building customer relationships easier access to financial services real time banking banking by telephone and internet annual report & accounts 2000 customers e-mpowering
TO MEET OUR GOVERNING OBJECTIVE WE AIM: • TO BE A LEADER IN OUR CHOSEN MARKETS
• TO BE THE FIRST CHOICE FOR OUR 16 MILLION CUSTOMERS
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Widows and, as a result, the investments now held to support the withprofits business of the Group’s life companies are much more significant than in previous years. In accordance with generally accepted accounting practice amongst listed insurance companies in the UK, the results of the Group’s insurance businesses have been separately analysed between an operating profit, which includes investment earnings calculated using longer-term rates of investment return, and a profit before tax, separately identifying the short-term fluctuations in investment returns (page 28).
Operating profit up 11 per cent to £4,246 million from £3,821 million.
11.4 per cent estimated market share of net new mortgage lending.
OUR FUTURE BOARD CHANGES We have a strong balance sheet, with a Triple A rating, and we are one of the most profitable banks in the world. Strategically, we are well placed in all key areas of UK retail financial services.
For years, we have been working to be more than just a bank and, in doing so, we have built one of the UK’s most diversified financial services companies. Not only is the market for financial services much bigger than the banking market, it is also growing much faster. We want to continue to grow our share of banking business in the UK, but our biggest opportunity for growth lies in increasing our share of total financial assets. So, there is plenty of room for growth. Our aim is to attract more of the business that our 16 million customers have with other financial companies. In pursuit of this strategy, in the year 2000, we sold more products to more people than ever before.
Today, market segmentation has assumed even greater importance. We believe that over time competition on price alone is a losing strategy. The key to success is to find new, different and, of course, better ways of serving each customer group – services that our customers value highly and that command a price reflecting that value. Ultimately, enhancing customer value for target customers is the primary means of delivering superior shareholder returns.
So, our basic strategy remains unchanged. We want to be the best and most successful company in the financial services industry. There is plenty of scope for organic growth in our chosen markets, but we shall also continue to seek growth by acquisition.
Against that background, we believe that the organisations which will survive and prosper in this changing environment will be those which maximise shareholder value by creating real value for their customers. Our vision is to create an organisation that understands and looks after our customers so well that they give us the privilege of looking after more of their financial affairs.
Our governing objective to maximise shareholder value over time is underpinned by our three strategic aims of being a leader in our chosen markets, being first choice for our customers by better understanding and meeting their needs, and by driving down our day-to-day operating costs so that we have greater scope for investment in better products, superior service and multi-channel distribution. We have made good progress on a number of fronts.
CUSTOMER RELATIONSHIP MANAGEMENT During 2000 we introduced a greatly enhanced model of customer relationship management (CRM) which is already improving customer loyalty, and increasing revenue growth in our retail business. This involves the real time delivery of detailed information to our customer facing staff and allows us to manage customer relationships in a manner that is consistent with an individual customer’s needs. The new system takes a segmented approach to our customer base and draws extensively on best CRM
At its heart, CRM is about retaining and deepening our relationships with our customers through a policy of segmentation and this forms a key part of our new strategies in the wealth management and small business sectors.
Goldman Sachs, international equity dealing and market making, custody and settlement, and access to selected equity capital market offerings managed by
Revenue growth will be a key component of sustainable profits over the next few years and we will therefore be investing heavily in core markets such as wealth management, long-term savings and investments, business banking, our core retail franchise and in new technology.
RESULTS So, how did these strategies translate into growth and profits? Our business as usual results for 2000 were good, with an 8 per cent growth in income, profit before tax up 11 per cent, customer lending up 12 per cent, and customer deposits up by 8 per cent. Our efficiency ratio remained good at 43.6 per cent, one of the best efficiency ratios in the world for a financial services group of our size, business mix and complexity. Asset quality improved and we maintained our strong position in all our core markets. Profit before tax on a statutory basis rose by £265 million, or 7 per cent, to £3,886 million. Retained profit for the year was £1,041 million, reflecting the significant capital generation within the Group. Income again grew satisfactorily with continuing margin pressure in retail markets more than offset by good volume growth in a number of areas. We achieved a record level of product sales, and market share gains in many of our core markets. We are now selling more retail products and servicing more personal customers than we have ever done.
The quality of the Group’s earnings remained high and profit before tax from UK Retail Financial Services, encompassing UK Retail Banking, Mortgages, and Insurance and Investments, increased by £599 million, or 24 per cent, to £3,129 million. This represents 74 per cent of total group profit. Our Wholesale Markets and International Banking divisions also continued to make solid progress.
BUSINESS BANKING In the small business market, we have been greatly encouraged by the success of a recent pilot of a set of new segmented offers, which we have developed in response to our business customers’ differing needs. The roll out of these new offers during 2001, coupled with further enhancement of our innovative small business portal – success4business.com – which within 6 months of launch already has over 20,000 registered customers, will cement our position as the UK’s leading bank for small business start ups. We have also launched LloydsTSBMarketplace, a trade facilitation web service, that allows suppliers and buyers access to a secure e-enabled environment to conduct business with a wide variety of companies within their specific marketplace.
Group and to British banking over the past forty years. His retirement will indeed mark the end of an era and we wish him every happiness and success in the next stage of his life. Maarten van den Bergh succeeds Sir Brian in April and
• Business Banking. Small businesses are served by dedicated business managers based in over 450 locations throughout the
At the end of 2000, funds managed and administered totalled some £12 billion.
Lloyds TSB Stockbrokers undertakes retail stockbroking through its Sharedeal Direct telephone service.
TeleDirect. The Group is the third largest residential mortgage lender in the UK, with a market share of 9.8 per cent, loans outstanding at the end of 2000 of £52.7 billion and over 980,000 borrowers.
• Scottish Widows Investment Partnership manages funds for the Group’s retail life, pensions and investment products.
• Treasury is a leading participant in foreign exchange, money and certain derivatives markets to meet the needs of customers, and as part of the Group’s trading activities, including liquidity management.
