Lloyds Bank plc

Half-Year Management Report

For the half-year to 30 June 2015

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 the 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 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 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 exchange rates, stock markets and currencies; the ability to
access sufficient sources of capital, liquidity and funding when required; changes to Lloyds Bank plc’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 potential for one or more countries to exit the Eurozone or European Union (EU)
(including the UK as a result of a referendum on its EU membership) and the impact of any sovereign credit rating
downgrade or other sovereign financial issues; technological changes and risks to cyber security; pandemic, natural and
other disasters, adverse weather and similar contingencies outside the Lloyds Banking Group’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 further Scottish devolution; changes to regulatory capital or liquidity requirements and similar
contingencies outside the Lloyds Banking Group’s control; the policies, decisions and actions of governmental or
regulatory authorities in the UK, the EU, the US or elsewhere including the implementation of key legislation and
regulation; the ability to attract and retain senior management and other employees; requirements or limitations imposed
on Lloyds Banking Group plc and the Lloyds Bank Group 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 Lloyds Banking Group plc’s latest Annual Report on Form 20-F filed 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.

CONTENTS

Page
Financial review 1
Principal risks and uncertainties 4
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 41
Independent review report 42
Contacts 44
LLOYDS BANK PLC 2015 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 £1,416 million for the half-year to 30 June 2015, a decrease of £402 million, or
22 per cent, compared to the profit before tax of £1,818 million for the half-year to 30 June 2014.

On 20 March 2015 the Group announced that it had agreed to sell a 9.99 per cent interest in TSB Banking Group plc
(TSB) to Banco de Sabadell S.A. (Sabadell) and that it had entered into an irrevocable undertaking to accept Sabadell’s
recommended cash offer in respect of its remaining 40.01 per cent interest in TSB. The sale of the 9.99 per cent interest
completed on 24 March 2015, reducing the Group’s holding in TSB to 40.01 per cent; this sale led to a loss of control and
the deconsolidation of TSB. On 30 June 2015 the Group announced that Sabadell’s offer had become unconditional in all
respects and the proceeds were received on 10 July 2015. In the half-year to 30 June 2015 the Group incurred a charge
of £660 million following the deconsolidation of TSB; this comprised a gain of £5 million on disposal of the 9.99 per cent
interest and the revaluation of the Group’s remaining 40.01 per cent interest, offset by a provision of £665 million in
relation to the Group’s obligations under the Transitional Service Agreement and in respect of IT provision.

Total income, net of insurance claims, increased by £364 million, or 4 per cent, to £9,020 million for the half-year to
30 June 2015 from £8,656 million in the half-year to 30 June 2014.

Net interest income increased by £138 million, or 3 per cent, to £5,215 million. This increase was despite an increase of
£57 million in the charge within net interest income for amounts allocated to unit holders in Open-Ended Investment
Companies, from £300 million in the half-year to 30 June 2014 to £357 million in the half-year to 30 June 2015.
Excluding this charge, net interest income was £195 million, or 4 per cent, higher at £5,572 million. The net interest
margin increased, reflecting the disposal of lower margin assets which were outside of the Group’s risk appetite at the
end of 2014 as well as the continued benefits of reduced funding and liability costs, partly offset by lower asset prices.

Other income decreased by £3,114 million, or 31 per cent, to £6,803 million, largely due to an £889 million decrease in
net trading income, reflecting lower income from the insurance businesses due to the impact of market conditions on the
policyholder assets within those businesses, relative to the half-year to 30 June 2014; together with a £2,078 million
reduction in insurance premium income. The market-driven movements in insurance trading income, together with the
movement in insurance premium income, were largely offset in the Group’s income statement by a £3,340 million, or
53 per cent, decrease in the insurance claims expense, to £2,998 million, and the impact on net interest income of
amounts allocated to unit holders in Open-Ended Investment Companies. Net trading income within the Group’s banking
operations was a profit of £888 million compared to a profit of £363 million in the half-year to 30 June 2014. Net fee and
commission income was £243 million, or 20 per cent, lower at £991 million, principally as a result of the sale of Scottish
Widows Investment Partnership, which completed on 31 March 2014. Insurance premium income was £2,078 million
lower at £1,414 million; regular income of £3,373 million in the half-year to 30 June 2015 was partly 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. This charge is offset by an equivalent credit within the insurance claims expense. Other operating income was
£96 million higher at £923 million as a result of increased income from the movement in value of in-force insurance
business.

Page 1 of 44
LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

FINANCIAL REVIEW (continued)

Total operating expenses increased by £1,246 million, or 20 per cent, to £7,443 million; although the half-year to 30 June
2015 includes a charge of £665 million relating to the disposal of TSB, there was a pension curtailment credit of
£822 million in the half-year to 30 June 2014 and the half-year to 30 June 2015 includes a charge in respect of regulatory
provisions of £1,835 million compared to a charge of £1,100 million in the same period in 2014. Excluding these items,
costs were £976 million, or 16 per cent, lower at £4,943 million. This decrease reflects a £711 million reduction in
Simplification and TSB build and dual-running costs, together with the impact of business disposals and the ongoing
benefits of the Group’s efficiency programmes.

The Group increased the provision for expected PPI costs by a further £1,400 million in first half of 2015. This brings the
amount provided to £13,425 million, of which £2,237 million remains unutilised. The unutilised provision comprises
elements to cover the Past Business Review (PBR), remediation activity and future reactive complaints including
associated administration costs. The volume of reactive PPI complaints in the first half of 2015 fell by 8 per cent
compared with the first half of 2014 but were marginally higher than the fourth quarter 2014 run-rate and above
expectations. Reactive complaints continue to be driven by Claims Management Company (CMC) activity.

The Group also made a further charge of £435 million in respect of other conduct issues. This comprises £318 million of
provisions related to potential claims and remediation in respect of legacy product sales and a fine of £117 million
following the agreement reached with the Financial Conduct Authority with regard to aspects of the Group’s PPI
complaint handling process during the period March 2012 to May 2013.

Impairment losses decreased by £480 million, or 75 per cent, to £161 million; the improvement reflects lower levels of
new impairment as a result of effective risk management, improving economic conditions and the continued low interest
rate environment.

The tax charge for the half-year to 30 June 2015 was £330 million (half-year to 30 June 2014: £384 million), representing
an effective tax rate of 23.3 per cent; this compares to an effective tax rate of 21.1 per cent in the first half of 2014, which
reflected tax exempt gains on the sales of businesses, including Scottish Widows Investment Partnership.

On the balance sheet, total assets were £31,764 million, or 4 per cent, lower at £834,684 million at 30 June 2015,
compared to £866,448 million at 31 December 2014. Loans and advances to customers decreased by £30,277 million, or
6 per cent, to £452,427 million, principally reflecting the deconsolidation of TSB which led to a decrease of
£21,643 million. Customer deposits decreased by £30,472 million, to £416,595 million, principally reflecting the
deconsolidation of TSB which led to a decrease of £24,625 million. Shareholders’ equity decreased by £724 million, or
1 per cent, from £48,777 million at 31 December 2014 to £48,053 million at 30 June 2015 as the retained profit for the
period of £1,035 million was more than offset by the impact of the dividend paid to shareholders of £540 million together
with a negative post-retirement defined benefit scheme remeasurement and other reserve movements. Non-controlling
interests were £783 million or 65 per cent, lower at £430 million, as a result of the deconsolidation of TSB.

The Group's common equity tier 1 capital ratio increased to 15.9 per cent at the end of June 2015, after allowing for the
interim dividend, from 15.1 per cent at the end of December 2014, driven predominantly by a reduction in risk-weighted
assets.

