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
24.02.2021
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
24.02.2021
re: 2020
Annual Report and Accounts
24 February 2021
LLOYDS BANKING GROUP PLC - ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2020
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 2020
This document will shortly be available for inspection
at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
A copy of the Annual Report and Accounts 2020 is available through
the 'Investors' 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 2020 (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 2020 Results News Release made available on 24 February
2021 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
Corporate Affairs
Matt Smith
+44
(0)20 7356 3522
Head of Media Relations
FORWARD LOOKING STATEMENTS
This
document contains certain forward-looking statements within the
meaning of Section 21E of the US Securities Exchange Act of 1934,
as amended, and section 27A of the US Securities Act of 1933, as
amended, with respect to the business, strategy, plans and/or
results of Lloyds Banking Group plc together with its subsidiaries
(the 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 Group's or its
directors' and/or management's beliefs and expectations, are
forward-looking statements. Words such as 'believes', 'achieves',
'anticipates', 'estimates', 'expects', 'targets', 'should',
'intends', 'aims', 'projects', 'plans', 'potential', 'will',
'would', 'could', 'considered', 'likely', 'may', 'seek', '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.
Examples of such forward-looking statements include, but are not
limited to, statements or guidance relating 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 the
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. 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 (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; any impact of the transition from IBORs to
alternative reference rates; 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; the Group's ESG targets
and/or commitments; changing customer behaviour including consumer
spending, saving and borrowing habits; changes to borrower or
counterparty credit quality impacting the recoverability and value
of balance sheet assets; concentration of financial exposure;
management and monitoring of conduct risk; exposure to counterparty
risk (including but not limited to third parties conducting illegal
activities without the Group's knowledge); 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), the EU-UK Trade and Cooperation
Agreement, 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; political instability including as a result of any UK
general election and any further possible referendum on Scottish
independence; 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 (including but not limited to the COVID-19
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, or other
such events; geopolitical unpredictability; risks relating to
climate change; changes in laws, regulations, practices and
accounting standards or taxation, including as a result of the UK's
exit from the EU; changes to regulatory capital or liquidity
requirements (including regulatory measures to restrict
distributions to address potential capital and liquidity stress)
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 laws,
legislation and regulation together with any resulting impact on
the future structure of the Group; 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 by Lloyds
Banking Group plc with the US Securities and Exchange Commission
for a discussion of certain factors and risks. 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 document are made
as of today's date, and the Group expressly disclaims any
obligation or undertaking to release publicly any updates or
revisions to any forward-looking statements contained in this
document to reflect any change in the 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 document 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
Principal Risks and Uncertainties
The principal risks and uncertainties relating to Lloyds Banking
Group plc are set out on page 57 of the Annual Report and Accounts.
The following is extracted in full and unedited from the
report:
2020 has been a year of significant uncertainty, including the
spread of COVID-19 and its impact on global and domestic economies
and the UK's exit from the European Union.
COVID-19 has had a significant impact on all risk types in 2020.
Understanding and managing its impacts dynamically has been a major
area of focus. The Group has responded quickly to the challenges
faced, putting in place risk mitigation strategies and refining its
investment and strategic plans.
All of the Group's principal risks, which are outlined on this
page, are reported regularly to the Board.
The risk management section from pages 143 to 204 provides a more
in-depth picture of how risk is managed within the
Group.
Key focus areas in 2020
Climate - New
The Group recognises the evolving pace of Climate Risk and has
adopted a comprehensive approach to embedding this risk within its
enterprise risk management framework. This includes the creation of
a new principal risk as well as its integration into our existing
principal risks. Work has also continued to develop scenario
modelling and other analytical tools and to increase the level of
external disclosure to further align to the Task Force on
Climate-related Financial Disclosures (TCFD)
recommendations.
Market
The Group's structural hedge, nominal balance £186 billion
(2019: £179 billion), provides protection against margin
compression caused by falling interest rates. In addition, customer
deposits have seen significant growth in 2020 which creates near
term interest rate exposure. Customer behaviour and hedging of
these balances are reviewed regularly.
