Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — FY2016 Earnings Presentation
30 slides from Lloyds Banking's earnings presentation, Feb 22, 2017
Slide 1: 2016 Results: Presentation to Analysts and Investors
TITLE SLIDE IS IN SENTENCE 2016 RESULTS CASE. GREEN BACKGROUND. Presentation to Analysts and Investors 22 February 2017
Slide 2: Agenda
AGENDA António Horta-Osório Highlights Group Chief Executive George Culmer Financial Results Chief Financial Officer 1
Slide 3: Highlights
HIGHLIGHTS Strong financial performance demonstrating the strength of the business model • Good underlying performance with strong improvement in statutory profit – Underlying profit of £7.9bn; statutory profit before tax more than doubled to £4.2bn • Strong capital generation of c.190bps in 2016 wi
Slide 4: Financial Performance
FINANCIAL PERFORMANCE Statutory profit more than doubled with strong balance sheet maintained and increased dividends £17.5bn • Good underlying profit of £7.9bn Income (1)% – Income down 1% with stable NII and slightly lower other income 48.7% – Positive operating jaws of 1%, with market leading cos
Slide 5: Differentiated Business Model
DIFFERENTIATED BUSINESS MODEL Our simple, low risk, UK focused business model is now delivering increased statutory profit as well as strong capital generation Profit progression (£bn) • Low risk and low cost business model provides 7.8 8.1 7.9 competitive advantage 6.2 2.6 • Business delivering con
Slide 6: UK Economy
UK ECONOMY Resilient UK economic performance; UK economy enters 2017 from a position of strength Real GDP growth(1) (%) Market swap rates(3) (%) 2.5 5 year swap rate 10 year swap rate 2 1.14 1.5 0.85 0.75 1 0.5 0.45 0 UK Germany US Canada France Italy Japan 2016 GDP IMF 2017 GDP BoE 2017 GDP Jun Dec
Slide 7: UK Economy
UK ECONOMY UK unsecured lending has grown but affordability remains good and debt-to-GDP has been reducing Unsecured lending (%) Debt to GDP (%) Total UK debt Annual growth in UK lending balances(1) to GDP(4) 20 257 258 263 256 250 249 252 100 15 10 90 5 80 0 70 -5 Q4 Q4 Q4 Q4 Q4 Q4 Q2 2010 2011 201
Slide 8: Creating the Best Customer Experience
CREATING THE BEST CUSTOMER EXPERIENCE Leading multi-brand, multi-channel proposition including UK’s largest digital bank Integrated multi-channel approach • UK’s largest branch network with c.2,000 branches • UK’s largest retail and commercial bank Branches with a leading Insurance proposition • Com
Slide 9: Creating the Best Customer Experience
CREATING THE BEST CUSTOMER EXPERIENCE Significant growth across the digital channel and major progress in our customer journey transformations delivered Needs met via digital(1) (%) Customer journey transformation 75 65 69 73 69 of approved applications proceed 62 59 61 55 52 54 Mortgages 55% to off
Slide 10: Becoming Simpler and More Efficient
BECOMING SIMPLER AND MORE EFFICIENT Rigorous and proven cost management process provides cost leadership; Simplification programme on track to deliver increased run-rate savings of £1.4bn Low cost business model (%) Cost:income ratio – 2016 UK peer comparison(1) • Market leading cost:income ratio of
Slide 11: Delivering Sustainable Growth
DELIVERING SUSTAINABLE GROWTH Well positioned to grow the business MBNA financial metrics • MBNA acquisition – Opportunity to acquire a prime UK credit card business with a strong brand Return on investment and complementary capabilities; no further PPI exposure after acquisition +17% – In line with
Slide 12: Delivering Sustainable Growth
DELIVERING SUSTAINABLE GROWTH Supporting the UK economy with continued loan growth in our targeted key customer segments Consumer Finance net lending (£bn) Net lending growth (£bn) 2014 7.1 YoY YoY (%) UK Motor 2015 9.5 Finance 2016 11.4 Open book mortgages (4.5) (2) Other Retail (0.1) (2) 2014 9.0
Slide 13: Outlook
OUTLOOK Confidence in the Group’s future prospects is reflected in the dividend and our strong financial targets Financial targets • Our differentiated business model is delivering – Cost discipline and low risk business model • Strong financial targets reflecting strength of provide competitive adv
Slide 14: Agenda
AGENDA António Horta-Osório Highlights Group Chief Executive George Culmer Financial Results Chief Financial Officer 13
Slide 15: Underlying Financial Performance
UNDERLYING FINANCIAL PERFORMANCE Good underlying performance (£m) 2016 2015 Change • Good underlying profit of £7.9bn Net interest income 11,435 11,482 – – Stable NII at £11.4bn with an increased margin of 2.71% Other income 6,065 6,155 (1)% offset by marginally lower average interest earning assets
