Lloyds Banking Group
Encyclopedia
Lloyds Banking Group plc is a major British financial institution
, formed through the acquisition of HBOS
by Lloyds TSB
in 2009. As at February 2010, HM Treasury
held a 41% shareholding through UK Financial Investments Limited
(see 'Government stake' below). The Group headquarters is located at 25 Gresham Street in London, with its registered office on The Mound
, Edinburgh. Lloyds Banking Group's activities are organised into four business divisions: Retail Banking (including Mortgages), Wholesale, Life, Pensions & Insurance, and Wealth & International. Lloyds' extensive operations span the globe including the US, Europe, Middle East and Asia.
Lloyds TSB was formed in 1995 by the merger of Lloyds Bank
and the Trustee Savings Bank
. The company operated in England and Wales
as Lloyds TSB
Bank plc and in Scotland as Lloyds TSB Scotland plc. Its other subsidiaries included the mortgage bank Cheltenham and Gloucester, life assurance company Scottish Widows
, finance house Black Horse and private equity investor Lloyds Development Capital.
Following the approval of both the Lloyds TSB and HBOS shareholders, the takeover was completed on 19 January 2009. The HBOS name ceased to be used publicly, although it will still exist as an employing entity. The Bank of Scotland
brand will remain in Scotland while the Halifax and Lloyds Bank brands will be used in England & Wales, with each offering different products and pricing. In his first interview as Lloyds Banking Group's new CEO António Mota de Sousa Horta Osório
told The Banker
that "We will keep the different brands because the customers are very different in terms of attitude".
The Group has announced it will sell all Lloyds TSB branches in Scotland, some in England & Wales, the TSB brand, the Cheltenham & Gloucester
branches and Intelligent Finance
as a consequence of the UK Government taking a 43.4% share in the Group in January 2009.
and the Trustee Savings Bank
("TSB") agreed to merge, creating at that time the second-largest bank in the UK by market capitalisation after HSBC Holdings
; and the largest by market share. The first chairman of the merged bank was Sir Robin Ibbs
.
Lloyds Bank was one of the oldest banks in the UK, tracing its establishment to Taylors and Lloyds founded in 1765 in Birmingham
by John Taylor and Sampson Lloyd
. Through a series of mergers, Lloyds emerged to become one of the Big Four banks
in the UK.
The TSB can trace its roots back to the first savings bank founded by Henry Duncan in Ruthwell
, Dumfriesshire
in 1810. The TSB itself was created in 1985, by an Act of Parliament that merged together all the remaining savings banks in England & Wales under TSB Bank plc and in Scotland as TSB Scotland plc (excepting Airdrie Savings Bank
which remains the only independent savings bank in the UK) .
With a history dating to the 17th century, Bank of Scotland
is the oldest surviving bank, after the Bank of England
, in what is now the United Kingdom. In 2001, a wave of consolidation in the UK banking market led the former Halifax Building Society, which traces its roots to 1853, to agree a £10.8 billion merger with the Bank of Scotland; Halifax is now used as brand for its the Bank's branches in England, Wales and Northern Ireland and for savings and mortgages in Scotland.
to the Mull of Galloway
.
In 2000, the group acquired Scottish Widows, a mutual life-assurance company based in Edinburgh in a deal worth £7 billion. This made the group the second-largest provider of life assurance and pensions in the UK after the Prudential
. In September the same year, Lloyds TSB purchased Chartered Trust from the Standard Chartered Bank
for £
627m to form Lloyds TSB Asset Finance Division which provides motor, retail and personal finance in the United Kingdom under the trading name Black Horse.
Lloyds TSB continued to take part in the consolidation, making a takeover bid for the Abbey National
in 2001, although this was later rejected by the Competition Commission
.
In October 2003, Lloyds TSB Group agreed the sale of its subsidiary, NBNZ Holdings Limited comprising the Group's New Zealand banking and insurance operations to Australia and New Zealand Banking Group Limited.
In July 2004, Lloyds TSB Group announced the sale of its business in Argentina
to Banco Patagonia Sudameris S.A. and its business in Colombia
to Primer Banco del Istmo, S.A.
On 20 December 2005, Lloyds TSB announced that it had reached an agreement to sell, for cash, the credit-card business of Goldfish to Morgan Stanley Bank International Limited
for a premium of £175m.
In 2007, Lloyds TSB announced that it has sold its Abbey Life insurance division
to Deutsche Bank
for £977m.
Lloyds TSB also became the first mainstream bank to launch a sharia
-compliant business account, with the Islamic Business and Corporate account being the latest financial product to be run in line with sharia principles, which has also resulted in some controversy.
reported that HBOS
was in takeover
talks with Lloyds TSB, in response to a precipitous drop in HBOS's share price. The takeover talks concluded successfully that evening, with a proposal to create a banking giant which would hold a third of the UK mortgage market. An announcement was made at 0700 on 18 September 2008.
On 19 November 2008, the new acquisition (and government preference share purchase) was agreed by the Lloyds TSB shareholders. A similar vote of HBOS shareholders on 12 December 2008 resulted in overwhelming approval of the takeover.
Lloyds TSB Group changed its name to Lloyds Banking Group upon completion of the takeover of HBOS on 19 January 2009.
On 12 February 2009, the CEO of Lloyds group, Eric Daniels
, was questioned about the banking crisis during a session of the Treasury Select Committee of the House of Commons. One of the key issues concerned Lloyds' takeover of HBOS in 2008, and the amount of due diligence
carried out before the acquisition. He said that a company would always like to do more due diligence on another company, but there are legal limits on how much is possible prior to an actual acquisition. Losses were a little higher than the £10 billion originally identified by the due diligence owing to write-off
s of property loans due to falling property prices and the lack of demand. The then-Chairman of Lloyds, Sir Victor Blank
, confirmed in an August 2009 interview with the BBC's Robert Peston that losses had been "at the worst end of expectations", but what had surprised the Lloyds board was the speed at which the losses happened, due to the unexpectedly sharp contraction of the world economy in the last quarter of 2008 and the early part of 2009. This position was confirmed by Archie Kane (senior Lloyds executive in Scotland) in evidence to the Scottish parliament's economy committee in December 2009.
announced a government plan where the Treasury would invest £37 billion ($64 billion, €47 billion) of new capital into several major UK banks to avert a collapse of the financial sector. The banks included Royal Bank of Scotland Group plc, Lloyds TSB and HBOS Plc.
