Lloyds Banking Group plc Half-Year Pillar 3 Disclosures. 16 August 2017

Transcription

1 Lloyds Bnking Group plc 2017 Hlf-Yer Pillr 3 Disclosures 16 August 2017

2 BASIS OF PREPARATION This report presents the condensed hlf-yer Pillr 3 disclosures of Lloyds Bnking Group plc ( the Group ) s t 30, prepred in ccordnce with Europen Bnking Authority (EBA) guidelines on Pillr 3 disclosure frequency nd the guidelines on disclosure requirements under Prt Eight of Regultion (EU) No 575/2013 finlised in Decemer The report should e red in conjunction with the 2017 Lloyds Bnking Group Hlf-Yer Results News Relese. The EBA guidelines on Pillr 3 disclosure frequency set out key informtion tht institutions in the EU nking sector should consider disclosing on more frequent thn nnul sis under Pillr 3. The Group s ssessment of these guidelines hs resulted in the disclosure of specific cpitl nd leverge informtion t the interim qurter ends, with further detiled nlysis provided t hlf-yer s covered y this report. These hlf-yer disclosures remin in ddition to the full nnul disclosure of the Group s Pillr 3 report. Risk-weighted ssets y type of risk re included in the individul hlf-yer Mngement Reports for the Group s significnt susidiries Lloyds Bnk Group nd Bnk of Scotlnd Group. In 2015 the Bsel Committee on Bnking Supervision pulished revised Pillr 3 disclosure requirements with the im of improving the comprility nd consistency of disclosures etween nks nd within the vrious disclosures mde y individul nks. The EBA susequently issued its finlised guidelines in Decemer 2016 to ensure the hrmonised nd timely implementtion of the Pillr 3 frmework revisions within the Europen Union. The EBA guidelines descried ove pply from 31 Decemer 2017, except for institutions tht, s t 1 Jnury 2016, qulify s G-SIBs (in ccordnce with the Commission Implementing Regultion (EU) No 1030/2014). These institutions were encourged to mke every effort to comply with the guidelines from yer-end Although Lloyds Bnking Group is not currently clssed s G-SIB, the Group hs worked with other UK nks (vi UK Finnce (formlly the British Bnkers Assocition)) to dopt forwrd-looking pproch nd greed with the Prudentil Regultion Authority (PRA) tht they would erly dopt limited numer of templtes for Decemer 2016 yer end nd interim reporting. FORD LOOKING STATEMENTS This document contins certin forwrd looking sttements with respect to the usiness, strtegy nd plns of Lloyds Bnking Group nd its current gols nd expecttions relting to its future finncil condition nd performnce. Sttements tht re not historicl fcts, including sttements out Lloyds Bnking Group s or its directors nd/or mngement s eliefs nd expecttions, re forwrd looking sttements. By their nture, forwrd looking sttements involve risk nd uncertinty ecuse they relte to events nd depend upon circumstnces tht will or my occur in the future. Fctors tht could cuse ctul usiness, strtegy, plns nd/or results (including ut not limited to the pyment of dividends) to differ mterilly from the plns, ojectives, expecttions, estimtes nd intentions expressed in such forwrd looking sttements mde y the Group or on its ehlf include, ut re not limited to: generl economic nd usiness conditions in the UK nd interntionlly; mrket relted trends nd developments; fluctutions in interest rtes (including low or negtive rtes), exchnge rtes, stock mrkets nd currencies; the ility to ccess sufficient sources of cpitl, liquidity nd funding when required; chnges to the Group s credit rtings; the ility to derive cost svings; chnging customer ehviour including consumer spending, sving nd orrowing hits; chnges to orrower or counterprty credit qulity; instility in the glol finncil mrkets, including Eurozone instility, the exit y the UK from the Europen Union (EU) nd the potentil for one or more other countries to exit the EU or the Eurozone nd the impct of ny sovereign credit rting downgrde or other sovereign finncil issues; technologicl chnges nd risks to cyer security; nturl, pndemic nd other dissters, dverse wether nd similr contingencies outside the Group s control; indequte or filed internl or externl processes or systems; cts of wr, other cts of hostility, terrorist cts nd responses to those cts, geopoliticl, pndemic or other such events; chnges in lws, regultions, ccounting stndrds or txtion, including s result of n exit y the UK from the EU, further possile referendum on Scottish independence; chnges to regultory cpitl or liquidity requirements nd similr contingencies outside the Group s control; the policies, decisions nd ctions of governmentl or regultory uthorities or courts in the UK, the EU, the US or elsewhere including the implementtion nd interprettion of key legisltion nd regultion; the ility to ttrct nd retin senior mngement nd other employees; requirements or limittions on the Group s result of HM Tresury s investment in the Group; ctions or omissions y the Group s directors, mngement or employees including industril ction; chnges to the Group s post-retirement defined enefit scheme oligtions; the provision of nking opertions services to TSB Bnking Group plc; the extent of ny future impirment chrges or write-downs cused y, ut not limited to, depressed sset vlutions, mrket disruptions nd illiquid mrkets; the vlue nd effectiveness of ny credit protection purchsed y the Group; the inility to hedge certin risks economiclly; the dequcy of loss reserves; the ctions of competitors, including non-nk finncil services nd lending compnies; nd exposure to regultory or competition scrutiny, legl, regultory or competition proceedings, investigtions or complints. Plese refer to the ltest Annul Report on Form 20-F filed with the US Securities nd Exchnge Commission for discussion of certin fctors together with exmples of forwrd looking sttements. Except s required y ny pplicle lw or regultion, the forwrd looking sttements contined in this document re mde s of tody s dte, nd Lloyds Bnking Group expressly disclims ny oligtion or undertking to relese pulicly ny updtes or revisions to ny forwrd looking sttements. The informtion, sttements nd opinions contined in this document do not constitute pulic offer under ny pplicle lw or n offer to sell ny securities or finncil instruments or ny dvice or recommendtion with respect to such securities or finncil instruments. Pge 1 of 48

