REG - Lloyds Banking Group - 2024 Results
20/02/2025 07:15
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RNS Number : 7745X Lloyds Banking Group PLC 20 February 2025
Lloyds Banking Group plc
2024 Results
News Release
20 February 2025
CONTENTS
Results for the full year (#Section3) 1
Income statement (underlying basis) and key balance sheet metrics (#Section4) 3
Quarterly information (#Section6) 4
Balance sheet analysis (#Section7) 5
Group results (#Section8) - (#Section4) statutory basis (#Section8) 6
Group Chief Executive's statement (#Section11) 7
Summary of Group results (#Section12) 10
Divisional results (#3073145fb2054de4afd74c20f787d3c4_31)
Segmental analysis - underlying basis (#145) 18
Retail (#Section39) 19
Commercial Banking (#Section40) 21
Insurance, Pensions and Investments (#Section41) 23
Equity Investments and Central Items (#Section42) 26
Alternative performance measures (#Section43) 27
Risk management (#Section50)
Capital risk (#Section51) 33
Credit risk (#Section57) 38
Liquidity risk (#Section67) 46
Interest rate sensitivity (#Section69) 46
Statutory information
Consolidated income statement (#Section72) 48
Consolidated statement of comprehensive income (#Section73) 49
Consolidated balance sheet (#Section74) 50
Consolidated statement of changes in equity (#Section75) 51
Consolidated cash flow statement (#Section76) 53
Notes to the condensed consolidated financial statements (#Section77) 54
Key dates (#Section86) 66
Basis of presentation (#Section87) 66
Forward-looking statements (#Section88) 67
Contacts (#Section89) 68
Alternative performance measures
The Group uses a number of alternative performance measures, including
underlying profit, in the description of its business performance and
financial position. These measures are labelled with a superscript 'A'
throughout this document, with the exception of content on pages 1 to 2 and
pages 7 to 9 which is, unless otherwise stated, presented on an underlying
basis. Further information on these measures is set out on page 27.
Forward-looking statements
This news release contains forward-looking statements. For further details,
reference should be made to page 67.
RESULTS FOR THE FULL YEAR
"In 2024 we continued to Help Britain Prosper, delivering for our customers,
shareholders and wider stakeholders. We successfully completed the first phase
of our ambitious and purpose-driven strategy, exceeding our revenue target and
transforming our propositions and capabilities as we returned the business to
growth.
The Group delivered a robust financial performance in 2024. Pleasingly and as
expected, income grew in the second half of the year, supported by a rising
banking net interest margin and momentum in other income. We also maintained
discipline in costs, whilst asset quality remained strong. This performance
enabled total shareholder distributions of £3.6 billion.
Guided by our purpose, we continue to drive positive change in areas where we
can have impact at scale and create value for all of our stakeholders. We are
a leading supporter of social housing, with around £20 billion of funding
since 2018. We have also exceeded the ambitious sustainable finance goals we
set for 2024.
Looking forward, we are building momentum as we enhance our franchise and
deliver differentiated outcomes for our customers. Our strategy is
transforming our capabilities, enabling us to deepen relationships with our
customers, grow in high value areas and drive cross-Group collaboration. We
are confident of generating more than £1.5 billion of additional income from
our strategic initiatives by 2026 as we build towards higher, more sustainable
returns."
Charlie Nunn, Group Chief Executive
Delivering on our purpose-driven strategy, confident of delivering 2026
strategic outcomes
• Clear purpose to Help Britain Prosper, built on a consistent vision of
being a customer-focused digital leader and integrated financial services
provider, able to capitalise on new opportunities at scale
• First phase of strategic transformation successfully completed,
delivering growth, building the business and transforming capabilities
• Generated £0.8 billion of additional revenues from strategic
initiatives, exceeding our target of c.£0.7 billion, and delivering
£1.2 billion of gross cost savings, mitigating inflationary pressures
• Delivered around 80 per cent of 2024 strategic outcomes, a significant
proportion materially ahead of targeted outcome
• Transformed engagement through our refreshed Mobile banking app and
launched innovative new propositions, such as Your Credit Score and Ready-Made
Investments
• Momentum building in second phase of strategy, increasingly confident in
medium-term revenue outlook, including delivering more than £1.5 billion of
additional revenues from strategic initiatives by 2026
• Continued commitment to generate higher, more sustainable returns and
capital generation for shareholders
Robust financial performance(1)
• Statutory profit after tax of £4.5 billion (2023: £5.5 billion) with
net income down 5 per cent on the prior year, operating costs up 3 per cent
(including the Bank of England Levy) and higher remediation and impairment
charges. Return on tangible equity of 12.3 per cent, 14.0 per cent before the
provision charge for motor finance commission arrangements
• Underlying net interest income of £12.8 billion, down 7 per cent
reflecting a lower banking net interest margin of 2.95 per cent and broadly
stable average interest-earning banking assets of £451.2 billion. Underlying
net interest income of £3.3 billion in the fourth quarter, up 1 per cent,
with a higher banking net interest margin of 2.97 per cent
• Underlying other income of £5.6 billion, 9 per cent higher than the
prior year, driven by strengthening customer and market activity and the
benefit of strategic initiatives. Underlying other income in the fourth
quarter was stable on the third quarter
• Operating lease depreciation of £1,325 million, up on 2023 as a result
of fleet growth, the depreciation of higher value vehicles and declines in
used electric car prices; £331 million in the fourth quarter, consistent with
expectations
• Continued cost discipline; operating costs of £9.4 billion, up 3 per
cent and in line with guidance, with cost efficiencies helping to partially
offset inflationary pressures, business growth costs and ongoing strategic
investment, alongside c.£0.1 billion relating to the sector-wide change in
the charging approach for the Bank of England Levy
• Remediation costs of £899 million in the year (2023: £675 million),
including £775 million in the fourth quarter, of which £700 million was in
relation to the potential impact of motor finance commission arrangements
• Strong asset quality; underlying impairment charge of £433 million and
an asset quality ratio of 10 basis points. Excluding the impact of
improvements to the economic outlook, the asset quality ratio was 19 basis
points. The portfolio remains well-positioned with improved credit performance
in the year
(1) See the basis of presentation on page 66.
RESULTS FOR THE FULL YEAR (continued)
Continued growth in customer franchise
• Underlying loans and advances to customers increased by £9.4 billion in
the year, including £2.1 billion in the fourth quarter, to £459.1 billion.
The increase in the year was led by UK mortgages growth of £6.1 billion
• Customer deposits of £482.7 billion increased significantly by £11.3
billion in the year, with growth in Retail deposits of £11.3 billion
alongside stable Commercial Banking deposits. Customer deposits growth was
particularly strong in the fourth quarter, with an increase of £7.0 billion
Strong capital generation driving increased capital return
• Strong pro forma capital generation(1) of 148 basis points. Excluding
the provision charge for motor finance commission arrangements, capital
generation was 177 basis points. Pro forma CET1 ratio(2) of 13.5 per cent,
after increased ordinary dividend and announced share buyback
• Risk-weighted assets of £224.6 billion up £5.5 billion in the year,
reflecting lending growth, Retail secured CRD IV increases and other
movements, partly offset by efficient management of risk-weighted assets
• Tangible net assets per share of 52.4 pence, up by 1.6 pence in the year
resulting from attributable profit, partly offset by capital distributions, a
lower pension surplus from negative market impacts and other movements
• The Board has recommended a final ordinary dividend of 2.11 pence per
share, resulting in a total ordinary dividend for 2024 of 3.17 pence per
share, up 15 per cent on prior year and in line with the Group's progressive
and sustainable ordinary dividend policy
• Given the Group's strong capital position, the Board has also announced
its intention to implement an ordinary share buyback programme of up to £1.7
billion
• Total capital returns in respect of 2024 of up to £3.6 billion, are
equivalent to c.9 per cent(3) of the Group's market capitalisation value
2025 guidance
Based on our current macroeconomic assumptions, for 2025 the Group expects:
• Underlying net interest income of c.£13.5 billion
• Operating costs of c.£9.7 billion
• Asset quality ratio of c.25 basis points
• Return on tangible equity of c.13.5 per cent
• Capital generation of c.175 basis points(4)
2026 guidance
Based on the expected macroeconomic environment and confidence in our
strategy, the Group maintains its guidance for 2026:
• Cost:income ratio of less than 50 per cent
• Return on tangible equity of greater than 15 per cent
• Capital generation of greater than 200 basis points(4)
• To pay down to a CET1 ratio of c.13.0 per cent
(1) Excluding capital distributions. Inclusive of the ordinary dividend
received from the Insurance business in February 2025.
(2) Includes both the full impact of the intended share buyback announced in
respect of 2024 and the ordinary dividend received from the Insurance business
in February 2025.
(3) Market capitalisation as at 14 February 2025.
(4) Excluding capital distributions. Inclusive of ordinary dividends
received from the Insurance business in February of the following year.
INCOME STATEMENT (UNDERLYING BASIS)(A) AND KEY BALANCE SHEET METRICS
2024 2023 Change
£m
£m %
Underlying net interest income 12,845 13,765 (7)
Underlying other income 5,597 5,123 9
Operating lease depreciation (1,325) (956) (39)
Net income 17,117 17,932 (5)
Operating costs (9,442) (9,140) (3)
Remediation (899) (675) (33)
Total costs (10,341) (9,815) (5)
Underlying profit before impairment 6,776 8,117 (17)
Underlying impairment charge (433) (308) (41)
Underlying profit 6,343 7,809 (19)
Restructuring (40) (154) 74
Volatility and other items (332) (152)
Statutory profit before tax 5,971 7,503 (20)
Tax expense (1,494) (1,985) 25
Statutory profit after tax 4,477 5,518 (19)
Earnings per share 6.3p 7.6p (1.3)p
Dividends per share - ordinary 3.17p 2.76p 15
Share buyback value £1.7bn £2.0bn (15)
Banking net interest margin(A) 2.95% 3.11% (16)bp
Average interest-earning banking assets(A) £451.2bn £453.3bn
Cost:income ratio(A) 60.4% 54.7% 5.7pp
Asset quality ratio(A) 0.10% 0.07% 3bp
Return on tangible equity(A) 12.3% 15.8% (3.5)pp
At 31 Dec 2024 At 31 Dec Change
2023
%
Underlying loans and advances to customers(A) £459.1bn £449.7bn 2
Customer deposits £482.7bn £471.4bn 2
Loan to deposit ratio(A) 95% 95%
CET1 ratio 14.2% 14.6% (0.4)pp
Pro forma CET1 ratio(A,1) 13.5% 13.7% (0.2)pp
UK leverage ratio 5.5% 5.8% (0.3)pp
Risk-weighted assets £224.6bn £219.1bn 3
Wholesale funding £92.5bn £98.7bn (6)
Liquidity coverage ratio(2) 146% 142% 4pp
Net stable funding ratio(3) 129% 130% (1)pp
Tangible net assets per share(A) 52.4p 50.8p 1.6p
(A) See page 27.
(1 ) 31 December 2023 and 31 December 2024 reflect both the full impact
of the share buybacks announced in respect of 2023 and 2024 and the ordinary
dividends received from the Insurance business in February 2024 and February
2025.
(2) The liquidity coverage ratio is calculated as a simple average of
month-end observations over the previous 12 months.
(3) The net stable funding ratio is calculated as a simple average of
month-end observations over the previous four quarter-ends.
(
)
QUARTERLY INFORMATION(A)
Quarter Quarter Change Quarter Quarter Quarter Quarter Quarter Quarter
ended ended % ended ended ended ended ended ended
31 Dec 30 Sep 30 Jun 31 Mar 31 Dec 30 Sep 30 Jun 31 Mar
2024 2024 2024 2024 2023 2023 2023 2023
£m £m £m £m £m £m £m £m
Underlying net interest income 3,276 3,231 1 3,154 3,184 3,317 3,444 3,469 3,535
Underlying other income 1,433 1,430 1,394 1,340 1,286 1,299 1,281 1,257
Operating lease depreciation (331) (315) (5) (396) (283) (371) (229) (216) (140)
Net income 4,378 4,346 1 4,152 4,241 4,232 4,514 4,534 4,652
Operating costs (2,450) (2,292) (7) (2,298) (2,402) (2,486) (2,241) (2,243) (2,170)
Remediation (775) (29) (70) (25) (541) (64) (51) (19)
Total costs (3,225) (2,321) (39) (2,368) (2,427) (3,027) (2,305) (2,294) (2,189)
Underlying profit before impairment 1,153 2,025 (43) 1,784 1,814 1,205 2,209 2,240 2,463
Underlying impairment (charge) credit (160) (172) 7 (44) (57) 541 (187) (419) (243)
Underlying profit 993 1,853 (46) 1,740 1,757 1,746 2,022 1,821 2,220
Restructuring (19) (6) (3) (12) (85) (44) (13) (12)
Volatility and other items (150) (24) (41) (117) 114 (120) (198) 52
Statutory profit before tax 824 1,823 (55) 1,696 1,628 1,775 1,858 1,610 2,260
Tax expense (124) (490) 75 (467) (413) (541) (438) (387) (619)
Statutory profit after tax 700 1,333 (47) 1,229 1,215 1,234 1,420 1,223 1,641
Earnings per share 1.0p 1.9p (0.9)p 1.7p 1.7p 1.7p 2.0p 1.6p 2.3p
Banking net interest margin(A) 2.97% 2.95% 2bp 2.93% 2.95% 2.98% 3.08% 3.14% 3.22%
Average interest-earning banking assets(A) £455.1bn £451.1bn 1 £449.4bn £449.1bn £452.8bn £453.0bn £453.4bn £454.2bn
Cost:income ratio(A) 73.7% 53.4% 20.3pp 57.0% 57.2% 71.5% 51.1% 50.6% 47.1%
Asset quality ratio(A) 0.14% 0.15% (1)bp 0.05% 0.06% (0.47)% 0.17% 0.36% 0.22%
Return on tangible equity(A) 7.1% 15.2% (8.1)pp 13.6% 13.3% 13.9% 16.9% 13.6% 19.1%
At At Change At At At At At At
31 Dec 2024 30 Sep % 30 Jun 31 Mar 2024 31 Dec 30 Sep 2023 30 Jun 2023 31 Mar 2023
2024 2024 2023
Underlying loans and advances to customers(A,1) £459.1bn £457.0bn £452.4bn £448.5bn £449.7bn £452.1bn £450.7bn £452.3bn
Customer deposits £482.7bn £475.7bn 1 £474.7bn £469.2bn £471.4bn £470.3bn £469.8bn £473.1bn
Loan to deposit ratio(A) 95% 96% (1)pp 95% 96% 95% 96% 96% 96%
CET1 ratio 14.2% 14.3% (0.1)pp 14.1% 13.9% 14.6% 14.6% 14.2% 14.1%
Pro forma CET1 ratio(A,2) 13.5% 14.3% (0.8)pp 14.1% 13.9% 13.7% 14.6% 14.2% 14.1%
UK leverage ratio 5.5% 5.5% 5.4% 5.6% 5.8% 5.7% 5.7% 5.6%
Risk-weighted assets £224.6bn £223.3bn 1 £222.0bn £222.8bn £219.1bn £217.7bn £215.3bn £210.9bn
Wholesale funding £92.5bn £93.3bn (1) £97.6bn £99.9bn £98.7bn £108.5bn £103.5bn £101.1bn
Liquidity coverage ratio(3) 146% 144% 2pp 144% 143% 142% 142% 142% 143%
Net stable funding ratio(4) 129% 129% 130% 130% 130% 130% 130% 129%
Tangible net assets per share(A) 52.4p 52.5p (0.1)p 49.6p 51.2p 50.8p 47.2p 45.7p 49.6p
(1) The increases between 31 March 2024 and 30 June 2024 and between 30
September 2024 and 31 December 2024 are net of the impact of the
securitisations of primarily legacy Retail mortgages, of £0.9 billion and
£1.0 billion respectively. The reduction between 30 September 2023 and 31
December 2023 is net of the impact of the securitisation of £2.7 billion of
UK Retail unsecured loans.
(2 ) 31 December 2023 and 31 December 2024 reflect both the full impact
of the share buybacks announced in respect of 2023 and 2024 and the ordinary
dividends received from the Insurance business in February 2024 and February
2025.
(3) The liquidity coverage ratio is calculated as a simple average of
month-end observations over the previous 12 months.
(4) The net stable funding ratio is calculated as a simple average of
month-end observations over the previous four quarter-ends.
BALANCE SHEET ANALYSIS
At 31 Dec 2024 At 30 Sep 2024 Change At 30 Jun Change At 31 Dec Change
£bn
£bn
2023
% 2024 %
£bn %
£bn
UK mortgages(1,2) 312.3 310.1 1 306.9 2 306.2 2
Credit cards 15.7 15.7 15.6 1 15.1 4
UK Retail unsecured loans 9.1 8.8 3 8.2 11 6.9 32
UK Motor Finance(3) 15.3 15.6 (2) 16.2 (6) 15.3
Overdrafts 1.2 1.1 9 1.0 20 1.1 9
Retail other(1,4) 17.9 17.3 3 17.2 4 16.6 8
Business and Commercial Banking(5) 29.7 30.7 (3) 31.5 (6) 33.0 (10)
Corporate and Institutional Banking 57.9 57.2 1 56.6 2 55.6 4
Central Items(6) - 0.5 (0.8) (0.1)
Underlying loans and advances to customers(A) 459.1 457.0 452.4 1 449.7 2
Retail current accounts 101.3 100.6 1 101.7 102.7 (1)
Retail savings accounts(7) 208.2 204.3 2 201.5 3 194.8 7
Wealth 10.2 10.1 1 10.1 1 10.9 (6)
Commercial Banking 162.6 160.7 1 161.2 1 162.8
Central Items 0.4 - 0.2 0.2
Customer deposits 482.7 475.7 1 474.7 2 471.4 2
Total assets 906.7 900.8 1 892.9 2 881.5 3
Total liabilities 860.8 854.4 1 847.8 2 834.1 3
Ordinary shareholders' equity 39.5 40.3 (2) 39.0 1 40.3 (2)
Other equity instruments 6.2 5.9 5 5.9 5 6.9 (10)
Non-controlling interests 0.2 0.2 0.2 0.2
Total equity 45.9 46.4 (1) 45.1 2 47.4 (3)
Ordinary shares in issue, excluding own shares 60,491m 61,419m (2) 62,458m (3) 63,508m (5)
(1) From the first quarter of 2024, open mortgage book and closed mortgage
book loans and advances, previously presented separately, are reported
together as UK mortgages; Wealth loans and advances, previously reported
separately, are included within Retail other. The 31 December 2023
comparative is presented on a consistent basis.
(2) The increases between 31 December 2023 and 30 June 2024 and between 30
September 2024 and 31 December 2024 are net of the impact of the
securitisations of primarily legacy Retail mortgages of £0.9 billion and
£1.0 billion respectively.
(3) UK Motor Finance balances on an underlying basis(A) exclude a finance
lease gross up. See page 27.
(4) Within underlying loans and advances, Retail other includes the European
and Wealth businesses.
(5) Previously named Small and Medium Businesses.
(6) Central Items includes central fair value hedge accounting adjustments.
(7) From the first quarter of 2024, Retail relationship savings accounts and
Retail tactical savings accounts, previously reported separately, are reported
together as Retail savings accounts. The 31 December 2023 comparative is
presented on a consistent basis.
GROUP RESULTS - STATUTORY BASIS
The results below are prepared in accordance with the recognition and
measurement principles of IFRS(®) Accounting Standards. The underlying
results are shown on page 3.
Summary income statement 2024 2023 Change
£m £m %
Net interest income 12,277 13,298 (8)
Other income 22,004 22,107
Total income 34,281 35,405 (3)
Net finance expense in respect of insurance and investment contracts (16,278) (16,776) 3
Total income, after net finance expense in respect of insurance and investment 18,003 18,629 (3)
contracts
Operating expenses (11,601) (10,823) (7)
Impairment charge (431) (303) (42)
Profit before tax 5,971 7,503 (20)
Tax expense (1,494) (1,985) 25
Profit after tax 4,477 5,518 (19)
Profit attributable to ordinary shareholders 3,923 4,933 (20)
Profit attributable to other equity holders 498 527 (6)
Profit attributable to non-controlling interests 56 58 (3)
Profit after tax 4,477 5,518 (19)
Ordinary shares in issue (weighted-average - basic) 62,413m 64,953m (4)
Basic earnings per share 6.3p 7.6 p (1.3)p
Summary balance sheet At 31 Dec At 31 Dec Change
2024 2023 %
£m £m
Assets
Cash and balances at central banks 62,705 78,110 (20)
Financial assets at fair value through profit or loss 215,925 203,318 6
Derivative financial instruments 24,065 22,356 8
Financial assets at amortised cost 531,777 514,635 3
Financial assets at fair value through other comprehensive income 30,690 27,592 11
Other assets 41,535 35,442 17
Total assets 906,697 881,453 3
Liabilities
Deposits from banks 6,158 6,153
Customer deposits 482,745 471,396 2
Repurchase agreements at amortised cost 37,760 37,703
Financial liabilities at fair value through profit or loss 27,611 24,914 11
Derivative financial instruments 21,676 20,149 8
Debt securities in issue at amortised cost 70,834 75,592 (6)
Liabilities arising from insurance and participating investment contracts 122,064 120,123 2
Liabilities arising from non-participating investment contracts 51,228 44,978 14
Other liabilities 30,644 22,827 34
Subordinated liabilities 10,089 10,253 (2)
Total liabilities 860,809 834,088 3
Total equity 45,888 47,365 (3)
Total equity and liabilities 906,697 881,453 3
GROUP CHIEF EXECUTIVE'S STATEMENT
2024 was a significant year for the Group. We continued to fulfil our purpose
of Helping Britain Prosper, supporting our customers, shareholders and wider
stakeholders. We have successfully completed the first chapter of our
ambitious purpose-driven strategy. Our transformation is delivering at pace
with tangible progress on building our franchise and enhancing our change
capabilities, leveraging data and technology to drive both growth and
efficiency. We are significantly enhancing our customer propositions across
the Group and returning the business to growth. These developments and
continued business momentum position us well to deliver stronger, more
sustainable returns as we head into the next phase of our strategy.
Alongside our strategic progress, we delivered a robust financial performance
in 2024. As expected, income grew in the second half of the year, supported by
a rising banking net interest margin, lending growth and momentum in other
income. We have maintained discipline on costs, despite the inflationary
backdrop. Asset quality remains strong.
In the fourth quarter we took an additional £700 million provision for the
potential remediation costs relating to motor finance commission arrangements.
This is in light of the Court of Appeal judgment on Wrench, Johnson and
Hopcraft that goes beyond the scope of the original FCA motor finance
commissions review. The provision reflects a probability weighted scenario
based methodology incorporating a number of inputs. Clearly significant
uncertainty remains around the final financial impact. In this context we
welcome the expedited Supreme Court hearing at the beginning of April.
Despite the additional provision for motor finance commission arrangements we
remain highly committed to shareholder distributions. Our robust performance
and strong capital position and generation has enabled the Board to recommend
a final ordinary dividend of 2.11 pence per share, resulting in a total
dividend for the year of 3.17 pence. This is up 15 per cent on the prior
year, in line with our progressive and sustainable ordinary dividend policy.
