Some financial terms.txt

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  1. Assets
    Anything owned by the company that has a monetary value: e.g. fixed assets like buildings, plants and machinery and vehicles; intangible elements like trade marks , brand names and current assets such as stock, debtors and cash. For a bank, one of the largest asset categories will be loans to customers.
  2. Basis points
    A basis point is a unit that is equal to 1/100th of a percentage point. It is frequently used to express percentage point changes of less than 1%, e.g. 0.5% is the same as 50bps.
  3. Book value
    The value of an asset as it appears on a balance sheet
  4. Capital
    The long term funds provided by lenders and investors to businesses
  5. Cashflow
    The movement of cash in and out of a business from day to day direct trading and other non-trading or indirect effects, such as capital expenditure, tax and dividend payments
  6. Combined businesses basis
    Results presented on this basis have been adjusted in order to provide more meaningful and relevant comparisons, primarily in relation to the combined entity of Lloyds and HBOS businesses.
  7. Core Tier One Capital
    Broadly speaking, this is the total equity that shareholders own in Lloyds Banking Group. Core Tier One capital absorbs losses when loans and investments turn bad in the event of a run on the bank. The higher a bank's Core Tier One capital, the safer it's considered to be (see also Core Tier One Ratio)
  8. Core Tier One Ratio
    The Core Tier One ratio is calculated by working out the bank's total Core Tier One Capital as a percentage of its total assets, taking into account the riskiness of the assets (Referred to as Risk Weighted Assets)
  9. Cost:Income Ratio
    An efficiency measure to assess a company's costs in relation to its income, calculated by dividing operating expenses (e.g. administrative costs, salaries, property expenses) by operating income. The lower the cost to income ratio, the more profitable and efficient.
  10. Cost management
    Management of cost related activities achieved by collecting, analysing, evaluating, and reporting cost information used for budgeting, estimating, forecasting and monitoring costs.
  11. Cost performance
    Accomplishment of a given task measured against present standards of accuracy, completeness, cost and speed
  12. Current Assets
    Cash and anything that is expected to be converted into cash within twelve months of the balance sheet date.
  13. Embedded Value (EV)
    The embedded value of a life insurance business is an estimate of teh value of both its net assets and the income stream expected from policies already in force.
  14. Fair value unwind
    Fair value unwind is an accounting mechanism which ensures the value of assets is reflected accurately over time
  15. Funding costs
    Every time we make a loan to a customer (take on an asset) we have to fund this (take on a liability) by taking a retail deposit or borrowing money on the money markets. The rate of interest we pay to our depositor or creditor forms a major part of our funding costs.
  16. Funding for Lending
    A scheme by the Bank of England and Treasury which provides funding to banks with the proviso that they lend to UK companies and households. As part of our Funding for Lending offer, we have reduced the interest rate on related loans by 1%. We've made funds available through several of our businesses and have launched a major press campaign about the scheme. Publicity is vital to enhance the confidence of businesses and consumers and let them know that money is available.
  17. Gross New Lending
    The total value of new loans advanced in a given time period. Repayments and other adjustments are excluded.
  18. Impairments
    The cost to the business, known as an "impairment loss" or "provision", of actual and potential bad debts from customers who are unable to repay borrowed money.
  19. Initial Public Offering (IPO)
    The process by which a company - whether new or established - issues shares to the public which can be traded on the stock market.
  20. Liquidity Profile
    The capacity of an organisation to turn assets into cash, with cash itself (i.e. money) as the most liquid asset
  21. Net Interest Margin
    A measure of the difference between interest income received and the amount of interest paid out, relative to the amount of interest-earning assets held. It is usually expressed as a percentage.
  22. Non-core
    These are banking activities which the Group has decided to discontinue. Non core includes many of our international activities as we re-shape our business to focus on the UK and territories with close links with the UK. It also includes specific portfolios such as self-certified mortgages, shipping loans, or certain commercial real estate projects. By exiting these areas, we lower the riskiness of our assets and become more appealing to investors. Having fewer risky activities on our balance sheet also improves our capital ratios.
  23. Operating Expenses
    These are the costs of the bank's business activites e.g. staff salaries, property costs, IT costs etc.
  24. Profit Before Tax (PBT)
    A profitability measure that looks at a company's profits before the company pays corporate income tax. This measure deducts all expenses from revenue, including interest expenses and operating expenses, and impairments but it leaves out the payment of tax.
  25. Provision
    The amount of money allocated to pay for one-off items such as defaulted customer loans or PPI redress.
  26. Risk Framework
    The model of risks in the organisation, typically detailing the various classes of risk and the degree of risk management expected.
  27. Risk Weighted Assets
    These are calculated by applying a "risk weighting" to all our assets. The total of risk weighted assets reflects both how much is outstanding to us from customers and how likely it is that the loans will be repaid in full and on time.
  28. Share capital
    The balance sheet nominal value paid into the company by shareholders at the time shares were issued.
  29. Total income
    Revenue (cash coming in through the door, paid to the business in exchange for a product or service).
  30. Underlying
    A figure which excludes one-off and exceptional items.
  31. Underlying profit/loss
    The profit or loss we would have made if we did not have to take into account one-off items such as PPI provisions. It's calculated by subtracting the bank's total costs and impairment charges from our income.
  32. Volatility
    The gain or loss recognised by the business from fluctuations in the value of securities held.
  33. Working capital
    CUrrent assets less current liabilities, representing the required investment to finance stock, debtors and work in progress.
  34. Wholesale funding
    Where the bank raises funds through the issuance of a debt instrument (security) which is purchased by an investor.
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Some financial terms.txt
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