Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — H1 2016 Earnings Presentation
31 slides from Lloyds Banking's earnings presentation, Jul 28, 2016
Slide 1: 2016 Half-Year Results
TITLE SLIDE IS IN SENTENCE 2016 HALF-YEAR CASE.RESULTS GREEN BACKGROUND. Presentation to Analysts 28 July 2016 and Investors
Slide 2: Agenda
AGENDA António Horta-Osório Delivering for our key stakeholders Group Chief Executive George Culmer Financial results Chief Financial Officer Juan Colombás Asset quality Chief Risk Officer António Horta-Osório Summary Group Chief Executive 1
Slide 3: Highlights for the First Half of 2016
HIGHLIGHTS FOR THE FIRST HALF OF 2016 Differentiated business model continues to provide competitive advantage with good financial performance in the period • Our differentiated retail and commercial business model has delivered another good financial performance • Following the EU referendum the ou
Slide 4: Financial Performance
FINANCIAL PERFORMANCE Good financial performance with robust underlying profit, improved statutory profit and strong returns Income £8.9bn • Strong underlying return on required equity of 14.0% with statutory return on required equity of 8.3% Cost:income ratio 47.8% • Underlying profit of £4.2bn (do
Slide 5: UK Economy
UK ECONOMY Sustainable economic recovery in recent years positions the UK well for period of uncertainty UK private sector debt / GDP(1) (%) Unemployment rate(3) (%) 90/91 recession 08/09 recession 12 90/91 recession 08/09 recession 100 90 10 80 70 8 60 6 50 40 4 1987 2016 1987 2016 Households Corpo
Slide 6: Transformation of the Business Positions Us Well
TRANSFORMATION OF THE BUSINESS POSITIONS US WELL Balance sheet substantially strengthened and business de-risked since 2010 through successful execution of strategy Run-off assets & RWAs (£bn) Wholesale funding & liquid assets(5) (£bn) Group Liquid assets Wholesale funding Funding less liquid assets
Slide 7: Low Risk Business Model
LOW RISK BUSINESS MODEL Low risk business model and prudent approach to lending position us well Mortgage portfolio trends (%) • Lending reflects prudent risk appetite 55.6 55.9 56.4 13.2 53.3 49.2 – Average mortgage LTV of 43%, with less than 1% with 12.0 46.1 11.7 43.2 LTV of >100% and only 9% wit
Slide 8: Our Strategic Focus
OUR STRATEGIC FOCUS Simple, low risk, customer focused, UK retail and commercial bank Creating the • Largest UK digital bank with over 12 million active online users; over 7 million mobile users best • Digital market share of 21%(1) with an award winning digital proposition customer • Net promoter s
Slide 9: Agenda
AGENDA António Horta-Osório Delivering for our key stakeholders Group Chief Executive George Culmer Financial results Chief Financial Officer Juan Colombás Asset quality Chief Risk Officer António Horta-Osório Summary Group Chief Executive 8
Slide 10: Financial Performance
FINANCIAL PERFORMANCE Robust underlying profit reflecting lower costs and strong credit quality H1 H1 (£m) 2016 2015 Change • Income of £8.9bn, down 1% – Net interest income up 1% reflecting 12bps Net interest income 5,782 5,715 1% improvement in NIM to 2.74% – Other income down 5% after improvement
Slide 11: Net Interest Income
NET INTEREST INCOME Resilient net interest income driven by further improvements in margin Net interest income (£m) Net interest margin (%) 1% 12bps 0.11 0.03 2.74 5,715 111 58 5,782 258 2.62 0.11 (360) (0.13) H1 2015 Asset Liability Wholesale One off H1 2016 H1 2015 Asset Liability Wholesale One of
Slide 12: Other Income
OTHER INCOME Other income down 5% with improvement in second quarter Other income (£m) Other income trend (£m) (5)% 1,661 1,592 1,616 3,253 4 1,528 (45) (20) 5 1,477 3,093 (104) 1,374 H1 2015 Retail Commercial Consumer Insurance Other H1 2016 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Banking F
Slide 13: Costs
COSTS Actively responding to changing customer behaviours with further efficiency savings targeted Operating costs (£m) (3)% • £0.6bn of Simplification II run-rate savings to date, 4,150 ahead of schedule to deliver original plan 124 52 4,041 (155) (35) (95) • Further efficiency savings targeted – A
Slide 14: Asset Quality
ASSET QUALITY Credit quality remains strong reflecting lower risk business Impairment charge (£m) 707 • Impairment charge of £245m and AQR of 11bps, 395 389 reflecting lower levels of releases and write backs 245 179 • Gross AQR of 26bps demonstrates prudent risk H1 2014 H2 2014 H1 2015 H2 2015 H1 2
Slide 15: Statutory Profit
STATUTORY PROFIT Statutory profit before tax more than doubled, with a significant reduction in conduct charges H1 H1 • £790m charge for ECNs taken in Q1, no further (£m) 2016 2015 charges to be taken following Supreme Court ruling Underlying profit 4,161 4,383 • Market volatility and other items in
