REG - Lloyds Banking Group - 2025 Q1 Interim Management Statement
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RNS Number : 9317G Lloyds Banking Group PLC 01 May 2025
Lloyds Banking Group plc
Q1 2025 Results
Interim management statement
1 May 2025
RESULTS FOR THE THREE MONTHS ENDED 31 MARCH 2025
"In the first quarter of 2025, the Group delivered sustained strength in
financial performance. In particular, net income continues to grow, following
the upward trajectory established in the second half of last year.
We maintained our cost discipline and asset quality remains resilient.
We continue to make good progress on our strategic transformation and deliver
innovative ways for our customers to manage their financial needs and achieve
their financial aspirations, in line with our purpose of Helping Britain
Prosper. This supports our ambition of higher, more sustainable returns that
will underpin delivery for all of our stakeholders. Our differentiated
business model stands out in the context of recent market volatility and
economic uncertainty and helps support UK households and businesses as they
further strengthen their financial resilience. Underpinned by our financial
performance, strategic execution and franchise strength, we remain confident
in the outlook for Lloyds Banking Group and in our 2025 and 2026 guidance."
Charlie Nunn, Group Chief Executive
Sustained strength in financial performance(1)
• Statutory profit after tax of £1.1 billion (three months to 31 March
2024: £1.2 billion) with net income up 4% and reduced volatility more than
offset by higher operating costs and a higher impairment charge. Robust return
on tangible equity of 12.6% (three months to 31 March 2024: 13.3%)
• Underlying net interest income of £3.3 billion, up 3% year on year and
up 1% versus the fourth quarter of 2024. This reflected a banking net interest
margin of 3.03%, up 8 basis points year on year (up 6 basis points compared
to the fourth quarter of 2024), alongside higher average interest-earning
banking assets of £455.5 billion
• Underlying other income of £1.5 billion, 8% higher than the prior year
and 1% higher than the fourth quarter of 2024, driven across businesses by
strengthening customer activity and the benefit of strategic initiatives
• Operating lease depreciation of £355 million, higher than the £283
million in the first quarter of 2024 as a result of fleet growth,
the depreciation of higher value vehicles and declines in used electric car
prices over 2024
• Operating costs of £2.6 billion, up 6%, combining inflationary
pressures, timing of strategic investment including planned higher severance
front-loaded into the first quarter of 2025 and business growth costs, partly
offset by cost savings and continued cost discipline
• Resilient asset quality with underlying impairment charge of £309
million and an asset quality ratio of 27 basis points. Excluding the impact of
updates to the economic outlook, the asset quality ratio was 24 basis points.
The portfolio remains well-positioned with stable and benign credit
performance in the quarter
• Strong growth in lending and deposits. Underlying loans and advances to
customers increased by £7.1 billion in the quarter to £466.2 billion, led by
UK mortgages growth of £4.8 billion. Customer deposits increased in the
quarter by £5.0 billion to £487.7 billion, with £2.7 billion growth in
Retail and £2.3 billion in Commercial Banking
• Risk-weighted assets of £230.1 billion, up £5.5 billion in the
quarter, reflecting strong lending growth and a temporary c.£2.5 billion
increase primarily due to hedging activity expected to reverse by the third
quarter
• Capital generation of 27 basis points; strong underlying banking build,
impacted by front-loaded severance and temporary risk-weighted asset impacts
primarily from hedging activity. CET1 ratio of 13.5%
• Tangible net assets per share of 54.4 pence, up by 2.0 pence in the
quarter from attributable profit alongside unwind of the cash flow hedge
reserve
2025 guidance reaffirmed
Based on our current macroeconomic assumptions, for 2025 the Group continues
to expect:
• 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%
• Capital generation of c.175 basis points(2)
(1) See the basis of presentation on page 14.
