Lloyds Banking Group plc · LSE:LLOY
Lloyds Banking — Investor Day (February 2018)
68 slides from Lloyds Banking's investor day presentation, Feb 21, 2018
Slide 1: Strategic Update
STRATEGIC UPDATE Presentation to analysts and investors | 21 February 2018
Slide 2: Transforming the Group for success in a digital world
Transforming the Group for success in a digital world António Horta-Osório Group Chief Executive 1
Slide 3: Solid foundations underpinning our customer centric business model
Solid foundations underpinning our customer centric business model Distinctive competitive strengths Best-in-class customer Highly efficient experience Cost:income Ratio1, Customer NPS FY20172 Differentiated multi-brand, multi- 62 56% channel customer propositions 47% 43 Market leading efficiency Pe
Slide 4: Largest digital bank in the UK, delivering market leading experience
Largest digital bank in the UK, delivering market leading experience Customer needs met via digital, % 68% £1bn investment in 61% digital announced 54% >13m digitally active customers Largest digital bank in the UK 40% 32% 209m digital visits per month Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 #1 rated UK
Slide 5: Changing customer behaviour and expectations create opportunities
Changing customer behaviour and expectations create opportunities Evolving customer needs and expectations… …require a proactive response Increasing personalisation • Richer interactions, better understanding of customer needs • Deeper customer engagement Connected, seamless experience • More person
Slide 6: Building on our solid foundations to future proof our business
Building on our solid foundations to future proof our business Strategic priorities Developing new sources of competitive advantage Differentiated multi-brand, multi-channel customer propositions with data-driven customer experience Market leading efficiency through tech- enabled productivity improv
Slide 7: More than £3bn strategic investment to deliver a significant transformation
More than £3bn strategic investment to deliver a significant transformation LEADING CUSTOMER EXPERIENCE MAXIMISING GROUP CAPABILITIES • #1 UK digital bank, with Open Banking • £6bn loan growth in start-ups, SME and functionality Mid Market businesses • #1 Branch network, serving complex needs • Sole
Slide 8: Continuing to deliver greater value for shareholders
Continuing to deliver greater value for shareholders Group Strategic Review 2 (2015-2017) Group Strategic Review 3 (2018-2020) Increased investment c.£1bn investment in digital >£3.0bn strategic investment Market leading £1.4bn simplification run-rate savings <£8.0bn operating costs in 2020, includi
Slide 9: Committed to Helping Britain Prosper
Committed to Helping Britain Prosper Delivering on our purpose Increasing our support going forward 20181 20202 >700,000 34% Lending to first time buyers £10bn £30bn individuals, businesses of senior roles now and charities trained in held by women. Up People digital skills during 2017 from 29% in 2
Slide 10: Evolving our business model and transforming the Group for success
Evolving our business model and transforming the Group for success in a digital world Our purpose Our strategic priorities Our ambition Helping Britain Prosper Maximising Digitising Group the Group capabilities Our aim Best bank for customers, Transforming colleagues and shareholders the Group for s
Slide 11: Delivering our transformation
Delivering our transformation Juan Colombás Chief Operating Officer 10
Slide 12: Delivery model leveraging our structural advantages
Delivery model leveraging our structural advantages …are enhanced by our recent Our structural advantages… …and our delivery model organisational changes… Single geography All critical components of Investment management is now transformation under one umbrella… organised around customer journeys wi
Slide 13: >£3bn strategic investment
Larger transformation programme with significantly increased strategic investment Focus on efficiency enabling increased investment And delivering a leading customer experience Total strategic investment, £bn +40% >£3bn strategic investment >£3.0bn +25% Maximising Group capabilities Leading customer
Slide 14: Business and Transformation leads
Business and Transformation leads Leading personal customer Digitising the Group Maximising Group experience & Transforming ways of working capabilities Vim Maru Jakob Pfaudler Zaka Mian Jen Tippin Antonio Lorenzo David Oldfield Group Director, Group Director, Group Director, Group People & Chief Ex
