Lloyds Banking Group Plc · LSE:LLOY
Lloyds Banking — Lloyds TSB Group — H1 2000 Earnings Presentation
26 slides from Lloyds Banking's earnings presentation, Jul 28, 2000
Slide 1: 2000 Interim Results
Peter Ellwood Group Chief Executive 2000 Interim Results 28 July 2000
Slide 2: The Financial Services Sector Today
THE FINANCIAL SERVICES SECTOR TODAY • The competitive environment has become even tougher and the sector is at a watershed: – changes in technology – price-led competition has intensified – increasing regulation – greater consumer empowerment • There will be winners and losers • Companies with clear
Slide 3: Statutory Results - First Half 2000
STATUTORY RESULTS - FIRST HALF 2000 • Profit before tax rose 12% to £2,068 million, post-tax return on equity was 32.7% • Revenue growth of 8% • Costs increased by 11%, largely as a result of exceptional restructuring costs and additional e-commerce investment • Efficiency ratio strong at 44% • Econ
Slide 4: Our Strategy Is Working
OUR STRATEGY IS WORKING • Leader in our chosen markets – Scottish Widows deal completed • First choice for customers – Customer Relationship Management and segmentation programmes further developed • Drive down day-to-day costs to enable us to invest for growth – our restructuring programme is on tr
Slide 5: Leader in Our Chosen Markets - Scottish Widows Integration
LEADER IN OUR CHOSEN MARKETS - SCOTTISH WIDOWS INTEGRATION • The Scottish Widows brand is working well at branch level • Slower sales of life, pensions and investment products in the first half, but stronger sales forecast in the second half • Satisfactory reaction to the merger within the IFA marke
Slide 6: First Choice for Customers - Segmentation & CRM
FIRST CHOICE FOR CUSTOMERS - SEGMENTATION & CRM • Segmentation policies working – growth in value added fee based accounts – growth in number of Personal Choice customers – growth in telephone banking – growth in internet banking – growth in commercial and business banking segmented offers • Custome
Slide 7: We Maintained Our Strong Market Leadership Position
WE MAINTAINED OUR STRONG MARKET LEADERSHIP POSITION Market Market share* position Fee-paying current accounts 35% 1st Current accounts 26% 1st Business Banking start-ups 24% 1st Household insurance 7% 1st Personal lending 10% 1st Dot.com recruitment 17% 2nd Personal savings 9% 4th Mortgages 10% 3rd
Slide 8: Drive Down Day-to-Day Costs - Efficiency Programme
DRIVE DOWN DAY-TO-DAY COSTS SO WE CAN BETTER INVEST IN THE FUTURE - EFFICIENCY PROGRAMME • Exceptional restructuring costs of £200 million in 2000 • Our aim is to achieve an efficiency ratio of below 35% by 2002 • In 2002, we expect our absolute costs to be less than in 1999 • The average pay-back p
Slide 9: Our E-Commerce Strategy
OUR E-COMMERCE STRATEGY • Our e-commerce strategy has four key elements: – multi-channel offer, LloydsTSB.com – stand-alone internet offer, evolvebank.com – business-to-business – e-enablement, leading to greater efficiency
Slide 10: Mergers and Acquisitions
MERGERS AND ACQUISITIONS • Further consolidation in the UK market is inevitable over time and we are well placed to participate • We continue to view all prospective targets overseas, with our primary focus being on opportunities in Europe and the USA • Any transaction must complement our strategies
Slide 11: Our Future
OUR FUTURE • We know that the trading environment will get tougher and more challenging • Our strategy for maximising shareholder value is founded upon growth through: – customer segmentation and relationship management – leveraging our brand strength and distribution capability – reducing our day-t
Slide 12: Kent Atkinson, Group Finance Director - 2000 Interim Results
Kent Atkinson Group Finance Director 2000 Interim Results 28 July 2000
Slide 13: Operating Profit