Lloyds TSB Commercial Finance and Alex Lawrie Factors are leading invoice discounting and factoring companies, providing finance to developing companies.
Rental income received from customers is included within other operating income. Operating lease assets were previously included within loans and advances and the related income within net interest income. This change has no effect on profit before tax. The effect of this change on the balance sheet has been to increase tangible fixed assets by £1,280 million and reduce loans and advances to customers by an equivalent amount (31 December 1999: £479 million). Comparative figures have been restated.
As mentioned above, 2000 figures contain a number of items which had a significant impact on the Group’s results.
Scottish Widows, the group net interest margin in the second half of 2000 was 3.67 per cent, compared with 3.70 per cent in the first half of the year. Good volume growth in customer lending and deposits more than compensated for the decrease in the margin. The efficiency ratio was 43.6 per cent compared with 42.7 per cent in 1999. Profit attributable to shareholders increased by 11 per cent, earnings per share increased by 10 per cent to 54.5p and economic profit increased by 10 per cent to £2,142 million. The post-tax return on average shareholders’ equity was 31.8 per cent, compared with 32.7 per cent in 1999. The post-tax return on average assets increased to 1.92 per cent from 1.82 per cent in 1999, and the post-tax return on average risk-weighted assets increased to 3.44 per cent from 3.24 per cent.
Economic profit increased by 6 per cent to £1,882 million, earnings per share increased by 7 per cent to 49.6p, shareholders’
Scottish Widows’ business have been consolidated in full with effect from that date. On a business as usual basis, Scottish
Total profit before tax on a business as usual basis from UK Retail Financial Services, which encompasses UK Retail Banking,
Mortgages, and Insurance and Investments, increased by £599 million, or 24 per cent, to £3,129 million from £2,530 million in 1999.
Net interest income 2,962 2,943 Other income 1,143 1,090 aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff
On 20 July 2000 the Group announced a mobile banking offer, in association with BT Cellnet, that will provide Lloyds TSB
On 13 December 2000 the Group announced that it had agreed to form a joint venture between Goldfish, Centrica’s financial services brand, and evolvebank.com, Lloyds TSB’s standalone internet banking operation. The joint venture will be known as Goldfish Holdings Ltd. Centrica will have a 70 per cent share of the joint venture and Lloyds TSB will have a 30 per cent share. The joint venture intends to offer a broad range of integrated financial services products from which customers can select to meet their individual needs. evolvebank.com will provide technology and banking expertise, together with Lloyds
Business Banking continues to attract a substantial number of new customers and has further consolidated the Group’s position as a market leader in the recruitment of start-up businesses. Some 116,000 new business customers chose Lloyds
TSB during the year. Revenue growth and profitability has again improved based on a 14 per cent increase in lodgements, a 13 per cent increase in lending and increased sales of insurance, mortgages and investment products. Business Banking has, during 2000, successfully launched four new relationship offers which provide our small business customers with a choice of options regarding the level of business and banking support they require from Lloyds TSB. Following a pilot study in May 2000, full national roll out has commenced and supports our strategy of increasing market share from 19 per cent in 1999 to 23 per cent in 2003.
In our UK wealth management businesses, UK Private Banking had another successful year. Profit before tax increased by 11 per cent to £110 million, from £99 million in 1999. £1.5 billion of new funds were gained during the year and total funds managed and administered now stand at some £12.2 billion. Lloyds TSB Stockbrokers, one of the largest retail stockbrokers in the UK, continued to perform well as high transaction levels were combined with efficiency gains. Pre-tax profit increased to £23 million compared with £21 million last year.
(covering the Group’s total UK mortgage business through Cheltenham & Gloucester, Lloyds TSB, Lloyds TSB Scotland,
A relatively low arrears position and the beneficial effect of house price increases have meant that bad debt provisions remained at a low level. New provisions were offset by releases and recoveries resulting in a net credit of £13 million for the year, compared with a credit of £3 million in 1999. The quality of our mortgage lending remains very satisfactory.
* including ‘normalised’ investment returns based on long-term rates of investment return and excluding changes in the economic assumptions applied to our long-term assurance business, pension provisions and stakeholder pension related charge
Operating profit, including investment returns based on long-term rates of investment return, from Insurance and Investments increased by 66 per cent to £1,447 million from £873 million, largely as a result of the inclusion, since 3 March 2000, of
Life was offset by the inclusion, from 3 March 2000, of Scottish Widows.
Pre-tax profit from general insurance operations, comprising underwriting and broking, rose by £130 million, or 28 per cent, to £591 million, mainly as a result of continued strong revenue growth and an improvement in our claims experience. The
Group has maintained its position as a leading distributor of personal lines insurance in the UK.
Stakeholder pensions will be introduced from 6 April 2001, with charges on these new products being limited by Government to a maximum of 1 per cent per annum. In order not to disadvantage existing pensions customers, charges will be reduced on our existing book. This will have the effect of reducing future cash flows in the Group’s embedded value calculation and a one-off charge of £80 million has therefore been made to the 2000 profit and loss account.
Total single premiums 3,479.7 1,589.6afffffffffffffffffffffffffff afffffffffffffffffffffffffff External unit trust sales: Regular payments 90.9 76.7 Single amounts 1,899.1 1,624.5 aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff
Total external unit trust sales 1,990.0 1,701.2afffffffffffffffffffffffffff afffffffffffffffffffffffffff Abbey Life:* Single premiums 21.7 286.1 Regular premiums 3.3 55.1 External unit trust sales: Regular payments 0.1 2.4 Single amounts 3.2 66.6
Premium income from underwriting: Other – 1 Re-insurance premiums (5) (5)
Operating profit, excluding short-term fluctuations in investment returns, from general insurance operations, comprising underwriting and broking, rose by £130 million, or 28 per cent, to £591 million.
Income from creditor insurance increased by 13 per cent, reflecting higher personal and business sector lending. Sales of home insurance policies increased by 10 per cent, with strong growth in both branch network and direct sales. Lloyds TSB
is now the leading distributor of household insurance in the UK. Overall new business sales in 2000 were over 2.4 million, 14 per cent higher than in 1999, of which over 900,000 were home insurance policies. The overall increase in sales, together with renewal business, produced a 22 per cent increase in commission income from broking and a 2 per cent increase in earned premium income from underwriting. Investment income, on a normalised basis, increased by 37 per cent to £67 million.
