Blueprint
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
20
February 2019
LLOYDS BANKING GROUP plc
(Translation
of registrant's name into English)
5th Floor
25 Gresham Street
London
EC2V 7HN
United Kingdom
(Address
of principal executive offices)
Indicate
by check mark whether the registrant files or will file annual
reports
under
cover Form 20-F or Form 40-F.
Form
20-F..X.. Form 40-F
Indicate
by check mark whether the registrant by furnishing the
information
contained
in this Form is also thereby furnishing the information to
the
Commission
pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes
No ..X..
If
"Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule
12g3-2(b):
82- ________
Index
to Exhibits
Item
No.
1 Regulatory News Service Announcement, dated 20 February
2019
re: 2018
Annual Report and Accounts
20
February 2019
LLOYDS BANKING GROUP PLC – ANNUAL REPORT AND
ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2018
In
accordance with Listing Rule 9.6.1, Lloyds Banking Group plc has
submitted today the following document to the National Storage
Mechanism.
●
Annual Report and
Accounts 2018
This
document will shortly be available for inspection at
http://www.morningstar.co.uk/uk/NSM
A copy
of the Annual Report and Accounts 2018 is available through the
‘Investors & Performance’ section of our website
www.lloydsbankinggroup.com
This
announcement also contains additional information for the purposes
of compliance with the Disclosure Guidance and Transparency Rules,
including principal risk factors, details of related party
transactions and a responsibility statement. This information is
extracted, in full unedited text, from the Annual Report and
Accounts 2018 (the ‘Annual
Report’). References to page numbers and notes to the
accounts made in the following Appendices, refer to page numbers
and notes to the accounts in the Annual Report. The 2018 Results
News Release made on 20 February 2019 contained a condensed set of
financial statements, the Group Chief Executive’s statement
and the Chief Financial Officer’s review.
-END-
For
further information:
Investor Relations
Douglas
Radcliffe
+44 (0)20 7356
1571
Group
Investor Relations Director
douglas.radcliffe@.lloydsbanking.com
Corporate Affairs
Matt
Smith
+44 (0)20 7356
3522
Head of
Corporate Media
matt.smith@lloydsbanking.com
FORWARD LOOKING STATEMENTS
This Annual Report contains certain forward looking statements with
respect to the business, strategy, plans and/or results of Lloyds
Banking Group and its current goals and expectations relating to
its future financial condition and performance. Statements that are
not historical facts, including statements about Lloyds Banking
Group’s or its directors’ and/or management’s
beliefs and expectations, are forward looking statements. Words
such as ‘believes’, ‘anticipates’,
‘estimates’, ‘expects’,
‘intends’, ‘aims’, ‘potential’,
‘will’, ‘would’, ‘could’,
‘considered’, ‘likely’,
‘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. By their nature, forward looking statements
involve risk and uncertainty because they relate to events and
depend upon circumstances that will or may occur in the
future.
Examples of such forward looking statements include, but are not
limited 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 Lloyds Banking 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; 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; changing customer behaviour including consumer
spending, saving and borrowing habits; changes to borrower or
counterparty credit quality; concentration of financial exposure; management
and monitoring of conduct risk; 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) and as a result of such exit and the potential for other
countries to exit the EU or the Eurozone and the impact of any
sovereign credit rating downgrade or other sovereign financial
issues; technological changes and risks to the security of IT and
operational infrastructure, systems, data and information resulting
from increased threat of cyber and other attacks; 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; risks related to
climate change; changes in laws, regulations, practices and
accounting standards or taxation, including as a result of the exit
by the UK from the EU, or a further possible referendum on Scottish
independence; 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 together with any resulting impact on the future
structure of the Group; the transition from IBORs to alternative
reference rates; the ability to attract and retain senior
management and other employees and meet its diversity objectives;
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 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, lending
companies and digital innovators and disruptive technologies; 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 and risks together with examples of forward looking
statements.
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. Except as required by any applicable law or regulation,
the forward looking statements contained in this Annual Report are
made as of the date hereof, and Lloyds Banking Group expressly
disclaims any obligation or undertaking to release publicly any
updates or revisions to any forward looking statements contained in
this Annual Report to reflect any change in Lloyds Banking
Group’s expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is
based.
