Lloyds TSB Group plc

Lloyds TSB Group plc
25 Gresham Street
United Kingdom
Tel: 44 20 7626 1500
Fax: 44 20 7489 3484
Web: www.lloydstsbgroup.co.uk
New York Ticker: LYG
No. Employees: 70,000
Turnover: (� Mn)9,567
Financial Year End: December
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For the fiscal year ended December 2003 Lloyds TSB Group achieved total income of �9.91 billion ($17.94 billion), an increase of 11.5% against 2002 income that totaled �8.89 billion.

Full year sales in this segment totaled �4,046 million, an increase of 8.6% against 2002 sales that were �3,727 million.

There was good organic growth in the personal loan and credit card businesses with outstanding balances increasing by 9% and 18% respectively over the year; after taking account of the impact of the acquisition of the Goldfish Bank portfolios, outstanding personal loan balances had increased by 10% and credit card balances by 36% by the end of December 2003.

Within UK retail banking, balances on current and savings and investment accounts grew by 10% reflecting the growth in the number of added value accounts and the success of new savings products launched during 2003. Over the last twelve months, mortgage balances outstanding increased by 13% to �70,750 million as net new lending increased to �8,283 million from �5,889 million; this represented an improved market share of 8.6%.

Other income increased by �72 million to �909 million. Fees earned from current account activity grew by �44 million reflecting increased volumes of added value accounts and higher monthly charges; returned cheque fees have also increased as the number of returned items has risen. There was also improved income from credit and debit card transactions, which increased by �46 million, mainly as a result of a growth in interchange income, higher overseas use commissions and other fees.

Full year sales in this segment totaled �1,734 million, a decrease of 10.5% against 2002 sales that were �1,939 million.

Income from long-term assurance business, excluding the effects of changes in economic assumptions and the investment variance, was �177 million lower. Income from existing business was lower as the benefit from experience variances and actuarial assumption changes reduced by �168 million, reflecting updated assumptions in respect of staff costs. There was also a reduction of �61 million in normalized investment earnings reflecting lower market rates of return. This was partly offset by a �105 million reduction in provisions for customer redress.

Insurance broking income fell by �43 million reflecting lower levels of creditor insurance and an increased allowance for the clawback of commissions by the insurance underwriters due to the early settlement of loans. There was also a �27 million reduction in income from unit trust and asset management activities as a result of lower average fund values and the continued weakness of the long-term savings market. This has been partly offset by a �49 million increase in general insurance premiums as income from the sale of home contents insurance improved, helped by the buoyant housing market.

New business income increased by �59 million, or 15%, to �457 million. Weighted sales of life and pensions products increased by 1% as sales volumes were affected by weak demand, as consumer confidence in long-term savings products remained low.

Regular premium sales amounted to �337.9 million, or 56% of total life and pensions weighted sales, compared to �286.3 million, or 48% of the total in 2002, an increase of �51.6 million. Weighted sales of regular premium pension products increased by �24.0 million as improved sales through the IFA channel, reflecting both Scottish Widows� marketing initiatives and investment in this channel, more than offset a reduction in sales through the branch network which have been affected by weak demand.

Sales of regular premium life products increased by �27.6 million mainly as a result of higher sales of term assurance and savings products; sales of mortgage-related products providing life cover on repayment mortgages continued to improve, reflecting the buoyant housing market and the resulting strong growth in mortgage lending.

Full year sales in this segment totaled �4,043 million, a decrease of 0.1% against 2002 sales that were �4,046 million.

Within the wholesale businesses net interest income fell by �74 million reflecting the implementation of the Competition Commission�s SME report remedies. There was also lower income from treasury activities as the interest rate cut in the early part of the year and flattening of the yield curve reduced market opportunities. This more than offset the effects of strong growth within the asset finance operations, which resulted in an increase in net interest income of �99 million; average asset finance balances increased by �991 million, mainly due to the continued demand for consumer credit in the UK and the margin widened by 48 basis points. There was also an increase in income from structured finance transactions following the growth in balances during 2002.

In international banking there was a modest increase in net interest income of �3 million. There was a �44 million improvement in net interest income from New Zealand as volume growth and favorable exchange rate movements have more than offset the effect of some margin erosion. In other areas, however, net interest income fell as balances have been reduced, particularly in Latin America, as the Lloyds TSB Group has sought to reduce its exposure to these economies.
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