Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — Q3 2021 Earnings Presentation
29 slides from Lloyds Banking's earnings presentation, 2021
Slide 1: Fixed Income Investor Presentation Q3 2021
FIXED INCOME INVESTOR PRESENTATION Q3 2021
Slide 2: Group Overview
Classification: Public Group Overview 2
Slide 3: Simple group structure with multiple issuance points
Capital, Funding & Classification:Results Group Overview Public Liquidity Appendix Simple group structure with multiple issuance points HoldCo Lloyds Banking Group Main Entities A2 / BBB+ / A Ratings1 P-1 / A-2 / F1 Sta / Sta / Sta Example Products Senior Unsecured - Capital Ring-Fenced Sub-Group No
Slide 4: Well positioned to continue delivering for all stakeholders
Classification: Public Well positioned to continue delivering for all stakeholders • Ongoing support for customers whilst Helping Britain Recover • Strong progress on Strategic Review 2021 priorities • Continued business momentum and solid financial performance • Strong capital position, underpinned
Slide 5: Strong progress on Strategic Review 2021
Classification: Public Strong progress on Strategic Review 2021 Illustrative examples of YTD progress Helping Britain Recover Customer ambitions Enhanced capabilities Exceeding £10bn first-time buyer Preferred financial partner for >25% increase in SME client target (YTD: c.£13bn) personal customers
Slide 6: Significant progress across our ESG ambitions
Classification: Public Significant progress across our ESG ambitions Announced ambitious goals to reach net zero emissions in our lending and investment portfolios by 2050 or sooner, with intermediate goals to Environmental - Help reduce carbon emissions we finance by >50% by 2030 - Halve the carb
Slide 7: Long-term ESG focus supported by memberships, awards and ratings
Classification: Public Long-term ESG focus supported by memberships, awards and ratings 1985 2008 2018 2020 Independent charitable Adopted the Equator Launched our Launched our Race Foundations established Principles Sustainability strategy Action Plan 2002 2014 2019 2021 Investment in energy saving
Slide 8: Financial Update
Classification: Public Financial Update 8
Slide 9: Continued business momentum and solid financial performance
Classification: Public Continued business momentum and solid financial performance Q3 2021 2021 YTD Net income £4.1bn £11.6bn • Solid net income performance, 5% ahead of Q2 and 8% ahead of prior year to date Cost:income ratio 48.3% 52.6% - NII £2.9bn in Q3, with AIEAs £447bn and NIM 255bps (incl. re
Slide 10: Continued franchise growth
Classification: Public Continued franchise growth Q3 lending change Q3 deposit change (£bn) (£bn) Retail Commercial Retail Commercial +£2.5bn +£1.5bn +£4.0bn +£0.5bn 0.4 • Total mortgage balances up £2.2bn in Q3 to £307.4bn driven by £2.7bn increase in open book; credit card 1.3 balances up £0.2bn a
Slide 11: Solid income performance
Classification: Public Solid income performance Net interest income and banking net interest margin (£bn, bps) £2.7bn £2.9bn +4bps 2 255 1 1 1 • NII of £8.3bn up 2% on prior YTD; Q3 at £2.9bn, up 4% 251 on Q2 (1) - NIM 255bps in Q3, up 4bps on Q2 - Structural hedge capacity increased to £240bn with
Slide 12: Continued focus on efficiency
Classification: Public Continued focus on efficiency Total costs (£m) +5% 271 6,126 +1% • Sustained cost discipline with market-leading 177 5,811 cost:income ratio of 52.6% YTD 74 • Operating costs, excluding remediation, £5.6bn year (24) (183) to date, up 1% on 2020 • Continue to expect 2021 operat
Slide 13: Strong asset quality and improved macroeconomic outlook
Classification: Public Strong asset quality and improved macroeconomic outlook Q3 2021 Q3 Q3 2020 YoY Impairment (£m) YTD 2021 YTD change Charges pre-updated MES1 411 159 1,192 (781) Retail 733 206 976 (243) Commercial Banking (318) (46) 211 (529) Other (4) (1) 5 (9) • Asset quality remains strong –
Slide 14: Capital, Funding & Liquidity
Classification: Public Capital, Funding & Liquidity 14
Slide 15: Capital, Funding & Liquidity summary
Capital, Funding & Classification:Results Group Overview Public Liquidity Appendix Capital, Funding & Liquidity summary Significant CET1 headroom to 2022 RWA regulatory headwinds, although MREL strongly positioned - c.940bps regulatory minimum and Group target uncertainties remain above expected req
Slide 16: Enhanced capital strength with significant headroom over target and requirements
