Lloyds Banking Group 2Q13 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“Our fully loaded core tier 1 ratio improved by 150 basis points in the half to 9.6%, and our fully loaded leverage ratio increased to 4.2%. This significant uplift was achieved through a combination of capital generation from our strong core franchise, the capital accretion from our non-core asset reductions and a number of successfully executed transactions”

“In Retail, we continue to be the U.K.’s largest lender to first-time buyers, providing 1 in every 4 with mortgages.”

“[the leverage ratio] is not an operational restriction for us. We are at 4.2% now at around 50 basis points since the start of the year. The trend continues to be upwards, so that will not be an effective restriction for us going forward. And therefore, I don’t see any business mix change as a consequence. What I think is, which is interesting, I believe, is that given it will be an operating restriction for others, especially in the building society-type bank, that will probably have an impact on their business mix or their prices in mortgages, which might be beneficial.”

“we have 25% of the U.K. retail market in savings, current accounts and mortgages, broadly speaking, we are at 1/2 that level in personal loans, credit cards, insurance, asset management and OOI of companies-related products, such as interest rates, protections, FX, transaction banking and capital markets”

“in a country where the long-term deposit ratio is above 1, every units you fund, you have to go and get deposits for it.”

“Clearly we’re seeing activity growth in the mortgage story, which we talked about balances, but the actual number of mortgage applications is much higher now than it has been for the last 2 or 3 years”

“we are the only bank in the U.K. which is not closing branches in net terms.”

“I do expect, as you said, asset margins to come under pressure, more pressure because the FLS is driving interest rates lower, which is macroeconomically the right thing to do. When you wanted to stimulate an economy, you lower interest rates in order for people to have a lower opportunity cost of consuming or investing now versus saving for the future. But given, as we discussed, that deposit margins have been going down even further because people are still saving a lot, and therefore, deposits are growing and increasing their growth rates and with the FLS also available, deposit prices have been coming down.”

” when you look at that part of the worst book, which is the Irish mortgages…We are the only bank in Ireland that has an impaired ratio, a declared impaired ratio in mortgages, which is bigger than the 90-day NPL ratio, which means that we are conservative in the way we consider a mortgage as impaired. All the other banks have a higher ratio in 90 days overdue loans than the impaired ratio they declare…they have been catching up and doing increasing provisions, and we have been doing less and less provisions.”

“o on business confidence, it’s quite interesting. I mean, I have said repeatedly last year that I was not seeing the U.K. economy going down. If you remember, I was not seeing a double dip. I was seeing the economy stable. From the beginning of the year, that I told you, I think the economy is recovering. And I can now tell you I think the signs are even stronger. So I do not expect a very quick or strong recovery. But the signs are much stronger in terms of breadth of the recovery and direction of the recovery…So much more certainty of direction and much wider signs in the economy. To give you an example, in SME lending, net lending, we are growing 5%, accelerating from 4%. We are growing in all regions of the U.K. except one. So everything is spread across the country. And business confidence, according to the studies that Lloyds has been publishing lately, confidence is increasing. I think the FLS was a game changer, not only in terms of the scheme itself but about the confidence that the publicity of the scheme being available transmitted.”