(2) 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
Three months ended Three months ended Change Three months ended Change
31 Mar 2025
£m 31 Mar 2024 % 31 Dec 2024 %
£m £m
Underlying net interest income 3,294 3,184 3 3,276 1
Underlying other income 1,452 1,340 8 1,433 1
Operating lease depreciation (355) (283) (25) (331) (7)
Net income 4,391 4,241 4 4,378
Operating costs (2,550) (2,402) (6) (2,450) (4)
Remediation - (25) (775)
Total costs (2,550) (2,427) (5) (3,225) 21
Underlying profit before impairment 1,841 1,814 1 1,153 60
Underlying impairment charge (309) (57) (160) (93)
Underlying profit 1,532 1,757 (13) 993 54
Restructuring (4) (12) 67 (19) 79
Volatility and other items (11) (117) 91 (150) 93
Statutory profit before tax 1,517 1,628 (7) 824 84
Tax expense (383) (413) 7 (124)
Statutory profit after tax 1,134 1,215 (7) 700 62
Earnings per share 1.7p 1.7p 1.0p 0.7p
Banking net interest margin(A) 3.03% 2.95% 8bp 2.97% 6bp
Average interest-earning banking assets(A) £455.5bn £449.1bn 1 £455.1bn
Cost:income ratio(A) 58.1% 57.2% 0.9pp 73.7% (15.6)pp
Asset quality ratio(A) 0.27% 0.06% 21bp 0.14% 13bp
Return on tangible equity(A) 12.6% 13.3% (0.7)pp 7.1% 5.5pp
At 31 Mar 2025 At 31 Mar Change At 31 Dec Change
2024
2024
% %
Underlying loans and advances to customers(A) £466.2bn £448.5bn 4 £459.1bn 2
Customer deposits £487.7bn £469.2bn 4 £482.7bn 1
Loan to deposit ratio(A) 96% 96% 95% 1pp
CET1 ratio 13.5% 13.9% (0.4)pp 14.2% (0.7)pp
Pro forma CET1 ratio(A,1) 13.5% 13.9% (0.4)pp 13.5%
Total capital ratio 18.4% 19.0% (0.6)pp 19.0% (0.6)pp
MREL ratio 30.4% 32.0% (1.6)pp 32.2% (1.8)pp
UK leverage ratio 5.5% 5.6% (0.1)pp 5.5%
Risk-weighted assets £230.1bn £222.8bn 3 £224.6bn 2
Wholesale funding(2) £89.4bn £99.9bn (11) £92.5bn (3)
Liquidity coverage ratio(3) 145% 143% 2pp 146% (1)pp
Net stable funding ratio(4) 128% 130% (2)pp 129% (1)pp
Tangible net assets per share(A) 54.4p 51.2p 3.2p 52.4p 2.0p
(A ) See page 13.
(1 ) 31 December 2024 reflects both the full impact of the share buyback
announced in respect of 2024 and the ordinary dividend received from the
Insurance business in February 2025.
(2) Excludes balances relating to margins of £1.4 billion (31 December
2024: £2.8 billion, 31 March 2024: £2.2 billion).
(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.
(
)
QUARTERLY INFORMATION(A)
Quarter Quarter Quarter Quarter Quarter
ended ended ended ended ended
31 Mar 31 Dec 30 Sep 30 Jun 31 Mar
2025 2024 2024 2024 2024
£m £m £m £m £m
Underlying net interest income 3,294 3,276 3,231 3,154 3,184
Underlying other income 1,452 1,433 1,430 1,394 1,340
Operating lease depreciation (355) (331) (315) (396) (283)
Net income 4,391 4,378 4,346 4,152 4,241
Operating costs (2,550) (2,450) (2,292) (2,298) (2,402)
Remediation - (775) (29) (70) (25)
Total costs (2,550) (3,225) (2,321) (2,368) (2,427)
Underlying profit before impairment 1,841 1,153 2,025 1,784 1,814
Underlying impairment charge (309) (160) (172) (44) (57)
Underlying profit 1,532 993 1,853 1,740 1,757
Restructuring (4) (19) (6) (3) (12)
Volatility and other items (11) (150) (24) (41) (117)
Statutory profit before tax 1,517 824 1,823 1,696 1,628
Tax expense (383) (124) (490) (467) (413)
Statutory profit after tax 1,134 700 1,333 1,229 1,215
Earnings per share 1.7p 1.0p 1.9p 1.7p 1.7p
Banking net interest margin(A) 3.03% 2.97% 2.95% 2.93% 2.95%
Average interest-earning banking assets(A) £455.5bn £455.1bn £451.1bn £449.4bn £449.1bn
Cost:income ratio(A) 58.1% 73.7% 53.4% 57.0% 57.2%
Asset quality ratio(A) 0.27% 0.14% 0.15% 0.05% 0.06%
Return on tangible equity(A) 12.6% 7.1% 15.2% 13.6% 13.3%
At At At At At
31 Mar 2025 31 Dec 30 Sep 2024 30 Jun 2024 31 Mar 2024
2024
Underlying loans and advances to customers(A,1) £466.2bn £459.1bn £457.0bn £452.4bn £448.5bn
Customer deposits £487.7bn £482.7bn £475.7bn £474.7bn £469.2bn
Loan to deposit ratio(A) 96% 95% 96% 95% 96%
CET1 ratio 13.5% 14.2% 14.3% 14.1% 13.9%
Pro forma CET1 ratio(A,2) 13.5% 13.5% 14.3% 14.1% 13.9%
Total capital ratio 18.4% 19.0% 19.0% 18.7% 19.0%
MREL ratio 30.4% 32.2% 32.2% 31.7% 32.0%
UK leverage ratio 5.5% 5.5% 5.5% 5.4% 5.6%
Risk-weighted assets £230.1bn £224.6bn £223.3bn £222.0bn £222.8bn
Wholesale funding £89.4bn £92.5bn £93.3bn £97.6bn £99.9bn
Liquidity coverage ratio(3) 145% 146% 144% 144% 143%
Net stable funding ratio(4) 128% 129% 129% 130% 130%
Tangible net assets per share(A) 54.4p 52.4p 52.5p 49.6p 51.2p
(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.
