Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — Q2 2023 Earnings Presentation
36 slides from Lloyds Banking's earnings presentation, Jul 26, 2023
Slide 1: Results
Classification: Public Results Lloyds LloydsBanking GroupGroup Banking 326 May 2023 July 2023 1
Slide 2: Business and strategic update
Classification: Public Business and strategic update 2
Slide 3: Changing external environment, consistent delivery
Classification: Public Changing external environment, consistent delivery Purpose Helping • Fully focused on proactively supporting customers Britain • Group performing well and as expected • Continuing to deliver on strategic ambitions; committed to 2024 and 2026 strategic benefits • Well positione
Slide 4: Increased focus on supporting customers
Classification: Public Increased focus on supporting customers • Contacted >10m savings customers1 and >200k mortgage customers2 • Committed to Mortgage Charter, including payment arrangements and product switching Proactive support • Higher rates with an expanded savings offering and awareness; 1.9
Slide 5: Robust delivery consistent with expected trends
Classification: Public Robust delivery consistent with expected trends Q2 NIM step down Resilience, anticipated mix shift Costs in line Q2 net interest margin Total deposits Q2 operating costs Asset quality remains resilient Group performing well Increasing returns to shareholders Q2 pre-MES asset q
Slide 6: Progressing our strategic transformation
Classification: Public Progressing our strategic transformation A clear strategic vision… …driving a 5-year transformation… …seeing ongoing progress in H1 2023 2022 Investment on track Laying the foundations, early benefits delivery £1.4bn strategic investment to date, of which £0.6bn in H1 2023 UK
Slide 7: Strategic priorities delivered in H1
Classification: Public Strategic priorities delivered in H1 Illustrative examples 20.6m digitally active customers, up c.13% vs. FY21 Growing mass affluent customers, alongside proposition developments, e.g. ready-made investments Drive revenue growth and Launched mobile first onboarding for sole tr
Slide 8: Strategic delivery in H2
Classification: Public Strategic delivery in H2 Drive revenue growth and Launch of dedicated mass affluent proposition Grow diversification Scale ‘HomeHub’ ecosystem to deliver seamless customer journey End-to-end digital origination for asset finance and extend mobile-first onboarding journey for l
Slide 9: Regular updates on strategic progress
Classification: Public Regular updates on strategic progress Our strategic vision Upcoming progress updates Oct 2023: Investor seminar: ‘Deepen and Innovate in Consumer’ UK customer-focused digital leader and Nov/Dec 2023: Investor seminar: ‘Target our Corporate and integrated financial Institutiona
Slide 10: Financial update
Classification: Public Financial update 10
Slide 11: Robust financial performance
Classification: Public Robust financial performance Financial performance (£m) H1 2023 H1 2022 YoY Net interest income 7,004 6,135 14% Other income 2,538 2,367 7% • Statutory PAT £2.9bn up 17%; H1 RoTE 16.6% Operating lease depreciation (356) (213) (67)% Net income 9,186 8,289 11% • Strong net incom
Slide 12: Resilience in customer franchise
Classification: Public Resilience in customer franchise Q2 lending change (£bn) Q2 deposit change (£bn) Retail Commercial Retail Commercial • Total lending £450.7bn, down £1.6bn or 0.4% in +£0.2bn/0% -£1.0bn/1% -£0.6bn/0% -£2.9bn/2% Q2; down 0.9% in H1 o Retail flat in Q2; mortgages down £1.1bn vs 0
Slide 13: Strong net interest income performance
Classification: Public Strong net interest income performance Average interest earning assets (£bn) 1 1 • NII £7.0bn, up 14% on H1 2022, down 2% in Q2 (2) (1) o H1 AIEAs £454bn; Q2 broadly stable vs Q1 453 o H1 NIM 318bps including 314bps in Q2, down 8bps 454 vs Q1 given expected headwinds • Expect
Slide 14: Mortgage balances showing underlying resilience
Classification: Public Mortgage balances showing underlying resilience Mortgage book (Book size £bn, Gross margin %1) 1.73% 1.52% 1.32% 310 311 306 YoY • Mortgage balances £306bn o Open book down £1.7bn, including £0.7bn in Q2 147 153 153 +4% o Back book c.£39bn, down £2.4bn in Q2 Front book o £2.5b
Slide 15: Growth in consumer businesses and CIB
Classification: Public Growth in consumer businesses and CIB UK Cards, Loans & Motor (Book size £bn, Gross margin %1) H1 2023 15 9 8 7 39 6.09% • UK Cards, Loans & Motor up £1.8bn in H1, including £1.0bn in Q2 H2 2022 14 9 7 7 37 6.51% o Credit cards up £0.6bn in H1 with higher H1 2022 14 9 7 7 37 6
Slide 16: Deposit franchise supporting customer needs
Classification: Public Deposit franchise supporting customer needs Customer deposits (Book size £bn, Gross margin %1) 0.41% 0.98% 1.34% 478 475 470 YoY • Total deposits £469.8bn, down £5.5bn in H1; down £3.3bn in Q2 113 114 108 (5)% • Retail deposits down £4.9bn in H1, including £0.6bn in Q2 o Retai
Slide 17: Structural hedge a significant tailwind
Classification: Public Structural hedge a significant tailwind Hedged balances1 (£bn) Hedge 250 255 255 capacity 250 255 255 75 80 80 • Structural hedge approved capacity unchanged Structural at £255bn; c.3.5 year weighted average duration hedge 145 145 145 30 30 30 • Prudent management of structura
Slide 18: Building confidence in other income
Classification: Public Building confidence in other income Other income (£m) • Other income of £2.5bn in H1; £1.3bn in Q2 1,281 o Retail: improved current account and credit 1,182 1,185 1,257 1,171 1,128 card performance, growing motor contribution o Commercial: improved markets and strong bond fran
Slide 19: Operating costs in line with expectations
Classification: Public Operating costs in line with expectations Operating costs (£m) +6% 187 188 (3) 4,413 (130) 4,171 • H1 operating costs £4.4bn, up 6% given planned strategic investment, new business and inflation H1 2022 Cost Pay & Investment, Other H1 2023 • H1 cost:income 48.8%; 48.0% ex. rem
Slide 20: Resilient observed asset quality
Classification: Public Resilient observed asset quality Impairment1 (£m) Q2 H1 2023 H1 2022 YoY Charge (credit) pre updated MES2 335 657 282 375 Retail 280 551 285 266 Commercial Banking 55 108 (7) 115 • H1 impairment charge £662m, AQR 29bps Other – (2) 4 (6) o H1 pre MES charge £657m includes roll-
Slide 21: Updated macroeconomic outlook
Classification: Public Updated macroeconomic outlook UK bank rate CPI inflation 6% 12% 5% 10% 4% 8% 3% 6% 2% 4% • Recent growth and inflation resilient, but expect 1% 2% higher base rate to dampen 2024 GDP recovery 0% 0% Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 o GDP expected to rise 0.