3 Contents Tle 1: Tle 2: Risk-weighted ssets movement y key driver Overview of risk-weighted ssets (OV1) Credit Risk Summry Tle 3: Risk-weighted ssets flow sttement of credit risk exposures (CR8) Tle 4: Credit risk exposures Tle 5: IRB Credit risk exposures y portfolio nd PD rnge Corporte Min (CR6) Tle 6: IRB Credit risk exposures y portfolio nd PD rnge Corporte SME (CR6) Tle 7: IRB Credit risk exposures y portfolio nd PD rnge Centrl governments nd centrl nks (CR6) Tle 8: IRB Credit risk exposures y portfolio nd PD rnge Institutions (CR6) Tle 9: IRB Credit risk exposures y portfolio nd PD rnge Residentil mortgges (SME) (CR6) Tle 10: IRB Credit risk exposures y portfolio nd PD rnge Residentil mortgges (non-sme) (CR6) Tle 11: IRB Credit risk exposures y portfolio nd PD rnge Qulifying revolving retil exposures (CR6) Tle 12: IRB Credit risk exposures y portfolio nd PD rnge Other SME (CR6) Tle 13: IRB Credit risk exposures y portfolio nd PD rnge Other non-sme (CR6) Tle 14A: IRB (specilised lending) (CR10) Tle 14B: Equity exposure suject to the simple risk weight method (CR10) Tle 15: Stndrdised pproch credit risk exposure nd credit risk mitigtion effects (CR4) Tle 16: Stndrdised pproch exposures y sset clss (CR5) Counterprty Credit Risk Summry Tle 17: Risk-weighted ssets flow sttement of counterprty credit risk exposures Tle 18: Counterprty credit risk exposures Tle 19: Credit vlution djustment (CVA) cpitl chrge (CCR2) Tle 20: IRB CCR exposure y portfolio nd PD scle Corporte Min (CCR4) Tle 21: IRB CCR exposure y portfolio nd PD scle Centrl government nd centrl nks (CCR4) Tle 22: IRB CCR exposure y portfolio nd PD scle Institutions (CCR4) Tle 23: CCR corporte exposures suject to supervisory slotting Tle 24: Stndrdised pproch CCR exposures y regultory portfolio nd risk (CCR3) Mrket Risk Summry Tle 25: Tle 26: Tle 27: Tle 28: Tle 29: Tle 30: Mrket risk cpitl requirements flow sttements of mrket risk exposures under n IMA (MR2-B) Comprison of VR estimtes with gins/losses (MR4) Mrket risk under internl models pproch (MR2-A) IMA vlues for trding portfolios (MR3) Mrket risk under stndrdised pproch (MR1) Cpitl nd Leverge Tle 31: Tle 32: Tle 33: Tle 34: Significnt Susidiries Tle 35: Tle 36: Tle 37: Tle 38: Tle 39: Tle 40: Tle 41: Tle 42: Lloyds Bnking Group own funds templte Lloyds Bnking Group leverge rtio common disclosure Lloyds Bnking Group summry reconcilition of ccounting ssets nd leverge rtio exposures Lloyds Bnking Group split-up of on lnce exposures (excluding derivtives, STFS nd exempted exposures) Lloyds Bnk Group overview of risk-weighted ssets (OV1) Lloyds Bnk Group own funds templte Lloyds Bnk Group leverge rtio common disclosure Lloyds Bnk Group summry reconcilition of ccounting ssets nd leverge rtio exposures Bnk of Scotlnd Group overview of risk-weighted ssets (OV1) Bnk of Scotlnd Group own funds templte Bnk of Scotlnd Group leverge rtio common disclosure Bnk of Scotlnd Group summry reconcilition of ccounting ssets nd leverge rtio exposures Pge 2 of 48

4 2017 Hlf-Yer Pillr 3 Updte The following disclosures include informtion on Lloyds Bnking Group s own-funds, leverge, risk-weighted ssets nd cpitl requirements y type of risk nd y exposure clss. At 30 June At 31 Dec Key rtios nd risk-weighted ssets Pro form common equity tier 1 cpitl rtio Common equity tier 1 cpitl rtio Trnsitionl tier 1 cpitl rtio Trnsitionl totl cpitl rtio Totl risk-weighted ssets 217,787m 215,534m Pro form leverge rtio Leverge rtio Modified UK leverge rtio Averge modified UK leverge rtio The common equity tier 1 nd leverge rtios t 30 nd 31 Decemer 2016 re reported on pro form sis, seprtely reflecting dividends pid y the Insurnce usiness in July 2017 (in reltion to 2017 interim ernings) nd Ferury 2017 (in reltion to 2016 full yer ernings). The countercyclicl leverge rtio uffer is currently nil. The Group s leverge rtio on modified sis, excluding qulifying centrl nk clims from the exposure mesure in ccordnce with the rule modifiction pplied to the UK Leverge Rtio Frmework y the PRA in The verge modified UK leverge rtio is sed on the verge of the month end tier 1 cpitl nd modified exposure mesures over the qurter (1 April 2017 to 30 ). The verge of 5.4 per cent compres to 5.4 per cent t the strt nd 5.2 per cent t the end of the qurter. Tle 1: Risk-weighted ssets movement y key driver Credit risk IRB Credit risk SA Credit risk totl 1 Counterprty credit risk 2 Mrket risk Opertionl risk Totl risk-weighted ssets s t 31 Decemer ,534 Less: totl threshold risk-weighted ssets 3 (10,851) Risk-weighted ssets t 31 Decemer ,665 18, ,621 9,623 3,147 25, ,683 Asset size (1,269) (238) (1,507) (258) (1,765) Asset qulity (539) (92) (631) (661) (1,292) Model updtes Methodology nd policy (324) (74) (398) (398) Acquisitions nd disposls (444) 6,351 5,907 (26) 930 6,811 Movement in risk levels (mrket risk only) (217) (217) Foreign exchnge (340) (109) (449) (336) (785) Other Risk-weighted ssets t ,806 24, ,600 8,342 2,930 26, ,094 Threshold risk-weighted ssets 3 10,693 Totl risk-weighted ssets s t 30 June ,787 Totl Credit risk includes securitistion risk-weighted ssets. Counterprty credit risk includes movements in contriutions to the defult fund of centrl counterprties nd movements in credit vlution djustment risk. Threshold risk-weighted ssets reflect the element of significnt investments nd deferred tx ssets tht re permitted to e risk-weighted insted of eing deducted from CET1 cpitl. Significnt investments primrily rise from investments in the Group s insurnce usiness. Pge 3 of 48

