REG - Lloyds Banking Group - 2025 results
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RNS Number : 8122Q Lloyds Banking Group PLC 29 January 2026
Lloyds Banking Group plc
2025 results
29 January 2026
CONTENTS
Results for the full year 1
Income statement (underlying basis)(A) and key balance sheet metrics 3
Quarterly information(A) 4
Balance sheet analysis 5
Group results - (#Section4) statutory basis 6
Group Chief Executive's statement 7
Summary of Group results(A) 9
Divisional results
Segmental analysis - underlying basis(A) 18
Retail 19
Commercial Banking 21
Insurance, Pensions and Investments 23
Equity Investments and Central Items 27
Risk management
Principal risks and uncertainties 29
Capital risk 30
Credit risk 35
Liquidity risk 48
Interest rate sensitivity 50
Statutory information
Condensed consolidated financial statements (unaudited) 51
Consolidated income statement (unaudited) 51
Consolidated statement of comprehensive income (unaudited) 52
Consolidated balance sheet (unaudited) 53
Consolidated statement of changes in equity (unaudited) 54
Consolidated cash flow statement (unaudited) 56
Notes to the condensed consolidated financial statements (unaudited) 57
Key dates 61
Basis of presentation 61
Alternative performance measures 62
Forward-looking statements 68
Contacts
Preliminary results
The financial information contained in this document is unaudited and does not
constitute statutory accounts within the meaning of section 434 of the
Companies Act 2006.
Forward-looking statements
This news release contains forward-looking statements. For further details,
reference should be made to page 68.
Alternative performance measures
The Group uses a number of alternative performance measures, including
underlying profit, in the description of its business performance and
financial position. These measures are labelled with a superscript 'A'
throughout this document, with the exception of content on pages 1 to 2 and
pages 7 to 8 which is, unless otherwise stated, presented on an underlying
basis. Further information on these measures is set out on page 62.
RESULTS FOR THE FULL YEAR
"In 2025, we entered the second phase of our five year strategy and continued
to deliver for customers, shareholders and wider stakeholders. As our
strategic transformation accelerates into 2026, we remain guided by our
purpose of Helping Britain Prosper in driving positive change in areas where
we can have impact at scale and create value.
The Group demonstrated sustained strength in financial performance in 2025,
including in the final quarter, with continued balance sheet and income
growth, as well as strong cost discipline and credit performance. This
performance enables total shareholder distributions of c.£3.9 billion for the
year.
Looking ahead to 2026 and the culmination of the five year strategy we set out
in 2022, our continued business momentum and strategic delivery enable us to
upgrade guidance. The sustained strength in performance means we are well
positioned for 2026 and beyond. Having entered this year on a positive
trajectory, I look forward to sharing more detail on the next stage of the
Group's strategy, beyond the current plan, in July."
Charlie Nunn, Group Chief Executive
Delivering on our purpose-driven strategy, confident in delivering 2026
strategic outcomes
• Diversified revenue growth across the business through focusing on
building the core franchise, deeper customer relationships, developing high
value business areas and cross-Group collaboration
• Delivered £1.4 billion of annualised additional revenues from strategic
initiatives in 2025; now confident in delivering c.£2 billion by the end of
2026 (ahead of previous target of c.£1.5 billion)
• Enhancing operating leverage through transforming delivery capabilities
and capitalising on scale, driving gross cost savings of £1.9 billion since
2021
• Progress in digital capabilities to innovate at scale and reinforce
competitive strength, driving revenue and efficiency opportunities, as
highlighted at the Digital and AI seminar in November 2025. Focused on
extending leadership position across new and emerging technologies including
Generative AI (Gen AI) and digital assets
Sustained strength in financial performance(1)
• Statutory profit before tax of £6.7 billion (2024: £6.0 billion)
benefitting from higher total income, partially offset by higher operating
expenses and a higher impairment charge. Return on tangible equity of 12.9%,
or 14.8% excluding a charge for motor finance commission arrangements in the
third quarter. Fourth quarter return on tangible equity of 15.7%
• Underlying net interest income of £13.6 billion, up 6% compared to
2024. This reflects a banking net interest margin of 3.06%, up 11 basis
points year-on-year (up 4 basis points in the fourth quarter to 3.10%),
alongside higher average interest-earning banking assets of £462.9 billion
• Underlying other income of £6.1 billion, 9% higher than 2024 (2% higher
in the fourth quarter versus the third), driven by strengthening customer
activity and the benefit of strategic initiatives
• Operating lease depreciation of £1,454 million, up 10%, due to fleet
growth, the depreciation of higher value vehicles and declines in used
electric car prices, partially offset by risk mitigation actions
• Operating costs of £9.8 billion, up 3% versus the prior year,
reflecting strategic investment (including increased severance expense),
business growth costs and inflationary pressures, partially offset by cost
savings from investment and continued business-as-usual cost discipline
• Remediation costs of £968 million, of which £800 million related to
the potential impact of motor finance commission arrangements taken in the
third quarter
• Underlying impairment charge of £795 million, reflecting strong and
stable credit performance and an asset quality ratio of 17 basis points
Growth in the customer franchise
• Underlying loans and advances to customers of £481.1 billion increased
by £22.0 billion (5%) in the year, with growth across Retail of £18.8
billion and Commercial Banking of £2.7 billion. Balances increased by £4.0
billion in the fourth quarter, significantly driven by an increase in UK
mortgages, Retail unsecured products and the European retail business
• Customer deposits of £496.5 billion increased by £13.8 billion (3%)
in the year, with £5.5 billion growth in Retail and £8.5 billion in
Commercial Banking. Customer deposits reduced by £0.2 billion in the fourth
quarter, with £1.0 billion growth in Retail current accounts, more than
offset by a reduction in Commercial Banking balances
RESULTS FOR THE FULL YEAR (continued)
Strong capital generation driving increased capital returns
• Strong capital generation of 147 basis points, or 178 basis points
excluding the third quarter charge for motor finance. Pro forma CET1 ratio of
13.2% after increased ordinary dividend and announced share buyback
• Risk-weighted assets of £235.5 billion, up £10.9 billion in 2025,
reflecting lending growth and Retail secured CRD IV increases, partially
offset by ongoing optimisation activity
• Tangible net assets per share of 57.0 pence, up 4.6 pence in 2025,
benefitting from attributable profit, the unwind of the cash flow hedge
reserve and a reduction in the number of shares following the share buyback
programme. This was partially offset by capital distributions, a lower pension
surplus and higher intangible assets
• The Board has recommended a final ordinary dividend of 2.43 pence per
share, resulting in a total ordinary dividend for 2025 of 3.65 pence per
share, up 15% on the prior year and in line with the Group's progressive and
sustainable ordinary dividend policy
• Given the Group's strong capital position, the Board has also announced
its intention to implement an ordinary share buyback programme of up to £1.75
billion. Going forward, the Group will now review excess capital distributions
in addition to the ordinary dividend every half year
• Total capital returns in respect of 2025 of up to £3.9 billion
2026 guidance
Based on our sustained strength in financial performance and our current
macroeconomic assumptions, for 2026 the Group expects:
• Underlying net interest income of c.£14.9 billion
• Cost:income ratio of less than 50% (including operating costs of less
than £9.9 billion)
• Asset quality ratio of c.25 basis points
• Return on tangible equity now of greater than 16%
• Capital generation of greater than 200 basis points(2)
• To pay down to a CET1 ratio of c.13.0%
(1) See the basis of presentation on page 61.
(2) Excludes capital distributions.
( )
INCOME STATEMENT (UNDERLYING BASIS)(A) AND KEY BALANCE SHEET METRICS
2025 2024 Change
£m £m %
Underlying net interest income 13,635 12,845 6
Underlying other income 6,120 5,597 9
Operating lease depreciation (1,454) (1,325) (10)
Net income 18,301 17,117 7
Operating costs (9,761) (9,442) (3)
Remediation (968) (899) (8)
Total costs (10,729) (10,341) (4)
Underlying profit before impairment 7,572 6,776 12
Underlying impairment charge (795) (433) (84)
Underlying profit 6,777 6,343 7
Restructuring (46) (40) (15)
Volatility and other items (70) (332) 79
Statutory profit before tax 6,661 5,971 12
Tax expense (1,904) (1,494) (27)
Statutory profit after tax 4,757 4,477 6
Earnings per share 7.0p 6.3p 0.7p
Dividends per share - ordinary 3.65p 3.17p 15
Share buyback value £1.75bn £1.70bn 3
Banking net interest margin(A) 3.06% 2.95% 11bp
Average interest-earning banking assets(A) £462.9bn £451.2bn 3
Cost:income ratio(A) 58.6% 60.4% (1.8)pp
Asset quality ratio(A) 0.17% 0.10% 7bp
Return on tangible equity(A) 12.9% 12.3% 0.6pp
At 31 Dec 2025 At 31 Dec 2024 Change
%
Underlying loans and advances to customers(A) £481.1bn £459.1bn 5
Customer deposits £496.5bn £482.7bn 3
Loan to deposit ratio(A) 97% 95% 2pp
CET1 ratio 14.0% 14.2% (0.2)pp
Pro forma CET1 ratio(A,1) 13.2% 13.5% (0.3)pp
UK leverage ratio 5.4% 5.5% (0.1)pp
Risk-weighted assets £235.5bn £224.6bn 5
Wholesale funding(2) £99.4bn £92.5bn 7
Liquidity coverage ratio(3) 145% 146% (1)pp
Net stable funding ratio(4) 124% 129% (5)pp
Tangible net assets per share(A) 57.0p 52.4p 4.6p
(A ) See page 62.
(1 ) 31 December 2025 and 31 December 2024 pro forma CET1 ratios reflect
the full impact of the share buybacks announced in respect of 2025 and 2024.
31 December 2024 pro forma CET1 ratio also reflects the ordinary dividend
received from the Insurance business in February 2025. The CET1 and pro forma
CET1 ratios at 31 December 2025 both reflect an ordinary dividend received
from the Insurance business in December 2025, that would previously have been
received in February of the following year.
(2) Excludes balances relating to cash collateral of £1.5 billion (31
December 2024: £2.8 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 Change Quarter Quarter Quarter Quarter Quarter Quarter
ended ended % ended ended ended ended ended ended
31 Dec 30 Sep 30 Jun 31 Mar 31 Dec 30 Sep 30 Jun 31 Mar
2025 2025 2025 2025 2024 2024 2024 2024
£m £m £m £m £m £m £m £m
Underlying net interest income 3,529 3,451 2 3,361 3,294 3,276 3,231 3,154 3,184
Underlying other income 1,594 1,557 2 1,517 1,452 1,433 1,430 1,394 1,340
Operating lease depreciation (379) (365) (4) (355) (355) (331) (315) (396) (283)
Net income 4,744 4,643 2 4,523 4,391 4,378 4,346 4,152 4,241
Operating costs (2,585) (2,302) (12) (2,324) (2,550) (2,450) (2,292) (2,298) (2,402)
Remediation (56) (875) 94 (37) - (775) (29) (70) (25)
Total costs (2,641) (3,177) 17 (2,361) (2,550) (3,225) (2,321) (2,368) (2,427)
Underlying profit before impairment 2,103 1,466 43 2,162 1,841 1,153 2,025 1,784 1,814
Underlying impairment charge (177) (176) (1) (133) (309) (160) (172) (44) (57)
Underlying profit 1,926 1,290 49 2,029 1,532 993 1,853 1,740 1,757
Restructuring (30) (7) (5) (4) (19) (6) (3) (12)
Volatility and other items 87 (109) (37) (11) (150) (24) (41) (117)
Statutory profit before tax 1,983 1,174 69 1,987 1,517 824 1,823 1,696 1,628
Tax expense (548) (396) (38) (577) (383) (124) (490) (467) (413)
Statutory profit after tax 1,435 778 84 1,410 1,134 700 1,333 1,229 1,215
Earnings per share 2.2p 1.0p 1.2p 2.1p 1.7p 1.0p 1.9p 1.7p 1.7p
Banking net interest margin(A) 3.10% 3.06% 4bp 3.04% 3.03% 2.97% 2.95% 2.93% 2.95%
Average interest-earning banking assets(A) (£bn) 470.3 465.5 1 460.0 455.5 455.1 451.1 449.4 449.1
Cost:income ratio(A) 55.7% 68.4% (12.7)pp 52.2% 58.1% 73.7% 53.4% 57.0% 57.2%
Asset quality ratio(A) 0.14% 0.15% (1)bp 0.11% 0.27% 0.14% 0.15% 0.05% 0.06%
Return on tangible equity(A) 15.7% 7.5% 8.2pp 15.5% 12.6% 7.1% 15.2% 13.6% 13.3%
At At Change At At At At At At
31 Dec 30 Sep % 30 Jun 31 Mar 2025 31 Dec 30 Sep 2024 30 Jun 2024 31 Mar 2024
2025 2025 2025 2024
Underlying loans and advances to customers(A,1) (£bn) 481.1 477.1 1 471.0 466.2 459.1 457.0 452.4 448.5
Customer deposits (£bn) 496.5 496.7 493.9 487.7 482.7 475.7 474.7 469.2
Loan to deposit ratio(A) 97% 96% 1.0pp 95% 96% 95% 96% 95% 96%
CET1 ratio 14.0% 13.8% 0.2pp 13.8% 13.5% 14.2% 14.3% 14.1% 13.9%
Pro forma CET1 ratio(A,2) 13.2% 13.8% (0.6)pp 13.8% 13.5% 13.5% 14.3% 14.1% 13.9%
UK leverage ratio 5.4% 5.2% 0.2pp 5.4% 5.5% 5.5% 5.5% 5.4% 5.6%
Risk-weighted assets (£bn) 235.5 232.3 1 231.4 230.1 224.6 223.3 222.0 222.8
Wholesale funding (£bn) 99.4 103.5 (4) 92.2 89.4 92.5 93.3 97.6 99.9
Liquidity coverage ratio(3) 145% 145% 145% 145% 146% 144% 144% 143%
Net stable funding ratio(4) 124% 126% (2)pp 127% 128% 129% 129% 130% 130%
Tangible net assets per share(A) 57.0p 55.0p 2.0p 54.5p 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 2025 and 31 December 2024 pro forma CET1 ratios reflect
the full impact of the share buybacks announced in respect of 2025 and 2024.
31 December 2024 and 30 June 2025 ratios also reflect the ordinary dividends
received from the Insurance business in February 2025 and July 2025
respectively. The CET1 and pro forma CET1 ratios at 31 December 2025 both
reflect an ordinary dividend received from the Insurance business in December
2025, that would previously have been received in February of the following
year.
(3) The liquidity coverage ratio is calculated as a simple average of
month-end observations over the previous 12 months.
(4) The net stable funding ratio is calculated as a simple average of
month-end observations over the previous four quarter-ends.
BALANCE SHEET ANALYSIS
At 31 Dec At 30 Sep 2025 Change At 30 Jun Change At 31 Dec 2024 Change
2025 £bn % 2025 % £bn %
£bn £bn
UK mortgages 323.1 321.0 1 317.9 2 312.3 3
Credit cards 17.3 16.8 3 16.4 5 15.7 10
UK Retail unsecured loans 10.5 10.3 2 9.9 6 9.1 15
UK Motor Finance(1) 16.4 16.1 2 16.0 3 15.3 7
Overdrafts 1.3 1.2 8 1.2 8 1.2 8
Retail Europe(2) 20.4 19.9 3 19.0 7 16.8 21
Retail other(2) 1.3 1.4 (7) 1.2 8 1.1 18
Business and Commercial Banking 28.3 28.8 (2) 29.1 (3) 29.7 (5)
Corporate and Institutional Banking 62.0 61.3 1 59.7 4 57.9 7
Central Items(3) 0.5 0.3 67 0.6 17 -
Underlying loans and advances to customers(A) 481.1 477.1 1 471.0 2 459.1 5
Retail current accounts 102.8 101.8 1 100.6 2 101.3 1
Retail savings accounts 212.5 212.4 213.1 208.2 2
Wealth 9.9 9.5 4 9.7 2 10.2 (3)
Commercial Banking 171.1 172.6 (1) 170.2 1 162.6 5
Central Items 0.2 0.4 (50) 0.3 (33) 0.4 (50)
Customer deposits 496.5 496.7 493.9 1 482.7 3
Total assets 944.1 937.5 919.3 3 906.7 4
Total liabilities 896.2 891.8 872.4 3 860.8 4
Ordinary shareholders' equity 41.8 40.2 4 40.4 3 39.5 6
Other equity instruments 5.9 5.2 13 6.3 (6) 6.2 (5)
Non-controlling interests 0.2 0.2 0.2 0.2
Total equity 47.9 45.6 5 46.9 2 45.9 4
Ordinary shares in issue, excluding own shares 58,799m 59,196m (1) 59,938m (2) 60,491m (3)
(1) UK Motor Finance balances on an underlying basis(A) exclude a
finance lease gross up. See page 62.
(2) Within underlying loans and advances, Retail Europe, previously
presented within Retail other, is reported separately. The comparatives are
represented on a consistent basis. Retail other primarily includes the Wealth
business.
(3) 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 basis
results are shown on page 3.
Summary income statement 2025 2024 Change
£m £m %
Net interest income 13,230 12,277 8
Other income(1) 6,192 5,726 8
Total income(1) 19,422 18,003 8
Operating expenses (11,966) (11,601) (3)
Impairment (795) (431) (84)
Profit before tax 6,661 5,971 12
Tax expense (1,904) (1,494) (27)
Profit after tax 4,757 4,477 6
Profit attributable to ordinary shareholders 4,196 3,923 7
Profit attributable to other equity holders 463 498 (7)
Profit attributable to non-controlling interests 98 56 75
Profit after tax 4,757 4,477 6
Ordinary shares in issue (weighted-average - basic) 59,790m 62,413m (4)
Basic earnings per share 7.0p 6.3p 0.7p
(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 represented on a consistent
basis.
Summary balance sheet At 31 Dec At 31 Dec 2024 Change
2025 £m %
£m
Assets
Cash and balances at central banks 56,661 62,705 (10)
Financial assets at fair value through profit or loss 240,413 215,925 11
Derivative financial instruments 19,727 24,065 (18)
Financial assets at amortised cost 553,672 531,777 4
Financial assets at fair value through other comprehensive income 36,320 30,690 18
Other assets 37,279 41,535 (10)
Total assets 944,072 906,697 4
Liabilities
Deposits from banks 5,779 6,158 (6)
Customer deposits 496,457 482,745 3
Repurchase agreements at amortised cost 38,570 37,760 2
Financial liabilities at fair value through profit or loss 27,909 27,611 1
Derivative financial instruments 16,132 21,676 (26)
Debt securities in issue at amortised cost 78,271 70,834 10
Liabilities arising from insurance and participating investment contracts 135,284 122,064 11
Liabilities arising from non-participating investment contracts 61,640 51,228 20
Other liabilities 26,269 30,644 (14)
Subordinated liabilities 9,894 10,089 (2)
Total liabilities 896,205 860,809 4
Total equity 47,867 45,888 4
Total equity and liabilities 944,072 906,697 4
GROUP CHIEF EXECUTIVE'S STATEMENT
2025 was a key year for the Group, entering the second phase of our strategy,
investing for the benefit of our customers and wider stakeholders and guided
by our purpose of Helping Britain Prosper. As we enter 2026, our
transformation is accelerating, supported by strong business momentum as well
as enhanced digital capabilities and innovative propositions that are driving
growth and efficiency across the franchise.
The Group demonstrated sustained strength in financial performance in 2025,
with franchise, balance sheet and income growth. Strong business performance
drove capital generation across the year of 147 basis points allowing total
shareholder distributions of £3.9 billion, even after an additional £800
million charge for motor finance in the third quarter.
Given our continued strategic execution and sustained strength in financial
performance, we remain confident in meeting our 2026 commitments (including
our upgraded target for return on tangible equity) and the Group's outlook
beyond 2026. We look forward to setting out the next phase of the Group's
strategy, beyond the current plan, in July.
Sustained strength in financial performance
Statutory profit before tax was £6.7 billion, up 12% year-on-year, with
higher underlying profit of £6.8 billion, driven by 7% growth in net income,
partially offset by higher operating costs and a higher underlying impairment
charge. Net income of £18.3 billion benefitted from a higher banking net
interest margin of 3.06% and continued broad-based growth in underlying other
income of 9%. Operating costs of £9.8 billion increased by 3%, reflecting
strategic investment (including an increased severance charge), business
growth costs and inflationary pressures, partially offset by increasing cost
savings from investment and business-as-usual cost discipline. The impairment
charge remained low at £795 million, with strong and stable credit
performance across our portfolios. Overall, this resulted in a return on
tangible equity of 12.9%, or 14.8% excluding the motor finance charge.
The Group's franchise and balance sheet grew during 2025. Underlying loans and
advances to customers of £481.1 billion were up £22.0 billion (5%),
reflecting growth across all Retail areas including UK mortgages and the
European business, alongside growth in Corporate and Institutional Banking.
Customer deposits of £496.5 billion increased by £13.8 billion (3%) across
the year. This included growth in Retail of £5.5 billion, driven by strength
in current accounts and savings, and Commercial Banking of £8.5 billion,
including growth in targeted sectors.
The Group delivered strong capital generation of 147 basis points in 2025
(178 basis points excluding the motor finance charge), and has a pro forma
CET1 ratio of 13.2%. Given the capital generation and strength of the CET1
position, the Board has recommended an increased final ordinary dividend of
2.43 pence per share, resulting in a total dividend for the year of 3.65 pence
per share, up 15% on the prior year. In addition, the Group has announced its
intention to implement an ordinary share buyback of up to £1.75 billion, as
we continue to distribute excess capital to shareholders. Together this
represents distributions of £3.9 billion in respect of 2025. Going forward,
reflecting increasing confidence in our capital generation, the Group will now
review excess capital distributions in addition to the ordinary dividend every
half year.
Guiding purpose of Helping Britain Prosper
The fundamentals of the UK economy are constructive. Our purpose allows us to
play a key role in promoting UK prosperity, aligning our strategy to support
UK economic growth sectors. As part of this, we recently committed to
providing a further £35 billion of new finance to companies investing and
operating in the UK in 2026. Alongside, we remain focused on improving access
to quality and affordable housing, lending £17 billion to first time buyers,
as well as supporting £3.2 billion of new finance to the social housing
sector in 2025.
