Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — FY2011 Earnings Presentation
80 slides from Lloyds Banking's earnings presentation, Feb 24, 2012
Slide 1: 2011 Results
2011 RESULTS 24 February 2012 António Horta-Osório Group Chief Executive
Slide 2: Accelerating balance sheet strength, improving customer service and efficiency
“Accelerating balance sheet strength, improving customer service and efficiency whilst investing to grow our profitable core business and deliver the best bank for customers” 1
Slide 3: Agenda
AGENDA SUMMARY 2011 IN CONTEXT PROGRESS AGAINST OUR STRATEGY FINANCIAL PERFORMANCE 2011 RESULTS TIM TOOKEY, GROUP FINANCE DIRECTOR UPDATE ON COSTS AND SIMPLIFICATION MARK FISHER, DIRECTOR, GROUP OPERATIONS ECONOMIC AND REGULATORY ENVIRONMENT GUIDANCE AND SUMMARY 2
Slide 4: Summary
SUMMARY Significant reduction in balance sheet risk Substantial improvement in funding and capital position Resilient core business performance given challenging environment Significantly stronger position iti than th twelve t l Good progress against strategic initiatives months ago Tangib
Slide 5: Agenda
AGENDA SUMMARY 2011 IN CONTEXT PROGRESS AGAINST OUR STRATEGY FINANCIAL PERFORMANCE 2011 RESULTS TIM TOOKEY, GROUP FINANCE DIRECTOR UPDATE ON COSTS AND SIMPLIFICATION MARK FISHER, DIRECTOR, GROUP OPERATIONS ECONOMIC AND REGULATORY ENVIRONMENT GUIDANCE AND SUMMARY 4
Slide 6: 2011 in context: the Group faced many challenges during the year
2011 IN CONTEXT The Group faced many challenges during the year ECONOMIC REGULATORY Weak UK economic recovery Increasing capital and liquidity requirements Continued uncertainty of debt contagion ICB uncertainty Flattening Fl i yield i ld curve RDR outlook l k Cost and availability of
Slide 7: Agenda
AGENDA SUMMARY 2011 IN CONTEXT PROGRESS AGAINST OUR STRATEGY FINANCIAL PERFORMANCE 2011 RESULTS TIM TOOKEY, GROUP FINANCE DIRECTOR UPDATE ON COSTS AND SIMPLIFICATION MARK FISHER, DIRECTOR, GROUP OPERATIONS ECONOMIC AND REGULATORY ENVIRONMENT GUIDANCE AND SUMMARY 6
Slide 8: Strategy summary presented in June 2011
STRATEGY SUMMARY PRESENTED IN JUNE 2011 Four key pillars to deliver our strategy to be the best bank for customers and d shareholders h h ld Continue to STRENGTHEN Robust CORE TIER 1 RATIO and our balance sheet and stable funding base liquidity position RESHAPE our Sustainable, predictable RoE, in b
Slide 9: Accelerating balance sheet strength
ACCELERATING BALANCE SHEET STRENGTH Non-core assets and RWA reduction, above market deposit growth h and d reduction d i in i wholesale h l l funding f di requirement i (£bn) FUNDED ASSETS(1) CUSTOMER DEPOSITS(3) Core loans & advances Non-core loans and advances STRENGTHEN and other funded assets an
Slide 10: Substantial reduction in loan to deposit ratio, strong capital position
ACCELERATING BALANCE SHEET STRENGTH Substantial reduction in our loan to deposit ratio, underpinned b strong capital by i l position ii LOAN TO DEPOSIT RATIO STRENGTHEN our balance 154% sheet and 135% £53bn reduction in non-core liquidity assets (–27%)(1) position 120% Non-core run-off released
Slide 11: Reshaping our business portfolio
