Slide 1: 2017 Half-Year Results
TITLE SLIDE IS IN SENTENCE 2017 HALF-YEAR CASE.RESULTS GREEN BACKGROUND. Presentation to Analysts and Investors 27 July 2017
Slide 2: Agenda
AGENDA António Horta-Osório Highlights Group Chief Executive George Culmer Financial Results Chief Financial Officer António Horta-Osório Summary Group Chief Executive 1
Slide 3: Highlights
HIGHLIGHTS Strong financial performance continues to demonstrate the strength of the business model • Strong first half financial performance with improved underlying and statutory profit – Underlying profit of £4.5bn and statutory profit of £2.5bn; underlying return on tangible equity of 16.6% • St
Slide 4: Financial Performance
FINANCIAL PERFORMANCE Strong underlying and statutory profit with increased interim dividends £9.3bn Total income • Strong underlying profit of £4.5bn 4% – Income up 4% with increased NII and Other Income 45.8% – Positive operating jaws of 5%, with market leading cost:income ratio Cost:income ratio
Slide 5: UK economy remains resilient
UK ECONOMY UK economy remains resilient Debt to GDP (%) Total UK debt to GDP(1) 260 253 261 257 253 249 246 251 • UK economy remains resilient following the economic 100 trends of recent years including 90 – Strong GDP growth 80 – Consumer and business deleveraging 70 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 – Recor
Slide 6: UK house prices resilient though some pressure in London and South East
UK ECONOMY UK house prices resilient though some pressure in London and South East Year-on-year house price growth(1) (%) 12 • UK house prices continue to rise in real terms though 11 London & SE price growth is slowing markedly 9 8 7 • Mortgage payment affordability better than or close to 5 5 the
Slide 7: Consumer indebtedness and servicing has improved
UK ECONOMY Consumer indebtedness and servicing has improved in recent years, although inflation is starting to impact disposable income Consumer debt-to-income by product(1) (%) 20% • Households have recently taken on more consumer credit, but debt burden remains low 15% 10% • Total household debt s
Slide 8: Our Strategic Focus
OUR STRATEGIC FOCUS We have made good progress in delivering our current strategic plan Creating the • Enhanced our multi-brand, multi-channel proposition; we operate the UK’s largest digital bank with a 21% market share and an award winning digital proposition best customer • Net promoter scores im
Slide 9: Our Strategic Focus
OUR STRATEGIC FOCUS We have made good progress in delivering our current strategic plan Creating the • Enhanced our multi-brand, multi-channel proposition; we operate the UK’s largest digital bank with a 21% market share and an award winning digital proposition best customer • Net promoter scores im
Slide 10: Our Strategic Focus
OUR STRATEGIC FOCUS We have made good progress in delivering our current strategic plan Creating the • Enhanced our multi-brand, multi-channel proposition; we operate the UK’s largest digital bank with a 21% market share and an award winning digital proposition best customer • Net promoter scores im
Slide 11: Delivering Sustainable Growth
DELIVERING SUSTAINABLE GROWTH Supporting the UK economy with continued loan growth in our targeted key customer segments Credit card net lending growth (£bn) • UK Consumer Finance net lending continues to grow 2015 9.3 – Organic credit card growth of 4% year-on-year (excl MBNA) – Continued strong gr
Slide 12: Agenda
AGENDA António Horta-Osório Highlights Group Chief Executive George Culmer Financial Results Chief Financial Officer António Horta-Osório Summary Group Chief Executive 11
Slide 13: Underlying Financial Performance
UNDERLYING FINANCIAL PERFORMANCE Strong underlying performance H1 H1 (£m) 2017 2016 Change • 8% increase in underlying profit to £4.5bn Net interest income 5,925 5,782 2% – NII increased 2% to £5.9bn reflecting an improved margin Other income 3,348 3,093 8% of 2.82% and a small initial contribution
Slide 14: Income
INCOME Total income of £9.3bn with increased NII and Other Income Net interest margin (%) Other Income quarterly trend (£bn) 8bps 1.9 0.04 2.82 1.6 2.74 0.10 1.5 1.5 1.5 1.4 (0.06) H1 Asset Liability Wholesale H1 Q1 Q2 Q3 Q4 Q1 Q2 2016 spread spread funding 2017 2016 2016 2016 2016 2017 2017 & mix &
Slide 15: Costs