In addition, the Group has announced its intention to implement a share
buyback programme of up to £1.7 billion, as we continue to distribute excess
capital to shareholders. This is in line with our target to pay down to 13.5
per cent CET1 ratio by the end of 2024.
We are building momentum as we now move into the second phase of our strategic
plan. We are continuing to create innovative new products for our customers.
More broadly, as the largest UK bank, the successful execution of our
purpose-driven strategy is helping to meet commitments across key societal
challenges such as infrastructure, energy transition, housing and pensions.
Our talented colleagues are critical to our transformation and I am very
pleased to see engagement increase in 2024 in the context of a period of
significant change.
Robust financial performance and consistent delivery
As said, the Group delivered a robust financial performance in 2024. Statutory
profit after tax was £4.5 billion. Underlying profit was £6.3 billion with
net income down 5 per cent, operating costs up 3 per cent and higher
remediation and underlying impairment charges. Robust net income of £17.1
billion included a resilient banking net interest margin of 2.95 per cent, in
line with guidance, and 9 per cent growth in underlying other income, offset
by higher operating lease depreciation. Operating costs of £9.4 billion, in
line with guidance, reflected cost efficiencies helping to partially offset
inflationary pressures, business growth costs and ongoing strategic
investment. Remediation costs of £899 million in the year (2023: £675
million), include the £700 million previously referenced in relation to motor
finance, alongside £199 million charges in relation to pre-existing
programmes. We continue to see strong asset quality, with improved credit
performance in the year. The asset quality ratio, including the benefit from
improved economic assumptions, was 10 basis points. Overall, this resulted in
a return on tangible equity of 12.3 per cent, or 14.0 per cent excluding the
motor finance provision.
As evidence of the strength of our franchise, the Group's balance sheet grew
in the year, with underlying loans and advances to customers increasing by
£9.4 billion to £459.1 billion. This reflected growth across Retail,
including mortgages and unsecured loans. Customer deposits of £482.7 billion
significantly increased in the year, by £11.3 billion, including growth in
Retail deposits of £11.3 billion alongside stable Commercial Banking
deposits.
The Group delivered strong capital generation of 148 basis points (177 basis
points excluding the motor finance provision) and a pro forma CET1 ratio of
13.5 per cent. This is after £3.6 billion of shareholder distributions
including an increased ordinary dividend and further announced share buyback
of up to £1.7 billion.
Guiding purpose of Helping Britain Prosper
We have an important role to play in creating a more sustainable and inclusive
future for people and businesses across the UK, shaping finance as a force for
good. Our purpose is evident across our franchise in all of our business areas
as we seek to help our customers realise their financial ambitions. It is also
highlighted in particular areas where we can drive positive change at scale,
creating value for all of our stakeholders.
GROUP CHIEF EXECUTIVE'S STATEMENT (continued)
As a leading commercial supporter of social housing, we are working to help
every UK household access quality and affordable housing. As part of this
journey, we are calling for 1 million affordable new homes by the end of the
decade. Since 2018 we have supported around £20 billion of funding to the
social housing sector. Alongside, our colleagues have raised over £3 million
since we started our partnership with the housing charity Crisis.
Given our importance to the UK economy, we are deeply involved in supporting a
more sustainable future by supporting the UK transition to net zero. Our
strategy to progress to net zero by 2050 represents a strategic and commercial
opportunity, consistent with our purpose of Helping Britain Prosper. In 2024,
we continued to support customers in their transition as well as making strong
progress against our sustainability goals. Since 2022 we have completed
£11.4 billion of EPC A and B mortgage lending, compared to our original
target of £10 billion, and delivered more than £9 billion of financing and
leasing for EVs. In Insurance, Pensions & Investments (IP&I) we met
our cumulative target of investing £20 to £25 billion in climate-aware
strategies a year early. In Commercial Banking we delivered £10.7 billion of
sustainable financing in 2024, in line with our target of £30 billion from
2024 to 2026.
Moving forward, we continue to challenge ourselves. We have set new targets
for a further £11 billion of EPC A and B mortgages and £10 billion of EV
financing by 2027. Alongside, we continue to work on the decarbonisation of
our business as we work to achieve net zero in our own operations by 2030.
First phase of purpose-driven strategy complete, building strong momentum
Our vision is to become a customer-focused digital leader and integrated
financial services provider, able to capitalise on new opportunities at scale.
This will drive higher, more sustainable returns for our shareholders.
In 2024 we completed the first chapter of our strategic plan, returning the
business to growth and generating £0.8 billion of additional revenues from
our strategic initiatives, surpassing our target of c.£0.7 billion. Our
strategy has helped support almost £2 billion of net income growth from 2021
to 2024. We have maintained discipline on costs, with £1.2 billion of gross
cost savings helping to offset higher investments and inflationary pressures.
We have also de-risked the business and reduced claims on capital by, for
example, addressing the pension deficit, securitising legacy higher risk
mortgage assets and dealing with significant in default situations. We have
transformed our capabilities by modernising our technology estate and
radically reforming our operations function to deliver more change more
efficiently.
When we launched the strategy we committed to a number of 2024 strategic
outcomes to support our ambitions and evidence our progress. We have
successfully delivered on these targets, meeting around 80 per cent of them,
with a significant proportion materially ahead of the original target. For
example, since 2021 we have increased depth of relationship by 5 per cent and
grown our Corporate and Institutional Banking (CIB) other income by more than
30 per cent, versus our original target of more than 20 per cent. We have
grown in high-value areas, with more than 15 per cent growth in Mass Affluent
banking balances. We have remained focused on cost efficiency, reducing legacy
applications by 17.5 per cent and our office footprint by more than 30 per
cent. We are enabling the franchise, having migrated around 50 per cent of
applications onto the cloud and reduced data centres by more than 30 per cent.
Delivering broad-based growth
Business growth has been achieved through a number of levers. We have grown
the core franchise, increasing our flow share in mortgages and improving our
share of balances in Retail current accounts. We have deepened relationships
with existing customers, transforming engagement through new and enhanced
propositions, such as in investments and mass affluent, enabling us to meet
more of our customers' needs. We are growing in high-value areas, including
targeted sectors within Commercial Banking such as infrastructure. We are
driving cross-Group collaboration by connecting customers with offerings
across our franchise for example increased protection penetration in mortgage
new business.
Growth has been facilitated by leveraging our digital leadership. This starts
with our refreshed mobile app that, with over 20 million users and over 6
billion annual logins, up by 50 per cent since 2021, creates a platform for
innovative new propositions that drive a competitive advantage. For example,
Your Credit Score now has over 11 million users and has helped over
780,000 customers improve their credit score in 2024. It has also enabled the
pre-approval of customers for different forms of credit, significantly
improving our loan conversion rate by 15 per cent. Ready-Made Investments is
another example of a new proposition gaining strong traction with our
customers. The investment tool is bespoke to each customer's risk appetite and
makes investing easier and more accessible. We are seeing great take-up,
particularly among younger generations, with around 40 per cent of customers
under the age of 35.
The successful execution of our first strategic phase means we exceeded our
target and delivered £0.8 billion of additional income from strategic
initiatives by 2024. We are building momentum as we aim to unlock further
growth in the period to 2026. We are now targeting over £1.5 billion of
additional strategic initiative income by 2026, of which half will be other
income.
GROUP CHIEF EXECUTIVE'S STATEMENT (continued)
As part of our ambition, in Retail we will deliver market leading customer
journeys and expanded propositions, while continuing to accelerate the shift
to mobile-first by creating more personalised digital experiences. By 2026 we
aim to further improve customer depth of relationship by 3 per cent versus
2024. We will continue to target high-value areas, growing Mass Affluent total
relationship balances by more than 10 per cent. In Retail lending we will
continue to enhance our homes proposition, including by retaining £8.5
billion mortgages in 2026 through our innovative homes ecosystem, alongside
expanding our unsecured offering and maintaining our Transport market share at
more than 15 per cent.
In Commercial we will further broaden CIB solutions, meeting more transaction
banking and market needs with continued balance sheet discipline. We are
targeting CIB other income growth of around 45 per cent by 2026 versus 2021.
In Business and Commercial Banking (BCB) we are aiming to build the best
digitally led relationship bank. By scaling digital servicing we will maintain
deposit share and grow in valuable sectors with broader needs, such as
manufacturing, driving a more than 10 per cent increase in transaction banking
and working capital income by 2026.
In IP&I we are unlocking the potential of the bancassurance model to
deliver innovative digital solutions and expanded propositions. We aim to
scale our digital waterfront to over 1.5 million customers by 2026, whilst
improving Group connectivity to drive growth in high-value areas, such as
ranking in the top three for Protection by 2025 and growing Workplace AuA. In
our Equity Investments business we are continuing to invest in fast growing UK
SMEs through LDC's unique model. We are also supporting the UK rental sector
by scaling Lloyds Living, our homes rental business.
Transforming capabilities to drive growth and operating leverage
In order to deliver our growth ambitions, our strategy is to maximise the
potential of our people, technology and data. We have hired more than 4,000
colleagues across data and tech who are accelerating our technology
modernisation. This transformation of capabilities is unlocking operating
leverage and helped us deliver the £1.2 billion of targeted gross cost
savings, including around £300 million of change efficiencies. For example,
improvements in digital servicing mean that more than 70 per cent of new
Business Banking and SME lending decisions are now automated. As a further
example of productivity enhancement we increased the number of active
customers served per FTE by more than 30 per cent.
Looking forward, we will continue to hire new engineering talent, scale cloud
adoption and accelerate decommissioning activity. This will allow us to
continue to adopt new technologies that deliver a step-change in our
capabilities. This includes our aspirations for Gen AI, for which we have
created a centre of excellence including around 200 data scientists and
engineers. We are developing use cases such as our knowledge support tool
currently being rolled out to 10,000 colleagues across the Group and an
AI-driven money management tool for our Mass Affluent customers. These
initiatives will generate further efficiencies as well as create opportunities
for growth. Together, they drive operating leverage, helping towards our
target of a cost:income ratio of less than 50 per cent by 2026.
We are making strong progress on our purpose-led strategy. We have generated
£0.8 billion of additional revenues from strategic initiatives as we return
the business to growth. We are transforming our franchise through innovative
propositions and enhanced capabilities. This gives us confidence in further
business growth and our ambition to generate more than £1.5 billion in
additional income from our strategic initiatives by 2026 whilst remaining
disciplined around costs and capital. We are progressing well towards
delivering higher, more sustainable returns for shareholders.
2025 guidance
Based on our current macroeconomic assumptions, for 2025 the Group expects:
• Underlying net interest income of c.£13.5 billion
• Operating costs of c.£9.7 billion
• Asset quality ratio of c.25 basis points
• Return on tangible equity of c.13.5 per cent
• Capital generation of c.175 basis points(1)
2026 guidance
Based on the expected macroeconomic environment and confidence in our
strategy, the Group maintains its guidance for 2026:
• Cost:income ratio of less than 50 per cent
• Return on tangible equity of greater than 15 per cent
• Capital generation of greater than 200 basis points(1)
• To pay down to a CET1 ratio of c.13.0 per cent
(1) Excluding capital distributions. Inclusive of ordinary dividends
received from the Insurance business in February of the following year.
SUMMARY OF GROUP RESULTS(A)
Statutory results
The Group's profit before tax for 2024 was £5,971 million, 20 per cent lower
than in 2023. This was driven by lower total income, higher operating expenses
and a higher impairment charge. Profit after tax was £4,477 million and
earnings per share was 6.3 pence (2023: £5,518 million and 7.6 pence
respectively).
Total income, after net finance expense in respect of insurance and investment
contracts for 2024 was £18,003 million, a decrease of 3 per cent on 2023.
Within this, net interest income of £12,277 million was down 8 per cent on
the prior year, driven by a lower margin. The margin performance over the year
reflected anticipated headwinds due to deposit churn and asset margin
compression, particularly in the mortgage book as it refinances in a lower
margin environment. These factors were partially offset by benefits from
higher structural hedge earnings as balances are reinvested in the higher rate
environment.
Other income amounted to £22,004 million in 2024, broadly in line with 2023.
Within other income, net trading income was £17,825 million compared to
£18,049 million in 2023. Within the Group's insurance activities, net trading
income was £16,013 million in 2024 (2023: £16,742 million), a decrease of
£729 million largely reflecting less favourable market performance in 2024.
Within the Group's banking activities, net trading income was £1,812 million
(2023: £1,307 million) with growth in Commercial Banking driven by strong
markets performance and higher levels of client activity. Outside of net
trading income within Retail, there was improved performance in UK Motor
Finance, with growth following the acquisition of Tusker in 2023 and higher
average vehicle rental values. Net fee and commission income was
£1,759 million compared to £1,831 million in 2023. The £729 million
decrease in net trading income within the Group's insurance activities was
largely offset by the £498 million decrease in net finance expense in respect
of insurance and investment contracts.
Total operating expenses of £11,601 million were 7 per cent higher than in
the prior year. This reflects higher operating lease depreciation, as a
result of fleet growth, the depreciation of higher value vehicles and
declines in used electric car prices, primarily in the
first half, alongside inflationary pressures, business growth costs and
ongoing strategic investments including severance. It also includes
c.£0.1 billion relating to the sector-wide change in the charging approach
for the Bank of England Levy taken in the first quarter, largely offset across
the year in net interest income. The Group has maintained its cost discipline
with cost efficiencies partly offsetting these items. In 2024, the Group
recognised remediation costs of £899 million (2023: £675 million),
including a £700 million provision in relation to the potential impact of
motor finance commission arrangements, alongside £199 million charges in
relation to pre-existing programmes.
Asset quality remains strong with improved credit performance in the year. The
impairment charge was £431 million compared to a £303 million charge in
2023 (which benefitted from a significant write-back following the full
repayment of debt from a single name client). The charge in 2024 includes a
credit from an improved economic outlook, notably house price growth and
changes in the first half of the year to the severe downside scenario
methodology. The charge also benefitted from strong portfolio performance and
the release of judgemental adjustments for inflation and interest rate risks
in 2024, as well as a release in Commercial Banking from loss rates used in
the model in the first half of the year and a debt sale write back in Retail
in the third quarter.
The Group saw good lending growth in 2024 with loans and advances to customers
increasing by £10.2 billion to £459.9 billion. This included £6.1 billion
growth in UK mortgages (net of the impact of the securitisation of
£1.9 billion of primarily legacy Retail mortgages in the second and fourth
quarters), £2.2 billion growth in UK Retail unsecured loans driven by
organic balance growth and lower repayments following a securitisation in the
fourth quarter of 2023, alongside a £0.6 billion increase in credit card
balances and growth in other Retail lending (principally in the European
retail business). In Commercial Banking, Business and Commercial Banking
lending decreased by £3.3 billion, including repayments of £1.6 billion of
government-backed lending. Corporate and Institutional Banking balances
increased £2.3 billion from strategic growth, notably higher infrastructure
lending.
Customer deposits of £482.7 billion significantly increased in the year by
£11.3 billion. Retail deposits were up £11.3 billion in the year driven by
inflows to limited withdrawal and fixed term deposits, partly offset by a
£1.4 billion reduction in current account balances. Commercial Banking
deposits were stable in the year, reflecting growth in target sectors offset
by an expected outflow in the third quarter.
Total equity of £45.9 billion at 31 December 2024 decreased from £47.4
billion at 31 December 2023. The movement reflected attributable profit for
the year and issuance of an AT1 capital instrument in October 2024, which was
more than offset by the dividends paid in May 2024 and September 2024, the
impact of redemption of AT1 capital instruments in June 2024 and December 2024
and the impact of the share buyback programme in respect of 2023.
SUMMARY OF GROUP RESULTS (continued)
Income statement (underlying basis)(A)
The Group's underlying profit was £6,343 million in 2024, a reduction of 19
per cent compared to £7,809 million in the prior year with lower net income,
higher operating costs and higher remediation and underlying impairment
charges. Underlying profit of £993 million in the fourth quarter was down 46
per cent compared to the third quarter of 2024, with net income slightly up,
more than offset by higher operating costs, including the annual Bank Levy and
a charge for the potential impacts of motor finance commission arrangements.
Net income(A)
2024 2023 Change
£m
£m %
Underlying net interest income 12,845 13,765 (7)
Underlying other income 5,597 5,123 9
Operating lease depreciation(1) (1,325) (956) (39)
Net income(A) 17,117 17,932 (5)
Banking net interest margin(A) 2.95% 3.11% (16)bp
Average interest-earning banking assets(A) £451.2bn £453.3bn
(1) Net of profits on disposal of operating lease assets of £59 million (31
December 2023: £93 million).
(
)
Net income of £17,117 million was down 5 per cent on 2023, driven by lower
underlying net interest income and an increased charge for operating lease
depreciation. This was partly offset by higher underlying other income. Net
income in the fourth quarter of 2024 was slightly up on the third quarter,
building on the growth seen in the third quarter.
Underlying net interest income of £12,845 million was down 7 per cent on
2023, with a resilient banking net interest margin of 2.95 per cent (2023:
3.11 per cent), compared to guidance of greater than 2.90 per cent,
benefitting from fewer than expected UK Bank Rate cuts, the change in charging
approach for the Bank of England Levy, solid deposit volumes and the
structural hedge contribution. The margin performance over the year reflected
anticipated headwinds due to deposit churn and asset margin compression,
particularly in the mortgage book as it refinances in a lower margin
environment. These factors were partially offset by benefits from higher
structural hedge earnings as balances are reinvested in the higher rate
environment. Average interest-earning banking assets in 2024 of
£451.2 billion were in line with guidance and broadly stable versus 2023.
This includes growth across Retail products partly offset by the impact of
securitisations, alongside a reduction in Commercial Banking assets, which
included continued repayments of government-backed lending in Business and
Commercial Banking and lower lending to banks. Underlying net interest income
in 2024 included a non-banking net interest expense of £469 million (2023:
£311 million), increasing as a result of higher funding costs and growth in
the Group's non-banking businesses.
Underlying net interest income of £3,276 million in the fourth quarter of
2024 was 1 per cent higher than in the third quarter (three months to
30 September 2024: £3,231 million), building on growth in the third quarter.
Growth in structural hedge earnings more than offset the impact from the
expected continuation of headwinds in respect of deposit churn and asset
margin compression, resulting in an increase in banking net interest margin to
2.97 per cent in the fourth quarter (three months to 30 September 2024: 2.95
per cent). Average interest-earning banking assets were £455.1 billion, up on
the third quarter from growth in UK mortgages, Retail unsecured loans and
Corporate and Institutional Banking. The non-banking net interest expense was
in line with the third quarter. Looking forward, the Group expects the
underlying net interest income for 2025 to be c.£13.5 billion.
The Group manages the risk to earnings and capital from movements in interest
rates by hedging the net liabilities which are stable or less sensitive to
movements in rates. At the end of the fourth quarter, the notional balance of
the sterling structural hedge was maintained at £242 billion (31 December
2023: £247 billion) with a weighted average duration of approximately
three-and-a-half years (31 December 2023: approximately three-and-a-half
years). This is consistent with the balance at the end of the second and third
quarters of 2024 (30 September 2024: £242 billion, 30 June 2024:
£242 billion), given stability in deposit flows. The Group generated
£4.2 billion of total income from sterling structural hedge balances in
2024, representing material growth over the prior year
(2023: £3.4 billion). The Group expects sterling structural hedge earnings
in 2025 to be £1.2 billion higher than in 2024 and £1.5 billion higher in
2026 than in 2025.
SUMMARY OF GROUP RESULTS (continued)
Underlying other income in 2024 of £5,597 million grew by 9 per cent (2023:
£5,123 million). Retail was up 10 per cent versus 2023, primarily due to UK
Motor Finance, including growth following the acquisition of Tusker in 2023
and higher average vehicle rental values. Within Commercial Banking growth of
8 per cent was driven by strong markets performance as a result of strategic
investment and higher levels of client activity. Insurance, Pensions and
Investments underlying other income grew by 7 per cent compared to 2023
driven by strong trading and higher general insurance income net of claims and
after the disposal of the in-force bulk annuities portfolio. In Equity
Investments and Central Items, underlying other income was up 50 per cent on
the prior year, driven by strong income growth from Lloyds Living. Underlying
other income in the fourth quarter was 11 per cent higher than the fourth
quarter of 2023 with growth across divisions.
The Group delivered organic growth in assets under administration (AuA) in
Insurance, Pensions and Investments and Wealth (reported within Retail), with
combined £5.7 billion net new money in open book AuA over 2024. In total,
open book AuA stand at c.£201 billion at 31 December 2024.
Operating lease depreciation of £1,325 million increased compared to the
prior year (2023: £956 million), as a result of fleet growth,
the depreciation of higher value vehicles and declines in used electric car
prices, primarily in the first half. The increase in 2024 includes the
c.£100 million additional charge taken in the second quarter to reflect
revised future expected residual values. The charge in the fourth quarter was
£331 million, consistent with expectations, given used car prices have
performed in line with assumptions.
Total costs(A)
2024 2023 Change
£m £m %
Operating costs(A) 9,442 9,140 (3)
Remediation 899 675 (33)
Total costs(A) 10,341 9,815 (5)
Cost:income ratio(A) 60.4% 54.7% 5.7pp
Total costs, including remediation, of £10,341 million were 5 per cent higher
than the prior year, with operating costs of £9,442 million up 3 per cent.
Operating costs include c.£0.1 billion relating to the sector-wide change in
the charging approach for the Bank of England Levy taken in the first quarter.
Excluding the Levy, operating costs were up 2 per cent. The Group has
maintained its cost discipline with cost efficiencies helping to partially
offset inflationary pressures, business growth costs and ongoing strategic
investments including severance.
Operating costs in 2025 are expected to be c.£9.7 billion, including
further increased severance and the impact from National Insurance
contributions changes (c.£0.1 billion).
The Group recognised remediation costs of £899 million in 2024 (2023:
£675 million), with £775 million in the fourth quarter, including an
additional £700 million in relation to the potential impact of motor finance
commission arrangements in light of the Court of Appeal (CoA) judgment in
relation to Wrench, Johnson and Hopcraft (WJH) in October 2024, which goes
beyond the scope of the original FCA motor finance commissions review. The
Supreme Court granted the relevant lenders permission to appeal the WJH
judgment and the substantive hearing is scheduled to be heard on 1 April to 3
April 2025. The total £1,150 million provision, including £450 million
provided in 2023, represents the Group's best estimate of the potential
impact, including both redress and operational costs, but notes that there is
a significant level of uncertainty in terms of the final outcome. As a result,
the final financial impact could differ materially to the amount provided.
The Group's cost:income ratio for 2024 was 60.4 per cent compared to
54.7 per cent in the prior year, and 73.7 per cent in the fourth quarter
impacted by the provision charge for motor finance commission arrangements and
the Bank Levy.
SUMMARY OF GROUP RESULTS (continued)
Underlying impairment(A)
2024 2023 Change
£m
£m %
Charges (credits) pre-updated MES(1)
Retail 789 1,064 26
Commercial Banking 48 (487)
Other (10) (12) (17)
827 565 (46)
Updated economic outlook (MES)
Retail (332) (233) 42
Commercial Banking (62) (24)
(394) (257) 53
Underlying impairment charge(A) 433 308 (41)
Asset quality ratio(A) 0.10% 0.07% 3bp
(1) Impairment charges excluding the impact from updated economic outlook
(multiple economic scenarios, MES) taken each quarter.