RESHAPING OUR BUSINESS PORTFOLIO All core businesses, apart from Wholesale, have good profit growth, h while hil we are exiting i i non-core activities i ii STRENGTHEN FOCUS ON THE CORE UNDERLYING ...WHILE DECREASING NON-CORE our balance BUSINESS… AND STRENGTHENING CAPITAL sheet and AND FUNDING liqu
Slide 12: Growth in core Retail deposit business
RESHAPING OUR BUSINESS PORTFOLIO Growth in our core Retail deposit business, above the UK market… k RETAIL DEPOSITS (YEAR ON YEAR GROWTH) (YEAR-ON-YEAR STRENGTHEN UK household deposit our balance growth has slowed sheet and 8% liquidity position LBG increased the growth differential in 2011, gro
Slide 13: Reshaping our business portfolio: driven by value (ISA example)
RESHAPING OUR BUSINESS PORTFOLIO …driven by value (ISA example) 2011 CASH 2011 CASH ISAs ISA STRENGTHEN ISA GROWTH(1) (HEADLINE ADVERTISED RATE) our balance sheet and liquidity 20% position 8% 3.25% 3.30% RESHAPE our 3.10% 3.00% 3.00% business portfolio Market Group 2.65% SHARE OF CASH ISA NEW 2.50%
Slide 14: Growing core Commercial net lending in a contracting market
RESHAPING OUR BUSINESS PORTFOLIO …and growing our core Commercial net lending, in a contracting i market k STRENGTHEN CORE COMMERCIAL NET LENDING our balance (YEAR-ON-YEAR GROWTH 2010-2011) sheet and liquidity £45bn of committed gross position lending to UK businesses of 3% which more than £12bn t
Slide 15: Simplifying the Group: integration and operating expenses
SIMPLIFYING THE GROUP Successful execution of integration, strong initial progress on simplification i lifi i and d a 6% reduction d i in i operating i expenses STRENGTHEN Successful S f l execution i off OPERATING EXPENSES(1) our balance integration has resulted in annual (6)% sheet and liquidity
Slide 16: Simplifying the Group: accelerating plans, customer complaints
SIMPLIFYING THE GROUP …and we are accelerating our Simplification plans whilst we make k ffurther h progress on customer service i FSA REPORTABLE BANKING COMPLAINTS PER 1,000 ACCOUNTS(1) STRENGTHEN our balance sheet and liquidity position 2.4 RESHAPE our 2.1 business portfolio 17 1.7 1.5 1.3 SIMPLIF
Slide 17: Investing to grow our core customer businesses
INVESTING TO GROW OUR CORE CUSTOMER BUSINESSES We continue to invest to grow our core customer businesses b based d on the h 5 key k growth h initiatives i ii i mentioned i d in i June J 2011 Successful launch of multibrand strategy Halifax f as a “challenger” “ brand: deposit growth 3 times UK
Slide 18: Agenda
AGENDA SUMMARY 2011 IN CONTEXT PROGRESS AGAINST OUR STRATEGY FINANCIAL PERFORMANCE 2011 RESULTS TIM TOOKEY, GROUP FINANCE DIRECTOR UPDATE ON COSTS AND SIMPLIFICATION MARK FISHER, DIRECTOR, GROUP OPERATIONS ECONOMIC AND REGULATORY ENVIRONMENT GUIDANCE AND SUMMARY 17
Slide 19: Profit before tax and fair value unwind
PROFIT BEFORE TAX AND FAIR VALUE UNWIND Combined businesses profit broadly in line with expectations, resilient performance in core business business, statutory result includes PPI provision £m GROUP CORE 2010 2011 2010 2011 Core business income Underlying Income(1) 23,537 21,197 19,972 18,933 decre
Slide 20: Financial performance: net interest margin and AQR
FINANCIAL PERFORMANCE Margin performance in line with guidance and improvement i AQR in NET INTEREST MARGIN ((%)) AQR ((%)) 5.56% 4.60% 2.48% 2.42% 2.21% 2.07% 2.01% 1.46% 1.62% 1 01% 1.01% 0 75% 0.75% 0.64% 2010 2011 2010 2011 Core Group Non-core 19
