Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — 9M 2011 Earnings Presentation
30 slides from Lloyds Banking's earnings presentation, Nov 8, 2011
Slide 1: Results for Nine Months Ended 30 September 2011
RESULTS FOR NINE MONTHS ENDED 30 SEPTEMBER 2011 8 November 2011 Tim Tookey Interim Group Chief Executive and Group Finance Director
Slide 2: Agenda
AGENDA Overview Tim Tookey Balance sheet de-risking Combined businesses trading performance Summary and financial targets 1
Slide 3: Overview
NINE MONTHS ENDED 30 SEPTEMBER 2011 Overview Further progress in reducing the Group’s risk – Further good progress on non-core asset reductions – Robust capital, liquidity and funding position – Growing customer deposit base and an improving loan to deposit ratio – No deterioration in overall asse
Slide 4: Further Good Progress on Non-Core Asset Reductions
FURTHER GOOD PROGRESS ON NON-CORE ASSET REDUCTIONS NON-CORE ASSETS £bn £42bn reduction in non-core assets in RWAs 144 129 121 year to September Total Assets 194 (22)% Further £11bn(1) reduction in Q3, with realised values broadly in line with book values Treasury 162 49 Assets 151 > £1bn reduc
Slide 5: 2011 Wholesale Term Funding Completed
2011 WHOLESALE TERM FUNDING COMPLETED WHOLESALE TERM ISSUANCE £bn 3.0 33.6 33.6 5.4 0.9 2.1 1.8 9.5 Unsecured 25.2 3.6 12.2 issuance Private issuance 6.8 24.1 Secured 21.4 issuance Public issuance 18.4 H1 2011 Q3 2011 Oct 2011 Total Total ANY FURTHER ISSUANCE IN 2011 WILL NOW PRE-FUND 2012 4
Slide 6: Strong Liquidity and Funding Position; Maturity Profile Maintained
STRONG LIQUIDITY AND FUNDING POSITION; MATURITY PROFILE MAINTAINED WHOLESALE FUNDING MATURITY WHOLESALE FUNDING £282BN £bn PROFILE More than 1 year £141bn / 50% (5)% 326 2 – 5 years 298 296 £61bn 282 >5 years £52bn 50% 50% 49% 50% 1 – 2 years £28bn Money market funding 50% 50% 51% 50% £80bn(1) Prima
Slide 7: Short-Term Wholesale Funding and Liquidity
SHORT-TERM WHOLESALE FUNDING AND LIQUIDITY Liquidity significantly exceeds short term funding and regulatory requirements 218 220 £bn 192 > 150% coverage 160 149 152 123 117 141 109 62 49 43 63 98 101 97 52 54 35 Dec Dec June Sept 2008 2010 2011 2011 Short term Total liquid Balances Other eligible U
Slide 8: Growing Customer Deposit Base and Improving Loan to Deposit Ratio
GROWING CUSTOMER DEPOSIT BASE AND IMPROVING LOAN TO DEPOSIT RATIO CUSTOMER DEPOSITS LOAN TO DEPOSIT RATIO £bn 169% 154% 144% 140% 4% 397 395 383 120% 114% 112% 371 Dec Dec Jun Sep Dec Dec Jun Sep 2009 2010 2011 2011 2009 2010 2011 2011 Group Core 7
Slide 9: Reduction in Government and Central Bank Funding
REDUCTION IN GOVERNMENT AND CENTRAL BANK FUNDING GOVERNMENT & CENTRAL £bn BANK FUNDING Repayments of £0.6bn in Q3 2011 partially offset by foreign 157.2 exchange movements of £0.3bn Further reduction expected in line with maturity profile: 96.6 107.2 – Q4 2011: £13.4bn – H1 2012: £18.5bn 51.2 37
Slide 10: A Strong Capital Position
A STRONG CAPITAL POSITION CAPITAL RATIOS RISK-WEIGHTED ASSETS Total capital £bn 15.2% 15.0% 15.3% 493 (9)% 12.4% 406 383 372 189 144 129 121 10.2% 10.1% 10.3% 8.1% 304 262 254 251 Dec Dec Jun Sep Dec Dec Jun Sep 2009 2010 2011 2011 2009 2010 2011 2011 Core Tier 1 ratio Other Capital Core Non-Core 9
Slide 11: A Strong Capital Position
