The ratings on Lloyds TSB Bank PLC (Lloyds TSB) reflect its strong banking profitability, good asset quality, and its wide U.K. financial services franchise. The group includes Cheltenham&Gloucester PLC (not rated) and Scottish Widows PLC (Scottish Widows; not rated). Core capitalization is weak by Standard&Poor's measures, however, even allowing for the relatively low risk of many group activities. Core capital flexibility declined in 2002. Standard&Poor's analysis of capital looks beyond the strong regulatory capital ratios by taking account of the proportion of group common equity that is required to support the life assurance business, based on the underlying strength of Scottish Widows. A significant portion of group common equity is required to support Scottish
