Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — Debt Investor Presentation (November 2017)
34 slides from Lloyds Banking's debt investor presentation, November 2017
Slide 1: Q3 Interim Management Statement
Q3 INTERIM MANAGEMENT STATEMENT Presentation to Fixed Income Investors November 2017
Slide 2: Group Overview
GROUP OVERVIEW Simple, low risk customer focused UK retail and commercial bank Our business model • UK’s largest branch network Simple, low risk, customer focused, Branches • Commercial Banking client relationship model UK retail and commercial bank • Trusted partner of intermediary distributors Our
Slide 3: Group Market Share
GROUP MARKET SHARE Strong market positions with growth in key customer segments Market Shares (%) • Open mortgage book expected to Consumer card balances MBNA 25 grow and end the year slightly above Current account volumes 25 FY 16 Retail deposit balances 20 (1) • UK Consumer Finance net lending Mor
Slide 4: Helping Britain Prosper
HELPING BRITAIN PROSPER Supporting people, businesses and communities across the UK Amount of lending committed to help people buy their first homes We’ll Help the construction industry to build more homes, supporting social housing and be No. of homes our Housing Growth Partnership has committed to
Slide 5: Q3 2017 Results
Q3 2017 RESULTS
Slide 6: Highlights for the First Nine Months of 2017
HIGHLIGHTS FOR THE FIRST NINE MONTHS OF 2017 Strong financial performance continues to demonstrate the strength of the business model • Strong financial performance with improved profit and returns on both underlying and statutory bases • Strong third quarter driven by income growth of 8% • Growth i
Slide 7: Delivering for Customers and Shareholders
DELIVERING FOR CUSTOMERS AND SHAREHOLDERS Significant strategic and financial progress in recent years Q3 income progression (£bn) • Creating the best customer experience – UK’s largest and top-ranked digital bank Retail – 13.2m online customers, 9m active on mobile 2016 2.6 1.2 0.4 4.3 Commercial B
Slide 8: Financial Performance
FINANCIAL PERFORMANCE Strong underlying performance with continued improvement in profit and returns YTD YTD (£m) 2017 2016 Change • Strong Q3 performance, with NII up 12% and Net interest income 9,117 8,630 6% underlying profit up 9% Other income 4,776 4,520 6% • YTD underlying profit of £6.6bn up
Slide 9: Financial Performance
FINANCIAL PERFORMANCE Total income up 6% with improvements in net interest income and other income NII and NIM vs Q3 YTD 2016 (£m) YTD other income (£bn) 2.72% (10)bps +11bps +7bps +5bps 2.85% 247 9,117 Retail 348 8,630 351 2016 1.6 1.3 1.4 0.2 4.5 Commercial (459) Banking +6% Insurance & Wealth 201
Slide 10: Asset Quality
ASSET QUALITY Asset quality remains strong reflecting Group’s continued prudent approach to risk Asset quality ratio (bps) • Gross AQR in line with previous years, despite single Q3 2015 11 25 large corporate impairment in the third quarter • Net AQR for the nine months increased to 16bps, Net Q3 20
Slide 11: Statutory Financial Performance
STATUTORY FINANCIAL PERFORMANCE Significant improvement in statutory profit reflecting improvement in underlying profit and lower below the line charges YTD YTD (£m) 2017 2016 • Statutory profit after tax of £3.1bn, up 50% Underlying profit 6,567 6,073 – Market volatility and other items in 2016 inc
Slide 12: Balance Sheet
BALANCE SHEET Customer balances now growing while continuing to optimise the portfolio Loans and advances (£bn) 457 • Loans and advances £455bn, up £5bn since year end 453 453 455 452 450 10 9 9 10 10 445 – Open mortgage book growth whilst still focusing on 10 9 margin; book expected to end 2017 sli
Slide 13: Balance Sheet
BALANCE SHEET Capital generation very strong with 2017 guidance enhanced Common equity tier 1 ratio (%) – Jun to Sep c.85bps 0.1 0.1 0.1 14.9 14.0 0.6 14.1 • Q3 CET1 capital generation of 85bps (0.8) – Strong underlying performance – CET1 ratio of 14.9%, pre dividend Jun 2017 Under- lying RWAs Marke
Slide 14: Summary
SUMMARY Confidence in the Group’s future prospects is reflected in our financial targets • Continued strong financial performance • Focused on delivering the final stages of our – Cost discipline and low risk business model current strategic plan continue to provide competitive advantage • The Group
Slide 15: Capital Position
CAPITAL POSITION
Slide 16: Capital Position
CAPITAL POSITION Well positioned in an evolving regulatory environment Capital composition(1) (%) Capital Resources 21.4% 21.2% £46.0bn 4.4% 4.0% £8.7bn • Strong capital position following c.85bps capital generation in Q3 0.9% 0.7% £1.5bn 2.5% £5.3bn Tier 2 2.5% – CET1 ratio of 14.1% (post dividend
Slide 17: Managing Evolution of CET1 Regulatory Requirements
MANAGING EVOLUTION OF CET1 REGULATORY REQUIREMENTS Strong capital generative business provides comfort for meeting regulatory buffers Capital buffer evolution(1) (%) • Current Pillar 2A CET1 requirement of 3.0% (reviewed PRA & MB annually by PRA) PRA & MB SRB PRA & MB CCyB • PRA Buffer reduced earli
