Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — Debt Investor Presentation (February 2021)
43 slides from Lloyds Banking's debt investor presentation, February 2021
Slide 1: Fixed Income Investor Presentation FY 2020
FIXED INCOME INVESTOR PRESENTATION FY 2020
Slide 2: Group Overview
Classification: Limited Group Overview 2
Slide 3: Simple group structure with multiple issuance points
Capital, Funding & Classification:Results Group Overview Limited Liquidity Appendix Simple group structure with multiple issuance points HoldCo Lloyds Banking Group Main Entities A3 / BBB+ / A+ Ratings1 P-2 / A-2 / F1 Neg / Neg / Neg Example Products Senior Unsecured - Capital Ring-Fenced Sub-Group
Slide 4: Growth in customer franchise, with further opportunities in targeted areas
Classification: Limited Growth in customer franchise, with further opportunities in targeted areas Channels market share Digital new business volumes1 19% 1 Branch new business volumes 27% Product market share Consumer credit card balances 25% PCA deposit balances 22% SME and small business lending
Slide 5: Supporting all stakeholders in 2020
Classification: Limited Supporting all stakeholders in 2020 Successfully supporting customers, colleagues and Strength of business model communities through the pandemic enabling continued delivery Government-backed loans for business • Digital leader, with accelerated transformation >£12bn customer
Slide 6: Helping Britain Prosper is at the heart of who we are
Classification: Limited Helping Britain Prosper is at the heart of who we are and underpins our business Driving sustainability Strategy to help the Championing diversity First FTSE100 company to set public transition to a sustainable low carbon economy gender, Black, Asian and Minority Ethnic and s
Slide 7: 2020 highlights show significant progress across our ESG ambitions
Classification: Limited 2020 highlights show significant progress across our ESG ambitions Ambitious goal to help reduce emissions we finance by >50% by 2030, on path to net zero by 2050 or sooner Environmental Developed three new operational climate pledges including net zero carbon operations
Slide 8: Economy supported by Government actions with strong housing market
Classification: Limited Economy supported by Government actions with strong housing market HPI & mortgage market completions1 LBG customers’ card spend2 (5-day rolling average, % change vs same period a year earlier) Mortgage Completions (£bn) HPI (%) 100% 30 8% 25 50% 6% 20 0% 15 4% 10 -50% 2% 5 0
Slide 9: Business transformed by our clear strategic path since 2011
Classification: Limited Business transformed by our clear strategic path since 2011 GSR1 (2011-2014) GSR2 (2015-2017) GSR3 (2018-2020) Purpose Helping Britain Prosper Key Reshape our portfolio Create the best customer experience Leading customer experience strategic Simplify the Group Become simpler
Slide 10: Our strategic progress has created capabilities that position us well for the future
Classification: Limited Our strategic progress has created capabilities that position us well for the future Efficiency has created capacity for new investment and Our core capabilities opportunities Purpose driven, customer focused business model Differentiated and sustainable franchise Digital lea
Slide 11: Financial Update
Classification: Limited Financial Update 11
Slide 12: Resilient business model, returning to profitability in the second half
Classification: Limited Resilient business model, returning to profitability in the second half Q4 20201 20201 £3.6bn £14.4bn Net income +6% (16)% • NII of £10.8bn down 13%, driven by lower rates and Cost:income ratio 59.9% 55.3% changing asset mix. 2020 NIM 2.52%; Q4 NIM 2.46% (incl. remediation) +
Slide 13: Strong customer franchise: resilient lending and Retail deposit growth ahead of market
Classification: Limited Strong customer franchise: resilient lending and Retail deposit growth ahead of market 2020 lending change 2020 deposit change (£bn) (£bn) • Mortgage balances up £5.2bn, to £293.8bn; including Q4 Retail Commercial Retail Commercial open book growth of £6.7bn +£1.5bn -£2.2bn +
Slide 14: Rate and yield curve headwinds, partly offset by strong mortgage activity
Classification: Limited Rate and yield curve headwinds, partly offset by strong mortgage activity Net interest income and banking net interest margin (£m) • 2020 NII £10.8bn, down 13% on prior year; NIM at 252bps 288 12,377 252 - NIM decrease impacted by lower rates and asset mix (657) 10,773 - Q4 N
Slide 15: Increased hedge capacity
