Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — Debt Investor Presentation (2020)
35 slides from Lloyds Banking's debt investor presentation, 2020
Slide 1: Fixed Income Investor Presentation H1 2020
FIXED INCOME INVESTOR PRESENTATION H1 2020
Slide 2: Group Overview & Strategy
Classification: Limited Group Overview & Strategy 2
Slide 3: Simple group structure with multiple issuance points
Capital, Funding & Classification:Results Group Overview Limited Liquidity Appendix Simple group structure with multiple issuance points HoldCo Lloyds Banking Group Main Entities A3 / BBB+ / A+ Ratings P-2 / A-2 / F1 Neg / Neg / Neg Example Products Senior Unsecured - Capital Ring-Fenced Sub-Group N
Slide 4: Quick response to the crisis with transformation positioning us well
Capital, Funding & Group Overview Classification:Results Limited Liquidity Appendix Quick response to the crisis with transformation positioning us well • >£9bn lending provided to businesses through active participation in Significant Government-backed schemes, broadly in line with natural market s
Slide 5: Economy deteriorated since Q1; signs of recovery, although uncertainty remains
Capital, Funding & Group Overview Classification:Results Limited Liquidity Appendix Economy deteriorated since Q1; signs of recovery, although uncertainty remains LBG customers’ spending1 Loan demand3 (7-day rolling average, % change vs. same period a year earlier) (Applications as a percentage of p
Slide 6: Helping Britain recover is integral to Group purpose
Capital, Funding & Group Overview Classification:Results Limited Liquidity Appendix Helping Britain recover is integral to Group purpose Opportunity to build a stronger bank whilst supporting a resilient economy with a more sustainable future • Working with Government and regulators to help househol
Slide 7: Current challenges, but remain well placed to deliver for shareholders
Capital, Funding & Group Overview Classification:Results Limited Liquidity Appendix Current challenges, but remain well placed to deliver for shareholders • Strong foundations and unique competitive strengths position the Group well for the evolving environment and emerging trends OUR Helping Britai
Slide 8: H1 2020 Results
Classification: Limited H1 2020 Results 8
Slide 9: Performance impacted by lower rates, activity and economic outlook deterioration
Capital, Funding & Group Overview Classification:Results Limited Liquidity Appendix Performance impacted by lower rates, activity and economic outlook deterioration £7.4bn Net income (16)% Cost:income ratio 52.3% • Net income of £7.4bn, down 16%, NIM of 2.59% impacted by rates (incl. remediation) +6
Slide 10: Retail customers deleveraging and building deposits while SME customers use Government schemes
Capital, Funding & Group Overview Classification:Results Limited Liquidity Appendix Retail customers deleveraging and building deposits while SME customers are using Government lending schemes and holding cash Movement in lending in Q2 Movement in deposits in Q2 (£bn) (£bn) Retail Commercial Retail
Slide 11: Lower net interest income and other income
Capital, Funding & Group Overview Classification:Results Limited Liquidity Appendix Lower net interest income and other income Net interest income and margin1 (£m) • NII of £5.5bn down 11% on prior year 2.90% (11)bps (11)bps (9)bps 2.59% (11)% • Rate and mix impacts will continue into H2 with AIEAs
Slide 12: Continued focus on efficiency, building on strong track record
Capital, Funding & Group Overview Classification:Results Limited Liquidity Appendix Continued focus on efficiency, building on strong track record Total costs (£m) (4)% 4,049 52 • Total costs of £3.9bn down 4% with operating costs (39) 34 3,876 5% lower and remediation up £34m (101) (120) • 6% lower
Slide 13: Impairment charges reflect updated economic assumptions and drive higher AQRs
Capital, Funding & Group Overview Classification:Results Limited Liquidity Appendix Impairment charges reflect updated economic assumptions and drive higher AQRs Impairment charges (£m) H1 20 Q2 20 Q1 20 H1 19 Incr. Charges pre-updated MES 788 420 368 579 209 Retail 578 253 325 556 22 • H1 charge in
Slide 14: Robust balance sheet with high levels of security
Capital, Funding & Group Overview Classification:Results Limited Liquidity Appendix Robust balance sheet with high levels of security Group loans and advances of £440bn (£bn) 26 70 Retail secured1 SME & Mid Corporates secured lending2 36 Corporate & Institutional • Balance sheet benefitting from pru
Slide 15: Predominance of high quality retail mortgages
Capital, Funding & Group Overview Classification:Results Limited Liquidity Appendix Predominance of high quality retail mortgages Mortgage book quality1,2 (£bn,%) 350 341 324 303 294 289 286 53.4% 59.6% • UK mortgages account for c.2/3 of Group lending 57.0% 88.4% 88.3% 89.3% 81.9% - Mortgage book p
Slide 16: High quality consumer finance portfolio
Capital, Funding & Group Overview Classification:Results Limited Liquidity Appendix High quality consumer finance portfolio Consumer finance portfolio of £43bn (£bn) Secured • Retail customers are being cautious on borrowing in 1 £19bn an uncertain environment Unsecured UK Motor Finance lending £24b
Slide 17: Credit card book managed carefully in recent years
