Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — Debt Investor Presentation (March 2014)
24 slides from Lloyds Banking's debt investor presentation, Mar 6, 2014
Slide 1: ECN Exchange Offer: Presentation to Fixed Income Investors
[GRAPHIC OMITTED] ECN EXCHANGE OFFER Presentation to Fixed Income Investors March 2014
Slide 2: Disclaimer
[GRAPHIC OMITTED] DISCLAIMER THIS DOCUMENT IS BEING PROVIDED TO YOU SOLELY FOR YOUR INFORMATION AND FOR USE AT A PRESENTATION TO BE HELD IN CONNECTION WITH THE EXCHANGE OFFER DESCRIBED HEREIN. THE DISTRIBUTION OF THIS PRESENTATION INTO ANY JURISDICTION MAY BE RESTRICTED BY LAW. PERSONS INTO WHOSE PO
Slide 3: Agenda
[GRAPHIC OMITTED] AGENDA EXECUTIVE SUMMARY CAPITAL STRATEGY TRANSACTION OVERVIEW
Slide 4: Executive Summary: Background and Rationale
[GRAPHIC OMITTED] EXECUTIVE SUMMARY Background and rationale CAPITAL POSITION * Strong capital position -- 10.3% CET1 ratio(1) * Significant capital generation -- Expect CET1 generation, including the effects of this transaction and prior to any dividends, to be c.2.5% over the next two years and 1.
Slide 5: Agenda: Capital Strategy
[GRAPHIC OMITTED] AGENDA EXECUTIVE SUMMARY CAPITAL STRATEGY TRANSACTION OVERVIEW
Slide 6: Capital Strategy and Outlook
[GRAPHIC OMITTED] CAPITAL STRATEGY AND OUTLOOK Strong sustainable returns and capital position BUSINESS MODEL * Substantial strategic progress and improved performance * Lower risk with strong, sustainable returns * Strongly capital generative STRONG CAPITAL POSITION * CET1 ratio of 10.3%(1); 3% abo
Slide 7: Capital Position: Impact of Transaction
[GRAPHIC OMITTED] CAPITAL POSITION -- IMPACT OF TRANSACTION Aligns capital base to evolving CRD IV capital framework RESTATED CAPITAL COMPOSITION (%) [GRAPHIC OMITTED] YEAR END 2013 CAPITAL POSITION * Strong CET1 ratio of 10.3% (1) RESTATED POST EXCHANGE(2)(3)* Substantially improved quality of capi
Slide 8: Target Capital Position
[GRAPHIC OMITTED] TARGET CAPITAL POSITION Optimises capital base in the context of evolving capital framework CAPITAL COMPOSITION TRANSITION TO 1 JAN 2019 [GRAPHIC OMITTED] Dec 2013 Pro Forma Post Exchange(1) 1 Jan 2014 CRD IV(3) Requirement 'Steady State' CRD IV(3) Requirement * Medium term steady
Slide 9: Agenda: Transaction Overview
[GRAPHIC OMITTED] AGENDA EXECUTIVE SUMMARY CAPITAL STRATEGY TRANSACTION OVERVIEW
Slide 10: Summary of Transaction: Overview
[GRAPHIC OMITTED] SUMMARY OF TRANSACTION Overview * Holders of ECNs have the opportunity to exchange their ECNs for new AT1 securities * The AT1 securities offered in the exchange offers will be capped at c.[pound]5bn * The offers are priced consistent with current trading levels * There is a waterf
Slide 11: Summary of Transaction: ECNs and Regulatory Call Feature
[GRAPHIC OMITTED] SUMMARY OF TRANSACTION ECNs and regulatory call feature PURPOSE OF ECNs * ECNs were originally issued in 2009 for the purpose of qualifying as core capital for stress test purposes * They contain a 5% core capital equity conversion trigger(1), above the then prevailing regulatory c
Slide 12: USD Exchange Offer Overview
[GRAPHIC OMITTED] USD EXCHANGE OFFER Overview RATIONALE * Aligns capital base to the evolving CRD IV framework, delivering the Group's medium term AT1 requirement * Improves leverage ratio metrics and rating agency capital measures * Provides opportunity to mitigate ECN regulatory call uncertainty E
Slide 13: Key Metrics and Accounting
[GRAPHIC OMITTED] KEY METRICS AND ACCOUNTING The anticipated impact of the exchange on key metrics IMPACT ON KEY METRICS * CET1 Ratio * Tier 1 Ratio * Basel III and CRD IV Leverage Ratio * SandP RAC Ratio * Underlying Profit * Tangible Net Asset Value (TNAV) * Net Interest Margin * Coupons on AT1s [