5 The risk-weighted ssets movement tle provides nlysis of the movements in the risk-weighted ssets in the period y risk type nd n insight into the key drivers of these movements. The key driver nlysis is compiled on monthly sis through the identifiction nd ctegoristion of risk-weighted sset movements nd is suject to mngement judgement. Key movements in credit risk, risk-weighted ssets Asset size movements. Credit risk-weighted ssets decresed y 1.5 illion due to continued ctive portfolio mngement prtly offset y trgeted growth in key customer segments. Asset qulity cptures movements due to chnges in orrower risk, including chnges in the economic environment. Net reductions of 0.6 illion primrily relte to net chnge in credit qulity nd model clirtions. Methodology nd policy reductions of 0.4 illion relte to cpitl efficient securitistion ctivity. Acquisitions nd disposls: the cquisition of MBNA incresed risk-weighted ssets y 6.4 illion, prtly offset y the disposl of the Group s interest in strtegic equity investment. Foreign exchnge movements reflect the pprecition of Sterling. Counterprty credit risk nd CVA risk-weighted sset reductions of 1.3 illion re driven minly y yield curve movements (included in sset qulity) nd foreign exchnge movements. Mrket risk, risk-weighted ssets reduced y 0.2 illion lrgely due to decrese in the exposure to long dted infltion linked gilts nd decrese in interest rte exposure. Opertionl risk, risk-weighted ssets incresed y 0.9 illion due to the cquisition of MBNA. Pge 4 of 48

6 Tle 2: Overview of risk-weighted ssets (OV1) Decemer 2016 Minimum cpitl requirements Decemer 2016 Minimum cpitl requirements 1 Credit risk (excluding counterprty credit risk) 165, ,650 13,247 13,012 2 Of which stndrdised pproch 24,538 18,688 1,963 1,495 3 Of which the foundtion rting-sed (FIRB) pproch 48,820 51,438 3,906 4,115 4 Of which the retil IRB (RIRB) pproch 65,330 64,970 5,226 5,198 Of which corportes specilised lending 12,297 13, ,077 Of which non-credit oligtion ssets 7,009 6, Of which equity IRB under the simple risk-weight or the internl models pproch 7,589 7, Counterprty credit risk 8,342 9, Of which mrked to mrket 6,334 7, Of which originl exposure 9 Of which the stndrdised pproch 10 Of which internl rtings-sed model method (IMM) Of which comprehensive pproch for credit risk mitigtion (for SFTs) Of which exposures to centrl counterprties (including trdes, defult fund contriutions nd initil mrgin) Of which credit vlution djustment (CVA) Settlement risk 14 Securitistion exposures in nking ook 1 4,017 3, Of which IRB rtings-sed pproch (RBA) 2,977 2, Of which IRB supervisory formul pproch (SFA) Of which internl ssessment pproch (IAA) Of which stndrdised pproch Mrket risk 2,930 3, Of which stndrdised pproch Of which internl model pproches 2,549 2, Lrge exposures 23 Opertionl risk 26,222 25,292 2,098 2, Of which sic indictor pproch 25 Of which stndrdised pproch 26,222 25,292 2,098 2, Of which dvnced mesurement pproch 27 Amounts elow the thresholds for deduction (suject to 250 risk weight) 10,693 10, Floor djustment 29 Totl 217, ,534 17,422 17, Securitistions re shown seprtely within this tle, however, re included within credit risk throughout the reminder of the disclosures (s per the reconcilition elow). s per OV1 Securitistion s Totl Credit risk s Totl credit risk 165,583 4, ,600 Of which: credit risk exposures suject to IRB pproch 141,045 3, ,806 Of which: credit risk exposures suject to stndrdised pproch 24, ,794 Pge 5 of 48

