Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — Debt Investor Presentation (February 2018)
41 slides from Lloyds Banking's debt investor presentation, Feb 21, 2018
Slide 1: 2017 Full Year Results
2017 Full Year Results Presentation to Fixed Income Investors | 21 February 2018
Slide 2: Simple, low risk customer focused UK bank with strong multi-channel franchise
Simple, low risk customer focused UK bank with strong multi-channel franchise Clear strategic plan Iconic brands serving over 27m Strong franchise across key channels and products retail customers Channels market share Digital new business volumes1 22% OUR Helping Britain Branches market share 21% P
Slide 3: Solid foundations underpinning our customer centric business model
Solid foundations underpinning our customer centric business model Distinctive competitive strengths Best-in-class customer Highly efficient experience Cost:income Ratio1, Customer NPS FY20172 Differentiated multi-brand, multi- 62 56% channel customer propositions 47% 43 Market leading efficiency Pe
Slide 4: Largest digital bank in the UK, delivering market leading experience
Largest digital bank in the UK, delivering market leading experience Customer needs met via digital, % 68% £1bn investment in 61% digital announced 54% >13m digitally active customers Largest digital bank in the UK 40% 32% 209m digital visits per month Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 #1 rated UK
Slide 5: Changing customer behaviour and expectations create opportunities
Changing customer behaviour and expectations create opportunities Evolving customer needs and expectations… …require a proactive response Increasing personalisation • Richer interactions, better understanding of customer needs • Deeper customer engagement Connected, seamless experience • More person
Slide 6: Building on our solid foundations to future proof our business
Building on our solid foundations to future proof our business Strategic priorities Developing new sources of competitive advantage Differentiated multi-brand, multi-channel customer propositions with data-driven customer experience Market leading efficiency through tech- enabled productivity improv
Slide 7: More than £3bn strategic investment to deliver a significant transformation
More than £3bn strategic investment to deliver a significant transformation LEADING CUSTOMER EXPERIENCE MAXIMISING GROUP CAPABILITIES • #1 UK digital bank, with Open Banking • £6bn loan growth in start-ups, SME and functionality Mid Market businesses • #1 Branch network, serving complex needs • Sole
Slide 8: Continuing to deliver greater value for shareholders
Continuing to deliver greater value for shareholders Group Strategic Review 2 (2015-2017) Group Strategic Review 3 (2018-2020) Increased investment c.£1bn investment in digital >£3.0bn strategic investment Market leading £1.4bn simplification run-rate savings <£8.0bn operating costs in 2020, includi
Slide 9: Committed to Helping Britain Prosper
Committed to Helping Britain Prosper Delivering on our purpose Increasing our support going forward 20181 20202 >700,000 34% Lending to first time buyers £10bn £30bn individuals, businesses of senior roles now and charities trained in held by women. Up People digital skills during 2017 from 29% in 2
Slide 10: Evolving our business model and transforming the Group for success in a digital world
Evolving our business model and transforming the Group for success in a digital world Our purpose Our strategic priorities Our ambition Helping Britain Prosper Maximising Digitising Group the Group capabilities Our aim Best bank for customers, Transforming colleagues and shareholders the Group for s
Slide 11: Full year results
LLOYDS Full year results 10
Slide 12: 2017 a landmark year – strong strategic and financial performance
2017 a landmark year – strong strategic and financial performance • Group returned to full private ownership at a surplus for the UK taxpayer • Successful delivery of GSR 2 with improved customer service, market-leading digital proposition, targeted lending growth and Simplification savings ahead of
Slide 13: Continued progress – business model is delivering increased profits and returns
Continued progress – business model is delivering increased profits and returns Profit progression (£bn) • Statutory profit increasing: growth in 7.8 8.1 7.9 8.5 underlying profit and reduction in below the 6.2 line charges despite higher PPI cost 2.6 • Consistent strong underlying profit 4.2 5.3 0.