Page 2 of 44
LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

FINANCIAL REVIEW (continued)

Capital ratios
At At
30 June 31 Dec
Capital resources 2015 2014
£m £m
Common equity tier 1
Shareholders’ equity per balance sheet 48,053 48,777
Adjustment to retained earnings for foreseeable dividends (540) (540)
Deconsolidation of insurance entities (1,262) (824)
Adjustment for own credit 115 158
Cash flow hedging reserve (627) (1,357)
Other adjustments 248 364
45,987 46,578
Less: deductions from common equity tier 1
Goodwill and other intangible assets (1,779) (1,875)
Excess of expected losses over impairment provisions and value adjustments (394) (565)
Removal of defined benefit pension surplus (718) (909)
Securitisation deductions (211) (211)
Significant investments (2,014) (2,021)
Deferred tax assets (4,551) (4,533)
Common equity tier 1 capital 36,320 36,464

Additional tier 1
Additional tier 1 instruments 4,761 5,442
Less: deductions from tier 1
Significant investments (1,180) (859)
Total tier 1 capital 39,901 41,047

Tier 2
Tier 2 instruments 13,979 16,156
Eligible provisions 475 333
Less: deductions from tier 2
Significant investments (1,760) (1,288)
Total tier 2 capital 12,694 15,201

Total capital resources 52,595 56,248

Risk-weighted assets 228,381 241,046

Common equity tier 1 capital ratio 15.9% 15.1%
Tier 1 capital ratio 17.5% 17.0%
Total capital ratio 23.0% 23.3%

Page 3 of 44
LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

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 and 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 2014 Annual Report and Accounts, with any
quantitative disclosures updated herein.

Credit risk – Adverse changes in the economic and market environment or the credit quality of our counterparties and
customers could reduce asset values; potentially increase write-downs and allowances for impairment losses thereby
adversely impacting profitability. Refer to 2014 Annual Report and Accounts for mitigating actions and further details.

Conduct risk – We face significant potential conduct risk, 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.
Refer to 2014 Annual Report and Accounts for mitigating actions and further details.

Market risk – Key market risks include interest rate and credit spread in the Banking business, credit spread and equity
in the Insurance business and the defined benefit pension schemes where asset and liability movements impact on our
capital position. Refer to 2014 Annual Report and Accounts for mitigating actions and further details. In addition, a hedge
has been implemented to provide protection from Insurance equity volatility.

Operational risk – Significant operational risks which may result in financial loss, disruption or damage to the reputation
of Lloyds Banking Group, including the availability, resilience and security of our core IT systems and the potential for
failings in our customer processes. Refer to 2014 Annual Report and Accounts for mitigating actions and further details.

Capital risk – Future capital position is potentially at risk from a worsening macroeconomic environment, which could
lead to adverse financial performance and deplete capital resources and/or increase capital requirements. Refer to 2014
Annual Report and Accounts for mitigating actions and further details.

Funding and liquidity risk – Our funding and liquidity position is supported by a significant and stable customer deposit
base. A deterioration in either our or the UK’s credit rating, or a sudden and significant withdrawal of customer deposits
could adversely impact Lloyds Banking Group’s funding and liquidity position. Refer to 2014 Annual Report and Accounts
for mitigating actions and further details. In addition, Lloyds Banking Group has a contingency funding plan providing
management actions and strategies available in stressed conditions.

Page 4 of 44
LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

PRINCIPAL RISKS AND UNCERTAINTIES (continued)

Legal and regulatory risk – The Group and its businesses are subject to ongoing regulation, associated legal and
regulatory risks, and legal and regulatory actions. They are also subject to the effects of changes in the laws, regulations,
policies, voluntary codes of practice (as well as in their respective interpretations) and court rulings in the UK, the
European Union and the other markets in which the Group operates. These laws and regulations include (i) increased
regulatory oversight, particularly in respect of conduct issues; (ii) prudential regulatory developments; and
(iii) industry-wide initiatives. Depending on the specific nature of the requirements and how they are enforced, such
changes could have a significant impact on the Group's operations, business prospects, structure, costs and/or capital
requirements.

Mitigating actions
The Legal, Regulatory and Mandatory Change Committee ensure we drive forward activity to develop plans for
ensuring delivery of all legal and regulatory changes and track their progress against those plans.
Continued investment in our people, processes, training and IT systems is assisting us in meeting our legal and
regulatory commitments.
Engagement with the regulatory authorities on forthcoming regulatory changes, market reviews and CMA
investigations.
Defined and embedded conduct risk strategy.

Governance risk – Against a background of increased regulatory focus on governance and risk management the most
significant challenges arise from the Senior Managers and Certification Regime (SMR) which comes into operation in
March 2016 and the requirement to Ring Fence core UK financial services and activities from January 2019.

Mitigating actions
The Group’s response to SMR is managed through a programme with workstreams addressing the implementation of
each of the major components.
A programme is in place to address the requirements of ring fencing and the Group is in close and regular contact
with regulators to develop the plans for our anticipated operating and legal structures.
Our aim is to ensure that evolving risk and governance arrangements continue to reflect the balance of business in
the Group while adhering to regulatory objectives.

People risk – Key people risks include the risk that the Group may fail to attract and retain talent in an increasingly
competitive marketplace, particularly in the light of the introduction of the Senior Managers and Certification Regime in
2016 which introduces a reverse burden of proof and increased accountability.

Mitigating actions
Focused actions on delivery of strategies to attract, retain and develop high calibre people.
Maintain compliance with legal and regulatory requirements relating to Senior Managers and Certification Regime,
embedding compliant and appropriate colleague behaviours.
Continue focus on the Group’s culture, delivering initiatives which reinforce behaviours to generate the best
long-term outcomes for customers and colleagues.

Page 5 of 44
LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)

CONSOLIDATED INCOME STATEMENT

Half-year Half-year
to 30 June to 30 June
2015 2014
Note £ million £ million
Interest and similar income 9,050 9,827
Interest and similar expense (3,835) (4,750)
Net interest income 5,215 5,077
Fee and commission income 1,598 1,843
Fee and commission expense (607) (609)
Net fee and commission income 991 1,234
Net trading income 3,475 4,364
Insurance premium income 1,414 3,492
Other operating income 923 827
Other income 6,803 9,917
Total income 12,018 14,994
Insurance claims (2,998) (6,338)
Total income, net of insurance claims 9,020 8,656
Regulatory provisions 10 (1,835) (1,100)
Other operating expenses (5,608) (5,097)
Total operating expenses 3 (7,443) (6,197)
Trading surplus 1,577 2,459
Impairment 4 (161) (641)
Profit before tax 1,416 1,818
Taxation 5 (330) (384)
Profit for the period 1,086 1,434

Profit attributable to non-controlling interests 51 34

Profit attributable to equity shareholders 1,035 1,400
Profit for the period 1,086 1,434

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

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

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Half-year Half-year
to 30 June to 30 June
2015 2014
£ million £ million
Profit for the period 1,086 1,434
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 (302) (599)
Taxation 60 120
(242) (479)
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 (16) 557
Income statement transfers in respect of disposals (49) (85)
Income statement transfers in respect of impairment − 2
Taxation − (50)
(65) 424
Movement in cash flow hedging reserve:
Effective portion of changes in fair value (403) 1,008
Net income statement transfers (508) (578)
Taxation 181 (84)
(730) 346
Currency translation differences (tax: nil) 27 (1)
Other comprehensive income for the period, net of tax (1,010) 290
Total comprehensive income for the period 76 1,724

Total comprehensive income attributable to non-controlling interests 51 34

Total comprehensive income attributable to equity shareholders 25 1,690
Total comprehensive income for the period 76 1,724

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

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

CONSOLIDATED BALANCE SHEET

At At
30 June 31 Dec
2015 2014
Note £ million £ million
Assets
Cash and balances at central banks 67,687 50,492
Items in course of collection from banks 1,159 1,173
Trading and other financial assets at fair value through profit or loss 6 148,455 152,520
Derivative financial instruments 27,725 35,483
Loans and receivables:
Loans and advances to banks 23,548 26,155
Loans and advances to customers 7 452,427 482,704
Debt securities 1,569 1,213
Due from fellow Lloyds Banking Group undertakings 11,599 11,482
489,143 521,554
Available-for-sale financial assets 32,173 56,493
Held-to-maturity investments 19,960 −
Investment properties 4,702 4,492
Goodwill 2,016 2,016
Value of in-force business 4,863 4,864
Other intangible assets 1,942 2,070
Tangible fixed assets 8,154 8,052
Current tax recoverable 154 157
Deferred tax assets 4,036 4,190
Retirement benefit assets 9 908 1,147
Other assets 21,607 21,745
Total assets 834,684 866,448

Page 8 of 44
LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

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

CONSOLIDATED BALANCE SHEET (continued)

