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

Good morning, everyone, and welcome to Lloyds Banking Group 2023 Annual General Meeting. As I said before, I'm still Robin Budenberg, Chair of the group, and it's a privilege to be here in the very great city of Glasgow this morning. Given our long-standing relationship with Glasgow's industrial past and investment in its enterprising future, I'm really pleased to be holding our AGM here for the first time since 2011. I'm also pleased to see so many of our shareholders present in person, and I know we also have a large number joining via the webcast. So welcome to you all as well. The AGM is an important annual event for Lloyds Banking Group. Not only does it still -- does it provide us with a platform to speak to all our shareholders but it also gives each of you the opportunity to ask us questions. Lloyds Banking Group has over 2 million shareholders, many of whom are individual investors which means that the AGM holds particular significance as an opportunity for us to engage directly with you. As I said before, the question-and-answer session will take place after updates from me, Charlie Nunn and Amanda Mackenzie, Chair of our Responsible Business Committee. And I'm sorry that some of the people that had to leave are not here to listen to what Amanda will have to say. After the Q&A has finished, we will conduct the formal requirements of the meeting, including voting on the proposed resolutions. So turning business of the meeting. I will share a few reflections on the performance of Lloyds Banking Group over the last year, including how we continue to deliver on the group's purpose of helping Britain prosper and supported our customers in a challenging economic environment. I will begin, however, by outlining a few changes we made to our Board in 2022. In August, Scott Wheway joined the Board as a Nonexecutive Director. And in September, he became Chair of Scottish Widows Group. Scott brings outstanding experience in the retail, insurance and banking sectors and both the group and the Scottish Widows are already benefiting from this. Thank you to Sophie O'Connor, who so ably held the role of interim chair of Scottish Widows before Scott assumed the role. We also announced the appointment of Cathy Turner as a Nonexecutive Director and a member of the Remuneration Committee from November last year. Cathy has strong nonexecutive and final services experience, and like Scott, we are already benefiting from her input as a member of the Board. At this point, I'd like to thank all our Board members, their guidance, input and contributions are greatly valued by me, by Charlie and by our management team. In a year when we announced the new strategy and navigated an unpredictable external environment, their support has been hugely important. Sarah Legg and Catherine Woods, who are other nonexecutive directors send their sincere apologies they were unable to attend today for extremely good rises. Turning to an overview of the group's performance last year. Overall, we've made good progress in maximizing the potential of our people, technology and data. These are critical enablers for the strategy we launched in February 2022. We committed then to transform our organization, creating higher, more sustainable contribution for all stakeholders and driving revenue growth and diversification across all our main business areas. In 2022, we saw a robust financial performance with early evidence of strategic delivery. Our net income was GBP 18 billion, up 14% on 2021, supported by continued recovery in customer activity and the interest rate environment. We are a beneficiary of rising interest rates, and our net interest income was up 18%, driven by the recovery of our net interest margin and increased lending to our customers. Our other income, which includes the income we earn from some of our products in wealth and insurance was up 4% at GBP 5.2 billion. This income grew across all business lines and is an important part of our strategy to diversify our revenue, on which Charlie will reflect further in his speech. You will have seen that our results for 2022 included a further GBP 50 million remediation charge in relation to HBOS Reading. Our focus continues to be on providing a resolution and closure for those impacted. We continue to operate -- cooperate with Sir David Foskett and the independent re-review panel, who are progressing well with their re-review. And following their introduction of the Fixed Sum Award, have now completed assessments or more than half of the cases. In addition, we continue to provide all the assistance and resource required as Dame Linda Dobbs continues her independent review. As in previous years, we've shared on our website a shareholder update, giving the latest position on matters relating to HBOS Reading. Although our new strategy is targeting growth, cost discipline remains a core focus for us and an important of our competitive advantage. In 2022, we reported operating costs of GBP 8.8 billion in line with our guidance and reflecting stable business as usual costs and increased strategic investment. Our statutory profit before tax for the full year was GBP 6.9 billion, broadly flat year-on-year despite a net impairment charge of around GBP 1.5 billion, which was partly driven by a revised economic outlook. And so I hope you agree that these figures show good business momentum. This robust performance underpinned our strong capital generation of 245 basis points for the year. Our core Tier 1 capital ratio, which is the key measure of our capital strength, finished the year at 14.1%, well above our ongoing target of around 13.5%. During a time when there has been considerable uncertainty in the banking sector, it's worth reminding ourselves of the balance sheet and the strength of that balance sheet that we have at Lloyds Banking Group. In turn, this enables us to return capital to shareholders, which we know is a very important part of our investment case. In total, we've announced capital returns of up to GBP 3.6 billion, more than 10% of the group's market valuation at year-end. This included a total ordinary dividend of 2.4p per share, up 20% on 2021. Remuneration is an important topic, especially in today's economic environment. We recognized early last year that some of our colleagues might face challenges and we've been very focused on supporting them. We were among the first organizations to make a payment to our colleagues to help with increases in the cost of living. This meant a payment of GBP 1,000 to the vast majority of our colleagues in August 2022, with an additional GBP 500 payment in December 2022 for many of our colleagues at lower pay grades. For this year, we have also implemented pay increases of between 8% and 13% with the majority of additional spend on pay directed to around 43,000 of our lowest paid colleagues, which we believe is the right thing to do. There were no pay increases for the executive directors this year, and variable awards were carefully assessed against the financial, customer and ESG-related measures agreed at the beginning of the year. It's also worth noting that our current directors' remuneration policy approved at the 2020 Annual General Meeting was due for review this year. The remuneration committee has undertaken a comprehensive review over several months to consider whether any changes should be recommended to shareholders. In the light of our renewed strategy, the group is looking to implement a new directors' remuneration policy this year to align executive remuneration more closely with our longer-term strategic objectives. This will include a return to a long-term incentive plan. The Remuneration Committee believes that the new long-term incentive plan will deliver stronger alignment with our strategic objectives. The plan will support a more demanding performance culture directly linking vesting outcomes to delivery of the strategy and the realization of its benefits for shareholders. This is consistent with incentive arrangements for most of our peers, and we consulted on our proposals with a broad range of shareholders and other key stakeholders who expressed support for alignment between business strategy performance and executive remuneration outcomes. The policy reflects that the transition to a low-carbon economy is at the core of our strategy and aligns with our corporate purpose of helping Britain prosper. As a bank with more than 26 million customers, we have a financial relationship with half of all adults in the U.K. coupled with the fact that we have more private shareholders than any other U.K. stock market-listed company, we play an integral role in our financial system, and we believe are a unique force for helping Britain prosper, helping our customers, colleagues and communities in a year where many have been hit by significant inflation rate pressures. For example, we trained more than 4,500 colleagues to provide additional financial assistance to our customers when and where it is needed. We proactively contacted 5.5 million customers to let them know that we are here to help. We contacted more than 200,000 of our mortgage customers to provide support with rising interest rates. And across the organization, we put in place around 250,000 personalized plans, helping individuals and businesses with their finances. For our business customers, we also got in touch with over 550,000 of those most impacted by the increased cost of living to offer sector-specific support measures as well as contacting and speaking to our customers in order to better understand the challenges they're facing due to the increased cost of living, we have proactively designed and deployed a range of measures to provide practical help. For example, by offering reduced payment plans or payment holidays on mortgages, motor finance, credit card and loans. We've offered 230,000 people an interest-free overdraft buffer and helped 110,000 to consolidate their debt into a single, more manageable loan. And for customers in acute financial difficulty, we have offered a hold on their account, pausing all interest and fees for 30 days, whilst they obtain further advice. Since Charlie's appointment in August 2021, we've seen meaningful change across the group. We've launched a new strategy, restructured our organization with new business units and platform-enabled ways of working and put in place a new dynamic leadership team with strong diversity of knowledge and expertise across financial services and digital. This has been and continues to be a pivotal period of investment in the future of Lloyds Banking Group. To conclude, 2022 was a challenging year in several ways: inflation, cost of living and interest rate rises have had a significant impact on individuals and businesses alike. We anticipate that the repercussions of this will mean 2023 will remain difficult for many of our customers. To me, this backdrop demonstrates the importance of operating as a purpose-led organization. I am immensely proud of how Lloyds Banking Group colleagues have supported customers and made a positive contribution to our communities while at the same time, delivering a robust performance for you, our shareholders. We are well underway with delivering against our strategy, which will deliver higher and more sustainable returns for our shareholders. And underpinning this progress are our strong financial foundations. However, it is the continued efforts and dedication of our colleagues that makes all this possible. So I really would like to finish by thanking every single one of them for their contribution. And with that, I will hand over to Charlie.