Slide 21: Group asset and liability margins
GROUP ASSET & LIABILITY MARGINS Funding cost pressure partly offset by liability funding b benefits fi ASSET MARGIN LIABILITY MARGIN Average Interest Earning Assets Average Interest Bearing Liabilities £626bn £585bn £341bn £364bn 9bp p 1 71% 1.71% 1.46% ((33)bp ) p (1)bp 21bp 0.98% 0.92% (3)bp (12)b
Slide 22: Core asset and liability margins
CORE ASSET & LIABILITY MARGINS Funding cost pressure partly offset by liability funding b benefits fi ASSET MARGIN LIABILITY MARGIN Average Interest Earning Assets Average Interest Bearing Liabilities £461bn £439bn £334bn £358bn 15bp 1 80% 1.80% 1.62% (31)bp (2)bp 21bp 0.98% 0.94% (4)bp (13)bp 2010
Slide 23: Improving asset quality driving a 26% impairment reduction
FINANCIAL PERFORMANCE Improving asset quality driving a 26% impairment reduction £bn 24.0 Conservative approach to risk fully 13.4 embedded across the business 26% 10.6 Group £3.4bn 26% 13.2 98 9.8 Retail £0.8bn 28% 6.6 6.6 5.4 Wholesale £1.2bn 29% 4.4 4.9 4.7 Commercial £0.1bn 21% 3.8 3.1
Slide 24: Core Retail business performance
CORE RETAIL BUSINESS PERFORMANCE Resilient performance given funding headwinds and muted d demand d UNDERLYING CORE BUSINESS (£m)(1) % CORE LOANS(4) AND RWAs (£bn) 2010 2011 Change (3)% Underlying income 9,695 8,874 (8)% 333.7 325.1 Total costs (4,637) (4,432) 4% Impairment(2) (2,612) (1,786) 32% Un
Slide 25: Core Wholesale business performance
CORE WHOLESALE BUSINESS PERFORMANCE A challenging trading environment UNDERLYING CORE BUSINESS (£m)(1) % CORE ASSETS(4), LOANS(5) 2010 2011 Change AND RWAs (£bn) (3)% Underlying income 4,907 4,297 (12)% (7)% Total costs (2,191) (2,107) 4% 108.3 104.8 Impairment(2) (574) (741) (29)% Underlying profit
Slide 26: Core Commercial business performance
CORE COMMERCIAL BUSINESS PERFORMANCE Strong performance despite challenging markets UNDERLYING CORE BUSINESS (£m)(1) % CORE LOANS(4) AND RWAs (£bn) 2010 2011 Change 3% Underlying income 1,543 1,674 8% 26.6 27.4 Total costs (984) (942) 4% Impairment(2) (381) (296) 22% 24.5 (3)% 23.8 Underlying profit
Slide 27: Core Insurance business performance
CORE INSURANCE BUSINESS PERFORMANCE Margin improved and costs reduced UNDERLYING CORE BUSINESS (£m)(1) % EEV NEW BUSINESS MARGIN 2010 2011 Change 50b 50bps 4.0% Underlying income 2,588 2,484 (4)% 3.5% Insurance claims (542) (343) 37% Income less insurance claims 2,046 2,141 5% Total costs (813) (772
Slide 28: Core Wealth and International business performance
CORE WEALTH AND INTERNATIONAL BUSINESS PERFORMANCE G d income Good i growth h and d deposit d i performance f UNDERLYING CORE BUSINESS (£m)(1) % CORE LOANS(4) AND RWAs (£bn) 2010 2011 Change (2)% (18)% Underlying income 1,295 1,369 6% 12.0 Total costs (1,109) (1,127) (2)% 9.8 8.1 79 7.9 Impairment(2
Slide 29: Agenda
AGENDA SUMMARY 2011 IN CONTEXT PROGRESS AGAINST OUR STRATEGY FINANCIAL PERFORMANCE 2011 RESULTS TIM TOOKEY, OO G O GROUP FINANCE C DIRECTOR C O UPDATE ON COSTS AND SIMPLIFICATION MARK FISHER, DIRECTOR, GROUP OPERATIONS ECONOMIC AND REGULATORY ENVIRONMENT GUIDANCE AND SUMMARY 28
Slide 30: 2011 Results: Tim Tookey
2011 RESULTS 24 February 2012 Tim Tookey y Group Finance Director
Slide 31: Delivering...
