Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — Debt Investor Presentation (July 2022)
32 slides from Lloyds Banking's debt investor presentation, Jul 27, 2022
Slide 1: 2022 Half Year Fixed Income Investor Presentation
Classification: Public 2022 Half Year Fixed Income Investor Presentation Lloyds Banking Group 27 July 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: 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 4: 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 5: Financial Update
Classification: Public Financial Update 5
Slide 6: 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 7: 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 8: 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 Mortgages Unsecured Commercial Other yea
Slide 9: 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 10: Continued deposit inflows supporting hedge sustainability
Classification: Public Continued deposit inflows supporting hedge sustainability Customer deposits up £2bn in H11,2 (Book size £bn, Gross margin %) • Retail current account balances up £1.9bn 0.15% 0.16% 0.41% in H1, including growth in Q2 474 476 478 YoY 17 17 18 • Commercial deposits down £0.8bn i
Slide 11: 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 12: 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 13: 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 MES 1 282 103 179 underlying charges below pre-COVID level Retail 315 45
Slide 14: 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 15: 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 16: Recovery being impacted by higher cost of living
Classification: Public Recovery being impacted by higher cost of living 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 2021 2022 7
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% CET1 remains ahead of regulatory 14.8% Capital CET11 MDA CET11 9.0% minimum and ongoing Group target of c.12.5% + c.1% management buffer FY 21 H1 22 MREL remains comfortably in excess of MREL 37.2% 32.4%1 ongoing requirement of 27.2% 2 f
Slide 19: 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 20: Capital strength maintained
Classification: Public Capital strength maintained Common equity tier 1 ratio 1 • Pro forma CET1 ratio of 14.8% reflects 16.3% strong capital build of 139bps during half- year after regulatory headwinds of 230bps 14.8% on 1 January 2022 Buffer to • UK CCyB rate set to increase from 1% in regulatory
Slide 21: Guiding to increased funding requirements over strategic plan period
Classification: Public Guiding to increased funding requirements over strategic plan period 2023 2022 onwards HoldCo Refinancing of c.£5-6bn • c.£3.5bn equivalent issued YTD, out of Senior maturities planned c.£5-6bn • Expect £10-15bn of wholesale funding Ongoing target of Ongoing needs in 2023 Tier
Slide 22: 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 A3
Slide 23: 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 24: Appendix
Classification: Public Appendix 24
Slide 25: Simple group structure with multiple issuance points
Classification: Public Simple group structure with multiple issuance points HoldCo Lloyds Banking Group BBB+ / A3 / A A-2 / P-2 / 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 26: 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 27: 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 28: 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 29: Diverse funding portfolio as at H1 22
Classification: Public Diverse funding portfolio as at H1 22 Wholesale funding portfolio by type 13% 22% MM Funding Covered Bond 29% £98bn Securitisation OpCo Senior Wholesale funding portfolio by currency 16% 8% HoldCo Senior Sub Debt 16% 4% 24% GBP USD 25% Wholesale funding portfolio by maturity £
Slide 30: Continued focus on legacy securities with significant reduction since 2021
Classification: Public Continued focus on legacy securities with significant reduction since 2021 • Legacy capital securities now constitute only c.£1.2bn, a reduction of c.£2.3bn £0.3bn since 2021 following LME and redemptions £0.7bn • Outstanding amount immaterial when compared to c.£66bn of regul
Slide 31: 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 Richard.Shrimpton@Lloydsbanking.com Bonds Capital and Recovery and Resolution Peter.Green@
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
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