Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — H1 2015 Earnings Presentation
26 slides from Lloyds Banking's earnings presentation, Jul 31, 2015
Slide 1: 2015 Half-Year Results
TITLE SLIDE IS IN SENTENCE 2015 HALF-YEAR CASE.RESULTS GREEN BACKGROUND. Presentation to Analysts and Investors 31 Month 00 July 2015 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: Highlights for the First Half of 2015
HIGHLIGHTS FOR THE FIRST HALF OF 2015 Continued improvement in financial performance with strong start to next phase of strategic journey • Strong start to the next phase of our strategic journey • Underlying performance improved; profit up 15% to £4.4bn with return on required equity of 16% • Statu
Slide 4: Financial Performance for the First Half of 2015
FINANCIAL PERFORMANCE FOR THE FIRST HALF OF 2015 Profit and returns substantially improved and balance sheet further strengthened • Underlying profit increased 15% to £4.4bn £9.0bn Income – Income up 2% driven by 6% increase in net interest income +2% – 75% reduction in impairment charge, AQR of 9bp
Slide 5: UK Economic Performance
UK ECONOMIC PERFORMANCE Supporting and benefiting from sustainable UK economic recovery GDP growth(1) (%) Unemployment and wage growth(2) (%) 2.7 10 8.4 2.6 7.8 7.2 8 1.7 1.5 5.7 5.6 0.9 6 0.3 3.2 4 2.0 2.3 2.1 1.7 1.3 1.0 (0.5) 2 (0.2) (0.8) 0 2012 2013 2014 2015e Q4 2011 Q2 2012 Q4 2012 Q2 2013 Q4
Slide 6: UK Economic Performance
UK ECONOMIC PERFORMANCE Supporting and benefiting from sustainable UK economic recovery Household spending(1) (£bn) and debt(2) (%) LBG mortgage portfolio trends(4) (%) 270 150 34 Household spending 145 Household debt 260 140 250 135 16 13 12 130 11 240 125 5 2 1 0.1 230 120 Q1 2009 Q1 2013 Q1 2015
Slide 7: Delivering for Our Customers and Shareholders
DELIVERING FOR OUR CUSTOMERS AND SHAREHOLDERS Clear strategic focus and differentiated business model providing competitive advantage Our business model • Clear strategy: UK retail and commercial focus Simple, low risk, customer focused, • Multi brand, multi channel distribution UK retail and commer
Slide 8: Delivering for Our Customers and Shareholders
DELIVERING FOR OUR CUSTOMERS AND SHAREHOLDERS Creating the best customer experience whilst becoming simpler and more efficient • Creating the best customer experience • Becoming simpler and more efficient – New intermediary mortgage process has improved – On track to deliver £1bn Simplification run-
Slide 9: Delivering for Our Customers and Shareholders
DELIVERING FOR OUR CUSTOMERS AND SHAREHOLDERS Delivering sustainable growth by supporting the UK economy through loan growth in key customer segments Net lending growth(1) (£bn) YoY YoY (%) • SME lending up 5% and Mid Market lending Mortgages 1.6 1 maintained; continue to outperform the market Unsec
Slide 10: Delivering for Our Customers and Shareholders
DELIVERING FOR OUR CUSTOMERS AND SHAREHOLDERS Continued focus on supporting customers and the UK economy through the successful delivery of our strategy • Supporting the UK economy with growth in Helping Britain Prosper key customer segments • Supporting and benefiting from UK economic recovery • Cu
Slide 11: Agenda
AGENDA António Horta-Osório Delivering for our key stakeholders Group Chief Executive George Culmer Financial results Chief Financial Officer 10
Slide 12: Financial Performance
FINANCIAL PERFORMANCE Strong improvement in underlying profit (£m) H1 2015 H1 2014 Change • Income 2% higher at £9.0bn Net interest 5,715 5,404 6% – Strong net interest income performance, up 6%, income largely driven by improvement in NIM Other income 3,253 3,376 (4)% – Other income lower, but 4% h
Slide 13: Net Interest Income
NET INTEREST INCOME Strong net interest income performance largely driven by improved margin Net interest income (£m) Net interest margin – vs. H2 2014 (%) 6% 17bps 103 5,715 0.06 2.62 453 0.05 0.09 5,404 0.03 2.45 (94) 114 (0.06) (265) H1 2014 Disposals Asset ECN Liability Wholesale H1 2015 H2 2014
