Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — FY2010 Earnings Presentation
82 slides from Lloyds Banking's earnings presentation, Feb 25, 2011
Slide 1: 2010 Results
2010 RESULTS 25 February 2011 Eric Daniels Group Chief Executive
Slide 2: Business Highlights: A year of significant progress
BUSINESS HIGHLIGHTS A year of significant progress STRONG OPERATING PERFORMANCE RISK REDUCED Balance sheet reduction plan Step change in profitability ahead of schedule Sharp fall in impairments Funding risk much reduced Good franchise momentum Capital position further strengthened Int
Slide 3: The Building Blocks for a Strong Business
THE BUILDING BLOCKS FOR A STRONG BUSINESS Driving customer value, earnings, capital and returns Value SUSTAINABLE GROWTH creation Efficiency, effectiveness Customer value Deep relationships Quality market share PROFITABILITY Complete integration Drive elements of profit model Optimise
Slide 4: Step Change in Profitability in 2010
STEP CHANGE IN PROFITABILITY IN 2010 Combined businesses results £22.9bn £23.6bn INCOME(1) UP 3% 2009 2010 STEP CHANGE IN PROFITABILITY £11.6bn £10.9bn £2.2bn COSTS DOWN 6% (£6.3bn) 2009 2010 2009 2010 £24.0bn IMPAIRMENTS DOWN 45% £13.2bn 2009 2010 (1) Excluding liability management gains and fair v
Slide 5: Sharp Fall in Impairments
SHARP FALL IN IMPAIRMENTS Lloyds risk disciplines showing through in more predictable impairments UK, US IRELAND, AUSTRALIA IMPAIRMENTS DOWN AS IMPAIRMENTS HIT BY ECONOMY RECOVERS WEAKER ECONOMIES WHOLESALE RETAIL £15.7bn 0.8 14.9 £4.4bn £5.6bn £4.2bn 0.2 £3.8bn 1.3 £2.7bn 3.4 0.9 4.2 2.4 4.3 2.9 0.
Slide 6: Good Franchise Momentum in 2010
GOOD FRANCHISE MOMENTUM IN 2010 Building the drivers of future growth GROWING THE SUPPORTING THE FRANCHISE ECONOMIC RECOVERY 1.9 million new personal current accounts £30 billion gross mortgage 5.2 million new savings lending (including accounts, 5% growth in retail remortgages) savings book
Slide 7: Integrating the Business
INTEGRATING THE BUSINESS Integration in the final phase KEY DEVELOPMENTS RUN-RATE COST SAVINGS Standardised operating model £2,000m Harmonised terms and conditions £1,379m £766m Standardised procurement and property processes 2009 2010 2011 Major systems changes target 6
Slide 8: Balance Sheet Reduction Ahead of Schedule
BALANCE SHEET REDUCTION AHEAD OF SCHEDULE ASSETS TARGETED FOR RUN-DOWN KEY POINTS Asset reduction programme halfway to goal £300bn – Goal: £200 billion asset £236bn run-off £195bn £41 billion reduction achieved in 2010 – Across all target asset groups 2008 2009 2010 Value-based approach Sale
Slide 9: Funding Risk Much Reduced
FUNDING RISK MUCH REDUCED TERM ISSUANCE WHOLESALE FUNDING <1 YEAR £162bn £149bn £50bn £10bn(1) 2009 2010 End 2009 End 2010 CENTRAL BANK FUNDING LOAN:DEPOSIT RATIO 169% 154% £157.2bn £96.6bn End 2009 End 2010 End 2009 End 2010 (1) Excluding government guaranteed issuance 8
Slide 10: Capital Position Further Strengthened
