The ratings on Lloyds TSB Bank PLC (Lloyds TSB) reflect its strong banking profitability, good asset quality, solid liquidity, and its extensive U.K. franchise. The group includes Cheltenham&Gloucester PLC (not rated) and Scottish Widows PLC (Scottish Widows; not rated). Core capitalization is considered weak by Standard&Poor's measures, even allowing for the relatively low risk of many group activities, and for the strong regulatory capital ratios. Core capital flexibility declined in 2002, although it has recently been helped by disposal proceeds, and dividend cover remains below group targets. Lloyds TSB is one of the largest U.K. banks. Banking profitability compares strongly internationally. It benefits from efficient and focused operations, and comparatively stable asset quality. Margins are still
