Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — H1 2021 Earnings Presentation
30 slides from Lloyds Banking's earnings presentation, Jul 29, 2021
Slide 1: 2021 Half Year Results
2021 HALF YEAR RESULTS Presentation to analysts and investors | 29 July 2021
Slide 2: Introduction and business update
Classification: Public Introduction and business update 1
Slide 3: 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 • Good progress on Strategic Review 2021 priorities • Solid financial performance and business momentum OUR Helping Britain • Continued balance sheet grow
Slide 4: Strategic Review 2021: Progress on Helping Britain Recover
Classification: Public Strategic Review 2021: Progress on Helping Britain Recover Focused where we can make a difference H1 progress vs. 2021 targets1 Expand availability of affordable c.£9bn lent to first time buyers; almost reaching FY target of £10bn Helping Britain and quality homes >£2bn of soc
Slide 5: Strategic Review 2021: Progress against our customer ambitions
Classification: Public Strategic Review 2021: Progress against our customer ambitions Preferred financial partner for personal customers Strategic actions taken to enhance Helping wealth offering Britain Mass market Recover 71 >£12bn digital offering Mass affluent HNW/UHNW Record all channel NPS, up
Slide 6: Strategic Review 2021: Progress in enhancing our capabilities
Classification: Public Strategic Review 2021: Progress in enhancing our capabilities Modernised technology architecture Integrated payments Helping Increase in clients onboarded to cash Britain Mobile app releases in H1 as % of HY20 Recover c.175% Target: Double number of releases in 2021 c.2x manag
Slide 7: Continuing economic recovery, although uncertainties remain
Classification: Public Continuing economic recovery, although uncertainties remain UK GDP1 Employments furloughed per day2 (Indexed to February 2020 = 100) (Millions) 105 12 100 10 95 8 90 6 4 85 2 80 0 75 Mar 20 Jun 20 Sep 20 Dec 20 Mar 21 Jun 21 J F M A M J J A S O N D J F M A M Employments furlou
Slide 8: Financial update
Classification: Public Financial update 7
Slide 9: Solid financial performance, continued business momentum
Classification: Public Solid financial performance, continued business momentum H1 2021 Net income £7.6bn • Net income recovering, 2% ahead of H1 2020, 8% ahead of H2 2020 - NII £5.4bn with AIEAs £441bn and H1 NIM 250bps Cost:income ratio 54.9% (incl. remediation) - Other income of £2.4bn; operating
Slide 10: Strong balance sheet and resilient net interest income
Classification: Public Strong balance sheet and resilient net interest income Average interest earning assets (£bn) +1% 10 1 441 437 (2) (5) • H1 AIEAs at £441bn up c.£4bn versus H2 2020 • NII of £5.4bn, down 1% on H1 2020 impacted by lower rates; up 2% on H2 • H1 NIM of 250bps, with Q2 margin of 25
Slide 11: Continued lending growth in mortgages; robust asset margins
Classification: Public Continued lending growth in mortgages; robust asset margins Changing asset mix (Book size £bn, Gross margin %1) Mortgage book UK consumer finance2 1.85% 1.82% 1.86% YoY 6.81% 6.72% 6.70% 305 +7% 294 39 37 36 285 24 25 9 9 8 Motor - New3 • Total mortgage book up £11.4bn in H1 2
Slide 12: Continued significant deposit growth reflecting franchise strength
Classification: Public Continued significant deposit growth reflecting franchise strength Increase in customer deposits1,2 Retail current account customers and average balances (Book size £bn, Gross margin %) (#m, £k) 0.20% 0.18% 0.15% YoY +8% 4.1 4.4 6.1 474 451 17 +25% 441 15 15 +10% 14 14 14 16.9
Slide 13: Franchise strength further building hedge sustainability
Classification: Public Franchise strength further building hedge sustainability Hedged balances1 (£bn) 185 190 210 225 179 180 186 215 65 • Structural hedge capacity of £225bn, up £15bn in H1 60 60 62 and £40bn since year end 2019, largely driven by 90 90 94 120 continued strong deposit growth c.41%
Slide 14: Resilient other income, some early signs of recovery
Classification: Public Resilient other income, some early signs of recovery Divisional other income (£bn) H1 2021 0.8 0.7 0.7 2.4 H2 2020 0.8 0.6 0.4 2.1 • Other income of £2.4bn YTD with £1.3bn in Q2 H1 2020 0.9 0.7 0.9 2.5 - Q2 benefits from strong contribution from Equity Investments business and
Slide 15: Continued focus on efficiency
Classification: Public Continued focus on efficiency Total costs (£m) +7.2% +0.8% 248 4,155 • Sustained cost discipline with market-leading 3,876 83 cost:income ratio of 54.9% 56 (1) - Rebuild of variable pay in the context of stronger than (107) expected financial performance - On track for c.£0.9b
