Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — H1 2022 Earnings Presentation
33 slides from Lloyds Banking's earnings presentation, Jul 27, 2022
Slide 1: 2022 Half Year Results Presentation
Classification: Public 2022 Half Year Results Presentation Lloyds Banking Group 27 July 2022
Slide 2: Introduction and business update
Classification: Public Introduction and business update 2
Slide 3: Strong performance with confidence in continued delivery
Classification: Public Strong performance with confidence in continued delivery Purpose • Resilient customer franchise • Strong financial performance with continued business momentum Helping Britain • Enhanced guidance for 2022 Prosper • Strength of performance enabling increased interim dividend •
Slide 4: Positioned to navigate external uncertainties
Classification: Public Positioned to navigate external uncertainties Resilient customer franchise Support where required Personal and business customers demonstrating resilience Deep customer insight enabling targeted engagement with strong asset quality trends Cards spending higher than 2019 and cu
Slide 5: Strong financial performance with continued business momentum
Classification: Public Strong financial performance with continued business momentum £8.5bn 51.2% 13.2% Net income up 12% Cost:income ratio down RoTE down 6.0pp vs H1 2021 8.0pp vs H1 2021 vs H1 2021 139bps 14.8% 0.8p Pro forma capital generation Pro forma CET1 ratio up Interim dividend per share in
Slide 6: Enabling strategic delivery
Classification: Public Enabling strategic delivery >£4bn net new money in Insurance and Wealth and 1.5pp growth in protection market share >20% increase in percentage share of FX wallet and 10% growth in new merchant services clients Grow Green lending on target: c.£4bn sustainable financing1 and fu
Slide 7: Financial update
Classification: Public Financial update 7
Slide 8: Strong financial performance with continued business momentum
Classification: Public Strong financial performance with continued business momentum Summary P&L and key metrics (£m) H1 2022 H1 2021 YoY • Net income up 12%; NIM 277bps Net interest income 6,135 5,418 13% Other income 2,529 2,417 5% • Operating costs up 5%; stable BAU costs and higher planned strat
Slide 9: Continued recovery in customer activity and franchise growth
Classification: Public Continued recovery in customer activity and franchise growth H1 lending change H1 deposit change (£bn) (£bn) Retail Commercial Retail Commercial +£4.8bn/1.3% +£4.3bn/4.7% +£3.3bn/1.1% -£0.8bn/-0.5% • Mortgage balances up £2.2bn to £310bn, 0.2 driven by £3.3bn open book growth
Slide 10: Growth in net interest income
Classification: Public Growth in net interest income Average interest-earning assets (AIEAs) (£bn) +0.3% 448.3 1.7 0.1 0.8 449.6 • NII £6.1bn, up 13% YoY and 7% HoH (1.3) − Increased AIEAs, deposit growth and higher NIM − H1 AIEAs £449.6bn, up £8.8bn on prior H2 2021 Mortgages Unsecured Commercial O
Slide 11: Illustrative NII sensitivity
Classification: Public Illustrative NII sensitivity • c.£175m additional NII in year 1 for a Cumulative impact of parallel shifts in interest rate curve – 25bps parallel increase in rates illustrative 50% deposit pass-through1 (£m) − Sensitivities dependent on pass-through assumption Year 1 Year 2 Y
Slide 12: Profitable mortgage growth in a competitive market
Classification: Public Profitable mortgage growth in a competitive market Mortgage book (Book size £bn, Gross margin %1) 1.86% 1.84% 1.73% YoY 308 310 305 • Mortgage balances up £2bn in H1 to £310bn; open book growth £3bn 132 138 147 +11% • Back book c.£57bn with attrition c.20%; Front book absolute
Slide 13: Consumer and commercial lending growth in H1
Classification: Public Consumer and commercial lending growth in H1 UK consumer finance1 (Book size £bn, Gross margin %2) H1 2022 15 9 7 7 37 6.63% • UK consumer finance up £1.0bn in H1 H2 2021 14 8 6 8 36 6.59% − Credit card balances up £0.4bn, all in Q2, given improving spend levels H1 2021 14 8 6
Slide 14: Continued deposit franchise growth
Classification: Public Continued deposit franchise growth Customer deposits1,2 (Book size £bn, Gross margin %) 0.15% 0.16% 0.41% 474 476 478 YoY 17 17 18 15 16 15 • Continued inflows to the Group’s trusted brands, up almost £70bn since 2019 174 168 167 (4)% • Deposits increased £2bn in H1 Relationsh
Slide 15: Continued franchise growth building hedge sustainability
Classification: Public Continued franchise growth building hedge sustainability Hedged balances1 • Structural hedge approved capacity of (£bn) 210 225 240 250 £250bn, up £10bn in H1 240 250 186 215 75 • Nominal balance of £250bn with c.3.5 year 70 62 65 weighted-average duration Structural 120 140 1
Slide 16: Other income supported by recovering customer activity