CAPITAL POSITION FURTHER STRENGTHENED CORE TIER 1 RATIO STRONG CAPITAL POSITION Reduced our risk profile in 2010 10.2% 8.1% Well placed for Basel III 5.6% Robust performance in stress tests Core tier 1 ratio including 31 Dec 31 Dec 31 Dec 2008 2009 2010 ECNs would be 12.1% 9
Slide 11: Performing in Line with Our 2010 Guidance
PERFORMING IN LINE WITH OUR 2010 GUIDANCE Now getting more predictable financials GUIDANCE 2010(1) High single digit growth REVENUE(2) GROWTH within 2 years 9 Margin expected to MARGINS increase to c.2% 9 c.200 p.a. basis points COST:INCOME RATIO improvement 9 Run rate savings of INTEGRATION BENEFIT
Slide 12: Summary: A year of significant progress
SUMMARY A year of significant progress RETURN TO PROFITABILITY RISK REDUCED Group delivering profits in 2010 Balance sheet being Good franchise momentum restructured across all divisions Funding position enhanced Integration programme on track Capital position strengthened Trajectory i
Slide 13: 2010 Results
2010 RESULTS 25 February 2011 Tim Tookey Group Finance Director
Slide 14: Delivering ……
DELIVERING …… BUSINESS MOMENTUM BALANCE SHEET AND CAPITAL STRENGTH A STRENGTHENED FUNDING POSITION SUMMARY 13
Slide 15: Business Performance: Income statement
BUSINESS PERFORMANCE Income statement HEADLINE UNDERLYING £m 2009 2010 % CHANGE % CHANGE Income(1) 23,964 23,444 (2)% 3%(2) Core +7% Non-core (9)% Costs (11,609) (11,078) 5% 6%(3) Impairments (23,988) (13,181) 45% 45% Profit before tax(4) (6,300) 2,212 Margin 1.77% 2.10% Integration savings run-rate
Slide 16: Return to Profitability
RETURN TO PROFITABILITY Business performance and statutory profit PROFIT BEFORE TAX (£m)(1) 2009 H1 2010 H2 2010 2010 Divisional performance (7,371) 988 1,421 2,409 Liability management gains 1,498 423 - 423 Fair value movement of ECN (427) 192 (812) (620) conversion feature Profit/(loss) before tax
Slide 17: Revenue Trends
REVENUE TRENDS Good underlying income growth £m +3% 23,964 423 23,641 23,444 22,893 (348) (620) (1,498) 427 11,238 9, 819 9, 622 10,167 1,096 13,822 12,726 12,726 13,822 2009 Liability MTM on Underlying NII OOI Underlying Liability MTM on 2010 Mgmt ECNs(1) 2009 2010 Mgmt ECNs(1) Net Interest Income
Slide 18: Net Interest Income Drivers
NET INTEREST INCOME DRIVERS Good performance driven by increased asset pricing IMPACT ON NII £bn VOLUME Non-core lending continues to fall Assets Customer deleveraging continues (0.4) Growth in relationship deposits Liabilities Competitive pressures remain 0.1 PRICING Increase driven b
Slide 19: Net Interest Income Drivers
NET INTEREST INCOME DRIVERS Good performance despite increasing funding costs IMPACT ON NII £bn VOLUME (0.3) PRICING 1.5 FUNDING VOLUME Fall in funding Significant reduction in customer funding gap 0.6 requirement Term issuance 2010 issuance requirements exceeded (0.2) plan FUNDING RATE Hi
Slide 20: Other Operating Income
OTHER OPERATING INCOME Underlying income fell 3%(1) (£m) (3)% 10,167 (70) (100) 9,819 (61) (117) Underlying Impact of PPI Overdraft Asset Other Underlying 2009 new charges sales 2010 business closure (1) Underlying income excludes liability management gains and the fair value movement of the ECN con
