per cent which does not exceed the long-term average growth rates for the markets in which Motor Finance participates. Management believes that any reasonably possible change in the key assumptions above would not cause the recoverable amount of the goodwill relating to Motor Finance to fall below the balance sheet carrying value. The impairment charge of £4 million related to the goodwill arising on a small, separable acquisition a number of years ago.
The recoverable amount of the goodwill relating to the Cards business has been based on a value-in-use calculation using pre-tax cash flow projections based on financial budgets and plans approved by management covering a five-year period and a discount rate of 13 per cent. The cash flows beyond the five year period assume no growth. Management believes that any reasonably possible change in the key assumptions above would not cause the recoverable amount of the goodwill relating to the Cards business to fall below the balance sheet carrying value.
The liabilities in respect of the Group’s UK annuity business are matched by a portfolio of fixed interest securities, including a large proportion of corporate bonds and illiquid loan assets. The value of the in-force business asset for UK annuity business has been calculated after taking into account an estimate of the market premium for illiquidity in respect of corporate bond holdings and relevant illiquid loan assets. In determining the market premium for illiquidity, a range of inputs are considered which reflect actual asset allocation and relevant observable market data. The illiquidity premium is estimated to be 77 basis points at 31 December 2020 (31 December 2019: 91 basis points).
The table below shows the resulting range of yields and other key assumptions at 31 December: Risk-free rate (value of in-force non-annuity business)1 (0.36) to 3.75 0.00 to 3.90
Expense inflation 3.30 3.41 1 All risk-free rates are quoted as the range of rates implied by the relevant forward swap curve.
Non-economic assumptions Future mortality, morbidity, expenses, lapse and paid-up rate assumptions are reviewed each year and are based on an analysis of past experience and on management’s view of future experience. Further information on these assumptions is given in note 30 and the effect of changes in key assumptions is given in note 31.
O ther inform ation Financial statem ents Lloyds Banking Group Annual Report and Accounts 2020 269
Balance sheet amount at 31 December 2019 380 — 521 — 2,907 3,808
Change in fair value of investment properties (note 7) (209) — — — — (209)
Depreciation charge for the year (note 11) — 127 680 1,011 228 2,046
Balance sheet amount at 31 December 2019 3,553 979 2,464 4,439 1,669 13,104 1 Primarily premises.
Rental income of £191 million (2019: £191 million) and direct operating expenses of £32 million (2019: £32 million) arising from properties that generate rental income have been recognised in the income statement.
Capital expenditure in respect of investment properties which had been contracted for but not recognised in the financial statements was £38 million (2019: £7 million).
Equipment leased to customers under operating leases primarily relates to vehicle contract hire arrangements.
O ther inform ation Financial statem ents Lloyds Banking Group Annual Report and Accounts 2020 271
Note 27: Financial liabilities at fair value through profit or loss £m £m
Note 29: Securitisations and covered bonds Securitisation programmes Loans and advances to customers include loans securitised under the Group’s securitisation programmes, 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.
The Group has not provided financial or other support by voluntarily offering to repurchase assets from any of its public securitisation programmes during 2020 (2019: none).
O ther inform ation Financial statem ents Lloyds Banking Group Annual Report and Accounts 2020 273
Change in liabilities charged to the income statement (note 10) 12,482 151 12,633 1 12,634
Change in liabilities charged to the income statement (note 10) 5,612 (1,022) 4,590 (105) 4,485
(i) Business description The Group principally writes the following types of life insurance contracts within its non-profit funds. Shareholder profits on these types of business arise from management fees and other policy charges.
O ther inform ation Financial statem ents Lloyds Banking Group Annual Report and Accounts 2020 275
Key changes in assumptions A detailed review of the Group’s assumptions in 2020 resulted in a net loss of £151 million (2019: net gain of £336 million). The following were the key impacts on profit before tax: – Change in persistency assumptions (£74 million decrease (2019: £67 million decrease)).
(iv) Options and guarantees outside the With-Profit Funds A number of typical guarantees are provided outside the With-Profit Funds such as guaranteed payments on death (for example term assurance) or guaranteed income for life (e.g. annuities). In addition, certain personal pension policyholders in Scottish Widows, for whom reinstatement to their occupational pension scheme was not an option, have been given a guarantee that their pension and other benefits will correspond in value to the benefits of the relevant occupational pension scheme. The key assumptions affecting the ultimate value of the guarantee are future salary growth, gilt yields at retirement, annuitant mortality at retirement, marital status at retirement and future investment returns. There is currently a provision, calculated on a deterministic basis, of £65 million (2019: £64 million) in respect of those guarantees.
Net claims outstanding at 31 December 265 241 1 Of which an increase of £362 million (2019: increase of £335 million) was in respect of current year claims and a decrease of £44 million (2019: decrease of £48 million) was in respect of prior year claims.
Note 31: Life insurance sensitivity analysis The following table demonstrates the effect of reasonably possible changes in key assumptions on profit before tax and equity disclosed in these financial statements assuming that the other assumptions remain unchanged. In practice this is unlikely to occur, and changes in some assumptions may be correlated. These amounts include movements in assets, liabilities and the value of the in-force business in respect of insurance contracts and participating investment contracts. The impact is shown in one direction but can be assumed to be reasonably symmetrical.
Future maintenance and investment expenses4 10% reduction 332 269 299 248
Guaranteed annuity option take up6 5% addition (2) (1) (1) (1)
Widening of credit default spreads8 0.25% addition (467) (378) (424) (352)
Total charge to the income statement (note 11) 566 532 705 £m £m
The maturity of the Group's lease liabilities was as follows: £m £m
Later than 1 year and not later than 2 years 197 222
Later than 3 years and not later than 4 years 147 170
Later than 4 years and not later than 5 years 123 145
Note 32: Liabilities arising from non-participating investment contracts The movement in liabilities arising from non-participating investment contracts may be analysed as follows: £m £m
(i) Characteristics of and risks associated with the Group’s schemes The Group has established a number of defined benefit pension schemes in the UK and overseas. All significant schemes are based in the UK, with the three most significant being the main sections of the Lloyds Bank Pension Scheme No. 1, the Lloyds Bank Pension Scheme No. 2 and the HBOS Final Salary Pension Scheme. At 31 December 2020, these schemes represented 94 per cent of the Group’s total gross defined benefit pension assets (2019: 94 per cent). These schemes provide retirement benefits calculated as a percentage of final pensionable salary depending upon the length of service; the minimum retirement age under the rules of the schemes at 31 December 2020 is generally 55 although certain categories of member are deemed to have a contractual right to retire at 50.
Terms have now been agreed in principle with the Trustee in respect of the most recent triennial funding valuations of the Group's three main defined benefit pension schemes. The valuations showed an aggregate ongoing funding deficit of approximately £7.3 billion as at 31 December 2019 (a funding level of 85.7 per cent) compared to a £7.3 billion deficit at 31 December 2016 (a funding level of 85.9 per cent). The revised deficit now includes an allowance for the impact of RPI reform announced by the Chancellor of the Exchequer in November 2020. Under the old recovery plan deficit contributions of approximately £0.8 billion were paid in 2020 and £1.3 billion was committed from 2021 to 2024. Under the new recovery plan, £0.8 billion plus a further 30 per cent of in-year capital distributions to ordinary shareholders, up to a limit on total deficit contributions of £2.0 billion per annum, is payable from 2021 until this deficit has been removed. The deficit contributions are in addition to the regular contributions to meet benefits accruing over the year, and to cover the expenses of running the scheme. The Group expects to pay contributions of at least £1.1 billion to its defined benefit schemes in 2021.
The last funding valuations of other Group schemes were carried out on a number of different dates. In order to report the position under IAS 19 as at 31 December 2020 the most recent valuation results for all schemes have been updated by qualified independent actuaries. The funding valuations use a more prudent approach to setting the discount rate and more conservative longevity assumptions than the IAS 19 valuations.
O ther inform ation Financial statem ents Lloyds Banking Group Annual Report and Accounts 2020 279 £m £m
Return on plan assets excluding amounts included in interest income 5,565 3,531
Quoted Unquoted Total Quoted Unquoted Total £m £m £m £m £m £m
O ther inform ation Financial statem ents Lloyds Banking Group Annual Report and Accounts 2020 281
Life expectancy for member aged 60, on the valuation date: Life expectancy for member aged 60, 15 years after the valuation date: The mortality assumptions used in the UK scheme valuations are based on standard tables published by the Institute and Faculty of Actuaries which were adjusted in line with the actual experience of the relevant schemes. The table shows that a member retiring at age 60 at 31 December 2020 is assumed to live for, on average, 27.0 years for a male and 29.0 years for a female. In practice there will be much variation between individual members but these assumptions are expected to be appropriate across all members. It is assumed that younger members will live longer in retirement than those retiring now. This reflects the expectation that mortality rates will continue to fall over time as medical science and standards of living improve. To illustrate the degree of improvement assumed the table also shows the life expectancy for members aged 45 now, when they retire in 15 years’ time at age 60. The Group has considered the impact of COVID-19 and whilst a higher number of deaths have been experienced in 2020, this does not have a material impact on the defined benefit obligation.
Risk exposure of the defined benefit schemes Whilst the Group is not exposed to any unusual, entity specific or scheme specific risks in its defined benefit pension schemes, it is exposed to a number of significant risks, detailed below: Inflation rate risk: the majority of the plans’ benefit obligations are linked to inflation both in deferment and once in payment. Higher inflation will lead to higher liabilities although this will be materially offset by holdings of inflation-linked gilts and, in most cases, caps on the level of inflationary increases are in place to protect against extreme inflation.
Investment risk: Scheme assets are invested in a diversified portfolio of debt securities, equities and other return-seeking assets. If the assets underperform the discount rate used to calculate the defined benefit obligation, it will reduce the surplus or increase the deficit. Volatility in asset values and the discount rate will lead to volatility in the net pension asset on the Group’s balance sheet and in other comprehensive income. To a lesser extent this will also lead to volatility in the pension expense in the Group’s income statement.
(Increase) decrease in the net defined benefit pension scheme surplus £m £m £m £m
The inflation assumption sensitivity applies to both the assumed rate of increase in the Consumer Price Index (CPI) and the Retail Price Index (RPI), and includes the impact on the rate of increases to pensions, both before and after retirement. These pension increases are linked to inflation (either CPI or RPI) subject to certain minimum and maximum limits.
A significant goal of the asset-liability matching strategies adopted by Group schemes is to reduce volatility caused by changes in market expectations of interest rates and inflation. In the main schemes, this is achieved by investing scheme assets in bonds, primarily fixed interest gilts and index linked gilts, and by entering into interest rate and inflation swap arrangements. These investments are structured to take into account the profile of scheme liabilities and actively managed to reflect both changing market conditions and changes to the liability profile.
On 28 January 2020, the main schemes entered into a £10 billion longevity insurance arrangement to hedge around 20 per cent of the schemes’ exposure to unexpected increases in life expectancy. This arrangement forms part of the schemes’ investment portfolio and will provide income to the schemes in the event that pensions are paid out for longer than expected. The transaction is structured as a pass-through with Scottish Widows as the insurer, and onwards reinsurance to Pacific Life Re Limited. The valuation of the swap was nil at inception and whilst there has been a slightly higher than expected number of deaths in the population covered by the arrangement, this has not had a material impact on the value of the swap.