The information, statements and opinions contained in this Annual
Report do not constitute a public offer under any applicable law or
an offer to sell any securities or financial instruments or any
advice or recommendation with respect to such securities or
financial instruments.
Appendix 1 – Principal risks and uncertainties
The
principal risks and uncertainties relating to Lloyds Banking Group
plc are set out on pages 32-35 of the Annual Report. The following
is extracted in full and unedited form from the Annual
Report.
The
most significant risks which could impact the delivery of our
long-term strategic objectives and our approach to each risk are
detailed below.
There
remains continued uncertainty around both the UK and global
political and macroeconomic environment. The potential impacts of
external factors have been considered in all principal risks to
ensure any material uncertainties continue to be monitored and are
appropriately mitigated.
As part
of the Group’s ongoing assessment of the potential
implications of the UK leaving the European Union, the Group
continues to consider the impact to its customers, colleagues and
products – as well as legal, regulatory, tax, financial and
capital implications.
Principal
risks and uncertainties are reviewed and reported regularly. As
part of a review of the Group’s risk categories, the
secondary risk categories of Change, Data management and
Operational resilience have been elevated to primary risk
categories, and Strategic risk has been included as a new primary
risk category, in the Group’s Risk Management Framework.
These changes will be embedded during 2019 and reflected within the
Group’s principal risks.
Full
analysis of risk categories page 114
Credit
The
risk that parties with whom we have contracted, fail to meet their
financial obligations (both on and off balance sheet).
Example
Observed
or anticipated changes in the economic environment could impact
profitability due to an increase in delinquency, defaults,
write-downs and/or expected credit losses
Key
mitigating actions
●
Credit
policy, incorporating prudent lending criteria, aligned with
Board-approved risk appetite, to effectively manage
risk
●
Robust
risk assessment and credit sanctioning to ensure we lend
appropriately and responsibly
●
Extensive
and thorough credit processes and controls to ensure effective risk
identification, management and oversight During the year we
strengthened affordability buffers and improved controls to
restrict lending to consumers with higher risk of
over-indebtedness
●
Effective,
well-established governance process supported by independent credit
risk oversight and assurance
●
Early
identification of signs of stress leading to prompt engagement with
the customer
Key
risk indicators
£937m
Impairment
charge
2017:
£795m
£9,215m
Stage 3
assets1
1 Jan
2018: £9,055m
Alignment
to strategic priorities and future focus
Maximising
the Group’s capabilities
●
We
seek to support sustainable growth in our targeted segments. We
have a conservative and well-balanced credit portfolio, managed
through the economic cycle and supported by strong credit portfolio
management.
●
We
are committed to better addressing our customers’ banking
needs through consistent, fair and responsible credit risk
decisions, aligned to customers’ circumstances, whilst
staying within prudent risk appetite.
●
Impairments
remain below long-term levels and are expected to increase as the
level of write-backs and releases reduces and impairments
normalise.
1
Underlying total gross lending.
Read
more pages 115 to 135
Regulatory and legal
The
risk that the Group is exposed to financial loss, fines, censure,
or legal or enforcement action; or to civil or criminal proceedings
in the courts (or equivalent) and/or the Group is unable to enforce
its rights due to failing to comply with applicable laws (including
codes of practice which could have legal implications),
regulations, codes of conduct or legal obligations, or a failure to
adequately manage actual or threatened litigation, including
criminal proceedings.
Example
●
Failure
to deliver key regulatory changes or to comply with ongoing
requirements
Key
mitigating actions
●
Implementation
of compliance and legal risk management policies and procedures to
ensure appropriate controls and processes are in place to comply
with legislation, rules and regulation
●
Embedding
Group-wide processes to monitor ongoing compliance with new
legislation, rules and regulation
●
Continued
investment in people, processes, training and IT to help meet our
legal and regulatory commitments
●
Ongoing
engagement with regulatory authorities and industry bodies on
forthcoming regulatory changes, market reviews and investigations,
ensuring programmes are established to deliver new regulation and
legislation
●
Ongoing
horizon scanning to identify changes in regulatory and legal
requirements
Key
risk indicators
£993m
Mandatory,
legal and regulatory investment spend
2017:
£886m
Alignment
to strategic priorities and future focus
Delivering
a leading customer experience
●
We
are committed to operating sustainably and responsibly, and commit
significant resource and expense to ensure we meet our legal and
regulatory obligations.
