Lloyds Banking Group (LLOY) Goldman Sachs 28th Annual European Financials conference summary

Macro environment and outlook

• UK macro environment remains resilient, with GDP and unemployment trends slightly better than expected for 2024 and 2025.

• Asset growth and impairments are both performing better than prior forecasts, though term rates remain higher and more volatile, slowing tangible net asset growth.

• Supportive macro conditions are expected to continue into 2025, providing a conducive backdrop for business performance.

Net interest income and margin dynamics

• Guidance for average interest earning assets (AIEA) above £450bn and net interest margin above 290bps for 2024 remains firm.

• Mortgage growth is strong, with Q1 application volumes up 20%, and retail lending outpacing commercial, where SME demand is slower.

• Margin headwinds include deposit churn and mortgage refinancing, but structural hedge provides a significant tailwind, expected to strengthen through 2026.

• Non-bank net interest income is expected to rise with increased activity in commercial, insurance, and investment areas.

Structural hedge and sensitivity

• Structural hedge earnings are set to rise by about £700m in 2024, with most benefits for 2024 and 2025 already locked in.

• Exposure to structural hedge benefits is mainly tied to deposit levels and interest rates, with offsetting effects between the two.