Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — Debt Investor Presentation (February 2024)
41 slides from Lloyds Banking's debt investor presentation, Feb 22, 2024
Slide 1: 2023 Results Fixed Income Presentation
Classification: Public 2023 Results Fixed Income Presentation Lloyds Banking Group 22 February 2024 1
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 Commercial Retail divisions Insurance Consumer Pensions & Insurance Relationships Small and Investments Corporate & Pensions & Consumer Consumer Investments Business Mediu
Slide 4: Our competitive strengths differentiate our proposition
Classification: Public Our competitive strengths differentiate our proposition 1 Largest UK bank Leading UK customer franchise with deep customer insight 2 Dedicated colleagues with £882bn 27m 50% Total assets Active customers % relationship with UK adults strong values 3 Operating at scale with dis
Slide 5: Helping Britain Prosper
Classification: Public Confidence in delivering higher, more sustainable returns Purpose • Customer support continuing in a resilient economy Helping • Purpose-driven strategy, on track to meet strategic outcomes Britain • Strong business performance, meeting 2023 financial guidance Prosper • Increa
Slide 6: Purpose-driven strategy delivers for broader stakeholders
Classification: Public Purpose-driven strategy delivers for broader stakeholders Illustrative activity in 2023 Communicated with >15m customers on savings options and 3.9m new savings accounts opened Proactive 7.5m1 customers proactively contacted to offer support and enhance financial resilience su
Slide 7: Robust financial performance
Classification: Public Robust financial performance £17.9bn £9.1bn 15.8% Net income, Operating costs, in line Return on tangible equity, up 3% vs 2022 with guidance above guidance 173bps £3.8bn 13.7% Pro forma capital generation1 Total capital distribution Pro forma CET1 ratio2 post regulatory headw
Slide 8: Significant strategic progress, on track for 2024 and 2026
Classification: Public Significant strategic progress, on track for 2024 and 2026 Grow Purpose-driven strategy Significant progress in 2023 On track for 2024 and 2026 £1.3bn strategic investment 2024 Drive revenue (£2.2bn to date) c.£0.7bn additional revenues1 growth and diversification c.£1.2bn gro
Slide 9: Financial update
Classification: Public Financial update 9
Slide 10: Robust financial performance, in line with guidance
Classification: Public Robust financial performance, in line with guidance Financial performance (£m) 2023 20222 YoY Net interest income 13,765 13,172 5% Other income 5,123 4,666 10% • Statutory PAT £5.5bn; RoTE 15.8% Operating lease depreciation (956) (373) • Strong net income, up 3%, with NIM 311b
Slide 11: Resilience in customer franchise
Classification: Public Resilience in customer franchise Q4 lending change (£bn) Q4 deposit change (£bn) Retail (+£0.8bn ex. • Lending £450bn; 2023 down 1%, Q4 down £2bn; securitisation) Commercial Retail Commercial flat ex. sale/securitisation activity -£1.9bn/-1% -£2.9bn/-3% +£1.8bn/+1% -£0.9bn/-1%
Slide 12: Mortgage book resilience
Classification: Public Mortgage book resilience Mortgage book (Book size £bn, Gross margin %1) 1.52% 1.32% 1.16% 311 306 306 YoY 17 14 12 25 24 (23)% • Mortgage balances £306bn 30 12 11 10 o Open book £298.5bn, down £1.1bn; Q4 up £0.2bn 98 104 114 o £2.5bn legacy portfolio exit in Q1 2023 • Group NI
Slide 13: Solid performance in other lending portfolios
Classification: Public Solid performance in other lending portfolios UK Cards, Loans & Motor (Book size £bn, Gross margin %1) H2 2023 15 8 7 7 2.7 37 5.60% • UK Cards, Loans & Motor flat in 2023; up £2.7bn 39 6.09% H1 2023 15 8 7 9 ex. loan securitisation H2 2022 14 7 7 9 37 6.51% o Credit cards fla
Slide 14: Robust deposit franchise performance
Classification: Public Robust deposit franchise performance Customer deposits (Book size £bn, Gross margin %1) 0.98% 1.34% 1.22% 475 470 471 YoY • Total deposits £471bn, down £4bn in 2023; up 114 108 103 (10)% £1bn in Q4 • Retail deposits down £2bn in 2023; up £2bn in Q4 o Retail current accounts do
Slide 15: Strong net interest income, in line with guidance
