Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — FY2015 Earnings Presentation
31 slides from Lloyds Banking's earnings presentation, Feb 25, 2016
Slide 1: 2015 Results: Presentation to Analysts and Investors
TITLE SLIDE IS IN SENTENCE 2015 RESULTS CASE. GREEN BACKGROUND. Presentation to Analysts and Investors 25 Month 00 February 2016 0000 Presenters Name
Slide 2: Agenda
AGENDA António Horta-Osório Delivering for our key stakeholders Group Chief Executive George Culmer Financial results Chief Financial Officer 1
Slide 3: 2015 Highlights
2015 HIGHLIGHTS Good strategic and financial progress as our differentiated UK focused model continues to deliver • Robust financial performance with increased underlying profits and returns – Increased underlying profit with higher income, improved cost:income ratio and lower impairments – Statutor
Slide 4: Financial Performance
FINANCIAL PERFORMANCE Underlying profit and returns improved with strong balance sheet and increased dividends £17.6bn • Underlying profit increased 5% to £8.1bn Income 1% – Income up 1% driven by 5% increase in net interest income £8.1bn – Recovery in other income in Q4, as expected Underlying prof
Slide 5: UK Economy
UK ECONOMY UK economy continues to perform well despite market volatility UK debt / GDP(1) (%) GDP growth forecasts(2) (%) Total UK 2.4 debt to GDP 262% 257% 251% 243% US 2.4 2.2 100 UK 2.2 88 1.7 85 Germany 1.8 80 2.1 70 Canada 1.7 60 France 1.5 1.4 1.3 40 Italy 1.2 Q4 2007 Q4 2009 Q4 2011 Q4 2013
Slide 6: Low Risk Business
LOW RISK BUSINESS The Group’s strong balance sheet and low risk business model positions us well Wholesale funding and liquid assets (£bn) CET1 and total capital vs. peers(3) (%) 109 123 98 95 88 89 CET1 ratio Total capital ratio 3 13.0 21.5 11.8 (82) (7) (156) (49) 18.2 (200) 116 120 138 170 251 29
Slide 7: Mortgage affordability
LOW RISK BUSINESS Mortgage credit quality continues to improve with book supported by employment trends and low interest rates Wage growth(1) (%) and employment(2) (m) LBG mortgage portfolio trends (%) 30.9 31.0 31.4 55.6 55.9 56.4 53.3 30.7 49.2 46.1 30.3 13.2 29.9 29.9 12.0 29.6 11.7 29.3 5.4 2.3
Slide 8: Differentiated Business Model
DIFFERENTIATED BUSINESS MODEL Our business model enables us to react effectively to the evolving operating environment Market trends LBG business model • Expect full service proposition • Leading multi-channel approach Customer • Increased digital adoption • UK’s largest digital bank • Resilient UK
Slide 9: Progress Against Strategic Priorities
PROGRESS AGAINST STRATEGIC PRIORITIES Becoming the best bank for customers and shareholders Creating the best Becoming simpler and Delivering sustainable customer experience more efficient growth • Cost leadership with continued • Growth in targeted areas • Leading digital proposition reductions in
Slide 10: Delivering Sustainable Growth
DELIVERING SUSTAINABLE GROWTH Supporting the UK economy with continued loan growth in targeted customer segments Net lending growth(1) (£bn) Growth in targeted segments (%) Net lending growth to Black Horse new business YoY YoY (%) SMEs since 2010 growth since 2013 (CAGR)(4) 48 25 Mortgages 2.8 1 17
Slide 11: Delivering Superior and Sustainable Returns
DELIVERING SUPERIOR AND SUSTAINABLE RETURNS Underlying profit and returns significantly improved with strong capital generation Underlying profit (£m) and RoRE (%) • Cost discipline and low risk business model providing competitive advantage 7,756 8,112 6,166 15.0 • Simple, UK focused, multi-brand m
Slide 12: Agenda
AGENDA António Horta-Osório Delivering for our key stakeholders Group Chief Executive George Culmer Financial results Chief Financial Officer 11
Slide 13: Financial Performance
FINANCIAL PERFORMANCE Good underlying performance with 5% improvement in profit driven by higher income, lower operating costs and lower impairments (£m) 2015 2014 Change • Income 1% higher at £17.6bn 11,482 10,975 5% – Net interest income up 5% reflecting 23bps Net interest income improvement in NI
Slide 14: Net Interest Income
NET INTEREST INCOME Good net interest income performance reflecting significant improvement in margin Net interest income (£m) Average interest earning assets (£bn) 5% 11,482 446.5 443.2 262 438.7 439.2 10,975 904 17.0 15.8 13.2 11.4 (153) (506) 429.5 427.4 425.5 427.8 2014 Run-off Asset Liability W
Slide 15: Other Income
OTHER INCOME Other income down 5%, largely due to run-off, but recovered in the fourth quarter Other income (£m) Other income trend (£m) (5)% 1% 6,467 1,680 1,696 1,661 11% 0% 1,578 1,592 102 145 6,155 1,513 1,528 6,016 110 6,010 (451) (6) (122) 1,374 (90) 2014 Run-off 2014 Retail Comm. Cons. Insura
Slide 16: Costs
