LLOBF - Lloyds Banking Group plc (LYG) Q4 2024 Earnings Conference Call Transcript

2025-02-20 12:42:10 ET

Lloyds Banking Group plc (LYG)

Q4 2024 Earnings Conference Call

February 20, 2025, 04:30 AM ET

Company Participants

Charlie Nunn - Executive Director and Group Chief Executive

William Chalmers - Executive Director and CFO

Douglas Radcliffe - Group IR Director

Conference Call Participants

Benjamin Toms - RBC

Perlie Mong - Bank of America

Jonathan Pierce - Jefferies

Ben Caven Roberts - Goldman Sachs

Chris Cant - Autonomous

Amit Goel - Mediobanca

Presentation

Charlie Nunn

Good morning, everyone. And thank you for joining our 2024 Full Year Results Presentation at our brilliant new London Headquarters. We will officially open the building to colleagues over the coming weeks. So we are very pleased to welcome you as our first guests. Let's hope everything goes all right.

As we now reach the end of our first phase of our five-year strategic transformation, our presentation will be slightly longer today. I'll start with a brief overview before handing over to William, who will run through the 2024 financials in detail. After this, I'm excited to share more detail on our strategic progress over the first three-year phase, as well as our plans for the remaining two years as we continue to transform the business at pace. We'll then have the usual time allocated for your questions.

Let me begin on Slide 3. I'd like to start by highlighting three key messages. Firstly, our purpose-led strategy is continuing to deliver strong outcomes for all stakeholders. We've made excellent progress in the first phase, driving broad-based momentum and positioning us well to accelerate our transformation in the second phase.

Secondly, our financial performance in 2024 was robust, in line with guidance. Our highly capital-generative business model enabled strong shareholder distributions, including a 15% increase in the ordinary dividend and a share buyback of £1.7 billion. This is despite an additional £700 million provision relating to Motor finance commissions taken in the fourth quarter. And finally, we're providing new guidance for 2025 and reaffirming our targets for 2026. We remain confident of delivering higher, more sustainable returns.

On Slide 4, I'll briefly cover how our purpose is driving value for all our stakeholders. We have a long-standing purpose of helping Britain prosper and a proven track record over many years of delivering outcomes that benefit all our stakeholders. Our actions provide clear benefits for our customers and communities across the UK, whilst driving business value and supporting the real economy in areas where we're well placed to lead the change. At the same time, these actions unlock new, attractive growth opportunities for the group.

For example, as the UK's largest mortgage lender, we're deeply involved in the housing sector. We've now lent nearly £100 billion to first-time buyers since 2018, including £15 billion in 2024.

Alongside, we've continued to build our customers' financial resilience and savings. And in the last few years, we've provided nearly £20 billion of funding to the social housing sector, £90 billion of infrastructure financing and almost £50 billion of sustainable financing. As you heard from me at the half year, we welcome the emphasis placed on sustainable economic growth by the government.

This, combined with signs of an improving macro backdrop and resilient fundamentals for consumers and businesses, positions the UK for faster growth. We believe we're well placed to support this.

Turning now to the strategic progress on Slide 5. I'll elaborate on this in more detail in the second part of my presentation, but I wanted to briefly highlight the strong progress we've made in the first phase of our strategic transformation across 2022 to '24. Significantly, we've returned the franchise to growth. This has been delivered through multiple levers, including leveraging our digital leadership position and increasing focus on higher value areas such as mass affluent.

At the same time, we've reinforced our efficiency position, with an increased focus on end-to-end digitization and the simplification of our technology estate. Our success in both areas is a result of the transformation of the group's capabilities across people, technology and data. We've made great strides in this area, significantly increasing the hiring of key engineering talent and adopting new technologies to drive innovation, creating the platform for the next phase.

Our execution in the first three years has already delivered clear financial benefits, including circa £2 billion of net income growth, a turnaround in our other income lines and significant improvements in returns and capital distributions. On the latter, our capital distributions over the past three years exceed £11 billion. As I'll discuss later, we see further financial upside looking ahead to 2026.

I'll now close this section with a brief look at our 2024 financials on Slide 6. Building upon our continued strategic progress, our financial performance in 2024 was robust, with positive business momentum in both the fourth quarter and over the course of the full year. Our 2024 financials also demonstrate delivery against the medium-term guidance we laid out for the first phase of our strategic plan.

We've delivered £0.8 billion of additional revenues from strategic initiatives, ahead of our £0.7 billion target, and £1.2 billion of gross cost savings, more than offsetting the impact of payer inflation during the period. Our 2024 return on tangible equity and capital generation were impacted by the additional provision relating to Motor finance commissions. However, both were ahead of the circa 13% and circa 175 basis points, excluding this.

I'll provide more details on our financial performance on a three-year view, as well as the outlook to 2026, in the second part of my presentation. But for now, I'll hand over to William to cover 2024 in more detail....

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