Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — FY2021 Earnings Presentation
36 slides from Lloyds Banking's earnings presentation, 2022
Slide 1: 2021 Results Fixed Income Investor Presentation
Classification: Public 2021 Results Fixed Income Investor Presentation Lloyds Banking Group
Slide 2: Lloyds Banking Group – strong foundations
Classification: Public Lloyds Banking Group – strong foundations Our strong foundations… …have created distinct competitive strengths Leading UK customer franchise with trusted brands Maintained leading market shares; 19% since 2017 >1m business client Relationship with relationships c.50% of UK adu
Slide 3: Solid financial performance in 2021
Classification: Public Solid financial performance in 2021 • Solid net income, up 9%, NIM 254bps • Maintained focus on operating costs, 1% £15.8bn 56.7% higher YoY including variable pay Net income up 9% Cost:income ratio up • Strong asset quality, £1.2bn net vs 2020 1.4pp vs 2020 impairment credit
Slide 4: Solid net interest income performance
Classification: Public Solid net interest income performance Average interest-earning assets (AIEAs) (£bn) +2% 15 • NII £11.2bn, up 4% on 2020, benefitting (3) 1 445 from increased AIEAs and stronger NIM (3) 435 − 2021 AIEAs £445bn, up £10bn on 2020 − Full year NIM 254bps, 257bps in Q4, up 2bps on Q
Slide 5: Strong mortgage growth with tighter new business margins
Classification: Public Strong mortgage growth with tighter new business margins Mortgage book (Book size £bn, Gross margin %1) 1.82% 1.86% 1.84% • Mortgage balances up £13.7bn to 305 308 YoY £307.5bn, open book growth £16bn 294 • Back book c.£64bn, Q4 YoY attrition c.16% 115 132 139 +21% • 2021 new
Slide 6: Other lending balances stabilised in H2 with robust margins
Classification: Public Other lending balances stabilised in H2 with robust margins UK consumer finance1 (Book size £bn, Gross margin %2) • UK consumer finance £0.8bn lower in year but stabilising in H2 H2 2021 14 8 6 8 36 6.59% − Credit card balances reduced £0.2bn in H1 2021 14 8 6 8 36 6.70% 2021,
Slide 7: Continued significant deposit franchise growth
Classification: Public Continued significant deposit franchise growth Increase in customer deposits1,2 (Book size £bn, Gross margin %) 0.18% 0.15% 0.16% 474 476 YoY 451 16 15 15 +11% 15 16 14 116 (5)% 123 125 • Significant £25.6bn increase in deposits in 2021, down £2.8bn in Q4 Continued inflows to
Slide 8: Continued franchise growth building hedge sustainability
Classification: Public Continued franchise growth building hedge sustainability Hedged balances1 (£bn) 190 210 225 240 240 215 • Structural hedge approved capacity of 180 186 65 70 £240bn, up £30bn in 2021 60 62 Structural hedge 90 94 120 140 • Prudent management of structural hedge 30 30 30 30 − c.