Classification: Public Other income supported by recovering customer activity Other income (£bn) • H1 other income £2.5bn; £1.3bn in Q2 1.3 1.3 1.3 1.3 1.3 − Retail: improved current account and 1.1 credit card performance − Commercial: improving transaction Q1 21 Q2 21 Q3 21 Q4 21 Q1 22 Q2 22 banki
Slide 17: Stable BAU costs, increased investment as planned
Classification: Public Stable BAU costs, increased investment as planned Operating costs (£m) +5% 159 4,249 • Operating costs £4.2bn, up 5% given 79 (15) 4,090 planned investment and new businesses 4,053 33 64 • Sustained cost discipline with BAU cost (124) management offsetting inflation pressure •
Slide 18: Strong asset quality and sustained low new to arrears
Classification: Public Strong asset quality and sustained low new to arrears Impairment • £377m net impairment charge; AQR 17bps (£m) H1 2022 H1 2021 YoY • Sustained low levels of new to arrears; Charges / (credits) pre-updated MES1 282 103 179 underlying charges below pre-COVID level Retail 315 451
Slide 19: Benign credit trends in a resilient Retail portfolio
Classification: Public Benign credit trends in a resilient Retail portfolio New to arrears as a proportion of total balances (3-month rolling average, %) 1.00% • Customers demonstrating resilience with 0.75% stock of arrears below pre-COVID level 0.50% • Cards charge-offs remain low and in line with
Slide 20: Resilient Commercial portfolio with stable trends
Classification: Public Resilient Commercial portfolio with stable trends SME overdraft1 and corporate RCF2 utilisation • Stable SME overdraft utilisation through (%) pandemic, below 8 year average 60% 50% 45% • Stable working capital utilisation through 40% the year 15% 20% 22% − RCF utilisation sta
Slide 21: Statutory profit after tax of £2.8bn
Classification: Public Statutory profit after tax of £2.8bn Statutory profit (£m) H1 2022 H1 2021 YoY Underlying profit 3,746 3,820 (2)% Restructuring costs (47) (10) • Underlying and statutory profit converging Volatility and other items (38) 95 following year end 2021 reporting changes Statutory p
Slide 22: Enhanced capital position and guidance
Classification: Public Enhanced capital position and guidance Risk-weighted assets • RWAs down £2bn since 1 January given £(2)bn (£bn) optimisation and credit/model reductions 2 16 212 1 210 (2) • 139bps capital generation after 31bps for (3) full fixed pension deficit contributions 196 • Pro forma
Slide 23: Strong performance in H1, enhancing 2022 guidance
Classification: Public Strong performance in H1, enhancing 2022 guidance • Net income £8.5bn, up 12% YoY, supported by higher NIM of 2.77% Strong financial • AQR 17bps with sustained low levels of new to arrears performance with • RoTE 13.2% given strong profitability continued business momentum • S
Slide 24: Wrap up
Classification: Public Wrap up 24
Slide 25: Strong performance with confidence in continued delivery
Classification: Public Strong performance with confidence in continued delivery Purpose • Resilient customer franchise • Strong financial performance with continued business momentum Helping Britain • Enhanced guidance for 2022 Prosper • Strength of performance enabling increased interim dividend •
Slide 26: Q&A
Classification: Public Q&A 26
Slide 27: Appendix
Classification: Public Appendix 27
Slide 28: Quarterly P&L and key ratios
Classification: Public Quarterly P&L and key ratios (£m) Q2 2022 Q1 2022 Q4 2021 Q3 2021 Q2 2021 Q1 2021 Underlying net interest income 3,190 2,945 2,893 2,852 2,741 2,677 Underlying other income 1,268 1,261 1,307 1,336 1,282 1,135 Operating lease depreciation (119) (94) (78) (111) (123) (148) Net i
Slide 29: Prudent economic scenarios
Classification: Public Prudent economic scenarios Scenario ECL(£m) Measure (%)1 2022 vs Q1 222 2023 2024 2025 2026 Ave. 22-26 GDP 3.5 (0.1) 1.2 1.8 1.7 1.7 2.0 Interest rate 1.64 0.25 3.12 2.97 2.88 2.78 2.68 Unemployment rate 3.1 (0.2) 2.7 2.9 3.2 3.4 3.1 Upside (30%) 3,810 HPI growth 3.2 (2.1) 3.6
Slide 30: Updated coverage after updated economic outlook
Classification: Public Updated coverage after updated economic outlook Gross Coverage (ex. Recoveries)1 Total P&L Net ECL Write-offs (£m, unless stated customer coverage ECL Write-offs charge/ increase/ ECL Q2 & Other Stage 1 Stage 2 Stage 3 Total otherwise) L&A (£bn) Q4 20211 Q4 2021 & Other (credi
Slide 31: Continued low mortgage LTVs
Classification: Public Continued low mortgage LTVs June 20221 20211 20101 Mainstream Buy to let Specialist Total Total Total Average LTVs 39.5% 45.4% 34.9% 40.2% 42.1% 55.6% New business LTVs 62.3% 59.3% N/A 61.9% 63.3% 60.9% ≤ 80% LTV 96.4% 99.7% 96.8% 97.0% 95.4% 57.0% >80–90% LTV 3.2% 0.1% 1.1% 2
Slide 32: 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 33: 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