20-F
Lloyds Banking Group plc (LYG)
As filed with the Securities and Exchange Commission on 13 February 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 20-F
☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended 31 December 2025
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-15246
Lloyds Banking Group plc
(previously Lloyds TSB Group plc)
(Exact name of Registrant as specified in its charter)
Scotland
(Jurisdiction of incorporation or organization)
33 Old Broad Street
London EC2N 1HZ
United Kingdom
(Address of principal executive offices)
Kate Cheetham, Company Secretary
Tel +44 (0) 20 7356 2104, Fax +44 (0) 20 7356 1808
33 Old Broad Street
London EC2N 1HZ
United Kingdom
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange<br><br>on which registered |
|---|---|---|
| Ordinary shares of nominal value 10 pence each, represented by American Depositary Shares ............. | The New York Stock Exchange | |
| $1,500,000,000 4.344% Subordinated Securities due in 2048 ...................................................................... | LYG48A | The New York Stock Exchange |
| $1,175,176,000 3.369% Subordinated Notes due 2046 ...................................................................................... | LYG46 | The New York Stock Exchange |
| $824,033,000 5.300% Subordinated Securities due 2045 .............................................................................. | LYG45 | The New York Stock Exchange |
| $1,250,000,000 4.943% Senior Callable Fixed-to-Fixed Rate Notes due 2036 .......................................... | LYG36A | The New York Stock Exchange |
| $1,250,000,000 6.068% Fixed Rate Reset Dated Subordinated Tier 2 Notes due 2036 .......................... | LYG36 | The New York Stock Exchange |
| $1,000,000,000 5.590% Senior Callable Fixed-to-Fixed Rate Notes due 2035 ......................................... | LYG35A | The New York Stock Exchange |
| $2,000,000,000 5.679% Senior Callable Fixed-to-Fixed Rate Notes due 2035 ......................................... | LYG35 | The New York Stock Exchange |
| $1,000,000.000 7.953% Fixed Rate Reset Subordinated Debt Securities due 2033 ................................. | LYG33A | The New York Stock Exchange |
| $1,250,000,000 4.976% Senior Callable Fixed-to-Fixed Rate Notes due 2033 .......................................... | LYG33 | The New York Stock Exchange |
| $300,000,000 Senior Callable Floating Rate Notes due 2031 ........................................................................ | LYG31B | The New York Stock Exchange |
| $1,500,000,000 4.425% Senior Callable Fixed-to-Fixed Rate Notes due 2031 ........................................... | LYG31A | The New York Stock Exchange |
| £500,000,000 1.985% Subordinated Notes due 2031 ....................................................................................... | LYG31 | The New York Stock Exchange |
| $1,500,000,000 5.721% Senior Callable Fixed-to-Fixed Rate Notes due 2030 ........................................... | LYG30 | The New York Stock Exchange |
| $500,000,000 Senior Callable Floating Rate Notes due 2029 ........................................................................ | LYG29B | The New York Stock Exchange |
| $1,250,000,000 4.818% Senior Callable Fixed-to-Fixed Rate Notes due 2029 ........................................... | LYG29A | The New York Stock Exchange |
| $1,250,000,000 5.871% Senior Callable Fixed-to-Fixed Rate Notes due 2029 ........................................... | LYG29 | The New York Stock Exchange |
| $750,000,000 Senior Callable Floating Rate Notes due 2028 ........................................................................ | LYG28H | The New York Stock Exchange |
| $1,250,000,000 5.087% Senior Callable Fixed-to-Fixed Rate Notes due 2028 .......................................... | LYG28G | The New York Stock Exchange |
| $300,000,000 Senior Callable Floating Rate Notes due 2028 ....................................................................... | LYG28F | The New York Stock Exchange |
| $1,500,000,000 5.462% Senior Callable Fixed-to-Fixed Rate Notes due 2028 .......................................... | LYG28E | The New York Stock Exchange |
| $1,000,000,000 3.750% Senior Callable Fixed-to-Fixed Rate Notes due 2028 .......................................... | LYG28D | The New York Stock Exchange |
| $1,250,000,000 4.550% Senior Notes due 2028 ................................................................................................ | LYG28C | The New York Stock Exchange |
| $1,500,000,000 4.375% Senior Notes due 2028 ................................................................................................ | LYG28B | The New York Stock Exchange |
| $1,750,000,000 3.574% Senior Notes due in 2028 (callable in 2027) ............................................................ | LYG28A | The New York Stock Exchange |
| $500,000,000 Senior Callable Floating Rate Notes due 2027 ........................................................................ | LYB27C | The New York Stock Exchange |
| $1,500,000,000 5.985% Senior Callable Fixed-to-Fixed Rate Notes due 2027 .......................................... | LYG27B | The New York Stock Exchange |
| $1,000,000,000 1.627% Senior Notes due 2027 .................................................................................................. | LYG27A | The New York Stock Exchange |
| $1,250,000,000 3.750% Senior Notes due 2027 ................................................................................................. | LYG27 | The New York Stock Exchange |
| $1,500,000,000 4.650% Subordinated Securities due 2026 ........................................................................... | LYG26 | The New York Stock Exchange |
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
6.625% Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Contingent Convertible Securities (Callable September 27, 2035 and every
five years thereafter)
7.500% Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Contingent Convertible Securities (Callable June 27, 2030 and every five
years thereafter)
6.750% Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Contingent Convertible Securities (Callable September 27, 2031 and every
five years thereafter)
8.000% Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Contingent Convertible Securities (Callable September 27, 2029 and on any
day until the First Reset Date on March 27, 2030 and on any day in the period six months before any subsequent Reset Date)
8.500% Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Contingent Convertible Securities (Callable March 27, 2028 and on any day
until the First Reset Date on September 27, 2028 and on any day in the period six months before any subsequent Reset Date)
8.500% Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Contingent Convertible Securities (Callable September 27, 2027 and on any
day until the First Reset Date on March 27, 2028 and on any day in the period six months before any subsequent Reset Date)
7.500% Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Contingent Convertible Securities
6.750% Callable Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Contingent Convertible Securities
The number of outstanding shares of each of Lloyds Banking Group plc’s classes of capital or common stock as of 31 December 2025 was:
| Ordinary shares, nominal value 10 pence each ......................................................................................................................................................................... | 58,885,743,602 |
|---|---|
| Preference shares, nominal value 25 pence each ..................................................................................................................................................................... | 296,140,832 |
| Preference shares, nominal value 25 cents each ...................................................................................................................................................................... | 86,617 |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☒ No ☐
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934.
Yes ☐ No ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth
company. See the definitions of “large accelerated filer”, “accelerated filer”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer ☒ Accelerated filer ☐ Non-Accelerated filer ☐ Emerging Growth Company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant
to Section 13(a) of the Exchange Act. ☐
The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its
Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting
firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b) ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
☐ U.S. GAAP
☒ International Financial Reporting Standards as issued by the International Accounting Standards Board
☐ Other
If ‘Other’ has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has
elected to follow:
Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes ☐ No ☐
Table of contents
| Introduction ........................................................................................................................................................................................................................................... | 1 | ||
|---|---|---|---|
| Forward-looking statements ............................................................................................................................................................................................................. | 2 | ||
| Enforceability of civil liabilities ......................................................................................................................................................................................................... | 2 | ||
| Part I ......................................................................................................................................................................................................................................................... | 3 | ||
| Item 1. | Identity of Directors, Senior Management and Advisers ............................................................................................................................. | 3 | |
| Item 2. | Offer Statistics and Expected Timetable ......................................................................................................................................................... | 3 | |
| Item 3. | Key Information ....................................................................................................................................................................................................... | 3 | |
| Item 4. | Information on the Company .............................................................................................................................................................................. | 4 | |
| Item 4A. | Unresolved Staff Comments ................................................................................................................................................................................ | 10 | |
| Item 5. | Operating and Financial Review and Prospects ............................................................................................................................................. | 11 | |
| Item 6. | Directors, Senior Management and Employees .............................................................................................................................................. | 23 | |
| Item 7. | Major Shareholders and Related Party Transactions .................................................................................................................................... | 25 | |
| Item 8. | Financial Information ............................................................................................................................................................................................. | 25 | |
| Item 9. | The Offer and Listing ............................................................................................................................................................................................. | 26 | |
| Item 10. | Additional Information .......................................................................................................................................................................................... | 26 | |
| Item 11. | Qualitative and Quantitative Disclosures About Market Risk ................................................................................................................... | 28 | |
| Item 12. | Description of Securities Other than Equity Securities ................................................................................................................................ | 29 | |
| Part II ....................................................................................................................................................................................................................................................... | 29 | ||
| Item 13. | Defaults, Dividend Arrearages and Delinquencies ......................................................................................................................................... | 29 | |
| Item 14. | Material Modifications to the Rights of Security Holders and Use of Proceeds .................................................................................... | 29 | |
| Item 15. | Controls and Procedures ....................................................................................................................................................................................... | 30 | |
| Item 16. | [Reserved] .................................................................................................................................................................................................................. | 32 | |
| Item 16A. | Audit Committee Financial Expert .................................................................................................................................................................... | 32 | |
| Item 16B. | Code of Ethics .......................................................................................................................................................................................................... | 32 | |
| Item 16C. | Principal Accountant Fees and Services ........................................................................................................................................................... | 32 | |
| Item 16D. | Exemptions from the Listing Standards for Audit Committees ................................................................................................................. | 32 | |
| Item 16E. | Purchases of Equity Securities by the Issuer and Affiliated Purchasers ................................................................................................... | 32 | |
| Item 16F. | Change in Registrant’s Certifying Accountant ................................................................................................................................................ | 32 | |
| Item 16G. | Corporate Governance .......................................................................................................................................................................................... | 32 | |
| Item 16H. | Mine Safety Disclosure ........................................................................................................................................................................................... | 32 | |
| Item 16I. | Disclosures Regarding Foreign Jurisdictions that Prevent Inspections ..................................................................................................... | 32 | |
| Item 16J. | Insider Trading Policies .......................................................................................................................................................................................... | 33 | |
| Item 16K. | Cybersecurity ............................................................................................................................................................................................................ | 33 | |
| Part III ...................................................................................................................................................................................................................................................... | 33 | ||
| Item 17. | Financial Statements ............................................................................................................................................................................................. | 33 | |
| Item 18. | Financial Statements ............................................................................................................................................................................................. | 33 | |
| Item 19. | Exhibits ...................................................................................................................................................................................................................... | 41 | |
| 1 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 | ||
| --- | --- |
Introduction
In this annual report on Form 20-F (the “Annual Report on Form 20-F”), references to the “Company” are to Lloyds Banking Group plc;
references to “Lloyds Banking Group”, “Lloyds” or the “Group” are to Lloyds Banking Group plc and its subsidiary and associated undertakings;
and references to “Lloyds Bank” are to Lloyds Bank plc. References to the “Financial Conduct Authority” or “FCA” and to the “Prudential
Regulation Authority” or “PRA” are to the United Kingdom (the UK) Financial Conduct Authority and the UK Prudential Regulation Authority.
Pursuant to Rule 12b-23(a) of the Securities Exchange Act of 1934, as amended, certain information required to be included in this Annual
Report on Form 20-F is being incorporated by reference from the Company’s statutory annual report for the year ended 31 December 2025,
including the consolidated financial statements of the Group included therein (the “Annual Report 2025”) as specified in this Annual Report on
Form 20-F. References to the “consolidated financial statements” or “financial statements” are to Lloyds Banking Group’s consolidated financial
statements incorporated by reference in this Annual Report on Form 20-F. Therefore, the information in this Annual Report on Form 20-F
should be read in conjunction with the Annual Report 2025, to the extent specified (see Exhibit 15.1). Any cross-references contained within
pages or sections that are incorporated by reference from the Annual Report 2025 are not also deemed incorporated by reference unless
indicated otherwise. With the exception of the items and pages so specified, the Annual Report 2025 is not being, and shall not be deemed to
be, filed as part of this Annual Report on Form 20-F.
The Group’s consolidated financial statements have been prepared in accordance with IFRS® Accounting Standards as issued by the
International Accounting Standards Board (IASB). Certain disclosures required by IFRS Accounting Standards have been included in sections
highlighted as “Audited” within Item 5 “Operating and Financial Review and Prospects” of this Annual Report on Form 20-F on pages 11 to 23.
Disclosures marked as audited indicate that they are within the scope of the audit of the financial statements taken as a whole; these
disclosures are not subject to a separate opinion.
The Group publishes its consolidated financial statements expressed in British pounds (“pounds Sterling”, “Sterling” or “£”), the lawful currency
of the UK. In this Annual Report on Form 20-F, references to “pence” and “p” are to one-hundredth of one pound Sterling; references to “US
Dollars”, “US$” or “$” are to the lawful currency of the United States; references to “cent” or “c” are to one-hundredth of one US Dollar;
references to “Euro” or “€” are to the lawful currency of the member states of the European Union (the “EU”) that have adopted a single
currency in accordance with the Treaty establishing the European Communities, as amended by the Treaty of European Union; references to
“Euro cent” are to one-hundredth of one Euro; references to “Australian Dollar”, “Australian $” or “A$” are to the lawful currency of Australia;
references to “Singapore Dollar”, “Singapore $” or “S$” are to the lawful currency of Singapore; and references to “Japanese Yen”, “Japanese ¥”
or “¥” are to the lawful currency of Japan. Solely for the convenience of the reader, this Annual Report on Form 20-F contains translations of
certain pounds Sterling amounts into US Dollars at specified rates. These translations should not be construed as representations by the Group
that the pounds Sterling amounts actually represent such US Dollar amounts or could be converted into US Dollars at the rate indicated or at
any other rate. Unless otherwise stated, the translations of pounds Sterling into US Dollars have been made at the Noon Buying Rate in New
York City for cable transfers in pounds Sterling as certified for customs purposes by the Federal Reserve Bank of New York (the Noon Buying
Rate) in effect on 31 December 2025. The Noon Buying Rate on 31 December 2025 differs from certain of the actual rates used in the
preparation of the consolidated financial statements, which are expressed in pounds Sterling, and therefore US Dollar amounts appearing in this
Annual Report on Form 20-F may differ significantly from actual US Dollar amounts which were translated into pounds Sterling in the
preparation of the consolidated financial statements in accordance with IFRS Accounting Standards.
| 2 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
|---|
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; risks related to new and emerging technologies, including artificial intelligence; 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.
For additional information about factors that could cause Group’s results to differ materially from those described in the forward-looking
statements, please see the Risk Factors for 2025 filed by the Company with the SEC on Form 6-K on 29 January 2026 (the “6-K Risk Factors”)
incorporated by reference in this Annual Report on Form 20-F (see Exhibit 15.2).
Enforceability of civil liabilities
The Company is a public limited company incorporated under the laws of Scotland. Most of the Company’s directors and executive officers and
certain of the experts named herein are residents of the UK. A substantial portion of the assets of the Company, its subsidiaries and such
persons, are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United
States upon all such persons or to enforce against them in US courts judgments obtained in such courts, including those predicated upon the
civil liability provisions of the federal securities laws of the United States. Furthermore, the Company has been advised by its solicitors that
there is doubt as to the enforceability in the UK, in original actions or in actions for enforcement of judgments of US courts, of certain civil
liabilities, including those predicated solely upon the federal securities laws of the United States.
| 3 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
|---|
Part I
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Item 3. Key Information
A.[Reserved]
B.Capitalization and indebtedness
Not applicable.
C.Reason for the offer and use of proceeds
Not applicable.
D.Risk factors
Set out below is a summary of certain risk factors which could affect the Company’s and the Group’s future results and prospects and may
cause them to differ from expected results materially. The factors listed below should not be regarded as a complete and comprehensive
statement of all potential risks and uncertainties that the Group’s businesses face.
Economic and financial risks
1.The Group’s businesses are subject to inherent and indirect risks arising from general macroeconomic conditions in the UK in particular,
but also in the Eurozone, the US, Asia and globally
2.The Group’s businesses are subject to inherent and perceived risks concerning liquidity and funding, particularly if the availability of
traditional sources of funding such as retail deposits or access to wholesale funding markets becomes more limited
3.A reduction in the Group’s credit rating(s) could materially adversely affect the Group’s results of operations, financial condition or
prospects
4.The Group’s businesses are inherently subject to the risk of market fluctuations, which could have a material adverse effect on the results
of operations, financial condition or prospects of the Group
5.Market conditions have resulted, and are expected to result in the future, in material changes to the estimated fair values of financial
assets of the Group, including negative fair value adjustments
6.The Group’s businesses are subject to inherent risks concerning borrower and counterparty credit quality which have affected and may
adversely impact the recoverability and value of assets on the Group’s balance sheet
7.The Group’s insurance business and defined benefit pension schemes are subject to insurance and market risks
8.The Group may be required to record Credit Value Adjustments, Funding Value Adjustments and Debit Value Adjustments on its
derivative portfolio, which could have a material adverse effect on its results of operations, financial condition or prospects
Regulatory and legal risks
1.The Group and its businesses are subject to substantial regulation and oversight. Adverse legal or regulatory developments could have a
material adverse effect on the Group’s business, results of operations, financial condition or prospects
2.The financial impact of legal or other proceedings and regulatory risks may be material and is difficult to quantify. Amounts eventually
paid may materially exceed the amount of provisions set aside to cover such risks, or existing provisions may need to be materially
increased in response to changing circumstances
3.The Group faces risks associated with its compliance with a wide range of laws and regulations
4.The Group is subject to the risk of having insufficient capital resources and/or not meeting liquidity requirements
5.The Group must comply with anti-money laundering, counter terrorist financing, anti-bribery, fraud and sanctions regulations
6.The Group is subject to resolution planning requirements
7.The Group is subject to regulatory actions which may be taken in the event of a bank or Group failure
8.Failure to manage the risks associated with changes in taxation rates or applicable tax laws, or misinterpretation of such tax laws, could
materially adversely affect the Group’s results of operations, financial condition or prospects
| 4 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
|---|
Part I continued
Business and operational risks
1.The Group is exposed to operational risks, including the failure to build sufficient resilience into business operations, and underlying
infrastructure and controls, as well as risks which may arise as a result of the failure of third party services
2.The Group is exposed to conduct risk
3.The Group’s business is subject to risks related to new and emerging technologies
4.The Group’s business is subject to risks related to cybercrime and technological failure
5.The Group is subject to the financial and non-financial risks related with ESG matters, for example, climate change and human rights
issues
6.The Group’s businesses are conducted in competitive environments, which are subject to ongoing regulatory scrutiny, and the Group’s
financial performance depends upon management’s ability to respond effectively to competitive pressures and any regulatory
developments
7.The Group could fail to attract, retain and develop high calibre talent
8.The Group may fail to execute its ongoing strategic change initiatives, and the expected benefits of such initiatives may not be achieved
on time or as planned
9.The Group may be unable to fully capture the expected value from acquisitions, which could materially and adversely affect its results of
operations, financial condition or prospects
10.The Group’s financial statements are based, in part, on assumptions and estimates
11.The Company may not have sufficient liquidity to meet its obligations, including its payment obligations with respect to its external debt
securities
12.The Company may not pay a dividend on its ordinary shares in any given financial/calendar year
13.Volatility in the price of the Company’s ordinary shares may affect the value of any investment in the Company
Reference is made to the 6-K Risk Factors for a description of the above risk factors which could affect the Group’s future results and may
cause them to differ from expected results materially. The factors discussed therein should not be regarded as a complete and comprehensive
statement of all potential risks and uncertainties that the Group’s businesses face. The 6-K Risk Factors should be read in conjunction with the
more detailed information contained in this Annual Report on Form 20-F, including as set forth in Item 4 - “Information on the Company” and
Item 5 - “Operating and Financial Review and Prospects”. For information on the Group’s risk management policies and procedures, see the
section titled “Risk Management” under Item 5 - “Operating and Financial Review and Prospects”.
Item 4. Information on the Company
A.History and development of the company
Lloyds Banking Group plc was incorporated as a public limited company and registered in Scotland under the UK Companies Act 1985 on
21 October 1985 with the registered number SC095000. Lloyds Banking Group plc’s registered office is Lloyds Banking Group plc, The Mound,
Edinburgh EH1 1YZ, Scotland, and its principal executive offices in the UK are located at Lloyds Banking Group plc, 33 Old Broad Street, London
EC2N 1HZ, telephone number +44 (0)20 7626 1500. Lloyds Banking Group maintains a website at www.lloydsbankinggroup.com.
The Group's origins date back to the 18th century with Taylors and Lloyds in Birmingham. Lloyds Bank plc was incorporated in 1865 and grew
through a number of mergers and acquisitions. In 1995, it acquired the Cheltenham and Gloucester Building Society.
TSB Group plc was formed in 1986 from the operations of four Trustee Savings Banks. By 1995, TSB had expanded into insurance, investment
management, and vehicle leasing. In 1995, TSB merged with Lloyds Bank plc to form Lloyds TSB Group plc.
In 2000, Lloyds TSB acquired Scottish Widows, enhancing its position in long-term savings and protection products. HBOS Group was created
in 2001 by merging Halifax plc and Bank of Scotland. On 18 September 2008, Lloyds TSB Group plc agreed to acquire HBOS plc, completing the
acquisition on 16 January 2009 and renaming itself Lloyds Banking Group plc.
Where you can find more information
The SEC maintains a website at www.sec.gov which contains, in electronic form, each of the reports and other information that the Group has
filed electronically with the SEC.
References herein to Lloyds Banking Group websites are textual references only and information on or accessible through such websites does
not form part of and is not incorporated into this Form 20-F.
B.Business overview
Lloyds Banking Group is a leading provider of financial services to individual and business customers in the UK. At 31 December 2025, Lloyds
Banking Group’s total assets were £944,072 million and Lloyds Banking Group had 60,061 employees (on a full-time equivalent basis). Lloyds
Banking Group’s market capitalisation at that date was £57,849 million. The Group reported a profit before tax for the year ended 31 December
2025 of £6,661 million, and its capital ratios at that date were 14.0% for common equity tier 1 capital, 16.2% for tier 1 capital and 18.9% for total
capital.
Lloyds Banking Group’s main business activities are retail and commercial banking and long-term savings, protection and investment and it
operates primarily in the UK. Services are offered through a number of well recognised brands including Lloyds Bank, Halifax, Bank of Scotland
and Scottish Widows, and through a range of distribution channels including the largest branch network and digital bank in the UK.
Reference is made to the “Consolidated income statement” on page 211 of the Annual Report 2025 for the Group’s income statement for each
of the last two years.
Reference is made to the section titled “Results of operations - 2023” under Item 5.A - “Operating results” on page 12.
Divisional information
The Group’s financial reporting segments are differentiated by the type of products provided and by whether the customers are individuals or
corporate entities. At 31 December 2025, the Group’s three primary operating divisions, which are also its financial reporting segments, were:
Retail; Commercial Banking; and Insurance, Pensions and Investments.
The Group Executive Committee, which is the chief operating decision maker for the Group (as defined by IFRS 8 Operating Segments), reviews
the Group’s internal reporting based around these segments (which reflect the Group’s organisational and management structures) in order to
assess performance and allocate resources; this reporting is on an underlying basis.
| 5 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
|---|
Part I continued
The aggregate total of the underlying basis segmental results constitutes a non-GAAP measure as defined in the SEC’s Regulation G.
Management uses aggregate underlying profit, a non-GAAP measure, as a measure of performance and believes that it provides important
information for investors because it is a comparable representation of the Group’s performance. Profit before tax is the comparable GAAP
measure to aggregate underlying profit. The results of the primary operating divisions are set out on the underlying basis in “Note 4: Segmental
analysis” on pages 228 to 232 of the Annual Report 2025, along with a reconciliation of this non-GAAP measure to its comparable GAAP
measure.
Reference is made to “Restructuring, volatility and other items” on page 56 of the Annual Report 2025 for performance commentary on
restructuring costs and market volatility and asset sales.
Reference is also made to “Volatility arising in the Insurance business” on page 59 of the Annual Report 2025 for information on insurance and
policyholder interests volatility.
Competitive environment
Reference is made to the “Our external environment” section on pages 10 to 13 of the Annual Report 2025 for information on the economy and
competitive environment.
Group structure and ring-fencing governance arrangements
Reference is made to the section titled “Group structure and ring-fencing governance arrangements” on page 73 of the Annual Report 2025.
Average balance sheet and interest income and expense
| 2025 | 2024 | 2023 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Average<br><br>balance<br><br>sheet<br><br>amount<br><br>£m | Interest<br><br>earned<br><br>£m | Average<br><br>yield<br><br>% | Average<br><br>balance<br><br>sheet<br><br>amount<br><br>£m | Interest<br><br>earned<br><br>£m | Average<br><br>yield<br><br>% | Average<br><br>balance<br><br>sheet<br><br>amount<br><br>£m | Interest<br><br>earned<br><br>£m | Average<br><br>yield<br><br>% | |
| Assets1 | |||||||||
| Financial assets at amortised cost: | |||||||||
| Loans and advances to banks | 70,780 | 2,657 | 3.75 | 75,135 | 3,508 | 4.67 | 100,631 | 4,172 | 4.15 |
| Loans and advances to customers | 473,647 | 23,756 | 5.02 | 456,763 | 23,242 | 5.09 | 452,222 | 20,419 | 4.52 |
| Reverse repurchase agreements | 49,058 | 2,336 | 4.76 | 48,343 | 2,685 | 5.55 | 40,004 | 2,044 | 5.11 |
| Debt securities | 13,712 | 658 | 4.80 | 15,251 | 779 | 5.11 | 12,433 | 559 | 4.50 |
| Financial assets at fair value through other<br><br>comprehensive income | 34,522 | 1,342 | 3.89 | 29,522 | 1,074 | 3.64 | 23,993 | 857 | 3.57 |
| Total average interest-earning assets of<br><br>banking book | 641,719 | 30,749 | 4.79 | 625,014 | 31,288 | 5.01 | 629,283 | 28,051 | 4.46 |
| Total average interest-earning financial<br><br>assets at fair value through profit or loss | 88,475 | 3,685 | 4.17 | 84,043 | 3,667 | 4.36 | 80,201 | 3,388 | 4.22 |
| Total average interest-earning assets | 730,194 | 34,434 | 4.72 | 709,057 | 34,955 | 4.93 | 709,484 | 31,439 | 4.43 |
| Allowance for impairment losses on<br><br>financial assets held at amortised cost | (3,182) | (3,461) | (4,732) | ||||||
| Non-interest earning assets | 202,622 | 190,269 | 174,725 | ||||||
| Total average assets and interest earned | 929,634 | 34,434 | 3.70 | 895,865 | 34,955 | 3.90 | 879,477 | 31,439 | 3.57 |
| Liabilities and shareholders’ funds1 | |||||||||
| Deposits by banks | 7,355 | 244 | 3.32 | 5,833 | 225 | 3.86 | 6,376 | 213 | 3.34 |
| Customer deposits | 376,795 | 9,257 | 2.46 | 356,294 | 10,132 | 2.84 | 342,305 | 7,148 | 2.09 |
| Repurchase agreements at amortised cost | 37,492 | 1,984 | 5.29 | 39,391 | 2,392 | 6.07 | 43,480 | 2,397 | 5.51 |
| Debt securities in issue at amortised cost2 | 72,671 | 5,299 | 7.29 | 74,171 | 5,493 | 7.41 | 79,038 | 4,253 | 5.38 |
| Lease liabilities | 1,136 | 28 | 2.46 | 1,490 | 31 | 2.08 | 1,486 | 30 | 2.02 |
| Subordinated liabilities | 10,344 | 707 | 6.83 | 10,541 | 738 | 7.00 | 10,549 | 712 | 6.75 |
| Total average interest-bearing liabilities of<br><br>banking book | 505,793 | 17,519 | 3.46 | 487,720 | 19,011 | 3.90 | 483,234 | 14,753 | 3.05 |
| Total average interest-bearing liabilities of<br><br>trading book | 29,413 | 1,690 | 5.75 | 27,232 | 1,700 | 6.24 | 23,513 | 1,445 | 6.15 |
| Total average interest-bearing liabilities | 535,206 | 19,209 | 3.59 | 514,952 | 20,711 | 4.02 | 506,747 | 16,198 | 3.20 |
| Non-interest-bearing customer accounts | 115,585 | 117,139 | 127,683 | ||||||
| Other non-interest-bearing liabilities | 231,633 | 216,300 | 197,431 | ||||||
| Total average non-interest-bearing<br><br>liabilities | 347,218 | 333,439 | 325,114 | ||||||
| Non-controlling interests, other equity<br><br>instruments and shareholders’ funds | 47,210 | 47,474 | 47,616 | ||||||
| Total average liabilities, average<br><br>shareholders’ funds and interest expense | 929,634 | 19,209 | 2.07 | 895,865 | 20,711 | 2.31 | 879,477 | 16,198 | 1.84 |
1The line items below are based on IFRS Accounting Standards terminology and include all major categories of average interest-earning assets and average interest-bearing liabilities.
2The impact of the Group’s hedging arrangements is included on this line.
| 6 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
|---|
Part I continued
| 2025 | 2024 | 2023 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Average interest-earning assets and net interest<br><br>income | Average<br><br>interest-<br><br>earning<br><br>assets<br><br>£m | Net<br><br>interest<br><br>income<br><br>£m | Net<br><br>interest<br><br>yield on<br><br>interest-<br><br>earning<br><br>assets<br><br>% | Average<br><br>interest-<br><br>earning<br><br>assets<br><br>£m | Net<br><br>interest<br><br>income<br><br>£m | Net<br><br>interest<br><br>yield on<br><br>interest-<br><br>earning<br><br>assets<br><br>% | Average<br><br>interest-<br><br>earning<br><br>assets<br><br>£m | Net<br><br>interest<br><br>income<br><br>£m | Net<br><br>interest<br><br>yield on<br><br>interest-<br><br>earning<br><br>assets<br><br>% |
| Banking business | 641,719 | 13,230 | 2.06 | 625,014 | 12,277 | 1.96 | 629,283 | 13,298 | 2.11 |
| Trading securities and other financial assets<br><br>at fair value through profit or loss | 88,475 | 1,995 | 2.25 | 84,043 | 1,967 | 2.34 | 80,201 | 1,943 | 2.42 |
| 730,194 | 15,225 | 2.09 | 709,057 | 14,244 | 2.01 | 709,484 | 15,241 | 2.15 |
Average balances are based on monthly averages.
The Group’s operations are predominantly UK-based and as a result an analysis between domestic and foreign operations is not provided.
Changes in net interest income – volume and rate analysis
The following table allocates changes in net interest income between volume, rate and their combined impact for 2025 compared with 2024
and for 2024 compared with 2023.
| 2025 compared with 2024<br><br>increase/(decrease) | 2024 compared with 2023<br><br>increase/(decrease) | |||||||
|---|---|---|---|---|---|---|---|---|
| Total<br><br>change<br><br>£m | Change in<br><br>volume<br><br>£m | Change in<br><br>rates<br><br>£m | Change in<br><br>rates and<br><br>volume<br><br>£m | Total<br><br>change<br><br>£m | Change in<br><br>volume<br><br>£m | Change in<br><br>rates<br><br>£m | Change in<br><br>rates and<br><br>volume<br><br>£m | |
| Interest income | ||||||||
| Financial assets at amortised cost: | ||||||||
| Loans and advances to banks | (851) | (203) | (688) | 40 | (664) | (1,057) | 526 | (133) |
| Loans and advances to customers | 514 | 859 | (333) | (12) | 2,823 | 205 | 2,592 | 26 |
| Reverse repurchase agreements | (349) | 40 | (383) | (6) | 641 | 426 | 178 | 37 |
| Debt securities | (121) | (79) | (47) | 5 | 220 | 127 | 76 | 17 |
| Financial assets at fair value through other<br><br>comprehensive income | 268 | 182 | 74 | 12 | 217 | 197 | 16 | 4 |
| Total banking book interest income | (539) | 799 | (1,377) | 39 | 3,237 | (102) | 3,388 | (49) |
| Total interest income on financial assets at<br><br>fair value through profit or loss | 18 | 194 | (167) | (9) | 279 | 163 | 111 | 5 |
| Total interest income | (521) | 993 | (1,544) | 30 | 3,516 | 61 | 3,499 | (44) |
| Interest expense | ||||||||
| Deposits by banks | 19 | 59 | (32) | (8) | 12 | (18) | 33 | (3) |
| Customer deposits | (875) | 583 | (1,379) | (79) | 2,984 | 292 | 2,586 | 106 |
| Repurchase agreements at amortised cost | (408) | (115) | (308) | 15 | (5) | (225) | 243 | (23) |
| Debt securities in issue at amortised cost | (194) | (111) | (85) | 2 | 1,240 | (262) | 1,600 | (98) |
| Lease liabilities | (3) | (8) | 6 | (1) | 1 | – | 1 | – |
| Subordinated liabilities | (31) | (13) | (18) | – | 26 | (1) | 27 | – |
| Total banking book interest expense | (1,492) | 395 | (1,816) | (71) | 4,258 | (214) | 4,490 | (18) |
| Total interest expense on trading and other<br><br>liabilities at fair value through profit or loss | (10) | 136 | (135) | (11) | 255 | 229 | 22 | 4 |
| Total interest expense | (1,502) | 531 | (1,951) | (82) | 4,513 | 15 | 4,512 | (14) |
Loan portfolio
Summary of loan loss experience
| 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | |
|---|---|---|---|
| Gross loans and advances to banks and customers and reverse repurchase agreements | 542,697 | 520,425 | 503,005 |
| Allowance for impairment losses | 3,012 | 3,192 | 3,725 |
| Ratio of allowance for credit losses to total lending (%) | 0.6 | 0.6 | 0.7 |
| 7 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 | ||
| --- | --- |
Part I continued
| Advances written off, net of recoveries | As a percentage of average lending | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | 2025<br><br>% | 2024<br><br>% | 2023<br><br>% | |||||||||
| Loans and advances to banks | – | – | – | – | – | – | ||||||||
| Loans and advances to customers | (1,096) | (1,029) | (1,115) | 0.2 | 0.2 | 0.2 | ||||||||
| Reverse repurchase agreements | – | – | – | – | – | – | ||||||||
| Total net advances written off | (1,096) | (1,029) | (1,115) | 0.2 | 0.2 | 0.2 | Allowance for expected credit losses | As a percentage of closing lending | ||||||
| --- | --- | --- | --- | --- | --- | --- | ||||||||
| 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | 2025<br><br>% | 2024<br><br>% | 2023<br><br>% | |||||||||
| Loans and advances to banks | 1 | 1 | 8 | – | – | 0.1 | ||||||||
| Loans and advances to customers | 3,011 | 3,191 | 3,717 | 0.6 | 0.7 | 0.8 | ||||||||
| Reverse repurchase agreements | – | – | – | – | – | – | ||||||||
| At 31 December | 3,012 | 3,192 | 3,725 | 0.6 | 0.6 | 0.7 |
Investment portfolio, maturities, deposits
Maturities and weighted average yields of interest-bearing securities
Financial assets at fair value through other comprehensive income and debt securities held at amortised cost
The weighted average yield for each range of maturities is calculated by dividing the annualised interest income prevailing at 31 December 2025
by the book value of securities held at that date.
| Maturing<br><br>within one year | Maturing after one<br><br>but within five years | Maturing after five<br><br>but within ten years | Maturing<br><br>after ten years | |||||
|---|---|---|---|---|---|---|---|---|
| Amount<br><br>£m | Average<br><br>yield<br><br>% | Amount<br><br>£m | Average<br><br>yield<br><br>% | Amount<br><br>£m | Average<br><br>yield<br><br>% | Amount<br><br>£m | Average<br><br>yield<br><br>% | |
| Financial assets at fair value through other<br><br>comprehensive income | 2,281 | 4.7 | 16,984 | 3.3 | 14,053 | 2.7 | 2,951 | 2.6 |
| Debt securities held at amortised cost | 2,962 | 3.3 | 3,956 | 4.1 | 4,383 | 4.1 | 2,691 | 2.3 |
Maturity analysis and interest rate sensitivity of loans and advances to banks and customers and reverse repurchase agreements
The following table analyses the maturity profile and interest rate sensitivity of loans by type on a contractual repayment basis at 31 December
- All amounts are before deduction of impairment allowances. Demand loans and overdrafts are included in the ‘maturing in one year or
less’ category.
| Maturing<br><br>in one<br><br>year<br><br>or less<br><br>£m | Maturing<br><br>after one<br><br>but within<br><br>five years<br><br>£m | Maturing<br><br>after five<br><br>but within<br><br>fifteen years<br><br>£m | Maturing<br><br>after<br><br>fifteen<br><br>years<br><br>£m | Total<br><br>£m | |
|---|---|---|---|---|---|
| Loans and advances to banks | 5,521 | 1,709 | 7 | – | 7,237 |
| Loans and advances to customers | 74,703 | 107,718 | 141,523 | 160,530 | 484,474 |
| Reverse repurchase agreements | 40,608 | 10,378 | – | – | 50,986 |
| Total loans | 120,832 | 119,805 | 141,530 | 160,530 | 542,697 |
| Of which: | |||||
| Fixed interest rate | 67,696 | 72,964 | 121,304 | 135,006 | 396,970 |
| Variable interest rate | 53,136 | 46,841 | 20,226 | 25,524 | 145,727 |
| 120,832 | 119,805 | 141,530 | 160,530 | 542,697 |
Deposits
The following tables show the details of the Group’s average customer deposits in each of the past three years.
| 2025 | 2024 | 2023 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Closing<br><br>balance<br><br>£m | Average<br><br>balance<br><br>£m | Average<br><br>rate<br><br>% | Closing<br><br>balance<br><br>£m | Average<br><br>balance<br><br>£m | Average<br><br>rate<br><br>% | Closing<br><br>balance<br><br>£m | Average<br><br>balance<br><br>£m | Average<br><br>rate<br><br>% | |
| Non-interest bearing demand deposits | 115,301 | 115,585 | – | 115,580 | 117,139 | – | 120,990 | 127,683 | – |
| Interest-bearing demand deposits | 260,408 | 257,144 | 2.04 | 250,967 | 253,033 | 2.83 | 251,411 | 254,426 | 2.14 |
| Other deposits | 120,748 | 119,651 | 3.35 | 116,198 | 103,261 | 2.89 | 98,995 | 87,879 | 1.95 |
| Total customer deposits | 496,457 | 492,380 | 1.88 | 482,745 | 473,433 | 2.14 | 471,396 | 469,988 | 1.52 |
| 8 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 | ||||||||
| --- | --- |
Part I continued
Uninsured deposits
The following table gives details of Lloyds Banking Group’s customer deposits which were not covered by any deposit protection scheme by
time remaining to maturity.
| 3 months<br><br>or less<br><br>£m | Over 3<br><br>months<br><br>but within<br><br>6 months<br><br>£m | Over 6<br><br>months<br><br>but within<br><br>12 months<br><br>£m | Over<br><br>12 months<br><br>£m | Total<br><br>£m | |
|---|---|---|---|---|---|
| At 31 December 2025 | 182,289 | 7,921 | 8,273 | 4,825 | 203,308 |
| At 31 December 2024 | 181,196 | 8,490 | 17,119 | 4,607 | 211,412 |
Total uninsured customer deposits have been calculated as the aggregate carrying value of the Group’s customer deposits less the insured
deposit amounts as determined for regulatory purposes by the Group’s licensed deposit-takers, being those deposits eligible for immediate
protection under deposit protection schemes (principally the Financial Services Compensation Scheme in the UK).
The maturity analysis for uninsured deposits has been estimated using the weighted-average maturity profile of the total customer deposits of
each of the Group’s licensed deposit-takers.
Recent developments
Share buyback
On 30 January 2026, the Group announced the launch of an ordinary share buyback of up to £1.75 billion, which is expected to be completed,
subject to continued authority from the PRA, by 31 December 2026.
Regulation
The below sets out a brief description of the Group’s primary regulators but does not include a description of all the regulations the Group may
be subject to.
Approach of the Financial Conduct Authority (“FCA”)
Under the Financial Services and Markets Act 2000, as amended by the Financial Services Act 2012 (“FSMA”), the FCA has a strategic objective
to ensure that the relevant markets function well. In support of this, the FCA has three operational objectives: to secure an appropriate degree
of protection for consumers; to safeguard the stability and reputation of the UK financial system and foster a competitive financial services
market that benefits consumers, alongside its secondary objective to facilitate the international competitiveness and growth of the UK
economy in the medium to long term.
The FCA Handbook sets out rules and guidance across a range of conduct issues with which financial institutions are required to comply
including high level principles of business and detailed conduct of business standards and reporting standards.
Approach of the Prudential Regulation Authority (“PRA”)
The PRA is part of the BoE (as defined below), with responsibility for prudential regulation and supervision. In 2025, the PRA revised its strategic
priorities to reflect the maturity of its policy and supervisory approaches, as well as to demonstrate its continued commitment to facilitate
innovation in key areas of its work. The PRA will continue to enhance its regulatory framework to maintain and ensure the safety and soundness
of the banking and insurance sectors and ensure continuing resilience. This strategy supports its statutory objectives: to promote the safety and
soundness of these firms and to contribute to the securing of an appropriate degree of protection for policyholders (for insurers). The PRA also
has two secondary objectives: to facilitate effective competition in the markets for services provided by PRA-authorised persons in carrying on
regulated activities; and to facilitate, subject to alignment with relevant international standards, the UK’s international competitiveness and
growth.
The PRA Rulebook sets out rules and guidance across a range of prudential matters which firms are required to comply with including areas such
as fundamental rules; ring-fencing requirements; reporting and prudential treatments. The PRA will change a firm’s business model if it judges
that mitigating risk measures are insufficient. Further to the UK implementation of CRD V a legal requirement has been established in the FSMA
that requires the PRA to authorise UK parent financial holding companies (“FHC”) or mixed financial holding companies (“MFHC”) that have at
least one bank or designated relevant investment firm as a subsidiary. As a result, Lloyds Banking Group plc (“the Company”) has received
authorisation to be recognised as the UK parent MFHC of the Group and is therefore responsible for ensuring prudential capital requirements
are applied on a consolidated basis.
Other bodies impacting the regulatory regime
The Bank of England (“BoE”)
The BoE has specific responsibilities in relation to financial stability, including: (i) ensuring the stability of the monetary system; (ii) oversight of
the financial system infrastructure, in particular payments systems in the UK and abroad; and (iii) maintaining a broad overview of the financial
system through its monetary stability role. The Financial Policy Committee (“FPC”) leads the BoE’s work on financial stability through the
identification and monitoring of risks that threaten the resilience of the UK financial system as a whole. It also has power to take action to
counter those risks, an example of such is unsustainable levels of debt and credit growth.
HM Treasury
HM Treasury is the government’s economic and finance ministry, setting the direction of the UK’s economic policy and working to achieve
strong and sustainable economic growth. Its responsibilities include financial services policy such as banking and financial services regulation,
financial stability, and ensuring competitiveness in the City of London financial markets; strategic oversight of the UK tax system; delivery of
infrastructure projects across the public sector; and ensuring the economy is growing sustainably.
| 9 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
|---|
Part I continued
UK Financial Ombudsman Service (“FOS”)
The FOS provides consumers with a free and independent service designed to resolve disputes where the customer is not satisfied with the
response received from the regulated firm. The FOS resolves disputes for eligible persons that cover most financial products and services
provided in (or from) the UK. The jurisdiction of the FOS extends to include firms conducting activities under the Consumer Credit Act 1974.
Although the FOS takes account of relevant regulation and legislation, its guiding principle is to resolve cases individually on merit on the basis
of what is fair and reasonable; in this regard, the FOS is not bound by law or even its own precedent. The final decisions made by the FOS are
legally binding on regulated firms who also have a requirement under the FCA rules to ensure that lessons learned as a result of determinations
by the FOS are effectively applied in future complaint handling.
British Bankers Resolution Service (“BBRS”)
The Company is also a member of the BBRS. BBRS is a non-profit organisation set up to resolve disputes between eligible larger small and
medium-sized enterprises and participating banks.
The Financial Services Compensation Scheme (“FSCS”)
The FSCS was established under the FSMA and is the UK’s statutory fund of last resort for customers of authorised financial services firms.
Companies within the Group are responsible for contributing to compensation schemes in respect of banks and other authorised financial
services firms that are unable to meet their obligations to customers. The FSCS can pay compensation to customers if a firm is unable, or likely
to be unable, to pay claims against it. The FSCS is funded by levies on firms authorised by the PRA and the FCA, including companies within the
Group.
The Payment System Regulator (“PSR”)
The PSR is an economic regulator for the payment systems industry, which was launched in April 2015. Payment systems form a vital part of the
UK’s financial system – they underpin the services that enable funds to be transferred between people and institutions. The purpose of PSR is to
make payment systems work well for those that use them. In December 2024, HM Treasury and the boards of both the FCA and PSR confirmed
the joining up of the managing director of the PSR with the executive director for payments and digital assets of the FCA role to ensure both
regulators collectively deliver HM Treasury’s new National Payments Vision in advancing an innovative, safe and competitive UK payments
sector. In September 2025, the Government consulted on its proposals to consolidate the functions of the PSR primarily into the FCA. This will
help streamline the regulatory environment and improve coordination and clarity on regulatory responsibilities.
UK Information Commissioner’s Office (“ICO”)
The ICO is the UK’s independent authority set up to uphold information rights in the public interest, promoting openness by public bodies and
data privacy for individuals. The ICO is responsible for overseeing implementation of the Data Protection Act 2018 which enshrines the General
Data Protection Regulation. This Act regulates, among other things, the lawful use of data relating to individual customers.
Competition regulation
UK Competition and Markets Authority (“CMA”)
The objective of the CMA is to promote competition to ensure that markets work well for consumers, businesses and the economy. Through its
five strategic objectives (promoting effective competition; championing consumers; helping government deploy tailored pro-competition
interventions to support growth, innovation and investment-related policies; fostering a regulatory landscape that attracts investment and
instils business confidence; and, prioritising UK interests) the CMA impacts the banking sector in a number of ways, including with its powers to
investigate and prosecute a number of criminal offences under competition law. In addition, the CMA is the lead enforcer for unfair contract
terms under the Consumer Rights Act 2015, which replaced the Unfair Terms in Consumer Contracts Regulations 1999.
The CMA has competition law powers which apply across the whole economy. Sectoral regulators such as the FCA may exercise the
competition law powers to enforce the prohibitions on anti-competitive agreements and on abuse of a dominant position, and to make market
investigation references, concurrently with the CMA in those sectors for which they have responsibility. In July 2019, the CMA signed a
memorandum of understanding with the FCA and the PSR, which sets out the arrangements for allocating cases, sharing information, dealing
with confidentiality constraints, and pooling resources in relation to their concurrent objectives to promote competition.
The CMA has launched a consultation to review existing market remedies to assess whether they remain necessary or proportionate. The scale
of the review represents a material consolidation of legacy obligations. If remedies are amended or removed, this could reduce ongoing
regulatory and operational burden.
The Digital Markets, Competition and Consumers Act 2024 introduced a new targeted and proportionate regulatory regime to address concerns
around competition in the digital industry.
EU regulation
The Group maintains a deposit-taking subsidiary in Berlin, Germany and an investment firm subsidiary in Frankfurt, Germany. The Berlin-based
subsidiary (Lloyds Bank GmbH) has a branch in the Netherlands. The Group also maintains a separate branch of Lloyds Bank plc in Berlin. All of
these entities are subject to EU and German regulations and are supervised by Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and
Deutsche Bundesbank. The Group maintains an additional entity for Scottish Widows Europe in Luxembourg, which is regulated by
Commissariat aux Assurances (CAA).
See also “Regulatory and Legal Risks – The Group faces risks associated with its compliance with a wide range of laws and regulations” and
“Regulatory and Legal Risks – The Group is subject to resolution planning requirements” on pages 10 and 13 respectively of the 6-K Risk Factors.
US regulation
Lloyds Bank Corporate Markets plc (“LBCM”) maintains a branch in the US and Lloyds Bank maintains a representative office in the US. As a
result, the Company and its subsidiaries doing business or conducting activities in the US are subject to oversight by the Federal Reserve Board.
The LBCM branch is also subject to regulation by the New York State Department of Financial Services.
Each of the Company and LBCM is treated as a bank holding company under the US Bank Holding Company Act of 1956 (“BHC Act”) and has
elected to be a financial holding company. Financial holding companies may engage in a broader range of financial and related activities than
are permitted to bank holding companies that do not maintain financial holding company status, including underwriting and dealing in all types
of securities. A financial holding company and its depository institution subsidiaries must meet certain capital ratios and be deemed to be “well
managed” for purposes of the Federal Reserve Board’s regulations. A financial holding company’s direct and indirect activities and investments
in the US are limited to those that are “financial in nature” or “incidental” or “complementary” to a financial activity, as defined in section
4(k)(4) of the BHC Act or determined by the Federal Reserve Board.
Bank holding companies and financial holding companies are also subject to approval requirements in connection with certain acquisitions or
investments. For example, the Group is required to obtain the prior approval of the Federal Reserve Board before acquiring, directly or
indirectly, the ownership or control of more than 5% of any class of the voting shares of any US bank or bank holding company.
| 10 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
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Part I continued
The Group’s US broker dealer, Lloyds Securities Inc. (LSI), is subject to regulation and supervision in the US and is a member of the Financial
Industry Regulatory Authority (FINRA) and is thus subject to requirements and oversight related to areas including sales methods, trade
practices, use and safekeeping of customers’ funds and securities, capital structure, recordkeeping, conduct of directors, officers and employees
and other matters pertinent to its securities business.
LBCM is registered as a swap dealer and as such, is subject to regulation and supervision by the Commodity Futures Trading Commission
(“CFTC”) with respect to certain of its swap activities and registration with the National Futures Association (“NFA”), CFTC and NFA rules and
regulations include requirements related to risk management practices, trade documentation and reporting, business conduct and
recordkeeping, among others.
A major focus of US governmental policy relating to financial institutions in recent years has been combating money laundering and terrorist
financing and enforcing compliance with US economic sanctions, with serious legal and reputational consequences for any failures arising in
these areas. The Group engages, or has engaged, in a limited amount of business with counterparties in certain countries which the US State
Department designated during the reporting period as state sponsors of terrorism, including Iran, Syria and Cuba. At 31 December 2025, the
Group did not believe that the Group’s business activities relating to countries designated as state sponsors of terrorism in 2025 were material
to its overall business.
The Group estimates that the value of its business in respect of such states represented less than 0.01% of the Group’s total assets and, for the
year ended December 2025, the Group believes that the Group’s revenues from all activities relating to such states were less than 0.001% of its
total income, net of insurance claims and changes in insurance and investment contract liabilities. This information has been compiled from
various sources within the Group, including information manually collected from relevant business units, and this has necessarily involved some
degree of estimate and judgement.
Disclosure pursuant to Section 219 of The Iran Threat Reduction and Syria and Human Rights Act (“ITRA”)
Since the introduction of an enhanced financial sanctions policy, the Group has been proactive in reducing its dealings with Iran and Syria, and
individuals and entities associated with these countries. There remain a small number of historic business activities which the Group has not yet
been able to terminate for legal or contractual reasons.
Pursuant to ITRA Section 219, the Group notes that during 2025, its non-US affiliates, Lloyds Bank plc and Bank of Scotland plc, received or
made payments involving entities owned or controlled by the Government of Iran as defined under section 560.304 of title 31, Code of Federal
Regulations, and/or designated under Executive Order 13382 or 13224. In all cases, the payment was permitted under UK sanctions legislation,
specific authority was sought from and granted by HM Treasury, the UK’s Competent Authority to provide such authorisations or the
payment(s) were credited to a blocked account, held in the name of the entity, in accordance with UK sanctions legislation.
Gross revenues from these activities were approximately £7,600. Net profits from these activities were approximately £7,600.
The Group’s business activities, being reported below, are conducted in compliance with applicable laws in respect of Iran and Syria sanctions
and, except as noted below, the Group intends to continue these historic activities until it is able to legally terminate the contractual
relationships or to maintain/ manage them in accordance with prevailing sanctions obligations. The nature of these activities is as follows:
1.Limited and infrequent payments made to and received from entities directly or indirectly linked to the Government of Iran. Such payments
are only made if they comply with UK regulation and legislation and/or licence from the US Treasury Department’s Office of Foreign Assets
Control.
2.Payments made to a blocked account in the name of Commercial Bank of Syria related to historic guarantees, entered into by the Group
between 1997 and 2008, the majority of which relate to Bail Bonds for vessels. The Commercial Bank of Syria’s designation under Executive
Order 13382 ended on 30 June 2025.
3.Sums paid out from a pension trust fund to UK nationals resident in the UK who were employees of a company indirectly owned or
controlled by an entity designated under Executive Order 13382 that is also owned or controlled by the Government of Iran.
C.Organizational structure
The Company is the holding company of the Lloyds Banking Group, which consists of the Company and its subsidiaries. The following are the
Group’s principal subsidiaries; the list includes all significant subsidiaries, and certain other subsidiaries as noted below, of the Company at 31
December 2025.
| Name of subsidiary undertaking | Country of<br><br>registration/<br><br>incorporation | Percentage of equity<br><br>share capital and<br><br>voting rights held | Nature of business | Registered office |
|---|---|---|---|---|
| Lloyds Bank plc | England | 100% | Banking and financial services | 25 Gresham Street, London EC2V 7HN |
| Scottish Widows Limited | England | 100%* | Life assurance | 25 Gresham Street, London EC2V 7HN |
| HBOS plc | Scotland | 100%* | Holding company | The Mound, Edinburgh EH1 1YZ |
| Bank of Scotland plc | Scotland | 100%* | Banking and financial services | The Mound, Edinburgh EH1 1YZ |
| Lloyds Bank Corporate Markets plc1 | England | 100% | Banking and financial services | 25 Gresham Street, London EC2V 7HN |
| LBG Equity Investments Limited1 | England | 100% | Financial services | 25 Gresham Street, London EC2V 7HN |
*Indirect interest
1Subsidiary that does not meet the quantitative threshold for significance.
The principal area of operation for each of the above subsidiaries is the United Kingdom.
D.Property, plant and equipment
Not applicable.
Item 4A. Unresolved Staff Comments
Not applicable.
| 11 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
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Part I continued
Item 5. Operating and Financial Review and Prospects
A.Operating results
Reference is made to the sections titled:
•“Our external environment” on pages 10 to 13 of the Annual Report 2025;
•Future developments in relation to the Group’s IFRS Accounting Standard reporting are discussed in “Note 1: Basis of preparation” on page
218 of the Annual Report 2025;
•“Note 3: Critical accounting judgements and key sources of estimation uncertainty” on page 228 of the Annual Report 2025; and
•“Note 19: Derivative financial instruments” on pages 269 to 271 of the Annual Report 2025.
Results of operations – 2025 and 2024
Income statement
Reference is made to the “Consolidated income statement” on page 211 of the Annual Report 2025 for the Group’s income statement for each
of the last two years.
Net interest income
| 2025 | 2024 | Change | |
|---|---|---|---|
| Net interest income (£m) | 13,230 | 12,277 | 8 |
| Average interest-earning assets (£m) | 641,719 | 625,014 | 3 |
| Average rates: | |||
| Gross yield on average interest-earning assets of the banking book1 (%) | 4.79 | 5.01 | (22)bp |
| Interest spread2 (%) | 1.33 | 1.11 | 22bp |
| Net interest margin3 (%) | 2.06 | 1.96 | 10bp |
1Gross yield is the rate of interest earned on average interest-earning assets of the banking book.
2Interest spread is the difference between the rate of interest earned on average interest-earning assets of the banking book and the rate of interest paid on average interest-bearing
liabilities of the banking book.
3The net interest margin represents the interest spread together with the contribution of interest-free liabilities. It is calculated by expressing net interest income as a percentage of
average interest-earning assets of the banking book.
Net interest income in the year of £13,230 million was up 8%, compared to £12,277 million in 2024, reflecting higher average interest-earning
assets and a higher margin. The net interest margin was 10 basis points higher at 2.06% (2024: 1.96%).
Average interest-earning assets of the banking book were £16,705 million higher at £641,719 million (2024: £625,014 million) primarily reflecting
an increase in average loans and advances to customers partially offset by a decrease in average loans and advances to banks.
Other income
Other income includes net fee and commission income, net trading income, insurance service result, net investment return and finance result in
respect of insurance and investment contracts and other operating income. For further detail on each of these items, reference is made to
“Note 6: Net fee and commission income” on pages 233 to 234 of the Annual Report 2025, “Note 7: Net trading income” on page 234 of the
Annual Report 2025, “Note 8: Insurance business (A)” on page 235 of the Annual Report 2025, “Note 8: Insurance business (B)” on pages 235 to
236 of the Annual Report 2025 and “Note 9: Other operating income” on page 242 of the Annual Report 2025.
Reference is also made to the “Statutory results” section on page 53 of the Annual Report 2025 for a description of the Group’s other income
result.
Operating expenses
For further detail on operating expenses, reference is made to “Note 10: Operating expenses” on page 242 of the Annual Report 2025.
Reference is also made to the “Statutory results” section on page 53 of the Annual Report 2025 for a description of the Group’s operating
expenses result.
Impairment
For further detail on the impairment result, reference is made to “Note 14: Impairment” on pages 251 to 252 of the Annual Report 2025.
Reference is also made to the “Statutory results” section on page 53 of the Annual Report 2025 for a description of the Group’s impairment
result.
Tax
For further detail on the tax result, reference is made to “Note 15: Tax” on pages 252 to 254 of the Annual Report 2025.
Reference is also made to the “Statutory results” section on page 53 of the Annual Report 2025 for a description of the Group’s tax result.
Balance sheet
Reference is made to the “Consolidated balance sheet” on page 213 of the Annual Report 2025 for the Group’s balance sheet for each of the
last two years.
Reference is also made to the “Statutory results” section on page 53 of the Annual Report 2025 for a description of material movements within
the Group’s consolidated balance sheet.
Capital
For further detail on the capital position, reference is made to:
•“Capital risk” on pages 144 to 145 and pages 147 to 150 of the Annual Report 2025; and
•“Capital returns” and “Minimum requirement for own funds and eligible liabilities (MREL)” on pages 145 and 146 of the Annual Report 2025
| 12 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
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Part I continued
Off-balance sheet arrangements
A table setting out the amounts and maturities of Lloyds Banking Group’s other commercial commitments and guarantees at 31 December 2025
is included in the section titled “Maturities of contingent liabilities, commitments and financial guarantees (audited)” on page 186 of the Annual
Report 2025. These commitments and guarantees are not included in Lloyds Banking Group’s consolidated balance sheet.
Lending commitments are agreements to lend to customers in accordance with contractual provisions; these are either for a specified period or,
as in the case of credit cards and overdrafts, represent a revolving credit facility which can be drawn down at any time, provided that the
agreement has not been terminated. The total amounts of unused commitments do not necessarily represent future cash requirements, in that
commitments often expire without being drawn upon.
Lloyds Banking Group’s banking businesses are also exposed to liquidity risk through the provision of securitisation facilities to certain corporate
customers. At 31 December 2025, Lloyds Banking Group offered securitisation facilities to its corporate and financial institution client base
through its conduit securitisation programme, Cancara. This is funded in the global asset-backed commercial paper market. The assets and
obligations of the programme are included in Lloyds Banking Group’s consolidated balance sheet. Lloyds Banking Group provides short-term
asset-backed commercial paper liquidity support facilities on commercial terms to the programme, for use should the issuer be unable to roll
over maturing commercial paper or obtain alternative sources of funding.
Details of securitisations and other special purpose entity arrangements entered into by Lloyds Banking Group are provided in “Note 26: Debt
securities in issue” on page 283 of the Annual Report 2025 and “Note 37: Structured entities” on pages 292 to 293 of the Annual Report 2025.
The successful development of Lloyds Banking Group’s ability to securitise its own assets has provided a mechanism to tap a well established
market, thereby diversifying Lloyds Banking Group’s funding base.
Within Lloyds Banking Group’s insurance businesses, the principal sources of liquidity are premiums received from policyholders, charges levied
upon policyholders, investment income and the proceeds from the sale and maturity of investments. The investment policies followed by Lloyds
Banking Group’s life assurance companies take account of anticipated cash flow requirements including by matching the cash inflows with
projected liabilities where appropriate. Cash deposits and highly liquid government securities are available to provide liquidity to cover any
higher than expected cash outflows.
Contractual cash obligations
For detail on contractual cash obligations in respect of subordinated liabilities and their maturity profile, reference is made to “Note 29:
Subordinated liabilities” on pages 285 to 286 of the Annual Report 2025 and “Note 18: Maturities of assets and liabilities” on pages 267 to 268
of the Annual Report 2025.
For detail on outstanding debt securities in issue and their maturity profile, reference is made to “Note 18: Maturities of assets and liabilities” on
pages 267 to 268 of the Annual Report 2025.
For detail on the Group’s lease liabilities, reference is made to “Note 27: Other liabilities” on page 283 of the Annual Report 2025.
For detail on the Group’s capital commitments, reference is made to “Capital commitments” within “Note 36: Contingent liabilities,
commitments and financial guarantees” on pages 291 and 292 of the Annual Report 2025.
The Group also had other purchase obligations totalling £4,858 million.
At 31 December 2025, the principal sources of potential liquidity for Lloyds Banking Group plc were dividends received from its directly owned
subsidiary companies, particularly Lloyds Bank plc and Scottish Widows Group Limited, and loans from this and other Lloyds Banking Group
companies. The ability of Lloyds Bank to pay dividends going forward, or for Lloyds Bank or other Lloyds Banking Group companies to make
loans to the Company depends on a number of factors, including their own regulatory capital requirements, distributable reserves and financial
performance.
Results of operations – 2023
The Group’s results for the year ended 31 December 2023, and a discussion of the results for the year ended 31 December 2024 compared to
those for the year ended 31 December 2023, were included in the Annual Report on Form 20-F for the year ended 31 December 2024, filed with
the SEC on 20 February 2025, the discussion for which is hereby incorporated by reference into this document.
| 13 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
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Part I continued
Divisional information
Please refer to the “Divisional information” section under Item 4.B - “Business overview” on page 4.
Divisional results
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.
Reference is made to “Note 4: Segmental analysis” on pages 228 to 232 of the Annual Report 2025 for a summary of the Retail division’s
underlying profit before tax.
•Underlying profit increased by £164 million to £3,356 million in 2025 compared to £3,192 million in 2024, driven by higher underlying net
interest income and higher underlying other income, offset by increased operating lease depreciation, higher underlying operating costs,
higher remediation and a higher underlying impairment charge
•Underlying net interest income increased by £707 million to £9,637 million in 2025 compared to £8,930 million in 2024, driven by structural
hedge earnings and higher unsecured loans balances, partially offset by continued mortgage refinancing and deposit churn headwinds
•Underlying other income increased £282 million to £2,636 million in 2025 compared to £2,354 million in 2024, driven by fleet growth and
higher average rental values in UK Motor Finance alongside strength in current account and credit card income
•Operating lease depreciation increased £126 million to £1,445 million in 2025 compared to £1,319 million in 2024, reflecting fleet growth, the
depreciation of higher value vehicles and declines in used electric car prices. Used car price volatility continues to be partly mitigated
through lease extensions, used car leasing and remarketing agreements
•Underlying operating costs increased by £241 million to £5,807 million in 2025 compared to £5,566 million in 2024, from strategic investment
(including planned severance), business growth costs and inflationary pressures, partially offset by cost savings from investment and
continued cost discipline
•Remediation increased by £181 million to £931 million in 2025 compared to £750 million in 2024. Remediation costs in 2025 included
£800 million relating to the potential impact of motor finance commission arrangements taken in the third quarter
•Underlying impairment increased by £277 million to £734 million in 2025 compared to a charge of £457 million in 2024. 2024 included a
credit for improved economic outlook. 2025 benefits from model refinements and a debt sale write back. Strong credit performance with
ongoing improvement in UK mortgages and stability across unsecured products
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.
Reference is made to “Note 4: Segmental analysis” on pages 228 to 232 of the Annual Report 2025 for a summary of the Commercial Banking
division’s underlying profit.
•Underlying profit increased by £145 million to £2,546 million in 2025 compared to £2,401 million in 2024, driven by higher underlying net
interest income and higher underlying other income, offset by higher underlying operating costs and a higher underlying impairment charge
•Underlying net interest income increased by £236 million to £3,670 million in 2025 compared to £3,434 million in 2024, underpinned by
strength in the deposits franchise including structural hedge refinancing benefits
•Underlying other income increased by £10 million to £1,825 million in 2025 compared to £1,815 million in 2024 driven by higher transaction
banking and markets income more than offsetting lower loan markets activity, with 2024 benefitting from one-off gains
•Underlying operating costs increased by £101 million to £2,853 million in 2025 compared to £2,752 million in 2024, reflecting strategic
investment (including planned high severance), business growth costs and inflationary pressures, partially offset by cost savings from
investment and continued cost discipline
•Remediation decreased by £77 million to £27 million in 2025 compared to £104 million in 2024, relating to a small number of rectification
programmes
•Underlying impairment charge of £60 million in 2025 compared to a credit of £14 million 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
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. 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.
Reference is made to “Note 4: Segmental analysis” on pages 228 to 232 of the Annual Report 2025 for a summary of the Insurance, Pensions
and Investments division’s underlying profit.
•Underlying profit from Insurance, Pensions and Investments was £110 million higher at £330 million compared to an underlying profit of
£220 million in 2024 primarily as a result of an increase of £124 million in underlying income
•Underlying net interest income was stable at a loss of £151 million (2024: a loss of £136 million. Underlying other income increased by £139
million, or 11% to £1,431 million from £1,292 million in 2024, driven by higher net general insurance and workplace pension business income,
alongside the integration of Schroders Personal Wealth in the fourth quarter
•Underlying operating costs were £9 million higher at £933 million (2024: £924 million) reflecting strategic investment, inflationary pressures
and the impact of the full acquisition of Schroders Personal Wealth in the fourth quarter, partially offset by cost savings from investment
and continued cost discipline
•Remediation decreased by £4 million to £15 million in 2025 compared to £19 million in 2024
| 14 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
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Part I continued
Other
Other 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
- Equity Investments and Central Items also includes income and expenses not attributed to the divisions, including residual underlying net
interest income after transfer pricing.
Reference is made to “Note 4: Segmental analysis” on pages 228 to 232 of the Annual Report 2025 for a summary of the remaining items of the
Company’s underlying profit.
Underlying profit in 2025 was higher compared to 2024, primarily as a result of an increase in underlying other income of £92 million, partly
offset by a reduction of £63 million in underlying total costs. Underlying net interest income decreased in 2025 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 versus 2024 as a result of strong income growth from Lloyds Living, partially offset by lower
income from LDC. Underlying total costs of £163 million in 2025 decreased by 28% on the prior year, including the effects of lower remediation
costs.
Environmental matters
Reference is made to the sections titled:
•“Sustainability review” on pages 35 to 49 of the Annual Report 2025;
•“Climate risk” on pages 150 to 152 of the Annual Report 2025; and
•“Sustainability governance” on pages 80 to 81 of the Annual Report 2025
Governmental policies
For information regarding the effects of governmental policies and factors on the Group's operating results, please see the section titled
"Regulatory and Legal Risks" in the 6-K Risk Factors and the section titled "Regulation" under Item 4.B - "Business Overview".
Risk management
Included in the sections incorporated by reference below are disclosures marked as audited. Such disclosures marked as audited form part of
the audited consolidated financial statements included in Item 18. Reference is made to:
•“Risk management” on pages 138 to 143 of the Annual Report 2025;
•“Capital risk” on pages 144 to 145 and pages 147 to 150 of the Annual Report 2025; and
•“Capital returns” and “Minimum requirement for own funds and eligible liabilities (MREL)” on pages 145 and 146 of the Annual Report 2025
•“Climate risk” on pages 150 to 152 of the Annual Report 2025;
•“Compliance risk” on page 152 of the Annual Report 2025;
•“Conduct risk” on page 153 of the Annual Report 2025;
•“Economic crime risk” on page 179 of the Annual Report 2025;
•“Insurance underwriting risk” on page 180 of the Annual Report 2025;
•“Liquidity risk” on pages 181 to 186 of the Annual Report 2025;
•“Market risk” on pages 187 to 193 of the Annual Report 2025;
•“Model risk” on page 194 of the Annual Report 2025; and
•“Operational risk” on pages 195 to 197 of the Annual Report 2025
| 15 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
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Part I continued
Credit risk
Definition
Credit risk is defined as the risk that parties with whom the Group has contracted fail to meet their financial obligations (both on and off-
balance sheet).
Level two risks
Retail credit (page 19), Commercial credit (page 21)
Included in the sections incorporated by reference below are disclosures marked as audited. Such disclosures marked as audited form part of
the audited consolidated financial statements included in Item 18. Reference is made to:
•“Risk appetite” on page 154 of the Annual Report 2025;
•“Identification and assessment” on page 154 of the Annual Report 2025;
•“Management and mitigation” on pages 154 to 157 of the Annual Report 2025;
•“Monitoring” on page 157 of the Annual Report 2025; and
•“Reporting” on page 157 of the Annual Report 2025.
The Group credit risk portfolio in 2025
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 impairment charge in 2025 was £795 million, up from £431 million in 2024, and includes a net charge from updates to the Group’s
macroeconomic outlook. Excluding macroeconomic updates, the Group’s impairment charge remains low and similar to 2024. The total
probability-weighted expected credit loss (ECL) allowance was lower in 2025 at £3,228 million (31 December 2024: £3,481 million) following
strong credit performance and additional benefits from model refinements.
Stage 2 loans and advances to customers are lower at £42,679 million versus the prior year (31 December 2024: £44,765 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 8.8% of total lending (31 December 2024: 9.7% with Stage 2 coverage reducing slightly at 2.7% (31 December
2024: 2.9%).
Stage 3 loans and advances to customers are lower at £6,526 million versus the prior year (31 December 2024: £6,716 million), and as a
percentage of total lending at 1.3% (31 December 2024: 1.5%). 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: 16.5%).
Total Group assets
Impairment charge (credit) by division
| Loans and<br><br>advances to<br><br>customers<br><br>£m | Loans and<br><br>advances to<br><br>banks<br><br>£m | Debt<br><br>securities<br><br>£m | Financialassets atfair valuethrough othercomprehensiveincomem | Other<br><br>£m | Undrawn<br><br>balances<br><br>£m | 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|---|---|---|---|---|---|
| UK mortgages | (59) | – | – | – | (1) | (60) | (194) | |
| Credit cards | 327 | – | – | – | (6) | 321 | 270 | |
| UK unsecured loans and<br><br>overdrafts | 269 | – | – | – | (12) | 257 | 272 | |
| UK Motor Finance | 214 | – | – | – | (2) | 212 | 116 | |
| Other | 3 | – | – | – | 1 | 4 | (7) | |
| Retail | 754 | – | – | – | (20) | 734 | 457 | |
| Business and Commercial<br><br>Banking | (53) | – | – | – | – | (53) | 47 | |
| Corporate and Institutional<br><br>Banking | 166 | – | – | – | (53) | 113 | (61) | |
| Commercial Banking | 113 | – | – | – | (53) | 60 | (14) | |
| Insurance, Pensions and<br><br>Investments | – | – | – | 2 | – | 2 | (9) | |
| Other | – | – | – | – | – | (1) | (3) | |
| Total impairment charge (credit) | 867 | – | – | 2 | (73) | 795 | 431 |
All values are in British Pounds.
| 16 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
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Part I continued
Total expected credit loss allowance
| At 31 Dec<br><br>2025<br><br>£m | At 31 Dec<br><br>2024<br><br>£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 |
Movements in total expected credit loss allowance
| Opening ECL<br><br>at 31 Dec 2024<br><br>£m | Write-offs<br><br>and other1<br><br>£m | Income<br><br>statement<br><br>charge (credit)<br><br>£m | Net ECL<br><br>increase<br><br>(decrease)<br><br>£m | Closing ECL at<br><br>31 Dec 2025<br><br>£m | |
|---|---|---|---|---|---|
| UK mortgages | 852 | (61) | (60) | (121) | 731 |
| Credit cards | 674 | (392) | 321 | (71) | 603 |
| UK unsecured loans and overdrafts | 523 | (282) | 257 | (25) | 498 |
| UK Motor Finance | 360 | (142) | 212 | 70 | 430 |
| Other | 67 | (8) | 4 | (4) | 63 |
| Retail | 2,476 | (885) | 734 | (151) | 2,325 |
| Business and Commercial Banking | 485 | (55) | (53) | (108) | 377 |
| Corporate and Institutional Banking | 504 | (106) | 113 | 7 | 511 |
| Commercial Banking | 989 | (161) | 60 | (101) | 888 |
| Insurance, Pensions and Investments | 15 | (3) | 2 | (1) | 14 |
| Other | 1 | 1 | (1) | – | 1 |
| Total2 | 3,481 | (1,048) | 795 | (253) | 3,228 |
1Contains adjustments in respect of purchased or originated credit-impaired financial assets.
2Total ECL includes £20 million relating to other non-customer-related assets (31 December 2024: £20 million).
Total expected credit loss allowance sensitivity to economic assumptions
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-<br><br>weighted<br><br>£m | Upside<br><br>£m | Base case<br><br>£m | Downside<br><br>£m | Severe<br><br>downside<br><br>£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 | 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 |
| 17 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 | ||||
| --- | --- |
Part I continued
Group loans and advances to customers
The following pages contain analysis of the Group’s loans and advances to customers by sub-portfolio. Loans and advances to customers are
categorised into the following stages:
•Stage 1 assets comprise of newly originated assets (unless purchased or originated credit-impaired), as well as those which have not
experienced a significant increase in credit risk. These assets carry an expected credit loss allowance equivalent to the expected credit losses
that result from those default events that are possible within 12 months of the reporting date (12 month expected credit losses)
•Stage 2 assets are those which have experienced a significant increase in credit risk since origination. These assets carry an expected credit
loss allowance equivalent to the expected credit losses arising over the lifetime of the asset (lifetime expected credit losses)
•Stage 3 assets have either defaulted or are otherwise considered to be credit-impaired. These assets carry a lifetime expected credit loss
•Purchased or originated credit-impaired assets (POCI) are those that have been originated or acquired in a credit-impaired state. This
includes within the definition of credit-impaired the purchase of a financial asset at a deep discount that reflects impaired credit losses
Loans and advances to customers and expected credit loss allowance
| At 31 December 2025 | Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | POCI<br><br>£m | Total<br><br>£m | Stage 2 as % of<br><br>total<br><br>% | Stage 3 as % of<br><br>total<br><br>% |
|---|---|---|---|---|---|---|---|
| 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 |
| Other1 | 540 | – | – | – | 540 | – | – |
| Total gross lending | 430,193 | 42,679 | 6,526 | 5,076 | 484,474 | 8.8 | 1.3 |
| 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 Finance2 | 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 | ||
| Other | – | – | – | – | – | ||
| Total | 850 | 1,160 | 1,039 | 159 | 3,208 | ||
| Customer related ECL allowance (drawn and undrawn) as a percentage of loans and advances to customers | |||||||
| Stage 1<br><br>% | Stage 2<br><br>% | Stage 3<br><br>% | POCI<br><br>% | Total<br><br>% | |||
| UK mortgages | – | 0.7 | 7.7 | 3.1 | 0.2 | ||
| Credit cards | 1.3 | 11.9 | 44.2 | – | 3.4 | ||
| UK unsecured loans and overdrafts | 1.6 | 15.3 | 58.0 | – | 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 | ||
| Business and Commercial Banking | 0.4 | 5.0 | 12.3 | – | 1.3 | ||
| Corporate and Institutional Banking | 0.2 | 6.7 | 33.8 | – | 0.8 | ||
| Commercial Banking | 0.2 | 5.6 | 21.8 | – | 1.0 | ||
| Other | – | – | – | – | – | ||
| Total | 0.2 | 2.7 | 15.9 | 3.1 | 0.7 |
1Contains central fair value hedge accounting adjustments.
2UK Motor Finance includes £243 million relating to provisions against residual values of vehicles subject to finance leases.
| 18 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
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Part I continued
| At 31 December 2024 | Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | POCI<br><br>£m | Total<br><br>£m | Stage 2 as % of<br><br>total<br><br>% | Stage 3 as % of<br><br>total<br><br>% |
|---|---|---|---|---|---|---|---|
| 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 |
| Other1 | 5 | – | – | – | 5 | – | – |
| Total gross lending | 405,360 | 44,765 | 6,716 | 6,207 | 463,048 | 9.7 | 1.5 |
| 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 Finance2 | 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 | ||
| Other | – | – | – | – | – | ||
| Total | 878 | 1,286 | 1,110 | 187 | 3,461 | ||
| Customer related ECL allowance (drawn and undrawn) as a percentage of loans and advances to customers | |||||||
| Stage 1<br><br>% | Stage 2<br><br>% | Stage 3<br><br>% | POCI<br><br>% | Total<br><br>% | |||
| 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 | ||
| Corporate and Institutional Banking | 0.2 | 6.5 | 38.8 | – | 0.9 | ||
| Commercial Banking | 0.3 | 6.1 | 22.6 | – | 1.1 | ||
| Other | – | – | – | – | – | ||
| Total | 0.2 | 2.9 | 16.5 | 3.0 | 0.7 |
1Contains central fair value hedge accounting adjustments.
2UK Motor Finance includes £178 million relating to provisions against residual values of vehicles subject to finance leases.
| 19 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
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Part I continued
Stage 2 loans and advances to customers and expected credit loss allowance
| Grosslendingm | ECL3<br><br>£m | As % of<br><br>gross<br><br>lending<br><br>% | Grosslendingm | ECL3<br><br>£m | As % of<br><br>gross<br><br>lending<br><br>% | Grosslendingm | ECL3<br><br>£m | As % of<br><br>gross<br><br>lending<br><br>% | Grosslendingm | ECL3<br><br>£m | As % of<br><br>gross<br><br>lending<br><br>% | ||||
| At 31 December 2025 | |||||||||||||||
| UK mortgages | 155 | 0.6 | 13 | 0.6 | 18 | 1.6 | 22 | 2.3 | |||||||
| Credit cards | 202 | 9.9 | 36 | 25.0 | 23 | 24.5 | 16 | 40.0 | |||||||
| UK unsecured loans and overdrafts | 116 | 17.4 | 53 | 9.5 | 31 | 24.0 | 14 | 32.6 | |||||||
| UK Motor Finance | 69 | 5.2 | 40 | 3.1 | 29 | 21.3 | 11 | 34.4 | |||||||
| Other | 2 | 3.2 | 6 | 2.0 | 1 | 9.1 | 2 | 14.3 | |||||||
| Retail | 544 | 1.8 | 148 | 3.4 | 102 | 6.8 | 65 | 6.0 | |||||||
| Business and Commercial Banking | 133 | 4.8 | 15 | 5.8 | 12 | 5.6 | 5 | 5.5 | |||||||
| Corporate and Institutional Banking | 135 | 7.2 | – | – | 1 | 14.3 | – | 0.0 | |||||||
| Commercial Banking | 268 | 5.8 | 15 | 5.4 | 13 | 5.9 | 5 | 2.4 | |||||||
| Total | 812 | 2.3 | 163 | 3.5 | 115 | 6.7 | 70 | 5.4 | |||||||
| At 31 December 2024 | |||||||||||||||
| UK mortgages | 191 | 0.7 | 38 | 2.0 | 22 | 1.8 | 24 | 2.5 | |||||||
| Credit cards | 248 | 11.4 | 43 | 28.9 | 24 | 28.9 | 16 | 45.7 | |||||||
| UK unsecured loans and overdrafts | 129 | 20.5 | 52 | 11.8 | 36 | 27.5 | 18 | 38.3 | |||||||
| UK Motor Finance | 49 | 4.1 | 30 | 2.9 | 25 | 17.7 | 11 | 30.6 | |||||||
| Other | 3 | 2.9 | 7 | 2.2 | 2 | 5.4 | 2 | 3.6 | |||||||
| Retail | 620 | 1.9 | 170 | 4.5 | 109 | 6.7 | 71 | 6.2 | |||||||
| Business and Commercial Banking | 154 | 6.3 | 18 | 4.2 | 10 | 5.7 | 5 | 4.0 | |||||||
| Corporate and Institutional Banking | 125 | 6.6 | 1 | 2.2 | – | – | 3 | 7.1 | |||||||
| Commercial Banking | 279 | 6.4 | 19 | 4.0 | 10 | 5.5 | 8 | 4.8 | |||||||
| Total | 899 | 2.4 | 189 | 4.4 | 119 | 6.6 | 79 | 6.0 |
All values are in British Pounds.
1Includes forbearance, client and product-specific indicators not reflected within quantitative PD assessments.
2Includes assets that have triggered PD movements, or other rules, given that being 1 to 29 days in arrears in and of itself is not a Stage 2 trigger.
3Expected credit loss allowance on loans and advances to customers (drawn and undrawn).
The Group’s assessment of a significant increase in credit risk, and resulting categorisation of Stage 2, includes customers moving into early
arrears as well as a broader assessment that an up-to-date customer has experienced a level of deterioration in credit risk since origination. A
more sophisticated assessment is required for up-to-date customers, which varies across divisions and product type. This assessment
incorporates specific triggers such as a significant proportionate increase in probability of default relative to that at origination, recent arrears,
forbearance activity, internal watch lists and external bureau flags. Up to date exposures in Stage 2 are likely to show lower levels of expected
credit loss (ECL) allowance relative to those that have already moved into arrears given that an arrears status typically reflects a stronger
indication of future default and greater likelihood of credit losses.
Retail credit performance
Portfolio overview
•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 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 9.5% of the Retail portfolio (31
December 2024: 10.6%). Stage 2 ECL coverage reduced to 2.3% (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 1.2%
of total loans and advances (31 December 2024: 1.3%)
•Stage 3 ECL coverage reduced to 13.8% (31 December 2024: 14.3%), largely due to continued house price increases
| 20 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
|---|
Part I continued
UK mortgages
•The UK mortgages portfolio increased to £323.8 billion (31 December 2024: £313.1 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, predominantly 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 9.4 of total UK mortgages balances (31 December 2024: 10.5%) 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 1.2% (31
December 2024: 1.3%), with continued growth in house prices resulting in a reduction in Stage 3 ECL coverage to 7.7% (31 December 2024:
8.0%)
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 44.2% (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 58.0% (31 December 2024: 67.4%)
UK Motor Finance
•UK Motor Finance balances (which exclude operating leases) increased to £17.1 billion (2024: £16.4 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 16.2% (31 December 2024: 14.6%)
•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
| 21 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
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Part I continued
Commercial Banking credit performance
Portfolio overview
•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
•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 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 21.8%
(31 December 2024: 22.6%)
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 12.3% (31 December 2024:
13.9%)
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
Included in the sections incorporated by reference below are disclosures marked as audited. Such disclosures marked as audited form part of
the audited consolidated financial statements included in Item 18. Reference is made to:
•“Movements in balances for the year ended 31 December 2025 (audited)” on page 164 of the Annual Report 2025;
•“Movements in balances for the year ended 31 December 2024 (audited)” on page 165 of the Annual Report 2025;
•“Concentrations of exposure (audited)” on page 165 of the Annual Report 2025;
•“Forbearance” on page 166 of the Annual Report 2025;
•“Credit quality of loans and advances to customers (audited)” on pages 166 to 168 of the Annual Report 2025;
•“Retail UK mortgage balance movements (audited)” on page 170 of the Annual Report 2025;
•“UK mortgages product analysis (statutory basis)” on page 171 of the Annual Report 2025;
•“Interest-only UK mortgages” on page 171 of the Annual Report 2025;
•“Collateral held as security for Retail loans and advances to customers (audited)” on page 172 of the Annual Report 2025;
•“Other Retail lending” and “Retail credit card balance movements (audited)” on page 173 of the Annual Report 2025;
•“Commercial Banking balance movements (audited)” on page 175 of the Annual Report 2025;
•“Collateral held as security for Commercial Banking loans and advances to customers (audited)” on page 176 of the Annual Report 2025;
•“Commercial Banking UK Real Estate” on page 176 of the Annual Report 2025;
•“Credit quality of other financial assets (audited)” on page 177 of the Annual Report 2025; and
•“Collateral held as security for other financial assets (audited)” on page 178 of the Annual Report 2025
| 22 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
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Part I continued
Glossary
| Term used | US equivalent or brief description |
|---|---|
| Accounts | Financial statements. |
| Articles of association | Articles and bylaws. |
| Associates | Long-term equity investments accounted for by the equity method. |
| Balance sheet | Statement of financial position. |
| Broking | Brokerage. |
| Building society | A building society is a mutual institution set up to lend money to its members for house purchases. |
| Buy-to-let mortgages | Buy-to-let mortgages are those mortgages offered to customers purchasing residential property as a rental<br><br>investment. |
| Called-up share capital | Ordinary shares, issued and fully paid. |
| Contract hire | Leasing. |
| Creditors | Payables. |
| Debtors | Receivables. |
| Deferred tax | Deferred income tax. |
| Finance lease | Capital lease. |
| Freehold | Ownership with absolute rights in perpetuity. |
| Leasehold | Land or property which is rented from the owner for a specified term under a lease. At the expiry of the term<br><br>the land or property reverts back to the owner. |
| Life assurance | Life insurance. |
| Net income | Profit before tax, excluding total costs and underlying impairment |
| Nominal value | Par value. |
| Open Ended Investment Company (OEIC) | Mutual fund. |
| Ordinary shares | Common stock. |
| Overdraft | A line of credit, contractually repayable on demand unless a fixed-term has been agreed, established through a<br><br>customer’s current account. |
| Preference shares | Preferred stock. |
| Premises | Real estate. |
| Profit attributable to equity shareholders | Net income. |
| Provisions | Reserves. |
| Regular premium | Premiums which are payable throughout the duration of a policy or for some shorter fixed period. |
| Reinsurance | The insuring again by an insurer of the whole or part of a risk that it has already insured with another insurer<br><br>called a reinsurer. |
| Retained profits | Retained earnings. |
| Share capital | Capital stock. |
| Shareholders’ equity | Stockholders’ equity. |
| Share premium account | Additional paid-in capital. |
| Shares in issue | Shares outstanding. |
| Specialist mortgages | Specialist mortgages include those mortgage loans provided to customers who have self-certified their<br><br>income. New mortgage lending of this type has not been offered by the Group since early 2009. |
| Undistributable reserves | Restricted surplus. |
| Write-offs | Charge-offs. |
Reference is made to the sections titled:
•“Regulation” under Item 4.B - “Business overview” on page 8;
•“Group structure and ring-fencing governance arrangements” under Item 4.B - “Business overview” on page 5; and
•“Legal actions and regulatory matters” under Item 8 - “Financial Information” on page 26.
B.Liquidity and capital resources
Reference is made to the sections titled:
•“Capital risk” on pages 144 to 145 and pages 147 to 150 of the Annual Report 2025; and
•“Capital returns” and “Minimum requirement for own funds and eligible liabilities (MREL)” on pages 145 and 146 of the Annual Report 2025
•“Liquidity risk” on pages 181 to 186 of the Annual Report 2025;
•“Market risk” on pages 187 to 193 of the Annual Report 2025;
•"Note 16: Measurement basis of financial assets and liabilities" on pages 255 to 256 of the Annual Report 2025;
•"Note 19: Derivative financial instruments" on pages 269 to 271 Annual Report 2025; and
•“Note 36: Contingent liabilities, commitments and financial guarantees - Capital commitments” on pages 291 to 292 of the Annual Report
2025
for information on the liquidity and capital resources.
| 23 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
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Part I continued
Investment portfolio, maturities, deposits
Reference is made to the sections titled:
•“Investment portfolio, maturities, deposits” section under Item 4.B - “Business overview” on page 7; and
•“Liquidity risk - Analysis of 2025 term issuance (audited)” on page 183 of the Annual Report 2025
The majority of the Group cash and cash equivalents are held in sterling.
C.Research and development, patents and licenses etc.
Reference is made to the section titled “Other statutory and regulatory information - Research and development activities” on page 135 of the
Annual Report 2025.
D.Trend information
Reference is made to the “Our external environment” section on pages 10 to 13 of the Annual Report 2025 for information on trend
information.
E.Critical accounting estimates
Reference is made to “Note 3: Critical accounting judgements and key sources of estimation uncertainty” on page 228 of the Annual Report
2025 for information on critical accounting estimates.
Item 6. Directors, Senior Management and Employees
A.Directors and senior management
The Group is led by the Board comprising a Chair (who was independent on appointment), independent non-executive directors and executive
directors with a wide range of experience. The appointment of directors is considered by the Nomination and Governance Committee and
approved by the Board. Following the provisions in the articles of association, directors must stand for election by the shareholders at the first
annual general meeting following their appointment. In line with UK Corporate Governance best practice, all directors are subject to annual re-
election by shareholders at each annual general meeting thereafter. The service contracts of all current executive directors are terminable on 12
months’ notice from the Group and six months’ notice from the individual. The Chair also has a letter of appointment. The Chair’s engagement
may be terminated on six months’ notice by either party. The Chair and the independent non-executive directors are not entitled to receive any
payment for loss of office (other than in the case of the Chair’s fees for the six month notice period). Independent non-executive directors are
appointed for an initial term of three years after which their appointment may continue subject to an annual review. Their appointment may be
terminated, in accordance with statute, regulation and the articles of association, at any time with immediate effect and without
compensation.
The Board meets regularly. In 2025, a total of 10 meetings were held.
The roles of the Chair, the Group Chief Executive and the Board and its governance arrangements, including the schedule of matters specifically
reserved to the Board for decision, are periodically reviewed. The matters reserved to the Board for decision include the approval of the annual
report and accounts and any other financial statements; the payment of dividends; the long-term objectives of the Group; the strategies
necessary to achieve these objectives; the Group’s medium-term plan and annual budget; significant investments and disposals; the basis of
allocation of capital within the Group; the organisational structure of the Group; the arrangements for ensuring that the Group manages risks
effectively; any significant change in accounting policies or practices; the appointment of the Company’s main professional advisers and their
fees (where material) other than the external auditors, whose fees are (subject to shareholder approval) approved by a Committee of the
Board; and the determination of Board and Committee structures, together with their size and composition.
According to the articles of association, the business and affairs of the Company are managed by the directors, who have delegated to
management the power to make decisions on operational matters, including those relating to credit, liquidity and market risk, within an agreed
framework.
All directors have access to the services of the Company Secretary and independent professional advice is available to the directors at the
Group’s expense, where they judge it necessary to discharge their duties as directors.
The Chair has a private discussion at least once a year with each director on a wide range of issues affecting the Group, including any matters
which the directors, individually, wish to raise.
There is an induction programme for all directors, which is tailored to their specific requirements having regard to their specific role on the
Board and their skills and experience to date.
Reference is made to the sections titled:
•“Our Board” on pages 68 to 69 of the Annual Report 2025;
•“Our Group Executive Committee” on page 71 of the Annual Report 2025;
•“Our governance structure and responsibilities” on pages 72 to 73 of the Annual Report 2025;
•“Board activities” on pages 74 to 75 of the Annual Report 2025;
•“Engaging with our stakeholders” on pages 76 to 78 of the Annual Report 2025;
•“Our culture in action” on page 79 of the Annual Report 2025;
•“Sustainability governance” on pages 80 to 81 of the Annual Report 2025; and
•“Board performance” on pages 82 to 83 of the Annual Report 2025.
| 24 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
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Part I continued
B.Compensation
For information on compensation, reference is made to the sections titled:
•“Directors’ remuneration report” on pages 98 to 110, pages 112 to 116 and pages 118 to 133 of the Annual Report 2025 (note the Director’s
remuneration report has not been audited under PCAOB standards);
•“Note 10: Operating expenses” on page 242 of the Annual Report 2025;
•“Note 11: Share-based payments” on pages 243 to 245 of the Annual Report 2025; and
•“Note 12: Retirement benefit obligations” on pages 245 to 250 of the Annual Report 2025.
C.Board practices
Please see “Item 19.C - Exhibits” for information on directors' service contracts.
For information on board practices, reference is made to the sections titled:
•“Our Board” on pages 68 to 69 of the Annual Report 2025;
•“Board performance” on pages 82 to 83 of the Annual Report 2025;
•“Nomination and Governance Committee report” on pages 85 to 86 of the Annual Report 2025;
•“Audit Committee report” on pages 88 to 91 of the Annual Report 2025 (except for the section titled “Viability statement” on page 90 of
the Annual Report 2025, which is not incorporated by reference in this Annual Report on Form 20-F);
•“Board Risk Committee report” on pages 92 to 96 of the Annual Report 2025;
•“Responsible Business Committee report” on page 97 of the Annual Report 2025;
•“Remuneration Committee Chair’s statement” on pages 98 to 102 of the Annual Report 2025;
•“Remuneration Committee” on page 105 of the Annual Report 2025;
•“2023 Directors’ Remuneration Policy summary and 2025 implementation” on pages 106 to 107 of the Annual Report 2025; and
•“Service agreements” and “Letters of appointment” on pages 130 to 131 of the Annual Report 2025.
D.Employees
As at 31 December 2025, the Group employed 60,061 people (on a full-time equivalent basis), compared with 61,228 at 31 December 2024 and
62,569 at 31 December 2023. At 31 December 2025, 55,266 employees were located in the UK, 760 in continental Europe, 185 in the Americas,
and 3,851 in the rest of the world. At the same date, 27,574 people were employed in Retail, 7,955 in Commercial Banking, 6,025 in Insurance,
Pensions and Investments, and 18,507 in other functions. Within Retail, Commercial Banking, Insurance, Pensions and Investments and other
functions there were 659 agency staff. During 2025, the Group’s non-permanent worker population increased by 2.6% to 24,005 at 31
December 2025, with an average of 23,879 during the year.
The Group has the Code of Ethics and Responsibility which applies to all employees. The Code of Ethics and Responsibility can be found at:
https://www.lloydsbankinggroup.com/sustainability/esg-policies-downloads.html.
An evolved approach to colleague engagement and collective representation was implemented during 2025. This new approach introduced
three forums to better represent colleagues at grades where trade union membership is low. The forums include the People Forum, the People
Consultation Forum, and the Management Advisory Forum. The Group also recognises two Trade Unions for collective bargaining purposes at
the three most junior grades. The Group also continues its engagement with Works Councils.
E.Share ownership
Reference is made to the section titled “Note 2(K): Accounting Policies (Employee benefits)” on page 223 of the Annual Report 2025 and “Note
11: Share-based payments” on pages 243 to 245 of the Annual Report 2025 for information on share ownership.
Reference is made to the tables titled “Directors’ share interests and share awards (audited)”, “Outstanding share plan interests (audited)” and
“Outstanding cash awards (audited)” on pages 114 to 115 of the Annual Report 2025.
F.Disclosure of a registrant's action to recover erroneously awarded compensation
There was no erroneously awarded compensation to management.
In 2023, the Group introduced a separate Performance Adjustment Policy which is specifically designed to comply with SEC rules which require
listed firms in the US (including foreign issuers such as Lloyds Banking Group) to be able to recover certain variable awards in the event of a
restatement of the company’s financial statements. This applies to awards made to the Group Executive Committee Members from 2 October
2023.
| 25 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
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Part I continued
Item 7. Major Shareholders and Related Party Transactions
A.Major shareholders
All shareholders within a class of the Company’s shares have the same voting rights. As at 5 February 2026 the Company had received
notification under the FCA Disclosure Guidance and Transparency Rules (‘DTR’) of the following holdings in the Company’s issued ordinary share
capital.
| Interest in shares1 | % of issued<br><br>share capital<br><br>/voting rights2 | |
|---|---|---|
| BlackRock, Inc.3 | 3,668,756,765 | 5.14% |
| Norges Bank4 | 1,935,747,756 | 3.02% |
1On 31 October 2018, Harris Associates L.P. made a disclosure under the DTR of a decrease in its indirect holding, to 3,551,514,571 ordinary shares, representing 4.99% of that share
class.On 19 May 2020, Harris Associates L.P. made a disclosure under the DTR of an increase in its holding to 3,523,149,161 ordinary shares, representing 5.00% of that share class. On
8 July 2021, Harris Associates L.P. made a disclosure under the DTR of a decrease in its holding to 3,545,505,426 ordinary shares, representing 4.99% of that share class. On 14 July
2021, Harris Associates L.P. made a disclosure under the DTR of an increase in its holding to 3,560,036,794 ordinary shares, representing 5.01% of that share class. On 19 July 2021,
Harris Associates L.P. made a further disclosure under the DTR of a decrease in its holding to 3,546,216,787 ordinary shares, representing 4.99% of that share class. It is understood
that Harris Associates L.P. disposed of their holding during the course of 2025.
2Percentage correct as at the date of notification. All holdings are direct unless stated to the contrary.
3The notification of 13 May 2015 provided by BlackRock, Inc. under Rule 5 of the DTR identifies (i) an indirect holding of 3,599,451,380 shares in the Company representing 5.04% of
the voting rights in the Company as at 12 May 2015, and (ii) a holding of 69,305,385 in other financial instruments in respect of the Company representing 0.09% of the voting rights
of the Company as at 12 May 2015. BlackRock, Inc.’s holding most recently notified to the Company under Rule 5 of the DTR varies from the holding disclosed in BlackRock, Inc.’s
Schedule 13-G filing with the SEC dated 8 February 2024, which identifies beneficial ownership of 5,352,886,800 shares in the Company representing 8.4% of the issued share
capital in the Company. This variance is attributable to different notification and disclosure requirements between these regulatory regimes. The notifiable holding by BlackRock,
Inc. received by the Company has not changed since 31 December 2015. Prior to 31 December 2015, BlackRock, Inc.’s holding in the Company was not required to be disclosed under
the SEC rules.
4Holding is composed of 1,927,747,756 ordinary shares, and 8,000,000 American Depositary Receipts.
As at 5 February 2026, the Company had 2,044,799 registered ordinary shareholders. The majority of the Company’s ordinary shareholders are
registered in the United Kingdom. 2,400,874,341 ordinary shares, representing 4.07% of the Company’s issued share capital, were held by BNY
Mellon as depositary for the ordinary share American Depositary Share Programme through which there were 188 record holders.
Additionally, the majority of the Company’s preference shareholders are registered in the United Kingdom, with a further one record holder with
an address in the United States registered through the Company’s preference share American Depositary Share Programme.
B.Related party transactions
Reference is made to the section titled “Note 35: Related party transactions” on pages 290 to 291 of the Annual Report 2025 for information
on related party transactions.
C.Interests of experts and counsel
Not applicable.
Item 8. Financial Information
A.Consolidated statements and other financial information
The “Consolidated Financial Statements” and “Notes to the Consolidated Financial Statements”, on pages 211 to 296 of the Annual Report
2025 are incorporated herein by reference.
See also Item 18 - “Financial Statements” on page 33. The audit opinion of Deloitte LLP (PCAOB ID No. 1147) is also included in Item 18.
Dividends and share buybacks
The Company’s ability to pay dividends is restricted under UK company law. Dividends may only be paid if distributable profits are available for
that purpose. In the case of a public limited company, a dividend may only be paid if the amount of net assets is not less than the aggregate of
the called-up share capital and undistributable reserves and if the payment of the dividend will not reduce the amount of the net assets to less
than that aggregate. In addition, a company cannot pay a dividend if any of its UK insurance subsidiaries is insolvent on a regulatory valuation
basis or, in the case of regulated entities, if the payment of a dividend results in regulatory capital requirements not being met. Similar
restrictions exist over the ability of the Company’s subsidiary companies to pay dividends to their immediate parent companies. Furthermore, in
the case of the Company, dividends may only be paid if sufficient distributable profits are available for distributions due in the financial year on
certain preferred securities. The Board has the discretion to decide whether to pay a dividend and the amount of any dividend. In making this
decision, the board is mindful of the level of dividend cover and, consequently, profit growth may not necessarily result in increases in the
dividend. In the case of American Depositary Shares, dividends are paid through The Bank of New York Mellon which acts as paying and transfer
agent.
The Group has a progressive and sustainable ordinary dividend policy whilst maintaining the flexibility to return further surplus capital through
buybacks or special dividends.
In February 2025, the Board approved an ordinary share buyback programme of up to £1.7 billion to return surplus capital in respect of 2024.
This commenced in February 2025 and completed in December 2025, with c.2.2 billion ordinary shares repurchased.
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. On 30 January 2026, the Group announced the launch of an ordinary share buyback of up to
£1.75 billion, which is expected to be completed, subject to continued authority from the PRA, by 31 December 2026.
Based on the total ordinary dividend 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 table below sets out the interim and final dividends declared in respect of the ordinary shares for fiscal years 2021 through 2025. The
Sterling amounts have been converted into US Dollars at the Noon Buying Rate in effect on each payment date with the exception of the
recommended final dividend for 2025, for which the Sterling amount has been converted into US Dollars at the Noon Buying Rate on 5 February
2026.
| 26 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
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Part I continued
| Interim<br><br>ordinary<br><br>dividend<br><br>per share<br><br>(pence) | Interim<br><br>ordinary<br><br>dividend<br><br>per share<br><br>(cents) | Final<br><br>ordinary<br><br>dividend<br><br>per share<br><br>(pence) | Final<br><br>ordinary<br><br>dividend<br><br>per share<br><br>(cents) | |
|---|---|---|---|---|
| 2021 | 0.67 | 0.93 | 1.33 | 1.66 |
| 2022 | 0.80 | 0.94 | 1.60 | 1.99 |
| 2023 | 0.92 | 1.15 | 1.84 | 2.32 |
| 2024 | 1.06 | 1.38 | 2.11 | 2.66 |
| 2025 | 1.22 | 1.65 | 2.43 | 3.29 |
Legal actions and regulatory matters
During the ordinary course of business the Group is subject to threatened or actual legal proceedings and regulatory reviews and investigations
both in the UK and overseas. Further discussion on the Group’s regulatory and legal provisions is set out in “Note 28: Provisions” on pages 283 to
285 of the Annual Report 2025 and its contingent liabilities relating to other legal actions and regulatory matters is set out in “Note 36:
Contingent liabilities, commitments and financial guarantees” on pages 291 to 292 of the Annual Report 2025.
B. Significant changes
No significant change has occurred since the date of the annual financial statements.
Item 9. The Offer and Listing
A.Offer and listing details
The ordinary shares of the Company are listed and traded on the London Stock Exchange under the symbol ‘LLOY’. The prices for shares as
quoted in the official list of the London Stock Exchange are in pounds Sterling.
The Company’s American Depositary Shares (ADSs) are listed on the New York Stock Exchange (NYSE) under the symbol ‘LYG’. Each ADS
represents four ordinary shares.
B.Plan of distribution
Not applicable.
C.Markets
Please refer to Item 9.A - “Offer and listing details” on page 26. In addition, as shown in the cover of this Annual Report on Form 20-F, certain
debt securities issued by the Company are listed and traded on the NYSE, and the Company’s Additional Tier 1 Securities also listed in the cover
of this Annual Report on Form 20-F are listed and traded on Euronext Dublin.
D.Selling shareholders
Not applicable.
E.Dilution
Not applicable.
F.Expenses of the issue
Not applicable.
Item 10. Additional Information
A.Share capital
Not applicable.
B.Memorandum of articles of association
For information regarding the Articles of Association, please refer to the discussion under the corresponding section of the Annual Report on
Form 20-F for the year ended 31 December 2021, filed with the SEC on 28 February 2022, which discussion is hereby incorporated by reference
into this Annual Report on Form 20-F.
C.Material contracts
The Company and its subsidiaries are party to various contracts in the ordinary course of business. There have been no material contracts, other
than contracts entered into in the ordinary course of business, to which Lloyds Banking Group plc or any member of the Group became a party
in 2025.
D.Exchange controls
There are no UK laws, decrees or regulations that restrict the Company’s import or export of capital, including the availability of cash and cash
equivalents for use by Lloyds Banking Group, or that affect the remittance of dividends, interest or other shareholders’ payments to non-UK
holders of the Company’s shares, except as set out in Taxation.
| 27 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
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Part I continued
E.Taxation
The following discussion is intended only as a general guide to current UK and US federal income tax considerations relevant to US holders (as
defined below in the section on US federal income tax considerations) of Lloyds Banking Group ordinary shares or ADSs who are not resident in
the UK for UK tax purposes. It is based on current law and tax authority practice and the terms of the current UK/US income tax treaty (the
Treaty), all of which are subject to change at any time, possibly with retroactive effect.
This summary does not consider your personal circumstances, and it is not a substitute for tax advice. Any person who is in any doubt as to their
tax position should consult their own professional adviser.
UK taxation of chargeable gains
Subject to the provisions set out in the next paragraph in relation to temporary non-residents, US holders generally will not be liable for UK tax
on chargeable gains unless they carry on a trade, profession or vocation in the UK through a branch or agency and the ordinary shares or ADSs
are or have been used or held by or for the purposes of the branch or agency, in which case such US holders might, depending on individual
circumstances, be liable to UK tax on chargeable gains on any disposition of ordinary shares or ADSs.
An individual US holder who is only temporarily not resident in the UK may, under anti-avoidance legislation, still be liable for UK tax on
chargeable gains realised, subject to any available exemption, relief and/or foreign tax credit.
UK taxation of dividends
The Company will not be required to withhold tax at source when paying a dividend on the ordinary shares or ADSs to a US holder.
Stamp duty and stamp duty reserve tax
Any conveyance or transfer on sale of ordinary shares (whether effected using the CREST settlement system or not) will be subject to UK stamp
duty or stamp duty reserve tax (SDRT). The transfer on sale of ordinary shares will be liable to ad valorem UK stamp duty or SDRT, generally at
the rate of 0.5% of the consideration paid (rounded up to the next multiple of £5 in the case of stamp duty). Stamp duty is usually the liability
of the purchaser or transferee of the ordinary shares. An unconditional agreement to transfer such ordinary shares will be liable to SDRT,
generally at the rate of 0.5% of the consideration paid, but such liability will be cancelled, or, if already paid, refunded, if the agreement is
completed by a duly stamped transfer within six years of the agreement having become unconditional. SDRT is normally the liability of the
purchaser or transferee of the ordinary shares.
UK tax law provides that when a holder of ordinary shares transfers such shares to the custodian or nominee for the depositary to facilitate the
issue of ADSs to a person representing the ordinary shares or to a person providing clearance services (or their nominee or agent), a liability to
UK stamp duty or SDRT at the rate of 1.5% (rounded up to the next multiple of £5 in the case of stamp duty) of the listed price of the ordinary
shares, calculated in sterling, will arise. Where a holder of ordinary shares transfers such shares to the custodian or nominee for the depositary
or clearance services this charge will generally apply, and generally be payable by the person receiving the ADSs or transferring the ordinary
shares into the clearance service. However, such transfers of ordinary shares will not attract a liability to stamp duty or SDRT where they satisfy
the conditions of an exemption or relief, including exemptions which can apply to certain transfers made in the course of capital raising or
qualifying listing arrangements.
Specific professional advice should be sought before paying a 1.5% stamp duty or SDRT charge in any circumstances. No liability to stamp duty
or SDRT will arise as a result of the cancellation of any ADSs with the ordinary shares that they represent being transferred to the ADS holder.
No liability to UK stamp duty or SDRT will arise on a transfer of ADSs provided that any document that gives effect to such transfer is not
executed in the UK and remains at all subsequent times outside the UK. An agreement to transfer ADSs will not give rise to a liability to SDRT.
US federal income tax considerations
The following summary describes material US federal income tax consequences of the ownership and disposition of ADSs or ordinary shares to
the US holders described below, but it does not purport to be a comprehensive description of all of the tax considerations that may be relevant
to a decision to own such securities. The summary applies only to US holders that hold ADSs or ordinary shares as capital assets for US federal
income tax purposes.
This discussion does not address any minimum or Medicare Contribution tax consequences, nor does it address US federal tax consequences to
US holders that are subject to special rules, such as:
•certain financial institutions;
•dealers or electing traders in securities that use a mark-to-market method of tax accounting;
•persons holding ADSs or ordinary shares as part of a hedge, straddle, wash sale, conversion or other integrated transaction or holders
entering into a constructive sale with respect to ADSs or ordinary shares;
•persons whose functional currency for US federal income tax purposes is not the US Dollar;
•persons who acquired ADSs or ordinary shares pursuant to the exercise of any employee stock option or otherwise as compensation;
•tax-exempt entities, ‘individual retirement accounts’ or ‘Roth IRAs’;
•persons holding ADSs or ordinary shares in connection with a trade or business conducted outside of the United States;
•partnerships or other entities classified as partnerships for US federal income tax purposes; or
•persons that own or are deemed to own 10% or more (by vote or value) of the stock of the Company.
If an entity that is classified as a partnership for US federal income tax purposes owns ADSs or ordinary shares, the US federal income tax
treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Partnerships owning ADSs or
ordinary shares and partners in such partnerships should consult their tax advisers as to the particular US federal income tax consequences of
owning and disposing of the ADSs or ordinary shares.
This summary is based on the US Internal Revenue Code of 1986, as amended (the Code), administrative pronouncements, judicial decisions and
final, temporary and proposed Treasury Regulations, as well as the Treaty, all as of the date hereof, changes to any of which may affect the tax
consequences described herein, possibly with retroactive effect. It assumes that each obligation provided for in or otherwise contemplated by
the Deposit Agreement will be performed in accordance with its terms.
As used herein, a ‘US holder’ is a person that is, for US federal income tax purposes, a beneficial owner of ADSs or ordinary shares and:
•a citizen or individual resident of the United States;
•a corporation, or other entity taxable as a corporation, created or organised in or under the laws of the United States, any state therein or
the District of Columbia; or
•an estate or trust the income of which is subject to US federal income taxation regardless of its source.
In general, a US holder who owns ADSs should be treated as the owner of the underlying shares represented by those ADSs for US federal
income tax purposes. Accordingly, no gain or loss should be recognised if a US holder exchanges ADSs for the underlying shares represented by
those ADSs.
| 28 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
|---|
Part I continued
Owners of ADSs or ordinary shares should consult their tax advisers as to the US, UK or other tax consequences of the ownership and
disposition of such securities in their particular circumstances, including the effect of any US state or local tax laws.
Taxation of distributions
Distributions paid on ADSs or ordinary shares, other than certain pro rata distributions of ordinary shares, will generally be treated as dividends
to the extent paid out of the Company’s current or accumulated earnings and profits (as determined in accordance with US federal income tax
principles). Because the Company does not maintain calculations of its earnings and profits under US federal income tax principles, it is
expected that distributions generally will be reported to US holders as dividends. The dividends will generally be foreign-source income to US
holders and will not be eligible for the dividends-received deduction generally allowed to US corporations under the Code.
Subject to applicable limitations, dividends paid to certain non-corporate US holders may be taxable at favourable rates. Non-corporate US
holders should consult their tax advisers to determine whether the favourable rates will apply to dividends they receive and whether they are
subject to any special rules that limit their ability to be taxed at these favourable rates.
Dividends will be included in a US holder’s income on the date of the US holder’s or, in the case of ADSs, the depositary’s receipt of the
dividend. The amount of any dividend income will equal the US Dollar value of the pounds Sterling received, calculated by reference to the
exchange rate in effect on the date of receipt regardless of whether the payment is converted into US Dollars on the date of receipt. If the
pounds Sterling received as a dividend are not converted into US Dollars on the date of receipt, then the US holder’s tax basis in the pounds
Sterling received will equal their US Dollar value on the date of receipt and the US holder may realise a foreign exchange gain or loss on the
subsequent conversion into US Dollars. Generally, any gains or losses resulting from the conversion of pounds Sterling into US Dollars will be
treated as US-source ordinary income or loss.
Taxation of capital gains
Gain or loss realised by a US holder on a sale or other disposition of ADSs or ordinary shares will generally be subject to US federal income tax as
capital gain or loss in an amount equal to the difference between the US holder’s tax basis in the ADSs or ordinary shares disposed of and the
amount realised on the disposition, in each case as determined in US Dollars. Gains or losses, if any, will generally be US-source and will be long-
term if the US holder held the ADSs or ordinary shares for more than one year. The deductibility of losses is subject to limitations.
Any UK stamp duty or SDRT imposed upon transfers of ADSs or ordinary shares will not be treated as a creditable foreign tax for US federal
income tax purposes. US holders should consult their tax advisers regarding whether any such UK stamp duty or SDRT may be deductible or
reduce the amount of gain (or increase the amount of loss) recognised upon a sale or other disposition of the ADSs or ordinary shares.
Information reporting and backup withholding
Dividends paid on, and the sale proceeds from, ADSs or ordinary shares that are made within the US or through certain US-related financial
intermediaries may be subject to information reporting and backup withholding requirements unless the US holder:
•is a corporation or other exempt recipient, or
•in the case of backup withholding, provides a correct taxpayer identification number and certifies that it is not subject to backup
withholding.
The amount of any backup withholding from a payment to a US holder will be allowed as a credit against the US holder’s US federal income tax
liability and may entitle it to a refund, provided that the required information is furnished on a timely basis to the Internal Revenue Service.
F.Dividends and paying agents
Not applicable.
G.Statements by experts
Not applicable.
H.Documents on display
Documents referred to and filed with the SEC together with this Annual Report on Form 20-F can be read and copied at the SEC’s public
reference room located at 100 F Street, NE, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms.
Copies of this Annual Report on Form 20-F as well as the Annual Report 2025 can be downloaded from the Financial Downloads page at
www.lloydsbankinggroup.com. The contents of this website are not incorporated by reference into this Annual Report on Form 20-F. This
Annual Report on Form 20-F is also filed and can be viewed via EDGAR on www.sec.gov.
I.Subsidiary information
Reference is made to the Item 4.C - “Organisational structure” on page 10.
J.Annual Report to Security Holders
The Company intends to submit any annual report provided to security holders in electronic format as an exhibit to a current report on Form 6-
K.
Item 11. Qualitative and Quantitative Disclosures About Market Risk
Reference is made to the sections titled:
•“Credit Risk” on pages 15 to 21;
•“Market Risk” on pages 187 to 193 of the Annual Report 2025; and
•“Note 39: Financial risk management” on page 294 of the Annual Report 2025
for information on market risk.
Reference is made to the “Loan portfolio” section under Item 4.B - “Business overview” on page 6.
| 29 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
|---|
Part I continued
Item 12. Description of Securities Other than Equity Securities
A.Debt securities
Not applicable.
B.Warrants and rights
Not applicable.
C.Other securities
Not applicable.
D.American Depositary Shares
ADR fees
The Company's American Depositary Shares (ADSs) are listed on the NYSE under the symbol “LYG”. Each ADS represents four ordinary shares.
The Group’s depositary, The Bank of New York Mellon (240 Greenwich Street, New York, New York 10286), collects its fees for delivery and
surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for
them. The depositary collects fees for making cash distributions to investors (including dividends) by deducting those fees from the amounts
distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by
deductions from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them.
The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.
| Persons depositing or withdrawing shares must pay: | For: |
|---|---|
| $5.00 (or less) per 100 ADSs (or portion of 100 ADSs) | Issuance of ADSs, including issuances resulting from a distribution of<br><br>shares or rights or other property.<br><br>Cancellation of ADSs for the purpose of withdrawal, including if the<br><br>deposit agreement terminates. |
| $.02 (or less) per ADS | Any cash distribution to ADS registered holders (including dividends). |
| A fee equivalent to the fee that would be payable if securities<br><br>distributed had been shares and the shares had been deposited for<br><br>issuance of ADSs | Distribution of securities distributed to holders of deposited securities<br><br>which are distributed by the depositary to ADS registered holders. |
| $.02 (or less) per ADSs per calendar year | Depositary services. |
| Registration or transfer fees | Transfer and registration of shares on the share register to or from the<br><br>name of the depositary or its agent when you deposit or withdraw<br><br>shares. |
| Expenses of the depositary | Cable, telex and facsimile transmissions (when expressly provided in<br><br>the deposit agreement).<br><br>Converting foreign currency to US Dollars. |
| Taxes and other governmental charges the depositary or the<br><br>custodian have to pay on any ADS or share underlying an ADS, for<br><br>example, stock transfer taxes, stamp duty or withholding taxes | As necessary. |
| Any charges incurred by the depositary or its agents for servicing the<br><br>deposited securities | As necessary. |
Fees received to date
In 2025, the Company received from the depositary $1,841,816 for continuing annual stock exchange listing fees, standard out-of-pocket
maintenance costs for the ADSs (consisting of the expenses of postage and envelopes for mailing annual and interim financial reports, printing
and distributing dividend checks, electronic filing of US Federal tax information, mailing required tax forms, stationery, postage, facsimile, and
telephone calls), any applicable performance indicators relating to the ADS facility, underwriting fees and legal fees. It also includes
reimbursements for certain investor relations programs or special investor relations promotional activities.
Fees to be paid in the future
The Bank of New York Mellon, as depositary, has agreed to reimburse the Company for maintenance expenses that they incur for the ADS
program. The depositary has agreed to pay the standard out-of-pocket maintenance costs for the ADSs, which consist of the expenses of
postage and envelopes for mailing annual and interim financial reports, printing and distributing dividend checks, electronic filing of US Federal
tax information, mailing required tax forms, stationery, postage, facsimile, and telephone calls. It has also agreed to reimburse the Company
annually for certain investor relationship programs or special investor relations promotional activities. The depositary has agreed to provide
payments to the Company based on the level of issuance, cancellation and dividend fees.
Part II
Item 13. Defaults, Dividend Arrearages and Delinquencies
None.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
None.
| 30 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
|---|
Part II continued
Item 15. Controls and Procedures
Reference is made to the section titled “Board responsibility”, “Control effectiveness review” and “Reviews by the Board” on page 84 of the
Annual Report 2025 for information on controls and procedures.
Statement on US Corporate Governance Standards
The Board is committed to the delivery of the Group’s strategy which is underpinned by high standards of corporate governance designed to
ensure consistency and rigour in its decision making. This report explains how those standards, in particular, those laid down in the Financial
Reporting Council’s UK Corporate Governance Code 2024 (the “UK Code”), apply in practice to ensure that the Board and management work
together for the long-term benefit of the Company and its shareholders. The UK Code can be accessed at www.frc.org.uk.
To assist the Board in carrying out its functions and to provide independent oversight of internal control and risk management, certain
responsibilities are delegated to the Board’s Committees. The Board is kept up to date on the activities of the Committees through reports from
each of the Committee Chairs. Terms of Reference for each of the Committees are available on the website at www.lloydsbankinggroup.com.
Information on the role and activities of the Nomination and Governance Committee, the Audit Committee, the Board Risk Committee and the
Responsible Business Committee can be found on pages 85 to 86 and 88 to 97 of the Annual Report 2025 (except “Viability statement” on
page 90 of the Annual Report 2025), which are incorporated by reference in this Annual Report on Form 20-F. For additional information about
the Group's internal and external audit functions, reference is made to the sections “Internal control” on page 84 of the Annual Report 2025
and the “Audit Committee report” on pages 88 to 91 of the Annual Report 2025, except for the “Viability statement” on page 90 of the Annual
Report 2025. Further information about the work of the Remuneration Committee is included on page 105 of the Annual Report 2025.
As a non-US company listed on the NYSE the Company is required to disclose any significant ways in which its corporate governance practices
differ from those followed by domestic US companies listed on the NYSE, key differences are set out in the paragraphs below. As the Company’s
main listing is on the London Stock Exchange, it follows the principles contained in the UK Code. The Group confirms that it applied the
principles and complied with all the relevant provisions of the Code throughout 2025. Compliance with the UK Code is discussed further on
page 67 of the Annual Report 2025.
The NYSE corporate governance listing standards require domestic US companies to adopt and disclose corporate governance policies. For the
Company, consistent with the principles of the UK Code, the Nomination and Governance Committee sets the corporate governance principles
applicable to the Company and oversees the annual evaluation of the performance of the Board, its Committees and its individual members.
Under the NYSE corporate governance listing standards, the remuneration, nomination and governance committees of domestic US companies
must be comprised of entirely independent directors. However for the Company, again consistent with the principles of the UK Code, the
Remuneration Committee and the Nomination and Governance Committee include the Chair, with all other members being independent non-
executive directors.
Disclosure controls and procedures
As of 31 December 2025, Lloyds Banking Group, under the supervision and with the participation of the Group’s management, including the
Group Chief Executive and the Chief Financial Officer, performed an evaluation of the effectiveness of the Group’s disclosure controls and
procedures. Based on this evaluation, the Group Chief Executive and Chief Financial Officer concluded that the Company’s disclosure controls
and procedures, at 31 December 2025, were effective for gathering, analysing and disclosing with reasonable assurance the information that
Lloyds Banking Group is required to disclose in the reports it files under the Securities Exchange Act of 1934, within the time periods specified in
the SEC’s rules and forms. Lloyds Banking Group’s management necessarily applied its judgement in assessing the costs and benefits of such
controls and procedures, which by their nature can provide only reasonable assurance regarding management’s control objectives.
Changes in internal control over financial reporting
There have been no changes in the Lloyds Banking Group’s internal control over financial reporting during the year ended 31 December 2025
that have materially affected, or are reasonably likely to materially affect, the Lloyds Banking Group’s internal control over financial reporting.
Management report on internal control over financial reporting
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The
Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with IFRS Accounting Standards.
The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS Accounting Standards and that
receipts and expenditures are being made only in accordance with authorisations of management and directors of the Company; and (iii)
provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the Company’s assets
that could have a material effect on the financial statements.
The management of the Company assessed the effectiveness of the Company’s internal control over financial reporting at 31 December 2025
based on the criteria established in Internal Control – Integrated Framework 2013 issued by the Committee of Sponsoring Organisations of the
Treadway Commission (COSO). Based on this assessment, management concluded that, at 31 December 2025, the Company’s internal control
over financial reporting was effective.
Internal control systems, no matter how well designed, have inherent limitations and may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Deloitte LLP, an independent registered public accounting firm, has issued opinions on the Company’s consolidated financial statements and on
its internal controls over financial reporting. These opinions appear on pages 37 to 40 and on page 31 respectively.
| 31 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
|---|
Part II continued
Report of independent registered public accounting firm
To the shareholders and the Board of Directors of Lloyds Banking Group plc
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Lloyds Banking Group plc and subsidiaries (the "Group") as at 31 December
2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). In our opinion, the Group maintained, in all material respects, effective internal control over financial
reporting as at 31 December 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
consolidated financial statements as at and for the year ended 31 December 2025, of the Group and our report dated 13 February 2026,
expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Group’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the Group’s internal control over financial reporting based on our audit. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the Group in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A
company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte LLP
London, United Kingdom
13 February 2026
| 32 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
|---|
Part II continued
Item 16. [Reserved]
[Reserved]
Item 16A. Audit Committee Financial Expert
Reference is made to the section titled “Our Board” on pages 68 to 69 of the Annual Report 2025 for information on the name, position and
experience of the members of the Audit Committee.
Sarah Legg is designated as the Audit Committee financial expert as defined by the SEC. All members of the Audit Committee qualify as
independent as defined by the US Exchange Act and the NYSE Corporate Governance Standards applicable to listed companies as described in
Section 303A of the NYSE Listed Company Manual.
Audit Committee report
Reference is made to the section titled “Audit Committee Report” on pages 88 to 91 of the Annual Report 2025, except for the “Viability
statement” on page 90 of the Annual Report 2025.
Item 16B. Code of Ethics
Please refer to the “Employees” section under Item 6.D - “Employees” on page 24.
Item 16C. Principal Accountant Fees and Services
Reference is made to the sections titled:
•“Note 13: Auditors’ Remuneration” on page 251 of the Annual Report 2025; and
•“Auditor independence and remuneration”, “External auditor” and “Statutory Audit Services compliance” on page 91 of the Annual Report
2025
for information on principal accountant fees and services.
Item 16D. Exemptions from the Listing Standards for Audit Committees
None.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 16F. Change in Registrant’s Certifying Accountant
Not applicable.
Item 16G. Corporate Governance
For additional information about the Group's corporate governance practices, reference is made to the sections titled:
•“Item 15 - Controls and Procedures” on page 30;
•“Chair's statement” on pages 66 to 67 of the Annual Report 2025;
•“UK Corporate Governance Code” on page 67 of the Annual Report 2025;
•“Our governance structure and responsibilities” on pages 72 to 73 of the Annual Report 2025;
•“Board activities” on pages 74 to 75 of the Annual Report 2025;
•“Engaging with our stakeholders” on pages 76 to 78 of the Annual Report 2025;
•“Our culture in action” on page 79 of the Annual Report 2025; and
•“Sustainability governance” on pages 80 to 81 of the Annual Report 2025.
Item 16H. Mine Safety Disclosure
Not applicable.
Item 16I. Disclosures Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
| 33 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
|---|
Part II continued
Item 16J. Insider Trading Policies
The Company has adopted dealing policies setting out requirements in relation to dealings in the Company’s securities by the Company’s
Directors, its executive committee members and attendees (in each case through the Dealing Policy for Directors, GEC Members and GEC
Attendees) and other employees (through the Code of Ethics and Responsibility). The Company believes these policies to be reasonably
designed to promote compliance with applicable insider trading and market abuse regulations, in particular the UK Market Abuse Regulation,
insider trading laws, rules and regulations, and the exchange listing standards. The Board recognises that it is the individual responsibility of
each director and employee to ensure he or she complies with the policies and applicable insider trading laws.
The Dealing Policy for Directors, GEC Members and GEC Attendees is filed as Exhibit 11.1 to this Annual Report on Form 20-F. The Code of Ethics
and Responsibility can be found at www.lloydsbankinggroup.com/sustainability/esg-policies-downloads.html and is filed as Exhibit 11.2 to this
Annual Report on Form 20-F.
Item 16K. Cybersecurity
The Group adopts a risk-based approach to mitigate cyber threats it faces. The effective operation of the Group’s estate is supported by an IT
and Cyber Security Governance framework, guided by a threat-based strategy which underpins investment decisions. The ongoing protection of
the estate and confidentiality of material information is ensured through adherence to the Group Security Policy and supporting third-party
supplier security schedule, which have been aligned to industry good practice including the NIST Cyber Security Framework; and material laws
and regulations. The Group’s IT systems and information security risk management processes, which includes assessment, documentation and
treatment have been integrated into its overall enterprise risk management framework. The Group engages a specialist third party consultancy
on a periodic basis, to assess the maturity of its cyber security programme, in assessing, identifying and managing material risks from
cybersecurity threats. During the handling of an incident, the Cyber Security team will continuously monitor and assess the impact to the
Group.
Whilst the Group did not identify any cyber threats that materially affected its business strategy, results of operations or financial condition in
2025, the Group remains exposed to the risk of cyber threats and future interruptions that could potentially disrupt business operations and
materially adversely affect the Group’s performance. The Board continues to invest heavily to protect the Group from cyber-attacks.
Investment continues to focus on improving the Group’s approach to identity and access management, data loss prevention, improving
capability to detect, respond and recover from cyber-attacks and improved ability to manage vulnerabilities across the estate.
The Board has overall oversight responsibility for the Group’s IT systems and information security risk management and delegates this oversight
to the Group Risk Committee (“GRC”). GRC is responsible for ensuring that management has processes in place designed to identify and
evaluate information, cyber and security risks that the Group is exposed to, implementing processes and programmes to manage these risks and
mitigate related incidents within appetite. The Board Risk Committee (“BRC”) continues to be supported by the IT and Cyber Advisory Forum
(“ITCAF”), which is attended by the BRC chair and other Board members. ITCAF dedicates time and attention to reviewing and challenging risks
associated with IT infrastructure, IT strategy, IT resilience and cyber risks. Senior management is responsible for identifying, considering and
assessing material IT systems and security risks on an ongoing basis, establishing processes to ensure that such potential risk exposures are
monitored, putting in place appropriate mitigation measures and maintaining control improvement programmes.
To deal with cybersecurity threats, the Group has a dedicated Cyber Security function led by a certified CSO with over 14 years of security
experience at the UK Government, Bank of England and major financial services institutions at a leadership level. The CSO actively participates
in Audit Committee and Board meetings and is responsible for offering updates on information security risks and mitigation strategies to the
Board and its subcommittees. Additionally, the CSO chairs a subcommittee comprised of stakeholders including, but not limited to security
representatives, risk management, compliance and Group Internal Audit. This subcommittee is focused on information security, to review major
policy changes, strategies and key risk mitigations to enhance the governance of the information security strategies and policies.
Part III
Item 17. Financial Statements
See response to Item 18 - “Financial Statements”.
Item 18. Financial Statements
The Consolidated Financial Statements and Notes to the Consolidated Financial Statements, on pages 211 to 296 of the Annual Report 2025
are incorporated herein by reference.
| 34 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
|---|
Part III continued
Schedule: Parent company disclosures
(A)Company income statement
| 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | |
|---|---|---|---|
| Interest income | 804 | 800 | 632 |
| Interest expense | (1,031) | (1,096) | (1,129) |
| Net interest expense | (227) | (296) | (497) |
| Net trading (losses) income | (129) | 61 | 71 |
| Dividends from subsidiaries | 2,990 | 5,187 | 5,024 |
| Other operating income | 893 | 701 | 672 |
| Other income | 3,754 | 5,949 | 5,767 |
| Total income | 3,527 | 5,653 | 5,270 |
| Operating expenses | (164) | (216) | (225) |
| Impairment credit | 3 | 3 | 10 |
| Profit before tax | 3,366 | 5,440 | 5,055 |
| Tax credit | 23 | 48 | 84 |
| Profit for the year | 3,389 | 5,488 | 5,139 |
| Profit attributable to ordinary shareholders | 2,926 | 4,990 | 4,612 |
| Profit attributable to other equity holders | 463 | 498 | 527 |
| Profit for the year | 3,389 | 5,488 | 5,139 |
(B)Company balance sheet
| 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|
| Assets | ||
| Cash and cash equivalents | 8 | 22 |
| Financial assets at fair value through profit or loss | 19,703 | 23,370 |
| Derivative financial instruments | 298 | 519 |
| Debt securities | 1,623 | 2,354 |
| Loans to subsidiaries | 16,949 | 17,068 |
| Investment in subsidiaries | 54,567 | 51,334 |
| Current tax recoverable | 6 | 75 |
| Deferred tax assets | 85 | 23 |
| Other assets | 7 | 14 |
| Total assets | 93,246 | 94,779 |
| Liabilities | ||
| Due to subsidiaries | 150 | 3 |
| Financial liabilities at fair value through profit or loss | 22,433 | 24,896 |
| Derivative financial instruments | 579 | 939 |
| Debt securities in issue at amortised cost | 9,941 | 8,310 |
| Other liabilities | 80 | 142 |
| Subordinated liabilities | 9,970 | 9,720 |
| Total liabilities | 43,153 | 44,010 |
| Equity | ||
| Share capital | 5,889 | 6,062 |
| Share premium account | 18,797 | 18,720 |
| Merger reserve | 6,759 | 6,759 |
| Capital redemption reserve | 5,971 | 5,751 |
| Retained profits | 6,730 | 7,282 |
| Shareholders’ equity | 44,146 | 44,574 |
| Other equity instruments | 5,947 | 6,195 |
| Total equity | 50,093 | 50,769 |
| Total equity and liabilities | 93,246 | 94,779 |
| 35 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 | |
| --- | --- |
Part III continued
Schedule: Parent company disclosures continued
(C)Company statement of changes in equity
| Attributable to ordinary shareholders | ||||||||
|---|---|---|---|---|---|---|---|---|
| Share capital1<br><br>£m | Share<br><br>premium1<br><br>£m | Merger<br><br>reserve2<br><br>£m | Capital<br><br>redemption<br><br>reserve3<br><br>£m | Retained<br><br>profits<br><br>£m | Total<br><br>£m | Other<br><br>equity<br><br>instruments<br><br>£m | Total<br><br>£m | |
| At 1 January 2023 | 6,729 | 18,504 | 6,806 | 4,932 | 5,222 | 42,193 | 5,297 | 47,490 |
| Total comprehensive income | – | – | – | – | 4,612 | 4,612 | 527 | 5,139 |
| Transactions with owners | ||||||||
| Dividends | – | – | – | – | (1,651) | (1,651) | – | (1,651) |
| Distributions on other equity<br><br>instruments | – | – | – | – | – | – | (527) | (527) |
| Issue of ordinary shares | 67 | 64 | – | – | – | 131 | – | 131 |
| Share buyback | (438) | – | – | 438 | (1,993) | (1,993) | – | (1,993) |
| Issue of other equity instruments | – | – | – | – | (13) | (13) | 1,778 | 1,765 |
| Repurchase and redemptions of<br><br>other equity instruments | – | – | – | – | – | – | (135) | (135) |
| Movement in treasury shares | – | – | – | – | 103 | 103 | – | 103 |
| Value of employee services | – | – | – | – | 227 | 227 | – | 227 |
| Total transactions with owners | (371) | 64 | – | 438 | (3,327) | (3,196) | 1,116 | (2,080) |
| At 31 December 2023 | 6,358 | 18,568 | 6,806 | 5,370 | 6,507 | 43,609 | 6,940 | 50,549 |
| Total comprehensive income | – | – | – | – | 4,990 | 4,990 | 498 | 5,488 |
| Transactions with owners | ||||||||
| Dividends | – | – | – | – | (1,828) | (1,828) | – | (1,828) |
| Distributions on other equity<br><br>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 | (47) | 12 | – | – | – | – |
| Issue of other equity instruments | – | – | – | – | (6) | (6) | 763 | 757 |
| Repurchase and redemptions of<br><br>other equity instruments | – | – | – | – | (316) | (316) | (1,508) | (1,824) |
| Movement in treasury shares | – | – | – | – | (173) | (173) | – | (173) |
| Value of employee services | – | – | – | – | 119 | 119 | – | 119 |
| Total transactions with owners | (296) | 152 | (47) | 381 | (4,215) | (4,025) | (1,243) | (5,268) |
| At 31 December 2024 | 6,062 | 18,720 | 6,759 | 5,751 | 7,282 | 44,574 | 6,195 | 50,769 |
| Total comprehensive income | – | – | – | – | 2,926 | 2,926 | 463 | 3,389 |
| Transactions with owners | ||||||||
| Dividends | – | – | – | – | (2,000) | (2,000) | – | (2,000) |
| Distributions on other equity<br><br>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 | – | – | – | – | (10) | (10) | 1,511 | 1,501 |
| Repurchase and redemptions of<br><br>other equity instruments | – | – | – | – | – | – | (1,759) | (1,759) |
| Movement in treasury shares | – | – | – | – | 38 | 38 | – | 38 |
| Value of employee services | – | – | – | – | 204 | 204 | – | 204 |
| Total transactions with owners | (173) | 77 | – | 220 | (3,478) | (3,354) | (711) | (4,065) |
| At 31 December 2025 | 5,889 | 18,797 | 6,759 | 5,971 | 6,730 | 44,146 | 5,947 | 50,093 |
1Share capital and share premium, previously presented in aggregate, are shown separately. Comparatives have been represented on a consistent basis.
2The merger reserve comprises the premium on shares issued on 13 January 2009 under the placing and open offer and shares issued on 16 January 2009 on the acquisition of HBOS
plc, offset by adjustments on the redemption of preference shares. Substantially all of the Company’s merger reserve is available for distribution.
3The capital redemption reserve represents transfers from the merger reserve in accordance with companies’ legislation and amounts transferred from share capital following the
cancellation of shares
| 36 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
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Part III continued
Schedule: Parent company disclosures continued
(D)Company cash flow statement
| 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | |
|---|---|---|---|
| Cash flows from operating activities | |||
| Profit before tax | 3,366 | 5,440 | 5,055 |
| Adjustments for: | |||
| Fair value and exchange adjustments and other non-cash items | 311 | (83) | 744 |
| Change in other assets | 4,405 | (1,850) | (1,317) |
| Change in other liabilities and other items | (747) | 4,523 | (555) |
| Dividends received | (2,990) | (5,187) | (5,024) |
| Distributions on other equity instruments received | (680) | (541) | (505) |
| Tax refunded | 84 | 115 | 4 |
| Net cash provided by (used in) operating activities | 3,749 | 2,417 | (1,598) |
| Cash flows from investing activities | |||
| Return of capital contribution | 1 | 1 | 1 |
| Dividends received | 2,990 | 5,187 | 5,024 |
| Distributions on other equity instruments received | 680 | 541 | 505 |
| Acquisitions of and capital injections to subsidiaries | (5,288) | (1,309) | (1,496) |
| Return of capital by subsidiaries | 2,054 | 800 | 278 |
| Amounts advanced to subsidiaries | (6,118) | (4,340) | (4,563) |
| Repayment of loans to subsidiaries | 5,796 | 2,055 | 3,556 |
| Interest received on loans to subsidiaries | 610 | 386 | 410 |
| Net cash provided by investing activities | 725 | 3,321 | 3,715 |
| Cash flows from financing activities | |||
| Dividends paid to ordinary shareholders | (2,000) | (1,828) | (1,651) |
| Distributions on other equity instruments | (463) | (498) | (527) |
| Interest paid on subordinated liabilities | (638) | (509) | (466) |
| Proceeds from issue of subordinated liabilities | 1,757 | 812 | 1,416 |
| Proceeds from issue of other equity instruments | 1,501 | 757 | 1,765 |
| Proceeds from issue of ordinary shares | 99 | 187 | 86 |
| Share buyback | (1,710) | (2,011) | (1,993) |
| Repayment of subordinated liabilities | (1,275) | (819) | (643) |
| Repurchase and redemptions of other equity instruments | (1,759) | (1,824) | (135) |
| Net cash used in financing activities | (4,488) | (5,733) | (2,148) |
| Change in cash and cash equivalents | (14) | 5 | (31) |
| Cash and cash equivalents at beginning of year | 22 | 17 | 48 |
| Cash and cash equivalents at end of year | 8 | 22 | 17 |
(E)Interests in subsidiaries
The principal subsidiaries, all of which have prepared accounts to 31 December 2024 and whose results are included in the consolidated
accounts of Lloyds Banking Group plc, are:
| Name of subsidiary undertaking | Country of<br><br>registration/<br><br>incorporation | Percentage of equity<br><br>share capital and<br><br>voting rights held | Nature of business | Registered office |
|---|---|---|---|---|
| Lloyds Bank plc | England | 100% | Banking and financial services | 25 Gresham Street, London EC2V 7HN |
| Scottish Widows Limited | England | 100%* | Life assurance | 25 Gresham Street, London EC2V 7HN |
| HBOS plc | Scotland | 100%* | Holding company | The Mound, Edinburgh EH1 1YZ |
| Bank of Scotland plc | Scotland | 100%* | Banking and financial services | The Mound, Edinburgh EH1 1YZ |
| Lloyds Bank Corporate Markets plc1 | England | 100% | Banking and financial services | 25 Gresham Street, London EC2V 7HN |
| LBG Equity Investments Limited1 | England | 100% | Financial services | 25 Gresham Street, London EC2V 7HN |
*Indirect interest
1Subsidiary that does not meet quantitative threshold for significance. Included for consistency with the consolidated financial statements.
The principal area of operation for each of the above subsidiaries is the United Kingdom.
| 37 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
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Part III continued
Report of independent registered public accounting firm
To the shareholders and the Board of Directors of Lloyds Banking Group plc
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Lloyds Banking Group plc and subsidiaries (the ‘Group’) as at 31 December
2025 and 2024, the related consolidated income statements, consolidated statements of comprehensive income, statements of changes in
equity, and cash flow statements, for each of the three years in the period ended 31 December 2025, and the related notes, the disclosures
marked as ‘Audited’ within Item 5 in the Operating and Financial Review and Prospects section on pages 11 to 23 and the schedule included in
Item 18, all included in the Annual Report on Form 20-F (collectively referred to as the ‘financial statements’). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Group as at 31 December 2025 and 2024, and the results of its
operations and its cash flows for each of the three years in the period ended 31 December 2025, in conformity with IFRS Accounting Standards
as issued by the International Accounting Standards Board (‘IASB’).
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
Group's internal control over financial reporting as at 31 December 2025, based on criteria established in Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated 13 February 2026,
expressed an unqualified opinion on the Group's internal control over financial reporting.
Basis for opinion
These financial statements are the responsibility of the Group's management. Our responsibility is to express an opinion on the Group's financial
statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to
the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud,
and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable
basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were
communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the
financial statements and (2) involved our especially challenging, subjective, or complex judgements. The communication of critical audit matters
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Expected credit losses
Impairment of loans and advances
Refer to notes 2, 14, 20, 21 and 39 in the financial statements
Critical Audit Matter description
The Group has recognised £3.2 billion of expected credit losses (‘ECL’) as at 31 December 2025. The valuation and allocation of ECL consists of a
number of assumptions that are inherently uncertain and require a high degree of complex and subjective auditor judgement, specialised skills
and knowledge, and complex impairment modelling. The increasing economic uncertainty resulting from geopolitical risks and the impact of
changes in the US trade tariff rates has further heightened the levels of judgement required, especially in the development of the base case
economic scenario and alternative economic scenarios.
The key areas we identified as having the most significant level of management judgement were in respect of:
•Multiple economic scenarios;
•Collectively assessed ECL;
•Individually assessed ECL; and
•ECL model adjustments.
Multiple economic scenarios
The Group’s economics team develops the future economic scenarios by developing a base case forecast based on a set of conditioning
assumptions, with the three outer economic scenarios (upside, downside and severe downside) derived using a Monte Carlo simulation around
the base case. The modelled severe downside scenario is then adjusted to capture supply-side risks not contemplated by the Monte Carlo
model. The upside, the base case and the downside scenarios are weighted at a 30% probability and the severe downside at a 10% probability.
The development of the base case scenario, including the conditioning assumptions, is inherently highly complex and requires significant
judgement.
Collectively assessed ECL
The ECL for the Retail and Commercial Banking divisions, except for individually assessed stage 3 commercial loans, is determined on a
collective basis using impairment models. These models use a number of significant judgements to calculate a probability weighted estimate by
applying a probability of default, exposure at default and a loss given default, taking account of collateral held or other loss mitigants,
discounted using the effective interest rate.
The key judgements and estimates in determining the collectively assessed ECL include:
•modelling approach, model assumptions and judgements, and selection of modelling data;
•credit risk ratings for the Commercial Banking division, which are performed on a counterparty basis for larger exposures by a credit officer;
and
•the appropriate allocation of assets into the correct staging taking into account any significant deterioration in credit risk since inception of
the loan.
| 38 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
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Part III continued
Individually assessed ECL
For individual provision assessments of larger exposures in stage 3 in the Commercial Banking division, complex and subjective auditor
judgement including specialised knowledge is required in evaluating the methodology, models and inputs that are inherently uncertain in
determining the ECL. The significant judgements in estimating provisions are the:
•completeness and appropriateness of the potential workout scenarios identified;
•probability of default assigned to each identified potential workout scenario; and
•valuation assumptions used in determining the expected recovery strategies.
ECL model adjustments
Where impairment models do not incorporate all factors relevant to estimating the ECL, adjustments are made to address known model
limitations and data limitations, emerging or non-modelled risks and the impact of economic uncertainty on different industry sectors. The
identification of model limitations is highly judgemental and inherently uncertain. The adjustments made to address these limitations require
specialist auditor judgement when evaluating the:
•completeness of adjustments; and
•methodology, assumptions, models and inputs.
How the Critical Audit Matter was addressed in the audit
Multiple economic scenarios
We performed the following procedures:
•tested the controls over the generation of the multiple economic scenarios including those over the Group’s governance processes to
approve the base case, different scenarios and the weightings applied to each scenario;
•working with our internal economic specialists:
◦challenged and evaluated economic forecasts in the base scenario such as the unemployment rate, House Price Index, Commercial Real
Estate prices, inflation and forecasted interest rates, and Gross Domestic Product through comparison to independent economic
outlooks, other external analyses and market data;
◦challenged and evaluated the appropriateness of changes in assumptions and/or the model including changes to the non-modelled
severe downside approach;
◦challenged and evaluated the appropriateness of the methodology applied to generate alternative macroeconomic scenarios, including
associated weightings and assumptions within the model; and
◦independently replicated the multiple economic scenario model and compared the outputs of our independent model to the Group’s
output to test scenario generation;
•tested the completeness and accuracy of the data used by the model;
•performed a stand back assessment of the appropriateness of the weightings applied to each of the scenarios based on publicly available
data; and
•evaluated the appropriateness of disclosures in respect of significant judgements and sources of estimation uncertainty including
macroeconomic scenarios.
Collectively assessed ECL
We tested controls across the process to estimate the ECL provisions including:
•model governance, including model validation and monitoring;
•model assumptions;
•allocation of assets into stages, including those to determine the credit risk rating in the Commercial Banking division; and
•completeness and accuracy of the data used by the model
Working with our internal modelling specialists our audit procedures over the key areas of estimation in the valuation and allocation of the ECL
covered the following:
•Model estimations; where we:
–evaluated the appropriateness of the modelling approach and assumptions used;
–independently replicated a sample of the models for all in-scope portfolios and compared the outputs of our independent models to the
Group’s outputs;
–assessed model performance by evaluating variations between observed data and model predictions;
–developed an understanding of model limitations and assessed these and remedial actions; and
–tested the completeness and accuracy of the data used in model execution and calibration.
•Allocation of assets into stages, where we:
–evaluated the appropriateness of quantitative and qualitative criteria used for allocation into IFRS 9 stages, including independently
assessing the credit rating of a sample of loans in the Commercial Banking division;
–tested the appropriateness of the stage allocation for a sample of exposures; and
–tested the data used by models in assigning IFRS 9 stages and evaluated the appropriateness of the model logic used.
Individually assessed ECL
For expected credit losses assessed individually we have:
•selected senior team members with extensive IFRS 9 knowledge and expertise to design and lead the execution of the audit of ECL;
•tested the controls over individually assessed provisions including assumptions and inputs into workout and recovery scenarios, as well as
valuation assumptions used; and
•evaluated the appropriateness of workout and recovery scenarios identified including the judgements to determine the timing and value of
associated cash flows as well as consideration of climate risk.
ECL model adjustments
In respect of the adjustments to models, we performed the following procedures in conjunction with our specialists:
•tested the controls over the valuation of in-model and post-model adjustments, including methodology, calculation, assumptions and the
completeness and accuracy of data used;
•evaluated the methodology, rationale and assumptions in developing the adjustments, and evaluated the Group’s selection of approaches;
•tested the completeness and accuracy of the data used in formulating the judgements;
•performed a recalculation of adjustments;
•evaluated the completeness of adjustments based on our understanding of both model and data limitations; and
•assessed the appropriateness of the disclosures and whether the disclosures appropriately address the uncertainty which exists in
determining the ECL.
| 39 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
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Part III continued
Regulatory and legal provisions
Provisions
Refer to notes 2 and 28 in the financial statements
Critical Audit Matter description
The Group operates in an environment where it is subject to regulatory investigations, litigation and customer remediation including allegations
of fraud and misconduct. The Group recognised an additional £800 million provision in the year 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 motor commission review
provision is £1,950 million.
Significant judgement and estimation is required by the Group to assess the best estimate to settle the obligation in respect of motor finance
commission arrangements based on the information available to the Group, under IAS 37 Provisions, Contingent Liabilities and Contingent
Assets as:
•the final redress scheme is not expected to be published by the Financial Conduct Authority (‘FCA’) until March 2026;
•there are uncertainties over the likely response rate and cost of delivery; and
•the related disclosures must accurately reflect this.
How the Critical Audit Matter was addressed in the audit
We performed the following audit procedures:
•tested the Group’s controls over the completeness of provisions, the review of the assessment of the provision and contingent liability
disclosures against the requirements of IAS 37, the review of the appropriateness of judgements used to determine a best estimate and the
completeness and accuracy of data used in the process;
•tested the governance control operating over the assumptions used in the motor finance commission provision model including agreement to
previous redress experience where applicable;
•inspected information, both supportive and contradictory, including the decision made by the Supreme Court in August 2025, the FCA’s
redress proposal in CP25/27 and the view of independent analysts, to determine whether management’s approach was reasonable;
•worked with our internal modelling specialists to independently recalculate the likely cost of redress under the FCA’s proposal;
•tested the methodology and assumptions applied to determine the provision;
•evaluated the mathematical accuracy of the model including the completeness and accuracy of data used in the model;
•inspected correspondence and, where appropriate, made direct inquiry with the Group’s regulators and internal and external legal counsel;
•verified and evaluated whether the methodology, data, significant judgements and assumptions and calculations used in the valuation of the
provisions are appropriate in the context of the applicable financial reporting framework; and
•evaluated the assessment of the provision and that the contingent liability disclosures appropriately reflect the facts and key sources of
estimation uncertainty, the associated probabilities and potential outcomes in accordance with IAS 37.
Defined benefit obligations
Retirement benefit obligations
Refer to notes 2 and 12 in the financial statements
Critical Audit Matter description
The Group operates a number of defined benefit retirement schemes, the obligations for which totalled £26.6 billion as at 31 December 2025.
Their valuation is determined with reference to key actuarial assumptions including mortality assumptions, discount rates and inflation rates.
Due to the size of these schemes, small changes in these assumptions can have a material impact on the value of the defined benefit obligation
and therefore, the determination of these assumptions requires significant auditor judgement.
How the Critical Audit Matter was addressed in the audit
We performed the following audit procedures:
•tested the Group’s controls over the valuation of the defined benefit obligations, including controls over the assumptions setting process;
and
•challenged and evaluated the key actuarial assumptions against the compiled expected ranges, determined by our internal actuarial experts,
based on observable market indices and market experience.
Valuation of certain complex and illiquid financial instruments held at fair value
Financial assets at fair value through profit or loss
Refer to notes 2, 16, 17 and 39 in the financial statements
Critical Audit Matter description
Financial instruments are classified as level 1, 2 or 3 in accordance with IFRS 13 ‘Fair value measurement’.
The fair value of complex and illiquid financial instruments, involves significant judgement. The extent of judgement applied by the Group in
valuing the Group’s financial investments varies with the nature of assets held, the markets in which they are traded, and the valuation
methodology applied.
The Group holds several portfolios of level 3 illiquid investments totalling £6.1 billion, the largest of which is held within the Insurance, Pensions
and Investments division, and includes loans in the commercial real estate, social housing, infrastructure, and education sectors. The valuation
of these loans uses complex valuation models as they are without readily determinable market values and were valued using significant
unobservable inputs, such as loan to bond premium and calibration spread that involved considerable judgement by management.
How the Critical Audit Matter was addressed in the audit
We tested the controls over the valuation of financial instruments, including controls over significant assumptions used in the valuation of these
financial assets, and model review controls.
| 40 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
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Part III continued
We worked with our valuation specialists in our audit of the valuation of the level 3 portfolio loans and we performed the following procedures:
•evaluated the appropriateness of loan valuation methodologies;
•calculated a range of comparable values for a sample of modelled illiquid financial instruments using an independent valuation model and
considered reasonable alternative key assumptions based on comparable securities and compared results;
•evaluated the appropriateness of the internal credit ratings methodology and tested the appropriateness of the ratings for a sample of loan
counterparties;
•evaluated the consistency and appropriateness of inputs and assumptions over time, challenging both significant movements and non-
movements where we expected change; and
•assessed the appropriateness of disclosures and sensitivity analysis.