At At
30 June 31 Dec
2015 2014
Note £ million £ million
Equity and liabilities
Liabilities
Deposits from banks 16,966 10,887
Customer deposits 416,595 447,067
Due to fellow Lloyds Banking Group undertakings 5,352 5,288
Items in course of transmission to banks 790 979
Trading and other financial liabilities at fair value through profit or loss 63,328 62,102
Derivative financial instruments 27,856 33,293
Notes in circulation 1,090 1,129
Debt securities in issue 8 77,219 75,672
Liabilities arising from insurance contracts and participating
investment contracts 81,209 86,941
Liabilities arising from non-participating investment contracts 26,131 27,248
Unallocated surplus within insurance businesses 290 320
Other liabilities 35,818 28,783
Retirement benefit obligations 9 467 453
Current tax liabilities 24 69
Deferred tax liabilities 40 54
Other provisions 4,443 4,200
Subordinated liabilities 28,583 31,973
Total liabilities 786,201 816,458

Equity
Share capital 1,574 1,574
Share premium account 35,533 35,533
Other reserves 6,074 6,842
Retained profits 4,872 4,828
Shareholders’ equity 48,053 48,777
Non-controlling interests 430 1,213
Total equity 48,483 49,990
Total equity and liabilities 834,684 866,448

Page 9 of 44
LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

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

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to equity shareholders

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

Comprehensive income
Profit for the period – – 1,035 1,035 51 1,086
Other comprehensive income
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
Transactions with owners
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
A divestment on sale of TSB Banking
Group plc (TSB) (note 14) – – – – (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

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

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

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)

Attributable to equity shareholders

Share Non-
capital and Other Retained controlling
premium reserves profits Total interests Total
£ million £ million £ million £ million £ million £ million

Balance at 1 January 2014 37,107 4,123 2,509 43,739 347 44,086

Comprehensive income
Profit for the period – – 1,400 1,400 34 1,434
Other comprehensive income
Post-retirement defined benefit
scheme remeasurements, net of tax – – (479) (479) – (479)
Movements in revaluation reserve in
respect of available-for-sale financial
assets, net of tax – 424 – 424 – 424
Movements in cash flow hedging
reserve, net of tax – 346 – 346 – 346
Currency translation differences (tax: nil) – (1) – (1) – (1)
Total other comprehensive income – 769 (479) 290 – 290
Total comprehensive income – 769 921 1,690 34 1,724
Transactions with owners
Dividends – – – – (8) (8)
Capital contributions received – – 153 153 – 153
Return of capital contributions – – (124) (124) – (124)
Adjustment on sale of non-controlling
interest in TSB (note 14) – – (135) (135) 565 430
Other changes in non-controlling
interests – – – – 10 10
Total transactions with owners – – (106) (106) 567 461
Balance at 30 June 2014 37,107 4,892 3,324 45,323 948 46,271

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

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

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)

Attributable to equity shareholders

Share Non-
capital and Other Retained controlling
premium reserves profits Total interests Total
£ million £ million £ million £ million £ million £ million

Balance at 1 July 2014 37,107 4,892 3,324 45,323 948 46,271

Comprehensive income
Profit for the period – – 380 380 53 433
Other comprehensive income
Post-retirement defined benefit
scheme remeasurements, net of tax – – 1,018 1,018 – 1,018
Movements in revaluation reserve in
respect of available-for-sale financial
assets, net of tax – 113 – 113 − 113
Movements in cash flow hedging
reserve, net of tax – 1,838 – 1,838 – 1,838
Currency translation differences,
net of tax – (1) – (1) – (1)
Total other comprehensive income – 1,950 1,018 2,968 − 2,968
Total comprehensive income – 1,950 1,398 3,348 53 3,401
Transactions with owners
Dividends – – – – (19) (19)
Value of employee services – – 2 2 – 2
Capital contribution received – – 214 214 – 214
Return of capital contributions – – (74) (74) – (74)
Adjustment on sale of non-controlling
interest in TSB (note 14) – – (36) (36) 240 204
Other changes in non-controlling
interests – – – – (9) (9)
Total transactions with owners – – 106 106 212 318
Balance as at 31 December 2014 37,107 6,842 4,828 48,777 1,213 49,990

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

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

CONSOLIDATED CASH FLOW STATEMENT

Half-year Half-year
to 30 June to 30 June
2015 2014
£ million £ million
Profit before tax 1,416 1,818
Adjustments for:
Change in operating assets 26,094 2,163
Change in operating liabilities 10 2,935
Non-cash and other items (5,656) 567
Tax received (30) 10
Net cash provided by (used in) operating activities 21,834 7,493

Cash flows from investing activities

Purchase of financial assets (12,358) (7,363)
Proceeds from sale and maturity of financial assets 14,838 1,685
Purchase of fixed assets (1,564) (1,651)
Proceeds from sale of fixed assets 526 725
Acquisition of businesses, net of cash acquired − (1)
Disposal of businesses, net of cash disposed (4,282) 536
Net cash used in investing activities (2,840) (6,069)

Cash flows from financing activities

Dividends paid to equity shareholders (540) −
Dividends paid to non-controlling interests (10) (8)
Return of capital contribution (431) (124)
Interest paid on subordinated liabilities (1,525) (1,311)
Proceeds from issue of subordinated liabilities − −
Repayment of subordinated liabilities (2,068) (1,182)
Change in non-controlling interests 1 10
Sale of non-controlling interest in TSB − 430
Net cash used in financing activities (4,573) (2,185)
Effects of exchange rate changes on cash and cash equivalents (2) 4
Change in cash and cash equivalents 14,419 (757)
Cash and cash equivalents at beginning of period 65,147 66,797
Cash and cash equivalents at end of period 79,566 66,040

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.

Page 13 of 44
LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

NOTES

Page
1 Accounting policies, presentation and estimates 15
2 Segmental analysis 15
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 Provisions for liabilities and charges 23
11 Contingent liabilities and commitments 26
12 Fair values of financial assets and liabilities 30
13 Related party transactions 37
14 Disposal of interest in TSB Banking Group plc 39
15 Ordinary dividends 39
16 Events since the balance sheet date 39
17 Future accounting developments 40
18 Ultimate parent undertaking 40
19 Other information 40

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

1. Accounting policies, presentation and estimates

These condensed consolidated half-year financial statements as at and for the period to 30 June 2015 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 2014 which were prepared in accordance
with International Financial Reporting Standards (IFRS) as adopted by the European Union. Copies of the 2014 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 and have had regard to the factors set out in Principal risks and uncertainties:
Funding and liquidity on page 4.

The accounting policies are consistent with those applied by the Group in its 2014 Annual Report and Accounts.

During the half-year to 30 June 2015, government debt securities with a carrying value of £19,938 million, previously
classified as available-for-sale, were reclassified to held-to-maturity. Unrealised gains on the transferred securities of
£194 million previously taken to equity continue to be held in the available-for-sale revaluation reserve and will be
amortised to the income statement over the remaining lives of the securities using the effective interest method or until
the assets become impaired.

Future accounting developments

Details of those IFRS pronouncements which will be relevant to the Group but which will not be effective at 31 December
2015 and which have not been applied in preparing these condensed consolidated half-year financial statements are set
out in note 17.

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 2014.

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 asset sales, volatile items, the insurance grossing adjustment, liability management,
Simplification costs, TSB build and dual-running costs, the charge relating to the TSB disposal, regulatory provisions,
certain past service pension credits or charges, the amortisation of purchased intangible assets and the unwind of
acquisition-related fair value adjustments are excluded in arriving at underlying profit.

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

2. Segmental analysis (continued)

Following the announcement of the sale of TSB to Banco Sabadell, the Group no longer considers TSB to be a separate
financial reporting segment and as a consequence its results are included in Other. The Group’s activities are organised
into four financial reporting segments: Retail; Commercial Banking; Consumer Finance and Insurance. There has been
no change to the descriptions of these segments as provided in note 4 to the Group’s financial statements for the year
ended 31 December 2014.

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 2014.

