Lloyds Bank PLC: Half-Year Management Report For The Half-Year To 30 June 2016

Lloyds Bank plc
Half-Year Management Report
For the half-year to 30 June 2016
Member of the Lloyds Banking Group

FORWARD LOOKING STATEMENTS
This document contains certain forward looking statements with respect to the business, strategy and plans of Lloyds
Bank Group and its current goals and expectations relating to its future financial condition and performance. Statements
that are not historical facts, including statements about Lloyds Bank Group’s or its directors’ and/or management’s beliefs
and expectations, are forward looking statements. By their nature, forward looking statements involve risk and
uncertainty because they relate to events and depend upon circumstances that will or may occur in the future. Factors
that could cause actual business, strategy, plans and/or results (including but not limited to the payment of dividends) to
differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward looking
statements made by the Lloyds Bank Group or on its behalf include, but are not limited to: general economic and
business conditions in the UK and internationally; market related trends and developments; fluctuations in interest rates
(including low or negative rates), exchange rates, stock markets and currencies; the ability to access sufficient sources of
capital, liquidity and funding when required; changes to the Lloyds Bank Group’s or Lloyds Banking Group plc’s credit
ratings; the ability to derive cost savings; changing customer behaviour including consumer spending, saving and
borrowing habits; changes to borrower or counterparty credit quality; instability in the global financial markets, including
Eurozone instability, the exit by the UK from the European Union (EU) and the potential for one or more other countries
to exit the EU or the Eurozone and the impact of any sovereign credit rating downgrade or other sovereign financial
issues; technological changes and risks to cyber security; natural, pandemic and other disasters, adverse weather and
similar contingencies outside the Lloyds Bank Group’s or Lloyds Banking Group plc’s control; inadequate or failed
internal or external processes or systems; acts of war, other acts of hostility, terrorist acts and responses to those acts,
geopolitical, pandemic or other such events; changes in laws, regulations, accounting standards or taxation, including as
a result of an exit by the UK from the EU, a further possible referendum on Scottish independence; changes to regulatory
capital or liquidity requirements and similar contingencies outside the Lloyds Bank Group’s or Lloyds Banking Group plc’s
control; the policies, decisions and actions of governmental or regulatory authorities or courts in the UK, the EU, the US
or elsewhere including the implementation and interpretation of key legislation and regulation; the ability to attract and
retain senior management and other employees; requirements or limitations on the Lloyds Bank Group or Lloyds
Banking Group plc as a result of HM Treasury’s investment in Lloyds Banking Group plc; actions or omissions by the
Lloyds Bank Group’s directors, management or employees including industrial action; changes to the Lloyds Bank
Group’s post-retirement defined benefit scheme obligations; the provision of banking operations services to TSB Banking
Group plc; the extent of any future impairment charges or write-downs caused by, but not limited to, depressed asset
valuations, market disruptions and illiquid markets; the value and effectiveness of any credit protection purchased by the
Lloyds Bank Group; the inability to hedge certain risks economically; the adequacy of loss reserves; the actions of
competitors, including non-bank financial services and lending companies; and exposure to regulatory or competition
scrutiny, legal, regulatory or competition proceedings, investigations or complaints. Please refer to the latest Annual
Report on Form 20-F filed by Lloyds Banking Group plc with the US Securities and Exchange Commission for a
discussion of certain factors together with examples of forward looking statements. Except as required by any applicable
law or regulation, the forward looking statements contained in this document are made as of today’s date, and Lloyds
Bank Group expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward
looking statements. The information, statements and opinions contained in this document do not constitute a public offer
under any applicable law or an offer to sell any securities or financial instruments or any advice or recommendation with
respect to such securities or financial instruments.
CONTENTS
Page
Financial review 1
Principal risks and uncertainties 5
Condensed consolidated half-year financial statements (unaudited)
Consolidated income statement 6
Consolidated statement of comprehensive income 7
Consolidated balance sheet 8
Consolidated statement of changes in equity 10
Consolidated cash flow statement 13
Notes 14
Statement of directors’ responsibilities 42
Independent review report 43
Contacts 45
LLOYDS BANK PLC 2016 HALF-YEAR RESULTS
FINANCIAL REVIEW
Principal activities
Lloyds Bank plc (the Bank) and its subsidiaries (together, the Group) provide a wide range of banking and financial
services in the UK and overseas.
The Group’s revenue is earned through interest and fees on a broad range of financial services products including
current and savings accounts, personal loans, credit cards and mortgages within the retail market; loans and capital
market products to commercial, corporate and asset finance customers; life, pensions and investment products; general
insurance; and private banking and asset management.
Review of results
The Group recorded a profit before tax of £1,003 million for the half year to 30 June 2016, a decrease of £413 million
compared with the profit before tax of £1,416 million for the half year to 30 June 2015.
Total income, net of insurance claims, decreased by £2,161 million, or 24 per cent, to £6,859 million for the half year to
30 June 2016 from £9,020 million in the half year to 30 June 2015.
Net interest income decreased by £233 million, or 4 per cent, to £4,982 million in the half year to 30 June 2016 compared
with £5,215 million in the same period in 2015. This was due in part to an increase of £165 million in the charge within
net interest income for amounts allocated to unit holders in Open-Ended Investment Companies, from £357 million in the
half year to 30 June 2015 to £522 million in the half year to 30 June 2016, as a result of higher investment returns in
2016. Excluding this charge from both periods, and the £192 million net interest income of TSB from the comparative
period, net interest income was £124 million, or 2 per cent, higher at £5,504 million in the half year to 30 June 2016
compared with £5,380 million in the same period in 2015. The net interest margin on the Group’s relationship lending and
similar assets improved, offsetting a small reduction in average interest-earning assets, which principally related to
lending outside of the Group’s risk appetite as well as in the mortgages and larger corporate portfolios, only partly offset
by growth in other personal finance and SME lending. The improvement in margin reflected lower deposit and wholesale
funding costs and a one-off credit to net interest income related to the credit card portfolio more than offsetting pressure
on asset prices.
Other income increased by £5,184 million to £11,987 million in the half year to 30 June 2016, compared with
£6,803 million in the same period in 2015, due mainly to a £3,794 million increase in net trading income, reflecting higher
income from the insurance businesses driven by the impact of market conditions on policyholder assets. These market
movements, together with the increase in insurance premium income, were largely offset in the Group’s income
statement by a £7,112 million increase in the insurance claims expense, and the impact on net interest income of
amounts allocated to unit holders in Open-Ended Investment Companies. Insurance premium income was £2,798 million
higher at £4,212 million compared with £1,414 million in the half year to 30 June 2015; underlying premium income of
£3,373 million in 2015 having been offset by a charge of £1,959 million relating to the recapture by a third party insurer of
a portfolio of policies previously reassured with the Group. Excluding this item from the comparable period, the insurance
premium income of £4,212 million in the half year to 30 June 2016 was £839 million, or 25 per cent, higher as a result of
increased bulk annuity business.
Net fee and commission income was £170 million, or 17 per cent, lower at £821 million in the half year to 30 June 2016
compared with £991 million in the half year to 30 June 2015, principally as a result of the disposal of TSB and reduced
levels of card and current account fees.
Other operating income was £1,238 million lower at a deficit of £315 million in the half year to 30 June 2016 compared
with income of £923 million in the half year to 30 June 2015. In the half year to 30 June 2016 the Group realised a gain of
£484 million arising on the sale of its investment in Visa Europe Limited, there was a £152 million increase in liability
management gains and an improvement in income from the movement in value of in-force insurance business; however
these items were more than offset by a loss of £993 million arising on transactions related to Lloyds Banking Group’s
tender offers and redemptions in respect of its Enhanced Capital Notes which completed in March 2016 and a loss of
£1,026 million which arose pursuant to a restructuring of the Bank’s capital instruments in June 2016.
Page 1 of 45
FINANCIAL REVIEW (continued)
There was a total regulatory provisions charge of £460 million in the half-year to 30 June 2016 compared to
£1,835 million in the same period in 2015, of which £445 million (half-year to 30 June 2015: £1,835 million) was in
expenses and £15 million (half-year to 30 June 2015: £nil) was recognised within income. No further provision has been
taken for PPI, where complaint levels over the first half have been around 8,500 per week on average, broadly in line
with expectations. The Group’s current PPI provision reflects the Group’s interpretation of the Financial Conduct
Authority’s (FCA) consultation paper regarding a potential time bar and the Plevin case and conclusion by mid-2018. The
Group awaits the FCA’s final decision however, should the time bar be longer than the proposed two years or the FCA’s
final decision be significantly delayed, then the Group may need to reassess its provision. The total charge of £460
million related to a range of other conduct issues and included £215 million in respect of arrears related activities on
secured and unsecured retail products, £70 million in respect of complaints relating to packaged bank accounts and
£50 million related to insurance products sold in Germany. In addition there were a number of smaller additions to
existing conduct risk provisions totalling £125 million across all divisions.
Other operating expenses decreased by £559 million, or 10 per cent, to £5,049 million in the half year to 30 June 2016
compared with £5,608 million in the half year to 30 June 2015; although the half year to 30 June 2015 included a charge
of £665 million relating to the disposal of TSB, adjusting for which costs were £106 million, or 2 per cent, higher at
£5,049 million in the half year to 30 June 2016 compared with £4,943 million in the same period in 2015 as savings from
the Group’s restructuring initiatives have been more than offset by the impact of annual pay increases, higher levels of
operating lease depreciation following continued growth in the Lex Autolease business and higher levels of restructuring
costs.
Impairment losses increased by £201 million to £362 million in the half year to 30 June 2016 compared with £161 million
in the half year to 30 June 2015. The impairment charge in respect of loans and receivables was £50 million, or 28 per
cent, higher at £229 million in the half year to 30 June 2016 compared to £179 million in the same period in 2015. Credit
quality remains good and the increased charge is largely due to a reduction in the level of provision releases and lower
write-backs from debt sales. In addition, there was an impairment charge of £146 million in respect of certain equity
investments in the Group’s available-for-sale portfolio.
The tax charge for the half year to 30 June 2016 was £253 million (half year to 30 June 2015: £330 million), representing
an effective tax rate of 25 per cent. The effective tax rate reflects the impact of tax exempt gains and capital losses not
previously recognised.
Total assets were £33,153 million or 4 per cent, higher at £851,057 million at 30 June 2016, compared with
£817,904 million at 31 December 2015. Cash and balances at central banks were £14,982 million, or 26 per cent, higher
at £73,399 million compared to £58,417 million at 31 December 2015, as the Group made use of favourable
opportunities for the placing of funds; and derivative assets were £18,435 million, or 64 per cent, higher at
£47,357 million compared to £28,922 million at 31 December 2015, as a result of increased market activity at the end of
June 2016 and movements in exchange rates. Loans and advances to customers decreased by £2,142 million from
£455,175 million at 31 December 2015 to £453,033 million at 30 June 2016; growth in unsecured personal finance and
SME lending was more than offset by reductions in larger corporate lending, mortgage balances, as the Group
concentrates on protecting margin in the current market, and in the portfolio of lending which is outside of the Group’s
risk appetite. Customer deposits increased by £4,953 million to £423,279 million compared with £418,326 million at
31 December 2015 following growth in corporate and SME deposits. Shareholders’ equity decreased by £335 million, or
1 per cent, from £46,962 million at 31 December 2015 to £46,627 million at 30 June 2016 as the retained profit for the
period of £687 million and the positive impact of other reserve movements, in particular in relation to the cash flow
hedging reserve, were more than offset by total dividend payments on ordinary shares in the period of £2,430 million.
The Group's transitional common equity tier 1 capital ratio decreased to 14.5 per cent at the end of June 2016 from
15.2 per cent at the end of December 2015, primarily reflecting dividend payments in the period. The transitional total
capital ratio was 21.7 per cent (31 December 2015: 22.2 per cent).
Page 2 of 45
Capital ratios
At At
30 June 31 Dec
1
Capital resources (transitional) 2016 2015
£m £m
Common equity tier 1
Shareholders’ equity per balance sheet 46,627 46,962
Adjustment to retained earnings for foreseeable dividends (911) (1,427)
1
Deconsolidation of insurance entities 1,307 578
Adjustment for own credit 25 67
Cash flow hedging reserve (2,925) (915)
Other adjustments (890) (433)
43,233 44,832
Less: deductions from common equity tier 1
Goodwill and other intangible assets (1,627) (1,719)
Excess of expected losses over impairment provisions and value adjustments − (270)
Removal of defined benefit pension surplus (818) (721)
Securitisation deductions (220) (169)
1
Significant investments (3,990) (4,001)
Deferred tax assets (4,198) (3,911)
Common equity tier 1 capital 32,380 34,041
Additional tier 1
Additional tier 1 instruments 7,108 4,761
Less: deductions from tier 1
Total tier 1 capital 38,200 37,625
Tier 2
Tier 2 instruments 11,620 13,562
Eligible provisions 114 221
Less: deductions from tier 2
Total tier 2 capital 10,225 12,027
Total capital resources 48,425 49,652
Risk-weighted assets 223,411 224,020
Common equity tier 1 capital ratio 14.5% 15.2%