The Group now has six general insurance products live on interactive television and has full quote and buy functionality on the internet for home, motor and travel insurance.
Wholesale Markets pre-tax profit increased by £21 million, or 3 per cent, to £749 million. Provisions for bad and doubtful debts increased by £19 million to £94 million largely as a result of a higher level of provisions in the motor finance businesses and the acquisition of Chartered Trust. Total assets increased by 7 per cent and risk-weighted assets grew by 16 per cent reflecting the acquisition of Chartered Trust. The efficiency ratio increased to 43.7 per cent, from 41.0 per cent in 1999, again reflecting the acquisition of Chartered Trust.
Net interest income 753 734 Other income 386 378 aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff
Profit before tax 501 444afffffffffffffffffffffffffff afffffffffffffffffffffffffff Efficiency ratio 51.7% 52.2% Total assets (year-end) £19.2bn £19.4bn Total risk-weighted assets (year-end) £11.9bn £11.6bn
International Banking pre-tax profit was £57 million, or 13 per cent, higher at £501 million compared with 1999 and represented 12 per cent of group pre-tax profit. 4 per cent related to our New Zealand business, 5 per cent to our Europe and offshore banking operations, and 3 per cent to Latin America.
Group: Net interest income £m 4,587 4,783 Average interest-earning assets £m 131,369 123,988 Gross yield on interest-earning assets % 8.41 8.43
Net interest margin % 3.49 3.86 Domestic: Net interest income £m 3,956 4,154 Average interest-earning assets £m 110,574 104,242 Gross yield on interest-earning assets % 8.07 7.69
Net interest margin % 3.58 3.98 International: Net interest income £m 631 629 Average interest-earning assets £m 20,795 19,746 Gross yield on interest-earning assets % 10.23 12.34
Other income increased by £737 million, or 23 per cent, to £3,882 million. This represented 46 per cent of total income.
Fees and commissions receivable increased by 11 per cent reflecting increased business volumes and strong growth in income from insurance broking. Other UK fees and commissions increased by 20 per cent, as a result of growth in all core
UK businesses and the impact of the acquisition of Scottish Widows. International fees and commissions increased by 6 per cent.
Fees and commissions payable increased by £53 million against 1999, largely as a result of higher interchange fees for card services and increased costs associated with a number of new products.
Income from long-term assurance business increased by £388 million, largely as a result of the impact of the acquisition of
Administrative expenses Staff: Salaries and profit sharing 1,626 1,500 National insurance 131 125
Other expenses: Communications and external data processing 394 406 Advertising and promotion 167 113 Professional fees 126 90 aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff
* excluding short-term fluctuations in investment returns, changes in economic assumptions, exceptional restructuring costs, pension provisions and stakeholder pension related charge
The exceptional restructuring costs of £188 million comprise mainly severance, consultancy costs, the write-down of equipment and the £21 million Chartered Trust restructuring provision. During 2001 we expect restructuring costs relating to the efficiency programme to be approximately £200 million, reducing to approximately £130 million in 2002 and £60 million in 2003. Annualised cost benefits resulting from these investments are expected to total approximately £75 million in 2001 rising to £410 million in 2004. Expenditure on e-commerce in 2001 is expected to be similar to 2000 at approximately £150 million, and we will also spend £100 million in 2001 to deliver our new wealth management strategies. Overall, the individual programmes associated with these costs are expected to achieve average payback within three years.
Group expects to recover. Provisions overseas decreased to £49 million from £88 million, mainly as a result of higher
Emerging Market Debt provision releases, which offset higher provisions in Argentina.
At the end of 2000 provisions for bad and doubtful debts totalled £2,173 million. This represented 1.9 per cent of total lending. The level of specific provisions increased to £1,816 million. Non-performing lending increased to £1,283 million from £1,088 million in December 1999, largely reflecting the acquisition of Chartered Trust, and represented 1.1 per cent of total lending, compared with 1.0 per cent in December 1999. At the end of the year, specific provisions represented over 140 per cent of non-performing loans. (Movements in provisions during the year are shown on page 61 in note 16.)
The international standard for measuring capital adequacy is the risk asset ratio, which relates capital to balance sheet assets and off-balance sheet exposures weighted according to broad categories of risk. At the end of December 2000 the risk asset ratios were 9.0 per cent for total capital and 8.2 per cent for tier 1 capital. The 8.2 per cent tier 1 capital ratio appears higher than would perhaps be expected for the Group. This reflects the higher level of supervisory deductions resulting from Lloyds
TSB’s significantly increased investment in life assurance following the acquisition of Scottish Widows.
Total risk-weighted assets 93.5 84.1afffffffffffffffffffffffffff afffffffffffffffffffffffffff Post-tax return on average risk-weighted assets 3.14% 3.02% Risk asset ratios: total capital 9.0% 15.0%
• the rationalisation of non-personal banking activities, through the progressive sharing and consolidation of operational functions.
During 2000, the restructuring costs relating to the efficiency programme comprised mainly severance, consultancy costs and the write-down of equipment. During 2001 we expect restructuring costs relating to the efficiency programme to be approximately £200 million, reducing to approximately £130 million in 2002 and £60 million in 2003. Annualised cost benefits resulting from these investments are expected to total approximately £75 million in 2001 rising to £410 million in 2004. Overall, the individual programmes associated with these costs are expected to achieve average payback within three years.
In addition, we incur significant costs each year on improving systems and on staff training programmes to enhance customer service and efficiency, as well as on the continuing refurbishment and maintenance of premises; these costs are charged to the profit and loss account.
