REG - Lloyds Bank Plc Lloyds Banking Group - 2025 Q1 Interim Management Statement
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RNS Number : 0334H Lloyds Bank PLC 01 May 2025
Lloyds Bank plc
Q1 2025 Interim Management Statement
1 May 2025
Member of the Lloyds Banking Group
FORWARD LOOKING STATEMENTS
This document contains certain forward-looking statements within the meaning
of Section 21E of the US Securities Exchange Act of 1934, as amended, and
section 27A of the US Securities Act of 1933, as amended, with respect to the
business, strategy, plans and/or results of Lloyds Bank plc together with its
subsidiaries (the Lloyds Bank Group) and its current goals and expectations.
Statements that are not historical or current facts, including statements
about the Lloyds Bank Group's or its directors' and/or management's beliefs
and expectations, are forward-looking statements. Words such as, without
limitation, 'believes', 'achieves', 'anticipates', 'estimates', 'expects',
'targets', 'should', 'intends', 'aims', 'projects', 'plans', 'potential',
'will', 'would', 'could', 'considered', 'likely', 'may', 'seek', 'estimate',
'probability', 'goal', 'objective', 'deliver', 'endeavour', 'prospects',
'optimistic' and similar expressions or variations on these expressions are
intended to identify forward-looking statements. These statements concern or
may affect future matters, including but not limited to: projections or
expectations of the Lloyds Bank Group's future financial position, including
profit attributable to shareholders, provisions, economic profit, dividends,
capital structure, portfolios, net interest margin, capital ratios, liquidity,
risk-weighted assets (RWAs), expenditures or any other financial items or
ratios; litigation, regulatory and governmental investigations; the Lloyds
Bank Group's future financial performance; the level and extent of future
impairments and write-downs; the Lloyds Bank Group's ESG targets and/or
commitments; statements of plans, objectives or goals of the Lloyds Bank Group
or its management and other statements that are not historical fact and
statements of assumptions underlying such statements. By their nature,
forward-looking statements involve risk and uncertainty because they relate to
events and depend upon circumstances that will or may occur in the future.
Factors that could cause actual business, strategy, targets, plans and/or
results (including but not limited to the payment of dividends) to differ
materially from forward-looking statements include, but are not limited to:
general economic and business conditions in the UK and internationally
(including in relation to tariffs); imposed and threatened tariffs and changes
to global trade policies; acts of hostility or terrorism and responses to
those acts, or other such events; geopolitical unpredictability; the war
between Russia and Ukraine; the conflicts in the Middle East; the tensions
between China and Taiwan; political instability including as a result of any
UK general election; market related risks, trends and developments; changes in
client and consumer behaviour and demand; exposure to counterparty risk; the
ability to access sufficient sources of capital, liquidity and funding when
required; changes to the Lloyds Bank Group's or Lloyds Banking Group plc's
credit ratings; fluctuations in interest rates, inflation, exchange rates,
stock markets and currencies; volatility in credit markets; volatility in the
price of the Lloyds Bank Group's securities; natural pandemic and other
disasters; risks concerning borrower and counterparty credit quality; risks
affecting defined benefit pension schemes; changes in laws, regulations,
practices and accounting standards or taxation; changes to regulatory capital
or liquidity requirements and similar contingencies; the policies and actions
of governmental or regulatory authorities or courts together with any
resulting impact on the future structure of the Lloyds Bank Group; risks
associated with the Lloyds Bank Group's compliance with a wide range of laws
and regulations; assessment related to resolution planning requirements; risks
related to regulatory actions which may be taken in the event of a bank or
Lloyds Bank Group or Lloyds Banking Group failure; exposure to legal,
regulatory or competition proceedings, investigations or complaints; failure
to comply with anti-money laundering, counter terrorist financing,
anti-bribery and sanctions regulations; failure to prevent or detect any
illegal or improper activities; operational risks including risks as a result
of the failure of third party suppliers; conduct risk; technological changes
and risks to the security of IT and operational infrastructure, systems, data
and information resulting from increased threat of cyber and other attacks;
technological failure; inadequate or failed internal or external processes or
systems; risks relating to ESG matters, such as climate change (and achieving
climate change ambitions) and decarbonisation, including the Lloyds Bank
Group's or the Lloyds Banking Group's ability along with the government and
other stakeholders to measure, manage and mitigate the impacts of climate
change effectively, and human rights issues; the impact of competitive
conditions; failure to attract, retain and develop high calibre talent; the
ability to achieve strategic objectives; the ability to derive cost savings
and other benefits including, but without limitation, as a result of any
acquisitions, disposals and other strategic transactions; inability to capture
accurately the expected value from acquisitions; and assumptions and estimates
that form the basis of the Lloyds Bank Group's financial statements. A number
of these influences and factors are beyond the Lloyds Bank Group's control.