(2 ) 31 December 2024 reflects both the full impact of the share buyback
announced in respect of 2024 and the ordinary dividend received from the
Insurance business in 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 Mar At 31 Mar Change At 31 Dec Change
2025
2024
2024
£bn
£bn %
£bn %
UK mortgages(1) 317.1 304.6 4 312.3 2
Credit cards 15.9 15.2 5 15.7 1
UK Retail unsecured loans 9.5 7.6 25 9.1 4
UK Motor Finance(2) 15.8 15.8 15.3 3
Overdrafts 1.2 1.0 20 1.2
Retail other(3) 19.0 16.9 12 17.9 6
Business and Commercial Banking 29.4 32.2 (9) 29.7 (1)
Corporate and Institutional Banking 58.5 55.6 5 57.9 1
Central Items(4) (0.2) (0.4) (50) -
Underlying loans and advances to customers(A) 466.2 448.5 4 459.1 2
Retail current accounts 102.5 103.1 (1) 101.3 1
Retail savings accounts 210.1 196.4 7 208.2 1
Wealth 9.8 10.2 (4) 10.2 (4)
Commercial Banking 164.9 159.3 4 162.6 1
Central Items 0.4 0.2 0.4
Customer deposits 487.7 469.2 4 482.7 1
Total assets 909.9 889.6 2 906.7
Total liabilities 862.1 841.8 2 860.8
Ordinary shareholders' equity 40.7 40.7 39.5 3
Other equity instruments 6.9 6.9 6.2 11
Non-controlling interests 0.2 0.2 0.2
Total equity 47.8 47.8 45.9 4
Ordinary shares in issue, excluding own shares 60,459m 63,653m (5) 60,491m
(1) The increase between 31 March 2024 and 31 December 2024 is net of the
impact of the securitisations of primarily legacy Retail mortgages of £1.9
billion.
(2) UK Motor Finance balances on an underlying basis(A) exclude a finance
lease gross up. See page 13.
(3) Within underlying loans and advances, Retail other includes the European
and Wealth businesses.
(4) Central Items includes central fair value hedge accounting adjustments.
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 2.
Summary income statement Three months ended Three months ended Change
31 Mar 31 Mar %
2025 2024
£m £m
Net interest income 3,204 3,045 5
Other income(1) 1,491 1,342 11
Total income(1) 4,695 4,387 7
Operating expenses (2,868) (2,703) (6)
Impairment charge (310) (56)
Profit before tax 1,517 1,628 (7)
Tax expense (383) (413) 7
Profit after tax 1,134 1,215 (7)
Profit attributable to ordinary shareholders 1,006 1,069 (6)
Profit attributable to other equity holders 115 135 (15)
Profit attributable to non-controlling interests 13 11 18
Profit after tax 1,134 1,215 (7)
Ordinary shares in issue (weighted-average - basic) 60,589m 63,906m (5)
Basic earnings per share 1.7p 1.7p
(1) Net finance expense in respect of insurance and investment contracts,
previously shown separately, is now included within other income as part of
total income. The comparative period is presented on a consistent basis.
Summary balance sheet At 31 Mar At 31 Dec Change
2025 2024 %
£m £m
Assets
Cash and balances at central banks 62,891 62,705
Financial assets at fair value through profit or loss 215,450 215,925
Derivative financial instruments 20,710 24,065 (14)
Financial assets at amortised cost 534,659 531,777 1
Financial assets at fair value through other comprehensive income 31,027 30,690 1
Other assets 45,160 41,535 9
Total assets 909,897 906,697
Liabilities
Deposits from banks 6,019 6,158 (2)
Customer deposits 487,691 482,745 1
Repurchase agreements at amortised cost 38,474 37,760 2
Financial liabilities at fair value through profit or loss 30,039 27,611 9
Derivative financial instruments 18,359 21,676 (15)
Debt securities in issue at amortised cost 67,823 70,834 (4)
Liabilities arising from insurance and participating investment contracts 120,131 122,064 (2)
Liabilities arising from non-participating investment contracts 49,829 51,228 (3)
Other liabilities 34,286 30,644 12
Subordinated liabilities 9,446 10,089 (6)
Total liabilities 862,097 860,809
Total equity 47,800 45,888 4
Total equity and liabilities 909,897 906,697
REVIEW OF PERFORMANCE(A)
Income statement(A)
The Group's statutory profit before tax for the first quarter of 2025 was
£1,517 million, 7% lower than in the first quarter of 2024. This was driven
by higher total income more than offset by higher operating expenses and a
higher impairment charge. Profit after tax was £1,134 million and earnings
per share was 1.7 pence (three months to 31 March 2024: £1,215 million and
1.7 pence respectively). Compared to the fourth quarter of 2024, statutory
profit after tax was up 62%, including the impact of a charge for the
potential impacts of motor finance commission arrangements in the fourth
quarter.
