Lloyds Banking Group (LLOY) Barclays 22nd Annual Global Financial Services Conference summary

Macroeconomic and political environment

• Sentiment towards the UK has improved, with falling inflation and interest rates, and a more stable political backdrop post-election.

• Asset growth, deposit stability, and operating income have all benefited from the constructive macro environment.

• The October budget is seen as a key event, with expectations for continued commitment to growth.

Net interest income and margin outlook

• Net interest income (NII) has been under pressure but is expected to recover in the second half of the year, supported by reduced deposit churn and structural hedge contributions.

• Margin guidance remains above 2.90% for the year, with upside and downside risks tied to deposit churn, mortgage pricing, and base rate changes.

• The pass-through of rate cuts will be managed holistically, considering customer value, funding needs, and competitor actions.

Structural hedge and earnings trajectory

• Structural hedge is expected to deliver over £700 million incremental income in 2024, with further material step-ups in 2025 and 2026.

• Headwinds from mortgages, deposit churn, and rate cuts are expected to dissipate by 2026, supporting a strong operational leverage story.

• The strategy aims for a greater than 15% ROE and over 200bps capital generation.