Lloyds Banking Group Plc · LSE:LLOY

Lloyds Banking — H1 2013 Earnings Presentation

44 slides from Lloyds Banking's earnings presentation, August 2013

  1. Slide 1: 2013 Half-Year Results

    2013 HALF-YEAR RESULTS Presentation to Analysts and Investors 1A Augustt 2013

  2. Slide 2: Agenda

    AGENDA GROUP & DIVISIONAL PERFORMANCE HIGHLIGHTS António Horta-Osório, Group Chief Executive H1 2013 FINANCIAL RESULTS George Culmer, Culmer Group Finance Director UPDATE ON COSTS AND SIMPLIFICATION Mark Fisher, Director, Group Operations SUMMARY AND GUIDANCE António Horta-Osório, Group Chief Execut

  3. Slide 3: Key Highlights for the First Half of 2013

    KEY HIGHLIGHTS FOR THE FIRST HALF OF 2013 ƒ Accelerated progress in delivering strategic plan ƒ Substantial increase in underlying profit benefiting from income growth of 2%, increased margin of 2.01% and further cost and impairment reductions ƒ Statutory profit before tax of £2.1bn ƒ Core loan book

  4. Slide 4: Financial Performance: Profitability and returns substantially improved

    FINANCIAL PERFORMANCE Profitability and returns substantially improved (£m) H1 2013 H1 2012 Change % Group income 9,464 9,246 2% ƒ Substantial increase in Group underlying and Group NIM 2.01% 1.93% 8bp statutory profit – Core C profit fit increased i d 26% tto £3 £3,696m 696 Group total costs (4,749

  5. Slide 5: Balance Sheet: Core loan book growing; non-core assets reduced

    BALANCE SHEET Core loan book continuing to grow; non-core assets substantially b i ll reduced; d d funding f di position i i further f h strengthened h d CORE LOANS AND ADVANCES(1) (£bn) NON-CORE ASSETS (£bn) 0% (30)% 1% (16)% 429 428 118 425 426 98 92 83 65 48 43 36 53 50 49 47 J 2012 Jun D 2012 De

  6. Slide 6: Balance Sheet: Substantial improvement in capital ratios

    BALANCE SHEET Substantial improvement in capital ratios FULLY LOADED CORE TIER 1 ƒ Remain confident in capital position – Now expect fully loaded core tier 1 ratio of 9.6% >10.0% above 10% at end 2013 8.1% ƒ Strongly g y capital p generative g strategy gy 7.1% – Core business capital generation 4.2%

  7. Slide 7: Core Divisional Financial Performance: Retail and Commercial Banking

    CORE DIVISIONAL FINANCIAL PERFORMANCE Strong Retail returns and improved Commercial Banking performance f RETAIL (£m) Retail 14% ƒ Underlying profit up 14% driven by reduction 1,669 in costs and impairments 1,458 ƒ Stable underlying y g income as decrease in 3.95% assets offset by margin improvement

  8. Slide 8: Core Divisional Financial Performance: Wealth, Asset Finance and Insurance

    CORE DIVISIONAL FINANCIAL PERFORMANCE Increased returns in Wealth and Asset Finance; strong performance f by b Insurance I WEALTH, ASSET FINANCE & INTERNATIONAL (£m) Wealth,, Asset Finance & International 47% ƒ Increased profitability and returns driven by 296 strong income performance and cost redu

  9. Slide 9: Supporting Our Customers and the UK Economy

    SUPPORTING OUR CUSTOMERS AND THE UK ECONOMY Return to growth in core loan book, ahead of guidance ƒ Committed over £24bn to UK customers CORE LOANS AND ADVANCES(1) (£bn) th through hFFunding di ffor L Lending di 1% – Net growth in FLS lending in H1 430 429 428 – Scheme now extended to January 2015 4

