Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — Debt Investor Presentation (July 2024)
40 slides from Lloyds Banking's debt investor presentation, Jul 25, 2024
Slide 1: 2024 Half Year Results Fixed Income Presentation
Classification: Public 2024 Half Year Results Fixed Income Presentation Lloyds Banking Group 25 July 2024
Slide 2: Business and strategic update
Classification: Public Business and strategic update 2
Slide 3: Leading UK digital bank and integrated financial services provider
Classification: Public Leading UK digital bank and integrated financial services provider Lloyds Banking Group Plc 3 core Retail Retail Commercial divisions Insurance Consumer Pensions & Insurance Relationships Small and Investments Corporate & Pensions & Consumer Consumer Investments Business Mediu
Slide 4: Helping Britain Prosper
Classification: Public Consistent strategic delivery, robust financial performance Purpose Helping • Supporting customers to meet a broad range of financial needs • Delivering on purpose driven strategy, benefitting all stakeholders Britain • Robust financial performance in line with expectations Pr
Slide 5: Robust financial performance, in line with expectations
Classification: Public Robust financial performance, in line with expectations Resilient Q2 net interest margin Momentum in Q2 OOI; YoY growth Q2 costs1 in line with FY expectations 293bps 9% £2.3bn Strong Q2 asset quality Growth in Q2 lending2 Growth in Q2 deposits 5bps c.£5bn c.£6bn Robust profita
Slide 6: Building momentum in strategic initiatives
Classification: Public Building momentum in strategic initiatives Building on strengths Growing business momentum Driving value 27m Customer relationships Strengthening customer relationships CIB Grow Growing in high value areas BCB 22m Digitally active users Increasing Group connectivity MA/IP&I Gr
Slide 7: Delivering growth
Classification: Public Grow Delivering growth Consumer mobile app active users, Strengthening relationships 19.4m up >30% since 2021 Delivering redesign of Consumer mobile app Launched Invest Wise and Ready-Made Pensions propositions c.2x YoY increase in 18-25 year old investment customers Increasin
Slide 8: Investing in enablers to drive operating leverage
Focus/Change Classification: Public Investing in enablers to drive operating leverage Strengthening cost and capital efficiency c.60% Lower unit costs from BCB servicing case study1 Digitising BCB customer servicing journeys; c.45% covered to date Reducing office footprint while enhancing office spa
Slide 9: Strong financial delivery
Classification: Public Strong financial delivery On track to deliver in 2024 Confident in 2026 Additional revenues from Additional revenues from c.£0.7bn strategic initiatives c.£1.5bn strategic initiatives c.£1.2bn Gross cost savings <50% Cost:income ratio c.13% RoTE >15% RoTE c.175bps Capital gene
Slide 10: Financial update
Classification: Public Financial update 10
Slide 11: Robust financial performance
Classification: Public Robust financial performance Financial performance (£m) H1 H1 YoY Q2 Q1 QoQ 2024 2023 % 2024 2024 % Net interest income 6,338 7,004 (10) 3,154 3,184 (1) Other income 2,734 2,538 8 1,394 1,340 4 • Statutory profit after tax £2.4bn; H1 RoTE 13.5% Operating lease depreciation (67
Slide 12: Growth across lending and deposits
Classification: Public Growth across lending and deposits Q2 lending change (£bn) Q2 deposit change (£bn) Retail Commercial Retail Commercial • Group lending £452bn, up £3.9bn or 1% in Q2, up +£4.0bn/1% +£0.3bn/0% +£3.6bn/1% +£1.9bn/1% (+4.9bn ex. £4.8bn ex. securitisation activity; up £2.7bn in H1
Slide 13: Resilient net interest income performance
Classification: Public Resilient net interest income performance Average interest earning assets (£bn) 1.3 1.1 • Q2 NII £3.2bn, down 1% QoQ (0.3) (1.7) (0.1) o Q2 AIEAs £449bn, stable vs. Q1 449.1 449.4 o Q2 NIM 293bps, down 2bps vs. Q1; 294bps in H1 o Q2 non-banking NII charge of £124m; H1 £229m Q1
Slide 14: Growth in mortgages
Classification: Public Growth in mortgages Mortgage book (Book size £bn, Gross margin %1) 1.32% 1.16% 1.02% 306 306 307 YoY 14 12 11 (21)% 25 24 20 • Mortgage balances £307bn, up £0.7bn in H1, up 10 10 10 £1.6bn ex. securitisation o Mortgages up £2.3bn or 1% in Q2, (£3.2bn ex. 99 111 125 securitisat