(
)
Asset quality remains strong with improved credit performance in the year.
Underlying impairment was a charge of £433 million (2023: £308 million),
resulting in an asset quality ratio of 10 basis points. The charge reflects a
£394 million multiple economic scenarios (MES) credit (2023: £257 million
credit) from an improved economic outlook, notably house price growth and
changes in the first half of the year to the severe downside scenario
methodology. The charge in the fourth quarter of £160 million includes a £70
million MES credit.
The pre-updated MES charge of £827 million is equivalent to an asset quality
ratio of 19 basis points. This is higher than the prior year pre-updated MES
charge of £565 million, which benefitted from a significant write-back
following the full repayment of debt from a single name client. The charge in
2024 benefitted from strong portfolio performance and the release of
judgemental adjustments for inflation and interest rate risks in 2024, as well
as a one-off release in Commercial Banking from loss rates used in the model
in the first half of the year and a one-off debt sale write back in Retail in
the third quarter. In the fourth quarter, the pre-updated MES charge was
£230 million, equating to 20 basis points. Looking forward, the Group expects
the asset quality ratio to be c.25 basis points in 2025.
SUMMARY OF GROUP RESULTS (continued)
Restructuring, volatility and other items
2024 2023 Change
£m
£m %
Underlying profit 6,343 7,809 (19)
Restructuring (40) (154) 74
Market volatility and asset sales (144) 35
Amortisation of purchased intangibles (81) (80) (1)
Fair value unwind (107) (107)
Volatility and other items (332) (152)
Statutory profit before tax 5,971 7,503 (20)
Tax expense (1,494) (1,985) 25
Statutory profit after tax 4,477 5,518 (19)
Earnings per share 6.3p 7.6p (1.3)p
Return on tangible equity(A) 12.3% 15.8% (3.5)pp
At 31 Dec 2024 At 31 Dec 2023 Change
%
Tangible net assets per share(A) 52.4p 50.8p 1.6p
Restructuring costs during 2024 were £40 million (2023: £154 million) and
include costs relating to the integration of Embark and Tusker as well as
those related to a contract termination. Volatility and other items were a net
loss of £332 million for the year (2023: net loss of £152 million). This
included £81 million for the amortisation of purchased intangibles (2023:
£80 million) and £107 million relating to fair value unwind (2023:
£107 million). Negative market volatility of £144 million (2023: positive
volatility of £35 million) was substantially driven by longer-term rate rises
in the period, driving negative insurance volatility, partly offset by
positive impacts from banking volatility. The fourth quarter volatility and
other items charge of £150 million, was primarily driven by insurance
volatility including from movements in interest rates.
The return on tangible equity for 2024 was 12.3 per cent (2023: 15.8 per
cent), with 7.1 per cent in the fourth quarter reflecting the provision charge
in relation to the potential impacts of motor finance commission arrangements.
Excluding this impact, the return on tangible equity was 14.0 per cent in 2024
and 13.9 per cent in the fourth quarter. The Group expects the return on
tangible equity for 2025 to be c.13.5 per cent.
Tangible net assets per share at 31 December 2024 was 52.4 pence, up 1.6 pence
in the year (31 December 2023: 50.8 pence). The increase resulted from
attributable profit and a reduction in the number of shares following the
share buyback programme announced in February 2024. This was offset by
capital distributions, a lower pension surplus from negative market impacts
and the foreign exchange impact on the redemption of a US dollar denominated
AT1 capital instrument. Tangible net assets per share was down 0.1 pence in
the fourth quarter. The decrease was due to increased long-term rates
impacting the cash flow hedge reserve and pension surplus, partly offset by
attributable profit, impacted by the provision charge relating to motor
finance commission arrangements.
In February 2024, the Board decided to return surplus capital in respect of
2023 through a share buyback programme of up to £2.0 billion. This commenced
on 23 February 2024 and completed on 13 November 2024 with c.3.7 billion (c.6
per cent) ordinary shares repurchased.
Tax
The Group recognised a tax expense of £1,494 million in the year (2023:
£1,985 million). This reflected lower profits than the prior year and tax
credits of £100 million on the finalisation of prior year returns within the
fourth quarter charge of £124 million. The Group expects a medium-term
effective tax rate of around 27 per cent based on the banking surcharge rate
of 3 per cent and the corporation tax rate of 25 per cent. An explanation of
the relationship between the tax expense and the Group's accounting profit for
the year is set out on page 55.
SUMMARY OF GROUP RESULTS (continued)
Balance sheet
At 31 Dec At 31 Dec Change
2024
2023
%
Underlying loans and advances to customers(A) £459.1bn £449.7bn 2
Customer deposits £482.7bn £471.4bn 2
Loan to deposit ratio(A) 95% 95%
Wholesale funding(1) £92.5bn £98.7bn (6)
Wholesale funding <1 year maturity(1) £31.3bn £35.1bn (11)
of which: money market funding <1 year maturity(1) £16.9bn £23.8bn (29)
Liquidity coverage ratio - eligible assets(2) £134.4bn £136.0bn (1)
Liquidity coverage ratio(3) 146% 142% 4pp
Net stable funding ratio(4) 129% 130% (1)pp
Total underlying expected credit loss allowance (at end of period)(A) £3,651m £4,337m (16)
(1) Excludes balances relating to margins of £2.8 billion (31 December
2023: £2.4 billion).
(2) Eligible assets are calculated as a monthly rolling simple average of
month end observations over the previous 12 months post any liquidity
haircuts.
(3) The liquidity coverage ratio is calculated as a simple average of
month-end observations over the previous 12 months.
(4) The net stable funding ratio is calculated as a simple average of
month-end observations over the previous four quarter-ends.
(
)
The Group saw good lending growth in 2024 with underlying loans and advances
to customers increasing by £9.4 billion to £459.1 billion. This included
£6.1 billion growth in UK mortgages (net of the impact of the securitisation
of £1.9 billion of primarily legacy Retail mortgages in the second and
fourth quarters), £2.2 billion growth in UK Retail unsecured loans driven by
organic balance growth and lower repayments following a securitisation in the
fourth quarter of 2023, alongside a £0.6 billion increase in credit card
balances and growth in other Retail lending (principally in the European
retail business). In Commercial Banking, Business and Commercial Banking
lending decreased by £3.3 billion, including repayments of £1.6 billion of
government-backed lending. Corporate and Institutional Banking balances
increased £2.3 billion from strategic growth, notably higher infrastructure
lending. Growth of £2.1 billion in underlying loans and advances to
customers in the fourth quarter included £2.2 billion in UK mortgages (net of
the £1.0 billion impact from a securitisation) and stable Commercial Banking
balances.
Customer deposits of £482.7 billion significantly increased in the year by
£11.3 billion, including £7.0 billion in the fourth quarter. Retail
deposits were up £11.3 billion in the year driven by inflows to limited
withdrawal and fixed term deposits, partly offset by a £1.4 billion reduction
in current account balances (significantly lower than the prior year, as
expected). In the fourth quarter, Retail current account balances increased by
£0.7 billion in contrast to a £1.1 billion reduction in the third quarter
helped by calendar timing impacts. Deposit churn observed within savings and
between savings and current accounts was lower in 2024 than in 2023 and lower
in the second half of 2024 than in the first half. Commercial Banking deposits
were stable in the year, reflecting growth in target sectors offset by an
expected outflow in the third quarter. The increase in Commercial Banking
deposits in the fourth quarter of £1.9 billion reflected growth in target
sectors alongside foreign exchange impacts.
The Group has a large, high quality liquid asset portfolio held mainly in cash
and government bonds, with all assets hedged for interest rate risk. The
Group's liquid assets continue to significantly exceed regulatory requirements
and internal risk appetite, with a strong, stable liquidity coverage ratio of
146 per cent (31 December 2023: 142 per cent) and a strong net stable funding
ratio of 129 per cent (31 December 2023: 130 per cent). The loan to deposit
ratio of 95 per cent, broadly stable compared to 31 December 2023 and 30
September 2024, continues to reflect a robust funding and liquidity position.
The underlying expected credit loss (ECL) allowance reduced to £3.7 billion
(31 December 2023: £4.3 billion) in the period, reflecting releases driven by
improvements to the Group's economic base case scenario. The uplift from the
base case to probability-weighted ECL is £0.4 billion (31 December 2023:
£0.7 billion). The ECL allowance includes judgemental adjustments which
reduce the ECL by £15 million (31 December 2023: £67 million increase to
ECL). The reduction in judgemental adjustments in the year was primarily from
the release of those held in respect of inflationary and interest rate risks,
which are now stabilising, with a resilient credit performance being observed.
SUMMARY OF GROUP RESULTS (continued)
Capital
At 31 Dec 2024 At 31 Dec Change
2023
%
CET1 ratio 14.2% 14.6% (0.4)pp
Pro forma CET1 ratio(A,1) 13.5% 13.7% (0.2)pp
UK leverage ratio 5.5% 5.8% (0.3)pp
Risk-weighted assets £224.6bn £219.1bn 3
Capital generation
Pro forma CET1 ratio as at 31 December 2023(A,1) 13.7%
Banking build (bps)(2) 221
Insurance dividend (bps) 14
Risk-weighted assets (bps) (14)
Other movements (bps)(3) (17)
Retail secured CRD IV increases and phased unwind of IFRS 9 transitional (27)
relief (bps)(4)
Capital generation excluding provision charge for motor finance commission 177
arrangements (bps)
Provision charge for motor finance commission arrangements (bps) (29)
Capital generation (bps) 148
Ordinary dividend (bps) (91)
Share buyback accrual (bps) (80)
Pro forma CET1 ratio as at 31 December 2024(A,1) 13.5%
(1) 31 December 2023 and 31 December 2024 reflect both the full impact of
the share buybacks announced in respect of 2023 and 2024 and the ordinary
dividends received from the Insurance business in February 2024 and February
2025.
(2 ) Includes impairment charge and excess regulatory expected losses,
excludes a charge for motor finance commission arrangements.
(3) Includes share-based payments and foreign exchange loss on a US dollar
AT1 redemption.
(4) Retail secured CRD IV increases with respect to performing exposures.
The Group's pro forma CET1 capital ratio at 31 December 2024 was 13.5 per cent
(31 December 2023: 13.7 per cent pro forma), in line with guidance. Capital
generation during the year was 148 basis points. Excluding the provision for
motor finance commission arrangements, capital generation was 177 basis
points, in line with guidance.
Capital generation reflects robust banking build and the interim half-year and
full-year dividends received from the Insurance business in June 2024 (£200
million) and February 2025 (£100 million) respectively, partially offset by
risk-weighted asset increases and other movements, including 15 basis points
relating to the foreign exchange translation loss following the US dollar AT1
capital instrument redemption in June. Regulatory headwinds of 27 basis
points in the year reflect an adjustment for part of the impact of the Retail
secured CRD IV increases and the reduction in the transitional factor applied
to IFRS 9 dynamic relief on 1 January 2024. There was a further 29 basis
points resulting from a provision relating to the potential impacts of motor
finance commission arrangements. The impact of the interim ordinary dividend
paid in September 2024 and the accrual for the recommended final ordinary
dividend equates to 91 basis points, with a further 80 basis points to cover
the accrual for the announced ordinary share buyback programme of up to £1.7
billion.
The Group expects capital generation in 2025 to be c.175 basis points and
reaffirms guidance for capital generation in 2026 of greater than 200 basis
points.
Excluding the Insurance dividend received in February 2025 and the full impact
of the announced ordinary share buyback programme, the Group's CET1 capital
ratio at 31 December 2024 was 14.2 per cent (31 December 2023: 14.6 per
cent).
SUMMARY OF GROUP RESULTS (continued)
Risk-weighted assets increased by £5.5 billion in the year to £224.6 billion
at 31 December 2024 (31 December 2023: £219.1 billion), in line with
guidance. This reflects the impact of lending growth, Retail secured CRD IV
increases and other movements, partly offset by optimisation including capital
efficient, net present value positive securitisation activity. In the fourth
quarter, risk-weighted assets increased by £1.3 billion primarily driven by
lending growth, operational risk and Retail secured CRD IV increases, again
partly offset by optimisation activity. In the context of the Retail secured
CRD IV increases, a risk-weighted asset increase of £3.3 billion was
recognised against performing exposures in 2024. Including this increase, it
is now envisaged that the overall uplift could be modestly higher than
£5 billion, subject to finalisation with the PRA.
The PRA published its second policy statement on implementing Basel 3.1 in the
UK in September 2024. The final regulations, which are now due to be
implemented on 1 January 2027 following a PRA announcement in January 2025,
will introduce substantial revisions to the approaches for calculating
risk-weighted assets. The Group expects the initial impact of Basel 3.1
implementation to be moderately positive.
The Group's regulatory CET1 capital requirement remains at around 12 per
cent, including the Pillar 2A CET1 capital requirement remaining at around 1.5
per cent of risk-weighted assets. The Board's view of the ongoing level of
total CET1 capital required to grow the business, meet current and future
regulatory requirements and cover economic and business uncertainties is
c.13.0 per cent. This includes a management buffer of around 1 per cent. In
order to manage risks and distributions in an orderly way, the Board intends
to progress towards paying down to the current CET1 capital target of c.13.0
per cent by the end of 2026.
Pensions
Following completion of the triennial valuation of its main defined benefit
pension schemes as at 31 December 2022, there will be no further deficit
contributions for this triennial period (to 31 December 2025).
Dividend and share buyback
The Group has a progressive and sustainable ordinary dividend policy whilst
maintaining the flexibility to return further surplus capital through share
buybacks or special dividends. In February 2024, the Board decided to return
surplus capital in respect of 2023 through a share buyback programme of up to
£2.0 billion. This commenced on 23 February 2024 and completed on 13 November
2024 with c.3.7 billion (c.6 per cent) ordinary shares repurchased.
In respect of 2024, the Board has recommended a final ordinary dividend of
2.11 pence per share, which, together with the interim ordinary dividend of
1.06 pence per share totals 3.17 pence per share, an increase of 15 per cent
compared to 2023, in line with the Board's commitment to a progressive and
sustainable ordinary dividend. The Board has also announced its intention to
implement an ordinary share buyback of up to £1.7 billion, which will
commence as soon as is practicable and is expected to be completed by 31
December 2025.
Based on the total ordinary dividend and the announced ordinary share buyback,
the total capital return in respect of 2024 will be up to £3.6 billion,
equivalent to c.9 per cent (as at 14 February 2025) of the Group's market
capitalisation value. The Group intends to pay down to its ongoing CET1
capital target of c.13.0 per cent by the end of 2026.
DIVISIONAL RESULTS
Segmental analysis - underlying basis(A)
2024 Retail Commercial Insurance, Equity Group
£m Banking Pensions and Investments £m
£m Investments and Central
£m Items
£m
Underlying net interest income 8,930 3,434 (136) 617 12,845
Underlying other income 2,384 1,825 1,292 96 5,597
Operating lease depreciation (1,319) (6) - - (1,325)
Net income 9,995 5,253 1,156 713 17,117
Operating costs (5,596) (2,762) (924) (160) (9,442)
Remediation (750) (104) (19) (26) (899)
Total costs (6,346) (2,866) (943) (186) (10,341)
Underlying profit before impairment 3,649 2,387 213 527 6,776
Underlying impairment (charge) credit (457) 14 7 3 (433)
Underlying profit 3,192 2,401 220 530 6,343
Banking net interest margin(A) 2.49% 4.39% 2.95%
Average interest-earning banking assets(A) £370.1bn £81.1bn - - £451.2bn
Asset quality ratio(A) 0.12% 0.00% 0.10%
Underlying loans and advances to customers(A,1) £371.5bn £87.6bn - - £459.1bn
Customer deposits £319.7bn £162.6bn - £0.4bn £482.7bn
Risk-weighted assets £125.1bn £73.8bn £0.4bn £25.3bn £224.6bn
2023 Retail Commercial Insurance, Equity Investments and Central Group
£m Banking Pensions and Items £m
£m Investments £m
£m
Underlying net interest income 9,647 3,799 (132) 451 13,765
Underlying other income 2,159 1,691 1,209 64 5,123
Operating lease depreciation (948) (8) - - (956)
Net income 10,858 5,482 1,077 515 17,932
Operating costs (5,469) (2,647) (880) (144) (9,140)
Remediation (515) (127) (14) (19) (675)
Total costs (5,984) (2,774) (894) (163) (9,815)
Underlying profit before impairment 4,874 2,708 183 352 8,117
Underlying impairment (charge) credit (831) 511 7 5 (308)
Underlying profit 4,043 3,219 190 357 7,809
Banking net interest margin(A) 2.73% 4.63% 3.11%
Average interest-earning banking assets(A) £365.6bn £86.8bn - £0.9bn £453.3bn
Asset quality ratio(A) 0.23% (0.54)% 0.07%
Underlying loans and advances to customers(A,1) £361.2bn £88.6bn - (£0.1bn) £449.7bn
Customer deposits £308.4bn £162.8bn - £0.2bn £471.4bn
Risk-weighted assets £119.3bn £74.2bn £0.2bn £25.4bn £219.1bn
(1) Equity Investments and Central Items includes central fair value hedge
accounting adjustments.
(
)
DIVISIONAL RESULTS (continued)
Retail
Retail offers a broad range of financial services products to personal
customers, including current accounts, savings, mortgages, credit cards,
unsecured loans, motor finance and leasing solutions. Its aim is to build
enduring relationships that meet more of its customers' financial needs and
improves their financial resilience throughout their lifetime. Retail operates
the largest digital bank in the UK and continues to improve digital experience
through a mobile-first strategy, deliver market-leading products and meet
consumer duty expectations whilst working within a prudent risk appetite.
Through strategic investment, alongside increased use of data, Retail aims to
deepen consumer relationships, deliver personalised propositions, broaden its
intermediary offering, improve customer experience and operational efficiency.
Strategic progress
• UK's largest digital bank with 22.7 million digitally active users; 20.2
million actively using the Group's mobile apps, up 8 per cent in 2024, with
over 6 billion logons this year. Mobile messaging interactions up over 60 per
cent on 2023
• Enriched mobile offering, including a redesigned Lloyds Bank app with
six new spaces allowing customers to manage their finances alongside 'Link
Pay', a safe and fast way to request payment. Enhanced personalisation of
in-app journeys and messaging, through data utilisation to better understand
customer needs
• Mortgage gross lending share increased 3 percentage points since 2023 to
20 per cent, alongside £15.1 billion lending to first time buyers in 2024 and
a 6 percentage point increase in take-up of protection insurance in 2024
• Grown Mass Affluent customer base to over 3 million and exceeded target
for growth in banking balances, up 15 per cent since 2021, with a dedicated
digital-first proposition providing product offers, digital tools and
financial coaching
• Increased customers served per distribution FTE by 30 per cent since
2021 and utilised the expertise of branch colleagues to answer personal
banking calls, to support 725,000 customers in 2024
• 5 per cent growth in depth of relationship(1) with customers, including
growth across all life stages
• 11.2 million customers registered for 'Your Credit Score', including 2.4
million registrations in 2024, contributing c.7 per cent of direct mortgages
applications value. Over 780,000 customers have improved their score in 2024
• Introduced fee free overseas debit card usage on the majority of
packaged bank accounts, supporting an increase in customers using debit cards
overseas and a stronger value proposition driving income diversification
• Launched 'Black Horse FlexPay', a flexible and easy way to pay for
larger purchases in instalments
• Surpassed 2024 sustainability targets, lending £11.4 billion in
mortgages on properties with an EPC rating of A or B(2) and £9.4 billion for
financing and leasing of battery electric and plug-in hybrid vehicles(2)
Financial performance
• Underlying net interest income 7 per cent lower, reflecting expected
mortgage and unsecured lending asset margin compression and continued deposit
churn headwinds, partly offset by higher structural hedge earnings
• Underlying other income up 10 per cent, driven by UK Motor Finance
including growth following the acquisition of Tusker in 2023 and higher
average vehicle rental values
• Operating lease depreciation charge higher due to fleet growth, the
depreciation of higher value vehicles and declines in used electric car
prices, primarily in the first half
• Operating costs up 2 per cent, with cost efficiencies helping to
partially offset inflationary pressures, business growth costs, ongoing
strategic investment including increased severance charges and the sector-wide
Bank of England Levy. Remediation costs of £750 million include a £700
million provision in relation to the potential impacts of motor finance
commission arrangements
• Underlying impairment charge of £457 million, lower than prior year and
includes a £332 million credit from an improved economic outlook, notably
house price growth, the release of judgemental adjustments for inflation and
interest rate risks, a one-off debt sale write back and strong portfolio
performance in UK mortgages
• Loans and advances to customers up £10.3 billion, including £6.1
billion growth in UK mortgages (net of securitisations of £1.9 billion), UK
Retail unsecured loans up £2.2 billion due to organic growth and lower
repayments following a securitisation in 2023, alongside £1.9 billion growth
across credit cards and other Retail (driven by European lending)
• Customer deposits up £11.3 billion, with inflows into limited
withdrawal and fixed term products, partly offset by a £1.4 billion
reduction in current account balances (significantly lower than the prior
year, as expected)
• Risk-weighted assets up 5 per cent in 2024, given higher lending and
Retail secured CRD IV model increases, partly offset by capital efficient
securitisation activity
(1 ) Customers retained from November 2021. Relates to product holdings,
for franchise customers with active relationship.
(2) Since 1 January 2022, new mortgage lending on residential property with
an Energy Performance Certificate rating of A or B at 30 September 2024; and
new lending for Black Horse and operating leases for Lex Autolease and Tusker
at 31 December 2024.
DIVISIONAL RESULTS (continued)
Retail (continued)
Retail performance summary(A)
2024 2023 Change
£m £m %
Underlying net interest income 8,930 9,647 (7)
Underlying other income 2,384 2,159 10
Operating lease depreciation (1,319) (948) (39)
Net income 9,995 10,858 (8)
Operating costs (5,596) (5,469) (2)
Remediation (750) (515) (46)
Total costs (6,346) (5,984) (6)
Underlying profit before impairment 3,649 4,874 (25)
Underlying impairment (457) (831) 45
Underlying profit 3,192 4,043 (21)
Banking net interest margin(A) 2.49% 2.73% (24)bp
Average interest-earning banking assets(A) £370.1bn £365.6bn 1
Asset quality ratio(A) 0.12% 0.23% (11)bp
At 31 Dec 2024 At 31 Dec 2023 Change
£bn
£bn
%
UK mortgages(1,2) 312.3 306.2 2
Credit cards 15.7 15.1 4
UK Retail unsecured loans 9.1 6.9 32
UK Motor Finance(3) 15.3 15.3
Overdrafts 1.2 1.1 9
Other(1,4) 17.9 16.6 8
Underlying loans and advances to customers(A) 371.5 361.2 3
Operating lease assets(5) 7.2 6.5 11
Total customer assets 378.7 367.7 3
Current accounts 101.3 102.7 (1)
Savings accounts(6) 208.2 194.8 7
Wealth 10.2 10.9 (6)
Customer deposits 319.7 308.4 4
Risk-weighted assets 125.1 119.3 5
(1) From the first quarter of 2024, open mortgage book and closed mortgage
book loans and advances, previously presented separately, are reported
together as UK mortgages; Wealth loans and advances, previously reported
separately, are included within Retail other. The 31 December 2023
comparative is presented on a consistent basis.