Thank you, Robin, and good morning, everyone. It was great to be with you at last year's AGM and have the chance to hear and answer your options. A lot has happened in the past 12 months. So I'll share an update on what we've been up to, how I see the outlook for 2023 and why, like Robin, I'm excited for the future of Lloyds Banking Group. It's an immense privilege responsibility and opportunity to be the CEO of a bank, which is so intrinsically inclined with the lives of its customers and communities. We have the ability and potential to change the lives of millions of people across the U.K. from helping someone to buy their first, next or forever home, to enabling a small business to become more sustainable and play their part in the transition to net zero. Last year, I spoke about our new strategy, much of which is focused on how Lloyds Banking Group will invest, grow and become more sustainable in order to better support the evolving needs of customers and ensure we are helping Britain prosper. We're making good progress against our strategic priorities, and I'll talk you through some highlights shortly. First, as Robin said a moment ago, we know that many individuals and families are experiencing pressures due to the cost of living environment. And the bank as a whole has mobilized to better understand and mitigate the challenges our customers face. We are proactively identifying and supporting those who need it most, reaching out to over 200,000 mortgage customers, most affected by rising interest rates and a further 550,000 business customers. And through financial tools and health checks, increasing the numbers of customers with a meaningful financial buffer. That's enough deposits to cover 3 months of essential spend to nearly 10 million people by the end of 2022. Just some of the ways we are committed to help increase our resilience of our customers. May I now reflect on our financial results for last year. Robin has already provided a high-level overview of our financial performance in 2022. So I won't repeat that. Aside from echoing his view that this constitutes a strong performance across the business. I'd like to provide some further insights around both the key indicators and outputs, which pertain to our performance and the very real positive impact we have across the U.K. In our retail business, we continue to build on our open mortgage portfolio, growing by GBP 6.3 billion in 2022. Consumer finance lending was also up and this positive trend was echoed in the commercial part of our business, where we saw balances up by GBP 1.2 billion, led by our corporate and institutional businesses where we see attractive opportunities for growth. And in pensions and insurance, we reported more than GBP 8 billion of net new assets under administration. Let me provide a little more detail on how these numbers show what they mean for our customers. We helped 64,000 first-time buyers move onto the property ladder. 95,000 start-ups and small businesses banked with us for the first time. We provided GBP 2.1 billion in funding for the social housing sector, supporting access for safe, good quality homes for those on the lowest incomes. This is part of GBP 15 billion we provided in financing to the social housing sector since 2018. And we made significant contributions to the transition to a low-carbon economy, becoming the first major U.K. bank to no longer provide direct project finance to new greenfield oil and gas developments, providing over GBP 13 billion of green and sustainable lending and publishing our first group climate transition plan. Amanda will go into this in more detail on the relevant activity shortly. It's important to note the efforts of our colleagues in making all of this possible. They are by the side of our customers in the key moments, and when supporting their everyday banking needs. This has enabled us to achieve our high customer satisfaction objectives, exceeding our targets for 2022. Turning to our results for the first quarter of this year released earlier in the month, we see a solid financial performance. Net income of GBP 4.7 billion was up 15% on the previous year, supported by net interest margin of 322 basis points, growth in other income and a continued low operating lease depreciation charge. Operating costs of GBP 2.2 million were up 5% on the first quarter of 2022. This reflects our continued strategic investment alongside inflationary effects on the cost base. We remain committed to market-leading efficiency and are on target to achieve our cost guidance of around GBP 9.1 billion for 2023. Asset quality is resilient. The impairment charge of GBP 243 million is equivalent to an asset quality ratio of 22 basis points, supported by a small release relating to an improved macroeconomic outlook versus Q4. In statutory profit after tax for Q1 was GBP 1.6 billion, and the return on tangible equity was 19.1%. This drove strong capital generation of 52 basis points even after taking the full GBP 800 million fixed pension contribution. The performance we see across the group and our capital strength, which Robin spoke about, provides the solid footing from which we can make progress on our growth-oriented strategy. Despite sector uncertainty in the U.S. and Europe, we remain resilient in our liquidity and capital and confident in delivering on the strategic ambitions. This time last year, I outlined my aspirations for Lloyds Banking Group to be on a path that leads to higher revenue growth by meeting a broader interconnected range of our customers' needs as well as more diversified revenues. Let me share an update on what we have achieved in the first year of this 5-year plan. In 2022, at a headline level, we delivered GBP 900 million of incremental strategic investment. This includes broadening our product offering, expanding in areas where we are underrepresented, and investing in technology that will improve customer experience. For example, we've seen a 15% increase in daily log-ons. And earlier this year, the group reached 20 million digitally active customers. That's 2 years ahead of our schedule. Building a compelling offering for the mass affluent customer segment is also an important part of our strategy. Later this year, we will launch our new digital-first proposition, and we have already increased by more than 5%, the savings and investments of this segment of customers. The acquisition of Embark Group, which we completed in early 2022 has further strengthened our offering to these customers. This year, we began rolling out a simple direct-to-consumer investment offering through our Lloyds Bank, Halifax and Bank of Scotland apps. Embark is also helping us support intermediaries independent financial advisers more than ever, an important part of our growth strategy. And we're also making significant progress in growing our life and critical illness insurance market through Scottish Widows, which has also attracted GBP 6 billion of net workplace pension flows, taking our total assets under administration to GBP 197 billion. This year, we will launch an enhanced intermediary proposition for life and critical illness insurance as we look to achieve our ambition of becoming a top 3 home insurance and workplace pensions provider. In our commercial business, we are investing in product capabilities, for example, by delivering the first phase of our new FX platform. We've already seen some early benefits from this investment, including around 20% growth in our FX trading percentage share of wallet. In addition, we are looking to broaden the services we can offer our customers through strategic fintech partnerships, such as the one with Satago for invoice discounting, helping customers better manage their cash flows. Alongside our full year results, we announced the acquisition of Tusker, a market-leading vehicle leasing company that provides electric and ultra-low emissions vehicles via salary sacrifice schemes. This acquisition supports our ambitions of growing our transport business whilst achieving our net zero emissions target by 2050. More broadly, and as part of this support for the green transition, we delivered GBP 8 billion of sustainable financing to businesses last year, which constitutes over half of our 2024 target. So overall, I'm pleased with our progress so far, particularly in light of the challenges in our operating environment. Our unique business model and competitive strengths provide a solid foundation from which to grow whilst continuing to deliver strong shareholder returns. I'm confident that we'll continue to build momentum in delivering on our purpose and strategy, meeting evolving companies in more pertinent and integrated ways. Building a strong inclusive society is at the heart of our purpose. And as one of the U.K.'s leading mortgage providers and biggest lenders for house building and development, we know that we have an important part to play in providing greater access to safe, affordable and sustainable housing. At present, there is a chronic undersupply of genuinely affordable housing in the U.K. with over 1 million households on waiting lists for social homes in England, Scotland and Wales. Meanwhile, housing associations need over GBP 100 billion to finance net zero requirements on their existing buildings, integral to the U.K.'s transition to a low-carbon economy which could help reduce fuel poverty and create more zero energy homes. Through our sector-first housing sustainability finance framework, we're keeping sustainability at the forefront of new builds and retrofits, which we finance. Last month, in partnership with the charity Crisis, we called for 1 million more social homes to be built over the next decade. This is a defining issue for the housing market, and we believe Lloyds Banking Group can play a significant role in addressing these structural economic and sustainable challenges in a way that is aligned with our commercial objectives. In summary, I believe that our purpose-driven strategy and financial standing reinforces confidence in the ability of Lloyds Banking Group to support our customers, colleagues and communities whilst delivering robust financial performance for shareholders, which includes shareholder distributions of up to GBP 3.6 billion in 2022. We are well underway with transforming our digital-first customer propositions to deliver our growth targets, aligned with our purpose of helping Britain prosper. We are committed to building a more sustainable and inclusive future for people and businesses, making a particular difference in housing, climate transition and improving customers' financial resilience. Whilst we continue to operate in uncertain times, and this is undoubtedly a challenging period for customers, we remain resilient and continue to provide proactive support. We are confident about delivering on the strategic priorities set out at our 2022 full year results. And we see a clear pathway to higher and more sustainable capital returns, which we are on track to achieve. I'd like to thank -- I'd like to end by thanking all of our colleagues for their dedicated efforts over the past year, enabling us to support and deliver for all of those we serve. I may now hand over to Amanda Mackenzie, Chair of our Responsible Business Committee.

