Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — Q1 2022 Earnings Presentation
31 slides from Lloyds Banking's earnings presentation, Apr 27, 2022
Slide 1: Q1 2022 Fixed Income Investor Presentation
Classification: Public Q1 2022 Fixed Income Investor Presentation Lloyds Banking Group 27 April 2022
Slide 2: Lloyds Banking Group – strong foundations
Classification: Public Lloyds Banking Group – strong foundations Our strong foundations… …have created distinct competitive strengths Leading UK customer franchise with trusted brands Maintained leading market shares; 19% since 2017 >1m business client Relationship with relationships c.50% of UK adu
Slide 3: Solid performance in Q1, well positioned looking forward
Classification: Public Solid performance in Q1, well positioned looking forward • Solid business and financial performance in Q1 − Strong revenue growth supported by increased NIM, continued recovery in customer activity and focus on costs − Asset quality remains strong and well positioned for a per
Slide 4: Solid business and financial performance
Classification: Public Solid business and financial performance Summary P&L and key metrics (£m) Q1 2022 Q1 2021 YoY • Strong net income, up 12%; NIM 268bps Net interest income 2,945 2,677 10% • Operating costs1 3% higher reflecting Other income 1,261 1,135 11% planned investment with stable BAU cos
Slide 5: Continued recovery in customer activity and franchise growth
Classification: Public Continued recovery in customer activity and franchise growth Q1 lending change Q1 deposit change • Total mortgage balances up £1.2bn in Q1 (£bn) (£bn) to £308.7bn, driven by £1.7bn increase in Retail Commercial Retail Commercial open book +£2.0bn / 0.6% +£2.6bn / 2.8% +£2.5bn
Slide 6: Strong revenue performance
Classification: Public Strong revenue performance • NII £2.9bn, up 10% on Q1 2021 Net interest income (NII) and banking net interest margin (NIM) (£bn, bps) − Stronger NIM 268bps, given base rate £2.9bn £2.9bn +11bps changes, deposit growth, hedge benefits 2 and continued capital base optimisation 1
Slide 7: Illustrative NII sensitivity
Classification: Public Illustrative NII sensitivity • Reflects shifts in forward rate curve • Marginal reduction in Year 1 sensitivity since year end driven by higher structural Cumulative impact of parallel shifts in interest rate curve1 hedge balance (£m) • Actual impact also depends on regulatory
Slide 8: Maintained focus on efficiency
Classification: Public Maintained focus on efficiency Operating costs • Cost:income ratio of 52.3% and operating (£m) +3% 63 costs of £2.1bn, up 3% given planned 2,098 2,045 61 investment and new businesses costs 2,035 36 (6) • Sustained cost discipline with stable BAU (64) (37) costs, offsetting in
Slide 9: Strong asset quality and sustained low new to arrears
Classification: Public Strong asset quality and sustained low new to arrears • £177m net charge, AQR 16bps • Sustained low levels of new to arrears; Impairment underlying charges below pre-COVID level (£m) Q1 2022 Q1 2021 YoY • Updated economic outlook: stronger HPI Charges pre-updated MES 1 150 99
Slide 10: UK economy resilient but pace of recovery expected to slow
Classification: Public UK economy resilient but pace of recovery expected to slow GDP has recovered to pre-pandemic levels Unemployment remains low Monthly UK GDP – Index, February 2020 = 1001 UK unemployment rate, % 2 105 6.0% 100 5.5% 95 5.0% 90 4.5% 85 4.0% 80 3.5% 2015 2016 2017 2018 2019 2020 2
Slide 11: Strategic Overview
Classification: Public Strategic Overview 11
Slide 12: Key messages
Classification: Public Key messages Higher, more diversified, revenues c.£0.7bn additional revenues from strategic initiatives in 2024; c.£1.5bn with a 50:50 NII/OOI split by 2026 Maintaining strong focus on cost discipline Transformation plan Flat costs in 2024 vs. 2022, with savings offsetting cos
Slide 13: Strategic execution creates clear outcomes
Classification: Public Strategic execution creates clear outcomes Deepen and Meeting more needs of existing customers innovate in Increased digitally active customers Consumer Higher market shares with intermediaries Strengthen Lower cost of technology cost and capital Lower cost of change efficienc
Slide 14: Our new strategy is guided by our purpose
Classification: Public Our new strategy is guided by our purpose A clear strategic vision… …with a transformation plan… …creating higher and more sustainable value Purpose Helping Britain Prosper Drive revenue growth and diversification Grow Strategic vision Higher, more UK customer-focused digital
Slide 15: Our purpose underpins our business and approach to ESG
Classification: Public Our purpose underpins our business and approach to ESG Purpose and mission Our purpose of Helping Britain Prosper is fundamental to the business Helping Strong alignment between purpose and value creation Britain Integrated with strategy to profitably deliver to all of our sta