OPERATING PROFIT 1999H1 1999H2 2000H1 £m £m £m Profit before tax - statutory 1,853 1,768 2,068 Short-term fluctuations in investment returns 12 16 (59) Changes in economic assumptions - - 127 Exceptional restructuring costs - - (74) Pension provision - (102) - Loss on sale and closure of businesses
Slide 14: Short-Term Fluctuations in Investment Returns
SHORT-TERM FLUCTUATIONS IN INVESTMENT RETURNS Investment returns - 2000H1 £m Normalised earnings on £4.8bn estate 120 (based on 8.00% return on equities and 5.25% return on gilts) Actual earnings 61 Short-term fluctuations in investment returns (59)
Slide 15: Scottish Widows - P&L Impact
SCOTTISH WIDOWS - P&L IMPACT March - June 2000 Reported Adjustments Adjusted £m £m £m Net interest income 4 4 Funding cost (80) (80) (76) (76) Other income 112 51 163 Total income 36 87 Operating expenses 45 28 17 (Loss) Profit before tax (9) 70
Slide 16: Scottish Widows - Impact on Group Margin
SCOTTISH WIDOWS - IMPACT ON GROUP MARGIN 2000H1 2000H1 1999H1 Net Interest Net Interest Net Interest Income Margin Margin £m % % Group 2,311 3.58 3.87 Scottish Widows Bank (4) - - Funding cost of Scottish Widows 80 0.12 - Group excluding Scottish Widows 2,387 3.70 3.87
Slide 17: Scottish Widows - Impact on Domestic Margin
SCOTTISH WIDOWS - IMPACT ON DOMESTIC MARGIN 2000H1 2000H1 1999H1 Net Interest Net Interest Net Interest Income Margin Margin £m % % Domestic 1,990 3.68 4.00 Scottish Widows Bank (4) - - Funding cost of Scottish Widows 80 0.15 - Domestic excluding Scottish Widows 2,066 3.83 4.00
Slide 18: Domestic Net Interest Margin
DOMESTIC NET INTEREST MARGIN % 4.5 4.00 3.97 4.0 3.85 3.83* 3.74 3.68 3.5 3.0 1998H1 1998H2 1999H1 1999H2 2000H1 *excluding Scottish Widows funding cost
Slide 19: Operating Results - First Half 2000
OPERATING RESULTS - FIRST HALF 2000* • Operating profit up 13% to £2,074 million, post-tax ROE 32.6% • Total revenue grew by 7% • Customer deposits increased by 3% to £97 billion. Customer lending grew 8% to £107 billion • Mortgages outstanding increased to a record £50.2 billion. Estimated market s
Slide 20: Revenue Growth
REVENUE GROWTH* £m 4,198 3,938 4,064 1,887 1,583 1,636 (40%) (40%) (45%) 2,355 2,428 2,311 (60% (60% (55% ) ) ) 1999H1 1999H2 2000H1 Net interest income Other income *excluding short-term fluctuations in investment returns, changes in economic assumptions and pension provision
Slide 21: Operating Expenses
OPERATING EXPENSES 1999H1 1999H2 2000H1 £m £m £m Total operating expenses 1,694 1,723 1,876 Exceptional restructuring costs - - 74 E-commerce investment costs - - 42 Scottish Widows - - 17 Underlying operating expenses 1,694 1,723 1,743
Slide 22: Loans and Advances to Customers
LOANS AND ADVANCES TO CUSTOMERS Period-end balances 1999H1 2000H1 Growth 1999H2 £bn £bn % £bn Mortgages 45.8 50.2 10 47.5 Other personal lending 9.8 10.3 5 10.1 Commercial and corporate lending 31.4 33.5 7 32.3 Total domestic lending 87.0 94.0 8 89.9 International lending 14.6 15.1 3 14.4 Total cust
Slide 23: Deposits - Customer Accounts
DEPOSITS - CUSTOMER ACCOUNTS Period-end balances 1999H1 2000H1 change 1999H2 Sterling: £bn £bn % £bn Current accounts 22.8 24.2 6 23.5 Savings and investment accounts 40.7 43.4 7 41.3 Other customer deposits 17.1 15.6 (9) 14.7 Total sterling deposits 80.6 83.2 3 79.5 Currency deposits 13.9 13.8 (1)
Slide 24: Economic Profit
ECONOMIC PROFIT* £m 1,200 Economic Profit up 12% on 1999H1 1,066 995 1,000 954 800 600 1999H1 1999H2 2000H1 *excluding short-term fluctuations in investment returns, changes in economic assumptions, exceptional restructuring costs, pension provision and loss on sale and closure of businesses
Slide 25: Delivering Value to Shareholders
DELIVERING VALUE TO SHAREHOLDERS • Good revenue growth • Significant progress with e-commerce developments • Scottish Widows now fully integrated; improved sales expected in the second half of the year • Strong mortgage performance • Efficiency programme gathering pace • Credit risks remain well con
Slide 26: Delivering Value to Shareholders
Delivering Value to Shareholders