Lloyds Banking Group - AGM Statement
Virtual Shareholder Event Statements
Following the Annual General Meeting of
Welcome to the
Our Annual General Meeting is an important event for the Group, allowing us to engage directly with you, our shareholders as well as for you to vote on our resolutions. But, with the current restrictions on people's movement and ability to gather, like many other companies, we have been forced to hold a virtual shareholder event rather than our usual AGM. The results of the votes on the resolutions proposed at this morning's AGM will be announced on our website in the usual way shortly.
However, we hope that this virtual meeting will help maintain our commitment to engaging with you as shareholders. We know how important it is to address your questions, and we value the opportunity to update you on the development of the Group, particularly given the extraordinary times in which we find ourselves.
I am pleased that later on in this presentation, after you have heard from Antonio and myself, we will be joined by
But let me start with Covid-19, which has changed and disrupted life for everyone in this country.
In our 250 years of serving the British economy we have experienced many downturns and several crises and on each occasion we have worked hard to contribute to the recovery of the economy and be there, by our customers' side. We expect to do exactly the same this time.
At this stage we can't be sure how the situation will evolve. But we do know that the impact of Covid-19 on our society, our economy and the way we go about our lives will be long lasting and profound. We recognise that our success is inextricably linked to the success and health of the
As a Group at the heart of the
This support will of course have a cost, but we see this social contribution as a type of social dividend - recognising both our obligations as a responsible business and the benefit we gain from operating in communities that we can help return to prosperity. It's the right thing to do and deployed at a time when our customers and communities most need it.
And, of course, this support for our customers and communities is only possible because of our people. Antonio will add his observations later about the remarkable work of so many of our employees. But let me say how deeply proud I am of how they have responded to this crisis. Many are going to exceptional lengths every day to serve our customers and their communities. Thank you to all of them.
Let me now turn to the more usual business of the meeting, starting with the Board.
Since our 2019 AGM we have appointed
I'd also like to take this opportunity to thank
I would also like to thank our Chief Operating Officer and Director,
Finally, on Board matters, since I am now moving to my 9th year on the Group Board, I previously announced that I plan to retire as Group Chairman no later than the next AGM. A search process was started at the beginning of the year to enable an orderly handover once my successor is identified.
I'd like to thank all our Board Members for their contribution and commitment over the past year.
Let me now turn to business performance and strategy. The Group delivered a resilient performance in 2019, maintaining our underlying profit with continued focus on our leading cost efficiency while increasing our strategic investment and strengthening our position as the
However we were of course disappointed that our statutory performance was impacted by additional PPI charges in the year, reflecting the increased volume of claims in the run up to the deadline last August.
Although the world has changed significantly since the year end, Antonio will highlight the key points from our 2019 performance in a moment. However I would like to say a few words about our long-term strategic aims and progress.
Following the Group's return to profitability after the last financial crisis, our strategic aim has been to transform the business to succeed in the rapidly changing consumer, technology and competitive environment. This means not only ensuring we have leading digital channels that allow customers to interface quickly and easily with our services on their phones and tablets, but also reengineering our internal processes and technology platforms to provide the speed and reliability that customers increasingly expect. That in turn means significant new demands on the skills and working patterns of our dedicated staff. It is a massive but essential programme of change to ensure we have a business that can sustain its service to customers and returns to shareholders in the years to come.
Given the growth of new competition, both large and small, our strategy has also been to recognise and build on the Group's areas of distinctive strength. One of those is the unique position we have to serve customers savings and retirement needs by linking the strength of our Scottish Widows business to our wider bank franchise. Our unique Single Customer View, where customers can see details of their pension and insurance products alongside their bank accounts online, is now available to over 5 million banking and insurance customers. We expect this to rise to around 9 million by the end of 2020.
During 2019 we took significant steps to add to our offering through strategic partnerships and acquisitions. We launched Schroders Personal Wealth to customers in September and we are now making good progress towards our ambition of becoming a top three financial planning business by the end of 2023.