(Barclays only avoided taking a capital investment from the UK Government by raising capital privately, whilst HSBC moved capital to its UK business from other parts of its organisation around the world.)
It has been confirmed that Lloyds TSB would have been required by the FSA
to take more additional capital from the government if it had not taken-over HBOS.
After the recapitalisations of HBOS and Lloyds TSB and Lloyds TSB's January 2009 acquisition of HBOS, the Government was holding a 43.4% stake in Lloyds Banking Group ordinary (voting) shares and £4bn of preference (non-voting) shares.
The conclusion from this exercise was that Lloyds would need additional capital to enable it to absorb the future losses on loans that would arise if such a severe scenario ever came to pass. As the wholesale funding markets were at that stage effectively closed, Lloyds made a deal with the UK government in March 2009 consisting of two elements:
still would). Instead, Lloyds launched a rights issue to raise capital from existing shareholders – as an existing 43.4% shareholder, the government chose to take part in this and thus maintain its shareholding at 43.4%. Following this, the National Audit Office has calculated the government's average buying price for its entire stake in Lloyds as about 74p.
It was announced in the Government's Pre-Budget Report on 9 December 2009 that the forecast for the total loss to taxpayers for all the bank bail-outs (not just Lloyds) had been reduced from £50bn to just £10bn – in part because of the restructuring of the Government's Asset Protection Scheme.
The final part of the December 2009 capital raising involved the issuing of new shares to existing debt holders in February 2010. This diluted existing shareholders, including the UK Government whose shareholding was reduced from 43.4% to c.41%.
On 3 November 2009, a series of announcements were made.
Tier 1 capital ratio thus increased to equivalent of 8.6% as at June 2009.
The EU Commission has required that the sell-off be completed within four years.
Lloyds Banking Group's new CEO António Mota de Sousa Horta Osório
told The Banker
that one of his first actions is to "accelerate the sale of the 600 branches" in order to meet the 2013 deadline.
Lloyds Banking Group most recent results show first quarter losses of £3.47 billion, down from the £721 million profit it recorded at the same stage last year.
The Group is organised as follows:
released a report documenting the extent to which Lloyds and other UK commercial banks invest in, provide banking services for and make loans to arms companies. The charity writes in its report that Lloyds holds shares in the UK arms sector totally £717.5 million, and serves as principal banker for BAE Systems
, the UK's largest arms company. The report also details Lloyds's dealings with known producers of cluster munitions and depleted uranium
.
". In November 2008 the bank delivered a notification to the Islamic Bank of Britain
(IBB) to cease all dealings with British charity Interpal
– a British non-political and non-profit making charity set up to help Palestinians, and one of the few sources of humanitarian assistance in occupied Gaza. The notification was delivered without warning or prior consultation. The following day, the UN announced that it had run out of food supplies and essentials in the Gaza Strip.
, Barclays, Lloyds Banking Group, and other banks were involved in helping the Alavi Foundation
, Bank Melli
, the Iranian government, and/or others circumvent US laws banning financial transactions with certain states. They did this by 'stripping' information out of wire transfers, thereby concealing the source of funds. Lloyds Banking Group settled with the government for $350,000,000.
(HM Revenue & Customs) on grounds of tax avoidance. Lloyds are accused of pouring hundreds of millions of pounds into transatlantic tax avoidance schemes in the form of loans to American financial institutions.
, carrying other bank shares with it. The acquisition was carried out rapidly in 2008, however due diligence
undertaken by Lloyds indicated an anticipated £8.5bn HBOS loss. The Lloyds management cited a deterioration in the economy subsequent to the due diligence for the HBOS losses increasing from the anticipated £8.5bn to the actual £10bn.
In June 2008, Lloyds TSB Group came top in the Race for Opportunity’s (RfO) annual survey.
In May 2009, Lloyds TSB Corporate Markets was recognised as ‘Bank of the Year’ for the fifth year running at Real FD/ CBI FDs' Excellence Awards.
In October 2009's "What Investment" magazine awards, Halifax won Best Savings Account Provider and Halifax Share Dealing was also named Best Share Dealing Service.
In October 2009's "Consumer Money Awards", Halifax won Best First Time Mortgage Provider. In addition, Lloyds' brands were commended in several other categories, including Cheltenham & Gloucester for Best Remortgage Provider and Best High Street Mortgage Provider; Lloyds TSB for Best Current Account Provider, Best Student Account Provider and Best Customer Service Provider; and Halifax for Best ISA Provider and Best High Street Savings Provider.
In November 2009's "Personal Finance Awards", Halifax was awarded Best Premium Current Account (for the Ultimate Reward Current Account) and Best Savings Account Provider. In the Best Mortgage Provider category, Halifax was highly commended. Halifax Sharedealing was named Best Online Stockbroker for the third year in a row, and was highly commended in the Excellence in Customer Service category. Halifax Investments was named Best Investment Product Provider. Lloyds TSB won Best Student Finance/Banking Provider and was also highly commended in the Best Current Account Provider awards. Scottish Widows was highly commended in the Best Pension Provider category.
In November 2009's "Your Mortgage Awards", Halifax won the award for Best Overall Mortgage Lender for the eighth year running, as well as the award for Best Large Loans Mortgage Lender. Birmingham Midshires was named Best Specialist and Buy-to-Let Mortgage Lender, and Lloyds TSB won the award for Best Overseas Mortgage Lender.
Lloyds TSB is also currently the official sponsor for the Asian Jewel Awards. The awards recognise the contribution made by the Asian community in Britain today. An example of this support is the bank's sponsorship of Peter Santamaria-Woods in motor racing.
Lloyds Banking Group is an active supporter of disability rights and best practice; in addition to being a Gold member of the Employers’ Forum on Disability
, in 2010 it helped create and currently sponsors the RADAR (The Royal Association for Disability Rights) Radiate network, the goal of which is to support and develop a talent pool of people with disabilities and health conditions and potentially act as a source of thinking for organisations on how 'disabled talent' is best spotted and developed.