The Group's underlying profit was £1,532 million in the first three months
of 2025, a reduction of 13% compared to £1,757 million in the same period in
2024 with higher net income more than offset by higher operating costs and a
higher underlying impairment charge. Underlying profit was up 54% compared to
the fourth quarter of last year, which included the charge for the potential
impacts of motor finance commission arrangements.
Net income of £4,391 million was up 4% compared to the first quarter of 2024,
driven by higher underlying net interest income and underlying other income,
partly offset by an increased charge for operating lease depreciation. Net
income in the first quarter was slightly up compared to the fourth quarter of
2024.
Within net income, underlying net interest income of £3,294 million was up 3%
versus the prior year (three months to 31 March 2024: £3,184 million). This
was supported by a banking net interest margin of 3.03% (three months to 31
March 2024: 2.95%), benefitting from strong deposit volumes and a growing
structural hedge contribution as balances are reinvested in a higher rate
environment, partially offset by continued asset margin compression and
deposit churn headwinds. Average interest-earning banking assets in the first
quarter of 2025 of £455.5 billion were higher than the first quarter of 2024
(three months to 31 March 2024: £449.1 billion). Growth in average
interest-earning banking assets was primarily driven by UK mortgages, UK
Retail unsecured loans and Europe, partially offset by Commercial Banking, in
turn driven by continued repayments of government-backed lending in Business
and Commercial Banking and lower lending to banks. Underlying net interest
income in the first three months of 2025 included a non-banking net interest
expense of £112 million (three months to 31 March 2024: £105 million),
increasing slightly as a result of growth in the Group's non-banking
businesses.
Underlying net interest income was slightly ahead of the fourth quarter of
2024, despite a lower day count in the quarter (three months to 31 December
2024: £3,276 million). A growing structural hedge contribution and strong
deposit volumes more than offset the impact of continued headwinds from
deposit churn and underlying asset margin compression. Together this resulted
in an increase in the banking net interest margin to 3.03% (three months to
31 December 2024: 2.97%). Average interest-earning banking assets were broadly
stable versus the fourth quarter of 2024, given the timing of lending growth
across the two quarters, lower bank lending and the impact of
securitisation activity in the fourth quarter. The Group continues to expect
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 first quarter of 2025, the notional
balance of the sterling structural hedge was maintained at £242 billion with
a stable weighted average duration of approximately three-and-a-half years.
The Group generated £1.2 billion of total income from sterling structural
hedge balances in the first three months of 2025, an increase over the prior
year (three months to 31 March 2024: £1.0 billion). The Group continues
to expect sterling structural hedge earnings in 2025 to be £1.2 billion
higher than in 2024.
Underlying other income in the first quarter of 2025 of £1,452 million grew
by 8% compared to the prior year (three months to 31 March 2024:
£1,340 million). In particular, this was driven by an increase of 16% in
Retail, primarily due to UK Motor Finance, including fleet growth and higher
average vehicle rental values, alongside Insurance, Pensions and Investments
up 8% from strong trading and higher general insurance income net of claims
and growth in the equity investments businesses. Compared to the fourth
quarter of 2024, underlying other income was up 1%, supported by continued UK
Motor Finance growth, strong markets performance in Commercial Banking and
higher general insurance income in Insurance, Pensions and Investments,
partially offset by the timing of exits in the Group's equity investment
businesses.
Operating lease depreciation of £355 million in the first three months of
2025 was higher than in the prior year (three months to 31 March
2024: £283 million), as a result of fleet growth, the depreciation of
higher value vehicles and declines in used electric car prices over 2024.
REVIEW OF PERFORMANCE (continued)
Total costs, including remediation, of £2,550 million were 5% higher than the
prior year. Operating costs of £2,550 million were up 6% combining
inflationary pressures, timing of strategic investment including planned
higher severance front-loaded into the first quarter of 2025 and business
growth costs, partly offset by cost savings and continued cost discipline.
Operating costs are still expected to be c.£9.7 billion in 2025, including
the impact of increased severance and changes to National Insurance
contributions (c.£0.1 billion).
No net remediation charge was recognised by the Group in the first three
months of 2025 (three months to 31 March 2024: £25 million). There have
been no further charges relating to motor finance commission arrangements. The
Supreme Court heard the appeal of the Wrench, Johnson and Hopcraft decision in
early April and has stated that it is likely to produce its judgment in July.
The FCA has indicated that the decision will inform its next steps in the
discretionary commission arrangements (DCA) review and that it will confirm
within six weeks of the decision if it is proposing a redress scheme and if
so, how it will take that forward. The FCA has also noted that its next steps
on non-DCA complaints will be informed by the decision.
The Group's cost:income ratio including remediation for the first quarter was
58.1%, impacted by the Bank of England supervisory charge and higher severance
costs. This compares to 57.2% in the first three months of 2024 and 73.7% in
the fourth quarter of 2024, which was impacted by the provision charge for the
potential impacts of motor finance commission arrangements and the Bank Levy.
