1. THE GLOBAL OUTLOOK JUNE 2010 TREVOR WILLIAMS CHIEF ECONOMIST WHOLESALE MARKETS

2. LLOYDS BANKING GROUP 2 CONSIDERABLE FISCAL SUPPORT HAS BEEN PROVIDED TO HEAD OFF GLOBAL RECESSION … -10 -8 -6 -4 -2 0 2 197019741978198219861990199419982002200620102014 Fiscal balance, % of GDP World Emerging and developing economies Advanced economies Forecast

3. LLOYDS BANKING GROUP 3 NOW, PRESSURE TO TACKLE FISCAL DEFICITS IS GROWING Source: Thomson Datastream, OECD Germany US Netherlands France PORTUGAL Poland SPAIN GREECE Iceland Belgium ITALY Slovakia Australia Norway Japan Sweden Switzerland IRELAND UK -10 -5 0 15 020406080100120140160180200 Public debt % GDP Public borrowing % GDP * OECD 2010 estimates Manageable, but deteriorating Cause for concern Fiscally prudentPath of fiscal rectitude (no one on it!) Korea - - 5 10

4. LLOYDS BANKING GROUP 4 …WITH SMALL ECONOMIES IN THE EURO FACING HEADWINDS Source: Lloyds TSB Corporate Markets Spread over 10yr Bunds 20052006200720082009 2010 0 1 2 3 4 5 6 7 Greece Spain Portugal Ireland

5. LLOYDS BANKING GROUP 5 EQUITIES ARE UNDER SELLING PRESSURE… Source: Lloyds TSB Corporate Markets 2007200820092010 Global equity indices, Jan 2007 = 100 40 50 60 70 80 90 100 110 120 130 FTSE 100 DOW JONES DAX 30 NIKKEI 225

6. LLOYDS BANKING GROUP 6 BONDS ARE ATTRACTING SAFE-HAVEN FLOWS… Source: Lloyds TSB Corporate Markets

7. LLOYDS BANKING GROUP 7 BUT MONETARY LOOSENING HAS BEEN AGGRESSIVE… Source: Thomson Datastream

8. LLOYDS BANKING GROUP 8 ‘UNCONVENTIONAL’ MONETARY MEASURES ADOPTED… 2007200820092010 50 100 150 200 250 300 350 US Federal Reserve ($2.3tn) Bank of England (£252bn) ECB (€2.1tn) Bank of Japan (Y121tn) Index of Central Bank's balance sheets, Jan 2007 = 100 Source: ltsb corporate markets

9. LLOYDS BANKING GROUP 9 INFLATION BACKDROP IS BENIGN Source: OECD 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 Jun-03Apr-04Feb-05Dec-05Oct-06Aug-07Jun-08Apr-09Feb-10 Core CPI Inflation, annual rate, % Advanced economies Emerging economies World

10. LLOYDS BANKING GROUP 10 EMERGING MARKET INFLATION NOT GOING TO BE A CONCERN FOR SOME YEARS 0 2 4 6 8 10 12 14 16 18 200220042006200820102012 % increase in year, CPI inflation Forecast Latin America Eastern Europe Middle East* Asia Africa * IMF forecast

11. LLOYDS BANKING GROUP 11 ACCOMMODATIVE SUPPORT CAN REMAIN IN PLACE Source: Datastream, Lloyds TSB Corporate Markets

12. LLOYDS BANKING GROUP 12 …SO WE STILL EXPECT GLOBAL RECOVERY TO PICK UP SPEED IN 2010 AND BEYOND… Source: Lloyds TSB Corporate Markets GDP %Yr 2008200920102011 World3.1-0.93.94.4 Developed economies (G10)0.4-3.32.22.6 US0.5-2.43.4 UK0.5-4.90.72.2 Japan-0.7-5.21.51.6 Eurozone0.6-4.01.01.7 Emerging economies (E10)6.32.76.87.0 -China8.98.79.58.7 -Brazil5.1-0.25.55.3 -India7.56.57.59.1 -Russia5.6-8.54.75.2