Tier 1 capital ratio 17.1% 16.8%
Total capital ratio 21.7% 22.2%
1
The presentation of the deconsolidation of the Group’s insurance entities has been amended at June 2016 with comparative figures
restated accordingly.
Page 3 of 45
Capital ratios (continued)
At At
30 June 31 Dec
2016 2015
£m £m
Risk-weighted assets
Foundation Internal Ratings Based (IRB) Approach 68,753 68,990
Retail IRB Approach 64,387 63,912
Other IRB Approach 18,274 18,661
IRB Approach 151,414 151,563
Standardised Approach 20,268 20,443
Credit risk 171,682 172,006
Counterparty credit risk 9,159 7,981
Contributions to the default fund of a central counterparty 466 488
Credit valuation adjustment risk 1,101 1,684
Operational risk 26,123 26,123
Market risk 2,922 3,775
Underlying risk-weighted assets 211,453 212,057
Threshold risk-weighted assets 11,958 11,963
Transitional risk-weighted assets 223,411 224,020
Page 4 of 45
PRINCIPAL RISKS AND UNCERTAINTIES
The most significant risks faced by the Group which could impact the success of delivering against the Group’s long-term
strategic objectives and through which global macro-economic, regulatory developments and market liquidity dynamics
could manifest, are detailed below. Except where noted, there has been no significant change to the description of these
risks or key mitigating actions disclosed in the Group’s 2015 Annual Report and Accounts, with any quantitative
disclosures updated herein.
Lloyds Banking Group has already considered many of the potential implications following the UK’s vote to leave the
European Union and will now develop this work in greater detail to assess the impact to its customers, colleagues and
products - as well as all legal, regulatory, tax, finance and capital implications.
Credit risk – The risk that customers to whom we have lent money or other counterparties with whom we have
contracted, fail to meet their financial obligations, resulting in loss to the Group. Adverse changes in the economic and
market environment or the credit quality of the Group’s counterparties and customers could reduce asset values and
potentially increase write-downs and allowances for impairment losses, thereby adversely impacting profitability.
Conduct risk – The Group faces significant potential conduct risks, including selling products which do not meet
customer needs, failing to deal with complaints effectively and exhibiting behaviours which do not meet market or
regulatory standards.
Market risk – The risk that the Group’s capital or earnings profile is affected by adverse market movements, in particular
interest rates and credit spreads in the Banking business, credit spread and equity in the Insurance business, and credit
spreads in the Group’s Defined Benefit Pension Schemes.
Operational risk – Significant operational risks which may result in financial loss, disruption or damage to the reputation
of the Group, including the availability, resilience and security of core IT systems and the potential for failings in customer
processes.
Capital risk – The risk that the Group has a sub-optimal amount or quality of capital or that capital is inefficiently
deployed across the Group.
Funding and liquidity risk – The risk that the Group has insufficient financial resources to meet its commitments as
they fall due, or can only secure them at excessive cost.
Regulatory and legal risk – The risks of changing legislation, regulation, policies, voluntary codes of practice and their
interpretation in the markets in which the Group operates can have a significant impact on the Group, including its
operations, business prospects, structure, costs and/or capital requirements and ability to enforce contractual obligations.
Governance risk – Against a background of increased regulatory focus on governance and risk management, the most
significant challenges arise from the embedding of the Senior Managers and Certification Regime (SM&CR) and the
requirement to ring-fence core UK financial services and activities from January 2019.
People risk – Key people risks include the risk that the Group fails to lead responsibly in an increasingly competitive
marketplace, particularly with the introduction of the SM&CR in 2016. This may dissuade capable individuals from taking
up senior positions within the industry.
Insurance risk – Key insurance risks within the Insurance business are longevity, persistency and property insurance.
Longevity risk is increasing following entry into the bulk annuity market at the end of 2015. Longevity is also the key
insurance risk in the Group’s Defined Benefit Pension Schemes.
Page 5 of 45
CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED INCOME STATEMENT
Half-year Half-year
to 30 June to 30 June
2016 2015
Note £ million £ million
Interest and similar income 8,538 9,050
Interest and similar expense (3,556) (3,835)
Net interest income 4,982 5,215
Fee and commission income 1,502 1,598
Fee and commission expense (681) (607)
Net fee and commission income 821 991
Net trading income 7,269 3,475
Insurance premium income 4,212 1,414
Other operating income (315) 923
Other income 11,987 6,803
Total income 16,969 12,018
Insurance claims (10,110) (2,998)
Total income, net of insurance claims 6,859 9,020
Regulatory provisions 11 (445) (1,835)
Other operating expenses (5,049) (5,608)
Total operating expenses 3 (5,494) (7,443)
Trading surplus 1,365 1,577
Impairment 4 (362) (161)
Profit before tax 1,003 1,416
Taxation 5 (253) (330)
Profit for the period 750 1,086
Profit attributable to ordinary shareholders 686 1,035

1
Profit attributable to other equity shareholders 1 −
Profit attributable to equity holders 687 1,035
Profit attributable to non-controlling interests 63 51
1
The profit after tax attributable to other equity holders of £1 million (half-year to 30 June 2015: £nil) is offset in reserves by a tax
credit attributable to ordinary shareholders of £nil (half-year to 30 June 2015: £nil).
Page 6 of 45
CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Half-year Half-year
2016 2015
£ million £ million
Other comprehensive income:
Items that will not subsequently be reclassified to profit or loss:
Post-retirement defined benefit scheme remeasurements (note 9):
Remeasurements before taxation (267) (302)
Taxation 40 60
(227) (242)
Items that may subsequently be reclassified to profit or loss:
Movements in revaluation reserve in respect of available-for-sale financial assets:
Change in fair value 184 (16)
Income statement transfers in respect of disposals (574) (49)
Income statement transfers in respect of impairment 146 −
Taxation 152 −
(92) (65)
Movement in cash flow hedging reserve:
Effective portion of changes in fair value 2,968 (403)
Net income statement transfers (223) (508)
Taxation (735) 181
2,010 (730)
Currency translation differences (tax: nil) (20) 27
Other comprehensive income for the period, net of tax 1,671 (1,010)
Total comprehensive income for the period 2,421 76
Total comprehensive income attributable to ordinary shareholders 2,357 25

Total comprehensive income attributable to other equity holders 1 −
Total comprehensive income attributable to equity holders 2,358 25
Total comprehensive income attributable to non-controlling interests 63 51
Total comprehensive income for the period 2,421 76
Page 7 of 45
CONSOLIDATED BALANCE SHEET
At At
30 June 31 Dec
2016 2015
Assets
Cash and balances at central banks 73,399 58,417
Items in course of collection from banks 904 697
Trading and other financial assets at fair value through profit or loss 6 146,622 141,149
Derivative financial instruments 47,357 28,922
Loans and receivables:
Loans and advances to banks 25,958 25,117
Loans and advances to customers 7 453,033 455,175
Debt securities 3,996 4,191
Due from fellow Lloyds Banking Group undertakings 2,440 11,045
485,427 495,528
Available-for-sale financial assets 35,860 33,032
Held-to-maturity investments 21,500 19,808
Goodwill 2,016 2,016
Value of in-force business 4,749 4,596
Other intangible assets 1,719 1,838
Property, plant and equipment 12,940 12,979
Current tax recoverable 33 44
Deferred tax assets 3,341 4,018
Retirement benefit assets 9 1,022 901
Other assets 14,168 13,959
Total assets 851,057 817,904
Page 8 of 45
CONSOLIDATED BALANCE SHEET (continued)
At At
30 June 31 Dec
2016 2015
Equity and liabilities
Liabilities
Deposits from banks 23,162 16,925
Customer deposits 423,279 418,326
Due to fellow Lloyds Banking Group undertakings 2,108 5,926
Items in course of transmission to banks 780 717
Trading and other financial liabilities at fair value through profit or loss 52,094 51,863
Derivative financial instruments 42,860 26,347
Notes in circulation 1,090 1,112
Debt securities in issue 8 88,758 82,056
Liabilities arising from insurance contracts and participating
investment contracts 88,386 80,317
Liabilities arising from non-participating investment contracts 19,353 22,777
Other liabilities 32,071 30,197
Retirement benefit obligations 9 592 365
Current tax liabilities 474 298
Deferred tax liabilities 36 33
Other provisions 4,346 5,687
Subordinated liabilities 21,392 27,605
Total liabilities 800,781 770,551
Equity
Share capital 1,574 1,574
Share premium account 37,373 35,533
Other reserves 7,885 5,987
Retained profits (205) 3,868
Shareholders’ equity 46,627 46,962
Other equity instruments 10 3,217 −
Total equity excluding non-controlling interests 49,844 46,962
Non-controlling interests 432 391
Total equity 50,276 47,353
Total equity and liabilities 851,057 817,904
Page 9 of 45
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity shareholders

Share
capital Other Non-
and Other Retained equity controlling
premium reserves profits Total instruments interests Total
£ million £ million £ million £ million £ million £ million £ million
Balance at 1 January 2016 37,107 5,987 3,868 46,962 − 391 47,353

Comprehensive income
Profit for the period − − 687 687 − 63 750
Other comprehensive income
Post-retirement defined
benefit scheme
remeasurements, net of tax − − (227) (227) − − (227)
Movements in revaluation
reserve in respect of
available-for-sale financial
assets, net of tax − (92) − (92) − − (92)
Movements in cash flow
hedging reserve, net of tax − 2,010 − 2,010 − − 2,010
Currency translation
differences (tax: nil) − (20) − (20) − − (20)
Total other comprehensive
income − 1,898 (227) 1,671 − − 1,671
Total comprehensive
income − 1,898 460 2,358 − 63 2,421
Transactions with owners
Dividends − − (2,430) (2,430) − (2) (2,432)
Distributions on other equity
instruments, net of tax − − (1) (1) − − (1)
Redemption of preference
shares 1,840 − (1,840) − − − −
Capital contributions received − − 143 143 − − 143
Return of capital contributions − − (405) (405) − − (405)
Issue of Additional Tier 1
securities (note 10) − − − − 3,217 − 3,217
Changes in non-controlling
interests − − − − − (20) (20)
Total transactions with
owners 1,840 − (4,533) (2,693) 3,217 (22) 502
Balance at 30 June 2016 38,947 7,885 (205) 46,627 3,217 432 50,276
Page 10 of 45
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)