Slide 15: Leading personal customer experience
Leading personal customer experience Vim Maru Jakob Pfaudler Group Director, Retail Group Director, Community Banking 14
Slide 16: Leading personal customer experience
Leading personal customer experience GSR3 priorities Key outcomes (2020) Build on our market leading digital financial UK digital bank, with services experience #1 Open Banking functionality Tailor and leverage multi-channel model in line Branch network, with evolving customer needs and behaviours #
Slide 17: Leading brands and customer franchise that differentiate us
Leading brands and customer franchise that differentiate us in a competitive market Differentiated brand proposition Extensive customer engagement3 Iconic brands serving over 27m retail customers1 72% of customers used two or more channels in 2017 209m digital 320m debit card visits transactions per
Slide 18: A track record of delivering increasing customer satisfaction
A track record of delivering increasing customer satisfaction Simpler product range1 Improved customer journeys Higher customer satisfaction PCA Customer NPS3 59 62 Reduction in new Rated mobile account 40% #1 43 business range opening journey2 Savings Reduction in customer 2011 2014 2017 Reduction
Slide 19: Significant competitive advantage from multi-channel model
Significant competitive advantage from multi-channel model Simple needs migrating to digital channels Multi-channel model critical Customer channel interactions Simple product needs met Value of multi-channel Indexed to 20141 Volume, %2 Market share3 1.4x customers relative to single channel 200 Dig
Slide 20: Opportunity to tailor and leverage multi-channel model
Opportunity to tailor and leverage multi-channel model in line with evolving customer needs and behaviours Branch network Compelling strategic agenda Branch-first Digital-first Digital • F2F for complex customers customers customers customer needs • Tailored channels to Comple • Differentiated forma
Slide 21: Physical distribution optimised for purpose, efficiency and reach
Physical distribution optimised for purpose, efficiency and reach Focusing on complex needs Optimising cost to serve Maintaining reach Customer-facing time on complex needs1 Branch and telephony costs per customer Branch market share indexed2 c.30% c.60% 100 c.15% 21% 21% 20% 81 45% <70 34% 3 3 2014
Slide 22: Well placed for future evolution of Open Banking
Well placed for future evolution of Open Banking Greater protections for Customers can begin Implications sharing their data for customers’ data Customers benefit from enhanced included products online security More customer control Customer Jan 2018 Jun 2018 Dec 2018 Jun 2019 Dec 2019 impact Regula
Slide 23: Remain #1 UK digital bank with Open Banking functionality
Remain #1 UK digital bank with Open Banking functionality LBG’s leading position Making Open Banking work for our customers 1. Largest digital financial Everything in one place services provider with multi- • Aggregated view of brand, multi-channel customer’s financial offering and strong Innovative
Slide 24: Use enhanced capabilities to meet customers' expectations for personalised services
Use enhanced capabilities to meet customers’ expectations for increasingly personalised services Demand for personalisation Enhanced capabilities Opportunity We have a diverse customer GSR3 capabilities will allow us to • Enhanced customer experience base with varying needs1: respond, from one-size-
Slide 25: Leading personal customer experience
Leading personal customer experience GSR3 priorities Key outcomes (2020) Build on our market leading digital financial UK digital bank, with services experience #1 Open Banking functionality Tailor and leverage multi-channel model in line Branch network, with evolving customer needs and behaviours #
Slide 26: Digitising the Group & Transforming ways of working
Digitising the Group & Transforming ways of working Zaka Mian Jen Tippin Group Director, Transformation Group People & Productivity Director 25
Slide 27: Digitising the Group & Transforming ways of working
Digitising the Group & Transforming ways of working GSR3 priorities Key outcomes (2020) Digitise more customer journeys end-to-end and scale of cost base up transformation to include our Central Functions >70% covered by journey transformation Simplification and progressive modernisation through tar
Slide 28: Scaling up our transformation to digitise the Group end-to-end