Classification: Limited Increased hedge capacity Hedged balances1 (£bn) 185 190 210 179 180 186 62 60 60 • Structural hedge notional balance of £186bn 90 90 94 - c.2.5 year weighted average life, up from c.2 years in Q3 29 30 30 Structural hedge • Hedge capacity of £210bn, increase of £25bn in 2020
Slide 16: Other income stabilising, geared to customer activity and ongoing investment
Classification: Limited Other income stabilising, geared to customer activity and ongoing investment Other income (£bn) • Other income £4.5bn; impacted by lower customer activity and lower non-recurring items vs. 2019 1.2 1.2 1.1 1.0 - Retail impacted by lower interchange income and Lex fleet volume
Slide 17: Continued strong focus on costs, alongside investment in the future of the business
Classification: Limited Continued strong focus on costs, alongside investment in the future of the business Total costs (£m) (4)% 8,320 • Total costs of £8.0bn down 4% with operating costs 103 4% lower and remediation costs 15% lower (45) • Delivery on operating cost target of <£7.6bn (238) 7,964 (1
Slide 18: Committed to further efficiency improvements, supporting continued investment
Classification: Limited Committed to further efficiency improvements, supporting continued investment Proven record of managing costs Cost framework presents opportunities (BAU costs1, £bn) BAU costs • Rigorous matrix approach to BAU costs (24)% • Productivity and 3rd party management (e.g. (Ongoing
Slide 19: Solid underlying impairment performance, with lower charges expected in 2021
Classification: Limited Solid underlying impairment performance, with lower charges expected in 2021 Impairment charges (£m) 2020 Q4 20 2019 Incr. vs 2019 Charges pre-updated MES 1,610 418 1,291 319 • Stable observed credit experience in Q4 Retail 1,359 383 1,038 321 - Support schemes remaining effe
Slide 20: Building coverage ratios across product areas
Classification: Limited Building coverage ratios across product areas ECL Net ECL P&L Write-offs ECL (£m) 2020 increase charge & other 2019 Retail 4,008 1,212 2,384 (1,172) 2,796 UK Mortgages 1,605 389 478 (89) 1,216 • Stock of ECL provisions £6.9bn, providing significant balance sheet resilience Ca
Slide 21: Strong performance on payment holidays with over 90% now matured
Classification: Limited Strong performance on payment holidays with over 90% now matured Current status of Retail payment holidays and balances1 (£bn) PHs granted 61.9 1.7 2.4 2.3 • Total of c.1.3m payment holidays (PHs) granted on £68bn In-force2 5.1 0.1 0.2 0.3 of lending, of which £6bn (8%) curre
Slide 22: Commercial: diversified portfolio with limited exposure to most impacted sectors
Classification: Limited Commercial: diversified portfolio with limited exposure to most impacted sectors Lending in key coronavirus-impacted sectors1 (£bn) Total 10.8 10.7 Movement since Q1 -1.1 +2.6 • Diverse client base with limited exposure to coronavirus- Retail non-food 2.2 1.7 19% impacted sec
Slide 23: Capital, Funding & Liquidity
Classification: Limited Capital, Funding & Liquidity 23
Slide 24: Robust metrics across Capital, Funding & Liquidity
Capital, Funding & Classification:Results Group Overview Limited Liquidity Appendix Robust metrics across Capital, Funding & Liquidity Significant CET1 headroom to £9.9bn of issuance in 2020 Strong liquidity metrics through the regulatory minimum and Group target pandemic £bn 16.2% 5 c.12.5% + mgt b
Slide 25: RWAs stable with optimisation more than offsetting credit migration
Classification: Limited RWAs stable with optimisation more than offsetting credit migration RWA 2020 movement (£bn) £(0.7)bn • Stable overall RWA performance 2.5 2.2 - Strong RWA management 203.4 1.6 202.7 1.9 (3.6) - Delay in expected credit migration (5.3) • RWA headwinds now delayed 2019 Credit U
Slide 26: Enhanced capital strength with significant headroom over target and requirements
Capital, Funding & Classification:Results Group Overview Limited Liquidity Appendix Enhanced capital strength with significant headroom over target and requirements • Enhanced capital strength with CET1 ratio of 16.2% (15.7% excl. +242bps software intangible benefit) 51 16.4 • 2020 capital build of
Slide 27: Increased headroom over capital requirements
Capital, Funding & Classification:Results Group Overview Limited Liquidity Appendix Increased headroom over capital requirements 1 Common equity tier 1 ratio 16.2% • CCyB confirmed at 0% until at least Q4 2021; earliest 13.8% Buffer to implementation of any change now Q4 2022 requirements c.5.4% • O