Thank you, Charlie and Robin, and good morning, everyone. Today, I will outline a little more detail on the progress of the responsible business agenda, which is at the core of our purpose of helping Britain prosper. Whilst there is always much to be done, I hope as shareholders, you can take pride in the examples that bring our work to life and be reassured by the ambition of our future plans. One of the biggest areas of discussion as a committee has been to oversee the progress towards becoming a truly purpose-driven organization. And last year, we identified key areas which support our purpose and where we can deliver most material impact, which because of our scale can help resolve some of the key economic, social and environmental challenges that the U.K. is facing. In our 2022 colleague survey, 92% of colleagues felt that delivering on our purpose will help us grow the business profitably, a number which has not only increased significantly, but which is a powerful demonstration of doing well by doing good. As you would expect, we also discussed the impact of the cost of living increases for our people and our customers, about which Robin and Charlie have already spoken. We had quarterly updates on colleague engagement activity and culture which included ongoing colleague listening and learning with my fellow board members. We continue to make progress in increasing the representation of women as well as black, Asian and minority ethnic colleagues in senior roles. And by the end of 2022, these have increased to 39.4% and 10.2%, respectively. The latest FTSE Women Leaders review report confirms that women are also represented in over 40% of our combined executive committee and their direct reports, which means the recommendations set out by the review is met. And in April this year, we announced a further goal to double the representation of colleagues with the disability by 2025. This is a demonstration of our continued focus to build an inclusive organization, not only because it is right, but in order to be more successful. Moving on to sustainability. Last year, I talked about how critical an issue the climate crisis is. And as you would hope, playing our part to tackle it is more important than ever. And given our scale and reach, our influence is significant in supporting and accelerating the U.K.'s transition to a low-carbon economy. Our strategy prioritizes key areas that will support our ambitions to achieve 100% net zero in our own operations by 2030. We also aim to achieve net zero in our supply chain and our financing investment activities by 2050. In our own operations, a great example of both action and ambition can be seen in the transformation of our Halifax office, which alone has been responsible for 10% of our gas consumption. We've now installed a ground source heat pump to replace the gas boiler there, requiring us to dig 2 bore holes, 305 meters deep. That's almost 1/4 of the way up Ben Nevis but underground. And in respect of our finance emissions where we have significant leverage, we've now published emission reduction targets for 2030 across 7 of the highest emitting sectors. Our target for the oil and gas sector, for example, covers all 3 scopes of emissions and aims to half absolute emissions by 2030. We have set several lending investment targets for our corporate and institutional clients, GBP 7.9 billion last year of a 2024 target of GBP 15 billion. In addition, we achieved GBP 3.5 billion in green mortgage lending, GBP 2.1 billion in financing for plug-in hybrid and electric vehicles and by the end of last year, had achieved GBP 17.5 billion in discretionary investments in funds that are focused on companies who are less carbon-intensive or actively developing climate solutions. All our targets are brought together in the first group climate transition plan published in February. We expect to evolve and iterate our plan in the future as we work together with all our stakeholders. We're also mindful of biodiversity loss and the interrelationship with climate to which we must respond. Our partnership with the Woodland Trust has facilitated the planting of over 3 million trees to date. And with farmland accounting for 70% of land use in the U.K. through our new partnership with the Sol Association, we're funding a program of bespoke on-farm consultancy for 1,000 of our largest agricultural customers across the U.K. This will identify financial and environmental advantages to their land. Another vital part of land use is that of housing, which Charlie has already mentioned. In 2022, we have provided GBP 2.1 billion of new funding to the social housing sector of which GBP 1 billion is sustainable or sustainability linked. And since 2018, we've been -- we've had supported now the building of an estimated of 35,000 new homes. We are further strengthening our work in this space to our recently announced a 2-year strategic partnership with Crisis, which aims to tackle the shortage of good quality affordable homes in the U.K. I have no doubt that our colleagues' passion and dedication for Crisis will be every bit as impressive as for previous charities with whom we've partnered so successfully. As you've heard from Robin and Charlie this morning, much has been achieved in 2022, and I would like to thank them for their leadership across this agenda and thank all our Lloyd's colleagues for their tireless efforts and commitment. Rhetoric is cheap and easy. Actions are tough and take time. So as we continue to move forward in 2023 as a committee, we will continue reviewing and seeing the proof that our purpose and our culture is being embedded, listening to our colleagues and importantly, overseeing our consumer duty plan. We will continue to review progress against our inclusion and diversity aspirations and rigorously support our sustainability plans. The strong foundations we have laid will continue to shape how we do business to create a more sustainable and inclusive future. Thank you for your support. Every single day is an opportunity to live up to our purpose. It's a huge privilege. We will endeavor to live up to the responsibility that comes with it. so that Lloyds Banking Group will continue to support the U.K. for generations to come. Thank you very much.

