Blueprint
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
21
February 2018
LLOYDS BANKING GROUP
plc
(Translation
of registrant's name into English)
5th Floor
25 Gresham Street
London
EC2V 7HN
United Kingdom
(Address
of principal executive offices)
Indicate
by check mark whether the registrant files or will file annual
reports
under
cover Form 20-F or Form 40-F.
Form
20-F..X.. Form 40-F
Indicate
by check mark whether the registrant by furnishing the
information
contained
in this Form is also thereby furnishing the information to
the
Commission
pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes
No ..X..
If
"Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule
12g3-2(b):
82- ________
Index
to Exhibits
21
February 2018
LLOYDS BANKING GROUP STRATEGIC UPDATE
'I am
delighted to announce today our strategy for the next three years
which will transform the Group for success in a digital world.
Over
the last six years the Group has made huge progress and has built
many strong capabilities including the largest and top rated
digital bank in the UK. As we enter the next phase of our journey
our team is determined to further improve the business, enhance
customer experience and deliver superior shareholder
returns.
The
external environment is evolving rapidly and I am confident that
this exciting and ambitious plan, with the significant additional
investment, will mean we remain at the forefront of UK financial
services, and continue to deliver our mission of Helping Britain
Prosper.'
António
Horta-Osório, Group Chief Executive
|
Key actions of the 2018-2020 strategic plan:
●
Transform the Group into a
digitised, simple, low risk, customer focused, UK financial
services provider
●
Leverage our multi-brand and
multi-channel model, including the UK's largest digital bank and
branch network, to be the best bank for
customers
●
Invest more than £3
billion in strategic initiatives, an increase of more than 40 per
cent on the previous strategy, to further enhance customer
propositions, further digitise the Group, maximise capabilities as
an integrated financial service provider and transform the way we
work.
Key outcomes and financial targets:
●
Growth in targeted segments
with strong statutory profit growth
●
Operating costs of less than
£8 billion in 2020 with cost: income ratio in low 40s as we
exit 2020
●
Asset quality ratio of
around 35 basis points through the cycle and less than 30 basis
points during the plan period
●
Strong and superior returns
(14-15 per cent return on tangible equity from 2019) on a higher
CET1 capital base
●
Strong capital generation
(170-200 basis points per year pre dividend) will continue to drive
attractive and sustainable capital returns
|
Strategy overview
Over
the last six years we have successfully transformed the Group,
restructuring and simplifying the business whilst enhancing
customer experience, Helping Britain Prosper and significantly
increasing shareholder returns.
We have
made strong progress, leveraging the unique strengths and assets of
the Group including our differentiated multi-brand strategy, our
multi-channel propositions, market leading efficiency, and the
largest digital bank and branch network in the UK.
As we
look to the future, we see the external environment evolving
rapidly. Changing customer behaviours, the pace of technological
evolution and changes in regulation all present opportunities.
Given our strong capabilities and the significant progress made in
recent years we believe we are in a unique position to compete and
win in this environment by developing additional competitive
advantages. We will continue to transform ourselves to succeed in
this digital world and the next phase of our strategy will ensure
we have the capabilities to deliver future success.
Strategic priorities
We have
identified four strategic priorities focused on the financial needs
and behaviours of the customer of the future: further enhancing our
leading customer experience; further digitising the Group;
maximising Group capabilities; and transforming ways of working. We
will invest more than £3 billion in these strategic
initiatives through the plan period that will drive our
transformation into a digitised, simple, low risk, customer focused
UK financial services provider.
Delivering a leading customer experience
We will
drive stronger customer relationships through best in class
propositions while continuing to provide our customers with
brilliant servicing and a seamless experience across all channels.
This will include:
●
remaining the number 1 digital bank in the UK with open
banking functionality;
●
unrivalled reach with UK's largest branch network serving
complex needs; and
●
data-driven and personalised customer
propositions.
Digitising the Group
We will
deploy new technology to drive additional operational efficiencies
that will make banking simple and easier for customers whilst
reducing operating costs, pursuing the following
initiatives:
●
deeper end-to-end transformation targeting over 70 per cent
of cost base;
●
simplification and progressive modernisation of our data and
IT infrastructure; and
●
technology enabled productivity improvements across the
business.
Maximising the Group's capabilities
We will
deepen customer relationships, grow in targeted segments and better
address our customers' banking and insurance needs as an integrated
financial services provider. This will include:
●
increasing Financial Planning and Retirement (FP&R) open
book assets by more than £50 billion by 2020 with more than 1
million new pension customers;
●
implementing an integrated FP&R proposition with single
customer view; and
●
start-up, SME and Mid Market net lending growth (more than
£6 billion in the plan period).
Transforming ways of working
We are
making our biggest ever investment in people, increasing colleague
training and development by 50 per cent to 4.4 million hours
per annum and embracing new technology to drive better customer
outcomes. The hard work, commitment and expertise of our colleagues
has enabled us to deliver to date and we will further invest in
capabilities and agile working practices. We have already
restructured the business and reorganised the leadership team to
ensure effective implementation of the new strategy.
