Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — FY2023 Earnings Presentation
36 slides from Lloyds Banking's earnings presentation, Feb 22, 2024
Slide 1: 2023 Results
Classification: Public 2023 Results Lloyds Banking Group 22 February 2024 1
Slide 2: Business and strategic update
Classification: Public Business and strategic update 2
Slide 3: Helping Britain Prosper
Classification: Public Confidence in delivering higher, more sustainable returns Purpose • Customer support continuing in a resilient economy Helping • Purpose-driven strategy, on track to meet strategic outcomes Britain • Strong business performance, meeting 2023 financial guidance Prosper • Increa
Slide 4: Purpose-driven strategy delivers for broader stakeholders
Classification: Public Purpose-driven strategy delivers for broader stakeholders Illustrative activity in 2023 Communicated with >15m customers on savings options and 3.9m new savings accounts opened Proactive 7.5m1 customers proactively contacted to offer support and enhance financial resilience su
Slide 5: Robust financial performance
Classification: Public Robust financial performance £17.9bn £9.1bn 15.8% Net income, Operating costs, in line Return on tangible equity, up 3% vs 2022 with guidance above guidance 173bps £3.8bn 13.7% Pro forma capital generation1 Total capital distribution Pro forma CET1 ratio2 post regulatory headw
Slide 6: Significant strategic progress, on track for 2024 and 2026
Classification: Public Significant strategic progress, on track for 2024 and 2026 Grow Purpose-driven strategy Significant progress in 2023 On track for 2024 and 2026 £1.3bn strategic investment 2024 Drive revenue (£2.2bn to date) c.£0.7bn additional revenues1 growth and diversification c.£1.2bn gro
Slide 7: Driving revenue growth and diversification: Consumer
Classification: Public Driving revenue growth and diversification: Consumer Grow Additional revenues Progress in 2023 Launched mobile-first onboarding; £7.5bn of sustainable1 mortgage lending since 2022 Deepen and 3.2m new users of Your Credit Score (8.8m total): +10pp increase in loan conversion ra
Slide 8: Driving revenue growth and diversification: Commercial
Classification: Public Driving revenue growth and diversification: Commercial Grow Additional revenues Progress in 2023 Launched mobile-first BCA onboarding1 with integrated new micro-business POS cards payments solution Digitise and c.£0.2bn by 2024 diversify our Reduced account opening times by up
Slide 9: Investing in enablers to improve pace and efficiency
Classification: Public Investing in enablers to improve pace and efficiency Gross savings Focus Progress in 2023 >10% increase in customers served per distribution FTE Strengthen cost and >20% reduction in office footprint since FY 2021 capital >£7bn gross RWA reduction through optimisation initiati
Slide 10: On track to deliver in 2024 and 2026
Classification: Public On track to deliver in 2024 and 2026; confidence in delivering higher, more sustainable returns Grow Purpose-driven strategy Strong business momentum, with strategic execution on track Drive revenue growth and diversification Grow Realising financial benefits Strengthen cost a
Slide 11: Financial update
Classification: Public Financial update 11
Slide 12: Robust financial performance, in line with guidance
Classification: Public Robust financial performance, in line with guidance Financial performance (£m) 2023 20222 YoY Net interest income 13,765 13,172 5% Other income 5,123 4,666 10% • Statutory PAT £5.5bn; RoTE 15.8% Operating lease depreciation (956) (373) • Strong net income, up 3%, with NIM 311b