Thank you, Amanda, and thank you for your passion and your conviction. I will now say a few words about the resolutions we'll be voting on today before giving shareholders the opportunity to ask questions. Voting will open before shareholder questions and will remain open for the duration of shareholder questions. I will give you a reminder to vote towards the end of shareholder questions and again, before voting closes. So unless there are any objections, I will now take notice of the Annual General Meeting as read. Thank you. Resolutions 1 to 21 are ordinary resolutions requiring a simple majority of more than 50% of the total votes cast to be approved. Resolutions 22 to 27 are special resolutions, and to be approved, require at least 3/4 of the votes cast to be in their favor. All the resolutions will be decided by a poll which means that each shareholder present in person, by proxy or corporate representative, has 1 vote for every share held. Turning to the voting handsets. Can I first check that everyone who would like a handset has one? Please raise your hand if you need one. Great. Many of you will have used the handset before. And the slide behind me explains how to use it for voting. Once I declare voting open, the list of resolutions will appear on your device. While you have the choice to withhold your vote, this is not a vote in law and so does not count either for or against a resolution. If you wish to vote on all resolutions in accordance with the Board's recommendations, there is an option to do this, which is shown at the top of the list of resolutions. To change your vote, choose the resolution and simply vote again, and your original instruction will be replaced. And to cancel the vote, select the resolution and press the X button. The vote will be removed and will not be counted. If you require any help, please raise your hand and one of our stewards will help you. So I now declare the voting open. [Voting]

And I'll now move to the part of the meeting where shareholders or their appointed proxies can ask questions. Out of respect for all shareholders, I ask that you ensure that your question relates to the items of business before the meetings. We take customer complaints very seriously, and it's important that they are dealt with properly. Customer complaints are not something, however, we can resolve in the room at the AGM, and it would be inappropriate to do so. So there is a customer services desk outside in the reception hall where my colleagues are available to help you with any specific queries on customer matters. Please raise any individual customer issues or inquiries with colleagues there after the meeting. In the interest of other shareholders, I would please encourage you to keep your questions short and avoid delivering long speeches. If you have more than one question, it would be great if you could ask all your questions at the same time. If you've already registered a question, I will say your name, and a steward will hand you a microphone so that you can ask your question.

So I think my first question comes from Julian Parrot.

Okay. As you said, my name is [ Julian Parrot ]. I'm here on behalf of ShareAction to ask a question about voluntary ethnicity pay gap reporting. ShareAction's good work team coordinates institutional investors with 3.7 trillion assets of funds under management. Its members support voluntary ethnicity pay gap reporting as a marker of a responsible business practice and as recommended by the race at work charter. As you know, ethnicity pay gap reporting captures the difference between the difference of the average pay of staff from black, Asian and minority ethnicities in the company compared to the average pay of white staff. A similar concept of that adopted in the gender pay gap reporting, though it is not mandatory. Indeed, the McKinsey 2020 Diversity Wins Study found that organizations with most ethnically and culturally diverse executive teams were the most financially successful being 36% more likely to outperform their peers. More recent studies have also demonstrated the job seekers value and find diversity, inclusion critically important. I am pleased to read that Lloyd's have been reporting their ethnicity pay gap data for the last 3 years since 2020 as part of the drive towards progress to becoming a more inclusive organization. My question would be, could the Board please provide an overview of Lloyd's position on taking the next step in ethnicity pay gap reporting in the U.K. by providing data across quartile bands and bonus proportions as recommended by CIPD, the Chartered Institute of Personal and -- Personnel and Development? And additionally, would the board be willing to meet with ShareAction and with the good work investor coalition to discuss this issue further?

