Lloyds Banking Group plc (LLOY) Earnings Call Transcript & Summary

Good morning, everyone. I'm Kate Cheetham, Lloyds Banking Group's General Counsel and Group Company Secretary, and I'm delighted to welcome you to our live virtual shareholder event today. Before I outline what you can expect from today's session, I just want to say a few words about arrangements for our 2021 Annual General Meeting on 20th of May. As you'll no doubt be aware, in light of the ongoing restrictions relating to the COVID-19 pandemic and the law preventing large gatherings, we've had to adapt our plans for the 2021 AGM. Earlier this week on our website and in The Mirror and Daily Mail today, we announced that the AGM will now take place at the Edinburgh International Conference Center to allow for the possibility that we may be able to accommodate a limited number of shareholders in person at the AGM, subject to attendance restrictions, social distancing and other safety requirements. The time and date of the AGM remain the same. We will publish further arrangements on our website once it's clear what is permitted legally. We won't know this until near the time of meeting. In deciding on the final arrangements, we will obviously prioritize the safety and security of our shareholders and colleagues, and given likely restrictions on attendees, a pre-registration system may be necessary. We ask shareholders to understand and comply with the Scottish COVID-19 protection levels and any attendance restrictions that may be necessary. We would strongly suggest that shareholders do not finalize travel arrangements until any new arrangements are confirmed. Now back to today's proceedings. We are delighted to host our first live virtual shareholder event. To give shareholders a chance to hear from the Board and ask questions before you vote on the proposed resolutions being put to our 2021 Annual General Meeting. And we know how important this is to you from the feedback we've received from our shareholders and other stakeholder groups. Today's event will provide you with the opportunity to put your questions to our Chair, Robin Budenberg; our interim Group Chief Executive, William Chalmers; our Deputy Chair, Alan Dickinson; and our Responsible Business Committee Chair, Sara Weller. In a moment, you'll hear messages from Robin, William and Sara before we begin the live Q&A session, which will be hosted by our Group Corporate Affairs Director, Andrew Walton. We received a number of questions in advance of today's event, and thank you for taking the time to submit these. We will do our best to answer as many of your questions as possible during today's event. As you'll appreciate, we aren't able to answer customer issues or complaints in this public setting. But should any shareholder submit one, we will follow up with the individual shareholder directly after this event. Answers to questions from shareholders will be displayed on our website as soon as possible after the event. And if you have any follow-up questions from today's event, you can e-mail them to ShareholderQuestions@ lloydsbanking.com. As a reminder, proxy voting will close at 11:00 a.m. U K. Time on Tuesday, the 18th of May. So please make sure you submit your votes in good time. We encourage shareholders to do this online through our share registrars Equiniti. And you can find details of how to do this on our website at www.lloydsbankinggroup.com. We'll now hear from Robin, William and Sara in a series of short videos. Thank you.