  10. Slide 10: Agenda

    AGENDA ACHIEVEMENTS AND GROUP PERFORMANCE António Horta-Osório, Group Chief Executive H1 2013 FINANCIAL RESULTS George Culmer, Culmer Group Finance Director UPDATE ON COSTS AND SIMPLIFICATION Mark Fisher, Director, Group Operations SUMMARY António Horta-Osório, Group Chief Executive 9

  11. Slide 11: Financial Performance: Substantial increase in underlying and statutory profit

    FINANCIAL PERFORMANCE Substantial increase in Group underlying and statutory profit GROUP ƒ Substantially improved underlying (£m) H1 2013 H1 2012 Change % profitability, driven by income growth Net interest income 5,206 5,215 – and further reductions in costs and impairments Other income(1) 4,258 4

  12. Slide 12: Financial Performance: Stabilising income trends and improved margin

    FINANCIAL PERFORMANCE Stabilising income trends and improved margin CORE UNDERLYING INCOME(1) (£m) H1/H1 8,576 8,709 9,071 +6% ƒ H1 2013 core income of £9,071m, up 6% 140 189 530 year-on-year 3 516 3,516 3 576 3,576 3 511 3,511 ƒ Income up 1% year-on-year excluding +1% St. James’s Place effects, wit

  13. Slide 13: Financial Performance: Improving Group margin

    FINANCIAL PERFORMANCE Improving Group margin driven by positive deposit margin GROUP MARGINS 0.16% 2.01% 1.93% (0.01)% (0.06)% (0.01)% ƒ Margin improvement in Group and core mainly driven by deposit margin and mix ƒ Reduction in asset prices, substantially H2 Deposit Asset Gov’t Structural H1 offset

  14. Slide 14: Financial Performance: Progress towards a lower risk business

    FINANCIAL PERFORMANCE Continued progress towards a lower risk business GROUP IMPAIRMENT (£m) GROSS IMPAIRED LOANS (£bn) % of book(1) 10.1% 9.4% 8.6% 7.7% 5,422 (43)% 4,365 60 (29)% 53 46 3,157 40 3 786 3,786 3 114 3,114 2 540 2,540 46 1,813 40 2,179 33 1,599 28 906 28 1,636 25 22 1,251 978 941 14 13

  15. Slide 15: Financial Performance: Reduction in impairment charge across divisions

    FINANCIAL PERFORMANCE Reduction in impairment charge across all divisions RETAIL (£m) (16)% ƒ Retail impairment down 16% largely driven by 758 reduction in the unsecured book 636 585 ƒ Unsecured charge reduced 23% reflecting strong 449 performance across all portfolios 173 187 H1 2012 H1 2013 ƒ Secu

  16. Slide 16: Legacy Issues: PPI complaint volumes declining

    LEGACY ISSUES PPI complaint volumes continuing to decline but costs slightly li h l hi higher h than h expectedd AVERAGE COMPLAINT VOLUMES PER MONTH(1) 140,000 (15)% ƒ Complaint C l i t volumes l continue ti to t fall f ll (24)% – Down c.40% on H2 2012 110,000 (28)% – Down 12% in the last quarter 80

  17. Slide 17: Balance Sheet Highlights

    BALANCE SHEET HIGHLIGHTS Strong balance sheet QoQ GROUP Movements Jun Dec Jun Change % H1 Q2 Q1 (£bn) 2013 2012 2012 Jun/Jun (£bn) 2013 2013 2013 ASSETS SOURCE OF FUNDS Core loans and advances(1) 428 425 429 – Non-core asset reduction 16 10 6 Non-core assets 83 98 118 (30)% Primary liquid asset 1 (5

  18. Slide 18: Non-Core Portfolio

    NON-CORE PORTFOLIO Further capital accretive reduction of £17bn (£16bn after currency effects), ff ) driven di by b non-retail il reduction d i NON RETAIL (£bn) RETAIL (£bn) T l net Total 131 external assets Treasury 49 assets (58)% (16)% 85 (6)% (25)% Total net 23 external assets 63 UK CRE(1) 24 (4