We continue to financially empower our customers. For example, our Ready-Made
Pensions product is a simple, long-term financial planning solution
benefitting customers including those who do not participate in
auto-enrolment. Of the over 7,000 accounts opened since launch, c.40% are
self-employed customers.
Supporting the net zero transition remains a significant strategic and
commercial opportunity. The Group has cumulatively delivered over
£70 billion of sustainable financing since 2022, including over
£21 billion in 2025.
Second phase of purpose-driven strategy, continued strong momentum, on track
for 2026
In 2025, we entered the second phase of our five year strategic plan,
continuing to scale the core business, driving growth in high value areas,
deepening customer relationships and strengthening cross-Group collaboration.
Strong strategic momentum means we now expect to generate c.£2 billion of
additional revenues from strategic initiatives by the end of 2026, exceeding
our initial £1.5 billion target.
GROUP CHIEF EXECUTIVE'S STATEMENT (continued)
In 2025 we continued to grow our Retail franchise through innovative new
propositions and enhanced capabilities. We maintained our focus on high-value
segments, building our Mass Affluent current account offering with the launch
of our Lloyds Premier product. As the UK's largest digital bank, we continued
to accelerate the shift to mobile-first. We now have c.21.5 million customers
using our app, an increase of c.45% since 2021. Alongside, we recently
announced the acquisition of Curve (subject to regulatory approval) which will
reinforce our leading digital experiences, including enhanced digital wallet
capabilities.
In Insurance, Pensions and Investments (IP&I), we are reinforcing our
competitive position in areas of strategic focus. We now have over 750,000
customers using our core app for workplace pension customers, helping to drive
regular workplace pension contributions up 5% year-on-year. With the intention
of capitalising on our position as the UK's only scale integrated financial
services provider, we continue to embed IP&I products across banking
journeys. The protection take-up rate for mortgage customers is now at 20% in
2025, up from 15% in 2024. Alongside, the recent full acquisition of Schroders
Personal Wealth accelerates delivery of our Wealth strategy and will deepen
relationships in a high value segment.
In Commercial Banking, we are building a digitally-led relationship bank and
driving income diversification through capital efficient growth. In Business
and Commercial Banking, we have strengthened deposit and lending growth
capabilities through enhanced digital propositions. This includes our new Gen
AI powered application which simplifies the Commercial Real Estate lending
journey by expediting the tenancy schedule process. In Corporate and
Institutional Banking, we are delivering on our ambition to become a broader
scale solution provider, meeting more of our customer needs. For example, in
2025 we launched a market-leading FX solution, supporting a c.21% increase in
foreign exchange volumes year-on-year.
Finally, within Equity Investments, alongside strong LDC performance in 2025,
our Lloyds Living business continues to be a significant growth driver, with a
portfolio of close to 8,000 homes, up from c.5,500 this time last year.
As we deliver growth we are focused on improving operating leverage through
cost and capital efficiency. Since 2021 we have delivered £1.9 billion of
gross cost savings through both business-as-usual management as well as more
transformational initiatives enabled by strategic investment. Alongside, we
have driven £24 billion of risk-weighted asset optimisation, primarily
through enhanced capabilities, data improvements and risk reduction
transactions.
Leveraging our enablers to drive long-term competitive strength
As highlighted in our recent Digital and AI seminar, our investment in
technology, data and people underpins our ambitions to grow the business with
innovation and improved operating leverage. Advances in our infrastructure and
capabilities allow us to deliver on our strategic priorities, such as enabling
a seven minute mobile current account opening process, in line with the sector
best, driving c.85% of our current account openings in 2025. Digital
investments have also supported simplification of our technology estate and
helped improve productivity, with an increase of c.45% in active customers
served per distribution FTE since 2021. Finally, we are extending our
leadership across new and emerging technologies, including Gen AI and digital
assets, and are well-placed to succeed in a period of potentially
transformational change for the industry. Our c.50 major live Gen AI use cases
delivered c.£50 million of value in 2025, as we built the foundations of our
capabilities. We are now targeting over £100 million of incremental P&L
benefit from Gen AI in 2026, as we start to scale the foundations.
Together, these developments drive improved operating leverage, helping
towards our target cost:income ratio of less than 50% in 2026. As we enter the
final year of our current strategy, we remain confident in our 2026 ambitions
to generate higher, more sustainable returns for our shareholders. Beyond
2026, we are committed to continuing income growth, improving operating
leverage and stronger, sustainable returns.
2026 guidance
Based on our sustained strength in financial performance and our current
macroeconomic assumptions, for 2026 the Group expects:
• Underlying net interest income of c.£14.9 billion
• Cost:income ratio of less than 50% (including operating costs of less
than £9.9 billion)
• Asset quality ratio of c.25 basis points
• Return on tangible equity now of greater than 16%
• Capital generation of greater than 200 basis points(1)
• To pay down to a CET1 ratio of c.13.0%
(1) Excludes capital distributions.
SUMMARY OF GROUP RESULTS(A)
Statutory results
Income statement
The Group's statutory profit before tax for 2025 was £6,661 million, 12%
higher than in 2024. This included higher total income, partially offset by
higher operating expenses and a higher impairment charge. Profit after tax was
£4,757 million and earnings per share were 7.0 pence (2024: £4,477 million
and 6.3 pence respectively).
Total income for 2025 was £19,422 million, an increase of 8% on the prior
year (2024: £18,003 million). Net interest income of £13,230 million was up
8% (2024: £12,277 million), driven by higher average interest-earning assets
and a higher margin, benefitting from franchise led volume growth and stronger
structural hedge income as eligible balances were reinvested in a higher rate
environment, partially offset by continued mortgage and deposit headwinds.
Other income increased by 8% to £6,192 million (2024: £5,726 million), with
higher other operating income and a higher insurance service result, partially
offset by lower net trading income. Other operating income increased by 22% to
£2,367 million (2024: £1,934 million) as a result of vehicle fleet growth
and higher average vehicle rental values in UK Motor Finance within Retail.
The insurance service result increased by 56% to £756 million (2024: £486
million), benefitting from higher income in the workplace pensions business,
higher general insurance income net of claims and the full acquisition of
Schroders Personal Wealth in the fourth quarter. This was alongside the gain
on sale of the Group's bulk annuities portfolio to Rothesay Life plc in the
first half of the year. Net trading income reduced to £1,485 million (2024:
£1,812 million), largely due to market movements partially offset by strong
income growth from Lloyds Living.
Total operating expenses of £11,966 million (2024: £11,601 million) included
a higher remediation charge relating to motor finance commission arrangements.
Excluding remediation, the impact of strategic investment (including planned
higher severance), business growth costs (including the full acquisition of
Schroders Personal Wealth) and inflationary pressures were partially mitigated
by cost savings from investment and continued business-as-usual cost
discipline. Operating expenses include operating lease depreciation which
increased due to fleet growth, the depreciation of higher value vehicles and
declines in used electric car prices, partly mitigated through lease
extensions, used car leasing and remarketing agreements.
A remediation charge of £968 million was recognised by the Group in 2025
(2024: £899 million), including £800 million in relation to the potential
impact of motor finance commission arrangements taken in the third quarter,
bringing the total provision recognised for motor finance to £1,950 million.
The 2025 impairment charge was £795 million, up from £431 million in 2024
which benefitted from a large credit from improvements in the Group's economic
outlook. In Retail, the charge for 2025 reflected both strong performance
alongside the benefits from calibrations and model refinements and a debt
sale. In Commercial Banking, higher charges in the first half of the year
driven by a small number of individual cases were more than offset by releases
from Stage 1 and Stage 2 model calibrations capturing strong credit
performance and reducing interest rates throughout the year.
SUMMARY OF GROUP RESULTS (continued)
Statutory results (continued)
Balance sheet
As at 31 December 2025, total assets were £944 billion, £37 billion higher
than the prior year (31 December 2024: £907 billion). Financial assets at
amortised cost were £554 billion, £22 billion higher versus the prior
year (31 December 2024: £532 billion), supported by increases in loans and
advances to customers. This included growth of £10.8 billion in UK mortgages,
alongside growth across UK Retail unsecured loans, credit cards, UK Motor
Finance and the European retail business totalling £7.3 billion. Lending
balances increased by £2.7 billion in Commercial Banking, with higher
Institutional balances including securitised products, alongside corporate
infrastructure growth, partially offset by repayments of government-backed
lending.
Financial assets held at fair value through profit or loss at £240 billion
increased by £24 billion during the year, with increased holdings in the
Insurance business as a result of market gains on investments held to back
insurance and investment contract liabilities as well as increased reverse
repurchase agreements in the banking business.
Derivative financial assets were £4 billion lower at £20 billion versus the
prior year (31 December 2024: £24 billion), driven by market movements in the
year. Financial assets at fair value through other comprehensive income
of £36 billion increased by £6 billion in the year reflecting increases in
liquid asset holdings. Cash and balances at central banks reduced by £6
billion to £57 billion (31 December 2024: £63 billion) reflecting a change
in the mix of liquidity holdings. Other assets were £4 billion lower,
primarily reflecting the disposal of the Group's bulk annuity business in the
second quarter, partially offset by increased operating lease assets resulting
from fleet growth and higher value vehicles in UK Motor Finance and increased
investment properties from business growth in Lloyds Living.
Total liabilities were £896 billion, £35 billion higher over the year
(31 December 2024: £861 billion). Customer deposits of £496
billion increased in the year by £14 billion. Retail deposits increased
£5.5 billion in the year, including growth in Retail savings accounts, as a
result of net inflows to limited withdrawal and fixed term deposits
particularly through increased ISA balances, and growth in European retail
balances. This was alongside strength in current account balances. Commercial
Banking deposits were up £8.5 billion, resulting from growth in targeted
sectors. Repurchase agreements at amortised cost increased by £1 billion to
£39 billion (31 December 2024: £38 billion), following £13 billion of
repayments of drawings from the Bank of England's Term Funding Scheme with
additional incentives for SMEs (TFSME), more than offset by increased
repurchase agreements.
Financial liabilities at fair value through profit or loss were stable at £28
billion at 31 December 2025 and derivative financial liabilities decreased by
£6 billion to £16 billion as a result of market movements. Liabilities
arising from insurance and investment contracts increased by £24 billion
reflecting the increase in policyholder investments. Other liabilities
decreased by £4 billion to £26 billion and included the effects of the
disposal of the Group's bulk annuity business, partially offset by increased
provisions primarily driven by the provision increase in relation to motor
finance commission arrangements. Debt securities in issue at amortised cost
increased by £7 billion to £78 billion, with new issuances in the year,
while subordinated liabilities remained stable at £10 billion.
Total equity of £48 billion at 31 December 2025 increased by £2 billion from
£46 billion at 31 December 2024. Profit for the year, the unwind of the cash
flow hedge reserve and issuance of AT1 capital instruments in February 2025
and November 2025 were partially offset by the impact of the ordinary share
buyback programme, the dividends paid in May 2025 and September 2025, as well
as the impact of redemptions of AT1 capital instruments in June 2025 and
September 2025, alongside a lower pension surplus.
SUMMARY OF GROUP RESULTS (continued)
Income statement - underlying basis(A)
The Group's underlying profit was £6,777 million in 2025, up 7% versus the
prior year (2024: £6,343 million). Higher underlying net interest income and
higher underlying other income were partially offset by higher operating costs
and a higher underlying impairment charge given a significant release in 2024
driven by the improved economic outlook. Underlying profit for the fourth
quarter was £1,926 million versus £1,290 million in the third quarter of the
year.
Net income(A)
2025 2024 Change
£m £m %
Underlying net interest income 13,635 12,845 6
Underlying other income 6,120 5,597 9
Operating lease depreciation(1) (1,454) (1,325) (10)
Net income(A) 18,301 17,117 7
Banking net interest margin(A) 3.06% 2.95% 11bp
Average interest-earning banking assets(A) £462.9bn £451.2bn 3
(1) Net of losses on disposal of operating lease assets of £10 million
(2024: profit of £59 million).
(
)
Net income of £18,301 million was up 7% compared to 2024, driven by higher
underlying net interest income and higher underlying other income, partially
offset by an increased charge for operating lease depreciation. Net income in
the fourth quarter of £4,744 million was up 2% compared to the third quarter
reflecting the same trends.
Within net income, underlying net interest income of £13,635 million was up
6% versus the prior year (2024: £12,845 million). This was supported by a
banking net interest margin of 3.06% (2024: 2.95%). The net interest margin
benefitted from franchise led volume growth and stronger structural hedge
income as eligible balances were reinvested in a higher rate environment,
partially offset by continued mortgage and deposit headwinds. Average
interest-earning banking assets in 2025 of £462.9 billion (2024: £451.2
billion) reflect strong customer led growth, primarily driven by UK mortgages,
credit cards, UK Retail unsecured loans and the European retail business. In
Commercial Banking, average interest-earning banking assets reduced, impacted
by continued repayments of government-backed lending within Business and
Commercial Banking and lower lending to banks offsetting non government-backed
lending growth. Underlying net interest income in 2025 also included a
non-banking net interest expense of £515 million (2024: £469 million),
increasing as a result of growth in the Group's other operating income
activities and the refinancing of these activities at higher rates. The Group
expects underlying net interest income for 2026 to be c.£14.9 billion.
Underlying net interest income of £3,529 million in the fourth quarter of
2025 was 2% higher than the third quarter (three months to 30 September 2025:
£3,451 million). A growing structural hedge contribution more than offset the
impact of continued headwinds from asset margin compression and a reduced UK
Bank Rate. This resulted in an increase in the banking net interest margin to
3.10% (three months to 30 September 2025: 3.06%). Average interest-earning
banking assets were higher in the fourth quarter at £470.3 billion (three
months to 30 September 2025: £465.5 billion), driven by UK mortgages, the
European retail business and the Corporate and Institutional Banking business.
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. As at 31 December 2025, the notional balance of the
sterling structural hedge was £244 billion (31 December 2024: £242 billion)
with a weighted average life of approximately 3.75 years (31 December 2024:
approximately 3.5 years). The Group generated £5.5 billion of total income
from sterling structural hedge balances in 2025, an increase of £1.3 billion
over the prior year (2024: £4.2 billion). The Group expects sterling
structural hedge earnings to be c.£7.0 billion in 2026, to be
c.£8.0 billion in 2027, with earnings growth from the structural hedge
expected to continue thereafter.
SUMMARY OF GROUP RESULTS (continued)
Income statement - underlying basis(A) (continued)
Underlying other income of £6,120 million in 2025 grew by 9% compared to the
prior year (2024: £5,597 million), driven by strengthening customer activity
and the benefit of investments in strategic initiatives. This included an
increase of 12% in Retail, driven by UK Motor Finance from fleet growth and
higher average vehicle rental values, alongside strength in income from
current accounts and credit cards. Commercial Banking increased by 1% from
higher transaction banking and markets income, partially offset by lower loan
markets activity, with 2024 benefitting from one-off gains. Insurance,
Pensions and Investments underlying other income was up 11% from strengthening
performance in the workplace pensions business, higher general insurance
income net of claims and the full acquisition of Schroders Personal Wealth in
the fourth quarter. Equity Investments and Central Items benefitted from
strong business growth in Lloyds Living.
Underlying other income in the fourth quarter was up 2% compared to the third
quarter. This was supported by continued growth in UK Motor Finance within
Retail, higher transaction banking income in Commercial Banking, alongside the
full acquisition of Schroders Personal Wealth in Insurance, Pensions and
Investments and continued business growth in Lloyds Living.
Operating lease depreciation of £1,454 million in 2025 was 10% higher than in
the prior year (2024: £1,325 million), due to fleet growth,
the depreciation of higher value vehicles and declines in used electric car
prices, partially offset by risk mitigation actions. Compared to the third
quarter of 2025, operating lease depreciation was 4% higher, in line with the
continued growth in fleet size and year-end valuations. The Group continues to
mitigate the risk of used car price movements through a number of market and
customer initiatives to both improve performance and reduce volatility,
including lease extensions, used car leasing, remarketing agreements and
residual value insurance.
Total costs(A)
2025 2024 Change
£m £m %
Operating costs(A) 9,761 9,442 (3)
Remediation 968 899 (8)
Total costs(A) 10,729 10,341 (4)
Cost:income ratio(A) 58.6% 60.4% (1.8)pp
Operating costs of £9,761 million increased by 3% in 2025 reflecting
strategic investment (including an increased severance charge), business
growth costs (including the full acquisition of Schroders Personal Wealth) and
inflationary pressures. These factors were partially mitigated by cost savings
from investment and continued business-as-usual cost discipline. Operating
costs in the fourth quarter increased by 12% as expected, which includes the
Bank Levy, additional investment spend and costs associated with the full
acquisition of Schroders Personal Wealth.
A remediation charge of £968 million was recognised by the Group in 2025
(2024: £899 million), including £800 million in relation to the potential
impact of motor finance commission arrangements taken in the third quarter,
bringing the total provision recognised for motor finance to £1,950 million.
The FCA published Consultation Paper CP25/27 in October 2025 setting out
detailed proposals for a scheme to redress unfair customer relationships,
including a more generous redress methodology than anticipated in the previous
scenario-based provision. The Group has made representations to the FCA on a
number of aspects of the proposed scheme, including that the proposed redress
methodology does not reflect the loss to the customer. The Group will assess
developments and potential impacts on the provision following the announcement
of the final scheme rules, which are expected by the end of March 2026. The
current provision represents the Group's best estimate. In the fourth quarter
the Group recognised a remediation charge of £56 million across a small
number of rectification programmes.
Total costs, including remediation, of £10,729 million were 4% higher than
the prior year, with net income up 7%. The cost:income ratio was 58.6% (2024:
60.4%) and the cost:income ratio excluding remediation was 53.3%. For 2026,
the cost:income ratio is expected to be less than 50%, with operating costs
expected to be less than £9.9 billion.
SUMMARY OF GROUP RESULTS (continued)
Income statement - underlying basis(A) (continued)
Underlying impairment(A)
2025 2024 Change
£m £m %
Charges (credits) pre-updated MES(1)
Retail 734 789 7
Commercial Banking (14) 48
Other 1 (10)
721 827 13
Updated economic outlook (MES)
Retail - (332)
Commercial Banking 74 (62)
74 (394)
Underlying impairment charge(A) 795 433 (84)
Asset quality ratio(A) 0.17% 0.10% 7bp
(1) Impairment charges excluding the impact from the updated economic
outlook (multiple economic scenarios, MES) taken each quarter.
(
)
The underlying impairment charge was £795 million (2024: £433 million),
resulting in an asset quality ratio of 17 basis points. The higher charge
includes a £74 million net charge from updated multiple economic scenarios
(MES), compared to a credit from MES of £394 million in 2024 which
benefitted from an improved economic outlook, notably house price growth.
The pre-updated MES charge of £721 million for 2025 is equivalent to an
asset quality ratio of 15 basis points. This was lower compared to the prior
year due to strong credit performance, with arrears low and stable across
portfolios, alongside one-off benefits primarily from model refinements and
calibrations. In Retail, the charge for 2025 reflected both strong performance
alongside the benefits from calibrations and model refinements and a debt
sale. In Commercial Banking, higher charges in the first half of the year
driven by a small number of individual cases were more than offset by releases
from Stage 1 and Stage 2 model calibrations capturing strong credit
performance and reducing interest rates throughout the year.
The impairment charge in the fourth quarter of £177 million, equivalent to
an asset quality ratio of 14 basis points, includes a £47 million MES charge
reflecting a higher short term unemployment outlook. The low pre-updated MES
charge for the quarter includes model refinement benefits and a large debt
sale write back in Retail which together reduced the charge. The asset quality
ratio excluding the model and debt sale benefits is considered to be closer to
25 basis points, both for the full year and the fourth quarter. The Group
expects the asset quality ratio to be c.25 basis points in 2026.
SUMMARY OF GROUP RESULTS (continued)
Income statement - underlying basis(A) (continued)
Restructuring, volatility and other items
2025 2024 Change
£m £m %
Underlying profit(A) 6,777 6,343 7
Restructuring (46) (40) (15)
Market and other volatility 72 (144)
Amortisation of purchased intangibles (86) (81) (6)
Fair value unwind (56) (107) 48
Volatility and other items (70) (332) 79
Statutory profit before tax 6,661 5,971 12
Tax expense (1,904) (1,494) (27)
Statutory profit after tax 4,757 4,477 6
Earnings per share 7.0p 6.3p 0.7p
Return on tangible equity(A) 12.9% 12.3% 0.6pp
At 31 Dec 2025 At 31 Dec 2024 Change
%
Tangible net assets per share(A) 57.0p 52.4p 4.6p
Restructuring costs for 2025 were £46 million (2024: £40 million).
Volatility and other items were a net loss of £70 million for 2025 (2024:
net loss of £332 million). This included the usual charges for the
amortisation of purchased intangibles of £86 million and fair value unwind
of £56 million. The reduction in fair value unwind primarily resulted from
the maturity of debt instruments, fair valued as part of the HBOS acquisition.
This was alongside a gain from market and other volatility of £72 million
(2024: net loss of £144 million), as a result of the gain on sale of the
Group's bulk annuities portfolio to Rothesay Life plc in the first half of the
year and the gain following the full acquisition of Schroders Personal Wealth
in the fourth quarter, partially offset by negative market volatility,
primarily insurance related. Volatility and other items in the fourth quarter
amounted to a net gain of £87 million.
Return on tangible equity and tangible net asset value
The return on tangible equity for the year was 12.9%, or 14.8% excluding the
third quarter charge for motor finance commission arrangements (2024: 12.3%),
with 15.7% in the fourth quarter. The Group now expects the return on tangible
equity for 2026 to be greater than 16%.
Tangible net assets per share at 31 December 2025 were 57.0 pence, up 4.6
pence in the year (31 December 2024: 52.4 pence) and up 2.0 pence in the
fourth quarter. The increase across 2025 resulted from attributable profit,
the unwind of the cash flow hedge reserve and a reduction in the number of
shares in issue due to the ordinary share buyback announced in February 2025.
This was partially offset by capital distributions, a lower pension surplus
and increased intangible assets following the full acquisition of Schroders
Personal Wealth.
