Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — Investor Day (October 2014)
53 slides from Lloyds Banking's investor day presentation, Oct 28, 2014
Slide 1: Strategic Update
STRATEGIC UPDATE Presentation to analysts and investors 28 October 2014
Slide 2: Agenda
AGENDA Lord Blackwell Introduction to the strategic update Chairman António Horta-Osório Our strategy and delivering sustainable growth Group Chief Executive Miguel Ángel Rodríguez Miguel-Ángel Rodríguez-Sola Sola Creating the best customer experience: Digital Group Director, Digital Alison Brittain
Slide 3: Agenda
AGENDA Lord Blackwell Introduction to the strategic update Chairman António Horta-Osório Our strategy and delivering sustainable growth Group Chief Executive Miguel Ángel Rodríguez Miguel-Ángel Rodríguez-Sola Sola Creating the best customer experience: Digital Group Director, Digital Alison Brittain
Slide 4: Unique position in the UK market
UNIQUE POSITION IN THE UK MARKET Our strength lies in our differentiated, multi brand, multi channel b i business model d l Low cost, low risk, customer focused, UK retail and commercial bank 3
Slide 5: Unique position in the UK market: best bank for customers and shareholders
UNIQUE POSITION IN THE UK MARKET We remain committed to Helping Britain Prosper by becoming the best b k ffor customers bank t and d shareholders h h ld BEST BANK FOR CUSTOMERS Commitment to Strongg customer Customer Multi channel Iconic service and relationships focused people distribution brands c
Slide 6: Achievements since 2011: Reshape and Strengthen
ACHIEVEMENTS SINCE 2011 Reshape and Strengthen – substantially complete Non-core reduction (£bn) International presence RESHAPE (143) (23) countries 30 194 c.51(1) 7 STRENGTHEN 28 23 D 2010 Dec Sep 2014 S D 2010 Dec Q3 2014 pro forma Fully loaded CET1 ratio (%) LTD ratio (%) SIMPLIFY (45) 4.9 12.0 1
Slide 7: Achievements since 2011: Simplify and Invest
ACHIEVEMENTS SINCE 2011 Simplify and Invest – accelerated delivery of strategic objectives Run rate savings (£bn) Cost reduction (£bn) RESHAPE (2.1) 0.3 11.1 c.9.0 20 2.0 1.7 STRENGTHEN 2011 strategic t t i FY 2014e 2014 FY 2010 FY 2014e 2014 (1) target Strategic investment(2) (£bn) Net promoter sco
Slide 8: Economic environment
ECONOMIC ENVIRONMENT Strengthened economic environment although some uncertainty remains Sustainable economic g growth (%) ( ) price index(1) ((£‘000)) House p 200 2.9 3.0 2.7 2.6 21.0% 180 1.7 (22.5)% 2.5% 160 0.3 1.3% 0.8% 0.5% 0.5% 0.5% 140 2012 2013 2014e 2015e 2016e 2017e Jun Apr Sep GDP Base r
Slide 9: New banking environment
NEW BANKING ENVIRONMENT Opportunities and risks from an increasingly complex regulatory and competitive titi environment i t COMPETITION REGULATION Prudential Traditional competitors Basel III Increasing focus on UK retail and commercial Solvency II market Ring fencing and resolution Lever
Slide 10: Changing customer trends
CHANGING CUSTOMER TRENDS Substantial change in digital adoption and demographics are changing customers’ t ’b behaviours h i andd expectations t ti Increased adoption p of technology gy (%) ( ) People p retiring g later (%) ( ) UK population that have internet access % of 65+ age group economically
Slide 11: Strategic focus
STRATEGIC FOCUS Strengthening our unique capabilities to respond to the changing external environment i t OUR BUSINESS MODEL Low cost, low risk, customer focused, UK retail and commercial bank OUR STRATEGIC PRIORITIES Creating the Becoming Delivering best customer simpler and sustainable experience
Slide 12: Creating the best customer experience
CREATING THE BEST CUSTOMER EXPERIENCE Responding to changing customer needs to create a better customer experience i Strategic initiatives Key outcomes Multi channel Improved customer experience Seamless S l multi lti channel h l through th h enhanced h d digital di it l offering ff i distributi
Slide 13: Becoming simpler and more efficient
BECOMING SIMPLER AND MORE EFFICIENT Improving customer interactions and maintaining cost leadership by simplifying i lif i our bbusiness i Strategic initiatives Key outcomes Simplification Increased automation of end to end customer journeys Process Re-engineering and simplifying redesign and pr
Slide 14: Delivering sustainable growth
DELIVERING SUSTAINABLE GROWTH Supporting UK economic growth, investing where we are under represented t d and d can supportt customers t Strategic initiatives Key outcomes Key retail and Maintain market leading position commercial in key retail business lines G Growth o t in line e with t the t