Financial institution
In financial economics, a financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries...
, formed through the acquisition of HBOS
HBOS
HBOS plc is a banking and insurance company in the United Kingdom, a wholly owned subsidiary of the Lloyds Banking Group having been taken over in January 2009...
by Lloyds TSB
Lloyds TSB
Lloyds TSB Bank Plc is a retail bank in the United Kingdom. It was established in 1995 by the merger of Lloyds Bank, established in Birmingham, England in 1765 and traditionally considered one of the Big Four clearing banks, with the TSB Group which traces its origins to 1810...
in 2009. As at February 2010, HM Treasury
HM Treasury
HM Treasury, in full Her Majesty's Treasury, informally The Treasury, is the United Kingdom government department responsible for developing and executing the British government's public finance policy and economic policy...
held a 41% shareholding through UK Financial Investments Limited
UK Financial Investments Limited
UK Financial Investments Ltd is a company set up in November 2008 by the UK Government to manage its shareholding in banks subscribing to its recapitalisation fund. They include Lloyds Banking Group , Royal Bank of Scotland Group and Northern Rock...
(see 'Government stake' below). The Group headquarters is located at 25 Gresham Street in London, with its registered office on The Mound
The Mound
The Mound is an artificial hill in central Edinburgh, Scotland, which connects Edinburgh's New Town and Old Town. It was formed by dumping around 1,501,000 cartloads of earth excavated from the foundations of the New Town into the drained Nor Loch which forms today's Princes Street Gardens. The...
, Edinburgh. Lloyds Banking Group's activities are organised into four business divisions: Retail Banking (including Mortgages), Wholesale, Life, Pensions & Insurance, and Wealth & International. Lloyds' extensive operations span the globe including the US, Europe, Middle East and Asia.
Lloyds TSB was formed in 1995 by the merger of Lloyds Bank
Lloyds Bank
Lloyds Bank Plc was a British retail bank which operated in England and Wales from 1765 until its merger into Lloyds TSB in 1995; it remains a registered company but is currently dormant. It expanded during the nineteenth and twentieth centuries and took over a number of smaller banking companies...
and the Trustee Savings Bank
Trustee Savings Bank
The Trustee Savings Bank was a British financial institution which specialised in accepting savings deposits from the poor. They did not trade their shares on the stock market and, unlike mutually held building societies, depositors had no voting rights nor the ability to direct the financial and...
. The company operated in England and Wales
England and Wales
England and Wales is a jurisdiction within the United Kingdom. It consists of England and Wales, two of the four countries of the United Kingdom...
as Lloyds TSB
Lloyds TSB
Lloyds TSB Bank Plc is a retail bank in the United Kingdom. It was established in 1995 by the merger of Lloyds Bank, established in Birmingham, England in 1765 and traditionally considered one of the Big Four clearing banks, with the TSB Group which traces its origins to 1810...
Bank plc and in Scotland as Lloyds TSB Scotland plc. Its other subsidiaries included the mortgage bank Cheltenham and Gloucester, life assurance company Scottish Widows
Scottish Widows
Scottish Widows plc is a life, pensions and investment company located in Edinburgh, Scotland, and is a subsidiary of Lloyds Banking Group. Its product range includes life assurance, pensions, investments and savings...
, finance house Black Horse and private equity investor Lloyds Development Capital.
Following the approval of both the Lloyds TSB and HBOS shareholders, the takeover was completed on 19 January 2009. The HBOS name ceased to be used publicly, although it will still exist as an employing entity. The Bank of Scotland
Bank of Scotland
The Bank of Scotland plc is a commercial and clearing bank based in Edinburgh, Scotland. With a history dating to the 17th century, it is the second oldest surviving bank in what is now the United Kingdom, and is the only commercial institution created by the Parliament of Scotland to...
brand will remain in Scotland while the Halifax and Lloyds Bank brands will be used in England & Wales, with each offering different products and pricing. In his first interview as Lloyds Banking Group's new CEO António Mota de Sousa Horta Osório
António Mota de Sousa Horta Osório
António Mota de Sousa Horta Osório is a Portuguese businessman who is Group Chief Executive of Lloyds Banking Group...
told The Banker
The Banker
The Banker is an English-language monthly international financial affairs publication owned by The Financial Times Ltd. and edited in London...
that "We will keep the different brands because the customers are very different in terms of attitude".
The Group has announced it will sell all Lloyds TSB branches in Scotland, some in England & Wales, the TSB brand, the Cheltenham & Gloucester
Cheltenham & Gloucester
Cheltenham & Gloucester plc is a mortgage and savings provider in the United Kingdom, a subsidiary of Lloyds Banking Group. C&G specialises in mortgages and savings products. Previously, C&G was a building society, known as the Cheltenham and Gloucester Building Society. C&G is one of the largest...
branches and Intelligent Finance
Intelligent Finance
Intelligent Finance is a Scottish offset bank, a division of Bank of Scotland plc which is part of Lloyds Banking Group. It was established as a division of Halifax plc in 2000 by Jim Spowart, who helped establish other direct financial services firms including Direct Line.Following a...
as a consequence of the UK Government taking a 43.4% share in the Group in January 2009.
Antecedents
Lloyds TSB was created in 1995, when the Lloyds BankLloyds Bank
Lloyds Bank Plc was a British retail bank which operated in England and Wales from 1765 until its merger into Lloyds TSB in 1995; it remains a registered company but is currently dormant. It expanded during the nineteenth and twentieth centuries and took over a number of smaller banking companies...
and the Trustee Savings Bank
Trustee Savings Bank
The Trustee Savings Bank was a British financial institution which specialised in accepting savings deposits from the poor. They did not trade their shares on the stock market and, unlike mutually held building societies, depositors had no voting rights nor the ability to direct the financial and...
("TSB") agreed to merge, creating at that time the second-largest bank in the UK by market capitalisation after HSBC Holdings
HSBC
HSBC Holdings plc is a global banking and financial services company headquartered in Canary Wharf, London, United Kingdom. it is the world's second-largest banking and financial services group and second-largest public company according to a composite measure by Forbes magazine...
