Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — FY2014 Earnings Presentation
37 slides from Lloyds Banking's earnings presentation, Feb 27, 2015
Slide 1: 2014 Results: Presentation to Analysts and Investors
TITLE SLIDE IS IN SENTENCE 2014 RESULTS CASE. GREEN BACKGROUND. Presentation to Analysts and Investors 27 Month 00 February 2015 0000 Presenters Name
Slide 2: Agenda
AGENDA António Horta-Osório Delivering for our key stakeholders Group Chief Executive George Culmer Financial results Chief Financial Officer António Horta-Osório Achieving sustainable growth Group Chief Executive 1
Slide 3: 2014 Highlights
2014 HIGHLIGHTS Successful delivery of strategy has transformed the business, enabling a substantial increase in profitability and dividend resumption • Delivery of 2011 strategic priorities has transformed the business – Lending and deposit growth in key customer segments and relationship brands –
Slide 4: 2011 Strategic Plan Delivered
2011 STRATEGIC PLAN DELIVERED Transforming the business for the benefit of our customers and shareholders • Delivered a low risk bank Reshape • Business now focused on key customer segments in UK market • Strong capital position Strengthen • Improved and stable funding base • Leading cost position S
Slide 5: Delivering for Our Shareholders: Low Risk Bank
DELIVERING FOR OUR SHAREHOLDERS We have delivered a low risk bank by reshaping and strengthening our balance sheet and funding position Impaired loan ratio & coverage (%) Funding mix & loan to deposit ratio Loan to 56.4% 154 135 121 113 107 deposit 48.2% 50.1% 45.9% 46.9% ratio (%) 383 406 Funding 4
Slide 6: Delivering for Our Shareholders: Financial Performance
DELIVERING FOR OUR SHAREHOLDERS We have significantly improved our financial performance Cost base (£bn) 11.1 • Cost base reduced to £9.4bn (£9.0bn excluding TSB in 10.8 line with guidance) 10.1 – Costs reduced by £1.7bn since 2010 9.6 9.4 – Enhanced Simplification run rate savings target of £2bn de
Slide 7: Delivering for Our Shareholders: Capital and Leverage Ratios
DELIVERING FOR OUR SHAREHOLDERS We have significantly strengthened our capital and leverage ratios CET 1 ratio(1) (%) Total capital ratio(1) (%) 5.7pp 6.8pp 12.8% 22.0% 18.8% 10.3% 17.3% 15.2% 15.6% 7.6% 8.1% 7.1% 2010 2011 2012 2013 2014(2) 2010 2011 2012 2013 2014(2) Leverage ratio (%) • 570bps in
Slide 8: Delivering for Our Customers: Helping Britain Prosper
DELIVERING FOR OUR CUSTOMERS We are helping Britain prosper Lending to SMEs & first time buyers (%) • Supporting households, businesses and communities Net lending growth to FTB customer growth over the past 4 years in line with our Helping Britain SMEs since 2010 since 2010 Prosper plan – We have h
Slide 9: Delivering for Our Customers: Service Improvement
DELIVERING FOR OUR CUSTOMERS Customer service continues to improve as we transform our culture and control environment Lower complaints(1) • Customer service measures improved 5 – Complaints have fallen from 2.4 to 1.5 per 1,000 accounts, and are approximately 50% lower than the 3 major banking peer
Slide 10: Agenda
AGENDA António Horta-Osório Delivering for our key stakeholders Group Chief Executive George Culmer Financial results Chief Financial Officer António Horta-Osório Achieving sustainable growth Group Chief Executive 9
Slide 11: Financial Performance: Substantial Increase in Underlying Profit
FINANCIAL PERFORMANCE Substantial increase in underlying profit • Underlying income (excluding SJP) up 1% (£m) 2014 2013 Change – Strong NII performance, up 8%, driven by 11,761 10,884 8% higher margins Net interest income – Reduction in other income reflects Other income 6,607 7,259 (9)% challengin
Slide 12: Net Interest Income
NET INTEREST INCOME Strong net interest income performance driven by margin and loan growth in key segments Net interest income(1) (£m) Net interest margin (%) 8% 1,568 110 11,761 2.48% 2.51% 2.47% 10,884 2.29% 2.32% 45 2.06% 2.17% 343 1.96% (535) (654) 2013 Disposals Continuing Asset ECN Liability