Please refer to the latest Annual Report on Form 20-F filed by Lloyds Bank plc
with the US Securities and Exchange Commission (the SEC), which is available
on the SEC's website at www.sec.gov, for a discussion of certain factors and
risks. Lloyds Bank plc may also make or disclose written and/or oral
forward-looking statements in other written materials and in oral statements
made by the directors, officers or employees of Lloyds Bank plc to third
parties, including financial analysts. Except as required by any applicable
law or regulation, the forward-looking statements contained in this document
are made as of today's date, and the Lloyds Bank Group expressly disclaims any
obligation or undertaking to release publicly any updates or revisions to any
forward-looking statements contained in this document whether as a result of
new information, future events or otherwise. The information, statements and
opinions contained in this document do not constitute a public offer under any
applicable law or an offer to sell any securities or financial instruments or
any advice or recommendation with respect to such securities or financial
instruments.
FINANCIAL REVIEW
Income statement
The Group's profit before tax for the first three months of 2025 was £1,177
million, 26% lower than the same period in 2024. This was driven by higher
operating expenses and a higher impairment charge. Profit after tax was
£881 million (three months to 31 March 2024: £1,159 million).
Total income for the first three months of 2025 was £4,371 million, broadly
in line with the same period in 2024 (three months to 31 March 2024: £4,385
million). Net interest income of £3,244 million was up 4% on the prior year
(three months to 31 March 2024: £3,127 million), driven by a higher margin
and higher average interest-earning assets. Other income decreased by 10% to
£1,127 million (three months to 31 March 2024: £1,258 million). The
decrease in other income reflected improved performance in UK Motor Finance,
with fleet growth and higher average vehicle rental values, which was more
than offset by negative market volatility and a reduction in income from
fellow Lloyds Banking Group undertakings.
Total operating expenses of £2,884 million were 6% higher than in the prior
year. This reflects higher costs, combining inflationary pressures, timing of
strategic investment including planned higher severance front-loaded into the
first quarter of 2025 and business growth costs, partly offset by cost savings
and continued cost discipline. This is alongside higher operating lease
depreciation, as a result of fleet growth, the depreciation of higher value
vehicles and declines in used electric car prices over 2024.
No net remediation charge was recognised by the Group in the first three
months of 2025 (three months to 31 March 2024: £25 million). There have
been no further charges relating to motor finance commission arrangements. The
Supreme Court heard the appeal of the Wrench, Johnson and Hopcraft decision in
early April and has stated that it is likely to produce its judgment in July.
The FCA has indicated that the decision will inform its next steps in the
discretionary commission arrangements (DCA) review and that it will confirm
within six weeks of the decision if it is proposing a redress scheme and if
so, how it will take that forward. The FCA has also noted that its next steps
on non-DCA complaints will be informed by the decision.
The impairment charge was £310 million, up from £70 million in the three
months to 31 March 2024. Asset quality remained resilient in the quarter. The
charge included strong portfolio performance in Retail, more than offset by a
higher charge in Commercial Banking, partly due to the non-recurrence of a
release from loss rates used in the model in 2024. The charge also included a
£100 million central adjustment to address downside risks to the base case
related to the potential impact from US tariff policies announced at the start
of April. These were becoming apparent around the balance sheet date and were
determined to not be fully captured within the modelled divisional ECL
allowances. This is partially offset by benefits to the MES from small
increases to house price and wage growth expectations.