Slide 15: Delivering sustainable growth: multiple growth opportunities
DELIVERING SUSTAINABLE GROWTH We have multiple growth opportunities that build on our strengths and d capabilities biliti LBG market share share, H1 2014(1) (%) Growth opportunity Current account volumes 25 M t Mortgage balances b l 24 Maintain market leadership in Retail deposit balances 22 key r
Slide 16: Business priorities: Digital transformation
BUSINESS PRIORITIES: DIGITAL TRANSFORMATION New digital propositions will transform customer interactions through a seamless l online, li mobile bil anddb branchh experience i Building on our digital strength Seamless multi channel interactions Since 2011... By 2017... >£750m invested in digital
Slide 17: Business priorities: Building on retail strength
BUSINESS PRIORITIES: BUILDING ON RETAIL STRENGTH Maintaining leadership positions whilst growing in under represented areas in i response tto customer t needs d Current performance Priorities Initiatives Mortgage balances £301bn Maintain share in core markets 1 Strengthen franchise Customer data
Slide 18: Business priorities: Commercial Banking
BUSINESS PRIORITIES: COMMERCIAL BANKING Targeting growth in key segments through relationship model while maintaining i t i i capital it l di discipline i li Current performance Priorities Initiatives SME lending in last SME and Mid Markets growth 12 months 5% Target growth in key through sector a
Slide 19: Business priorities: Integrated insurance offer
BUSINESS PRIORITIES: INTEGRATED INSURANCE OFFER Responding to changing customer needs and regulation by leveraging G Group capability bilit Current performance Priorities Initiatives Corporate and Broaden reach through customer individual pension 2m franchise customers Leveraging unique 1 Levera
Slide 20: Business priorities: Consumer Finance
BUSINESS PRIORITIES: CONSUMER FINANCE Optimising growth in Asset Finance and Credit Cards through digital capability, bilit G Group relationships, l ti hi and d non-franchise f hi opportunities t iti Current performance Priorities Initiatives Point of sale car finance share 12% Strong franchise dr
Slide 21: Capabilities to deliver
CAPABILITIES TO DELIVER Entering the next phase of our strategy from a position of competitive, operational ti l and d fifinancial i l strength t th Strategic priorities Clear, simple strategy Creating the best customer experience Multi brand, multi channel model enabling differentiation Stron
Slide 22: Agenda
AGENDA Lord Blackwell Introduction to the strategic update Chairman António Horta-Osório Our strategy and delivering sustainable growth Group Chief Executive Miguel Ángel Rodríguez Miguel-Ángel Rodríguez-Sola Sola Creating the best customer experience: Digital Group Director, Digital Alison Brittain
Slide 23: Digital is changing the world of banking
DIGITAL IS CHANGING THE WORLD OF BANKING Customers are changing how they want to interact and fulfil their needs UK economy is digitising... digitising ...as as is UK financial services UK e-commerce sales as % overall business turnover 16% growth 25 digital retail customer banking sales, UK market,
Slide 24: Importance of multi channel
IMPORTANCE OF MULTI CHANNEL Digital in a multi channel context allows us to better meet customer needs d and d create value l ffor the h bbankk Digital as part of a Value of multi multi channel approach channel approach Average retail product holdings(1), August 2014 More choice and convenience fo
Slide 25: Strong foundation and performance
STRONG FOUNDATION AND PERFORMANCE Significant digital investment over three years has built resilient, secure digital di i l iinfrastructure f and d compelling lli di digital i l propositions ii Digital investment Substantial digital presence and focus >£750m digital c.20% investment in last three
Slide 26: Prepared for the future
PREPARED FOR THE FUTURE We have responded to how our customers want to bank with us We are now meeting many digital Multi channel approach driving customer needs in three ways customer and efficiency benefits New business needs met online Customer satisfaction across channels 40% of simple custome
Slide 27: Digital banking evolution
DIGITAL BANKING EVOLUTION Digitisation is expected to accelerate with opportunities to provide b better service, i greater efficiency ffi i and d growth h More needs to be met through digital Future opportunities to capture Retail customers, digital % 2014 2017e Better service 50-70 Meeting comple
