Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — UBS Financial Services Conference 2014
25 slides from Lloyds Banking's conference presentation, May 20, 2014
Slide 1: UBS Financial Services Conference
UBS FINANCIAL SERVICES CONFERENCE New York 20 May 2014 George Culmer, Chief Financial Officer Andrei Magasiner, Group Corporate Treasurer
Slide 2: Agenda
AGENDA OUR BUSINESS MODEL Q1 2014 PERFORMANCE TREASURY UPDATE SUMMARY 1
Slide 3: Strategy: Best bank for customers
STRATEGY Best bank for customers LLOYDS BANK BANK OF SCOTLAND SIMPLE, LOW RISK, UK FOCUSED RETAIL AND COMMERCIAL BANK ICONIC AND DISTINCTIVE BRANDS MULTI CHANNEL DISTRIBUTION HALIFAX SCOTTISH WIDOWS EFFICIENT SYSTEMS AND PROCESSES HIGH QUALITY, COMMITTED COLLEAGUES HELPING BRITAIN PROSPER THROUGH OU
Slide 4: Strategy: Best bank for shareholders
STRATEGY Best bank for shareholders 2011 STRATEGIC OBJECTIVES EFFICIENT, LOW RISK BUSINESS MODEL OBJECTIVES LEADING COST POSITION RESHAPE LOWER RISK APPETITE our business portfolio STRENGTHEN to fit our assets, our balance sheet and LOWER FINANCIAL LEVERAGE capabilities and risk liquidity position a
Slide 5: Accelerated delivery of strategic objectives
STRATEGY Accelerated delivery of strategic objectives ASSET Over £200bn of non-core asset reduction to end 2013 REDUCTION Achieved EU commitment target 2 years ahead of plan International presence significantly reduced INTERNATIONAL Exited or announced exit from 21 countries, target of 10 or
Slide 6: A strong improvement to underlying and statutory profit
STRATEGY A strong improvement to underlying and statutory profit UNDERLYING PROFIT(1) STATUTORY PROFIT BEFORE TAX(1) £1.4bn £6.2bn £0.4bn £(0.6)bn £2.6bn £1.8bn £(3.8)bn £0.4bn 2011 2012 2013 Q1 2014 2011 2012 2013 Q1 2014 (1) UK Reported. 5
Slide 7: Agenda
AGENDA OUR BUSINESS MODEL Q1 2014 PERFORMANCE TREASURY UPDATE SUMMARY 6
Slide 8: Highlights for the first three months of 2014
HIGHLIGHTS FOR THE FIRST THREE MONTHS OF 2014 Continue to successfully execute on our strategy Underlying profit increased 22% to £1.8bn and statutory PBT of £1.4bn Lending and deposit growth in our key customer segments Customers at the heart of our business; launched Helping Britain Prospe
Slide 9: Financial performance: profit and returns improved
FINANCIAL PERFORMANCE Profit and returns substantially improved and balance sheet strengthened UNDERLYING £1.8bn Group underlying profit increased to £1.8bn PROFIT 22% – Net interest margin up 36bp to 2.32% – Simplification delivering further efficiencies; costs down 5% – Substantial 57% reduction
Slide 10: Supporting our customers and the UK economy
SUPPORTING OUR CUSTOMERS AND THE UK ECONOMY Continued loan growth in key customer segments Stronger UK economic growth NET LENDING BALANCES (%) – Improving housing market YoY QoQ – Unemployment falling – Strengthening consumer and business confidence Mortgages(1) 2% +0.3% – Disposable income growi
Slide 11: Good deposit growth
GOOD DEPOSIT GROWTH Relationship strategy continues to deliver DEPOSIT GROWTH (YoY) Deposit growth reflects strength of our customer franchise £7.1bn Retail relationship brands driving deposit growth in a low base rate environment 12% £8.9bn £15.4bn 4% 4% Growth in high quality Transaction Ban
Slide 12: Maintaining the reducing cost trend
FINANCIAL PERFORMANCE Maintaining the reducing cost trend TOTAL COSTS TREND (£bn) 11.1 (13)% 5% cost reduction 10.8 10.1 Simplification run-rate savings of 9.6 £1.6bn; continue to target exit c.9.0 (E)(1) run-rate of £2bn by end 2014 Continue to expect 2014 costs of around £9bn (excluding TSB
Slide 13: Further strengthening the balance sheet
FURTHER STRENGTHENING THE BALANCE SHEET Common equity tier 1 and leverage positions further strengthened FULLY LOADED COMMON EQUITY TIER 1 RATIO 10.7% Stronger capital position 10.3% 9.6% principally driven by underlying 8.1% 7.1% 7.7% profit – £400m insurance dividend paid to Group in Q1 H2 H2 H1