Slide 16: Strong ESG ratings supported by clear deliverables
Classification: Public Strong ESG ratings supported by clear deliverables AAA MSCI 1 AA AA AA A • Reduce carbon emissions we finance by >50% by 2030, on the path BBB to net zero by 2050 or sooner BBB • Net zero for our own operations by 2030 BB • Sustainability embedded across business priorities B
Slide 17: Capital, Funding & Liquidity
Classification: Public Capital, Funding & Liquidity 17
Slide 18: Capital, MREL & Liquidity summary
Classification: Public Capital, MREL & Liquidity summary 16.3% CET12 remains ahead of regulatory 14.2% Capital CET11 MDA CET1 9.0% minimum and ongoing Group target of c.12.5% + c.1% management buffer FY 21 Q1 22 MREL2 comfortably in excess of ongoing MREL 37.2% 31.6% requirement of 27.2%3 FY 21 Q1 2
Slide 19: Capital strength maintained
Classification: Public Capital strength maintained Common equity tier 1 ratio 1 • Q1 CET 1 ratio 14.2% reflects strong capital build of 50bps during quarter after 16.3% regulatory headwinds of 230bps on 1 January 2022 14.2% Buffer to • UK CCyB rate set to increase to 1% in regulatory December 2022,
Slide 20: Strong capital position enabling significant accelerated pension contributions
Classification: Public Strong capital position enabling significant accelerated pension contributions Risk-weighted assets (£bn) £(2)bn • RWA regulatory inflation of £16bn on 16 212 2 1 January 210 (2) (2) • RWAs down £2bn since 1 January 196 supported by continued optimisation; limited credit impac
Slide 21: MREL comfortably in excess of ongoing requirements
Classification: Public MREL comfortably in excess of ongoing requirements MREL ratio 1 27.2% • Total capital ratio of 18.9% and MREL ratio O-SII 1.7% 2 Buffers of 31.6% remain strongly positioned CCB 2.5% 4.2% — Reduction in MREL ratio a result of post 1 2 x Pillar 2A 3 Jan 2022 regulatory changes i
Slide 22: Continued focus on legacy securities with significant reduction since Q3 2021
Classification: Public Continued focus on legacy securities with significant reduction since Q3 2021 • Legacy capital securities now constitute only c.£1.2bn, a reduction of c.£2.3bn £0.3bn since Q3 2021 following LME and redemptions £0.7bn • Outstanding amount immaterial when compared to c.£66bn of
Slide 23: Guiding to increased funding requirements over strategic plan period
Classification: Public Guiding to increased funding requirements over strategic plan period 2023 2022 onwards HoldCo Broadly limited to • c.£2.2bn equivalent issued YTD, out of c.£5-6bn Senior refinancing planned c.£5-6bn • 2023-24 likely to be closer to “steady state” volumes of c.£15-20bn a year a
Slide 24: Strong credit ratings across the Group
Classification: Public Strong credit ratings across the Group Non-Ring-Fenced Insurance HoldCo Ring-Fenced Bank Bank Sub-Group Lloyds Bank, Lloyds Bank Corporate UK Sovereign Lloyds Banking Group Scottish Widows 1 Bank of Scotland Markets BBB+ A+ A S&P AA Stable Stable Stable - Stable A-2 A-1 A-1 A2
Slide 25: Appendix
Classification: Public Appendix 25
Slide 26: Simple group structure with multiple issuance points
Classification: Public Simple group structure with multiple issuance points HoldCo Lloyds Banking Group BBB+ / A2 / A A-2 / P-1 / F1 Sta / Sta / Sta Senior Unsecured - Capital Ring-Fenced Sub-Group Non-Ring-Fenced Sub-Group Insurance Sub-Group Equity Investments Sub-Group Lloyds Bank, Bank of Scotla
Slide 27: Prudent economic scenarios
Classification: Public Prudent economic scenarios Scenario Measure (%) 2022 vs Q4 211 2023 2024 2025 2026 Ave. 22-26 GDP 3.6 (0.4) 1.0 1.8 1.6 1.6 1.9 Interest rate 1.39 (0.05) 1.80 2.00 2.02 2.05 1.85 Upside (30%) Unemployment rate 3.3 - 3.4 3.6 3.8 3.8 3.6 HPI growth 5.3 2.7 4.8 4.9 3.9 3.8 4.5 CR
Slide 28: Diverse funding portfolio
Classification: Public Diverse funding portfolio Wholesale funding portfolio by type 12% 25% MM Funding Covered Bond 27% £100bn Securitisation OpCo Senior Wholesale funding portfolio by currency 16% 8% HoldCo Senior Sub Debt 16% 4% 25% GBP USD 26% Wholesale funding portfolio by maturity £100bn EUR O
Slide 29: LBCM balance sheet and income statement overview
Classification: Public LBCM balance sheet and income statement overview Balance sheet and income statement key metrics as at FY 2021 £89bn Other 6 5 Other Total RWAs CET1 Capital 16 Derivatives Derivatives 18 • LBCM is well positioned to support the Group’s strategy and ambitions for revenue Financi
Slide 30: Debt investor relations contacts
Classification: Public Debt investor relations contacts Group Corporate Treasury Peter Green Liz Padley Richard Shrimpton Head of Senior Funding & Covered Non-Bank Entities Treasurer & Head of Deputy Treasurer +44 (0)20 7158 2843 Bonds Capital and Recovery and Resolution +44 (0)20 7158 2145 +44 (0)2
Slide 31: 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