Lloyds Banking Group Plc · LSE:LLOY

Lloyds Banking — Q1 2014 Earnings Presentation

19 slides from Lloyds Banking's earnings presentation, May 1, 2014

  1. Slide 1: Results for the Quarter Ended 31 March 2014

    RESULTS FOR THE QUARTER ENDED 31 MARCH 2014 1 May 2014 António Horta-Osório, Group Chief Executive George Culmer, Chief Financial Officer

  2. Slide 2: Highlights for the First Three Months of 2014

    HIGHLIGHTS FOR THE FIRST THREE MONTHS OF 2014  Continue to successfully execute on our strategy  Underlying profit increased 22% to £1.8bn and statutory PBT of £1.4bn  Lending and deposit growth in our key customer segments  Customers at the heart of our business; launched Helping Britain Prospe

  3. Slide 3: Financial Performance: Profit and returns substantially improved

    FINANCIAL PERFORMANCE Profit and returns substantially improved and balance sheet strengthened UNDERLYING £1.8bn  Group underlying profit increased to £1.8bn PROFIT 22% – Net interest margin up 36bp to 2.32% – Simplification delivering further efficiencies; costs down 5% – Substantial 57% reduction

  4. Slide 4: Supporting Our Customers and the UK Economy

    SUPPORTING OUR CUSTOMERS AND THE UK ECONOMY Continued loan growth in key customer segments  Stronger UK economic growth NET LENDING BALANCES (%) – Improving housing market YoY QoQ – Unemployment falling – Strengthening consumer and business confidence Mortgages(1) 2% +0.3% – Disposable income growi

  5. Slide 5: Good Deposit Growth

    GOOD DEPOSIT GROWTH Relationship strategy continues to deliver DEPOSIT GROWTH (YoY)  Deposit growth reflects strength of our customer franchise £7.1bn  Retail relationship brands driving deposit growth in a low base rate environment 12% £8.9bn £15.4bn 4% 4%  Growth in high quality Transaction Ban

  6. Slide 6: Looking Ahead: Guidance for 2014

    LOOKING AHEAD Guidance for 2014  Loan growth in all key customer segments  Full year 2014 net interest margin now expected to increase to around 2.40%(1)  Other income will remain challenging  Further benefits from Simplification; guidance for full year costs of £9bn excluding TSB unchanged  Co

  7. Slide 7: Financial Performance: Substantial increase in underlying profit

    FINANCIAL PERFORMANCE Substantial increase in underlying profit Q1 Q1 (£m) 2014 2013 Change  Underlying profit up 22%, up 73% excluding SJP Net interest income 2,811 2,552 10% Other income 1,718 1,857 (7)%  Total income excluding SJP up 3% 4,529 4,409 3% St. James’s Place – 480 –  Other income re

  8. Slide 8: Strong net interest income performance, other income reflects disposals

    FINANCIAL PERFORMANCE Strong net interest income performance, other income reflects disposals and challenging market environment NET INTEREST INCOME (£m) 10% 480 101 2,811  Net interest income higher driven by 2,553 improved liability margin and lower cost 20 (173) of funds (170)  Positive liabili

  9. Slide 9: Further improvement in costs and impairment

    FINANCIAL PERFORMANCE Further improvement in costs and impairment TOTAL COSTS (£m) (5)%  5% cost reduction 2,408 80 2,298  Simplification run-rate savings of (127) 29 34 £1.6bn; continue to target exit (126) run-rate of £2bn by end 2014  Continue to expect 2014 costs of around £9bn (excluding TSB

  10. Slide 10: Strong statutory performance

    FINANCIAL PERFORMANCE Strong statutory performance Q1 Q1 (£m) 2014 2013  Asset sales includes gain on sale of SWIP of £105m; Q1 2013 includes gain on sale of Underlying profit 1,800 1,479 government bonds of £776m Asset sales 126 823  Volatile items includes £204m gain on ECN Volatile items (6) 25

  11. Slide 11: Legacy Issues: No change to PPI provision

    LEGACY ISSUES No change to PPI provision AVERAGE COMPLAINT VOLUMES PER MONTH(1) (15)%  Complaint volumes marginally above 140,000 (24)% projections in Q1 (31)% 105,000 (28)% – Q1 monthly average of c.42,000 (12)% complaints (8)% – Down 31% vs. Q1 2013 70,000 (24)% 13% 35,000  Reactive uphold rates

  12. Slide 12: Balance Sheet Highlights: Strong balance sheet

    BALANCE SHEET HIGHLIGHTS Strong balance sheet GROUP 2014 MOVEMENTS Mar Dec (£bn) 2014 2013 Change (£bn) Q1 2014 ASSETS SOURCE OF FUNDS Deposit growth(1) 5.3 Loans and advances(1) 466 468 0% Loans and advances(1) 2.0 Global Corporates 33 37 (10)% Run-off asset reduction 3.6 Other loans and advances 4

  13. Slide 13: Common equity tier 1 and leverage positions further strengthened

    FURTHER STRENGTHENING THE BALANCE SHEET Common equity tier 1 and leverage positions further strengthened FULLY LOADED COMMON EQUITY TIER 1 RATIO – DEC TO MAR  Stronger capital position 0.2% 0.7% 0.2% 0.2% principally driven by underlying (0.5)% 10.7% 10.3% (0.4)% profit – £400m insurance dividend p

  14. Slide 14: Strong capital position with medium term AT1 requirement met

    FURTHER STRENGTHENING THE BALANCE SHEET Strong capital position with medium term AT1 requirement met through recent ECN exchange CAPITAL COMPOSITION (%)(1) £bn  Strong total capital ratio of 19.5% 19.5 52.1 18.8 Tier 2 4.1 11.0 Tier 2 4.4  Substantially improved quality of capital with c.£5.3bn of

  15. Slide 15: Summary: Successful execution of our simple, clear strategy

    SUMMARY Successful execution of our simple, clear strategy  Supporting our customers and helping Britain prosper  UK economic recovery gathering momentum  Financial performance further improved, with stronger underlying profitability  Guidance for margin and impairments improved  Continue to st

  16. Slide 16: Appendix

    APPENDIX

  17. Slide 17: Run-off Portfolio: Reduction of £3.6bn in the first quarter

    RUN-OFF PORTFOLIO Reduction of £3.6bn in the first quarter RUN-OFF PORTFOLIO (£bn) (11)% Total assets 33 30  Run-off assets reduced 11% to International retail 8 £29.7bn 8 c.23 Treasury assets 3 3 UK CRE 7 Int’l Retail c.8 6  Underlying loss decreased to Other corporate 11 Non-Retail c.15 £183m 10

  18. Slide 18: Low Risk Business Model

    LOW RISK BUSINESS MODEL Increasing recognition of balance sheet strength and de-risking UK BANK CDS(1) 400 Bank Current level(2) Change since (bps) Jan 2012 (bps) LBG 68 (274) 350 HSBC 58 (86) Barclays 72 (124) 300 Standard Chartered 99 (82) RBS 97 (246) 250 200 150 Standard Chartered 100 RBS Barcla

  19. Slide 19: Forward Looking Statements and Basis of Presentation

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

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