Maturity analysis of benefits expected to be paid: In more than 45 years 2,287 3,160
During the year ended 31 December 2020 the charge to the income statement in respect of defined contribution schemes was £319 million (2019: £287 million; 2018: £300 million), representing the contributions payable by the employer in accordance with each scheme’s rules.
Note 35: Deferred tax The Group’s deferred tax assets and liabilities are as follows: Statutory position £m £m Tax disclosure £m £m
Asset at 31 December 2,696 2,622 Asset at 31 December 2,696 2,622
As a result of legislation enacted in 2016, the UK corporation tax rate had been expected to reduce from 19 per cent to 17 per cent on 1 April 2020. The Group measures its deferred tax assets and liabilities at the value expected to be recoverable or payable in future periods, and so at 31 December 2019 substantially all of its deferred tax was measured using the 17 per cent tax rate. During the December 2019 election campaign, however, the UK Government stated its intention to maintain the corporation tax rate at 19 per cent, and this tax rate was substantively enacted on 17 March 2020. The Group therefore remeasured its deferred tax assets and liabilities at 19 per cent. The deferred tax impact of this remeasurement in 2020 is a credit of £350 million in the income statement and a charge of £51 million in other comprehensive income.
On 29 October 2018, the UK Government announced its intention to restrict the use of capital tax losses to 50 per cent of any future gains arising. This restriction was substantively enacted on 2 July 2020 and as a result the Group recognised additional deferred tax liabilities of £63 million, with an impact of £47 million as a prior year charge in the income statement and £16 million in other comprehensive income, in respect of unrealised gains at that date.
Credit to other comprehensive income — — 74 116 — — — — 190
(Charge) credit to other comprehensive income — — (3) 22 — — — — 19
Exchange and other adjustments — — — — — — (1) (1)
Deferred tax not recognised Deferred tax assets of £85 million (2019: £24 million) have been recognised in respect of the future tax benefit of certain expenses of the life assurance business carried forward. The deferred tax asset not recognised in respect of the remaining expenses is approximately £414 million (2019: £254 million), and these expenses can be carried forward indefinitely. The unrecognised deferred tax asset has increased in 2020 because, as UK markets performed poorly, there was a significant increase in the amount of expenses to carry forward.
In addition, no deferred tax asset is recognised in respect of unrelieved foreign tax credits of £46 million (2019: £46 million), as there are no expected future taxable profits against which the credits can be utilised. These credits can be carried forward indefinitely.
O ther inform ation Financial statem ents Lloyds Banking Group Annual Report and Accounts 2020 285
Provisions for financial commitments and guarantees Provisions are recognised for expected credit losses on undrawn loan commitments and financial guarantees. See also note 18.
Payment protection insurance (excluding MBNA) The Group has made provisions for PPI costs totalling £21,960 million; of which £85 million was recognised in the final quarter of the year ended 31 December 2020. Of the approximately six million enquiries received pre-deadline, more than 99 per cent have now been processed. The £85 million charge in the fourth quarter was driven by the impact of coronavirus delaying operational activities during 2020, the final stages of work to ensure operational completeness ahead of an orderly programme close and final validation of information requests and complaints with third parties that resulted in a limited number of additional complaints to be handled. A small part of the costs incurred during the year also reflect the costs associated with litigation activity to date.
Payment protection insurance (MBNA) As announced in December 2016, the Group's exposure continues to remain capped at £240 million under the terms of the MBNA sale and purchase agreement. No additional charge has been made by MBNA to its PPI provision in the year ended 31 December 2020; total cash payments in the year were £241 million and the remaining provision at 31 December 2020 was £61 million (31 December 2019: £302 million).
HBOS Reading – review The Group completed its compensation assessment for those within the Customer Review in 2019 with more than £109 million of compensation paid, in addition to £15 million for ex-gratia payments and £6 million for the reimbursement of legal fees. The Group is applying the recommendations from Sir Ross Cranston’s review, issued in December 2019, including a reassessment of direct and consequential losses by an independent panel, an extension of debt relief and a wider definition of de facto directors. Further details of the panel were announced on 3 April 2020 and the panel's full scope and methodology was published on 7 July 2020. The panel’s stated objective is to consider cases via a non-legalistic and fair process, and to make their decisions in a generous, fair and common-sense manner. Details of an appeal process for the further assessments of debt relief and de facto director status have also been announced. The Group continues to make progress on its assessment of claims for further debt relief and de facto director status, completing preliminary assessments for 98 per cent of claims on both debt relief and de facto directors. As part of these activities the Group has recorded charges in relation to compensation payments and associated costs (projected to the fourth quarter of 2021) in 2020 in applying the recommendations, in respect of debt relief and de facto director status. During 2021, decisions from the independent panel re-review on direct and consequential losses will start to be issued, which is likely to result in further charges but it is not possible to estimate the potential impact at this stage. The Group is committed to implementing Sir Ross' recommendations in full.
The Dame Linda Dobbs review, which is considering the Group’s handling of HBOS Reading between January 2009 and January 2017, is now expected to complete towards the end of 2021. The cost of undertaking the review is included in the revised provision.
Customer claims in relation to insurance branch business in Germany The Group continues to receive claims from customers in Germany relating to policies issued by Clerical Medical Investment Group Limited (subsequently renamed Scottish Widows Limited), with smaller numbers of claims received from customers in Austria and Italy. The German industry-wide issue regarding notification of contractual 'cooling off' periods continued to lead to a similar number of claims in 2020 as 2019. The total provision made to 31 December 2020 was £674 million (31 December 2019: £656 million); utilisation of the provision was £28 million in the year ended 31 December 2020 (2019: £28 million); the remaining unutilised provision as at 31 December 2020 was £93 million (31 December 2019: £101 million). The ultimate financial effect, which could be significantly different from the current provision, will be known only once all relevant claims have been resolved.
The Group carries provisions of £112 million (2019: £118 million) for indemnities and other matters relating to legacy business disposals in prior years.
Note 37: Subordinated liabilities The movement in subordinated liabilities during the year was as follows: Preference shares
Repurchases and redemptions during the year1 — (1,609) — (3,125) (4,734)
Other movements (all non-cash) 82 186 (23) 592 837 1 The repurchases and redemptions resulted in cash outflows of £3,874 million (2019: £818 million).
Preference shares £m 6.3673% Non-cumulative Fixed to Floating Rate Preference Shares callable 2019 3
Note 38: Share capital (1) Authorised share capital As permitted by the Companies Act 2006, the Company removed references to authorised share capital from its articles of association at the annual general meeting on 5 June 2009. This change took effect from 1 October 2009.
Issued under employee share schemes 786,648,222 775,882,951 768,551,098 79 78 77
Share issuances In 2020, 787 million shares (2019: 776 million shares; 2018: 769 million shares) were issued in respect of employee share schemes.
In addition, the Company is not aware of any agreements between shareholders that may result in restrictions on the transfer of securities and/or voting rights. Information regarding significant direct or indirect holdings of shares in the Company can be found on page 112.
The directors have authority to allot and issue ordinary and preference shares and to make market purchases of ordinary and preference shares as granted at the annual general meeting on 21 May 2020. The authority to issue shares and the authority to make market purchases of shares will expire at the next annual general meeting. Shareholders will be asked, at the annual general meeting, to give similar authorities.
Ordinary shares The holders of ordinary shares, who held 100 per cent of the total ordinary share capital at 31 December 2020, are entitled to receive the Company’s report and accounts, attend, speak and vote at general meetings and appoint proxies to exercise voting rights. Holders of ordinary shares may also receive a dividend (subject to the provisions of the Company’s articles of association) and on a winding up may share in the assets of the Company.
Preference shares The Company has in issue various classes of preference shares which are all classified as liabilities under accounting standards and which are included in note 37.
These securities will, in the event of the winding-up of the issuer, be subordinated to the claims of depositors and all other creditors of the issuer, other than creditors whose claims rank equally with, or are junior to, the claims of the holders of the subordinated liabilities. The subordination of specific subordinated liabilities is determined in respect of the issuer and any guarantors of that liability. The claims of holders of preference shares and preferred securities are generally junior to those of the holders of undated subordinated liabilities, which in turn are junior to the claims of holders of the dated subordinated liabilities. The Group has not had any defaults of principal, interest or other breaches with respect to its subordinated liabilities during 2020 (2019: none).
Revaluation reserve in respect of equity shares held at fair value through other comprehensive income (47) 19 5
Profit for the year attributable to other equity holders 453 466 433
– The securities bear a fixed rate of interest until the first call date. After the initial call date, in the event that they are not redeemed, the AT1 securities will bear interest at rates fixed periodically in advance for five year periods based on market rates.
– Interest on the securities will be due and payable only at the sole discretion of Lloyds Banking Group plc, and Lloyds Banking Group plc may at any time elect to cancel any Interest Payment (or any part thereof) which would otherwise be payable on any Interest Payment Date. There are also certain restrictions on the payment of interest as specified in the terms.
– The securities convert into ordinary shares of Lloyds Banking Group plc, at a pre-determined price, should the fully loaded Common Equity Tier 1 ratio of the Group fall below 7.0 per cent.
Gains and losses attributable to own credit risk (net of tax)1 (55) (306) 389
Other employee award schemes 74 165 207 1 During 2020 the Group derecognised, on redemption, financial liabilities on which cumulative fair value movements relating to own credit of £1 million net of tax (2019: £nil; 2018: £nil), had been recognised directly in retained profits.
The payment of dividends by subsidiaries and the ability of members of the Group to lend money to other members of the Group may be subject to regulatory or legal restrictions, the availability of reserves and the financial and operating performance of the entity. Details of such restrictions and the methods adopted by the Group to manage the capital of its subsidiaries are provided under Capital Risk on page 189.
O ther inform ation Financial statem ents Lloyds Banking Group Annual Report and Accounts 2020 291
At the time of approving the Group’s results for the year ended 31 December 2019, the directors recommended a final dividend of 2.25 pence per share (2018: 2.14 pence per share) representing a total dividend of £1,586 million (2018: £1,523 million), which was to be paid on 27 May 2020. However, on 31 March 2020 the Group announced the cancellation of its final 2019 ordinary dividend. This decision was taken by the Board at the specific request of the regulator, the PRA, in line with all other major UK listed banks, as a result of the developing coronavirus crisis.
Dividends paid during the year were as follows: pence per share pence per share pence per share £m £m £m
During the year ended 31 December 2020 the Group operated the following share-based payment schemes, all of which are equity settled.
Group Performance Share plan The Group operates a Group Performance Share plan that is equity settled. No award has been made in respect of 2020; the charge in the year relates to prior year awards for which the deferral period has completed.
Save-As-You-Earn schemes Eligible employees may enter into contracts through the Save-As-You-Earn (SAYE) schemes to save up to £500 per month and, at the expiry of a fixed term of three years, have the option to use these savings within six months of the expiry of the fixed term to acquire shares in the Group at a discounted price of no less than 80 per cent (90 per cent for the 2020 plan) of the market price at the start of the invitation.