Slide 13: Resilience in customer franchise
Classification: Public Resilience in customer franchise Q4 lending change (£bn) Q4 deposit change (£bn) Retail (+£0.8bn ex. • Lending £450bn; 2023 down 1%, Q4 down £2bn; securitisation) Commercial Retail Commercial flat ex. sale/securitisation activity -£1.9bn/-1% -£2.9bn/-3% +£1.8bn/+1% -£0.9bn/-1%
Slide 14: Strong net interest income, in line with guidance
Classification: Public Strong net interest income, in line with guidance Average interest earning assets (£bn) 2.2 2.5 • 2023 NII £13.8bn, up 5% YoY, Q4 down 4% vs Q3 (0.2) (3.2) 453 o 2023 AIEAs £453bn; Q4 broadly flat vs Q3 452 o Full year NIM 311bps; 298bps in Q4, down 10bps vs Q3 from deposit an
Slide 15: Mortgage book resilience
Classification: Public Mortgage book resilience Mortgage book (Book size £bn, Gross margin %1) 1.52% 1.32% 1.16% 311 306 306 YoY 17 14 12 25 24 (23)% • Mortgage balances £306bn 30 12 11 10 o Open book £298.5bn, down £1.1bn; Q4 up £0.2bn 98 104 114 o £2.5bn legacy portfolio exit in Q1 2023 • Group NI
Slide 16: Solid performance in other lending portfolios
Classification: Public Solid performance in other lending portfolios UK Cards, Loans & Motor (Book size £bn, Gross margin %1) H2 2023 15 8 7 7 2.7 37 5.60% • UK Cards, Loans & Motor flat in 2023; up £2.7bn 39 6.09% H1 2023 15 8 7 9 ex. loan securitisation H2 2022 14 7 7 9 37 6.51% o Credit cards fla
Slide 17: Robust deposit franchise performance
Classification: Public Robust deposit franchise performance Customer deposits (Book size £bn, Gross margin %1) 0.98% 1.34% 1.22% 475 470 471 YoY • Total deposits £471bn, down £4bn in 2023; up 114 108 103 (10)% £1bn in Q4 • Retail deposits down £2bn in 2023; up £2bn in Q4 o Retail current accounts do
Slide 18: Structural hedge a significant tailwind
Classification: Public Structural hedge a significant tailwind Hedged balances1 (£bn) 255 255 247 80 80 77 • Structural hedge notional £247bn, down £8bn in Structural hedge 145 145 140 2023, inc. £4bn in Q4 30 30 30 • c.3.5 year weighted average duration 513 507 511 • Prudent management of structura
Slide 19: Building confidence in other income
Classification: Public Building confidence in other income Other income (£m) • OOI £5.1bn in 2023, up 10% YoY; £1.3bn in Q4 • Growth based on activity levels and investment o Retail: improved PCA and credit card 1,281 1,299 1,286 1,182 1,185 1,171 1,257 performance, growing motor contribution 1,128
Slide 20: Disciplined operating costs, in line with guidance
Classification: Public Disciplined operating costs, in line with guidance Operating costs (£m) +5% 350 48 • 2023 operating costs £9.1bn, up 5%; planned 346 strategic investment, new business and inflation (276) 9,140 o Q4 £2.5bn, inc. investment and bank levy 8,672 • Cost:income 54.7%; 51.0% ex. Rem
Slide 21: Strong asset quality, in line with guidance
Classification: Public Strong asset quality, in line with guidance Impairment (£m) Q4 2023 2022 YoY • 2023 impairment charge £308m Charge (credit) pre updated MES1 (353) 565 915 (350) o Pre-MES charge £565m reflects continued Retail 277 1,064 773 291 resilience and significant write-back in Q4 Comme
Slide 22: Updated macroeconomic outlook
Classification: Public Updated macroeconomic outlook CPI inflation UK bank rate 12% 6% 10% 5% 8% 4% 6% 3% 4% 2% • GDP growth to remain subdued in 2024; sharply 2% 1% declining inflation expected to benefit HPI1 0% 0% Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 o GDP expected to
Slide 23: Stable credit performance across portfolios