●
We
respond as appropriate to impending legislation, regulation and
associated consultations and participate in industry bodies. We
continue to be proactive in responding to significant ongoing and
new legislation, regulation and court proceedings.
Read
more page 135
Conduct
The
risk of customer detriment due to poor design, distribution and
execution of products and services or other activities which could
undermine the integrity of the market or distort competition
leading to unfair customer outcomes, regulatory censure and
financial and reputational loss.
Example
●
The
most significant conduct cost in recent years has been PPI
mis-selling
Key
mitigating actions
●
Conduct
policies and procedures are in place to ensure appropriate controls
and processes that deliver fair customer outcomes
●
Conduct
risk appetite metrics provide a granular view of how our products
and services are performing for customers through the customer
lifecycle
●
Product
approval, continuous product review processes and customer outcome
testing in place (across products and services)
●
Learning
from past mistakes through root cause analysis
●
Clear
customer accountabilities for colleagues, with rewards driven by
customer-centric metrics
●
Further
enhancements and embedding of our framework to support all
customers, including those in vulnerable circumstances
Key
risk indicators
92.5%
Conduct
risk appetite metric performance-Group
2017:
92.3%
Alignment
to strategic priorities and future focus
Delivering
a leading customer experience
●
As
we transform our business, minimising conduct risk is critical to
achieving our strategic goals and meeting regulatory
standards.
●
We
have senior committees that ensure our focus on embedding a
customer-centric culture and delivering fair outcomes across the
Group. Further enhancements to our conduct risk framework continue
to support this through robust and effective management of conduct
risk. Together these support our vision of being the best bank for
customers, enabling the delivery of a leading customer experience
through effective root cause analysis and learning from customer
feedback.
Read
more page 136
Operational
We face
significant operational risks which may disrupt services to
customers, cause reputational damage, and result in financial loss.
These include the availability, resilience and security of our core
IT systems, unlawful or inappropriate use of customer data, theft
of sensitive data, fraud and financial crime threats, and the
potential for failings in our customer processes.
Example
●
The
dynamic threat posed by cyber risk to the confidentiality and
integrity of electronic data or the availability of
systems
Key mitigating actions
●
Investing
in enhanced cyber controls to protect against external threats to
the confidentiality or integrity of electronic data, or the
availability of systems, and to ensure effective third-party
assurance
●
Enhancing
the resilience of systems that support critical business processes
with independent verification of progress on an annual
basis
●
Significant
investment in compliance with General Data Protection Regulation
and Basel Committee on Banking Supervision standards
●
Working
with industry bodies and law enforcement agencies to identify and
combat fraud and money laundering
Key
risk indicators
99.97%
Availability
of core systems
2017:
99.98%
Alignment
to strategic priorities and future focus
Delivering
a leading customer experience
●
We
recognise that resilient and secure technology, and appropriate use
of data, is critical to delivering a leading customer experience
and maintaining trust across the wider industry.
●
The
availability and resilience of IT systems remains a key strategic
priority and the Cyber programme continues to focus on enhancing
cyber security controls. Internal programmes ensure that data is
used correctly, and the control environment is regularly assessed
through both internal and third-party testing.
Read
more pages 136 to 138
People
Key
people risks include the risk that we fail to maintain
organisational skills, capability, resilience and capacity levels
in response to organisational, political and external market change
and evolving business needs.
Example
●
Inability
to attract or retain colleagues with key skills could impact the
achievement of business objectives
Key
mitigating actions
●
Focused
action to attract, retain and develop high calibre people.
Delivering initiatives to reinforce behaviours which generate the
best outcomes for customers and colleagues
●
Managing
organisational capability and capacity to ensure there are the
right skills and resources to meet our customers’
needs
●
Effective
remuneration arrangements to promote appropriate colleague
behaviours and meet regulatory expectations
●
During
2018 we enhanced our colleague wellbeing strategies to ensure
support is in place to meet colleague needs, and to help achieve
the skills and capability growth required to build a workforce for
the ‘Bank of the Future’
Key
risk indicators
79%
Values
and behaviours index1
2017:
80%
Alignment
to strategic priorities and future focus
Transforming
ways of working
●
Regulatory
requirements relating to personal accountability and remuneration
rules could affect the Group’s ability to attract and retain
the calibre of colleagues required to meet changing customer needs.