/s/ Deloitte LLP
London, United Kingdom
13 February 2026
We have served as the Group’s auditor since 2021.
| 41 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 |
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Part III continued
Item 19. Exhibits
A.Annual Report
The following pages from the Annual Report 2025 (see Exhibits 15.1) are incorporated by reference into this Annual Report on Form 20-F, listed
in order of appearance. The content of websites and other sources, reports and materials referenced on these pages are not incorporated by
reference into this Annual Report on Form 20-F.
| Pages in the Annual Report 2025 | ||||
|---|---|---|---|---|
| Annual Report on Form 20-F section | Section in the Annual Report 2025 | From | To | |
| Part 1 | Item 4. | Consolidated income statement | 211 | |
| Note 4: Segmental analysis | 228 | 232 | ||
| Restructuring, volatility and other items | 56 | |||
| Volatility arising in the Insurance business | 59 | |||
| Our external environment | 10 | 13 | ||
| Group structure and ring-fencing governance arrangements | 73 | |||
| Part 1 | Item 5. | Our external environment | 10 | 13 |
| Note 1: Basis of preparation | 218 | |||
| Note 3: Critical accounting judgements and key sources of estimation uncertainty | 228 | |||
| Note 19: Derivative financial instruments | 269 | 271 | ||
| Consolidated income statement | 211 | |||
| Note 6: Net fee and commission income | 233 | 234 | ||
| Note 7: Net trading income | 234 | |||
| Note 8: Insurance business (A) | 235 | |||
| Note 8: Insurance business (B) | 235 | 236 | ||
| Note 9: Other operating income | 242 | |||
| Statutory results | 53 | |||
| Note 10: Operating expenses | 242 | |||
| Note 14: Impairment | 251 | 252 | ||
| Note 15: Tax | 252 | 254 | ||
| Consolidated balance sheet | 213 | |||
| Capital risk | 144 | 145 | ||
| Capital returns and Minimum requirement for own funds and eligible liabilities (MREL) | 145 | 146 | ||
| Capital risk | 147 | 150 | ||
| Maturities of contingent liabilities, commitments and financial guarantees (audited) | 186 | |||
| Note 26: Debt securities in issue | 283 | |||
| Note 37: Structured entities | 292 | 293 | ||
| Note 29: Subordinated liabilities | 285 | 286 | ||
| Note 18: Maturities of assets and liabilities | 267 | 268 | ||
| Note 27: Other liabilities | 283 | |||
| Note 36: Contingent liabilities, commitments and financial guarantees | 291 | 292 | ||
| Note 4: Segmental analysis | 228 | 232 | ||
| Sustainability review | 35 | 49 | ||
| Climate risk | 150 | 152 | ||
| Sustainability governance | 80 | 81 | ||
| Risk management | 138 | 143 | ||
| Compliance risk | 152 | |||
| Conduct risk | 153 | |||
| Economic crime risk | 179 | |||
| Insurance underwriting risk | 180 | |||
| Liquidity risk | 181 | 186 | ||
| Market risk | 187 | 193 | ||
| Model risk | 194 | |||
| Operational risk | 195 | 197 | ||
| Credit risk: Risk appetite | 154 | |||
| Credit risk: Identification and assessment | 154 | |||
| Credit risk: Management and mitigation | 154 | 157 | ||
| Credit risk: Monitoring | 157 | |||
| Credit risk: Reporting | 157 | |||
| Movements in balances for the year ended 31 December 2025 (audited) | 164 | |||
| Movements in balances for the year ended 31 December 2024 (audited) | 165 | |||
| Concentrations of exposure (audited) | 165 | |||
| Forbearance | 166 | |||
| Credit quality of loans and advances to customers (audited) | 166 | 168 | ||
| Retail UK mortgage balance movements (audited) | 170 | |||
| UK mortgages product analysis (statutory basis) | 171 | |||
| Interest-only UK mortgages | 171 | |||
| 42 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 | |||
| --- | --- |
Part III continued
| Pages in the Annual Report 2025 | ||||
|---|---|---|---|---|
| Annual Report on Form 20-F section | Section in the Annual Report 2025 | From | To | |
| Collateral held as security for Retail loans and advances to customers (audited) | 172 | |||
| Other Retail lending | 173 | |||
| Retail credit card balance movements (audited) | 173 | |||
| Commercial Banking balance movements (audited) | 175 | |||
| Collateral held as security for Commercial Banking loans and advances to customers<br><br>(audited) | 176 | |||
| Commercial Banking UK Real Estate | 176 | |||
| Credit quality of other financial assets (audited) | 177 | |||
| Collateral held as security for other financial assets (audited) | 178 | |||
| Note 16: Measurement basis of financial assets and liabilities | 255 | 256 | ||
| Liquidity risk - Analysis of 2025 term issuance (audited) | 183 | |||
| Other statutory and regulatory information - Research and development activities | 135 | |||
| Part 1 | Item 6. | Our Board | 68 | 69 |
| Our Group Executive Committee | 71 | |||
| Our governance structure and responsibilities | 72 | 73 | ||
| Board activities | 74 | 75 | ||
| Engaging with our stakeholders | 76 | 78 | ||
| Our culture in action | 79 | |||
| Sustainability governance | 80 | 81 | ||
| Board performance | 82 | 83 | ||
| Directors' remuneration report | 98 | 110 | ||
| Directors' remuneration report | 112 | 116 | ||
| Directors' remuneration report | 118 | 133 | ||
| Note 10: Operating expenses | 242 | |||
| Note 11: Share-based payments | 243 | 245 | ||
| Note 12: Retirement benefit obligations | 245 | 250 | ||
| Nomination and Governance Committee report | 85 | 86 | ||
| Audit Committee report (except “Viability statement” on page 90) | 88 | 91 | ||
| Board Risk Committee report | 92 | 96 | ||
| Responsible Business Committee report | 97 | |||
| Remuneration Committee Chair’s statement | 98 | 102 | ||
| Remuneration Committee | 105 | |||
| 2023 Directors’ Remuneration Policy summary and 2025 implementation | 106 | 107 | ||
| Service agreement and Letters of appointment | 130 | 131 | ||
| Note 2(K): Accounting policies (Employee benefits) | 223 | |||
| Directors’ share interests and share awards (audited) | 114 | 115 | ||
| Outstanding share plan interests (audited) | 114 | 115 | ||
| Outstanding cash awards (audited) | 114 | 115 | ||
| Part 1 | Item 7. | Note 35: Related party transactions | 290 | 291 |
| Part 1 | Item 8. | The Consolidated Financial Statements and Notes to the Consolidated Financial<br><br>Statements | 211 | 296 |
| Note 28: Provisions | 283 | 285 | ||
| Note 36: Contingent liabilities, commitments and financial guarantees | 291 | 292 | ||
| Part 1 | Item 11. | Market risk | 187 | 193 |
| Note 39: Financial risk management | 294 | |||
| Part 2 | Item 15. | Board responsibility, Control effectiveness review, Reviews by the Board | 84 | |
| Committees' membership role and activities | 85 | 86 | ||
| Committees’ membership role and activities (except “Viability statement” on page 90) | 88 | 97 | ||
| Internal control | 84 | |||
| Audit Committee report (except “Viability statement” on page 90) | 88 | 91 | ||
| Remuneration Committee | 105 | |||
| UK Corporate Governance Code | 67 | |||
| Part 2 | Item 16A. | Our Board | 68 | 69 |
| Audit Committee report (except “Viability statement” on page 90) | 88 | 91 | ||
| Part 2 | Item 16C. | Note 13: Auditors’ remuneration | 251 | |
| Auditor independence and remuneration, External auditor and Statutory Audit Services<br><br>compliance | 91 | |||
| Part 2 | Item 16G. | Chair's statement | 66 | 67 |
| UK Corporate Governance Code | 67 | |||
| Our governance structure and responsibilities | 72 | 73 | ||
| Board activities | 74 | 75 | ||
| Engaging with our stakeholders | 76 | 78 | ||
| 43 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 | |||
| --- | --- |
Part III continued
| Pages in the Annual Report 2025 | ||||
|---|---|---|---|---|
| Annual Report on Form 20-F section | Section in the Annual Report 2025 | From | To | |
| Our culture in action | 79 | |||
| Sustainability governance | 80 | 81 | ||
| Part 3 | Item 18. | The Consolidated Financial Statements and Notes to the Consolidated Financial<br><br>Statements | 211 | 296 |
B.The 6-K Risk Factors
The following pages from the Form 6-K filed 29 January 2026 (see Exhibit 15.2) are incorporated by reference into this Annual Report on Form
20-F. The content of websites and other sources, reports and materials referenced on these pages are not incorporated by reference into this
Annual Report on Form 20-F.
| Pages in the Form 6-K filed 29<br><br>January 2026 | ||||
|---|---|---|---|---|
| Annual Report on Form 20-F section | Section in the Form 6-K filed 29 January 2026 | From | To | |
| Part 1 | Item 3. | Risk Factors | 1 | 23 |
| Part 1 | Item 4. | Regulatory and Legal Risks – The Group faces risks associated with its compliance with a<br><br>wide range of laws and regulations | 10 | |
| Regulatory and Legal Risks – The Group is subject to resolution planning requirements | 13 | |||
| 44 | Lloyds Banking Group plc Annual Report on Form 20-F 2025 | |||
| --- | --- |
Part III continued
C.Exhibits
Signature
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorised the
undersigned to sign this annual report on its behalf.
| Lloyds Banking Group plc | |
|---|---|
| By: | /s/ William Chalmers |
| Name: | William Chalmers |
| Title: | Chief Financial Officer |
| Dated: | 13 February 2026 |
Document
EXHIBIT 2(d)
Description of Securities Registered Under Section 12 of the Exchange Act
As of December 31, 2025, Lloyds Banking Group plc (“LBG,” the “Company,” “we,” “us” and “our”) had the following series of securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Ticker symbol | Name of each exchange on which registered |
|---|---|---|
| Ordinary shares of nominal value 10 pence each, represented by American Depositary Shares | The New York Stock Exchange | |
| 4.344% Subordinated Securities due in 2048 | LYG48A | The New York Stock Exchange |
| 3.369% Fixed Rate Reset Subordinated Debt Securities due 2046 | LYG46 | The New York Stock Exchange |
| 5.300% Subordinated Securities due 2045 | LYG45 | The New York Stock Exchange |
| 4.943% Senior Callable Fixed-to-Fixed Rate Notes due 2036 | LYG36A | The New York Stock Exchange |
| 6.068% Fixed Rate Reset Dated Subordinated Tier 2 Notes due 2036 | LYG36 | The New York Stock Exchange |
| 5.590% Senior Callable Fixed-to-Fixed Rate Notes due 2035 | LYG35A | The New York Stock Exchange |
| 5.679% Senior Callable Fixed-to-Fixed Rate Notes due 2035 | LYG35 | The New York Stock Exchange |
| 7.953% Fixed Rate Reset Subordinated Debt Securities due 2033 | LYG33A | The New York Stock Exchange |
| 4.976% Senior Callable Fixed-to-Fixed Rate Notes due 2033 | LYG33 | The New York Stock Exchange |
| Senior Callable Floating Rate Notes due 2031 | LYG 31B | The New York Stock Exchange |
| 4.425% Senior Callable Fixed-to-Fixed Rate Notes due 2031 | LYG 31A | The New York Stock Exchange |
| 1.985% Fixed Rate Reset Subordinated Debt Securities due 2031 | LYG31 | The New York Stock Exchange |
| 5.721% Senior Callable Fixed-to-Fixed Rate Notes due 2030 | LYG30 | The New York Stock Exchange |
| 4.818% Senior Callable Fixed-to-Fixed Rate Notes due 2029 | LYG29A | The New York Stock Exchange |
| Senior Callable Floating Rate Notes due 2029 | LYG29B | The New York Stock Exchange |
| 5.871% Senior Callable Fixed-to-Fixed Rate Notes due 2029 | LYG29 | The New York Stock Exchange |
| Senior Callable Floating Rate Notes due 2028 | LYG28H | The New York Stock Exchange |
| 5.087% Senior Callable Fixed-to-Fixed Rate Notes due 2028 | LYG28G | The New York Stock Exchange |
| Senior Callable Floating Rate Notes due 2028 | LYG28F | The New York Stock Exchange |
| 5.462% Senior Callable Fixed-to-Fixed Rate Notes due 2028 | LYG28E | The New York Stock Exchange |
| 3.750% Senior Callable Fixed-to-Fixed Rate Notes due 2028 | LYG28D | The New York Stock Exchange |
| 4.550% Senior Notes due 2028 | LYG28C | The New York Stock Exchange |
| 4.375% Senior Notes due 2028 | LYG28B | The New York Stock Exchange |
| 3.574% Senior Notes due in 2028 | LYG28A | The New York Stock Exchange |
| Senior Callable Floating Rate Notes due 2027 | LYG27C | The New York Stock Exchange |
| 5.985% Senior Callable Fixed-to-Fixed Rate Notes due 2027 | LYG27B | The New York Stock Exchange |
| 1.627% Senior Callable Fixed-to-Fixed Rate Notes due 2027 | LYG27A | The New York Stock Exchange |
| 3.750% Senior Notes due 2027 | LYG27 | The New York Stock Exchange |
| 4.650% Subordinated Securities due 2026 | LYG26 | The New York Stock Exchange |
Capitalized terms used but not defined herein have the meanings given to them in LBG’s annual report on Form 20-F for the fiscal year ended December 31, 2025 (the “2025 Annual Report”).
Ordinary Shares
The following is a summary of the material terms of the ordinary shares and preference shares, as set forth in our Articles of Association and the material provisions of U.K. law. This description is a summary and does not purport to be complete. You are encouraged to read our Articles of Association, which are filed as an exhibit to LBG’s annual report on Form 20-F for the fiscal year ended December 31, 2021, incorporated by reference into this document (the “2021 Annual Report”).
Share Capital
As at December 31, 2025, the number of shares outstanding was as follows:
| Class of Share | number<br><br>(in thousands) | amount<br><br>(in £m) |
|---|---|---|
| Ordinary shares, nominal value of 10 pence each | 58,885,744 | 5,888.57 |
| Preference shares, nominal value of 25 pence each | 296,141 | 74.04 |
| Preference shares, nominal value of 25 cents each | 87 | 0.021 |
Please refer to pages 171-176 of the 2021 Annual Report for a summary of the material provisions of LBG’s Articles of Association.
1 Converted based on the pound sterling/U.S. dollar exchange rate of £1/U.S.$1.3447 on December 31, 2025, as announced by the U.S. Federal Reserve Board.
American Depositary Shares
The following is a summary of the general terms and provisions of the deposit agreement under which the Depositary will deliver the American Depositary Shares (“ADSs”). The deposit agreement is among us, The Bank of New York Mellon, as Depositary, and all registered holders and beneficial owners from time to time of ADSs issued under it. This summary does not purport to be complete. You should read the deposit agreement, which we have filed with the SEC as an exhibit to the registration statement of which this prospectus is a part. You may also read the deposit agreement at the depositary offices of The Bank of New York Mellon in The City of New York and the offices of the Custodian in London. The principal executive office of the Depositary and its depositary office is currently located at 240 Greenwich Street, New York, NY 10286.
American Depositary Shares
The Bank of New York Mellon, as Depositary, will register and deliver ADSs pursuant to the deposit agreement. Each ADS will represent four ordinary shares, or evidence of the right to receive four ordinary shares, deposited with the Custodian and registered in the name of the Depositary or its nominee (such ordinary shares, together with any additional ordinary shares at any time deposited or deemed deposited under the deposit agreement and any other securities, cash or other property received by the Depositary or the Custodian in respect of such ordinary shares, the “Deposited Securities”).
ADSs can be held either (A) directly (i) by having an American Depositary Receipt (“ADR”), which is a certificate evidencing a specific number of ADSs, registered in the holder’s name, or (ii) by having ADSs registered in the owner’s name in the Direct Registration System (“DRS”), or (B) indirectly by holding a security entitlement in ADSs through a broker or other financial institution. A direct holder of an ADS is an ADS registered holder. This description assumes that each holder is an ADS registered holder. Indirect holders of ADSs must rely on the procedures of a broker or other financial institution to assert the rights of ADS registered holders described in this section, and such holders should consult with their broker or financial institution to find out what those procedures are.
The DRS is a system administered by DTC pursuant to which the depositary may register the ownership of uncertificated ADSs, which ownership shall be evidenced by periodic statements sent by the depositary to the registered holders of uncertificated ADSs. See “—Direct Registration System” below.
Holders of ADSs will not have shareholder rights. Scottish law governs shareholder rights. The Depositary will be the holder of the ordinary shares represented by each investor’s ADSs. As a registered holder of ADSs, each investor will have ADS registered holder rights as set forth in the deposit agreement. The deposit agreement also sets forth the rights and obligations of us and of the Depositary. New York law governs the deposit agreement and the ADSs.
In this section, the term “deliver”, or its noun form, when used with respect to ADSs, shall mean (A) book-entry transfer of ADSs to an account at The Depository Trust Company, or its successor, designated by the person entitled to such delivery, (B) registration of ADSs not evidenced by an ADR on the books of the Depositary in the name requested by the person entitled to such delivery and mailing to that person of a statement confirming that registration or (C) if requested by the person entitled to such delivery, delivery at the office of the Depositary to the person entitled to such delivery of one or more ADRs evidencing ADSs registered in the name requested by that person. The term “surrender”, when used with respect to ADSs, shall mean (A) one or more book-entry transfers of ADSs to the DTC account of the Depositary, (B) delivery to the Depositary at its office of an instruction to surrender ADSs not evidenced by an ADR or (C) surrender to the Depositary at its office of one or more ADRs evidencing ADSs.
Deposit and Withdrawal
The Depositary has agreed, subject to the terms and conditions of the deposit agreement, that upon delivery to the Custodian of ordinary shares (or evidence of rights to receive ordinary shares) in a form satisfactory to the Custodian, the Depositary will, upon payment of the fees, charges and taxes provided in the deposit agreement, deliver to, or upon the written order of, the person or persons named in the notice of the Custodian delivered to the Depositary or requested by the person depositing such shares with the Depositary, the number of ADSs issuable in respect of such deposit.
Upon surrender at the office of the Depositary of ADSs for the purpose of withdrawal of the Deposited Securities represented thereby, and upon payment of the fees, governmental charges and taxes provided in the deposit agreement, and subject to the terms and conditions of the deposit agreement, our Articles of Association and the Deposited Securities, the holder of such ADSs will be entitled to delivery, to him or upon his order, as permitted by applicable law, of the amount of Deposited Securities at the time represented by such ADSs. The forwarding of share certificates, other securities, property, cash and other documents of title for such delivery will be at the risk and expense of the holder.
An ADR holder may surrender its ADR to the Depositary for the purpose of exchanging its ADR for uncertificated ADSs. The Depositary will cancel that ADR and will send the ADS registered holder a statement confirming that the ADS registered holder is the registered holder of uncertificated ADSs. Alternatively, upon receipt by the Depositary of a proper instruction from a registered holder of uncertificated ADSs requesting the exchange of uncertificated ADSs for certificated ADSs, the Depositary will execute and deliver to the ADS registered holder an ADR evidencing those ADSs.
Ordinary shares that the Depositary believes have been withdrawn from a restricted depositary receipt facility established or maintained by a depositary bank (including any such other facility maintained by the Depositary) may be accepted for deposit only if those ordinary shares are not “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act, and the Depositary may, as a condition of accepting those ordinary shares for deposit, require the person depositing those ordinary shares to provide the Depositary with a certificate to the foregoing effect.
Dividends and Other Distributions
The Depositary will distribute all cash dividends or other cash distributions that it receives in respect of deposited ordinary shares to the holders of the ADSs, after payment of any charges and fees provided for in the deposit agreement in proportion to their holdings of ADSs. The cash amount distributed will be reduced by any amounts that the Depositary must withhold on account of taxes.
If we make a non-cash distribution in respect of any deposited ordinary shares, the Depositary will distribute the property it receives to holders of the ADSs, after deduction or upon payment of any taxes, charges and fees provided for in the deposit agreement, in proportion to their holdings of ADSs. If a distribution that we make in respect of deposited ordinary shares consists of a dividend in, or free distribution of, ordinary shares, the Depositary may, after consultation with us, and will, if we request so in writing, distribute to holders of the ADSs, in proportion to their holdings of ADSs, additional ADSs representing the amount of ordinary shares received as such dividend or free distribution. If the Depositary does not distribute additional ADSs, each ADS will from then forward also represent its proportional share of the additional ordinary shares distributed in respect of the deposited ordinary shares before the dividend or free distribution.
If the Depositary determines that any distribution of property, other than cash or ordinary shares, cannot be made proportionately among ADS holders or if for any other reason, including any requirement that we or the Depositary withhold an amount on account of taxes or other governmental charges, the Depositary deems that such a distribution is not feasible, the Depositary may dispose of all or part of the property in any manner, including by public or private sale, that it deems equitable and practicable. The Depositary will then distribute the net proceeds of any such sale (net of any fees and expenses of the Depositary provided for in the deposit agreement) to ADS holders as in the case of a distribution received in cash.
Record Date
Whenever any cash dividend or other cash distribution becomes payable or any distribution other than cash shall be made, or whenever rights shall be issued with respect to the deposited ordinary shares, or whenever the Depositary causes a change in the number of ordinary shares represented by each ADS or receives notice of any meeting of holders of ordinary shares, the Depositary will fix a record date, which shall be as close as possible to the corresponding record date set by us, for the determination of the ADS holders who are entitled to receive the dividend distribution, distribution of rights or the net proceeds of the sale of ordinary shares as the case may be, or to give instructions for the exercise of voting rights at the meeting, subject to the provisions of the deposit agreement.
Voting of the Underlying Deposited Securities
When the Depositary receives notice of any meeting of holders of ordinary shares, it will, if we request, as soon as practicable thereafter, mail to the record holders of ADSs a notice including:
•the information contained in the notice of meeting provided by us;
•a statement that the record holders of ADSs at the close of business on a specified record date will be entitled, subject to any applicable provision of Scottish law and the Articles of Association or any similar document of ours, to instruct the Depositary as to the exercise of any voting rights pertaining to the ordinary shares represented by their ADSs; and
•a brief explanation of how they may give instructions.
The Depositary has agreed that it will endeavor, in so far as practical, to vote or cause to be voted the ordinary shares in accordance with any written non-discretionary instructions of record holders of ADSs that it receives on or before the date set by the Depositary for that purpose. However, holders of ADSs may not receive notice or otherwise learn of a meeting of holders of ordinary shares in time to instruct the Depositary prior to a cut-off date the Depositary will set. The Depositary will not vote the ordinary shares except in accordance with such instructions.
Holders of ADSs will not be entitled to vote ordinary shares directly.
Inspection of Transfer Books
The Depositary will, at its office in New York City, keep books for the registration and transfer of ADSs. These books will be open for inspection by ADS holders at all reasonable times. However, this inspection may not be for the purpose of communicating with ADS holders in the interest of a business or object other than our business or a matter related to the deposit agreement or the ADSs.
Reports and Notices
We will furnish the Depositary with our annual and interim reports as described under “Incorporation of Documents by Reference”. The Depositary will make available at its office in New York City, for any ADS holder to inspect, any reports and communications received from us that are both received by the Depositary as holder of ordinary shares and made generally available by us to the holders of those ordinary shares, including our annual report and accounts and interim report and accounts. Upon our written request, the Depositary will mail copies of those reports to ADS holders as provided in the deposit agreement.
On or before the first date on which we give notice, by publication or otherwise, of:
•any meeting of holders of the ordinary shares;
•any adjourned meeting of holders of the ordinary shares; or
•the taking of any action in respect of any cash or other distributions or the offering of any rights in respect of the ordinary shares,
we have agreed to transmit to the Depositary and the Custodian a copy of the notice in the form given or to be given to holders of the ordinary shares. If requested in writing by us, the Depositary will, at our expense, arrange for the prompt transmittal or mailing of such notices, and any other reports or communications made generally available to holders of the ordinary shares, to all holders of ADSs.
Amendment and Termination of the Deposit Agreement
The form of the ADRs and any provisions of the deposit agreement may at any time and from time to time be amended by agreement between us and the Depositary, without the consent of holders of ADSs, in any respect which we and the Depositary may deem necessary or advisable. Any amendment that imposes or increases any fees or charges, other than taxes and other governmental charges, registration fees, transmission costs, delivery costs or other such expenses, or that otherwise prejudices any substantial existing right of holders of outstanding ADSs, will not take effect as to outstanding ADSs until thirty (30) days after notice of the amendment has been given to the record holders of those ADSs. Every holder of ADSs at the time an amendment becomes effective will be deemed by continuing to hold the ADSs to consent and agree to the amendment and to be bound by the deposit agreement or the ADR as amended. No amendment may impair the right of any holder of ADSs to surrender ADSs and receive in return the ordinary shares represented by those ADSs.
Whenever we direct, the Depositary has agreed to terminate the deposit agreement by mailing a termination notice to the record holders of all ADSs then outstanding at least ninety (90) days before the date fixed in the notice of termination. The Depositary may likewise terminate the deposit agreement by mailing a termination notice to us and the record holders of all ADSs then outstanding if at any time sixty (60) days shall have expired since the Depositary delivered a written notice to us of its election to resign and a successor depositary shall not have been appointed and accepted its appointment.
If any ADSs remain outstanding after the date of any termination, the Depositary will then:
•discontinue the registration of transfers of ADSs;
•suspend the distribution of dividends to holders of ADSs; and
•not give any further notices or perform any further acts under the deposit agreement, except those listed below, with respect to those ADSs.
The Depositary will, however, continue to collect dividends and other distributions pertaining to the ordinary shares. It will also continue to sell rights and other property as provided in the deposit agreement and deliver ordinary shares, together with any dividends or other distributions received with respect to them and the net proceeds of the sale of any rights or other property, in exchange for ADSs surrendered to it.
At any time after the date of termination of the deposit agreement, the Depositary may sell the ordinary shares then held. The Depositary will then hold uninvested the net proceeds of any such sales, together with any other cash then held by it under the deposit agreement, unsegregated and without liability for interest, for the pro rata benefit of the holders of ADSs that have not previously been surrendered.
Charges of the Depositary
The following charges shall be incurred by any party depositing or withdrawing ordinary shares, or by any party surrendering ADSs or to whom ADSs are issued:
| $5.00 (or less) per 100 ADSs (or portion of 100 ADSs) | Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property.<br><br>Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates. |
|---|---|
| $.02 (or less) per ADS | Any cash distribution to ADS registered holders (including dividends). |
| A fee equivalent to the fee that would be payable if securities distributed had been shares and the shares had been deposited for issuance of ADSs | Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADS registered holders. |
| $.02 (or less) per ADSs per calendar year | Depositary services. |
| Registration or transfer fees | Transfer and registration of shares on the share register to or from the name of the depositary or its agent when you deposit or withdraw shares. |
| Expenses of the depositary | Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement).<br><br>Converting foreign currency to US Dollars. |
| Taxes and other governmental charges the depositary or the custodian have to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes | As necessary. |
| Any charges incurred by the depositary or its agents for servicing the deposited securities | As necessary. |
The Depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The Depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The Depositary may collect its annual fee for depositary services by deductions from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants for them. The Depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.
The Depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent, advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account. The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement and the rate that the Depositary or its affiliate receives when buying or selling foreign currency for its own account. The Depositary makes no representation that the exchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that the method by which that rate will be determined will be the most favorable to ADS holders, subject to the Depositary’s obligation to act without negligence or bad faith. The methodology used to determine exchange rates used in currency conversions is available upon request.
The holders of ADSs will be responsible for any taxes or other governmental charges payable on their ADSs or on the ordinary shares. The Depositary may refuse to transfer ADSs or allow withdrawal of the ordinary shares until such taxes or other charges are paid. The Depositary may apply payments owed to holders of ADSs or sell deposited ordinary shares underlying such ADSs to pay any taxes owed and holders of ADSs will remain liable for any deficiency. If the Depositary sells deposited ordinary shares, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to holders of ADSs any proceeds, or send to holders of ADSs any property, remaining after it has paid the taxes.
Direct Registration System
ADSs not evidenced by ADRs shall be transferable as uncertificated registered securities under the laws of the State of New York.
The Direct Registration System (“DRS”) and Profile Modification System (“Profile”) will apply to uncertificated ADSs upon acceptance thereof to DRS by DTC. DRS is the system administered by DTC pursuant to which the Depositary may register the ownership of uncertificated ADSs, which ownership shall be evidenced by periodic statements sent by the Depositary to the owners entitled thereto. Profile is a required feature of DRS which allows a DTC participant, claiming to act on behalf of a registered holder of ADSs, to direct the Depositary to register a transfer of those ADSs to DTC or its nominee and to deliver those ADSs to the DTC account of that DTC participant without receipt by the Depositary of prior authorization from the ADS registered holder to register such transfer.
In connection with and in accordance with the arrangements and procedures relating to DRS/Profile, the parties to the deposit agreement understand that the Depositary will not verify, determine or otherwise ascertain that the DTC participant which is claiming to be acting on behalf of an ADS registered holder in requesting registration of transfer and delivery described in the paragraph above has the actual authority to act on behalf of the ADS registered holder (notwithstanding any requirements under the Uniform Commercial Code). In the deposit agreement, the parties agree that the Depositary’s reliance on and compliance with instructions received by the Depositary through the DRS/Profile System and in accordance with the deposit agreement, shall not constitute negligence or bad faith on the part of the Depositary.
General
Neither the Depositary nor we nor any of the Depositary’s or our respective directors, employees, agents or affiliates will be liable to ADS holders if prevented or forbidden or delayed by any present or future law of any country or by any governmental or regulatory authority or stock exchange, any present or future provision of the Articles of Association, any provision of any securities issued or distributed by us, or any act of God or war or terrorism or other circumstances beyond our or its control in performing our or its obligations under the deposit agreement. The obligations of each of us and the Depositary under the deposit agreement are expressly limited to performing our and its specified duties without negligence or bad faith.
The ADSs are transferable on the books of the Depositary or its agent. However, the Depositary may close the transfer books as to ADSs at any time when it deems it expedient to do so in connection with the performance of its duties or at our request. As a condition precedent to the execution and delivery, registration of transfer, split-up, combination or surrender of any ADSs or withdrawal of any ordinary shares, the Depositary or the Custodian may require the person presenting the ADSs or depositing the ordinary shares to pay a sum sufficient to reimburse it for any related tax or other governmental charge and any share transfer or registration fee and any applicable fees payable as provided in the deposit agreement. The Depositary may withhold any dividends or other distributions, or may sell for the account of the holder any part or all of the ordinary shares represented by the ADSs, and may apply those dividends or other distributions or the proceeds of any sale in payment of the tax or other governmental charge. The ADS holder will remain liable for any deficiency.
Any ADS holder may be required from time to time to furnish the Depositary or the Custodian with proof satisfactory to the Depositary of citizenship or residence, exchange control approval, legal or beneficial ownership of ADSs or other securities, compliance with all applicable laws or regulations and the terms of the deposit agreement or such information relating to the registration on our books or those that the registrar maintains for us for the ordinary shares in registered form, or other information, to execute certificates and to make representations and warranties that the Depositary deems necessary or proper or as we may reasonably request by written request to the Depositary. Until those requirements have been satisfied, the Depositary may withhold the delivery or registration of transfer of any ADSs or the distribution or sale of any dividend or other distribution or proceeds of any sale or distribution or the delivery of any deposited preference shares or other property related to the ADSs. The delivery or registration of transfer of ADSs may be suspended during any period when the transfer books of the Depositary are closed or if we or the Depositary deems it necessary or advisable. The surrender of outstanding ADSs and the withdrawal of ordinary shares may only be suspended as a result of:
•temporary delays caused by closing the transfer books or those of the Depositary or the deposit of ordinary shares in connection with voting at shareholder meetings, or the payment of dividends;
•the non-payment of fees, taxes and similar charges; and
•non-compliance with any U.S. or foreign laws or governmental regulations relating to the ADSs or to the withdrawal of ordinary shares.
Debt Securities
Each series of notes listed on the New York Stock Exchange and set forth on the cover page to the 2025 Annual Report has been issued by LBG. Each of these series of notes was issued pursuant to an effective registration statement and a related prospectus and prospectus supplement (if applicable) setting forth the terms of the relevant series of notes.
The following table sets forth the dates of the registration statements, dates of the base prospectuses and dates of issuance for each relevant series of notes (the “Notes”).
| Date of Base Prospectus | Series | Registration Statement | Date of Issuance |
|---|---|---|---|
| June 6, 2025 | 4.425% Senior Callable Fixed-to-Fixed Rate Notes due 2036 | 333-287829 | November 4, 2025 |
| June 6, 2025 | 4.943% Senior Callable Fixed-to-Fixed Rate Notes due 2031 | 333-287829 | November 4, 2025 |
| June 6, 2025 | Senior Callable Floating Rate Notes due 2031 | 333-287829 | November 4, 2025 |
| June 6, 2025 | 4.818% Senior Callable Fixed-to-Fixed Rate Notes due 2029 | 333-287829 | June 13, 2025 |
| June 6, 2025 | Senior Callable Floating Rate Notes due 2029 | 333-287829 | June 13, 2025 |
| June 6, 2025 | 6.068% Fixed Rate Reset Dated Subordinated Tier 2 Notes due 2036 | 333-287829 | June 13, 2025 |
| June 7, 2022 | 5.590% Senior Callable Fixed-to-Fixed Rate Notes due 2035 | 333-265452 | November 26, 2024 |
| June 7, 2022 | 5.087% Senior Callable Fixed-to-Fixed Rate Notes due 2028 | 333-265452 | November 26, 2024 |
| June 7, 2022 | Senior Callable Floating Rate Notes due 2028 | 333-265452 | November 26, 2024 |
| June 7, 2022 | 5.721% Senior Callable Fixed-to-Fixed Rate Notes due 2030 | 333-265452 | June 5, 2024 |
| June 7, 2022 | 5.679% Senior Callable Fixed-to-Fixed Rate Notes due 2035 | 333-265452 | January 5, 2024 |
| June 7, 2022 | 5.462 % Senior Callable Fixed-to-Fixed Rate Notes due 2028 | 333-265452 | January 5, 2024 |
| June 7, 2022 | Senior Callable Floating Rate Notes due 2028 | 333-265452 | January 5, 2024 |
| June 7, 2022 | 5.985% Senior Callable Fixed-to-Fixed Rate Notes due 2027 | 333-265452 | August 7, 2023 |
| June 7, 2022 | Senior Callable Floating Rate Notes due 2027 | 333-265452 | August 7, 2023 |
| June 7, 2022 | 5.871% Senior Callable Fixed-to-Fixed Rate Notes due 2029 | 333-265452 | March 6, 2023 |
| June 7, 2022 | 7.953% Fixed Rate Reset Subordinated Debt Securities due 2033 | 333-265452 | November 15, 2022 |
| June 7, 2022 | 4.976% Senior Callable Fixed-to-Fixed Rate Notes due 2033 | 333-265452 | August 11, 2022 |
| June 3, 2019 | 3.750% Senior Callable Fixed-to-Fixed Rate Notes due 2028 | 333-231902 | March 18, 2022 |
| June 3, 2019 | 3.369% Fixed Rate Reset Subordinated Debt Securities | 333-260953 | December 14, 2021 |
| June 3, 2019 | 1.985% Fixed Rate Reset Subordinated Debt Securities | 333-231902 | June 15, 2021 |
| June 3, 2019 | 1.627% Senior Callable Fixed-to-Fixed Rate Notes due 2027 | 333-231902 | March 11, 2021 |
| June 2, 2016 | 4.550% Senior Notes due 2028 | 333-211791 | August 9, 2018 |
| June 2, 2016 | 4.375% Senior Notes due 2028 | 333-211791 | March 15, 2018 |
| June 2, 2016 | 4.344% Subordinated Securities due in 2048 | 333-211791 | January 4, 2018 |
| June 2, 2016 | 3.574% Senior Notes due in 2028 | 333-211791 | October 31, 2017 |
| June 2, 2016 | 3.750% Senior Notes due 2027 | 333-211791 | January 4, 2017 |
| June 2, 2016 | 5.300% Subordinated Securities due 2045 | 333-214016 | November 4, 2016 |
| June 7, 2013 | 4.650% Subordinated Securities due 2026 | 333-189150 | March 17, 2016 |
Each of the following descriptions of our Notes is a summary and does not purport to be complete and is qualified in its entirety by the full terms of the Notes and the relevant indenture thereto, which are available at www.sec.com. Each of the descriptions is organized by each base prospectus and includes the description of notes for each issuance thereunder. References to “accompanying prospectus” refers to the relevant base prospectus for the issuance. To the extent the language in the prospectus supplement modifies language in the base prospectus or there is any inconsistency between the information in the base prospectus and the prospectus supplement, the terms of the prospectus supplement govern.
A.Base Prospectus – dated June 6, 2025:
DESCRIPTION OF DEBT SECURITIES
The following is a summary of the general terms of the debt securities issued by LBG. Each time that debt securities are issued, a prospectus supplement will be filed with the SEC, which you should read carefully. The prospectus supplement will summarize specific financial terms of your security and may contain additional terms of those debt securities. The terms presented here, together with the terms contained in the prospectus supplement, will be a description of the material terms of the debt securities, but if there is any inconsistency between the terms presented here and those in the prospectus supplement, those in the prospectus supplement will apply and will replace those presented here. Therefore, the statements we make below in this section may not apply to your debt security. You should also read the indentures and any related supplemental indentures establishing such debt securities under which we will respectively issue the debt securities, which have been filed with the SEC as exhibits to the registration statement of which this prospectus is a part.
References to “debt securities” in this prospectus, mean the senior debt securities and subordinated debt securities that may be issued by LBG. The term “debt securities” does not include the “capital securities” described under “Description of Capital Securities”.
Senior debt securities will be issued under a senior debt indenture. Subordinated debt securities will be issued under a subordinated debt indenture. The subordinated debt securities of any series will be subordinated obligations. Each indenture for debt securities issued by LBG is a contract between LBG and The Bank of New York Mellon, acting through its London Branch, which will initially act as trustee. None of the indentures limit our ability to incur additional indebtedness, including additional senior indebtedness.
General
The debt securities are not deposits and are not insured or guaranteed by the U.S. Federal Deposit Insurance Corporation or any other government agency of the United States or the United Kingdom.
The indentures do not limit the amount of debt securities that we may issue. We may issue debt securities in one or more series. The relevant prospectus supplement for any particular series of debt securities will contain, where applicable, the following terms of, and other information relating to, any of the offered debt securities:
•whether they are senior debt securities or subordinated debt securities;
•their title (which will distinguish the debt securities of the series from all other debt securities), authorized denomination and aggregate principal amount;
•the price or prices at which they will be issued;
•their maturity date;
•the annual interest rate or rates, or how to calculate the interest rate or rates;
•the date or dates from which interest, if any, will accrue or the method, if any, by which such date or dates will be determined;
•whether the payment of interest can be deferred;
•whether payments are conditional on our ability to make such payments and remain able to pay our debts as they fall due and that our assets continue to exceed our liabilities (other than subordinated liabilities);
•the times and places for payment of the principal of and premium, if any, and any interest, if any, on the debt securities;
•the terms of any mandatory or optional redemption, including the amount of any premium;
•any repurchase or sinking fund provisions;
•if other than the principal amount thereof, the portion of the principal amount of the debt securities payable upon acceleration or redemption;
•the currency or currencies in which they are denominated and in which we will make any payments;
•whether the debt securities will be issued in whole or in part in the form of one or more global securities;
•provisions, if any, for the exchange, modification or conversion of such debt securities, including, but not limited to, with respect to senior debt securities, the terms, if any, on which such senior debt securities may or will be converted into or exchanged at our option or otherwise for our stock or other securities or for stock or other securities of another entity or other entities, into a basket or baskets of such securities, into an index or indices of such securities, into the cash value therefor or into any combination of the foregoing, any specific terms relating to the adjustment thereof and the period during which such senior debt securities may or shall be so converted or exchanged;
•whether the amounts of payment of principal of and premium, if any, or interest, if any, on the debt securities may be determined with reference to an index or are otherwise not fixed on the original issue date thereof, the manner in which such amounts shall be determined and the calculation agent, if any, who will be appointed and authorized to calculate such amounts;
•any modifications or additions to the events of default with respect to the debt securities offered;
•any additional subordination terms with respect to the subordinated debt securities offered;
•whether and under what circumstances, if other than those described in this prospectus, we will pay additional amounts on the debt securities and whether, and on what terms, if other than those described in this prospectus, we may redeem the debt securities following certain developments with respect to tax laws;
•provisions relating to the exercise of the U.K. bail-in power by the relevant U.K. resolution authority;
•any listing on a securities exchange; and
•any other terms of the debt securities.
In addition, the prospectus supplement will describe the material U.S. federal and U.K. tax considerations that apply to any particular series of debt securities.
Debt securities may bear interest at a fixed rate or a floating rate. We may sell any debt securities that bear no interest, or that bear interest at a rate that at the time of issuance is below the prevailing market rate, at a discount to their stated principal amount.
Holders of debt securities shall have no voting rights except those described under the heading “—Modification and Waiver” below.
If we issue subordinated debt securities that, in each case, qualify as Tier 2 capital or other capital for regulatory purposes, the payment, subordination, redemption, events of default and other terms may vary from those described in this prospectus and will be set forth in the relevant prospectus supplement.
Payments
We will make any payments of interest and principal on any particular series of debt securities on the dates and, in the case of payments of interest, at the rate or rates, that are set out in, or that are determined by the method of calculation described in, the relevant prospectus supplement.
Subordinated Debt Securities
Unless the relevant prospectus supplement provides otherwise, if we do not make a payment on a series of subordinated debt securities on any payment date, the obligation to make that payment shall be deferred, if it is an interest payment, until the date upon which we pay a dividend on any class of our share capital and, if it is a principal payment, until the first business day after the date that falls six months after the original payment date (a “Deferred Payment Date”). If we fail to make a payment before the Deferred Payment Date, that failure shall not create a default or otherwise allow any holder to sue us for the payment or take any other action. The relevant prospectus supplement will set forth the terms on which the payment of interest and principal on the subordinated debt securities can be deferred and any other terms relating to payments on subordinated debt securities.
Subordination
Senior Debt Securities
Unless the relevant prospectus supplement provides otherwise, senior debt securities and coupons (if any) appertaining thereto constitute direct, unconditional, unsecured and unsubordinated obligations ranking pari passu, without any preference among themselves, with all of our other outstanding unsecured and unsubordinated obligations, present and future, except such obligations as are preferred by operation of law.
Subordinated Debt Securities
Unless the relevant prospectus supplement provides otherwise, in a winding-up, all payments on any series of subordinated debt securities will be subordinate to, and subject in right of payment to the prior payment in full of, all claims of all creditors other than claims in respect of any liability that is, or is expressed to be, subordinated, whether only in the event of a winding up or otherwise, to the claims of all or any creditors, in the manner provided in the relevant subordinated debt indenture.
General
As a consequence of these subordination provisions, if winding-up proceedings should occur, each holder of subordinated debt securities may recover less ratably than the holders of unsubordinated liabilities. If, in any winding-up, the amount payable on any series of debt securities and any claims ranking equally with that series are not paid in full, those debt securities and other claims ranking equally will share ratably in any distribution of assets in a winding-up in proportion to the respective amounts to which they are entitled. If any holder is entitled to any recovery with respect to the debt securities in any winding-up or liquidation, the holder might not be entitled in those proceedings to a recovery in U.S. dollars and might be entitled only to a recovery in pounds respective amounts to which they are entitled. If any holder is entitled to any recovery with respect to the debt securities in any winding-up or liquidation, the holder might not be entitled in those proceedings to a recovery in U.S. dollars and might be entitled only to a recovery in pounds sterling or any other lawful currency of the United Kingdom.
Agreement with Respect to the Exercise of U.K. Bail-in Power
The debt securities may be subject to the exercise of the U.K. bail-in power by the relevant U.K. resolution authority. As more fully set out in the relevant prospectus supplement, if the U.K. bail-in power applies to the debt securities of a series, by its acquisition of the debt securities, each holder of such debt securities will be bound by (a) the effect of the exercise of any U.K. bail-in power by the relevant U.K. resolution authority and (b) the variation of the terms of debt securities or the relevant indenture, if necessary, to give effect to the exercise of any U.K. bail-in power by the relevant U.K. resolution authority.
Additional Amounts
Unless the relevant prospectus supplement provides otherwise, amounts to be paid on any series of debt securities will be made without deduction or withholding for, or on account of, any and all present and future income, stamp and other taxes, levies, imposts, duties, charges or fees imposed, levied, collected, withheld or assessed by or on behalf of the United Kingdom or any political subdivision thereof or authority thereof that has the power to tax (a “U.K. taxing jurisdiction”), unless such deduction or withholding is required by law. If at any time a U.K. taxing jurisdiction requires us to make such deduction or withholding, we will pay additional amounts with respect to the interest only on the debt securities (“Additional Amounts”) that are necessary in order that the net amounts of interest paid to the holders of those debt securities, after the deduction or withholding, shall equal the amounts of interest only which would have been payable on that series of debt securities if the deduction or withholding had not been required. However, this will not apply to any such tax, levy, impost, duty, charge or fee which would not have been deducted or withheld but for the fact that:
•the holder or the beneficial owner of the debt securities is a domiciliary, national or resident of, or engaging in business or maintaining a permanent establishment or physically present in, a U.K. taxing jurisdiction or otherwise having some connection with the U.K. taxing jurisdiction other than the holding or ownership of a debt security, or the collection of any payment of, or in respect of, principal of, or any interest or other payment on, any debt security of the relevant series;
•except in the case of a winding-up in the United Kingdom, the relevant debt security is presented (where presentation is required) for payment in the United Kingdom;
•the relevant debt security is presented (where presentation is required) for payment more than 30 days after the date payment became due or was provided for, whichever is later, except to the extent that the holder would have been entitled to the Additional Amounts on presenting the debt security for payment at the close of that 30 day period;
•the holder or the beneficial owner of the relevant debt security or the beneficial owner of any payment of or in respect of principal of, or any interest or other payment on, the debt security failed to comply with a request by us or our liquidator or other authorized person addressed to the holder to provide information concerning the nationality, residence or identity of the holder or the beneficial owner or to make any declaration or other similar claim to satisfy any requirement, which is required or imposed by a statute, treaty, regulation or administrative practice of a U.K. taxing jurisdiction as a precondition to exemption from all or part of the tax, levy, impost, duty, charge or fee;
•the deduction or withholding is imposed by reason of any agreement with the U.S. Internal Revenue Service in connection with Sections 1471-1474 of the U.S. Internal Revenue Code and the U.S. Treasury regulations thereunder (“FATCA”), any intergovernmental agreement between the United States and the United Kingdom or any other jurisdiction with respect to FATCA, or any law, regulation or other official guidance enacted in any jurisdiction implementing, or relating to, FATCA or any intergovernmental agreement; or
•any combination of the above items,
nor shall Additional Amounts be paid with respect to any interest only on the debt securities to any holder who is a fiduciary or partnership or settlor with respect to such fiduciary or a member of such partnership other than the sole beneficial owner of such payment to the extent such payment would be required by the laws of any taxing jurisdiction to be included in the income for tax purposes of a beneficiary or partner or settlor with respect to such fiduciary or a member of such partnership or a beneficial owner who would not have been entitled to such Additional Amounts, had it been the holder.
Whenever we refer in this prospectus and any prospectus supplement, in any context, to the payment of interest on, or in respect of, any debt security of any series, we mean to include the payment of Additional Amounts to the extent that, in the context, Additional Amounts are, were or would be payable.
Redemption of Senior Debt Securities
Tax Redemption of Senior Debt Securities
Unless the relevant prospectus supplement provides otherwise, we will have the option to redeem the senior debt securities of any series, as a whole but not in part, upon not less than 30 nor more than 60 days’ notice to each holder of senior debt securities, on any interest payment date, at a redemption price equal to 100% of their principal amount together with any accrued but unpaid interest, to the redemption date, or, in the case of discount securities, their accreted face amount, together with any accrued interest, if, at any time, we determine that as a result of a change in or amendment to the laws or regulations of a U.K. taxing jurisdiction, including any treaty to which it is a party, or any change in the application or interpretation of those laws or regulations, including a decision of any court or tribunal which change or amendment becomes effective or applicable on or after a date included in the terms of such senior debt securities:
•in making any payments on the particular series of senior debt securities, we have paid or will or would on the next interest payment date be required to pay Additional Amounts;
•the payment of interest on the next interest payment date in respect of any of the series of senior debt securities would be treated as “a distribution” within the meaning of Chapter 2, Part 23 of the Corporation Tax Act 2010 of the United Kingdom, or any statutory modification or reenactment of such Act; or
•on the next interest payment date we would not be entitled to claim a deduction in respect of the payment of interest in computing our U.K. taxation liabilities, or the value of such deduction to us would be materially reduced.
Prior to the giving of any notice of redemption, we must deliver to the trustee (i) a written legal opinion of independent United Kingdom counsel of recognized standing selected by us in a form satisfactory to the trustee confirming that the relevant change or amendment has occurred and that we are entitled to exercise its right of redemption; and (ii) an officer’s certificate, evidencing compliance with such provisions and stating that we are entitled to redeem the senior debt securities pursuant to the terms of such senior debt securities.
Optional Redemption of Senior Debt Securities
The relevant prospectus supplement will specify whether or not the relevant issuer may redeem the senior debt securities of any series, in whole or in part, at its option, including any conditions to its right to exercise such option, in any other circumstances and, if so, the prices and any premium at which and the dates on which it may do so. Any notice of redemption of senior debt securities of any series will state, among other items:
•the redemption date;
•the relevant regular record date or special record date;
•the amount of senior debt securities to be redeemed if less than all of the outstanding senior debt securities of any series is to be redeemed;
•the redemption price;
•that, the redemption price will become due and payable on the redemption date and, if applicable, that interest will cease to accrue on such date;
•the place or places at which such senior debt securities are to be surrendered for payment of the redemption price; and
•the CUSIP, Common Code and/or ISIN number or numbers, if any, with respect to the senior debt securities being redeemed.
In the case of a partial redemption, the trustee shall select the senior debt securities to be redeemed in any manner which it deems fair and appropriate, and consistent with the rules and regulations of the applicable clearing system.
We or any of our respective subsidiaries may at any time and from time to time purchase senior debt securities of any series in the open market or by tender (available to each holder of senior debt securities of the relevant series) or by private agreement, if applicable law permits. Any senior debt securities of any series that we purchase beneficially for our account, other than in connection with dealing in securities, will be treated as cancelled and will no longer be issued and outstanding.
Redemption of Subordinated Debt Securities
Any terms of the redemption of any series of subordinated debt securities, whether at our option or upon the occurrence of certain events (including, but not be limited to, the occurrence of certain tax or regulatory events), will be set forth in the relevant prospectus supplement.
Under existing PRA requirements, we may not make any redemption or repurchase of certain debt securities beneficially for our own account, other than a repurchase in connection with dealing in securities, unless, among other things, prior notice to the PRA is given and, in certain circumstances, the PRA has consented or given its permission in advance. The PRA (or any successor thereto) may impose conditions on any redemption or repurchase, all of which will be set out in the accompanying prospectus supplement with respect to any series of debt securities.
Modification and Waiver
We and the trustee may make certain modifications and amendments to the applicable indenture with respect to any series of debt securities without the consent of the holders of the debt securities. Other modifications and amendments may be made to the indenture with the consent of the holder or holders of not less than a majority, or in the case of subordinated debt securities, two-thirds, in aggregate outstanding principal amount of the debt securities of the series outstanding under the indenture that are affected by the modification or amendment, voting as one class. However, no modifications or amendments may be made without the consent of the holder of each debt security affected that would:
•change the stated maturity of the principal amount of any debt security;
•reduce the principal amount of, the interest rates on, or any premium payable upon the redemption of, with respect to, any debt security;
•reduce the amount of principal of discount securities that would be due and payable upon an acceleration of their maturity date;
•change any obligation to pay Additional Amounts;
•change the currency of payment;
•impair the right to institute suit for the enforcement of any payment due and payable;
•reduce the percentage in aggregate principal amount of outstanding debt securities of any series necessary to modify or amend the relevant indenture or to waive compliance with certain provisions of the relevant indenture and any Senior Debt Security Event of Default, Subordinated Debt Security Event of Default or Subordinated Debt Security Default (as such terms are defined below);
•modify the subordination provisions or change the terms of our obligations in respect of the due and punctual payment of the amounts due and payable on the debt securities in a manner adverse to the holders; or
•modify any of the above requirements.
In addition, variations in the terms and conditions of our subordinated debt securities of any series, including modifications relating to subordination, redemption, a Subordinated Debt Security Event of Default, or Subordinated Debt Security Default (as such terms are defined below) as described in the relevant prospectus supplement, may require the permission of, or consent from, the PRA.
Events of Default; Default; Limitation of Remedies
Senior Debt Security Event of Default
Unless the relevant prospectus supplement provides otherwise, a “Senior Debt Security Event of Default” with respect to any series of senior debt securities shall result if:
•LBG does not pay any principal or interest on any senior debt securities of that series within 14 days from the due date for payment and the principal or interest has not been duly paid within 14 days following written notice from the trustee or from holders of 25% in aggregate principal amount of the outstanding senior debt securities of that series to LBG requiring the payment to be made. It shall not, however, be a Senior Debt Security Event of Default if during the 14 days after the notice, LBG delivers a written opinion of legal advisors, who may be an employee of, or legal advisors for, LBG or other legal advisors, to the trustee, such opinion to be acceptable to the trustee (“Opinion of Counsel”), concluding that such sums were not paid in order to comply with a law, regulation or order of any court of competent jurisdiction; provided however, that the trustee may by notice to LBG require LBG to take such action (including but not limited to proceedings for a declaration by a court of competent jurisdiction) as the trustee may be advised in an Opinion of Counsel, upon which opinion the trustee may conclusively rely, is appropriate and reasonable in the circumstances to resolve such doubt, in which case LBG will forthwith take and expeditiously proceed with such action and will be bound by any final resolution of the doubt resulting therefrom. If any such action results in a determination that the relevant payment can be made without violating any applicable law, regulation or order, then such payment will become due and payable on the expiration of 14 days after the trustee gives written notice to LBG informing it of such resolution. The foregoing shall not otherwise be deemed to impair the right of any holder to receive payment of the principal of and interest on any such security or to institute suit for the enforcement of any such payment;
•LBG defaults in the performance or breaches, any covenant or warranty of the senior debt indenture (other than as stated above with respect to payments when due) and that breach has not been remedied within 60 days of receipt of a written notice from (i) the trustee certifying that in its opinion the breach is materially prejudicial to the interests of the holders of the senior debt securities of that series and requiring the breach to be remedied or (ii) holders of at least 25% in outstanding principal amount of the senior debt securities of that series requiring the breach to be remedied; or
•either a court of competent jurisdiction issues an order which is not successfully appealed within 30 days, or an effective shareholders’ resolution is validly adopted, for the winding-up of LBG (other than under or in connection with a scheme of reconstruction, merger or amalgamation not involving bankruptcy or insolvency).
If a Senior Debt Security Event of Default occurs and is continuing, the trustee or the holders of at least 25% in aggregate principal amount of the senior outstanding debt securities of that series may at their discretion declare the outstanding senior debt securities of that series to be due and repayable immediately (and the senior debt securities of that series shall thereby become due and repayable) at their principal amount (or at such other repayment amount as may be specified in or determined in accordance with the relevant prospectus supplement and in the case of original issue discount securities, the accreted face amount) together with accrued interest, if any, as provided in the prospectus supplement. However, after such declaration but before the trustee obtains a judgment or decree for payment of money due, the holder or holders of a majority in aggregate principal amount of the outstanding senior debt securities of the series may rescind or annul the declaration of acceleration and its consequences, but only if all Senior Debt Security Events of Default have been cured or waived and all payments due, other than those due as a result of acceleration, have been made. The trustee may at its discretion and without further notice institute such proceedings as it may think suitable, against LBG to enforce payment. Notwithstanding any contrary provisions, nothing shall impair the right of a holder, absent the holder’s consent, to sue for any payments due but unpaid with respect to the senior debt securities.
Unless the relevant prospectus supplement provides otherwise, by accepting a senior debt security, each holder will be deemed to have waived any right of set-off, counterclaim or combination of accounts with respect to the senior debt securities or the applicable indenture that they might otherwise have against LBG whether before or during the winding-up of LBG.
Subordinated Debt Security Events of Default
Unless the relevant prospectus supplement provides otherwise, a “Subordinated Debt Security Event of Default” with respect to any series of subordinated debt securities of LBG shall result if either:
•a court of competent jurisdiction makes an order which is not successfully appealed within 30 days; or
•an effective shareholders’ resolution is validly adopted for the winding-up of LBG other than under or in connection with a scheme of amalgamation or reconstruction not involving a bankruptcy or insolvency.
The exercise of any U.K. bail-in power by the relevant U.K. resolution authority shall not constitute a Subordinated Debt Security Event of Default.
If a Subordinated Debt Security Event of Default occurs and is continuing, the trustee or the holder or holders of at least 25% in aggregate principal amount of the outstanding subordinated debt securities of each series may declare to be due and payable immediately in accordance with the terms of the indenture the principal amount of, any accrued but unpaid payments (or, in the case of original issue discount securities, the accreted face amount, together with any accrued interest), including any deferred interest on the subordinated debt securities of the series. However, after such declaration but before the trustee obtains a judgment or decree for payment of money due, the holder or holders of a majority in aggregate principal amount of the outstanding subordinated debt securities of the series may rescind or annul the declaration of acceleration and its consequences, but only if all Subordinated Debt Security Events of Default have been cured or waived and all payments due, other than those due as a result of acceleration, have been made.
Subordinated Debt Security Defaults
In addition to Subordinated Debt Security Events of Default, the subordinated debt indentures also separately provide for Subordinated Debt Security Defaults. Unless the relevant prospectus supplement provides otherwise, it shall be a “Subordinated Debt Security Default” with respect to any series of subordinated debt securities if:
•any installment of interest upon any subordinated debt security of that series is not paid on or before its deferred payment date or such other date specified for its payment in the subordinated debt indentures and such failure continues for 14 days; or
•all or any part of the principal of any subordinated debt security of that series is not paid on its deferred payment date, or when it otherwise becomes due and payable, whether upon redemption or otherwise, and such failure continues for seven days.
If a Subordinated Debt Security Default occurs and is continuing, the trustee may commence a proceeding in Scotland (but not elsewhere) for the winding-up of LBG.
However, a failure to make any payment on a series of subordinated debt securities shall not be a Subordinated Debt Security Default if it is withheld or refused in order to comply with any applicable fiscal or other law or regulation or order of any court of competent jurisdiction and LBG delivers an Opinion of Counsel to the trustee with that conclusion, at any time before the expiry of the applicable 14 day or seven day period by independent legal advisers.
Notwithstanding any contrary provisions, nothing shall impair the right of a holder, absent the holder’s consent, to sue for any payments due but unpaid with respect to the subordinated debt securities.
Unless the relevant prospectus supplement provides otherwise, by accepting a subordinated debt security, each holder and the trustee will be deemed to have waived any right of set-off, counterclaim or combination of accounts with respect to the subordinated debt security or the applicable indenture (or between obligations which LBG may have under or in respect of any subordinated debt security and any liability owed by a holder or the trustee to LBG) that they might otherwise have against LBG, whether before or during the winding-up or liquidation of LBG.
Events of Default and Defaults–General
Subject to certain exceptions, such as in the case of a default in the payment of the principal (or premium, if any) or interest on a senior debt security, the trustee may, without the consent of the holders, waive or authorize a Senior Debt Security Event of Default, provided that in the opinion of the trustee, the interests of the holders shall not be materially prejudiced thereby and provided further that the trustee shall not exercise any powers conferred on it in contravention of any notice in writing to LBG and the trustee of a declaration described in “—Senior Debt Security Event of Default” above but so that no such notice shall affect any waiver or authorization previously given or made.
The holder or holders of not less than a majority in aggregate principal amount of the outstanding debt securities of any series may waive any past Senior Debt Security Event of Default, Subordinated Debt Security Event of Default or Subordinated Debt Security Default with respect to the series, except a Senior Debt Security Event of Default, Subordinated Debt Security Event of Default or Subordinated Debt Security Default, in respect of the payment of interest, if any, or principal of (or premium, if any) or payments on any debt security or a covenant or provision of the indenture which cannot be modified or amended without the consent of each holder of debt securities of such affected series.
Subject to the provisions of the applicable indenture relating to the duties of the trustee, if a Senior Debt Security Event of Default, Subordinated Debt Security Event of Default or Subordinated Debt Security Default occurs and is continuing with respect to the debt securities of any series, the trustee will be under no obligation to any holder or holders of the debt securities of the series, unless they have offered indemnity or security satisfactory to the trustee in its sole discretion. Subject to the indenture provisions for the indemnification of the trustee, the holder or holders of a majority in aggregate principal amount of the outstanding debt securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee, or exercising any trust or power conferred on the trustee with respect to the series, if the direction is not in conflict with any rule of law or with the applicable indenture and does not expose the trustee to undue risk and the action would not be unjustly prejudicial to the holder or holders of any debt securities of any series not taking part in that direction. The trustee may take any other action that it deems proper which is not inconsistent with that direction.
The indentures provide that the trustee will, within 90 days after the occurrence of a Senior Debt Security Event of Default, Subordinated Debt Security Event of Default or Subordinated Debt Security Default with respect to the debt securities of any series, give to each holder of the debt securities of the affected series notice of the Senior Debt Security Event of Default, Subordinated Debt Security Event of Default or Subordinated Debt Security Default known to it, unless the Senior Debt Security Event of Default, Subordinated Debt Security Event of Default or Subordinated Debt Security Default, has been cured or waived; provided that the trustee shall be protected in withholding notice (except for a payment default) if it determines in good faith that withholding notice is in the interest of the holders of the debt securities of the affected series.
We are required to furnish to the trustee a statement as to our compliance with all conditions and covenants under the indenture (i) annually, and (ii) within five Business Days of a written request from the trustee.
Consolidation, Merger and Sale of Assets; Assumption
We may, without the consent of the holders of any of the debt securities, consolidate or amalgamate with, merge into or transfer or lease our assets substantially as an entirety to any person, provided that any successor corporation formed by any consolidation or amalgamation or into which we are merged, or any transferee or lessee of our assets, is a company organized under the laws of any part of the United Kingdom that assumes, by a supplemental indenture, our obligations on the debt securities, and under the applicable indenture, immediately after giving effect to such transaction, no event of default or default shall have occurred and be continuing, and we procure the delivery of a customary officer’s certificate and legal opinion providing that the conditions precedent to the transaction have been complied with.
Governing Law
The debt securities and the indentures will be governed by and construed in accordance with the laws of the State of New York, except that, as the indentures specify, the subordination provisions relating to each series of debt securities issued by LBG in the relevant indenture will be governed and construed in accordance with the laws of Scotland.
Notices
All notices to holders of registered debt securities shall be validly given if in writing and mailed, first-class postage prepaid, to them at their respective addresses in the registers maintained by the trustee.
The Trustee
The Bank of New York Mellon, acting through its London Branch, 160 Queen Victoria Street, London EC4V 4LA, is the trustee under the indentures. The trustee shall have and be subject to all the duties and responsibilities specified with respect to an indenture trustee under the Trust Indenture Act of 1939, as amended (the “TIA”). Subject to the provisions of the TIA, the trustee is under no obligation to exercise any of the powers vested in it by the indentures at the request of any holder of notes, unless offered indemnity or security satisfactory to the trustee in its sole discretion, by the holder against the costs, expense and liabilities which might be incurred thereby. LBG and certain members of the Group maintain deposit accounts and conduct other banking transactions with The Bank of New York Mellon in the ordinary course of our business. The Bank of New York Mellon under a nominee name is also the book-entry depositary with respect to certain of our debt securities and the depositary with respect to the ADSs representing certain of our ordinary shares.
Consent to Service of Process
Under the indentures, LBG irrevocably designates Kelvina Smith, Chief Legal Officer, Lloyds Securities Inc. and Deputy Chief Legal Officer, North America, Lloyds Bank Corporate Markets plc (or any successor thereto), currently of 1095 Avenue of the Americas, New York, NY 10036, as the authorized agent for service of process in any legal action or proceeding arising out of or relating to the indentures or any debt securities brought in any federal or state court in the Borough of Manhattan, in The City of New York, New York and LBG irrevocably submits to the jurisdiction of those courts.
DESCRIPTION OF CERTAIN PROVISIONS RELATING TO DEBT SECURITIES AND CAPITAL SECURITIES
Form of Debt Securities and Capital Securities; Book-Entry System
General
Unless the relevant prospectus supplement states otherwise, the debt securities and capital securities shall initially be represented by one or more global securities in registered form, without coupons attached, and will be deposited with or on behalf of one or more depositaries, including, without limitation, The Depository Trust Company (“DTC”), Euroclear Bank SA/NV (“Euroclear”) and/or Clearstream Banking, S.A. (“Clearstream Luxembourg”), and will be registered in the name of such depositary or its nominee. Unless and until the debt securities or capital securities, as applicable, are exchanged in whole or in part for other securities under the terms of the applicable indenture or the global securities are exchanged for definitive securities, the global securities may not be transferred except as a whole by the depositary to a nominee or a successor of the depositary.
Special procedures to facilitate clearance and settlement have been established among these clearing systems to trade securities across borders in the secondary market. Where payments for securities we issue in global form will be made in U.S. dollars, these procedures can be used for cross-market transfers and the securities will be cleared and settled on a delivery against payment basis. Cross-market transfers of securities that are not in global form may be cleared and settled in accordance with other procedures that may be established among the clearing systems for these securities.
The debt securities and capital securities may be accepted for clearance by DTC, Euroclear and Clearstream Luxembourg.
Neither we nor the trustee nor any of our or their agents has any responsibility for any aspect of the actions of DTC, Euroclear or Clearstream Luxembourg or any of their direct or indirect participants. Neither we nor the trustee nor any of our or their agents has any responsibility for any aspect of the records kept by DTC, Euroclear or Clearstream Luxembourg or any of their direct or indirect participants. Neither we nor the trustee nor any of our or their agents supervise these systems in any way. This is also true for any other clearing system indicated in a prospectus supplement.
DTC, Euroclear or Clearstream Luxembourg and their participants perform these clearance and settlement functions under agreements they have made with one another or with their customers. Investors should be aware that DTC, Euroclear or Clearstream Luxembourg and their participants are not obligated to perform these procedures and may modify them or discontinue them at any time.
The description of the clearing systems in this section reflects our understanding of the rules and procedures of DTC, Euroclear or Clearstream Luxembourg as they are currently in effect. Those systems could change their rules and procedures at any time.
So long as the depositary, or its nominee, is the holder of a global security, the depositary or its nominee will be considered the sole holder of such global security for all purposes under the indentures. Except as described below under the heading “—Issuance of Definitive Securities”, no participant, indirect participant or other person will be entitled to have debt securities or capital securities, as applicable, registered in its name, receive or be entitled to receive physical delivery of debt securities or capital securities, as applicable, in definitive form or be considered the owner or holder of the debt securities or capital securities, as applicable, under the indentures. Each person having an ownership or other interest in debt securities or capital securities, as applicable, must rely on the procedures of the depositary, and, if a person is not a participant in the depositary, must rely on the procedures of the participant or other securities intermediary through which that person owns its interest to exercise any rights and obligations of a holder under the indentures, the debt securities or capital securities, as applicable.
Payments on Global Securities
Payments of any amounts in respect of any global securities will be made by the trustee to the depositary. Payments will be made to beneficial owners of debt securities or capital securities, as applicable, in accordance with the rules and procedures of the depositary or its direct and indirect participants, as applicable. We, the trustee and any of our and their agents will not have any responsibility or liability for any aspect of the records of any securities intermediary in the chain of intermediaries between the depositary and any beneficial owner of an interest in a global security, or the failure of the depositary or any intermediary to pass through to any beneficial owner any payments that we make to the depositary.
The Clearing Systems
DTC, Euroclear and Clearstream Luxembourg have advised us as follows:
DTC. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly. The DTC rules applicable to its participants are on file with the SEC.
Euroclear. Euroclear holds securities for its participants and clears and settles transactions between its participants through simultaneous electronic book-entry delivery against payment, thus eliminating the need for physical movement of certificates. Euroclear provides various other services, including safekeeping, administration, clearance and settlement and securities lending and borrowing, and interfaces with domestic markets in several countries. Euroclear is operated by Euroclear Bank, under contract with Euroclear plc, a U.K. corporation. Euroclear Bank conducts all operations, and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with Euroclear Bank, not Euroclear plc. Euroclear plc establishes policy for Euroclear on behalf of Euroclear participants. Euroclear participants include banks (including central banks), securities brokers and dealers and other professional financial intermediaries and may include any underwriters for the debt securities or contingent convertible securities, as applicable. Indirect access to Euroclear is also available to other firms that clear through or maintain a custodial relationship with a Euroclear participant, either directly or indirectly. Euroclear is an indirect participant in DTC. Securities clearance accounts and cash accounts with Euroclear are governed by the Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of the Euroclear System (collectively, the “Euroclear Terms and Conditions”), and applicable law. The Euroclear Terms and Conditions govern transfers of securities and cash within Euroclear, withdrawals of securities and cash from Euroclear, and receipts of payments with respect to securities in Euroclear.
Clearstream Luxembourg. Clearstream Luxembourg is incorporated under the laws of The Grand Duchy of Luxembourg as a société anonyme and is subject to regulation by the Luxembourg Commission for the Supervision of the Financial Sector (Commission de Surveillance du Secteur Financier). Clearstream Luxembourg is owned by Deutsche Börse AG, a publicly traded company. Clearstream Luxembourg holds securities for its participants and facilitates the clearance and settlement of securities transactions among its participants through electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of certificates. Clearstream Luxembourg provides to its participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream Luxembourg interfaces with domestic markets in several countries.
Clearstream Luxembourg’s customers include worldwide securities brokers and dealers, banks, trust companies and clearing corporations and may include professional financial intermediaries. Its U.S. customers are limited to securities brokers, dealers and banks. Indirect access to the Clearstream Luxembourg system is also available to others that clear through Clearstream Luxembourg customers or that have custodial relationships with its customers, such as banks, brokers, dealers and trust companies. Clearstream Luxembourg is an indirect participant in DTC. Clearstream Luxembourg has established an electronic bridge with Euroclear to facilitate settlement of trades between Clearstream Luxembourg and Euroclear. Distributions with respect to the securities held beneficially through Clearstream Luxembourg are credited to cash accounts of Clearstream Luxembourg customers in accordance with its rules and procedures, to the extent received by Clearstream Luxembourg.
Other Clearing Systems. We may choose any other clearing system for a particular series of securities. The clearance and settlement procedures for the clearing system we choose will be described in the applicable prospectus supplement.
Primary Distribution
The distribution of debt securities and capital securities will be cleared through one or more of the clearing systems that we have described above or any other clearing system that is specified in the applicable prospectus supplement. Payment for debt securities and capital securities will be made on a delivery versus payment or free delivery basis. These payment procedures will be more fully described in the applicable prospectus supplement.
Clearance and settlement procedures may vary from one series of debt securities and capital securities, as applicable, to another according to the currency that is chosen for the specific series of debt securities or capital securities. Customary clearance and settlement procedures are described below.
We will submit applications to the relevant system or systems for the debt securities and capital securities to be accepted for clearance. The clearance numbers that are applicable to each clearance system will be specified in the applicable prospectus supplement.
Clearance and Settlement Procedures
DTC. DTC participants that hold debt securities or capital securities, as applicable, through DTC on behalf of investors will follow the settlement practices applicable to United States corporate debt obligations in DTC’s Same-Day Funds Settlement System.
Debt securities and capital securities, as applicable, will be credited to the securities custody accounts of these DTC participants against payment in same-day funds, for payments in U.S. dollars, on the settlement date. For payments in a currency other than U.S. dollars, debt securities or capital securities, as applicable, will be credited free of payment on the settlement date. If payment is made other than in U.S. dollars, separate payment arrangements outside of the DTC system must be made between the DTC Participants involved.
Euroclear and Clearstream Luxembourg. We understand that investors that hold debt securities or capital securities, as applicable, through Euroclear or Clearstream Luxembourg accounts will follow the settlement procedures that are applicable to conventional Eurobonds in registered form for securities.
Debt securities or capital securities, as applicable, will be credited to the securities custody accounts of Euroclear and Clearstream Luxembourg participants on the business day following the settlement date, for value on the settlement date. They will be credited either free of payment or against payment for value on the settlement date.
Secondary Market Trading
Trading Between DTC Participants
Secondary market trading between DTC participants will occur in the ordinary way in accordance with DTC’s rules. Secondary market trading will be settled using procedures applicable to United States corporate debt obligations in DTC’s Same-Day Funds Settlement System for securities.
If payment is made in U.S. dollars, settlement will be in same-day funds. If payment is made in a currency other than U.S. dollars, settlement will be free of payment. If payment is made other than in U.S. dollars, separate payment arrangements outside of the DTC system must be made between the DTC participants involved.
Trading Between Euroclear and/or Clearstream Luxembourg Participants
We understand that secondary market trading between Euroclear and/or Clearstream Luxembourg participants will occur in the ordinary way following the applicable rules and operating procedures of Euroclear and Clearstream Luxembourg. Secondary market trading will be settled using procedures applicable to conventional Eurobonds in registered form for securities.
Trading Between a DTC Seller and a Euroclear or Clearstream Luxembourg Purchaser
A purchaser of debt securities or capital securities, as applicable, that are held in the account of a DTC participant must send instructions to Euroclear or Clearstream Luxembourg at least one business day prior to settlement. The instructions will provide for the transfer of the debt securities or capital securities, as applicable, from the selling DTC participant’s account to the account of the purchasing Euroclear or Clearstream Luxembourg participant. Euroclear or Clearstream Luxembourg, as the case may be, will then instruct the common depositary for Euroclear and Clearstream Luxembourg to receive the debt securities or capital securities, as applicable, either against payment or free of payment.
The interests in the debt securities or capital securities, as applicable, will be credited to the respective clearing system. The clearing system will then credit the account of the participant, following its usual procedures. Credit for the debt securities or capital securities, as applicable, will appear on the next day, European time. Cash debit will be back-valued to, and the interest on the debt securities or capital securities, as applicable, will accrue from, the value date, which would be the preceding day, when settlement occurs in New York. If the trade fails and settlement is not completed on the intended date, the Euroclear or Clearstream Luxembourg cash debit will be valued as of the actual settlement date instead.
Euroclear participants or Clearstream Luxembourg participants will need the funds necessary to process same-day funds settlement. The most direct means of doing this is to pre-position funds for settlement, either from cash or from existing lines of credit, as for any settlement occurring within Euroclear or Clearstream Luxembourg. Under this approach, participants may take on credit exposure to Euroclear or Clearstream Luxembourg until the debt securities or capital securities, as applicable, are credited to their accounts one business day later.
As an alternative, if Euroclear or Clearstream Luxembourg has extended a line of credit to them, participants can choose not to pre-position funds and will instead allow that credit line to be drawn upon to finance settlement. Under this procedure, Euroclear participants or Clearstream Luxembourg participants purchasing debt securities or capital securities, as applicable, would incur overdraft charges for one business day (assuming they cleared the overdraft as soon as the securities were credited to their accounts). However, any interest on the debt securities or capital securities, as applicable, would accrue from the value date. Therefore, in many cases, the investment income on debt securities or capital securities, as applicable, that is earned during that one-business day period may substantially reduce or offset the amount of the overdraft charges. This result will, however, depend on each participant’s particular cost of funds.
Because the settlement will take place during New York business hours, DTC participants will use their usual procedures to deliver debt securities or capital securities, as applicable, to the depositary on behalf of Euroclear participants or Clearstream Luxembourg participants. The sale proceeds will be available to the DTC seller on the settlement date. For DTC participants, then, a cross-market transaction will settle no differently than a trade between two DTC participants.
Special Timing Considerations
Investors should be aware that they will only be able to make and receive deliveries, payments and other communications involving the debt securities or capital securities, as applicable, through Clearstream Luxembourg and Euroclear on days when those systems are open for business. Those systems may not be open for business on days when banks, brokers and other institutions are open for business in the United States.
In addition, because of time-zone differences, there may be problems with completing transactions involving Clearstream Luxembourg and Euroclear on the same business day as in the United States. U.S. investors who wish to transfer their interests in the debt securities or capital securities, as applicable, or to receive or make a payment or delivery of the debt securities or capital securities, as applicable, on a particular day, may find that the transactions will not be performed until the next business day in Luxembourg or Brussels, depending on whether Clearstream Luxembourg or Euroclear is used.
Issuance of Definitive Securities
So long as the depositary holds the global securities of a particular series of debt securities or capital securities, as applicable, such global securities will not be exchangeable for definitive securities of that series unless:
•the depositary notifies the trustee that it is unwilling or unable to continue to act as depositary for the debt securities or capital securities, as applicable, or the depositary ceases to be a clearing agency registered under the Exchange Act;
•we are wound up and we fail to make a payment on the debt securities or capital securities, as applicable, when due; or
•at any time we determine at our option and in our sole discretion that the global securities of a particular series of debt securities or capital securities should be exchanged for definitive debt securities or capital securities, as applicable, of that series in registered form.
Each person having an ownership or other interest in a debt security or capital security, as applicable, must rely exclusively on the rules or procedures of the depositary as the case may be, and any agreement with any direct or indirect participant of the depositary, including Euroclear or Clearstream Luxembourg and their participants, as applicable, or any other securities intermediary through which that person holds its interest, to receive or direct the delivery of possession of any definitive security. The indentures permit us to determine at any time and in our sole discretion that debt securities or capital securities, as applicable, shall no longer be represented by global securities. DTC has advised us that, under its current practices, it would notify its participants of our request, but will only withdraw beneficial interests from the global securities at the request of each DTC participant. We would issue definitive certificates in exchange for any such beneficial interests withdrawn.
Unless otherwise specified in the relevant prospectus supplement, definitive debt securities and definitive capital securities will be issued in registered form only. To the extent permitted by law, we, the trustee and any paying agent shall be entitled to treat the person in whose name any definitive security is registered as its absolute owner.
Payments in respect of each series of definitive securities and definitive capital securities will be made to the person in whose name such definitive securities are registered as it appears in the register for that series of debt securities or capital securities, as applicable. Payments will be made in respect of the debt securities or capital securities, as applicable, by check drawn on a bank in New York or, if the holder requests, by transfer to the holder’s account in New York. Definitive securities should be presented to the paying agent for redemption.
If we issue definitive debt securities or capital securities, as applicable, of a particular series in exchange for a particular global security, the depositary, as holder of that global security, will surrender it against receipt of the definitive debt securities or capital securities, as applicable, cancel the book-entry debt securities or capital securities, as applicable, of that series, and distribute the definitive debt securities or capital securities, as applicable, of that series to the persons and in the amounts that the depositary specifies pursuant to the internal procedures of such depositary.
If definitive securities are issued in the limited circumstances described above, those securities (i) will be transferable only on the register for that series of debt securities or capital securities, and (ii) may be transferred in whole or in part in denominations of any whole number of securities upon surrender of the definitive securities certificates together with the form of transfer endorsed on it, duly completed and executed at the specified office of a paying agent. If only part of a securities certificate is transferred, a new securities certificate representing the balance not transferred will be issued to the transferor within three business days after the paying agent receives the certificate. The new certificate representing the balance will be delivered to the transferor by uninsured post at the risk of the transferor, to the address of the transferor appearing in the records of the paying agent. The new certificate representing the securities that were transferred will be sent to the transferee within three business days after the paying agent receives the certificate transferred, by uninsured post at the risk of the holder entitled to the securities represented by the certificate, to the address specified in the form of transfer.
1.Prospectus Supplement - 4.425% Senior Callable Fixed-to-Fixed Rate Notes due 2031, 4.943% Senior Callable Fixed-to-Fixed Rate Notes due 2036 and Senior Callable Floating Rate Notes due 2031
DESCRIPTION OF THE SENIOR NOTES
In this prospectus supplement, we refer to the 2031 Fixed Rate Notes and the 2036 Fixed Rate Notes collectively as the “Fixed Rate Notes” and to the Fixed Rate Notes and the Floating Rate Notes collectively as the “Senior Notes”. The following is a summary of certain terms of the Senior Notes. It supplements the description of the general terms of the debt securities of any series we may issue contained in the accompanying prospectus under the heading “Description of Debt Securities”. If there is any inconsistency between the following summary and the description in the accompanying prospectus, the following summary governs.
2031 Fixed Rate Notes
The 2031 Fixed Rate Notes will be issued in an aggregate principal amount of $1,500,000,000 and will mature on November 4, 2031. The 2031 Fixed Rate Notes bear interest at a fixed annual rate during the initial fixed rate period and at a reset annual rate during the reset fixed rate period, each as described below.
During the initial fixed rate period, interest will accrue from November 4, 2025 on the 2031 Fixed Rate Notes at a fixed rate of 4.425% per annum. Interest accrued on the Senior Notes during the initial fixed rate period will be payable semi-annually in arrear on May 4 and November 4 of each year, commencing on May 4, 2026. We refer to each such interest payment date during the initial fixed rate period as a “fixed rate interest payment date”.
During the reset fixed rate period, interest will accrue on the 2031 Fixed Rate Notes at a fixed annual rate equal to the applicable U.S. Treasury Rate (as defined below) as determined by the Calculation Agent (as defined herein) on the 2031 Fixed Rate Notes Reset Determination Date (as defined below), plus 82 basis points (0.820%). Interest accrued on the 2031 Fixed Rate Notes during the reset fixed rate period will be payable semi-annually in arrear on May 4, 2031 and November 4, 2031. We refer to each such interest payment date during the reset fixed rate period as a “2031 Fixed Rate Notes reset rate interest payment date”, and together with the fixed rate interest payment dates, the “2031 Fixed Rate Notes interest payment dates”.
The “initial fixed rate period” is from, and including, November 4, 2025 to, but excluding, November 4, 2030 (the “2031 Fixed Rate Notes Reset Date”) and the “reset fixed rate period” starts from, and including, the 2031 Fixed Rate Notes Reset Date to, but excluding, November 4, 2031.
The “2031 Fixed Rate Notes Reset Determination Date” will be on the second business day immediately preceding the 2031 Fixed Rate Notes Reset Date.
2036 Fixed Rate Notes
The 2036 Fixed Rate Notes will be issued in an aggregate principal amount of $1,250,000,000 and will mature on November 4, 2036. The 2036 Fixed Rate Notes bear interest at a fixed annual rate during the initial fixed rate period and at a reset annual rate during the reset fixed rate period, each as described below.
During the initial fixed rate period, interest will accrue from November 4, 2025 on the 2036 Fixed Rate Notes at a fixed rate of 4.943% per annum. Interest accrued on the Senior Notes during the initial fixed rate period will be payable semi-annually in arrear on May 4 and November 4 of each year, commencing on May 4, 2026. We refer to each such interest payment date during the initial fixed rate period as a “fixed rate interest payment date”.
During the reset fixed rate period, interest will accrue on the 2036 Fixed Rate Notes at a fixed annual rate equal to the applicable U.S. Treasury Rate (as defined below) as determined by the Calculation Agent (as defined herein) on the 2036 Fixed Rate Notes Reset Determination Date (as defined below), plus 97 basis points (0.970%). Interest accrued on the 2036 Fixed Rate Notes during the reset fixed rate period will be payable semi-annually in arrear on May 4, 2036 and November 4, 2036. We refer to each such interest payment date during the reset fixed rate period as a “2036 Fixed Rate Notes reset rate interest payment date”, and together with the fixed rate interest payment dates, the “2036 Fixed Rate Notes interest payment dates”.
The “initial fixed rate period” is from, and including, November 4, 2025 to, but excluding, November 4, 2035 (the “2036 Fixed Rate Notes Reset Date”) and the “reset fixed rate period” starts from, and including, the 2036 Fixed Rate Notes Reset Date to, but excluding, November 4, 2036.
The “2036 Fixed Rate Notes Reset Determination Date” will be on the second business day immediately preceding the 2036 Fixed Rate Notes Reset Date.
Interest will be paid to holders of record of each series of Fixed Rate Notes in respect of the principal amount thereof outstanding 15 calendar days preceding the relevant Fixed Rate Notes interest payment date, whether or not a business day. If the scheduled maturity date or date of redemption or repayment is not a business day, we may pay interest and principal on the next succeeding business day, but interest on that payment will not accrue during the period from and after the scheduled maturity date or date of redemption or repayment.
Initial Fixed Rate Period
Interest on the Fixed Rate Notes during the initial fixed rate period will be calculated on the basis of a 360-day year consisting of twelve 30-day months and, in the case of an incomplete month, on the basis of the actual number of days elapsed in such period. If any scheduled fixed rate interest payment date, redemption date or maturity date is not a business day, we will pay interest and principal, as applicable, on the next business day, but interest on that payment will not accrue during the period from and after such scheduled fixed rate interest payment date, redemption date or maturity date.
Reset Fixed Rate Period
Interest on the Fixed Rate Notes during the reset fixed rate period will be calculated on the basis of a 360-day year consisting of twelve 30-day months and, in the case of an incomplete month, on the basis of the actual number of days elapsed in such period. The interest rate for the 2031 Fixed Rate Notes during the reset fixed rate period will be reset on the 2031 Fixed Rate Notes Reset Date. The interest rate for the 2036 Fixed Rate Notes during the reset fixed rate period will be reset on the 2036 Fixed Rate Notes Reset Date. If any scheduled reset rate interest payment date, redemption date or maturity date is not a business day, we will pay interest and principal, as applicable, on the next business day, but interest on that payment will not accrue during the period from and after such scheduled reset rate interest payment date, redemption date or maturity date.
Determination of the U.S. Treasury Rate
The U.S. Treasury Rate shall be determined by The Bank of New York Mellon, London Branch as calculation agent (the “Calculation Agent”).
“U.S. Treasury Rate” means, with respect to the 2031 Fixed Rate Notes Reset Date or the 2036 Fixed Rate Notes Reset Date, as applicable, the rate per annum equal to: (1) the arithmetic average of the yields on actively traded U.S. Treasury securities adjusted to constant maturity for the maturity of one year (“Yields”), for the five consecutive business days immediately prior to the 2031 Fixed Rate Notes Reset Determination Date or the 2036 Fixed Rate Notes Reset Determination Date, as applicable, and appearing under the caption “Treasury constant maturities” on the 2031 Fixed Rate Notes Reset Determination Date or the 2036 Fixed Rate Notes Reset Determination Date, as applicable, as of 5:00 p.m. (New York City time), in the applicable most recently published statistical release designated “H.15 Daily Update”, or any successor publication that is published by the Board of Governors of the Federal Reserve System that establishes yields on actively traded U.S. Treasury securities adjusted to constant maturity, under the caption “Treasury constant maturities”, for the maturity of one year; provided that if the Yield is not available through such release (or successor publication) for any relevant business day, then the arithmetic average will be determined based on the Yields for the remaining business days during the five business day period described above (provided further that if the Yield is available for only a single business day during such five business day period, the “U.S. Treasury Rate” will mean the single-day Yield for such day); or (2) if such release (or any successor release) is not published during the week immediately prior to the 2031 Fixed Rate Notes Reset Determination Date or the 2036 Fixed Rate Notes Reset Determination Date, as applicable, or does not contain such yields, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for the 2031 Fixed Rate Notes Reset Date or the 2036 Fixed Rate Notes Reset Date, as applicable.
If the U.S. Treasury Rate cannot be determined, for whatever reason, as described under (1) or (2) above, “U.S. Treasury Rate” means the rate in percentage per annum as notified by the Calculation Agent to the Issuer equal to the last reported Yield on U.S. Treasury securities having a maturity of one year based on information appearing in the most recently published statistical release designated “H.15 Daily Update” (or any successor publication by the Board of Governors of the Federal Reserve System and that establishes yields on actively traded U.S. Treasury securities) as of 5:00 p.m. (New York City time) on the 2031 Fixed Rate Notes Reset Determination Date or the 2036 Fixed Rate Notes Reset Determination Date, as applicable.
“Comparable Treasury Issue” means, with respect to the applicable reset fixed rate period, the U.S. Treasury security or securities selected by the Issuer with a maturity date on or about the last day of the applicable reset fixed rate period and that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities denominated in U.S. dollars and having a maturity of one year.
“Comparable Treasury Price” means, with respect to the 2031 Fixed Rate Notes Reset Date or the 2036 Fixed Rate Notes Reset Date, respectively, (i) the arithmetic average of the Reference Treasury Dealer Quotations for the 2031 Fixed Rate Notes Reset Date or the 2036 Fixed Rate Notes Reset Date, as applicable, received by the Issuer (calculated by the Calculation Agent on the 2031 Fixed Rate Notes Reset Determination Date preceding the 2031 Fixed Rate Notes Reset Date or the 2036 Fixed Rate Notes Reset Determination Date preceding the 2036 Fixed Rate Notes Reset Date, as applicable), after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (ii) if fewer than five such Reference Treasury Dealer Quotations are received by the Issuer, the arithmetic average of all such quotations, or (iii) if fewer than two such Reference Treasury Dealer Quotations are received by the Issuer, then such Reference Treasury Dealer Quotation as quoted in writing to the Issuer by a Reference Treasury Dealer.
“Reference Treasury Dealer” means each of up to five banks selected by the Issuer, or the affiliates of such banks, which are (i) primary U.S. Treasury securities dealers, and their respective successors, or (ii) market makers in pricing corporate bond issues denominated in U.S. dollars.
“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and the 2031 Fixed Rate Notes Reset Date and the 2036 Fixed Rate Notes Reset Date, the bid and offered prices obtained by LBG for the applicable Comparable Treasury Issue, expressed in each case as a percentage of its principal amount, at 11:00 a.m. (New York City time), on the 2031 Fixed Rate Notes Reset Determination Date or the 2036 Fixed Rate Notes Reset Determination Date, as applicable.
All calculations of the Calculation Agent, in the absence of manifest error, will be conclusive for all purposes and binding on the Issuer, the Trustee, the paying agent and on the holders of the Senior Notes.
All percentages resulting from any of the above calculations will be rounded, if necessary, to the nearest one hundred thousandth of a percentage point, with five one-millionths of a percentage point rounded upwards (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)) and all dollar amounts used in or resulting from such calculations will be rounded to the nearest cent (with one-half cent being rounded upwards).
The interest rate on each series of Fixed Rate Notes during the reset fixed rate period will in no event be higher than the maximum rate permitted by law or lower than 0.00% per annum.
Floating Rate Notes
The Floating Rate Notes will be issued in an aggregate principal amount of $300,000,000 and will mature on November 4, 2031. The Floating Rate Notes bear interest at a floating rate from November 4, 2025, as described below.
The Floating Rate Notes Interest Rate will be equal to the sum of (A) the SOFR Index Average (as defined below), as determined, with respect to each Floating Rate Notes Interest Period (as defined below), on the applicable Floating Rate Notes Interest Determination Date (as defined below), and (B) 1.100% per annum, provided that the Floating Rate Notes Interest Rate with respect to any Floating Rate Notes Interest Period shall be subject to a minimum rate per annum of 0.00% (the “Minimum Rate”), calculated on the basis of a 360-day year and the actual number of days elapsed.
The first Floating Rate Notes interest payment date (as defined below) will fall on February 4, 2026. Thereafter, interest on the Floating Rate Notes will be paid quarterly in arrear on February 4, May 4, August 4 and November 4 of each year (together with the first Floating Rate Notes interest payment date, each a “Floating Rate Notes interest payment date”). However, if a Floating Rate Notes interest payment date would fall on a day that is not a business day, other than the interest payment date that is also a redemption date or the date of maturity, the Floating Rate Notes interest payment date will be postponed to the next succeeding day that is a business day and interest thereon will continue to accrue, except that if the business day falls in the next succeeding calendar month, the applicable Floating Rate Notes interest payment date will be the immediately preceding business day. In each such case, except for the Floating Rate Notes interest payment date falling on a redemption date or the maturity date, the Floating Rate Notes Interest Periods and the Floating Rate Notes Reset Dates (as defined below) will be adjusted accordingly to calculate the amount of interest payable on the Floating Rate Notes.
The Floating Rate Notes Interest Rate will be reset on each Floating Rate Notes interest payment date (together with the initial Floating Rate Notes Reset Date, each a “Floating Rate Notes Reset Date”). However, if any Floating Rate Notes Reset Date would otherwise be a day that is not a business day, that Floating Rate Notes Reset Date will be postponed to the next succeeding day that is a business day, except that if the business day falls in the next succeeding calendar month, the applicable Floating Rate Notes Reset Date will be the immediately preceding business day.
Interest will be paid to holders of record of the Floating Rate Notes in respect of the principal amount thereof outstanding 15 calendar days preceding the relevant Floating Rate Notes interest payment date, whether or not a business day. If the scheduled maturity date or date of redemption or repayment is not a business day, we may pay interest and principal on the next succeeding business day, but interest on that payment will not accrue during the period from and after the scheduled maturity date or date of redemption or repayment.
The first interest period will begin on and include November 4, 2025 and will end on and exclude February 4, 2026. Thereafter, the interest periods will be the periods from and including a Floating Rate Notes interest payment date to but excluding the immediately succeeding Floating Rate Notes interest payment date (together with the initial interest period, each a “Floating Rate Notes Interest Period”). However, the final Floating Rate Notes Interest Period will be the period from and including the Floating Rate Notes interest payment date immediately preceding the maturity date to but excluding the maturity date. The Floating Rate Notes interest determination date (“Floating Rate Notes Interest Determination Date”) for each Floating Rate Interest Period will be on the fifth U.S. Government Securities Business Day (as defined below) preceding the applicable Floating Rate Notes interest payment date. If a tax redemption or Loss Absorption Disqualification Event redemption (see “Description of the Senior Notes—Tax Redemption” and “Description of the Senior Notes—Loss Absorption Disqualification Event Redemption” in this prospectus supplement) occurs, the Floating Rate Notes Interest Determination Date will be on the fifth U.S. Government Securities Business Day preceding such tax redemption or Loss Absorption Disqualification Event redemption date, as applicable. “U.S. Government Securities Business Day” means any day except for a Saturday, Sunday or a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in U.S. government securities.
Calculation of Floating Rate Notes Interest Rate
The Calculation Agent for the Floating Rate Notes is The Bank of New York Mellon, London Branch or its successor appointed by LBG. The Calculation Agent will determine the Floating Rate Notes Interest Rate for each Floating Rate Notes Interest Period by reference to the SOFR Index Average on the applicable Floating Rate Notes Interest Determination Date. Promptly upon such determination, the Calculation Agent will notify LBG and the Trustee (as defined below) of the applicable Floating Rate Notes Interest Rate. Upon the request of the holder of any Floating Rate Note, the Calculation Agent will provide the Floating Rate Notes Interest Rate as determined for the most recent applicable Floating Rate Notes Interest Period.
Subject to the circumstances described under “— SOFR Discontinuation” below, the “SOFR Index Average” for each Floating Rate Notes Interest Period shall be equal to the value of the SOFR rates for each day during the relevant Floating Rate Notes Interest Period as calculated by the Calculation Agent as follows:
with the resulting percentage being rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with 0.000005 being rounded upwards, where:
“dc” for any SOFR Observation Period, means the number of calendar days in the relevant SOFR Observation Period;
“SOFR Index” means the SOFR Index in relation to any U.S. Government Securities Business Day as published by the NY Federal Reserve on the NY Federal Reserve’s Website at the SOFR Determination Time;
“SOFR IndexEnd” means the SOFR Index value on the date that is five U.S. Government Securities Business Days preceding the Floating Rate Notes interest payment date relating to such Floating Rate Notes Interest Period (or in the final Floating Rate Notes Interest Period, preceding the maturity date) (such date a “SOFR Index Determination Date”); and
“SOFR IndexStart” means the SOFR Index value on the date that is five U.S. Government Securities Business Days preceding the first date of the relevant Floating Rate Notes Interest Period (such date a “SOFR Index Determination Date”), and, for the initial Floating Rate Notes Interest Period, the SOFR Index value on October 28, 2025.
Subject to the circumstances described under “— SOFR Discontinuation” below, if the SOFR Index is not published on any relevant SOFR Index Determination Date and a SOFR Benchmark Event and its related SOFR Benchmark Replacement Date has not occurred, the “SOFR Index Average” for such Floating Rate Notes Interest Period shall be calculated by the Calculation Agent on the relevant Floating Rate Notes Interest Determination Date as follows:
with the resulting percentage being rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with 0.000005 being rounded upwards, where:
“d” for any SOFR Observation Period, means the number of calendar days in the relevant SOFR Observation Period;
“do” for any SOFR Observation Period, means the number of U.S. Government Securities Business Days in the relevant SOFR Observation Period;
“i” means a series of whole numbers from one to do, each representing the relevant U.S. Government Securities Business Days in chronological order from (and including) the first U.S. Government Securities Business Day in the relevant SOFR Observation Period;
“ni” for any U.S. Government Securities Business Day “i” in the relevant SOFR Observation Period, means the number of calendar days from (and including) such U.S. Government Securities Business Day “i” up to (but excluding) the following U.S. Government Securities Business Day (“i+1”); and
“SOFRi” for any U.S. Government Securities Business Day “i” in the relevant SOFR Observation Period, is equal to SOFR in respect of that day “i”.
In connection with the SOFR provisions above, the following definitions apply:
“Bloomberg Screen SOFRRATE Page” means the Bloomberg screen designated “SOFRRATE” or any successor page or service; “NY Federal Reserve” means the Federal Reserve Bank of New York;
“NY Federal Reserve’s Website” means the website of the NY Federal Reserve, currently at www.newyorkfed.org, or any successor website of the NY Federal Reserve or the website of any successor administrator of SOFR;
“Reuters Page USDSOFR=” means the Reuters page designated “USDSOFR=” or any successor page or service;
“SOFR” means, with respect to any day (including any U.S. Government Securities Business Day), the rate determined by the Calculation Agent, as the case may be, in accordance with the following provisions:
(a) the Secured Overnight Financing Rate published at the SOFR Determination Time, as such rate is reported on the Bloomberg Screen SOFRRATE Page, then the Secured Overnight Financing Rate published at the SOFR Determination Time, as such rate is reported on the Reuters Page USDSOFR= or, if no such rate is reported on the Reuters Page USDSOFR=, then the Secured Overnight Financing Rate that appears at the SOFR Determination Time on the NY Federal Reserve’s Website; or
(b) if the rate specified in (a) above does not appear, the SOFR published on the NY Federal Reserve’s Website for the first preceding U.S. Government Securities Business Day for which SOFR was published on the NY Federal Reserve’s Website;
“SOFR Determination Time” means approximately 3:00 p.m. (New York City time) on the NY Federal Reserve’s Website on the immediately following U.S. Government Securities Business Day; and
“SOFR Observation Period” means, in respect of each Floating Rate Notes Interest Period, the period from (and including) the fifth U.S. Government Securities Business Day preceding the first date in such Floating Rate Notes Interest Period to (but excluding) the fifth U.S. Government Securities Business Day preceding the Floating Rate Notes interest payment date (or in the final Floating Rate Notes Interest Period, preceding the maturity date) for such Floating Rate Notes Interest Period.
SOFR Discontinuation
Notwithstanding the provisions described under “—Calculation of Floating Rate Notes Interest Rate” above, if a SOFR Benchmark Event and its related SOFR Benchmark Replacement Date occurs when any Floating Rate Notes Interest Rate (or any component part thereof) remains to be determined by reference to the SOFR Benchmark in respect of the Floating Rate Notes, then LBG (or its designee) may, at its sole discretion, appoint and consult with an Independent Adviser, as soon as reasonably practicable, with a view to LBG (or its designee) determining a SOFR Benchmark Replacement and the applicable SOFR Benchmark Replacement Adjustment Spread and any other amendments to the terms of the Floating Rate Notes, in accordance with the provisions below.
In the absence of fraud, LBG (or its designee) and any Independent Adviser appointed pursuant to this section “— SOFR Discontinuation”, as applicable, shall have no liability whatsoever to LBG, the Trustee (as defined below), the Calculation Agent, any paying agent or the holders of the Floating Rate Notes for any determination made by it or for any advice given to LBG (or its designee) in connection with any determination made by LBG (or its designee) pursuant to this section “— SOFR Discontinuation”.
If LBG (or its designee) has not appointed an Independent Adviser in accordance with this section “— SOFR Discontinuation”, LBG (or its designee) may still make any determinations and/or any amendments contemplated by and in accordance with this section “— SOFR Discontinuation” (with the relevant provisions in this section applying mutatis mutandis to allow such determinations or amendments to be made by LBG (or its designee) without consultation with an Independent Adviser). Any determination, decision or election that may be made by LBG (or its designee) pursuant to this section “— SOFR Discontinuation”, including any determination with respect to tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error, will be made in LBG’s (or its designee’s) sole discretion, and, notwithstanding anything to the contrary in the documentation relating to the Floating Rate Notes, shall become effective without consent from the holders of the Floating Rate Notes or any other party.
Subject to the paragraph below, if LBG (or its designee), following consultation with its Independent Adviser, no later than three business days prior to the Floating Rate Notes Interest Determination Date relating to the next Floating Rate Notes Interest Period (the “Determination Cut-off Date”) determines the SOFR Benchmark Replacement for the purposes of determining the Floating Rate Notes Interest Rate for all future Floating Rate Notes Interest Periods (subject to the subsequent operation of this section “— SOFR Discontinuation” during any other future Floating Rate Notes Interest Periods), then such SOFR Benchmark Replacement shall be the SOFR Benchmark for all future Floating Rate Notes Interest Periods (subject to the subsequent operation of this section during any other future Floating Rate Notes Interest Period(s)).
Notwithstanding the above paragraph, if LBG (or its designee), following consultation with its Independent Adviser, determines prior to the Determination Cut-off Date that no SOFR Benchmark Replacement exists then the relevant Floating Rate Notes Interest Rate shall be determined using the SOFR Benchmark last displayed on the relevant page prior to the relevant Floating Rate Notes Interest Determination Date. This paragraph shall apply to the relevant Floating Rate Notes Interest Period only. Any subsequent Floating Rate Notes Interest Period(s) shall be subject to the subsequent operation of, and adjustment as provided in, this section “— SOFR Discontinuation”.
Promptly following the determination of the SOFR Benchmark Replacement as described in this section “— SOFR Discontinuation”, LBG (or its designee) shall give notice thereof pursuant to this section to the Trustee, the Calculation Agent, any paying agents and the holders of the Floating Rate Notes. For the avoidance of doubt, neither the Trustee, the Calculation Agent nor any paying agents shall have any responsibility for making such determination.
Subject to receipt of notice pursuant to the above paragraph, the Trustee, the Calculation Agent and any paying agents shall, at the direction and expense of LBG, effect such waivers and consequential amendments to the terms and conditions of the Floating Rate Notes, the Indenture and any other document as LBG (or its designee), following consultation with its Independent Adviser, determines may be required to give effect to any application of this section “— SOFR Discontinuation”, including, but not limited to:
(i) changes to the terms and conditions of the Floating Rate Notes which LBG (or its designee), following consultation with its Independent Adviser, determines may be required in order to follow market practice (determined according to factors including, but not limited to, public statements, opinions and publications of industry bodies and organizations) in relation to such SOFR Benchmark Replacement, including, but not limited to (A) the business day, business day convention, day count fraction, Floating Rate Notes Interest Determination Date and/or any relevant time applicable to the Floating Rate Notes and (B) the method for determining the fallback to the Floating Rate Notes Interest Rate if such SOFR Benchmark Replacement is not available; and
(ii) any other changes which LBG (or its designee), following consultation with its Independent Adviser, determines are reasonably necessary to ensure the proper operation and comparability to the SOFR Benchmark of such SOFR Benchmark Replacement, which changes shall apply to the Floating Rate Notes for all future Floating Rate Notes Interest Periods (subject to the subsequent operation of this section “— SOFR Discontinuation”). None of the Trustee, the Calculation Agent or any paying agents shall be responsible or liable for any determinations, decisions or elections made by LBG (or its designee) with respect to any waivers or consequential amendments to be effected pursuant to this section “— SOFR Discontinuation” or any other changes and shall be entitled to rely conclusively on any certifications provided to each of them in this regard.
No consent of the holders of the Floating Rate Notes shall be required in connection with effecting the relevant SOFR Benchmark Replacement as described in this section or such other relevant adjustments pursuant to this section, including for the execution of, or amendment to, any documents or the taking of other steps by LBG (or its designee) or any of the parties to the Indenture or Calculation Agent Agreement (if required).
By its acquisition of the Floating Rate Notes, each holder and beneficial owner of the Floating Rate Notes and each subsequent holder and beneficial owner acknowledges, accepts, agrees to be bound by, and consents to, LBG’s (or its designee’s) determination of the SOFR Benchmark Replacement, as contemplated by this section “— SOFR Discontinuation”, and to any amendment or alteration of the terms and conditions of the Floating Rate Notes, including an amendment of the amount of interest due on the Floating Rate Notes, as may be required in order to give effect to this section “— SOFR Discontinuation”, without the need for any further consent from the holders of the Floating Rate Notes. The Trustee shall be entitled to rely on this deemed consent in connection with any supplemental indenture or amendment which may be necessary to give effect to the SOFR Benchmark Replacement or any application of this section “— SOFR Discontinuation”.
By its acquisition of the Floating Rate Notes, each holder and beneficial owner of the Floating Rate Notes and each subsequent holder and beneficial owner waives any and all claims in law and/or equity against the Trustee, the Calculation Agent and any paying agent for, agrees not to initiate a suit against the Trustee, the Calculation Agent and any paying agent in respect of, and agrees that neither the Trustee, the Calculation Agent nor any paying agent will be liable for, any action that the Trustee, the Calculation Agent or any paying agent, as the case may be, takes, or abstains from taking, in each case in accordance with this section “— SOFR Discontinuation” or any losses suffered in connection therewith.
Notwithstanding any other provision of this section “— SOFR Discontinuation”, no SOFR Benchmark Replacement will be adopted, nor will the SOFR Benchmark Replacement Adjustment (as applicable) be applied, nor will any other amendments to the terms and conditions of the Floating Rate Notes be made, if and to the extent that, in the determination of LBG , the same could reasonably be expected to result in the exclusion of the Floating Rate Notes (in whole or in part) from LBG’s and/or its subsidiaries’ minimum requirements for (A) own funds and eligible liabilities and/or (B) loss absorbing capacity instruments, in each case as such minimum requirements are applicable to LBG and/or its subsidiaries and as determined in accordance with, and pursuant to, the relevant Loss Absorption Regulations.
“Corresponding Tenor” with respect to a SOFR Benchmark Replacement means a tenor (including overnight) having approximately the same length (disregarding business day adjustment) as the applicable tenor for the then-current SOFR Benchmark;
“Independent Adviser” means an independent financial institution of international repute or an independent financial adviser with appropriate expertise appointed by LBG under this section “— SOFR Discontinuation”;
“ISDA” means the International Swaps and Derivatives Association, Inc. or any successor;
“ISDA Definitions” means the 2006 ISDA Definitions, as published by ISDA, as amended, supplemented or replaced from time to time;
“ISDA Fallback Rate” means the rate to be effective upon the occurrence of a SOFR Index Cessation Event according to (and as defined in) the ISDA Definitions, where such rate may have been adjusted for an overnight tenor, but without giving effect to any additional spread adjustment to be applied according to such ISDA Definitions;
“ISDA Spread Adjustment” means the spread adjustment, or method for calculating or determining such spread adjustment (which may be a positive or negative value or zero) that shall have been selected by ISDA as the spread adjustment that would apply to the ISDA Fallback Rate;
“Relevant Governmental Body” means the Board of Governors of the Federal Reserve System and/or the NY Federal Reserve or a committee officially endorsed or convened by the Board of Governors of the Federal Reserve System and/or the NY Federal Reserve, or any successor.
“SOFR Benchmark” means, initially, the SOFR Index Average, provided that if a SOFR Benchmark Event has occurred with respect to the SOFR Index Average or the then-current SOFR Benchmark, then “SOFR Benchmark” means the applicable SOFR Benchmark Replacement;
“SOFR Benchmark Event” means the occurrence of one or more of the following events with respect to the then-current SOFR Benchmark (including the daily published component used in the calculation thereof):
(1) a public statement or publication of information by or on behalf of the administrator of the SOFR Benchmark (or such component) announcing that such administrator has ceased or will cease to provide the SOFR Benchmark (or such component), permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the SOFR Benchmark (or such component);
(2) a public statement or publication of information by the regulatory supervisor for the administrator of the SOFR Benchmark (or such component), the central bank for the currency of the SOFR Benchmark (or such component), an insolvency official with jurisdiction over the administrator for the SOFR Benchmark (or such component), a resolution authority with jurisdiction over the administrator for the SOFR Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for the SOFR Benchmark (or such component), which states that the administrator of the SOFR Benchmark (or such component) has ceased or will cease to provide the SOFR Benchmark (or such component) permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the SOFR Benchmark (or such component); or
(3) a public statement or publication of information by the regulatory supervisor for the administrator of the SOFR Benchmark announcing that the SOFR Benchmark is no longer representative;
“SOFR Benchmark Replacement” means the first alternative set forth in the order below that can be determined by LBG, following consultation with its Independent Adviser:
(a) the sum of (a) the alternate rate of interest that has been selected or recommended by the Relevant Governmental Body as the replacement for the then-current SOFR Benchmark for the applicable Corresponding Tenor and (b) the SOFR Benchmark Replacement Adjustment;
(b) the sum of (a) the ISDA Fallback Rate and (b) the SOFR Benchmark Replacement Adjustment; or
(c) the sum of (a) the alternate rate that has been selected by LBG, in consultation with the Independent Adviser, as the replacement for the then-current SOFR Benchmark for the applicable Corresponding Tenor giving due consideration to any industry-accepted rate as a replacement for the then-current SOFR Benchmark for U.S. dollar-denominated floating rate notes at such time and (b) the SOFR Benchmark Replacement Adjustment;
“SOFR Benchmark Replacement Adjustment” means the first alternative set forth in the order below that can be determined by LBG, following consultation with its Independent Adviser:
(a) the spread adjustment, or method for calculating or determining such spread adjustment (which may be a positive or negative value or zero) that has been selected or recommended by the Relevant Governmental Body for the applicable Unadjusted SOFR Benchmark Replacement;
(b) if the applicable Unadjusted SOFR Benchmark Replacement is equivalent to the ISDA Fallback Rate, then the ISDA Spread Adjustment;
(c) the spread adjustment (which may be a positive or negative value or zero) determined by LBG, following consultation with its Independent Adviser, giving due consideration to any industry accepted spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the then-current SOFR Benchmark with the applicable Unadjusted SOFR Benchmark Replacement for U.S. dollar-denominated floating rate notes at such time;
“SOFR Benchmark Replacement Date” means the earliest to occur of the following events with respect to the then-current SOFR Benchmark (including the daily published component used in the calculation thereof):
(1) in the case of clause (1) or (2) of the definition of “SOFR Benchmark Event,” the later of (a) the date of the public statement or publication of information referenced therein and (b) the date on which the administrator of the SOFR Benchmark permanently or indefinitely ceases to provide the SOFR Benchmark (or such component); or
(2) in the case of clause (3) of the definition of “SOFR Benchmark Event,” the date of the public statement or publication of information referenced therein; and
“Unadjusted SOFR Benchmark Replacement” means the SOFR Benchmark Replacement excluding the applicable SOFR Benchmark Replacement Adjustment.
General
The Senior Notes will constitute our direct, unconditional, unsecured and unsubordinated obligations ranking pari passu and without any preference among themselves and at least pari passu, with all of our other outstanding unsecured and unsubordinated obligations, present and future, subject to such exceptions as may be provided by mandatory provisions of applicable law.
Each of the 2031 Fixed Rate Notes, the 2036 Fixed Rate Notes and the Floating Rate Notes will constitute a separate series of senior debt securities issued under an indenture dated as of July 6, 2010, as amended by the First Supplemental Indenture dated as of July 6, 2016 (the “Senior Indenture”) between us as Issuer and The Bank of New York Mellon, acting through its London Branch, as trustee (the “Trustee”), as supplemented by a Twenty-Second Supplemental Indenture to be dated as of November 4, 2025 (the “Twenty-Second Supplemental Indenture” and, together with the Senior Indenture, the “Indenture”) between us as Issuer and the Trustee, The Bank of New York Mellon, London Branch as paying agent and The Bank of New York Mellon SA/NV, Dublin Branch, as senior debt security registrar. Book-entry interests in the Senior Notes will be issued in minimum denominations of $200,000 and in integral multiples of $1,000 in excess thereof.
The Bank of New York Mellon, London Branch is designated as the paying agent. We may at any time designate additional paying agents or rescind the designation of paying agents or approve a change in the office through which any paying agent acts.
We will issue the Senior Notes in fully registered form. Each series of Senior Notes will be represented by one or more global securities in the name of a nominee of The Depository Trust Company (the “DTC”). You will hold beneficial interest in the Senior Notes through the DTC and its participants. The Underwriters expect to deliver the Senior Notes through the facilities of the DTC on November 4, 2025. For a more detailed summary of the form of the Senior Notes and settlement and clearance arrangements, you should read “Description of Certain Provisions Relating to Debt Securities and Capital Securities—Form of Debt Securities and Capital Securities; Book-Entry System” in the accompanying prospectus. Indirect holders trading their beneficial interests in the Senior Notes through the DTC must trade in the DTC’s same-day funds settlement system and pay in immediately available funds. Secondary market trading will occur in the ordinary way following the applicable rules and operating procedures of Euroclear and Clearstream Luxembourg.
Definitive debt securities will only be issued in limited circumstances described under “Description of Certain Provisions Relating to Debt Securities and Capital Securities—Form of Debt Securities and Capital Securities; Book-Entry System” in the accompanying prospectus.
Payment of principal of and interest on the Senior Notes, so long as the Senior Notes are represented by global securities, will be made in immediately available funds. Beneficial interests in the global securities will trade in the same-day funds settlement system of the DTC, and secondary market trading activity in such interests will therefore settle in same-day funds.
A “business day” means any day, other than Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in the City of New York or in the City of London.
All payments in respect of the Senior Notes by us or our paying agent will be made subject to any deduction or withholding that may be imposed or levied by any jurisdiction. Except as provided under “—Payment of Additional Amounts” below, no additional amounts will be paid on the Senior Notes with respect to any such amounts withheld. For the avoidance of doubt, notwithstanding anything to the contrary herein, if by reason of any agreement with the U.S. Internal Revenue Service in connection with Sections 1471-1474 of the U.S. Internal Revenue Code and the U.S. Treasury regulations thereunder (“FATCA”), any intergovernmental agreement between the United States and the United Kingdom or any other jurisdiction with respect to FATCA, or any law, regulation or other official guidance enacted or issued in any jurisdiction implementing, or relating to, FATCA or any intergovernmental agreement, any of us, the Trustee, our paying agent or another withholding agent deducts and withholds from any amount payable on, or in respect of, the Senior Notes, the amounts so deducted or withheld shall be treated as
having been paid to the holder of the Senior Notes, and no additional amounts will be paid on account of any such deduction or withholding. Neither we, the Trustee nor our paying agent shall have any liability in connection with our compliance with any such withholding obligation under applicable law.
Optional Redemption
On at least 5 business days’ but no more than 30 business days’ prior written notice delivered to the registered holders of a series of Senior Notes, we may, in our sole discretion (but subject to, if and to the extent then required by the Relevant Regulator or the Loss Absorption Regulations, our giving notice to the Relevant Regulator and the Relevant Regulator granting us permission) redeem that series of Senior Notes, in whole, but not in part, on November 4, 2030 for the 2031 Fixed Rate Notes and the Floating Rate Notes and, in whole, but not in part, on November 4, 2035 for the 2036 Fixed Rate Notes, at a redemption price equal to 100% of the principal amount of such series of Senior Notes plus accrued and unpaid interest thereon, if any, to, but excluding, the date of redemption (the “redemption date”).
Agreement with Respect to the Exercise of U.K. Bail-in Power
Notwithstanding any other agreements, arrangements, or understandings between us and any holder or beneficial owner of the Senior Notes, by purchasing or acquiring the Senior Notes, each holder (including each beneficial owner) of the Senior Notes acknowledges, accepts, agrees to be bound by and consents to the exercise of any U.K. bail-in power (as defined below) by the relevant U.K. resolution authority that may result in (i) the reduction or cancellation of all, or a portion, of the principal amount of, or interest on, the Senior Notes; (ii) the conversion of all, or a portion, of the principal amount of, or interest on, the Senior Notes into shares or other securities or other obligations of LBG or another person (and the issue to or conferral on the holder of such shares, securities or obligations, including by means of amendment, modification or variation of the terms of the Senior Notes); and/or (iii) the amendment or alteration of the maturity of the Senior Notes, or amendment of the amount of interest due on the Senior Notes, or the dates on which interest becomes payable, including by suspending payment for a temporary period; any U.K. bail-in power may be exercised by means of variation of the terms of the Senior Notes solely to give effect to the exercise by the relevant U.K. resolution authority of such U.K. bail-in power. With respect to (i), (ii) and (iii) above, references to principal and interest shall include payments of principal and interest that have become due and payable (including principal that has become due and payable at the relevant maturity date), but which have not been paid, prior to the exercise of any U.K. bail-in power. Each holder and each beneficial owner of the Senior Notes further acknowledges and agrees that the rights of the holders and/or beneficial owners under the Senior Notes are subject to, and will be varied, if necessary, solely to give effect to, the exercise of any U.K. bail-in power by the relevant U.K. resolution authority. For these purposes, a “U.K. bail-in power” is any write-down, conversion, transfer, modification, moratorium and/or suspension power existing from time to time under any laws, regulations, rules or requirements relating to the resolution of financial holding companies, mixed financial holding companies, banks, banking group companies, credit institutions and/or investment firms incorporated in the United Kingdom in effect and applicable in the United Kingdom to LBG or other members of the Group, including but not limited to any such laws, regulations, rules or requirements which are implemented, adopted or enacted in the United Kingdom within the context of the U.K. resolution regime under the Banking Act 2009 as the same has been or may be amended from time to time (whether pursuant to the U.K. Financial Services (Banking Reform) Act 2013, secondary legislation or otherwise) (the “Banking Act”) and/or the Loss Absorption Regulations, pursuant to which obligations of a bank, banking group company, credit institution or investment firm or any of its affiliates can be reduced, canceled, modified, transferred and/or converted into shares or other securities or obligations of the obligor or any other person (or suspended for a temporary period) or pursuant to which any right in a contract governing such obligations may be deemed to have been exercised. A reference to the “relevant U.K. resolution authority” is to any authority with the ability to exercise a U.K. bail-in power.
According to the principles contained in the Banking Act, we expect that the relevant U.K. resolution authority would exercise its U.K. bail-in power in respect of the Senior Notes having regard to the hierarchy of creditor claims (with the exception of excluded liabilities, as such term is described in the Banking Act) and that the holders of the Senior Notes would be treated equally in respect of the exercise of any U.K. bail-in power with all other claims that would rank pari passu with the Senior Notes upon an insolvency of LBG.
No repayment of the principal amount of the Senior Notes or payment of interest on the Senior Notes shall become due and payable after the exercise of any U.K. bail-in power by the relevant U.K. resolution authority unless, at the time that such repayment or payment, respectively, is scheduled to become due, such repayment or payment would be permitted to be made by us under the laws and regulations of the United Kingdom applicable to us or other members of the Group. See also “Risk Factors― Under the terms of the Senior Notes, you have agreed to be bound by the exercise of any U.K. bail-in power imposed by the relevant U.K. resolution authority”.
Neither a reduction or cancellation, in part or in full, of the principal amount of, or interest on, the Senior Notes or the conversion thereof into another security or obligation of LBG or another person, as a result of the exercise of the U.K. bail-in power by the relevant U.K. resolution authority with respect to LBG, nor the exercise of the U.K. bail-in power by the relevant U.K. resolution authority with respect to the Senior Notes will be a Senior Notes Default or a Senior Notes Event of Default for any purpose.
LBG’s obligations to indemnify the Trustee in accordance with Section 6.07 of the Senior Indenture (as supplemented by the Twenty-Second Supplemental Indenture) shall survive the exercise of the U.K. Bail-in Power by the relevant U.K. resolution authority with respect to the Senior Notes.
By purchasing or acquiring Senior Notes, each holder and each beneficial owner of the Senior Notes: (i) acknowledges and agrees that the exercise of the U.K. bail-in power by the relevant U.K. resolution authority in respect of the Senior Notes shall not give rise to a default or an Event of Default for purposes of Section 315(b) (Notice of Default) and Section 315(c) (Duties of the Trustee in Case of Default) of the Trust Indenture Act (the “TIA”); (ii) to the extent permitted by the TIA, waives any and all claims against the Trustee for, agrees not to initiate a suit against the Trustee in respect of, and agrees that the Trustee shall not be liable for, any action that the Trustee takes, or abstains from taking, in either case in accordance with the exercise of the U.K. bail-in power by the relevant U.K. resolution authority with respect to the Senior Notes; and (iii) acknowledges and agrees that, upon the exercise of any U.K. bail-in power by the relevant U.K. resolution authority, (a) the Trustee shall not be required to take any further directions from holders or beneficial owners of the Senior Notes under Section 5.12 (Control by Holders) of the Senior Indenture, and (b) neither the Senior Indenture nor the Twenty-Second Supplemental Indenture shall impose any duties upon the Trustee whatsoever with respect to the exercise of any U.K. bail-in power by the relevant U.K. resolution authority. Notwithstanding the foregoing, if, following the completion of the exercise of the U.K. bail-in power by the relevant U.K. resolution authority, any of the Senior Notes remain outstanding (for example, if the exercise of the U.K. bail-in power results in only a partial write-down of the principal of such Senior Notes), then the Trustee’s duties under the Indenture shall remain applicable with respect to such Senior Notes following such completion to the extent that LBG and the Trustee agree pursuant to a supplemental indenture or an amendment to the Indenture, unless LBG and the Trustee agree in writing that a supplemental indenture is not necessary.
By purchasing or acquiring the Senior Notes, each holder and each beneficial owner shall be deemed to have (i) consented to the exercise of any U.K. bail-in power as it may be imposed without any prior notice by the relevant U.K. resolution authority of its decision to exercise such power with respect to the Senior Notes and (ii) authorized, directed and requested DTC and any direct participant in DTC or other intermediary through which it holds such Senior Notes to take any and all necessary action, if required, to implement the exercise of any U.K. bail-in power with respect to the Senior Notes as it may be imposed, without any further action or direction on the part of such holder or beneficial owner or the Trustee.
Upon the exercise of the U.K. bail-in power by the relevant U.K. resolution authority with respect to the Senior Notes, we shall provide a written notice to DTC as soon as practicable regarding such exercise of the U.K. bail-in power for purposes of notifying holders and beneficial owners of such occurrence. We shall also deliver a copy of such notice to the Trustee for information purposes. Any delay or failure by us in delivering the notices referred to in this paragraph shall not affect the validity and enforceability of the U.K. bail-in power.
For a discussion of certain risk factors relating to the U.K. bail-in power, see “Risk Factors—Risks relating to the Senior Notes”.
Events of Default; Default; Limitation of Remedies
Events of Default
An “Event of Default” with respect to a series of Senior Notes shall result if:
•a court of competent jurisdiction makes an order which is not successfully appealed within 30 days; or
•an effective shareholders’ resolution is validly adopted,
for the winding-up of LBG, other than under or in connection with a scheme of amalgamation or reconstruction not involving a bankruptcy or insolvency.
If an Event of Default occurs, the Trustee or the holder or holders of at least 25% in aggregate principal amount of the outstanding notes of such series of Senior Notes may declare to be due and payable immediately in accordance with the terms of the Indenture the principal amount of, and accrued but unpaid interest thereon, if any, and any Additional Amounts (as defined below), on the Senior Notes of that series. However, after this declaration but before the Trustee obtains a judgment or decree for payment of money due, the holder or holders of a majority in aggregate principal amount of the outstanding notes of such series of Senior Notes may rescind the declaration of acceleration and its consequences, but only if all Events of Default have been remedied and all payments due, other than those due as a result of acceleration, in respect of such series of Senior Notes have been made.
Defaults
A “Default” with respect to a series of Senior Notes shall result if:
•any installment of interest in respect of the Senior Notes of such series is not paid on or before its interest payment date and such failure continues for 14 days; or
•all or any part of the principal of the Senior Notes of such series is not paid when it otherwise becomes due and payable, whether upon redemption or otherwise, and such failure continues for seven days.
If a Default occurs with respect to a series of Senior Notes, the Trustee may commence a proceeding for the winding-up of LBG, provided that the Trustee may not (except in such winding-up, in accordance with “Events of Default” above) declare the principal amount of, or any other amount in respect of, the outstanding Senior Notes of any series to be due and payable.
However, a failure to make any payment on a series of Senior Notes shall not be a Default if it is withheld or refused in order to comply with any applicable fiscal or other law or regulation or order of any court of competent jurisdiction and LBG delivers a written opinion of legal advisors, who may be an employee of, or legal advisors for, LBG or other legal advisors, such opinion to be acceptable to the Trustee (“Opinion of Counsel”), to the Trustee with that conclusion, at any time before the expiry of the applicable 14 day or seven day period by independent legal advisers, provided, however, that the Trustee may by notice to LBG require it to take such action (including but not limited to proceedings for a declaration by a court of competent jurisdiction) as the Trustee may be advised in an Opinion of Counsel, upon which opinion the Trustee may conclusively rely, is appropriate and reasonable in the circumstances to resolve such doubt, in which case LBG will forthwith take and expeditiously proceed with such action and will be bound by any final resolution of the doubt resulting therefrom. If any such action results in a determination that the relevant payment can be made without violating any applicable law, regulation or order then such payment will become due and payable on the expiration of 14 days (in the case of a Default in respect of a payment of interest) or seven days (in the case of a Default in respect of a payment of principal) after the Trustee gives written notice to LBG informing it of such resolution.
During the continuance of an Event of Default, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of holders of such series of Senior Notes by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in the Indenture or in aid of the exercise of any power granted therein, or to enforce any other legal or equitable right vested in the Trustee by the Indenture or by law, provided, however, that LBG shall not, as a result of the bringing of such judicial proceedings, be required to pay any amount representing or measured by reference to the principal of, or any interest on, the Senior Notes of such series prior to any date on which the principal of, or any interest on, the Senior Notes of such series would have otherwise been payable by LBG.
Notwithstanding any contrary provisions, nothing shall impair the right of a holder, absent the holder’s consent, to sue for any payments due but unpaid with respect to such series of Senior Notes.
General
The holder or holders of not less than a majority in aggregate principal amount of the outstanding Senior Notes may waive any past Event of Default or Default in respect of such series, except an Event of Default or Default in respect of the payment of interest, if any, or principal of (or premium, if any) or payments on any Senior Note of such series or a covenant or provision of the Indenture which cannot be modified or amended without the consent of each holder of the Senior Notes of such series.
Subject to the provisions of the Indenture relating to the duties of the Trustee, if an Event of Default or a Default occurs, the Trustee will be under no obligation to take direction from any holder or holders of such series of Senior Notes, unless they have offered reasonable indemnity to the Trustee. Subject to the Indenture provisions for the indemnification of the Trustee, the holder or holders of a majority in aggregate principal amount of the outstanding Senior Notes of such series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, if the direction is not in conflict with any rule of law or with the Indenture and does not expose the Trustee to undue risk and the action would not be unjustly prejudicial to the holder or holders of the Senior Notes not taking part in that direction. The Trustee may take any other action that it deems proper which is not inconsistent with that direction.
The Indenture provides that the Trustee will, within 90 days after the occurrence of an Event of Default or a Default, give to each holder of a series of Senior Notes notice of the Event of Default or Default known to it, unless the Event of Default or Default, has been cured or waived in respect of such series. However, the Trustee shall be protected in withholding notice if it determines in good faith that withholding notice is in the interest of the holders.
We are required to furnish to the Trustee a statement as to our compliance with all conditions and covenants under the Indenture (i) annually, and (ii) within five business days of a written request from the Trustee.
Additional Issuances
We may, without the consent of the holders of a series of Senior Notes, issue additional notes having the same ranking and same interest rate, maturity date, redemption terms and other terms as such series of Senior Notes described in this prospectus supplement except for the price to the public, issue date and first interest payment date, provided however that such additional notes that form part of any series of Senior Notes described in this prospectus supplement and are issued with the same CUSIP, Common Code and/or ISIN number or numbers as the outstanding Senior Notes of the relevant series must be fungible with the outstanding Senior Notes of that series for U.S. federal income tax purposes. Any such additional notes, together with the Senior Notes offered by this prospectus supplement, will constitute a single series of securities under the Indenture. There is no limitation on the amount of Senior Notes or other debt securities that we may issue under such indenture.
Tax Redemption
In addition to our right to redeem each series of Senior Notes described above under “—Optional Redemption”, we may (subject to, if and to the extent then required by the Relevant Regulator or the Loss Absorption Regulations, our giving notice to the Relevant Regulator and the Relevant Regulator granting us permission) redeem Senior Notes of any series in whole but not in part if we determine that as a result of a change in or amendment to the laws or regulations of the United Kingdom or any political subdivision thereof or authority thereof that has the power to tax (a “U.K. taxing jurisdiction”) (including any treaty to which such U.K. taxing jurisdiction is a party), or any change in the application or interpretation of such laws or regulations (including a decision of any court or tribunal) which change or amendment becomes effective or applicable on or after November 4, 2025:
•in making any payments on the Senior Notes of the relevant series, we have paid or will or would on the next payment date be required to pay additional amounts;
•payments on the next payment date in respect of the Senior Notes of the relevant series would be treated as “distributions” within the meaning of Chapter 2 Part 23 of the Corporation Tax Act 2010 of the United Kingdom, or any statutory modification or re-enactment of such Act; or
•on the next payment date we would not be entitled to claim a deduction in respect of the payments in computing our U.K. taxation liabilities, or the value of the deduction to us would be materially reduced.
In the event of such a redemption, the redemption price of the Senior Notes of the relevant series will be 100% of their principal amount together with accrued but unpaid interest thereon, if any, to the date of redemption.
If we elect to redeem the Senior Notes of any series in accordance with this subsection, they will cease to accrue interest from the redemption date, unless there is a failure to pay the redemption price on the payment date. The circumstances in which we may redeem the Senior Notes of any series and the applicable procedures are described further in the accompanying prospectus under “Description of Debt Securities—Redemption of Senior Debt Securities”.
Loss Absorption Disqualification Event Redemption
We may, at our option (but subject to, if and to the extent then required by the Relevant Regulator or the Loss Absorption Regulations, our giving notice to the Relevant Regulator and the Relevant Regulator granting us permission), having given not less than 15 nor more than 30 days’ notice to holders, redeem all but not some only of a series of Senior Notes outstanding at any time at 100% of their principal amount together with accrued but unpaid interest thereon, if any, to the date of redemption, if immediately prior to the giving of the notice referred to above, we notify the Trustee that a Loss Absorption Disqualification Event has occurred.
A “Loss Absorption Disqualification Event” shall be deemed to have occurred with respect to a series of Senior Notes if, as a result of any amendment to, or change in, the Loss Absorption Regulations, or any change in the application or official interpretation of the Loss Absorption Regulations, in any such case becoming effective on or after the issue date of the first tranche of the Senior Notes, such Senior Notes are or (in our opinion or the opinion of the Relevant Regulator and/or the relevant U.K. resolution authority) are likely to be fully or partially excluded from LBG’s or the Group’s minimum requirements for (A) own funds and eligible liabilities and/or (B) loss absorbing capacity instruments, in each case as such minimum requirements are applicable to LBG and/or the Group and determined in accordance with, and pursuant to, the relevant Loss Absorption Regulations; provided that a Loss Absorption Disqualification Event shall not occur where the exclusion of the Senior Notes from the relevant minimum requirement(s) is due to the remaining maturity of the Senior Notes being less than any period prescribed by any applicable eligibility criteria for such minimum requirements under the relevant Loss Absorption Regulations effective with respect to LBG and/or the Group on the issue date of the first tranche of the Senior Notes.
“Loss Absorption Regulations” means, at any time, the laws, regulations, requirements, guidelines, rules, standards and policies relating to minimum requirements for own funds and eligible liabilities and/or loss absorbing capacity instruments of the United Kingdom, the Relevant Regulator, the relevant U.K. resolution authority and/or the Financial Stability Board then applicable in the United Kingdom including, without limitation to the generality of the foregoing, any regulations, requirements, guidelines, rules, standards and policies relating to minimum requirements for own funds and eligible liabilities and/or loss absorbing capacity instruments adopted or applied by the Relevant Regulator and/or the relevant U.K. resolution authority from time to time (whether or not such regulations, requirements, guidelines, rules, standards or policies are applied generally or specifically to LBG or to the Group).
Conditions to redemption and purchase, etc.
Any redemption or purchase of a series of Senior Notes (other than redemption on the relevant maturity date), and any modification to the terms of a series of Senior Notes or any indenture relating thereto, is subject to, if and to the extent then required by the Relevant Regulator or the Loss Absorption Regulations, our giving notice to the Relevant Regulator and the Relevant Regulator granting us permission therefor and otherwise to compliance with the Loss Absorption Regulations if and to the extent then required thereunder.
“Relevant Regulator” means the relevant U.K. resolution authority or such other governmental authority in the United Kingdom (or if LBG becomes domiciled in a jurisdiction other than the United Kingdom, in such other jurisdiction) having primary supervisory authority with respect to LBG and/or the Group with respect to resolution matters.
Payment of Additional Amounts
Amounts to be paid on the Senior Notes will be made without deduction or withholding for, or on account of, any and all present and future income, stamp and other taxes, levies, imposts, duties, charges, or fees imposed, levied, collected, withheld or assessed by or on behalf of a U.K. taxing jurisdiction, unless such deduction or withholding is required by law. If at any time a U.K. taxing jurisdiction requires us to make such deduction or withholding, we will pay additional amounts with respect to interest only on the Senior Notes (“Additional Amounts”) that are necessary in order that the net amounts of interest paid to the holders of the Senior Notes, after the deduction or withholding, shall equal the amounts of interest only which would have been payable on the Senior Notes if the deduction or withholding had not been required. However, this will not apply to any such amount that would not have been payable or due but for the fact that:
•the holder or the beneficial owner of the relevant Senior Notes is a domiciliary, national or resident of, or engaging in business or maintaining a permanent establishment or physically present in, a U.K. taxing jurisdiction or otherwise having some connection with the U.K. taxing jurisdiction other than the holding or ownership of the relevant Senior Note, or the collection of any payment of, or in respect of, principal of, or any interest or other payment on, the relevant Senior Note;
•except in the case of a winding up in the United Kingdom, the relevant Senior Notes are presented (where presentation is required) for payment in the United Kingdom;
•the relevant Senior Notes are presented (where presentation is required) for payment more than 30 days after the date payment became due or was provided for, whichever is later, except to the extent that the holder would have been entitled to the Additional Amounts on presenting the Senior Notes for payment at the close of that 30 day period;
•the holder or the beneficial owner of the relevant Senior Notes or the beneficial owner of any payment of or in respect of principal of, or any interest or other payment on, the relevant Senior Notes failed to comply with a request by us or our liquidator or other authorized person addressed to the holder to provide information concerning the nationality, residence or identity of the holder or the beneficial owner or to make any declaration or other similar claim to satisfy any requirement, which is required or imposed by a statute, treaty, regulation or administrative practice of a U.K. taxing jurisdiction as a precondition to exemption from all or part of the tax, levy, impost, duty, charge or fee;
•the deduction or withholding is imposed by reason of any agreement with the U.S. Internal Revenue Service in connection with Sections 1471- 1474 of the US Internal Revenue Code and the U.S. Treasury regulations thereunder (“FATCA”), any intergovernmental agreement between the United States and the United Kingdom or any other jurisdiction with respect to FATCA, or any law, regulation or other official guidance enacted or issued in any jurisdiction implementing, or relating to, FATCA or any intergovernmental agreement; or
•any combination of the above items,
nor shall Additional Amounts be paid with respect to any interest only on the Senior Notes to any holder who is a fiduciary or partnership or any person other than the sole beneficial owner of such payment to the extent such payment would be required by the laws of any taxing jurisdiction to be included in the income for tax purposes of a beneficiary or partner or settlor with respect to such fiduciary or a member of such partnership or a beneficial owner who would not have been entitled to such Additional Amounts, had it been the holder.
Whenever we refer in this prospectus supplement, in any context, to the payment of interest on, or in respect of, any Senior Note, we mean to include the payment of Additional Amounts to the extent that, in the context, Additional Amounts are, were or would be payable.
Waiver of Right to Set-Off
Subject to applicable law, no holder may exercise or claim any right of set-off, counterclaim, combination of accounts, compensation or retention in respect of any amount owed to it by LBG arising under or in connection with the Senior Notes. By accepting a Senior Note, each holder will be deemed to have waived any right of set-off, counterclaim, combination of accounts, compensation or retention with respect to such Senior Note or the Indenture (or between our obligations under or in respect of any Senior Note and any liability owed by a holder or the Trustee to us) that they might otherwise have against us, whether before or during our winding up. Notwithstanding the provisions of the foregoing sentence, if any of the said rights and claims of any holder of any Senior Note against LBG is discharged by set-off, counterclaim, combination of accounts, compensation or retention, such holder will immediately pay an amount equal to the amount of such discharge to LBG (or, in the event of winding-up or administration of LBG, the liquidator or, as applicable, the administrator of LBG) and accordingly such discharge will be deemed not to have taken place.
Trustee; Direction of Trustee
LBG’s obligations to indemnify the Trustee in accordance with Section 6.07 of the Senior Indenture (as supplemented by the Twenty-Second Supplemental Indenture) shall survive the exercise of the U.K. bail-in power by the relevant U.K. resolution authority with respect to the Senior Notes and the Indenture.
By purchasing or acquiring the Senior Notes, each holder (including each beneficial owner) of the Senior Notes acknowledges and agrees that, upon the exercise of any U.K. bail-in power by the relevant U.K. resolution authority, (a) the Trustee shall not be required to take any further directions from holders or beneficial owners of the Senior Notes under Section 5.12 (Control by Holders) of the Senior Indenture, and (b) neither the Senior Indenture nor the Twenty-Second Supplemental Indenture shall impose any duties upon the Trustee whatsoever with respect to the exercise of any U.K. bail-in power by the relevant U.K. resolution authority. Notwithstanding the foregoing, if, following the completion of the exercise of the U.K. bail-in power by the relevant U.K. resolution authority, any of the Senior Notes remain outstanding (for example, if the exercise of the U.K. bail-in power results in only a partial write-down of the principal of such Senior Notes), then the Trustee’s duties under the Indenture shall remain applicable with respect to such Senior Notes following such completion to the extent that LBG and the Trustee agree pursuant to a supplemental indenture or an amendment to the Indenture, unless LBG and the Trustee agree in writing that a supplemental indenture is not necessary.
In addition to the foregoing, the Trustee may decline to act or accept direction from holders unless it receives written direction from holders representing a majority in aggregate principal amount of the Senior Notes and security and/or indemnity satisfactory to the Trustee in its sole discretion. The Indenture shall not be deemed to require the Trustee to take any action which may conflict with applicable law, or which may be unjustly prejudicial to the holders not taking part in the direction, or which could subject the Trustee to risk or for which it is not indemnified to its satisfaction in its sole discretion.
The Trustee makes no representations regarding, and shall not be liable with respect to, the information set forth in this prospectus supplement.
Subsequent Holders’ Agreement
Holders and beneficial owners of the Senior Notes that acquire the Senior Notes in the secondary market shall be deemed to acknowledge, agree to be bound by and consent to the same provisions specified herein to the same extent as the holders and beneficial owners of the Senior Notes that acquire the Senior Notes upon their initial issuance, including, without limitation, with respect to the acknowledgement and agreement to be bound by and consent to the terms of the Senior Notes including in relation to the U.K. bail-in power.
Listing
We intend to apply for the listing of each series of Senior Notes on the New York Stock Exchange in accordance with its rules.
Governing Law
The Senior Indenture, the Twenty-Second Supplemental Indenture and the Senior Notes are governed by, and construed in accordance with, the laws of the State of New York, except that, as the Indenture specifies, the provisions relating to the waiver of set-off in the Indenture are governed by and construed in accordance with Scots law.
2.Prospectus Supplement - 4.818% Senior Callable Fixed-to-Fixed Rate Notes due 2029, Senior Callable Floating Rate Notes due 2029, and 6.068% Fixed Rate Reset Dated Subordinated Tier 2 Notes due 2036
DESCRIPTION OF THE NOTES
In this prospectus supplement, we refer to the Senior Notes and the Subordinated Notes collectively as the “Notes”. The following is a summary of certain terms of the Notes. It supplements the description of the general terms of the debt securities of any series we may issue contained in the accompanying prospectus under the heading “Description of Debt Securities”. If there is any inconsistency between the following summary and the description in the accompanying prospectus, the following summary governs.
Senior Notes
Senior Fixed Rate Notes
The Senior Fixed Rate Notes will be issued in an aggregate principal amount of $1,250,000,000 and will mature on June 13, 2029. The Senior Fixed Rate Notes bear interest at a fixed annual rate during the Senior Fixed Rate Notes initial fixed rate period and at a reset annual rate during the Senior Fixed Rate Notes reset fixed rate period, each as described below.
During the Senior Fixed Rate Notes initial fixed rate period, interest will accrue from June 13, 2025 on the Senior Fixed Rate Notes at a fixed rate of 4.818% per annum. Interest accrued on the Senior Fixed Rate Notes during the Senior Fixed Rate Notes initial fixed rate period will be payable semi-annually in arrears on June 13 and December 13 of each year, commencing on December 13, 2025. We refer to each such interest payment date during the Senior Fixed Rate Notes initial fixed rate period as a “Senior Fixed Rate Notes fixed rate interest payment date”.
During the Senior Fixed Rate Notes reset fixed rate period, interest will accrue on the Senior Fixed Rate Notes at a fixed annual rate equal to the Senior Fixed Rate Notes U.S. Treasury Rate (as defined below) as determined by the Calculation Agent (as defined herein) on the Senior Notes Fixed Rate Reset Determination Date (as defined below), plus 83 basis points (0.830%). Interest accrued on the Senior Fixed Rate Notes during the Senior Fixed Rate Notes reset fixed rate period will be payable semi-annually in arrears on December 13, 2028 and June 13, 2029. We refer to each such Senior Fixed Rate Notes interest payment date during the Senior Fixed Rate Notes reset fixed rate period as a “Senior Fixed Rate Notes reset rate interest payment date”, and together with the Senior Fixed Rate Notes fixed rate interest payment dates, the “Senior Fixed Rate Notes interest payment dates”.
The “Senior Fixed Rate Notes initial fixed rate period” is from, and including, June 13, 2025 to, but excluding, June 13, 2028 (the “Senior Fixed Rate Notes Reset Date”) and the “Senior Fixed Rate Notes reset fixed rate period” starts from, and including, the Senior Fixed Rate Notes Reset Date to, but excluding, June 13, 2029.
The “Senior Fixed Rate Notes Reset Determination Date” will be on the second business day immediately preceding the Senior Fixed Rate Notes Reset Date.
Interest will be paid to holders of record of the Senior Fixed Rate Notes in respect of the principal amount thereof outstanding 15 calendar days preceding the relevant Senior Fixed Rate Notes interest payment date, whether or not a business day. If the scheduled maturity date or date of redemption or repayment is not a business day, we may pay interest and principal on the next succeeding business day, but interest on that payment will not accrue during the period from and after the scheduled maturity date or date of redemption or repayment.
Senior Fixed Rate Notes Initial Fixed Rate Period
Interest on the Senior Fixed Rate Notes during the Senior Fixed Rate Notes initial fixed rate period will be calculated on the basis of a 360-day year consisting of twelve 30-day months and, in the case of an incomplete month, on the basis of the actual number of days elapsed in such period. If any scheduled Senior Fixed Rate Notes fixed rate interest payment date, redemption date or maturity date is not a business day, we will pay interest on the next business day, but interest on that payment will not accrue during the period from and after such scheduled Senior Fixed Rate Notes fixed rate interest payment date, redemption date or maturity date.
Senior Fixed Rate Notes Reset Fixed Rate Period
Interest on the Senior Fixed Rate Notes during the Senior Fixed Rate Notes reset fixed rate period will be calculated on the basis of a 360-day year consisting of twelve 30-day months and, in the case of an incomplete month, on the basis of the actual number of days elapsed in such period. The interest rate for the Senior Fixed Rate Notes during the Senior Fixed Rate Notes reset fixed rate period will be reset on the Senior Fixed Rate Notes Reset Date. If any scheduled Senior Fixed Rate Notes reset rate interest payment date, redemption date or maturity date is not a business day, we will pay interest on the next business day, but interest on that payment will not accrue during the period from and after such scheduled Senior Fixed Rate Notes reset rate interest payment date, redemption date or maturity date.
Determination of the Senior Fixed Rate Notes U.S. Treasury Rate
The Senior Fixed Rate Notes U.S. Treasury Rate shall be determined by The Bank of New York Mellon, London Branch as calculation agent (the “Calculation Agent”).
The “Senior Fixed Rate Notes U.S. Treasury Rate” means the rate per annum equal to: (1) the arithmetic average of the yields on actively traded U.S. Treasury securities adjusted to constant maturity for the maturity of one year (“Yields”), for the five consecutive business days immediately prior to the Senior Fixed Rate Notes Reset Determination Date, and appearing under the caption “Treasury constant maturities” on the Senior Fixed Rate Notes Reset Determination Date, as of 5:00 p.m. (New York City time), in the applicable most recently published statistical release designated “H.15 Daily Update”, or any successor publication that is published by the Board of Governors of the Federal Reserve System that establishes yields on actively traded U.S. Treasury securities adjusted to constant maturity, under the caption “Treasury constant maturities”, for the maturity of one year; provided that if the Yield is not available through such release (or successor publication) for any relevant business day, then the arithmetic average will be determined based on the Yields for the remaining business days during the five business day period described above (provided further that if the Yield is available for only a single business day during such five business day period, the “Senior Fixed Rate Notes U.S. Treasury Rate” will mean the single-day Yield for such day); or (2) if such release (or any successor release) is not published during the week immediately prior to the Senior Fixed Rate Notes Reset Determination Date or does not contain such yields, the rate per annum equal to the semi-annual equivalent yield to maturity of the Senior Fixed Rate Notes Comparable Treasury Issue, calculated using a price for the Senior Fixed Rate Notes Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Senior Fixed Rate Notes Comparable Treasury Price for the Senior Fixed Rate Notes Reset Date.
If the Senior Fixed Rate Notes U.S. Treasury Rate cannot be determined, for whatever reason, as described under (1) or (2) above, the “Senior Fixed Rate Notes U.S. Treasury Rate” means the rate in percentage per annum as notified by the Calculation Agent to the Issuer equal to the last reported Yield on U.S. Treasury securities having a maturity of one year based on information appearing in the most recently published statistical release designated “H.15 Daily Update” (or any successor publication by the Board of Governors of the Federal Reserve System and that establishes yields on actively traded U.S. Treasury securities) as of 5:00 p.m. (New York City time) on the Senior Fixed Rate Notes Reset Determination Date.
“Senior Fixed Rate Notes Comparable Treasury Issue” means, with respect to the Senior Fixed Rate Notes reset fixed rate period, the U.S. Treasury security or securities selected by the Issuer with a maturity date on or about the last day of the Senior Fixed Rate Notes reset fixed rate period and that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities denominated in U.S. dollars and having a maturity of one year.
“Senior Fixed Rate Notes Comparable Treasury Price” means (i) the arithmetic average of the Senior Fixed Rate Notes Reference Treasury Dealer Quotations for the Senior Fixed Rate Notes Reset Date, received by the Issuer (calculated by the Calculation Agent on the Senior Fixed Rate Notes Reset Determination Date preceding the Senior Fixed Rate Notes Reset Date), after excluding the highest and lowest such Senior Fixed Rate Notes Reference Treasury Dealer Quotations, or (ii) if fewer than five such Senior Fixed Rate Notes Reference Treasury Dealer Quotations are received by the Issuer, the arithmetic average of all such quotations, or (iii) if fewer than two such Senior Fixed Rate Notes Reference Treasury Dealer Quotations are received by the Issuer, then such Senior Fixed Rate Notes Reference Treasury Dealer Quotation as quoted in writing to the Issuer by a Senior Fixed Rate Notes Reference Treasury Dealer.
“Senior Fixed Rate Notes Reference Treasury Dealer” means each of up to five banks selected by the Issuer, or the affiliates of such banks, which are (i) primary U.S. Treasury securities dealers, and their respective successors, or (ii) market makers in pricing corporate bond issues denominated in U.S. dollars.
“Senior Fixed Rate Notes Reference Treasury Dealer Quotations” means, with respect to each Senior Fixed Rate Notes Reference Treasury Dealer and the Senior Fixed Rate Notes Reset Date, the bid and offered prices obtained by LBG for the Senior Fixed Rate Notes Comparable Treasury Issue, expressed in each case as a percentage of its principal amount, at 11:00 a.m. (New York City time), on the Senior Fixed Rate Notes Reset Determination Date.
All calculations of the Calculation Agent, in the absence of manifest error, will be conclusive for all purposes and binding on the Issuer, the Trustee, the paying agent and on the holders of the Senior Notes.
All percentages resulting from any of the above calculations will be rounded, if necessary, to the nearest one hundred thousandth of a percentage point, with five one-millionths of a percentage point rounded upwards (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)) and all dollar amounts used in or resulting from such calculations will be rounded to the nearest cent (with one-half cent being rounded upwards).
The interest rate on the Senior Fixed Rate Notes during the Senior Fixed Rate Notes reset fixed rate period will in no event be higher than the maximum rate permitted by law or lower than 0.00% per annum.
Senior Floating Rate Notes
The Senior Floating Rate Notes will be issued in an aggregate principal amount of $500,000,000 and will mature on June 13, 2029. The Senior Floating Rate Notes bear interest at a floating rate from June 13, 2025, as described below.
The Senior Floating Rate Notes Interest Rate will be equal to the sum of (A) the SOFR Index Average (as defined below), as determined, with respect to each Senior Floating Rate Notes Interest Period (as defined below), on the applicable Senior Floating Rate Notes Interest Determination Date (as defined below), and (B) 1.060% per annum, provided that the Senior Floating Rate Notes Interest Rate with respect to any Senior Floating Rate Notes Interest Period shall be subject to a minimum rate per annum of 0.00% (the “Minimum Rate”), calculated on the basis of a 360-day year and the actual number of days elapsed.
The first Senior Floating Rate Notes interest payment date (as defined below) will fall on September 13, 2025. Thereafter, interest on the Senior Floating Rate Notes will be paid quarterly in arrears on March 13, June 13, September 13 and December 13 of each year (together with the first Senior Floating Rate Notes interest payment date, each a “Senior Floating Rate Notes interest payment date”). However, if a Senior Floating Rate Notes interest payment date would fall on a day that is not a business day, other than the interest payment date that is also a redemption date or the date of maturity, the Senior Floating Rate Notes interest payment date will be postponed to the next succeeding day that is a business day and interest thereon will continue to accrue, except that if the business day falls in the next succeeding calendar month, the applicable Senior Floating Rate Notes interest payment date will be the immediately preceding business day. In each such case, except for the Senior Floating Rate Notes interest payment date falling on a redemption date or the maturity date, the Senior Floating Rate Notes Interest Periods and the Senior Floating Rate Notes Reset Dates (as defined below) will be adjusted accordingly to calculate the amount of interest payable on the Senior Floating Rate Notes.
The Senior Floating Rate Notes Interest Rate will be reset on each Senior Floating Rate Notes interest payment date (together with the initial Senior Floating Rate Notes Reset Date, each a “Senior Floating Rate Notes Reset Date”). However, if any Senior Floating Rate Notes Reset Date would otherwise be a day that is not a business day, that Senior Floating Rate Notes Reset Date will be postponed to the next succeeding day that is a business day, except that if the business day falls in the next succeeding calendar month, the applicable Senior Floating Rate Notes Reset Date will be the immediately preceding business day.
Interest will be paid to holders of record of the Senior Floating Rate Notes in respect of the principal amount thereof outstanding 15 calendar days preceding the relevant Senior Floating Rate Notes interest payment date, whether or not a business day. If the scheduled maturity date or date of redemption or repayment is not a business day, we may pay interest and principal on the next succeeding business day, but interest on that payment will not accrue during the period from and after the scheduled maturity date or date of redemption or repayment.
The first interest period will begin on and include June 13, 2025 and will end on and exclude September 13, 2025. Thereafter, the interest periods will be the periods from and including a Senior Floating Rate Notes interest payment date to but excluding the immediately succeeding Senior Floating Rate Notes interest payment date (together with the initial interest period, each a “Senior Floating Rate Notes Interest Period”). However, the final Senior Floating Rate Notes Interest Period will be the period from and including the Senior Floating Rate Notes interest payment date immediately preceding the maturity date to but excluding the maturity date. The Senior Floating Rate Notes interest determination date (“Senior Floating Rate Notes Interest Determination Date”) for each Senior Floating Rate Interest Period will be on the fifth U.S. Government Securities Business Day (as defined below) preceding the applicable Senior Floating Rate Notes interest payment date. If a tax redemption or Loss Absorption Disqualification Event redemption (see “Description of the Senior Notes—Tax Redemption” and “Description of the Senior Notes—Loss Absorption Disqualification Event Redemption” in this prospectus supplement) occurs, the Senior Floating Rate Notes Interest Determination Date will be on the fifth U.S. Government Securities Business Day preceding such tax redemption or Loss Absorption Disqualification Event redemption date, as applicable. “U.S. Government Securities Business Day” means any day except for a Saturday, Sunday or a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in U.S. government securities.
Calculation of Senior Floating Rate Notes Interest Rate
The Calculation Agent for the Senior Floating Rate Notes is The Bank of New York Mellon, London Branch or its successor appointed by LBG. The Calculation Agent will determine the Senior Floating Rate Notes Interest Rate for each Senior Floating Rate Notes Interest Period by reference to the SOFR Index Average on the applicable Senior Floating Rate Notes Interest Determination Date. Promptly upon such determination, the Calculation Agent will notify LBG and the Trustee (as defined below) of the applicable Senior Floating Rate Notes Interest Rate. Upon the request of the holder of any Senior Floating Rate Note, the Calculation Agent will provide the Senior Floating Rate Notes Interest Rate as determined for the most recent applicable Senior Floating Rate Notes Interest Period.
Subject to the circumstances described under “— SOFR Discontinuation” below, the “SOFR Index Average” for each Senior Floating Rate Notes Interest Period shall be equal to the value of the SOFR rates for each day during the relevant Senior Floating Rate Notes Interest Period as calculated by the Calculation Agent as follows:
with the resulting percentage being rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with 0.000005 being rounded upwards, where:
“dc” for any SOFR Observation Period, means the number of calendar days in the relevant SOFR Observation Period;
“SOFR Index” means the SOFR Index in relation to any U.S. Government Securities Business Day as published by the NY Federal Reserve on the NY Federal Reserve’s Website at the SOFR Determination Time;
“SOFR IndexEnd” means the SOFR Index value on the date that is five U.S. Government Securities Business Days preceding the Senior Floating Rate Notes interest payment date relating to such Senior Floating Rate Notes Interest Period (or in the final Senior Floating Rate Notes Interest Period, preceding the maturity date) (such date a “SOFR Index Determination Date”); and
“SOFR IndexStart” means the SOFR Index value on the date that is five U.S. Government Securities Business Days preceding the first date of the relevant Senior Floating Rate Notes Interest Period (such date a “SOFR Index Determination Date”), and, for the initial Senior Floating Rate Notes Interest Period, the SOFR Index value on June 10, 2025.
Subject to the circumstances described under “— SOFR Discontinuation” below, if the SOFR Index is not published on any relevant SOFR Index Determination Date and a SOFR Benchmark Event and its related SOFR Benchmark Replacement Date has not occurred, the “SOFR Index Average” for such Senior Floating Rate Notes Interest Period shall be calculated by the Calculation Agent on the relevant Senior Floating Rate Notes Interest Determination Date as follows:
with the resulting percentage being rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with 0.000005 being rounded upwards, where:
“d” for any SOFR Observation Period, means the number of calendar days in the relevant SOFR Observation Period;
“do” for any SOFR Observation Period, means the number of U.S. Government Securities Business Days in the relevant SOFR Observation Period;
“i” means a series of whole numbers from one to do, each representing the relevant U.S. Government Securities Business Days in chronological order from (and including) the first U.S. Government Securities Business Day in the relevant SOFR Observation Period;
“ni” for any U.S. Government Securities Business Day “i” in the relevant SOFR Observation Period, means the number of calendar days from (and including) such U.S. Government Securities Business Day “i” up to (but excluding) the following U.S. Government Securities Business Day (“i+1”); and
“SOFRi” for any U.S. Government Securities Business Day “i” in the relevant SOFR Observation Period, is equal to SOFR in respect of that day “i”.
