REG - Bank of Scotland Plc Lloyds Banking Group Bank of Scotland Halifax PLC HBOS Treas Serv - 2025 Half-Year Results
24/07/2025 11:30
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RNS Number : 4118S Bank of Scotland Plc 24 July 2025
Bank of Scotland plc
2025 Half-Year Results
24 July 2025
Member of the Lloyds Banking Group
CONTENTS
Financial review 1
Principal risks and uncertainties 3
Statutory information
Condensed consolidated half-year financial statements (unaudited) 4
Condensed consolidated income statement (unaudited) 5
Condensed consolidated statement of comprehensive income (unaudited) 6
Condensed consolidated balance sheet (unaudited) 7
Condensed consolidated statement of changes in equity (unaudited) 8
Condensed consolidated cash flow statement (unaudited) 10
Notes to the condensed consolidated half-year financial statements (unaudited) 11
Statement of d (#Section29) irectors' (#Section29) responsibilities 29
Forward- (#Section30) looking statements 30
Contacts 31
FINANCIAL REVIEW
Principal activities
Bank of Scotland plc (the Bank) and its subsidiaries (together, the Group)
provide a wide range of banking and financial services. The Group's revenue is
earned through interest and fees on a broad range of financial services
products including current and savings accounts, personal loans, credit cards
and mortgages within the retail market and loans and other products to
commercial and corporate customers.
Income statement
The Group's profit before tax for the first half of 2025 was £680 million,
compared to a profit before tax of £427 million for the same period in 2024.
This was driven by higher total income, partially offset by higher operating
expenses and a higher impairment charge. Profit after tax was £524 million
(half-year to 30 June 2024: profit after tax of £311 million).
Total income for the half-year was £2,634 million, an increase of 29% on the
first half of 2024. Net interest income was £2,281 million, compared to
£1,833 million for the same period in 2024, driven by higher average
interest-earning assets and a higher margin. Other income of £353 million was
£147 million higher than the first half of 2024. The increase reflected
higher net trading income of £114 million which was £62 million higher than
the first half of 2024, reflecting rate movements. This was alongside higher
net fee and commission income of £177 million which was £79 million higher
than the same period in 2024 which was impacted by changes to commission
arrangements with Scottish Widows.
Operating expenses of £1,894 million were 18% higher than in the first half
of 2024, reflecting inflationary pressures, 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. The Group recognised remediation costs of £2 million (half-year
to 30 June 2024: £41 million), across a small number of rectification
programmes.
Asset quality remained robust in the first half of 2025. The impairment charge
of £60 million compared to a charge of £4 million in the half-year to 30
June 2024, which benefitted from a credit from improvements in the Group's
economic outlook.
The Group recognised a tax expense of £156 million in the first half of 2025
(half-year to 30 June 2024: £116 million).
Balance sheet
Total assets of £338,088 million were £7,004 million higher, or 2%,
compared to £331,084 million at 31 December 2024. Financial assets at
amortised cost were £9,344 million higher at £328,550 million compared to
£319,206 million at 31 December 2024, with increases in loans and advances
to customers of £6,726 million to £307,515 million. The increase in loans
advances to customers was primarily due to growth in UK mortgages. There were
also increases in balances due from fellow Lloyds Banking Group undertakings
of £2,729 million in the period.
Total liabilities of £321,715 million increased £6,861 million compared to
£314,854 million at 31 December 2024. This was driven by an increase in
customer deposits of £2,580 million in the period, driven by a strong
performance throughout the ISA season, as well as increases in balances due to
fellow Lloyds Banking Group undertakings of £3,233 million.
Total equity increased by £143 million from £16,230 million at 31 December
2024 to £16,373 million at 30 June 2025. The movement reflected attributable
profit for the period, partially offset by an interim dividend of £250
million.
FINANCIAL REVIEW (continued)
Capital
The capital position of Bank of Scotland plc is presented on an unconsolidated
basis. The Bank's capital position as at 30 June 2025 is set out in the below
table.
Capital resources of the Bank
At 30 Jun At 31 Dec
2025 2024
£m £m
Common equity tier 1
Shareholders' equity per unconsolidated balance sheet 14,064 14,087
Adjustment to retained earnings for foreseeable dividends (400) (250)
Cash flow hedging reserve 89 78
Other adjustments (1) (1)
13,752 13,914
less: deductions from common equity tier 1
Goodwill and other intangible assets (675) (709)
Prudent valuation adjustment (40) (39)
Excess of expected losses over impairment provisions and value adjustments (293) (238)
Removal of defined benefit pension surplus (32) (38)
Significant investments (66) (50)
Deferred tax assets (1,791) (1,812)
Common equity tier 1 capital 10,855 11,028
Additional tier 1
Additional tier 1 instruments 2,600 2,600
Total tier 1 capital 13,455 13,628
Tier 2
Tier 2 instruments 1,500 1,500
Eligible provisions and other adjustments 166 274
Total tier 2 capital 1,666 1,774
Total capital resources 15,121 15,402
Risk-weighted assets 81,830 81,493
Capital and leverage ratios
Common equity tier 1 capital ratio 13.3 % 13.5 %
Tier 1 capital ratio 16.4 % 16.7 %
Total capital ratio 18.5 % 18.9 %
UK leverage ratio 4.3 % 4.4 %
The Bank's common equity tier 1 (CET1) capital ratio reduced from 13.5% at 31
December 2024 to 13.3% at 30 June 2025. The profits for the period were more
than offset by the accrual for the foreseeable ordinary dividend and an
increase in risk-weighted assets. The total capital ratio decreased to 18.5%
(31 December 2024: 18.9%) reflecting the increase in risk-weighted assets and
the reduction in total capital, including the reduction in eligible provisions
recognised through tier 2.
Risk-weighted assets increased by £337 million from £81,493 million at 31
December 2024 to £81,830 million at 30 June 2025, largely reflecting impact
of lending growth.
The Bank's UK leverage ratio of 4.3% at 30 June 2025 has decreased from 4.4%
at 31 December 2024, reflecting the reduction in total tier 1 capital and an
increase in the exposure measure. The increase in the leverage exposure
measure reflects lending growth in the balance sheet.
Pillar 3 Disclosures
The Bank will publish a condensed set of half-year Pillar 3 disclosures in the
second half of August. A copy of the disclosures will be available to view at:
www.lloydsbankinggroup.com/investors/financial-downloads.html.