We recognise the challenges in delivering the Group’s
strategic priorities and we will continue to invest in the
development of colleague capabilities and agile working practices.
This investment will deliver a leading customer experience and
allow the Group to respond quickly to customers’ rapidly
changing decision-making in a digital era.
1
Formerly known as Best bank for customers index.
Read
more page 138
Insurance underwriting
Key
insurance underwriting risks within the Insurance business are
longevity, persistency and property insurance. Longevity risk is
expected to increase as our presence in the bulk annuity market
increases.
Example
●
Uncertain property
insurance claims impact Insurance earnings and capital, e.g.
extreme weather conditions, such as flooding, can result in high
property damage claims.
Key
mitigating actions
●
Strategic decisions
made consider the maintenance of the current well-diversified
portfolio of insurance risks.
●
Processes for
underwriting, claims management, pricing and product design seek to
control exposure. Experts in demographic risk (for example
longevity) support the propositions.
●
Reinsurance and
other risk transfer arrangements are actively reviewed for their
efficacy, including monitoring the strength of third-parties with
whom the risk is shared.
Key
risk indicators
£14,384m
Insurance
(Life and Pensions
present
value of new
business
premiums)
2017:
£9,951m
£690m
General
Insurance
underwritten
total
gross written
premiums
2017:
£733m
Alignment to strategic priorities and future focus
Delivering a leading customer experience
●
We
are committed to meeting the changing needs of customers by working
to provide a range of insurance products via multiple channels. The
focus is on delivering a leading customer experience by helping
customers protect themselves today whilst preparing for a secure
financial future.
●
Strategic
growth initiatives within Insurance are developed and managed in
line with a defined risk appetite, aligned to the Group risk
appetite and strategy.
Read
more pages 138 to 139
Capital
The
risk that we have a sub-optimal quantity or quality of capital or
that capital is inefficiently deployed across the
Group.
Example
●
A worsening
macroeconomic environment could lead to adverse financial
performance, which could deplete capital resources and/ or increase
capital requirements due to a deterioration in customers’
creditworthiness.
Key
mitigating actions
●
A comprehensive
capital management framework that includes setting of capital risk
appetite and dividend policy.
●
Close monitoring of
capital and leverage ratios to ensure we meet regulatory
requirements and risk appetite.
●
Comprehensive
stress testing analyses to evidence capital adequacy.
Key
risk indicators
13.9%
Common
equity tier 1
ratio1,2
2017:
13.9%
5.6%
UK
leverage ratio1
2017:
5.4%
Alignment
to strategic priorities and future focus
Maximising
the Group’s capabilities
●
Ensuring
we hold an appropriate level of capital to maintain financial
resilience and market confidence underpins our strategic objectives
of supporting the UK economy, and growth in targeted segments
through the cycle.
1 Pro
forma.
2 CET1
ratio after ordinary dividends and share buyback.
Read
more pages 139 to 147
Funding and liquidity
Funding
risk is the risk that we do not have sufficiently stable and
diverse sources of funding. Liquidity risk is the risk that we have
insufficient financial resources to meet our commitments as they
fall due.
Example
●
A deterioration in
either the Group’s or the UK’s credit rating, or a
sudden and significant withdrawal of customer deposits, would
adversely impact our funding and liquidity position.
Key
mitigating actions
●
Holding liquid
assets to cover potential cash and collateral outflows and to meet
regulatory requirements. In addition, maintaining a further pool of
assets that can be used to access central bank liquidity
facilities.
●
Undertaking daily
monitoring against a number of market and Group-specific early
warning indicators.
●
Maintaining a
contingency funding plan detailing actions and strategies available
in stressed conditions.
Key
risk indicators
£129bn
LCR
eligible assets
2017:
£121bn
107%
Loan to
deposit ratio
1 Jan
2018: 107%
Alignment
to strategic priorities and future focus
Maximising
the Group’s capabilities
●
We
maintain a strong funding position in line with our low risk
strategy, and the loan to deposit ratio remains within our target
range.