(2) The increase in UK mortgages underlying loans and advances to customers
is net of the impact of the securitisations of £1.9 billion of primarily
legacy Retail mortgages in the second and fourth quarters of 2024.
(3) UK Motor Finance balances on an underlying basis(A) exclude a finance
lease gross up. See page 27.
(4) Within underlying loans and advances, Retail other includes the European
and Wealth businesses.
(5) Operating lease assets relate to Lex Autolease and Tusker.
(6) From the first quarter of 2024, Retail relationship savings accounts and
Retail tactical savings accounts, previously reported separately, are reported
together as Retail savings accounts. The 31 December 2023 comparative is
presented on a consistent basis.
(
)
DIVISIONAL RESULTS (continued)
Commercial Banking
Commercial Banking serves small and medium businesses and corporate and
institutional clients, providing lending, transactional banking, working
capital management, debt financing and risk management services whilst
connecting the whole Group to clients. Through investment in digital
capability and product development, Commercial Banking will deliver an
enhanced customer experience via a digital-first model in Business and
Commercial Banking and an expanded client proposition across Commercial
Banking, generating diversified capital efficient growth and supporting
customers in their transition to net zero.
Strategic progress
• Maintained position as number 1 ranked(1) Infrastructure and Project
Finance Bank in the UK, financing wind farms, solar, and investments into
newer low carbon technologies
• Increased euro and US dollar debt capital markets issuance volumes by 39
per cent, outperforming the market(2)
• Awarded Best Bank for Digitalisation at the Global Trade Review Awards
2024. Completed the Group's first electronic bill of lading transaction,
reducing transaction time, execution risk, costs and environmental impact
• Delivered £10.7 billion of sustainable financing(3) in 2024. Ranked
first in ESG-labelled bond issuance for UK issuers(4)
• Launched 'Lloyds Bank Market Insights' bringing together economics and
markets expertise to provide topical and timely thought leadership to clients;
consistently recognised as one of the leading forecasters of the UK economy
• Awarded Best Bank Foreign Exchange Trading for Corporates in the UK(5)
and delivered 42 per cent year on year increase in foreign exchange volumes
• Achieved strategic objective of Top 5 sterling interest rate swap
counterparty with number 2 ranking
• Expanded the mobile-first onboarding journey following initial launch in
2023 to include multiple party limited companies, clubs and societies; around
9 in 10 Business Banking accounts now being originated digitally
• Threshold for automated credit decisioning increased to up to £100,000
for customers meeting criteria, with new mobile overdraft journey enabling
Business Banking customers to digitally apply for an overdraft facility
• Launched new mobile app journeys for instant access, term and notice
accounts
• Enhanced Merchant Services proposition, including improved access to
Clover offering and introduction of tailored terminal integrations, helping
customers to automate business management processes
• Delivered increased personalised content for customers in both mobile
app and browser, resulting in over half a billion personalised digital
impressions and driving significant increase in engagement
• Hosted the Lilac Review following the publication of the Disability and
Entrepreneur Report in partnership with Small Business Britain and founding
signatory to the Disability Finance Code for Entrepreneurship
Financial performance
• Underlying net interest income of £3,434 million, down 10 per cent on
the prior year, driven by expected customer movements into interest-bearing
accounts, as well as lower average deposit balances
• Underlying other income increased 8 per cent to £1,825 million,
reflecting client franchise growth due to strategic investment and higher
levels of client activity, driving a strong markets performance
• Operating costs 4 per cent higher with cost efficiencies helping to
partially offset inflationary pressures, business growth costs, ongoing
strategic investment and the sector-wide Bank of England Levy. Remediation
costs were £104 million
• Underlying impairment credit of £14 million, reduced from the prior
year which included a significant one-off write-back. The credit in 2024
reflected strong asset quality, a one-off release from model loss rates and
updated economic scenarios. The charge on new and existing Stage 3 clients
remains low
• Customer lending 1 per cent lower at £87.6 billion reflecting ongoing
net repayments within Business and Commercial Banking, including
government-backed lending, partly offset by strategic growth in Corporate and
Institutional Banking, notably higher infrastructure lending
• Customer deposits stable at £162.6 billion, with growth in target
sectors, offset by an expected outflow in the third quarter
• Risk-weighted assets 1 per cent lower at £73.8 billion, reflecting
efficient allocation of capital and optimisation activity
(1) Infralogic 1 January 2024 to 31 December 2024, by deal volume and value.
(2) Refinitiv Eikon; all international bonds in euro and US dollar,
excluding Sovereign, supranational and agency
issuance.( )
(3) In line with the Group's Sustainable Financing Framework.
(4) Bondradar; excluding Sovereign, supranational and agency issuance.
(5) Coalition Greenwich Voice of Clients - 2024 European Corporate Foreign
Exchange Study.
DIVISIONAL RESULTS (continued)
Commercial Banking (continued)
Commercial Banking performance summary(A)
2024 2023 Change
£m £m %
Underlying net interest income 3,434 3,799 (10)
Underlying other income 1,825 1,691 8
Operating lease depreciation (6) (8) 25
Net income 5,253 5,482 (4)
Operating costs (2,762) (2,647) (4)
Remediation (104) (127) 18
Total costs (2,866) (2,774) (3)
Underlying profit before impairment 2,387 2,708 (12)
Underlying impairment credit (charge) 14 511 (97)
Underlying profit 2,401 3,219 (25)
Banking net interest margin(A) 4.39% 4.63% (24)bp
Average interest-earning banking assets(A) £81.1bn £86.8bn (7)
Asset quality ratio(A) 0.00% (0.54%)
At 31 Dec 2024 At 31 Dec 2023 Change
£bn
£bn %
Business and Commercial Banking 29.7 33.0 (10)
Corporate and Institutional Banking 57.9 55.6 4
Underlying loans and advances to customers 87.6 88.6 (1)
Customer deposits 162.6 162.8
Risk-weighted assets 73.8 74.2 (1)
DIVISIONAL RESULTS (continued)
Insurance, Pensions and Investments
Insurance, Pensions and Investments (IP&I) supports over 10 million
customers, with a number one ranking in Home Insurance new policy share, a
number two ranking in UK defined contribution Workplace provision, and a top
three position for Individual Annuities provision with annualised annuity
payments of over £0.9 billion. Total Assets under administration (AuA) are
£232 billion (excluding Wealth). The Group continues to invest significantly
into IP&I to develop the business, including the investment propositions
to support the Group's Mass Affluent strategy, digitisation, innovating
intermediary propositions and accelerating the transition to a low carbon
economy.
Strategic progress
• Scottish Widows now has more than 1 million digitally registered
customers. Recently relaunched an app for workplace pension customers which
has over 400,000 users, 60 per cent of which are active users
• Increased the product offering with the introduction of Ready-Made
Pensions, the Self Invested Personal Pension and Pet Insurance. Alongside
Ready-Made Investments launched in 2023, with c.45,000 accounts opened to date
and c.40 per cent of customers under the age of 35, this creates a
significant opportunity to grow the business and drive deeper customer
relationships
• Continued to grow home insurance market share through the Group's strong
brands, transforming customer experiences through digitisation, whilst also
delivering productivity gains. New policies increased by over 24 per cent and
market share grew by 0.9 percentage points to 15.0 per cent compared to 2023
• Continued momentum in the protection insurance offering, utilising
Retail channels with take-up rates (as a percentage of mortgage completions)
increasing from 9.1 per cent to 15.2 per cent in 2024
• Successful launch of refreshed independent financial advisor proposition
on new architecture driving significant new business with applications for
protection cover up 50 per cent in the second half of the year following the
launch
• Open book AuA of £185 billion (2023: £164 billion), with 13 per cent
growth in the year. Net AuA flows of £5.3 billion, contributing to an
increased stock of deferred profit. This included a significant contribution
from the workplace pensions business, with a 9 per cent increase in regular
contributions to pensions administered and £108 billion of AuA
• Market share of stocks and shares ISA new account openings at 19.8 per
cent, second in the market(1) (12 months to 30 September 2023: 20.2 per
cent, second in the market)
• Grew individual annuities market share by 4 percentage points to 23.5
per cent(1), issuing c.£1.7 billion of policies (2023: c.£1.0 billion).
Focused strategic presence following the sale (subject to High Court approval)
of the bulk annuities business
• Completed the transfer of the longstanding life and pensions business to
IP&I's strategic platform with four migrations successfully executed
during 2024
• Climate-aware investments increased by £4.2 billion in 2024, bringing
overall investment to £25.9 billion, currently exceeding the target of £20
billion to £25 billion by the end of 2025(2)
• Ended the year with a Trustpilot score of 4.3 stars for Scottish Widows
and 4.6 for Lloyds Insurance
Financial performance
• Underlying profit up 16 per cent after agreed sale (subject to High
Court approval) of the in-force bulk annuity portfolio
• Underlying other income of £1,292 million, up 7 per cent from strong
trading, with higher net general insurance income
• Operating costs up 5 per cent, with cost efficiencies helping to
partially offset inflationary pressures, business growth costs and ongoing
strategic investment including increased severance charges
• Balance of deferred profits broadly stable in the year at £5.0 billion
(after release to income of £419 million) and after allowing for the
reinsurance agreement entered into for the in-force bulk annuity portfolio,
including £126 million from new business, reflecting value generation in
workplace pensions and individual annuities
• Life and pensions sales (PVNBP) up 5 per cent driven by strong
performance in the individual annuities and workplace business partly offset
by the agreed sale (subject to High Court approval) of the in-force bulk
annuity portfolio
• Payment of a £100 million final dividend to Lloyds Banking Group plc in
February 2025, after the £200 million interim dividend, supported by a strong
capital position with an estimated Insurance Solvency II ratio of 158 per cent
(154 per cent after proposed dividend)
• Credit asset portfolio strong, rated 'A-' on average. Well diversified,
with less than 2.5 per cent of assets backing annuities being sub-investment
grade or unrated. Strong liquidity position with c.£3 billion cash and cash
equivalents
(1) ISA information reflects opening through direct channels and is based on
12 months to 30 September 2024. Annuities information reflects nine months
to 30 September 2024.
(2) Includes a range of funds with a bias towards investing in companies
that are reducing the carbon intensity of their businesses and/or are
developing climate solutions.
DIVISIONAL RESULTS (continued)
Insurance, Pensions and Investments (continued)
Insurance, Pensions and Investments performance summary(A)
2024 2023 Change
£m £m %
Underlying net interest income (136) (132) (3)
Underlying other income 1,292 1,209 7
Net income 1,156 1,077 7
Operating costs (924) (880) (5)
Remediation (19) (14) (36)
Total costs (943) (894) (5)
Underlying profit before impairment 213 183 16
Underlying impairment 7 7
Underlying profit 220 190 16
Life and pensions sales (PVNBP)(A,1) 18,249 17,449 5
New business value of insurance and participating investment contracts
recognised in the year(A,2)
of which: deferred to contractual service margin and risk adjustment 126 173 (27)
of which: losses recognised on initial recognition (15) (20) 25
111 153 (27)
Assets under administration (net flows)(3) £5.3bn £5.1bn 4
General insurance underwritten new gross written premiums(A) 197 124 59
General insurance underwritten total gross written premiums(A) 737 579 27
General insurance combined ratio 97% 106% (9)pp
At 31 Dec 2024 At 31 Dec 2023 Change
%
Insurance Solvency II ratio (pre-dividend)(4) 158% 186% (28)pp
Total customer assets under administration £231.9bn £213.1bn 9
(1) Present value of new business premiums.
(2) New business value represents the value added to the contractual service
margin and risk adjustment at the initial recognition of new contracts, net of
acquisition expenses and any loss component on onerous contracts (which is
recognised directly in the income statement) but does not include existing
business increments.
(3) The movement in asset inflows and outflows driven by business activity
(excluding market movements).
(4) Equivalent estimated regulatory view of ratio (including With-Profits
funds and post dividend where applicable) was 148 per cent (31 December 2023:
166 per cent, post-February 2024 dividend).
Breakdown of net income(A)
2024 2023
Deferred Other in-year profit Total Deferred Other in-year profit Total
profit release(1) £m £m profit release(1) £m £m
£m £m
Life open book (pensions, individual annuities, Wealth and protection) 350 318 668 267 290 557
Non-life (General insurance) - 229 229 - 171 171
Other items(2) 69 190 259 85 223 308
Bulk annuities(3) - - - 35 6 41
Net income(A) 419 737 1,156 387 690 1,077
(1 ) Total deferred profit release is represented by contractual service
margin (CSM) and risk adjustment releases from holdings on the balance sheet.
CSM is released as insurance contract services are provided; risk adjustment
is released as uncertainty within the calculation of the liabilities
diminishes. Amounts are shown net of reinsurance.
(2 ) Other items represents the income from longstanding business, return
on shareholder assets and interest on subordinated debt.
(3 ) 2024 reflects the agreed sale (subject to High Court approval) of
the in-force bulk annuity portfolio to Rothesay Life plc.
DIVISIONAL RESULTS (continued)
Insurance, Pensions and Investments (continued)
Movement in the deferred profit(1) (contractual service margin (CSM) and risk
adjustment)
Life open book Other products(2) Bulk annuities(3) Total(1)
£m £m £m £m
Deferred profit at 1 January 2024 4,025 702 578 5,305
New business written 126 - - 126
Release to income statement (350) (69) - (419)
Other movements 415 53 (460) 8
Deferred profit at 31 December 2024 4,216 686 118 5,020
Deferred profit at 1 January 2023 3,661 909 538 5,108
New business written 120 - 53 173
Release to income statement (267) (85) (35) (387)
Other movements 511 (122) 22 411
Deferred profit at 31 December 2023 4,025 702 578 5,305
(1) Total deferred profit is represented by CSM and risk adjustment, both
held on the balance sheet. CSM is released as insurance contract services are
provided; risk adjustment is released as uncertainty within the calculation of
the liabilities diminishes. Amounts are shown net of reinsurance.
(2) Other products includes longstanding business and European business.
(3 ) Bulk annuities for 2024 reflects the reinsurance agreement entered
into as part of the agreed sale (subject to High Court approval) of the
in-force bulk annuity portfolio to Rothesay Life plc, with the impact of the
reinsurance agreement included within Other movements.
Volatility arising in the Insurance business
2024 2023
£m £m
Insurance volatility (56) 198
Policyholder interests volatility 162 116
Total volatility 106 314
Insurance hedging arrangements (442) (422)
Total(1) (336) (108)
(1 ) Total insurance volatility is included within market volatility and
asset sales, which in total resulted in a loss of £144 million in 2024 (2023:
gain of £35 million). See page 29.
Insurance volatility impacts statutory profit before tax (through volatility
and asset sales) but does not impact underlying profit, which is based on an
expected return. The impact of the actual return differing from the expected
return is included within insurance volatility. This is because movements in
their value can have a significant impact on the profitability of the Group.
Management believes that it is appropriate to disclose the results on the
basis of an expected return.
The Group manages its Insurance business exposures to equity, interest rate,
foreign currency exchange rate and inflation movements within the Insurance,
Pensions and Investments division. It does so by balancing the importance of
managing the impacts to both Solvency capital and earnings volatility, as
these factors can impact the dividend that the Insurance business can pay up
to Lloyds Banking Group plc. This approach can result in volatility in
statutory profit before tax. Total insurance volatility resulted in losses of
£336 million (2023: £108 million), driven by increases in interest rates
and equity performance.
(
)
DIVISIONAL RESULTS (continued)
Equity Investments and Central Items
2024 2023 Change
£m £m %
Underlying net interest income 617 451 37
Underlying other income 96 64 50
Net income 713 515 38
Operating costs (160) (144) (11)
Remediation (26) (19) (37)
Total costs (186) (163) (14)
Underlying profit before impairment 527 352 50
Underlying impairment 3 5 (40)
Underlying profit 530 357 48
Equity Investments and Central Items includes the Group's equity investments
businesses, including Lloyds Development Capital (LDC), the Group's share of
the Business Growth Fund (BGF) and the Housing Growth Partnership (HGP), as
well as Lloyds Living. Also included are income and expenses not attributed to
other divisions, including residual underlying net interest income after
transfer pricing (which includes the recharging to other divisions of the
Group's external AT1 distributions), and the unwind of hedging costs relating
to historic gilt sales.
Net income in 2024 was higher compared to 2023, with stronger underlying net
interest income and higher underlying other income. This included £393
million, after funding costs relating to the Group's equity and direct
investment businesses (2023: £344 million). Underlying net interest income
was higher than in 2023, which was impacted by short-term central hedging
costs in the first half of 2023. Underlying other income includes £502
million (2023: £437 million) generated by the Group's equity and direct
investment businesses increasing as a result of strong income growth from
Lloyds Living, while income from LDC was flat in the year at £425 million
(2023: £418 million).
Total costs of £186 million in 2024 increased 14 per cent on the prior year,
largely due to costs associated with the agreed sale (subject to High Court
approval) of the Group's in-force bulk annuity portfolio. Underlying
impairment was a £3 million credit compared to a £5 million credit in 2023.
(
)
ALTERNATIVE PERFORMANCE MEASURES
The statutory results are supplemented with those presented on an underlying
basis and also with other alternative performance measures. This is to enable
a comprehensive understanding of the Group and facilitate comparison with
peers. The Group Executive Committee, which is the 'chief operating decision
maker' (as defined by IFRS 8 Operating Segments) for the Group, reviews the
Group's results on an underlying basis in order to assess performance and
allocate resources. Management uses underlying profit before tax, an
alternative performance measure, as a measure of performance and believes that
it provides important information for investors. This is because it allows for
a comparable representation of the Group's performance by removing the impact
of items such as volatility caused by market movements outside the control of
management.
In arriving at underlying profit, statutory profit before tax is adjusted for
the items below, to allow a comparison of the Group's underlying performance:
• Restructuring costs relating to merger, acquisition, integration and
disposal activities
• Volatility and other items, which includes the effects of certain asset
sales, the volatility relating to the Group's hedging arrangements and that
arising in the Insurance business, the unwind of acquisition-related fair
value adjustments and the amortisation of purchased intangible assets
The analysis of lending and expected credit loss (ECL) allowances is presented
on both a statutory and an underlying basis and a reconciliation between the
two is shown on page 42. On a statutory basis, purchased or originated
credit-impaired (POCI) assets include a fixed pool of mortgages that were
purchased as part of the HBOS acquisition at a deep discount to face value
reflecting credit losses incurred from the point of origination to the date of
acquisition. Over time, these POCI assets will run off as the loans redeem,
pay down or losses crystallise. The underlying basis assumes that the lending
assets acquired as part of a business combination were originated by the Group
and are classified as either Stage 1, 2 or 3 according to the change in credit
risk over the period since origination. Underlying ECL allowances have been
calculated accordingly. The Group uses the underlying basis to monitor the
creditworthiness of the lending portfolio and related ECL allowances. The
statutory basis also includes an accounting adjustment within UK Motor Finance
required under IFRS 9 to recognise a continuing involvement asset following
the partial derecognition of a component of the Group's finance lease book via
a securitisation in the third quarter of 2024.
ALTERNATIVE PERFORMANCE MEASURES (continued)
The Group calculates a number of metrics that are used throughout the banking
and insurance industries on an underlying basis. These metrics are not
necessarily comparable to similarly titled measures presented by other
companies and are not any more authoritative than measures presented in the
financial statements, however management believes that they are useful in
assessing the performance of the Group and in drawing comparisons between
years. A description of these measures and their calculation, is given below.
Alternative performance measures are used internally in the Group's Monthly
Management Report.
Asset quality ratio The underlying impairment charge or credit for the period in respect of loans
and advances to customers, both drawn and undrawn, expressed as a percentage
of average gross loans and advances to customers for the period. This measure
is useful in assessing the credit quality of the loan book.
Banking net interest margin Banking net interest income on customer and product balances in the banking
businesses as a percentage of average gross interest-earning banking assets
for the period. This measure is useful in assessing the profitability of the
banking business.
Cost:income ratio Total costs as a percentage of net income calculated on an underlying basis.
This measure is useful in assessing the profitability of the Group's
operations before the effects of the underlying impairment credit or charge.
Gross written premiums Gross written premiums is a measure of the volume of General Insurance
business written during the period. This measure is useful for assessing the
growth of the General Insurance business.
Life and pensions sales (present value of new business premiums) Present value of regular premiums plus single premiums from new business
written in the current period. This measure is useful for assessing sales in
the Group's life, pensions and investments insurance business.
Loan to deposit ratio Underlying loans and advances to customers divided by customer deposits.
Operating costs Operating expenses adjusted to remove the impact of operating lease
depreciation, remediation, restructuring costs, the amortisation of purchased
intangibles, the insurance gross up and other statutory items.
New business value This represents the value added to the contractual service margin and risk
adjustment at the initial recognition of new contracts, net of acquisition
expenses (derived from the statutory balance sheet movements) and any loss
component on onerous contracts (which is recognised directly in the income
statement) but does not include existing business increments.
Pro forma CET1 ratio CET1 ratio adjusted for the effects of the dividend paid up by the Insurance
business in the subsequent quarter and the full impact of the announced
ordinary share buyback programme.
Return on tangible equity Profit attributable to ordinary shareholders, divided by average tangible net
assets. This measure is useful in providing a consistent basis with which to
measure the Group's performance.
Tangible net assets per share Net assets excluding intangible assets such as goodwill and
acquisition-related intangibles divided by the number of ordinary shares in
issue. This measure is useful in assessing shareholder value.
Underlying profit before impairment Underlying profit adjusted to remove the underlying impairment credit or
charge. This measure is useful in allowing for a comparable representation of
the Group's performance before the effects of the forward-looking underlying
impairment credit or charge.
Underlying profit Statutory profit before tax adjusted for certain items as detailed above. This
measure allows for a comparable representation of the Group's performance by
removing the impact of certain items including volatility caused by market
movements outside the control of management.
ALTERNATIVE PERFORMANCE MEASURES (continued)
The following table reconciles the Group's income statement on a statutory
basis to its underlying basis equivalent:
Statutory basis Removal of: Underlying basis(A)
£m Volatility Insurance £m
and other gross up(3)
items(1,2) £m
£m
2024
Net interest income 12,277 578 (10) 12,845 Underlying net interest income
Other income, net of net finance 5,726 (375) 246 5,597 Underlying other income
expense in respect of insurance
and investment contracts
(1,325) - (1,325) Operating lease depreciation
Total income, net of net finance expense in respect of insurance and 18,003 (1,122) 236 17,117 Net income
investment contracts
Operating expenses(4) (11,601) 1,496 (236) (10,341) Total costs(4)
Impairment charge (431) (2) - (433) Underlying impairment charge
Profit before tax 5,971 372 - 6,343 Underlying profit
2023
Net interest income 13,298 479 (12) 13,765 Underlying net interest income
Other income, net of net finance expense in respect of insurance and 5,331 (447) 239 5,123 Underlying other income
investment contracts
(956) - (956) Operating lease depreciation
Total income, net of net finance expense in respect of insurance and 18,629 (924) 227 17,932 Net income
investment contracts
Operating expenses(4) (10,823) 1,235 (227) (9,815) Total costs(4)
Impairment charge (303) (5) - (308) Underlying impairment charge
Profit before tax 7,503 306 - 7,809 Underlying profit
(1) In the year ended 31 December 2024 this comprised the effects of market
volatility and asset sales (losses of £144 million); the amortisation of
purchased intangibles (£81 million); restructuring costs (£40 million); and
fair value unwind (losses of £107 million).