Tax
The Group recognised a tax expense of £1,904 million in 2025 (2024:
£1,494 million), representing an effective tax rate of 28.6%. Excluding
motor finance remediation costs, the tax rate would have been 27.2%. The Group
expects a medium-term effective tax rate of around 27% based on the banking
surcharge rate of 3% and the corporation tax rate of 25%.
SUMMARY OF GROUP RESULTS (continued)
Balance sheet
At 31 Dec At 31 Dec 2024 Change
2025 %
Underlying loans and advances to customers(A) £481.1bn £459.1bn 5
Customer deposits £496.5bn £482.7bn 3
Loan to deposit ratio(A) 97% 95% 2pp
Wholesale funding(1) £99.4bn £92.5bn 7
Wholesale funding <1 year maturity(1) £37.0bn £31.3bn 18
of which: money market funding <1 year maturity(1) £26.6bn £16.9bn 57
Liquidity coverage ratio - eligible assets(2) £131.4bn £134.4bn (2)
Liquidity coverage ratio(3) 145% 146% (1)pp
Net stable funding ratio(4) 124% 129% (5)pp
Total underlying expected credit loss allowance(A) £3,353m £3,651m (8)
(1) Excludes balances relating to cash collateral of £1.5 billion (31
December 2024: £2.8 billion).
(2) Eligible assets are calculated as a monthly rolling simple average
of month-end observations over the previous 12 months post any liquidity
haircuts.
(3) The liquidity coverage ratio is calculated as a simple average of
month-end observations over the previous 12 months.
(4) The net stable funding ratio is calculated as a simple average of
month-end observations over the previous four quarter-ends.
(
)
The Group saw strong customer lending growth in the year, with underlying
loans and advances to customers increasing by £22.0 billion (or 5%) to
£481.1 billion. This included growth of £10.8 billion in UK mortgages
alongside growth across UK Retail unsecured loans, credit cards, UK Motor
Finance and the European retail business totalling £7.7 billion. Lending
balances increased by £2.7 billion in Commercial Banking, with higher
Institutional balances including securitised products, alongside corporate
infrastructure growth, partially offset by repayments of £1.4 billion of
government-backed lending within Business and Commercial Banking. Underlying
loans and advances increased by £4.0 billion in the fourth quarter, including
growth in UK mortgages, Retail unsecured products and the European retail
business.
Customer deposits of £496.5 billion increased significantly in the year, by
£13.8 billion, or 3%. Retail deposits were up £5.5 billion in the year,
including £4.0 billion growth in Retail savings accounts, as a result of net
inflows to limited withdrawal and fixed term deposits particularly through
increased ISA balances, and growth in European retail balances. This was
alongside strength in current account balances. Commercial Banking deposits
were up £8.5 billion in the year (31 December 2024: £162.6 billion),
resulting from growth in targeted sectors. In the fourth quarter, customer
deposits reduced £0.2 billion, with growth in Retail current accounts of
£1.0 billion, offset by a reduction of £1.5 billion in Commercial Banking,
given seasonal flows and balance sheet management.
The Group saw growth of £7.9 billion net new money during 2025 in Insurance,
Pensions and Investments open book assets under administration (AuA). In
total, open book AuA stand at £232 billion at 31 December 2025. This
included £0.5 billion of net new money and £18 billion of AuA relating to
the full acquisition of Schroders Personal Wealth.
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% at 31 December 2025 (31 December 2024: 146%) and a net stable funding
ratio of 124% (31 December 2024: 129%). The loan to deposit ratio of 97%,
slightly up versus 31 December 2024, continues to reflect a robust funding
and liquidity position, with significant capacity to grow lending. Wholesale
funding increased to £99.4 billion (2024: £92.5 billion), with money market
funding returning to normalised levels following the repayment of £13.1
billion of drawings from the Bank of England's Term Funding Scheme with
additional incentives for SMEs (TFSME).
SUMMARY OF GROUP RESULTS (continued)
Balance sheet (continued)
The underlying expected credit loss (ECL) allowance reduced to £3.4 billion
at 31 December 2025 (31 December 2024: £3.7 billion). The uplift from the
base case to probability-weighted ECL is £0.4 billion (31 December 2024:
£0.4 billion). The ECL allowance includes judgemental adjustments which
increase the ECL by £242 million (31 December 2024: £15 million decrease to
ECL). The increase compared to 2024 is primarily due to the removal of
negative ECL adjustments previously held for loss given default adjustments in
both Retail Unsecured and Commercial Banking, where respective model
enhancements have removed the need for an adjustment. The ECL allowance
continues to include a £50 million judgemental adjustment taken in the first
half of the year in respect of the global tariff and geo-political disruption
risks to specific drivers across various corporate sectors not reflected in
broad macroeconomic model variables.
Capital
At 31 Dec At 31 Dec 2024 Change
2025 %
CET1 ratio 14.0% 14.2% (0.2)pp
Pro forma CET1 ratio(A,1) 13.2% 13.5% (0.3)pp
UK leverage ratio 5.4% 5.5% (0.1)pp
Risk-weighted assets £235.5bn £224.6bn 5
Capital generation
Pro forma CET1 ratio as at 31 December 2024(A,1) 13.5%
Banking build (bps)(2) 228
Insurance dividend (bps) 9
Risk-weighted assets (bps) (54)
Other movements (bps)(3) 14
Retail secured CRD IV increases (bps)(4) (19)
Capital generation excluding provision charge for motor finance commission 178
arrangements (bps)
Provision charge for motor finance commission arrangements (bps) (31)
Capital generation (bps) 147
Ordinary dividend (bps) (97)
Share buyback accrual (bps) (79)
Pro forma CET1 ratio as at 31 December 2025(A,1) 13.2%
(1) 31 December 2025 and 31 December 2024 pro forma CET1 ratios reflect
the full impact of the share buybacks announced in respect of 2025 and 2024.
31 December 2024 pro forma CET1 ratio also reflects the ordinary dividend
received from the Insurance business in February 2025. The CET1 and pro forma
CET1 ratios at 31 December 2025 both reflect an ordinary dividend received
from the Insurance business in December 2025, that would previously have been
received in February of the following year.
(2 ) Includes impairment charge and excess regulatory expected losses,
excludes the charge for motor finance commission arrangements.
(3) Includes share-based payments and market volatility.
(4) Retail secured CRD IV increases include additional risk-weighted
assets as well as related excess regulatory expected losses.
The Group's pro forma CET1 capital ratio at 31 December 2025 was 13.2% (31
December 2024: 13.5% pro forma). Capital generation during the year was 147
basis points, in line with updated guidance. Excluding the provision charge
for motor finance commission arrangements in the third quarter, capital
generation was 178 basis points.
SUMMARY OF GROUP RESULTS (continued)
Capital (continued)
Capital generation reflects strong banking build and the £200 million of
dividends received from the Insurance business across July and December 2025,
partially offset by risk-weighted asset increases and the charge for motor
finance. Regulatory headwinds of 19 basis points in the year reflect an uplift
for the CRD IV model outcomes on Retail secured. The impact of the interim
ordinary dividend paid in September 2025 and the accrual for the recommended
final ordinary dividend equates to 97 basis points, with a further 79 basis
points to cover the accrual for the announced ordinary share buyback programme
of up to £1.75 billion. Capital generation in the fourth quarter of 37 basis
points reflects strong banking build and the dividend received from the
Insurance business in December 2025, partially offset by risk-weighted asset
increases and regulatory headwinds. The Group reaffirms guidance for capital
generation in 2026 of greater than 200 basis points.
Excluding the full impact of the announced ordinary share buyback programme,
the Group's CET1 capital ratio at 31 December 2025 was 14.0% (31 December
2024: 14.2%).
Risk-weighted assets increased by £10.9 billion to £235.5 billion at 31
December 2025 (31 December 2024: £224.6 billion). This reflects the impact
of strong customer lending growth, Retail secured CRD IV increases and other
movements, partially offset by continued optimisation activity. In the fourth
quarter, risk-weighted assets increased by £3.2 billion following lending
growth and Retail secured CRD IV increases, partially offset by optimisation
activity. In the context of the Retail secured CRD IV models, an additional
risk-weighted asset increase of £2.0 billion was recognised in the fourth
quarter. This reflects model outcomes, in line with previous guidance on the
anticipated impact and remains subject to review and approval by the PRA.
The Group expects the initial impact of Basel 3.1 implementation on 1 January
2027 to result in a Day 1 risk-weighted assets reduction in the range of c.£6
billion to c.£8 billion.
The PRA provided an update to the Group's Pillar 2A CET1 capital requirement
during the third quarter, with the requirement reducing slightly to c.1.4% of
risk-weighted assets from the previous requirement of c.1.5% of risk-weighted
assets. The Group's total regulatory CET1 capital requirement remains c.12% 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%. The Board intends to pay down to
the CET1 capital target of c.13.0% by the end of 2026.
Pensions
The 31 December 2022 triennial valuation for the main defined benefit schemes
was completed in 2023. Following the contributions paid in 2023, no further
deficit contributions have been paid for this triennial period (to
31 December 2025). Any future contributions will be conditional on the 31
December 2025 triennial valuation which is expected to be completed during
2026.
Dividend and share buyback
The Group has a progressive and sustainable ordinary dividend policy whilst
maintaining the flexibility to return further surplus capital through share
buybacks or special dividends. In February 2025, the Board decided to return
surplus capital in respect of 2024 through an ordinary share buyback programme
of up to £1.7 billion. This commenced on 21 February and completed on 8
December 2025, with c.2.2 billion (c.4%) ordinary shares repurchased at an
average price of 77.13 pence per share.
In respect of 2025, the Board has recommended a final ordinary dividend of
2.43 pence per share, which, together with the interim ordinary dividend of
1.22 pence per share totals 3.65 pence per share, an increase of 15% compared
to 2024, in line with the Board's commitment to a progressive and sustainable
ordinary dividend. The Board has also announced its intention to implement an
ordinary share buyback of up to £1.75 billion, which will commence as soon as
is practicable and is expected to be completed by 31 December 2026.
Based on the combined interim and proposed final ordinary dividends and the
announced ordinary share buyback, the total capital return in respect of 2025
will be up to £3.9 billion, equivalent to c.6% (as at 26 January 2026) of the
Group's market capitalisation value. The Group intends to pay down to its CET1
capital target of c.13.0% by the end of 2026. Going forward, given the Board's
continued confidence in capital generation, the Group will now review excess
capital distributions in addition to the ordinary dividend every half year.
DIVISIONAL RESULTS
Segmental analysis - underlying basis(A)
2025 Retail Commercial Insurance, Equity Group
£m Banking Pensions and Investments £m
£m Investments and Central
£m Items
£m
Underlying net interest income 9,637 3,670 (151) 479 13,635
Underlying other income 2,636 1,825 1,431 228 6,120
Operating lease depreciation (1,445) (9) - - (1,454)
Net income 10,828 5,486 1,280 707 18,301
Operating costs (5,807) (2,853) (933) (168) (9,761)
Remediation (931) (27) (15) 5 (968)
Total costs (6,738) (2,880) (948) (163) (10,729)
Underlying profit before impairment 4,090 2,606 332 544 7,572
Underlying impairment (charge) credit (734) (60) (2) 1 (795)
Underlying profit 3,356 2,546 330 545 6,777
Banking net interest margin(A) 2.65% 4.93% 3.06%
Average interest-earning banking assets(A) £384.6bn £78.3bn - - £462.9bn
Asset quality ratio(A) 0.19% 0.07% 0.17%
Underlying loans and advances to customers(A,1) £390.3bn £90.3bn - £0.5bn £481.1bn
Customer deposits £325.2bn £171.1bn - £0.2bn £496.5bn
Risk-weighted assets £130.4bn £78.5bn £0.5bn £26.1bn £235.5bn
2024 Retail Commercial Insurance, Equity Investments and Central Group
£m Banking Pensions and Items £m
£m Investments £m
£m
Underlying net interest income 8,930 3,434 (136) 617 12,845
Underlying other income(2) 2,354 1,815 1,292 136 5,597
Operating lease depreciation (1,319) (6) - - (1,325)
Net income 9,965 5,243 1,156 753 17,117
Operating costs(2) (5,566) (2,752) (924) (200) (9,442)
Remediation (750) (104) (19) (26) (899)
Total costs (6,316) (2,856) (943) (226) (10,341)
Underlying profit before impairment 3,649 2,387 213 527 6,776
Underlying impairment (charge) credit (457) 14 7 3 (433)
Underlying profit 3,192 2,401 220 530 6,343
Banking net interest margin(A,3) 2.54% 4.51% 2.95%
Average interest-earning banking assets(A) £370.1bn £81.1bn - - £451.2bn
Asset quality ratio(A) 0.12% 0.00% 0.10%
Underlying loans and advances to customers(A,1) £371.5bn £87.6bn - - £459.1bn
Customer deposits £319.7bn £162.6bn - £0.4bn £482.7bn
Risk-weighted assets £125.1bn £73.8bn £0.4bn £25.3bn £224.6bn
(1 ) Equity Investments and Central Items includes central fair value
hedge accounting adjustments.
(2) In 2025, the Group revised its treatment of certain divisional
variable payment related costs. Previously reported within divisional
operating costs, these are now included within divisional underlying other
income. Comparative figures have been represented on a consistent basis, with
no net impact on segmental profit or loss. Total Group comparatives are
unchanged.
(3) In 2025, the Group revised its capital transfer pricing methodology;
comparative segmental banking net interest margin has been represented on a
consistent basis.
(
)
DIVISIONAL RESULTS (continued)
Retail
Retail offers a broad range of financial services products to personal
customers, including current accounts, savings, mortgages, credit cards,
unsecured loans, motor finance and leasing solutions. Its aim is to build
enduring relationships meeting more of its customers' financial needs and
improving financial resilience throughout their lifetime. Retail operates the
largest digital bank in the UK and is improving digital experience through a
mobile-first strategy. Retail delivers market-leading products and meets
consumer duty expectations, working within a prudent risk appetite. Outside of
the UK, Retail has a growing mortgages and savings focused European business.
Through strategic investment and increased use of data, Retail aims to deepen
consumer relationships, deliver personalised propositions, broaden its
intermediary offering, improve customer experience and increase operational
efficiency.
Strategic progress
• UK's largest digital bank with c.21.5 million customers actively using
the Group's mobile apps, engaging in c.6.5 billion logons in 2025, with c.85%
of current account openings via the seven minute mobile opening process
• Announced the planned acquisition of Curve, a leading digital wallet
provider that combines customers' bank cards, with unique features including
enabling customers to retrospectively move transactions between accounts
• Lent £17 billion to over 70,000 first time buyers in 2025, supported by
our first time buyer boost proposition
• Direct mortgage applications up c.32% versus 2024 with 20% protection
insurance take up, up 5 percentage points
• In credit cards, launched Lloyds Ultra, a market leading 1% cashback
product supporting a wide range of customer needs from travel and rewards
along with the launch of Lloyds Advance supporting existing customers starting
their credit journey
• Introduced digital co-servicing, to allow customers to view accounts
across Lloyds, Halifax and Bank of Scotland brands in one app and online, with
in branch co-serving reaching over 1 million transactions since launch
• Strengthened and grew relationships with Mass Affluent customers through
Lloyds Premier, supporting customers who have a c.2 times greater depth of
relationship
• Launched an enhanced Digital Loan Refinance journey across Lloyds, Bank
of Scotland, Halifax and MBNA, delivering greater flexibility and convenience
and meeting the needs of c.100,000 customers since launch
• Empowered customers financially by providing up-to-date insights on
their credit report, resulting in over 500,000 customers improving their
credit score each quarter
• Made electric vehicles more accessible through Tusker, with the fleet
now approaching 85,000 vehicles, up 49% versus 2024, supporting the UK's
ambition to transition to net zero by 2050
Financial performance
• Underlying net interest income increased 8%, with stronger structural
hedge earnings and higher unsecured loan balances, partially offset by
continued mortgage refinancing and deposit churn headwinds
• Underlying other income up 12% from fleet growth and higher average
vehicle rental values in UK Motor Finance, alongside strength in current
account and credit card income
• Operating lease depreciation charge increased by 10% due to fleet
growth, the depreciation of higher value vehicles and declines in used
electric car prices. Used car price volatility and performance continue to be
partly mitigated through lease extensions, used car leasing, and remarketing
agreements
• Operating costs up 4%, from strategic investment (including planned
higher severance), business growth costs and inflationary pressures, partially
offset by cost savings from investment and continued business-as-usual cost
discipline. Remediation costs of £931 million include £800 million relating
to the potential impact of motor finance commission arrangements taken in the
third quarter
• Underlying impairment charge of £734 million, higher than 2024 which
included a £332 million credit from the improved economic outlook. 2025
benefits from model refinements and a debt sale write back in the fourth
quarter. Strong credit performance with ongoing improvement in UK mortgages
and stability across unsecured
• Underlying loans and advances to customers of £390.3 billion, up £18.8
billion, with an increase of £10.8 billion in UK mortgages alongside growth
across UK Retail unsecured loans, credit cards, UK Motor Finance and the
European retail business totalling £7.7 billion
• Customer deposits of £325.2 billion, up £5.5 billion with net inflows
to limited withdrawal and fixed term UK savings including an additional
c.£7.5 billion ISA balances throughout 2025, alongside growth in European
savings, supported by strength in current accounts balances
• Risk-weighted assets up 4% in the year, given strong lending growth and
Retail secured CRD IV model increases, partially offset by optimisation
activity
DIVISIONAL RESULTS (continued)
Retail (continued)
Retail performance summary(A)
2025 2024 Change
£m £m %
Underlying net interest income 9,637 8,930 8
Underlying other income(1) 2,636 2,354 12
Operating lease depreciation (1,445) (1,319) (10)
Net income 10,828 9,965 9
Operating costs(1) (5,807) (5,566) (4)
Remediation (931) (750) (24)
Total costs (6,738) (6,316) (7)
Underlying profit before impairment 4,090 3,649 12
Underlying impairment charge (734) (457) (61)
Underlying profit 3,356 3,192 5
Banking net interest margin(A,2) 2.65% 2.54% 11bp
Average interest-earning banking assets(A) £384.6bn £370.1bn 4
Asset quality ratio(A) 0.19% 0.12% 7bp
(1 ) In 2025, the Group revised its treatment of certain divisional
variable payment related costs. Previously reported within divisional
operating costs, these are now included within divisional underlying other
income. Comparative figures have been represented on a consistent basis, with
no net impact on segmental profit or loss. Total Group comparatives are
unchanged.
(2 ) In 2025, the Group revised its capital transfer pricing methodology;
comparative segmental banking net interest margin has been represented on a
consistent basis.
At 31 Dec 2025 At 31 Dec 2024 Change
£bn £bn %
UK mortgages 323.1 312.3 3
Credit cards 17.3 15.7 10
UK Retail unsecured loans 10.5 9.1 15
UK Motor Finance(1) 16.4 15.3 7
Overdrafts 1.3 1.2 8
Retail Europe(2) 20.4 16.8 21
Retail other(2) 1.3 1.1 18
Underlying loans and advances to customers(A) 390.3 371.5 5
Operating lease assets(3) 8.2 7.2 14
Total customer assets 398.5 378.7 5
Current accounts 102.8 101.3 1
Savings accounts 212.5 208.2 2
Wealth 9.9 10.2 (3)
Customer deposits 325.2 319.7 2
Risk-weighted assets 130.4 125.1 4
(1) UK Motor Finance balances on an underlying basis(A) exclude a
finance lease gross up. See page 62.
(2) Within underlying loans and advances, Retail Europe, previously
presented within Retail other, is reported separately. The comparative is
represented on a consistent basis. Retail other primarily includes the Wealth
business.
(3) Operating lease assets relate to Lex Autolease and Tusker.
DIVISIONAL RESULTS (continued)
Commercial Banking
Commercial Banking serves small and medium businesses and corporate and
institutional clients, providing lending, transactional banking, working
capital management, debt financing and risk management services, whilst
connecting the whole Group to clients. Through investment in digitisation,
product development and coverage capability, Commercial Banking is delivering
an enhanced customer experience via a digital-first model in Business and
Commercial Banking and an expanded client proposition in Corporate and
Institutional Banking. This is meeting customer growth objectives, generating
diversified capital efficient growth and supporting customers in their
transition to net zero.
Strategic progress
• Enhanced digital propositions including the fixed term deposits mobile
journey, new mobile lending journey and enriched personalisation, driving
deposit and lending growth
• Scaled and improved digital servicing offering, enabling greater
customer flexibility and efficiency, with over 1 million Business Banking and
SME customers now able to view and manage their mandate and signing
authorities online
• Delivered c.£1.6 billion in sustainable finance to SME customers and
provided targeted support to over 9,000 under-represented business owner
groups, while launching innovative propositions with industry partners
• Launched the first Gen AI powered application in Business and Commercial
Banking, making the Commercial Real Estate lending journey easier by
simplifying and expediting the tenancy schedule process
• Awarded landmark UK Government banking services contract connecting us
to the majority of UK households, with the bank expected to handle around 400
million transactions a year
• Named 'Bank/Funder of the Year' at The North West Dealmakers Awards,
supporting regional growth
• Delivered £24.5 billon(1) of sustainable financing towards the three
year commitment of £30 billion between 2024 and 2026. Supported the UK's
initial three carbon capture projects
• Markets business achieving first ranking in all issuer Sterling
Structured Finance(2) and second ranking in all issuer Sterling Debt Capital
Markets(3). Ranked first for 'Overall Service Quality' in Coalition Greenwich
Voice of Client UK Corporate Interest Rate Derivatives Study for the second
year running
• Delivered a c.21% year-on-year growth in foreign exchange volumes.