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
Retail 3,743 559 4,302 1,839 4,629 (327)
Commercial Banking 1,234 1,023 2,257 1,193 1,842 415
Consumer Finance 658 677 1,335 539 1,462 (127)
Insurance (73) 1,025 952 584 1,241 (289)
Other 345 − 345 228 17 328
Group 5,907 3,284 9,191 4,383 9,191 –
Reconciling items:
Insurance grossing adjustment (241) 287 46 –
Asset sales, volatile items and
1
liability management 26 (384) (358) (355)
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
2
Group (277) 490 213 223
Group – statutory 5,215 3,805 9,020 1,416
1
Comprises (i) losses on disposals of assets which are not part of normal business operations (£52 million); (ii) the net effect of
banking volatility, changes in the fair value of the equity conversion feature of the Lloyds Banking Group’s Enhanced Capital Notes
and net derivative valuation adjustments (losses of £297 million); and (iii) the results of liability management exercises (losses of
£6 million).
2
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.

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

2. Segmental analysis (continued)

Other Total
income, income, Profit
Net net of net of (loss) Inter-
interest insurance insurance before External segment
Half-year to 30 June 2014 income claims claims tax revenue revenue
£m £m £m £m £m £m
Underlying basis
Retail 3,493 700 4,193 1,710 4,497 (304)
Commercial Banking 1,234 984 2,218 1,156 1,785 433
Consumer Finance 645 675 1,320 534 1,377 (57)
Insurance (64) 854 790 461 859 (69)
Other 496 235 731 (42) 734 (3)
Group 5,804 3,448 9,252 3,819 9,252 –
Reconciling items:
Insurance grossing adjustment (239) 314 75 –
Asset sales, volatile items and liability
1
management 10 (1,135) (1,125) (1,130)
Volatility relating to the insurance business – (122) (122) (122)
Simplification costs – – – (519)
TSB build and dual running costs – – – (309)
Payment protection insurance provision – – – (600)
Other conduct provisions – – – (500)
2
Past service credit – – – 710
Amortisation of purchased intangibles – – – (171)
Fair value unwind (313) (71) (384) (315)
Removal of impact of other entities in the
3
Lloyds Banking Group (185) 1,145 960 955
Group – statutory 5,077 3,579 8,656 1,818
1
Comprises (i) gains on disposals of assets which are not part of normal business operations (£94 million); (ii) the net effect of banking
volatility, changes in the fair value of the equity conversion feature of the Lloyds Banking Group’s Enhanced Capital Notes and net
derivative valuation adjustments (gain of £152 million); and (iii) the results of liability management exercises (losses of £1,376 million).
2
This represents the curtailment credit of £843 million following the Group’s decision to reduce the cap on pensionable pay (see
note 3) partly offset by the cost of other changes to the pay, benefits and reward offered to employees.
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.

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

2. Segmental analysis (continued)

At At
30 June 31 Dec
Segment external assets 2015 2014
£m £m

Retail 315,088 317,246

Commercial Banking 179,530 241,754
Consumer Finance 26,514 25,646
Insurance 150,899 150,615
Other 150,801 119,635
Total Group 822,832 854,896

Lloyds Bank Group statutory 834,684 866,448

Impact of other entities in the Lloyds Banking Group (11,852) (11,552)
Segment external assets as above 822,832 854,896

Segment customer deposits

Retail 278,231 285,539
Commercial Banking 125,407 119,882
Consumer Finance 11,423 14,955
Other 1,534 26,691
Total Group and Lloyds Bank Group statutory 416,595 447,067

Segment external liabilities

Retail 286,376 295,880
Commercial Banking 232,024 231,400
Consumer Finance 16,502 18,581
Insurance 144,915 144,921
Other 94,974 114,211
Total Group 774,791 804,993

Lloyds Bank Group statutory 786,201 816,458

Impact of other entities in the Lloyds Banking Group (11,410) (11,465)
Segment external liabilities as above 774,791 804,993

Page 18 of 44
LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

3. Operating expenses

Half-year Half-year
to 30 June to 30 June
2015 2014
£m £m
Administrative expenses:
Staff costs excluding pension curtailments and past service credits 2,410 2,879
1
Past service credit − (822)
Total staff costs 2,410 2,057
Premises and equipment 360 444
Other expenses 1,830 1,647
4,600 4,148
Depreciation and amortisation 1,008 949
Total operating expenses, excluding regulatory provisions 5,608 5,097
Regulatory provisions:
Payment protection insurance provision (note 10) 1,400 600
Other regulatory provisions (note 10) 435 500
1,835 1,100
Total operating expenses 7,443 6,197
1
On 11 March 2014 the Group announced a change to its defined benefit pension schemes, revising the existing cap on the increases
in pensionable pay used in calculating the pension benefit, from 2 per cent to nil with effect from 2 April 2014. The effect of this
change was to reduce the Group's retirement benefit obligations recognised on the balance sheet by £843 million with a
corresponding curtailment gain recognised in the income statement in the half-year to 30 June 2014, partly offset by a charge of
£21 million following a change to pension arrangements for staff within the TSB business.

4. Impairment

Half-year Half-year
to 30 June to 30 June
2015 2014
£m £m
Impairment losses on loans and receivables:
Loans and advances to customers 181 639
Debt securities classified as loans and receivables (2) −
Impairment losses on loans and receivables 179 639
Other credit risk provisions (18) 2
Total impairment charged to the income statement 161 641

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

5. Taxation

A reconciliation of the tax (charge) credit that would result from applying the standard UK corporation tax rate to the profit
(loss) before tax to the actual tax (charge) credit is given below:
Half-year Half-year
to 30 June to 30 June
2015 2014
£m £m
Profit before tax 1,416 1,818

Tax charge thereon at UK corporation tax rate of 20.25 per cent (2014: 21.5 per cent) (287) (391)
Factors affecting tax (charge) credit:
UK corporation tax rate change 7 −
Disallowed items (86) (108)
Non-taxable items 49 43
Overseas tax rate differences (8) (17)
Gains exempted or covered by capital losses 47 147
Policyholder tax (39) (23)
Adjustments in respect of previous periods (14) (22)
Effect of results in joint ventures and associates − (3)
Other items 1 (10)
Tax charge (330) (384)

In accordance with IAS 34, the Group’s income tax expense for the half-year to 30 June 2015 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.

On 8 July 2015, the Government announced that the corporation tax rate applicable from 1 April 2017 would be 19 per
cent and from 1 April 2020 would be 18 per cent. In addition, the Government announced that from 1 January 2016
banking profits will be subject to an additional tax surcharge of 8 per cent. The proposed reductions in the rate of
corporation tax and the introduction of the banking surcharge are expected to be enacted, and the impact accounted for,
in the second half of 2015.

6. Trading and other financial assets at fair value through profit or loss

At At
30 June 31 Dec
2015 2014
£m £m
Trading assets 43,429 48,504

Other financial assets at fair value through profit or loss:

Treasury and other bills 22 22
Debt securities 40,520 41,840
Equity shares 64,484 62,154
105,026 104,016
Total trading and other financial assets at fair value through profit or loss 148,455 152,520

Included in the above is £95,798 million (31 December 2014: £94,857 million) of assets relating to the insurance
businesses.

Page 20 of 44
LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

7. Loans and advances to customers

At At
30 June 31 Dec
2015 2014
£m £m
Agriculture, forestry and fishing 7,092 6,586
Energy and water supply 3,690 3,853
Manufacturing 6,400 6,000
Construction 5,303 6,425
Transport, distribution and hotels 14,283 15,112
Postal and communications 3,037 2,624
Property companies 36,253 36,682
Financial, business and other services 38,729 44,979
Personal:
Mortgages 311,031 333,318
Other 20,603 23,123
Lease financing 2,797 3,013
Hire purchase 8,559 7,403
457,777 489,118
Allowance for impairment losses on loans and advances (5,350) (6,414)
Total loans and advances to customers 452,427 482,704

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
2015 2014
£m £m
Medium-term notes issued 25,705 22,167
Covered bonds 25,500 27,191
Certificates of deposit 9,313 7,033
Securitisation notes 10,842 11,908
Commercial paper 5,859 7,373
Total debt securities in issue 77,219 75,672

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 2015, external parties held £10,842 million (31 December 2014: £11,908 million) and the Group’s subsidiaries
held £27,707 million (31 December 2014: £38,149 million) of total securitisation notes in issue of £38,549 million
(31 December 2014: £50,057 million). The notes are secured on loans and advances to customers and debt securities
classified as loans and receivables amounting to £62,853 million (31 December 2014: £75,970 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 44
LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

8. Debt securities in issue (continued)

Covered bond programmes

At 30 June 2015, external parties held £25,500 million (31 December 2014: £27,191 million) and the Group’s subsidiaries
held £4,970 million (31 December 2014: £6,339 million) of total covered bonds in issue of £30,470 million (31 December
2014: £33,530 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 £9,210 million (31 December 2014: £11,251 million) held by the Group are restricted in use to repayment
of the debt securities issued by the structured entities, the term advances relating to covered bonds and other legal
obligations.

