Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — Debt Investor Presentation (July 2023)
40 slides from Lloyds Banking's debt investor presentation, Jul 26, 2023
Slide 1: Fixed Income Presentation
Classification: Public Fixed Income Presentation Lloyds Banking Group 26 July 2023 1
Slide 2: Business and strategic update
Classification: Public Business and strategic update 2
Slide 3: Changing external environment, consistent delivery
Classification: Public Changing external environment, consistent delivery Purpose Helping • Fully focused on proactively supporting customers Britain • Group performing well and as expected • Continuing to deliver on strategic ambitions; committed to 2024 and 2026 strategic benefits • Well positione
Slide 4: Increased focus on supporting customers
Classification: Public Increased focus on supporting customers • Contacted >10m savings customers1 and >200k mortgage customers2 • Committed to Mortgage Charter, including payment arrangements and product switching Proactive support • Higher rates with an expanded savings offering and awareness; 1.9
Slide 5: Robust delivery consistent with expected trends
Classification: Public Robust delivery consistent with expected trends Q2 NIM step down Resilience, anticipated mix shift Costs in line Q2 net interest margin Total deposits Q2 operating costs Asset quality remains resilient Group performing well Increasing returns to shareholders Q2 pre-MES asset q
Slide 6: Progressing our strategic transformation
Classification: Public Progressing our strategic transformation A clear strategic vision… …driving a 5-year transformation… …seeing ongoing progress in H1 2023 2022 Investment on track Laying the foundations, early benefits delivery £1.4bn strategic investment to date, of which £0.6bn in H1 2023 UK
Slide 7: Strategic priorities delivered in H1
Classification: Public Strategic priorities delivered in H1 Illustrative examples 20.6m digitally active customers, up c.13% vs. FY21 Growing mass affluent customers, alongside proposition developments, e.g. ready-made investments Drive revenue growth and Launched mobile first onboarding for sole tr
Slide 8: Strategic delivery in H2
Classification: Public Strategic delivery in H2 Drive revenue growth and Launch of dedicated mass affluent proposition Grow diversification Scale ‘HomeHub’ ecosystem to deliver seamless customer journey End-to-end digital origination for asset finance and extend mobile-first onboarding journey for l
Slide 9: Financial update
Classification: Public Financial update 9
Slide 10: Robust financial performance
Classification: Public Robust financial performance Financial performance (£m) H1 2023 H1 2022 YoY Net interest income 7,004 6,135 14% Other income 2,538 2,367 7% • Statutory PAT £2.9bn up 17%; H1 RoTE 16.6% Operating lease depreciation (356) (213) (67)% Net income 9,186 8,289 11% • Strong net incom
Slide 11: Resilience in customer franchise
Classification: Public Resilience in customer franchise Q2 lending change (£bn) Q2 deposit change (£bn) Retail Commercial Retail Commercial • Total lending £450.7bn, down £1.6bn or 0.4% in +£0.2bn/0% -£1.0bn/1% -£0.6bn/0% -£2.9bn/2% Q2; down 0.9% in H1 o Retail flat in Q2; mortgages down £1.1bn vs 0
Slide 12: Strong net interest income performance
Classification: Public Strong net interest income performance Average interest earning assets (£bn) 1 1 • NII £7.0bn, up 14% on H1 2022, down 2% in Q2 (2) (1) o H1 AIEAs £454bn; Q2 broadly stable vs Q1 454 453 o H1 NIM 318bps including 314bps in Q2, down 8bps vs Q1 given expected headwinds • Expect
Slide 13: Mortgage balances showing underlying resilience
Classification: Public Mortgage balances showing underlying resilience Mortgage book (Book size £bn, Gross margin %1) 1.73% 1.52% 1.32% 310 311 306 YoY • Mortgage balances £306bn o Open book down £1.7bn, including £0.7bn in Q2 147 153 153 +4% o Back book c.£39bn, down £2.4bn in Q2 Front book o £2.5b
Slide 14: Growth in consumer businesses and CIB
Classification: Public Growth in consumer businesses and CIB UK Cards, Loans & Motor (Book size £bn, Gross margin %1) H1 2023 15 9 8 7 39 6.09% • UK Cards, Loans & Motor up £1.8bn in H1, including £1.0bn in Q2 H2 2022 14 9 7 7 37 6.51% o Credit cards up £0.6bn in H1 with higher H1 2022 14 9 7 7 37 6
Slide 15: Deposit franchise supporting customer needs
Classification: Public Deposit franchise supporting customer needs Customer deposits (Book size £bn, Gross margin %1) 0.41% 0.98% 1.34% 478 475 470 YoY • Total deposits £469.8bn, down £5.5bn in H1; down £3.3bn in Q2 113 114 108 (5)% • Retail deposits down £4.9bn in H1, including £0.6bn in Q2 o Retai
Slide 16: Structural hedge a significant tailwind
Classification: Public Structural hedge a significant tailwind Hedged balances1 (£bn) Hedge 250 255 255 capacity 250 255 255 80 80 75 • Structural hedge approved capacity unchanged Structural at £255bn; c.3.5 year weighted average duration hedge 145 145 145 30 30 30 • Prudent management of structura
Slide 17: Updated macroeconomic outlook
Classification: Public Updated macroeconomic outlook UK bank rate CPI inflation 6% 12% 5% 10% 4% 8% 3% 6% 2% 4% • Recent growth and inflation resilient, but expect 1% 2% higher base rate to dampen 2024 GDP recovery 0% 0% Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 o GDP expected to rise 0.
