Lloyds Banking Group plc (NYSE:LYG) Q4 2023 Earnings Call Transcript
Lloyds Banking Group plc (NYSE:LYG) Q4 2023 Earnings Call Transcript February 22, 2024
Lloyds Banking Group plc isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Charles Nunn: Good morning, everyone, and thanks very much for joining us at our 2023 full year results presentation. In line with prior results, I'll begin with a short overview of the group's financial and strategic performance. William will then provide the usual detail on our financials. Following a brief summary, we'll then take your questions. Let me begin on Slide 3. I'm really pleased with the progress we've made on implementing our customer-focused strategy, whilst at the same time, delivering strong outcomes for our shareholders. Now there are lots of moving parts in Q4 that William will talk through shortly. But underlying that, the business has performed strongly. With that in mind, I'd like to highlight the following 3 things.
Firstly, we've now completed the second year of our strategic transformation and are generating real business momentum. We remain on track to meet our strategic targeted outcomes. Secondly, we've met or exceeded the guidance that we laid out during the year, whilst taking proactive action to address a number of headwinds. Our financial performance has enabled increased capital returns of £3.8 billion in the year. And finally, we're confident of delivering higher, more sustainable returns for shareholders. Importantly, we are reiterating both our returns and capital generation for 2024 and 2026. Turning now to Slide 4, where I will highlight how we've delivered for all stakeholders in 2023. We have provided proactive and targeted support during a period of ongoing uncertainty for our customers.
For example, we've contacted more than 15 million customers in 2023 to increase awareness regarding savings options and enhanced propositions. Off the back of this, more customers trusted us with their savings, with balances actually growing in the year. We've also used our data insights to contact around 7.5 million customers offering support where required. Alongside this, our purpose-driven strategy is focused on building a more inclusive society. To this end, we've provided further support to first-time buyers and the social housing sector. Those are both part of a multiyear commitment that combined totals nearly £100 billion of support since 2018. Finally, supporting the transition to a low carbon economy and creating a more sustainable future remains of great importance.
Linked to this, we are increasing our commercial banking sustainable financing target to £45 billion by 2026. Combined, these actions are representative of the strength of our purpose, helping Britain prosper, which enables us to successfully deliver for all stakeholders and deliver profitable growth for the business. On Slide 5, let me now address how we delivered for our shareholders with a brief overview of some of the key financial and nonfinancial metrics. William will take you through the detail later, but we have delivered a robust financial performance in line with both our expectations and the guidance we provided. This is despite some difficult unexpected headwinds, combined with an uncertain external environment. Net income growth of 3% was supported by growth in both net interest income and other operating income.
Combined with disciplined operating costs and strong asset quality, the group delivered a return on tangible equity of 15.8% for the year. This translated into strong capital generation of 173 basis points even after the impacts of regulatory headwinds and a provision relating to the FCA review of Motor Finance Commission arrangements. Excluding these exceptional items, our underlying capital generation was significantly stronger in excess of 200 basis points. This enabled total capital return of £3.8 billion, equivalent to around 14% of the group's market capitalization. This includes a 15% increase in the ordinary dividend as well as a share buyback of up to £2 billion. To pause briefly on the FCA motor finance review, as you will have seen, we have taken a charge of £450 million.
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