July 02 -
Summary analysis -- Lloyds TSB Bank PLC --------------------------- 02-Jul-2012
CREDIT RATING: A/Stable/A-1 Country: United Kingdom
Primary SIC: National
Mult. CUSIP6: 53943R
Mult. CUSIP6: 53943S
Mult. CUSIP6: 53944X
Mult. CUSIP6: 539473
Mult. CUSIP6: 53947M
Mult. CUSIP6: 53947N
Mult. CUSIP6: 53947P
Mult. CUSIP6: 53947Q
Mult. CUSIP6: 5394E6
Mult. CUSIP6: 5394E7
Mult. CUSIP6: 5394E8
Mult. CUSIP6: G55356
Credit Rating History:
Local currency Foreign currency
29-Nov-2011 A/A-1 A/A-1
06-Mar-2009 A+/A-1 A+/A-1
14-Jan-2009 AA-/A-1+ AA-/A-1+
Major Rating Factors
-- Strong position in U.K. retail banking and leading positions in U.K. commercial and corporate banking, and insurance.
-- Strong management focus to rapidly improve the bank's funding and liquidity profile, and accelerate the reduction in its typically riskier, non-core assets.
-- Government support, which includes a 39.2% common equity stake.
-- Credit performance remains worse than most peers.
-- Below-average risk-adjusted capital, by our measures.
-- Underlying income growth prospects appear weak, and a number of nonrecurring items continue to weigh on capital generation.
Standard & Poor's Rating Services' outlook on U.K.-based Lloyds TSB Bank PLC is stable. We assume that Lloyds will make further strides to improve its funding and liquidity profile, over and above the beneficial impact of the ongoing reduction in its non-core assets. It also reflects the likelihood that we will revise our assessment of either its risk position or capital and earnings to "adequate" over the next 12-18 months, which under our criteria, will permit the removal of the transitional notch in the counterparty credit rating. If the revision does not occur, or if we think that it is unlikely to occur within the stated timeframe, then we may lower the ratings by one notch. Our ratings assume that:
-- Lloyds will improve its capital ratio to close to the 7.0% mark as measured under Standard & Poor's risk-adjusted (RAC) framework by end-2013 and could further improve thereafter.
-- Lloyds will generate moderately supportive statutory profitability in 2012, and will improve profitability considerably in 2013, both on an underlying and statutory basis.
-- While credit costs will remain a drag on earnings in 2012, they will progressively ease, and that new areas of relative weakness will not emerge.
-- Risks arising from Lloyds' EC-mandated retail business disposal are not material to Lloyds' business stability, capitalization, or funding.
We consider a positive rating action to be unlikely while Lloyds continues its transition.