In other areas, we completed the integration of
And in line with our overall strategic transformation, we continued to respond to our customers' changing needs through our multi-channel and multi-brand strategy. Alongside our commitment to maintain the
For our commercial clients, we launched self-serve business banking loans and rolled out a new digitised small business lending tool. We were the first
So I am pleased we continued to make strong strategic progress in 2019, and are well placed with a strong balance sheet to continue to support the
Which brings me to the dividend. These extraordinary times lead to difficult decisions. Following a request from the
However, while we have held back on the payment of dividends, I am well aware that any surplus capital in the business still belongs to you as shareholders. I would like to reassure shareholders that the Board remains committed to returning surplus capital to shareholders in due course both through future dividends and potential share buy backs as appropriate and we will continue to keep this under review.
Now let me turn to executive remuneration, and before I talk about the changes we are proposing to our Remuneration Policy, I would like to briefly mention a decision that has been taken in the context of Covid-19.
I can confirm that in response to the current situation, our Group Executive Committee have asked that they do not receive an annual bonus under the 2020 Group Performance Share Award. This decision was made in solidarity with the communities in which we operate and in recognition of the priorities of our stakeholders - and I believe it was the right thing for them to do.
In setting our general remuneration principles the Group believes in pay for performance, ensuring our approach to remuneration is aligned to the interests of our shareholders. Variable remuneration is heavily weighted towards long-term performance, with the majority being share-based. Awards are also subject to deferral and holding periods.
For 2019, the reduction in statutory profit meant that the Group Performance Share pool was reduced 33 per cent compared to 2018, reflecting the impact of PPI and other conduct-related costs. The Group Chief Executive and Chief Operating Officer also independently requested not to receive Group Performance Share awards for 2019.
As you will be aware, we proposed a new Directors' Remuneration Policy for approval at today's AGM, following extensive consultation with shareholders. You can read the detail of this plan in the Annual Report, but I would like to draw your attention to some of the highlights.
We are also introducing a new long-term variable reward, known as the Long Term Share Plan, to replace the current Group Ownership scheme. We believe this plan is more closely aligned to creating shareholder value over the longer term. We have aimed to reduce complexity in our reward structure, but awards will be subject to a pre-grant test as well as performance underpins to ensure they don't reward failure - and the maximum opportunities in the plan have also been significantly reduced. As a result of all these changes, the maximum total compensation for the Group Chief Executive is reducing by almost 30 per cent.
While we have had broad support for the new policy in our consultation with shareholders, I'm aware that a number have expressed continuing reservations about different aspects of the plan, and in the light of today's votes we will continue to engage with them, to discuss their concerns.
There, of course, has been a great deal of public interest in matters of executive pay and fairness, and rightly so. We remain very focused on addressing the pay gap in our organisation from the bottom up, and not just from the top down. We hope you'll agree that we have made significant progress in this respect over the past year.
Finally, I would now like to provide a brief update in relation to the historic HBOS Reading fraud and the progress made since last year's AGM. As outlined last year, we have been providing shareholders with a rolling update on the status of these matters on our website.
As I have said before, the Group has deeply apologised to those customers affected by these crimes and, following the conclusion of the trial, sought to provide them with compensation for their distress and losses. As detailed in our latest update, in December we published the independent report by Sir
We also continue to cooperate fully with the ongoing Dame
As set out in that note, one clear conclusion we have recognised is that the culture of the Group has at times been too defensive, too bureaucratic and legalistic, failing to fully understand the concerns raised by customers and communicate sympathetically. That is something which, in recent years, we have been working hard to address.
I am very conscious that the criminal activities that took place over a decade ago in this HBOS operation have cast a long shadow over the victims of the fraud as well as the reputation of our bank, but I can assure you that we will continue our efforts to do the right thing for all those whom it has impacted. And I am proud of what I see now in the commitment of the many people who work for Lloyds, who work every day to serve our customers to the best of their ability and to earn their trust and loyalty.
