Slide 1: 2017 Results
2017 RESULTS Presentation to analysts and investors | 21 February 2018
Slide 2: Full year results – Introduction
Full year results – Introduction António Horta-Osório Group Chief Executive 1
Slide 3: 2017 a landmark year – strong strategic and financial performance
2017 a landmark year – strong strategic and financial performance • Group returned to full private ownership at a surplus for the UK taxpayer • Successful delivery of GSR 2 with improved customer service, market-leading digital proposition, targeted lending growth and Simplification savings ahead of
Slide 4: Continued progress – business model is delivering increased profits and returns
Continued progress – business model is delivering increased profits and returns Profit progression (£bn) • Statutory profit increasing: growth in 7.8 8.1 7.9 8.5 underlying profit and reduction in below the 6.2 line charges despite higher PPI cost 2.6 • Consistent strong underlying profit 4.2 5.3 0.
Slide 5: UK economy has proven resilient
UK economy has proven resilient Unemployment rate and GDP(1) Employment rate(2) and pay growth (%) (%) 9 76 6 6 74 4 3 2 72 0 0 (3) 70 (2) (6) 68 (4) 2007 2009 2011 2013 2015 2017 2007 2009 2011 2013 2015 2017 Unemployment rate GDP growth Employment rate (LHS) Pay growth (RHS) UK external trade volu
Slide 6: Summary – confidence in the Group’s future prospects reflected in 2018 targets
Summary – confidence in the Group’s future prospects reflected in 2018 targets • Significant strategic progress in the year • Continued strong financial performance ‐ Cost discipline and low risk business model continue to provide competitive advantage ‐ Strong profit, returns and capital generation
Slide 7: Full year results – Financials
Full year results – Financials George Culmer Chief Financial Officer 6
Slide 8: Strong statutory and underlying performance with continued improvement in profits and returns
Strong statutory and underlying performance with continued improvement in profits and returns (£m) 2017 2016 Change • 2017 statutory profit of £5.3bn up 24% with Net income 17,472 16,605 5% underlying profit of £8.5bn up 8% Operating costs (8,184) (8,093) (1)% • Strong Q4 performance, with NII up 14
Slide 9: Net income up 5% with improvements in net interest income and other income
Net income up 5% with improvements in net interest income and other income Net interest income and net interest margin Other income (£m) (£bn) 2.71% -11bps +13bps +6bps 2.79% +7bps 2.86% +4% 2017 2.2 1.8 1.8 0.4 6.2 430 12,320 588 11,890 11,435 549 2016 2.2 1.8 1.9 0.2 6.1 (682) 2015 2.3 1.8 2.0 0.1
Slide 10: Operating costs continue to be tightly managed providing competitive advantage
Operating costs continue to be tightly managed providing competitive advantage Operating costs(1) (£m) -1% 135 8,184 8,093 8,049 169 50 • Operating costs down 1% year on year before 174 MBNA, driven by Simplification savings (437) • Delivered enhanced Simplification run rate savings target of £1.4bn
Slide 11: Asset quality remains strong reflecting a continued prudent approach to risk
Asset quality remains strong reflecting a continued prudent approach to risk Asset quality ratio Mortgage portfolio quality (bps) 56.4 53.3 2017 28 18 2 49.2 46.1 44.0 43.6 2016 28 15 81.9 86.4 89.0 89.5 2015 28 70.4 14 59.6 Net AQR Gross AQR MBNA 2012 (1) 2013 2014 2015 2016 2017 Proportion 80% LT
Slide 12: Divisions showing continued progress and strong financial performance
Divisions showing continued progress and strong financial performance Net income Retail (£bn) • Underlying profit increased 9% with NII up 8%, 2017 10.0 4.8 2.0 0.7 17.5 14bps improvement in NIM and OOI up 3% • Lending up 3%, including open mortgage growth 2016 9.5 4.6 2.0 0.5 16.6 • MBNA performing
Slide 13: Significant improvement in statutory profit and returns
Significant improvement in statutory profit and returns • Statutory profit after tax of £3.5bn, up 41% (£m) 2017 2016 Change Underlying profit 8,493 7,867 8% ‐ Market volatility and other items in 2016 included the £790m charge for redemption of ECNs Market volatility and other items (82) (922) ‐ Re
Slide 14: Balance sheet – balance growth while continuing to optimise the portfolio
Balance sheet – balance growth while continuing to optimise the portfolio Loans and advances • Loans and advances £456bn, up £6bn since 2016 (£bn) 457 455 456 453 452 453 ‐ Open mortgage book growth in 2017 while 10 450 445 9 8 10 10 9 continuing to focus on the Group margin 10 9 447 448 ‐ SME growt
Slide 15: Capital generation very strong with capital ratios enhanced
Capital generation very strong with capital ratios enhanced +245bps • CET1 capital generation of 245bps 0.3 0.4 15.5 2.2 0.8 14.4 ‐ CET1 ratio of 15.5%, 13.9% post-ordinary 13.9 Common 13.0 (1.2) (1.1) dividend and buyback (0.5) equity tier ‐ Total ordinary DPS 3.05p, up 20%, with a 1 ratio share bu
Slide 16: Summary – confidence in the Group’s future prospects
Summary – confidence in the Group’s future prospects • Continued strong financial performance Statutory PBT and RoTE progression 10 ‐ Cost discipline and low risk business model (£bn) 8.9 continue to provide competitive advantage 8 ‐ Strong profit, returns and capital generation 6.6 • Strong financi
Slide 17: Appendix
Appendix , | I
Slide 18: Mortgage LTVs – further improvement in 2017
Mortgage LTVs – further improvement in 2017 Dec 2017 Dec 2016 Dec 2015 Dec 2010 Mainstream Buy to let Specialist Total Total Total Total(1) Average LTVs 41.7% 53.0% 47.4% 43.6% 44.0% 46.1% 55.6% New business LTVs 63.7% 59.1% n/a 63.0% 64.4% 64.7% 60.9% ≤ 80% LTV 88.5% 94.6% 88.8% 89.5% 89.0% 86.4% 5
Slide 19: Prudently provisioned – coverage ratio increasing across the Group
Prudently provisioned – coverage ratio increasing across the Group while impaired loan ratio falls 3.1 2.3 2.3 2.1 2.1 1.9 Impaired 1.8 1.6 1.4 1.3 loan ratio (%) Mortgages Credit cards Retail other Commercial Group 96.7 89.1 81.8 82.9 Coverage ratio 36.6 37.1 37.7 43.1 43.4 45.6 (%) Mortgages Credi
Slide 20: Forward looking statement and basis of presentation
Forward looking statement and basis of presentation Forward looking statement and basis of presentation This document contains certain forward looking statements with respect to the business, strategy, plans and /or results of Lloyds Banking Group and its current goals and expectations relating to i