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PRINCIPAL RISKS AND UNCERTAINTIES
The important risks faced by the Group are detailed below. External risks may
impact the success of delivering against the Group's long-term strategic
objectives. They include, but are not limited to, macroeconomic and
geopolitical uncertainties and inflation trends which could contribute to the
cost of living and associated implications for consumers and businesses.
Asset quality remains robust with stable credit performance throughout the
period. The Group continues to monitor the impacts of the economic environment
closely 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 Group continues to invest in technology to strengthen its capabilities,
ensuring the appropriate use of models and artificial intelligence.
Operational resilience remains a high priority area for the Group to ensure
that it can continue to effectively prevent, withstand and respond to
potential cybersecurity threats and incidents such as IT system outages, using
threat intelligence and learnings from recent industry events where relevant.
The Group is transforming its approach to risk management to support its
strategic ambition and purpose of Helping Britain Prosper. Following changes
to the three lines of defence model in 2024 to ensure more clearly defined
responsibilities and accountabilities across the business, further
enhancements to the way the Group delivers risk management have been made by
standardising practices and streamlining processes. The Group Risk Management
Framework was enhanced during the first half of 2025, along with the approach
to risk appetite and risk governance, enabling simplification and efficiency.
The Group has 10 principal risks, which are unchanged in 2025 and are
underpinned by a suite of level two risks. These risks are reviewed and
reported regularly to the Board in alignment with the enhanced Group Risk
Management Framework, and consist of capital risk, climate risk, compliance
risk, conduct risk, credit risk, economic crime risk, liquidity risk, market
risk, model risk and operational risk. Further information regarding the
Group's principal risks is available on page 5 in the Group's 2024 annual
report and accounts.
STATUTORY INFORMATION
Condensed consolidated half-year financial statements (unaudited)
Condensed consolidated income statement (unaudited) 5
Condensed consolidated statement of comprehensive income (unaudited) 6
Condensed consolidated balance sheet (unaudited) 7
Condensed consolidated statement of changes in equity (unaudited) 8
Condensed consolidated cash flow statement (unaudited) 10
Notes to the condensed consolidated half-year financial statements (unaudited)
1 Basis of preparation and accounting policies 11
2 Critical accounting judgements and key sources of estimation uncertainty 12
3 Net fee and commission income 12
4 Operating expenses 12
5 Impairment 13
6 Tax 13
7 Fair values of financial assets and liabilities 13
8 Allowance for expected credit losses 18
9 Debt securities in issue 24
10 Provisions 25
11 Dividends on ordinary shares 26
12 Related party transactions 26
13 Contingent liabilities, commitments and guarantees 27
CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)
Note Half-year Half-year
to 30 Jun to 30 Jun
2025 2024
£m £m
Interest income 7,382 6,929
Interest expense (5,101) (5,096)
Net interest income 2,281 1,833
Fee and commission income 342 334
Fee and commission expense (165) (236)
Net fee and commission income 3 177 98
Net trading income 114 52
Other operating income 62 56
Other income 353 206
Total income 2,634 2,039
Operating expenses 4 (1,894) (1,608)
Impairment 5 (60) (4)
Profit before tax 680 427
Tax expense 6 (156) (116)
Profit for the period 524 311
Profit attributable to ordinary shareholders 404 212
Profit attributable to other equity holders 120 99
Profit for the period 524 311
The accompanying notes are an integral part of the condensed consolidated
half-year financial statements.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
Half-year Half-year
to 30 Jun to 30 Jun
2025 2024
£m £m
Profit for the period 524 311
Other comprehensive income
Items that will not subsequently be reclassified to profit or loss:
Post-retirement defined benefit scheme remeasurements
Remeasurements before tax (9) (3)
Deferred tax 3 1
(6) (2)
Items that may subsequently be reclassified to profit or loss:
Movements in cash flow hedging reserve:
Effective portion of changes in fair value taken to other comprehensive income (16) 3
Net income statement transfers (4) (3)
Deferred tax 4 -
(16) -
Movements in foreign currency translation reserve:
Currency translation differences (tax: £nil) 1 -
Transfers to income statement (tax: £nil) - -
Currency translation differences (tax: £nil) 1 -
Total other comprehensive loss for the period, net of tax (21) (2)
Total comprehensive income for the period 503 309
Total comprehensive income attributable to ordinary shareholders 383 210
Total comprehensive income attributable to other equity holders 120 99
Total comprehensive income for the period 503 309
The accompanying notes are an integral part of the condensed consolidated
half-year financial statements.
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
Note At 30 Jun At 31 Dec
2025 2024
£m £m
Assets
Cash and balances at central banks 2,689 2,853
Financial assets at fair value through profit or loss 7 259 278
Derivative financial instruments 2,338 3,337
Loans and advances to banks 138 103
Loans and advances to customers 307,515 300,789
Debt securities 1,204 1,350
Due from fellow Lloyds Banking Group undertakings 19,693 16,964
Financial assets at amortised cost 328,550 319,206
Goodwill 452 452
Current tax recoverable 174 1,273
Deferred tax assets 1,828 1,875
Retirement benefit assets 45 52
Other assets 1,753 1,758
Total assets 338,088 331,084
Liabilities
Deposits from banks 103 179
Customer deposits 167,633 165,053
Repurchase agreements at amortised cost 23,157 22,168
Due to fellow Lloyds Banking Group undertakings 113,140 109,907
Financial liabilities at fair value through profit or loss 7 18 22
Derivative financial instruments 3,655 3,503
Notes in circulation 2,119 2,121
Debt securities in issue at amortised cost 9 8,461 8,654
Other liabilities 1,441 1,203
Provisions 10 456 511
Subordinated liabilities 1,532 1,533
Total liabilities 321,715 314,854
Equity
Share capital 5,847 5,847
Other reserves 3,048 3,063
Retained profits 4,878 4,712
Ordinary shareholders' equity 13,773 13,622
Other equity instruments 2,600 2,600
Total equity excluding non-controlling interests 16,373 16,222
Non-controlling interests - 8
Total equity 16,373 16,230
Total equity and liabilities 338,088 331,084
The accompanying notes are an integral part of the condensed consolidated
half-year financial statements.