Slide 21: Economic Assumptions
ECONOMIC ASSUMPTIONS Expect slow recovery, in line with consensus GDP BASE RATE (% growth) 2.6 2.4 3.0 2.1 2.1 1.9 1.9 2.5 % quarter average Market implied rate 2.0 1.4 1.5 1.0 Group assumption 0.5 0.0 2010 2011 2012 2011 2012 Group Consensus from HMT OBR data Base survey of Independent Scenario for
Slide 22: Drivers of Future Margin
DRIVERS OF FUTURE MARGIN Limited core income growth in 2011 given by flat Net Interest Margin 2011 Continued subdued lending markets Further reduction in non-core assets VOLUME Opportunity for growth in core business Growth in customer deposits 2.08% 2.12% 2.10% Asset re-pricing offset by
Slide 23: Drivers of Future Margin
DRIVERS OF FUTURE MARGIN BANK BASE RATE, WHOLESALE ISSUANCE COSTS & MARGIN OUTLOOK 2010 2014 Higher absolute issuance costs 3.21% WHOLESALE ISSUANCE COSTS(1) but at lower spreads over time Lloyds Banking Group forecast 0.50% BANK BASE RATE 3.75% 1.56% ASSET MARGIN Limited further improvement
Slide 24: Cost Performance
COST PERFORMANCE Continued strong cost control £m (6)% 11,609 393 10,928(1) (247) (827) 2009 Operating Cost Investment/ 2010 Operating lease synergies Other Operating expenses depreciation expenses Continued strong cost control and delivery of synergy programmes (1) Excluding impairment of fixed ass
Slide 25: Synergy Progression
SYNERGY PROGRESSION Strong delivery of synergy programmes RUN RATE STRONG PERFORMANCE IN 2010 £m 79 non-branch properties exited 2,000 (162 since start of programme) £236 million procurement benefits 1,379 Integrated IT infrastructure build largely complete Improved processes implemented 766
Slide 26: Reductions in Underlying Cost:Income Ratio
REDUCTIONS IN UNDERLYING COST : INCOME RATIO UNDERLYING COST : INCOME RATIO(1) 50.7% 46.2% c.40% Excl. Bank Levy 2009 2010 2014 Costs broadly flat in 2011 (1) Excluding liability management gains, fair value movement of the ECN conversion feature and impairment of fixed assets 25
Slide 27: Group Impairment Charge
GROUP IMPAIRMENT CHARGE Significant reduction, primarily driven by Wholesale £bn £10.8 billion (45%) reduction in Group impairment charge £1.5 billion (35%) reduction in Retail 24.0 (45)% impairment charge 13.4 £11.2 billion (72%) reduction in Wholesale 12.4 impairment charge 10.6 – primarily
Slide 28: Irish Portfolio
IRISH PORTFOLIO Coverage level increased due to economic uncertainties IMPAIRED/UNIMPAIRED ASSETS Market sentiment adversely impacted by downturn and EU-IMF bail out 54% Consequently asset prices expected to be depressed for 42% longer 40% 37% Coverage ratio increased to 54% 53% (from 42% at H
Slide 29: Retail – Good Performance
RETAIL – GOOD PERFORMANCE Good performance driven by income growth and lower impairment PROFIT BEFORE TAX (£bn) Profit before tax increased to 0.7 4.7 £4.7 billion, driven by good income growth, tight cost control Income and a significantly lower Core +£1.0 billion 1.0 impairment charge Non-core +