Slide 14: UK economy has proven resilient
UK economy has proven resilient Unemployment rate and GDP(1) Employment rate(2) and pay growth (%) (%) 9 76 6 6 74 4 3 2 72 0 0 (3) 70 (2) (6) 68 (4) 2007 2009 2011 2013 2015 2017 2007 2009 2011 2013 2015 2017 Unemployment rate GDP growth Employment rate (LHS) Pay growth (RHS) UK external trade volu
Slide 15: Summary – confidence in the Group's future prospects reflected in 2018 targets
Summary – confidence in the Group’s future prospects reflected in 2018 targets • Significant strategic progress in the year • Continued strong financial performance ‐ Cost discipline and low risk business model continue to provide competitive advantage ‐ Strong profit, returns and capital generation
Slide 16: Strong statutory and underlying performance with continued improvement in profits and returns
Strong statutory and underlying performance with continued improvement in profits and returns (£m) 2017 2016 Change • 2017 statutory profit of £5.3bn up 24% with Net income 17,472 16,605 5% underlying profit of £8.5bn up 8% Operating costs (8,184) (8,093) (1)% • Strong Q4 performance, with NII up 14
Slide 17: Net income up 5% with improvements in net interest income and other income
Net income up 5% with improvements in net interest income and other income Net interest income and net interest margin Other income (£m) (£bn) 2.71% -11bps +13bps +6bps 2.79% +7bps 2.86% +4% 2017 2.2 1.8 1.8 0.4 6.2 430 12,320 588 11,890 11,435 549 2016 2.2 1.8 1.9 0.2 6.1 (682) 2015 2.3 1.8 2.0 0.1
Slide 18: Operating costs continue to be tightly managed providing competitive advantage
Operating costs continue to be tightly managed providing competitive advantage Operating costs(1) (£m) -1% 135 8,184 8,093 8,049 169 50 • Operating costs down 1% year on year before 174 MBNA, driven by Simplification savings (437) • Delivered enhanced Simplification run rate savings target of £1.4bn
Slide 19: Asset quality remains strong reflecting a continued prudent approach to risk
Asset quality remains strong reflecting a continued prudent approach to risk Asset quality ratio Mortgage portfolio quality (bps) 56.4 53.3 2017 28 18 2 49.2 46.1 44.0 43.6 2016 28 15 81.9 86.4 89.0 89.5 2015 28 70.4 14 59.6 Net AQR Gross AQR MBNA 2012 (1) 2013 2014 2015 2016 2017 Proportion 80% LT
Slide 20: Divisions showing continued progress and strong financial performance
Divisions showing continued progress and strong financial performance Net income Retail (£bn) • Underlying profit increased 9% with NII up 8%, 2017 10.0 4.8 2.0 0.7 17.5 14bps improvement in NIM and OOI up 3% • Lending up 3%, including open mortgage growth 2016 9.5 4.6 2.0 0.5 16.6 • MBNA performing
Slide 21: Significant improvement in statutory profit and returns
Significant improvement in statutory profit and returns • Statutory profit after tax of £3.5bn, up 41% (£m) 2017 2016 Change Underlying profit 8,493 7,867 8% ‐ Market volatility and other items in 2016 included the £790m charge for redemption of ECNs Market volatility and other items (82) (922) ‐ Re
Slide 22: Balance sheet – balance growth while continuing to optimise the portfolio
Balance sheet – balance growth while continuing to optimise the portfolio Loans and advances • Loans and advances £456bn, up £6bn since 2016 (£bn) 457 455 456 453 452 453 ‐ Open mortgage book growth in 2017 while 10 450 445 9 8 10 10 9 continuing to focus on the Group margin 10 9 447 448 ‐ SME growt
Slide 23: Summary – confidence in the Group's future prospects
Summary – confidence in the Group’s future prospects • Continued strong financial performance Statutory PBT and RoTE progression 10 ‐ Cost discipline and low risk business model (£bn) 8.9 continue to provide competitive advantage 8 ‐ Strong profit, returns and capital generation 6.6 • Strong financi
Slide 24: Capital Position
LLOYDS Capital Position 23
Slide 25: Group continues to maintain a strong capital position
Group continues to maintain a strong capital position Strong CET1 capital generation1 Capital composition2 (%) 300 c.545bps 245bps 250 c.190bps 200 21.2% 150 110bps 100 4.0% 50 0 3.1% 2015 2016 2017 T2 T1 • Strong capital position supported by 245bps of capital generation CET1 over 2017 13.9% • Ongo
Slide 26: Capital generation very strong with capital ratios enhanced