Slide 13: Supporting Our Customers and the UK Economy
SUPPORTING OUR CUSTOMERS AND THE UK ECONOMY Continued loan growth in key customer segments and deposit growth in relationship brands Net lending growth (%) Deposit growth (%) Last 12 months Last 12 months Retail 4 Mortgages(1) 2 relationship brands Unsecured personal Commercial (3) 10 lending & othe
Slide 14: Other Income
OTHER INCOME Performance reflects the ongoing challenging market environment Other income (£m) 7,920 (9)%(1) 7,259 42 6,607 • Other income down 9% (excluding SJP) in 2014 (661) (154) (251) (289) reflecting disposals and market environment – Commercial Banking: challenging market conditions, particul
Slide 15: Costs
COSTS Market leading cost position with improvements in 2014 from Simplification, disposals and run-off reductions Total costs (£m) • 2% reduction in cost base to £9.4bn, with guidance of (2)% 9,635 £9.0bn excluding TSB achieved 502 9,412 9,042 (449) 116 (370) (392) • Enhanced Simplification cost re
Slide 16: Asset Quality
ASSET QUALITY Further improvement reflecting a low risk business; AQR reduced to 24bps Impairment (£m) & AQR (%) Gross impaired loans (£bn) 3,157 46 2,540 40 1,813 32 22 25 1.10 1,191 20 0.95 16 14 758 13 0.69 442 8 0.45 0.30 0.18 H1 H2 H1 H2 H1 H2 Dec Jun Dec Jun Dec 2012 2012 2013 2013 2014 2014 2
Slide 17: Divisional Financial Performance
DIVISIONAL FINANCIAL PERFORMANCE Significant improvement in profitability with increases in all banking divisions Underlying profit • Strong underlying profit growth in Retail and Commercial Banking, driven by income growth and (£m) 2014 2013 Change reduced impairments Retail 3,228 3,015 7% • Commer
Slide 18: Financial Performance: Statutory Profit
FINANCIAL PERFORMANCE Statutory profit of £1.8bn after Simplification and legacy charges, significantly up on 2013 (£m) 2014 2013 • Asset sales and volatile items includes loss on ECN Underlying profit 7,756 6,166 exchange; 2013 includes gain on sale of government bonds Asset sales & volatile items
Slide 19: Legacy Issues – PPI
LEGACY ISSUES – PPI PPI provision of £2.2bn for 2014 compared with £3.1bn in 2013 Average complaint volumes per month(1) • Additional charge of £0.7bn taken in Q4 driven by (54)% 2014 100,000 – Higher than expected reactive complaints (12)% 45,000 – Additional costs relating to remediation, (22)% in
Slide 20: Further Strengthening the Balance Sheet
FURTHER STRENGTHENING THE BALANCE SHEET Strong balance sheet. Run-off reduction ahead of expectations Dec Dec Change 2014 Movements (£bn) 2014 2013 (£bn) H1 H2 Total ASSETS SOURCE OF FUNDS Loans and advances(1) 463 465 – Deposit growth(1) 6 4 10 Global Corporates 30 38 (21)% TSB 22 24 (8)% Global Co
Slide 21: Tangible Net Assets
TANGIBLE NET ASSETS Further progression in TNAV to 54.9p Tangible net assets per share (p) – Dec to Dec 8.5 3.8 • Increase in TNAV per share to 54.9p 1.5 54.9 reflects 48.5 (3.4) (2.5) (1.5) – Strong underlying earnings – Positive reserve movements – Partly offset by legacy and ECN Dec Underlying Le
Slide 22: Further Strengthening the Balance Sheet: Risk Weighted Assets
FURTHER STRENGTHENING THE BALANCE SHEET Balance sheet substantially de-risked with significant reduction in risk weighted assets RWA reduction drivers (£bn) 321 • RWAs reduced by £32bn to £240bn, 272 primarily driven by 240 (9) (10) (7) (6) – Successful management of run-off – Improved economic cond
Slide 23: Further Strengthening the Balance Sheet: Capital Generation
FURTHER STRENGTHENING THE BALANCE SHEET A strongly capital generative business Common equity tier 1 ratio (%) • CET1 ratio strengthened to 12.8% 1.4% 0.2% • Our Pillar 2A requirement equates to 3.2% 0.3% (0.5)% 13.0% 3.8% of RWAs, of which 2.1% must be 12.8% (1.5)% (0.4)% (0.2)% covered by CET1 10.3
Slide 24: Summary
SUMMARY Transformation of business through delivery of strategy underpins progressive dividend policy • Substantial increase in profitability • Dividend of 0.75p per share and returns recommended by the Board in respect of 2014 • Strongly capital generative business • Progressive dividend policy wit