Thank you, Mr. [ Parrot ]. And thank you also to my predecessor, who I think was one of the first -- I think we were one of the first organizations to comply with the best standards in terms of ethnicity pay gap reporting. And I'm glad to see that our ethnicity pay gap has reduced this year, and we fully intend to continue that trend in future years, which is fundamentally the point of -- that we are all trying to achieve. We have a very good relationship with ShareAction, and I understand that we had a recent meeting with you. And of course, we would be very happy to continue to do so. And we are -- there are new standards coming in, as you say, in this area, and we are absolutely committed to continuing to be at the forefront of compliance with those standards. So we look forward to discussing that with you and your colleagues over the coming months. So my next question comes from Mr. [ Gorman ].

Well -- now before -- it's only a short question. Well, I'll put some background into this on why I am asking this. A week after last year's AGM, Mr. Johnson, the then Prime Minister, made a 720-kilometer round trip from London to Newcastle and the microphones and the cameras that were in there, and he made one simple statement, he come here to reissue with a people Teesside, and I found that very strange like the rest of the people in the Northeast. Now what has recently come out now about the dealings between the elected mayor Mr. Houchen of Teesside and the 2 big companies who are investing on the Tees work site. Now this site is 10 kilometers in length and 3 kilometers in width. This is just 1 site. Now you said you invest in green energy and not the other, while obviously the companies are setting up here are building wind turbines but the plants -- your name is what this site follows. Teesside is one of the top 5 most dangerous areas in the world, it's built below sea level, the environment. Now like 2008, where they put all the eggs in one basket, wonder what happened there. This government has put all her eggs in one basket again, it's called City regions, Brexit and Freeport. Now the question I'm going to get to is this, what is Lloyds' Plan B to provide economic support in the northeast if the investigations into the Teesside mayor and his role in Teesport is an adverse outcome.

Thank you, Mr. [ Gorman ], and once again, for your passion for Teesside, which we heard last year. Sorry.

This affects the whole of Britain because if this is true, what has been -- and I'll can't be only representative for the staff here, all the newspaper reports and everything else, my notes, I have signed them. So this -- so the staff also know what is going on. Now this affects the whole of Britain because these are dodgy deals. I mean, these companies are worldwide and massive, Sunland, the Nissan plant, is the only plant in Britain that builds car batteries. The list just goes on and on. And we've seen in 2008 what happened when the cover between politicians and the bankers. Now if I were to engineer in an industrial base course in [indiscernible] bank Britain and the banking system there, it includes the City of London, make no mistake about it. All foreign banks and the investors will [indiscernible] and move on to mainland. And where does it leave all the people on these isles, 67 million of those? And where does it leave all your job? And who's going to get the plan, Westminster or the [indiscernible] 2008 that was all [indiscernible] fault. So I'd advise you people to keep very, very close eye on what is going on, The Sun, the Financial Times, the Yorkshire Post, the Daily Mail and the local newspapers have got big write-ups, including The new European. This involves everybody and the environment, in particular because I said it, with the sea level is now -- the sea level is now rising, to spend billions, billions the [indiscernible]. They won't spend a single euro to build a [ balance ] to protect Teesside from going up. And for Europe, I'll go with it, make no mistake about it. Sorry, I'm just putting the background in. But my advice to people is to get very, very close on what is going on and make sure this bank and every other bank and financial institution has a plan B because we see what happened in 2008, and not only 2008 look like a bonfire at the [ dance ] Christmas buy, make no mistake about it. Nobody wants to invest in Britain, full stop. So who's going to pay the pensions?

Okay. If I may, can I answer your question? Thank you. First of all, obviously, politics in Teesside is very much up for local communities. It's not up to us to interfere in that in any regard. I completely agree with you that what happens in the regions and nations around the U.K. is absolutely fundamental to the health of banks like Lloyds Banking Group, and we keep a very close focus on that. We have regional investors in every region. The vast majority of our people work outside of London, for example, over 1/5 of our people work and live in Scotland. I myself spent time in Newcastle at the back end of last year. I met with senior management of the 2 big ports there. I visited the Catapult, the Energy Catapult. I think there's a really interesting and exciting opportunity for the people of Teesside. And we very much want to support that. And we are very focused on doing that. So thank you for your urgings in that regard. Plan B, I think, is to continue to support all the regions, including Teesside.

[indiscernible]

I think we have to focus on what we can control and that is the relationship with the customers that we have in every area around the U.K. and also helping them to invest in their own future. What they see as best for their future is something for them to determine.

[indiscernible]

I think many investors see it in very much the same way that we do. We are there to support efforts made by local communities, which is fundamentally what we're trying to do.

[indiscernible]

I'm very comfortable that Lloyds Banking Group, as I said in my speech, is in a very healthy and secure position. I think we are supporting other people investing across Britain.

[indiscernible]

Okay. Thank you, Mr. [ Gorman ]. I've tried to answer your question as best as I can. Thank you, and thank you for coming today. I hope to see you again next year. So the next question is from Ms. [ Kisby ], please.

I'm also representing ShareAction. My name is [ Judith ], and my question is related to the restrictions on oil and gas financing at corporate level. ShareAction is grateful for the constructive engagement that we have had with Lloyds Banking Group on the content of its climate strategy and recognize that the bank has made important progress on its interim overarching net zero target, which is aligned with credible 1.5-degree centigrade pathways. We commend the board for committing to not directly finance greenfield oil and gas fields and being the first U.K. bank to do so. However, this policy does not include financing for oil and gas at the corporate level. Share action research found that less than 10% of European banks financing to oil and gas expanded was in the form of project finance. According to the latest Banking on Climate Chaos report, Lloyd's financed $1.8 billion in fossil fuels in 2022, representing a $500 million increase from their financing in 2021. It is crucial that Lloyds Banking Group publishes a plan to restrict financing at the corporate level for new oil and gas to phase down its financed emissions on a pathway aligned with 1.5 degrees centigrade. This can include a commitment to require clients to publish transition plans by a specific date, setting out red lines for it and specifying that these plans must prohibit the development of new oil and gas fields and also commitment to exclude oil and gas companies with expansion plans. So my question is, will Lloyds commit to publishing a plan to restrict corporate financing for new oil and gas by the end of 2023?