So to conclude, the longer-term impact of coronavirus remains unclear but the Group will maintain its focus on supporting customers and the
I would like to thank all our shareholders for their continued support and hope that this time next year we will be able to gather for our AGM in the usual way. Meanwhile I hope all of you, and your families, stay well and safe. Now let me hand over to António.
Chief Executive's speech
Thank you Chairman. On behalf of the Board and the Group Executive Committee, thank you for your continued support and the leadership and guidance you provide to the Group.
I would like to echo your acknowledgement of the extraordinary times we are living in and take this opportunity to wish everyone watching, and their families, well and hope that they stay safe and healthy.
Despite the unusual circumstances, I am pleased that we still have this opportunity to speak to you, our shareholders, and look forward to answering the questions you have submitted. Before I talk about our recent financial performance and progress in terms of Responsible Business and the environment, I'd like to spend some time on our response to the COVID-19 crisis and the incredible work of our colleagues who continue to go above and beyond, in very unusual and challenging circumstances to support our customers.
Covid-19 will have a deep and lasting impact on all of us. We are totally committed to helping households and businesses, in turn supporting the
For our personal customers we have offered a range of practical measures to help take the pressure off their finances in these difficult times. This has included agreeing almost one million repayment holidays for customers with mortgages, loans, motor finance and credit cards. In addition, we are offering interest and fee-free overdrafts up to
And for our most vulnerable customers we have introduced a new dedicated line for customers aged over 70. In addition, we have put in place measures to give priority to customers who need extra support, such as
I am also pleased to say that our operations have shown resilience and we have adapted swiftly to the challenges we face. Over 95 per cent of our branch network remains open and our call centres are well-staffed to handle the significant increase in volume being seen from customers. Importantly, our digital banking apps have remained fully operational throughout the lockdown, despite the significantly increased demands from existing and new customers through new registrations and daily logins.
For the business community we have fully embraced the decisive action of the Government to set up a number of emergency lending schemes, as well as adopting our own measures to address companies' cash flow pressures. Our commercial businesses have supported clients by agreeing over 45,000 fee free overdrafts, capital repayment holidays and deferred payments. This is all backed by our
As I look at the challenges we have faced and the way we have had to rapidly adapt, I have been deeply impressed by the commitment of our relationship managers who have been working tirelessly, talking to tens of thousands of business customers to understand how the coronavirus crisis is impacting them and to provide support wherever they can.
For smaller businesses, which are the lifeblood of the British economy, we have moved quickly. We are proud to be playing our part by delivering the Government's flagship Bounce Back Loan scheme approving loans totalling over
The Coronavirus Business Interruption Loan Scheme - or CBILS - is also a key part of our nation's response offering larger loans to SMEs and we are approving the vast majority of eligible CBILS applications that we assess. We have adapted our product range, rapidly put in place new systems and significantly increased our resources to speed up loan requests and approvals. This means we have now been able to approve more than 6,700 CBILS loans to a value of
Finally, we have also enhanced our financial support for our charitable partners and the Group's independent charitable Foundations. In recent weeks we have launched a partnership with We Are Digital which has seen tablet devices delivered free of charge to over-70s isolated by Covid-19, to help keep them connected, as well as providing a specialist phone line to help up to 20,000 customers access the internet.
We have also supported The Silver Line, a partner to
Secondly, our people have been - and will continue to be - absolutely central to how we respond to the challenges of Covid-19. Our colleagues have adapted swiftly to ensure the resilience of our operations. I want to express my gratitude to all my colleagues across the Group. They have shown exemplary dedication and professionalism. I know that many of them remain anxious about the health of loved ones and the impact of coronavirus on their communities, but they have continued to be focused on serving our customers every day.