In connection with the SOFR provisions above, the following definitions apply:
“Bloomberg Screen SOFRRATE Page” means the Bloomberg screen designated “SOFRRATE” or any successor page or service; “NY Federal Reserve” means the Federal Reserve Bank of New York;
“NY Federal Reserve’s Website” means the website of the NY Federal Reserve, currently at www.newyorkfed.org, or any successor website of the NY Federal Reserve or the website of any successor administrator of SOFR;
“Reuters Page USDSOFR=” means the Reuters page designated “USDSOFR=” or any successor page or service;
“SOFR” means, with respect to any day (including any U.S. Government Securities Business Day), the rate determined by the Calculation Agent, as the case may be, in accordance with the following provisions:
(a) the Secured Overnight Financing Rate published at the SOFR Determination Time, as such rate is reported on the Bloomberg Screen SOFRRATE Page, then the Secured Overnight Financing Rate published at the SOFR Determination Time, as such rate is reported on the Reuters Page USDSOFR= or, if no such rate is reported on the Reuters Page USDSOFR=, then the Secured Overnight Financing Rate that appears at the SOFR Determination Time on the NY Federal Reserve’s Website; or
(b) if the rate specified in (a) above does not appear, the SOFR published on the NY Federal Reserve’s Website for the first preceding U.S. Government Securities Business Day for which SOFR was published on the NY Federal Reserve’s Website;
“SOFR Determination Time” means approximately 3:00 p.m. (New York City time) on the NY Federal Reserve’s Website on the immediately following U.S. Government Securities Business Day; and
“SOFR Observation Period” means, in respect of each Senior Floating Rate Notes Interest Period, the period from (and including) the fifth U.S. Government Securities Business Day preceding the first date in such Senior Floating Rate Notes Interest Period to (but excluding) the fifth U.S. Government Securities Business Day preceding the Senior Floating Rate Notes interest payment date (or in the final Senior Floating Rate Notes Interest Period, preceding the maturity date) for such Senior Floating Rate Notes Interest Period.
SOFR Discontinuation
Notwithstanding the provisions described under “—Calculation of Senior Floating Rate Notes Interest Rate” above, if a SOFR Benchmark Event and its related SOFR Benchmark Replacement Date occurs when any Senior Floating Rate Notes Interest Rate (or any component part thereof) remains to be determined by reference to the SOFR Benchmark in respect of the Senior Floating Rate Notes, then LBG (or its designee) may, at its sole discretion, appoint and consult with an Independent Adviser, as soon as reasonably practicable, with a view to LBG (or its designee) determining a SOFR Benchmark Replacement and the applicable SOFR Benchmark Replacement Adjustment Spread and any other amendments to the terms of the Senior Floating Rate Notes, in accordance with the provisions below.
In the absence of fraud, LBG (or its designee) and any Independent Adviser appointed pursuant to this section “— SOFR Discontinuation”, as applicable, shall have no liability whatsoever to LBG, the Trustee (as defined below), the Calculation Agent, any paying agent or the holders of the Senior Floating Rate Notes for any determination made by it or for any advice given to LBG (or its designee) in connection with any determination made by LBG (or its designee) pursuant to this section “— SOFR Discontinuation”.
If LBG (or its designee) has not appointed an Independent Adviser in accordance with this section “— SOFR Discontinuation”, LBG (or its designee) may still make any determinations and/or any amendments contemplated by and in accordance with this section “— SOFR Discontinuation” (with the relevant provisions in this section applying mutatis mutandis to allow such determinations or amendments to be made by LBG (or its designee) without consultation with an Independent Adviser). Any determination, decision or election that may be made by LBG (or its designee) pursuant to this section “— SOFR Discontinuation”, including any determination with respect to tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error, will be made in LBG’s (or its designee’s) sole discretion, and, notwithstanding anything to the contrary in the documentation relating to the Senior Floating Rate Notes, shall become effective without consent from the holders of the Senior Floating Rate Notes or any other party.
Subject to the paragraph below, if LBG (or its designee), following consultation with its Independent Adviser, no later than three business days prior to the Senior Floating Rate Notes Interest Determination Date relating to the next Senior Floating Rate Notes Interest Period (the “Determination Cut-off Date”) determines the SOFR Benchmark Replacement for the purposes of determining the Senior Floating Rate Notes Interest Rate for all future Senior Floating Rate Notes Interest Periods (subject to the subsequent operation of this section “— SOFR Discontinuation” during any other future Senior Floating Rate Notes Interest Periods), then such SOFR Benchmark Replacement shall be the SOFR Benchmark for all future Senior Floating Rate Notes Interest Periods (subject to the subsequent operation of this section during any other future Senior Floating Rate Notes Interest Period(s)).
Notwithstanding the above paragraph, if LBG (or its designee), following consultation with its Independent Adviser, determines prior to the Determination Cut-off Date that no SOFR Benchmark Replacement exists then the relevant Senior Floating Rate Notes Interest Rate shall be determined using the SOFR Benchmark last displayed on the relevant page prior to the relevant Senior Floating Rate Notes Interest Determination Date. This paragraph shall apply to the relevant Senior Floating Rate Notes Interest Period only. Any subsequent Senior Floating Rate Notes Interest Period(s) shall be subject to the subsequent operation of, and adjustment as provided in, this section “— SOFR Discontinuation”.
Promptly following the determination of the SOFR Benchmark Replacement as described in this section “— SOFR Discontinuation”, LBG (or its designee) shall give notice thereof pursuant to this section to the Trustee, the Calculation Agent, any paying agents and the holders of the Senior Floating Rate Notes. For the avoidance of doubt, neither the Trustee, the Calculation Agent nor any paying agents shall have any responsibility for making such determination.
Subject to receipt of notice pursuant to the above paragraph, the Trustee, the Calculation Agent and any paying agents shall, at the direction and expense of LBG, effect such waivers and consequential amendments to the terms and conditions of the Senior Floating Rate Notes, the Indenture and any other document as LBG (or its designee), following consultation with its Independent Adviser, determines may be required to give effect to any application of this section “— SOFR Discontinuation”, including, but not limited to:
(i) changes to the terms and conditions of the Senior Floating Rate Notes which LBG (or its designee), following consultation with its Independent Adviser, determines may be required in order to follow market practice (determined according to factors including, but not limited to, public statements, opinions and publications of industry bodies and organizations) in relation to such SOFR Benchmark Replacement, including, but not limited to (A) the business day, business day convention, day count fraction, Senior Floating Rate Notes Interest Determination Date and/or any relevant time applicable to the Senior Floating Rate Notes and (B) the method for determining the fallback to the Senior Floating Rate Notes Interest Rate if such SOFR Benchmark Replacement is not available; and
(ii) any other changes which LBG (or its designee), following consultation with its Independent Adviser, determines are reasonably necessary to ensure the proper operation and comparability to the SOFR Benchmark of such SOFR Benchmark Replacement, which changes shall apply to the Senior Floating Rate Notes for all future Senior Floating Rate Notes Interest Periods (subject to the subsequent operation of this section “— SOFR Discontinuation”). None of the Trustee, the Calculation Agent or any paying agents shall be responsible or liable for any determinations, decisions or elections made by LBG (or its designee) with respect to any waivers or consequential amendments to be effected pursuant to this section “— SOFR Discontinuation” or any other changes and shall be entitled to rely conclusively on any certifications provided to each of them in this regard.
No consent of the holders of the Senior Floating Rate Notes shall be required in connection with effecting the relevant SOFR Benchmark Replacement as described in this section or such other relevant adjustments pursuant to this section, including for the execution of, or amendment to, any documents or the taking of other steps by LBG (or its designee) or any of the parties to the Indenture or Calculation Agent Agreement (if required).
By its acquisition of the Senior Floating Rate Notes, each holder and beneficial owner of the Senior Floating Rate Notes and each subsequent holder and beneficial owner acknowledges, accepts, agrees to be bound by, and consents to, LBG’s (or its designee’s) determination of the SOFR Benchmark Replacement, as contemplated by this section “— SOFR Discontinuation”, and to any amendment or alteration of the terms and conditions of the Senior Floating Rate Notes, including an amendment of the amount of interest due on the Senior Floating Rate Notes, as may be required in order to give effect to this section “— SOFR Discontinuation”, without the need for any further consent from the holders of the Senior Floating Rate Notes. The Trustee shall be entitled to rely on this deemed consent in connection with any supplemental indenture or amendment which may be necessary to give effect to the SOFR Benchmark Replacement or any application of this section “— SOFR Discontinuation”.
By its acquisition of the Senior Floating Rate Notes, each holder and beneficial owner of the Senior Floating Rate Notes and each subsequent holder and beneficial owner waives any and all claims in law and/or equity against the Trustee, the Calculation Agent and any paying agent for, agrees not to initiate a suit against the Trustee, the Calculation Agent and any paying agent in respect of, and agrees that neither the Trustee, the Calculation Agent nor any paying agent will be liable for, any action that the Trustee, the Calculation Agent or any paying agent, as the case may be, takes, or abstains from taking, in each case in accordance with this section “— SOFR Discontinuation” or any losses suffered in connection therewith.
Notwithstanding any other provision of this section “— SOFR Discontinuation”, no SOFR Benchmark Replacement will be adopted, nor will the SOFR Benchmark Replacement Adjustment (as applicable) be applied, nor will any other amendments to the terms and conditions of the Senior Floating Rate Notes be made, if and to the extent that, in the determination of LBG , the same could reasonably be expected to result in the exclusion of the Senior Floating Rate Notes (in whole or in part) from LBG’s and/or its subsidiaries’ minimum requirements for (A) own funds and eligible liabilities and/or (B) loss absorbing capacity instruments, in each case as such minimum requirements are applicable to LBG and/or its subsidiaries and as determined in accordance with, and pursuant to, the relevant Loss Absorption Regulations.
“Corresponding Tenor” with respect to a SOFR Benchmark Replacement means a tenor (including overnight) having approximately the same length (disregarding business day adjustment) as the applicable tenor for the then-current SOFR Benchmark;
“Independent Adviser” means an independent financial institution of international repute or an independent financial adviser with appropriate expertise appointed by LBG under this section “— SOFR Discontinuation”;
“ISDA” means the International Swaps and Derivatives Association, Inc. or any successor;
“ISDA Definitions” means the 2006 ISDA Definitions, as published by ISDA, as amended, supplemented or replaced from time to time;
“ISDA Fallback Rate” means the rate to be effective upon the occurrence of a SOFR Index Cessation Event according to (and as defined in) the ISDA Definitions, where such rate may have been adjusted for an overnight tenor, but without giving effect to any additional spread adjustment to be applied according to such ISDA Definitions;
“ISDA Spread Adjustment” means the spread adjustment, or method for calculating or determining such spread adjustment (which may be a positive or negative value or zero) that shall have been selected by ISDA as the spread adjustment that would apply to the ISDA Fallback Rate;
“Relevant Governmental Body” means the Board of Governors of the Federal Reserve System and/or the NY Federal Reserve or a committee officially endorsed or convened by the Board of Governors of the Federal Reserve System and/or the NY Federal Reserve, or any successor.
“SOFR Benchmark” means, initially, the SOFR Index Average, provided that if a SOFR Benchmark Event has occurred with respect to the SOFR Index Average or the then-current SOFR Benchmark, then “SOFR Benchmark” means the applicable SOFR Benchmark Replacement;
“SOFR Benchmark Event” means the occurrence of one or more of the following events with respect to the then-current SOFR Benchmark (including the daily published component used in the calculation thereof):
(1) a public statement or publication of information by or on behalf of the administrator of the SOFR Benchmark (or such component) announcing that such administrator has ceased or will cease to provide the SOFR Benchmark (or such component), permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the SOFR Benchmark (or such component);
(2) a public statement or publication of information by the regulatory supervisor for the administrator of the SOFR Benchmark (or such component), the central bank for the currency of the SOFR Benchmark (or such component), an insolvency official with jurisdiction over the administrator for the SOFR Benchmark (or such component), a resolution authority with jurisdiction over the administrator for the SOFR Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for the SOFR Benchmark (or such component), which states that the administrator of the SOFR Benchmark (or such component) has ceased or will cease to provide the SOFR Benchmark (or such component) permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the SOFR Benchmark (or such component); or
(3) a public statement or publication of information by the regulatory supervisor for the administrator of the SOFR Benchmark announcing that the SOFR Benchmark is no longer representative;
“SOFR Benchmark Replacement” means the first alternative set forth in the order below that can be determined by LBG, following consultation with its Independent Adviser:
(a) the sum of (a) the alternate rate of interest that has been selected or recommended by the Relevant Governmental Body as the replacement for the then-current SOFR Benchmark for the applicable Corresponding Tenor and (b) the SOFR Benchmark Replacement Adjustment;
(b) the sum of (a) the ISDA Fallback Rate and (b) the SOFR Benchmark Replacement Adjustment; or
(c) the sum of (a) the alternate rate that has been selected by LBG, in consultation with the Independent Adviser, as the replacement for the then-current SOFR Benchmark for the applicable Corresponding Tenor giving due consideration to any industry-accepted rate as a replacement for the then-current SOFR Benchmark for U.S. dollar-denominated floating rate notes at such time and (b) the SOFR Benchmark Replacement Adjustment;
“SOFR Benchmark Replacement Adjustment” means the first alternative set forth in the order below that can be determined by LBG, following consultation with its Independent Adviser:
(a) the spread adjustment, or method for calculating or determining such spread adjustment (which may be a positive or negative value or zero) that has been selected or recommended by the Relevant Governmental Body for the applicable Unadjusted SOFR Benchmark Replacement;
(b) if the applicable Unadjusted SOFR Benchmark Replacement is equivalent to the ISDA Fallback Rate, then the ISDA Spread Adjustment;
(c) the spread adjustment (which may be a positive or negative value or zero) determined by LBG, following consultation with its Independent Adviser, giving due consideration to any industry accepted spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the then-current SOFR Benchmark with the applicable Unadjusted SOFR Benchmark Replacement for U.S. dollar-denominated floating rate notes at such time;
“SOFR Benchmark Replacement Date” means the earliest to occur of the following events with respect to the then-current SOFR Benchmark (including the daily published component used in the calculation thereof):
(1) in the case of clause (1) or (2) of the definition of “SOFR Benchmark Event,” the later of (a) the date of the public statement or publication of information referenced therein and (b) the date on which the administrator of the SOFR Benchmark permanently or indefinitely ceases to provide the SOFR Benchmark (or such component); or
(2) in the case of clause (3) of the definition of “SOFR Benchmark Event,” the date of the public statement or publication of information referenced therein; and
“Unadjusted SOFR Benchmark Replacement” means the SOFR Benchmark Replacement excluding the applicable SOFR Benchmark Replacement Adjustment.
General
The Senior Notes will constitute our direct, unconditional, unsecured and unsubordinated obligations ranking pari passu and without any preference among themselves and at least pari passu, with all of our other outstanding unsecured and unsubordinated obligations, present and future, subject to such exceptions as may be provided by mandatory provisions of applicable law.
Each series of Senior Notes will constitute a separate series of senior debt securities issued under an indenture dated as of July 6, 2010, as amended by the First Supplemental Indenture dated as of July 6, 2016 (the “Senior Base Indenture”) between us as Issuer and The Bank of New York Mellon, acting through its London Branch, as trustee (the “Trustee”), as supplemented by a Twenty-First Senior Supplemental Indenture to be dated as of June 13, 2025 (the “Twenty-First Senior Supplemental Indenture” and, together with the Senior Base Indenture, the “Senior Indenture”) between us as Issuer and the Trustee, The Bank of New York Mellon, London Branch as paying agent and The Bank of New York Mellon SA/NV, Dublin Branch, as senior debt security registrar. Book-entry interests in the Senior Notes will be issued in minimum denominations of $200,000 and in integral multiples of $1,000 in excess thereof.
The Bank of New York Mellon, London Branch is designated as the paying agent. We may at any time designate additional paying agents or rescind the designation of paying agents or approve a change in the office through which any paying agent acts.
We will issue the Senior Notes in fully registered form. Each series of Senior Notes will be represented by one or more global securities in the name of a nominee of The Depository Trust Company (the “DTC”). You will hold beneficial interest in the Senior Notes through the DTC and its participants. The Underwriters expect to deliver the Senior Notes through the facilities of the DTC on June 13, 2025. For a more detailed summary of the form of the Senior Notes and settlement and clearance arrangements, you should read “Description of Certain Provisions Relating to Debt Securities and Capital Securities—Form of Debt Securities and Capital Securities; Book-Entry System” in the accompanying prospectus. Indirect holders trading their beneficial interests in the Senior Notes through the DTC must trade in the DTC’s same-day funds settlement system and pay in immediately available
funds. Secondary market trading will occur in the ordinary way following the applicable rules and operating procedures of Euroclear and Clearstream Luxembourg.
Definitive debt securities will only be issued in limited circumstances described under “Description of Certain Provisions Relating to Debt Securities and Capital Securities—Form of Debt Securities and Capital Securities; Book-Entry System” in the accompanying prospectus.
Payment of principal of and interest on the Senior Notes, so long as the Senior Notes are represented by global securities, will be made in immediately available funds. Beneficial interests in the global securities will trade in the same-day funds settlement system of the DTC, and secondary market trading activity in such interests will therefore settle in same-day funds.
A “business day” means any day, other than Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in the City of New York or in the City of London.
All payments in respect of the Senior Notes by us or our paying agent will be made subject to any deduction or withholding that may be imposed or levied by any jurisdiction. Except as provided under “—Payment of Additional Amounts” below, no additional amounts will be paid on the Senior Notes with respect to any such amounts withheld. For the avoidance of doubt, notwithstanding anything to the contrary herein, if by reason of any agreement with the U.S. Internal Revenue Service in connection with Sections 1471-1474 of the U.S. Internal Revenue Code and the U.S. Treasury regulations thereunder (“FATCA”), any intergovernmental agreement between the United States and the United Kingdom or any other jurisdiction with respect to FATCA, or any law, regulation or other official guidance enacted or issued in any jurisdiction implementing, or relating to, FATCA or any intergovernmental agreement, any of us, the Trustee, our paying agent or another withholding agent deducts and withholds from any amount payable on, or in respect of, the Senior Notes, the amounts so deducted or withheld shall be treated as having been paid to the holder of the Senior Notes, and no additional amounts will be paid on account of any such deduction or withholding. Neither we, the Trustee nor our paying agent shall have any liability in connection with our compliance with any such withholding obligation under applicable law.
Optional Redemption
On at least 5 business days’ but no more than 30 business days’ prior written notice delivered to the registered holders of a series of Senior Notes, we may, in our sole discretion (but subject to, if and to the extent then required by the Relevant Regulator or the Loss Absorption Regulations, our giving notice to the Relevant Regulator and the Relevant Regulator granting us permission) redeem that series of Senior Notes, in whole, but not in part, on June 13, 2028, at a redemption price equal to 100% of the principal amount of such series of Senior Notes plus accrued and unpaid interest thereon, if any, to, but excluding, the date of redemption (the “Senior Notes redemption date”).
Agreement with Respect to the Exercise of U.K. Bail-in Power
Notwithstanding any other agreements, arrangements, or understandings between us and any holder or beneficial owner of the Senior Notes, by purchasing or acquiring the Senior Notes, each holder (including each beneficial owner) of the Senior Notes acknowledges, accepts, agrees to be bound by and consents to the exercise of any U.K. bail-in power (as defined below) by the relevant U.K. resolution authority that may result in (i) the reduction or cancellation of all, or a portion, of the principal amount of, or interest on, the Senior Notes; (ii) the conversion of all, or a portion, of the principal amount of, or interest on, the Senior Notes into shares or other securities or other obligations of LBG or another person (and the issue to or conferral on the holder of such shares, securities or obligations, including by means of amendment, modification or variation of the terms of the Senior Notes); and/or (iii) the amendment or alteration of the maturity of the Senior Notes, or amendment of the amount of interest due on the Senior Notes, or the dates on which interest becomes payable, including by suspending payment for a temporary period; any U.K. bail-in power may be exercised by means of variation of the terms of the Senior Notes solely to give effect to the exercise by the relevant U.K. resolution authority of such U.K. bail-in power. With respect to (i), (ii) and (iii) above, references to principal and interest shall include payments of principal and interest that have become due and payable (including principal that has become due and payable at the relevant maturity
date), but which have not been paid, prior to the exercise of any U.K. bail-in power. Each holder and each beneficial owner of the Senior Notes further acknowledges and agrees that the rights of the holders and/or beneficial owners under the Senior Notes are subject to, and will be varied, if necessary, solely to give effect to, the exercise of any U.K. bail-in power by the relevant U.K. resolution authority. For these purposes, a “U.K. bail-in power” is any write-down, conversion, transfer, modification, moratorium and/or suspension power existing from time to time under any laws, regulations, rules or requirements relating to the resolution of financial holding companies, mixed financial holding companies, banks, banking group companies, credit institutions and/or investment firms incorporated in the United Kingdom in effect and applicable in the United Kingdom to LBG or other members of the Group, including but not limited to any such laws, regulations, rules or requirements which are implemented, adopted or enacted in the United Kingdom within the context of the U.K. resolution regime under the Banking Act 2009 as the same has been or may be amended from time to time (whether pursuant to the U.K. Financial Services (Banking Reform) Act 2013, secondary legislation or otherwise) (the “Banking Act”) and/or the Loss Absorption Regulations, pursuant to which obligations of a bank, banking group company, credit institution or investment firm or any of its affiliates can be reduced, canceled, modified, transferred and/or converted into shares or other securities or obligations of the obligor or any other person (or suspended for a temporary period) or pursuant to which any right in a contract governing such obligations may be deemed to have been exercised. A reference to the “relevant U.K. resolution authority” is to any authority with the ability to exercise a U.K. bail-in power.
According to the principles contained in the Banking Act, we expect that the relevant U.K. resolution authority would exercise its U.K. bail-in power in respect of the Senior Notes having regard to the hierarchy of creditor claims (with the exception of excluded liabilities, as such term is described in the Banking Act) and that the holders of the Senior Notes would be treated equally in respect of the exercise of any U.K. bail-in power with all other claims that would rank pari passu with the Senior Notes upon an insolvency of LBG.
No repayment of the principal amount of the Senior Notes or payment of interest on the Senior Notes shall become due and payable after the exercise of any U.K. bail-in power by the relevant U.K. resolution authority unless, at the time that such repayment or payment, respectively, is scheduled to become due, such repayment or payment would be permitted to be made by us under the laws and regulations of the United Kingdom applicable to us or other members of the Group. See also “Risk Factors― Under the terms of the Notes, you have agreed to be bound by the exercise of any U.K. bail-in power imposed by the relevant U.K. resolution authority”.
Neither a reduction or cancellation, in part or in full, of the principal amount of, or interest on, the Senior Notes or the conversion thereof into another security or obligation of LBG or another person, as a result of the exercise of the U.K. bail-in power by the relevant U.K. resolution authority with respect to LBG, nor the exercise of the U.K. bail-in power by the relevant U.K. resolution authority with respect to the Senior Notes will be a Senior Notes Default or a Senior Notes Event of Default for any purpose.
LBG’s obligations to indemnify the Trustee in accordance with Section 6.07 of the Senior Base Indenture (as supplemented by the Twenty-First Senior Supplemental Indenture) shall survive the exercise of the U.K. Bail-in Power by the relevant U.K. resolution authority with respect to the Senior Notes.
By purchasing or acquiring Senior Notes, each holder and each beneficial owner of the Senior Notes: (i) acknowledges and agrees that the exercise of the U.K. bail-in power by the relevant U.K. resolution authority in respect of the Senior Notes shall not give rise to a default or an Event of Default for purposes of Section 315(b) (Notice of Default) and Section 315(c) (Duties of the Trustee in Case of Default) of the Trust Indenture Act (the “TIA”); (ii) to the extent permitted by the TIA, waives any and all claims against the Trustee for, agrees not to initiate a suit against the Trustee in respect of, and agrees that the Trustee shall not be liable for, any action that the Trustee takes, or abstains from taking, in either case in accordance with the exercise of the U.K. bail-in power by the relevant U.K. resolution authority with respect to the Senior Notes; and (iii) acknowledges and agrees that, upon the exercise of any U.K. bail-in power by the relevant U.K. resolution authority, (a) the Trustee shall not be required to take any further directions from holders or beneficial owners of the Senior Notes under Section 5.12 (Control by Holders) of the Senior Base Indenture, and (b) neither the Senior Base Indenture nor the Twenty-First Senior Supplemental Indenture shall impose any duties upon the Trustee whatsoever with respect to the exercise of any U.K. bail-in power by the relevant U.K. resolution authority. Notwithstanding the foregoing, if, following the completion of the exercise of the U.K. bail-in power by the relevant U.K. resolution authority, any of the Senior
Notes remain outstanding (for example, if the exercise of the U.K. bail-in power results in only a partial write-down of the principal of such Senior Notes), then the Trustee’s duties under the Senior Indenture shall remain applicable with respect to such Senior Notes following such completion to the extent that LBG and the Trustee agree pursuant to a supplemental indenture or an amendment to the Senior Indenture, unless LBG and the Trustee agree in writing that a supplemental indenture is not necessary.
By purchasing or acquiring the Senior Notes, each holder and each beneficial owner shall be deemed to have (i) consented to the exercise of any U.K. bail-in power as it may be imposed without any prior notice by the relevant U.K. resolution authority of its decision to exercise such power with respect to the Senior Notes and (ii) authorized, directed and requested DTC and any direct participant in DTC or other intermediary through which it holds such Senior Notes to take any and all necessary action, if required, to implement the exercise of any U.K. bail-in power with respect to the Senior Notes as it may be imposed, without any further action or direction on the part of such holder or beneficial owner or the Trustee.
Upon the exercise of the U.K. bail-in power by the relevant U.K. resolution authority with respect to the Senior Notes, we shall provide a written notice to DTC as soon as practicable regarding such exercise of the U.K. bail-in power for purposes of notifying holders and beneficial owners of such occurrence. We shall also deliver a copy of such notice to the Trustee for information purposes. Any delay or failure by us in delivering the notices referred to in this paragraph shall not affect the validity and enforceability of the U.K. bail-in power.
For a discussion of certain risk factors relating to the U.K. bail-in power, see “Risk Factors—Risks relating to the Notes”.
Events of Default; Default; Limitation of Remedies
Senior Notes Events of Default
A “Senior Notes Event of Default” with respect to a series of Senior Notes shall result if:
•a court of competent jurisdiction makes an order which is not successfully appealed within 30 days; or
•an effective shareholders’ resolution is validly adopted,
for the winding-up of LBG, other than under or in connection with a scheme of amalgamation or reconstruction not involving a bankruptcy or insolvency.
If a Senior Notes Event of Default occurs, the Trustee or the holder or holders of at least 25% in aggregate principal amount of the outstanding notes of such series of Senior Notes may declare to be due and payable immediately in accordance with the terms of the Senior Indenture the principal amount of, and accrued but unpaid interest thereon, if any, and any Senior Notes Additional Amounts (as defined below), on the Senior Notes of that series. However, after this declaration but before the Trustee obtains a judgment or decree for payment of money due, the holder or holders of a majority in aggregate principal amount of the outstanding notes of such series of Senior Notes may rescind the declaration of acceleration and its consequences, but only if all Senior Notes Events of Default have been remedied and all payments due, other than those due as a result of acceleration, in respect of such series of Senior Notes have been made.
Defaults
A “Senior Notes Default” with respect to a series of Senior Notes shall result if:
•any installment of interest in respect of the Senior Notes of such series is not paid on or before its interest payment date and such failure continues for 14 days; or
•all or any part of the principal of the Senior Notes of such series is not paid when it otherwise becomes due and payable, whether upon redemption or otherwise, and such failure continues for seven days.
If a Senior Notes Default occurs with respect to a series of Senior Notes, the Trustee may commence a proceeding for the winding-up of LBG, provided that the Trustee may not (except in such winding-up, in accordance with “Events of Default” above) declare the principal amount of, or any other amount in respect of, the outstanding Senior Notes of any series to be due and payable.
However, a failure to make any payment on a series of Senior Notes shall not be a Senior Notes Default if it is withheld or refused in order to comply with any applicable fiscal or other law or regulation or order of any court of competent jurisdiction and LBG delivers a written opinion of legal advisors, who may be an employee of, or legal advisors for, LBG or other legal advisors, such opinion to be acceptable to the Trustee (“Opinion of Counsel”), to the Trustee with that conclusion, at any time before the expiry of the applicable 14 day or seven day period by independent legal advisers, provided, however, that the Trustee may by notice to LBG require it to take such action (including but not limited to proceedings for a declaration by a court of competent jurisdiction) as the Trustee may be advised in an Opinion of Counsel, upon which opinion the Trustee may conclusively rely, is appropriate and reasonable in the circumstances to resolve such doubt, in which case LBG will forthwith take and expeditiously proceed with such action and will be bound by any final resolution of the doubt resulting therefrom. If any such action results in a determination that the relevant payment can be made without violating any applicable law, regulation or order then such payment will become due and payable on the expiration of 14 days (in the case of a Senior Notes Default in respect of a payment of interest) or seven days (in the case of a Senior Notes Default in respect of a payment of principal) after the Trustee gives written notice to LBG informing it of such resolution.
During the continuance of a Senior Notes Event of Default, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of holders of such series of Senior Notes by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in the Senior Indenture or in aid of the exercise of any power granted therein, or to enforce any other legal or equitable right vested in the Trustee by the Senior Indenture or by law, provided, however, that LBG shall not, as a result of the bringing of such judicial proceedings, be required to pay any amount representing or measured by reference to the principal of, or any interest on, the Senior Notes of such series prior to any date on which the principal of, or any interest on, the Senior Notes of such series would have otherwise been payable by LBG.
Notwithstanding any contrary provisions, nothing shall impair the right of a holder, absent the holder’s consent, to sue for any payments due but unpaid with respect to such series of Senior Notes.
General
The holder or holders of not less than a majority in aggregate principal amount of the outstanding Senior Notes may waive any past Senior Notes Event of Default or Senior Notes Default in respect of such series, except a Senior Notes Event of Default or Senior Notes Default in respect of the payment of interest, if any, or principal of (or premium, if any) or payments on any Senior Note of such series or a covenant or provision of the Senior Indenture which cannot be modified or amended without the consent of each holder of the Senior Notes of such series.
Subject to the provisions of the Senior Indenture relating to the duties of the Trustee, if a Senior Notes Event of Default or a Senior Notes Default occurs, the Trustee will be under no obligation to take direction from any holder or holders of such series of Senior Notes, unless they have offered reasonable indemnity to the Trustee. Subject to the Senior Indenture provisions for the indemnification of the Trustee, the holder or holders of a majority in aggregate principal amount of the outstanding Senior Notes of such series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, if the direction is not in conflict with any rule of law or with the Senior Indenture and does not expose the Trustee to undue risk and the action would not be unjustly prejudicial to the holder or holders of the Senior Notes not taking part in that direction. The Trustee may take any other action that it deems proper which is not inconsistent with that direction.
The Senior Indenture provides that the Trustee will, within 90 days after the occurrence of a Senior Notes Event of Default or a Senior Notes Default, give to each holder of a series of Senior Notes notice of the Senior Notes Event of Default or Senior Notes Default known to it, unless the Senior Notes Event of Default or Senior Notes Default,
has been cured or waived in respect of such series. However, the Trustee shall be protected in withholding notice if it determines in good faith that withholding notice is in the interest of the holders.
We are required to furnish to the Trustee a statement as to our compliance with all conditions and covenants under the Senior Indenture (i) annually, and (ii) within five business days of a written request from the Trustee.
Additional Issuances
We may, without the consent of the holders of a series of Senior Notes, issue additional notes having the same ranking and same interest rate, maturity date, redemption terms and other terms as such series of Senior Notes described in this prospectus supplement except for the price to the public, issue date and first interest payment date, provided however that such additional notes that form part of any series of Senior Notes described in this prospectus supplement must be fungible with the outstanding Senior Notes of that series for U.S. federal income tax purposes. Any such additional notes, together with the Senior Notes offered by this prospectus supplement, will constitute a single series of securities under the Senior Indenture. There is no limitation on the amount of Senior Notes or other debt securities that we may issue under such indenture.
Tax Redemption
In addition to our right to redeem each series of Senior Notes described above under “—Optional Redemption”, we may (subject to, if and to the extent then required by the Relevant Regulator or the Loss Absorption Regulations, our giving notice to the Relevant Regulator and the Relevant Regulator granting us permission) redeem the Senior Notes of any series in whole but not in part if we determine that as a result of a change in or amendment to the laws or regulations of the United Kingdom or any political subdivision thereof or authority thereof that has the power to tax (a “U.K. taxing jurisdiction”) (including any treaty to which such U.K. taxing jurisdiction is a party), or any change in the application or interpretation of such laws or regulations (including a decision of any court or tribunal) which change or amendment becomes effective or applicable on or after June 13, 2025:
•in making any payments on the Senior Notes of the relevant series, we have paid or will or would on the next payment date be required to pay additional amounts;
•payments on the next payment date in respect of the Senior Notes of the relevant series would be treated as “distributions” within the meaning of Chapter 2 Part 23 of the Corporation Tax Act 2010 of the United Kingdom, or any statutory modification or re-enactment of such Act; or
•on the next payment date we would not be entitled to claim a deduction in respect of the payments in computing our U.K. taxation liabilities, or the value of the deduction to us would be materially reduced.
In the event of such a redemption, the redemption price of the Senior Notes of the relevant series will be 100% of their principal amount together with accrued but unpaid interest thereon, if any, to the date of redemption.
If we elect to redeem the Senior Notes of any series in accordance with this subsection, they will cease to accrue interest from the Senior Notes redemption date, unless there is a failure to pay the redemption price on the payment date. The circumstances in which we may redeem the Senior Notes of any series and the applicable procedures are described further in the accompanying prospectus under “Description of Debt Securities—Redemption of Senior Debt Securities”.
Loss Absorption Disqualification Event Redemption
We may, at our option (but subject to, if and to the extent then required by the Relevant Regulator or the Loss Absorption Regulations, our giving notice to the Relevant Regulator and the Relevant Regulator granting us permission), having given not less than 15 nor more than 30 days’ notice to holders, redeem all but not some only of a series of Senior Notes outstanding at any time at 100% of their principal amount together with accrued but unpaid interest thereon, if any, to the date of redemption, if immediately prior to the giving of the notice referred to above, we notify the Trustee that a Loss Absorption Disqualification Event has occurred.
A “Loss Absorption Disqualification Event” shall be deemed to have occurred with respect to a series of Senior Notes if, as a result of any amendment to, or change in, the Loss Absorption Regulations, or any change in the application or official interpretation of the Loss Absorption Regulations, in any such case becoming effective on or after the issue date of the first tranche of the Senior Notes, such Senior Notes are or (in our opinion or the opinion of the Relevant Regulator and/or the relevant U.K. resolution authority) are likely to be fully or partially excluded from LBG’s or the Group’s minimum requirements for (A) own funds and eligible liabilities and/or (B) loss absorbing capacity instruments, in each case as such minimum requirements are applicable to LBG and/or the Group and determined in accordance with, and pursuant to, the relevant Loss Absorption Regulations; provided that a Loss Absorption Disqualification Event shall not occur where the exclusion of the Senior Notes from the relevant minimum requirement(s) is due to the remaining maturity of the Senior Notes being less than any period prescribed by any applicable eligibility criteria for such minimum requirements under the relevant Loss Absorption Regulations effective with respect to LBG and/or the Group on the issue date of the first tranche of the Senior Notes.
“Loss Absorption Regulations” means, at any time, the laws, regulations, requirements, guidelines, rules, standards and policies relating to minimum requirements for own funds and eligible liabilities and/or loss absorbing capacity instruments of the United Kingdom, the Relevant Regulator, the relevant U.K. resolution authority and/or the Financial Stability Board then applicable in the United Kingdom including, without limitation to the generality of the foregoing, any regulations, requirements, guidelines, rules, standards and policies relating to minimum requirements for own funds and eligible liabilities and/or loss absorbing capacity instruments adopted or applied by the Relevant Regulator and/or the relevant U.K. resolution authority from time to time (whether or not such regulations, requirements, guidelines, rules, standards or policies are applied generally or specifically to LBG or to the Group).
Conditions to redemption and purchase, etc.
Any redemption or purchase of a series of Senior Notes (other than redemption on the relevant maturity date), and any modification to the terms of a series of Senior Notes or any indenture relating thereto, is subject to, if and to the extent then required by the Relevant Regulator or the Loss Absorption Regulations, our giving notice to the Relevant Regulator and the Relevant Regulator granting us permission therefor and otherwise to compliance with the Loss Absorption Regulations if and to the extent then required thereunder.
“Relevant Regulator” means, in relation to the Senior Notes, the relevant U.K. resolution authority or such other governmental authority in the United Kingdom (or if LBG becomes domiciled in a jurisdiction other than the United Kingdom, in such other jurisdiction) having primary supervisory authority with respect to LBG and/or the Group in such circumstances.
Payment of Additional Amounts
Amounts to be paid on the Senior Notes will be made without deduction or withholding for, or on account of, any and all present and future income, stamp and other taxes, levies, imposts, duties, charges, or fees imposed, levied, collected, withheld or assessed by or on behalf of a U.K. taxing jurisdiction, unless such deduction or withholding is required by law. If at any time a U.K. taxing jurisdiction requires us to make such deduction or withholding, we will pay additional amounts with respect to interest only on the Senior Notes (“Senior Notes Additional Amounts”) that are necessary in order that the net amounts of interest paid to the holders of the Senior Notes, after the deduction or withholding, shall equal the amounts of interest only which would have been payable on the Senior Notes if the deduction or withholding had not been required. However, this will not apply to any such amount that would not have been payable or due but for the fact that:
•the holder or the beneficial owner of the relevant Senior Notes is a domiciliary, national or resident of, or engaging in business or maintaining a permanent establishment or physically present in, a U.K. taxing jurisdiction or otherwise having some connection with the U.K. taxing jurisdiction other than the holding or ownership of the relevant Senior Note, or the collection of any payment of, or in respect of, principal of, or any interest or other payment on, the relevant Senior Note;
•except in the case of a winding up in the United Kingdom, the relevant Senior Notes are presented (where presentation is required) for payment in the United Kingdom;
•the relevant Senior Notes are presented (where presentation is required) for payment more than 30 days after the date payment became due or was provided for, whichever is later, except to the extent that the holder would have been entitled to the Senior Notes Additional Amounts on presenting the Senior Notes for payment at the close of that 30 day period;
•the holder or the beneficial owner of the relevant Senior Notes or the beneficial owner of any payment of or in respect of principal of, or any interest or other payment on, the relevant Senior Notes failed to comply with a request by us or our liquidator or other authorized person addressed to the holder to provide information concerning the nationality, residence or identity of the holder or the beneficial owner or to make any declaration or other similar claim to satisfy any requirement, which is required or imposed by a statute, treaty, regulation or administrative practice of a U.K. taxing jurisdiction as a precondition to exemption from all or part of the tax, levy, impost, duty, charge or fee;
•the deduction or withholding is imposed by reason of any agreement with the U.S. Internal Revenue Service in connection with Sections 1471- 1474 of the US Internal Revenue Code and the U.S. Treasury regulations thereunder (“FATCA”), any intergovernmental agreement between the United States and the United Kingdom or any other jurisdiction with respect to FATCA, or any law, regulation or other official guidance enacted or issued in any jurisdiction implementing, or relating to, FATCA or any intergovernmental agreement; or
•any combination of the above items,
nor shall Senior Notes Additional Amounts be paid with respect to any interest only on the Senior Notes to any holder who is a fiduciary or partnership or any person other than the sole beneficial owner of such payment to the extent such payment would be required by the laws of any taxing jurisdiction to be included in the income for tax purposes of a beneficiary or partner or settlor with respect to such fiduciary or a member of such partnership or a beneficial owner who would not have been entitled to such Senior Notes Additional Amounts, had it been the holder.
Whenever we refer in this prospectus supplement, in any context, to the payment of interest on, or in respect of, any Senior Note, we mean to include the payment of Senior Notes Additional Amounts to the extent that, in the context, Senior Notes Additional Amounts are, were or would be payable.
Waiver of Right to Set-Off
Subject to applicable law, no holder may exercise or claim any right of set-off, counterclaim, combination of accounts, compensation or retention in respect of any amount owed to it by LBG arising under or in connection with the Senior Notes. By accepting a Senior Note, each holder will be deemed to have waived any right of set-off, counterclaim, combination of accounts, compensation or retention with respect to such Senior Note or the Senior Indenture (or between our obligations under or in respect of any Senior Note and any liability owed by a holder or the Trustee to us) that they might otherwise have against us, whether before or during our winding up. Notwithstanding the provisions of the foregoing sentence, if any of the said rights and claims of any holder of any Senior Note against LBG is discharged by set-off, counterclaim, combination of accounts, compensation or retention, such holder will immediately pay an amount equal to the amount of such discharge to LBG (or, in the event of winding-up or administration of LBG, the liquidator or, as applicable, the administrator of LBG) and accordingly such discharge will be deemed not to have taken place.
Trustee; Direction of Trustee
LBG’s obligations to indemnify the Trustee in accordance with Section 6.07 of the Senior Base Indenture (as supplemented by the Twenty-First Senior Supplemental Indenture) shall survive the exercise of the U.K. bail-in power by the relevant U.K. resolution authority with respect to the Senior Notes and the Senior Indenture.
By purchasing or acquiring the Senior Notes, each holder (including each beneficial owner) of the Senior Notes acknowledges and agrees that, upon the exercise of any U.K. bail-in power by the relevant U.K. resolution authority, (a) the Trustee shall not be required to take any further directions from holders or beneficial owners of the Senior Notes under Section 5.12 (Control by Holders) of the Senior Base Indenture, and (b) neither the Senior Base Indenture nor the Twenty-First Senior Supplemental Indenture shall impose any duties upon the Trustee whatsoever with respect to the exercise of any U.K. bail-in power by the relevant U.K. resolution authority. Notwithstanding the foregoing, if, following the completion of the exercise of the U.K. bail-in power by the relevant U.K. resolution authority, any of the Senior Notes remain outstanding (for example, if the exercise of the U.K. bail-in power results in only a partial write-down of the principal of such Senior Notes), then the Trustee’s duties under the Senior Indenture shall remain applicable with respect to such Senior Notes following such completion to the extent that LBG and the Trustee agree pursuant to a supplemental indenture or an amendment to the Senior Indenture, unless LBG and the Trustee agree in writing that a supplemental indenture is not necessary.
In addition to the foregoing, the Trustee may decline to act or accept direction from holders unless it receives written direction from holders representing a majority in aggregate principal amount of the Senior Notes and security and/or indemnity satisfactory to the Trustee in its sole discretion. The Senior Indenture shall not be deemed to require the Trustee to take any action which may conflict with applicable law, or which may be unjustly prejudicial to the holders not taking part in the direction, or which could subject the Trustee to risk or for which it is not indemnified to its satisfaction in its sole discretion.
The Trustee makes no representations regarding, and shall not be liable with respect to, the information set forth in this prospectus supplement.
Subsequent Holders’ Agreement
Holders and beneficial owners of the Senior Notes that acquire the Senior Notes in the secondary market shall be deemed to acknowledge, agree to be bound by and consent to the same provisions specified herein to the same extent as the holders and beneficial owners of the Senior Notes that acquire the Senior Notes upon their initial issuance, including, without limitation, with respect to the acknowledgement and agreement to be bound by and consent to the terms of the Senior Notes including in relation to the U.K. bail-in power.
Listing
We intend to apply for the listing of each series of Senior Notes on the New York Stock Exchange in accordance with its rules.
Governing Law
The Senior Base Indenture, the Twenty-First Senior Supplemental Indenture and the Senior Notes are governed by, and construed in accordance with, the laws of the State of New York, except that, as the Senior Indenture specifies, the provisions relating to the waiver of set-off in the Senior Indenture are governed by and construed in accordance with Scots law.
Subordinated Notes
The Subordinated Notes will be issued in an aggregate principal amount of $1,250,000,000 and will mature on June 13, 2036. Interest will accrue on the Subordinated Notes from, and including, June 13, 2025 to, but excluding, June 13, 2035 (the “Subordinated Notes Reset Date”), at a fixed rate of 6.068% per annum (the “Subordinated Notes Initial Interest Rate”), payable semi-annually in arrears, on June 13 and December 13 of each year, commencing on December 13, 2025, and from, and including, the Subordinated Notes Reset Date to, but excluding, the maturity date (the “Subordinated Notes Reset Period”), at a rate per annum calculated by the Calculation Agent on the Subordinated Notes Reset Determination Date (as defined below) as being equal to the sum of the Subordinated Notes U.S. Treasury Rate (as defined below) and 1.600%, such sum being converted to a semi-annual rate in accordance with market convention (rounded to three decimal places, with 0.0005 rounded down) (the “Subordinated Notes Reset Rate of Interest”). Interest will be payable semi-annually in arrears on June 13 and December 13 of each year (each, an “Subordinated Notes interest payment date”), commencing on December 13, 2025 to, and including, maturity. Interest will be paid to holders of record of the Subordinated Notes as of 15 calendar days immediately preceding the related Subordinated Notes interest payment date, whether or not a business day.
Interest on the Subordinated Notes will be calculated on the basis of a 360-day year consisting of twelve 30-day months and, in the case of an incomplete month, on the basis of the actual number of days elapsed in such period. If any scheduled Subordinated Notes interest payment date, redemption date or maturity date is not a business day, we will pay interest on the next business day, but interest on that payment will not accrue during the period from and after the scheduled Subordinated Notes interest payment date, redemption date or maturity date. If the scheduled maturity date or date of redemption or repayment is not a business day, we may pay interest and principal on the next succeeding business day, but interest on that payment will not accrue during the period from and after the scheduled maturity date or date of redemption or repayment.
All calculations of the Calculation Agent, in the absence of manifest error, will be conclusive for all purposes and binding on LBG, the Calculation Agent, the Trustee, the Paying Agent and on the holders of the Subordinated Notes.
All dollar amounts used in or resulting from such calculations will be rounded to the nearest cent (with one half-cent being rounded upwards).
There shall be no Subordinated Notes Deferred Payment Dates (as defined in the accompanying prospectus) in respect of the Subordinated Notes.
In this description of the Subordinated Notes, the following expressions have the following meanings:
“Applicable Regulations” means, at any time, the laws, regulations, requirements, guidelines and policies relating to capital adequacy and prudential supervision (including, without limitation, as to leverage) then in effect in the United Kingdom including, without limitation to the generality of the foregoing (and for so long as the same are applicable in the United Kingdom), any regulations, requirements, guidelines and policies relating to capital adequacy adopted by the Relevant Regulator, from time to time (whether or not such requirements, guidelines or policies are applied generally or specifically to LBG or the Group (as defined below)).
A “business day” means any day, other than Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in the City of New York or in the City of London.
“Capital Disqualification Event” shall occur if at any time LBG determines that as a result of a change or pending change to the regulatory classification of the Subordinated Notes which becomes effective on or after June 13, 2025 (the “Issue Date”) some or all of the aggregate outstanding principal amount of the Subordinated Notes ceases or would be likely to cease to be included in, or count towards, the Tier 2 Capital of LBG and/or the Group.
“Group” means LBG and its subsidiaries and subsidiary undertakings from time to time.
“Relevant Regulator” means, in relation to the Subordinated Notes, the BoE acting through its Prudential Regulation Committee or such other governmental authority in the United Kingdom (or if LBG becomes domiciled in a jurisdiction other than the United Kingdom, in such other jurisdiction) having primary supervisory authority with respect to LBG and/or the Group with respect to prudential matters, as the case may be.
“Senior Creditors” means in respect of LBG (i) creditors of LBG whose claims are admitted to proof in the winding-up or administration of LBG and who are unsubordinated creditors of LBG and (ii) creditors of LBG whose claims are or are expressed to be subordinated to the claims of other creditors of LBG (other than those whose claims constitute, or would, but for any applicable limitation on the amount of such capital, constitute Tier 1 Capital or Tier 2 Capital of LBG, or whose claims rank or are expressed to rank pari passu with, or junior to, the claims of holders of the Subordinated Notes).
“Subordinated Notes Reset Determination Date” means the second business day immediately preceding the Subordinated Notes Reset Date.
“Tier 1 Capital” has the meaning given to it by the Relevant Regulator from time to time.
“Tier 2 Capital” has the meaning given to it by the Relevant Regulator from time to time.
Determination of the Subordinated Notes U.S. Treasury Rate
The Subordinated Notes U.S. Treasury Rate shall be determined by The Bank of New York Mellon, London Branch as calculation agent (the “Calculation Agent”).
The “Subordinated Notes U.S. Treasury Rate” means the rate per annum equal to: (1) the arithmetic average of the yields on actively traded U.S. Treasury securities adjusted to constant maturity for the maturity of one year (“Yields”), for the five consecutive business days immediately prior to the Subordinated Notes Reset Determination Date, and appearing under the caption “Treasury constant maturities” on the Subordinated Notes Reset Determination Date, as of 5:00 p.m. (New York City time), in the applicable most recently published statistical release designated “H.15 Daily Update”, or any successor publication that is published by the Board of Governors of the Federal Reserve System that establishes yields on actively traded U.S. Treasury securities adjusted to constant maturity, under the caption “Treasury constant maturities”, for the maturity of one year; provided that if the Yield is not available through such release (or successor publication) for any relevant business day, then the arithmetic average will be determined based on the Yields for the remaining business days during the five business day period described above (provided further that if the Yield is available for only a single business day during such five business day period, the “Subordinated Notes U.S. Treasury Rate” will mean the single-day Yield for such day); or (2) if such release (or any successor release) is not published during the week immediately prior to the Subordinated Notes Reset Determination Date or does not contain such yields, the rate per annum equal to the semi-annual equivalent yield to maturity of the Subordinated Notes Comparable Treasury Issue, calculated using a price for the Subordinated Notes Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Subordinated Notes Comparable Treasury Price for the Subordinated Notes Reset Date.
If the Subordinated Notes U.S. Treasury Rate cannot be determined, for whatever reason, as described under (1) or (2) above, the “Subordinated Notes U.S. Treasury Rate” means the rate in percentage per annum as notified by the Calculation Agent to the Issuer equal to the last reported Yield on U.S. Treasury securities having a maturity of one year based on information appearing in the most recently published statistical release designated “H.15 Daily Update” (or any successor publication by the Board of Governors of the Federal Reserve System and that establishes yields on actively traded U.S. Treasury securities) as of 5:00 p.m. (New York City time) on the Subordinated Notes Reset Determination Date.
“Subordinated Notes Comparable Treasury Issue” means, with respect to the Subordinated Notes Reset Period, the U.S. Treasury security or securities selected by the Issuer with a maturity date on or about the last day of the Subordinated Notes Reset Period and that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities denominated in U.S. dollars and having a maturity of one year.
“Subordinated Notes Comparable Treasury Price” means (i) the arithmetic average of the Subordinated Notes Reference Treasury Dealer Quotations for the Subordinated Notes Reset Date, received by the Issuer (calculated by the Calculation Agent on the Subordinated Notes Reset Determination Date preceding the Subordinated Notes Reset Date), after excluding the highest and lowest such Subordinated Notes Reference Treasury Dealer Quotations, or (ii) if fewer than five such Subordinated Notes Reference Treasury Dealer Quotations are received by the Issuer, the arithmetic average of all such quotations, or (iii) if fewer than two such Subordinated Notes Reference Treasury Dealer Quotations are received by the Issuer, then such Subordinated Notes Reference Treasury Dealer Quotation as quoted in writing to the Issuer by a Subordinated Notes Reference Treasury Dealer.
“Subordinated Notes Reference Treasury Dealer” means each of up to five banks selected by the Issuer, or the affiliates of such banks, which are (i) primary U.S. Treasury securities dealers, and their respective successors, or (ii) market makers in pricing corporate bond issues denominated in U.S. dollars.
“Subordinated Notes Reference Treasury Dealer Quotations” means, with respect to each Subordinated Notes Reference Treasury Dealer and the Subordinated Notes Reset Date, the bid and offered prices obtained by LBG for the Subordinated Notes Comparable Treasury Issue, expressed in each case as a percentage of its principal amount, at 11:00 a.m. (New York City time), on the Subordinated Notes Reset Determination Date.
All calculations of the Calculation Agent, in the absence of manifest error, will be conclusive for all purposes and binding on the Issuer, the Trustee, the paying agent and on the holders of the Subordinated Notes.
All percentages resulting from any of the above calculations will be rounded, if necessary, to the nearest one hundred thousandth of a percentage point, with five one-millionths of a percentage point rounded upwards (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)) and all dollar amounts used in or resulting from such calculations will be rounded to the nearest cent (with one-half cent being rounded upwards).
The interest rate on the Subordinated Notes during the Subordinated Notes reset fixed rate period will in no event be higher than the maximum rate permitted by law or lower than 0.00% per annum.
General
The Subordinated Notes will constitute our direct, unconditional, unsecured, unguaranteed and subordinated obligations ranking pari passu without any preference among themselves and ranking junior in right of payment to the claims of any existing and future unsecured and unsubordinated indebtedness of LBG. In a winding up or in the event that an administrator has been appointed in respect of us and notice has been given that it intends to declare and distribute a dividend, all amounts due in respect of or arising under (including any damages awarded for breach of any obligations under) the Subordinated Notes will be subordinated to, and subject in right of payment to the prior payment in full of, all claims of all Senior Creditors.
The rights and claims of the holders of the Subordinated Notes shall rank at least pari passu with the claims of holders of all obligations of LBG which constitute, or would but for any applicable limitation on the amount of such capital constitute, Tier 2 Capital of LBG and in priority to (1) the claims of holders of all obligations of LBG which constitute Tier 1 Capital of LBG, (2) the claims of holders of all undated or perpetual subordinated obligations of LBG and (3) the claims of holders of all ordinary share capital of LBG.
In addition, because we are a holding company, our rights to participate in the assets of any subsidiary if it is liquidated will be subject to the prior claims of its creditors, including in the case of bank subsidiaries, their depositors, except to the extent that we may be a creditor with recognized claims against the subsidiary.
The Subordinated Notes will constitute a separate series of subordinated debt securities issued under the indenture dated as of November 4, 2014 (the “Subordinated Base Indenture”) between us and The Bank of New York Mellon acting through its London Branch, as trustee (the “Trustee”), as amended by an eleventh subordinated supplemental indenture to be dated as of the Issue Date (the “Eleventh Subordinated Supplemental Indenture” and, together with the Subordinated Base Indenture, the “Subordinated Indenture”) between us, the Trustee, the Paying Agent and The Bank of New York Mellon SA/NV, Dublin Branch as Registrar. Book-entry interests in the Subordinated Notes will be issued in minimum denominations of $200,000 and in integral multiples of $1,000 in excess thereof.
The Bank of New York Mellon, London Branch is designated as the paying agent. We may at any time designate additional paying agents or rescind the designation of paying agents or approve a change in the office through which any paying agent acts.
We will issue the Subordinated Notes in fully registered form. The Subordinated Notes will be represented by one or more global securities in the name of a nominee of The Depository Trust Company (“DTC”). You will hold beneficial interest in the Subordinated Notes through DTC and its participants. We expect the Subordinated Notes to be delivered through the facilities of DTC on the Issue Date. For a more detailed summary of the form of the Subordinated Notes and settlement and clearance arrangements, you should read “Description of Certain Provisions Relating to Debt Securities and Capital Securities—Form of Debt Securities and Capital Securities; Book-Entry System” in the accompanying prospectus. Indirect holders trading their beneficial interests in the Subordinated Notes through DTC must trade in DTC’s same-day funds settlement system and pay in immediately available funds. Secondary market trading will occur in the ordinary way following the applicable rules and clearing system and operating procedures of DTC, including those of its indirect participants, Euroclear and Clearstream Luxembourg.
Definitive debt securities will only be issued in limited circumstances described under “Description of Certain Provisions Relating to Debt Securities and Capital Securities—Form of Debt Securities and Capital Securities; Book-Entry System” in the accompanying prospectus.
Payment of principal of and interest on the Subordinated Notes, so long as the Subordinated Notes are represented by global securities, will be made in immediately available funds. Beneficial interests in the global securities will trade in the same-day funds settlement system of DTC, and secondary market trading activity in such interests will therefore settle in same-day funds.
All payments in respect of the Subordinated Notes by us or our paying agent will be made subject to any deduction or withholding that may be imposed or levied by any jurisdiction. Except as provided under “—Payment of Additional Amounts”, no additional amounts will be paid on the Subordinated Notes with respect to any such amounts withheld. For the avoidance of doubt, notwithstanding anything to the contrary herein, if by reason of any agreement with the U.S. Internal Revenue Service in connection with Sections 1471-1474 of the U.S. Internal Revenue Code and the U.S. Treasury regulations thereunder (“FATCA”), any intergovernmental agreement between the United States and the United Kingdom or any other jurisdiction with respect to FATCA, or any law, regulation or other official guidance enacted or issued in any jurisdiction implementing, or relating to, FATCA or any intergovernmental agreement, any of us, the Trustee, our paying agent or another withholding agent deducts and withholds from any amount payable on, or in respect of, the Subordinated Notes, the amounts so deducted or withheld shall be treated as having been paid to the holder of the Subordinated Notes, and no additional amounts will be paid on account of any such deduction or withholding. Neither we, the Trustee nor our paying agent shall have any liability in connection with our compliance with any such withholding obligation under applicable law.
Agreement with Respect to the Exercise of U.K. Bail-in Power
Notwithstanding any other agreements, arrangements, or understandings between us and any holder or beneficial owner of the Subordinated Notes, by purchasing or acquiring the Subordinated Notes, each holder (including each beneficial owner) of the Subordinated Notes acknowledges, accepts, agrees to be bound by and consents to the exercise of any U.K. bail-in power (as defined below) by the relevant U.K. resolution authority that may result in (i) the reduction or cancellation of all, or a portion, of the principal amount of, or interest on, the Subordinated Notes; (ii) the conversion of all, or a portion, of the principal amount of, or interest on, the Subordinated Notes into shares or other securities or other obligations of LBG or another person (and the issue to or conferral on the holder of such shares, securities or obligations, including by means of amendment, modification or variation of the terms of the Subordinated Notes); and/or (iii) the amendment or alteration of the maturity of the Subordinated Notes, or amendment of the amount of interest due on the Subordinated Notes, or the dates on which interest becomes payable, including by suspending payment for a temporary period; any U.K. bail-in power may be exercised by means of variation of the terms of the Subordinated Notes solely to give effect to the exercise by the relevant U.K. resolution authority of such U.K. bail-in power. With respect to (i), (ii) and (iii) above, references to principal and interest shall include payments of principal and interest that have become due and payable (including principal that has become due and payable at the relevant maturity date), but which have not been paid, prior to the exercise of any U.K. bail-in power. Each holder and each beneficial owner of the Subordinated Notes further acknowledges and agrees that the rights of the holders and/or beneficial owners under the Subordinated Notes are subject to, and will be varied, if necessary, solely to give effect to, the exercise of any U.K. bail-in power by the relevant U.K. resolution authority. For these purposes, a “U.K. bail-in power” is any write-down, conversion, transfer, modification, moratorium and/or suspension power existing from time to time under any laws, regulations, rules or requirements relating to the resolution of financial holding companies, mixed financial holding companies, banks, banking group companies, credit institutions and/or investment firms incorporated in the United Kingdom in effect and applicable in the United Kingdom to LBG or other members of the Group, including but not limited to any such laws, regulations, rules or requirements which are implemented, adopted or enacted in the United Kingdom within the context of the U.K. resolution regime under the Banking Act 2009 as the same has been or may be amended from time to time (whether pursuant to the U.K. Financial Services (Banking Reform) Act 2013, secondary legislation or otherwise) (the “Banking Act”), pursuant to which obligations of a bank, banking group company, credit institution or investment firm or any of its affiliates can be reduced, canceled, modified, transferred and/or converted into shares or other securities or obligations of the obligor or any other person (or suspended for a temporary period) or pursuant to which any right in a contract governing such obligations may be deemed to have been exercised. A reference to the “relevant U.K. resolution authority” is to any authority with the ability to exercise a U.K. bail-in power.
According to the principles contained in the Banking Act, we expect that the relevant U.K. resolution authority would exercise its U.K. bail-in power in respect of the Subordinated Notes having regard to the hierarchy of creditor claims (with the exception of excluded liabilities, as such term is described in the Banking Act) and that the holders of the Subordinated Notes would be treated equally in respect of the exercise of any U.K. bail-in power with all other claims that would rank pari passu with the Subordinated Notes upon an insolvency of LBG.
No repayment of the principal amount of the Subordinated Notes or payment of interest on the Subordinated Notes shall become due and payable after the exercise of any U.K. bail-in power by the relevant U.K. resolution authority unless, at the time that such repayment or payment, respectively, is scheduled to become due, such repayment or payment would be permitted to be made by us under the laws and regulations of the United Kingdom applicable to us or other members of the Group. See also “Risk Factors― Under the terms of the Notes, you have agreed to be bound by the exercise of any U.K. bail-in power imposed by the relevant U.K. resolution authority”.
Neither a reduction or cancellation, in part or in full, of the principal amount of, or interest on, the Subordinated Notes or the conversion thereof into another security or obligation of LBG or another person, as a result of the exercise of the U.K. bail-in power by the relevant U.K. resolution authority with respect to LBG, nor the exercise of the U.K. bail-in power by the relevant U.K. resolution authority with respect to the Subordinated Notes will be a Subordinated Notes Default or a Subordinated Notes Event of Default for any purpose.
LBG’s obligations to indemnify the Trustee in accordance with Section 6.07 of the Subordinated Base Indenture (as amended by the Eleventh Subordinated Supplemental Indenture) shall survive the exercise of the U.K. Bail-in Power by the relevant U.K. resolution authority with respect to the Subordinated Notes.
By purchasing or acquiring Subordinated Notes, each holder and each beneficial owner of the Subordinated Notes: (i) acknowledges and agrees that the exercise of the U.K. bail-in power by the relevant U.K. resolution authority in respect of the Subordinated Notes shall not give rise to a default or an Event of Default for purposes of Section 315(b) (Notice of Default) and Section 315(c) (Duties of the Trustee in Case of Default) of the Trust Indenture Act (the “TIA”); (ii) to the extent permitted by the TIA, waives any and all claims against the Trustee for, agrees not to initiate a suit against the Trustee in respect of, and agrees that the Trustee shall not be liable for, any action that the Trustee takes, or abstains from taking, in either case in accordance with the exercise of the U.K. bail-in power by the relevant U.K. resolution authority with respect to the Subordinated Notes; and (iii) acknowledges and agrees that, upon the exercise of any U.K. bail-in power by the relevant U.K. resolution authority, (a) the Trustee shall not be required to take any further directions from holders or beneficial owners of the Subordinated Notes under Section 5.12 (Control by Holders) of the Subordinated Base Indenture, and (b) neither the Subordinated Base Indenture nor the Eleventh Subordinated Supplemental Indenture shall impose any duties upon the Trustee whatsoever with respect to the exercise of any U.K. bail-in power by the relevant U.K. resolution authority. Notwithstanding the foregoing, if, following the completion of the exercise of the U.K. bail-in power by the relevant U.K. resolution authority, any of the Subordinated Notes remain outstanding (for example, if the exercise of the U.K. bail-in power results in only a partial write-down of the principal of such Subordinated Notes), then the Trustee’s duties under the Subordinated Indenture shall remain applicable with respect to such Subordinated Notes following such completion to the extent that LBG and the Trustee agree pursuant to a supplemental indenture or an amendment to the Subordinated Indenture, unless LBG and the Trustee agree in writing that a supplemental indenture is not necessary.
By purchasing or acquiring the Subordinated Notes, each holder and each beneficial owner shall be deemed to have (i) consented to the exercise of any U.K. bail-in power as it may be imposed without any prior notice by the relevant U.K. resolution authority of its decision to exercise such power with respect to the Subordinated Notes and (ii) authorized, directed and requested DTC and any direct participant in DTC or other intermediary through which it holds such Subordinated Notes to take any and all necessary action, if required, to implement the exercise of any U.K. bail-in power with respect to the Subordinated Notes as it may be imposed, without any further action or direction on the part of such holder or beneficial owner or the Trustee.
Upon the exercise of the U.K. bail-in power by the relevant U.K. resolution authority with respect to the Subordinated Notes, we shall provide a written notice to DTC as soon as practicable regarding such exercise of the U.K. bail-in power for purposes of notifying holders and beneficial owners of such occurrence. We shall also deliver a copy of such notice to the Trustee for information purposes. Any delay or failure by us in delivering the notices referred to in this paragraph shall not affect the validity and enforceability of the U.K. bail-in power.
For a discussion of certain risk factors relating to the U.K. bail-in power, see “Risk Factors—Risks relating to the Notes”.
Events of Default; Default; Limitation of Remedies
The applicable defaults, events of default and limitations of remedies which apply to the Subordinated Notes are described in the accompanying prospectus under “Description of Debt Securities—Events of Default; Default; Limitation of Remedies—Subordinated Debt Security Events of Default” and “Description of Debt Securities—Events of Default; Default; Limitation of Remedies—Subordinated Debt Security Defaults”.
Additional Issuances
We may, without the consent of the holders of the Subordinated Notes, issue additional notes having the same ranking and same interest rate, maturity date, redemption terms and other terms as the Subordinated Notes described in this prospectus supplement except for the price to the public, issue date and first Subordinated Notes interest payment date, provided however that such additional notes that form part of the Subordinated Notes described in this prospectus supplement must be fungible with the outstanding Subordinated Notes for U.S. federal income tax purposes. Any such additional notes, together with the Subordinated Notes offered by this prospectus supplement, will constitute a single series of securities under the Subordinated Indenture. There is no limitation on the amount of Subordinated Notes or other debt securities that we may issue under such indenture.
Optional Redemption
The Subordinated Notes will, subject to the satisfaction of the conditions described under “—Conditions to Redemption, Purchase, Substitution or Variation” below, be redeemable in whole, but not in part, at the option of LBG on the Subordinated Notes Reset Date at 100% of their principal amount, together with accrued and unpaid interest thereon, if any, on the Subordinated Notes, to, but excluding, June 13, 2035.
Notice of any optional redemption of the Subordinated Notes will be given to holders not less than 15 nor more than 30 calendar days prior to the date fixed for redemption in accordance with “—Conditions to Redemption, Purchase, Substitution or Variation” below, and to the Trustee at least five (5) business days prior to the date notice is sent to holders, unless a shorter notice period shall be satisfactory to the Trustee.
Tax Redemption
If at any time a Tax Event has occurred, LBG may, subject to the satisfaction of the conditions described under “—Conditions to Redemption, Purchase, Substitution or Variation” below, redeem the Subordinated Notes, in whole but not in part, at any time, at 100% of their principal amount, together with accrued interest thereon, if any, to, but excluding, the date fixed for redemption.
A “Tax Event” will be deemed to have occurred if LBG determines that:
(1) as a result of a Tax Law Change, in making any payments on the Subordinated Notes, LBG has paid or will or would on the next payment date be required to pay any Subordinated Notes Additional Amounts (as defined in the accompanying prospectus) to any holder pursuant to “—Payment of Additional Amounts” below and/or
(2) a Tax Law Change would:
•result in LBG not being entitled to claim a deduction in respect of any payments (or its corresponding funding costs as recognized in its financial statements) in respect of the Subordinated Notes in computing its taxation liabilities or the amount or value of such deduction to LBG would be materially reduced;
•prevent the Subordinated Notes from being treated as loan relationships for United Kingdom tax purposes;
•as a result of the Subordinated Notes being in issue, result in LBG not being able to have losses or deductions set against the profits or gains, or profits or gains offset by the losses or deductions, of companies with which it is or would otherwise be so grouped for applicable United Kingdom tax purposes (whether under the group relief system current as of the Issue Date or any similar system or systems having like effect as may from time to time exist);
•result in a United Kingdom tax liability, or the receipt of income or profit which would be subject to United Kingdom tax, in respect of a write-down of the principal amount of the Subordinated Notes or the conversion of the Subordinated Notes into shares or other obligations of LBG (including pursuant to the terms and conditions of the Subordinated Notes or as a result of the exercise of any regulatory powers under the Banking Act); or
•result in a Subordinated Note or any part thereof being treated as a derivative or an embedded derivative for United Kingdom tax purposes,
in each case, provided that, LBG could not avoid the foregoing in connection with the Subordinated Notes by taking measures reasonably available to it.
“Tax Law Change” means a change in, or amendment to, the laws or regulations of the United Kingdom, or any political subdivision or authority therein or thereof, having the power to tax, including any treaty to which the United Kingdom is a party, or any change in any generally published application or interpretation of such laws, including a decision of any court or tribunal, or any change in the generally published application or interpretation of such laws by any relevant tax authority or any generally published pronouncement by any tax authority, which change, amendment or pronouncement (x) (subject to (y)) becomes effective on or after the Issue Date, or (y) in the case of a change in law, if such change is enacted by United Kingdom Act of Parliament or implemented by statutory instrument, on or after the Issue Date.
Notice of any redemption of the Subordinated Notes due to the occurrence of a Tax Event will be given to holders not less than 15 nor more than 30 calendar days prior to the relevant redemption date in accordance with “—Conditions to Redemption, Purchase, Substitution or Variation” below, and to the Trustee at least five (5) business days prior to the date notice is sent to holders, unless a shorter notice period shall be satisfactory to the Trustee.
Prior to the giving of any notice of redemption, LBG must deliver to the Trustee (i) a legal opinion, in a form satisfactory to the Trustee, to the effect that a Tax Event has occurred, and (ii) an officer’s certificate confirming that (1) all the conditions necessary for redemption have occurred and that LBG could not avoid the consequences of the Tax Event by taking measures reasonably available to it, and (2) that if, and to the extent required under Applicable Regulations, LBG has demonstrated to the satisfaction of the Relevant Regulator that the relevant change or event is material and was not reasonably foreseeable by LBG on the Issue Date. The Trustee shall be entitled to accept such opinion and officer’s certificate without any further inquiry and without liability to any person, in which event such opinion and officer’s certificate shall be conclusive and binding on the Trustee and the holders of the Subordinated Notes.
Capital Disqualification Event Redemption
We may redeem the Subordinated Notes, in whole but not in part, at any time, upon not less than 15 calendar days’ nor more than 30 calendar days’ notice to the holders of the Subordinated Notes, if at any time immediately prior to the giving of the notice referred to above a Capital Disqualification Event has occurred. In the event of such a redemption, the redemption price of the Subordinated Notes will be 100% of their principal amount together with accrued but unpaid interest thereon, if any, `to, but excluding, the date fixed for redemption. Any right of redemption will be subject to the conditions set forth under “—Conditions to Redemption, Purchase, Substitution or Variation” below.
Prior to the giving of any notice of redemption, LBG must deliver to the Trustee an officer’s certificate stating that (1) a Capital Disqualification Event has occurred, and (2) if, and to the extent required under Applicable Regulations, LBG has demonstrated to the satisfaction of the Relevant Regulator that the relevant change was not reasonably foreseeable by LBG as at the Issue Date. The Trustee shall be entitled to accept such officer’s certificate without any further inquiry, in which event such officer’s certificate shall be conclusive and binding on the Trustee and the holders of the Subordinated Notes.
Substitution or Variation
If a Tax Event or Capital Disqualification Event has occurred, then LBG may, subject to “—Conditions to Redemption, Purchase, Substitution or Variation” below, but without any requirement for the consent or approval of the holders of the Subordinated Notes, at any time (whether before, on or following the Subordinated Notes Reset Date) either substitute all (but not some only) of the Subordinated Notes for, or vary the terms of the Subordinated Notes so that they remain or, as appropriate, become, Subordinated Notes Compliant Securities, and the Trustee shall (subject to the below) agree to such substitution or variation. Upon the expiry of such notice, LBG shall either vary the terms of or substitute the Subordinated Notes, as the case may be.
Notice of any substitution or variation of the Subordinated Notes due to the occurrence of a Tax Event or Capital Disqualification Event will be given to holders not less than 15 nor more than 30 calendar days prior to the date of substitution or variation (as applicable), and to the Trustee at least five (5) business days prior to the date of such notice to holders, unless a shorter notice period shall be satisfactory to the Trustee. Such notice shall specify the date fixed for substitution or, as the case may be, variation of the Subordinated Notes and shall, except as otherwise provided herein, be irrevocable.
Prior to the giving of any notice of substitution or variation, LBG must deliver to the Trustee an officer’s certificate stating that a Tax Event or Capital Disqualification Event, as the case may be, has occurred, setting out the details thereof, and stating that the terms of the relevant Subordinated Notes Compliant Securities comply with the definition thereof. The Trustee shall be entitled to accept such officer’s certificate without any further inquiry and without liability to any person, in which event such officer’s certificate shall be conclusive and binding on the Trustee and the holders and beneficial owners of the Subordinated Notes.
“Subordinated Notes Compliant Securities” means securities issued directly by LBG that:
(a) have terms not materially less favorable to an investor than the terms of the Subordinated Notes (as reasonably determined by LBG in consultation with an investment bank or financial adviser of international standing (which in either case is independent of LBG)) and provided that LBG has delivered an officer’s certificate to such effect (including as to such consultation) to the Trustee (upon which the Trustee shall be entitled to rely without further inquiry and without liability to any person) prior to the issue or variation of the relevant securities);
(b) subject to (a) above (1) contain terms which comply with the then current requirements of the Relevant Regulator in relation to Tier 2 capital; (2) provide for the same interest rate and interest payment dates from time to time applying to the Subordinated Notes; (3) rank pari passu with the ranking of the Subordinated Notes; (4) preserve any existing rights under the Subordinated Indenture to any accrued interest or other amounts which have not been either paid or canceled; and (5) preserve the obligations of LBG as to payments of principal in respect of the Subordinated Notes, including (without limitation) as to the timing and amount of such payments;
(c) are (1) listed on the New York Stock Exchange or (2) listed on such other stock exchange as is a Recognized Stock Exchange at that time as selected by LBG; and
(d) where the Subordinated Notes which have been substituted or varied had a published rating (solicited by, or assigned with the cooperation of, LBG) from a Rating Agency immediately prior to their substitution or variation, each such Rating Agency has ascribed, or announced its intention to ascribe, an equal or higher published rating to the relevant Subordinated Notes Compliant Securities.
“Recognized Stock Exchange” means a recognized stock exchange as defined in section 1005 of the U.K. Income Tax Act 2007 as the same may be amended from time to time and any provision, statute or statutory instrument replacing the same from time to time.
Purchases
Subject to applicable law in force at the relevant time, including the Applicable Regulations, we may at any time, and from time to time, purchase Subordinated Notes in the open market or by tender or by private agreement in any manner and at any price or at differing prices. Subordinated Notes purchased or otherwise acquired by us may be (i) held, (ii) resold or (iii) at our sole discretion, surrendered to the Trustee for cancellation (in which case all Subordinated Notes so surrendered will forthwith be cancelled in accordance with applicable law and thereafter may not be re-issued or resold). Any such purchases will be subject to the conditions set forth under “—Conditions to Redemption, Purchase, Substitution or Variation” below.
Conditions to Redemption, Purchase, Substitution or Variation
Any redemption, purchase, substitution or variation of the Subordinated Notes prior to the maturity date is subject to:
(a) LBG giving notice to the Relevant Regulator and the Relevant Regulator granting permission to LBG to redeem, purchase, substitute or vary the Subordinated Notes, as the case may be (in each case to the extent, and in the manner, required by the Applicable Regulations); and
(b) in respect of any redemption of the Subordinated Notes proposed to be made prior to the fifth anniversary of the date of issuance of the Subordinated Notes, if and to the extent then required under the Applicable Regulations: (A) in the case of an optional redemption due to a Tax Event, LBG having demonstrated to the satisfaction of the Relevant Regulator that the relevant change or event is material and was not reasonably foreseeable by LBG as at the Issue Date; or (B) in the case of redemption following the occurrence of a Capital Disqualification Event, LBG having demonstrated to the satisfaction of the Relevant Regulator that the relevant change (or pending change) was not reasonably foreseeable by LBG as at the Issue Date and the Relevant Regulator considering such change to be sufficiently certain;
(c) if and to the extent then required under the Applicable Regulations, either: (A) LBG having replaced the Subordinated Notes with instruments qualifying as own funds of equal or higher quality on terms that are sustainable for the income capacity of LBG; or (B) (save in the case of sub-paragraph (d)(A) below) LBG demonstrating to the satisfaction of the Relevant Regulator that the own funds and eligible liabilities of LBG would, following such redemption, purchase, substitution or variation exceed its minimum applicable capital requirements (including any applicable buffer requirements) by a margin that the Relevant Regulator considers necessary at such time; and
(d) in the case of any purchase prior to the fifth anniversary of the date of issuance of the Subordinated Notes, in addition to satisfying either of the conditions specified in paragraph (c) above, either: (A) LBG having, before or at the same time as such purchase, replaced the Subordinated Notes with own funds instruments of equal or higher quality at terms that are sustainable for the income capacity of LBG, and the Relevant Regulator having permitted such action on the basis of the determination that it would be beneficial from a prudential point of view and justified by exceptional circumstances; or (B) the relevant Subordinated Notes being purchased for market-making purposes in accordance with the Applicable Regulations.
Any refusal by the Relevant Regulator to grant its permission as contemplated above shall not constitute a Subordinated Notes Default or a Subordinated Notes Event of Default for any purpose. Notwithstanding the above conditions, if, at the time of any redemption, purchase, substitution or variation, the then-prevailing Applicable Regulations permit the repayment, purchase, substitution or variation only after compliance with one or more alternative or additional preconditions to those set out above, LBG shall comply with such other and/or, as appropriate, additional pre-condition(s).
Modification and Waiver
The modification and waiver provisions which apply to the Subordinated Notes are described in the accompanying prospectus under “Description of Debt Securities—Modification and Waiver”.
Payment of Additional Amounts
The payment of additional amounts provisions which apply to the Subordinated Notes (and exceptions thereto) are described in the accompanying prospectus under “Description of Debt Securities—Additional Amounts”. Holders and beneficial owners should note that we will not be required to pay any additional amounts to the extent that any withholding or deduction applied to payments of principal.
Waiver of Right to Set-Off
Subject to applicable law, no holder may exercise or claim any right of set-off, counterclaim, combination of accounts, compensation or retention in respect of any amount owed to it by LBG arising under or in connection with the Subordinated Notes. By accepting a Subordinated Note, each holder will be deemed to have waived any right of set-off, counterclaim, combination of accounts, compensation or retention with respect to such Subordinated Note or the Subordinated Indenture (or between our obligations under or in respect of any Subordinated Note and any liability owed by a holder or the Trustee to us) that they might otherwise have against us, whether before or during our winding up. Notwithstanding the provisions of the foregoing sentence, if any of the said rights and claims of any holder of any Subordinated Note against LBG is discharged by set-off, counterclaim, combination of accounts, compensation or retention, such holder will immediately pay an amount equal to the amount of such discharge to LBG (or, in the event of winding-up or administration of LBG, the liquidator or, as applicable, the administrator of LBG) and accordingly such discharge will be deemed not to have taken place.
Trustee; Direction of Trustee
LBG’s obligations to indemnify the Trustee in accordance with Section 6.07 of the Subordinated Base Indenture (as amended by the Eleventh Subordinated Supplemental Indenture) shall survive the exercise of the U.K. bail-in power by the relevant U.K. resolution authority with respect to the Subordinated Notes and the Subordinated Indenture.
By purchasing or acquiring the Subordinated Notes, each holder (including each beneficial owner) of the Subordinated Notes acknowledges and agrees that, upon the exercise of any U.K. bail-in power by the relevant U.K. resolution authority, (a) the Trustee shall not be required to take any further directions from holders or beneficial owners of the Subordinated Notes under Section 5.12 (Control by Holders) of the Subordinated Base Indenture, and (b) neither the Subordinated Base Indenture nor the Eleventh Subordinated Supplemental Indenture shall impose any duties upon the Trustee whatsoever with respect to the exercise of any U.K. bail-in power by the relevant U.K. resolution authority. Notwithstanding the foregoing, if, following the completion of the exercise of the U.K. bail-in power by the relevant U.K. resolution authority, any of the Subordinated Notes remain outstanding (for example, if the exercise of the U.K. bail-in power results in only a partial write-down of the principal of such Subordinated Notes), then the Trustee’s duties under the Subordinated Indenture shall remain applicable with respect to such Subordinated Notes following such completion to the extent that LBG and the Trustee agree pursuant to a supplemental indenture or an amendment to the Subordinated Indenture, unless LBG and the Trustee agree in writing that a supplemental indenture is not necessary.
In addition to the foregoing, the Trustee may decline to act or accept direction from holders unless it receives written direction from holders representing a majority in aggregate principal amount of the Subordinated Notes and security and/or indemnity satisfactory to the Trustee in its sole discretion. The Subordinated Indenture shall not be deemed to require the Trustee to take any action which may conflict with applicable law, or which may be unjustly prejudicial to the holders not taking part in the direction, or which could subject the Trustee to risk or for which it is not indemnified to its satisfaction in its sole discretion.
The Trustee makes no representations regarding, and shall not be liable with respect to, the information set forth in this prospectus supplement.
Subsequent Holders’ Agreement
Holders and beneficial owners of the Subordinated Notes that acquire the Subordinated Notes in the secondary market shall be deemed to acknowledge, agree to be bound by and consent to the same provisions specified herein to the same extent as the holders and beneficial owners of the Subordinated Notes that acquire the Subordinated Notes upon their initial issuance, including, without limitation, with respect to the acknowledgement and agreement to be bound by and consent to the terms of the Subordinated Notes including in relation to the U.K. bail-in power.
Listing
We intend to apply for the listing of the Subordinated Notes on the New York Stock Exchange in accordance with its rules.
Governing Law
The Subordinated Base Indenture, the Eleventh Subordinated Supplemental Indenture and the Subordinated Notes are governed by, and construed in accordance with, the laws of the State of New York, except for the subordination and waiver of set-off provisions relating to the Subordinated Notes, which are governed by, and construed in accordance with, the laws of Scotland.
B.Base Prospectus – dated June 7, 2022:
Please refer to pages 3-18 of Exhibit 2(d) of LBG’s annual report on Form 20-F for the fiscal year ended December 31, 2022 (the “2022 Annual Report”).
1.Prospectus Supplement - 5.590% Senior Callable Fixed-to-Fixed Rate Notes due 2035, 5.087% Senior Callable Fixed-to-Fixed Rate Notes due 2028 and Senior Callable Floating Rate Notes due 2028
Please refer to pages 4-21 of Exhibit 2(d) of LBG’s annual report on Form 20-F for the fiscal year ended December 31, 2024 (the “2024 Annual Report”).
2.Prospectus Supplement - 5.721% Senior Callable Fixed-to-Fixed Rate Notes due 2030
Please refer to pages 21-31 of Exhibit 2(d) of the 2024 Annual Report.
3.Prospectus Supplement - 5.679% Senior Callable Fixed-to-Fixed Rate Notes due 2035, 5.462% Senior Callable Fixed-to-Fixed Rate Notes due 2028 and Senior Callable Floating Rate Notes due 2028
Please refer to pages 31-49 of Exhibit 2(d) of the 2024 Annual Report.
4.Prospectus Supplement - 5.985% Senior Callable Fixed-to-Fixed Rate Notes due 2027 and Senior Callable Floating Rate Notes due 2027
Please refer to pages 49-65 of Exhibit 2(d) of the 2024 Annual Report.
5.Prospectus Supplement - 5.871% Senior Callable Fixed-to-Fixed Rate Notes due 2029:
Please refer to pages 66-76 of Exhibit 2(d) of the 2024 Annual Report.
- Prospectus Supplement - 7.953% Fixed Rate Reset Subordinated Debt Securities due 2033:
Please refer to pages 18-28 of Exhibit 2(d) of the 2022 Annual Report.
C. Prospectus - Offer to Exchange 3.369% Fixed Rate Reset Subordinated Debt Securities due 2046 with a call date in 2041 for American Depositary Shares (“ADSs”) representing LBG’s 6.413% Non-Cumulative Fixed to Floating Rate Preference Shares, ADSs representing LBG’s 6.657% Non-Cumulative Fixed to Floating Rate Preference Shares, 6.00% Subordinated Notes due 2033 issued by HBOS plc, LBG’s 4.582% Subordinated Debt Securities due 2025 and LBG’s 4.500% Fixed Rate Subordinated Debt Securities due 2024:
Please refer to pages 4-18 of Exhibit 2(d) of the 2021 Annual Report.
D. Base Prospectus - dated June 3, 2019:
Please refer to pages 15-28 of Exhibit 2(d) of LBG’s annual report on Form 20-F for the fiscal year ended December 31, 2019 (the “2019 Annual Report”).
- Prospectus Supplement - 3.750% Senior Callable Fixed-to-Fixed Rate Notes due 2028:
Please refer to pages 39-49 of Exhibit 2(d) of the 2022 Annual Report.
- Prospectus Supplement - 1.985% Fixed Rate Reset Subordinated Debt Securities due 2031:
Please refer to pages 18-27 of Exhibit 2(d) of the 2021 Annual Report.
E. Base Prospectus - dated June 2, 2016:
Please refer to pages 42-58 of Exhibit 2(d) of the 2019 Annual Report.
- Prospectus Supplement - 4.550% Senior Notes due 2028:
Please refer to pages 66-73 of Exhibit 2(d) of the 2019 Annual Report.
- Prospectus Supplement - 4.375% Notes due 2028:
Please refer to pages 98-106 of Exhibit 2(d) of the 2019 Annual Report.
- Prospectus Supplement - 4.344% Fixed Rate Subordinated Debt Securities due 2048:
Please refer to pages 106-117 of Exhibit 2(d) of the 2019 Annual Report.
- Prospectus Supplement - 3.574% Senior Callable Fixed-to-Floating Rate Notes due 2028:
Please refer to pages 117-126 of Exhibit 2(d) of the 2019 Annual Report.
- Prospectus Supplement - 3.750% Senior Notes due 2027:
Please refer to pages 126-133 of Exhibit 2(d) of the 2019 Annual Report.
F. Base Prospectus - dated June 7, 2013:
Please refer to pages 138-152 of Exhibit 2(d) of the 2019 Annual Report.
- Prospectus Supplement - 4.650% Fixed Rate Subordinated Debt Securities due 2026:
Please refer to pages 152-163 of Exhibit 2(d) of the 2019 Annual Report.
G. Prospectus - Offer to Exchange 4.582% Subordinated Debt Securities due 2025 and 5.300% Subordinated Debt Securities due 2045 for New 4.582% Subordinated Debt Securities due 2025 and New 5.300% Subordinated Debt Securities due 2045:
Please refer to pages 202-215 of Exhibit 2(d) of the 2019 Annual Report.
75
Document
Exhibit 4(b)(xix)
Private & Confidential
Chris Vogelzang
Date 11 June 2025
Dear Chris,
Appointment as Non-Executive Director – Lloyds Banking Group
Following our recent discussions, I am pleased to confirm that the Board of Lloyds Banking Group plc (“LBG”) has approved your appointment as a non-executive director, subject to the conditions set out in paragraph 2 below.
All directors of LBG also serve on the subsidiary HBOS plc board as well as the two principal subsidiary “Ring Fenced Bank” boards of Lloyds Bank plc and Bank of Scotland plc (together with the board of Lloyds Banking Group plc, the “Boards”). As discussed, your proposed appointment as a non-executive director will therefore be to the Boards of LBG, HBOS plc, Lloyds Bank plc and Bank of Scotland plc (each a “Company” and together, the “Companies”). The Boards will generally meet simultaneously, or on the same date if meeting separately.
In this letter, the term “Group” shall have the meaning given to it in section 1261(1) of the Companies Act 2006 (the “Act”) and shall also be deemed to include affiliates of the Companies and LBCM and subsidiary undertakings in which LBCM or any Company has a minority shareholding.
This letter sets out the terms and conditions covering your appointment.
1Appointments
1.1Your appointment to the Boards is subject to the provisions of the Articles of Association of the relevant company, as amended from time to time (the “Articles”), the Act, general law and, where applicable, the Listing Rules, the Prospectus Rules and the Disclosure Guidance & Transparency Rules of the Financial Conduct Authority (the “FCA”).
1.2Your appointment to the Boards is to take effect on 16 June 2025. You will be obliged to retire from the LBG Board at the next Annual General Meeting of LBG (“AGM”) (which will be held in 2026) but will be eligible for election by shareholders at that meeting. Thereafter (and despite anything to the contrary in the Articles) in line with the recommendations of Provision 18 of the UK Corporate Governance Code, your appointments will be subject to annual re-election by shareholders to the LBG Board and you will therefore be required to retire at each AGM. Subject to satisfactory performance (see paragraph 16 below) and LBG Board approval, you will be invited to stand for re-election by shareholders at the AGM in each year of your appointment.
Lloyds Banking Group plc is registered in Scotland no. 95000. Registered office: The Mound, Edinburgh, EH1 1YZ
1.3Subject to the terms set out in this letter and to the relevant Articles, non-executive directors appointed to the Boards are appointed for an initial term of three years. The Boards may invite you to serve for an additional period.
2Conditions
2.1The commencement of this appointment and, thereafter, the continuation of your appointment to the Boards is subject to:
2.1.1the Companies being satisfied that you are fit and proper to perform your functions and responsibilities as a non-executive director;
2.1.2the completion, to the Companies’ satisfaction, of necessary background checks in accordance with any applicable regulatory requirements;
2.1.3receipt by the Companies of satisfactory references, as determined in its absolute discretion, from your current and previous employers over the past six years and any organisations at which you serve or have served as a non-executive director, and such other references as may be required by the Companies and/or in order to comply with regulatory requirements in force from time to time; and
2.1.4you having any and all regulatory approvals and competencies that may be required from time to time for the role you perform as a member of the Boards.
2.2You must inform the Boards of any significant changes in your personal circumstances which may impact on your status (including but not limited to any matters relating to fitness and proprietary which may have an impact on this status or your ability to remain as a director).
2.3The continuation of your appointment to the Boards is further contingent upon:
2.3.1satisfactory performance in your role and contribution to the Boards and any Committees on which you serve (see paragraph 16 below); and
2.3.2election and re-election to the LBG Board by shareholders at the AGM in the manner described in sub-paragraph 1.2 above.
3Board Committees
3.1In addition to your appointment as a non-executive director of the Companies, you will be required to serve on at least two Committees and/or forums of the Boards, which may be subject to rotation. It has been agreed that you will serve as:
3.1.1Member, Responsible Business Committee; and
3.1.2Member, IT and Cyber Advisory Forum (“ITCAF”).
3.2Your appointment to these Committees entails separate responsibilities as detailed in the terms of reference of the Committees, which will be provided to you separately.
3.3You may also be required to serve on sub-committees of these Committees and ad hoc Committees of the Boards established from time to time that are for specific purposes.
4Role and Duties
4.1General Duties
4.1.1Your duties will be those normally required of a non-executive director. In particular, you should have regard to:
(i)the Financial Reporting Council’s Corporate Governance Code Guidance on the role of a non-executive director as updated on 7 May 2025, of which an extract is included in Schedule 1 of this letter;
(ii)the Prudential Regulation Authority’s (“PRA”) Supervisory Statement 5/16 on Corporate governance: Board responsibilities in July 2018, of which an extract is included in Schedule 2 of this letter; and
(iii)the FCA’s Guidance on the role and responsibilities of non-executive directors of SMCR firms, of which an extract is included in Schedule 3 of this letter.
4.1.2All directors must take decisions objectively in the interests of each Company and not do anything which is harmful to the relevant Company or its business.
4.1.3Each Board is collectively responsible for promoting the success of the relevant Company by directing its affairs. All directors are required to (amongst other things):
(i)provide entrepreneurial leadership of each Company within a framework of prudent and effective controls which enable risk to be assessed and managed;
(ii)set each Company’s strategic aims, ensure that the necessary financial and human resources are in place for the relevant Company to meet its objectives, and review management performance; and
(iii)set each Company’s values and standards and ensure that its obligations to shareholders and others are understood and met.
4.1.4In addition, as a member of the Ring Fenced Bank Boards you will have responsibility with the other directors for ensuring effective governance of the Ring Fenced Banks, including identifying and addressing any potential conflicts of interest with respect to each Ring Fenced Banks and other group entities in a way that ensures that the integrity of each Ring Fenced Bank is upheld.
4.1.5Your more specific responsibilities and accountabilities are reflected in the Group’s wider governance framework and will include, to the extent relevant, any responsibilities prescribed pursuant to UK or other applicable regulation and as notified to the FCA and/or the PRA, details of which are available from the Company Secretary upon request.
5Time Commitment
5.1As a non-executive director, you are required to devote such time as is necessary to effectively discharge your duties as a director. Overall, we anticipate a time commitment equivalent to approximately 35 to 40 days per annum after the induction phase, which comprises:
| 1.1Base time commitment for non-executive directors | 1.1approx. 25 to 28 days |
|---|---|
| 1.1Additional time for membership of Responsible Business Committee | 1.1approx. 5 to 6 days |
| 1.1Additional time for membership of ITCAF | 1.1approx. 5 to 6 days |
5.2
5.3This will include attendance in person (where at all possible) at (and preparation for) scheduled monthly meetings of the Boards and Committees, preparation and attendance at the AGM and at strategy sessions (including a up to 2 offsite meetings a year). I have provided you with a schedule of Board and Committee meetings.
5.4The minimum time commitment outlined above is based on planned events. You will be expected to devote appropriate preparation time ahead of each meeting and such other time as is reasonably required to discharge your duties as a director (for example if one of the Companies is involved in increased activity because it is involved in a major transaction). From time to time, you may be required to attend meetings at short notice.
5.5As a director of LBG and the Ring Fenced Banks, you may also be required to attend or represent the Group at meetings with regulators, the Government, investors or other third parties as appropriate.
5.6By accepting this appointment, you confirm that you are able to allocate sufficient time to meet the expectations of your role to the satisfaction of the Boards. Notwithstanding paragraph 9 below, the agreement of the Chair must be sought before accepting additional commitments, in order to discuss whether they might affect your ability to meet the time commitments necessary to discharge your duties.
5.7The rules of the PRA and FCA require that you do not hold more than one executive director position with two non-executive director positions, or more than four non-executive directorships at the same time (including director positions held outside of financial services, but excluding director positions for organisations which do not pursue predominantly commercial objectives). However, director positions held within the same group are treated as a single directorship.
6Fees
6.1In consideration for your appointments, you will be paid the following fees and sub-paragraphs 6.2 to 6.5 below shall apply to your fees except where otherwise provided in, or determined in accordance with, the Articles:
| Non-executive director base fee | £92,200 |
|---|---|
| Responsible Business Committee | £25,000 |
| ITCAF | £25,000 |
| Total fees payable | £142,200 |
6.2
6.3Your fee(s) will accrue on a daily basis and be payable in twelve monthly instalments on the 20th of each month, which may be subject to change, by bank transfer to a bank account held in your name, less any tax and national insurance contributions that must be deducted. Each such instalment will relate to the calendar month in which payment is made.
6.4Your fee(s) will be subject to an annual review in accordance with the Group’s policies.
6.5If for any reason related to your illness, disability or injury, you are unable to carry out your duties, payment of any fee(s) during any period of incapacity will be at the discretion of the Boards.
6.6Any specific and additional services rendered by you to the Companies will be remunerated on the basis to be agreed by the Boards at the time such services are commissioned.
7Reimbursement of Expenses
You will be entitled to claim for reimbursement of any reasonable expenses properly incurred in performing your duties, provided such expenses conform to the Group’s expenses policy. Amounts reimbursed will be paid grossed-up for tax, where applicable, in accordance with the Non Executive Director Expenses Policy.
8Independent Status
8.1As an independent non-executive director it is important that you remain independent in character and judgement. The Boards of the Companies have determined you to be independent according to provision 10 of the UK Corporate Governance Code upon your appointment.
8.2You are required to inform the Company Secretary of any circumstances which are likely to affect, or could appear to affect, your judgement and therefore your status as an independent director.
9Outside Interests
9.1It is accepted and acknowledged that you have business interests other than those of the Group. It is a condition of your appointment commencing that you declare any such directorships, appointments and interests to the Boards in writing and obtain the Boards’ approval of them.
9.2If you wish to take on any additional directorships, appointments or interests, the Boards’ consent must be obtained in advance. Regardless of any approval given in relation to such directorships, appointments or interests, it is your responsibility to ensure that you can meet the time commitment required by the role.
9.3If at any time you become aware of any matter which might give rise to a conflict of interest with the Companies you must first discuss the matter with the Boards and, if necessary, obtain their consent (including, where applicable, by resolution of the directors to authorise such interest). Before doing so, it may be practicable to discuss the matter directly with the Chair.
10Code of conduct and compliance
10.1From the date of this letter and during the appointment, you will comply with applicable prevailing laws, regulations, codes and sanctions, as well as any dealing or other code that the Companies may establish and such other policies, codes and requirements as issued from time to time.
10.2Additionally, the rules of the PRA and FCA set out certain minimum requirements to which the Companies must contractually require you to adhere.
10.3Conduct Rules
10.4These are that you must:
10.4.1act with integrity;
10.4.2act with due skill, care and diligence;
10.4.3be open and co-operative with the FCA, the PRA and other regulators;
10.4.4pay due regard to the interests of customers and treat them fairly;
10.4.5observe proper standards of market conduct;
10.4.6 act to deliver good outcomes for retail customers.
10.5Senior Manager Conduct Rules
10.6You must disclose appropriately any information of which the FCA or PRA would reasonably expect notice.
11Status of Appointment and Right to Work
11.1You will not be an employee of any of the Companies nor any member of the Group and this letter shall not constitute a contract of employment. This letter sets out the only payments you will receive for performing your duties. Accordingly, no other remuneration or benefits will be provided and, in particular, you will not participate in any of the Companies’ or Group’s remuneration or benefit programmes, arrangements, schemes or plans. For the avoidance of doubt, if there is any conflict between this letter and the terms of any Group policy, staff handbook or staff manual issued to you, the terms of this letter will prevail.
11.2You are required to ensure you have the necessary permission to enter the UK to attend meetings of the Boards and Committees etc (see paragraph 5.2 above) and will notify the Company Secretary promptly if you cease to have the necessary permission. If entering the UK as a business visitor, you will ensure that any activities undertaken in the UK will be permissible under the Immigration Rules Appendix Visitor: Permitted Activities.
12Confidentiality
12.1Without prejudice to the terms of the confidentiality agreement dated 2 June 2025, you may have access to and have knowledge of the Group’s trade secrets and confidential information. You acknowledge that the disclosure of any trade secrets and confidential information to actual or potential competitors of the Group may place the Group at a serious competitive disadvantage and may do serious financial damage, financial and/or otherwise to its or their business and business development and may cause immeasurable harm. As such, you will not use or disclose to any person, firm or organisation (except as required by law or to carry out your duties under this letter) any trade secrets, knowhow, business information or other private or confidential information relating to the business, finances or affairs of any member of the Group, or any customer of the Group, or any other information provided to you on the basis that it is confidential. You will use your best endeavours to prevent the unauthorised use or disclosure of any such information. This restriction will continue to apply after your appointment ends without limit in time but will not apply to information which becomes public, unless through unauthorised disclosure by you. After your appointments end you will return all documents and information (whether written, visual or electronic) under your possession or control which belong to any member of the Group.
12.2Your attention is also drawn to the requirements under legislation and regulation relating to the disclosure of price sensitive information. You must avoid making any statements or engaging in any dealings that might contravene these requirements. The Company Secretary can provide further information and advice on these matters upon request. The Group’s policy is that all external communication regarding the Group’s affairs is restricted to the Chair, Group Chief Executive and Chief Corporate Affairs Officer only.
13Return of Property
13.1Upon the termination of your appointment, you will as soon as practical return to LBG, at such place as LBG may reasonably specify:
13.1.1all documents and information (in whatever form, whether written, visual, or electronic), including any copies, under your possession or control which belong to, or contain any confidential information relating to, any member of the Group; and
13.1.2all other property provided to you in connection with your appointment, in good condition (allowing for fair wear and tear).
14Intellectual Property
14.1From the date of this letter, you agree that any intellectual property rights which may exist or arise in any work product which you create or contribute to in your provision of services to the Companies over the course of your appointment shall subsist in the relevant Company.
15Induction and Training
15.1Following your appointment, we will provide a comprehensive, formal and tailored induction. We will also arrange for you to meet senior management and the Group’s auditors should you wish to do so. We will also offer to major shareholders the opportunity to meet you should you wish to do so. You are also entitled to request any additional information or briefings to assist you in the execution of your duties.
15.2The Chair will also meet with you regularly to discuss and agree your training and development needs.
16Evaluation and Review of your Performance
The performance of individual directors and the Boards and their Committees is evaluated annually. If, in the interim, there are any matters which cause you concern about your role you should discuss them with the Chair as soon as is appropriate.
17Termination
17.1Once appointed, you will cease to hold the office of director of the Companies if:
17.1.1you resign from your appointment or choose not to stand for re-election to the LBG Board at the next AGM;
17.1.2your appointment is terminated or LBG chooses not to propose you for re-election at the next AGM;
17.1.3shareholders fail to elect or re-elect you as a director of LBG at an AGM;
17.1.4you fail to meet, on an ongoing basis, the standards expected of a person performing your role;
17.1.5you are no longer regarded by the Boards as fit and proper to perform any responsibilities or functions assigned to you from time to time as determined by the Companies in their absolute discretion;
17.1.6you cease to hold any necessary regulatory approval which the Company reasonably believes is necessary in order for you to perform your functions and responsibilities as amended from time to time;
17.1.7you commit a serious breach of the relevant laws, or breach of the rules, requirements, regulations or codes (as amended from time to time) of any relevant listing authority, the FCA,
the PRA or any regulatory authorities relevant to the Company or any Group company, or any rules, requirements, regulations, or codes relevant to the Company or any policy issued by the Company (as amended from time to time), or
17.1.8the Articles or any applicable law or regulation prevents you from continuing as a director of the Companies.
17.2In the case of sub-paragraphs 17.1.1 and 17.1.2 above, you will not be entitled to notice or compensation for loss of office. However, we will endeavour to give you reasonable notice where appropriate. You are requested to give reasonable notice of your resignation and make the Chair aware of any intention not to seek re-election so that the Boards can plan for orderly succession. In the case of sub-paragraphs 17.1.3 to 17.1.8 above, your appointment will terminate with immediate effect and without compensation.
17.3Your appointment may also be terminated in accordance with the provisions of the Articles.
18Directors’ Liability Indemnity and Insurance
18.1To the extent permitted by law and in accordance with the relevant Articles, you are entitled to be indemnified by the Companies against all costs and liabilities incurred in the execution of your duties. A deed of indemnity is included in your appointment pack for your signature and return.
18.2The Group also has directors’ and officers’ liability insurance cover maintained from time to time (however, nothing in this letter shall oblige the Group to maintain any such cover on its current terms or at all). A copy of the current policy document can be provided by the Company Secretary upon request.
19Independent Professional Advice
Occasions may arise when you consider that you need professional advice in the furtherance of your duties as a director and it will be appropriate for you to consult independent advisers at the Companies’ expense. A copy of the Group’s agreed procedure under which directors may obtain such independent advice is available upon request. The Companies will reimburse the full cost of such expenditure that is reasonably and properly incurred in accordance with the Group’s policies.
20Disclosure and Dealings in Shares
20.1Under the Act, where a director of a company is in any way, directly or indirectly, interested in a proposed transaction or arrangement with any of the Companies or one that has been entered into by any Company, he/she must declare the nature and extent of that interest. You may give any such notice at a meeting of the directors, in writing or by general notice.
20.2During the continuance of your appointment you will be expected to comply (and to procure that your spouse, dependent children and other connected persons comply) where relevant with any rule of law or regulation of any competent authority or of any Company from time to time in force in relation to dealings in shares, debentures and other securities of any Company and unpublished price sensitive information affecting the shares, debentures and other securities of such Company. A link to a copy of the Company’s Code for Directors’ Dealings in Securities has been provided to you via email and a copy will also be provided in your appointment pack.
21Companies House formalities
AP01 Forms, prescribed by the Act, must be filed at Companies House. Please provide the relevant personal details to the Company Secretary as soon as possible, so that the Company Secretary can make the filings.
22Shareholdings
22.1All directors are expected to hold shares in LBG. If you would like to receive whole or part of your monthly fee in shares, we would be happy to make the necessary arrangements for you.
23Governing Law
This letter and any non-contractual obligations arising out of or in connection with it is governed by and will be interpreted in accordance with the laws of England and Wales. Each of the parties submits to the exclusive jurisdiction of the Courts of England and Wales as regards any claim or matter arising under this letter.
24Please acknowledge receipt and acceptance of the above terms by signing and returning the enclosed copy of this letter.
25Please do not hesitate to contact me for any assistance in any matters during the term of your appointment. I will write formally again at the time the appointment is confirmed by the Boards and look forward to welcoming you to the Group.
Yours sincerely
/s/ Robin Budenberg
Sir Robin Budenberg
Group Chair
For and on behalf of each of Lloyds Banking Group plc, HBOS plc, Lloyds Bank plc and Bank of Scotland plc
I hereby acknowledge receipt of and accept the terms set out in this letter and accept the proposed terms of appointment.
/s/ Chris Vogelzang
Signed ……………………………….
Chris Vogelzang
Dated ……… June 11 2025………………………..
Schedule 1 Guidance on the Role of Non-Executive Directors (extracted from sections 76 to 79 of the Financial Reporting Council’s Corporate Governance Code Guidance as updated on 7 May 2025)
When appointed, non-executive directors are expected to devote time to a comprehensive, formal and tailored induction that generally extends beyond the boardroom. Initiatives such as partnering a non-executive director with an executive board member may speed up the process of them acquiring an understanding of the main areas of business activity, especially areas involving significant risk. They may visit operational sites and talk with managers and members of the workforce. A non-executive director may use these conversations to better understand the culture of the organisation and the way things are done in practice and to gain insight.
Non-executive directors need sufficient time available to discharge their responsibilities effectively. The time commitment to engage with shareholders and other key stakeholders and get to know the business can be significant. Non-executive directors assess the demands of their portfolios and other commitments carefully before accepting new appointments, devoting time to developing and refreshing their knowledge and skills, to ensure that they continue to make a positive contribution to the board.
Non-executive directors need timely, high-quality information sufficiently in advance so that there can be thorough consideration of the issues prior to, and informed debate and challenge at, board meetings. They seek clarification or amplification from management where they consider the information provided is inadequate or lacks clarity.
Non-executive directors do not operate exclusively within the confines of the boardroom but have a good understanding of the business and its relationships with significant stakeholders. Accordingly, it is advisable for them to take opportunities to meet other stakeholders from all levels of the organisation.
Schedule 2
Non-Executive Directors: guidance on their role, knowledge and experience (extracted from PRA Supervisory Statement 5/16, dated July 2018, paragraphs 6 and 7)
Unitary boards comprise a combination of executive and non-executive directors. Executive directors have specific management responsibilities for which they are accountable to the board. It is their responsibility to manage the firm’s business on behalf of the board and exercise judgement in the running of the business on a day-to-day basis. They should exercise that judgement within the strategy, risk appetite and other assessment and control frameworks set and overseen by their board. Non-executive directors’ responsibilities require them to both support and oversee executive management. As board members, they all share in the wider board duty to promote the success of the company and to ensure that the regulated firm for which they are responsible continues to meet the Threshold Conditions.
In discharging their responsibilities boards should act in a cooperative and collegiate manner whereby the non-executives support and encourage executive management and vice versa. But this should not inhibit the non-executive directors from challenging executive management and holding them to account effectively. The PRA expects the chair to play a pivotal role in facilitating this culture.
Executive management manage the firm’s business on behalf of the board. Boards therefore delegate a wide range of duties and responsibilities to the chief executive or to executive management. The PRA expects boards to be precise over what they delegate to the executive management and the limitations and accountabilities associated with each of the matters that are delegated. In doing so the PRA expects boards to articulate clearly and unambiguously the matters reserved to the board and the manner in which executive management must report and escalate matters to them, including the exercise of judgement in escalating matters of particular significance even if within the delegated mandate.
Accordingly the board and particularly the non-executive directors on the board should hold management to account against the matters delegated and be able to challenge the executive effectively and promptly.
Between them the non-executive directors need to have sufficient current and relevant knowledge and experience, including sector experience, to understand the key activities and risks involved in the business model and to provide effective challenge across the major business lines of the firm. The PRA expects to see evidence of effective challenge, particularly in relation to key strategic decisions. It is the role of the chair to ensure that all views are heard and that the executives are not able to control the board discussion. However, board responsibility is collective and an effective board is not simply a collection of specialists. So just as the board should not delegate responsibility for major decisions to particular directors, the non-executives should not simply delegate responsibility for challenging the executives on particular issues to individuals among them who are considered specialist in the area.
Even a broadly constituted and well-experienced board cannot necessarily be expected to have expertise in every aspect of a broad and complex financial business. The point is to have the diversity of experience and capacity to provide effective challenge across the full range of the firm’s business and the opportunity to
explore key business issues rigorously. Sometimes that may require the board to understand and reach decisions on complex technical, legal, regulatory or other issues. It is the responsibility of the executives to explain such issues in clear and transparent terms that enable the board to exercise their collective judgement and, where necessary, non-executive directors should be able to call on appropriate professional advice, although the directors will always remain ultimately and collectively accountable for all the board’s decisions.
Schedule 3
Guidance on the role and responsibilities of non-executive directors of SMCR firms (extracted from COCON 1 Annex 1 as at the date of this letter)
| COCON 1 | Introduction | |
|---|---|---|
| COCON 1.1 | This annex applies to non-executive directors (NEDs) of an SMCR firm. | |
| COCON 1.2 | This annex covers the role of a NED in performing the roles in (1) to (4), below: | |
| (1) | the role of chair of the board of directors; | |
| (2) | the role of chair of the nomination committee; | |
| (3) | the role of chair of any other committee (irrespective of whether performing that role is itself a designated senior management function); | |
| (4) | the general NED role. | |
| COCON 1.3 | The FCA's view of the role of a NED is consistent with the duties of directors included in UK company law and the description of the role of a NED in the UK Corporate Governance Code. | |
| COCON 2 | The general role of a NED | |
| COCON 2.1 | The role of a NED performing the general NED role is to: | |
| (1) | provide effective oversight and challenge; and | |
| (2) | help develop proposals on strategy. | |
| COCON 2.2 | To deliver this, their responsibilities include: | |
| (1) | attending and contributing to board and committee meetings and discussions; | |
| (2) | taking part in collective board and committee decisions, including voting and providing input and challenge; and | |
| (3) | ensuring they are sufficiently and appropriately informed of the relevant matters prior to taking part in board or committee discussions and decisions. |
| COCON 2.3 | Other key roles of a NED include: | |
|---|---|---|
| (1) | scrutinising the performance of management in meeting agreed goals and objectives; | |
| (2) | monitoring the reporting of performance; | |
| (3) | satisfying themselves on the integrity of financial information; | |
| (4) | satisfying themselves that financial controls and systems of risk management are robust and defensible; | |
| (5) | scrutinising the design and implementation of the remuneration policy; | |
| (6) | providing objective views on resources, appointments and standards of conduct; and | |
| (7) | being involved in succession planning. | |
| COCON 3 | Role of a NED as chair of the board or a committee | |
| COCON 3.1 | Subject to any specific governance arrangements, rules or requirements applicable to the board or particular committees, a NED’s responsibility as chair of the board or a committee includes: | |
| (1) | ensuring that the board or committee meets with sufficient frequency; | |
| (2) | fostering an open, inclusive discussion which challenges executives, where appropriate; | |
| (3) | ensuring that the board or committee devotes sufficient time and attention to the matters within its remit; | |
| (4) | helping to ensure that the board or committee and its members have the information necessary to its and their tasks; | |
| (5) | reporting to the main board on the committee’s activities; | |
| (6) | facilitating the running of the board or committee to assist it in providing independent oversight of executive decisions; and | |
| (7) | in relation to the nomination committee, safeguarding the independence and overseeing the performance of the nomination committee. | |
| COCON 3.2 | The chair of the nomination committee should take reasonable steps to ensure that the nomination committee complies with: | |
| (1) | the requirements in SYSC 4.3A about the nomination committee (if that part of SYSC applies to the firm); and |
| (2) | any specific and relevant requirements relating to the committee or to the matters within the committee’s responsibilities. | |
|---|---|---|
| COCON 3.3 | Paragraph 3.2 of this annex is still relevant to a firm: | |
| (1) | that is not required by the FCA Handbook to have a nomination committee; or | |
| (2) | for which being the chair of such a committee is not a controlled function; | |
| if it has such a committee. | ||
| COCON 4 | General approach to the role of a NED | |
| COCON 4.1 | The FCA recognises that NEDs individually do not manage a firm’s business in the same way as executive directors. Therefore, the responsibilities for which NEDs are accountable are likely to be more limited. | |
| COCON 4.2 | A NED is neither required nor expected to assume executive responsibilities. | |
| COCON 4.3 | Although NEDs who are subject to the senior management regime for SMF managers have individual duties under that regime, the FCA views the regime and its application as consistent with the principle of collective decision-making. | |
| COCON 4.4 | The standard of care, skill and diligence that the FCA would expect from a NED is the care, skill and diligence that would be exercised by a reasonably diligent person with: | |
| (1) | the general knowledge, skill and experience that may reasonably be expected of a person carrying out the functions carried out by the NED in relation to the firm, taking into account the standards in the Handbook (especially COCON and DEPP); and | |
| (2) | the general knowledge, skill and experience that the NED has. |
Document
EXHIBIT 8.1
LLOYDS BANKING GROUP STRUCTURE
The following is list of the principal subsidiaries of Lloyds Banking Group plc at 31 December 2025.
| Name of subsidiary undertaking | Country of<br>registration/<br>incorporation | Percentage of equity share<br>capital and voting rights held | Nature of business | Registered office |
|---|---|---|---|---|
| Lloyds Bank plc | England | 100% | Banking and financial services | 25 Gresham Street, London EC2V 7HN |
| Scottish Widows Limited | England | 100% * | Life assurance | 25 Gresham Street, London EC2V 7HN |
| HBOS plc | Scotland | 100% * | Holding company | The Mound, Edinburgh EH1 1YZ |
| Bank of Scotland plc | Scotland | 100% * | Banking and financial services | The Mound, Edinburgh EH1 1YZ |
| Lloyds Bank Corporate Markets plc1 | England | 100% | Banking and financial services | 25 Gresham Street, London EC2V 7HN |
| LBG Equity Investments Limited1 | England | 100% | Financial services | 25 Gresham Street, London EC2V 7HN |
*Indirect interest
1Subsidiary that does not meet quantitative threshold for significance. Included for consistency with the consolidated financial statements.
Document
Exhibit 11.1
| DEALING POLICY FOR DIRECTORS, GEC MEMBERS AND GEC ATTENDEES |
|---|
| LLOYDS BANKING GROUP PLC<br><br>LLOYDS BANK PLC<br><br>HBOS PLC<br><br>BANK OF SCOTLAND PLC<br><br><br><br><br><br><br><br>Date approved by the Boards: 8 December 2025 – effective 8 December 2025 |
CONTENTS
| 1 WHAT ARE THE KEY TERMS USED IN THIS POLICY? | 2 |
|---|---|
| 2 DEALING AND NOTIFICATION REQUIREMENTS "AT A GLANCE" | 2 |
| 3 DOES THIS POLICY APPLY TO ME? | 3 |
| 4 WHY IS THIS POLICY IMPORTANT? | 4 |
| 5 WHAT KINDS OF DEALINGS ARE COVERED BY THIS POLICY? | 5 |
| 6 WHAT ARE MY OBLIGATIONS UNDER THIS POLICY? | 6 |
| 6.1 OBLIGATIONS IN RELATION TO GROUP SECURITIES | 6 |
| 6.2 OBLIGATIONS IN RELATION TO OTHER SECURITIES | 7 |
| 7 HOW DO I OBTAIN CLEARANCE TO DEAL? | 7 |
| 8 HOW DO I NOTIFY THE GROUP OF MY DEALINGS? | 8 |
| 8.1 PROCEDURE FOR ALL PERSONS TO WHOM THIS DEALING POLICY APPLIES | 8 |
| 8.2 ADDITIONAL OBLIGATIONS FOR PDMRS AND THEIR PCAS | 8 |
| 9 APPENDIX 1 - PERSONS CLOSELY ASSOCIATED | 9 |
| 10 APPENDIX 2 – CLEARANCE AND NOTIFICATION REQUIREMENTS IN SPECIFIC DEALING SCENARIOS | 10 |
| 10.1 CERTAIN DEALINGS ON BEHALF OF A RESTRICTED PERSON WHERE A MANAGER OR TRUSTEE HAS COMPLETE DISCRETION | 10 |
| 10.2 DEALINGS IN RELATION TO THE GROUP'S SHARE PLANS | 11 |
| 10.3 DEALINGS IN A TRUSTEE CAPACITY | 11 |
1WHAT ARE THE KEY TERMS USED IN THIS POLICY?
| Board | The board of directors of any Group Company |
|---|---|
| Closed Period | The period in respect of a Group Company during which dealing is not permitted by Restricted Persons as described in Section 6.1 |
| Deal / dealing | Any transaction in securities of any nature – see Section 5 for further details |
| GEC | Group Executive Committee of Lloyds Banking Group plc, Lloyds Bank plc, Bank of Scotland plc and/or HBOS plc |
| Group | Lloyds Banking Group plc, Lloyds Bank plc, HBOS plc and Bank of Scotland plc |
| --- | --- |
| Group Company | Each of Lloyds Banking Group plc, Lloyds Bank plc, HBOS plc and/or Bank of Scotland plc, as appropriate |
| Group Securities | Any publicly traded or quoted shares or debt instruments, and any linked derivatives or financial instruments, issued by a Group Company |
| inside information | Information that: (i) relates directly or indirectly to particular securities or to a particular issuer of securities; (ii) is of a precise nature; (iii) has not been made public; and (iv) if it were made public, would be likely to have a significant effect on the price of any securities. |
| IMS | Interim management statement |
| Other Securities | Any securities other than Group Securities |
| PAD Rules | The CCOR Control Room Personal Account Dealing Rules as amended from time to time or such other rules and/or policy which may replace them in relation to inside information and personal account dealing restrictions and obligations |
| PCA | Person closely associated as described in Appendix 1 |
| PDMR | Person discharging managerial responsibilities for the purposes of UK MAR, being all Board members and all GEC members (but not any GEC attendees) |
| Restricted Person (or you) | Any person to whom this Dealing Policy applies – see Section 3 for further details |
| securities | Any shares or debt instruments (including, but not limited to, investment funds) and any linked derivatives or financial instruments, in each case whether or not publicly traded or quoted |
| UK MAR | UK Market Abuse Regulation |
2DEALING AND NOTIFICATION REQUIREMENTS "AT A GLANCE"
| Restricted Person? | UK MAR status | Person to whom this <br>Dealing Policy applies | Dealings in Group Securities | Dealings in Other Securities | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Required to seek clearance to deal?* | Required to notify dealings?* | RNS announcement to the market required?* | Required to seek clearance to deal? | Required to notify dealings? | |||||||||||||||
| All Restricted Persons | PDMRs and their PCAs | Non-executive director | Yes – see 6.1 and 7 | Yes – see 6.1, 8.1 and 8.2 | Yes | No – see 6.2 | No – see 6.2 | ||||||||||||
| Non-executive director's PCA | Yes – see 6.1 and 7 | Yes – see 6.1, 8.1 and 8.2 | Yes | No – see 6.2 | No – see 6.2 | ||||||||||||||
| Executive director | Yes – see 6.1 and 7 | Yes – see 6.1, 8.1 and 8.2 | Yes | See the PAD Rules | |||||||||||||||
| Executive director's PCA | Yes – see 6.1 and 7 | Yes – see 6.1, 8.1 and 8.2 | Yes | See the PAD Rules | |||||||||||||||
| GEC member (excluding executive directors) | Yes – see 6.1 and 7 | Yes – see 6.1, 8.1 and 8.2 | Yes | See the PAD Rules | |||||||||||||||
| GEC member's PCA | Yes – see 6.1 and 7 | Yes – see 6.1, 8.1 and 8.2 | Yes | See the PAD Rules | |||||||||||||||
| N/A | GEC attendee | Yes – see 6.1 and 7 | Yes – see 6.1 and 8.1 | No | See the PAD Rules | ||||||||||||||
| GEC attendee's PCA | Yes – see 6.1 and 7 | Yes – see 6.1 and 8.1 | No | See the PAD Rules | |||||||||||||||
| Step 1 | Step 2 | Step 3 | Step 4 | ||||||||||||||||
| --- | --- | --- | --- | ||||||||||||||||
| Check you do not have inside information in relation to any Group Securities<br><br>Check the Group is not in a Closed Period | Seek clearance to deal in Group Securities using the method set out in Requesting Permission To Deal Procedure document provided to you separately | Following receipt of clearance to deal, deal as soon as possible and in any event within two working days. If you fail to deal within this timeline, repeat Steps 1 and 2 | Following dealing, notify your dealing using the method set out in the Requesting Permission To Deal Procedure document provided to you separately (either providing the contract note immediately or once it becomes available or providing the specified data) |
3DOES THIS POLICY APPLY TO ME?
This Dealing Policy applies to Restricted Persons, being:
•all directors on the boards of each of Lloyds Banking Group plc, Lloyds Bank plc, HBOS plc and Bank of Scotland plc;
•all members of the Group Executive Committee of each of Lloyds Banking Group plc, Lloyds Bank plc, Bank of Scotland plc and HBOS plc;
•all attendees of the Group Executive Committee of each of Lloyds Banking Group plc, Lloyds Bank plc, Bank of Scotland plc and HBOS plc; and
•all persons closely associated with any person falling within any of the categories set out above (see Appendix 1 for further detail).
This Dealing Policy does not apply to you if you are not a director, or member or attendee of the Group Executive Committee, of any of Lloyds Banking Group plc, Lloyds Bank plc, HBOS plc and Bank of Scotland plc, or a person closely associated with any of those categories of person.
It is the responsibility of Restricted Persons to be aware of their responsibilities with regard to securities dealings and to ensure they comply with this Dealing Policy.
Note that other policies, such as the PAD Rules, may apply in addition to this Dealing Policy. In the event of any inconsistency between this Dealing Policy and any other policy, this Dealing Policy shall prevail.
4WHY IS THIS POLICY IMPORTANT?
As companies with securities that are listed and admitted to trading on various stock exchanges, including the London Stock Exchange, the Group Companies and their respective directors and employees must comply with various important regulatory requirements relating to securities dealings, including under UK MAR. UK MAR includes provisions on inside information, dealing in listed securities and market abuse. It is enforced by the UK Financial Conduct Authority.
This Dealing Policy sets out the procedures that have been established to ensure that the Group Companies and their respective directors and specified employees can comply with their regulatory obligations under UK MAR. Additional processes or procedures may apply in relation to dealings in Group Securities listed on a stock exchange outside the UK. The Group Secretariat team should be consulted prior to any such dealings so that any additional requirements can be confirmed.
The intention of this Dealing Policy is to prevent anyone from dealing, or placing themselves under suspicion of dealing, in securities when in possession of inside information or ahead of the publication of periodic financial information and to make all individuals to whom this Dealing Policy applies aware of their responsibilities (in particular in relation to abiding by restrictions on dealings, seeking appropriate clearance to deal and, where required, making mandatory notifications following any dealing).
It is your responsibility to read and comply with this Dealing Policy. Breaches of the regulatory requirements relating to securities dealings may have serious consequences for the Group Companies and their Restricted Persons, including civil fines for market abuse dealings and criminal charges for any persons involved in insider dealing. Any breaches of this Dealing Policy will therefore be taken seriously and, in the case of employees subject to this Dealing Policy, may lead to disciplinary action being taken against the individual concerned.
GEC members and attendees should read this Dealing Policy alongside the PAD Rules, which apply to dealings in Other Securities by GEC members and attendees and their respective PCAs. In the event of any inconsistency between this Dealing Policy and any other policy (including the PAD Rules), this Dealing Policy shall prevail.
5WHAT KINDS OF DEALINGS ARE COVERED BY THIS POLICY?
The definition of "dealing" for the purposes of this Dealing Policy is very wide. The following is a non-exhaustive list of transactions in Group Securities which are dealings for the purpose of this policy:
•buying or agreeing to buy securities;
•selling or agreeing to sell securities (which includes selling or agreeing to sell shares to pay tax when receiving shares under one of the Group's share plans, unless you are otherwise told that clearance is not needed);
•being granted, accepting, acquiring, disposing of, exercising or discharging any option or warrant (whether for the call, or put or both) or any other transactions in or relating to any other type of derivative (including cash-settled transactions and phantom options);
•participating in, receiving securities or awards or options for securities under, altering, or leaving any of the Group's share plans;
•entering into or leaving any dividend re-investment plan;
•using any securities as security for a loan (whether by way of borrowing or lending or otherwise);
•transferring any securities to a spouse, civil partner or other family member;
•transferring securities between two accounts that are ultimately beneficially owned by the same person (including transferring to or from an ISA) or any other change in the legal holder of securities (even where the beneficial ownership remains the same);
•entering, amending or cancelling any trading plan or investment plan in respect of securities;
•giving or receiving a gift of securities (including by way of inheritance);
•giving instructions to the manager of a pension fund to invest in or sell securities (or a fund which includes securities);
•subscribing for or agreeing to subscribe for securities (including participating in any capital increase or debt instrument issuance, or agreeing to subscribe for securities by way of a share-for-share exchange or similar transaction);
•entering into or exercising equity swaps, a contract for difference, derivatives and financial instruments that are linked to debt instruments (including credit default swaps); and
•entering into certain transactions under a life insurance policy where (i) you are the policyholder, (ii) you bear the investment risk and (iii) you have the power or discretion to make investment decisions, or execute transactions, regarding specific instruments for that life insurance policy.
•Dealing covers circumstances where:
•you are dealing on your own behalf;
•you are dealing on behalf of someone else (e.g. if you are acting as an executor of an estate, or as trustee of a trust, that holds securities);
•someone else is dealing on your behalf (e.g. your broker, investment fund manager, pension fund or trustee of your family trust), including where that person exercises discretion;
•transactions that are conditional in some way (e.g. where execution depends on the occurrence or fulfilment of certain conditions); and
•there is an automatic or non-automatic conversion of one security into another (e.g. the exchange of convertible bonds for shares).
•Although "dealing" is interpreted broadly, different requirements and procedures for seeking clearance to deal and notifying any dealing may apply depending on the circumstances surrounding that dealing. See Section 6 and Appendix 2 for further details.
•If you are in doubt, you should assume that any proposed action or decision by you, or by someone on your behalf, in relation to securities may be a "dealing" and obtain guidance from the Group Secretariat team.
6WHAT ARE MY OBLIGATIONS UNDER THIS POLICY?
6.1OBLIGATIONS IN RELATION TO GROUP SECURITIES
If you wish to deal in Group Securities, you must obtain prior clearance to do so. See Section 7 for further detail on how to seek clearance to deal in Group Securities. You must not deal in considerations of a short-term nature (i.e. with a maturity of one year or less).
You should not seek, and will not be given, clearance to deal in Group Securities of a Group Company during:
•a time when you hold inside information in relation that Group Company;
•a Closed Period in relation to that Group Company (save in exceptional circumstances in accordance with applicable regulation).
The Closed Periods for each of the Group Companies are as follows:
•Year end results (applicable to Lloyds Banking Group plc): 30 calendar days immediately preceding the announcement of Lloyds Banking Group plc’s preliminary results (the “Start Date”) until 7am one clear day after the announcement of the preliminary results
•Year end results (applicable to HBOS plc, Lloyds Bank plc and Bank of Scotland plc): the Start Date until 7am one clear day after the announcement of the relevant Group Company’s annual report and accounts
•Q1 IMS (applicable to Lloyds Banking Group plc and Lloyds Bank plc only): 1 April until 7am one clear day after the announcement of the Group Company's Q1 IMS
•Half-year results: 30 calendar days immediately preceding the announcement of the Group Company's interim results until 7am one clear day after the announcement of the Group Company's interim results
•Q3 IMS (applicable to Lloyds Banking Group plc and Lloyds Bank plc only): 1 October until 7am one clear day after the announcement of the Group Company's Q3 IMS
•Following any dealing in Group Securities, you must notify the Group Secretariat team so that any required announcements and notifications can be made. See Section 8 for further detail on how to notify the Group Secretariat team of your dealings in Group Securities.
6.2OBLIGATIONS IN RELATION TO OTHER SECURITIES
If you are a GEC member or a GEC attendee, you must refer to the PAD Rules which sets out your obligations in relation to dealings by you and your PCAs in Other Securities.
If you are a non-executive director on the Board or the PCA of a non-executive director on the Board, you are not required to seek clearance to deal, or notify your dealings, in Other Securities.
Note, however, that there is a general prohibition against dealing in any company's securities at any time when you hold inside information about that company. When making a decision on whether or not to deal in Other Securities, you should be mindful of any information that has been disclosed to you (for example, to non-executive directors in the context of impairment and other credit reviews provided periodically to the Audit Committee or Board Risk Committee or in relation to contract negotiations / reviews) and if you are in any doubt, you should seek guidance on whether it is appropriate to deal in Other Securities in those circumstances from the Group Secretariat team.
7HOW DO I OBTAIN CLEARANCE TO DEAL?
If you wish to seek clearance to deal in Group Securities, you must do so using the process set out in the Requesting Permission To Deal Procedure document provided to you separately.
Note that there are a small number of dealings in Group Securities which do not require prior clearance – see Appendix 2 for further details.
Upon receipt, the request will be considered by the Control Room, the approver relevant to your role (or their alternate) and, in the case of GEC members and attendees, Reward. When considering whether to provide clearance to deal in Group Securities, consent will not be unreasonably withheld but you should note that the approver may choose to withhold consent for reputational reasons or as a result of public perception considerations.
You will generally be notified of the outcome of your request within two working days. Any clearance to deal may be provided subject to conditions, which you must comply with. A reasoned explanation for any refusal to provide clearance to deal will also be provided unless prohibited by law.
Once you receive clearance to deal in Group Securities, you must deal as soon as possible after receiving clearance and in any event within two working days of receiving clearance. If you do not deal in Group Securities within this time period, or there is new information which is or has the potential to become inside information, you must seek clearance to deal again using the process set out in the Requesting Permission To Deal Procedure document provided to you separately before dealing.
8HOW DO I NOTIFY THE GROUP OF MY DEALINGS?
8.1PROCEDURE FOR ALL PERSONS TO WHOM THIS DEALING POLICY APPLIES
Once you have dealt in Group Securities, you must notify the Group Secretariat team as soon as practicable and no later than two working days after the dealing occurred.
You should do so following the process set out in the Requesting Permission To Deal Procedure document provided to you separately.
The following information, which is usually set out on the contract note, should be included on any notification of dealings in Group Securities:
•name of the person that dealt in Group Securities;
•name of the relevant issuer (e.g. Lloyds Banking Group plc, Lloyds Bank plc);
•description of the security (e.g. ordinary shares, debt instruments);
•nature of the transaction (e.g. acquisition, disposal, exercise of options);
•price and volume of the transaction(s);
•date of the transaction(s); and
•trading venue of the transaction(s) (e.g. London Stock Exchange).
•Note that there are a small number of dealings in Group Securities which do not require notification by you to the Group Secretariat team – see Appendix 2 for further details.
8.2ADDITIONAL OBLIGATIONS FOR PDMRS AND THEIR PCAS
Under UK MAR, PDMRs (i.e. all directors and GEC members) and their PCAs are required to notify the relevant Group Company and the FCA of their dealings in Group Securities promptly and no later than three working days after the dealing occurred. Unless instructed to the contrary by the PDMR or PCA, the relevant Group Company will notify the FCA of any dealings in Group Securities by a PDMR and their PCAs using the details provided, although the PDMR or PCA (as applicable) remains legally responsible for the notification.
Under UK MAR, the relevant Group Company is also required to announce dealings in Group Securities by PDMRs and their PCAs via regulatory information service announcement within two working days of the Group Company receiving notification of the dealing from the PDMR or PCA (as applicable).
If you are a PDMR or a PCA of a PDMR, you should be aware of the additional obligations described in this Section 8.2 and should follow the procedure described in Section 8.1 and in particular must notify the Group Secretariat team no later than two working days after the dealing occurred to ensure that these obligations can be complied with.
9APPENDIX 1 - PERSONS CLOSELY ASSOCIATED
The checklists below are designed to help you identify whether a certain individual or legal person is your PCA for the purposes of this Dealing Policy. If you have any questions, you should contact the Group Secretariat team.
PCA checklist – Family Members
| Relationship | PCA |
|---|---|
| Husband/wife/civil partner | ✓ |
| Husband/wife/civil partner (separated, including legally separated, but not yet divorced) | ✓ |
| Ex-husband/wife/civil partner (after divorce finalised) | ✘ |
| Live-in partner | ✓ |
| Live-out partner | ✘ |
| Child/step-child under 18 and unmarried/no civil partner | ✓ |
| Child/step-child under 18 who is married or has a civil partner and does not live at home | ✘ |
| Child/step-child over 18 and not living at home (a child/step-child attending university away from home, and only returning home during holidays is not considered to be a PCA, but will become a PCA after returning home, and remaining there for more than 12 months) | ✘ |
| Live-in relative (e.g. elderly aunt, grandchild, adult child or married child under 18) who has shared the same address for 1 year or more | ✓ |
| Live-in non-relative (e.g. au pair, lodger) | ✘ |
| Other relatives who do not share the same address as the Restricted Person (parents, siblings, in-laws etc.) | ✘ |
PCA checklist – Corporate Interests
| Relationship | PCA |
|---|---|
| Corporate body, trust or partnership of which you or any of your PCAs discharges the managerial responsibilities (e.g. a cross-directorship, where you or your PCA is on the board of a company outside the Group and takes part in or influences the decisions of that company in relation to transactions in Group Securities – normally a non-executive directorship position on another company will not make that company a PCA) | ✓ |
| Corporate body, trust or partnership which is directly or indirectly controlled by you or any of your PCAs | ✓ |
| Corporate body, trust or partnership set up for the benefit of you or any of your PCAs | ✓ |
| Corporate body, trust or partnership the economic interests of which are substantially equivalent to those of you or any of your PCAs | ✓ |
10APPENDIX 2 – CLEARANCE AND NOTIFICATION REQUIREMENTS IN SPECIFIC DEALING SCENARIOS
As described in Section 5, "dealing" is interpreted broadly and therefore a wide range of transactions are covered by this Dealing Policy. As a general rule, you should seek clearance to deal in Group Securities as described in Section 7 and should notify the Group Secretariat team of your dealings in Group Securities as described in Section 8.
This Appendix describes a number of dealings that deviate from this general rule, where clearance to deal or notification (or both) is not required. Further guidance can be obtained from the Group Secretariat team.
10.1CERTAIN DEALINGS ON BEHALF OF A RESTRICTED PERSON WHERE A MANAGER OR TRUSTEE HAS COMPLETE DISCRETION
You are not required to seek clearance to deal, or to notify the Group Secretariat team of your dealings in Group Securities, where you (or someone on your behalf) buys or sells an investment product which is known to hold an interest not exceeding 20% in Group Securities and it is not possible for you to determine or influence the investment strategy or dealings carried out, such that the manager or trustee has complete discretion.
The manager or trustee would have complete discretion, for example, in most mutual funds, index trackers or other retail investment products (so there would be no need to apply for clearance for dealings by those funds). Before buying or selling, you should take reasonable steps to find out if the investment product includes an exposure to Group Securities.
Where you can determine or influence the investment strategy or dealings carried out by someone else on your behalf, or the exposure to Group Securities exceeds 20%, you should seek clearance to deal and notify the Group Secretariat team of your dealings in the usual way.
10.2DEALINGS IN RELATION TO THE GROUP'S SHARE PLANS
Actions that do not require clearance or notification
The following specific actions in relation to the Group's share plans do not require you to seek clearance and do not require you to notify the Group Secretariat team of your dealings:
•you being granted an option or award under one of the Group's share plans (but, as set out below, you do have to seek clearance to accept an invitation to participate in the Group's Sharesave Scheme or to join a Group share plan or to leave a Group share plan e.g. Sharesave or Sharematch);
•you receiving a normal quarterly allocation of Group Securities as a Fixed Share Award;
•where you already participate in the Group's Sharematch offering, you receiving a normal monthly allocation of partnership and/or matching shares;
•you being notified of the vesting of an award under any of the Group's share plans; and
•you receiving Group Securities (or cash payment) in settlement of vesting (but, as set out below, you do have to seek clearance for any election that you make in connection with vesting of any award unless you are specifically told otherwise at the time); and
•any other instance where you are specifically informed by a formal share plan communication or the Group Secretariat team that clearance to deal and notification of your dealings are not required.
Actions that require clearance and notification to Group Secretariat
You should seek clearance and notify the Group Secretariat team of your dealings in relation to any other action under any of the Group's share plans unless you are specifically told otherwise in the formal share plan communication at the time. Without limitation, this includes:
•you joining or leaving any of the Group's share plans;
•you stopping, starting or changing contributions under the Group's Sharematch plan (i.e. Partnership and Matching Shares);
•you opting out of receiving a Colleague Group Ownership Share award;
•you making an application to participate in the Group's Sharesave Scheme, or you withdrawing from the scheme or changing or cancelling your monthly savings contract;
•you exercising any option or award under the Group's share plans;
•you making any election in relation to the vesting of an award or option (such as electing to sell Group Securities or cash out an award to pay tax); and
•you transferring Group Securities out of a Group share plan to your own share account, into an ISA, or to any other person.
10.3DEALINGS IN A TRUSTEE CAPACITY
If you act as the trustee of a trust, you should speak to the Group Secretariat team about your obligations in respect of any dealings in Group Securities carried out by the trustees of that trust.
| 11 |
|---|
Document
EXHIBIT 12.1
CERTIFICATIONS REQUIRED UNDER SECTION 302 OF THE SARBANES-OXLEY ACT
I, Charlie Nunn, certify that:
1.I have reviewed this annual report on Form 20-F of Lloyds Banking Group plc (the “Company”);
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and we have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
5.The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarise and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
| /s/ Charlie Nunn |
|---|
| Charlie Nunn, Group Chief Executive |
| Date: 13 February 2026 |
Document
EXHIBIT 12.2
CERTIFICATIONS REQUIRED UNDER SECTION 302 OF THE SARBANES-OXLEY ACT
I, William Chalmers, certify that:
1.I have reviewed this annual report on Form 20-F of Lloyds Banking Group plc (the “Company”);
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and we have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
5.The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarise and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
| /s/ William Chalmers |
|---|
| William Chalmers, Chief Financial Officer |
| Date: 13 February 2026 |
Document
EXHIBIT 13.1
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(SUBSECTIONS (a) AND (b) OF SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE)
This certification set forth below is being submitted in connection with the Annual Report on Form 20-F for the year ended 31 December 2025 (the “Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.
Charlie Nunn, the Group Chief Executive, and William Chalmers, the Chief Financial Officer, of Lloyds Banking Group plc, each certifies that, to the best of his knowledge:
1.the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and
2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Lloyds Banking Group plc.
| 13 February 2026 |
|---|
| /s/ Charlie Nunn |
| Charlie Nunn |
| Group Chief Executive |
| /s/ William Chalmers |
| William Chalmers |
| Chief Financial Officer |
Document
EXHIBIT 15.3
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement No. 333-287829 on Form F-3 of our reports dated 13 February 2026, relating to the financial statements of Lloyds Banking Group plc and the effectiveness of Lloyds Banking Group plc’s internal control over financial reporting appearing in this Annual Report on Form 20-F for the year ended 31 December 2025.
/s/ Deloitte LLP
London, United Kingdom
13 February 2026
lyg-20251231
Helping
Britain
Prosper
Lloyds Banking Group plc
Annual Report and Accounts 2025
We’re delivering
sustainable profit
and returns
With a clear strategic plan...
| Grow | Focus | Change |
|---|---|---|
| Drive revenue<br><br>growth and<br><br>diversification | Strengthen<br><br>cost and capital<br><br>efficiency | Maximise<br><br>the potential of<br><br>people, technology<br><br>and data |
...reinforcing competitive advantage...
| Market leader | Cost and capital leader | Digital and AI leader |
|---|---|---|
| #1 in key markets,<br><br>enhancing growth<br><br>as an integrated<br><br>financial services<br><br>provider. | Efficient scale model,<br><br>building operating<br><br>leverage. De-risked<br><br>and optimised<br><br>balance sheet. | Largest UK digital<br><br>bank, leading across<br><br>emerging technologies,<br><br>reinforcing revenue<br><br>and cost opportunity. |
...delivering strong shareholder outcomes...
| Strengthening<br><br>income | Growing<br><br>balance sheet | Stronger,<br><br>sustainable returns | Increasing shareholder<br><br>distributions | ||
|---|---|---|---|---|---|
| 7%<br><br>Year-on-year net<br><br>income growth | 5%<br><br>Year-on-year loan growth | 12.9%<br><br>Return on tangible equity | £3.9bn<br><br>Dividend and share buyback | ...and well positioned for 2026 and beyond. | |
| --- |
Lloyds Banking Group plc Annual Report and Accounts 2025
01
In this report
Our purpose of Helping Britain Prosper
has long guided how we support
customers to invest, grow and thrive.
Strategic report
01 to 34
| Chair’s statement | 02 |
|---|---|
| Group Chief Executive’s review | 03 |
| Our business model | 06 |
| Our external environment | 10 |
| Our strategy | 14 |
| Our key performance indicators | 18 |
| Our colleagues | 22 |
| Risk overview | 24 |
| Section 172(1) statement | 30 |
| Task Force on Climate-related Financial<br><br>Disclosures (TCFD) | 32 |
| Non-financial and sustainability<br><br>information statement | 33 |
| Viability statement and going concern | 34 |
Sustainability review
36 to 49
| Sustainability review introduction | 36 |
|---|---|
| Our value chain | 38 |
| Sustainability risks and opportunities | 39 |
| Supporting the transition to net zero | 42 |
Financial results
51 to 64
| Results for the full year | 51 |
|---|---|
| Divisional results | 61 |
Governance
66 to 136
| Directors’ report | 66 |
|---|---|
| Committee reports | 85 |
| Directors’ remuneration report | 98 |
| Other statutory and regulatory information | 134 |
Risk management
138 to 197
| The Group’s approach to risk | 138 |
|---|---|
| Risk governance structure | 140 |
| Stress testing | 142 |
| Full analysis of principal risk categories | 144 |
Financial statements
199 to 304
| Independent auditors’ report | 199 |
|---|---|
| Consolidated financial statements | 211 |
| Parent company financial statements | 297 |
Other information
306 to 324
| Shareholder information | 306 |
|---|---|
| Alternative performance measures | 308 |
| Subsidiaries and related undertakings | 313 |
| Forward-looking statements | 324 |
The 2025 annual report and accounts
incorporates the strategic report, the
directors’ report and the consolidated
financial statements, all of which have
been approved by the Board of directors.
On behalf of the Board
| Sir Robin Budenberg<br><br>Chair, Lloyds Banking Group plc<br><br>13 February 2026 |
|---|
Register here to go<br><br>paperless for 2026 <br> |
||
|---|---|---|
| --- | Our reporting<br><br>Our reporting suite helps us communicate clearly with a<br><br>wide range of stakeholders. The annual report and accounts<br><br>outlines our strategic direction, financial and operational<br><br>performance, and environmental and social impact. It<br><br>includes forward-looking statements on the Group’s future<br><br>financial position, results and objectives. We use alternative<br><br>performance measures to complement statutory results,<br><br>with strategic report commentary on an underlying basis<br><br>unless stated. Additional disclosures, including our<br><br>sustainability report, are available online. | |
| --- | See our full reporting<br><br>suite including our<br><br>sustainability report<br><br>on the Investors page <br> <br><br>of our website. |
|
| --- |
Lloyds Banking Group plc Annual Report and Accounts 2025
02
Chair’s statement
Driving growth through
purpose and innovation
Sir Robin
Budenberg
Chair
| Read full biography <br> |
|---|
Delivering on our purpose-driven strategy
Reflecting on 2025, it has been another year of significant progress
for the Group, delivering for customers, colleagues, communities
and shareholders. We have continued to invest and transform the
business, delivering strong progress against our strategic objectives
and further enhancing the customer proposition and our platform
for growth.
At the heart of our transformation is digital innovation, bringing
together transformative technologies and skilled people to
meet customer needs effectively. We are a digital and AI leader
with distinct competitive advantages and have taken action to
enhance our infrastructure and capabilities to create a platform for
innovation and business growth. This is enabling us to deliver leading
and innovative customer propositions and experiences across
the Group and we are now extending this to new and emerging
technologies such as digital assets. These steps will open up new
opportunities for our customers and maintain our commercial
leadership. Read more on pages 14 to 17.
At the same time, we are delivering on our purpose of Helping
Britain Prosper and creating a more sustainable and inclusive
future for people and businesses across the UK whilst accessing
new commercial growth opportunities. Embedding a positive,
values based performance culture remains important. The Board
places great emphasis on shaping and fostering this culture and,
throughout 2025, engaged with colleagues better to understand
their experiences. These insights informed Board discussions and
decision making, ensuring that we continue to build the culture
of the organisation. Read more on page 79.
The UK economy proved resilient to a volatile and uncertain global
economic and political environment in 2025, with growth similar to
its recent long-term trend rate. Regulatory developments have been
constructive from a prudential perspective where we now have
more clarity on capital requirements. We have taken an additional
provision of £800 million for Motor Finance as a result of our
assessment of the impact of the FCA's proposed redress scheme
and we await further clarity on the final rules. We welcome the
FCA's broader strategic focus on growth and simplifying regulation.
Generating value for shareholders
I was pleased to see our market value strengthen considerably
during the course of 2025, with the share price up more than 79%.
I believe this improvement reflects the Group’s strategic progress,
consistent financial performance and the growing confidence
in our ability to deliver higher, more sustainable returns.
Following the financial progress made during the year, the Board
has recommended a final ordinary dividend of 2.43 pence per
share, bringing the total proposed ordinary dividend for 2025
to 3.65 pence per share, an increase of 15% compared with the
prior year. In addition, on 30 January 2026 the Group announced
the launch of a share buyback programme to repurchase up to
£1.75 billion of ordinary shares.
| Shareholder returns | |
|---|---|
| 3.65p<br><br>total ordinary dividend<br><br>per share, up 15% | £3.9bn<br><br>returned to<br><br>shareholders for 2025 |
Directors
We regularly review the Board’s composition and diversity to ensure
we maintain the right balance of skills, experience and perspectives
at the highest level. In June 2025, Chris Vogelzang was appointed
as a non-executive director and joined the Responsible Business
Committee. Scott Wheway stepped down from the Board in
October 2025. For more insight into our Board structure and
changes, refer to page 68.
Remuneration
As we advance our strategy, attracting and retaining talent across the
business remains essential. The Board’s Remuneration Committee
carefully determines all awards, ensuring that they align with market
conditions, regulatory developments, Group performance and
shareholder expectations. The Group intends to implement a new
remuneration policy in 2026, designed to incentivise the leadership
team to deliver continued strategic and financial progress and guide
the Group into its next strategic cycle. The policy places greater
emphasis on sustainable high performance and shareholder value
creation. More information on our approach to remuneration can
be found on page 98.
Summary
I’m proud of what Lloyds Banking Group continues to deliver for
customers, colleagues and shareholders and of how we’re doing it.
Through long-term investment in our business and communities,
we’re driving sustainable growth and building resilience. I’d specifically
like to thank our colleagues for their continued dedication and focus
on meeting the evolving needs of our customers.
| Sir Robin Budenberg<br><br>Chair |
|---|
Lloyds Banking Group plc Annual Report and Accounts 2025
03
Group Chief Executive’s review
Purpose-driven strategy
delivering enhanced results
Charlie Nunn
Group Chief
Executive
| Read full biography <br> |
|---|
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.
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.
Lloyds Banking Group plc Annual Report and Accounts 2025
04
Group Chief Executive’s review continued
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
- 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 points1
•To pay down to a CET1 ratio of c.13.0%
1Excludes capital distributions.
| Charlie Nunn<br><br>Group Chief Executive |
|---|
 |
Purpose in action | ||
|---|---|---|---|
| Empowering customers<br><br>for digital success<br><br>The Consumer Digital Index is a comprehensive study<br><br>of digital and financial lives. As the nation’s largest<br><br>digital bank, we use our unique data and expertise<br><br>to deliver powerful insights through this report.<br><br>Our 2025 findings reveal a major shift, with more than<br><br>28 million adults now using AI tools to manage their<br><br>money, from everyday budgeting and savings goals to<br><br>financial education. Further information can be found<br><br>on page 33 of our sustainability report .<br><br><br>We’re committed to ensuring everyone has the tools,<br><br>confidence and access to thrive in a digital-first economy.<br><br>Through Lloyds Bank Academy, c.428,000 individuals have<br><br>benefitted from our digital and financial skills programmes<br><br>in 2025, empowering our customers with knowledge<br><br>and building a more resilient, inclusive financial future. |
Read our 2025<br><br>UK Consumer<br><br>Digital Index <br> |
||
| --- |
Lloyds Banking Group plc Annual Report and Accounts 2025
05
| Customers | Colleagues | Communities |
|---|---|---|
| c.28m<br><br>customers with<br><br>23.6 million<br><br>digitally active | >60,000<br><br>colleagues who take<br><br>pride in working for<br><br>an inclusive and<br><br>diverse Group | >325 yearsof supporting individuals and communities throughout the UK |
| We’re Helping Britain Prosper<br><br>whilst successfully delivering<br><br>for all stakeholders in 2025 | ||
| £17bn<br><br>of lending to first time<br><br>buyers, supporting<br><br>greater access to<br><br>home ownership | 40.4%<br><br>of our executive<br><br>senior roles were<br><br>held by women | 1bncommitment to finance opportunities aligned to our Regional Impact Fund |
| £35bn<br><br>committed in new<br><br>finance to support<br><br>companies investing<br><br>and operating in<br><br>the UK during 2026 | >30,000<br><br>customer facing<br><br>colleagues actively<br><br>using AI to enhance<br><br>customer experiences | c.36mdonated to our Charitable Foundations, and more than 800 million donated over the last 40 years |
| £9.1bn<br><br>interest paid to<br><br>customers, of which<br><br>around £8.2 billion was<br><br>paid to savers | c.£31m<br><br>invested in upskilling and<br><br>training our colleagues<br><br>for the future | 2.8bncash taxes paid, one of the UK's largest corporate taxpayers |
| £5.4bn<br><br>paid in salaries,<br><br>investing in talent and<br><br>driving performance | 4.4bnpaid to suppliers and regulatory bodies, supporting our ability to serve customers effectively | |
| See our key performance indicators on pages 18 to 21 |
All values are in British Pounds.
Lloyds Banking Group plc Annual Report and Accounts 2025
06
Our business model
What we do
Our business model
is focused on Helping
Britain Prosper in
a way that delivers
sustainable profit
and returns
Our competitive
advantages
Leading UK customer franchise
with deep customer insight
c.28 million customers with unequalled
reach across the UK. Extensive customer
data and analysis ensures we can anticipate
and meet the needs of these customers
more effectively.
All-channel distribution
with digital leadership
and trusted brands
Operating through a range of brands
and distribution channels, including
the UK’s largest digital bank.
Unique customer proposition
Serving all our customers’ banking,
investment and insurance needs
through a comprehensive product range.
Innovation through modern
and transformative technology
Continued investment in our technology
platform, apps and change function enables
us to innovate in order to anticipate
and meet customers’ needs.
Operating at scale
with cost discipline
Our scale and efficiency enable us
to operate and invest more effectively.
Focused and capital
generative business model
Allowing significant investment
while generating attractive returns
for shareholders.
Our vision
To be the UK customer-
focused digital leader and
integrated financial services
provider, capitalising on new
opportunities, at scale.
Our purpose
Helping Britain Prosper.
We do this by creating a more
sustainable and inclusive
future for people and
businesses, shaping finance
as a force for good.
Financial strength and
robust risk management
Strong capital position. Robust approach
to risk, as reflected in the quality of
our portfolio and underwriting criteria.
