Slide 1: 2021 Results Presentation
Classification: Public 2021 Results Presentation Lloyds Banking Group
Slide 2: Agenda
Classification: Public Agenda Section 1 Introduction Charlie Nunn, Group Chief Executive Section 2 2021 strategic and William Chalmers, Chief Financial Officer financial progress Section 3 Strategy update Charlie Nunn, Group Chief Executive William Chalmers, Chief Financial Officer Section 4 Q&A Cha
Slide 3: Introduction
Classification: Public Introduction 3
Slide 4: 2021 strategic and financial progress
Classification: Public 2021 strategic and financial progress 4
Slide 5: Solid financial performance in 2021
Classification: Public Solid financial performance in 2021 • Solid net income, up 9%, NIM 254bps • Maintained focus on operating costs, 1% £15.8bn 56.7% higher YoY including variable pay Net income up 9% Cost:income ratio up • Strong asset quality, £1.2bn net vs 2020 1.4pp vs 2020 impairment credit
Slide 6: Helping Britain Recover
Classification: Public Helping Britain Recover Performance against commitments for 20211 >93k >£16bn Start-ups and small businesses Lent to first-time homebuyers Group’s focus areas for 2021 supported vs target 75k2 vs target £10bn • Recovery and growth of businesses • Financial health of households
Slide 7: Progress against Strategic Review 2021
Classification: Public Progress against Strategic Review 2021 Our customer ambitions Enhanced capabilities +69 Maintained record all-channel NPS (FY21) 1.8x Mobile app releases in 2021 vs 2020 (target 2x) £16bn Net growth in open mortgage book in 2021 3x Corporate clients onboarded to new cash manag
Slide 8: Solid net interest income performance
Classification: Public Solid net interest income performance Average interest-earning assets (AIEAs) (£bn) +2% 15 • NII £11.2bn, up 4% on 2020, benefitting (3) 1 445 from increased AIEAs and stronger NIM (3) 435 − 2021 AIEAs £445bn, up £10bn on 2020 − Full year NIM 254bps, 257bps in Q4, up 2bps on Q
Slide 9: Strong mortgage growth with tighter new business margins
Classification: Public Strong mortgage growth with tighter new business margins Mortgage book (Book size £bn, Gross margin %1) 1.82% 1.86% 1.84% • Mortgage balances up £13.7bn to 305 308 YoY £307.5bn, open book growth £16bn 294 • Back book c.£64bn, Q4 YoY attrition c.16% 115 132 139 +21% • 2021 new
Slide 10: Other lending balances stabilised in H2 with robust margins
Classification: Public Other lending balances stabilised in H2 with robust margins UK consumer finance1 (Book size £bn, Gross margin %2) • UK consumer finance £0.8bn lower in year but stabilising in H2 H2 2021 14 8 6 8 36 6.59% − Credit card balances reduced £0.2bn in H1 2021 14 8 6 8 36 6.70% 2021,
Slide 11: Continued significant deposit franchise growth
Classification: Public Continued significant deposit franchise growth Increase in customer deposits1,2 (Book size £bn, Gross margin %) 0.18% 0.15% 0.16% 474 476 YoY 451 16 15 15 +11% 15 16 14 116 (5)% 123 125 • Significant £25.6bn increase in deposits in 2021, down £2.8bn in Q4 Continued inflows to
Slide 12: Continued franchise growth building hedge sustainability
Classification: Public Continued franchise growth building hedge sustainability Hedged balances1 (£bn) 190 210 225 240 240 215 • Structural hedge approved capacity of 180 186 65 70 £240bn, up £30bn in 2021 60 62 Structural hedge 90 94 120 140 • Prudent management of structural hedge 30 30 30 30 − c.