Slide 16: Income
INCOME Total income of £17.5bn with stable NII and slightly lower other income Net interest margin (%) Other income trend (£m) 1,661 8bps 1,616 1,592 0.10 2.71 1,528 1,545 2.63 0.10 1,477 1,427 1,374 (0.12) 2015 Asset Liability Wholesale 2016 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 spread spread funding 2015 2015 2
Slide 17: Divisional Income Performance
DIVISIONAL INCOME PERFORMANCE Resilient divisional income performance with trends in line with wider Group Total income (£bn) 7.8 • Retail: resilient margin and tactical deposit reduction; lower Retail 7.6 fees driven by ATM costs and packaged bank accounts 4.6 • Commercial Banking: growth due to in
Slide 18: Costs
COSTS Operating costs continue to be tightly managed; costs are lower than 2015 and £2bn lower than 2010, despite further investment in the business Operating costs (£m) 8,311 (3)% • Operating costs(1) lower than 2015 driven by 156 17 8,093 Simplification savings and lower run-off, partly offset 100
Slide 19: Asset Quality
ASSET QUALITY Credit quality remains strong with no signs of deterioration in the portfolio Impairment charge (£m) Asset quality ratio (bps) 5,697 135 88 3,004 104 52 58 28 28 1,102 568 645 23 14 15 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Gross Net Impaired loans (£bn) & impaired loan rati
Slide 20: Statutory Financial Performance
STATUTORY FINANCIAL PERFORMANCE Significant increase in statutory profit primarily reflecting lower PPI provisions • Market volatility includes a £484m gain on Visa sale, (£m) 2016 2015 offset by FV unwind and amortisation of intangibles Underlying profit 7,867 8,112 • Restructuring costs include Si
Slide 21: Balance Sheet
BALANCE SHEET AIEAs down slightly primarily due to run-off; RWAs down c.£7bn due to balance sheet management actions Divisional AIEAs (£bn) • Pro-active management of the balance sheet 2014 309 93 29 30 461 Retail • AIEAs excluding run-off broadly stable at £426bn Commercial 307 Banking – Growth in
Slide 22: Balance Sheet: Common Equity Tier 1 Ratio
BALANCE SHEET Strong capital generation provides the capacity for increased dividends and funding of the MBNA acquisition Common equity tier 1 ratio (%) – Sep to Dec • Pro forma CET1 ratio of 13.8% c.80bps – Retention of c.80bps of capital to cover the 0.6 0.2 0.0 0.2 14.9 capital impact of the MBNA
Slide 23: Outlook
OUTLOOK Confidence in the Group’s future prospects is reflected in the dividend and our strong financial targets Financial targets • Our differentiated business model is delivering – Cost discipline and low risk business model • Strong financial targets reflecting strength of provide competitive adv
Slide 24: Appendix
TITLE SLIDE IS IN APPENDIX CASE. SENTENCE GREEN BACKGROUND.
Slide 25: Mortgage Portfolio LTVs
MORTGAGE PORTFOLIO LTVS Further improvement in LTVs during 2016 Dec 2016 Dec 2015 Dec 2014 Dec 2010 Mainstream Buy to let Specialist Total Total Total Total(1) Average LTVs 41.8% 53.7% 49.2% 44.0% 46.1% 49.2% 55.6% New business LTVs 65.0% 61.9% – 64.4% 64.7% 64.8% 60.9% ≤ 80% LTV 88.6% 91.8% 85.2% 8
Slide 26: Average Interest Earning Assets (AIEAs)
AVERAGE INTEREST EARNING ASSETS (AIEAs) AIEAs down slightly reflecting continued reduction in run-off and lower mortgage lending due to strategic focus on margin in a highly competitive market AIEAs and customer loans (£bn) Q4 Q3 Q2 Q1 2016 2016 2016 2016 Net loans and advances 449.7 451.7 453.0 456
Slide 27: Tangible Net Asset Value and Leverage Ratio
TANGIBLE NET ASSET VALUE AND LEVERAGE RATIO Movement in TNAV per share reflects strong statutory profit and reserve movements; leverage ratio further improved due to capital generation Tangible net assets per share (p) – Dec to Dec Leverage ratio (%) 5.4p 0.7 0.1 0.1 5.4 11.0 4.8 5.0 2.2 (0.3) (0.4)
Slide 28: Market Share
MARKET SHARE Continue to deliver sustainable growth in target areas LBG market share(1) (%) Current account volumes 25 Retail deposit balances 20 Mortgage balances(2) 20 SME and small business lending balances 19 SME main bank relationships 19 Lex Autolease fleet cars stock 18 Average market Mid mar
Slide 29: Branch Presence
BRANCH PRESENCE Multi-brand strategy serving different segments of the market Branch network comparison Large relationship brands Challenger brands Scottish brands 1,733 1,542 1,309 1,302(1) 1,286 1,177 1,140 1,058 841 748 711 691 662 657 631(2) 588 295 336 241 193 152 112 75 73 48 8 H1 2011 vs H2 2
Slide 30: 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