; and the largest by market share. The first chairman of the merged bank was Sir Robin Ibbs
Robin Ibbs
Sir John "Robin" Ibbs, KBE is an English banker. He was Chairman of Lloyds Bank from 1993 to 1997 and of Lloyds TSB Group PLC from 1995 to 1997.-Life:...
.
Lloyds Bank was one of the oldest banks in the UK, tracing its establishment to Taylors and Lloyds founded in 1765 in Birmingham
Birmingham
Birmingham is a city and metropolitan borough in the West Midlands of England. It is the most populous British city outside the capital London, with a population of 1,036,900 , and lies at the heart of the West Midlands conurbation, the second most populous urban area in the United Kingdom with a...
by John Taylor and Sampson Lloyd
Sampson Lloyd
There are three generations of Sampson Lloyd in the Lloyd family of Birmingham, England. The second co-founded Lloyds Bank.Sampson Lloyd I and Mary , Quakers of Welsh origin, moved from their Leominster, Herefordshire farm in 1698 to Edgbaston Street in Birmingham.After the death of Sampson I in...
. Through a series of mergers, Lloyds emerged to become one of the Big Four banks
Big Four (banks)
Big Four is the colloquial name for the four main banks in several countries, where the banking industry is dominated by just four institutions and where the phrase has gained currency.-Australia:...
in the UK.
The TSB can trace its roots back to the first savings bank founded by Henry Duncan in Ruthwell
Ruthwell
Ruthwell is a village and parish on the Solway Firth between Dumfries and Annan in Dumfries and Galloway, Scotland.Ruthwell's most famous inhabitant was the Rev. Dr. Henry Duncan. He was a minister, author, antiquarian, geologist, publisher, philanthropist, artist and businessman.In 1810, Dr...
, Dumfriesshire
Dumfriesshire
Dumfriesshire or the County of Dumfries is a registration county of Scotland. The lieutenancy area of Dumfries has similar boundaries.Until 1975 it was a county. Its county town was Dumfries...
in 1810. The TSB itself was created in 1985, by an Act of Parliament that merged together all the remaining savings banks in England & Wales under TSB Bank plc and in Scotland as TSB Scotland plc (excepting Airdrie Savings Bank
Airdrie Savings Bank
Airdrie Savings Bank is a small commercial bank operation in the Lanarkshire and Glasgow areas of Scotland. It runs 8 branches throughout this area, with its head office in Airdrie, North Lanarkshire...
which remains the only independent savings bank in the UK) .
Bank of Scotland
The Bank of Scotland plc is a commercial and clearing bank based in Edinburgh, Scotland. With a history dating to the 17th century, it is the second oldest surviving bank in what is now the United Kingdom, and is the only commercial institution created by the Parliament of Scotland to...
is the oldest surviving bank, after the Bank of England
Bank of England
The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694, it is the second oldest central bank in the world...
, in what is now the United Kingdom. In 2001, a wave of consolidation in the UK banking market led the former Halifax Building Society, which traces its roots to 1853, to agree a £10.8 billion merger with the Bank of Scotland; Halifax is now used as brand for its the Bank's branches in England, Wales and Northern Ireland and for savings and mortgages in Scotland.
Lloyds TSB merger
The creation of Lloyds TSB was the beginning of a large-scale consolidation in the UK banking market. In 1995, the merger between TSB and Lloyds Bank formed Lloyds TSB Group plc, one of the largest forces in domestic banking. In June 1999, TSB and Lloyds Bank branches in England and Wales were re-branded Lloyds TSB. Branches in Scotland came under the new brand of Lloyds TSB Scotland, which now had branches stretching from the Northern IslesNorthern Isles
The Northern Isles is a chain of islands off the north coast of mainland Scotland. The climate is cool and temperate and much influenced by the surrounding seas. There are two main island groups: Shetland and Orkney...
to the Mull of Galloway
Mull of Galloway
The Mull of Galloway is the southernmost point of Scotland. It is situated in Wigtownshire, Dumfries and Galloway.A lighthouse is positioned at the point . Built in 1830 by engineer Robert Stevenson, the white-painted round tower is high...
.
In 2000, the group acquired Scottish Widows, a mutual life-assurance company based in Edinburgh in a deal worth £7 billion. This made the group the second-largest provider of life assurance and pensions in the UK after the Prudential
Prudential plc
Prudential plc is a multinational financial services company headquartered in London, United Kingdom.Prudential's largest division is Prudential Corporation Asia, which has over 15 million customers across 13 Asian markets and is a top-three provider of life insurance in mainland China, Hong...
. In September the same year, Lloyds TSB purchased Chartered Trust from the Standard Chartered Bank
Standard Chartered Bank
Standard Chartered PLC is a multinational financial services company headquartered in London, United Kingdom with operations in more than seventy countries...
for £
Pound sterling
The pound sterling , commonly called the pound, is the official currency of the United Kingdom, its Crown Dependencies and the British Overseas Territories of South Georgia and the South Sandwich Islands, British Antarctic Territory and Tristan da Cunha. It is subdivided into 100 pence...
627m to form Lloyds TSB Asset Finance Division which provides motor, retail and personal finance in the United Kingdom under the trading name Black Horse.
Lloyds TSB continued to take part in the consolidation, making a takeover bid for the Abbey National
Abbey National
Abbey National plc was a UK-based bank and former building society, which latterly traded under the Abbey brand name. It became a wholly owned subsidiary of Grupo Santander of Spain in 2004, and was rebranded as Santander in January 2010, forming Santander UK along with the savings business of the...
in 2001, although this was later rejected by the Competition Commission
Competition Commission
The Competition Commission is a non-departmental public body responsible for investigating mergers, markets and other enquiries related to regulated industries under competition law in the United Kingdom...
.
In October 2003, Lloyds TSB Group agreed the sale of its subsidiary, NBNZ Holdings Limited comprising the Group's New Zealand banking and insurance operations to Australia and New Zealand Banking Group Limited.
In July 2004, Lloyds TSB Group announced the sale of its business in Argentina
Argentina
Argentina , officially the Argentine Republic , is the second largest country in South America by land area, after Brazil. It is constituted as a federation of 23 provinces and an autonomous city, Buenos Aires...
to Banco Patagonia Sudameris S.A. and its business in Colombia
Colombia
Colombia, officially the Republic of Colombia , is a unitary constitutional republic comprising thirty-two departments. The country is located in northwestern South America, bordered to the east by Venezuela and Brazil; to the south by Ecuador and Peru; to the north by the Caribbean Sea; to the...
to Primer Banco del Istmo, S.A.