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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
Attributable to ordinary shareholders Other Non-
equity controlling
instruments interests
£m £m
Share Other Retained Total Total
capital reserves profits £m £m
£m £m £m
At 1 January 2025 5,847 3,063 4,712 13,622 2,600 8 16,230
Comprehensive income
Profit for the period - - 404 404 120 - 524
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, net of tax - - (6) (6) - - (6)
Movements in cash flow hedging reserve, net of tax - (16) - (16) - - (16)
Movements in foreign currency translation reserve, net of tax - 1 - 1 - - 1
Total other comprehensive loss - (15) (6) (21) - - (21)
Total comprehensive (loss) income(1) - (15) 398 383 120 - 503
Transactions with owners
Dividends - - (250) (250) - - (250)
Distributions on other equity instruments - - - - (120) - (120)
Changes in non-controlling interests - - 8 8 - (8) -
Capital contributions received - - 10 10 - - 10
Total transactions with owners - - (232) (232) (120) (8) (360)
At 30 June 2025(2) 5,847 3,048 4,878 13,773 2,600 - 16,373
(1) Total comprehensive income attributable to owners of the parent was
£503 million.
(2) Total equity attributable to owners of the parent was £16,373 million.
The accompanying notes are an integral part of the condensed consolidated
half-year financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) (continued)
Attributable to ordinary shareholders Other Non-
equity controlling
instruments interests
£m £m
Share Other Retained Total Total
capital reserves profits £m £m
£m £m £m
At 1 January 2024 5,847 3,061 5,133 14,041 2,550 8 16,599
Comprehensive income
Profit for the period - - 212 212 99 - 311
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, net of tax - - (2) (2) - - (2)
Movements in cash flow hedging reserve, net of tax - - - - - - -
Total other comprehensive loss - - (2) (2) - - (2)
Total comprehensive income(1) - - 210 210 99 - 309
Transactions with owners
Dividends - - (650) (650) - - (650)
Distributions on other equity instruments - - - - (99) - (99)
Capital contributions received - - 10 10 - - 10
Total transactions with owners - - (640) (640) (99) - (739)
At 30 June 2024(2) 5,847 3,061 4,703 13,611 2,550 8 16,169
Comprehensive income
Profit for the period - - 393 393 107 - 500
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, net of tax - - 3 3 - - 3
Movements in revaluation reserve in respect of debt securities held at fair - (1) - (1) - - (1)
value through other comprehensive income, net of tax
Movements in cash flow hedging reserve, net of tax - 3 - 3 - - 3
Total other comprehensive income - 2 3 5 - - 5
Total comprehensive income(1) - 2 396 398 107 - 505
Transactions with owners
Dividends - - (400) (400) - - (400)
Distributions on other equity instruments - - - - (107) - (107)
Issue of other equity instruments - - - - 1,250 - 1,250
Redemption of other equity instruments - - - - (1,200) - (1,200)
Capital contributions received - - 13 13 - - 13
Total transactions with owners - - (387) (387) (57) - (444)
At 31 December 2024(2) 5,847 3,063 4,712 13,622 2,600 8 16,230
(1) Total comprehensive income attributable to owners of the parent for the
half-year to 30 June 2024 was £309 million (half-year to 31 December 2024:
£505 million).
(2) Total equity attributable to owners of the parent at 30 June 2024 was
£16,161 million (31 December 2024: £16,222 million).
The accompanying notes are an integral part of the condensed consolidated
half-year financial statements.
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CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
Half-year Half-year
to 30 Jun to 30 Jun
2025 2024
£m £m
Cash flows from operating activities
Profit before tax 680 427
Adjustments for:
Change in operating assets (8,104) (5,635)
Change in operating liabilities 6,912 6,916
Non-cash and other items (74) (226)
Tax paid(1) (167) (617)
Tax refunded(1) 1,162 350
Net cash provided by operating activities 409 1,215
Cash flows from investing activities
Purchase of fixed assets(1) (150) (82)
Purchase of other intangible assets(1) (3) (46)
Proceeds from sale of fixed assets(1) 2 7
Proceeds from goodwill and other intangible assets(1) 2 -
Net cash used in investing activities (149) (121)
Cash flows from financing activities
Dividends paid to ordinary shareholders (250) (650)
Distributions on other equity instruments (120) (99)
Interest paid on subordinated liabilities (50) (55)
Net cash used in financing activities (420) (804)
Change in cash and cash equivalents (160) 290
Cash and cash equivalents at beginning of period 2,883 2,126
Cash and cash equivalents at end of period 2,723 2,416
1 Previously presented in aggregate.
Interest received was £7,341 million (30 June 2024: £6,808 million) and
interest paid was £4,171 million (30 June 2024: £4,637 million).
Cash and cash equivalents comprise cash and non-mandatory balances with
central banks and amounts due from banks with an original maturity of less
than three months.
The accompanying notes are an integral part of the condensed consolidated
half-year financial statements.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
Note 1: Basis of preparation and accounting policies
These condensed consolidated half-year financial statements as at and for the
period to 30 June 2025 have been prepared in accordance with the Disclosure
Guidance and Transparency Rules of the Financial Conduct Authority (FCA) and
with International Accounting Standard 34 (IAS 34), Interim Financial
Reporting as adopted by the United Kingdom and comprise the results of Bank of
Scotland plc (the Bank) together with its subsidiaries (the Group). They do
not include all of the information required for full annual financial
statements and should be read in conjunction with the Group's consolidated
financial statements as at and for the year ended 31 December 2024 which
complied with international accounting standards in conformity with the
requirements of the Companies Act 2006 and were prepared in accordance with
IFRS® Accounting Standards as issued by the International Accounting
Standards Board (IASB). Copies of the 2024 annual report and accounts are
available on the Lloyds Banking Group's website and are also available upon
request from Investor Relations, Lloyds Banking Group plc, 33 Old Broad
Street, London, EC2N 1HZ.
The directors consider that it is appropriate to continue to adopt the going
concern basis in preparing these condensed consolidated half-year financial
statements. In reaching this assessment, the directors have taken into account
the uncertainties affecting the UK economy and their potential effects upon
the Group's performance and projected funding and capital position; the impact
of further stress scenarios has also been considered. On this basis, the
directors are satisfied that the Group will maintain adequate levels of
funding and capital for the foreseeable future.
The Group's accounting policies are consistent with those applied by the Group
in its financial statements for the year ended 31 December 2024 and there have
been no changes in the Group's methods of computation.
The IASB has issued an amendment to IAS 21 The Effects of Changes in Foreign
Exchange Rates, effective 1 January 2025. This amendment has not had a
significant impact on the Group.
