Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — Lloyds TSB Group — FY2001 Earnings Presentation
35 slides from Lloyds Banking's earnings presentation, Feb 15, 2002
Slide 1: 2001 Results: Growing our Business
2001 Results Growing our Business Kent Atkinson Group Finance Director 15th February 2002
Slide 2: Profit before tax
Profit before tax 2000 2001 Increase £m £m % Business as usual operating profit 4,195 4,462 6 Exceptional restructuring costs (188) (217) Abbey National offer costs - (16) Sale of Lloyds TSB Asset Mgmt S.A. - 39 Pension provisions (100) (70) Changes in economic assumptions 127 - Stakeholder pension
Slide 3: Profit before tax
Profit before tax 2000 2001 Increase £m £m % Business as usual operating profit 4,195 4,462 6 Exceptional restructuring costs (188) (217) Abbey National offer costs - (16) Sale of Lloyds TSB Asset Mgmt S.A. - 39 Pension provisions (100) (70) Changes in economic assumptions 127 - Stakeholder pension
Slide 4: Profit before tax by main business
Profit before tax by main business 2000 2001 Increase £m £m % UK Retail Banking 776 633 (18) Mortgages 889 955 7 Insurance and Investments 1,425 1,601 12 UK Retail Financial Services 3,090 3,189 3 Wholesale Markets 746 937 26 International Banking 477 444 (7) Central group items (118) (108) Business
Slide 5: Underlying revenue growth
Underlying revenue growth 2000 2001 Increase £m £m % Total income (BAU) 8,671 9,544 10 Acquisitions/operating leases (132) (373) Underlying income 8,539 9,171 7
Slide 6: Domestic net interest margin
Domestic net interest margin % 4.5 4.00 3.97 4.0 3.83* 3.80* 3.78* 3.78* 3.68 3.5 3.48 3.50 3.47 3.0 1999H1 1999H2 2000H1 2000H2 2001H1 2001H2 *excluding Scottish Widows funding cost
Slide 7: Underlying operating expenses
Underlying operating expenses 2000 2001 Increase £m £m % Operating expenses (BAU) 3,764 4,091 9 Acquisitions/operating leases (182) (367) 3,582 3,724 4 Incremental new revenue investment (224) (235) Underlying cost growth 3,358 3,489 4
Slide 8: Enhanced efficiency programme
Enhanced efficiency programme 2000 2001 2002 2003 2004 £m £m £m £m £m Exceptional restructuring costs: Initial efficiency programme 188 217 130 60 - Further initiatives - - 170 40 - Total 188 217 300 100 - Expected annualised benefits: Initial efficiency programme - 75 145 320 410 Further initiative
Slide 9: Efficiency programme
Efficiency programme • Some efficiency gains will be re-invested to support improved products, service and sales • In 2002, business as usual costs are expected to grow by no more than the rate of inflation • Business as usual revenues to grow at a materially higher rate than business as usual costs
Slide 10: Charge for bad and doubtful debts
Charge for bad and doubtful debts Average % of Average 2001 Lending Lending £m £bn 2000 2001 UK Retail Banking 439 16.9 2.27 2.60 Mortgages (24) 54.6 (0.03) (0.04) Wholesale Markets 155 33.2 0.32 0.47 Total domestic 570 104.7 0.45 0.54 International Banking 122 16.1 0.80 0.76 Total charge 692 120.8
Slide 11: Exposure to Argentina
Exposure to Argentina 2001 £m Local balance sheet 465 Subsidiaries of multinationals (offshore) 150 Government bonds 100 Total Group exposure 715
Slide 12: Credit quality
Credit quality • Non-performing loans decreased to £1,222 million • Provisions for bad and doubtful debts represent over 120 per cent of non-performing loans • The Treasury asset portfolio is high quality with over 99.9 per cent rated as investment grade • Lloyds TSB remains the only major sharehold
Slide 13: Quality of earnings
Quality of earnings General Insurance Life Assurance/ 15% (14%) Long Term Savings 20% (19%) Retail Banking 14% (18%) International Banking 10% (11%) Mortgages 21% (21%) Wholesale Markets 20% (17%) Operating Profit - 2001* * business as usual basis, excluding central group items
Slide 14: Economic profit
Economic profit £m 2,500 2,204 2,081 1,949 2,000 1,632 1,500 1,000 500 0 1998 1999 2000 2001 business as usual basis
Slide 15: 2001 Results: Growing our Business
2001 Results Growing our Business 15th February 2002 Peter Ellwood Group Chief Executive
Slide 16: Our operating environment
Our operating environment • More competition • More regulation • Economic slowdown • Flight to quality
Slide 17: Against this background, solid results
Against this background, solid results • Business as usual PBT up 6% and trading surplus up 11% • Income up 10% • Business as usual earnings per share up 7% • Fee and other income 48% of total income
Slide 18: Ingredients of success
