Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — Debt Investor Presentation (2018)
30 slides from Lloyds Banking's debt investor presentation, 2018
Slide 1: Fixed Income Investor Presentation HY 2018
FIXED INCOME INVESTOR PRESENTATION HY 2018
Slide 2: Strong and sustainable earnings continue to demonstrate the strength of the business model
Strong and sustainable earnings continue to demonstrate the strength of the business model • Significant business progress with strong start to the Group’s latest strategic plan ‐ Successful delivery of key initiatives including Open Banking, the planned integration of Zurich and MBNA and launch of
Slide 3: Financial performance – strong and sustainable statutory performance
Financial performance – strong and sustainable statutory performance £9.0bn Net income +2% • Strong statutory profit of £2.3bn up 38% Cost:income ratio (incl. 47.7% ‐ Net income up 2% with increased NII and stronger Other Income in remediation) (4.2)pp Q2; NIM increased to 293bps Cost:income ratio (
Slide 4: UK economy remains resilient
UK economy remains resilient Employment rate(1) and GDP growth CPI inflation and pay growth(2) (%) (%) 4 62 7 2 61 5 0 3 60 (2) 1 59 (4) (1) (6) 58 (3) (8) 57 2007 2009 2011 2013 2015 2017 2007 2009 2011 2013 2015 2017 GDP growth (lhs) Employment rate (rhs) CPI inflation BoE estimates of Basle III T
Slide 5: Transformational strategy targeting significant customer and business enhancements
Transformational strategy targeting significant customer and business enhancements DIGITISING THE GROUP MAXIMISING GROUP CAPABILITIES • End to end transformation covering more • £6bn loan growth in start-ups, SME and than 70% of our cost base Mid Market businesses • Simplification and progressive •
Slide 6: Cost discipline enables greater investment capacity and increased returns
Cost discipline enables greater investment capacity and increased returns Market leading efficiency position Cost:income ratio(1), % 51.9 Low 40s incl. Market leading 47.7 remediation Freeing up efficiency capital for >£3.0bn 45.8 44.9 Higher NPS scores strategic investment H1 2017 H1 2018 2020 (Exi
Slide 7: Financial Performance
LLOYDS Financial Performance
Slide 8: Strong financial performance with continued growth in profits and returns
Strong financial performance with continued growth in profits and returns (£m) H1 2018 H1 2017 Change • Underlying profit increased 7% to £4.2bn Net interest income 6,344 5,925 7% Vocalink – 146 – • Net income increased 2% to £9.0bn Other Income 3,124 3,202 (2)% ‐ NII up 7% with improved margin of 2
Slide 9: Net interest income increase driven by improved margin and AIEA growth
Net interest income increase driven by improved margin and AIEA growth Net interest income and margin • Net interest income up 7% to £6.3bn driven by an (£bn, %) 2.90% 2.93% 3 improved margin of 2.93% and higher AIEAs 2.82% 2.74% 2.69% ‐ Lower funding and deposit costs more than offset 2.8 mortgage
Slide 10: Credit quality remains strong reflecting a continued prudent approach to risk
Credit quality remains strong reflecting a continued prudent approach to risk Asset quality ratio (bps) • Gross AQR lower at 27bps with net AQR up due to lower releases and write-backs -10 -7 -13 • Underlying credit portfolio remains stable with 28 28 27 no overall deterioration in credit risk indic
Slide 11: Credit quality – diversified, high quality £290bn UK mortgage portfolio
Credit quality – diversified, high quality £290bn UK mortgage portfolio Mortgage portfolio quality Geographically diversified mortgage portfolio(1) (%) (£bn) 56.4 53.3 49.2 46.1 Lloyds 43% 43% 14% 44.0 43.6 43.5 81.9 86.4 89.0 89.5 88.8 70.4 Rest of 59.6 50% 40% 10% market 2012 2013 2014 2015 2016 2
Slide 12: Credit quality – consumer finance portfolio benefits from conservative underwriting
Credit quality – consumer finance portfolio benefits from conservative underwriting and prudent assumptions Credit cards – new to arrears as proportion of total book (%) • Prime credit card book with conservative risk appetite 2.0% ‐ No deterioration seen across the portfolio 1.5% ‐ New to arrears f
Slide 13: Significant growth in statutory profit and returns