7 PILLAR 1 CAPITAL REQUIREMENTS: CREDIT RISK This section detils Lloyds Bnking Group s credit risk profile, focusing on regultory mesures such s exposure t defult nd risk-weighted ssets. Credit risk exposures (excluding thresholds) incresed y 0.3 per cent to illion. Of the Group s credit risk exposures, 83 per cent ( illion) re risk-weighted under the IRB pproch, with the reminder ( illion) risk-weighted using the Stndrdised pproch. Totl credit risk risk-weighted ssets (excluding thresholds) incresed y 1.79 per cent to illion, primrily due to the cquisition of MBNA. The Group s verge risk weight for credit risk exposures remined stle t 25 per cent. Tle 3: Risk-weighted ssets flow sttement of credit risk exposures 1 Credit risk IRB mount totl Credit risk IRB cpitl requirements totl Credit risk - SA mount totl Credit risk - SA cpitl requirements totl 1 Risk-weighted ssets s t 31 Decemer ,665 11,814 18,956 1,517 2 Asset size (1,269) (102) (238) (19) 3 Asset qulity (539) (43) (92) (7) 4 Model updtes Methodology nd policy (324) (26) (74) (6) 6 Acquisitions nd disposls (444) (36) 6, Foreign exchnge (340) (27) (109) (9) 8 Other 9 Risk-weighted ssets s t ,806 11,584 24,794 1,984 1 Credit risk includes securitistion risk-weighted ssets. Pge 6 of 48

8 Tle 4: Credit risk exposures Credit risk exposure 1 Riskweighted ssets Minimum cpitl requirements Averge risk weight 5 Exposure clss Exposures suject to the IRB pproch Foundtion IRB pproch Corporte min 75,699 38,743 3, Corporte SME 11,784 7, Corporte specilised lending Centrl governments nd centrl nks 16,395 1, Institutions 4, Retil IRB pproch Retil mortgges 335,692 39,111 3, Of which: residentil mortgges (SME) 9,969 2, Of which: residentil mortgges (non-sme) 325,723 36,567 2, Qulifying revolving retil exposures 39,290 12, Other SME 2,331 1, Other non-sme 17,131 12, Other IRB pproches 2 Corporte specilised lending 17,374 12, Equities exchnge trded 555 1, Equities privte equity 2,741 5, Equities other Securitistion positions 3 22,992 3, Non-credit oligtion ssets 4 10,586 7, Totl IRB pproch 557, ,806 11, Exposures suject to the stndrdised pproch Centrl governments nd centrl nks 79, Regionl governments or locl uthorities Pulic sector entities Multilterl development nks 1,876 Interntionl orgnistions Institutions Corportes 12,600 10, Retil 12,517 9, Secured y mortgges on immovle property 5,345 2, Of which: residentil property 5,343 2, Of which: commercil property Exposures in defult Exposures ssocited with prticulrly high risk Securitistion positions 1, Short term clims on institutions nd corportes Collective investment undertkings (CIUs) Other items 4 3,417 2, Totl stndrdised pproch 117,878 24,794 1, Totl credit risk 675, ,600 13, Pge 7 of 48

9 Credit risk exposure 1 Decemer 2016 Riskweighted ssets Minimum cpitl requirements Averge risk weight 5 Exposure clss Exposures suject to the IRB pproch Foundtion IRB pproch Corporte min 78,527 41,171 3, Corporte SME 11,981 7, Corporte specilised lending Centrl governments nd centrl nks 15,153 1, Institutions 6, Retil IRB pproch Retil mortgges 335,510 39,550 3, Of which: residentil mortgges (SME) 10,211 2, Of which: residentil mortgges (non-sme) 325,299 36,888 2, Qulifying revolving retil exposures 36,984 12, Other SME 2,445 1, Other non-sme 16,026 11, Other IRB pproches 2 Corporte specilised lending 18,814 13,467 1, Equities exchnge trded 461 1, Equities privte equity 2,583 4, Equities other 382 1, Securitistion positions 3 26,066 3, Non-credit oligtion ssets 4 10,890 6, Totl IRB pproch 561, ,665 11, Exposures suject to the stndrdised pproch Centrl governments nd centrl nks 81,021 Regionl governments or locl uthorities Pulic sector entities Multilterl development nks 1,753 Interntionl orgnistions Institutions Corportes 13,511 10, Retil 4,114 2, Secured y mortgges on immovle property 5,504 1, Of which: residentil property 5,501 1, Of which: commercil property Exposures in defult Exposures ssocited with prticulrly high risk Securitistion positions 1, Short term clims on institutions nd corportes Collective investment undertkings (CIUs) Other items 4 3,091 2, Totl stndrdised pproch 111,472 18,956 1, Totl credit risk 673, ,621 13, Credit risk exposure is exposure t defult (EAD) pre credit risk mitigtion (CRM). Credit risk exposures suject to other IRB pproches include corporte specilised lending exposures risk weighted in ccordnce with supervisory slotting criteri, equity exposures risk weighted in ccordnce with the Simple Risk Weight Method nd securitistion positions risk weighted in ccordnce with the IAA nd the RBA. Securitistion positions exclude mounts llocted to the 1,250 per cent risk weight ctegory. These mounts re deducted from cpitl, fter the ppliction of SCRAs, rther thn eing risk weighted t 1,250 per cent. Other items (Stndrdised Approch) nd non-credit oligtion ssets (IRB pproch) predominntly relte to other lnce ssets tht hve no ssocited credit risk. These comprise vrious non-finncil ssets, including fixed ssets, csh, items in the course of collection, prepyments nd sundry detors. Averge risk weight is risk-weighted ssets expressed s percentge of credit risk exposure (which is EAD pre-crm, ut post- CCF). Pge 8 of 48