On 20 December 2005, Lloyds TSB announced that it had reached an agreement to sell, for cash, the credit-card business of Goldfish to Morgan Stanley Bank International Limited
Morgan Stanley
Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....
for a premium of £175m.
In 2007, Lloyds TSB announced that it has sold its Abbey Life insurance division
Abbey Life
Abbey Life plc was a leading life assurance business based in London also with an office in Bournemouth. It was listed on the London Stock Exchange and was once a constituent of the FTSE 100 Index.-History:...
to Deutsche Bank
Deutsche Bank
Deutsche Bank AG is a global financial service company with its headquarters in Frankfurt, Germany. It employs more than 100,000 people in over 70 countries, and has a large presence in Europe, the Americas, Asia Pacific and the emerging markets...
for £977m.
Lloyds TSB also became the first mainstream bank to launch a sharia
Sharia
Sharia law, is the moral code and religious law of Islam. Sharia is derived from two primary sources of Islamic law: the precepts set forth in the Quran, and the example set by the Islamic prophet Muhammad in the Sunnah. Fiqh jurisprudence interprets and extends the application of sharia to...
-compliant business account, with the Islamic Business and Corporate account being the latest financial product to be run in line with sharia principles, which has also resulted in some controversy.
Acquisition of HBOS
On 17 September 2008, the BBCBBC
The British Broadcasting Corporation is a British public service broadcaster. Its headquarters is at Broadcasting House in the City of Westminster, London. It is the largest broadcaster in the world, with about 23,000 staff...
reported that HBOS
HBOS
HBOS plc is a banking and insurance company in the United Kingdom, a wholly owned subsidiary of the Lloyds Banking Group having been taken over in January 2009...
was in takeover
Takeover
In business, a takeover is the purchase of one company by another . In the UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to the acquisition of a private company.- Friendly takeovers :Before a bidder makes an offer for another...
talks with Lloyds TSB, in response to a precipitous drop in HBOS's share price. The takeover talks concluded successfully that evening, with a proposal to create a banking giant which would hold a third of the UK mortgage market. An announcement was made at 0700 on 18 September 2008.
On 19 November 2008, the new acquisition (and government preference share purchase) was agreed by the Lloyds TSB shareholders. A similar vote of HBOS shareholders on 12 December 2008 resulted in overwhelming approval of the takeover.
Lloyds TSB Group changed its name to Lloyds Banking Group upon completion of the takeover of HBOS on 19 January 2009.
On 12 February 2009, the CEO of Lloyds group, Eric Daniels
Eric Daniels
John Eric Daniels is an American banker and former chief executive officer of Lloyds Banking Group.-Early life:...
, was questioned about the banking crisis during a session of the Treasury Select Committee of the House of Commons. One of the key issues concerned Lloyds' takeover of HBOS in 2008, and the amount of due diligence
Due diligence
"Due diligence" is a term used for a number of concepts involving either an investigation of a business or person prior to signing a contract, or an act with a certain standard of care. It can be a legal obligation, but the term will more commonly apply to voluntary investigations...
carried out before the acquisition. He said that a company would always like to do more due diligence on another company, but there are legal limits on how much is possible prior to an actual acquisition. Losses were a little higher than the £10 billion originally identified by the due diligence owing to write-off
Write-off
The term write-off describes a reduction in recognized value. In accounting terminology, it refers to recognition of the reduced or zero value of an asset. In income tax statements, it refers to a reduction of taxable income as recognition of certain expenses required to produce the income...
s of property loans due to falling property prices and the lack of demand. The then-Chairman of Lloyds, Sir Victor Blank
Victor Blank
Sir Maurice Victor Blank, FRCOG is a prominent British businessman.-Background:Born in 1942, he was educated at Stockport Grammar School and then studied Modern History at St. Catherine's College, Oxford....
, confirmed in an August 2009 interview with the BBC's Robert Peston that losses had been "at the worst end of expectations", but what had surprised the Lloyds board was the speed at which the losses happened, due to the unexpectedly sharp contraction of the world economy in the last quarter of 2008 and the early part of 2009. This position was confirmed by Archie Kane (senior Lloyds executive in Scotland) in evidence to the Scottish parliament's economy committee in December 2009.
Government stake
October 2008 to January 2009
On 13 October 2008, PM Gordon BrownGordon Brown
James Gordon Brown is a British Labour Party politician who was the Prime Minister of the United Kingdom and Leader of the Labour Party from 2007 until 2010. He previously served as Chancellor of the Exchequer in the Labour Government from 1997 to 2007...
announced a government plan where the Treasury would invest £37 billion ($64 billion, €47 billion) of new capital into several major UK banks to avert a collapse of the financial sector. The banks included Royal Bank of Scotland Group plc, Lloyds TSB and HBOS Plc.
(Barclays only avoided taking a capital investment from the UK Government by raising capital privately, whilst HSBC moved capital to its UK business from other parts of its organisation around the world.)
It has been confirmed that Lloyds TSB would have been required by the FSA
Financial Services Authority
The Financial Services Authority is a quasi-judicial body responsible for the regulation of the financial services industry in the United Kingdom. Its board is appointed by the Treasury and the organisation is structured as a company limited by guarantee and owned by the UK government. Its main...
to take more additional capital from the government if it had not taken-over HBOS.
After the recapitalisations of HBOS and Lloyds TSB and Lloyds TSB's January 2009 acquisition of HBOS, the Government was holding a 43.4% stake in Lloyds Banking Group ordinary (voting) shares and £4bn of preference (non-voting) shares.
February to June 2009
Then in February 2009, after it became apparent that the recession would be deeper than originally anticipated, the FSA was instructed to stress test the banks against a severe economic downturn. The FSA has stated that the assumptions underlying the FSA Stress Test were not intended to be a forecast of what was likely to happen, but were designed to simulate a very severe (near catastrophic) economic scenario. These assumptions included:- A peak-to-trough fall in UK GDP of over 6 per cent, with growth not returning until 2011 and only returning to trend-rate growth in 2012;
- A rise in UK unemployment to just over 12 per cent;
- A 50 per cent peak-to-trough fall in UK house prices;
- A 60 per cent peak-to-trough fall in UK commercial property prices.