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
2015 2014
£m £m
Defined benefit pension schemes:
Fair value of scheme assets 38,041 38,133
Present value of funded obligations (37,399) (37,243)
Net pension scheme asset 642 890
Other post-retirement schemes (201) (196)
Net retirement benefit asset 441 694

Recognised on the balance sheet as:

Retirement benefit assets 908 1,147
Retirement benefit obligations (467) (453)
Net retirement benefit asset 441 694

The movement in the Group’s net post-retirement defined benefit scheme liability during the period was as follows:

£m

At 1 January 2015 694

Income statement charge (154)
Employer contributions 203
Remeasurement (302)
At 30 June 2015 441

The principal assumptions used in the valuations of the defined benefit pension scheme were as follows:

At At
30 June 31 Dec
2015 2014
% %
Discount rate 3.80 3.67
Rate of inflation:
Retail Prices Index 3.14 2.95
Consumer Price Index 2.14 1.95
Rate of salary increases 0.00 0.00
Weighted-average rate of increase for pensions in payment 2.69 2.59

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

9. Post-retirement defined benefit schemes (continued)

The application of the revised assumptions as at 30 June 2015 to the Group’s principal post-retirement defined benefit
schemes has resulted in a remeasurement loss of £302 million which has been recognised in other comprehensive income,
net of deferred tax of £60 million.

10. Provisions for liabilities and charges

Payment protection insurance

The Group made provisions totalling £12,025 million to 31 December 2014 against the costs of paying redress to
customers in respect of past sales of PPI policies, including the related administrative expenses.

The Group has increased the provision by a further £1,400 million which brings the total amount provided to
£13,425 million, of which, at 30 June 2015, £2,237 million remained unutilised (17 per cent of total provision). The
remaining provision covers the Past Business Review (PBR), remediation activity and future customer initiated
complaints including associated administration expenses.

The main drivers of the provision are as follows:

Proactive mailing resulting from Past Business Reviews (PBR)

The Group has mailed 98 per cent of the total PBR scope, with the remaining mailings scheduled for completion in the
second half of 2015. The Group is confident that the scope of proactive mailing is final, albeit monitoring continues, and
there has consequently been no change to the amount provided.

Remediation
The Group continues to progress the re-review of previously handled cases. Approximately 1.2 million cases were
included within the scope of remediation at 31 December 2014 covering both previously defended and previously
redressed complaints for re-review. The Group has completed the review of approximately 96 per cent of all complaints
previously defended, which were prioritised given their complexity and the level of potential redress required, with some
residual payments expected in the second half of 2015. During the half-year, the scope was extended by 0.2 million to
1.4 million cases. The remaining scope is expected to be substantially complete by the end of the year. The change in
scope, together with higher overturn rates and average redress, has resulted in an additional provision of approximately
£400 million.

Volumes of reactive complaints (after excluding complaints from customers where no PPI policy was held)
At 31 December 2014, the provision assumed a total of 3.6 million complaints would be received. During the first half of
2015 complaint volumes were 8 per cent lower than over the same period of 2014 and 2 per cent lower than the second
half of 2014. The run rate of complaints in the first half of 2015 was, however, marginally higher than the fourth quarter
2014 run-rate and above expectations. Complaint volumes continue to be largely driven by Claims Management
Company (CMC) activity. As a result, the Group has increased the total expected complaint volumes to 3.9 million with
approximately 0.7 million still to be received. Coupled with higher than expected average redress and the additional
associated administration costs, this has resulted in a further provision of approximately £1,000 million.

Page 23 of 44
LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

10. Provisions for liabilities and charges (continued)

Average monthly
reactive complaint Quarter on
Quarter volume quarter %
Q1 2013 61,259 (28%)
Q2 2013 54,086 (12%)
Q3 2013 49,555 (8%)
Q4 2013 37,457 (24%)
Q1 2014 42,259 13%
Q2 2014 39,426 (7%)
Q3 2014 40,624 3%
Q4 2014 35,910 (12%) During the second quarter of 2015 the Group has seen a fall of
Q1 2015 37,791 5% approximately 2 per cent in complaint levels. However, the provision
Q2 2015 36,957 (2%) remains sensitive to future trends.

Average redress
Average redress has trended higher than expected by approximately £200 per policy due to a change in the product and
age mix of complaints.

Expenses
The Group expects to maintain the PPI operation on its current scale for longer than previously anticipated given the
update to volume related assumptions and the re-review of previously handled cases continuing into the second half of
2015. The estimate for administrative expenses, which comprise complaint handling costs and costs arising from cases
subsequently referred to the FOS, is included in the provision increase outlined above.

Sensitivities
The Group estimates that it has sold approximately 16 million policies since 2000. These include policies that were not
mis-sold as they were suitable for, and appropriately disclosed to, the customer. Since the commencement of the PPI
redress programme in 2011 the Group estimates that it has contacted, settled or provided for in excess of 45 per cent of
the policies sold since 2000, covering both customer-initiated complaints and actual and expected proactive mailings
undertaken by the Group.

The cash payments in the first half of 2015 were approximately £1.7 billion covering PBR, remediation and reactive
complaints and associated administration costs. The PBR and remediation programmes are expected to be substantially
complete by the end of this year, slightly later than envisaged. The monthly run-rate spend of these programmes is
expected to reduce significantly from the current level of around £140 million to around £30 million by the end of the year
with an associated reduction in operating costs.

The total amount provided for PPI represents the Group’s best estimate of the likely future costs. A number of risks and
uncertainties remain, in particular with respect to future complaint volumes, which are primarily driven by the level of
CMC initiated complaints. The current provision assumes a significant decrease in reactive complaint volumes over the
next 18 months compared with recent quarterly trends. If this decline is delayed by six months and reactive complaints
remain at the same level as the first half of 2015, this would lead to an additional provision of approximately £1.0 billion
at the end of the year; a similar level of provisioning would be required for each six months of flat complaint volumes in
2016.

Page 24 of 44
LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

10. Provisions for liabilities and charges (continued)

Key metrics and sensitivities are highlighted in the table below:

1
Sensitivities To date unless noted Future Sensitivity

2
Reactive complaints since origination (m) 3.2 0.7 0.1 = £240m
Proactive mailing:
3
– number of policies (m) 2.7 0.1 n/a
4
– response rate 34% 30% 1% = £3m
5
Average uphold rate per policy 78% 75% 1% = £12m
6
Average redress per upheld policy £1,935 £2,000 £100 = £90m
7
Remediation cases (m) 0.7 0.7 1 case = £400
Administrative expenses (£m) 2,420 400 1 case = £500
1
All sensitivities exclude claims where no PPI policy was held.
2
Sensitivity includes complaint handling costs, and have increased as a result of higher average redress and a shift towards older
policies.
3
To date volume includes customer initiated complaints.
4
Metric relates to mature mailings only. Future response rates are expected to be lower than experienced to date as mailings to higher
risk customers have been prioritised.
5
The percentage of complaints where the Group finds in favour of the customer. This is a blend of proactive and customer initiated
complaints. The 78 per cent uphold rate is based on six months to June 2015. The lower uphold rate in the future reflects a lower
proportion of PBR related cases which typically have a higher uphold rate, reflecting the higher risk nature of those policy sales.
6
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 June 2015. The
increase in future average redress is influenced by a shift in the reactive complaint mix towards older, and therefore more expensive,
policies.
7
Remediation to date is based on cases reviewed as at 30 June 2015, but not necessarily settled. The sensitivity is based on the
expected future average cost of a remediation case. It is an average of full payments, top-up payments and nil payouts where the
original decision is retained. It is lower than experienced to date as future remediation largely comprises top-up payments on
previously redressed cases.