Future accounting developments
There are a number of new accounting pronouncements issued by the IASB with an
effective date of 1 January 2027. This includes IFRS 18 Presentation and
Disclosure in Financial Statements which replaces IAS 1 Presentation of
Financial Statements and IFRS 19 Subsidiaries without Public Accountability:
Disclosures. The impact of these standards is being assessed and they have not
yet been endorsed for use in the UK.
The IASB has issued its annual improvements and a number of amendments to the
IFRS Accounting Standards effective 1 January 2026, including Amendments to
IFRS 9 Financial Instruments and Amendments to IFRS 7 Financial Instruments
Disclosure. These improvements and amendments are not expected to have a
significant impact on the Group.
The Bank's ultimate parent undertaking and controlling party is Lloyds Banking
Group plc which is incorporated in Scotland. Lloyds Banking Group plc has
published consolidated accounts for the year to 31 December 2024 and copies
may be obtained from Investor Relations, Lloyds Banking Group plc, 33 Old
Broad Street, London, EC2N 1HZ and are available for download from
www.lloydsbankinggroup.com.
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
were approved by the directors on 27 February 2025 and were delivered to the
Registrar of Companies on 2 April 2025. The independent auditors' report on
those accounts was unqualified and did not include a statement under sections
498(2) (accounting records or returns inadequate or accounts not agreeing with
records and returns) or 498(3) (failure to obtain necessary information and
explanations) of the Act.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 2: Critical accounting judgements and key sources of estimation
uncertainty
The preparation of the Group's financial statements in accordance with IFRS
requires management to make judgements, estimates and assumptions in applying
the accounting policies that affect the reported amounts of assets,
liabilities, income and expenses. Due to the inherent uncertainty in making
estimates, actual results reported in future periods may be based upon amounts
which differ from these estimates. Estimates, judgements and assumptions are
continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be
reasonable under the circumstances. In preparing the financial statements, the
Group has considered the impact of climate-related risks on its financial
position and performance. While the effects of climate change represent a
source of uncertainty, the Group does not consider there to be a material
impact on its judgements and estimates from the physical, transition and other
climate-related risks in the short-term.
The Group's significant judgements, estimates and assumptions are unchanged
compared to those disclosed in note 3 of the Group's 2024 financial
statements. Further information on the critical accounting judgements and key
sources of estimation uncertainty for the allowance for expected credit losses
is set out in note 8.
Note 3: Net fee and commission income
Half-year Half-year
to 30 Jun to 30 Jun
2025 2024
£m £m
Fee and commission income:
Current accounts 104 97
Credit and debit card fees 209 207
Other fees and commissions 29 30
Total fee and commission income 342 334
Fee and commission expense (165) (236)
Net fee and commission income 177 98
Note 4: Operating expenses
Half-year Half-year
to 30 Jun to 30 Jun
2025 2024
£m £m
Staff costs 581 531
Premises and equipment costs 129 86
Depreciation and amortisation 147 135
Amounts payable to fellow Lloyds Banking Group undertakings and other expenses 1,037 856
Total operating expenses 1,894 1,608
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 5: Impairment
Half-year Half-year
to 30 Jun to 30 Jun
2025 2024
£m £m
Loans and advances to customers 78 18
Due from fellow Lloyds Banking Group undertakings (3) (4)
Financial assets held at amortised cost 75 14
Loan commitments and financial guarantees (15) (10)
Total impairment 60 4
Note 6: Tax
In accordance with IAS 34, the Group's income tax expense for the half-year to
30 June 2025 is based on the best estimate of the weighted-average annual
income tax rate expected for the full financial year. The tax effects of
one-off items are not included in the weighted-average annual income tax rate,
but are recognised in the relevant period.
An explanation of the relationship between tax expense and accounting profit
is set out below:
Half-year Half-year
to 30 Jun to 30 Jun
2025 2024
£m £m
Profit before tax 680 427
UK corporation tax thereon at 25.0% (2024: 25.0%) (170) (107)
Impact of surcharge on banking profits (19) (8)
Non-deductible costs: conduct charges - 5
Other non-deductible costs (37) (28)
Non-taxable income 2 6
Tax relief on coupons on other equity instruments 30 25
Tax-exempt gains/(losses) on disposals 2 -
Adjustments in respect of prior years 36 (9)
Tax expense (156) (116)
Note 7: Fair values of financial assets and liabilities
The valuations of financial instruments have been classified into three levels
according to the quality and reliability of information used to determine
those fair values. Note 14 to the Group's financial statements for the year
ended 31 December 2024 details the definitions of the three levels in the
fair value hierarchy.
Financial instruments classified as financial assets at fair value through
profit or loss, derivative financial instruments and financial liabilities at
fair value through profit or loss are recognised at fair value.
The Group manages valuation adjustments for its derivative exposures on a net
basis; the Group determines their fair values on the basis of their net
exposures. In all other cases, fair values of financial assets and liabilities
measured at fair value are determined on the basis of their gross exposures.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 7: Fair values of financial assets and liabilities (continued)
The following tables provide an analysis of the financial assets and
liabilities of the Group that are carried at fair value in the Group's
consolidated balance sheet, grouped into levels 1 to 3 based on the degree to
which the fair value is observable. There were no significant transfers
between level 1 and level 2 during the period.
Financial assets Level 1 Level 2 Level 3 Total
£m £m £m £m
At 30 June 2025
Loans and advances to customers at fair value through profit or loss - - 259 259
Derivative financial instruments - 2,338 - 2,338
Total financial assets carried at fair value - 2,338 259 2,597
At 31 December 2024
Loans and advances to customers at fair value through profit or loss - - 278 278
Derivative financial instruments - 3,337 - 3,337
Total financial assets carried at fair value - 3,337 278 3,615
Financial liabilities Level 1 Level 2 Level 3 Total
£m £m £m £m
At 30 June 2025
Debt securities in issue designated at fair value through profit or loss - - 18 18
Derivative financial instruments - 3,533 122 3,655
Total financial liabilities carried at fair value - 3,533 140 3,673
At 31 December 2024
Debt securities in issue designated at fair value through profit or loss - - 22 22
Derivative financial instruments - 3,364 139 3,503
Total financial liabilities carried at fair value - 3,364 161 3,525
Valuation control framework
Key elements of the valuation control framework include model validation
(incorporating pre-trade and post-trade testing), product implementation
review and independent price verification. The framework covers processes for
all 3 levels in the fair value hierarchy. Formal committees meet quarterly to
discuss and approve valuations in more judgemental areas.
