Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — Q3 2020 Earnings Presentation
25 slides from Lloyds Banking's earnings presentation, Oct 29, 2020
Slide 1: Q3 Interim Management Statement
Q3 INTERIM MANAGEMENT STATEMENT Presentation to analysts and investors | 29 October 2020
Slide 2: Introduction
Introduction António Horta-Osório Group Chief Executive 1
Slide 3: Encouraging business recovery with return to profitability in Q3
Encouraging business recovery with return to profitability in Q3 • Open mortgage book up £3.5bn in Q3 and 22% share of approvals1 Encouraging business recovery in a • Supporting businesses with 18% share of government support loans2 challenging operating • Deposits up £35bn YTD with Retail current a
Slide 4: Digital strength reinforced, creating new opportunities
Digital strength reinforced, creating new opportunities Largest digital bank in the UK Record customer satisfaction Digital Net Promoter Score 17.1m Digital active users, up 700k YTD +8% 69 64 12.1m Mobile app users, up 1.4m YTD Dec 19 Sep 20 RECOGNISED DIGITAL LEADER Meeting more customer needs Unl
Slide 5: Continuing to build an inclusive and more sustainable future
Continuing to build an inclusive and more sustainable future Proactive response to coronavirus pandemic • Working with the Government, regulators and other stakeholders to help Britain recover • Proactively supporting customers, colleagues and communities; mental health and well-being key areas • Gu
Slide 6: Financial update
Financial update William Chalmers Chief Financial Officer 5
Slide 7: Resilient business model with return to profitability in Q3
Resilient business model with return to profitability in Q3 Q3 20201 2020 YTD1 £3.4bn £10.8bn Net income (2)% (17)% Cost:income ratio 56.9% 53.8% • Q3 net income £3.4bn, down 2% on Q2; Q3 NIM 2.42% (incl. remediation) +1.7pp +7.3pp • Other income of £1.0bn in Q3 impacted by lower Pre-provision £1.5b
Slide 8: Strength of customer franchise in Q3
Strength of customer franchise in Q3 Movement in lending in Q3 Movement in deposits in Q3 (£bn) (£bn) Retail Commercial Retail Commercial • £3bn net growth in mortgages in Q3 with £3.5bn +£2.6bn -£3.8bn +£5.4bn +£0.6bn increase in open mortgage book; 22% market share of approvals4 and strong pipelin
Slide 9: Emerging margin stability with stronger volume growth
Emerging margin stability with stronger volume growth Net interest income and banking net interest margin (£, bps) £2.5bn £2.6bn +2bps • NII of £8.1bn YTD, £2.6bn in Q3 5 2 242 240 - Q3 NIM of 242bps, consistent with guidance; strong (4) (1) lending performance will support Q4 NII, offsetting yield
Slide 10: Low level of customer activity continues to impact other income
Low level of customer activity continues to impact other income Other income • Other income of £3.4bn YTD with £1.0bn in Q3 (£bn) • Q3 impacted by lower activity and c.£80m one-off charge relating to Asset Management Market Review (AMMR) - Resilient Q3 in Retail supported by increased card spend - L
Slide 11: Continued progress in efficiency enabling ongoing strategic investment
Continued progress in efficiency enabling ongoing strategic investment Total costs (£m) (4)% 6,043 78 (163) (65) 28 5,811 • Total costs of £5.8bn down 4% with operating costs down 4% (110) - 5% lower BAU costs enables continued investment and enhanced customer support, whilst partly offsetting Q3 20
Slide 12: Strong underlying credit performance in Q3, although uncertainty remains
Strong underlying credit performance in Q3, although uncertainty remains Impairment charges (£m) Q3 YTD Q3 20 H1 20 PY YTD Incr. Charges pre-updated MES 1,192 404 788 950 242 Retail 976 3981 578 816 160 • Impairment experience in Q3 relatively benign, Commercial Banking 211 5 206 194 17 benefitting
Slide 13: Maintained prudent reserving across business lines
