Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — Q1 2012 Earnings Presentation
24 slides from Lloyds Banking's earnings presentation, May 1, 2012
Slide 1: Results for the Quarter Ended 31 March 2012
RESULTS FOR THE QUARTER ENDED 31 MARCH 2012 1 May 2012 António Horta-Osório Group Chief Executive
Slide 2: Overview
QUARTER ENDED 31 MARCH 2012 Overview Further strengthening the balance sheet, reshaping the business and reducing risk – £12.4bn non-core asset reduction in Q1 2012 – £65bn of £104bn reduction target achieved since Dec 2010 – 6% deposit growth since Q1 2011 – Loan-to-deposit Loan to deposit ratio
Slide 3: Accelerating Balance Sheet Strength: Non-core assets and RWA reduction
ACCELERATING BALANCE SHEET STRENGTH Non-core assets and RWA reduction, above market deposit growth h and d reduction d i in i wholesale h l l funding f di requirement i FUNDED ASSETS(1) (£bn) CUSTOMER DEPOSITS(3) (£bn) STRENGTHEN 633 (11)% 6% our balance 412 sheet and 165 588 406 liquidity 566 posit
Slide 4: Accelerating Balance Sheet Strength: Loan to deposit ratio and capital
ACCELERATING BALANCE SHEET STRENGTH Substantial reduction in our loan to deposit ratio, underpinned b strong capital by i l position ii LOAN TO DEPOSIT RATIO CAPITAL POSITION STRENGTHEN our balance sheet and 148% 16.2% liquidity position 15.6% 135% 14.8% 130% RESHAPE our business portfolio 116% 11.0
Slide 5: Reshaping Our Business Portfolio: SME net lending growth
RESHAPING OUR BUSINESS PORTFOLIO …and continuing to grow our net lending to SMEs, in a contracting i market k CORE COMMERCIAL NET LENDING (YEAR ON YEAR GROWTH MAR 2011 – MAR 2012) (YEAR-ON-YEAR STRENGTHEN our balance sheet and liquidity position 4% RESHAPE our business portfolio Market Lloyds y Bank
Slide 6: Simplifying the Group: 7% reduction in total costs
SIMPLIFYING THE GROUP Strong initial progress on simplification and a 7% reduction i totall costs in STRENGTHEN our balance sheet and liquidity position Our proven capabilities from integration TOTAL COSTS ((£m)) give us great confidence in realising cost savings from simplification (7)% RESHAPE o
Slide 7: Simplifying the Group: Banking complaints
SIMPLIFYING THE GROUP …and we are accelerating our simplification plans whilst we make f th progress on delivering further d li i strengthened t th d customer t experience i FSA banking H2 2010 H1 2011 H2 2011 STRENGTHEN complaints our balance Banking Complaints Banking Complaints Banking Complaints
Slide 8: Simplifying the Group: FOS change rate
SIMPLIFYING THE GROUP Overturn rates from Financial Ombudsman Service also continue i to fall f ll 55% Bank A STRENGTHEN our balance 54% sheet and liquidity 50% position 45% e (%) RESHAPE our Bank B business 42% FOS Change Rate portfolio 40% Bank C 35% 36% SIMPLIFY the Group 30% Bank D 28% 25% INVES
Slide 9: Investing to Grow Our Core Customer Businesses
INVESTING TO GROW OUR CORE CUSTOMER BUSINESSES We continue to invest based on the 5 key growth initiatives mentioned i d in i June J 2011 Further improvements to Retail’s branch infrastructure including over 100 Lloyds y TSB branch refurbishments STRENGTHEN Retail Improved internet offerings inc
Slide 10: Financial Performance
FINANCIAL PERFORMANCE Resilient underlying performance in core business and i increasing i return on RWAs RWA £m GROUP CORE Q1 Q1 Q1 Q1 2011 2012 2011 2012 Underlying income(1) 5,580 4,731 4,881 4,353 Reduction due to challenging environment resulting in asset (15)% (11)% and net interest margin red
Slide 11: Business Performance: Statutory reconciliation
BUSINESS PERFORMANCE Statutory reconciliation; improvement on Q1 2011 reflects PPI provision i i £m Q1 2011 Q Q1 2012 Q Profit before tax – combined businesses basis 284 628 Integration costs ( (315) ) – Project Verde costs (18) (108) Simplification costs – (161) Amortisation of purchased intangible
Slide 12: Financial Performance – Margin and AQR
FINANCIAL PERFORMANCE – MARGIN AND AQR Resilient margin performance and improvement in AQR NET INTEREST MARGIN AQR 4.93% 5.01% 4.82% 2.47% 2.39% 2.47% 2.34% 2.32% 3.64% 3.71% 2.16% 2 09% 2.09% 2.05% 1.97% 1.95% 1.70% 1.84% 1.63% 1.30% 1.14% 1 24% 1.24% 1.16% 0.80% 0.64% 0.55% 0.56% 0.87% 0.36% 0.75%