Slide 16: Balance Sheet
BALANCE SHEET Average interest earning assets (AIEAs) broadly stable in first half of 2016, excluding run-off Average interest earning assets (£bn) 465.6 456.7 444.8 34.0 25.9 16.4 438.9 12.3 436.9 10.9 • AIEAs were broadly stable in the first half of 2016, excluding run-off 431.6 430.8 428.4 426.6
Slide 17: Balance Sheet: Capital Generation
BALANCE SHEET Capital generation remains strong Common equity tier 1 ratio (%) – Dec to Jun 0.3 • 50bps capital generation in Q2 after 30bps 1.1 14.1 13.0 (0.2) (0.4) 13.5 13.0 impact of EU referendum (0.3) (0.5) – EU referendum impact primarily relates to FX movement on RWAs Dec Under- Under- Condu
Slide 18: Agenda
AGENDA António Horta-Osório Delivering for our key stakeholders Group Chief Executive George Culmer Financial results Chief Financial Officer Juan Colombás Asset quality Chief Risk Officer António Horta-Osório Summary Group Chief Executive 17
Slide 19: Asset Quality – Mortgages
ASSET QUALITY – MORTGAGES Continued improvement in risk profile of mortgage book Average LTV(1) (%) 75.6 72.9 • Equity levels have increased significantly 55.6 51.9 52.7 49.2 – Average LTV of 43%, with less than 1% >100% LTV 43.2 41.0 • Underweight in London Dec 2010 Jun 2016 • Prudent risk appetite
Slide 20: Asset Quality – Commercial Banking
ASSET QUALITY – COMMERCIAL BANKING Substantially de-risked portfolio with limited exposure to higher risk segments Corporate gearing(1) (%) 35 90/91 recession 08/09 recession • Corporate gearing has fallen since 2008 easing debt 30 burdens and helping reduce repayment costs 25 20 • Limited exposure
Slide 21: Asset Quality – UK Consumer Finance
ASSET QUALITY – UK CONSUMER FINANCE Growing in an under represented area with a prudent risk appetite Balances (£bn) 27.4 26.7 27.9 24.7 24.3 5.2 4.7 22.2 7.2 9.6 10.9 • Portfolio performance reflects prudent approach to 5.1 12.0 lending with impaired loans down in all segments 10.5 8.3 8.2 7.9 7.7
Slide 22: Agenda
AGENDA António Horta-Osório Delivering for our key stakeholders Group Chief Executive George Culmer Financial results Chief Financial Officer Juan Colombás Asset quality Chief Risk Officer António Horta-Osório Summary Group Chief Executive 21
Slide 23: Delivering for Our Customers and Shareholders
DELIVERING FOR OUR CUSTOMERS AND SHAREHOLDERS Our differentiated business model is delivering and given the transformation of the business and prudent approach to risk we are well placed • Our differentiated business model is Helping Britain Prosper delivering • Remain open for business and – Cost d
Slide 24: Appendix
TITLE SLIDE IS IN APPENDIX CASE. SENTENCE GREEN BACKGROUND.
Slide 25: Mortgage Portfolio LTVs
MORTGAGE PORTFOLIO LTVS Further improvement in LTVs Jun 2016 Dec 2015 Dec 2014 Dec 2010 Mainstream Buy-to-let Specialist Total Total Total Total(1) Average LTVs 41.0% 52.7% 49.2% 43.2% 46.1% 49.2% 55.6% New business LTVs 64.8% 62.3% N/A 64.3% 64.7% 64.8% 60.9% ≤ 80% LTV 90.9% 91.6% 85.0% 90.7% 86.4%
Slide 26: Average Interest Earning Assets
AVERAGE INTEREST EARNING ASSETS AIEAs broadly stable in first half of 2016, excluding run-off AIEAs & customer loans (£bn) Q2 Q1 Q4 Q3 Q2 2016 2016 2015 2015 2015 • Reduction in AIEAs in recent years primarily driven Net loans and advances 453.0 456.7 455.2 455.0 452.3 by disposal of run-off assets
Slide 27: Delivering Prudent Loan Growth
DELIVERING PRUDENT LOAN GROWTH Supporting the UK economy with continued loan growth in targeted customer segments Net lending growth(1) (£bn) Growth in targeted segments (%) Net lending growth to Black Horse new business YoY YoY (%) SMEs since 2010 growth since H1 2013 (CAGR)(3) 28 42 Mortgages 0 –
Slide 28: Tangible Net Asset Value and Leverage Ratio
TANGIBLE NET ASSET VALUE AND LEVERAGE RATIO Movement in TNAV per share reflects movements in underlying profit and reserves offset by conduct, the impact of ECNs, and dividend payments Tangible net assets per share (p) – Dec to Jun • TNAV per share increased to 55.0p, reflecting 5.8 2.5 55.0 52.3 (1
Slide 29: Market Share
MARKET SHARE Continue to deliver sustainable growth in targeted areas LBG market share(1) (%) FY 2014 Current account volumes 25 25 Retail deposit balances 21 23 Mortgage balances(2) 21 22 SME and small business lending balances(3) 19 18 SME main bank relationships 19 19 Mid markets main bank relati
Slide 30: Branch Presence
BRANCH PRESENCE Multi-brand strategy serving different segments of the market Large relationship brands Challenger brands Scottish brands 1,733 1,542 1,363 1302(1) 1,286 1,180 1,177 1,091 882 847 711 694 662 660 631 (2) 608 295 264 336 209 152 121 75 74 41 8 H1 2011 vs H1 2016 branch presence by bra
Slide 31: 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