Slide 9: Other income showing signs of recovery
Classification: Public Other income showing signs of recovery Other income • Other income of £5.1bn in 2021, with (£bn) £1.3bn in Q4 − Retail seeing recovering customer activity levels, offset by reduced Lex fleet 1.3 1.3 1.3 1.2 1.2 1.0 1.1 1.1 − Broadly stable performance overall in Commercial Ban
Slide 10: Maintained focus on efficiency
Classification: Public Maintained focus on efficiency Operating costs • Sustained cost discipline; cost:income ratio (£m) +1% of 56.7% and operating costs of c.£7.6bn 253 7,630 7,585 (24) • Remediation of £1.3bn includes £790m for 92 HBOS Reading, £600m in Q4 reflecting (12) (264) estimated future c
Slide 11: Strong asset quality and low new to arrears
Classification: Public Strong asset quality and low new to arrears Q4 YoY Impairment (£m) 2021 2021 2020 change • £1.2bn net impairment credit for 2021, Charges pre-updated MES1 557 146 1,610 (1,053) £467m credit in Q4, both given improved Retail 887 154 1,359 (472) macroeconomic outlook Commercial
Slide 12: Improving economic outlook for the UK
Classification: Public Improving economic outlook for the UK GDP has recovered to pre-pandemic levels Unemployment remains low Monthly UK GDP – Index, January 2019 = 1001 UK unemployment rate, %2 105 6.0% 100 5.5% 95 5.0% 90 4.5% 85 4.0% 80 3.5% 75 2015 2016 2017 2018 2019 2020 2021 2022 2019 2020 2
Slide 13: Strategic Update
Classification: Public Strategic Update 13
Slide 14: Key messages
Classification: Public Key messages Higher, more diversified, revenues c.£0.7bn additional revenues from strategic initiatives in 2024; c.£1.5bn with a 50:50 NII/OOI split by 2026 Maintaining strong focus on cost discipline Transformation plan Flat costs in 2024 vs. 2022, with savings offsetting cos
Slide 15: Delivering for our stakeholders, profitably
Classification: Public Delivering for our stakeholders, profitably Purpose drives value Delivering for our stakeholders Improving access to quality housing Promoting financial inclusion and education Clear purpose and mission Building an inclusive society Enabling regional development Strategic dire
Slide 16: Drive revenue growth and diversification
Classification: Public Drive revenue growth and diversification Key outcomes from strategic initiatives c.£1.5bn per annum Deepen and Create a new Additional revenues in 2026 innovate in mass affluent (c.£0.7bn in 2024) Consumer offering 50:50 NII/OOI split from strategic initiatives by 2026 Target
Slide 17: Strategic execution creates clear outcomes
Classification: Public Strategic execution creates clear outcomes Deepen and Meeting more needs of existing customers innovate in Increased digitally active customers Consumer Higher market shares with intermediaries Strengthen Lower cost of technology cost and capital Lower cost of change efficienc
Slide 18: Guidance overview
Classification: Public Guidance overview 2022 2024 2026 Income NIM to be above 260bps Stable BAU costs Stable BAU costs throughout the plan Costs <50% cost:income ratio c.£8.8bn operating costs (2021: £8.3bn) c.£8.8bn operating costs, flat on 2022 AQR Net AQR of around 20bps Net AQR less than 30bps
Slide 19: Capital, Funding & Liquidity
Classification: Public Capital, Funding & Liquidity 19
Slide 20: Capital, MREL & Liquidity summary
Classification: Public Capital, MREL & Liquidity summary 1 Jan 22 pro forma CET1 post-headwinds 16.3% 16.2% CET1 CET11 remains ahead of regulatory 14.0% Capital MDA CET1 9.1% CET1 minimum and ongoing Group target of c.12.5% + c.1% management buffer FY 20 FY 21 1 Jan 22 37.2% MREL2 strongly positione
Slide 21: Enhanced capital strength
Classification: Public Enhanced capital strength Common equity tier 1 ratio 1 1 Jan 22 pro forma CET1 post-headwinds • Pro forma CET1 ratio of 16.3% reflecting 16.3% strong banking build of 210bps • Headwinds of c.230bps on 1 January 2022 13.8% Buffer to 14.0% results in 14.0% pro forma CET1 regulat
Slide 22: Effective RWA management and strong capital build
Classification: Public Effective RWA management and strong capital build Risk-weighted assets (£bn) £(6.7)bn 1.8 202.7 (0.4) • RWAs down £6.7bn in 2021, down £4.7bn in Q4, driven by Commercial optimisation 196.0 (8.1) • 1 January 2022 pro forma RWAs £212bn, given net regulatory inflation of c.£16bn