DELIVERING …… PERFORMANCE IN LINE WITH EXPECTATIONS PRUDENT MANAGEMENT OF NON-CORE BUSINESS SIGNIFICANTLY IMPROVED CAPITAL RATIOS, STRENGTHENED LIQUIDITY AND FUNDING POSITION SUMMARY 30
Slide 32: Income statement
INCOME STATEMENT Combined businesses profit broadly in line with expectations £m GROUP CORE 2010 2011 2010 2011 Underlying income(1) 23,537 21,197 19,972 18,933 (10)% (5)% Total costs (11,078) (10,621) (9,884) (9,682) 4% 2% Impairment (13,181) (9,787) (3,612) (2,887) 26% 20% Profit before tax – 2,21
Slide 33: Resilient underlying profits
RESILIENT UNDERLYING PROFITS Liability management gains more than offset volatile items £m 2010 2011 % Change Profit before tax – combined businesses basis 2,212 2,685 21% Adjust to exclude effects of liability management, volatile items and asset sales Gains and losses on asset sales (453) (88) Ban
Slide 34: Business performance: statutory result and PPI provision
BUSINESS PERFORMANCE Statutory result principally reflecting PPI provision £m 2010 2011 % Change Profit before tax – combined businesses basis 2,212 2,685 21% Integration, simplification and EC mandated retail (1,653) (1,452) business disposal costs Volatility arising in insurance businesses 306 (83
Slide 35: Performance of core business
PERFORMANCE OF CORE BUSINESS Resilient performance despite challenging market conditions £m 2010 2011 % Change Net interest income 11,745 10,916 (7)% Other operating income Other 8,769 , , 8,360 ( ) (5)% Insurance claims (542) (343) 37% Effects of liability management, volatile items 51 603 and asse
Slide 36: Business performance – income
BUSINESS PERFORMANCE – INCOME Reductions as a result of smaller balance sheet and subdued d demand d £m (10)% (10)% 23,444 93 23,537 21,197 21,123 (1,120) (58) (566) (185) (411) (74) £665m core £665 £455m non-core 2010 0 0 Volatile o at e 2010 0 0 Custo e Customer Other Ot e Wholesale o esa e Treasu
Slide 37: Business performance – core income
BUSINESS PERFORMANCE – CORE INCOME Reductions principally due to subdued demand and customer deleveraging d l i £m (2)% (5)% 20 023 20,023 19 972 19,972 612 18,933 603 19,536 (51) (665) (589) (173) (224) 2010 0 0 Volatile o at e 2010 0 0 Customer Asset sset Deposit epos t Wholesale o esa e Ot e Othe
Slide 38: Group net interest margin
GROUP NET INTEREST MARGIN Reduced banking margins reflecting continued high f di funding cost 2.21% 2 07% 2.07% 1.81% UNFAVOURABLE FAVOURABLE Higher funding Improvement in costs asset rates Increasing cost of Mix of deposit vs liquid assets wholesale funding Lower return on Run off of po
Slide 39: Cost performance
COST PERFORMANCE Continued strong cost control and delivery of operating efficiencies ffi i i £m 4% 6% 11,078 10,882 179 189 10 621 10,621 (150) (46) 116 10,253 (490) (178) (77) 2010 Impairment FSCS 2010 Incremental Simplification Operatingg Other 2011 FSCS Bank 2011 total of tangible operating syne
Slide 40: Financial performance: impairment reductions in each division
FINANCIAL PERFORMANCE Improving asset quality driving over 20% impairment reductions d i in i each h division di i i RETAIL (£bn) WHOLESALE (£bn) 29% 28% 4.1 PRINCIPAL DRIVERS 2.7 2.9 0.1 2.0 Retail – decrease in the 0.2 3.5 unsecured charge 2.2 2.6 1.8 0.6 0 6 0.7 0 7 Wholesale – reduced 2010 2
Slide 41: Impairment charge: Wholesale and W&I
IMPAIRMENT CHARGE Substantial further reductions WHOLESALE (£bn) W&I (£bn) Material reduction primarily in corporate real Trend continues to be dominated by Ireland estate and related portfolios Decline in valuations of Australasian property Supported by the stabilising UK and US One third
Slide 42: Impairment charge: Retail and Commercial
IMPAIRMENT CHARGE Substantial further reductions RETAIL (£bn) COMMERCIAL (£bn) Lower unsecured impairments reflect improved Lower default levels in a subdued UK economy risk management and business quality Our outlook remains cautious Secured charges reflect forward looking house price i mov
Slide 43: New to arrears and impairments
NEW TO ARREARS AND IMPAIRMENTS Continuing improvement in credit quality RETAIL SECURED (£bn) RETAIL UNSECURED (£bn) New to arrears New to arrears 15.2 14.8 14.5 13.2 3.4 3.1 2.6 2.2 H1/10 H2/10 H1/11 H2/11 H1/10 H2/10 H1/11 H2/11 WHOLESALE (£m) COMMERCIAL (£m) New to impaired N New tto impaired i i
Slide 44: Irish portfolio
IRISH PORTFOLIO Coverage level increased due to economic uncertainties but portfolio f li stabilised bili d IMPAIRED / UNIMPAIRED ASSETS (%) 62% 56% U i Unimpaired i d 54% Impaired 42% Coverage ratio 40% 37% 66% 64% 53% 44% 33% 14% H1/09 H2/09 H1/10 H2/10 H1/11 H2/11 Weakness in Irish economy cont
Slide 45: Performance summary
PERFORMANCE SUMMARY Performing in line with expectations Income reductions result from smaller balance sheet and subdued demand Margin guidance achieved despite challenging funding environment Successful liabilityy management g exercise more than offsets volatile items and asset sales Excell
Slide 46: Delivering...