(2) In the year ended 31 December 2023 this comprised the effects of market
volatility and asset sales (gains of £35 million); the amortisation of
purchased intangibles (£80 million); restructuring costs (£154 million); and
fair value unwind (losses of £107 million).
(3) Under IFRS 17, expenses which are directly associated with the
fulfilment of insurance contracts are reported as part of the insurance
service result within statutory other income. On an underlying basis these
expenses remain within costs.
(4) Statutory operating expenses includes operating lease depreciation. On
an underlying basis operating lease depreciation is included in net income.
ALTERNATIVE PERFORMANCE MEASURES (continued)
2024 2023
Asset quality ratio(A)
Underlying impairment (charge) credit (£m) (433) (308)
Remove non-customer underlying impairment credit (£m) (23) (13)
Underlying customer related impairment (charge) credit (£m) (456) (321)
Loans and advances to customers (£bn) 459.9 449.7
Remove finance lease gross-up(1) (£bn) (0.8) -
Underlying loans and advances to customers(A) (£bn) 459.1 449.7
Add back:
Expected credit loss allowance (drawn, statutory basis) (£bn) 3.2 3.7
Acquisition related fair value adjustments (£bn) 0.1 0.3
Underlying gross loans and advances to customers (£bn) 462.4 453.7
Averaging (£bn) (3.5) 3.1
Average underlying gross loans and advances to customers (£bn) 458.9 456.8
Asset quality ratio(A) 0.10% 0.07%
Banking net interest margin(A)
Underlying net interest income (£m) 12,845 13,765
Remove non-banking underlying net interest expense (£m) 469 311
Banking underlying net interest income (£m) 13,314 14,076
Underlying gross loans and advances to customers (£bn) 462.4 453.7
Adjustment for non-banking and other items:
Fee-based loans and advances (£bn) (10.0) (8.9)
Other (£bn) 2.0 4.2
Interest-earning banking assets (£bn) 454.4 449.0
Averaging (£bn) (3.2) 4.3
Average interest-earning banking assets(A) (£bn) 451.2 453.3
Banking net interest margin(A) 2.95% 3.11%
Cost:income ratio(A)
Operating costs(A) (£m) 9,442 9,140
Remediation (£m) 899 675
Total costs (£m) 10,341 9,815
Net income (£m) 17,117 17,932
Cost:income ratio(A) 60.4% 54.7%
(1) The finance lease gross up represents a statutory accounting adjustment
required under IFRS 9 to recognise a continuing involvement asset following
the partial derecognition of a component of the Group's finance lease book via
a securitisation in the third quarter of 2024.
ALTERNATIVE PERFORMANCE MEASURES (continued)
2024 2023
Operating costs(A)
Operating expenses (£m) 11,601 10,823
Adjustment for:
Operating lease depreciation (£m) (1,325) (956)
Remediation (£m) (899) (675)
Restructuring (£m) (40) (154)
Amortisation of purchased intangibles (£m) (81) (80)
Insurance gross up (£m) 236 227
Other statutory items (£m) (50) (45)
Operating costs(A) (£m) 9,442 9,140
Return on tangible equity(A)
Profit attributable to ordinary shareholders (£m) 3,923 4,933
Average ordinary shareholders' equity (£bn) 40.0 38.9
Remove average goodwill and other intangible assets (£bn) (8.0) (7.7)
Average tangible equity (£bn) 32.0 31.2
Return on tangible equity(A) 12.3% 15.8%
Underlying profit before impairment(A)
Statutory profit before tax (£m) 5,971 7,503
Remove impairment charge (£m) 431 303
Remove volatility and other items including restructuring (£m) 374 311
Underlying profit before impairment(A) (£m) 6,776 8,117
Life and pensions sales (present value of new business premiums)(A)
Premiums received (£m) 10,679 9,768
Investment sales (£m) 10,986 10,615
Effect of capitalisation factor (£m) 3,609 3,426
Effect of annualisation (£m) 401 455
Gross premiums from existing long-term business (£m) (7,426) (6,815)
Life and pensions sales (present value of new business premiums)(A) (£m) 18,249 17,449
ALTERNATIVE PERFORMANCE MEASURES (continued)
2024 2023
£m £m
New business value of insurance and participating investment contracts
recognised in the year(A)
Contractual service margin 61 92
Risk adjustment for non-financial risk 65 86
Losses recognised on initial recognition (93) (71)
33 107
Impacts of reinsurance contracts recognised in the year 39 29
Increments, single premiums and transfers received on workplace pension 35 17
contracts initially recognised in the year
Amounts relating to contracts modified to add a drawdown feature and 4 -
recognised as new contracts
New business value of insurance and participating investment contracts 111 153
recognised in the year(A)
At 31 Dec 2024 At 31 Dec 2023
Loan to deposit ratio(A)
Underlying loans and advances to customers(A) (£bn) 459.1 449.7
Customer deposits (£bn) 482.7 471.4
Loan to deposit ratio(A) 95% 95%
Pro forma CET1 ratio(A)
CET1 ratio 14.2% 14.6%
Insurance dividend and share buyback accrual(1) (0.7)% (0.9)%
Pro forma CET1 ratio(A) 13.5% 13.7%
Tangible net assets per share(A)
Ordinary shareholders' equity (£m) 39,521 40,224
Goodwill and other intangible assets (£m) (8,188) (8,306)
Deferred tax effects and other adjustments (£m) 350 352
Tangible net assets (£m) 31,683 32,270
Ordinary shares in issue, excluding own shares 60,491m 63,508m
Tangible net assets per share(A) 52.4p 50.8p
(1) Dividend paid up by the Insurance business in the subsequent quarter
(added) and the impact of the announced ordinary share buyback programme
(deducted).
RISK MANAGEMENT
CAPITAL RISK
CET1 target capital ratio
The Board's view of the ongoing level of CET1 capital required by the Group to
grow the business, meet current and future regulatory requirements and cover
economic and business uncertainties is c.13.0 per cent which includes a
management buffer of around 1 per cent. This takes into account, amongst other
considerations:
• The minimum Pillar 1 CET1 capital requirement of 4.5 per cent of
risk-weighted assets
• The Group's Pillar 2A CET1 capital requirement, set by the PRA, which is
the equivalent of around 1.5 per cent of risk-weighted assets
• The Group's countercyclical capital buffer (CCyB) requirement which is
around 1.8 per cent of risk-weighted assets
• The capital conservation buffer (CCB) requirement of 2.5 per cent of
risk-weighted assets
• The Ring-Fenced Bank (RFB) sub-group's other systemically important
institution (O-SII) buffer of 2.0 per cent of risk-weighted assets, which
equates to 1.7 per cent of risk-weighted assets at Group level
• The Group's PRA Buffer, set after taking account of the results of any
PRA stress tests and other information, as well as outputs from the Group's
own internal stress tests. The PRA requires this buffer to
remain confidential
• The likely performance of the Group in various potential stress
scenarios and ensuring capital remains resilient in these
• The economic outlook for the UK and business outlook for the Group
• The desire to maintain a progressive and sustainable ordinary dividend
policy in the context of year to year earnings movements
Minimum requirement for own funds and eligible liabilities (MREL)
The Group is not classified as a global systemically important bank (G-SIB)
but is subject to the Bank of England's MREL statement of policy (MREL SoP)
and must therefore maintain a minimum level of MREL resources. Applying the
MREL SoP to current minimum capital requirements at 31 December 2024, the
Group's MREL, excluding regulatory capital and leverage buffers, is the higher
of 2 times Pillar 1 plus 2 times Pillar 2A, equivalent to 21.3 per cent of
risk-weighted assets, or 6.5 per cent of the UK leverage ratio exposure
measure. In addition, CET1 capital cannot be used to meet both MREL and
capital or leverage buffers.
Leverage minimum requirements
The Group is currently subject to the following minimum requirements under the
UK Leverage Ratio Framework:
• A minimum tier 1 leverage ratio requirement of 3.25 per cent of the
total leverage exposure measure
• A countercyclical leverage buffer (CCLB) which is currently 0.6 per cent
of the total leverage exposure measure
• An additional leverage ratio buffer (ALRB) of 0.7 per cent of the total
leverage exposure measure applies to the RFB sub-group, which equates to 0.6
per cent at Group level
At least 75 per cent of the 3.25 per cent minimum leverage ratio requirement
as well as 100 per cent of all regulatory leverage buffers must be met with
CET1 capital.
Stress testing
The Group undertakes a wide-ranging programme of stress testing, providing a
comprehensive view of the potential impacts arising from the risks to which
the Group and its key legal entities are exposed. One of the most important
uses of stress testing is to assess the resilience of the operational and
strategic plans of the Group and its legal entities to adverse economic
conditions and other key vulnerabilities. As part of this programme the Group
participated in the PRA desk-based stress test in 2024. The test evaluated the
resilience of the UK banking system to two hypothetical scenarios including
severe but plausible combinations of adverse shocks to the UK and global
economies. Both scenarios had House Price Index (HPI) falls of 28 per cent,
Commercial Real Estate (CRE) falls of 35 per cent and an increase in
unemployment of 4.7 per cent. One scenario tested a Base Rate peak of 9 per
cent whilst the other explored a Base Rate reduction to 0.1 per cent. The
results were published in November 2024 and the report concluded the UK
banking system is well capitalised, maintains high levels of liquidity and
asset quality remains strong. The report did not publish individual Bank
results and the Group was not required to take any capital actions. The Bank
of England has updated its approach to stress testing the UK banking system
and, as part of that, in 2025 the Group will participate in the PRA Bank
Capital Stress Test.
CAPITAL RISK (continued)
Capital and MREL resources
An analysis of the Group's capital position and MREL resources as at 31
December 2024 is presented in the following table. This reflects the
application of the transitional arrangements for IFRS 9.
At 31 Dec 2024 At 31 Dec 2023(1)
£m £m
Common equity tier 1: instruments and reserves
Share capital and share premium account 24,782 24,926
Banking retained earnings(2) 19,582 19,000
Banking other reserves(2) 2,786 3,136
Adjustment to retained earnings for foreseeable dividends (1,276) (1,169)
45,874 45,893
Common equity tier 1: regulatory adjustments
Cash flow hedging reserve 3,755 3,766
Goodwill and other intangible assets (5,679) (5,731)
Prudent valuation adjustment (354) (417)
Excess of expected losses over impairment provisions and value adjustments (270) -
Removal of defined benefit pension surplus (2,215) (2,653)
Significant investments(2) (5,024) (4,975)
Deferred tax assets (4,025) (4,048)
Other regulatory adjustments (83) 62
Common equity tier 1 capital 31,979 31,897
Additional tier 1: instruments
Other equity instruments 6,170 6,915
Additional tier 1: regulatory adjustments
Significant investments(2) (800) (1,100)
Total tier 1 capital 37,349 37,712
Tier 2: instruments and provisions
Subordinated liabilities 6,366 6,320
Eligible provisions - 371
Tier 2: regulatory adjustments
Significant investments(2) (964) (964)
Total capital resources 42,751 43,439
Ineligible AT1 and tier 2 instruments(3) (94) (139)
Amortised portion of eligible tier 2 instruments issued by Lloyds Banking 891 1,113
Group plc
Other eligible liabilities issued by Lloyds Banking Group plc(4) 28,675 25,492
Total MREL resources 72,223 69,905
Risk-weighted assets 224,632 219,130
Common equity tier 1 capital ratio 14.2% 14.6%
Tier 1 capital ratio 16.6% 17.2%
Total capital ratio 19.0% 19.8%
MREL ratio 32.2% 31.9%
(1) Restated for presentational changes.
(2) In accordance with banking capital regulations, the Group's Insurance
business is excluded from the scope of the Group's capital position. The
Group's investment in the equity and other capital instruments of the
Insurance business are deducted from the relevant tier of capital
('Significant investments'), subject to threshold regulations that allow a
portion of the equity investment to be risk-weighted rather than deducted from
capital. The risk-weighted portion forms part of threshold risk-weighted
assets.
(3) Instruments not issued out of the holding company.
(4) Includes senior unsecured debt.
CAPITAL RISK (continued)
Movements in CET1 capital resources
The key movements are set out in the table below.
Common
equity tier 1
£m
At 31 December 2023 31,897
Banking business profits(1) 4,765
Movement in foreseeable dividend accrual(2) (107)
Dividends paid out on ordinary shares during the year (1,828)
Adjustment to reflect full impact of share buyback (2,011)
Dividends received from the Insurance business(3) 450
IFRS 9 transitional adjustment to retained earnings (159)
Excess regulatory expected losses (270)
Redemption of other equity instruments (316)
Distributions on other equity instruments (498)
Other movements 56
At 31 December 2024 31,979
(1) Under banking capital regulations, profits made by Insurance are removed
from CET1 capital. However, when dividends are paid to the Group by Insurance
these are recognised through CET1 capital.
(2) Reflects the reversal of the brought forward accrual for the final 2023
ordinary dividend, net of the accrual for the final 2024 ordinary dividend.
(3) Received in February 2024 and June 2024.
The Group's CET1 capital ratio reduced to 14.2 per cent at 31 December 2024
from 14.6 per cent at 31 December 2023, with the increase in CET1 capital
resources more than offset by the increase in risk-weighted assets.
CET1 capital resources increased by £82 million, with banking business
profits for the year and the receipt of dividends paid up by the Insurance
business offset by:
• The interim ordinary dividend paid in September 2024, the accrual for
the final 2024 ordinary dividend of 2.11 pence per share and distributions on
other equity instruments
• The recognition of the full capital impact of the ordinary share buyback
programme announced as part of the Group's 2023 year end results, which
completed in November 2024
• The recognition of a foreign exchange translation loss upon the
redemption of a US dollar denominated AT1 capital instrument in June 2024
The full capital impact of the ordinary share buyback programme and the
Insurance dividend received in February 2024 were reflected through the
Group's pro forma CET1 ratio of 13.7 per cent at 31 December 2023.
The Group's pro forma CET1 ratio of 13.5 per cent at 31 December 2024 reflects
the full capital impact of the ordinary share buyback programme announced as
part of the Group's 2024 year end results and the Insurance dividend received
in February 2025.
CAPITAL RISK (continued)
Movements in total capital and MREL
The Group's total capital ratio reduced to 19.0 per cent at 31 December 2024
(31 December 2023: 19.8 per cent), reflecting reductions in both Additional
Tier 1 and Tier 2 capital and the increase in risk-weighted assets, partly
offset by the increase in CET1 capital. The reduction in Additional Tier 1
capital reflects redemptions, including the US dollar AT1 capital instrument
redeemed in June 2024, offset in part by a new issuance and a reduction in the
Group's significant investment in instruments issued by the Insurance business
following a redemption by the Insurance business as it sought to refine its
capital structure. The reduction in Tier 2 capital primarily reflects the
impact of regulatory amortisation on instruments, interest rate movements and
a reduction in eligible provisions recognised through Tier 2 capital,
partially offset by new issuances.
The MREL ratio increased to 32.2 per cent at 31 December 2024 (31 December
2023: 31.9 per cent) largely reflecting the increase in other eligible
liabilities driven by new issuances, net of calls and maturities. This was
partly offset by the reduction in total capital resources and the increase in
risk-weighted assets.
Risk-weighted assets
At 31 Dec 2024 At 31 Dec 2023
£m £m
Foundation Internal Ratings Based (IRB) Approach 43,366 44,504
Retail IRB Approach 90,567 85,459
Other IRB Approach(1) 21,878 20,941
IRB Approach 155,811 150,904
Standardised (STA) Approach(1) 22,532 22,074
Credit risk 178,343 172,978
Securitisation 8,346 8,958
Counterparty credit risk 6,561 5,847
Credit valuation adjustment risk 485 689
Operational risk 27,183 26,416
Market risk 3,714 4,242
Risk-weighted assets 224,632 219,130
of which: threshold risk-weighted assets(2) 10,738 11,028
(1) Threshold risk-weighted assets are included within Other IRB Approach
and Standardised (STA) Approach.
(2) Threshold risk-weighted assets reflect the element of significant
investments and deferred tax assets that are permitted to be risk-weighted
instead of being deducted from CET1 capital. Significant investments primarily
arise from the investment in the Group's Insurance business.
Risk-weighted assets increased by £5.5 billion in the year to £224.6 billion
at 31 December 2024 (31 December 2023: £219.1 billion), in line with
guidance. This reflects the impact of lending growth, Retail secured CRD IV
increases and other movements, partly offset by optimisation including capital
efficient, net present value positive securitisation activity.
CAPITAL RISK (continued)
Leverage ratio
The table below summarises the component parts of the Group's leverage ratio.
At 31 Dec 2024 At 31 Dec 2023
£m £m
Total tier 1 capital 37,349 37,712
Exposure measure
Statutory balance sheet assets
Derivative financial instruments 24,065 22,356
Securities financing transactions 69,941 56,184
Loans and advances and other assets 812,691 802,913
Total assets 906,697 881,453
Qualifying central bank claims (62,396) (77,625)
Deconsolidation adjustments(1)
Derivative financial instruments 563 585
Loans and advances and other assets (191,551) (178,552)
Total deconsolidation adjustments (190,988) (177,967)
Derivatives adjustments (6,254) (4,896)
Securities financing transactions adjustments 3,351 2,262
Off-balance sheet items 40,186 40,942
Amounts already deducted from tier 1 capital (12,395) (12,523)
Other regulatory adjustments(2) (4,127) (4,012)
Total exposure measure 674,074 647,634
UK leverage ratio 5.5 % 5.8%
Leverage exposure measure (including central bank claims) 736,470 725,259
Leverage ratio (including central bank claims) 5.1 % 5.2%
Total MREL resources 72,223 69,905
MREL leverage ratio 10.7 % 10.8%
(1) Deconsolidation adjustments relate to the deconsolidation of certain
Group entities that fall outside the scope of the Group's regulatory capital
consolidation, primarily the Group's Insurance business.
(2) Includes adjustments to exclude lending under the Government's Bounce
Back Loan Scheme (BBLS).
Analysis of leverage movements
The Group's UK leverage ratio reduced to 5.5 per cent (31 December 2023: 5.8
per cent) reflecting the reduction in the total tier 1 capital position and
the increase in the leverage exposure measure following lending growth and
increases across securities financing transactions and other assets (excluding
central bank claims).
(
)
CREDIT RISK
Overview
The Group's portfolios are well positioned to benefit from an improved, but
still challenging macroeconomic environment. The Group maintains a prudent
approach to credit risk appetite and risk management, with strong credit
origination criteria including evidence of affordability and robust LTVs in
the secured portfolios.
Asset quality remains strong with improved credit performance in the year. In
UK mortgages and unsecured portfolios, reductions in new to arrears and flows
to default have been observed in 2024. Securitisations of primarily legacy
Retail mortgages, totalling £2.0 billion of gross loans and advances to
customers, during the second and fourth quarter will help mitigate credit
risks in higher risk assets. Credit quality remains broadly stable and
resilient in Commercial Banking. The Group continues to monitor the impacts of
the economic environment carefully through a suite of early warning indicators
and governance arrangements that ensure risk mitigating action plans are in
place to support customers and protect the Group's positions.
The underlying impairment charge in 2024 was £433 million, increasing from a
charge of £308 million in 2023 which benefitted from a significant write-back
following the full repayment of debt from a single name client. The 2024
charge included a higher credit from improvements in the Group's macroeconomic
outlook in the year resulting in a release of £394 million (2023: a release
of £257 million) as well as strong portfolio performance in 2024, a one-off
release in Commercial Banking from loss rates used in the model and a one-off
debt sale write back in Retail in the third quarter. The Group's underlying
probability-weighted total ECL allowance decreased in the year to
£3,651 million (31 December 2023: £4,337 million).
Group Stage 2 underlying loans and advances to customers decreased to £48,075
million (31 December 2023: £56,545 million) and as a percentage of total
lending to 10.4 per cent (31 December 2023: 12.5 per cent). The movement
includes a redevelopment of the IFRS 9 staging approach and criteria for UK
mortgages which increased Stage 2 assets, introduced alongside the adoption of
a new ECL model, which together are more than offset by the transfer of assets
from Stage 2 to Stage 1 as a result of improvements in the Group's
macroeconomic outlook. Of the total Group Stage 2 loans and advances to
customers, 92.3 per cent are up to date (31 December 2023: 91.3 per cent).
Stage 2 coverage reduced slightly to 2.8 per cent (31 December 2023: 3.0 per
cent).
Stage 3 underlying loans and advances to customers decreased to
£9,021 million (31 December 2023: £10,110 million), and as a percentage of
total lending to 2.0 per cent (31 December 2023: 2.2 per cent), as a result
of improved credit performance in addition to the securitisation of primarily
legacy accounts within UK mortgages. The lower proportion of UK mortgages in
Stage 3 led to an increase in Group Stage 3 coverage to 16.4 per cent
(31 December 2023: 15.8 per cent).
Prudent risk appetite and risk management
• The Group continues to take a prudent and proactive approach to credit
risk management and credit risk appetite with robust oversight, particularly
in response to recent external events. Risk appetite is in line with the
Group's strategy, and helps support customers during continued economic
uncertainties in both global and domestic markets
• Sector, asset and product concentrations within the portfolios are
closely monitored and controlled, with mitigating actions taken where
appropriate. Sector and product risk appetite parameters help manage exposure
to higher risk and cyclical sectors, segments and asset classes
• The Group's effective risk management seeks to ensure early
identification and management of customers and counterparties who may be
showing signs of distress
• The Group will continue to work closely with its customers to ensure
that they receive the appropriate level of support, including but not
restricted to embracing the standards outlined in the Mortgage Charter
CREDIT RISK (continued)
Impairment charge (credit) by division - statutory and underlying(A) basis
Loans and Loans and Debt Financial Other Undrawn 2024 2023
advances to advances securities assets at £m balances £m £m
customers to banks £m fair value £m
£m £m through other
comprehensive
income
£m
Retail 470 - - - - (13) 457 831
Commercial Banking 37 (7) (6) - - (38) (14) (511)
Insurance, Pensions and Investments - - - - (9) - (9) (12)
Equity Investments and Central Items - - - (3) - - (3) (5)
Total impairment charge (credit) 507 (7) (6) (3) (9) (51) 431 303
Insurance, Pensions and Investments (underlying basis)(A) - - - - (7) - (7) (7)
Total impairment charge (credit) (underlying basis)(A) 507 (7) (6) (3) (7) (51) 433 308
Asset quality ratio(A) 0.10 % 0.07 %
Credit risk balance sheet basis of presentation
The balance sheet analyses which follow have been presented on two bases; the
statutory basis which is consistent with the presentation in the Group's
accounts and the underlying basis which is used for internal management
purposes. A reconciliation between the two bases has been provided.
In the following statutory basis tables, purchased or originated
credit-impaired (POCI) assets include a fixed pool of mortgages that were
purchased as part of the HBOS acquisition at a deep discount to face value
reflecting credit losses incurred from the point of origination to the date of
acquisition. The residual expected credit loss (ECL) allowance and resulting
low coverage ratio on POCI assets reflects further deterioration in the
creditworthiness from the date of acquisition. Over time, these POCI assets
will run off as the loans redeem, pay down or as loans are written off.
