Enhanced support for business
You will have heard this morning that the Treasury has worked with the main banks to improve the financial support available to businesses experiencing cash-flow challenges as a result of the epidemic. We are delighted that the Chancellor has agreed to the simplify the CBIL scheme. From today all applications for support will be considered under the scheme.
The Chancellor’s announcement is a welcome broadening of the scheme which will mean that many more eligible businesses can benefit from 0% interest on term loans for the first 12 months. We’re pleased too by the announcement of (CLBILS) which provides much needed help for larger firms. We will continue to do all that we can to support our clients, large and small, in these difficult times.
One of the likely consequences of this simplification is that demand for loans under CBILS will increase sharply. We have been working flat out in recent days to build up our capacity to deal with greater volumes but it is worth recalling that even before these changes demand was already far higher than what we are used to dealing with. With the support of our regulators we have reorganised ourselves and our processes as fast as possible to put all available resource into supporting our business customers. But like all businesses we too are dealing with the human effect of the virus and social distancing measures on our staffing levels. Please bear with us.
The Government continues to require that eligibility for CBILS is based on viability. Not all small businesses will qualify for support, particularly if it has been reasonably assessed that the finance will not help the business to trade-out of its cash-flow difficulty, and will not prevent it from going out of business in the short-to-medium term.
We have received a number of inquiries about the working of CBILS from parliamentarians on behalf of their constituents. Please see below for some frequently asked questions which we hope might help you and your team, which we can send to you as an attachment if you prefer.
Additional support for larger businesses
The Chancellor also announced a new Coronavirus Large Business Interruption Loan Scheme (CLBILS). The additional acronym may be a mouthful, but this is a positive step in addressing help to the ‘missing middle’ - those businesses currently excluded from the schemes reserved for small and large businesses (CBILS and CCFF).
The new CLBILS will provide a government guarantee of 80pc to support banks in making available more loans of up to £25m to businesses with an annual turnover of between £45m and £500m. Loans backed by a guarantee under CLBILS will be offered at commercial rates of interest and further details of the scheme will be announced by the Government later this month.
Specific help for over-70s and NHS workers
Because our call centres are extremely busy at present, we have introduced a new, dedicated telephone service for the over-70s. This ensures that our elderly and more vulnerable customers can get through to personalised help quickly. We are writing to over three million customers who qualify to explain the support available, including details of the new telephone number and a guide on how best to manage their money and protect themselves from fraud.
In addition we are using our technology to fast-track NHS employees who call us so they don‘t have to wait. When they call our helplines they will automatically receive priority service. This is because we recognise the pressures they may already be facing on the country’s behalf. We are also working to identify any other customers who may need extra support, such as those who have previously informed us that they have specific service needs because of a vulnerability, and we will be deploying technology that will allow us to prioritise their calls through our existing telephone lines where possible. We are also taking steps to make it easier for customers to get access to cash where they are unable to leave their home owing to the current circumstances.
Meanwhile we continue to keep as many branches open as possible. We have had to close a number due to staff illness or to deep-clean them, and these closures can happen at short notice. Roughly 90pc of our branches remain open, on weekdays from 10am to 2pm. We have suspended our mobile branch service.
News for shareholders
Earlier this week our Board announced its decision not to make any dividend payments or share buybacks on Lloyds Banking Group shares until the end of 2020. In response to a request from our regulator to ensure that we are preserving resources to support customers, the Board also decided to cancel payment of the final 2019 dividend. Clearly this will come as a disappointment to our shareholders, many of whom are customers, but we feel this is a prudent step to take in the current circumstances.
Getting cash to small businesses in your communities
We remain focused on helping the Government deliver its Coronavirus Business Interruption Loan Scheme. Thanks to the changes introduced in the initial weeks to simplify eligibility, we have been steadily increasing the number of customers helped. Operational difficulties have meant that this has not gone as smoothly as we would have wanted to begin with, but the rate of delivery is accelerating and we are getting help to qualifying businesses as quickly as possible. The latest figures from UK Finance, which speaks for the industry as a whole, show a significant increase in the number of loans being approved. Total lending under the scheme has grown by £700 million in the last week, an increase of 150 per cent.
We are also having to manage expectations amid justifiable public interest. The rules set by the Treasury make clear that CBILS are not designed for all businesses, principally because they require us to assess affordability. Even with a taxpayer guarantee of 80pc, CBILS are loans and may not be suitable for businesses that would struggle to meet the additional repayment costs after the 12 month interest-free period expires. We know from cases MPs have brought to our attention that this is a source of profound frustration for those that find themselves excluded through no fault of their own. Details of how CBILS work and how to apply can be found here.
CBILS are not the only form of help available. Indeed, so far only a fraction of the thousands of small business customers we support have applied for one, although they may do so later. Many for the moment are instead making use of government support such as VAT or NIC deferrals and furloughing staff under the Job Retention Scheme. We are finding that the great majority - four out of five – don’t want to take on additional debt. Rather, they want to reduce overheads by seeking short term working capital solutions. We have been using the £2bn coronavirus fund we set up at the beginning of the crisis, with 17,000 capital repayment holidays and 10,000 overdraft extensions put in place so far - fee-free. Our data also shows that many micro-businesses, such as sole traders, are supporting themselves by seeking help with their personal finances too, for example though mortgage repayment holidays, another key part of the overall package we offer.
