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Lloyds Banking Group plc

Lloyds Banking Group plc A strong business performance with continued strategic progress

Lloyds Banking Group plc (LON:LLOY) today announced Q1 2019 Interim Management Statement.

GROUP CHIEF EXECUTIVE’S STATEMENT

In the first three months of 2019 we have again delivered a strong business performance with continued strategic progress, increased statutory and underlying profit and strong financial returns. While Brexit uncertainty persists, and continued uncertainty could further impact the economy, I remain confident that our unique business model, and in particular our market leading efficiency and targeted investment, will continue to deliver superior performance and returns for our customers and shareholders.

António Horta-Osório

Group Chief Executive

HIGHLIGHTS FOR THE THREE MONTHS ENDED 31 MARCH 2019

Good progress against strategic priorities with accelerated investment in the business

· Strategic investment of £1.2 billion since launch of GSR3 in February 2018

· Further progress on digitising the Group and enhancing customer propositions

· MBNA migration completed ahead of schedule with increased return on investment of 18 per cent expected

· Schroders Personal Wealth on track to launch in second quarter

Continued strong business performance with increased profits and market leading returns

· Statutory profit after tax of £1.2 billion up 2 per cent with strong return on tangible equity of 12.5 per cent and earnings per share up 2 per cent to 1.49 pence

· Underlying profit of £2.2 billion up 8 per cent driven by increased net income and lower operating costs

· Net income increased by 2 per cent to £4.4 billion with a robust net interest margin of 2.91 per cent, higher other income and lower operating lease depreciation

· Total costs of £1,977 million down 4 per cent driven by lower operating costs and remediation charges

· Cost:income ratio further improved to 44.7 per cent with positive jaws of 6 per cent

· Credit quality remains strong, with no deterioration in credit risk. Net asset quality ratio of 25 basis points up on fourth quarter reflecting expected lower releases and write backs

· Statutory profit before tax of £1.6 billion with higher underlying profit offset by movements in below the line items, including an estimated charge for exiting the Standard Life Aberdeen investment management agreement

· Tangible net assets per share increased to 53.4 pence driven by strong underlying profit

Balance sheet strength maintained with lower capital requirement

· CET1 capital build of 31 basis points in the quarter after the expected one off impact from the implementation of IFRS 16 (11 basis points); CET1 ratio of 14.2 per cent, pre dividend accrual

· Systemic Risk Buffer confirmed by the PRA at 200 basis points for the Ring Fenced Bank, equivalent to 170 basis points for the Group, 40 basis points lower than previously included in guidance due to management action

· As a result of the lower Systemic Risk Buffer and net 30 basis point reduction in the Pillar 2A announced in July 2018, the Board’s view of the current level of capital required by the Group to grow the business, meet regulatory requirements and cover uncertainties has reduced from around 13 per cent to around 12.5 per cent, plus a management buffer of around 1 per cent

Financial targets for 2019 and the longer term reaffirmed

· Net interest margin of c.2.90 per cent in 2019 and resilient through the plan period

· Ongoing capital build of 170 to 200 basis points per annum

· Net asset quality ratio expected to be less than 30 basis points in 2019 and through the plan period

· Operating costs to be less than £8 billion in 2019; cost:income ratio expected to fall every year and be in the low 40s exiting 2020, including remediation

· Return on tangible equity of 14 to 15 per cent in 2019

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