Dedicated colleagues
with strong values
Highly engaged, skilled, customer
focused, diverse workforce with
significant expertise and experience.
| See how our purpose is driving performance on page 14 to 17 |
|---|
Lloyds Banking Group plc Annual Report and Accounts 2025
07
| Our structure | ||
|---|---|---|
| We have three core divisions that have been structured<br><br>to serve our customers’ needs effectively. | ||
| Retail | ||
| --- | ||
| Consumer relationships<br><br>Current accounts<br><br>Savings accounts<br><br>Mass affluent proposition<br><br>UK private bank | ||
| Consumer lending<br><br>Mortgages<br><br>Credit cards<br><br>Personal loans<br><br>Motor finance | ||
| Read more on page 61 | Insurance,<br><br>Pensions and<br><br>Investments | |
| --- | ||
| Insurance<br><br>Home, Motor, Health, Pet<br><br>Protection | ||
| Pensions and retirement<br><br>Workplace pensions<br><br>Direct to customer pensions<br><br>Retirement | ||
| Investments<br><br>Ready-Made Investments<br><br>Share dealing | ||
| Read more on page 63 | Commercial<br><br>Banking | |
| --- | ||
| Business and<br><br>commercial banking<br><br>Business loans<br><br>Transactional banking<br><br>Working capital<br><br>Merchant services | ||
| Corporate and<br><br>institutional banking<br><br>Lending and debt capital markets<br><br>Cash liquidity<br><br>Risk management | ||
| Read more on page 62 | ||
| In addition, Equity Investments and Central Items includes the Group’s direct investments businesses. Read more on page 64 | ||
| --- | Our trusted brands | |
| --- | ||
| With over 325 years’ heritage across our family of brands, we serve and support<br><br>the evolving needs of our customers and clients across the UK. |
| Our values | ||||||
|---|---|---|---|---|---|---|
| These values are at the heart of everything we do – guiding our decisions,<br><br>shaping our culture, and driving our purpose of Helping Britain Prosper. | People-first<br><br>We listen and<br><br>care for people<br><br>as individuals. | Bold<br><br>We innovate and<br><br>do things differently<br><br>to better serve our<br><br>customers and grow<br><br>with purpose. | Inclusive<br><br>We learn about<br><br>and embrace our<br><br>differences, and<br><br>seek out diverse<br><br>perspectives. | Sustainable<br><br>We take responsibility<br><br>for the impact of our<br><br>actions on nature and<br><br>Britain’s transition to<br><br>net zero. | Trust<br><br>We give each other<br><br>the space and support<br><br>to take things on and<br><br>see them through. | |
| --- | --- | --- | --- | --- |
Lloyds Banking Group plc Annual Report and Accounts 2025
08
Our business model continued
How we do it
| We deliver for<br><br>our customers by<br><br>focusing on their needs,<br><br>continually innovating<br><br>the products and services<br><br>we offer, developing and<br><br>investing in new solutions,<br><br>and using our expertise<br><br>and influence to create<br><br>positive change. | |
|---|---|
| Innovation, development<br><br>and influence | |
| Driving innovation through effective<br><br>use of customer feedback, data and<br><br>technology ensures we remain relevant<br><br>to the customer whilst enhancing industry<br><br>standards. Our commitment to digital<br><br>transformation is critical for future growth<br><br>and sustainability. | |
| Products, services<br><br>and solutions | |
| Offering a comprehensive range of financial<br><br>products and services, increasingly through<br><br>digital channels. We tailor these offerings<br><br>to meet individual and business needs,<br><br>ensuring customers can access the right<br><br>financial solutions. | |
| How we serve our customers | Successful business<br><br>performance |
| Delivering sustainable profit and growth<br><br>based on financial strength ensures we can<br><br>invest for the future, both in the business<br><br>and customer propositions, whilst returning<br><br>capital to our owners. | |
| Funding, investment<br><br>and expertise | |
| Ongoing investment in the business<br><br>ensures we can meet the evolving needs<br><br>of our customers in a commercial way.<br><br>Our significant funding helps people<br><br>and businesses invest and grow whilst<br><br>our expertise and tailored solutions<br><br>help clients navigate financial challenges,<br><br>fostering success and sustainable returns. |
Lloyds Banking Group plc Annual Report and Accounts 2025
09
| Sustainable and inclusive growth | ||
|---|---|---|
| Customers<br><br>We provide financial services<br><br>to over half of the UK adult<br><br>population and more than<br><br>one million businesses.<br><br>By meeting our customers’<br><br>needs we’re unlocking<br><br>sustainable growth. | Colleagues<br><br>We are committed to building<br><br>an inclusive and sustainable<br><br>organisation that is truly<br><br>representative of our customers.<br><br>We recognise that colleagues<br><br>who can be their authentic selves<br><br>at work are central to our success. | Communities<br><br>Our success is intrinsically linked<br><br>with the success of all regions<br><br>across the whole of the UK.<br><br>When local people, local businesses<br><br>and their communities prosper,<br><br>so do we. |
| c.£14bn<br><br>of sustainable finance provided<br><br>for Commercial Banking<br><br>customers in 2025<br><br>£7.5bn<br><br>of new tax-free savings supported<br><br>through ISA propositions in 2025 | 19.0%<br><br>of our senior roles were<br><br>held by colleagues with<br><br>disabilities in 2025<br><br>17.5%<br><br>of our executive roles held by<br><br>Black, Asian or Minority Ethnic<br><br>colleagues in 2025 | £3.2bn<br><br>of new finance supported<br><br>in the social housing sector<br><br>in 2025<br><br>>£1.8m<br><br>raised by our colleagues and<br><br>customers to support Crisis<br><br>and Simon Community in 2025 |
| Sustainable profit and returns | ||
| Shareholders<br><br>Our strategic progress, coupled<br><br>with our financial results and<br><br>continued investment, reinforces<br><br>our confidence in achieving our<br><br>2026 guidance.<br><br>The Group’s sustained strength in<br><br>financial performance has delivered<br><br>strong capital generation, enabling<br><br>an increased dividend and a share<br><br>buyback of up to £1.75 billion. | 3.65p<br><br>total proposed ordinary dividend<br><br>per share for 2025, up 15%<br><br>£3.9bn<br><br>returned to shareholders<br><br>for 2025 |
Lloyds Banking Group plc Annual Report and Accounts 2025
10
Our external environment
External
context,
opportunities
and risks
We’ve adapted our business and
strategy in response to the fast
pace of change in our external
environment and to address
ever-evolving stakeholder
needs. This helps ensure
the Group can capitalise
on opportunities and manage
risks as they emerge, and is
resilient over the longer term.
| Economy |
|---|
| Overview<br><br>The UK economy proved resilient to global challenges in 2025.<br><br>Although elevated inflation and pay growth resulted in slower<br><br>interest rate cuts than in the US and Eurozone, real-wages<br><br>grew and households’ spending growth rose. Lower inflation in<br><br>2026 is expected to allow further interest rate cuts to support<br><br>the economy while the government continues to address its<br><br>deficit. Low private sector indebtedness and high household<br><br>savings provide resilience and capacity for improving growth. |
| Link to strategy |
Market context
•The UK economy is estimated to have grown by 1.4% in 2025,
proving resilient to rising taxes, uncertainty from the shift in the
global trade environment as the US introduced significant import
tariffs, and to continued conflict in Ukraine and the Middle East
•The economy has not settled back to pre-pandemic norms,
however. Inflation remained elevated above its 2% target,
increasing from 2.5% in 2024 to 3.4% in 2025, partly a result of
government policy impacts – a large rise in water bills, VAT on
private school fees, Vehicle Excise Duty changes, a 6.7% rise in
the National Living Wage and an increase in employer National
Insurance. Consequently, households’ high inflation expectations
kept pay growth strong through much of the year
•As a result, the Bank of England reduced interest rates only
slowly. Bank Rate was cut by 100 basis points through 2025 to
end the year at 3.75%, 150 basis points lower than its 2023 to
2024 peak – a smaller reduction than the 175 basis points in the
US and 200 basis points in the Eurozone. The unemployment rate
rose by 0.7 percentage points in the year to November, to 5.1%
•With this backdrop, UK households raised their spending growth,
but cautiously, saving a high proportion of disposable income.
House prices rose by less than 1%, reflecting affordability
of mortgage payments being still more of a constraint than
pre-pandemic
•Nevertheless, growth in 2025 in the markets we operate in
returned to rates similar to, or better than, pre-pandemic.
Both households’ and corporates’ leverage had fallen to low
levels, creating space for a pick-up in borrowing. Mortgages and
household deposits benefitted from the high level of housing
transactions early in the year in advance of the stamp-duty
increase in April. The drag on SMEs’ borrowing balances from
pay-down of government-guaranteed COVID-scheme lending
is now abating
Lloyds Banking Group plc Annual Report and Accounts 2025
11
Our response
•In a world of heightened economic uncertainty, our purpose of
Helping Britain Prosper is ever more important. Our strategy and
business model position us well in both constructive and more
challenging economic environments
•Our strategy is focused on faster growing, high potential sectors
such as housing, pensions, investments, and infrastructure.
We are already driving growth in these areas, leveraging our
competitive advantage as the UK’s only integrated financial
services provider. As a result, we expect the Group to continue
to grow faster than the wider economy over the coming years
•Our transformation allied to our strong customer franchise
captures opportunity by effectively meeting evolving
customer needs and demands, diversifying income streams,
and also with efficiency. Our large scale and strong balance
sheet, with a prudent approach to risk, provides both access
to growth opportunities and resilience at times of challenging
economic conditions
2026 outlook
•We forecast GDP growth of 1.2% in 2026, a little below 2025’s
estimated 1.4%. Although the government will continue to shrink
its budget deficit via rising taxes, the resulting drag on the
economy is expected to be offset by lower rates and reduced
policy uncertainty, allowing the economy to grow closer to its
‘potential’ or ‘trend’ rate through the year
•Some uncertainties are expected to reduce now that the scale
and impact of US tariffs has become clearer, notwithstanding
likely readjustment in response to legal challenges
•More importantly, interest rates are switching from being a drag
on the economy to a marginal support, as many customers
refinancing mortgages will begin to obtain lower rates than
their existing deals. Mortgage rates fell in late 2025 as markets
priced earlier Bank Rate cuts, in response to Budget measures
subtracting c.50 basis points from mid-2026 inflation forecasts
•The reduced near-term inflation outlook should lessen concern
of a self-perpetuating cycle between elevated inflation and
elevated pay growth that some members of the Bank of
England’s Monetary Policy Committee had cited as a key reason
for reticence to cut rates more swiftly through 2025. We expect
CPI inflation to decline to 2.6% in 2026 from 3.4% in 2025, and
assume two further Bank Rate cuts to 3.25% by the third quarter
of 2026
•Growth closer to the economy’s ‘potential’ or ‘trend’ rate
through 2026 should mean that unemployment drifts up only
a little further from its level of 5.1% at November 2025
•However, we expect the lagged impact of rising unemployment
to mean that pay growth falls by more than the reduction in
inflation during 2026
•Households are therefore likely to maintain a cautious approach
towards spending. Alongside, we expect house prices to rise by
only 2%, close to the average of the past three years, lacking the
benefit from elevated housing transactions early in 2025
•Growth in the markets we operate in is expected to slow slightly
in comparison to 2025, for these reasons
| Customers |
|---|
| Overview<br><br>Most customers continue to prefer digital engagement<br><br>channels which offer convenient and personalised financial<br><br>solutions with frictionless journeys, to proactively manage their<br><br>finances. AI is accelerating this shift by enabling customers<br><br>to rapidly evaluate the market and seek advice on the best<br><br>products to meet their needs. Alongside, financial health across<br><br>most households and businesses is strengthening, supported<br><br>by improving confidence and falling rates. |
| Link to strategy |
Market context
•Reducing rates have increased consumer confidence and
improved the outlook for mortgage holders, as the majority
of the market is currently financed on higher rates
•With one in three customers now using AI weekly to manage
their finances (UK Consumer Digital Index 2025, based on survey
of 5,000 customers, results may not be representative of all
customers), expectations for seamless and personalised digital
journeys continue to grow
•Customers are seeking to access financial solutions at their point
of need, supported by growth in embedded finance
•Corporates and SMEs are confident about future prospects
for their businesses, despite wider economic uncertainty
Our response
•Redesigned app with improved onboarding and servicing
journeys, empowering customers to achieve financial goals
•Integration of AI into servicing journeys, such as underwriting
for SME CRE lending, driving better and faster decisioning
•Branch co-servicing enabling Halifax, Bank of Scotland or Lloyds
customers to use any of our branches to manage their accounts
•Enhancements across our product suite, including launch of
Lloyds Premier, meeting more needs for Mass Affluent customers
•Improved mobile PCA onboarding journey. Launch of mobile
Business Banking loans journey
2026 outlook
•Launch of AI financial assistant bringing personalised,
round-the-clock financial guidance to mobile app customers
•Integration of digital wallet capabilities following our proposed
acquisition of the fintech Curve to provide greater payment
flexibility and access to advanced digital wallet features
•Scale digital journeys across Business Banking with extended digital
onboarding and origination and greater personalisation capacity
| UK economic growth<br><br>% GDP growth | 1.4% | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 1.1 | 1.4 | |||||||||
| 8.5 | 5.1 | 0.3 | ||||||||
| 2021 | 2022 | 2023 | 2024 | 2025 | Digitally active users<br><br>m | 23.6m | ||||
| --- | --- | --- | --- | --- | ||||||
| 18.3 | 19.8 | 21.5 | 22.7 | 23.6 | ||||||
| 2021 | 2022 | 2023 | 2024 | 2025 |
Lloyds Banking Group plc Annual Report and Accounts 2025
12
Our external environment continued
| Competitors |
|---|
| Overview<br><br>Competition remains intense with high street banks and<br><br>building societies maintaining their focus on share growth,<br><br>and building scale by consolidating smaller players. Alongside,<br><br>neobanks and fintechs continue to gain momentum by<br><br>leveraging their strong digital experiences and broadening their<br><br>customer offering across Retail and Commercial segments. |
| Link to strategy |
Market context
•Ongoing new business margin pressure across deposit and
mortgage markets, driven by intense competition
•Continued disruption to the single-provider banking model, with
digital onboarding and engagement channels making it easier for
customers to manage relationships across multiple providers
•New, smaller entrants reshaping financial services through tightly
targeted propositions supported by strong digital experiences
•Opportunity for providers with breadth of offering and
personalised journeys to deepen their customer relationships
Our response
•Market-leading direct and intermediary journeys reaching
customers in their preferred channel
•Relevant and differentiated cross-Group propositions meeting
a wider set of financial needs
•Tailored solutions designed to simplify complex financial
decisions, offer expert guidance, and provide exclusive rewards
•Empowered customers financially with up-to-date credit report
insights enabling over 500,000 customers to improve their credit
score each quarter
•Focus on high value areas, including our Home ecosystem which
is increasing engagement and helping retain customer balances
•Successful pilot of embedded finance offering through
BlackHorse Flexpay with growth in merchant sign-ups in 2025
2026 outlook
•Enhance access to relevant and tailored propositions across
customer life stages, leveraging our proposition breadth
•Integrate Schroders Personal Wealth, to be rebranded as Lloyds
Wealth, combining expert face to face advice with powerful
digital tools to deepen our relationships in high value segments
•Leverage technology and data to deliver more compelling,
personalised digital propositions to support customer goals
| Technology<br><br>and data |
|---|
| Overview<br><br>Rapidly evolving technology landscape, accelerated<br><br>by developments in artificial intelligence and digital<br><br>transformation. These shifts are enabling new engagement<br><br>models, innovative propositions and greater cost efficiency.<br><br>Gen AI is enhancing customer interactions through more<br><br>personalised engagement, with digital asset innovation<br><br>creating opportunities for greater customer control<br><br>and faster, more efficient transactions. |
| Link to strategy |
Market context
•Digital banking with AI-powered functionality continues to lower
cost to serve, whilst increasing innovation and speed to market,
driving accelerated customer adoption and greater competition
•Incumbents are moving to modern and efficient platforms, which
unlock richer personalisation and proposition development
capabilities, enabling accelerated revenue growth through more
targeted and differentiated offerings
•Sophistication of cyber threats requires banks to continually
enhance security measures to protect customers
Our response
•Launched the UK’s first in-app financial assistant
•Agile Platform operating model, increasing efficiency and speed
of change by combining our business and technology teams
•Increasing our technology hires, including the launch of Lloyds
Technology centre to bring talent in-house
•Continued enhancement of legacy infrastructure with more than
20% reduction in technology applications and c.50% reduction in
data centres since 2021
•Extending our capabilities in new and emerging technologies
through investment in Gen AI and digital assets, with 50 live Gen
AI use cases in 2025 generating c.£50 million incremental value
•UK first digital assets use-case with Aberdeen Investments
and Archax, using tokenised units as collateral for FX trades
2026 outlook
•Actively scaling Gen AI deployment, targeting over £100 million
in incremental P&L benefit in 2026 as we build seamless digital
journeys and personalised customer interactions
•Building capability to be at the forefront of agentic AI,
bridging the advice gap through in-app agents
•Position as the UK leader in digital assets, developing GB
Tokenised Deposits pilot use cases to build value add in
customer journeys
| Mortgage market share<br><br>total gross lending – flow | 18.9% | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 18.5 | 17.2 | 16.9 | 19.9 | 18.9 | ||||||
| 2021 | 2022 | 2023 | 2024 | 2025 | IT applications on cloud<br><br>% | >50% | ||||
| --- | --- | --- | --- | --- | ||||||
| 1 | 2 | 7 | c.50 | >50 | ||||||
| 2021 | 2022 | 2023 | 2024 | 2025 |
Lloyds Banking Group plc Annual Report and Accounts 2025
13
| Society and<br><br>environment |
|---|
| Overview<br><br>Evolving environmental and societal issues, along with new<br><br>regulations, require companies to clearly understand the<br><br>related risks and opportunities. This includes recognising<br><br>the role the Group can play through its products and<br><br>services in helping customers and their communities<br><br>respond to these developments. |
| Link to strategy |
Market context
•Organisations must have a clear understanding of environmental
and sustainability issues and integrate them in their strategies
and decision making, understanding their impacts,
dependencies, risks and opportunities
•Organisations need to respond to the evolving regulatory
and geopolitical landscape including evolving stakeholder
expectations, uncertainty and the acceleration of sustainability-
related financial risks and opportunities
Our response
•Since 2022, the Bank has financed £70.9 billion of sustainable
lending, with £21.9 billion of sustainable finance supported
in 2025
•Scottish Widows have achieved discretionary investments
of £81.3 billion in climate-aware strategies, with the
increase primarily driven by the launch of Scottish Widows
Lifetime Investment
•Issuance of the first sterling corporate blue bond by a UK
corporate for Thames Tideway
•Delivered £340 million of lending against our £500 million
financing commitment with the National Wealth Fund
•Empowered over 7,000 customers through our Ready-Made
Pensions since launch
•Over £800 million donated to our four charitable
Foundations across the UK since 1985
2026 outlook
•Integration of sustainability approach into the next stage of
our Group strategy, identifying risks and opportunities
•Continue to evolve our sustainable finance framework and
related financing activities and propositions, remaining aligned to
our sustainability pillars, whilst shaping finance as a force for good
•Enhance our disclosures through the use of data, to support
meeting evolving regulatory expectations
| Regulation |
|---|
| Overview<br><br>The regulatory landscape continues to evolve rapidly<br><br>to support growth of the UK economy and innovation.<br><br>The Government’s Leeds Reforms, announced in July 2025,<br><br>contained a number of proposals seeking to position the UK<br><br>as the number one destination for financial services companies<br><br>by 2035. The proposals announced by the Government and<br><br>regulators span a range of areas directly relevant to the Group. |
| Link to strategy |
Market context
•The Economic Secretary is reviewing the ring-fencing regime
to support growth and stability, while the Financial Policy
Committee has reviewed bank capital requirements
•The FCA will introduce a new regulated activity, ‘targeted support’
in spring 2026. It will complement existing advice by letting firms
offer tailored suggestions to customer groups, aiming to broaden
access and help consumers manage their finances
•The Government, FCA and Financial Ombudsman Service consulted
on reforms to modernise the UK’s redress system. In 2025, the FOS
introduced a case fee for professional representatives and announced
plans to change the interest rate on compensation awards
•The Government is reforming the Consumer Credit Act to create
a simpler, more agile regime that allows firms to deliver innovative
new products and services, and good consumer outcomes
•The Government has published the Strategy for Future Retail
Payments Infrastructure, and is progressing plans to abolish
the Payment Systems Regulator and consolidate its functions
primarily within the FCA
•The UK is rapidly developing a regulatory regime for digital assets;
crypto, stablecoins and tokenised assets, set for implementation
by late 2026
•The FCA launched a consultation process on a scheme
for motor finance compensation
Our response
•We will continue to engage constructively with the authorities on
the wide range of regulatory reforms currently being progressed
to ensure that tangible changes are delivered which will promote
better outcomes for consumers and the wider economy
•We’re monitoring developments and contributing to consultations
to support innovation while ensuring market integrity and stability
•We responded to the FCA’s consultation on a proposed motor
finance compensation scheme emphasising that a strong and
stable motor finance market is critical to ensuring that customers
have access to competitive finance to support their needs
| Sustainable lending (active targets)<br><br>and climate-aware investments | | --- || Timeline of key regulatory changes | | --- || l | Progress | | | Target | | --- | --- | --- | --- || Early<br><br>2026 | HM Treasury’s ring-fencing review, conducted with the Bank of<br><br>England and reporting into the Economic Secretary to the Treasury | | --- | --- | | Spring<br><br>2026 | Expected FCA Enhanced Accountability Rules | | Q2<br><br>2026 | Ongoing consultation on ring-fencing rules | | Q1<br><br>2027 | Basel 3.1 implementation |
| Commercial Banking | | --- || Mortgages | | --- |
| 2024/<br><br>2025 | £24.5bn | | --- | --- || 2025 | £5.3bn | | --- | --- || £30bn by 2026 | | --- || £11bn by 2027 | | --- || Motor | | --- || Scottish Widows | | --- |
| 2025 | £2.8bn | | --- | --- || £81.3bn invested in<br><br>climate-aware strategies | | --- || £10bn by 2027 | | --- || For further details on our sustainable finance progress see page 45. | | --- |
Lloyds Banking Group plc Annual Report and Accounts 2025
14
Our strategy
| Our purpose-driven strategy is focused on<br><br>supporting the needs of our customers, colleagues and<br><br>communities, whilst delivering long-term, sustainable<br><br>returns and thereby creating value for our shareholders. | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Our strategic priorities | |||||||||
 |
Grow<br><br>Growth is a core focus of our<br><br>strategy. Around two-thirds<br><br>of our c.£3 billion strategic<br><br>investment over 2022 to<br><br>2025 was aligned to growing<br><br>and diversifying revenue.<br><br>There are four primary pillars<br><br>for growth.<br><br>Read more on page 16 | Focus<br><br>We are investing to grow<br><br>and diversify our revenue,<br><br>alongside maintaining<br><br>our disciplined approach<br><br>to efficient cost and capital<br><br>management.<br><br>Read more on page 17 | Change<br><br>Delivering our strategy<br><br>requires the Group to<br><br>accelerate the intensity<br><br>with which we use digital<br><br>technologies and data to<br><br>support customers. Our<br><br>colleagues’ expertise and<br><br>skills are instrumental<br><br>to our success.<br><br>Read more on page 17 | Our purpose pillars | |||||
| --- | --- | --- | --- | --- | |||||
| Our strategy is driven by our purpose, with each of the five pillars<br><br>below woven into our core strategic priorities and helping deliver shareholder value. | |||||||||
| Access to quality<br><br>and affordable<br><br>housing<br><br>To help all UK<br><br>households regardless<br><br>of income or tenure | Empowering a<br><br>prosperous future<br><br>For our customers<br><br>and businesses | Supporting regional<br><br>development and<br><br>communities<br><br>As our success is<br><br>intrinsically linked<br><br>with their success | Building an<br><br>inclusive<br><br>organisation<br><br>To better support<br><br>our customers<br><br>and communities | Supporting the<br><br>UK transition<br><br>By providing<br><br>financial solutions<br><br>and building resilience |
Read more on page 36
| Increased confidence in delivering our<br><br>2026 strategic commitments | |||
|---|---|---|---|
| c.£2bn<br><br>additional revenues<br><br>from strategic<br><br>initiatives | <50%<br><br>cost:income ratio | >16%<br><br>RoTE | >200bps<br><br>capital generation |
Lloyds Banking Group plc Annual Report and Accounts 2025
15
| Supporting<br><br>first time buyers<br><br>As the UK’s largest mortgage lender we support<br><br>first time buyers to get on the housing ladder,<br><br>providing £17 billion of funding in 2025 to them.<br><br>Our ‘First Time Buyer Boost’ proposition<br><br>launched in August 2024, is helping more<br><br>customers by enhancing the amount they can<br><br>safely borrow by up to 22%. In 2025 we have<br><br>made available £5 billion of lending through this<br><br>proposition, helping 14,000 first time buyers<br><br>borrow more than 4.5 times their income.<br><br>In addition, our ‘Your Credit Score’ tool helped<br><br>over 500,000 customers improve their credit<br><br>score every quarter during 2025. We are<br><br>equipping our customers with the tools to<br><br>improve their financial wellbeing while gaining<br><br>insights to generate sustainable growth. | £17bn<br><br>of funding to first time buyers | |
|---|---|---|
| --- | Financing the transition<br><br>in the North West<br><br>In 2025 we acted as Mandated Lead Arranger in the provision of a<br><br>£154 million debt commitment as part of a wider £2.5 billion financing<br><br>package to support the HyNet CO₂ Transport and Storage Project in<br><br>the North West of England and North Wales.<br><br>Eni’s Liverpool Bay Carbon Capture and Storage project is the<br><br>backbone of HyNet which will be critical in reducing emissions from<br><br>essential but hard-to-abate sectors such as energy-from-waste,<br><br>cement manufacturing, and low-carbon hydrogen production. Once<br><br>operational, HyNet will play a significant role in the UK government’s<br><br>net zero strategy.<br><br>The project also expects to create over 2,000 jobs during its initial<br><br>construction phase and thousands more through wider investment<br><br>across the North West, demonstrating how finance can drive<br><br>commercial growth and supporting regional development,<br><br>aligned to our purpose of Helping Britain Prosper. | |
| --- | Deepening our commitment<br><br>to social housing<br><br>We’ve supported over £22 billion of financing for social housing<br><br>since 2018 – including £3.2 billion this year alone.<br><br>In 2025, the Group announced a £100 million loan agreement<br><br>to fund the sustainable retrofit of thousands of social homes<br><br>across the South, West and East of England, with Sovereign<br><br>Network Group (SNG), one of the UK’s leading housing<br><br>associations. This lending formed part of our £500 million<br><br>commitment to finance the retrofit of social housing in the UK.<br><br>Social housing continues to be a source of lending growth<br><br>for the Group.<br><br>£100m<br><br>loan agreement to fund sustainable<br><br>retrofit of social homes with SNG | |
| --- |
| Helping more people<br><br>plan for the future<br><br>The UK has the largest pension market in Europe,<br><br>worth over £2 trillion, however our latest Scottish<br><br>Widows retirement report shows that 39% of<br><br>people will fail to meet basic living standards in<br><br>retirement, notably those who are self-employed<br><br>and younger workers.<br><br>In 2024 we launched our Ready-Made Pension<br><br>offering to help customers manage their pension<br><br>savings and plan for retirement, with this offering<br><br>now available to those who are not an existing<br><br>customer through our Scottish Widows website.<br><br>At the end of 2025 we now have over 7,000<br><br>accounts opened, with 27% of our customers aged<br><br>35 and under and approximately 41% self-employed.<br><br>We are committed to designing products that<br><br>directly address our customers’ needs and bridge<br><br>gaps in the market, ensuring we play a vital role<br><br>in supporting the prosperity and resilience of<br><br>communities across the UK while growing our<br><br>assets under management. | ||
|---|---|---|
| --- | Read more in our Women<br><br>and Retirement Report <br> |
|
| --- |
Lloyds Banking Group plc Annual Report and Accounts 2025
16
Our strategy continued
| 2025 progress | 2026 priorities | 2026 outcomes | ||||||
|---|---|---|---|---|---|---|---|---|
| Deepen and<br><br>innovate in<br><br>Consumer | •Completed a full redesign of the<br><br>app experience across Lloyds,<br><br>Bank of Scotland and Halifax<br><br>with improved onboarding<br><br>and servicing<br><br>•Expanded lending through<br><br>our new Ultra and Advance<br><br>credit cards and tailored<br><br>mortgage propositions for<br><br>limited companies<br><br>•Announced third-party<br><br>Motor and Health insurance<br><br>partnerships with Axa<br><br>and Vitality | •Continue to build personalised,<br><br>seamless experiences across<br><br>all channels, driving customer<br><br>value and simplifying<br><br>interactions<br><br>•Broaden and innovate across<br><br>our product range to meet<br><br>evolving customer needs and<br><br>the competitive challenge<br><br>•Accelerate our mobile-first<br><br>approach while reimagining<br><br>physical spaces to enhance<br><br>efficiency and deepen<br><br>engagement | 3%<br><br>further increase in-depth of<br><br>relationship (versus 2024)<br><br>c.50%<br><br>increase in active customers<br><br>served per distribution FTE<br><br>(versus 2021) | Create a new<br><br>Mass Affluent<br><br>offering | •Strengthened and grew<br><br>relationships with Mass Affluent<br><br>customers through Lloyds<br><br>Premier, supporting customers<br><br>who have a c.2 times greater<br><br>depth of relationship with<br><br>exclusive benefits, offers and<br><br>optimised digital experiences<br><br>•Strong uptake across our<br><br>Direct-to-Consumer investment<br><br>products with 84,000 accounts<br><br>opened to-date | •Continue to enhance our<br><br>Mass Affluent proposition, with<br><br>improved digital experiences,<br><br>supporting customers to achieve<br><br>their financial goals<br><br>•Integration of Schroders<br><br>Personal Wealth, offering full<br><br>advice propositions to Mass<br><br>Affluent customers across<br><br>Lloyds, Halifax, Bank of<br><br>Scotland and Scottish Widows | >10%<br><br>increase in Mass Affluent<br><br>total relationship balances,<br><br>including assets under<br><br>administration | |
| --- | --- | --- | --- | Digitise and<br><br>diversify our<br><br>BCB business | •Strong progress towards<br><br>becoming a digital-first<br><br>relationship bank, with over<br><br>50% of products originated and<br><br>fulfilled digitally, and over 50%<br><br>of key servicing interactions<br><br>digitised, achieving our 2026<br><br>target a year early<br><br>•Diversified our business, shifting<br><br>sector mix and enhancing<br><br>propositions across Merchant<br><br>Services, Cards, Trade and FX<br><br>to meet more client needs | •Deliver more personalised<br><br>and engaging digital solutions<br><br>through automating lending<br><br>decisions, expanding our<br><br>multi-currency capabilities,<br><br>and introducing tailored nudges<br><br>to support client goals<br><br>•Provide greater client flexibility<br><br>with enhanced data ingestion<br><br>capabilities and connecting the<br><br>Group to over 70 accounting<br><br>software packages | Maintain<br><br>small business deposit<br><br>market share<br><br>>50%<br><br>of key servicing<br><br>interactions digitised | |
| --- | --- | --- | --- | Develop our<br><br>Corporate and<br><br>Institutional<br><br>business (CIB) | •Awarded a landmark cash<br><br>management and payments<br><br>contract with the government<br><br>to serve over 30 central<br><br>departments and public<br><br>sector bodies<br><br>•Delivered c.21% year-on-year<br><br>growth in foreign exchange<br><br>volumes<br><br>•Launched a market-leading<br><br>foreign exchange algorithmic<br><br>proposition | •Position ourselves as a broader<br><br>CIB partner, providing an<br><br>integrated Cash-Debt-Risk<br><br>offering to meet all client needs<br><br>•Disciplined expansion across<br><br>key client markets in the US<br><br>and Europe<br><br>•Connect CIB clients to wider<br><br>Group propositions to unlock<br><br>greater value | c.45%<br><br>increase in CIB other<br><br>operating income<br><br>(versus 2021)<br><br>>5.25%<br><br>income / average<br><br>risk-weighted assets | |
| --- | --- | --- | --- |
Lloyds Banking Group plc Annual Report and Accounts 2025
17
| 2025 progress | 2026 priorities | 2026 outcomes | ||||||
|---|---|---|---|---|---|---|---|---|
| Strengthen<br><br>cost and<br><br>capital<br><br>efficiency | •Disciplined cost management<br><br>with a further c.£700 million<br><br>gross cost savings delivered in<br><br>2025, contributing towards<br><br>a total gross cost saving of<br><br>£1.9 billion since 2021<br><br>•Investment in digital journeys<br><br>continued to lower our cost<br><br>to serve with a c.45% increase<br><br>in customers served per<br><br>distribution FTE compared<br><br>to 2021<br><br>•Strong balance sheet<br><br>management with risk-weighted<br><br>assets optimisation of £24 billion<br><br>since 2021, including over<br><br>£5 billion in 2025<br><br>•Maintained strong capital<br><br>generation of 147 basis points<br><br>in 2025 | •Continued commitment to<br><br>enhance productivity and<br><br>cost saves through strategic<br><br>investment in simplification<br><br>and digitisation, driving an<br><br>improved cost:income ratio<br><br>of less than 50% in 2026<br><br>•Ongoing focus on growth<br><br>of capital-lite revenue and<br><br>other operating income from<br><br>strategic initiatives<br><br>•Maintain focus on risk-weighted<br><br>asset optimisation supported<br><br>by value-add securitisation<br><br>opportunities | <50%<br><br>cost:income ratio<br><br>>200bps<br><br>capital generation | 2025 progress | 2026 priorities | 2026 outcomes | ||
| --- | --- | --- | --- | |||||
| Maximise<br><br>the potential<br><br>of people,<br><br>technology<br><br>and data | People<br><br>•c.9,000 technology and data<br><br>hires since 2021, supporting our<br><br>growth and change delivery<br><br>•Deployed Gen AI colleague tools<br><br>at scale with over 30,000<br><br>Copilot licences distributed<br><br>•Modernised our property estate,<br><br>supporting improved ways<br><br>of working | •Support strategic delivery by<br><br>increasing the number of new<br><br>hires in key skill areas<br><br>•Continue to scale enterprise<br><br>Gen AI support tools to enhance<br><br>productivity of our colleagues<br><br>•Ongoing commitments to<br><br>building a more inclusive<br><br>organisation | Maintain<br><br>strong employee<br><br>engagement index<br><br>(versus 2024) | |||||
| Technology and data<br><br>•Continued mobile app and<br><br>digital journey investment,<br><br>enabling more than 95% of<br><br>Retail sales via digital channels<br><br>•Greater change efficiency;<br><br>c.30% gross reduction in run and<br><br>change tech costs since 2021<br><br>•Developed Gen AI foundations | •Continue to accelerate legacy<br><br>app decommissioning and<br><br>cloud migration<br><br>•Actively scale Gen AI in use<br><br>cases to support customers<br><br>and colleagues, including the<br><br>deployment of the UK’s first<br><br>large-scale, multi-feature<br><br>agentic AI powered<br><br>financial assistant | >30%<br><br>applications on<br><br>modern technology<br><br>35%<br><br>gross reduction in run and<br><br>change technology costs<br><br>(versus 2021) |
Lloyds Banking Group plc Annual Report and Accounts 2025
18
Our key performance indicators
| Strategic progress and sustained<br><br>strength in financial performance |
|---|
| Financial |
Our key performance indicators
highlight our progress in relation to
the Group’s most important priorities.
These encompass a range of measures designed to assess both
financial and non-financial performance, ensuring a balanced
consideration of the interests of all stakeholders.
The majority of these key performance indicators also inform
remuneration across the Group to ensure that our colleagues
are rewarded for delivering for both customers and shareholders.
This alignment considers the Group’s financial performance as well
as specific conduct and risk management controls.
This year we have refined our financial key performance indicators
to ensure they more clearly reflect progress against our strategic
priorities and our approach to creating long‑term shareholder
value. The former ordinary dividend chart has been replaced
with a broader shareholder distributions measure, which captures
both ordinary dividends and share buybacks, providing a more
comprehensive view of total capital returned to shareholders.
In addition, we have introduced capital generation, recognising its
importance as a key outcome of our strategy and a fundamental
driver of our ability to maintain sustainable distributions.
During 2025, the Group continued to perform well, demonstrating
strategic progress and sustained strength in financial performance.
Strong capital generation was delivered by income growth, cost
discipline and strong credit performance in 2025, despite the
impact of the additional motor finance charge in the third quarter.
Our strategic progress combined with this financial performance
gives us confidence in our 2026 guidance.
| Key performance indicators that are directly linked<br><br>to our remuneration are marked with this symbol.<br><br>More information can be found within our directors’<br><br>remuneration report from page 98. | ||
|---|---|---|
| We use a number of alternative performance measures in<br><br>the description of our business performance and financial<br><br>position. These measures are labelled with this symbol.<br><br>See page 308 for our alternative performance measures. | 1Expectation based on the Group’s current macroeconomic assumptions.<br><br>2Reported on a pro forma basis, reflecting declared share buybacks and any<br><br>dividends received from the Insurance business in the subsequent quarter prior to<br><br>the publication of the financial results. Excludes phased unwind of IFRS 9 relief.<br><br>3Capital generation excludes capital distributions and variable pension<br><br>contributions but includes dividends received from the Insurance business in the<br><br>subsequent quarter prior to the publication of the financial results.<br><br>4Excludes a decrease of 230 basis points related to regulatory changes that came<br><br>into effect on 1 January 2022.<br><br>5Excludes a decrease of 21 basis points related to the acquisition of Tusker. | |
| --- |
Statutory profit<br><br>after tax<br><br>£m<br><br> |
|---|
| 4,757 |
| 5,885 | 3,923 | 5,518 | 4,477 | 4,757 | |||
|---|---|---|---|---|---|---|---|
| 2021 | 2022 | 2023 | 2024 | 2025 | Link to strategy<br><br><br><br> |
Statutory profit after tax of £4,757 million is<br><br>6% higher than 2024 with higher total income<br><br>partially offset by higher operating expenses,<br><br>a higher impairment charge and a higher tax<br><br>expense. 2025 was impacted by a charge<br><br>relating to motor finance commission<br><br>arrangements of £800 million. Excluding the<br><br>motor finance charge, statutory profit after tax<br><br>was £5,428 million (2024: £5,035 million). | |
| --- | --- | Net income<br><br>£m<br><br> |
|||||
| --- | |||||||
| 18,301 |
| 15,763 | 17,465 | 17,932 | 17,117 | 18,301 | ||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2022 | 2023 | 2024 | 2025 | Link to strategy<br><br><br><br> |
Net income of £18,301 million is 7% higher<br><br>than 2024, with higher underlying net interest<br><br>income, in line with guidance, and higher<br><br>underlying other income, partially offset<br><br>by increased operating lease depreciation. | ||
| --- | --- | Return on<br><br>tangible equity<br><br>%<br><br><br><br> |
||||||
| --- | ||||||||
| 12.9 |
| 13.8 | 9.8 | 15.8 | 12.3 | 12.9 | |||
|---|---|---|---|---|---|---|---|
| 2021 | 2022 | 2023 | 2024 | 2025 | Link to strategy<br><br><br><br> |
Return on tangible equity of 12.9%. Excluding<br><br>the charge for motor finance commission<br><br>arrangements, return on tangible equity was<br><br>14.8%, above guidance. This reflects the Group’s<br><br>sustained strength in financial performance.<br><br>2026 guidance1: Return on tangible equity<br><br>of greater than 16%. | |
| --- | --- |
Lloyds Banking Group plc Annual Report and Accounts 2025
19
| Operating costs<br><br>£m<br><br><br><br> |
|---|
| 9,761 |
| 8,312 | 8,672 | 9,140 | 9,442 | 9,761 | |||
|---|---|---|---|---|---|---|---|
| 2021 | 2022 | 2023 | 2024 | 2025 | Link to strategy<br><br><br><br> |
Operating costs of £9,761 million rose 3% versus<br><br>2024, reflecting strategic investment, business<br><br>growth and inflationary pressures, partially<br><br>offset by cost savings from investment and<br><br>continued cost discipline. Delivery was in line<br><br>with guidance excluding the full acquisition of<br><br>Schroders Personal Wealth.<br><br>2026 guidance1: Cost:income ratio of less than<br><br>50% (including operating costs of less than<br><br>£9.9 billion). | |
| --- | --- | Common equity<br><br>tier 1 ratio (CET1)<br><br>%<br><br><br><br> |
|||||
| --- | |||||||
| 13.2 |
| 16.3 | 14.1 | 13.7 | 13.5 | 13.2 | |||
|---|---|---|---|---|---|---|---|
| 20212 | 20222 | 20232 | 20242 | 20252 | Link to strategy<br><br> |
The pro forma CET1 ratio remains strong<br><br>at 13.2%, after an increased recommended<br><br>ordinary dividend and the announced share<br><br>buyback of up to £1.75 billion.<br><br>2026 guidance1: Expect to pay down to a CET1<br><br>ratio of c.13.0% by end of 2026. | |
| --- | --- | Total shareholder<br><br>return<br><br>%<br><br> |
|||||
| --- | |||||||
| 87.9 |
| 35 | 0 | 10.9 | 21.2 | 87.9 | |||
|---|---|---|---|---|---|---|---|
| 2021 | 2022 | 2023 | 2024 | 2025 | Link to strategy<br><br><br><br><br><br> |
Total in-year shareholder return was 87.9%.<br><br>The share price was 79.3% higher than one<br><br>year earlier, with the remaining return being<br><br>attributed to the ordinary dividend. | |
| --- | --- | Underlying profit<br><br>£m<br><br> |
|||||
| --- | |||||||
| 6,777 |
| 7,536 | 7,028 | 7,809 | 6,343 | 6,777 | |||
|---|---|---|---|---|---|---|---|
| 2021 | 2022 | 2023 | 2024 | 2025 | Link to strategy<br><br><br><br> |
Underlying profit of £6,777 million in 2025<br><br>was 7% higher than in 2024 due to higher net<br><br>income partially offset by higher operating costs<br><br>and a higher underlying impairment charge.<br><br>Excluding the motor finance charge, underlying<br><br>profit was £7,577 million (2024: £7,043 million). | |
| --- | --- | Capital generation3<br><br>bps<br><br> |
|||||
| --- | |||||||
| 147 |
| 210 | 245 | 173 | 148 | 147 | |||
|---|---|---|---|---|---|---|---|
| 2021 | 20224 | 20235 | 2024 | 2025 | Link to strategy<br><br><br><br> |
The Group delivered strong capital generation<br><br>of 147 basis points in 2025, in line with updated<br><br>guidance (178 basis points excluding the motor<br><br>finance provision).<br><br>2026 guidance1: Capital generation of greater<br><br>than 200 basis points. | |
| --- | --- |
| Shareholder<br><br>distributions<br><br>£bn<br><br> |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 3.9 | 2021 | 20224 | 20235 | 2024 | 2025 | |||||
| --- | --- | --- | --- | --- | 0.5 | 0.6 | 0.6 | 0.7 | 0.7 | |
| --- | --- | --- | --- | --- | ||||||
| Link to strategy<br><br><br><br> |
l | l | Final dividend | l | Buyback | |||||
| --- | --- | --- | --- | --- | --- | |||||
| For 2025, total distributions amounted to 3.9 billion. This includes a total recommended ordinary dividend of 3.65 pence per share, up 15% versus last year and reflecting our progressive and sustainable ordinary dividend policy; this covers both interim and final dividends. The Group has also announced a share buyback of up to 1.75 billion. |
All values are in British Pounds.
Lloyds Banking Group plc Annual Report and Accounts 2025
20
Our key performance indicators continued
| Non-financial |
| --- || Customer |
| --- || Digitally active users<br><br>m<br><br> |
| --- |
| 23.6 |
| 18.3 | 19.8 | 21.5 | 22.7 | 23.6 | |||
|---|---|---|---|---|---|---|---|
| 2021 | 2022 | 2023 | 2024 | 2025 | Link to strategy<br><br><br><br> |
The Group operates the largest digital bank<br><br>in the UK and reflecting the pace of digital<br><br>adoption, the number of active digital users<br><br>increased in the year to 23.6 million, up 4%<br><br>year-on-year. Within this we had c.21.5 million<br><br>app users, which represents a 6% increase from<br><br>last year. | |
| --- | --- | Customer satisfaction<br><br>Relationship net<br><br>promoter score<br><br> |
|||||
| --- | |||||||
| 16.1 |
| 17.2 | 19.7 | 16.1 | |||||
|---|---|---|---|---|---|---|---|
| 20211 | 20221 | 2023 | 2024 | 2025 | Link to strategy<br><br><br><br> |
In 2025, we transitioned from an all-channel net<br><br>promoter score to a relationship net promoter<br><br>score, which measures the customer likelihood<br><br>of recommending us based on their overall<br><br>experience. We believe the year-on-year decline<br><br>is largely driven by changes to the mobile<br><br>banking app, with customers telling us that<br><br>there is more we can do to improve journeys<br><br>and experience. Actions are in place to support<br><br>improvement in 2026. | |
| --- | --- | Customer complaints<br><br>FCA reportable<br><br>complaints per<br><br>1,000 accounts<br><br> |
|||||
| --- | |||||||
| 4.84 |
| 2.60 | 2.57 | 3.33 | 5.10 | 4.84 | |||
|---|---|---|---|---|---|---|---|
| H1 2023 | H2 2023 | H1 2024 | H2 2024 | H1 2025 | Link to strategy<br><br> |
We remain committed to delivering the highest<br><br>level of service to our customers, with our<br><br>colleagues working diligently to understand<br><br>and address the concerns raised. Despite<br><br>the ongoing impact of Motor commission<br><br>complaints, overall volumes fell from the second<br><br>half of 2024. Data for the second half of 2025 is<br><br>not available at time of publishing. | |
| --- | --- | Group customer<br><br>dashboard (GCD)<br><br>(November YTD)<br><br>Pts – 2024 to 2025<br><br>% – 2021 to 2023<br><br> |
|||||
| --- | |||||||
| 65 |
| 79 | 80 | 86 | 83 | 65 | |||
|---|---|---|---|---|---|---|---|
| 2021 | 2022 | 2023 | 20242 | 20252 | Link to strategy<br><br><br><br> |
In 2025, the Group customer dashboard (GCD)<br><br>score declined to 65. This was down year-on-<br><br>year, in part due to a decline in our net promoter<br><br>score and elevated customer complaints, as<br><br>outlined on this page. While we improved or<br><br>maintained performance on 64% of our GCD<br><br>measures, we continue to strive to achieve more<br><br>of our customer ambitions in 2026. | |
| --- | --- | Climate | |||||
| --- | Operational carbon<br><br>emissions<br><br>tCO2e<br><br> |
||||||
| --- | |||||||
| 103,148 |
| 112,067 | 117,671 | 122,616 | 123,449 | 103,148 | |||
|---|---|---|---|---|---|---|---|
| 20/21 | 21/22 | 22/233 | 23/243 | 24/254 | Link to strategy<br><br> |
In 2024/25, our market-based carbon emissions<br><br>that form part of the balanced scorecard<br><br>were amended to exclude international travel.<br><br>Compared to previously reported numbers<br><br>there has been a 42% decrease since baseline<br><br>year 2018/19 when market-based carbon<br><br>emissions were 176,993 tCO2e and 16% decrease<br><br>since 2023/24. Restating prior year<br><br>comparatives to exclude international travel<br><br>gives a reduction of 39% from baseline year and<br><br>10% from 2023/24. With the decrease from the<br><br>prior period mainly driven by a reduction in<br><br>domestic employee commuting. Further details<br><br>of our market-based overall emissions including<br><br>international travel can be found in the<br><br>sustainability metrics datasheet .<br> |
|
| --- | --- |
Lloyds Banking Group plc Annual Report and Accounts 2025
21
| Colleague | |||
|---|---|---|---|
| --- | |||
| 75 | Link to strategy<br><br> |
Our annual colleague survey, MyVoice, achieved<br><br>a record participation rate of 85%5, indicating<br><br>positive colleague sentiment. The employee<br><br>engagement index of 75% improved by<br><br>4 percentage points. This increase was driven by<br><br>career development opportunities, a supportive<br><br>and inclusive culture and reward, putting us in a<br><br>strong position to continue our transformation. | |
| --- | --- |
| 72 | 78 | 66 | 71 | 75 |
|---|---|---|---|---|
| 20213 | 2022 | 2023 | 2024 | 2025 |
Inclusion
| Link to strategy<br><br> |
|---|
In 2025 we launched a suite of inclusion ambitions which include one gender and two UK ethnicity ambitions for our executive
colleagues. We believe that setting ambitions for our leadership team is important to provide role modelling and inspiration for
our colleagues and ensures more inclusive and better strategic decision making. The focus will continue to 2030. Read more on
pages 22 to 23. To understand the Group’s approach on inclusion, please see our sustainability report .
| Gender balance in executive roles6<br><br>%<br><br> |
40.4 |
|---|
45% to 55%
| 2025 | 40.4% | | --- | --- || l | Progress | | --- | --- | | | | 2030 ambition range || Black heritage colleagues in executive roles6<br><br>% | 4.3 | | --- | --- |
3.5% to 4%
| 2025 | 4.3% |
| --- | --- || l | Progress |
| --- | --- |
| | | 2030 ambition range || Black, Asian and Minority Ethnic<br><br>colleagues in executive roles6<br><br>%<br><br> | 17.5 |
| --- | --- |
19% to 22%
| 2025 | 17.5% | | --- | --- || l | Progress | | --- | --- | | | | 2030 ambition range || Disability representation<br><br>in senior roles by 20257<br><br>% | 19.0 | | --- | --- |
12%
| 2025 | 19.0% | | --- | --- || l | Progress | | --- | --- | | | | 2025 ambition || Key performance indicators that are directly linked<br><br>to our remuneration are marked with this symbol.<br><br>More information can be found within our directors’<br><br>remuneration report from page 98. | | --- | | We use a number of alternative performance measures in<br><br>the description of our business performance and financial<br><br>position. These measures are labelled with this symbol.<br><br>See page 308 for our alternative performance measures. |
| 1Data for 2021 and 2022 is not available and has been excluded from the chart.<br><br>2Change in measurement approach from 2024, so comparison of 2024-2025 to prior<br><br>years is not like-for-like.<br><br>3Restated data to improve the accuracy of reporting, using actual data to replace<br><br>estimates and updates to historical emissions.<br><br>4Excludes international travel.<br><br>5Our annual survey (MyVoice) is sent to both UK and international colleagues.<br><br>6Executive roles include Grade X colleagues only. For gender, it includes UK and<br><br>international based colleagues, excluding US and subject to local laws and<br><br>regulations. For ethnicity it includes UK based colleagues only.<br><br>7Senior manager roles include grades F, G and X. |
|---|
Lloyds Banking Group plc Annual Report and Accounts 2025
22
Our colleagues
Being inclusive allows us to be the best business
for colleagues and customers
Our colleague engagement
In 2025, we extended how we listen to colleagues to create a more
regular and complete picture of sentiment across the year.
We ran six surveys at key points during the year and reintroduced
our joiners and leavers survey, giving us a continuous view across the
colleague lifecycle – from onboarding through to exit. With more
than 64,000 colleagues working across the Group, this cadence
ensures we hear from a broad cross‑section of roles, locations and
tenure, and can take timely action where it matters most.
MyVoice, our annual colleague survey, achieved a record 85%
completion rate, delivering the widest view of sentiment so far.
Colleagues also shared over 200,000 comments, providing a rich,
nuanced evidence base to understand what is working well and
where we can strengthen our approach. Results this year show
robust improvements across themes, including our employee
engagement index (up four percentage points to 75%) and
employee net promoter score (up 15 points to +23). Taken together,
these outcomes indicate we are in a strong position to continue to
progress our transformation.
During the year the Group communicated directly with colleagues
detailing Group performance, changes in the economic and financial
environment, and updates on key strategic initiatives. Meetings
were held throughout the year between the Group and our
recognised unions. Please see page 77 for further examples of how
the Board engages with the Group’s workforce and why the Board
considers those arrangements to be effective.
For 2025, the Remuneration Committee approved Group
Performance Share awards for colleagues, and colleagues are
eligible to participate in HMRC-approved share plans which
promote share ownership by giving employees an opportunity to
invest in Group shares. The vast majority of our colleagues hold
shares in the Group.
Our 2025 inclusion performance
We aspire to be the UK’s leading business for inclusion by
supporting our customers, colleagues and communities. In 2025,
we strengthened our commitment by laying strong foundations that
will enable long-term progress. We placed inclusion at the centre of
how we work, embedding it into our purpose, performance and
culture. This meant integrating inclusive governance principles into
organisational design, pay and recruitment processes to support
fair, transparent and consistent decision making.
Our progress was further supported by our inclusion plans which
we have developed with our Group Executive Allies and our
employee networks.
Social mobility
We remain committed to removing barriers and providing
opportunities for people from all socio-economic backgrounds
to reach their potential.
According to MyVoice, 65% of UK colleagues have shared their
socio-economic background with us. Notably, 22% of colleagues
overall and 21% of our senior colleagues come from low socio-
economic backgrounds, which compares favourably against other
organisations as per the Progress Together annual benchmarking.
We’re proud to be named finalists in four categories at the 2025 UK
Social Mobility Awards, and one of our senior leaders was a finalist
of the Champion of the Year. In 2025, we supported young people
in education from primary to further and higher education. Our
Youth outreach helped over 100,000 young people across all
education levels (including school, college and university students).
They were supported with developing essential skills and
experiences to realise their potential.
Outreach extended to five UK regions, inclusive of regions where
opportunities for social mobility are significantly lower relative to
the UK as a whole.
Gender
We are dedicated to advancing gender equality by strengthening
the talent pipeline and driving balanced representation.
In 2025 we set a new ambition to reach and maintain a gender
balance of between 45 to 55% in executive roles by the end of
- Setting this ambition for our leadership team is important
in providing role modelling and inspiration for our colleagues and
ensures more inclusive strategic decision making. At the end of
2025, the number of women in executive level roles (X+) stands
at 40.4%, putting us on track to meet our 2030 ambitions.
Our award winning Elevate Programme, which develops leadership
capability among women across tech, data and security, continues
to grow, with over 100 women participating in 2025.
Our disclosures in relation to board diversity as required under the
UK Listing Rule UKLR6.6.6(9) are on page 136.
Ethnicity
We are committed to building an inclusive society and creating an
organisation that reflects the community we serve.
Building representation of colleagues of Black, Asian and Minority
Ethnic heritages, to reflect the society of which we are a part,
remains challenging, but we are focused on it and continue to make
progress. We have moved to range ambitions of 3.5 to 4% for
Black heritage and 19 to 22% for Black, Asian and Minority Ethnic
colleagues in executive roles1. These new 2030 UK ethnicity
ambitions reflect UK census data, the evolving diversity of society
and industry benchmarks.
We continue to exceed the Parker Review recommendation of
having at least one Black, Asian or Minority Ethnic Board member.
Guided by our Race Action Plan since 2020, we remain focused on
driving cultural change, improving recruitment and progression, and
unlocking potential for Black heritage communities across the UK.
Disability and neurodiversity
We aspire to be a best-in-class leader in disability and neuro-
inclusion. Last year, we publicly launched our Blueprint for disability
and neuro-inclusion, sharing our commitments.
Alongside our ambition, we’ve committed to making recruitment
more inclusive, supporting career development, improving
accessibility in workspaces and technology, upskilling colleagues to
reduce stigma, and championing the disability community beyond
our organisation. In 2025, we held a facilitated workshop for all
our talent acquisition managers, which tangibly increased their
confidence in supporting hiring managers and candidates with
disabilities and neurodivergent conditions, throughout the
recruitment process.
Sexual orientation and gender identity
We continue to build a more inclusive environment for our LGBTQ+
colleagues. Our LGBTQ+ network, Rainbow, remains central to
this work and has supported colleagues for ten years. In 2025, we
partnered with our Employee Assistance Programme (EAP) provider
to launch an enhanced clinical pathway tailored to the needs of
LGBTQ+ colleagues and allies. We believe this is the first service of
its kind in the UK offered jointly by an employer and EAP provider.
Developed in response to colleague feedback, it was piloted in 2024
and is now a permanent offering. Staffed by people with lived
experience and specialist training, it provides a safe, empathetic
space for support, shared experiences and tailored resources.
1 Executive roles include Grade X colleagues only. For gender, it includes UK and
international based colleagues, excluding US and subject to local laws and regulations.
For ethnicity it includes UK based colleagues only.
Lloyds Banking Group plc Annual Report and Accounts 2025
23
|
Purpose in action | ||||||
|---|---|---|---|---|---|---|---|
| Upskilling colleagues<br><br>on neuro-inclusion<br><br>Since its launch in September 2024, over 54,000 colleagues<br><br>have completed the ‘This is Me’ e-module and c.8,500 line<br><br>managers have attended the workshop. This programme<br><br>plays a pivotal role in helping us build a more disability and<br><br>neuro-inclusive organisation, driving better outcomes for our<br><br>colleagues, customers and communities. Our commitment<br><br>to neurodiversity was also honoured globally at the<br><br>2025 Davos Neurodiversity Summit, where we received the<br><br>Impact Award for Corporate Leadership in Neuro-inclusion. | Read more from<br><br>our colleagues <br> |
||||||
| --- | 2025 progress and performance on inclusion metrics | ||||||
| --- | Number 2025 | % 2025 | % 2024 | ||||
| --- | --- | --- | --- | --- | --- | ||
| Gender1<br><br>(UK and international<br><br>colleagues, excluding<br><br>colleagues who are<br><br>based in the US, subject to<br><br>local laws and regulations) | Board members | Men | 5 | 50.0 | 50.0 | ||
| Women | 5 | 50.0 | 50.0 | ||||
| Senior positions on the Board2 | Men | 3 | 75.0 | 75.0 | |||
| Women | 1 | 25.0 | 25.0 | ||||
| GEC3 | Men | 8 | 61.5 | 53.8 | |||
| Women | 5 | 38.5 | 46.2 | ||||
| Executive roles4 | Men | 199 | 59.6 | 61.4 | |||
| Women | 135 | 40.4 | 38.6 | ||||
| Senior managers5 | Men | 4,577 | 59.6 | 59.6 | |||
| Women | 3,101 | 40.4 | 40.4 | ||||
| All colleagues | Men | 29,722 | 46.5 | 45.2 | |||
| Women | 34,200 | 53.5 | 54.8 | ||||
| Ethnicity1<br><br>(UK based colleagues only) | Board members | White British or other White | 8 | 80.0 | 80.0 | ||
| Asian heritage | 1 | 10.0 | 10.0 | ||||
| Mixed/multiple ethnic groups | 1 | 10.0 | 10.0 | ||||
| Senior positions on the Board2 | White British or other White | 4 | 100.0 | 100.0 | |||
| GEC3 | White British or other White | 11 | 84.6 | 84.6 | |||
| Asian heritage | 2 | 15.4 | 15.4 | ||||
| Executive roles4 | Black, Asian and Minority Ethnic representation | 57 | 17.5 | 14.6 | |||
| Black heritage | 14 | 4.3 | 3.3 | ||||
| Senior managers5 | Black, Asian and Minority Ethnic representation | 996 | 13.6 | 12.6 | |||
| Black heritage | 139 | 1.9 | 1.8 | ||||
| Disability<br><br>(UK based colleagues only) | Colleagues who disclose that they have a disability | 12,776 | 21.6 | 18.7 | |||
| Senior managers4 who disclose that they have a disability | 1,388 | 19.0 | 16.1 | ||||
| Sexual orientation<br><br>and gender identity<br><br>(UK based colleagues only) | Colleagues who disclose their sexual orientation | 47,560 | 80.4 | 77.8 | |||
| Colleagues who disclose that they are LGBTQ+ | 2,506 | 4.2 | 4.0 | ||||
| Colleagues who disclose their gender identity | 43,897 | 74.2 | 69.9 |
1Data in the table above is collated and reported in compliance with the provisions of
section 414C(8)(c) Companies Act 2006. For Listing rule UKLR 6.6.6(10) please see
further information on our Board diversity and executive management on page 136.
2 Senior positions on the Board refer to the roles of the Chief Executive Officer,
Chief Financial Officer, Senior Independent Director and Chair of the Board.
3The Group Executive Committee (GEC) assists the Group Chief Executive in strategic,
cross-business or Group-wide matters and inputs to the Board. The GEC includes the
Group Chief Executive and excludes colleagues who report to a member or attendee of
the GEC, including administrative or executive support roles (personal assistant,
executive assistant).
4Executive roles include grade X colleagues only.
5Senior manager roles include grades F, G and X.
Key definitions:
•All diversity information for ethnicity, disability, sexual orientation and gender identity
is based on voluntary self-declaration by colleagues. Our systems do not record diversity
data colleagues who have not declared this information and is for UK payroll only
•Gender data includes those on parental/maternity leave, absent without leave and
long-term sick and excludes contractors, temporary and agency staff. International
colleagues are included, except those based in the US, subject to local laws and
regulations
•LGBTQ+ includes Asexual / Ace Spectrum, Bisexual / Bi, Gay Man, Lesbian / Gay
Woman, Pansexual, Other Sexual Orientation and includes Trans*
•A colleague is an individual who is paid via the Group’s payroll and employed on a
permanent or fixed-term contract (employed for a limited period). Includes parental
leavers and internationals (UK includes Guernsey, Isle of Man, Jersey and Gibraltar
subject to and local laws and regulations). Excludes leavers, Group non-executive
directors, contractors, temps and agency staff
•Diversity calculations are based on headcount, not full-time employee value
Lloyds Banking Group plc Annual Report and Accounts 2025
24
Risk overview
Continuing our risk transformation
journey through 2025
The Group’s approach to risk
| Risk management framework | |
|---|---|
 |
Group and risk management strategies<br><br>•The Group strategy is driven by strategic priorities<br><br>and informed by the Group’s risk profile,<br><br>considering external economic, political and<br><br>regulatory threats. This shapes risk appetite<br><br>and risk management practices<br><br>•The risk management strategy supports delivery<br><br>of the Group strategy by ensuring principal risks<br><br>are managed consistently within appetite and the<br><br>target control environment |
 |
Culture, values and behaviours<br><br>•The RMF provides tools for colleagues to make the<br><br>right decisions, balancing stakeholder needs, risks and<br><br>trade-offs and encouraging a culture of intellectual<br><br>curiosity, innovation and proactive risk management |
 |
Risk governance<br><br>•Designed to enable sound decision making in line<br><br>with good corporate governance standards across<br><br>all legal entities. Board and executive committees<br><br>hold key decision-making authority, with clear<br><br>responsibilities for risk management, delegated<br><br>powers and reporting requirements<br><br>•The Board’s responsibilities can be found on page 73 |
 |
Three lines of defence<br><br>•Aligned with industry best practice, the Group applies<br><br>a three lines of defence model, with all colleagues<br><br>accountable for managing risk in daily activities<br><br>and demonstrating behaviours consistent with<br><br>the Group’s purpose, values and culture |
 |
Risk function mandate<br><br>•Clarifies Risk’s role as an oversight and control<br><br>function within the three lines of defence, supporting<br><br>the Chief Risk Officer in fulfilling accountabilities<br><br>defined in their role profile and delegated by the<br><br>Group Chief Executive and the Board |
 |
Risk appetite<br><br>•The type and level of risk the Group is willing to<br><br>accept in pursuit of its strategic objectives, which<br><br>must operate within Board-approved parameters.<br><br>Set annually for the Group and its legal entities |
 |
Risk architecture and approach<br><br>•The Group’s risk architecture defines a consistent,<br><br>unified approach and a common language for all<br><br>principal risks. Risk principles and policies translate<br><br>risk appetite into actionable risk management |
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.
Risk profile and performance in 2025
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 284.
The Risk overview provides a summary of performance for each of
the Group’s principal risks, along with emerging and topical risks.
Resetting Risk
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. Further information about
the RMF and the Resetting Risk programme can be found on
pages 138 to 139.
| Our approach<br><br>“We’re on an exciting transformation<br><br>journey through our Resetting Risk<br><br>programme, allowing us to further<br><br>evolve our risk management<br><br>approach and accelerate decision<br><br>making to achieve improved<br><br>outcomes for our customers.” |
|---|
| Stephen Shelley<br><br>Chief Risk Officer |
Lloyds Banking Group plc Annual Report and Accounts 2025
25
Principal risks
| Summary table for 2025 |
|---|
The risks outlined in this section are used to monitor and report
the risk exposures posing the greatest potential impact to the
Group. All principal risks are reported regularly to the Board Risk
| Capital |
|---|
| Climate |
| Compliance |
| Conduct |
| Credit |
| Economic crime |
| Insurance underwriting |
| Liquidity |
| Market |
| Model |
| Operational |
Committee and Board, and are reviewed at least annually to
ensure they remain fit for purpose.
Sustainability related risks are intrinsically linked to our principal
risks. Pages 39 to 41 provide an overview of our sustainability
related risks and opportunities assessment, and highlight related
principal risks.
The risk management section on pages 144 to 197 provides a
detailed review of these risks, including definitions and how they are
identified, assessed, managed, mitigated, monitored and reported.
| See page 16 | See page 17 | See page 17 | | --- | --- | --- || Capital risk | | | --- | --- | | The Group continued to maintain its strong capital position in 2025<br><br>with a CET1 capital ratio of 13.2% on a pro forma basis (2024: 13.5% pro<br><br>forma). This remains ahead of regulatory requirements and in excess of<br><br>the Group’s ongoing target of c.13.0%, which includes a management<br><br>buffer of around 1%. Banking business profits for the year and the receipt<br><br>of dividends from the Insurance business, partially offset by risk-<br><br>weighted asset (RWA) increases and regulatory headwinds, have<br><br>continued to enable strong shareholder distributions.<br><br>Downside risks and uncertainties arising from economic and regulatory<br><br>headwinds, including in relation to Retail secured CRD IV RWA increases,<br><br>continue to be closely monitored. | Mitigating actions<br><br>•Capital management framework is in place, including the setting<br><br>of capital risk appetite, capital planning and stress testing activities<br><br>•Regular refresh and monitoring of early warning indicators and<br><br>maintenance of a contingency framework to address emerging<br><br>capital concerns<br><br>•Robust risk management through prudent underwriting standards,<br><br>balance sheet and portfolio management and capital optimisation || Climate risk | | | --- | --- | | Climate risk remains stable, with no material adjustments to the<br><br>Group’s financial statements required for the impact from physical<br><br>and transition risks, and ongoing monitoring of potential reputational<br><br>impacts, including performance of emission reduction targets against<br><br>broader UK progress.<br><br>The Group has refined how it reflects the cross-cutting impacts of climate<br><br>risk with other principal risks. Focus remains on embedding consideration<br><br>of climate-related risks and enhancing capabilities for measuring and<br><br>managing these, in line with evolving external expectations. | Mitigating actions<br><br>•Guidance outlines the impacts of climate risk across other principal<br><br>risks, supporting embedding within Group policies and procedures<br><br>•This informs suitable consideration within the management of other<br><br>principal risks, including client engagement, assessment informed<br><br>by scenario analysis and relevant case management || Compliance risk | | | --- | --- | | The compliance risk profile remains stable. The Group continues<br><br>to monitor compliance risk closely given the pace of regulatory and<br><br>legislative change, a continued volume of regulatory data requests<br><br>and to enable strategic business growth within risk appetite. | Mitigating actions<br><br>•Policies and standards setting out clear requirements and controls<br><br>that apply across the business, aligned to the Group’s risk appetite<br><br>•Identification, assessment and implementation of regulatory and<br><br>legal requirements by risk specialists and legal colleagues as needed<br><br>•Local controls, processes, procedures and resources to ensure<br><br>appropriate governance and compliance by business units |
Lloyds Banking Group plc Annual Report and Accounts 2025
26
Risk overview continued
| Conduct risk | ||||
|---|---|---|---|---|
| Conduct risk remained elevated in 2025, recognising areas of<br><br>ongoing focus driven by legal decisions, regulatory changes and<br><br>complaint trends.<br><br>The Group continues to monitor the evolving situation in relation<br><br>to motor finance commission arrangements and potential impacts<br><br>to customers and its risk and control profile, liaising closely with<br><br>regulatory bodies.<br><br>Enhancements continue to be made to the Group’s control<br><br>environment, with mitigating actions and controls in place to deliver<br><br>good outcomes for customers, protect market integrity, prevent<br><br>colleague misconduct and ensure effective management of concerns<br><br>raised through whistleblowing.<br><br>The Group remains focused on the treatment of vulnerable customers<br><br>and complaints performance. | Mitigating actions<br><br>•Policies and strategies are in place to prevent colleague misconduct<br><br>and support good customer outcomes with ongoing focus on<br><br>utilising root cause insights to support the management and<br><br>mitigation of complaint volumes<br><br>•Active engagement with regulatory bodies and key stakeholders to<br><br>ensure that the Group’s strategic conduct focus continues to meet<br><br>evolving stakeholder expectations<br><br>•Strengthening policies, controls and reporting capabilities to<br><br>demonstrate good outcomes for customers and markets | Credit risk | ||
| --- | --- | |||
| Credit performance has remained strong and stable in 2025.<br><br>In the Group’s retail portfolios, low and stable arrears have been<br><br>observed. The Group’s commercial portfolio remains strong.<br><br>The underlying impairment charge in 2025 was £795 million, up from<br><br>£433 million in 2024, and includes a net charge from updates to the<br><br>Group’s macroeconomic outlook of £74 million compared to a large<br><br>release of £394 million in 2024. Excluding macroeconomic updates,<br><br>the Group’s underlying impairment charge remains low and similar to<br><br>2024.<br><br>The total underlying probability-weighted expected credit loss (ECL)<br><br>allowance was lower in 2025 at £3,353 million (31 December 2024:<br><br>£3,651 million). | Mitigating actions<br><br>•Appropriate and robust credit processes, strategies and controls to<br><br>ensure effective risk identification, management and oversight<br><br>•Significant monitoring in place, including early warning indicators<br><br>•Selective credit tightening reflective of forecast changes in the<br><br>macroeconomic environment, including updates to affordability<br><br>lending controls for forward-looking costs | Economic crime risk | ||
| --- | --- | |||
| Economic crime remains a principal risk for the Group, reflecting the<br><br>inherent risks within the external environment, driven by geopolitical<br><br>instability and an evolving economic crime threat landscape.<br><br>Controls are in place to address bribery and corruption, fraud, money<br><br>laundering and sanction risks. In 2025, business units continued<br><br>to deliver against action plans, which strengthened the control<br><br>environment, reduced residual risk and responded to changing<br><br>regulatory expectations. During the year, two new Board-level risk<br><br>appetite metrics were introduced to further enhance oversight of<br><br>sanctions and fraud.<br><br>Protecting customers remains a key priority, with ongoing<br><br>consideration of regulatory developments, data-sharing capabilities,<br><br>and interventions across the economic crime lifecycle. | Mitigating actions<br><br>•Robust economic crime policy and standards<br><br>•Delivery of Group-wide Economic Crime Prevention Strategy,<br><br>supported by periodic reviews to address emerging risks and<br><br>regulatory developments<br><br>•Sustained progress in remediation activities to strengthen the<br><br>control environment and reduce residual risk<br><br>•Continued enhancements of our industry-leading fraud detection<br><br>capabilities to respond to evolving threats | Insurance underwriting risk | ||
| --- | --- | |||
| Insurance underwriting risk remains stable. Life and Pensions<br><br>present value of new business premium increased to £21.0 billion<br><br>(2024: £18.2 billion), driven by higher contribution from workplace,<br><br>protection and Scottish Widows platform businesses, partially offset<br><br>by lower sales in the annuities business due to market conditions.<br><br>Gross written premiums increased to £762 million (2024: £737 million). | Mitigating actions<br><br>•Underwriting quality is the primary mechanism used to manage<br><br>insurance risk<br><br>•Robust processes are embedded for underwriting, reinsurance,<br><br>claims management, pricing, product design and product<br><br>management<br><br>•Management through diversification and pooling of risks |
Lloyds Banking Group plc Annual Report and Accounts 2025
27
| Liquidity risk | ||||
|---|---|---|---|---|
| The Group maintained its strong liquidity and funding position with<br><br>a loan to deposit ratio of 97% (2024: 95%).<br><br>The Group’s liquid assets continue to exceed the regulatory minimum<br><br>and internal risk appetite, with a monthly simple average over the<br><br>previous 12-months’ liquidity coverage ratio (LCR) of 145% (2024: 146%).<br><br>The Group maintains access to diverse sources and tenors of funding. | Mitigating actions<br><br>•Maintenance of a portfolio of unencumbered high quality liquid<br><br>assets in excess of regulatory requirements<br><br>•Robust management and monitoring of liquidity risks to ensure<br><br>systems and arrangements are adequate with regard to internal risk<br><br>appetite, Group strategy and regulatory requirements<br><br>•Significant customer deposit base, driven by inflows to trusted brands<br><br>•Participation in term issuance programmes | Market risk | ||
| --- | --- | |||
| Market conditions have remained stable in 2025. The Group remains<br><br>well hedged, ensuring near-term interest rate exposure is appropriately<br><br>managed. The Group’s structural hedge has increased to £244 billion in<br><br>2025 (2024: £242 billion) due to strong deposit growth.<br><br>Following the agreements made as part of the Group's main defined<br><br>benefit pension schemes triennial valuations at 31 December 2022,<br><br>there are no further deficit contributions payable for this triennial<br><br>period (to 31 December 2025). The IAS 19 accounting surplus has<br><br>reduced to £2.6 billion at 31 December 2025 (2024: £2.9 billion). | Mitigating actions<br><br>•Structural hedge programmes to stabilise earnings<br><br>•Close monitoring of market risks and where appropriate, all asset<br><br>and liability matching and hedging<br><br>•Monitoring of the credit allocation in the defined benefit pension<br><br>schemes, as well as the hedges in place against adverse movements<br><br>in nominal rates, inflation and longevity | Model risk | ||
| --- | --- | |||
| In 2025, the Group has made significant progress in strengthening its<br><br>model risk management.<br><br>The Group’s model risk operating framework continues to improve with<br><br>investment in training and resources to support framework adoption<br><br>and further development of our CRD IV models. The Group continues<br><br>to anticipate and address regulatory requirements, embedding SS1/23<br><br>principles into our day-to-day risk management, including proactive<br><br>engagement with regulators.<br><br>The control environment for model risk continues to be enhanced,<br><br>meeting both internal and regulatory requirements to support the safe<br><br>and strategic development of AI and machine learning applications<br><br>within the Group.<br><br>Investment in model risk management remains a priority for the<br><br>Group to further improve risk management and as an enabler to drive<br><br>strategic developments. | Mitigating actions<br><br>•Continued enhancement and embedding of the model risk<br><br>management framework for managing and mitigating model risk<br><br>•The Group’s independent model validation process provides<br><br>ongoing, independent, and effective challenge to model<br><br>development and use<br><br>•Establishment of a governance framework for the management<br><br>of AI model risks across principal risk categories<br><br>•Introduction of a wider range of model status categories to provide<br><br>more transparent and informative reporting of model risk | Operational risk | ||
| --- | --- | |||
| Operational risk remained stable in 2025, with key risks relating to<br><br>change execution risk, data and privacy, supplier risk, IT systems and<br><br>information, cyber and physical security. Operational loss event volumes<br><br>continue to be low, primarily relating to transaction and data processing,<br><br>IT systems and change execution.<br><br>The Group continues to demonstrate resilience in delivering strategic<br><br>change safely, despite some IT outages occurring during the year.<br><br>No material security breaches took place in 2025, though some<br><br>events at third-party suppliers reinforced the need for vigilance and<br><br>robust oversight.<br><br>The Group places a strong emphasis on analysing progress against its<br><br>strategic transformation delivery, using learnings to drive improvements<br><br>and ensure effective management of change execution risk. | Mitigating actions<br><br>•Deployment of a range of risk management strategies, such as<br><br>avoidance, mitigation, transfer (including insurance) and acceptance<br><br>•Ongoing focus on people risk measures including culture, capability<br><br>and capacity to support strategic growth plans<br><br>•The Group continues to invest strategically to mitigate operational<br><br>risks, strengthen controls and to meet operational resilience<br><br>regulatory requirements<br><br>•Internal reviews and industry engagement on IT outages to drive<br><br>control improvement and ensure effective supplier assurance |
Lloyds Banking Group plc Annual Report and Accounts 2025
28
Risk overview continued
Emerging and topical risks
Emerging and topical risks remain an area of ongoing focus for the
Group’s Board and senior management. During 2025, the Group has
continued to strengthen its approach to identifying, assessing and
prioritising emerging risks, recognising the continued complexity and
interdependence of global and sector-specific challenges.
The Group’s emerging and topical risk themes have been refined in
2025, reflecting developments in geopolitical uncertainty,
technological disruption, climate transition and regulatory change.
These themes have been subject to reviews at executive and Board-
level committees, including the Board Risk Committee, with actions
agreed to strengthen monitoring and mitigation strategies.
Particular attention has been given to drivers of the emerging and
topical risk themes, such as supply chain fragility and evolving
customer behaviours.
Building on the foundations established in prior years, the Group’s
methodology now places greater emphasis on forward-looking,
scenario-based exercises to anticipate potential shifts in the
emerging risk landscape. These exercises explore how emerging risks
could materialise and interact under plausible conditions, leveraging
insights from senior leaders and subject matter experts to test
critical assumptions, examine interdependencies and identify
potential second-order impacts across the business.
Looking ahead to 2026, horizon scanning and thematic analysis will
continue as a key risk management tool to anticipate future trends,
ensuring preparedness for both risks and opportunities arising from
an increasingly volatile environment while safeguarding customers,
colleagues and shareholders.
| Emerging and topical risk themes | ||||
|---|---|---|---|---|
| Consumer<br><br>and market<br><br>dynamics | Market offerings are increasingly personalised, simple and transparent through<br><br>digital means. Increased competition from traditional and non-traditional<br><br>competitors means brand loyalty is under pressure, and the influence of social<br><br>media heightens the risk of poor customer outcomes against an uncertain<br><br>societal backdrop. Similarly, digital exclusion, particularly among older or less<br><br>digitally literate groups, requires balancing investment in innovation with<br><br>inclusive service delivery. Rapid growth in new, often loss-leading financial<br><br>products intensifies market competition, raising concerns around sustainability,<br><br>mis-selling, data ethics and product suitability. | |||
| Evolution of<br><br>technology,<br><br>AI and<br><br>cybercrime | The accelerating pace of technological innovation, spanning AI, blockchain, cloud<br><br>computing and digital currencies, is reshaping the financial landscape. While these<br><br>developments offer significant opportunities to enhance customer experiences<br><br>and operational efficiency, they also introduce new risks. Balancing the adoption<br><br>of emerging technologies with the need to maintain digital sovereignty, protect<br><br>against evolving cybercrime and uphold data privacy and ethical standards is<br><br>increasingly complex. At the same time, cloud vulnerabilities and the rapid<br><br>evolution of AI and tokenisation challenge traditional business models, requiring<br><br>firms to remain agile, transparent and resilient in the face of disruption. | |||
| Emerging and topical<br><br>risk themes | ||||
| Principal risks | Geopolitical<br><br>and economic<br><br>environment | Global uncertainty continues to reshape the regulatory and operating<br><br>environment, with shifting geopolitical alliances, economic fragmentation,<br><br>and evolving health dynamics challenging traditional models of cross-border<br><br>engagement. Organisations must navigate a complex web of international<br><br>regulations, sanctions and trade compliance while responding to the impacts<br><br>of extreme weather events, financial market volatility and unexpected events,<br><br>in order to manage the impacts to operations, customers and suppliers. | ||
| Regulatory<br><br>agenda and<br><br>expectations | The regulatory landscape is evolving rapidly, shaped by political priorities, shifting<br><br>expectations of regulatory bodies, and growing awareness of environmental and<br><br>ethical responsibilities. Sudden market interventions, calls for enhanced consumer<br><br>protections and the need for greater transparency in disclosures are encouraging<br><br>firms to demonstrate compliance, ethical integrity and adaptability. New entrants,<br><br>without legacy challenges and benefitting from lower regulatory constraints<br><br>present competitive pressures. The increasing importance of responsible corporate<br><br>behaviour is prompting a more proactive and thoughtful approach to governance,<br><br>underpinned by a commitment to legal integrity and sustainable business practices. | |||
| Strategic and<br><br>operational<br><br>adaptability | Disruption from supplier dependencies, infrastructure outages, or severe data<br><br>loss can significantly impact service delivery and trust. Evolving business models,<br><br>workforce transformation, and the need to attract and retain future-ready<br><br>talent places pressure on organisational culture and capability. Balancing<br><br>operational efficiency with colleague wellbeing, while adapting to a dynamic risk<br><br>landscape shaped by network vulnerabilities, is critical to sustaining performance<br><br>and delivering strong customer outcomes. Growing mental health concerns<br><br>among customers and employees demand an adaptive, resilient and inclusive<br><br>approach to risk management and strategic planning. |
Lloyds Banking Group plc Annual Report and Accounts 2025
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| Emerging and topical risk theme | Drivers | Key mitigating actions |
|---|---|---|
| Consumer<br><br>and market<br><br>dynamics | •Ageing population<br><br>•Changing and expanding<br><br>customer base<br><br>•Data ethics and privacy<br><br>•Disinformation and social media<br><br>•Market dynamics<br><br>•Non-traditional competitive<br><br>landscape<br><br>•Societal expectations of<br><br>financial services institutions<br><br>•Societal polarisation | •Review of customer propositions, participation choices<br><br>by business area. Continued focus on consumer duty,<br><br>ESG and vulnerability<br><br>•Periodic review of the Group’s strategy, including review<br><br>of performance, key risks and external environment<br><br>•Ongoing assessment of the impact of customer sentiment,<br><br>complaint volumes and media coverage<br><br>•Regular customer insight analysis and risk assessments<br><br>undertaken to understand impacts of changing<br><br>demographics |
| Evolution of<br><br>technology, AI<br><br>and cybercrime | •Blockchain and tokenisation<br><br>•Cloud vulnerabilities<br><br>•Digital currencies and payments<br><br>•Digital sovereignty<br><br>•Emerging technologies<br><br>•Evolution and scaling of AI<br><br>•Evolution of cybercrime | •Regular updates on data and technology strategy, and deep<br><br>dives completed on generative AI, cyber risk, technology risk<br><br>and economic crime prevention at relevant committees<br><br>•Partnership with Cambridge Spark to deliver ‘Leading with<br><br>AI’ programme to over 200 senior leaders<br><br>•Implemented a data ethics framework and Ethical AI<br><br>framework within our Group data and model risk policies<br><br>•Establishing feature teams focused on emerging technology<br><br>trends such as tokenisation and exploring new partnerships<br><br>to deliver new capabilities |
| Geopolitical<br><br>and economic<br><br>environment | •Extreme weather events<br><br>•Financial market volatility<br><br>•Geopolitical influences<br><br>•Quantitative tightening and<br><br>fiscal restraints | •Quarterly review of the Group’s economic assumptions in<br><br>response to the macroeconomic environment<br><br>•Periodic intelligence scanning to detect and identify triggers<br><br>and events which may impact the Group and its operations<br><br>•Undertake stress testing to analyse the impact of different<br><br>economic scenarios on the Group’s performance |
| Regulatory<br><br>agenda and<br><br>expectations | •Compliance and legal integrity<br><br>•Failing to ensure ethical<br><br>corporate behaviour<br><br>•Necessary regulatory reform<br><br>•Regulatory disclosures and<br><br>external disclosures | •Ongoing monitoring of regulatory developments through<br><br>horizon scanning activity<br><br>•Regular engagement by senior management and Board<br><br>members with regulators on key topics and specific areas of<br><br>regulatory focus, including responses to consultations<br><br>•Legal and regulatory lens applied to cost and investment<br><br>prioritisation<br><br>•Organisational focus on meeting all relevant regulatory<br><br>requirements and expectations |
| Strategic and<br><br>operational<br><br>adaptability | •Business model evolution<br><br>•Colleague conduct and wellbeing<br><br>•Network and infrastructure<br><br>blackouts<br><br>•Operational efficiency challenges<br><br>•Organisational culture and<br><br>mindset<br><br>•Physical and mental health<br><br>impacts<br><br>•Skills of the future<br><br>•Strategic transformation<br><br>•Supplier challenges and<br><br>dependencies<br><br>•Talent attraction and retention | •The Group implements playbooks if significant disruptive<br><br>events occur, such as another pandemic or system outages,<br><br>and these are refreshed at least annually to prepare for<br><br>such events<br><br>•The Group has strengthened measures to ensure that we are<br><br>more prepared for significant disruption to supply chains<br><br>•Enhanced business continuity plans to enable the majority<br><br>of our colleagues to work remotely where possible,<br><br>supported by ongoing cloud migration of applications<br><br>•Regular reviews of the Group’s strategic workforce planning<br><br>focused on short- medium- and long-term view of the skills<br><br>composition required, alongside our culture, inclusion and<br><br>diversity goals |
Lloyds Banking Group plc Annual Report and Accounts 2025
30
Section 172(1) statement
Effective stakeholder
engagement underpins
decision making by the Board
Considering stakeholder interests is
key to decision making by the Board.
To better understand their interests,
the Board receives feedback from
stakeholders through engagement both
inside and outside of the boardroom
including at specific events and through
the Group’s Closer to Customers,
Clients and Colleagues programme.
Senior management supports Board decision making by addressing
stakeholder implications in proposals submitted to the Board
for consideration and providing the Board with details of
stakeholder interactions.
Further detail on stakeholder engagement is contained within
the directors’ report on pages 76 to 78.
| Section 172(1)<br><br>statement<br><br>This section (pages 30 to 31) is our Section 172(1) statement<br><br>for the purposes of the Companies Act 2006 (the Act),<br><br>describing how the directors have had regard to the matters<br><br>set out in section 172(1) (a) to (f) of the Act when performing<br><br>their duty to promote the success of the Company under<br><br>section 172. Further detail on key stakeholder interaction is<br><br>also contained within the directors’ report on pages 76 to 78.<br><br>The directors remain mindful in all their deliberations of the<br><br>long-term consequences of their decisions, as well as the<br><br>importance of Lloyds Banking Group plc (the Company)<br><br>maintaining a reputation for high standards of business<br><br>conduct and the Board engaging with, and taking account of<br><br>the interests of, stakeholders.<br><br>The three key Board decisions outlined in this section<br><br>(Empowering customers through technology and innovation,<br><br>Growing wealth strategy and unlocking bancassurance<br><br>potential and Delivering financial reporting at greater pace)<br><br>illustrate this in practice. | | --- || Empowering<br><br>customers<br><br>through<br><br>technology<br><br>and innovation | | --- |
Board considerations:
In 2025, in line with the Group’s customer-focused strategy, the
Board considered initiatives aimed at accelerating and broadening
the Group’s digital transformation and deepening customer
relationships as well as simplifying customer interactions.
Board initiatives:
•In June, the Board approved the Consumer Duty annual report
and considered how good customer outcomes remain critical as
the Group focuses on customer experience and differentiation.
Throughout 2025, the Board received updates on co-servicing,
which enables customers to service products across our
brands seamlessly – whether in branch, online or when they need
extra support
•Customer differentiation was also the focus of executive
briefings to the Board in June and November on the Group’s
proposed acquisition of Curve, a London based fintech
operating an innovative digital wallet platform, with a view to
accelerating the Group’s digital wallet strategy and differentiate
customer experience
Future focus:
The Board is committed to supporting the Group’s strategy to deliver
market-leading digital experiences and empower its customers.
Lloyds Banking Group plc Annual Report and Accounts 2025
31
| Growing<br><br>wealth strategy<br><br>and unlocking<br><br>bancassurance<br><br>potential |
|---|
Board considerations:
The Board has an ongoing commitment to the Group’s focus on the
customer, including through its wealth strategy and the offering of
personalised propositions to customers for everyday value and key
life events, both within Insurance, Pensions and Investments (IP&I)
and across the Group more broadly.
Board initiatives:
•In July, the Board approved the acquisition of the outstanding
interest in Schroders Personal Wealth (SPW), the wealth
management and advice business previously operated as a joint
venture with Schroders Group
•The Board engaged with the executive on the transaction’s
strategic rationale and the benefits for customers with SPW
subsequently rebranding as Lloyds Wealth
•In May and June, the Board considered the steps being taken
within IP&I to develop the Group’s bancassurance model and
enhance customer services
Future focus:
The Board will continue to support the executive to grow and
diversify revenue by strengthening bancassurance and transforming
the Group’s wider wealth business with a full advice proposition
available to mass affluent banking customers across brands as well
as to new customers.
| Delivering<br><br>financial<br><br>reporting at<br><br>greater pace |
|---|
Board considerations:
In 2025, the Board and its Audit Committee considered whether
the Group should move to preliminary reporting, reflecting the
Group’s strategic ambition to deliver at pace and enhance
transparency with stakeholders.
Board initiatives:
•In June, the Board and its Audit Committee considered the
strategic benefits of preliminary reporting which included earlier
market messaging and focusing senior management on driving
the organisation forwards earlier in 2026, as well as the risks,
such as audit limitations and initial increased implementation
workload for colleagues
•In July, the Board, upon recommendation from the Audit
Committee, approved the half year results announcement,
including disclosure related to the announcement of the
intention to start preliminary reporting at year end
Future focus:
The Board will monitor the impact of this changed approach to
financial reporting on stakeholders. Ongoing engagement with
shareholders, colleagues and external audit will remain a priority
for the Board.
Lloyds Banking Group plc Annual Report and Accounts 2025
32
Task Force on Climate-related Financial Disclosures (TCFD)
Creating a sustainable and inclusive future is core to our purpose
of Helping Britain Prosper. We report on sustainability matters
throughout this annual report and accounts (ARA), in particular
in the following sections: (i) Strategic report, pages 22 to 23
and 32 to 33; (ii) Sustainability review on pages 35 to 49;
(iii) Risk management on pages 150 to 152; (iv) Governance
pages 80 to 81 and (v) in the supplementary sustainability report .
We comply with the UKLR 6.6.6R(8) and Sections 414CA and
414CB of the UK Companies Act 2006. Our disclosures which
are presented consistent with the 2021 TCFD recommendations
and recommended disclosures across all four of the TCFD pillars:
strategy; governance; risk management; and metrics and targets,
requirements under Sections 414CA and 414CB have been
considered by cross-reference.
Additional detail on our progress against our metrics and targets
can be found in our sustainability report and sustainability
metrics data sheet . Our separate supplements ensure we
can provide a comprehensive response, that is presented in
a decision-useful manner for users of the reports.
In addition to the compliance below, in-scope entities within
our Insurance, Pensions and Investments business, which are
incorporated as part of Scottish Widows Group, are required
to report in compliance with FCA ESG Sourcebook Chapter 2
‘Disclosures on climate-related financial information’ (set out
via FCA PS21/24) reporting requirements for the period ending
31 December 2025. This additional compliance will be met
through Entity and Product level reporting to be published
on the Scottish Widows website in June 2026.
We will continue to assess and develop our disclosures against
the TCFD recommendations and recommended disclosures,
considering relevant TCFD guidance and materials along with
expected disclosure requirements such as UK Sustainability
Reporting Standards: SRS S1 ‘General requirements’ and
SRS S2 ‘Climate-related disclosures’.
 |
TCFD and Climate-related financial disclosures cross-reference table | |
|---|---|---|
| Recommendations | Reference (ARA unless specified otherwise) | |
| Strategy | ||
| A. Describe the climate-related risks and opportunities the organisation has identified over the short,<br><br>medium and long term. (Companies Act 2006 – Sections 414CA and 414CB 2A (b) and (d)) | Pages 39 to 41<br><br>Pages 44 to 47<br><br>Pages 150 to 152 | |
| B. Describe the impact of climate-related risks and opportunities on the organisation’s business,<br><br>strategy and financial planning. (Companies Act 2006 – Sections 414CA and 414CB 2A (e)) | Pages 39 to 41<br><br>Pages 42 to 47<br><br>Pages 150 to 152<br><br>Notes to financial statements<br><br>Page 228 and pages 278 to 279 | |
| C. Describe the resilience of the organisation’s strategy, taking into consideration different climate-<br><br>related scenarios, including a 2°C or lower scenario. (Companies Act 2006 – Sections 414CA and<br><br>414CB 2A (f)) | Page 48 to 49<br><br>Pages 150 to 152<br><br>Page 228 and pages 278 to 279 | |
| Governance | ||
| A. Describe the Board’s oversight of climate-related risks and opportunities. (Companies Act 2006 –<br><br>Sections 414CA and 414CB 2A (a)) | Pages 80 to 81 | |
| B. Describe management’s role in assessing and managing climate-related risks and opportunities.<br><br>(Companies Act 2006 – Sections 414CA and 414CB 2A (a)) | Pages 80 to 81 | |
| Risk Management | ||
| A. Describe the organisation’s processes for identifying and assessing climate-related risks.<br><br>(Companies Act 2006 – Sections 414CA and 414CB 2A (b) | Page 25<br><br>Pages 39 to 40<br><br>Pages 150 to 152 | |
| B. Describe the organisation’s processes for managing climate-related risks. (Companies Act 2006 –<br><br>Sections 414CA and 414CB 2A (b)) | Pages 39 to 40<br><br>Pages 150 to 152 | |
| C. Describe how processes for identifying, assessing, and managing climate-related risks<br><br>are integrated into the organisation’s overall risk management. (Companies Act 2006 –<br><br>Sections 414CA and 414CB 2A (c)) | Pages 150 to 152 | |
| Metrics and Targets | ||
| A. Disclose the metrics used by the organisation to assess climate-related risks and opportunities in<br><br>line with its strategy and risk management process (Companies Act 2006 – Sections 414CA and<br><br>414CB 2A (h)) | Pages 42 to 49, 110 and 122<br><br>Sustainability report pages 62 to 81 and<br><br>118 to 120 | |
| B. Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the<br><br>related risks. (Companies Act 2006 – Sections 414CA and 414CB 2A (h)) | Pages 42 to 49<br><br>Sustainability report pages 62 to 81 and<br><br>118 to 120 | |
| C. Describe the targets used by the organisation to manage climate‑related risks and opportunities<br><br>and performance against targets. (Companies Act 2006 – Sections 414CA and 414CB 2A (g)) | Pages 42 to 49<br><br>Sustainability report pages 62 to 81 and<br><br>118 to 120 |
Lloyds Banking Group plc Annual Report and Accounts 2025
33
Non-financial and sustainability information statement
The Non-Financial Reporting requirements contained in Sections 414CA, 414CB and 414C(7)(b)(i)(iii) of the Companies Act 2006 are
addressed within this section. The table below signposts the information necessary to understand our Group’s development, performance
and position and the impact of our activity relating to environmental matters, our employees, social matters, our respect for human rights,
and anti-corruption and anti-bribery matters. We provide cross references to indicate in which part of the Group’s reporting the respective
requirements are embedded.
|
Non-financial and sustainability information reference table | ||||
|---|---|---|---|---|---|
| Statement | Information necessary to understand our Group<br><br>and its impact, policies, due diligence and outcomes | Reference to the<br><br>annual report and accounts | |||
| Business model | Our business model | Pages 06 to 09 | |||
| Our approach to sustainability materiality and value chain | Page 38 | ||||
| Our strategy | Page 36 | ||||
| Progress and performance based on key non-financial metrics | Pages 20 to 21 and 42 to 49 | ||||
| Principal risks | Risk overview including risk management framework | Pages 24 to 29 | |||
| Climate risk | Pages 25 and 150 to 152 | ||||
| Economic crime risk | Pages 26 and 179 | ||||
| Operational risk | Pages 27 and 195 to 197 | ||||
| Conduct risk | Pages 26 and 153 | ||||
| Our stakeholders | Stakeholder engagement | Pages 22, 30 to 31 and<br><br>76 to 78 | |||
| Further information on how we support our stakeholders is included within<br><br>the Code of ethics and responsibility and internal colleague policies including <br><br><br>Colleague policy1, Health and Safety policy1 and Speak Up policy1 which are<br><br>summarised in our sustainability report <br> |
|||||
| Climate and<br><br>environmental<br><br>sustainability | Supporting the UK transition and our progress on ambitions and targets | Pages 42 to 49 | |||
| Identification, assessment and management of climate risk | Pages 39 to 40 and 150 to 152 | ||||
| Task Force on Climate-related Financial Disclosures (TCFD) | Page 32 | ||||
| Climate-related financial disclosures (CFD) | Page 32 | ||||
| Policies which support our approach to environmental sustainability include our<br><br>sector statements During 2025, we recorded no material environmental incidents <br><br><br>or regulatory enforcement actions and reduced operational greenhouse gas emissions<br><br>year-over-year |
|||||
| Social matters | Social sustainability risk arises through operational, conduct and credit risk with<br><br>identified risks and opportunities disclosed along with associated metrics | Pages 39 to 41 | |||
| Core to our purpose, our sustainability strategy identified four social sustainability<br><br>focus areas, where we can make the biggest difference, while creating opportunities<br><br>for our future growth. Further detail is included in the sustainability report <br> |
Pages 14 to 15, 22 to 23 and<br><br>36 to 38 | ||||
| Anti-bribery and<br><br>corruption | The Group has a dedicated Economic Crime Prevention (ECP) function. The ECP<br><br>policy sets out the minimum requirements to which all Group businesses must<br><br>comply across anti-bribery and corruption (ABC); anti-money laundering and<br><br>counterterrorist financing (AML); fraud; sanctions; and tax evasion. Economic crime<br><br>is treated as a principal risk. During the year, no bribery or corruption incidents were<br><br>substantiated, and 99% of in‑scope employees completed anti‑bribery training | Pages 26, 94 and 179 | |||
| Further policies which support our approach include: Anti-bribery policy statement <br><br><br>and Code of ethics and responsibility <br> |
|||||
| Respect for<br><br>human rights | The Group is committed to operating in accordance with internationally accepted<br><br>human rights standards and with all relevant legislation including the UK Modern<br><br>Slavery Act 2015. The Group’s approach to human rights is supported by several<br><br>Group policies and programmes including: Our Code of Supplier Responsibility <br><br><br>which sets out the key social, ethical and environmental values and behaviours that<br><br>we want our suppliers to abide by. Human rights policy statement , Modern slavery <br><br><br>and human trafficking statement and our colleague policy1, data privacy policy1, <br><br><br>data ethics policy1 and information, cyber and physical security policy1 which has<br><br>been summarised within the sustainability report During 2025, we had no <br><br><br>substantiated reports of modern slavery across our business and supply chain, and<br><br>strengthened controls through training and assurance, including continued rollout of<br><br>our group-wide modern slavery module and executive/Board training. |
||||
| Topic is considered as part of conduct, economic crime and operational risk | Pages 25 to 27 | ||||
| Activities to support our colleagues and promote Inclusion | Pages 22 to 23 | ||||
| Governance | Key Board discussions and decisions | Pages 30 to 31 | |||
| Sustainability governance | Pages 80 to 81 |
1Certain Group policies, internal standards and guidelines are not published externally.
Lloyds Banking Group plc Annual Report and Accounts 2025
34
Viability statement and going concern
Viability statement
The directors have an obligation under the UK Corporate
Governance Code to state whether they believe the Company
and the Group will be able to continue in operation and meet their
liabilities as they fall due over a specified period determined by the
directors, taking account of the current position and the principal
risks of the Company and the Group.
In making this assessment, the directors have considered a wide
range of information, including:
•The principal risks and emerging and topical risks which could
impact the performance of the Group
•The 2022 Strategic Review which sets out the Group’s customer
and business strategy for the period from 2022 to 2026
•The Group’s operating plan which comprises detailed financial,
capital and funding projections together with an assessment
of relevant risk factors for the period from 2026 to 2028
Group, legal entities and divisional operating plans are produced
and subject to rigorous stress testing on an annual basis.
The planning process takes account of the Group’s business
objectives, the risks taken to seek to meet those objectives and
the controls in place to mitigate those risks to ensure they remain
within the Group’s overall risk appetite.
The Group’s annual planning process comprises the following
key stages:
•The Board reviews and agrees the Group’s strategy, risk appetite
and objectives in the context of the operating environment and
external market commitments
•The divisional teams develop their operating plans, ensuring
that they are in line with the Group’s strategy and risk appetite
•The financial projections and underlying assumptions in respect
of expected market and business changes, emerging and future
expected legal, accounting and regulatory changes, are subject
to rigorous review and challenge from both divisional and
Group executives
•In addition, the Board obtains independent assurance from the
Risk function over the alignment of the plan with Group strategy
and the Board’s risk appetite. This assessment performed by the
Risk function also identifies the key risks to delivery of the
Group’s operating plan
•The planning process is also underpinned by robust capital and
funding stress testing management policies and toolkits. These
allow the Group to assess compliance of the operating plan with
the Group's risk appetite
The scenarios used for stress testing are designed to consider
a range of plausible risks, vulnerabilities and severities, and take
account of the availability and likely effectiveness of mitigating
actions that could be taken by management to avoid or reduce the
impact or occurrence of the underlying risks. The Group conducts
internal stress testing and completes the PRA regulatory exercises.
In 2025, stress tests have considered a range of economic scenarios
covering multiple outlooks and economic paths, including differing
interest rates paths and a range of severity in other key economic
factors. Group stress results are segmented to provide insight,
inform risk appetite, and allow for development of mitigating
actions. In considering the likely effectiveness of such actions, the
conclusions of the Board’s regular monitoring and review of risk and
internal control systems, as discussed on pages 137 to 197, is taken
into account. Further information on stress testing and reverse
stress testing is provided on pages 142 and 143.
•Stress testing outputs are presented to the Board Risk
Committee for review and challenge. All regulatory exercises
are approved by the Board
•The final operating plan, Risk function assessment and the
results of the stress testing are presented to the Board for
approval. Once approved, the operating plan drives detailed
divisional and Group targets for the following year
The directors have specifically assessed the prospects of the
Company and the Group over the current plan period. The Board
considers that a three-year period continues to present a reasonable
degree of confidence over expected events and macroeconomic
assumptions, while still providing an appropriate longer-term
outlook. Information relevant to the assessment can be found in the
following sections of the annual report and accounts:
•The Group’s principal activities, business and operating models
and strategic direction are described in the strategic report on
pages 01 to 34
•Emerging and topical risks are disclosed on pages 28 and 29
•The principal risks, including the Group’s objectives, policies and
processes for managing credit, capital, liquidity and funding, are
provided in the risk management section on pages 137 to 197
•The Group’s approach to stress testing and reverse stress testing,
including both regulatory and internal stresses, is described on
pages 142 and 143
Based upon this assessment, the directors have a reasonable
expectation that the Company and the Group will be able to
continue in operation and meet their liabilities as they fall due
over the next three years to 31 December 2028.
| Going concern | |
|---|---|
| The going concern of the Company and the Group is dependent<br><br>on successfully funding their respective balance sheets and<br><br>maintaining adequate levels of capital.<br><br>In order to satisfy themselves that the Company and the Group<br><br>have adequate resources to continue to operate for the<br><br>foreseeable future, the directors have reviewed the Group’s<br><br>operating plan and its funding and capital positions, including<br><br>a consideration of the implications of climate change. | The directors have also taken into account the impact of further<br><br>stress scenarios as well as a number of other key dependencies<br><br>which are set out in the risk management section under principal<br><br>risks and uncertainties: funding and liquidity on pages 181 to 186<br><br>and capital position on pages 144 to 150. Additionally, the<br><br>directors have considered the capital and funding projections<br><br>of the Company.<br><br>Accordingly, the directors conclude that the Company and<br><br>the Group have adequate resources to continue in operational<br><br>existence for a period of at least 12 months from the date of<br><br>the approval of the financial statements and therefore it is<br><br>appropriate to continue to adopt the going concern basis in<br><br>preparing the accounts. |
Lloyds Banking Group plc Annual Report and Accounts 2025
35
Sustainability
review
| Sustainability review introduction | 36 |
|---|---|
| Our value chain | 38 |
| Sustainability risks and opportunities | 39 |
| Supporting the transition to net zero | 42 |
Creating a
sustainable
and inclusive
future
We deliver on our purpose through creating
a more sustainable and inclusive future
Lloyds Banking Group plc Annual Report and Accounts 2025
36
Sustainability review introduction
Charlie Nunn
Group Chief
Executive
| Read full biography <br> |
|---|
The Group is committed to a purpose-driven strategy that
supports the needs of our customers, colleagues and communities,
while delivering long-term sustainable returns and creating value
for shareholders.
Access to quality and affordable housing
We are proud to play a leading role in the UK’s housing market,
working with communities, developers and local partners to
accelerate the delivery of quality, affordable homes for people who
need them most.
In 2025, we provided £17 billion to first-time buyers, supporting
business growth and helping 70,000 customers onto the property
ladder. Last year, we strengthened our mortgage offering with the
launch of ‘First Time Buyer Boost’, making an additional £5 billion
available to customers who may previously have missed out on
securing a mortgage. By making home ownership possible for
thousands more people, ‘Boost’ is helping customers realise their
ambitions of home ownership, while driving income growth in
a competitive market.
The Group has a long-standing commitment to support the social
housing sector and our financing is helping more people access
secure, affordable homes, while strengthening lending growth.
A brilliant example is our £100 million financing agreement with
the Sovereign Network Group, which will fund the retrofit of
4,500 social homes. This support will improve energy efficiency,
aiming to make these homes cost-effective, comfortable and
quality places to live.
Beyond championing the social housing sector, we are broadening
access to home ownership and making it easier to access new,
energy-efficient family homes. Through Lloyds Living, we now
operate a growing portfolio of over 5,450 professionally managed
homes, offering more rental and shared ownership options to
customers across the UK. Through our market-leading role in the UK’s
housing sector, we are successfully growing our business, while
helping more people move into quality homes and build their futures.
Empowering a prosperous future
As the UK’s only integrated financial services provider, we are deeply
committed to empowering our customers to achieve their financial
ambitions.
Since launching Ready‑Made Pensions in 2024, we’ve opened over
7,000 accounts, helping customers access simple, flexible ways to
build their retirement savings. Our Ready‑Made Investments are
empowering people to take control of their finances, with c.84,000
customers starting to invest since launch. With a market‑leading
fund charge, more of our customers’ money is invested directly into
their futures, with over £500 million invested to date. Both offerings
mean we’re supporting a growing customer base, while contributing
to an increase in other operating income through management fees.
We are using our extensive data and digital capabilities to
strengthen customers’ credit health and improve access to
borrowing. Over 500,000 customers improved their credit scores
every quarter last year, building resilience and confidence.
Our Benefits Calculator highlighted £93.3 million of support payable
to customers, and we paid £9.1 billion in interest payments in 2025,
supporting everyday resilience and deepening customer and
client relationships.
Supporting regional development
and communities
We are committed to supporting growth and creating opportunities
in regions and communities across the UK. In the North West, we
acted as mandate lead arranger for a £154 million debt commitment
to a critical carbon capture infrastructure project that creates 2,000
jobs, demonstrating how our finance delivers commercial growth and
regional development, while reducing emissions.
Last year, we supported the Community Development Finance sector
as it continues to scale. Our initial £43 million investment in 2024,
delivered through the £1 billion Regional Impact Fund, has since
supported over 370 regional businesses and helped unlock new
capital in local economies.
Our Lloyds Bank Foundations are another useful community
asset and we marked their 40th anniversary in 2025. Since the
Foundations were established in 1985, we have donated over
£800 million and countless hours of our colleagues’ time in support
of small and local charities across the UK. Beyond our Foundations,
our colleagues also spent more than 11,000 hours volunteering for
national homelessness charity Crisis, raising almost £5 million since
the start of our partnership in 2023. Our deep-rooted presence in UK
communities reflects the enduring impact of our charitable initiatives
and the strength of our commercial success, working together to
create lasting value for customers and communities.
Building an inclusive organisation
We are clear that our workforce needs to reflect the customers and
communities we serve. Over the past year, we have continued to
advance our 2030 inclusion ambitions, strengthening our focus on
increasing representation in executive roles. We remain committed
to removing barriers and providing opportunities for people to reach
their potential regardless of their socio-economic backgrounds. In
2025, our youth outreach programmes supported over 100,000
people across school, college and university, building essential skills
and strengthening the Group’s talent pipeline. Ensuring that
we build an inclusive workforce means we can attract – and retain –
the exceptional talent we need to deliver on our strategy and build
a business that meets evolving customer needs.
Supporting the UK transition
We continue to strengthen the resilience of our balance sheet and
investment portfolios by deploying capital to support the UK’s
transition. Since 2022, we have provided £70.9 billion of sustainable
finance and we have now invested £81.3 billion in climate-aware
strategies since 2020.
We are structuring new forms of finance that link institutional capital
to critical national infrastructure. One example is our support for the
first corporate issuance of a blue bond in sterling, co-coordinating
£250 million for London’s Thames Tideway Tunnel. Once completed,
we expect that the tunnel will reduce pollution, support the capital’s
long-term water resilience. It showcases how innovation in
sustainable finance can drive positive societal impact and robust
financial outcomes. Alongside this leadership in nature‑based
finance, we continue to play a critical role in strengthening the UK’s
energy security. Our support for major national projects, including
Sizewell C, reflects our commitment to backing large‑scale, clean
power that will help secure reliable, affordable energy for the UK.
These examples underline how we are supporting the long‑term
resilience of critical infrastructure, while unlocking significant
commercial growth opportunities aligned to the UK’s transition.
Continuing to deliver in 2026
We continue 2026 from a position of strength with a clear focus on
purposeful growth. By combining positive impact with sustainable,
long-term returns, we will continue to deliver on our purpose of
Helping Britain Prosper.
Lloyds Banking Group plc Annual Report and Accounts 2025
37
| >£93m<br><br>of benefits highlighted<br><br>as payable to customers<br><br>since the launch of our<br><br>Benefits Calculator | | --- || Championing sustainable<br><br>infrastructure finance<br><br>The Group played a pivotal role in supporting Tideway’s issuance of the<br><br>first sterling corporate blue bond by a UK corporate, raising £250 million<br><br>to finance the final stages of London’s Thames Tideway Tunnel.<br><br>This innovative financing accelerates the UK’s environmental goals by<br><br>reducing sewage pollution spills in the River Thames by around 95%,<br><br>while generating returns for investors and the Group.<br><br>By connecting institutional capital to critical infrastructure, Lloyds Bank<br><br>helps ensure long-term water resilience, supports local jobs, and fosters a<br><br>cleaner environment, demonstrating how sustainable finance can deliver<br><br>both positive societal impact and robust financial outcomes for the UK. | | --- |
| Group financing secures<br><br>regional water supply<br><br>The Haweswater Aqueduct Resilience Programme (HARP) demonstrates<br><br>how collaboration across the Group delivers value for customers and<br><br>sustainable returns.<br><br>By leveraging expertise from multiple teams, the Group committed<br><br>£100 million in long-term financing, as part of a £3 billion deal, a project<br><br>to safeguard the daily supply of clean drinking water for up to 2.5 million<br><br>people across Cumbria, Lancashire and Greater Manchester.<br><br>The project will create up to 1,200 local jobs, and channels annuity<br><br>customers’ investments into impactful projects. The result is a model<br><br>that benefits communities, facilitates competitive pricing and generates<br><br>sustainable returns. | | --- || Partnerships to<br><br>deliver more social<br><br>and supported<br><br>housing<br><br>In 2025, the Group partnered with<br><br>Homewards, a programme led by HRH The<br><br>Prince of Wales and The Royal Foundation,<br><br>to help make homelessness rare, brief and<br><br>unrepeated in six locations across the UK.<br><br>Aligned with the Group’s purpose of Helping<br><br>Britain Prosper, we committed £50 million<br><br>in new lending to support small and<br><br>medium-sized housing providers and<br><br>charities in the Homewards locations<br><br>and Liverpool, including those offering<br><br>wrap-around support for individuals<br><br>with complex needs.<br><br>This partnership will combine funding<br><br>with sector expertise, increasing access<br><br>to good quality housing. | | --- || c.1,800<br><br>colleagues enrolled in<br><br>new reskilling pathways<br><br>to develop future skills | | --- |
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38
Our value chain
Developing our value chain
and materiality approach
Our value chain
At the heart of our purpose of Helping Britain Prosper is a desire
to create value for all our stakeholders by understanding what
matters to them. Engaging with and listening to our stakeholders
is intrinsic to our business in order for us to act in a trusted
and responsible manner.
As one of the largest UK financial services organisations with the
majority of our operations and exposure in the UK, we are impacted
by the country’s macroeconomic, regulatory, political and physical
environment – which poses challenges and creates dependencies
as well as opportunities for the business. Our role is to facilitate
the flow of funds between participants in the economy, act as
custodians of financial assets and protect value for our customers,
all while considering long-term trends and their impact on what
we do and the value we create for the society and communities
in which we operate.
Our customers, clients and shareholders input into our operations
by trusting us with their savings and investments. We, in turn, ensure
that capital is allocated efficiently to support borrowing needs and
deliver value for those we serve.
Access to credit supports economic growth, as customers and
clients use their borrowings to make investments and purchases,
propelling production and infrastructure development, supporting
communities and wider society. We work with our customers and
clients to make sure we help them fulfil their ambitions delivering
products in a responsible manner.
Our operations are built around this management of capital for our
stakeholders requiring safeguarding of our customers’ money and
data. We know our colleagues are the key ingredient to our success
and we aim to create an inclusive and supportive environment in
which everyone can thrive. Suppliers are asked to comply with
specific Third Party Supplier Policies when applicable to the services
they provide. All suppliers are expected to conform to our Code of
Supplier Responsibility. We operate with prudent and appropriate
internal risk management, together with our regulators, ensuring
we protect our customers and clients, colleagues and communities.
We deliver sustainable returns to our shareholders while maintaining
a safe, stable and prosperous financial system for the UK.
We consider ‘materiality’ to be the threshold at which a
sustainability matter becomes sufficiently important to our
investors and other stakeholders that it should be reported. We
also consider disclosure standards and other applicable rules and
regulations as part of our materiality assessment for determining
material topics and the associated risks and opportunities arising
from these topics. Further detail on how we apply materiality in
determining our climate risks can be found within our risk
management section on page 150.
Our material sustainability topics
Our material topics list considers both our external and internal
environments, which includes our value chain, markets in which we
operate, products, services and activities, as well as horizon scanning
and stakeholder engagement. Our internal environment includes
colleagues, processes and policies, culture and management.
| We prioritise our material topics based on: | |
|---|---|
| The strategic importance of the issue to the Group | |
| The importance of the issue to our stakeholders | |
| The social, economic and environmental impact of each<br><br>topic in relation to the core activities, products and<br><br>services provided by the Group |
Our materiality review and impact analysis was initially undertaken
in line with the UNEP FI Principles for Responsible Banking and
among other inputs, the UN Sustainability Development Goals
(SDGs) in 2020 and is refreshed and reviewed annually. In 2025,
we reviewed our commercial exposures and operations to refresh
both our positive and negative impacts and sustainability‑related
risks and opportunities. We confirmed our analysis and advanced
our approach to financial materiality, integrating sustainability
considerations into existing materiality processes and tools.
Identifying and assessing our material sustainability risks allows us
to understand where we have the opportunities to deliver impact.
The assessment of our opportunities drives our strategy and
business model through our purpose pillars, with progress measured
against our ambitions, targets and pledges.
| Our assessment has identified the following material topics: | |
|---|---|
| •Artificial intelligence<br><br>•Biodiversity and nature<br><br>•Climate change<br><br>and transition<br><br>•Cyber security and<br><br>data privacy<br><br>•Diversity, equity<br><br>and inclusion | •Financial crime<br><br>•Financial inclusion<br><br>and resilience<br><br>•Governance and<br><br>conduct<br><br>•Health and wellbeing<br><br>of colleagues<br><br>•Human rights<br><br>•Regional inequalities |
| Further details on these material<br><br>topics and our responses to managing<br><br>these areas can be found on page 2 in<br><br>our sustainability report <br> |
Future developments to our materiality approach
We are leveraging the knowledge gained from our understanding
of our value chain and material topics to enhance our materiality
approach in readiness for upcoming reporting standards. The Group
is reviewing the regulatory landscape and preparing for readiness to
report in alignment with expected UK government endorsement of
UK Sustainability Reporting Standards. Our current expectation is
that the Group will be required to report under EU CSRD for the
financial year 2028.
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39
Sustainability risks and opportunities
Integrating material topics into risk management
Our material topics have helped inform our understanding
of the Group’s key sustainability risks and opportunities,
across a range of Environmental, Social and Governance topics.
Identifying and assessing our material sustainability topics and
associated risks and opportunities allows us to align them to, and
consider their impact on, our strategy and purpose pillars, and be
cognisant of their impact on our business model both now and in
the future.
Sustainability risks
As shown in the table on the next page, the impacts from
sustainability risks largely manifest through other principal risks that
the Group faces (including credit, conduct and operational risks).
Our approach to principal risk identification, assessment and
management as part of our risk management framework can
be found on page 141. For sustainability-related risks our ambition
is to embed consideration of these risks into our wider risk
management processes.
Risks covering social and governance matters are considered
in line with the material topics we have identified. In addition,
environmental risks (encompassing Climate and Nature) are primarily
considered to arise through two channels, physical or transition risks:
•Physical risks arising from changes in climate or weather
patterns, or the degradation of nature. These can either be acute
(event driven such as floods, storms or pest outbreaks), or
chronic (longer-term shifts such as rising sea levels or droughts)
•Transition risks due to societal changes or those associated with
moving towards a low carbon economy and nature recovery,
including changes to policy, legislation and regulation, technology
and market, or legal risks from failing to manage the transition
Consideration of sustainability-related risks within our risk
management framework continues to develop, with our approach
most mature in our established approach to ESG credit risk
management. Further details on this process can be found within
our sustainability report .
We will continue to enhance our overall approach to credit and
other risks as part of further development of the Group’s approach
to risk management and principal risks we face.
Sustainability opportunities
Our biggest opportunities to support business growth, our
colleagues and our customers, are in relation to the areas where
we have the largest lending and investment portfolios.
Understanding our risks and impacts helps us to identify key
opportunities to support our customers. Identifying and assessing
our material risks (including climate) allows us to understand where
we have the opportunities to deliver impact.
The identification, assessment and management of our
opportunities is undertaken on a regular basis by our functional-level
and divisional teams, and approval of new initiatives governed in line
with our sustainability governance structure, as detailed on pages 80
to 81.
Through this work we have identified opportunities aligned to our
purpose pillars outlined on page 14, such as responding to increasing
customer preference for sustainable products and lending,
supporting investment in transition-related technology, embracing
opportunities to reduce our carbon footprint, increasing the supply
of social and affordable housing as well as empowering and
supporting our customers and clients to build financial resilience.
The assessment of our opportunities drives our strategy
and business model through our purpose pillars, with progress
measured against our ambitions, targets and pledges.
We assess material risks and opportunities over the short,
medium and long term as sustainability-related matters materialise
over time. The timings of these will also be impacted by external
factors, such as government policy and regulation, technology
developments, as well as our customers' response. We have aligned
time frames to those used for business planning:
The table within this section provides an overview of our
sustainability risks and opportunities assessment.
| Purpose in action |
|---|
Supporting our agricultural
clients to transition
Moor Farm, a 154-hectare enterprise in Baschurch, Shropshire,
demonstrates how sustainability and profitability can work
hand in hand.
After experiencing financial challenges in the cattle business,
they adopted regenerative practices inspired by Gabe Brown.
Key actions included eliminating ad-lib feed, saving £30,000
annually and transitioning to a grass-based system with
strip grazing.
Participation in the Soil Association Exchange baselining
audit, funded by Lloyds Bank, enables Moor Farm to measure
sustainability performance, track progress, and make targeted
improvements. Adoption of regenerative practices, quantified
through the SAX tool, opens access to premium markets. With
demand for ethical, low-carbon food rising, the farm is well
positioned to capture new revenue streams. Moor Farm
illustrates how regenerative agriculture can deliver cost savings,
climate resilience, and market differentiation, offering significant
potential for profitability and sustainability when scaled across
the sector.
We are committed to supporting customers on their transition
journeys, recognising that sustainable business practices are
essential for long-term prosperity.
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40
Sustainability risks and opportunities continued
|
Risks | |||||
|---|---|---|---|---|---|---|
| Risk description | Principal risk | Driver | Time<br><br>horizon | How this is monitored | Sustainability<br><br>Material Topic | |
| Deterioration in customers’ creditworthiness,<br><br>affordability or valuations of assets and<br><br>investments from the transition towards<br><br>a low-carbon economy and/or the impact of<br><br>extreme weather events or natural hazards | Credit,<br><br>Market |  <br><br> <br><br> <br><br> <br><br> <br><br> |
Short,<br><br>Medium,<br><br>Long | Elements of climate change incorporated into annual<br><br>ECL assessment, see page 278, along with a range of<br><br>quantitative metrics across portfolios, for example,<br><br>EPC ratings and flood risk for residential mortgages.<br><br>Qualitative updates on nature, although<br><br>measurement capability is still evolving | Climate change,<br><br>Biodiversity and<br><br>nature | |
| General insurance – greater losses from higher<br><br>volume of home insurance claims | Insurance<br><br>underwriting | <br><br><br><br> |
Short,<br><br>Medium,<br><br>Long | Defined risk appetite. For further details of insurance<br><br>risk and policy, please see page 133 of our<br><br>sustainability report <br> |
Climate change | |
| Life insurance – changes in mortality, morbidity<br><br>and longevity risks driven by climate and<br><br>environment, such as changes in air quality,<br><br>temperature and vector-borne diseases | Insurance<br><br>underwriting | <br><br><br><br> |
Short,<br><br>Medium,<br><br>Long | Deaths, critical illness, sickness inception and<br><br>recovery rates, policy lapses and paid-up rates for<br><br>material business lines are monitored and managed.<br><br>Pricing and product terms and conditions are<br><br>designed to reduce risk | Climate change,<br><br>Biodiversity and<br><br>nature | |
| Disruption to the Group’s supply chain or<br><br>damage to premises due to increased frequency<br><br>and severity of extreme weather events, such<br><br>as floods and storms affecting services | Operational | <br><br><br><br> |
Short,<br><br>Medium,<br><br>Long | Invocation of Group Incident Management (GIM)<br><br>Operational Framework. Incident reports reviewed<br><br>monthly at Group Incident Operating Forum (GIOF) | Climate change,<br><br>Biodiversity and<br><br>nature | |
| Failure to deliver on our voluntary sustainability<br><br>commitments including supporting the<br><br>transition to net zero | Compliance |  |
Short,<br><br>Medium,<br><br>Long | Progress against our emission reduction targets and<br><br>sustainable lending and investments. For further<br><br>details please see pages 43 to 47 | Climate change,<br><br>Governance and<br><br>conduct | |
| Material errors in external sustainability<br><br>reporting, or failure to meet the relevant<br><br>disclosure requirements | Operational | |
Short,<br><br>Medium | Qualitative updates provided to Group executive<br><br>committees. Further details can be found on<br><br>pages 80 to 81 | Climate change,<br><br>Diversity, equity<br><br>and inclusion,<br><br>Human rights | |
| External perception of greenwashing in the<br><br>Group’s disclosures, marketing or product<br><br>communications | Conduct | <br><br> |
Short,<br><br>Medium | Qualitative updates as part of executive governance<br><br>on the Group’s communications strategy and<br><br>associated policy framework | Governance and<br><br>conduct | |
| Financial hardship as a result of<br><br>macroeconomic pressures resulting<br><br>in delinquencies | Credit,<br><br>Market | |
Short,<br><br>Medium | Scenario updates are presented to executive<br><br>committees on a regular basis. See page 92 | Financial inclusion<br><br>and resilience | |
| Financial education gaps in society resulting in<br><br>lower engagement with financial products and<br><br>lower level of financial resilience | Credit,<br><br>Conduct | |
Short,<br><br>Medium | Purpose pillar updates are provided to Responsible<br><br>Business Committee. See page 97 | Financial inclusion<br><br>and resilience | |
| Artificial intelligence impacting customer<br><br>service experience and presenting limitations<br><br>for customers with accessibility needs | Conduct | |
Short,<br><br>Medium | Qualitative updates given to Board Risk Committee<br><br>see page 81 | Financial inclusion<br><br>and resilience,<br><br>Governance and<br><br>conduct | |
| Colleague wellbeing – the failure to provide<br><br>an appropriate colleague culture, reward,<br><br>talent management and wellbeing policies<br><br>and process | Operational | |
Short,<br><br>Medium | Quantitative and qualitative indicators, such as<br><br>succession, diversity, retention see pages 22 to 23 | Diversity, equity and<br><br>inclusion, Health and<br><br>wellbeing of<br><br>colleagues | |
| Changes in social sentiment and expectations<br><br>of the Group in relation to sustainability topics | Conduct | |
Medium,<br><br>Long | Scenario updates are presented to executive<br><br>committees on a regular basis. See page 97 | Financial inclusion<br><br>and resilience,<br><br>Health and<br><br>wellbeing of<br><br>colleagues | |
| Losses incurred by our customers and<br><br>organisation due to economic crime. | Economic<br><br>crime | |
Short,<br><br>Medium | Risks monitored through regular updates to<br><br>executive committees, key indicators and risk<br><br>appetite reviews. See page 179 | Financial crime | |
| Ineffective technology implementation could<br><br>result in service disruption due to internal<br><br>failure or cyber-attack, threatening business<br><br>continuity and customer experience | Operational | |
Short,<br><br>Medium,<br><br>Long | Qualitative updates given to Responsible Business<br><br>Committee see page 81 | Cyber security and<br><br>data privacy,<br><br>Governance and<br><br>conduct |
Lloyds Banking Group plc Annual Report and Accounts 2025
41
|
Opportunities | |||||
|---|---|---|---|---|---|---|
| Opportunity description | Principal risk | Driver | Time<br><br>horizon | How this is monitored | Sustainability<br><br>Material Topic | |
| Reducing the emissions and improving the<br><br>resilience of our own operations | Operational,<br><br>Climate | <br><br><br><br> |
Short,<br><br>Medium | Our own operational pledges. For further details, see<br><br>page 70 of our sustainability report <br> |
Climate change | |
| Providing finance to support investment in<br><br>climate-related technology and solutions | Market,<br><br>Climate,<br><br>Credit | <br><br> |
Short,<br><br>Medium | Our Commercial Banking sustainable lending target<br><br>see page 45 | Climate change | |
| Develop products to support sustainable<br><br>projects including loans and green bonds | Market,<br><br>Credit | <br><br><br><br> |
Short,<br><br>Medium | Our sustainable lending targets. For further details<br><br>please see page 45 | Climate change,<br><br>Regional inequalities | |
| Increasing consumer preference for<br><br>sustainable products | Market | <br><br><br><br> |
Short,<br><br>Medium | Our Scottish Widows Lifetime Investments default<br><br>proposition for workplace customers includes<br><br>funds that integrate ESG-tilts and apply our<br><br>exclusions policy | Climate change,<br><br>Regional<br><br>inequalities,<br><br>Financial inclusion<br><br>and resilience | |
| Develop industry partnerships to help drive<br><br>sustainable, low carbon and nature positive<br><br>solutions for our customers to transition | Conduct,<br><br>Climate | <br><br><br><br> |
Short,<br><br>Medium | Our sustainable lending targets. For further details<br><br>please see page 45. For details on our partnerships<br><br>that support the UK transition see our website <br> |
Climate change,<br><br>Biodiversity<br><br>and nature,<br><br>Regional inequalities | |
| Supporting nature recovery projects as a test<br><br>and learning on how we can leverage green<br><br>finance to support nature restoration in<br><br>the future | Market,<br><br>Credit | |
Medium,<br><br>Long | Internal KPIs set at a project level | Biodiversity and<br><br>nature | |
| Transforming the inclusion of our business<br><br>to support our colleagues and enable us<br><br>to develop more inclusive and accessible<br><br>products to serve our customers | Operational | <br><br> |
Short,<br><br>Medium | Colleague inclusion performance see page 23<br><br>and support provided to businesses owned<br><br>by Black, disabled and women entrepreneurs, see<br><br>page 28 of our sustainability report <br> |
Diversity, equity and<br><br>inclusion, Human<br><br>Rights | |
| Digital and artificial intelligence tools to<br><br>support, empowering customers financial<br><br>resilience and to identify customer<br><br>vulnerabilities while ensuring good outcomes<br><br>for customers | Conduct,<br><br>Operational | |
Short,<br><br>Medium | Qualitative updates given to Responsible Business<br><br>Committee see page 81 | Artificial Intelligence,<br><br>Financial inclusion<br><br>and resilience,<br><br>Governance and<br><br>conduct | |
| Opportunities to invest in the UK’s regions and<br><br>develop products and services that support<br><br>regeneration, job creation and productivity,<br><br>collaborating with government | Conduct,<br><br>Operational | <br><br> |
Short,<br><br>Medium | Funding provided to support communities and<br><br>regions within the UK. See pages 37 to 47 of our<br><br>sustainability report <br> |
Regional inequalities | |
| Support the government ambitions increasing<br><br>accessibility and availability of affordable<br><br>quality and sustainable housing | Conduct,<br><br>Operational | <br><br> |
Short,<br><br>Medium,<br><br>Long | First time buyer performance and sustainable<br><br>or sustainability-linked social housing financing<br><br>to the social housing sector. See page 14 of our<br><br>sustainability report <br> |
Regional<br><br>inequalities,<br><br>Financial inclusion<br><br>and resilience | |
| Develop products that support customer<br><br>lifestyle needs (e.g. pension products; income<br><br>protection) so the Group can support our<br><br>customers to plan for the future, and grow our<br><br>customer base and assets under management | Conduct,<br><br>Operational | <br><br><br><br> |
Short,<br><br>Medium | Our workplace pension, Ready-Made Pension,<br><br>Ready-Made Investments and insurance offerings.<br><br>See pages 31 to 32 of our sustainability report <br> |
Financial inclusion<br><br>and resilience |
| £633m | £3.2bn | >84,000 |
|---|---|---|
| financing for<br><br>Sizewell C energy<br><br>security project | of new finance<br><br>supporting social<br><br>housing in 2025 | customers empowered<br><br>through our ready-<br><br>made investments |
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42
Supporting the transition to net zero
How sustainability is factored
into our internal reporting and
planning process
Climate considerations form part of our planning and forecasting
activities. We consider climate effects in our base case economic
scenario and forecast financed emissions alongside climate risks and
opportunities within the Group’s operating plan, primarily across
four key areas: Bank financed emissions, Scottish Widows
investment carbon intensity, own operations and supply chain.
Our planning process acknowledges the dependencies on external
factors such as policies, technology developments and customer
behaviour. We continue to monitor the impact of these external
factors on our Group ambitions and targets alongside working
in partnership with our customers and other stakeholders
to support the UK transition.
How we monitor and report sustainability-related matters:
•We forecast Bank financed emissions to 2030, including
high-carbon sectors, own operations, and, since 2025,
the Scottish Widows carbon investment footprint
•Internally, we report quarterly on sustainable lending and
investments, and regularly on financed emissions, with 2025
seeing the inclusion of wider social sustainability metrics;
these processes inform executive remuneration and Board
risk appetite
•The majority of our sustainability costs incurred by the Group
form part of business-as-usual activities. In addition, finance
tracks specific project-related sustainability investments across
climate, nature and social initiatives, engaging directly with
business units to ensure strategic alignment, with around
c.£28 million dedicated in 2025 to support customer transition,
alongside ongoing activities
•Financial statement preparation considers climate change
impacts on the Group’s financial position, with no material
impact forecasted to expected credit loss, see page 278
| Progress in reduction of our Group’s emissions (MtCO2e)1 |
|---|
Our environmental strategy
Our environmental strategy supports growth and balance sheet
resilience by supporting our customers, clients and the broader
economy transition. We do this by managing our impacts, mitigating
our risks, and seeking growth opportunities through financing and
investment activities.
Our strategy is based on understanding the changes and solutions
needed to enable the transition, the associated opportunities, risks and
dependencies; supported by scenario analysis. It is supported by our
engagement with clients on Client Transition Plans, investees through
our stewardship approach and suppliers helping us to understand what
this means in reality for them and the wider economy.
Recognising the global shortfall in the pace of transition, our
systems-led approach identifies material risks and opportunities,
prioritising actions to unlock progress. We address interdependencies
across sectors and extend our focus beyond climate to nature and
social considerations, aiming for a Just Transition, with the actions
we take closely aligning with our purpose pillars.
Our emissions reduction ambitions
The Group have set four ambitions across our own operations,
supply chain and lending and investments to support the
decarbonisation of our business in line with limiting global warming
to 1.5°C. We recognise that there are significant challenges and
external dependencies in many areas of the economy, including the
technologies, solutions and policies required, that will need to be
addressed for us to achieve these. The progress we have made
against our ambitions are shown within each section.
To date, our emissions footprint has guided where we have the
biggest role to play. We calculate our emissions in line with the
Greenhouse Gas Protocol, further detail is in our sustainability metrics
basis of reporting . The makeup of our lending portfolio means our
biggest exposure to sectors at increased climate risk is in relation to
our residential mortgages, real estate sector and agriculture. The scale
of our emissions varies across different areas of the business.
A breakdown of our Group’s absolute emissions is shown to the right.
What this looks like for the Group
The scale of our current emissions varies across
different areas of the business.
| Bank<br><br>financed |
| --- || Baseline year2<br><br>MtCO2e<br><br>29.2 |
| --- || 2024 MtCO2e<br><br>18.6 |
| --- || Baseline year2<br><br>MtCO2e<br><br>12.5 |
| --- || Scottish<br><br>Widows<br><br>financed3 |
| --- || 2024 MtCO2e<br><br>8.8 |
| --- || Baseline year2<br><br>MtCO2e<br><br>0.53 |
| --- || Supply<br><br>chain4 |
| --- || 2024/25<br><br>0.51<br><br>MtCO2e |
| --- || Own<br><br>operations |
| --- || Baseline year2<br><br>MtCO2e<br><br>0.18 |
| --- || 2024/25<br><br>0.11<br><br>MtCO2e |
| --- || 1Based on 2024 data available for Bank and Scottish Widows financed emissions Scope 1<br><br>and 2 emissions only. 2024/25 period end data for supply chain emissions and own<br><br>operations includes Scope 1, 2 and 3 categories and is reported on a market basis.<br><br>2Baseline year determined by ambition (2018 for Bank, 2019 for Scottish Widows, 2021/22 for<br><br>Supply Chain and 2018/2019 for Own Ops) MtCO2e – Megatonnes Carbon Dioxide equivalents.<br><br>3Scottish Widows ambition is intensity based for details on progress see page 45. The<br><br>difference to the amount shown in the diagram is due to rounding differences.<br><br>4Supply chain emissions are calculated from supplier spend totalling £4.4 billion (net of VAT).<br><br>In addition there is a further £5.7 billion (gross spend) spread across other business areas.<br><br>For further details on our methodology see sustainability metrics basis of reporting .<br> |
| --- || 1Baseline year determined by ambition (2018 for Bank, 2019 for Scottish Widows, 2021/22<br><br>for Supply Chain and 2018/2019 for Own Ops) MtCO2e – Megatonnes Carbon Dioxide<br><br>equivalents.<br><br>2Based on 2024 data available for Bank and Scottish Widows financed emissions Scope 1<br><br>and 2 emissions only. 2024/25 period end data for supply chain emissions and own<br><br>operations includes Scope 1, 2 and 3 categories and is reported on a market basis.<br><br>3Supply Chain emissions are calculated from supplier spend totalling £4.4 billion (net of<br><br>VAT). In addition there is a further £5.7 billion (including VAT) spread across other business<br><br>areas. Further details on our methodology see sustainability metrics basis of reporting<br><br>2025.<br><br>Further details on our methodology see sustainability metrics basis of reporting 2025 .<br> |
| --- |
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43
| Bank<br><br>Our ambition<br><br>Work with customers, government and<br><br>the market to help reduce the carbon<br><br>emissions we finance by more than 50%<br><br>by 2030 on the path to net zero by<br><br>2050 or sooner.<br><br>1From a 2018 baseline, covering Scope 1 and 2 emissions. |
| --- || Our progress | | | | |
| --- | --- | --- | --- | --- |
| MtCO2e reduction (%) | l | Progress <br>
| l | 2030 ambition |
Our latest estimate shows a 36% reduction in our Bank financed
emissions from our 2018 baseline of 29.2 MtCO2e.
Our net zero ambition was set in 2020 and informed by the
UK CCC’s assessment then of UK sectoral emissions reductions
pathways. While we have made progress to date, achieving
this ambition depends on how quickly the underlying sectors
transition given the challenges and external dependencies
that exist in many areas of the economy. These challenges
and dependencies are related to policy and regulatory support,
market readiness and public awareness, technology availability
and infrastructure, supply chains and workforce skills and grid
decarbonisation. We explain specific dependencies by system
in our transition plan, see our sustainability report .
We are committed to supporting clients and the wider economy
through this transition, but variability in policy, technology
deployment and market conditions will influence the outcomes
we are able to achieve.
| 2018 Baseline |
|---|
Our actions
Our overall Bank financed emissions reduction ambition is
supported by ten sector-specific NZBA targets covering our
highest emitting sectors.
These targets are supported by sector-specific transition plans
which detail how we are supporting our customers and clients
to transition in these areas.
| Sector target summary | ||||
|---|---|---|---|---|
| System and targets1 | Baseline year of target | Target baseline2 | 2024 Target progress | Divergence from pathway3 |
| Greening the built environment | ||||
| UK mortgages – 35% reduction in emissions<br><br>intensity to 30kgCO2e/m2 by 2030 | 2020 | 46kgCO2e/m2 | 42kgCO2e/m2 | 2.0% |
| Commercial and residential real estate (C&RRE) –<br><br>43% reduction in emissions intensity to 22kgCO2e/<br><br>m2 by 2030 | 2021 | 38kgCO2e/m2 | 34kgCO2e/m2 | 5.6% |
| Low carbon transport | ||||
| Retail motor (cars and LCVs) – 48% reduction in<br><br>emissions intensity to 82gCO2e/km by 2030 | 2018 | 157gCO2e/km | 132gCO2e/km | (1.8%) |
| Road passenger transport – 47% reduction in<br><br>emissions intensity to 67gCO2e/pkm by 2030 | 2019 | 125gCO2e/pkm | 109gCO2e/pkm | 0.6% |
| Automotive (OEMs) – 47% reduction in emissions<br><br>intensity to 131gCO2e/vkm by 2030 | 2020 | 246gCO2e/vkm | 234gCO2e/vkm | 18.7% |
| Aviation – 31% reduction in emissions intensity to<br><br>788gCO2e/rtk by 2030 | 2019 | 1,143gCO2e/rtk | 743gCO2e/rtk | (24.4)% |
| Sustainable farming and food | ||||
| Agriculture – 23% reduction of absolute emissions<br><br>to 5.1MtCO2e by 2030 | 2021 | 6.6MtCO2e | 5.4MtCO2e | (13.3)% |
| Energy transition | ||||
| Oil and gas – 50% reduction in absolute emissions<br><br>to 3.6MtCO2e by 2030 | 2019 | 7.2MtCO2e | 1.6MtCO2e | (59.3)% |
| Power generation – 81% reduction in emissions<br><br>intensity to 51gCO2e/kWh by 2030 | 2020 | 264gCO2e/kWh | 6gCO2e/kWh | (96.4)% |
| Thermal coal – Full exit of thermal coal power in<br><br>the UK by 2023. Full exit from all entities that<br><br>operate thermal coal facilities by 2030 | – | – | – | –% |
| 1There are rounding differences between target baseline, percentage reduction and 2030 target. Targets cover on-balance sheet assets. The scope of our target has been defined<br><br>within the sustainability metrics basis of reporting 2025 available at sustainability downloads .<br><br><br>2C&RRE, Retail motor, Road passenger transport, Automotive (OEMs), Aviation, Agriculture, Power and Oil and gas baselines have been updated due to methodology changes,<br><br>correction of misstatements due to error and revised client data.<br><br>3Shows divergence between 2024 actual and 2024 reference pathway emission intensity. Arrow up – performance for 2024 ahead of reference pathway. Arrow down –<br><br>performance for 2024 behind reference pathway. Retail motor divergence is based on divergence from scenario pathway as no reference pathway is available. |
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Supporting the transition to net zero continued
Overview of decarbonising by system
As part of our planning process, we forecast our Bank financed
emissions to 2030 for our priority sector targets, comparing this
to our 2030 target outcome. Within the sustainability report our
progress updates include insights on the key risks, dependencies and
progress on achieving our 2030 targets. For further details please
see individual sector updates within our sustainability report .
Energy
Energy contributes to 19.2%1,2,3 of UK emissions, and makes up 1.6%
of the Group’s Bank financed emissions. This system enables the
decarbonisation of society and other systems or sectors such as the
electrification of passenger transport or domestic heating.
To support the transition of this system our activities include:
•Continuing to engage with clients on their net zero transition,
reviewing and considering their transition-related targets,
commitments and progress
•Aligning current and future growth strategy to the UK
government’s Clean Power 2030 ambition, in order to continue
playing a role in the transition
Greening the built environment
Contributing to 25.1%1,2 of UK emissions and 26.3% of the Group’s
Bank financed emissions the built environment touches a number of
areas across the Group, including our residential mortgages portfolio
and our commercial real estate clients.
The energy system is intrinsically linked to decarbonisation of the
built environment with decarbonisation of electricity, a critical
enabler alongside a switch away from gas boilers to lower carbon
heating alternatives.
To support the transition of this system our activities include:
•Continuing to enhance data capability across the system to
understand risks and impacts and target actions effectively
•Identifying finance models to support customers and make
retrofit affordable
•Enhancing customer education to understand options available
•Encouraging development of policy frameworks to support
retrofitting at scale
•Unlocking skills through our participation in industry-leading
skills and diveristy initiatives
Low carbon transport
Surface transport is the highest emitting sector in the UK,
accounting for 23.2%1,2 of total emissions and 15.1% of the Bank’s
financed emissions. Our low carbon transport system addresses
transport by road and by air, with surface transport the highest
emitting sector in the UK.
To support the transition of this system our activities include:
•Considering innovative financing models, such as cashback
incentives, to encourage customer uptake of low carbon
transport, with the Group financing 1 in 8 electric vehicles
on UK roads
•Using data to highlight benefits to customers of switching
to low carbon vehicles
•Facilitating the move to greener vehicles by considering support
for the required support infrastructure and associated new
financing opportunities
Sustainable farming and food
Responsible for 12.4%1,2 of UK emissions and 29.0% of Bank financed
emissions. Our system addresses primary agriculture and the food
value chain and plays an important role in ensuring food security
in the UK.
To support the transition of this system our activities include:
•Articulating the challenges through policy engagement with
government and industry bodies
•Investing in tools that will support our customers, including
collaborating with Soil Association Exchange and Finance Earth
to pilot new financing models that reward farmers for prioritising
environmental outcomes
•Engaging with our most material food, drink and retail clients
though our Client Transition Plan assessments for the sector
•Launching the Agriculture Transition Finance loan to help
farmers adopt regenerative practices
1Sourced from Department for Energy Security and Net Zero – 2023 UK greenhouse
gas emissions.
2UK emissions from 2023, including energy supply were 96.6MtCO2e for built
environment, 89.1MtCO2e for Passenger Car, Electric Vehicle, Buses and Light Duty
Vehicles, and aviation transport and 47.7MtCO2e for sustainable farming and food.
Total UK emissions from 2023, including energy supply where 385.0MtCO2e for the
entire UK.
3UK emissions from energy supply in 2023 were 74.0MtCO2e. Emissions for the Energy
transition system relate to UK energy supply emissions including emissions from power
generation and fuel supply.
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45
| Sustainable financing<br><br>and investment targets1<br><br>We have established sustainable<br><br>finance and investment targets<br><br>aligned to our core business areas. |
|---|
Since 2022 our cumulative sustainable lending is £70.9 billion
covering our Commercial Banking, Motor and Mortgages
businesses. Our active targets for these areas are £30 billion
sustainable finance for Commercial Banking customers by the
end of 2026, £10 billion of financing for electric vehicles and
£11 billion of mortgage lending for EPC A and B rated properties
both by the end of 2027. We achieved our original target to
invest in climate-aware strategies at the end of 2024. At year
end 2025 we have £81.3 billion invested in climate-aware
strategies. This is a significant rise compared to the prior period,
driven by the launch of our new workplace proposition, Scottish
Widows Lifetime Investment, which includes a higher proportion
of climate-aware ESG-tilted investment strategies.
| Our Sustainable finance and investment targets | | --- || Group-wide sustainable finance<br><br>Commercial Banking1,2,3 | | | --- | --- | | | Total £45bn<br><br>(cumulative target) | | Mortgages1,4 | £40.3bn<br><br>Current progress | | | Total £21bn<br><br>(cumulative target) | | Motor1,5 | £18.5bn<br><br>Current progress | | | Total £18bn<br><br>(cumulative target) | | | £12.1bn<br><br>Current progress | | Total sustainable finance achieved since 2022 | £70.9bn || l | Performance against previous target | Target outperformance | | --- | --- | --- | | l | Performance against current target | Target |
| Target | ||
|---|---|---|
| £15bn | t 15.8bn | |
| Progress (bn lending) |
All values are in British Pounds.
| Target | |||
|---|---|---|---|
| 10bn | |||
| t £5.3bn | 11bn | ||
| Progress (bn lending) | 2027 target |
All values are in British Pounds.
| Target | ||
|---|---|---|
| t 2.8bn | ||
| Progress (bn lending) |
All values are in British Pounds.
| Scottish Widows6 | |
|---|---|
| Discretionary investment in climate-aware strategies | £81.3bn |
1As defined within the Sustainable Financing Framework available in our sustainability downloads
2The new Commercial Banking target (1 January 2024 onwards) relates to both Corporate and Institutional Banking customers and Business and Commercial Banking customers. From 1
January 2022 to 31 December 2023 the target applied to corporate and institutional customers only, and was measured against the criteria set out in the 2023 Sustainable Financing
Framework.
3Includes £0.6bn lending to SMEs located in the most socio-economically disadvantaged areas in the UK and to female-led businesses, both of which form part of the social eligibility
criteria, included for the first time in 2025.
4New mortgage lending on UK (excluding Channel Islands) residential property that meets an EPC rating of B or higher. The target includes remortgages but excludes further advances.
£18.5 billion covers the period from January 2022 to September 2025. £5.3 billion was achieved from 1 January 2025 to 30 September 2025. There are rounding differences between the
cumulative total and the individual target positions.
5From 1 January 2025 the new target includes new lending advances and operating leases for EVs; includes cars and vans. From 1 January 2022 to 31 December 2024 the target covered
EVs and plug-in hybrid vehicles new lending advances for Black Horse and operating leases for Lex Autolease (gross) and operating leases for Tusker (gross, post-acquisition by the
Group (February 2023)); includes cars and vans. There are rounding differences between the cumulative total and the individual target positions.
6This 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.
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Supporting the transition to net zero continued
| Scottish Widows<br><br>Our ambition<br><br>Achieving net zero emissions across our<br><br>investment portfolio by 2050, with the<br><br>interim target of halving our carbon<br><br>footprint by 2030. | ||
|---|---|---|
| To support our ambition we set ourselves the following targets:<br><br>•Invest between £20 billion to £25 billion in climate-aware<br><br>investment strategies1, with at least £1 billion invested into climate<br><br>solutions investments by 2025<br><br>•Halving the carbon footprint2,3 of our investment portfolios by 2030 | ||
| Our progress | ||
| --- | --- | --- |
| tCO2e/m invested | ||
| 20234 | Baseline4 | |
| Carbon footprint (where data is available)(tCO2e/m) | 64.7 | 116.1 |
| 1Climate-aware investment strategies: This refers to funds that have a focus on investment in companies that are either adapting their businesses to reduce carbon emissions or developing solutions to address climate change. We will invest in climate solution investments either within these strategies or other funds. For more information on our calculation methodology for these targets please see the sustainability metrics basis of reporting 2025 which is available on our sustainability downloads . 2From a 2019 baseline. 3Carbon footprint is a measure of carbon intensity calculated as absolute value of emissions applicable to an investment divided by the value of investment. The carbon footprint measured, where data is available, for year end 2024 was 55.2 tCO2e/m against a 2019 baseline of 116.1 tCO2e/m. 4The metrics for 2019 and 2023 have not been restated in the current period. |
All values are in British Pounds.
Our Scottish Widows Group 2024 carbon footprint was
55.2 tCO2e/£m, down from our 2019 baseline of 116.1 tCO2e/£m,
which represents a 52% decrease. Whilst financed emissions
continued to decline over 2024, the more significant driver of the
fall in footprint was the rise in the market value of the investment
portfolio in line with market performance over the year. We consider
the long-term trend of our carbon footprint to avoid the impact of
short-term market volatility on results and decision making.
We achieved our original target to invest in climate-aware
strategies at the end of 2024. At year end 2025 we have
£81.3 billion invested in climate-aware strategies. This is a
significant rise from what we’ve already achieved, driven by
the launch of our new workplace proposition, Scottish Widows
Lifetime Investment, which includes a higher proportion of
climate-aware ESG-tilted investment strategies.
Our updated transition plan – The Road to 2030 and Beyond –
was released in October 2025 and reaffirms our commitment
to investing for a net zero by 2050 transition that delivers good
customer outcomes. In this new plan, we detail how we invest and
influence to drive the transition, and monitor our progress. The
Plan shifts focus from just looking at portfolio decarbonisation
towards enabling real-world emissions reduction and delivering
resilient, responsible investment outcomes for customers.
Key areas of focus include:
•Investing in climate leaders that are aligned to the goals of the Paris
Agreement, and influence climate laggards that are not aligned
•Seek new climate and nature solutions opportunities,
particularly through private markets
•Take a holistic, systems-level approach to net zero that
connects climate, nature and social issues
Further details on this activity is included on pages 112-113 in our
sustainability report .
| Supply chain<br><br>Our ambition<br><br>Reduce our supply chain emissions<br><br>by 50% by 2030, on a path to net zero<br><br>by 20501. | | --- || Our progress | | | | | --- | --- | --- | --- | | tCO2e | | | | | | Current year<br><br>2024/25 | Restated2<br><br>2023/24 | Restated2<br><br>baseline year<br><br>2021/22 | | Scope 3 supply chain<br><br>emissions GHG Protocol<br><br>Categories 1,2,4 and 8 | 511,909 | 504,299 | 530,621 | | 1From a 2021/22 baseline.<br><br>2Our baseline and prior period comparative were restated due to<br><br>methodology changes. | | | |
For the period, October 2024 to September 2025, our emissions
are calculated from supplier spend totalling £4.4 billion (net of
VAT). This represents an 11% increase in spend compared to our
baseline year, with absolute emissions decreasing by 4%, and
emissions intensity by 13%.
Whilst we have seen a reduction in emissions, progress has
been impacted by an increase in category 2 emissions reflecting
the Group’s investment in our new data centre, as well as capital
expenditure to maintain and transform our office and branch
network. In addition, an increase in category 4 emissions primarily
due to increased spend with a single supplier. The pace of
decarbonisation by our supply chain also plays a factor,
emphasising the need for collective progress.
The calculation of our category 2 and category 4 emissions
relies predominantly on less accurate calculation methodologies.
These activities are also more carbon intensive. Whilst we expect
this spend to decrease as our investment programme concludes,
we will continue to encourage our key suppliers to disclose their
full scope of material emissions and collaborate with them
through our Emerald Standard programme. This year, we have
had direct engagement with 170 suppliers who make the biggest
contribution to our supply chain emissions.
In October 2025, Comprehensive Environmental Data Archive
(CEDA) released an update to carbon emissions factors for 2023
onwards. As a result, we have restated baseline year + 1 and
baseline year + 2.
To maintain consistency and comparability between our
disclosures, we also re-aligned some of our previous CEDA
mappings based upon improved understanding of descriptions
and corrected immaterial findings identified in prior years. These
changes have been applied retrospectively, to our baseline year,
to ensure our data reflects the most accurate and up-to-date
information available.
Additional details on our supply chain emissions and our Emerald
Standard are included within our sustainability report .
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47
| Our operations<br><br>Our ambition<br><br>Achieve net zero own operations by<br><br>2030, based on our 2018/19 baseline. | ||||||
|---|---|---|---|---|---|---|
| The delivery of our ambition is supported by five pledges:<br><br>•Reduce our direct carbon emissions by at least 90% by 20301<br><br>•Reduce total energy consumption across our operations by 50%<br><br>by 20301<br><br>•Maintain travel-related carbon emissions below 50%1,2<br><br>•Zero waste by 2030 (includes our legacy waste reduction pledge)3<br><br>•Water neutrality by 20304 | Our progress | |||||
| --- | --- | --- | --- | --- | ||
| Net zero ambition progress | l | Progress | l | 2030 ambition | ||
| Net zero carbon operations by 2030 | ||||||
| 1From a 2018/19 baseline.<br><br>2From 2023/24 our travel related carbon emissions pledge considers domestic<br><br>travel only.<br><br>3Reduce operation waste by 80% by 2025 from a 2014/2015 baseline. Zero waste is<br><br>defined as 90% diversion from landfill and incineration.<br><br>4Water neutrality across our buildings, reducing our water consumption as much<br><br>as possible, and offsetting the residual volume. Includes water consumption across<br><br>our full operational estate. |
| 2018/19 Baseline | | --- || Net Zero | | --- |
Our actions
We continue to make strong progress against our ambition and
pledges. We recognise that in order to maintain progress, we will
need to keep investing in our buildings, as well as supporting
colleagues in the transition towards a greener future.
We continued reducing our carbon emissions associated with
heating fuel across our branches through a targeted programme
to remove gas burning appliances. This year several branches
were assessed for gas removal, with four buildings having
their gas boilers replaced with more carbon-friendly electric
heating systems.
We will continue rolling out our heating decarbonisation
programme across the branch estate. To reduce our reliance
on grid electricity, we will investigate suitable locations for
the installation of solar arrays and take action on these
where suitable.
The Group promotes sustainable travel through our sustainable
car scheme and refreshed travel and expenses colleague
guidance. We have continued our activities this year to provide
our colleagues with more sustainable travel choices. To increase
awareness of the sustainable travel options available to
colleagues, we hosted a series of sustainable travel roadshows
including virtual lunch and learn sessions for liftshare and cycle
to work schemes.
Further details of progress against our operation pledges
can be found within our sustainability report .
Streamlined energy carbon reporting
Methodology
The Group follows the principles of the Greenhouse Gas (GHG)
Protocol Corporate Accounting and Reporting Standard to
calculate Scope 1, 2 and 3 emissions from our worldwide operations.
Energy consumption is calculated according to guidance set out by
the Department for Energy Security and Net Zero. The reporting
period is 1 October 2024 to 30 September 2025.
Emissions are reported based on the operational control approach.
•Reported Scope 1 emissions are from activities for which the
Group is responsible, including those generated from gas and
oil used in buildings, emissions from fuels used in UK company
owned vehicles used for business travel, and fugitive emissions
from the use of air conditioning and chiller/refrigerant plant
•Reported Scope 2 emissions are generated from the use and
purchase of electricity and imported heat through heat networks
which are calculated in line with GHG protocol using both the
location and market-based methodologies
•Reported Scope 3 emissions relate to business travel (category 6)
and commuting (category 7) undertaken by colleagues, emissions
from colleagues working from home (category 7), operational
waste (category 5) and the extraction and distribution of each
of our energy sources – electricity, imported heating, gas and
oil (category 3). Scope 3 emissions do not include purchased
goods and services, capital goods, upstream transportation and
distribution and upstream leased assets (category 1, 2, 4 and 8) and
investments (category 15), these figures are included in our supply
chain and financed emissions reporting shown on pages 43 to 46
•The methodology to derive reported Scope 1, 2 and 3 emissions
is provided in our sustainability metrics basis of reporting 2025
Exclusions
Emissions associated with our joint ventures and investments
are not currently calculated as they fall outside the scope of our
operational boundary. The Group does not have any emissions
associated with the purchase of steam or dedicated cooling,
aside from that provided through heat networks for its own use.
We are not aware of any other material sources of omissions from
our reporting.
| Intensity ratio | | --- || | October 2024 to<br><br>September 2025 | October 2023 to<br><br>September 2024 | October 2022 to<br><br>September 20231 | | --- | --- | --- | --- | | GHG emissions (CO2e)<br><br>per £m of underlying<br><br>income (location based) | 8.4 | 10.2 | 9.8 | | GHG emissions (CO2e)<br><br>per £m of underlying<br><br>income (market based) | 6.2 | 7.2 | 6.8 |
Our overall location-based carbon emissions2 were 154,198 tonnes
CO2e; an 11.5% decrease year-on-year. While our overall market-
based3 carbon emissions were 112,750 tonnes CO2e; an 8.7% decrease
since 2023/24. Group energy consumption (electricity and gas)
has continued to reduce in line with reduction in the number of
properties, extensive investment in energy efficiency across our
buildings and adaptations; this has been offset by an increase in our
emissions from business travel with the Group drawing more select
skills from the global market. The operating model evolution has
impacted our carbon emissions through a need for increased
international travel by our colleagues.
1Intensities have been restated for 2022/23 and 2023/24 emissions data to improve the
accuracy of reporting, using actual data to replace estimates and improvements to
fugitive gas calculations. Underlying income figures for those years have not changed.