In accordance with generally accepted accounting practice in the UK, it is the Group’s accounting policy to carry the investments comprising the reserves held by its life companies at market value. In the past, this has not had a significant impact upon the Group’s results because of the limited reserves necessary to support the predominantly unit-linked business of Lloyds TSB Life Assurance and Abbey Life. However, the reserves held to support the with-profits business of Scottish
CHANGES IN THE ECONOMIC ASSUMPTIONS APPLIED TO OUR LONG-TERM ASSURANCE BUSINESS
Banking and mortgage activities represent the most significant element of the Group’s business in terms of profit, assets and exposure to risk. These activities are entered into in both the UK and overseas and principally comprise the Group’s core business of lending and deposit taking, involving a full range of personal and corporate customers. In entering into this business, the Group’s objective is to secure a margin between the interest paid to customers on their deposits and interest received on amounts advanced. In order to do this, more complex financial instruments, such as derivatives, are used as a means of reducing risk by hedging exposures to movements in exchange rates, interest rates or other market variables.
Treasury department in London. Most of the Group’s trading activity is to meet the requirements of customers for foreign exchange and interest rate products, from which the Group is able to earn a spread on the rates charged. However, interest rate and exchange rate positions are taken out using derivatives (forward foreign exchange contracts, interest rate swaps and forward rate agreements) and on-balance sheet instruments (mainly debt securities). The objective of these positions is to earn a profit from favourable movements in market rates. Accordingly, these transactions are reflected in the accounts at their fair value and gains and losses shown in the profit and loss account as dealing profits.
At an operating level, the Group promotes sound internal risk management practices through the directors of its separate business units, who are primarily responsible for measuring, monitoring and controlling the range of portfolio and operating risks within their specific area of accountability. The directors and management of the business units, as the primary risk
Compliance. They are responsible for ensuring that the risks within their business are identified, assessed, controlled and monitored, and that the controls and procedures implemented comply with Group policies and standards, which are extensively documented in rule books and procedures manuals.
The Director of Group Risk Management and Compliance heads Group Risk and reports to the Group Chief Executive. Group
• Maintenance of a centralised facilities database. Group Risk operates a centralised database of large corporate, sovereign and bank facilities designed to ensure that a consistent aggregation policy is maintained throughout the Group.
• Portfolio analysis. In conjunction with Group Risk, group businesses identify and define portfolios of credit and related risk exposures and the key benchmarks, behaviours and characteristics by which those portfolios are managed in terms of credit risk exposure. This entails the production and analysis of regular portfolio monitoring reports for review by Group Risk.
Regular independent audits of credit processes are undertaken by Group Audit. Such audits include consideration of the completeness and adequacy of credit manuals and lending guidelines, together with an in-depth analysis of a representative sample of accounts in the portfolio to assess the quality of the loan book and other exposures. Individual accounts are reviewed to ensure that the facility grade is appropriate, that credit procedures have been properly followed and that, where an account is non-performing, provisions raised are adequate.
Market risk is the risk of losses being incurred as a result of adverse movements in interest or exchange rates or other market variables. Market risk arises in all areas of the Group’s activities and is managed by a variety of different techniques.
The sources and maturities of assets and liabilities are closely monitored and diversified to avoid any undue concentration. A
Business units within the Group are responsible for identifying and managing risks, and Group Risk has developed a standard methodology, which is being implemented by business units throughout the Group. Group Audit provides independent verification of the effectiveness of risk control within business units.
Internal control techniques include segregation of duties, exception and exposure reporting, business continuity planning, reconciliations, and delegation of authority, and are based on the submission of timely and reliable management reporting.
Investment strategy is determined by the term and nature of the underwriting liabilities and asset/liability matching positions are actively monitored. General insurance exposure to accumulations of risk and possible catastrophes is mitigated by reinsurance arrangements which are broadly spread over different reinsurers. Appropriate reinsurance arrangements also apply within the life and pensions businesses.
The Group has a dedicated environmental risk unit which is responsible for the development of environmental policies and procedures, and provides practical advice and guidance on environmental issues to business units. Significant progress has been made in developing the Group’s environmental management system, and this is detailed in the environmental report contained in the information pack ‘Lloyds TSB: the community and our business’ (see page 77 for details).
Interest rate related contracts include interest rate swaps, forward rate agreements and options. An interest rate swap is an agreement between two parties to exchange fixed and floating interest payments, based upon interest rates defined in the contract, without the exchange of the underlying principal amounts. Forward rate agreements are contracts for the payment of the difference between a specified rate of interest and a reference rate, applied to a notional principal amount at a specific date in the future. At 31 December 2000 the total notional principal amount of interest rate related contracts outstanding was £380.9 billion (1999: £518.3 billion) of which £292.6 billion (1999: £385.0 billion) were interest rate swaps and £48.1 billion (1999: £85.6 billion) were forward rate agreements.
Equity derivatives are also used by the Group as part of its equity based retail product activity, whereby index-linked equity options are purchased to eliminate the Group’s exposure to fluctuations in various international stock exchange indices. At 31 December 2000 the total notional principal amount of equity contracts was £2.8 billion (1999: £2.4 billion).
five year £m £m £m £m £m aaaaaaasfff aaaaaaasfff aaaaaaasfff aaaaaaasfff aaaaaaasfff
Note Figures for 1999 and earlier years have been restated to reflect the implementation of FRS12 and FRS15 (relating to provisions and tangible fixed assets) and other minor adjustments.
37 The board 38 Directors’ report 40 Directors’ remuneration 46 Corporate governance 48 Auditors’ report 49 Consolidated profit and loss account 50 Consolidated balance sheet 52 Company balance sheet 53 Other statements 54 Consolidated cash flow statement 55 Notes to the accounts
Michael D Ross Deputy Group Chief Executive Joined the board in 2000. Joined Scottish Widows in 1964 and following a number of senior and general management appointments became group chief executive of that company in 1991. Aged 54.