Capital generation very strong with capital ratios enhanced +245bps • CET1 capital generation of 245bps 0.3 0.4 15.5 2.2 0.8 14.4 ‐ CET1 ratio of 15.5%, 13.9% post-ordinary 13.9 Common 13.0 (1.2) (1.1) dividend and buyback (0.5) equity tier ‐ Total ordinary DPS 3.05p, up 20%, with a 1 ratio share bu
Slide 27: Transitional MREL ratio at Dec 2017 = 25.7%
Strong progress made towards future MREL requirements MREL Requirement c.£5bn run-rate c.£5bn run-rate p.a • Dec 2017 transitional MREL – 25.7% p.a HoldCo Senior HoldCo Senior HoldCo Senior • MREL met with regulatory capital and senior unsecured issuance at HoldCo Transitional MREL ratio at Dec 2017
Slide 28: Liquidity, Funding & Credit Ratings
Liquidity, Funding & Credit Ratings 27
Slide 29: Strong and stable liquidity position
Strong and stable liquidity position LCR eligible assets 123 121 121 • LCR eligible liquid assets represent over 8 times 8x 22 Money Markets funding and exceed total 14 15 wholesale funding 2015 2016 2017 (2) LCR eligible assets MM funding • LCR of 127%1 exceeding regulatory minimum Loan to deposit
Slide 30: Composition of wholesale funding as at Dec 2017
Composition of wholesale funding as at 31 Dec 2017 Product, currency and maturity – £101bn £10.2bn1 Term Issuance GBP EUR USD Other £bn 10 8.8 6% 9 18% 18% 8 MM Funding GBP 7 25% Covered Bonds 6 EUR 32% 5 11% Securitisation 4 USD OpCo Senior 3 24% Other 2 1.0 HoldCo Senior 0.4 1 26% Subordinated 37%
Slide 31: Global issuance capability supported by strong credit ratings
Global issuance capability supported by strong credit ratings LBG entity Credit Rating Product Programmes Senior Unsecured EMTN, SEC Registered Shelf, HoldCo Long-term A3 / Stable BBB+ / Stable A+ / Stable Lloyds Banking Subordinated debt Kangaroo, Samurai Group Short-term P-2 A-2 F1 - - Ring-fenced
Slide 32: Structural Reform
LLOYDS Structural Reform 31
Slide 33: Retaining simple, UK retail and commercial model supported by new entity LBCM
Retaining simple, UK retail and commercial model supported by new entity LBCM HoldCo (Lloyds Banking Group plc) Ring-Fenced Sub-Group Non-Ring-Fenced Sub-Group Insurance Sub-Group Equity Investments (Lloyds Bank plc) (LBCM) (Scottish Widows) Sub-Group Majority of Group activities, Primary business l
Slide 34: Group on track to meet ring-fencing requirements
Group on track to meet ring-fencing requirements Client Communications Ring-fencing Transfer 1 Jan 2019 Communications and Scheme (RFTS) Implementation of UK disclosures to clients Transfer of business to ring-fencing regime ongoing LBCM Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q4 2018 2019 2019 LBCM Ratings
Slide 35: Appendix
Appendix : fi Fans | i
Slide 36: Evolution of regulatory capital buffers
Evolution of regulatory capital buffers Capital • Currently 1.875% CET1 in 2018 during phase in Conservation • 2.5% CET1 from 1 January 2019 Buffer • UK buffer 0.5% CET1 from June 2018, increasing to 1% CET1 from Countercyclical November 2018 Buffer • FPC to reconsider the adequacy of a 1% buffer ra
Slide 37: Mortgage LTVs – further improvement in 2017
Mortgage LTVs – further improvement in 2017 Dec 2017 Dec 2016 Dec 2015 Dec 2010 Mainstream Buy to let Specialist Total Total Total Total(1) Average LTVs 41.7% 53.0% 47.4% 43.6% 44.0% 46.1% 55.6% New business LTVs 63.7% 59.1% n/a 63.0% 64.4% 64.7% 60.9% ≤ 80% LTV 88.5% 94.6% 88.8% 89.5% 89.0% 86.4% 5
Slide 38: Prudently provisioned – coverage ratio increasing across the Group
Prudently provisioned – coverage ratio increasing across the Group while impaired loan ratio falls 3.1 2.3 2.3 2.1 2.1 1.9 Impaired 1.8 1.6 1.4 1.3 loan ratio (%) Mortgages Credit cards Retail other Commercial Group 96.7 89.1 81.8 82.9 Coverage ratio 36.6 37.1 37.7 43.1 43.4 45.6 (%) Mortgages Credi
Slide 39: Notes
Notes LLOYDS 38
Slide 40: Debt Investor Relations Contacts
Debt Investor Relations Contacts Website: www.lloydsbankinggroup.com/investors/fixed-income-investors INVESTOR RELATIONS LONDON Douglas Radcliffe Edward Sands Group Investor Relations Director Director, Investor Relations +44 (0)20 7356 1571 +44 (0)20 7356 1585 douglas.radcliffe@lloydsbanking.com ed
Slide 41: Forward looking statement and basis of presentation
Forward looking statement and basis of presentation Forward looking statement and basis of presentation This document contains certain forward looking statements with respect to the business, strategy, plans and /or results of Lloyds Banking Group and its current goals and expectations relating to i
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