Thank you, Kate. Welcome, everyone, to the Lloyd's Banking Group virtual shareholder event, which we're holding ahead of our actual AGM next week. I'm Robin Budenberg, and I've been Group Chair since January, having joined the Board in October last year. So this is my first Lloyds Banking Group shareholder event. These are important events, which allow us to engage directly with you, our shareholders, and give you the opportunity to ask us questions. In keeping with the updates, we normally provide you at the AGM, today, I'd like to say a few words about changes to our Board in 2020, an overview of our performance in 2020, the resumption of our dividend, our remuneration policy, the HBOS Reading fraud and some reflections from me as I begin my tenure as Chair and some comments on our plans for 2021. So first, changes to the group's Board. It's only fitting that I start by thanking my predecessor, Lord Blackwell, who has held the Chair role for these last 6 years. Norman's dedication and tireless work in this position means he's left us with strong governance and a clear purpose and strategy. This is also our first shareholder even since António Horta-Osório stepped down as CEO. Over the last decade, Antonio has led our transformation, delivering our purpose of Helping Britain Prosper, while creating a truly customer-focused business underpinned by strong financial foundations. I'd like to thank him on behalf of the Board and wish him well and all the best in his new role at Credit Suisse. Later this year, we look forward to welcoming Charlie Nunn as Group Chief Executive. As we said when announcing his appointment, Charlie will bring world-class operational, technological and strategic expertise to build on the strength of our existing team. In the meantime, I'd like to thank William Chalmers for assuming the responsibilities of interim Chief Executive in this period. His steady hand will be key to setting us up for future success and allowing Charlie to hit the ground running. In addition, there have been some other changes to our Board in the last 12 months. In January of this year, Catherine Woods took over the role of Chair of the Board Risk Committee. Catherine joined the Board in March 2020 and has extensive experience in the banking industry. I'd like to thank Nick Prettejohn, who held the role of Chair of the Board Risk Committee last year on an interim basis. We announced in September that Simon Henry was leaving the Board. Sarah Legg has now taken on his role as Chair of the Audit Committee. Sarah was Group Financial controller at HSBC until early 2019, following a long career in financial leadership roles. And finally, earlier this year, we announced that Sara Weller would retire as Chair of the Responsible Business Committee and as a nonexecutive director later this month. I'd really like to thank Sara for her leadership and commitment in chairing the committee since it was created in 2015. And I'm pleased to welcome Amanda Mackenzie, a nonexecutive director since 2018 to the role of Chair of the Responsible Business Committee following Sara's retirement. I'd like to thank all our Board members for their contribution and hard work over the past year. We announced a number of very important changes, notably to the Chair and CEO roles, and the Board played a key role in providing stability, continuity and guidance. And from a personal perspective, I'd like to thank them for making me feel so welcome since I joined the group. So 2020 will be remembered as a year dominated by the COVID-19 pandemic and our response to that and the economic crisis that followed. In many ways, it was the ultimate test of our commitment to the group's purpose of Helping Britain Prosper. You'll hear more from William about the variety of ways in which we've been supporting our colleagues, customers and communities through the pandemic, but I'd like to take this opportunity to recognize the efforts of every Lloyds Banking Group colleague who has worked through this crisis, especially those who have been serving our customers in our branches and our call centers. Your response in the last year has been nothing short of monumental, and you made me incredibly proud to become a part of this business. So thank you from me and from the group's Board for all that you have achieved. Despite the impacts of the pandemic, our financial performance has also demonstrated the group's underlying strength and the benefits of being a focused, sustainable, efficient and low-risk U.K. financial services leader. William will talk you through the numbers in detail. But given the background, we were pleased to report an underlying profit of GBP 2.2 billion and statutory profit before tax of GBP 1.2 billion. We also continued our strategic investment in the group, with a particular focus on digitizing our products and processes, something that proved incredibly important in helping our colleagues and customers respond to the pandemic. Regarding our dividend. Last year, following a request to all banks by the Prudential Regulation Authority, the group suspended dividends on ordinary shares and canceled the final dividend for 2019. These decisions were not taken lightly, and I'm sure will have come as a disappointment to you, our shareholders. However, our capital position has remained strong as a result. And following the PRA announcement in December, the Board was, therefore, able to recommend a total ordinary dividend of 0.57p per share, the maximum allowable within the PRA guidelines. We recognize the importance of the dividend to our shareholders. The PRA has said that they will consider their guidance on 2021 dividends before banks announce their half year results. So the Board expects to be in a position to discuss interim dividends when it reviews the performance of the business for the first half of the year. Our position on quarterly dividends will also be confirmed at that time. The Board remains committed to future capital returns. In 2021, subject to regulatory guidance, the Board intends to grow the dividend from 2020, in line with the group's progressive and sustainable ordinary dividend policy. Now let me turn to executive remuneration. Rightfully, an important topic for our shareholders. As I have said, last year was a challenging one for our customers and for the economy. And it's therefore, appropriate that this was reflected in remuneration across the group for 2020. In April last year, all members of the group executive team asked not to be considered for their bonus entitlement for 2020, a decision they made in solidarity with the communities in which we operate and in recognition of the priorities of our stakeholders. However, because we didn't meet our profit targets threshold for 2020, there was, in fact, no bonus at all for last year. So no bonuses were paid at any level of the business. We did, however, want to recognize the tremendous hard work and commitment of our colleagues who have gone above and beyond for our customers every day and have done so under extraordinary circumstances. We have, therefore, given all colleagues a share award of GBP 400 and gave nearly 40,000 customer-facing colleagues a GBP 250 recognition award last summer. We've also resumed above inflation pay increases this year for most of our people, geared towards those on lower pay. Therefore, while our senior leaders took a very significant pay cut for the year, most of our staff saw their total remuneration protected. And those at the most junior levels saw an increase on 2019. Again, this was the right thing to do. I'd also like to give a brief update on the HBOS Reading fraud, understandably, an important issue to many of our shareholders. We have published several updates on our website on the actions the group has taken to address the criminal activities that took place between 2003 and 2007 as well as learning the necessary lessons. I encourage shareholders to read these detailed updates, which I hope address many of your questions. Actions taken have included apologizing to the customers affected and seeking to compensate them fairly and generously. Following the independent report by Sir Ross Cranston on our initial compensation review, we've taken forward his recommendations in a further review of customer direct and consequential loss compensation by an independent panel led by Sir David Foskett. The Foskett panel has begun issuing its first outcomes to customers, and we're giving them all the resources and assistance they require to provide closure for customers. We continue to cooperate fully with the ongoing Dame Linda Dobbs inquiry, which the Board set up to look at our handling of the investigations following the HBOS acquisition. Importantly, we continue to learn what we can from this situation so that we can better serve our customers and shareholders in future. That has meant being honest about the things we haven't done well. The times our culture and communications have been too legalistic or lacking in empathy, for example. I have no doubt that there will be further lessons to be learned, particularly from Dame Linda Dobbs's review before we draw this matter finally to a close. The most important thing of all, though, is to provide real closure for impacted customers. Finally, I wanted to finish with some broader thoughts as I start out as Chair of Lloyds Banking Group. Before joining, I was all too aware of the group's reach and impact in U.K. communities. Not only is Lloyds Banking Group the U.K.'s largest retail and commercial financial services provider, it is also a historic institution with an established reputation and relationships across the country. As a result, the critical role Lloyds Banking Group will play in helping Britain recover from the pandemic cannot be overstated. Our main responsibility is to be there for our customers and communities today, helping them through the challenging times we are currently in. But we also have a responsibility to be thinking about the next 5 and even 50 years, anticipating the changes we know are coming and planning for society's future prosperity. I have spoken recently about 4 key principles, which I believe will underpin the U.K.'s future economic progress and which will need to be embraced by any business seeking to participate in a successful recovery, including our own. These are, first, innovation driven by technology. We saw a nearly 20% increase in customers using our mobile app at the start of the pandemic. Following these technology driven trends has never been optional, but now it is an absolutely essential part of building successful businesses. And secondly, the importance of local economies. We've seen a huge shift of spending away from traditional city hubs, particularly London in the last year. 7 in 10 consumers plan to spend more on local businesses than in the previous year. We need to spread prosperity across the U.K. with a mindset shift that empowers local voices to do the right thing for local economies. Third, environmental sustainability. The green economy is expected to grow at 4x the rate of the economy as a whole. And we've seen demand for electric vehicles grow by some 2.5x in our vehicle leasing business. But I believe the moral imperative is more important than the economic trend. We must embed sustainable principles in everything we do, even when times are as difficult as they are today. And that brings me to the last of these principles, social purpose. Our insight suggests that 2 in 3 consumers think businesses should be doing more to help society and the environment. And that's even higher for the younger generations. This clearly is what our purpose Helping Britain Prosper is all about, including our ongoing work to build a more inclusive culture and support for those most in need across the U.K. All 4 of these themes were starting to emerge before the pandemic hit but have been dramatically accelerated in its wake. Reassuringly, they've been at the heart of Lloyds Banking Group's ethos for many years and underpin the plans that we have made to help Britain recover in 2021. That purpose is at the heart of Strategic Review 2021, a series of commitments we outlined in February, focusing on the areas of society where we believe we can make the most difference, while continuing to develop Lloyds Banking Group's capabilities to create the U.K.'s preferred financial partner for personal customers and the best bank for businesses. Our plans are based on clear execution priorities for 2021, underpinned by long-term strategic thinking. William will be giving more detail on these plans shortly, but having been heavily involved in the development of the strategy, the Board is highly supportive of our direction and excited about the opportunities it presents for all our stakeholders. In summary, therefore, 2020 will go down as a challenging and redefining period in the U.K. history, but also as a pivotal moment for Lloyds Banking group. Although the outlook is uncertain, the pandemic provides a unique opportunity for banks to demonstrate their commitment to customers, colleagues, the economy and broader society. We have to support people through the very real challenges they are currently facing. Although some have paid down debt and saved, many others have seen rising debt and falling financial resilience. Our plans for recovery must be sensitive to these challenges. And we also have to play our part in working to address the disparities the pandemic has underlined, particularly along regional, racial and generational lines. Helping Britain Recover encapsulates all these responsibilities. I have great confidence in the group's direction for the years ahead. We have the right team, a clear purpose and strategic direction and a fundamentally resilient business, all of which will drive our success as the U.K. recovers from the pandemic. I want to express my thanks, again, to our colleagues for their resilience and to our customers for their patience in the last year. And I'd like to thank all of you for your support of the group and for listening today. I believe we have a lot to look forward to. And I truly hope that next year, I will be speaking to you in person. Thank you.