The conclusion from this exercise was that Lloyds would need additional capital to enable it to absorb the future losses on loans that would arise if such a severe scenario ever came to pass. As the wholesale funding markets were at that stage effectively closed, Lloyds made a deal with the UK government in March 2009 consisting of two elements:
- Redemption of Preference Shares. The £4bn of preference (non-voting) shares held by UKFI were repaid on 8 June 2009 following the issue of new ordinary shares – this will avoid the payment of £480m annual interest to the Treasury and allow Lloyds to resume the payment of dividends when profits allow. These new ordinary shares were initially available to existing shareholders through an Open Offer at 38.43p that closed on 5 June 2009 – 87% were taken-up. The remaining 13% were all placed in the market on 8 June 2009 at 60p. This Open Offer and Placing was underwritten by the Treasury – if none of these new ordinary shares had been taken-up by existing shareholders or the open market, the government (as underwriters of the deal) would have bought them and their shareholding would have increased to a maximum of 65%. This did not happen, the government holding remained at 43.4% and Lloyds became the first European bank to repay government 'credit-crunch' investment. (Following the government's 43.4% participation in June's Open Offer, the average buying price of the government's total shareholding was 122.6p)
- Asset Protection Scheme. Lloyds agreed in principle to enter the government's Asset Protection Scheme to insure it against potential future losses on previous loans (primarily on the old HBOS portfolio). The fee for this would have been paid for by the issue to the government of new 'B' (non-voting) shares, which could have increased the government holding to a maximum of c.62% (or higher if the government had bought all the ordinary shares issued to redeem the preference shares).
Second Half of 2009
However, with Lloyds impairments having peaked in the first half of 2009, by the middle of 2009 the Asset Protection Scheme increasingly looked like a poor deal for Lloyds. Following negotiations, the government confirmed on 3 November 2009 that Lloyds would not enter the scheme (although RBSRoyal Bank of Scotland
The Royal Bank of Scotland Group is a British banking and insurance holding company in which the UK Government holds an 84% stake. This stake is held and managed through UK Financial Investments Limited, whose voting rights are limited to 75% in order for the bank to retain its listing on the...
still would). Instead, Lloyds launched a rights issue to raise capital from existing shareholders – as an existing 43.4% shareholder, the government chose to take part in this and thus maintain its shareholding at 43.4%. Following this, the National Audit Office has calculated the government's average buying price for its entire stake in Lloyds as about 74p.
It was announced in the Government's Pre-Budget Report on 9 December 2009 that the forecast for the total loss to taxpayers for all the bank bail-outs (not just Lloyds) had been reduced from £50bn to just £10bn – in part because of the restructuring of the Government's Asset Protection Scheme.
The final part of the December 2009 capital raising involved the issuing of new shares to existing debt holders in February 2010. This diluted existing shareholders, including the UK Government whose shareholding was reduced from 43.4% to c.41%.
Capital raising and EU-mandated divestment
Capital raising
Avoidance of Government Asset Protection Scheme (GAPS) through at least £21 billion additional core capital generation:- £13.5 billion rights issue (HMT/UKFI has decided to fully subscribe in order to avoid current holding being diluted)
- over £7.5 billion exchange of existing debt notes into a 'contingent' form that will convert to equity if Lloyds' core tier 1 ratio drops below 5% (strong investor demand increased this to the maximum £9bn)
Tier 1 capital ratio thus increased to equivalent of 8.6% as at June 2009.
GAPS exit fee
Payment to HMT of £2.5bn GAPS 'exit fee' to cover the effective protection provided by the scheme since it was proposed earlier in the year.Divestment (sell-off)
Creation and sell-off of a retail banking business with at least 600 branches, a 4.6% personal current account market share and approximately 19% of the Group’s mortgage book, to include:- C&G savings accounts and all C&G branch-based mortgages, all C&G branches but not the C&G brand
- Lloyds TSB Scotland, including all branch-based customers, but not the Lloyds TSB brand
- c.250 Lloyds TSB branches in England and Wales, including customers based at those branches
- The TSB brand (usable across the UK)
- Intelligent Finance (the business and customers)
The EU Commission has required that the sell-off be completed within four years.
Lloyds Banking Group's new CEO António Mota de Sousa Horta Osório
António Mota de Sousa Horta Osório
António Mota de Sousa Horta Osório is a Portuguese businessman who is Group Chief Executive of Lloyds Banking Group...
told The Banker
The Banker
The Banker is an English-language monthly international financial affairs publication owned by The Financial Times Ltd. and edited in London...
that one of his first actions is to "accelerate the sale of the 600 branches" in order to meet the 2013 deadline.
Lloyds Banking Group most recent results show first quarter losses of £3.47 billion, down from the £721 million profit it recorded at the same stage last year.
Curtailments
According to Union leader, the Lloyds Banking Group had cut 30,000 jobs since February 2009, but in August 2011, the company announced to cut another 1,300 jobs.Operations
- Lloyds TSB and Bank of Scotland Retail Bank – Joy Griffiths (formerly of LTSB)
- Provides a full range of banking and financial services to some 15 million personal customers through c.2,000 branches across the UK
- Lloyds TSB branch network – England & Wales
- Cheltenham and Gloucester branch network – England & Wales
- Lloyds TSB Scotland branch network – Scotland
- Bank of ScotlandBank of ScotlandThe Bank of Scotland plc is a commercial and clearing bank based in Edinburgh, Scotland. With a history dating to the 17th century, it is the second oldest surviving bank in what is now the United Kingdom, and is the only commercial institution created by the Parliament of Scotland to...
branch network – Scotland
- Provides a full range of banking and financial services to some 15 million personal customers through c.2,000 branches across the UK
- Halifax Retail Bank – David Nicholson (formerly of HBOS)
- Provides a full range of banking and financial services to some 15 million personal customers through c.1,000 branches across England & Wales
- Halifax branch network – England & Wales
- Provides a full range of banking and financial services to some 15 million personal customers through c.1,000 branches across England & Wales
- Retail Products & Marketing – Antonio Lorenzo, Group Executive Director (formerly of Santander)
- Telephone Banking
- Digital Banking (internet, mobile, etc.)