Slide 13: Other income showing signs of recovery
Classification: Public Other income showing signs of recovery Other income • Other income of £5.1bn in 2021, with (£bn) £1.3bn in Q4 − Retail seeing recovering customer activity levels, offset by reduced Lex fleet 1.3 1.3 1.3 1.2 1.2 1.0 1.1 1.1 − Broadly stable performance overall in Commercial Ban
Slide 14: Maintained focus on efficiency
Classification: Public Maintained focus on efficiency Operating costs • Sustained cost discipline; cost:income ratio (£m) +1% of 56.7% and operating costs of c.£7.6bn 253 7,630 7,585 (24) • Remediation of £1.3bn includes £790m for 92 HBOS Reading, £600m in Q4 reflecting (12) (264) estimated future c
Slide 15: Strong asset quality and low new to arrears
Classification: Public Strong asset quality and low new to arrears Q4 YoY Impairment (£m) 2021 2021 2020 change • £1.2bn net impairment credit for 2021, Charges pre-updated MES1 557 146 1,610 (1,053) £467m credit in Q4, both given improved Retail 887 154 1,359 (472) macroeconomic outlook Commercial
Slide 16: Statutory profit after tax of £5.9bn
Classification: Public Statutory profit after tax of £5.9bn YoY (£m) 2021 Q4 2020 change • Restructuring costs £956m; £570m in Q4 Underlying profit 8,040 1,785 2,193 Restructuring costs (956) (570) (521) (83)% − c.£400m software write-off in Q4 given Severance costs (109) (18) (156) 30% new technolo
Slide 17: Effective RWA management
Classification: Public Effective RWA management Risk-weighted assets • RWAs down £6.7bn in 2021, down £4.7bn (£bn) in Q4, driven by Commercial optimisation £(6.7)bn 202.7 1.8 • Limited credit migration to date, supported (0.4) by high quality book and house prices 196.0 (8.1) • 1 January 2022 pro fo
Slide 18: Strong capital build enabling total distribution of £3.4bn
Classification: Public Strong capital build enabling total distribution of £3.4bn • Total capital return equivalent to £3.4bn, c.10% of market cap Common equity tier 1 ratio − Final ordinary dividend of 1.33p per (%, bps) share; total ordinary dividend of 2p Capital build 210bps (Q4 51bps) − Share b
Slide 19: Strategy update
Classification: Public Strategy update 19
Slide 20: Key messages
Classification: Public Key messages Higher, more diversified, revenues c.£0.7bn additional revenues from strategic initiatives in 2024; c.£1.5bn with a 50:50 NII/OOI split by 2026 Maintaining strong focus on cost discipline Transformation plan Flat costs in 2024 vs. 2022, with savings offsetting cos
Slide 21: Building on our strong foundations
Classification: Public Building on our strong foundations Our strong foundations… …have created distinct competitive strengths Leading UK customer franchise with trusted brands Maintained leading market shares; 19% since 2017 >1m business client Relationship with relationships c.50% of UK adults Lar
Slide 22: Changing environment, opportunity to do more
Classification: Public Changing environment, opportunity to do more Key challenges Key opportunities High NII dependency in a low rate environment Grow and diversify revenue base Customer behaviour and competition driving disintermediation Create more valuable relationships as integrated provider Ac
Slide 23: Our strategy serves our purpose and builds upon our participation choices
Classification: Public Our strategy serves our purpose and builds upon our participation choices Purpose Strategic participation choices Strategic vision Customer focus UK consumers and UK-linked businesses and corporates Helping Product focus UK customer-focused Britain Meeting all consumer and bus
Slide 24: Transforming to create higher and more sustainable value
Classification: Public Transforming to create higher and more sustainable value A clear strategic vision… …with a transformation plan… …creating higher and more sustainable value Drive revenue growth and diversification Grow UK customer-focused digital Higher, more leader and integrated Strengthen c
Slide 25: Delivering for our stakeholders, profitably
Classification: Public Delivering for our stakeholders, profitably Purpose drives value Delivering for our stakeholders Improving access to quality housing Promoting financial inclusion and education Clear purpose and mission Building an inclusive society Enabling regional development Strategic dire
Slide 26: Higher, more sustainable, returns and capital generation
Classification: Public Higher, more sustainable, returns and capital generation c.£3bn incremental strategic investment by 2024… …will create higher, more sustainable, returns >10% RoTE by 2024 Drive revenue growth and diversification c.£0.7bn additional revenues from strategic initiatives Grow c.£8
Slide 27: Our strategic priorities
Classification: Public Our strategic priorities 27
Slide 28: Drive revenue growth and diversification
Classification: Public Drive revenue growth and diversification Key outcomes from strategic initiatives c.£1.5bn per annum Deepen and Create a new Additional revenues in 2026 1 innovate in 2 mass affluent (c.£0.7bn in 2024) Consumer offering 50:50 NII/OOI split from strategic initiatives by 2026 Tar
Slide 29: Deepen and innovate in Consumer