Thank you, Robin. I'd like to echo your words of thanks to both Lord Blackwell and Antonio for their very significant contributions to Lloyds Banking Group. Both have been a tremendous source of guidance and leadership for the group and also for me personally in my time here. I'm very pleased to be here as interim Group Chief Executive, ahead of Charlie Nunn joining us as Group Chief Executive in August. My speech today will focus on 3 areas. I'll give some more detail on our performance in 2020, both in terms of our numbers and our response to the coronavirus pandemic. I'll then talk about our strategy, the outcomes of our last strategic plan and the objectives for Strategic Review 2021, which we announced in February. Finally, I'll finish with a look at our performance in the first quarter of 2021, which we published at the end of April. First, our financial performance in 2020. As Robin said, while COVID-19 clearly had a significant impact during the year, our resilient business model enabled us to deliver profitability despite the challenging macroeconomic environment. The 2020 results we reported in February showed both the strength of our customer franchise and balance sheet and that our strategy has delivered. For the 2020 financial year, we reported an underlying profit of GBP 2.2 billion and statutory profit before tax of GBP 1.2 billion. Net income for the year was GBP 14.4 billion, down 16% on 2019, reflecting reductions in net interest income and other income as a result of the pandemic. We further reduced total costs at the same time as continuing to invest in digital projects and absorbing additional coronavirus-related expenses. Last year, underlined the importance of this investment in digital, positioning us well to support our customers and their changing needs. We reported an elevated impairment charge for the year of GBP 4.2 billion. While this was below the range we forecast at the half year, it highlighted the potential economic impact of the pandemic on our customers. For now, we remain in a stable economic environment, significantly due to the government's economic support measures, and we continue to be very well provisioned against the uncertainties ahead. Our strong balance sheet and capital position enabled us to continue to support our customers and the U.K. economy throughout 2020. We grew our lending in key segments, such as mortgages, where we increased our open mortgage book by over GBP 5.2 billion across the year. We achieved our 2020 commitment of extending GBP 18 billion in gross lending to U.K. businesses, including exceeding our 3-year GBP 6 billion target of increased annual net lending to start-ups. Meanwhile, we saw a GBP 39 billion increase in customer deposit balances, reflecting the strength of our trusted brands in an uncertain environment. Looking ahead, many uncertainties remain, but we saw some stability in the second half of 2020, and as I'll discuss later, the first signs of recovery in 2021. These figures demonstrate the group's underlying health and resilience, but they tell only part of the story of our efforts in 2020. All organizations had to make significant changes in response to the pandemic, and Lloyds Banking Group has been no different. We're incredibly proud of how our people and our business has adapted. We believe our response has been powerful in ensuring our customers are supported, people are safe, and our business remains fundamentally resilient and healthy. For our customers, we adapted quickly to give them access to the services and support they needed through the channels that the circumstances required. We were able to keep more than 90% of our branches open at the height of the first lockdown and have averaged 97% thereafter. At the same time, more and more of our customers turn to digital and online banking. Our position as the U.K.'s leading digital bank, and we're well placed to meet their needs. Indeed, we saw our active digital banking customers increase to 17.4 million, 2 million more than the prior year, with record levels of customer satisfaction. Our rapid response meant we could get a help to those that needed it most. We introduced dedicated phone lines for elderly customers and frontline NHS staff. To date, we have provided almost 1.3 million payment holidays for mortgages, loans, credit cards and motor finance to customers experiencing difficulty or needing some financial breathing space. It's good to see that the vast majority of customers who originally took a payment holiday have now returned to making payments. Inevitably, responding to such a high volume of change in a short period of time caused some disruption to our services, such as call waiting times. We sought to address these as soon as possible, and we're grateful to our customers for bearing with us as we have adapted. For businesses, we listened to the challenges they're facing and stepped up our support to help them through a uniquely challenging period. We have provided over GBP 12 billion through the government-backed lending schemes to date as well as 34,000 capital repayment holidays to ease the financial pressures that many faced. For our people, we are committed to paying all employees in full, whatever their circumstances, to give peace of mind and help them focus on our customers. We've also continued to put their mental and physical health top of the agenda, launching a colleague wellbeing portal and providing free subscriptions to the wellbeing app Headspace. More broadly, alongside efforts to address the impact of the pandemic, we've maintained our focus on the social and economic issues facing U.K. society. 2020 was an important year in raising awareness of the need for significant societal change. We know that Lloyds Banking Group has a leading role to play in this process. In July, we launched our Race Action plan, the first commitment of its kind by a FTSE 100 company. This includes the public goal to specifically increase black representation in senior roles to align with the overall U.K. labor market. At the same time, tackling issues like career progression, cultural awareness and our values and behaviors. Since the launch of the plan, we have created a Race advisory panel to hold us accountable as we shape and create policies that build an inclusive culture at Lloyds Banking Group. Climate change remains one of the biggest issues facing the U.K. today. We are committed to supporting the transition to a low-carbon economy to embed sustainable principles into everything we do. A green recovery is one of the central pillars of our plans to help Britain recover from the pandemic. We've been on this journey for many years, providing over GBP 7.3 billion in green finance since 2016, empowering the equivalent of 10.1 million homes through our support to renewable energy projects since the start of 2018. But we know the path to a low-carbon economy requires us to take a long-term view with near-term action. And that's why we've accelerated our plans to work with customers, government and wider stakeholders to reduce the emissions we finance by more than 50% by 2030. This will set us on our path to achieve net 0 by 2050 or sooner, while also seeking to make our own carbon footprint net 0 by 2030. Sara will give some more detail on how we're seeking to be a responsible and sustainable business. In short, we believe in our commitment to encourage a long-term approach to climate change, while recognizing the urgency that it demands. The action we have taken on all these issues from culture change to climate change is part of taking our purpose to Help Britain Prosper seriously. This purpose has underpinned all of our efforts to help Britain recover from the pandemic, and it forms an integral part of our strategic plans for 2021. Before I walk you through Strategic Review 2021, I'd like to acknowledge that 2020 was also the final year of our most recent 3-year strategic plan, GSR3, launched in 2018, to transform the group for success in a digital world. Over that 3-year period, we