Share Non-
capital and Other Retained controlling
premium reserves profits Total interests Total
£ million £ million £ million £ million £ million £ million
Balance at 1 January 2015 37,107 6,842 4,828 48,777 1,213 49,990

Profit for the period – – 1,035 1,035 51 1,086
Post-retirement defined benefit
scheme remeasurements, net of tax – – (242) (242) – (242)
Movements in revaluation reserve in
respect of available-for-sale financial
assets, net of tax – (65) – (65) – (65)
Movements in cash flow hedging
reserve, net of tax – (730) – (730) – (730)
Currency translation differences (tax: nil) – 27 – 27 – 27
Total other comprehensive income – (768) (242) (1,010) – (1,010)
Total comprehensive income – (768) 793 25 51 76
Dividends – – (540) (540) (10) (550)
Capital contributions received – – 221 221 – 221
Return of capital contributions – – (431) (431) – (431)
Value of employee services – – 1 1 – 1
Adjustment on sale of TSB Banking
Group plc (TSB) – – – – (825) (825)
Other changes in non-controlling
interests – – – – 1 1
Total transactions with owners – – (749) (749) (834) (1,583)
Balance at 30 June 2015 37,107 6,074 4,872 48,053 430 48,483
Page 11 of 45
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)

Share Non-
capital and Other Retained controlling
premium reserves profits Total interests Total
£ million £ million £ million £ million £ million £ million
Balance at 1 July 2015 37,107 6,074 4,872 48,053 430 48,483

(Loss) profit for the period – – (372) (372) 45 (327)
Post-retirement defined benefit
scheme remeasurements, net of tax – – 27 27 – 27
Movements in revaluation reserve in
respect of available-for-sale financial
assets, net of tax – (304) – (304) − (304)
Movements in cash flow hedging
reserve, net of tax – 288 – 288 – 288
Currency translation differences,
net of tax – (71) – (71) – (71)
Total other comprehensive income – (87) 27 (60) − (60)
Total comprehensive income – (87) (345) (432) 45 (387)
Dividends – – (540) (540) (42) (582)
Capital contribution received – – 50 50 – 50
Return of capital contributions – – (169) (169) – (169)
Other changes in non-controlling
interests – – – – (42) (42)
Total transactions with owners – – (659) (659) (84) (743)
Balance as at 31 December 2015 37,107 5,987 3,868 46,962 391 47,353
Page 12 of 45
CONSOLIDATED CASH FLOW STATEMENT
Half-year Half-year
2016 2015
£ million £ million
Adjustments for:
Change in operating assets (10,042) 26,094
Change in operating liabilities 33,262 10
Non-cash and other items 7,202 (5,656)
Tax received 105 (30)
Net cash provided by (used in) operating activities 31,530 21,834
Cash flows from investing activities

Purchase of financial assets (3,441) (12,358)
Proceeds from sale and maturity of financial assets 2,729 14,838
Purchase of fixed assets (1,820) (1,564)
Proceeds from sale of fixed assets 909 526
Acquisition of businesses, net of cash acquired (6) −
Disposal of businesses, net of cash disposed 5 (4,282)
Net cash used in investing activities (1,624) (2,840)
Cash flows from financing activities

Dividends paid to ordinary shareholders (2,430) (540)
Distributions on other equity instruments (1) −
Dividends paid to non-controlling interests (2) (10)
Return of capital contribution (405) (431)
Issue of Additional Tier 1 securities 3,217 −
Interest paid on subordinated liabilities (1,262) (1,525)
Proceeds from issue of subordinated liabilities 2,753 −
Repayment of subordinated liabilities (12,407) (2,068)
Repayments to parent company (4,585) −
Change in non-controlling interests (5) 1
Net cash used in financing activities (15,127) (4,573)
Effects of exchange rate changes on cash and cash equivalents 15 (2)
Change in cash and cash equivalents 14,794 14,419
Cash and cash equivalents at beginning of period 71,953 65,147
Cash and cash equivalents at end of period 86,747 79,566
Cash and cash equivalents comprise cash and balances at central banks (excluding mandatory deposits) and amounts
due from banks with a maturity of less than three months. Included within cash and cash equivalents at 30 June 2016 is
£12,613 million (30 June 2015: £11,377 million; 31 December 2015: £13,545 million) held within the Group’s life funds,
which is not immediately available for use in the business.
Page 13 of 45
NOTES
Page
1 Accounting policies, presentation and estimates 15
2 Segmental analysis 16
3 Operating expenses 19
4 Impairment 19
5 Taxation 20
6 Trading and other financial assets at fair value through profit or loss 20
7 Loans and advances to customers 21
8 Debt securities in issue 21
9 Post-retirement defined benefit schemes 22
10 Other equity instruments 23
11 Provisions for liabilities and charges 23
12 Contingent liabilities and commitments 27
13 Fair values of financial assets and liabilities 30
14 Related party transactions 37
15 Dividends on ordinary shares 39
16 Future accounting developments 39
17 Ultimate parent undertaking 41
18 Other information 41
Page 14 of 45
1. Accounting policies, presentation and estimates
These condensed consolidated half-year financial statements as at and for the period to 30 June 2016 have been
prepared in accordance with the Disclosure Rules and Transparency Rules of the Financial Conduct Authority (FCA) and
with International Accounting Standard 34 (IAS 34), Interim Financial Reporting as adopted by the European Union and
comprise the results of Lloyds Bank plc (the Bank) together with its subsidiaries (the Group). They do not include all of
the information required for full annual financial statements and should be read in conjunction with the Group’s
consolidated financial statements as at and for the year ended 31 December 2015 which were prepared in accordance
with International Financial Reporting Standards (IFRS) as adopted by the European Union. Copies of the 2015 Annual
Report and Accounts are available on the Lloyds Banking Group’s website and are available upon request from Investor
Relations, Lloyds Banking Group plc, 25 Gresham Street, London EC2V 7HN.
The directors consider that it is appropriate to continue to adopt the going concern basis in preparing the condensed
consolidated half-year financial statements. In reaching this assessment, the directors have considered projections for
the Group’s capital and funding position,
The accounting policies are consistent with those applied by the Group in its 2015 Annual Report and Accounts.
Future accounting developments

Details of those IFRS pronouncements which will be relevant to the Group but which will not be effective at 31 December
2016 and which have not been applied in preparing these condensed consolidated half-year financial statements are set
out in note 16.
Critical accounting estimates and judgements

The preparation of the Group’s financial statements requires management to make judgements, estimates and
assumptions that impact the application of accounting policies and the reported amounts of assets, liabilities, income and
expenses. Due to the inherent uncertainty in making estimates, actual results reported in future periods may include
amounts which differ from those estimates. Estimates, judgements and assumptions are continually evaluated and are
based on historical experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances. There have been no significant changes in the basis upon which estimates have
been determined, compared to that applied at 31 December 2015.
2. Segmental analysis
The Group provides a wide range of banking and financial services in the UK and in certain locations overseas. The
Group Executive Committee (GEC) of the Lloyds Banking Group has been determined to be the chief operating decision
maker for the Group. Following the transfer of HBOS to the Group on 1 January 2010, all of the trading activities of the
Lloyds Banking Group are carried out within the Group and, as a result, the chief operating decision maker reviews the
Group’s performance by considering that of the Lloyds Banking Group.
The segmental results and comparatives are presented on an underlying basis, the basis reviewed by the chief operating
decision maker. The effects of the redemption of the Group’s Enhanced Capital Notes, asset sales, volatile items, the
insurance grossing adjustment, liability management, restructuring costs, TSB dual-running costs, the charge relating to
the TSB disposal, conduct provisions, the amortisation of purchased intangible assets and the unwind of acquisition-
related fair value adjustments are excluded in arriving at underlying profit.
The Group’s activities are organised into four financial reporting segments: Retail; Commercial Banking; Consumer
Finance and Insurance. The Group’s unsecured personal lending portfolio, previously part of Retail, is now managed by
Consumer Finance and elements of the Group’s business in the Channel Islands and the Isle of Man were transferred
from Retail to Commercial Banking; comparatives have been restated accordingly. There has been no other change to
the descriptions of these segments as provided in note 4 to the Group’s financial statements for the year ended
31 December 2015.
Page 15 of 45
2. Segmental analysis (continued)
There has been no change to the Group’s segmental accounting for internal segment services or derivatives entered into
by units for risk management purposes since 31 December 2015.
Other Total
income, income, Profit
Net net of net of (loss) Inter-
interest insurance insurance before External segment
Half-year to 30 June 2016 income claims claims tax revenue revenue
£m £m £m £m £m £m
Underlying basis
Retail 3,296 558 3,854 1,548 4,333 (479)
Commercial Banking 1,306 982 2,288 1,236 2,137 151
Consumer Finance 994 658 1,652 690 1,942 (290)
Insurance (80) 921 841 446 300 541
Other 266 (26) 240 241 163 77
Group 5,782 3,093 8,875 4,161 8,875 −
Reconciling items:
Insurance grossing adjustment (423) 519 96 −
1
Enhanced Capital Notes − (790) (790) (790)
Asset sales, volatile items and liability
2
management 20 624 644 500
Volatility relating to the insurance business − (372) (372) (372)
3
Restructuring costs − − − (307)
Other conduct provisions − (15) (15) (460)
Amortisation of purchased intangibles − − − (168)
Fair value unwind (154) 36 (118) (110)
Removal of impact of other entities in the
4
Lloyds Banking Group (243) (1,218) (1,461) (1,451)
Group – statutory 4,982 1,877 6,859 1,003
1
The loss relating to the ECNs was £790 million, representing the write-off of the embedded derivative and the premium paid on
redemption of the remaining notes.
2
Comprises (i) gains on disposals of assets which are not part of normal business operations (£335 million); (ii) the net effect of
banking volatility and net derivative valuation adjustments (gain of £19 million); and (iii) the results of liability management exercises
(gains of £146 million).
3
Principally comprises the severance costs related to phase II of the Simplification programme.
4
This reflects the inclusion in the results reviewed by the chief operating decision maker of the Bank’s fellow subsidiary undertakings
and its parent undertaking, Lloyds Banking Group plc.
Page 16 of 45
Other Total
income, income,
Net net of net of Inter-
interest insurance insurance Profit (loss) External segment
Half-year to 30 June 2015 income claims claims before tax revenue revenue
£m £m £m £m £m £m
Underlying basis
1
Retail 3,364 554 3,918 1,603 4,194 (276)
1
Commercial Banking 1,266 1,027 2,293 1,212 1,850 443
1
Consumer Finance 1,005 678 1,683 756 1,889 (206)
Insurance (73) 1,025 952 584 1,241 (289)
Other 153 (31) 122 228 (206) 328
Group 5,715 3,253 8,968 4,383 8,968 –
Reconciling items:
Insurance grossing adjustment (241) 287 46 –
TSB income 192 31 223 −
Enhanced Capital Notes − (390) (390) (390)
Asset sales, volatile items and
2
liability management 26 6 32 35
Volatility relating to the insurance
business – 18 18 18
Simplification costs – – – (32)
TSB build and dual running costs – – – (85)
Charge relating to the TSB
disposal – 5 5 (660)
Payment protection insurance
provision – – – (1,400)
Other conduct provisions – – – (435)
Amortisation of purchased
intangibles – – – (164)
Fair value unwind (200) 105 (95) (77)
Removal of impact of other
entities in the Lloyds Banking
3
Group (277) 490 213 223
Group – statutory 5,215 3,805 9,020 1,416
1
Restated, see page 15.
2
Comprises (i) losses on disposals of assets which are not part of normal business operations (£52 million); (ii) the net effect of
banking volatility and net derivative valuation adjustments (gains of £93 million); and (iii) the results of liability management exercises
(losses of £6 million).
3
This reflects the inclusion in the results reviewed by the chief operating decision maker of the Bank’s fellow subsidiary undertakings
and its parent undertaking, Lloyds Banking Group plc.
Page 17 of 45
At At
30 June 31 Dec
1
Segment external assets 2016 2015
£m £m
Retail 302,851 307,887