Slide 14: Agenda
AGENDA OUR BUSINESS MODEL Q1 2014 PERFORMANCE TREASURY UPDATE SUMMARY 13
Slide 15: Group Corporate Treasury (GCT)
GROUP CORPORATE TREASURY (GCT) Supporting the delivery of a low risk business model Achieved by: Establishing a robust funding position and reducing the Group’s funding costs Improving the quality of the capital base by satisfying the Group’s AT1 requirements Driving a lower capital requiremen
Slide 16: Robust funding position
ROBUST FUNDING POSITION The Group’s funding transformation is now complete, which has resulted in significantly reduced funding costs CUSTOMER L&A, DEPOSITS AND LDR WHOLESALE FUNDING REDUCTION 154% 135% 298 121% 113% 111% 251 102 65 170 28 138 130 22 20 590 549 512 495 491 444 196 186 406 423 438 38
Slide 17: Improved capital base: combined buffer
IMPROVED CAPITAL BASE The Group is well placed as the regulatory framework is finalised... Earnings volatility Management Buffer BUFFER CET1 PRA Medium Pillar 2b Systemic COMBINED BUFFER Other SII Term Illustrative Global SII Risk Buffer Earnings Buffer Guidance CET1 Buffer 0% to 3% volatility 0% to
Slide 18: Improved capital base over five years
IMPROVED CAPITAL BASE ...and has significantly improved the quality of its capital base over the past five years We have satisfied our steady-state AT1 requirement IMPROVING CAPITAL RATIO 20.8% Total Capital Ratio 19.5% (New Rules) 18.8% 14.0% 12.7% FL Tier 1 Ratio 11.2% 2% AT1 Issuance (1) 10.7% FL
Slide 19: Lower capital requirement: pension de-risking
LOWER CAPITAL REQUIREMENT De-risking the Group’s defined benefit pension scheme helps reduce capital requirements Dec 2012 Dec 2013 % of assets held in 32% 18% Equities % of rates exposure 45% 54% hedged % of inflation exposure 54% 71% hedged Scheme assets of c.£33bn, with around 250,000 members
Slide 20: Low volatility earnings: structural hedge
LOW VOLATILITY EARNINGS Using a structural hedge stabilises the Group’s NII GROUP BALANCE SHEET ROLLING STRUCTURAL HEDGE PROGRAMME Assets Liabilities In the absence of a structural hedge programme, the Group NII would rise and fall Insurance Insurance with the prevailing level of three month LIBOR
Slide 21: Validation by the rating agencies
VALIDATION BY THE RATING AGENCIES The rating agencies are recognising the work being done by the Group to de-risk the bank The Group is the first major UK focused RATING CHANGES SINCE 1 Jan 2013 bank to be upgraded by a major ratings agency since the start of the financial crisis Standalone Senior
Slide 22: Agenda
AGENDA OUR BUSINESS MODEL Q1 2014 PERFORMANCE TREASURY UPDATE SUMMARY 21
Slide 23: Looking ahead: guidance for 2014
LOOKING AHEAD Guidance for 2014 Loan growth in all key customer segments Full year 2014 net interest margin now expected to increase to around 2.40%(1) Other income will remain challenging Further benefits from Simplification; guidance for full year costs of £9bn excluding TSB unchanged Co
Slide 24: Summary
SUMMARY Successful execution of our simple, clear strategy Supporting our customers and helping Britain prosper UK economic recovery gathering momentum Financial performance further improved, with stronger underlying profitability Guidance for margin and impairments improved Continue to st
Slide 25: Forward looking statements and basis of presentation
FORWARD LOOKING STATEMENTS AND BASIS OF PRESENTATION FORWARD LOOKING STATEMENTS This announcement contains forward looking statements with respect to the business, strategy and plans of the Lloyds Banking Group and its current goals and expectations relating to its future financial condition and per
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