invested nearly GBP 3 billion to enhance the experience of our customers, accelerate the digitization of the group and transform our ways of working as well as strengthening our position as the U.K.'s largest digital bank, demonstrated by the growth in digital customers, we increased the proportion of products that originate through digital channels from 68% in 2017 to 85% today. We also lent around GBP 40 billion to first-time buyers, significantly above our GBP 30 billion commitment. For our commercial banking clients, we exceeded our GBP 6 billion target of additional net lending to start-ups, SMEs and mid-market customers and achieved our GBP 18 billion commitment in 2020 for gross new lending to U.K. businesses. We've also driven growth across a number of our core markets, including the creation of a comprehensive insurance and wealth offering. As part of this, we've enhanced our position in financial planning and retirement through the Schroders Personal Wealth joint venture, with an ambition to become a top 3 financial planning business provider by the end of 2025. We've also significantly grown our market shares in home insurance, corporate pensions and individual annuities. All of these efforts provided the foundations for the next phase of our strategy, Strategic Review 2021. At its heart, Strategic Review 2021 seeks to build Lloyds' position as the U.K.'s preferred financial partner for personal customers and the best bank for business. We will do this by unlocking coordinated growth opportunities across our core business areas of retail, insurance and wealth and commercial banking, supported by enhancements in our key capabilities: payments, data, technology and our people. We continue to be driven by our purpose of Helping Britain Prosper, shifting our focus in 2021 to Helping Britain Recover. In this, we will focus on 5 key areas embedded in our business, where we believe we can make the biggest difference to help us recognize this purpose. First, we will help rebuild household financial health and well-being by providing practical support to help our customers facing financial difficulty get back on track. Second, we will support businesses to recover, adapt and grow. This includes developing recovery plans for our customers, supporting at least 75,000 U.K. businesses to start up in 2021 and helping at least 185,000 small businesses boost their digital capabilities through our local academies and partnerships. Third, we will expand the availability of affordable and quality homes across the U.K., providing GBP 10 billion of lending to help people buy their first home in 2021 and GBP 1.5 billion of new funding to support social housing. Fourth, we will help accelerate the transition to a low-carbon economy. Alongside the commitments I outlined earlier, 2021 will also see us expand the funding available under our green finance initiatives from GBP 3 billion to GBP 5 billion. We'll also introduce a fossil fuel-free fund to support green growth. And fifth, we will continue to help build an inclusive society and organization by setting new aspirational goals for our leadership team that reflects the society that we serve. This includes 50% of senior roles being held by women, 13% by our black, Asian and minority ethnic colleagues and 3% specifically by black colleagues by 2025. It is also important that we re-imagine our ways of working to meet the needs of our people as we emerge from the pandemic into a world that is going to be fundamentally different. We know from recent surveys that 80% of our employees who did not previously work from home would like to do so for a material part of the week in future. And when they are in the office, they want to spend time collaborating. We will create a future-ready workspace to facilitate this, while seeking to reduce our office space by around 20% over the next 3 years. Together, this will deliver a more sustainable workplace for our colleagues and our business. Stepping back, Strategic Review 2021 provides us with clear focus and targets to execute for the coming year, all underpinned by long-term strategic thinking. We believe this combination will enable us to build our leadership position as the U.K.'s preferred financial partner. In addition, in executing Strategic Review 2021, we aim to deliver long-term shareholder value. We are targeting a return on tangible equity in excess of cost of equity over the medium term. Our Q1 results in April demonstrate early progress against our plans. In the first 3 months of this year, we lent nearly GBP 4 billion to first-time buyers and in March, recorded our biggest month for total mortgage completions since 2008. We also launched the new Halifax branded digital-first protection product, saw a 75% increase in Schroders Personal Wealth referrals, supported by our new relationship consultants. All of this was alongside a 130% increase in users of our Business Finance Assistant, accounting proposition for commercial customers. And in April, we joined as a founding member of the Net Zero Banking Alliance to help accelerate the transition to a low-carbon economy and achieve our net 0 by 2050 ambitions. These are just a few of the indicators of how Strategic Review 2021 is helping us achieve our broader objective of helping Britain recover from the pandemic. Our Q1 results also demonstrated encouraging financial progress and growth in our business. Statutory profit before tax was GBP 1.9 billion, significantly above consensus and up on both Q4 and the previous year, while net income for the quarter was GBP 3.7 billion, up 2% on Q4. In a challenging environment, the group continued to demonstrate cost discipline with total costs of GBP 1.9 billion, down 2% year-on-year, while we also spent GBP 200 million in strategic investment, putting us on track to meet our target of GBP 900 million in 2021. Business momentum was positive, with our open mortgage book growing by GBP 6 billion in the first 3 months of the year. We also saw a notable increase in retail current accounts of GBP 5.6 billion, demonstrating our business strength in what remains a subdued environment. Credit quality also remained strong, which together with an improved economic outlook, resulted in a net impairment credit of GBP 323 million in the quarter, driven by an overall GBP 459 million release of expected credit loss provisions. While the economic outlook remains uncertain, the continued success of the vaccine rollout and additional government support measures saw us improve our forecast for U.K. GDP growth in 2021 from 3% to 5%. And given the solid financial performance in the first quarter of 2021, we have enhanced our guidance for 2021. Based on the group's current economic assumptions, we now expect our net interest margin to be in excess of 245 basis points, net asset quality ratio to be below 25 basis points and statutory return on tangible equity for the group to be between 8% and 10%, excluding a circa 2.5 percentage point benefit from anticipated changes in the corporate tax rate. Therefore, while we still have a lot to do to keep supporting the U.K. recovery, the first quarter shows positive progress against our plans and represents a solid start to 2021. To finish, I'd like to join Robin in paying tribute to all those who have been working for the group over the last year. Our colleagues have faced so many challenges from working from home for the first time to implementing social distancing in branches from scratch. And those who are working tirelessly to support our customers and each other, they have embodied our purpose by actively contributing to the communities of which they're a part, often while juggling challenging responsibilities at home. Their can-do attitude and willingness to always go the extra mile has been nothing short of outstanding. The quality of our people, our clear purpose and our bold plans for 2021 will give me great confidence in the future of our organization. Thank you all for your time, and I look forward to answering your questions later on.