●
Our
funding position allows the Group to grow targeted business
segments, and better address our customers’
needs.
Read
more pages 147 to 152
Governance
Against
a background of increased regulatory focus on governance and risk
management, the most significant challenges arise from ensuring
that the Group continues to demonstrate compliance with the
requirements to ring-fence core UK financial services and
activities, the potential impact of EU exit and further
requirements under the Senior Manager & Certification Regime
(SM&CR).
Examples
●
Inadequate or
complex governance arrangements to address ring-fencing
requirements and the potential impact of EU exit could result in a
weaker control environment, delays in decision making and lack of
clear accountability.
●
Non-compliance
with, or breaches of SM&CR requirements could result in lack of
clear accountability, and legal and regulatory
consequences.
Key
mitigating actions
●
To meet
ring-fencing requirements, core UK financial services and
activities have been ring-fenced from other activities of the Group
and an appropriate control environment and governance structures
are in place to ensure compliance.
●
A dedicated change
programme is in place and addressing the additional SM&CR
requirements which will come into force during 2019.
●
A dedicated
programme is in place to assess and address the potential impacts
of EU exit on the Group’s operations in Europe. The Group is
in close and regular contact with regulators to develop and deploy
our planned operating and legal structure to mitigate the potential
impacts of EU exit.
●
Evolving risk and
governance arrangements to ensure they continue to be appropriate
to comply with regulatory objectives.
Key
risk indicators
N/A
Alignment
to strategic priorities and future focus
Delivering
a leading customer experience
●
Ring-fencing
ensures that we are safer and continue to deliver a leading
customer experience by providing further protection to core retail
and SME deposits, increasing transparency of our operations and
facilitating the options available in resolution.
●
Our
governance framework and strong culture of ownership and
accountability enabled effective, on time, compliance with the
SM&CR requirements and enable us to demonstrate clear
accountability for decisions.
Read
more page 153
Market
The
risk that our capital or earnings profile is affected by adverse
market rates, in particular interest rates and credit spreads in
the banking business, equity and credit spreads in the Insurance
business, and credit spreads in the Group’s defined benefit
pension schemes.
Examples
●
Earnings are
impacted by our ability to forecast and model customer behaviour
accurately and establish appropriate hedging
strategies.
●
The Insurance
business is exposed indirectly to equity risk through the value of
future management charges on policyholder funds. Credit spread risk
within the Insurance business primarily arises from bonds and loans
used to back annuities.
●
Narrowing credit
spreads will increase the cost of pension scheme
benefits.
Key
mitigating actions
●
Structural hedge
programmes implemented to manage liability margins and margin
compression.
●
Equity and credit
spread risks are closely monitored and, where appropriate, asset
and liability matching is undertaken.
●
The Group’s
defined benefit pension schemes continue to monitor their credit
allocation as well as the hedges in place against nominal rate and
inflation movements.
Key
risk indicators
£1,146m
IAS 19
Pension surplus
2017:
£509m
Alignment
to strategic priorities and future focus
Maximising
the Group’s capabilities
●
We
actively manage our exposure to movements in market rates, to drive
lower volatility earnings and offer a comprehensive customer
proposition with hedging strategies to support strategic aims.
Mitigating actions are implemented to reduce the impact of market
movements, resulting in a more stable capital
position.
●
Effective
interest rate and inflation hedging has kept volatility in the
Group’s defined benefit pension schemes low. This combined
with improved market conditions has helped keep the schemes in IAS
19 surplus in 2018. This allows us to more efficiently utilise
available capital resources to better enable the Group to maximise
its capabilities.
Read
more pages 154 to 159
Model
The
risk of financial loss, regulatory censure, reputational damage or
customer detriment, as a result of deficiencies in the development,
application and ongoing operation of models and rating
systems.
Example:
●
The consequences of
inadequate models could include: inappropriate levels of capital or
impairments; inappropriate credit or pricing decisions; and adverse
impacts on funding or liquidity, or the Group’s earnings and
profits.
Key
mitigating actions
●
A comprehensive
model risk management framework.
●
Defined roles and
responsibilities, with clear ownership and
accountability.
●
Principles
regarding the requirements of data integrity, development,
validation, implementation and ongoing maintenance.
●
Regular model
monitoring.