- Product Design (current accounts, savings accounts, mortgages, loans, credit cards)
- Customer Marketing
- Specialist Units
- Birmingham MidshiresBirmingham MidshiresBirmingham Midshires is a commercial bank in the United Kingdom, a division of Bank of Scotland plc . It is headquartered at Pendeford Business Park, Wolverhampton, England and has 67 offices throughout England...
– mortgage and savings brand (buy-to-let mortgages) - Intelligent FinanceIntelligent FinanceIntelligent Finance is a Scottish offset bank, a division of Bank of Scotland plc which is part of Lloyds Banking Group. It was established as a division of Halifax plc in 2000 by Jim Spowart, who helped establish other direct financial services firms including Direct Line.Following a...
– mortgages and savings brand - Scottish Widows Bank – offset mortgages
- Birmingham Midshires
- Wholesale Banking – G. Truett Tate, Group Executive Director (formerly of LTSB)
- Provides banking and related services for major UK and multinational corporates and financial institutions. It also provides asset finance and manages Lloyds Banking Group's activities in financial markets through its treasury function. Also provides banking and financial services in North America (US and Canada).
- Lloyds Bank Corporate Markets
- Blackhorse (point-of-sale motor finance)
- Lex Autolease
- Provides banking and related services for major UK and multinational corporates and financial institutions. It also provides asset finance and manages Lloyds Banking Group's activities in financial markets through its treasury function. Also provides banking and financial services in North America (US and Canada).
- Commercial – John Maltby (formerly of LTSB)
- Provides banking and related services for small- and medium-sized UK businesses (SME).
- Lloyds TSB Commercial
- Bank of Scotland Commercial
- Lloyds TSB Commercial Finance
- Provides banking and related services for small- and medium-sized UK businesses (SME).
- Life, Pensions & Investments – Phil Loney (formerly of LTSB)
- Scottish WidowsScottish WidowsScottish Widows plc is a life, pensions and investment company located in Edinburgh, Scotland, and is a subsidiary of Lloyds Banking Group. Its product range includes life assurance, pensions, investments and savings...
is the Group's specialist provider of life assurance, pensions and investment products, distributed through the Lloyds TSB branch network, through independent financial advisers and directly via the telephone and the internet. Insurance and Investments also includes general insurance underwriting and broking (home, creditor, motor, travel, pet). Profit before tax from Insurance and Investments in 2006 was €1,110 (£950) million.- Clerical MedicalClerical MedicalClerical Medical is a British life insurance, pensions and investments company founded in 1824.In 1824, Dr George Pinckard formed a committee of physicians and members of the clergy which published a pamphlet called 'Prospectus for the Establishment of a new Assurance Office with Improved...
– The Clerical Medical brand will be phased out with the sales team merging with that of Scottish Widows. - Lloyds TSB Insurance Services Limited
- Halifax Insurance
- Clerical Medical
- Scottish Widows
- General Insurance – Andy Briggs (formerly of LTSB)
- Buildings, Contents and Motor insurance via:
- Lloyds TSB, Halifax & Bank of Scotland branches
- Telephone Sales
- Internet
- 3rd Parties, e.g. Moneysupermarket.com
- Buildings, Contents and Motor insurance via:
- Wealth and International – Antonio Lorenzo, Group Executive Director (formerly of Santander)
- UK Private Banking
- International Private Banking
- International Retail Banking – includes Channel Islands and Isle of Man
- International Banking – includes Bank of Scotland (Ireland) and Lloyds Bank Australia
- Scottish Widows Investment Partnership (SWIP)
- Other Group Directors
- Tim Tookey – Group Finance Director (formerly of LTSB)
- Juan Colombás – Chief Risk Officer (formerly of Santander)
- Angie Risley – Group Human Resources Director (formerly of LTSB)
- Mark Fisher – Group Operations and Integration Director (externally recruited to Lloyds Banking Group from RBS)
Key numbers
| 2008 | 2009 | 2010 | |
|---|---|---|---|
| Stability – Core T1 Capital Ratio | 6.4% | 8.1% | 10.2% |
| Income | £21,355 million | £23,964 million | £23,641 million |
| Profitability (before tax) – Continuing Basis | £6,713 million loss | £6,300 million loss | £2,212 million |
| Impairment Charge | £14,880 million | £23,988 million | £13,181 million |
| Net Interest Margin | 2.01% | 1.77% | 2.10% |
| Efficiency – Cost-Income Ratio | 48.4% | 46.2% | |
| Lending (Gross) – Mortgages | £28 billion | £35 billion | £30 billion |
| Lending (Gross) – Large Businesses | £25 billion | £38 billion | |
| Lending (Gross) – Small & Medium Businesses | £10 billion | £11 billion |
Links to the arms trade
In December 2008 the British anti-poverty charity War on WantWar on Want
War on Want is an anti-poverty charity based in London, England. It seeks to highlight the needs of poverty-stricken areas around the world and lobbies governments and international agencies to tackle problems as well as raising public awareness of the concerns of developing nations while...
released a report documenting the extent to which Lloyds and other UK commercial banks invest in, provide banking services for and make loans to arms companies. The charity writes in its report that Lloyds holds shares in the UK arms sector totally £717.5 million, and serves as principal banker for BAE Systems
BAE Systems
BAE Systems plc is a British multinational defence, security and aerospace company headquartered in London, United Kingdom, that has global interests, particularly in North America through its subsidiary BAE Systems Inc. BAE is among the world's largest military contractors; in 2009 it was the...
, the UK's largest arms company. The report also details Lloyds's dealings with known producers of cluster munitions and depleted uranium
Depleted uranium
Depleted uranium is uranium with a lower content of the fissile isotope U-235 than natural uranium . Uses of DU take advantage of its very high density of 19.1 g/cm3...
.
Cutting off aid to Gaza
Lloyds TSB stands accused of "cutting off aid to GazaGaza
Gaza , also referred to as Gaza City, is a Palestinian city in the Gaza Strip, with a population of about 450,000, making it the largest city in the Palestinian territories.Inhabited since at least the 15th century BC,...