Scaling up our transformation to digitise the Group end-to-end and transform our ways of working Digitising the Group & Transforming ways of working Creating the largest UK digital bank Broader and deeper digital Enhancing digital capabilities and undertaking transformation Customer Journey Transfor
Slide 29: Broader and deeper digital transformation
Broader and deeper digital transformation, leveraging improved technology and data capabilities Broader and deeper transformation… …leveraging improved capabilities GSR2 GSR3 +40% End-to-end digitisation, including End-to-end more activities along the value Enhanced channel >£3bn transformation chai
Slide 30: Making continuous improvements to everyday banking with emerging technologies
Making continuous improvements to everyday banking by leveraging emerging technologies Using applied sciences to transform both customer experience and operational effectiveness 20 - 40% ~45 seconds increase in customer satisfaction ~20% Customer less time spent per call for Greater convenience thro
Slide 31: Simplification and progressive modernisation of our IT architecture
Simplification and progressive modernisation of our IT architecture Targeted simplification and “at scale” exploitation of new tech-enabled opportunities • API enabled channel to Channel Cyber defences leverage FinTech and technology Branch Telephony Digital API exploit Open Banking • Insight powere
Slide 32: More agile and more efficient ways of working
More agile and more efficient ways of working Moving from waterfall… …to Agile in more than half of our change activity Change resource 1 Sequential approach with fixed Iterative approach with short Up to efficiency requirements defined at outset development sprints 30% improvement 2 Limited user fe
Slide 33: Biggest ever investment in our People to build key skills
Biggest ever investment in our People to build key skills of the future Investing in People to create lasting competitive advantage Academies to develop skills for specialist roles Increase in training 50% and development Leadership programmes to role model ways of working to 4.4m hours p.a. Upskill
Slide 34: Long-term enhancements to our business and competitive position
Long-term enhancements to our business and competitive position Structural upgrade to our business Strong position to compete Improved capabilities Strengthening our competitive advantages Cost:income ratio1, % Upgraded data architecture Disruptor Data-driven customer experience c.35% aspiration Enh
Slide 35: Digitising the Group & Transforming ways of working
Digitising the Group & Transforming ways of working GSR3 priorities Key outcomes (2020) Digitise more customer journeys end-to-end and scale of cost base up transformation to include our Central Functions >70% covered by journey transformation Simplification and progressive modernisation through tar
Slide 36: Maximising Group capabilities
Maximising Group capabilities Antonio Lorenzo David Oldfield Chief Executive, Scottish Widows Group Director, Commercial Group Director, Insurance & Wealth Banking 35
Slide 37: Maximising Group capabilities – Insurance & Wealth
Maximising Group capabilities – Insurance & Wealth Antonio Lorenzo Chief Executive, Scottish Widows Group Director, Insurance & Wealth 36
Slide 38: Maximising Group capabilities: Insurance & Wealth
Maximising Group capabilities: Insurance & Wealth GSR3 priorities Key outcomes (2020) Capture the Corporate Pensions opportunity, leveraging the Zurich acquisition and Group strengths >1m New pension customers Offer customers a single home for their banking and insurance needs Financial Planning Dri
Slide 39: Insurance & Wealth business with diversity and scale
Insurance & Wealth business with diversity and scale Unique business model Integral part of Lloyds Banking Group Iconic Group brands Underlying profit Strength across our Retirement & General £0.9bn in 2017 (12% of Group) Protection core markets Investment Insurance Cumulative Scale player1 >9m £145
Slide 40: Meeting customers' Financial Planning & Retirement needs in a growing market
Meeting customers’ Financial Planning & Retirement needs in a growing market Significant market opportunity… …which we will start to capture during GSR3 Market AuA, Financial Planning & Retirement products, £tn1 CAGR +5% 3.0 Double-digit new business income growth 2.4 2.1 across Financial Planning &
Slide 41: Capturing the Corporate Pensions opportunity