The weighted average fair value of options granted in the year was £0.33 (2019: £0.59). The fair values of options granted have been determined using a standard Black-Scholes model. The weighted average share price at the time that the options were exercised during 2020 was £0.36 (2019: £0.60). The weighted average remaining contractual life of options outstanding at the end of the year was 4.1 years (2019: 3.8 years).
Other share plans Lloyds Banking Group Executive Group Ownership Share Plan The plan, introduced in 2006, is aimed at delivering shareholder value by linking the receipt of shares to an improvement in the performance of the Group over a three year period. Awards are made within limits set by the rules of the plan, with the limits determining the maximum number of shares that can be awarded equating to three times annual salary. In exceptional circumstances this may increase to four times annual salary.
At the end of the performance period for the 2017 grant, the targets had not been fully met and therefore these awards vested in 2020 at a rate of 49.7 per cent.
Awards in respect of the 2018 grant vested in 2021 at a rate of 33.75 per cent. In previous years participants were entitled to any dividends paid in the vesting period. However, following a regulatory change prohibiting the payment of dividend equivalents on awards, the number of shares subject to award was determined by applying an adjustment factor to the share price on grant. Details of the performance conditions for the plan are provided in the Directors’ remuneration report.
The weighted average fair value of awards granted in 2019 was £0.55.
On 20 May 2020, the Group made an award of £200 (2019: £200) of shares to all eligible employees. The number of shares awarded was 45,612,424 (2019: 22,422,337), with an average fair value of £0.30 (2019: £0.62) based on the market price at the date of award.
Granted, including certain adjustments (includes entitlements of appointed key management personnel) — — —
Exercised/lapsed (includes entitlements of former key management personnel) — — (1)
Exercised/lapsed (includes entitlements of former key management personnel) (30) (29) (37)
Repayments (includes loans of former key management personnel) — (1) (1)
No provisions have been recognised in respect of loans given to key management personnel (2019 and 2018: £nil).
Collective investment vehicles The Group manages 137 (2019: 141) collective investment vehicles, such as Open Ended Investment Companies (OEICs) and of these 76 (2019: 75) are consolidated. The Group invested £659 million (2019: £804 million) and redeemed £1,159 million (2019: £1,771 million) in the unconsolidated collective investment vehicles during the year and had investments, at fair value, of £2,234 million (2019: £3,417 million) at 31 December. The Group earned fees of £93 million from the unconsolidated collective investment vehicles during 2020 (2019: £127 million).
Joint ventures and associates At 31 December 2020 there were loans and advances to customers of £28 million (2019: £75 million) outstanding and balances within customer deposits of £73 million (2019: £5 million) relating to joint ventures and associates.
In addition to the above balances, the Group has a number of other associates held by its venture capital business that it accounts for at fair value through profit or loss. At 31 December 2020, these companies had total assets of approximately £4,387 million (2019: £4,761 million), total liabilities of approximately £4,928 million (2019: £5,322 million) and for the year ended 31 December 2020 had turnover of approximately £3,857 million (2019: £4,286 million) and made a net loss of approximately £435 million (2019: net loss of £190 million). In addition, the Group has provided £1,295 million (2019: £1,266 million) of financing to these companies on which it received £91 million (2019: £86 million) of interest income in the year.
Note 46: Contingent liabilities, commitments and guarantees Interchange fees With respect to multi-lateral interchange fees (MIFs), the Group is not involved in the ongoing litigation which involves card schemes such as 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 retailers against both Visa and Mastercard continues in the English Courts (and includes a judgment of the Supreme Court in June 2020 upholding the Court of Appeal's finding in 2018 that historic interchange arrangements of Mastercard and Visa infringed competition law); and
It is currently not possible to predict the scope and ultimate outcome on the Group of the various outstanding regulatory investigations not encompassed by the settlements, any private lawsuits or any related challenges to the interpretation or validity of any of the Group's contractual arrangements, including their timing and scale. As such, it is not practicable to provide an estimate of any potential financial effect.
Other legal actions and regulatory matters In addition, during the ordinary course of 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, investors or other third parties, as well as legal and regulatory reviews, challenges, investigations and enforcement actions, both in the UK and overseas. All 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. In those instances where it is concluded that it is more likely than not that a payment will be made, a provision is established to management's best estimate of the amount required at the relevant balance sheet date. In some cases it will not be possible to form a view, for example because the facts are unclear or because further time is needed properly to assess the merits of the case, and no provisions are held in relation to such matters. In these circumstances, specific disclosure in relation to a contingent liability will be made where material. However 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.
Note 47: Structured entities The Group’s interests in structured entities are both consolidated and unconsolidated. Details of the Group’s interests in consolidated structured entities are set out in note 29 for securitisations and covered bond vehicles, note 34 for structured entities associated with the Group’s pension schemes, and below in part (A) and (B). Details of the Group’s interests in unconsolidated structured entities are included below in part (C).
(B) Consolidated collective investment vehicles and limited partnerships The assets of the Insurance business held in consolidated collective investment vehicles, such as Open-Ended Investment Companies and limited partnerships, are not directly available for use by the Group. However, the Group’s investment in the majority of these collective investment vehicles is readily realisable. As at 31 December 2020, the total carrying value of these consolidated collective investment vehicle assets and liabilities held by the Group was £57,430 million (2019: £68,724 million).
The Group considers itself the sponsor of a structured entity where it is primarily involved in the design and establishment of the structured entity and further where the Group transfers assets to the structured entity, markets products associated with the structured entity in its own name and/or provides guarantees regarding the structured entity’s performance.
Items in the course of collection from banks — — — — — 299 — 299
Financial assets at fair value through profit or loss — 20,825 150,801 — — — — 171,626
Derivative financial instruments 816 28,797 — — — — — 29,613
Loans and advances to banks — — — — — 10,746 — 10,746
Assets arising from contracts held with reinsurers — — 19,543 — — — 842 20,385
Items in course of transmission to banks — — — — — 306 — 306
Financial liabilities at fair value through profit or loss — 15,818 — 6,828 — — — 22,646
Derivative financial instruments 684 26,629 — — — — — 27,313
Notes in circulation — — — — — 1,305 — 1,305
Debt securities in issue — — — — — 87,397 — 87,397
Derivative financial instruments 1,236 25,133 — — — — — 26,369
Loans and advances to customers — — — — — 494,988 — 494,988
Financial assets at amortised cost — — — — — 510,307 — 510,307
Financial assets at fair value through other comprehensive income — — — — 25,092 — — 25,092
Financial liabilities at fair value through profit or loss — 13,955 — 7,531 — — — 21,486
Derivative financial instruments 1,105 24,674 — — — — — 25,779
Debt securities in issue — — — — — 97,689 — 97,689
Liabilities arising from nonparticipating investment contracts — — — — — — 37,459 37,459
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, notes in circulation and liabilities arising from non-participating investment contracts. Fair values have not been disclosed for discretionary participating investment contracts. There is currently no agreed definition of fair valuation for discretionary participation features applied under IFRS and therefore the range of possible fair values of these contracts cannot be measured reliably.
Level 2 Level 2 valuations are those where quoted market prices are not available, for example where the instrument is traded in a market that is not considered to be active or valuation techniques are used to determine fair value and where these techniques use inputs that are based significantly on observable market data. Examples of such financial instruments include most over-the-counter derivatives, financial institution issued securities, certificates of deposit and certain asset-backed securities.
(3) Financial assets and liabilities carried at fair value (A) Financial assets, excluding derivatives Valuation hierarchy At 31 December 2020, the Group’s financial assets carried at fair value, excluding derivatives, totalled £218,772 million (2019: £208,098 million). The table below analyses these financial assets by balance sheet classification, asset type and valuation methodology (level 1, 2 or 3, as described on page 300). The fair value measurement approach is recurring in nature. There were no significant transfers between level 1 and 2 during the year.
Assets arising from contracts held with reinsurers — 19,543 — 19,543
Total financial assets carried at fair value, excluding derivatives 129,901 73,479 15,392 218,772
Bank and building society certificates of deposit 52 932 — 984
Financial assets at fair value through profit or loss 112,473 32,808 14,908 160,189
Total financial assets at fair value through profit or loss 112,473 55,625 14,908 183,006
Total financial assets at fair value through other comprehensive income 13,411 11,273 408 25,092
Transfers out of the level 3 portfolio (399) — (399) (134) — (134)
Gains (losses) recognised in the income statement, within other income, relating to the change in fair value of those assets held at 31 December 109 — 109 269 — 269
Loans and advances to customers and banks The fair value of these assets is determined using discounted cash flow techniques. The discount rates are derived from market observable interest rates, a risk margin that reflects loan credit ratings and an incremental illiquidity premium based on historical spreads at origination on similar loans.
Where there is limited trading activity in debt securities, the Group uses valuation models, consensus pricing information from third party pricing services and broker or lead manager quotes to determine an appropriate valuation. Debt securities are classified as level 3 if there is a significant valuation input that cannot be corroborated through market sources or where there are materially inconsistent values for an input. Asset classes classified as level 3 mainly comprise certain collateralised loan obligations and collateralised debt obligations.
Liabilities designated at fair value through profit or loss — 6,783 45 6,828
Gains recognised in the income statement, within other income, relating to the change in fair value of those liabilities held at 31 December — —
O ther inform ation Financial statem ents Lloyds Banking Group Annual Report and Accounts 2020 305
(C) Derivatives All of the Group’s derivative assets and liabilities are carried at fair value. At 31 December 2020, such assets totalled £29,613 million (2019: £26,369 million) and liabilities totalled £27,313 million (2019: £25,779 million). The table below analyses these derivative balances by valuation methodology (level 1, 2 or 3, as described on page 300). The fair value measurement approach is recurring in nature. There were no significant transfers between level 1 and level 2 during the year.
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total £m £m £m £m £m £m £m £m
Where the Group’s derivative assets and liabilities are not traded on an exchange, they are valued using valuation techniques, including discounted cash flow and options pricing models, as appropriate. The types of derivatives classified as level 2 and the valuation techniques used include: – Interest rate swaps which are valued using discounted cash flow models; the most significant inputs into those models are interest rate yield curves which are developed from publicly quoted rates.
Certain unobservable inputs used to calculate CVA, FVA, and own credit adjustments, are not significant in determining the classification of the derivative and debt instruments. Consequently, these inputs do not form part of the level 3 sensitivities presented.
The table below analyses movements in level 3 derivative assets and liabilities carried at fair value.
Losses (gains) recognised in the income statement within other income 84 (112) 81 (75)
Credit and Debit Valuation Adjustments (CVA and DVA) are applied to the Group’s over-the-counter derivative exposures with counterparties that are not subject to strong interbank collateral arrangements. These exposures largely relate to the provision of risk management solutions for corporate customers within the Commercial Banking division.
The risk exposures that are used for the CVA and DVA calculations are strongly influenced by interest rates. Due to the nature of the Group’s business the CVA/DVA exposures tend to be on average the same way around such that the valuation adjustments fall when interest rates rise. A one per cent rise in interest rates would lead to a £83 million fall in the overall valuation adjustment to £240 million. The CVA model used by the Group does not assume any correlation between the level of interest rates and default rates.
The Group has also recognised a Funding Valuation Adjustment to adjust for the net cost of funding uncollateralised derivative positions. This adjustment is calculated on the expected future exposure discounted at a suitable cost of funds. A ten basis points increase in the cost of funds will increase the funding valuation adjustment by approximately £26 million.