Transfers into and out of level 3 portfolios
Transfers out of level 3 portfolios arise when inputs that could have a
significant impact on the instrument's valuation become market observable;
conversely, transfers into the portfolios arise when sources of data cease to
be observable.
Valuation methodology
For level 2 and level 3 portfolios, there is no significant change to the
valuation methodology (techniques and inputs) disclosed in the Group's
financial statements for the year ended 31 December 2024 applied to these
portfolios.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 7: Fair values of financial assets and liabilities (continued)
Movements in level 3 portfolio
The tables below analyse movements in the level 3 financial assets portfolio.
Financial Derivative assets Total
assets £m financial
at fair value assets
through carried at
profit or loss fair value
£m £m
At 1 January 2025 278 - 278
Losses recognised in the income statement within other income (16) - (16)
Purchases/increases to customer loans 14 - 14
Repayments of customer loans (17) - (17)
At 30 June 2025 259 - 259
Losses recognised in the income statement, within other income, relating (16) - (16)
to the change in fair value of those assets held at 30 June 2025
At 1 January 2024 266 - 266
Gains recognised in the income statement within other income 30 - 30
Purchases/increases to customer loans 3 - 3
Repayments of customer loans (15) - (15)
At 30 June 2024 284 - 284
Gains recognised in the income statement, within other income, relating 28 - 28
to the change in fair value of those assets held at 30 June 2024
The tables below analyse movements in the level 3 financial liabilities
portfolio.
Financial Derivative liabilities Total
liabilities £m financial
at fair value liabilities
through carried at
profit or loss fair value
£m £m
At 1 January 2025 22 139 161
Gains recognised in the income statement within other income (2) (5) (7)
Redemptions (2) (12) (14)
At 30 June 2025 18 122 140
Gains recognised in the income statement, within other income, (2) (3) (5)
relating to the change in fair value of those liabilities held at 30 June 2025
At 1 January 2024 23 132 155
Losses recognised in the income statement within other income 2 23 25
Redemptions (2) (12) (14)
At 30 June 2024 23 143 166
Losses recognised in the income statement, within other income, 2 21 23
relating to the change in fair value of those liabilities held at 30 June 2024
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 7: Fair values of financial assets and liabilities (continued)
Sensitivity of level 3 valuations
The tables below set out the effects of reasonably possible alternative
assumptions for categories of level 3 financial assets and financial
liabilities.
Effect of reasonably
possible alternative
assumptions(1)
At 30 June 2025 Valuation Significant Carrying value Favourable changes Unfavourable
techniques unobservable inputs(2) £m £m changes
£m
Financial assets at fair value through profit or loss
Loans and advances to customers Discounted cash flows Interest rate spreads 259 20 (18)
(+/- 50bps)
Level 3 financial assets carried at fair value 259
Financial liabilities at fair value through profit or loss
Securitisation notes Discounted cash flows Interest rate spreads 18 1 (1)
(+/- 50bps)
Derivative financial liabilities
Shared appreciation rights Market values - property valuation HPI (+/- 1%) 122 12 (11)
Level 3 financial liabilities carried at fair value 140
At 31 December 2024
Financial assets at fair value through profit or loss
Loans and advances to customers Discounted cash flows Interest rate spreads 278 19 (18)
(+/- 50bps)
Level 3 financial assets carried at fair value 278
Financial liabilities at fair value through profit or loss
Securitisation notes Discounted cash flows Interest rate spreads 22 1 (1)
(+/- 50bps)
Derivative financial liabilities
Shared appreciation rights Market values - property valuation HPI (+/- 1%) 139 12 (11)
Level 3 financial liabilities carried at fair value 161
(1) Where the exposure to an unobservable input is managed on a net basis,
only the net impact is shown in the table.
(2) Ranges are shown where appropriate and represent the highest and lowest
inputs used in the level 3 valuations.
Unobservable inputs
Significant unobservable inputs affecting the valuation of debt securities and
derivatives are unchanged from those described in the Group's financial
statements for the year ended 31 December 2024.
Reasonably possible alternative assumptions
Valuation techniques applied to many of the Group's level 3 instruments often
involve the use of two or more inputs whose relationship is interdependent.
The calculation of the effect of reasonably possible alternative assumptions
included in the table above reflects such relationships and is unchanged from
that described in note 14 to the Group's financial statements for the year
ended 31 December 2024.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 7: Fair values of financial assets and liabilities (continued)
The table below summarises the carrying values of financial assets and
liabilities measured at amortised cost in the Group's consolidated balance
sheet. The fair values presented in the table are at a specific date and may
be significantly different from the amounts which will actually be paid or
received on the maturity or settlement date.
At 30 June 2025 At 31 December 2024
Carrying Fair Carrying Fair
value value value value
£m £m £m £m
Financial assets
Loans and advances to banks 138 138 103 103
Loans and advances to customers 307,515 306,437 300,789 298,373
Debt securities 1,204 1,198 1,350 1,343
Due from fellow Lloyds Banking Group undertakings 19,693 19,693 16,964 16,964
Financial liabilities
Deposits from banks 103 103 179 179
Customer deposits 167,633 168,005 165,053 165,478
Repurchase agreements 23,157 23,157 22,168 22,168
Due to fellow Lloyds Banking Group undertakings 113,140 113,140 109,907 109,907
Debt securities in issue 8,461 8,461 8,654 8,705
Subordinated liabilities 1,532 1,553 1,533 1,552
The carrying amounts of cash and balances at central banks and notes in
circulation are a reasonable approximation of their fair values.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 8: 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 17 to the Group's financial statements for
the year ended 31 December 2024, with the most significant set out below.
The table below analyses total ECL allowance, separately identifying the
amounts that have been modelled, those that have been individually assessed
and those arising through the application of judgemental adjustment.
Modelled Individually Judgemental Total
ECL assessed adjustments ECL
£m £m £m £m
At 30 June 2025 1,440 58 100 1,598
At 31 December 2024 1,635 146 102 1,883
Adjustments to modelled ECL
These adjustments principally comprise:
Repossession risk: £93 million (31 December 2024: £114 million)
Additional ECL continues to be held judgementally to capture the potential
repossession and recovery risk from specific subsets of largely long-term
defaulted cases. This is alongside an adjustment to capture a longer duration
between default and repossession than model assumptions use on existing and
future defaults. The reduction in the period reflects latest data points on
the population judged at risk.