Slide 16: Strong asset quality and improved economic outlook
Classification: Public Strong asset quality and improved economic outlook H1 Q2 H1 YoY Impairment (£m) 2021 2021 2020 change Charges pre-updated MES1 252 43 788 (536) Retail 527 206 578 (51) Commercial Banking (272) (161) 206 (478) • Asset quality remains strong with low new to arrears and underlyin
Slide 17: Retail – high quality and improving mortgage book; new to arrears remain low
Classification: Public Retail – high quality and improving mortgage book; new to arrears remain low Mortgage book quality1,2 (£bn,%) 350 341 324 307 303 294 295 289 • High quality UK mortgages account for over 60% of 53.4% 57.0% 59.6% 88.4% 88.3% 91.6% 93.9% total Group lending 81.9% - Net growth of
Slide 18: Commercial – diversified portfolio with limited exposure to most impacted sectors
Classification: Public Commercial – diversified portfolio with limited exposure to most impacted sectors Key coronavirus-impacted sectors net lending utilisation change since H1 20201 H1 21 drawn (£bn) balance (£bn) Auto. dealerships2 (1.1) 1.3 • c.70% of Commercial exposure3 at investment grade Hot
Slide 19: Strong recovery in statutory profit after tax to £3.9bn
Classification: Public Strong recovery in statutory profit after tax to £3.9bn (£m) H1 2021 H1 2020 Underlying profit / (loss) 4,065 (281) Restructuring costs (255) (133) • Restructuring costs of £255m, reflecting an increase in Severance costs (69) (28) technology R&D and severance Property transfo
Slide 20: RWAs down £1.8bn in H1; regulatory pressure in 2022
Classification: Public RWAs down £1.8bn in H1; regulatory pressure in 2022 Risk-weighted assets (£bn) £(1.8)bn 1.4 202.7 1.2 200.9 • RWAs down £1.8bn in H1 to £201bn, driven by (0.6) Commercial Banking optimisation (3.8) • Limited credit migration seen to date, supported by high quality book and HPI
Slide 21: Enhanced capital strength with significant headroom over target and requirements
Classification: Public Enhanced capital strength with significant headroom over target and requirements Common equity tier 1 ratio (%, bps) +50bps +93bps 16 115 16.7 • CET 1 ratio 16.7% underpinned by strong 16.2 (6) (32) (6) (37) capital build with 93bps in H1 15.5 • CET 1 ratio 15.5% excluding sof
Slide 22: 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 • Good progress on Strategic Review 2021 priorities • Solid financial performance and business momentum OUR Helping Britain • Continued balance sheet grow
Slide 23: Questions and Answers
Classification: Public Questions and Answers William Chalmers Jon Burgess Interim Group Chief Deputy Group Chief Executive Financial Officer 22
Slide 24: Appendix
Classification: Public Appendix 23
Slide 25: Quarterly P&L and key ratios
Classification: Public Quarterly P&L and key ratios (£m) Q2 2021 Q1 2021 Q4 2020 Q3 2020 Q2 2020 Q1 2020 Net interest income 2,741 2,677 2,677 2,618 2,528 2,950 Other income 1,282 1,135 1,066 988 1,235 1,226 Operating lease depreciation (123) (148) (150) (208) (302) (224) Net income 3,900 3,664 3,59
Slide 26: Prudent economic scenarios
Classification: Public Prudent economic scenarios Economic measure Change since Scenario ECL (£m) (%) 2021 FY 20201 2022 2023 2024 2025 2021-25 GDP 6.1 2.4 5.5 1.4 1.4 1.2 3.1 Interest rate 0.52 (0.62) 1.27 1.09 1.32 1.58 1.16 Upside 4,807 Unemployment rate 4.7 (0.7) 4.9 4.4 4.2 4.1 4.5 (30%) HPI gr
Slide 27: Modest reduction in coverage reflecting updated economic outlook
Classification: Public Modest reduction in coverage reflecting updated economic outlook Gross Coverage (excl. Recoveries)1 Q4 2020 Net ECL P&L Write-offs customer Total Total ECL increase / charge / Write-offs ECL & Other (£m) L&A (£bn) Stage 1 Stage 2 Stage 3 Total Coverage1 HY 2021 (decrease) (cre
Slide 28: Continued low mortgage LTVs
Classification: Public Continued low mortgage LTVs June 20211 20201 20101 Mainstream Buy to let Specialist Total Total Total Average LTVs 42.2% 48.8% 39.2% 43.1% 43.5% 55.6% New business LTVs 63.6% 60.2% N/A 63.1% 63.9% 60.9% ≤ 80% LTV 92.8% 99.3% 95.4% 94.0% 91.6% 57.0% >80–90% LTV 6.8% 0.4% 1.5% 5
Slide 29: Growth in customer franchise, with further opportunities in targeted areas
Classification: Public Growth in customer franchise, with further opportunities in targeted areas Channels market share Digital new business volumes1 19% 1 Branch new business volumes 36% Product market share Consumer credit card balances 26% PCA deposit balances 23% SME and small business lending b
Slide 30: 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 the business, strategy, p