Slide 30: Wholesale – Impairment Significantly Lower
WHOLESALE – IMPAIRMENT SIGNIFICANTLY LOWER Return to profitability driven by reduction in impairment PROFIT BEFORE TAX (£bn) 0.6 Profit before tax increased to £3.3 billion principally driven by Income (3.7) significant reduction in Core +£0.2 billion impairment charge Non-core -£0.5 billion Imp
Slide 31: Insurance – Solid Performance
INSURANCE – SOLID PERFORMANCE Capital intensity reduced SALES – PVNBP (20)% SALES DOWN EEV Margin 3.5% WHILST 2.5% INCREASED MARGINS UP PROFITABILITY 2009 2010 IFRS +13% (140)bps £1,102m 3.3% £975m NEW BUSINESS 1.9% CAPITAL IMPROVED(1) 2009 2010 (400)bps 2009 2010 83% 79% GI COMBINED RATIO IMPROVED
Slide 32: Delivering ……
DELIVERING …… BUSINESS MOMENTUM BALANCE SHEET AND CAPITAL STRENGTH A STRENGTHENED FUNDING POSITION SUMMARY 31
Slide 33: Good Progress on Asset Reductions
GOOD PROGRESS ON ASSET REDUCTIONS £105 billion asset reduction since end 2008 £bn 300 £105bn 236(1) (9) 195 (20) (3) (8) (1) 2008 2009 Impairments Treasury Retail Wholesale International 2010 assets Over 50% of £200bn targeted reduction achieved in two years with minimal losses to date on disposal o
Slide 34: Indicative Profile of Core / Non-Core Business
INDICATIVE PROFILE OF CORE / NON-CORE BUSINESS Non-core reductions continue to be important CORE NON-CORE Income (underlying) % 82 18 Impairment % 31 69 RWAs % 65 35 Total assets £bn 797 195 Non-core assets are more capital intensive and generate a disproportionate level of impairment 33
Slide 35: Balance Sheet De-risking
BALANCE SHEET DE-RISKING Reducing the capital intensity of our business RISK-WEIGHTED ASSETS (£bn) 493.3 Overall RWA reduction driven by: 406.4 – Asset reductions Non-core 188.7 – Reclassification of certain assets to Foundation IRB (£23bn impact) 141.0 Further risk-weighted asset reductions exp
Slide 36: A Strong Capital Position
A STRONG CAPITAL POSITION Improving quality and quantity of capital CORE TIER 1 RATIO (%) 1.7% 10.2% (0.1)% 0.5% Core tier 1 ratio including ECNs 8.1% would be 12.1% Tier 1 ratio: 11.6% Total capital ratio: 15.2% Improved quality of capital base including Basel III mitigation Return to pro
Slide 37: Impact of Basel Changes
IMPACT OF BASEL CHANGES Impact of Basel 2.5/3 changes on pro-forma Core tier 1 ratio(1) 2.0% 14.7% 3.7% (1.2)% Impact of insurance deduction on CT1 in B2.5 20% 2014 is c.0.3% B3 80% 10.2% Dec 2010 Consensus Increase in RWA’s Illustrative Dec 2013 CT1 ratio retained earnings from Basel 2.5/3 £60bn RW
Slide 38: Delivering ……
DELIVERING …… BUSINESS MOMENTUM BALANCE SHEET AND CAPITAL STRENGTH A STRENGTHENED FUNDING POSITION SUMMARY 37
Slide 39: Further Reductions in Our Wholesale Funding
FURTHER REDUCTIONS IN OUR WHOLESALE FUNDING …and maturity profile maintained WHOLESALE FUNDING MATURITY PROFILE WHOLESALE FUNDING £298BN £bn 50% (13)% 343 2–5 years 326 £52bn 298 1–2 years > 5 years £47bn £50bn 151 > 1 yr 44% 164 50% 149 50% 22% reduction in < 1 year 192 < 1 yr 162 56% 149 50% 50% P