Slide 15: Solid performance in other lending portfolios
Classification: Public Solid performance in other lending portfolios UK Cards, Loans & Motor (Book size £bn, Gross margin %1) H1 2024 16 8 8 8 40 5.50% • UK Cards, Loans & Motor up £2.7bn in H1, including H2 2023 15 7 8 7 37 5.60% £1.4bn in Q2 H1 2023 15 9 8 7 39 6.09% o Credit cards up £0.5bn in H1
Slide 16: Growing customer deposit franchise
Classification: Public Growing customer deposit franchise Customer deposits (Book size £bn, Gross margin %1) 1.34% 1.22% 1.13% YoY 470 471 475 • Total deposits £475bn, up £3.3bn or 1% in H1; up 108 103 102 (6)% £5.5bn in Q2 • Retail deposits up £4.9bn in H1; up £3.6bn in Q2 186 195 202 8% o Retail c
Slide 17: Continuing tailwind from the structural hedge
Classification: Public Continuing tailwind from the structural hedge Hedged balances1 (£bn) 255 247 242 80 77 77 Structural hedge 145 140 135 • Structural hedge notional £242bn, down £5bn in H1, including £2bn in Q2 30 30 30 • Stable c.3.5 year weighted average duration 507 511 514 • Prudent managem
Slide 18: Building momentum in other income
Classification: Public Building momentum in other income Other income (£m) • Q2 other income £1.4bn up 9% YoY; H1 up 8% YoY o Retail: Growing Motor contribution, driven by a larger fleet and higher rental value 1,394 1,340 1,257 1,281 1,299 1,286 o Commercial: Strong Markets performance from strateg
Slide 19: Continued discipline on costs
Classification: Public Continued discipline on costs Operating costs (£bn) +4% (+2% ex. accelerated severance) 0.10 0.05 0.05 0.25 4.70 • Q2 operating costs £2.3bn, stable QoQ excluding 4.60 £0.1bn BoE levy (0.15) 4.40 • H1 operating costs £4.7bn, up 7% YoY or up 4% excluding BoE levy H1 2023 Cost P
Slide 20: Strong asset quality
Classification: Public Strong asset quality Impairment (£m) H1 H1 YoY Q2 Q1 QoQ 2024 2023 £m 2024 2024 £m • Strong asset quality, reflected in resilient Group Charge (credit) pre updated MES1 425 657 (232) 176 249 (73) credit performance Retail 463 551 (88) 160 303 (143) o Portfolios either stable o
Slide 21: Consistently reassuring performance across portfolios
Classification: Public Consistently reassuring performance across portfolios New to arrears (3 month rolling average, %) 1.00% • Improvement in Mortgages new to arrears and 0.75% default rates in H1 and Q2; average LTV 43% 0.50% • Resilient performance in other portfolios 0.25% 0.00% • Stable SME wo
Slide 22: Updated macroeconomic outlook
Classification: Public Updated macroeconomic outlook UK bank rate CPI inflation 6% 12% 5% 10% 4% 8% 3% 6% 2% 4% • Latest economics 1% 2% 0% 0% o Modest forecast changes since Q1 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 22 23 23 24 24 25 25 26 26 22 23 23 24 24 25 25 26 26 o GDP growth s
Slide 23: Delivering in line with expectations
Classification: Public Delivering in line with expectations • Robust financial performance Purpose Helping • 15% higher interim dividend Britain • Reaffirming guidance for 2024 o NIM >290bps Prosper o Operating costs c.£9.4bn including c.£0.1bn BoE levy o AQR now expected to be <20bps o RoTE c.13% o
Slide 24: Capital, funding & liquidity
Classification: Public Capital, funding & liquidity 24
Slide 25: Key Credit Metrics
Classification: Public Key Credit Metrics 14.1% 18.7% 87bps CET1 ratio Total Capital ratio Capital generation post regulatory headwinds1 31.7% 5.4% 144% MREL ratio Leverage ratio Liquidity Coverage Ratio 130% 5bps 43% Net Stable Funding Ratio Asset Quality Ratio2 Average Mortgage LTV 1 – Capital gen
Slide 26: Strong Capital, MREL and Liquidity Ratios
Classification: Public Strong Capital, MREL and Liquidity Ratios Capital 13.7% 14.1% 5.8% 5.4% • CET1 of 14.1% remains ahead of 10.3% MDA4 CET11 CET1 Leverage Leverage • Current Group CET1 target of c.13.5% reducing to c.13% by end 2026 FY 23 H1 24 FY 23 H1 24 • Leverage ratio reduction largely due
Slide 27: Strong capital generation
Classification: Public Strong capital generation Risk weighted assets (£bn) 0.4 1.4 3.9 0.9 (3.7) 222.0 219.1 • RWAs £222.0bn, Q2 down £0.8bn due to reversal of temporary Q1 RWA increase and optimisation o H1 up £2.9bn driven by underlying lending and 2023 Underlying Credit / CRD IV1 Market risk Opt