10 Exposures suject to the IRB Approch key movements for the six months to 30 FIRB Corporte Min Corporte Min exposures decresed y 2.8 illion nd risk-weighted ssets reduced y 2.4 illion driven y ctive portfolio mngement. Institutions Institutions exposures decresed y 1.2 illion minly driven y portfolio relncing exercise on the Group s ond portfolio. Retil IRB Residentil Mortgges Retil mortgge exposure ws rodly stle compred to the end of 2016 fter reflecting the recquisition of portfolio of mortgges from TSB in the second qurter. Qulifying Revolving Retil Exposures Whilst gross exposure remined firly stle, credit risk exposure lnces incresed due to EAD model clirtions reflecting policy chnges. The resulting increse in risk-weighted ssets hs lrgely een offset y improving customer risk profile. Retil Other non-sme Retil other (non-sme) exposures hve incresed y 1.1 illion nd risk-weighted ssets incresed y 0.6 illion minly s result of continued growth in UK Retil Motor Finnce usiness. Corporte Specilised lending (slotting) Corporte specilised lending (slotting) exposures nd risk-weighted ssets reduced y 1.4 illion nd 1.2 illion respectively lrgely due to ctive portfolio mngement nd cpitl-efficient securitistion ctivity. Securitistion Positions Securitistion exposures decresed y 3.1 illion primrily s result of decrese in investment grde nd lower risk weighted investor positions, prtilly offset y new originted securitistion trnsction. Equities Other Equity Other exposures hve decresed y 0.2 illion nd risk-weighted ssets reduced y 0.6 illion due to the disposl of the Group s interest in strtegic equity investments. Exposures suject to the Stndrdised Approch key movements for the six months to 30 Corportes Exposures nd risk-weighted ssets decresed y 0.9 illion nd 0.7 illion respectively primrily driven y continued portfolio mngement ctivity. Retil Exposures nd risk-weighted ssets incresed y 8.4 illion nd 6.3 illion respectively due to the cquisition of MBNA. Pge 9 of 48

11 Anlysis of credit risk exposures suject to the IRB Approch This section provides detiled nlysis, y PD grde, of credit risk exposures suject to the IRB Approch. Exposures re presented on post CRM nd post CCF sis. The tles elow tke into ccount PD nd LGD floors specified y regultors in respect of the clcultion of regultory cpitl requirements. The EBA guidelines include single prescried scle for presenting the credit qulity of ll IRB portfolios y sset clss, which is used in tles tht follow. Throughout this section density represents the verge risk weight. Numer of oligors corresponds to the numer of individul PDs (in ech nd). In the cse of Corporte Min nd Corporte SME, s customers my hve exposures in oth Commercil Bnking nd Consumer Finnce Motor divisions, n individul corporte oligor my e counted twice. Tle 5: IRB Credit risk exposures y portfolio nd PD rnge - Corporte Min (CR6) c d e f g h I j k l Originl onlnce gross exposure Off lnce exposures pre CCF EAD post CRM nd post CCF Averge mturity (yers) Vlue djustments nd provisions PD Scle Corportes Min Averge CCF Averge PD Numer of oligors Averge LGD density EL 0.00 to < ,719 19, , , , to <0.25 5,912 7, , , , to < ,035 11, , , , to <0.75 2,916 2, , , , to <2.50 6,357 3, , , , to < , , , , to < (Defult) , Su-totl 45,414 45, , , , Originl onlnce gross exposure Off lnce exposures pre CCF c d EAD post CRM nd post CCF e Decemer 2016 f Numer of oligors g h Averge mturity (yers) I j k Vlue djustments nd provisions PD Scle Corportes Min Averge CCF Averge PD Averge LGD density EL 0.00 to < ,090 18, , , , to <0.25 7,035 8, , , , to <0.50 9,632 11, , , , to <0.75 3,291 2, , , , to <2.50 6,735 4, , , , to < ,637 1, , , , to < (Defult) Su-totl 46,385 46, , , , l Pge 10 of 48

12 Tle 6: IRB Credit risk exposures y portfolio nd PD rnge - Corporte SME (CR6) c d e f g h I j k l Originl onlnce gross exposure Off lnce exposures pre CCF EAD post CRM nd post CCF Averge mturity (yers) Vlue djustments nd provisions PD Scle Corportes SME Averge CCF Averge PD Numer of oligors Averge LGD density EL 0.00 to < , to < to < , , to <0.75 1, , , to <2.50 3, , , , to < , , , , to < , (Defult) Su-totl 9,676 2, , , , Originl onlnce gross exposure Off lnce exposures pre CCF c d EAD post CRM nd post CCF e Decemer 2016 f Numer of oligors g h Averge mturity (yers) I j k l Vlue djustments PD Scle Corportes SME Averge CCF Averge PD Averge LGD density EL 0.00 to < , to < to < , , to <0.75 1, , , to <2.50 3, , , , to < , , , , to < , (Defult) Su-totl 10,007 2, , , , nd provisions Pge 11 of 48

13 Tle 7: IRB Credit risk exposures y portfolio nd PD rnge - Centrl governments nd centrl nks (CR6) c d e f g h I j k l PD Scle Centrl governments nd centrl nks Originl onlnce gross exposure Off lnce exposures pre CCF EAD post CRM nd post CCF Averge mturity (yers) Vlue djustments nd provisions Averge CCF Averge PD Numer of oligors Averge LGD density EL 0.00 to < ,395 16, , to < to < to < to < to < to < (Defult) Su-totl 16,395 16, , PD Scle Centrl governments nd centrl nks Originl onlnce gross exposure Off lnce exposures pre CCF c d EAD post CRM nd post CCF e Decemer 2016 f Numer of oligors g h Averge mturity (yers) I j k l Vlue djustments Averge CCF Averge PD Averge LGD density EL 0.00 to < ,153 15, , to < to < to < to < to < to < (Defult) Su-totl 15,153 15, , nd provisions Pge 12 of 48