Maintained prudent reserving across business lines ECL Net ECL P&L Write- ECL (£m) Q3 2020 increase charge offs 2019 Retail 4,289 1,493 2,418 (925) 2,796 Secured 1,772 556 624 (68) 1,216 • YTD impairment charge of £4.1bn contributing to £3bn ECL increase, largely in Q2 Cards 1,039 433 792 (359) 606
Slide 14: Diversified commercial portfolio with limited exposure to most impacted sectors
Diversified commercial portfolio with limited exposure to most impacted sectors Lending in key coronavirus-impacted sectors1 (£bn) • Small reduction in balances in coronavirus-impacted sectors since half year Oil & gas 1.4 2.7 70% • c.2% of Group lending and c.12% of Commercial to key Retail non-foo
Slide 15: Majority of first payment holidays matured with high proportion repaying
Majority of first payment holidays matured with high proportion repaying Current status of Retail payment holidays and balances1 (£bn) PHs granted 62.7 1.6 2.1 2.2 • Payment holidays granted on £69bn of lending, with Outstanding2 13.2 0.4 0.5 0.5 1.9 <£15bn now outstanding2 2.2 - 96% of first paymen
Slide 16: Statutory profit after tax of £688m in Q3, with RoTE of 7.4%
Statutory profit after tax of £688m in Q3, with RoTE of 7.4% (£m) Q3 2020 2020 YTD Underlying profit 1,162 881 • Statutory profit after tax of £688m in Q3 Restructuring costs (155) (288) • Restructuring up on Q2 given resumption of severance and property rationalisation, Volatility and other items 2
Slide 17: Enhanced capital strength with significant headroom over target and requirements
Enhanced capital strength with significant headroom over target and requirements Common equity tier 1 ratio (%, bps) +145bps • Enhanced capital strength with CET1 143 +62bps 83 15.2 ratio of 15.2% (14.0% excl. transitionals) 44 84 • Q3 capital build of 64bps, including benefit from RWA reductions 13
Slide 18: Well placed to deliver for shareholders
Well placed to deliver for shareholders • Return to profitability with Q3 statutory profit after tax £688m and RoTE 7.4% OUR Helping Britain • Mortgage activity picking up strongly and increase in Retail current accounts PURPOSE Prosper ahead of the market; business strength offsetting yield curve p
Slide 19: Questions and Answers
LLOYDS Questions and Answers 18
Slide 20: Appendix
Appendix , | I
Slide 21: Quarterly P&L and key ratios
Quarterly P&L and key ratios (£m) Q3 2020 Q2 2020 Q1 2020 Q4 2019 Q3 2019 Q2 2019 Q1 2019 Net interest income 2,618 2,528 2,950 3,102 3,130 3,062 3,083 Other income 988 1,235 1,226 1,267 1,315 1,594 1,556 Operating lease depreciation (208) (302) (224) (236) (258) (254) (219) Net income 3,398 3,461 3
Slide 22: Prudent economic scenarios
Prudent economic scenarios Current scenario (%) Probability Balance sheet Scenario weighting (%) ECL (£m) Economic measure 2020 2021 2022 2020-22 GDP (10.0) 6.0 3.0 (1.7) Interest rate 0.10 0.10 0.10 0.10 Base case 30 6,627 Unemployment rate 5.2 7.8 5.9 6.3 House price growth 2.0 (4.0) 1.0 (1.1) CRE
Slide 23: Coverage across business lines
Coverage across business lines Drawn balances (£m)1 Expected credit loss provisions (£m) 1 Coverage (excl. Recoveries) Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Retail 292,911 50,119 5,522 348,552 898 2,233 1,158 4,289 0.3% 4.5% 21.7% 1.2% Secured 243,
Slide 24: Continued low mortgage LTVs
Continued low mortgage LTVs September 20201 Dec 20191 Dec 20101 Mainstream Buy to let Specialist Total Total Total Average LTVs 42.4% 50.0% 41.5% 43.5% 44.9% 55.6% New business LTVs 65.2% 57.4% n/a 63.9% 64.3% 60.9% ≤ 80% LTV 89.4% 98.5% 94.0% 91.2% 87.5% 57.0% >80–90% LTV 9.8% 1.0% 2.5% 8.0% 10.0%
Slide 25: Forward looking statements
Forward looking statements This document contains certain forward looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934, as amended, and section 27A of the US Securities Act of 1933, as amended, with respect to the business, strategy, plans and/or results of