Securitisations and covered bonds In addition to the assets detailed above, the Group also holds assets that are encumbered through the Group’s asset-backed conduits and its securitisation and covered bond programmes. Further details of these assets are provided in notes 19 and 20.
Maturities of assets and liabilities Up to 1 month £m £m £m £m £m £m £m
Debt securities held as loans and receivables 9 – – 1 98 208 28 3,847 4,191
Liabilities arising from insurance and investment contracts 1,580 1,558 2,279 2,066 2,269 7,817 20,674 64,828 103,071
Cash and balances at central banks 50,476 1 13 2 – – – – 50,492
The Group’s financial guarantee contracts are accounted for as financial instruments and measured at fair value on the balance sheet. The majority of the Group’s financial guarantee contracts are callable on demand, were the guaranteed party to fail to meet its obligations. It is, however, expected that most guarantees will expire unused. The contractual nominal amounts of these guarantees totalled £7,165 million at 31 December 2015 (2014: £7,161 million) with £4,014 million expiring within one year; £942 million between one and three years; £1,182 million between three and five years; and £1,027 million over five years (2014: £4,133 million expiring within one year; £1,823 million between one and three years; £674 million between three and five years; and £531 million over five years).
(C) Non-cash and other items 2015 £m 2014 £m 2013 £m
Net gain on sale of available-for-sale financial assets (51) (131) (629)
Accretion of discounts and amortisation of premiums and issue costs 339 122 286
Payments in respect of payment protection insurance provision (3,091) (2,458) (2,674)
Less: amounts with a maturity of three months or more (10,640) (10,520) (7,546)
The trustee of the ECNs has been granted leave by the Supreme Court to appeal the Court of Appeal decision. In the event that the Supreme Court were to determine that a CDE had not occurred, the Group would compensate fairly the holders of the ECNs whose securities are redeemed using the Regulatory Call Right for losses suffered as a result of early redemption.
These changes may result in a material increase in the Group’s balance sheet provisions for credit losses although the extent of any increase will depend upon, amongst other things, the composition of the Group’s lending portfolios and forecast economic conditions at the date of implementation. The requirement to transfer assets between stages and to incorporate forward looking data into the expected credit loss calculation, including multiple economic scenarios, is likely to result in impairment charges being more volatile when compared to the current IAS 39 impairment model.
Issue of ordinary shares 510 – – – 510 – 510
Other employee award schemes – – – 292 292 – 292
Net cash provided by (used in) operating activities (1,540) (2,712) 3,835
Cash and cash equivalents at beginning of year 195 511 2,231
Cash and cash equivalents at end of year 24 195 511
Repurchases and redemptions during the year: Foreign exchange and other movements 38 – (52) (14)
NOTE 8: RELATED PARTY TRANSACTIONS continued Details of the subsidiaries and related undertakings are given on pages 299 to 307 and are incorporated by reference.
Financial assets: Cash and cash equivalents – – – 24 24
Financial liabilities: Debt securities in issue – – – – –
Financial assets: Cash and cash equivalents – – – 195 195
Financial liabilities: Debt securities in issue – – – 561 561
Derecognised following completion of the Group’s ECN exchange and retail offers – (967)
Sensitivity of level 3 valuations Effect of reasonably possible alternative assumptions
NOTE 10: OTHER INFORMATION Lloyds Banking Group plc was incorporated as a public limited company and registered in Scotland under the UK Companies Act 1985 on 21 October 1985 with the registered number 95000. Lloyds Banking Group plc’s registered office is The Mound, Edinburgh EH1 1YZ, Scotland, and its principal executive offices in the UK are located at 25 Gresham Street, London EC2V 7HN.
