Bank of Scotland Plc
Bank of Scotland plc: Half-Year Management Report
Bank of Scotland plc / Key word(s): Half Year Results Bank of Scotland plc For the half-year to 30 June 2015 Member of the Lloyds Banking Group FORWARD LOOKING STATEMENTS This document contains certain forward looking statements with respect to the business, strategy and plans of the Bank of Scotland Group and its current goals and expectations relating to its future financial condition and performance. Statements that are not historical facts, including statements about the Bank of Scotland Group’s or its directors’ and/or management’s beliefs and expectations, are forward looking 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. 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 Bank of Scotland 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 Bank of Scotland plc’s, HBOS plc’s, Lloyds Bank plc’s or Lloyds Banking Group plc’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; pandemic, natural and other disasters, adverse weather and similar contingencies outside the Lloyds Banking 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 Lloyds Banking Group’s control; the policies, decisions and actions of governmental or regulatory authorities in the UK, the EU, the US or elsewhere including the implementation of key legislation and regulation; the ability to attract and retain senior management and other employees; requirements or limitations imposed on Lloyds Banking Group plc, Lloyds Bank plc, HBOS plc and the Bank of Scotland Group as a result of HM Treasury’s investment in Lloyds Banking Group plc; actions or omissions by the Bank of Scotland Group’s directors, management or employees including industrial action; 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 Bank of Scotland 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 Lloyds Banking Group plc’s 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. Except as required by any applicable law or regulation, the forward looking statements contained in this document are made as of today’s date, and the Bank of Scotland Group expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward looking statements. CONTENTS
FINANCIAL REVIEW Principal activities During the half-year to 30 June 2015, the Group earned revenue through interest and fees on a broad range of financial services products including current and savings accounts, personal loans, credit cards and mortgages within the retail market; loans and capital market products to commercial, corporate and asset finance customers; and private banking. Review of results Total income increased by £186 million to £3,735 million for the half-year to 30 June 2015 from £3,549 million in the half-year to 30 June 2014. Net interest income increased by £157 million, or 5 per cent, to £3,271 million. The net interest margin increased, reflecting the disposal of lower margin assets which were outside of the Group’s risk appetite at the end of 2014 as well as the continued benefits of reduced funding and liability costs, partly offset by lower asset prices. Other income increased by £29 million, or 7 per cent, to £464 million, largely due to an increase in net trading income of £130 million which more than offset a £112 million decrease in other operating income. Net trading income was a profit of £219 million compared to a profit of £89 million in the half-year to 30 June 2014. Net fee and commission income was £11 million, or 5 per cent, higher at £236 million, Other operating income was £112 million lower at £9 million partly as a result of gains on asset sales in 2014 which were not repeated. Total operating expenses increased by £286 million, or 16 per cent, to £2,131 million; although there was a charge in respect of regulatory provisions of £547 million compared to a charge of £214 million in the same period in 2014. Excluding these items, costs were £47 million, or 3 per cent, lower at £1,584 million. This decrease reflects the impact of business disposals and the ongoing benefits of the Lloyds Banking Group’s efficiency programmes. The Group increased the provision for expected PPI costs by a further £341 million in first half of 2015. This brings the amount provided to £3,760 million, of which £772 million remains unutilised. The unutilised provision comprises elements to cover the Past Business Review (PBR), remediation activity and future reactive complaints including associated administration costs. The volume of reactive PPI complaints in the first half of 2015 fell by 8 per cent compared with the first half of 2014 but were marginally higher than the fourth quarter 2014 run-rate and above expectations. Reactive complaints continue to be driven by Claims Management Company (CMC) activity. The Group also made a further charge of £206 million in respect of other conduct issues. This comprises £164 million of provisions related to potential claims and remediation in respect of legacy product sales and a fine of £42 million following the agreement reached with the Financial Conduct Authority with regard to aspects of the Group’s PPI complaint handling process during the period March 2012 to May 2013. Impairment losses decreased by £483 million, or 84 per cent, to £91 million; the improvement reflects lower levels of new impairment as a result of effective risk management, improving economic conditions and the continued low interest rate environment. The tax charge for the half-year to 30 June 2015 was £292 million (half-year to 30 June 2014: £218 million), representing an effective tax rate of 19.3 per cent; this compares to an effective tax rate of 19.3 per cent in the first half of 2014. The Group’s common equity tier 1 capital ratio fell to 12.7 per cent at the end of June 2015, from 13.3 per cent at the end of December 2014, reflecting the adjustment to retained earnings for foreseeable dividends, offset by a reduction in risk-weighted assets. Please click on, or paste the following link to view the full announcement: http://www.rns-pdf.londonstockexchange.com/rns/7293U_1-2015-7-31.pdf 2015-07-31 Dissemination of a Corporate News, transmitted by DGAP – a service of EQS Group AG. The issuer is solely responsible for the content of this announcement. The DGAP Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. Media archive at www.dgap-medientreff.de and www.dgap.de |
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