Commercial Banking 201,259 178,838
Consumer Finance 39,176 36,501
Insurance 147,718 143,217
Other 157,228 140,245
Total Group 848,232 806,688
Lloyds Bank Group statutory 851,057 817,904

Impact of other entities in the Lloyds Banking Group (2,825) (11,216)
Segment external assets as above 848,232 806,688
Segment customer deposits

Retail 271,293 273,719
Other 1,474 1,527
Total Group and Lloyds Bank Group statutory 423,279 418,326
Segment external liabilities

Retail 276,001 278,933
Insurance 141,318 137,233
Other 118,644 101,974
Total Group 799,294 759,708
Lloyds Bank Group statutory 800,781 770,551

Impact of other entities in the Lloyds Banking Group (1,487) (10,843)
Segment external liabilities as above 799,294 759,708
1
Restated, see page 15.
Page 18 of 45
3. Operating expenses
Half-year Half-year
2016 2015
£m £m
Administrative expenses:
Staff costs 2,462 2,410
Premises and equipment 353 360
Other expenses 1,068 1,830
3,883 4,600
Depreciation and amortisation 1,166 1,008
Total operating expenses, excluding regulatory provisions 5,049 5,608
Regulatory provisions:
Payment protection insurance provision (note 11) − 1,400
1
Other regulatory provisions (note 11) 445 435
445 1,835
Total operating expenses 5,494 7,443
1
In addition, regulatory provisions of £15 million (half-year to 30 June 2015: £nil) have been charged against income.
4. Impairment
Half-year Half-year
2016 2015
£m £m
Impairment losses on loans and receivables:
Loans and advances to customers 229 181
Debt securities classified as loans and receivables − (2)
Impairment losses on loans and receivables 229 179
Impairment of available-for-sale financial assets 146 −
Other credit risk provisions (13) (18)
Total impairment charged to the income statement 362 161
Page 19 of 45
5. Taxation
A reconciliation of the tax charge that would result from applying the standard UK corporation tax rate to the profit before
tax to the actual tax charge is given below:
Half-year Half-year
2016 2015
£m £m
Tax charge thereon at UK corporation tax rate of 20 per cent (2015: 20.25 per cent) (201) (287)
Factors affecting tax (charge) credit:
Impact of bank surcharge (59) −
Differences in UK corporation tax rates 2 7
Disallowed items (122) (86)
Non-taxable items 95 49
Overseas tax rate differences (6) (8)
Gains exempted or covered by capital losses 8 47
Policyholder tax (34) (39)
Tax losses not previously recognised 49 −
Adjustments in respect of previous periods 10 (14)
Effect of results in joint ventures and associates − −
Other items 5 1
Tax charge (253) (330)
In accordance with IAS 34, the Group’s income tax expense for the half-year to 30 June 2016 is based on the best
estimate of the weighted-average annual income tax rate expected for the full financial year. The tax effects of one-off
items are not included in the weighted-average annual income tax rate, but are recognised in the relevant period.
The Finance (No. 2) Act 2015 introduced an additional surcharge of 8 per cent on banking profits from 1 January 2016.
On 16 March 2016, the Government announced a reduction in the corporation tax rate applicable from 1 April 2020 to
17 per cent and a further restriction to the amount of banks’ profits that can be offset by carried forward losses for the
purposes of calculating tax liabilities from 50 per cent to 25 per cent. The proposed reduction in the rate of corporation
tax and the further bank loss relief restriction are expected to be enacted, and accounted for, in the second half of 2016.
6. Trading and other financial assets at fair value through profit or loss
At At
30 June 31 Dec
2016 2015
£m £m
Trading assets 45,034 42,670
Other financial assets at fair value through profit or loss:

Treasury and other bills 64 74
Debt securities 39,101 37,330
Equity shares 62,423 61,075
101,588 98,479
Total trading and other financial assets at fair value through profit or loss 146,622 141,149
Included in the above is £95,611 million (31 December 2015: £91,096 million) of assets relating to the insurance
businesses.
Page 20 of 45
7. Loans and advances to customers
At At
30 June 31 Dec
2016 2015
£m £m
Agriculture, forestry and fishing 7,047 6,924
Energy and water supply 3,129 3,247
Manufacturing 6,394 5,953
Construction 5,736 4,952
Transport, distribution and hotels 13,272 13,526
Postal and communications 2,581 2,563
Property companies 32,213 32,228
Financial, business and other services 41,959 43,072
Personal:
Mortgages 309,338 312,877
Other 20,443 20,579
Lease financing 2,792 2,751
Hire purchase 10,862 9,536
455,766 458,208
Allowance for impairment losses on loans and advances to customers (2,733) (3,033)
Total loans and advances to customers 453,033 455,175
Loans and advances to customers include advances securitised under the Group's securitisation and covered bond
programmes.
8. Debt securities in issue
At At
30 June 31 Dec
2016 2015
£m £m
Medium-term notes issued 31,074 29,329
Covered bonds 31,873 27,200
Certificates of deposit 11,592 11,101
Securitisation notes 7,091 7,763
Commercial paper 7,128 6,663
Total debt securities in issue 88,758 82,056
The notes issued by the Group’s securitisation and covered bond programmes are held by external parties and by
subsidiaries of the Group.
Securitisation programmes
At 30 June 2016, external parties held £7,091 million (31 December 2015: £7,763 million) and the Group’s subsidiaries
held £27,804 million (31 December 2015: £29,303 million) of total securitisation notes in issue of £34,895 million
(31 December 2015: £37,066 million). The notes are secured on loans and advances to customers and debt securities
classified as loans and receivables amounting to £56,336 million (31 December 2015: £58,090 million), the majority of
which have been sold by subsidiary companies to bankruptcy remote structured entities. The structured entities are
consolidated fully and all of these loans are retained on the Group's balance sheet.
Page 21 of 45
8. Debt securities in issue (continued)
Covered bond programmes

At 30 June 2016, external parties held £31,873 million (31 December 2015: £27,200 million) and the Group’s subsidiaries
held £3,601 million (31 December 2015: £4,197 million) of total covered bonds in issue of £35,474 million (31 December
2015: £31,397 million). The bonds are secured on certain loans and advances to customers that have been assigned to
bankruptcy remote limited liability partnerships. These loans are retained on the Group's balance sheet.
Cash deposits of £8,783 million (31 December 2015: £8,383 million) which support the debt securities issued by the
structured entities, the term advances related to covered bonds and other legal obligations are held by the Group.
9. Post-retirement defined benefit schemes
The Group’s post-retirement defined benefit scheme obligations are comprised as follows:
At At
30 June 31 Dec
2016 2015
£m £m
Defined benefit pension schemes:
Fair value of scheme assets 43,752 37,639
Present value of funded obligations (43,117) (36,903)
Net pension scheme asset 635 736
Other post-retirement schemes (205) (200)
Net retirement benefit asset 430 536
Recognised on the balance sheet as:

Retirement benefit assets 1,022 901
Retirement benefit obligations (592) (365)
Net retirement benefit asset 430 536
The movement in the Group’s net post-retirement defined benefit scheme liability during the period was as follows:
£m
At 1 January 2016 536

Income statement charge (136)
Employer contributions 297
Remeasurement (267)
At 30 June 2016 430
The principal assumptions used in the valuations of the defined benefit pension scheme were as follows:
At At
30 June 31 Dec
2016 2015
% %
Discount rate 2.80 3.87
Rate of inflation:
Retail Prices Index 2.73 2.99
Consumer Price Index 1.73 1.99
Rate of salary increases 0.00 0.00
Weighted-average rate of increase for pensions in payment 2.44 2.58
Page 22 of 45
10. Other equity instruments
In June 2016 the Bank issued £3,217 million of Sterling, Dollar and Euro Additional Tier 1 (AT1) securities to Lloyds
Banking Group plc. The AT1 securities are fixed rate resetting or floating rate Perpetual Subordinated Permanent
Write-Down Securities with no fixed maturity or redemption date.
The principal terms of the AT1 securities are described below:

The securities rank behind the claims against the Bank of unsubordinated creditors on a Winding-Up.
The fixed rate reset securities bear a fixed rate of interest until the first call date. After the initial call date, in the event
that they are not redeemed, the fixed rate reset AT1 securities will bear interest at rates fixed periodically in advance.
The floating rate AT1 securities will be reset quarterly both prior to and following the first call date.
Interest on the securities will be due and payable only at the sole discretion of the Bank and the Bank may at any
time elect to cancel any Interest Payment (or any part thereof) which would otherwise be payable on any Interest
Payment Date. There are also certain restrictions on the payment of interest as specified in the terms.
The securities are undated and are repayable, at the option of the Bank, in whole at the first call date, or at any
Interest Payment date thereafter. In addition, the AT1 securities are repayable, at the option of the Bank, in whole for
certain regulatory or tax reasons. Any repayments require the prior consent of the Prudential Regulation Authority.
The securities will be subject to a Permanent Write Down should the fully Loaded Common Equity Tier 1 ratio of the
Bank fall below 7.0 per cent.
11. Provisions for liabilities and charges
Payment protection insurance

