Lloyds Banking Group SWOT and PESTLE Analysis

Strength

1. UK’s largest digital bank, branch reach and customer franchise: Lloyd Bank is UK’s largest digital bank with commendable scale and reach across the Kingdom serving 27 million customers, with more than 13 million active online users and having a presence in nearly every community. Digitization has rapidly transformed our living and the pace of adoption continues to surpass expectations. Lloyd has invested heavily in technological advancements to enhance customer experience for personalization while altering the manner in which customers interact with banks. The increasing use of intelligent systems is a laudable way to respond to customers’ growing expectations for personalization and relevance. Technology also ushers in organizational benefits in terms of efficiency, ability to respond to an evolving operating environment, as well as aiding risk taking decisions and mitigating fraud. As the UK’s leading financial services provider, Lloyd is playing a vital role in shaping UK’s economy. The financial house is also UK’s largest corporate tax payer.

2. Consumer Understanding and supporting processes: Understanding of consumer needs and processes to support the needs has been an important aspect for Lloyds. A comprehensive multi-channel distribution network along with the customer focused strategy and adapting to new digital capabilities is helping to address the changing consumer needs. Lloyd offers a wide basket of services through differentiated multi-channel approach which addresses different customer segments by giving seamless experience across all channels. It offers commercial financing, insurance, risk management, investment, lending services & also takes deposits. It is also personalizing customer propositions through data driven experiences to gain market leadership. This will also attract new customers and improve group’s earnings.

3. Solid Capital Generation: Lloyd stands on solid a capital base that ensures regulatory compliance. It generated 2.45 per cent of CET1 capital on a pro forma basis before ordinary dividends. The highly capital generative nature strengthens its position to implement Basel III norms & meet any changes arising. It also creates a scalable and resilient banking infrastructure. Its leading capital position in the banking sector also gives it a competitive edge. This is because of operational efficiency which provides cost advantage & prudent yet low risk participation choices that benefits both customers and shareholders. CET 1 capital generation was 55 bps more than 2016 level & the capital returns also increased. Capital generation is expected to remain solid with an estimated 170-200 basis points of capital generation per year pre dividend. Lloyd’s financial strength has translated into great capital position which is the strongest in the banking sector worldwide.

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Weakness

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Opportunity

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Threat

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Political

1. Lloyds Shares Sell off by UK government: UK government sold its shares for £21.2 billion that accounted for 43% stake in Lloyds to recover the taxpayers money for which it received more than what it had paid for. This has made Lloyds a privately owned business and removed government’s influence as it was the largest shareholder. This was possible because of a robust cost reduction regime that buoyed profits which grew by little over 100% to £4.2bn as past mis-selling costs fell away. This has given the group more agility to build a more customer focused business. This sale will rejuvenate the bank and continue its strong stronger financial performance. It was also able to repay all of the queen’s money by getting rid of toxic assets worth billions of pounds that accumulated since the financial crisis by replacing short-term wholesale funding with deposits.

2. Continued uncertainty around both the UK and global political and macroeconomic environment: A string of events like the Brexit Bump, Donald Trump's Presidential rise, rise of far-right parties in Europe and continued impuissance in the financial industry – have attracted clouds of uncertainty to an already fragile global economy. Due to economic and political uncertainty caused by the Brexit vote in June 2016, the IMF had lowered the global economic growth forecast for 2017 to 3.4%. The Global Financial Stability Report of the IMF states that over 25% of all banks in developed countries (controlling $11 trillion in assets) remain weak. The UK economic outlook by PWC has projected UK growth to remain modest at around 1.6% in 2019, but the Eurozone economy has been dragging and any upheavals in international trade tensions could dampen global growth in 2019 and beyond. In case of smooth Brexit, it is predicted that the Bank of England would raise interest rates by a quarter of a percent to 1% in mid-2019.

Economic

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Social

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Technological

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Legal

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Environmental

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