Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — Debt Investor Presentation (October 2022)
33 slides from Lloyds Banking's debt investor presentation, Oct 27, 2022
Slide 1: 2022 Q3 Fixed Income Investor Presentation
Classification: Public 2022 Q3 Fixed Income Investor Presentation Lloyds Banking Group 27 October 2022
Slide 2: Robust performance, confidence in continued delivery
Classification: Public Robust performance, confidence in continued delivery Purpose • Maintaining support for customers • Continued income growth supported by rate environment and robust business volumes; strong capital generation • Strong observed asset quality and stable credit trends Helping Brit
Slide 3: Supporting our customers
Classification: Public Supporting our customers Purpose • Customers demonstrating resilience and adapting to higher cost of living • Support provided where required with increased operational capacity − Retail o Proactively contacting those most-impacted o Suppressed fees for vulnerable customers o
Slide 4: Financial Update
Classification: Public Financial Update 4
Slide 5: Robust financial performance
Classification: Public Robust financial performance Summary P&L and key metrics (£m) Q3 2022 Q3 2021 YTD YTD YoY Net interest income 9,529 8,270 15% • Balance sheet franchise growth Other income 3,811 3,753 2% Operating lease depreciation (295) (382) 23% • Net income up 12%; NIM 284bps Net income 13
Slide 6: Ongoing strength in customer franchise
Classification: Public Ongoing strength in customer franchise Q3 lending change Q3 deposit change (£bn) (£bn) Retail Commercial Retail Commercial • Mortgage balances up £1.0bn in Q3 at +£1.9bn/0.5% +£0.6bn/0.6% +£1.5bn/0.5% +£3.5bn/2.1% £310.7bn; £1.8bn open book growth • Credit card balances up £0.
Slide 7: Continued income growth
Classification: Public Continued income growth Net interest income (NII) and banking net interest margin (NIM) • NII £9.5bn YTD, up 15% on prior year (£bn, bps) £3.2bn £3.4bn − Stronger Q3 NIM 298bps given base rate +11bps movements, hedge earnings and robust 15 4 298 balance growth 287 (7) (1) − Co
Slide 8: Increased hedge earnings with enhanced buffer
Classification: Public Increased hedge earnings with enhanced buffer • >£70bn growth in deposits since 2019 Growth in structural hedge capacity and buffer since 2019 contributing to increased hedge income (£bn) 17 72 31 − Q3 hedge income c.£120m above Q3 21 (2) 9 − Unutilised deposit buffer increase
Slide 9: Rigorous cost discipline alongside planned investment increase
Classification: Public Rigorous cost discipline alongside planned investment increase Operating costs (£m) +6% +1% 297 6,436 • Operating costs £6.4bn YTD, up 6% given 103 6,139 planned investment alongside stable BAU 6,066 161 8 (20) • Sustained cost discipline with BAU cost (179) management offsett
Slide 10: Strong observed asset quality; updated economic scenarios
Classification: Public Strong observed asset quality; updated economic scenarios Impairment1 • Q3 net impairment charge of £668m (£m) Q3 2022 Q3 YTD 2022 − Updated net MES charge of £418m; Charge/(credit) pre-updated MES 2 532 250 £618m for updated scenarios alongside Retail 520 235 £200m central CO
Slide 11: Resilient customer behaviour
Classification: Public Resilient customer behaviour Increased credit card spend in discretionary categories SME overdraft and corporate RCF2 utilisation stable (% change, September 2022 vs September 2019) (%) 60% 50% Largely discretionary 45% 40% +32% 20% +29% 22% +22% +19% 16% +16% +12% +11% 0% +1%
Slide 12: Resilient portfolios