Slide 25: Agenda
AGENDA António Horta-Osório Delivering for our key stakeholders Group Chief Executive George Culmer Financial results Chief Financial Officer António Horta-Osório Achieving sustainable growth Group Chief Executive 24
Slide 26: Strategic Focus
STRATEGIC FOCUS Strengthening our unique capabilities to respond to the changing external environment OUR BUSINESS MODEL Low cost, low risk, customer focused, UK retail and commercial bank OUR STRATEGIC PRIORITIES Creating the Becoming Delivering best customer simpler and sustainable experience more
Slide 27: Delivering Sustainable Growth
DELIVERING SUSTAINABLE GROWTH Supporting UK economic growth – significant opportunities within our prudent risk appetite LBG market share(1) (%) • Targeting total growth of £30bn in net lending over the next 3 years Current account volumes 25 Mortgage balances(2) 21 • We target to maintain market le
Slide 28: Summary
SUMMARY Becoming the best bank for our customers and shareholders while supporting the UK economic recovery Best bank for customers • Successful delivery of strategy has transformed the business, enabling dividend resumption • Delivering the best customer experience • The Group has a clear strategic
Slide 29: Appendix
TITLE SLIDE IS IN APPENDIX CASE. SENTENCE GREEN BACKGROUND. 00 Month 0000 Presenters Name
Slide 30: 2014 Financial Performance
2014 FINANCIAL PERFORMANCE Profit and returns substantially improved and balance sheet further strengthened Income £18.4bn • Income growth driven by 8% increase in net interest income (excl SJP) +1% – Net interest margin of 2.45%, up 33bps – Loan growth in key customer segments Underlying £7.8bn pro
Slide 31: Run-off Portfolio
RUN-OFF PORTFOLIO Assets reduced by £16bn in 2014 Run-off portfolio (£bn) (49)% • Run-off assets almost halved to £17bn, Total assets 33 with reductions across all asset segments International retail 8 Treasury assets 3 • Key reductions in the year include UK CRE 7 17 – £3.8bn of UK CRE 6 – Over £3b
Slide 32: Further Strengthening the Balance Sheet: Capital Composition
FURTHER STRENGTHENING THE BALANCE SHEET Strong capital position with medium term AT1 requirements met through ECN exchange in H1 Capital composition(1) (%) £bn 22.0 52.8 • Strong total capital ratio of 22.0% 18.8 Tier 2 4.5 10.9 Tier 2 4.4 ECN tier 2 1.0 2.3 • Substantially improved quality of capit
Slide 33: Low Risk Business Model
LOW RISK BUSINESS MODEL Significant progress in strengthening and de-risking the balance sheet resulting in one of the lowest CDS spreads in the banking industry UK bank CDS(1) Bank Current level Change since 380 (bps)(2) Jan 2012 (bps) LBG 45 (297) 330 Barclays 45 (151) HSBC 47 (97) 280 RBS 52 (291
Slide 34: Mortgage Portfolio LTVs
MORTGAGE PORTFOLIO LTVS Further improvement with average LTV now below 50% and only 2% of the portfolio with an LTV greater than 100% Dec 2014 Dec 2013 Dec 2012 Mainstream Buy to let Specialist Total Total Total(1) Average LTVs 46.3% 61.3% 59.2% 49.2% 53.3% 56.4% New business LTVs 65.3% 62.7% n/a 64
Slide 35: Irish Portfolio
IRISH PORTFOLIO Significant reduction in last 12 months in a capital accretive manner Portfolio breakdown (£bn) Dec 2014 Dec 2013 Gross assets: £7.9bn(1) (net: £5.3bn) Gross assets: £15.4bn(2) (net: £8.7bn) Non-retail gross assets: £3.4bn (net: £1.0bn) Non-retail gross assets: £9.4bn (net: £3.4bn) 7
Slide 36: Group Defined Benefit (DB) Pension Schemes
GROUP DEFINED BENEFIT (DB) PENSION SCHEMES Significant de-risking of DB pension schemes DB pension schemes balance sheet (£bn) • Net balance sheet position improvement of £1.7bn to 2014 2013 Change a surplus of £0.7bn in 2014 driven by – Strong investment performance supported by large Aggregate bal
Slide 37: Forward Looking Statement and Basis of Presentation
FORWARD LOOKING STATEMENT AND BASIS OF PRESENTATION FORWARD LOOKING STATEMENTS This document 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 perf