At 31 December 2020, the Group’s derivative trading business held mid to bid-offer valuation adjustments of £83 million (2019: £80 million).
Underlying asset/ net asset value (incl. property prices), broker quotes or discounted cash flows3 n/a
Level 3 financial liabilities carried at fair value 1,419 1,415 1 Ranges are shown where appropriate and represent the highest and lowest inputs used in the level 3 valuations.
– Earnings multiples are used to value certain unlisted equity investments; a higher earnings multiple will result in a higher fair value.
Derivatives Reasonably possible alternative assumptions have been determined in respect of swaptions in the Group’s derivative portfolios which are priced using industry standard option pricing models. Such models require interest rate volatilities which may be unobservable at longer maturities. To derive reasonably possible alternative valuations these volatilities have been flexed within a range of 13 per cent to 128 per cent (2019: 10 per cent to 128 per cent).
O ther inform ation Financial statem ents Lloyds Banking Group Annual Report and Accounts 2020 309
(4) Financial assets and liabilities carried at amortised cost (A) Financial assets Valuation hierarchy The table below analyses the fair values of the financial assets of the Group which are carried at amortised cost by valuation methodology (level 1, 2 or 3, as described on page 300). Financial assets carried at amortised cost are mainly classified as level 3 due to significant unobservable inputs used in the valuation models. Where inputs are observable, debt securities are classified as level 1 or 2.
Financial assets at amortised cost: Loans and advances to customers: Stage 11 449,300 449,477 — 54,600 394,877
Loans and advances to customers: Stage 2 27,548 28,259 — — 28,259
Loans and advances to customers: POCI 13,572 13,572 — — 13,572
Reverse repos included in above amounts: Loans and advances to customers 54,600 54,600 — 54,600 —
Loans and advances to banks The carrying value of short-dated loans and advances to banks is assumed to be their fair value. The fair value of loans and advances to banks is estimated by discounting the anticipated cash flows at a market discount rate adjusted for the credit spread of the obligor or, where not observable, the credit spread of borrowers of similar credit quality.
Debt securities The fair values of debt securities are determined predominantly from lead manager quotes and, where these are not available, by alternative techniques including reference to credit spreads on similar assets with the same obligor, market standard consensus pricing services, broker quotes and other research data.
Deposits from banks and customer deposits The fair value of bank and customer deposits repayable on demand is assumed to be equal to their carrying value.
Financial assets at fair value through other comprehensive income 6,025 5,105 7,897 5,875
Financial assets at amortised cost: Loans and advances to customers1 34,584 4,451 42,545 7,335 1 The carrying value of associated liabilities excludes securitisation notes held by the Group of £27,448 million (31 December 2019: £31,436 million).
Financial assets at fair value through profit or loss: Loans and advances to banks: Loans and advances to customers: Financial assets at fair value through other comprehensive income 27,603 — 27,603 — (5,132) 22,471
Financial assets at fair value through profit or loss: Loans and advances to banks: Loans and advances to customers: Financial assets at fair value through other comprehensive income 25,092 — 25,092 — (5,859) 19,233
At 31 December 2020 the aggregate notional principal of interest rate swaps designated as fair value hedges was £215,325 million (2019: £183,489 million) with a net fair value asset of £211 million (2019: asset of £569 million) (note 17). The gains on the hedging instruments were £988 million (2019: gains of £1,144 million). The losses on the hedged items attributable to the hedged risk were £441 million (2019: losses of £1,001 million). The gains and losses relating to the fair value hedges are recorded in net trading income.
The interest rate benchmark reforms also affect assets designated in fair value hedges with a notional of £107,340 million (2019: £102,969 million), of which £103,438 million (2019: £98,278 million) is in respect of Sterling LIBOR, and liabilities designated in fair value hedges with a notional of £35,360 million (2019: £62,295 million), of which £10,518 million (2019: £9,186 million) is in respect of Sterling LIBOR. These fair value hedges principally relate to mortgages in Retail and debt securities in issue.
At 31 December 2020, the notional amount of the hedging instruments in hedging relationships to which these amendments apply was £464,744 million (2019: £604,602 million), of which £116,498 million (2019: £117,076 million) relates to Sterling LIBOR fair value hedges and £302,707 million (2019: £400,439 million) relates to Sterling LIBOR cash flow hedges.
The Group is managing the process to transition to alternative benchmark rates under its Group-wide IBOR Transition Programme. This programme has developed an implementation plan for new products and a transition plan for legacy products. The programme also encompasses the associated impacts on systems, processes, accounting and reporting and includes dealing with the impact on hedge accounting relationships of the transition to alternative reference rates.
(B) Foreign exchange risk The corporate and retail businesses incur foreign exchange risk in the course of providing services to their customers. All non-structural foreign exchange exposures in the non-trading book are transferred to the trading area where they are monitored and controlled. These risks reside in the authorised trading centres who are allocated exposure limits. The limits are monitored daily by the local centres and reported to the market and liquidity risk function in London. Associated VaR and the closing, average, maximum and minimum are disclosed on page 159. The Group also manages foreign currency risk via cash flow hedge accounting, utilising currency swaps.
Credit risk The Group’s credit risk exposure arises in respect of the instruments below and predominantly in the United Kingdom. Information about the Group’s exposure to credit risk, credit risk management, measurement and mitigation can be found on pages 160 to 182.
Loans and advances to banks, net2 10,746 — 10,746 9,775 — 9,775
Financial assets at fair value through other comprehensive income3 27,437 — 27,437 24,865 — 24,865
Total loans and advances to customers before allowance for impairment losses 504,603 498,247
Total loans and advances to customers 498,843 494,988 1 Includes both UK and overseas mortgage balances.
The Group’s operations are predominantly UK-based and as a result an analysis of credit risk exposures by geographical region is not provided.
(C) Credit quality of assets Loans and advances The analysis of lending has been prepared based on the division in which the asset is held; with the business segment in which the exposure is recorded reflected in the ratings system applied. The internal credit ratings systems used by the Group differ between Retail and Commercial, reflecting the characteristics of these exposures and the way that they are managed internally; these credit ratings are set out below. All probabilities of default (PDs) include forward-looking information and are based on 12 month values, with the exception of credit impaired.
Quality classification IFRS 9 PD range Quality classification IFRS 9 PD range
Stage 3 assets include balances of £179 million (2019: £205 million) (with outstanding amounts due of £732 million (2019: £1,700 million)) which have been subject to a partial write-off and where the Group continues to enforce recovery action.
Stage 2 and Stage 3 assets with a carrying amount of £22,200 million (2019: £219 million) were modified during the year. No material gain or loss was recognised by the Group.
As at 31 December 2020 and 2019, assets that had been previously modified whilst classified as Stage 2 or Stage 3 and were classified as Stage 1 were not material.
CMS 19 — — — — — — — — — —
RMS 7-9 — — — — — — — — — —
RMS 10 — — — — — — — — — —
Central overlay — — — — — 400 — — — 400
In respect of: Total loans and advances to customers 433,943 51,659 6,490 12,511 504,603 1,372 2,145 1,982 261 5,760 1 Principally comprises reverse repurchase agreement balances.
RMS 14 — — — — — — — — — —
Total loans and advances to customers 139,075 8,441 285 74 147,875 212 234 13 — 459
In respect of: Total loans and advances to customers 139,075 8,441 285 74 147,875 212 234 13 — 459
Loans and advances to banks: CMS 11-14 — — — — — — — — — —
Debt securities held at amortised cost An analysis by credit rating of the Group’s debt securities held at amortised cost is provided below: Investment grade1 Other2 Total
Asset-backed securities: Corporate and other debt securities 1,721 28 1,749 1,650 14 1,664
2 Other comprises sub-investment grade (2020: £8 million; 2019: £nil) and not rated (2020: £40 million; 2019: £14 million).
Financial assets at fair value through other comprehensive income (excluding equity shares) An analysis of the Group’s financial assets at fair value through other comprehensive income is included in note 20. The credit quality of the Group’s financial assets at fair value through other comprehensive income (excluding equity shares) is set out below: Investment grade1 Other2 Total
Corporate and other debt securities 12,786 149 12,935 11,036 15 11,051
Debt securities, treasury and other bills held at fair value through profit or loss An analysis of the Group’s financial assets at fair value through profit or loss is included in note 16. Substantially all of the loans and advances to customers and banks recognised at fair value through profit or loss have a good quality rating. The credit quality of the Group’s debt securities, treasury and other bills held at fair value through profit or loss is set out below: Investment grade1 Other2 Total
Asset-backed securities: Other asset-backed securities 261 — 261 241 — 241
Corporate and other debt securities 15,743 2,145 17,888 15,932 2,051 17,983
Treasury bills and other bills 18 — 18 19 — 19
2 Other comprises sub-investment grade (2020: £344 million; 2019: £251 million) and not rated (2020: £1,839 million; 2019: £1,846 million).
Investment grade1 Other2 Total £m £m £m £m £m £m 1 Credit ratings equal to or better than ‘BBB’.
O ther inform ation Financial statem ents Lloyds Banking Group Annual Report and Accounts 2020 327
The Group holds collateral in respect of loans and advances to banks and customers as set out below. The Group does not hold collateral against debt securities, comprising asset-backed securities and corporate and other debt securities, which are classified as financial assets held at amortised cost.
Loans and advances to banks There were reverse repurchase agreements which are accounted for as collateralised loans within loans and advances to banks with a carrying value of £2,686 million (2019: £1,555 million), against which the Group held collateral with a fair value of £2,682 million (2019: £1,516 million).
At 31 December 2020 70 per cent to 80 per cent 43,656 3,364 187 1,303 48,510 29 136 46 58 269 80 per cent to 90 per cent 21,508 1,009 74 470 23,061 28 79 31 34 172 90 per cent to 100 per cent 555 126 21 190 892 3 16 11 19 49
Stage 1 Stage 2 Stage 3 POCI Total gross Stage 1 Stage 2 Stage 3 POCI
Reverse repurchase transactions At 31 December 2020 there were reverse repurchase agreements which were accounted for as collateralised loans with a carrying value of £58,643 million (2019: £54,600 million), against which the Group held collateral with a fair value of £59,157 million (2019: £52,982 million), all of which the Group was able to repledge. There were no collateral balances in the form of cash provided in respect of reverse repurchase agreements included in these amounts (2019: £nil). These transactions were generally conducted under terms that are usual and customary for standard secured lending activities.
Stage 1 and Stage 2 secured commercial lending is predominantly managed on a cash flow basis. On occasion, it may include an assessment of underlying collateral, although, for Stage 3 lending, this will not always involve assessing it on a fair value basis. No aggregated collateral information for the entire unimpaired secured commercial lending portfolio is provided to key management personnel.
Financial assets at fair value through profit or loss (excluding equity shares) Included in financial assets at fair value through profit or loss are reverse repurchase agreements treated as collateralised loans with a carrying value of £12,993 million (2019: £11,269 million). Collateral is held with a fair value of £13,169 million (2019: £11,081 million), all of which the Group is able to repledge. At 31 December 2020, £10,049 million had been repledged (2019: £9,605 million).
