Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — Debt Investor Presentation (October 2023)
29 slides from Lloyds Banking's debt investor presentation, Oct 25, 2023
Slide 1: Fixed Income Presentation
Classification: Public Fixed Income Presentation Lloyds Banking Group 25 October 2023 1
Slide 2: Business and strategic update
Classification: Public Business and strategic update 2
Slide 3: Consistent delivery
Classification: Public Consistent delivery Purpose • Supporting customers Helping • Delivering strategic ambitions Britain • Continued robust financial performance • Reaffirming 2023 financial guidance • Well positioned to deliver for all stakeholders 3
Slide 4: Financial update
Classification: Public Financial update 4
Slide 5: Continued robust financial performance
Classification: Public Continued robust financial performance Financial performance (£m) Q3 2023 Q3 2022 YoY1 YTD YTD1 Net interest income 10,448 9,529 10% Other income 3,837 3,538 8% • Statutory PAT £4.3bn; RoTE 16.6% Operating lease depreciation (585) (295) (98)% • Strong net income, up 7%, NIM 31
Slide 6: Ongoing resilience in customer franchise
Classification: Public Ongoing resilience in customer franchise Q3 lending change1 (£bn) Q3 deposit change3 (£bn) Retail Commercial Retail Commercial • Total loans £452bn, up £1.4bn in Q3; down 0.6% +£1.2bn/0.3% -£0.6bn/0.7% +£0.7bn/0.2% +£0.1bn/0.1% YTD o Retail up £1.2bn in Q3; total mortgages sta
Slide 7: Solid income performance
Classification: Public Solid income performance Net interest income and banking margin (£bn, bps) £3.5bn £3.4bn • NII £10.4bn YTD, £3.4bn in Q3 7 o YTD AIEAs £453bn; Q3 broadly stable vs Q2 - 314 (6) (7) o YTD NIM 315bps; 308bps in Q3, down 6bps vs Q2, 308 given expected headwinds o Structural hedge
Slide 8: Costs in line with expectations
Classification: Public Costs in line with expectations Operating costs (£m) +5% 81 236 210 6,654 (189) 6,316 • YTD operating costs £6.7bn, up 5% given planned strategic investment, new business and inflation Q3 2022 Cost Pay & Investment, Other Q3 2023 • Cost:income 49.5%; 48.6% ex. remediation YTD
Slide 9: Reassuring performance across portfolios
Classification: Public Reassuring performance across portfolios Mortgage portfolio mix and new to arrears (Balances £bn, NTAs %, LTV %) 290 295 309 313 308 308 • Mortgage book remains resilient with arrears below 2019; average LTV 43% and new to arrears 0.36% 0.31% stable in quarter 0.27% 0.26% 0.25
Slide 10: Resilient observed asset quality
Classification: Public Resilient observed asset quality Impairment (£m) Q3 2023 Q3 2022 Q3 2023 YoY YTD YTD Charge (credit) pre updated MES1 261 918 532 386 Retail 236 787 520 267 • Q3 YTD impairment charge £849m, AQR 25bps Commercial Banking 31 139 1 138 Other (6) (8) 11 (19) o Pre-MES charge £918m
Slide 11: Updated macroeconomic outlook
Classification: Public Updated macroeconomic outlook UK bank rate CPI inflation 6% 12% 5% 10% 4% 8% 3% 6% 2% 4% • Modest growth improvement, lower base rate 1% 2% 0% 0% o GDP now expected to strengthen 0.4% in 2023, Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 versus 0.2% assumed at Q2 21 2
Slide 12: Consistent delivery
Classification: Public Consistent delivery Purpose • Continued robust financial performance Helping • 2023 financial guidance Britain o NIM of >310bps o Operating costs of c.£9.1bn o AQR now expected to be <30bps o RoTE of >14% o Capital generation of c.175bps • Well positioned to deliver for all st
Slide 13: Capital, funding & liquidity
Classification: Public Capital, funding & liquidity 13
Slide 14: Capital, MREL and liquidity summary
Classification: Public Capital, MREL and liquidity summary CET1 remains ahead of both 14.6% MDA2 10.3% regulatory minimum and the Capital 14.1% CET11 CET1 ongoing Group target of c.12.5% + c.1% management buffer FY 22 Q3 23 31.7% 32.6% MREL remains strong and in MREL MREL MREL excess of regulatory r
Slide 15: Capital strength maintained
Classification: Public Capital strength maintained Common Equity Tier 1 ratio (%, bps) 14.6% • UK CCyB rate increased from 1% to 2% in July 2023, representing an equivalent increase in 1.7% the Group’s CCyB from 0.9% to 1.8% MDA 10.3% 1.8% • O-SII buffer maintained at 1.7% until reassessment in Dece