Capturing the Corporate Pensions opportunity, leveraging the Zurich acquisition and Group-wide capabilities Market opportunity Key initiatives and outcomes Corporate Pension AuA Integrating Zurich platform to increase projected to grow at 11% scale, enhance capabilities and reach into new, growing s
Slide 42: Offering customers a single home for banking and insurance needs
Offering customers a single home for their banking and insurance needs Our Single Customer View… …brings our Insurance proposition to Retail digital customers Unrivalled level of engagement with customers >13m Digitally active users 16 Average visits per month #1 rated UK mobile app since 2015 1 Sig
Slide 43: Strong distribution model to drive growth across Intermediary and Relationship channels
Strong distribution model to drive growth across Intermediary and Relationship channels We are investing in each channel to grow our business Launch Open Market Option (OMO) annuity, allowing customers of any pension provider to buy a Scottish Widows annuity Individual annuities market 15% share1, a
Slide 44: Maximising Group capabilities: Insurance & Wealth
Maximising Group capabilities: Insurance & Wealth GSR3 priorities Key outcomes (2020) Capture the Corporate Pensions opportunity, leveraging the Zurich acquisition and Group strengths >1m New pension customers Offer customers a single home for their banking and insurance needs Financial Planning Dri
Slide 45: Maximising Group capabilities - Commercial Banking
Maximising Group capabilities - Commercial Banking David Oldfield Group Director, Commercial Banking 44
Slide 46: Maximising Group capabilities – Commercial Banking
Maximising Group capabilities – Commercial Banking GSR3 priorities Key outcomes (2020) Growth in net Digitise propositions and support lending needs to drive growth in SME and Mid Markets £6bn lending to Start- ups, SMEs and Mid Markets Upgrade propositions to deepen relationships with Global Corpor
Slide 47: Solid foundations and simple model delivering best-in-class returns
Solid foundations and simple model delivering best-in-class returns Simple, low risk, relationship-led and UK-focused model Strong track record of delivery (GSR2) Targeted growth Retail Commercial Banking Simple SME and Mid Market segmentation Business Banking SMEs Mid Markets Global Financial Corpo
Slide 48: Transforming our propositions to meet our clients' evolving needs
Transforming our propositions to meet our clients’ evolving needs Wide ranging client needs…. …supported through our key GSR3 themes Seamless multi-channel engagement Invest and grow In SME and Mid Markets For simple Fully digital self-serve • Digitise client experience needs they • Increase self-se
Slide 49: Invest and grow in SME and Mid Markets
Invest and grow in SME and Mid Markets In GSR3 we will... Digital origination of simple loans, with online servicing Digitise client Faster time to loan sanction and cash draw down Loans serviceable experience Enhance digital offering in FX, Rates and deposits 100% online Transform transaction and b
Slide 50: Deepen relationships in Global Corporates and Financial Institutions
Deepen relationships in Global Corporates and Financial Institutions In GSR3 we will... Modernisation of capabilities to expand client offering Broaden Payments Address more liquidity needs and provide more financing Cash management 1 in 3 mandates won & Cash solutions (from 1 in 8) Management Conti
Slide 51: Make the Relationship Manager role more productive
Make the Relationship Manager role more productive with more time spent on value adding activity Clients want … Through our Relationship Managers we will deliver… Frictionless multi-channel A trusted partner providing valuable insight and engagement and flawless creating strategic conversations serv
Slide 52: We can work across the Group to bring joined up solutions
We can work across the Group to bring joined up solutions Strong cross-divisional collaboration will drive deeper relationships with Commercial clients Focus going forward Retail & Maximising Group Community Bank Branch servicing Franchise distribution capabilities to target Commercial cards General
Slide 53: Maximising Group capabilities – Commercial Banking
Maximising Group capabilities – Commercial Banking GSR3 priorities Key outcomes (2020) Growth in net Digitise propositions and support lending needs to drive growth in SME and Mid Markets £6bn lending to Start- ups, SMEs and Mid Markets Upgrade propositions to deepen relationships with Global Corpor
Slide 54: Financial projections and targets