Archie G Kane Group Executive Director, IT and Operations Joined TSB Commercial Holdings in 1986 and held a number of senior and general management appointments in the Group before being appointed to the board in 2000. After some 10 years in the accountancy profession, joined General Telephone & Electronics Corporation in 1980, serving as finance director in the UK from
Alan E Moore CBE*§ Deputy Chairman Joined Lloyds Bank International in 1980. Held a number of senior and general management appointments in that company and in Lloyds Bank before becoming a director of Lloyds Bank in 1989 and deputy chief executive and treasurer in 1994. Following the merger with TSB Group in 1995, became deputy group chief executive of Lloyds TSB Group and then deputy chairman in August 1998. Joined Glyn Mills & Co in 1953, holding senior appointments there until his secondment, as director general, to the Bahrain Monetary Agency from 1974 to 1979. Aged 64.
L E (Paddy) Linaker**§ (retiring at the annual general meeting on
The Earl of Selborne KBE FRS Chairman of The Agricultural Mortgage Corporation A director since 1995, having been a director of Lloyds Bank since 1994. Managing director of The Blackmoor Estate, his family business. Chancellor of Southampton University since 1996. President of the Royal Geographical Society from 1997 to 2000. Aged 60.
* Member of the audit committee ** Chairman of the audit committee † Member of the remuneration committee ‡ Chairman of the remuneration committee § Member of the nomination committee ◆ Chairman of the nomination committee
The Company is a holding company and its subsidiaries provide a comprehensive range of banking and financial services through branches and offices in the UK and overseas.
A review of the business and an indication of future developments are given on pages 2 to 33.
The authority for the Company to purchase, in the market, up to 555 million of its shares, representing some 10 per cent of the issued ordinary share capital, expires at the annual general meeting. It was not used during the year and shareholders will be asked to give a similar authority at the annual general meeting. Details are contained in the accompanying notice of meeting.
Mr Pell left the board on 7 January 2000 and Sir Nicholas
Mr Ross and Mr Urquhart joined the board on 3 March 2000.
Profit sharing and share option schemes are available for most staff, to encourage their financial involvement in the Group.
published by the Department of Trade and Industry regarding the making of payments to suppliers. A copy of the code and information about it may be obtained from the address shown on page 77.
As the Company owed no amounts to trade creditors at 31 December 2000, the number of days required to be shown in this report, to comply with the provisions of the Companies
The remuneration committee reviewed the attainment of targets and agreed the bonus payments.
(who do not include the chairman or the deputy chairmen) the opportunity of an award, deferred until after the end of 2002 and which is subject to two performance targets, based on the efficiency ratio and return on equity. For the group chief executive the maximum award will be equal to 50 per cent of aggregate basic salary for the years 2000-2002 and for other executive directors, the maximum award will be equal to 25 per cent of aggregate basic salary for these three years.
The two minimum performance targets are a reduction in the group’s efficiency ratio to 37 per cent by the end of 2002 and a return on equity of 28 per cent by the end of 2002. No payment will be made under the plan unless both these minimum targets are met.
There must also have been growth in earnings per share that is at least equal to the aggregate percentage change in the retail price index, plus three percentage points for each complete year of the relevant period. These are the performance conditions which were confirmed by the shareholders at the annual general meeting in 2000.
Proposals will be made to shareholders at the annual general meeting relating to the executive share option scheme, and will include recommendations regarding performance conditions and the time over which options may vest. Details are contained in the accompanying notice of meeting.
Mr Pritchard each has a service agreement which the company may terminate by giving one year’s notice. Mr Ross’s service agreement provides for two years’ notice for the first two years of employment with the Group. After that, the notice period will decrease by one month for each month of service. In the fourth year, Mr Ross’s contract will provide for one year’s notice, like those of the other executive directors. None of the other directors has a service agreement with a notice period of one year or more.
Salaries/fees benefits payments sharing Total 1999 aaaaaaffffffffffffffffffffffffff aaaaaaffffffffffffffffffffffffff aaaaaaffffffffffffffffffffffffff aaaaaaffffffffffffffffffffffffff aaaaaaffffffffffffffffffffffffff aaaaaaffffffffffffffffffffffffff
Column (a) above is the increase in pension built up during the year. It recognises (i) the accrual rate for the additional year’s service based on the pensionable salary in force at the year end and (ii) the effect of pay changes in ‘real’ (inflation adjusted) terms on the pension already earned at the start of the year.
The directors’ interests, all beneficial, in shares in Lloyds TSB Group were: Shares: At At 1 January 1 January
Gain made by Sir Nicholas Goodison, who retired on 11 April 2000 172 Gain made by S A Maran, who served during 1999 27 Gain made by G F Pell, who left the board on 7 January 2000 815 aaaaaaasfff aaaaaaasfff 27 4,098aas aas
**This is the difference between the market price of the shares on the day on which the share option was exercised and the price paid for the shares, and includes the value of shares issued to compensate directors for the special dividend mentioned above.
†During the year these share options lapsed following termination of savings contracts linked to the staff sharesave option scheme, in accordance with the rules of the scheme.
The board meets eleven times a year and a programme is prepared and agreed each year, which ensures that the directors are able regularly to review corporate strategy and the operations and results of the business units in the Group and to discharge their other duties. The roles of the chairman, the group chief executive and the board and its governance arrangements are reviewed annually.
Group’s business and to hear from senior executives below board level.
More information about directors’ remuneration is given in the directors’ remuneration report on pages 40 to 45 and details of how the board reviews financial and operational controls and risk management generally are shown on page 47 and in the financial review on pages 11 to 33.