The Group uses the underlying basis to monitor the creditworthiness of the
lending portfolio and related ECL allowances because it provides a different
perspective of the credit performance of the POCI assets purchased as part of
the HBOS acquisition. The underlying basis assumes that the lending assets
acquired as part of a business combination were originated by the Group and
are classified as either Stage 1, 2 or 3 according to the change in credit
risk over the period since origination. Underlying ECL allowances have been
calculated accordingly. Unless otherwise stated, the following credit risk
commentary is provided on an underlying basis.
The statutory basis also includes an accounting adjustment within UK Motor
Finance required under IFRS 9 to recognise a continuing involvement asset
following the partial derecognition of a component of the Group's finance
lease book via a securitisation in the third quarter of 2024.
CREDIT RISK (continued)
Total expected credit loss allowance - statutory and underlying(A) basis
At 31 Dec 2024 At 31 Dec
2023
£m
£m
Customer related balances
Drawn 3,191 3,717
Undrawn 270 322
3,461 4,039
Loans and advances to banks 1 8
Debt securities 4 11
Other assets 15 26
Total expected credit loss allowance 3,481 4,084
Acquisition fair value adjustment 170 253
Total expected credit loss allowance (underlying basis)(A) 3,651 4,337
of which: Customer related balances (underlying basis)(A) 3,631 4,292
of which: Drawn (underlying basis)(A) 3,361 3,970
Movements in total expected credit loss allowance - statutory and
underlying(A) basis
Opening ECL at Write-offs Income Net ECL Closing ECL at
31 Dec and other(1) statement increase 31 Dec
2023 £m charge (credit) (decrease) 2024
£m £m £m £m
UK mortgages(2) 1,115 (69) (194) (263) 852
Credit cards 810 (406) 270 (136) 674
UK unsecured loans and overdrafts 515 (264) 272 8 523
UK Motor Finance 342 (98) 116 18 360
Other 88 (14) (7) (21) 67
Retail 2,870 (851) 457 (394) 2,476
Business and Commercial Banking 538 (100) 47 (53) 485
Corporate and Institutional Banking 644 (79) (61) (140) 504
Commercial Banking 1,182 (179) (14) (193) 989
Insurance, Pensions and Investments 26 (2) (9) (11) 15
Equity Investments and Central Items 6 (2) (3) (5) 1
Total(3) 4,084 (1,034) 431 (603) 3,481
UK mortgages (underlying basis)(A,4) 1,368 (152) (194) (346) 1,022
Retail (underlying basis)(A) 3,123 (934) 457 (477) 2,646
Insurance, Pensions and Investments (underlying basis)(A) 26 (4) (7) (11) 15
Total (underlying basis)(A) 4,337 (1,119) 433 (686) 3,651
(1) Contains adjustments in respect of purchased or originated
credit-impaired financial assets.
(2) Includes £53 million within write-offs and other relating to the
securitisation of primarily legacy Retail mortgages, totalling £2.0 billion
of gross loans and advances to customers.
(3) Total ECL includes £20 million relating to other non-customer-related
assets (31 December 2023: £45 million).
(4) Includes £81 million within write-offs and other relating to the
securitisation of primarily legacy Retail mortgages, totalling £2.0 billion
of gross loans and advances to customers.
(
)
CREDIT RISK (continued)
Total expected credit loss allowance sensitivity to economic assumptions -
statutory and underlying(A) basis
The measurement of ECL reflects an unbiased probability-weighted range of
possible future economic outcomes. The Group achieves this by generating four
economic scenarios to reflect the range of outcomes; the central scenario
reflects the Group's base case assumptions used for medium-term planning
purposes, an upside and a downside scenario are also selected together with a
severe downside scenario. If the base case moves adversely, it generates a
new, more adverse downside and severe downside which are then incorporated
into the ECL. Consistent with prior years, the base case, upside and downside
scenarios carry a 30 per cent weighting; the severe downside is weighted at 10
per cent.
The following table shows the Group's ECL for the probability-weighted,
upside, base case, downside and severe downside scenarios, with the severe
downside scenario incorporating adjustments made to CPI inflation and UK Bank
Rate paths. The stage allocation for an asset is based on the overall scenario
probability-weighted probability of default and hence the staging of assets is
constant across all the scenarios. In each economic scenario the ECL for
individual assessments is held constant reflecting the basis on which they are
evaluated. Judgemental adjustments applied through changes to model inputs or
parameters, or more qualitative post model adjustments, are apportioned across
the scenarios in proportion to modelled ECL where this better reflects the
sensitivity of these adjustments to each scenario. The probability-weighted
view shows the extent to which a higher ECL allowance has been recognised to
take account of multiple economic scenarios relative to the base case; the
uplift on a statutory basis being £445 million compared to £678 million at
31 December 2023.
Probability- Upside Base case Downside Severe
weighted £m £m £m downside
£m £m
UK mortgages 852 345 567 1,064 2,596
Credit cards 674 518 641 773 945
Other Retail 950 843 923 1,010 1,172
Commercial Banking 989 745 889 1,125 1,608
Other 16 16 16 16 17
At 31 December 2024 3,481 2,467 3,036 3,988 6,338
UK mortgages (underlying basis)(A) 1,022 512 735 1,235 2,773
At 31 December 2024 (underlying basis)(A) 3,651 2,634 3,204 4,159 6,515
UK mortgages 1,115 395 670 1,155 4,485
Credit cards 810 600 771 918 1,235
Other Retail 945 850 920 981 1,200
Commercial Banking 1,182 793 1,013 1,383 2,250
Other 32 32 32 32 32
At 31 December 2023 4,084 2,670 3,406 4,469 9,202
UK mortgages (underlying basis)(A) 1,368 650 930 1,400 4,738
At 31 December 2023 (underlying basis)(A) 4,337 2,925 3,666 4,714 9,455
Reconciliation between statutory and underlying(A) bases of gross loans and
advances to customers and expected credit loss allowance on drawn balances
Gross loans and advances to customers Expected credit loss allowance on drawn balances
Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
£m £m £m £m £m £m £m £m £m £m
At 31 December 2024
Underlying basis(A) 405,324 48,075 9,021 - 462,420 736 1,199 1,426 - 3,361
POCI assets (762) (3,310) (2,305) 6,377 - - (39) (318) 357 -
Acquisition fair - - - (170) (170) - - - (170) (170)
value adjustment
Continuing use asset 798 - - - 798 - - - - -
36 (3,310) (2,305) 6,207 628 - (39) (318) 187 (170)
Statutory basis 405,360 44,765 6,716 6,207 463,048 736 1,160 1,108 187 3,191
At 31 December 2023
Underlying basis(A) 387,060 56,545 10,110 - 453,715 901 1,532 1,537 - 3,970
POCI assets (1,766) (3,378) (2,963) 8,107 - (1) (65) (400) 466 -
Acquisition fair - - - (253) (253) - - - (253) (253)
value adjustment
(1,766) (3,378) (2,963) 7,854 (253) (1) (65) (400) 213 (253)
Statutory basis 385,294 53,167 7,147 7,854 453,462 900 1,467 1,137 213 3,717
CREDIT RISK (continued)
Loans and advances to customers and expected credit loss allowance - statutory
and underlying(A) basis
At 31 December 2024 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 269,760 32,995 4,166 6,207 313,128 10.5 1.3
Credit cards 13,534 2,441 265 - 16,240 15.0 1.6
UK unsecured loans and overdrafts 9,314 1,247 175 - 10,736 11.6 1.6
UK Motor Finance 13,897 2,398 124 - 16,419 14.6 0.8
Other 17,373 516 147 - 18,036 2.9 0.8
Retail 323,878 39,597 4,877 6,207 374,559 10.6 1.3
Business and Commercial Banking 25,785 3,172 1,197 - 30,154 10.5 4.0
Corporate and Institutional Banking 55,692 1,996 642 - 58,330 3.4 1.1
Commercial Banking 81,477 5,168 1,839 - 88,484 5.8 2.1
Equity Investments and Central Items(1) 5 - - - 5 - -
Total gross lending 405,360 44,765 6,716 6,207 463,048 9.7 1.5
UK mortgages (underlying basis)(A,2) 270,522 36,305 6,471 313,298 11.6 2.1
UK Motor Finance (underlying basis)(A,3) 13,099 2,398 124 15,621 15.4 0.8
Retail (underlying basis)(A) 323,842 42,907 7,182 373,931 11.5 1.9
Total gross lending (underlying basis)(A) 405,324 48,075 9,021 462,420 10.4 2.0
Customer related ECL allowance (drawn and undrawn)
UK mortgages 55 275 335 187 852
Credit cards 210 331 133 - 674
UK unsecured loans and overdrafts 170 235 118 - 523
UK Motor Finance(4) 173 115 72 - 360
Other 16 14 37 - 67
Retail 624 970 695 187 2,476
Business and Commercial Banking 132 187 166 - 485
Corporate and Institutional Banking 122 129 249 - 500
Commercial Banking 254 316 415 - 985
Equity Investments and Central Items - - - - -
Total 878 1,286 1,110 187 3,461
UK mortgages (underlying basis)(A,2) 55 314 653 1,022
UK Motor Finance (underlying basis)(A,3) 173 115 72 360
Retail (underlying basis)(A) 624 1,009 1,013 2,646
Total (underlying basis)(A) 878 1,325 1,428 3,631
Customer related ECL allowance (drawn and undrawn) as a percentage of loans
and advances to customers
Stage 1 Stage 2 Stage 3 POCI Total Adjusted Stage 3(5) Adjusted Total(5)
%
%
%
%
%
% %
UK mortgages - 0.8 8.0 3.0 0.3
Credit cards 1.6 13.6 50.2 - 4.2
UK unsecured loans and overdrafts 1.8 18.8 67.4 - 4.9
UK Motor Finance 1.2 4.8 58.1 - 2.2
Other 0.1 2.7 25.2 - 0.4
Retail 0.2 2.4 14.3 3.0 0.7
Business and Commercial Banking 0.5 5.9 13.9 - 1.6 18.4 1.6
Corporate and Institutional Banking 0.2 6.5 38.8 - 0.9 38.8 0.9
Commercial Banking 0.3 6.1 22.6 - 1.1 26.9 1.1
Equity Investments and Central Items - - - - -
Total 0.2 2.9 16.5 3.0 0.7 17.3 0.7
UK mortgages (underlying basis)(A,2) - 0.9 10.1 0.3
UK Motor Finance (underlying basis)(A,3) 1.3 4.8 58.1 2.3
Retail (underlying basis)(A) 0.2 2.4 14.1 0.7
Total (underlying basis)(A) 0.2 2.8 15.8 0.8 16.4 0.8
(1) Contains central fair value hedge accounting adjustments.
(2 ) UK mortgages balances on an underlying basis(A) exclude the impact
of the HBOS acquisition-related adjustments.
(3) UK Motor Finance balances on an underlying basis(A) at 31 December 2024
exclude a finance lease gross up.
(4) UK Motor Finance includes £178 million relating to provisions against
residual values of vehicles subject to finance leases.
(5) Stage 3 and Total exclude loans in recoveries in Business and Commercial
Banking of £296 million and Corporate and Institutional Banking of £1
million.
CREDIT RISK (continued)
Loans and advances to customers and expected credit loss allowance - statutory
and underlying(A) basis
At 31 December 2023 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 256,596 38,533 4,337 7,854 307,320 12.5 1.4
Credit cards 12,625 2,908 284 - 15,817 18.4 1.8
UK unsecured loans and overdrafts 7,103 1,187 196 - 8,486 14.0 2.3
UK Motor Finance 13,541 2,027 112 - 15,680 12.9 0.7
Other 15,898 525 144 - 16,567 3.2 0.9
Retail 305,763 45,180 5,073 7,854 363,870 12.4 1.4
Business and Commercial Banking 27,525 4,458 1,530 - 33,513 13.3 4.6
Corporate and Institutional Banking 52,049 3,529 538 - 56,116 6.3 1.0
Commercial Banking 79,574 7,987 2,068 - 89,629 8.9 2.3
Equity Investments and Central Items(1) (43) - 6 - (37)
Total gross lending 385,294 53,167 7,147 7,854 453,462 11.7 1.6
UK mortgages (underlying basis)(A,2) 258,362 41,911 7,300 307,573 13.6 2.4
Retail (underlying basis)(A) 307,529 48,558 8,036 364,123 13.3 2.2
Total gross lending (underlying basis)(A) 387,060 56,545 10,110 453,715 12.5 2.2
Customer related ECL allowance (drawn and undrawn)
UK mortgages 169 376 357 213 1,115
Credit cards 234 446 130 - 810
UK unsecured loans and overdrafts 153 244 118 - 515
UK Motor Finance(3) 188 91 63 - 342
Other 20 21 47 - 88
Retail 764 1,178 715 213 2,870
Business and Commercial Banking 140 231 167 - 538
Corporate and Institutional Banking 156 218 253 - 627
Commercial Banking 296 449 420 - 1,165
Equity Investments and Central Items - - 4 - 4
Total 1,060 1,627 1,139 213 4,039
UK mortgages (underlying basis)(A,2) 170 441 757 1,368
Retail (underlying basis)(A) 765 1,243 1,115 3,123
Total (underlying basis)(A) 1,061 1,692 1,539 4,292
Customer related ECL allowance (drawn and undrawn) as a percentage of loans
and advances to customers
Stage 1 Stage 2 Stage 3 POCI Total Adjusted Stage 3(4) Adjusted Total(4)
%
%
%
%
%
% %
UK mortgages 0.1 1.0 8.2 2.7 0.4
Credit cards 1.9 15.3 45.8 - 5.1 49.4 5.1
UK unsecured loans and overdrafts 2.2 20.6 60.2 - 6.1 65.6 6.1
UK Motor Finance 1.4 4.5 56.3 - 2.2
Other 0.1 4.0 32.6 - 0.5
Retail 0.2 2.6 14.1 2.7 0.8 14.2 0.8
Business and Commercial Banking 0.5 5.2 10.9 - 1.6 13.9 1.6
Corporate and Institutional Banking 0.3 6.2 47.0 - 1.1
Commercial Banking 0.4 5.6 20.3 - 1.3 24.1 1.3
Equity Investments and Central Items - - 66.7 - -
Total 0.3 3.1 15.9 2.7 0.9 16.8 0.9
UK mortgages (underlying basis)(A,2) 0.1 1.1 10.4 0.4
Retail (underlying basis)(A) 0.2 2.6 13.9 0.9 13.9 0.9
Total (underlying basis)(A) 0.3 3.0 15.2 0.9 15.8 0.9
(1) Contains central fair value hedge accounting adjustments.
(2) UK mortgages balances on an underlying basis(A) exclude the impact of
the HBOS acquisition-related adjustments.
(3) UK Motor Finance includes £187 million relating to provisions against
residual values of vehicles subject to finance leases.
(4) Stage 3 and Total exclude loans in recoveries in credit cards of
£21 million, UK unsecured loans and overdrafts of £16 million and Business
and Commercial Banking of £327 million.
(
)
CREDIT RISK (continued)
Stage 2 loans and advances to customers and expected credit loss allowance -
statutory and underlying(A) basis
Up to date 1 to 30 days Over 30 days Total
past due(2) past due
PD movements Other(1)
At 31 December 2024 Gross ECL(3) Gross ECL(3) Gross ECL(3) Gross ECL(3) Gross ECL(3)
lending £m lending £m lending £m lending £m lending £m
£m £m £m £m £m
UK mortgages 28,909 191 1,869 38 1,240 22 977 24 32,995 275
Credit cards 2,174 248 149 43 83 24 35 16 2,441 331
UK unsecured loans and overdrafts 630 129 439 52 131 36 47 18 1,247 235
UK Motor Finance 1,192 49 1,029 30 141 25 36 11 2,398 115
Other 103 3 321 7 37 2 55 2 516 14
Retail 33,008 620 3,807 170 1,632 109 1,150 71 39,597 970
Business and Commercial Banking 2,445 154 426 18 176 10 125 5 3,172 187
Corporate and Institutional Banking 1,903 125 45 1 6 - 42 3 1,996 129
Commercial Banking 4,348 279 471 19 182 10 167 8 5,168 316
Total 37,356 899 4,278 189 1,814 119 1,317 79 44,765 1,286
UK mortgages (underlying basis)(A) 31,510 216 2,000 41 1,559 27 1,236 30 36,305 314
Retail 35,609 645 3,938 173 1,951 114 1,409 77 42,907 1,009
(underlying basis)(A)
Total 39,957 924 4,409 192 2,133 124 1,576 85 48,075 1,325
(underlying basis)(A)
At 31 December 2023
UK mortgages 26,665 146 9,024 133 1,771 52 1,073 45 38,533 376
Credit cards 2,612 345 145 49 115 34 36 18 2,908 446
UK unsecured loans and overdrafts 756 148 279 46 112 34 40 16 1,187 244
UK Motor Finance 735 30 1,120 30 138 21 34 10 2,027 91
Other 125 5 295 7 52 5 53 4 525 21
Retail 30,893 674 10,863 265 2,188 146 1,236 93 45,180 1,178
Business and Commercial Banking 3,455 202 590 17 253 8 160 4 4,458 231
Corporate and Institutional Banking 3,356 214 14 - 28 3 131 1 3,529 218
Commercial Banking 6,811 416 604 17 281 11 291 5 7,987 449
Total 37,704 1,090 11,467 282 2,469 157 1,527 98 53,167 1,627
UK mortgages (underlying basis)(A) 28,126 157 9,990 156 2,297 64 1,498 64 41,911 441
Retail 32,354 685 11,829 288 2,714 158 1,661 112 48,558 1,243
(underlying basis)(A)
Total 39,165 1,101 12,433 305 2,995 169 1,952 117 56,545 1,692
(underlying basis)(A)
(1 ) Includes forbearance, client and product-specific indicators not
reflected within quantitative PD assessments.
(2) Includes assets that have triggered PD movements, or other rules, given
that being 1 to 29 days in arrears in and of itself is not a Stage 2 trigger.
(3) Expected credit loss allowance on loans and advances to customers (drawn
and undrawn).
LIQUIDITY RISK
The Group has maintained its strong funding and liquidity position with a loan
to deposit ratio of 95 per cent as at 31 December 2024 (31 December 2023: 95
per cent). Total wholesale funding decreased to £92.5 billion as at
31 December 2024 (31 December 2023: £98.7 billion) driven by a reduction in
Money Market funding. The Group maintains access to diverse sources and tenors
of funding.
The Group's liquid assets continue to exceed the regulatory minimum and
internal risk appetite, with a liquidity coverage ratio (LCR)(1) of 146 per
cent as at 31 December 2024 (31 December 2023: 142 per cent) calculated on a
Group consolidated basis based on the PRA rulebook. The increase in the LCR
resulted from a reduction in net cash outflows, primarily from a reduction in
wholesale funding. All assets within the liquid asset portfolio are hedged for
interest rate risk. Following the implementation of structural reform,
liquidity risk is managed at a legal entity level with the Group consolidated
LCR representing the composite of the Ring-Fenced Bank and Non-Ring-Fenced
Bank entities.
LCR eligible assets(1) have reduced to £134.4 billion (31 December 2023:
£136.0 billion), driven by a reduction in wholesale funding. In addition to
the Group's reported LCR eligible assets, the Group maintains borrowing
capacity at central banks which averaged £72 billion in the 12 months to 31
December 2024. The net stable funding ratio remains strong at 129 per cent
(based on a quarterly simple average over the previous four quarters) as at
31 December 2024 (31 December 2023: 130 per cent).
During 2024, the Group accessed wholesale funding across a range of currencies
and markets with term issuance volumes totalling £13.9 billion. The Group
expects full-year wholesale issuance requirements of less than £10.0 billion
for 2025. The total outstanding amount of drawings from the Bank of England's
Term Funding Scheme with additional incentives for SMEs (TFSME) has reduced to
£21.9 billion at 31 December 2024 (31 December 2023: £30.0 billion),
with maturities in 2025, 2027 and beyond. The repayment of TFSME has been
factored into the Group's funding plans.
The Group's credit ratings are well positioned and continue to reflect the
strength of the Group's management and franchise, along with its robust
financial performance, capital and funding position. In November 2024, Fitch
upgraded the Group's ratings by one notch.
(1) Based on a monthly simple average over the previous 12 months.
INTEREST RATE SENSITIVITY
The Group manages the risk to its earnings and capital from movements in
interest rates centrally by hedging the net liabilities which are stable or
less sensitive to movements in rates. As at 31 December 2024, the Group's
sterling structural hedge had a notional balance of £242 billion, a reduction
from £247 billion at 31 December 2023. This is consistent with the balance at
the end of the second and third quarters of 2024 (30 September 2024: £242
billion, 30 June 2024: £242 billion), given stability in deposit flows.
Illustrative cumulative impact of parallel shifts in interest rate curve(1)
The table below shows the banking book net interest income sensitivity to an
instantaneous parallel shift in interest rates. Sensitivities reflect shifts
in the interest rate curve. The actual impact will also depend on the
prevailing regulatory and competitive environment at the time. This
sensitivity is illustrative and does not reflect new business margin
implications and/or pricing actions today or in future periods, other than as
outlined. The sensitivity is greater on downward parallel shifts due to
pricing lags on deposit accounts.
The following assumptions have been applied:
• Instantaneous parallel shift in interest rate curve, including UK Bank
Rate
• Balance sheet remains constant
• Illustrative 50 per cent pass-through on deposits and 100 per cent
pass-through on assets, which could be different in practice
Year 1 Year 2 Year 3
£m
£m
£m
+50 basis points c.225 c.350 c.600
+25 basis points c.125 c.175 c.300
-25 basis points (c.150) (c.175) (c.300)
-50 basis points (c.300) (c.375) (c.600)
(1) Sensitivity based on modelled impact on banking book net interest
income, including the future impact of structural hedge maturities. Annual
impacts are presented for illustrative purposes only and are based on a number
of assumptions which are subject to change. Year 1 reflects the 12 months from
the 31 December 2024 balance sheet position.