I am proud to say that our colleagues support for customers has been flexible and sensitive, while operationally we have shown resilience, strength and the ability to adapt and innovate at pace. In the first few weeks of the crisis we rolled out the technology and training to allow around 45,000 of our colleagues to work from home, up from the previous level of around 15,000. Where working from home is not possible, and our colleagues are providing a critical service, such as in our branch network, we have consistently and closely followed government guidance around social distancing and we have regularly updated and supported colleagues on the precautions they should take. I want to commend the collaborative role our unions, Unite and Accord have been playing in helping us address staff concerns.
We have suspended all role reduction plans while committing to pay all of our staff, in full, whatever their circumstances. This is important as it removes uncertainty for our colleagues, and allows them to focus on supporting our customers and serving their communities.
I am proud of the way
I would now like to spend a bit of time talking about:
· Our recent financial performance, the impact of Covid-19, and how our financial strength is critical to our response and support for customers;
· Our approach to responsible business and the environment.
Let me start with our recent financial performance and the financial strength of the Group, which is fundamental in our ability to support our customers through Covid-19.
Following a solid start to 2020, we are now seeing the emerging economic impact of the coronavirus crisis and this will of course be reflected in our performance going forward.
At our recent first quarter results we announced statutory profit before tax of
Importantly, the Group is in a strong financial position and our balance sheet remains well positioned for the current environment given our prudent approach to lending and low risk
Secured lending makes-up over 80 per cent of our balance sheet, including
As the Chairman mentioned earlier, I would now like to update you on the steps we have taken following publication of Sir
I am personally overseeing this, working with victims and other stakeholders to ensure those customers affected by the HBOS Reading fraud can now be confident their claims have been properly addressed in an open and transparent manner.
The distress caused to those affected by the criminal misconduct at HBOS Reading over a decade ago remains a matter of deep regret to me and my colleagues. We are determined to rebuild trust by implementing
While Covid-19 presents an immediate challenge, climate change remains one of the biggest issues facing the
I am pleased to be able to update you on the strong progress we have made on our sustainability strategy. This strategy, set out in 2018, recognises that
Our goal is to be a leader in supporting the
In 2019 we made significant progress, reaching our 2020 targets to support 5 million homes that can be powered through
Our sustainability strategy and our achievements continue to be well recognised. We were ranked as a "leader" and 2nd in
Looking ahead we are committed to announcing more products and services in 2020 that will help support a greener future for the
Identifying and managing climate-related risks and disclosing these in line with the
We recognise that improving our own environmental footprint is an important foundation for sustainability activity at
We know there is more to do, and we are continually improving, but our ambition to finance a greener future for the
I would like to conclude where we started. Covid-19 represents an unprecedented challenge for the Group, and the whole of the
For further information:
Group Investor Relations Director
Email: [email protected]
+44 (0) 20 7356 1571
Group Corporate Affairs
Head of Media Relations
Email: [email protected]
+44 (0) 20 7356 3522
Forward looking statements
This document contains certain forward looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934, as amended, and section 27A of the US Securities Act of 1933, as amended, with respect to the business, strategy, plans and/or results of
Words such as 'believes', 'anticipates', 'estimates', 'expects', 'intends', 'aims', 'potential', 'will', 'would', 'could', 'considered', 'likely', 'estimate' and variations of these words and similar future or conditional expressions are intended to identify forward looking statements but are not the exclusive means of identifying such statements.
Examples of such forward looking statements include, but are not limited to: projections or expectations of the Group's future financial position including profit attributable to shareholders, provisions, economic profit, dividends, capital structure, portfolios, net interest margin, capital ratios, liquidity, risk-weighted assets (RWAs), expenditures or any other financial items or ratios; litigation, regulatory and governmental investigations; the Group's future financial performance; the level and extent of future impairments and write-downs; statements of plans, objectives or goals of the Group or its management including in respect of statements about the future business and economic environments in the
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
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