A STRONG CAPITAL POSITION CORE TIER 1 RATIO (%) 0.7% 0.0% 10.2% 10.3% Good capital generation (0.6)% from core business 8.1% Effect of the statutory loss was broadly offset by the reduction in RWAs Core tier 1 ratio excludes the impact of ECN’s which would increase it to 12.3% Dec Dec Core Non
Slide 12: Exposures to Selected Eurozone Countries
EXPOSURES TO SELECTED EUROZONE COUNTRIES Exposures declining and closely managed; minimal Sovereign exposures Financial and £m insurance Direct Banking businesses Sovereign groups ABS assets(1) Corporate Retail Belgium 87 309 - 271 451 - Greece - - 61 - 557 - Ireland - 346 329 82 8,646 6,453 Italy 5
Slide 13: Asset Quality: UK Mortgage Portfolio
ASSET QUALITY: UK MORTGAGE PORTFOLIO Books performing satisfactorily with stable profiles 30 Sep 2011 31 Dec 2010 £bn £bn Portfolio >100% >100% >100% >100% LTV LTV LTV LTV and >3 months and >3 months in arrears in arrears 27.8 (8.3%) Specialist 5.1 (18.3%) 0.8 (2.9%) 5.7 (19.4%) 0.8 (2.7%) 47.9 (14.
Slide 14: Asset Quality: Retail Unsecured Lending Portfolio
ASSET QUALITY: RETAIL UNSECURED LENDING PORTFOLIO Impaired loans continue to decline UNSECURED IMPAIRED LOANS UNSECURED LOANS – NEW TO ARREARS £m £m 3,819 (11.9% of portfolio) 2,981 (10.7% of portfolio) 2,695 (10.4% of 2,540 portfolio) (10.0% of portfolio) Dec 09 Dec 10 Jun 11 Sep 11 Dec 09 June 10
Slide 15: Asset Quality: Wholesale and Commercial
ASSET QUALITY: WHOLESALE AND COMMERCIAL CORE WHOLESALE AND COMMERCIAL: NON-CORE WHOLESALE: IMPAIRED LOANS BROADLY STABLE ASSET QUALITY STABILISING 40.4% 39.9% 38.8% 4.4% 3.4% 3.4% 10.3% 10.6% 10.4% 5.0% 4.9% 5.0% Dec 10 Jun 11 Sept 11 Dec 10 Jun 11 Sept 11 Wholesale Commercial Impaired loans AQR (%
Slide 16: Asset Quality: Irish Portfolio
ASSET QUALITY: IRISH PORTFOLIO Some portfolio reduction in Q3, but impaired loans and provisioning continue to increase PORTFOLIO BREAKDOWN 31 Dec 2010 30 Sep 2011 Portfolio size: £27.5bn (€31.8bn) Portfolio size: £26.1bn (€30.3bn) 27.5 14.4 7.8 26.1 17.3 10.1 7.7 7.4 0.9 0.6 1.3 1.0 8.1 7.4 4.3 5.5
Slide 17: Summary: Continued Good Improvements in Balance Sheet Strength and Risk Reduction
SUMMARY: CONTINUED GOOD IMPROVEMENTS IN BALANCE SHEET STRENGTH AND RISK REDUCTION Further good progress on non-core asset reductions 2011 term funding objectives completed A robust capital and liquidity position Growing customer deposit base and an improving loan to deposit ratio No deteri
Slide 18: Business Performance - Income
BUSINESS PERFORMANCE - INCOME Nine months to Nine months to Change 30 Sept 2011 30 Sept 2010 Total income(1) £15,253m £18,007m (15)% Income before volatility effects and £15,441m £17,578m (12)% liability management gains Income before volatility effects and liability £16,095m £17,650m (9)% managemen
Slide 19: Business Performance - Income: Volatility and Liability Management Effects
BUSINESS PERFORMANCE – INCOME Volatility and liability management effects (15)% £m Income from business operations 18,007 (423) 309 (316) (12)% 1 17,578 15,441 0 (410) 254 (32) 15,253 2010 Liability Net ECN Banking 2010 2011 Liability Net ECN Banking 2011 Total mgt CVA(1) Fair volatility mgt CVA(1)
Slide 20: Net Credit Value Adjustment