STATUTORY INFORMATION
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
Note 2023
2024 £m
£m
Interest income 31,288 28,051
Interest expense (19,011) (14,753)
Net interest income 12,277 13,298
Fee and commission income 2,943 2,926
Fee and commission expense (1,184) (1,095)
Net fee and commission income 1,759 1,831
Net trading income (losses) 17,825 18,049
Insurance revenue 3,291 3,008
Insurance service expense (2,733) (2,414)
Net (expense) income from reinsurance contracts held (72) 2
Insurance service result 486 596
Other operating income 1,934 1,631
Other income 22,004 22,107
Total income 34,281 35,405
Net finance (expense) income from insurance, participating investment and (10,341) (11,684)
reinsurance contracts
Movement in third party interests in consolidated funds (1,059) (1,109)
Change in non-participating investment contracts (4,878) (3,983)
Net finance (expense) income in respect of insurance and investment contracts (16,278) (16,776)
Total income, after net finance expense in respect of insurance and investment 18,003 18,629
contracts
Operating expenses (11,601) (10,823)
Impairment (431) (303)
Profit before tax 5,971 7,503
Tax expense 3 (1,494) (1,985)
Profit for the year 4,477 5,518
Profit attributable to ordinary shareholders 3,923 4,933
Profit attributable to other equity holders 498 527
Profit attributable to equity holders 4,421 5,460
Profit attributable to non-controlling interests 56 58
Profit for the year 4,477 5,518
Basic earnings per share 6 6.3p 7.6p
Diluted earnings per share 6 6.2p 7.5p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2023
2024 £m
£m
Profit for the year 4,477 5,518
Other comprehensive income
Items that will not subsequently be reclassified to profit or loss:
Post-retirement defined benefit scheme remeasurements:
Remeasurements before tax (768) (1,633)
Current tax 50 376
Deferred tax 154 52
(564) (1,205)
Movements in revaluation reserve in respect of equity shares held at fair
value through other comprehensive income:
Change in fair value 93 (54)
Deferred tax - (3)
93 (57)
Gains and losses attributable to own credit risk:
(Losses) gains before tax (78) (234)
Deferred tax 22 66
(56) (168)
Items that may subsequently be reclassified to profit or loss:
Movements in revaluation reserve in respect of debt securities held at fair
value through other comprehensive income:
Change in fair value (53) (40)
Income statement transfers in respect of disposals (7) (122)
Income statement transfers in respect of impairment (3) (2)
Current tax 1 1
Deferred tax 16 46
(46) (117)
Movements in cash flow hedging reserve:
Effective portion of changes in fair value taken to other comprehensive income (2,577) 545
Net income statement transfers 2,597 1,838
Deferred tax (9) (673)
11 1,710
Movements in foreign currency translation reserve:
Currency translation differences (tax: £nil) (73) (53)
Transfers to income statement (tax: £nil) - -
(73) (53)
Total other comprehensive (loss) income for the year, net of tax (635) 110
Total comprehensive income (loss) for the year 3,842 5,628
Total comprehensive income (loss) attributable to ordinary shareholders 3,288 5,043
Total comprehensive income attributable to other equity holders 498 527
Total comprehensive income (loss) attributable to equity holders 3,786 5,570
Total comprehensive income attributable to non-controlling interests 56 58
Total comprehensive income (loss) for the year 3,842 5,628
CONSOLIDATED BALANCE SHEET
At 31 Dec At 31 Dec
2024 2023
£m £m
Assets
Cash and balances at central banks 62,705 78,110
Financial assets at fair value through profit or loss 215,925 203,318
Derivative financial instruments 24,065 22,356
Loans and advances to banks 7,900 10,764
Loans and advances to customers 459,857 449,745
Reverse repurchase agreements 49,476 38,771
Debt securities 14,544 15,355
Financial assets at amortised cost 531,777 514,635
Financial assets at fair value through other comprehensive income 30,690 27,592
Goodwill and other intangible assets 8,188 8,306
Current tax recoverable 526 1,183
Deferred tax assets 5,005 5,185
Retirement benefit assets 3,028 3,624
Other assets 24,788 17,144
Total assets 906,697 881,453
Liabilities
Deposits from banks 6,158 6,153
Customer deposits 482,745 471,396
Repurchase agreements at amortised cost 37,760 37,703
Financial liabilities at fair value through profit or loss 27,611 24,914
Derivative financial instruments 21,676 20,149
Notes in circulation 2,121 1,392
Debt securities in issue at amortised cost 70,834 75,592
Liabilities arising from insurance and participating investment contracts 122,064 120,123
Liabilities arising from non-participating investment contracts 51,228 44,978
Other liabilities 25,918 19,026
Retirement benefit obligations 122 136
Current tax liabilities 45 39
Deferred tax liabilities 125 157
Provisions 2,313 2,077
Subordinated liabilities 10,089 10,253
Total liabilities 860,809 834,088
Equity
Share capital 6,062 6,358
Share premium account 18,720 18,568
Other reserves 8,827 8,508
Retained profits 5,912 6,790
Ordinary shareholders' equity 39,521 40,224
Other equity instruments 6,195 6,940
Total equity excluding non-controlling interests 45,716 47,164
Non-controlling interests 172 201
Total equity 45,888 47,365
Total equity and liabilities 906,697 881,453
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to ordinary shareholders
Share Other Retained Total Other Non- Total
capital and reserves profits £m equity controlling £m
premium £m £m instruments interests
£m £m £m
At 1 January 2024 24,926 8,508 6,790 40,224 6,940 201 47,365
Comprehensive income
Profit for the year - - 3,923 3,923 498 56 4,477
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, net of tax - - (564) (564) - - (564)
Movements in revaluation reserve in respect of financial assets held at fair
value through other comprehensive income, net of tax:
Debt securities - (46) - (46) - - (46)
Equity shares - 93 - 93 - - 93
Gains and losses attributable to own credit risk, net of tax - - (56) (56) - - (56)
Movements in cash flow hedging reserve, net of tax - 11 - 11 - - 11
Movements in foreign currency translation reserve, net of tax - (73) - (73) - - (73)
Total other comprehensive loss - (15) (620) (635) - - (635)
Total comprehensive (loss) income(1) - (15) 3,303 3,288 498 56 3,842
Transactions with owners
Dividends - - (1,828) (1,828) - (83) (1,911)
Distributions on other equity instruments - - - - (498) - (498)
Issue of ordinary shares 190 - - 190 - - 190
Share buyback (369) 369 (2,011) (2,011) - - (2,011)
Redemption of preference shares 35 (35) - - - - -
Issue of other equity instruments - - (6) (6) 763 - 757
Repurchases and redemptions of other equity instruments - - (316) (316) (1,508) - (1,824)
Movement in treasury shares - - (173) (173) - - (173)
Value of employee services
Share option schemes - - 43 43 - - 43
Other employee award schemes - - 110 110 - - 110
Changes in non-controlling interests - - - - - (2) (2)
Total transactions with owners (144) 334 (4,181) (3,991) (1,243) (85) (5,319)
Realised gains and losses on equity shares held at fair value through other - - - - - - -
comprehensive income
At 31 December 2024 24,782 8,827 5,912 39,521 6,195 172 45,888
(1) Total comprehensive income attributable to owners of the parent was a
surplus of £3,786 million.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)
Attributable to ordinary shareholders
Share Other Retained Total Other Non- Total
capital and reserves profits £m equity controlling £m
premium £m £m instruments interests
£m £m £m
At 1 January 2023 25,233 6,587 6,550 38,370 5,297 244 43,911
Comprehensive income
Profit for the year - - 4,933 4,933 527 58 5,518
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, net of tax - - (1,205) (1,205) - - (1,205)
Movements in revaluation reserve in respect of financial assets held at fair
value through other comprehensive income, net of tax:
Debt securities - (117) - (117) - - (117)
Equity shares - (57) - (57) - - (57)
Gains and losses attributable to own credit risk, net of tax - - (168) (168) - - (168)
Movements in cash flow hedging reserve, net of tax - 1,710 - 1,710 - - 1,710
Movements in foreign currency translation reserve, net of tax - (53) - (53) - - (53)
Total other comprehensive income (loss) - 1,483 (1,373) 110 - - 110
Total comprehensive income(1) - 1,483 3,560 5,043 527 58 5,628
Transactions with owners
Dividends - - (1,651) (1,651) - (101) (1,752)
Distributions on other equity instruments - - - - (527) - (527)
Issue of ordinary shares 131 - - 131 - - 131
Share buyback (438) 438 (1,993) (1,993) - - (1,993)
Issue of other equity instruments - - (6) (6) 1,778 - 1,772
Repurchases and redemptions of other equity instruments - - - - (135) - (135)
Movement in treasury shares - - 103 103 - - 103
Value of employee services
Share option schemes - - 58 58 - - 58
Other employee award schemes - - 169 169 - - 169
Changes in non-controlling interests - - - - - - -
Total transactions with owners (307) 438 (3,320) (3,189) 1,116 (101) (2,174)
Realised gains and losses on equity shares held at fair value through other - - - - - - -
comprehensive income
At 31 December 2023 24,926 8,508 6,790 40,224 6,940 201 47,365
(1) Total comprehensive income attributable to owners of the parent was a
surplus of £5,570 million.
CONSOLIDATED CASH FLOW STATEMENT
2024 2023
£m £m
Cash flows from operating activities
Profit before tax 5,971 7,503
Adjustments for:
Change in operating assets (39,622) (9,110)
Change in operating liabilities 23,603 4,232
Non-cash and other items 5,990 5,622
Tax paid (1,305) (1,437)
Tax refunded 970 -
Net cash (used in) provided by operating activities (4,393) 6,810
Cash flows (used in) provided by investing activities
Purchase of financial assets (10,518) (10,311)
Proceeds from sale and maturity of financial assets 7,062 5,298
Purchase of fixed assets (4,364) (3,961)
Purchase of other intangible assets (1,259) (1,494)
Proceeds from sale of fixed assets 1,505 1,027
Proceeds from sale of goodwill and other intangible assets 62 -
Acquisition of businesses and joint ventures, net of cash acquired (179) (380)
Net cash (used in) provided by investing activities (7,691) (9,821)
Cash flows used in financing activities
Dividends paid to ordinary shareholders (1,828) (1,651)
Distributions in respect of other equity instruments (498) (527)
Distributions in respect of non-controlling interests (83) (101)
Interest paid on subordinated liabilities (622) (623)
Proceeds from issue of subordinated liabilities 812 1,417
Proceeds from issue of other equity instruments 757 1,772
Proceeds from issue of ordinary shares 187 86
Share buyback (2,011) (1,993)
Repayment of subordinated liabilities (819) (1,745)
Repurchases and redemptions of other equity instruments (1,824) (135)
Change in stake of non-controlling interests (2) -
Net cash used in financing activities (5,931) (3,500)
Effects of exchange rate changes on cash and cash equivalents (7) (480)
Change in cash and cash equivalents (18,022) (6,991)
Cash and cash equivalents at beginning of year 88,838 95,829
Cash and cash equivalents at end of year 70,816 88,838
Cash and cash equivalents comprise cash and non-mandatory balances with
central banks and amounts due from banks with a maturity of less than three
months. Included within cash and cash equivalents at 31 December 2024 is
£23 million (31 December 2023: £31 million) of restricted cash and cash
equivalents held within the Group's long-term insurance and investments
operations, which is not immediately available for use in the business.
Interest received was £29,721 million (2023: £26,461 million; 2022: £16,074
million) and interest paid was £17,840 million (2023: £11,100 million;
2022: £3,320 million).
(
)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting policies and presentation
These condensed consolidated financial statements as at and for the year to 31
December 2024 have been prepared in accordance with the Listing Rules of the
Financial Conduct Authority (FCA) relating to Preliminary Announcements and
comprise the results of Lloyds Banking Group plc (the Company) together with
its subsidiaries (the Group). They do not include all of the information
required for full annual financial statements. Copies of the 2024 annual
report and accounts will be available on the Group's website and upon request
from Investor Relations, Lloyds Banking Group plc, 25 Gresham Street, London
EC2V 7HN.
The directors consider that it is appropriate to continue to adopt the going
concern basis in preparing the financial statements. In reaching this
assessment, the directors have considered the Group's capital and funding
position, the impact of climate change upon the Group's future performance and
the results from stress testing scenarios.
The Group's accounting policies are consistent with those applied by the Group
in its financial statements for the year ended 31 December 2023 and there
have been no changes in the Group's methods of computation. The Group's
accounting policies are set out in full in the 2024 annual report and
accounts.
The financial information contained in this document does not constitute
statutory accounts within the meaning of section 434 of the Companies Act 2006
(the Act). The statutory accounts for the year ended 31 December 2024 will be
published on the Group's website and will be delivered to the Registrar of
Companies in accordance with section 441 of the Act. The statutory accounts
for the year ended 31 December 2023 have been filed with the Registrar of
Companies. The report of the auditor on those accounts was unqualified, did
not draw attention to any matters by way of emphasis and did not include a
statement under sections 498(2) or 498(3) of the Act.
2. Critical accounting judgements and key sources of estimation
uncertainty
The critical accounting judgements and key sources of estimation uncertainty
made by management in applying the Group's accounting policies are set out in
full in the Group's 2024 annual report and accounts. Those affecting the
Group's recognition and measurement of allowance for expected credit losses
are set out in note 4.
3. Tax expense
The UK corporation tax rate for the year was 25.0 per cent per cent (2023:
23.5 per cent). The increase in applicable tax rate from 2023 relates to the
change in statutory tax rate effective from 1 April 2023. An explanation of
the relationship between tax expense and accounting profit is set out below.
2024 2023
£m £m
Profit before tax 5,971 7,503
UK corporation tax thereon (1,493) (1,763)
Impact of surcharge on banking profits (157) (305)
Non-deductible costs: conduct charges (27) (29)
Non-deductible costs: bank levy (37) (35)
Other non-deductible costs (73) (106)
Non-taxable income 78 80
Tax relief on coupons on other equity instruments 125 124
Tax-exempt gains on disposals 98 35
Policyholder tax (75) (61)
Deferred tax asset in respect of life assurance expenses (5) 84
Adjustments in respect of prior years 94 -
Other (22) (9)
Tax expense (1,494) (1,985)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. Allowance for expected credit losses
The calculation of the Group's allowance for expected credit loss allowances
requires the Group to make a number of judgements, assumptions and estimates.
These are set out in full in note 21 of the Group's 2024 annual report and
accounts, with the most significant detailed below.
The table below analyses total ECL allowances by portfolio, separately
identifying the amounts that have been modelled, those that have been
individually assessed and those arising through the application of judgemental
adjustments.
Judgemental adjustments due to:
At 31 December 2024 Modelled Individually Inflationary Other Total
ECL assessed and interest £m ECL
£m £m rate risk £m
£m
UK mortgages 720 - - 132 852
Credit cards 681 - - (7) 674
Other Retail 860 - - 90 950
Commercial Banking 894 354 - (259) 989
Other 16 - - - 16
Total 3,171 354 - (44) 3,481
At 31 December 2023
UK mortgages 991 - 61 63 1,115
Credit cards 703 - 92 15 810
Other Retail 866 - 33 46 945
Commercial Banking 1,124 340 - (282) 1,182
Other 32 - - - 32
Total 3,716 340 186 (158) 4,084
Application of judgement in adjustments to modelled ECL
Impairment models fall within the Group's model risk framework with model
monitoring, periodic validation and back testing performed on model
components, such as probability of default. Limitations in the models or data
inputs may be identified through these assessments and review of model
outputs, which may require appropriate judgemental adjustments to the ECL.
These adjustments are determined by considering the particular attributes of
exposures which have not been adequately captured by the impairment models and
range from changes to model inputs and parameters, at account level (in-model
adjustments), through to more qualitative post-model adjustments.
During 2022 and 2023 the intensifying inflationary pressures, alongside rising
interest rates created further risks not deemed to be fully captured by ECL
models which meant judgemental adjustments were required. Throughout 2024
these risks subsided with inflation back at around 2 per cent, base rates
reducing and credit performance proving resilient. As a result, the judgements
held in respect of inflationary and interest rate risks have been removed
(2023: £186 million). Other judgements continue to be applied for broader
data and model limitations, both increasing and decreasing ECL where deemed
necessary.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. Allowance for expected credit losses (continued)
Generation of multiple economic scenarios
The estimate of expected credit losses is required to be based on an unbiased
expectation of future economic scenarios. The approach used to generate the
range of future economic scenarios depends on the methodology and judgements
adopted. The Group's approach is to start from a defined base case scenario,
used for planning purposes, and to generate alternative economic scenarios
around this base case. The base case scenario is a conditional forecast
underpinned by a number of conditioning assumptions that reflect the Group's
best view of key future developments. If circumstances appear likely to
materially deviate from the conditioning assumptions, then the base case
scenario is updated.
The base case scenario is central to a range of future economic scenarios
generated by simulation of an economic model, for which the same conditioning
assumptions apply as in the base case scenario. These scenarios are ranked by
using estimated relationships with industry-wide historical loss data. With
the base case already pre-defined, three other scenarios are identified as
averages of constituent scenarios located around the 15th, 75th and 95th
percentiles of the distribution. The full distribution is therefore summarised
by a practical number of scenarios to run through ECL models representing an
upside, the base case, and a downside scenario weighted at 30 per cent each,
together with a severe downside scenario weighted at 10 per cent. The scenario
weights represent the distribution of economic scenarios and not subjective
views on likelihood. The inclusion of a severe downside scenario with a
smaller weighting ensures that the non-linearity of losses in the tail of the
distribution is adequately captured. Macroeconomic projections may employ
reversionary techniques to adjust the paths of economic drivers towards
long-run equilibria after a reasonable forecast horizon. The Group does not
use such techniques to force the MES scenarios to revert to the base case
planning view. Utilising such techniques would be expected to be immaterial
for expected credit losses since loss sensitivity is minimal after the initial
five years of the projections.
A forum under the chairmanship of the Chief Economist meets at least quarterly
to review and, if appropriate, recommend changes to the method by which
economic scenarios are generated, for approval by the Chief Financial Officer
and Chief Risk Officer. The Group continues to judge it appropriate to include
a non-modelled severe downside scenario for Group ECL calculations. The
scenario is generated as a simple average of a fully modelled severe scenario,
better representing shocks to demand, and a scenario with higher paths for UK
Bank Rate and CPI inflation, as a representation of shocks to supply. The
combined 'adjusted' scenario used in ECL modelling is considered to better
reflect the risks around the Group's base case view in an economic environment
where demand and supply shocks are more balanced.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. Allowance for expected credit losses (continued)
Base case and MES economic assumptions
The Group's base case economic scenario has been updated to reflect ongoing
geopolitical developments and changes in domestic economic policy. The Group's
updated base case scenario has three conditioning assumptions. First,
cross-border conflicts do not lead to major disruptions in commodity prices or
global trade. Second, the US pursues a more isolationist economic agenda, with
policies including trade tariffs; immigration cuts; and unfunded tax cuts.
China, EU and UK are assumed to retaliate to US tariffs imposed on them.
Third, UK Budget public investment plans are assumed to have a small but
positive impact on trend productivity growth, subject to further review as
more specific policy detail emerges.
Based on these assumptions and incorporating the economic data published in
the fourth quarter, the Group's base case scenario is for a slow expansion in
GDP and a rise in the unemployment rate alongside modest changes in
residential and commercial property prices. Against a backdrop of some
persistence in inflationary pressures, UK Bank Rate is expected to be lowered
gradually 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 accommodated 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 in the fourth
quarter of 2024, for which actuals may have since emerged prior to
publication.
Scenarios by year
The key UK economic assumptions made by the Group are shown in the following
tables across a number of measures explained below.
Annual assumptions
Gross domestic product (GDP) growth and Consumer Price Index (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 over
each year. Unemployment rate and UK Bank Rate are averages over the year.
Five-year average
The five-year average reflects the average annual growth rate, or level, over
the five-year period. It includes movements within the current reporting year,
such that the position as at 31 December 2024 covers the five years 2024 to
2028. The inclusion of the reporting year within the five-year period reflects
the need to predict variables which remain unpublished at the reporting date
and recognises that credit models utilise both level and annual changes. The
use of calendar years maintains a comparability between the annual assumptions
presented.