Classification: Public 1 Deepen and innovate in Consumer Leading UK consumer franchise Opportunity to deepen relationships and innovate intermediary propositions Customer financial needs1 Largest UK 26m bank £200m run-rate Total across all providers Consumer relationships through (Avg UK consumer) c
Slide 30: Deepen and innovate in Consumer relationships
Classification: Public 1 Deepen and innovate in Consumer relationships Business priorities: £600m incremental strategic investment over 3 years 2024 outcomes: Maintain leading market share in core product areas through service and digital solutions >5% Protect and grow Increase in depth of relations
Slide 31: Innovate and broaden our intermediary propositions
Classification: Public 1 Innovate and broaden our intermediary propositions Business priorities: £400m incremental strategic investment over 3 years 2024 outcomes: Maintain value maximising approach in mortgages with our specialist brands and partnerships with major distributors >£55bn new AuA Prote
Slide 32: Create a new mass affluent offering
Classification: Public 2 Create a new mass affluent offering Strong platform for growth Opportunity to expand in growing mass affluent market Significant scope for a targeted LBG …and a rapidly growing market Largest UK >2m mass affluent offering… bank Eligible mass affluent customers across Lloyds
Slide 33: Create a new mass affluent offering
Classification: Public 2 Create a new mass affluent offering Business priorities: £300m incremental strategic investment over 3 years 2024 outcomes: Enhanced propositions including high quality current Tailored banking accounts, mortgages and complex lending >£5bn proposition Unique digital and data
Slide 34: Digitise and diversify our SME business
Classification: Public 3 Digitise and diversify our SME business Well positioned to succeed Opportunity to meet more client needs with a digital-first model Non lending income as a % of total income Largest UK Top 3 bank c.8pp Across key purpose aligned sectors1 Scope to grow ancillary revenues Deep
Slide 35: Digitise and diversify our SME business
Classification: Public 3 Digitise and diversify our SME business Business priorities: £500m incremental strategic investment over 3 years 2024 outcomes: Broaden Provide extensive support to UK businesses, improve >50% relationships with service, support net zero transition, and optimise returns impr
Slide 36: Target our Corporate and Institutional offering
Classification: Public 4 Target our Corporate and Institutional offering Our differentiated position Opportunity to strengthen a core business with focus on UK-linked clients Corporate and Institutional OOI as a % of total income Largest UK Leading provider bank UK Gilts, GBP DCM, project 18pp finan
Slide 37: Target our Corporate and Institutional offering
Classification: Public 4 Target our Corporate and Institutional offering Business priorities: £200m incremental strategic investment over 3 years 2024 outcomes: Strengthen Product enhancements in core capabilities - transaction £15bn cash-debt-risk banking, debt financing, and targeted markets inves
Slide 38: Strengthen cost efficiency
Classification: Public Strengthen cost efficiency Key priorities: c.£1bn incremental strategic investment over 3 years 2024 outcomes: Lower cost of technology Simplify our technology estate through decommissioning or migration to more efficient infrastructure >15% Reduction in legacy applications Lo
Slide 39: Strengthen capital efficiency
Classification: Public Strengthen capital efficiency Strong balance sheet with a clear approach to capital management Clear growth focus: Discipline: Growth in capital-lite, fee Rigid discipline on pricing generating OOI businesses and returns Capital management approach Portfolio management: Buildi
Slide 40: Maximise the potential of people, technology and data
Classification: Public Maximise the potential of people, technology and data People 2024 outcomes: Transforming ways of working, recruiting and Improve developing new skills; building an inclusive organisation Employee Engagement Index Technology Further embedding an agile technology model, 20% driv
Slide 41: Strategic execution creates clear outcomes
Classification: Public Strategic execution creates clear outcomes Deepen and Meeting more needs of existing customers innovate in Increased digitally active customers Consumer Higher market shares with intermediaries Strengthen Lower cost of technology cost and capital Lower cost of change efficienc
Slide 42: Higher, more sustainable, returns and capital generation
Classification: Public Higher, more sustainable, returns and capital generation 42
Slide 43: Clear financial framework
Classification: Public Clear financial framework 1 2 3 4 Grow and diversify Strong focus on cost Higher, more Higher, more sustainable, revenues discipline sustainable, returns capital generation Disciplined return hurdles and clear execution outcomes 43
Slide 44: Plan based on prudent economic assumptions
Classification: Public Plan based on prudent economic assumptions Assumptions reflect ongoing Covid recovery Positive exposure to rate rises, although not primary driver of returns1 2022 2023 2024 £m Year 1 Year 2 Year 3 GDP growth (YoY) 3.7% 1.5% 1.3% +50bps c.375 c.525 c.800 Bank Rate 0.81% 1.00%
Slide 45: Strategy enhances long-term revenue potential