Classification: Public Strong net interest income, in line with guidance Average interest earning assets (£bn) 2.2 2.5 • 2023 NII £13.8bn, up 5% YoY, Q4 down 4% vs Q3 (0.2) (3.2) 453 o 2023 AIEAs £453bn; Q4 broadly flat vs Q3 452 o Full year NIM 311bps; 298bps in Q4, down 10bps vs Q3 from deposit an
Slide 16: Structural hedge a significant tailwind
Classification: Public Structural hedge a significant tailwind Hedged balances1 (£bn) 255 255 247 80 80 77 • Structural hedge notional £247bn, down £8bn in Structural hedge 145 145 140 2023, inc. £4bn in Q4 30 30 30 • c.3.5 year weighted average duration 513 507 511 • Prudent management of structura
Slide 17: Building confidence in other income
Classification: Public Building confidence in other income Other income (£m) • OOI £5.1bn in 2023, up 10% YoY; £1.3bn in Q4 • Growth based on activity levels and investment o Retail: improved PCA and credit card 1,281 1,299 1,286 1,182 1,185 1,171 1,257 performance, growing motor contribution 1,128
Slide 18: Disciplined operating costs, in line with guidance
Classification: Public Disciplined operating costs, in line with guidance Operating costs (£m) +5% 350 48 • 2023 operating costs £9.1bn, up 5%; planned 346 strategic investment, new business and inflation (276) 9,140 o Q4 £2.5bn, inc. investment and bank levy 8,672 • Cost:income 54.7%; 51.0% ex. Rem
Slide 19: Strong asset quality, in line with guidance
Classification: Public Strong asset quality, in line with guidance Impairment (£m) Q4 2023 2022 YoY • 2023 impairment charge £308m Charge (credit) pre updated MES1 (353) 565 915 (350) o Pre-MES charge £565m reflects continued Retail 277 1,064 773 291 resilience and significant write-back in Q4 Comme
Slide 20: Stable credit performance across portfolios
Classification: Public Stable credit performance across portfolios New to arrears as a proportion of total balances (3 month rolling average, %) 1.00% • Mortgage book resilient with new to arrears 0.75% stable and below 2019; average LTV 43.6% 0.50% • Consumer finance trends stable; new to arrears 0
Slide 21: Updated macroeconomic outlook
Classification: Public Updated macroeconomic outlook CPI inflation UK bank rate 12% 6% 10% 5% 8% 4% 6% 3% 4% 2% • GDP growth to remain subdued in 2024; sharply 2% 1% declining inflation expected to benefit HPI1 0% 0% Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 o GDP expected to
Slide 22: Consistent guidance; confidence in delivering higher, more sustainable returns
Classification: Public Consistent guidance; confidence in delivering higher, more sustainable returns 2024 2026 Income NEW: NIM >290bps Costs NEW: c.£9.3bn operating costs <50% cost:income ratio Asset quality ratio NEW: <30bps Return on tangible equity c.13% >15% Risk weighted assets £220bn - £225bn
Slide 23: Capital, funding & liquidity
Classification: Public Capital, funding & liquidity 23
Slide 24: Key Credit Metrics
Classification: Public Key Credit Metrics 13.7% 19.8% 31.9% Pro forma CET1 ratio1 Total Capital ratio MREL ratio 173bps 29bps 5.8% Pro forma capital generation2 Asset Quality Ratio3 Leverage ratio post regulatory headwinds 43.6% 130% 142% Average Mortgage LTV Net Stable Funding Ratio Liquidity Cover
Slide 25: Strong Capital, MREL and Liquidity Ratios
Classification: Public Strong Capital, MREL and Liquidity Ratios 5.8% • CET1 remains ahead of 10.3% MDA4 and 13.7% Capital 14.1% 5.6% the Group target of 13.5% by 2024, 13% CET11 CET11 Leverage Leverage by 2026 FY 22 FY 23 FY 22 FY 23 • MREL remains strong and in excess of 31.7% 31.9% MREL MREL MREL
Slide 26: Strong capital generation, in line with guidance
Classification: Public Strong capital generation, in line with guidance Risk weighted assets (£bn) • RWAs £219.1bn, up £8.2bn, inc. £1.4bn in Q4 3.0 2.2 2.3 3.1 o CRD IV updates1 £5.0bn, inc. £2.0bn in Q4; est. 5.0 further c.£5bn 2024-26, subject to PRA review (7.4) 219.1 • Continue to expect 2024 R
Slide 27: Low risk balance sheet post targeted risk reduction
Classification: Public Low risk balance sheet post targeted risk reduction Lower mortgage LTV and CRE exposure 2012 2023 Movement Mortgages • De-risking across retail and commercial portfolios Average LTVs 56.4% 43.6% (23)pp o 2006-08 mortgage portfolio halved since 2018 (£31bn New business LTVs 62.