Thank you. As this will be my final AGM, I'm delighted to have the chance, even in this unique way to update you on the work of the Responsible Business Committee. With the group's unique position at the heart of the British economy, we firmly believe it's our responsibility to help address the economic, social and environmental challenges the U.K. faces. COVID-19 has affected us all and transformed the society in which we live. Therefore, our priority and the focus of the Responsible Business Committee is to do what we can to help the U.K. recover in an inclusive and sustainable way. Today, I'd like to share some examples of how we've sought to live out our purpose in the past year, working with others to address vital issues like mental health, domestic abuse and digital skills, before finishing with a look at what's coming up in the next year. To take the first of those, it's never been more important to care for mental health, wellbeing and resilience, given the extra pressures the pandemic has placed on us all. That's why Lloyds Banking Group moved quickly at the start of the first lockdown to increase support for our colleagues by adding to our online tools and resources, including free subscriptions to the Headspace app, which provides mental health and wellbeing advice. 16,000 of our people have taken advantage of this resource to date. At the same time, we continued our work with Mental Health UK to enable the charity to increase the capacity of the U.K.'s first mental health and money advice service. Sadly, the country also saw an increase in cases of domestic abuse after the start of lockdown. We sought to support colleagues going through this by introducing an emergency support service for anyone affected by domestic abuse, allowing them to access safe, secure accommodation and get professional advice on their next steps. Another area of focus has been helping businesses, individuals and charities access vital digital skills. Just before last year's AGM, we introduced a new dedicated phone line with We Are Digital to provide guidance and remote training to customers who couldn't access our branches. The service has supported 13,000 digitally excluded people to date, helping them learn everyday digital tasks like online banking, booking appointments and having video calls with loved ones. Our Lloyds Bank Digital Academy has worked alongside these initiatives to help over 85,000 people and business owners develop their digital literacy. Finally, our independent charitable foundations stepped up their support for small and local charities during the pandemic. We were seeing increased demands on their services at the same time as seeing incomes reduced. To support these efforts, Lloyds Banking Group committed to maintain its funding to the foundations for 2021, locking in over GBP 50 million across 2 years and giving certainty at a very uncertain time. These examples complement the fantastic individual efforts from our colleagues, who stepped up as delivery drivers and emergency paramedics, among other things, to help their communities while doing their day jobs. We're incredibly proud of these efforts. However, not all the challenges of last year resulted from the pandemic. We have continued to develop and strengthen our commitment to tackle underlying issues such as climate change. Robin and William have outlined our headline commitments to reduce our carbon footprint and help the U.K. transition to a low-carbon economy. To provide some additional detail, our latest annual report saw us publish an initial estimate of our 2018 financed emissions baseline and developed our first emissions intensity reduction ambition for the power sector. Further sector targets will be published throughout 2021. And earlier this year, Scottish Widows became the first major pensions and insurance provider to target halving the carbon footprint of all of its GBP 170 billion of investments by 2030 on its path to net 0 by 2050. Alongside these efforts, we've continued our work to build an inclusive organization that reflects the communities we serve. William has spoken today about the Race Action plan we launched in July last year and the progress we are already making. Building on this, our charitable foundation for England and Wales committed to allocate 25% of its grant funding to charities led by and serving communities of racial minorities. In the first round of grants under the new commitment, 38% of the funding was actually allocated to charities from ethnic minority backgrounds. We know we have a long way to go, but we believe these to be positive steps towards a more inclusive organization and society. As we look ahead to 2021 and beyond, the group will continue its work on the critical aspects of being a responsible business with a renewed focus on Helping Britain Recover. Importantly, we want this to be a recovery with economic stability, environmental sustainability and social inclusivity at its heart. Our specific 2021 commitments include expanding the funding available under our green finance initiatives from GBP 3 billion to GBP 5 billion, training 6,500 colleagues to support customers with debt advice and providing GBP 10 billion of lending to help people buy their first home in 2021. Through pledges such as these, we will continue to target the areas where we can make the most difference and identify new opportunities to take a leadership role in building a more sustainable and inclusive society. There will be lots we have to learn along the way, and we may not always get it right, but we believe this to be the appropriate response to our purpose of Helping Britain Prosper and an essential component of building a successful recovery. In the year ahead, we'll therefore, stay focused on embedding these principles into our strategy, our processes and our culture. Before I close, I just wanted to say that it has been my great pleasure to chair our Responsible Business Committee over the past 6 years and to play a part in steering the contributions of the group as it helps Britain recover. Thank you for listening.