14 Tle 8: IRB Credit risk exposures y portfolio nd PD rnge - Institutions (CR6) c d e f g h I j k l Originl onlnce gross exposure Off lnce exposures pre CCF EAD post CRM nd post CCF Averge mturity (yers) Vlue djustments nd provisions PD Scle Institutions Averge CCF Averge PD Numer of oligors Averge LGD density EL 0.00 to <0.15 2,490 2, , to < to < to < to < to < to < (Defult) Su-totl 2,906 2, , Originl onlnce gross exposure Off lnce exposures pre CCF c d EAD post CRM nd post CCF e Decemer 2016 f Numer of oligors g h Averge mturity (yers) I j k Vlue djustments nd provisions PD Scle Institutions Averge CCF Averge PD Averge LGD density EL 0.00 to <0.15 3,668 1, , to < to < to < to < to < to < (Defult) Su-totl 4,223 2, , l Key movements Institutions exposures decresed y 1.2 illion nd verge LGD incresed y 5.7 per cent minly driven y portfolio relncing exercise on the Group s ond portfolio. Pge 13 of 48

15 Tle 9: IRB Credit risk exposures y portfolio nd PD rnge - Residentil mortgges (SME) (CR6) PD Scle Residentil mortgges (SME) Originl onlnce gross exposure Off lnce exposures pre CCF c d EAD post CRM nd post CCF e f g I j k Vlue djustments nd provisions l m Undrwn commitments (post CCF) Averge CCF Averge PD Numer of oligors Averge LGD density EL 0.00 to < to < to < to <0.75 2, , , to <2.50 4, , , to < , , , to < , (Defult) , Su-totl 9, , , , PD Scle Residentil mortgges (SME) Originl onlnce gross exposure Off lnce exposures pre CCF c d EAD post CRM nd post CCF e Decemer 2016 f Numer of oligors g I j k Vlue djustments nd provisions l m Undrwn commitments (post CCF) Averge CCF Averge PD Averge LGD density EL 0.00 to < to < to < to <0.75 3, , , to <2.50 3, , , to < , , , to < , (Defult) , Su-totl 9, , , , Pge 14 of 48

16 Tle 10: IRB Credit risk exposures y portfolio nd PD rnge - Residentil mortgges (non-sme) (CR6) c d e f g I j k l m PD Scle Residentil mortgges (non-sme) Originl onlnce gross exposure Off lnce exposures pre CCF EAD post CRM nd post CCF Vlue djustments nd provisions Undrwn commitments (post CCF) Averge CCF Averge PD Numer of Averge LGD 1 density EL oligors 0.00 to < ,255 11, , ,111, , , to < , , , , to < , , , , to <0.75 7, , , , to < , , , , to < , , , , to < , , , , (Defult) 4, , , , Su-totl 299,207 12, , ,899, , ,661 12,088 Decemer 2016 PD Scle Residentil mortgges (non-sme) Originl onlnce gross exposure Off lnce exposures pre CCF c d EAD post CRM nd post CCF e Decemer 2016 f Numer of oligors g I j k Vlue djustments nd provisions l m Undrwn commitments (post CCF) Averge CCF Averge PD Averge LGD 1 density EL 0.00 to < ,668 10, , ,140, , , to < , , , , to < , , , , to <0.75 7, , , , to < , , , , to < , , , , to < ,777 3, , , (Defult) 4,286 4, , , Su-totl 300,316 11, , ,932, , ,703 10,459 Pge 15 of 48

17 Tle 11: IRB Credit risk exposures y portfolio nd PD rnge - Qulifying revolving retil exposures (CR6) c d e f g I j k l m PD Scle Qulifying revolving retil exposures Originl onlnce gross exposure Off lnce exposures pre CCF EAD post CRM nd post CCF Vlue djustments nd provisions Undrwn commitments (post CCF) Averge CCF Averge PD Numer of oligors Averge LGD density EL 0.00 to <0.15 1,050 20, , ,856, , to < , , ,170, , to <0.50 1,223 5, , ,883, , to <0.75 1,063 2, , ,605, , to <2.50 3,504 4, , ,852, , , to < ,161 1, , ,685, , , to < , , (Defult) , Su-totl 11,802 40, , ,847, , ,480 PD Scle Qulifying revolving retil exposures Originl onlnce gross exposure Off lnce exposures pre CCF c d EAD post CRM nd post CCF e Decemer 2016 f Numer of oligors g I j k Vlue djustments nd provisions l m Undrwn commitments (post CCF) Averge CCF Averge PD Averge LGD density EL 0.00 to < , , ,510, , to < , , ,674, , to <0.50 1,161 5, , ,577, , to <0.75 1,049 2, , ,544, , to <2.50 3,476 4, , ,859, , , to < ,148 2, , ,788, , , to < , , (Defult) , Su-totl 11,538 40, , ,737, , ,440 Pge 16 of 48

18 Tle 12: IRB Credit risk exposures y portfolio nd PD rnge Other SME (CR6) c d e f g I j k l m Originl onlnce gross exposure Off lnce exposures pre CCF EAD post CRM nd post CCF Vlue djustments nd provisions Undrwn commitments (post CCF) PD Scle Other SME Averge CCF Averge PD Numer of oligors Averge LGD density EL 0.00 to < to < to < to < , to < , to < , to < , (Defult) , Su-totl 1, , , , Originl onlnce gross exposure Off lnce exposures pre CCF c d EAD post CRM nd post CCF e Decemer 2016 f Numer of oligors g I j k Vlue djustments nd provisions l m Undrwn commitments (post CCF) PD Scle Other SME Averge CCF Averge PD Averge LGD density EL 0.00 to < to < to < to < , to < , to < , to < , (Defult) , Su-totl 1, , , , Pge 17 of 48

