Lloyds Banking Group plc · LSE:LLOY
Lloyds Banking — Q3 2022 Earnings Presentation
21 slides from Lloyds Banking's earnings presentation, Dec 8, 2022
Slide 1: ShareSoc webinar Lloyds Banking Group
Classification: Public ShareSoc webinar Lloyds Banking Group Douglas Radcliffe, Group Investor Relations Director Andrew Pipe, Head Economist 8 December 2022
Slide 2: Welcome and introduction
Classification: Public Welcome and introduction Douglas Radcliffe, Group Investor Relations Director 2
Slide 3: Economic update
Classification: Public Economic update Andrew Pipe, Head Economist 3
Slide 4: Better UK economic recovery than assumed
Classification: Public Better UK economic recovery than assumed Real-terms GDP1 UK average house price3 (index, 2019Q4 = 100) (multiple of average household disposable income) 105 5.5 COVID-19 100 5.0 95 4.5 90 4.0 85 3.5 80 3.0 75 2.5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2.0 '18
Slide 5: But war & energy crisis now pushing economy into recession
Classification: Public But war & energy crisis now pushing economy into recession Households’ spending on housing energy1 Mortgage payment for average buyer at 75% LTV2 (% of total households’ spending) (% of household disposable income) 7 40 Expected 2023 avg. under current Energy X 6 Price Guarant
Slide 6: Different debt problem to previous recessions
Classification: Public Different debt problem to previous recessions Debt level1 (% of annualised GDP) • No recent build-up in private-sector 120 indebtedness to reverse Hholds Non-financial companies Gov't • Household debt broadly flat (vs 100 incomes) since 2015 80 • Some have ‘excess’ savings • N
Slide 7: Prudent forecast at Q3
Classification: Public Prudent forecast at Q3 Real-terms GDP1 UK CPI inflation3 (one-quarter % change) (%, quarter average) LBG Poll median Unemployment rate2 UK house prices4 (%, quarter average) (forecast % peak-to-trough decline) 0% -1% -2% -3% -4% -5% -6% -7% -8% -9% Pantheon -10% OBR -11% Knigh
Slide 8: Business and financial update
Classification: Public Business and financial update Douglas Radcliffe, Group Investor Relations Director 8
Slide 9: Transforming to create higher and more sustainable value
Classification: Public Transforming to create higher and more sustainable value A clear strategic vision… …with a transformation plan… …creating higher and more sustainable value Drive revenue growth and diversification Clear purpose: Helping Grow Britain Prosper Higher, more Strategic vision: UK St
Slide 10: Drive revenue growth and diversification
Classification: Public Drive revenue growth and diversification Key outcomes from strategic initiatives c.£1.5bn per annum Deepen and Create a new Additional revenues in 2026 1 innovate in 2 mass affluent (c.£0.7bn in 2024) Consumer offering 50:50 NII/OOI split from strategic initiatives by 2026 Tar
Slide 11: Supporting our customers
Classification: Public Supporting our customers Purpose • Customers demonstrating resilience and adapting to higher cost of living • Support provided where required with increased operational capacity − Retail o Proactively contacting those most-impacted o Suppressed fees for vulnerable customers o
Slide 12: Robust financial performance
Classification: Public Robust financial performance Summary P&L and key metrics (£m) Q3 2022 Q3 2021 YTD YTD YoY Net interest income 9,529 8,270 15% • Balance sheet franchise growth Other income 3,811 3,753 2% Operating lease depreciation (295) (382) 23% • Net income up 12%; NIM 284bps Net income 13
Slide 13: Ongoing strength in customer franchise
Classification: Public Ongoing strength in customer franchise Q3 lending change Q3 deposit change (£bn) (£bn) Retail Commercial Retail Commercial • Mortgage balances up £1.0bn in Q3 at +£1.9bn/0.5% +£0.6bn/0.6% +£1.5bn/0.5% +£3.5bn/2.1% £310.7bn; £1.8bn open book growth • Credit card balances up £0.
Slide 14: Continued income growth
Classification: Public Continued income growth Net interest income (NII) and banking net interest margin (NIM) • NII £9.5bn YTD, up 15% on prior year (£bn, bps) £3.2bn £3.4bn − Stronger Q3 NIM 298bps given base rate +11bps movements, hedge earnings and robust 15 4 298 balance growth 287 (7) (1) − Co
Slide 15: Rigorous cost discipline alongside planned investment increase
Classification: Public Rigorous cost discipline alongside planned investment increase Operating costs (£m) +6% +1% 297 6,436 • Operating costs £6.4bn YTD, up 6% given 103 6,139 planned investment alongside stable BAU 6,066 161 8 (20) • Sustained cost discipline with BAU cost (179) management offsett
Slide 16: Strong observed asset quality; updated economic scenarios
Classification: Public Strong observed asset quality; updated economic scenarios Impairment1 • Q3 net impairment charge of £668m (£m) Q3 2022 Q3 YTD 2022 − Updated net MES charge of £418m; Charge/(credit) pre-updated MES2 532 250 £618m for updated scenarios alongside Retail 520 235 £200m central COV
Slide 17: Resilient customer behaviour
Classification: Public Resilient customer behaviour Increased credit card spend in discretionary categories SME overdraft and corporate RCF2 utilisation stable (% change, September 2022 vs September 2019) (%) 60% Largely discretionary 50% 45% 40% +32% 20% +29% 22% +22% +19% 16% +16% +12% +11% 0% +1%
Slide 18: Statutory profit after tax £4.0bn YTD
Classification: Public Statutory profit after tax £4.0bn YTD Statutory profit (£m) Q3 2022 Q3 2021 YTD YTD YoY Underlying profit 5,475 5,903 (7)% • Underlying and statutory profit converging Restructuring costs (69) (34) following year end 2021 reporting changes Volatility and other items (237) 65 •
Slide 19: Effective RWA management and strong capital generation
Classification: Public Effective RWA management and strong capital generation Risk-weighted assets (£bn) -£1bn • RWAs down £1bn since 1 January: credit 16 212 3 2 211 and model reductions and optimisation (3) (3) • 191bps capital generation after (31)bps for 196 full fixed pension deficit contributi
Slide 20: Robust performance, confidence in continued delivery
Classification: Public Robust performance, confidence in continued delivery • Maintaining support for customers Helping Britain • Strong observed asset quality and stable credit trends Prosper • Robust financial performance and revised economic outlook driving updated guidance for 2022 • NIM now exp
Slide 21: Q&A
Classification: Public Q&A Douglas Radcliffe, Group Investor Relations Director Andrew Pipe, Head Economist 21