The effectiveness of the internal control system is reviewed regularly by the board and the audit committee which also receives reports of reviews undertaken around the Group by the
In our opinion the financial statements give a true and fair view of the state of affairs of the Company and the Group as at 31 December 2000 and of the profit and cash flows of the
Interest receivable: Interest receivable and similar income arising from debt securities 443 – 443 430 Other interest receivable and similar income 10,511 100 10,611 10,022 aaaaaaffffffffffffffffffffffffff aaaaaaffffffffffffffffffffffffff aaaaaaffffffffffffffffffffffffff aaaaaafffffffffffffffffffffffffffff
General insurance premium income 399 – 399 390 Other operating income 381 – 381 242 aaaaaaffffffffffffffffffffffffff aaaaaaffffffffffffffffffffffffff aaaaaaffffffffffffffffffffffffff aaaaaafffffffffffffffffffffffffffff
Depreciation and amortisation 386 – 386 277 aaaaaaffffffffffffffffffffffffff aaaaaaffffffffffffffffffffffffff aaaaaaffffffffffffffffffffffffff aaaaaafffffffffffffffffffffffffffff
Profit on ordinary activities before tax 7 3,886 3,621 Tax on profit on ordinary activities 9 1,113 1,101 aaaaaaffffffffffffffffffffffffff aaaaaaffffffffffffffffffffffffffffff
Profit for the year attributable to shareholders 10 2,724 2,514 aaaaaaffffffffffffffffffffffffff aaaaaafffffffffffffffffffffffffff
Sir Brian Pitman P B Ellwood M K Atkinson Chairman Group Chief Executive Group Finance Director balance sheet consolidated * restated (note 1)
Net assets 9,734 8,693aafffffffffffffffffffffffffff aafffffffffffffffffffffffffff Capital and reserves Called-up share capital 44 1,396 1,389 Share premium account 45 595 404
Shareholders’ funds at end of year 9,737 8,581aafffffffffffffffffffffffffff aafffffffffffffffffffffffffff other statements
Net cash outflow from returns on investments and servicing of finance (491) (281)
Total taxation (864) (807) Capital expenditure and financial investment: Additions to fixed asset investments (23,552) (23,147) Disposals of fixed asset investments 24,756 21,921 Additions to tangible fixed assets (1,006) (595) Disposals of tangible fixed assets 78 83 Capital injection to life fund – (220)
Net cash inflow (outflow) from capital expenditure and financial investment 276 (1,958)
In addition, the Group has implemented the Finance & Leasing Association’s Statement of Recommended Accounting Practice ‘Accounting Issues in the Asset Finance and Leasing Industry’. As a result, the presentation of assets held for leasing to customers under operating lease agreements has been changed. These assets are now included within tangible fixed assets and depreciation charged over their estimated useful economic lives. Rental income received from customers is included within other operating income. Operating lease assets were previously included within loans and advances and the related income within net interest income. This change has no effect on profit before tax. The effect of this change on the balance sheet has been to increase tangible fixed assets by £1,280 million and reduce loans and advances to customers by an equivalent amount (1999: £479 million). Comparative figures have been restated.
The Group has also implemented the requirements of Financial Reporting Standard 16 ‘Current Tax’; the effect has not been significant.
notes to the accounts k Leasing and instalment credit transactions (continued)
Debt securities, apart from those held for dealing purposes, are stated at cost as adjusted for the amortisation of any premiums and discounts arising on acquisition, which are amortised from purchase to maturity in equal annual instalments. Debt securities acquired in exchange for advances to countries experiencing payment difficulties, either collateralised or due to be collateralised by US Treasury securities, are included in the Group’s portfolio of investment securities at an amount based on the market value at the date of exchange as adjusted for the amortisation of discount on acquisition. Equity shares, apart from those held for dealing purposes, are stated at cost less amounts written off. Debt securities and equity shares held for dealing purposes are included at market value. Investments held within the long-term assurance fund are included on the following basis: stocks, shares, fixed interest securities and unit trusts held for unit linked funds are valued in accordance with policy conditions at market prices; other stocks and shares and fixed interest securities are valued at middle market price and other unit trusts at bid price; investment properties are included at valuation by independent valuers at existing use value at 31 December 2000, and mortgages and loans are at cost less amounts written off.
Income from both finance and operating leases is credited to the profit and loss account in proportion to the net cash invested so as to give a constant rate of return over each period after taking account of tax.
Derivatives are used in the Group’s trading activities to meet the financial needs of customers, for proprietary purposes and to manage risk in the Group’s trading portfolios. Such instruments include exchange rate forwards and futures, currency swaps and options together with interest rate swaps, forward rate agreements, interest rate options and futures. These derivatives are carried at fair value and all changes in fair value are reported within dealing profits in the profit and loss account. Fair values are normally determined by reference to quoted market prices; internal models are used to determine fair value in instances where no market price is available. The unrealised gains and losses on trading derivatives are included within other assets and other liabilities respectively; these items are reported gross except in instances where the Group has entered into legally binding netting agreements, where the Group has a right to insist on net settlement that would survive the insolvency of the counterparty; in these cases the positive and negative fair values of trading derivatives with the relevant counterparties are offset within the balance sheet totals.
Foreign exchange trading income 141 133 Securities and other gains 57 82 aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff 198 215afffffffffffffffffffffffffff afffffffffffffffffffffffffff Dealing profits include the profits and losses arising both on the purchase and sale of trading instruments and from the year-end revaluation to market value, together with the interest income earned from these instruments and the related funding cost.
It is the Group’s policy to seek competitive tenders for all consultancy projects.
The Group operates a number of schemes which provide post-retirement health care benefits to certain employees, retired employees and their dependent relatives. The total cost for the Group in 2000 was £3 million (1999: £17 million). For the principal scheme, the latest actuarial valuation of the liability was carried out at 31 December 2000. This valuation showed the Group’s liability to be £72 million, which had been fully provided for at that date. The principal actuarial assumptions adopted were that, over the long term, the valuation discount rate and the rate of increase in medical costs would be 4 per cent and 3 per cent respectively higher than annual price inflation.
In February 2000 the Group announced a new efficiency programme aimed at reducing its overall cost base. The main features of the efficiency programme, which is primarily focused on non-customer facing activities, will be the centralisation of computer operations; the further consolidation of large scale processing operations and support functions including the complete removal of all back office processing from branches; the further streamlining of the branch network, combined with the expansion of lower cost delivery channels such as telephone banking and internet operations; the further reduction of purchasing costs; and the rationalisation of non-personal banking activities, through the progressive sharing and consolidation of operational functions. The programme is expected to be completed by 2003. During 2000 costs of £108 million were incurred, mainly comprising severance and consultancy costs.