Asset quality remained resilient in the quarter. The underlying impairment
charge was £309 million (three months to 31 March 2024: £57 million),
resulting in an asset quality ratio of 27 basis points. Within this, updated
multiple economic scenarios (MES) resulted in a £35 million net charge (three
months to 31 March 2024: £192 million credit). This included a £100 million
central adjustment to address downside risks to the base case related to the
potential impact from US tariff policies announced at the start of April.
These were becoming apparent around the balance sheet date and were determined
to not be fully captured within the modelled divisional ECL allowances. This
is partially offset by benefits to the MES from small increases to house price
and wage growth expectations.
The pre-updated MES charge of £274 million is equivalent to an asset quality
ratio of 24 basis points. The higher pre-updated MES charge compared to prior
year is driven by the non-recurrence of a one-off release from loss rates used
in the model in Commercial Banking in the first quarter of 2024. Excluding
this one-off impact, the pre-updated MES charge is favourable to the prior
year with strong portfolio performance in Retail more than offsetting a
higher charge in Commercial Banking. The Group continues to expect the asset
quality ratio to be c.25 basis points in 2025.
Restructuring costs for the first three months of 2025 were £4 million (three
months to 31 March 2024: £12 million). Volatility and other items were a net
cost of £11 million for the first three months (three months to 31 March
2024: net cost of £117 million). This included £20 million for the
amortisation of purchased intangibles (three months to 31 March 2024:
£20 million) and £21 million relating to the usual fair value unwind
(three months to 31 March 2024: £26 million), alongside positive market
volatility of £30 million (three months to 31 March 2024: negative market
volatility of £71 million).
The return on tangible equity for the first quarter was 12.6% (three months to
31 March 2024: 13.3%). The Group continues to expect the return on tangible
equity for 2025 to be c.13.5%.
Tangible net assets per share at 31 March 2025 were 54.4 pence, up 2.0 pence
in the quarter (31 December 2024: 52.4 pence), from attributable profit
alongside unwind of the cash flow hedge reserve.
The Group has commenced the share buyback announced in February 2025, with
c.0.3 billion shares repurchased as at 31 March 2025.
REVIEW OF PERFORMANCE (continued)
Balance sheet
The Group saw strong lending growth in the first quarter of 2025 with
underlying loans and advances to customers increasing by £7.1 billion from
the end of 2024 to £466.2 billion. This included growth of £4.8 billion in
UK mortgages and growth across UK Retail unsecured loans, credit cards, UK
Motor Finance and the European retail business. Lending balances remained
broadly stable in Commercial Banking, with growth in Institutional balances
partly offset by repayments of £0.5 billion of government-backed lending.
Customer deposits of £487.7 billion increased significantly in the quarter
by £5.0 billion. Retail deposits were up £2.7 billion in the period, driven
by net inflows to limited withdrawal and fixed term deposits alongside higher
current account balances, as a result of the Group's strong propositions and
growing customer incomes. Commercial Banking deposits were up £2.3 billion in
the quarter, aided by short term balances.
The Group delivered £0.9 billion net new money in Insurance, Pensions and
Investments and Wealth open book assets under administration (AuA) over the
period. In total, open book AuA stand at c.£199 billion at 31 March 2025.
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
145% (31 December 2024: 146%) and net stable funding ratio of 128%
(31 December 2024: 129%). The loan to deposit ratio of 96%, stable compared
to 31 December 2024, continues to reflect a robust funding and liquidity
position, with significant capacity to grow lending.
Capital
The Group's CET1 capital ratio at 31 March 2025 was 13.5% (31 December 2024:
13.5% pro forma). Capital generation during the first three months was 27
basis points, reflecting strong banking build after the impact of front-loaded
severance costs, partially offset by risk-weighted asset increases, including
temporary increases. The Group has accrued a foreseeable ordinary dividend of
23 basis points, based upon a pro-rated amount of the 2024 full year dividend.
The Group continues to expect capital generation in 2025 to be c.175 basis
points.
Risk-weighted assets increased by £5.5 billion to £230.1 billion at 31 March
2025 (31 December 2024: £224.6 billion). This reflects the impact of strong
lending growth, but also includes a temporary c.£2.5 billion increase
primarily due to hedging activity that is expected to reverse by the third
quarter. The growth in risk-weighted assets was partly offset by continued
optimisation activity and other movements. While no Retail secured CRD IV
increases were recognised during the quarter, the Group continues to envisage
that the overall uplift to be recognised against performing exposures in
respect of CRD IV secured assets could be modestly higher than £5 billion
(including the £3.3 billion recognised in 2024), subject to finalisation with
the PRA.
The Group's regulatory CET1 capital requirement remains at around 12%. This
includes the Pillar 2A CET1 capital requirement of about 1.5% 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 remains c.13.0%. This includes a
management buffer of c.1%. In order to manage risks and distributions in an
orderly way, the Board intends to progress in stages towards paying down to
the current CET1 capital target of c.13.0% by the end of 2026.
