Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — Lloyds TSB Group — H1 2001 Earnings Presentation
32 slides from Lloyds Banking's earnings presentation, Jul 27, 2001
Slide 1: 2001 Interim Results
2001 Interim Results 27 July 2001 Kent Atkinson Group Finance Director 1
Slide 2: Profit before tax
Profit before tax 2000H1 2000H2 2001H1 £m £m £m Business as usual operating profit 2,049 2,146 2,237 Short-term fluctuations in investment returns (38) (56) (329) Exceptional restructuring costs (74) (114) (54) Abbey National offer costs - - (16) Changes in economic assumptions 127 - - Pension provi
Slide 3: Impact of FRS 18
Impact of FRS 18 • Uncollateralised EMD bond portfolio, previously in loans and advances, now reclassified as debt securities • Prior year adjustment reduces 2000 profit before tax by £26 million. PBT in 2001H1 reduces by £25 million • Reserves increase by £286 million, loans and advances reduce by
Slide 4: Domestic net interest income
Domestic net interest income 2001H1 v 2000H1 £m Change due to volume growth 154 Change due to margin reduction (11) Net benefit 143 Scottish Widows funding cost (102) Increase in domestic net interest income 41 4
Slide 5: Domestic net interest margin
Domestic net interest margin % 4.5 4.5 4.00 4.00 3.97 3.97 4.0 4.0 3.83* 3.83* 3.80* 3.80* 3.78* 3.78* 3.68 3.68 3.5 3.5 3.48 3.48 3.47 3.47 3.0 3.0 1999H1 1999H1 1999H2 1999H2 2000H1 2000H1 2000H2 2000H2 2001H1 2001H1 *excluding Scottish Widows funding cost 5
Slide 6: Underlying revenue growth
Underlying revenue growth 2000H1 2000H2 2001H1 £m £m £m Total income (bau) 4,206 4,465 4,711 Acquisitions/operating leases (12) (120) (189) Underlying income 4,194 4,345 4,522 6
Slide 7: Scottish Widows
Scottish Widows • Gross premiums £2.5 billion, up 21% • 20% growth in pro-forma weighted sales • Underlying profits increased by 3% on 2000H2 • Acquisition projections on track • We expect to continue to grow market share in the second half of 2001 and beyond • Successful integration of SWIP; new ma
Slide 8: Underlying operating expenses
Underlying operating expenses 2000H1 2000H2 2001H1 £m £m £m Total operating expenses (statutory) 1,876 2,076 2,133 Exceptional restructuring costs (74) (114) (54) Abbey National offer costs - - (16) Acquisitions/operating lease depreciation (46) (136) (193) 1,756 1,826 1,870 Incremental new revenue
Slide 9: Quality of earnings
Quality of earnings General Insurance Life Assurance/ 15% (14%) Long Term Savings 20% (15%) Retail Banking 14% (18%) International Banking 12% (13%) Mortgages 19% (22%) Wholesale Markets 20% (18%) Operating Profit* * business as usual basis, excluding central group items 9
Slide 10: Charge for bad and doubtful debts
Charge for bad and doubtful debts Average % of Average 2001H1 Lending Lending £m £bn 2000H1 2001H1 UK Retail Banking 196 16.3 2.75 2.43 Mortgages 2 51.2 (0.02) 0.01 Insurance & Investments - 1.1 - - Wholesale Markets 68 33.4 0.23 0.41 Total domestic 266 102.0 0.51 0.53 International Banking 57 15.7
Slide 11: Profit before tax by main business
Profit before tax by main business 2000H1 2000H2 2001H1 £m £m £m UK Retail Banking 372 404 330 Mortgages 441 448 423 Insurance and Investments 591 834 792 UK Retail Financial Services 1,404 1,686 1,545 Wholesale Markets 377 369 445 International Banking 261 216 276 Central group items 7 (125) (29) B
Slide 12: Economic profit
Economic profit £m 2,500 2,500 2,081 2,081 1,949 1,949 2,000 2,000 1,634 1,634 1,500 1,500 1,129 1,129 1,000 1,000 500 500 00 1998 1998 1999 1999 2000 2000 2001H1 2001H1 business as usual basis 12
Slide 13: Interim Results
Interim Results 27 July 2001 Peter Ellwood Group Chief Executive 1
Slide 14: The future Lloyds TSB
The future Lloyds TSB 2