Capital, Funding & Classification:Results Group Overview Public Liquidity Appendix Enhanced capital strength with significant headroom over target and requirements Common equity tier 1 ratio • CET 1 ratio 17.2%, underpinned by 159bps capital build year to date • CET 1 ratio 16.1% excluding software
Slide 17: RWAs down £2bn in Q3; regulatory pressure in 2022
Classification: Public RWAs down £2bn in Q3; regulatory pressure in 2022 Risk-weighted assets (£bn) £(2)bn 1 203 1 • RWAs down £2bn YTD to £201bn, benefitting from 1 201 Commercial Banking optimisation (5) • Limited credit migration seen to date, supported by high quality book and HPI • 2021 RWAs ex
Slide 18: Well positioned for end-state MREL requirements
Capital, Funding & Classification:Results Group Overview Public Liquidity Appendix Well positioned for end-state MREL requirements Transitional MREL ratio 36.9% • Strongly positioned with total capital ratio of 23.6% and SRB 1.7% MREL ratio of 36.9%; c.£1.4bn of MREL eligible senior unsecured and £5
Slide 19: Scale of legacy capital securities limited in context of wider capital stack
Capital, Funding & Classification:Results Group Overview Public Liquidity Appendix Scale of legacy capital securities limited in context of wider capital stack Legacy Securities (£bn) • Legacy capital securities constitute only £3.5bn, 0.3 compared to c.£74bn of our regulatory loss-absorbing capacit
Slide 20: Prudent funding and liquidity position with limited funding requirements
Capital, Funding & Classification:Results Group Overview Public Liquidity Appendix Prudent funding and liquidity position with limited funding requirements Wholesale funding portfolio by maturity and type 2021 Funding by currency • Average LCR remains comfortably 13% 21% 23% 24% above regulatory min
Slide 21: Ratings unchanged over the quarter
Capital, Funding & Classification:Results Group Overview Public Liquidity Appendix Ratings unchanged over the quarter Ring-Fenced Non-Ring- HoldCo Bank Fenced Bank Lloyds Bank, Lloyds Bank Lloyds UK Sovereign 1 Bank of Corporate Commentary Banking Group 1 Scotland Markets 1 • In June, S&P returned t
Slide 22: Appendix
Classification: Public Appendix 22
Slide 23: Quarterly P&L and key ratios
Classification: Public Quarterly P&L and key ratios (£m) Q3 2021 Q2 2021 Q1 2021 Q4 2020 Q3 2020 Q2 2020 Q1 2020 Net interest income 2,852 2,741 2,677 2,677 2,618 2,528 2,950 Other income 1,336 1,282 1,135 1,066 988 1,235 1,226 Operating lease depreciation (111) (123) (148) (150) (208) (302) (224) N
Slide 24: Illustrative NII sensitivity to shifts in interest rate curves
Classification: Public Illustrative NII sensitivity to shifts in interest rate curves • Sensitivities reflect shifts in forward rate curve Illustrative cumulative impact of parallel shifts in interest rate curve1 • NII impact driven by structural hedge maturity (£m) reinvestment and benefit on certa
Slide 25: Prudent economic scenarios
Classification: Public Prudent economic scenarios ECL Economic vs vs Average Scenario (£m) measure (%) 2021 HY 20211 FY 20201 2022 2023 2024 2025 2021-25 GDP 6.7 0.6 3.0 5.5 1.1 1.4 1.4 3.2 Interest rate 0.26 (0.26) (0.88) 1.57 1.62 1.78 2.03 1.45 Upside 4,584 Unemployment rate 4.6 (0.1) (0.8) 4.1 4
Slide 26: Updated coverage after updated economic outlook
Classification: Public Updated coverage after updated economic outlook Gross Coverage (excl. Recoveries)1 Total P&L Write-offs customer Coverage1 ECL Write-offs charge / Net ECL ECL Q3 & Other Q3 (£m) L&A (£bn) Stage 1 Stage 2 Stage 3 Total Q4 2020 Q4 2020 & Other (credit) decrease 2021 YTD 2020 Ret
Slide 27: Continued low mortgage LTVs
Classification: Public Continued low mortgage LTVs September 20211 20201 20101 Mainstream Buy to let Specialist Total Total Total Average LTVs 42.1% 48.7% 38.7% 43.0% 43.5% 55.6% New business LTVs 63.9% 60.4% N/A 63.4% 63.9% 60.9% ≤ 80% LTV 93.2% 99.4% 95.8% 94.3% 91.6% 57.0% >80–90% LTV 6.3% 0.3% 1
Slide 28: Debt Investor Relations Contacts
Classification: Public Debt Investor Relations Contacts Website: www.lloydsbankinggroup.com/investors/fixed-income-investors GROUP CORPORATE TREASURY Richard Shrimpton Peter Green Liz Padley Treasury Markets Director Head of Senior Funding & Covered Bonds Head of Capital Structuring, Holding Company
Slide 29: Forward looking statements
Classification: Public 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 Lloyds Banking Group plc