Slide 14: Other Income
OTHER INCOME Other income down 4%, largely due to disposals and run-off, but increased in second quarter. Other income expected to be broadly stable in 2015 Other income (£m) Other income trend (£m) (4)% 4% 1,680 1,696 1,661 3,376 171 1,578 1,592 39 3,253 1,513 (155) (141) (37) H1 2014 Disposals Ret
Slide 15: Costs
COSTS Continued tight management of costs with an improved cost:income ratio Operating costs (£m) 0% • Operating costs flat on H1 2014 with efficiency savings funding increased business investment 4,134 126 4,150 191 54 (276) (79) • New Simplification programme has delivered run-rate savings of £225
Slide 16: Asset Quality
ASSET QUALITY Further improvement reflecting a low risk business; AQR reduced to 9bps Impairment (£m) & AQR (%) Gross impaired loans (£bn) 3,098 2,481 46 40 1,754 32 1.12 25 1,141 22 20 0.95 16 13 14 0.70 707 12 0.45 395 8 7 0.30 179 0.17 0.09 H1 2012 H2 2012 H1 2013 H2 2013 H1 2014 H2 2014 H1 2015
Slide 17: Divisional Financial Performance
DIVISIONAL FINANCIAL PERFORMANCE Significant improvement in profitability with increases in all divisions, driven by income growth and reduced impairments Underlying profit • Improvement in Retail primarily driven by improved (£m) H1 2015 H1 2014 Change net interest income, with NIM up 16bps to 2.44
Slide 18: Statutory Profit
STATUTORY PROFIT Strong increase in statutory profit to £1.2bn despite conduct charges, primarily relating to PPI, and loss on sale of TSB (£m) H1 2015 H1 2014 • 38% increase in statutory profit to £1.2bn Underlying profit 4,383 3,819 • Asset sales includes charge of £390m from revaluation of ECNs (
Slide 19: Legacy Issues – PPI
LEGACY ISSUES – PPI Additional PPI provision of £1.4bn for H1 2015 PPI provision analysis(1) (bn) • Past business review H1 charge Cumulative Unutilised – 98% of programme complete with final 2% to be provision June 2015 completed in second half – no further provision Past business review – 1.7 0.2
Slide 20: Balance Sheet
BALANCE SHEET Balance sheet de-risked with average interest earning assets broadly flat, excluding run-off and TSB; further reductions in risk weighted assets Average interest earning assets (£bn) 543 511 24 484 • Average interest earning assets have been broadly 23 456 flat, excluding run-off and T
Slide 21: Balance Sheet
BALANCE SHEET Dividend policy supported by strong balance sheet and capital generation Common equity tier 1 ratio (%) • Balance sheet 0.5 – CET1 ratio improved to 13.3% primarily driven by 1.8 13.5 13.3 underlying profit 12.8 (0.9) (0.3) (0.4) (0.2) – Leverage ratio remains strong at 4.9%, total cap
Slide 22: Summary
SUMMARY Strong financial performance, with improved guidance reflecting confidence in the Group’s future prospects 2015 guidance enhanced or reconfirmed • Clear strategic focus and a differentiated business model • Full year NIM improved to around 2.60% • Increase in profitability and returns with •
Slide 23: Appendix
TITLE SLIDE IS IN APPENDIX CASE. SENTENCE GREEN BACKGROUND. 00 Month 0000 Presenters Name
Slide 24: Mortgage Portfolio LTVs
MORTGAGE PORTFOLIO LTVS Further improvement in portfolio quality with average LTV below 46% and only 1% of the portfolio with an LTV greater than 100% Jun 2015 Dec 2014 Dec 2013 Dec 2012 Mainstream Buy to let Specialist Total Total Total Total(1) Average LTVs 43.3% 56.7% 54.4% 45.9% 49.2% 53.3% 56.4
Slide 25: Further Strengthening the Balance Sheet
FURTHER STRENGTHENING THE BALANCE SHEET Strong capital position with medium term AT1 requirement already met Capital composition(1) (%) • Strong total capital ratio of 21.7% £bn 22.0 21.7 49.2 • Tier 2 reduction largely reflects calls and a change Tier 2 4.5 Tier 2 3.8 8.7 in the regulatory value of
Slide 26: 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