2Includes Scope 1, 2 emissions and Scope 3 categories 3, 5, 6 and 7. Scope 3 categories 1,
2, 4, 8 and 15 are excluded.
3Since January 2019, our Scope 2 market-based emissions relating to electricity
consumption are zero tCO2e as we have procured renewable electricity mainly through
our Power Purchase Agreement (PPA) and Green Tariff, and renewable certificates
equivalent to the remainder to make up the total electricity consumption in each of the
markets in which we operate.
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48
Supporting the transition to net zero continued
| Carbon emissions (tonnes CO2e) | | --- || | October 2024 to<br><br>September 2025<br><br>tonnes CO2e | October 2023 to<br><br>September 2024<br><br>tonnes CO2e4 | October 2022 to<br><br>September 2023<br><br>tonnesCO2e4 | | --- | --- | --- | --- | | Total tCO2e<br><br>(location based) | 154,198 | 174,230 | 176,372 | | Total tCO2e<br><br>(market based) | 112,750 | 123,449 | 122,616 | | Total Scope 1 and 2<br><br>(location based) | 60,537 | 70,825 | 75,508 | | Of which: UK Scope 1<br><br>and 2 (location based) | 57,229 | 69,055 | 74,735 | | Total Scope 1 and 2<br><br>(market based) | 19,089 | 20,044 | 21,751 | | Of which: UK Scope 1<br><br>and 2 (market based) | 18,946 | 19,881 | 21,541 | | Total Scope 1 | 19,084 | 20,040 | 21,740 | | Total Scope 2<br><br>(market based) | 5 | 4 | 11 | | Of which: Electricity | – | – | – | | Total Scope 2<br><br>(location based) | 41,453 | 50,785 | 53,768 | | Total Scope 3 | 93,660 | 103,405 | 100,865 |
4Metrics have been restated for 2022/23 and 2023/24 emissions data to improve the
accuracy of reporting, using actual data to replace estimates and improvements to
fugitive gas calculations.
Further information covering our baseline year 2021/22 to 2024/25 is
available in our sustainability metrics datasheet 2025 .
| Global energy use (kWhs) | | --- || | October 2024 to<br><br>September 2025<br><br>kWhs | October 2023 to<br><br>September 2024<br><br>kWhs1 | October 2022 to<br><br>September 2023<br><br>kWhs1 | | --- | --- | --- | --- | | Total global<br><br>energy use | 297,278,022 | 332,775,377 | 362,706,349 | | Of which:<br><br>UK energy use | 290,342,633 | 327,700,875 | 358,791,923 | | Total building<br><br>energy | 279,207,852 | 313,952,935 | 344,118,916 | | Total Company<br><br>owned vehicle<br><br>energy | 6,502,390 | 8,704,843 | 10,108,961 | | Total grey fleet2<br><br>vehicle energy | 4,632,390 | 5,043,096 | 4,564,047 |
1Restated data since 2022/23 to improve the accuracy of reporting, using actual data
to replace estimates and updates to historical emissions. Scope 3 – Business Travel
(category 6) also restated to reflect improving data coverage for Air and Rail emissions.
2Grey fleet refers to colleague and hired road vehicles being used for a business purpose.
Energy efficiency
We have continued our efforts to reduce our energy consumption
through the delivery of energy efficiency project works. Our
connected energy management contract with Mitie has produced
a combined energy reduction of 4,751,980 kWhs across 29 sites. This
year the programme focused on ensuring our building management
systems controlled our internal environments appropriately and
reduce energy waste through plant overrides.
| Assessing our resilience<br><br>to climate risk<br><br>The risks associated with climate change<br><br>and the transition to a low carbon<br><br>economy can potentially expose the<br><br>Group to financial losses and therefore<br><br>present an important consideration for<br><br>the resilience of the Group’s strategy.<br><br>Our Assessment for 2025 continues<br><br>to support our view that our strategy<br><br>remains resilient to the challenges<br><br>of climate risk. |
|---|
We continue to review our strategy to support the transition to net
zero to ensure it captures our current view of potential risks and
opportunities, as reflected in the previous sections.
To inform our latest assessment of the resilience of the Group’s
strategy we have:
•Updated our understanding of the areas of our business facing
the greatest risk, based on the size of the Group’s exposure and
the potential relative impact across key sectors
•Completed additional analysis to understand the potential
impacts from these risks if they were to occur
Areas at greater risk
Understanding the potential impact of climate risk is initially
informed by identifying which areas of the Group’s portfolios could
be affected. We assess both physical and transition risk, noting that
our physical risk assessment is currently more focused on our
mortgage and home insurance books.
Climate change can increase the likelihood and severity of flood
events, which could negatively impact property valuations and
increase insurance costs. Our assessment tells us that approximately
1 in 6 properties within our mortgage portfolio are at risk of flooding,
and just over 1 in 100 meet our very high risk criteria for the present
day time horizon. We continue to work closely with the government
to mitigate the risks around flood resilience and have integrated
property level controls into our originations process. Stricter energy
efficiency regulations rendering properties non-compliant could
also have a negative impact on property valuations and lead
to increased affordability pressures on customers to transition.
For our Commercial Banking lending and investments portfolios,
we have undertaken further analysis to inform which sectors are
most exposed to climate risk using different models and scenarios,
including bespoke scenarios and the Network for Greening the
Financial System (NGFS) scenarios.
Lloyds Banking Group plc Annual Report and Accounts 2025
49
Our latest analysis has assessed the potential financial impacts
across key sectors under a range of scenarios, including the NGFS
Net Zero 2050 and Delayed Transition scenarios. Our analysis here
however focuses on the Net Zero 2050 scenario as this analysis
describes the ideal outcome that the Group’s net zero strategy and
targets are aiming for. This level of analysis is focused on identifying
where more detailed assessment is required. Recent flaws
acknowledged in the NGFS scenarios have been reviewed and
mitigated where necessary within assessments using these scenarios,
including as part of ECL assessment (see Note 21, page 278).
We recognise the actions required under these scenarios’ assumptions
now tend to generate increased transition risks compared to previous
iterations, reflecting the lack of sufficient progress to date and
external dependencies such as government policy.
Our analysis shows the sectors most impacted in the Net Zero 2050
scenario include coal mining, oil and gas, transport, automotive and
utilities. These remain broadly unchanged from last year, noting
higher impacts observed in the automotive sector, driven by the
lower projections of EV uptake. Further detail is provided on analysis
for our investments portfolio in the sustainability report .
A summary of bank lending to sectors with increased climate risk
is shown in the table on page 78 of our sustainability report .
The make-up of the Group’s lending portfolio means the biggest
exposures are in the residential mortgages and real estate sector,
although short-term risks are expected to be limited based on the
current policy landscape. Our exposure to other sectors with higher
sensitivity to transition risk is lower and the Group continues to
monitor loans and advances in these sectors. A similar sectoral
analysis of Scottish Widows' assets under management is provided
on page 117 of our sustainability report .
Analysis of potential impacts
Climate-related risks are complex, forward-looking and uncertain,
and unlike traditional financial models, there is no historic dataset
to test climate model outcomes against. Therefore, our approach
to assessing the impact of these risks continues to evolve as our
understanding matures and develop, including our scenario analysis
capabilities and we’re continuing to embed these, as detailed
within the risk management section on page 150 and page 124 in
our sustainability report . The following assessments have been
undertaken to evaluate our resilience to the impacts of the risks
related to climate change.
Lending
For the last two years, we have incorporated consideration of some
impacts of climate risk into our calculation of expected credit losses,
as outlined in Note 21, page 278. This exercise was repeated in 2025
with similar results. This continues to support management’s view
that there is a low residual risk of material error or omission in the
Group’s financial statements due to climate-related risks and as
a result no adjustments have been made to ECL measured as at
31 December 2025.
We have also performed a stress exercise on the largest credit
portfolio, retail mortgages, and quantified the impact on losses
and implication on capital. The transition risk stress explored
affordability shocks due to retrofitting and valuation impacts
for properties falling below hypothetical future minimum energy
efficiency standards. The climate impact was immaterial in relation
to both impairment and capital effect.
Investment and insurance
We continue to assess risks to the achievement of our strategic
objectives over the short to medium term by stress testing our
business plan. Amongst other stress tests, we considered a bespoke
climate scenario and compared this to the base planning scenario.
Over the past few years these stress tests against the base plan have
assessed scenarios capturing different climate risk drivers, for 2025
we considered acute physical risk events and subsequent social,
economic and governmental actions.
This analysis showed us the variation in projected profitability
caused by an adverse climate scenario and the potential for it to
impact Scottish Widows Group’s capital position.
Lloyds Banking Group plc Annual Report and Accounts 2025
50
Financial
results
| Results for the full year | ||||
|---|---|---|---|---|
| Income statement – underlying basisA | 51 | |||
| Key balance sheet metrics | 51 | |||
| Balance sheet analysis | 52 | |||
| Summary of Group results | 53 | |||
| Segmental analysis – underlying basisA | 60 | Divisional results | ||
| --- | --- | |||
| Retail | 61 | |||
| Commercial Banking | 62 | |||
| Insurance, Pensions and Investments | 63 | |||
| Equity Investments and Central Items | 64 |
Delivering
long-term,
sustainable
returns
We are Helping Britain Prosper in a way
that delivers sustainable profit and growth
Lloyds Banking Group plc Annual Report and Accounts 2025
51
Income statement – underlying basisA
| 2025<br><br>£m | 2024<br><br>£m | Change<br><br>% | |
|---|---|---|---|
| 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) |
| 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 |
| Dividends per share – ordinary | 3.65p | 3.17p | 15 |
| Share buyback value | £1.75bn | £1.70bn | 3 |
| Banking net interest marginA | 3.06% | 2.95% | 11bp |
| Average interest-earning banking assetsA | £462.9bn | £451.2bn | 3 |
| Cost:income ratioA | 58.6% | 60.4% | (1.8)pp |
| Asset quality ratioA | 0.17% | 0.10% | 7bp |
| Return on tangible equityA | 12.9% | 12.3% | 0.6pp |
ASee page 308.
Key balance sheet metrics
| At 31 Dec<br><br>2025 | At 31 Dec<br><br>2024 | Change<br><br>% | |
|---|---|---|---|
| Underlying loans and advances to customersA | £481.1bn | £459.1bn | 5 |
| Customer deposits | £496.5bn | £482.7bn | 3 |
| Loan to deposit ratioA | 97% | 95% | 2pp |
| CET1 ratio | 14.0% | 14.2% | (0.2)pp |
| Pro forma CET1 ratioA,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 funding2 | £99.4bn | £92.5bn | 7 |
| Wholesale funding <1 year maturity2 | £37.0bn | £31.3bn | 18 |
| of which: money market funding <1 year maturity2 | £26.6bn | £16.9bn | 57 |
| Liquidity coverage ratio – eligible assets3 | £131.4bn | £134.4bn | (2) |
| Liquidity coverage ratio4 | 145% | 146% | (1)pp |
| Net stable funding ratio5 | 124% | 129% | (5)pp |
| Tangible net assets per shareA | 57.0p | 52.4p | 4.6p |
131 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.
2Excludes balances relating to cash collateral of £1.5 billion (31 December 2024: £2.8 billion).
3Eligible assets are calculated as a monthly rolling simple average of month-end observations over the previous 12 months post any liquidity haircuts.
4The liquidity coverage ratio is calculated as a simple average of month-end observations over the previous 12 months.
5The net stable funding ratio is calculated as a simple average of month-end observations over the previous four quarter-ends.
Lloyds Banking Group plc Annual Report and Accounts 2025
52
Balance sheet analysis
| At 31 Dec<br><br>2025<br><br>£bn | At 30 Sep<br><br>2025<br><br>£bn | Change<br><br>% | At 30 Jun<br><br>2025<br><br>£bn | Change<br><br>% | At 31 Dec<br><br>2024<br><br>£bn | Change<br><br>% | |
|---|---|---|---|---|---|---|---|
| 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 Finance1 | 16.4 | 16.1 | 2 | 16.0 | 3 | 15.3 | 7 |
| Overdrafts | 1.3 | 1.2 | 8 | 1.2 | 8 | 1.2 | 8 |
| Retail Europe2 | 20.4 | 19.9 | 3 | 19.0 | 7 | 16.8 | 21 |
| Retail other2 | 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 Items3 | 0.5 | 0.3 | 67 | 0.6 | (17) | – | |
| Underlying loans and advances to customersA | 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 | 1 | 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) |
1UK Motor Finance balances on an underlying basisA exclude a finance lease gross up. See page 308.
2Within 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.
3Central Items includes central fair value hedge accounting adjustments.
Lloyds Banking Group plc Annual Report and Accounts 2025
53
Summary of Group results
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.
The Group recognised a tax expense of £1,904 million in 2025 (2024: £1,494 million).
Balance sheet
As at 31 December 2025, total assets were £944,072 million, £37,375 million higher than the prior year (31 December 2024:
£906,697 million). Financial assets at amortised cost were £553,672 million, £21,895 million higher versus the prior year (31 December 2024:
£531,777 million), supported by increases in loans and advances to customers. This included growth of £10,806 million in UK mortgages,
alongside growth across UK Retail unsecured loans, credit cards, UK Motor Finance and the European retail business totalling £7,307 million.
Lending balances increased by £2,707 million 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 £240,413 million increased by £24,488 million 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 £4,338 million lower at £19,727 million versus the prior year (31 December 2024: £24,065 million), driven by
market movements in the year. Financial assets at fair value through other comprehensive income of £36,320 million increased by
£5,630 million in the year reflecting increases in liquid asset holdings. Cash and balances at central banks reduced by £6,044 million to
£56,661 million (31 December 2024: £62,705 million) reflecting a change in the mix of liquidity holdings. Other assets were £4,256 million
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 £896,205 million, £35,396 million higher over the year (31 December 2024: £860,809 million). Customer deposits
of £496,457 million increased in the year by £13,712 million. Retail deposits increased £5,442 million 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 £8,418 million, resulting from growth in targeted sectors. Repurchase agreements at amortised cost increased by
£810 million to £38,570 million (31 December 2024: £37,760 million), 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 £27,909 million at 31 December 2025 and derivative financial liabilities
decreased by £5,544 million to £16,132 million as a result of market movements. Liabilities arising from insurance and investment contracts
increased by £23,632 million reflecting the increase in policyholder investments. Other liabilities decreased by £4,375 million to
£26,269 million 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 £7,437 million to £78,271 million, with new issuances in the year, while subordinated liabilities remained stable at
£9,894 million.
Total equity of £47,867 million at 31 December 2025 increased by £1,979 million from £45,888 million 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.
Lloyds Banking Group plc Annual Report and Accounts 2025
54
Summary of Group results continued
Underlying resultsA
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 incomeA
| 2025<br><br>£m | 2024<br><br>£m | Change<br><br>% | |
|---|---|---|---|
| Underlying net interest income | 13,635 | 12,845 | 6 |
| Underlying other income | 6,120 | 5,597 | 9 |
| Operating lease depreciation1 | (1,454) | (1,325) | (10) |
| Net incomeA | 18,301 | 17,117 | 7 |
| Banking net interest marginA | 3.06% | 2.95% | 11bp |
| Average interest-earning banking assetsA | £462.9bn | £451.2bn | 3 |
1Net 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.
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.
Lloyds Banking Group plc Annual Report and Accounts 2025
55
Total costsA
| 2025<br><br>£m | 2024<br><br>£m | Change<br><br>% | |
|---|---|---|---|
| Operating costsA | 9,761 | 9,442 | (3) |
| Remediation | 968 | 899 | (8) |
| Total costsA | 10,729 | 10,341 | (4) |
| Cost:income ratioA | 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.
Underlying impairmentA
| 2025<br><br>£m | 2024<br><br>£m | Change<br><br>% | |
|---|---|---|---|
| Charges (credits) pre-updated MES1 | |||
| Retail | 734 | 789 | 7 |
| Commercial Banking | (14) | 48 | |
| Other | 1 | (10) | |
| 721 | 827 | 13 | |
| Updated economic outlook | |||
| Retail | – | (332) | |
| Commercial Banking | 74 | (62) | |
| 74 | (394) | ||
| Underlying impairment chargeA | 795 | 433 | (84) |
| Asset quality ratioA | 0.17% | 0.10% | 7bp |
1Impairment 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.
Lloyds Banking Group plc Annual Report and Accounts 2025
56
Summary of Group results continued
Restructuring, volatility and other items
Volatility and other items consists of market and other volatility, amortisation of purchased intangibles and fair value unwind.
Restructuring costs
Restructuring costs for 2025 were £46 million (2024: £40 million).
Market and other volatility
Market and other volatility resulted in a net gain 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.
Amortisation of purchased intangibles
The Group incurred a charge of £86 million (2024: £81 million) for the amortisation of intangible assets.
Fair value unwind
The results include the impact of the fair value adjustments arising from historical acquisitions. In 2025 the principal financial effect of the
fair value unwind is to reflect the effective interest rates applicable at the date of acquisition, on liabilities that were acquired at values
that differed from their original book value. The Group incurred a charge of £56 million (2024: £107 million) relating to fair value unwind,
with the reduction resulting from the maturity of debt instruments, fair valued as part of the HBOS acquisition.
Further information on the reconciliation of statutory to underlying results is included on page 308.
Return on tangible equityA and tangible net assets per shareA
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%. An explanation of the relationship between the tax
expense and the Group’s accounting profit for the year is set out in note 15 to the consolidated financial statements on page 252.
Balance sheet
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).
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.
Lloyds Banking Group plc Annual Report and Accounts 2025
57
Capital
Capital generation
| Pro forma CET1 ratio as at 31 December 2024A,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 arrangements (bps) | 178 |
| 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 2025A,1 | 13.2% |
131 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.
2Includes impairment charge and excess regulatory expected losses, excludes the charge for motor finance commission arrangements.
3Includes share-based payments and market volatility.
4Retail 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.
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. On 30 January 2026, the Group announced the launch of an ordinary
share buyback of up to £1.75 billion which is expected to be completed, subject to continued authority from the PRA, 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.
Lloyds Banking Group plc Annual Report and Accounts 2025
58
Summary of Group results continued
Other financial information
Post-tax return on average assets
| 2025<br><br>% | 2024<br><br>% | |
|---|---|---|
| Post-tax return on average assets | 0.51 | 0.50 |
Share buyback in respect of 2024 results
During 2025, the Group completed a £1.7 billion share buyback programme, in respect of 2024 results, with c.2.2 billion shares purchased at
an average price of 77.13 pence per share. Through a reduction in the weighted average number of ordinary shares in issue, share buybacks
have the effect of increasing earnings per share and, depending on the average price paid per share, can either increase or decrease the
tangible net assets per share. The share buyback in respect of 2024 results had the effect of increasing the earnings per share by 0.1 pence
and increasing the tangible net assets per share by 2.1 pence, compared to the equivalent distribution through an ordinary dividend.
Insurance, Pensions and Investments performance summaryA
| 2025<br><br>£m | 2024<br><br>£m | Change<br><br>% | ||||||
|---|---|---|---|---|---|---|---|---|
| Life and pensions sales (PVNBP)A,1 | 21,047 | 18,249 | 15 | |||||
| New business value of insurance and participating investment contracts recognised in the yearA,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 premiumsA | 175 | 197 | (11) | |||||
| General insurance underwritten total gross written premiumsA | 762 | 737 | 3 | |||||
| General insurance combined ratioA | 89% | 97% | (8)pp | At 31 Dec<br><br>2025 | At 31 Dec<br><br>2024 | Change<br><br>% | ||
| --- | --- | --- | --- | |||||
| Insurance Solvency II ratio (pre-dividend)4 | 144% | 158% | (14)pp | |||||
| Total customer assets under administrationA,3 | £279.6bn | £247.1bn | 13 |
1Present value of new business premiums can fluctuate due to timing of new schemes.
2New 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.
3The 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.
4Equivalent estimated regulatory view of ratio (including With-Profits funds and post dividend where applicable) was 140% (31 December 2024: 148%, post-February 2025 dividend).
Breakdown of net incomeA
| Deferred profit release1m | Other in-year<br><br>profit<br><br>£m | Total<br><br>£m | Deferred profit release1m | Other in-year<br><br>profit<br><br>£m | Total<br><br>£m |
| Life open book (pensions, individual annuities, Wealth and protection) | 455 | 801 | 318 | 668 | |
| Non-life (General insurance) | 277 | 277 | 229 | 229 | |
| Other items2 | 135 | 202 | 190 | 259 | |
| Net incomeA | 867 | 1,280 | 737 | 1,156 |
All values are in British Pounds.
1Total 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.
2Other items represents the income from longstanding business, return on shareholder assets and interest on subordinated debt.
Lloyds Banking Group plc Annual Report and Accounts 2025
59
Movement in deferred profit1 (contractual service margin (CSM) and risk adjustment)
| Life open book<br><br>£m | Other<br><br>products2<br><br>£m | Bulk annuities3<br><br>£m | Total1<br><br>£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 |
1Total 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.
2Other products includes longstanding business and European business.
3Bulk 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.
Volatility arising in the Insurance business
| 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|
| Insurance volatility | 36 | (56) |
| Policyholder interests volatility | 256 | 162 |
| Total volatility | 292 | 106 |
| Insurance hedging arrangements | (537) | (442) |
| Total1 | (245) | (336) |
1Total 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 308.
The most significant limitation associated with excluding insurance volatility from the underlying basis results is that insurance volatility
requires assumptions to be made for the normalised return on equities and other investments. Management compensates for this
limitation by monitoring closely the assumptions used to calculate the normalised return used within the calculation of insurance volatility.
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.
Lloyds Banking Group plc Annual Report and Accounts 2025
60
Segmental analysis – underlying basisA
| 2025 | Retail<br><br>£m | CommercialBankingm | Group<br><br>£m |
|---|---|---|---|
| Underlying net interest income | 9,637 | 3,670 | 13,635 |
| Underlying other income | 2,636 | 1,825 | 6,120 |
| Operating lease depreciation | (1,445) | (9) | (1,454) |
| Net income | 10,828 | 5,486 | 18,301 |
| Operating costs | (5,807) | (2,853) | (9,761) |
| Remediation | (931) | (27) | (968) |
| Total costs | (6,738) | (2,880) | (10,729) |
| Underlying profit before impairment | 4,090 | 2,606 | 7,572 |
| Underlying impairment (charge) credit | (734) | (60) | (795) |
| Underlying profit | 3,356 | 2,546 | 6,777 |
| Banking net interest marginA | 2.65% | 4.93% | 3.06% |
| Average interest-earning banking assetsA | £384.6bn | 78.3bn | £462.9bn |
| Asset quality ratioA | 0.19% | 0.07% | 0.17% |
| Underlying loans and advances to customersA,1 | £390.3bn | 90.3bn | £481.1bn |
| Customer deposits | £325.2bn | 171.1bn | £496.5bn |
| Risk-weighted assets | £130.4bn | 78.5bn | £235.5bn |
All values are in British Pounds.
| 2024 | Retail<br><br>£m | CommercialBankingm | Equity<br><br>Investments<br><br>and Central<br><br>Items<br><br>£m | Group<br><br>£m |
|---|---|---|---|---|
| Underlying net interest income | 8,930 | 3,434 | 617 | 12,845 |
| Underlying other income2 | 2,354 | 1,815 | 136 | 5,597 |
| Operating lease depreciation | (1,319) | (6) | – | (1,325) |
| Net income | 9,965 | 5,243 | 753 | 17,117 |
| Operating costs2 | (5,566) | (2,752) | (200) | (9,442) |
| Remediation | (750) | (104) | (26) | (899) |
| Total costs | (6,316) | (2,856) | (226) | (10,341) |
| Underlying profit (loss) before impairment | 3,649 | 2,387 | 527 | 6,776 |
| Underlying impairment (charge) credit | (457) | 14 | 3 | (433) |
| Underlying profit | 3,192 | 2,401 | 530 | 6,343 |
| Banking net interest marginA | 2.54% | 4.51% | 2.95% | |
| Average interest-earning banking assetsA | £370.1bn | 81.1bn | – | £451.2bn |
| Asset quality ratioA | 0.12% | 0.00% | 0.10% | |
| Underlying loans and advances to customersA,1 | £371.5bn | 87.6bn | – | £459.1bn |
| Customer deposits | £319.7bn | 162.6bn | £0.4bn | £482.7bn |
| Risk-weighted assets | £125.1bn | 73.8bn | £25.3bn | £224.6bn |
All values are in British Pounds.
1Equity Investments and Central Items includes central fair value hedge accounting adjustments.
2In 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.
3In 2025, the Group revised its capital transfer pricing methodology; comparative segmental banking net interest margin has been represented on a consistent basis.
Number of employees (full-time equivalent)
| At 31 Dec<br><br>2025 | At 31 Dec<br><br>2024 | |
|---|---|---|
| Retail | 27,781 | 29,734 |
| Commercial Banking | 8,126 | 8,850 |
| Insurance, Pensions and Investments | 6,254 | 5,882 |
| Group functions and services | 18,559 | 17,544 |
| 60,720 | 62,010 | |
| Agency staff | (659) | (782) |
| Total number of employees | 60,061 | 61,228 |
The Group has increased its non-permanent worker population by around 2.6% in 2025. Overall, the Group has reduced its permanent
workforce and invested in growth within the Lloyds Technology Office to increase skills in technology and data.
Lloyds Banking Group plc Annual Report and Accounts 2025
61
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
Lloyds Banking Group plc Annual Report and Accounts 2025
62
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 billon1 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 Finance2 and second ranking in all issuer Sterling Debt Capital
Markets3. 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
1In line with the Group’s Sustainable Financing Framework; sustainable financing since 1 January 2024.
2Source: LSEG Workspace: GBP Structured Finance (excluding collateralised debt obligations).
3Source: LSEG GBP Debt Capital Markets; Investment Grade bonds (excluding Sovereign, supranational and agency).
Lloyds Banking Group plc Annual Report and Accounts 2025
63
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 20241
•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 minutes2
•Increased Protection market share to 7.8% (30 September 2024: 5.8%) following successful launch of refreshed advisor proposition in
- New business IFA applications more than double those in 20242
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
1This 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-tilted indices developed in partnership with Robeco.
2Home 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.
Lloyds Banking Group plc Annual Report and Accounts 2025
64
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
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:
| At 31 Dec<br><br>2025<br><br>£m | At 31 Dec<br><br>2024<br><br>£m | |
|---|---|---|
| Underlying net interest expense | (132) | (109) |
| Underlying other income | 579 | 502 |
| Net income | 447 | 393 |
| Total costs | (96) | (78) |
| Underlying profit | 351 | 315 |
Lloyds Banking Group plc Annual Report and Accounts 2025
65
Governance
| Directors’ report | ||||
|---|---|---|---|---|
| Chair’s statement | 66 | |||
| UK Corporate Governance Code | 67 | |||
| Our Board | 68 | |||
| Our Board composition at a glance | 70 | |||
| Boards of the Ring-Fenced Banks and Group Executive Committee | 71 | |||
| Our governance structure and responsibilities | 72 | |||
| Board activities | 74 | |||
| Engaging with our stakeholders | 76 | |||
| Our culture in action | 79 | |||
| Sustainability governance | 80 | |||
| Board performance | 82 | |||
| Internal control | 84 | Committee reports | ||
| --- | --- | |||
| Nomination and Governance Committee report | 85 | |||
| Audit Committee report | 88 | |||
| Board Risk Committee report | 92 | |||
| Responsible Business Committee report | 97 | |||
| Directors’ remuneration report | 98 | |||
| Other statutory and regulatory information | 134 |
Governance
with purpose
Effective and proportionate governance underpins
our ability to deliver long-term value and
maintain trust with our stakeholders
Lloyds Banking Group plc Annual Report and Accounts 2025
66
Chair’s statement
Sir Robin
Budenberg
Chair
| Read full biography <br> |
|---|
Good governance has underpinned the
transformation of the Group and is
helping achieve our 2026 goals with
precision and pace.
| Board membership and attendance at scheduled meetings1 | |
|---|---|
| Sir Robin Budenberg | 10/10 |
| Charlie Nunn | 10/10 |
| William Chalmers | 10/10 |
| Cathy Turner | 10/10 |
| Nathan Bostock | 9/102 |
| Sarah Legg | 10/10 |
| Amanda Mackenzie | 10/10 |
| Harmeen Mehta | 10/10 |
| Chris Vogelzang | 5/53 |
| Scott Wheway | 8/84 |
| Catherine Woods | 10/10 |
| 1Where a director is unable to attend a Board or Committee meeting he/she<br><br>receives papers in advance and has the opportunity to provide comments to the<br><br>Chair of the Board or to the relevant Committee Chair.<br><br>2Nathan Bostock was unable to attend one meeting due a commitment scheduled<br><br>prior to Nathan joining the Board.<br><br>3Chris Vogelzang was appointed to the Board on 16 June 2025.<br><br>4Scott Wheway stepped down from the Board on 31 October 2025.<br><br>Other attendees<br><br>Nigel Hinshelwood (the Senior Independent Director of<br><br>the Ring-Fenced Banks), Sarah Bentley and Brendan Gilligan<br><br>(both independent non-executive directors of the Ring-Fenced<br><br>Banks) attend meetings as observers to provide insight on the<br><br>Ring-Fenced Banks when required. The Company Secretary<br><br>and Chief Risk Officer also attend Board meetings. |
| Read more | |
|---|---|
| Skills and experience | pages 68 to 69 |
| Role of the Board (and on the corporate<br><br>governance page of the Group’s website )<br> |
page 72 |
| Board performance review | pages 82 to 83 |
I’m pleased to present this 2025 corporate governance report.
Looking back on the year, I’m proud of the significant progress
the Group has made in delivering on our purpose-driven and
customer-focused strategy. The Board has overseen the continued
transformation of the Group and has considered initiatives to
accelerate the Group’s digital transformation, deepen customer
relationships and enhance customer propositions. Good governance
underpins this progress and is fundamental to enabling the Group
to continue to move towards achieving its 2026 goals with precision
and pace.
In terms of boardroom dynamics, I have been impressed by the
quality of reporting by executives and by the diverse contributions
and constructive challenge made by directors at Board meetings.
The 2025 Board performance review was facilitated externally
and the review concluded that the Board is highly functioning and
deeply engaged.
Beyond Board level, the ongoing embedding of a healthy culture
at the Group is considered vital by the Board, particularly amidst
ongoing organisational change and political and economic
uncertainty. During 2025, the Board engaged with colleagues
to better understand their experiences and support the fostering
of a values-led and performance-based culture throughout
the organisation.
Below are key governance activities that took place in 2025. Going
forward, the Board will maintain its focus on effective governance
and accelerating decision making for the benefit of stakeholders.
Board oversight of strategy
The Board continued to oversee the executive’s progress on
delivering the 2025 strategic commitments. In June and November,
as part of separate two-day off-sites, the Board participated in
dedicated sessions on the Group’s proposed strategic vision beyond
- Read more on page 78.
Cultural transformation
In January and July, the Board discussed the Group’s ongoing cultural
transformation progress. As mentioned above, in 2025, Board
members engaged in quarterly listening sessions with colleagues,
insights from which were reviewed by the Responsible Business
Committee and shared with the Board for consideration. Read
more on page 79.
Empowering customers through innovation
In June, the Board approved the Consumer Duty Annual Report
and considered how good customer outcomes remain critical as
the Group focuses on customer experience and differentiation.
Throughout 2025, the Board received updates on co-servicing which
makes banking simpler by enabling customers to service products
across our brands seamlessly – whether in branch, online or when
they need extra support. Read more on pages 74, 75 and 97.
Growing wealth strategy and bancassurance
In July, the Board approved the acquisition of the outstanding
interest in Schroders Personal Wealth, the wealth management
and advice business previously operated as a joint venture with
Schroders Group. In May and June, the Board considered the steps
being taken within Insurance, Pensions and Investments to develop
the Group’s bancassurance model and enhance customer services.
Read more on pages 31 and 75.
Lloyds Banking Group plc Annual Report and Accounts 2025
67
Board performance review
As mentioned on the previous page, the 2025 Board performance
review was externally facilitated by board review specialist, Lisa
Thomas of Independent Board Evaluation. Key findings can be
found on page 82.
Board and Committee changes
Chris Vogelzang was appointed as a non-executive director
of the Company and a member of the Responsible Business
Committee on 16 June 2025.
Scott Wheway retired from the Board and as Chair of Scottish
Widows Group on 31 October 2025.
Chris Vogelzang will be appointed as a member of the Board Risk
Committee with effect from 1 April 2026.
Ring-fencing governance
Although this is Lloyds Banking Group plc’s corporate governance
report, I would like to thank Nigel Hinshelwood, Sarah Bentley
and Brendan Gilligan for their contribution to the Group as non-
executive directors of Lloyds Bank plc and Bank of Scotland plc
(the Ring-Fenced Banks). Read more on pages 71 and 73.
Stakeholder engagement
The Board considers understanding and meeting the Group’s
responsibilities and duties to shareholders, customers and the
communities we serve to be central to our purpose and of vital
importance. Read more on pages 76 to 78.
| Sir Robin Budenberg<br><br>Chair | | --- || UK Corporate Governance Code | | --- | | Compliance statement<br><br>The UK Corporate Governance Code 2024 (the Code) applied to<br><br>the financial year ended 31 December 2025 with the exception of<br><br>Provision 29, which applies to the Company’s financial year which<br><br>began on 1 January 2026. The Company will report against<br><br>Provision 29 of the Code in its annual report and accounts for the<br><br>year ending 31 December 2026. Read more about the Group’s<br><br>preparation for Provision 29 coming into force on pages 84, 91<br><br>and 93. Provision 29 of the UK Corporate Governance Code 2018<br><br>(2018 Code) applied to the financial year ended 31 December 2025.<br><br>This directors’ report is set out in a way that helps shareholders<br><br>and investors to evaluate how the Company has applied the<br><br>principles and complied with the provisions of the Code during<br><br>2025. The table below signposts parts of the annual report and<br><br>accounts which relate to the principles and provisions of the<br><br>Code and provision 29 of the 2018 Code, including where the<br><br>relevant information is not in the directors’ report.<br><br>The Company confirms that it applied the principles<br><br>and complied with all relevant provisions of the Code and with<br><br>provision 29 of the 2018 Code throughout 2025. The Code is<br><br>available at www.frc.org.uk. || Principles of the Code | | | | --- | --- | --- | | 1 | Board leadership and company purpose | Pages | | A | Effective board | 68 to 70 and<br><br>72 to 84 | | B | Purpose, values and strategy | 02 to 17,<br><br>74 to 75 and 78 | | | Culture | 79 | | C | Board decisions and outcomes | 72 to 86 | | D | Stakeholder engagement | 76 to 78 and 108 | | E | Workforce policies and practice | 22 and 91 | | 2 | Division of responsibilities | | | F | Role of Chair | 73 | | G | Independence | 68 to 69 and 86 | | | Division of responsibilities | 72 to 73 | | H | Role of non-executive directors and time<br><br>commitments | 73 and 86 | | I | Policies, processes, information, time<br><br>and resources | 72 to 73 and 86 | | 3 | Composition, succession and evaluation | | | J | Board appointments and succession plans | 85 to 86 | | K | Board skills, experience and knowledge | 68 to 70 | | L | Annual board performance review | 82 to 83 | | 4 | Audit, risk and internal control | | | M | External auditor and internal audit | 91 | | | Integrity of financial reporting | 88 to 91 | | N | Fair, balanced and understandable assessment | 136 | | O | Risk management framework | 138 to 197<br><br>and 90 | | | Internal financial controls | 84 and 90 | | 5 | Remuneration | | | P | Linking remuneration with purpose,<br><br>values and strategy | 98 to 133 | | Q | Remuneration policy | 106 to 133 | | R | Performance outcomes in 2025 | 106 to 123 |
Lloyds Banking Group plc Annual Report and Accounts 2025
68
Our Board
| Sir Robin<br><br>Budenberg CBE<br><br>Chair |
|---|
Appointed: October 2020 (Board), January 2021
(Chair)
Skills, experience and contribution:
•Extensive financial services and investment
banking experience
•Strong governance and strategic advisory skills in
relation to companies and government
•Regulatory, public policy and stakeholder
management experience
Robin was Chair of The Crown Estate for nine years
until July 2025. He spent 25 years advising UK
companies and the UK Government while working for
S.G. Warburg/UBS Investment Bank and was formerly
Chief Executive and Chairman of UK Financial
Investments (UKFI), managing the Government’s
investments in UK banks following the 2008 financial
crisis. He qualified as a chartered accountant.
Key external appointments:
None
| Charlie Nunn<br><br>Executive<br><br>director and<br><br>Group Chief<br><br>Executive |
|---|
Appointed: August 2021
Skills, experience and contribution:
•Extensive financial services experience including
in chief executive and other leadership roles
•Strategic planning and implementation
•Extensive experience of digital transformation
Charlie has over 25 years’ experience in the financial
services sector. Prior to joining the Group, Charlie
held a range of leadership positions at HSBC,
including Global Chief Executive, Wealth and
Personal Banking, and Group Head of Wealth
Management and Digital, as well as Global Chief
Operating Officer of Retail Banking and Wealth
Management. Charlie began his career at Accenture,
where he worked for 13 years in the US, France,
Switzerland and the UK before being made a Partner.
He then moved to McKinsey & Co. as a Senior
Partner, leading on projects for five years.
Key external appointments:
None
| William Chalmers<br><br>Executive director<br><br>and Chief Financial<br><br>Officer |
|---|
Appointed: August 2019
Skills, experience and contribution:
•Significant board-level strategic and financial
leadership experience
•Strategic planning and development, mergers and
acquisitions, equity and debt capital structuring
and risk management
William joined the Board in August 2019, when he
was appointed Chief Financial Officer and was
Interim Group Chief Executive from May 2021 to
August 2021.
William has worked in financial services for over 25
years and previously held a number of senior roles at
Morgan Stanley, including Co-Head of the Global
Financial Institutions Group and Head of EMEA
Financial Institutions Group. Before joining Morgan
Stanley, William worked for J. P. Morgan, again in the
Financial Institutions Group.
Key external appointments:
None
| Cathy Turner<br><br>Senior Independent<br><br>Director |
|---|
Appointed: November 2022 (Board), September
2023 (Senior Independent Director)
Skills, experience and contribution:
•Significant executive and non-executive financial
services experience
•Knowledge of complex remuneration matters
•Communications expertise with a broad range of
stakeholders including investors, regulators,
government, media and unions
Cathy has significant financial services experience,
having worked in senior executive positions at
Barclays plc and at the Group. Cathy has previously
been a Non-Executive Director and Chair of the
Remuneration Committee of Aldermore Group plc,
Quilter plc, Spectris plc and Countrywide plc.
Key external appointments:
Non-Executive Director of Rentokil Initial plc and
Partner on a part-time basis at Manchester Square
Partners LLP.
| Nathan Bostock<br><br>Independent non-<br><br>executive director<br><br>and Chair of Lloyds<br><br>Bank Corporate<br><br>Markets plc and<br><br>Lloyds Bank GmbH |
|---|
Appointed: August 2024
Skills, experience and contribution:
•A wealth of financial, risk and regulatory expertise
•Extensive experience in large-scale customer and
corporate facing businesses
•Significant executive experience in the financial
services industry
Nathan was Chief Executive Officer of Santander
UK plc from 2014 until 2022 and then Head of
Investment Platforms at Banco Santander S.A. until
his retirement from Santander in 2023.
Prior to joining Santander in 2014, Nathan was an
executive director and Group Chief Financial Officer
of RBS and previously held the post of Chief Risk
Officer at RBS. Before joining RBS, Nathan held
various senior positions at Santander UK plc between
2004 and 2009, including Executive Director, Finance
Director and commercial Chief Executive Officer roles
in Financial Markets and Corporate Banking and in
Cards and Insurance. He is qualified as a chartered
accountant.
Key external appointments:
Non-Executive Director of Centrica plc1.
| Sarah Legg<br><br>Independent<br><br>non-executive<br><br>director |
|---|
Appointed: December 2019
Skills, experience and contribution:
•Strong financial leadership and regulatory
reporting skills
•Significant audit and risk experience in financial
leadership
•Strong transformation programme experience
Sarah has spent her entire executive career in
financial services with almost 30 years at HSBC. She
was the Group Financial Controller, a Group General
Manager and CFO for HSBC’s Asia Pacific region. She
also spent eight years as a Non-Executive Director of
Hang Seng Bank Limited.
Key external appointments:
Non-Executive Director of Severn Trent plc, Non-
Executive Director of Man Group plc and a Trustee of
the Lloyds Bank Foundation for England and Wales.
Lloyds Banking Group plc Annual Report and Accounts 2025
69
| Amanda<br><br>Mackenzie LVO OBE<br><br>Independent<br><br>non-executive director |
|---|
Appointed: October 2018
Skills, experience and contribution:
•Extensive experience in ESG matters including
responsible business and sustainability
•Strong customer engagement and digital
technology experience
•Significant marketing and brand background
Amanda was Chief Executive of Business in the
Community, of which King Charles III is the Royal
Founding Patron and which promotes responsible
business and corporate responsibility.
Prior to that role, she was a member of Aviva’s Group
Executive for seven years as Chief Marketing and
Communications Officer and was seconded to help
launch the United Nations Sustainable Development
Goals. She is also a former Director of British Airways
AirMiles, BT, Hewlett Packard Inc and British Gas.
Key external appointments:
Non-Executive Director of The British Land Company
plc, Chair of The Queen’s Reading Room and Chair
and partner of Otherwise Partners LLP.
| Harmeen Mehta<br><br>Independent<br><br>non-executive<br><br>director |
|---|
Appointed: November 2021
Skills, experience and contribution:
•Over 25 years’ experience leading digital, AI-
driven, complex transformation
•Experience of building and running technology-led
businesses and creating new ventures
•A wealth of international and financial services
knowledge having lived in 11 countries and worked
across 30 countries on six continents
Harmeen was appointed Chief Digital and Innovation
Officer at Equinix in April 2025.
Prior to that role, she was Chief Digital and
Innovation Officer at BT and spent seven years as
Global Chief Information Officer and Head of Cyber
Security and Cloud Business at Bharti Airtel, leading
its cloud and security businesses. Earlier in her career,
Harmeen held CIO positions at BBVA, HSBC and
Bank of America Merrill Lynch.
Key external appointments:
Chief Digital and Innovation Officer at Equinix and
Non-Executive Director, UK Parliament, Information
& Digital Board.
| Chris Vogelzang<br><br>Independent<br><br>non-executive<br><br>director |
|---|
Appointed: June 2025
Skills, experience and contribution:
•Extensive experience in retail and
commercial banking
•Strong understanding of technology’s role
in financial services
•Track record of driving transformation
within organisations
Chris was Chief Executive Officer of Danske Bank A/S
from 2019 until 2021. Prior to that, he held a number
of senior positions at ABN AMRO, including Managing
Board member with responsibility for Retail and
Private Banking, Chief Executive Officer of Retail
Banking for The Netherlands and Chief Executive
Officer of Global Private Banking.
Key external appointments:
Non-Executive Director of Wolters Kluwer N.V.
| Catherine Woods<br><br>Independent<br><br>non-executive<br><br>director |
|---|
Appointed: March 2020
Skills, experience and contribution:
•Extensive executive experience of international
financial institutions
•Deep experience of risk and transformation
oversight
•Strong focus on culture and corporate
governance
Catherine is a former Deputy Chair and Senior
Independent Director of AIB Group plc where she
also chaired the Board Audit Committee. In her
executive career with J.P. Morgan Securities, she
was Vice President, European Financial Institutions,
Mergers and Acquisitions, and Vice President
Equity Research Department, forming the European
Banks Team.
Key external appointments:
Deputy Chair of BlackRock Asset Management
Ireland Limited.
| Kate Cheetham<br><br>Chief Legal Officer<br><br>and Company<br><br>Secretary |
|---|
Appointed: July 2019 (Company Secretary)
Skills, experience and contribution:
•Significant legal and governance leadership
experience within financial services
•Strategic functional planning and development,
corporate, mergers and acquisitions, regulation
and risk management
Kate became Group General Counsel (now Chief
Legal Officer) in May 2015 and Company Secretary
in July 2019. Kate joined the Group in 2005 from
Linklaters, where she was a corporate lawyer
specialising in mergers and acquisitions transactions.
Before her current roles, Kate held a number of senior
positions including Deputy Group General Counsel
and General Counsel for Group Legal.
| Audit Committee member | |||
|---|---|---|---|
| Board Risk Committee member | |||
| Nomination and Governance Committee member | |||
| Remuneration Committee member | |||
| Responsible Business Committee member | |||
| Committee Chair | Board changes during the year | ||
| --- | --- | ||
| 16 June 2025<br><br>Chris Vogelzang joined the Board<br><br>as a non-executive director | 31 October 2025<br><br>Scott Wheway retired as a non-executive<br><br>director of the Board and as Chair of<br><br>Scottish Widows Group3 |
1Nathan will continue to serve on the Centrica plc board until no later than the end of July 2026. Nathan will join the board of Jupiter Asset Management plc as a non-executive director
and Chair designate on 1 March 2026 and will take on the role of Chair of that company, subject to regulatory approval, with effect from 1 April 2026.
2Chris Vogelzang will be appointed as a member of the Board Risk Committee with effect from 1 April 2026.
3Chris Moulder, the Senior Independent Director of Scottish Widows Group, assumed the role of interim Chair of Scottish Widows Group while a process is run for the appointment of
the next Chair of Scottish Widows Group.
Lloyds Banking Group plc Annual Report and Accounts 2025
70
Our Board composition at a glance
| Our Board in 2025 |
|---|
Skills and experience
Collective view of the skills and experience of the non-executive directors1
| Retail/commercial banking | |||
|---|---|---|---|
| Financial markets/wholesale banking industry | |||
| Insurance | |||
| Audit and finance | |||
| Risk – in financial institutions | |||
| Technology/digital | |||
| Consumer/marketing/distribution | |||
| Major change programmes | |||
| ESG: environment, sustainability and climate change | |||
| ESG: social, inclusion and diversity, and governance | |||
| Government/regulator interface | |||
| Listed board governance, including investor relations and remuneration | |||
| Strategic thinking | l | Number of non-executive directors (out of 8) with deep experience/distinctive strength | |
| --- | --- | ||
| l | Number of non-executive directors (out of 8) with deep experience/distinctive strength or with good experience and knowledge | Gender balance2<br><br>A.Female – 5 (50%)<br><br>B.Male – 5 (50%) | |
| --- |
| Ethnicity2<br><br>A.Black, Asian or Minority<br><br>Ethnic – 2 (20%)<br><br>B.White – 8 (80%) |
|---|
| Tenure2<br><br>A.0-2 years – 2 (20%)<br><br>B.2-4 years – 1 (10%)<br><br>C.4-6 years – 4 (40%)<br><br>D.6-8 years – 3 (30%) |
|---|
| Age2<br><br>A.51-55 – 2 (20%)<br><br>B.56-60 – 2 (20%)<br><br>C.61-65 – 5 (50%)<br><br>D.66+ – 1 (10%) |
|---|
| 1Assessment by the Nomination and Governance Committee in respect of Board members in office as at 31 December 2025.<br><br>2As at 31 December 2025 and remains correct as at the date of publication of the annual report. |
|---|
Lloyds Banking Group plc Annual Report and Accounts 2025
71
Boards of the Ring-Fenced Banks and Group Executive Committee
| Boards of the Ring-Fenced Banks |
|---|
Each of the directors of Lloyds Banking Group plc is also a director
of Lloyds Bank plc and Bank of Scotland plc, which are the banks
within the Group that have been included within the ring-fence
(together, the Ring-Fenced Banks). The boards of the Ring-Fenced
Banks have three additional independent non-executive directors:
Nigel Hinshelwood (Senior Independent Director), Sarah Bentley
and Brendan Gilligan. Read more about the role of the Ring-Fenced
Bank-only directors and the Group’s structure on page 73.
Read the full biographies of the Ring-Fenced Bank-only directors
on our corporate governance page .
| Nigel Hinshelwood<br><br>Senior Independent<br><br>Director<br><br>Lloyds Bank plc<br><br>and Bank of<br><br>Scotland plc |
|---|
Appointed: January 2019
Skills, experience and contribution
•Extensive experience in the financial services
sector in the UK and worldwide
•Significant experience of large-scale
transformation, operations and technology
Nigel was a partner at Ernst & Young and also
held various roles at HSBC, including Deputy CEO
of HSBC Bank plc, Head of HSBC Insurance Holdings,
Chief Operating Officer for EMEA and Global Head
of Operations.
| Sarah Bentley<br><br>Non-executive<br><br>director<br><br>Lloyds Bank plc<br><br>and Bank of<br><br>Scotland plc |
|---|
Appointed: January 2019
Skills, experience and contribution
•Extensive digital and digital transformation
experience
•Strong customer and marketing skills
Sarah was formerly Chief Executive Officer and
Executive Director of Thames Water Utilities Limited.
Prior to those roles, Sarah was Chief Customer
Officer at Severn Trent plc and a member of its
Executive Committee and the Managing Partner for
Accenture’s Digital business unit in the UK & Ireland.
| Brendan Gilligan<br><br>Non-executive<br><br>director<br><br>Lloyds Bank plc<br><br>and Bank of<br><br>Scotland plc |
|---|
Appointed: January 2019
Skills, experience and contribution
•Extensive experience in core strategic finance
and controllership roles in the financial
services industry
•Significant experience of serving on the boards of
regulated financial services businesses in the UK,
France, Switzerland and Poland
Brendan worked in commercial and consumer
banking services and financing with Woodchester
Investments plc and, after its acquisition by General
Electric Company, with GE Capital.
| Our Group Executive Committee |
|---|
| Charlie Nunn<br><br>Executive director<br><br>and Group Chief<br><br>Executive<br><br>Appointed:<br><br>August 2021 | | --- || William Chalmers<br><br>Executive director<br><br>and Chief Financial<br><br>Officer<br><br>Appointed:<br><br>June 2019 | | --- || Chirantan Barua<br><br>Chief Executive Officer,<br><br>Scottish Widows and<br><br>Insurance, Pensions<br><br>and Investments<br><br>Appointed:<br><br>May 2023 | | --- || Kate Cheetham<br><br>Chief Legal Officer<br><br>and Company<br><br>Secretary<br><br>Appointed:<br><br>July 2017 | | --- |
| Elyn Corfield1<br><br>Chief Executive<br><br>Officer, Business and<br><br>Commercial Banking<br><br>Appointed:<br><br>July 2022 | | --- || Sharon Doherty<br><br>Chief People and<br><br>Places Officer<br><br>Appointed:<br><br>June 2022 | | --- || Ron van Kemenade<br><br>Chief Operating<br><br>Officer<br><br>Appointed:<br><br>June 2023 | | --- || Laura Needham<br><br>Chief Internal<br><br>Auditor<br><br>Appointed:<br><br>October 2022 | | --- |
| Jayne Opperman<br><br>Chief Executive<br><br>Officer, Consumer<br><br>Lending<br><br>Appointed:<br><br>January 2023 | | --- || Stephen Shelley<br><br>Chief Risk Officer<br><br>Appointed:<br><br>September 2017 | | --- || Jasjyot Singh OBE<br><br>Chief Executive<br><br>Officer, Consumer<br><br>Relationships<br><br>Appointed:<br><br>July 2022 | | --- || Andrew Walton<br><br>Chief Sustainability<br><br>Officer and Chief<br><br>Corporate Affairs<br><br>Officer<br><br>Appointed:<br><br>September 2018 | | --- |
| John Winter2<br><br>Chief Executive<br><br>Officer, Corporate<br><br>and Institutional<br><br>Banking<br><br>Appointed:<br><br>September 2022 |
|---|
1Elyn Corfield will step down as
Chief Executive Officer for Business
and Commercial Banking and be
succeeded by Amanda Murphy at
the end of February 2026, subject
| Read the full biographies<br><br>of the Group Executive<br><br>Committee <br> |
|---|
to regulatory approval.
2John Winter will step down as Chief
Executive Officer for Corporate and
Institutional Banking and be succeeded
by John Langley in March 2026, subject
to regulatory approval.
Lloyds Banking Group plc Annual Report and Accounts 2025
72
Our governance structure and responsibilities
The role of the Board
The Board is responsible for promoting and assessing the Group’s
long-term sustainable success, generating value for shareholders
and contributing to wider society. It sets the Group’s purpose,
values and strategy, with the aim of Helping Britain Prosper –
read more on pages 74 to 75 and 78.
The Board is also responsible for establishing and promoting
a culture of customer focus (including treating customers fairly),
risk awareness and ethical behaviours through the Group values,
and monitoring how that culture has been embedded.
Read more about the Board’s customer focus on pages 30 to 31 and
74 to 76 and about its monitoring of culture on page 79.
The Board is also responsible for ensuring that the Group’s culture is
aligned with its purpose, values and strategy – read more on pages
74 to 75 and 79.
The Board believes that engaging with stakeholders is crucial for
achieving the Group’s strategy and long-term goals. Details on
stakeholder engagement are on pages 76 to 78 and the directors’
section 172(1) statement is on pages 30 to 31.
| Our Board and governance structure |
| --- || Lloyds Banking Group Board | | | | | |
| --- | --- | --- | --- | --- | --- |
| Chair | Executive<br><br>directors | | Non-executive<br><br>directors | | Company<br><br>Secretary |
| Sir Robin<br><br>Budenberg | Group Chief<br><br>Executive:<br><br>Charlie Nunn | Chief Financial<br><br>Officer:<br><br>William Chalmers | Senior<br><br>Independent<br><br>Director:<br><br>Cathy Turner | Nathan Bostock<br><br>Sarah Legg<br><br>Amanda Mackenzie<br><br>Harmeen Mehta<br><br>Chris Vogelzang<br><br>Catherine Woods | Kate<br><br>Cheetham |
| | Group Chief<br><br>Executive<br><br>Committees<br><br>See page 140 | | | | || Board Committees | | | | | |
| --- | --- | --- | --- | --- | --- |
| | Nomination<br><br>and Governance<br><br>Committee | Audit<br><br>Committee | Board Risk<br><br>Committee | Remuneration<br><br>Committee | Responsible<br><br>Business Committee |
| | Responsible for keeping<br><br>the Board’s governance<br><br>arrangements under review,<br><br>ensuring there is a formal,<br><br>rigorous and transparent<br><br>procedure for the<br><br>appointment of new<br><br>directors, ensuring Board<br><br>and senior management<br><br>succession plans are in<br><br>place, leading the process<br><br>for Board appointments<br><br>and assisting the Board in<br><br>ensuring its composition<br><br>is regularly reviewed<br><br>and refreshed. | Responsibilities include<br><br>monitoring and reviewing<br><br>the formal arrangements<br><br>established by the Board in<br><br>respect of the integrity of<br><br>the financial reporting and<br><br>narrative reporting of the<br><br>Group and the Company,<br><br>the independence and<br><br>effectiveness of the<br><br>internal and external<br><br>audit functions and the<br><br>effectiveness of the internal<br><br>controls and the risk<br><br>management framework. | Responsible for assisting the<br><br>Board in fulfilling its risk<br><br>governance and oversight<br><br>responsibilities, including<br><br>oversight of the<br><br>development,<br><br>implementation and<br><br>maintenance of the<br><br>Company’s risk appetite,<br><br>risk principles and overall<br><br>risk management and<br><br>internal control framework. | Responsibilities include<br><br>reviewing and approving<br><br>the remuneration policy<br><br>and framework for the<br><br>directors of the Group and<br><br>the overall remuneration<br><br>policy for the Group<br><br>and overseeing the<br><br>implementation of<br><br>those policies. | Responsibilities include<br><br>providing oversight of and<br><br>support for the Group’s<br><br>strategy and plans for<br><br>delivering the Company’s<br><br>aspirations to become a truly<br><br>purpose-driven organisation,<br><br>considering and recommending<br><br>to the Board for approval<br><br>the Group’s reporting relating<br><br>to purpose and sustainability<br><br>matters, oversight of the<br><br>Group’s Consumer Duty<br><br>responsibilities and being<br><br>the designated body for<br><br>workforce engagement. |
| | See page 85 | See page 88 | See page 92 | See pages 98 to 102 and 105 | See page 97 || The terms of reference for the Board Committees can be found on our corporate governance page <br> |
| --- |
Lloyds Banking Group plc Annual Report and Accounts 2025
73
Division of responsibilities
There is a clear, written division of responsibilities which is
documented in the Group's Corporate Governance Framework
and provides that:
•The Chair has overall responsibility for the leadership of the
Board and ensuring its effectiveness in all aspects of its operation
•The Senior Independent Director acts as a sounding board for
the Chair on Board and shareholder matters and as a conduit for
the views of non-executive directors. The Senior Independent
Director is available to help resolve shareholders’ concerns where
necessary and attends meetings with major shareholders to
understand issues and concerns
•The Group Chief Executive manages and leads the business
The Chair and the independent non-executive directors challenge
management constructively and help develop and set the Group’s
strategy. They actively participate in Board decision making.
Board meetings
There are separate boards and board committees of Lloyds Banking
Group plc, Lloyds Bank plc, Bank of Scotland plc and HBOS plc,
but most meetings are held concurrently under the ‘Aligned Board
Model’. As most of the Group’s business sits within the Ring-Fenced
Banks, the interests of the Ring-Fenced Banks, Lloyds Banking
Group plc and HBOS plc are aligned in most circumstances. This
model is supported by a number of safeguards to enable the Group
to operate in this way including the appointment of three Ring-
Fenced Bank-only non-executive directors and a Ring-Fenced Bank
Risk Officer, all of whose primary focus is on protecting the interests
of the Ring-Fenced Banks.
Lloyds Banking Group plc has a continuous agenda-setting and
escalation process to ensure the Board receives timely and relevant
information for decision making. Led by the Chair, with support
from the Group Chief Executive and the Company Secretary, this
ensures that sufficient time is allocated for strategic discussions and
| Read more about the roles of the Chair,<br><br>the Senior Independent Director,<br><br>the Group Chief Executive and the Board<br><br>on our corporate governance page <br> |
|---|
business critical items. The process for escalating issues and setting
agendas is regularly reviewed and enhanced as needed. Read more
about Board activities on pages 74 to 75 and 78.
| Group structure and ring-fencing governance arrangements | |||||
|---|---|---|---|---|---|
| Since 1 January 2019, UK legislation has required large UK banks<br><br>to separate personal banking services, such as current and savings<br><br>accounts, from riskier activities, such as investment banking,<br><br>in other parts of their business. This is called ring-fencing.<br><br>The Group’s structure and governance arrangements meet<br><br>these regulatory requirements.<br><br>As mentioned on page 71, Lloyds Bank plc and Bank of Scotland<br><br>plc are the banks within the Group which have been included<br><br>within the ring-fence (together, the Ring-Fenced Banks).<br><br>The governance structure focuses on ensuring:<br><br>•Independent decision making by the Ring-Fenced Banks’<br><br>boards – on any matters where there might be a conflict<br><br>between the interests of the Ring-Fenced Banks and the<br><br>interests of another part of the Group and that any such<br><br>conflicts are identified and appropriately managed<br><br>•Risks affecting the Ring-Fenced Banks are considered and<br><br>managed from the Ring-Fenced Banks’ perspective – including<br><br>maintenance of the capital adequacy and liquidity of the<br><br>Ring-Fenced Banks<br><br>•Clear and effective governance at both Ring-Fenced Bank<br><br>level and Lloyds Banking Group plc level – including second<br><br>and third lines of defence in respect of risk management | The subsidiaries in the Group are structured into the following<br><br>sub-groups under Lloyds Banking Group plc, providing effective<br><br>governance for the business undertaken in each sub-group:<br><br>•Ring-Fenced Banks sub-group containing Lloyds Bank plc<br><br>and Bank of Scotland plc (including the Halifax and<br><br>MBNA businesses), serving both their personal and commercial<br><br>customers<br><br>•Non-Ring-Fenced Bank sub-group – Lloyds Bank Corporate<br><br>Markets plc – which provides products and services to Group<br><br>customers that are not allowed within the ring-fence, as well<br><br>as serving financial institutions’ customers and holding certain<br><br>of the Group’s subsidiaries and branches outside the UK<br><br>•Insurance sub-group under Scottish Widows Group Limited<br><br>(including Scottish Widows Limited)<br><br>•Equity sub-group under LBG Equity Investments Limited<br><br>(including Lloyds Development Capital (Holdings) Limited)<br><br>The boards of the Ring-Fenced Banks comprise all of the Group<br><br>directors plus three additional independent non-executive<br><br>directors: Nigel Hinshelwood (Senior Independent Director),<br><br>Sarah Bentley and Brendan Gilligan – read their biographies on<br><br>page 71. These Ring-Fenced Bank-only directors are independent<br><br>of the management and the rest of the Group and their role is to<br><br>act exclusively in the best interests of the Ring-Fenced Banks.<br><br>They therefore play a crucial role in the governance structure,<br><br>with an enhanced role in managing any potential conflicts<br><br>between the Ring-Fenced Banks and the Group. | Lloyds Banking Group plc simplified sub-group structure | |||
| --- | Lloyds Banking Group plc Board | ||||
| --- | Aligned boards<br><br>Lloyds Bank plc1<br><br>HBOS plc<br><br>Bank of Scotland plc1<br><br>1 Ring-Fenced Banks | Lloyds Bank<br><br>Corporate<br><br>Markets plc<br><br>Non-Ring-Fenced Bank | Scottish<br><br>Widows Group<br><br>Limited<br><br>Insurance | LBG Equity<br><br>Investments<br><br>Limited<br><br>Equity Investments | |
| --- | --- | --- | --- |
Lloyds Banking Group plc Annual Report and Accounts 2025
74
Board activities
Overview
These pages highlight some of the Board’s main
activities throughout the year, with a timeline
of key discussions, outcomes, in-depth sessions
and external insights
Agenda planning
Each Board meeting agenda includes standing updates and
other items for consideration by the Board. The Board regularly
receives reports from the Group Chief Executive, Chief Financial
Officer, Chief Operating Officer and Chief Risk Officer,
providing insights on important strategic, financial, operational
and risk matters for the Group. Chairs of Board Committees
and major subsidiaries deliver regular updates to the Board on
recent meetings and activities. The Board also receives a
standing corporate governance update, covering emerging
governance developments, annual governance framework
and policy reviews and governance-related approvals. Agendas
provide for other items to be considered by the Board as
relevant including certain topics at different stages as
management’s thinking evolves.
January
Discussion matters included
•Preview of 2024 results and year end distribution options
•Progress against strategic transformation metrics
•Culture transformation progress
Key decisions/outcomes included
•Approved ESG-related disclosures and targets
•Approved matters relating to the risk management
framework, risk appetite and risk metrics
•Approved directors’ suitability for election/re-election and
non-executive directors’ independence
February
Discussion matters included
•Performance against customer engagement goals and
an update on co-servicing strategy
•An update on the ‘Speak Up’ whistleblowing programme
•Insights from Internal Audit on the Group’s control
| Board training<br><br>During the year, Board members had the opportunity to<br><br>attend training sessions, which were designed to keep the<br><br>Board informed on a range of relevant topics and emerging<br><br>focus areas. Training topics are selected and agreed<br><br>through a collaborative process involving key executive<br><br>teams, the Company Secretary and the Nomination and<br><br>Governance Committee. For more detail on the training<br><br>programme and the topics covered, see page 87. |
|---|
environment
Key decisions/outcomes included
•Approved the Group’s operating plan, which sets out the
Group’s business forecast
•Agreed proposed 2025 metrics for assessing customer
experience outcomes
•Approved the 2024 annual report and accounts and
capital distributions
•Approved the Modern Slavery and Human Trafficking
Statement
•Approved an updated policy on Board and Group Executive
Committee share dealing
•Adopted recommendations from the 2024 Board
performance review
| Topics key: |
|---|
| Strategy<br><br>Customers and clients<br><br>Purpose, culture and values<br><br>Sustainability<br><br>Risk management and regulatory<br><br>Financial<br><br>Governance<br><br>Political and economic environment |
April
Discussion matters included
•An update on the reputational and political environment
•Business unit performance and strategy updates
•Aspects of the Group’s proposed strategic vision beyond 2026
Key decisions/outcomes included
•Approved the operational resilience self-assessment
•Approved the refreshed Corporate Governance Framework
•Approved the Q1 2025 financial results
External insights
The Group’s brokers joined the Board for a discussion on the
financial services market, including the competitive landscape,
as well as shareholder engagement activities.
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75
May
Discussion matters included
•Business unit performance and strategy updates
•An update on geopolitical developments
•An update on the economic crime prevention programme
Key decisions/outcomes included
•Provided feedback to management on discussions around
the Group’s proposed strategic vision beyond 2026
In-depth session/external insights
At a session presented by external speakers, the Board discussed
developments in the private credit market. A joint session was also
held with the Lloyds Bank Corporate Markets and Scottish
Widows boards to discuss business growth and strategic progress.
The Board also attended the annual general meeting.
June
Discussion matters included
•Further discussion on progress against strategic
transformation metrics
•Business unit performance and strategy updates, including
further consideration of co-servicing strategy developments
•Customer insights and performance against Group metrics
for assessing customer experience outcomes
•An update on generative AI initiatives
•A briefing on the proposed acquisition of Curve
•The format of financial results reporting from 2026
Key decisions/outcomes included
•Approved the appointment of Chris Vogelzang as a director
•Approved the annual Consumer Duty report
•Approved the Bank Capital Stress Test results
In-depth session and external insights
As part of a two-day offsite event, the Board held a dedicated
session on the Group’s proposed strategic vision beyond 2026
(read more on page 78) and a session on geopolitical
developments, facilitated by an external speaker.
July
Discussion matters included
•Progress with risk and culture transformation programmes
•The Chief Internal Auditor’s views on the control environment
•Business unit performance updates
•The FCA’s firm evaluation letter and, with the FCA in
attendance, the FCA’s regulatory strategy
•The PRA’s periodic summary review letter with the PRA
in attendance
Key decisions/outcomes included
•Approved the 2025 interim dividend and half year results,
including the announcement of changes to the format of
financial reporting from 2026, as discussed by the Board in June
•Approved the acquisition of the outstanding interest in
Schroders Personal Wealth and discussed customer benefits
and experience as part of the proposals
September
Discussion matters included
•Strategic vision and operational transformation beyond 2026
•An updated view of the reputational and political environment
•Business unit performance and strategy updates, including
further review of co-servicing strategy
•Performance against Group metrics for assessing customer
experience outcomes
•Key outcomes and conclusions from the annual Group
incident exercise
Key decisions/outcomes included
•Approved the proposed cost of equity metric for 2025
•Approved updates to certain risk appetite metrics
•In October, the Board approved the Q3 2025 financial results
November
Discussion matters included
•Business unit performance and strategy updates
•An update on workforce engagement activities during
the year
Key decisions/outcomes included
•Further discussed the proposed acquisition of Curve and the
opportunity to offer broader differentiation for customers
•Discussed changes to colleague defined contribution pensions
•Approved annual ring-fencing compliance matters
•Approved the Board Inclusion Policy
In-depth session
The Board held a two-day offsite event which included a
dedicated session to continue to explore the strategic vision
beyond 2026 (read more on page 78).
December
Discussion matters included
•Updates from business unit CEOs, Finance, the Chief
Operating Office and Risk on the operating plan approach
•Economic considerations and assumptions for the
operating plan
•Customer insights and the development of the Group’s 2026
metrics for assessing customer experience outcomes
•Recommendations from the Board performance review
Key decisions/outcomes included
•Provided feedback on the operating plan, which sets out
the Group’s business forecast, and confirmed support for
the approach
•Approved further changes to the share dealing policy and
a new share dealing portal for Board and Group Executive
Committee members
External insights
A Board development session (supported by an external
facilitator) followed on from a previous session held
in November 2024 and included a discussion focused
on digital assets.
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76
Engaging with our stakeholders
Stakeholder engagement
The Board recognises the fundamental importance of engaging with
its stakeholders, gaining a deeper understanding of their views and
the importance of this understanding in informing their discussions
and decision making. During the year, key stakeholders included
customers, clients, colleagues, shareholders, communities,
regulators and suppliers.
The Group’s Closer to Customers, Clients and Colleagues
programme remains a key method by which non-executive directors
hear directly from the Board’s stakeholders.
The programme helps the directors better understand the
important issues for the Group’s stakeholders, the role the Group
plays in supporting them and how the Group is performing here.
Activity under the programme, along with other forms of director
engagement, is described below. Examples of decision making by
the Board which had particular relevance to their stakeholder
engagement can be found on pages 30 to 31.
| Customers<br><br>and clients | How does that engagement<br><br>impact Board decisions?<br><br>•Hearing directly from customers and clients helps better<br><br>determine the action the Group takes now and in the future<br><br>to best support our customers’ needs<br><br>•Direct engagement helps the Board in ensuring the Group can<br><br>best meet its Consumer Duty obligations<br><br>•Regular updates from the executive team help to identify<br><br>opportunities for innovation and improvement to better<br><br>support our customers and clients<br><br>•Review of the Group customer dashboard gives the Board the<br><br>opportunity to ensure meaningful changes are delivered to<br><br>further improve customer outcomes |
|---|---|
| Why does the Board engage?<br><br>The Board’s engagement with customers is central to the<br><br>Group’s customer-centric approach, including the Group’s ability<br><br>to evolve to meet changing customer needs and support our<br><br>customers in achieving their financial ambitions.<br><br>How did the Board engage?<br><br>•Sessions providing deeper insight into the issues faced by<br><br>specific customer groups, including single person households,<br><br>small businesses and later life including retirement<br><br>•Holding events with clients in Edinburgh, Manchester and<br><br>London to hear directly from them on the issues their<br><br>businesses are facing<br><br>•Regular updates to the Board by the executive team gave<br><br>insight into the Group’s performance in delivering on its<br><br>customer and client-related objectives, including customer<br><br>insight sessions and ongoing consideration of the Group<br><br>customer dashboard<br><br>•Concerns relevant to customers and clients were identified<br><br>for consideration in wider proposals put to the Board |
|
Engagement in action |
|---|---|
| Pension<br><br>engagement<br><br>During the year, the Board and its Remuneration Committee<br><br>consulted with colleagues on proposals to move the Group’s UK<br><br>defined contribution pension provision from Your Tomorrow and<br><br>Your Retirement Plan to the Scottish Widows Master Trust.<br><br>The Board engaged with colleagues to understand their views<br><br>through a comprehensive digital first consultation process.<br><br>This included around 1,800 items of feedback formally submitted<br><br>by colleagues across all grades, business units and age groups.<br><br>Trade union partners, including Accord and Unite, were also<br><br>consulted, along with the Group’s People Consultation Forum,<br><br>allowing collective consultation and a number of relevant<br><br>questions to be raised, resulting in no formal objections or<br><br>requests for further action.<br><br>The Board was pleased to have the opportunity to hear from<br><br>colleagues and representatives so as to be able to take their<br><br>views into account prior to making the decision to transfer the<br><br>future pension provision of the Group’s UK colleagues to the<br><br>Scottish Widows Master Trust from 2026. |
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77
| Colleagues | •Helps the Board gain additional insight on matters which<br><br>colleagues have raised as part of wider engagement activity<br><br>and allows progress against matters raised to be monitored | |||
|---|---|---|---|---|
| Why does the Board engage?<br><br>The Board’s ambition is that the Group continues to be a place<br><br>where people who are passionate about our purpose wish to<br><br>work. Engagement with colleagues helps to understand better<br><br>how they remain motivated to achieve our purpose with the<br><br>skills needed to deliver on the Group’s wider strategic objectives.<br><br>How did the Board engage?<br><br>•Held a number of colleague engagement and recognition<br><br>events with the opportunity to hear directly from colleagues<br><br>and recognise their achievements in supporting our customers<br><br>•Considered reports on key themes raised during colleague<br><br>engagement activity, including the work of the People Forum,<br><br>the People Consultation Forum and the Management<br><br>Advisory Forum<br><br>•Review by its Responsible Business Committee of findings<br><br>from surveys of colleague sentiment and other colleague<br><br>engagement reports<br><br>How does that engagement<br><br>impact board decisions?<br><br>•Allows the Board to understand directly colleague views on<br><br>the Group’s progress against its strategy, including what could<br><br>improve this progress, and colleague observations from<br><br>interacting with customers, further informing wider Board<br><br>decision making | |
Engagement in action | ||
| --- | --- | |||
| Engaging with our workforce<br><br>The Board’s Responsible Business Committee is the<br><br>designated body for workforce engagement, providing<br><br>focus, but with the Board retaining a commitment for<br><br>individual Board members to engage with colleagues directly<br><br>throughout the year. The Responsible Business Committee<br><br>reports regularly to the Board on its colleague engagement<br><br>agenda. The Board considers these arrangements to<br><br>be effective as the work of the Responsible Business<br><br>Committee combined with the other colleague engagement<br><br>methods in this section allows engagement with diverse<br><br>colleague groups. | Shareholders | •The Board’s Nomination and Governance Committee<br><br>considered correspondence from institutional shareholders and<br><br>non-governmental organisations along with market feedback.<br><br>The Committee also reviewed initiatives aimed at enhancing<br><br>shareholder processes to ensure they remain effective and<br><br>aligned with regulatory and shareholder expectations<br><br>•Directors engaged with shareholders at the Group’s annual<br><br>general meeting and encouraged shareholder participation<br><br>by inviting questions and facilitating open discussion<br><br>How does that engagement<br><br>impact Board decisions?<br><br>•Shareholder feedback helped the Board to better understand<br><br>investor sentiment, in turn informing relevant discussions<br><br>and decision making, including in relation to the Group’s<br><br>strategic progress<br><br>•Feedback also helped to inform the ongoing development of<br><br>the Group’s approach to communicating with external parties | ||
| --- | --- | |||
| Why does the Board engage?<br><br>With one of the largest shareholder bases in the UK, the Board<br><br>remains committed to understanding the needs and expectations<br><br>of our shareholders, both private and institutional, helping to<br><br>further inform Board decision making.<br><br>How did the Board engage?<br><br>•Directors including the Chair, Group Chief Executive and<br><br>Chief Financial Officer met regularly with institutional<br><br>shareholders, both in the UK and internationally<br><br>•Considered updates from Investor Relations on market views<br><br>and shareholder sentiment, including an annual presentation<br><br>from our corporate brokers on matters including perceptions<br><br>of the Group | Communities<br><br>and environment | •The Board continues to be supported in environmental matters<br><br>by its Responsible Business Committee, which considers<br><br>stakeholder views on matters relating to the Group’s ambition<br><br>to be a trusted, sustainable, inclusive and responsible business.<br><br>The report of that Committee can be found on page 97<br><br>How does that engagement<br><br>impact Board decisions?<br><br>•Engagement with the Group’s charitable partners allowed<br><br>the Board to better understand the Group’s impact within<br><br>local communities<br><br>•The work of the Responsible Business Committee gives<br><br>the Board deeper insight into its role as both an employer<br><br>and a collaborator within the communities in which the Group<br><br>is present | ||
| --- | --- | |||
| Why does the Board engage?<br><br>The Group’s presence in a large number of communities across<br><br>the UK continues to reinforce the importance of engagement<br><br>and action to help these communities prosper, while also helping<br><br>to build a more sustainable and inclusive future.<br><br>How did the Board engage?<br><br>•Members of the Board met with representatives of<br><br>charities and community groups supported by the Group’s<br><br>charitable foundations |
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Engaging with our stakeholders continued
| Regulators and<br><br>government | •Discussions included the Board’s role in oversight of the<br><br>Group’s key risks and the execution of its strategy<br><br>•The PRA and FCA attended a meeting of the Board during<br><br>which progress against actions from their Periodic Summary<br><br>Meeting and Firm Evaluation letters were discussed<br><br>•Directors engaged with the Government during the year<br><br>on matters relating to the impact of policy on the financial<br><br>services sector<br><br>How does that engagement<br><br>impact Board decisions?<br><br>•Ongoing direct discussions allow the Board to better<br><br>understand the regulators’ and the Government’s priorities<br><br>and how these are best acknowledged in the Board’s wider<br><br>decision making | ||||
|---|---|---|---|---|---|
| Why does the Board engage?<br><br>The Board recognises the importance of its ongoing constructive<br><br>relationships and dialogue with both government and the<br><br>regulatory authorities in markets in which the Group operates,<br><br>in particular in achieving the Group’s strategic ambitions,<br><br>and continuing to deliver for the Group’s wider stakeholders.<br><br>How did the Board engage?<br><br>•Directors held ongoing discussions with the FCA and PRA on<br><br>various aspects of the regulatory agenda | Suppliers | •The Board continued to oversee resilience in the supply chain<br><br>ensuring the Group’s most important supplier relationships<br><br>were not impacted by potential material events<br><br>How does that engagement<br><br>impact Board decisions?<br><br>•Ensures the Group’s approach continues to meet wider<br><br>industry standards on supplier management, in particular<br><br>supplier payment practices<br><br>•Allows a deeper understanding of our supply chain and the<br><br>degree to which our suppliers’ operations align to the strategy<br><br>and purpose of the Group | |||
| --- | --- | ||||
| Why does the Board engage?<br><br>The Board recognises the importance of the partners the<br><br>Group relies on for key aspects of the Group’s operations and<br><br>strengthening these relationships to achieve both the Group’s<br><br>and its suppliers’ wider ambitions.<br><br>How did the Board engage?<br><br>•The Audit Committee considered reports from the Group’s<br><br>Sourcing and Finance teams on the efficiency of supplier<br><br>payment practices, including those relating to the Group’s<br><br>key suppliers | Strategy discussions | ||||
| --- | --- | ||||
| While strategy was regularly discussed at Board meetings<br><br>throughout the year, the Board also participated in two<br><br>dedicated strategy sessions which were held offsite. These<br><br>sessions provided the opportunity for iterative engagement<br><br>on strategy between the Board and the executive team,<br><br>enabling early input on emerging plans and ongoing dialogue<br><br>as the strategy developed. The sessions also allowed the Board<br><br>to test strategic assumptions from a stakeholder perspective.<br><br>June<br><br>Topics discussed at the June offsite session included the complex<br><br>external environment, its potential evolution beyond 2026 and<br><br>key considerations for the Group. The Board also discussed the<br><br>development of the Group’s purpose ambitions and focus areas,<br><br>scope for efficiencies in the Group’s operating model and<br><br>the potential strategic vision beyond 2026 for the Group<br><br>and specific businesses. | November<br><br>At the offsite session in November, the Board continued to<br><br>explore the potential strategic vision beyond 2026. Discussion<br><br>topics included consideration of potential strategic focus<br><br>areas for each of the Group’s business units as well as further<br><br>refinement of the Group’s purpose outcomes. The Board also<br><br>considered changes in the market and external environment<br><br>since the offsite discussion in June, with a particular focus<br><br>on the pace of development and impact of generative AI. | Grow | Focus | Change | |
| --- | --- | --- | |||
| Drive revenue growth<br><br>and diversification | Strengthen cost and<br><br>capital efficiency | Maximise the<br><br>potential of people,<br><br>technology and data |
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Our culture in action
| How the Board monitors and assesses culture | ||
|---|---|---|
| The directors continue to engage with colleagues to deepen<br><br>their understanding of how culture is experienced across the<br><br>Group. Colleague listening is a core part of the Group’s culture,<br><br>using an ongoing feedback system to inform transformation and<br><br>performance. Methods used by the Board to monitor and assess<br><br>culture in 2025 included:<br><br>•Board participation in quarterly ‘listening sessions’, part of<br><br>the Group’s ‘Closer to Customers, Clients and Colleagues’<br><br>programme of engagement, where colleagues shared views<br><br>with the Board on key topics such as culture, collaboration<br><br>and risk. Groups of colleagues interacted with this year<br><br>include Next Generation Talent, Leaders and Lloyds<br><br>Technology Centre colleagues<br><br>•Board consideration of the results of surveys (annual and<br><br>regular pulse) designed to understand colleague sentiment and<br><br>highlight any cultural issues focus areas such as simplification<br><br>•Feedback from focus groups whereby colleagues shared<br><br>views on our ways of working, inclusion, decision making<br><br>and AI and technology<br><br>•Branch visits and colleague breakfasts attended by<br><br>non-executive directors and the Chair, which gave colleagues<br><br>the opportunities to share their views<br><br>•Review of the Group culture dashboard – read more below<br><br>The Chair and Group Chief Executive have comprehensive<br><br>colleague engagement programmes throughout the year. | Outcomes of the Board’s monitoring and assessment | |
| --- | ||
| Insights gained from the Board’s engagement with colleagues<br><br>and from colleague feedback more generally are reviewed<br><br>by the Responsible Business Committee as the designated<br><br>workforce engagement body and key themes and results<br><br>are shared with the Board on a quarterly basis. During 2025,<br><br>these insights enabled the Board to consider progress on, and<br><br>actions required to continue to advance towards, workforce<br><br>and cultural transformation ambitions and also to satisfy itself<br><br>that workforce engagement methods and associated updates<br><br>remain appropriate and effective. As a result, the Board<br><br>provided input into 2026 cultural focus areas across simplicity,<br><br>accountability and performance and requested the executive<br><br>establish a methodology and metrics to track the Group’s<br><br>cultural and behavioural change.<br><br>The 2025 Board listening sessions provided the Board with<br><br>colleague views on crucial topics such as the Group’s approach<br><br>to risk, collaboration between teams, use of AI and simplification.<br><br>This feedback enabled the Board to input into the iteration of<br><br>key transformation and culture programmes, for example helping<br><br>shape the Group’s programme of work to remove barriers and<br><br>blockers so we can deliver more value to customers at pace.<br><br>The 2025 annual colleague survey demonstrated observable<br><br>cultural outcomes whereby key metrics across all indices<br><br>improved, including the Group’s employee engagement<br><br>index improving and its colleague advocacy (net promoter)<br><br>score increasing. | Embedding the desired culture | |
| --- | ||
| The Group culture dashboard is a key element of how<br><br>the Group embeds the desired culture throughout the<br><br>organisation. Introduced in November 2023 and shared<br><br>twice yearly with the Board, the dashboard tracks<br><br>insights related to performance, change and customer<br><br>outcomes and identifies blockers to our cultural goals.<br><br>The dashboard’s outcomes are a key input to culture plans,<br><br>driving action towards cultural transformation and creating<br><br>a strong culture that drives good customer outcomes.<br><br>This, alongside our Group cultural framework, which aligns<br><br>values throughout the organisation and promotes colleague<br><br>listening activity and culture and people plans, plays a key<br><br>role in embedding the Group’s culture. |
Employee
engagement index
75%
up 4pts vs 2024
Colleague advocacy
(net promoter) score
+23
up 15pts vs 2024
Manager net
promoter score
+62
up 7pts vs 2024
MyVoice annual survey
response rate
85%
up 4pts vs 2024
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80
Sustainability governance
Sustainability governance
Given the strategic importance of our sustainability ambitions
and commitments in managing the impacts arising from climate
change and broader social issues, the Group’s governance structure
provides clear oversight and ownership of the Group’s sustainability
strategy and management of risks and opportunities.
Sustainability-related responsibilities at Board level are overseen
by the Responsible Business Committee, with specific reporting,
remuneration and risk management responsibilities in relation to
sustainability-related matters (including climate) shared with the
Audit Committee, Remuneration Committee and the Board Risk
Committee. This ensures appropriate Board-level coordination
and cooperation on these matters.
Climate risks and opportunities are identified, assessed and
managed by business unit level teams governed via functional and
divisional level steering groups and committees including the Group
Risk Committee. For further details on the control environment
operating at a business unit level for climate-related controls,
please see page 125 of our sustainability report .
The Responsible Business Committee oversees the Group’s delivery
of its purpose including the delivery of our sustainability strategy.
It conducts deep dives into current priority areas and escalates for
review and discussion to the Board as appropriate. The Group’s
purpose pillars are outlined on page 14.
The Committee also makes recommendations to the Board for
social strategies and environmental sustainability activities.
The Remuneration Committee plays a key role in embedding
sustainability into executive performance management. It oversees
the integration of ESG performance measures into the Group’s
balanced scorecard and LTIP frameworks, thereby aligning
remuneration outcomes with the Group’s sustainability ambitions
and climate-related goals.
We engage proactively with investors and other key stakeholders
throughout the year on our sustainability priorities and plans. Given
sustainability is at the heart of our purpose-driven strategy, with
ambitious climate targets reflected in strategic objectives, the
progress already being made in this area and the Group’s existing
focus on enhanced disclosure, transparency and engagement, the
Board does not believe it is necessary to propose a separate climate
vote at our 2026 annual general meeting at this time. We will
continue to be transparent on our support for the UK’s transition,
our ambitions and targets, plans and progress and to consider on a
regular basis whether to propose a climate vote.
Executive-level governance
The accountable executive for the Group’s sustainability strategy is
the Chief Sustainability Officer and Chief Corporate Affairs Officer,
with relevant teams in place to drive this strategy forward. There
are four key committees that provide management oversight at
an executive level: the Group Sustainability Committee, the Group
Risk Committee, the Group Disclosure Committee and the Group
| Our sustainability governance structure | |||||
|---|---|---|---|---|---|
| Board level | |||||
| Lloyds Banking Group plc Board1 | |||||
| Responsible<br><br>Business<br><br>Committee<br><br>(RBC)2 | Board Risk<br><br>Committee<br><br>(BRC) | Audit<br><br>Committee<br><br>(AC) | Remuneration<br><br>Committee<br><br>(RemCo) | ||
| Executive level | |||||
| Group<br><br>Sustainability<br><br>Committee<br><br>(GSC) | Group Risk<br><br>Committee<br><br>(GRC) | Group<br><br>Disclosure<br><br>Committee<br><br>(GDC) | Group<br><br>Executive<br><br>Committee<br><br>(GEC)1 | ||
| Business and functional level | |||||
| Divisional and functional-level<br><br>climate and sustainability<br><br>steering groups or committees | |||||
| 1The Chair of the Scottish Widows Board (except for any Interim Chair) sits on the<br><br>Lloyds Banking Group plc Board. The Scottish Widows CEO sits on the Group<br><br>Executive Committee and updates the Group Executive Committee on relevant<br><br>insurance matters which can include papers for Group Executive Committee<br><br>consideration.<br><br>2The Chair of the Responsible Business Committee, Amanda Mackenzie, is a non-<br><br>executive director on the Board, a member of the Remuneration Committee, the<br><br>Nomination and Governance Committee and the Audit Committee. Amanda helps<br><br>ensure that sustainability is discussed and considered by the Board. Amanda has<br><br>extensive experience in ESG matters, including helping launch the United Nations<br><br>Sustainable Development Goals. |
Executive Committee. These are supported by a number of divisional
and function-level teams who consider sustainability topics.
Group Sustainability Committee governance
The Group Sustainability Committee provides direction and
oversight of the Group’s sustainability strategy, as well as oversight
of the Group’s approach to meeting external environmental and
social ambitions and targets. Through regular meetings the Group
Sustainability Committee reviews sustainability opportunities and
makes recommendations to the Group Executive Committee and
the Responsible Business Committee where appropriate.
The Group Sustainability Committee is supported by divisional and
functional-level teams; further details on their role can be found on
pages 120 of our sustainability report .
Group Risk Committee governance
Responsibility for overseeing the management of financial risks
from climate change rests with the relevant Chief Risk Officers
across the Group, who have Senior Management Function (SMF)
responsibility covering the Ring-Fenced Banks (Lloyds Bank plc
and Bank of Scotland plc), Lloyds Bank Corporate Markets and
the Solvency UK regulated entities in Scottish Widows Group
(under Scottish Widows Group, its Finance Director has additional
SMF responsibilities to manage the risks while the Chief Risk Officer
has oversight).
The Group Risk Committee oversees the Group’s management of
emerging and principal risks such as climate risk, operational risk,
conduct risk and economic crime. Climate risk is considered
regularly through the Group’s risk reporting to the Group Risk
Committee in addition to standalone updates on an annual basis
which inform discussions at the Board Risk Committee. Relevant
updates are also provided across the Group’s key legal entities,
as required. Additional engagement on relevant climate-related
matters is undertaken through the existing risk governance
structure, for example sector risks and opportunities related
to climate are presented and discussed at senior credit forums.
Group Disclosure Committee governance
The Group Disclosure Committee provides oversight of the
accuracy, completeness and timeliness of disclosures made to the
market and/or prospective investors. This includes sustainability
disclosures in our annual report and accounts, sustainability
report and separate sustainability supplements .
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81
|
Sustainability in action |
|---|---|
| Modern slavery Board training<br><br>In 2025, the Group delivered targeted human rights and<br><br>modern slavery training for senior leaders, including the<br><br>Board and Group Executive Committee. The Board<br><br>undertook a voluntary session on the evolving global legal<br><br>landscape, highlighting financial sector responsibilities and<br><br>the strategic importance of embedding human rights into<br><br>core business practices. The training, supported by Unseen<br><br>UK, explored risks across operations, supply chains, lending<br><br>and investments, and it shared practical examples of how<br><br>integration strengthens resilience and integrity. This initiative<br><br>reinforces the Group’s commitment to responsible business<br><br>conduct, equipping leaders to manage human rights risks and<br><br>supporting long-term sustainability objectives. |
Group Executive Committee governance
Climate considerations form part of our planning and forecasting
activities. This includes forecasting of our Bank financed emissions
to 2030 for our high-carbon-intensive sectors. These emissions
forecasts are included as part of our operating plan process, shared
with the Group Executive Committee and the Board.
Business and functional level
Executive-level governance of sustainability risk is supported by
existing governance structures across our divisions that are used
to oversee decisions related to sustainability risk that impact
the divisions, ensuring sustainability risks are managed as part
of regular activity.
| Key sustainability topics discussed at the Board’s Committee meetings in 2025 | |
|---|---|
| Across the Group’s governance structure, key areas of discussion at Board Committee level are detailed below in relation to the<br><br>Group’s sustainability strategy, targets and approach to managing climate-related risk. These Committees meet at least quarterly<br><br>with sustainability matters, including climate, discussed at a number of these meetings. There were 12 specific updates given<br><br>to the Board in 2025 on climate-related matters. | |
| Lloyds Banking Group plc Board | |
| Committee | Sustainability topics discussed |
| Responsible<br><br>Business<br><br>Committee<br><br>See the Responsible<br><br>Business Committee<br><br>report on page 97 | •The Committee recommended to the Board the Group’s updated Consumer Lending Sustainable Finance<br><br>targets for Mortgages and Motor and restatement of the Group’s operational carbon targets ahead of<br><br>publication of the 2024 Sustainability Report<br><br>•Purpose pillar deep dives on regional development, inclusion, financial empowerment and environmental<br><br>sustainability<br><br>•Monitoring progress against climate ambitions, targets, pledges and strategic levers<br><br>•Discussion on plans and progress across environmental sustainability strategy and our approach for nature<br><br>•Recommended to the Board the approval of the external sector statement, modern slavery and human<br><br>trafficking statement and annual Consumer Duty Board report<br><br>•Review of sustainable finance framework updates<br><br>•Review of colleague engagement strategy, feedback and outcomes<br><br>•Discussion on community engagement |
| Board Risk<br><br>Committee<br><br>See the Board Risk<br><br>Committee report on<br><br>pages 92 to 96 | •Review of the key climate risks facing the Group, including uncertainty of the transition to a low-carbon<br><br>economy, especially for sectors which are heavily dependent on technological development and<br><br>government policy<br><br>•Update on the PRA’s expectations for managing climate-related risks, as outlined in Consultation Paper<br><br>10/25, noting this aligns with the Group’s direction, including in relation to the development of internal<br><br>scenario modelling and capabilities to assess these<br><br>•Review of the Board climate risk appetite, while looking to ensure the Group avoids risks from potential<br><br>economic and social misalignment in material sectors such as homes and agriculture<br><br>•Wider sustainability topics included: the Group’s treatment of vulnerable customers, generative AI deep<br><br>dive which outlined the Group’s AI ethics principles and how use cases are overseen via the Data and AI<br><br>Ethics Committee, economic crime deep dive and key drivers of people risk and mitigating action |
| Audit<br><br>Committee<br><br>See the Audit<br><br>Committee report on<br><br>pages 88 to 91 | •Review of developments with regulations including UK Sustainability Reporting Standards, US and EU<br><br>regulations, including Corporate Sustainability Reporting Directive<br><br>•Activity to assess impacts of climate-related risks and opportunities on the financial statements including<br><br>quantification of impacts of climate risk on Expected Credit Loss<br><br>•Updates on the control environment embedded to support 2025 sustainability reporting, including<br><br>assurance<br><br>•Review of sustainability reporting approach and integrated sustainability disclosures for the Group in 2025 |
| Remuneration<br><br>Committee<br><br>See the Director’s<br><br>remuneration report<br><br>on pages 121 and 122 | •Review and approve performance measures, weightings and targets used in the scorecards that inform<br><br>the remuneration of executive directors. Executive remuneration is linked to the successful delivery<br><br>of the Group’s long-term strategy and considers measures relating to financial and non-financial<br><br>performance, including sustainability measures aligned to our public commitments on climate change,<br><br>promoting inclusion and diversity and colleague engagement<br><br>•Regularly discuss Group performance, including relevant headwinds/tailwinds underlying that<br><br>performance, in the context of both all-colleague and executive remuneration, ensuring reward<br><br>outcomes appropriately properly reflect overall stakeholder experience |
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Board performance
Board performance review
How the Board performs and is evaluated
The annual Board performance review provides an opportunity
to identify improvements to its effectiveness, maximise strengths
and highlight areas of further development, enabling the Board to
continuously improve its own performance and the performance of
the Group. The Board is committed to the independent evaluation
of its own performance and that of its Committees at least once
every three years, as recommended by the UK Corporate
Governance Code 2024. An externally facilitated evaluation
was conducted in 2022, with internal evaluations having been
conducted in 2023 and 2024, and therefore the Board
performance review was externally facilitated in 2025.
The Chair of the Board, with the support of the Nomination and
Governance Committee, leads the Board in considering and
responding to the review of the Board’s effectiveness, which
includes a review of its Committees and individual directors.
Performance evaluation of the Chair is carried out by the
non-executive directors, led by the Senior Independent Director,
considering the views of the executive directors.
Progress against actions from the
2024 evaluation of the Board’s performance
A summary of progress against the feedback from the
2024 evaluation is set out on page 83.
2025 Board performance review
The 2025 evaluation was facilitated externally by Lisa Thomas of
Independent Board Evaluation (IBE) in September and October
- IBE is an independent external service provider with no other
connection to the Group or any individual directors. The evaluation
took into account the findings from the 2024 evaluation as well as
an externally facilitated Board development session.
The 2025 Board performance review concluded that the Board is
highly functioning and deeply engaged. The Group intends to report
back in its next annual report on the actions taken as a result of the
evaluation. The strengths and areas for growth and continued focus
are outlined below.
| Process for 2025 performance review |
|---|
| Appointed IBE<br><br>following a<br><br>competitive<br><br>tender process | Evaluation<br><br>brief<br><br>provided<br><br>to IBE | One-to-one<br><br>interviews<br><br>conducted | Board and<br><br>Committee<br><br>meetings<br><br>observed<br><br>by IBE | Observations<br><br>discussed<br><br>with the Group<br><br>Chair and<br><br>Committee<br><br>chairs | Reports<br><br>presented to<br><br>the Board and<br><br>Committees<br><br>and actions<br><br>agreed | | --- | --- | --- | --- | --- | --- || Key findings from the 2025 performance review | | --- |
The 2025 Board performance review concluded that the Board is highly functioning and deeply engaged.
| Theme and link to strategy | Strengths | Areas for improvement/continued focus |
|---|---|---|
| Board composition,<br><br>skills and relevance<br><br>Grow<br> |
•The way in which the Group Chair orchestrates<br><br>meetings and continues to deliver Board<br><br>improvement<br><br>•Executive directors who model transparency and<br><br>collaboration and are considered exceptional<br><br>leaders for the business<br><br>•The quality and rigour demonstrated in the process<br><br>for selecting new Board members | •Continue to consider Board skills against future needs<br><br>of the Group, focusing on the next two to five years<br><br>•Take a more fluid approach to non-executive<br><br>director terms to match skills to strategy and keep<br><br>relevance as the bar, not a nine-year term<br><br>•Continue refining succession plans for the Board<br><br>and executive directors, ensuring ideal sequencing<br><br>and contingencies |
| Board culture, focus,<br><br>engagement and<br><br>agenda<br><br>Focus<br> |
•The embedding of the Group’s purpose into Board<br><br>thinking and how that is tested<br><br>•The way in which the Group Chair fosters<br><br>relationships to sustain boardroom culture<br><br>•The Board’s remit and accountability and the way<br><br>the agenda balances different stakeholder<br><br>interests, supported by sound values to do the<br><br>right thing<br><br>•The progressive approach to Board development | •Consider Board and Committee meeting focus<br><br>areas and agenda shape based on materiality and<br><br>forward-looking matters<br><br>•Assess the need for additional external data or<br><br>input to inform Board or Committee discussions<br><br>•Board members to role model performance culture<br><br>by encouraging more in-room group discussion<br><br>focused on challenge and accountability |
| Board governance<br><br>Change<br> |
•The quality of the governance overall, including<br><br>oversight through the rigour seen at Board<br><br>Committees, which are considered to be very well<br><br>chaired and to be effective in fulfilling their remit<br><br>•Decision making processes are well handled and<br><br>discussions well trailed<br><br>•The support provided by the Corporate<br><br>Governance team | •Implement short-form Board papers to support<br><br>the Board’s focus on key areas<br><br>•Continue to shape Board materials to ensure a<br><br>balanced and relevant mix of content, including<br><br>useful external perspectives<br><br>•Consider further development of individualised<br><br>induction and education plans, with dedicated<br><br>budgets if needed |
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83
| Progress against the 2024 evaluation |
|---|
The main focus in improvements to Board effectiveness in 2025 has centred around bringing in more external perspectives to facilitate
insightful Board discussions and continuing to address the rapidly evolving external environment through the strategy. The Board also
focused on driving the implementation of cultural change across the organisation to deliver the right outcomes, as well as Board
recruitment and development.
| Theme and link to strategy | Feedback from the 2024 evaluation | Actions taken in 2025 |
|---|---|---|
| Board leadership<br><br>and contribution<br><br>Grow<br> |
•Explore opportunities to increase external<br><br>perspectives and time for informal discussions to<br><br>take place outside of Board meetings, enhancing<br><br>the richness of content and views<br><br>•Continue to consider Board composition and focus<br><br>on skills required for future Board recruitment | •Opportunities to share external perspectives and<br><br>engagement with the Board in a variety of formal<br><br>and informal settings, including meetings, offsites<br><br>and dinners covering such topics as private credit,<br><br>geopolitical developments and market insights<br><br>•Board composition and skills reviewed by the<br><br>Nomination and Governance Committee, with<br><br>priority skills for recruitment identified. The Board’s<br><br>breadth of skills was enhanced through the<br><br>appointment of Chris Vogelzang in June 2025<br><br>•Engaged Spencer Stuart to facilitate a Board<br><br>development session involving a strategic<br><br>discussion on digital assets in December 2025,<br><br>building on the successful session delivered in<br><br>November 2024 |
| Risk and control<br><br>Focus<br> |
•Continue to enhance the quality of materials<br><br>to the Board to ensure they highlight the key<br><br>messages, risks, challenges and expected outcomes<br><br>so as to optimise the efficiency of meetings<br><br>•Expand the extent to which presentations<br><br>demonstrate iterative thinking as well as<br><br>lessons learned | •Following input from a wide variety of<br><br>stakeholders, the Board paper template, guidance<br><br>and training programme were reviewed. This<br><br>guidance sets out the requirement for stakeholders<br><br>to consider potential risks, how they will be<br><br>addressed and that executives’ priorities are to be<br><br>presented for discussion in a structured and<br><br>consistent format<br><br>•There was focus on the quality control of Board<br><br>papers through ongoing guidance and training<br><br>provided to stakeholders by the Corporate<br><br>Governance team throughout the year<br><br>•Board meetings provided time for Committee<br><br>Chairs to highlight constructive challenge, feedback<br><br>and outcomes from Committee meetings<br><br>•Iterative thinking was demonstrated through<br><br>management’s presentation of early views on<br><br>a number of topics, such as the strategic vision<br><br>beyond 2026 |
| Strategy<br><br>Change<br> |
•Continued focus on both the opportunities<br><br>and threats resulting from a fast-evolving<br><br>external environment<br><br>•Ensure customer and colleague perspectives<br><br>and insights shared with the Board are presented<br><br>in a comprehensive way, including as part of<br><br>the strategy | •The Board has spent dedicated time on a range of<br><br>fast-changing topics both at Board meetings and at<br><br>the strategy offsite meetings in June and November.<br><br>Topics included business unit strategy and<br><br>competitive landscape, the fast-evolving external<br><br>environment and its reputational, geopolitical and<br><br>economic implications and data, digital assets,<br><br>technology and use of artificial intelligence<br><br>•The Board regularly received updates on customer<br><br>and colleague perspectives during the year,<br><br>including as part of strategy updates. The new<br><br>Board paper template also reminds stakeholders<br><br>to consider both customer and colleague impacts<br><br>in their papers |
| People, culture<br><br>and environment<br><br>Change<br> |
•The Board to support and challenge management<br><br>further on the implementation of cultural<br><br>change throughout the organisation to deliver<br><br>the right outcomes | •There were regular updates to the Board and<br><br>relevant Committees from the People and Places<br><br>function to understand colleague views and<br><br>progress of the cultural transformation agenda<br><br>•The Board had the opportunity to continue to<br><br>develop a deeper understanding of customer<br><br>and colleague views through various activities,<br><br>including engagement and events at offsites<br><br>and participation in the ‘Closer to Customers,<br><br>Clients and Colleagues’ programme |
Lloyds Banking Group plc Annual Report and Accounts 2025
84
Internal control
Internal control
Board responsibility
The Board is responsible for, and monitors, the Lloyds Banking
Group Risk Management Framework (LBG RMF) and internal
control framework. The LBG RMF and internal control framework
is designed to facilitate effective and efficient operations and to
ensure the quality and integrity of internal and external reporting
and compliance with applicable laws and regulations. It is also
used to assist the Board in determining the nature and extent of
the principal risks the Group is willing to take to achieve its strategy,
and in putting in place appropriate controls to maintain those
risks within the Group’s risk appetite. The directors and senior
management are committed to maintaining a robust control
framework as the foundation for the delivery of effective risk
management. The directors acknowledge their responsibilities
in relation to LBG’s RMF and internal control framework,
and for reviewing its effectiveness.
In establishing and reviewing the LBG RMF and internal control
framework, the directors carried out a robust assessment of the
emerging and principal risks facing the Group, including those that
might threaten its business model, future performance, solvency
or liquidity and reputation, the potential impact and likelihood of
a risk event occurring, the timescale over which risk events might
occur and the costs of control. The process for identification,
evaluation and management of the emerging and principal risks
faced by the Group is integrated into the Group’s overall enterprise
framework for risk and is designed to also identify whether the
controls in place result in an acceptable level of risk. At Group level,
the Enterprise-Wide Risk Management (EWRM) report and risk
appetite dashboard are reviewed and regularly debated by the
Group Risk Committee and the Board Risk Committee, with formal
updates provided by those committees to the Board to ensure that
the Board is satisfied with the overall risk profile, risk
accountabilities and mitigating actions. The report and dashboard
together provide a view of the Group’s overall risk profile, key risks
and management actions, together with performance against risk
appetite and an overview of emerging risks which could affect the
Group’s performance over the life of the operating plan. Information
regarding the main features of the internal control and risk
management systems in relation to the financial reporting process
| Audit and Risk Committee Forum for non-executive directors |
|---|
| The audit and risk committee Forum is now an established<br><br>annual event in the Board calendar and was most recently held<br><br>in November 2025. Members of the Group, Insurance and Lloyds<br><br>Bank Corporate Markets audit committees and board risk<br><br>committees as well as colleagues from the business attended.<br><br>The aims of this informal forum are to have interactive<br><br>discussion to gain a shared understanding and appreciation<br><br>of common areas of interest. The topics discussed were:<br><br>•the Group’s approach to complying with provision 29 of the<br><br>UK Corporate Governance Code 2024, which relates to the<br><br>effectiveness of material controls<br><br>•Political and economic environments and future implications<br><br>for the Group<br><br>•AI: use and opportunities across Audit, Risk and Finance<br><br>and views of associated risks |
is provided within the risk management report on pages 138 to 197.
The LBG RMF is currently being refreshed and the revised design
will cover risk management for the entirety of the Group whilst
providing sufficient flexibility to allow for legal entity and local
jurisdiction requirements.
Control effectiveness review
All material controls are reviewed and assessed in response to
material triggers. Control assessments consider both the adequacy
of their design and operating effectiveness. In the event a control
is not effective, action plans are implemented to improve control
design or performance. Control effectiveness against all residual
risks is aggregated by risk category, monitored and reported via the
monthly EWRM report. The EWRM report is produced by the EWRM
team and reviewed and challenged by the Risk Function Executive
Committee and Group Risk Committee. On an annual basis, a point-
in-time assessment is made for control effectiveness against each risk
category and across the sub-groups. The Operational Risk System,
Key Risk Insights or EWRM are the sources used for this point-in-time
assessment and a year-on-year comparison on control effectiveness
is reported to the Board Risk Committee and the Board.
Reviews by the Board
The effectiveness of the LBG RMF and internal control framework is
reviewed at least annually by the Board, the Board Risk Committee
and the Audit Committee, which also receive reports of reviews
undertaken by the Risk Function and Group Audit.
The Audit Committee receives reports from the Group’s external
auditor, Deloitte LLP (which include details of significant internal
control matters that they have identified) and has a discussion
with the auditor at least once a year without executives present,
to ensure that there are no unresolved issues of concern. The
Group’s risk management and internal control systems are regularly
reviewed by the Board Risk Committee and the Board and are
consistent with the Corporate Governance Code Guidance on
Audit, Risk, and Internal Control issued by the Financial Reporting
Council. There is also an annual independent Control Effectiveness
review by Group Audit which is reviewed by the Board Risk
Committee and Audit Committee. These reports have confirmed
appropriate risk and internal control systems have been in place
for principal risks in the year under review and up to the date of
the approval of the annual report. The Group, Ring-Fenced Bank
sub-group and Lloyds Bank Corporate Markets have achieved full
compliance with BCBS 239 risk data aggregation and risk reporting
requirements, and actively continue to maintain this status.
Throughout the year both the Board Risk Committee and Audit
Committee have reviewed and approved proposals from the
Executive in relation to our preparations to comply with the
updated requirements of Provision 29 of the FRC’s UK Corporate
Governance Code 2024, relating to our approach to identifying and
reporting on the effectiveness of material controls ahead of
implementation from our financial year that began on 1 January
2026.
Conclusion
The 2025 LBG RMF and internal control framework review provides
reasonable assurance that the Group's risks and controls are
effective or that where any control weaknesses are identified, they
are subject to management oversight and action plans.
The Board in conjunction with the Audit Committee and the Board
Risk Committee concluded that the Group’s risk management
arrangements throughout 2025 were adequate overall. The Board
is confident that the continuous improvements underway will
ensure that the Group’s risk management arrangements will remain
sufficiently robust to meet developing risk management best
practice for the future, including assessing, and making a declaration
of, effectiveness of material controls.
Lloyds Banking Group plc Annual Report and Accounts 2025
85
Nomination and Governance Committee report
Sir Robin
Budenberg
Chair, Nomination
and Governance
Committee
| Read full biography <br> |
|---|
Effective succession planning and
ongoing development of Board
members ensure the Board retains
a diverse mix of skills, qualities
and strengths.
| Key activities in 2025 |
|---|
| •Board and senior executive succession planning<br><br>•Board and Committee composition, skills and training<br><br>•Board performance review outcomes<br><br>•Shareholder relations<br><br>•Corporate governance framework review<br><br>•Subsidiary governance<br><br>•Board Inclusion Policy |
| Membership and attendance at scheduled meetings | |
|---|---|
| Sir Robin Budenberg (Committee Chair) | 5/5 |
| Amanda Mackenzie | 5/5 |
| Cathy Turner | 5/5 |
| Scott Wheway | 4/41 |
| 1Scott Wheway stepped down from the Committee on 31 October 2025.<br><br>Other attendees<br><br>Nigel Hinshelwood, the Senior Independent Director of the<br><br>Ring-Fenced Banks, attends meetings as an observer to provide<br><br>insight on the Ring-Fenced Banks when required. The Group<br><br>Chief Executive also attends as appropriate. |
| Read more | ||
|---|---|---|
| Skills and experience | pages 68 to 69 | |
| Board composition | page 70 | |
| Responsibilities (and its terms of reference,<br><br>which are on our corporate governance page )<br> |
page 72 | |
| Board performance review | pages 82 to 83 |
Introduction
During 2025, the Committee continued to focus on succession
planning at both Board and executive level, playing a key role in
the composition and diversity of the Board. The Committee also
focused on training and development of Board members and on
Board performance, including implementation of actions arising
from the 2024 Board evaluation process and the outcome of the
2025 externally facilitated Board performance review. These areas
and the Committee’s other key activities are covered in more detail
in this report.
Board and Committee changes
Scott Wheway retired from the Board with effect from 31 October
- The Board is grateful for the contribution Scott made to the
Group and for the leadership and commercial acumen he brought
to the Board and in his role as Chair of Scottish Widows Group.
As part of the Committee’s strategic recruitment for core skills,
Chris Vogelzang was appointed as a non-executive director and
as a member of the Responsible Business Committee with effect from
16 June 2025 to supplement the Board’s existing retail and commercial
banking experience. Details of the selection process for Chris’s
appointment can be found below. Chris will be appointed as a
member of the Board Risk Committee with effect from 1 April 2026.
| Appointment process – non-executive directors |
|---|
| The Committee oversees the process for appointing non-<br><br>executive directors, providing recommendations to the Board<br><br>for the selection of a preferred candidate. In early 2025, the<br><br>Committee initiated a search to recruit for an additional non-<br><br>executive director based on a role specification which included<br><br>retail and commercial banking experience.<br><br>The search involved open advertising as well as the<br><br>appointment of Spencer Stuart, an executive search and<br><br>leadership consulting firm. The search process resulted in a<br><br>shortlist of potential candidates, who were interviewed by the<br><br>Chair and other non-executive directors. Further interviews<br><br>were then conducted with preferred candidates. Following this,<br><br>a recommendation was made to the Committee and, in turn,<br><br>the Committee recommended to the Board Chris Vogelzang’s<br><br>appointment as a non-executive director. This formal, rigorous<br><br>and transparent appointment process was based on merit<br><br>and objective criteria and sought to promote diversity, inclusion<br><br>and equal opportunity by considering a broad range of factors<br><br>including gender balance, social and ethnic backgrounds,<br><br>cognitive and personal strengths and the Group’s future<br><br>strategic direction.<br><br>Spencer Stuart, who were engaged in the recruitment that led<br><br>to Chris Vogelzang’s appointment, have no connection with the<br><br>Group or individual directors other than providing leadership<br><br>search and succession planning services and facilitating Board<br><br>development sessions. |
Board and Committee performance review
This year, in line with the UK Corporate Governance Code’s
recommendation of an externally facilitated Board performance
review every three years, the performance of the Board was
reviewed by an external board review specialist, Lisa Thomas
of Independent Board Evaluation. The Committee considered
the outcomes of Lisa Thomas’s review, including those
outcomes specific to the Committee, agreed the action plan and
recommended it to the Board for approval. Details of the review,
its outcomes and the action plan are provided on page 82.
The Committee subsequently undertook an annual review of its
own performance, the findings of which were considered by the
Committee at its January 2026 meeting with the conclusion reached
that the performance of the Committee continues to be effective.
Lloyds Banking Group plc Annual Report and Accounts 2025
86
Nomination and Governance Committee report continued
| Succession planning |
|---|
| Succession planning, at both Board level and across key senior<br><br>management roles, remained a core area of focus for the<br><br>Committee during 2025. Effective succession planning assists<br><br>the Group in delivering on its long-term strategic objectives by<br><br>ensuring the desired mix of knowledge, skills, experience and<br><br>diversity of Board members and executives.<br><br>Board succession planning<br><br>The Committee supports the Chair in reviewing the composition<br><br>of the Board and its Committees with attention given to the<br><br>skills, diversity and tenure of members. The Committee gives<br><br>consideration to further non-executive representation on the<br><br>Board, keeping in view the current and future needs of the<br><br>business. The promotion of inclusivity in gender, ethnicity,<br><br>background and thought, as well as the outcomes of<br><br>performance reviews, are also considered.<br><br>A Board skills matrix, a summary of which is on page 70,<br><br>assists the Committee in tracking individual member and Group<br><br>strengths and identifying any gaps in the desired collective skills<br><br>profile of the Board. As discussed on the prior page in relation<br><br>to the appointment process, the Committee identified the<br><br>desire for enhanced retail and commercial banking experience<br><br>on the Board, resulting in the recruitment of Chris Vogelzang.<br><br>The Committee has also identified the need for additional<br><br>consumer, digital and insurance experience resulting in ongoing<br><br>recruitment processes to address those needs.<br><br>A search for Scott Wheway’s successor as a non-executive<br><br>director of the Company and Chair of Scottish Widows Group<br><br>was initiated following announcement of Scott’s decision<br><br>to retire from the Group. The Committee reviewed the draft<br><br>role specification at its meeting in November 2025 as part<br><br>of the search.<br><br>As part of the Committee’s formal succession planning<br><br>approach, the Committee reviewed the rotation-based<br><br>recruitment activity timetable, emergency cover plans and<br><br>Board Succession Protocol (including the Emergency Succession<br><br>Protocol for the Chair), with the aim of facilitating orderly<br><br>transitions and mitigating risks from unexpected departures.<br><br>Executive succession planning<br><br>At an executive level, the Chair is responsible for developing and<br><br>maintaining a succession plan for the Group Chief Executive<br><br>who is, in turn, primarily responsible for developing and<br><br>maintaining succession plans for key leadership positions in the<br><br>senior executive team. As part of its oversight of succession<br><br>planning for executive directors and members of the senior<br><br>executive team, the Committee received and discussed regular<br><br>updates from the Group Chief Executive covering executive<br><br>succession arrangements. These discussions demonstrated the<br><br>continuing effectiveness of the Group’s approach to executive<br><br>succession planning, whereby the Board recognises the<br><br>importance of the ongoing development of a diverse pipeline<br><br>of current and future leaders across the Group’s executive and<br><br>management levels. This is supported by a range of policies<br><br>across the Group which promote the engagement of under-<br><br>represented groups within the business to help continue to<br><br>build a diverse talent pipeline. Further details can be found<br><br>on page 22. |
Independence
The Nomination and Governance Committee monitors whether
there are any relationships or circumstances which may affect a
director’s independence. Based on its assessment for 2025, the
Committee is satisfied that, throughout the year, all non-executive
directors remained independent1 in character and judgement and
are independent directors for the purposes of the Code.
Time commitments
Non-executive directors are advised of time commitments for the
Board and relevant Committees prior to their appointment and are
required to devote such time as is necessary to discharge their
duties effectively. The time commitments of the directors are
considered by the Board on appointment and annually thereafter.
The outcome of the most recent review was that the Board is
satisfied that there are no directors whose time commitments are
considered to be a matter for concern.
Directors are asked to agree new external appointments, which may
affect existing time commitments to the Board and its Committees,
with the Chair and to seek Board approval before the proposed
start date. During 2025, Harmeen Mehta was appointed as the
Chief Digital and Innovation Officer of Equinix and Nathan Bostock
accepted the role of non-executive director and chair designate of
Jupiter Fund Management plc with effect from 1 March 2026 and,
subject to regulatory approval, will take on the role of Chair of that
company with effect from 1 April 2026. The Committee and the
Board considered the time commitments and potential conflicts
involved prior to Harmeen and Nathan accepting their respective
roles and were satisfied that they would both continue to have
sufficient time to commit to their Board appointments. Following
recommendation from the Committee, the Board approved the
two additional appointments.
In recommending directors for election and/or re-election at the
annual general meeting, the Committee has reviewed the
performance of each non-executive director and his/her ability to
continue meeting the time commitments required. This takes into
consideration individual capabilities, skills and experiences and any
potential conflicts of interest that have been disclosed. The external
roles held by all directors were considered to be appropriate. Details
of the Board process in relation to actual and potential conflicts of
interest can be found on page 134.
The Group’s Corporate Governance Framework
The Group's Corporate Governance Framework is reviewed each
year and efforts are made to continue to simplify and improve the
framework. In February 2025, the Committee considered changes
to reflect the UK Corporate Governance Code 2024 and also a
significant updating of the content to provide a more proportionate
and user-friendly governance approach and to facilitate more
effective decision making throughout the Group. The current review
of the Group’s Corporate Governance Framework is in progress and
will build on the simplification made as part of the 2025 review.
Subsidiary governance
The Committee considered changes to the Group’s subsidiary
governance framework, which focused on proportionate
governance and simplification. The Committee also considered the
governance of Lloyds Bank GmbH in the context of chair succession
for that company.
The Committee approved the list of the Group’s material
subsidiaries and the appointment of a number of individuals to the
boards of those subsidiaries including to the Scottish Widows Group
Limited and Lloyds Bank Corporate Markets plc boards.
Shareholder relations and
corporate governance developments
The Committee considered the Group’s engagement with
shareholders, key investor focus areas and correspondence with
shareholders on governance issues.
As part of its broader governance responsibilities, the Committee
considered updates on developments in corporate governance
during the year. This included reviewing and considering aspects
of the implementation of the Economic Crime and Corporate
Transparency Act and legislative changes to reduce the corporate
reporting burden on companies.
1The Chair was independent on appointment. Under the Code, thereafter the test of
independence is not appropriate in relation to the Chair.
Lloyds Banking Group plc Annual Report and Accounts 2025
87
| Training and development | |||||
|---|---|---|---|---|---|
| To ensure the Board remains effective and able to continue to<br><br>support the delivery of our strategy, it is essential that directors<br><br>stay informed about recent and upcoming developments and<br><br>maintain up-to-date knowledge and skills.<br><br>The Board continued to focus on its development throughout<br><br>the year with external insight and training sessions offered<br><br>across a range of topics which complement the Board agenda,<br><br>examples of which are set out below. In addition to the below<br><br>topics, there was mandatory training, including on Speak Up<br><br>(the Group’s whistleblowing programme) and on the Financial<br><br>Conduct Authority’s Conduct Rules.<br><br>At its meetings in November 2025 and January 2026, the<br><br>Committee looked back at the 2025 Board training plan and<br><br>also considered the learnings from the external Board<br><br>performance review to help inform the 2026 training schedule.<br><br>The Committee discussed priority areas and topics for Board<br><br>training as well as what types of external inputs and stimulus<br><br>would be most useful for Board members. | |||||
| Q1 2025<br><br>•Generative AI: maximising opportunities<br><br>while navigating the complexities around<br><br>governance and risk | |||||
| Q2 2025<br><br>•Resolution and recovery plan<br><br>•Private credit<br><br>•Geopolitical global developments | |||||
| Q3 2025<br><br>•Environmental markets<br><br>•Model risk<br><br>•FCA redress schemes | |||||
| Q4 2025<br><br>•Operational resilience (including cyber security risk)<br><br>and third party implications<br><br>•Modern slavery and human rights – read more on<br><br>page 81<br><br>•Digital assets | Exceeded or met the UK Listing Rules targets1 | ||||
| --- | --- | --- | |||
| 50%<br><br>of the board<br><br>being women | One<br><br>of the senior<br><br>board positions<br><br>being held by<br><br>a woman2 | Two<br><br>members of the<br><br>board being from<br><br>a minority ethnic<br><br>background | |||
| 1 UK Listing Rule 6.6.6(9) targets are at least 40% and, for the latter two targets,<br><br>at least one. Data as at 31 December 2025 and remains correct as at the date of<br><br>publication of the annual report.<br><br>2 Cathy Turner is the Senior Independent Director. |
Board Inclusion Policy
The Board Inclusion Policy (the Policy) sets out the Board’s
approach to diversity and inclusion and provides a high-level
indication of the Board’s approach to this in respect of senior
management roles. This is governed in greater detail through the
Group’s policies. A copy of the Policy is available on the
sustainability page on our website.
The Board places great emphasis on ensuring that its membership
reflects inclusion in its broadest sense. Consideration is given to
the combination of diversity demographics, skills, experience,
educational, socio-economic and professional background and
other relevant personal attributes on the Board to provide the range
of perspectives, insights and challenge needed to support good
decision making.
In order to achieve a broad representation of diversity, the Board
ensures inclusive appointment practices and promotes equal
opportunities. New appointments and succession plans are made
on merit, taking account of the specific skills and experience,
independence and knowledge needed to ensure a rounded Board
and the diverse benefits each candidate can bring to the overall
Board composition.
Objectives for achieving an inclusive Board are reviewed on a regular
basis. On gender balance, the Board is committed to maintaining
at least four women Board members and aspires to maintain 45 to
55% female representation on their Boards, higher than the FTSE
Women Leaders recommendation of 40%, while recognising the
limited numbers involved. The representation of women on the
Board is currently 50%. On ethnicity, the Board is committed to
meeting the Parker Review recommendation of having at least one
Black, Asian or Minority Ethnic Board member.
Currently, the Policy is not applied to Board Committees
individually because of their small membership, although the Board
strives to apply similar representation across the Committees. Four
of the five Board Committees are chaired by women. The Board
is comfortable that the diversity of the Board is reflected across
Committee memberships and that this remains an ongoing
consideration. As at 31 December 2025, the Group meets all three
board diversity targets specified under UK Listing Rule 6.6.6(9) –
read more at the bottom of this page. Further information disclosed
in accordance with UK Listing Rule 6.6.6(9), (10) and (11) can be
found on page 136. The gender balance of the Group’s senior
management and their direct reports can be found on on page 23.
The Board places high emphasis on not only its own diversity but on
the oversight of the Group’s inclusion approach and ambitions and
is kept updated on progress. Any material changes to the Group’s
inclusion approach are approved by the Group Executive
Committee, reviewed by the Responsible Business Committee
and approved at Board level. This includes material changes in
the Group’s inclusion ambitions and supporting plans. The Group’s
policies are subject to local laws and regulations and the aspirations
identified in the fourth paragraph above reflect targets set out in
the UK Listing Rules LR6.6.6(9).
Further information on the current approach to the Group’s
inclusion ambitions, progress and performance can be found
on pages 22 to 23.
Lloyds Banking Group plc Annual Report and Accounts 2025
88
Audit Committee report
Sarah Legg
Chair, Audit
Committee
| Read full biography <br> |
|---|
Rigorous challenge of key judgements
and oversight of continuous
improvement in financial reporting
on an end-to-end basis.
| Key activities in 2025 |
|---|
| •Monitoring the integrity of the financial statements and<br><br>non-financial (including narrative) reporting<br><br>•Overseeing the continuous improvement in financial and<br><br>regulatory reporting including associated controls<br><br>•Reviewing the findings of the Group Internal Audit function<br><br>and challenging the internal audit plan on a forward<br><br>looking basis<br><br>•Engaging with the subsidiary audit committees on their<br><br>activities in the year |
| Membership and attendance at scheduled meetings | |
|---|---|
| Sarah Legg (Committee Chair) | 7/7 |
| Nathan Bostock | 7/7 |
| Amanda Mackenzie | 7/7 |
| Catherine Woods | 7/7 |
| Other attendees<br><br>Nigel Hinshelwood and Brendan Gilligan, the Senior<br><br>Independent Director and an independent non-executive<br><br>director respectively of the Ring-Fenced Banks, attend meetings<br><br>as observers to provide insight on the Ring-Fenced Banks when<br><br>required. The Group Chief Executive, the Chief Financial Officer,<br><br>the Chief Risk Officer, the Group Financial Controller, the Chief<br><br>Internal Auditor and the external auditor also attend meetings<br><br>as appropriate. While the Committee’s membership comprises<br><br>the non-executive directors noted above, all non-executive<br><br>directors may attend meetings as agreed with the Chair of<br><br>the Committee |
| Read more | ||
|---|---|---|
| Skills and experience | pages 68 to 69 | |
| Responsibilities (and its terms of reference,<br><br>which are on our corporate governance page )<br> |
page 72 |
Introduction
I am pleased to report on the Committee’s activities over the past
year. I thank the Committee members for their contributions and
support. The participation of Ring-Fenced Bank-only directors as
observers has provided valuable insights.
In 2025, the Committee collaborated closely with other Board
Committees, especially with the Board Risk Committee on
preparations for Provision 29 of the UK Corporate Governance
Code 2024, which relates to our approach to identifying and
reporting on the effectiveness of material controls. The joint Audit
and Risk Forum established in 2022 met again in 2025 to discuss
topics of mutual interest and consider common themes on a
forward-looking basis (read more on page 84). Looking forward to
2026, in addition to our core responsibilities, the Committee will
continue to provide rigorous challenge and monitor areas of
continuous improvement on an end-to-end basis.
Committee purpose and responsibilities
The Committee’s purpose is to oversee the integrity of the Group’s
and Company’s financial and narrative reporting. It also reviews the
independence and effectiveness of the internal and external audit
functions, internal controls, the risk management framework and
whistleblowing arrangements. This includes the statutory audit of
consolidated financial statements and the independence of the
external auditor.
The Committee reports to the Board on its responsibilities and
recommendations, all of which were accepted during the year.
In satisfying its purpose, the Committee undertakes the functions
detailed within Disclosure Guidance and Transparency Rule 7.1.3R.
During the year the Committee considered a number of matters
relating to the Group’s financial reporting, which are summarised
on the following pages. In addition, the Committee considered a
number of other matters not related directly to financial reporting.
These matters are discussed in detail on the final page of this report.
Committee composition, skills,
experience and operation
The Committee operates independently of the executive to safeguard
shareholders’ interests in financial reporting and internal control.
All members of the Committee are independent non-executive
directors with competence in the financial sector and their
biographies can be found on pages 68 to 69. Sarah Legg is a Fellow
of the Chartered Institute of Management Accountants and of the
Association of Corporate Treasurers, with extensive knowledge of
financial markets, treasury, risk management and international
accounting standards. She is a member having recent and relevant
financial experience for the purposes of the UK Corporate
Governance Code and is the Audit Committee financial expert
for SEC purposes.
During the course of the year, the Committee held separate sessions
with the internal and external audit teams without members of the
executive management present.
The Committee undertook an annual review of its own
performance, the findings of which, together with the outcomes
of the externally facilitated Board performance review process as
relevant to the Committee, were considered by the Committee
members with the conclusion reached that the performance of
the Committee continues to be effective.
Audit Partner
Mike Lloyd has been Deloitte LLP (Deloitte) lead audit partner for
the Group since Deloitte was appointed auditor for the 2021 year
end. Following completion of the audit for the year ended 31
December 2025, Ben Jackson will be the lead audit partner for the
Group, with a related transition period, supported by the
Committee.
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89
| Matters considered during 2025 | | --- || | Jan | Feb | Apr | Jun | Jul | Oct | Dec | | --- | --- | --- | --- | --- | --- | --- | --- | | Reporting | | | | | | | | | Review of external reporting<br><br>documents | ò | ò | ò | Å | ò | ò | ò | | Significant accounting judgements | ò | ò | ò | ò | ò | ò | ò | | Going concern assumption/viability<br><br>statement | Å | ò | Å | Å | ò | Å | Å | | Regulatory reporting | ò | Å | ò | ò | Å | ò | Å | | Sustainability-related reporting | Å | ò | Å | ò | Å | ò | Å | | Activities of subsidiary audit<br><br>committees | ò | ò | Å | Å | ò | ò | Å | | Corporate governance and the Audit<br><br>and Assurance Framework | Å | Å | ò | Å | Å | ò | Å | | Control environment | | | | | | | | | Control update<br><br>(including Sarbanes-Oxley) | ò | ò | ò | ò | ò | ò | ò | | Annual review of risk management<br><br>framework and control effectiveness<br><br>review summary | ò | Å | Å | Å | Å | Å | Å || | Jan | Feb | Apr | Jun | Jul | Oct | Dec | | --- | --- | --- | --- | --- | --- | --- | --- | | Group Audit | | | | | | | | | Reports from Group Audit, including<br><br>Speak Up (whistleblowing) | ò | Å | ò | ò | ò | ò | ò | | External audit | | | | | | | | | Reports from the external auditor<br><br>(including external audit plan) | ò | ò | ò | ò | ò | ò | ò | | Reappointment, remuneration,<br><br>non-audit services and effectiveness | Å | ò | ò | Å | ò | Å | Å | | Other | | | | | | | | | Audit committee effectiveness review | ò | Å | Å | Å | Å | ò | Å | | Finance strategy and transformation | Å | ò | ò | Å | Å | ò | Å |
Financial reporting
During the year, and in relation to the year ended 31 December 2025, the Committee considered the following issues in relation to the
Group’s financial statements and disclosures, with input from management, the risk function and Group Audit.
| Areas of focus | | --- || | Key issues | Committee review and conclusion | | --- | --- | --- | | Allowance for<br><br>impairments on<br><br>loans and advances<br><br>31 December 2025:<br><br>£3,228 million<br><br>31 December 2024:<br><br>£3,481 million | The Group’s impairment<br><br>provision is dependent on<br><br>management’s judgements<br><br>on matters such as future<br><br>interest rates, house prices<br><br>and unemployment rates, as<br><br>well as its assessment of the<br><br>current financial position of<br><br>its customers. | During the year, the Committee has reviewed the level of provision held for<br><br>expected credit losses (ECL) by the Group and the judgements and estimates<br><br>used to calculate the provision. The Committee has monitored underlying<br><br>credit performance trends and the evolution of the Group’s economic outlook<br><br>and Multiple Economic Scenario (MES) approach in a year where ECL assessment<br><br>has needed to respond quickly and appropriately to significant domestic and<br><br>international events. The Committee has overseen further progress on ECL modelling<br><br>and the corresponding reduction in the number of judgemental adjustments for<br><br>model limitations where mitigated by model development.<br><br>Note 21 to the financial statements includes details of the Group’s ECLs allowances,<br><br>including those resulting from judgemental adjustments (31 December 2025:<br><br>£224 million credit; 31 December 2024: £44 million debit). The Committee has<br><br>reviewed management’s rationale for these provisions and has challenged whether<br><br>their inclusion and quantification are appropriate. It also considered management’s<br><br>assessment of climate risk impacts on ECL and the conclusion that no adjustment<br><br>was required.<br><br>Conclusion: The Committee was satisfied that the impairment provision and the<br><br>disclosures provided in the financial statements were appropriate. | | Uncertain tax<br><br>provisions | The Group has open tax<br><br>matters which require it to<br><br>make judgements about the<br><br>most likely outcome for the<br><br>purposes of calculating its<br><br>tax position. | The Committee reviewed management’s assessment of the Group’s uncertain<br><br>tax positions, which took into account the views of the relevant tax authorities<br><br>and any external advice it received. In particular, following the conclusion of the<br><br>First Tier Tribunal in favour of HMRC, it considered the Group's assessment of its<br><br>continued likelihood of success in its claim for group relief of losses in its former<br><br>Irish banking subsidiary.<br><br>Conclusion: The Committee was satisfied that the provisions and disclosures made<br><br>in respect of uncertain tax positions were appropriate. | | Retirement benefit<br><br>obligations<br><br>31 December 2025:<br><br>£26,571 million<br><br>31 December 2024:<br><br>£27,118 million | The value of the Group’s<br><br>defined benefit pension plan<br><br>obligations is determined<br><br>using both financial and<br><br>demographic assumptions. | The Committee reviewed the process used by management to determine<br><br>appropriate assumptions to calculate the Group’s defined benefit liabilities.<br><br>These included the discount rate, the future rate of inflation and expected<br><br>mortality rates.<br><br>Conclusion: The Committee was satisfied that management had used appropriate<br><br>assumptions that reflected the Group’s most recent experience and were consistent<br><br>with market data and other information. |
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Audit Committee report continued
| Areas of focus continued | | --- || | Key issues | Committee review and conclusion | | --- | --- | --- | | Insurance liabilities<br><br>and participating<br><br>investment<br><br>contracts<br><br>31 December 2025:<br><br>£135,284 million<br><br>31 December 2024:<br><br>£127,332 million | Determining the value of the<br><br>Group’s liabilities arising from<br><br>insurance and participating<br><br>investment contracts<br><br>requires management to<br><br>make significant estimates<br><br>for both economic and<br><br>non-economic actuarial<br><br>assumptions. | The Committee considered updates from management and from the Group’s<br><br>Insurance Audit Committee summarising its activities, which included a review of<br><br>the economic and non-economic assumptions made by management to determine<br><br>the carrying value of Group’s liabilities arising from insurance and participating<br><br>investment contracts. The assumptions discussed were in respect of maintenance<br><br>expenses, investment expenses allowance, lapse and paid-up assumptions on<br><br>Workplace business and updated mortality projections.<br><br>Conclusion: The Committee was satisfied that the assumptions used to calculate<br><br>the Group’s liabilities arising from insurance and participating investment contracts<br><br>were appropriate. | | Conduct risk<br><br>provisions<br><br>31 December 2025:<br><br>£2,276 million<br><br>31 December 2024:<br><br>£1,600 million | Management judgement<br><br>is used to determine<br><br>the expected costs of<br><br>remediation and, where<br><br>appropriate, the related<br><br>administration costs. | The Committee has received regular updates on the Group’s conduct risk matters<br><br>and the progress it has made including updates in relation to the Supreme Court<br><br>judgment handed down on 1 August 2025 on motor commission arrangements, the<br><br>FCA consultation paper published on 7 October 2025 on an industry-wide redress<br><br>scheme for motor finance, HBOS Reading and Responsible Lending.<br><br>Conclusion: The Committee has considered management’s assessment of the<br><br>Group’s provision for conduct-related matters and was satisfied that the provisions<br><br>held at 31 December 2025 were appropriate. | | Going concern<br><br>statement | The directors are required to<br><br>confirm whether they have a<br><br>reasonable expectation that<br><br>the Company and the Group<br><br>will be able to continue to<br><br>operate and meet their<br><br>liabilities as they fall due<br><br>for a specified period. | The Committee assisted the Board in determining the appropriateness of adopting<br><br>the going concern basis of accounting. This assessment was based on the Group’s<br><br>operating, funding and capital plans which included consideration of climate-related<br><br>matters on the Group’s performance and its projected funding and capital position.<br><br>The Committee also took into account the results of the Group’s stress testing<br><br>activities (pages 142 and 143), its principal risks (pages 25 to 27) and its emerging<br><br>and topical risks (pages 28 and 29).<br><br>Conclusion: The Committee determined that the going concern basis of accounting<br><br>was appropriate. | | Financial assets<br><br>held at fair value<br><br>through profit or<br><br>loss classified as<br><br>level 3<br><br>31 December 2025:<br><br>£10,251 million<br><br>31 December 2024:<br><br>£9,889 million | Determining the fair value of<br><br>the Group’s financial assets<br><br>classified as level 3 requires<br><br>management to make<br><br>significant estimates. | Financial assets held at fair value through profit or loss are classified into three levels<br><br>according to the quality and reliability of information used to determine their fair<br><br>values. Those classified as level 1 or level 2 are valued using observable market data,<br><br>either directly or within models. Assets classified as level 3 are those where at least<br><br>one input which could have a significant effect on the instrument’s valuation is not<br><br>based on observable market data and as such involves significant judgement. During<br><br>the year, the Committee reviewed the valuations of the Group’s level 3 financial<br><br>assets held at fair value through profit or loss, the valuation techniques and the<br><br>Group’s governance processes.<br><br>Conclusion: The Committee was satisfied that the valuations and disclosures made<br><br>in respect of the Group’s level 3 financial assets classified at fair value through profit<br><br>or loss were appropriate. |
Other significant issues
The following matters were also considered by the Committee.
Viability statement
The viability statement must disclose the basis for the directors’
conclusions and explain why the period chosen is appropriate.
The Committee assisted the Board in performing the assessment
of the viability of the Company and the Group. This assessment
considered a wide range of information including principal,
emerging and topical risks that could impact the performance of
the Group and its operating plan which comprises detailed financial,
capital and funding projections together with an assessment of the
relevant risk factors for the period from 2026 to 2028 inclusive. The
Committee advised the Board that three years was a suitable period
of review for the viability statement and that the viability statement
could be provided. The viability statement is disclosed within the
strategic report on page 34.
Risk management and internal control systems
Full details of the internal control and risk management framework
in relation to the financial reporting process are given within the risk
management section on pages 138 to 197. Specific related matters
that the Committee considered for the year included:
•The effectiveness of systems for internal control, financial
reporting and risk management
•The extent of the work undertaken across the Group to ensure
that the control environment continued to operate effectively
•The major findings of internal investigations into control
weaknesses, fraud or misconduct and management’s response,
along with any control deficiencies identified through the
assessment of the effectiveness of the internal controls over
financial reporting under the US Sarbanes-Oxley Act (SOX).
Specifically, the Committee continued to closely monitor the
deficiencies identified in respect of privileged access to the IT
infrastructure and the Group’s remediation activity to address
the control findings identified. The Committee was satisfied that
internal controls over financial reporting were appropriately
designed and operating effectively
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91
Risk-weighted assets and regulatory reporting
The focus on the quality of regulatory reporting continues to be
high on the PRA’s agenda. Across the first, second and third lines
of defence, management continues to focus on strengthening
the control environment in regulatory reporting with a link to
longer-term and strategic initiatives also being considered.
The ongoing programme of external assurance on regulatory
reporting commissioned by the Committee has been extended
to provide coverage across both capital (including risk-weighted
assets) and liquidity reporting. Management have provided regular
updates to the Committee over the year to highlight progress made
in improving the reporting control environment across regulatory
reporting. In addition, KPMG gave an external perspective so
Committee members could hear a wider view on control matters.
UK Corporate Governance Code 2024 Provision 29
The Committee, in conjunction with the Board Risk Committee,
has been preparing for the introduction of Provision 29 of the UK
Corporate Governance Code 2024 effective for the financial year
that began on 1 January 2026. Further details on the Group’s
approach to internal controls, and the review of their effectiveness,
are set out on page 84.
Speak Up (the Group’s whistleblowing service)
The Committee reviewed management reports on the Group’s
whistleblowing arrangements, ensuring colleagues can report issues
confidentially and without fear of retaliation. These well-publicised
arrangements allow reporting of inappropriate practices with
independent investigations or follow-ups. The Committee reported
on its consideration of whistleblowing arrangements to the Board.
Sustainability reporting
The Committee was updated on the Group’s responses to UK
Government consultations on matters such as UK Sustainability
Reporting Standards and Transition Plans. Compliance with existing
UK companies regulation requirements for climate-related financial
disclosure has been considered when assessing external disclosures.
The Committee continues to monitor Group capabilities and
progress with the production of sustainability reporting, the linkage
to financial statements, the enhanced control environment and the
developments with governance and assurance. Further discussion
can be found on pages 36 to 49.
Group Internal Audit
In monitoring the activity, role and effectiveness of the internal
audit function and its audit programme the Committee:
•Approved the updated Audit Charter, which sets out the
purpose, role and mandate of internal audit
•Approved the annual audit plan and budget, including resources
•Reviewed progress against the plan through quarterly updates
•Reviewed the annual audit opinion on the control framework
•Considered the major findings of significant internal audits,
management’s response and themes by major risk type
•Assessed and concluded upon the quality of Group Audit’s
work through review of quality assurance reporting on a six-
monthly basis
Based on the above and through regular interactions by all Audit
Committee members with the Chief Internal Auditor and an
informal networking session with Group Audit colleagues in July,
the Committee is satisfied with the effectiveness and impact of
the internal audit function and the appropriateness of its resources.
Finance strategy and transformation
Significant investment has been made to transform the Finance
function, including the launch of a new Group-wide General
Ledger in 2025. The Group also improved cost and investment
management processes, procurement tools and colleague expenses
systems. Enhancements in cost planning and reporting, alongside
continuous investment in the Group's financial data, will boost
planning and commercial insights. Further investment in the control
infrastructure and use of emerging AI technology will enhance the
colleague experience and provide commercial benefits.
The Committee received timely updates on progress, risk
management, proposed plans and the associated financial and
non-financial benefits.
Auditor independence and remuneration
The Committee is responsible for establishing the Group’s policies
and procedures designed to protect the independence and
objectivity of the external auditor. In April 2025, the Committee
reviewed its non-audit services policy; no substantive changes were
made to the policy.
The policy details those services that the auditor is permitted to
carry out and pre-approves certain of these services provided the
fee is below a threshold; all other permitted services must be
specifically approved in advance by the Committee. Prior to the
engagement of the auditor for a permitted service, the policy
requires that senior management confirms whether the Committee
has pre-approved the service or specific approval is required.
The total amount of fees paid to the auditor for both audit and
non-audit related services in 2025 and further information on the
policy is disclosed in note 13 to the financial statements.
External auditor
Following an external audit tender in 2018, Deloitte was appointed
as auditor of the Company and the Group with effect from the 2021
financial year. Mike Lloyd is the statutory audit partner for the
Group and attends all meetings of the Committee. The Committee
oversees the relationship with the external auditor including its
terms of engagement and remuneration and monitors its
independence and objectivity. In 2025 the Chair of the Committee
met with the Deloitte leaders responsible for the key subsidiary
audits to hear directly from them about the approach to these
component parts. This enhanced the overall understanding of the
external audit and provided a further opportunity to engage with
important aspects of the process. The Committee also reviewed
Deloitte’s audit plan, including the underlying methodology and
Deloitte’s risk identification processes. In its assessment of Deloitte’s
performance and effectiveness, the Committee has considered:
Deloitte’s interactions with the Committee; the responses to a
questionnaire issued to the Group’s businesses, Finance, Risk,
Internal Audit and non-executive directors; and the FRC’s Audit
Quality Inspection Report published in July 2025. In addition, the
FRC’s Audit Quality Review team reviewed Deloitte’s audit of the
Group’s 2024 financial statements as part of its latest annual
inspection of audit firms and noted several areas of good practice.
The Committee received a copy of the report and discussed it with
Deloitte. There were no key or other findings. The Committee
concluded that it was satisfied with the auditor’s performance and
recommended to the Board a proposal for the reappointment of
the auditor at the Company’s annual general meeting.
Statutory Audit Services compliance
The Company and the Group confirm compliance with the
provisions of The Statutory Audit Services for Large Companies
Market Investigation (Mandatory Use of Competitive Tender
Processes and Audit Committee Responsibilities) Order 2014,
which relates to the frequency and governance of tenders for
the appointment of the external auditor and Audit Committee
responsibilities including negotiating and agreeing the statutory
audit fee and the setting of a policy on the provision of non-audit
services for the year to 31 December 2025. There are no plans as
at the date of this report to conduct a tender exercise for external
audit services.
Audit Committees and the External Audit:
Minimum Standard
The Group is compliant with Audit Committees and the External
Audit: Minimum Standard published by the FRC in May 2023 and
this report explains the activities we have undertaken to meet the
requirements of this Standard.
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92
Board Risk Committee report
Catherine Woods
Chair, Board Risk
Committee
| Read full biography <br> |
|---|
Strengthening operational resilience is
essential to safeguarding the Group’s
services to customers in a continuously
changing external threat landscape.
| Key activities in 2025 |
|---|
| •Oversight of enhancements to risk management and<br><br>embedding of changes to the three lines of defence model<br><br>•Ongoing oversight of operational resilience risks and<br><br>continuous enhancements to controls, particularly in relation<br><br>to cybersecurity, IT stability and supplier risk<br><br>•Oversight and challenge of change management and<br><br>execution risks, focusing on strategic transformation progress<br><br>•Reviewed progress on strengthening economic crime<br><br>prevention controls<br><br>•Continued oversight and challenge on model and data risk,<br><br>ensuring effective risk management of artificial intelligence<br><br>•Considered management of climate risk, particularly<br><br>greenwashing controls and scenario modelling capabilities<br><br>•Reviewed management of capital, funding and liquidity risks,<br><br>including structural hedge activity and provided challenge on<br><br>stress testing design and execution<br><br>•Ongoing assessment of emerging and topical risks |
| Membership and attendance at scheduled meetings | |||||
|---|---|---|---|---|---|
| Catherine Woods (Committee Chair) | 9/9 | ||||
| Nathan Bostock | 8/91 | ||||
| Sarah Legg | 9/9 | ||||
| Cathy Turner | 9/9 | ||||
| Scott Wheway | 6/71,2 | ||||
| 1Nathan Bostock and Scott Wheway were each unable to attend one meeting due<br><br>to scheduling conflicts.<br><br>2Scott Wheway stepped down from the Committee on 31 October 2025.<br><br>Other attendees<br><br>Nigel Hinshelwood and Brendan Gilligan, the Senior Independent<br><br>Director and an independent non-executive director respectively<br><br>of the Ring-Fenced Banks, attend meetings as observers to<br><br>provide insight on the Ring-Fenced Banks when required. The<br><br>Chief Risk Officer has full access to the Committee and attends<br><br>all meetings. The Chief Internal Auditor and members of the<br><br>executive also attend meetings as appropriate. | Read more | ||||
| --- | --- | --- | |||
| Skills and experience | pages 68 to 69 | ||||
| Responsibilities (and its terms of reference,<br><br>which are on our corporate governance page )<br> |
page 72 |
Introduction
I am pleased to report on how the Committee has discharged its
responsibilities during 2025. The year has been marked by persistent
macroeconomic and geopolitical uncertainties, compounded by
ongoing cost of living pressures, which continue to influence a range
of risks faced by both the Group and the wider economy.
The Committee maintained regular oversight of the embedding of
the Group’s enhanced risk management framework and the three
lines of defence approach. It also reviewed and recommended
Board approval of the evolved risk appetite approach. Significant
time was dedicated to considering changes to the Group’s risk and
control profile. Separate reviews of risk and control plans for
specific business units were also undertaken. These activities remain
central to the ongoing transformation and strengthening of the
Group’s risk management.
Operational resilience was a key area of focus, including IT outages
and cybersecurity, both from a Group and supplier standpoint.
Consideration was given to the increased external cyber threat
landscape and industry challenges, together with further
improvements to controls. A deep dive into payments systems
was also conducted, with a focus on the security and resilience
of these core systems. The review of a self-assessment of the
Group’s supplier risk management framework against regulatory
requirements provided a broader perspective on business
continuity, complemented by a deep dive into supplier risk,
emphasising the importance of minimum resilience standards.
The Committee continued to regularly review credit risk
performance across commercial and consumer portfolios. Deep
dives offered further insights into specific portfolios during the year,
covering the Group’s mortgage business, consumer unsecured
portfolio, derivative exposures and project finance business.
Broader credit management information was reviewed at each
meeting, with the Chief Risk Officer providing perspectives on the
overall credit environment. Oversight of model risk included a deep
dive on generative and agentic AI together with implementation of
the associated assurance framework.
Good customer outcomes remained a priority, with the Committee
overseeing the effectiveness of controls and seeking additional
structured updates on evolving conduct risk matters. Areas of
particular focus included the Group’s treatment of vulnerable
customers, Financial Ombudsman Service complaint overturn
rates and oversight of the delivery and reconciliation of critical
communications to retail customers. The Committee, and the
Board, has considered the potential impact of the FCA’s motor
finance commission redress scheme and will continue to assess
developments following the announcement by the FCA of the final
scheme rules.
The Committee assessed several other key areas, including
economic crime prevention, change execution risk and people
risk. Consideration was also given to climate risk, reviewing
enhanced greenwashing controls, regulatory expectations and
the development of climate scenario modelling capabilities. All
these areas are explored in greater detail throughout this report.
I look forward to welcoming Chris Vogelzang as a member of the
Committee, with his appointment being effective from 1 April 2026.
Chris will bring strong retail and commercial banking experience
to the Committee’s deliberations. I would also like to take this
opportunity to formally thank Scott Wheway for his valuable
contribution to the Committee’s work over the past three years and
wish him every success in his new role, following his decision to step
down from his Group position on 31 October 2025. The challenge
and commercial insight Scott brought to the Committee have been
immensely beneficial.
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93
Committee purpose and responsibilities
The Committee assists the Board in fulfilling its risk governance
and oversight roles and responsibilities. It is responsible for ensuring
the risk culture is fully embedded and supports at all times the
Group’s agreed risk appetite. The Committee is also responsible for
reviewing and recommending to the Board the nature and extent of
principal risks the Company is willing to take in order to achieve its
long-term objectives and oversees current risk exposures.
The Committee oversees the development, implementation and
maintenance of the Group’s overall risk management framework
and internal control framework. It reviews and recommends to the
Audit Committee the assessment of the effectiveness of the Group’s
risk management framework and internal controls, covering
material controls, other than financial reporting controls which
are covered by the Audit Committee.
The Committee, in conjunction with the Audit Committee, has been
preparing for the introduction of Provision 29 of the UK Corporate
Governance Code 2024. Further details on the Group’s approach to
internal controls, and the review of their effectiveness, are set out
on page 84. During the year, the Committee’s terms of reference
were reviewed and updated, including changes to responsibilities
driven by the implementation of Provision 29.
More details on the Group’s wider approach to risk management
can be found in the risk management section on pages 137 to 197.
Full details of the Committee’s responsibilities are set out
in its terms of reference, which can be found on the corporate
governance page on our website.
Committee composition, skills,
experience and operation
Two of the three designated independent non-executive directors
of the Ring-Fenced Banks attend meetings as observers in order to
provide insights on matters relevant to the Ring-Fenced Banks when
required and as part of their role in the Group’s overall governance
structure. For the majority of the year, prior to Scott Wheway’s
departure, membership of the Committee included the Chairs of
both Lloyds Bank Corporate Markets plc and Scottish Widows
Group Limited. Committee membership is kept under regular
review by the Nomination and Governance Committee.
The Committee undertook an annual review of its own
performance, the findings of which, together with the outcomes
of the externally facilitated Board performance review process
as relevant to the Committee, were considered by Committee
members with the conclusion reached that the performance of
the Committee continues to be effective.
During the year, Committee members attended various training
sessions and briefings as part of the Board’s ongoing training
schedule, with a number of these covering matters particularly
relevant to the Committee’s considerations. These sessions continue
to help deepen Committee members’ knowledge on specific topics,
further enhancing discussion and challenge at subsequent
Committee meetings.
Interaction with other Board
and Executive Committees
As the most senior risk committee in the Group, the Committee
interacts with other related risk committees, including the executive
Group Risk Committee. This helps ensure the appropriate escalation
of relevant matters to the Committee for review and consideration.
The Committee continues to be supported by the IT and Cyber
Advisory Forum, which dedicates additional time and resource to
reviewing and challenging risks associated with IT infrastructure, IT
strategy, IT resilience and cyber risks. The Chair and other members
of the Committee attend this Forum.
Regular interaction between Board Committees is maintained,
helping to strengthen relationships and facilitate broader
perspectives and discussion on relevant topics. The Chair of the
Board Risk Committee is a member of the Audit Committee, and
conversely, the Chair of the Audit Committee is a member of the
Board Risk Committee. The Chair of the Remuneration Committee
is also a member of the Committee, further enhancing discussion on
alignment of remuneration to risk performance and the Chair of the
Responsible Business Committee attends Committee meetings for
matters of specific interest.
The annual Group-wide Audit and Risk Forum was held in
November 2025, providing an opportunity for members of both
Committees to discuss key areas of common interest, further
strengthening the debate and challenge of matters provided
by these Committees. Themes this year included a focus on the
Group’s approach to implementation of Provision 29 of the UK
Corporate Governance Code 2024.
The Committee continues to review regular updates from the Non-
Ring-Fenced Bank and Insurance sub-groups, headed up by Lloyds
Bank Corporate Markets plc and Scottish Widows Group Limited
respectively, summarising key discussions and decisions taken at the
relevant entities’ risk committees.
Matters considered by the Committee
During 2025, the Committee considered a broad range of current
and forward-looking risks across all key areas of risk management,
in addition to a continued focus on risk culture and risk appetite.
The Committee regularly uses deep dives to focus on key risk topics,
enabling greater analysis of particular topics and associated risks.
The following pages provide a summary of the risks considered by
the Committee, its role and an outline of the conclusions which
were ultimately reached.