Launched a market-leading foreign exchange execution algorithmic solution
• Delivered UK's first tokenised collateral transfer on a public
blockchain, awarded 'Best Bank for Digitalisation' by Global Trade Review and
enhanced the Markets Intelligence data product offering
• Strong growth in cross-Group collaboration, across pensions, vehicle
leasing and workplace solutions, delivering Group products to commercial
clients
Financial performance
• Underlying net interest income of £3,670 million, up 7% on the prior
year, underpinned by strength in deposit franchise including structural hedge
refinancing benefits
• Underlying other income increased 1% to £1,825 million, largely driven
by higher transaction banking and markets income more than offsetting lower
loan markets activity, with 2024 benefitting from one-off gains
• Operating costs up 4% reflecting strategic investment (including planned
higher severance), business growth costs and inflationary pressures, partially
offset by cost savings from investment and continued business-as-usual cost
discipline. Remediation costs were £27 million across a small number of
rectification programmes
• Underlying impairment charge of £60 million compared to a credit in
2024 which benefitted from the improved economic outlook. 2025 included model
calibration benefits alongside strong credit performance particularly in the
second half of the year which more than offset higher Stage 3 charges observed
in the first half of the year
• Customer lending was 3% higher at £90.3 billion, reflecting growth in
Institutional balances including securitised products, alongside corporate
infrastructure growth. This was partially offset by government-backed lending
repayments in Business and Commercial Banking
• Customer deposits 5% higher at £171.1 billion, with growth in targeted
sectors
• Risk-weighted assets 6% higher at £78.5 billion, reflecting lending
growth in Corporate and Institutional Banking partially offset by optimisation
activity
(1) In line with the Group's Sustainable Financing Framework;
sustainable financing since 1 January 2024.
(2 ) Source: LSEG Workspace: GBP Structured Finance (excluding
collateralised debt obligations).
(3 ) Source: LSEG GBP Debt Capital Markets; Investment Grade bonds
(excluding Sovereign, supranational and agency).
DIVISIONAL RESULTS (continued)
Commercial Banking (continued)
Commercial Banking performance summary(A)
2025 2024 Change
£m £m %
Underlying net interest income 3,670 3,434 7
Underlying other income(1) 1,825 1,815 1
Operating lease depreciation (9) (6) (50)
Net income 5,486 5,243 5
Operating costs(1) (2,853) (2,752) (4)
Remediation (27) (104) 74
Total costs (2,880) (2,856) (1)
Underlying profit before impairment 2,606 2,387 9
Underlying impairment (charge) credit (60) 14
Underlying profit 2,546 2,401 6
Banking net interest margin(A,2) 4.93% 4.51% 42bp
Average interest-earning banking assets(A) £78.3bn £81.1bn (3)
Asset quality ratio(A) 0.07% 0.00% 7bp
(1 ) In 2025, the Group revised its treatment of certain divisional
variable payment related costs. Previously reported within divisional
operating costs, these are now included within divisional underlying other
income. Comparative figures have been represented on a consistent basis, with
no net impact on segmental profit or loss. Total Group comparatives are
unchanged.
(2 ) In 2025, the Group revised its capital transfer pricing methodology;
comparative segmental banking net interest margin has been represented on a
consistent basis.
At 31 Dec At 31 Dec 2024 Change
2025 £bn %
£bn
Business and Commercial Banking 28.3 29.7 (5)
Corporate and Institutional Banking 62.0 57.9 7
Loans and advances to customers 90.3 87.6 3
Customer deposits 171.1 162.6 5
Risk-weighted assets 78.5 73.8 6
DIVISIONAL RESULTS (continued)
Insurance, Pensions and Investments
Insurance, Pensions and Investments (IP&I) serves over 10 million
customers, holds a top three market share across Home, Workplace and
Individual Annuities businesses and has £280 billion in assets under
administration. The Group continues to invest significantly in the business.
This includes enhancing investment propositions, supporting the Group's Wealth
and Mass Affluent strategy, driving digitisation in customer facing and
operational platforms, innovating intermediary propositions and contributing
to the transition to a low carbon economy.
Strategic progress
• Announced the full acquisition of Schroders Personal Wealth (SPW),
previously a joint venture with Schroders Group, becoming a fully owned
subsidiary and now rebranding to 'Lloyds Wealth'. The full acquisition of
c.60,000 clients and c.£17 billion in AuA supports the Group's ambitions for
a market leading end-to-end wealth offering with financial advice offered to
our banking and workplace customer base
• Growth in Ready-Made Investments, with c.84,000 accounts opened to date.
c.40% of customers under the age of 35. Launch of managed growth funds, a
range of multi-asset funds at market leading ongoing fund charges, bringing
institutional pricing to customers to support their long term investment goals
• Growth of 15% in open book AuA to £232 billion (31 December 2024: £201
billion) and AuA net flows of £7.9 billion, with a significant contribution
from the workplace pension business. The growth was helped in part by greater
collaboration and penetration across Commercial Banking clients. Excluding
SPW, AuA grew 16%
• Climate-aware investments increased by £55.4 billion in 2025 driven by
the launch of Scottish Widows Lifetime Investment, bringing overall
investments to £81.3 billion, with the original target met at the end of
2024(1)
• Industry leading Trustpilot scores of 4.5 stars for Scottish Widows and
4.7 for Lloyds Insurance, driven by increased investment in automation, AI
adoption and training, following the completion of the migration of 4 million
policies to modern infrastructure
• More than 1.75 million digitally registered Scottish Widows customers,
with the core app for workplace pension customers growing by more than 75%
year-on-year to over 750,000 users, c.60% of which are active users
• Increased partnerships product offering with relaunch of the Group's
motor insurance product through AXA and the recent launch of the Health
Partnership with Vitality, helping to complement the insurance ecosystem in a
low risk, low capital intensity manner
• Captured over 14% of new home insurance policy market, leveraging the
Group's trusted brands and digitising customer journeys with some claims being
settled in as little as five minutes(2)
• Increased Protection market share to 7.8% (30 September 2024: 5.8%)
following successful launch of refreshed advisor proposition in 2024. New
business IFA applications more than double those in 2024(2)
Financial performance
• Underlying profit of £330 million was up 50%. This included underlying
other income of £1,431 million, up 11%, driven by strong business performance
including higher general insurance net of claims, strengthening performance in
the workplace pension business and the integration of Schroders Personal
Wealth in the fourth quarter. Excluding Schroders Personal Wealth, underlying
profit was £303 million, up 38%
• Operating costs were up 1%. Excluding Schroders Personal Wealth
operating costs were down 2% with costs savings from investment and continued
business-as-usual cost discipline partially offset by strategic investment and
inflationary pressures
• Balance of deferred profits (including the risk adjustment) grew to
£5.2 billion (after release to income of £413 million), including
£93 million from new business, reflecting value generation in the workplace
pensions business
• Life and pensions sales (PVNBP) up 15%, driven by higher contribution
from Workplace, Protection and Scottish Widows Platform businesses, partially
offset by lower sales in the Annuities business due to market conditions
• Payment of a further £50 million interim dividend in December 2025 to
Lloyds Banking Group plc, after the £150 million interim dividend paid in
July 2025, supported by a strong capital position with an estimated Insurance
Solvency II ratio of 144% and reflected in the robust result in the recent PRA
Life Insurance Stress Test( )
(1 ) This refers to funds that have a focus on investment in companies
that are either adapting their business to reduce carbon emissions or
developing solutions to address climate change. Scottish Widows Lifetime
Investment has climate aware ESG-tiled indices developed in partnership with
Robeco.
(2) Home insurance Market Share information as per internal analysis of
eBenchmarkers data, Protection as per the ABI. Home Insurance Shares reflect
information at 30 November 2025, Protection shares as at 30 September 2025.
DIVISIONAL RESULTS (continued)
Insurance, Pensions and Investments (continued)
Insurance, Pensions and Investments performance summary(A)
2025 2024 Change
£m £m %
Underlying net interest income (151) (136) (11)
Underlying other income 1,431 1,292 11
Net income 1,280 1,156 11
Operating costs (933) (924) (1)
Remediation (15) (19) 21
Total costs (948) (943) (1)
Underlying profit before impairment 332 213 56
Underlying impairment (charge) credit (2) 7
Underlying profit 330 220 50
Life and pensions sales (PVNBP)(A,1) 21,047 18,249 15
New business value of insurance and participating investment contracts
recognised in the year(A,2)
of which: deferred to contractual service margin and risk adjustment 93 126 (26)
of which: losses recognised on initial recognition (13) (15) 13
80 111 (28)
Assets under administration (net flows)(A,3) £7.9bn £5.7bn 39
General insurance underwritten new gross written premiums(A) 175 197 (11)
General insurance underwritten total gross written premiums(A) 762 737 3
General insurance combined ratio(A) 89% 97% (8)pp
At 31 Dec At 31 Dec 2024 Change
2025 %
Insurance Solvency II ratio (pre-dividend)(4) 144% 158% (14)pp
Total customer assets under administration(A,3) £279.6bn £247.1bn 13
(1) Present value of new business premiums can fluctuate due to timing
of new schemes.
(2) New business value represents the value added to the contractual
service margin and risk adjustment at the initial recognition of new
contracts, net of acquisition expenses and any loss component on onerous
contracts (which is recognised directly in the income statement) but does not
include existing business increments.
(3) The movement in asset inflows and outflows driven by business
activity (excluding market movements). Following the full acquisition of
Schroders Personal Wealth in the fourth quarter of 2025, this presentation
includes Wealth AuAs (previously reported within Retail). For 2025, total
customer assets under administration and net flows now include £18 billion
and £0.5 billion respectively and the comparative period has been shown on a
consistent basis. For 2024, excluding Wealth AuAs, total customer assets under
administration were £231.9 billion and net flows were £5.3 billion.
(4) Equivalent estimated regulatory view of ratio (including
With-Profits funds and post dividend where applicable) was 140% (31 December
2024: 148%, post-February 2025 dividend).
( )
DIVISIONAL RESULTS (continued)
Insurance, Pensions and Investments (continued)
Breakdown of net income(A)
2025 2024
Deferred Other in-year profit Total Deferred Other in-year profit Total
profit release(1) £m £m profit release(1) £m £m
£m £m
Life open book (pensions, individual annuities, Wealth and protection) 346 455 801 350 318 668
Non-life (General insurance) - 277 277 - 229 229
Other items(2) 67 135 202 69 190 259
Net income(A) 413 867 1,280 419 737 1,156
(1 ) Total deferred profit release is represented by contractual service
margin (CSM) and risk adjustment releases from holdings on the balance sheet.
CSM is released as insurance contract services are provided; risk adjustment
is released as uncertainty within the calculation of the liabilities
diminishes. Amounts are shown net of reinsurance.
(2 ) Other items represents the income from longstanding business, return
on shareholder assets and interest on subordinated debt.
Movement in the deferred profit(1) (contractual service margin (CSM) and risk
adjustment)
Life open book Other products(2) Bulk annuities(3) Total(1)
£m £m £m £m
Deferred profit at 1 January 2025 4,216 686 118 5,020
New business 93 - - 93
Release to income statement (346) (67) - (413)
Other movements 486 157 (118) 525
Deferred profit at 31 December 2025 4,449 776 - 5,225
Deferred profit at 1 January 2024 4,025 702 578 5,305
New business 126 - - 126
Release to income statement (350) (69) - (419)
Other movements 415 53 (460) 8
Deferred profit at 31 December 2024 4,216 686 118 5,020
(1) Total deferred profit is represented by CSM and risk adjustment,
both held on the balance sheet. CSM is released as insurance contract services
are provided; risk adjustment is released as uncertainty within the
calculation of the liabilities diminishes. Amounts are shown net of
reinsurance.
(2) Other products includes longstanding business and European business.
(3 ) Bulk annuities for 2024 reflected the reinsurance agreement entered
into as part of the agreed sale of the in-force bulk annuity portfolio to
Rothesay Life plc, with the impact of the reinsurance agreement included
within Other movements. This sale has since completed.
DIVISIONAL RESULTS (continued)
Insurance, Pensions and Investments (continued)
Volatility arising in the Insurance business
2025 2024
£m £m
Insurance volatility 36 (56)
Policyholder interests volatility 256 162
Total volatility 292 106
Insurance hedging arrangements (537) (442)
Total(1) (245) (336)
(1 ) Total insurance volatility is included within market and other
volatility in the Group underlying basis income statement, which in total
resulted in a gain of £72 million in 2025 (2024: loss of £144 million). See
page 64.
Insurance volatility impacts statutory profit before tax (through market and
other volatility) but does not impact underlying profit, which is based on an
expected return. The impact of the actual return differing from the expected
return is included within insurance volatility. This is because movements in
their value can have a significant impact on the profitability of the Group.
Management believes that it is appropriate to disclose the results on the
basis of an expected return.
The Group manages its Insurance business exposures to equity, interest rate,
foreign currency exchange rate and inflation movements within the Insurance,
Pensions and Investments division. It does so by balancing the importance of
managing the impacts to both Solvency capital and earnings volatility, as
these factors can impact the dividend that the Insurance business can pay up
to Lloyds Banking Group plc. This approach can result in volatility in
statutory profit before tax. Total insurance volatility resulted in losses of
£245 million (2024: losses of £336 million), driven by increases in
interest rates and equity markets and decreases in inflation.
(
)
DIVISIONAL RESULTS (continued)
Equity Investments and Central Items
Equity Investments and Central Items includes the Group's equity investment
businesses, including LDC, Lloyds Living, the Housing Growth Partnership
(HGP), the Group's share of the Business Growth Fund (BGF) and the MADE
Partnership joint venture. LDC is a leading private equity investor,
supporting more than 90 growing SMEs that span all regions and sectors of the
UK economy and employ over 25,000 people. LDC has almost £2.3 billion assets
under management. Lloyds Living is the Group's residential landlord business
with 7,750 homes in operation or contracted as at 31 December 2025. Equity
Investments and Central Items also includes income and expenses not attributed
to the divisions, including residual underlying net interest income after
transfer pricing.
Strategic progress
• Invested almost £250 million in 2025 through LDC, taking total capital
deployed since the start of 2020 to over £2 billion
• More than half of LDC transactions took place in the fourth quarter of
the year, signalling positive momentum
• Supported LDC portfolio companies to make 45 acquisitions, helping them
to grow despite challenging market conditions
• Exited 11 successful investments where the businesses grew revenues by
an average of 155% and created more than 1,200 jobs. Generated more than £600
million of exit proceeds and an average money multiple return of 3.3 times
• Lloyds Living portfolio saw significant expansion in 2025 with a
completed portfolio of c.5,450 homes, with c.2,300 additional homes under
development
• Completed scheme occupancy in Lloyds Living of 95% and rental growth
tracking at over 4% (annualised basis)
• Helped support transition to a low-carbon economy with c.850
all-electric homes, of which 285 completed in 2025 and a 25 home zero bills
pilot with Octopus Energy
• HGP committed to build a further c.2,000 homes taking total homes
committed since investment started in 2016 to over 15,000 and homes sold of
c.5,500. Homes committed in 2025 have high energy efficiency standards, with
100% target rated as EPC B or above and 1 in 4 rated as EPC A
• HGP awarded Specialist Financier of the year by the 2025 RESI Awards and
dedicated 300 days of the senior advisor network of industry leaders time to
support SMEs in the current housing cycle challenge
• The first full year of the MADE Partnership, the LBG/Barratt
Redrow/Homes England master developer joint venture saw MADE progress master
plan opportunities with potential to deliver up to 7,350 new homes
Financial performance
• Net income of £707 million 6% lower compared to 2024, with higher
underlying other income more than offset by lower underlying net interest
income. Underlying net interest income was lower given increased funding costs
to support volume growth in the Group's equity and direct investment business,
alongside lower divisional recharges from a reduction in structured
medium-term note and AT1 distribution costs
• Underlying other income includes £579 million (2024: £502 million)
generated by the Group's equity and direct investment businesses, increasing
15% versus 2024 as a result of strong income growth from Lloyds Living (up
£69 million), partially offset by lower income from LDC (down £15 million)
• Total costs of £163 million in 2025 decreased 28% on the prior year,
including lower remediation costs
DIVISIONAL RESULTS (continued)
Equity Investments and Central Items (continued)
Equity Investments and Central Items summary(A)
2025 2024 Change
£m £m %
Underlying net interest income 479 617 (22)
Underlying other income(1) 228 136 68
Net income 707 753 (6)
Operating costs(1) (168) (200) 16
Remediation 5 (26)
Total costs (163) (226) 28
Underlying profit before impairment 544 527 3
Underlying impairment credit 1 3 (67)
Underlying profit 545 530 3
(1 ) In 2025, the Group revised its treatment of certain divisional
variable payment related costs. Previously reported within divisional
operating costs, these are now included within divisional underlying other
income. Comparative figures have been represented on a consistent basis, with
no net impact on segmental profit or loss. Total Group comparatives are
unchanged.
Within this, the performance of the Group's equity investment businesses,
including LDC, Lloyds Living, the Housing Growth Partnership (HGP), the
Group's share of the Business Growth Fund (BGF) and the MADE Partnership joint
venture, is summarised as follows:
2025 2024 Change
£m £m %
Underlying net interest expense (132) (109) (21)
Underlying other income 579 502 15
Net income 447 393 14
Total costs (96) (78) (23)
Underlying profit 351 315 11
( )
(
)
RISK MANAGEMENT
PRINCIPAL RISKS AND UNCERTAINTIES
The most 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.
Risk management is essential to our business model and strategy, helping us to
embrace opportunities responsibly and drive sustainable growth for the Group.
Our strong risk management culture, underpinned by our enhanced risk
management framework (RMF), is vital in safeguarding the Group, colleagues and
customers against both existing and emerging risks.
The Group's credit performance remains strong and stable; the loan portfolio
remains well positioned amid macroeconomic uncertainty and is closely
monitored to proactively identify signs of stress.
Operational resilience remains crucial, enabling the Group to prevent,
withstand and respond to cybersecurity threats and IT outages, using
intelligence and learnings from recent global events.
The Group continues to modernise its technology and strengthen capabilities
and ensure the safe, responsible use of models and tools such as artificial
intelligence.
The latest position regarding motor finance commission arrangements and the
potential impact is provided on page 58.
During 2025, the Group has continued to make progress in its risk
transformation journey, allowing us to further evolve our risk management
approach to deliver good outcomes for our customers. This has included the
consistent implementation of the RMF requirements for all of the Group's legal
entities, business units and functions.
The RMF ensures processes are in place to facilitate robust risk management
and effective decision making.
The Group's risk policies are supported by risk toolkits, which set out clear
guidance and minimum standards for proactive identification and effective risk
management, fostering a strong risk management culture across the Group.
The Group has 11 principal risks, which are unchanged in 2025 from the prior
year and are underpinned by a suite of level two risks. These consist of
capital risk, climate risk, compliance risk, conduct risk, credit risk,
economic crime risk, insurance underwriting risk, liquidity risk, market risk,
model risk and operational risk. These risks are reviewed and reported on
regularly to the Board in alignment with the enhanced RMF.
The Group will publish a detailed review of all of its principal risks in the
annual report and accounts in February. This will include definitions and how
the principal risks are identified, assessed, managed, mitigated, monitored
and reported. A copy of the disclosures will be available to view at:
www.lloydsbankinggroup.com/investors/financial-downloads.html.
CAPITAL RISK
Overview
CET1 target capital ratio
The Board's view of the ongoing level of CET1 capital required by the Group to
grow the business, meet current and future regulatory requirements and cover
economic and business uncertainties is c.13.0%, which includes a management
buffer of around 1%. This takes into account, amongst other considerations:
• The minimum Pillar 1 CET1 capital requirement of 4.5% of risk-weighted
assets
• The Group's Pillar 2A CET1 capital requirement, set by the PRA, which is
the equivalent of around 1.4% of risk-weighted assets
• The Group's countercyclical capital buffer (CCyB) requirement, which is
around 1.8% of risk-weighted assets
• The capital conservation buffer (CCB) requirement of 2.5% of
risk-weighted assets
• The Ring-Fenced Bank (RFB) sub-group's other systemically important
institution (O-SII) buffer of 2.0% of risk-weighted assets, which equates to
1.6% of risk-weighted assets at Group level
• The Group's PRA Buffer, set after taking account of the results of any
regulatory stress tests and other information, as well as outputs from the
Group's own internal stress tests. The PRA requires this buffer to
remain confidential
• The likely performance of the Group in various potential stress
scenarios and ensuring capital remains resilient in these
• The economic outlook for the UK and business outlook for the Group
• The desire to maintain a progressive and sustainable ordinary dividend
policy in the context of year-to-year earnings movements
Minimum requirement for own funds and eligible liabilities (MREL)
The Group is not classified as a global systemically important bank (G-SIB)
but is subject to the Bank of England's MREL statement of policy (MREL SoP)
and must therefore maintain a minimum level of MREL resources. Applying the
MREL SoP to current minimum capital requirements at 31 December 2025, the
Group's MREL, excluding regulatory capital and leverage buffers, is the higher
of 2 times Pillar 1 plus 2 times Pillar 2A, equivalent to 21.0% of
risk-weighted assets, or 6.5% of the UK leverage ratio exposure measure. In
addition, CET1 capital cannot be used to meet both MREL and capital or
leverage buffers.
Leverage minimum requirements
The Group is currently subject to the following minimum requirements under the
UK Leverage Ratio Framework:
• A minimum tier 1 leverage ratio requirement of 3.25% of the total
leverage exposure measure
• A countercyclical leverage buffer (CCLB) which is currently 0.6% of the
total leverage exposure measure
• An additional leverage ratio buffer (ALRB) of 0.7% of the total leverage
exposure measure applies to the RFB sub-group, which equates to 0.6% at Group
level
At least 75% of the 3.25% minimum leverage ratio requirement as well as 100%
of all regulatory leverage buffers must be met with CET1 capital.
Stress testing
The Group undertakes a wide-ranging programme of stress testing, providing a
comprehensive view of the potential impacts arising from the risks to which
the Group and its key legal entities are exposed. One of the most important
uses of stress testing is to assess the resilience of the operational and
strategic plans of the Group and its legal entities to adverse economic
conditions and other key risks. As part of this programme the Group
participated in the Bank of England 2025 Bank Capital Stress Test. The
scenario tests a severe negative global aggregate supply shock, leading to
deep recessions globally and in the UK. In the scenario, GDP falls 5%,
unemployment and inflation rise, and central banks increase interest rates
(peak of 8%). The results were published in December 2025 and the report
concluded that the UK banking system remains well capitalised. The Group
passed the stress test, performing strongly, and was not required to take any
capital actions.
CAPITAL RISK (continued)
Capital and MREL resources
An analysis of the Group's capital position and MREL resources as at 31
December 2025 is presented in the following table. 31 December 2024 reflects
the application of the transitional arrangements for IFRS 9.