Slide 23: MREL comfortably in excess of ongoing requirements
Classification: Public MREL comfortably in excess of ongoing requirements Transitional MREL ratio • Strongly positioned with transitional total capital of 23.6% and transitional MREL ratio 27.7% of 37.2% O-SII 1.7% 1 Buffers CCB 2.5% 4.2% • The Group continues to operate prudent buffers over regulat
Slide 24: Significant reduction in legacy securities since Q3 2021
Classification: Public Significant reduction in legacy securities since Q3 2021 Legacy securities • Legacy capital securities now constitute only c.£1.2bn, a reduction of c.£2.3bn £0.3bn since Q3 2021 following LME and redemptions £0.7bn • Outstanding amount immaterial when compared to c.£73bn of re
Slide 25: Guiding to increased funding requirements over strategic plan period
Classification: Public Guiding to increased funding requirements over strategic plan period 2023 2022 onwards • Guiding to increased levels of issuance for HoldCo Broadly limited to 2022; issued c.£650m equivalent YTD c.£5-6bn Senior refinancing • 2023-24 likely to be closer to “steady state” volume
Slide 26: 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 BBB+ A+ A S&P AA Stable Stable Stable - Stable A-2 A-1 A-1 A2
Slide 27: Appendix
Classification: Public Appendix 27
Slide 28: Simple group structure with multiple issuance points
Classification: Public Simple group structure with multiple issuance points HoldCo Lloyds Banking Group BBB+ / A2 / A A-2 / P-1 / 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 29: Diverse funding portfolio
Classification: Public Diverse funding portfolio Wholesale funding portfolio by type 15% 18% MM Funding Covered Bond £91bn 19% Securitisation OpCo Senior Wholesale funding portfolio by currency 29% 7% HoldCo Senior Sub Debt 17% 2% 24% GBP USD 28% Wholesale funding portfolio by maturity £91bn EUR Oth
Slide 30: Illustrative NII sensitivity
Classification: Public Illustrative NII sensitivity • Reflects shifts in forward rate curve • Impact driven by structural hedge re- Cumulative impact of parallel shifts in interest rate curve1 investment and benefit on certain deposits (£m) • Actual impact also depends on regulatory and competitive
Slide 31: Prudent economic scenarios
Classification: Public Prudent economic scenarios ECL Economic measure vs Q3 vs FY Average Scenario (£m) (%) 2021 20211 20201 2022 2023 2024 2025 2021-25 GDP 7.1 0.4 3.4 4.0 1.4 1.3 1.4 3.0 Interest rate 0.14 (0.12) (1.00) 1.44 1.74 1.82 2.03 1.43 Upside (30%) 4,018 Unemployment rate 4.4 (0.2) (1.0)
Slide 32: Updated coverage after updated economic outlook
Classification: Public Updated coverage after updated economic outlook Gross Coverage (ex. Recoveries)1 Total P&L Net ECL Write-offs customer coverage ECL Write-offs charge / increase / ECL Q4 & Other (£m) L&A (£bn) Stage 1 Stage 2 Stage 3 Total Q4 20201 Q4 2020 & Other (credit) (decrease) 2021 FY 2
Slide 33: Continued low mortgage LTVs
Classification: Public Continued low mortgage LTVs December 20211 20201 20101 Mainstream Buy to let Specialist Total Total Total Average LTVs 41.3% 47.7% 37.5% 42.1% 43.5% 55.6% New business LTVs 63.7% 60.4% N/A 63.3% 63.9% 60.9% ≤ 80% LTV 94.5% 99.5% 95.9% 95.4% 91.6% 57.0% >80–90% LTV 5.0% 0.2% 1.
Slide 34: Glossary and definitions
Classification: Public Glossary and definitions Term Definitions and calculations AIEA Average Interest-Earning Banking Assets Asset Quality Ratio: The underlying impairment credit or charge for the period in respect of loans and advances to customers, expressed as a percentage of AQR average gross
Slide 35: Debt investor relations contacts
Classification: Public Debt investor relations contacts Group Corporate Treasury Peter Green Liz Padley Richard Shrimpton Head of Senior Funding & Covered Head of Capital Structuring, Holding Deputy Treasurer +44 (0)20 7158 2843 Bonds Company and Recovery & Resolution +44 (0)20 7158 2145 +44 (0)20 7
Slide 36: Forward looking statements
Classification: Public Forward looking statements This document contains certain forward-looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934, as amended, and section 27A of the US Securities Act of 1933, as amended, with respect to Lloyds Banking Group plc