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94
Board Risk Committee report continued
| Key activities for the year | | --- || Area of focus | Key role of Committee | Key outcomes | | --- | --- | --- | | Risk management framework | | | | | •The Committee received regular updates<br><br>on the effectiveness of the Group risk<br><br>management framework to enable<br><br>oversight of its development and ensure<br><br>it aligns with emerging regulatory, corporate<br><br>governance and industry best practice | •In January, the Committee recommended that the Board approve<br><br>an enhanced risk management framework. The Committee received<br><br>regular updates on its implementation across the Group throughout<br><br>the year, driving clarity and consistency in the management of both<br><br>financial and non-financial risks<br><br>•The Committee has overseen enhancements made to the Group’s<br><br>approach to risk appetite and operational risk management<br><br>•The effectiveness of the Group risk management framework<br><br>was supported in November | | Risk and control profile | | | | | •Significant time was spent reviewing the<br><br>Group’s risk and control profile<br><br>•Detailed insights were provided to the<br><br>Committee throughout the year, with an<br><br>enhanced consolidated Enterprise-Wide Risk<br><br>Management report introduced to improve<br><br>the Committee’s visibility of material risk<br><br>and control issues | •The Group’s Risk and Control Self-Assessment approach has been<br><br>enhanced. The new risk scoring assessment, which ensures a focus<br><br>on the most significant risks was welcomed by the Committee<br><br>•The Committee has been preparing for the introduction of Provision<br><br>29 of the UK Corporate Governance Code 2024 for our financial year<br><br>that began on 1 January 2026 and supported the proposed approach<br><br>•The Committee continued to review three-year risk and control<br><br>improvement plans for both Business and Commercial Banking<br><br>and Corporate and Institutional Banking, together with a deep dive<br><br>on the markets control environment<br><br>•In November, the Committee reviewed and supported the Risk<br><br>function and Group Audit’s report on the effectiveness of internal<br><br>controls required to manage risk | | Non-financial risks | | | | Conduct and<br><br>compliance | •The Committee is responsible for<br><br>overseeing that effective controls are<br><br>in place to ensure that good outcomes<br><br>are realised for customers and that<br><br>the Group complies with its existing<br><br>regulatory obligations<br><br>•Emphasising conduct and compliance’s<br><br>importance to the Group and the scale of<br><br>regulatory attention, the Committee<br><br>requested more frequent updates | •Customer treatment has been the subject of a number of discussions<br><br>at the Committee in 2025. Focus areas included:<br><br>–The Group’s treatment of vulnerable customers, including<br><br>outcomes from the FCA’s market survey and case study analysis<br><br>–Complaints brought to the Financial Ombudsman Service (FOS),<br><br>including understanding the root causes<br><br>–Oversight of the delivery and reconciliation of critical<br><br>communications to Retail customers<br><br>▪Detailed reports on legal developments and litigation risks were<br><br>considered on a half-yearly basis<br><br>▪The Committee reviewed the Group’s ring-fencing arrangements<br><br>in November, including implementation of near term reforms earlier<br><br>in the year, and supported the Board in their confirmation of overall<br><br>compliance with ring-fencing governance requirements | | Economic<br><br>crime | •Recognising the significant external threat<br><br>from economic crime to the Group and its<br><br>customers, the Committee received updates<br><br>on its exposure and prevention | •Sanctions, politically exposed persons (PEPs) payment and customer<br><br>screening alerts were the focus of an update to the Committee<br><br>in January<br><br>•In April, the Committee considered an economic crime deep<br><br>dive, which included progress updates on enhancing the control<br><br>environment. The progress made to strengthen capability and<br><br>capacity was recognised<br><br>•The Committee reviewed the Money Laundering Reporting Officer’s<br><br>annual report | | Strategic<br><br>transformation<br><br>oversight | •The Committee received quarterly updates<br><br>on the performance of the Group’s extensive<br><br>current and future strategic change agenda.<br><br>This enabled the Committee to assess the<br><br>impact of any material change programmes<br><br>on the Group | •The Committee continued with its focus on ensuring effective<br><br>management of change execution risk, with a strong emphasis on<br><br>analysing strategic transformation delivery progress, challenging how<br><br>the Group assesses the value derived and lessons learned from the<br><br>platform-based operating model | | Operational<br><br>resilience | •Oversight of operational resilience was<br><br>a continued key focus area in 2025, with<br><br>regular updates on IT service stability<br><br>•A deep dive was undertaken on payments<br><br>with a focus on the security and resilience<br><br>of these core systems | •In March, the Committee reviewed the Group’s operational<br><br>resilience self-assessment, which detailed scenario testing, recovery<br><br>timeframes and regulatory expectations. The self-assessment<br><br>was subsequently recommended to the Board for approval<br><br>•The Committee covered IT service stability, particularly in response<br><br>to outages experienced in the first half of the year, and oversaw<br><br>improved performance<br><br>•A comprehensive review of payment systems was conducted,<br><br>focusing on the continuity and resilience of core operations |
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| Key activities for the year continued | | --- || Area of focus | Key role of Committee | Key outcomes | | --- | --- | --- | | Non-financial risks continued | | | | Cybersecurity | •The Committee acknowledges the<br><br>importance of cybersecurity and has<br><br>received regular updates from the Group’s IT<br><br>and Cyber Advisory Forum (ITCAF) | •In light of the increased threat landscape and market events in 2025,<br><br>the Committee was briefed on cyber-related issues and efforts to<br><br>reduce IT vulnerabilities and enhance the control environment | | Supplier risk<br><br>management | •Close attention has been paid to the<br><br>Group’s suppliers to ensure resilience of<br><br>service to the Group’s customers | •In January, the Committee scrutinised a self-assessment of the<br><br>Group’s supplier risk framework against the Prudential Regulation<br><br>Authority’s Supervisory Statement 2/21 and questioned the status<br><br>of compliance with new critical third-party regulations<br><br>•A deep dive on supplier risk was conducted in October. The<br><br>Committee emphasised the importance of ensuring all suppliers<br><br>meet minimum resilience standards<br><br>•Despite not having a significant impact on the Group, following the<br><br>Amazon Web Services outage in October, the Committee discussed<br><br>lessons learned to drive control enhancements | | People and<br><br>health, safety<br><br>and premises<br><br>risks | •The performance and safety of colleagues<br><br>is of utmost importance to the Committee,<br><br>which has provided advice, oversight and<br><br>challenge during the year | •Key drivers of people risk, mitigating actions and current and future<br><br>areas of focus were considered by the Committee. Discussions<br><br>focused on measuring culture, capability and capacity, and<br><br>supporting strategic growth plans<br><br>•The Committee recognised the progress made on health, safety<br><br>and premises risk, noting improved automation of controls and data<br><br>insights. Further focus is required given increasing levels of verbal<br><br>abuse faced by branch colleagues | | Data and<br><br>privacy risk | •Data and privacy risk is a continuing area<br><br>of focus for the Committee<br><br>•The Committee received updates on the<br><br>data management risk profile and data<br><br>privacy breaches | •A deep dive on the data and privacy risk profile was undertaken<br><br>in July, with a follow-up in October. The Committee recognised<br><br>that the Group is progressing towards a mature data management<br><br>state with issues prioritised by impact, supported by AI-driven data<br><br>quality monitoring<br><br>•Alongside the deep dive, a proposal to revise the Group-wide Data<br><br>Retention Schedule was noted<br><br>•Compliance with the principles for effective risk data aggregation<br><br>and risk reporting (BCBS 239) was discussed in July | | Financial risks | | | | Credit risk | •The Committee has frequently reviewed and<br><br>challenged the performance of the Group’s<br><br>commercial and consumer credit portfolios<br><br>through regular credit management<br><br>information and deep dives on portfolios<br><br>requiring additional focus | •The Committee was pleased to note that the Group’s credit<br><br>performance remained strong and stable in 2025<br><br>•A deep dive of the Group’s mortgages portfolio was completed,<br><br>which considered an overview of the portfolio’s credit performance,<br><br>market outlook and evolving risks. The Committee noted the<br><br>material reduction in legacy assets that were originated before 2009<br><br>•A deep dive on the Group’s derivatives portfolio was undertaken,<br><br>which included a sensitivity analysis. The overall high credit quality<br><br>of the counterparties was noted by the Committee<br><br>•A consumer lending credit risk deep dive highlighted the Group’s<br><br>focus on sustainable growth. The Committee considered<br><br>macroeconomic trends, performance and customers’<br><br>financial resilience<br><br>•Infrastructure and project finance was also the focus of a deep dive,<br><br>providing the Committee with a detailed overview of the business<br><br>strategy and credit risks within the portfolio, such as concentration<br><br>risk and growth in US exposures | | Motor finance | •With significant external factors impacting<br><br>the motor finance sector, the Committee<br><br>has carefully monitored the transport<br><br>portfolio’s performance, its exposure to<br><br>residual value risk and the evolving situation<br><br>in relation to motor finance commission<br><br>arrangements | •The Committee received a detailed update on motor finance residual<br><br>value risk. The Committee noted the significant focus on building<br><br>capabilities to mitigate residual value risk given ongoing volatility,<br><br>particularly in relation to battery electric vehicles (BEVs)<br><br>•The Group has considered the potential impact of the FCA’s motor<br><br>finance commission redress scheme and will continue to assess<br><br>developments following the announcement by the FCA of the final<br><br>scheme rules |
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Board Risk Committee report continued
| Key activities for the year continued | | --- || Area of focus | Key role of Committee | Key outcomes | | --- | --- | --- | | Financial risks continued | | | | Capital and<br><br>liquidity | •The Committee has closely monitored<br><br>the associated risks from capital, liquidity<br><br>and funding | •After challenge and discussion from the Committee, the 2025 ICAAP<br><br>was approved in March. The Committee was satisfied that the<br><br>Group’s current and planned capital adequately covers the risk<br><br>of financial loss it is, or might be, exposed to. During the year, the<br><br>Committee also considered the approach and methodology for the<br><br>2026 ICAAP, including scrutinising the specific scenarios that help set<br><br>operational risk capital for the Group<br><br>•In April, the Committee approved the Group’s ILAAP. This included<br><br>compliance with the PRA’s Overall Liquidity Adequacy Rules (OLAR)<br><br>and refreshed Pillar 2 assessments<br><br>•A capital optimisation deep dive took place in May, which focused<br><br>on managing capital demand. The Committee expressed its support<br><br>on plans and improvement of the Group’s capabilities<br><br>•Updates on customer deposit trends and mix and the subsequent<br><br>impacts this has for structural hedge activity were also provided<br><br>to the Committee | | Other | | | | Model risk | •Model risk continued to be an area of<br><br>significant internal and external focus,<br><br>with the Committee overseeing the<br><br>Group’s current model risk landscape<br><br>and proposed improvements<br><br>•The validation process for AI models also<br><br>remained an area of importance in 2025 | •During 2025, the Committee continued its oversight of model risk<br><br>management, with regular updates being provided<br><br>•The Committee gave particular focus to the implementation of<br><br>Capital Requirements Directive (CRD) IV models and embedding<br><br>of the PRA’s Supervisory Statement 1/23 principles on Model<br><br>Risk Management<br><br>•November’s update included an assessment of the effectiveness<br><br>of the model risk framework with details of future enhancements<br><br>•A deep dive on generative and agentic AI took place in July,<br><br>which outlined the development and implementation of an<br><br>AI assurance framework | | Climate risk | •The Committee oversaw the impact of<br><br>climate risk on the Group’s activities and<br><br>considered the latest activity to assess and<br><br>mitigate these risks | •A deep dive on climate risk was discussed in May. The Committee<br><br>considered the Group’s key climate risks, the PRA’s Consultation<br><br>Paper CP10/25 and continued development of internal climate<br><br>scenario modelling capabilities | | Recovery plans<br><br>and resolution | •Recovery planning and resolution remained<br><br>an important area of focus for the<br><br>Committee throughout 2025<br><br>•The Committee has periodically reviewed<br><br>the Group’s recovery and resolution plans | •Prior to the Committee’s approval of the approach to the 2025<br><br>Recovery Plan, a dedicated training session on recovery and<br><br>resolution was held. The recovery plan focused on updating the<br><br>recovery stress scenarios and aligning these to recovery strategy<br><br>to the stress scenarios used in the 2025 ICAAP<br><br>•As part of the recovery plan, the Committee considered a<br><br>comprehensive Trading Activity Wind Down (TWD) analysis,<br><br>which uses the severe stress scenario to evaluate TWD stress<br><br>•The approach to the Group’s Resolution Integrated Scenario Test<br><br>was approved by the Committee in May 2025 and will take place<br><br>in the first half of 2026 | | Emerging and<br><br>topical risks | •Emerging risk and topical risk themes have<br><br>been regularly monitored by the Committee<br><br>during 2025 | •The Group’s approach to emerging risks has been refined further<br><br>during 2025. In November, the Committee reviewed an updated<br><br>register of emerging and topical risk themes |
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Responsible Business Committee report
Amanda
Mackenzie
Chair, Responsible
Business Committee
| Read full biography <br> |
|---|
By embedding purpose, sustainability
and inclusion, we are determined to
create lasting positive impact for
customers, colleagues and communities
accross the UK.
| Key activities in 2025 |
|---|
| •Driving the Group’s ambitions to build a sustainable and<br><br>inclusive future<br><br>•Engaging our colleagues to deliver cultural change<br><br>•Delivering on our duty to customers and stakeholders |
| Membership and attendance at scheduled meetings | |
|---|---|
| Amanda Mackenzie (Committee Chair) | 4/4 |
| Sir Robin Budenberg | 4/4 |
| Sarah Legg | 4/4 |
| Chris Vogelzang | 1/11 |
| 1Chris Vogelzang joined the Committee on 16 June 2025<br><br>Other attendees<br><br>Sarah Bentley, an independent non-executive director of the<br><br>Ring-Fenced Banks, attends meetings as an observer to provide<br><br>insight on the Ring-Fenced Banks when required. The Group<br><br>Chief Executive and, as appropriate, representatives from<br><br>Group Audit also attend. |
| Read more | ||
|---|---|---|
| Skills and experience | pages 68 to 69 | |
| Responsibilities (and in its terms of reference,<br><br>which are on our corporate governance page )<br> |
page 72 |
Introduction
I am pleased to report on the Committee’s work in 2025 and I
would like to thank members for their contributions. Over the past
12 months, our focus has been resolute: driving the actions that will
help build a more sustainable and inclusive future for the people
and communities the Group serves. By concentrating on the areas
where we can have the greatest positive impact, we continue to
strengthen our business, deepen trust and deliver long-term,
sustainable value for both shareholders and other stakeholders.
Committee operation
The Committee met four times during 2025. As part of our ongoing
commitment to governance, the Committee undertook an annual
review of its own performance, the findings of which, together
with the outcomes of the externally facilitated Board performance
review process as relevant to the Committee, were considered by
the Committee at its January 2026 meeting; it was considered that
the performance of the Committee continues to operate effectively
with a strong focus on governance and responsible oversight.
Purpose in action
Throughout 2025, the Committee focused on how the Group is
making the most meaningful difference for customers, colleagues
and communities. This approach not only supports long-term
business resilience but also helps impact the people and places
that need it most.
This year, we considered the Group’s efforts to empower prosperous
futures for customers and its continued leadership in improving
access to quality and affordable housing, reinforcing our longstanding
commitment to the UK’s social housing sector. We also considered
the Group’s work with UK universities to advance regional growth
across the country. Demonstrating our continued commitment to
supporting the UK’s transition, we approved updates to financed
emission sector targets in line with the Government’s Seventh Carbon
Budget. The Group also achieved the highest ISS ESG QualityScore,
reflecting our strong ESG governance and transparent disclosures.
And with the launch of new products, including the Agricultural
Transition Finance loan, the Group continued to showcase its
determination to turn intention into action on sustainability.
More detail on our responsible business activity can be found
on pages 35 to 49 and in our sustainability report .
In 2025, we also celebrated 40 years since the launch of our
four independent Charitable Foundations. Since 1985, more than
£800 million has been donated to almost 70,000 charities across
the UK, a powerful legacy of collaboration and impact in the
communities we serve.
The Committee also reviewed the progress towards the Group’s
2030 inclusion ambitions. We saw encouraging steps in increasing
senior representation and reaffirmed the importance of using data
to build an inclusive organisation that recognises the business value
of social mobility. The Committee remains fully supportive of the
work underway to increase representation from key demographics.
I remain inspired by the Group’s actions and its commitment
to ensure its workforce reflects the communities it serves.
More detail can be found on pages 22 to 23.
Colleague engagement
Our colleagues are central to the delivery of the Group’s strategic
ambitions. As the designated body for workforce engagement, the
Committee supports the Group’s engagement strategy, reporting
to the Board on the key themes and issues we are hearing from
colleagues. This year, we focused on culture and collaboration,
accountability and empowerment, as well as skills and growth.
More details on our colleague engagement activities can be found
on page 77.
Consumer Duty
The Committee continues to fulfil the Board’s responsibilities
for Consumer Duty and I remain the Board’s Consumer Duty
Champion. During 2025, we received regular progress updates from
business units and reviewed the annual Consumer Duty Report
ahead of its submission to the Board. Consumer Duty underpins
how the Group serves customers and sits at the heart of our
strategy, ensuring we deliver good, fair and responsible outcomes.
Lloyds Banking Group plc Annual Report and Accounts 2025
98
Directors’ remuneration report
Cathy Turner
Chair, Remuneration
Committee
| Read full biography <br> |
|---|
Our proposed 2026 Policy places
greater emphasis on sustainable
high performance and the creation
of shareholder value, pivoting
from guaranteed fixed pay to
performance-related variable pay.
| Key activities in 2025 |
|---|
| •Agreed a multi-year pay deal with a fixed award approach<br><br>for the majority of our colleagues, which includes a £1,2001<br><br>pay award for 2026 and 2027<br><br>•Conducted a thorough review of the Directors’<br><br>Remuneration Policy to ensure it supports the Group’s<br><br>strategic priorities<br><br>•Completed an extensive shareholder consultation on<br><br>executive remuneration |
| Membership and attendance | |
|---|---|
| Cathy Turner (Committee Chair) | 6/6 |
| Sir Robin Budenberg | 6/6 |
| Amanda Mackenzie | 6/6 |
| Catherine Woods | 6/6 |
| Other attendees<br><br>Nigel Hinshelwood and Sarah Bentley, the Senior Independent<br><br>Director and an independent non-executive director<br><br>respectively of the Ring-Fenced Banks, attend meetings as<br><br>observers to provide insight on the Ring-Fenced Banks when<br><br>required. In addition, the Committee engaged with and received<br><br>updates from the Group Chief Executive, Chief People and<br><br>Places Officer, Total Reward Director and the Chief Risk Officer. |
| Read more | ||
|---|---|---|
| Remuneration at a glance | page 103 | |
| 2025 annual report on remuneration | pages 105 to 123 | |
| 2026 Directors’ Remuneration Policy | pages 124 to 133 | |
| Responsibilities (and in its terms of reference,<br><br>which are on our corporate governance page )<br> |
page 72 |
Dear shareholder
On behalf of the Board, I am pleased to present the directors’
remuneration report (DRR) for the year ended 31 December 2025
and the proposed Directors’ Remuneration Policy (Policy), for which
we are seeking approval at our annual general meeting (AGM) in
May 2026.
I would also like to take this opportunity to thank our shareholders
for the strong support received at the 2025 AGM, with 94%
approval of our 2024 DRR.
Sustained strength in financial performance
and how we have delivered for our customers,
communities and shareholders in 2025
2025 has been another year of significant progress for the Group,
delivering for our customers, communities, and shareholders. Given
our continued strategic execution and sustained strength in
financial performance, this enabled a total proposed ordinary
dividend for 2025 of 3.65 pence per share, an increase of 15%
compared with the prior year. In addition, the Group announced
the launch of a share buyback programme to repurchase up to £1.75
billion of ordinary shares, reinforcing our commitment to creating
long-term value for our 2.1 million shareholders, including around
80% of our employees.
In 2025, we continued to deliver on our purpose of Helping Britain
Prosper. We remain focused on improving access to quality and
affordable housing, lending £17 billion to first time buyers in 2025
and supporting £3.2 billion of new finance to the social housing
sector. Additionally, we recently committed to providing a further
£35 billion of new finance to companies investing and operating in
the UK in 2026.
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.
Continuing to support colleagues
through our transformation
I am immensely proud of the role our colleagues have played in
delivering for our customers, communities and shareholders in 2025.
We have continued our significant transformation and the
commitment of our colleagues remains critical to its success.
In 2024 and 2025, we provided a two-year pay deal to give
colleagues certainty during a fast-changing economic environment
as we continued to transform our Group. This year, we have
agreed another multi-year pay deal for junior colleagues with our
recognised unions, Accord and Unite, continuing our support for
colleagues by keeping things simple and providing certainty. In
2026, this includes a pay award of £1,2001, with a new minimum
salary of £26,2001, and in 2027, a further pay increase of £1,2001
will apply, with the minimum salary rising to £27,4001. Our new
minimum salary from 1 April 2026 will be 7.0% above the national
Real Living Wage; our London rates will be 10.9% above the London
Real Living Wage.
As set out last year, in continuing to consider arrangements for
engaging with the Group’s workforce, the Board approved an
evolved approach to colleague engagement, implemented during
- This new approach built on existing colleague listening activity
and introduced three colleague-led forums designed to increase
colleague voice, particularly at grades where trade union
representation is low.
For colleagues not included in the two-year pay-deal, we shared our
approach with the People Forum and listened to and acted on their
feedback, providing higher increases for those lower in their pay
range. For our more senior colleagues, we continued our
discretionary pay approach, maintaining a strong emphasis on
individual impact and contribution, peer pay comparisons and
position within the pay range.
1Pro-rated for reduced hours.
Lloyds Banking Group plc Annual Report and Accounts 2025
99
Finally, I’m delighted to celebrate the success of the 2022
Sharesave, a savings scheme combined with a share option plan
which enables our colleagues to save for their future and then buy
shares in the Group at a discounted price. The scheme launched
in December 2022 with an option price of 39 pence and matured
on 1 January 2026 at a price of 99 pence. Around 15,000 of our
colleagues, approximately 25% of the Group’s employees, have
shared in the significant value they helped create for shareholders
through Sharesave. The typical savings amount from colleagues
participating in the 2022 Sharesave was £112 per month, and at the
above gain would see a final realisation benefit of around £6,000.
PRA/FCA remuneration reform
In October 2025, the PRA and FCA published a joint policy
statement which made significant, positive changes to the delivery
of variable pay for Material Risk Takers (MRTs); these changes
better align the UK with global norms and make it easier for UK
firms to attract and retain global talent.
Excluding our executive directors, we implemented these changes
with immediate effect. For our executive directors, we are mindful
that additional considerations apply. As a consequence, for
our executive directors, we will be subjecting variable pay to a
greater level of deferral and delivery of shares than required by the
regulatory rules; this is detailed as part of our implementation report.
2025 Group-wide variable reward outcomes
2025 was a key year for the Group, entering the second phase of our
strategy demonstrating sustained strength in financial performance
with franchise, balance sheet and income growth.
In determining the 2025 Group Performance Share (GPS) annual
bonus pool outcome, the Committee has considered a range of
factors, including the Group’s underlying financial performance,
its reward market positioning, our Group balanced scorecard (BSC)
outcome and our risk management. The Group BSC contains
measures of financial and non-financial performance, reflecting a
range of stakeholders including shareholders, customers and clients,
colleagues, and our communities and the environment. The
scorecard is described in more detail on pages 110 and 111.
The Committee has approved a 2025 GPS pool of £405 million,
representing a year-on-year increase of 10% compared to 2024.
The increased pool in 2025 shows continuing alignment to the
underlying financial performance of the Group.
In 2023, Long Term Share Plan (LTSP – a restricted share plan with
underpins) awards were granted to approximately 840 colleagues,
including our executive directors. The decision to award LTSP
awards in 2023 was based on performance relating to 2022. To
ensure that subsequent performance has been sustained, a ‘pre-vest
test’ consisting of three financial underpins and four key questions
has been considered by the Committee. Based on the outcome of
that test, the Committee has determined that the awards should
vest in full. The Committee also considered whether there was
any requirement to adjust the final outcome for windfall gains,
particularly as share price appreciation (c.75% share price growth
over the life of the plan) accounts for such a significant proportion
of the value realised by colleagues. The Committee concluded that
the share price growth over the period was reflective of underlying
performance and shareholder experience and as a consequence
determined that no adjustment is necessary. The 2023 LTSP is the
final long-term incentive in the form of an award under a restricted
share plan to vest having been replaced by a performance-based
Long Term Incentive Plan (LTIP) from 2024.
2025 Executive director variable
reward outcomes
In 2025, our Group Chief Executive (GCE), Charlie Nunn, has
overseen the continued delivery of the Group’s strategy, financial
targets, investment priorities, and market share growth in priority
areas, which will set the Group up for success in 2026, the final year
of the first strategic phase.
He has demonstrated strong leadership throughout another
challenging year for consumers while working closely with the UK
Regulators and UK Government on several key areas.
Our Chief Financial Officer (CFO), William Chalmers, has played a
critical role in the execution of the Group’s strategy and maintained
positive engagement with investors and regulators on the Group’s
performance and strategic direction, while showing strong financial
and risk management.
The Group BSC, comprising seven financial and non-financial
performance measures, is the principal input into the annual bonus
awards for the GCE and CFO. As I set out in my Chair statement
in 2024, the impact of any motor finance provision in 2025 on
financial metrics would be excluded, with any impact considered
on a discretionary case-by-case basis, to allow the Committee to
set robust financial targets aligned to the financial planning and
budgeting process.
A detailed breakdown of the outcome of the Group BSC is set out
on page 110. After careful consideration, the Committee does not
consider that the mechanical outcome of 81.9% properly reflects
the performance of the Group given the additional provision taken
for motor finance this year (see page 283). In assessing the impact
of the provision on the Group’s financial performance with due
consideration to the fact that it relates to issues that took place
prior to the appointment of the current management team, the
Committee has agreed a 74% outcome is appropriate which has
resulted in a 7.9 percentage point reduction from the mechanical
outcome. Taken with the impact on the Group BSC in 2023
and 2024, the Committee is satisfied that the total provisions
taken by the Group to date have been appropriately reflected
in executive variable pay outcomes.
On the basis of a Group BSC outcome of 74.0% the final
2025 GPS awards for the GCE and CFO were £1,424,895
and £908,835 respectively.
2026 Directors’ Remuneration Policy
The current Policy, which received 96% support from our
shareholders at the 2023 AGM, is due for renewal in 2026. In
preparation, the Committee has undertaken a thorough review
to ensure the Policy acts as a strong incentive to our management
team, who are well regarded by our shareholders, to deliver
continued strategic and financial progress and guide the Group
into its next strategic cycle. The Policy places greater emphasis
on sustainable high performance and shareholder value creation.
The 2026 Policy proposes a material reduction in guaranteed
fixed pay for our executive directors alongside a higher
performance-related variable reward opportunity to enhance
our pay-for-performance proposition and further align executive
reward outcomes with the experience of our shareholders. The
scorecards which drive variable reward outcomes have also been
reviewed, with an increased weighting towards quantitative
financial measures, and 2026 financial targets have been set
substantially higher than in previous years reflecting the Group’s
ambitious growth plans.
Shareholder consultation
We place significant emphasis on our shareholders’ views and have
undertaken a comprehensive consultation, across both 2024 and
2025, on executive pay to ensure those views are well understood
and properly reflected in the proposed Policy.
In 2024, I consulted with a range of shareholders and proxy
rating agencies to discuss their views on executive pay ahead of
Policy implementation in 2025. The feedback was valuable and
indicated broad support for the management of executive pay
at the Group which our shareholders consider is undertaken
responsibly. Our shareholders clearly understood our rationale
for the fixed pay changes and the importance of rewarding our
executive directors, who are well regarded amongst our investors,
fairly for their roles in the short and long term.
Lloyds Banking Group plc Annual Report and Accounts 2025
100
Directors’ remuneration report continued
One area of particular discussion during the 2024 consultation
was the timing of fixed pay increases ahead of the Policy review in
- As I set out in my Chair statement in 2024, the Committee
considered the feedback carefully and determined to take a two-
step approach to ensure the executive directors were paid fairly
ahead of the 2026 Policy review. Appropriate fixed pay changes
were implemented in 2025.
In the 2024 DRR, I noted that fixed pay would be reconsidered
as part of the 2026 Policy review, where we anticipated that,
consistent with likely market movements, the fixed share award
(FSA) element would be significantly reduced and a higher,
performance-related, variable reward opportunity recommended.
I once again consulted with shareholders in 2025 to ensure our early
Policy thinking was reflective of shareholder views. In October 2025,
I spoke with our largest shareholders, representing around 25% of
issued share capital (ISC), followed in November 2025 by engaging
with the main proxy rating agencies whose recommendations are
considered by a significant portion of our register.
During those meetings, we specifically focused on the significant
pivot from fixed to variable pay, the increased weighting of financial
measures across our scorecards, and how we benchmarked our
proposals to test them against an appropriate range of peers.
Feedback from shareholders during the consultation was positive.
In particular, shareholders welcomed the early engagement,
acknowledged the clear and well-articulated rationale for the
changes and the market alignment of the proposed package.
Following our initial consultation, we issued a letter to a number
of institutional shareholders who were not part of the initial
consultation, seeking their input on the proposals discussed as well
as sharing feedback received to date. In total, approximately 60%
of the Group’s ISC were contacted on the proposed 2026 Policy.
Taken as a whole, the Committee determined that the course we
are on is appropriate for our business. However, our shareholders
were also clear on three areas where they wanted the Committee
to reflect:
•Future-proofing – shareholders expect the Policy to provide
sufficient flexibility to last the cycle and do not expect the Group
to seek a new Policy before 2029
•Performance targets – recognising the potential increase in
quantum, shareholders expect performance measures to be
transparent and targets should continue to be stretching
•Benchmarking – clear and transparent benchmarking, including
consideration of the choice of peer group, particularly where
firms have exposure to the US which has influenced their
remuneration structure or overall quantum and those of similar
size and performance to the Group
How the Committee has considered and addressed these key points
is discussed in more detail below.
Policy background and context
Since the appointment of Charlie Nunn as our GCE in August 2021,
£43 billion of shareholder value has been created through a
combination of growth in our market capitalisation of c.£25 billion
and through distributions of c.£18 billion, c.131% of the value of the
Company in August 2021.
In February 2022, the Group launched its new strategy, building on
our strong foundations and our purpose of Helping Britain Prosper.
At that time, the Committee conducted a thorough review of the
Group’s Policy to ensure it supported the Group’s strategic priorities
and the interests of our shareholders.
Following this review, as part of our refreshed 2023 Policy, we made
significant changes to our executive reward package to drive a high-
performing culture and create a stronger link between performance,
reward, and the creation of shareholder value. Principal amongst
those changes was the return to a performance-related LTIP,
providing an increased variable opportunity but with significantly
greater downside risk than the restricted share plan it replaced.
We also increased shareholding requirements for our executive
directors to further strengthen alignment with our shareholders by
requiring them to hold a higher multiple of salary in Group shares,
increasing the requirement from 350% to 400% and from 250% to
300% for the GCE and CFO, respectively. The shareholding policy
applies for two years post-employment.
The Committee believes that the current Policy, despite greater
design constraints applicable at the time, has served the Group
well and we continue to make strong progress in delivering our
purpose-driven strategy, building differentiated customer outcomes
and growing our business as we build towards our ambitious targets
for 2026.
The Committee is also mindful of external factors which impact
the 2026 Policy design, in particular the removal of the regulatory
2:1 bonus cap, FCA/PRA reforms, updated Investment Association
Principles of Remuneration, and the new directors’ remuneration
policies approved by the shareholders of the Group’s main UK
banking peers.
The Committee has reflected on the 2023 Policy and has
concluded that a simple annual bonus/LTIP structure remains
most appropriate for our business, providing the closest alignment
with the shareholder experience as well as transparency in terms
of targets and outcomes for both our executive directors and our
shareholders. During our consultations, investors have been
supportive of this approach.
After careful consideration throughout 2025, the Committee
has concluded that the direction set out in the 2024 DRR,
pivoting towards a more leveraged, performance-oriented package,
remains the right one to place more emphasis on sustainable high
performance and shareholder value creation.
Fixed pay
The new Policy removes FSAs (currently set at 100% of salary),
reduces our executive directors’ pension contributions from 15% to
10% of salary to better align to the market and at a level lower than
the majority of the wider workforce, and removes the flexible
benefits allowance and the CFO’s company car allowance.
The base salaries of our GCE and CFO will be increased by 3%, in
line with wider workforce fixed pay funding for 2026 to £1,416,642
and £903,572, respectively, effective 1 April 2026. Subject to
approval of the Policy at the 2026 AGM, also effective 1 April 2026,
salaries will be increased by an additional £112,531 and £82,684
to reflect the partial consolidation of FSAs and flexible benefits
allowance. Taken together, these changes will reduce our executive
director fixed pay by approximately 44%.
As acknowledged by the UK regulators at the time the bonus cap
was removed, the regulations did not limit total remuneration but
placed upward pressure on banking fixed pay which is not
performance related and cannot be subsequently adjusted or
clawed back. The fixed pay changes proposed as part of the 2026
Policy will bring the GCE’s fixed pay as a percentage of total
maximum compensation in line with FTSE 30 norms; down from
33% to 12%, compared to the FTSE 30 median of 14%. For the CFO,
this would be down from 33% to 14%, compared to the FTSE 30
median of 15%.
Variable pay
Alongside the reduction in fixed pay, the Committee also intends to
make responsible use of the Group’s 8:1 variable-to-fixed pay ratio
to increase the executive directors’ variable pay opportunity to
place further emphasis on a high-performing culture and create a
stronger link between performance, reward, and the creation of
shareholder value.
For the GCE, the Committee is proposing to increase the maximum
annual bonus award from 140% to 300% of base salary and the
maximum LTIP opportunity from 300% to 500%; for the Group
CFO, the proposed increases are to 250% and 450%, respectively.
Lloyds Banking Group plc Annual Report and Accounts 2025
101
These changes will place significantly more of the executive
directors’ pay at risk, increasing the variable pay component
to over 85% of total maximum remuneration from 67% today.
| Reward structure change |
|---|
| Group Chief Executive<br><br>Charlie Nunn | Total<br><br>maximum<br><br>remuneration |
|---|---|
| 2025 |
| 140% | 300% | £9.1m | |
|---|---|---|---|
| p | |||
| 3.0m |
All values are in British Pounds.
| 2026 | ||
|---|---|---|
| 500% | £13.9m | |
| p | ||
| 1.7m | ||
| 44% fixed pay reduction |
All values are in British Pounds.
| Chief Financial Officer<br><br>William Chalmers | Total<br><br>maximum<br><br>remuneration |
|---|---|
| 2025 |
| 140% | 300% | £5.8m | |
|---|---|---|---|
| p | |||
| 1.9m |
All values are in British Pounds.
| 250% | 450% | £8.0m | |
| 1.1m | |||
| 44% fixed pay reduction |
All values are in British Pounds.
| l | Base<br><br>salary | l | Fixed share<br><br>awards | l | Pension/<br><br>Benefits | l | Short term<br><br>variable | l | Long term<br><br>variable |
|---|
The Committee is satisfied that the maximum total compensation
opportunity under the proposed Policy is appropriately positioned
relative to the market to create a strong incentive to the current
management team to lead the Group into its next strategic cycle
without needing to revisit the Policy ahead of 2029.
Subject to shareholder approval of the new Policy and following a
pre-grant test based on 2025 performance, including the outcome
of the 2025 Group BSC, 2026 LTIP awards will be granted following
the AGM under the terms of the 2026 Policy at 500% of salary for
the GCE and 450% of salary for the Group CFO.
Shareholding requirement
To further strengthen the alignment between executive directors’
interests and those of our shareholders, we are also proposing to
increase the Group’s shareholding requirement from 400% to 500%
of base salary for the GCE and from 300% to 450% for the Group
CFO as part of the 2026 DRP, aligned to their respective maximum
proposed LTIP opportunities. As is currently the case, the
shareholding policy applies for two years post-employment.
Performance scorecards and targets
The Committee is clear that the performance targets which drive
both GPS and LTIP outcomes are key in driving executive director
behaviour and ensuring focus on sustainable high performance and
the creation of shareholder value. For that reason, the Committee
has dedicated significant time to both the Group BSC and the LTIP
performance measures and is making substantive changes.
Our 2023 Policy rightly placed significant emphasis on strategic
transformation, and that was reflected in the 35% weighting to the
Strategic Delivery block in our LTIP scorecard. Under the new 2026
Policy, the Committee is clear that the Group’s transformation and
change must translate into sustainable high performance and the
creation of value for our shareholders. To reflect that pivot we plan
to significantly increase the financial weighting of the LTIP scorecard
from not less than 50% to not less than 75%, to focus the vesting
outcome of the LTIP on the financial results of our transformation.
For 2026, the LTIP measures will be return on tangible equity
(RoTE) (30% weighting), capital generation (15% weighting)
and relative total shareholder return (TSR) (30% weighting).
Recognising the importance of stretching financial targets to our
shareholders, we have increased our RoTE target range for the 2026
LTIP award by two full percentage points from 13% to 16% to 15% to
18% and our capital generation range from 185 to 230 basis points
to 200 to 250 basis points. Both the RoTE and capital generation
targets are on a three-year average basis from 2026 to 2028.
| Group RoTE target progression within the LTIP |
|---|
| 2026 to 2028 | +2ppt | t 15% | 18% u | | --- | --- | --- | --- || 2025 to 2027 | +1ppt | t 13% | 16% u | | --- | --- | --- | --- || 2024 to 2026 | t 12% | 15% u | | --- | --- | --- || ll | Performance range | | --- | --- |
The remaining weight will remain aligned to strategic delivery (15%)
and environmental sustainability commitments (10%), which we
intend to maintain as a separate block to ensure clarity and visibility
over our climate-related performance.
Our current Group BSC, which is a key input into annual GPS
decisions for our executive directors and informs the level of annual
LTIP grant, has, for a number of years, included a strong weighting
to financial measures; for that reason, the Committee is not
proposing to change the current 60% weighting for 2026.
However, to recognise the longer-term nature of the Group’s
ambitions on decarbonisation, the Committee will use the LTIP
as the principal measure of the Group’s progress on environmental
sustainability by moving the Reduction in our Operational Carbon
Emissions measure from the short-term to the long-term scorecard.
To reflect the criticality of continued transformation of our
workforce to enable delivery of Group strategy, our 2026 Group
BSC will include a broader and more comprehensive ‘People
measure’ weighted 15%; this will retain our current focus on
inclusion and colleague engagement but also include a wider range
of people transformation metrics considered by the Board. These
will include, for example, colleague upskilling and the adoption of
AI, a first we believe amongst our peers.
To recognise the importance of our customers and to ensure
executive variable reward outcomes reflect their experience,
the remaining 25% weight will be aligned to the Group Customer
Dashboard (an increase of 5 percentage points from 2025).
Collectively, these changes will represent a significant pivot toward
financial performance, with over 60% of total reward opportunity
being linked to financial measures versus approximately 35% under
the previous Policy.
Market benchmarking
Benchmarking was one of the key discussion points during our
shareholder engagement; from those conversations it was clear
that our investors expected us to use benchmarking to test our
proposals, rather than be led by it, and also to be thoughtful over
our choice of peers.
Lloyds Banking Group plc Annual Report and Accounts 2025
102
Directors’ remuneration report continued
To satisfy itself that the increased total reward package on offer to
the executive directors is reasonable, the Committee has carefully
tested its proposals against our main UK banking peers and a subset
of the FTSE 30 which excludes firms whose pay structures are
heavily influenced by the US market where pay practices are
markedly different to the UK. For similar reasons, the Committee
has decided not to consider a specific European peer set as part of
the exercise.
Based on the benchmarking data set out below, the Committee is
satisfied that the proposed Policy is well positioned versus market:
| Group Chief Executive Charlie Nunn |
|---|
| UK banking<br><br>peer<br><br>median | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| FTSE<br><br>30 peer<br><br>median | |||||||||
| LBG<br><br>2026 | |||||||||
| LBG<br><br>2025 | £1.8m | 260% | 520% | ||||||
| --- | --- | --- | £14.2m | ||||||
| --- | |||||||||
| £11.0m | |||||||||
| £13.9m | |||||||||
| £9.1m | £1.7m | 210% | 490% | ||||||
| --- | --- | --- | £1.7m | 300% | 500% | ||||
| --- | --- | --- | £3.0m | 140% | 300% | ||||
| --- | --- | --- | ll | Fixed pay | ll | Short-term variable | ll | Long-term variable | |
| --- | --- | --- | --- | --- | --- | Chief Financial Officer William Chalmers | |||
| --- |
| UK banking<br><br>peer<br><br>median | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| FTSE<br><br>30 peer<br><br>median | |||||||||
| LBG<br><br>2026 | |||||||||
| LBG<br><br>2025 | £1.2m | 235% | 435% | ||||||
| --- | --- | --- | £8.2m | ||||||
| --- | |||||||||
| £5.9m | |||||||||
| £8.0m | |||||||||
| £5.8m | £1.0m | 200% | 375% | ||||||
| --- | --- | --- | £1.1m | 250% | 450% | ||||
| --- | --- | --- | £1.9m | 140% | 300% | ||||
| --- | --- | --- | ll | Fixed pay | ll | Short-term variable | ll | Long-term variable | |
| --- | --- | --- | --- | --- | --- |
UK banking peers: Barclays, HSBC, NatWest and Standard Chartered.
FTSE 30 firms included: 3i Group, Anglo American, BAE Systems, Barclays, BP, Compass
Group, Diageo (CFO only), Experian, Glencore (GCE only), Haleon, HSBC, Imperial Brands,
NatWest, RELX, Rio Tinto, Rolls-Royce, Shell, SSE, Standard Chartered, Tesco, Unilever and
Vodafone Group.
FTSE 30 firms excluded for having pay structures heavily influenced by the US market:
Ashtead, Astrazeneca, BAT, GSK, LSEG, National Grid and Reckitt Benckiser.
Peer 2025 data aged 3% for comparison purposes.
A key discussion point with shareholders during the consultation
was how the Committee considers peers closest to the Group in
terms of size, complexity and performance, given the diverse nature
of the companies comprising the FTSE 30.
The Committee has also considered a narrower subset of the FTSE
30 which are more comparable to the Group in terms of market
capitalisation (as a useful proxy for size and complexity) as well
as TSR performance and has, again, concluded that the proposals
are reasonable.
Renewal of the North America Employee
Stock Purchase Plan 2016 Rules
We will also be recommending a resolution to the AGM to renew
our US Employee Stock Purchase plan, which is similar to our UK
Sharematch scheme, to ensure its continued operation beyond
the current approval period, which is due to expire in 2026.
Conclusion
Together with my Committee members, I would like to thank our
shareholders for their continued support and critical engagement on
executive pay during 2025, and our people for their commitment to
our customers and communities, and for delivering another set of
robust results in 2025.
On behalf of the Board
| Cathy Turner<br><br>Chair, Remuneration Committee | | --- || Directors’ Remuneration Policy design process and approach to consultation | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | October to<br><br>November<br><br>2024 | December<br><br>2024 | January<br><br>2025 | May to<br><br>September<br><br>2025 | October to<br><br>November<br><br>2025 | November<br><br>2025 | December<br><br>2025 | January to<br><br>February<br><br>2026 |
| Consultation on<br><br>2025 fixed pay<br><br>implementation | ||
|---|---|---|
| Attendees<br><br>Major institutional<br><br>shareholders<br><br>representing c.25%<br><br>of the shareholder<br><br>register<br><br>Proxy rating agencies | Board Governance<br><br>Event | |
| --- | ||
| Attendees<br><br>Shareholders<br><br>representing c.31%<br><br>of the shareholder<br><br>register attended<br><br>the event | Follow-up<br><br>consultation on<br><br>2025 fixed pay<br><br>implementation | |
| --- | ||
| Attendees<br><br>Proxy rating agencies | Review of existing<br><br>Policy and proposals<br><br>for new Policy | |
| --- | Consultation on<br><br>2026 proposed<br><br>Policy | |
| --- | ||
| Attendees<br><br>Major institutional<br><br>shareholders<br><br>representing c.25%<br><br>of the shareholder<br><br>register<br><br>Proxy rating agencies | Remuneration<br><br>Committee meeting<br><br>to discuss investor<br><br>feedback | |
| --- | Letter issued setting<br><br>out proposed Policy,<br><br>feedback from initial<br><br>consultation and<br><br>inviting feedback | |
| --- | ||
| Recipients<br><br>Major institutional<br><br>shareholders<br><br>representing c.60%<br><br>of the shareholder<br><br>register | Discuss further<br><br>shareholder<br><br>feedback and<br><br>approve proposed<br><br>Policy for<br><br>shareholder vote<br><br>at 2026 AGM | |
| --- | ||
| Engaged with<br><br>shareholders in<br><br>response to<br><br>feedback |
Lloyds Banking Group plc Annual Report and Accounts 2025
103
2025 Remuneration at a glance
This section provides a summary of key 2025 remuneration outcomes for the Group and its executive directors and how they align to our
strategic delivery and wider stakeholder experience.
| Strategy and Stakeholder key |
|---|
| Our reward outcomes reflect our strategic delivery and wider stakeholder experience as demonstrated by our Group balanced<br><br>scorecard and Long Term Share Plan scorecard, as shown below. |
| 2025 Single total figure of remuneration (000) |
| --- |
| Group Chief Executive Charlie Nunn |
| The Group Chief Executive’s total remuneration for 2025 was 7.4 million, up 20% from 2024. The Chief Financial Officer’s total remuneration for 2025 was 5.0 million, an 18% increase from the previous year. The year-on-year increases were primarily driven by fixed pay changes implemented in 2025, described in detail on page 106, higher short-term variable reward outcomes of 74.0% of maximum compared to 68.1% in 2024 and finally the share price appreciation linked to the vesting of the long-term variable awards which benefitted from share price increase over the period from 52 to 91 pence. For full details please see page 109. |
All values are in British Pounds.
| 2025 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | Total £7,407 | |||||||||||
| --- | ||||||||||||
| Total £6,169 | Total £4,976 | |||||||||||
| --- | ||||||||||||
| Total £4,212 | 2025 | |||||||||||
| --- | ||||||||||||
| 2024 | l | Fixed | l | Short Term Variable | l | Long Term Variable | l | Value from share price appreciation | ||||
| --- | --- | --- | --- | --- | --- | --- | --- | 2025 Group balanced scorecard outcome | ||||
| --- | --- | --- | --- | |||||||||
| Financial (60%) | Profit after tax | 21.8% / 25% | ||||||||||
| Return on tangible equity | 22.1% / 25% | |||||||||||
| Operating costs | 5.8% / 10% | |||||||||||
| Non-financial (40%) | Group customer dashboard | 13% / 20% | ||||||||||
| Reducing our operational<br><br>carbon emissions | 5% / 5% | |||||||||||
| Increasing gender and ethnic<br><br>representation in executive roles | 6.75% / 7.5% | |||||||||||
| Culture and colleague<br><br>engagement | 7.5% / 7.5% | |||||||||||
| Mechanical balanced scorecard outcome | 81.9% | |||||||||||
| Discretionary Committee adjustment | -7.9 | |||||||||||
| Revised balanced scorecard outcome | 74.0% | |||||||||||
| For full details please see pages 110 and 111. | 2023 Long Term Share Plan outcome | |||||||||||
| --- | --- | --- | --- | |||||||||
| Financial (100%) | CET1 ratio – Group CET1<br><br>ratio above the guided<br><br>management target<br><br>each year, including all<br><br>regulatory buffers | Met | ||||||||||
| RoTE – Group RoTE exceeds<br><br>the average for UK peer<br><br>banks over the three years | Met | |||||||||||
| Ordinary dividend<br><br>– Increased ordinary<br><br>dividend payments<br><br>over the plan period | Met | |||||||||||
| Award (% max) vesting | 100% | |||||||||||
| For full details on the ‘pre-vest test’ please see page 112. | 2025 Group Performance Share pool | |||||||||||
| --- | --- | |||||||||||
| The underlying profitability of the Group is the key driver of our<br><br>GPS pool, ensuring strong pay-for-performance alignment. The<br><br>Group BSC is also considered in setting the pool and therefore<br><br>the final outcome considers our strategic delivery and wider<br><br>stakeholder experience.<br><br>The Committee determined a pool for 2025 of £405 million, up<br><br>10% from 2024, recognising increased underlying performance. | 10% <br> |
|||||||||||
| --- |
| 2025 |
|---|
| 2024 |
Lloyds Banking Group plc Annual Report and Accounts 2025
104
Directors’ remuneration report continued
Revised Policy overview
The below table sets out the revised Directors’ Remuneration Policy which will be put forward to shareholders at the 2026 AGM. The full
Policy can be found on pages 124 to 133.
| Current 2023 Policy | Proposed changes in 2026 Policy and rationale |
| --- | --- || 
<br><br>Base<br><br>Salary | •Reflective of individual role, taking account<br><br>of responsibilities, experience and pay in<br><br>the wider Group<br><br>•Base salaries are typically reviewed<br><br>annually with any increases normally taking<br><br>effect from 1 April for executive directors | No change to Policy. |
| --- | --- | --- |
| 
<br><br>Fixed Share<br><br>Award | •Delivered entirely in Lloyds Banking Group<br><br>shares, released over three years with 33%<br><br>being released annually following the year<br><br>of the award<br><br>•The maximum award is 100% of base salary | Change:<br><br>•Fixed share awards have been removed from the<br><br>2026 Policy<br><br>Why:<br><br>To set fixed pay at an appropriate level in line with market<br><br>standard for executive directors and further align executive<br><br>remuneration with stakeholder experience. |
| 
<br><br>Pension | •Provides cost-effective and market<br><br>competitive retirement benefits<br><br>•Maximum allowance for executive directors<br><br>is 15% of salary, aligned with that available<br><br>to the majority of the workforce | Change:<br><br>•Maximum allowance of 10% of salary for executive directors<br><br>Why:<br><br>To set fixed pay at an appropriate level in line with market<br><br>standard for executive directors. This will move from being<br><br>in line with to less than the majority of the wider workforce. |
| 
<br><br>Benefits | •Flexible benefit allowance of 4% of salary<br><br>•Other benefits include medical insurance,<br><br>car allowance and transportation | Change:<br><br>•Flexible benefit allowance has been removed<br><br>•Car allowance has been removed<br><br>Why:<br><br>To align executive director remuneration package with the<br><br>wider workforce where these allowances were consolidated<br><br>in previous years and to set fixed pay at an appropriate level. |
| 
<br><br>Group<br><br>Performance<br><br>Share<br><br>(Short Term Variable) | •Maximum opportunity of 140% of salary<br><br>for executive directors, with normal target<br><br>level at 50% of maximum opportunity<br><br>•Performance adjustment including malus<br><br>and clawback provisions apply | Change:<br><br>•Maximum opportunity of 300% of salary for GCE and<br><br>250% for other executive directors<br><br>Why:<br><br>To place further emphasis on a high-performing culture and<br><br>create a stronger link between performance, reward, and the<br><br>creation of shareholder value. The increase in maximum<br><br>variable reward opportunity should be considered alongside<br><br>the reduction in fixed pay described above. |
| 
<br><br>Long Term<br><br>Incentive Plan<br><br>(Long Term Variable) | •The maximum LTIP opportunity is 300%<br><br>of salary for all executive directors<br><br>•A minimum of 50% of the award being<br><br>dependent on financial measures<br><br>•Performance adjustment including malus<br><br>and clawback provisions apply | Change:<br><br>•Maximum opportunity of 500% of salary for GCE and<br><br>450% for other executive directors<br><br>•A minimum of 75% of the award being dependent on<br><br>financial measures<br><br>Why:<br><br>To place further emphasis on a high-performing culture and<br><br>create a stronger link between performance, reward, and the<br><br>creation of shareholder value. The increase in maximum<br><br>variable reward opportunity should be considered alongside<br><br>the reduction in fixed pay described above. |
Lloyds Banking Group plc Annual Report and Accounts 2025
105
Remuneration Committee
The Committee comprises of four non-executive directors including
Sir Robin Budenberg, Group Chair. The non-executive directors are
from a wide background to provide a balanced and independent
view on remuneration matters.
Two of the three designated independent non-executive directors
of the Ring-Fenced Banks, including the Senior Independent
Director, also attend meetings of the Committee as observers in
order to provide insights on matters relevant to the Ring-Fenced
Banks and as part of their role in the Group’s overall governance
structure. For further details of Committee membership and
attendance at meetings, please see page 98.
During the year, Charlie Nunn, as the GCE provided regular briefings
to the Committee. In addition, the Committee engaged with
and received updates from the Chief People and Places Officer,
Total Reward Director and the Chief Risk Officer.
The purpose of the Committee is to set the remuneration for all
executive directors and the Chair, including pensions rights and
any compensation payments. It recommends and monitors the level
and structure of remuneration for senior management and material
risk takers.
It also considers and approves an overall remuneration policy and
philosophy for the Group that is aligned with its long-term business
strategy, its business objectives, its risk appetite, purpose and
values and the long-term interests of the Group and recognises the
interests of the relevant stakeholders including the wider workforce.
The Committee’s operation is designed to ensure that no conflicts
of interest arise and in particular, the Committee ensures that no
individual is present when matters relating to their own
remuneration are discussed.
Advisers
PwC was appointed by the Committee in May 2022 following
a competitive tender process and was retained for 2025.
The Committee is of the view that PwC provides independent
remuneration advice to the Committee and does not have any
connections with the Group or any director that may impair
its independence.
More broadly, PwC provides unrelated professional services to
the Group in the ordinary course of business including tax, advisory,
internal audit and non-audit assurance services. PwC attended
Committee meetings upon invitation and fees payable for the
provision of services in respect of directors’ remuneration in 2025
amounted to £134,625 excluding VAT.
Fees paid to PwC for advising the Committee are based partly
on a fixed fee and partly on a time and materials basis.
| Committee activities in the year | | --- || | Jan | Feb | May | Sep | Nov | Dec | | --- | --- | --- | --- | --- | --- | --- | | Executive directors’ remuneration | | | | | | | | Executive directors’ fixed pay proposals | l | ¡ | ¡ | l | ¡ | ¡ | | Executive directors’ performance and variable<br><br>remuneration | l | l | ¡ | l | l | l | | Directors’ remuneration report | l | l | ¡ | ¡ | ¡ | l | | Directors’ Remuneration Policy design | ¡ | ¡ | ¡ | l | l | l | | All employee remuneration | | | | | | | | Fixed pay proposals | ¡ | ¡ | ¡ | l | l | ¡ | | Group performance and GPS pool | l | l | l | l | l | l | | Employee insights | ¡ | l | ¡ | ¡ | ¡ | ¡ | | Remuneration for other senior executives | l | l | ¡ | ¡ | ¡ | l | | Reward governance | | | | | | | | Consideration of policy and conduct matters | l | l | l | l | l | l |
| Statement of voting at annual general meeting | | --- || The table below sets out the voting outcome at the annual general meeting in May 2025 in relation to the annual report on remuneration.<br><br>The Directors' Remuneration Policy was subject to a binding vote at the annual general meeting in May 2023. | | | | | | | --- | --- | --- | --- | --- | --- | | | Votes<br><br>cast in favour | | Votes<br><br>cast against | | Votes<br><br>withheld | | | Number of<br><br>shares<br><br>(millions) | Percentage of<br><br>votes cast | Number of<br><br>shares<br><br>(millions) | Percentage of<br><br>votes cast | Number of<br><br>shares<br><br>(millions) | | 2024 annual report on remuneration (advisory vote) | 37,913 | 94.23% | 2,323 | 5.77% | 28 | | Directors’ Remuneration Policy (binding vote in 2023) | 39,002 | 96.00% | 1,623 | 4.00% | 68 |
Lloyds Banking Group plc Annual Report and Accounts 2025
106
Directors’ remuneration report continued
2023 Directors’ Remuneration Policy
summary and 2025 implementation
The 2023 Directors’ Remuneration Policy, which applied during
2025, was approved by shareholders at the AGM on 18 May 2023
with 96% of votes cast and took effect from that date. The full
Policy is set out in the 2022 annual report and accounts (pages 125
to 133) which is available on our website.
Details of the new Policy being proposed to shareholders at the
2026 AGM are set out on pages 124 to 133.
A summary of the 2023 Policy for the executive directors and how
it was implemented during 2025 is shown below.
| Read more<br><br>2023 Directors’ Remuneration Policy in full <br> |
| --- || Directors’ remuneration | Wider workforce alignment |
| --- | --- || <br><br>Base<br><br>Salary | •Base salaries are reviewed annually with increases typically taking effect from<br><br>1 April<br><br>•Increases will normally be no more than the increase awarded to the overall<br><br>employee population<br><br>With effect from 1 January 2025, the 13% discount applied to the GCE’s salary on<br><br>appointment was reversed, taking his salary to £1,335,321, and from 1 April 2025,<br><br>salaries for the executive directors increased by 3%, less than the wider<br><br>workforce, to £1,375,381 for the GCE and £877,254 for the CFO. | The pay deal for the wider<br><br>workforce in 2025 reflected<br><br>a 4.1% budget.<br><br>The approach focused on<br><br>lower paid colleagues with<br><br>junior colleagues receiving<br><br>a minimum £1,500 award<br><br>in 2025 (pro-rated for<br><br>reduced hours). |
| --- | --- | --- |
| <br><br>Fixed Share<br><br>Award | •Delivered entirely in Lloyds Banking Group shares, released over three years<br><br>with 33% being released annually following the year of the award<br><br>•The maximum award is 100% of base salary<br><br>From 1 January 2025, fixed share awards were increased to align with the<br><br>executive directors salaries. | To maintain an appropriate<br><br>balance between fixed and<br><br>variable remuneration, and<br><br>to further align the interests<br><br>of executive directors and<br><br>shareholders, a portion of<br><br>fixed pay was delivered in<br><br>the form of shares.<br><br>Fixed share awards were<br><br>only granted to the GCE<br><br>and the CFO. |
| <br><br>Pension | •The maximum allowance for executive directors is set at 15% of base salary<br><br>•Any director may elect to receive some or all of their pension allowance<br><br>as cash in lieu of pension<br><br>Pension allowances for all executive directors for 2025 was set at 15%<br><br>of base salary. | The maximum allowance<br><br>for all executive directors<br><br>for 2025 was set at 15% of<br><br>base salary in line with the<br><br>majority of the workforce. |
| <br><br>Benefits | Benefits may include those currently provided and disclosed in the annual report<br><br>on remuneration. Core benefits include a company car or car allowance, private<br><br>medical insurance, life insurance and other benefits that may be selected<br><br>through the Group’s flexible benefits plan.<br><br>Benefits for 2025 were unchanged from 2024. Executive directors received<br><br>a flexible benefit allowance of 4% of base salary. The CFO also received a car<br><br>allowance. | Flexible benefit allowance<br><br>of 4% of base salary was<br><br>consolidated into base<br><br>salary in July 2023 for<br><br>colleagues, simplifying<br><br>their reward package and<br><br>benefitting from pension<br><br>contribution entitlement. |
Lloyds Banking Group plc Annual Report and Accounts 2025
107
| Directors’ remuneration | Wider workforce alignment |
| --- | --- || <br><br>Group<br><br>Performance<br><br>Share<br><br>(Short Term Variable) | •The normal ‘target’ level of the GPS is 50% of maximum opportunity<br><br>•The maximum GPS opportunity is 140% of salary for the executive directors<br><br>The GCE and CFO received 2025 GPS awards of 74.0% of maximum in line with<br><br>the final Group balanced scorecard outcome as shown on page 110.<br><br>The Group’s policy is to apply deferral to variable reward in line with minimum<br><br>regulatory requirements. However, to recognise market practice and shareholder<br><br>expectations for executive directors, we will apply deferral to 2025 annual bonus<br><br>awards above our Policy minimum.<br><br>Our default position is to award GPS 50% in cash and 50% in shares released<br><br>over three years in equal tranches; however, as both executive directors have<br><br>met their respective shareholding requirements we will award 75% in cash and<br><br>25% in shares released over three years in equal tranches. | All Group employees<br><br>are eligible to receive an<br><br>award through the Group<br><br>Performance Share scheme.<br><br>The Committee determined<br><br>a GPS pool of £405 million<br><br>for 2025. |
| --- | --- | --- |
| <br><br>Long Term<br><br>Incentive Plan<br><br>(Long Term Variable) | •Awards will be granted in the form of conditional rights to shares in<br><br>the Group<br><br>•The maximum LTIP opportunity is 300% of salary for the executive directors<br><br>2025 LTIP awards were granted in March 2025 at 300% of salary for executive<br><br>directors. Awards were deferred over seven years to be released in five equal<br><br>tranches, each with a one-year hold.<br><br>The 2023 LTSP award vested in full as shown on page 112. | The wider workforce are<br><br>not eligible for LTIP awards,<br><br>consistent with<br><br>market practice. |
| | |
| --- | --- |
| The GPS and LTIP are both considered variable remuneration for the purpose of regulatory and deferral requirements. Deferral levels are determined at the time of award in compliance with regulatory requirements which currently require that, for executive directors, at least 40% of the first 660,000 of total variable remuneration and 60% | of any excess to be deferred for up to four years with pro-rata vesting,<br><br>at least 50% of total variable remuneration to be delivered in shares<br><br>or equity-linked instruments and where a portion of variable<br><br>remuneration is delivered upfront and in shares it is subject to<br><br>a minimum one-year holding period. |
All values are in British Pounds.
|
Performance adjustment | Judgement on individual performance adjustment is informed by taking<br><br>into account the severity of the issue, the individual’s proximity to the<br><br>issue and the individual’s behaviour in relation to the issue. Individual<br><br>adjustment may be applied through adjustments to balanced scorecard<br><br>assessments and/or through reducing the variable remuneration outcome.<br><br>Awards are subject to clawback for a period of up to seven years after<br><br>the date of award, which may be extended to ten years where there<br><br>is an ongoing internal or regulatory investigation. The Committee<br><br>has considered the time period of up to ten years and believes that<br><br>is an appropriate length of time for performance adjustment to apply.<br><br>The application of clawback will generally be considered when:<br><br>•There is reasonable evidence of employee misbehaviour<br><br>or material error<br><br>•There is material failure of risk management at a Group, business<br><br>area, division and/or business unit level | ||||
|---|---|---|---|---|---|---|
| Performance adjustment may result in a reduction of up to 100% of the<br><br>variable remuneration opportunity for the relevant period. It can be<br><br>applied on a collective or individual basis. The application of malus will<br><br>generally be considered when:<br><br>•There is reasonable evidence of employee misbehaviour or material<br><br>error or that they participated in conduct which resulted in losses<br><br>for the Group or failed to meet appropriate standards of fitness<br><br>and propriety<br><br>•There is material failure of risk management<br><br>•The Committee determines that the financial results for a given year<br><br>do not support the level of variable remuneration awarded<br><br>•Any other circumstances where the Committee consider<br><br>adjustments should be made | 2023 Directors’ Remuneration Policy and Group remuneration policy alignment | |||||
| --- | Executive<br><br>directors | Group Executive<br><br>Committee | Other material<br><br>risk takers | Other<br><br>employees | ||
| --- | --- | --- | --- | --- | ||
| Fixed | ||||||
| Base salary<br> |
l | l | l | l | ||
| Fixed share award / Role-based allowance <br> |
l | l | l | ¡ | ||
Pension and benefits<br><br><br> |
l | l | l | l | ||
| Variable | ||||||
| Short term incentive<br> |
l | l | l | l | ||
| Long term incentive<br> |
l | l | ¡ | ¡ |
Lloyds Banking Group plc Annual Report and Accounts 2025
108
Directors’ remuneration report continued
Explore life at Lloyds Banking Group
In addition to our core reward offering, we also offer a range of
wider benefits.
| Read more<br><br>A guide to life at Lloyds Banking Group <br> |
| --- || Sharesave |
| --- |
Sharesave is a savings account combined with a share option plan,
it enables our colleagues to save for their future and then buy shares
in the Group at a discounted price.
48%
of colleagues participate in Sharesave
| Sharematch | ||
|---|---|---|
| Sharematch allows our colleagues to invest in Lloyds Banking<br><br>Group shares in a tax-efficient way. For every two shares<br><br>bought, we give three matching shares completely free up to a<br><br>maximum colleague investment of £30 per month. This allows<br><br>our colleagues to share in the success of the Group through<br><br>share price growth as well as dividend income.<br><br>59%<br><br>of colleagues participate in Sharematch | Colleague Sustainable Cars | |
| --- | ||
| Colleague Sustainable Cars is a salary sacrifice scheme that<br><br>enables colleagues to drive a brand-new Ultra Low Emission<br><br>Vehicle (ULEV) through a reduction in salary. In 2025 we<br><br>partnered with Tusker, the Group’s own specialist in salary<br><br>sacrifice schemes, and will now offer only Zero Emission<br><br>Vehicles (ZEV), further reducing our environmental impact<br><br>and improving urban air quality in support of the Group’s<br><br>sustainability ambitions.<br><br>>4,200 cars<br><br>As of 31 December 2025, the scheme has grown to 4,213 cars<br><br>since its launch in 2021, making it one of the largest in the<br><br>UK private sector | Colleague wellbeing including Bupa cover | |
| --- |
At Lloyds Banking Group, the health and wellbeing of our colleagues
is central to how we work and succeed. We want every colleague
to thrive, at work and in life, whatever their role, or personal
circumstances. Our approach focuses on creating an inclusive
culture and providing access to appropriate support for physical,
mental, and financial wellbeing, alongside tools and resources that
help colleagues make healthy, sustainable choices.
Colleagues can access a range of wellbeing resources, including our
Employee Assistance Programme, colleague wellbeing events, and
digital wellbeing tools. This includes access to the Headspace app,
which provides interactive and self‑guided content for meditation,
stress management and sleep support.
All employees are entitled to company‑paid, Bupa‑administered
Private Medical Benefit (UK Mainland) or Private Medical Insurance
(Offshore), regardless of grade. Cover includes a neurodiversity
assessment and coaching, support for gender reaffirmation, and
from 1 January 2026 access to a range of cancer screening options
for colleagues and their dependants.
Engagement with the wider workforce
The Board’s ambition is that the Group continues to be a place
where people who are passionate about our purpose wish to work.
Engagement with colleagues helps to better understand how they
remain motivated to achieve our purpose, with the skills needed
to deliver on the Group’s wider strategic objectives. In 2024 the
Board approved an evolved approach to workforce engagement,
implemented during 2025. This approach built on existing listening
activities and introduced three new forums – the People Forum,
People Consultation Forum, and Management Advisory Forum –
designed to increase colleague voice, particularly at grades where
trade union membership is low. Where appropriate, these forums
will be engaged on matters of remuneration, including how
executive remuneration aligns to the wider workforce.
In 2025, the Board held a number of colleague engagement events,
with the opportunity to hear directly from colleagues. We also
continue to engage colleagues through regular surveys and
townhalls. In 2025, the Group Chief Executive hosted two virtual
all-colleague townhall sessions, where colleagues were invited to
submit questions in advance.
The most popular questions were addressed, including those under
the ‘People and culture’ category where colleagues can submit
questions around remuneration.
Meetings were also held with our recognised trade unions to ensure
open dialogue on pay and reward. These activities collectively
support transparency and help the Board understand colleague
sentiment on remuneration, ensuring executive pay decisions align
with the wider workforce.
| Colleague engagement survey – reward |
|---|
| We ask our colleagues a simple question each year –<br><br>“Overall, I believe my reward package fairly reflects my role.”<br><br>67%<br><br>of colleagues answered this favourably (up 3 points from 2024<br><br>and 19 points above the financial services industry average) |
Lloyds Banking Group plc Annual Report and Accounts 2025
109
| Charlie Nunn | William Chalmers | |||
| 000 | 2025 | 2024 | 2025 | 2024 |
| Base salary | 1,365 | 1,170 | 871 | 844 |
| Fixed share award1 | 1,365 | 1,082 | 871 | 519 |
| Benefits | 71 | 52 | 48 | 63 |
| Pension | 205 | 176 | 131 | 127 |
| Total fixed pay | 3,006 | 2,480 | 1,921 | 1,553 |
| Group Performance Share2 | 1,425 | 1,127 | 909 | 812 |
| Long-term incentive3,4 | ||||
| –Value excluding share price appreciation | 1,704 | 1,687 | 1,228 | 1,216 |
| –Share price appreciation | 1,272 | 875 | 917 | 631 |
| Total variable pay | 4,401 | 3,689 | 3,054 | 2,659 |
| Other remuneration5 | – | – | 1 | – |
| Total remuneration | 7,407 | 6,169 | 4,976 | 4,212 |
| Less: Performance adjustment6 | – | – | – | – |
| Total remuneration less performance adjustment | 7,407 | 6,169 | 4,976 | 4,212 |
All values are in British Pounds.
1The fixed share award is part of fixed remuneration and is not subject to any performance conditions (see page 106).
2Awards for Charlie Nunn and William Chalmers will be made in March 2026 in a combination of cash and shares.
3The 2023 Long Term Share Plan (LTSP) vesting (see page 112) at 100% was confirmed by the Remuneration Committee at its meeting on 12 February 2026. The total number of shares
vesting will be 3,283,896 for Charlie Nunn and 2,366,848 for William Chalmers. The average share price between 1 October 2025 and 31 December 2025 of 90.64 pence has been used
to indicate the value. The shares were awarded in 2023 based on a share price of 51.901 pence. The amount of the long-term incentive vesting attributable to share price appreciation is
shown in the table above.
4The long-term incentive figures for 2024 have been adjusted to reflect the vesting share price of 71.42 pence instead of the average price of 55.969 pence reported in the 2024 report.
5Other remuneration payments comprise income from all-employee share plans, which arises through employer matching or discounting of employee purchases.
6No malus or clawback provisions were applied in relation to the executive directors during the year.
| Charlie Nunn | William Chalmers | |
| Pension/Benefits | ||
| Pension | 204,805 | 130,630 |
| Car or car allowance1 | 14,718 | 12,000 |
| Flexible benefits payments | 54,615 | 34,835 |
| Private medical insurance | 1,205 | 1,205 |
| Subtotal for Total Benefits less pension | 70,538 | 48,040 |
All values are in British Pounds.
1For Charlie Nunn this includes the benefit associated with the Colleague Sustainable Car Scheme (salary sacrifice) and for William Chalmers this includes a car allowance.
Defined benefits pension arrangements (audited)
There are no executive directors with defined benefit pension entitlements.
Payments for loss of office (audited)
No payments for loss of office were made in 2025.
Payments within the reporting year to past directors (audited)
There were no payments made to past directors in 2025.
External appointments
No executive director served as a non-executive director on the board of another company in 2025.
Lloyds Banking Group plc Annual Report and Accounts 2025
110
Directors’ remuneration report continued
2025 Group balanced scorecard
The balanced scorecard provides transparency on how our
executive directors’ remuneration outcomes for 2025 GPS directly
align with our performance, strategy and stakeholder experience.
Strong performance across both financial and non-financial
measures has resulted in an overall mechanical outcome of 81.9%
as set out in the scorecard assessment table below.
For 2025, any impact relating to motor finance provisions on
financial metrics was excluded, to allow the Committee to set
robust targets aligned to the financial planning and budgeting
process, as described in our 2024 directors’ remuneration report.
Instead, the Committee would assess and determine an appropriate
impact to the scorecard and resulting executive directors 2025
annual GPS outcomes.
In assessing the impact of the provision on the Group’s financial
performance with due consideration to the fact that it relates to
issues that took place prior to the appointment of the current
management team, the Committee has decided to exercise its
discretion to adjust the BSC to a more appropriate outcome of
74.0%.
Commentary on non-financial performance is described on page 111.
| Our 2025 Group balanced scorecard |
|---|
| Financial (60%) | Profit after tax1 | 4,054m | £5,712m | £5,428m | 87% | 21.8% |
|---|---|---|---|---|---|---|
| Return on tangible equity1 | 11% | 15.5% | 14.8% | 88% | 22.1% | |
| Operating costs2 | 9,411m | £9,132m | £9,288m | 58% | 5.8% | |
| Non-financial (40%) | Groupcustomer dashboard | 25 | 100 | 65 | 65% | 13.0% |
| Reducing ouroperationalcarbon emissions3 | 27% | 36% | 39% | 100% | 5.0% | |
| Increasing our gender& ethnic representation in executive roles4 | 36.0% | 42.0% | 40.4% | 80% | 3.00% | |
| 14.4% | 16.1% | 17.5% | 100% | 3.75% | ||
| Culture andcolleague engagement | 60% | 75% | 75% | 100% | 7.5% | |
| Mechanical balanced scorecard outcome | 81.9% | |||||
| Discretionary Committee adjustment | -7.9 | |||||
| Revised balanced scorecard outcome | 74.0% | |||||
| 1Profit after tax and return on tangible equity measures exclude the 800 million provision in 2025 in relation to motor finance commission arrangements.2Operating costs exclude remediation and in-year GPS expense. |
All values are in British Pounds.
| Charlie Nunn – Group Chief Executive | ||||
|---|---|---|---|---|
| Maximum award | £1,925,533 | |||
| Group balanced scorecard outcome | 74.0% | |||
| Annual GPS award | £1,424,895 | |||
| •Continued delivery of the Group’s strategy, financial targets,<br><br>investment priorities, and market share growth in priority areas,<br><br>which will set the Group up for success in 2026, the final year of the<br><br>first strategic phase<br><br>•Demonstrated strong leadership throughout another challenging<br><br>year for consumers, proactively managing risk issues and the<br><br>strategic direction of the Group<br><br>•Worked closely with the UK Regulators and UK Government on<br><br>several key areas (e.g. motor finance and UK growth ambitions)<br><br>•Group financials remain robust, with the Group delivering 2025 and<br><br>on-track for 2026, driven by strong income performance, strategic<br><br>delivery, and effective risk management – contributing to the<br><br>strong share price performance in 2025 | William Chalmers – Chief Financial Officer | |||
| --- | --- | |||
| Maximum award | £1,228,156 | |||
| Group balanced scorecard outcome | 74.0% | |||
| Annual GPS award | £908,835 | |||
| •Played a critical role in the execution of the Group’s strategy and<br><br>maintained positive engagement with investors and regulators<br><br>on the Group’s performance and strategic direction<br><br>•Strong financial and risk management, delivering the plan<br><br>throughout 2025 and on-track for 2026 commitments, with<br><br>continued focus on cost and investment management, alongside<br><br>net interest income and other operating income growth<br><br>•Sustained strength in financial performance and strong capital,<br><br>funding, and balance sheet growth, enabling strong share<br><br>price performance in 2025, a 15% increase in dividend and<br><br>an increased buyback |
Lloyds Banking Group plc Annual Report and Accounts 2025
111
Group balanced scorecard non-financial measures performance in 2025
The table below outlines the Committee’s assessment of the non-financial elements of the scorecard.
| Non-financial measures (40% weighting) commentary |
| --- || Measure | Link to<br><br>strategy | Link to<br><br>stakeholder | Commentary |
| --- | --- | --- | --- |
| Group customer<br><br>dashboard<br><br>20% weighting<br><br>Our assessment of how<br><br>effectively we are serving<br><br>customers across our brands,<br><br>products and services.<br><br>It brings together survey based<br><br>measures (such as net promoter<br><br>score and customer satisfaction)<br><br>and operational indicators<br><br>(including digital engagement<br><br>and performance of key<br><br>customer journeys). | <br><br> | 
| •The 2025 dashboard contains 135 measures spanning products, services,<br><br>customer segments and business areas, with 46 driving the overall outcome<br><br>within the Group balanced scorecard<br><br>•The 2025 score is 65, on a 0-100 scale, with the score moving up or down<br><br>depending on how many measures exceed or fall short of stretching targets<br><br>at an aggregated level. This means less favourable performance in some<br><br>areas can be offset by strong performance in others, and vice versa<br><br>•We have made good progress on our strategic transformation, with<br><br>performance on 64% of measures improved or maintained year-on-year.<br><br>However, we have seen an increase in customer complaints reflective of<br><br>broader market changes and a small decline in our net promoter scores with<br><br>customers telling us that there is more we can do to improve mobile app<br><br>journeys and experiences, finding support when needed and making their<br><br>money work harder for them |
| Reducing our<br><br>operational carbon<br><br>emissions<br><br>5% weighting<br><br>Reported vs 2018/2019 baseline.<br><br>Includes Scope 1, Scope 2 and<br><br>Scope 3 carbon emissions,<br><br>excluding international travel.<br><br>Reporting year is October to<br><br>September. | | 
| •A 39% reduction has been achieved year to date from our 2018/19 baseline,<br><br>demonstrating continued strong progress in reducing the Group’s<br><br>operational carbon footprint<br><br>•Performance has been supported by improved energy management<br><br>practices, investment in more efficient office spaces and colleagues making<br><br>conscious decisions to travel less frequently and in more sustainable, lower<br><br>emission modes of transport<br><br>•These actions underpin our pathway to net zero carbon operations by 2030<br><br>and our ambition to reduce energy use by 50% |
| Increasing our<br><br>gender and ethnic<br><br>representation in<br><br>executive roles<br><br>7.5% weighting<br><br>Executive roles include grade X<br><br>colleagues only, subject to local<br><br>laws and regulation. | | <br><br>
| •We have seen an increase in women in executive roles to 40.4% during<br><br>2025. This is against our ambition to achieve 45% to 55% women in<br><br>executive roles by year end 2030<br><br>•Throughout 2025, we also saw continued improvement in the<br><br>representation of Black, Asian and Minority Ethnic colleagues in executive<br><br>positions. At year end, 17.5% of executive roles were held by Black, Asian<br><br>and Minority Ethnic colleagues, representing strong progress toward our<br><br>ambition of reaching 19% to 22% by 2030 |
| Culture<br><br>and colleague<br><br>engagement<br><br>7.5% weighting<br><br>Our employee engagement<br><br>index score. | | | •Our employee engagement index (EEI) encompasses pride and satisfaction<br><br>working for the Group, and also recommending the Group as a great place<br><br>to work<br><br>•Our 2025 EEI results highlight our supportive and inclusive culture, alongside<br><br>the opportunities for learning, development and internal mobility that shape<br><br>colleagues’ experiences at the Group. A key factor driving the year-on-year<br><br>improvement in engagement was colleagues’ increased confidence in our<br><br>reward and benefits package, which many cite as an important reason for<br><br>staying with the Group || Measuring customer experience<br><br>across five priority pillars. | | | | | | Across the Group’s<br><br>trusted brands |
| --- | --- | --- | --- | --- | --- | --- |
| | How did<br><br>customers<br><br>feel about the<br><br>brand? | Were our<br><br>propositions<br><br>compelling? | Did we<br><br>deliver on<br><br>service<br><br>expectations? | Did we<br><br>attract new<br><br>customers? | Did we<br><br>deepen<br><br>relationships? | |
| | Link to<br><br>strategy | Link to<br><br>strategy | Link to<br><br>strategy | Link to<br><br>strategy | Link to<br><br>strategy | |
| | | | | | | See page 07 |
Lloyds Banking Group plc Annual Report and Accounts 2025
112
Directors’ remuneration report continued
2023 Long Term Share Plan
A Long Term Share Plan award was granted in relation to 2022
performance under the terms of the previous Policy.
It is an important feature of the LTSP that performance is assessed
and appropriately recognised upfront in the award size during the
‘pre-grant test’.
A final ‘pre-vest test’ of financial underpins and consideration
of four key questions takes place prior to vesting to ensure
performance over the period has been sustainable. The Committee
has completed the full assessment and there is nothing known now
which, had it been known at the time of grant, would have changed
the initial award levels.
The outcome of the ‘pre-vest test’ of both financial underpin
performance and consideration of the four key questions
is shown below.
| Pre-vest test – underpins |
| --- || Financial (100%) | CET1 ratio – Group CET1 ratio above the guided management target each year<br><br>(c.13.5% by 2024 and c.13.0% by 2026), including all regulatory buffers | 2023 | 13.7% | Met |
| --- | --- | --- | --- | --- |
| | | 2024 | 13.5% | |
| | | 2025 | 13.2% | |
| | RoTE – Group RoTE exceeds the average for UK peer banks1 over the<br><br>three years. Average RoTE for peer banks: 11.9% (2023), 11.6% (2024)<br><br>and 11.8% (20252) | 2023 | 15.8% | Met |
| | | 2024 | 12.3% | |
| | | 2025 | 12.9% | |
| | Ordinary dividend – Increased ordinary dividend payments over the<br><br>plan period (subject to any further sector-wide regulatory constraints).<br><br>Starting point in 2022 was a dividend of 2.40p | 20233 | 2.76p | Met |
| | | 20243 | 3.17p | |
| | | 20253 | 3.65p | |
| | Award (% maximum) vesting | | | 100% || 1Peers: Barclays Group, HSBC Holdings, NatWest Group, Santander UK and Virgin Money UK.<br><br>22025 peer bank average based on latest company published consensus as of 5 February 2026 where full-year results not available. In October 2024,<br><br>Nationwide completed its acquisition of Virgin Money; therefore no Virgin Money UK 2025 RoTE available. Instead, 2024 RoTE has been used as a proxy.<br><br>3Dividend shown includes both interim and final for the respective performance year. For 2025, this is the proposed final dividend. |
| --- || Pre-vest test – additional consideration by the Committee | | |
| --- | --- | --- |
| In conjunction with the assessment of performance against the<br><br>financial underpins above, the Committee considered the four<br><br>questions below to satisfy itself that there is nothing known now<br><br>which, had it been known at the time of grant, would have<br><br>changed the initial award levels: | | The Group continues to make meaningful progress in supporting<br><br>the UK’s transition to a low carbon economy. Our progress is<br><br>monitored through updates and deep dives at a Group Executive<br><br>Committee and Board level providing visibility of achievements,<br><br>learnings, and the external dependencies shaping the Group’s<br><br>transition pathway and performance. Progress against our<br><br>ambitions, targets, and commitments can be found on pages 35<br><br>to 49, and in our sustainability report . <br><br><br>During the 2023 to 2025 performance period, there have been no<br><br>serious external conduct matters or severe reputational damage.<br><br>While there continues to be uncertainty around motor finance<br><br>issue, the Committee has determined that it should not impact<br><br>the 2023 LTSP vesting outcome.<br><br>The Committee concluded that performance considered in the<br><br>‘pre-grant test’ has been sustainable and therefore no discretion<br><br>has been applied. The 2023 LTSP awards will vest at 100%,<br><br>as the outcome represents a fair reflection of performance<br><br>during the period. |
| Q | Has the Bank lived up to its ambition to be the Best Bank<br><br>for Customers? | |
| Q | Do the Group’s financial results and capital position<br><br>adequately reflect risk, conduct and any other non-financial<br><br>considerations, including ESG? | |
| Q | Has the Group made meaningful progress in supporting the<br><br>UK’s transition to net zero? | |
| Q | Has the Group suffered a serious conduct event or has severe<br><br>reputational damage arisen from the Group not living<br><br>its values? | |
| A | The Group has maintained its strong capital position and<br><br>delivery for customers, communities and shareholders since<br><br>making awards in 2023. Risk management is essential to<br><br>our business model and strategy, helping us to embrace<br><br>opportunities responsibly and drive sustainable growth for<br><br>the Group. | |
In determining the final vesting outcome of the 2023 Long Term
Share Plan, the Committee carefully considered alignment with
shareholder experience and whether adjustments were required
for windfall gains.
Awards were granted in March 2023 at 51.901 pence, around 10%
higher than awards granted in March 2022.
The award price is considered a fair reflection of the share price in
the 12 months leading up to grant. The share price used to calculate
indicative value is 90.64 pence, detailed on page 109. While 75%
higher, the Committee considers it reasonably represents
performance over the period.
The Committee concluded there was no windfall gain over the
period and as such no adjustment was required.
Lloyds Banking Group plc Annual Report and Accounts 2025
113
| Relative importance of spend on pay |
|---|
The graphs below illustrate the total remuneration of all Group employees compared with returns of capital to shareholders in the form of
dividends and share buyback.
| Dividend and share buyback1<br><br>£bn |
|---|
| --- |
| 2025 |
|---|
| 2024 |
12025: Proposed ordinary dividend in respect of the financial year ended 31 December
2025, partly paid in 2025 and partly to be paid in 2026 and share buyback.
2024: Ordinary dividend in respect of the financial year ended 31 December 2024,
partly paid in 2024 and partly paid in 2025 and share buyback.
| Salaries and performance-based compensation2<br><br>£bn | | --- || 0% | | --- |
| 2025 |
|---|
| 2024 |
2Performance-based compensation includes expense for the following plans: Group
Performance Share (2025: £412 million, 2024: £368 million), Long Term Incentive Plan,
Long Term Share Plan and Executive Group Ownership Share (2025: £24 million,
2024: £28 million), Executive Share Awards (2025: £0.00 million, 2024: £0.03 million).
For the 2025 performance year, the value of awards was £405 million for Group
Performance Share and £26 million for Long Term Incentive Plan.
Comparison of returns to shareholders and Group Chief Executive total remuneration
The required chart below shows the historical total shareholder return (TSR) of Lloyds Banking Group plc compared with the FTSE 100.
The FTSE 100 Index has been chosen as it is a widely recognised equity index of which Lloyds Banking Group plc has been a constituent
throughout this period.
| Historical TSR Performance<br><br>Growth in the value of a hypothetical £100 holding since 31 December 2015 (to 31 December 2025) | | --- || Lloyds Banking Group | FTSE 100 Index | | --- | --- || Value of £100 invested on 31 December 2015 | 250 | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 200 | | | | | | | | | | | | | | 150 | | | | | | | | | | | | | | 100 | | | | | | | | | | | | | | 50 | | | | | | | | | | | | | | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Dec<br><br>2015 | Dec<br><br>2016 | Dec<br><br>2017 | Dec<br><br>2018 | Dec<br><br>2019 | Dec<br><br>2020 | Dec<br><br>2021 | Dec<br><br>2022 | Dec<br><br>2023 | Dec<br><br>2024 | Dec<br><br>2025 |
| Group Chief Executive remuneration over the last ten years | | --- || Group Chief<br><br>Executive | Sir António Horta-Osório1 | | | | | | William<br><br>Chalmers2 | Charlie Nunn3,4 | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Year | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2021 | 2021 | 2022 | 2023 | 2024 | 2025 | | GCE single figure of<br><br>remuneration £000 | 5,791 | 6,434 | 6,544 | 4,424 | 3,604 | 2,444 | 819 | 5,523 | 3,767 | 3,681 | 6,169 | 7,407 | | Annual bonus/GPS<br><br>payout (% of<br><br>maximum<br><br>opportunity) | 77% | 77% | 67.6% | n/a | n/a | 57.8% | 78.2% | 57.8% | 84.1% | 80.3% | 68.1% | 74.0% | | Long-term incentive<br><br>vesting (% of<br><br>maximum<br><br>opportunity) | 55% | 66.3% | 68.7% | 49.7% | 33.75% | 41.8% | n/a | n/a | n/a | n/a | 100% | 100% |
1Sir António Horta-Osório independently requested that he be withdrawn from consideration for a Group Performance Share award in 2019 and 2020. There were no GPS awards for
2020 performance.
2William Chalmers was the Interim Group Chief Executive from 1 May 2021 until 15 August 2021, remuneration in the table above is for this period.
3Charlie Nunn succeeded Sir António Horta-Osório as Group Chief Executive with effect from 16 August 2021 and the single figure total remuneration for 2021 includes a one-off buy-out
of £4.231 million.
4The single figure of remuneration figure for 2024 has been adjusted from what was reported in the 2024 report as per detail set out on page 109.
Lloyds Banking Group plc Annual Report and Accounts 2025
114
Directors’ remuneration report continued
|
Single total figure of remuneration and shareholding for Chair and non-executive directors (audited) | ||||
|---|---|---|---|---|---|
| Fees (000) | Benefits (000)4 | Total (000) | Total<br><br>shareholding5 | ||
| 2025 | 2025 | 2025 | at 31 December<br><br>2025 | ||
| Chair and non-executive directors | |||||
| Sir Robin Budenberg | 750 | 1 | 751 | 2,500,000 | |
| Nathan Bostock | 359 | 4 | 363 | 430 | |
| Sarah Legg | 254 | 6 | 260 | 200,000 | |
| Amanda Mackenzie | 239 | 3 | 242 | 63,567 | |
| Harmeen Mehta | 117 | 7 | 124 | 20,000 | |
| Cathy Turner | 285 | 3 | 288 | 424,113 | |
| Chris Vogelzang1 | 77 | 1 | 78 | 80,500 | |
| Scott Wheway2 | 407 | 18 | 425 | 168,356 | |
| Catherine Woods3 | 264 | 12 | 276 | 124,262 |
All values are in British Pounds.
1Chris Vogelzang was appointed on 16 June 2025.
2 Scott Wheway retired on 31 October 2025. The number of shares shown is as of the day of leaving.
3The value of benefits in respect of 2024 includes the correction of previous tax treatment from 2023. Excluding the correction, the benefits figure for 2024 is £7,047.
4Benefits for the non-executive directors relates to reimbursement for expenses incurred in the course of duties. The Chair’s benefits also include private medical insurance.
Non-executive directors do not receive variable pay.
5Shares owned outright. Includes holdings of any Person Closely Associated. There has been no change in shareholdings from 31 December 2025 to 13 February 2026. Directors are not
permitted to enter into any hedging arrangements in relation to share awards. No director uses shareholding as collateral.
|
Directors’ share interests and share awards (audited) | ||||||
|---|---|---|---|---|---|---|---|
| Number of shares | Number of options | Total shareholding | |||||
| Owned outright1 | Unvested<br><br>subject to<br><br>continued<br><br>employment | Unvested<br><br>subject to<br><br>performance | Unvested<br><br>subject to<br><br>continued<br><br>employment | Vested<br><br>unexercised | Totals at<br><br>31 December<br><br>20252 | ||
| Executive directors3 | |||||||
| Charlie Nunn | 10,140,467 | 2,987,208 | 20,208,631 | 2,599,919 | – | 35,936,225 | |
| William Chalmers | 10,740,854 | 3,858,710 | 14,565,244 | 39,701 | – | 29,204,509 |
1Includes holdings of any Person Closely Associated, of which there are currently none.
2There has been no change in shareholdings from 31 December 2025 to 13 February 2026.
3Directors are not permitted to enter into any hedging arrangements in relation to share awards. No director uses shareholding as collateral.
Lloyds Banking Group plc Annual Report and Accounts 2025
115
|
Outstanding share plan interests (audited) | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| At 1 January<br><br>2025 | Granted/<br><br>awarded | Vested/<br><br>released/<br><br>exercised | Lapsed | At 31<br><br>December<br><br>2025 | Exercise<br><br>price | Exercise periods | ||||
| From | To | Notes | ||||||||
| Charlie Nunn | ||||||||||
| LTSP 2022 – 2024 | 3,588,364 | – | 717,672 | – | 2,870,692 | 2 | ||||
| LTSP 2023 – 2025 | 3,283,896 | – | – | – | 3,283,896 | 2 | ||||
| LTIP 2024 – 2026 | 10,376,712 | – | – | – | 10,376,712 | 2 | ||||
| LTIP 2025 – 2027 | – | 6,548,023 | – | – | 6,548,023 | 2,3,4 | ||||
| Deferred GPS awarded in 2023 (2022 GPS) | 335,442 | – | 218,926 | – | 116,516 | 5 | ||||
| Deferred GPS awarded in 2025 (2024 GPS) | – | 788,076 | 788,076 | – | – | 6,7 | ||||
| Share Buy-Out | 1,368,990 | – | 1,368,990 | – | – | – | 11/03/2025 | 10/03/2030 | 1 | |
| 1,369,012 | – | – | – | 1,369,012 | – | 11/03/2026 | 10/03/2031 | 1 | ||
| 891,217 | – | – | – | 891,217 | – | 11/03/2027 | 10/03/2032 | 1 | ||
| 339,690 | – | – | – | 339,690 | – | 11/03/2028 | 10/03/2033 | 1 | ||
| William Chalmers | ||||||||||
| GOS 2020 – 2022 | 1,291,908 | – | 430,636 | – | 861,272 | 2 | ||||
| LTSP 2021 – 2023 | 1,237,872 | – | 309,468 | – | 928,404 | 2 | ||||
| LTSP 2022 – 2024 | 2,586,292 | – | 517,258 | – | 2,069,034 | 2 | ||||
| LTSP 2023 – 2025 | 2,366,848 | – | – | – | 2,366,848 | 2 | ||||
| LTIP 2024 – 2026 | 7,478,949 | – | – | – | 7,478,949 | 2 | ||||
| LTIP 2025 – 2027 | – | 4,719,447 | – | – | 4,719,447 | 2,3,4 | ||||
| Deferred GPS awarded in 2023 (2022 GPS) | 132,703 | – | 132,703 | – | – | 5 | ||||
| Deferred GPS awarded in 2025 (2024 GPS) | – | 568,000 | 568,000 | – | – | 6,7 | ||||
| 2021 Sharesave | 17,177 | – | 17,177 | – | – | 39.40p | 01/01/2025 | 30/06/2025 | ||
| 2023 Sharesave | 20,171 | – | – | – | 20,171 | 38.55p | 01/01/2027 | 30/06/2027 | ||
| 2024 Sharesave | 19,530 | – | – | – | 19,530 | 52.35p | 01/01/2028 | 30/06/2028 |
1When Charlie Nunn joined the Group on 16 August 2021 as Group Chief Executive and executive director, he was granted deferred share awards and deferred cash to replace unvested
awards from his previous employer, HSBC. Options vested on 10 March 2025 and Charlie Nunn exercised the options on 21 March 2025, acquiring 725,564 shares, after the settlement
of income tax and national insurance contributions. The shares received are subject to holding periods that mirror those of the replaced HSBC shares, with 288,328 shares having no
holding period and 437,236 a 12-month holding period.
2All GOS, LTSP and LTIP awards have a three-year performance/underpin period ending 31 December. Awards were made in the form of conditional rights to free shares.
3In line with regulatory requirements, LTIPs awarded during 2025 were ineligible for dividend equivalents. In accordance with the 2023 Directors’ Remuneration Policy, the LTIP award
was determined at 300% of salary for Charlie Nunn and William Chalmers. The number of shares to be granted was determined by taking the average share price over the five days
prior to grant (25 February 2025 to 3 March 2025), which was 71.48 pence and applying a discount based on Lloyds Banking Group’s expected dividend yield for the vesting period
(54.14 pence).
42025 LTIP vesting is subject to performance conditions applicable for the first three years from grant as detailed on page 132 of the 2024 directors’ remuneration report. Each year the
Remuneration Committee will monitor the Group’s progress in relation to the performance conditions.
5The third tranche of the 2022 GPS deferred award, vested on 5 March 2025. The closing market price of Lloyds Banking Group shares on that date was 73.08 pence. The awards were
settled in shares net of tax, with the resulting shares subject to a one-year holding period.
6The 2024 GPS is delivered half in an immediately vested share award with shares subject to a holding period until March 2026, and half paid in cash. The value of the shares awarded
in respect of the GPS granted in March 2025 was £563,316 (788,076 shares) for Charlie Nunn; and £406,007 (568,000 shares) for William Chalmers. The awards are not subject to
performance conditions. The number of shares granted was determined by taking the average Lloyds Banking Group share price over the five days prior to grant (25 February 2025
to 3 March 2025), which was 71.48 pence.
7The 2024 GPS share award vested on 5 March 2025. The closing market price of the Lloyds Banking Group shares on that date was 73.08 pence. The award was settled in shares net
of tax, with the resulting shares subject to a one-year holding period.
|
Outstanding cash awards (audited) | |||||
|---|---|---|---|---|---|---|
| At 1 January<br><br>2025<br><br>£ | Granted/<br><br>awarded<br><br>£ | Vested /<br><br>released /<br><br>exercised<br><br>£ | At 31<br><br>December<br><br>2025<br><br>£ | Notes | ||
| Charlie Nunn | ||||||
| Deferred GPS cash awarded in 2023 (2022 GPS) | 174,096 | – | 113,625 | 60,471 | 1 | |
| William Chalmers | ||||||
| Deferred GPS cash awarded in 2023 (2022 GPS) | 68,874 | – | 68,874 | – | 1 |
1Half of the deferred portion of the 2022 GPS awards are delivered in cash.
2£2,000 of 2024 GPS was delivered in cash in March 2025 for both executive directors. Half of the remaining 2024 GPS was delivered in cash on 20 June 2025. Charlie Nunn received
£561,316 and William Chalmers received £404,007.
Lloyds Banking Group plc Annual Report and Accounts 2025
116
Directors’ remuneration report continued
Shareholding requirement
To further strengthen the alignment between executive directors’
interests and those of our shareholders, executives are expected to
build and maintain a significant shareholding in the Group in direct
proportion to their salary.
The minimum shareholding requirements applicable to executive
directors at 31 December 2025 are 400% of salary for the Group
Chief Executive and 300% of salary for the Chief Financial Officer.
Executive directors have five years from the date of appointment
to meet the requirement. In the event that exceptional individual
circumstances exist resulting in an executive not being able to
comply with the Policy, the Remuneration Committee will consider
whether an exception should apply.
Charlie Nunn met the requirement ahead of the required date
of 15 August 2026 and currently holds 656% of salary in Group
shares at 31 December 2025. This is an increase from 344%
which was published in the 2024 directors’ remuneration report.
William Chalmers met the requirement by 2 June 2024 and currently
holds 1128% of salary in Group shares at 31 December 2025,
significantly exceeding his shareholding requirement. This is an
increase from 656% which was published in the 2024 directors’
remuneration report.
Increase in shareholding requirements
In recognition of the increased variable opportunity offered by the
proposed 2026 Directors’ Remuneration Policy, the shareholding
requirement applicable to the GCE will increase from 400%
to 500% of salary and from 300% to 450% for the CFO.
Post-employment shareholding requirement
Executive directors are contractually bound to a post-employment
shareholding requirement of two years at a level equal to the lower
of the shareholding requirements immediately prior to departure
or the actual shareholding on departure. The post-employment
requirement will be maintained through self-certification,
with the Committee keeping this approach under review.
None of those who were directors at the end of the year had
any other interest in the capital of Lloyds Banking Group plc
or its subsidiaries.
| Shareholding requirement | | --- || £5.50m | | --- |
| Charlie Nunn<br><br>Actual: 656% of salary<br><br>Requirement: 400%<br><br>of salary by 15/08/26 | | --- || 31/12/25 | | --- | | 31/12/24 || 1 | | --- || £2.63m | | --- |
| 31/12/25 | ||
|---|---|---|
| 31/12/24 | William Chalmers<br><br>Actual: 1128% of salary<br><br>Requirement: 300%<br><br>of salary by 02/06/24 | |
| --- |
| 1 | | --- || Requirement | l | Actual2 | l | Unvested subject to<br><br>continued employment3 | l | Unvested subject<br><br>to performance4 | | --- | --- | --- | --- | --- | --- | --- |
12024 shareholding has been recalculated using the average share price for the period 1 January 2025 to 31 December 2025 (77.42 pence).
2Calculated using the average share price for the period 1 January 2025 to 31 December 2025 (77.42 pence). Includes ordinary shares, net of tax where appropriate, acquired through the
vesting of the deferred Group Performance Share plan, fixed share awards as the shares have no performance conditions, awards in the form of options which have vested but have not
been exercised, unvested performance tested Executive Group Ownership Share awards and Long Term Share Plan awards, shares held in the Share Incentive Plan (SIP) Trust, i.e. Free,
Partnership, Matching and Dividend shares which are no longer subject to forfeiture, as defined in the SIP Rules. Shares held by persons closely associated, broadly meaning spouse
or partner and children, are also included, of which there are currently none.
3Unvested shares subject to continued employment do not count towards the shareholding requirement and are shown after deduction of estimated income tax and national insurance.
4Unvested shares subject to performance are shown with an assumed 100% vesting outcome and after deduction of estimated income tax and national insurance. The final vesting
outcome could range between 0-100%. Shares subject to performance are also subject to continued employment.
Lloyds Banking Group plc Annual Report and Accounts 2025
117
Gender and ethnicity pay
The publication of our Gender and Ethnicity Pay Gap report each
year is an opportunity to pause and reflect on the progress we’re
making towards our inclusion ambitions. Helping Britain Prosper
means creating opportunity for everyone, and inclusion is how we
make that happen. This year, we’re pleased to share that we’ve
continued to make encouraging strides.
| Read more<br><br>Gender and Ethnicity Pay Gap Report<br><br>April 2024 to April 2025 <br> |
| --- || Gender pay gap – April 2024 to April 2025 |
| --- |
| Progress has continued to close the mean Gender pay gap; this has<br><br>reduced 1.0 percentage point to 24.9%. As of April 2025, 38.8% of<br><br>executive roles were held by women.<br><br>Overview<br><br>The Gender pay gap reflects the different representation of men and<br><br>women across levels in the organisation. This does highlight a clear<br><br>opportunity to keep strengthening career progression and<br><br>representation, with a particular focus on supporting women to<br><br>progress into more senior roles.<br><br>What the data shows<br><br>Continued progress has been made in closing the mean Gender pay<br><br>gap, with the gap reducing by 1.0 percentage point to 24.9%. This<br><br>improvement demonstrates that our actions are moving us in the right<br><br>direction, however, we remain committed to accelerating our progress.<br><br>Our commitments to gender inclusion<br><br>Integrating inclusion into the way we run our business has been core to<br><br>our success to date. Holding our Group executives to account is<br><br>paramount. Our data led approach, which is grounded in key metrics<br><br>and insight gathered through colleague feedback, allows our business<br><br>area executives to identify opportunities to accelerate progress and to<br><br>also address any gaps. How our executives bridge identified<br><br>opportunities, forms a core part of performance conversations.<br><br>We take active steps to drive inclusion through all stages of our<br><br>colleague lifecycle from recruitment, to progression and retention.<br><br>In 2025 we set a new ambition to reach and maintain a gender balance<br><br>of between 45% to 55% in executive roles by the end of 2030.<br><br>Setting this ambition for our leadership team is important in providing<br><br>role modelling and inspiration for our colleagues and ensures more<br><br>inclusive strategic decision making. It also supports greater innovation<br><br>and adaptability, both vital as we continue to transform our business<br><br>for the future.<br><br>At the end of 2025, the number of women in executive level roles (X+)<br><br>stands at 40.4%, putting us on track to meet our 2030 ambitions.<br><br>We proudly co-sponsor the Government-backed FTSE Women Leaders<br><br>Review which sets recommendations to increase the representation of<br><br>women on boards and in leadership. We achieved all the Review’s<br><br>recommendations in 2023, two years ahead of the deadline. In 2025<br><br>we achieved 13th place.<br><br>In 2025, our continued commitment has once again been recognised<br><br>externally, with our inclusion in the Times Top 50 Employers for<br><br>Gender Equality for the 14th consecutive year. |
| Mean pay gap<br><br>% || Ethnicity pay gap – April 2024 to April 2025 |
| --- |
| Continued progress has been made with the mean gap reducing by 1.3<br><br>percentage points from 3.0% to 1.7% from last year.<br><br>Overview<br><br>We remain committed to publishing our Ethnicity pay gap report on a<br><br>voluntary basis. We have chosen to publish for the past six years<br><br>because we recognise the importance of transparency in encouraging<br><br>focus and inspiring purposeful, action-led change. It helps to hold us<br><br>accountable to delivering on our commitment and we believe it will<br><br>lead to sustainable positive change for our people.<br><br>What the data shows<br><br>As at April 2025, 91.5% of our colleagues have chosen to disclose their<br><br>ethnicity with us, an encouraging increase from 88.2% in April 2023.<br><br>Whilst we have more to do to close the gap, we have seen<br><br>improvements within the representation of our senior leadership<br><br>teams which has had a significant impact on gap closure to date.<br><br>Our commitments to ethnic diversity<br><br>In an increasingly multicultural society, we can only truly be the best<br><br>bank for our customers if our workforce reflects the diversity of the UK<br><br>population and ultimately our customers. Our goal is to increase our<br><br>workforce diversity and unlock the full potential of our Black, Asian,<br><br>and Minority Ethnic colleagues.<br><br>We remain guided by the principles of our Race Action Plan, launched<br><br>in 2020, which focuses on driving cultural change, improving<br><br>recruitment and progression across the Group, and setting out the<br><br>steps we are taking to deliver sustainable change for our people,<br><br>customers, and the communities we serve.<br><br>In 2025, we reset our UK ambition: to increase representation of Black,<br><br>Asian, and Minority Ethnic colleagues in executive roles to between<br><br>19% and 22%, and to grow Black representation in executive positions<br><br>to between 3.5% and 4% by the end of 2030.<br><br>We have seen steady growth in ethnic representation across the<br><br>Group, particularly at senior levels. To accelerate this progress, we<br><br>launched a series of Regional Thought Leadership and Networking<br><br>events. These are designed to build external professional communities<br><br>with the skills, insights, and experience aligned to our business needs,<br><br>centred around our strategic locations. This approach helps create a<br><br>diverse talent pool for today and the future.<br><br>Recognising opportunities to improve the progression of colleagues from<br><br>Black heritage backgrounds, we continue to invest in career initiatives.<br><br>These focus on understanding colleagues’ career experiences and<br><br>aspirations, while promoting existing support that is available to all our<br><br>colleagues such as mentorship and sponsorship opportunities.<br><br>In addition, we remain committed to supporting Black business<br><br>communities through our Black Entrepreneur Programme, where trust<br><br>has more than doubled from 36% in 2022 to 84% today.<br><br>At the 2025 Ethnicity Awards we were once again recognised overall<br><br>‘Outstanding Employer’ for the fourth time since the launch of the<br><br>awards in 2018. |
| Mean pay gap<br><br>% |
| 2025 | ||
|---|---|---|
| 2024 | 2025 | |
| --- | ||
| 2024 |
Lloyds Banking Group plc Annual Report and Accounts 2025
118
Directors’ remuneration report continued
|
Percentage change in remuneration levels | |||||
|---|---|---|---|---|---|---|
| The table below sets out the change in the directors’ base salary/fees, taxable benefits and annual bonus compared with the change in<br><br>our UK-based colleagues’ pay. Lloyds Banking Group plc is not an employing entity, and therefore the disclosure below is made on a<br><br>voluntary basis to compare any change with all employees of the wider Group based in the UK. This population has been chosen as the<br><br>majority of our workforce are based in the UK and is considered to be the most appropriate group of employees. The same population is<br><br>used for the purposes of the Chief Executive Officer pay ratio disclosure on page 119 of the report. | ||||||
| % change | 2020 to 2021 | 2021 to 2022 | 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | |
| Base salary8 | ||||||
| Charlie Nunn2 | n/a | 1 | – | 3 | 17 | |
| William Chalmers3 | 12 | (9) | – | 3 | 3 | |
| All employees1 | 4 | 6 | 13 | 10 | 5 | |
| GPS4,8 | ||||||
| Charlie Nunn2 | n/a | 47 | (5) | (12) | 26 | |
| William Chalmers3 | n/a | (2) | 34 | (12) | 12 | |
| All employees1 | n/a | 12 | (14) | (4) | 10 | |
| Benefits6,8 | ||||||
| Charlie Nunn2 | n/a | 4 | (37) | 8 | 37 | |
| William Chalmers3 | 2 | 35 | – | 2 | (24) | |
| Sir Robin Budenberg | n/a | – | 100 | (50) | – | |
| All employees1 | 1 | 5 | (43) | (71) | (12) | |
| Fees5 | ||||||
| Sir Robin Budenberg | 243 | 1 | 1 | 4 | 15 | |
| Nathan Bostock10 | n/a | n/a | n/a | n/a | 3 | |
| Sarah Legg | 28 | 6 | 2 | 2 | 9 | |
| Amanda Mackenzie | (1) | 7 | 2 | 22 | 9 | |
| Harmeen Mehta | n/a | 2 | 4 | 4 | 10 | |
| Cathy Turner | n/a | n/a | 38 | 76 | 3 | |
| Chris Vogelzang7 | n/a | n/a | n/a | n/a | n/a | |
| Scott Wheway9 | n/a | n/a | 1 | 4 | 3 | |
| Catherine Woods | 43 | 4 | 2 | 2 | 6 |
1Lloyds Banking Group plc is not a contracting entity but considers all UK-based employees to be appropriate for purposes of an ‘All employees’ calculation.
2Charlie Nunn became the Group Chief Executive in August 2021. Figures for 2021 have been annualised based on the single total figure table.
3William Chalmers was the Interim Group Chief Executive from May to August 2021 and received a deputisation payment for this period.
4No Group Performance Share (annual bonus) was paid for 2020 performance.
5In some instances, non-executive directors may change membership or become the Chair of a Committee during the year, resulting in year-on-year percentage changes in fees.
6Some non-executive directors have received other benefits that relate to reimbursement for expenses incurred in the course of duties. Reimbursements of these expenses do not
provide an accurate comparison to benefits received by colleagues and are therefore not included.
7Chris Vogelzang was appointed on 16 June 2025 and therefore no year-on-year comparison shown.
82022 to 2023 and 2023 to 2024 variance was impacted by the consolidation of variable pay and Flex cash allowance into base salary.
9Scott Wheway retired on 31 October 2025. Figures for 2025 have been annualised based on the single total figure table.
10Nathan Bostock was appointed on 1 August 2024. Figures for 2024 have been annualised based on the single total figure table.
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|
Chief Executive Officer pay ratio | |||||||
|---|---|---|---|---|---|---|---|---|
| The Remuneration Committee views pay ratios as a useful reference point to inform policy-setting, but also takes into consideration a<br><br>number of other factors. The table below shows the ratios of the GCE’s total remuneration to the remuneration of colleagues since 2017.<br><br>The change in the pay ratios for 2025 is explained in more detail below. | ||||||||
| Total compensation | Fixed pay | |||||||
| Year | Methodology | P25 (Lower<br><br>Quartile) | P50<br><br>(Median) | P75 (Upper<br><br>Quartile) | P25 (Lower<br><br>Quartile) | P50<br><br>(Median) | P75 (Upper<br><br>Quartile) | |
| 2025 | A | 205:1 | 141:1 | 81:1 | 87:1 | 60:1 | 34:1 | |
| 2024 | A | 165:1 | 114:1 | 63:1 | 75:1 | 53:1 | 29:1 | |
| 2023 | A | 112:1 | 80:1 | 45:1 | 76:1 | 54:1 | 31:1 | |
| 2022 | A | 120:1 | 86:1 | 48:1 | 81:1 | 59:1 | 35:1 | |
| 2021 | A | 316:1 | 225:1 | 120:1 | 93:1 | 66:1 | 38:1 | |
| 2020 | A | 132:1 | 95:1 | 54:1 | 103:1 | 75:1 | 42:1 | |
| 2019 | A | 179:1 | 128:1 | 71:1 | 114:1 | 82:1 | 47:1 | |
| 2018 | A | 237:1 | 169:1 | 93:1 | 113:1 | 81:1 | 48:1 | |
| 2017 | A | 245:1 | 177:1 | 97:1 | 113:1 | 82:1 | 48:1 | |
| Y-o-Y (2024 vs 2025) | 24% | 13% |
Notes to the table:
•The 2025 total remuneration for the colleagues identified at P25, P50 and P75 are as follows: £36,157, £52,638, £91,900
•The 2025 base salary for the colleagues identified at P25, P50 and P75 are as follows: £26,819, £42,756, £75,606
•The P25, P50 and P75 colleagues were determined on 31 December 2025 based on calculating total remuneration for all UK employees
for the 2025 financial year. Payroll data from 1 January 2025 to 31 December 2025
•Colleague total remuneration has been calculated in line with the single total figure of remuneration. The single total figure of
remuneration has been calculated for 55,280 UK colleagues within the Group for a full year including full-time equivalent base pay,
2025 Group Performance Share awards, vesting 2023 Long Term Share Plan awards (for eligible colleagues), core benefits, pension,
overtime and shift payments, travel/relocation payments (for eligible colleagues) and private medical benefit
•The average share price between 1 October 2025 and 31 December 2025 of 90
.64
pence has been used to indicate the value of vesting
2023 Long Term Share Plan awards
•Due to operational constraints, the calculation of the colleague Pension Input Figure excludes inflationary adjustments for those
on the defined benefit scheme. The omission of this factor does not materially affect the outcome of the ratio and/or distort the validity
of the valuation
•All other data has been calculated in line with the methodology for the single total figure of remuneration for the GCE
Our ratios have been calculated using Methodology option A on the basis that it provided the most accurate means of identifying the
median, lower and upper quartile colleagues. The ratio has been calculated taking into account the pay and benefits of 55,280 UK
employees, other than the individual performing the role of GCE.
The change in total remuneration ratios since 2017 is largely driven by the more volatile nature of variable pay for the GCE. Explanations
for the year-on-year change in pay ratios prior to 2023 can be found in previous directors’ remuneration reports for the relevant period.
The reduction in 2023 was attributed to three key factors. Recognising the desire to focus on the remuneration of lower paid colleagues,
no annual pay award was proposed for the GCE for 2023 while the pay budget for the wider workforce was 6.3%. Given the approach
focused on lower paid colleagues and colleagues lower in their pay range, this resulted in pay increases of between 8% and 13% for around
43,000 colleagues. In addition, from July 2023 we consolidated a significant portion of our Group Performance Share into base salary for
around 32,000 colleagues, further increasing the fixed pay element. Finally, the GCE received a lower annual short-term variable award
for 2023 compared to 2022.
In 2024, the total compensation ratio increased by 43% largely driven by the 2022 LTSP award vesting for Charlie Nunn, the first vesting
of a long-term incentive award for our Group Chief Executive since appointment. Excluding this, the year-on-year comparison would have
been down 9% on 2023. The fixed pay ratio reduced by 2% as colleagues realised a full-year impact of Group Performance Share
consolidation from July 2023.
For 2025, the total compensation ratio has increased primarily due to two factors. The first is the fixed pay changes set out in the 2024
directors’ remuneration report which included reversing the impact of the discount applied to the GCE’s salary on appointment (13%) and
increasing the fixed share awards to match base salary; thus setting the fixed pay at an appropriate level ahead of the 2026 Policy review.
The second is the increase in variable pay outcomes in 2025; firstly the short-term annual bonus outcome of 74% of maximum in 2025 was
higher than corresponding 68.1% in 2024 and, the portion of the long-term incentive vesting attributed to share price appreciation was
45% higher than the prior year (c.52 pence at grant to c.91 pence used to calculate indicative value). The fixed pay ratio has increased due
to the same reasons as set out for the total compensation ratio.
For the majority of colleagues, year-on-year changes in remuneration are principally driven by pay increases and the impacts of Group
performance and collective adjustment. The Group has a commitment to pay progression and a continued focus on ensuring higher
pay awards for colleagues who are lower paid or paid lower within their pay range. We are committed to ensuring all colleagues are
rewarded fairly.
The Committee is thoughtful of the volatility in pay ratios due to variable reward outcomes. Although the pay ratio is used as a useful
reference point to inform policy-setting, the Committee takes into account a number of other factors to assess colleague pay progression.
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Directors’ remuneration report continued
Implementation of Policy in 2026
The 2026 Directors’ Remuneration Policy is subject to approval at the annual general meeting in May 2026. The Group proposes to
implement the Policy in the following way subject to shareholder approval.
| Performance year | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | |
|---|---|---|---|---|---|---|---|
| Base Salary | Paid in cash | ||||||
| Pension/<br><br>Benefits | Paid in performance year | ||||||
| Short Term<br><br>Variable | Performance period | 75% in cash<br><br>upfront | 25% paid in shares and released<br><br>over three years in equal tranches | ||||
| Long Term<br><br>Variable | Pre-grant test | Performance period | 75% shares | Two-year holding period | |||
| 25% shares | One-year<br><br>holding period | How our remuneration is delivered | |||||
| --- | Directors’ remuneration | ||||||
| --- | <br><br>Base Salary |
||||||
| --- | --- | ||||||
| As set out in the Chair statement on pages 98 to 102, the new<br><br>2026 Policy removes fixed share awards (currently set at 100% of<br><br>salary), reduces executive director pension contributions from<br><br>15% to 10% of salary and removes the flexible benefits allowance<br><br>and the CFO’s car allowance.<br><br>The base salaries of our Group Chief Executive and Chief<br><br>Financial Officer will be increased by 3% respectively effective<br><br>1 April 2026. Subject to approval of the Policy at the 2026 AGM,<br><br>also effective 1 April 2026, salaries will be increased by an<br><br>additional £112,531 and £82,684 to reflect the partial<br><br>consolidation of fixed share awards and flexible benefits<br><br>allowance.<br><br>Taken together, these changes will reduce our executive director<br><br>fixed pay by approximately 44%. | The on-cycle 3% annual increase, effective 1 April 2026, to the<br><br>salary of both executive directors is in line with the 2026 3.1%<br><br>budget as part of the pay deal for wider workforce.<br><br>For further context and detail, please refer to pages 98 to 102.<br><br>Salaries from 1 April 2026 will therefore be as follows:<br><br>GCE: £1,416,642<br><br>CFO: £903,572<br><br>Subject to approval of the Policy at the 2026 AGM, salaries<br><br>will be increased to the following, also effective 1 April 2026:<br><br>GCE: £1,529,174<br><br>CFO: £986,256 | <br><br>Pension |
|||||
| --- | --- | ||||||
| Pension allowances for all executive directors are set at 10% of<br><br>base salary.<br><br>Around 52,000 colleagues participate in the Group’s Defined<br><br>Contribution (DC) Pension scheme where the maximum<br><br>opportunity for the workforce is 15% of base salary. | Executive directors’ employer pension contributions are<br><br>therefore less than those available to the majority of the<br><br>workforce. | <br><br>Benefits |
|||||
| --- | --- | ||||||
| As described above, the flexible benefit allowance of 4% of base<br><br>salary has been removed as part of the 2026 Policy. The CFO’s<br><br>car allowance has also been removed.<br><br>Executive directors can continue to select benefits including<br><br>life assurance and critical illness cover from the flexible<br><br>benefits catalogue. | The cost of any selection will come from the executive directors’<br><br>base salary. Other benefits include transportation and private<br><br>medical cover. |
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| Directors’ remuneration continued |
| --- || <br><br>Group Performance Share (Short Term Variable) | |
| --- | --- |
| Overview<br><br>Maximum opportunities for executive directors for 2026 are 300%<br><br>of base salary for the Group Chief Executive and 250% for the Chief<br><br>Financial Officer. For the 2026 performance year, any GPS opportunity<br><br>will be awarded in March 2027 in a combination of cash and shares.<br><br>Individual awards as a percentage of maximum will directly relate to<br><br>the overall Group balanced scorecard performance assessment<br><br>outcome in the first instance.<br><br>The Group’s policy is to apply deferral to variable reward in line with<br><br>minimum regulatory requirements. However, we are mindful that<br><br>additional considerations apply when it comes to executive director<br><br>remuneration in the UK. We will set out our deferral position each year,<br><br>at award, in the annual report on remuneration, taking into account<br><br>shareholder expectations, market practice and emerging trends. Our<br><br>current approach to GPS delivery is set out on page 120.<br><br>2026 Group balanced scorecard<br><br>The performance measures for determining any individual 2026 GPS<br><br>awards for executive directors are outlined in the table below.<br><br>The measures and targets are set annually by the Committee to reflect<br><br>the strategic priorities of the Group and take into account both the<br><br>annual financial plan and operating plan against the backdrop of the<br><br>rapidly evolving external economic and societal landscape.<br><br>Performance measures and weightings<br><br>The 2026 scorecard metrics have been reviewed alongside the 2026 LTIP<br><br>measures, shown on page 122, to ensure they are complementary and<br><br>there is minimal overlap which would risk duplication of outcomes.<br><br>Whilst a RoTE measure is also included in the LTIP performance metrics, it<br><br>is considered a fundamental indicator of Group performance and creation<br><br>of shareholder value. The RoTE within the annual scorecard focuses on<br><br>in-year performance while the LTIP assesses long-term performance.<br><br>As discussed in the Chair statement on pages 98 to 102, to recognise<br><br>the longer-term nature of the Group’s ambitions on decarbonisation,<br><br>the Committee will use the LTIP as the principal measure of the Group’s<br><br>progress on environmental sustainability by moving the Reduction in<br><br>our Operational Carbon Emissions measure from the short-term to the<br><br>long-term scorecard for 2026.<br><br>To recognise the importance of our customers and to ensure executive<br><br>variable reward outcomes reflect their experience, the Group customer<br><br>dashboard weighting will be increased to 25%. | To reflect the criticality of continued transformation of our workforce<br><br>to enable delivery of Group strategy, our 2026 Group balanced<br><br>scorecard will include a broader ‘People measure’ weighted 15%; this<br><br>will retain our current focus on inclusion and colleague engagement but<br><br>also include a wider range of people transformation metrics considered<br><br>by the Board. These will include, for example, colleague upskilling and<br><br>the adoption of AI, a first we believe amongst our peers.<br><br>Targets and methodology<br><br>Setting stretching targets is a key component of our demanding<br><br>performance-driven culture. The Committee has undertaken a<br><br>thorough exercise to ensure targets are sufficiently stretching,<br><br>taking into consideration our operating plan and, where applicable,<br><br>forward-looking guidance.<br><br>The Committee agreed targets to evaluate performance in 2026 and<br><br>these will be disclosed retrospectively in the 2026 annual report<br><br>alongside the level of performance achieved, as the Committee<br><br>considers such targets to be commercially sensitive.<br><br>To recognise exceptional items are not budgeted, profit after tax,<br><br>return on tangible equity and cost:income ratio measures will exclude<br><br>these from 2026. Instead, the Committee will consider any impact<br><br>on a case-by-case basis taking account of the impact on the full range<br><br>of the Group’s stakeholders including its customers, colleagues,<br><br>shareholders and communities.<br><br>Discretion<br><br>When determining the final outcome, the Committee may consider<br><br>any personal or business area objectives and whether there has been<br><br>effective, consistent and proactive risk management and conduct<br><br>outcomes across all dimensions.<br><br>When assessing performance, the Committee can exercise its<br><br>judgement to determine the appropriate outcome. This helps to<br><br>avoid any potential unintended outcomes that might arise from<br><br>the application of formulaic performance criteria.<br><br>
|| Our 2026 Group balanced scorecard |
| --- || Financial (60%) | Profit after tax1 | 25% |
| --- | --- | --- |
| | Return on tangible equity1 | 25% |
| | Cost:income ratio1 | 10% |
| Non-financial (40%) | Customer<br><br>Our assessment of how effectively we are serving customers across all brands,<br><br>products and services as measured by our Group Customer Dashboard | 25% |
| | People<br><br>A holistic assessment of our gender and ethnic representation in executive roles2,<br><br>culture and colleague engagement and a wider range of people transformation metrics | 15% |
1Profit after tax, return on tangible equity and cost:income ratio measures will exclude any exceptional items. Instead, items will be reviewed on a case-by-case basis by the
Remuneration Committee.
2 Executive roles include grade X colleagues only, subject to local laws and regulation.
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Directors’ remuneration report continued
| Directors’ remuneration continued |
| --- || <br><br>Long Term Incentive Plan (Long Term Variable) | |
| --- | --- |
| Overview<br><br>The Group’s demanding, high performance culture is critical to delivering<br><br>our ambitious strategy. LTIP awards will be granted in relation to 2025<br><br>performance under the terms of the new 2026 Policy. The Committee<br><br>concluded that 2025 performance, including assessment of our 2025<br><br>Group balanced scorecard and other factors, was at a level to make<br><br>awards. This is known as the ‘pre-grant test’.<br><br>To ensure strong alignment between variable reward outcomes and the<br><br>creation of shareholder value, the Committee has determined that LTIP<br><br>awards will be granted with a value of 500% of base salary to the GCE<br><br>and 450% of base salary to the CFO to reflect the Group’s performance<br><br>in 2025.<br><br>LTIP grants are normally made in March. However, for 2026 for the<br><br>executive directors the grants will be made, subject to approval of the<br><br>2026 Policy, shortly after the 2026 AGM, by reference to the same<br><br>grant date, grant price and performance and vesting periods used in<br><br>March 2026 for the Group's other LTIP participants.<br><br>Performance measures and weightings<br><br>As discussed in the Chair statement on pages 98 to 102, the financial<br><br>block has been increased to 75% weight for 2026. Return on tangible<br><br>equity emphasises the efficient use of capital and ensures focus on long-<br><br>term value creation, capital generation recognises the importance of<br><br>maintaining a strong financial foundation for the Group and prioritises<br><br>capital-accretive decision making for the long term, and rTSR compares<br><br>the value delivered to a shareholder in the Group over the performance<br><br>period with the value delivered to shareholders by our peers. | A dedicated 15% weighting will assess our strategic delivery; the final stage<br><br>of the current strategy in 2026; and the progress of our new strategy<br><br>(which we look forward to setting out in July 2026) in 2027 and 2028.<br><br>Finally, 10% weight is attributed to sustainability measures, reflecting that<br><br>the transition to a low carbon economy is at the core of our strategy and<br><br>aligns with our purpose of Helping Britain Prosper. For 2026 this will also<br><br>include assessment of our operational carbon reduction.<br><br>Recognising exceptional items are not budgeted, RoTE and capital<br><br>generation will exclude these from 2026. Instead, the Committee will<br><br>consider any impact on a case-by-case basis taking account of the<br><br>impact on the full range of the Group’s stakeholders including its<br><br>customers, colleagues, shareholders and communities.<br><br>Target setting<br><br>Setting targets is a critical focus area for the Committee and a rigorous<br><br>exercise has been undertaken to ensure our targets are sufficiently<br><br>stretching. We have taken into account our long-term strategic ambitions,<br><br>commitments to our sustainability agenda, comparable industry returns<br><br>and the higher variable reward opportunity available to our executive<br><br>directors through our 2026 Policy.<br><br>Operation<br><br>Awards made in 2026 will be subject to the Group’s performance<br><br>between January 2026 and December 2028.<br><br>Awards will vest in two tranches; 75% after three years, subject to a<br><br>two-year post-vesting retention period, 25% after four years subject to<br><br>a one-year post-vesting retention period. || 2026-2028 LTIP scorecard |
| --- || Financial (75%) | Return on tangible equity (RoTE)1,2 –<br><br>average over three years | 30% | 15% | 18% |
| --- | --- | --- | --- | --- |
| | Capital generation1,3 –<br><br>average over three years | 15% | 200 bps | 250 bps |
| | Relative Total Shareholder Return4 –<br><br>cumulative over three years | 30% | Median of the peer group | Upper quartile of the peer group |
| Strategic (15%) | Delivery of the Group’s strategic objectives<br><br>by the end of 2028 | 15% | Assessment of the Group’s delivery against our current five-year<br><br>strategic plan, ending in 2026, alongside the Group’s progress<br><br>toward delivering on our next strategic cycle through 2028,<br><br>which will be outlined in July 2026.<br><br>The assessment will include, but not be limited by, how the Group<br><br>continues to Grow, Focus and Change its business to achieve our<br><br>purpose of Helping Britain Prosper. After undertaking this review,<br><br>the Committee will exercise its judgement to determine the vesting<br><br>outcome on a holistic basis. | |
| Sustainability5 (10%) | Sustainable finance and investment | 10% | The Committee will assess the Group’s performance against its<br><br>publicly disclosed environmental targets aligned to cumulative<br><br>sustainable finance and investment provided over the<br><br>performance period, 2028 progress towards 2030 sector targets<br><br>and Scottish Widows emissions reduction ambition, and our own<br><br>operational carbon reduction. After this assessment the<br><br>Committee will holistically determine a vesting outcome. | |
| | Achievement of 2030 sector targets and<br><br>Scottish Widows’ emissions reduction ambition | | |
| | Reducing our operational carbon emissions6 | | |
1Return on tangible equity and capital generation measures will exclude exceptional items. Instead, items will be reviewed on a case-by-case basis by the Remuneration Committee.
2If average RoTE reaches 15% then 7.5% of the award vests. If average RoTE reaches 18% then 30% of the award vests. If average RoTE is between the threshold and maximum,
vesting is calculated on a straight-line basis between these two points.
3If average capital generation reaches 200 basis points then 3.75% of the award vests. If average capital generation reaches 250 basis points then 15% of the award vests.
If average capital generation is between the threshold and maximum, vesting is calculated on a straight-line basis between these two points.
4Peer group unchanged from 2025 grant: HSBC, Barclays, NatWest, BNP Paribas, Santander, ING, Intesa Sanpaolo, BBVA, UniCredit, Nordea, Crédit Agricole, Caixa, KBC Group,
Deutsche Bank, SocGen, Danske, ABN AMRO, Bank of Ireland. Where performance falls between threshold and maximum levels, an intermediate percentage will vest.
5See pages 35 to 49 for an overview of our ambitions, targets, and commitments.
6Includes Scope 1, Scope 2 and Scope 3 carbon emissions, excluding international travel.
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123
| Directors’ remuneration continued | |||
|---|---|---|---|
| Chair and non-executive director fees and benefits | |||
| --- | --- | --- | --- |
| Any increases normally take effect from 1 January of a given year.The Committee is responsible for evaluating and approving the Chair’s fees. The Chair does not participate in these discussions. The GCE and the Chair are responsible for evaluating and making recommendations to the Board in relation to the fees of the non-executive directors (NEDs).The Chair receives an all-inclusive fee, which is reviewed periodically plus benefits including life insurance, medical insurance and transportation. The Committee retains the right to provide additional benefits depending on individual circumstances.NEDs are paid a basic fee plus additional fees for the Chair/ membership of Committees and for membership of Group company Boards, non-Board level committees and/or other specific responsibilities. | Additional fees are also paid to the Senior Independent Director<br><br>to reflect additional responsibilities.<br><br>The Chair and the NEDs are not entitled to receive any payment<br><br>for loss of office (other than in the case of the Chair’s fees for the<br><br>six-month notice period) and are not entitled to participate in<br><br>the Group’s variable remuneration arrangements, all-employee<br><br>share plan or pension arrangements.<br><br>NEDs are reimbursed for expenses incurred in the course<br><br>of their duties, such as travel and accommodation expenses,<br><br>on a grossed-up basis (where applicable).<br><br>Non-executive directors may receive more than one of the<br><br>above fees. | ||
| As set out in the 2024 directors’ remuneration report there is a 100,000 increase to the annual fee for the Chair from 1 January 2026 taking the fee to 850,000. This is step two of the two-stage increase announced last year. Following a detailed review of peer benchmarks and to ensure our non-executive directors are paid appropriately for the experience and time requirements required, the table below sets out changes to non-executive director fees from 1 January 2026. | |||
| 2026 | 2025 | % change<br><br>2025 to 2026 | |
| Basic non-executive director fee | 95,000 | 92,200 | 3.0% |
| Senior Independent Director | 64,200 | 64,200 | —% |
| Audit Committee Chair | 79,180 | 77,250 | 2.5% |
| Remuneration Committee Chair | 79,180 | 77,250 | 2.5% |
| Risk Committee Chair | 79,180 | 77,250 | 2.5% |
| Responsible Business Committee Chair | 61,500 | 60,000 | 2.5% |
| IT and Cyber Advisory Forum Chair | 61,500 | 60,000 | 2.5% |
| Audit Committee member | 35,875 | 35,000 | 2.5% |
| Remuneration Committee member | 35,875 | 35,000 | 2.5% |
| Risk Committee member | 35,875 | 35,000 | 2.5% |
| Responsible Business Committee member | 25,625 | 25,000 | 2.5% |
| IT and Cyber Advisory Forum member | 25,625 | 25,000 | 2.5% |
| Nomination and Governance Committee member | 16,750 | 16,550 | 1.2% |
All values are in British Pounds.
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Directors’ remuneration report continued
2026 Directors’ Remuneration Policy (proposed)
Approval for this Directors’ Remuneration Policy (Policy) will be
sought at the AGM on 14 May 2026 and, if approved, it will take
effect from that date.
It is intended that approval of the Policy will be sought at three-year
intervals, unless amendments to the Policy are required, in which
case further shareholder approval will be sought. Information on
how the Policy will be implemented in 2026 is included in the
annual report on remuneration.
2026 Policy changes
As set out in detail in pages 98 to 102, over the course of 2025, the
Committee conducted a thorough review of the existing Policy to
ensure it supports the Group’s strategic priorities. Input was sought
from a range of stakeholders including institutional shareholders,
the main proxy rating agencies, executive directors and the
Committee’s external advisers, PricewaterhouseCoopers (PwC), to
ensure a broad range of views were sought as well as alignment with
market best practice and compliance with applicable regulations.
The Chair of the Committee engaged directly with a significant
number of the Group’s largest shareholders both in one-on-one
dialogue and as part of a written communication programme and
ensured the full range of those views were represented and carefully
considered by the Committee as part of its discussions on proposed
changes to the Policy. In total, approximately 60% of the Group’s
issued share capital were contacted on the proposed 2026 Policy.
The changes to Policy are set out in detail in the following pages.
The 2026 Policy will act as a strong incentive to the current
management team, who are well regarded by shareholders, to
deliver our ambitious 2026 targets and to lead the Group through
its next strategic cycle whilst also placing even greater emphasis
on sustainable high performance and the creation of shareholder
value. There will be a significant reduction in guaranteed fixed pay
alongside increased variable reward opportunity further
emphasising pay-for-performance. Underpinning this will be an
increased weighting to financial measures in our performance
conditions and an increase in shareholding requirements to ensure
the executives are closely aligned with shareholder experience.
During consultation, shareholders expressed broad support for
the proposals with no major concerns raised. Increased financial
weighting and shareholding requirements were received positively.
Shareholders continue to express their expectation that targets
should be transparent and stretching which has been and will be
given full consideration when approving targets for scorecards
which drive both short- and long-term award outcomes. During
consultation, it was heard, and acknowledged, that this Policy
should last the full three-year cycle with no desire from shareholders
to re-approve a Policy until the next on-cycle approval in 2029.
Benchmarking was one of the key discussion points during our
shareholder engagement; from those conversations it was clear
that our investors expected us to use benchmarking to test our
proposals, rather than be led by it, and also to be thoughtful over
our choice of peers. The approach which the Committee took to
benchmarking the Remuneration Policy is set out in the Chair’s
statement.
While colleagues were not formally consulted on the Policy, the
Committee ensured that the pay and reward proposition of all
colleagues was taken into account in the process of developing the
Policy and the People Forum was engaged to explain the alignment
of executive reward to that of the rest of the Group.
No executive director has been involved in the determination of
their own remuneration. To manage conflicts of interests effectively,
executive directors were asked to step out of relevant committee
meetings and relevant papers were also redacted for individuals
if required.
Performance measures and link to strategy
The performance measures selected for the GPS and LTIP will be set
annually by the Committee taking account of the Group’s strategic
priorities and its most important financial measures. Performance
measures are selected to ensure an appropriate balance between
short- and long-term strategic goals and to align executive director
and shareholder interests. Rationale for performance measures
selected and their link to both strategic delivery and wider
stakeholder alignment will be shown in the annual report on
remuneration for the year under review. In determining the
appropriate set of measures and targets for annual bonus
and LTIP awards, the Committee has discretion to vary the
performance measures, or to substitute the metrics, over the
life of the Policy taking into account the Group’s strategic plan
or emerging best practice.
2026 Directors’ Remuneration Policy and Group
remuneration policy alignment
The only significant difference between the Policy for executive
directors and colleagues outside the Group Executive Committee
is participation in the LTIP which is restricted to those most directly
accountable for the successful delivery of the Group’s strategy.
LTIP awards are subject to forward-looking performance measures
and are granted in shares ensuring a strong pay-for-performance
link and alignment between executive director remuneration
and shareholder interests.
The table below summarises how the Policy applies across
the Group.
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| 2026 Directors’ Remuneration Policy and Group remuneration policy alignment |
| --- || | Executive<br><br>directors | Group Executive<br><br>Committee | Other material<br><br>risk takers | Other<br><br>employees |
| --- | --- | --- | --- | --- |
| Fixed1 | | | | |
| Base salary<br> | l | l | l | l |
| Pension <br> | l | l | l | l |
| Benefits<br> | l | l | l | l |
| Variable | | | | |
| Short term incentive<br> | l | l | l | l |
| Long term incentive<br> | l | l | ¡ | ¡ |
1Role-based allowances remain for Group Executive Committee members and certain other material risk takers. Executive directors are not eligible for a role-based allowance.
| Remuneration Policy table for executive directors |
| --- || <br><br>Base Salary | |
| --- | --- |
| Purpose and link to strategy<br><br>To support the recruitment and retention of executive directors<br><br>of the calibre required to develop and deliver the Group’s<br><br>strategic priorities. Base salary reflects the role of the individual,<br><br>taking account of market competitiveness, responsibilities and<br><br>experience, and pay in the Group as a whole.<br><br>Operation<br><br>Base salaries are typically reviewed annually with any increases<br><br>normally taking effect from 1 April for executive directors. When<br><br>determining and reviewing base salary levels, the Committee<br><br>takes into account base salary increases for employees<br><br>throughout the Group and ensures that decisions are made<br><br>within the following two parameters:<br><br>•An objective assessment of the individual’s responsibilities<br><br>and the size and scope of their role, using objective job-sizing<br><br>methodologies<br><br>•Pay for comparable roles in comparable publicly listed firms<br><br>of a similar size<br><br>Salary may be paid in pounds sterling (GBP) or other currency<br><br>and at an exchange rate determined by the Committee. | Maximum potential<br><br>The Committee will make no increase which it believes<br><br>is inconsistent with the two parameters. Increases will<br><br>normally be no more than the increase awarded to the<br><br>overall employee population. However, a greater salary increase<br><br>may be appropriate in certain circumstances, such as a new<br><br>appointment made on a salary below a market competitive level,<br><br>where phased increases are planned, or where there has been an<br><br>increase in the responsibilities of an individual. Where increases<br><br>are awarded in excess of the wider employee population, the<br><br>Committee will provide an explanation in the relevant annual<br><br>report on remuneration.<br><br>Performance measures<br><br>N/A<br><br>Changes<br><br>No change to Policy on base salary.<br><br>To set fixed pay at an appropriate level in line with market<br><br>standard for executive directors and further align executive<br><br>remuneration with stakeholder experience, fixed share awards<br><br>have been removed from the Policy. || <br><br>Pension | |
| --- | --- |
| Purpose and link to strategy<br><br>To provide cost effective and market competitive retirement<br><br>benefits, supporting executive directors in building long-term<br><br>retirement savings.<br><br>Operation<br><br>Executive directors are entitled to participate in the Group’s<br><br>defined contribution scheme with company contributions set<br><br>as a percentage of salary.<br><br>An executive director may elect to receive some or all of their<br><br>pension allowance as cash in lieu of pension contribution. | Maximum potential<br><br>The maximum allowance for all executive directors is set at 10%<br><br>of base salary, which is lower than that of the majority of the<br><br>wider workforce.<br><br>Performance measures<br><br>N/A<br><br>Changes<br><br>To set fixed pay at an appropriate level in line with market<br><br>standard for executive directors, maximum employer pension<br><br>contribution available has been reduced from 15% to 10% of base<br><br>salary. This will move the executive directors from being in line<br><br>with, to less than the majority of the wider workforce. |
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Directors’ remuneration report continued
| Remuneration Policy table for executive directors continued |
| --- || <br><br>Benefits | |
| --- | --- |
| Purpose and link to strategy<br><br>To provide flexible benefits as part of a competitive<br><br>remuneration package.<br><br>Operation<br><br>Benefits may include those currently provided and disclosed<br><br>in the annual report on remuneration. Core benefits include<br><br>private medical insurance, life insurance and other benefits<br><br>that may be selected through the Group’s flexible benefits plan.<br><br>In certain circumstances, the Committee may provide additional<br><br>benefits to individuals, which may include, but are not limited to,<br><br>accommodation, relocation, and travel support. | Maximum potential<br><br>N/A<br><br>Performance measures<br><br>N/A<br><br>Changes<br><br>To align executive director remuneration package with the wider<br><br>workforce where flex and car allowances were consolidated<br><br>in previous years and to set fixed pay at an appropriate level,<br><br>executive directors will no longer receive a flexible benefits<br><br>allowance. Car allowance has also been removed as a benefit. || All-employee plans | |
| --- | --- |
| Purpose and link to strategy<br><br>Executive directors are eligible to participate in HMRC tax<br><br>advantaged share plans which promote share ownership by<br><br>giving employees an opportunity to invest in Group shares.<br><br>Operation<br><br>Executive directors may participate in these plans in line with<br><br>HMRC guidelines currently prevailing (where relevant), on the<br><br>same basis as other eligible employees.<br><br>Maximum potential<br><br>Participation levels may be increased up to HMRC limits as<br><br>amended from time to time. The monthly savings limits for<br><br>Save As You Earn (SAYE) is currently £500. | The maximum value of shares that may be purchased under the<br><br>Share Incentive Plan (SIP) in any year is currently £1,800 with a<br><br>two-for-one match. Currently a three-for-two match is operated<br><br>up to a maximum colleague investment of £30 per month.<br><br>The maximum value of free shares that may be awarded in<br><br>any year is £3,600.<br><br>Performance measures<br><br>N/A<br><br>Changes<br><br>No change to Policy. |
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| Remuneration Policy table for executive directors continued |
| --- || <br><br>Group Performance Share (Short Term Variable) | |
| --- | --- |
| Purpose and link to strategy<br><br>To incentivise and reward the achievement of the Group’s<br><br>annual financial and strategic targets whilst supporting the<br><br>delivery of higher, more sustainable returns.<br><br>Operation<br><br>Measures and targets are set annually and awards are<br><br>determined by the Committee after the year end based on<br><br>performance against the targets set. The GPS may be delivered<br><br>in cash, shares, notes or other debt instruments including<br><br>contingent convertible bonds. Where all or part of any award is<br><br>deferred, the Committee may adjust these deferred awards in<br><br>the event of any variation of share capital, demerger, special<br><br>dividend or distribution or amend the terms of the plan in<br><br>accordance with the plan rules.<br><br>Where an award or a deferred award is in shares or other share<br><br>linked instrument, dividends or dividend equivalents may accrue<br><br>over the vesting period and are payable in respect of awards that<br><br>vest. These will be paid in shares unless the individual has met<br><br>their shareholding requirement in which case they may be<br><br>payable in cash at the discretion of the Committee. Where<br><br>dividends or dividend equivalents are not accrued, the grant<br><br>price of shares to be awarded may be discounted to reflect the<br><br>lack of dividend equivalents.<br><br>The Committee applies its judgement to determine the payout<br><br>level commensurate with business and/or individual performance<br><br>or other factors as determined by the Committee. The<br><br>Committee may reduce the level of award (including to zero),<br><br>apply additional conditions to the vesting or delay the vesting of<br><br>deferred awards to a specified date or until conditions set by the<br><br>Committee are satisfied, where it considers it appropriate.<br><br>Awards may be subject to malus and clawback for a period of up<br><br>to seven years after the date of award which may be extended<br><br>to 10 years where there is an ongoing internal or regulatory<br><br>investigation. | Maximum potential<br><br>The maximum GPS opportunities are 300% of base salary for<br><br>the Group Chief Executive and 250% of base salary for other<br><br>executive directors.<br><br>Performance measures<br><br>Measures and targets are set annually by the Committee<br><br>in line with the Group’s strategic business plan and further<br><br>details are set out in the annual report on remuneration for<br><br>the relevant year.<br><br>Measures consist of both financial and non-financial measures<br><br>and the weighting of these measures will be determined<br><br>annually by the Committee. All assessments of performance are<br><br>ultimately subject to the Committee’s judgement, but measures<br><br>will not vest if threshold performance is not met. The payout for<br><br>threshold performance will not exceed 25% of maximum. The<br><br>normal ‘target’ level of the GPS is 50% of maximum opportunity.<br><br>The Committee is committed to providing transparency in its<br><br>decision making in respect of GPS awards and will disclose<br><br>historic measures and target information together with<br><br>information relating to how the Group has performed against<br><br>those targets in the annual report on remuneration for the<br><br>relevant year except to the extent that this information is<br><br>deemed to be commercially sensitive, in which case it will be<br><br>disclosed once it is deemed not to be sensitive.<br><br>Changes<br><br>The maximum GPS for the GCE has been increased from<br><br>140% to 300% of base salary and the maximum GPS for other<br><br>executive directors has been increased from 140% to 250%<br><br>of base salary.<br><br>The Policy gives the Committee flexibility to permit dividends<br><br>or dividend equivalents to be awarded on deferred awards. |
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Directors’ remuneration report continued
| Remuneration Policy table for executive directors continued |
| --- || <br><br>Long Term Incentive Plan (Long Term Variable) | |
| --- | --- |
| Purpose and link to strategy<br><br>To align executive directors’ long-term variable remuneration<br><br>with the Group’s strategic ambitions, while ensuring alignment<br><br>with shareholder interests.<br><br>Operation<br><br>Awards will be granted under the rules of the 2023 Long Term<br><br>Incentive Plan, which was approved by shareholders at the 2023<br><br>AGM; awards will be granted in the form of conditional rights to<br><br>shares in the Group.<br><br>Dividends or dividend equivalents may accrue over the<br><br>vesting period and are payable in respect of awards that vest.<br><br>These will be paid in shares unless the individual has met their<br><br>shareholding requirement in which case they may be payable<br><br>in cash at the discretion of the Committee. Where dividends<br><br>or dividend equivalents are not accrued, the grant price of<br><br>shares to be awarded may be discounted to reflect the lack<br><br>of dividend equivalents.<br><br>The vesting and release of awards will comply with regulation<br><br>and shareholder expectations, which is currently a performance<br><br>period of at least three years, and a total performance and<br><br>holding period of least five years.<br><br>The Committee retains full discretion to amend the vesting levels<br><br>should the outcome not reflect business and/or individual<br><br>performance including risk and conduct outcomes. The<br><br>Committee may reduce (including to zero) the level of the<br><br>award, apply additional conditions to the vesting, or delay the<br><br>vesting of awards to a specified date or until conditions set by<br><br>the Committee are satisfied, where it considers it appropriate.<br><br>Awards may be subject to malus and clawback for a period<br><br>of up to seven years after the date of award which may<br><br>be extended to ten years where there is an ongoing internal<br><br>or regulatory investigation. | Maximum potential<br><br>The maximum Long Term Incentive Plan opportunity is 500%<br><br>of base salary for the Group Chief Executive and 450% of base<br><br>salary for other executive directors. The actual award level<br><br>granted will be determined with reference to a pre-grant test<br><br>based on an assessment of performance by the Committee.<br><br>Performance measures<br><br>Awards will be subject to forward-looking performance measures<br><br>based on financial and non-financial measures, such as strategic<br><br>and sustainability, set out in the annual report on remuneration<br><br>each year; performance will be measured over a period of not<br><br>less than three years as determined by the Committee.<br><br>The Committee has the discretion to change the measures<br><br>or their weightings, from grant to grant, subject to a minimum<br><br>of 75% of the award being dependent on financial measures.<br><br>No more than 25% of the award will vest for threshold<br><br>performance. 100% of the award will vest for achieving the<br><br>maximum performance. Where performance falls between<br><br>threshold and maximum levels, an intermediate number of<br><br>awards will vest.<br><br>Changes<br><br>The maximum LTIP for the GCE has been increased from 300%<br><br>to 500% of base salary and the maximum LTIP for other executive<br><br>directors has been increased from 300% to 450% of base salary.<br><br>The minimum weighting to financial performance measures has<br><br>increased from 50% to 75%.<br><br>To provide alignment to shareholders, the Policy allows for the<br><br>grant of dividends or dividend equivalents to be awarded on<br><br>deferred awards. || <br><br><br><br>Deferral of variable remuneration and holding periods | |
| --- | --- |
| Operation<br><br>Both the GPS and LTIP are treated as variable remuneration<br><br>for purpose of applicable remuneration regulation.<br><br>At award, payment and deferral levels must meet minimum rules<br><br>for executive directors. The current minimum requirements are:<br><br>•At least 40% of the first £660,000 of total variable<br><br>remuneration and 60% of any excess to be deferred for<br><br>up to four years with pro-rata vesting<br><br>•At least 50% of total variable remuneration to be delivered<br><br>in shares or equity-linked instruments<br><br>•Where a portion of variable remuneration is delivered<br><br>upfront and in shares it is subject to a minimum one-year<br><br>holding period | Changes<br><br>No change to Policy that payment and deferral levels and the<br><br>operation of any holding period is determined annually at the<br><br>time of the award.<br><br>Additional context<br><br>To maintain flexibility across the period of our Policy, we believe<br><br>minimum regulatory requirements is the most appropriate Policy<br><br>position. However, we are mindful that additional considerations<br><br>apply when it comes to executive director remuneration in the UK.<br><br>We will set out our deferral position each year in the annual report<br><br>on remuneration, taking into account shareholder expectations,<br><br>market practice and emerging trends. |
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| Remuneration Policy table for executive directors continued |
| --- || <br><br><br><br>Performance adjustment | |
| --- | --- |
| Performance adjustment is determined by the Remuneration<br><br>Committee and may result in a reduction of up to 100% variable<br><br>remuneration opportunity for the relevant period. It can be<br><br>applied on a collective or individual basis.<br><br>The application of malus will generally be considered when:<br><br>•there is reasonable evidence of employee misbehaviour or<br><br>material error or that they participated in conduct which<br><br>resulted in losses for the Group or failed to meet appropriate<br><br>standards of fitness and propriety<br><br>•there is material failure of risk management at a Group,<br><br>business area, division and/or business unit level<br><br>•the Committee determines that the financial results for a<br><br>given year do not support the level of variable remuneration<br><br>awarded<br><br>•any other circumstances where the Committee consider<br><br>adjustments should be made | Judgement on individual performance adjustment is informed<br><br>by taking into account the severity of the issue, the individual’s<br><br>proximity to the issue and the individual’s behaviour in relation<br><br>to the issue. Individual adjustment may be applied through<br><br>adjustments to balanced scorecard assessments and/or through<br><br>reducing the variable remuneration outcome.<br><br>Awards are subject to clawback for a period of up to seven years<br><br>after the date of award, which may be extended to ten years<br><br>where there is an ongoing internal or regulatory investigation.<br><br>The Committee has considered the time period of up to ten<br><br>years and believes that is an appropriate length of time for<br><br>performance adjustment to apply.<br><br>The application of clawback will generally be considered when:<br><br>•there is reasonable evidence of employee misbehaviour or<br><br>material error<br><br>•there is material failure of risk management at a Group,<br><br>business area, division and/or business unit level |
Discretion in relation to variable rewards
The Committee retains discretion with regards to all variable
rewards plans. This relates to:
•The timing, size and type of awards and holding periods, subject
to Policy maxima, regulatory requirements and the annual
setting of targets
•Where performance measures are used and performance against
those measures is not commensurate with the Group’s overall
financial or strategic performance over the performance period
•Adjustment of targets and measures if events occur which cause
it to determine that it is appropriate to do so. The Committee
also retains the right to change performance measures and the
weighting of measures, including following feedback from
regulators, shareholders and/or other stakeholders; and
amending the plan rules in accordance with their terms and or
amending the basis of operation (including but not limited to the
approach in respect of dividend equivalents) including in light of
any change to regulatory requirements or guidance or feedback
from regulators
•To exercise discretion in accordance with the rules, including in
relation to whether or not malus or clawback provisions would
apply, in connection with recruitment, or terminations of
employment, or corporate events affecting the Company
•Adjustments required in certain circumstances (e.g. rights issues,
corporate restructuring events and special dividends)
•The determination of how dividend equivalents should be
calculated and paid
The exercise of the Committee’s discretion will be disclosed in
accordance with regulatory requirements.
Legacy awards and restrictions on payments
Awards in respect of the 2025 GPS will be granted in 2026 under
the terms of the 2023 Directors’ Remuneration Policy approved by
shareholders on 18 May 2023. Awards in respect of the 2026 Long
Term Incentive Plan will be granted following the AGM in 2026
under the terms of the new Directors’ Remuneration Policy (the
2026 Policy), subject to shareholder approval of the 2026 Policy.
The Committee reserves the right to make any remuneration
payments/awards and any payments/awards for loss of office,
notwithstanding that they are not in line with the Policy set
out above where the terms of the payment/award were agreed
(i) before the 2026 Policy came into effect or (ii) at a time when the
relevant individual was not a director of the Group and, in the
opinion of the Committee, the payment/award was not in
consideration for the individual becoming a director of the Group.
Such payments/awards will have been set out in the annual report
on remuneration for the relevant year and include awards and
payments made under previous approved remuneration Policies.
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Directors’ remuneration report continued
| Illustration of application of Remuneration Policy | | --- || The charts below illustrate possible remuneration outcomes under the following four scenarios:<br><br>1The maximum that may be paid, assuming full GPS payout and full vesting under the new LTIP with a share price appreciation of 50% for the<br><br>LTIP. The basis of the calculation of the share price appreciation is that the share price embedded in the calculation for the ‘maximum’ bar chart<br><br>is assumed to increase by 50%.<br><br>2The maximum that may be paid, assuming full GPS payout and full vesting under the new LTIP with no share price appreciation.<br><br>3The expected value of remuneration for performance midway between threshold and maximum, assuming 50% of maximum Group Performance<br><br>Share opportunity and 50% vesting of maximum Long Term Incentive Plan opportunity.<br><br>4The minimum that may be paid, where only the fixed element is paid (base salary, benefits and pension).<br><br>Amounts are based on base salaries as at 1 April 2026, 10% pension allowance and private medical cover. Implementation of the Policy in 2026 is set<br><br>out in the annual report on remuneration. | | --- || | Value of package | | | --- | --- | --- | | Charlie Nunn (GCE) | | William Chalmers (CFO) || | Maximum – with share price appreciation | | | | | Total | | --- | --- | --- | --- | --- | --- | --- | | 9% | | t 1% | 26% | 43% | 22% | £17.7m |
| Maximum | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 11% | t 1% | 33% | 55% | £13.9m | Mid-performance | ||||||||
| --- | --- | --- | --- | --- | |||||||||
| 20% t 2% | t 29% | t 49% | £7.8m | Minimum | |||||||||
| --- | --- | --- | |||||||||||
| 91% t 9% | £1.7m | Maximum – with share price appreciation | Total | ||||||||||
| --- | --- | --- | --- | --- | --- | ||||||||
| 10% | t 1% | 24% | 43% | 22% | £10.2m | Maximum | |||||||
| --- | --- | --- | --- | --- | |||||||||
| 12% | t 1% | 31% | 56% | £8.0m | Mid-performance | ||||||||
| --- | --- | --- | --- | --- | |||||||||
| 22% | t 2% | t 27% | t 49% | £4.5m | Minimum | ||||||||
| --- | --- | --- | |||||||||||
| 91% | t 9% | £1.1m | l | Salary | l | Pension/Benefits | l | Group Performance Share | l | Long Term Incentive Plan | l | Share price appreciation | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
Approach to recruitment and
appointment to the Board
In determining appropriate remuneration arrangements on hiring
a new executive director, the Committee will take into account
all relevant factors. This may include the experience and calibre
of the individual, local market practice, the existing remuneration
arrangements for other executives and the business circumstances.
The Committee will seek to ensure that arrangements are in the
best interests of both the Group and its shareholders and will seek
not to pay more than is necessary.
The Committee may make awards on hiring an external candidate
to ‘buy out’ remuneration arrangements forfeited, or opportunities
lost on leaving a previous employer. In doing so the Committee
will take account of relevant factors including any performance
conditions attached to these awards, the form in which they were
granted (e.g. cash or shares), the currency of the awards, and the
timeframe of awards. Any such award made will be made in
accordance with the PRA’s Rulebook and made on a comparable
basis to those forfeited and, where required, will be subject to
malus and clawback at the request of the previous employer as
required by the PRA rules.
The package will normally be aligned with the Remuneration
Policy. However, the Committee retains the discretion to make
appropriate remuneration decisions outside the standard Policy to
facilitate the recruitment of an individual of the required calibre in
exceptional circumstances.
This may, for example, include the following circumstances:
•An interim recruit, appointed to fill an executive director role on
a short-term basis
•Exceptional circumstances requiring the Chair to take on an
executive function on a short-term basis
•An executive director recruited from a business or location
where benefits are provided that do not fall into the
definition of ‘variable remuneration forfeited’ but where the
Committee considers it reasonable to buy out these benefits,
or where the form of remuneration to be bought out requires
a differentiated approach
•Transitional arrangements for overseas hires, which might include
relocation expenses and accommodation
Variable remuneration awarded to a new executive director may
not exceed the multiple of annualised fixed pay specified by the
Remuneration Committee.
In making any such remuneration decisions, the Committee will
apply any appropriate performance measures in line with those
applied to other executive directors.
A full explanation will be provided of any buy-out award or
discretionary payment.