At 31 Dec 2025 At 31 Dec 2024
£m £m
Common equity tier 1: instruments and reserves
Share capital and share premium account 24,686 24,782
Banking retained earnings(1) 20,671 19,582
Banking other reserves(1) 4,374 2,786
Adjustment to retained earnings for foreseeable dividends (1,429) (1,276)
48,302 45,874
Common equity tier 1: regulatory adjustments
Cash flow hedge reserve 2,062 3,755
Goodwill and other intangible assets (5,996) (5,679)
Prudent valuation adjustment (343) (354)
Excess of expected losses over impairment provisions and value adjustments (631) (270)
Removal of defined benefit pension surplus (1,968) (2,215)
Significant investments(1) (4,708) (5,024)
Deferred tax assets (3,812) (4,025)
Other regulatory adjustments 24 (83)
Common equity tier 1 capital 32,930 31,979
Additional tier 1: instruments
Other equity instruments 5,923 6,170
Additional tier 1: regulatory adjustments
Significant investments(1) (800) (800)
Total tier 1 capital 38,053 37,349
Tier 2: instruments and provisions
Subordinated liabilities 7,489 6,366
Tier 2: regulatory adjustments
Significant investments(1) (963) (964)
Total capital resources 44,579 42,751
Ineligible AT1 and tier 2 instruments(2) (79) (94)
Amortised portion of eligible tier 2 instruments issued by Lloyds Banking - 891
Group plc
Other eligible liabilities issued by Lloyds Banking Group plc(3) 31,232 28,675
Total MREL resources 75,732 72,223
Risk-weighted assets 235,513 224,632
Common equity tier 1 capital ratio 14.0% 14.2%
Tier 1 capital ratio 16.2% 16.6%
Total capital ratio 18.9% 19.0%
MREL ratio 32.2% 32.2%
(1) In accordance with banking capital regulations, the Group's
Insurance business is excluded from the scope of the Group's capital position.
The Group's investment in the equity and other capital instruments of the
Insurance business are deducted from the relevant tier of capital
('Significant investments'), subject to threshold regulations that allow a
portion of the equity investment to be risk-weighted rather than deducted from
capital. The risk-weighted portion forms part of threshold risk-weighted
assets.
(2) Instruments not issued out of the holding company.
(3) Includes senior unsecured debt.
(
)
CAPITAL RISK (continued)
Movements in CET1 capital resources
The key movements are set out in the table below.
Common
equity tier 1
£m
At 31 December 2024 31,979
Banking business profits(1) 4,891
Movement in foreseeable dividend accrual(2) (153)
Dividends paid on ordinary shares during the year (2,000)
Adjustment to reflect full impact of share buyback (1,710)
Dividends received from the Insurance business(3) 300
Movement in treasury shares and employee share schemes 251
Deferred tax asset 212
Goodwill and other intangible assets (317)
Excess regulatory expected losses (361)
Significant investments 316
Distributions on other equity instruments (463)
Other movements (15)
At 31 December 2025 32,930
(1) Under banking capital regulations, profits made by Insurance are
removed from CET1 capital. However, when dividends are paid to the Group by
Insurance these are recognised through CET1 capital.
(2) Reflects the reversal of the brought forward accrual for the final
2024 ordinary dividend, net of the accrual for the final 2025 ordinary
dividend.
(3) Received in February 2025, July 2025 and December 2025.
The Group's CET1 capital ratio was 14.0% at 31 December 2025 (31 December
2024: 14.2%) with the increase in CET1 capital resources more than offset by
the increase in risk-weighted assets from year end 2024.
CET1 capital resources increased by £951 million, with banking business
profits for the year and the receipt of dividends paid up by the Insurance
business largely offset by:
• The interim ordinary dividend paid in September 2025, the accrual for
the recommended final 2025 ordinary dividend of 2.43 pence per share and
distributions on other equity instruments
• The recognition of the full capital impact of the ordinary share buyback
programme announced as part of the Group's 2024 year end results, which
completed in December 2025
The full capital impact of the ordinary share buyback programme announced as
part of the Group's 2025 year end results is reflected through the Group's pro
forma CET1 capital ratio of 13.2% at 31 December 2025.
CAPITAL RISK (continued)
Movements in total capital and MREL
The Group's total capital ratio reduced to 18.9% at 31 December 2025 (31
December 2024: 19.0%). The increase in CET1 capital and the issuance of new
AT1 and tier 2 capital instruments during the year was more than offset by AT1
and tier 2 instrument calls, other tier 2 movements and the increase in
risk-weighted assets.
The MREL ratio remained at 32.2% at 31 December 2025 (31 December 2024: 32.2%)
with the increase in MREL resources, reflecting the increase in other eligible
liabilities and total capital resources after adjustments, broadly offset by
the increase in risk-weighted assets.
Risk-weighted assets
At 31 Dec 2025 At 31 Dec 2024
£m £m
Foundation Internal Ratings Based (IRB) Approach 47,782 43,366
Retail IRB Approach 90,354 90,567
Other IRB Approach(1) 23,292 21,878
IRB Approach 161,428 155,811
Standardised (STA) Approach(1) 27,166 22,532
Credit risk 188,594 178,343
Counterparty credit risk(2) 6,835 7,046
Securitisation 8,472 8,346
Market risk 3,844 3,714
Operational risk 27,768 27,183
Risk-weighted assets 235,513 224,632
of which: threshold risk-weighted assets(3) 10,672 10,738
(1) Threshold risk-weighted assets are included within Other IRB
Approach and Standardised (STA) Approach.
(2) Includes credit valuation adjustment risk.
(3) Threshold risk-weighted assets reflect the element of significant
investments and deferred tax assets that are permitted to be risk-weighted
instead of being deducted from CET1 capital. Significant investments primarily
arise from the investment in the Group's Insurance business.
Risk-weighted assets increased by £10.9 billion to £235.5 billion at 31
December 2025 (31 December 2024: £224.6 billion). This reflects the impact
of strong customer lending growth, Retail secured CRD IV increases and other
movements, partially offset by continued optimisation activity.
CAPITAL RISK (continued)
Leverage ratio
The table below summarises the component parts of the Group's leverage ratio.
At 31 Dec 2025 At 31 Dec 2024
£m £m
Total tier 1 capital 38,053 37,349
Exposure measure
Derivative financial instruments 19,727 24,065
Securities financing transactions 71,967 69,941
Loans and advances and other assets 852,378 812,691
Total statutory balance sheet assets 944,072 906,697
Qualifying central bank claims (56,231) (62,396)
Deconsolidation adjustments(1) (210,617) (190,988)
Derivatives adjustments (283) (6,254)
Securities financing transactions adjustments 2,489 3,351
Off-balance sheet items 44,410 40,186
Amounts already deducted from tier 1 capital (12,622) (12,395)
Other regulatory adjustments(2) (2,879) (4,127)
Total exposure measure 708,339 674,074
UK leverage ratio 5.4% 5.5%
Leverage exposure measure (including central bank claims) 764,570 736,470
Leverage ratio (including central bank claims) 5.0% 5.1%
Total MREL resources 75,732 72,223
MREL leverage ratio 10.7% 10.7%
(1) Deconsolidation adjustments relate to the deconsolidation of certain
Group entities that fall outside the scope of the Group's regulatory capital
consolidation, primarily the Group's Insurance business.
(2) Includes adjustments to exclude lending under the Government's
Bounce Back Loan Scheme (BBLS).
Analysis of leverage movements
The Group's UK leverage ratio reduced to 5.4% at 31 December 2025 (31 December
2024: 5.5%), with the increase in total tier 1 capital more than offset by the
increase in the leverage exposure measure. The latter primarily reflects
increases across loans and advances and other assets, due in part to strong
customer lending growth, in addition to an increase in off-balance sheet
items.
(
)
Pillar 3 disclosures
The Group will publish full year Pillar 3 disclosures in February. A copy of
the disclosures will be available to view at:
www.lloydsbankinggroup.com/investors/financial-downloads.html.
CREDIT RISK
Overview
Credit performance has remained strong and stable in 2025. The Group maintains
a measured approach to credit risk appetite and risk management with strong
credit origination criteria embedded, including affordability tests and robust
LTVs in the secured portfolios.
In UK mortgages, reductions in new to arrears and flows to default have been
observed, whilst unsecured portfolios continue to exhibit low and stable
arrears trends. Credit performance also remains strong in Commercial Banking.
The Group continues to assess the impacts of the economic and geopolitical
environment carefully through a suite of early warning indicators and
governance arrangements that ensure risk mitigating action plans are in place
to support customers and protect the Group's positions.
The underlying impairment charge in 2025 was £795 million, up from £433
million in 2024, and includes a net charge from updates to the Group's
macroeconomic outlook of £74 million compared to a large release of
£394 million in 2024. Excluding macroeconomic updates, the Group's
underlying impairment charge remains low and similar to 2024. The total
underlying probability-weighted expected credit loss (ECL) allowance was lower
in 2025 at £3,353 million (31 December 2024: £3,651 million) following
strong credit performance and additional benefits from model refinements.
Stage 2 underlying loans and advances to customers are lower at £45,413
million versus the prior year (31 December 2024: £48,075 million) following
strong credit performance particularly within UK mortgages. Additionally,
growth in lending from new business inflows dilute the proportion of Stage 2
loans and advances to 9.4% of total lending (31 December 2024: 10.4%) with
Stage 2 coverage reducing slightly at 2.6% (31 December 2024: 2.8%).
Stage 3 underlying loans and advances to customers are lower at £8,349
million versus the prior year (31 December 2024: £9,021 million), and as a
percentage of total lending at 1.7% (31 December 2024: 2.0%). Migrations into
Stage 3 from a small number of cases within Commercial Banking were offset by
continued strong performance, especially following improving default rates
within UK mortgages. Growth in house prices combined with strong credit
performance across Retail also reduced the total Group Stage 3 coverage to
15.9% (31 December 2024: 16.4%).
Prudent risk appetite and risk management
• The Group continues to take a prudent and proactive approach to credit
risk appetite and credit risk management with robust oversight. Risk appetite
is in line with the Group's strategy and helps support customers through
continued economic uncertainties in both global and domestic markets
• Sector, asset and product concentrations within the portfolios are
closely monitored and controlled, with mitigating actions taken where
appropriate. Sector and product risk parameters help manage exposure to higher
risk and cyclical sectors, segments and asset classes
• The Group's effective risk management seeks to ensure early
identification and management of customers and counterparties who may be
showing signs of distress
• The Group will continue to work closely with its customers to ensure
that they receive the appropriate level of support where required
CREDIT RISK (continued)
Impairment charge (credit) by division - statutory and underlying(A) basis
2025 2024 Change
£m
£m %
UK mortgages (60) (194) (69)
Credit cards 321 270 (19)
UK unsecured loans and overdrafts 257 272 6
UK Motor Finance 212 116 (83)
Other 4 (7)
Retail 734 457 (61)
Business and Commercial Banking (53) 47
Corporate and Institutional Banking 113 (61)
Commercial Banking 60 (14)
Insurance, Pensions and Investments 2 (9)
Equity Investments and Central Items (1) (3) (67)
Total impairment charge 795 431 (84)
Insurance, Pensions and Investments (underlying basis)(A) 2 (7)
Total impairment charge (underlying basis)(A) 795 433 (84)
Asset quality ratio(A) 0.17% 0.10% 7bp
Credit risk balance sheet basis of presentation
The balance sheet analyses which follow have been presented on two bases; the
statutory basis which is consistent with the presentation in the Group's
accounts and the underlying basis which is used for internal management
purposes. Further detail is included on page 62.
Total expected credit loss allowance - statutory and underlying(A) basis
At 31 Dec 2025 At 31 Dec 2024
£m £m
Customer related balances
Drawn 3,011 3,191
Undrawn 197 270
3,208 3,461
Loans and advances to banks 1 1
Debt securities 5 4
Other assets 14 15
Total expected credit loss allowance 3,228 3,481
Acquisition fair value adjustment 125 170
Total expected credit loss allowance (underlying basis)(A) 3,353 3,651
of which: Customer related balances (underlying basis)(A) 3,333 3,631
of which: Drawn (underlying basis)(A) 3,136 3,361
CREDIT RISK (continued)
Total expected credit loss allowance sensitivity to economic assumptions -
statutory and underlying(A) basis
The measurement of ECL reflects an unbiased probability-weighted range of
possible future economic outcomes. The Group achieves this by generating four
economic scenarios to reflect the range of outcomes; the central scenario
reflects the Group's base case assumptions used for medium-term planning
purposes, an upside and a downside scenario are also selected together with a
severe downside scenario. If the base case moves adversely, it generates a
new, more adverse downside and severe downside which are then incorporated
into the ECL. Consistent with prior years, the base case, upside and downside
scenarios carry a 30% weighting; the severe downside is weighted at 10%.
The following table shows the Group's ECL for the probability-weighted,
upside, base case, downside and severe downside scenarios. The stage
allocation for an asset is based on the overall probability-weighted
probability of default and hence the staging of assets is constant across all
the scenarios. In each economic scenario the ECL for individual assessments is
held constant reflecting the basis on which they are evaluated. Judgemental
adjustments applied through changes to model inputs or parameters, or more
qualitative post model adjustments, are apportioned across the scenarios in
proportion to modelled ECL where this better reflects the sensitivity of these
adjustments to each scenario. The probability-weighted view shows the extent
to which a higher ECL allowance has been recognised to take account of
multiple economic scenarios relative to the base case; the uplift on a
statutory basis being £366 million compared to £445 million at 31 December
2024.
Probability- Upside Base case Downside Severe
weighted £m £m £m downside
£m £m
UK mortgages 731 341 510 937 1,943
Credit cards 603 498 579 674 777
Other Retail 991 922 969 1,036 1,126
Commercial Banking 888 690 789 1,010 1,414
Other 15 15 15 15 15
At 31 December 2025 3,228 2,466 2,862 3,672 5,275
UK mortgages (underlying basis)(A) 856 466 635 1,062 2,068
At 31 December 2025 (underlying basis)(A) 3,353 2,591 2,987 3,797 5,400
UK mortgages 852 345 567 1,064 2,596
Credit cards 674 518 641 773 945
Other Retail 950 843 923 1,010 1,172
Commercial Banking 989 745 889 1,125 1,608
Other 16 16 16 16 17
At 31 December 2024 3,481 2,467 3,036 3,988 6,338
UK mortgages (underlying basis)(A) 1,022 512 735 1,235 2,773
At 31 December 2024 (underlying basis)(A) 3,651 2,634 3,204 4,159 6,515
The impact of isolated changes in the UK unemployment rate and House Price
Index (HPI) has been assessed on a univariate basis. Although such changes
would not be observed in isolation, as economic indicators tend to be
correlated in a coherent scenario, this gives insight into the sensitivity of
the Group's ECL to gradual changes in these two critical economic factors.
The impacts are assessed as changes to probability-weighted modelled ECL
inclusive of the impacts upon staging of assets, excluding post model
adjustments. In previous assessments, impacts were assessed as changes to base
case modelled ECL only (at 100 per cent weighting) with staging held flat to
the reported view, and similarly excluded post model adjustments. The updated
approach addresses the limitations of the prior methodology and provides a
more representative view of the potential impact of these sensitivities.
The ECL impact due to a change in unemployment has reduced in 2025 compared to
2024 as a result of lower loss rates within the Commercial Banking model. The
HPI reduction versus 2024 is due to lower default rates and a reduced
proportion of assets in Stage 2 for UK mortgages, following strong credit
performance in the year.
CREDIT RISK (continued)
Total expected credit loss allowance sensitivity to economic assumptions
(continued)
The table below shows the impact on the Group's ECL resulting from a 1
percentage point increase or decrease in the UK unemployment rate. The
increase or decrease is presented based on the adjustment phased evenly over
the first 10 quarters of all four scenarios. A more immediate increase or
decrease would drive a more material ECL impact as it would be fully reflected
in both 12-month and lifetime probability of defaults.
At 31 December 2025 At 31 December 2024(1)
1pp increase in 1pp decrease in 1pp increase in 1pp decrease in
unemployment unemployment unemployment unemployment
£m £m £m £m
UK mortgages 11 (11) 13 (12)
Credit cards 54 (53) 54 (53)
Other Retail 25 (25) 23 (24)
Commercial Banking 58 (48) 113 (82)
ECL impact 148 (137) 203 (171)
(1) For 2025, impacts are assessed as changes to probability-weighted
modelled ECL inclusive of the impacts upon staging of assets, excluding post
model adjustments. The comparative period has been represented on a consistent
basis.
The table below shows the impact on the Group's ECL in respect of UK mortgages
of an increase or decrease in loss given default for a 10 percentage point
increase or decrease in HPI. The increase or decrease is presented based on
the adjustment phased evenly over the first 10 quarters of all four scenarios.
At 31 December 2025 At 31 December 2024(1)
10pp increase 10pp decrease 10pp increase 10pp decrease
in HPI in HPI in HPI in HPI
£m £m £m £m
ECL impact (172) 261 (207) 312
(1) For 2025, impacts are assessed as changes to probability-weighted
modelled ECL inclusive of the impacts upon staging of assets, excluding post
model adjustments. The comparative period has been represented on a consistent
basis.
Reconciliation between statutory and underlying(A) bases of gross loans and
advances to customers and expected credit loss allowance on drawn balances
Gross loans and advances to customers Expected credit loss allowance on drawn balances
Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
£m £m £m £m £m £m £m £m £m £m
At 31 December 2025
Underlying basis(A) 430,493 45,413 8,349 - 484,255 737 1,107 1,292 - 3,136
POCI assets (644) (2,734) (1,823) 5,201 - - (30) (254) 284 -
Acquisition fair - - - (125) (125) - - - (125) (125)
value adjustment
Continuing involvement asset 344 - - - 344 - - - - -
(300) (2,734) (1,823) 5,076 219 - (30) (254) 159 (125)
Statutory basis 430,193 42,679 6,526 5,076 484,474 737 1,077 1,038 159 3,011
At 31 December 2024
Underlying basis(A) 405,324 48,075 9,021 - 462,420 736 1,199 1,426 - 3,361
POCI assets (762) (3,310) (2,305) 6,377 - - (39) (318) 357 -
Acquisition fair - - - (170) (170) - - - (170) (170)
value adjustment
Continuing involvement asset 798 - - - 798 - - - - -
36 (3,310) (2,305) 6,207 628 - (39) (318) 187 (170)
Statutory basis 405,360 44,765 6,716 6,207 463,048 736 1,160 1,108 187 3,191
CREDIT RISK (continued)
Loans and advances to customers and expected credit loss allowance - statutory
and underlying(A) basis
At 31 December 2025 Stage 1 Stage 2 Stage 3 POCI Total Stage 2 Stage 3
£m £m £m £m £m as % of as % of
total total
Loans and advances to customers
UK mortgages 284,307 30,414 4,016 5,076 323,813 9.4 1.2
Credit cards 15,258 2,326 274 - 17,858 13.0 1.5
UK unsecured loans and overdrafts 10,601 1,397 193 - 12,191 11.5 1.6
UK Motor Finance 14,222 2,786 141 - 17,149 16.2 0.8
Other 21,245 392 145 - 21,782 1.8 0.7
Retail 345,633 37,315 4,769 5,076 392,793 9.5 1.2
Business and Commercial Banking 24,362 3,329 979 - 28,670 11.6 3.4
Corporate and Institutional Banking 59,658 2,035 778 - 62,471 3.3 1.2
Commercial Banking 84,020 5,364 1,757 - 91,141 5.9 1.9
Equity Investments and Central Items(1) 540 - - - 540 - -
Total gross lending 430,193 42,679 6,526 5,076 484,474 8.8 1.3
UK mortgages (underlying basis)(A,2) 284,951 33,148 5,839 323,938 10.2 1.8
UK Motor Finance (underlying basis)(A,3) 13,878 2,786 141 16,805 16.6 0.8
Retail (underlying basis)(A) 345,933 40,049 6,592 392,574 10.2 1.7
Total gross lending (underlying basis)(A) 430,493 45,413 8,349 484,255 9.4 1.7
Customer related ECL allowance (drawn and undrawn)
UK mortgages 55 208 309 159 731
Credit cards 205 277 121 - 603
UK unsecured loans and overdrafts 172 214 112 - 498
UK Motor Finance(4) 202 149 79 - 430
Other 17 11 35 - 63
Retail 651 859 656 159 2,325
Business and Commercial Banking 92 165 120 - 377
Corporate and Institutional Banking 107 136 263 - 506
Commercial Banking 199 301 383 - 883
Equity Investments and Central Items - - - - -
Total 850 1,160 1,039 159 3,208
UK mortgages (underlying basis)(A,2) 55 238 563 856
UK Motor Finance (underlying basis)(A) 202 149 79 430
Retail (underlying basis)(A) 651 889 910 2,450
Total (underlying basis)(A) 850 1,190 1,293 3,333
Customer related ECL allowance (drawn and undrawn) as a percentage of loans
and advances to customers
Stage 1 Stage 2 Stage 3 POCI Total Adjusted Stage 3(5) Adjusted Total(5)
%
%
%
%
%
% %
UK mortgages - 0.7 7.7 3.1 0.2
Credit cards 1.3 11.9 44.2 - 3.4 45.7 3.4
UK unsecured loans and overdrafts 1.6 15.3 58.0 - 4.1 60.5 4.1
UK Motor Finance 1.4 5.3 56.0 - 2.5
Other 0.1 2.8 24.1 - 0.3
Retail 0.2 2.3 13.8 3.1 0.6 13.8 0.6
Business and Commercial Banking 0.4 5.0 12.3 - 1.3 15.7 1.3
Corporate and Institutional Banking 0.2 6.7 33.8 - 0.8 33.8 0.8
Commercial Banking 0.2 5.6 21.8 - 1.0 24.9 1.0
Equity Investments and Central Items - - - - -
Total 0.2 2.7 15.9 3.1 0.7 16.5 0.7
UK mortgages (underlying basis)(A,2) - 0.7 9.6 0.3
UK Motor Finance (underlying basis)(A,3) 1.5 5.3 56.0 2.6
Retail (underlying basis)(A) 0.2 2.2 13.8 0.6 13.8 0.6
Total (underlying basis)(A) 0.2 2.6 15.5 0.7 15.9 0.7
(1) Contains central fair value hedge accounting adjustments.
(2 ) UK mortgages balances on an underlying basis(A) exclude the impact
of the HBOS acquisition-related adjustments.
(3) UK Motor Finance balances on an underlying basis(A) exclude a
finance lease gross up.