Financial returns
The UK
economy has proven resilient and going forward our plans and
projections assume this performance continues with a steady
increase in base rate to 1.25 per cent by the end of
2020.
The
strategy outlined today will enable the Group to deliver strong
statutory profit growth supported by targeted asset growth in key
segments, a resilient net interest margin, lower operating costs,
strong asset quality and lower remediation costs, whilst delivering
strong capital generation and sustainable and superior shareholder
returns.
Costs
will continue to be a competitive advantage as we deliver market
leading efficiency. We expect operating costs to be less than
£8 billion in 2020. We also expect to achieve a cost:income
ratio in the low 40s as we exit 2020, including future remediation
costs. We continue to expect improvements in the cost:income ratio
every year.
Asset
quality remains strong and, given our low risk business model and
the significant portfolio improvements in recent years, we now
expect an asset quality ratio of around 35 basis points through the
cycle and less than 30 basis points through the plan
period.
We
expect to deliver an improved return on tangible equity (RoTE) of
14.0-15.0 per cent from 2019 onwards on a higher CET1 capital base
of c.13 per cent plus a management buffer of around 1 per
cent.
Capital
generation is expected to remain strong with 170-200 basis points
of capital generation per year pre dividend and as a result we
expect to deliver progressive and sustainable ordinary dividends
whilst maintaining the flexibility to return surplus capital to
shareholders.
Forward looking statements
This
document contains certain forward looking statements with respect
to the business, strategy, plans and /or results of Lloyds Banking
Group and its current goals and expectations relating to its future
financial condition and performance. Statements that are not
historical facts, including statements about Lloyds Banking Group's
or its directors' and/or management's beliefs and expectations, are
forward looking statements. By their nature, forward looking
statements involve risk and uncertainty because they relate to
events and depend upon circumstances that will or may occur in the
future. Factors that could cause actual business, strategy, plans
and/or results (including but not limited to the payment of
dividends) to differ materially from forward looking statements
made by the Group or on its behalf include, but are not limited to:
general economic and business conditions in the UK and
internationally; market related trends and developments;
fluctuations in interest rates, inflation, exchange rates, stock
markets and currencies; the ability to access sufficient sources of
capital, liquidity and funding when required; changes to the
Group's credit ratings; the ability to derive cost savings and
other benefits including, but without limitation as a result of any
acquisitions, disposals and other strategic transactions; changing
customer behaviour including consumer spending, saving and
borrowing habits; changes to borrower or counterparty credit
quality; instability in the global financial markets, including
Eurozone instability, instability as a result of the exit by the UK
from the European Union (EU) and the potential for other countries
to exit the EU or the Eurozone and the impact of any sovereign
credit rating downgrade or other sovereign financial issues;
technological changes and risks to the security of IT and
operational infrastructure, systems, data and information resulting
from increased threat of cyber and other attacks; natural, pandemic
and other disasters, adverse weather and similar contingencies
outside the Group's control; inadequate or failed internal or
external processes or systems; acts of war, other acts of
hostility, terrorist acts and responses to those acts,
geopolitical, pandemic or other such events; changes in laws,
regulations, accounting standards or taxation, including as a
result of the exit by the UK from the EU, or a further possible
referendum on Scottish independence; changes to regulatory capital
or liquidity requirements and similar contingencies outside the
Group's control; the policies, decisions and actions of
governmental or regulatory authorities or courts in the UK, the EU,
the US or elsewhere including the implementation and interpretation
of key legislation and regulation together with any resulting
impact on the future structure of the Group; the ability to attract
and retain senior management and other employees and meet its
diversity objectives; actions or omissions by the Group's
directors, management or employees including industrial action;
changes to the Group's post-retirement defined benefit scheme
obligations; the extent of any future impairment charges or
write-downs caused by, but not limited to, depressed asset
valuations, market disruptions and illiquid markets; the value and
effectiveness of any credit protection purchased by the Group; the
inability to hedge certain risks economically; the adequacy of loss
reserves; the actions of competitors, including non-bank financial
services, lending companies and digital innovators and disruptive
technologies; and exposure to regulatory or competition scrutiny,
legal, regulatory or competition proceedings, investigations or
complaints. Please refer to the latest Annual Report on Form 20-F
filed with the US Securities and Exchange Commission for a
discussion of certain factors together with examples of forward
looking statements. Except as required by any applicable law or
regulation, the forward looking statements contained in this
document are made as of today's date, and Lloyds Banking Group
expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to any forward looking
statements. The information, statements and opinions contained in
this document do not constitute a public offer under any applicable
law or an offer to sell any securities or financial instruments or
any advice or recommendation with respect to such securities or
financial instruments.
LLOYDS
BANKING GROUP plc
(Registrant)
By: Douglas
Radcliffe
Name: Douglas
Radcliffe
Title: Group
Investor Relations Director
Date: 21st
February 2018