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01/11 08:15
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary highlights strong financial performance, including a robust CET1 ratio and capital generation. Despite some cost pressures, the company shows growth in customer lending and deposits, with optimistic guidance for net interest income and margins. The Q&A section reinforces positive sentiment, with expectations for stable impairments and increasing non-banking NII. The commitment to share buybacks and cautious acquisitions also supports shareholder returns. Overall, the combination of strong financial metrics and optimistic future guidance suggests a positive stock price movement over the next two weeks.
Statutory profit after tax 3.8 billion, up from previous year.
Return on tangible equity 14%, consistent with previous year.
Net income 12.7 billion year to date, showing growth compared to prior year.
Net interest income 3.2 billion in Q3, up 2% quarter on quarter.
Net interest margin 2.95%, up 2 basis points from Q2.
Operating costs 7 billion in the first nine months, up 5% year on year.
Impairment charge 273 million year to date, with a Q3 charge of 172 million.
Tangible net assets per share 52.5p, up 2.9p in Q3.
Capital generation 132 basis points year to date, on track for 175 basis points for the full year.
Customer lending balances 457 billion, up 4.6 billion in Q3.
Deposits 476 billion, up 1 billion in Q3.
Other operating income 4.2 billion year to date, up 9% year on year.
Cost to income ratio 53.4% in Q3.
Remediation charge 29 million in Q3, 124 million year to date.
Asset quality ratio 15 basis points in Q3, with a year to date ratio of 18 basis points.
Risk weighted assets 223 billion, up 4.2 billion in the first nine months.
CET1 ratio 14.3% after 71 basis points of ordinary dividend accrual.
Mortgage Book Growth: Mortgage balances increased by 3.2 billion in Q3, reflecting a strengthening market and improved customer proposition.
Retail Business Growth: Continued growth in cards and unsecured loans, with increases of 0.1 billion and 0.6 billion respectively.
Market Share in Mortgages: Achieved a market share inflow of approximately 21.5% in mortgages during Q3.
Deposits Growth: Deposits increased by 1 billion in Q3, with retail savings accounts up by 2.8 billion.
Cost Management: Operating costs were stable at 2.3 billion in Q3, with a year-to-date increase of 5%.
Asset Quality: Impairment charge of 172 million in Q3, maintaining strong asset quality with an AQR of 15 basis points.
Strategic Transformation Progress: Continued execution of strategic initiatives, with a target of generating 1.5 billion in additional revenues by 2026.
Capital Generation: Strong capital generation of 132 basis points year-to-date, on track for a target of 175 basis points for the full year.
Competitive Pressures: The company is experiencing competitive pressures in the mortgage market, with deposit churn and mortgage refinancing acting as headwinds to net interest margin (NIM). The management noted that deposit churn has eased slightly, which is a positive sign, but competition remains a concern.
Regulatory Issues: The company is awaiting the outcome of court cases related to motor finance, which could impact provisioning. Additionally, the FCA's motor commission review is expected in May 2025, which may also influence future financial expectations.
Supply Chain Challenges: There are indications of supply chain challenges affecting the motor finance sector, particularly with dealers holding lower stock levels than seen in the first half of the year.
Economic Factors: The economic outlook appears to be improving, which has positively influenced asset quality. However, the company remains cautious about potential economic downturns and their impact on credit quality.
Cost Management: Operating costs are expected to rise due to inflationary pressures, but the company is implementing cost discipline measures to mitigate these increases. The management has set a cost guidance of approximately 9.4 billion for 2024.
Interest Rate Environment: The company is navigating a declining interest rate environment, which poses challenges for net interest income and margins. The management expects further rate cuts in the future, which could impact profitability.
Strategic Transformation Progress: Lloyds Banking Group continues to make good progress on its strategic transformation, delivering for customers and driving higher, sustainable returns.
Strategic Income Growth: The group is on track to deliver an additional £0.7 billion of strategic income in 2024.
Cost Management: Operating costs are expected to be around £9.4 billion in 2024, with a focus on cost discipline and efficiency.
Mortgage Market Share: The group achieved a market share inflow of approximately 21.5% in mortgages during Q3, supported by strategic investments.
Strategic Investments: Investments in intermediary journeys and product propositions are contributing to improved market share and customer satisfaction.
2024 Guidance: Lloyds Banking Group reaffirms its guidance for 2024, expecting net interest margin to be greater than 290 basis points.
Return on Tangible Equity (ROTE): The group expects a return on tangible equity of approximately 13% for 2024.
Asset Quality Ratio: The asset quality ratio is expected to be less than 20 basis points for 2024.
Capital Generation: The group aims for a capital generation target of around 175 basis points for the full year.
Tangible Net Asset Value (TNAV) Growth: TNAV per share is expected to grow as headwinds unwind, with a target of over 15% ROTE by 2026.
Ordinary Dividend Accrual: The closing CET1 ratio for the quarter is 14.3% after 71 basis points of ordinary dividend accrual.
Share Buyback Program: In Q3, the TNAV benefited from the mechanical reversal of the 0.9p per share accrual for the share buyback that was flagged at Q2. The group has a £2 billion buyback program ongoing.
The earnings call summary and Q&A reveal a positive outlook with reaffirmed guidance, strategic revenue growth, and a focus on digital investments. Despite some uncertainties in management responses, the commitment to shareholder returns and strong financial metrics, including increasing dividends and capital optimization, suggest a positive market reaction. The company's strategic initiatives and optimistic guidance outweigh any concerns, likely resulting in a positive stock price movement over the next two weeks.
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