19 Tle 13: IRB Credit risk exposures y portfolio nd PD rnge Other non-sme (CR6) c d e f g I j k l m Originl onlnce gross exposure Off lnce exposures pre CCF EAD post CRM nd post CCF Vlue djustments nd provisions Undrwn commitments (post CCF) PD Scle Other non-sme Averge CCF Averge PD Numer of oligors Averge LGD density EL 0.00 to < , to < , to <0.50 3, , , , to <0.75 2, , , to <2.50 6, , , , to < , , , , to < , (Defult) , Su-totl 17, , ,956, , Originl onlnce gross exposure Off lnce exposures pre CCF c d EAD post CRM nd post CCF e Decemer 2016 f Numer of oligors g I j k Vlue djustments nd provisions l m Undrwn commitments (post CCF) PD Scle Other non-sme Averge CCF Averge PD Averge LGD density EL 0.00 to < , to < , to <0.50 3, , , to <0.75 2, , , , to <2.50 6, , , , to < , , , , to < , (Defult) , Su-totl 15, , ,895, , Pge 18 of 48

20 Tle 14A: IRB (specilised lending) (CR10) Regultory ctegories Remining mturity Specilised lending Onlnclnce Off- mount mount RW Exposure mount Expected losses 1) Strong Less thn 2.5 yers 3, ,558 1,587 Equl to or more thn 2.5 yers 3, ,857 2, ) Good Less thn 2.5 yers 3, ,484 2, Equl to or more thn 2.5 yers 3, ,349 3, ) Stisfctory Less thn 2.5 yers Equl to or more thn 2.5 yers 1, ,137 1, ) Wek Less thn 2.5 yers Equl to or more thn 2.5 yers ) Defult 1,2 Less thn 2.5 yers Equl to or more thn 2.5 yers Totl Less thn 2.5 yers 6,723 1,174 7,802 4, Equl to or more thn 2.5 yers 8,299 1,523 9,572 7, Regultory ctegories Remining mturity Decemer 2016 Specilised lending Onlnce mount Offlnce mount RW Exposure mount Expected losses 1) Strong Less thn 2.5 yers 2, ,772 1,192 Equl to or more thn 2.5 yers 4,255 1, ,090 3, ) Good Less thn 2.5 yers 2, ,004 2, Equl to or more thn 2.5 yers 4, ,890 4, ) Stisfctory Less thn 2.5 yers Equl to or more thn 2.5 yers 1, ,183 1, ) Wek Less thn 2.5 yers Equl to or more thn 2.5 yers ) Defult 1,2 Less thn 2.5 yers Equl to or more thn 2.5 yers Totl Less thn 2.5 yers 5,965 1,207 7,197 4, Equl to or more thn 2.5 yers 9,969 1,903 11,617 9, Exposures ctegorised s defult do not ttrct risk weighting ut insted re treted s EL deductions t rte of 50 per cent of the exposure vlue. Totl for the on-lnce nd off-lnce exposures in defult is lower thn the exposure mount (presented on post CRM nd post CCF sis). This is due to the offset of the impirment llownces ginst the on-lnce mounts in line with the specified EBA requirements for this tle. Pge 19 of 48

21 Tle 14B: Equity exposure suject to the simple risk weight method (CR10) Equities under the simple risk-weight pproch On-lnce Off-lnce mount mount RW Exposure mount Cpitl requirements Ctegories Exchnge-trded equity exposures , Privte equity exposures 2, ,741 5, Other equity exposures Totl 3, ,504 7, Decemer 2016 Equities under the simple risk-weight pproch On-lnce Off-lnce mount mount Exposure mount Cpitl requirements RW Ctegories Exchnge-trded equity exposures , Privte equity exposures 2, ,583 4, Other equity exposures , Totl 3, ,426 7, Pge 20 of 48

22 Tle 15: Stndrdised pproch credit risk exposure nd credit risk mitigtion effects (CR4) c d e f Exposures efore CCF nd CRM Exposures post-ccf nd CRM nd density On lnce mount Off lnce mount On lnce mount Off lnce mount density 1 1 Centrl governments nd centrl nks 79, , Regionl governments or locl uthorities 3 Pulic sector entities Multilterl development nks 1,876 1,876 5 Interntionl orgnistions 6 Institutions Corportes 9,351 6,865 8,387 3,335 10, Retil 12,313 21,269 12, , Secured y mortgges on immovle property 5, , , Of which: residentil property 5, , , Of which: commercil property Exposures in defult Exposures ssocited with prticulrly high risk 12 Covered onds 13 Short term clims on institutions nd corportes 14 Collective investment undertkings (CIUs) Equity exposures 16 Other items 3,417 3,417 2, Totl 113,124 28, ,159 3,952 24, Decemer 2016 c d e f Exposures efore CCF nd CRM Exposures post-ccf nd CRM nd density On lnce mount Off lnce mount On lnce mount Off lnce mount density 1 1 Centrl governments nd centrl nks 80, , Regionl governments or locl uthorities 3 Pulic sector entities Multilterl development nks 1,753 1,753 5 Interntionl orgnistions 6 Institutions Corportes 10,987 5,945 9,782 2,574 10, Retil 3, , , Secured y mortgges on immovle property 5, , , Of which: residentil property 5, , , Of which: commercil property Exposures in defult Exposures ssocited with prticulrly high risk 12 Covered onds 13 Short term clims on institutions nd corportes 14 Collective investment undertkings (CIUs) Equity exposures 16 Other items 3, , , Totl 107,361 7, ,156 3,209 18, density is expressed s percentge of exposures post CCF nd CRM. Pge 21 of 48