Slide 40: Further Reductions in Government & Central Bank Funding
FURTHER REDUCTIONS IN GOVERNMENT & CENTRAL BANK FUNDING Accelerated pay-down ahead of contractual maturities REDUCING GOVERNMENT & CENTRAL BANK FUNDING £bn (39)% 157.2 £61 billion reduction in government and central bank funding Other(1) 96.6 Further £13 billion repayment of 107.2 government and
Slide 41: Further Reductions in Our Loan to Deposit Ratio
FURTHER REDUCTIONS IN OUR LOAN TO DEPOSIT RATIO Loan to deposit ratio now at 154% - Core book ratio is 119% REPORTED RATIO CORE BUSINESS RATIO (1500)bps 169% (900)bps 154% 128% 119% 2009 2010 2009 2010 Loan to deposit ratio continues to improve due to: – Excellent relationship deposit growth – Con
Slide 42: Funding Summary
FUNDING SUMMARY Executing a broad funding strategy Reduced absolute level of wholesale funding 9 Reducing reliance on short-term funding 9 Good deposit growth 9 Substantial liquid asset buffer (£98 billion) provides 2011 flexibility 9 Reduced government and central bank funding by £61 bill
Slide 43: Delivering ……
DELIVERING …… BUSINESS MOMENTUM BALANCE SHEET AND CAPITAL STRENGTH A STRENGTHENED FUNDING POSITION SUMMARY 42
Slide 44: A Profitable, Strengthened Business
A PROFITABLE, STRENGTHENED BUSINESS Good progress towards our medium term targets Strong progress in balance sheet reduction 9 Further reduction in risk in the business 9 Funding and liquidity position much improved 9 Stronger capital ratios 9 Substantial reduction in Group impairments 9
Slide 45: Appendix
APPENDIX LLOYDS BANKING GROUP ae
Slide 46: Loans and Advances to Customers
LOANS AND ADVANCES TO CUSTOMERS LOANS AND ADVANCES TO CUSTOMERS £611 BILLION(1) 31 Dec 2010 Financial, business & other services 10% Property companies 13% Personal other 6% Construction 1% Manufacturing 2% Personal mortgages 58% Corporate other 1% Agriculture, forestry & fishery 1% Lease financing
Slide 47: Mortgage Portfolio
MORTGAGE PORTFOLIO UK MORTGAGE PORTFOLIO £341.1 BILLION 31 Dec 2010 Specialist £29.3bn Mainstream £265.4bn Buy to let £46.4bn 46
Slide 48: Mortgage Portfolio
MORTGAGE PORTFOLIO NEW BUSINESS 31 Dec 2009 31 Dec 2010 £34.7bn £30.1bn Buy to Let & Other(1) Buy to Let £5.0bn First Time £4.4bn First Time Buyer Buyer £5.3bn £5.5bn 14% 15% 15% 18% Further Further Advances Advances £4.0bn 12% £2.9bn 10% 32% Home 20% Home 37% movers movers 27% £11.2bn £11.0bn Remor
Slide 49: Mortgage Portfolio LTVs
MORTGAGE PORTFOLIO LTVs MAINSTREAM BUY TO LET SPECIALIST GROUP Average LTVs 51.9% 75.6% 72.9% 55.6% New business LTVs 60.0% 66.5% n/a 60.9% <= 80% LTV 61.2% 44.4% 39.3% 57.0% > 80–90% LTV 15.3% 18.0% 21.3% 16.2% > 90–100% LTV 11.9% 19.1% 20.0% 13.6% > 100% LTV 11.6% 18.5% 19.4% 13.2% Value > 100% LT
Slide 50: Mortgage Portfolio
MORTGAGE PORTFOLIO 31 DEC 2010 31 DEC 2009 Portfolio >100% >100% >100% £341.1bn LTV LTV LTV and >3 months and >3 months in arrears in arrears Specialist £29.3bn 8.6% £5.7bn (19.4%) £0.8bn (2.7%) £0.7bn (2.3%) Buy to let £46.4bn 13.6% £8.6bn (18.5%) £0.6bn (1.3%) £0.6bn (1.2%) Mainstream £265.4bn 77.