Good morning, everyone. I'm Andrew Walton, Corporate Affairs Director for Lloyds Banking Group, and I'll be reading out the questions which you, our shareholders, have submitted. We've received a number of questions, and we hope to answer all of them in the time allowed. As Kate mentioned earlier, we're unable to address any customer-specific issues or complaints in this public setting. But if you submit one, we will follow up with you directly on an individual basis after this event. [Operator Instructions] Any questions that are posed but that don't arrive in time will be answered by e-mail as soon as possible after the event. We will also publish the most commonly asked questions and their answers on our website. Now let's get started with our first question. And our first question is on dividends, and several shareholders, including [ Vic Knight ] and Robert Jackson asked the same question. [ Vic ] asks: I understand why, for reasons of national economic stability, the U.K. government instructed banks not to pay dividends in 2020 when the COVID crisis began early that same year. But this included the final dividend of 2019, and that seemed unfair to me at the time. Hence, although the first dividend of 0.57p for 2021 is welcome, has Lloyds made any representations to government about now paying the final dividend of 2019? And secondly, when in the future, government restrictions are fully lifted with regard to banks paying out dividends, will Lloyds be making any special dividend payments to shareholders out of reserve capital built up for the COVID crisis? Robin, over to you.

Thank you, Andrew. As I said in my speech, we were sorry that we had to suspend the 2019 dividend, and that was not done likely in any way at all. We very much hope that by the time we get to our half year results, we will have greater clarity from our regulators on the approach that they are comfortable with us taking to dividends. I think our focus at that time will be on creating a long-term sustainable dividend, which we can start, if you like, from the basis of last year. And as I said, we would be expecting to be paying a higher dividend for this year than we did last year. So I think what our shareholders would really like is to know what a long-term sustainable dividend is, and that will be our priority. If at that stage, we are faced with the happy circumstances of having surplus capacity, we'll obviously consider what to do with that. But I think our view as a Board is that our priority should be about creating a progressive long-term dividend policy that people can rely on.

Thank you, Robin. Our next question is from [ John Hoggard ]. Why are full details of the directors' remuneration not included in the annual review alongside the Remuneration Committee Chair's statement? It should not be necessary for shareholders to obtain the bulky annual report and accounts for this information. Robin, can you answer that?

Thank you, [ Mr. Hoggard ]. As you can imagine, working out what we put into the briefer review compared to the annual report is always something we think very hard about. There is guidance available, and we do follow that guidance. And particularly, we follow that guidance in relation to the remuneration report. The remuneration report in the annual report is a very lengthy document. And I think including the whole of it in the annual review would be putting too many pages in what is meant to be an efficient, less paper-intensive document. As I hope you are aware, any shareholders that want to receive the full annual report on an annual basis are able to do that. And equally, anyone that wants to view our annual report online can do that as well. So we try and get the balance right. Again, we'll think about that and look what was in the annual review this year and check, but we feel comfortable that we've got the balance right. But thank you for the question.

Thank you, Robin. Our next question is from [ Michael Baird ]. [ Mr. Baird ] has shared at length his difficulties in dealing with the business banking section of Bank of Scotland and spoken about many long forms to complete, multiple signatories and annual paperwork. He asks whether there may be an easier way to deal with small business paperwork.

Thank you, [ Mr. Baird ]. We naturally try and reduce as much paperwork as we possibly can because we recognize that it is an imposition on our customers, and I'm particularly sorry to hear that our valued customers in Scotland are suffering in this way. We try very much to put everything that we can online because we find that most people find that more convenient, more easy to deal with. And this is something that I will take away from this meeting and look into and come back to you on. Thank you.

Thank you. Our next question is from Adam Bolton. And he says: I've been a customer of yours for over 40 years. I'm also a private investor. It's been tough being an investor as we've continually taken hits over the years. If Scotland votes out of the U.K., what are you going to do? I'm aware that most of your offices will be in another country and one that may not be fiscally stable. This is of grave concern to me, both as an account holder and an investor. Robin?