Other regulatory provisions

Litigation in relation to insurance branch business in Germany
Clerical Medical Investment Group Limited (CMIG) has received a number of claims in the German courts relating to
policies issued by CMIG but sold by independent intermediaries in Germany, principally during the late 1990s and early
2000s. Following decisions in July 2012 from the Federal Court of Justice in Germany the Group recognised provisions
totalling £520 million during the period to 31 December 2014. Recent experience has been broadly in line with
expectations and, accordingly, no further provision has been recognised in the half-year to 30 June 2015. The remaining
unutilised provision as at 30 June 2015 is £137 million.

The validity of the claims facing CMIG 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 only be known 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 2015 the Lloyds Banking Group had identified 1,723 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.

At 30 June 2015, the total amount provided for redress and related administration costs for in-scope customers was
£680 million (31 December 2014: £680 million). As at 30 June 2015, the Group has utilised £617 million (31 December
2014: £571 million), with £63 million (31 December 2014: £109 million) of the provision remaining.

Page 25 of 44
LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

10. Provisions for liabilities and charges (continued)

FCA review of complaint handling

On 5 June 2015 the FCA announced a settlement with the Group totalling £117 million following its investigation into
aspects of the Group’s PPI complaint handling process during the period March 2012 to May 2013. The FCA did not find
that the Group acted deliberately. The Group has reviewed all customer complaints fully defended during the Relevant
Period. The remediation costs of reviewing these affected cases are not materially in excess of existing provisions.

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 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. During the half-year to 30 June 2015, the Group charged an
additional £318 million (half-year to 30 June 2014: £225 million) in respect of a number of matters affecting the Retail,
Commercial Banking and Consumer Finance divisions. This includes a provision of £175 million for customer redress
and associated administration costs in response to complaints concerning Packaged Bank Accounts. At 30 June 2015,
provisions for other legal actions and regulatory matters of £732 million remained unutilised.

11. Contingent liabilities and commitments

Interchange fees
With respect to interchange fees, the Group is following closely the course of investigations, litigation and recent
regulation (as described below) which involve card schemes such as Visa and MasterCard. The Group is not directly
involved in these matters but is a member of certain card schemes, in particular, Visa and MasterCard. The matters
referred to above include the following:

A new European Regulation to regulate cross-border and domestic fallback multilateral interchange fees (MIFs) in the
EU. This regulation came into force on 8 June 2015 and it will introduce interchange fee caps for credit card MIFs (to
30 bps) and debit card MIFs (to 20bps). The interchange fee caps come in to force on 9 December 2015;
The European Commission also continues to pursue other competition investigations into MasterCard and Visa
probing, amongst other things, interchange paid in respect of cards issued outside the EEA;
Litigation continues in the English High Court against both Visa and MasterCard. This litigation has been brought by
several retailers who are seeking damages for allegedly ‘overpaid’ MIFs;
The new UK payments regulator may exercise its powers to regulate domestic interchange fees. In addition, the FCA
has undertaken a market study in relation to the UK credit cards market.

The ultimate impact on the Group of the above investigations, regulatory or legislative developments and the litigation
against VISA and MasterCard can only be known at the conclusion of these matters.

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.

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

11. Contingent liabilities and commitments (continued)

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
(RICO) and the Commodity Exchange Act (CEA), 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). That court’s dismissal of plaintiffs’ anti-trust claims has been appealed
to the New York Federal Court of Appeal.

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.

The Lloyds Banking Group also reviewed its activities in relation to the setting of certain foreign exchange daily
benchmark rates and related matters. The Lloyds Banking Group has been co-operating with the FCA and other
regulators and has been providing information about the Group’s review to those regulators. In addition, the Lloyds
Banking Group, together with a number of other banks, was named as a defendant in several actions filed in the District
Court between late 2013 and February 2014, in which the plaintiffs alleged that the defendants manipulated WM/Reuters
foreign exchange rates in violation of US antitrust laws. On 31 March 2014, plaintiffs effectively withdrew their claims
against the Lloyds Banking Group (but not against all defendants) by filing a superseding consolidated and amended
pleading against a number of other defendants without naming any Lloyds Banking Group entity as a defendant.

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 2015, the principal balance outstanding on these loans
was £15,797 million (31 March 2014: £16,591 million). Although 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.

PRA/FCA report on HBOS

On 12 September 2012 the FSA announced that it was starting work on a public interest report on HBOS. That report is
now being produced as a joint PRA/FCA report but has not yet been published.

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

11. Contingent liabilities and commitments (continued)

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. This includes open matters where Her Majesty's Revenue and Customs (HMRC) adopt a different
interpretation and application of tax law which might lead to additional tax. 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 the second half of 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 Group of
approximately £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.

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 Lloyds Banking Group is reviewing the
issues raised by the judgment and will respond as appropriate to any investigations or proceedings that may in due
course be instigated as a result of these issues.

Plevin v Paragon Personal Finance Limited

On 27 May 2015 the FCA gave an update on its announcement from January 2015 that it would be collecting evidence
on current trends in PPI complaints to assess whether the current approach to PPI complaint handling is continuing to
meet its objectives. The FCA stated that it expects to give its view in the summer. In that announcement the FCA also
noted that in November 2014 the Supreme Court had ruled in Plevin v Paragon Personal Finance Limited [2014] UKSC 6
(Plevin) that the lender’s failure to disclose a large commission payment on a single premium PPI policy made the
relationship between that lender and the borrower unfair under section 140A of the Consumer Credit Act 1974. The FCA
is considering whether additional rules and/or guidance are required to deal with the potential impact of the Plevin
decision on complaints about PPI and indicated that it expects to announce its views on this aspect, including next steps,
in its announcement in the summer. The Financial Ombudsman Service are also considering the implications for PPI
complaints. Given the current uncertainty, it is not presently possible to estimate the financial impact of the Plevin
decision and accordingly no additional provision has been established at this stage, but it is possible that the impact
could be material.

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 employees, customers, investors or other
third parties, as well as 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.

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

11. Contingent liabilities and commitments (continued)

Contingent liabilities and commitments arising from the banking business

At At
30 June 31 Dec
2015 2014
£m £m
Contingent liabilities
Acceptances and endorsements 130 59
Other:
Other items serving as direct credit substitutes 405 330
Performance bonds and other transaction-related contingencies 2,034 2,293
2,439 2,623
Total contingent liabilities 2,569 2,682

Commitments
Documentary credits and other short-term trade-related transactions 42 101
Forward asset purchases and forward deposits placed 428 162

Undrawn formal standby facilities, credit lines and other commitments to lend:
Less than 1 year original maturity:
Mortgage offers made 10,463 8,809
Other commitments 59,901 64,015
70,364 72,824
1 year or over original maturity 35,679 34,455
Total commitments 106,513 107,542

Of the amounts shown above in respect of undrawn formal standby facilities, credit lines and other commitments to lend,
£55,027 million (31 December 2014: £55,029 million) was irrevocable.

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

12. 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 51 to the Group’s 2014 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 2014 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 2015 31 December 2014

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 148,455 148,455 152,520 152,520
Derivative financial instruments 27,725 27,725 35,483 35,483
Loans and receivables:
Loans and advances to banks 23,548 23,892 26,155 26,031
Loans and advances to customers 452,427 450,321 482,704 480,631
Debt securities 1,569 1,491 1,213 1,100
Due from fellow Lloyds Banking Group
undertakings 11,599 11,599 11,482 11,482
489,143 487,303 521,554 519,244
Available-for-sale financial instruments 32,173 32,173 56,493 56,493
Held-to-maturity- investments 19,960 19,785 − −
Financial liabilities
Deposits from banks 16,966 16,978 10,887 10,902
Customer deposits 416,595 416,933 447,067 450,038
Due to fellow Lloyds Banking Group undertakings 5,352 5,352 5,288 5,288
Trading and other financial liabilities at fair value
through profit or loss 63,328 63,328 62,102 62,102
Derivative financial instruments 27,856 27,856 33,293 33,293
Debt securities in issue 77,219 79,843 75,672 79,664
Liabilities arising from non-participating investment
contracts 26,131 26,131 27,248 27,248
Financial guarantees 44 44 51 51
Subordinated liabilities 28,583 31,532 31,973 34,780

