Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — KBW 2013 UK Financials Day
21 slides from Lloyds Banking's conference presentation, Sep 16, 2013
Slide 1: KBW 2013 UK Financials Day Presentation
KBW 2013 UK FINANCIALS DAY PRESENTATION 16 SEPTEMBER 2013 LONDON Andrei Magasiner Group Corporate Treasurer
Slide 2: Agenda
AGENDA RESULTS OVERVIEW CAPITAL STRENGTH BALANCE SHEET RISK MANAGEMENT LIQUIDITY AND WHOLESALE FUNDING SUMMARY 1
Slide 3: Results Overview
RESULTS OVERVIEW Key highlights for the first half of 2013 Accelerated progress in delivering strategic plan Substantial increase in underlying profit benefiting from income growth of 2%, increased margin of 2.01% and further cost and impairment reductions Statutory profit before tax of £2.1bn
Slide 4: Financial Performance
FINANCIAL PERFORMANCE Profitability and returns substantially improved (£m) H1 2013 H1 2012 Change % Group income 9,464 9,246 2% Substantial increase in Group underlying and Group NIM 2.01% 1.93% 8bp statutory profit – Core C profit fit increased i d 26% tto £3 £3,696m 696 Group total costs (4,749
Slide 5: Balance Sheet
BALANCE SHEET Core loan book continuing to grow; non-core assets substantially b i ll reduced; d d funding f di position i i further f h strengthened h d CORE LOANS AND ADVANCES(1) (£bn) NON-CORE ASSETS (£bn) 0% (30)% 1% (16)% 429 428 118 425 426 98 92 65 83 48 43 36 53 50 49 47 J 2012 Jun D 2012 De
Slide 6: Capital
CAPITAL Substantial improvement in capital ratios FULLY LOADED CORE TIER 1 Remain confident in capital position – Now expect fully loaded core tier 1 ratio of 9.6% >10.0% above 10% at end 2013 8.1% Strongly g y capital p generative g strategy gy 7.1% – Core business capital generation 4.2% 3.8%
Slide 7: Agenda
AGENDA RESULTS OVERVIEW CAPITAL STRENGTH BALANCE SHEET RISK MANAGEMENT LIQUIDITY AND WHOLESALE FUNDING SUMMARY 6
Slide 8: Capital Strength: Evolution of the Structure of Required Capital
CAPITAL STRENGTH Evolution of the Structure of Required Capital CORE TIER 1 TREND (%) FULLY LOADED CET1 (%) 14% 10.1 9.6 12% 8.7 8.1 10% 8% 6% 4% 2007 2008 2009 2010 2011 2012 Barclays(1) RBS(1) LBG HSBC Group CT1 Peer Average CT1 (1) Includes management actions; Source: Published accounts at 30 Jun
Slide 9: Capital Strength: Regulatory Change Agenda
CAPITAL STRENGTH Lloyds remains well placed to continue to respond to the on-going i regulatory l change h agenda d Field Topic Q4 13 Q1 14 Q2 14 Q3 14 CRD IV CP 5/13 - consultation lt ti d deadline dli 2 Oct In force UK CRD IV Capital floors project and Standardised comparison Sept Stress PRA stres
Slide 10: Capital Strength: Evolution of the Structure of Required Capital
CAPITAL STRENGTH Evolution of the Structure of Required Capital Pre 2012 2012-13 2014+ Basel 2 Basel 3 CET1 Full CRD IV Basel 2 T1 &T2 (End-point) 17% – 20% 14% – 17% Mgt g Buffer Some of ICG must now be met Mgt Buffer T2 with CET1 12% – 15% ICG Increasing stress buffer Mgt Buffer ICG T2 AT1 1.5
Slide 11: Capital Securities: Indicative Walk-Through to Year End 2015
CAPITAL STRENGTH Capital securities: Indicative Walk-Through to year end 2015 TIER 1 SECURITIES 2012 – 2015 (£bn) CRD IV transition reduces deductions 6.9 6.9 from non-equity capital arising from 0.7 1.2 Target insurance. This will reduce the need for 62 6.2 AT1 5.7 Reg. Tier 1 and Tier 2 capital
Slide 12: Current Key Drivers for Lloyds Banking Group
CAPITAL STRENGTH Current key drivers for Lloyds Banking Group • A Announced d 1A Augustt th thatt £5 £5.1bn 1b hhad dbbeen d delivered li d ((subsequent b t announcement of sale of Heidelberger Leben +£0.4bn CET1) FPC > £7.0bn • Expect to meet without recourse to further equity issuance or the utili
Slide 13: Agenda
AGENDA RESULTS OVERVIEW CAPITAL STRENGTH BALANCE SHEET RISK MANAGEMENT LIQUIDITY AND WHOLESALE FUNDING SUMMARY 12
Slide 14: Balance Sheet Risk Management: Simple, Low Risk Balance Sheet
BALANCE SHEET RISK MANAGEMENT Simple, low risk balance sheet BALANCE SHEET ASSETS LIABILITIES £877bn £877bn Insurance Assets Insurance All assets and liabilities are £157bn Liabilities charged/rewarded 3m LIBOR £148bn Derivatives & Derivatives & Where customer balances Other Liabilities Other As
Slide 15: Behaviourally Fixed Rate Portfolios
BALANCE SHEET RISK MANAGEMENT Behaviourally fixed rate portfolios BALANCE SHEET ASSETS LIABILITIES £877bn £877bn Insurance Assets Insurance £157bn Liabilities £148bn Customer balances without Derivatives & predictable maturity dates (e.g. Derivatives & Other Assets at Other Liabilities current acc
Slide 16: Agenda
AGENDA RESULTS OVERVIEW CAPITAL STRENGTH BALANCE SHEET RISK MANAGEMENT LIQUIDITY AND WHOLESALE FUNDING SUMMARY 15
Slide 17: Developments in Liquidity
Developments in Liquidity Basel III to CRD IV Developments UK Banks currently hold primary Currently 100% in UK liquidity in the form of cash and sovereign bonds 80% PRA Under CRD IV – LCR initially minimum – introduced at 60% with transition to 100% by 1/1/18 100% by 1/1/18 Current 60% 60% CRD
Slide 18: The Role of Wholesale Funding
THE ROLE OF WHOLESALE FUNDING What is the role of Wholesale Funding going forward? WHOLESALE FUNDING REQUIREMENT CORE LOAN CORE CORE LOANS Wholesale funding used to fund: TO DEPOSIT CUSTOMER AND RATIO DEPOSITS ADVANCES – Primary y Liquidity y Buffer 100% – Portion of Funded Assets not covered by C
Slide 19: Agenda
AGENDA RESULTS OVERVIEW CAPITAL STRENGTH BALANCE SHEET RISK MANAGEMENT LIQUIDITY AND WHOLESALE FUNDING SUMMARY 18
Slide 20: Summary
SUMMARY Focused UK retail and commercial bank Expect to deliver strong, stable and sustainable returns for our shareholders Confident in our capital position as we work through the evolving regulatory landscape Opportunity to further optimise our capital structure as tier 1 and tier 2 capita
Slide 21: Forward Looking Statements and Basis of Presentation
FORWARD LOOKING STATEMENTS AND BASIS OF PRESENTATION FORWARD LOOKING STATEMENTS This presentation contains forward looking statements with respect to the business, strategy and plans of the Lloyds Banking Group, its current goals and expectations relating to its future financial condition and perfor