Thank you, Mr. Bolton. And first of all, many thanks for your loyalty, both as a customer and a shareholder. We really appreciate it. Our Scotland -- our businesses in Scotland are very important to us, both with Bank of Scotland and with Scottish Widows. We have truly iconic Scottish businesses. So our commitment to Scotland will continue regardless of what happens around independence. That is obviously not something that we are facing in terms of -- in terms of referendums just yet, and that's something for politicians to decide. But from our perspective, we will very much be placing Scotland at the heart of what we do. We went through an extensive period of preparation during the last referendum, and we will review everything that we did at that time to make sure that if the time comes, we're ready and we can reinforce our commitment to Scotland. Thank you.

Thank you. Our next question is from [ Sheena Langford ] of ShareAction. I'd like to begin by thanking Lloyds for substantively engaging with ShareAction on its general climate strategy and for making significant progress in this area over the last 4 years. However, from 2016 to 2020, Lloyds made very little progress in reducing its annual financing of the fossil fuel sector with over USD 2.3 billion of annual financing for 2020 relative to 2016's $2.95 billion. The bank's annual financing of offshore oil and gas grew in 2020 relative to 2019 as did its financing of the fracking industry. Lloyds made a bold commitment in January of last year to halve emissions associated with its lending portfolio. However, the bank has so far failed to set out sector-specific thresholds and time lines for phasing out exposure to oil and gas, both conventional and unconventional. Moreover, its current coal policy does not include restrictions for existing clients or coal developers and fail to set out a clear time line for international clients to phase out exposure to the industry. When will Lloyds publish a plan to phase out its exposure, defined as project finance, corporate finance and underwriting, to fossil fuel assets in the short to medium term by a specific date?

The question -- as I think we all said, our commitments to climate change are very important to us. But I think, in common with many other organizations, we are at the beginning of the journey, and we have to make sure that we're absolutely clear about the direction that we're going to take. And 2020 was a lot about focusing on, if you like, the baseline, to make sure that we set out in the right direction. And again, as Sara said, we focused on 1 or 2 particular sectors of real importance, including the power sector and the level of emissions intensity in our financing portfolio in that sector. But we have a long way to go. And -- but we are absolutely committed to getting to the end of that journey. Sara, you might say a few words about fossil fuels, in particular.

Yes, of course, Robin. Thank you. And thank you, [ Sheena ], for both the question and for your continued engagement with us on this area. As you know, as Robin has said, we have some stiff targets and a real pace underway to hit those targets. In the coal area, particularly, which is, I think, one of the highest-profile focuses for all of us, we would, as you know, already be one of the lowest financers of the coal industry -- or coal sector amongst U.K. banks. And indeed, within coal mining, our financing activity is very, very de minimis. We've also, as you know, made a commitment by 2022 that we will be not financing either new or existing oil -- coal-fired power stations. So that's quite a big step. And then I think alongside all of that work, we are, as you know, market leading now, I think, in the financing of renewable energy, in particular, offshore wind, which is a big focus to us. But as you rightly say, it's a journey. We have got some stiff targets to hit. We are going to be moving at pace. I hope we'll continue with our dialogue over the next year. As we do that, and the expectation is we'll publish more detail and more sector plans over that next year. So thank you for your support, Sheena. And I'm sure we'll be on this journey for a little while yet.

Thank you. Thank you, Sara. Our next question is on HBOS Reading and comes from 2 shareholders, [ Trina Pierce ] and [ Nicholas Watts ]. [ Trina ] asks: Will you explain why the interim CEO has constructively refused to respond to my correspondence as to whether or not he intends to continue with the criminality of the coverup by Mr. Horta-Osorio exposed in the APPG letters and why he is refusing to declare these letters to shareholders in advance of the May AGM 2021? Robin?

Thank you for that question. And again, just to repeat what I said earlier, we have and continue to apologize to customers that were affected by the HBOS Reading fraud. And we are absolutely committed to providing closure to those customers. I think that the correspondence that you refer to is correspondence between the APPG and the FCA. And it would probably be inappropriate for me to comment on that. But I think that correspondence is available on the website of the APPG. I think from our point of view, we, as a Board, have commissioned an independent review into everything that has happened, particularly around the initial reporting of the fraud as part of following Lloyds acquisition of HBOS. And Dame Linda Dobbs, as I said earlier, is doing a very detailed but fundamentally independent review of everything that has happened in that regard. And we will look forward to the outcome of her review. And as I said earlier, I am sure that we will have more lessons that we need to learn in addition to the lessons that we have already learned, which again, I alluded to earlier. So thank you for that.

Thank you. Okay. Our next question is on PPI and comes from 2 shareholders, [ Gerald Mace ] and [ Garry McGregor ]. And they ask: Did the previous Lloyds CEO make a gross mistake in fighting the first single customer complaint with regard to Payment Protection Insurance when this could have been settled out of court? Robin?

I think what has become clear from the PPI issue is that this was a broad industry issue that needed to be dealt with in the light of public scrutiny. And I think that it could not have been done through being squirreled away in dark corners. I think it had to be exposed. It was exposed. Every bank, particularly Lloyds, have paid significant redress for PPI. And I think that was the appropriate way to go about the issue.

Thank you. Our next question comes from [ Andrew Doyle ] and is in 3 parts. Please could the Board explain why bonuses and share options are awarded whilst dividends are restricted. Secondly, will the Board set out a plan for the payment of dividends declared and not paid and confirm that these will be set aside for future payment? And thirdly, will the Board confirm that share buybacks will not be implemented? Robin?