Slide 51: Mortgage Arrears Trends
MORTGAGE ARREARS TRENDS % OF TOTAL CASES >3 MONTHS IN ARREARS 8% 7% 6% 5% 4% Market 2.11%(2) 3% 2% 1% 0% Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 CML total market (1) Mainstream Specialist Buy to Let (1) Source: Council of Mortgage Lenders (2) C
Slide 52: Trend in Mortgage Portfolio Arrears
TREND IN MORTGAGE PORTFOLIO ARREARS CUSTOMERS NEW TO ARREARS Volume ‘000s 160 144 131 128 129 128 H1 08 H2 08 H1 09 H2 09 H1 10 H2 10 51
Slide 53: Mortgage Portfolio – Properties in Repossession
MORTGAGE PORTFOLIO – PROPERTIES IN REPOSSESSION PROPERTIES IN REPOSSESSION NEW REPOSSESSIONS (% OF TOTAL MORTGAGE CASES) (% OF TOTAL MORTGAGE CASES) 0.11% 0.09% 0.07% 0.05% CML Lloyds CML Lloyds average(1) Banking average(1) Banking Group(2) Group(2) 31 Dec 2010 31 Dec 2010 (1) Council of Mortgage L
Slide 54: Mortgage Portfolio – Properties in Repossession
MORTGAGE PORTFOLIO – PROPERTIES IN REPOSSESSION PROPERTIES IN REPOSSESSION % of mortgage cases Peaked in 2008 Q3 0.13% 0.25% 0.20% Council of Mortgage Lenders 0.15% 0.10% 0.05% Lloyds Banking Group 0.00% Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 53
Slide 55: Mortgage Portfolio – New Repossessions
MORTGAGE PORTFOLIO – NEW REPOSSESSIONS NEW REPOSSESSIONS % of total cases 0.07% 0.09% 0.05% 0.06% CML LBG CML LBG 31 Dec 2010 31 Dec 2009 54
Slide 56: Repossessions Flow
REPOSSESSIONS FLOW FLOW TO REPOSSESSION 0.14% 0.12% 0.10% 0.08% 0.06% 0.04% 0.02% 0.00% Q4 08 Q4 09 Q4 10 Lloyds Banking Group Council of Mortgage Lenders 55
Slide 57: Unsecured Lending Portfolio
UNSECURED LENDING PORTFOLIO 31 DEC 2009 31 DEC 2010 £32.1bn £27.9bn Credit Credit cards cards Other £12.3bn Other £11.2bn £0.3bn £0.2bn Personal Personal Current Current Accounts Accounts £2.6bn £2.6bn Loans Loans £16.9bn £13.9bn Impairment charge as a % of average lending Cards Loans Cards Loans 11
Slide 58: Unsecured Lending Portfolio
UNSECURED LENDING PORTFOLIO £m UNSECURED IMPAIRED LOANS 3,819 3,603 2,981 Dec June Dec 2009 2010 2010 Loans Cards Current accounts 57
Slide 59: Loans and Advances to Corporate Customers
LOANS AND ADVANCES TO CORPORATE CUSTOMERS LOANS AND ADVANCES TO CORPORATE CUSTOMERS £219.7BN(1) 31 Dec 2010 Transport Post and communications distribution and 1% hotels 15% Construction Property 4% companies 36% Manufacturing 6% Corporate other 1% Agriculture, forestry and fishing 2% Lease financing
Slide 60: Commercial/Residential Property & Housebuilder Lending
COMMERCIAL/RESIDENTIAL PROPERTY & HOUSEBUILDER LENDING £83.7bn Lloyds Banking Group UK Lloyds Banking Group Overseas(1) £56.3bn 67% 33% £27.4bn LBG UK LBG Overseas Gross (pre FV adjustment and impairment). Includes Joint Ventures (1) Includes lending to non UK residents, and excludes residential mor
Slide 61: UK Commercial/Residential Property & Housebuilder Lending
UK COMMERCIAL/RESIDENTIAL PROPERTY & HOUSEBUILDER LENDING COMMERCIAL PROPERTY £35.7bn RESIDENTIAL PROPERTY £17.3bn Through the cycle policy, £56.3bn(1) 54% Housing Associations supporting existing customer (local authority cash flows) franchise Larger residential property Some concentration
Slide 62: Overseas Property Lending
OVERSEAS PROPERTY LENDING IRELAND £11.7bn AUSTRALIA £6.1bn £27.4bn(1) 55% Property Investment, 44% Property Investment, of of which 66% is impaired which 51% is impaired 45% Property Development, 56% Property Development, of of which 94% is impaired which 61% is impaired 22% 43% EUROPE, NORT