Slide 28: Group is holding more CET1 resources, despite a lower risk balance sheet
Classification: Public Group is holding more CET1 resources, despite a lower risk balance sheet The CET1 equivalent of 13.0% has increased • Medium-term CET1 target revised by Board taking 32.0 into account 30.0 o Improved certainty with respect to regulatory 28.0 28.5 impacts 27.6 27.4 26.0 26.4 26
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 142% c.65% of deposits in Retail; diversified Commercial Deposit growth since 2019 led by Retail2 (£bn) balances (£bn) 451 476 475 471 412 Cor
Slide 30: Wholesale issuance outlook
Classification: Public Wholesale issuance outlook Issuance 2024 • Expect c.£15bn of issuance in 2024 across all principles entities and products o Stable supply vs 2023 HoldCo Refinancing of £7-8bn Senior maturities o Reduction vs Q3 guidance (c.£20bn) given strong deposit performance o Good progres
Slide 31: Appendix
Classification: Public Appendix 31
Slide 32: Modest net issuance volumes in 2024
Classification: Public Modest net issuance volumes in 2024 The Group has access to a diverse range of funding programmes, products, and markets HoldCo redemption profile (£bn)1 10.0 1.8 7.9 1.3 7.2 1.8 7.6 0.8 0.8 5.3 0.8 1.4 0.4 1.7 6.9 5.2 5.4 6.8 5.0 3.2 2024 2025 2026 2027 2028 Senior T2 AT1 OpC
Slide 33: Diverse funding portfolio as at FY 2023
Classification: Public Diverse funding portfolio as at FY 2023 Wholesale funding portfolio by type 13% 24% MM Funding Covered Bond 29% £99bn Securitisation OpCo Senior Wholesale funding portfolio by currency 14% HoldCo Senior Sub Debt 8% 16% 4% 26% 26% GBP USD EUR Other Wholesale funding portfolio b
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: Strong ratings across the Group
Classification: Public 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 AA Stable St
Slide 36: Quarterly P&L and key ratios
Classification: Public Quarterly P&L and key ratios (£m) Q4 2023 Q3 2023 Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 Net interest income 3,317 3,444 3,469 3,535 3,643 3,394 3,190 2,945 Other income 1,286 1,299 1,281 1,257 1,128 1,171 1,185 1,182 Operating lease depreciation (371) (229) (216) (14
Slide 37: Updated economic scenarios
Classification: Public Updated economic scenarios Scenario ECL (£m) Measure (%) 2023 vs Q4 2022 2024 2025 2026 2027 Ave. 23-27 GDP 0.3 0.2 1.5 1.7 1.7 1.9 1.4 Unemployment rate 4.0 1.2 3.3 3.1 3.1 3.1 3.3 HPI growth 1.9 4.7 0.8 6.9 7.2 6.8 4.7 Upside (30%) 2,925 CRE price growth (3.9) (12.4) 9.0 3.8
Slide 38: Updated coverage after revised economic outlook
Classification: Public Updated coverage after revised economic outlook Write Gross Total P&L Net ECL offs Coverage (ex. Recoveries) (£m, unless stated customer coverage ECL Write offs charge/ incr./ ECL & Other otherwise) L&A (£bn) Stage 1 Stage 2 Stage 3 Total Q4 2022 Q4 2022 & Other1 (credit) (dec
Slide 39: Low mortgage LTVs
Classification: Public Low mortgage LTVs December 20231 20221 20101 Mainstream Buy to let Specialist Total Total Total Average LTVs 43.1% 48.1% 35.0% 43.6% 41.6% 55.6% New business LTVs 62.5% 51.6% N/A 61.7% 61.7% 60.9% ≤80% LTV 87.2% 99.5% 96.4% 89.3% 93.9% 57.0% >80–90% LTV 9.4% 0.4% 1.2% 7.8% 4.7
Slide 40: 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 41: Contacts
Classification: Public Contacts Group Corporate Treasury Richard Shrimpton Liz Padley Deputy Treasurer Managing Director, Capital and Term Funding Richard.Shrimpton@Lloydsbanking.com Claire-Elizabeth.Padley@Lloydsbanking.com Pascale Dorey Youmei Koh Director, Debt Investor Relations Associate Direct
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