". In November 2008 the bank delivered a notification to the Islamic Bank of Britain
Islamic Bank of Britain
The Islamic Bank of Britain plc is a commercial bank in the United Kingdom, established in August 2004 to offer Sharia compliant financial service products to British Muslims. The bank has seven branches in London, Birmingham, Manchester and Leicester...
(IBB) to cease all dealings with British charity Interpal
Interpal
Interpal is the working name for the British charity Palestinian Relief and Development Fund founded in 1994 which states that it is a non-political charity to alleviate problems faced by Palestinians, and focused solely on the provision of relief and development aid to the poor and needy...
– a British non-political and non-profit making charity set up to help Palestinians, and one of the few sources of humanitarian assistance in occupied Gaza. The notification was delivered without warning or prior consultation. The following day, the UN announced that it had run out of food supplies and essentials in the Gaza Strip.
Money laundering
A 2010 report by the Wall Street Journal described how Credit SuisseCredit Suisse
The Credit Suisse Group AG is a Swiss multinational financial services company headquartered in Zurich, with more than 250 branches in Switzerland and operations in more than 50 countries.-History:...
, Barclays, Lloyds Banking Group, and other banks were involved in helping the Alavi Foundation
Alavi Foundation
The Alavi Foundation is a private not-for-profit organization based in the United States.The Alavi Foundation is the successor organization to the Pahlavi Foundation, a nonprofit group used by Mohammad Reza Pahlavi to advance Iran's charitable interests in America...
, Bank Melli
Bank Melli Iran
Bank Melli Iran , also called the National Bank of Iran, is the first national Iranian bank. The bank was established in 1927 by the order of the Majlis and since then has consistently been one of the most influential Iranian banks.In 1931 the Iranian Majlis authorized the bank to print and...
, the Iranian government, and/or others circumvent US laws banning financial transactions with certain states. They did this by 'stripping' information out of wire transfers, thereby concealing the source of funds. Lloyds Banking Group settled with the government for $350,000,000.
Tax avoidance
In 2009, a case was brought against Lloyds by a department of the UK TreasuryHM Treasury
HM Treasury, in full Her Majesty's Treasury, informally The Treasury, is the United Kingdom government department responsible for developing and executing the British government's public finance policy and economic policy...
(HM Revenue & Customs) on grounds of tax avoidance. Lloyds are accused of pouring hundreds of millions of pounds into transatlantic tax avoidance schemes in the form of loans to American financial institutions.
HBOS bad loans
On Friday, 13 February 2009, Lloyds Banking Group revealed that the losses at HBOS were greater than had been anticipated at around £10billion. The share price of Lloyds Banking Group plunged 32% on the London Stock ExchangeLondon Stock Exchange
The London Stock Exchange is a stock exchange located in the City of London within the United Kingdom. , the Exchange had a market capitalisation of US$3.7495 trillion, making it the fourth-largest stock exchange in the world by this measurement...
, carrying other bank shares with it. The acquisition was carried out rapidly in 2008, however due diligence
Due diligence
"Due diligence" is a term used for a number of concepts involving either an investigation of a business or person prior to signing a contract, or an act with a certain standard of care. It can be a legal obligation, but the term will more commonly apply to voluntary investigations...
undertaken by Lloyds indicated an anticipated £8.5bn HBOS loss. The Lloyds management cited a deterioration in the economy subsequent to the due diligence for the HBOS losses increasing from the anticipated £8.5bn to the actual £10bn.
Awards and recognition
In July 2007, Euromoney announced Lloyds TSB as the winners of its Awards for Excellence.In June 2008, Lloyds TSB Group came top in the Race for Opportunity’s (RfO) annual survey.
In May 2009, Lloyds TSB Corporate Markets was recognised as ‘Bank of the Year’ for the fifth year running at Real FD/ CBI FDs' Excellence Awards.
In October 2009's "What Investment" magazine awards, Halifax won Best Savings Account Provider and Halifax Share Dealing was also named Best Share Dealing Service.
In October 2009's "Consumer Money Awards", Halifax won Best First Time Mortgage Provider. In addition, Lloyds' brands were commended in several other categories, including Cheltenham & Gloucester for Best Remortgage Provider and Best High Street Mortgage Provider; Lloyds TSB for Best Current Account Provider, Best Student Account Provider and Best Customer Service Provider; and Halifax for Best ISA Provider and Best High Street Savings Provider.
In November 2009's "Personal Finance Awards", Halifax was awarded Best Premium Current Account (for the Ultimate Reward Current Account) and Best Savings Account Provider. In the Best Mortgage Provider category, Halifax was highly commended. Halifax Sharedealing was named Best Online Stockbroker for the third year in a row, and was highly commended in the Excellence in Customer Service category. Halifax Investments was named Best Investment Product Provider. Lloyds TSB won Best Student Finance/Banking Provider and was also highly commended in the Best Current Account Provider awards. Scottish Widows was highly commended in the Best Pension Provider category.
In November 2009's "Your Mortgage Awards", Halifax won the award for Best Overall Mortgage Lender for the eighth year running, as well as the award for Best Large Loans Mortgage Lender. Birmingham Midshires was named Best Specialist and Buy-to-Let Mortgage Lender, and Lloyds TSB won the award for Best Overseas Mortgage Lender.
Sponsorships
Lloyds TSB was appointed the first Official Partner for the London Olympics 2012.Lloyds TSB is also currently the official sponsor for the Asian Jewel Awards. The awards recognise the contribution made by the Asian community in Britain today. An example of this support is the bank's sponsorship of Peter Santamaria-Woods in motor racing.
Lloyds Banking Group is an active supporter of disability rights and best practice; in addition to being a Gold member of the Employers’ Forum on Disability
Employers’ Forum on Disability
Employers' Forum on Disability is the UK’s national employers’ network specifically focused on the topic of disability.Its membership of about 350 employers, including 100 multinational corporations, small and medium sized enterprises and public sector employers, employ approximately 18 per cent...
, in 2010 it helped create and currently sponsors the RADAR (The Royal Association for Disability Rights) Radiate network, the goal of which is to support and develop a talent pool of people with disabilities and health conditions and potentially act as a source of thinking for organisations on how 'disabled talent' is best spotted and developed.