Classification: Public Strategy enhances long-term revenue potential Net income Business plan assumptions (Illustrative, £bn) 2021 15.8 Ongoing mortgage margin pressure Headwinds IFRS17 impact in 2023, with recovery thereafter Headwinds Normalisation of equity investment contribution and OLD1 Existi
Slide 46: A clear approach to BAU cost management
Classification: Public A clear approach to BAU cost management 1 Transparency: Adopting a new basis of reporting 2 Stable BAU costs: c.£600m savings by 2024 to offset headwinds Representation of 2021 operating costs, (£m) +c.£685m £0.2bn savings Technology Modernised technology reducing c.180 c.8,30
Slide 47: Increased investment in the business
Classification: Public Increased investment in the business 3 New Opex: Savings to offset new initiatives 4 Incremental strategic investment c.£3bn Incremental strategic investment c.£350m Gross savings from strategic initiatives: to c.£3bn over three years by 2024 technology, data and lowering cost
Slide 48: Maintaining cost discipline through a period of investment
Classification: Public Maintaining cost discipline through a period of investment Key outcomes Operating costs (£bn) Stable BAU costs New Opex Throughout the plan Headwinds Headwinds c.8.8 c.8.8 8.3 c.£8.8bn New Savings Savings Operating costs in 2024, flat on 2022; Savings reducing beyond 2024 Stab
Slide 49: Higher, more sustainable, returns
Classification: Public Higher, more sustainable, returns Key outcomes Return on tangible equity (%) Savings >12% >10% RoTE by 2024 and >12% by 2026 as full investment benefits are realised 11.4 >10% Capital dist. Headwinds Disciplined RWA growth beyond 2022 as business growth and regulatory changes
Slide 50: Higher, more sustainable, capital generation
Classification: Public Higher, more sustainable, capital generation Capital generation Clear capital return policy (Pre-variable pension contributions1) Step change as benefits of investment realised and new investment reduces 175-200bps Capital return in 2021 2021 £3.4bn c.10% of market capitalisat
Slide 51: Guidance overview
Classification: Public Guidance overview 2022 2024 2026 Income NIM to be above 260bps Stable BAU costs Stable BAU costs throughout the plan Costs <50% cost:income ratio c.£8.8bn operating costs (2021: £8.3bn) c.£8.8bn operating costs, flat on 2022 AQR Net AQR of around 20bps Net AQR less than 30bps
Slide 52: Closing remarks
Classification: Public Closing remarks 52
Slide 53: Strategic vision delivering higher, more sustainable, returns
Classification: Public Strategic vision delivering higher, more sustainable, returns A clear strategic vision… …to create higher, more sustainable, returns Higher, more diversified, revenues Strong focus on cost discipline UK customer-focused digital leader and integrated financial Enabling our stra
Slide 54: Q&A
Classification: Public Q&A 54
Slide 55: Appendix
Classification: Public Appendix 55
Slide 56: Quarterly P&L and key ratios
Classification: Public Quarterly P&L and key ratios (£m) Q4 2021 Q3 2021 Q2 2021 Q1 2021 Q4 2020 Q3 2020 Q2 2020 Q1 2020 Underlying net interest income 2,893 2,852 2,741 2,677 2,677 2,618 2,528 2,950 Underlying other income 1,307 1,336 1,282 1,135 1,066 988 1,235 1,226 Operating lease depreciation (
Slide 57: Illustrative NII sensitivity
Classification: Public Illustrative NII sensitivity • Reflects shifts in forward rate curve • Impact driven by structural hedge re- Cumulative impact of parallel shifts in interest rate curve1 investment and benefit on certain deposits (£m) • Actual impact also depends on regulatory and competitive
Slide 58: Prudent economic scenarios
Classification: Public Prudent economic scenarios ECL Economic measure vs Q3 vs FY Average Scenario (£m) (%) 2021 20211 20201 2022 2023 2024 2025 2021-25 GDP 7.1 0.4 3.4 4.0 1.4 1.3 1.4 3.0 Interest rate 0.14 (0.12) (1.00) 1.44 1.74 1.82 2.03 1.43 Upside (30%) 4,018 Unemployment rate 4.4 (0.2) (1.0)
Slide 59: Updated coverage after updated economic outlook
Classification: Public Updated coverage after updated economic outlook Gross Coverage (ex. Recoveries)1 Total P&L Net ECL Write-offs customer coverage ECL Write-offs charge / increase / ECL Q4 & Other (£m) L&A (£bn) Stage 1 Stage 2 Stage 3 Total Q4 20201 Q4 2020 & Other (credit) (decrease) 2021 FY 2
Slide 60: Continued low mortgage LTVs
Classification: Public Continued low mortgage LTVs December 20211 20201 20101 Mainstream Buy to let Specialist Total Total Total Average LTVs 41.3% 47.7% 37.5% 42.1% 43.5% 55.6% New business LTVs 63.7% 60.4% N/A 63.3% 63.9% 60.9% ≤ 80% LTV 94.5% 99.5% 95.9% 95.4% 91.6% 57.0% >80–90% LTV 5.0% 0.2% 1.
Slide 61: Glossary and definitions
Classification: Public Glossary and definitions Term Definitions and calculations AIEA Average Interest-Earning Banking Assets Asset Quality Ratio: The underlying impairment credit or charge for the period in respect of loans and advances to customers, expressed as a percentage of AQR average gross
Slide 62: Forward looking statements
Classification: Public Forward looking statements This document contains certain forward-looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934, as amended, and section 27A of the US Securities Act of 1933, as amended, with respect to Lloyds Banking Group plc