Meanwhile we continue to work with government to refine and extend the options available. While customer demand below £25,000 is mainly for payment holidays and overdrafts, we now offer CBILS from £10,000 for limited companies and from £25,000 for others, up to a maximum of £5m. We have also helped the Government develop the CBILS for larger businesses - CLBILS - to close the gap left for those too big to qualify for small business help but not large enough to qualify for the Government’s investment-grade corporate support (CCFF). However, we recognise there is still a lot to do to anticipate growing demand for help in the coming weeks and months, and to address the needs of those not strong enough to borrow their way out of the crisis. That’s why we have also been exploring with Government alternatives such as grant schemes and taking an equity stake in a business.
Supporting personal customers - and the NHS
We have concentrated on our duty to keep banking services available for all while devising new ways to help those in difficulty or struggling to access financial services. We’ve offered our personal customers payment holidays on mortgages, loans and cards, a £500 interest-free overdraft, no fees for missed payments and access to fixed term accounts without charge. So far we have agreed more than 350,000 personal loan payment holidays and nearly 300,000 mortgage payment holidays. Our motor finance customers can already access three-month payment deferrals on Hire Purchase, Personal Contract Purchase and Contract Hire products. This has already helped more than 50,000 people.
We have launched a new dedicated phone line for elderly customers and developed a new process to allow a trusted person limited access to an account for customers who need cash but can’t get to one of our branches and don’t bank digitally. In addition, our branch staff are now making ‘wellbeing calls’ – informal phone calls to elderly customers focused on providing human contact, reassurance and support rather than on specific banking needs.
Calls from customers who work for the NHS are answered as a priority. Separately we have sent more than 80m letters and 15m text messages to customers explaining what’s available, including a guide to how best to manage their money and stay safe from fraud.
In the last few days, we have set up a specialist phone line with the charity We Are Digital, to help up to 20,000 vulnerable customers learn digital skills and stay connected online. Users will be helped with everyday tasks such as online shopping and connecting virtually with family and friends, as well as online banking. This partnership will also deliver up to 2000 tablets to customers aged over 70 who would benefit most and don’t have a suitable device to access the internet.
We are also increasing our engagement with charities. With our support, The Silver Line, partner to Age UK, will continue to offer a 24/7 helpline and friendship services to those aged 55 plus who may be feeling lonely or isolated. This service has seen a huge increase in calls and this funding will help them meet this demand. We’re also providing extra funding to our long-term charity partner Mental Health UK to extend the Mental Health and Money Advice Service for those in financial difficulty.
Working safely with coronavirus
The initial scramble to reorganise ourselves to keep branches and call centres operating while protecting staff and customers has eased somewhat as we have got used to new ways of working. We have collaborated closely with our recognised trade unions Accord and Unite to make sure we are doing everything we can to create a safe working environment in all our sites, including appropriate social distancing requirements, specialised deep cleaning and Perspex screens in branches. Thanks to the efforts of our staff we are keeping nine out of 10 branches open on average, while our IT teams have allowed us to increase steadily the number of colleagues working from home, which in turn has taken some of the pressure off our call centres as we deal with significant increases in customer demand. We remain hugely grateful to our key worker colleagues who continue to report for duty in order to support our customers and keep the UK’s financial infrastructure running.
Coronavirus impact on the UK economy and what it means for our customers
We are frequently asked what part the banks will play in absorbing the economic shock of coronavirus, and this week provided some early answers. Most of the major lenders reported their quarterly results, which showed sharp falls in profits and significant impairments - the amounts set aside to cover anticipated losses. We published ours yesterday and they included our projections for the initial impact of coronavirus on our business and our customers, and also our estimates for what coronavirus means for the UK’s economic prospects.
Our statutory profit before tax for the first quarter of the year was down 95pc to £74m, reflecting an impairment charge of £1.4bn. Despite that, our capital ratio - a measure of a bank’s strength - is at 14.2pc, above the amount required by regulators. The economic impact of coronavirus is challenging but will depend on the severity and length of the pandemic and the effect of state measures in the UK and around the world. Our prudent central scenario estimates that the UK economy will shrink by 5pc this year, then grow by 2pc over 2020-21. We also expect house prices to fall by 5pc this year, before growing by 2pc in 2021. Lloyds Banking Group won’t be immune as we take on the losses of our customers, but we are confident that the strength of our balance sheet and of our business model will allow us to meet all the lending demands of our customers in the weeks and months ahead. The strength we have built over the past decade can now help protect the UK economy.
You can read our results and access our webcast here.