  19. Slide 19: Further Strengthening the Balance Sheet

    FURTHER STRENGTHENING THE BALANCE SHEET A strongly capital generative business FULLY LOADED CORE TIER 1 1.4% 0.6% 9.6% 8.1% 0.7% ƒ Estimated fully loaded CRD IV (0.8)% (0.4)% core tier 1 ratio improved to 9.6%, ahead h d off previous i guidance id ƒ Strong tier 1 leverage ratio of 4.2%, Dec Underlyi

  20. Slide 20: Agenda

    AGENDA ACHIEVEMENTS AND GROUP PERFORMANCE António Horta-Osório, Group Chief Executive 2013 HALF YEAR FINANCIAL RESULTS George g Culmer,, Group p Finance Director UPDATE ON COSTS AND SIMPLIFICATION Mark Fisher, Director, Group Operations SUMMARY António Horta-Osório, Group Chief Executive 19

  21. Slide 21: Financial Performance: Maintaining the reducing cost trend

    FINANCIAL PERFORMANCE Maintaining the reducing cost trend TOTAL COSTS (£m) (6)% 5,045 56 23 4,749 ƒ 6% cost reduction versus H1 2012 (321) ((41)) (13) – Driven by strong Simplification savings – Investment in strategic initiatives up £23m to £158m H1 2012 Si Simplification lifi ti St St. IInflation

  22. Slide 22: Strong Delivery Continues

    STRONG DELIVERY CONTINUES Simplification continues to improve the customer experience, examples l include… i l d ƒ Over 120,000 ISA transfers ‘in’ received YTD through new AUTOMATED automated process ISA TRANSFER ƒ 80% of transfers completed at ‘first point of contact’ in branch or by phone ƒ Fully

  23. Slide 23: Simplification and Best Bank for Customers

    SIMPLIFICATION AND BEST BANK FOR CUSTOMERS Strong reduction in complaints, with customer service continuing i i to improve… i FCA BANKING COMPLAINTS CUSTOMER SATISFACTION PER 1,000 ACCOUNTS (excluding PPI) NET PROMOTER SCORES 6 70% 65% 5 60% Bank A LloydsTSB 4 Bank B 55% Bank of Scotland 3 Bank C 50

  24. Slide 24: Simplifying the Group

    SIMPLIFYING THE GROUP Two years into the programme, strong progress continues TOTAL SUPPLIER NUMBERS SIMPLIFICATION OF THE GROUP 20000 CONTINUES CONTINUES… 18,006 (47)% 18000 16000 15,655 ƒ Transfer of 1.7m mortgage accounts onto 14000 single mortgage system Original g target 12000 10,533 10,000 9,5

  25. Slide 25: Simplification Savings

    SIMPLIFICATION SAVINGS On track to meet commitments SIMPLIFICATION RUN RATE SAVINGS (£m) Targeted £1.9bn exit run rate ƒ Programme now in second at the end of 2014 half – Strong delivery of benefits continues 1,160 ƒ £1,160m run-rate savings at 847 mid-year 2013 512 242 ƒ Well on track to meet £1.9b

  26. Slide 26: Agenda

    AGENDA ACHIEVEMENTS AND GROUP PERFORMANCE António Horta-Osório, Group Chief Executive H1 2013 FINANCIAL RESULTS George g Culmer,, Group p Finance Director UPDATE ON COSTS AND SIMPLIFICATION Mark Fisher, Director, Group Operations SUMMARY António Horta- Horta-Osório, Group Chief Executive 25

  27. Slide 27: Half Year 2013 Summary

    HALF YEAR 2013 SUMMARY Strong progress in delivering clearly differentiated strategy ƒ Strong performance in first six months of 2013 ƒ Substantial increase in Group profits ƒ Core profitability and returns further improved ƒ Delivering strategic plan ahead of expectations – Strengthening and refocu