●
Independent review
of models.
●
Periodic validation
and re-approval of models.
Key
risk indicators
N/A
Alignment
to strategic priorities and future focus
Digitising
the Group
●
The
Group’s models play a vital role in supporting Group strategy
to ensure profitable growth in targeted segments and the
Group’s drive toward automation and digital solutions to
enhance customer outcomes. Model risk management helps ensure these
models are implemented in a controlled and safe manner for both the
Group and customers.
Read
more page 159
Appendix 2 – Related Party Transactions
The
following statements regarding related party transactions of Lloyds
Banking Group plc are set out on pages 237 to 238 of the Annual
Report. The following is extracted in full and unedited form from
the Annual Report.
Note 46: Related party transactions
Key management personnel
Key
management personnel are those persons having authority and
responsibility for planning, directing and controlling the
activities of an entity; the Group’s key management personnel
are the members of the Lloyds Banking Group plc Group Executive
Committee together with its Non‑Executive
Directors.
The
table below details, on an aggregated basis, key management
personnel compensation:
|
|
2018 £m
|
2017£m
|
2016£m
|
|
Compensation
|
|
|
|
|
Salaries
and other short-term benefits
|
14
|
13
|
17
|
|
Post-employment
benefits
|
–
|
–
|
−
|
|
Share-based
payments
|
18
|
22
|
23
|
|
Total compensation
|
32
|
35
|
40
|
Aggregate
contributions in respect of key management personnel to defined
contribution pension schemes were £nil million (2017:
£0.05 million; 2016: £0.1 million).
|
|
2018
million
|
2017
million
|
2016
million
|
|
Share option plans
|
|
|
|
|
At 1
January
|
1
|
3
|
9
|
|
Granted,
including certain adjustments (includes
entitlements of appointed key management personnel)
|
–
|
–
|
3
|
|
Exercised/lapsed
(includes entitlements of former key management
personnel)
|
(1)
|
(2)
|
(9)
|
|
At 31 December
|
–
|
1
|
3
|
|
|
2018
million
|
2017
million
|
2016
million
|
|
Share plans
|
|
|
|
|
At 1
January
|
82
|
65
|
82
|
|
Granted,
including certain adjustments (includes entitlements of appointed
key management personnel)
|
39
|
37
|
29
|
|
Exercised/lapsed
(includes entitlements of former key management
personnel)
|
(37)
|
(20)
|
(46)
|
|
At 31 December
|
84
|
82
|
65
|
The
tables below detail, on an aggregated basis, balances outstanding
at the year end and related income and expense, together with
information relating to other transactions between the Group and
its key management personnel:
|
|
2018 £m
|
2017£m
|
2016£m
|
|
Loans
|
|
|
|
|
At 1
January
|
2
|
4
|
5
|
|
Advanced
(includes loans of appointed key management personnel)
|
1
|
1
|
3
|
|
Repayments
(includes loans of former key management personnel)
|
(1)
|
(3)
|
(4)
|
|
At 31 December
|
2
|
2
|
4
|
The
loans are on both a secured and unsecured basis and are expected to
be settled in cash. The loans attracted interest rates of between
6.70 per cent and 24.20 per cent in 2018 (2017: 6.45 per cent and
23.95 per cent; 2016: 2.49 per cent and 23.95 per
cent).
No
provisions have been recognised in respect of loans given to key
management personnel (2017 and 2016: £nil).
|
|
2018 £m
|
2017£m
|
2016£m
|
|
Deposits
|
|
|
|
|
At 1
January
|
20
|
12
|
13
|
|
Placed
(includes deposits of appointed key management
personnel)
|
33
|
41
|
41
|
|
Withdrawn
(includes deposits of former key management personnel)
|
(33)
|
(33)
|
(42)
|
|
At 31 December
|
20
|
20
|
12
|
Deposits
placed by key management personnel attracted interest rates of up
to 3.5 per cent (2017: 4.0 per cent; 2016: 4.0
per cent).
At 31
December 2018, the Group did not provide any guarantees in respect
of key management personnel (2017 and 2016: none).
At 31
December 2018, transactions, arrangements and agreements entered
into by the Group’s banking subsidiaries with directors and
connected persons included amounts outstanding in respect of loans
and credit card transactions of £0.5 million with 3 directors
and 3 connected persons (2017: £0.01 million with three
directors and two connected persons; 2016: £0.4 million with
five directors and two connected persons).