ADDITIONAL INFORMATION
Capital generation
Pro forma CET1 ratio as at 31 December 2024(A,1) 13.5%
Banking build (bps)(2) 55
Risk-weighted assets (bps) (34)
Other movements (bps)(3) 6
Capital generation (bps) 27
Ordinary dividend (bps) (23)
CET1 ratio as at 31 March 2025 13.5%
(1) 31 December 2024 reflects both the full impact of the share buyback
announced in respect of 2024 and the ordinary dividend received from the
Insurance business in February 2025.
(2 ) Includes impairment charge and movement in excess regulatory
expected losses.
(3) Includes share-based payments.
Underlying impairment(A)
Three months ended Three months ended Change Three months ended Change
31 Mar 2025
£m 31 Mar 2024 % 31 Dec 2024 %
£m £m
Charges (credits) pre-updated MES(1)
Retail 204 303 33 197 (4)
Commercial Banking 71 (49) 32
Other (1) (5) (80) 1
274 249 (10) 230 (19)
Updated economic outlook (MES)
Retail (90) (196) (54) (63) 43
Commercial Banking 25 4 (7)
Other 100 - -
35 (192) (70)
Underlying impairment charge(A) 309 57 160 (93)
Asset quality ratio(A) 0.27% 0.06% 21bp 0.14% 13bp
(1) Impairment charges excluding the impact from updated economic outlook
(multiple economic scenarios, MES) taken each quarter.
(
)
ADDITIONAL INFORMATION (continued)
Loans and advances to customers and expected credit loss allowance -
underlying(A) basis
At 31 March 2025 Stage 1 Stage 2 Stage 3 Total Stage 2 Stage 3
£m £m £m £m as % of as % of
total total
Loans and advances to customers
UK mortgages(1) 276,559 35,116 6,363 318,038 11.0 2.0
Credit cards 13,875 2,327 261 16,463 14.1 1.6
UK unsecured loans and overdrafts 9,660 1,325 171 11,156 11.9 1.5
UK Motor Finance(2) 13,502 2,491 131 16,124 15.4 0.8
Other 18,462 471 151 19,084 2.5 0.8
Retail 332,058 41,730 7,077 380,865 11.0 1.9
Business and Commercial Banking 25,778 2,946 1,160 29,884 9.9 3.9
Corporate and Institutional Banking 55,355 2,631 1,014 59,000 4.5 1.7
Commercial Banking 81,133 5,577 2,174 88,884 6.3 2.4
Equity Investments and Central Items(3) (88) - - (88)
Total gross lending 413,103 47,307 9,251 469,661 10.1 2.0
Customer related ECL allowance (drawn and undrawn)
UK mortgages(1) 52 279 624 955
Credit cards 199 308 130 637
UK unsecured loans and overdrafts 167 240 114 521
UK Motor Finance(4) 170 118 75 363
Other 14 14 38 66
Retail 602 959 981 2,542
Business and Commercial Banking 133 183 172 488
Corporate and Institutional Banking 117 152 324 593
Commercial Banking 250 335 496 1,081
Equity Investments and Central Items(5) 50 50 - 100
Total 902 1,344 1,477 3,723
Customer related ECL allowance (drawn and undrawn) as a percentage of loans
and advances to customers(6)
Stage 1 Stage 2 Stage 3 Total
%
%
%
%
UK mortgages - 0.8 9.8 0.3
Credit cards 1.4 13.2 49.8 3.9
UK unsecured loans and overdrafts 1.7 18.1 66.7 4.7
UK Motor Finance 1.3 4.7 57.3 2.3
Other 0.1 3.0 25.2 0.3
Retail 0.2 2.3 13.9 0.7
Business and Commercial Banking 0.5 6.2 18.8 1.6
Corporate and Institutional Banking 0.2 5.8 32.0 1.0
Commercial Banking 0.3 6.0 25.7 1.2
Equity Investments and Central Items -
Total 0.2 2.8 16.4 0.8
(1 ) UK mortgages balances on an underlying basis(A) exclude the impact
of the HBOS acquisition-related adjustments.
(2) UK Motor Finance balances on an underlying basis(A) exclude a finance
lease gross up.
(3) Contains central fair value hedge accounting adjustments.
(4) UK Motor Finance includes £178 million relating to provisions against
residual values of vehicles subject to finance leases.
(5) Equity Investments and Central Items includes a £100 million central
adjustment that has not been allocated to specific portfolios.
(6) Stage 3 and Total exclude loans in recoveries in Business and Commercial
Banking of £243 million and Corporate and Institutional Banking of £1
million.
(
)
ADDITIONAL INFORMATION (continued)
Total ECL allowance by scenario - underlying basis(A)
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 Consumer Price Index (CPI)
inflation and UK Bank Rate paths.