Slide 18: Resilient observed asset quality
Classification: Public Resilient observed asset quality Impairment1 (£m) Q2 H1 2023 H1 2022 YoY Charge (credit) pre updated MES2 335 657 282 375 Retail 280 551 285 266 • H1 impairment charge £662m, AQR 29bps Commercial Banking 55 108 (7) 115 Other – (2) 4 (6) o H1 pre MES charge £657m includes roll-
Slide 19: Consistently reassuring performance across portfolios
Classification: Public Consistently reassuring performance across portfolios New to arrears as a proportion of total balances (3 month rolling average, %) 1.00% 0.75% • Modest increase in new to arrears from a low 0.50% base; broadly similar or lower than pre- pandemic 0.25% 0.00% • Stable SME overd
Slide 20: Mortgage portfolio demonstrating resilience
Classification: Public Mortgage portfolio demonstrating resilience Gross lending, LTV and new to arrears Gross New to arrears1 lending, Loan to • Mortgage book resilient; arrears below 2019 value £bn H1 2019 H1 2023 levels 2006-08 32 34% 0.7% 0.9% o Modest increase in arrears from legacy variable Re
Slide 21: Robust business performance supporting enhanced 2023 guidance
Classification: Public Robust business performance supporting enhanced 2023 guidance • Robust financial performance Purpose • Higher interim dividend Helping • Enhancing guidance for 2023, delivering higher, more sustainable Britain returns o NIM now expected to be >310bps o Operating costs expected
Slide 22: Capital, funding & liquidity
Classification: Public Capital, funding & liquidity 22
Slide 23: Capital, MREL and liquidity summary
Classification: Public Capital, MREL and liquidity summary CET1 remains ahead of both MDA 10.3% from July 2023 14.2% regulatory minimum and the Capital 14.1% MDA2 9.4% CET11 CET1 ongoing Group target of c.12.5% + c.1% management buffer FY 22 H1 23 31.7% 31.0% MREL remains strong, and in MREL MREL MR
Slide 24: Capital strength maintained
Classification: Public Capital strength maintained Common equity tier 1 ratio (%, bps) 14.2% • CET1 ratio of 14.2%; H1 capital build of 111bps • UK CCyB rate increased from 1% to 2% in July 2023, representing an equivalent increase in the Group’s CCyB from 0.9% to 1.8% 1.7% MDA 10.3% from July 2023
Slide 25: Strong capital generation
Classification: Public Strong capital generation Risk weighted assets (£bn) 3.0 0.6 0.4 3.0 (2.6) • RWAs £215.3bn, up £4.4bn in H1 including £3.0bn 215.3 210.9 adjustment for anticipated CRD IV model impact • Strong 111bps capital generation after 30bps full fixed pension deficit contributions 2022
Slide 26: Diversified deposit base; strong liquidity position
Classification: Public Diversified deposit base; strong liquidity position Loan to deposit ratio 96%, Net stable funding ratio 130%, Liquidity coverage ratio 142% c.65% of deposits in Retail; diversified Commercial >90% of deposit growth since 2019 in diversified Retail3 (£bn) balances (£bn) 451 476
Slide 27: Wholesale funding requirements returning to more normalised levels
Classification: Public Wholesale funding requirements returning to more normalised levels over strategic plan period Issuance 2023 principles HoldCo Refinancing of <£5bn Senior maturities • c.£4bn remaining of the 2023 issuance plan o Issued Senior HoldCo (£2.6bn), Tier 2 (£750m), AT1 (£1.8bn), Seni
Slide 28: Appendix
Classification: Public Appendix 28
Slide 29: Wholesale funding requirements supported by redemption profile
Classification: Public Wholesale funding requirements supported by redemption profile HoldCo redemption profile (£bn)1 9.9 1.8 7.8 1.3 1.8 6.2 0.8 0.8 3.0 3.4 6.8 0.6 5.2 0.4 1.7 5.4 • Redemption profile supports increased 2.4 issuance, with net supply increasing 1.3 moderately 2023 2024 2025 2026 2