Significant growth in statutory profit and returns • Statutory profit after tax of £2.3bn, up 38% (£m) H1 2018 H1 2017 Change • Market volatility and other items includes £105m Underlying profit 4,234 3,952 7% loss on sale of Irish mortgage portfolio Volatility and other items (190) (37) – • Restruc
Slide 14: Capital Position
LLOYDS Capital Position 13
Slide 15: Group continues to maintain strong buffers to current and fully loaded MDA requirements
Group continues to maintain strong buffers to current and fully loaded MDA requirements Ongoing capital build of 170-200bps p.a. 14.5% c.13% + c.1% Management buffer • CET1 ratio of 14.5% post dividend accrual(2); 5.1% SRB(1) 121bps of CET1 build over H1 2018 0.9% MDA trigger • Capital build (pre-di
Slide 16: Group ahead of 2020 MREL requirements and on track for 2022
Group ahead of 2020 MREL requirements and on track for 2022 29.7%(1) • Strong total capital base supports HoldCo Senior £16.9bn continued MREL build HoldCo Senior (2 x P1) + P2A = 20.7% + Buffers • Solid progress on MREL build in 2018; June 2018 pro forma transitional MREL ratio of 29.7%(1) MREL eli
Slide 17: Liquidity, Funding & Credit Ratings
Liquidity, Funding & Credit Ratings 16
Slide 18: Strong and stable funding and liquidity position
Strong and stable funding and liquidity position • Stable customer balance sheet £416bn £418bn £444bn £442bn • LCR(2) increased to 129% in the short-term Customer deposits (1) Loans and advances given ring-fencing transition; loan to deposit ratio of 106% 1 Jan 18 (3) 30 Jun 18 • LCR eligible assets
Slide 19: Composition of wholesale funding as at June 2018
Composition of wholesale funding as at 30 June 2018 Product, currency and maturity – £122bn £14.6bn(1) Gross Term Issuance USD EUR GBP Other £bn 7 6.1 6% 6 MM Funding 15% 5 25% OpCo 25% GBP 4 3.2 HoldCo Senior EUR 35% 3 21% Securitisation USD 2 1.7 1.8 1.8 22% Covered bond 1 34% Other 14% Subdebt 0
Slide 20: 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 21: Environmental, Social and Governance overview (ESG)
Environmental, Social and Governance overview (ESG) • The Group’s success is inextricably linked to the Helping Britain Prosper Plan priorities 2018(1) 2020(2) British economy – ESG already a key part of our strategy Lending to first time buyers £10bn £30bn People Individuals, businesses and chariti
Slide 22: Structural Reform
LLOYDS Structural Reform 21
Slide 23: Structural changes required by ring-fencing almost complete
Structural changes required by ring-fencing almost complete HoldCo (Lloyds Banking Group plc) Ring-Fenced Sub-Group (Lloyds Non-Ring-Fenced Sub-Group Insurance Sub-Group Equity Investments Bank plc) (LBCM) (Scottish Widows) Sub-Group Majority of Group activities, including: Primary business lines in
Slide 24: Appendix
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Slide 25: Mortgage LTVs – further improvement in the first half of 2018
Mortgage LTVs – further improvement in the first half of 2018 Jun 2018 Dec 2017 Dec 2016 Dec 2010 Mainstream Buy to let Specialist Total Total Total Total(1) Average LTVs 41.7% 52.2% 46.2% 43.5% 43.6% 44.0% 55.6% New business LTVs 63.2% 57.6% n/a 62.3% 63.0% 64.4% 60.9% ≤ 80% LTV 87.7% 94.1% 88.6% 8
Slide 26: Loans and Advances to Customers
Loans and Advances to Customers(1) Other personal lending, £29bn, 6% Lease financing, £2bn, 0.4% Postal and telecommunications, Hire purchase, £15bn, 3% £2bn, 1% Property companies, £27bn, 6% Mortgages, £299bn, 63% Transport, distribution and Other Industries, £65bn, 14% hotels, £14bn, 3% Constructi
Slide 27: 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 volumes(1) 22% OUR Helping Britain Branches market share 21%
Slide 28: Notes
Notes LLOYDS 27
Slide 29: 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 30: Forward looking statements and basis of presentation
Forward looking statements and basis of presentation Forward looking statements This document contains certain forward looking statements with respect to the business, strategy, plans and /or results of Lloyds Banking Group (the “Group”) and its current goals and expectations relating to its future
Lloyds Banking Group — Debt Investor Presentation (2018) on 6ix