  28. Slide 28: Half Year 2013 Summary – Outlook

    HALF YEAR 2013 SUMMARY – OUTLOOK Further progress expected in the second half of 2013 and b beyondd ƒ Group net interest margin expected to be close to 2.10% for the full year 2013 ƒ Expect Group total costs of around £9.6bn in 2013 and around £9.15bn in 2014 ƒ Expect further improvement in asset qu

  29. Slide 29: Half Year 2013 Summary: Well-positioned for UK recovery

    HALF YEAR 2013 SUMMARY Well-positioned to benefit from the UK economic recovery ƒ Focused UK retail and commercial bank ƒ Leading cost position and lower risk model, delivering a low cost of equity ƒ Rebuilding trust by focusing on customer needs and addressing remaining legacy issues ƒ Continuing t

  30. Slide 30: Forward Looking Statements and Basis of Presentation

    FORWARD LOOKING STATEMENTS AND BASIS OF PRESENTATION FORWARD LOOKING STATEMENTS This presentation contains forward looking statements with respect to the business, strategy and plans of the Lloyds Banking Group, its current goals and expectations relating to its future financial condition and perfor

  31. Slide 31: Appendix

    APPENDIX

  32. Slide 32: Loans and Advances to Customers

    LOANS AND ADVANCES TO CUSTOMERS LOANS AND ADVANCES TO CUSTOMERS £520.4bn(1) 30 Jun 2013 Financial, business and other services 9% Property companies 10% Personal other 5% Construction 1% Manufacturing 2% Personal mortgages Corporate other 64% 1% Agriculture, forestry and fishery 1% L Lease fi financ

  33. Slide 33: UK Mortgage Portfolio

    UK MORTGAGE PORTFOLIO UK MORTGAGE PORTFOLIO £321.7bn(1) UK MORTGAGES JUN 2013 DEC 2012 30 Jun 2013 Impaired loans £6.2bn £6.3bn Specialist £24.8bn Buy to let Impaired loans as % of £50 6bn £50.6bn 1.9% % 2.0% % closing l i advances d Impairment provisions £1.6bn £1.6bn £246.3bn Mainstream Impairment

  34. Slide 34: Mortgage Portfolio LTVs

    MORTGAGE PORTFOLIO LTVs Mainstream Buy to let Specialist Total Total Jun 2013 Jun 2013 Jun 2013 Jun 2013 Dec 2012 Average g LTVs 50.6% 69.6% 68.9% 54.0% 56.4% New business LTVs 63.4% 64.8% n/a 63.6% 62.6% ≤80% LTV 69.8% 61.7% 50.0% 67.0% 59.6% >80–90% LTV 15.6% 14.9% 19.9% 15.8% 16.8% >90–100% LTV 8

  35. Slide 35: Unsecured Lending Portfolio

    UNSECURED LENDING PORTFOLIO UNSECURED PORTFOLIO £21.8bn(1) IMPAIRED BALANCE (£m) 30 Jun 2013 2,695 Credit cards 243 2,370 £9.3bn 295 Overdrafts 2,014 1,999 253 1,776 £2.5bn 1,350 333 297 1,100 923 847 776 £10.0bn 1,102 975 838 819 Loans 703 Jun 2011 Dec 2011 Jun 2012 Dec 2012 Jun 2013 Loans Cards Ov

  36. Slide 36: Direct Real Estate Lending

    DIRECT REAL ESTATE LENDING Commercial/Residential property COMMERCIAL/RESIDENTIAL PROPERTY Core TOTAL Non-core £41.4bn(1) UK Core UK Non-Core Overseas £20 3bn £20.3bn £9 4bn £9.4bn £11 7bn(2) £11.7bn ƒ Gross £20.3bn/net £19.9bn ƒ Gross £9.4bn/net £6.6bn ƒ Ireland (Gross £7.2bn/net £2.3bn) 91% impair