The Group has made provisions totalling £16,025 million since 2011 against the costs of paying redress to customers in
respect of past sales of PPI policies, including the related administrative expenses.
No additional charge has been made in the first half of 2016.
As at 30 June 2016, £1,950 million or 12 per cent of the total provision remained unutilised relating predominantly to
reactive complaints and associated administration costs.
Total cash payments were £1,508 million in the first half of 2016 which included remediation. The re-review of previously
handled cases is now complete.
On 26 November 2015, the Financial Conduct Authority (FCA) published a consultation paper (CP15/39: Rules and
guidance on payment protection insurance complaints) proposing (i) the introduction of a deadline by which consumers
would need to make their PPI complaints including an FCA led communications campaign, and (ii) rules and guidance
about how firms should handle PPI complaints in light of the Supreme Court’s decision in Plevin v Paragon Personal
Finance Limited [2014] UKSC 61 (Plevin). The Group awaits the FCA’s final decision and should the time bar be longer
than the proposed two years or the FCA’s final decision be significantly delayed, then the Group may need to reassess
its provision.
In 2015, the Group increased the total expected reactive complaints to 4.7 million (including complaints falling under the
Plevin rules and guidance) in light of the FCA proposals, equivalent to approximately 10,000 complaints per week
through to a time bar of mid-2018. There is no change in the total expected reactive complaints, with approximately
1.1 million still to be received.
Page 23 of 45
11. Provisions for liabilities and charges (continued)
The volume of complaints during the first half of 2016 was marginally lower than the prior year, at around 8,500 per
week; this is broadly in line with the Group’s expectations.
Monthly complaint trends could vary significantly, given they are likely to be impacted by a number of factors including
seasonality, the potential impact of the FCA’s proposed communication campaign as well as changes in the regulation of
Claims Management Companies (CMCs).
The provision includes an estimate to cover redress that would be payable under the FCA’s proposed new rules and
guidance in light of Plevin.
Average monthly
reactive
(including Plevin) Quarter-on-quarter Year-on-year
Quarter complaint volume* % %
Q1 2014 42,259 13% (31%)
Q2 2014 39,426 (7%) (27%)
Q3 2014 40,624 3% (18%)
Q4 2014 35,910 (12%) (4%)
Q1 2015 37,791 5% (11%)
Q2 2015 36,957 (2%) (6%)
Q3 2015 37,586 2% (7%)
Q4 2015 33,998 (10%) (5%)
Q1 2016 37,293 10% (1%)
Q2 2016 37,222 (0%) 1%
*Net complaints – i.e. exclude claims where no PPI policy was held
Sensitivities
The Group estimates that it has sold approximately 16 million policies since 2000. These include policies that were not
mis-sold. Since the commencement of the PPI redress programme in 2011 the Group estimates that it has contacted,
settled or provided for 49 per cent of the policies sold since 2000, covering both customer-initiated complaints and actual
and PBR mailings undertaken by the Group.
The total amount provided for PPI represents the Group’s best estimate of the likely future cost. However a number of
risks and uncertainties remain in particular with respect to future volumes. The cost could differ materially from the
Group’s estimates and the assumptions underpinning them, and could result in a further provision being required. There
is significant uncertainty around the impact of the proposed FCA media campaign, CMC and customer activity and the
deadline for PPI complaints may be later than originally expected.
Page 24 of 45
Key metrics and sensitivities are highlighted in the table below:
To date
1
Sensitivities unless noted Future Sensitivity
2
Customer initiated complaints since origination (m) 3.6 1.1 0.1 = £180m
3
Average uphold rate per policy 74% 89% 1% = £35m
Average redress per upheld policy4 £1,700 £1,250 £100 = £145m
Administrative expenses (£m) 3,005 450 1 case = £400
1
All sensitivities exclude claims where no PPI policy was held.
2
Sensitivity includes complaint handling costs. Future volume includes complaints falling into the Plevin rules and guidance. As a
result, the sensitivity per 100,000 complaints includes cases where the average redress would be lower than historical trends.
3
The percentage of complaints where the Group finds in favour of the customer excluding PBR. The 74 per cent uphold rate per policy
is based on the six months to 30 June 2016. Future uphold rate and sensitivities are influenced by a proportion of complaints falling
under the Plevin rules and guidance which would otherwise be defended. As a result, the future uphold rate is higher than historical
trends.
4
The amount that is paid in redress in relation to a policy found to have been mis-sold, comprising, where applicable, the refund of
premium, compound interest charged and interest at 8 per cent per annum. Actuals are based on the six months to 30 June 2016.
Future average redress is influenced by expected compensation payments for complaints falling under the Plevin rules and guidance,
which have lower average redress than non Plevin cases.
Other regulatory provisions

Customer claims in relation to insurance branch business in Germany
The Group continues to receive claims in Germany from customers relating to policies issued by Clerical Medical
Investment Group Limited (subsequently renamed Scottish Widows Limited). The Group recognised provisions totalling
£545 million during the period to 31 December 2015.
The German industry-wide issue regarding notification of contractual ‘cooling off’ periods has continued to lead to an
increasing number of claims in 2016. Accordingly a provision increase of £50 million was recognised in the half-year to
30 June 2016 giving a total provision of £595 million; the remaining unutilised provision as at 30 June 2016 is
£143 million (31 December 2015: £124 million).
The validity of the claims facing the Group depends upon the facts and circumstances in respect of each claim. As a
result the ultimate financial effect, which could be significantly different from the current provision, will be known only
once all relevant claims have been resolved.
Interest rate hedging products

In June 2012, a number of banks, including the Lloyds Banking Group, reached agreement with the FSA (now FCA) to
carry out a review of sales made since 1 December 2001 of interest rate hedging products (IRHP) to certain small and
medium-sized businesses. As at 30 June 2016 the Lloyds Banking Group had identified 1,739 sales of IRHPs to
customers within scope of the agreement with the FCA which have opted in and are being reviewed and, where
appropriate, redressed. The Lloyds Banking Group agreed that it would provide redress to any in-scope customers
where appropriate. The Lloyds Banking Group continues to review the remaining cases within the scope of the
agreement with the FCA and has met all of the regulator’s requirements to date.
By the end of 2015, the Group had charged a total of £720 million in respect of redress and related administration costs
for in-scope customers. An additional £10 million has been provided in the half-year to 30 June 2016 raising the total
amount provided to £730 million. As at 30 June 2016, the Group has utilised £701 million (31 December 2015: £652
million), with £29 million (31 December 2015: £68 million) of the provision remaining.
Page 25 of 45
Arrears handling related activities

Following a review of the Lloyds Banking Group’s secured and unsecured arrears handling activities, the Lloyds Banking
Group has put in place a number of actions to further improve its handling of customers in these areas. As a result, the
Group has provided an additional £215 million in the first half of 2016 (bringing the total provision to £351 million), for the
costs of identifying and rectifying certain arrears management fees and activities. As at 30 June 2016, the unutilised
provision was £346 million (31 December 2015: £136 million).
Other legal actions and regulatory matters

In the course of its business, the Group is engaged in discussions with the PRA, FCA and other UK and overseas
regulators and other governmental authorities on a range of matters. The Lloyds Banking Group also receives complaints
and claims from customers in connection with its past conduct and, where significant, provisions are held against the
costs expected to be incurred as a result of the conclusions reached. In the half-year to 30 June 2016, the Group
charged an additional £119 million in respect of matters within the Retail division and £66 million in respect of the
Commercial Banking, Consumer Finance and Insurance divisions.
At 30 June 2016, provisions for other legal actions and regulatory matters of £627 million (31 December 2015:
£677 million) remained unutilised, principally in relation to the sale of bancassurance products and packaged bank
accounts and other Retail provisions.
12. Contingent liabilities and commitments
Interchange fees
With respect to multi-lateral interchange fees (MIFs), the Group is not directly involved in the on-going investigations and
litigation (as described below) which involve card schemes such as Visa and MasterCard. However, the Group is a
member of Visa and MasterCard and other card schemes.
− The European Commission continues to pursue certain competition investigations into MasterCard and Visa probing,
amongst other things, MIFs paid in respect of cards issued outside the EEA;
− Litigation continues in the English Courts against both Visa and MasterCard. This litigation has been brought by
several retailers who are seeking damages for allegedly ‘overpaid’ MIFs. From publicly available information, it is
understood these damages claims are running to different timescales with respect to the litigation process. It is also
possible that new claims may be issued. Judgment in the Sainsbury’s v MasterCard case was handed down on
14 July 2016. Sainsbury’s is entitled to recover approximately £69 million (plus interest) in damages from
MasterCard. It is unclear whether MasterCard will seek to appeal the judgment. However, the judgment considers a
number of important matters that are likely to influence the conduct of ongoing (and future) litigation in relation to both
Visa and MasterCard.
− Any ultimate impact on the Group of the above investigations and the litigation against Visa and MasterCard remains
uncertain at this time.
Visa Inc completed its acquisition of Visa Europe on 21 June 2016. The Group’s share of the sale proceeds comprised
cash consideration of approximately £330 million (of which approximately £300 million was received on completion of the
sale and £30 million is deferred for three years) and preferred stock, which the Group measures at fair value. The
preferred stock is convertible into Class A Common Stock of Visa Inc or its equivalent upon the occurrence of certain
events. As part of this transaction, the Group and certain other UK banks also entered into a Loss Sharing Agreement
(LSA) with Visa Inc, which clarifies the allocation of liabilities between the parties should the litigation referred to above
result in Visa Inc being liable for damages payable by Visa Europe. Visa Inc only has recourse to the LSA once more
than €1 billion of losses relating to UK domestic MIFs have arisen or once the total value of the preferred stock issued by
Visa to certain UK banks on completion has been reduced to zero. This would be effected by a downward adjustment to
the conversion ratio. In determining the fair value of the preferred stock, the Group includes adjustments for both the
stock’s illiquidity and the potential for changes in the conversion ratio. The maximum amount of liability to which the
Group may be subject under the LSA is capped at the cash consideration which was received by the Group at
completion. Visa Inc may also have recourse to a general indemnity, currently in place under Visa Europe’s Operating
Regulations, for damages claims concerning inter or intra-regional MIF setting activities.
Page 26 of 45
12. Contingent liabilities and commitments (continued)
LIBOR and other trading rates

In July 2014, the Lloyds Banking Group announced that it had reached settlements totalling £217 million (at 30 June
2014 exchange rates) to resolve with UK and US federal authorities legacy issues regarding the manipulation several
years ago of Lloyds Banking Group companies’ submissions to the British Bankers’ Association (BBA) London Interbank
Offered Rate (LIBOR) and Sterling Repo Rate. The Lloyds Banking Group continues to cooperate with various other
government and regulatory authorities, including the Serious Fraud Office, the Swiss Competition Commission, and a
number of US State Attorneys General, in conjunction with their investigations into submissions made by panel members
to the bodies that set LIBOR and various other interbank offered rates.
Certain Lloyds Banking Group companies, together with other panel banks, have also been named as defendants in
private lawsuits, including purported class action suits, in the US in connection with their roles as panel banks
contributing to the setting of US Dollar, Japanese Yen and Sterling LIBOR. The lawsuits, which contain broadly similar
allegations, allege violations of the Sherman Antitrust Act, the Racketeer Influenced and Corrupt Organizations Act and
the Commodity Exchange Act, as well as various state statutes and common law doctrines. Certain of the plaintiffs’
claims, including those asserted under US anti-trust laws, have been dismissed by the US Federal Court for Southern
District of New York (the District Court). The New York Federal Court of Appeal overturned the District Court’s dismissal
of plaintiffs’ antitrust claims in May 2016. The anti-trust claims have now been revived. An application to dismiss these
claims for lack of personal jurisdiction will be made following the positive November 2015 decision which dismissed OTC
and exchange-based plaintiffs’ claims against the Group for lack of personal jurisdiction.
Certain Lloyds Banking Group companies are also named as defendants in UK based claims raising LIBOR manipulation
allegations in connection with interest rate hedging products.
It is currently not possible to predict the scope and ultimate outcome on the Lloyds Banking Group of the various
outstanding regulatory investigations not encompassed by the settlements, any private lawsuits or any related challenges
to the interpretation or validity of any of the Lloyds Banking Group’s contractual arrangements, including their timing and
scale.
Financial Services Compensation Scheme