Slide 28: Digital transformation priorities
DIGITAL TRANSFORMATION PRIORITIES Three digital priorities to continue to embrace the digital future through h h c.£1bn £1b iinvestment over threeh years Simple, mobile first propositions and innovative Deliver customer- digital services 1 centric digital Transformation of customer experience pr
Slide 29: Digital priorities: Delivering customer-centric digital propositions
DIGITAL PRIORITIES 1. Delivering customer-centric digital propositions Digital Example a p e outco outcomes es Retail Complete online servicing journeys customers Meet complex needs digitally (e.g. mortgages) providing customers with support on their key financial decisions Improve customer ex
Slide 30: Digital priorities: Enhancing our digital capabilities and delivery
DIGITAL PRIORITIES 2. Enhancing our digital capabilities and delivery Enhancing our digital capabilities Digital outcomes Customers and Clients Transforming customer / client relationships and service Digital gateway + Customer Customer-led led propositions and innovation Greater customer insight
Slide 31: Digital priorities: Transforming customer journeys end to end
DIGITAL PRIORITIES 3. Transforming customer journeys end to end to improve customer experience, i attract new customers and d achieve hi cost efficiencies ffi i i Example journey to transform From Example of potential outcomes 25 days to offer Same week offer capability Help me to buy a Limite
Slide 32: Digital priorities: Transforming customer journeys end to end
DIGITAL PRIORITIES 3. Transforming customer journeys end to end to improve customer experience, i attract new customers and d achieve hi cost efficiencies ffi i i Example journey to transform Transform customer experience p Contextual, anytime, anywhere self-service Help p me to buy y a home Sea
Slide 33: Agenda
AGENDA Lord Blackwell Introduction to the strategic update Chairman António Horta-Osório Our strategy and delivering sustainable growth Group Chief Executive Miguel Ángel Rodríguez Miguel-Ángel Rodríguez-Sola Sola Creating the best customer experience: Digital Group Director, Digital Alison Brittain
Slide 34: Customer strategy
CUSTOMER STRATEGY Our customer strategy is multi brand and multi channel Multi brand maximises Retail Retail’s s reach reach… Value focused high Active current account customers Clear Service focused street challenger positioning relationship brands Leader in mortgages and savings Retail with spec
Slide 35: Multi channel customers
MULTI CHANNEL CUSTOMERS Customers are increasingly adopting a multi channel approach and multi lti channel h l customers t create t more value l ffor th the G Group Multi channel customers hold a higher number Customers are using different channels of products on average More customers are using mob
Slide 36: Evolving role of telephony
EVOLVING ROLE OF TELEPHONY Telephony’s core purpose will migrate from transaction enquiries to complex l queries i and d remote t advice, d i enabling bli iincreased dbbranchh productivity d ti it Remote advice improves customer The role of telephony will change convenience and reduces risk As cus
Slide 37: Branch role for customers
BRANCH ROLE FOR CUSTOMERS Convenient branches continue to have an important role for acquiring new and d serving i existing i ti customers t Branches are important for Branches are used by all age customer acquisition groups and segments Proportion of customers (using any channel) Group personal cur
Slide 38: Branch presence
BRANCH PRESENCE Our multi brand strategy means we have the largest branch reach in the UK even after UK, ft th the TSB divestment di t t 2013 Competitor branch networks(1)(2) Large relationship brands Challenger brands Scottish brands 1,545 1,391(3) 1 296 1,296 1,186 1,144(4) 663 652 631 293 289 145
Slide 39: Developing our modern efficient branch network
DEVELOPING OUR MODERN EFFICIENT BRANCH NETWORK Retaining the convenience and reach of a large branch network while realising li i significant i ifi t efficiencies ffi i i Commitment to maintain or grow share of Increasing the branches with enhanced customer experience efficiency of the branch networ
Slide 40: Developing our modern efficient branch network
DEVELOPING OUR MODERN EFFICIENT BRANCH NETWORK Retaining the convenience and reach of a large branch network while realising li i significant i ifi t efficiencies ffi i i Consolidating and upgrading dated branches... ...to a modernised, brand aligned look Improving the branch layout... ...to enable