Five-year start to peak and trough
The peak or trough for any metric may occur intra year and therefore not be
identifiable from the annual assumptions, so they are also disclosed. For GDP,
house price growth and commercial real estate price growth, the peak, or
trough, reflects the highest, or lowest cumulative quarterly position reached
relative to the start of the five-year period, which as at 31 December 2024 is
1 January 2024. Given these metrics may exhibit increases followed by greater
falls, the start to trough movements quoted may be smaller than the equivalent
'peak to trough' movement (and vice versa for start to peak). Unemployment, UK
Bank Rate and CPI inflation reflect the highest, or lowest, quarterly level
reached in the five-year period.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. Allowance for expected credit losses (continued)
At 31 December 2024 2024 2025 2026 2027 2028 2024 Start to Start to
% % % % % to 2028 average peak trough
% % %
Upside
Gross domestic product 0.8 1.9 2.2 1.5 1.4 1.6 8.9 0.7
Unemployment rate 4.3 3.5 2.8 2.7 2.8 3.2 4.4 2.7
House price growth 3.4 3.7 6.5 6.6 5.4 5.1 28.2 0.4
Commercial real estate price growth 0.7 7.8 6.7 3.2 0.5 3.7 20.0 (0.8)
UK Bank Rate 5.06 4.71 5.02 5.19 5.42 5.08 5.50 4.50
CPI inflation 2.6 2.8 2.6 2.9 3.0 2.8 3.5 2.0
Base case
Gross domestic product 0.8 1.0 1.4 1.5 1.5 1.2 7.0 0.7
Unemployment rate 4.3 4.7 4.7 4.5 4.5 4.5 4.8 4.2
House price growth 3.4 2.1 1.0 1.4 2.4 2.0 10.5 0.4
Commercial real estate price growth 0.7 0.3 2.5 1.9 0.0 1.1 5.4 (0.8)
UK Bank Rate 5.06 4.19 3.63 3.50 3.50 3.98 5.25 3.50
CPI inflation 2.6 2.8 2.4 2.4 2.2 2.5 3.5 2.0
Downside
Gross domestic product 0.8 (0.5) (0.4) 1.0 1.5 0.5 3.2 0.0
Unemployment rate 4.3 6.0 7.4 7.4 7.1 6.4 7.5 4.2
House price growth 3.4 0.6 (5.5) (6.6) (3.4) (2.4) 4.0 (11.4)
Commercial real estate price growth 0.7 (7.8) (3.1) (0.9) (2.3) (2.7) 0.7 (12.9)
UK Bank Rate 5.06 3.53 1.56 0.96 0.68 2.36 5.25 0.59
CPI inflation 2.6 2.8 2.3 1.8 1.2 2.1 3.5 0.9
Severe downside
Gross domestic product 0.8 (1.9) (1.5) 0.7 1.3 (0.1) 1.2 (2.4)
Unemployment rate 4.3 7.7 10.0 10.0 9.7 8.4 10.2 4.2
House price growth 3.4 (0.8) (12.4) (13.6) (8.8) (6.7) 3.4 (29.2)
Commercial real estate price growth 0.7 (17.4) (8.5) (5.5) (5.7) (7.5) 0.7 (32.3)
UK Bank Rate - modelled 5.06 2.68 0.28 0.08 0.02 1.62 5.25 0.02
UK Bank Rate - adjusted(1) 5.06 4.03 2.70 2.23 1.95 3.19 5.25 1.88
CPI inflation - modelled 2.6 2.8 1.9 1.0 0.1 1.7 3.5 (0.2)
CPI inflation - adjusted(1) 2.6 3.6 2.1 1.4 0.8 2.1 3.9 0.7
Probability-weighted
Gross domestic product 0.8 0.5 0.8 1.2 1.4 1.0 5.7 0.7
Unemployment rate 4.3 5.0 5.5 5.4 5.3 5.1 5.5 4.2
House price growth 3.4 1.8 (0.7) (1.0) 0.4 0.8 5.3 0.4
Commercial real estate price growth 0.7 (1.7) 1.0 0.7 (1.1) (0.1) 0.7 (1.3)
UK Bank Rate - modelled 5.06 4.00 3.09 2.90 2.88 3.59 5.25 2.88
UK Bank Rate - adjusted(1) 5.06 4.13 3.33 3.12 3.08 3.74 5.25 3.06
CPI inflation - modelled 2.6 2.8 2.4 2.2 1.9 2.4 3.5 1.8
CPI inflation - adjusted(1) 2.6 2.9 2.4 2.3 2.0 2.4 3.5 1.9
(1) The adjustment to UK Bank Rate and CPI inflation in the severe downside
is considered to better reflect the risks around the Group's base case view in
an economic environment where the risks of supply and demand shocks are more
balanced.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. Allowance for expected credit losses (continued)
At 31 December 2023 2023 2024 2025 2026 2027 2023 Start to Start to
% % % % % to 2027 average peak trough
% % %
Upside
Gross domestic product 0.3 1.5 1.7 1.7 1.9 1.4 8.1 0.2
Unemployment rate 4.0 3.3 3.1 3.1 3.1 3.3 4.2 3.0
House price growth 1.9 0.8 6.9 7.2 6.8 4.7 25.7 (1.2)
Commercial real estate price growth (3.9) 9.0 3.8 1.3 1.3 2.2 11.5 (3.9)
UK Bank Rate 4.94 5.72 5.61 5.38 5.18 5.37 5.79 4.25
CPI inflation 7.3 2.7 3.1 3.2 3.1 3.9 10.2 2.1
Base case
Gross domestic product 0.3 0.5 1.2 1.7 1.9 1.1 6.4 0.2
Unemployment rate 4.2 4.9 5.2 5.2 5.0 4.9 5.2 3.9
House price growth 1.4 (2.2) 0.5 1.6 3.5 1.0 4.8 (1.2)
Commercial real estate price growth (5.1) (0.2) 0.1 0.0 0.8 (0.9) (1.2) (5.3)
UK Bank Rate 4.94 4.88 4.00 3.50 3.06 4.08 5.25 3.00
CPI inflation 7.3 2.7 2.9 2.5 2.2 3.5 10.2 2.1
Downside
Gross domestic product 0.2 (1.0) (0.1) 1.5 2.0 0.5 3.4 (1.2)
Unemployment rate 4.3 6.5 7.8 7.9 7.6 6.8 8.0 3.9
House price growth 1.3 (4.5) (6.0) (5.6) (1.7) (3.4) 2.0 (15.7)
Commercial real estate price growth (6.0) (8.7) (4.0) (2.1) (1.2) (4.4) (1.2) (20.4)
UK Bank Rate 4.94 3.95 1.96 1.13 0.55 2.51 5.25 0.43
CPI inflation 7.3 2.8 2.7 1.8 1.1 3.2 10.2 1.0
Severe downside
Gross domestic product 0.1 (2.3) (0.5) 1.3 1.8 0.1 1.0 (2.9)
Unemployment rate 4.5 8.7 10.4 10.5 10.1 8.8 10.5 3.9
House price growth 0.6 (7.6) (13.3) (12.7) (7.5) (8.2) 2.0 (35.0)
Commercial real estate price growth (7.7) (19.5) (10.6) (7.7) (5.2) (10.3) (1.2) (41.8)
UK Bank Rate - modelled 4.94 2.75 0.49 0.13 0.03 1.67 5.25 0.02
UK Bank Rate - adjusted(1) 4.94 6.56 4.56 3.63 3.13 4.56 6.75 3.00
CPI inflation - modelled 7.3 2.7 2.2 0.9 (0.2) 2.6 10.2 (0.3)
CPI inflation - adjusted(1) 7.6 7.5 3.5 1.3 1.0 4.2 10.2 0.9
Probability-weighted
Gross domestic product 0.3 0.1 0.8 1.6 1.9 0.9 5.4 0.1
Unemployment rate 4.2 5.3 5.9 5.9 5.7 5.4 6.0 3.9
House price growth 1.4 (2.5) (0.9) (0.3) 1.8 (0.1) 2.0 (2.8)
Commercial real estate price growth (5.3) (1.9) (1.1) (1.0) (0.2) (1.9) (1.2) (9.9)
UK Bank Rate - modelled 4.94 4.64 3.52 3.02 2.64 3.75 5.25 2.59
UK Bank Rate - adjusted(1) 4.94 5.02 3.93 3.37 2.95 4.04 5.42 2.89
CPI inflation - modelled 7.3 2.7 2.8 2.3 1.9 3.4 10.2 1.9
CPI inflation - adjusted(1) 7.4 3.2 3.0 2.4 2.0 3.6 10.2 2.0
(1) The adjustment to UK Bank Rate and CPI inflation in the severe downside
is considered to better reflect the risks around the Group's base case view in
an economic environment where supply shocks are the principal concern.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. Allowance for expected credit losses (continued)
Base case scenario by quarter
Gross domestic product 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 December 2024 First Second Third Fourth First Second Third Fourth
quarter quarter quarter quarter quarter quarter quarter quarter
2024 2024 2024 2024 2025 2025 2025 2025
% % % % % % % %
Gross domestic product 0.7 0.4 0.0 0.1 0.2 0.3 0.3 0.3
Unemployment rate 4.3 4.2 4.3 4.4 4.5 4.6 4.7 4.8
House price growth 0.4 1.8 4.6 3.4 3.6 4.0 3.0 2.1
Commercial real estate price growth (5.3) (4.7) (2.8) 0.7 1.8 1.4 0.9 0.3
UK Bank Rate 5.25 5.25 5.00 4.75 4.50 4.25 4.00 4.00
CPI inflation 3.5 2.1 2.0 2.5 2.4 3.0 2.9 2.7
At 31 December 2023 First Second Third Fourth First Second Third Fourth
quarter quarter quarter quarter quarter quarter quarter quarter
2023 2023 2023 2023 2024 2024 2024 2024
% % % % % % % %
Gross domestic product 0.3 0.0 (0.1) 0.0 0.1 0.2 0.3 0.3
Unemployment rate 3.9 4.2 4.2 4.3 4.5 4.8 5.0 5.2
House price growth 1.6 (2.6) (4.5) 1.4 (1.1) (1.5) 0.5 (2.2)
Commercial real estate price growth (18.8) (21.2) (18.2) (5.1) (4.1) (3.8) (2.2) (0.2)
UK Bank Rate 4.25 5.00 5.25 5.25 5.25 5.00 4.75 4.50
CPI inflation 10.2 8.4 6.7 4.0 3.8 2.1 2.3 2.8
ECL sensitivity to economic assumptions
The impact of isolated changes in the UK unemployment rate and House Price
Index (HPI) has been assessed on a univariate basis. Although such changes
would not be observed in isolation, as economic indicators tend to be
correlated in a coherent scenario, this gives insight into the sensitivity of
the Group's ECL to gradual changes in these two critical economic factors.
The impacts are assessed as changes to base case modelled ECL only (at 100 per
cent weighting) with staging held flat to the reported view. The probability
weighted ECL impact of applying the changes to all four scenarios, including
the impact on staging and post model adjustments, would be greater.
The table below shows the impact on the Group's ECL resulting from a 1
percentage point increase or decrease in the UK unemployment rate. The
increase or decrease is presented based on the adjustment phased evenly over
the first 10 quarters of the base case scenario. A more immediate increase or
decrease would drive a more material ECL impact as it would be fully reflected
in both 12-month and lifetime probability of defaults.
At 31 December 2024 At 31 December 2023
1pp increase in 1pp decrease in 1pp increase in 1pp decrease in
unemployment unemployment unemployment unemployment
£m £m £m £m
UK mortgages(1) 4 (3) 33 (32)
Credit cards 40 (41) 38 (38)
Other Retail 18 (20) 19 (19)
Commercial Banking 71 (67) 88 (83)
ECL allowance 133 (131) 178 (172)
(1 ) 2024 calculated using updated models.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. Allowance for expected credit losses (continued)
The table below shows the impact on the Group's ECL in respect of UK mortgages
of an increase or decrease in loss given default for a 10 percentage point
increase or decrease in HPI. The increase or decrease is presented based on
the adjustment phased evenly over the first 10 quarters of the base case
scenario.
At 31 December 2024 At 31 December 2023
10pp increase 10pp decrease 10pp increase 10pp decrease
in HPI in HPI in HPI in HPI
£m £m £m £m
ECL impact(1) (127) 182 (201) 305
(1 ) 2024 calculated using updated models.
5. Provisions
Regulatory and legal provisions
In the course of its business, the Group is engaged on a regular basis in
discussions with UK and overseas regulators and other governmental authorities
on a range of matters, including legal and regulatory reviews and, from time
to time, enforcement investigations (including in relation to compliance with
applicable laws and regulations, such as those relating to prudential
regulation, consumer protection, investment advice, employment, business
conduct, systems and controls, environmental, sustainability,
competition/anti-trust, tax, anti-bribery, anti-money laundering and
sanctions). Any matters discussed or identified during such discussions and
inquiries may result in, among other things, further inquiry or investigation,
other action being taken by governmental and/or regulatory authorities,
increased costs being incurred by the Group, remediation of systems and
controls, public or private censure, restriction of the Group's business
activities and/or fines. The Group also receives complaints in connection with
its past conduct and claims brought by or on behalf of current and former
employees, customers (including their appointed representatives), investors
and other third parties and is subject to legal proceedings and other legal
actions from time to time. Any events or circumstances disclosed could have a
material adverse effect on the Group's financial position, operations or cash
flows. Provisions are held where the Group can reliably estimate a probable
outflow of economic resources. The ultimate liability of the Group may be
significantly more, or less, than the amount of any provision recognised. If
the Group is unable to determine a reliable estimate, a contingent liability
is disclosed. The recognition of a provision does not amount to an admission
of liability or wrongdoing on the part of the Group. During the year ended
31 December 2024 the Group charged a further £899 million in respect of
legal actions and other regulatory matters and the unutilised balance at
31 December 2024 was £1,600 million (31 December 2023: £1,105 million).
The most significant items are outlined below.
Motor commission review
The Group recognised a £450 million provision in 2023 for the potential
impact of the FCA review into historical motor finance commission arrangements
and sales announced in January 2024. In the fourth quarter of 2024, a further
£700 million provision has been recognised in relation to motor finance
commission arrangements, in light of the Court of Appeal (CoA) decisions
handed down in their judgment in Wrench, Johnson and Hopcraft (WJH) in October
2024, which goes beyond the scope of the original FCA motor finance
commissions review.
The CoA judgment in WJH, determined that motor dealers acting as credit
brokers owe certain duties to disclose to their customers commission payable
to them by lenders, and that lenders will be liable for dealers'
non-disclosures. This sets a higher bar for the disclosure of and consent to
the existence, nature, and quantum of any commission paid than had been
understood to be required or applied across the motor finance industry prior
to the decision. The Group's understanding of compliant disclosure was built
on FCA and other regulatory guidance and previous legal authorities. These CoA
decisions relate to commission disclosure and consent obligations which go
beyond the scope of the current FCA motor finance commissions review. The
Supreme Court granted the relevant lenders permission to appeal the WJH
judgment and the substantive hearing is scheduled to be heard on 1 April to 3
April 2025.
Following the WJH decision, the FCA extended their temporary complaint
handling rules in relation to discretionary commission arrangements (DCA)
complaints to include non-DCA commission complaints until December 2025. The
FCA has also announced that it intends to set out next steps in its review
into DCAs in May 2025 and hopes to provide an update on motor finance non-DCA
complaints at the same time, but its next steps in relation to both types of
complaint will depend on the progress of the appeal to the Supreme Court of
WJH and the timing and nature of any decision. In addition, there are a number
of other relevant judicial proceedings which may influence the eventual
outcome, including a judicial review (which is now subject to appeal) of a
final decision by the Financial Ombudsman Service (FOS) against another lender
that was heard in October 2024.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Provisions (continued)
The Group continues to receive complaints as well as claims in the County
Courts in respect of motor finance commissions. A large number of those claims
have been stayed, as has a claim in the Competition Appeal Tribunal.
In establishing the provision estimate, the Group has created a number of
scenarios to address uncertainties around a number of key assumptions. These
include the potential outcomes of the Supreme Court appeal, any steps that the
FCA may take and outcomes in relation to the extent of harm and remedies.
Other key assumptions include applicable commission models, commission rates,
time periods, response rates, uphold rates, levels of redress / interest
applied and costs to deliver. The Group will continue to assess developments
and potential impacts, including the outcome of the appeals, any announcement
by the FCA of their next steps, and any action by other regulators or
government bodies. Given that there is a significant level of uncertainty in
terms of the eventual outcome, the ultimate financial impact could materially
differ from the amount provided.
HBOS Reading - review
The Group continues to apply the recommendations from Sir Ross Cranston's
review, issued in December 2019, including a reassessment of direct and
consequential losses by an independent panel (the Foskett Panel), an extension
of debt relief and a wider definition of de facto directors. The Foskett
Panel's full scope and methodology was published on 7 July 2020. The Foskett
Panel's stated objective is to consider cases via a non-legalistic and fair
process and to make its decisions in a generous, fair and common sense manner,
assessing claims against an expanded definition of the fraud and on a lower
evidential basis.
In June 2022, the Foskett Panel announced an alternative option, in the form
of a fixed sum award which could be accepted as an alternative to
participation in the full re-review process, to support earlier resolution of
claims for those deemed by the Foskett Panel to be victims of the fraud.
Virtually all of the population have now had decisions via the Fixed Sum Award
process, with operational costs, redress and tax costs associated with the
re-reviews recognised within the amount provided.
Notwithstanding the settled claims and the increase in outcomes which builds
confidence in the full estimated cost, uncertainties remain and the final
outcome could be different. There is no confirmed timeline for the completion
of the re-review process nor the review by Dame Linda Dobbs. The Group remains
committed to implementing the recommendations in full.
Payment protection insurance (PPI)
The Group continues to challenge PPI litigation cases, with mainly operational
costs and legal fees associated with litigation activity recognised within
regulatory and legal provisions.
Customer claims in relation to insurance branch business in Germany
The Group continues to receive claims from customers in Germany relating to
policies issued by Clerical Medical Investment Group Limited (subsequently
renamed Scottish Widows Limited), with smaller numbers of claims received from
customers in Austria and Italy. Operational costs, redress and legal fees
associated with the claims are recognised within regulatory and legal
provisions.
6. Earnings per share
2024 2023
£m £m
Profit attributable to ordinary shareholders - basic and diluted 3,923 4,933
2024 2023
million million
Weighted average number of ordinary shares in issue - basic 62,413 64,953
Adjustment for share options and awards 661 807
Weighted average number of ordinary shares in issue - diluted 63,074 65,760
Basic earnings per share 6.3p 7.6p
Diluted earnings per share 6.2p 7.5p
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. Dividends on ordinary shares and share buyback
The directors have recommended a final dividend, which is subject to approval
by the shareholders at the annual general meeting on 15 May 2025, of 2.11
pence per ordinary share (2023: 1.84 pence per ordinary share), equivalent to
£1,276 million, before the impact of any cancellations of shares under the
Company's buyback programme (2023: £1,169 million, following cancellations
of shares under the Company's 2024 buyback programme up to the record date),
which will be paid on 20 May 2025. These financial statements do not reflect
the recommended dividend.
Shareholders who have already joined the dividend reinvestment plan will
automatically receive shares instead of the cash dividend. Key dates for the
payment of the recommended dividend are outlined on page 66.
Share buyback
The Board has announced its intention to implement an ordinary share buyback
of up to £1.7 billion. This represents the return to shareholders of capital,
surplus to that required to provide capacity to grow the business, meet
current and future regulatory requirements and cover uncertainties. The share
buyback programme will commence as soon as is practicable and is expected to
be completed, subject to continued authority from the PRA, by 31 December
2025.
8. Contingent liabilities and commitments
Interchange fees
With respect to multi-lateral interchange fees (MIFs), the Group is not a
party in the ongoing or threatened litigation which involves the card schemes
Visa and Mastercard or any settlements of such litigation. However, the Group
is a member/licensee of Visa and Mastercard and other card schemes. The
litigation in question is as follows:
• Litigation brought by or on behalf of retailers against both Visa and
Mastercard in the English Courts, in which retailers are seeking damages on
grounds that Visa and Mastercard's MIFs breached competition law (this
includes a judgment of the Supreme Court in June 2020 upholding the Court of
Appeal's finding in 2018 that certain historic interchange arrangements of
Mastercard and Visa infringed competition law)
• Litigation brought on behalf of UK consumers in the English Courts
against Mastercard
Any impact on the Group of the litigation against Visa and Mastercard remains
uncertain at this time, such that it is not practicable for the Group to
provide an estimate of any potential financial effect. Insofar as Visa is
required to pay damages to retailers for interchange fees set prior to June
2016, contractual arrangements to allocate liability have been agreed between
various UK banks (including the Group) and Visa Inc, as part of Visa Inc's
acquisition of Visa Europe in 2016. These arrangements cap the maximum amount
of liability to which the Group may be subject and this cap is set at the cash
consideration received by the Group for the sale of its stake in Visa Europe
to Visa Inc in 2016. In 2016, the Group received Visa preference shares as
part of the consideration for the sale of its shares in Visa Europe. A release
assessment is carried out by Visa on certain anniversaries of the sale (in
line with the Visa Europe sale documentation) and as a result, some Visa
preference shares may be converted into Visa Inc Class A common stock from
time to time. Any such release and any subsequent sale of Visa common stock
does not impact the contingent liability.
LIBOR and other trading rates
Certain Group companies, together with other panel banks, have been named as
defendants in ongoing private lawsuits, including purported class action
suits, in the US in connection with their roles as panel banks contributing to
the setting of US dollar, Japanese yen and Sterling London Interbank Offered
Rate.
Certain Group companies are also named as defendants in (i) UK-based claims,
and (ii) two Dutch class actions, raising LIBOR manipulation allegations. A
number of claims against the Group in the UK relating to the alleged mis-sale
of interest rate hedging products also include allegations of LIBOR
manipulation.
It is currently not possible to predict the scope and ultimate outcome on the
Group of any private lawsuits or ongoing related challenges to the
interpretation or validity of any of the Group's contractual arrangements,
including their timing and scale. As such, it is not practicable to provide an
estimate of any potential financial effect.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. Contingent liabilities and commitments (continued)
Tax authorities
The Group has an open matter in relation to a claim for group relief of losses
incurred in its former Irish banking subsidiary, which ceased trading on 31
December 2010. In 2020, HMRC concluded its enquiry into the matter and issued
a closure notice denying the group relief claim. The Group appealed to the
First Tier Tax Tribunal. The hearing took place in May 2023. In January 2025,
the First Tier Tribunal concluded in favour of HMRC. The Group believes it has
applied the rules correctly and that the claim for group relief is correct.
Having reviewed the Tribunal's conclusions and having taken appropriate
advice, the Group intends to appeal the decision and does not consider this to
be a case where an additional tax liability will ultimately fall due. If the
final determination of the matter by the judicial process is that HMRC's
position is correct, management believes that this would result in an increase
in current tax liabilities of approximately £975 million (including
interest) and a reduction in the Group's deferred tax asset of approximately
£275 million. Following the First Tier Tax Tribunal outcome, the tax will be
paid and recognised as a current tax asset, given the Group's view that the
tax liability will not ultimately fall due. It is unlikely that any appeal
hearing will be held before 2026, and final conclusion of the judicial process
may not be for several years.
There are a number of other open matters on which the Group is in discussions
with HMRC (including the tax treatment of certain costs arising from the
divestment of TSB Banking Group plc and the tax treatment of costs relating to
HBOS Reading), none of which is expected to have a material impact on the
financial position of the Group.
Arena and Sentinel litigation claims
The Group is facing claims alleging breach of duty and/or mandate in the
context of an underlying external fraud matter involving Arena Television. The
Group is defending the claims, which are at an early stage. As such, it is not
practicable to estimate the final outcome of the matter and its financial
impact (if any) to the Group.
FCA investigation into the Group's anti-money laundering control framework
As previously disclosed, the FCA had opened an investigation into the Group's
compliance with domestic UK money laundering regulations and the FCA's rules
and Principles for Businesses, with a focus on aspects of its anti-money
laundering control framework. This investigation has now been closed by the
FCA without any enforcement action taken.
Other legal actions and regulatory matters
In addition, in the course of its business the Group is subject to other
complaints and threatened or actual legal proceedings (including class or
group action claims) brought by or on behalf of current or former employees,
customers (including their appointed representatives), investors or other
third parties, as well as legal and regulatory reviews, enquiries and
examinations, requests for information, audits, challenges, investigations and
enforcement actions, which could relate to a number of issues. This includes
matters in relation to compliance with applicable laws and regulations, such
as those relating to prudential regulation, employment, consumer protection,
investment advice, business conduct, systems and controls, environmental,
sustainability, competition/anti-trust, tax, anti-bribery, anti-money
laundering and sanctions, some of which may be beyond the Group's control,
both in the UK and overseas. Where material, such matters are periodically
reassessed, with the assistance of external professional advisers where
appropriate, to determine the likelihood of the Group incurring a liability.
The Group does not currently expect the final outcome of any such case to have
a material adverse effect on its financial position, operations or cash flows.
Where there is a contingent liability related to an existing provision the
relevant disclosures are included within note 5.
KEY DATES
Shares quoted ex-dividend for 2024 final dividend 10 April 2025
Record date for 2024 final dividend 11 April 2025
Final date for joining or leaving the final 2024 dividend reinvestment plan 29 April 2025
Q1 2025 Interim Management Statement 1 May 2025
Annual General Meeting 15 May 2025
Final 2024 dividend paid 20 May 2025
2025 Half-year results 24 July 2025
Q3 2025 Interim Management Statement 23 October 2025
BASIS OF PRESENTATION
This release covers the results of Lloyds Banking Group plc together with its
subsidiaries (the Group) for the year ended 31 December 2024. Unless otherwise
stated, income statement commentaries throughout this document compare the
year ended 31 December 2024 to the year ended 31 December 2023 and the balance
sheet analysis compares the Group balance sheet as at 31 December 2024 to the
Group balance sheet as at 31 December 2023. The Group uses a number of
alternative performance measures, including underlying profit, in the
discussion of its business performance and financial position. These measures
are labelled with a superscript 'A' throughout this document. Further
information on these measures is set out above. Unless otherwise stated,
commentary on page 1 to 2 and pages 7 to 9 are given on an underlying basis.
The 2024 annual report and accounts and Pillar 3 disclosures can be found at:
www.lloydsbankinggroup.com/investors/financial-downloads.html.
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 Banking Group plc together
with its subsidiaries (the Group) and its current goals and expectations.
Statements that are not historical or current facts, including statements
about the 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 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 Group's
future financial performance; the level and extent of future impairments and
write-downs; the Group's ESG targets and/or commitments; statements of plans,
objectives or goals of the 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); 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
Group's credit ratings; fluctuations in interest rates, inflation, exchange
rates, stock markets and currencies; volatility in credit markets; volatility
in the price of the Group's securities; natural pandemic and other disasters;
risks concerning borrower and counterparty credit quality; risks affecting
insurance business and 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 Group; risks
associated with the 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
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 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; assumptions and estimates
that form the basis of the Group's financial statements; and potential changes
in dividend policy. A number of these influences and factors are beyond the
Group's control. Please refer to the latest Annual Report on Form 20-F filed
by Lloyds Banking Group 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 Banking Group 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 Banking Group 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 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.
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
Grant Ringshaw
External Relations Director
020 7356 2362
grant.ringshaw@lloydsbanking.com
Matt Smith
Head of Media Relations
07788 352 487
matt.smith@lloydsbanking.com
Copies of this News Release may be obtained from:
Investor Relations, Lloyds Banking Group plc, 25 Gresham Street, London EC2V
7HN
The statement can also be found on the Group's website -
www.lloydsbankinggroup.com
Registered office: Lloyds Banking Group plc, The Mound, Edinburgh, EH1 1YZ
Registered in Scotland No. SC095000
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