The Group's defined benefit pension schemes have seen an
improvement in IAS19 accounting surplus to £1.6 billion (2019:
£0.5 billion), as a result of Deficit Reduction Contributions
and greater than expected asset returns partially offset by the
impact of the Retail Price Index (RPI) reform announced by the
Chancellor of the Exchequer in November 2020.
Credit
A range of measures have been deployed to help support customers,
including around 1.3 million payment holidays, c.£12 billion
of additional government support scheme lending through the Bounce
Back Loan (BBLS) and Coronavirus Business Interruption Loan (CBILS)
schemes, together with liquidity facilities for larger
clients.
This support together with the wide array of public policy
interventions, such as the job retention scheme, has limited the
increase in unemployment, and helped to suppress credit defaults
and business failures
The Group has responded dynamically to mitigate and address credit
risk, with specific focus on higher risk segments, sectors and
counterparties, as well as undertaking extensive preparation to
support the expected increase in customers who may experience
financial difficulty.
The 2020 full year impairment charge of £4,247 million (2019:
£1,291 million) reflects the deteriorating economic outlook,
with reserves built in anticipation of an increase in losses during
2021 as unemployment increases and more business failures are
seen.
Funding and liquidity
The Group maintained its strong funding and liquidity position
throughout 2020, with the loan to deposit ratio decreasing to 98
per cent (2019: 107 per cent). Customer deposits increased
significantly as spending reduced and customers deposited
government lending scheme balances.
During the year, the Group repaid all outstanding amounts of its
Term Funding Scheme (TFS) and Funding for Lending Scheme (FLS)
drawings and drew £13.7 billion from the Term Funding Scheme
with additional incentives for SMEs (TFSME).
Total wholesale funding reduced by £14.8 billion principally
as a result of the growth in customer deposits.
Capital
Underlying capital build was adversely impacted in 2020, mainly due
to a significant uplift in impairment provisions, however the
year-end capital position is significantly strengthened due to the
earlier reversal of the 2019 full year ordinary dividend accrual
and enhanced IFRS 9 transitional relief, which partially offset the
increase in impairment provisions. Closing CET1 ratio of
16.21 per
cent (15.01 per
cent excluding transitional relief).
The Group's capital requirements have reduced in 2020 due to lower
Pillar 2A requirements and the reduction in the UK countercyclical
capital buffer rate in response to the impact of COVID-19. The
Group therefore has significant headroom to absorb further
potential losses and to continue to support households and
businesses as they recover from the COVID-19 pandemic.
Insurance underwriting
Lower market activity as a result of the pandemic and noting the
one-off 2019 benefit from workplace auto-enrolment step-ups, saw
Life and Pensions present value of new business premium fall to
£14.5 billion in 2020 (2019: £17.5 billion). Near term
underwriting risk increased, reflecting policyholder behaviour on
workplace savings products. Significant amounts of life and
morbidity risk continued to be re-insured. No material change to
General Insurance underwriting risk in 2020, with total gross
written premium falling slightly to £662 million (2019:
£671 million), due to the reduction in branch
footfall.
Change/execution
The Change/execution risk profile has remained stable in the year.
The Group's change portfolio was reprioritised at pace to support
critical and COVID-19 related activities. Enhanced, targeted
control monitoring was implemented to ensure safe delivery of
change during the year.
Conduct
The Group has adapted quickly to the impacts of the pandemic,
providing significant support to impacted customers. Comprehensive
preparations have been undertaken to help identify and further
support those customers in financial difficulty.
Data
The Group continues to improve its capabilities in the management
of data risk, with an improvement seen in the regular half yearly
capability assessment. Areas of improvement include delivery of a
new data risk and control library, embedding data by design and
ethics principles into the data science lifecycle, increasing
capabilities and broader awareness.
Governance
Governance risk has remained stable, despite the need for
accelerated decision-making and a significant increase in the
amount of remote working, together with a number changes to GEC and
Board members throughout the year. Ensuring appropriate and
efficient governance remains a key priority.