Slide 13: Financial Performance – Impairment
FINANCIAL PERFORMANCE – IMPAIRMENT Further reduction, in line with expectations £m GROUP IMPAIRMENT (36)% 2,814 (31)% 2,608 , 2,409 1,956 1,907 1 657 1,657 1,879 1,769 1,345 1,245 729 907 611 640 412 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Core Non-core Full year guidance for impairment reaffirmed 1
Slide 14: New to Arrears and Impairments
NEW TO ARREARS AND IMPAIRMENTS Continuing improvement in credit quality RETAIL SECURED (£bn) RETAIL UNSECURED (£bn) New to arrears New to arrears 7.6 7.6 7.3 7.5 7.3 7.2 6.9 6.4 6.2 1.7 1.7 1.7 1.5 1.4 1.3 1.2 1.1 0.9 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 10 10 10 10 11 11 11 11 12 1
Slide 15: Financial Performance - Impairment by division
FINANCIAL PERFORMANCE - IMPAIRMENT Improving asset quality driving impairment reductions UK RETAIL (£m) WHOLESALE (£m) 16% PRINCIPAL DRIVERS (37)% (14)% UK Retail – credit 586 (1)% 613 p performance remains 526 454 strong; unsecured charge 375 370 declining further Wholesale – lower charges g ov
Slide 16: Business Performance – UK Retail Customer Deposits
BUSINESS PERFORMANCE – UK RETAIL CUSTOMER DEPOSITS Strong 2012 Q1 deposit growth driven by fixed term products demonstrating the strength of our multibrand strategy UK RETAIL CUSTOMER DEPOSITS (YEAR ON YEAR GROWTH) (YEAR-ON-YEAR 8.0% 7.0% 6.1% 6.0% 5.1% 4.9% 5.0% 5.0% 3.0% 2.9% 2.6% (1)% UK Lloyds U
Slide 17: Reshaping Our Business Portfolio: ISA example
RESHAPING OUR BUSINESS PORTFOLIO …driven by value (ISA example) 2012 ANNUAL CASH 2012 CASH ISAs ISA GROWTH(1) (HEADLINE ADVERTISED BRANCH RATES – MARCH 2012) 19% 3.30% 3.05% 2.85% 2.75% 2.75% 2.75% 2.65% 8% 2.25% Market Lloyds Banking Bank Lloyds Halifax BoS Bank Bank Bank Bank Group A TSB B C D E U
Slide 18: Further Substantial Non-Core Asset Reduction
FURTHER SUBSTANTIAL NON-CORE ASSET REDUCTION Non-core assets reduced by £12.4bn in the first quarter, primarily i il driven di by b treasury asset reductions d i £bn RWA 144 109 104 Total assets 194 (9)%(1) Treasury assets 49 Commercial 141 Real Estate 26 23 128 16 21 Other Wholesale 37 19 31 30 Int
Slide 19: Wholesale Funding: 2012 term funding plan completed
WHOLESALE FUNDING 2012 term funding plan already completed £bn WHOLESALE TERM ISSUANCE(1) 4.4 24.7 24.7 2.5 2012 term funding 4.7 1.9 plan l completed l t d 7.5 Unsecured against our stated 11.2 issuance target of £20 – 1.7 £25bn 13.9 1.1 0.6 No plans to issue Private any benchmark issuance 3.9
Slide 20: Wholesale Funding: Falling requirement and increasing liquidity
WHOLESALE FUNDING Falling funding requirement and increasing liquidity WHOLESALE FUNDING MATURITY WHOLESALE FUNDING £231BN PROFILE £bn > 1 year 60% 326 2 – 5 years 298 £58bn (8)% 251 >5 years 50% 231 £57b £57bn 50% 1 – 2 years £25bn 55% 60% £55bn £13bn money CGS market 50% 50% £23bn 45% term 40% Pri
Slide 21: Liquidity
LIQUIDITY Liquidity significantly exceeds short term funding and regulatory l requirements i £bn 223 245% 202 192 coverage 179% coverage 160 149 117 107 49 62 109 113 91 44 31 38 36 63 100 98 95 106 69 75 57 55 35 Dec 2008 Dec 2010 Dec 2011 Mar 2012 Wholesale Total liquid Short-term Wholesale Balanc
Slide 22: Summary
SUMMARY Well placed to realise over time the Group’s full potential for growthh Balance sheet further strengthened Further progress in reducing the Group’s risk Resilient core business performance despite continuing challenging macro environment: strong performance in costs and improved Substa
Slide 23: Results for the Quarter Ended 31 March 2012
RESULTS FOR THE QUARTER ENDED 31 MARCH 2012 1 May 2012 António Horta-Osório Group Chief Executive
Slide 24: Forward Looking Statements and Basis of Preparation
FORWARD LOOKING STATEMENTS AND BASIS OF PREPARATION FORWARD LOOKING STATEMENTS This presentation contains forward looking statements with respect to the business, business strategy and plans of the Lloyds Banking Group, Group its current goals and expectations relating to its future financial condit