HIGHLIGHTS FOR THE THREE MONTHS ENDED 31 MARCH 2021
Solid financial performance reflects business momentum and improved economic outlook
• Statutory profit after tax of £1,397 million supported by business momentum and a release of expected credit loss provisions, given the improved economic outlook. Statutory return on tangible equity of 13.9 per cent with tangible net assets per share of 52.4 pence
• Recovering trading surplus of £1,748 million, a reduction of 12 per cent compared to the first three months of 2020, but an increase of 21 per cent on the final quarter of 2020
- Net income of £3.7 billion, down 7 per cent year on year (up 2 per cent on the previous quarter), with higher average interest-earning assets of £439 billion, net interest margin of 2.49 per cent and other income of £1.1 billion
- Total costs of £1.9 billion down 2 per cent, driven by continued operating cost control and lower remediation costs
• Asset quality remains strong with credit experience benign. Net impairment credit of £323 million in the quarter, driven by a £459 million release given the UK's improved economic outlook. Management judgements in respect of coronavirus retained, now c.£1 billion including the £400 million central overlay taken in the fourth quarter
Balance sheet and capital strength further enhanced
• Capital build of 54 basis points in the quarter with CET1 ratio of 16.7 per cent, significantly ahead of the ongoing target of c.12.5 per cent, plus a management buffer of c.1 per cent and regulatory requirements of c.11 per cent
• Loans and advances up £3.3 billion in the quarter to £443.5 billion, including £6.0 billion open mortgage book growth
• Customer deposits up £11.7 billion in the quarter to £462.4 billion with Retail current accounts up £5.6 billion
• Loan to deposit ratio of 96 per cent provides a strong liquidity position and significant potential to lend into recovery
Outlook
• Given the solid financial performance in the first quarter of 2021, the Group is enhancing its guidance for 2021. Based on the Group's current economic assumptions:
- Net interest margin now expected to be in excess of 245 basis points
- Operating costs to reduce to c.£7.5 billion
- Net asset quality ratio now expected to be below 25 basis points
- Risk-weighted assets in 2021 to be broadly stable on 2020
- Statutory return on tangible equity now expected to be between 8 and 10 per cent, excluding c.2.5 percentage point benefit from tax rate changes
- Accruing dividends with intention to resume progressive and sustainable ordinary dividend policy
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