The Financial Services Compensation Scheme (FSCS) is the UK’s independent statutory compensation fund of last
resort for customers of authorised financial services firms and pays compensation if a firm is unable or likely to be unable
to pay claims against it. The FSCS is funded by levies on the authorised financial services industry. Each deposit-taking
institution contributes towards the FSCS levies in proportion to their share of total protected deposits on 31 December of
the year preceding the scheme year, which runs from 1 April to 31 March.
Following the default of a number of deposit takers in 2008, the FSCS borrowed funds from HM Treasury to meet the
compensation costs for customers of those firms. At 31 March 2016, the end of the latest FSCS scheme year for which it
has published accounts, the principal balance outstanding on these loans was £15,655 million (31 March 2015:
£15,797 million). Although it is anticipated that the substantial majority of this loan will be repaid from funds the FSCS
receives from asset sales, surplus cash flow or other recoveries in relation to the assets of the firms that defaulted, any
shortfall will be funded by deposit-taking participants of the FSCS. The amount of future levies payable by the Group
depends on a number of factors including the amounts recovered by the FSCS from asset sales, the Group’s
participation in the deposit-taking market at 31 December, the level of protected deposits and the population of deposit-
taking participants.
Page 27 of 45
Tax authorities
The Group provides for potential tax liabilities that may arise on the basis of the amounts expected to be paid to tax
authorities including open matters where Her Majesty's Revenue and Customs (HMRC) adopt a different interpretation
and application of tax law. The Lloyds Banking Group has an open matter in relation to a claim for group relief of losses
incurred in its former Irish banking subsidiary, which ceased trading on 31 December 2010. In 2013 HMRC informed the
Lloyds Banking Group that their interpretation of the UK rules, permitting the offset of such losses, denies the claim; if
HMRC’s position is found to be correct management estimate that this would result in an increase in current tax liabilities
of approximately £600 million and a reduction in the Lloyds Banking Group’s deferred tax asset of approximately
£400 million (overall impact on the Lloyds Bank Group of £950 million). The Lloyds Banking Group does not agree with
HMRC's position and, having taken appropriate advice, does not consider that this is a case where additional tax will
ultimately fall due. There are a number of other open matters on which the Group is in discussion with HMRC; none of
these is expected to have a material impact on the financial position of the Group.
Residential mortgage repossessions

In August 2014, the Northern Ireland High Court handed down judgment in favour of the borrowers in relation to three
residential mortgage test cases, concerning certain aspects of the Lloyds Banking Group’s practice with respect to the
recalculation of contractual monthly instalments of customers in arrears. The FCA is actively engaged with the industry in
relation to these considerations. The Lloyds Banking Group will respond as appropriate to this and any investigations,
proceedings, or regulatory action that may in due course be instigated as a result of these issues.
The Financial Conduct Authority’s announcement on time-barring for PPI complaints and Plevin v Paragon
Personal Finance Limited
On 26 November 2015 the FCA issued a Consultation Paper on the introduction of a deadline by which consumers
would need to make their PPI complaints or else lose their right to have them assessed by firms or the Financial
Ombudsman Service, and proposed rules and guidance concerning the handling of PPI complaints in light of the
Supreme Court’s decision in Plevin v Paragon Personal Finance Limited [2014] UKSC 61 (Plevin). The next step is for
the FCA to issue a policy statement. The Financial Ombudsman Service is also considering the implications of Plevin for
PPI complaints. The implications of potential time-barring and the Plevin decision in terms of the scope of any court
proceedings or regulatory action remain uncertain.
Mortgage arrears handling activities

On 26 May 2016, the Lloyds Banking Group was informed that an enforcement team at the FCA had commenced an
investigation in connection with the Lloyds Banking Group’s mortgage arrears handling activities. This investigation is
ongoing and it is currently not possible to make a reliable assessment of the liability, if any, that may result from the
investigation.
Other legal actions and regulatory matters

In addition, during the ordinary course of business the Group is subject to other complaints and threatened or actual legal
proceedings (including class or group action claims) brought by or on behalf of current or former employees, customers,
investors or other third parties, as well as legal and regulatory reviews, challenges, investigations and enforcement
actions, both in the UK and overseas. All such material matters are periodically reassessed, with the assistance of
external professional advisers where appropriate, to determine the likelihood of the Group incurring a liability. In those
instances where it is concluded that it is more likely than not that a payment will be made, a provision is established to
management's best estimate of the amount required at the relevant balance sheet date. In some cases it will not be
possible to form a view, for example because the facts are unclear or because further time is needed properly to assess
the merits of the case, and no provisions are held in relation to such matters. However the Group does not currently
expect the final outcome of any such case to have a material adverse effect on its financial position, operations or cash
flows.
Page 28 of 45
Contingent liabilities and commitments arising from the banking business

At At
30 June 31 Dec
2016 2015
£m £m
Contingent liabilities
Acceptances and endorsements 130 52
Other:
Other items serving as direct credit substitutes 516 458
Performance bonds and other transaction-related contingencies 2,007 2,123
2,523 2,581
Total contingent liabilities 2,653 2,633
Commitments
Documentary credits and other short-term trade-related transactions − −
Forward asset purchases and forward deposits placed 772 421
Undrawn formal standby facilities, credit lines and other commitments to lend:
Less than 1 year original maturity:
Mortgage offers made 10,490 9,995
Other commitments 63,295 57,809
73,785 67,804
1 year or over original maturity 39,553 44,691
Total commitments 114,110 112,916
Of the amounts shown above in respect of undrawn formal standby facilities, credit lines and other commitments to lend,
£62,358 million (31 December 2015: £63,086 million) was irrevocable.
Page 29 of 45
13. Fair values of financial assets and liabilities
The valuations of financial instruments have been classified into three levels according to the quality and reliability of
information used to determine those fair values. Note 49 to the Group’s 2015 financial statements describes the
definitions of the three levels in the fair value hierarchy.
Valuation control framework

Key elements of the valuation control framework, which covers processes for all levels in the fair value hierarchy
including level 3 portfolios, include model validation (incorporating pre-trade and post-trade testing), product
implementation review and independent price verification. Formal committees meet quarterly to discuss and approve
valuations in more judgemental areas.
Transfers into and out of level 3 portfolios

Transfers out of level 3 portfolios arise when inputs that could have a significant impact on the instrument’s valuation
become market observable; conversely, transfers into the portfolios arise when consistent sources of data cease to be
available.
Valuation methodology
For level 2 and level 3 portfolios, there is no significant change to what was disclosed in the Group’s 2015 Annual Report
and Accounts in respect of the valuation methodology (techniques and inputs) applied to such portfolios.
The table below summarises the carrying values of financial assets and liabilities presented on the Group’s balance
sheet. The fair values presented in the table are at a specific date and may be significantly different from the amounts
which will actually be paid or received on the maturity or settlement date.
30 June 2016 31 December 2015

Carrying Fair Carrying Fair
value value value value
£m £m £m £m
Financial assets
Trading and other financial assets at fair value
through profit or loss 146,622 146,622 141,149 141,149
Derivative financial instruments 47,357 47,357 28,922 28,922
Loans and receivables:
Loans and advances to banks 25,958 25,979 25,117 25,130
Loans and advances to customers 453,033 453,520 455,175 454,797
Debt securities 3,996 3,882 4,191 4,107
Due from fellow Lloyds Banking Group
undertakings 2,440 2,440 11,045 11,045
485,427 485,821 495,528 495,079
Available-for-sale financial instruments 35,860 35,860 33,032 33,032
Held-to-maturity- investments 21,500 22,804 19,808 19,851
Financial liabilities
Deposits from banks 23,162 23,177 16,925 16,934
Customer deposits 423,279 423,824 418,326 418,512
Due to fellow Lloyds Banking Group undertakings 2,108 2,108 5,926 5,926
Trading and other financial liabilities at fair value
through profit or loss 52,094 52,094 51,863 51,863
Derivative financial instruments 42,860 42,860 26,347 26,347
Debt securities in issue 88,758 91,402 82,056 85,093
Liabilities arising from non-participating investment
contracts 19,353 19,353 22,777 22,777
Subordinated liabilities 21,392 22,597 27,605 29,996
Page 30 of 45
13. Fair values of financial assets and liabilities (continued)
The carrying amount of the following financial instruments is a reasonable approximation of fair value: cash and balances
at central banks, items in the course of collection from banks, items in course of transmission to banks and notes in
circulation.
The Group manages valuation adjustments for its derivative exposures on a net basis; the Group determines their fair
values on the basis of their net exposures. In all other cases, fair values of financial assets and liabilities measured at fair
value are determined on the basis of their gross exposures.
The following tables provide an analysis of the financial assets and liabilities of the Group that are carried at fair value in
the Group’s consolidated balance sheet, grouped into levels 1 to 3 based on the degree to which the fair value is
observable.
Financial assets
Level 1 Level 2 Level 3 Total
£m £m £m £m
At 30 June 2016
through profit or loss:
Loans and advances to customers − 33,625 − 33,625
Loans and advances to banks − 2,387 − 2,387
Debt securities 22,797 23,057 2,263 48,117
Equity shares 60,887 34 1,508 62,429
Treasury and other bills 64 − − 64
Total trading and other financial assets at fair
value through profit or loss 83,748 59,103 3,771 146,622
Available-for-sale financial assets:
Debt securities 27,210 7,406 50 34,666
Equity shares 451 14 729 1,194
Total available-for-sale financial assets 27,661 7,420 779 35,860
Derivative financial instruments 63 45,749 1,545 47,357
Total financial assets carried at fair value 111,472 112,272 6,095 229,839
At 31 December 2015
Loans and advances to customers − 30,109 − 30,109
Loans and advances to banks − 3,065 − 3,065
Debt securities 20,919 22,513 3,389 46,821
Equity shares 59,061 292 1,727 61,080
Treasury and other bills 74 − − 74
Total trading and other financial assets at fair
value through profit or loss 80,054 55,979 5,116 141,149
Available-for-sale financial assets:
Debt securities 25,266 6,518 55 31,839
Equity shares 43 521 629 1,193
Total available-for-sale financial assets 25,309 7,039 684 33,032
Derivative financial instruments 43 27,955 924 28,922
Total financial assets carried at fair value 105,406 90,973 6,724 203,103
Page 31 of 45
Financial liabilities
Level 1 Level 2 Level 3 Total
£m £m £m £m
At 30 June 2016
Liabilities held at fair value through profit or loss − 9,443 2 9,445
Trading liabilities 2,687 39,962 − 42,649
Total trading and other financial liabilities at fair
value through profit or loss 2,687 49,405 2 52,094
Derivative financial instruments 97 41,433 1,330 42,860
Total financial liabilities carried at fair value 2,784 90,838 1,332 94,954
At 31 December 2015
Liabilities held at fair value through profit or loss − 7,878 1 7,879
Trading liabilities 4,153 39,831 − 43,984
Total trading and other financial liabilities at fair
value through profit or loss 4,153 47,709 1 51,863
Derivative financial instruments 41 25,583 723 26,347
Total financial liabilities carried at fair value 4,194 73,292 724 78,210
Financial guarantees are recognised at fair value on initial recognition and are classified as level 3; the balance is not
material.
Page 32 of 45
Movements in level 3 portfolio

The tables below analyse movements in the level 3 financial assets portfolio.
Trading
and other Total
financial Available- financial
assets at fair for-sale assets
value through financial Derivative carried at
profit or loss assets assets fair value
£m £m £m £m
At 1 January 2016 5,116 684 924 6,724

Exchange and other adjustments 6 1 61 68
Gains recognised in the income statement within
other income 317 − 547 864
Gains recognised in other comprehensive income
within the revaluation reserve in respect of
available-for-sale financial assets − 248 − 248
Purchases 335 204 6 545
Sales (2,031) (494) (35) (2,560)
Transfers into the level 3 portfolio 187 136 45 368
Transfers out of the level 3 portfolio (159) − (3) (162)
At 30 June 2016 3,771 779 1,545 6,095
Gains recognised in the income statement
within other income relating to those assets
held at 30 June 2016 373 − 635 1,008
Trading
and other Total
financial Available- financial
assets at fair for-sale assets
value through financial Derivative carried at
profit or loss assets assets fair value
£m £m £m £m
At 1 January 2015 5,104 270 2,126 7,500