(4) UK Motor Finance includes £243 million relating to provisions
against residual values of vehicles subject to finance leases.
(5) Stage 3 and Total exclude loans in recoveries in credit cards of £9
million, UK unsecured loans and overdrafts of £8 million, Business and
Commercial Banking of £217 million and Corporate and Institutional Banking of
£1 million.
CREDIT RISK (continued)
Loans and advances to customers and expected credit loss allowance - statutory
and underlying(A) basis
At 31 December 2024 Stage 1 Stage 2 Stage 3 POCI Total Stage 2 Stage 3
£m £m £m £m £m as % of as % of
total total
Loans and advances to customers
UK mortgages 269,760 32,995 4,166 6,207 313,128 10.5 1.3
Credit cards 13,534 2,441 265 - 16,240 15.0 1.6
UK unsecured loans and overdrafts 9,314 1,247 175 - 10,736 11.6 1.6
UK Motor Finance 13,897 2,398 124 - 16,419 14.6 0.8
Other 17,373 516 147 - 18,036 2.9 0.8
Retail 323,878 39,597 4,877 6,207 374,559 10.6 1.3
Business and Commercial Banking 25,785 3,172 1,197 - 30,154 10.5 4.0
Corporate and Institutional Banking 55,692 1,996 642 - 58,330 3.4 1.1
Commercial Banking 81,477 5,168 1,839 - 88,484 5.8 2.1
Equity Investments and Central Items(1) 5 - - - 5 - -
Total gross lending 405,360 44,765 6,716 6,207 463,048 9.7 1.5
UK mortgages (underlying basis)(A,2) 270,522 36,305 6,471 313,298 11.6 2.1
UK Motor Finance (underlying basis)(A,3) 13,099 2,398 124 15,621 15.4 0.8
Retail (underlying basis)(A) 323,842 42,907 7,182 373,931 11.5 1.9
Total gross lending (underlying basis)(A) 405,324 48,075 9,021 462,420 10.4 2.0
Customer related ECL allowance (drawn and undrawn)
UK mortgages 55 275 335 187 852
Credit cards 210 331 133 - 674
UK unsecured loans and overdrafts 170 235 118 - 523
UK Motor Finance(4) 173 115 72 - 360
Other 16 14 37 - 67
Retail 624 970 695 187 2,476
Business and Commercial Banking 132 187 166 - 485
Corporate and Institutional Banking 122 129 249 - 500
Commercial Banking 254 316 415 - 985
Equity Investments and Central Items - - - - -
Total 878 1,286 1,110 187 3,461
UK mortgages (underlying basis)(A,2) 55 314 653 1,022
UK Motor Finance (underlying basis)(A) 173 115 72 360
Retail (underlying basis)(A) 624 1,009 1,013 2,646
Total (underlying basis)(A) 878 1,325 1,428 3,631
Customer related ECL allowance (drawn and undrawn) as a percentage of loans
and advances to customers
Stage 1 Stage 2 Stage 3 POCI Total Adjusted Stage 3(5) Adjusted Total(5)
%
%
%
%
%
% %
UK mortgages - 0.8 8.0 3.0 0.3
Credit cards 1.6 13.6 50.2 - 4.2
UK unsecured loans and overdrafts 1.8 18.8 67.4 - 4.9
UK Motor Finance 1.2 4.8 58.1 - 2.2
Other 0.1 2.7 25.2 - 0.4
Retail 0.2 2.4 14.3 3.0 0.7
Business and Commercial Banking 0.5 5.9 13.9 - 1.6 18.4 1.6
Corporate and Institutional Banking 0.2 6.5 38.8 - 0.9 38.8 0.9
Commercial Banking 0.3 6.1 22.6 - 1.1 26.9 1.1
Equity Investments and Central Items - - - - -
Total 0.2 2.9 16.5 3.0 0.7 17.3 0.7
UK mortgages (underlying basis)(A,2) - 0.9 10.1 0.3
UK Motor Finance (underlying basis)(A,3) 1.3 4.8 58.1 2.3
Retail (underlying basis)(A) 0.2 2.4 14.1 0.7
Total (underlying basis)(A) 0.2 2.8 15.8 0.8 16.4 0.8
(1) Contains central fair value hedge accounting adjustments.
(2) UK mortgages balances on an underlying basis(A) exclude the impact
of the HBOS acquisition-related adjustments.
(3) UK Motor Finance balances on an underlying basis(A) exclude a
finance lease gross up.
(4) UK Motor Finance includes £178 million relating to provisions
against residual values of vehicles subject to finance leases.
(5) Stage 3 and Total exclude loans in recoveries in Business and
Commercial Banking of £296 million and Corporate and Institutional Banking of
£1 million.
(
)
CREDIT RISK (continued)
Retail
• The Retail portfolio has continued to deliver strong credit performance
in 2025 and remains well positioned despite macroeconomic headwinds. Consumers
continue to show strength in the context of inflationary pressures
• Robust risk management remains firmly embedded, underpinned by strong
affordability and indebtedness controls for lending and a prudent risk
appetite approach. Lending strategies are assessed regularly and are
calibrated to reflect the latest macroeconomic conditions
• In UK mortgages, new to arrears and flow to default rates have improved
during 2025, while in the unsecured portfolios and UK Motor Finance, new to
arrears and flows to default have remained low and stable
• The Retail impairment charge in 2025 was £734 million, higher than the
£457 million charge for 2024 which benefitted from a large release of £332
million from improvements in the Group's macroeconomic outlook. Excluding
macroeconomic updates, the impairment charge is slightly lower than 2024 due
to continued stability in flows to default with additional write-backs from
model refinements
• Retail customer related ECL allowance as a percentage of drawn loans and
advances (coverage) has reduced to 0.6% (31 December 2024: 0.7%)
• Strong credit performance and higher portfolio balances have reduced
Stage 2 loans and advances to 10.2% of the Retail portfolio (31 December 2024:
11.5%). Stage 2 ECL coverage reduced to 2.2% (31 December 2024: 2.4%)
• Stable and low flows to default and higher portfolio balances have also
resulted in a reduction in Retail Stage 3 loans and advances to 1.7% of total
loans and advances (31 December 2024: 1.9%)
• Stage 3 ECL coverage reduced to 13.8% (31 December 2024: 14.1%),
largely due to continued house price increases
UK mortgages
• The UK mortgages portfolio increased to £323.9 billion (31 December
2024: £313.3 billion), driven by sustained customer demand
• New to arrears in the UK mortgages portfolio improved during 2025. The
portfolio remains well positioned with a strong loan to value (LTV) profile.
Portfolio quality improved during the year, supported by robust affordability
and credit controls with higher risk legacy vintage balances continuing to
reduce
• The impairment credit of £60 million for 2025 is lower than the credit
of £194 million in 2024. Both years included favourable updates to the
macroeconomic outlook, predominately via continued growth in house prices,
however this benefit was more material in 2024. Excluding macroeconomic
updates, the impairment charge is favourable year-on-year due to improving
flow to default rates
• Stage 2 loans and advances have reduced to 10.2% of total UK mortgages
balances (31 December 2024: 11.6%) following the removal of non-modelled
adjustments previously applied to UK Bank Rate and CPI inflation in the severe
downside scenario, combined with strong credit performance and higher
portfolio balances
• Continued strong credit performance and higher portfolio balances also
resulted in a reduction in Stage 3 loans and advances to 1.8% (31 December
2024: 2.1%), with continued growth in house prices resulting in a reduction in
Stage 3 ECL coverage to 9.6% (31 December 2024: 10.1%)
CREDIT RISK (continued)
UK mortgages product analysis - statutory basis(1)
At 31 December 2025 At 31 December 2024(1)
Mainstream Buy-to-let Specialist Total Mainstream Buy-to-let Specialist Total
UK mortgages loans and advances to customers (£m) 273,106 47,858 2,849 323,813 261,630 47,984 3,514 313,128
UK mortgages greater than 3 months in arrears(2)
Number of cases 17,070 3,351 2,208 22,629 20,112 4,511 2,818 27,441
Total mortgages accounts (%) 1.0 1.0 8.6 1.1 1.2 1.2 9.2 1.3
Value of loans(3) (£m) 2,518 486 397 3,401 2,850 623 504 3,977
Total mortgages balances (%) 0.9 1.0 13.9 1.1 1.1 1.3 14.3 1.3
Loan to value
Less than 60% (%) 52.0 64.1 90.0 54.2 55.6 68.5 89.4 57.9
60% to 70% (%) 15.4 21.4 6.4 16.2 16.7 21.1 6.9 17.2
70% to 80% (%) 15.5 14.4 2.0 15.2 14.1 10.3 2.0 13.4
80% to 90% (%) 14.4 0.1 0.9 12.2 11.9 0.1 0.9 10.0
90% to 100% (%) 2.7 0.0 0.4 2.2 1.7 0.0 0.5 1.5
Greater than 100% (%) 0.0 0.0 0.3 0.0 0.0 0.0 0.3 0.0
Total (%) 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Average loan to value(4)
Stock of residential mortgages (%) 44.7 48.2 32.0 45.0 43.2 47.3 32.9 43.6
New residential lending in the period (%) 64.7 58.8 n/a 64.1 64.1 56.4 n/a 63.2
(1) This table is now presented on a statutory basis. The comparative
period has been represented on the same basis.
(2) Excluding repossessions.
(3) Value of loans represents gross book value excluding the impact of
HBOS acquisition adjustments of mortgages more than three months in arrears.
These accounts are a subset of total Stage 3 given the exclusion of accounts
in possession and those meeting other Stage 3 criteria.
(4) Average loan to value is calculated as total loans and advances as a
percentage of the total indexed collateral of these loans and advances.
CREDIT RISK (continued)
Credit cards
• Credit card balances increased to £17.9 billion (2024: £16.2
billion), driven by higher demand for new cards and increased customer
spending
• The credit card portfolio is a prime book. New to arrears continue to be
low and repayment rates remain strong
• The impairment charge of £321 million for 2025 is higher than the
charge of £270 million in 2024, due to updates to the Group's macroeconomic
outlook, notably upwards revisions to the unemployment forecast, compared to
favourable updates in 2024. Portfolio performance remained stable with
additional write-backs from model refinements related to loss rates, and an
unsecured debt sale completed in the fourth quarter. Total ECL coverage is
lower at 3.4% (31 December 2024: 4.2%)
• Stable credit performance and higher portfolio balances resulted in a
reduction in Stage 2 loans and advances to 13.0% of total credit card balances
(31 December 2024: 15.0%), with lower Stage 2 ECL coverage at 11.9% (31
December 2024: 13.6%)
• Similarly, Stage 3 loans and advances reduced slightly to 1.5% (31
December 2024: 1.6%) with model refinements also contributing to reduce Stage
3 ECL coverage to 45.7% (31 December 2024: 50.2%)
UK unsecured loans and overdrafts
• UK unsecured loans and overdraft balances increased to £12.2 billion
(2024: £10.7 billion) driven by organic balance growth and lower repayments
• The impairment charge of £257 million for 2025 is lower than the charge
of £272 million for 2024, largely due to loss rate model refinements. ECL and
coverage are both lower at a total level and across all stages
• Strong credit performance and higher portfolio balances within unsecured
loans resulted in a slight reduction in Stage 2 loans and advances to 11.5% of
total balances (31 December 2024: 11.6%), with Stage 2 ECL coverage lower at
15.3% (31 December 2024: 18.8%)
• Similarly, Stage 3 loans and advances remained stable at 1.6% (31
December 2024: 1.6%), with model refinements also contributing to reduce Stage
3 ECL coverage to 60.5% (31 December 2024: 67.4%)
UK Motor Finance
• UK Motor Finance balances (which exclude operating leases) increased to
£16.8 billion (2024: £15.6 billion), driven by retail demand, alongside
increased stocking
• Updates to Residual Value (RV) and Voluntary Termination (VT) provisions
held against Personal Contract Purchase (PCP) and Hire Purchase (HP) lending
are included within ECL and the impairment charge. Volatility in used vehicle
values have primarily driven an ECL increase to £243 million as at 31
December 2025 (31 December 2024: £178 million)
• The impairment charge of £212 million for 2025 is higher than the
charge of £116 million for 2024, reflecting increased RV and VT charges
year-on-year. Increased RV and VT provisions drove increases to Stage 2 ECL
coverage to 5.3% (31 December 2024: 4.8%), with Stage 2 loans and advances
increasing slightly to 16.6% (31 December 2024: 15.4%)
• Stage 3 loans and advances remained stable at 0.8% (31 December 2024:
0.8%), with Stage 3 ECL coverage reducing slightly to 56.0% (31 December 2024:
58.1%)
Other
• Other Retail loans and advances increased to £21.8 billion
(31 December 2024: £18.0 billion), largely driven by growth in the European
business
• Stage 2 loans and advances reduced to 1.8% (31 December 2024: 2.9%), due
to higher portfolio balances, with coverage across stages broadly stable.
Stage 3 loans and advances remained stable at 0.7% of total loans and
advances (31 December 2024: 0.8%)
• There was a £4 million impairment charge in 2025, compared to a £7
million credit in 2024
Commercial Banking
• Portfolio credit performance remained strong. The Group continues to
monitor external developments and their impact upon the macroeconomic climate
generally and also on specific sectors within the portfolio
• Credit strategies and policy remain robust, and within risk appetite
tolerances. The Group remains focused on credit underwriting and monitoring
standards, and proactively managing higher risk and cyclical sector exposures
CREDIT RISK (continued)
Commercial Banking (continued)
• The Group continues to review segments of portfolios as appropriate,
ensuring credit strategies, appetite, sensitivities and mitigation action
plans are up-to-date and suitable for rapid action in response to both risks
and opportunities, whilst supporting clients in the right way and ensuring the
Group is protected
• Credit playbooks, covering a range of potential credit downside
scenarios, are maintained and refreshed as conditions evolve. Early warning
indicators and risk appetite metrics are tracked and provide timely insight to
enable proactive action where appropriate
• The Group continues to provide early support to customers in difficulty
through focused risk management via its Watchlist and Business Support
framework. The approach balances prudent risk appetite with ensuring support
for financially viable clients, reinforcing the Group's commitment to
resilience and responsible client management
• Commercial Banking UK Real Estate committed drawn lending grew by £0.7
billion to £10.0 billion in 2025 (net of £2.6 billion exposures subject to
protection through significant risk transfer (SRT) securitisations).
Performance has remained strong and stable within this sector, with a decrease
in cases in its Watchlist category and limited flow into Business Support
• The net impairment charge in 2025 was £60 million, versus a credit of
£14 million in 2024 and includes a £74 million charge from the updated
macroeconomic outlook, including a judgemental adjustment in respect of global
tariff and geo-political disruption risks. Excluding macroeconomic updates, a
small number of single name charges were observed in the first half of the
year, largely isolated to a single sector and not representative of trends
across the portfolio. This has been offset by releases from Stage 1 and Stage
2 provisions capturing strong credit performance and reducing interest rates
throughout the year
• ECL allowances decreased in the year to £883 million in 2025 (31
December 2024: £985 million), also as a result of favourable model updates
partially offset by single name cases
• Stage 2 loans and advances increased to £5,364 million (31 December
2024: £5,168 million). Stage 2 as a proportion of total loans and advances to
customers is stable at 5.9% (31 December 2024: 5.8%) with stable credit
performance and model updates resulting in lower Stage 2 ECL coverage at 5.6%
(31 December 2024: 6.1%)
• Stage 3 loans and advances decreased to £1,757 million (31 December
2024: £1,839 million) and as a proportion of total loans and advances to
customers to 1.9% (31 December 2024: 2.1%), given movements in the first half
of 2025. Stage 3 ECL coverage is lower at 24.9% (31 December 2024: 26.9%)
Business and Commercial Banking
• Business and Commercial Banking lending reduced to £28.7 billion (31
December 2024: £30.2 billion), driven by government-backed lending
repayments. Excluding these, the lending portfolio grew in the year
• A net impairment credit of £53 million in 2025 compares to a charge of
£47 million in 2024, driven by improved expectations for accounts in
recoveries alongside continued strong credit performance
• Stage 2 loans and advances increased to £3,329 million (31 December
2024: £3,172 million). Stage 2 as a proportion of total loans and advances to
customers increased to 11.6% (31 December 2024: 10.5%), while Stage 2 ECL
coverage decreased to 5.0% (31 December 2024: 5.9%) following model updates
• Stage 3 loans and advances decreased to £979 million (31 December 2024:
£1,197 million), primarily driven by repayments and reduced to 3.4% (31
December 2024: 4.0%) as a proportion of total loans and advances. Stage 3 ECL
coverage reduced to 15.7% (31 December 2024: 18.4%)
Corporate and Institutional Banking
• Corporate and Institutional lending grew to £62.5 billion (31 December
2024: £58.3 billion), reflecting growth in Institutional balances including
securitised products, alongside corporate infrastructure growth
• A net impairment charge of £113 million in 2025 compares to an
impairment credit of £61 million in 2024, driven by a small number of single
name charges, primarily in the first half of the year
• Stage 2 loans and advances increased to £2,035 million (31 December
2024: £1,996 million). Stage 2 as a proportion of total loans and advances to
customers is stable at 3.3% (31 December 2024: 3.4%), with Stage 2 ECL
coverage at 6.7% (31 December 2024: 6.5%)
• Stage 3 loans and advances increased to £778 million (31 December 2024:
£642 million) and as a proportion of total loans and advances to customers to
1.2% (31 December 2024: 1.1%), driven by a small number of single name
transfers to Stage 3, mainly in the first half of the year. Stage 3 ECL
coverage decreased to 33.8% (31 December 2024: 38.8%) following the write-off
of a large longstanding case that was fully provided for
CREDIT RISK (continued)
Base case and MES economic assumptions
The Group's base case economic scenario has been updated to reflect global
developments and changes in domestic economic policy. The Group's updated base
case scenario has the following conditioning assumptions. First, developments
in global conflicts, technology or financial sector issues do not cause a
significant degree of financial market volatility. Second, the US effective
tariff rate is maintained at levels prevailing at the balance sheet date
pending a switch to a sector-based tariff framework. Third, the UK's
macroeconomic framework for monetary and fiscal policy remains in place,
alongside broader continuity on other areas of government policy.
Based on these assumptions and incorporating the economic data published for
the third 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, modest
further reductions in UK Bank Rate are expected to continue 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 fourth quarter of 2025. Actual data 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. Since 30 September 2025, the non-modelled adjustments
previously applied to UK Bank Rate and CPI inflation in the severe downside
scenario have been removed. This is because the incremental ECL impact is no
longer considered sufficiently material to justify their application.
Accordingly, its removal has had no material impact on ECL.
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 December 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 0.3 0.1 0.3 0.3 0.3 0.4 0.4
Unemployment rate 4.5 4.7 5.0 5.1 5.3 5.3 5.2 5.1
House price growth 2.9 2.7 1.3 0.8 1.3 1.6 1.6 1.6
Commercial real estate price growth 2.5 2.6 2.6 1.2 0.5 0.2 0.1 0.6
UK Bank Rate 4.50 4.25 4.00 3.75 3.75 3.50 3.25 3.25
CPI inflation 2.8 3.5 3.8 3.7 3.3 2.6 2.2 2.2
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
CREDIT RISK (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 December 2025 2025 2026 2027 2028 2029 2025-2029
% % % % % average
%
Upside
Gross domestic product growth 1.4 2.0 2.3 1.6 1.6 1.8
Unemployment rate 4.8 4.2 3.2 3.1 3.2 3.7
House price growth 0.8 3.5 7.1 6.9 6.0 4.8
Commercial real estate price growth 1.2 7.9 4.9 1.7 0.8 3.2
UK Bank Rate 4.13 3.94 4.59 5.07 5.33 4.61
CPI inflation 3.4 2.6 2.4 2.8 3.1 2.9
Base case
Gross domestic product growth 1.4 1.2 1.4 1.5 1.6 1.4
Unemployment rate 4.8 5.2 4.8 4.6 4.5 4.8
House price growth 0.8 1.6 1.9 2.2 3.1 1.9
Commercial real estate price growth 1.2 0.6 1.7 0.5 0.2 0.9
UK Bank Rate 4.13 3.44 3.25 3.44 3.50 3.55
CPI inflation 3.4 2.6 2.2 2.2 2.3 2.6
Downside
Gross domestic product growth 1.4 (0.3) (0.5) 1.1 1.6 0.7
Unemployment rate 4.8 6.6 7.5 7.4 7.0 6.7
House price growth 0.8 (0.2) (4.7) (5.7) (2.8) (2.6)
Commercial real estate price growth 1.2 (7.1) (4.2) (2.7) (2.3) (3.1)
UK Bank Rate 4.13 2.74 1.09 0.75 0.52 1.85
CPI inflation 3.4 2.6 2.0 1.4 1.0 2.1
Severe downside
Gross domestic product growth 1.4 (1.9) (1.8) 0.7 1.4 0.0
Unemployment rate 4.8 8.3 10.2 9.9 9.4 8.5
House price growth 0.8 (1.2) (11.1) (12.2) (7.8) (6.5)
Commercial real estate price growth 1.2 (17.4) (9.8) (7.4) (5.4) (8.0)
UK Bank Rate 4.13 1.91 0.10 0.03 0.01 1.24
CPI inflation 3.4 2.6 1.7 0.5 (0.4) 1.6
Probability-weighted
Gross domestic product growth 1.4 0.7 0.8 1.3 1.6 1.2
Unemployment rate 4.8 5.6 5.7 5.5 5.4 5.4
House price growth 0.8 1.3 0.2 (0.2) 1.1 0.6
Commercial real estate price growth 1.2 (1.3) (0.3) (0.9) (0.9) (0.4)
UK Bank Rate 4.13 3.23 2.69 2.78 2.81 3.13
CPI inflation 3.4 2.6 2.2 2.0 1.9 2.4
CREDIT RISK (continued)
Base case and MES economic assumptions (continued)
At 31 December 2024 2024 2025 2026 2027 2028 2024-2028 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 was considered to better reflect the risks around the Group's base
case view in an economic environment where the risks of supply and demand
shocks are more balanced.
LIQUIDITY RISK
Overview
The Group has maintained its strong funding and liquidity position with a loan
to deposit ratio of 97% as at 31 December 2025 (31 December 2024: 95%).
Total wholesale funding has increased to £99.4 billion as at 31 December
2025 (31 December 2024: £92.5 billion). The Group maintains access to
diverse sources and tenors of funding.