  37. Slide 37: Direct Real Estate Lending

    DIRECT REAL ESTATE LENDING Commercial/Residential property UK COMMERCIAL/RESIDENTIAL PROPERTY BOOK £29.7bn(1) (39)% 48 5 48.5 5.8 43.9 40.8 5.9 36.6 4.4 34.7 44 4.4 30.7 30 7 29.7 3.9 42.7 3.9 3.2 38.0 36.4 32 2 32.2 30.8 26.8 26.5 Jun 2010 Dec 2010 Jun 2011 Dec 2011 Jun 2012 Dec 2012 Jun 2013 Net e

  38. Slide 38: Irish Portfolio

    IRISH PORTFOLIO Robust coverage which minimises downside risks PORTFOLIO BREAKDOWN (£bn) 30 Jun 2013 31 Dec 2012 Gross assets: £19.1bn (1) (Net: £10.2bn) Gross assets: £19.5bn (2) (Net: £10.9bn) Non-retail gross assets: £12.2bn (Net: £4.5bn) Non-retail gross assets: £12.9bn (Net: £5.4bn) 19 1 19.1 1

  39. Slide 39: Selected Eurozone Exposures

    SELECTED EUROZONE EXPOSURES Substantial reductions achieved and minimal sovereign exposures remaini Banks & other th IInsurance Sovereign financial shareholder (£m) debt(1) institutions ABS Corporate Personal assets Total Ireland – 1,315 , 184 5,236 , 5,704 , 103 12,542 , Spain 14 505 34 2,203 52 20

  40. Slide 40: Non-Core Reductions

    NON-CORE REDUCTIONS Non-core reductions continue to be capital accretive H1 2013 H1 2012 Loss before tax(1) (£m) (621) (1,524) Post tax loss ‘capital consumed’ (£m) (477) (1,151) Reduced RWAs (£bn) 17.7 15.4 att 10% ‘‘capital it l released’ l d’ (£ (£m)) 1 768 1,768 1 540 1,540 Decrease in EEL(2) (£

  41. Slide 41: Balance Sheet Further Strengthened: Funding and liquidity

    BALANCE SHEET FURTHER STRENGTHENED Funding transformation complete; liquidity coverage f h improved further i d WHOLESALE FUNDING (£bn) (47)% ƒ Wholesale funding reduced by £12.6bn in 298 251 (38)% the first half of 2013 100 (31)% 69 (55)% 170 ƒ Short-term funding 32% of total wholesale 49 157 44 31

  42. Slide 42: Balance Sheet Further Strengthened: Wholesale funding

    BALANCE SHEET FURTHER STRENGTHENED Broad spread of wholesale funding with increasing asset coverage £bn Jun 2013 Dec 2012 WHOLESALE FUNDING £157bn Bank deposits(1) 12 15 > 1 year 68% Certificates of deposit 12 11 M di Medium-term t notes t 30 35 2 – 5 years £36bn >5 years Covered bonds 37 39 £50bn C

  43. Slide 43: Net Tangible Assets

    NET TANGIBLE ASSETS NET TANGIBLE ASSETS (£bn) NET TANGIBLE ASSETS PER SHARE (p) 1.7 54.6 51.9 1.4 (0.1) ((0.3)) 1.2 0.2 39.0 36.6 1.0 Dec 2012 H1 2013 Sales of Other Jun 2013 Dec 2012 Share H1 2013 Sales of Other Jun 2013 earnings SJP issues earnings SJP impact shares impact shares 42

  44. Slide 44: Forward Looking Statements and Basis of Presentation

    FORWARD LOOKING STATEMENTS AND BASIS OF PRESENTATION FORWARD LOOKING STATEMENTS This presentation contains forward looking statements with respect to the business, strategy and plans of the Lloyds Banking Group, its current goals and expectations relating to its future financial condition and perfor

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