For details contact: BNY Mellon Depositary Receipts, PO Box 30170, College Station, TX 77842-3170. Telephone: 1-866-259-0336 (US toll free), international callers: +1 201-680-6825. Alternatively visit www.adrbnymellon.com or email shrrelations@cpushareownerservices.com
Security – share fraud and scams Shareholders should exercise caution when unsolicited callers offer the chance to buy or sell shares with promises of huge returns. If it sounds too good to be true, it usually is and we would ask that shareholders take steps to protect themselves. We strongly recommend seeking advice from an independent financial adviser authorised by the Financial Conduct Authority (FCA). Shareholders can verify whether a firm is authorised via the Financial Services Register which is available at www.fca.org.uk
Factors that could cause actual business, strategy, plans and/or results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such 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 exchange rates, stock markets and currencies; 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; changing customer behaviour including consumer spending, saving and borrowing habits; changes to borrower or counterparty credit quality; instability in the global financial markets, including Eurozone instability, the potential for one or more countries to exit the Eurozone or European Union (EU) (including the UK as a result of a referendum on its EU membership) and the impact of any sovereign credit rating downgrade or other sovereign financial issues; technological changes and risks to cyber security; natural, pandemic and other disasters, adverse weather and similar contingencies outside the Group’s control; inadequate or failed internal or external processes or systems; acts of war, other acts of hostility, terrorist acts and responses to those acts, geopolitical, pandemic or other such events; changes in laws, regulations, accounting standards or taxation, including as a result of further Scottish devolution; changes to regulatory capital or liquidity requirements and similar contingencies outside the Group’s control; the policies, decisions and actions of governmental or regulatory authorities or courts in the UK, the EU, the US or elsewhere including the implementation and interpretation of key legislation and regulation; the ability to attract and retain senior management and other employees; requirements or limitations imposed on the Group as a result of HM Treasury’s investment in the Group; actions or omissions by the Group’s directors, management or employees including industrial action; changes to the Group’s post-retirement defined benefit scheme obligations; the provision of banking operations services to TSB Banking Group plc; the extent of any future impairment charges or write-downs caused by, but not limited to, depressed asset valuations, market disruptions and illiquid markets; the value and effectiveness of any credit protection purchased by the Group; the inability to hedge certain risks economically; the adequacy of loss reserves; the actions of competitors, including non-bank financial services and lending companies; and exposure to regulatory or competition scrutiny, legal, regulatory or competition proceedings, investigations or complaints. Please refer to the latest Annual Report on Form 20-F filed with the US Securities and Exchange Commission for a discussion of certain factors together with examples of forward looking statements.
An embedded equity conversion feature is a derivative contained within the terms and conditions of a debt instrument that enables or requires the instrument to be converted into equity under a particular set of circumstances. The Group’s Enhanced Capital Notes (ECNs) contain such a feature whereby these notes convert to ordinary shares in the event that the consolidated core tier 1 ratio of the Group falls below 5 per cent.
Enhanced Capital Notes (ECNs) The Group’s ECNs are subordinated notes issued by the Group that contain an embedded equity conversion feature. Further details of these are given in note 41.
Full time equivalent A full time employee works a standard five day week. The hours or days worked by part time employees are measured against this standard and accumulated along with the number of full time employees and counted as full time equivalents. This is a more consistent measure of the amount of time worked than employee numbers which will fluctuate as the mix of part-time and full-time employees changes.
Impaired loans Impaired loans are loans where the Group does not expect to collect all the contractual cash flows or to collect them when they are contractually due.
Loan-to-value ratio (LTV) The loan-to-value ratio is a mathematical calculation which expresses the amount of a mortgage balance outstanding as a percentage of the total appraised value of the property.
Over-the-counter derivatives Over-the-counter derivatives are derivatives for which the terms and conditions can be freely negotiated by the counterparties involved, unlike exchange traded derivatives which have standardised terms.
Sub-investment grade This refers to credit ratings issued by external credit rating agencies that are below ‘BBB’ grade or its equivalent.
Trading book Positions in financial instruments and commodities held for trading purposes or to hedge other elements of the trading book.
Liquidity 18 Describe how the bank manages its potential liquidity needs. 153-154, 157-158
Subsidiary undertakings The Group holds a majority of the voting rights of the following undertakings.
Lex Vehicle Leasing (Holdings) Limited 100% i 100% ii 100% x
Subsidiary undertakings(i) Name of undertaking Addison Social Housing Holdings Limited, (Jersey)
The SAFA 0494 Limited Partnership (to be placed into liquidation), ( Cayman Islands)
Open Ended Investment Companies and Other Funds The following comprises a list of the Group’s Open Ended Investment Companies and other Funds
UK Strategic Fund 94% INSIGHT INVESTMENT FUNDS-OF-FUNDS II ICVC Absolute Insight Fund ix 39%
INVESCO PERPETUAL FAR EASTERN INVESTMENT SERIES Invesco Perpetual Asian Equity Income Fund x 25%
UK Tracker Fund 48% SCOTTISH WIDOWS UK AND INCOME INVESTMENT FUNDS ICVC iii
UK Growth Fund 62% SSGA ASIA PACIFIC TRACKER FUND v 82%