Slide 16: Continued strong capital generation
Classification: Public Continued strong capital generation Risk weighted assets (£bn) 1.9 2.0 2.9 3.0 (3.0) • RWAs £217.7bn, up £6.8bn YTD incl. £2.4bn in Q3 217.7 • Strong 165bps capital generation after 30bps full 210.9 fixed pension deficit contributions; 129bps after regulatory headwinds • CET1
Slide 17: Diversified deposit base; strong liquidity position
Classification: Public Diversified deposit base; strong liquidity position Loan to deposit ratio 96%, Net stable funding ratio 130%, Liquidity coverage ratio 142% c.65% of deposits in Retail; diversified Commercial >90% of deposit growth since 2019 in diversified Retail3 (£bn) balances (£bn) 451 476
Slide 18: Wholesale funding requirements returning to more normalised levels
Classification: Public Wholesale funding requirements returning to more normalised levels over strategic plan period Issuance 2023 principles • 2023 issuance programme largely complete o ~£1bn OpCo funding remaining HoldCo Refinancing of Senior <£5bn maturities o Pre-funding will be considered, subj
Slide 19: Appendix
Classification: Public Appendix 19
Slide 20: Wholesale funding requirements supported by redemption profile
Classification: Public Wholesale funding requirements supported by redemption profile HoldCo redemption profile (£bn)1 10.3 1.9 8.0 1.4 1.9 6.2 0.8 5.1 0.8 0.4 1.7 7.0 5.3 5.6 1.0 3.0 • Redemption profile supports increased 1.0 issuance 2023 2024 2025 2026 2027 Senior T2 AT1 • The Group has access t
Slide 21: Diverse funding portfolio as at Q3 2023
Classification: Public Diverse funding portfolio as at Q3 2023 Wholesale funding portfolio by type 12% MM Funding Covered Bond 31% 28% £108bn Securitisation OpCo Senior Wholesale funding portfolio by currency 12% HoldCo Senior Sub Debt 7% 14% 4% 23% 25% GBP USD EUR Other Wholesale funding portfolio
Slide 22: 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 23: Strong credit ratings across the Group
Classification: Public Strong credit ratings1 across the Group Non-Ring-Fenced Insurance HoldCo Ring-Fenced Bank Bank Sub-Group Lloyds Banking Lloyds Bank, Lloyds Bank UK Sovereign Scottish Widows3 Group Bank of Scotland Corporate Markets AA BBB+ A+ A S&P Stable Stable Stable - Stable A-2 A-1 A-1 A3
Slide 24: Strong ESG ratings supported by clear deliverables
Classification: Public Strong ESG ratings supported by clear deliverables Focus on opportunities to support housing and physical We have regeneration MSCI 1 Enabling regional identified 4 Increase regional productivity and create high-quality jobs AA AA AA AA development Encourage inclusive growth b
Slide 25: Our Group Climate Transition Plan
Classification: Public Our Group Climate Transition Plan We have identified 4 We have set focus net several areas zero No new direct financing of new FFirst round of Net Zero Banking F Support oil and gas clients to establish F £10bn green mortgage lending F £20-25bn SW investment in F 50% reduction
Slide 26: Quarterly P&L and key ratios
Classification: Public Quarterly P&L and key ratios (£m) Q3 2023 Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 Net interest income 3,444 3,469 3,535 3,643 3,394 3,190 2,945 Other income 1,299 1,281 1,257 1,128 1,171 1,185 1,182 Operating lease depreciation (229) (216) (140) (78) (82) (119) (94) Ne
Slide 27: Updated economic scenarios
Classification: Public Updated economic scenarios Scenario ECL (£m) Measure (%) 2023 vs Q4 2022 2024 2025 2026 2027 Ave. 23-27 GDP 0.8 0.7 2.0 1.5 1.8 2.1 1.6 Unemployment rate 3.9 1.1 2.9 2.8 3.1 3.1 3.1 HPI growth (3.4) (0.6) 1.4 9.5 9.7 7.6 4.8 Upside (30%) 3,986 CRE price growth (0.4) (8.9) 9.5
Slide 28: 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 29: Contacts
Classification: Public Contacts Group Corporate Treasury Peter Green Liz Padley Richard Shrimpton Managing Director, Non Bank Head of Senior Funding & Covered Deputy Treasurer Entities Treasurer & Head of Capital Richard.Shrimpton@Lloydsbanking.com Bonds Peter.Green@Lloydsbanking.com and Recovery an
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