LLOBF - Lloyds Banking Group plc (LYG) Q2 2024 Earnings Call Transcript

2024-07-25 11:34:07 ET

Lloyds Banking Group plc (LYG)

Q2 2024 Earnings Conference Call

July 25, 2024 04:30 AM ET

Company Participants

Charlie Nunn - Executive Director and Group Chief Executive

William Chalmers - Executive Director and Chief Financial Officer

Conference Call Participants

Jason Napier - UBS

Aman Rakkar - Barclays

Benjamin Toms - RBC Capital Markets

Edward Firth - KBW

Joseph Dixon - Jefferies

Guy Stebbings - Exane BNP

Andrew Coombs - Citi

Chris Cant - Autonomous

Amit Goel - Mediobanca

Presentation

Operator

Thank you for standing by, and welcome to the Lloyds Banking Group 2024 Half Year Results Call. At this time, all participants are in a listen-only mode. There will be presentations from Charlie Nunn and William Chalmers, followed by a question-and-answer session. [Operator Instructions]. Please note this call is scheduled for 90 minutes and is being recorded.

I'll now hand over to Charlie Nunn. Please go ahead.

Charlie Nunn

Thank you, operator, and good morning everyone. And thank you for joining our 2024 half year results presentation. As usual, I'll start by providing a short overview of the group's financial and strategic performance. We will then run through the financials in detail. Following a brief summary, we'll have plenty of time to take your questions.

Let me begin on Slide 3. I'm pleased to say that we're continuing to make strong progress on delivering in line with our purpose driving positive outcomes for customers, colleagues and shareholders. I'll cover this in more detail on the following pages, But to start, I'd like to highlight the following three key messages. Firstly, we're now halfway through our five year strategic transformation. We remain on track to deliver our interim 2024 targeted outcome, delivering meaningful change for our customers, and creating value for the group.

Secondly, we've delivered a robust financial performance in the first half in line with the expectations we laid out for full-year. This is driving strong capital generation and enabling consistent growth in shareholder distribution. And finally, we are reaffirming our guidance for 2024 and remain confident of delivering higher more sustainable returns in 2026.

Turning now to our purpose on Slide 4. Delivering in line with our clear long standing purpose of Helping Britain Prosper ensures that we drive outcomes that benefit all stakeholders. During the first half, we continue to provide extensive support to our customers to help them meet their life cycle financial needs, such as supporting their savings goals through our strong ISA proposition.

Our 19% share of cash ISA flows has enabled an additional £6 billion of tax free savings for our customers. We also help more than 50,000 small businesses and charities start a new banking relationship with us. We remain focused on contributing to an inclusive society and supporting the transition to a low carbon economy with these also representing new opportunities for growth. Since the beginning of 2022, we provided around £38 billion of sustainable financing. Looking ahead, we welcome the emphasis that's been placed on sustainable economic growth by the new government.

Businesses like ours have a vital role to play working in partnership with the government to address national priorities and help communities across the U.K. prosper. We are positioned in this regard and believe we can make a meaningful contribution across key focus areas such as sustainable infrastructure, housing, and financial planning.

On Slide 5, I'll provide a brief overview of our financial performance. Our robust financial performance in the second quarter and across the first half was consistent with our expectations and guidance. Our Q2 NIM has remained resilient, whilst we continue to deliver strong momentum in the other income with our strategic initiatives supporting this growth. Net income was lower reflecting an increase in operating lease depreciation, an area that William will cover in more detail shortly.

As well on the P&L, costs are tracking in line with guidance, and asset quality remains strong. We've also grown the balance sheet in the quarter with broad based lending growth of £5 billion excluding a Q2 securitization, whilst deposits were up £6 billion with growth in both retail and commercial banking. Our return on tangible equity was 13.5% for the first half. This translates into strong capital generation of 87 basis points with 47 basis points in Q2. In line with our intention to deliver attractive shareholder distributions, we today announced a 15% increase in the interim ordinary dividend to £1.06 per share. Our financial performance is supported by our strategic progress as we realize the benefits of our investments. I'll provide an update on this over the coming slides starting with Slide 6....

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