Adjustment for specific segments: £13 million (31 December 2024: £14
million)
The Group monitors risks across specific segments of its portfolios which may
not be fully captured through collective models. The judgement for fire safety
and cladding uncertainty remains in place as the only Mortgages segment
sufficiently material to address, given evidence of cases with defective
cladding, or other fire safety issues.
Lifetime extension on revolving products: £34 million (31 December 2024: £40
million)
An adjustment is required to extend the lifetime used for Stage 2 exposures on
Retail revolving products from a three-year modelled lifetime, which reflected
the outcome data available when the ECL models were developed, to a more
representative lifetime. Incremental defaults beyond year three are calculated
through the extrapolation of the default trajectory observed throughout the
three years and beyond.
Adjustments to loss given defaults (LGDs): £(32) million (31 December 2024:
£(52) million)
A number of adjustments are made to the loss given default (LGD) assumptions
used within unsecured and motor credit models. For unsecured portfolios, the
adjustments reflect the impact of changes in collection debt sale strategy on
the Group's LGD models, incorporating up to date customer performance and
forward flow debt sale pricing.
In preceding years, adjustments have been required to mitigate limitations
identified in the modelling approach which were causing loss given defaults to
be inflated. These included the lack of benefit from amortisation of exposures
relative to collateral values at default, and the need to reflect an
exposure-weighted calculation. These two adjustments have been released
following respective enhancements to models. One remaining adjustment remains
for a specific segment of the SME portfolio which judgementally applies a more
appropriate blended LGD rate from credit risk profile segments more aligned to
experience.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 8: Allowance for expected credit losses (continued)
Corporate insolvency rates: £(20) million (31 December 2024: £(35) million)
The volume of UK corporate insolvencies continues to exhibit an elevated trend
beyond December 2019 levels, revealing a marked misalignment between observed
UK corporate insolvencies and the Group's equivalent credit performance. This
dislocation gives rise to uncertainty over the drivers of the observed trends
in the metric and the appropriateness of the Group's Commercial Banking model
response which uses observed UK corporate insolvencies data to anchor future
loss estimates to. Given the Group's asset quality remains robust with low
defaults, a negative adjustment is applied by reverting judgementally to the
long-term average of the insolvency rate. The scale of the negative adjustment
reduced in the period reflecting both the reduction in observed actual UK
corporate insolvencies rates, narrowing the gap of the misalignment, as well
from a one-off change due to the interaction with the implementation of loss
rate model enhancements in the period.
Global tariff and geo-political disruption risks: £2 million (31 December
2024: £nil)
This new adjustment was raised in the first half of 2025 to recognise the
potential risks to specific drivers across various corporate sectors not
reflected in broad macroeconomic model drivers. These are potential nuanced
risks to businesses inherent in the base case which could also worsen in the
downside scenarios. This assessment is judgemental and apportioned across all
sectors given the uncertainty of how these risks would emerge.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 8: 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, global
conflicts do not lead to major discontinuities in commodity prices or global
trade. Second, the US will impose tariffs on countries with a bilateral trade
deficit after the Liberation Day 90 day pause expires, resulting in an
increased effective tariff rate relative to prior assumptions. Third, the UK
Industrial Strategy and Spending Review are not assumed to substantially
change the UK fiscal outlook.
Based on these assumptions and incorporating the economic data published in
the second quarter of 2025, the Group's base case scenario is for a slow
expansion in gross domestic product (GDP) and a further rise in the
unemployment rate alongside small gains in residential and commercial property
prices. With underlying inflationary pressures expected to recede, gradual
cuts in UK Bank Rate are expected to continue during 2025, reaching a
'neutral' policy stance in 2026. 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 at
the second 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 17 to the financial statements for the year ended 31
December 2024. For June 2025, the Group continues to judge it appropriate to
include a non-modelled severe downside scenario for Group ECL calculations.
The scenario is now 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.
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 of 30 June 2025 covers the five years 2025 to 2029.
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.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 8: Allowance for expected credit losses (continued)
At 30 June 2025 2025 2026 2027 2028 2029 2025
% % % % % to 2029 average
%
Upside
Gross domestic product growth 1.2 2.0 1.8 1.4 1.4 1.6
Unemployment rate 4.4 3.5 3.1 3.1 3.2 3.5
House price growth 3.6 6.5 7.9 6.2 4.8 5.8
Commercial real estate price growth 5.1 8.1 3.8 1.1 0.4 3.6
UK Bank Rate 4.21 4.50 4.84 5.05 5.21 4.76
CPI inflation 3.3 2.5 2.7 3.1 3.1 2.9
Base case
Gross domestic product growth 1.0 1.0 1.5 1.5 1.5 1.3
Unemployment rate 4.8 5.0 4.7 4.5 4.5 4.7
House price growth 2.6 3.0 2.3 2.5 2.8 2.6
Commercial real estate price growth 1.6 1.1 1.3 0.3 0.0 0.9
