The ratings reflect Lloyds’ leading retail and commercial banking franchise in the UK. The group pursues a multi-brand and multi-channel strategy, maintaining the largest domestic branch network as well as being the largest domestic digital bank. In addition, the group is the only integrated UK banking and insurance provider, with ambitions to further grow in the areas of retirement and investment and general insurance and protection.

Over the last several years, management has substantially reduced the risks (asset quality, funding) stemming from the acquisition of HBOS at the peak of the crisis. Scope expects management to remain committed to the group’s lower risk profile. Further, the impact of legacy issues, primarily PPI and conduct matters, should continue to decline, narrowing the gap between underlying and statutory profitability.

Due to Lloyds’ domestic focus, Scope regards cautiously the still unknown consequences of the UK’s exit from the EU. However, considering the group’s strong business franchise and sound financial profile, Scope sees Lloyds being solidly positioned against potential headwinds.

On 19 July 2018, Scope took rating actions on the ratings of various Lloyds Banking Group entities to reflect organisational and legal changes made to implement UK ring-fencing requirements. These actions included the first-time assignment of an Issuer Rating of A to Lloyds Bank Corporate Markets PLC (LBCM), the group’s future non-ring-fenced bank. The one-notch differential between LBCM’s Issuer Rating and its parent’s is based on the former’s potentially less central role in the group’s strategy and on its inherently more volatile business mix.

Download the full report on Lloyds here.