DELIVERING …… PERFORMANCE IN LINE WITH EXPECTATIONS PRUDENT MANAGEMENT OF NON-CORE BUSINESS SIGNIFICANTLY IMPROVED CAPITAL RATIOS, STRENGTHENED LIQUIDITY AND FUNDING POSITION SUMMARY 45
Slide 47: Non-core portfolio
NON-CORE PORTFOLIO Continued disciplined reductions in non-core portfolio £bn £53BN(1) NON-CORE REDUCTION IN 2011 RWA 144 109 ≤65 £4.8bn UK CRE disposals; Total assets 194 27% c. 80% of which is outside London Treasury Substantial run-off of treasury assets Assets 49 141 Commercial Cash receiv
Slide 48: Performance of non-core business
PERFORMANCE OF NON-CORE BUSINESS Reductions in impairments and costs partially offset by lower i income and d lower l fair f i value l unwind i d £m 2010 2011 Movement Net interest income 2,398 1,317 (1,081) Other operating income 1,167 947 (220) Effects of liability management, volatile items (144)
Slide 49: Non-core capital consumption / release
NON-CORE CAPITAL CONSUMPTION / RELEASE £0.3bn capital release; real benefit even greater due to avoidance id off future f impairments i i H1 2011 H2 2011 FY 2011 Loss before tax(1) (£m) (1,762) (1,902) (3,664) Post tax loss ‘capital p consumed’ (£m) ( ) ((1,295) , ) ((1,398) , ) ((2,693) , ) Reduced
Slide 50: Exposures to selected Eurozone countries
EXPOSURES TO SELECTED EUROZONE COUNTRIES Substantial reductions achieved and minimal sovereign exposures remaini £m Direct Banks & sovereign & other Insurance central bank financial shareholder balances institutions assets ABS Corporate Retail Total Greece – – – 55 431 – 486 Italy 16 521 47 39 81 –
Slide 51: Delivering...
DELIVERING …… PERFORMANCE IN LINE WITH EXPECTATIONS PRUDENT MANAGEMENT OF NON-CORE BUSINESS SIGNIFICANTLY IMPROVED CAPITAL RATIOS, STRENGTHENED LIQUIDITY AND FUNDING POSITION SUMMARY 50
Slide 52: Capital strengthened with asset reduction offsetting PPI and trading impact
CAPITAL STRENGTHENED WITH ASSET REDUCTION OFFSETTING PPI & TRADING IMPACT L Lower capital i l intensity i i off new business b i % 0.5% 1.3% 0.0% (0.2)% ((0.2)% ) 10.8% 10 2% 10.2% (0.6)% (0.2)% 0.4% core 0.7% combined businesses profit 0.9% non-core (0.9)% statutory and other items RWA impacts Capi
Slide 53: Capital: CRD IV
CAPITAL: CRD IV Maintaining prudent capital reserves over and above regulatory l requirements i Date of rule Estimated impact if applied change to December 2011 core tier 1 RWA increases largely from derivative valuation adjustments, c. £25-30bn RWAs c. (0.8)% January changes in definition of defaul
Slide 54: Loan to deposit ratio
LOAN TO DEPOSIT RATIO Further improvement driven by deposit growth and reduction i lending in l di balances b l LOANS AND ADVANCES(1) (£bn) LOAN TO DEPOSIT RATIO (%) (7)% 626 590 549 169% 154% 135% Dec Dec Dec 2009 2010 2011 CUSTOMER DEPOSITS(2) (£bn) 120% 6% 109% 371 383 406 Dec Dec Dec 2009 2010 2
Slide 55: Further improvement in wholesale funding
FURTHER IMPROVEMENT IN WHOLESALE FUNDING Prudent maturity profile driven by successful issuance programme WHOLESALE FUNDING MATURITY PROFILE (£bn) WHOLESALE FUNDING £251BN (16)% > 1 year 55% 298 2 – 5 years 251 £60bn 149 50% >5 years 1 – 2 years 138 £26bn £52bn 55% £69bn 149 money £23bn market CGS 5
Slide 56: Wholesale funding – term issuance
WHOLESALE FUNDING – TERM ISSUANCE £15bn of 2012 requirements already completed £bn 2012 ISSUANCE YTD £2bn pre-funded in 2011 50.0 £5bn liability management exercise i contributes t ib t ttowards d funding plans 35.3 2012 YTD term funding volume 10.6 £8b £8bn 20-25 65% – €1.25bn 5yr covered bon