Classification: Public Resilient portfolios Average mortgage LTV Commercial Banking UK direct real estate LTV1 • Average mortgage LTV 40.3% with 96% of book below 80% LTV 45% 40% 48% 39% − Average household income for 4% 17% mortgages c.£75k p.a.2 13% 11% H2 2019 Q3 2022 H2 2019 Q3 2022 • Net CRE ex
Slide 13: Updated macroeconomic outlook
Classification: Public Updated macroeconomic outlook UK bank rate CPI inflation 5.0% 4.0% 10% • Latest macroeconomic base case reflects 3.0% some deterioration in outlook 2.0% 5% − Base rate forecast to peak at 4.00% at 1.0% year end 2022 0.0% 0% Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
Slide 14: Statutory profit after tax £4.0bn YTD
Classification: Public Statutory profit after tax £4.0bn YTD Statutory profit (£m) Q3 2022 Q3 2021 YTD YTD YoY Underlying profit 5,475 5,903 (7)% • Underlying and statutory profit converging Restructuring costs (69) (34) following year end 2021 reporting changes Volatility and other items (237) 65 S
Slide 15: Robust performance, confidence in continued delivery
Classification: Public Robust performance, confidence in continued delivery • Maintaining support for customers Helping Britain • Strong observed asset quality and stable credit trends Prosper • Robust financial performance and revised economic outlook driving updated guidance for 2022 • NIM now exp
Slide 16: Capital, Funding & Liquidity
Classification: Public Capital, Funding & Liquidity 16
Slide 17: Capital, MREL and Liquidity summary
Classification: Public Capital, MREL and Liquidity summary 16.3% CET1 remains ahead of regulatory 15.0% Capital CET1 MDA CET1 8.5% minimum and ongoing Group target of c.12.5% + c.1% management buffer FY 21 Q3 22 MREL remains comfortably in excess of MREL 37.2% 32.8% ongoing requirement of 25.6% 1 fo
Slide 18: Effective RWA management and strong capital generation
Classification: Public Effective RWA management and strong capital generation Risk-weighted assets (£bn) -£1bn • RWAs down £1bn since 1 January: credit 16 212 3 2 211 and model reductions and optimisation (3) (3) • 191bps capital generation after (31)bps for 196 full fixed pension deficit contributi
Slide 19: Capital strength maintained
Classification: Public Capital strength maintained Common equity tier 1 ratio 16.3% • CET1 ratio of 15.0% reflects strong capital build of 191bps YTD pre regulatory headwinds of 230bps on 1 January 2022 15.0% • UK CCyB rate set to increase from 0% currently to 1% in December 2022 and 2% in July 2023
Slide 20: Guiding to increased funding requirements over strategic plan period
Classification: Public Guiding to increased funding requirements over strategic plan period Issuance 2023 principles HoldCo c.£5-10bn Refinancing of • 2022 funding plan completed with £6.1bn Senior maturities of senior HoldCo issued vs guidance of £5- £6bn c.£2bn across T1 Ongoing • Total issuance o
Slide 21: Term funding maturities
Classification: Public Term funding maturities HoldCo redemption profile (£bn)1 11.0 2.0 8.5 1.5 6.6 2.0 0.1 0.7 0.9 3.5 • Strong liquidity position with LCR at 146% 7.5 0.4 2.0 5.8 5.6 1.8 • Issuance in recent years less than 2.0 1.3 maturities 2022 2023 2024 2025 2026 2 • Redemption profile suppor
Slide 22: Appendix
Classification: Public Appendix 22
Slide 23: Simple group structure with multiple issuance points
Classification: Public Simple group structure with multiple issuance points HoldCo Lloyds Banking Group BBB+ / A3 / A A-2 / P-2 / F1 Sta / Sta / Sta Senior Unsecured - Capital Ring-Fenced Sub-Group Non-Ring-Fenced Sub-Group Insurance Sub-Group Equity Investments Sub-Group Lloyds Bank, Bank of Scotla
