Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — Q3 2022 Earnings Presentation
23 slides from Lloyds Banking's earnings presentation, Oct 27, 2022
Slide 1: Q3 Interim Management Statement
Classification: Public Q3 Interim Management Statement Lloyds Banking Group 27 October 2022
Slide 2: Robust performance, confidence in continued delivery
Classification: Public Robust performance, confidence in continued delivery Purpose • Maintaining support for customers • Continued income growth supported by rate environment and robust business volumes; strong capital generation • Strong observed asset quality and stable credit trends Helping Brit
Slide 3: 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 4: 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 5: 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 6: 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 7: Increased hedge earnings with enhanced buffer
Classification: Public Increased hedge earnings with enhanced buffer • >£70bn growth in deposits since 2019 Growth in structural hedge capacity and buffer since 2019 contributing to increased hedge income (£bn) 17 72 31 − Q3 hedge income c.£120m above Q3 21 (2) 9 − Unutilised deposit buffer increase
Slide 8: 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 9: 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 10: 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 11: Resilient portfolios
Classification: Public Resilient portfolios Average mortgage LTV Commercial Banking UK direct real estate LTV1 • Average mortgage LTV 40.3% with 96% of book below 80% LTV 45% 40% 48% 39% − Average household income for 4% 17% mortgages c.£75k p.a.2 13% 11% H2 2019 Q3 2022 H2 2019 Q3 2022 • Net CRE ex
Slide 12: Updated macroeconomic outlook
Classification: Public Updated macroeconomic outlook UK bank rate CPI inflation 5.0% 4.0% 10% • Latest macroeconomic base case reflects 3.0% some deterioration in outlook 2.0% 5% − Base rate forecast to peak at 4.00% at 1.0% year end 2022 0.0% 0% Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
Slide 13: 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 14: 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 15: 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 16: Q&A
Classification: Public Q&A 16
Slide 17: Appendix
Classification: Public Appendix 17
Slide 18: Quarterly P&L and key ratios
Classification: Public Quarterly P&L and key ratios (£m) Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 Q2 2021 Q1 2021 Underlying net interest income 3,394 3,190 2,945 2,893 2,852 2,741 2,677 Underlying other income 1,282 1,268 1,261 1,307 1,336 1,282 1,135 Operating lease depreciation (82) (119) (94) (78
Slide 19: Updated economic scenarios
Classification: Public Updated economic scenarios Scenario ECL (£m) Measure (%) 2022 vs Q2 221 2023 2024 2025 2026 Ave. 22-26 GDP 3.6 0.1 0.4 1.0 1.5 2.1 1.7 Interest rate 2.16 0.52 5.28 5.17 4.30 4.12 4.20 Unemployment rate 3.3 0.2 2.8 3.2 3.5 3.8 3.3 Upside (30%) 3,778 HPI growth 6.1 2.9 (2.7) 7.2
Slide 20: Updated coverage after updated economic outlook
Classification: Public Updated coverage after updated economic outlook Gross Coverage (ex. Recoveries)2 Total P&L Net ECL Write-offs (£m, unless stated customer coverage ECL Write-offs charge/ incr./ ECL Q3 & Other Stage 1 Stage 2 Stage 3 Total otherwise)1 L&A (£bn) Q4 20211 Q4 2021 & Other (credit)
Slide 21: Low mortgage LTVs
Classification: Public Low mortgage LTVs September 20221 20211 20101 Mainstream Buy to let Specialist Total Total Total Average LTVs 39.6% 45.4% 34.5% 40.3% 42.1% 55.6% New business LTVs 62.4% 58.8% N/A 61.9% 63.3% 60.9% ≤ 80% LTV 95.4% 99.7% 96.6% 96.1% 95.4% 57.0% >80–90% LTV 4.1% 0.1% 1.2% 3.4% 4
Slide 22: Disclaimer
Classification: Public Disclaimer Important notice The information, statements, views and opinions contained in this document and accompanying discussion (“this Presentation”) are for informational and reference purposes only. This Presentation has been provided by the Group (defined below). This Pr
Slide 23: Investor Relations contacts
Classification: Public Investor Relations contacts Douglas Radcliffe, Group Investor Relations Director +44 (0)20 7356 1571 Douglas.Radcliffe@lloydsbanking.com Edward Sands, Director, Investor Relations +44 (0)20 7356 1585 Edward.Sands@lloydsbanking.com Nora Thoden, Director, Investor Relations – ES