Leading franchise in U.K. financial services; Strong risk-adjusted earnings; Improving revenue momentum and tight cost control; and Asset quality underpinned by a large residential mortgage book. Weak core capitalization by Standard&Poor's measures, although capital flexibility is slowly improving; A proportionately large exposure to unsecured retail lending, on which impairment charges have significantly increased; and Less international diversification than most similarly rated peers. The ratings on U.K.-incorporated Lloyds TSB Bank PLC (Lloyds TSB) recognize the group's excellent domestic business position, strong risk-adjusted profitability, and controlled risk profile. They also reflect Standard&Poor's Ratings Services expectation that its weak capitalization, according to our measures, will improve over the next three years. Lloyds TSB has a strong franchise in U.K.