Thank you, Ms. [ Kisby ]. As you say, I would make 2 general points to begin with. Firstly, our exposure to oil and gas companies is very limited compared to our peer group, less than 1% of our customer balances. And we have, as you stated, set out some very clear objectives in regard to our overall exposure and the financing that we provide to oil and gas companies. As you said, first of all, we've committed not to directly finance new oil and gas projects. We have also said that we will aim to reduce the amount of emissions that we finance in the industry by 50% by 2030. However, I think we feel that the right way of going about that is not simply to stop lending to people because otherwise, in reality, other people will lend to them. And I think we can use our influence better, as you say, by ensuring that all our customers in that sector have credible transition plans. And we are working with other people to create the best possible standards for those transition plans. And that is something that we commit to work through with our customers over the course of the coming year. Thank you. So our next question comes from Mr. [ Sterling ].

My name is [ John Sterling ]. I'm a customer of the Bank of Scotland. And my question is, why does the bank not want new customers? You have removed branch managers, so anyone wishing to set up a business and open a business account, one, does not get any helpful advice; two, flies under the bank's radar for spotting opportunities to suggest matters of mutual benefit. [ Folding ] a branch merely gets a computer demanding an account number. This is impossible if you're a new person and wanting to open an account. Linked to that, have the short-term savings and not having branch managers and closing branches, having driven customers away, has that been used to increase remuneration to any employee other than Board members?

Thank you, Mr. [ Sterling ]. And if I can, first of all, just say that as I mentioned earlier, we have not increased executive pay for our extremely able executive directors this year. In terms of your question, I think it's been a very significant trend over the last 10, 15 years is the trend towards people wanting to interact with us digitally. We recognize that we need to keep other channels open, and we do, as a group, have the largest branch network in the U.K. of any of the banking groups. But we now find that people really do want to interface with us digitally. I think at one stage in May, we had 24 million log-ons on a single day and that we find is the way in which customers want to develop their relationship with us. But at the same time, we recognize that we need to keep all channels open for our customers. And I'm sorry, that you've had difficulty with the Bank of Scotland. And I have to say, we spent the last couple of days talking with customers with the Bank of Scotland and it does a brilliant job most of the time. And what I would say is that what we're doing essentially to the extent that we are reducing our branch side. We're reinvesting that in direct lines of communication with our customers in contact centers, as I mentioned earlier, we allocated 4,500 people to our contact centers to help people through the cost of living issue that we are facing at the moment and that sort of expertise is simply not possible to have in every single branch. So we are reinvesting money that comes from a rationalization of the branch network into broader services that help provide the customer service that we think our customers want. And I'm very sorry Mr. Sterling that, that has not worked in your case, so I apologize. Next question. [ Rachel Boothroyd ].

My name is [ Rachel Boothroyd ], and I'm here from Unite's Organizing and Leverage Department. So as I'm sure the Board will know Unite is in disputes with LPG at the moment over the rollout of the compressed hours review in 2 departments, P&P and consumer lending. Let's be clear, this is an attack on flexible working. Yes, there is a huge struggle feeling amongst the workforce against this. We've launched the collective grievance have it scrapped. We've got thousands of workless colleagues that work at your bank sign in this already. The Board does not seem to be listening at all. So I have a testimony here from the mother of a colleague affected by the review. And I do want the Board and I want shareholders to hear it. So be brief. So she says the impact of this compressed hours review would quite simply forced my daughter into unemployment at a time of a cost of living crisis. Not only would she lose her career that she worked hard for. She will be placed in financial hardship for a pilot with no clear reasons as to why it's being into place. The impact of this tears through our family, the stress it is causing is just horrendous. My daughter is happening to make life-changing choices the way this pilot has been dropped on colleagues with no explanation, no reasoning behind it and no date to show any negative impact on the businesses, quite frankly, awful. We have been treated like children who were forced in making life changing choices. Q1 results came out with glowing results everyone being thanks for all their hard work and contribution but these results were achieved by work in a compressed shift and working from home, it makes no sense. This has rocked my confidence in the bank and its ability to make the right decision the way this has been delivered, in my opinion, fails to reach the value set out by the group and the impact of this across colleagues' lives is catastrophic. So this is one of the colleagues who you've all credited this morning, we're delivering huge profits to shareholders through their hard work, and this is an outrageous way for her to be treated and she is one of many. And my question is this, do you recognize that the compressed hours pilot review is a direct attack on working women, parents and carers who work at your bank.

Thank you, Ms. Boothroyd you're very welcome here today, and I'm very sorry to hear the comments from your colleague. I would make the point that, as you say, at this stage, what we're doing is conducting 2 pilot projects. We've also asked colleagues set out their views on flexible working. We, as an organization, are very proud that we have led the development of flexible working, and we will continue to do that. We want to make sure that as flexible working evolves, we can do something that is fair for everyone and helps teams become effective. But I would stress that no decisions have been taken. We are focused on listening to colleagues what they have to say. This will also be particularly around compressed hours. There will be a big focus on individuals and the needs of individuals and any outcome will very much be based on individual discussions between colleagues and their line managers. So I'm very sorry that upset has been caused by this, and we will seek to come to conclusions as soon as we can, but I think it's really important that before we do that, we hear the views and we trial different options. Thank you. Please, can Ms. Boothroyd have the microphone again, please?

I just want to finish by saying that this is not a policy which is in step with a commitment to flexible working. It's just not -- and this is the feedback you've had from colleagues, thousands and thousands of comments on [ Yama ] and as well in your survey. And coming through the unions who we represent the workforce, it's not in staff with flexible working and it arose with modern working practices. And it is going to exclude a lot of very capable hard work in people from the late force in Lloyds, it's going to do nothing to address imbalances in gender and equality and pay pension certainly, we need to think about that. Obviously, we'll be taking it further as a union, and I would encourage shareholders who are concerned about the impact this is going to have on the diversity of Lloyds' workforce to write directly to the Board to express their concern.

Thank you, Ms. Boothroyd. Naturally, that is not our intention. And I hope we will see how things turn out. But thank you for your contribution. And again, I'm very sorry to hear about the comments of your colleague. So next question is from Lynn Scott.