People
2020 has seen increased colleague workloads and significant changes
to ways of working, with up to 50,000 colleagues working from home.
Improved colleague sentiment demonstrates that the extensive
support measures deployed by the Group, with a continued focus on
colleague wellbeing and resilience, are helping to mitigate these
risks.
Operational resilience
Business continuity plans have proved resilient, with particular
attention applied to heightened risks in the supply
chain.
Operational
Despite anticipated heightened operational risks in cyber, fraud
and technology, the volume of operational loss events has remained
broadly consistent in 2020 compared to 2019.
Model
Model risk has increased due to the nature and uncertainty of the
economic outlook. The effect of government led customer support
initiatives have weakened established relationships between model
inputs and outputs, reducing the ability to forecast using models
alone. While underlying model drivers are expected to remain valid
in the longer term, year-end impairment reporting contains a
greater element of governed judgement to reflect current
conditions.
Regulatory and legal
Regulatory risk has been impacted by a small number of instances of
non-compliance, requiring forbearance from regulators. Forbearance
requirements have been due to the re-prioritisation of resource to
support the provision of essential services to customers and to
respond to new regulatory requirements, such as payment holidays.
Legal risk has been impacted by the UK's exit from the EU, in
particular continued uncertainty of the future UK legal and
regulatory financial services framework.
Strategic
Strategic risk is a significant source of risk for the Group,
influencing the Group's strategy, business model, performance and
risk profile. The development of our strategic risk framework is a
key priority for the Group.
Significant work has been undertaken during 2020 to understand the
risk implications of the Group's strategy and the key drivers of
strategic risk. These are outlined in more detail on the following
pages and will be further developed and embedded across the Group
during 2021.
1 Includes
a 0.5 per cent benefit following the implementation of the revised
capital treatment of intangible software assets which the PRA is
proposing to reverse.
Appendix 2 - Related Party Transactions
The following statements regarding related party transactions of
Lloyds Banking Group plc are set out on pages 294 to 295 of the
Annual Report. The following is extracted in full and unedited form
from the Annual Report.
Note 45: 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:
|
2020
|
2019
|
2018
|
|
£m
|
£m
|
£m
|
Compensation
|
|
|
|
Salaries and other short-term benefits
|
13
|
15
|
14
|
Post-employment benefits
|
-
|
-
|
-
|
Share-based payments
|
13
|
15
|
18
|
Total compensation
|
26
|
30
|
32
|
Aggregate contributions in respect of key management personnel to
defined contribution pension schemes were £nil (2019:
£nil; 2018: £nil).
|
2020
|
2019
|
2018
|
|
million
|
million
|
million
|
Share option plans
|
|
|
|
At 1 January
|
-
|
-
|
1
|
Granted, including certain adjustments (includes entitlements of
appointed key management personnel)
|
-
|
-
|
-
|
Exercised/lapsed (includes entitlements of former key management
personnel)
|
-
|
-
|
(1)
|
At 31 December
|
-
|
-
|
-
|
|
2020
|
2019
|
2018
|
|
million
|
million
|
million
|
Share plans
|
|
|
|
At 1 January
|
101
|
84
|
82
|
Granted, including certain adjustments (includes entitlements of
appointed key management personnel)
|
46
|
46
|
39
|
Exercised/lapsed (includes entitlements of former key management
personnel)
|
(30)
|
(29)
|
(37)
|
At 31 December
|
117
|
101
|
84
|
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:
|
2020
|
2019
|
2018
|
|
£m
|
£m
|
£m
|
Loans
|
|
|
|
At 1 January
|
2
|
2
|
2
|
Advanced (includes loans of appointed key management
personnel)
|
-
|
1
|
1
|
Repayments (includes loans of former key management
personnel)
|
-
|
(1)
|
(1)
|
At 31 December
|
2
|
2
|
2
|
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 0.39 per cent and 24.20 per cent in 2020 (2019: 6.45 per
cent and 24.20 per cent; 2018: 6.70 per cent and 24.20 per
cent).