Exchange and other adjustments (1) − (45) (46)
Losses recognised in the income statement within
other income (61) − (143) (204)
Gains recognised in other comprehensive income
within the revaluation reserve in respect of
available-for-sale financial assets − 1 − 1
Purchases 785 38 182 1,005
Sales (649) (6) (105) (760)
Transfers into the level 3 portfolio 20 − − 20
Transfers out of the level 3 portfolio (48) − (37) (85)
At 30 June 2015 5,150 303 1,978 7,431
Losses recognised in the income statement within
other income relating to those assets held at
30 June 2015 (39) – (143) (182)
Page 33 of 45
The tables below analyse movements in the level 3 financial liabilities portfolio.
Trading and
other financial Total
liabilities at financial
fair value liabilities
through Derivative carried at
profit or loss liabilities fair value
£m £m £m
At 1 January 2016 1 723 724

Exchange and other adjustments − 43 43
Losses recognised in the income statement within other income 1 606 607
Additions − 10 10
Redemptions − (52) (52)
At 30 June 2016 2 1,330 1,332
Losses recognised in the income statement within other
income relating to those liabilities held at 30 June 2016 1 592 593
Trading and
other financial Total
liabilities at financial
fair value liabilities
through Derivative carried at
profit or loss liabilities fair value
£m £m £m
At 1 January 2015 5 1,456 1,461

Exchange and other adjustments − (33) (33)
Gains recognised in the income statement within other income − (100) (100)
Additions − 124 124
Redemptions (4) (102) (106)
Transfers out of the level 3 portfolio − (12) (12)
At 30 June 2015 1 1,333 1,334
Gains recognised in the income statement within other income
relating to those liabilities held at 30 June 2015 − (100) (100)
Page 34 of 45
The tables below set out the effects of reasonably possible alternative assumptions for categories of level 3 financial
assets and financial liabilities which have an aggregated carrying value greater than £500 million.
At 30 June 2016
Effect of reasonably
possible alternative
1
assumptions
Significant
Valuation unobservable Carrying Favourable Unfavourable
2
technique(s) inputs Range value changes changes
£m £m £m
Trading and other financial assets at fair value through profit or loss:
Equity and venture Market approach Earnings multiple
capital investments 0.3/16.6 2,280 73 (80)
Unlisted equities Underlying n/a n/a
and debt asset/net asset
securities, value (incl.
3
property property prices)
partnerships in the
life funds 1,310 − (21)
Other 181
3,771
Available for sale financial assets 779
Derivative financial assets:

Interest rate Option pricing Interest rate
derivatives model volatility 2%/115% 1,545 17 (24)
1,545
Financial assets carried at fair value 6,095
Trading and other financial liabilities at fair value through profit or loss 2
Derivative financial liabilities:

derivatives model volatility 2%/115% 1,330
1,330
Financial liabilities carried at fair value 1,332
1
Where the exposure to an unobservable input is managed on a net basis, only the net impact is shown in the table.
2
The range represents the highest and lowest inputs used in the level 3 valuations.
3
Underlying asset/net asset values represent fair value.
Page 35 of 45
At 31 December 2015
Effect of reasonably possible

1
alternative assumptions
Significant
Valuation unobservable Carrying Favourable Unfavourable
2
technique(s) inputs Range value changes changes
£m £m £m
Trading and other financial assets at fair value through profit or loss:
Equity and venture Market approach Earnings multiple
capital investments 1/17.5 2,279 72 (72)
Unlisted equities Underlying n/a n/a
and debt asset/net asset
securities, value (incl.
3
property property prices)
partnerships in the
life funds 2,538 − (48)
Other 299
5,116
Available for sale financial assets 684
Derivative financial assets:

derivatives model volatility 1%/63% 924 20 (19)
924
Financial assets carried at fair value 6,724
Trading and other financial liabilities at fair value through profit or loss 1
Derivative financial liabilities:

derivatives model volatility 1%/63% 723
723
Financial liabilities carried at fair value 724
1
Where the exposure to an unobservable input is managed on a net basis, only the net impact is shown in the table.
2
The range represents the highest and lowest inputs used in the level 3 valuations.
3
Underlying asset/net asset values represent fair value.
Unobservable inputs
Significant unobservable inputs affecting the valuation of debt securities, unlisted equity investments and derivatives are
unchanged from those described in the Group’s 2015 financial statements.
Reasonably possible alternative assumptions

Valuation techniques applied to many of the Group’s level 3 instruments often involve the use of two or more inputs
whose relationship is interdependent. The calculation of the effect of reasonably possible alternative assumptions
included in the table above reflects such relationships and are unchanged from those described in the Group’s 2015
financial statements.
Page 36 of 45
14. Related party transactions
Balances and transactions with fellow Lloyds Banking Group undertakings

The Bank and its subsidiaries have balances due to and from the Bank’s parent company, Lloyds Banking Group plc,
and fellow Group undertakings. These are included on the balance sheet as follows:
At At
30 June 31 Dec
2016 2015
£m £m
Assets
Loans and receivables: Due from fellow Lloyds Banking Group undertakings 2,440 11,045
Trading and other financial assets at fair value through profit or loss 37 9
Liabilities
Due to fellow Lloyds Banking Group undertakings 2,108 5,926
Derivative financial instruments 484 46
Subordinated liabilities 3,288 10,890
During the half-year to 30 June 2016 the Group earned £59 million (half-year to 30 June 2015: £66 million) of interest
income and incurred £443 million (half-year to 30 June 2015: £561 million) of interest expense on balances and
transactions with Lloyds Banking Group plc and fellow Group undertakings.
UK government
In January 2009, the UK government through HM Treasury became a related party of the Lloyds Banking Group plc, the
Bank’s parent company, following its subscription for ordinary shares issued under a placing and open offer. As at
30 June 2016, HM Treasury held an interest of 9.1 per cent in the Lloyds Banking Group plc’s ordinary share capital, with
its interest having fallen below 20 per cent on 11 May 2015. As a consequence of HM Treasury no longer being
considered to have a significant influence, it ceased to be a related party of Lloyds Banking Group plc and therefore of
the Group, for IAS 24 purposes at that date.
In accordance with IAS 24, UK government-controlled entities were related parties of the Group until 11 May 2015. The
Group also regarded the Bank of England and entities controlled by the UK government, including The Royal Bank of
Scotland Group plc (RBS), NRAM plc and Bradford & Bingley plc, as related parties.
The Lloyds Banking Group has participated in a number of schemes operated by the UK government and central banks
and made available to eligible banks and building societies.
National Loan Guarantee Scheme

The Lloyds Banking Group participates in the UK government’s National Loan Guarantee Scheme, providing eligible UK
businesses with discounted funding based on the Lloyds Banking Group’s existing lending criteria. Eligible businesses
who have taken up the funding benefit from a 1 per cent discount on their funding rate for a pre-agreed period of time.
Funding for Lending

The Funding for Lending Scheme represents a further source of cost effective secured term funding available to the
Lloyds Banking Group. The initiative supports a broad range of UK based customers, focussing primarily on providing
small businesses with cheaper finance to invest and grow. In November 2015, the Bank of England announced that the
deadline for banks to draw down their borrowing allowance would be extended for a further two years until 31 January
2018. At 30 June 2016, the Lloyds Banking Group had drawn down £33.1 billion (31 December 2015: £32.1 billion) under
the Scheme.
Page 37 of 45
14. Related party transactions (continued)
Enterprise Finance Guarantee Scheme

The Lloyds Banking Group participates in the Enterprise Finance Guarantee Scheme which supports viable businesses
with access to lending where they would otherwise be refused a loan due to a lack of lending security. The Department
for Business, Innovation and Skills provides the lender with a guarantee of up to 75 per cent of the capital of each loan
subject to the eligibility of the customer. As at 30 June 2016, the Lloyds Banking Group had offered 6,647 loans to
customers, worth over £568 million. Under the most recent renewal of the terms of the scheme, Lloyds Bank plc and
Bank of Scotland plc, on behalf of the Lloyds Banking Group, contracted with The Secretary of State for Business,
Innovation and Skills.
Help to Buy
The Help to Buy Scheme is a scheme promoted by the UK government and is aimed to encourage participating lenders
to make mortgage loans available to customers who require higher loan-to-value mortgages. Halifax and Lloyds are
currently participating in the Scheme whereby customers borrow between 90 per cent and 95 per cent of the purchase
price. In return for the payment of a commercial fee, HM Treasury has agreed to provide a guarantee to the lender to
cover a proportion of any loss made by the lender. £3,383 million of outstanding loans at 30 June 2016 (31 December
2015: £3,133 million) had been advanced under this scheme.
Business Growth Fund

The Lloyds Banking Group has invested £222 million (31 December 2015: £176 million) in the Business Growth Fund
(under which an agreement was entered into with RBS amongst others) and, as at 30 June 2016, carries the investment
at a fair value of £216 million (31 December 2015: £170 million).
Big Society Capital

The Lloyds Banking Group has invested £38 million (31 December 2015: £36 million) in the Big Society Capital Fund
under which an agreement was entered into with RBS amongst others and, as at 30 June 2016, carries the investment at
a fair value of £37 million (31 December 2015: £33 million).
Housing Growth Partnership

The Lloyds Banking Group has invested £11 million (31 December 2015: £4 million) and has committed to invest up to a
further £39 million into the Housing Growth Partnership under which an agreement was entered into with the Homes and
Communities Agency.
Central bank facilities

In the ordinary course of business, the Lloyds Banking Group may from time to time access market-wide facilities provided
by central banks.
Other government-related entities

Other than the transactions referred to above, there were no significant transactions with the UK government and UK
government-controlled entities (including UK government-controlled banks) during the year that were not made in the
ordinary course of business or that were unusual in their nature or conditions.
Other related party transactions

Other related party transactions for the half-year to 30 June 2016 are similar in nature to those for the year ended
31 December 2015.
Page 38 of 45
15. Dividends on ordinary shares
The Bank paid a dividend of £2,430 million on 12 May 2016; the Bank paid dividends of £540 million on 14 May 2015
and a further £540 million on 23 September 2015.
16. Future accounting developments
The following pronouncements are not applicable for the year ending 31 December 2016 and have not been applied in
preparing these financial statements. Save as disclosed below, the full impact of these accounting changes is being
assessed by the Group. As at 27 July 2016, these pronouncements are awaiting EU endorsement.
IFRS 9 Financial Instruments
IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement.
Classification and Measurement