In addition, securities held as collateral in the form of stock borrowed amounted to £54,232 million (2019: £32,888 million). Of this amount, £52,887 million (2019: £30,594 million) had been resold or repledged as collateral for the Group’s own transactions.
Irrevocable loan commitments and other credit-related contingencies At 31 December 2020, the Group held irrevocable loan commitments and other credit-related contingencies of £76,515 million (2019: £66,398 million). Collateral is held as security, in the event that lending is drawn down, on £19,548 million (2019: £12,391 million) of these balances.
O ther inform ation Financial statem ents Lloyds Banking Group Annual Report and Accounts 2020 329
Deposits from banks Included in deposits from banks are balances arising from repurchase transactions of £18,767 million (2019: £18,105 million); the fair value of the collateral provided under these agreements at 31 December 2020 was £18,874 million (2019: £17,545 million).
Customer deposits Included in customer deposits are balances arising from repurchase transactions of £9,417 million (2019: £9,530 million); the fair value of the collateral provided under these agreements at 31 December 2020 was £8,087 million (2019: £9,221 million).
Financial liabilities at fair value through profit or loss The fair value of collateral pledged in respect of repurchase transactions, accounted for as secured borrowing, where the secured party is permitted by contract or custom to repledge was £12,608 million (2019: £8,324 million).
Securities lending transactions The following on balance sheet financial assets have been lent to counterparties under securities lending transactions: £m £m
Up to 1 month 1-3 months 3-6 months 6-9 months 9-12 months 1-2 years 2-5 years
Loans and advances to customers 27,200 23,432 27,322 16,092 12,088 30,342 73,562 288,805 498,843
Derivative financial instruments and financial liabilities at fair value through profit or loss 5,099 8,182 4,666 1,529 324 1,728 4,541 23,890 49,959
Cash and balances at central banks 55,128 2 — — — — — — 55,130
Financial liabilities at fair value through profit or loss 3,904 7,117 5,096 2,139 10,513 28,769
Liabilities arising from non-participating investment contracts 38,450 — — — — 38,450
Liabilities arising from non-participating investment contracts 37,459 — — — — 37,459
The principal amount for undated subordinated liabilities with no redemption option is included within the over five years column; interest of approximately £24 million (2019: £29 million) per annum which is payable in respect of those instruments for as long as they remain in issue is not included beyond five years.
Change in financial assets held at amortised cost (7,634) (12,423) (27,038)
Change in derivative financial instruments and financial assets at fair value through profit or loss (14,315) 3,887 22,046
Change in derivative financial instruments and financial liabilities at fair value through profit or loss 2,619 (5,078) (24,606)
Up to 1 month 1-3 months 3-6 months 6-9 months 9-12 months 1-3 years 3-5 years
O ther inform ation Financial statem ents Lloyds Banking Group Annual Report and Accounts 2020 333
Net charge in respect of defined benefit schemes 247 245 405
Included within cash and cash equivalents at 31 December 2020 is £84 million (2019: £49 million; 2018: £40 million) held within the Group's long-term insurance and investments businesses, which is not immediately available for use in the business.
Note 53: Future accounting developments The following pronouncements are not applicable for the year ending 31 December 2020 and have not been applied in preparing these financial statements. Save as disclosed below, the impact of these accounting changes is still being assessed by the Group and reliable estimates cannot be made at this stage.
These amendments are not expected to have a significant impact on the Group.
Minor amendments to other accounting standards The IASB has issued a number of minor amendments to IFRSs effective 1 January 2021 and in later years (including IFRS 9 Financial Instruments and IAS 37 Provisions, Contingent Liabilities and Contingent Assets). These amendments are not expected to have a significant impact on the Group.
Net assets acquired: Financial assets at fair value through profit or loss — 7,350 —
O ther inform ation Financial statem ents Lloyds Banking Group Annual Report and Accounts 2020 335
The directors approved the parent company financial statements on 23 February 2021.
Other equity instruments Total equity £ million £ million £ million £ million £ million £ million £ million
Issue of other equity instruments — — — (7) (7) 1,136 1,129
Value of employee services: Share option schemes — — — 53 53 — 53
Distributions on other equity instruments — — — — — (466) (466)
Issue of ordinary shares 107 — — — 107 — 107
Issue of other equity instruments — — — (5) (5) 896 891
Movement in treasury shares — — — (52) (52) — (52)
Value of employee services: Share option schemes — — — 48 48 — 48
Other employee award schemes — — — 74 74 — 74 1 No statement of comprehensive income has been shown for the parent company, as permitted by section 408 of the Companies Act 2006. Total comprehensive income comprises only the profit for the year.
Net cash (used in) provided by investing activities (3,101) 13,713 (5,911)
Cash and cash equivalents at end of year 7 29 57
Note 4: Share capital, share premium account and other equity instruments Details of the Company’s share capital, share premium account and other equity instruments are as set out in notes 38, 39 and 42 to the consolidated financial statements.
Note 3: Amounts due from subsidiaries These comprise short-term lending to subsidiaries, repayable on demand. As required by IFRS 9, the Company has established an allowance for impairment losses for amounts due from its subsidiaries (31 December 2020: £3 million; 31 December 2019: £1 million) based on the probability of its subsidiaries defaulting on the amounts payable in the next 12 months. The carrying value of the amounts owed by subsidiaries is a reasonable approximation to fair value.
Note 1: Basis of preparation and accounting policies The financial statements of Lloyds Banking Group plc comply with international accounting standards in conformity with the requirements of the Companies Act 2006. The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). IFRS comprises accounting standards prefixed IFRS issued by the International Accounting Standards Board (IASB) and those prefixed IAS issued by the IASB’s predecessor body as well as interpretations issued by the IFRS Interpretations Committee and its predecessor body. On adoption of IFRS 9 in 2018, the Group elected to continue applying hedge accounting under IAS 39.
Issue costs of other equity instruments (net of tax) — (5) (7)
Note 10: Related party transactions Key management personnel The key management personnel of the Group and the Company are the same. The relevant disclosures are given in note 45 to the consolidated financial statements.
Ordinary share capital Other capital instruments Total £m £m £m £m £m £m
In addition the Company carries out banking activities through its subsidiary, Lloyds Bank plc. At 31 December 2020, the Company held deposits of £7 million with Lloyds Bank plc (2019: £29 million). Given the volume of transactions flowing through the account, it is not meaningful to provide gross inflow and outflow information. Included within other liabilities is £805 million (2019: £105 million) due to subsidiary undertakings. In addition, at 31 December 2020 the Company had interest rate and currency swaps with Lloyds Bank plc and Lloyds Bank Corporate Markets plc with an aggregate notional principal amount of £49,388 million and a net positive fair value of £1,029 million (2019: notional principal amount of £37,555 million and a net positive fair value of £338 million). Of this amount an aggregate notional principal amount of £19,909 million and a net positive fair value of £1,418 million (2019: notional principal amount of £21,164 million and a net positive fair value of £707 million) were designated as fair value hedges to manage the Company’s issuance of subordinated liabilities.
Held at amortised cost Held for trading Other Total £m £m £m £m £m £m
Financial assets at fair value through profit or loss — — 12,516 — — 12,516
Financial liabilities at fair value through profit or loss — — — 3,464 — 3,464
Financial liabilities at fair value through profit or loss 30 31 41 3,554 — 3,656
The principal amount for undated subordinated liabilities with no redemption option is included within the over 5 years column; interest of approximately £1 million (2019: £1 million) per annum which is payable in respect of those instruments for as long as they remain in issue is not included beyond 5 years.
Annual general meeting (AGM) The health and wellbeing of the Group's shareholders, customers and employees are of paramount importance and the Board is constantly reviewing the impacts of the COVID-19 pandemic. The Board is considering the format of this year’s AGM to ensure that shareholders have the opportunity to suitably engage with the Board. Details will be made available in the Notice of AGM, which will be published towards the end of March and will be available on our website at www.lloydsbankinggroup.com
Note: All internet services are available 24/7. Telephone dealing services are available between 8.00 am and 9.00 pm, Monday to Friday. To open a share dealing account with any of these services, you must be 18 years of age or over and be resident in the UK, Jersey, Guernsey or the Isle of Man.
O ther inform ation Lloyds Banking Group Annual Report and Accounts 2020 345
For details contact: BNY Mellon Shareowner Services, 462 South 4th Street, Suite 1600, Louisville KY 40202. Telephone: 1-866-259-0336 (US toll free), international callers: +1 201-680-6825. Alternatively visit www.adrbnymellon.com or email shrrelations@cpushareownerservices.com
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Total income, net of insurance claims 15,126 18,359 18,626 18,659 17,267
Profit for the year attributable to ordinary shareholders 865 2,459 3,975 3,144 2,092
Number of ordinary shares in issue (millions) 7 70,839 70,053 71,164 71,973 71,374
Post-tax return on average shareholders’ equity 2.0 5.7 9.3 7.2 4.9
5 At the time of approving the Group’s results for the year ended 31 December 2019, the directors recommended a final dividend of 2.25 pence per share representing a total dividend of £1,586 million, which was to be paid on 27 May 2020. However, on 31 March 2020 the Group announced the cancellation of its final 2019 ordinary dividend. This decision was taken by the Board at the specific request of the regulator, the PRA, in line with all other major UK listed banks, as a result of the developing coronavirus crisis.
7 For 2016, this figure excluded the limited voting ordinary shares owned by the Lloyds Bank Foundations. The limited voting ordinary shares were redesignated as ordinary shares on 1 July 2017.
8 Averages are calculated on a monthly basis from the consolidated financial data of Lloyds Banking Group.
9 Total dividend for the year divided by earnings attributable to ordinary shareholders adjusted for tax relief on distributions to other equity holders.
10 The cost:income ratio is calculated as total operating expenses as a percentage of total income (net of insurance claims).
O ther inform ation Lloyds Banking Group Annual Report and Accounts 2020 347
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 Banking Group plc together with its subsidiaries (the Group) and its current goals and expectations relating to its future financial condition and performance. Statements that are not historical facts, including statements about the Group's or its directors' and/or management's beliefs and expectations, are forward-looking statements.
Words such as ‘believes’, ‘achieves’, ‘anticipates’, ‘estimates’, ‘expects’, ‘targets’, ‘should’, ‘intends’, ‘aims’, ‘projects’, ‘plans’, ‘potential’, ‘will’, ‘would’, ‘could’, ‘considered’, ‘likely’, ‘may’, ‘seek’, ‘estimate’ and variations of these words and similar future or conditional expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.
Examples of such forward-looking statements include, but are not limited to, statements or guidance relating to: projections or expectations of the 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 Group’s future financial performance; the level and extent of future impairments and write-downs; statements of plans, objectives or goals of the Group or its management including in respect of statements about the future business and economic environments in the UK and elsewhere including, but not limited to, future trends in interest rates, foreign exchange rates, credit and equity market levels and demographic developments; statements about competition, regulation, disposals and consolidation or technological developments in the financial services industry; and statements of assumptions underlying such statements.