Financial projections and targets George Culmer Chief Financial Officer 53
Slide 55: Clear strategy that will underpin delivery of superior returns
Clear strategy that will underpin the delivery of superior returns and create greater value for shareholders Transforming the Group for success in a digital world Sustainable and low risk growth OUR Helping Britain PURPOSE Prosper Market leading efficiency Best bank for OUR customers, colleagues AIM
Slide 56: Sustainable and low risk growth – Opportunities for growth in targeted key segments
Sustainable and low risk growth – Opportunities for growth in targeted key segments Strong franchise across key channels and products Further growth opportunities Channels market share • Organic growth in targeted key segments: Digital new business volumes1 22% Branches market share 21% - Financial
Slide 57: Cost of risk expected to remain low
Sustainable and low risk growth – Cost of risk expected to remain low, with through the cycle guidance improved Cost of risk to remain low Reflecting our low risk business model Asset quality ratio (net), bps • Low risk business model underpinned by prudent participation choices and portfolio de-ris
Slide 58: Market leading efficiency – Targeting further absolute cost reductions
Market leading efficiency – Targeting further absolute cost reductions, creating capacity for strategic investment Further absolute cost reductions Outlook Operating cost1 trajectory, £bn • Proven track record of delivering cost reductions; 10.0 cost base reduced by c.£2bn since 2011 8.7 8.2 <8.0 •
Slide 59: Targeting strong statutory profit growth
Superior returns and lower cost of equity – Targeting strong statutory profit growth Continued strong statutory profit progression Closing the gap to underlying PBT Statutory profit before tax, £bn • Statutory PBT has increased significantly since 2011 and now accounts for 62% of underlying PBT 2.5
Slide 60: Targeting improved returns on a higher capital base
Superior returns and lower cost of equity – Targeting improved returns on a higher capital base Higher capital base Improved returns on a higher capital base Post-capital return CET1 ratio1 Around 1% 13.9 mgmt. buffer 12.8 13.0 13.0 10.3 7.1 7.6 8.1 • Targeting improved statutory RoTE of 14.0% - c.1
Slide 61: Delivering superior shareholder returns
Superior returns and lower cost of equity – Delivering superior shareholder returns Simple, differentiated business model Clear participation choices with low UK focus complexity Lower cost Re-shaped and de-risked Lower impairments, lower volatility and of equity business lower cost of funding Posit
Slide 62: Strong capital generation and attractive capital return policy
Strong capital generation and attractive capital return policy – Capital generative business model with clear framework for capital return Consistent capital generation Enabling superior shareholder returns Pre-dividend capital generation per annum, bps1 • Business model remains strongly capital gen
Slide 63: Closing comments
Closing comments António Horta-Osório Group Chief Executive 62
Slide 64: Transforming the Group for success in a digital world
Transforming the Group for success in a digital world Our purpose Our strategic priorities Our ambition Helping Britain Prosper Maximising Digitising Group the Group capabilities Our aim Best bank for customers, Transforming colleagues and shareholders the Group for success in a digital world Our bu
Slide 65: Appendix
Appendix , | i
Slide 66: Speakers' biographies
Speakers’ biographies Vim Maru Jakob Pfaudler Zaka Mian Group Director, Retail Group Director, Community Banking Group Director, Transformation Vim was appointed Group Director, Retail in Jakob was appointed Group Director, Zak joined the Group in 1989 as a Business September 2017. Community Banking
Slide 67: Speakers' biographies
Speakers’ biographies Antonio Lorenzo Jennifer Tippin Chief Executive, Scottish Widows and David Oldfield Group People and Productivity Director Group Director, Insurance and Wealth Group Director, Commercial Banking Jen was appointed as Group People and Antonio was appointed Chief Executive, David
Slide 68: Forward looking statement
Forward looking statement Forward looking statement This document contains certain forward looking statements with respect to the business, strategy, plans and /or results of Lloyds Banking Group and its current goals and expectations relating to its future financial condition and performance. State