Lynn Scott also from United Union and it's also a [ rant ] about the compressed hours. And we have a lot of testimonials from some of our colleagues. This is from a mother. She's finishing early, partly around half my time to pick up daughter from school. One of the options that I'm going to have to choose between is can I still do this and go part-time, which means I will do an annual salary of about GBP 3,700 a year. And that's most of my last few years of pay rises. Alternative is to force myself to put my children in the breakfast clubs, not the school clubs, which is a slightly cheaper option, but it's still going to cost over GBP 1,000 for working over that aren't conductive to me or my family. This is a choice that thousands of parents have been left with through a choice that the bank is making and forcing on employees. So my question is, does Lloyds think that this is fair to ask workers to make a choice of losing certain thousand or GBP 1,000 because of choices they are making and forcing a pilot of people that don't work it.

Thank you. as I'm in danger of repeating myself, but these discussions will be very much had on individual basis. We clearly need to create a flexible work pattern that is fair for everybody that allows teams to work effectively together. But I emphasize again that we are listening and that is the point of these pilots and the question there that has gone out to colleagues. But again, I'm very sorry to hear about the concerns expressed by our colleagues. Thank you. So next question comes from Ashley Greece.

My name is Ashley Greece. I'm also from United Union in the Organized and Leverage Department. Just following on from what my colleagues have said, and on behalf of the employees employed by Lloyds. I have a testimonial from one of them. And it says, firstly, I want to say is that the removal of compressed working hours, prejudices single mothers, parents, carers and those with a disability. Both myself and my husband would be targeted by the new pilot, which is very concerning for us. My husband and I work at Lloyds on compressed hours, which allows us to care for our children who have additional needs. Therefore, it is important that the majority of the care is between us as parents, changing the days or being unable to work compressed hours would cause a great distress for our children. A child winder is not an option for us. We wouldn't be able to afford it to start with, but our children need to be looked after by their parents due to their needs. Now the question that's coming from them, is Lloyds okay with leading a policy, which is going to discriminate against parents with children who have disabilities and additional needs?

Thank you, Ms. Greece. As I said earlier, these will be individual discussions around compressed hours. And we will be, or our team will be particularly focused on any form of vulnerability as part of those discussions. Thank you. Mr. Simon [ Biggs ].

So a question for Scott. Scott, we -- and Amanda Mackenzie, my question is around how the company goes about researching ESG partners or fund managers. The company seems committed to ESG, which is fabulous. The partnership Scottish Widows has formed with BlackRock to create the climate transition equity firm. It sounds like an important part of that strategy. I was shocked to read at the end of last year in resurgence and ecologists Magazine BlackRock was 1 of 3 European U.S. investment companies with a combined GBP 12 billion in businesses linked to Amazon rainforest disruption. The information source was forest and finance. I understand scientists are saying that the Amazon is reaching ecological tipping points with an implication for us all and future generations. The partnering with BlackRock seems at odds with the spirit and detail found in the Scottish Widows' responsibility, responsible investment framework and its exclusion and stewardship policies. And I come to this meeting with a clear sense that my shareholding is condoning BlackRock's actions. The question is, does the company research its ESG partners? Have you been aware of BlackRock's links with rain forest disruption? And if so, is there any dialogue?

Thank you, Mr. Banks. I don't think it would be appropriate for us to comment on our partners. But I can assure you that we vet our partners very closely. We make sure that they align with our purpose and values and because if we don't do that, then as Amanda said, if we're not serious about this, then there's no point in doing it. Scott, I don't know whether there's anything in particular you would like to add to that.

Thank you, Chairman. Without going into too much detail, I'd also outline that our approach is shown on the responsible investing report, which obviously, people can access both digitally and through other means. There's 3 key tenets in that in the Scottish Widows approach. The first one is that we're intending to invest GBP 20 billion to GBP 25 billion in responsible investment climate change strategies by 2025. The second is that we're going to aim to halve our carbon footprint by 2030. And the third thing, of course, is our overall commitment to net zero by 2050. As you would imagine, within the governance framework of Scottish Widows, we monitor our progress against all of those commitments on a regular basis through the appropriate committees and I'm pleased with the progress that we're making so far.

Thank you. I'm sorry, it's probably not appropriate for us to address the BlackRock issue directly. But we will take it away and think about it. Thank you. Mr. Neeve.

As witnessed to the 21-day call-for-action notice, served on you and the Board at last year's AGM, can you quantify what efforts have been made to settle the up metal crime cases. You promised Mr. Leite and the shareholders, you would address in respect of the individual cases, the folders of which are deposited the at the reception last year.

Thank you, Mr. Neeve. I think what I promised is that I would make sure that those cases were reviewed. As I understand it, there were 96 cases and each of those has been reviewed and we sent a response about the outcome of that. We have no evidence of any fraud that is alleged around our Bristol operations that has been investigated by ourselves. And as I understand it also by the police. We've gone through each of those 96 cases, and I would emphasize, if any individual who forms part of those cases wants to contact us, we would be very happy for that to happen. But we don't believe that anything in those 96 cases, most of them are either -- have either been already reviewed by us or actually are not to do with Lloyds at all. But we have gone through them all very carefully, Mr. Neeve. We spent a lot of time on this, including external legal time to give ourselves comfort with the conclusion that we've come to. I know you won't agree with that. And again, I would emphasize that if any of those individuals want to contact us directly, we would, of course, deal with them appropriately.

Do wanted to discuss it as is my wife. And our case references are [indiscernible] 52 and 52a, and we have never heard from you or the Board about these cases.

And my understanding is that we responded to Mr. Leite, who is the person who handed us the file on your behalf last year.

Yes. But we've been in direct discussion with the Board and never got a reply since's our home was confiscated in 2014. Ms. Cheetham is never replied to my letters.

I -- as you can imagine, we don't entirely agree with your characterization around that. This is something, as you know, that we've been discussing over many years. And unfortunately, has also been considered in the court, and we can't come to a conclusion on the outcome.

Then I refer you to clause 19 of the notice. And you certainly haven't addressed that issue.

If there are individual things, as I said at the outset, I think they are best dealt with outside this room with customer complaints, Mr. Neeve.

Customer complaints are no use to us. We require...

I think that's what customer complaints are for Mr. Neeve.

Yes. But we have the blocks stopping us getting to you and the Board.

We are not, as a Board, the right people to deal with individual complaints. We have people who are highly specialized and who are very empathetic to the requirements of our customers. Sometimes, we simply can't agree. And I know that, that is the case here, and I'm very sorry that we are not able to agree.

Well -- so you're refusing to continue any dialogue...

You have any new information, any new evidence we would be very happy to take that new information and new evidence.

