Lloyds Banking Group(US:LYG)2023-02-24 17:09Financial Performance - The profit before tax for the year ended December 31, 2022, was £6,928 million, slightly up from £6,902 million in 2021[13]. - Net interest income increased significantly to £13,957 million in 2022 from £9,366 million in 2021[13]. - Total income, net of insurance claims and changes in insurance and investment contract liabilities, was £18,209 million, compared to £16,324 million in 2021[13]. - Operating expenses decreased to £9,759 million in 2022 from £10,800 million in 2021[13]. - Underlying profit before tax for Lloyds Banking Group in 2022 was £7,448 million, a slight decrease of 1.2% from £7,536 million in 2021[16]. - Retail segment reported a profit of £4,497 million in 2022, down from £4,832 million in 2021, reflecting a decline of 6.9%[16]. - Commercial Banking segment achieved a profit of £1,861 million in 2022, a marginal increase of 0.9% compared to £1,844 million in 2021[16]. - Insurance, Pensions and Investments segment saw a significant increase in profit to £391 million in 2022, up 39.2% from £281 million in 2021[16]. - Other segment reported a profit of £699 million in 2022, an increase of 20.7% from £579 million in 2021[16]. - The Group's profit attributable to ordinary shareholders for 2022 was £5,021 million, down from £5,355 million in 2021[195]. Assets and Capital - As of December 31, 2022, Lloyds Banking Group's total assets were £877,829 million and the market capitalization was £30,555 million[12]. - The capital ratios as of December 31, 2022, were 19.7% for total capital, 17.1% for tier 1 capital, and 15.1% for common equity tier 1 capital[12]. - The Group's total assets decreased to £877,829 million in 2022 from £886,525 million in 2021[195]. - The Group's total lending as of December 31, 2022, amounted to £410,153 million, with personal lending accounting for 85.4% of the total[104]. Organizational Structure and Strategy - The Group's primary operating divisions include Retail, Commercial Banking, and Insurance, Pensions and Investments[14]. - The Group's new organizational structure was adopted on July 1, 2022, aligning with strategic objectives and enhancing performance assessment[36]. - Lloyds Banking Group aims to drive revenue growth and diversification, focusing on deepening and innovating in Consumer and targeting Corporate and Institutional offerings[34]. - The Group's strategy emphasizes becoming a UK-customer focused digital leader and integrated financial services provider, capitalizing on new opportunities[33]. Acquisitions and Investments - The Group completed the acquisition of Embark Group in February 2022, enhancing its Wealth proposition alongside Schroders Personal Wealth[30]. - In February 2023, the Group acquired 100% of Hamsard 3352 Limited ("Tusker"), expanding its salary sacrifice proposition within motor finance[31]. - The Group's acquisition of Hamsard 3352 Limited ("Tusker") aims to expand its salary sacrifice proposition within motor finance[175]. - A share buyback program was announced to repurchase up to £2.0 billion of outstanding ordinary shares, commencing on 23 February 2023[176]. Sustainability and Emissions - The company aims to reduce financed emissions by more than 50% by 2030, targeting net zero by 2050 or sooner[50]. - Scottish Widows targets to halve the carbon footprint of its investments by 2030, also on the path to net zero by 2050[50]. - The company plans to achieve net zero carbon operations by 2030, reducing direct carbon emissions by at least 75% and energy consumption by 50% compared to a 2018/2019 baseline[51]. - In 2022, the company achieved £7.9 billion in sustainable finance for corporate and institutional customers, with a target of £15 billion by 2024[52]. - The company financed £2.1 billion for electric vehicles in 2022, aiming for £8 billion by 2024[52]. - The company achieved £3.5 billion in green mortgage lending in 2022, with a target of £10 billion by 2024[52]. - The company has committed to reduce supply chain emissions by at least 50% by 2030, focusing on 123 suppliers contributing over 80% of supply chain carbon emissions[58]. - The total Scope 3 emissions from the supply chain in the baseline year 2021/2022 were 747,409 tonnes CO2e[59]. - The Group's estimated absolute financed emissions are based on total Group assets of £871.3 billion, with approximately 82% of the balance sheet in scope of the PCAF methodology[61]. - The Group aims to achieve its emissions reduction targets by 2030 and 2050, using 2019 as the baseline year for measuring progress[76]. - The Group has set a decarbonization target in line with the IEA NZE 2050 scenario for the automotive sector, expecting clients to align their targets accordingly[106]. - The Group plans a full exit from thermal coal power in the UK by the end of 2023 and from all entities operating thermal coal facilities by 2030[106]. - The Group has set a target for a 50% reduction in absolute emissions from oil and gas operations by 2030, equating to a reduction from 7.8 MtCO2e in 2019 to 3.9 MtCO2e[137]. Climate Risk and Management - Climate risk is considered a principal risk within the Enterprise Risk Management Framework, ensuring consistent integration across business activities[148]. - The company has made significant progress in embedding ESG risk management into credit processes, focusing on three key areas: ESG credit risk framework, portfolio management, and case management[156]. - The Group's climate risk policy is structured around eight principles to meet climate change ambitions and regulatory expectations[152]. - The company is focused on improving data quality for measuring climate risk, recognizing data limitations as a significant area of concern[156]. - The Group's financial planning process incorporates climate considerations, assessing the impact of climate change on financial statements and expected credit losses[109]. - The Group has established a centre of excellence to enhance climate scenario analysis capabilities, building on experiences from the Bank of England's Climate Biennial Exploratory Scenario exercise[161]. - The Group's preliminary assessment identified the agriculture sector as a key focus due to its significant impact on UK natural ecosystems[131].