Service agreements
The service contracts of all current executive directors are terminable
on 12 months’ notice from the Group and six months’ notice from the
individual. The Chair also has a letter of appointment. The Chair’s
engagement may be terminated on six months’ notice by either party.
| Notice to be given<br><br>by the Group | Date of service<br><br>agreement | |
|---|---|---|
| Sir Robin Budenberg | 6 months | 04 July 2020 |
| Charlie Nunn | 12 months | 29 November 2020 |
| William Chalmers | 12 months | 15 March 2019 |
The service contracts and letters of appointment are available for
inspection at the Company’s registered office.
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Notice periods
Newly appointed executive directors will be employed on contracts
that include the following provisions:
•The individual will be required to give six months’ notice if they
wish to leave and the Group will give 12 months’ notice other
than for material misconduct, neglect or other circumstances
where the individual may be summarily dismissed by written
notice. In exceptional circumstances, new joiners will be offered
a longer notice period (typically reducing to 12 months within
two years of joining)
•In the event of long-term incapacity, if the executive director
does not perform their duties for a period of at least 26 weeks
(in aggregate over a 12-month period), the Group shall be
entitled to terminate the executive’s employment by giving
three months’ notice
•At any time after notice to terminate is given by either the Group
or the executive director, the Group may require the executive
director to take leave for some or all of the notice period
•At any time, at its absolute discretion, the Group may elect
to terminate the individual’s employment by paying to the
executive director, in lieu of the notice period, an amount
equivalent to base salary, subject to mitigation as described
more fully in the termination payments section of this report
Letters of appointment
The non-executive directors all have letters of appointment and
are appointed for an initial term of three years after which their
appointment may continue subject to an annual review. Non-
executive directors may have their appointment terminated, in
accordance with statute, regulation and the articles of association,
at any time with immediate effect and without compensation.
All directors are subject to annual re-election by shareholders.
The service contracts and letters of appointments are available
for inspection at the Company’s registered office.
| NED | Date of letter of appointment | Date of appointment |
|---|---|---|
| Sir Robin Budenberg1 | 4 July 2020 | 1 October 2020 |
| Nathan Bostock | 29 July 2024 | 1 August 2024 |
| Sarah Legg | 21 October 2019 | 1 December 2019 |
| Amanda Mackenzie | 17 April 2018 | 1 October 2018 |
| Harmeen Mehta | 5 October 2021 | 1 November 2021 |
| Cathy Turner | 11 October 2022 | 1 November 2022 |
| Chris Vogelzang | 11 June 2025 | 16 June 2025 |
| Scott Wheway | 26 July 2022 | 1 August 2022 |
| Catherine Woods | 22 October 2019 | 1 March 2020 |
1Chair is subject to a six-month notice period.
| Remuneration Policy table for non-executive directors | |
|---|---|
 <br><br>Chair and non-executive director fees and benefits |
|
| Purpose and link to strategy<br><br>To provide an appropriate reward to attract and retain a<br><br>high-calibre individual with the relevant skills, knowledge<br><br>and experience, and to reflect the time commitment required<br><br>to fulfil the role effectively.<br><br>Operation<br><br>The Committee is responsible for evaluating and approving the<br><br>Chair’s fees. The Chair does not participate in these discussions.<br><br>The Group Chief Executive and the Chair are responsible for<br><br>evaluating and making recommendations to the Board in relation<br><br>to the fees of the non-executive directors (NEDs).<br><br>When determining and reviewing fee and benefit levels,<br><br>the Committee ensures that decisions are made within the<br><br>following parameters:<br><br>•The individual’s skills and experience<br><br>•An objective assessment of the individual’s responsibilities<br><br>and the size and scope of their role, using objective sizing<br><br>methodologies<br><br>•Fees and benefits for comparable roles in comparable<br><br>publicly listed firms of a similar size<br><br>The Chair receives an all-inclusive fee, which is reviewed<br><br>periodically plus benefits including life insurance, medical insurance<br><br>and transportation. The Committee retains the right to provide<br><br>additional benefits depending on individual circumstances. | NEDs are paid a basic fee plus additional fees for the Chair/<br><br>membership of Committees and for membership of Group<br><br>company Boards, non-Board level committees and/or other<br><br>specific responsibilities.<br><br>An additional fee is also paid to the Senior Independent Director<br><br>to reflect the additional responsibilities.<br><br>Any increases normally take effect from 1 January of a given year.<br><br>The Chair and the NEDs are not entitled to receive any payment<br><br>for loss of office (other than in the case of the Chair’s fees for the<br><br>six-month notice period) and are not entitled to participate in<br><br>the Group’s variable remuneration arrangements, all-employee<br><br>share plan or pension arrangements.<br><br>NEDs are reimbursed for expenses incurred in the course of<br><br>their duties, such as travel and accommodation expenses,<br><br>on a grossed-up basis (where applicable).<br><br>Maximum potential<br><br>Any increase in fees or benefits currently provided will be<br><br>consistent with the parameters above.<br><br>Performance measures<br><br>N/A<br><br>Changes<br><br>No change to Policy. |
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Directors’ remuneration report continued
Termination payments
It is the Group’s policy that where notice pay continues to be
payable after termination, it should be paid on a phased basis,
normally mitigated in the event that alternative employment is
secured in line with executive directors’ service contracts. Where it
is appropriate to make a GPS award to the individual, this should
relate to the period of active service, rather than the full notice
period. Any GPS payment will be determined on the basis of
performance as for all continuing employees and will remain subject
to performance adjustment (malus and clawback) and deferral.
Generally, on termination of employment, unvested GPS awards,
Group Ownership Share awards, Long Term Share Plan awards,
Long Term Incentive awards and other rights to payments will lapse
except where termination falls within one of the reasons set out
below. In the event of redundancy, the individual may receive a
payment in line with statutory entitlements at that time. If an
executive director is dismissed for gross misconduct, the executive
director will receive normal contractual entitlements until the date
of termination and all deferred GPS, Group Ownership Share, Long
Term Share Plan and Long Term Incentive Plan awards will lapse.
| Termination payments | | --- || | Base salary | Pension and benefits1 | | --- | --- | --- | | Resignation | Entitlement to base salary continues for full notice period.<br><br>If employment is terminated prior to end of notice period,<br><br>balance of notice pay is paid in monthly instalments, offset<br><br>by earnings from any new employment during this period.<br><br>If resignation is to take up a new employment, base salary<br><br>would continue during any period of garden leave but may<br><br>then cease if early release date agreed. | Paid until date of termination including any period<br><br>of leave required by the Group (subject to<br><br>individual benefit scheme rules). | | Redundancy or<br><br>termination by mutual<br><br>agreement | Entitlement to base salary continues for full notice period.<br><br>If employment is terminated prior to end of notice period,<br><br>balance of notice pay is paid in monthly instalments, offset<br><br>by earnings from any new employment during this period. | Paid until date of termination including any period<br><br>of leave required by the Group (subject to<br><br>individual benefit scheme rules). | | Retirement/ill health,<br><br>injury, permanent<br><br>disability/death | Paid until date of retirement/death. For ill health, injury or<br><br>permanent disability which results in the loss of employment,<br><br>paid for the applicable notice period (including any period of<br><br>leave required by the Group). | Paid until date of death/ retirement (subject to<br><br>individual benefit scheme rules). For ill health,<br><br>injury, permanent disability, paid for the notice<br><br>period including any period of leave required by the<br><br>Group (subject to individual benefit scheme rules). | | Change of control<br><br>or merger | N/A | N/A | | Other reason where the<br><br>Committee determines<br><br>that the executive should<br><br>be treated as a good leaver | Entitlement to base salary continues for full notice period.<br><br>If employment is terminated prior to end of notice period,<br><br>balance of notice pay is paid in monthly instalments, offset<br><br>by earnings from any new employment during this period. | Paid until date of termination including any period<br><br>of leave required by the Group (subject to<br><br>individual benefit scheme rules). |
1In certain circumstances, certain benefits may continue for a period post-termination.
Chair and non-executive director fees
Chair and non-executive director fees are paid until the date of leaving the Board in all circumstances set out above. The Chair is entitled to
six months’ notice.
Lloyds Banking Group plc Annual Report and Accounts 2025
133
| Termination payments | | --- || | Group Performance Share<br><br>(Annual bonus plan)1,2,5 | Long Term Incentive Plan<br><br>(Long term variable reward plan)2,3,4,5 | | --- | --- | --- | | Resignation | Unvested deferred GPS awards and entitlement<br><br>to be considered for in-year award are normally<br><br>forfeited on resignation unless the Committee<br><br>determines, in exceptional circumstances, to treat<br><br>as a good leaver, as set out below. | Unvested awards normally lapse on date of leaving (or on notice of<br><br>leaving) unless the Committee determines otherwise in exceptional<br><br>circumstances that they will vest on the original vesting date<br><br>(or exceptionally on the date of leaving).<br><br>Where the award is to vest it will be subject to the original performance<br><br>conditions and time pro-rating (for months worked in the performance<br><br>period). Malus and clawback will apply. | | Redundancy or<br><br>termination by<br><br>mutual agreement | For cases of redundancy, unvested deferred<br><br>GPS awards are retained and in-year GPS<br><br>awards are accrued until the date of termination<br><br>(or the commencement of garden leave if earlier).<br><br>Such awards would be subject to deferral, malus<br><br>and clawback. | Awards vest on the original vesting date (or exceptionally on the date<br><br>of leaving). Vesting is subject to the performance conditions and time<br><br>pro-rating (for months worked in the performance period). Malus and<br><br>clawback provisions will continue to apply. | | Retirement/ill health,<br><br>injury, permanent<br><br>disability | Unvested deferred GPS awards are retained and<br><br>in-year GPS awards are accrued until the date of<br><br>termination (or the commencement of garden<br><br>leave if earlier). Such awards would be subject to<br><br>deferral, malus and clawback. | Awards vest on the original vesting date (or exceptionally on the date<br><br>of leaving). Vesting is subject to the performance conditions and time<br><br>pro-rating (for months worked in the performance period). Malus and<br><br>clawback provisions will continue to apply. | | Death | Unvested deferred GPS awards are retained and<br><br>in-year GPS awards are accrued until the date of<br><br>death. Deferred GPS awards vest on death in<br><br>cash, unless the Committee determines<br><br>otherwise. | Awards vest in full on the date of death unless in exceptional<br><br>circumstances the Remuneration Committee determines that the<br><br>performance against targets set do not support full vesting. | | Change of control<br><br>or merger | In-year GPS accrued up until date of change of<br><br>control or merger (current year). Where there is a<br><br>Corporate Event, deferred GPS awards vest to the<br><br>extent and timing determined by the Committee<br><br>in its absolute discretion. | Awards vest on date of event. Vesting is subject to the performance<br><br>conditions and time pro-rating (for months worked in the performance<br><br>period unless determined otherwise). The Committee may decide<br><br>not to time pro-rate in its absolute discretion. Malus and clawback<br><br>provisions will continue to apply. Instead of vesting, awards may be<br><br>exchanged for equivalent awards over the shares of the acquiring<br><br>company or another company or equivalent cash based awards. | | Other reason where<br><br>the Committee<br><br>determines that<br><br>the executive<br><br>should be treated<br><br>as a good leaver | Unvested deferred GPS awards retained and<br><br>in-year GPS awards are accrued until the date of<br><br>termination (or the commencement of garden<br><br>leave if earlier). Deferred GPS awards vest in line<br><br>with normal timeframes and are subject to malus<br><br>and clawback. The Committee may allow awards<br><br>to vest early if it considers it appropriate. | Awards vest on the original vesting date (or exceptionally on the date<br><br>of leaving). Vesting is subject to the performance conditions and time<br><br>pro-rating (for months worked in the performance period). Malus and<br><br>clawback provisions will continue to apply. |
1If any GPS is to be paid to the executive director for the current year, this will be determined on the basis of performance for the period of actual service, rather than the full notice
period (and so excluding any period of leave required by the Group).
2Reference to change of control or merger includes a compromise or arrangement under section 899 of the Companies Act 2006 or equivalent. Legacy fixed share awards may also be
released/ exchanged in the event of a resolution for the voluntary winding up of the Company; a demerger, delisting, distribution (other than an ordinary dividend) or other transaction,
which, in the opinion of the Committee, might affect the current or future value of any award; or a reverse takeover, merger by way of a dual listed company or other significant
corporate event, as determined by the Committee. In the event of a demerger, special dividend or other transaction which would in the Committee’s opinion affect the value of
awards, the Committee may allow a deferred Group Performance Share award or a long term incentive award to vest to the extent relevant performance conditions are met to that
date and if the Committee so determined, on a time pro-rated basis (unless determined otherwise) to reflect the number of months of the performance period worked.
3The terms applicable on a cessation of employment to GOS awards are as shown on page 97 of the 2017 Remuneration Policy. The terms applicable on a cessation of employment to
LTSP awards as shown on page 122 of the 2020 Remuneration Policy.
4In the event that performance conditions are required to be assessed prior to the normal vesting date in connection with the leaver event, the Committee retains discretion to make
such an assessment on such basis as it considers appropriate.
5Any awards which vest pursuant to a good leaver event will remain subject to any applicable post-vesting holding period.
On termination, the executive director will be entitled to payment for any accrued holiday not taken as part of any period of garden leave
calculated by reference to base salary.
The cost of legal, tax or other advice incurred by an executive director in connection with the termination of their employment and/or the
cost of support in seeking alternative employment may be met up to a maximum of £100,000 (excl. VAT). Additional payments may be
made where required to settle legal disputes, or as consideration for new or amended post-employment restrictions.
Where an executive director is in receipt of expatriate or relocation expenses at the time of termination (as at the date of publication no
current executive director is in receipt of such expenses), the cost of actual expenses incurred or benefits provided may continue to be
reimbursed for up to 12 months after termination or, at the Group’s discretion, a one-off payment may be made to cover the costs of
premature cancellation. The cost of repatriation may also be covered.
Audited content
All narrative and quantitative tables within the directors’ remuneration report are unaudited unless otherwise stated. Where disclosures
have been audited, this has been carried out under International Standards on Auditing (ISAs).
Lloyds Banking Group plc Annual Report and Accounts 2025
134
Other statutory and regulatory information
This directors’ report on pages 66 to 136 is our
directors’ report for the purposes of the Companies
Act 2006 and fulfils the requirements of the
corporate governance statement for the purposes
of the Financial Conduct Authority’s Disclosure
Guidance and Transparency Rules (DTR).
Profit and dividends
The consolidated income statement shows a statutory profit
before tax for the year ended 31 December 2025 of £6,661 million
(2024: £5,971 million). The directors have recommended a final
ordinary dividend for 2025, which is subject to approval by the
shareholders at the annual general meeting (AGM), of 2.43 pence per
share, which together with the interim ordinary dividend of 1.22 pence
per share represents a total ordinary dividend for the year of
3.65 pence per share, equivalent to £2.2 billion. If approved by
shareholders, the final ordinary dividend will be paid on 19 May 2026.
A final ordinary dividend of 2.11 pence per share totalling
£1,271 million in respect of 2024 was paid on 20 May 2025 and
an interim ordinary dividend of 1.22 pence per share totalling
£729 million was paid on 9 September 2025. Further information
on dividends is shown in note 34 on page 289 and is incorporated
into this directors’ report by reference.
For 2025, the Board intends to return up to £1.75 billion through
a share buyback programme in respect of the Company’s ordinary
shares. 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 regulatory requirements and cover uncertainties.
The share buyback programme commenced on 30 January 2026
and is expected to be completed by 31 December 2026. Based
on the total proposed ordinary dividend and the intended ordinary
share buyback the total capital return in respect of 2025 will be up
to £3.9 billion.
The Company intends to use the authority for the repurchase of
ordinary shares granted to it at the 2025 AGM to implement the
share buyback. Details of this existing authority are set out under
‘Power of directors in relation to shares’. Shareholders will be
asked to renew the authority at the 2026 AGM, in line with
common practice.
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.
Appointment and retirement of directors
The appointment and retirement of directors is governed by the
Company’s articles of association, the UK Corporate Governance
Code 2024 and the Companies Act 2006. The Company’s articles
of association may only be amended by a special resolution of the
shareholders in a general meeting.
In the interests of good governance and in accordance with the
provisions of the UK Corporate Governance Code 2024, all directors
will retire at the 2026 AGM and those wishing to serve for the first
time or again will submit themselves for election or re-election
(as applicable). Biographies of the current directors are set
out on pages 68 to 69. Details of the directors seeking election
or re-election at the AGM are set out in the Notice of Meeting.
Board composition
The names and biographical information of all current directors are
on pages 68 to 69. Changes to the composition of the Board since
1 January 2025 up to the date of this report are shown in the
table below:
| Joined the Board | Left the Board | |
|---|---|---|
| Chris Vogelzang | 16 June 2025 | |
| Scott Wheway | 31 October 2025 |
Directors’ and officers’ liability insurance
Throughout 2025 the Group had appropriate insurance cover
in place to protect directors, including the directors who retired
during the year, from liabilities that may arise against them
personally in connection with the performance of their role.
As well as insurance cover, the Group agrees to indemnify the
directors to the maximum extent permitted by law. Further
information on the Group’s indemnity arrangements is provided
in the directors’ indemnities section below.
Directors’ indemnities
The directors of the Company have entered into individual
deeds of indemnity with the Company which constituted ‘qualifying
third-party indemnity provisions’ for the purposes of the Companies
Act 2006. The deeds indemnify the directors to the maximum
extent permitted by law and remain in force. The deeds were in
force during the whole of the financial year or from the date of
appointment for any director appointed during the course of the
year. Deeds for existing directors are available for inspection at the
Company’s registered office.
The Company has also granted deeds of indemnity by deed poll
and by way of entering into individual deeds, which constitute
‘qualifying third-party indemnity provisions’ to the directors of
the Group’s subsidiary companies, including to former directors
who retired during the year and since the year end, and to Group
colleagues subject to the provisions of the Senior Managers and
Certification Regime. Such deeds were in force during the financial
year ended 31 December 2025 and remain in force as at the date of
this report.
Qualifying pension scheme indemnities have also been granted to
the trustees of the Group’s pension schemes, which were in force
for the whole of the financial year and remain in force as at the date
of this report.
Conflicts of interest
The Board has a comprehensive procedure for reviewing, and as
permitted by the Companies Act 2006 and the Company’s articles
of association, approving actual and potential conflicts of interest.
Directors have a duty to notify the Chair and Company Secretary
as soon as they become aware of actual or potential conflict
situations. Any changes to the commitments of directors are
reported to the Nomination and Governance Committee and the
Board and a register of directors’ interests is regularly reviewed and
authorised by the Board to ensure that the authorisation status
remains appropriate.
Share capital
Detail of the rights and obligations attaching to the Company’s
issued share capital may be found in notes 29 and 30 to the
financial statements on pages 285 and 287.
Power of directors in relation to shares
The Board manages the business of the Company under the powers
set out in the articles of association, which include the directors’
ability to issue or buy back shares. The directors were granted
authorities to issue and allot shares and to buy back shares at the
2025 AGM. Shareholders will be asked to renew these authorities at
the 2026 AGM.
The authority in respect of purchase of the Company’s ordinary
shares, as granted at the 2024 AGM, was limited to 6,377,697,127
ordinary shares, equivalent to 10% of the issued ordinary share
capital of the Company as at the latest practicable date prior to
publication of the 2024 AGM Notice of Meeting. Such authority
was used during the year under review in connection with the share
buyback programme described below and, as at 31 December 2025
and the date of this report, a total of 2,204,109,740 ordinary shares
had been repurchased under such authority.
Lloyds Banking Group plc Annual Report and Accounts 2025
135
The Company undertook an ordinary share buyback programme,
which was launched on 21 February 2025 and ended on 8 December
- The programme repurchased in aggregate 2,204,109,740
ordinary shares, each with a nominal value of 10 pence, for an
aggregate consideration of c.£1.7 billion (aggregate nominal value
of the ordinary shares £220,410,974) as a means by which to return
surplus capital to shareholders and to reduce the ordinary share
capital of the Company.
All of the repurchased ordinary shares were cancelled and together
represented 3.74% of the called up share capital of the Company
as at 31 December 2025. Further information in relation to the
2025 ordinary share buyback programme is provided on page 57.
The authority in respect of purchase of the Company’s
ordinary shares, as granted at the 2025 AGM, was limited to
6,059,214,381 ordinary shares, none of which had been utilised
as at 31 December 2025, however will be utilised for the buyback
programme commenced on 30 January 2026. Information on
transactions in own shares is made publicly available via the
regulatory information service and on the Company’s website at
www.lloydsbankinggroup.com
Branches
The Group provides a wide range of banking and financial services
through branches and offices in the UK and overseas.
Research and development activities
During the ordinary course of business, the Group develops new
products and services within the business units.
Change of control
The Company is not party to any significant agreements which take
effect, alter or terminate upon a change of control of the Company
following a takeover bid. There are no agreements between the
Company and its directors or employees providing compensation
for loss of office or employment resulting from a takeover, except
for the Company’s employee share plans which contain provisions
relating to a change of control set out on page 287.
Capital Requirements
(Country-by-Country Reporting)
As required under the Capital Requirements (Country-by-Country
Reporting) Regulations 2013, the Group’s related disclosures may
be found online on the financial downloads page of our website.
Post balance sheet events
Details of events since the date of the balance sheet are provided
in note 41 on page 296.
Substantial shareholders
Major shareholders do not have different voting rights from other
holders of ordinary shares. Information provided to the Company
by substantial shareholders pursuant to the DTR is published
via a Regulatory Information Service. As at 31 December 2025,
the Company had been notified by its substantial shareholders
under Rule 5 of the DTR of the following interests in the
Company’s shares:
| Interest in shares | % of issued share capital with<br><br>rights to vote in all circumstances<br><br>at general meetings1 | |
|---|---|---|
| BlackRock, Inc. | 3,668,756,7652 | 5.14% |
| Norges Bank | 1,935,747,756 | 3.02% |
1Percentage provided was correct at the date of notification. All holdings are direct
holdings unless stated to the contrary.
2The most recent notification provided by BlackRock, Inc. under Rule 5 of the DTR
identifies (i) an indirect holding of 3,599,451,380 shares in the Company representing
5.04% of the voting rights in the Company, and (ii) a holding of 69,305,385 in other
financial instruments in respect of the Company representing 0.09% of the voting
rights of the Company. As at 11 February 2026, BlackRock, Inc.’s holding most recently
notified to the Company under Rule 5 of the DTR varies from the holding disclosed in
BlackRock, Inc.’s Schedule 13-G filing with the US Securities and Exchange Commission
dated 8 February 2024, which identifies beneficial ownership of 5,352,886,800 shares
in the Company representing 8.4% of the issued share capital in the Company. This
variance is attributable to different notification and disclosure requirements between
these regulatory regimes.
Harris Associates L.P. held at last notification on 19 July 2021 pursuant to Rule 5 of the
DTR an indirect holding of 3,546,216,787 shares, representing 4.99%. It is understood
that Harris Associates L.P. disposed of their holding during the course of 2025.
No further notifications have been received under Rule 5 of the DTR
as at the date of this report.
Information incorporated by reference
| Content | Pages | |
|---|---|---|
| Group results | Summary of Group results | 53 to 59 |
| Ordinary dividends | Dividends on ordinary shares | 289 |
| Directors’ emoluments | Directors’ remuneration report | 98 to 133 |
| Internal control and<br><br>financial risk management | Financial reporting risk | 141 |
| Risk management | 24 to 29<br><br>137 to 197 | |
| Financial instruments | 255 to 266<br><br>294 | |
| Information included in<br><br>the strategic report | Future developments | 1 to 29 |
| Post balance sheet events | 2 and 3 | |
| Environmental disclosures | 32<br><br>35 to 49 | |
| Supporting disability | 22 | |
| Engagement with colleagues | 22 and 77 | |
| Engagement with customers,<br><br>suppliers and others | 76 to 78 | |
| Disclosures required under<br><br>UK Listing Rule 6.6.1R | Significant contracts | 290 to 291 |
| Dividend waivers | 289 to 290 | |
| Principal risks and<br><br>uncertainties | Funding and liquidity | 27<br><br>181 to 186 |
| Capital position | 25<br><br>144 to 150 | |
| Viability statement | Risk overview | 34 |
| Going concern statement | Risk overview | 34 |
| Share capital and control | Share capital and restrictions<br><br>on the transfer of shares or<br><br>voting rights | 287 |
| Employee share schemes –<br><br>exercise voting rights | 287 | |
| Rights and obligations<br><br>attaching to the Company’s<br><br>issued share capital | 287 | |
| Environmental disclosures | Carbon reporting | 47 to 48 |
Independent auditor and audit information
Each person who is a director at the date of approval of this report
confirms that, so far as the director is aware, there is no relevant
audit information of which the Company’s auditor is unaware and
each director has taken all the steps that he or she ought to have
taken as a director to make himself or herself aware of any relevant
audit information and to establish that the Company’s auditor is
aware of that information.
This confirmation is given and should be interpreted in accordance
with the provisions of the Companies Act 2006.
Lloyds Banking Group plc Annual Report and Accounts 2025
136
Other statutory and regulatory information continued
Board and executive management diversity (these disclosures are made as at 31 December 2025, in compliance
with UK Listing Rules UKLR 6.6.6(9) and UKLR 6.6.6(10))
Reporting table on gender representation
| Number of<br><br>Board members | Percentage of<br><br>the Board | Number of senior positions<br><br>on the Board (CEO, CFO,<br><br>SID and Chair) | Number in executive<br><br>management<br><br>(GEC) | Percentage in executive<br><br>management<br><br>(GEC) | |
|---|---|---|---|---|---|
| Men | 5 | 50% | 3 | 8 | 61.5% |
| Women | 5 | 50% | 1 | 5 | 38.5% |
| Other categories | 0 | 0% | 0 | 0 | 0.0% |
| Not specified/Prefer not to say | 0 | 0% | 0 | 0 | 0.0% |
Reporting table on ethnicity representation
| Number of<br><br>Board members | Percentage of<br><br>the Board | Number of senior positions<br><br>on the Board (CEO, CFO,<br><br>SID and Chair) | Number in executive<br><br>management<br><br>(GEC) | Percentage in<br><br>executive management<br><br>(GEC) | |
|---|---|---|---|---|---|
| White British or other white | 8 | 80% | 4 | 11 | 84.6% |
| Mixed/Multiple ethnic groups | 1 | 10% | 0 | 0 | 0% |
| Asian/Asian British | 1 | 10% | 0 | 2 | 15.4% |
| Black/African/Caribbean/Black British | 0 | 0% | 0 | 0 | 0% |
| Other ethnic group | 0 | 0% | 0 | 0 | 0% |
| Not specified/prefer not to say | 0 | 0% | 0 | 0 | 0% |
Methodology and definitions
All data in the table above is disclosed as at 31 December 2025.
All diversity information for ethnicity is based on voluntary self-
declaration with Board and executive management asked to
disclose based on the categories shown in the table above. Our
systems do not record diversity data of colleagues who have not
declared this information and is for UK payroll only. Gender data
includes those on parental/maternity leave, absent without leave
and long-term sick and excludes contractors, Group non-executive
directors, temporary and agency staff. Executive management
numbers are based on members and attendees of the Group
Executive Committee. Diversity calculations are based on
headcount, not full-time employee value.
Further details on our gender and diversity data including progress
on our ambitions can be found on pages 22 to 23.
Statement of directors’ responsibilities
The directors are responsible for preparing the annual report,
including the directors’ remuneration report and the financial
statements, in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements
for each financial year. Under that law, the directors are required
to prepare the Group and parent company financial statements in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006.
Under company law, the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and the Company and of
the profit or loss of the Company and Group for that period. In
preparing these financial statements, the directors are required to
properly select and apply accounting policies; present information,
including accounting policies, in a manner that provides relevant,
reliable, comparable and understandable information; provide
additional disclosures when compliance with the specific
requirements in international accounting standards in conformity
with the requirements of the Companies Act 2006 are insufficient
to enable users to understand the impact of particular transactions,
other events and conditions on the entity’s financial position and
financial performance; and make an assessment of the Company’s
ability to continue as a going concern. The financial statements also
comply with International Financial Reporting Standards as issued
by the IASB.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the Company and the Group and enable
them to ensure that the financial statements and the directors’
remuneration report comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
the Group and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s
website. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation in
other jurisdictions.
Each of the current directors who are in office as at the date of this
report, and whose names and functions are listed on pages 68 to 69
of this annual report, confirm that, to the best of his or her knowledge:
•The Group and the Company financial statements, which have
been prepared in accordance with international accounting
standards in conformity with the requirements of the Companies
Act 2006, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the
undertakings included in the consolidation taken as a whole
•The strategic report and directors’ report include a fair review
of the development and performance of the business and the
position of the Company and the undertakings included in the
consolidation taken as a whole, together with a description of
the principal risks and uncertainties they face
•The annual report and accounts, taken as a whole, are fair,
balanced and understandable and provide the information
necessary for shareholders to assess the Company and the
Group’s position, performance, business model and strategy
This responsibility statement was approved by the Board of
directors on 13 February 2026.
Kate Cheetham
Company Secretary
On behalf of the Board
13 February 2026
Lloyds Banking Group plc
Registered in Scotland, No. SC095000
Lloyds Banking Group plc Annual Report and Accounts 2025
137
Risk
management
| The Group’s approach to risk | 138 |
|---|---|
| Risk governance structure | 140 |
| Stress testing | 142 |
| Full analysis of principal risk categories | 144 |
Driving
opportunities
through a strong
risk culture
A robust approach to risk management
is integral to the Group’s strategy of delivering
sustainable growth
Lloyds Banking Group plc Annual Report and Accounts 2025
138
Risk management
Risk management is at the heart of
Helping Britain Prosper and creating a
more sustainable and inclusive future
for people and businesses.
Our mission is to protect our customers,
shareholders, colleagues and the Group, while
enabling sustainable growth. This is achieved through
informed risk decisions and robust risk management,
supported by a consistent risk-focused culture.
The Risk overview (pages 24 to 29) provides a summary of risk
management within the Group and the key focus areas for 2025.
This full risk management section provides a more in-depth view of
how risk is managed within the Group including key developments
in 2025, and the framework by which risks are identified, assessed,
managed, mitigated, monitored and reported.
All narrative and quantitative tables within the risk management
section are unaudited unless otherwise stated. The audited
information is required to comply with the requirements of relevant
IFRS Accounting Standards.
The Group’s approach to risk
The Group operates a prudent approach to risk, with rigorous
controls, supporting sustainable business growth within the
Group’s risk appetite and minimising losses. Through a strong and
independent risk function, a robust control framework is maintained
to identify and escalate current and emerging risks, and drive good
risk-reward decision making.
To comply with UK-specific ring-fencing requirements, core banking
services are ring-fenced from other activities within the overall
Group. The Group’s Corporate Governance Framework applies
across Lloyds Banking Group plc, Lloyds Bank plc, Bank of Scotland
plc and HBOS plc. It is tailored where needed to meet the entity-
specific needs of Lloyds Bank plc and Bank of Scotland plc, within
the Ring-Fenced Bank sub-group (RFB) and supplementary
corporate governance frameworks are in place to address the
specific requirements of the other sub-groups (Non-Ring-Fenced
Bank, Insurance and Direct Investments).
The Group’s Risk Management Framework (RMF) was enhanced in
2025 and is structured to align with the industry-accepted internal
control framework standards and applies to every area of the
business, covering all types of risk. The framework defines a
proportionate, materiality-based approach to risk management
that can be consistently applied across the Group. This enhanced
approach replaces previous legal entity and business-specific
frameworks, ensuring clarity, consistency and an ease of use.
The Group’s RMF also includes an evolved approach to risk
appetite, which introduces a consistent and top-down approach to
the setting of Board risk appetite across the Group and its legal
entities. This provides greater clarity and visibility of the Group’s risk
appetite, demonstrating the significance of risk appetite for the
Group in achieving its strategic objectives.
The RMF provides the Group with an effective mechanism for
developing and embedding risk policies and risk management
strategies which are aligned with the risks faced by its businesses.
Risk policies have been updated during 2025, setting out
mandatory requirements, limits, parameters and controls to
ensure each of the Group’s risks remain within appetite.
Key enhancements to the RMF have been delivered through the
Resetting Risk programme. The Risk function’s focus is now on
supporting the embedding of the enhanced framework across the
Group to ensure consistent application, maturity, and sustained
effectiveness.
The Group’s risk management framework
The RMF has connectivity across its component parts, ensuring
processes are in place to facilitate risk management and decision-
making across the organisation. It provides a common structure
across the Group and can be appropriately calibrated for all legal
entities, business units and Group functions.
| Group strategy<br><br>and the risk<br><br>management<br><br>strategy | | --- || Culture,<br><br>values and<br><br>behaviours | | --- || Risk<br><br>architecture<br><br>and approach | | --- || Risk<br><br>management<br><br>framework | | --- || Risk<br><br>appetite | | --- || Risk<br><br>governance | | --- || Risk function<br><br>mandate | | --- || Three lines<br><br>of defence | | --- |
Group strategy and the risk management strategy
The Group strategy is underpinned by clear strategic priorities and
financial targets designed to create value and deliver sustainable
returns. It is shaped by an understanding of the Group’s risk profile,
considering economic, political and regulatory uncertainties. This
informs risk appetite and risk management practices.
All risk-taking activities are aligned to the Group’s strategy and
purpose, aiming to generate sustainable outcomes and shareholder
value. The Group and legal entity Chief Risk Officers (CROs) play a
critical role by challenging proposals, reconciling risk appetite, and
ensuring adherence through ongoing oversight.
The risk management strategy enables consistent management of
principal risks within appetite and the target control environment.
It draws on risk and control improvement plans, developed by sub-
groups, legal entities and business units, which outline actions to
strengthen capabilities over a defined period.
The Risk function oversees and challenges the business, combining
these plans with regular reporting to ensure operations remain
within appetite and improvements are delivered as planned. It also
maintains its own plan to enhance the RMF and achieve the target
state for risk management.
Culture, values and behaviours
The Group’s culture, guided by the Group’s values, is fundamental
to its purpose of Helping Britain Prosper and its strategic objectives.
Leaders shape and embed a supportive risk culture of
accountability, strong customer focus, intellectual curiosity,
innovation and proactive risk management. The RMF, Code of
Ethics and Responsibility and Colleague Conduct Policy give
guidance and tools for working responsibly and making the right
decisions. Speak Up, the Group’s whistleblowing programme,
ensures colleagues’ concerns are taken seriously and treated
sensitively.
Lloyds Banking Group plc Annual Report and Accounts 2025
139
To support a strong risk culture across the Group, all colleagues
complete risk training as part of their annual mandatory training.
A library of risk management learning resources is available, which
all colleagues who have specific risk management roles can access
to build their skills and capabilities.
There is ongoing investment in risk systems and models alongside
the Group’s focus on customer and product systems and processes.
This drives improvements in risk data quality, aggregation and
reporting, enabling effective and efficient risk decisions.
Risk governance
The Group’s approach to risk is based on a robust control
framework and strong risk management culture, enabling the
delivery of effective risk management, guiding the way all
employees approach their work, behave and make decisions.
Authority is delegated from the Board to individuals through the
management hierarchy. Senior management are supported by a
committee-based structure, ensuring open challenge and effective
decision making.
The Group’s risk appetite, principles, policies, procedures, controls,
and reporting are regularly reviewed and updated as required, to
ensure they remain in line with evolving regulation, law, corporate
governance and industry good practice.
The Board and senior management encourage a culture of
transparency which supports the interaction of the executive and
non-executive governance structure.
Board-level engagement, combined with senior management in
Group-wide risk issues at Group Executive Committee level, ensure
that any escalated issues are addressed promptly and that
necessary remediation plans are initiated as required.
Line managers are accountable for identifying and managing risks in
their individual businesses, ensuring that business decisions balance
risk and reward, and are consistent with the Group’s risk appetite.
The risk governance structure is explained on page 140.
Three lines of defence
In line with industry best practice, the Group adopts a three lines of
defence model of risk governance, implemented on a functional,
rather than activity basis. This model is reviewed annually by the
Board as part of its RMF approval.
All colleagues are responsible for the management of risk in day-to-
day activities, demonstrating risk practices and behaviours that are
consistent with the Group’s purpose, values and culture. The Group
Chief Executive (GCE) leads on all aspects of executive governance
as part of the execution of the Board-approved strategy, business
and operating plan and ensures the efficient use of resources. The
effective management of risks as defined within the RMF, however
is considered to be outside of the three lines of defence. The Board
also sits above the three lines of defence.
The first line of defence (1LOD) and second line of defence (2LOD)
are considered as management and operate the control
environment. Independence must be maintained through clear
boundaries of accountability, however a service may be provided
from one line to another, for example the provision of subject
matter expertise.
In line with the functional approach, control activities undertaken
by specific functions within 1LOD, such as Group Finance and Group
Legal, do not result in these functions being part of 2LOD. Further,
risk management activities and approvals performed within the Risk
function, including reporting and model development, do not result
in these functions being considered as 1LOD.
The roles and responsibilities of each of the three lines of defence
are outlined on page 140.
Risk function mandate
The Risk function mandate expands on the requirements for Risk as
an oversight and control function that are set out in the three lines
of defence. It sets out the role of the CRO, including their
accountabilities, and the key outcomes expected of the Risk
function in relation to oversight and challenge, control and culture.
This section sets the high-level mandate for the Risk function to
perform oversight and challenge activities across the Group and will
support the development of a consistent, proportionate and
materiality-based approach to risk oversight for all legal entities,
business units and Group functions.
Risk appetite
The Group’s approach to setting and the ongoing management of
risk appetite is an integral component of the Group’s RMF.
The Group defines risk appetite as the type and aggregate level of
risk it is willing to take or accept in pursuit of its strategic objectives
and business plans.
The Board is responsible for approving the Group’s Board risk
appetite at least annually. Risk appetite is documented for the
Group, as well as sub-groups and legal entities as required. All legal
entities, business units and Group functions must operate within the
risk appetite parameters set by the Group Board. Group Board-level
risk appetite metrics are augmented further by lower-level measures
to facilitate the management of Board risk appetite. The
performance of Board risk appetite metrics and management
measures across risk types is reported regularly to Board Risk
Committee and Group Risk Committee.
The Group’s risk appetite statement is articulated through
qualitative statements of risk appetite and quantitative risk
appetite metrics. These are defined for all principal risks as
appropriate, setting clear boundaries and expectations under both
business-as-usual and stress conditions.
The Group’s strategy and risk management strategy operate in
tandem with risk appetite. It reinforces the Group’s purpose,
strategy and objectives by driving behaviour and setting boundaries
around risk taking, to monitor changes in risk exposure, enabling the
delivery of its strategic aims.
Risk architecture and approach
This sets out a common language and standard definitions to
facilitate consistency and clarity in risk management terminology
and how risks should be managed. Policy architecture for all
principal risks ensures a consistent approach to the management
of risk across the Group. High-level risk principles and detailed risk
policies explain the requirements, controls, limits and parameters
that must be implemented to manage risk, and the risk
management tools and processes to be used across the Group.
The Group’s events-based risk management framework is
comprised of principal risks, underpinned by a second and third risk
level as appropriate. This brings consistency and clarity of the risks
that the Group faces, aligning to industry best practice and
regulatory expectations.
Additionally, the Group identifies emerging and topical risks by
proactive horizon scanning and assessment of the potential impact
of a future internal or external event of trend, which could have a
materially positive or adverse impact on the Group and its
customers, but where the probability, timescale and/or materiality
may be difficult to accurately assess. These will be added to the
events-based risk management framework as appropriate.
Lloyds Banking Group plc Annual Report and Accounts 2025
140
Risk management continued
Risk governance structure
The risk governance structure below is integral to effective risk management across the Group. To meet ring-fencing requirements, the
Boards and Board Committees of the Group, and the Ring-Fenced Banks as well as relevant Committees of the Group, and the Ring-
Fenced Banks will sit concurrently and are referred to as the Aligned Board Model. Please see page 73 for further information on the
Group’s approach to ring-fencing.
| Risk governance structure |
| --- || Audit Committee | Board | | Board Risk Committee |
| --- | --- | --- | --- |
| Group Chief Executive | | | |
| | Primary escalation | | |
| Group and Ring-Fenced Banks Risk Committee | | | |
| | Primary escalation | | |
| Risk Function committees<br><br>and governance | | Business area principal<br><br>enterprise risk committees | || Aggregation | Reporting | Escalation |
| --- | --- | --- || Three lines of defence model<br><br>The RMF establishes a ‘three lines of defence’ model defining clear responsibilities and accountabilities and ensuring effective independent oversight<br><br>and assurance on key decisions, while ensuring appropriate risk resource and capabilities for each area: | | | | |
| --- | --- | --- | --- | --- |
| First line of defence | 
<br><br>Independent<br><br>challenge of<br><br>first line of<br><br>defence | Second line of defence | <br><br>Independent<br><br>challenge of<br><br>both first and<br><br>second lines<br><br>of defence | Third line of defence |
| Risk management | | Risk oversight | | Risk assurance |
| Business areas have end-to-end<br><br>accountability for risks in their<br><br>processes and must ensure strong<br><br>governance and controls, both<br><br>internally and with third parties,<br><br>to manage risks appropriately<br><br>within Board-approved appetite<br><br>parameters. They identify, assess,<br><br>mitigate, monitor, and report risks,<br><br>maintain risk management skills, and<br><br>comply with Group policies and<br><br>relevant regulations. | | The Risk function, led by the Chief<br><br>Risk Officer, is independent from<br><br>the first line of defence. It advises<br><br>on, monitors, challenges, approves,<br><br>escalates, and reports to the Board<br><br>and Group Chief Executive on<br><br>first-line risk-taking. It oversees<br><br>governance, risk management,<br><br>controls and regulatory compliance,<br><br>ensuring these align to the RMF and<br><br>Board-set risk appetite. | | Group Audit, led by the Chief<br><br>Internal Auditor, provide<br><br>independent assurance on the<br><br>effectiveness of the first and second<br><br>lines of defence’s management of<br><br>risk, including assessing the design<br><br>and operation of key controls and<br><br>the adequacy and effectiveness of<br><br>internal controls. Their scope of<br><br>work is unrestricted based on their<br><br>independent assessment of the<br><br>Group’s key risks. |
Group Board and executive committees with risk management responsibilities
Assisted by the Board Risk and Audit Committees, the Board approves the Group’s overall governance, risk and control frameworks and
risk appetite. Refer to the corporate governance section on pages 72 to 73 for further information on Board Committees.
The governance structure includes several committees with defined roles and responsibilities, summarised below:
| Board committees | Risk focus |
|---|---|
| Board | Approves risk appetite and the RMF, identifies and<br><br>monitors exposures including principal risks and<br><br>emerging risks, reviews internal controls and the<br><br>cascade of delegated authority |
| Board Risk<br><br>Committee | Oversees the RMF, its effectiveness, and that of<br><br>internal controls; risk appetite, risk principles, stress<br><br>testing, and approves ICAAP and ILAAP. Inputs into<br><br>remuneration decisions |
| Audit Committee | Oversees financial reporting, internal audit and<br><br>whistleblowing |
| Executive committees | |
| Group Executive<br><br>Committee | Supports the Group Chief Executive with risk,<br><br>strategy, customer, colleague and operational<br><br>matters, culture change and succession planning |
| Group and Ring-<br><br>Fenced Banks<br><br>Risk Committee | Develops and monitors the RMF and material risk<br><br>and control matters. Supported by business unit<br><br>risk committees |
The Group Chief Executive is supported by the following:
•Group and Ring-Fenced Banks Asset and Liability Committees
•Group and Ring-Fenced Banks Strategic Delivery Committees
•Group and Ring-Fenced Banks Disclosure Committees
•Group Sustainability Committee
•Group Conduct Investigations Committee
•Group and Ring-Fenced Banks Cost Management Committees
•Group and Ring-Fenced Banks Contentious Regulatory Committees
The Group and Ring-Fenced Banks Risk Committee is supported by
business unit risk committees, cross-business unit committees addressing
specific matters of Group-wide significance, and second line of defence
Risk committees ensuring oversight of risk management. These include:
•Group Capital Risk Committee
•Group Financial Risk Committee
•Economic Crime Prevention Committee
•Group Liquidity Risk Committee
•Group Market Risk Committee
•Group Model Governance Committee
Lloyds Banking Group plc Annual Report and Accounts 2025
141
Risk decision making and reporting
Risk analysis and reporting enables better understanding of risks and
returns, supporting the identification of opportunities as well as
better management of risks.
An aggregate view of the Group’s overall risk profile, key risks
and management actions, and performance against risk appetite,
including the Enterprise-Wide Risk Management report, is
reported to and discussed regularly at Group Risk Committee
and Board Risk Committee.
Risk and control cycle from identification to reporting
To allow senior management to make informed risk decisions, the
business follows a continuous risk management approach. This risk
and control cycle, from identification to reporting, ensures that
there is consistency in the approach to managing and mitigating
risks impacting the Group.
The risk and control self-assessment (RCSA) process is used to
identify, measure and manage operational risks across the Group.
Risks are identified and measured on an inherent basis, using a
consistent quantification methodology.
Financial reporting and tax risk management
systems and internal controls
The Group has a Disclosure Committee which assists the Group
Chief Executive and Chief Financial Officer in fulfilling their
disclosure responsibilities under relevant listing and other regulatory
and legal requirements. In addition, the Audit Committee reviews
the quality and acceptability of the Group’s financial disclosures.
For further information on the Audit Committee’s responsibilities
relating to financial reporting see pages 89 to 91.
| Risk and control cycle |
|---|
| <br><br>Risk identification and assessment<br><br>Risk identification is conducted on a continuous<br><br>basis through the use of scenario analysis which<br><br>considers the most material and emerging risks the<br><br>Group faces, and identifies and assesses extreme,<br><br>but plausible instances which may occur. |
<br><br>Risk management and mitigation<br><br>Risks are then managed with appropriate controls<br><br>or mitigation plans put in place, which are<br><br>reviewed to ensure their effectiveness. Any risks<br><br>which cannot be mitigated will then require risk<br><br>acceptance via the appropriate risk governance. |
|---|---|
| <br><br>Risk reporting<br><br>Risks are reported via appropriate Group, sub-Group<br><br>and Divisional level risk reports and committees,<br><br>allowing independent challenge by the Risk function.<br><br>When thresholds for risk appetite are breached,<br><br>committee minutes are clear on the actions and<br><br>time frames required to address the risk and bring<br><br>the exposure back within tolerance. |
<br><br>Risk monitoring<br><br>Proactive monitoring or testing is established<br><br>to ensure that controls continue to be effective,<br><br>and that the Group remains within risk appetite. |
Lloyds Banking Group plc Annual Report and Accounts 2025
142
Risk management continued
Exposure to risk arising from the business activities of the Group
The table below provides a high level guide to how the Group’s business activities are reflected through its risk-weighted assets (RWAs),
which are calculated in accordance with prudential banking capital requirements. There are a number of risks that are not captured in
RWAs such as pension obligation risk and interest rate risk in the banking book, which instead fall within the scope of the Group's Pillar 2A
capital requirements. Furthermore the risk relating to Insurance activities is not included in this table as Insurance is subject to a different
set of prudential rules (Solvency II regime). Business activities for each division are provided in the divisional results on pages 61 to 64.
| At 31 December 2025 | Retail<br><br>£bn | Commercial<br><br>Banking<br><br>£bn | Insurance, Pensions and<br><br>Investments1<br><br>£bn | Equity Investments and<br><br>Central Items2<br><br>£bn | Group<br><br>£bn |
|---|---|---|---|---|---|
| Risk-weighted assets (RWAs) | |||||
| Credit risk | 113.1 | 59.9 | 0.2 | 13.2 | 186.4 |
| Counterparty credit risk3 | – | 5.9 | – | 1.0 | 6.9 |
| Market risk | – | 3.8 | – | – | 3.8 |
| Operational risk | 17.3 | 8.9 | 0.3 | 1.3 | 27.8 |
| Total (excluding threshold) | 130.4 | 78.5 | 0.5 | 15.5 | 224.9 |
| Threshold4 | – | – | – | 10.6 | 10.6 |
| Total | 130.4 | 78.5 | 0.5 | 26.1 | 235.5 |
1As a separate regulated business, the Insurance business maintains its own solvency requirements, including appropriate management buffers, and reports directly to the Insurance
Board. Insurance does not hold any RWAs as its assets are removed from the Group’s banking regulatory capital calculations. However, in accordance with banking capital rules part of
the Group’s equity investment in Insurance is included in the calculation of threshold RWAs, while the remainder is taken as a deduction from common equity tier 1 (CET1) capital.
2Equity Investments and Central Items includes the risk-weighted assets of the Group’s equity investments businesses (including LDC and Lloyds Living) and Group Corporate Treasury,
in addition to other central amounts.
3Exposures relating to the default fund of a central counterparty and credit valuation adjustment risk are included in counterparty credit risk.
4Threshold RWAs reflect the proportion of significant investments and deferred tax assets that are permitted to be risk-weighted instead of deducted from CET1 capital. Significant
investments primarily arise from the investment in the Group’s Insurance business.
Stress testing
Overview
Stress testing is recognised as a key risk management tool by the
Boards, senior management, the businesses and the Risk and
Finance functions of all parts of the Group and its legal entities. It is
fully embedded in the planning process of the Group and its key
legal entities as a key activity in medium-term planning, and senior
management is actively involved in stress testing activities.
Scenario stress testing is used to support:
Risk identification:
•Understanding key vulnerabilities of the Group and its key legal
entities under adverse economic conditions
Risk appetite:
•Assessing the results of the stress test against the risk appetite of
all parts of the Group to ensure the Group and its legal entities
are managed within their risk parameters
•Setting of risk appetite by assessing the underlying risks under
stress conditions
Strategic and capital planning:
•Senior management and the Boards of the Group and its key
legal entities to adjust strategies if the plan does not meet risk
appetite in a stressed scenario
•The ICAAP, by demonstrating capital adequacy and informing
the setting of management buffers (see capital risk on pages 144
to 150) of the Group and its separately regulated legal entities
•Meeting the requirements of regulatory stress tests that are used
to inform the setting of PRA buffers
•The capital allocation process which feeds into business unit
performance management
Risk mitigation:
•The development of potential actions and contingency plans to
mitigate the impact of adverse scenarios. Stress testing also links
directly to the recovery and resolution planning process of the
Group and its legal entities
Regulatory stress tests
In 2025 the PRA completed the Bank Capital Stress Test. The
scenario was designed to test the resilience of the UK banking
system under severe global aggregate supply shock, which leads to
deep recessions across the world and escalation of geopolitical
tensions, resulting in a sharp increase in commodity and energy
prices, large falls in asset prices and higher global interest rates. 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.
In addition, Scottish Widows Group Limited participated in the
PRA’s Life Insurance Stress Test. The scenario was designed to test
the resilience of major UK annuity providers under severe, yet
plausible, market conditions. The scenario included falls in equities,
yields and credit events including downgrades and property crashes.
Permitted management actions were restricted. The results were
published in November 2025 and show that, having sold the bulk
annuity business in 2024 and hedged much of its equity exposure,
Scottish Widows Group Limited is resilient to the chosen scenario.
Internal stress tests
On at least an annual basis, the Group conducts macroeconomic
stress tests to highlight and understand the key vulnerabilities of the
Group’s and its legal entities’ business plans to adverse changes in the
economic environment, to evaluate mitigating actions and ensure that
there are adequate financial resources in the event of a downturn.
Reverse stress testing
Reverse stress testing is used to explore the vulnerabilities of the
Group’s and its key legal entities’ strategies and plans for extreme
adverse events that would cause the businesses to fail. Where this
identifies plausible scenarios with an unacceptably high risk, the
Group or its entities will adopt measures to prevent or mitigate that
and reflect these in strategic plans.
Lloyds Banking Group plc Annual Report and Accounts 2025
143
Other stress testing activity
The Group’s stress testing programme also involves undertaking
assessments of liquidity scenarios, market risk sensitivities and
scenarios, and business-specific scenarios. If required, ad hoc stress
testing exercises are also undertaken to assess emerging risks,
as well as in response to regulatory requests. This wide-ranging
programme provides a comprehensive view of the potential impacts
arising from the risks to which the Group is exposed and reflects the
nature, scale and complexity of the Group. The Group continues to
participate in the Bank of England’s System-wide exploratory
scenarios (SWES).
Detailed stress testing information can be found within each
relevant risk in the Risk management section (capital risk page 150,
Insurance underwriting risk page 180, liquidity risk page 184 and
market risk page 188).
Methodology
The stress tests process must comply with all regulatory
requirements, which is achieved through comprehensive scenarios
and a rigorous divisional, functional, risk and executive review and
challenge process, supported by analysis and insight into impacts on
customers and business drivers.
All relevant business, Risk and Finance teams are involved in the
delivery of analysis, and ensure the sensitivity of the business plan
to each risk is well understood. The methodologies and modelling
approach used for stress testing embed direct links between the
macroeconomic scenarios and the drivers for each business area
to give appropriate stress sensitivities. All material assumptions
used in modelling are documented and justified, with a clearly
communicated review and sign-off process. Modelling is
supported by expert judgement and is subject to the Group model
governance policy.
Governance
Clear accountabilities and responsibilities for stress testing are
assigned to senior management and the Risk and Finance functions
throughout the Group and its key legal entities. This is formalised
through policy and related documentation, which is reviewed at
least annually.
The Group Financial Risk Committee (GFRC), chaired by the Chief
Risk Officer and attended by the Chief Financial Officer and other
senior Risk and Finance colleagues, has primary responsibility for
overseeing the development and execution of the Group’s and Ring-
Fenced Banks’ stress tests. A similar process is in place within Lloyds
Bank Corporate Markets (LBCM) and Scottish Widows for
governance of their specific results.
The review and challenge of the Group’s and Ring-Fenced Banks’
detailed stress forecasts, the key assumptions behind these, and the
methodology used to translate the economic assumptions into
stressed outputs conclude with the appropriate Finance and Risk
sign-off. The outputs are then presented to the GFRC and the Board
Risk Committee for review and challenge. With regulatory exercises
being approved at Board Risk Committee and Board where
appropriate. There is a similar process within LBCM for the
governance of the LBCM-specific results.
Lloyds Banking Group plc Annual Report and Accounts 2025
144
Risk management continued
Full analysis of principal risk categories
The Group’s risk framework covers all types of risk which affect the Group and could impact on the achievement of its strategic objectives.
Detailed information relating to each principal risk is included over the following pages, 144 to 197.
| Capital risk | ||
|---|---|---|
| Definition<br><br>Capital risk is defined as the risk that an insufficient<br><br>quantity or quality of capital is held to meet<br><br>regulatory requirements or to support business<br><br>strategy, an inefficient level of capital is held or that<br><br>capital is inefficiently deployed across the Group.<br><br>The Risk overview, on page 25, contains a summary of capital risk<br><br>performance and key mitigating actions. | Financial risk indicators<br><br>•CET1 ratio: 14.0% (2024: 14.2%)<br><br>•Total capital ratio: 18.9% (2024: 19.0%)<br><br>•MREL ratio: 32.2% (2024: 32.2%) | |
| --- |
Risk appetite
The Group manages its capital above regulatory requirements to
support the achievement of its business strategy and to continue to
serve customers in a macroeconomic downturn.
For the Group, capital risk appetite is set to remain above current
regulatory requirements in a business-as-usual environment and
above defined regulatory thresholds in a mild or severe stress.
Scottish Widows Group Limited sets capital risk appetite to remain
above insurance capital requirements in a mild stress.
Risk appetite for the Group is expressed through the CET1 capital
ratio and Tier 1 leverage ratio, whilst Scottish Widows Group
Limited mainly expresses its risk appetite under Solvency II
requirements, these being key measures of capital resilience.
Identification and assessment
The minimum amount of total capital, under Pillar 1 of the
regulatory capital framework, is set at 8% of total risk-weighted
assets (RWAs). At least 4.5% of RWAs are required to be met with
common equity tier 1 (CET1) capital and at least 6% of RWAs are
required to be met with tier 1 capital. Minimum Pillar 1 requirements
are supplemented by additional minimum requirements under Pillar
2A of the regulatory capital framework, the aggregate of which is
referred to as the Group’s Total Capital Requirement (TCR).
Additional minimum capital requirements under Pillar 2A are set
by the PRA as a firm-specific Individual Capital Requirement (ICR)
reflecting a point in time estimate, which may change over time,
of the minimum amount of capital to cover risks that are not fully
covered by Pillar 1, such as concentration risk, residual value risk and
operational risk, and those risks not covered at all by Pillar 1, such
as pension obligation risk and interest rate risk in the banking book
(IRRBB). This is set as a variable amount for Pillar 2A (being a set
percentage of RWAs), with fixed add-ons for certain risk types. The
Group’s Pillar 2A capital requirement at 31 December 2025 is the
equivalent of around 2.5% of RWAs, of which the minimum amount
to be met by CET1 capital is the equivalent of around 1.4% of RWAs.
The Group is also required to hold a number of regulatory capital
buffers which must be met with CET1 capital. In addition, the Group
is also subject to minimum capital requirements under the UK
Leverage Ratio Framework, where at least 75% of the 3.25%
minimum leverage ratio requirement as well as the full amount of
regulatory leverage buffers must be met with CET1 capital. Further
information regarding capital and leverage buffers is provided in the
Group’s Pillar 3 disclosures.
A capital risk event arises when the Group has insufficient capital
resources to support its strategic objectives and plans, and
potentially fails to meet both regulatory and external stakeholder
requirements and expectations. This could arise due to a depletion
of the Group’s capital resources as a result of risks being realised, or
through a significant increase RWAs as a result of rule changes or
economic deterioration. Alternatively, a shortage of capital could
arise from an increase in the minimum requirements for capital or
leverage, or the minimum requirement for own funds and eligible
liabilities (MREL) either at Group, Ring-Fenced Bank (RFB) sub-
group or regulated entity level.
The Internal Capital Adequacy Assessment Process (ICAAP) is a key
mechanism for assessing the Group’s capital risks, ensuring that the
Group has robust strategies, processes and systems in place to
support the identification and measurement of Pillar 2 risks.
Emerging and topical risk assessments are regularly conducted to
identify and assess any emerging capital risks, for example, from
market conditions, regulatory changes, reputational issues, and
includes consideration of issues emerging in the wider Group risk
landscape with potential capital consequences. Assessment outputs
are used to inform stress testing activities and risk appetite setting.
Scenario analysis and stress testing, including reverse stress testing,
are used to identify sources of potential capital risk, and highlight
vulnerabilities along with potential mitigating actions.
Board-level capital risk appetite is proposed and reviewed at least
annually and approved by the Board. It comprises a capital risk
appetite statement and set of quantitative metrics. This is supported
by a suite of management measures and operational limits.
Management and mitigation
The Group maintains capital levels across all regulated entities
commensurate with a prudent level of solvency to achieve
financial resilience and market confidence. To support this,
capital risk appetite is calibrated by taking into consideration
both an internal view of the amount of capital to hold as well as
external regulatory requirements.
The Group assesses both its regulatory capital requirements and
the quantity and quality of capital resources it holds to meet
those requirements in accordance with the relevant provisions of
the Capital Requirements Directive (CRD V) and Capital
Requirements Regulation (UK CRR). This is supplemented
through additional regulation set out under the PRA Rulebook
and through associated statements of policy, supervisory
statements and other regulatory guidance.
The Group has a capital management framework that includes the
setting of capital risk appetite and capital planning and stress
testing activities. Close monitoring of capital, leverage and MREL
ratios is undertaken to ensure the Group meets regulatory
requirements and risk appetite levels and deploys its capital
resources efficiently.
A capital contingency framework is defined as part of the Group
Recovery Plan, setting out trigger levels at which mitigating actions
should be considered. Supporting this is a suite of internal and
external early warning indicators (EWIs), to ensure timely escalation
of emerging concerns. The Group is able to accumulate additional
capital through the retention of profits over time, which can be
enhanced through reducing or cancelling proposed dividend
payments and share buybacks, by raising new equity via, for
example, a rights issue or debt exchange and by raising additional
tier 1 or tier 2 capital securities. The cost and availability of
additional capital are dependent upon market conditions and
perceptions at the time.
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145
The Group is also able to manage the demand for capital through
management actions including adjusting its lending strategy,
business disposals and through the efficient use of securitisations
and other optimisation activity.
A capital plan and periodic re-forecasting, ensures that business
strategy can be delivered within capital risk appetite. The capital
plan provides visibility of key risks and assumptions, along with
appropriate sensitivities, to inform executive decision making.
The internal stress of the capital plan reviews ratios against
appropriate thresholds in stress conditions to inform strategic
decision making and any potential mitigating actions.
Monitoring
The Group, relevant sub-groups and legal entities regularly monitor
their capital positions against risk appetite and regulatory
requirements.
EWIs are monitored regularly for early signs of capital risk, with the
Capital Contingency Level (CCL) reviewed and agreed each month,
taking account of the latest capital position and risk profile as part
of the capital contingency framework.
The Group’s capital performance (including capital returns) is
monitored against the capital plan, latest forecast and external
guidance. Appropriate capital monitoring activity is in place to
support early identification of deterioration in outlook or deviation
from capital plans.
The regulatory capital framework within which the Group operates
continues to evolve and further detail on this is provided in the
Group’s Pillar 3 disclosures. The Group continues to monitor
prudential developments closely, analysing the potential capital
impacts to ensure that, through organic capital generation and
management actions, it continues to maintain a strong capital
position that exceeds both minimum regulatory requirements and
its risk appetite, maintaining consistency with market expectations.
Reporting
Capital risk appetite metrics and a set of management measures are
reported to relevant Asset Liability Committees (ALCOs) and Board
as required.
Operational limits are reported to the relevant committee, forum or
individual as required.
Regular and periodic reporting to executive and Board-level
committees provide sufficient information on the current and
forward view of the capital position, and risk profile to enable
effective capital management decision making, including visibility of
key assumptions and judgements.
Regular reporting includes monthly capital performance updates to
Group Executive Committee (GEC), updates on capital
management and monitoring activity to Group Asset Liability
Committee (GALCO), as well as escalation of matters to GALCO,
GEC, Risk Committees and Board-level committees as required.
Periodic reporting includes capital plans, distribution decisions,
regulatory stress tests and ICAAP, requiring executive and/or Board
approval.
Regulatory reports required by the PRA and other regulatory bodies
are submitted within mandated timelines.
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
Capital returns
The Group has in place a progressive and sustainable ordinary
dividend policy which allows for flexibility to return surplus capital
to shareholders through share buybacks or special dividends.
Surplus capital represents capital over and above the amount
management wish to retain to grow the business, meet current and
future regulatory requirements and cover uncertainties. The amount
of required capital may vary from time to time depending on
circumstances and by its nature there can be no guarantee that any
return of surplus capital will be made.
Given the Group’s sustained strength in financial performance and
strong capital position at the year end, the Board has recommended
a final ordinary dividend of 2.43 pence per share. This is in addition
to the interim ordinary dividend of 1.22 pence per share that was
announced as part of the 2025 half-year results and paid in
September 2025. The total proposed ordinary dividend for the year
is therefore 3.65 pence per share. On 30 January 2026, the Group
announced the launch of an ordinary share buyback of up to
£1.75 billion, which is expected to be completed, subject to
continued authority from the PRA, by 31 December 2026.
The Board remains committed to future capital returns and will
maintain its progressive and sustainable ordinary dividend policy
alongside further returns of surplus capital as appropriate. The
Board will continue to give due consideration at year end to the size
of the final dividend payment and to the return of any surplus
capital based upon the circumstances at the time. 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.
The ability of the Group to pay a dividend is also subject to
constraints including the availability of distributable reserves,
legal and regulatory restrictions and the Group’s financial and
operating performance.
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146
Risk management continued
Distributable reserves are determined as required by the
Companies Act 2006 by reference to a company’s individual
financial statements. At 31 December 2025 Lloyds Banking
Group plc (‘the Company’) had accumulated distributable
reserves of approximately £13 billion. Substantially all of the
Company’s merger reserve is available for distribution under UK
company law as a result of transactions undertaken to
recapitalise the Company in 2009.
Lloyds Banking Group plc acts as a holding company which also
issues capital and other securities to capitalise and fund the
activities of the Group. The profitability of the holding company,
and its ability to sustain dividend payments, is therefore dependent
upon the continued receipt of dividends and interest from its main
operating subsidiaries, including Lloyds Bank plc (the Ring-Fenced
Bank), Lloyds Bank Corporate Markets plc, LBG Equity Investments
Limited and Scottish Widows Group Limited (the Insurance
business). The principal operating subsidiary is Lloyds Bank plc
which, at 31 December 2025, had a consolidated CET1 capital ratio
that exceeded minimum regulatory requirements and internal risk
appetite levels.
A number of Group subsidiaries, principally those with banking and
insurance activities, are subject to regulatory capital requirements
which require minimum amounts of capital to be maintained
relative to their size and risk. The Group actively manages the
capital of its subsidiaries, which includes monitoring the regulatory
capital ratios for its banking and insurance subsidiaries and, on a
consolidated basis, the RFB sub-group against approved risk
appetite levels. The Group requires all subsidiary entities, subject to
agreement by their governing bodies, to remit surplus capital to
their parent companies at least annually.
Minimum requirement for own funds
and eligible liabilities (MREL)
Global systemically important banks (G-SIBs) are subject to an
international standard on total loss absorbing capacity (TLAC). The
standard is designed to enhance the resilience of the global financial
system by ensuring that failing G-SIBs have sufficient capital to
absorb losses and recapitalise under resolution, whilst continuing to
provide critical banking services.
In the UK, the Bank of England has implemented the requirements
of the international TLAC standard through the establishment of a
framework which sets out MREL. The purpose of MREL is to require
firms to maintain sufficient own funds and eligible liabilities that are
capable of credibly bearing losses or recapitalising a bank whilst in
resolution. MREL can be satisfied by a combination of regulatory
capital and certain unsecured liabilities (which must be subordinate
to a firm’s operating liabilities).
Although the Group is not classified as a G-SIB it is subject to the
Bank of England’s MREL framework, including the statement of
policy on MREL (the ‘MREL SoP’) which requires the Group to
maintain a minimum level of MREL resources.
Under the requirements of the framework, the Group operates a
single point of entry (SPE) resolution strategy, with Lloyds Banking
Group plc as the designated resolution entity.
Applying the MREL SoP to 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.
Internal minimum requirements for own funds and eligible liabilities
(Internal MREL) also apply to the Group’s material sub-groups and
entities, being the RFB sub-group, Lloyds Bank plc, Bank of Scotland
plc and Lloyds Bank Corporate Markets plc.
Analysis of pro forma CET1 capital position
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. 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.
The full impact of the ordinary share buyback programme will be
accrued for through the Group’s actual capital position during the
first quarter of 2026.
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%).
Lloyds Banking Group plc Annual Report and Accounts 2025
147
Capital resources (audited) and MREL resources (unaudited)
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. The Group’s Pillar 3 disclosures provide a comprehensive analysis
of the own funds of the Group.
| At 31 Dec<br><br>2025<br><br>£m | At 31 Dec<br><br>2024<br><br>£m | |
|---|---|---|
| Common equity tier 1: instruments and reserves | ||
| Share capital and share premium account | 24,686 | 24,782 |
| Banking retained earnings1 | 20,671 | 19,582 |
| Banking other reserves1 | 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 investments1 | (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 investments1 | (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 investments1 | (963) | (964) |
| Total capital resources (audited) | 44,579 | 42,751 |
| Ineligible AT1 and tier 2 instruments2 | (79) | (94) |
| Amortised portion of eligible tier 2 instruments issued by Lloyds Banking Group plc | – | 891 |
| Other eligible liabilities issued by Lloyds Banking Group plc3 | 31,232 | 28,675 |
| Total MREL resources (unaudited) | 75,732 | 72,223 |
| Risk-weighted assets (unaudited) | 235,513 | 224,632 |
| Common equity tier 1 capital ratio (unaudited) | 14.0% | 14.2% |
| Tier 1 capital ratio (unaudited) | 16.2% | 16.6% |
| Total capital ratio (unaudited) | 18.9% | 19.0% |
| MREL ratio (unaudited) | 32.2% | 32.2% |
1In 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.
2Instruments not issued out of the holding company.
3Includes senior unsecured debt.
Total capital requirement
The Group’s total capital requirement (TCR) as at 31 December 2025, being the aggregate of the Group’s Pillar 1 and Pillar 2A capital
requirements, was £24,735 million (31 December 2024: £23,907 million).
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148
Risk management continued
Movements in CET1 capital resources
The key movements are set out in the table below.
| Common<br><br>equity<br><br>tier 1<br><br>£m | |
|---|---|
| At 31 December 2024 | 31,979 |
| Banking business profits1 | 4,891 |
| Movement in foreseeable dividend accrual2 | (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 business3 | 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 |
1Under 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.
2Reflects the reversal of the brought forward accrual for the final 2024 ordinary dividend, net of the accrual for the final 2025 ordinary dividend.
3Received 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
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.
Lloyds Banking Group plc Annual Report and Accounts 2025
149
Risk-weighted assets
| At 31 Dec<br><br>2025<br><br>£m | At 31 Dec<br><br>2024<br><br>£m | |
|---|---|---|
| Foundation Internal Ratings Based (IRB) Approach | 47,782 | 43,366 |
| Retail IRB Approach | 90,354 | 90,567 |
| Other IRB Approach1 | 23,292 | 21,878 |
| IRB Approach | 161,428 | 155,811 |
| Standardised (STA) Approach1 | 27,166 | 22,532 |
| Credit risk | 188,594 | 178,343 |
| Counterparty credit risk2 | 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 assets3 | 10,672 | 10,738 |
1Threshold risk-weighted assets are included within Other IRB Approach and Standardised (STA) Approach.
2Includes credit valuation adjustment risk.
3Threshold 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.
Leverage ratio
The table below summarises the component parts of the Group’s leverage ratio.
| At 31 Dec<br><br>2025<br><br>£m | At 31 Dec<br><br>2024<br><br>£m | |
|---|---|---|
| Total tier 1 capital | 38,053 | 37,349 |
| Exposure measure | ||
| Statutory balance sheet assets | ||
| 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 adjustments1 | (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 adjustments2 | (2,879) | (4,127) |
| Total exposure measure | 708,339 | 674,074 |
| Average exposure measure3 | 713,268 | |
| UK leverage ratio | 5.4% | 5.5% |
| Average UK leverage ratio3 | 5.3% | |
| 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% |
1Deconsolidation 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.
2Includes adjustments to exclude lending under the Government’s Bounce Back Loan Scheme (BBLS).
3The average UK leverage ratio is based on the average of the month end tier 1 capital position and average exposure measure over the quarter (1 October 2025 to 31 December 2025).
The average of 5.3% compares to 5.2% at the start and 5.4% at the end of the quarter.
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150
Risk management continued
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.
The average leverage ratio reflected the issuance of a new AT1
capital instrument during the last quarter of 2025.
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.
G-SIB indicators
Although the Group is not classified as a Global Systemically
Important Bank (G-SIB) at 31 December 2025, by virtue of the
Group’s leverage exposure measure exceeding €200 billion the
Group is required to report G-SIB indicator metrics to the PRA.
The Group’s indicator metrics used within the 2025 Basel G-SIBs
annual exercise will be disclosed at the end of April 2026 and the
results are expected to be made available by the Basel Committee
later this year.
Insurance business
The business transacted by the insurance companies within the
Group comprises both life insurance business and general insurance
business. Life insurance comprises unit-linked, non-profit and With-
Profits business.
Scottish Widows Limited (SW Ltd) holds the only With-Profits funds
managed by the Group. The UK insurance companies within the
Group are regulated by the PRA. SW Ltd’s European insurance
subsidiary is regulated by the CAA.
The Solvency II regime for insurers and insurance groups came
into force from 1 January 2016 and was subsequently amended as
part of the Solvency UK reforms. Insurance is required to
calculate solvency capital requirements and available capital on
a risk-based approach. Insurance calculates regulatory capital on
the basis of an internal model, which has been approved by the
PRA.
The minimum required capital must be maintained at all times
throughout the year. These capital requirements and the capital
available to meet them are regularly estimated in order to ensure
that capital requirements are being met. The capital position of
the Group’s insurance businesses is reviewed on a regular basis by
the Insurance, Pensions and Investments Executive Committee.
All minimum regulatory requirements of the insurance companies
have been met during the year.
| Climate risk |
|---|
| Definition<br><br>The Group defines climate risk as the risk from the<br><br>impacts of climate change and the transition to net<br><br>zero (‘inbound risk’), or a result of the Group’s<br><br>response to tackling climate change and supporting<br><br>the transition to net zero (‘outbound risk’).<br><br>The Risk overview, on page 25, contains a summary of climate risk<br><br>performance and key mitigating actions. |
Risk appetite
The Group manages climate risk in line with our strategy and targets
to support the UK’s transition to net zero by 2050, while operating
within the risk appetite for other applicable risks, such as credit risk.
The Group recognises that there are external dependencies outside
of our control for certain sectors which may have implications for
the Group’s wider strategy, however, the Group endeavours to keep
pace with the UK’s wider progress. The Group also ensures robust
management of potential impacts from physical risks or
greenwashing and has no tolerance for non-compliance with
regulatory requirements.
Identification and assessment
Climate risk is a principal risk within the Group’s RMF, recognising
the importance of the topic. This approach provides an overall view
of the climate-related risks which may impact the Group and aims
to ensure suitable consistency in the approach to managing these
risks. However, the cross-cutting impacts from climate risk manifest
through other risk types. As part of embedding climate risk within
the Group’s RMF, there is clear documentation of the cross-cutting
impacts to be considered as part of managing other principal risks,
with ongoing activity to ensure the Group’s principles are suitably
considered within this.
Identification of climate risk draws upon consideration of the
potential drivers of climate risk, either physical risk, resulting from
changes in climate or weather patterns, such as floods or rising sea
levels; or transition risk, resulting from changes to progress towards
a low carbon economy, such as government policy and
technological developments.
The key risks facing the Group are grouped into four components:
failure to deliver on net zero ambitions; the impact from physical
and transition risks; deficiencies in external disclosures; and
greenwashing. The potential impacts from these risks are then
mapped against the other principal risks that these manifest in or
are managed through, with climate-related factors considered as
part of assessment of these risks. The Group looks to update its
assessments of material risks at least annually, with materiality
considered in line with the thresholds used for other financial and
non-financial risks within the Group’s RMF. Further detail on the
Group’s key sustainability related risks, including climate-related
risks, as well as opportunities, is provided on pages 39 to 41.
Initial understanding of the potential risks facing the Group is
informed by key data points, particularly in relation to the impact
from physical and transition risks.
Transition risk varies significantly both across and within sectors.
Identification of potential risks is based on the relative emissions at
sector level, which have also informed the Group’s transition plan,
and supported by specific customer-level information. For lending
and investment to corporates, the Group’s ESG tool assesses
exposure to the impact of climate risk for specific clients as part of
the credit decisioning process. For Retail lending, risk factors such as
the EPC profile of mortgage properties and the power train for
motor finance are considered.
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151
Identification of physical risk requires information on the potential
hazards which could impact the relevant locations where the Group
has exposure. The Group is particularly focused on developing a
clear view of potential exposure to high risk of flooding across its
mortgage and insurance portfolios.
In general, quantifying the impact of the risks associated with
climate change requires scenario analysis, particularly given the
different potential outcomes and time horizons over which the risks
may manifest. The Group continues to develop its climate scenario
analysis capabilities to inform analysis of climate risks, as well as to
help shape the Group’s strategy to reflect climate opportunities and
assess its resilience. The outputs of scenario analysis are used to
support consideration of potential impacts of climate risk within key
processes, including credit, capital and liquidity assessments.
Several examples of where scenario analysis is used to assess
climate risk are outlined below.
The impacts of climate-related change on credit quality in expected
credit losses (ECL) were assessed for retail and commercial loan
portfolios for both transition and physical risks, as covered in the
Assessing our Resilience section on page 48.
The Group has assessed the risks transmitted via traded assets
across three climate scenarios, to understand the high-level impact
of short-term market risk factor shocks stemming from physical and
transition risk narratives. Resulting stressed valuations fell within
existing stress test framework outcomes demonstrating the
resilience of existing risk management approaches.
To support assessment of potential greenwashing risks, the Group
has repeated a scenario exercise focussed on Commercial Banking
lending activities. This looked at the effects of policy tightening
leading to significant increases in expectations for managing
sustainability and identified actions to further enhance the
robustness of internal controls to mitigate the risks of greenwashing.
The Group’s sustainability report provides further details on
several aspects of the identification and assessment processes
highlighted, including: exposure to increased climate risk sectors on
page 78; and developments in climate scenario analysis, including
assessment of flood risk on page 124.
Management and mitigation
Failure to deliver on net zero ambitions
The Group has continued to develop action plans across its systems-
led approach for supporting the UK’s transition. The Group’s climate
transition plan sets out the steps it will take to reduce emissions for
its own operations and supply chain, as well as the emissions
associated with its lending and investments portfolios. Delivery
against the Group’s net zero ambitions is considered within the
Regulatory Compliance Risk Policy, in relation to voluntary
commitments and frameworks the Group has signed up to. This
includes requirements to support measurement of emissions and
suitable monitoring of progress informing discussions at Group
Sustainability Committee on direction of the Group’s strategy.
Impact from physical and transition risks
Physical and transition risks impact various other principal risks in
different ways, with several approaches in place to support
mitigation of these risks outlined below.
Credit
For commercial lending, the Group continues to embed climate and
broader ESG-related risks into credit processes through a targeted,
risk-based approach. ESG factors including climate, environmental,
nature-related, social, and governance risks are systematically
assessed using an enhanced ESG Credit Risk Indicator Framework.
This framework informs sector-level strategy supporting alignment
with the Group’s risk appetite.
ESG Credit Risk Assessments evaluate a client’s or transaction’s
exposure to ESG-related risks, such as operational resilience and the
credibility of transition plans. Clients identified with elevated ESG-
related risks are subject to enhanced due diligence as part of the
credit decision-making process.
Within Retail, the Group adopts a measured approach to managing
climate risk. In transport, the transition to low-carbon system is
closely managed, while EPC controls and physical risks such as
flooding are embedded within mortgage credit decisioning.
Further detail on management of climate-related and ESG credit
risks is provided on page 128 of the Group’s sustainability report .
Insurance underwriting
Provision of household insurance can be impacted by both physical
and transition risks, in particular, the potential for underwriting and
insurance risks arising from climate change, such as increased
frequency and severity of extreme weather events. Given the short-
term nature of home insurance policies, the Group is able to update
its view of risk regularly and change its approach as risks develop.
This helps mitigate the long-term exposure to climate risks. The
Group aims to support customers in improving the resilience of their
homes, including reaching out ahead of extreme weather events to
provide elements of advice and guidance on how to protect
themselves and their homes.
Market risk
For the Investments portfolio in Scottish Widows, the Group
manages potential impacts from physical and transition risks on the
value or availability of assets through a range of controls, including
due diligence on the selection and oversight of external fund
managers, with specific consideration of ESG factors. The
investments team has dedicated fund investment leads who are
responsible for all aspects of oversight, including review of climate-
related risks and ESG factors and related data supplied by external
fund managers. The Group also utilises the ESG Tool as part of its
credit risk assessment process.
Operational
Climate-related impacts could affect operational resilience through
properties, IT systems, people and third-party suppliers and create
disruption to services. The Group has processes in place to consider
the resilience of its property in relation to physical risks, particularly
focused on its offices, data centres and branch network, to
minimise the risk of service disruption.
The Group’s Code of Supplier Responsibility outlines the minimum
standards and advanced expectations of third-party suppliers.
Suppliers are required to proactively identify, manage and reduce
their environmental impact across their operations, products, and
services. The Code specifies that suppliers must comply with all
applicable environmental legislation and regulation, including
climate-related disclosures and transition plans where relevant. For
further information, refer to the Group’s Code of Supplier
Responsibility .
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Risk management continued
Deficiencies in external disclosures
The Group’s external disclosures are subject to a robust governance
process, including appropriate legal review. This provides an
assessment of the relevant reporting requirements, such as the
Climate-related Financial Disclosures requirements (CFD) and Task
Force on Climate-related Financial Disclosures (TCFD)
recommendations.
Greenwashing
The Group has established measures to manage conduct risk and
mitigate greenwashing, reinforcing transparency and accuracy in
communications and disclosures. These measures include reviewing
ESG-related content prior to publication, providing dedicated
guidance and training to support product governance and content
creation and external legal review of sustainability-related content
within the annual report and other disclosures. Together, these
actions complement climate-related risk reporting obligations
and demonstrate the Group’s commitment to responsible
communication. Looking ahead, the Group will continue to enhance
its approach, as well as investigating any challenges or suggestions of
greenwashing and embedding learnings into future improvements.
Monitoring
The Group ensures visibility and awareness of climate risks across its
risk profile, with management information across a range of themes
regularly assessed across the relevant business units. This is in
addition to quarterly monitoring of the Group’s progress against its
net zero ambitions through the Group Sustainability Committee, as
well as consideration within the Group’s operating plan process.
The Group also closely monitors climate-related regulatory
developments to ensure its approach meets current requirements
and progress towards meeting evolving expectations is tracked.
This includes understanding developments in sustainability
reporting and prudential supervision. Further detail on these
is provided on page 141 of the Group’s sustainability report .
Reporting
The Group’s climate risk profile is regularly reviewed, with an
overview provided as part of the Group’s risk reporting. Additional
management information on climate risk is included within
reporting to Group Risk Committee and Board Risk Committee,
providing visibility of potential exposure to physical and transition
risks across key areas of the Group.
| Compliance risk |
|---|
| Definition<br><br>The risk of financial penalties, regulatory censure,<br><br>criminal or civil enforcement action or customer<br><br>detriment as a result of failure to identify, assess,<br><br>correctly interpret, comply with, or manage<br><br>regulatory and/or legal requirements.<br><br>Level two risks<br><br>Legal; Regulatory<br><br>The Risk overview, on page 25, contains a summary of compliance risk<br><br>performance and key mitigating actions. |
Risk appetite
The Group does not tolerate non-adherence to regulatory and legal
requirements and all colleagues employed by the Group are
expected to comply with legal and regulatory obligations,
requirements, statutes and permissions.
Where inadvertent instances of non-compliance occur, these are
promptly addressed with corrective action to minimise exposure
and avoid recurrence.
Identification and assessment
Compliance risk is measured against defined risk appetite metrics,
which assess material regulatory breaches and material legal
incidents.
The Group Legal function provides legal advice and together with
the Risk function, delivers oversight, proactive support and
constructive challenge to the wider business in identifying and
managing regulatory and legal issues.
The Group engages with regulatory authorities and industry bodies
on forthcoming regulatory changes, market reviews and
investigations, ensuring programmes are established to deliver new
regulation and legislation.
Horizon scanning is used to identify both medium- and long-term
compliance risks that could affect the ability to achieve strategic
objectives. This includes but is not limited to new or updated
regulations, legislations, guidance and updates. Similarly, the
Group’s emerging and topical risks provide a forward-looking view
of themes, with the potential to alter execution of strategy or
operations in the medium to long term.
Management and mitigation
The Group’s strategy supports a continued focus on proactive
identification, management and mitigation of compliance risk,
embedded through colleague recruitment, training, performance
management and clear accountabilities.
Permissions, licenses, waivers, modifications and authorisations are
in place and maintained to ensure that appropriate approvals have
been sought to carry out regulated activities.
Compliance policies and standards are in place, setting out clear
requirements and controls that apply across the business, aligned to
the Group’s risk appetite.
The Senior Managers and Certification Regime (SMCR) is used to
ensure that accountabilities are clearly allocated to and from senior
managers, with expectation that all Senior Manager Function (SMF)
and Material Risk Takers (MRT) colleagues deliver compliant
outcomes in line with regulatory expectations.
Monitoring
Compliance with relevant laws and regulations is supported by risk
oversight and monitoring activity. The Group continues to evolve its
approach to traceability of regulatory obligations as part of the risk
management framework.
Regulatory and legal breaches are escalated and recorded, with
regulators notified of material breaches in line with expected
timescales. Breaches are used as a trigger to consider the
compliance risk profile.
Changes to the internal and external environment are regularly
monitored to ensure there is an accurate and up-to-date view of
the risk profile. This includes but is not limited to:
•Using key risk, control and performance indicators as relevant to
monitor the risk profile
•Monitoring relevant risk appetite metrics against agreed
thresholds, including the escalation of breaches
•Understanding the impact of change activity on the risk and
control environment
Reporting
Reporting ensures that senior management have visibility of the
Group’s compliance risk exposure to enable informed decision
making.
Data for risk profiles, events and issues is reported to the relevant
risk committee(s) by all appropriate business units, Group functions
and sub-groups.
Regulatory reporting is submitted to regulators as required.
Lloyds Banking Group plc Annual Report and Accounts 2025
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| Conduct risk |
|---|
| Definition<br><br>The risk of the Group’s activities, behaviours,<br><br>strategy or business planning, having an adverse<br><br>impact on outcomes for customers, undermining the<br><br>integrity of the market or distort competition, which<br><br>could lead to regulatory censure, reputational<br><br>damage or financial loss.<br><br>Level two risks<br><br>Colleague; Customer; Market<br><br>The Risk overview, on page 26, contains a summary of conduct risk<br><br>performance and key mitigating actions. |
Risk appetite
The Group is committed to maintaining a strong conduct and
customer focused culture that minimises customer harm and
maintains good customer outcomes. The Group manages conduct
risk to ensure that the actions and behaviours of the Group and its
colleagues do not:
•Negatively impact the delivery of good customer outcomes at all
stages of the customer journey
•Have an adverse effect on the markets in which it operates
•Conflict with the Group’s purpose and values or expose it to
negative reputational impact
The Group does not tolerate deliberately or negligently causing
detriment to customers.
Identification and assessment
Conduct risks are identified through day-to-day business
management, with product owners accountable for current and
emerging risks.
Horizon scanning for regulatory and market developments is used to
identify both medium- and long-term conduct risks that could
affect the ability to achieve strategic objectives.
Customer outcomes are monitored and assessed in line with the
Group’s regulatory requirements, including Consumer Duty, and to
mitigate the customer conduct risks the Group faces.
There are monitoring systems in place to detect instances of market
abuse alongside procedures to ensure that any detected instances
are dealt with swiftly and effectively. This includes procedures to
identify and report suspicious transactions where relevant. The
Group implements and monitors adherence with market abuse and
personal account dealing procedures that are aligned with the UK’s
market abuse legislation.
Management and mitigation
The Group’s strategy supports a continued focus on proactive
identification and mitigation of conduct risk, embedded through
colleague recruitment, training, performance management and clear
accountabilities.
Conduct risk appetite is established at Group and divisional level,
with metrics supporting the Group risk appetite to ensure ongoing
focus and escalation via appropriate governance procedures.
Conduct policies and procedures are in place to ensure appropriate
controls and processes to deliver good customer outcomes,
including fair value and meeting customer needs, and support
market integrity and competition requirements.
Complaints are managed through responding to, and learning from,
root causes of complaint volumes and Financial Ombudsman
Service (FOS) change rates.
The Group actively engages with regulatory bodies and other
stakeholders to develop understanding of concerns related to
customer treatment, colleague behaviours, effective competition
and market integrity, to ensure that the Group’s strategic conduct
focus continues to meet evolving stakeholder expectations.
Ongoing engagement with any third parties involved in serving the
Group’s customers ensures consistent delivery in line with the
Group’s own standards and expectations.
In respect of the motor finance commissions review, 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. Further details are provided on
page 284.
Market conduct remains an area of focus with ongoing
enhancements to our surveillance and control environment. The
Group is a member of the Fixed Income, Currencies and
Commodities Markets Standard Board and is committed to
conducting its market activities in line with the principles of the UK
Money Markets Code, the Global Precious Metals Code and the FX
Global Code.
Monitoring
The Group maintains comprehensive monitoring activities to ensure
the effective management of conduct risk, including:
•Conduct Risk Appetite Metrics (CRAMs), with escalation to the
Board where required
•Oversight across the three lines of defence, ensuring
accountability and robust governance
•Data-driven insights into customer outcomes, including
monitoring aligned to Consumer Duty requirements
•Tracking risk appetite metrics and management measures
against agreed thresholds, with prompt escalation of any
breaches
•Use of key risk, control, and performance indicators to monitor
the overall risk profile
•Assessment of the impact of change and transformation
initiatives on the risk and control environment
•Monitoring strategic changes and new product offerings,
ensuring associated risks are understood and managed
•Identification, escalation, and recording of events in line with
operational risk protocols, including immediate regulatory
notification where required. Effective root cause analysis is
undertaken to address issues, strengthen the control
environment (including resilience), and inform capital
requirements for unexpected severe losses
The Group continues to refine its approach to data-led monitoring
as part of its data strategy.
Reporting
Conduct risk is governed through divisional risk committees, with
significant issues escalated to the Group Risk Committee in
accordance with the Group’s risk management framework. Risk
profiles, events, and issues at all organisational levels are reported to
the relevant committees to ensure full visibility and informed
decision making.
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Risk management continued
| Credit risk |
|---|
| Definition<br><br>Credit risk is defined as the risk that parties with<br><br>whom the Group has contracted fail to meet their<br><br>financial obligations (on and off-balance sheet).<br><br>Level two risks<br><br>Retail credit (page 169); Commercial credit (page 174)<br><br>The Risk overview, on page 26, contains a summary of credit risk<br><br>performance and key mitigating actions. |
| Financial risk indicators (underlying basisA)<br><br>•Impairment charge: £795 million (2024: £433 million)<br><br>•Expected credit loss: £3,353 million (2024: £3,651 million)<br><br>•Loans and advances in Stage 2: 9.4% (2024: 10.4%) |
| --- |
Risk appetite
The Group is commercially required to take credit risk to support
the strategy of the business and maintain underwriting standards to
enable safe and sustainable growth. The Group maintains a well-
balanced credit portfolio through the economic cycle, considering
stressed losses and aligned with the Group’s target return on equity.
Risk appetite is expressed primarily through origination quality
metrics, designed to ensure quality of new business written is within
acceptable tolerances and stress loss outcomes.
Identification and assessment
The principal sources of credit risk within the Group where financial
loss may occur arise from loans and advances (for example
mortgages, term loans and overdrafts), contingent guarantees (for
example, credit instruments such as guarantees or letters of credit),
commitments, debt securities, derivatives to customers, financial
institutions and sovereigns, and leasing arrangements where the
Group is the lessor. These also expose the Group to refinance risk in
the event the Group does not wish to refinance an exposure at its
contractual maturity date and the obligor is unable to repay by
securing alternative finance.
Credit risk exposures in the Insurance, Pensions and Investments
division relate mostly to bond and loan assets which, together with
some related swaps, are used to fund annuity commitments within
shareholder funds; plus balances held in liquidity funds to manage
Insurance division’s liquidity requirements, and exposure
to reinsurers.
The investments held in the Group’s defined benefit pension
schemes also expose the Group to credit risk. Note 12 to the
consolidated financial statements on page 245 provides further
information on the defined benefit pension schemes’ assets
and liabilities.
The maximum credit risk exposure of the Group in the event of
other parties failing to perform their obligations is considered to
be the balance sheet carrying amount or, for non-derivative off-
balance sheet transactions and financial guarantees, their
contractual nominal amounts (not taking into account any
collateral held).
Further details can be seen in note 16 to the consolidated
financial statements on page 255 and note 36 to the
consolidated financial statements on page 291.
Credit risk is identified through relationship and portfolio
management, credit stewardship and/or through automated
decision processes for portfolios or individual customers. Risks are
assessed against the capacity of the customer to repay the debt and
expected returns to determine whether, and on what terms, to
grant credit. Individual credit assessments are controlled via
approved limits and parameters which are formally delegated to
approved individuals with appropriate level of skill and judgement.
Models provide a way of objectively assessing credit risk and a range
of approaches are used to ensure a clear understanding of the risk
profile including, but not limited to, Probability of Default (PD),
Exposure at Default (EAD) and Loss Given Default (LGD) models.
Horizon scanning is used to identify credit risks arising from changing
market and economic conditions and changes to regulatory
requirements. The Group’s credit portfolios are subject to regular
stress testing, including Group-led PRA and other regulatory stress
tests focusing on individual divisions and portfolios. For further
information see pages 142 to 143.
The process for credit risk identification, measurement and
control is integrated into the Board-approved framework for
credit risk appetite and governance.
Credit risk is measured from different perspectives using a range
of appropriate modelling and scoring techniques at a number of
levels of granularity, including total balance sheet, individual
portfolio, pertinent concentrations and individual customer – for
both new business and existing exposure. Key metrics, which
may include but are not limited to, total exposure, ECL, risk-
weighted assets, new business quality, concentration risk and
portfolio performance, are reported monthly to risk committees
and forums.
Measures such as ECL, risk-weighted assets, observed credit
performance, predicted credit quality (usually from predictive
credit scoring models), collateral cover and quality, and other
credit drivers (such as cash flow, affordability, leverage and
indebtedness) have been incorporated into the Group’s credit
risk management practices to enable effective risk measurement
across the Group.
Management and mitigation
The Group uses a range of approaches to mitigate credit risk.
Credit risk management
Prudent credit principles, risk policies, standards and appetite
statements
The independent Risk function sets out the credit principles, credit
risk policies, credit standards and credit risk appetite statements.
Credit risk appetite is set at Board level and is described and
reported through a suite of metrics devised from a combination
of accounting and credit portfolio performance measures, which
include the use of various credit risk rating systems as inputs and
assess credit risk at a counterparty level using three components:
(i) the probability of default by the counterparty on its
contractual obligations; (ii) the current exposures to the
counterparty and their likely future development, from which
the Group derives the exposure at default; and (iii) the likely loss
ratio on the defaulted obligations, the loss given default.
•Credit authorities are delegated by relevant Boards to Chief Risk
Officers, with subsequent delegation to enable colleagues to
make credit decisions
•Credit risk management is undertaken at a customer, portfolio
and macro level. Portfolios are monitored and actions taken to
ensure they remain within risk appetite and approved limits
•Periodic reviews of specific business, sector and portfolio
strategies are undertaken to assess the risk return profile and
ensure risk is being managed, sustainable returns optimised, and
that quality is not sacrificed for growth
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155
•The ratio of risk to reward influences pricing decisions with PD,
LGD and EAD acting as key drivers to assess the potential
profitability of deals and portfolios, and to facilitate risk-
adjusted pricing and strategy decisions
•Repayment from cash flows is the primary form of risk mitigation
the Group seeks to ensure that customers can meet their
obligations
•To mitigate the risk of loss due to insufficient cash flows,
mitigation is also managed where appropriate through taking
security, collateral, credit default swaps, credit risk insurance,
financial covenants, significant risk transactions, risk netting,
guarantees, credit linked debt instruments and operational/
contractual rights to offset mutual obligations
•The Group supports and works with customers to return them to
performing and forbearance may be provided for customers
when an unexpected change in circumstances impacts their
ability to meet financial obligations. If a return to performing
status is not possible, the Group will seek to recover monies
owed
Limitations on concentration risk
There are portfolio controls on certain industries, sectors and
products to reflect risk appetite as well as individual, customer
and bank limit risk tolerances. Credit standards, appetite
statements and mandates are aligned to the Group’s risk
appetite and restrict exposure to higher risk countries and
potentially vulnerable sectors and asset classes. Exposures are
monitored to prevent both an excessive concentration of risk
and single name concentrations. These concentration risk
controls are not necessarily in the form of a maximum limit on
exposure, but may instead require new business in concentrated
sectors to fulfil additional minimum standards and/or guideline
requirements. The Group’s largest credit limits are regularly
monitored by the Board Risk Committee and reported in
accordance with regulatory requirements.
Defined country risk management framework
The Group sets a maximum country risk appetite for countries
based on economic, financial, political and social factors as well as
the approved business and strategic plans of the Group. Risk-based
appetite for all countries is set within the independent Risk
function.
Specialist expertise
Credit quality is managed and controlled by a number of specialist
units within the business and Risk function, which provide for
example: intensive management and control; security perfection;
maintenance of customer and facility records; expertise in
documentation for lending and associated products; sector-specific
expertise; and legal services applicable to the particular market
segments and product ranges offered by the Group.
Frequent and robust credit risk assurance
An independent department within the Risk function provides
oversight that credit risk is effectively managed and to ensure
appropriate controls are in place and adhered to. Group Audit
conducts assurance on the effectiveness of credit risk management.
Collateral
The principal types of acceptable collateral include: residential
and commercial properties; charges over business assets such
as inventory and accounts receivable; financial instruments such
as debt securities; vehicles; cash; and guarantees received from
third parties.
The Group maintains credit standards on the acceptability of
specific classes of collateral.
For non-mortgage retail lending to small businesses, collateral may
include second charges over residential property and the
assignment of life cover.
Collateral held as security for financial assets other than loans and
advances is determined by the nature of the underlying exposure.
Debt securities, including treasury and other bills, are generally
unsecured, with the exception of asset-backed securities and similar
instruments such as covered bonds, which are secured by portfolios
of financial assets. Collateral is generally not held against loans and
advances to financial institutions and debt securities. Debt
securities are classified as financial assets held at amortised cost.
Securities are held as part of reverse repurchase or securities
borrowing transactions or where a collateral agreement has been
entered into under a master netting agreement. Derivative
transactions with financial institutions are typically collateralised
under a Credit Support Annex (CSA) in conjunction with the
International Swaps and Derivatives Association (ISDA) Master
Agreement. Derivative transactions with non-financial customers
are not usually supported by a CSA.
Collateral requirements at origination depend on the transaction’s
nature and the borrower’s credit quality, size and structure.
For non-retail exposures, the Group may seek:
•A first charge over land and buildings owned and occupied by
the business
•A debenture over the assets of a company or limited liability
partnerships
•Limited personal guarantees from directors of a company or
limited liability partnership
•Key man insurance
The Group has standards on acceptable collateral valuations,
maximum loan-to-value (LTV) ratios, and other criteria for
application reviews. The customer or counterparty must
demonstrate its ability to generate funds from normal operations to
repay a customer or counterparty’s financial commitments, rather
than relying on the disposal of collateral.
Although lending decisions are primarily based on expected cash
flows, any collateral provided may impact the pricing and other
terms of a loan or facility granted. This will have a financial impact
on the amount of net interest income recognised and on internal
loss given default estimates that contribute to the determination of
asset quality and returns.
The Group requires collateral to be valued by a qualified,
independent source at the time of borrowing, where
appropriate. For retail residential mortgages and limited
residential assets in Commercial, automated valuation models
may be used, subject to accuracy and LTV limits. Third-party
valuations are regularly monitored and reviewed. Collateral
values are reviewed based on lending type, collateral and
account performance to ensure they remain appropriate. If
collateral value declines, the Group may seek additional
collateral or amend facility terms. The Group adjusts estimated
market values to take account of the costs of realisation and any
discount associated with the realisation of the collateral when
estimating credit losses.
In some circumstances, where the discounted value of the
estimated net proceeds from the liquidation of collateral (i.e. net
of costs, expected haircuts and anticipated changes in the value
of the collateral to the point of sale) is greater than the
estimated exposure at default, no credit losses are expected and
no ECL allowance is recognised.
The Group considers risk concentrations by collateral providers and
collateral type with a view to ensuring that any potential undue
concentrations of risk are identified and suitably managed by
changes to strategy, standards and/or business plans.
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156
Risk management continued
The Group seeks to avoid correlation or wrong-way risk where
possible. Under the Group’s repurchase (repo) policy, the issuer of
the collateral and the repo counterparty should be neither the same
nor connected. The same rule applies for derivatives. The Risk
function has the necessary discretion to extend this rule to other
cases where there is significant correlation, or agree exceptions, for
example, countries with a rating equivalent to AA- or better may be
considered to have no adverse correlation between a counterparty
domiciled in that country and the country of risk (issuer of
securities), or for short-dated transactions with counterparties with
certain specific Sovereign issues.
The Group’s credit risk disclosures for unimpaired other retail
lending show assets gross of collateral and therefore disclose the
maximum loss exposure.
During the year, £394 million of collateral was repossessed
(2024: £285 million), consisting primarily of residential property.
Forbearance
The Group’s aim in offering forbearance and other assistance to
customers in financial distress is to benefit both the customer and
the Group by supporting its customers and acting in their best
interests by, where possible, bringing customer facilities back into a
sustainable position.
The Group offers a range of tools and assistance to support
customers who are encountering financial difficulties. Cases are
managed on an individual basis, with the circumstances of each
customer considered separately and the action taken judged
as being appropriate and sustainable for both the customer
and the Group.
Forbearance measures consist of concessions towards a debtor that
is experiencing or about to experience difficulties in meeting its
financial commitments. This can include modification of the
previous terms and conditions of a contract or a total or partial
refinancing of a troubled debt contract, either of which would
not have been required had the debtor not been experiencing
financial difficulties.
The provision and review of such assistance is controlled through
the application of an appropriate framework and associated
controls. Regular review of the assistance offered to customers
is undertaken to confirm that it remains appropriate, alongside
monitoring of customers’ performance and the level of
payments received.
The Group classifies accounts as forborne at the time a customer in
financial difficulty is granted a concession.
Balances in default or classified as Stage 3 are always considered to
be non-performing. Balances may be non-performing but not in
default or Stage 3, where for example they are within their non-
performing forbearance cure period.
Non-performing exposures can be reclassified as performing
forborne after a minimum 12-month cure period, providing there are
no past due amounts or concerns regarding the full repayment of
the exposure. A minimum of a further 24 months must pass from
the date the forborne exposure was reclassified as performing
forborne before the account can exit forbearance. If conditions to
exit forbearance are not met at the end of this probation period,
the exposure shall continue to be identified as forborne until all the
conditions are met.
The Group’s treatment of loan renegotiations is included in the
impairment policy in note 2(H) to the consolidated financial
statements on page 221.
Additional mitigation for Retail customers
The Group uses a variety of lending criteria when assessing
applications for mortgages and unsecured lending. The general
approval process uses credit acceptance scorecards and involves a
review of an applicant’s previous credit history using internal data
and information held by Credit Reference Agencies (CRA).
The Group also assesses the affordability and sustainability of
lending for each borrower. For secured lending this includes use of
an appropriate stressed interest rate scenario. Affordability
assessments for all lending are compliant with relevant regulatory
and conduct guidelines. The Group takes reasonable steps to
validate information used in the assessment of a customer’s income
and expenditure.
In addition, the Group has in place quantitative limits such as
maximum limits for individual customer products, the level of
borrowing to income and the ratio of borrowing to collateral. Some
of these limits relate to internal approval levels and others are policy
limits above which the Group will typically reject borrowing
applications. The Group also applies certain criteria that are
applicable to specific products, for example applications for buy-to-
let mortgages.
For UK mortgages, the Group’s credit standard permits owner
occupier applications with a maximum LTV of 95%. This can
increase to 100% for specific products where additional security is
provided by a supporter of the applicant and held on deposit by the
Group. Applications with an LTV above 90% are subject to
enhanced underwriting criteria, including higher scorecard cut-offs
and loan size restrictions.
Buy-to-let mortgages within Retail are limited to a maximum loan
size of £2,000,000 and 80% LTV for a single property. Buy-to-let
applications must pass a minimum rental cover ratio of 125% under
stressed interest rates, after applicable tax liabilities. Portfolio
landlords (customers with four or more mortgaged buy-to-let
properties) are subject to additional controls including evaluation of
overall portfolio resilience.
The Group’s credit standard is to reject any application for a lending
product where a customer is registered as bankrupt or insolvent, or
has a recent County Court Judgment or financial default registered
at a CRA used by the Group above de minimis thresholds. In
addition, the Group typically rejects applicants where total
unsecured debt, debt-to-income ratios, or other indicators of
financial difficulty exceed credit standard limits.
Where credit acceptance scorecards are used, new models, model
changes and monitoring of model effectiveness are independently
reviewed and approved in accordance with the governance
framework set by the Group Model Governance Committee.
The Group generally does not take physical possession of
properties or other assets held as collateral and uses external
agents to realise the value as soon as practicable, generally at
auction, to settle indebtedness. Any surplus funds are returned
to the borrower or are otherwise dealt with in accordance with
appropriate insolvency regulations. In certain circumstances the
Group takes physical possession of assets held as collateral
against commercial lending. In such cases, the assets are carried
on the Group’s balance sheet and are classified according to the
Group’s accounting policies.
Additional mitigation for Commercial Banking customers
Individual credit assessment and independent sanction of
customer and bank limits
With the exception of small exposures to small to medium-sized
enterprises (SME) customers where certain relationship managers
have limited delegated credit approval authority, credit risk in
commercial customer portfolios is subject to approval by the
independent Risk function, which considers the strengths and
weaknesses of individual transactions, the balance of risk and
reward, and how credit risk aligns to risk appetite and the Group‘s
strategy.
Credit facilities provided are subject to an Annual Credit Review
(ACR) in line with Credit Standards, to confirm appetite for ongoing
provision of existing facilities.
Lloyds Banking Group plc Annual Report and Accounts 2025
157
Exposure to individual counterparties, groups of counterparties or
customer risk segments is controlled through a tiered hierarchy of
credit authority delegations and risk-based credit limit guidances
per client group for larger exposures. Approval requirements for
each decision are based on a number of factors including, but not
limited to, the transaction amount, the customer’s aggregate
facilities, any risk mitigation in place, credit standards, risk appetite,
credit risk ratings and the nature and term of the risk. The Group’s
credit risk appetite criteria for counterparty and customer loan
underwriting is generally the same as that for loans intended to be
held to maturity. All hard loan/bond underwriting must be approved
by the Risk function. A pre-approved credit matrix may be used for
‘best efforts’ underwriting.
Counterparty credit limits
Limits are set against all types of exposure in a counterparty name,
in accordance with an agreed methodology for each exposure type.
This includes credit risk exposure on individual derivatives and
securities financing transactions, which incorporates potential
future exposures from market movements against agreed
confidence intervals. Aggregate facility levels by counterparty are
set and limit breaches are subject to escalation procedures.
Daily settlement limits
Settlement risk arises in any situation where a payment in cash,
securities or equities is made in the expectation of a corresponding
receipt in cash, securities or equities. Daily settlement limits are
established for each relevant counterparty to cover the aggregate of
all settlement risk arising from the Group’s market transactions on
any single day. Where possible, the Group uses Continuous Linked
Settlement in order to reduce foreign exchange (FX) settlement risk.
Master netting agreements
It is a credit requirement that a Group-approved master
netting agreement must be used for all derivative and traded
product transactions and must be in place prior to trading, with
separate documentation required for each Group entity providing
facilities. This requirement extends to trades with clients and the
counterparties used for the Group’s own hedging activities, which
may also include clearing trades with Central Counterparties (CCPs).
Any exceptions must be approved by the appropriate credit
approver. Master netting agreements do not generally result in an
offset of balance sheet assets and liabilities for accounting purposes,
as transactions are usually settled on a gross basis. However, within
relevant jurisdictions and for appropriate counterparty types,
master netting agreements do reduce the credit risk to the extent
that, if an event of default occurs, all trades with the counterparty
may be terminated and settled on a net basis. The Group’s overall
exposure to credit risk on derivative instruments subject to master
netting agreements can change substantially within a short period,
since this is the net position of all trades under the master netting
agreement.
Other credit risk transfers
The Group also undertakes asset sales, credit derivative based
transactions, securitisations (including significant risk transfer
transactions), purchases of credit default swaps and purchase of
credit risk insurance as a means of mitigating or reducing credit risk
and/or risk concentration, taking into account the Group’s credit
risk appetite, the nature of assets and the prevailing market
conditions.
Monitoring
Credit risk exposure is monitored using various internal risk
management measures against limits approved by automated
decision tools, or individuals with set delegated authorities.
Portfolios are monitored to evaluate trends in credit risk measures
including PD, EAD, LGD, Expected Credit Loss (ECL), Expected Loss
(EL) and Risk-Weighted Assets (RWA), and ensure that the overall
composition of the lending portfolios remains consistent with Board
approved risk appetite.
Early Warning Indicators are used to detect early signs of a
deterioration in credit quality.
Reporting
Credit Risk Appetite Metrics and a set of management measures are
reported to relevant Boards, Risk Committees and Forums as
required.
Operational limits are reported to the relevant committees, forums
or individuals as required.
Robust insight, analytical, and reporting capabilities are in place to
produce timely and reliable risk data and management information
to meet internal and external reporting requirements.
The Group credit risk portfolio in 2025
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 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%).
Lloyds Banking Group plc Annual Report and Accounts 2025
158
Risk management continued
Total Group assets
Impairment charge (credit) by division – statutory and underlyingA basis
| Loans and<br><br>advances to<br><br>customers<br><br>£m | Loans and<br><br>advances to<br><br>banks<br><br>£m | Debt<br><br>securities<br><br>£m | Financialassets atfair valuethrough othercomprehensiveincomem | Other<br><br>£m | Undrawn<br><br>balances<br><br>£m | 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|---|---|---|---|---|---|
| UK mortgages | (59) | – | – | – | (1) | (60) | (194) | |
| Credit cards | 327 | – | – | – | (6) | 321 | 270 | |
| UK unsecured loans and<br><br>overdrafts | 269 | – | – | – | (12) | 257 | 272 | |
| UK Motor Finance | 214 | – | – | – | (2) | 212 | 116 | |
| Other | 3 | – | – | – | 1 | 4 | (7) | |
| Retail | 754 | – | – | – | (20) | 734 | 457 | |
| Business and Commercial<br><br>Banking | (53) | – | – | – | – | (53) | 47 | |
| Corporate and Institutional<br><br>Banking | 166 | – | – | – | (53) | 113 | (61) | |
| Commercial Banking | 113 | – | – | – | (53) | 60 | (14) | |
| Insurance, Pensions and<br><br>Investments | – | – | – | 2 | – | 2 | (9) | |
| Equity Investments and<br><br>Central Items | – | – | – | – | – | (1) | (3) | |
| Total impairment charge (credit) | 867 | – | – | 2 | (73) | 795 | 431 | |
| Insurance, Pensions and<br><br>Investments (underlying basis)A | – | – | – | 2 | – | 2 | (7) | |
| Total impairment charge (credit)<br><br>(underlying basis)A | 867 | – | – | 2 | (73) | 795 | 433 | |
| Asset quality ratioA | 0.17% | 0.10% |
All values are in British Pounds.
Credit risk balance sheet basis of presentation
The balance sheet analyses which follow have been presented on two bases; the statutory basis which is consistent with the presentation
in the Group’s accounts and the underlying basis which is used for internal management purposes. A reconciliation between the two bases
has been provided.
In the following statutory basis tables, purchased or originated credit-impaired (POCI) assets include a fixed pool of mortgages that were
purchased as part of the HBOS acquisition at a deep discount to face value reflecting credit losses incurred from the point of origination to
the date of acquisition. The residual expected credit loss (ECL) allowance on POCI assets reflects further deterioration in the
creditworthiness from the date of acquisition. Over time, these POCI assets will run off as the loans redeem, pay down or as loans are
written off.
The Group uses the underlying basis to monitor the creditworthiness of the lending portfolio and related ECL allowances because it
provides a different perspective of the credit performance of the POCI assets purchased as part of the HBOS acquisition. The underlying
basis assumes that the lending assets acquired as part of a business combination were originated by the Group and are classified as either
Stage 1, 2 or 3 according to the change in credit risk over the period since origination. Underlying ECL allowances have been calculated
accordingly. Unless otherwise stated, the following credit risk commentary is provided on an underlying basis.
The statutory basis also includes an accounting adjustment within UK Motor Finance required under IFRS 9 to recognise a continuing
involvement asset following the partial derecognition of a component of the Group’s finance lease book via a securitisation in the third
quarter of 2024.
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159
Total expected credit loss allowance – statutory and underlyingA basis
| At 31 Dec<br><br>2025<br><br>£m | At 31 Dec<br><br>2024<br><br>£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 |
Movements in total expected credit loss allowance – statutory and underlyingA basis
| Opening ECL at<br><br>31 Dec 2024<br><br>£m | Write-offs<br><br>and other1<br><br>£m | Income<br><br>statement<br><br>charge (credit)<br><br>£m | Net ECL<br><br>increase<br><br>(decrease)<br><br>£m | Closing ECL at<br><br>31 Dec 2025<br><br>£m | |
|---|---|---|---|---|---|
| UK mortgages | 852 | (61) | (60) | (121) | 731 |
| Credit cards | 674 | (392) | 321 | (71) | 603 |
| UK unsecured loans and overdrafts | 523 | (282) | 257 | (25) | 498 |
| UK Motor Finance | 360 | (142) | 212 | 70 | 430 |
| Other | 67 | (8) | 4 | (4) | 63 |
| Retail | 2,476 | (885) | 734 | (151) | 2,325 |
| Business and Commercial Banking | 485 | (55) | (53) | (108) | 377 |
| Corporate and Institutional Banking | 504 | (106) | 113 | 7 | 511 |
| Commercial Banking | 989 | (161) | 60 | (101) | 888 |
| Insurance, Pensions and Investments | 15 | (3) | 2 | (1) | 14 |
| Equity Investments and Central Items | 1 | 1 | (1) | – | 1 |
| Total2 | 3,481 | (1,048) | 795 | (253) | 3,228 |
| UK mortgages (underlying basis)A | 1,022 | (106) | (60) | (166) | 856 |
| Retail (underlying basis)A | 2,646 | (930) | 734 | (196) | 2,450 |
| Insurance, Pensions and Investments (underlying basis)A | 15 | (3) | 2 | (1) | 14 |
| Total (underlying basis)A | 3,651 | (1,093) | 795 | (298) | 3,353 |
1Contains adjustments in respect of purchased or originated credit-impaired financial assets.
2Total ECL includes £20 million relating to other non-customer-related assets (31 December 2024: £20 million).
Total expected credit loss allowance sensitivity to economic assumptions – statutory and underlyingA 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.
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160
Risk management continued
| Probability-<br><br>weighted<br><br>£m | Upside<br><br>£m | Base case<br><br>£m | Downside<br><br>£m | Severe<br><br>downside<br><br>£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 |
Group loans and advances to customers
The following pages contain analysis of the Group’s loans and advances to customers by sub-portfolio. Loans and advances to customers
are categorised into the following stages:
•Stage 1 assets comprise of newly originated assets (unless purchased or originated credit-impaired), as well as those which have not
experienced a significant increase in credit risk. These assets carry an expected credit loss allowance equivalent to the expected credit
losses that result from those default events that are possible within 12 months of the reporting date (12 month expected credit losses)
•Stage 2 assets are those which have experienced a significant increase in credit risk since origination. These assets carry an expected
credit loss allowance equivalent to the expected credit losses arising over the lifetime of the asset (lifetime expected credit losses)
•Stage 3 assets have either defaulted or are otherwise considered to be credit-impaired. These assets carry a lifetime expected credit loss
•Purchased or originated credit-impaired assets (POCI) are those that have been originated or acquired in a credit-impaired state. This
includes within the definition of credit-impaired the purchase of a financial asset at a deep discount that reflects impaired credit losses
Reconciliation between statutory and underlyingA 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<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | POCI<br><br>£m | Total<br><br>£m | Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | POCI<br><br>£m | Total<br><br>£m | |
| At 31 December 2025 | ||||||||||
| Underlying basisA | 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<br><br>value adjustment | – | – | – | (125) | (125) | – | – | – | (125) | (125) |
| Continuing involvement<br><br>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 basisA | 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<br><br>value adjustment | – | – | – | (170) | (170) | – | – | – | (170) | (170) |
| Continuing involvement<br><br>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 |
Lloyds Banking Group plc Annual Report and Accounts 2025
161
Loans and advances to customers and expected credit loss allowance – statutory and underlyingA basis
| At 31 December 2025 | Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | POCI<br><br>£m | Total<br><br>£m | Stage 2<br><br>as % of total | Stage 3<br><br>as % of 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 Items1 | 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 Finance4 | 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,3 | 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<br><br>% | Stage 2<br><br>% | Stage 3<br><br>% | POCI<br><br>% | Total<br><br>% | Adjusted<br><br>Stage 35<br><br>% | Adjusted<br><br>Total5<br><br>% | |
| 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 |
1Contains central fair value hedge accounting adjustments.
2UK mortgages balances on an underlying basisA exclude the impact of the HBOS acquisition-related adjustments.
3UK Motor Finance balances on an underlying basisA exclude a finance lease gross up.
4UK Motor Finance includes £243 million relating to provisions against residual values of vehicles subject to finance leases.
5Stage 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.
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162
Risk management continued
| At 31 December 2024 | Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | POCI<br><br>£m | Total<br><br>£m | Stage 2<br><br>as % of total | Stage 3<br><br>as % of 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 Items1 | 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 Finance4 | 173 | 115 | 72 | – | 360 | ||
| Other | 16 | 14 | 37 | – | 67 | ||
| Retail | 624 | 970 | 695 | 187 | 2,476 | ||
| Business and Commercial Banking | 132 | 187 | 166 | – | 485 | ||
| Corporate and Institutional Banking | 122 | 129 | 249 | – | 500 | ||
| Commercial Banking | 254 | 316 | 415 | – | 985 | ||
| Equity Investments and Central Items | – | – | – | – | – | ||
| Total | 878 | 1,286 | 1,110 | 187 | 3,461 | ||
| UK mortgages (underlying basis)A,2 | 55 | 314 | 653 | 1,022 | |||
| UK Motor Finance (underlying basis)A,3 | 173 | 115 | 72 | 360 | |||
| Retail (underlying basis)A | 624 | 1,009 | 1,013 | 2,646 | |||
| Total (underlying basis)A | 878 | 1,325 | 1,428 | 3,631 | |||
| Customer related ECL allowance (drawn and undrawn) as a percentage of loans and advances to customers | |||||||
| Stage 1<br><br>% | Stage 2<br><br>% | Stage 3<br><br>% | POCI<br><br>% | Total<br><br>% | Adjusted<br><br>Stage 35<br><br>% | Adjusted<br><br>Total5<br><br>% | |
| 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 |
1Contains central fair value hedge accounting adjustments.
2UK mortgages balances on an underlying basisA exclude the impact of the HBOS acquisition-related adjustments.
3UK Motor Finance balances on an underlying basisA exclude a finance lease gross up.
4UK Motor Finance includes £178 million relating to provisions against residual values of vehicles subject to finance leases.
5Stage 3 and Total exclude loans in recoveries in Business and Commercial Banking of £296 million and Corporate and Institutional Banking of £1 million.
Lloyds Banking Group plc Annual Report and Accounts 2025
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Stage 2 loans and advances to customers and expected credit loss allowance – statutory and underlyingA basis
| Grosslendingm | ECL3<br><br>£m | As % of<br><br>gross<br><br>lending | Grosslendingm | ECL3<br><br>£m | As % of<br><br>gross<br><br>lending | Grosslendingm | ECL3<br><br>£m | As % of<br><br>gross<br><br>lending | Grosslendingm | ECL3<br><br>£m | As % of<br><br>gross<br><br>lending | ||||
| At 31 December 2025 | |||||||||||||||
| UK mortgages | 155 | 0.6 | 13 | 0.6 | 18 | 1.6 | 22 | 2.3 | |||||||
| Credit cards | 202 | 9.9 | 36 | 25.0 | 23 | 24.5 | 16 | 40.0 | |||||||
| UK unsecured loans and overdrafts | 116 | 17.4 | 53 | 9.5 | 31 | 24.0 | 14 | 32.6 | |||||||
| UK Motor Finance | 69 | 5.2 | 40 | 3.1 | 29 | 21.3 | 11 | 34.4 | |||||||
| Other | 2 | 3.2 | 6 | 2.0 | 1 | 9.1 | 2 | 14.3 | |||||||
| Retail | 544 | 1.8 | 148 | 3.4 | 102 | 6.8 | 65 | 6.0 | |||||||
| Business and Commercial Banking | 133 | 4.8 | 15 | 5.8 | 12 | 5.6 | 5 | 5.5 | |||||||
| Corporate and Institutional Banking | 135 | 7.2 | – | – | 1 | 14.3 | – | 0.0 | |||||||
| Commercial Banking | 268 | 5.8 | 15 | 5.4 | 13 | 5.9 | 5 | 2.4 | |||||||
| Total | 812 | 2.3 | 163 | 3.5 | 115 | 6.7 | 70 | 5.4 | |||||||
| UK mortgages (underlying basis)A | 172 | 0.6 | 19 | 0.9 | 21 | 1.5 | 26 | 2.3 | |||||||
| Retail (underlying basis)A | 561 | 1.7 | 154 | 3.4 | 105 | 6.0 | 69 | 5.4 | |||||||
| Total (underlying basis)A | 829 | 2.2 | 169 | 3.6 | 118 | 6.0 | 74 | 5.0 | |||||||
| At 31 December 2024 | |||||||||||||||
| UK mortgages | 191 | 0.7 | 38 | 2.0 | 22 | 1.8 | 24 | 2.5 | |||||||
| Credit cards | 248 | 11.4 | 43 | 28.9 | 24 | 28.9 | 16 | 45.7 | |||||||
| UK unsecured loans and overdrafts | 129 | 20.5 | 52 | 11.8 | 36 | 27.5 | 18 | 38.3 | |||||||
| UK Motor Finance | 49 | 4.1 | 30 | 2.9 | 25 | 17.7 | 11 | 30.6 | |||||||
| Other | 3 | 2.9 | 7 | 2.2 | 2 | 5.4 | 2 | 3.6 | |||||||
| Retail | 620 | 1.9 | 170 | 4.5 | 109 | 6.7 | 71 | 6.2 | |||||||
| Business and Commercial Banking | 154 | 6.3 | 18 | 4.2 | 10 | 5.7 | 5 | 4.0 | |||||||
| Corporate and Institutional Banking | 125 | 6.6 | 1 | 2.2 | – | – | 3 | 7.1 | |||||||
| Commercial Banking | 279 | 6.4 | 19 | 4.0 | 10 | 5.5 | 8 | 4.8 | |||||||
| Total | 899 | 2.4 | 189 | 4.4 | 119 | 6.6 | 79 | 6.0 | |||||||
| UK mortgages (underlying basis)A | 216 | 0.7 | 41 | 2.1 | 27 | 1.7 | 30 | 2.4 | |||||||
| Retail (underlying basis)A | 645 | 1.8 | 173 | 4.4 | 114 | 5.8 | 77 | 5.5 | |||||||
| Total (underlying basis)A | 924 | 2.3 | 192 | 4.4 | 124 | 5.8 | 85 | 5.4 |
All values are in British Pounds.
1Includes forbearance, client and product-specific indicators not reflected within quantitative PD assessments.
2Includes assets that have triggered PD movements, or other rules, given that being 1 to 29 days in arrears in and of itself is not a Stage 2 trigger.
3Expected credit loss allowance on loans and advances to customers (drawn and undrawn).
The Group’s assessment of a significant increase in credit risk, and resulting categorisation of Stage 2, includes customers moving into early
arrears as well as a broader assessment that an up-to-date customer has experienced a level of deterioration in credit risk since origination.
A more sophisticated assessment is required for up-to-date customers, which varies across divisions and product type. This assessment
incorporates specific triggers such as a significant proportionate increase in probability of default relative to that at origination, recent
arrears, forbearance activity, internal watch lists and external bureau flags. Up to date exposures in Stage 2 are likely to show lower levels
of expected credit loss (ECL) allowance relative to those that have already moved into arrears given that an arrears status typically reflects
a stronger indication of future default and greater likelihood of credit losses.
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Risk management continued
Movements in balances for the year ended 31 December 2025 (audited)
The movement tables below are compiled by comparing the position at the end of the period to that at the beginning of the year. Transfers
between stages are deemed to have taken place at the start of the reporting period, with all other movements shown in the stage in which
the asset is held at the end of the period. Purchased or originated credit-impaired are not transferable.
Additions and repayments comprise new loans originated and repayments of outstanding balances throughout the reporting period.
The Group’s impairment charge comprises impact of transfers between stages, other changes in credit quality and additions
and repayments.
Advances written off have first been transferred to Stage 3 and then acquired a full allowance through other changes in credit quality.
Recoveries of amounts previously written off are shown at the full recovered value, with a corresponding entry in repayments and release of
allowance through other changes in credit quality.
Movements in the gross carrying amount for loans and advances to customers and for allowance for expected credit losses were as follows:
| Gross carrying amount | Allowance for expected credit losses | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | POCI<br><br>£m | Total<br><br>£m | Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | POCI<br><br>£m | Total<br><br>£m | |
| At 1 January 2025 | 405,360 | 44,765 | 6,716 | 6,207 | 463,048 | 736 | 1,160 | 1,108 | 187 | 3,191 |
| Exchange and other adjustments1 | 1,034 | (17) | 3 | 8 | 1,028 | (13) | (1) | 18 | 45 | 49 |
| Transfers to Stage 1 | 7,165 | (7,021) | (144) | – | 240 | (221) | (19) | – | ||
| Transfers to Stage 2 | (10,427) | 11,211 | (784) | – | (53) | 114 | (61) | – | ||
| Transfers to Stage 3 | (1,557) | (1,871) | 3,428 | – | (35) | (157) | 192 | – | ||
| Net change in ECL<br><br>due to transfers | (153) | 257 | 350 | 454 | ||||||
| Impact of transfers between stages2 | (4,819) | 2,319 | 2,500 | – | (1) | (7) | 462 | 454 | ||
| Other changes in credit quality2 | 27 | (46) | 677 | 11 | 669 | |||||
| Additions and repayments | 28,618 | (4,388) | (1,606) | (1,130) | 21,494 | (12) | (29) | (140) | (75) | (256) |
| Charge (credit) to the income<br><br>statement | 14 | (82) | 999 | (64) | 867 | |||||
| Disposals and derecognition | – | – | – | – | – | – | – | – | – | – |
| Advances written off | (1,296) | (9) | (1,305) | (1,296) | (9) | (1,305) | ||||
| Recoveries of amounts previously<br><br>written off | 209 | – | 209 | 209 | – | 209 | ||||
| At 31 December 2025 | 430,193 | 42,679 | 6,526 | 5,076 | 484,474 | 737 | 1,077 | 1,038 | 159 | 3,011 |
| Allowance for<br><br>expected credit losses | (737) | (1,077) | (1,038) | (159) | (3,011) | |||||
| Net carrying amount | 429,456 | 41,602 | 5,488 | 4,917 | 481,463 | |||||
| Drawn ECL coverage3 (%) | 0.2 | 2.5 | 15.9 | 3.1 | 0.6 |
1Exchange and other adjustments includes the impact of movements in exchange rates, discount unwind, derecognising assets as a result of modifications and adjustments in respect of
purchased or originated credit-impaired financial assets (POCI). Where a POCI asset’s expected credit loss is less than its expected credit loss on purchase or origination, the increase in
its carrying value is recognised within gross loans, rather than as a negative impairment allowance.
2Includes a credit for methodology and model changes of £136 million, split by stage as £41 million credit for Stage 1, £47 million credit for Stage 2, £52 million credit for Stage 3 and
£4 million charge for POCI.
3Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers.
The total allowance for expected credit losses includes £243 million (2024: £178 million) in respect of residual value impairment and
voluntary terminations within the Group’s UK Motor Finance business.
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165
Movements in balances for the year ended 31 December 2024 (audited)
| Gross carrying amount | Allowance for expected credit losses | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | POCI<br><br>£m | Total<br><br>£m | Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | POCI<br><br>£m | Total<br><br>£m | |
| At 1 January 2024 | 385,294 | 53,167 | 7,147 | 7,854 | 453,462 | 900 | 1,467 | 1,137 | 213 | 3,717 |
| Exchange and other adjustments1 | (910) | (23) | (74) | 12 | (995) | (12) | (6) | 21 | 53 | 56 |
| Transfers to Stage 1 | 25,658 | (25,607) | (51) | – | 413 | (404) | (9) | – | ||
| Transfers to Stage 2 | (25,390) | 25,967 | (577) | – | (66) | 126 | (60) | – | ||
| Transfers to Stage 3 | (1,104) | (2,119) | 3,223 | – | (21) | (178) | 199 | – | ||
| Net change in ECL<br><br>due to transfers | (293) | 340 | 303 | 350 | ||||||
| Impact of transfers between stages2 | (836) | (1,759) | 2,595 | – | 33 | (116) | 433 | 350 | ||
| Other changes in credit quality2 | (130) | (66) | 709 | 66 | 579 | |||||
| Additions and repayments | 22,529 | (6,140) | (1,612) | (910) | 13,867 | (50) | (107) | (193) | (72) | (422) |
| Charge (credit) to the income<br><br>statement | (147) | (289) | 949 | (6) | 507 | |||||
| Disposals and derecognition3 | (717) | (480) | (366) | (694) | (2,257) | (5) | (12) | (25) | (18) | (60) |
| Advances written off | (1,174) | (55) | (1,229) | (1,174) | (55) | (1,229) | ||||
| Recoveries of amounts previously<br><br>written off | 200 | – | 200 | 200 | – | 200 | ||||
| At 31 December 2024 | 405,360 | 44,765 | 6,716 | 6,207 | 463,048 | 736 | 1,160 | 1,108 | 187 | 3,191 |
| Allowance for<br><br>expected credit losses | (736) | (1,160) | (1,108) | (187) | (3,191) | |||||
| Net carrying amount | 404,624 | 43,605 | 5,608 | 6,020 | 459,857 | |||||
| Drawn ECL coverage4 (%) | 0.2 | 2.6 | 16.5 | 3.0 | 0.7 |
1Exchange and other adjustments includes the impact of movements in exchange rates, discount unwind, derecognising assets as a result of modifications and adjustments in respect of
purchased or originated credit-impaired financial assets (POCI). Where a POCI asset’s expected credit loss is less than its expected credit loss on purchase or origination, the increase in
its carrying value is recognised within gross loans, rather than as a negative impairment allowance.
2Includes a credit for methodology and model changes of £24 million, split by stage as £20 million credit for Stage 1, £2 million charge for Stage 2, £15 million charge for Stage 3 and
£21 million credit for POCI.
3Relates to the securitisations of primarily legacy Retail mortgages
4Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers.
Concentrations of exposure (audited)
The Group’s management of concentration risk includes portfolio controls on certain industries, sectors and products to reflect risk
appetite as well as individual, customer and bank limit risk tolerances. Credit policies and appetite statements are aligned to the Group’s
risk appetite and restrict exposure to higher risk countries and potentially vulnerable sectors and asset classes. Exposures are monitored to
prevent both an excessive concentration of risk and single name concentrations. The Group’s largest credit limits are regularly monitored by
the Board Risk Committee and reported in accordance with regulatory requirements. As part of its credit risk policy, the Group considers
sustainability risk (which incorporates environmental (including climate), social and governance) in the assessment of Commercial
Banking facilities.
At 31 December 2025 the most significant concentrations of exposure were in mortgages.
| 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|
| Agriculture, forestry and fishing | 6,071 | 6,424 |
| Construction1 | 3,175 | 3,389 |
| Energy and water supply | 5,571 | 4,912 |
| Financial, business and other services | 40,221 | 38,034 |
| Manufacturing | 5,326 | 4,790 |
| Mining and Quarrying | 314 | 205 |
| Personal: | ||
| Mortgages1 | 346,033 | 330,840 |
| Lease financing2 | 13,972 | 13,249 |
| Other | 31,145 | 28,016 |
| Postal and telecommunications | 3,177 | 3,182 |
| Property companies | 19,139 | 19,271 |
| Transport, distribution and hotels | 10,330 | 10,736 |
| Total loans and advances to customers before allowance for impairment losses | 484,474 | 463,048 |
| Allowance for impairment losses (note 21 to the consolidated financial statements, page 272) | (3,011) | (3,191) |
| Total loans and advances to customers | 481,463 | 459,857 |
1Includes both UK and overseas mortgage balances.
2Lease financing, previously reported in aggregate, is presented separately according to whether the lending is personal or non-personal. Non-personal lease financing is allocated to the
industries or sectors relevant to the exposure. Comparatives are represented on a consistent basis.
Lloyds Banking Group plc Annual Report and Accounts 2025
166
Risk management continued
Forbearance
The basis of disclosure for forbearance is the CRR Article 47b definition. On a statutory basis, forbearance for the major retail portfolios
increased by £
122
million to £
3,672
million in 2025 (2024: £3,550 million).
Commercial Banking forborne loans and advances increased by £241 million to £2,460 million in 2025 (2024: £2,219 million), of which
£1,852 million were in Stage 3 (2024: £1,784 million).
For information on customer treatments, see page 156.
Credit quality of loans and advances to customers (audited)
The analysis of lending has been prepared based on the division in which the asset is held, with the business segment in which the exposure
is recorded reflected in the ratings system applied. The internal credit ratings systems used by the Group differ between Retail and
Commercial, reflecting the characteristics of these exposures and the way that they are managed internally; these credit ratings are set out
below. All probabilities of default (PDs) include forward-looking information and are based on 12-month values, with the exception of
credit-impaired.
| Retail | Commercial | ||
|---|---|---|---|
| Quality classification | IFRS 9 PD range | Quality classification | IFRS 9 PD range |
| RMS 1–3 | 0.00–0.80% | CMS 1–5 | 0.000–0.100% |
| RMS 4–6 | 0.81–4.50% | CMS 6–10 | 0.101–0.500% |
| RMS 7–9 | 4.51–14.00% | CMS 11–14 | 0.501–3.000% |
| RMS 10 | 14.01–20.00% | CMS 15–18 | 3.001–20.000% |
| RMS 11–13 | 20.01–99.99% | CMS 19 | 20.001–99.999% |
| RMS 14 | 100.00% | CMS 20–23 | 100.000% |
Stage 3 assets include balances of £235 million (2024: £297 million) (with outstanding amounts due of £992 million (2024: £971 million))
which have been subject to a partial write-off and where the Group continues to enforce recovery action.
There were no modifications of Stage 2 and Stage 3 assets during the year (2024: none). No material gain or loss was recognised by
the Group.
As at 31 December 2025 there were no (2024: none) significant assets that had been previously modified while classified as Stage 2 or Stage 3
and were classified as Stage 1.
Lloyds Banking Group plc Annual Report and Accounts 2025
167
| Drawn exposures | Allowance for expected credit losses | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Gross drawn exposures and expected credit<br><br>loss allowance (audited) | Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | POCI<br><br>£m | Total<br><br>£m | Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | POCI<br><br>£m | Total<br><br>£m |
| At 31 December 2025 | ||||||||||
| Retail – UK mortgages | ||||||||||
| RMS 1–3 | 276,020 | 19,717 | – | – | 295,737 | 43 | 99 | – | – | 142 |
| RMS 4–6 | 8,034 | 6,274 | – | – | 14,308 | 6 | 34 | – | – | 40 |
| RMS 7–9 | 154 | 1,193 | – | – | 1,347 | 1 | 12 | – | – | 13 |
| RMS 10 | 23 | 338 | – | – | 361 | – | 5 | – | – | 5 |
| RMS 11–13 | 76 | 2,892 | – | – | 2,968 | 1 | 57 | – | – | 58 |
| RMS 14 | – | – | 4,016 | 5,076 | 9,092 | – | – | 309 | 159 | 468 |
| 284,307 | 30,414 | 4,016 | 5,076 | 323,813 | 51 | 207 | 309 | 159 | 726 | |
| Retail – credit cards | ||||||||||
| RMS 1–3 | 5,708 | 6 | – | – | 5,714 | 11 | – | – | – | 11 |
| RMS 4–6 | 8,221 | 1,108 | – | – | 9,329 | 85 | 44 | – | – | 129 |
| RMS 7–9 | 1,321 | 793 | – | – | 2,114 | 48 | 87 | – | – | 135 |
| RMS 10 | 8 | 140 | – | – | 148 | 1 | 26 | – | – | 27 |
| RMS 11–13 | – | 279 | – | – | 279 | – | 91 | – | – | 91 |
| RMS 14 | – | – | 274 | – | 274 | – | – | 121 | – | 121 |
| 15,258 | 2,326 | 274 | – | 17,858 | 145 | 248 | 121 | – | 514 | |
| Retail – UK unsecured loans and<br><br>overdrafts | ||||||||||
| RMS 1–3 | 1,376 | 2 | – | – | 1,378 | 4 | – | – | – | 4 |
| RMS 4–6 | 8,130 | 624 | – | – | 8,754 | 106 | 34 | – | – | 140 |
| RMS 7–9 | 1,062 | 324 | – | – | 1,386 | 37 | 33 | – | – | 70 |
| RMS 10 | 26 | 110 | – | – | 136 | 2 | 19 | – | – | 21 |
| RMS 11–13 | 7 | 337 | – | – | 344 | 1 | 99 | – | – | 100 |
| RMS 14 | – | – | 193 | – | 193 | – | – | 112 | – | 112 |
| 10,601 | 1,397 | 193 | – | 12,191 | 150 | 185 | 112 | – | 447 | |
| Retail – UK Motor Finance | ||||||||||
| RMS 1–3 | 8,531 | 910 | – | – | 9,441 | 135 | 22 | – | – | 157 |
| RMS 4–6 | 5,083 | 1,275 | – | – | 6,358 | 63 | 52 | – | – | 115 |
| RMS 7–9 | 606 | 359 | – | – | 965 | 3 | 25 | – | – | 28 |
| RMS 10 | – | 77 | – | – | 77 | – | 10 | – | – | 10 |
| RMS 11–13 | 2 | 165 | – | – | 167 | – | 39 | – | – | 39 |
| RMS 14 | – | – | 141 | – | 141 | – | – | 79 | – | 79 |
| 14,222 | 2,786 | 141 | – | 17,149 | 201 | 148 | 79 | – | 428 | |
| Retail – other | ||||||||||
| RMS 1–3 | 18,554 | 3 | – | – | 18,557 | 7 | – | – | – | 7 |
| RMS 4–6 | 2,616 | 213 | – | – | 2,829 | 10 | 7 | – | – | 17 |
| RMS 7–9 | 75 | 86 | – | – | 161 | – | 1 | – | – | 1 |
| RMS 10 | – | 57 | – | – | 57 | – | 1 | – | – | 1 |
| RMS 11–13 | – | 33 | – | – | 33 | – | 1 | – | – | 1 |
| RMS 14 | – | – | 145 | – | 145 | – | – | 35 | – | 35 |
| 21,245 | 392 | 145 | – | 21,782 | 17 | 10 | 35 | – | 62 | |
| Total Retail | 345,633 | 37,315 | 4,769 | 5,076 | 392,793 | 564 | 798 | 656 | 159 | 2,177 |
| Commercial Banking | ||||||||||
| CMS 1–5 | 31,945 | 123 | – | – | 32,068 | 6 | – | – | – | 6 |
| CMS 6–10 | 17,918 | 40 | – | – | 17,958 | 18 | – | – | – | 18 |
| CMS 11–14 | 31,833 | 2,007 | – | – | 33,840 | 110 | 41 | – | – | 151 |
| CMS 15–18 | 2,324 | 2,486 | – | – | 4,810 | 39 | 144 | – | – | 183 |
| CMS 19 | – | 708 | – | – | 708 | – | 94 | – | – | 94 |
| CMS 20–23 | – | – | 1,757 | – | 1,757 | – | – | 382 | – | 382 |
| 84,020 | 5,364 | 1,757 | – | 91,141 | 173 | 279 | 382 | – | 834 | |
| Other1 | 540 | – | – | – | 540 | – | – | – | – | – |
| Total loans and advances to<br><br>customers | 430,193 | 42,679 | 6,526 | 5,076 | 484,474 | 737 | 1,077 | 1,038 | 159 | 3,011 |
1Drawn exposures include centralised fair value hedge accounting adjustments.
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168
Risk management continued
| Drawn exposures | Allowance for expected credit losses | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Gross drawn exposures and expected credit loss<br><br>allowance (audited) | Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | POCI<br><br>£m | Total<br><br>£m | Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | POCI<br><br>£m | Total<br><br>£m |
| At 31 December 2024 | ||||||||||
| Retail – UK mortgages | ||||||||||
| RMS 1–3 | 261,101 | 21,213 | – | – | 282,314 | 46 | 143 | – | – | 189 |
| RMS 4–6 | 8,487 | 7,384 | – | – | 15,871 | 6 | 51 | – | – | 57 |
| RMS 7–9 | 112 | 1,296 | – | – | 1,408 | – | 15 | – | – | 15 |
| RMS 10 | 17 | 273 | – | – | 290 | – | 5 | – | – | 5 |
| RMS 11–13 | 43 | 2,829 | – | – | 2,872 | 1 | 59 | – | – | 60 |
| RMS 14 | – | – | 4,166 | 6,207 | 10,373 | – | – | 335 | 187 | 522 |
| 269,760 | 32,995 | 4,166 | 6,207 | 313,128 | 53 | 273 | 335 | 187 | 848 | |
| Retail – credit cards | ||||||||||
| RMS 1–3 | 5,058 | 10 | – | – | 5,068 | 11 | 1 | – | – | 12 |
| RMS 4–6 | 7,231 | 1,129 | – | – | 8,360 | 87 | 52 | – | – | 139 |
| RMS 7–9 | 1,242 | 859 | – | – | 2,101 | 51 | 107 | – | – | 158 |
| RMS 10 | 3 | 149 | – | – | 152 | – | 31 | – | – | 31 |
| RMS 11–13 | – | 294 | – | – | 294 | – | 106 | – | – | 106 |
| RMS 14 | – | – | 265 | – | 265 | – | – | 133 | – | 133 |
| 13,534 | 2,441 | 265 | – | 16,240 | 149 | 297 | 133 | – | 579 | |
| Retail – UK unsecured loans and<br><br>overdrafts | ||||||||||
| RMS 1–3 | 1,207 | 2 | – | – | 1,209 | 3 | – | – | – | 3 |
| RMS 4–6 | 7,020 | 484 | – | – | 7,504 | 98 | 27 | – | – | 125 |
| RMS 7–9 | 1,047 | 307 | – | – | 1,354 | 40 | 36 | – | – | 76 |
| RMS 10 | 31 | 111 | – | – | 142 | 3 | 22 | – | – | 25 |
| RMS 11–13 | 9 | 343 | – | – | 352 | 1 | 112 | – | – | 113 |
| RMS 14 | – | – | 175 | – | 175 | – | – | 118 | – | 118 |
| 9,314 | 1,247 | 175 | – | 10,736 | 145 | 197 | 118 | – | 460 | |
| Retail – UK Motor Finance | ||||||||||
| RMS 1–3 | 8,967 | 760 | – | – | 9,727 | 112 | 16 | – | – | 128 |
| RMS 4–6 | 4,487 | 1,169 | – | – | 5,656 | 55 | 40 | – | – | 95 |
| RMS 7–9 | 440 | 247 | – | – | 687 | 2 | 17 | – | – | 19 |
| RMS 10 | – | 46 | – | – | 46 | – | 6 | – | – | 6 |
| RMS 11–13 | 3 | 176 | – | – | 179 | – | 36 | – | – | 36 |
| RMS 14 | – | – | 124 | – | 124 | – | – | 72 | – | 72 |
| 13,897 | 2,398 | 124 | – | 16,419 | 169 | 115 | 72 | – | 356 | |
| Retail – other | ||||||||||
| RMS 1–3 | 15,163 | 238 | – | – | 15,401 | 4 | 4 | – | – | 8 |
| RMS 4–6 | 2,132 | 190 | – | – | 2,322 | 11 | 7 | – | – | 18 |
| RMS 7–9 | 78 | 72 | – | – | 150 | – | 3 | – | – | 3 |
| RMS 10 | – | 7 | – | – | 7 | – | – | – | – | – |
| RMS 11–13 | – | 9 | – | – | 9 | – | – | – | – | – |
| RMS 14 | – | – | 147 | – | 147 | – | – | 37 | – | 37 |
| 17,373 | 516 | 147 | – | 18,036 | 15 | 14 | 37 | – | 66 | |
| Total Retail | 323,878 | 39,597 | 4,877 | 6,207 | 374,559 | 531 | 896 | 695 | 187 | 2,309 |
| Commercial Banking | ||||||||||
| CMS 1–5 | 26,925 | 6 | – | – | 26,931 | 3 | – | – | – | 3 |
| CMS 6–10 | 17,126 | 56 | – | – | 17,182 | 13 | – | – | – | 13 |
| CMS 11–14 | 32,424 | 1,128 | – | – | 33,552 | 122 | 21 | – | – | 143 |
| CMS 15–18 | 5,002 | 3,253 | – | – | 8,255 | 67 | 166 | – | – | 233 |
| CMS 19 | – | 725 | – | – | 725 | – | 77 | – | – | 77 |
| CMS 20–23 | – | – | 1,839 | – | 1,839 | – | – | 413 | – | 413 |
| 81,477 | 5,168 | 1,839 | – | 88,484 | 205 | 264 | 413 | – | 882 | |
| Other1 | 5 | – | – | – | 5 | – | – | – | – | – |
| Total loans and advances to<br><br>customers | 405,360 | 44,765 | 6,716 | 6,207 | 463,048 | 736 | 1,160 | 1,108 | 187 | 3,191 |
1Drawn exposures include centralised fair value hedge accounting adjustments.
Lloyds Banking Group plc Annual Report and Accounts 2025
169
Retail credit performance
Portfolio overview
•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
- 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, predominantly 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 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
- 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
Lloyds Banking Group plc Annual Report and Accounts 2025
170
Risk management continued
Retail UK mortgage balance movements (audited)
| Gross carrying amount | Allowance for expected credit losses | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | POCI<br><br>£m | Total<br><br>£m | Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | POCI<br><br>£m | Total<br><br>£m | |
| Retail – UK mortgages | ||||||||||
| At 1 January 2025 | 269,760 | 32,995 | 4,166 | 6,207 | 313,128 | 53 | 273 | 335 | 187 | 848 |
| Exchange and other adjustments1 | – | – | – | 7 | 7 | (1) | (1) | 36 | 45 | 79 |
| Transfers to Stage 1 | 3,892 | (3,850) | (42) | – | 29 | (27) | (2) | – | ||
| Transfers to Stage 2 | (5,474) | 6,053 | (579) | – | (2) | 25 | (23) | – | ||
| Transfers to Stage 3 | (399) | (999) | 1,398 | – | – | (19) | 19 | – | ||
| Net change in ECL due to transfers | (29) | 27 | 60 | 58 | ||||||
| Impact of transfers between stages2 | (1,981) | 1,204 | 777 | – | (2) | 6 | 54 | 58 | ||
| Other changes in credit quality2 | (6) | (33) | 89 | 11 | 61 | |||||
| Additions and repayments | 16,528 | (3,785) | (794) | (1,129) | 10,820 | 7 | (38) | (72) | (75) | (178) |
| Charge (credit) to the income<br><br>statement | (1) | (65) | 71 | (64) | (59) | |||||
| Advances written off | (139) | (9) | (148) | (139) | (9) | (148) | ||||
| Recoveries of amounts previously<br><br>written off | 6 | – | 6 | 6 | – | 6 | ||||
| At 31 December 2025 | 284,307 | 30,414 | 4,016 | 5,076 | 323,813 | 51 | 207 | 309 | 159 | 726 |
| Allowance for expected credit losses | (51) | (207) | (309) | (159) | (726) | |||||
| Net carrying amount | 284,256 | 30,207 | 3,707 | 4,917 | 323,087 | |||||
| Drawn ECL coverage3 (%) | – | 0.7 | 7.7 | 3.1 | 0.2 |
1Exchange and other adjustments includes the impact of movements in exchange rates, discount unwind, derecognising assets as a result of modifications and adjustments in respect of
purchased or originated credit-impaired financial assets (POCI). Where a POCI asset’s expected credit loss is less than its expected credit loss on purchase or origination, the increase in
its carrying value is recognised within gross loans, rather than as a negative impairment allowance.
2Includes a credit for methodology and model changes of £12 million, split by stage as £22 million credit for Stage 2, £6 million charge for Stage 3 and £4million charge for POCI.
3Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers.
| Gross carrying amount | Allowance for expected credit losses | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | POCI<br><br>£m | Total<br><br>£m | Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | POCI<br><br>£m | Total<br><br>£m | |
| Retail – UK mortgages | ||||||||||
| At 1 January 2024 | 256,596 | 38,533 | 4,337 | 7,854 | 307,320 | 161 | 374 | 357 | 213 | 1,105 |
| Exchange and other adjustments1 | – | – | – | 12 | 12 | 1 | – | 50 | 53 | 104 |
| Transfers to Stage 1 | 21,133 | (21,105) | (28) | – | 135 | (132) | (3) | – | ||
| Transfers to Stage 2 | (21,077) | 21,473 | (396) | – | (11) | 32 | (21) | – | ||
| Transfers to Stage 3 | (299) | (1,341) | 1,640 | – | – | (39) | 39 | – | ||
| Net change in ECL due to transfers | (122) | 114 | 56 | 48 | ||||||
| Impact of transfers between stages2 | (243) | (973) | 1,216 | – | 2 | (25) | 71 | 48 | ||
| Other changes in credit quality2 | (94) | (19) | 26 | 66 | (21) | |||||
| Additions and repayments | 13,901 | (4,143) | (956) | (910) | 7,892 | (16) | (48) | (79) | (72) | (215) |
| Charge (credit) to the income<br><br>statement | (108) | (92) | 18 | (6) | (188) | |||||
| Disposals and derecognition3 | (494) | (422) | (366) | (694) | (1,976) | (1) | (9) | (25) | (18) | (53) |
| Advances written off | (70) | (55) | (125) | (70) | (55) | (125) | ||||
| Recoveries of amounts previously<br><br>written off | 5 | – | 5 | 5 | – | 5 | ||||
| At 31 December 2024 | 269,760 | 32,995 | 4,166 | 6,207 | 313,128 | 53 | 273 | 335 | 187 | 848 |
| Allowance for expected credit losses | (53) | (273) | (335) | (187) | (848) | |||||
| Net carrying amount | 269,707 | 32,722 | 3,831 | 6,020 | 312,280 | |||||
| Drawn ECL coverage4 (%) | – | 0.8 | 8.0 | 3.0 | 0.3 |
1Exchange and other adjustments includes the impact of movements in exchange rates, discount unwind, derecognising assets as a result of modifications and adjustments in respect of
purchased or originated credit-impaired financial assets (POCI). Where a POCI asset’s expected credit loss is less than its expected credit loss on purchase or origination, the increase in
its carrying value is recognised within gross loans, rather than as a negative impairment allowance.
2Includes a charge for methodology and model changes of £7 million, split by stage as £1 million charge for Stage 1, £9 million charge for Stage 2, £18 million charge for Stage 3 and
£21 million credit for POCI.
3Relates to the securitisations of primarily legacy Retail mortgages.
4Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers.
Lloyds Banking Group plc Annual Report and Accounts 2025
171
UK mortgages product analysis (statutory basis)1
| At 31 December 2025 | At 31 December 20241 | |||||||
|---|---|---|---|---|---|---|---|---|
| Mainstream | Buy-to-let | Specialist | Total | Mainstream | Buy-to-let | Specialist | Total | |
| UK mortgages loans and advances to customers<br><br>(£m) | 273,106 | 47,858 | 2,849 | 323,813 | 261,630 | 47,984 | 3,514 | 313,128 |
| UK mortgages greater than 3 months in arrears2 | ||||||||
| 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 loans3 (£m) | 2,518 | 486 | 397 | 3,401 | 2,850 | 623 | 504 | 3,977 |
| Total mortgage 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 | – | 0.4 | 2.2 | 1.7 | – | 0.5 | 1.5 |
| Greater than 100% | – | – | 0.3 | – | – | – | 0.3 | – |
| Total (%) | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 |
| Average loan to value4 | ||||||||
| 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 |
1This table is now presented on a statutory basis. The comparative period has been represented on the same basis.
2Excluding repossessions.
3Value 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.
Interest-only UK mortgages
The Group provides interest-only mortgages to owner occupier mortgage customers whereby only payments of interest are made for the
term of the mortgage with the customer responsible for repaying the principal outstanding at the end of the loan term. At 31 December
2025, owner occupier interest-only balances as a proportion of total owner occupier balances had reduced to 11.4% (31 December 2024:
12.5%). The average loan to value remained low at 37.5% (31 December 2024: 36.5%).
For existing interest-only mortgages, a contact strategy is in place during the term of the mortgage to ensure that customers are aware of
their obligations to repay the principal upon maturity of the loan. Treatment strategies are in place to help customers anticipate and plan
for repayment of capital at maturity and support those who may have difficulty in repaying the principal amount. A dedicated specialist
team supports customers who have passed their contractual maturity date and are unable to fully repay the principal. A range of
treatments are offered to customers based on their individual circumstances to create fair and sustainable outcomes.
Analysis of owner occupier interest-only UK mortgages
| At 31 Dec 2024 | |
|---|---|
| Interest-only balances (m) | 33,023 |
| Stage 1 (%) | 39.4 |
| Stage 2 (%)1 | 44.5 |
| Stage 3 (%) | 5.5 |
| Purchased or originated credit-impaired (%) | 10.6 |
| Average loan to value (%) | 36.5 |
| Maturity profile (m) | |
| Due | 1,541 |
| Within 1 year | 1,012 |
| 2 to 5 years | 8,209 |
| 6 to 10 years | 10,772 |
| Greater than 10 years | 11,489 |
| Past term interest-only balances (m)2 | 1,490 |
| Stage 1 (%) | 0.3 |
| Stage 2 (%) | 8.6 |
| Stage 3 (%) | 51.8 |
| Purchased or originated credit-impaired (%) | 39.3 |
| Average loan to value (%) | 35.2 |
| Negative equity (%) | 2.5 |
All values are in British Pounds.
1Includes adoption of a new ECL model, where the significant increase in credit risk (SICR) quantitative Stage 2 trigger is now defined as a doubling of an account’s PD since origination.
2 Balances where all interest-only elements have moved past term. Some may subsequently have had a term extension, so are no longer classed as due.
Lloyds Banking Group plc Annual Report and Accounts 2025
172
Risk management continued
Collateral held as security for Retail loans and advances to customers (audited)
UK mortgages
An analysis by loan-to-value ratio of the Group’s UK residential mortgage lending is provided below. The value of collateral used in
determining the loan-to-value ratios has been estimated based upon the last actual valuation, adjusted to take into account subsequent
movements in house prices. The market takes into account many factors, including environmental considerations such as flood risk and
energy efficient additions, in arriving at the value of a home.