Slide 57: Short-term wholesale funding and liquidity
SHORT-TERM WHOLESALE FUNDING & LIQUIDITY Liquidity significantly exceeds short-term funding and regulatory l requirements i £bn 218 202 192 143% coverage 179% 160 coverage 149 152 117 107 49 62 59 113 109 44 49 38 63 Primary 100 98 93 101 95 liquid 69 assets 52 57 35 Dec Dec Jun Dec 2008 2010 2011 2
Slide 58: Delivering...
DELIVERING …… PERFORMANCE IN LINE WITH EXPECTATIONS PRUDENT MANAGEMENT OF NON-CORE BUSINESS SIGNIFICANTLY IMPROVED CAPITAL RATIOS, STRENGTHENED LIQUIDITY AND FUNDING POSITION SUMMARY 57
Slide 59: Summary
SUMMARY Resilient performance in line with expectations in a difficult economic environment Core business performance reflects subdued demand in key markets and the benefits of improved funding profile Prudent management g of the non-core business with disciplined p approach pp to non-core ass
Slide 60: Agenda
AGENDA SUMMARY 2011 IN CONTEXT PROGRESS AGAINST OUR STRATEGY FINANCIAL PERFORMANCE 2011 RESULTS TIM TOOKEY, GROUP FINANCE DIRECTOR UPDATE ON COSTS AND SIMPLIFICATION MARK FISHER, DIRECTOR, GROUP OPERATIONS ECONOMIC AND REGULATORY ENVIRONMENT GUIDANCE AND SUMMARY 60
Slide 61: 2011 Results: Mark Fisher
2011 RESULTS 24 February 2012 Mark Fisher Director, Group Operations
Slide 62: Update on costs and simplification
UPDATE ON COSTS AND SIMPLIFICATION
Slide 63: 2011 total costs
2011 TOTAL COSTS Total costs reduced 4%, operating expenses down 6% TOTAL COSTS 2010 2011 Change £m £m % Operating expenses 10,882 10,253 (6) UK bank levy - 189 FSCS Costs 46 179 Impairment of tangible fixed assets 150 - Total costs 11,078 10,621 (4) Integration synergies annual run-rate 1,379 2,054
Slide 64: Total costs: integration synergies delivered
TOTAL COSTS Integration synergies delivered with costs down £1.6bn (13%) f from 2008 (13)% 12,236 888 10,621 189 89 (178) (1,851) (663) 2008 Integration Op. lease Bank levy Inflation / Simplification 2011 cost depreciation VAT / NIC / savings synergies Investment and Other costs 64
Slide 65: Simplification programme
SIMPLIFICATION The Simplification Programme is central to becoming the b best bank b k for f customers and d a high hi h performing f i organisation i i SIMPLIFYING OUR BUSINESS Enhanced customer experience CUSTOMER BENEFITS Reduced errors and complaints Faster, more efficient service Reduce
Slide 66: Simplification: fast start and strong momentum
SIMPLIFICATION Fast start and strong momentum gives us confidence that savings i can be b accelerated l d WHAT WE SAID IN 4 KEY WORKSTREAMS Savings in Number of JUNE… 2014 initiatives (£bn) Invest I t Operations and Processes 06 0.6 25 Implement workflow, automate, improve IT significantly in land
Slide 67: Simplification: fast start to cost savings
SIMPLIFICATION Fast start to cost savings with early deliverables achieved SIMPLIFICATION MOBILISED £178m benefits in 2011 / Run-rate £242m 2,098 role reductions announced – 1,665 FTE reductions by year end Corporate functions (eg Risk, HR, Finance) centralised Wholesale and Retail Bank rest
Slide 68: Simplification: analysis of processes across the Group
SIMPLIFICATION We have analysed our processes across the Group CUSTOMER INITIATED BANK OR 3RD PARTY INITIATED PROCESSES 68
Slide 69: Simplification: focusing on key processes