COSTS Operating costs continue to be tightly managed and reduced year-on-year Operating costs (£m) 1% • Operating costs down 1% since H1 2016 driven by 4,041 63 4,018 Simplification savings, partly offset by increased 95 investment in the business and inflation 65 (246) • MBNA costs of £21m in June
Slide 16: Asset Quality
ASSET QUALITY Credit quality remains strong Impairment charge (£m) Asset quality ratio (bps) 389 400 135 268 88 245 104 179 52 58 28 28 23 23 15 14 12 H1 H2 H1 H2 H1 2012 2013 2014 2015 2016 H1 2017 2015 2015 2016 2016 2017 Gross Net Impaired loans (£bn) & impaired loan ratio (%) • Impairment of £26
Slide 17: Low risk lending portfolio primarily in mortgages
ASSET QUALITY Low risk lending portfolio primarily in mortgages; UK Consumer Finance accounts for just 9% of customer assets and is prudently managed Group customer assets(1) (£bn) • Mortgages account for 64% of customer assets, with good 96 mortgage payment affordability and a strong LTV profile Mo
Slide 18: Statutory Financial Performance
STATUTORY FINANCIAL PERFORMANCE Increase in statutory profit after taking further conduct charges H1 H1 • Market volatility and other items in 2016 included the (£m) 2017 2016 £790m ECN redemption charge Underlying profit 4,492 4,161 • Restructuring costs include Simplification, non-branch property
Slide 19: Balance Sheet
BALANCE SHEET Further balance sheet optimisation; £3bn increase in loans and advances to customers and £2bn increase in RWAs Group loans & advances to customers (£bn) 456 455 453 • Improved capital returns and RWA efficiency through 450 business mix optimisation • Loans and advances to customers inc
Slide 20: Strong capital generation in line with guidance
BALANCE SHEET Strong capital generation in line with full-year 2017 guidance Common equity tier 1 ratio (%) – 2017 YTD • CET1 capital generation of 1.0% 1.0% 1.4 0.3 14.0 – Good underlying performance and lower 0.1 13.0 13.5 RWAs (pre MBNA), partly offset by conduct (0.8) (0.5) – In line with guidan
Slide 21: Agenda
AGENDA António Horta-Osório Highlights Group Chief Executive George Culmer Financial Results Chief Financial Officer António Horta-Osório Summary Group Chief Executive 20
Slide 22: Summary
SUMMARY Differentiated business model continues to deliver Profit progression (£bn) 7.8 8.1 7.9 6.2 • Our differentiated business model is delivering 4.5 2.6 – Simple, efficient and low risk business model provides 4.2 2.5 0.4 1.8 1.6 competitive advantage (0.6) – Multi-brand and multi-channel opera
Slide 23: Delivery of the current strategic plan
SUMMARY Delivery of the current strategic plan and responding to the evolving environment Helping Britain Prosper • Focused on delivering final year of • Supporting and benefiting from UK current strategic plan economic performance • Started work to prepare our next three Best bank for customers yea
Slide 24: Appendix
TITLE SLIDE IS IN APPENDIX CASE. SENTENCE GREEN BACKGROUND.
Slide 25: Mortgage Portfolio LTVs
MORTGAGE PORTFOLIO LTVS Further improvement in LTVs during 2017 June 2017 Dec 2016 Dec 2015 Dec 2010 Mainstream Buy to let Specialist Total Total Total Total(1) Average LTVs 40.9% 52.4% 47.5% 43.0% 44.0% 46.1% 55.6% New business LTVs 64.7% 60.6% n/a 64.0% 64.4% 64.7% 60.9% ≤ 80% LTV 89.4% 93.3% 87.4
Slide 26: Tangible Net Asset Value and Leverage Ratio
TANGIBLE NET ASSET VALUE AND LEVERAGE RATIO Movement in TNAV per share reflects strong statutory profit offset by final 2016 dividend payment and MBNA impact; strong leverage ratio maintained Tangible net assets per share (p) – Dec to Jun Leverage ratio (%) 1.2p 0.4 0.1 5.1 4.8 4.9 6.3 (0.2) (0.2) 5
Slide 27: Ring-fencing on track with key milestones achieved
RING-FENCING ON TRACK WITH KEY MILESTONES ACHIEVED Limited impact from ring-fencing given simple, UK, retail and commercial model LLOYDS BANKING GROUP • Group is making good progress with ring-fencing, on track to meet 1 January 2019 deadline • Given we are a simple, UK, retail and commercial bank t
Slide 28: Non ring-fenced bank well defined with strong preliminary ratings
RING-FENCING ON TRACK WITH KEY MILESTONES ACHIEVED Non ring-fenced bank well defined with strong preliminary ratings Implementation of the non ring-fenced bank Lloyds Bank Corporate Markets ratings Non ring-fenced bank activities Lloyds Bank Corporate Lloyds Bank • Commercial Banking Markets Financi
Slide 29: Forward Looking Statement and Basis of Presentation
FORWARD LOOKING STATEMENT AND BASIS OF PRESENTATION FORWARD LOOKING STATEMENTS 2017 HALF YEAR RESULTS 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 finan