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Lloyds Banking Group Plc Management Discusses Q2 2011 Results - Earnings Call Transcript

Our main scenario continues therefore to point to a slow recovery in line with consensus, with continued deleveraging and high inflation for some time to come. On the other hand, as we discussed 5 weeks ago, there are some additional scenarios of additional macroeconomic risks such as the double-dip confrontation [ph] from a sovereign debt crisis, where the probability of occurrence has recently increased. Against this backdrop, our decision to accelerate our noncore disposals and strengthen our funding position in the first half of 2011 was key. Reducing the risk in the balance sheets and adapting our business model to be more resilient to any future volatility in the markets will continue to benefit the financial strength and competitive position of the group.

The business performance in the half year has been resilient, even the economic and regulatory uncertainty and the significant challenges facing the business. These results are in line with our expectations. Tim will provide more detail on the financial performance of the group, with substantially greater disclosure on both core and noncore businesses. We are reporting an underlying profit before tax, which excludes liability management and ECN effects of GBP 1.3 billion in the first half at 36% on the prior year. This is a resilient performance based on falling impairments and slightly lower costs, substantially offsetting the fall in underlying revenues.

In our core businesses, the group generating an underlying profit before tax of GBP 2.9 billion in the first half, and Tim will add more detail on this. At the same time, we have continued to reduce the group's risk profile and we have made good progress in improving the loan-to-deposit ratio from 154% to 144%, reflecting the balance sheet reduction and strong deposit gathering programs during the half year, whilst maintaining our robust capital position. We've continued to make strong progress with integration and this is now in its final stages. The benefits of these in our property procurement and IT-related programs will continue to flow through and drive us towards the overall annual synergy targets of GBP 2 billion by the end of this year. From an IT perspective, we have already rolled out the large counter system to Halifax and Bank of Scotland branches and migrated HBOS ATMs to the Lloyds platform. This puts us in a good position for the final migration of Halifax and Bank of Scotland customer accounts and data to the scale [ph] Lloyds platform. This is an immense exercise involving the migration of approximately 30 million customer accounts but this platform foundation -- this platform would be the foundation for the group's transformation plans.

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