SIMPLIFICATION We are focussing on the processes that will both maximise cost savings i and d simplify i lif customer service i FTE VOLUME BY PROCESS NUMBERS 100k 80k 85k FTEs mapped to 910 end-to-end processes 60k 125 processes FTE 68k FTE 16k FTE involved in top 5 40k processes Focus on top
Slide 70: Industrial scale process re-engineering
SIMPLIFICATION Industrial scale process re-engineering focused on three core customer treatments ONE TOUCH SEMI AUTOMATED EXPERT HANDLING Fully Automated Image & Workflow Centres of Excellence Level of Automation 70
Slide 71: Early momentum carried into 2012
SIMPLIFICATION Early momentum carried into 2012, with over 180 initiatives now underway d EARLY 2012 DELIVERIES Further 1,690 , role reductions announced Efficiency improvements in – Account Transfer (Switchers) process - April – Improved I d Commercial C i lL Lending di process rolling lli outt
Slide 72: Cost position summary
COST POSITION SUMMARY Integration synergies £2bn delivered Total Cost base reduced by 13% since 2008 and 4% in 2011, with Operating Expenses reducing by 6% in 2011 Fast start to Simplification Programme and tight cost management process implemented Strong momentum and mobilising at scale to
Slide 73: 2011 Results: Mark Fisher
2011 RESULTS 24 February 2012 Mark Fisher Director, Group Operations
Slide 74: Agenda
AGENDA SUMMARY 2011 IN CONTEXT PROGRESS AGAINST OUR STRATEGY FINANCIAL PERFORMANCE 2011 RESULTS TIM TOOKEY, GROUP FINANCE DIRECTOR UPDATE ON COSTS AND SIMPLIFICATION MARK FISHER, DIRECTOR, GROUP OPERATIONS ECONOMIC AND REGULATORY ENVIRONMENT GUIDANCE AND SUMMARY 74
Slide 75: Economic and regulatory environment
ECONOMIC AND REGULATORY ENVIRONMENT WEAK SHORT-TERM OUTLOOK DEMANDING REGULATORY FOR THE UK ECONOMY ENVIRONMENT GDP GREATER CLARITY EMERGING Flat in 2012, with modest recovery ON UK REGULATORY in 2013 FRAMEWORK ICB report and Government UK BASE RATE response provides id greater t clarity l it To r
Slide 76: Agenda
AGENDA SUMMARY 2011 IN CONTEXT PROGRESS AGAINST OUR STRATEGY FINANCIAL PERFORMANCE 2011 RESULTS TIM TOOKEY, GROUP FINANCE DIRECTOR UPDATE ON COSTS AND SIMPLIFICATION MARK FISHER, DIRECTOR, GROUP OPERATIONS ECONOMIC AND REGULATORY ENVIRONMENT GUIDANCE AND SUMMARY 76
Slide 77: Guidance: 2012 expectations
GUIDANCE 2012 Guidance – our expectations are… Income will be lower than in 2011, given the economic outlook and further non- Income core asset reductions, subdued demand in the core loan book, higher wholesale funding costs, and interest rates likely to remain lower for longer Full yyear bankin
Slide 78: Guidance: medium-term
GUIDANCE Medium-term guidance Remain confident that Strategic Review targets are achievable over time As indicated in Q3 IMS, expect attainment of income-related targets, including for Other Operating Income, Income to be delayed as a result of the weaker-than-expected weaker than expected econo
Slide 79: Summary
SUMMARY Significant reduction in balance sheet risk Substantial improvement in funding and capital position Resilient core business performance given challenging environment Significantly stronger position iti than th twelve t l Good progress against strategic initiatives months ago Tangib
Slide 80: Forward looking statements and basis of presentation
FORWARD LOOKING STATEMENTS AND BASIS OF PRESENTATION 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 perfor