FINANCIAL REVIEW (continued)
Balance sheet
Total assets were £5,143 million, or 1%, higher at £616,356 million at 31
March 2025 (31 December 2024: £611,213 million).
Financial assets at amortised cost were £3,135 million higher at
£508,032 million (31 December 2024: £504,897 million) with increases in
loans and advances to customers. This included growth of £4,807 million in UK
mortgages and growth across UK Retail unsecured loans, credit cards, UK Motor
Finance and the European retail business. Lending balances reduced in
Commercial Banking as a result of repayments of government-backed lending. The
growth in loans and advances to customers was partly offset by a
£908 million reduction in reverse repurchase agreements, a £302 million
reduction in loans and advances to banks and a £1,474 million reduction in
debt securities.
Cash and balances at central banks decreased 1% to £42,000 million.
Financial assets held at fair value through profit or loss increased by £733
million, due to increased reverse repurchase agreements. Derivative financial
assets were £520 million lower at £3,715 million (31 December 2024:
£4,235 million), driven by interest rate and currency movements in the
period. Financial assets at fair value through other comprehensive income were
stable in the period at £30,682 million. Other assets were £1,853 million
higher, primarily reflecting increased settlement balances.
Total liabilities were £3,230 million higher at £574,696 million
(31 December 2024: £571,466 million). Customer deposits of
£456,574 million increased in the period by £4,780 million. Retail deposits
increased by £2,637 million in the period, driven by net inflows to limited
withdrawal and fixed term deposits alongside higher current account balances.
Commercial Banking deposits were up in the quarter, aided by short term
balances.
Other liabilities increased by £1,034 million reflecting increased
settlement balances, while debt securities in issue decreased by
£2,789 million, with higher levels of maturities in the period.
Total equity increased to £41,660 million at 31 March 2025 (31 December 2024:
£39,747 million). The increase primarily reflected profit attributable to
ordinary shareholders alongside unwind of the cash flow hedge reserve and
issuance of an AT1 capital instrument in February 2025 to Lloyds Banking Group
plc.
Capital
The Group's common equity tier 1 (CET1) capital ratio reduced to 13.6% at 31
March 2025 from 13.7% at 31 December 2024. Profit for the first three months
of the year was offset by the accrual for foreseeable ordinary dividends and
an increase in risk-weighted assets.
The Group's total capital ratio at 31 March 2025 remained at 19.9% (31
December 2024: 19.9%). The increase in CET1 capital and the issuance of a new
AT1 capital instrument were offset by the increase in risk-weighted assets and
a reduction in tier 2 capital reflecting an instrument call and other
movements.
Risk-weighted assets increased by £3,955 million to £190,951 million at 31
March 2025 from £186,996 million at 31 December 2024. This reflects the
impact of lending growth, but also includes a temporary c.£2.5 billion
increase primarily due to hedging activity that is expected to reverse by the
third quarter. The growth in risk-weighted assets was partly offset by
continued optimisation activity and other movements.
The Group's UK leverage ratio increased to 5.5% at 31 March 2025 from 5.4% at
31 December 2024, reflecting an increase in the total tier 1 capital position,
partially offset by an increase in the leverage exposure measure. The latter
reflects increases across loans and advances and other assets, due in part to
lending growth, partially offset by a reduction in the measure for securities
financing transactions.
CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)
Three months ended Three months ended
31 Mar 31 Mar
2025 2024
£m £m
Net interest income 3,244 3,127
Other income 1,127 1,258
Total income 4,371 4,385
Operating expenses (2,884) (2,728)
Impairment (310) (70)
Profit before tax 1,177 1,587
Tax expense (296) (428)
Profit after tax 881 1,159
Profit attributable to ordinary shareholders 774 1,069
Profit attributable to other equity holders 98 86
Profit attributable to equity holders 872 1,155
Profit attributable to non-controlling interests 9 4
Profit after tax 881 1,159
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
At 31 Mar 2025 At 31 Dec 2024
£m £m
Assets
Cash and balances at central banks 42,000 42,396
Financial assets at fair value through profit or loss 3,054 2,321
Derivative financial instruments 3,715 4,235
Financial assets at amortised cost 508,032 504,897
Financial assets at fair value through other comprehensive income 30,682 30,344
Other assets 28,873 27,020
Total assets 616,356 611,213
Liabilities
Deposits from banks 3,899 3,144
Customer deposits 456,574 451,794
Repurchase agreements 38,474 37,760
Due to fellow Lloyds Banking Group undertakings 3,981 4,049
Financial liabilities at fair value through profit or loss 4,538 4,630
Derivative financial instruments 5,327 5,787
Debt securities in issue at amortised cost 42,492 45,281
Other liabilities 12,844 11,810
Subordinated liabilities 6,567 7,211
Total liabilities 574,696 571,466
Total equity 41,660 39,747
Total equity and liabilities 616,356 611,213
ADDITIONAL FINANCIAL INFORMATION
1. Basis of presentation
This release covers the results of Lloyds Bank plc together with its
subsidiaries (the Group) for the three months ended 31 March 2025.
The Group's Q1 2025 Interim Pillar 3 Disclosures can be found at:
www.lloydsbankinggroup.com/investors/financial-downloads.html.
Accounting policies
The accounting policies are consistent with those applied by the Group in its
2024 Annual Report and Accounts.
2. Loans and advances to customers and expected credit loss allowance
At 31 March 2025 Stage 1 Stage 2 Stage 3 POCI Total Stage 2 Stage 3
£m £m £m £m £m as % of as % of
total total
Loans and advances to customers
UK mortgages 275,816 31,912 4,137 6,016 317,881 10.0 1.3
Credit cards 13,875 2,327 261 - 16,463 14.1 1.6
UK unsecured loans and overdrafts 9,660 1,325 171 - 11,156 11.9 1.5
UK Motor Finance 14,197 2,491 131 - 16,819 14.8 0.8
Other 18,462 471 151 - 19,084 2.5 0.8
Retail 332,010 38,526 4,851 6,016 381,403 10.1 1.3
Business and Commercial Banking 25,778 2,946 1,160 - 29,884 9.9 3.9
Corporate and Institutional Banking 36,705 2,528 1,007 - 40,240 6.3 2.5
Commercial Banking 62,483 5,474 2,167 - 70,124 7.8 3.1
Other(1) (414) - - - (414)
Total gross lending 394,079 44,000 7,018 6,016 451,113 9.8 1.6
Customer related ECL allowance (drawn and undrawn)
UK mortgages 52 245 322 179 798
Credit cards 199 308 130 - 637
UK unsecured loans and overdrafts 167 240 114 - 521
UK Motor Finance(2) 170 118 75 - 363
Other 14 14 38 - 66
Retail 602 925 679 179 2,385
Business and Commercial Banking 133 183 172 - 488
Corporate and Institutional Banking 108 149 323 - 580
Commercial Banking 241 332 495 - 1,068
Other(3) 50 50 - - 100
Total 893 1,307 1,174 179 3,553
Customer related ECL allowance (drawn and undrawn) as a percentage of loans
and advances to customers
Stage 1 Stage 2 Stage 3 POCI Total
%
%
%
%
%
UK mortgages - 0.8 7.8 3.0 0.3
Credit cards 1.4 13.2 49.8 - 3.9
UK unsecured loans and overdrafts 1.7 18.1 66.7 - 4.7
UK Motor Finance 1.2 4.7 57.3 - 2.2
Other 0.1 3.0 25.2 - 0.3
Retail 0.2 2.4 14.0 3.0 0.6
Business and Commercial Banking 0.5 6.2 14.8 - 1.6
Corporate and Institutional Banking 0.3 5.9 32.1 - 1.4
Commercial Banking 0.4 6.1 22.8 - 1.5
Other - -
Total 0.2 3.0 16.7 3.0 0.8
(1) Contains central fair value hedge accounting adjustments.