Underlying basis(A) Probability- Upside Base case Downside Severe
weighted £m £m £m downside
£m £m
At 31 March 2025(1) 3,744 2,869 3,296 4,219 6,285
At 31 December 2024 3,651 2,634 3,204 4,159 6,515
(1 ) Includes £100 million central adjustment held constant across all
scenarios.
Base case and MES economic assumptions
The Group's base case scenario is for a slow expansion in gross domestic
product (GDP) and a modest rise in the unemployment rate alongside small gains
in residential and commercial property prices. Inflationary pressures remain
persistent, but gradual cuts in UK Bank Rate are expected to continue during
2025. Risks around this base case economic view lie in both directions and are
largely captured by the generation of alternative economic scenarios.
The Group has taken into account the latest available information at the
reporting date in defining its base case scenario and generating alternative
economic scenarios. The scenarios include forecasts for key variables as of
the first quarter of 2025. Actuals for this period, or restatements of past
data, may have since emerged prior to publication and have not been included.
The Group's approach to generating alternative economic scenarios is set out
in detail in note 21 to the financial statements of the Group's 2024 annual
report and accounts.
The Group had included assumptions for expected tariffs and potential
responses in its quarter-end base case conditioning assumptions prior to
announcements at the start of April. Initial non-UK tariffs announced in the
first few days of April and the immediate market response were larger than
expected. Accordingly, the Group has adopted a £100 million central
adjustment to reflect the potential ECL impact, informed by high level
sensitivity to key UK economic metrics based on tariff scenarios. Subsequent
developments through April were judged to relate to conditions after the
balance sheet date and will be reflected in the second quarter reporting
period.
UK economic assumptions - base case scenario by quarter
Key quarterly assumptions made by the Group in the base case scenario are
shown below. GDP growth is presented quarter-on-quarter. House price growth,
commercial real estate price growth and CPI inflation are presented
year-on-year, i.e. from the equivalent quarter in the previous year.
Unemployment rate and UK Bank Rate are presented as at the end of each
quarter.
At 31 March 2025 First Second Third Fourth First Second Third Fourth
quarter quarter quarter quarter quarter quarter quarter quarter
2025 2025 2025 2025 2026 2026 2026 2026
% % % % % % % %
Gross domestic product growth 0.2 0.2 0.3 0.3 0.4 0.4 0.4 0.4
Unemployment rate 4.6 4.7 4.8 4.8 4.8 4.8 4.8 4.8
House price growth 3.8 3.8 2.4 1.7 1.3 1.7 1.9 1.8
Commercial real estate price growth 2.6 2.8 2.7 1.3 0.9 0.7 0.8 1.1
UK Bank Rate 4.50 4.25 4.00 4.00 3.75 3.75 3.50 3.50
CPI inflation 2.8 3.6 3.6 3.5 3.0 2.8 2.6 2.7
ADDITIONAL INFORMATION (continued)
Base case and MES economic assumptions (continued)
UK economic assumptions - scenarios by year
Key annual assumptions made by the Group are shown below. GDP growth and CPI
inflation are presented as an annual change, house price growth and commercial
real estate price growth are presented as the growth in the respective indices
within the period. Unemployment rate and UK Bank Rate are averages for the
period.
At 31 March 2025 2025 2026 2027 2028 2029 2025-2029
% % % % % average
%
Upside
Gross domestic product growth 1.3 2.2 1.6 1.5 1.4 1.6
Unemployment rate 4.1 3.2 3.1 3.1 3.2 3.3
House price growth 2.9 5.9 6.8 5.4 4.3 5.1
Commercial real estate price growth 6.1 5.7 2.6 1.0 0.4 3.2
UK Bank Rate 4.43 4.72 4.86 5.06 5.20 4.85
CPI inflation 3.3 2.8 2.8 3.1 3.0 3.0
Base case
Gross domestic product growth 0.8 1.4 1.6 1.6 1.5 1.3
Unemployment rate 4.7 4.8 4.6 4.5 4.5 4.6
House price growth 1.7 1.8 1.9 2.5 2.9 2.1
Commercial real estate price growth 1.3 1.1 1.2 0.6 0.3 0.9
UK Bank Rate 4.19 3.63 3.50 3.50 3.50 3.66
CPI inflation 3.4 2.8 2.5 2.5 2.4 2.7
Downside
Gross domestic product growth (0.2) (0.9) 0.9 1.5 1.5 0.6
Unemployment rate 5.6 7.4 7.6 7.3 7.0 7.0
House price growth 0.5 (3.4) (6.7) (4.2) (1.1) (3.0)
Commercial real estate price growth (4.7) (5.7) (1.7) (2.2) (2.3) (3.4)
UK Bank Rate 3.83 1.67 0.96 0.65 0.42 1.51
CPI inflation 3.4 2.8 2.0 1.5 1.0 2.1
Severe downside
Gross domestic product growth (1.1) (2.3) 0.7 1.4 1.5 0.0
Unemployment rate 6.8 10.0 10.2 9.7 9.3 9.2