But you haven't addressed the legacy issues.

As I've said, we have reviewed those issues, and we don't think that any further action is appropriate. But if you have any further evidence any further information, we would, of course, review that as we have done the other evidence and information you've provided to us. Thank you. Mr. Fields, just so everyone knows, we have 3 questions now remaining as far as I'm aware, but obviously, people are open to ask further questions. Please, I will come to you in a second. I'm absolutely not intending to cut anyone off. But I just want to let people know that if we are coming towards the end of questions and therefore, if you want to vote, I will give you a final reminder at the end people to be aware of that in advance. So Mr. Fields.

Right. I've got 2 questions for you. One is about Scottish Widows. On the 25th of March this year -- and I'm one of 7,000 people that has a policy you have not paid down time. My main argument is when we are going to pay out the money that is owing to our people. I have had 2 reasons and 1 was given in the hall today. And everyone is completely opposite. That is the first question. Do you want me to go in more detail?

I think the second question would be good if you have a second question.

The second question involves customer service. Much the same sort of thing -- with this, it is an account of the Halifax. I have been to Halifax in Chester when there was 2, 1 did the actual setting up in this account. And now, I won't have to take it over, but I can't get an answer from [ Leon ]. What I mean an answer from leads is everybody here can read the figures over a number of years. And anybody doubt me, I've got the report on here for each year, and we're going back to 2014. There's been a mistake made in an account, customer services affair, all these will not give me an answer, "yes, you're right on that figure." Because one particular account and one particular year, and particular year, it went out GBP 47,000 in my favor. An account I've been to the Halifax, I can write to [ Leon ]. I even wrote to Cathy that I was going to ask this question. We still haven't got it answered. All I get it's a standard reply you'll get a reply, but the same outside, they might give me an answer. I'm very interested on the Scottish Widows question. Because if it to me, the time like a paper like that, I've taken an argument up one person who knows in the financial mess once before, a certain government authority will not get it sorted out. So I'm waiting for the answers.

Okay. Thank you, Mr. Fields. First of all, I would say that in relation to Scottish Widows, we did have some poor service because we had very significantly greater than expected demand and therefore, the telephone system did not work as it should, and for that, we apologize. It's obviously impossible for me to answer your questions on individual accounts and the issues around the individual accounts. And I would encourage you to speak to customer service, and they will make sure that you do get an answer in a short period of time. Scott, is there anything you would add?

No, I don't -- I'll just add my words of apology. We do feel that we didn't meet the levels of service we aspire to for a short period earlier this year. I'm not sure Mr. Fields if your complaint is attached to that issue or not. But regardless, it's clearly not appropriate for us to discuss personal issues in this forum, but I can assure you that the customer service desk side will take it up and resolve your issue.

I can't discuss the times.

Sorry.

You can't discuss the times on the article on the 25th of March. Page 66.

Which was about the certain delays that people are facing?

Yes, Scottish Widows.

Yes. I think that's what we were apologizing for. We recognize that, as Scott says, for a period of -- a relatively short period of time, our service levels were not up to scratch because we simply haven't been able to deploy enough people to cope with the surge of demand that we felt that we faced, and I apologize for that.

Well, I waited nearly 2 years for this payout.

Okay. Well, again, I think all I can say is please go to customer complaints in the lobby, and we will make sure that you get an answer quickly.

Well, I'm going to answer the [indiscernible] straight in the account.

Thank you. Mr. Miller. Would you like to wait for the microphone, Mr. Miller? There's one behind you.

Mr. Budenberg, I have 4 questions. I represent the Lloyds Bank Victims Group, which is the med files. It was also an industry stakeholder adviser on property for a money laundering to HMRC, treasury and trading standards. I can tell you there is fraud in those accounts and so on. I also have an apology today from Professor Nigel Harper, who can't be here. And what a shame as victims group to see [indiscernible] up there? I also represent a bigger group now, which is Project Hague, you can guess where we're going to take things and that now represents 900 cases. Each case has got 5 to 15 victims. Those are cases against Lloyds Bank, the government, the state on state failure, also RBS and Clyde style. The first question that I have -- I'd like to say this is 4 questions, 4 different victims. In your -- if you -- if the Board can please turn to your book, your brochure. And if you can go to Page 218 of the annual 2022 report, Note 1 states that the report has been done in accordance with the Companies Act 2006. And on Page 213, the signatures are of yourself, Mr. Nunn and Mr. Chalmers. Do you stand by that? Are their your signatures?

Yes.

And are you saying that if there's any fraud or anything in line with the 2006 Companies Act, you will now take responsibility?

I think what we're saying is that the accounts were prepared...

You'll sign them more, if you're the Board.

Yes, and the accounts were prepared in accordance with all regulations and companies...

As directors, you have to take responsibility and sign those off which if it is wrong, it's a criminal offense.

We believe that those accounts...

You believe -- okay. That's our due diligence. Okay. Now so my first question is to the Risk Committee. But sadly, [indiscernible] is not here today and also Catherine Woods, but we've got Alan Dickinson. Maybe we could substitute Sarah and Catherine for Amanda and Cathy, maybe they could answer. How is the committee of risk, of internal crime being fraud and human rights abuse by your staff, what would the Board of Directors -- if it's done by your Board of Directors, your legal teams, your auditors, such as if they put in force annual returns. What happens -- what would the other members of the Board do in line with suspicious activity reports and proceeds to Crime Act 2002. If you discovered that people on your Board, if there were red flags going up, what would the other Board members do?

My role as Chair is to ensure that proper governance is followed in all respects in relation to Lloyds Banking Group.

So what would you...

And I am quite comfortable that we have systems and processes in place that ensure that if those sorts of issues were highlighted they would be properly taken into account.

So if there was red flags going up by any of your Board members, you would suspend them. What would you do?

I do not believe this is about individual Board members. I think we thought...

If I can carry on there. So in this week, Sunday Post former banker in RBS asset stripping unit faces prosecution as families battle for compensation, a former banker who was part of the infamous turnaround GRG division of RBS Scotland that cripple thousands of business owners is facing prosecution criminal prosecution and lengthy criminal investigation, it can be revealed. This was at -- the time, this bank was under Ms. Alan Dickinson. You do not think with Mr. Dickinson on your Board and knowing that the misperformance and fraud, which I know took place at Lloyds to be assumed that red flag should now be going up against Alan Dickinson.