Slide 63: Leveraged Finance Lending
LEVERAGED FINANCE LENDING LLOYDS ACQUISITION FINANCE LLOYDS INTERNATIONAL £11.6bn £2.9bn £14.5bn Key product is cash flow Well spread by industry lending. The business sector originates, executes and portfolio manages deals 95% of country risk in portfolio is Australia or New Portfolio expos
Slide 64: Risk Capital Portfolio at Carry Value
RISK CAPITAL PORTFOLIO AT CARRY VALUE(1) MANAGE FOR GROWTH MANAGE FOR VALUE LLOYDS DEVELOPMENT CAPITAL (£1.2bn) FUND INVESTMENTS (£2.3bn) Ongoing direct equity business being £4.1bn(2) Generally, Limited Partner Investments in managed for growth private equity funds; well diversified LDC has b
Slide 65: Treasury Debt Securities Portfolio
TREASURY DEBT SECURITIES PORTFOLIO LOANS AND AVAILABLE FAIR VALUE 31 DEC 10 ADVANCES FOR SALE THROUGH P&L TOTAL £bn £bn £bn £bn Asset Backed Securities 24.2 9.4 1.1 34.7 Covered bonds - 3.5 - 3.5 Bank / Financial Institution 0.8 8.7 1.8 11.3 Fixed and Floating Rate Notes Bank Certificate of Deposits
Slide 66: Asset Backed Securities Portfolio
ASSET BACKED SECURITIES PORTFOLIO NET EXPOSURE CARRY VALUE 31 DEC 10 £bn % Mortgage Backed Securities – US RMBS 4.2 55 – Non-US RMBS 7.9 92 – CMBS 3.5 85 15.6 77 Collateralised Debt Obligations – Corporate 0.1 85 – Commercial Real Estate 0.3 53 – CLO 4.7 92 – Other 0.1 37 5.2 85 Personal sector – Au
Slide 67: Impairment Losses on Loans and Advances to Customers
IMPAIRMENT LOSSES ON LOANS AND ADVANCES TO CUSTOMERS 2009 2010 % OF AVERAGE LENDING IMPAIRMENT £m £m 2009 2010 Retail 4,221 2,747 1.11 0.74 – Secured (mortgages) 789 292 0.23 0.09 – Unsecured 3,432 2,455 9.94 8.11 Wholesale 14,031 4,226 5.92 2.08 Wealth and International 4,058 5,985 6.04 8.90 Total
Slide 68: Impairment Charge
IMPAIRMENT CHARGE Significant reduction, primarily driven by Wholesale GROUP RETAIL 45% reduction in Group impairment charge Significant reduction in secured and Reduction primarily driven by reductions in unsecured impairments Wholesale, partially offset by the impact of Improving asset qua
Slide 69: Impairment Charge
IMPAIRMENT CHARGE Significant reduction, primarily driven by Wholesale WHOLESALE W&I Primarily driven by reductions in Driven by further deterioration in Ireland in commercial real estate and related portfolios second half Traditional business impairments Some effect from specific Australian
Slide 70: Impaired Asset Ratios – Group
IMPAIRED ASSET RATIOS – GROUP 2010 RETAIL WHOLESALE WEALTH & INT’L GROUP Loans and advances to customers (gross) £369bn £188bn £66bn £626bn Impaired loans £10bn £35bn £20bn £65bn Impaired loans as % of closing advances 2.6% 18.4% 30.7% 10.3% Impairment provisions £3bn £16bn £11bn £30bn Impairment pr
Slide 71: Irish Portfolio
IRISH PORTFOLIO Static loan book with increased provisioning across the business £bn PORTFOLIO BREAKDOWN 31 Dec 2009 31 Dec 2010 8.3 7.7 0.6 0.3 0.9 0.6 9.1 8.1 3.0 1.1 4.3 2.4 11.7 11.7 9.2 6.1 4.8 2.2 Loan Impaired Impairment Loan Impaired Impairment book loan provision book loan provision balance
Slide 72: Asset & Liability Margins