Factors that could cause actual business, strategy, plans and/or results (including but not limited to the payment of dividends) to differ materially from forward-looking statements made by the Group or on its behalf include, but are not limited to: general economic and business conditions in the UK and internationally; market related trends and developments; fluctuations in interest rates, inflation, exchange rates, stock markets and currencies; any impact of the transition from IBORs to alternative reference rates; the ability to access sufficient sources of capital, liquidity and funding when required; changes to the Group’s credit ratings; the ability to derive cost savings and other benefits including, but without limitation as a result of any acquisitions, disposals and other strategic transactions; the ability to achieve strategic objectives; the Group’s ESG targets and/or commitments; changing customer behaviour including consumer spending, saving and borrowing habits; changes to borrower or counterparty credit quality impacting the recoverability and value of balance sheet assets; concentration of financial exposure; management and monitoring of conduct risk; exposure to counterparty risk (including but not limited to third parties conducting illegal activities without the Group’s knowledge); instability in the global financial markets, including Eurozone instability, instability as a result of uncertainty surrounding the exit by the UK from the European Union (EU), the EU-UK Trade and Cooperation Agreement, and as a result of such exit and the potential for other countries to exit the EU
Lloyds Banking Group may also make or disclose written and/or oral forward-looking statements in reports filed with or furnished to the US Securities and Exchange Commission, Lloyds Banking Group annual reviews, half-year announcements, proxy statements, offering circulars, prospectuses, press releases and other written materials and in oral statements made by the directors, officers or employees of Lloyds Banking Group to third parties, including financial analysts.
Cost:income ratio Total costs as a percentage of net income calculated on an underlying basis.
Loan to deposit ratio Loans and advances to customers net of allowance for impairment losses and excluding reverse repurchase agreements divided by customer deposits excluding repurchase agreements on an underlying basis.
Return on tangible equity - existing basis Statutory profit after tax adjusted to add back amortisation of intangible assets, and to deduct profit attributable to non-controlling interests and other equity holders, divided by average tangible net assets.
Return on tangible equity - new basis Statutory profit after tax adjusted to deduct profit attributable to non-controlling interests and other equity holders, divided by average tangible net assets
A G Finance Ltd 50 iii # A.C.L. Ltd 1 i ACL Autolease Holdings Ltd 1 i ADF No.1 Pty Ltd 8 i Alex Lawrie Factors Ltd 9 i Alex. Lawrie Receivables Financing Ltd 9 i Amberdate Ltd 1 i v Anglo Scottish Utilities Partnership 1 + * Aquilus Ltd (in liquidation) 13 i Automobile Association Personal Finance Ltd 4 i Bank of Scotland (B G S) Nominees Ltd 5 * Bank of Scotland (Stanlife) London Nominees Ltd – applied for strike off 5 *
Bank of Scotland Nominees (Unit Trusts) Ltd – applied for strike off 5 *
Bank of Wales Ltd 47 i Barents Leasing Ltd 1 i Barnwood Mortgages Ltd (in liquidation) 13 i Birchcrown Finance Ltd 1 v xxviii Birmingham Midshires Financial Services Ltd 4 i Birmingham Midshires Land Development Ltd (in liquidation)
Cardnet Merchant Services Ltd 1 # ̂ iii xxx CF1 Ltd (in liquidation) 13 viii ix # Cashfriday Ltd 9 i Cashpoint Ltd 1 i Caveminster Ltd 1 i CBRail S.A.R.L. 53 i Cedar Holdings Ltd (in liquidation) 13 i Central Mortgage Finance Ltd (in liquidation) 13 i CF Asset Finance Ltd (in liquidation) 13 i Cheltenham & Gloucester plc 12 i Clerical Medical Finance plc 20 i Clerical Medical Financial Services Ltd 20 i Clerical Medical International Holdings B.V. 21 i Clerical Medical Investment Fund Managers Ltd 4 i Clerical Medical Non Sterling Property Company S.A.R.L.
Lex Autolease (CH) Ltd 1 i Lex Autolease (VC) Ltd 1 i Lex Autolease Carselect Ltd 1 i Lex Autolease Ltd 1 i Lex Vehicle Leasing (Holdings) Ltd (in liquidation) 13 ii iii xi Lex Vehicle Leasing Ltd (in liquidation) 13 i Lime Street (Funding) Ltd (in liquidation) 13 i Lloyds (Gresham) Ltd 1 i xi Lloyds (Gresham) No. 1 Ltd 1 i Lloyds (Nimrod) Specialist Finance Ltd 1 i Lloyds America Securities Corporation 11 i Lloyds Asset Leasing Ltd 1 i Lloyds Bank (Branches) Nominees Ltd (in liquidation)
Lloyds Bank (Colonial & Foreign) Nominees Ltd 1 i Lloyds Bank (Fountainbridge 1) Ltd (in liquidation) 65 i Lloyds Bank (Fountainbridge 2) Ltd (in liquidation) 65 i Lloyds Bank (I.D.) Nominees Ltd 1 i Lloyds Bank (International Services) Ltd 58 i Lloyds Bank (Stock Exchange Branch) Nominees Ltd (in liquidation)
Lloyds Bank Asset Finance Ltd 1 i Lloyds Bank Commercial Finance Ltd 9 i Lloyds Bank Commercial Finance Scotland Ltd 43 i Lloyds Bank Corporate Asset Finance (HP) Ltd 1 i Lloyds Bank Corporate Asset Finance (No.1) Ltd 1 i Lloyds Bank Corporate Asset Finance (No.2) Ltd 1 i Lloyds Bank Corporate Asset Finance (No.3) Ltd 1 i Lloyds Bank Corporate Asset Finance (No.4) Ltd 1 i Lloyds Bank Corporate Markets plc 1 i ̂ Lloyds Bank Corporate Markets Wertpapierhandelsbank GmbH
Lloyds Bank General Leasing (No. 11) Ltd 1 i Lloyds Bank General Leasing (No. 17) Ltd (in liquidation)
Lloyds Bank GmbH 59 i Lloyds Bank Hill Samuel Holding Company Ltd (in liquidation)
Lloyds Bank Insurance Services Ltd 1 i Lloyds Bank International Ltd 58 i Lloyds Bank Leasing (No. 6) Ltd 1 i Lloyds Bank Leasing (No. 8) Ltd (in liquidation) 13 i Lloyds Bank Leasing Ltd 1 i Lloyds Bank Maritime Leasing (No. 10) Ltd 1 i Lloyds Bank Maritime Leasing (No.16) Ltd (in liquidation)
Lloyds Property Investment Company No. 4 Ltd 1 i Lloyds Property Investment Company No.5 Ltd (in liquidation)
Subsidiary undertakings The Group directly or indirectly holds 100 % of the share class or a majority of voting rights (including where the undertaking does not have share capital as indicated) in the following undertakings. All material subsidiary undertakings are consolidated by Lloyds Banking Group.
Addison Social Housing Holdings Ltd 61 Cancara Asset Securitisation Ltd 63 Cardiff Auto Receivables Securitisation 2018-1 Plc 26 Cardiff Auto Receivables Securitisation 2019-1 Plc 26 Cardiff Auto Receivables Securitisation Holdings Ltd
Celsius European Lux 2 S.A.R.L. 30 Cheltenham Securities 2017 Ltd 61 Fontwell II Securities 2020 DAC 42 Chepstow Blue Holdings Ltd 26 Chepstow Blue plc 26 Chester Asset Options No.2 Ltd (in liquidation) 19 Chester Asset Option No.3 Ltd (applied for strike off)
Gresham Receivables (No.48) UK Ltd 54 Guildhall Asset Purchasing Company (No 3) Ltd 63 Guildhall Asset Purchasing Company (No.11) UK Ltd
Sandown 2012-2 plc (in liquidation) 6 Sandown Gold 2012-1 Holdings Ltd (applied for strike off)
Sandown Gold 2012-1 plc (in liquidation) 6 SARL Coliseum 62 SARL Hiram 62 SAS Compagnie Fonciere De France 62 SCI Astoria Invest 62 SCI De L’Horloge 62 SCI Equinoxe 62 SCI Rambuteau CFF 62 Swan Funding 2 Ltd 61 Syon Securities 2019 DAC 42 Syon Securities 2020 DAC 42 Syon Securities 2020-2 DAC 42 Thistle Investments (AMC) Ltd 26 Thistle Investments (ERM) Ltd 26 Wetherby II Securities 2018 DAC 55 Wetherby III Securities 2019 DAC 42 Wetherby Securities 2017 Ltd 61 Lloyds Bank Foundation for England & Wales • 52 The Halifax Foundation for Northern Ireland • 15 Lloyds Bank Foundation for the Channel Islands • 52 Bank of Scotland Foundation • 5 MBNA General Foundation • 47
Lloyds UDT Asset Rentals Ltd (in liquidation) 13 i Lloyds UDT Leasing Ltd 1 i Lloyds UDT Ltd (in liquidation) 13 i Lloyds Your Tomorrow Trustee Ltd 1 i Loans.co.uk Ltd 47 i London Taxi Finance Ltd 1 ii iii London Uberior (L.A.S. Group) Nominees Ltd – applied for strike off 5 *
Lotus Finance Ltd 50 ii # LTGP Limited Partnership Incorporated 34 * Mainsearch Company Ltd (in liquidation) 13 i Maritime Leasing (No. 19) Ltd 1 i MBNA Direct Ltd (in liquidation) 13 i MBNA Europe Finance Ltd 46 i MBNA Europe Holdings Ltd 47 i MBNA Global Services Ltd (in liquidation) 13 i MBNA Ltd 47 i MBNA R & L S.A.R.L. 53 i MBNA Receivables Ltd 63 i Membership Services Finance Ltd 4 i Mitre Street Funding S.A.R.L. 56 i NFU Mutual Finance Ltd 47 ii viii # Nominees (Jersey) Ltd 58 i Nordic Leasing Ltd (in liquidation) 13 i NWS Trust Ltd 5 i Pacific Leasing Ltd 1 i Pensions Management (S.W.F.) Ltd 25 * Peony Eastern Leasing Ltd (in liquidation) 13 i Peony Leasing Ltd (in liquidation) 13 i Peony Western Leasing Ltd (in liquidation) 13 i Perry Nominees Ltd 1 i PIPS Asset Investments Ltd 1 ii iii Prestonfield Investments Ltd 5 i Proton Finance Ltd 50 iii # R.F. Spencer and Company Ltd 9 i Ranelagh Nominees Ltd 1 i Retail Revival (Burgess Hill) Investments Ltd 1 i Saint Michel Holding Company No1 28 i Saint Michel Investment Property 28 i Saint Witz 2 Holding Company No1 28 i Saint Witz 2 Investment Property 28 i Savban Leasing Ltd 1 i Scotland International Finance B.V. 21 i Scottish Widows Administration Services (Nominees) Ltd 25 i