Thank you, [ Mr. Doyle ]. On your first point, I should repeat again what I said earlier, which is that no bonus was paid as a result of 2020 to our staff as a whole. Quite rightly in our view, we did make awards at relatively low levels, particularly to those who have been exposed and have been so brilliant at working with our customers. We felt that was the right thing to do. We have set in place reward schemes for our senior colleagues, but they are very much focused on the future and based on future performance, not on last year. So I think we hope we got the balance right. And I certainly feel that we thought very carefully about the balance between the interest of our shareholders and the interest of our colleagues and the importance of keeping our colleagues motivated. And again, as William said earlier, focused on looking after our customers at this difficult time. In terms of the dividend. I described earlier, I think, our approach to dividend, which is it seems to the Board that the most important thing is to give a degree of confidence to shareholders about the future level of dividend. So we intend to implement, subject, of course, to regulatory clarity, a renewal of a progressive and sustainable dividend policy at a level higher than last year. Again, as I said before, if we are in the fortunate position of having excess capacity, we will think what to do with that at the time. But our focus is very much creating something that our shareholders can rely on, which we believe will be their main priority.

Thank you. Our next question is from [ Column Canning ]. And he says: I'm a banker of 40 years and a shareholder of Lloyds Banking Group. I wish you to direct and instruct your group customer services director to contact me and to engage with me on an ongoing basis so as reasonable and fair solutions can be discussed, explored and hopefully closed to the benefit of the bank and the customer. I have multiple distressed customers who are infuriated by the disdain and rudeness being displayed by your group customer services director. I have made one of your nonexecutive directors aware of this. This request is pragmatic and sensible, and I want you to give me a commitment the same will be agreed to. Thank you. Robin?

Thank you, [ Mr. Canning ]. First of all, I apologize if your clients have been upset. And if we have not dealt with their complaints in an empathetic way, which, as we've said before, is something that we feel is a lesson that we are learning all the time. And I apologize if anything has gone awry in that regard. I'm aware that you have been dealing on behalf of some of your clients with our executive complaints group. And I should say that I have spoken to them about these issues. My understanding is that we have got to a final point, and we said what we feel that we can say in that regard. Of course, everyone is not going to agree with the way in which we deal with every complaint, and there are other methods open for your clients to appeal the decisions we've come to through, for example, the Financial Ombudsman Service. So I'm afraid, I think that's all I can say about that. I think we've exhausted the complaints process as I understand it. Thank you.

Okay. Our next question is from [ Roger Keyworth ], and is in 2 parts. As one who now has just 4 Lloyds accounts, I'm delighted to report that my Halifax reward account has many, if not all, the Lloyds current account arrangements. My only major concern is phone line. I'm not told why I am in the queue. If I know, then I can make a reasonably informed judgment as to whether to hang on or ring off. Please can you arrange that from as soon as possible, this is rectified. And the second part of the question is I can fully understand exactly why you or we would be unwilling to print many hundreds of thousands of copies of the annual report, including the enormous postage costs when few, if any, will really be read. However, reading any part of them from the screen may be difficult. Please, can you look into this for me? Robin?

Thank you, [ Mr. Keyworth ]. And first of all, again, thank you for your long period as a customer and obviously, your broad usage of our services. We really appreciate that type of loyalty. I will take away the point you make about the one account that you find difficult to print and see what the position is with that. And hopefully, we will communicate with you that -- around that subsequently. On your question on our phone lines. I should, first of all, just say that over the course of the last year, our phone lines have not been operating at the level that we would have wanted them to operate. My understanding is that things have improved substantially over the last few months. But I'd like to apologize to all customers for a degree of service interruption that has happened. We've been training a lot of our colleagues to take on different roles in order to fill some of the surges that we've had in demand for these sorts of services. And your suggestion on our -- we do actually have facilities on many of our lines that tell you if the wait time is going to be more than 5 minutes. And I understand that we're looking at doing that for our main line as well. So I hope that you will see improvements over the course of the next year. And thank you very much for your thought process. On the question of annual reports. Yes, our annual report for regulatory reasons is incredibly thick and incredibly detailed, and William spends a lot of his time getting it absolutely right. So I don't want to belittle it in any way, but it is very heavy, uses a lot of paper, and that is the reason why we are really quite careful about sending it out. But I should emphasize that any shareholder that wants a copy of the annual report can get one. Equally, any shareholder can go online on to our website and see a copy of the full annual report online, whichever works better from your perspective.

Okay. Thank you, Robin. The next question is our last question and comes from [ Karanveer Singh ]. What is LBG's stance on cryptocurrencies? And would LBG consider buying bitcoin? Robin?

I think cryptocurrencies are something that are developing very fast at the moment. I think there's a lot of uncertainty about their future use. I think inevitably, as a bank, we need to take the potential implications of cryptocurrencies carefully into account in our future strategy, which we do and will continue to do. As for buying bitcoin. I think that is possibly not the best use of our shareholders' funds, but who knows. Actually, I think it's probably not the best use of our shareholders' fund.

Thank you, Robin. That concludes today's Q&A. Thank you, once again, to all who submitted questions. We'll update our website as soon as possible with the most commonly asked questions. And if you have any follow-up questions from today's event, you can e-mail them to [email protected]. Now back to you, Robin.

Thank you. Thank you, Andrew, and thank you to all of our shareholders who asked questions today. The purpose of today's shareholder event was to give you the opportunity to hear from and put your questions to me and our panel of Board members before the deadline to submit your proxy votes ahead of our AGM next week, allowing you to reflect on what you've heard. As Kate said, at the start of today's event, further details on the arrangements for our AGM next Thursday will be published on our website once it is clear what is permitted legally, which will not be known until near the time of the meeting. So please make sure you check our website for updates. Finally, on behalf of the Board, I'd like to thank everyone for joining our event today. We hope you found this useful and look forward to engaging with our shareholders again soon. That concludes today's event. Thank you.