The ratings on U.K.-incorporated Lloyds TSB Bank PLC recognize its 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. financial services across both retail and corporate sectors. Its international activity is extremely limited because, unlike many of its peers, it has returned most "surplus" capital to shareholders and focused on its core U.K. business. Risk-adjusted earnings are strong, particularly in banking and general insurance, while returns from life assurance subsidiary Scottish Widows PLC (AA-/Stable/--) are improving as it delivers a long-term plan to enhance sales and