Getting money to the businesses that need help
On Monday the Government’s new ‘bounce back’ loans will be launched, which aim to get money to businesses that qualify, quickly. This is a huge operational challenge for all the banks taking part, and we have cooperated closely with the Treasury and the British Business Bank to ensure that at Lloyds and Bank of Scotland we are ready to go. We welcomed this latest addition to the schemes introduced by the Chancellor, and are grateful for the way the Government has continued to adapt them in light of evolving understanding and customer need. The aim is to keep it simple: from Monday our business customers will be able to use a simple online form to provide us with key information. If they meet the criteria and pass basic identity checks they should be approved, and can expect cash within 24 hours of approval. Final details are being hammered out with the Treasury over the weekend, ready for Monday.
Meanwhile we have been working our way through the initial backlog of applications for CBILS, with more than £500m in loans agreed so far. We regret the frustration our customers have experienced as we tried to deal with the demand, and recognise that in too many cases they didn’t receive the level of service they were entitled to expect. I’ve certainly seen that in some of the cases you have brought to my attention. But the situation has improved markedly in recent days, with the daily amounts of loans agreed climbing steadily and now better reflecting our share of SME market lending. Hundreds of colleagues have been redeployed and retrained from elsewhere in the bank to support business customers. Changes introduced by the Treasury to reduce requirements for documents to prove future affordability have also helped. We are now running at acceptance rates that match what we saw before the crisis - with about 8/10 applications agreed - and the process is getting quicker. We are still finding that the majority of small business customers who have asked us for help have preferred to seek working capital solutions such as fee-free capital repayment holidays or overdrafts (40,000 agreed so far), rather than take on more term debt through CBILS (more than 4,500 agreed). But we recognise that more businesses may require loans in the future. You can find examples of some of the businesses we have helped around the country here.
Our coronavirus support for business is set out here, and from Monday will include instructions for accessing bounce back loans.
Helping our personal banking customers find the help they need
As the largest retail and commercial bank in the UK, with 27 million customers, we have mobilised ourselves to help those experiencing financial difficulties as a result of the pandemic. So far we have agreed 880,000 payment holidays, including more than 400,000 for mortgages, in excess of 200,000 for credit cards and more than 100,000 for motor finance. But we recognise too that we will need to help customers manage the return to payments at some point and we are working to understand the needs particularly of our vulnerable customers to ease the transition back to some kind of normality.
From the outset we knew that we had to keep financial services available to our customers. Despite the effect of illness on our staff and the requirements of social distancing, more than 90 per cent of our Lloyds, Halifax and Bank of Scotland branches have remained open, along with our call centres and essential infrastructure sites. Critically, our digital banking operations have remained fully operational throughout. While we continue to experience high volumes of calls, we are continuing to improve our service in our call centres and wait times are improving.
Our ability to prioritise customers who work for the NHS when they call us has saved them an estimated 400 hours so far and we are also providing free personal belongings cover for them and those working in the social care sector, giving them peace of mind while they are at work or travelling. We’ve supported more than 95,000 customers through our over-70s helpline and we’ve sent out more than 83 million emails or letters and 21 million text messages to customers, keeping them up to date.
Keeping our staff and customers safe while supporting our communities
To meet the coronavirus challenge, the Group has had to reorganise itself to focus on dealing with the impact of the pandemic and to ensure we can continue to deliver our services safely for our colleagues and customers. In a matter of weeks, we have increased the number of staff able to work from home, from 15,000 before the crisis to 45,000 now, thanks in part to the building of more than 10,000 secure laptops able to handle customer data safely. As part of the way we have re-organised ourselves 1300 of our colleagues have moved to new roles to support faster services for our retail customers. Where working from home is not possible, and our colleagues are providing a critical service, such as in our branch network, we’re closely following government guidance around social distancing and updating colleagues on the precautions they should take.
Meanwhile we have suspended all role reduction programmes while committing to pay all of our staff, in full, whatever their circumstances. This is important as it removes uncertainty for colleagues, allowing them to focus on supporting customers and serving their communities. Our partnership with our recognised unions Accord and Unite has been critical to helping us meet the needs of our colleagues.
With the charity WeAreDigital we are funding a specialist phone line to help 20,000 vulnerable customers get started with using the internet to stay connected with friends and family. We are also supporting The Silver Line, run by AgeUK, to enable it to continue to offer a 24/7 helpline and friendship services to the over 55s who may be feeling lonely or isolated. And we have funded an extension of the Money and Mental Health advice service for those in financial difficulty.
Finally, I want to tell you about a new online learning platform we’ve helped the Department for Education in England deliver which will allow people to enhance their skills while staying at home. The Skills Toolkit provides access to free, high-quality digital and numeracy courses which will help users build their abilities, progress in work and boost their job prospects. The courses range from everyday maths and using email and social media more effectively at work to more advanced training. The platform also offers employees who have been furloughed an opportunity to keep up their skills development while they are at home. The scheme has drawn on some of the expertise Lloyds has gained while establishing its own Digital Academies in Manchester and Bristol. It also links to our ‘Learn for Everyday Life’ courses on topics ranging from dealing with online fraud, presenting yourself online, improving your CV and working with others safely online.