UK Bank Rate 4.13 3.56 3.50 3.50 3.50 3.64
CPI inflation 3.3 2.7 2.4 2.5 2.4 2.7
Downside
Gross domestic product growth 0.6 (1.2) 0.6 1.3 1.5 0.5
Unemployment rate 5.2 7.2 7.5 7.2 7.0 6.8
House price growth 1.6 (0.8) (5.9) (4.7) (1.8) (2.4)
Commercial real estate price growth (1.6) (6.8) (1.6) (2.3) (2.7) (3.0)
UK Bank Rate 4.02 1.90 0.99 0.68 0.46 1.61
CPI inflation 3.3 2.5 1.9 1.5 1.1 2.1
Severe downside
Gross domestic product growth 0.1 (3.0) 0.0 1.2 1.4 (0.1)
Unemployment rate 5.8 9.7 10.2 9.8 9.4 9.0
House price growth 0.8 (3.9) (13.4) (10.9) (6.3) (6.9)
Commercial real estate price growth (6.5) (16.0) (7.4) (6.7) (5.7) (8.6)
UK Bank Rate - modelled 3.88 0.68 0.11 0.03 0.01 0.94
UK Bank Rate - adjusted(1) 4.34 3.09 2.80 2.77 2.76 3.15
CPI inflation - modelled 3.3 2.5 1.4 0.5 (0.1) 1.5
CPI inflation - adjusted(1) 3.5 3.8 3.2 2.8 2.4 3.1
Probability-weighted
Gross domestic product growth 0.9 0.2 1.1 1.4 1.4 1.0
Unemployment rate 4.9 5.7 5.6 5.4 5.4 5.4
House price growth 2.4 2.2 0.0 0.1 1.1 1.2
Commercial real estate price growth 0.9 (0.9) 0.3 (1.0) (1.2) (0.4)
UK Bank Rate - modelled 4.09 3.06 2.81 2.77 2.75 3.10
UK Bank Rate - adjusted(1) 4.14 3.30 3.08 3.04 3.03 3.32
CPI inflation - modelled 3.3 2.5 2.2 2.2 2.0 2.4
CPI inflation - adjusted(1) 3.3 2.7 2.4 2.4 2.2 2.6
(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.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 8: Allowance for expected credit losses (continued)
At 31 December 2024 2024 2025 2026 2027 2028 2024
% % % % % to 2028 average
%
Upside
Gross domestic product growth 0.8 1.9 2.2 1.5 1.4 1.6
Unemployment rate 4.3 3.5 2.8 2.7 2.8 3.2
House price growth 3.4 3.7 6.5 6.6 5.4 5.1
Commercial real estate price growth 0.7 7.8 6.7 3.2 0.5 3.7
UK Bank Rate 5.06 4.71 5.02 5.19 5.42 5.08
CPI inflation 2.6 2.8 2.6 2.9 3.0 2.8
Base case
Gross domestic product growth 0.8 1.0 1.4 1.5 1.5 1.2
Unemployment rate 4.3 4.7 4.7 4.5 4.5 4.5
House price growth 3.4 2.1 1.0 1.4 2.4 2.0
Commercial real estate price growth 0.7 0.3 2.5 1.9 0.0 1.1
UK Bank Rate 5.06 4.19 3.63 3.50 3.50 3.98
CPI inflation 2.6 2.8 2.4 2.4 2.2 2.5
Downside
Gross domestic product growth 0.8 (0.5) (0.4) 1.0 1.5 0.5
Unemployment rate 4.3 6.0 7.4 7.4 7.1 6.4
House price growth 3.4 0.6 (5.5) (6.6) (3.4) (2.4)
Commercial real estate price growth 0.7 (7.8) (3.1) (0.9) (2.3) (2.7)
UK Bank Rate 5.06 3.53 1.56 0.96 0.68 2.36
CPI inflation 2.6 2.8 2.3 1.8 1.2 2.1
Severe downside
Gross domestic product growth 0.8 (1.9) (1.5) 0.7 1.3 (0.1)
Unemployment rate 4.3 7.7 10.0 10.0 9.7 8.4
House price growth 3.4 (0.8) (12.4) (13.6) (8.8) (6.7)
Commercial real estate price growth 0.7 (17.4) (8.5) (5.5) (5.7) (7.5)
UK Bank Rate - modelled 5.06 2.68 0.28 0.08 0.02 1.62
UK Bank Rate - adjusted(1) 5.06 4.03 2.70 2.23 1.95 3.19
CPI inflation - modelled 2.6 2.8 1.9 1.0 0.1 1.7
CPI inflation - adjusted(1) 2.6 3.6 2.1 1.4 0.8 2.1
Probability-weighted
Gross domestic product growth 0.8 0.5 0.8 1.2 1.4 1.0
Unemployment rate 4.3 5.0 5.5 5.4 5.3 5.1
House price growth 3.4 1.8 (0.7) (1.0) 0.4 0.8
Commercial real estate price growth 0.7 (1.7) 1.0 0.7 (1.1) (0.1)
UK Bank Rate - modelled 5.06 4.00 3.09 2.90 2.88 3.59
UK Bank Rate - adjusted(1) 5.06 4.13 3.33 3.12 3.08 3.74
CPI inflation - modelled 2.6 2.8 2.4 2.2 1.9 2.4
CPI inflation - adjusted(1) 2.6 2.9 2.4 2.3 2.0 2.4
(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.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 8: 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 30 June 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 0.7 0.0 0.1 0.2 0.3 0.3 0.4 0.4
Unemployment rate 4.5 4.7 4.9 5.0 5.0 5.0 4.9 4.9
House price growth 2.9 3.1 2.7 2.6 3.7 4.0 3.5 3.0
Commercial real estate price growth 2.5 2.7 2.6 1.6 1.2 1.0 1.0 1.1
UK Bank Rate 4.50 4.25 4.0 3.75 3.75 3.50 3.50 3.50
CPI inflation 2.8 3.6 3.4 3.5 3.0 2.6 2.6 2.4
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 growth 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
ECL sensitivity to economic assumptions
The table below 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 PD 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 being £244
million compared to £287 million at 31 December 2024.
ECL allowance Probability- Upside Base case Downside Severe
weighted £m £m £m downside
£m £m
At 30 June 2025 1,598 1,119 1,354 1,837 3,047
At 31 December 2024 1,883 1,266 1,596 2,175 3,722
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 8: Allowance for expected credit losses (continued)
Movement in expected credit loss allowance
Half-year to 30 June Half-year to 30 June Half-year to 31 December
2025 2024 2024
£m £m £m
Opening ECL at start of period 1,883 2,404 2,083
Write-offs and other(1) (345) (325) (287)
Income statement charge 60 4 87
Net ECL decrease (285) (321) (200)
Closing ECL at end of period 1,598 2,083 1,883
(1 ) Contains adjustments in respect of purchased or originated
credit-impaired financial assets.
( )
(
)
Note 9: Debt securities in issue
At 30 June 2025 At 31 December 2024
At At Total At At Total
fair value amortised £m fair value amortised £m
through cost through cost
profit £m profit £m
or loss or loss
£m £m
Senior unsecured notes issued - 5,720 5,720 - 5,899 5,899
Securitisation notes 18 2,741 2,759 22 2,755 2,777
18 8,461 8,479 22 8,654 8,676
Covered bonds and securitisation programmes
The Group's securitisation vehicles issue notes that are held both externally
and internally, and are secured on loans and advances to customers amounting
to £25,838 million at 30 June 2025 (31 December 2024: £25,738 million), the
majority of which have been sold to bankruptcy remote structured entities. As
the structured entities are funded by the issue of debt on terms whereby the
majority of the risks and rewards of the portfolio are retained by the
subsidiary, the structured entities are consolidated fully and all of these
loans are retained on the Group's balance sheet.