Insurance and Investments Operating profit 1,447 873 Short-term fluctuations in investment returns (119) 28 Changes in economic assumptions 127 – Exceptional restructuring costs (59) – Pension provisions (100) (102) Stakeholder pension related charge (80) –
UK Retail Financial Services 2,799 2,456 Wholesale Markets and International Banking Profit before exceptional restructuring costs 1,250 1,172 Exceptional restructuring costs (30) –
Surplus emerging 175 69 Value of in-force business 266 89 aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff
Total gross income 12,832 2,583 15,415afffffffffffffffffffffffffff afffffffffffffffffffffffffff afffffffffffffffffffffffffff Profit on ordinary activities before tax 3,427 459 3,886afffffffffffffffffffffffffff afffffffffffffffffffffffffff afffffffffffffffffffffffffff
Fees and commissions receivable 2,227 270 2,497 Dealing profits (before expenses) 154 61 215 Income from long-term assurance business 219 8 227 General insurance premium income 390 – 390 Other operating income 141 101 242 aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff
Total gross income 11,146 2,877 14,023afffffffffffffffffffffffffff afffffffffffffffffffffffffff afffffffffffffffffffffffffff Profit on ordinary activities before tax 3,201 420 3,621afffffffffffffffffffffffffff afffffffffffffffffffffffffff afffffffffffffffffffffffffff
UK corporation tax Current tax on profits for the year 942 768 Adjustments in respect of prior years 3 21
pence pence per share per share £m £m aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff 30.6 26.6 1,683 1,451afffffffffffffffffffffffffff afffffffffffffffffffffffffff afffffffffffffffffffffffffff afffffffffffffffffffffffffff 12 Earnings per share 2000 1999 aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff
eligible bills Balance Balance sheet Valuation sheet Valuation £m £m £m £m aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff
At 31 December 2000 626 4 630afffffffffffffffffffffffffff afffffffffffffffffffffffffff afffffffffffffffffffffffffff Investment securities are those intended for use on a continuing basis in the activities of the Group and not for dealing purposes.
14 Loans and advances to banks 2000 1999 £m £m aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff
Lending to banks 615 721 Deposits placed with banks 14,731 16,298 aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff
aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff 114,455 102,149afffffffffffffffffffffffffff afffffffffffffffffffffffffff Loans and advances by residual maturity repayable: 3 months or less 20,980 17,689 1 year or less but over 3 months 8,286 6,935 5 years or less but over 1 year 24,408 19,342
Chartered Trust plc and CARS 4 have also entered into interest rate swaps in respect of this transaction, the interest rates payable and receivable under these swaps are set by reference to market rates of interest on an arm’s length basis.
Category 2: This comprises lending where the operation of the customer’s account has ceased. The lending is managed by specialist recovery departments and has been written down to its estimated realisable value. Interest is not added to the lending nor placed on a suspense account as its recovery is considered unlikely; it is only taken to income if it is received.
Transport, distribution and hotels 3,836 3,540 Property companies 2,470 2,303 Financial, business and other services 9,295 6,614 Personal: mortgages* 52,659 47,451
Cost discounts Provisions Total £m £m £m £m aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff
At 31 December 2000 54 13 41afffffffffffffffffffffffffff afffffffffffffffffffffffffff afffffffffffffffffffffffffff Investment securities are those intended for use on a continuing basis in the activities of the Group and not for dealing purposes.
Amounts payable in: 1 year or less 20 2 5 years or less but over 1 year 3 2 aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff 23 4afffffffffffffffffffffffffff afffffffffffffffffffffffffff 28 Capital commitments
Capital expenditure contracted but not provided for at 31 December 2000 amounted to £33 million (1999: £41 million), of which £28 million (1999: £33 million) relates to assets to be leased to customers under operating leases.
The value of long-term assurance business attributable to shareholders included in the consolidated balance sheet comprises: Net tangible assets of life companies including surplus 4,128 723 Value of other shareholders’ interests in long-term assurance funds 2,421 1,551 aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff 6,549 2,274afffffffffffffffffffffffffff afffffffffffffffffffffffffff The shareholders’ interest in the long-term assurance business has been calculated on the basis of a series of economic and actuarial assumptions.
The revised assumptions, which have been used with effect from 1 January 2000 for Abbey Life and the bancassurance operation of Lloyds TSB Life, have resulted in a one-off credit to the profit and loss account of £127 million. The same assumptions have been used for the Scottish Widows business from the date of acquisition.
aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff 51,085 26,542afffffffffffffffffffffffffff afffffffffffffffffffffffffff Investments shown above comprise: Fixed interest securities 14,512 7,415 Stocks, shares and unit trusts 31,885 16,996 Investment properties 3,098 1,045 Other properties 10 10 Mortgages and loans 117 50 aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff 52,683 27,718afffffffffffffffffffffffffff afffffffffffffffffffffffffff The liabilities to policyholders comprise: Technical provisions: Long-term business provision (net of reinsurance) 23,514 3,025 Claims outstanding (net of reinsurance) 172 114
notes to the accounts 33 Assets and liabilities denominated in foreign 2000 1999 currencies £m £m aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff
Repayable on demand 4,330 3,594 Other deposits by banks with agreed maturity dates or periods of notice by residual maturity repayable: 3 months or less 9,712 12,551 1 year or less but over 3 months 1,790 1,153 5 years or less but over 1 year 695 341 aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff 16,735 17,694afffffffffffffffffffffffffff afffffffffffffffffffffffffff £m £m aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff
Bonds and medium-term notes by residual maturity repayable: 1 year or less 538 309 2 years or less but over 1 year 169 188 5 years or less but over 2 years 472 690 aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff
The short-term borrowings of the Company comprise floating rate unsecured loan notes 2001. These notes are not subordinated and bear interest at rates set periodically in advance based on London Interbank rates. They are repayable, at the noteholders’ option, at six monthly intervals.