Slide 22: Consistently reassuring performance across portfolios
Classification: Public Consistently reassuring performance across portfolios New to arrears as a proportion of total balances (3 month rolling average, %) 1.00% 0.75% • Modest increase in new to arrears from a low base; broadly similar or lower than pre- 0.50% pandemic 0.25% • Stable SME overdraft u
Slide 23: Mortgage portfolio demonstrating resilience
Classification: Public Mortgage portfolio demonstrating resilience Gross lending, LTV and new to arrears Gross New to arrears1 Loan to lending, • Mortgage book resilient; arrears below 2019 levels value H1 2019 H1 2023 £bn 2006-08 32 34% 0.7% 0.9% o Modest increase in arrears from legacy variable Re
Slide 24: TNAV impacted by rates; underlying and statutory profit converge
Classification: Public TNAV impacted by rates; underlying and statutory profit converge Statutory profit (£m) H1 2023 H1 2022 YoY Underlying profit 4,041 3,662 10% Restructuring (25) (47) 47% • H1 restructuring £25m Volatility and other items (146) (466) 69% Statutory profit before tax 3,870 3,149 2
Slide 25: Strong capital generation
Classification: Public Strong capital generation Risk weighted assets (£bn) 3.0 0.6 0.4 3.0 (2.6) 215.3 • RWAs £215.3bn, up £4.4bn in H1 including £3.0bn 210.9 adjustment for anticipated CRD IV model impact • Strong 111bps capital generation after 30bps full fixed pension deficit contributions 2022
Slide 26: Robust business performance supporting enhanced 2023 guidance
Classification: Public Robust business performance supporting enhanced 2023 guidance • Robust financial performance Purpose • Higher interim dividend Helping • Enhancing guidance for 2023, delivering higher, more sustainable Britain returns o NIM now expected to be >310bps o Operating costs expected
Slide 27: Closing remarks
Classification: Public Closing remarks 27
Slide 28: Changing external environment, consistent delivery
Classification: Public Changing external environment, consistent delivery Purpose Helping • Fully focused on proactively supporting customers Britain • Group performing well and as expected • Continuing to deliver on strategic ambitions; committed to 2024 and 2026 strategic benefits • Well positione
Slide 29: Q&A
Classification: Public Q&A 29
Slide 30: Appendix
Classification: Public Appendix 30
Slide 31: Quarterly P&L and key ratios
Classification: Public Quarterly P&L and key ratios (£m) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 Net interest income 3,469 3,535 3,643 3,394 3,190 2,945 Other income 1,281 1,257 1,128 1,171 1,185 1,182 Operating lease depreciation (216) (140) (78) (82) (119) (94) Net income 4,534 4,652 4,693
Slide 32: 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 1.6 0.9 1.5 2.0 1.3 Unemployment rate 3.3 0.5 2.7 3.0 3.4 3.3 3.1 HPI growth (3.3) (0.5) 2.4 7.8 7.5 7.3 4.3 Upside (30%) 3,991 CRE price growth 2.3 (6.2) 6.5 1.
Slide 33: Updated coverage after revised economic outlook
Classification: Public Updated coverage after revised economic outlook Gross Write customer Total P&L Net ECL offs Coverage (ex. Recoveries) (£m, unless stated L&A coverage ECL Write offs charge/ incr./ ECL & Other otherwise) (£bn) Stage 1 Stage 2 Stage 3 Total Q4 2022 Q4 2022 & Other1 (credit) (dec
Slide 34: Low mortgage LTVs
Classification: Public Low mortgage LTVs June 20231 20221 20101 Mainstream Buy to let Specialist Total Total Total Average LTVs 41.6% 47.1% 34.7% 42.3% 41.6% 55.6% New business LTVs 60.9% 53.0% N/A 60.2% 61.7% 60.9% ≤80% LTV 90.7% 99.8% 96.5% 92.3% 93.9% 57.0% >80–90% LTV 7.2% 0.1% 1.1% 6.0% 4.7% 16
Slide 35: 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 36: Investor Relations contacts
Classification: Public Investor Relations contacts Douglas Radcliffe, Group Investor Relations Director +44 (0)20 7356 1571 Douglas.Radcliffe@lloydsbanking.com Edward Sands, Director, Investor Relations +44 (0)20 7356 1585 Edward.Sands@lloydsbanking.com Nora Thoden, Director, Investor Relations – ES