Slide 41: Creating the best customer experience
CREATING THE BEST CUSTOMER EXPERIENCE Our multi brand, multi channel strategy will continue to be focused on the needs d off our customers t and d provide id a platform l tf ffor growth th Because customers…. We will… …value different things from different …keep our multi brand strategy brands ...in
Slide 42: Agenda
AGENDA Lord Blackwell Introduction to the strategic update Chairman António Horta-Osório Our strategy and delivering sustainable growth Group Chief Executive Miguel Ángel Rodríguez Miguel-Ángel Rodríguez-Sola Sola Creating the best customer experience: Digital Group Director, Digital Alison Brittain
Slide 43: Becoming simpler and more efficient: track record of delivery
BECOMING SIMPLER AND MORE EFFICIENT Strong track record of delivery: cost leadership achieved while improving customer t experience i Simplification run rate savings (£bn) Simplification 2011 – 2014 2.0 Run rate savings ahead of original 1.5 Business target b benefits fit Roles R l reduced d d b
Slide 44: Becoming simpler and more efficient: next phase of simplification
BECOMING SIMPLER AND MORE EFFICIENT Next phase of simplification expected to deliver additional £1bn of annual savings, i greater t value l ffor customers t andd iimproved d competitiveness titi Next phase 2015 – 2017 Indicative run rate savings Process Digital transformation of end to end journey
Slide 45: Investing for long term sustainability
INVESTING FOR LONG TERM SUSTAINABILITY Investment in customer focused capability and achieving further cost and operational ti l efficiencies ffi i i Investment in simplification initiatives of £1.6bn over the plan period Simplification initiatives to focus on: – Simplifying end to end customer
Slide 46: Enhancing our cost leadership
ENHANCING OUR COST LEADERSHIP Continued focus on costs will enable us to extend our competitive advantage d t Underlying cost:income ratios(1) (%) H1 Q3 End Cost management remains a key focus 2014 2014 2017 64 63 Expect to deliver a cost:income ratio of 58 around 45% exiting 2017 51 50 Target
Slide 47: Financial shape
FINANCIAL SHAPE Continuing to build on our strong balance sheet position Our achievements Maintaining balance sheet strength Capital and leverage positions strengthened – 12.0% CET1 ratio Further reductions in run-off run off – 21.0% total capital ratio portfolio – 4.7% leverage ratio Wholesal
Slide 48: Medium term financial targets
MEDIUM TERM FINANCIAL TARGETS Improved shareholder returns through sustainable growth, greater efficiency ffi i and d llower risk i k METRIC TARGETS Simplification savings £1bn of further Simplification run rate savings by end of 2017 Efficiency FTE reduction c.9,000 role reduction across 2015 –
Slide 49: Agenda
AGENDA Lord Blackwell Introduction to the strategic update Chairman António Horta-Osório Our strategy and delivering sustainable growth Group Chief Executive Miguel Ángel Rodríguez Miguel-Ángel Rodríguez-Sola Sola Creating the best customer experience: Digital Group Director, Digital Alison Brittain
Slide 50: Summary
SUMMARY We are well positioned to deliver our strategy given our track record and strong t business b i model d l Differentiated low cost, low risk, UK focused Our strategic priorities retail and commercial bank Customers remain at the heart of our strategy Creating the best customer experience
Slide 51: Summary
SUMMARY We will enhance our customer proposition while generating strong returns t for f shareholders h h ld Best bank for customers Unique assets Delivering the best customer – Multi brand, brand multi channel distribution model experience i – Strong customer franchise – Integrated insurance pr
Slide 52: Lloyds Banking Group
LLOYDS BANKING GROUP Lloyds Banking Group is one of Britain's leading banking groups, made up of brands such as Halifax, Lloyds Bank, Bank of Scotland and Scottish Widows. We have rebuilt our business to be stable, trusted and sustainable. We are deeply grateful for the support given to us by the UK
Slide 53: Forward looking statements and basis of presentation
FORWARD LOOKING STATEMENTS AND BASIS OF PRESENTATION FORWARD LOOKING STATEMENTS This presentation contains certain forward looking statements with respect to the business business, strategy and plans of Lloyds Banking Group and its current goals and expectations relating to its future financial cond