House price growth (0.6) (8.4) (13.8) (9.6) (5.0) (7.6)
Commercial real estate price growth (12.5) (13.3) (7.1) (5.7) (4.9) (8.8)
UK Bank Rate - modelled 3.38 0.39 0.09 0.03 0.01 0.78
UK Bank Rate - adjusted(1) 4.25 2.94 2.80 2.76 2.75 3.10
CPI inflation - modelled 3.4 2.5 1.3 0.4 (0.2) 1.5
CPI inflation - adjusted(1) 3.8 3.8 3.2 2.7 2.4 3.2
Probability-weighted
Gross domestic product growth 0.5 0.6 1.3 1.5 1.5 1.1
Unemployment rate 5.0 5.6 5.6 5.4 5.4 5.4
House price growth 1.4 0.5 (0.8) 0.1 1.3 0.5
Commercial real estate price growth (0.4) (1.0) (0.1) (0.7) (1.0) (0.6)
UK Bank Rate - modelled 4.07 3.04 2.81 2.76 2.74 3.08
UK Bank Rate - adjusted(1) 4.16 3.30 3.08 3.04 3.01 3.32
CPI inflation - modelled 3.4 2.7 2.3 2.1 1.9 2.5
CPI inflation - adjusted(1) 3.4 2.9 2.5 2.4 2.2 2.7
(1) The adjustment to UK Bank Rate and CPI inflation in the severe downside
is considered to better reflect the risks to the Group's base case view in an
economic environment where the risks of supply and demand shocks are seen as
more balanced.
ALTERNATIVE PERFORMANCE MEASURES
The statutory results are supplemented with a number of metrics that are used
throughout the banking and insurance industries on an underlying basis. A
description of these measures and their calculation, which remain materially
unchanged since the year-end, is set out on pages 27 to 32 of the Group's 2024
Full Year Results news release.
Three months ended Three months ended
31 Mar 2025 31 Mar 2024
Banking net interest margin(A)
Underlying net interest income(A) (£m) 3,294 3,184
Remove non-banking underlying net interest expense (£m) 112 105
Banking underlying net interest income (£m) 3,406 3,289
Loans and advances to customers (£bn) 466.9 448.5
Remove finance lease gross up(1) (£bn) (0.7) -
Underlying loans and advances to customers(A) (£bn) 466.2 448.5
Add back:
Expected credit loss allowance (drawn) (£bn) 3.3 3.6
Acquisition related fair value adjustments (£bn) 0.2 0.2
Underlying gross loans and advances to customers (£bn) 469.7 452.3
Adjustment for non-banking and other items:
Fee-based loans and advances (£bn) (9.7) (9.7)
Other (£bn) 1.3 6.8
Interest-earning banking assets (£bn) 461.3 449.4
Averaging (£bn) (5.8) (0.3)
Average interest-earning banking assets(A) (£bn) 455.5 449.1
Banking net interest margin(A) 3.03% 2.95%
(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.
Three months ended Three months ended
31 Mar 2025 31 Mar 2024
Return on tangible equity(A)
Profit attributable to ordinary shareholders (£m) 1,006 1,069
Average ordinary shareholders' equity (£bn) 40.1 40.4
Remove average goodwill and other intangible assets (£bn) (7.8) (8.0)
Average tangible equity (£bn) 32.3 32.4
Return on tangible equity(A) 12.6% 13.3%
( )
(
)
KEY DATES
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 three months ended 31 March 2025. Unless
otherwise stated, income statement commentaries throughout this document
compare the three months ended 31 March 2025 to the three months ended 31
March 2024 and the balance sheet analysis compares the Group balance sheet as
at 31 March 2025 to the Group balance sheet as at 31 December 2024. 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 is given on an underlying basis. The Group's Q1
Interim 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); imposed and
threatened tariffs and changes to global trade policies; acts of hostility or
terrorism and responses to those acts, or other such events; geopolitical
unpredictability; the war between Russia and Ukraine; the conflicts in the
Middle East; the tensions between China and Taiwan; political instability
including as a result of any UK general election; market related risks, trends
and developments; changes in client and consumer behaviour and demand;
exposure to counterparty risk; the ability to access sufficient sources of
capital, liquidity and funding when required; changes to the 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
Matt Smith
Head of Media Relations
07788 352 487
matt.smith@lloydsbanking.com
Emma Fairhurst
Media Relations Senior Manager
07814 395 855
emma.fairhurst@lloydsbanking.com
Copies of this Interim Management Statement may be obtained from:
Investor Relations, Lloyds Banking Group plc, 33 Old Broad Street, London,
EC2N 1HZ
The statement can also be found on the Group's website -
www.lloydsbankinggroup.com
Registered office: Lloyds Banking Group plc, The Mound, Edinburgh, EH1 1YZ
Registered in Scotland No. SC095000
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