A resilient performance in a challenging environment – reflecting on our Full Year Results

Today we announced our financial results for 2020 and our Strategic Review for the coming year.

2020 was a challenging year for everyone, but across the UK we saw people and communities come together to support each other and adapt to a completely new way of life.

I’m incredibly grateful to all our colleagues for working so hard to continue to serve our customers during this time – and to our customers for bearing with us as we’ve adapted our services. 

Our 2020 highlights

• Over 90% of our branch network remained open, with 1.3 million payment holidays provided to customers and over £12 billion of support for businesses through various government loan schemes. 
• We established a dedicated phone line for the over 70s and frontline NHS staff, while also providing free personal belongings cover to our NHS customers.
• We launched our Race Action Plan, the first commitment of its kind by a FTSE 100 company, to build a fully inclusive workplace and ensure our business lives up to the standards expected of it.
• We pledged to work with all our stakeholders to tackle climate change by reducing the carbon emissions we finance by 50% by 2030 – on the path to net zero by 2050 or sooner.
• We launched The Big Conversation, which brought together over 900 local businesses, policymakers, community leaders and experts to discuss how we can work together to Help Britain Recover. 
• Over 50,000 of our colleagues have been working from home, and have continued to keep things running and support our customers just as efficiently as before. 

We’re really proud of what we have achieved in such a difficult and disruptive year, and as our third strategic plan draws to a close we’re taking the opportunity to reflect before moving forward.

Concluding our third strategic plan (2018-20)

2020 was the final year of our most recent strategic plan, launched in 2018 to help the Group transform for success in a digital world. This transformation underpinned our response to coronavirus last year – by making our business simpler, more agile and digitised in the years running up to 2020, we put ourselves in a position to adapt quickly to the situation and to keep serving our customers throughout.

As the largest mortgage lender in the UK, we have supported more and more of our customers to buy their first home. This includes lending around £40 billion to first time buyers between 2018 and 2020, exceeding our target by more than 30%.

Over the past three years we have delivered on our plans to support our Commercial Banking clients, exceeding our £6 billion target of increased net lending to start-ups, SMEs and Mid Market customers and achieving our annual £18 billion commitment for gross lending to UK businesses in 2019 and 2020. We believe that supporting businesses to start up and grow is fundamental to Helping Britain Recover, and have now helped more than 265,000 businesses start up since 2018.

Given our unique position as the UK’s only banking and insurance provider, we have extended the functionality and reach of our unique Single Customer View capability while increasing the assets we hold on behalf of customers by £46 billion.

As part of our strategic commitment to maximise the Group’s capabilities, we have enhanced our position in financial planning and retirement through launching the Schroders Personal Wealth joint venture, with an ambition to become a top-three financial planning business by 2025. 

Over the course of the strategic plan we significantly increased our investment in technology, helping us increase the scale and speed at which we deliver transformation initiatives. We were able to further strengthen our position as the largest digital bank in the UK with 17.4 million digitally active customers, up from 13.4 million in 2017. 

We have continued to modernise and simplify the Group’s IT architecture and have partnered with specialist technology and fintech providers, such as Google Cloud to accelerate our progress in deploying smarter technology to benefit our customers and deliver operational efficiencies.

This technology and our multi-channel model meant we were able to continue offering our products and services to our digitally active customers when coronavirus hit, while also keeping our branch network open for those needing face-to-face support. 

Of course our systems and strategy would have been nothing without the people driving them – but our transformation laid the foundations for our flexible and agile response to the past year, and forms the basis of our plans for 2021.

Our financial performance in 2020

Despite the challenge of a global pandemic, our customer-focused business model enabled us to deliver a profit for 2020. Our results continue to demonstrate the strength of our customer brands, our balance sheet and our strategy.  

Across the year, underlying profit was £2.2 billion and statutory profit before tax was £1.2 billion. Net income was £14.4 billion, largely reflecting lower interest rates and reduced levels of customer activity. 

Total costs were reduced by a further 4% to £8 billion, despite our continued investment in digital projects and support for customers through the coronavirus pandemic, and our cost:income ratio was 55.3%. 

The impairment charge for the year was £4.2 billion, below the £4.5 to £5.5 billion range forecast in July last year, due to relative economic stability in the second half of 2020 and the impact of government support measures. We have taken a small, largely administrative PPI provision of £85 million, although more than 99% of pre-deadline queries have now been processed.

We maintained a strong balance sheet with a CET1 capital ratio of 16.2% after dividends. This key measure of capital strength shows the Group has considerable buffers against potential future losses and capacity to lend into a recovery. We also saw customer deposits with our trusted brands increase £39 billion to £450 billion.

Finally, we have also been able to recommend an ordinary dividend of 0.57p (taking Prudential Regulation Authority guidance into account), demonstrating the health of our business. 

Looking forward

2021 will be an important year of recovery for the UK. Our Strategic Review focuses on Helping Britain Recover by supporting all the people and regions in our society. It also continues our transformation as a Group, enhancing our capabilities and building our position as Britain’s preferred financial partner.

I hope you will take the time to read about our plan for the year; I will certainly be focusing my remaining two months on ensuring its success.