Subsidiaries
Details
of the Group’s subsidiaries and related undertakings are
provided on pages 289–295. In accordance with IFRS 10
Consolidated financial statements, transactions and balances with
subsidiaries have been eliminated on consolidation.
Pension funds
The
Group provides banking and some investment management services to
certain of its pension funds. At 31 December 2018, customer
deposits of £225 million (2017: £337 million) and
investment and insurance contract liabilities of
£79 million (2017: £307 million) related to the
Group’s pension funds.
Collective investment vehicles
The
Group manages 131 (2017: 134) collective investment vehicles, such
as Open Ended Investment Companies (OEICs) and of these 82 (2017:
83) are consolidated. The Group invested £620 million (2017:
£418 million) and redeemed £404 million (2017: £616
million) in the unconsolidated collective investment vehicles
during the year and had investments, at fair value, of £2,513
million (2017: £2,328 million) at 31 December. The Group
earned fees of £128 million from the unconsolidated
collective investment vehicles during 2018 (2017: £133
million).
Joint ventures and associates
At 31
December 2018 there were loans and advances to customers of
£57 million (2017: £123 million) outstanding and balances
within customer deposits of £2 million (2017: £9 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 2018,
these companies had total assets of approximately £4,091
million (2017: £4,661 million), total liabilities of
approximately £4,616 million (2017: £5,228 million) and
for the year ended 31 December 2018 had turnover of approximately
£4,522 million (2017: £4,601 million) and made a loss of
approximately £125 million (2017: net loss of £87
million). In addition, the Group has provided £1,141 million
(2017: £1,226 million) of financing to these companies on
which it received £49 million (2017: £81 million) of
interest income in the year.
Appendix 3 – Directors’ Responsibility
Statement
The
following statement is extracted from page 81 of the Annual Report.
The following is extracted in full and unedited form from the
Annual Report. This statement relates solely to the Annual Report
and is not connected to the extracted information set out in this
announcement or the 2018 Results News Release dated 20 February
2019.
Statement of directors’ responsibilities
The
Directors are responsible for preparing the annual report, the
Directors’ remuneration report and the financial statements
in accordance with applicable law and regulations. Company law
requires the Directors to prepare financial statements for each
financial year. Under that law, the Directors have prepared the
Group and parent Company financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the European Union. Under company law, the Directors must not
approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the Group
and the Company and of the profit or loss of the Company and Group
for that period. In preparing these financial statements, the
Directors are required to: select suitable accounting policies and
then apply them consistently; make judgements and accounting
estimates that are reasonable and prudent; and state whether
applicable IFRSs as adopted by the European Union have been
followed.
The
Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and the Group and enable them to
ensure that the financial statements and the Directors’
remuneration report comply with the Companies Act 2006 and, as
regards the Group financial statements, Article 4 of the IAS
Regulation. They are also responsible for safeguarding the assets
of the Company and the Group and hence for taking reasonable steps
for the prevention and detection of fraud and other
irregularities.
A copy
of the financial statements is placed on our website at
www.lloydsbankinggroup.com. The Directors are responsible for the
maintenance and integrity of the Company’s website.
Legislation in the UK governing the preparation and dissemination
of financial statements may differ from legislation in other
jurisdictions.
Each of
the current Directors who are in office as at the date of this
report, and whose names and functions are listed on pages 52 to 53
of this annual report, confirm that, to the best of his or her
knowledge:
●
the Group financial
statements, which have been prepared in accordance with IFRSs as
adopted by the European Union, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Company and Group; and
●
the management
report contained in the strategic report and the Directors’
report includes a fair review of the development and performance of
the business and the position of the Company and Group, together
with a description of the principal risks and uncertainties that
they face.
The
Directors consider that the annual report and accounts, taken as a
whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the
Company’s position and performance, business model and
strategy. The Directors have also separately reviewed and approved
the strategic report.
Signatures
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
LLOYDS
BANKING GROUP plc
(Registrant)
By: Douglas
Radcliffe
Name: Douglas
Radcliffe
Title: Group
Investor Relations Director
Date: 20
February 2019