Slide 18: Peer Comparison: Relative Capital Strength
PEER COMPARISON: RELATIVE CAPITAL STRENGTH Strongly capitalised at 21.2% Capital composition(1) CET1 Tier 1 Total Capital 21.2% 20.7% LBG Total Capital 4.0% 17.5% LBG Tier 1 Capital 3.1% 3.0% 15.1% 14.7% 1.1% 1.7% 1.7% 17.2% (2) 14.1% 13.7% 13.8% 11.3% 11.1% LBG UK Average French Average Canadian Av
Slide 19: Progression Toward MREL Requirement
PROGRESSION TOWARD MREL REQUIREMENT MREL build continues via efficient issuance activity from a strong capital base MREL build c.£4-5bn MREL required p.a. • MREL met with regulatory capital and c.£4-5bn MREL senior unsecured issuance at HoldCo required p.a. HoldCo Senior level HoldCo HoldCo Senior S
Slide 20: UK Approach to Resolution
UK APPROACH TO RESOLUTION Defined approach underpinned by clear preference for structural subordination 1 Losses occur at the OpCo and are passed to HoldCo via write down of intercompany HoldCo Loss Absorption Hierarchy assets HoldCo Senior Unsecured Losses arise at OpCo OpCo Loss Absorption Hierarc
Slide 21: Structural Reform
STRUCTURAL REFORM
Slide 22: Group Structure Post-Ringfencing
GROUP STRUCTURE POST-RINGFENCING LBCM core to the Group’s simple, UK, retail and commercial model Lloyds Banking Group plc (Hold Co) Insurance Sub Group Equity Investments Ring-Fenced Sub-Group Non-Ring-Fenced Sub-Group (Scottish Widows) Sub- Group Majority of Group activities, including: Primary bu
Slide 23: Business Strategy & Target Market
BUSINESS STRATEGY & TARGET MARKET LBCM’s strategy and proposition will be complementary to the Group • LBCM is core to the Group’s existing customer proposition and will ensure a continued offering to: – Global Corporates (GC), Financial Institution (FI) and Mid-Market (MM) corporate clients in the
Slide 24: LBCM: Strong Ratings Assigned
LBCM: STRONG RATINGS ASSIGNED Investment grade preliminary ratings • Lloyds Bank Corporate Markets has been assigned Lloyds Bank strong investment grade preliminary / expected / Corporate Lloyds Bank prospective ratings by S&P, Fitch and Moody’s Markets S&P • Both S&P and Fitch have taken a “top-dow
Slide 25: Funding, Liquidity and Credit Ratings
FUNDING, LIQUIDITY AND CREDIT RATINGS
Slide 26: Wholesale Funding
WHOLESALE FUNDING Composition of wholesale funding as at 30 Sept 2017 Product, currency and maturity – £99bn Senior unsecured debt maturities(1) Senior HoldCo LBG (£6.4bn Total) Senior OpCo LB (£26.9bn Total) 6% 18% 19% MM Funding GBP 26% Covered Bonds EUR 7% 32% 1.6 Securitisation 5.1 USD 4.3 OpCo
Slide 27: Wholesale Funding
WHOLESALE FUNDING Diverse and simple term funding model has enabled successful execution £5.6bn Term issuance YTD 2017 Issuer Funding platforms GBP EUR USD Other Capital/ MREL(2) issuance Lloyds Banking • Subordinated debt: AT1, Tier 2 LBG (HoldCo) HoldCo senior Group (A3/BBB+/A+)(1) • Senior unsecu
Slide 28: Liquidity
LIQUIDITY High level of liquidity Primary/LCR eligible liquid assets(1) (£bn) (2) 123 121 119 105 • Liquid assets are broadly unchanged compared to 2016 • Strong liquid asset portfolio maintained, comprised largely of cash and LCR eligible securities 2014 2015 2016 2017 Q3 • LCR eligible liquid asse
Slide 29: Credit Ratings
CREDIT RATINGS Strong credit ratings, with stable outlook unless stated otherwise Lloyds Bank Bank of LBG (HoldCo) Lloyds Bank HBOS Corporate Scotland Markets(1) MOODY’S Long Term A3 Aa3 Aa3 Aa3 (P) A2 Short Term P-2 P-1 P-1 P-1 (P) P-1 S&P Positive Positive Positive Outlook Outlook Outlook Long Ter
Slide 30: Appendix
APPENDIX
Slide 31: EBA & PRA Stress Scenario Comparison
EBA & PRA STRESS SCENARIO COMPARISON The 2017 PRA stress test combines elements of recent scenarios with a high rates environment to test all aspects of UK banks UK domestic stress scenarios PRA 2017 PRA 2016 PRA 2015 PRA 2014 EBA 2016 EBA 2014 GDP -4.7 -4.3 -3.2 -3.9 -4.2 -3.5 (peak-to-trough, ppts
Slide 32: Stress Testing Framework
STRESS TESTING FRAMEWORK Reduction in stress peak to trough reflects recent de-risking EBA FL CET1 ratio deltas(1) 2014 v 2016 adverse scenarios (bps) • Stronger balance sheet bps FL CET1 - Adverse Delta (2014 test) FL CET1 - Adverse Delta (2016 test) and FL CET1 ratio for 800 the 2016 stress tests
Slide 33: Debt Investor Relations Contacts
DEBT INVESTOR RELATIONS CONTACTS Website: www.lloydsbankinggroup.com/investors/debt-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.radcliffe@lloydsbanking.com edward.sa
Slide 34: Forward Looking Statement and Basis of Presentation
FORWARD LOOKING STATEMENT AND BASIS OF PRESENTATION FORWARD LOOKING STATEMENTS This document contains certain forward looking statements with respect to the business, strategy and plans of Lloyds Banking Group and its current goals and expectations relating to its future financial condition and perf
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