Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — Q3 2021 Earnings Presentation
23 slides from Lloyds Banking's earnings presentation, Oct 28, 2021
Slide 1: Q3 Interim Management Statement
Q3 INTERIM MANAGEMENT STATEMENT Presentation to analysts and investors | 28 October 2021
Slide 2: Introduction
Introduction Charlie Nunn Group Chief Executive 1
Slide 3: Strategic and financial update
Strategic and financial update William Chalmers Chief Financial Officer 2
Slide 4: Strong progress on Strategic Review 2021
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: engagement following
Slide 5: Continued business momentum and solid financial performance
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. remediation) - Other inco
Slide 6: Continued franchise growth
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 and motor finance down £
Slide 7: Solid income performance
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 Q2 2021 Structural Reta
Slide 8: Continued focus on efficiency
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 operating costs to be circa £
Slide 9: Strong asset quality and improved macroeconomic outlook
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 – sustained low levels o
Slide 10: Strong capital build supported by lower RWAs
Strong capital build supported by lower RWAs Common equity tier 1 ratio (%, bps) +96bps • CET 1 ratio 17.2%, underpinned by 159bps +159bps capital build year to date 186 18 (17) (28) (7) 17.2 • CET 1 ratio 16.1% excluding software 16.2 (56) benefit and IFRS 9 transitional relief 16.1 - Ongoing targe
Slide 11: Well positioned to continue delivering for all stakeholders
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 by ongoing strong capi
Slide 12: Questions and Answers
LLOYDS Questions and Answers 11
Slide 13: Appendix 1: IFRS 17
LLOYDS Appendix 1: IFRS 17 12
Slide 14: IFRS 17: key messages
IFRS 17: key messages • IFRS 17 is an accounting change which impacts phasing of profit recognition for insurance contracts - Expected future profit on insurance contracts is currently recognised as new business income at inception - Under IFRS 17, profit is deferred to the balance sheet and recogni
Slide 15: IFRS 17: illustrative impact on accounting profit recognition
IFRS 17: illustrative impact on accounting profit recognition; no change to economic value Directional medium-term impact of IFRS 17 on reported IFRS 4 IFRS 17 insurance other income New Expected profit Day 1 profit deferred on business recognised on balance sheet and spread profit day 1 in income o
Slide 16: IFRS 17: illustrative impact on capital
IFRS 17: illustrative impact on capital Illustrative impact on Group and Insurance capital (year end 2020) (£bn) Group capital Insurance capital Remove VIF, partly offset by items including liability remeasurement • IFRS 17 does not impact the and establishing CSM liability economic value of the ins
Slide 17: Appendix 2
Appendix 2 Mi i
Slide 18: Quarterly P&L and key ratios
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) Net income 4,077 3,900 3
Slide 19: Illustrative NII sensitivity to shifts in interest rate curves
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 certain deposit balances Yea
Slide 20: Prudent economic scenarios
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 4.0 3.8 3.8 4.1 (30%) HP
Slide 21: Updated coverage after updated economic outlook
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 Retail 366.6 0.2% 3.7% 20.
Slide 22: Continued low mortgage LTVs
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% 1.4% 5.1% 7.8% 16.2% >90
Slide 23: Forward looking statements
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 together with its subsi