NET CREDIT VALUE ADJUSTMENT Relates to the provision of risk management solutions for our corporate franchise within Wholesale Charge relates only to credit risk comprises Credit Value Adjustment net of Debit Value Adjustment Driven by current market conditions, not by any accounting change, o
Slide 21: Business Performance - Income from Business Operations
BUSINESS PERFORMANCE - INCOME Income from business operations £m (12)% 17,578 72 17,650 (9)% 147 (506) (301) 16,095 (415) (244) 15,441 (235) (654) 2010 Asset Core Non- W/sale Rate Treasury Other Asset 2011 Income sales Core Funding and & sales Income from business Mix Trading from business operation
Slide 22: Business Performance
BUSINESS PERFORMANCE Nine months to Nine months to Change £m 30 Sept 2011 30 Sept 2010 Operating expenses (7,909) (8,141) 3% Integration savings run-rate 1,930 1,268 52% Impairment (7,378) (9,426) 22% Profit before tax(1) 1,748 2,488 (30)% Statutory loss before tax (3,858) 1,967 (1) Combined busines
Slide 23: Cost Performance: 3% Reduction
COST PERFORMANCE: 3% REDUCTION Continued strong cost control delivers 2% core reduction 3% £m 8,141(1) 86 132 7,909 791 683 (314) (27) (109) 7,350 7,226 Q3 2010 Incremental Simplification Operating VAT Other incl. Q3 2011 Operating synergies and other leases & NIC inflation Operating expenses cost s
Slide 24: Impairment Charge
IMPAIRMENT CHARGE Q3 Performance better than expected GROUP IMPAIRMENT DIVISIONAL BREAKDOWN £m £m 9,426 13,399 W&I 3,433 7,378 10,589 Commercial 277 3,334 6,554 6,627 5,422 206 Wholesale 3,738 2,243 1,956 Retail 1,978 1,595 H1 H2 H1 H2 H1 Q3 Nine Nine 2009 2009 2010 2010 2011 2011 months to months t
Slide 25: Group Profit/(Loss) Before Tax and Fair Value Unwind
GROUP PROFIT/(LOSS) BEFORE TAX AND FAIR VALUE UNWIND £m 722 547 (19) (93) (442) (545) (1,093) Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010 2010 2010 2010 2011 2011 2011 24
Slide 26: Business Performance – Core and Non-Core
BUSINESS PERFORMANCE – CORE AND NON-CORE Core Non-core £m 9 months ended Sept 9 months ended Sept % % 2011 2010 change 2011 2010 change Income(1) 14,119 15,561 (9)% 1,134 2,446 (54)% Income before volatility 14,307 15,132 (5)% 1,134 2,446 (54)% effects and liability management gains(1) Operating exp
Slide 27: Non-Core Capital Consumption / Released
NON-CORE CAPITAL CONSUMPTION / RELEASED H1 2011(2) Q3 2011 £m Loss before tax (1) (1,762) (865) Post tax loss -> ‘Capital consumed’ (1,295) (636) Reduced RWAs (£bn) 15.2 7.5 at 10% -> ‘Capital released’ 1,520 750 Decrease/(increase) in EEL (487) (10) Net capital (consumed) / released (262) 104 Fundi
Slide 28: Summary and Financial Targets
NINE MONTHS ENDED 30 SEPTEMBER 2011 SUMMARY AND FINANCIAL TARGETS Further progress in reducing the Group’s risk Resilient underlying trading performance despite challenging market conditions Financial targets maintained, though delivery of medium-term targets may be delayed if weak economic co
Slide 29: Results for Nine Months Ended 30 September 2011
RESULTS FOR NINE MONTHS ENDED 30 SEPTEMBER 2011 8 November 2011 Tim Tookey Interim Group Chief Executive and Group Finance Director
Slide 30: Forward Looking Statements and Basis of Preparation
FORWARD LOOKING STATEMENTS AND BASIS OF PREPARATION FORWARD LOOKING STATEMENTS This announcement 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 perform