Cash deposits of £955 million (31 December 2024: £1,020 million) which
support the debt securities issued by the structured entities, the term
advances related to covered bonds and other legal obligations, are held by the
Group.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 10: Provisions
Provisions Regulatory Other Total
for financial and legal £m £m
commitments provisions
and guarantees(1) £m
£m
At 1 January 2025 113 300 98 511
Provisions applied - (73) (84) (157)
(Credit) charge for the period (15) 2 115 102
At 30 June 2025 98 229 129 456
(1) In respect of loans and advances to customers.
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 half-year to
30 June 2025 the Group charged a further £2 million in respect of legal
actions and other regulatory matters and the unutilised balance at 30 June
2025 was £229 million (31 December 2024: £300 million). The most significant
items are outlined below.
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.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 10: Provisions (continued)
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.
Note 11: Dividends on ordinary shares
The Bank paid a dividend of £250 million on 25 February 2025 (£650 million
in the half-year to 30 June 2024).
Note 12: Related party transactions
Balances and transactions with fellow Lloyds Banking Group undertakings
The Bank and its subsidiaries have balances due to and from the Bank's
ultimate parent company, Lloyds Banking Group plc, and fellow Lloyds Banking
Group undertakings. These are included on the balance sheet as follows:
At 30 Jun At 31 Dec
2025 2024
£m £m
Assets, included within:
Derivative financial instruments 2,003 2,893
Financial assets at amortised cost: due from fellow Lloyds Banking Group 19,693 16,964
undertakings
Liabilities, included within:
Due to fellow Lloyds Banking Group undertakings 113,140 109,907
Derivative financial instruments 3,304 3,041
Debt securities in issue 5,449 5,363
Subordinated liabilities 1,503 1,504
During the half-year to 30 June 2025 the Group earned £430 million (half-year
to 30 June 2024: £529 million) of interest income and incurred £2,932
million (half-year to 30 June 2024: £2,788 million) of interest expense and
recognised net fee and commission income of £17 million (half year to 30 June
2024: net fee and commission expense of £66 million) on balances and
transactions with Lloyds Banking Group plc and fellow Lloyds Banking Group
undertakings.
In addition, during the half-year to 30 June 2025 the Group incurred
expenditure of £61 million (half-year ended 30 June 2024: £39 million) on
behalf of fellow Lloyds Banking Group undertakings which was recharged to
those undertakings; and fellow Lloyds Banking Group undertakings incurred
expenditure of £909 million (half-year ended 30 June 2024: £681 million) on
behalf of the Group which has been recharged to the Group.
Other related party transactions
Other related party transactions for the half-year to 30 June 2025 are similar
in nature to those for the year ended 31 December 2024.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 13: Contingent liabilities, commitments and guarantees
Contingent liabilities, commitments and guarantees
At 30 June 2025 contingent liabilities, such as performance bonds and letters
of credit, arising from the banking business were £100 million (31 December
2024: £98 million).
The contingent liabilities of the Group arise in the normal course of its
banking business and it is not practicable to quantify their future financial
effect. Total commitments and guarantees were £66,264 million (31 December
2024: £65,069 million), of which in respect of undrawn formal standby
facilities, credit lines and other commitments to lend, £20,264 million (31
December 2024: £18,025 million) was irrevocable.
Interchange fees
With respect to multi-lateral interchange fees (MIFs), the Lloyds Banking
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 final judgment of the Supreme Court in 2020 upholding the Court of
Appeal's finding in 2018 that certain historic interchange arrangements of
Mastercard and Visa infringed competition law and a subsequent judgment of the
Competition Appeal Tribunal in June 2025 finding that all default interchange
fee rules of Mastercard and Visa (including after the Interchange Fee
Regulation), infringed competition law)
• Litigation brought on behalf of UK consumers in the English Courts
against Mastercard (settlement of which was approved by the Competition Appeal
Tribunal in the first half of 2025)
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 Lloyds Banking 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 Lloyds Banking Group may be subject
and this cap is set at the cash consideration received by the Lloyds Banking
Group for the sale of its stake in Visa Europe to Visa Inc in 2016. In 2016,
the Lloyds Banking 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 Lloyds Banking 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 Lloyds Banking 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 Lloyds Banking 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
Lloyds Banking Group of any private lawsuits or ongoing related challenges to
the interpretation or validity of any of the Lloyds Banking 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 HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 13: Contingent liabilities, commitments and guarantees (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 has appealed to the Upper Tier Tax Tribunal, 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 the Group of approximately
£195 million (including interest). The Group, following conclusion of the
hearing and having taken appropriate advice, does not consider that this is a
case where additional tax will ultimately fall due.
There are a number of other open matters on which the Group is in discussions
with HMRC (including 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.
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 10.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors listed below (being all the directors of Bank of Scotland plc)
confirm that to the best of their knowledge these condensed consolidated
half-year financial statements have been prepared in accordance with UK
adopted International Accounting Standard 34, Interim Financial Reporting, and
that the half-year management report herein includes a fair review of the
information required by DTR 4.2.7R and DTR 4.2.8R, namely:
• an indication of important events that have occurred during the six
months ended 30 June 2025 and their impact on the condensed consolidated
half-year financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
• material related party transactions in the six months ended 30 June 2025
and any material changes in the related party transactions described in the
last annual report.
Signed on behalf of the Board by
Charlie Nunn
Group Chief Executive
23 July 2025
Bank of Scotland plc Board of Directors:
Executive directors:
Charlie Nunn (Group Chief Executive)
William Chalmers (Chief Financial Officer)
Non-executive directors:
Sir Robin Budenberg CBE (Chair)
Sarah Bentley
Brendan Gilligan
Nigel Hinshelwood
Sarah Legg
Amanda Mackenzie LVO OBE
Harmeen Mehta
Cathy Turner
Scott Wheway
Catherine Woods
Nathan Bostock
Chris Vogelzang
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 Bank of Scotland 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 escalation of
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
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; and
assumptions and estimates that form the basis of the Group's financial
statements. 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
07353 885 690
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 News Release 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: Bank of Scotland plc, The Mound, Edinburgh EH1 1YZ
Registered in Scotland No. SC327000
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