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

12. 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 2015
Trading and other financial assets at fair value
through profit or loss:
Loans and advances to customers − 26,601 − 26,601
Loans and advances to banks − 6,564 − 6,564
Debt securities 24,156 22,957 3,670 50,783
Equity shares 62,668 337 1,480 64,485
Treasury and other bills 22 − − 22
Total trading and other financial assets at fair
value through profit or loss 86,846 56,459 5,150 148,455
Available-for-sale financial assets:
Debt securities 24,896 5,366 − 30,262
Equity shares 47 709 303 1,059
Treasury and other bills 852 − − 852
Total available-for-sale financial assets 25,795 6,075 303 32,173
Derivative financial instruments 51 25,696 1,978 27,725
Total financial assets carried at fair value 112,692 88,230 7,431 208,353

At 31 December 2014
Trading and other financial assets at fair value
through profit or loss:
Loans and advances to customers − 28,513 − 28,513
Loans and advances to banks − 8,212 − 8,212
Debt securities 24,230 24,495 3,457 52,182
Equity shares 60,164 343 1,647 62,154
Treasury and other bills 1,459 − − 1,459
Total trading and other financial assets at fair
value through profit or loss 85,853 61,563 5,104 152,520
Available-for-sale financial assets:
Debt securities 47,437 7,151 − 54,588
Equity shares 45 727 270 1,042
Treasury and other bills 852 11 − 863
Total available-for-sale financial assets 48,334 7,889 270 56,493
Derivative financial instruments 94 33,264 2,125 35,483
Total financial assets carried at fair value 134,281 102,716 7,499 244,496

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

12. Fair values of financial assets and liabilities (continued)

Financial liabilities
Level 1 Level 2 Level 3 Total
£m £m £m £m
At 30 June 2015
Trading and other financial liabilities at fair value
through profit or loss:
Liabilities held at fair value through profit or loss − 7,393 1 7,394
Trading liabilities 3,592 52,342 − 55,934
Total trading and other financial liabilities at fair
value through profit or loss 3,592 59,735 1 63,328
Derivative financial instruments 108 26,415 1,333 27,856
Financial guarantees − − 44 44
Total financial liabilities carried at fair value 3,700 86,150 1,378 91,228

At 31 December 2014
Trading and other financial liabilities at fair value
through profit or loss:
Liabilities held at fair value through profit or loss − 6,739 5 6,744
Trading liabilities 2,700 52,658 − 55,358
Total trading and other financial liabilities at fair
value through profit or loss 2,700 59,397 5 62,102
Derivative financial instruments 68 31,769 1,456 33,293
Financial guarantees − − 51 51
Total financial liabilities carried at fair value 2,768 91,166 1,512 95,446

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

12. Fair values of financial assets and liabilities (continued)

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 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)

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 2014 4,232 449 1,807 6,488

Exchange and other adjustments – (9) (9) (18)
Gains (losses) recognised in the income statement
within other income 167 (78) 50 139
Gains recognised in other comprehensive income
within the revaluation reserve in respect of
available-for-sale financial assets – 15 – 15
Purchases 432 199 10 641
Sales (367) (173) (104) (644)
Transfers into the level 3 portfolio 441 – 22 463
Transfers out of the level 3 portfolio – (74) (53) (127)
At 30 June 2014 4,905 329 1,723 6,957
Gains recognised in the income statement within
other income relating to those assets held at
30 June 2014 140 − 50 190

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

12. Fair values of financial assets and liabilities (continued)

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 Financial carried at
profit or loss liabilities guarantees fair value
£m £m £m £m

At 1 January 2015 5 1,456 51 1,512

Exchange and other adjustments − (33) − (33)
(Gains) losses recognised in the income
statement within other income − (100) (7) (107)
Additions − 124 − 124
Redemptions (4) (102) − (106)
Transfers out of the level 3 portfolio − (12) − (12)
At 30 June 2015 1 1,333 44 1,378
Gains (losses) recognised in the income
statement within other income relating to
those liabilities held at 30 June 2015 − (100) (7) (107)

Trading and
other financial Total
liabilities at financial
fair value liabilities
through Derivative Financial carried at
profit or loss liabilities guarantees fair value
£m £m £m £m

At 1 January 2014 39 986 50 1,075

Exchange and other adjustments – (5) – (5)
(Gains) losses recognised in the income
statement within other income (2) 78 (2) 74
Additions – 5 – 5
Redemptions (25) (53) – (78)
Transfers into the level 3 portfolio – 5 – 5
At 30 June 2014 12 1,016 48 1,076
Gains (losses) recognised in the income
statement within other income relating to those
liabilities held at 30 June 2014 − (78) − (78)

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

12. Fair values of financial assets and liabilities (continued)

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 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 4/16 2,179 75 (75)
Unlisted equities Underlying n/a
and debt asset/net asset
securities, value (incl.
3
property property prices)
partnerships in the
life funds n/a 2,615 − (6)
Other 356
5,150
Available for sale financial assets 303

Derivative financial assets:

Interest rate Discounted cash Inflation swap rate
derivatives flow – funding
component (bps) 6/177 1,410 12 (13)
Option pricing Interest rate
model volatility 0%/76% 568 4 (4)
1,978
Financial assets carried at fair value 7,431

Trading and other financial liabilities at fair value through profit or loss 1
Derivative financial liabilities:
Interest rate Discounted cash Inflation swap rate –
derivatives flow funding component
(bps) 6/177 846 − −
Option pricing Interest rate
model volatility 0%/76% 487 − −
1,333
Financial guarantees 44
Financial liabilities carried at fair value 1,378
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.

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

12. Fair values of financial assets and liabilities (continued)

At 31 December 2014

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 4/14 2,214 75 (75)
Unlisted equities Underlying n/a
and debt asset/net asset
securities, value (incl.
3
property property prices)
partnerships in the
life funds n/a 2,617 4 (2)
Other 273
5,104
Available for sale financial assets 270

Derivative financial assets:

Interest rate Discounted cash Inflation swap rate
derivatives flow – funding
component (bps) 3/167 1,382 17 (16)
Option pricing Interest rate
model volatility 4%/120% 743 6 (6)
2,125
Financial assets carried at fair value 7,499
Trading and other financial liabilities at fair value through profit or loss 5

Derivative financial liabilities:

Interest rate Discounted cash Inflation swap rate
derivatives flow – funding
component (bps) 3/167 807
Option pricing Interest rate
model volatility 4%/120% 649
1,456
Financial guarantees 51
Financial liabilities carried at fair value 1,512
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 2014 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 2014
financial statements.

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

13. 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
2015 2014
£m £m

Assets
Loans and receivables: Due from fellow Lloyds Banking Group undertakings 11,599 11,482
Trading and other financial assets at fair value through profit or loss 9 −

Liabilities
Due to fellow Lloyds Banking Group undertakings 5,352 5,288
Derivative financial instruments 78 106
Subordinated liabilities 11,141 11,364

During the half-year to 30 June 2015 the Group earned £66 million (half-year to 30 June 2014: £83 million) of interest
income and incurred £561 million (half-year to 30 June 2014: £569 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 2015, HM Treasury held an interest of 16.87 per cent in 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; the Group 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 has participated in the UK government’s National Loan Guarantee Scheme, which was
launched on 20 March 2012. Through the scheme, the Lloyds Banking Group is providing eligible UK businesses with
discounted funding, subject to continuation of the scheme and its financial benefits, and 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.

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

13. Related party transactions (continued)

Funding for Lending

In August 2012, the Lloyds Banking Group announced its support for the UK Government’s Funding for Lending Scheme
and confirmed its intention to participate in the scheme. The Funding for Lending Scheme represents a further source of
cost effective secured term funding available to the Lloyds Banking Group. The original initiative supported a broad range
of UK based customers, providing householders with more affordable housing finance and businesses with cheaper
finance to invest and grow. In November 2013, the Lloyds Banking Group entered into extension letters with the Bank of
England to take part in an extension of the Funding for Lending Scheme until the end of January 2015. This extension of
the Funding for Lending Scheme focused on providing businesses with cheaper finance to invest and grow. In December
2014, the Bank of England announced a further extension to the Funding for Lending Scheme running to the end of
January 2016 with an increased focus on supporting small businesses. At 30 June 2015, the Lloyds Banking Group had
drawn down £24 billion (31 December 2014: £20 billion) under the Funding for Lending Scheme, of which £14 billion had
been drawn down under the extension to the scheme announced in 2013.