Slide 30: Diverse funding portfolio as at H1 2023
Classification: Public Diverse funding portfolio as at H1 2023 Wholesale funding portfolio by type 12% 32% MM Funding Covered Bond 27% £103bn Securitisation OpCo Senior Wholesale funding portfolio by currency 12% HoldCo Senior Sub Debt 6% 14% 3% 24% 23% GBP USD Wholesale funding portfolio by maturit
Slide 31: Simple group structure with multiple issuance points
Classification: Public Simple group structure with multiple issuance points HoldCo Lloyds Banking Group BBB+ / A3 / A1 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 Scotl
Slide 32: Strong credit ratings across the Group
Classification: Public Strong credit ratings1 across the Group Non-Ring-Fenced Insurance HoldCo Ring-Fenced Bank Bank Sub-Group Lloyds Banking Lloyds Bank, Lloyds Bank UK Sovereign Scottish Widows2 Group Bank of Scotland Corporate Markets AA BBB+ A+ A S&P Stable Stable Stable - Stable A-2 A-1 A-1 A3
Slide 33: Strong ESG ratings supported by clear deliverables
Classification: Public Strong ESG ratings supported by clear deliverables Focus on opportunities to support housing and physical We have regeneration MSCI 1 Enabling regional identified 4 AA AA AA Increase regional productivity and create high-quality jobs AA development Encourage inclusive growth b
Slide 34: Our Group Climate Transition Plan
Classification: Public Our Group Climate Transition Plan We have identified 4 We have set focus net several areas zero No new direct financing of new FFirst round of Net Zero Banking F Support oil and gas clients to establish F £10bn green mortgage lending F £20-25bn SW investment in F 50% reduction
Slide 35: Quarterly P&L and key ratios
Classification: Public Quarterly P&L and key ratios (£m) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 Net interest income 3,469 3,535 3,643 3,394 3,190 2,945 Other income 1,281 1,257 1,128 1,171 1,185 1,182 Operating lease depreciation (216) (140) (78) (82) (119) (94) Net income 4,534 4,652 4,693
Slide 36: Updated economic scenarios
Classification: Public Updated economic scenarios Scenario ECL (£m) Measure (%) 2023 vs Q4 2022 2024 2025 2026 2027 Ave. 23-27 GDP 0.8 0.7 1.6 0.9 1.5 2.0 1.3 Unemployment rate 3.3 0.5 2.7 3.0 3.4 3.3 3.1 HPI growth (3.3) (0.5) 2.4 7.8 7.5 7.3 4.3 Upside (30%) 3,991 CRE price growth 2.3 (6.2) 6.5 1.
Slide 37: Updated coverage after revised economic outlook
Classification: Public Updated coverage after revised economic outlook Gross Write custome Total P&L Net ECL offs Coverage (ex. Recoveries) (£m, unless stated r L&A coverage ECL Write offs charge/ incr./ ECL & Other otherwise) (£bn) Stage 1 Stage 2 Stage 3 Total Q4 2022 Q4 2022 & Other1 (credit) (de
Slide 38: Low mortgage LTVs
Classification: Public Low mortgage LTVs June 20231 20221 20101 Mainstream Buy to let Specialist Total Total Total Average LTVs 41.6% 47.1% 34.7% 42.3% 41.6% 55.6% New business LTVs 60.9% 53.0% N/A 60.2% 61.7% 60.9% ≤80% LTV 90.7% 99.8% 96.5% 92.3% 93.9% 57.0% >80–90% LTV 7.2% 0.1% 1.1% 6.0% 4.7% 16
Slide 39: 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
Slide 40: Contacts
Classification: Public Contacts Group Corporate Treasury Peter Green Liz Padley Richard Shrimpton Managing Director, Non Bank Head of Senior Funding & Covered Deputy Treasurer Entities Treasurer & Head of Capital Richard.Shrimpton@Lloydsbanking.com Bonds Peter.Green@Lloydsbanking.com and Recovery an
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