23 Tle 16: Stndrdised pproch exposures y sset clss (CR5) Stndrdised exposures in the tle elow re stted fter CCF nd CRM Risk weight Others Totl Of which: Unrted 1 Exposure Clsses 1 Centrl governments or centrl nks 79, ,917 79,874 2 Regionl government or locl uthorities 3 Pulic sector entities Multilterl development nks 1,876 1,876 1,876 5 Interntionl orgnistions 6 Institutions Corportes 218 2,261 9, ,722 9,208 8 Retil 12, ,517 12,517 9 Secured y mortgges on immovle property 4, ,345 5,345 Of which: residentil property 4, ,343 5,343 Of which: commercil property Exposures in defult Higher-risk ctegories 12 Covered onds 13 Institutions nd corportions with short term credit ssessment 14 Collective investment undertkings Equity 16 Other items 231 1,056 2,130 3,417 3, Totl 81,997 1,722 4,870 2,546 12,773 11, , ,087 Pge 22 of 48

24 Tle 16: Stndrdised pproch exposures y sset clss (CR5) (continued) Decemer 2016 Risk weight Exposure Clsses 1 Centrl governments or centrl nks 81,300 81,300 81,300 2 Regionl government or locl uthorities 3 Pulic sector entities Multilterl development nks 1,753 1,753 1,753 5 Interntionl orgnistions 6 Institutions Corportes 198 2,275 9, ,356 9,767 8 Retil 4, ,114 4,114 9 Secured y mortgges on immovle property 5, ,504 5,504 Of which: residentil property 5, ,501 5,501 Of which: commercil property Exposures in defult Higher-risk ctegories 12 Covered onds 13 Institutions nd corportions with short term credit ssessment 14 Collective investment undertkings Equity 16 Other items ,905 3,091 3, Totl 83,276 1,500 5,229 2,557 4,137 12, , , Others Totl Of which: Unrted 1 1 Of which: Unrted includes ny exposures for which credit ssessment y nominted ECAI is not utilised in determining risk weight or tht hve specific risk weights pplied depending on their clss s specified in rticles 113 to 134. Pge 23 of 48

25 PILLAR 1 CAPITAL REQUIREMENTS: COUNTERPARTY CREDIT RISK This section detils Lloyds Bnking Group s counterprty credit risk profile, focusing on regultory mesures such s exposure t defult nd risk-weighted ssets. Counterprty credit risk (including CVA) represents smll proportion (4 per cent) (2016: 4.5 per cent) of the Group s totl risk-weighted ssets. Counterprty credit risk exposures incresed y 53 per cent to 46.4 illion primrily due to the utilistion of the Bnk of Englnd term funding scheme. Risk-weighted ssets decresed y 13 per cent to 8.3 illion primrily due to yield curve movements nd foreign exchnge impcts. Tle 17: Risk-weighted ssets flow sttement of counterprty credit risk exposures 1, Cpitl mounts requirements Risk-weighted ssets s t 31 Decemer , Asset size (258) (21) Asset qulity (661) (53) Model updtes Methodology nd policy Acquisitions nd disposls (26) (2) Foreign exchnge (336) (27) Other Risk-weighted ssets s t 30 8, There re no exposures under the Internl Model Method requiring nlysis under EBA templte CCR7. The Group hs elected to include the ove risk-weighted ssets flow sttement of totl CCR s supplementry disclosure. Counterprty credit risk includes movements in contriutions to the defult fund of centrl counterprties nd movements in credit vlution djustment risk. Pge 24 of 48

26 Tle 18: Counterprty credit risk exposures Exposure vlue Decemer 2016 Exposure vlue Foundtion IRB pproch Corporte min 7,438 2,881 7,902 3,213 Corporte SME 5 5 Centrl governments nd centrl nks , Institutions 3,708 1,407 4,420 1,828 Other IRB pproch Corporte specilised lending 1 2,783 2,034 3,206 2,453 Securitistion positions Totl IRB pproch 15,183 6,481 17,470 7,691 Exposures suject to the stndrdised pproch Centrl governments nd centrl nks 21,612 3,597 3 Multilterl development nks Interntionl orgnistions Institutions 8, , Corportes 1, , Totl stndrdised pproch 31, , Contriutions to the defult fund of centrl counterprty Credit vlution djustment Totl 46,417 8,342 30,258 9, Exposures suject to the IRB Supervisory Slotting Approch. No positions relting to counterprty credit risk securitistion positions were deducted from cpitl in either 2017 or CVA exposure vlue of 3.7 illion (2016: 4.5 illion) is emedded in the sset clss nlysis ove. Tle 19: Credit vlution djustment (CVA) cpitl chrge (CCR2) Decemer 2016 Exposure vlue Exposure vlue 1 Totl portfolios suject to the Advnced CVA cpitl chrge 2 (i) VR component (including the 3 multiplier) 3 (ii) Stressed VR component (including the 3 multiplier) 4 All portfolios suject to the stndrdised method 3, , EU4 Bsed on originl exposure method 5 Totl suject to the CVA cpitl chrge 3, , Pge 25 of 48

27 Tle 20: IRB CCR exposure y portfolio nd PD scle Corporte Min (CCR4) c d e f g Numer Averge Averge of Averge mturity PD oligors LGD (yers) EAD post CRM density PD Scle Corportes Min 0.00 to <0.15 4, , to < to <0.50 1, to < to < to < to < (Defult) Su-totl 7, , , Decemer 2016 c d e f g Averge Averge Numer Averge mturity PD of oligors LGD (yers) EAD post CRM density PD Scle Corportes Min 0.00 to <0.15 4, , to < to <0.50 1, to < to < to < to < (Defult) Su-totl 7, , , Pge 26 of 48