(2) UK Motor Finance includes £178 million relating to provisions against
residual values of vehicles subject to finance leases.
(3 ) Other includes a £100 million central adjustment that has not been
allocated to specific portfolios.
ADDITIONAL FINANCIAL INFORMATION (continued)
3. UK economic assumptions
Base case and MES economic assumptions
The Group's base case scenario is for a slow expansion in gross domestic
product (GDP) and a modest rise in the unemployment rate alongside small gains
in residential and commercial property prices. Inflationary pressures remain
persistent, but gradual cuts in UK Bank Rate are expected to continue during
2025. Risks around this base case economic view lie in both directions and are
largely captured by the generation of alternative economic scenarios.
The Group has taken into account the latest available information at the
reporting date in defining its base case scenario and generating alternative
economic scenarios. The scenarios include forecasts for key variables as of
the first quarter of 2025. Actuals for this period, or restatements of past
data, may have since emerged prior to publication and have not been included.
The Group's approach to generating alternative economic scenarios is set out
in detail in note 19 to the financial statements of the Group's 2024 annual
report and accounts.
The Group had included assumptions for expected tariffs and potential
responses in its quarter-end base case conditioning assumptions prior to
announcements at the start of April. Initial non-UK tariffs announced in the
first few days of April and the immediate market response were larger than
expected. Accordingly, the Group has adopted a £100 million central
adjustment to reflect the potential ECL impact, informed by high level
sensitivity to key UK economic metrics based on tariff scenarios. Subsequent
developments through April were judged to relate to conditions after the
balance sheet date and will be reflected in the second quarter reporting
period.
UK economic assumptions - base case scenario by quarter
Key quarterly assumptions made by the Group in the base case scenario are
shown below. GDP growth is presented quarter-on-quarter. House price growth,
commercial real estate price growth and CPI inflation are presented
year-on-year, i.e. from the equivalent quarter in the previous year.
Unemployment rate and UK Bank Rate are presented as at the end of each
quarter.
At 31 March 2025 First Second Third Fourth First Second Third Fourth
quarter quarter quarter quarter quarter quarter quarter quarter
2025 2025 2025 2025 2026 2026 2026 2026
% % % % % % % %
Gross domestic product growth 0.2 0.2 0.3 0.3 0.4 0.4 0.4 0.4
Unemployment rate 4.6 4.7 4.8 4.8 4.8 4.8 4.8 4.8
House price growth 3.8 3.8 2.4 1.7 1.3 1.7 1.9 1.8
Commercial real estate price growth 2.6 2.8 2.7 1.3 0.9 0.7 0.8 1.1
UK Bank Rate 4.50 4.25 4.00 4.00 3.75 3.75 3.50 3.50
CPI inflation 2.8 3.6 3.6 3.5 3.0 2.8 2.6 2.7
ADDITIONAL FINANCIAL INFORMATION (continued)
3. UK economic assumptions (continued)
UK economic assumptions - scenarios by year
Key annual assumptions made by the Group are shown below. GDP growth and CPI
inflation are presented as an annual change, house price growth and commercial
real estate price growth are presented as the growth in the respective indices
within the period. Unemployment rate and UK Bank Rate are averages for the
period.
