Bank of Scotland plc, owned by Lloyds Banking Group, reported a loss before tax for the half-year to June 30, 2023, of £112 million, compared to a profit before tax of £1.157 billion for the same period in 2022, “as a result of lower net interest income and a higher impairment charge.”

Total income for the half-year was £1.751 billion, a decrease of 33% on the first half of 2022.

Net interest income was £1.565 billion, compared to £2.472 billion for the same period in 2022. “This was impacted by higher funding costs on intra-group borrowing which more than offset the benefits from UK Bank Rate increases and effects of average interest-earning asset growth,” said Bank of Scotland.

“Other income of £186 million was 16 per cent higher than the first half of 2022, driven by increases in both net fee and commission income and other operating income.

“Net fee and commission income for the period was £175 million compared to £143 million in the first half of 2022, reflecting improved credit and debit card performance. Other operating income in the period of £56 million was up £27 million.”

Operating expenses of £1.485 billion were 2% higher than in the first half of 2022 “due to higher depreciation given increased strategic investment, partly offset by lower staff costs.”

Bank of Scotland added: “The group recognised remediation costs of £11 million (half-year to 30 June 2022: £2 million).

“There have been no further charges relating to HBOS Reading and the provision held continues to reflect the group’s best estimate of its full liability, albeit uncertainties remain.

“The impairment charge was £378 million compared with a £18 million charge in the half-year to 30 June 2022.

“The increase reflects the expected credit loss (ECL) allowance build from Stage 1 loans rolling forward into a more adverse economic outlook, as well as increased flows to default primarily in legacy variable rate mortgage portfolios and the inclusion of MBNA limited following the transfer from Lloyds Bank plc in November 2022.

“This increase was partly offset by a lower charge from economic outlook revisions.”

Bank of Scotland said the group’s balance sheet remained broadly stable compared to December 31, 2022.

“Total assets of £320,026 million were down £215 million compared to £320,241 million at 31 December 2022,” said Bank of Scotland.

“Financial assets at amortised cost were £562 million lower at £308,100 million compared to £308,662 million at 31 December 2022 with debt securities £1,957 million higher, offset by a reduction in balances due from fellow Lloyds Banking Group undertakings of £358 million and loans and advances to customers of £2,172 million to £290,244 million.

“The reduction in loans and advances to customers was largely as a result of the exit of £2.5 billion of legacy mortgage loans.

“Total liabilities of £303,746 million were down £449 million compared to £304,195 million at 31 December 2022 driven by a reduction in customer deposits of £3,951 million in the period to £162,412 million.

“The reduction in the first half included a decrease in current account balances from tax payments, higher spend and a more competitive market, partly offset by growth in savings balances.

“This was partially offset by increases in balances due to fellow Lloyds Banking Group undertakings of £2,094 million and debt securities in issue of £1,455 million.

“Total equity increased by £234 million from £16,046 million at 31 December 2022 to £16,280 million at 30 June 2023.”