Slide 24: Strong credit ratings across the Group
Classification: Public Strong credit ratings across the Group Non-Ring-Fenced Insurance HoldCo Ring-Fenced Bank Bank Sub-Group Lloyds Bank, Lloyds Bank Corporate UK Sovereign Lloyds Banking Group Scottish Widows 1 Bank of Scotland Markets AA BBB+ A+ A S&P Negative Stable Stable Stable - A-2 A-1 A-1
Slide 25: Strong ESG ratings supported by clear deliverables
Classification: Public Strong ESG ratings supported by clear deliverables • Reduce carbon emissions we finance by >50% by 2030, on the path AAA to net zero by 2050 or sooner MSCI 1 AA AA AA • Net zero for our own operations by 2030 and reduce the emissions A from our suppliers by 50% by 2030 on the
Slide 26: Quarterly P&L and key ratios
Classification: Public Quarterly P&L and key ratios (£m) Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 Q2 2021 Q1 2021 Underlying net interest income 3,394 3,190 2,945 2,893 2,852 2,741 2,677 Underlying other income 1,282 1,268 1,261 1,307 1,336 1,282 1,135 Operating lease depreciation (82) (119) (94) (78
Slide 27: Updated economic scenarios
Classification: Public Updated economic scenarios Scenario ECL (£m) Measure (%) 2022 vs Q2 221 2023 2024 2025 2026 Ave. 22-26 GDP 3.6 0.1 0.4 1.0 1.5 2.1 1.7 Interest rate 2.16 0.52 5.28 5.17 4.30 4.12 4.20 Unemployment rate 3.3 0.2 2.8 3.2 3.5 3.8 3.3 Upside (30%) 3,778 HPI growth 6.1 2.9 (2.7) 7.2
Slide 28: Updated coverage after updated economic outlook
Classification: Public Updated coverage after updated economic outlook Gross Coverage (ex. Recoveries)2 Total P&L Net ECL Write-offs (£m, unless stated customer coverage ECL Write-offs charge/ incr./ ECL Q3 & Other Stage 1 Stage 2 Stage 3 Total otherwise)1 L&A (£bn) Q4 20211 Q4 2021 & Other (credit)
Slide 29: Low mortgage LTVs
Classification: Public Low mortgage LTVs September 20221 20211 20101 Mainstream Buy to let Specialist Total Total Total Average LTVs 39.6% 45.4% 34.5% 40.3% 42.1% 55.6% New business LTVs 62.4% 58.8% N/A 61.9% 63.3% 60.9% ≤ 80% LTV 95.4% 99.7% 96.6% 96.1% 95.4% 57.0% >80–90% LTV 4.1% 0.1% 1.2% 3.4% 4
Slide 30: Diverse funding portfolio as at Q3 2022
Classification: Public Diverse funding portfolio as at Q3 2022 Wholesale funding portfolio by type 13% 20% MM Funding Covered Bond £99bn 14% Securitisation OpCo Senior Wholesale funding portfolio by currency 34% 8% HoldCo Senior Sub Debt 16% 3% 23% GBP USD 25% Wholesale funding portfolio by maturity
Slide 31: Continued focus on legacy securities with significant reduction since 2021
Classification: Public Continued focus on legacy securities with significant reduction since 2021 • Legacy capital securities now constitute only c.£1.2bn, a reduction of c.£2.3bn £0.3bn since 2021 following LME and redemptions £0.7bn • Outstanding amount immaterial when compared to c.£66bn of regul
Slide 32: Disclaimer
Classification: Public Disclaimer Important notice The information, statements, views and opinions contained in this document and accompanying discussion (“this Presentation”) are for informational and reference purposes only. This Presentation has been provided by the Group (defined below). This Pr
Slide 33: Contacts
Classification: Public Contacts Group Corporate Treasury Peter Green Liz Padley Richard Shrimpton Head of Senior Funding & Covered Non-Bank Entities Treasurer & Head of Deputy Treasurer Richard.Shrimpton@Lloydsbanking.com Bonds Capital and Recovery and Resolution Peter.Green@Lloydsbanking.com Claire
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