At 31 March 2025 2025 2026 2027 2028 2029 2025-2029
% % % % % average
%
Upside
Gross domestic product growth 1.3 2.2 1.6 1.5 1.4 1.6
Unemployment rate 4.1 3.2 3.1 3.1 3.2 3.3
House price growth 2.9 5.9 6.8 5.4 4.3 5.1
Commercial real estate price growth 6.1 5.7 2.6 1.0 0.4 3.2
UK Bank Rate 4.43 4.72 4.86 5.06 5.20 4.85
CPI inflation 3.3 2.8 2.8 3.1 3.0 3.0
Base case
Gross domestic product growth 0.8 1.4 1.6 1.6 1.5 1.3
Unemployment rate 4.7 4.8 4.6 4.5 4.5 4.6
House price growth 1.7 1.8 1.9 2.5 2.9 2.1
Commercial real estate price growth 1.3 1.1 1.2 0.6 0.3 0.9
UK Bank Rate 4.19 3.63 3.50 3.50 3.50 3.66
CPI inflation 3.4 2.8 2.5 2.5 2.4 2.7
Downside
Gross domestic product growth (0.2) (0.9) 0.9 1.5 1.5 0.6
Unemployment rate 5.6 7.4 7.6 7.3 7.0 7.0
House price growth 0.5 (3.4) (6.7) (4.2) (1.1) (3.0)
Commercial real estate price growth (4.7) (5.7) (1.7) (2.2) (2.3) (3.4)
UK Bank Rate 3.83 1.67 0.96 0.65 0.42 1.51
CPI inflation 3.4 2.8 2.0 1.5 1.0 2.1
Severe downside
Gross domestic product growth (1.1) (2.3) 0.7 1.4 1.5 0.0
Unemployment rate 6.8 10.0 10.2 9.7 9.3 9.2
House price growth (0.6) (8.4) (13.8) (9.6) (5.0) (7.6)
Commercial real estate price growth (12.5) (13.3) (7.1) (5.7) (4.9) (8.8)
UK Bank Rate - modelled 3.38 0.39 0.09 0.03 0.01 0.78
UK Bank Rate - adjusted(1) 4.25 2.94 2.80 2.76 2.75 3.10
CPI inflation - modelled 3.4 2.5 1.3 0.4 (0.2) 1.5
CPI inflation - adjusted(1) 3.8 3.8 3.2 2.7 2.4 3.2
Probability-weighted
Gross domestic product growth 0.5 0.6 1.3 1.5 1.5 1.1
Unemployment rate 5.0 5.6 5.6 5.4 5.4 5.4
House price growth 1.4 0.5 (0.8) 0.1 1.3 0.5
Commercial real estate price growth (0.4) (1.0) (0.1) (0.7) (1.0) (0.6)
UK Bank Rate - modelled 4.07 3.04 2.81 2.76 2.74 3.08
UK Bank Rate - adjusted(1) 4.16 3.30 3.08 3.04 3.01 3.32
CPI inflation - modelled 3.4 2.7 2.3 2.1 1.9 2.5
CPI inflation - adjusted(1) 3.4 2.9 2.5 2.4 2.2 2.7
(1) The adjustment to UK Bank Rate and CPI inflation in the severe downside
is considered to better reflect the risks to the Group's base case view in an
economic environment where the risks of supply and demand shocks are seen as
more balanced.
(
)
CONTACTS
For further information please contact:
INVESTORS AND ANALYSTS
Douglas Radcliffe
Group Investor Relations Director
020 7356 1571
douglas.radcliffe@lloydsbanking.com
Rohith Chandra-Rajan
Director of Investor Relations
07786 988936
rohith.chandra-rajan@lloydsbanking.com
Nora Thoden
Director of Investor Relations - ESG
020 7356 2334
nora.thoden@lloydsbanking.com
Tom Grantham
Investor Relations Senior Manager
07851 440 091
thomas.grantham@lloydsbanking.com
Sarah Robson
Investor Relations Senior Manager
07494 513 983
sarah.robson2@lloydsbanking.com
CORPORATE AFFAIRS
Matt Smith
Head of Media Relations
07788 352 487
matt.smith@lloydsbanking.com
Emma Fairhurst
Media Relations Senior Manager
07814 395 855
emma.fairhurst@lloydsbanking.com
Copies of this Interim Management Statement may be obtained from:
Investor Relations, Lloyds Banking Group plc, 33 Old Broad Street, London,
EC2N 1HZ
The statement can also be found on the Group's website -
www.lloydsbankinggroup.com
Registered office: Lloyds Bank plc, 25 Gresham Street, London, EC2V 7HN
Registered in England No. 2065
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