No provisions have been recognised in respect of loans given to key
management personnel (2019 and 2018: £nil).
|
2020
|
2019
|
2018
|
|
£m
|
£m
|
£m
|
Deposits
|
|
|
|
At 1 January
|
23
|
20
|
20
|
Placed (includes deposits of appointed key management
personnel)
|
25
|
44
|
33
|
Withdrawn (includes deposits of former key management
personnel)
|
(38)
|
(41)
|
(33)
|
At 31 December
|
10
|
23
|
20
|
Deposits placed by key management personnel attracted interest
rates of up to 2.0 per cent (2019: 3.0 per cent; 2018: 3.5 per
cent).
At 31 December 2020, the Group did not provide any guarantees in
respect of key management personnel (2019 and 2018:
none).
At 31 December 2020, 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 £0.6 million with four
directors and two connected persons (2019: £0.6 million with
four directors and two connected persons; 2018: £0.5 million
with three directors and three connected persons).
Subsidiaries
Details of the Group's subsidiaries and related undertakings are
given on pages 349 to 354. 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 2020, customer
deposits of £151 million (2019: £169 million) and
investment and insurance contract liabilities of £152 million
(2019: £127 million) related to the Group's pension funds. As
disclosed in note 34, the Group's main pension funds have entered
into a longevity insurance arrangement that was structured as a
pass-through involving Scottish Widows.
Collective investment vehicles
The Group manages 137 (2019: 141) collective investment vehicles,
such as Open Ended Investment Companies (OEICs) and of these 76
(2019: 75) are consolidated. The Group invested £659 million
(2019: £804 million) and redeemed £1,159 million (2019:
£1,771 million) in the unconsolidated collective investment
vehicles during the year and had investments, at fair value, of
£2,234 million (2019: £3,417 million) at 31 December. The
Group earned fees of £93 million from the unconsolidated
collective investment vehicles during 2020 (2019: £127
million).
Joint ventures and associates
At 31 December 2020 there were loans and advances to customers of
£28 million (2019: £75 million) outstanding and balances
within customer deposits of £73 million (2019: £5
million) relating to joint ventures and associates.
During the year the Group paid fees of £7 million (2019:
£2 million) to its Schroders Personal Wealth joint venture and
also made a payment of £20 million under the terms of an
Operating Margin Guarantee put in place as part of the agreements
for the establishment of the joint venture.
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 2020,
these companies had total assets of approximately £4,387
million (2019: £4,761 million), total liabilities of
approximately £4,928 million (2019: £5,322 million) and
for the year ended 31 December 2020 had turnover of approximately
£3,857 million (2019: £4,286 million) and made a net
loss of approximately £435 million (2019: net loss of
£190 million). In addition, the Group has provided £1,295
million (2019: £1,266 million) of financing to these companies
on which it received £91 million (2019: £86 million)
of interest income in the year.
Appendix 3 - Directors' Responsibility Statement
The following statement is extracted from page 114 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 2020 Results News Release dated 24
February 2020.
Statement of directors' responsibilities
The Directors are responsible for preparing the annual report,
including 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 accounting standards in conformity
with the requirements of the Companies Act 2006. Additionally, the
Financial Conduct Authority's Disclosure Guidance and Transparency
Rules require the Directors to prepare the group financial
statements in accordance with international financial reporting
standards adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in 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 for the Group and
Company, international accounting standards in conformity with the
requirements of the Companies Act 2006 and, for the Group,
international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in 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, international financial
reporting standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union. 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/investors. 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 82
to 83 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 international accounting standards in conformity with the
requirements of the Companies Act 2006 and in accordance with
international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union
and the Company financial statements which have been prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006, give a true and
fair view of the assets, liabilities, financial position and profit
or loss of the Group and the Company.
●
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 the
Group together with a description of the principal risks and
uncertainties 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 and
the Group's position, 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: 24.02.2021