Ingredients of success In this climate, Lloyds TSB has four inherent advantages: • Clear strategy • 3 major business units, all with strong potential • Some of the best brands in financial services • Strong opportunities to grow revenues organically, and increase cost efficiencies
Slide 19: Ingredients of success: clear vision
Ingredients of success Clear vision • Understand and meet customers’ needs • Create value for customers • Gain customers’ trust • Engage our staff
Slide 20: Ingredients of success: clear strategy
Ingredients of success Clear strategy • Leader in our chosen markets • First choice for our customers • Driving down our day-to-day costs Outcome = maximising shareholder value
Slide 21: Leader in our chosen markets
Leader in our chosen markets Market Market share Position 2001* Personal Lending (stock) 1 13.0% Home Insurance 1 9.4% Current Accounts (stock) 1 24.0% Motor Finance 1 10.5% Pensions (regular) 2 8.0% Business Banking (stock) 3 20.0% Mortgages (stock) 3 9.5% *estimates based on internal data and a ra
Slide 22: First choice for our customers
First choice for our customers • Customer Relationship Management • Improved fee structure • Personal and non-personal segmentation • Low levels of customer attrition, below the industry average
Slide 23: Driving down our day-to-day costs
Driving down our day-to-day costs Aim to create headroom for future investment • Continued focus on strict cost management • Business as usual costs in second half of 2001 lower than in first half of 2001 • Expanded efficiency programme
Slide 24: A sustained and solid track record
A sustained and solid track record £m 5,000 Business as usual operating profit pe nce Dividends per share 5,000 35 35 4,000 30 30 4,000 25 25 3,000 3,000 20 20 2,000 2,000 15 15 10 10 1,000 1,000 55 00 00 1995 1995 1996 1996 1997 1997 1998 1998 1999 1999 2000 2000 2001 2001 1996 1997 1998 1999 2000
Slide 25: A sustained and solid track record
A sustained and solid track record Lloyds TSB total shareholder return relative to 115 115 bank sector and FTSE 100 110 110 105 105 100 100 95 95 90 90 Lloyds Lloyds TSB TSB 85 85 bank bank sector sector 80 80 FTSE FTSE 100 100 75 75 1 011 000 0011 011 11 0011 11 011 11 011 MMa 1 11 11 bb--0 -00 rr-
Slide 26: Key businesses: UK Retail Banking
Key businesses UK Retail Banking • Extensive repositioning – investment in infrastructure – improved products – more customer facing staff • Positioned for sustainable future growth
Slide 27: Key businesses: Mortgages
Key businesses Mortgages • Key objective to grow the business prudently but profitably • Good growth in profitability, despite high levels of competition • Asset quality remains very satisfactory
Slide 28: Key businesses: Insurance and Investments
Key businesses Insurance and Investments • Operating profits up 12% • Good volume growth in Life and Pensions • Market share increased • Integration on track • General Insurance a continued success
Slide 29: Key businesses: Wholesale and International
Key businesses Wholesale and International • Strong profit growth • Focus on high quality asset growth • Good performance by International Banking, excluding provisions in Argentina
Slide 30: 2001 - key results
2001 - key results • Market shares have increased • Retail Banking sales up 14% • Life and Pensions sales up 31% • Sold more products to more customers than ever before • Strong high quality results from Corporate division • Efficiency programme expanded
Slide 31: 2001 - a good outcome
2001 - a good outcome Asset quality • Domestic provisions charge 0.54% of average lending • Prudent lending culture will continue • Well placed to withstand any economic downturn
Slide 32: Mergers and acquisitions
Mergers and acquisitions • Focus is predominantly on organic growth • Open to a value enhancing domestic or overseas deal • Lloyds TSB is well placed to take advantage of a cross-border deal: we have many transferable skills
Slide 33: Summary and conclusion
Summary and conclusion • Strong income growth • Strong cost control • Focus on prudent and profitable growth • We’re in good shape
Slide 34: Forward looking statements
Forward looking statements This announcement contains forward-looking statements with respect to the business, strategy and plans of the Lloyds TSB Group and its current goals and expectations relating to its future financial condition and performance. Statements that are not historical facts, inclu
Slide 35: Delivering Value to Shareholders
Delivering Value to Shareholders