13. LLOYDS BANKING GROUP 13 …IN A RANGE OF ECONOMIES… Source: Lloyds TSB Corporate Markets -4 -2 0 2 4 6 8 10 197019741978198219861990199419982002200620102014 World Emerging and developing economies Advanced economies % increase in year F'cast

14. LLOYDS BANKING GROUP 14 …SO GLOBAL ECONOMY TO FACE LONG TERM SHIFT… Countries2007Rank2010Rank2015Rank2025Rank2035Rank US13.827114.019116.280121.976229.5512 China7.15129.285214.205230.168153.6801 Japan4.44034.22434.61445.08945.4065 India3.08343.79845.729311.421321.1113 Germany2.85852.78653.08453.55763.8377 France2.08962.06372.27892.70093.16912 UK2.06471.99482.30882.87883.52410 Russia2.03782.08162.62763.84555.5024 Italy1.79391.695101.823102.019142.09215 Brazil1.776101.96592.45173.33474.6166 Mexico1.464111.451111.810112.575103.7049 Spain1.380121.329121.428131.643161.74817 South Korea1.204131.297131.605122.283112.99213 Canada1.171141.179141.426141.855152.29314 Turkey0.947150.963151.315152.216123.46411 Indonesia0.805160.943161.268162.132133.7058 Australia0.702170.751170.893171.171181.44618 Netherlands0.647180.641190.718190.860200.99420 Poland0.591190.650180.815181.230171.84816 South Africa0.452200.473200.586200.908191.39119 Global GDP trends, to 2035 Trillions $ PPP

15. LLOYDS BANKING GROUP 15 GLOBAL CURRENT ACCOUNT IMBALANCES TO DIMINISH -3 -2 0 1 2 3 200120032005200720092012 Oil exportersGerman & JapanOther AsiaUS European excluding Germany % share of global GDP F'cast Source: IFSL

16. LLOYDS BANKING GROUP 16 BIG FLOWS OF CASH ARE BEING GENERATED, A LOT FINDS ITS WAY TO EUROPE Official foreign exchange reserves held in SWFs SWF investment into EU countries Total: $7,520bn Source: IFSL UK 49% Germany 15% France 12% Netherlands 6% Italy 4% Others 14% % share, completed investment transactions by SWFs, 1995 - Jun 2009, total $187bn Asian reserves not in Sovereign Wealth Funds Rest of world Sovereign Wealth Funds % share, end-2009 17% 47% 36%

17. LLOYDS BANKING GROUP 17 ASSETS UNDER MANAGEMENT TO GROW 051015202530 Pension funds Mutual Funds Insurance funds Sovereign wealth funds Private equity Hedge funds $ trillion, end-2009 Source: IFSL

18. LLOYDS BANKING GROUP 18 SWF ASSETS UNDER MANAGEMENT BY CATEGORY - 1,000 2,000 3,000 4,000 5,000 6,000 1999200120032005200720092012 Commodity Non-commodity $bnForecast Source: IFSL

19. LLOYDS BANKING GROUP 19 SWFS MARKET SHARE BY COUNTRY AND REGION Source: IFSL end-2009 By country$bnstake (%) China928.024.0 United Arab Emirates677.018.0 Norway445.012.0 Saudi Arabia436.011.0 Singapore370.010.0 Kuwait203.05.0 Russia168.04.0 Others573.015.0 By region Middle East1,62043 Asia1,35036 Europe67018 Americas902 Other702 Total3,800

20. LLOYDS BANKING GROUP 20  Disorderly reversal of unprecedented policy measures - Leave it too late: inflationary risk, asset price bubble - Move too early: threaten the incipient recovery  Credit conditions fail to improve sufficiently  Rise in oil commodity prices squeezes western real incomes  Major economies fail to rebalance (particularly China and the US)  Rising tide of protectionism  Spread of contagion from Greece to other sovereigns SUBSTANTIAL MID-TERM RISKS REMAIN BUT WE REMAIN CONFIDENT THE CORNER HAS BEEN TURNED

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