Scottish Widows Administration Services Ltd 1 i Scottish Widows Auto Enrolment Services Ltd 1 i Scottish Widows Europe 27 i Scottish Widows Financial Services Holdings 3 i Scottish Widows’ Fund and Life Assurance Society 25 *
Scottish Widows Schroder Personal Wealth Ltd 1 i Scottish Widows Schroder Wealth Holdings Ltd 1 ii # Scottish Widows Services Ltd 3 i Scottish Widows Trustees Ltd 25 i Scottish Widows Unit Funds Ltd 3 i Scottish Widows Unit Trust Managers Ltd 45 i Seabreeze Leasing Ltd 1 i Seaspirit Leasing Ltd 1 i Share Dealing Nominees Ltd 4 i Shogun Finance Ltd 50 iii # Silentdale Ltd (in liquidation) 13 v vii xxviii St Andrew’s Group Ltd 20 i St Andrew’s Insurance plc 20 i St Andrew’s Life Assurance plc 20 i St. Mary’s Court Investments 1 i Standard Property Investment (1987) Ltd 5 ii iii Standard Property Investment Ltd 57 i # Sussex County Homes Ltd 4 i Suzuki Financial Services Ltd 50 ii # SW Funding plc 3 i # SW No.1 Ltd 3 i SWAMF (GP) Ltd (in liquidation) 13 i SWAMF Nominee (1) Ltd (in liquidation) 13 i The Agricultural Mortgage Corporation plc 45 i The British Linen Company Ltd 5 i The Mortgage Business plc 4 i Thistle Leasing + * Tower Hill Property Investments (7) Ltd 47 i # Tower Hill Property Investments (10) Ltd 47 i # Tranquility Leasing Ltd 1 i Uberior (Moorfield) Ltd 5 i Uberior Co-Investments Ltd 5 i Uberior ENA Ltd 5 i Uberior Equity Ltd 5 i Uberior Europe Ltd 5 i Uberior Fund Investments Ltd 5 i Uberior Infrastructure Investments Ltd 5 i Uberior Infrastructure Investments (No.2) Ltd 1 i Uberior Investments Ltd 5 i Uberior Nominees Ltd – applied for strike off 5 * Uberior Trading Ltd 5 i Uberior Trustees Ltd – applied for strike off 5 * Uberior Ventures Australia Pty Ltd 8 i Uberior Ventures Ltd 5 i UDT Budget Leasing Ltd (in liquidation) 13 i United Dominions Leasing Ltd 1 i
O ther inform ation Lloyds Banking Group Annual Report and Accounts 2020 351
Westerham Trade Centre, The Flyers Way, Westerham, TN16 1DE xvii xviii & Ashtons Group Holdings Ltd 99% Unit 4 74 Dyke Road Mews, Brighton, BN1 3JD ii & Asset Solutions Group Ltd 89.25% Osprey House, Crayfields Business Park, New Mills Road, Orpington, Kent, BR5 3QJ,
Backhouse (Westbury) JV Ltd 50% DAC Beachcroft LLP, Portwall Place, Portwall Lane, Bristol, BS1 9HS, United Kingdom ii Backhouse (Castle Cary) JV Ltd 50% DAC Beachcroft LLP, Portwall Place, Portwall Lane, Bristol, BS1 9HS, United Kingdom ii Beckstones (Rheda Park) Ltd 50% 4 Cowper Road, Gilwilly Industrial Estate, Penrith, Cumbria, United Kingdom, CA11 9BN ii Bergamot Ventures Ltd 50% 6th Floor, 25 Farringdon Street, London, EC4A 4AB iii Blue Bay Travel Group Ltd 99.17% A4 Bellringer Road, Trentham Business Quarter, Stoke-On-Trent, ST4 8GB xviii & BoS Mezzanine Partners Fund LP n/a 7 Melville Crescent, Edinburgh, EH3 7JA * Bowbridge Homes (Raunds) Ltd 50% Unit 4 Shieling Court, Corby, England, NN18 9QD ii Briar Homes (Darnley) Ltd 50% Radleigh House 1 Golf Road, Clarkston, Glasgow, G76 7HU ii Brington North Holdco Ltd 50% 25 Gresham Street, London, EC2V 7HN ~ Burnham SPV Ltd 50% Weir House, Hurst Road, East Molesey, Surrey, KT8 9AY ii Caedmon Homes (St Johns Mews) Ltd 50% Baldwins Wynyard Park House, Wynyard Avenue, Wynyard, TS22 5TB, United Kingdom ii Caedmon Homes Ltd 50% Baldwins Wynyard Park House, Wynyard Avenue, Wynyard, TS22 5TB, United Kingdom ii Caedmon Homes Kirby Hill Ltd 50% C/O Azets Holdings Ltd Wynyard Park House, Wynyard Avenue, Wynyard, United Kingdom, TS22 5TB ii Cardel Group Ltd 89.25% 5 The Marquis Business Centre, Royston Road, Baldock, SG7 6XL xviii & Chianti Holdings Limited 99% c/o Freeths Llp, Floor 3, 100 Wellington Street, Leeds, United Kingdom, LS1 4LT ii & City & General Securities Ltd 100% 10 Upper Berkeley Street, London, W1H 7PE iii & City Living (Midlands) Ltd 50% Old Banks Chambers, 582-586 Kingsbury Road, Erdington, Birmingham, B24 9ND ii Citysprint (UK) Holdings Ltd 82.03%
Delancey Arnold UK Ltd (in liquidation) 50% 4th Floor, 4 Victoria Street, St Albans, Hertfordshire, AL1 3TF iii Delancey Rolls UK Ltd (in liquidation) 50% 4th Floor, 4 Victoria Street, St Albans, Hertfordshire, AL1 3TF iii Devonshire Homes (Cullompton) Ltd 50% Devonshire House, Lowman Green, Tiverton, Devon, EX16 4LA ii Devonshire Homes (Landkey) Ltd 50% Devonshire House, Lowman Green, Tiverton, Devon, EX16 4LA, United Kingdom ii Devonshire Homes (St Austell) Ltd 50% Devonshire House, Lowman Green, Tiverton, Devon, EX16 4LA, United Kingdom ii Dino Newco Ltd 89.25%
2nd Floor Waverley House, 7-12 Noel Street, London W1F 8GQ xviii xvii & Europa Property Company (Northern) Ltd 100% Europa House, 20 Esplanade, Scarborough, North Yorkshire, YO11 2AQ viii & Evolution Funding Group Ltd 99% Thompson Close, Whittington Moor, Chesterfield, S41 9AZ ii & Express Engineering (Group) Ltd 99%
Sterling House, Grimbald Crag Close, Knaresborough, England, HG5 8PJ xviii xvi & Hedge End Place (Durkan) LLP n/a 4 Elstree Gate, Elstree Way, Borehamwood, Hertfordshire, WD6 1JD * Hedge End Place Hold Co Ltd 50% 25 Gresham Street, London, EC2V 7HN ~ Highlands Bidco Ltd 99% Commsworld House, Peffer Place, Edinburgh EH16 4BB ii & Hillcrest Homes (Hurst Green) Ltd 50% Mynshulls House, 14 Cateaton Street, Manchester, M3 1SQ ii Hollins Homes (Aston) Ltd 50% Suite 4 No. 1 King Street, Manchester, M2 6AW, United Kingdom ii Hollins Homes (Newton) Ltd 50% Suite 4 No. 1 King Street, Manchester, M2 6AW, United Kingdom ii Hollins Homes (Wingates) Ltd 50% Suite 4 1 King Street, Manchester, M2 6AW, United Kingdom ii Homes By Carlton (MSTG1) Ltd 50% Carlton House, 15 Parsons Court, Welbury Way, Newton Aycliffe, County Durham, DL5 6ZE ii Iglufastnet Ltd 89.25%
2nd Floor, 165 The Broadway, Wimbledon, London, SW19 1NE ii & xxiii James Taylor Homes (Kingston) Ltd 50% James Taylor House, St. Albans Road East, Hatfield, AL10 0HE, United Kingdom ii James Taylor Homes (Newton Longville) Ltd 50% James Taylor House, St. Albans Road East, Hatfield, AL10 0HE, United Kingdom ii Jupiter Bidco Ltd 78.29% The Light House, Brooks Lane, Middlewich, England, CW10 0JG ii & Kenmore Capital 2 Ltd (in liquidation) 50% Grant Thornton UK LLP, 110 Queen Street, Glasgow, G1 3BX iii ~ Kenmore Capital 3 Ltd (in receivership) 50% Grant Thornton UK LLP, 110 Queen Street, Glasgow, G1 3BX iii ~ Kenmore Capital Ltd (in liquidation) 50% Grant Thornton UK LLP, 110 Queen Street, Glasgow, G1 3BX iii ~
One Eleven, Edmund Street, Birmingham, England, B3 2HJ ii iii & Kruger Bidco Ltd 99% Rhino House, Deans Road, Ellesmere Port, United Kingdom, CH65 4DR ii & LF (Holdco) Ltd 99% Price House, 37 Stoney Street, Nottingham NG1 1LS ii & London Topco Ltd 62.82% Uk Head Office, Gloucester Road, Cheltenham, Gloucestershire, GL51 8NR, United Kingdom ii & Mableford Ltd 50% Lindum Business Park, Station Road, North Hykeham, Lincoln, LN6 3QX, United Kingdom ii Magicard Holdings Ltd 89.25%
City Gate House, 22 Southwark Bridge Road, London, SE1 9HB i v Neilson Active Holidays Group Ltd 89.25% Locksview, Brighton Marina, Brighton, BN2 5HA ii & Northern Edge Ltd 39.4% The Beacon, 176 St. Vincent Street, Glasgow, G2 5SG iii & Odyssey Bidco Limited 99% Hjp Audley House, Northbridge Road, Berkhamsted, Hertfordshire, United Kingdom, HP4 1EH ii & Omnium Leasing Company 39% N/A + Onapp (Topco) II Ltd 82.5%
Blackwood House, Union Grove Lane, Aberdeen, AB10 6XU xviii & xvii Paladone Holdings Ltd 89.25% Apex House, Dolphin Way, Shoreham-by-Sea, West Sussex, BN43 6NZ, United Kingdom ii & Panther Partners Ltd 89%
16 Kirby Street, London, EC1N 8TS xviii & xvii PPCE Holdings Ltd 89.25% 40 St. Pauls Square, Birmingham, United Kingdom, B3 1FQ xviii & Park Bidco Ltd 99% Liliput Road, Brackmills Industrial Estate, Northampton, United Kingdom NN4 7DT ii & Pertemps Network Group Ltd 93.83% Meriden Hall, Main Road, Meriden, Coventry CV7 7PT iii & Personal Touch Holdings Ltd (in liquidation) 100%
Four Brindleyplace, Birmingham, B1 2HZ, United Kingdom ii iii viii &
Prestbury 1 Limited Partnership n/a Cavendish House, 18 Cavendish Square, London, W1G 0PJ * & Project Belize Ltd 89.25% Sawley Marina, Long Eaton, Nottinghamshire, NG10 3AE ii & Project Bolt Newco 1 Ltd 89.25% Ground Floor Redcentral, 60 High Street, Redhill, Surrey, United Kingdom, RH1 1SH xviii & Project Bronze Ltd 99% Fifth Floor, 55 King Street, Manchester M4 4LQ ii & Project TC Ltd 99% Browne Jacobson Llp (Cs) Mowbray House, Castle Meadow Road, Nottingham NG2 1BJ ii & Project Chicago Newco Ltd 89.25% Church Lane, Church Lane, Norton, Worcester, WR5 2PR ii & Project Polka Topco Ltd 89.25% Roundhouse Road, Faverdale Industrial Estate, Darlington, County Durham, DL3 0UR,