Foreign exchange and interest rate contracts 2,346 1,981 Current tax 631 617
Interest payable 1,670 1,229 Other creditors and accruals 2,655 2,080 aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff 4,325 3,309afffffffffffffffffffffffffff afffffffffffffffffffffffffff £m £m aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff
Exchange and other adjustments (5) Adjustments on acquisition (3) Tax provided 108 aaaaaffffffffffffffffffffffffff
At 31 December 2000 34 202 76 96 – 34 442afffffffffffffffffffffffffff afffffffffffffffffffffffffff afffffffffffffffffffffffffff afffffffffffffffffffffffffff afffffffffffffffffffffffffff afffffffffffffffffffffffffff afffffffffffffffffffffffffff Pension obligations
Whenever the Group ceases to occupy a property, or commits itself to doing so, it is the Group’s policy to raise a provision to cover any anticipated shortfall when comparing the recoverable amount of its interest in the property to the future rental and other payments that the Group is obligated to make over the remaining term of the lease. These provisions are made by reference to a prudent estimate of expected sub-let income and the possibility of disposing of the Group’s interest in the lease, taking into account conditions in the property market. These provisions are reassessed on an annual basis and will normally run off over the remaining life of the leases concerned, currently averaging six years; where a property is disposed of earlier than anticipated, any remaining balance in the provision relating to that property is released.
† Subordinated Step-up Floating Rate Notes 2009 callable 2004 (US$500 million) 334 309 – – ▲ 8.36% Subordinated Notes 2010 (NZ$100 million) 30 – – – ✠ 61⁄4% Subordinated Notes 2010 (E400 million) 250 – – –
†✠ Subordinated Floating Rate Notes 2010 (US$400 million) 267 – – –
▲ 65⁄8% Subordinated Notes 2015 343 – – – †▲ Subordinated Floating Rate Notes 2020 (E100 million) 62 – – –
aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff 1,792 2,048afffffffffffffffffffffffffff afffffffffffffffffffffffffff US dollars US$m US$m Preference shares of US25 cents each 40 –afffffffffffffffffffffffffff afffffffffffffffffffffffffff Euro em em Preference shares of e25 cents each 40 –afffffffffffffffffffffffffff afffffffffffffffffffffffffff 44 Called-up share capital (continued) 2000 1999 aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff
Issued and fully paid: Issued to the QUEST (note 29) 7 – 7 aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff
Share premium account: Premium arising on issue of shares 191 191 aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff
At 31 December 2000, transactions, arrangements and agreements entered into by the Group’s banking subsidiaries with directors and connected persons and with officers included: Number of Total Number of Total persons £000 persons £000 aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff
47 Contingent liabilities and commitments 2000 1999 £m £m aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff
aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff 516,059 4,119 4,141afffffffffffffffffffffffffff afffffffffffffffffffffffffff afffffffffffffffffffffffffff Equity contracts 2,393 646 16afffffffffffffffffffffffffff afffffffffffffffffffffffffff afffffffffffffffffffffffffff Effect of netting (3,950) (3,950)
aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff 2,600 96 35afffffffffffffffffffffffffff afffffffffffffffffffffffffff afffffffffffffffffffffffffff Notional Fair values principal aaaaaffffffffffffffffffffffffffaaaaaffffffffffffffffffffffffffss amount Positive Negative aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff
The aggregate carrying value of non-trading derivatives with a positive fair value was an asset of £23 million (1999: an asset of £1 million) and with a negative fair value was a liability of £1 million (1999: an asset of £1 million).
The maturity of the notional principal amounts and replacement cost of both trading and non-trading instruments entered into with third parties was: Under 1 to 5 Over 5 1 year years years Total aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff
An analysis of the net replacement cost of both trading and non-trading instruments entered into with third parties by counterparty type is set out below: £m £m aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff
The table below summarises the repricing mismatches of the Group’s non-trading assets and liabilities. Items are allocated to time bands by reference to the earlier of the next contractual interest rate repricing date and the maturity date.
Assets: Treasury bills and other eligible bills 534 40 46 9 1 – 630 Loans and advances to banks 13,034 1,184 392 112 241 135 15,098 Loans and advances to customers 69,266 4,894 6,112 30,391 5,737 (2,075) 114,325 Debt securities and equity shares 2,497 475 340 902 1,448 51 5,713 aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff
As at 31 December 1999 Trading book Non-trading book aaaaaaaafaaaaffffffffffffffffffffffffff aaaaaaaafaaaaffffffffffffffffffffffffff
The Group uses a variety of financial instruments to hedge exposures in its banking book; these hedges are accounted for on an accruals basis, in line with the underlying instruments being hedged. Any gains or losses that would occur if these instruments were carried at market value are therefore not recognised.
Details of value at risk in the Group’s global trading activities are given on page 31 in the financial review.
A summarised profit and loss account for Scottish Widows for the period from 1 January 2000 to 2 March 2000 is set out below: £m aaaaaffffffffffffffffffffffffff
Loss after tax for the period to 2 March 2000 (36)afffffffffffffffffffffffffff Profit after tax for the year ended 31 December 1999 333afffffffffffffffffffffffffff All recognised gains and losses are included in the profit and loss account.
Net interest income 122 Net fees and commissions (17) Other income 17 aaaaaffffffffffffffffffffffffff
Total income 122 Operating expenses (84) Provisions for bad and doubtful debts (23)
Goodwill arising on consolidation 2,405 22 aaaaaffffffffffffffffffffffffff aaaaaffffffffffffffffffffffffff 6,588 27affffffffffffffffffffffffff afffffffffffffffffffffffffff Satisfied by: Issue of loan notes 1,077 –
Number % Millions % aaasfffaafaaaaafff aaasfffaafaaaaafff aaasfffaafaaaaafff aaasfffaafaaaaafff aaasfffaafaaaaafff aaasfffaafaaaaafff aaasfffaafaaaaafff aaasfffaafaaaaafff 1,026,168 100.00 5,507.4* 100.00aassfffs aassfffs aassfffs aassfffs
Individual Savings Accounts (ISAs) The Company provides a facility for investing in Lloyds TSB shares through an ISA. For details please contact Lloyds TSB Private Banking, Freepost, PO Box 149, Haywards Heath, West Sussex RH16 3BR. Telephone 0345 418418.