ASSET & LIABILITY MARGINS Asset repricing gains but deposit spread pressure ASSET MARGIN LIABILITY MARGIN Average Interest Earning Assets: Average Interest Bearing Liabilities: £674bn £637bn £347bn £353bn 45bp 3bp 1.56% (3)bp 1.28% 1.11% 0.97% (28)bp (3)bp 2009 Asset Asset Other 2010 2009 Deposit Ot
Slide 73: Fair Value Unwind
FAIR VALUE UNWIND £bn 3.1 c2.0 c.0.6 c.0.2 (c.0.4) 2010 2011 2012 2013 2014 Further fair value unwind expected 72
Slide 74: Net Tangible Assets
NET TANGIBLE ASSETS NET TANGIBLE ASSETS (£bn) NET TANGIBLE ASSETS PER SHARE (p) 58.1 0.4 1.0 59.2 (0.3) 2.2 0.4 0.6 40.3 37.1 31 Dec Exchange 2010 Other 31 Dec 31 Dec Exchange 2010 Other 31 Dec 2009 offers Earnings 2010 2009 offers Earnings 2010 impact impact 73
Slide 75: Business Performance: Balance Sheet
BUSINESS PERFORMANCE Balance Sheet 2009 2010 % IMPROVED Balance sheet strength: Funded assets £715bn £655bn 8% Liquid assets £88bn £98bn 11% Strong capital and funding position: Core Tier 1 ratio 8.1% 10.2% Loan/deposit ratio 169% 154% Central bank & government funding £157bn £97bn 38% Wholesale fun
Slide 76: Good Progress on Asset Reductions
GOOD PROGRESS ON ASSET REDUCTIONS On target to achieve £200 billion asset run-off £bn 300 £105bn 236 195 Treasury assets 49 Commercial Real Estate 27 100 Other Wholesale 51 c.20 for International 37 each portfolio Retail(1) 31 2008 2009 2010 Target Balance sheet reduction on track (1) Primarily made
Slide 77: Reducing Our Wholesale Funding Requirements
REDUCING OUR WHOLESALE FUNDING REQUIREMENTS Maintaining broad spread of wholesale funding £bn DEC 2009 DEC 2010 Bank deposits 49 26 Certificates of deposit 51 42 Clear benefit delivered by managing balance sheet down Medium-term notes 90 88 Covered bonds 28 32 Good relationship customer deposit
Slide 78: Successful Term Issuance - £50bn Achieved
SUCCESSFUL TERM ISSUANCE - £50bn ACHIEVED Utilising a wide variety of funding products and sources 2010 PUBLIC TERM 2010 PUBLIC TERM TERM ISSUANCE ISSUANCE BY PRODUCT ISSUANCE BY CURRENCY c.£30 billion of public term issuance Tier1 Other 4% 10% completed in 2010 Lower Tier 2 MTN 11% GBP USD 33% 18
Slide 79: Wholesale Funding Costs
WHOLESALE FUNDING COSTS Funding spreads have continued to increase through 2010 LLOYDS 5 YEAR CDS (bps) 250 200 The cost of wholesale funding has 150 continued to increase through 2010 – higher average H2/10 issuance costs than H1/10 100 Weighted average cost of wholesale funding rising as older
Slide 80: Peer Group Core Tier 1 Ratios
PEER GROUP CORE TIER 1 RATIOS CORE TIER 1 RATIO 10.7% 10.8% 10.5% 10.2%(1) 1.2%(2) 9.0% Lloyds RBS(3) Barclays(3) HSBC(4) Standard Banking Chartered(5) Group(3) (1) Excluding effect of ECNs (2) APS benefit (3) Reported FY10 (4) Reported Q310 (5) Reported H110 79
Slide 81: Impact of Basel 3: Preparation Notes
IMPACT OF BASEL 3 Preparation notes Please find below preparation notes regarding slide 25 The 2013 Core Tier 1 ratio presented is illustrative. Consensus estimates for retained earnings are from 23 analysts as at 8 Feb 2011. Not all these analysts provided estimates for the full 3 year period.
Slide 82: Forward Looking Statements
FORWARD LOOKING STATEMENTS This announcement contains forward looking statements with respect to the business, strategy and plans of the Lloyds Banking Group, its current goals and expectations relating to its future financial condition and performance. Statements that are not historical facts, incl