Capital, Funding & Group Overview Classification:Results Limited Liquidity Appendix Credit card book managed carefully in recent years Credit cards delinquency trend1 (%) 2.5% 2.0% • Prime credit card book benefits from high quality growth and conservative underwriting in recent years 1.5% - Selecti
Slide 18: Diversified commercial portfolio with limited exposure to most vulnerable sectors
Capital, Funding & Group Overview Classification:Results Limited Liquidity Appendix Diversified commercial portfolio with limited exposure to most vulnerable sectors Lending in key coronavirus-impacted sectors1 (£bn) Retail non-food 2.4 1.8 19% Oil & gas 1.4 2.7 69% Auto. dealerships2 2.4 1.5 2% • D
Slide 19: High quality SME book and de-risked real estate portfolio
Capital, Funding & Group Overview Classification:Results Limited Liquidity Appendix High quality SME book and de-risked real estate portfolio SME write-offs (£m) • Low levels of SME impairment in recent years, with average write-off rate <0.25% over last 3 years1 - Assets c.90% secured, with origina
Slide 20: Payment holidays continue to support customers through temporary pressures
Capital, Funding & Group Overview Classification:Results Limited Liquidity Appendix Payment holidays continue to support customers through temporary pressures Current status of Retail payment holidays1 (#k) • Payment holidays now available until 31 October • >1.1m holidays granted, of which c.750k r
Slide 21: Dynamics of IFRS 9 charge and sensitivities
Capital, Funding & Group Overview Classification:Results Limited Liquidity Appendix Dynamics of IFRS 9 charge and sensitivities IFRS 9 charges reflect timing of changes in ECL provisions (£bn) 7.2 Provisions raised on new • IFRS 9 requires immediate recognition of lifetime 2.8 business expected cred
Slide 22: Higher reserving across business lines driven by increase in ECL provisions
Capital, Funding & Group Overview Classification:Results Limited Liquidity Appendix Higher reserving across business lines driven by increase in ECL provisions ECL Net ECL P&L Write- ECL (£m) H1 2020 increase charge offs H2 2019 Retail 4,214 1,418 2,095 (677) 2,796 Secured 1,763 547 603 (56) 1,216 C
Slide 23: Capital, Funding & Liquidity
Classification: Limited Capital, Funding & Liquidity 23
Slide 24: Improved CET1 position with significant resources to support customers
Capital, Funding & Classification:Results Group Overview Limited Liquidity Appendix Improved CET1 position with significant resources to support customers; increased headroom over MDA and requirements CET1 Ratio • CET1 ratio of 14.6% (13.4% FL) – underlying build, IFRS9 transitional relief and 14.6%
Slide 25: Interim MREL requirement met at 1 Jan 2020; on track for end-state
Capital, Funding & Classification:Results Group Overview Limited Liquidity Appendix Interim MREL requirement met at 1 Jan 2020; on track for end-state Transitional MREL Ratio 36.8% • BOE timeline unchanged at 1 Jan 2022; final requirement SRB 1.7% to be confirmed in Q4 CCB 2.5% HoldCo Snr • PRA redu
Slide 26: Strong liquidity position maintained
Capital, Funding & Classification:Results Group Overview Limited Liquidity Appendix Strong liquidity position maintained 1 LCR well above regulatory minimum1 High Quality Liquidity Pool2 £125bn £126bn £131bn £138bn • Average LCR % remains 2 2 1 1 2 3 comfortably above regulatory 1 1 73 minimum at 14
Slide 27: Group funding portfolio strongly positioned, with 2020 issuance plan largely complete
Capital, Funding & Classification:Results Group Overview Limited Liquidity Appendix Group funding portfolio strongly positioned, with 2020 issuance plan largely complete Funding Portfolio by Maturity at H1 2020 H1 2020 Funding by Product £bn • £8.5bn equivalent issued YTD; 2020 1 5 < 1 Year (MM) gui
Slide 28: Credit ratings remain strong but with negative pressures
Capital, Funding & Classification:Results Group Overview Limited Liquidity Appendix Credit ratings remain strong but with negative pressures Ring-Fenced Non-Ring- HoldCo Bank Fenced Bank Lloyds Bank, Lloyds Bank Lloyds Bank of Corporate Commentary UK Sovereign Banking Group Scotland Markets • Negati
Slide 29: Appendix
Classification: Limited Appendix 29
Slide 30: Prudent economic scenarios
Capital, Funding & Group Overview Classification:Results Limited Liquidity Appendix Prudent economic scenarios Current scenario (%) Probability Balance sheet Scenario weighting (%) ECL (£m) Economic measure 2020 2021 2022 2020-22 GDP (10.0) 6.0 3.0 (1.8) Interest rate 0.10 0.10 0.10 0.10 Base case 3
Slide 31: Continued low mortgage LTVs
Capital, Funding & Group Overview Classification:Results Limited Liquidity Appendix Continued low mortgage LTVs June 20201 Dec 20191 Dec 20101 Mainstream Buy to let Specialist Total Total Total Average LTVs 42.8% 50.8% 42.5% 44.0% 44.9% 55.6% New business LTVs 64.3% 56.8% n/a 63.0% 64.3% 60.9% ≤ 80%
Slide 32: Coverage across business lines
Capital, Funding & Group Overview Classification:Results Limited Liquidity Appendix Coverage across business lines Drawn balances (£bn)1 Provisions (£m) 1 Coverage (excl. Recoveries) Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Retail 288.1 51.1 5.6 344.8
Slide 33: Notes
Classification: Limited Notes 33
Slide 34: Debt Investor Relations Contacts
Classification: Limited 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.Radcli
Slide 35: Forward looking statements
Classification: Limited 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 the business, strategy,
Lloyds Banking Group — Debt Investor Presentation (2020) on 6ix