Slide 14: Exchange Offer: Summary Terms of the Output AT1 Securities
[GRAPHIC OMITTED] EXCHANGE OFFER Summary terms of the output AT1 securities ISSUER * Lloyds Banking Group plc --- ---------------------------------------------------------------------------------------------------------------------------------- EXPECTED ISSUE RATINGS * BB- (SandP); BB- (Fitch) --- -
Slide 15: Transaction Sequencing and Timeline
[GRAPHIC OMITTED] TRANSACTION SEQUENCING AND TIMELINE * Offer commenced 6 March 2014 -- USD Exchange Offer: minimum 20 business day offer period, unless otherwise extended Calendar Month March April Week Days 6 7 10 11 12 13 14 17 18 19 20 21 24 25 26 27 28 31 1 2 3 4 7 USD Exchange Offer Period USD
Slide 16: Summary of Transaction: Key Messages
[GRAPHIC OMITTED] SUMMARY OF TRANSACTION Key messages * The Group has: -- a strong capital position with 10.3% CET1 ratio(1) -- a lower risk business model with strong, sustainable returns and capital generation * These offers align the Group's capital base to the evolving CRD IV capital framework -
Slide 17: Appendix
LLOYDS BANKING GROUP oedh APPENDIX
Slide 18: USD Exchange Offer Structure
[GRAPHIC OMITTED] USD EXCHANGE OFFER USD exchange offer structure Ex c ha nge Pr ior ity Ty ========================= === USD PNC10 Exchange Offer ------------------------ -------- --- ------ --- ----- ----- ------ ------ -------- 1 LT2 NO.1 PLC USD 100k 1k 986 7.875 Nov-20 n/a 106.00 --------- ----
Slide 19: USD Exchange Offer: Eligibility Criteria
[GRAPHIC OMITTED] USD EXCHANGE OFFER Eligibility criteria * Offers to Exchange from Holders of a Series of ECNs will be accepted for new AT1 Securities, only if the principal amount of the AT1 Securities issued in exchange for such ECNs is at least equal to or greater than $200,000 (both before and
Slide 20: Structural Comparison with Other AT1 Notes
[GRAPHIC OMITTED] TRANSACTION OVERVIEW Structural comparison with other AT1 notes Issue Date/ Format Issue Rating Coupon Coupon Structure Interest Cancellation Call Options Loss Absorption Trigger for Principal Loss Absorption PoNV AT1 Securities [] USD: PerpNC10 [] BB- (SandP / Fitch) [] 7.500% []
Slide 21: Regulatory Call Risk Factors
[GRAPHIC OMITTED] REGULATORY CALL RISK FACTORS Regulatory Call of the ECNs The ECNs were issued for the purpose of counting as both lower tier 2 capital and 'stress test' core capital of the Group. Pursuant to the terms of the ECNs, should any series of ECNs cease to qualify for inclusion in the low
Slide 22: Conversion Mechanism
[GRAPHIC OMITTED] CONVERSION MECHANISM * Upon occurrence of Trigger Event, the AT1 Securities will fully convert on the Conversion Date into ordinary shares of the Issuer at the Conversion Price * The relevant ordinary shares will be delivered to the Settlement Shares Depositary. The Issuer may elec
Slide 23: Terms of the Output AT1 Securities
[GRAPHIC OMITTED] TRANSACTION OVERVIEW Terms of the output AT1 securities ISSUER ISSUER RATING EXPECTED ISSUE RATINGS AT1 SECURITIES ISSUE FORMAT STATUS COUPON STRUCTURE INTEREST CANCELLATION OPTIONAL REDEMPTION REGULATORY EVENT TAX EVENT CONVERSION INTO ORDINARY SHARES CONVERSION TRIGGER SETTLEMENT
Slide 24: Forward Looking Statements
[GRAPHIC OMITTED] FORWARD LOOKING STATEMENTS This presentation contains certain forward looking statements with respect to the business, strategy and plans of Lloyds Banking Group and its current goals and expectations relating to its future financial condition and performance. Statements that are n
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