Slide 28: Continued risk reduction supporting a low-risk balance sheet
Classification: Public Continued risk reduction supporting a low-risk balance sheet Lower mortgage LTV and CRE exposure 2012 H1 24 Movement • De-risking across retail and commercial portfolios Mortgages o 2006-08 mortgage portfolio halved since 2018 (£27bn vs £65bn), Average LTVs 56.4% 43.0% (13.4)p
Slide 29: Diversified deposit base; strong liquidity position
Classification: Public Diversified deposit base; strong liquidity position Loan to deposit ratio 95%, Net stable funding ratio 130%, Liquidity coverage ratio 144% c.66% of deposits in Retail; diversified Commercial Deposit growth since 2019 led by Retail2 (£bn) balances (£bn) 451 476 475 471 475 412
Slide 30: Wholesale issuance outlook
Classification: Public Wholesale issuance outlook Issuance 2024 principles • Now expect <£15bn of issuance in 2024 across all entities and products HoldCo £7-8bn Refinancing of o Deposit strength supporting reduction in maturities Senior OpCo issuance volumes o Issued £6.5bn Senior HoldCo, £450m Tie
Slide 31: Sustainable Bond Issuance
Classification: Public Sustainable Bond Issuance Sustainable % of • Updated framework published in April 2024 Portfolio ICMA Theme Example Definitions1 Eligible Portfolio2 o Sets out clear eligibility criteria for Green and Construction, acquisition or retrofitting of Social eligible asset portfolio
Slide 32: Reaffirming strong ratings across the Group
Classification: Public Reaffirming strong ratings across the Group Credit ratings1 Non-Ring-Fenced Insurance HoldCo Ring-Fenced Bank Bank Sub-Group ESG ratings1 Lloyds Banking Lloyds Bank, Lloyds Bank UK Sovereign Scottish Widows2 Group Bank of Scotland Corporate Markets MSCI AA AA AA BBB+ A+ A S&P
Slide 33: Appendix
Classification: Public Appendix 33
Slide 34: Simple group structure with multiple issuance points
Classification: Public Simple group structure with multiple issuance points HoldCo Lloyds Banking Group BBB+ / A3 / A1 A-2 / P-2 / F1 Sta / Sta / Sta Senior Unsecured - Capital Ring-Fenced Sub-Group Non-Ring-Fenced Sub-Group Insurance Sub-Group Equity Investments Sub-Group Lloyds Bank, Bank of Scotl
Slide 35: CET1 resources and target
Classification: Public CET1 resources and target The CET1 equivalent of 13.0% has increased • Medium-term CET1 target revised by Board at year- 28.5 28.9 end, taking into account 27.6 o Low risk balance sheet post targeted risk reduction 27.4 o Improved certainty with respect to regulatory impacts 2
Slide 36: Quarterly P&L and key ratios
Classification: Public Quarterly P&L and key ratios (£m) Q2 2024 Q1 2024 Q4 2023 Q3 2023 Q2 2023 Q1 2023 Net interest income 3,154 3,184 3,317 3,444 3,469 3,535 Other income 1,394 1,340 1,286 1,299 1,281 1,257 Operating lease depreciation (396) (283) (371) (229) (216) (140) Net income 4,152 4,241 4,
Slide 37: Updated economic scenarios
Classification: Public Updated economic scenarios Scenario ECL (£m) Measure (%) 2024 vs. Q1 2024 2025 2026 2027 2028 Ave. 24-28 GDP 1.1 0.0 2.3 1.7 1.5 1.4 1.6 Unemployment rate 4.1 0.9 3.2 3.0 2.9 2.9 3.2 HPI growth 2.2 (1.5) 5.0 7.3 6.0 5.2 5.1 Upside (30%) 2,804 CRE price growth 2.2 (4.3) 8.7 2.4
Slide 38: Low mortgage LTVs
Classification: Public Low mortgage LTVs June 20241 20231 20101 Mainstream Buy to let Specialist Total Total Total Average LTVs 42.5% 47.1% 34.1% 43.0% 43.6% 55.6% New business LTVs 64.0% 55.4% N/A 62.9% 61.7% 60.9% ≤80% LTV 87.7% 99.8% 96.6% 89.7% 89.3% 57.0% >80–90% LTV 10.7% 0.1% 1.2% 8.9% 7.8% 1
Slide 39: Disclaimer
Classification: Public Disclaimer Important notice The information, statements, views and opinions contained in this document and accompanying discussion (“this Presentation”) are for informational and reference purposes only. This Presentation has been provided by the Group (defined below). This Pr
Slide 40: Contacts
Classification: Public Contacts Group Corporate Treasury Richard Shrimpton Kris Middleton Youmei Koh Deputy Treasurer & Treasury Head of Term Issuance and Capital Associate Director, Debt Investor Markets Director Structuring Relations Richard.Shrimpton@Lloydsbanking.com Kristofer.Middleton@Lloydsba
Lloyds Banking Group — Debt Investor Presentation (July 2024) on 6ix