IFRS 9 requires financial assets to be classified into one of three measurement categories, fair value through profit or
loss, fair value through other comprehensive income and amortised cost, on the basis of the objectives of the entity’s
business model for managing its financial assets and the contractual cash flow characteristics of the instruments.
The Group has undertaken an assessment to determine the potential impact of changes in classification and
measurement of financial assets. The adoption of IFRS 9 is unlikely to result in a significant change to current asset
measurement bases, however, the final impact will be dependent on the facts and circumstances that exist on 1 January
2018.
IFRS 9 retains most of the existing requirements for financial liabilities. However, for financial liabilities designated at fair
value through profit or loss, gains or losses attributable to changes in own credit risk may be presented in other
comprehensive income. This change is expected to be immaterial to the Group.
Impairment
IFRS 9 also replaces the existing ‘incurred loss’ impairment approach with an expected credit loss approach, resulting in
earlier recognition of credit losses. The IFRS 9 impairment model has three stages. Entities are required to recognise a
12 month expected loss allowance on initial recognition (stage 1) and a lifetime expected loss allowance when there has
been a significant increase in credit risk (stage 2). The assessment of whether a significant increase in credit risk has
occurred is a key aspect of the IFRS 9 methodology and involves quantitative and qualitative measures and therefore
requires considerable management judgement. Stage 3 requires objective evidence that an asset is credit-impaired,
which is similar to the guidance on incurred losses in IAS 39. Loan commitments and financial guarantees not measured
at fair value through profit or loss are also in scope.
IFRS 9 requires the use of more forward looking information including reasonable and supportable forecasts of future
economic conditions. The need to consider multiple economic scenarios and how they could impact the loss allowance is
a subjective feature of the IFRS 9 impairment model. The final methodology for multiple economic scenarios is still under
development, however, economic scenarios are likely to consider the Group’s five year operating plan and stress testing
scenarios. Appropriate governance and oversight will be established around the process. It is important that the linkage
between expected credit losses, economic scenarios, and stress testing is understood and transparent.
These changes may result in a material increase in the Group’s balance sheet provisions for credit losses and may
therefore negatively impact the Group's regulatory capital position. The extent of any increase in provisions will depend
upon, amongst other things, the composition of the Group’s lending portfolios and forecast economic conditions at the
date of implementation. The requirement to transfer assets between stages and to incorporate forward looking data into
the expected credit loss calculation, including multiple economic scenarios, is likely to result in impairment charges being
more volatile when compared to the current IAS 39 impairment model.
Page 39 of 45
16. Future accounting developments (continued)
Hedge Accounting
The hedge accounting requirements of IFRS 9 are more closely aligned with risk management practices and follow a
more principle-based approach than IAS 39, however, there is an option to maintain the existing IAS 39 hedge
accounting rules until the IASB completes its project on macro hedging. The Group currently expects to continue
applying IAS 39 hedge accounting in accordance with this accounting policy choice.
Transition
IFRS 9 is effective for annual periods beginning on or after 1 January 2018 with no requirement to restate prior periods. If
comparative periods are not restated, at the date of initial application, any difference between the carrying amount of
financial assets and the change in loss allowance shall be recognised in opening retained earnings.
IFRS 9 implementation programme

The Group has an established IFRS 9 programme to ensure a high quality implementation in compliance with the
standard and regulatory guidance. The programme involves Finance and Risk functions across the Group with Divisional
and Group steering committees providing oversight. The key responsibilities of the programme include defining IFRS 9
methodology and accounting policy, development of expected loss models, identifying data and system requirements,
and establishing an appropriate operating model and governance framework.
Impairment methodologies have been documented and, in addition to IFRS 9, assessed against the expectations of the
Basel Committee on Banking Supervision paper ‘Guidance on Credit Risk and Accounting for Expected Credit Losses’,
and the Global Public Policy Committee paper ‘The implementation of IFRS 9 impairment requirements by banks’.
The build phase of the programme is underway for the core credit risk models. Systems, processes and model testing
will take place in 2017 to embed the changes, enhance business readiness and help improve the understanding of the
new impairment models. The programme is progressing in line with its delivery plans.
For all material portfolios, IFRS 9 expected credit loss calculation will leverage the systems, data and models used to
calculate regulatory expected credit losses. IFRS 9 expected credit loss models will use the three key input parameters
for the computation of expected loss: probability of default; loss given default; and exposure at default.
However, given the conservatism inherent in the regulatory expected losses calculation, a number of adjustments to
these components must be made to ensure compliance with IFRS 9 requirements.
IFRS 9 models differ from the regulatory models in a number of conceptual ways, for example stage 2 assets under
IFRS 9, for which there has been a significant increase in credit risk, carry a lifetime expected loss amount; whereas
regulatory models generate 12 month expected losses for non-defaulted loans, even though they may have experienced
a significant increase in credit risk. In addition, different assets are in scope for each reporting base. As a result, the size
of the regulatory expected losses should not be taken as a proxy for the size of the loss allowance under IFRS 9.
IFRS 15 Revenue from Contracts with Customers

IFRS 15 replaces IAS 18 Revenue and IAS 11 Construction Contracts. Financial instruments, leases and insurance
contracts are out of scope and so this standard is not currently expected to have a significant impact on the Group’s
profitability.
IFRS 15 is effective for annual periods beginning on or after 1 January 2018.
IFRS 16 Leases
On 13 January 2016 the IASB issued IFRS 16 to replace IAS 17 Leases. IFRS 16 requires lessees to recognise a right of
use asset and a liability for future payments arising from a lease contract. Lessor accounting requirements remain
aligned to the current approach under IAS 17.
Page 40 of 45
16. Future accounting developments (continued)
IFRS 16 is effective for annual periods beginning on or after 1 January 2019.
Amendments to IAS 7 Statement of Cash Flows, IAS 12 Income Taxes and IFRS 2 Share-based Payment
During 2016, the IASB has issued amendments to IAS 7 Statement of Cash Flows which require additional disclosure
about an entity’s financing activities, IAS 12 Income Taxes which clarify when a deferred tax asset should be recognised
for unrealised losses and IFRS 2 Share-based Payment which provide guidance on accounting for cash and certain
net-settled schemes. These revised requirements, which are effective for annual periods beginning on or after 1 January
2017 for IAS 7 and IAS 12 and 1 January 2018 for IFRS 2, are not expected to have a significant impact on the Group.
17. Ultimate parent undertaking
The Bank's ultimate parent undertaking and controlling party is Lloyds Banking Group plc which is incorporated in
Scotland. Lloyds Banking Group plc has published consolidated accounts for the year to 31 December 2015 and copies
may be obtained from Investor Relations, Lloyds Banking Group, 25 Gresham Street, London EC2V 7HN and available
for download from www.lloydsbankinggroup.com.
18. Other information
The financial information in these condensed consolidated half-year financial statements does not constitute statutory
accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended
31 December 2015 have been delivered to the Registrar of Companies. The auditors’ report on those accounts was
unqualified, did not include an emphasis of matter paragraph and did not include a statement under section 498 of the
Companies Act 2006.
Page 41 of 45
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The directors listed below (being all the directors of Lloyds Bank plc) confirm that to the best of their knowledge these
condensed consolidated half-year financial statements have been prepared in accordance with International Accounting
Standard 34, Interim Financial Reporting, as adopted by the European Union, and that the half-year management report
herein includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:
an indication of important events that have occurred during the six months ended 30 June 2016 and their impact on
the condensed consolidated half-year financial statements, and a description of the principal risks and uncertainties
for the remaining six months of the financial year; and
material related party transactions in the six months ended 30 June 2016 and any material changes in the related
party transactions described in the last annual report.
Signed on behalf of the board by
António Horta-Osório
Group Chief Executive
27 July 2016
Lloyds Bank plc board of directors:

António Horta-Osório (Group Chief Executive)
George Culmer (Chief Financial Officer)
Juan Colombás (Chief Risk Officer)
Lord Blackwell (Chairman)
Anita Frew (Deputy Chairman)
Alan Dickinson
Simon Henry
Nicholas Luff
Deborah McWhinney
Nicholas Prettejohn
Stuart Sinclair
Anthony Watson CBE
Sara Weller CBE
Page 42 of 45
INDEPENDENT REVIEW REPORT TO LLOYDS BANK PLC
Report on the condensed consolidated half-year financial statements
Our conclusion
We have reviewed Lloyds Bank plc's condensed consolidated half-year financial statements (the "interim financial
statements") in the 2016 half-year management report of Lloyds Bank plc for the six month period ended 30 June 2016.
Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are
not prepared, in all material respects, in accordance with International Accounting Standard 34, ‘Interim Financial
Reporting’, as adopted by the European Union and the Disclosure Rules and Transparency Rules of the United
Kingdom’s Financial Conduct Authority.
What we have reviewed

The interim financial statements comprise:
the consolidated balance sheet as at 30 June 2016;

the consolidated income statement for the six months ended 30 June 2016
the consolidated statement of comprehensive income for the six months ended 30 June 2016;
the consolidated cash flow statement for the six months ended 30 June 2016;
the consolidated statement of changes in equity for the six months ended 30 June 2016; and
the explanatory notes to the interim financial statements.
The interim financial statements included in the 2016 half-year management report have been prepared in accordance
with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union and the
Disclosure Rules and Transparency Rules of the United Kingdom’s Financial Conduct Authority.
As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors

The 2016 half-year management report, including the interim financial statements, is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the 2016 half-year management report in
accordance with the Disclosure Rules and Transparency Rules of the United Kingdom’s Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial statements in the 2016 half-year management report
based on our review. This report, including the conclusion, has been prepared for and only for the company for the
purpose of complying with the Disclosure Rules and Transparency Rules of the United Kingdom’s Financial Conduct
Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly
agreed by our prior consent in writing.
Page 43 of 45
INDEPENDENT REVIEW REPORT TO LLOYDS BANK PLC (continued)
What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410,
‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’ issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing
(UK and Ireland) and, consequently, does not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the 2016 half-year management report and considered whether it
contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
27 July 2016
Notes:
(a) The maintenance and integrity of the Lloyds Banking Group plc website is the responsibility of the directors; the work carried out
by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any
changes that may have occurred to the interim financial statements since they were initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Page 44 of 45
CONTACTS
For further information please contact:
INVESTORS AND ANALYSTS

Douglas Radcliffe
Group Investor Relations Director
020 7356 1571
[email protected]
Mike Butters
Director of Investor Relations
020 7356 1187
[email protected]
Andrew Downey
Director of Investor Relations
020 7356 2334
[email protected]
CORPORATE AFFAIRS
Ed Petter
Group Media Relations Director
020 8936 5655
[email protected]
Matt Smith
Head of Corporate Media
020 7356 3522
[email protected]
Copies of this news release may be obtained from Investor Relations, Lloyds Banking Group plc, 25 Gresham Street,
London EC2V 7HN. The full news release can also be found on the Group’s website – www.lloydsbankinggroup.com.
Registered office: Lloyds Banking Group plc, The Mound, Edinburgh, EH1 1YZ
Registered in Scotland no. 95000
Page 45 of 45

Lloyds Bank PLC: Half-Year Management Report For The Half-Year To 30 June 2016

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Lloyds Bank plc

Half-Year Management Report

For the half-year to 30 June 2016

Member of the Lloyds Banking Group

FINANCIAL REVIEW (continued)

FINANCIAL REVIEW (continued)

Total capital resources 48,425 49,652

Risk-weighted assets 223,411 224,020

Common equity tier 1 capital ratio 14.5% 15.2%

FINANCIAL REVIEW (continued)

Capital ratios (continued)

PRINCIPAL RISKS AND UNCERTAINTIES

CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)

CONSOLIDATED INCOME STATEMENT

Profit attributable to ordinary shareholders 686 1,035

CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Total comprehensive income attributable to ordinary shareholders 2,357 25

CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

CONSOLIDATED BALANCE SHEET

CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

CONSOLIDATED BALANCE SHEET (continued)

CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to equity shareholders

Balance at 1 January 2016 37,107 5,987 3,868 46,962 − 391 47,353

CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)

Attributable to equity shareholders

Balance at 1 January 2015 37,107 6,842 4,828 48,777 1,213 49,990

CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)

Attributable to equity shareholders

Balance at 1 July 2015 37,107 6,074 4,872 48,053 430 48,483

CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

CONSOLIDATED CASH FLOW STATEMENT

Cash flows from investing activities

Cash flows from financing activities

1. Accounting policies, presentation and estimates

Future accounting developments

Critical accounting estimates and judgements

2. Segmental analysis (continued)

2. Segmental analysis (continued)

2. Segmental analysis (continued)

Retail 302,851 307,887

Lloyds Bank Group statutory 851,057 817,904

Segment customer deposits

Segment external liabilities

Lloyds Bank Group statutory 800,781 770,551

Other financial assets at fair value through profit or loss:

7. Loans and advances to customers

8. Debt securities in issue

8. Debt securities in issue (continued)

Covered bond programmes

9. Post-retirement defined benefit schemes

Recognised on the balance sheet as:

At 1 January 2016 536

10. Other equity instruments