KEY HIGHLIGHTS FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2012
'We have made further significant progress this quarter, improving underlying performance in a challenging environment, while continuing to deliver returns above the cost of equity in the core business and strengthen our already robust balance sheet. We have a strong commitment to helping Britain prosper, and our early participation in the Funding for Lending scheme is enabling us to extend further financing to businesses and customers in the UK. As part of this focus on supporting sustainable economic growth, we are continuing to increase SME lending on a net basis in a contracting market and provide mortgages to one in four first-time home buyers. We remain confident that, by delivering our strategy to be a simple, customer-focused UK retail and commercial bank, we can rebuild the trust of our customers and other stakeholders and can deliver sustainable returns for our shareholders over time.'
António Horta-Osório, Group Chief Executive
Improved underlying Group performance in a challenging environment
- Underlying profit increased by 148 per cent to £1,904 million
- Net interest margin in line with plan at 1.93 per cent (first nine months of 2011: 2.10 per cent)
- Further reductions in costs (down 5 per cent) and impairment (down 40 per cent)
- Statutory loss before tax of £583 million, including a further PPI provision of £1 billion in the third quarter
Core business continuing to deliver returns above the cost of equity
- Return on risk-weighted assets of 2.61 per cent (first nine months of 2011: 2.48 per cent)
- Loans and advances to customers marginally down in third quarter at £426.0 billion (30 June 2012: £428.5 billion)
- Net interest margin of 2.32 per cent; stable in third quarter
- Credit quality remains strong: impairment reduced 40 per cent to £1,351 million; impairment charge as a percentage of average advances improved to 0.41 per cent (first nine months of 2011: 0.66 per cent)
Investing in our core business to improve service, and support our customers and the UK economy
- Lowest FSA reportable banking complaints (excl. PPI) of major UK banks at 1.4 per 1,000 accounts
- Net Promoter Scores up in all the three main retail brands
- SME net lending growth of 4 per cent in the last 12 months against market down 4 per cent
- UK's largest lender to first-time buyers, helping around 40,000 customers buy their first home so far in 2012
- First bank to access Funding for Lending scheme: £1 billion drawn in September; lending commitments to SMEs increased by £1 billion to £13 billion; £500 million commitment made to first-time buyer market
Further good progress on initiatives to simplify and reshape the business
- Simplification run-rate cost savings increased by £418 million in the nine months to end September to £660 million
- Non-core assets reduced by £31 billion to £110 billion, ahead of 2012 full year guidance
- 12 countries or overseas branches now exited, or exit announced, out of target of 15 by the end of 2014
Strong balance sheet: improved capital ratios, continued above-market deposit growth and strong liquidity
- Strong capital position: core tier 1 ratio continues to improve and is now 11.5 per cent; total capital ratio increased to 16.6 per cent, confident we will meet future regulatory capital requirements
- Continued above-market deposit growth of 6 per cent year-on-year
- Group loan to deposit ratio further improved to 124 per cent (core: 102 per cent)
- Greater balance sheet flexibility, with surplus liquidity deployed in repurchase of over £10 billion of term funding in Q3
Guidance reaffirmed or improved
- Full year 2012 Group net interest margin expected to be around 1.93 per cent, in line with previous guidance
- Cost base of close to £10 billion in full year 2012, two years ahead of original plan; reduction of around £1 billion since 2010
- 2012 impairment charge guidance further lowered to approximately £6 billion
- Full year 2012 non-core asset reduction target further increased to around £38 billion, £13 billion more than original target; continue to expect non-core asset reduction to be capital generative
- Expect to reach our long-term loan to deposit ratio target of 100 per cent for the core business in the first quarter of 2013, at the same time as reaching a 120 per cent loan to deposit ratio for the Group