Project Sketch Ltd 88.30% 11 Vantage Way, Erdington, Birmingham, B24 9GZ ii & Quantum (Flimwell) Ltd 50% Kings Parade, Lower Coombe Street, Croydon, CR0 1AA ii Quentin Park (Cumwhinton) Ltd 50% 4 Cowper Road, Gilwilly Industrial Estate, Penrith CA11 9BN ii Ramco Acquisition Ltd 88.74%
6 Queens Road, Aberdeen, Scotland, AB15 4ZT xvi xii xix &
3MC Middlemarch Business Park, Siskin Drive, Coventry, West Midlands, England, CV3 4FJ xvii xviii & Stroma Group Ltd 98.89 % Unit 4, Pioneer Way, Castleford, West Yorkshire, WF10 5QU xviii & Stonewood Partnerships (Brook Farm) Ltd 50% The Stonewood Office West Yatton Lane, Castle Combe, Chippenham, Wiltshire, SN14 7EY ii Temple Topco Ltd 89.25% Market Place, Henley-On-Thames, Oxfordshire, RG9 2AD ii & The Exceed Partnership LP n/a Cavendish House, 39-41 Waterloo Street, Birmingham, B2 5PP * The Great Wigmore Partnership (G.P.) Ltd 50%
33 Cavendish Square, London, W1G 0PW ii iii The Orchards (Burgh by Sands) Ltd 50% 4 Cowper Road, Gilwilly Industrial Estate, Penrith CA11 9BN ii The Power Industrial Group Ltd (in liquidation) 82.5%
Deloitte LLP, 1 City Square, Leeds, LS1 2AL ii & xviii Thistlerow Ltd 50% Radleigh House 1 Golf Road, Clarkston, Glasgow, G76 7HU ii Timec 1667 Ltd 99% Unit 7 & 8 Diamond Court, Newcastle Upon Tyne, NE3 2EN ii & United House Group Holdings Ltd 82.5% 26 Kings Hill Avenue, Kings Hill, West Malling, Kent, ME19 4AE ii & Whittington Facilities Ltd (in administration) 100% c/o Deloitte LLP, Four Brindley Place, Birmingham B1 2HZ vi Williams Topco Ltd 89.25% The Old Post Office, St. Nicholas Street, Newcastle Upon Tyne, United Kingdom, NE1 1RH ii & ZWPV Ltd 89.25% Zip World Base Camp, Denbigh Street, Llanrwst, LL26 0LL ii &
% of fund held by immediate parent (or by the Group where this varies Notes
ABERDEEN STANDARD OEIC IV 8 Aberdeen Global Corporate Bond Tracker Fund 98.30% ASI UK Equity Index Managed Fund 82.67%
AGFE UK REAL ESTATE SENIOR DEBT FUND LP 26 AgFe UK Real Estate Senior Debt Fund LP 78%
BAILLIE GIFFORD INVESTMENT FUNDS ICVC 13 Baillie Gifford Multi Asset Growth Fund 23.10%
BLACKROCK AUTHORISED CONTRACTUAL SCHEME 1 11 ACS Climate Transition World Equity Fund 68.79% ACS World Multifactor Equity Tracker Fund 45.12% BlackRock ACS Japan Equity Tracker Fund 76.85% BlackRock ACS UK Equity Tracker Fund 91.87% BlackRock ACS US Equity Tracker Fund 77.18%
BNY MELLON MANAGED FUNDS II 10 Insight Absolute Fund of Funds 84.02%
HBOS ACTIVELY MANAGED PORTFOLIO FUNDS ICVC 1 Absolute Return Fund 94.59% Diversified Return Fund 94.22% Dynamic Return Fund 96.62%
HBOS SPECIALISED INVESTMENT FUNDS ICVC 1 Cautious Managed Fund 51.68% Ethical Fund 81.73% Fund of Investment Trusts 40.08% Smaller Companies Fund 65.10% Special Situations Fund 50.41%
HBOS UK INVESTMENT FUNDS ICVC 1 UK Equity Income Fund 61.53% UK FTSE All-Share Index Tracking Fund 56.88% UK Growth Fund 62.92%
MULTI MANAGER ICVC 22 Multi Manager UK Equity Growth Fund 83.73% Multi Manager UK Equity Income Fund 39.42%
PAN EUROPEAN URBAN RETAIL FUND 24 Pan European Urban Retail Fund 22%
RUSSELL INVESTMENT COMPANY PLC 15 Russell Asia Pacific Fund 33.08% Russell Euro Fixed Income Fund 32.46% Russell Investments US Bond Fund 51.67% Russell Sterling Bond Fund 44.26%
SCHRODER FUNDS ICAV 23 Schroder Sterling Liquidity Fund 85.92% Schroder Sterling Short Duration Bond Fund 91.37%
SCHRODER INTERNATIONAL SELECTION FUND 19 Emerging Market Bond Fund 65.36% Multi Asset Total Return 20.71%
SCHRODER MATCHING PLUS 19 Schroder Matching Plus Bespoke Investment Fund 10 100%
Adventurous Growth Fund 44.62% Balanced Growth Fund 30.95% Corporate Bond 1 Fund 96.10% Corporate Bond PPF Fund 100% Progressive Growth Fund 46.94% Scottish Widows GTAA 1 83.54% SW Corporate Bond Tracker 100% UK Index Linked Gilt Fund 100%
American Growth Fund 83.51% European Growth Fund 89% Global Growth Fund 55.13% Japan Growth Fund 93.23% Pacific Growth Fund 75.29%
Emerging Markets Fund 87.89% UK All Share Tracker Fund 91.06% UK Fixed Interest Tracker Fund 96.49% UK Index-Linked Tracker Fund 39.08% UK Smaller Companies Fund 20.27% UK Tracker Fund 45.74%
UNIVERSE, THE CMI GLOBAL NETWORK 6 CMIG Access 80% 100% CMIG Focus Euro Bond 99.93% CMIG GA 70 Flexible 100% CMIG GA 80 Flexible 100%
UNIVERSE, THE CMI GLOBAL NETWORK (Continued) CMIG GA 90 Flexible 100% Continental Euro Equity 97.39% Euro Bond 59.66% Euro Cautious 89.14% Euro Currency Reserve 98.63% European Enhanced Equity 100% Japan Enhanced Equity 93.17% Pacific Enhanced Basin 79.33% UK Equity 77.55% US Bond 94.14% US Currency Reserve 75.98% US Enhanced Equity 86.92% US Tracker 28.92%
Luxembourg (19) 5, Rue Hohenhof, L-1736, Senningerberg, Luxembourg (20) 2a, Rue Albert Borschette, BP 2174, L-1021, Luxembourg (21) Thesis Unit Trust Management Ltd , Exchange Building, St. John’s Street, Chichester, West
Sussex PO19 1UP (22) 25 Gresham Street, London EC2V 7HN (23) Schroder Investment Management (Ireland) Limited, Georges Court, 54-62 Townsend
* The undertaking does not have share capital + The undertaking does not have a registered office # In relation to Subsidiary Undertakings, an undertaking external to the Group holds shares
Registered office addresses (1) 25 Gresham Street, London, EC2V 7HN (2) Charterhall House, Charterhall Drive, Chester, CH88 3AN (3) 69 Morrison Street, Edinburgh, EH3 8YF (4) Trinity Road, Halifax, West Yorkshire HX1 2RG (5) The Mound, Edinburgh, EH1 1YZ (6) 40a Station Road, Upminster, Essex, RM14 2TR (7) Naritaweg 165, 1043 BW, Amsterdam, Netherlands (8) Minter Ellison, Governor Macquarie Tower, Level 40, 1 Farrer Place, Sydney, NSW 2000,
Australia (9) 1 Brookhill Way, Banbury, Oxon, OX16 3EL (10) 6th Floor, 125 London Wall, London EC2Y 5AS (11) The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801 (12) Barnett Way, Gloucester, GL4 3RL (13) 1 More London Place, London, SE1 2AF (14) 1095 Avenue of the America’s, 34th Floor, New York, NY 10036, United States (15) 2 North Queen Street, Belfast, Northern Ireland, BT15 1ES (16) Suite 6, Rineanna House, Shannon Free Zone, Co. Clare, Ireland (17) 60313 Frankfurt AM Main, Thurn-Und, Taxis-Platz 6, Germany (18) Hoogoorddreef, 151101BA, Amsterdam, Netherlands (19) The Shard, 32 London Bridge Street, London SE1 9SG (20) 33 Old Broad Street, London, EC2N 1HZ (21) Prins Bernhardplein 200, 1097 JB, Amsterdam, Netherlands (22) Citco REIF Services, 20 Rue de Poste, L-2346, Luxembourg (23) International House, Cooil Road, Douglas, Isle of Man, IM2 2SP (24) Corporation Service Company, 251 Little Falls Drive, Wilmington, DE 19808, USA (25) 69 Morrison Street, Edinburgh, United Kingdom, EH3 8BW (26) 1 Bartholomew Lane, London EC2N 2AX, United Kingdom (27) 1, Avenue du Bois, Luxembourg, L – 1251, Luxembourg (28) SAB Formalities, 23 Rue de Roule, Paris, 75001, France (29) c/o PATRIZIA, 166 Sloane Street, London, SW1X 9QF (30) 20 Rue de la Poste, L-2346 Luxembourg (31) 2nd Floor, 21 Palmer Street, London, SW1H 0AD (32) McStay Luby, Dargan House, 21-23 Fenian Street, Dublin 2, Ireland (33) 3rd Floor, Standard Bank House, 47-49 La Motte Street, St. Helier, JE2 4SZ, Jersey (34) P O Box 186, Royal Chambers, St Julian’s Avenue, St. Peter Port, GY1 4HP, Guernsey (35) De Entrée 254, 1101 EE, Amsterdam, Netherlands (36) 47 Esplanade, St. Helier, Jersey, JE1 0BD (37) Fascinatio Boulevard 1302, 2909VA Capelle aan den IJssel, Netherlands (38) Avenida Dr. Chucri Zaidan, n° 296, cj 231 e 51, Bairro Vila Cordeiro, Cidade de São Paulo,
Estado de São Paulo, Cep 04583-110 Brazil (39) 2nd Floor, Liberation House, Castle Street, St. Helier, JE1 1EY, Jersey (40) 1 Vine Street, London, W1J 0AH (41) 39 Queens Road, Aberdeen, AB15 4ZN (42) 5th Floor, The Exchange, George’s Dock, IFSC, Dublin 1, Ireland (43) 110 St. Vincent Street, Glasgow, G2 4QR (44) 35 Great St. Helen’s, London, EC3A 6AP (45) Charlton Place, Charlton Road, Andover, SP10 1RE (46) Glategny Court, Glategny Esplanade, St. Peter Port, GY1 1WR, Guernsey (47) Cawley House, Chester Business Park, Chester, CH4 9FB, United Kingdom (48) 6/12, Primrose Road, Bangalore, 560025, India (49) 106 Route d'Arlon, Mamer, L-8210, Luxembourg (50) St William House, Tresillian Terrace, Cardiff, CF10 5BH (51) 18th Floor, United Centre, 95 Queensway, Hong Kong (52) Pentagon House, 52-54 Southwark Street, London, SE1 1UN (53) 1A Heienhaff, Senningerberg, L-1736, Luxembourg (54) Wilmington Trust SP Services (London) Limited, Third Floor, 1 King’s Arms Yard, London,
O ther inform ation Lloyds Banking Group Annual Report and Accounts 2020 355