The Group's liquid assets continue to exceed the regulatory minimum and
internal risk appetite, with a liquidity coverage ratio (LCR)(1) of 145% as at
31 December 2025 (31 December 2024: 146%) calculated on a Group consolidated
basis based on the PRA rulebook. The decrease in the LCR resulted from a
reduction in liquid assets, from an increase in lending and repayments of Bank
of England Term Funding Scheme with additional incentives for SMEs (TFSME)
partially offset by an increase in customer deposits, and a decrease in net
cash outflows, primarily from a reduction in outflows related to derivative
exposures arising from historic market volatility. All assets within the
liquid asset portfolio are hedged for interest rate risk. Following the
implementation of structural reform, liquidity risk is managed at a legal
entity level with the Group consolidated LCR representing the composite of the
Ring-Fenced Bank and Non-Ring-Fenced Bank entities.
LCR eligible assets(1) have reduced to £131.4 billion (31 December 2024:
£134.4 billion), primarily driven by an increase in lending and TFSME
repayments, partially offset by an increase in customer deposits. In addition
to the Group's reported LCR eligible assets, the Group maintains borrowing
capacity at central banks which averaged £87 billion in the year to 31
December 2025 (31 December 2024: £72 billion). The net stable funding ratio
remains strong at 124% (calculated as a quarterly simple average over the
previous four quarters) as at 31 December 2025 (31 December 2024: 129%).
LCR eligible assets comprise £125.8 billion LCR level 1 eligible assets (31
December 2024: £128.5 billion) and £5.6 billion LCR level 2 eligible assets
(31 December 2024: £5.9 billion). These assets are available to meet cash and
collateral outflows and regulatory requirements. The Insurance business
manages a separate liquidity portfolio to mitigate insurance liquidity risk.
The banking business also has a significant amount of non-LCR eligible liquid
assets which are eligible for use in a range of central bank or similar
facilities. Future use of such facilities will be based on prudent liquidity
management and economic considerations, having regard to external market
conditions.
During 2025, the Group accessed wholesale funding across a range of currencies
and markets with term issuance volumes totalling £13.8 billion. The total
outstanding amount of drawings from the TFSME has reduced to £8.8 billion as
at 31 December 2025 (31 December 2024: £21.9 billion), with further
maturities in 2027 and beyond. The repayment of TFSME maturities has been
factored into the Group's funding plans.
The Group's credit ratings are well positioned and continue to reflect the
strength of the Group's management and franchise, along with its robust
financial performance, capital and funding position. In September 2025,
S&P upgraded the Group's issuer credit rating by one notch.
(1) Based on a monthly simple average over the previous 12 months.
LIQUIDITY RISK (continued)
Group funding requirements and sources
At 31 Dec 2025 At 31 Dec 2024 Change
£bn
£bn
%
Group funding position
Total Group assets 944.1 906.7 4
Less other liabilities(1) (261.7) (247.8) (6)
Funding requirements 682.4 658.9 4
Customer deposits 496.5 482.7 3
Wholesale funding(2) 99.4 92.5 7
Repurchase agreements - non-trading 29.8 15.9 87
Term Funding Scheme with additional incentives for SMEs (TFSME) 8.8 21.9 (60)
Repurchase agreements at amortised cost 38.6 37.8 2
Total equity 47.9 45.9 4
Funding sources 682.4 658.9 4
(1) Other assets and other liabilities primarily include balances in the
Group's Insurance business and the fair value of derivative assets and
liabilities.
(2 ) The Group's definition of wholesale funding aligns with that used by
other international market participants; including bank deposits, debt
securities in issue and subordinated liabilities. Excludes balances relating
to cash collateral of £1.5 billion (31 December 2024: £2.8 billion).
Reconciliation of Group funding to the balance sheet
At 31 December 2025 Included Cash collateral received(1) Fair value Balance
in funding £bn and other sheet
analysis accounting £bn
£bn methods
£bn
Deposits from banks 3.8 2.0 - 5.8
Debt securities in issue 83.9 - (5.6) 78.3
Subordinated liabilities 11.7 - (1.8) 9.9
Total wholesale funding 99.4 2.0
Customer deposits 496.5 - - 496.5
Repurchase agreements at amortised cost 38.6 - - 38.6
Total equity 47.9 - - 47.9
Funding sources 682.4 2.0
At 31 December 2024
Deposits from banks 3.1 3.2 (0.1) 6.2
Debt securities in issue 77.2 - (6.4) 70.8
Subordinated liabilities 12.2 - (2.1) 10.1
Total wholesale funding 92.5 3.2
Customer deposits 482.7 - - 482.7
Repurchase agreements at amortised cost 37.8 - - 37.8
Total equity 45.9 - - 45.9
Funding sources 658.9 3.2
(1) The Group enters into derivatives and repurchase and reverse
repurchase agreements with various counterparties which are governed by
industry standard master netting agreements. The Group holds cash collateral
on its balance sheet in respect of these agreements. At 31 December 2025,
£2.0 billion (31 December 2024: £3.2 billion) was with bank counterparties,
of which £1.5 billion (31 December 2024: £2.8 billion) relates primarily to
the Global Markets business of Lloyds Bank Corporate Markets plc, whilst
£0.5 billion (31 December 2024: £0.4 billion) relates to the Insurance
business.
LIQUIDITY RISK (continued)
Analysis of term issuance in 2025
Sterling US dollar Euro Other Total
£bn £bn £bn currencies(1) £bn
£bn
Securitisation(2) 0.8 - 0.6 - 1.4
Covered bonds 1.0 - 0.4 - 1.4
Senior unsecured notes 0.8 3.7 2.5 0.7 7.7
Subordinated liabilities - 0.9 0.9 - 1.8
Additional tier 1 0.7 0.8 - - 1.5
Total issuance 3.3 5.4 4.4 0.7 13.8
(1) Includes Australian dollar, Swiss franc, Hong Kong dollar and
Japanese yen.
(2) Securitisation includes externally issued notes from significant
risk transfer transactions.
(
)
INTEREST RATE SENSITIVITY
The Group manages the risk to its earnings and capital from movements in
interest rates centrally by hedging the net liabilities which are stable or
less sensitive to movements in rates. The notional balance of the sterling
structural hedge stood at £244 billion at 31 December 2025 (31 December 2024:
£242 billion).
Illustrative cumulative impact of parallel shifts in interest rate curve(1)
The table below shows the banking book net interest income sensitivity to an
instantaneous parallel shift in interest rates. Sensitivities reflect shifts
in the interest rate curve. The actual impact will also depend on the
prevailing regulatory and competitive environment at the time. This
sensitivity is illustrative and does not reflect new business margin
implications and/or pricing actions today or in future periods, other than as
outlined. The sensitivity is greater on downward parallel shifts due to
pricing lags on deposit accounts.
The following assumptions have been applied:
• Instantaneous parallel shift in interest rate curve, including UK Bank
Rate
• Balance sheet remains constant
• Illustrative 50% pass-through on deposits and 100% pass-through on
assets, which could be different in practice
Year 1 Year 2 Year 3
£m
£m
£m
+50 basis points c.225 c.400 c.675
+25 basis points c.100 c.200 c.325
-25 basis points (c.125) (c.200) (c.350)
-50 basis points (c.275) (c.400) (c.675)
(1) Sensitivity based on modelled impact on banking book net interest
income, including the future impact of structural hedge maturities. Annual
impacts are presented for illustrative purposes only and are based on a number
of assumptions which are subject to change. Year 1 reflects the 12 months from
the 31 December 2025 balance sheet position.
STATUTORY INFORMATION
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
2024(1)
2025 £m
£m
Interest income 30,749 31,288
Interest expense (17,519) (19,011)
Net interest income 13,230 12,277
Fee and commission income 3,118 2,943
Fee and commission expense (1,334) (1,184)
Net fee and commission income 1,784 1,759
Net trading income 1,485 1,812
Insurance revenue 3,438 3,291
Insurance service expense (2,543) (2,733)
Net expense from reinsurance contracts held (139) (72)
Insurance service result 756 486
Net investment return on assets held to back insurance and investment 23,844 16,013
contracts
Net finance expense in respect of insurance and investment contracts (24,044) (16,278)
Net investment return and finance result in respect of insurance and (200) (265)
investment contracts
Other operating income 2,367 1,934
Other income 6,192 5,726
Total income 19,422 18,003
Operating expenses (11,966) (11,601)
Impairment (795) (431)
Profit before tax 6,661 5,971
Tax expense (1,904) (1,494)
Profit for the year 4,757 4,477
Profit attributable to ordinary shareholders 4,196 3,923
Profit attributable to other equity holders 463 498
Profit attributable to equity holders 4,659 4,421
Profit attributable to non-controlling interests 98 56
Profit for the year 4,757 4,477
Basic earnings per share 7.0p 6.3p
Diluted earnings per share 6.9p 6.2p
(1 ) Comparative periods have been represented for presentational
changes. See note 1.
(
)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
2024(1)
2025 £m
£m
Profit for the year 4,757 4,477
Other comprehensive income
Items that will not subsequently be reclassified to profit or loss:
Post-retirement defined benefit scheme remeasurements:
Remeasurements before tax (520) (768)
Current tax 50 50
Deferred tax 85 154
(385) (564)
Movements in revaluation reserve in respect of equity shares held at FVOCI:
Change in fair value 34 93
Deferred tax - -
34 93
Gains and losses attributable to own credit risk:
Losses before tax (126) (78)
Deferred tax 35 22
(91) (56)
(442) (527)
Items that may subsequently be reclassified to profit or loss:
Movements in revaluation reserve in respect of debt securities held at FVOCI:
Change in fair value 34 (53)
Current tax 1 1
Deferred tax (8) 14
27 (38)
Income statement transfers in respect of disposals (3) (7)
Deferred tax 1 2
(2) (5)
Income statement transfers in respect of impairment (1) (3)
24 (46)
Movements in cash flow hedge reserve:
Effective portion of changes in fair value taken to other comprehensive income 482 (2,577)
Deferred tax (136) 719
346 (1,858)
Net income statement transfers 1,869 2,597
Deferred tax (523) (728)
1,346 1,869
1,692 11
Movements in foreign currency translation reserve: Currency translation 54 (73)
differences (tax: £nil)
1,770 (108)
Total other comprehensive income (loss) for the year, net of tax 1,328 (635)
Total comprehensive income for the year 6,085 3,842
Total comprehensive income attributable to ordinary shareholders 5,524 3,288
Total comprehensive income attributable to other equity holders 463 498
Total comprehensive income attributable to equity holders 5,987 3,786
Total comprehensive income attributable to non-controlling interests 98 56
Total comprehensive income for the year 6,085 3,842
(1 ) Current tax and deferred tax impacts, previously shown in aggregate
for each reserve, are now presented alongside each line item. Comparatives are
represented on a consistent basis.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
At 31 Dec At 31 Dec
2025 2024
£m £m
Assets
Cash and balances at central banks 56,661 62,705
Financial assets at fair value through profit or loss 240,413 215,925
Derivative financial instruments 19,727 24,065
Loans and advances to banks 7,236 7,900
Loans and advances to customers 481,463 459,857
Reverse repurchase agreements 50,986 49,476
Debt securities 13,987 14,544
Financial assets at amortised cost 553,672 531,777
Financial assets at fair value through other comprehensive income 36,320 30,690
Goodwill and other intangible assets 8,593 8,188
Current tax recoverable 1,346 526
Deferred tax assets 3,990 5,005
Retirement benefit assets 2,695 3,028
Other assets 20,655 24,788
Total assets 944,072 906,697
Liabilities
Deposits from banks 5,779 6,158
Customer deposits 496,457 482,745
Repurchase agreements at amortised cost 38,570 37,760
Financial liabilities at fair value through profit or loss 27,909 27,611
Derivative financial instruments 16,132 21,676
Notes in circulation 2,118 2,121
Debt securities in issue at amortised cost 78,271 70,834
Liabilities arising from insurance and participating investment contracts 135,284 122,064
Liabilities arising from non-participating investment contracts 61,640 51,228
Other liabilities 20,945 25,918
Retirement benefit obligations 120 122
Current tax liabilities 52 45
Deferred tax liabilities 146 125
Provisions 2,888 2,313
Subordinated liabilities 9,894 10,089
Total liabilities 896,205 860,809
Equity
Share capital 5,889 6,062
Share premium account 18,797 18,720
Other reserves 10,744 8,827
Retained profits 6,291 5,912
Ordinary shareholders' equity 41,721 39,521
Other equity instruments 5,947 6,195
Total equity excluding non-controlling interests 47,668 45,716
Non-controlling interests 199 172
Total equity 47,867 45,888
Total equity and liabilities 944,072 906,697
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
Attributable to ordinary shareholders Other Non- Total
equity controlling £m
instruments interests
£m £m
Share Share premium(2) Other Retained Total
capital(2) £m reserves profits £m
£m £m £m
At 1 January 2025 6,062 18,720 8,827 5,912 39,521 6,195 172 45,888
Comprehensive income
Profit for the year - - - 4,196 4,196 463 98 4,757
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, net of tax - - - (385) (385) - - (385)
Movements in revaluation reserve in respect of FVOCI assets, net of tax:
Debt securities - - 24 - 24 - - 24
Equity shares - - 34 - 34 - - 34
Gains and losses attributable to own credit risk, net of tax - - - (91) (91) - - (91)
Movements in cash flow hedge reserve, net of tax - - 1,692 - 1,692 - - 1,692
Movements in foreign currency translation reserve, net of tax - - 54 - 54 - - 54
Total other comprehensive income (loss) - - 1,804 (476) 1,328 - - 1,328
Total comprehensive income(1) - - 1,804 3,720 5,524 463 98 6,085
Transactions with owners
Dividends - - - (2,000) (2,000) - (51) (2,051)
Distributions on other equity instruments - - - - - (463) - (463)
Issue of ordinary shares 47 77 - - 124 - - 124
Share buyback (220) - 220 (1,710) (1,710) - - (1,710)
Issue of other equity instruments - - - (7) (7) 1,511 - 1,504
Repurchases and redemptions of other equity instruments - - - - - (1,759) - (1,759)
Movement in treasury shares - - - 38 38 - - 38
Value of employee services - - - 211 211 - - 211
Changes in non-controlling interests - - - 20 20 - (20) -
Total transactions with owners (173) 77 220 (3,448) (3,324) (711) (71) (4,106)
Realised gains and losses on FVOCI equity shares - - (107) 107 - - - -
At 31 December 2025 5,889 18,797 10,744 6,291 41,721 5,947 199 47,867
(1) Total comprehensive income attributable to owners of the parent was
a surplus of £5,987 million.
(2) Share capital and share premium, previously presented in aggregate,
are shown separately. Comparatives have been represented on a consistent
basis.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) (continued)
Attributable to ordinary shareholders Other Non- Total
equity controlling £m
instruments interests
£m £m
Share Share premium(2) Other Retained Total
capital(2) £m reserves profits £m
£m £m £m
At 1 January 2024 6,358 18,568 8,508 6,790 40,224 6,940 201 47,365
Comprehensive income
Profit for the year - - - 3,923 3,923 498 56 4,477
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, net of tax - - - (564) (564) - - (564)
Movements in revaluation reserve in respect of FVOCI assets, net of tax:
Debt securities - - (46) - (46) - - (46)
Equity shares - - 93 - 93 - - 93
Gains and losses attributable to own credit risk, net of tax - - - (56) (56) - - (56)
Movements in cash flow hedge reserve, net of tax - - 11 - 11 - - 11
Movements in foreign currency translation reserve, net of tax - - (73) - (73) - - (73)
Total other comprehensive loss - - (15) (620) (635) - - (635)
Total comprehensive (loss) income(1) - - (15) 3,303 3,288 498 56 3,842
Transactions with owners
Dividends - - - (1,828) (1,828) - (83) (1,911)
Distributions on other equity instruments - - - - - (498) - (498)
Issue of ordinary shares 73 117 - - 190 - - 190
Share buyback (369) - 369 (2,011) (2,011) - - (2,011)
Redemption of preference shares - 35 (35) - - - - -
Issue of other equity instruments - - - (6) (6) 763 - 757
Repurchases and redemptions of other equity instruments - - - (316) (316) (1,508) - (1,824)
Movement in treasury shares - - - (173) (173) - - (173)
Value of employee services - - - 153 153 - - 153
Changes in non-controlling interests - - - - - - (2) (2)
Total transactions with owners (296) 152 334 (4,181) (3,991) (1,243) (85) (5,319)
Realised gains and losses on equity shares held at FVOCI - - - - - - - -
At 31 December 2024 6,062 18,720 8,827 5,912 39,521 6,195 172 45,888
(1) Total comprehensive income attributable to owners of the parent was
a surplus of £3,786 million.
(2) Share capital and share premium, previously presented in aggregate,
are shown separately. Comparatives have been represented on a consistent
basis.
CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
2025 2024
£m £m
Cash flows from operating activities
Profit before tax 6,661 5,971
Adjustments for:
Change in operating assets (40,689) (39,622)
Change in operating liabilities 35,403 23,603
Non-cash and other items 6,431 5,990
Tax paid (2,305) (1,305)
Tax refunded 200 970
Net cash provided by (used in) operating activities 5,701 (4,393)
Cash flows used in investing activities
Purchase of financial assets (19,762) (10,518)
Proceeds from sale and maturity of financial assets 14,309 7,062
Purchase of property, plant and equipment (5,071) (4,364)
Purchase of other intangible assets (1,252) (1,259)
Proceeds from sale of property, plant and equipment 1,560 1,505
Proceeds from sale of goodwill and other intangible assets - 62
Acquisition of businesses and joint ventures, net of cash acquired 27 (179)
Net cash used in investing activities (10,189) (7,691)
Cash flows used in financing activities
Dividends paid to ordinary shareholders (2,000) (1,828)
Distributions in respect of other equity instruments (463) (498)
Distributions in respect of non-controlling interests (51) (83)
Interest paid on subordinated liabilities (806) (622)
Proceeds from issue of subordinated liabilities 1,757 812
Proceeds from issue of other equity instruments 1,504 757
Proceeds from issue of ordinary shares 99 187
Share buyback (1,710) (2,011)
Repayment of subordinated liabilities (1,928) (819)
Repurchases and redemptions of other equity instruments (1,759) (1,824)
Change in stake of non-controlling interests - (2)
Net cash used in financing activities (5,357) (5,931)
Effects of exchange rate changes on cash and cash equivalents (378) (7)
Change in cash and cash equivalents (10,223) (18,022)
Cash and cash equivalents at beginning of year 70,816 88,838
Cash and cash equivalents at end of year 60,593 70,816
Cash and cash equivalents comprise cash and non-mandatory balances with
central banks and amounts due from banks with a maturity of less than three
months. Included within cash and cash equivalents at 31 December 2025 is
£16 million (31 December 2024: £23 million) of restricted cash and cash
equivalents held within the Group's long-term insurance and investments
operations, which is not immediately available for use in the business.
(
)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1: Basis of preparation and accounting policies
These condensed consolidated financial statements as at and for the year to 31
December 2025 have been prepared in accordance with the Listing Rules of the
Financial Conduct Authority (FCA) relating to Preliminary Announcements and
comprise the results of Lloyds Banking Group plc (the Company) together with
its subsidiaries (the Group). They do not include all of the information
required for full annual financial statements. Copies of the 2025 annual
report and accounts will be available from 18 February 2026, via the Group's
website and 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 the financial statements. In reaching this
assessment, the directors have considered the Group's capital and funding
position, the impact of climate change upon the Group's future performance and
the results from stress testing scenarios.
The Group's accounting policies are consistent with those applied by the Group
in its financial statements for the year ended 31 December 2024 and there
have been no changes in the Group's methods of computation.
Net investment return on assets held to back insurance and investment
contracts, previously shown within net trading income, is presented separately
on the face of the income statement. Net finance expense in respect of
insurance and investment contracts, previously shown outside total income in
the income statement, is included within other income as part of total income.
This change has been made to represent more clearly the impact of the Group's
insurance business on the results. Comparative periods are represented on a
consistent basis.
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 2025 will be
published on the Group's website and will be delivered to the Registrar of
Companies in accordance with section 441 of the Act. The statutory accounts
for the year ended 31 December 2024 have been filed with the Registrar of
Companies. The report of the auditor on those accounts was unqualified, did
not draw attention to any matters by way of emphasis and did not include a
statement under sections 498(2) or 498(3) of the Act.
Note 2: Critical accounting judgements and key sources of estimation
uncertainty
The preparation of the Group's financial statements in accordance with IFRS
Accounting Standards 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 these
condensed consolidated 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 critical accounting judgements and key sources of estimation uncertainty
made by management in applying the Group's accounting policies are unchanged
from 31 December 2024 and are set out in full in the Group's 2024 annual
report and accounts.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 3: Provisions
Regulatory and legal provisions
In the course of its business, the Group is engaged on a regular basis in
discussions with UK and overseas regulators and other governmental authorities
on a range of matters, including legal and regulatory reviews and, from time
to time, enforcement investigations (including in relation to compliance with
applicable laws and regulations, such as those relating to prudential
regulation, consumer protection, investment advice, employment, business
conduct, systems and controls, environmental, sustainability,
competition/anti-trust, tax, anti-bribery, anti-money laundering and
sanctions). Any matters discussed or identified during such discussions and
inquiries may result in, among other things, further inquiry or investigation,
other action being taken by governmental and/or regulatory authorities,
increased costs being incurred by the Group, remediation of systems and
controls, public or private censure, restriction of the Group's business
activities and/or fines. The Group also receives complaints and pre-action
correspondence in connection with its past conduct and claims brought or
threatened 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 of these matters, events or circumstances 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 full year to 31 December 2025
the Group charged a further £968 million in respect of legal actions and
other regulatory matters and the unutilised balance at 31 December 2025 was
£2,276 million (31 December 2024: £1,600 million). The most significant
items are outlined below.
Motor commission review
The Group recognised a further £800 million provision in the third quarter of
2025 following the FCA's announcement in October 2025 that it intends to
implement a motor finance commission redress scheme. As at 31 December 2025,
the total provision recognised is £1,950 million.