Enterprise Finance Guarantee

The Lloyds Banking Group participates in the Enterprise Finance Guarantee Scheme which was launched in January
2009 as a replacement for the Small Firms Loan Guarantee Scheme. The scheme is a UK government-backed loan
guarantee, 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 (formerly the Department for Business,
Enterprise and Regulatory Reform) 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 within the rules of the scheme. As at 30 June 2015, the Lloyds Banking Group
had offered 6,378 loans to customers, worth over £539 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
On 7 October 2013, Bank of Scotland plc entered into an agreement with The Commissioners of Her Majesty's Treasury
by which it agreed that the Halifax Division of Bank of Scotland plc would participate in the Help to Buy Scheme with
effect from 11 October 2013 and that Lloyds Bank plc would participate from 3 January 2014. 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 arising from a higher loan-to-value loan being made. £2,484 million of outstanding loans at
30 June 2015 (31 December 2014: £1,950 million) had been advanced by the Lloyds Banking Group under this scheme.

Business Growth Fund

The Lloyds Banking Group has invested £151 million (31 December 2014: £118 million) in the Business Growth Fund
(under which an agreement was entered into with RBS amongst others) and, as at 30 June 2015, carries the investment
at a fair value of £142 million (31 December 2014: £105 million).

Big Society Capital

The Lloyds Banking Group has invested £33 million in the Big Society Capital Fund under which an agreement was
entered into with RBS amongst others.

Housing Growth Partnership

The Lloyds Banking Group has committed to invest up to £50 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.

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

13. Related party transactions (continued)

Other government-related entities

There were no significant transactions with other 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 2015 are similar in nature to those for the year ended
31 December 2014.

14. Disposal of interest in TSB Banking Group plc

On 20 March 2015 the Group announced that it had agreed to sell a 9.99 per cent interest in TSB Banking Group plc
(TSB) to Banco de Sabadell S.A. (Banco Sabadell) and that it had entered into an irrevocable undertaking to accept
Banco Sabadell’s recommended cash offer in respect of its remaining 40.01 per cent interest in TSB. The offer by Banco
Sabadell was conditional, amongst other things, upon regulatory approval.

The sale of the 9.99 per cent interest completed on 24 March 2015, reducing the Group’s holding in TSB to 40.01 per
cent; this sale led to a loss of control and the deconsolidation of TSB. The Group’s residual investment in 40.01 per cent
of TSB was then recorded at fair value, as an asset held for sale. The Group recognised a loss of £660 million reflecting
the net costs of the Transitional Service Agreement between Lloyds and TSB, the contribution to be provided by Lloyds
to TSB in moving to alternative IT provision and the net result on sale of the 9.99 per cent interest and fair valuation of
the residual investment.

The Group announced on 30 June 2015 that all relevant regulatory clearances had been received and that the sale was
therefore unconditional in all respects, so that at 30 June 2015 the Group was carrying a receivable from Banco Sabadell
in respect of the final proceeds of sale. The proceeds were received on 10 July 2015.

15. Ordinary dividends

The directors have approved an interim dividend of £540 million which will be paid in the second half of 2015.

A dividend of £540 million in respect of the year ended 31 December 2014 was paid in May 2015.

16. Events since the balance sheet date

On 30 July 2015, the Group announced that it had agreed the sale of a portfolio of Irish commercial loans, with a book
value of £724 million, for a cash consideration of approximately £827 million; after transaction and other costs the gain
on disposal is not expected to be significant. The transaction is expected to complete in the fourth quarter of 2015.

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

17. Future accounting developments

The following pronouncements are not applicable for the year ending 31 December 2015 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.

IFRS 9 Financial Instruments

IFRS 9 replaces IAS 39 Financial Instruments: Recognition 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. These changes are not expected to
have a significant impact on the Group.

IFRS 9 also replaces the existing ‘incurred loss’ impairment approach with an expected credit loss approach. This
change is likely to result in an increase in the Group’s balance sheet provisions for credit losses although the extent of
any increase will depend upon, amongst other things, the composition of the Group’s lending portfolios and forecast
economic conditions at the date of implementation. In February 2015, the Basel Committee on Banking Supervision
published a consultative document outlining supervisory expectations regarding sound credit risk practices associated
with implementing and applying an expected credit loss accounting framework. A final version is expected to be issued at
the end of 2015.

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. The revised requirements are not expected to have a significant impact on
the Group.

IFRS 9 is effective for annual periods beginning on or after 1 January 2018. As at 30 July 2015, this pronouncement is
awaiting EU endorsement.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 replaces IAS 18 Revenue and IAS 11 Construction Contracts. IFRS 15 establishes principles for reporting
useful information about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s
contracts with customers. Revenue is recognised at an amount that reflects the consideration to which the entity expects
to be entitled in exchange for goods and services. Financial instruments, leases and insurance contracts are out of scope
and so this standard is not expected to have a significant impact on the Group.

IFRS 15 is effective for annual periods beginning on or after 1 January 2017, although in May 2015, the IASB issued an
exposure draft proposing to defer the effective date to 1 January 2018. In addition, on 30 July 2015 another exposure
draft was issued proposing targeted amendments to the standard. As at 30 July 2015, this standard is awaiting EU
endorsement.

18. 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 2014 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.

19. 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 2014 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.

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

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 2015 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 2015 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
30 July 2015

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
Carolyn Fairbairn
Simon Henry
Dyfrig John CBE
Nicholas Luff
Nicholas Prettejohn
Anthony Watson CBE
Sara Weller CBE

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

INDEPENDENT REVIEW REPORT TO LLOYDS BANK PLC

Report on the condensed consolidated half-year financial statements

Our conclusion
We have reviewed the condensed consolidated half-year financial statements, defined below, in the half-year
management report of Lloyds Bank plc for the six months ended 30 June 2015. Based on our review, nothing has come
to our attention that causes us to believe that the condensed consolidated half-year financial statements are not
prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European
Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

This conclusion is to be read in the context of what we say in the remainder of this report.

What we have reviewed

The condensed consolidated half-year financial statements, which are prepared by Lloyds Bank plc, comprise:

the consolidated income statement for the six months ended 30 June 2015;
the consolidated statement of comprehensive income for the six months ended 30 June 2015;
the consolidated balance sheet as at 30 June 2015;
the consolidated statement of changes in equity for the six months ended 30 June 2015;
the consolidated cash flow statement for the six months ended 30 June 2015; and
the explanatory notes to the condensed consolidated half-year financial statements

As disclosed in note 1, 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.

The condensed consolidated half-year financial statements included in the 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 and Transparency Rules of the United Kingdom's Financial Conduct Authority.

What a review of condensed consolidated 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 half-year management report and considered whether it contains
any apparent misstatements or material inconsistencies with the information in the condensed consolidated half-year
financial statements.

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

INDEPENDENT REVIEW REPORT TO LLOYDS BANK PLC (continued)

Responsibilities for the condensed consolidated half-year financial statements and the review

Our responsibilities and those of the directors

The half-year management report, including the condensed consolidated half-year financial statements, is the
responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-year
management report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial
Conduct Authority.

Our responsibility is to express to the company a conclusion on the condensed consolidated half-year financial
statements in the 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 and Transparency Rules of the
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.

PricewaterhouseCoopers LLP
Chartered Accountants
30 July 2015
London

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 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.

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LLOYDS BANK PLC 2015 HALF-YEAR RESULTS

CONTACTS

For further information please contact:

INVESTORS AND ANALYSTS

Douglas Radcliffe
Investor Relations Director
020 7356 1571
douglas.radcliffe@finance.lloydsbanking.com

Mike Butters
Director of Investor Relations
020 7356 1187
mike.butters@finance.lloydsbanking.com

Duncan Heath
Director of Investor Relations
020 7356 1585
duncan.heath@finance.lloydsbanking.com

CORPORATE AFFAIRS
Matthew Young
Group Corporate Affairs Director
020 7356 2231
matt.young@lloydsbanking.com

Ed Petter
Group Media Relations Director
020 8936 5655
ed.petter@lloydsbanking.com

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

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