25.2.2011
By Simon Miller
Lloyds Banking is “well ahead” of Basel III with its increase capital position, its 2010 results revealed today.
In the group chief executive’s statement, Eric Daniels commented: “We considerably strengthened our capital position in the year, positioning us well ahead of the implementation of the Basel Committee on Banking Supervision’s so called ‘Basel III’ capital reforms, and changes expected to a number of accounting practices.”
Lloyds said its core tier 1 ratio had increased to 10.2% from 8.1% at the end of 2009, “substantially in excess of regulatory requirements”.
Daniels added: “We also restructured the capital within our insurance subsidiaries, which will deliver substantial benefits under the Basel III reforms. At the year end, our tier 1 ratio was 11.6%, and our total capital ratio was 15.2%.”
Lloyds also enhanced its funding and liquidity position in 2010, “thereby further reducing the Group’s risk, albeit at some incremental cost”.
The deposit base increased by 3%, which, together with the reduction in the size of its balance sheet, resulted in an improvement in Lloyds’ loan to deposit ratio to 154% at the end of 2010 from 169% at the 2009 year end.
In addition, Lloyds exceeded its guidance for term wholesale funding issuance, achieving £50bn of issuance in the year. The bank also continued to broaden the range of its funding sources, and maintained the proportion of wholesale funding with a maturity of more than one year at 50 %.
Term issuance during the year helped Lloyds materially reduce the liquidity it received from government and central bank sources, by £61bn to £97bn at the year end and we have made further progress since then.
The annual results revealed a pre-tax profit of £2.2bn, a recovery from a £6.3bn loss in 2009.
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