The Supreme Court judgment in Johnson v FirstRand Bank Limited in August 2025
found that there was an unfair relationship under s.140A of the Consumer
Credit Act (CCA). Following the Supreme Court judgment, the FCA published
Consultation Paper CP25/27 in October 2025 setting out detailed proposals for
a scheme (including their proposed basis) to redress unfair customer
relationships.
The increased provision reflects the increased likelihood of a higher number
of scheme cases (i.e. discretionary commission arrangements, commercial tie or
high commission arrangements) being eligible for redress, including those
dating back to 2007 and also the likelihood of a higher level of redress than
anticipated in the previous scenario-based provision; the FCA's proposed
redress calculation approach is less closely linked to customer loss than
previously anticipated. The Group has made representations to the FCA on a
number of aspects of the proposed scheme.
On 3 December 2025, the FCA announced that the pause on motor finance
complaints handling would be lifted on 31 May 2026 for complaints made in
relation to the subject matter of the scheme, and that this timeline may be
superseded in due course by the operational timetable to be set out in the
final scheme rules. The FCA also lifted the pause on handling motor finance
complaints in respect of leasing products on 5 December 2025. The Group
continues to receive new complaints as well as claims in the County Courts in
respect of motor finance commissions. A large number of those claims have been
stayed, as has a claim in the Competition Appeal Tribunal. In April 2026, the
Court of Appeal is expected to consider whether, in the context of motor
finance claims, it is possible for multiple unfair relationship claims to be
dealt with via one omnibus claim form.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
Note 3: Provisions (continued)
Motor commission review (continued)
In establishing the provision estimate, the Group has considered the potential
impact of the FCA's proposed redress scheme, as well as a number of possible
modifications to the scheme which might arise as a result of the consultation.
The Group will continue to assess developments and potential impacts following
the announcement by the FCA of the final scheme rules, which are expected by
the end of March 2026. The ultimate financial impact will be determined by a
number of factors still to be resolved, in particular the final scheme rules,
customer response rates, scheme operating costs, any further interventions and
any broader implications of legal proceedings and complaints. Given the
significant level of uncertainty in terms of the final outcome, the ultimate
financial impact could materially differ from the amount provided. The total
£1,950 million provision represents the Group's current best estimate of the
potential impact of the motor finance issue.
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.
All of the population have now had an initial decision, with a small number of
the populations' challenges to the Panel's initial decision ongoing through
the published 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 separate review by Dame Linda Dobbs. The
Group remains committed to implementing the recommendations in full.
Payment protection insurance (PPI)
The Group continues to challenge PPI litigation cases, with mainly operational
costs and legal fees associated with litigation activity recognised within
regulatory and legal provisions.
Customer claims in relation to insurance branch business in Germany
The Group continues to receive claims from customers in Germany relating to
policies issued by Clerical Medical Investment Group Limited (subsequently
renamed Scottish Widows Limited), with smaller numbers of claims received from
customers in Austria and Italy. Operational costs, redress and legal fees
associated with the claims are recognised within regulatory and legal
provisions.
Note 4: Dividends on ordinary shares and share buyback
The directors have recommended a final dividend, which is subject to approval
by the shareholders at the annual general meeting on 14 May 2026, of 2.43
pence per ordinary share (2024: 2.11 pence per ordinary share), equivalent to
£1,429 million, before the impact of any cancellations of shares under the
Company's buyback programme (2024: £1,271 million, following cancellations
of shares under the Company's 2025 buyback programme up to the record date),
which will be paid on 19 May 2026. These financial statements do not reflect
the recommended dividend. Shareholders who have already joined the dividend
reinvestment plan will automatically receive shares instead of the cash
dividend. Key dates for the payment of the recommended dividend are outlined
on page 61.
Share buyback
The Board has announced its intention to implement an ordinary share buyback
of up to £1.75 billion. This represents the return of capital, over and above
the Board's view of the current level of capital required to grow the
business, meet current and future regulatory requirements and cover
uncertainties. The share buyback programme will commence as soon as is
practicable and is expected to be completed, subject to continued authority
from the PRA, by 31 December 2026.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) continued
Note 5: Contingent liabilities
Interchange fees
With respect to multi-lateral interchange fees (MIFs), the Group is not a
party in the ongoing or threatened litigation which involves the card schemes
Visa and Mastercard or any settlements of such litigation. However, the Group
is a member/licensee of Visa and Mastercard and other card schemes.
Litigation has been 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 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.
Separate litigation was 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 Group) and Visa Inc, as part of Visa Inc's
acquisition of Visa Europe in 2016. These arrangements cap the maximum amount
of liability to which the Group may be subject and this cap is set at the cash
consideration received by the Group for the sale of its stake in Visa Europe
to Visa Inc in 2016. In 2016, the Group received Visa preference shares as
part of the consideration for the sale of its shares in Visa Europe. A release
assessment is carried out by Visa on certain anniversaries of the sale (in
line with the Visa Europe sale documentation) and as a result, some Visa
preference shares may be converted into Visa Inc Class A common stock from
time to time. Any such releases and any subsequent sales of Visa common stock
do not impact the contingent liability.
LIBOR and other trading rates
Certain Group companies, together with other panel banks, were previously
named as defendants in private lawsuits in the US in connection with their
roles as panel banks contributing to the setting of US dollar, Japanese yen
and Sterling London Interbank Offered Rate. Certain Group company dismissals
from these lawsuits remain subject to appeal.
Certain Group companies are also named as defendants in two Dutch class
actions, raising LIBOR manipulation allegations and one English claim relating
to the alleged mis-sale of interest rate hedging products which also includes
an allegation of LIBOR manipulation.
It is currently not possible to predict the scope and ultimate outcome on the
Group of any private lawsuits. As such, it is not practicable to provide an
estimate of any potential financial effect.
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 approximately £980 million (including
interest) and a reduction in the Group's deferred tax asset of approximately
£270 million. Following the First Tier Tax Tribunal outcome, the tax has
been paid to HMRC and recognised as a current tax asset, given the Group's
view that the tax liability will not ultimately fall due. The appeal has been
listed for hearing in March 2027, however final conclusion of the judicial
process may not be for several years.
There are a number of other open matters on which the Group is in discussions
with HMRC (including the tax treatment of costs relating to HBOS Reading),
none of which is expected to have a material impact on the financial position
of the Group.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) continued
Note 5: Contingent liabilities (continued)
Arena and Sentinel litigation claims
The Group is facing claims brought by (i) Arena Television Limited and Arena
Holdings Limited and (ii) Sentinel Broadcast Limited, alleging breach of duty
and/or mandate in connection with an external fraud. The Group is continuing
to defend the claims and has applied for permission to appeal the Court's
decision not to determine a central legal issue on a summary basis. At this
stage, 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 actions) 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 3 above.
KEY DATES
Annual Report and Accounts published 18 February 2026
Shares quoted ex-dividend for 2025 final dividend 9 April 2026
Record date for 2025 final dividend 10 April 2026
Final date for joining or leaving the final 2025 dividend reinvestment plan 27 April 2026
Q1 2026 Interim Management Statement 29 April 2026
Annual General Meeting 14 May 2026
Final 2025 dividend paid 19 May 2026
2026 Half-year results 30 July 2026
Q3 2026 Interim Management Statement 29 October 2026
BASIS OF PRESENTATION
This release covers the results of Lloyds Banking Group plc together with its
subsidiaries (the Group) for the year ended 31 December 2025. The financial
information contained in this document is unaudited and 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 19 February 2025 and were delivered to the
Registrar of Companies. 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.
Unless otherwise stated, income statement commentaries throughout this
document compare the year ended 31 December 2025 to the year ended 31 December
2024 and the balance sheet analysis compares the Group balance sheet as at 31
December 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 below. Unless otherwise
stated, commentary on pages 1 to 2 and pages 7 to 8 are given on an underlying
basis.
The Group will publish the 2025 annual report and accounts and Pillar 3
disclosures on 18 February 2026. A copy of the disclosures will be available
to view at: www.lloydsbankinggroup.com/investors/financial-downloads.html.
ALTERNATIVE PERFORMANCE MEASURES
The statutory results are supplemented with those presented on an underlying
basis and also with other alternative performance measures. This is to enable
a comprehensive understanding of the Group and facilitate comparison with
peers. The Group Executive Committee, which is the 'chief operating decision
maker' (as defined by IFRS 8 Operating Segments) for the Group, reviews the
Group's results on an underlying basis in order to assess performance and
allocate resources. Management uses underlying profit before tax, an
alternative performance measure, as a measure of performance and believes that
it provides important information for investors. This is because it allows for
a comparable representation of the Group's performance by removing the impact
of items such as volatility caused by market movements outside the control of
management.
In arriving at underlying profit, statutory profit before tax is adjusted for
the items below, to allow a comparison of the Group's underlying performance:
• Restructuring costs relating to merger, acquisition, integration and
disposal activities
• Volatility and other items, which includes the effects of certain asset
sales, the volatility relating to the Group's hedging arrangements and that
arising in the Insurance business, the unwind of acquisition-related fair
value adjustments and the amortisation of purchased intangible assets
The analysis of lending and expected credit loss (ECL) allowances is presented
on both a statutory and an underlying basis and a reconciliation between the
two is shown on page 38. On a statutory basis, purchased or originated
credit-impaired (POCI) assets include a fixed pool of mortgages that were
purchased as part of the HBOS acquisition at a deep discount to face value
reflecting credit losses incurred from the point of origination to the date of
acquisition. Over time, these POCI assets will run off as the loans redeem,
pay down or losses crystallise. The underlying basis assumes that the lending
assets acquired as part of a business combination were originated by the Group
and are classified as either Stage 1, 2 or 3 according to the change in credit
risk over the period since origination. Underlying ECL allowances have been
calculated accordingly. The Group uses the underlying basis to monitor the
creditworthiness of the lending portfolio and related ECL allowances. The
statutory basis also includes an accounting adjustment within UK Motor Finance
required under IFRS 9 to recognise a continuing involvement asset following
the partial derecognition of a component of the Group's finance lease book via
a securitisation in the third quarter of 2024.
The Group's alternative performance measures may not be comparable with
similarly titled measures used by other organisations and should not be viewed
in isolation, but instead should be regarded as supplementary information
alongside the statutory results. The exclusion of certain adjustments from
underlying profit may result in it being materially higher or lower than
statutory profit before tax, for example in the event of a large
restructuring, underlying profit would be higher than statutory profit before
tax.
ALTERNATIVE PERFORMANCE MEASURES (continued)
The Group calculates a number of metrics that are used throughout the banking
and insurance industries on an underlying basis. These metrics are not
necessarily comparable to similarly titled measures presented by other
companies and are not any more authoritative than measures presented in the
financial statements, however management believes that they are useful in
assessing the performance of the Group and in drawing comparisons between
years. A description of these measures and their calculation, is given below.
Alternative performance measures are used internally in the Group's Monthly
Management Report.
Asset quality ratio The underlying impairment charge or credit for the period in respect of loans
and advances to customers, both drawn and undrawn, expressed as a percentage
of average gross loans and advances to customers for the period. This measure
is useful in assessing the credit quality of the loan book.
Assets under administration (AuA) AuA represents all assets managed or administered by or on behalf of the
Group's subsidiaries. It includes assets that are reported within the Group
statutory balance sheet and those that are reported independently. It is a
useful measure as it impacts potential earnings arising from Asset Management
Charges and the relative size of the business.
Assets under administration (net flows) AuA (net flows) measures the net position of inflows and outflows to AuAs and
is a useful measure of growth in AuA. Inflows include net premiums and
deposits and other funds received from customers included in AuA. Outflows
include net claims, redemptions and surrenders under other funds withdrawn by
customers from AuA. Net flows exclude market movements.
Banking net interest margin Banking net interest income on customer and product balances in the banking
businesses as a percentage of average gross interest-earning banking assets
for the period. This measure is useful in assessing the banking profitability.
Cost:income ratio Total costs as a percentage of net income calculated on an underlying basis.
This measure is useful in assessing the profitability of the Group's
operations before the effects of the underlying impairment credit or charge.
General insurance combined ratio General insurance combined ratio is a key metric used in the insurance
industry to assess an insurer's profitability and operational efficiency, with
a ratio below 100% indicating profitability. It is calculated as incurred
claims, and earned commission or earned expenses, expressed as a percentage of
net insurance revenue.
Gross written premiums Gross written premiums is a measure of the volume of General Insurance
business written during the period. This measure is useful for assessing the
growth of the General Insurance business.
Life and pensions sales (present value of new business premiums) Present value of regular premiums plus single premiums from new business
written in the current period. This measure is useful for assessing sales in
the Group's life, pensions and investments insurance business.
Loan to deposit ratio Underlying loans and advances to customers divided by customer deposits.
Operating costs Operating expenses adjusted to remove the impact of operating lease
depreciation, remediation, restructuring costs, the amortisation of purchased
intangibles, the insurance gross up and other statutory items.
New business value This represents the value added to the contractual service margin and risk
adjustment at the initial recognition of new contracts, net of acquisition
expenses (derived from the statutory balance sheet movements) and any loss
component on onerous contracts (which is recognised directly in the income
statement) but does not include existing business increments.
ALTERNATIVE PERFORMANCE MEASURES (continued)
Pro forma CET1 ratio CET1 ratio adjusted for the effect of the full impact of the announced
ordinary share buyback programme. Where disclosed, the ratio is further
adjusted for the effect of any dividend paid up by the Insurance business in
the subsequent quarter prior to the publication of the financial results.
Return on tangible equity Profit attributable to ordinary shareholders, annualised and divided by
average tangible net assets. This measure is useful in providing a consistent
basis with which to measure the Group's performance.
Tangible net assets per share Net assets excluding intangible assets such as goodwill and
acquisition-related intangibles divided by the number of ordinary shares in
issue. This measure is useful in assessing shareholder value.
Underlying profit before impairment Underlying profit adjusted to remove the underlying impairment credit or
charge. This measure is useful in allowing for a comparable representation of
the Group's performance before the effects of the forward-looking underlying
impairment credit or charge.
Underlying profit Statutory profit before tax adjusted for certain items as detailed above. This
measure allows for a comparable representation of the Group's performance by
removing the impact of certain items including volatility caused by market
movements outside the control of management.
The following table reconciles the Group's income statement on a statutory
basis to its underlying basis equivalent:
Statutory basis Removal of: Underlying basis(A)
£m Restructuring, volatility Insurance £m
and other gross up(3)
items(1,2) £m
£m
2025
Net interest income 13,230 403 2 13,635 Underlying net interest income
Other income 6,192 (326) 254 6,120 Underlying other income
(1,454) - (1,454) Operating lease depreciation(4)
Total income 19,422 (1,377) 256 18,301 Net income
Operating expenses(4) (11,966) 1,493 (256) (10,729) Total costs
Impairment charge (795) - - (795) Underlying impairment charge
Profit before tax 6,661 116 - 6,777 Underlying profit
2024
Net interest income 12,277 578 (10) 12,845 Underlying net interest income
Other income 5,726 (375) 246 5,597 Underlying other income
(1,325) - (1,325) Operating lease depreciation(4)
Total income 18,003 (1,122) 236 17,117 Net income
Operating expenses(4) (11,601) 1,496 (236) (10,341) Total costs
Impairment charge (431) (2) - (433) Underlying impairment charge
Profit before tax 5,971 372 - 6,343 Underlying profit
(1) In the year ended 31 December 2025 this comprised the effects of
market and other volatility (gains of £72 million); the amortisation of
purchased intangibles (£86 million); restructuring costs (£46 million); and
fair value unwind (losses of £56 million).
(2) In the year ended 31 December 2024 this comprised the effects of
market and other volatility (losses of £144 million); the amortisation of
purchased intangibles (£81 million); restructuring costs (£40 million); and
fair value unwind (losses of £107 million).
(3) Under IFRS 17, expenses which are directly associated with the
fulfilment of insurance contracts are reported as part of the insurance
service result within statutory other income. On an underlying basis these
expenses remain within costs.
(4) Net of losses on disposal of operating lease assets of £10 million
(2024: profit of £59 million). Statutory operating expenses includes
operating lease depreciation. On an underlying basis operating lease
depreciation is included in net income.
ALTERNATIVE PERFORMANCE MEASURES (continued)
2025 2024
£m £m
Asset quality ratio(A)
Underlying impairment charge (£m) (795) (433)
Remove non-customer underlying impairment charge (credit) (£m) 1 (23)
Underlying customer related impairment charge (£m) (794) (456)
Loans and advances to customers (£bn) 481.5 459.9
Remove finance lease gross-up(1) (£bn) (0.4) (0.8)
Underlying loans and advances to customers(A) (£bn) 481.1 459.1
Add back expected credit loss allowance (drawn, statutory basis) (£bn) 3.0 3.2
Add back acquisition related fair value adjustments (£bn) 0.1 0.1
Underlying gross loans and advances to customers (£bn) 484.2 462.4
Averaging (£bn) (9.8) (3.5)
Average underlying gross loans and advances to customers (£bn) 474.4 458.9
Asset quality ratio(A) 0.17% 0.10%
Banking net interest margin(A)
Underlying net interest income(A) (£m) 13,635 12,845
Remove non-banking underlying net interest expense (£m) 515 469
Banking underlying net interest income (£m) 14,150 13,314
Underlying gross loans and advances to customers (£bn) 484.2 462.4
Adjustment for non-banking and other items:
Fee-based loans and advances (£bn) (11.3) (10.0)
Other (£bn) (0.1) 2.0
Interest-earning banking assets (£bn) 472.8 454.4
Averaging (£bn) (9.9) (3.2)
Average interest-earning banking assets(A) (£bn) 462.9 451.2
Banking net interest margin(A) 3.06% 2.95%
Cost:income ratio(A)
Operating costs(A) (£m) 9,761 9,442
Remediation (£m) 968 899
Total costs (£m) 10,729 10,341
Net income (£m) 18,301 17,117
Cost:income ratio(A) 58.6% 60.4%
(1) The finance lease gross up represents a statutory accounting
adjustment required under IFRS 9 to recognise a continuing involvement asset
following the partial derecognition of a component of the Group's finance
lease book via a securitisation in the third quarter of 2024.
ALTERNATIVE PERFORMANCE MEASURES (continued)
2025 2024
£m £m
General insurance combined ratio(A)
Insurance revenue 752 655
Adjustment for:
Allocation of reinsurance premiums (49) (47)
Net insurance revenue 703 608
Total incurred claims 376 344
Total expenses 217 221
Insurance service expense 593 565
Adjustment for:
Amounts recoverable from reinsurers for incurred claims (4) (6)
Other operating expenses 38 33
Total commission and expenses 627 592
General insurance combined ratio(A) 89% 97%
Operating costs(A)
Operating expenses 11,966 11,601
Adjustment for:
Operating lease depreciation (1,454) (1,325)
Remediation (968) (899)
Restructuring (46) (40)
Amortisation of purchased intangibles (86) (81)
Insurance gross up 256 236
Other 93 (50)
Operating costs(A) 9,761 9,442
Return on tangible equity(A)
Profit attributable to ordinary shareholders (£m) 4,196 3,923
Average ordinary shareholders' equity (£bn) 40.5 40.0
Remove average goodwill and other intangible assets (£bn) (7.8) (8.0)
Average tangible equity (£bn) 32.7 32.0
Return on tangible equity(A) 12.9% 12.3%
Underlying profit before impairment(A)
Statutory profit before tax (£m) 6,661 5,971
Remove impairment charge (£m) 795 431
Remove volatility and other items including restructuring (£m) 116 374
Underlying profit before impairment(A) (£m) 7,572 6,776
Life and pensions sales (present value of new business premiums)(A)
Premiums received (£m) 10,620 10,679
Investment sales (£m) 13,715 10,986
Effect of capitalisation factor (£m) 4,047 3,609
Effect of annualisation (£m) 526 401
Gross premiums from existing long-term business (£m) (7,861) (7,426)
Life and pensions sales (present value of new business premiums)(A) (£m) 21,047 18,249
ALTERNATIVE PERFORMANCE MEASURES (continued)
2025 2024
£m £m
New business value of insurance and participating investment contracts
recognised in the year(A)
Contractual service margin 18 61
Risk adjustment for non-financial risk 60 65
Losses recognised on initial recognition (92) (93)
(14) 33
Impacts of reinsurance contracts recognised in the year 46 39
Roll forward of new business to end of period including increments, single 48 35
premiums and transfers, of contracts initially recognised in the year
Amounts relating to contracts modified to add a drawdown feature and - 4
recognised as new contracts
New business value of insurance and participating investment contracts 80 111
recognised in the year(A)
( )
At 31 Dec At 31 Dec 2024
2025
Assets under administration(A)
Total insurance assets 217,155 197,135
Adjustment for:
Assets not backing customer products within AuA (5,483) (10,423)
Structured entities consolidated under IFRS 10 (12,756) (11,309)
Assets backing Insurance and annuity products not considered AuA (15,446) (14,849)
Investment products and share dealing business managed by Insurance, Pensions 99,087 89,858
and Investments, but not on the consolidated balance sheet
Other (2,934) (3,281)
Total customer assets under administration 279,623 247,131
Loan to deposit ratio(A)
Underlying loans and advances to customers(A) (£bn) 481.1 459.1
Customer deposits (£bn) 496.5 482.7
Loan to deposit ratio(A) 97% 95%
Pro forma CET1 ratio(A)
CET1 ratio 14.0% 14.2%
Insurance dividend and share buyback accrual(1) (0.8)% (0.7)%
Pro forma CET1 ratio(A) 13.2% 13.5%
Tangible net assets per share(A)
Ordinary shareholders' equity (£m) 41,721 39,521
Goodwill and other intangible assets (£m) (8,593) (8,188)
Deferred tax effects and other adjustments (£m) 366 350
Tangible net assets (£m) 33,494 31,683
Ordinary shares in issue, excluding own shares 58,799m 60,491m
Tangible net assets per share(A) 57.0p 52.4p
(1) Reflects a reduction for the impact of the announced ordinary share
buyback programme. 31 December 2024 also reflects an increase for the dividend
paid up by the Insurance business in February 2025. The CET1 and pro forma
CET1 ratios at 31 December 2025 both reflect an ordinary dividend received
from the Insurance business in December 2025, that would previously have been
received in February of the following year.
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 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
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
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: Lloyds Banking Group plc, The Mound, Edinburgh, EH1 1YZ
Registered in Scotland No. SC095000
LEI 549300PPXHEU2JF0AM85
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