Slide 28: Well positioned for end-state MREL requirements
Capital, Funding & Classification:Results Group Overview Limited Liquidity Appendix Well positioned for end-state MREL requirements Transitional MREL ratio 36.4% • Strongly positioned with total capital ratio of 23.3%, well SRB 1.7% above requirements of 16.0%3, and MREL ratio of 36.4%; CCB 2.5% c.£
Slide 29: Successful execution of 2020 funding plan; prudent funding and liquidity position
Capital, Funding & Classification:Results Group Overview Limited Liquidity Appendix Successful execution of 2020 funding plan; prudent funding and liquidity position Wholesale funding portfolio by maturity and type 2020 Funding by currency • Average LCR % remains comfortably 12% 23% 20% 20% above re
Slide 30: Credit ratings remain strong, with negative pressures due to the pandemic
Capital, Funding & Classification:Results Group Overview Limited Liquidity Appendix Credit ratings remain strong, with negative pressures due to the pandemic Ring-Fenced Non-Ring- HoldCo Bank Fenced Bank Lloyds Bank, Lloyds Bank Lloyds UK Sovereign 1 Bank of Corporate Commentary Banking Group 1 Scot
Slide 31: Strategic Review 2021
Classification: Limited Strategic Review 2021 31
Slide 32: Today's environment brings new challenges and opportunities
Classification: Limited Today’s environment brings new challenges and opportunities Our core capabilities Challenges Opportunities Purpose driven, customer Restoring personal and business finances to health Taking a transformational and leading role in focused business model Helping Britain Recover
Slide 33: Strategic Review 2021: The next evolution of our strategy
Classification: Limited Strategic Review 2021: The next evolution of our strategy Our strategy – Building the UK’s preferred financial partner Our enhanced • Core purpose of Helping Britain Prosper, Our customer ambitions capabilities with focus of Helping Britain Recover at the heart of our strateg
Slide 34: Helping Britain Recover: Focused on where we can make a difference
Classification: Limited Helping Britain Recover: Focused on where we can make a difference, embedded in the business Helping Britain Recover priorities Supporting our enhanced ambitions £ Help rebuild households’ >6,500 colleagues trained to support customers build their financial resilience financi
Slide 35: Strategic Review 2021: The next evolution of our strategy
Classification: Limited Strategic Review 2021: The next evolution of our strategy Clear execution in 2021 Delivering sustainable shareholder value • Guidance based on current economic assumptions: Our customer ambitions Our enhanced capabilities - Net interest margin to be in excess of 240bps Modern
Slide 36: Strategic Review 2021: The next evolution of our strategy
Classification: Limited Strategic Review 2021: The next evolution of our strategy Core purpose of Helping Britain Prosper Focused on Helping Britain Recover, in remains unchanged areas where we can make a difference Unlocking co-ordinated growth Supported by our enhanced capabilities opportunities a
Slide 37: Appendix
Classification: Limited Appendix 37
Slide 38: Prudent economic scenarios
Classification: Limited Prudent economic scenarios Current scenario (%) Probability Balance sheet Scenario weighting (%) ECL (£m) Economic measure 2020 2021 2022 2020-22 GDP (10.5) 3.7 5.7 (1.9) Interest rate 0.10 1.14 1.27 0.84 Upside 30 5,766 Unemployment rate 4.3 5.4 5.4 5.1 HPI growth 6.3 (1.4)
Slide 39: Coverage across business lines
Classification: Limited 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 302,872 46,185 5,488 354,545 827 1,985 1,196 4,008 0.3 4.3 2
Slide 40: Continued low mortgage LTVs
Classification: Limited Continued low mortgage LTVs 20201 20191 20101 Mainstream Buy to let Specialist Total Total Total Average LTVs 42.5% 49.7% 40.9% 43.5% 44.9% 55.6% New business LTVs 65.1% 58.2% n/a 63.9% 64.3% 60.9% ≤ 80% LTV 89.9% 98.6% 94.2% 91.6% 87.5% 57.0% >80–90% LTV 9.6% 0.9% 2.3% 7.8%
Slide 41: Notes
Classification: Limited Notes 41
Slide 42: Debt Investor Relations Contacts
Classification: Limited Debt Investor Relations Contacts Website: www.lloydsbankinggroup.com/investors/fixed-income-investors INVESTOR RELATIONS LONDON Douglas Radcliffe Edward Sands Group Investor Relations Director Director, Investor Relations +44 (0)20 7356 1571 +44 (0)20 7356 1585 Douglas.Radcli
Slide 43: Forward looking statements
Classification: Limited 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,
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