Slide 15: Satisfactory Results
Satisfactory Results • Business as usual profit before tax up 9% • Income up 8% (adjusting for acquisitions) • Costs up 7% (adjusting for acquisitions), reducing to 2% after revenue investment • ROE 30.6% • Efficiency ratio 43.8% • Fee and non-interest income 49% (47%) 3
Slide 16: Continuing a Long Record of Successful Delivery
Continuing a Long Record of Successful Delivery £m £m 80 80 2,500 2,500 Business Business as as usual usual Operating Operating Profit Profit Fee income rises as % of total income 70 70 2,000 2,000 60 60 % of total income 50 50 1,500 1,500 40 40 1,000 1,000 30 30 Fee income 20 20 500 500 Interest in
Slide 17: The New Environment
The New Environment Customer demands are increasing Relationships will capture value Only one route for sustainable growth Create value for customers Maximise shareholder value 5
Slide 18: Key Drivers for Growth
Key Drivers for Growth Service Distribution Product offering Segmentation Motivated staff = Income growth 6
Slide 19: Customer Service
Customer Service On-line real time banking 7 days a week, 24 hours a day Over 2,000 more staff in branches New systems to identify customer needs World class Customer Relationship Management 7
Slide 20: Distribution
Distribution Largest branch network Largest telephone banking service Most visited financial services website Customer recruitment at record levels 8
Slide 21: Product Offering
Product Offering Improved product range Record current account sales 500,000 added value accounts sold Best cross-sell rate 9
Slide 22: Sales up 15%
Product Offering Market share increase Sales up + 15% Scottish Widows + 20% Customer lending + 12% Customer deposits + 8% 10
Slide 23: Creating a More Balanced Business
Creating a More Balanced Business Market share Market share 2000A* 2001A* Personal lending (stock) 10.6% 13.1% Current accounts balances outstanding 23.8% 25.2% Unit Trusts & ISAs 5.5% 5.6% Pensions regular 5.66% 7.07% Personal savings (stock) 8.3% 8.2% Mortgages (net new lending) 10.5% 8.0% *estima
Slide 24: Customer Segmentation
Customer Segmentation 1m Personal Choice customers Wealth Management – potential 1m affluent customers Business & Commercial Banking 12
Slide 25: Highly Motivated Staff
Highly Motivated Staff Over 2,000 more staff Intensive training programme Certificate in Customer Service accreditation Flexible working package 13
Slide 26: Key Drivers for Growth
Key Drivers for Growth Service Distribution Product offering Segmentation Motivated staff = Income growth 14
Slide 27: Quality of Business
Quality of Business • Good spread of sustainable earnings • UK Retail Financial Services increased by 10% • Wholesale and International increased by 13% • Asset quality maintained - AAA rated • Well positioned for any economic downturn 15
Slide 28: Creating a More Balanced Business
Creating a More Balanced Business UK Retail Wholesale Insurance & Banking & & Investments Mortgages International Profit before £ 753 m £792 m £721 m tax As % of 33% 35% 32% total* otal* *excluding Central Group Items 16
Slide 29: Cost Management
Cost Management • Continue vigorous focus on costs • Cost growth in H2 will be lower than in H1 • The Group Efficiency Programme is delivering • Exploring all opportunities to further increase productivity • Incremental investment costs have peaked 17
Slide 30: Growth
Growth • Organic growth prospects are good • Cross border transactions inevitable • We have considerable transportable skills to support overseas growth 18
Slide 31: Conclusion
Conclusion Satisfactory results Strong growth opportunities Strong focus on efficiency Strong future 19
Slide 32: Delivering Value to Shareholders
Delivering Value to Shareholders 20