COSTS Operating costs continue to be tightly managed and are lower than 2014 despite further significant investment in the business Operating costs (£m) • Operating costs lower than 2014 driven by 0% Simplification savings, disposals and run-off, despite 8,322 466 117 26 8,311 increased investment i
Slide 17: Asset Quality
ASSET QUALITY Significant improvement in impairments reflecting low risk business; AQR of 14bps Impairment (£m) & AQR (%) Gross impaired loans (£bn) 1.62 60 46 1.02 32 28 9,787 22 0.58 16 14 5,697 0.23 8 10 0.14 4 2,895 1,102 568 Dec 2011 Dec 2012 Dec 2013 Dec 2014 Dec 2015 2011 2012 2013(1) 2014(1)
Slide 18: Divisional Financial Performance
DIVISIONAL FINANCIAL PERFORMANCE Good underlying profit performance across all divisions Underlying profit (£m) 2015 2014 Change • Impairment charges lower in all banking divisions Retail 3,514 3,228 9% • Improved profit in Retail predominantly driven by Commercial margin improvement of 11bps 2,431
Slide 19: Financial Performance
FINANCIAL PERFORMANCE Statutory profit before tax down primarily reflecting higher PPI charges; increased tax rate impacting after tax profits (£m) 2015 2014 • Asset sales and other items in 2015 includes volatility, fair value unwind and amortisation of intangibles Underlying profit 8,112 7,756 Ass
Slide 20: Legacy Issues – PPI
LEGACY ISSUES – PPI Provision of £4.0bn in 2015, including £2.1bn in Q4 due to FCA consultation Average complaint volumes per month(1) • Provision increased by £4.0bn in 2015, taking total (66)% provision to £16.0bn 100,000 • £2.1bn charge in Q4 largely reflecting action on proposed FCA time-bar and
Slide 21: Further Strengthening the Balance Sheet
FURTHER STRENGTHENING THE BALANCE SHEET Continued RWA reduction RWA reduction drivers (£bn) 271.9 • RWAs reduced by £17bn primarily driven by 239.7 – Continued successful disposal of run-off assets 0.5 222.7 (6.8) (8.7) (2.0) – General improvement in credit quality – Sale of TSB Dec Dec Economic Dis
Slide 22: Further Strengthening the Balance Sheet
FURTHER STRENGTHENING THE BALANCE SHEET Highly capital generative business model supports Group’s dividend policy Common equity tier 1 ratio (%) • Strong pro forma CET1 ratio, improved to 13.0% 3.4% 0.7% (0.3)% 0.2% 13.9% 13.0% 12.8% (2.3)% (0.6)% (0.9)% • Leverage ratio of 4.8%, on a pro forma basi
Slide 23: Group Structure and Future Regulatory Requirements
GROUP STRUCTURE AND FUTURE REGULATORY REQUIREMENTS Simple, UK focused business model positions us well for ring-fencing and MREL Group structure under ring-fencing framework • Clear plan given simple, UK, retail and commercial business model with minimal customer impact Lloyds Banking Group • Vast m
Slide 24: Delivering Superior and Sustainable Returns
DELIVERING SUPERIOR AND SUSTAINABLE RETURNS Underlying profit and returns significantly improved with strong capital generation Underlying profit (£m) and RoRE (%) • Cost discipline and low risk business model providing competitive advantage 7,756 8,112 6,166 15.0 • Simple, UK focused, multi-brand m
Slide 25: Appendix
TITLE SLIDE IS IN APPENDIX CASE. SENTENCE GREEN BACKGROUND. 00 Month 0000 Presenters Name
Slide 26: Mortgage Portfolio LTVs
MORTGAGE PORTFOLIO LTVS Further improvement in LTVs Dec 2015 Dec 2014 Dec 2013 Dec 2012 Mainstream Buy to let Specialist Total Total Total Total(1) Average LTVs 43.6% 56.3% 53.3% 46.1% 49.2% 53.3% 56.4% New business LTVs 65.2% 63.0% – 64.7% 64.8% 64.0% 62.6% ≤80% LTV 86.8% 87.2% 78.9% 86.4% 81.9% 70
Slide 27: Mortgage Book Quality
MORTGAGE BOOK QUALITY Continued improvement in risk profile of mortgage book Mortgages greater than 3 months in arrears(1) (%) Buy-to-let growth vs. market (%) 29 29 3.0 28 2.9 12 2.8 2.8 9 26 2.1 2.0 6 6 4 4 4 2 2010 2011 2012 2013 2014 2015 2012 2013 2014 2015 LBG growth Market growth LBG market s
Slide 28: Tangible Net Asset Value
TANGIBLE NET ASSET VALUE Movement in TNAV per share reflects good underlying profit offset by conduct charges and reserve movements, and the payment of dividends Tangible net assets per share (p) – Dec to Dec 9.1 (0.7) 54.9 (6.1) 53.8 52.3 • TNAV per share of 52.3p (2014: 54.9p) reflects (3.4) (1.5)
Slide 29: Average Interest Earning Assets
AVERAGE INTEREST EARNING ASSETS Ongoing business AIEAs broadly flat in 2015 AIEAs(1) and customer loans (£bn) Q4 Q3 Q2 Q1 2015 2015 2015 2015 • Average interest earning assets are gross of Net loans and advances 455.2 455.0 452.3 455.1 impairments Impairment provisions 4.4 4.9 7.0 7.4 • AIEAs are cu
Slide 30: Market Share
MARKET SHARE Continue to deliver sustainable growth in targeted areas LBG market share(1) (%) FY 2014 Current account volumes 25 25 Retail deposit balances(2) 22 23 Mortgage balances(3) 21 22 SME main bank relationships 19 19 SME and small business lending balances 18 18 Mid markets main bank relati
Slide 31: 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