Classification: Public Stable credit performance across portfolios New to arrears as a proportion of total balances (3 month rolling average, %) 1.00% • Mortgage book resilient with new to arrears 0.75% stable and below 2019; average LTV 43.6% 0.50% • Consumer finance trends stable; new to arrears 0
Slide 24: Underlying and statutory profit converge, TNAV building
Classification: Public Underlying and statutory profit converge, TNAV building Statutory profit (£m) 2023 20221 YoY Underlying profit 7,809 7,028 11% Restructuring (154) (80) (93)% • 2023 restructuring charge £154m Volatility and other items (152) (2,166) 93% • Usual fair value unwind, alongside mod
Slide 25: Strong capital generation, in line with guidance
Classification: Public Strong capital generation, in line with guidance Risk weighted assets (£bn) • RWAs £219.1bn, up £8.2bn, inc. £1.4bn in Q4 3.0 2.2 2.3 3.1 o CRD IV updates1 £5.0bn, inc. £2.0bn in Q4; est. 5.0 further c.£5bn 2024-26, subject to PRA review (7.4) 219.1 • Continue to expect 2024 R
Slide 26: Consistent guidance; confidence in delivering higher, more sustainable returns
Classification: Public Consistent guidance; confidence in delivering higher, more sustainable returns 2024 2026 Income NEW: NIM >290bps Costs NEW: c.£9.3bn operating costs <50% cost:income ratio Asset quality ratio NEW: <30bps Return on tangible equity c.13% >15% Risk weighted assets £220bn - £225bn
Slide 27: Closing remarks
Classification: Public Closing remarks 27
Slide 28: Helping Britain Prosper
Classification: Public Confidence in delivering higher, more sustainable returns Purpose • Customer support continuing in a resilient economy Helping • Purpose-driven strategy, on track to meet strategic outcomes Britain • Strong business performance, meeting 2023 financial guidance Prosper • Increa
Slide 29: Q&A
Classification: Public Q&A
Slide 30: Appendix
Classification: Public Appendix 30
Slide 31: Quarterly P&L and key ratios
Classification: Public Quarterly P&L and key ratios (£m) Q4 2023 Q3 2023 Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 Net interest income 3,317 3,444 3,469 3,535 3,643 3,394 3,190 2,945 Other income 1,286 1,299 1,281 1,257 1,128 1,171 1,185 1,182 Operating lease depreciation (371) (229) (216) (14
Slide 32: Updated economic scenarios
Classification: Public Updated economic scenarios Scenario ECL (£m) Measure (%) 2023 vs Q4 2022 2024 2025 2026 2027 Ave. 23-27 GDP 0.3 0.2 1.5 1.7 1.7 1.9 1.4 Unemployment rate 4.0 1.2 3.3 3.1 3.1 3.1 3.3 HPI growth 1.9 4.7 0.8 6.9 7.2 6.8 4.7 Upside (30%) 2,925 CRE price growth (3.9) (12.4) 9.0 3.8
Slide 33: Updated coverage after revised economic outlook
Classification: Public Updated coverage after revised economic outlook Write Gross Total P&L Net ECL offs Coverage (ex. Recoveries) (£m, unless stated customer coverage ECL Write offs charge/ incr./ ECL & Other otherwise) L&A (£bn) Stage 1 Stage 2 Stage 3 Total Q4 2022 Q4 2022 & Other1 (credit) (dec
Slide 34: Low mortgage LTVs
Classification: Public Low mortgage LTVs December 20231 20221 20101 Mainstream Buy to let Specialist Total Total Total Average LTVs 43.1% 48.1% 35.0% 43.6% 41.6% 55.6% New business LTVs 62.5% 51.6% N/A 61.7% 61.7% 60.9% ≤80% LTV 87.2% 99.5% 96.4% 89.3% 93.9% 57.0% >80–90% LTV 9.4% 0.4% 1.2% 7.8% 4.7
Slide 35: 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 36: Investor Relations contacts
Classification: Public Investor Relations contacts Douglas Radcliffe, Group Investor Relations Director +44 (0)20 7356 1571 Douglas.Radcliffe@lloydsbanking.com Nora Thoden, Director, Investor Relations – ESG +44 (0)20 7356 2334 Nora.Thoden@lloydsbanking.com Sarah Robson, Senior Manager, Investor Rel