In some circumstances, where the discounted value of the estimated net proceeds from the liquidation of collateral (i.e. net of costs,
expected haircuts and anticipated changes in the value of the collateral to the point of sale) is greater than the estimated exposure at
default, no credit losses are expected and no ECL allowance is recognised.
| At 31 December 2025 | At 31 December 2024 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Stage 1<br><br>(£m) | Stage 2<br><br>(£m) | Stage 3<br><br>(£m) | POCI<br><br>(£m) | Total<br><br>(£m) | Stage 1<br><br>(£m) | Stage 2<br><br>(£m) | Stage 3<br><br>(£m) | POCI<br><br>(£m) | Total<br><br>(£m) | |
| Gross drawn exposures | ||||||||||
| Less than 60% | 142,960 | 25,099 | 2,811 | 4,343 | 175,213 | 145,055 | 27,851 | 3,014 | 5,066 | 180,986 |
| 60% to 70% | 48,852 | 2,647 | 620 | 451 | 52,570 | 49,746 | 2,954 | 643 | 638 | 53,981 |
| 70% to 80% | 47,327 | 1,324 | 321 | 158 | 49,130 | 40,292 | 1,168 | 307 | 232 | 41,999 |
| 80% to 90% | 38,070 | 1,181 | 165 | 62 | 39,478 | 30,215 | 898 | 123 | 109 | 31,345 |
| 90% to 100% | 7,053 | 156 | 46 | 22 | 7,277 | 4,420 | 109 | 36 | 63 | 4,628 |
| Greater than 100% | 45 | 7 | 53 | 40 | 145 | 32 | 15 | 43 | 99 | 189 |
| Total | 284,307 | 30,414 | 4,016 | 5,076 | 323,813 | 269,760 | 32,995 | 4,166 | 6,207 | 313,128 |
| Allowance for expected<br><br>credit losses | ||||||||||
| Less than 60% | 11 | 128 | 105 | 62 | 306 | 14 | 165 | 130 | 66 | 375 |
| 60% to 70% | 10 | 36 | 69 | 34 | 149 | 11 | 51 | 77 | 36 | 175 |
| 70% to 80% | 15 | 20 | 56 | 23 | 114 | 13 | 30 | 59 | 27 | 129 |
| 80% to 90% | 16 | 19 | 37 | 15 | 87 | 13 | 23 | 32 | 17 | 85 |
| 90% to 100% | 3 | 4 | 14 | 6 | 27 | 2 | 3 | 13 | 10 | 28 |
| Greater than 100% | – | 1 | 28 | 19 | 48 | – | 1 | 24 | 31 | 56 |
| Total | 55 | 208 | 309 | 159 | 731 | 53 | 273 | 335 | 187 | 848 |
UK mortgages energy performance certificate analysis
The energy performance certificate (EPC) profile of the security associated with the Group’s UK mortgage portfolio is shown below:
| EPC profile | A<br><br>£m | B<br><br>£m | C<br><br>£m | D<br><br>£m | E<br><br>£m | F<br><br>£m | G<br><br>£m | Unrated<br><br>properties<br><br>£m | Total |
|---|---|---|---|---|---|---|---|---|---|
| At 31 December 2025 | 2,087 | 47,170 | 77,625 | 102,066 | 32,690 | 6,124 | 1,361 | 54,690 | 323,813 |
| At 31 December 2024 | 1,113 | 40,469 | 68,128 | 97,392 | 33,021 | 6,293 | 1,370 | 65,342 | 313,128 |
The above data is sourced using the latest available government EPC information. The Group has no EPC data available for 16.9%
(2024: 20.9%) of the UK mortgage portfolio; this portion is classified as unrated properties.
EPC ratings are not considered to be a material credit risk factor, and do not form part of the Group’s credit risk calculations.
Lloyds Banking Group plc Annual Report and Accounts 2025
173
Other Retail lending
At 31 December 2025, Stage 1 and Stage 2 other retail gross lending amounted to £68,227 million (2024: £60,720 million). Stage 3 other
retail lending amounted to £406 million, net of an impairment allowance of £347 million (2024: £351 million, net of an impairment
allowance of £360 million).
Lending decisions are predominantly based on an obligor’s ability to repay rather than reliance on the disposal of any security provided.
Where the lending is secured, collateral values are rigorously assessed at the time of loan origination and are thereafter monitored in
accordance with business unit credit policy.
The Group’s credit risk disclosures for unimpaired other retail lending show assets gross of collateral and therefore disclose the maximum
loss exposure.
Retail credit card balance movements (audited)
| Gross carrying amount | Allowance for expected credit losses | |||||||
|---|---|---|---|---|---|---|---|---|
| Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | Total<br><br>£m | Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | Total<br><br>£m | |
| Retail – credit cards | ||||||||
| At 1 January 2025 | 13,534 | 2,441 | 265 | 16,240 | 149 | 297 | 133 | 579 |
| Exchange and other adjustments | – | – | – | – | – | – | (19) | (19) |
| Transfers to Stage 1 | 956 | (953) | (3) | – | 92 | (91) | (1) | – |
| Transfers to Stage 2 | (657) | 694 | (37) | – | (10) | 27 | (17) | – |
| Transfers to Stage 3 | (206) | (227) | 433 | – | (5) | (55) | 60 | – |
| Net change in ECL due to transfers | (52) | 77 | 78 | 103 | ||||
| Impact of transfers between stages1 | 93 | (486) | 393 | – | 25 | (42) | 120 | 103 |
| Other changes in credit quality1 | (24) | (14) | 272 | 234 | ||||
| Additions and repayments | 1,631 | 371 | (11) | 1,991 | (5) | 7 | (12) | (10) |
| Charge to the income statement | (4) | (49) | 380 | 327 | ||||
| Advances written off | (496) | (496) | (496) | (496) | ||||
| Recoveries of amounts previously written off | 123 | 123 | 123 | 123 | ||||
| At 31 December 2025 | 15,258 | 2,326 | 274 | 17,858 | 145 | 248 | 121 | 514 |
| Allowance for expected credit losses | (145) | (248) | (121) | (514) | ||||
| Net carrying amount | 15,113 | 2,078 | 153 | 17,344 | ||||
| Drawn ECL coverage2 (%) | 1.0 | 10.7 | 44.2 | 2.9 |
1Includes a credit for methodology and model changes of £53 million, split by stage as £18 million credit for Stage 1, £18 million credit for Stage 2 and £17 million credit for Stage 3.
2Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers.
| Gross carrying amount | Allowance for expected credit losses | |||||||
|---|---|---|---|---|---|---|---|---|
| Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | Total<br><br>£m | Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | Total<br><br>£m | |
| Retail – credit cards | ||||||||
| At 1 January 2024 | 12,625 | 2,908 | 284 | 15,817 | 168 | 401 | 130 | 699 |
| Exchange and other adjustments | – | – | – | – | – | – | (18) | (18) |
| Transfers to Stage 1 | 1,162 | (1,162) | – | – | 128 | (128) | – | – |
| Transfers to Stage 2 | (642) | 683 | (41) | – | (13) | 31 | (18) | – |
| Transfers to Stage 3 | (184) | (241) | 425 | – | (5) | (65) | 70 | – |
| Net changes in ECL due to transfers | (71) | 84 | 84 | 97 | ||||
| Impact of transfers between stages | 336 | (720) | 384 | – | 39 | (78) | 136 | 97 |
| Other changes in credit quality | (31) | (22) | 284 | 231 | ||||
| Additions and repayments | 573 | 253 | (15) | 811 | (27) | (4) | (11) | (42) |
| Charge to the income statement | (19) | (104) | 409 | 286 | ||||
| Advances written off | (506) | (506) | (506) | (506) | ||||
| Recoveries of amounts previously written off | 118 | 118 | 118 | 118 | ||||
| At 31 December 2024 | 13,534 | 2,441 | 265 | 16,240 | 149 | 297 | 133 | 579 |
| Allowance for expected credit losses | (149) | (297) | (133) | (579) | ||||
| Net carrying amount | 13,385 | 2,144 | 132 | 15,661 | ||||
| Drawn ECL coverage1 (%) | 1.1 | 12.2 | 50.2 | 3.6 |
1Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers.
Lloyds Banking Group plc Annual Report and Accounts 2025
174
Risk management continued
Commercial Banking credit performance
Portfolio overview
•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
•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
Lloyds Banking Group plc Annual Report and Accounts 2025
175
Commercial Banking balance movements (audited)
| Gross carrying amount | Allowance for expected credit losses | |||||||
|---|---|---|---|---|---|---|---|---|
| Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | Total<br><br>£m | Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | Total<br><br>£m | |
| Commercial Banking | ||||||||
| At 1 January 2025 | 81,477 | 5,168 | 1,839 | 88,484 | 205 | 264 | 413 | 882 |
| Exchange and other adjustments | (543) | (38) | – | (581) | (13) | (2) | 6 | (9) |
| Transfers to Stage 1 | 1,439 | (1,353) | (86) | – | 62 | (53) | (9) | – |
| Transfers to Stage 2 | (2,502) | 2,633 | (131) | – | (12) | 12 | – | – |
| Transfers to Stage 3 | (485) | (277) | 762 | – | (5) | (18) | 23 | – |
| Net change in ECL due to transfers | (45) | 80 | 108 | 143 | ||||
| Impact of transfers between stages1 | (1,548) | 1,003 | 545 | – | – | 21 | 122 | 143 |
| Other changes in credit quality1 | (15) | (9) | 45 | 21 | ||||
| Additions and repayments | 4,634 | (769) | (475) | 3,390 | (4) | 5 | (52) | (51) |
| Charge to the income statement | (19) | 17 | 115 | 113 | ||||
| Advances written off | (153) | (153) | (153) | (153) | ||||
| Recoveries of amounts previously written off | 1 | 1 | 1 | 1 | ||||
| At 31 December 2025 | 84,020 | 5,364 | 1,757 | 91,141 | 173 | 279 | 382 | 834 |
| Allowance for expected credit losses | (173) | (279) | (382) | (834) | ||||
| Net carrying amount | 83,847 | 5,085 | 1,375 | 90,307 | ||||
| Drawn ECL coverage2 (%) | 0.2 | 5.2 | 21.7 | 0.9 |
1Includes a credit for methodology and model changes of £19 million, split by stage as £18 million credit for Stage 1, £23 million charge for Stage 2 and £24 million credit for Stage 3.
2Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers.
| Gross carrying amount | Allowance for expected credit losses | |||||||
|---|---|---|---|---|---|---|---|---|
| Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | Total<br><br>£m | Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | Total<br><br>£m | |
| Commercial Banking | ||||||||
| At 1 January 2024 | 79,574 | 7,987 | 2,068 | 89,629 | 232 | 372 | 418 | 1,022 |
| Exchange and other adjustments | (103) | (5) | (64) | (172) | (13) | (5) | 1 | (17) |
| Transfers to Stage 1 | 2,361 | (2,347) | (14) | – | 86 | (85) | (1) | – |
| Transfers to Stage 2 | (1,850) | 1,951 | (101) | – | (12) | 13 | (1) | – |
| Transfers to Stage 3 | (301) | (258) | 559 | – | (4) | (19) | 23 | – |
| Net changes in ECL due to transfers | (63) | 70 | 62 | 69 | ||||
| Impact of transfers between stages1 | 210 | (654) | 444 | – | 7 | (21) | 83 | 69 |
| Other changes in credit quality1 | (11) | (20) | 152 | 121 | ||||
| Additions and repayments | 1,796 | (2,160) | (449) | (813) | (10) | (62) | (81) | (153) |
| Charge to the income statement | (14) | (103) | 154 | 37 | ||||
| Advances written off | (163) | (163) | (163) | (163) | ||||
| Recoveries of amounts previously written off | 3 | 3 | 3 | 3 | ||||
| At 31 December 2024 | 81,477 | 5,168 | 1,839 | 88,484 | 205 | 264 | 413 | 882 |
| Allowance for expected credit losses | (205) | (264) | (413) | (882) | ||||
| Net carrying amount | 81,272 | 4,904 | 1,426 | 87,602 | ||||
| Drawn ECL coverage2 (%) | 0.3 | 5.1 | 22.5 | 1.0 |
1Includes a credit for methodology and model changes of £25 million, split by stage as £17 million credit for Stage 1, £8 million credit for Stage 2, £nil for Stage 3.
2Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers.
Lloyds Banking Group plc Annual Report and Accounts 2025
176
Risk management continued
Collateral held as security for Commercial Banking loans and advances to customers (audited)
Stage 1 and Stage 2 secured lending
For Stage 1 and Stage 2 secured commercial lending, the Group reports assets gross of collateral and therefore discloses the maximum
loss exposure. Stage 1 and Stage 2 secured commercial lending is predominantly managed on a cash flow basis. On occasion, it may include
an assessment of underlying collateral, although, for Stage 3 lending, this will not always involve assessing it on a fair value basis. No
aggregated collateral information for the entire unimpaired secured commercial lending portfolio is provided to key management
personnel.
Stage 3 secured lending
The value of collateral is re-evaluated and its legal soundness reassessed if there is observable evidence of distress of the borrower;
this evaluation is used to determine potential loss allowances and management’s strategy to either repair the business or recover the debt.
At 31 December 2025, Stage 3 secured commercial lending amounted to £448 million, net of an impairment allowance of £121 million
(2024: £450 million, net of an impairment allowance of £150 million). The fair value of the collateral held in respect of impaired secured
commercial lending was £468 million (2024: £575 million). In determining the fair value of collateral, no specific amounts have been
attributed to the costs of realisation. For the purposes of determining the total collateral held by the Group in respect of impaired secured
commercial lending, the value of collateral for each loan has been limited to the principal amount of the outstanding advance in order to
eliminate the effects of any over-collateralisation and to provide a clearer representation of the Group’s exposure.
Commercial Banking UK Real Estate
•Commercial Banking UK Real Estate committed drawn lending stood at £10.0 billion at 31 December 2025 (net of £2.6 billion exposures
subject to protection through Significant Risk Transfer (SRT) securitisations). This compares to £9.3 billion at 31 December 2024 (net of
£3.1 billion subject to SRT securitisations). In addition there are undrawn lending facilities of £3.2 billion (31 December 2024: £2.8 billion)
to predominantly investment grade rated corporate customers
•The Group classifies Real Estate as exposure which is directly supported by cash flows from property activities (as opposed to trading
activities, such as hotels, care homes and housebuilders). Drawn lending of £6.9 billion to social housing providers are also excluded
(31 December 2024: £7.2 billion)
•The portfolio continues to remain well positioned and proactively managed with conservative LTVs, good levels of interest cover and
appropriate risk mitigants in place
•Overall performance of the portfolio has remained strong and stable, with a decrease in cases in its more closely monitored Watchlist
category and limited flow into Business Support
•Lending continues to be heavily weighted towards investment real estate (c.94%) rather than development. Of these investment
exposures c.92% have an LTV of less than 70%, with an average LTV of 45%. The average gross interest cover ratio was 3.1 times, with
c.75% having gross interest cover of above 2 times
•The portfolio is well diversified with approximately 45% of exposures relating to commercial real estate, including c.13% secured by
office assets, c.9% by retail assets and c.13% by industrial assets. Approximately 49% of the portfolio relates to residential lending
•Recognising this is a cyclical sector, total (gross and net) and asset type quantum caps are in place to control origination and exposure.
Focus remains on the UK market and new business has been written in line with a prudent risk appetite criteria including conservative
LTVs, strong quality of income and proven management teams. Development lending criteria also includes maximum loan to gross
development value and maximum loan to cost
•Use of SRT securitisations also acts as a risk mitigant in this portfolio. Run-off of these is carefully managed and sequenced to avoid
concentrations
LTV – UK Real Estate1
| At 31 December 2025 | At 31 December 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| Stage 1 and 2<br><br>£m | Stage 3<br><br>£m | Total<br><br>£m | Total<br><br>% | Stage 1 and 2<br><br>£m | Stage 3<br><br>£m | Total<br><br>£m | Total<br><br>% | |
| Less than 60% | 8,894 | 65 | 8,959 | 84.6 | 8,621 | 34 | 8,655 | 84.5 |
| 60% to 70% | 712 | 21 | 733 | 6.9 | 815 | 49 | 864 | 8.4 |
| 70% to 80% | 53 | 16 | 69 | 0.7 | 166 | 5 | 171 | 1.7 |
| 80% to 100% | 40 | 21 | 61 | 0.6 | 40 | 69 | 109 | 1.1 |
| 100% to 120% | 5 | 47 | 52 | 0.5 | 7 | 32 | 39 | 0.4 |
| 120% to 140% | 1 | — | 1 | – | 5 | — | 5 | – |
| Greater than 140% | 4 | 76 | 80 | 0.8 | 11 | 81 | 92 | 0.9 |
| Unsecured2 | 630 | — | 630 | 6.0 | 303 | — | 303 | 3.0 |
| Subtotal | 10,339 | 246 | 10,585 | 100.0 | 9,968 | 270 | 10,238 | 100.0 |
| Other3 | 721 | 45 | 766 | 525 | 67 | 592 | ||
| Total investment | 11,060 | 291 | 11,351 | 10,493 | 337 | 10,830 | ||
| Development | 607 | 19 | 626 | 731 | 8 | 739 | ||
| Government supported lending4 | 56 | 2 | 58 | 87 | 2 | 89 | ||
| Business Banking5 | 528 | 7 | 535 | 704 | 9 | 713 | ||
| Total gross | 12,251 | 319 | 12,570 | 12,015 | 356 | 12,371 | ||
| Significant Risk Transfer | (2,585) | (3,109) | ||||||
| Total net | 9,985 | 9,262 |
1Figures in the table above are stated on gross basis with Significant Risk Transfer deducted to show final net position. 2024 figures were previously prepared on a net basis and have
been represented on a consistent basis.
2Predominantly Investment grade corporate CRE lending where the Group is relying on the corporate covenant.
3Mainly lower value transactions where LTV not recorded on Commercial Banking UK Real Estate monitoring system.
4Bounce Back Loan Scheme and Coronavirus Business Interruption Loan Scheme lending to real estate clients, where government guarantees are in place at 100% and 80%, respectively.
5Business Banking excluded from the published table in the annual report and accounts 2024.
Lloyds Banking Group plc Annual Report and Accounts 2025
177
Credit quality of other financial assets (audited)
Cash and balances at central banks
Substantially all of the Group’s cash and balances at central banks are due from the Bank of England, the Federal Reserve Bank of New
York or the Deutsche Bundesbank.
Debt securities, treasury and other bills, and contracts held with reinsurers at fair value through profit or loss
Substantially all of the Group’s trading assets and other loans and advances to customers, loans and advances to banks and reverse
repurchase agreements held at fair value through profit or loss have an investment grade rating. The credit quality of the Group’s other
debt securities, treasury and other bills, and contracts held with reinsurers held at fair value through profit or loss is set out below:
| 2025 | 2024 | |||||
|---|---|---|---|---|---|---|
| Investment<br><br>grade1<br><br>£m | Other<br><br>£m | Total<br><br>£m | Investment<br><br>grade1<br><br>£m | Other<br><br>£m | Total<br><br>£m | |
| Other financial assets mandatorily at fair value through profit or<br><br>loss: | ||||||
| Debt securities: | ||||||
| Government securities | 16,593 | – | 16,593 | 7,093 | – | 7,093 |
| Other public sector securities | 1,898 | 7 | 1,905 | 2,286 | 2 | 2,288 |
| Bank and building society certificates of deposit | 7,036 | – | 7,036 | 8,667 | – | 8,667 |
| Asset-backed securities | 909 | 14 | 923 | 641 | 11 | 652 |
| Corporate and other debt securities | 20,476 | 2,934 | 23,410 | 13,984 | 2,899 | 16,883 |
| 46,912 | 2,955 | 49,867 | 32,671 | 2,912 | 35,583 | |
| Treasury and other bills | 11 | – | 11 | 32 | – | 32 |
| Contracts held with reinsurers | 8,168 | – | 8,168 | 10,527 | – | 10,527 |
| Total other financial assets mandatorily held at fair value<br><br>through profit or loss (excluding loans and advances and equity<br><br>shares) | 55,091 | 2,955 | 58,046 | 43,230 | 2,912 | 46,142 |
1Credit ratings equal to or better than ‘BBB’.
Credit risk in respect of trading and other financial assets at fair value through profit or loss held within the Group’s unit-linked funds is
borne by the policyholders and credit risk in respect of With-Profits funds is largely borne by the policyholders. Consequently, the Group
has no significant exposure to credit risk for such assets which back those contract liabilities.
Loans and advances to banks
Significantly all of the Group’s loans and advances to banks are assessed as Stage 1.
Reverse repurchase agreement held at amortised cost
All of the Group’s reverse repurchase agreements held at amortised cost are assessed as Stage 1.
Debt securities held at amortised cost
At 31 December 2025 significantly all of the Group’s debt securities held at amortised cost are investment grade.
Debt securities at fair value through other comprehensive income (excluding equity shares)
At 31 December 2025 significantly all of the Group’s debt securities at fair value through other comprehensive income are investment grade.
Derivative assets
The Group reduces exposure to credit risk by using master netting agreements and by obtaining collateral in the form of cash or highly
liquid securities.
| 2025 | 2024 | |||||
|---|---|---|---|---|---|---|
| Investment<br><br>grade1<br><br>£m | Other<br><br>£m | Total<br><br>£m | Investment<br><br>grade1<br><br>£m | Other<br><br>£m | Total<br><br>£m | |
| Trading and other | 18,361 | 1,341 | 19,702 | 22,684 | 1,333 | 24,017 |
| Hedging | 24 | 1 | 25 | 39 | 9 | 48 |
| Total derivative financial instruments | 18,385 | 1,342 | 19,727 | 22,723 | 1,342 | 24,065 |
1Credit ratings equal to or better than ‘BBB’.
Financial guarantees and loan commitments
The level of expected credit loss allowance associated with the Group’s financial guarantees and loan commitments is not significant.
At 31 December 2025, £153,410 million were Stage 1 (2024: £143,914 million), £4,083 million were Stage 2 (2024: £4,565 million), £61 million
were Stage 3 (2024: £101 million) and £20 million was POCI (2024: £39 million). Against these exposures the Group held an allowance for
expected credit losses of £197 million (2024: £270 million).
Further details can be seen in note 21 to the consolidated financial statements on page 272.
Lloyds Banking Group plc Annual Report and Accounts 2025
178
Risk management continued
Collateral held as security for other financial assets (audited)
The Group does not hold collateral against debt securities which are classified as financial assets held at amortised cost.
Reverse repurchase agreements
The Group enters into reverse repurchase agreements which are accounted for as collateralised loans (see note 16 to the consolidated
financial statements on page 255).
Financial assets at fair value through profit or loss (excluding equity shares)
Included in financial assets at fair value through profit or loss are reverse repurchase agreements, against which the Group holds collateral,
all of which the Group is able to repledge (see note 16 to the consolidated financial statements on page 255). At 31 December 2025,
£12,257 million had been repledged (2024: £10,676 million).
These transactions were generally conducted under terms that are usual and customary for standard secured lending activities.
Derivative assets, after offsetting of amounts under master netting arrangements
The Group reduces exposure to credit risk by using master netting agreements and by obtaining collateral in the form of cash or highly
liquid securities (see note 16 to the consolidated financial statements on page 255).
Irrevocable loan commitments and other credit-related contingencies
The Group holds irrevocable loan commitments and other credit-related contingencies (see note 36 to the consolidated financial
statements on page 291). Collateral is held as security, in the event that lending is drawn down, on £18,272 million (2024: £17,181 million)
of these balances.
Collateral pledged as security (audited)
The Group pledges assets primarily for repurchase agreements and securities lending transactions which are generally conducted under
terms that are usual and customary for standard secured borrowing contracts.
Repurchase agreements
The Group enters into repurchase agreements which include amounts due under the Bank of England’s Term Funding Scheme with
additional incentives for SMEs (TFSME) (see note 16 to the consolidated financial statements on page 255).
Financial liabilities at fair value through profit or loss
Included in financial liabilities at fair value through profit or loss are repurchase agreements, against which the Group pledges collateral
(see note 16 to the consolidated financial statements on page 255). The secured party is permitted by contract or custom to repledge
this collateral.
Securities lending transactions
The following on-balance sheet financial assets have been lent to counterparties under securities lending transactions:
| 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|
| Financial assets at fair value through profit or loss | 1,088 | 889 |
| Financial assets at fair value through other comprehensive income | 5,034 | 6,124 |
| Total | 6,122 | 7,013 |
In addition, securities held as collateral in the form of stock borrowed amounted to £
12,763
million (
2024
: £20,887 million). Of this amount,
£
7,542
million (
2024
: £11,781 million) had been resold or repledged as collateral for the Group’s own transactions.
These transactions were generally conducted under terms that are usual and customary for standard secured lending activities.
Securitisations and covered bonds
In addition to the assets detailed above, the Group also holds assets that are encumbered through the Group’s asset-backed conduits and
its securitisation and covered bond programmes. Further details of these assets are provided in note 26 to the consolidated financial
statements on page 283.
Lloyds Banking Group plc Annual Report and Accounts 2025
179
| Economic crime risk |
|---|
| Definition<br><br>Economic crime risk is defined as the risk that the<br><br>Group implements ineffective policies, systems,<br><br>processes and controls to prevent, detect and<br><br>respond to the risk of fraud and/or financial crime<br><br>resulting in increased losses, regulatory censure, fines<br><br>and/or adverse publicity in the UK or other<br><br>jurisdictions in which the Group operates.<br><br>Level two risks<br><br>Anti-bribery; Anti-money laundering; Fraud; Sanctions<br><br>The Risk overview, on page 26, contains a summary of economic crime<br><br>risk performance and key mitigating actions. |
Risk appetite
The Group recognises that economic crime risk presents itself as a
consequence of conducting business and it must be managed and
mitigated in order to protect our customers, our communities and
the Group.
The Group seeks to prevent, detect and disrupt economic crime and
manages its risk exposure through delivering compliant, robust and
risk-based controls to minimise the ability of criminals to exploit our
products, services and customers, whilst also supporting victims and
the legitimate economy.
The Group does not tolerate preventable or avoidable breaches of
economic crime legislation.
Economic crime risk appetite is expressed through the management
of economic crime controls and breaches in line with agreed
tolerances and fraud losses aligned to agreed provisions.
Identification and assessment
The principal economic crime risks to the Group are:
•Bribery, including corruption
•Money laundering, including terrorist financing, proliferation
financing and the facilitation of tax evasion
•Sanctions
•Fraud, including intentional acts of deception or omission by
external or internal parties
All of the above could result in customer detriment, financial loss,
regulatory censure and/or reputational damage.
Threat analysis enables the Group to conduct investigations of
previously undetected or unknown economic crime risks through
the receipt of intelligence from both the industry and law
enforcement. This is supplemented with internal data analysis to
further develop the intelligence and understand how economic
crime is manifesting within the Group.
An annual business economic crime risk assessment is used to
provide a more detailed analysis of the level of economic crime risk
across the Group. More detailed risk assessments of customers and
third parties are also undertaken to understand the profile of those
whom the Group is doing business with to determine the level of
economic crime risk and how that should be treated.
Horizon scanning and external engagement is used to identify,
examine and assess the external landscape and use intelligence to
identify potential sources of both medium- and long-term economic
crime risks, emerging issues and opportunities, and to provide a
platform for benchmarking and collaboration across the industry.
Management and mitigation
Controls are used across the Group to reduce the likelihood of a risk
occurring, or the impact should it occur. Controls apply to
customers, third parties and colleagues, including at initial
onboarding, scheduled stages and at trigger-based events, such as
the exiting of relationships, suppliers and intermediaries, and
colleagues. Control testing is then completed to ensure the
effectiveness of controls.
Customer, payment and third-party screening processes are in place
to identify prohibited relationships and payments, higher risk
relationships including Politically Exposed Persons (PEPs) and
residents in high risk third countries, suspicious payments and any
customers that are outside of appetite. Suspicious payments are
subject to investigation, customer contact and rejection of
prohibited and fraudulent payments.
Due diligence is performed at the onboarding stage to build an
understanding of who the Group is establishing a relationship with,
and continues throughout the relationship to ensure it remains up-
to-date with an accurate risk classification.
Group-wide economic crime prevention policies and standards are
maintained to ensure compliance with legal and regulatory
requirements. The completion of a Group-wide risk assessment and
implementation of a comprehensive suite of systems, processes and
controls support the Group to detect and prevent the use of its
banking network for money laundering, bribery, fraud and activities
prohibited by legal and regulatory sanctions.
The Group’s economic crime prevention policy requires all
colleagues to complete mandatory economic crime training on at
least an annual basis. The Group’s fraud awareness programme also
remains a key component of the fraud control environment.
Monitoring
Events and their associated impacts are identified, escalated and
recorded to ensure that losses are managed in line with risk
appetite. Effective root cause analysis is undertaken to identify
issues that need to be resolved and where action is necessary to
strengthen the control environment, including resilience.
Suspicious Activity Reporting (SAR) is in place to enable internal
reporting by colleagues and external disclosure by the Nominated
Officer to the UK Financial Intelligence Unit (UKFIU).
Changes to the internal and external environment are regularly
monitored to ensure there is an accurate and up-to-date view of
the risk profile. This includes but is not limited to:
•Utilising outputs from horizon scanning to determine changes in
regulatory obligations or the external environment
•Using key risk, control and performance indicators (as relevant)
to monitor the risk profile
•Monitoring risk appetite metrics and management measures
against agreed thresholds, including the escalation of breaches
•Understanding the impact of change and/or transformation
activity on the risk and control environment
•Ensuring strategic changes or new product offerings are
monitored and impacts understood
Reporting
Economic crime reporting ensures that senior management have full
visibility of the Group’s economic crime risk exposure, to enable
informed decision making.
Money Laundering Reporting Officer (MLRO) reports are presented
annually to the relevant legal entity and Group-level risk
committees.
Lloyds Banking Group plc Annual Report and Accounts 2025
180
Risk management continued
| Insurance underwriting risk | ||
|---|---|---|
| Definition<br><br>Insurance underwriting risk is defined as the risk of<br><br>adverse developments in liabilities due to timing,<br><br>frequency and severity of claims for insured/<br><br>underwritten events, customer behaviour and<br><br>expense costs.<br><br>The Risk overview, on page 26, contains a summary of insurance<br><br>underwriting risk performance and key mitigating actions. | Financial risk indicators<br><br>•Life and Pensions sales (present value of new business premiums)A:<br><br>£21,047 million (2024: £18,249 million)<br><br>•General insurance underwritten total gross written premiumsA:<br><br>£762 million (2024: £737 million) | |
| --- |
Risk appetite
The Group is commercially required to take some forms of insurance
underwriting risk. For example, longevity and general insurance
underwriting risks to support customer demands and generate
operating income. Other underwriting risks, particularly persistency
and expense risk, need to be managed to avoid significant
fluctuations in the value of business written.
Identification and assessment
The primary source of insurance underwriting risk within the Group
arises from the Insurance business.
Poor persistency is a major risk in the life and pensions business,
stemming from customer behaviour that leads to increased
cancellations or stopped contributions. Longevity risk has reduced
following the sale of the bulk annuity business but still exists in the
individual annuity business and the Group’s defined benefit pension
scheme. Page 246 provides further information on the defined
benefit scheme.
Property insurance risk is a key risk within the general insurance
business, arising from home insurance. Exposures can arise, for
example, from weather-related risks such as major floods or
windstorms when property damage claims are higher than
expected.
Expenses are incurred in writing and administering all insurance
business, with the risk of costs being higher than expected managed
through regular cost initiatives and operating model reviews.
The Own Risk and Solvency Assessment (ORSA) is used to identify,
assess, manage and report the short- to medium-term risks
associated with the Insurance sub-group and assess the overall
solvency needs related to the risk profile.
Emerging and horizon risk assessments and horizon scanning are
regularly conducted to identify emerging insurance underwriting
risks arising from economic and market conditions, regulatory
changes and reputational issues.
Scenario analysis and stress testing are used to identify and quantify
sources of potential insurance underwriting risk, highlight any
vulnerabilities identified and propose appropriate remedial action.
Reverse stress testing is also performed to identify and assess
scenarios that would cause the Group to fail and to propose
mitigating actions to alleviate the risk of failure.
Models provide a way of objectively assessing insurance
underwriting risk and a range of approaches are used to ensure a
clear understanding of the risk profile.
An annual review and setting of demographic and expense best
estimate assumptions is carried out, enabling risk exposures to be
quantified and appropriate levels of capital, reserves and customer
premiums to be set.
The Group’s critical accounting judgements and key sources of
estimation uncertainty for its Insurance business are set out in
note 8 to the consolidated financial statements on page 235.
Management and mitigation
Underwriting is the primary mechanism used to manage insurance
risk and appropriate underwriting procedures are in place to
support the effective underwriting of insurance products.
A limit framework is in place to manage insurance underwriting risk.
Limits are set on underwriting capacity and authority is delegated to
individuals based on their specific expertise.
Product pricing uses data from risk assessments, reinsurance
arrangements, actuarial analysis, market dynamics, regulatory
compliance, and customer characteristics and aims to balance
adequately covering risks, remaining competitive, and satisfying
regulatory requirements.
Product terms and policy wording are drafted to ensure they do not
expose the business to a greater number of claims than anticipated,
whilst maintaining fair customer outcomes.
A robust reserving process is in place to evaluate, review and
estimate unpaid claims and ensure appropriate resources are
available to settle claims as they arise. This is supported by an
effective claims management process which ensures that any claims
are reviewed and handled efficiently, effectively and in line with
relevant policy wording.
Reinsurance and diversification are also used to mitigate risk
exposure.
Monitoring
Insurance underwriting risk is reviewed monthly relative to the
established risk appetite.
Exposure is monitored regularly to ensure that the risks
underwritten are diversified in order to manage risk concentration,
and to verify adequacy of reinsurance.
Projected and current exposure to insurance underwriting risk
relative to the overall risk profile is considered in the ORSA and the
operating plan.
The appropriateness of assumptions is tracked through the
monitoring of relevant experience against expectations. Persistency,
claims and expenses are analysed monthly; mortality, morbidity and
longevity are analysed annually.
Reporting
Insurance underwriting risk appetite metrics and management
measures are reported to relevant risk committees, boards and
forums as required.
Operational limits are reported to the relevant committee, forum or
individual as required. Underwriting and claims issues are reported
to the relevant committees within the Insurance business.
Lloyds Banking Group plc Annual Report and Accounts 2025
181
| Liquidity risk | ||
|---|---|---|
| Definition<br><br>Liquidity risk is the risk that the Group<br><br>has insufficient financial resources to meet<br><br>its commitments as they fall due or can only<br><br>secure them at excessive cost.<br><br>Level two risks<br><br>Funding; Liquidity<br><br>The Risk overview, on page 27, contains a summary of liquidity risk<br><br>performance and key mitigating actions. | Financial risk indicators<br><br>•Liquidity coverage ratio: 145% (2024: 146%)<br><br>•Net stable funding ratio: 124% (2024: 129%)<br><br>•Loan to deposit ratio: 97% (2024: 95%) | |
| --- |
Risk appetite
The Group is commercially required to take liquidity risk to meet its
customers’ borrowing and depositing needs and generate
shareholder returns.
The Banking Group’s liquidity risk appetite is maintained above
regulatory minima in a severe but plausible stress for a reasonable
time-period, relying on non-franchise damaging management
actions. Scottish Widows Group Limited’s appetite is to maintain a
prudent liquidity profile to meet all commitments, in stressed
conditions, as they fall due.
For the Banking Group, risk appetite is expressed primarily through
the Liquidity Coverage Ratio (LCR) metric, measured in a regulatory
defined 30-day severe stress scenario. This is supplemented by
additional metrics to manage longer term liquidity stresses, such as
the Net Stable Funding Ratio (NSFR). For Scottish Widows Group
Limited, risk appetite is expressed primarily through holding
sufficient liquid assets to meet entity-specific requirements in
stressed conditions.
Identification and assessment
Liquidity exposure represents the potential stressed outflows in any
future period, less expected inflows. The Group considers liquidity
exposure from both an internal and a regulatory perspective.
The Internal Liquidity Adequacy Assessment Process (ILAAP) is the
key mechanism for assessing the Group’s liquidity and funding
needs. It is completed at least annually and used to ensure that the
Group has robust strategies, processes and systems in place to
support the identification, measurement, management, monitoring
and reporting of liquidity risk over an appropriate set of time
horizons.
Liquidity risk appetite is proposed and reviewed at least annually
and approved by the Board. It comprises a liquidity risk appetite
statement and set of quantitative metrics. This is supported by a
suite of management measures.
Scenario analysis and stress testing are used to identify sources of
potential liquidity risk, highlight any vulnerabilities identified and
propose appropriate remedial action. Reverse stress testing is also
performed to identify and assess scenarios that would cause the
Group to fail and to propose mitigating actions to alleviate the risk
of failure.
Emerging and topical risk assessments are regularly conducted to
identify liquidity risks arising from market conditions, regulatory
changes, reputational issues, balance sheet changes and new
product offerings. Assessment outputs are used to inform the
liquidity risk stress testing framework.
Management and mitigation
Liquidity risk is managed through a series of measures, tests and
reports that are primarily based on contractual maturities with
behavioural overlays as appropriate. The Group undertakes
quantitative and qualitative analysis of the behavioural aspects
of its assets and liabilities in order to reflect their expected
behaviour.
The Group maintains a diverse, reliable and cost-effective funding
structure and strategy, which considers areas such as maturity
mismatches, concentration of funding sources, asset encumbrance
and stability of funding. The operating plan, which includes an
issuance plan, is produced for the Group and its material legal
entities ensuring compliance with Board liquidity risk appetite limits
across all years of the plan.
The Group considers the cost of liquidity and funding when forming
business plans and strategies to ensure liquidity and funding usage is
optimised. The transfer pricing mechanism ensures that levels of
liquidity risk taken in the Group are controlled and incentivises an
optimum funding mix.
A liquid asset buffer of unencumbered high quality liquid assets is
held to protect the Group against a range of stress scenarios. The
composition and eligibility of marketable assets is considered under
business-as-usual and stressed conditions.
The Group manages and monitors liquidity risks and ensures that
liquidity risk management systems and arrangements are
adequate with regard to the internal risk appetite, Group
strategy and regulatory requirements. Liquidity policies and
procedures are subject to independent internal oversight by the
Risk function. Overseas branches and subsidiaries of the Group
may also be required to meet the liquidity requirements of the
entity’s domestic country. Management of liquidity requirements
is performed by the overseas branch or subsidiary in line with
Group policy. Liquidity risk of the Insurance business is actively
managed and monitored within the Insurance legal entities. The
Group plans funding requirements over its planning period,
combining business-as-usual and stressed conditions. The Group
manages its liquidity position paying regard to its internal risk
appetite, Liquidity Coverage Ratio (LCR) and Net Stable Funding
Ratio (NSFR) as required by the PRA, the Capital Requirements
Directive (CRD V) and the Capital Requirements Regulation (UK
CRR) liquidity requirements.
Monitoring
Daily monitoring and control processes are in place to address
internal and regulatory liquidity requirements. A range of market
and internal early warning indicators are monitored daily for early
signs of liquidity risk in the market or specific to the Group.
A liquidity contingency framework is maintained as part of the
Recovery Plan and sets out strategies for addressing liquidity
shortfalls in emergency situations, detailing governance and
escalation procedures in the context of a liquidity stress event.
The Recovery Plan is prepared to ensure the Group continues to
operate through a liquidity crisis, documents how the Group would
respond to a financial stress event and restore itself to a viable
position.
Funding concentrations by counterparty, currency and tenor are
regularly monitored and, where high levels of concentrations exist,
these are managed as part of the operating plan process and limited
by the liquidity risk monitoring framework.
Lloyds Banking Group plc Annual Report and Accounts 2025
182
Risk management continued
Reporting
Liquidity Board Risk Appetite Metrics and a set of management
measures are reported to relevant Asset Liability Committee
(ALCOs) and Board as required.
Operational limits are reported to the relevant committee, forum or
individual as required.
Regulatory reports required by the PRA, FCA and other regulatory
bodies are submitted within mandated timelines and processes are
in place to demonstrate, evidence and attest to regulatory
compliance.
The Group is subject to the Bank of England’s Resolvability
Assessment Framework (RAF) and ensures appropriate capabilities
are in place and documented to support the Funding in Resolution
(FiR) requirements.
Liquidity and funding management in 2025
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 assets1 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.
1Based on a monthly simple average over the previous 12 months.
Group funding requirements and sources
| At 31 Dec<br><br>2025<br><br>£bn | At 31 Dec<br><br>2024<br><br>£bn | Change<br><br>% | |
|---|---|---|---|
| Group funding position | |||
| Total Group assets | 944.1 | 906.7 | 4 |
| Less other liabilities1 | (261.7) | (247.8) | (6) |
| Funding requirements | 682.4 | 658.9 | 4 |
| Customer deposits | 496.5 | 482.7 | 3 |
| Wholesale funding2 | 99.4 | 92.5 | 7 |
| Repurchase agreements at amortised cost: | |||
| Repurchase agreements – non-trading | 29.8 | 15.9 | 87 |
| Term Funding Scheme with additional incentives for SMEs (TFSME) | 8.8 | 21.9 | (60) |
| 38.6 | 37.8 | 2 | |
| Total equity | 47.9 | 45.9 | 4 |
| Funding sources | 682.4 | 658.9 | 4 |
1Other liabilities primarily include balances in the Group’s Insurance business and the fair value of derivative liabilities.
2The 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).
Lloyds Banking Group plc Annual Report and Accounts 2025
183
Reconciliation of Group funding to the balance sheet (audited)
| At 31 December 2025 | At 31 December 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| Included in<br><br>funding<br><br>analysis<br><br>£bn | Cash<br><br>collateral<br><br>received1<br><br>£bn | Fair value<br><br>and other<br><br>accounting<br><br>methods<br><br>£bn | Balance<br><br>sheet<br><br>£bn | Included in<br><br>funding<br><br>analysis<br><br>£bn | Cash<br><br>collateral<br><br>received1<br><br>£bn | Fair value<br><br>and other<br><br>accounting<br><br>methods<br><br>£bn | Balance<br><br>sheet<br><br>£bn | |
| Deposits from banks | 3.8 | 2.0 | – | 5.8 | 3.1 | 3.2 | (0.1) | 6.2 |
| Debt securities in issue | 83.9 | – | (5.6) | 78.3 | 77.2 | – | (6.4) | 70.8 |
| Subordinated liabilities | 11.7 | – | (1.8) | 9.9 | 12.2 | – | (2.1) | 10.1 |
| Total wholesale funding | 99.4 | 2.0 | 92.5 | 3.2 | ||||
| Customer deposits | 496.5 | – | – | 496.5 | 482.7 | – | – | 482.7 |
| Repurchase agreements at<br><br>amortised cost | 38.6 | – | – | 38.6 | 37.8 | – | – | 37.8 |
| Total equity | 47.9 | – | – | 47.9 | 45.9 | – | – | 45.9 |
| Funding Sources | 682.4 | 2.0 | 658.9 | 3.2 |
1The 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.
Analysis of 2025 total wholesale funding by residual maturity
| Up to 1<br><br>month<br><br>£bn | 1 to 3<br><br>months<br><br>£bn | 3 to 6<br><br>months<br><br>£bn | 6 to 9<br><br>months<br><br>£bn | 9 to 12<br><br>months<br><br>£bn | 1 to 2<br><br>years<br><br>£bn | 2 to 5<br><br>years<br><br>£bn | Over<br><br>five years<br><br>£bn | Total<br><br>at 31 Dec<br><br>2025<br><br>£bn | Total<br><br>at 31 Dec<br><br>2024<br><br>£bn | |
|---|---|---|---|---|---|---|---|---|---|---|
| Deposits from banks | 1.6 | 0.4 | 0.8 | 0.9 | 0.1 | – | – | – | 3.8 | 3.1 |
| Debt securities in issue: | ||||||||||
| Certificates of deposit<br><br>issued | 0.2 | 1.3 | 2.3 | 1.9 | 1.1 | 0.5 | – | – | 7.3 | 5.5 |
| Commercial paper | – | 7.0 | 6.3 | 2.3 | 0.3 | – | – | – | 15.9 | 8.3 |
| Senior unsecured notes<br><br>issued | – | 0.8 | 2.2 | 1.6 | 0.8 | 9.6 | 15.9 | 12.1 | 43.0 | 46.5 |
| Covered bonds | – | 0.9 | 0.8 | 0.1 | 1.0 | 3.0 | 4.6 | 0.8 | 11.2 | 11.6 |
| Securitisation notes | – | – | – | 0.2 | 0.5 | 1.7 | 3.5 | 0.6 | 6.5 | 5.3 |
| 0.2 | 10.0 | 11.6 | 6.1 | 3.7 | 14.8 | 24.0 | 13.5 | 83.9 | 77.2 | |
| Subordinated liabilities | – | 1.1 | – | 0.5 | – | – | 4.4 | 5.7 | 11.7 | 12.2 |
| Total wholesale funding | 1.8 | 11.5 | 12.4 | 7.5 | 3.8 | 14.8 | 28.4 | 19.2 | 99.4 | 92.5 |
Total wholesale funding by currency (audited)
| Sterling<br><br>£bn | US dollar<br><br>£bn | Euro<br><br>£bn | Other<br><br>currencies<br><br>£bn | Total<br><br>£bn | |
|---|---|---|---|---|---|
| At 31 December 2025 | 21.6 | 46.4 | 25.1 | 6.3 | 99.4 |
| At 31 December 2024 | 21.0 | 41.5 | 22.6 | 7.4 | 92.5 |
Analysis of 2025 term issuance (audited)
| Sterling<br><br>£bn | US dollar<br><br>£bn | Euro<br><br>£bn | Other<br><br>currencies<br><br>£bn1 | Total<br><br>£bn | |
|---|---|---|---|---|---|
| Securitisation2 | 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 |
1Includes Australian dollar, Swiss franc, Hong Kong dollar and Japanese yen.
2Securitisation includes externally issued notes from significant risk transfer transactions.
Lloyds Banking Group plc Annual Report and Accounts 2025
184
Risk management continued
Liquidity portfolio
At 31 December 2025, the Group had £131.4 billion of highly liquid unencumbered LCR eligible assets, based on a monthly simple average
over the previous 12 months post any liquidity haircuts (31 December 2024: £134.4 billion), of which £125.8 billion was LCR level 1 eligible
(31 December 2024: £128.5 billion) and £5.6 billion was LCR level 2 eligible (31 December 2024: £5.9 billion). These assets are available to
meet cash and collateral outflows and regulatory requirements.
Liquidity risk is managed in line with the Group Liquidity Risk Policy, with the Insurance Group managing liquidity risk on a standalone basis.
Assets held for annuities are specifically chosen to correspond to the expectation of timing of annuity payments. For With Profits and unit-
linked business, portfolios are managed through mandates which ensure that they are run within defined tolerances, maintaining sufficient
liquidity to carry out operations of the portfolio without material disruption. For non-linked products other than annuity contracts, backing
investments are mostly held in gilts with minimal liquidity risk. Investments are arranged to minimise the possibility of being a distressed
seller whilst at the same time investing to meet policyholder obligations. This is achieved by anticipating policyholder behaviour and sales of
underlying assets within funds.
LCR eligible assets
| Average1 | ||
|---|---|---|
| 2025<br><br>£bn | 2024bn | |
| Cash and central bank reserves | 59.3 | 62.0 |
| High quality government/MDB/agency bonds2 | 64.0 | 63.6 |
| High quality covered bonds | 2.5 | 2.9 |
| Level 1 | 125.8 | 128.5 |
| Level 23 | 5.6 | 5.9 |
| Total LCR eligible assets | 131.4 | 134.4 |
All values are in British Pounds.
1Eligible assets are calculated as an average of month-end observations over the previous 12 months post any liquidity haircuts.
2Designated multilateral development banks (MDB).
3Includes Level 2A and Level 2B.
LCR eligible assets by currency
| Sterling<br><br>£bn | US dollar<br><br>£bn | Euro<br><br>£bn | Other<br><br>currencies<br><br>£bn | Total<br><br>£bn | |
|---|---|---|---|---|---|
| At 31 December 2025 | |||||
| Level 1 | 87.5 | 21.9 | 16.4 | – | 125.8 |
| Level 2 | 2.6 | 1.0 | 1.1 | 0.9 | 5.6 |
| Total1 | 90.1 | 22.9 | 17.5 | 0.9 | 131.4 |
| At 31 December 2024 | |||||
| Level 1 | 89.8 | 21.0 | 17.7 | – | 128.5 |
| Level 2 | 2.6 | 1.7 | 1.1 | 0.5 | 5.9 |
| Total1 | 92.4 | 22.7 | 18.8 | 0.5 | 134.4 |
1Eligible assets are calculated as an average of month-end observations over the previous 12 months post any liquidity haircuts.
The Group 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.
Stress testing results
Internal liquidity stress testing results at 31 December 2025 (based on a monthly simple average over the previous 12 months) showed that
the Group had liquidity resources representing 144% of modelled outflows under the Group’s most severe liquidity stress scenario
(31 December 2024: 136%). The increase in ratio is explained primarily by a decrease in modelled stress outflows.
This scenario includes a two notch downgrade of the Group’s current long-term debt rating and accompanying one notch short-term
downgrade implemented instantaneously by all major rating agencies.
Lloyds Banking Group plc Annual Report and Accounts 2025
185
Maturities of financial instrument liabilities (audited)
The table below analyses financial instrument liabilities of the Group, excluding those arising from insurance and participating investment
contracts, on an undiscounted future cash flow basis according to contractual maturity, into relevant maturity groupings based on the
remaining period at the balance sheet date; balances with no fixed maturity are included in the over 5 years category. In the case of dated
subordinated liabilities, the maturity presented is based on call date where applicable. The Group’s preference shares have partially
discretionary coupons and have been included in the below analysis.
| Up to 1<br><br>month<br><br>£m | 1 to 3<br><br>months<br><br>£m | 3 to 12<br><br>months<br><br>£m | 1 to 5<br><br>years<br><br>£m | Over 5<br><br>years<br><br>£m | Total<br><br>£m | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| At 31 December 2025 | ||||||||||||||
| Deposits from banks | 1,872 | 421 | 1,930 | 1,579 | 10 | 5,812 | ||||||||
| Customer deposits | 428,915 | 23,351 | 35,640 | 9,722 | 503 | 498,131 | ||||||||
| Repurchase agreements at amortised cost | 11,966 | 9,750 | 7,866 | 6,773 | 3,147 | 39,502 | ||||||||
| Financial liabilities at fair value through profit or loss | 13,140 | 6,062 | 2,953 | 2,044 | 5,657 | 29,856 | ||||||||
| Notes in circulation | 2,118 | – | – | – | – | 2,118 | ||||||||
| Debt securities in issue at amortised cost | 408 | 9,959 | 22,797 | 40,064 | 13,427 | 86,655 | ||||||||
| Liabilities arising from non-participating investment contracts | 61,640 | – | – | – | – | 61,640 | ||||||||
| Lease liabilities | 35 | 59 | 200 | 446 | 392 | 1,132 | ||||||||
| Subordinated liabilities | 24 | 1,170 | 990 | 6,247 | 8,328 | 16,759 | ||||||||
| Total non-derivative financial liabilities | 520,118 | 50,772 | 72,376 | 66,875 | 31,464 | 741,605 | ||||||||
| Derivative financial liabilities | ||||||||||||||
| Gross settled derivatives – outflows | 89,450 | 66,862 | 43,379 | 40,311 | 21,260 | 261,262 | ||||||||
| Gross settled derivatives – inflows | (88,088) | (65,410) | (42,508) | (38,949) | (18,853) | (253,808) | ||||||||
| Gross settled derivatives – net flows | 1,362 | 1,452 | 871 | 1,362 | 2,407 | 7,454 | ||||||||
| Net settled derivative liabilities | 8,258 | 35 | 62 | 291 | 1,784 | 10,430 | ||||||||
| Total derivative financial liabilities | 9,620 | 1,487 | 933 | 1,653 | 4,191 | 17,884 | Up to 1<br><br>month<br><br>£m | 1 to 3<br><br>months<br><br>£m | 3 to 12<br><br>months<br><br>£m | 1 to 5<br><br>years<br><br>£m | Over 5<br><br>years<br><br>£m | Total<br><br>£m | ||
| --- | --- | --- | --- | --- | --- | --- | ||||||||
| At 31 December 2024 | ||||||||||||||
| Deposits from banks | 1,809 | 673 | 904 | 2,775 | 105 | 6,266 | ||||||||
| Customer deposits | 437,693 | 14,873 | 24,811 | 6,127 | 256 | 483,760 | ||||||||
| Repurchase agreements at amortised cost | 8,974 | 5,169 | 15,300 | 9,416 | – | 38,859 | ||||||||
| Financial liabilities at fair value through profit or loss | 15,208 | 3,965 | 1,803 | 2,102 | 7,078 | 30,156 | ||||||||
| Notes in circulation | 2,121 | – | – | – | – | 2,121 | ||||||||
| Debt securities in issue at amortised cost | 3,704 | 10,367 | 13,624 | 38,973 | 8,519 | 75,187 | ||||||||
| Liabilities arising from non-participating investment contracts | 51,228 | – | – | – | – | 51,228 | ||||||||
| Lease liabilities | 28 | 65 | 241 | 574 | 461 | 1,369 | ||||||||
| Subordinated liabilities | 26 | 698 | 1,676 | 4,207 | 6,705 | 13,312 | ||||||||
| Total non-derivative financial liabilities | 520,791 | 35,810 | 58,359 | 64,174 | 23,124 | 702,258 | ||||||||
| Derivative financial liabilities | ||||||||||||||
| Gross settled derivatives – outflows | 100,432 | 61,356 | 43,231 | 34,795 | 22,505 | 262,319 | ||||||||
| Gross settled derivatives – inflows | (97,653) | (59,238) | (41,319) | (32,333) | (18,950) | (249,493) | ||||||||
| Gross settled derivatives – net flows | 2,779 | 2,118 | 1,912 | 2,462 | 3,555 | 12,826 | ||||||||
| Net settled derivative liabilities | 10,432 | 92 | 109 | 404 | 1,557 | 12,594 | ||||||||
| Total derivative financial liabilities | 13,211 | 2,210 | 2,021 | 2,866 | 5,112 | 25,420 |
The majority of the Group’s non-participating investment contract liabilities are unit-linked. These unit-linked products are invested in
accordance with unit fund mandates. Clauses are included in policyholder contracts to permit the deferral of sales, where necessary, so
that linked assets can be realised without being a forced seller.
The principal amount for undated subordinated liabilities and preference shares with no redemption option is included within the over 5
years column; interest of £16 million (2024: £16 million) in respect of the undated subordinated liabilities and £28 million (2024: £28 million)
in respect of the preference shares, per annum is not included beyond 5 years.
An analysis of the Group’s total wholesale funding by residual maturity and by currency is set out on page 183.
Lloyds Banking Group plc Annual Report and Accounts 2025
186
Risk management continued
Cash flows arising from insurance liabilities (audited)
The following table presents the estimated amount and timing of the remaining contractual discounted cash flows arising from insurance
liabilities. The amounts presented do not include those relating to the liability for remaining coverage of contracts that are measured under
the premium allocation approach.
| Less than 1<br><br>year<br><br>£m | 1 to 2<br><br>years<br><br>£m | 2 to 3<br><br>years<br><br>£m | 3 to 4<br><br>years<br><br>£m | 4 to 5<br><br>years<br><br>£m | Over 5<br><br>years<br><br>£m | Total<br><br>£m | |
|---|---|---|---|---|---|---|---|
| At 31 December 2025 | |||||||
| Liabilities arising from insurance and participating<br><br>investment contracts | (1,823) | (1,941) | (2,316) | (2,775) | (3,147) | (117,710) | (129,712) |
| Reinsurance contract liabilities | 3 | 3 | 3 | 2 | 2 | 12 | 25 |
| Total | (1,820) | (1,938) | (2,313) | (2,773) | (3,145) | (117,698) | (129,687) |
| At 31 December 2024 | |||||||
| Liabilities arising from insurance and participating<br><br>investment contracts | (1,038) | (1,292) | (1,951) | (2,453) | (2,992) | (112,055) | (121,781) |
| Reinsurance contract liabilities | 3 | 3 | 3 | 3 | 2 | 13 | 27 |
| Total | (1,035) | (1,289) | (1,948) | (2,450) | (2,990) | (112,042) | (121,754) |
For insurance contracts which are neither unit-linked nor in the Group’s with-profit funds, in particular annuity liabilities, the aim is to invest
in assets such that the cash flows on investments match those on the projected future liabilities.
Insurance and participating investment contract liabilities payable on demand (audited)
Some of the Group’s insurance and participating investment contract liabilities are payable on demand as shown in the table below:
| 2025 | 2024 | |||
|---|---|---|---|---|
| Amounts<br><br>payable on<br><br>demand<br><br>£m | Carrying<br><br>amount<br><br>£m | Amounts<br><br>payable on<br><br>demand<br><br>£m | Carrying<br><br>amount<br><br>£m | |
| Life | 122,691 | 118,931 | 110,402 | 107,909 |
| Non-life | – | – | – | – |
| Total | 122,691 | 118,931 | 110,402 | 107,909 |
The amounts payable on demand represent contract surrender values and incurred claims.
Maturities of contingent liabilities, commitments and financial guarantees (audited)
The table below shows the contractual maturity of the Group’s contingents, commitments and financial guarantees. Commitments are
shown in the time band containing the earliest date the commitment can be drawn down. For financial guarantee contracts, the maximum
amount of the guarantee is allocated to the earliest period in which the guarantee could be called.
| Up to 1<br><br>month<br><br>£m | 1 to 3<br><br>months<br><br>£m | 3 to 6<br><br>months<br><br>£m | 6 to 9<br><br>months<br><br>£m | 9 to 12<br><br>months<br><br>£m | 1 to 3<br><br>years<br><br>£m | 3 to 5<br><br>years<br><br>£m | Over 5<br><br>years<br><br>£m | Total<br><br>£m | |
|---|---|---|---|---|---|---|---|---|---|
| At 31 December 2025 | |||||||||
| Acceptances and endorsements | 97 | 6 | 2 | – | – | – | – | – | 105 |
| Other contingent liabilities | 215 | 555 | 366 | 86 | 290 | 691 | 364 | 337 | 2,904 |
| Total contingent liabilities | 312 | 561 | 368 | 86 | 290 | 691 | 364 | 337 | 3,009 |
| Lending commitments and financial guarantees | 143,506 | 1,553 | 1,057 | 2,061 | 2,341 | 3,468 | 3,058 | 435 | 157,479 |
| Other commitments | 95 | – | – | – | – | – | – | – | 95 |
| Total commitments and financial guarantees | 143,601 | 1,553 | 1,057 | 2,061 | 2,341 | 3,468 | 3,058 | 435 | 157,574 |
| Total contingents, commitments and financial<br><br>guarantees | 143,913 | 2,114 | 1,425 | 2,147 | 2,631 | 4,159 | 3,422 | 772 | 160,583 |
| At 31 December 2024 | |||||||||
| Acceptances and endorsements | 24 | 11 | 3 | 1 | – | – | – | – | 39 |
| Other contingent liabilities | 208 | 357 | 225 | 115 | 370 | 547 | 211 | 533 | 2,566 |
| Total contingent liabilities | 232 | 368 | 228 | 116 | 370 | 547 | 211 | 533 | 2,605 |
| Lending commitments and financial guarantees | 134,283 | 1,416 | 1,729 | 1,562 | 3,367 | 2,755 | 3,140 | 256 | 148,508 |
| Other commitments | 94 | 6 | 11 | – | – | – | – | – | 111 |
| Total commitments and financial guarantees | 134,377 | 1,422 | 1,740 | 1,562 | 3,367 | 2,755 | 3,140 | 256 | 148,619 |
| Total contingents, commitments and financial<br><br>guarantees | 134,609 | 1,790 | 1,968 | 1,678 | 3,737 | 3,302 | 3,351 | 789 | 151,224 |
Lloyds Banking Group plc Annual Report and Accounts 2025
187
| Market risk | ||
|---|---|---|
| Definition<br><br>Market risk is defined as the risk that the Group’s<br><br>capital or earnings profile are adversely affected by<br><br>changes in market rates or prices, including, but not<br><br>limited to, interest rates, foreign exchange, equity<br><br>prices and credit spreads.<br><br>Level two risks<br><br>Banking book (page 189); Pension (page 192); Insurance (page 192);<br><br>Trading book (page 193)<br><br>The Risk overview, on page 27, contains a summary of market risk<br><br>performance and key mitigating actions. | Financial risk indicators<br><br>•Structural hedge: £244 billion (2024: £242 billion)<br><br>•Average 95% 1-day trading VaR: £2.2 million (2024: £2.4 million) | |
| --- |
Risk appetite
The Group effectively manages market risk from banking and
insurance activity and is commercially required to engage in trading
and direct investment activity, as a necessary component of our
business model, to satisfy customer demands and generate stable
financial returns.
The Group aims to balance potential returns with the need to
safeguard our capital base and is willing to accept fluctuations in
earnings that do not trigger mandatory distribution restrictions,
even in mild stress market conditions.
Risk appetite is expressed primarily through an earning at risk
metric, measured in a mild market risk stress scenario. This is
supplemented by additional metrics for specific portfolios, such as
the Structural hedge and the Trading Book.
Balance sheet linkages
The information provided in the table below aims to facilitate the
understanding of linkages between banking, trading and insurance
balance sheet items and the positions disclosed in the Group’s
market risk disclosures.
Market risk linkage to the balance sheet
| Banking | |||||
|---|---|---|---|---|---|
| 2025 | Total<br><br>£m | Trading book1<br><br>£m | Non-<br><br>trading<br><br>£m | Insurance<br><br>£m | Primary market risk factor |
| Assets | |||||
| Cash and balances at central banks | 56,661 | – | 56,661 | – | Interest rate |
| Financial assets at fair value through profit<br><br>or loss | 240,413 | 25,537 | 5,331 | 209,545 | Interest rate, foreign exchange, credit spread,<br><br>equity |
| Derivative financial instruments | 19,727 | 16,278 | 2,329 | 1,120 | Interest rate, foreign exchange, credit spread |
| Financial assets at amortised cost | |||||
| Loans and advances to banks | 7,236 | – | 7,145 | 91 | Interest rate |
| Loans and advances to customers | 481,463 | – | 481,463 | – | Interest rate |
| Reverse repurchase agreements | 50,986 | – | 50,986 | – | Interest rate |
| Debt securities | 13,987 | – | 13,987 | – | Interest rate, credit spread |
| Financial assets at amortised cost | 553,672 | – | 553,581 | 91 | |
| Financial assets at fair value through other<br><br>comprehensive income | 36,320 | – | 36,320 | – | Interest rate, foreign exchange, credit spread |
| Other assets | 37,279 | – | 30,880 | 6,399 | Interest rate, credit spread |
| Total assets | 944,072 | 41,815 | 685,102 | 217,155 | |
| Liabilities | |||||
| Deposit from banks | 5,779 | – | 5,779 | – | Interest rate |
| Customer deposits | 496,457 | – | 496,457 | – | Interest rate |
| Repurchase agreements at amortised cost | 38,570 | – | 38,570 | – | Interest rate |
| Financial liabilities at fair value through<br><br>profit or loss | 27,909 | 23,666 | 4,243 | – | Interest rate, foreign exchange |
| Derivative financial instruments | 16,132 | 11,196 | 3,772 | 1,164 | Interest rate, foreign exchange, credit spread |
| Debt securities in issue at amortised cost | 78,271 | – | 77,383 | 888 | Interest rate, credit spread |
| Liabilities arising from insurance and<br><br>investment contracts | 196,924 | – | – | 196,924 | Interest rate, credit spread, equity |
| Subordinated liabilities | 9,894 | – | 9,382 | 512 | Interest rate, foreign exchange |
| Other liabilities | 26,269 | – | 12,084 | 14,185 | Interest rate, credit spread |
| Total liabilities | 896,205 | 34,862 | 647,670 | 213,673 |
1Assets and liabilities are classified as trading book if they meet the requirements as set out in the Capital Requirements Regulation, article 104.
Lloyds Banking Group plc Annual Report and Accounts 2025
188
Risk management continued
The defined benefit pension schemes’ assets and liabilities are
included under other assets and other liabilities in this table and
note 12 to the consolidated financial statements on page 245
provides further information.
The Group’s trading book assets and liabilities are originated
within the Commercial Banking business units.
Within the Group’s balance sheet these fall under the trading assets
and liabilities and derivative financial instruments.
The assets and liabilities are classified as trading book if they meet
the requirements as set out in the Capital Requirements Regulation,
article 104. Further information on these activities can be found
under the Trading portfolios section on page 193.
Derivative assets and liabilities are held by the Group for three main
purposes: to provide risk management solutions for clients, to
manage portfolio risks arising from client business and to manage
and hedge the Group’s own risks.
Insurance business assets and liabilities relate to policyholder funds,
as well as shareholder invested assets, including annuity funds.
The Group ensures that it has adequate cash and balances at
central banks and stocks of high quality liquid assets (for example,
gilts or US Treasury securities) that can be converted easily into cash
to meet liquidity requirements. The majority of these assets are
asset swapped and held at fair value through other comprehensive
income. For further information see Liquidity risk page 181.
The majority of debt issuance originates from the Group’s capital
and funding activities and the interest rate risk of the debt issued is
hedged by swapping them into a floating rate.
The non-trading book primarily consists of customer on-balance
sheet activities and the Group’s capital and funding activities, which
expose it to the risk of adverse movements in market rates or prices,
predominantly interest rates, credit spreads, exchange rates and
equity prices, as described in further detail within the Banking
activities section.
Identification and assessment
The Group ensures that all current and potential future market risks
are identified, understood and appropriately managed.
The market risk impacts of complex transactions, new products and
significant product changes identified by sub-groups, legal entities
or business units are reviewed by the Risk function prior to approval.
Additionally, the market risk for all products is reviewed and
documented through the market risk attestation process.
Where a new market risk exposure is discovered for example
through scenario analysis, stress testing, profit and loss attribution,
back-testing or model review, this must be notified to the Risk
function. Reverse stress testing is also performed to identify and
assess scenarios that would cause the Group to fail and to propose
mitigating actions to alleviate the risk of failure.
Market risk appetite is proposed and reviewed at least annually and
approved by the Board. It comprises a market risk appetite
statement and set of quantitative metrics. This is supported by a
suite of management measures.
Management and mitigation
Group Asset and Liability Committee (GALCO) is responsible for
approving and monitoring market risk management techniques,
measures and behavioural assumptions.
The transfer pricing process ensures that the level of market risk
taken in the Group is controlled and incentivises effective
management of market risk. Hedging costs, benefits and risks are
incorporated into the Group’s product pricing and contribute to
performance measurement.
All hedgeable banking book market risk exposures in sub-groups,
legal entities and business units are transferred to and centralised
within the Corporate Treasury of the relevant legal entity using an
appropriate transfer pricing process. Exposures are then managed
by the Corporate Treasury.
Appropriate trading limits are allocated to trading desks. It is the
responsibility of first line of defence to manage the risk profile in
accordance with these limits on both the desk and trader level, with
heads of desks responsible for managing risk within agreed limits.
The long-term financial management of all the Group’s defined
benefit pension schemes and the impact of both the current and
potential risk management strategy is analysed and monitored by
Group Corporate Treasury to ensure an appropriate financial
management strategy is agreed with the relevant Trustees and
implemented.
Within Insurance, market risk is managed by considering business
strategy and risk appetite, which typically state (or limit) the
amount and type of risk the Group is willing to take in pursuit of the
strategy.
Monitoring
GALCO and Group Market Risk Committee (GMRC) regularly review
high level market risk exposures as part of the wider risk
management framework. They also make recommendations to the
Board concerning overall market risk appetite and policy.
Across the Group, appropriate monitoring, reporting and escalation
processes are in place for all market risk exposures consistent with
the size and complexity of the risk as well as the requirements of the
recipients.
Market risk exposures are monitored against market risk appetite
and reported to the relevant audience at the appropriate
frequency, and reported in accordance with all legal and regulatory
requirements.
In Insurance, monitoring of (Solvency II capital) market risk
exposures against risk appetite, or other internal limits, is carried out
monthly.
Reporting
Market risk appetite metrics and a set of management measures are
reported to the relevant Asset and Liability Committees (ALCOs)
and Board as required.
Operational limits are reported to the relevant committee, forum or
individual as required.
Regulatory reports required by the PRA, FCA and other regulatory
bodies are submitted within mandated timelines and processes are
in place to demonstrate, evidence and attest to regulatory
compliance.
Lloyds Banking Group plc Annual Report and Accounts 2025
189
Banking activities
Identification and assessment
The Group’s banking activities expose it to the risk of adverse
movements in market rates or prices, predominantly interest rates,
credit spreads, exchange rates and equity prices. The volatility of
market rates or prices can be affected by both the transparency of
prices and the amount of liquidity in the market for the relevant
asset, liability or instrument.
Interest rate risk
Yield curve risk in the Group’s divisional portfolios, and in the
Group’s capital and funding activities, arises from the different
repricing characteristics of the Group’s non-trading assets, liabilities
and off-balance sheet positions.
Basis risk arises from the potential changes in spreads between
indices, for example where the bank lends with reference to a
central bank rate but funds with reference to a market rate, for
example, SONIA, and the spread between these two rates widens
or tightens.
Optionality risk arises predominantly from embedded optionality
within assets, liabilities or off-balance sheet items where either the
Group or the customer can affect the size or timing of cash flows.
One example of this is mortgage prepayment risk where the
customer owns an option allowing them to prepay when it is
economical to do so. This can result in customer balances
amortising more quickly or slowly than anticipated due to
customers’ response to changes in economic conditions.
Foreign exchange risk
Economic foreign exchange exposure arises from the Group’s
investment in its overseas operations. In addition, the Group incurs
foreign exchange risk through non-functional currency flows from
services provided by customer-facing divisions, the Group’s debt
and capital management programmes and is exposed to volatility in
its CET1 ratio, due to the impact of changes in foreign exchange
rates on the retranslation of non-sterling-denominated risk-
weighted assets.
Equity risk
Equity risk arises primarily from two different sources:
•The Group’s direct equity exposure within the Equity sub-group
including private equity exposure from investments held by LDC,
Housing Growth Partnership and its stake in BGF, in addition to
other equity exposure from a small number of legacy strategic
equity holdings and recently acquired minority fintech stakes
•A small exposure to Lloyds Banking Group share price through
deferred shares and deferred options granted to employees as
part of their benefits package
Credit spread risk
Credit spread risk arises largely from: (i) the liquid asset portfolio
held in the management of Group liquidity, comprising government,
supranational and other eligible assets; (ii) the Credit Valuation
Adjustment (CVA) and Debit Valuation Adjustment (DVA)
sensitivity to credit spreads; (iii) a number of the Group’s structured
medium-term notes where the Group has elected to fair value the
notes through the profit and loss account; and (iv) banking book
assets in Commercial Banking held at fair value under IFRS 9.
Sensitivities
Interest rate risk exposure is monitored monthly using the following
methodologies.
Market value sensitivity considers all repricing mismatches
(behaviourally adjusted where appropriate) in the current balance
sheet and calculates the change in market value that would result
from an instantaneous 25, 100 and 200 basis points parallel rise or
fall in the yield curve. The market value sensitivities are calculated
on a static balance sheet using principal cash flows excluding
interest, commercial margins and other spread components and are
discounted at the risk-free rate.
Interest income sensitivity measures the impact on future net
interest income arising from various economic scenarios. These
include instantaneous 25, 100 and 200 basis point parallel shifts in
all yield curves and the Group economic scenarios. These scenarios
are reviewed every year and are designed to replicate severe but
plausible economic events, capturing risks that would not be
evident through the use of parallel shocks alone such as basis risk
and steepening or flattening of the yield curve.
Unlike the market value sensitivities, the interest income
sensitivities incorporate additional behavioural assumptions as to
how and when individual products would reprice in response to
changing rates.
Reported sensitivities are not necessarily predictive of future
performance as they do not capture additional management
actions that would likely be taken in response to an immediate,
large, movement in interest rates. These actions could reduce the
net interest income sensitivity, help mitigate any adverse impacts or
they may result in changes to total income that are not captured in
the net interest income.
The structural hedging programme managing interest rate risk in the
banking book relies on assumptions made around customer
behaviour. A number of metrics are in place to monitor the risks
within the portfolio.
The Group has an integrated Asset and Liability Management (ALM)
system which supports non-traded asset and liability management
of the Group. This provides a single consolidated tool to measure
and manage interest rate repricing profiles (including behavioural
assumptions), perform stress testing and produce forecast outputs.
The Group is aware that any assumptions-based model is open to
challenge.
A full behavioural review is performed annually, or in response to
changing market conditions, to ensure the assumptions remain
appropriate and the model itself is subject to annual re-validation,
as required under the Group model governance policy. The key
behavioural assumptions are:
•Embedded optionality within products
•The duration of balances that are contractually repayable on
demand, such as current accounts and overdrafts, together with
net free reserves of the Group
•The re-pricing behaviour of managed rate liabilities, such as
variable rate savings
Lloyds Banking Group plc Annual Report and Accounts 2025
190
Risk management continued
Group banking activities: market value sensitivity (audited)
The table below shows, split by material currency, the Group’s market value sensitivities to an instantaneous parallel up and down 25 and
100 basis points change to all interest rates.
| 2025 | 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| Up<br><br>25bps<br><br>£m | Down<br><br>25bps<br><br>£m | Up<br><br>100bps<br><br>£m | Down<br><br>100bps<br><br>£m | Up<br><br>25bps<br><br>£m | Down<br><br>25bps<br><br>£m | Up<br><br>100bps<br><br>£m | Down<br><br>100bps<br><br>£m | |
| Sterling | 22.8 | (23.0) | 89.6 | (93.7) | 4.7 | (4.7) | 17.9 | (19.5) |
| US dollar | (3.6) | 3.6 | (14.1) | 14.6 | (1.4) | 1.4 | (5.4) | 5.7 |
| Euro | (3.7) | (0.4) | (14.5) | (1.6) | (1.4) | (2.3) | (5.1) | (9.4) |
| Other | (1.6) | 1.6 | (6.3) | 6.4 | (1.0) | 1.0 | (3.6) | 4.3 |
| Total | 13.9 | (18.2) | 54.7 | (74.3) | 0.9 | (4.6) | 3.8 | (18.9) |
This is a risk-based disclosure and the amounts shown would be amortised in the income statement over the duration of the portfolio.
The market value sensitivity has increased year-on-year as a result of increased customer prepayments for fixed mortgages.
Group banking activities: market value sensitivity to a steepening and flattening of the yield curve (audited)
The table below shows supplementary value sensitivity to a steepening and flattening (c.100 basis points around the three-year point)
in the yield curve. This ensures there are no unintended consequences to managing risk to parallel shifts in rates.
| 2025 | 2024 | |||
|---|---|---|---|---|
| Steepener<br><br>£m | Flattener<br><br>£m | Steepener<br><br>£m | Flattener<br><br>£m | |
| Sterling | 2.7 | (3.2) | (1.4) | 0.3 |
| US dollar | 1.8 | (1.8) | (0.6) | 0.5 |
| Euro | (9.1) | (1.3) | (12.8) | 3.2 |
| Other | 3.3 | (3.3) | (2.4) | 3.1 |
| Total | (1.3) | (9.6) | (17.2) | 7.1 |
Group banking activities: three-year net interest income sensitivity (audited)
The table below shows the banking book net interest income sensitivity on a one- to three-year forward-looking basis to an instantaneous
parallel up 25, down 25, up 50 and down 50 basis points change to all interest rates.
| 2025 | 2024 | |||||
|---|---|---|---|---|---|---|
| Year 1<br><br>£m | Year 2<br><br>£m | Year 3<br><br>£m | Year 1<br><br>£m | Year 2<br><br>£m | Year 3<br><br>£m | |
| Up 50bps | 216 | 376 | 660 | 234 | 357 | 591 |
| Up 25 bps | 109 | 189 | 331 | 117 | 179 | 296 |
| Down 25bps | (131) | (192) | (336) | (150) | (181) | (297) |
| Down 50bps | (261) | (386) | (673) | (302) | (364) | (595) |
Year 1 net interest income sensitivity, to both up and down shocks, has decreased slightly year-on-year mostly as a result of changing
customer deposit behaviour and structural hedge activity.
The overall three-year net interest income sensitivity to up and down 25 basis points and 50 basis points shocks is largely due to
reinvestment of structural hedge maturities in years two and three.
The sensitivities are illustrative and do not reflect new business margin implications and/or pricing actions, other than as outlined.
The following assumptions have been applied:
•Instantaneous parallel shift in interest rate curve, including bank base rate
•Balance sheet remains constant
•Illustrative 50% pass-through on deposits and 100% pass-through on assets, which could be different in practice
Basis risk, foreign exchange, equity and credit spread risks are measured primarily through scenario analysis by assessing the impact on
profit before tax over a 12-month horizon arising from a change in market rates, and reported within the Board risk appetite on a monthly
basis. Supplementary measures such as sensitivity and exposure limits are applied where they provide greater insight into risk positions.
Frequency of reporting supplementary measures varies from daily to quarterly appropriate to each risk type.
Lloyds Banking Group plc Annual Report and Accounts 2025
191
Management and mitigation
The Group’s policy is to optimise reward while managing its
market risk exposures within the risk appetite defined by the
Board. The Group market risk policy and procedures outlines the
hedging process, and the centralisation of risk from divisions into
Group Corporate Treasury (GCT), for example via the transfer
pricing framework. GCT is responsible for managing the
centralised risk and does this through natural offsets of matching
assets and liabilities, and appropriate hedging activity of the
residual exposures, subject to the authorisation and mandate
of GALCO within the Board risk appetite. The hedges are
externalised to the market by derivative desks within GCT
and the Commercial Bank. The Group mitigates income
statement volatility through hedge accounting. This reduces
the accounting volatility arising from the Group’s economic
hedging activities and any hedge accounting ineffectiveness
is continuously monitored.
The Group establishes hedge accounting relationships for
interest rate risk components using cash flow hedges and fair
value hedges. The Group is exposed to cash flow interest rate risk
on its variable rate loans and deposits together with its floating
rate subordinated debt. The derivatives used to manage the
structural hedge may be designated into cash flow hedges to
manage income statement volatility. The economic items related
to the structural hedge, for example current accounts, are not
eligible hedged items under IAS 39 for inclusion into accounting
hedge relationships. The Group is exposed to fair value interest
rate risk on its fixed rate customer loans, its fixed rate customer
deposits and the majority of its subordinated debt.
Hedge ineffectiveness arises during the management of interest
rate risk due to residual unhedged risk. Sources of
ineffectiveness, which the Group may decide to not fully
mitigate, can include basis differences, timing differences and
notional amount differences. The effectiveness of accounting
hedge relationships is assessed between the hedging derivatives
and the documented hedged item, which can differ to the
underlying economically hedged item.
The largest residual risk exposure arises from balances that are
deemed to be insensitive to changes in market rates (including
current accounts, a portion of variable rate deposits and investable
equity), and is managed through the Group structural hedge.
Consistent with the Group’s strategy to deliver stable returns,
GALCO seeks to minimise large reinvestment risk, and to smooth
earnings over a range of investment tenors. The structural hedge
consists of longer-term fixed rate assets or interest rate swaps and
the amount and duration of the hedging activity is reviewed
regularly by GALCO.
The Group’s exposure to pipeline and prepayment risks are
managed through hedging in line with expected customer
behaviour. These are appropriately monitored and controlled
through divisional ALCOs.
Economic foreign exchange exposures arising from non-functional
currency flows are identified by divisions and transferred and
managed centrally. The Group also has a policy of forward hedging
its forecasted currency profit and loss to year end.
The Group’s structural foreign currency exposure is represented
by its investments in overseas subsidiaries and branches which
create capital resources denominated in foreign currencies,
principally USD and EUR. Gains or losses on structural foreign
currency exposures are taken to reserves, resulting in a
movement in CET1 capital. The Group’s main overseas operations
are in America and Europe and do not represent a significant
proportion on its overall portfolio.
The Group makes use of both accounting and economic foreign
exchange exposures, as an offset against the impact of changes in
foreign exchange rates on the value of non-sterling-denominated
risk-weighted assets. This involves the holding of a structurally open
currency position; sensitivity is minimised where, for a given
currency, the ratio of the structural open position to risk-weighted
assets equals the CET1 ratio. Continually evaluating this structural
open currency position against evolving non-sterling-denominated
risk-weighted assets mitigates volatility in the Group’s CET1 ratio.
The Group manages foreign currency accounting exposure via
cash flow hedge accounting, utilising currency swaps and
forward foreign exchange trades. All non-structural foreign
exchange exposures in the non-trading book are managed
centrally within allocated exposure limits.
Monitoring
The appropriate limits and triggers are monitored by senior
executive committees within the Banking divisions. Banking assets,
liabilities and associated hedging are actively monitored and if
necessary rebalanced to be within agreed tolerances.
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Risk management continued
Defined benefit pension schemes
Identification and assessment
The Group’s defined benefit pension schemes are exposed to risks
that impact their assets and liabilities, that could adversely impact
the Group.
•The liability discount rate exposes the Group to interest rate risk
and credit spread risk, which is partially offset by fixed interest
assets, such as government and corporate bonds and swaps
•Increases to pensions in deferment and in payment expose the
Group to inflation risk, which is partially offset by real assets,
such as index-linked gilts and swaps
•The schemes’ asset holdings expose the Group to investment
risk. Assets are invested in a diversified portfolio of debt
securities, equities and other return-seeking assets
•The schemes’ membership exposes the Group to longevity risk,
which is partially offset by longevity swap assets
For further information on defined benefit pension scheme assets
and liabilities please refer to note 12 to the consolidated financial
statements on page 245.
The schemes are assessed on a number of different measures for
differing purposes, including but not limited to, the IAS 19
accounting basis for annual reporting and accounts, and the
Trustees’ Technical Provisions funding basis for agreeing
contributions into the schemes.
Management of the schemes’ assets is primarily the responsibility of
the Trustees of the schemes, who are responsible for setting the
investment strategy in consultation with the Group, and, for
agreeing funding requirements with the Group as part of the
triennial valuation process.
Pension scheme risks are measured and monitored using a number
of different metrics and use a range of techniques including scenario
analysis and stress testing.
Management and mitigation
The Group takes an active involvement in agreeing risk mitigation
strategies with the schemes’ Trustees.
The current and long-term investment strategy is regularly reviewed
to ensure an appropriate balance of risk. An interest rate and
inflation hedging programme is in place to reduce liability risk and
the schemes hold a diversified portfolio of debt securities and other
return seeking assets.
The merits of longevity risk transfer and hedging solutions are
reviewed regularly, and the Trustees have put in place longevity
swaps to mitigate longevity risk.
Monitoring
In addition to the wider risk management framework, governance
of the schemes includes a specialist Group Pensions Committee.
The surplus, or deficit, in the schemes is tracked regularly along with
various single factor and scenario stresses which consider the risks
to the assets and liabilities holistically. Key metrics are monitored
regularly including the impact on the Group’s capital resources of
the schemes, the performance against risk limits and triggers, and
the performance of the hedged asset and liability matching
positions.
Insurance business
Identification and assessment
The main elements of market risk to which the Group is exposed
through the Insurance business are equity, credit default spread,
interest rate and inflation.
Equity risk arises indirectly through the value of future management
charges on policyholder funds.
Credit default spread risk mainly arises from annuities where
policyholders’ future cash flows are guaranteed at retirement.
Exposure arises if the market value of the assets moves differently
to the liabilities they back. This exposure arises from credit
downgrades and defaults.
Interest rate risk arises through credit and interest assets which are
mainly held to cover the annuity and general insurance liabilities.
Inflation exposure arises from inflation-linked policyholder benefits
and future expenses.
Current and potential future market risk exposures within Insurance
are assessed using a range of techniques including stress, reverse
stress and scenario testing, as well as stochastic modelling.
Risk measures include 1-in-200 year stresses for the Insurance
business’ regulatory capital assessments and other supporting
measures where appropriate, including those set out in note 8(I) of
the consolidated financial statements on page 240.
Management and mitigation
Equity and credit spread risks are closely monitored. Asset liability
matching, hedging and unit matching are all used to reduce the
sensitivity of equity movements.
Interest rate risk in the annuity book is monitored and mitigated by
investing in assets whose cash flows closely match those on the
projected future liabilities. It is not possible to eliminate the risk
completely as the timing of insured events is uncertain and bonds
are not available for all required maturities. Other market risks
(e.g. interest rate exposure outside the annuity book and inflation)
are also closely monitored and where considered appropriate,
hedges are put in place to reduce exposure.
The costs and benefits of market risk mitigation are considered in
strategy and business planning decisions, with consideration given
to the impacts to various metrics.
Monitoring
Market risks in the Insurance business are monitored by Insurance
senior executive committees and ultimately the Insurance Board.
Monitoring includes the progression of market risk against limits, as
well as the sensitivity of profit before tax to combined market risk
stress scenarios and in-year market movements. Asset and liability
matching positions and hedges in place are actively monitored and
if necessary rebalanced to be within agreed tolerances. In addition,
market risk is controlled via approved investment policies and
mandates.
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Trading portfolios
Identification and assessment
The Group’s trading activity is small relative to its peers. The Group’s
trading activity is undertaken primarily to meet the financial
requirements of commercial and retail customers for foreign
exchange, credit, interest rate and inflation products. These
activities support customer flow and market making activities.
All trading activities are performed within the Commercial Banking
division. While the trading positions taken are generally small, any
extreme moves in the main risk factors and other related risk factors
could cause significant losses in the trading book depending on the
positions at the time. The average 95% 1-day trading VaR (Value at
Risk; diversified across risk factors) was relatively stable in 2025 at
£2.2 million (31 December 2024: £2.4 million).
Trading market risk measures are applied to all of the Group’s
regulatory trading books and they include daily VaR (see trading
portfolios: VaR table), sensitivity-based measures, and stress
testing calculations.
The Group internally uses stress testing as the primary risk measure,
complemented by VaR, for all trading book positions. The trading
portfolios: VaR table shows some relevant statistics for the Group’s
1-day 95% confidence level VaR, based on 300 historical
consecutive business days to year end 2025 and year end 2024.
The risk of loss measured by the VaR model is the loss in earnings
which is not expected to be exceeded with 95% confidence. The
total and average trading VaR numbers reported below have been
obtained after the application of the diversification benefits across
the five risk types, but do not reflect any diversification between
Lloyds Bank Corporate Markets plc and any other entities. The
maximum and minimum VaR reported for each risk category did not
necessarily occur on the same day as the maximum and minimum
VaR reported at Group level.
The market risk for the trading book continues to be low relative to
the size of the Group and in comparison to peers. This reflects the
fact that the Group’s trading operations are customer-centric and
focused on hedging and recycling client risks.
Although it is an important market standard measure of risk, VaR
has limitations. One of them is the use of a limited historical data
sample which influences the output by the implicit assumption that
future market behaviour will not differ greatly from the historically
observed period. Another known limitation is the use of defined
holding periods which assumes that the risk can be liquidated or
hedged within that holding period. Also calculating VaR at the
chosen confidence interval does not give enough information about
potential losses which may occur if this level is exceeded. The Group
fully recognises these limitations and supplements the use of VaR
with a variety of other measurements which reflect the nature of
the business activity. These include detailed sensitivity analysis,
position reporting and a stress testing programme.
Trading book VaR (1-day 99%) is compared daily against both
hypothetical and actual profit and loss. The 1-day 99% VaR chart
can be found in the Group’s Pillar 3 disclosures .
Management and mitigation
The level of exposure is controlled by establishing and
communicating the approved risk limits and controls through
policies and procedures that define the responsibility and authority
for risk taking. Market risk limits are clearly and consistently
communicated to the business. Any new or emerging risks are
brought within risk reporting and defined limits.
Monitoring
Trading risk is monitored daily against 1-day 95% VaR and stress
testing limits. These limits are complemented with position level
action triggers and profit and loss referrals. Risk and position limits
are set and managed at both desk and overall trading book levels.
They are reviewed at least annually and can be changed as required
within the overall Group risk appetite framework.
Trading portfolios: VaR (1-day 95% confidence level) (audited)
| At 31 December 2025 | At 31 December 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| Close<br><br>£m | Average<br><br>£m | Maximum<br><br>£m | Minimum<br><br>£m | Close<br><br>£m | Average<br><br>£m | Maximum<br><br>£m | Minimum<br><br>£m | |
| Interest rate risk | 1.1 | 2.2 | 4.2 | 0.9 | 4.0 | 2.4 | 5.5 | 1.2 |
| Foreign exchange risk | 0.1 | 0.2 | 0.7 | 0.1 | 0.1 | 0.2 | 0.7 | 0.1 |
| Equity risk | – | – | – | – | – | – | – | – |
| Credit spread risk | 0.2 | 0.3 | 0.5 | 0.1 | 0.2 | 0.3 | 0.4 | 0.2 |
| Inflation risk | 0.1 | 0.2 | 1.7 | 0.1 | 0.1 | 0.3 | 0.7 | 0.1 |
| All risk factors before diversification | 1.5 | 2.9 | 4.8 | 1.5 | 4.4 | 3.2 | 6.2 | 2.0 |
| Portfolio diversification | (0.4) | (0.7) | – | – | (0.6) | (0.8) | – | – |
| Total VaR | 1.1 | 2.2 | 4.3 | 1.0 | 3.8 | 2.4 | 5.1 | 1.3 |
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194
Risk management continued
| Model risk |
|---|
| Definition<br><br>Model Risk is defined as the potential for adverse<br><br>consequences from model errors or the<br><br>inappropriate use of modelled outputs to inform<br><br>business decisions. Adverse consequences could lead<br><br>to a deterioration in the prudential position, non-<br><br>compliance with applicable laws and/or regulations,<br><br>or damage to the Group’s reputation. Model risk can<br><br>also lead to financial loss, as well as qualitative<br><br>limitations such as the imposition of restrictions on<br><br>business activities.<br><br>The Risk overview, on page 27, contains a summary of model risk<br><br>performance and key mitigating actions. |
Risk appetite
Models underpin a broad range of activities which are essential in
supporting the Group’s strategy. The Group manages model risk to
prevent potential adverse consequences arising from model errors
or the inappropriate use of modelled outputs to inform business
decisions.
Risk appetite is expressed through tolerances measuring the
effectiveness of the model risk control framework and model use.
Identification and assessment
The Group uses models to support a broad range of activity,
including:
•Capital adequacy calculation
•Formulating business strategies
•Informing business decisions
•Identifying and measuring risks
•Credit decisioning
•Fraud and economic crime
•Pricing models
•Impairment calculation
•Stress testing and forecasting
•Market risk measurement
These models use quantitative methods to process input data into
quantitative or qualitative outputs which have a quantitative
measure associated with them. They use simplifications of complex
real-world systems and processes, therefore the use of models
creates model risk.
The wide scope and breadth of coverage leads to model risk
exposure across a number of the Group’s principal activities.
A comprehensive discovery exercise has been undertaken across the
Group to identify all models (and in-scope deterministic
quantitative methods), complimented with model risk training to
help colleagues with continued identification.
All models which are under development, implemented for use, or
decommissioned are recorded in the model inventory. The inventory
contains a record of all direct and indirect model interdependencies
to obtain a better understanding of aggregate model risk.
A risk-based model tiering approach is used to prioritise validation
activities and to identify and classify those models that pose the
most risk to the Group. All models are assigned a model tier by the
model owner, based on model materiality and complexity.
Challenge by independent validation teams is provided where
appropriate.
Management and mitigation
The Group manages model risk to prevent potential adverse
consequences arising from model errors or the inappropriate use of
modelled outputs to inform business decisions. Adverse
consequences could lead to deterioration in the prudential position,
non-compliance with applicable laws and/or regulations, or damage
to the Group’s reputation.
Model risk can also lead to financial loss, as well as qualitative
limitations such as the imposition of restrictions on business
activities.
Material models are independently validated to ensure model risks
are appropriately identified, assessed and mitigated. The model
validation process provides ongoing, independent and effective
challenge to model performance and use. The outputs of the
validation are documented in a model validation report, which
outlines findings and assigns an independent risk rating.
New model developments, material changes to existing models
or new model uses all require pre-approval before implementation
and use.
Model issues and limitations are identified throughout the model
lifecycle. Detailed action plans are created to remediate model
issues and are captured in the model inventory. Model limitations
are clearly outlined within model development documentation.
Post model adjustments can be used after model approval to
mitigate model weaknesses where unforeseen risks and
uncertainties are not adequately reflected in models. There must be
a clear rationale for use.
The evolution of AI systems will support the Group in increasing
productivity and reimagining the customer experience through
innovative solutions. However, these advancements introduce
unique model risks. To address these risks, additional controls are
being developed to support the safe and controlled use of the
Group’s AI aspirations.
Monitoring
Ongoing performance monitoring is undertaken to assess model
performance against established tolerances.
Periodic validations performed by both the model owner and
independent validation teams provide an in-depth assessment of
fitness for purpose, at a frequency and depth determined by the
model’s risk tier.
Reporting
Board model risk appetite metrics and management measures are
reported to the Board and Group Model Governance Committee as
required. This provides senior management with visibility of the
Group’s model risk exposure.
Regulatory reports required by the PRA are submitted within
mandated timelines. Processes are in place to demonstrate,
evidence and attest to regulatory compliance.
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195
| Operational risk |
|---|
| Definition<br><br>Operational risk is defined as the risk of actual or<br><br>potential impact to the Group (financial and/or non-<br><br>financial) resulting from inadequate or failed internal<br><br>processes, people and systems or from external events.<br><br>Resilience is core to the management of operational<br><br>risk within Lloyds Banking Group to ensure that<br><br>business processes (including those that are<br><br>outsourced) can withstand operational risks and can<br><br>respond to and meet customer and stakeholder needs<br><br>when continuity of operations is compromised.<br><br>Level two risks<br><br>Business continuity; Change execution; Data and privacy; Financial<br><br>reporting and tax; Health, safety and premises; Information, cyber and<br><br>physical security; Internal and external supplier; IT systems; Payments<br><br>and transaction execution; People<br><br>The Risk overview, on page 27, contains a summary of operational risk<br><br>performance and key mitigating actions. |
Risk appetite
The Group manages and mitigates inherent operational risk to serve
our customers and meet our strategic objectives, however accepts
that it is not practical or economic to avoid all operational risks.
The Group accepts that operational disruption and material
operational risk events may occur. When they do, it responds
quickly, seeking to protect customers, the Group, and the wider
market from non-financial impacts and prevent reoccurrence.
Risk appetite is expressed through individual tolerances for each of
the Group’s operational risks, allowing risk decisions to be taken
within clear boundaries.
Identification and assessment
The principal operational risk to the Group covers a number of level
two operational risks, which could result in customer harm, unfair
outcomes, colleague detriment, financial loss, regulatory censure
and/or reputational damage. A number of these risks could increase
where there is a reliance on third-party suppliers to provide services
to the Group or its customers.
Horizon scanning is used to identify both medium- and long-term
operational risks that could affect the ability to achieve strategic
objectives. Similarly, the emerging and topical risks provide a
forward-looking view of themes with the potential to alter
execution of strategy or operations in the medium to long term.
Scenario analysis and loss forecasting form an integral part of
identifying operational risk, focusing on severe but plausible events
that have an impact on customers, colleagues, reputation, or
finances. Scenario analysis findings are used to inform risk
management activity, such as identifying control improvements or
risk exposures that are not fully understood. New scenarios or
enhancements to existing scenarios are identified by considering
emerging risks, threats, or changes to the risk profile. Loss
forecasting feeds directly into capital planning.
Management and mitigation
Controls are activities performed to reduce the likelihood of a risk
occurring or the impact of a risk should it occur. Controls are
established across the business and can be preventative, detective,
or relate to recovery. Controls can also be manual, semi or fully
automated, and their performance is monitored. All types of
controls come together to form a robust control environment.
Key controls, defined as those providing the greatest defence
against risks materialising, are identified and assessed as part of the
Group’s Risk and Control Self Assessment (RCSA) process to ensure
they are adequately designed and operating effectively.
Issues and actions are used to address identified risk exposure or
weaknesses in the control environment in a consistent manner.
The operational risk events by risk category table below shows high
level loss and event trends for the Group using Basel II categories.
Based on data captured on the Group’s RCSA, in 2025 the highest
frequency of events occurred in external fraud with 91% of the total
volume. Clients, products and business practices accounted for the
highest losses by value at 81%. Conduct risks are explained in further
detail on page 153. Operational risk losses and scenario analysis is
used to inform the Internal Capital Adequacy Assessment Process
(ICAAP). The Group calculates its minimum (Pillar I) operational risk
capital requirements using The Standardised Approach (TSA). Pillar
II is calculated using internal and external loss data and severe but
plausible scenarios that may occur in the next 12 months.
Operational risk events by risk category (losses greater than or equal to £10,000)1
| % of total volume | % of total losses | |||
|---|---|---|---|---|
| 2025 | 20242 | 2025 | 20242 | |
| Business disruption and system failures | 0.54 | 1.24 | 0.09 | 0.92 |
| Clients, products and business practices3 | 2.00 | 1.87 | 81.10 | 83.50 |
| Damage to physical assets | 0.03 | 0.16 | – | 0.02 |
| Employee practices and workplace safety | 0.28 | 0.59 | 0.04 | 0.24 |
| Execution, delivery and process management | 5.94 | 12.51 | 9.72 | 6.30 |
| External fraud4 | 91.08 | 83.37 | 9.05 | 9.01 |
| Internal fraud4 | 0.13 | 0.26 | – | 0.01 |
| Total | 100.00 | 100.00 | 100.00 | 100.00 |
1Excludes losses related to Insurance; only losses from investment firm entities within the Scottish Widows Group Limited are included.
22024 figures have been restated to reflect any losses that occurred during the year and were captured after the 2024 financial year-end.
3The risk management of clients, products and business practices is outlined within conduct risk, on page 153.
4Fraud level two risk is explained in further detail under economic crime risk on page 179.
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196
Risk management continued
Specific mitigating actions for level two operational level risks are:
Business continuity
The Group remains committed to managing operational resilience
risks and ensuring lessons are learned from internal and external
events of disruption, which may have an impact on the Group’s
ability to continue operations. The Group’s priority is centred on
minimising any potential impacts to the Group and its customers, as
well as the wider financial sector and UK economy, such as through
scenario analysis and testing, business continuity, supplier exit
planning and implementation of ‘resilience by design’.
Change execution
The Group takes a range of mitigating actions with respect to
change execution risk.
These include the following:
•Ensuring there are sufficient, appropriately skilled colleagues to
support the safe delivery of the Group’s current and future
change portfolio
•Businesses assess the potential impacts of undertaking any
change activity on their ability to execute effectively, on
customers and colleagues and on the potential consequences for
existing business risk profiles
•Ensuring compliance with the change policy and associated
policies and procedures, which set out the principles and key
controls that apply across the business and are aligned to the
Group’s risk appetite
•The implementation of effective governance and control
frameworks to ensure adequate controls are in place to manage
change activity and act to mitigate the change execution risks
identified. These controls, such as testing, are monitored in line
with the change policy and RMF
•Events and incidents related to change activities are escalated
and managed appropriately in line with risk framework guidance
Data and privacy
The Group continues to invest to reduce data risk exposure, by:
•Delivering a strategy focused on data management and culture,
data-driven insights, platforms, tooling and AI-enablement
•Enhancing data quality and capability, such as standardised
controls implemented across critical data elements
•Embedding data privacy impact assessments in the processing of
high-risk data
Financial reporting and tax
The Group maintains risk management systems and internal
controls relating to the financial reporting and tax processes
ensuring:
•The consistent and appropriate application of accounting
policies, the accurate recording of transactions, which are
undertaken in accordance with delegated authorities, and
safeguarding of assets with liabilities properly stated
•The calculation, preparation and reporting of financial,
regulatory (financial) and tax outcomes in accordance with
applicable International Financial Reporting Standards, statutory
and regulatory requirements, such as the UK Finance Code for
Financial Reporting Disclosure and the US Sarbanes-Oxley Act
•Ongoing monitoring to assess the impact of emerging regulation
and legislation on financial, regulatory (financial) and tax
reporting
•An accurate view of the Group’s performance to allow the Board
and senior management to appropriately manage the affairs and
strategy of the business and each of its entities and sub-groups
Health and safety and premises
The Group strives to ensure compliance with legal and regulatory
requirements, embedding compliant and appropriate colleague
behaviours in line with its policies, values and people risk priorities.
The Group continues to monitor horizon scanning, risk assessments
and any incident information to continually improve its health,
safety and premises risk management. Colleagues also regularly
complete health and safety training to ensure that policies,
standards, procedures, processes and practices are understood and
implemented effectively.
Information, cyber and physical security
The Group adopts a risk-based approach to mitigate cyber threats it
faces. Specifically, the Group continues to enhance access controls
across certain business applications and associated IT infrastructure.
The effective operation of the Group’s estate is supported by an IT
and Cyber Security Governance framework, guided by a threat-
based strategy which underpins investment decisions. The ongoing
protection of the estate and confidentiality of material information
is ensured through adherence to the Group Security Policy which
has been aligned to industry good practice including the NIST Cyber
Security Framework; and material laws and regulations. The Group
engages a specialist third-party consultancy on a periodic basis, to
assess the maturity of its cyber security programme, in assessing,
identifying and managing material risks from cyber security threats.
Group Risk Committee is responsible for ensuring that management
has processes in place designed to identify and evaluate
information, cyber and security risks that the Group is exposed to,
implementing processes and programmes to manage these risks and
mitigate related incidents within appetite. The Board Risk
Committee (BRC) continues to be supported by the IT and Cyber
Advisory Forum (ITCAF), which is attended by the BRC chair and
other Board members. ITCAF dedicates time and attention to
reviewing and challenging risks associated with IT infrastructure, IT
strategy, IT resilience and cyber risks. Senior management is
responsible for identifying, considering and assessing material IT
systems and security risks on an ongoing basis, establishing
processes to ensure that such potential risk exposures are
monitored, putting in place appropriate mitigation measures and
maintaining control improvement programmes.
Internal and external supplier
The threat landscape associated with third party suppliers and the
critical services they provide continues to receive a significant
amount of attention. The Group acknowledges the importance of
control and responsibility for critical business services and processes,
which could cause significant harm to the Group’s customers
The Group segments its suppliers by criticality and has processes in
place to support ongoing supplier management, including:
•Policy expectations are underpinned by standards, notably the
sourcing and supply chain management framework
•All material arrangements are set out in written agreements and
based on Group standard terms, which comply with regulations,
including the expectation that all sub-outsourcing is managed in
line with the supplier’s contractual obligations to the Group
•A risk-proportionate process exists for onboarding and managing
third-party arrangements through the life cycle
•Pre-outsourcing and ongoing risk assessments to identify key
operational and financial risks, including on-site or virtual
assurance for suppliers with a higher criticality assessment
•Assessments drive the level of ongoing supplier governance,
assurance and monitoring. For example, the Group provides
training and other resources to its suppliers to support IT systems
and information security resilience in its supply chain
IT systems
The Group continues its journey to simplify its technology estate, in
line with its strategy, through the targeted simplification of legacy
applications, infrastructure platforms and on-premise data centres.
The Group has controls in place to manage legacy technology, IT
change and monitoring, incident management and recovery. IT
disaster recovery is a key capability to recover from multiple
scenarios, ranging from likely and medium impact (such as
infrastructure failure for a single application), to low likelihood with
severe or material impact scenarios, such as the loss of a data centre
or cloud region.
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People
The Group takes many mitigating actions with respect to people
risk. Key areas of focus include:
•Focusing on leadership and colleague engagement, through
delivery of strategies to attract, retain and develop high calibre
people together with a focus on creating a strong and resilient
talent pipeline
•Continued focus on the Group’s culture and inclusivity strategy
by developing and delivering initiatives that reinforce the
appropriate behaviours which generate the best possible long-
term outcomes for customers and colleagues
•Managing organisational capability and capacity through
divisional people strategies to ensure there are the right skills and
resources to meet customers’ needs and deliver the Group’s
strategic plan
•Ensuring colleague wellbeing strategies and support are in place
to meet colleague needs, alongside skills and capability growth
required to maximise the potential of our people
•Ensuring compliance with legal and regulatory requirements,
embedding compliant and appropriate colleague behaviours in
line with Group policies, values and its people risk priorities
•Reviewing and enhancing people processes to ensure they are fit
for purpose and operationally resilient
Payments and transaction execution
The Group adopts a robust approach to minimising risks associated
with payments or transaction execution, which may have an impact
on customers, clients, or internal operations. This includes
processing and execution failures relating to clients and products,
such as errors in payment processing or management of payments
and claims, including those where a third party is operating on the
Group’s behalf.
Monitoring
Events and their associated impacts are identified, escalated and
recorded to ensure that losses are managed in line with risk
appetite, with some events requiring immediate notification to the
regulator. Effective root cause analysis is undertaken to identify
issues that need to be resolved and where action is necessary to
strengthen the control environment, including resilience. Events
data is also used to inform the amount of capital required to cover
unexpected severe operational risk losses.
Changes to the internal and external environment are regularly
monitored to ensure there is an accurate and up-to-date view of
the operational risk profile. This includes but is not limited to:
•Utilising outputs from horizon scanning to determine changes in
regulatory obligations or the external environment
•Using key risk, control and performance indicators (as relevant)
to monitor the risk profile
•Monitoring risk appetite metrics and management measures
against agreed thresholds, including the escalation of breaches
•Understanding the impact of change and/or transformation
activity on the risk and control environment
•Ensuring strategic changes or new product offerings are
monitored and impacts understood
Reporting
Operational risk reporting ensures senior management has full
visibility of the Group’s operational risk exposure to enable
informed decision making.
Sub-group, legal entity, business unit and Group function
operational risk profile, event, and issue data is reported to the
relevant risk committee(s).
Lloyds Banking Group plc Annual Report and Accounts 2025
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Financial
statements
| Independent auditors’ report | 199 | |||||
|---|---|---|---|---|---|---|
| Consolidated financial statements | ||||||
| Consolidated income statement | 211 | |||||
| Consolidated statement of comprehensive income | 212 | |||||
| Consolidated balance sheet | 213 | |||||
| Consolidated statement of changes in equity | 214 | |||||
| Consolidated cash flow statement | 217 | |||||
| Notes to the consolidated financial statements | ||||||
| 1. | Basis of preparation | 218 | ||||
| 2. | Accounting policies | 218 | ||||
| 3. | Critical accounting judgements and key sources of estimation<br><br>uncertainty | 228 | ||||
| 4. | Segmental analysis | 228 | ||||
| 5. | Net interest income | 233 | ||||
| 6. | Net fee and commission income | 233 | ||||
| 7. | Net trading income | 234 | ||||
| 8. | Insurance business | 235 | ||||
| 9. | Other operating income | 242 | ||||
| 10. | Operating expenses | 242 | ||||
| 11. | Share-based payments | 243 | ||||
| 12. | Retirement benefit obligations | 245 | ||||
| 13. | Auditors’ remuneration | 251 | ||||
| 14. | Impairment | 251 | ||||
| 15. | Tax | 252 | ||||
| 16. | Measurement basis of financial assets and liabilities | 255 | ||||
| 17. | Fair values of financial assets and liabilities | 257 | ||||
| 18. | Maturities of assets and liabilities | 267 | ||||
| 19. | Derivative financial instruments | 269 | ||||
| 20. | Loans and advances to customers | 272 | ||||
| 21. | Allowance for expected credit losses | 272 | ||||
| 22. | Finance lease receivables | 280 | ||||
| 23. | Goodwill and other intangible assets | 280 | ||||
| 24. | Other assets | 281 | ||||
| 25. | Lessee disclosures | 282 | ||||
| 26. | Debt securities in issue | 283 | ||||
| 27. | Other liabilities | 283 | ||||
| 28. | Provisions | 283 | ||||
| 29. | Subordinated liabilities | 285 | ||||
| 30. | Share capital | 287 | ||||
| 31. | Earnings per share | 287 | ||||
| 32. | Other reserves | 288 | ||||
| 33. | Other equity instruments | 289 | ||||
| 34. | Dividends on ordinary shares | 289 | ||||
| 35. | Related party transactions | 290 | ||||
| 36. | Contingent liabilities, commitments and financial guarantees | 291 | ||||
| 37. | Structured entities | 292 | ||||
| 38. | Transfers of financial assets | 293 | ||||
| 39. | Financial risk management | 294 | ||||
| 40. | Cash flow statement | 295 | ||||
| 41. | Events since the balance sheet date | 296 | Parent company financial statements | |||
| --- | --- | --- | ||||
| Parent company income statement | 297 | |||||
| Parent company balance sheet | 298 | |||||
| Parent company statement of changes in equity | 299 | |||||
| Parent company cash flow statement | 300 | |||||
| Notes to the parent company financial statements | ||||||
| 1. | Basis of preparation and accounting policies | 301 | ||||
| 2. | Measurement basis of financial assets and liabilities | 301 | ||||
| 3. | Fair values of financial assets and liabilities | 302 | ||||
| 4. | Derivative financial instruments | 302 | ||||
| 5. | Deferred tax | 302 | ||||
| 6. | Debt securities in issue at amortised cost | 302 | ||||
| 7. | Subordinated liabilities | 303 | ||||
| 8. | Share capital and other equity instruments | 303 | ||||
| 9. | Related party transactions | 303 | ||||
| 10. | Financial risk management | 304 | ||||
| The Group has adopted the UK Finance Code for Financial Reporting<br><br>Disclosure and these 2025 financial statements have been prepared in<br><br>compliance with its principles. |
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Consolidated income statement
for the year ended 31 December
| Note | 2025<br><br>£m | 20241<br><br>£m | 20231<br><br>£m | |
|---|---|---|---|---|
| Interest income | 30,749 | 31,288 | 28,051 | |
| Interest expense | (17,519) | (19,011) | (14,753) | |
| Net interest income | 5 | 13,230 | 12,277 | 13,298 |
| Fee and commission income | 3,118 | 2,943 | 2,926 | |
| Fee and commission expense | (1,334) | (1,184) | (1,095) | |
| Net fee and commission income | 6 | 1,784 | 1,759 | 1,831 |
| Net trading income | 7 | 1,485 | 1,812 | 1,307 |
| Insurance revenue | 3,438 | 3,291 | 3,008 | |
| Insurance service expense | (2,543) | (2,733) | (2,414) | |
| Net expense from reinsurance contracts held | (139) | (72) | 2 | |
| Insurance service result | 8 | 756 | 486 | 596 |
| Net investment return on assets held to back insurance and investment contracts | 23,844 | 16,013 | 16,742 | |
| Net finance expense in respect of insurance and investment contracts | (24,044) | (16,278) | (16,776) | |
| Net investment return and finance result in respect of insurance and investment contracts | (200) | (265) | (34) | |
| Other operating income | 9 | 2,367 | 1,934 | 1,631 |
| Other income | 6,192 | 5,726 | 5,331 | |
| Total income | 19,422 | 18,003 | 18,629 | |
| Operating expenses | 10 | (11,966) | (11,601) | (10,823) |
| Impairment | 14 | (795) | (431) | (303) |
| Profit before tax | 6,661 | 5,971 | 7,503 | |
| Tax expense | 15 | (1,904) | (1,494) | (1,985) |
| Profit for the year | 4,757 | 4,477 | 5,518 | |
| Profit attributable to ordinary shareholders | 4,196 | 3,923 | 4,933 | |
| Profit attributable to other equity holders | 463 | 498 | 527 | |
| Profit attributable to equity holders | 4,659 | 4,421 | 5,460 | |
| Profit attributable to non-controlling interests | 98 | 56 | 58 | |
| Profit for the year | 4,757 | 4,477 | 5,518 | |
| Basic earnings per share | 31 | 7.0p | 6.3p | 7.6p |
| Diluted earnings per share | 31 | 6.9p | 6.2p | 7.5p |
1Comparative periods have been represented for presentational changes. See note 1.
The accompanying notes are an integral part of the consolidated financial statements.
Lloyds Banking Group plc Annual Report and Accounts 2025
212
Consolidated statement of comprehensive income
for the year ended 31 December
| 2025<br><br>£m | 20241<br><br>£m | 20231<br><br>£m | |
|---|---|---|---|
| Profit for the year | 4,757 | 4,477 | 5,518 |
| Other comprehensive income | |||
| Items that will not subsequently be reclassified to profit or loss: | |||
| Post-retirement defined benefit scheme remeasurements: | |||
| Remeasurements before tax | (520) | (768) | (1,633) |
| Current tax | 50 | 50 | 376 |
| Deferred tax | 85 | 154 | 52 |
| (385) | (564) | (1,205) | |
| Movements in revaluation reserve in respect of equity shares held at FVOCI: | |||
| Change in fair value | 34 | 93 | (54) |
| Deferred tax | – | – | (3) |
| 34 | 93 | (57) | |
| Gains and losses attributable to own credit risk: | |||
| Losses before tax | (126) | (78) | (234) |
| Deferred tax | 35 | 22 | 66 |
| (91) | (56) | (168) | |
| (442) | (527) | (1,430) | |
| 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) | (40) |
| Current tax | 1 | 1 | 1 |
| Deferred tax | (8) | 14 | 11 |
| 27 | (38) | (28) | |
| Income statement transfers in respect of disposals | (3) | (7) | (122) |
| Deferred tax | 1 | 2 | 35 |
| (2) | (5) | (87) | |
| Income statement transfers in respect of impairment | (1) | (3) | (2) |
| 24 | (46) | (117) | |
| Movements in cash flow hedge reserve: | |||
| Effective portion of changes in fair value taken to other comprehensive income | 482 | (2,577) | 545 |
| Deferred tax | (136) | 719 | (160) |
| 346 | (1,858) | 385 | |
| Net income statement transfers | 1,869 | 2,597 | 1,838 |
| Deferred tax | (523) | (728) | (513) |
| 1,346 | 1,869 | 1,325 | |
| 1,692 | 11 | 1,710 | |
| Movements in foreign currency translation reserve: Currency translation differences (tax: £nil) | 54 | (73) | (53) |
| 1,770 | (108) | 1,540 | |
| Total other comprehensive income (loss) for the year, net of tax | 1,328 | (635) | 110 |
| Total comprehensive income for the year | 6,085 | 3,842 | 5,628 |
| Total comprehensive income attributable to ordinary shareholders | 5,524 | 3,288 | 5,043 |
| Total comprehensive income attributable to other equity holders | 463 | 498 | 527 |
| Total comprehensive income attributable to equity holders | 5,987 | 3,786 | 5,570 |
| Total comprehensive income attributable to non-controlling interests | 98 | 56 | 58 |
| Total comprehensive income for the year | 6,085 | 3,842 | 5,628 |
1Current 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.
The accompanying notes are an integral part of the consolidated financial statements.
Lloyds Banking Group plc Annual Report and Accounts 2025
213
Consolidated balance sheet
at 31 December
| Note | 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|---|
| Assets | |||
| Cash and balances at central banks | 56,661 | 62,705 | |
| Financial assets at fair value through profit or loss | 17 | 240,413 | 215,925 |
| Derivative financial instruments | 19 | 19,727 | 24,065 |
| Loans and advances to banks | 7,236 | 7,900 | |
| Loans and advances to customers | 20 | 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 | 17 | 36,320 | 30,690 |
| Goodwill and other intangible assets | 23 | 8,593 | 8,188 |
| Current tax recoverable | 1,346 | 526 | |
| Deferred tax assets | 15 | 3,990 | 5,005 |
| Retirement benefit assets | 12 | 2,695 | 3,028 |
| Other assets | 24 | 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 | 17 | 27,909 | 27,611 |
| Derivative financial instruments | 19 | 16,132 | 21,676 |
| Notes in circulation | 2,118 | 2,121 | |
| Debt securities in issue at amortised cost | 26 | 78,271 | 70,834 |
| Liabilities arising from insurance and participating investment contracts | 8 | 135,284 | 122,064 |
| Liabilities arising from non-participating investment contracts | 61,640 | 51,228 | |
| Other liabilities | 27 | 20,945 | 25,918 |
| Retirement benefit obligations | 12 | 120 | 122 |
| Current tax liabilities | 52 | 45 | |
| Deferred tax liabilities | 15 | 146 | 125 |
| Provisions | 28 | 2,888 | 2,313 |
| Subordinated liabilities | 29 | 9,894 | 10,089 |
| Total liabilities | 896,205 | 860,809 | |
| Equity | |||
| Share capital | 30 | 5,889 | 6,062 |
| Share premium account | 18,797 | 18,720 | |
| Other reserves | 32 | 10,744 | 8,827 |
| Retained profits | 6,291 | 5,912 | |
| Ordinary shareholders’ equity | 41,721 | 39,521 | |
| Other equity instruments | 33 | 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 |
The accompanying notes are an integral part of the consolidated financial statements.
The directors approved the consolidated financial statements on 13 February 2026.
| Sir Robin Budenberg<br><br>Chair | Charlie Nunn<br><br>Group Chief Executive | William Chalmers<br><br>Chief Financial Officer |
|---|
Lloyds Banking Group plc Annual Report and Accounts 2025
214
Consolidated statement of changes in equity
for the year ended 31 December
| Attributable to ordinary shareholders | Non-<br><br>controlling<br><br>interests<br><br>£m | Total<br><br>£m | |||||
|---|---|---|---|---|---|---|---|
| Share<br><br>capital3<br><br>£m | Share<br><br>premium3<br><br>£m | Other<br><br>reserves<br><br>£m | Retained<br><br>profits4<br><br>£m | Totalm | |||
| At 1 January 2025 | 6,062 | 18,720 | 8,827 | 5,912 | 39,521 | 172 | 45,888 |
| Comprehensive income | |||||||
| Profit for the year | – | – | – | 4,196 | 4,196 | 98 | 4,757 |
| Other comprehensive income | |||||||
| Post-retirement defined benefit<br><br>scheme remeasurements, net of<br><br>tax | – | – | – | (385) | (385) | – | (385) |
| Movements in revaluation<br><br>reserve in respect of FVOCI<br><br>assets, net of tax: | |||||||
| Debt securities | – | – | 24 | – | 24 | – | 24 |
| Equity shares | – | – | 34 | – | 34 | – | 34 |
| Gains and losses attributable to<br><br>own credit risk, net of tax | – | – | – | (91) | (91) | – | (91) |
| Movements in cash flow hedge<br><br>reserve, net of tax | – | – | 1,692 | – | 1,692 | – | 1,692 |
| Movements in foreign currency<br><br>translation reserve, net of tax | – | – | 54 | – | 54 | – | 54 |
| Total other comprehensive<br><br>income (loss) | – | – | 1,804 | (476) | 1,328 | – | 1,328 |
| Total comprehensive income1 | – | – | 1,804 | 3,720 | 5,524 | 98 | 6,085 |
| Transactions with owners | |||||||
| Dividends (note 34) | – | – | – | (2,000) | (2,000) | (51) | (2,051) |
| Distributions on other equity<br><br>instruments | – | – | – | – | – | – | (463) |
| Issue of ordinary shares | 47 | 77 | – | – | 124 | – | 124 |
| Share buyback (note 32) | (220) | – | 220 | (1,710) | (1,710) | – | (1,710) |
| Issue of other equity<br><br>instruments (note 33) | – | – | – | (7) | (7) | – | 1,504 |
| Repurchases and redemptions<br><br>of other equity instruments<br><br>(note 33) | – | – | – | – | – | – | (1,759) |
| Movement in treasury shares | – | – | – | 38 | 38 | – | 38 |
| Value of employee services | – | – | 211 | 211 | – | 211 | |
| Changes in non-controlling<br><br>interests | – | – | – | 20 | 20 | (20) | – |
| Total transactions with owners | (173) | 77 | 220 | (3,448) | (3,324) | (71) | (4,106) |
| Realised gains and losses on<br><br>FVOCI equity shares | – | – | (107) | 107 | – | – | – |
| At 31 December 20252 | 5,889 | 18,797 | 10,744 | 6,291 | 41,721 | 199 | 47,867 |
All values are in British Pounds.
1Total comprehensive income attributable to owners of the parent was a surplus of £5,987 million (2024: surplus of £3,786 million; 2023: surplus of £5,570 million).
2Total equity attributable to owners of the parent was £47,668 million (2024: £45,716 million; 2023: £47,164 million).
3Share capital and share premium, previously presented in aggregate, are shown separately. Comparatives have been represented on a consistent basis.
4Retained profits are stated after deducting £17 million representing 87 million treasury shares held.
Further details of movements in the Group’s share capital, reserves and other equity instruments are provided in notes 30 and 32 to 33.
The accompanying notes are an integral part of the consolidated financial statements.
Lloyds Banking Group plc Annual Report and Accounts 2025
215
| Attributable to ordinary shareholders | Non-<br><br>controlling<br><br>interests<br><br>£m | Total<br><br>£m | |||||
|---|---|---|---|---|---|---|---|
| Share<br><br>capital1<br><br>£m | Share<br><br>premium1<br><br>£m | Other<br><br>reserves<br><br>£m | Retained<br><br>profits2<br><br>£m | Totalm | |||
| At 1 January 2024 | 6,358 | 18,568 | 8,508 | 6,790 | 40,224 | 201 | 47,365 |
| Comprehensive income | |||||||
| Profit for the year | – | – | – | 3,923 | 3,923 | 56 | 4,477 |
| Other comprehensive income | |||||||
| Post-retirement defined benefit<br><br>scheme remeasurements, net of<br><br>tax | – | – | – | (564) | (564) | – | (564) |
| Movements in revaluation reserve<br><br>in respect of FVOCI assets, net of<br><br>tax: | |||||||
| Debt securities | – | – | (46) | – | (46) | – | (46) |
| Equity shares | – | – | 93 | – | 93 | – | 93 |
| Gains and losses attributable to<br><br>own credit risk, net of tax | – | – | – | (56) | (56) | – | (56) |
| Movements in cash flow hedge<br><br>reserve, net of tax | – | – | 11 | – | 11 | – | 11 |
| Movements in foreign currency<br><br>translation reserve, net of tax | – | – | (73) | – | (73) | – | (73) |
| Total other comprehensive loss | – | – | (15) | (620) | (635) | – | (635) |
| Total comprehensive (loss)<br><br>income | – | – | (15) | 3,303 | 3,288 | 56 | 3,842 |
| Transactions with owners | |||||||
| Dividends (note 34) | – | – | – | (1,828) | (1,828) | (83) | (1,911) |
| Distributions on other equity<br><br>instruments | – | – | – | – | – | – | (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<br><br>(note 33) | – | – | – | (6) | (6) | – | 757 |
| Repurchases and redemptions of<br><br>other equity instruments (note 33) | – | – | – | (316) | (316) | – | (1,824) |
| Movement in treasury shares | – | – | – | (173) | (173) | – | (173) |
| Value of employee services | – | – | – | 153 | 153 | – | 153 |
| Changes in non-controlling<br><br>interests | – | – | – | – | – | (2) | (2) |
| Total transactions with owners | (296) | 152 | 334 | (4,181) | (3,991) | (85) | (5,319) |
| Realised gains and losses on equity<br><br>shares held at FVOCI | – | – | – | – | – | – | – |
| At 31 December 2024 | 6,062 | 18,720 | 8,827 | 5,912 | 39,521 | 172 | 45,888 |
All values are in British Pounds.
1Share capital and share premium, previously presented in aggregate, are shown separately. Comparatives have been represented on a consistent basis.
2Retained profits are stated after deducting £47 million representing 126 million treasury shares held.
The accompanying notes are an integral part of the consolidated financial statements.
Lloyds Banking Group plc Annual Report and Accounts 2025
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Consolidated statement of changes in equity continued
for the year ended 31 December
| Attributable to ordinary shareholders | Non-<br><br>controlling<br><br>interests<br><br>£m | Total<br><br>£m | |||||
|---|---|---|---|---|---|---|---|
| Share<br><br>capital1<br><br>£m | Share<br><br>premium1<br><br>£m | Other<br><br>reserves<br><br>£m | Retained<br><br>profits2<br><br>£m | Totalm | |||
| At 1 January 2023 | 6,729 | 18,504 | 6,587 | 6,550 | 38,370 | 244 | 43,911 |
| Comprehensive income | |||||||
| Profit for the year | – | – | – | 4,933 | 4,933 | 58 | 5,518 |
| Other comprehensive income | |||||||
| Post-retirement defined benefit<br><br>scheme remeasurements, net of<br><br>tax | – | – | – | (1,205) | (1,205) | – | (1,205) |
| Movements in revaluation reserve<br><br>in respect of FVOCI assets, net of<br><br>tax: | |||||||
| Debt securities | – | – | (117) | – | (117) | – | (117) |
| Equity shares | – | – | (57) | – | (57) | – | (57) |
| Gains and losses attributable to<br><br>own credit risk, net of tax | – | – | – | (168) | (168) | – | (168) |
| Movements in cash flow hedge<br><br>reserve, net of tax | – | – | 1,710 | – | 1,710 | – | 1,710 |
| Movements in foreign currency<br><br>translation reserve, net of tax | – | – | (53) | – | (53) | – | (53) |
| Total other comprehensive income<br><br>(loss) | – | – | 1,483 | (1,373) | 110 | – | 110 |
| Total comprehensive income | – | – | 1,483 | 3,560 | 5,043 | 58 | 5,628 |
| Transactions with owners | |||||||
| Dividends (note 34) | – | – | – | (1,651) | (1,651) | (101) | (1,752) |
| Distributions on other equity<br><br>instruments | – | – | – | – | – | – | (527) |
| Issue of ordinary shares | 67 | 64 | – | – | 131 | – | 131 |
| Share buyback | (438) | – | 438 | (1,993) | (1,993) | – | (1,993) |
| Issue of other equity instruments<br><br>(note 33) | – | – | – | (6) | (6) | – | 1,772 |
| Repurchases and redemptions of<br><br>other equity instruments (note 33) | – | – | – | – | – | – | (135) |
| Movement in treasury shares | – | – | – | 103 | 103 | – | 103 |
| Value of employee services | – | – | – | 227 | 227 | – | 227 |
| Changes in non-controlling<br><br>interests | – | – | – | – | – | – | – |
| Total transactions with owners | (371) | 64 | 438 | (3,320) | (3,189) | (101) | (2,174) |
| Realised gains and losses on equity<br><br>shares held at FVOCI | – | – | – | – | – | – | – |
| At 31 December 2023 | 6,358 | 18,568 | 8,508 | 6,790 | 40,224 | 201 | 47,365 |
All values are in British Pounds.
1Share capital and share premium, previously presented in aggregate, are shown separately. Comparatives have been represented on a consistent basis.
2Retained profits are stated after deducting £10 million representing 61 million treasury shares held.
The accompanying notes are an integral part of the consolidated financial statements.
Lloyds Banking Group plc Annual Report and Accounts 2025
217
Consolidated cash flow statement
for the year ended 31 December
| Note | 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | |
|---|---|---|---|---|
| Cash flows (used in) provided by operating activities | ||||
| Profit before tax | 6,661 | 5,971 | 7,503 | |
| Adjustments for: | ||||
| Change in operating assets | 40(A) | (40,689) | (39,622) | (9,110) |
| Change in operating liabilities | 40(B) | 35,403 | 23,603 | 4,232 |
| Non-cash and other items | 40(C) | 6,431 | 5,990 | 5,622 |
| Tax paid | 15 | (2,305) | (1,305) | (1,437) |
| Tax refunded | 15 | 200 | 970 | – |
| Net cash provided by (used in) operating activities | 5,701 | (4,393) | 6,810 | |
| Cash flows used in investing activities | ||||
| Purchase of financial assets | (19,762) | (10,518) | (10,311) | |
| Proceeds from sale and maturity of financial assets | 14,309 | 7,062 | 5,298 | |
| Purchase of property, plant and equipment | (5,071) | (4,364) | (3,961) | |
| Purchase of other intangible assets | (1,252) | (1,259) | (1,494) | |
| Proceeds from sale of property, plant and equipment | 1,560 | 1,505 | 1,027 | |
| Proceeds from sale of goodwill and other intangible assets | – | 62 | – | |
| Acquisition of businesses and joint ventures, net of cash acquired | 40(D) | 27 | (179) | (380) |
| Net cash used in investing activities | (10,189) | (7,691) | (9,821) | |
| Cash flows used in financing activities | ||||
| Dividends paid to ordinary shareholders | 34 | (2,000) | (1,828) | (1,651) |
| Distributions in respect of other equity instruments | (463) | (498) | (527) | |
| Distributions in respect of non-controlling interests | (51) | (83) | (101) | |
| Interest paid on subordinated liabilities | (806) | (622) | (623) | |
| Proceeds from issue of subordinated liabilities | 1,757 | 812 | 1,417 | |
| Proceeds from issue of other equity instruments | 1,504 | 757 | 1,772 | |
| Proceeds from issue of ordinary shares | 99 | 187 | 86 | |
| Share buyback | (1,710) | (2,011) | (1,993) | |
| Repayment of subordinated liabilities | (1,928) | (819) | (1,745) | |
| Repurchases and redemptions of other equity instruments | (1,759) | (1,824) | (135) | |
| Change in stake of non-controlling interests | – | (2) | – | |
| Net cash used in financing activities | (5,357) | (5,931) | (3,500) | |
| Effects of exchange rate changes on cash and cash equivalents | (378) | (7) | (480) | |
| Change in cash and cash equivalents | (10,223) | (18,022) | (6,991) | |
| Cash and cash equivalents at beginning of year | 70,816 | 88,838 | 95,829 | |
| Cash and cash equivalents at end of year | 40(E) | 60,593 | 70,816 | 88,838 |
Interest received was £29,843 million (2024: £29,721 million; 2023: £26,461 million) and interest paid was £16,589 million (2024: £17,840 million;
2023: £11,100 million).
The accompanying notes are an integral part of the consolidated financial statements.
Lloyds Banking Group plc Annual Report and Accounts 2025
218
Notes to the consolidated financial statements
for the year ended 31 December
Note 1: Basis of preparation
The consolidated financial statements of Lloyds Banking Group plc and its subsidiary undertakings (the Group) have been prepared in
accordance with United Kingdom adopted international accounting standards and in conformity with the requirements of the Companies
Act 2006. The financial statements have also been prepared in accordance with IFRS® Accounting Standards as issued by the International
Accounting Standards Board (IASB).
The financial information has been prepared under the historical cost convention, as modified by the revaluation of investment properties,
insurance and reinsurance contract assets and liabilities measured at their fulfilment values in accordance with IFRS 17, financial assets
measured at fair value through other comprehensive income, trading securities and certain other financial assets and liabilities at fair value
through profit or loss and all derivative contracts. 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.
Current and deferred tax are presented separately for each movement in the revaluation reserve in respect of debt securities held at fair
value through other comprehensive income and movements in the cash flow hedge reserve within the statement of other comprehensive
income. Previously both current tax and deferred tax were presented in aggregate for each reserve.
The IASB has issued an amendment to IAS 21 The Effects of Changes in Foreign Exchange Rates, effective 1 January 2025. This amendment
has not had a significant impact on the Group.
Future accounting developments
There are a number of new accounting pronouncements issued by the IASB with an effective date of 1 January 2027, including IFRS 18
Presentation and Disclosure in Financial Statements which replaces IAS 1 Presentation of Financial Statements. While many of the existing
requirements of IAS 1 Presentation of Financial Statements are retained, IFRS 18 Presentation and Disclosure in Financial Statements
introduces additional disclosure obligations in relation to the structure of the income statement, management-defined performance
measures, and the aggregation and disaggregation of financial information. IFRS 18 will have no impact on the Group’s net profit as it
impacts neither recognition nor measurement. The new standard will impact the presentation of the Group’s results as it requires that
operating, investing and financing activities are presented separately. There will also be a change in the Group’s cash flow statement as
IFRS 18 requires that the first line of the cash flow statement is operating profit rather than profit before tax.
The IASB has issued its annual improvements and a number of amendments to the IFRS Accounting Standards effective 1 January 2026,
including Amendments to IFRS 9 Financial Instruments and Amendments to IFRS 7 Financial Instruments Disclosures. These improvements
and amendments are not expected to have a significant impact on the Group.
Note 2: Accounting policies
The Group’s accounting policies are set out below. These accounting policies have been applied consistently.
(A)Consolidation
The assets, liabilities and results of Group undertakings (including structured entities) are included in the financial statements on the basis
of accounts made up to the reporting date. Group undertakings include subsidiaries, associates and joint ventures. Details of the Group’s
subsidiaries and related undertakings are given on pages 313 to 323.
Subsidiaries are entities controlled by the Group. The Group controls an entity when it has power over the entity, is exposed to, or has
rights to, variable returns from its involvement with the entity, and has the ability to affect those returns through the exercise of its power.
This generally accompanies a shareholding of more than one half of the voting rights although in certain circumstances a holding of less
than one half of the voting rights may still result in the ability of the Group to exercise control. The existence and effect of potential voting
rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The Group
reassesses whether or not it controls an entity if facts and circumstances indicate that there have been changes to any of the above
elements. Subsidiaries are fully consolidated from the date on which control is transferred to the Group; they are deconsolidated from the
date that control ceases.
The Group consolidates collective investment vehicles if its beneficial ownership interests give it substantive rights to remove the external
fund manager of the investment activities of the fund. Where a subsidiary of the Group is the fund manager of a collective investment
vehicle, the Group considers a number of factors in determining whether it acts as principal, and therefore controls the collective
investment vehicle, including: an assessment of the scope of the Group’s decision-making authority over the investment vehicle; the rights
held by other parties including substantive removal rights without cause over the Group acting as fund manager; the remuneration to
which the Group is entitled in its capacity as decision-maker; and the Group’s exposure to variable returns from the beneficial interest that
it holds in the investment vehicle. Consolidation may be appropriate in circumstances where the Group has less than a majority beneficial
interest. Where a collective investment vehicle is consolidated, the interests of parties other than the Group are reported in other liabilities
and the movement in those interests is reported within net finance expense arising from insurance and investment contracts.
Structured entities are entities that are designed so that their activities are not governed by way of voting rights. In assessing whether the
Group has power over such entities in which it has an interest, the Group considers factors such as the purpose and design of the entity; its
practical ability to direct the relevant activities of the entity; the nature of the relationship with the entity; and the size of its exposure to
the variability of returns of the entity.
The treatment of transactions with non-controlling interests depends on whether, as a result of the transaction, the Group loses control of
the subsidiary. Changes in the parent’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity
transactions; any difference between the amount by which the non-controlling interests are adjusted and the fair value of the
consideration paid or received is recognised directly in equity and attributed to the owners of the parent entity.
Lloyds Banking Group plc Annual Report and Accounts 2025
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Note 2: Accounting policies continued
Where the Group loses control of the subsidiary, at the date when control is lost the amount of any non-controlling interest in that former
subsidiary is derecognised and any investment retained in the former subsidiary is remeasured to its fair value; the gain or loss that is
recognised in profit or loss on the partial disposal of the subsidiary includes the gain or loss on the remeasurement of the retained interest.
Intercompany transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated.
The acquisition method of accounting is used to account for business combinations by the Group. The consideration for the acquisition of a
subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration
includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are
expensed as incurred except those relating to the issuance of debt instruments (see (E)(4) below) or share capital (see (P) below).
Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair value at the
acquisition date.
(B)Goodwill
Goodwill arises on business combinations and represents the excess of the cost of an acquisition over the fair value of the Group’s share of
the identifiable assets, liabilities and contingent liabilities acquired. Where the fair value of the Group’s share of the identifiable assets,
liabilities and contingent liabilities of the acquired entity is greater than the cost of acquisition, the excess is recognised immediately in the
income statement.
Goodwill is recognised as an asset at cost and is tested at least annually for impairment. For impairment testing, goodwill is allocated to the
cash-generating unit (CGU) or groups of CGUs that are expected to benefit from the business combination. The Group’s CGUs are largely
product based for its Retail and Insurance businesses and client based for its Commercial Banking business. An impairment loss is
recognised if the carrying amount of a CGU is determined to be greater than its recoverable amount. The recoverable amount of a CGU is
the higher of its fair value less costs to sell and its value in use. If an impairment loss is identified, the carrying value of the goodwill is written
down immediately through the income statement. This impairment loss cannot be reversed in a subsequent period. At the date of disposal
of a subsidiary, the carrying value of attributable goodwill is included in the calculation of the profit or loss on disposal.
(C)Other intangible assets
Intangible assets which have been determined to have a finite useful life are amortised on a straight-line basis over their estimated useful
life as follows: up to seven years for capitalised software; 10 to 15 years for brands and other intangible assets.
Intangible assets with finite useful lives are reviewed at each reporting date to assess whether there is any indication that they are
impaired. If any such indication exists the recoverable amount of the asset is determined and in the event that the asset’s carrying amount
is greater than its recoverable amount, it is written down immediately. Certain brands have been determined to have an indefinite useful
life and are not amortised. Such intangible assets are assessed annually to determine whether the asset is impaired and to reconfirm that
an indefinite useful life remains appropriate. In the event that an indefinite life is inappropriate, a finite life is determined and a further
impairment review is performed on the asset.
(D)Revenue recognition
(1)Net interest income
Interest income and expense are recognised in the income statement using the effective interest method for all interest-bearing financial
instruments, except for those classified at fair value through profit or loss. The effective interest method is a method of calculating the
amortised cost of a financial asset or liability and of allocating the interest income or interest expense over the expected life of the financial
instrument. The effective interest rate is the rate that exactly discounts the estimated future cash payments or receipts over the expected life
of the financial instrument to the gross carrying amount of the financial asset (before adjusting for expected credit losses) or to the amortised
cost of the financial liability, including early redemption fees, other fees, and premiums and discounts that are an integral part of the overall
return. In the case of financial assets that are purchased or originated credit-impaired, the effective interest rate is the rate that discounts the
estimated future cash flows to the amortised cost of the instrument. Direct incremental transaction costs related to the acquisition, issue or
disposal of a financial instrument are also taken into account. Interest income from non-credit-impaired financial assets is recognised by
applying the effective interest rate to the gross carrying amount of the asset; for credit-impaired financial assets, the effective interest rate is
applied to the net carrying amount after deducting the allowance for expected credit losses. Impairment policies are set out in (H) below.
(2)Fee and commission income and expense
Fees and commissions receivable which are not an integral part of the effective interest rate are recognised as income as the Group fulfils
its performance obligations. The Group’s principal performance obligations arising from contracts with customers are in respect of value
added current accounts, credit cards and debit cards. These fees are received, and the Group provides the service, monthly; the fees are
recognised in income on this basis. The Group also receives certain fees in respect of its asset finance business where the performance
obligations are typically fulfilled towards the end of the customer contract; these fees are recognised in income on this basis. Where it is
unlikely that the loan commitments will be drawn, loan commitment fees are recognised in fee and commission income over the life of the
facility, rather than as an adjustment to the effective interest rate for the lending expected to be drawn. Incremental costs incurred to
generate fee and commission income are charged to fee and commission expense as they are incurred.
(3)Other
Dividend income is recognised when the right to receive payment is established.
Revenue recognition policies specific to trading income are set out in (E)(3) below, those relating to leases are set out in (J)(1) below and
those relating to life insurance and general insurance business are set out in (M) below.
(E)Financial assets and liabilities
On initial recognition, financial assets are classified as measured at amortised cost, fair value through other comprehensive income or fair
value through profit or loss, depending on the Group’s business model for managing those financial assets and whether the resultant cash
flows represent solely payments of principal and interest on principal outstanding. The Group assesses its business models at a portfolio
level based on its objectives for the relevant portfolio, how the performance of the portfolio is managed and reported, and the frequency
of asset sales. Financial assets with embedded derivatives are considered in their entirety when considering their cash flow characteristics.
The Group reclassifies financial assets only when its business model for managing those assets changes. A reclassification will only take
place when the change is significant to the Group’s operations and will occur at a portfolio level and not for individual instruments;
reclassifications are expected to be rare.
Lloyds Banking Group plc Annual Report and Accounts 2025
220
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 2: Accounting policies continued
Equity investments are measured at fair value through profit or loss unless the Group elects at initial recognition to account for the
instruments at fair value through other comprehensive income. For these instruments, principally strategic investments, dividends are
recognised in profit or loss but fair value gains and losses are not subsequently reclassified to profit or loss following derecognition of the
investment.
The Group initially recognises loans and advances, deposits, debt securities in issue and subordinated liabilities when the Group becomes a
party to the contractual provisions of the instrument. Regular way purchases and sales of securities and other financial assets and trading
liabilities are recognised on trade date, being the date that the Group is committed to purchase or sell an asset.
Financial assets are derecognised when the contractual right to receive cash flows from those assets has expired or when the Group has
transferred its contractual right to receive the cash flows from the assets and either: substantially all of the risks and rewards of ownership
have been transferred; or the Group has neither retained nor transferred substantially all of the risks and rewards, but has transferred
control. Financial liabilities are derecognised when the obligation is discharged, cancelled or expires.
(1)Financial instruments measured at amortised cost
Financial assets that are held to collect contractual cash flows where those cash flows represent solely payments of principal and interest
are measured at amortised cost. A basic lending arrangement results in contractual cash flows that are solely payments of principal and
interest on the principal amount outstanding. Where the contractual cash flows introduce exposure to risks or volatility unrelated to a basic
lending arrangement such as changes in equity prices or commodity prices, the payments do not comprise solely principal and interest.
Financial assets measured at amortised cost are predominantly loans and advances to customers and banks, reverse repurchase
agreements and certain debt securities used by the Group to manage its liquidity. Loans and advances and reverse repurchase agreements
are initially recognised when cash is advanced to the borrower at fair value inclusive of transaction costs. Interest income is accounted for
using the effective interest method (see (D) above).
Financial liabilities are measured at amortised cost, except for trading liabilities and other financial liabilities designated at fair value
through profit or loss on initial recognition which are held at fair value.
(2)Financial assets measured at fair value through other comprehensive income
Financial assets that are held to collect contractual cash flows and for subsequent sale where those cash flows represent solely payments of
principal and interest are recognised in the balance sheet at their fair value, inclusive of transaction costs. Interest calculated using the
effective interest method and foreign exchange gains and losses on assets denominated in foreign currencies are recognised in the income
statement. All other gains and losses arising from changes in fair value are recognised directly in other comprehensive income, until the
financial asset is either sold or matures, at which time, other than in respect of equity shares, the cumulative gain or loss previously
recognised in other comprehensive income is recognised in the income statement. The cumulative revaluation amount in respect of equity
shares is transferred directly to retained profits. The Group recognises a charge for expected credit losses in the income statement (see (H)
below). As the asset is measured at fair value, the charge does not adjust the carrying value of the asset, and this is reflected in other
comprehensive income.
(3)Financial instruments measured at fair value through profit or loss
Financial assets are classified at fair value through profit or loss where they do not meet the criteria to be measured at amortised cost or
fair value through other comprehensive income or where they are designated at fair value through profit or loss to reduce an accounting
mismatch. All derivatives are carried at fair value through profit or loss, other than those in effective cash flow hedging relationships.
Derivatives are carried on the balance sheet as assets when their fair value is positive and as liabilities when their fair value is negative.
Refer to note 17 (Fair values of financial assets and liabilities) for details of valuation techniques and significant inputs to valuation models.
Derivatives embedded in a financial asset are not considered separately; the financial asset is considered in its entirety when determining
whether its cash flows are solely payments of principal and interest. Derivatives embedded in financial liabilities and insurance contracts
(unless the embedded derivative is itself an insurance contract) are treated as separate derivatives when their economic characteristics and
risks are not closely related to those of the host contract and the host contract is not carried at fair value through profit or loss. These
embedded derivatives are measured at fair value with changes in fair value recognised in the income statement.
The assets backing the insurance and investment contracts issued by the Group do not meet the criteria to be measured at amortised cost
or fair value through other comprehensive income as they are managed on a fair value basis and accordingly are measured at fair value
through profit or loss. Similarly, trading securities, which are debt securities and equity shares acquired principally for the purpose of selling
in the short term or which are part of a portfolio which is managed for short-term gains, do not meet these criteria and are also measured
at fair value through profit or loss. Financial assets measured at fair value through profit or loss are recognised in the balance sheet at their
fair value. Fair value gains and losses together with interest coupons and dividend income are recognised in the income statement within
net trading income.
Financial liabilities are measured at fair value through profit or loss where they are trading liabilities or where they are designated at fair
value through profit or loss in order to reduce an accounting mismatch; where the liabilities are part of a group of liabilities (or assets and
liabilities) which is managed, and its performance evaluated, on a fair value basis; or where the liabilities contain one or more embedded
derivatives that significantly modify the cash flows arising under the contract and would otherwise need to be separately accounted for.
Financial liabilities measured at fair value through profit or loss are recognised in the balance sheet at their fair value. Fair value gains and
losses are recognised in the income statement within net trading income in the period in which they occur, except in the case of financial
liabilities designated at fair value through profit or loss where gains and losses attributable to changes in own credit risk are recognised in
other comprehensive income.
The fair values of assets and liabilities traded in active markets are based on current bid and offer prices, respectively, which include the
expected effects of potential changes to laws and regulations, risks associated with climate change and other factors. If the market is not
active the Group establishes a fair value by using valuation techniques. The fair values of derivative financial instruments are adjusted
where appropriate to reflect credit risk (via credit valuation adjustments (CVAs), debit valuation adjustments (DVAs) and funding valuation
adjustments (FVAs)), market liquidity and other risks.
(4)Borrowings
Borrowings (which include deposits from banks, customer deposits, repurchase agreements, debt securities in issue and subordinated
liabilities) are recognised initially at fair value, being their issue proceeds net of transaction costs incurred. These instruments are
subsequently stated at amortised cost using the effective interest method.
Lloyds Banking Group plc Annual Report and Accounts 2025
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Note 2: Accounting policies continued
Preference shares and other instruments which carry a mandatory coupon or are redeemable on a specific date are classified as financial
liabilities. The coupon on these instruments is recognised in the income statement as interest expense. Securities which carry a
discretionary coupon and have no fixed maturity or redemption date are classified as other equity instruments. Interest payments on these
securities are recognised as distributions from equity in the period in which they are paid.
An exchange of financial liabilities on substantially different terms is accounted for as an extinguishment of the original financial liability
and the recognition of a new financial liability. The difference between the carrying amount of a financial liability extinguished and the new
financial liability is recognised in profit or loss together with any related costs or fees incurred. When a financial liability is exchanged for an
equity instrument, the new equity instrument is recognised at fair value and any difference between the carrying value of the liability and
the fair value of the new equity instrument is recognised in profit or loss.
(5)Sale and repurchase agreements (including securities lending and borrowing)
Securities sold subject to repurchase agreements (repos) continue to be recognised on the balance sheet where substantially all of the risks
and rewards are retained. Funds received for repos carried at fair value are included within trading liabilities.
Securities purchased under agreements to resell (reverse repos), where the Group does not acquire substantially all of the risks and rewards
of ownership, are measured at amortised cost or at fair value. Those measured at fair value are recognised within trading securities.
The difference between sale and repurchase price is treated as interest and accrued over the life of the agreements using the effective
interest method.
Securities borrowing and lending transactions are typically secured; collateral takes the form of securities or cash advanced or received.
Securities lent to counterparties are retained on the balance sheet. Securities borrowed are not recognised on the balance sheet, unless
these are sold to third parties, in which case the obligation to return them is recorded at fair value as a trading liability. Cash collateral given
or received is treated as a loan and advance measured at amortised cost or customer deposit.
(F)Hedge accounting
As permitted by IFRS 9, the Group continues to apply the requirements of IAS 39 to its hedging relationships.
Changes in the fair value of all derivative instruments, other than those in effective cash flow hedging relationships, are recognised
immediately in the income statement. As noted in (2) below, the change in fair value of a derivative in an effective cash flow hedging
relationship is allocated between the income statement and other comprehensive income.
Hedge accounting allows one financial instrument, generally a derivative, to be designated as a hedge of another financial instrument such
as a loan or deposit or a portfolio of such instruments. At the inception of the hedge relationship, formal documentation is drawn up
specifying the hedging strategy, the hedged item, the hedging instrument and the methodology that will be used to measure the
effectiveness of the hedge relationship in offsetting changes in the fair value or cash flow of the hedged risk. The effectiveness of the
hedging relationship is tested both at inception and throughout its life and if at any point it is concluded that it is no longer highly effective
in achieving its documented objective, hedge accounting is discontinued. Note 19 provides details of the types of derivatives held by the
Group and presents separately those designated in hedge relationships.
(1)Fair value hedges
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together
with the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk; this also applies if the hedged
asset is classified as a financial asset at fair value through other comprehensive income. If the hedge no longer meets the criteria for hedge
accounting, changes in the fair value of the hedged item attributable to the hedged risk are no longer recognised in the income statement.
The cumulative adjustment that has been made to the carrying amount of the hedged item is amortised to the income statement using the
effective interest method over the period to maturity.
(2)Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other
comprehensive income in the cash flow hedge reserve. The gain or loss relating to the ineffective portion is recognised immediately in the
income statement. Amounts accumulated in equity are reclassified to the income statement in the periods in which the hedged item
affects profit or loss. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any
cumulative gain or loss existing in equity at that time remains in equity and is recognised in the income statement when the forecast
transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative
gain or loss that was reported in equity is immediately transferred to the income statement.
(G)Offset
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right of offset
and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. Cash collateral on exchange
traded derivative transactions is presented gross unless the collateral cash flows are always settled net with the derivative cash flows. In
certain situations, even though master netting agreements exist, the lack of management intention to settle on a net basis results in the
financial assets and liabilities being reported gross on the balance sheet.
(H)Impairment of financial assets
The impairment charge in the income statement reflects the change in expected credit losses, including those arising from fraud. Expected
credit losses are recognised for loans and advances to customers and banks, other financial assets held at amortised cost, financial assets
(other than equity investments) measured at fair value through other comprehensive income, and certain loan commitments and financial
guarantee contracts. Expected credit losses are calculated as an unbiased and probability-weighted estimate using an appropriate
probability of default, adjusted to take into account a range of possible future economic scenarios, and applying this to the estimated
exposure of the Group at the point of default after taking into account the value of any collateral held, repayments, or other mitigants of
loss and including the impact of discounting using the effective interest rate.
Lloyds Banking Group plc Annual Report and Accounts 2025
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Notes to the consolidated financial statements continued
for the year ended 31 December
Note 2: Accounting policies continued
At initial recognition, allowance (or provision in the case of some loan commitments and financial guarantees) is made for expected credit
losses resulting from default events that are possible within the next 12 months (12-month expected credit losses). In the event of a
significant increase in credit risk since origination, allowance (or provision) is made for expected credit losses resulting from all possible
default events over the expected life of the financial instrument (lifetime expected credit losses). Financial assets where 12-month
expected credit losses are recognised are considered to be Stage 1; financial assets which are considered to have experienced a significant
increase in credit risk since initial recognition are in Stage 2; and financial assets which have defaulted or are otherwise considered to be
credit-impaired are allocated to Stage 3. Some Stage 3 assets, mainly in Commercial Banking, are subject to individual rather than
collective assessment. Such cases are subject to a risk-based impairment sanctioning process, and these are reviewed and updated at least
quarterly, or more frequently if there is a significant change in the credit profile. The collective assessment of impairment aggregates
financial instruments with similar risk characteristics, such as whether the facility is revolving in nature or secured and the type of security
held against financial assets.
An assessment of whether credit risk has increased significantly since initial recognition considers the change in the risk of default occurring
over the remaining expected life of the financial instrument. In determining whether there has been a significant increase in credit risk, the
Group uses quantitative tests based on relative and absolute probability of default (PD) movements linked to internal credit ratings
together with qualitative indicators such as watchlists and other indicators of historical delinquency, credit weakness or financial difficulty.
The use of internal credit ratings and qualitative indicators ensures alignment between the assessment of staging and the Group’s
management of credit risk which utilises these internal metrics within distinct retail and commercial portfolio risk management practices.
However, unless identified at an earlier stage, the credit risk of financial assets is deemed to have increased significantly when more than
30 days past due. The use of a payment holiday in and of itself has not been judged to indicate a significant increase in credit risk, with the
underlying long-term credit risk deemed to be driven by economic conditions and captured through the use of forward-looking models.
These portfolio-level models are capturing the anticipated volume of increased defaults and therefore an appropriate assessment of staging
and expected credit loss. Where the credit risk subsequently improves such that it no longer represents a significant increase in credit risk
since initial recognition, the asset is transferred back to Stage 1.
Assets are transferred to Stage 3 when they have defaulted or are otherwise considered to be credit-impaired. Default is considered to
have occurred when there is evidence that the customer is experiencing financial difficulty which is likely to affect significantly the ability to
repay the amount due. IFRS 9 contains a rebuttable presumption that default occurs no later than when a payment is 90 days past due
which the Group uses for all its products. In addition, other indicators of mortgage default are added including end-of-term payments on
past due interest-only accounts and loans considered non-performing due to recent arrears or forbearance. The use of payment holidays is
not considered to be an automatic trigger of regulatory default and therefore does not automatically trigger Stage 3. Days past due will also
not accumulate on any accounts that have taken a payment holiday including those already past due.
In certain circumstances, the Group will renegotiate the original terms of a customer’s loan, either as part of an ongoing customer
relationship or in response to adverse changes in the circumstances of the borrower. In the latter circumstances, the loan will remain
classified as either Stage 2 or Stage 3 until the credit risk has improved such that it no longer represents a significant increase since
origination (for a return to Stage 1), or the loan is no longer credit-impaired (for a return to Stage 2). On renegotiation the gross carrying
amount of the loan is recalculated as the present value of the renegotiated or modified contractual cash flows, which are discounted at the
original effective interest rate. Renegotiation may also lead to the loan and associated allowance being derecognised and a new loan being
recognised initially at fair value.
Purchased or originated credit-impaired financial assets (POCI) include financial assets that are purchased or originated at a deep discount
that reflects incurred credit losses. At initial recognition, POCI assets do not carry an impairment allowance; instead, lifetime expected
credit losses are incorporated into the calculation of the effective interest rate. All changes in lifetime expected credit losses subsequent to
the assets’ initial recognition are recognised as an impairment charge.
A loan or advance is normally written off, either partially or in full, against the related allowance when the proceeds from realising any
available security have been received or there is no realistic prospect of recovery and the amount of the loss has been determined.
Subsequent recoveries of amounts previously written off decrease the amount of impairment losses recorded in the income statement.
For both secured and unsecured retail balances, the write-off takes place only once an extensive set of collections processes has been
completed, or the status of the account reaches a point where policy dictates that continuing attempts to recover are no longer
appropriate. For commercial lending, a write-off occurs if the loan facility with the customer is restructured, the asset is under
administration and the only monies that can be received are the amounts estimated by the administrator, the underlying assets are
disposed and a decision is made that no further settlement monies will be received, or external evidence (for example, third party
valuations) is available that there has been an irreversible decline in expected cash flows.
(I)Property, plant and equipment
Property, plant and equipment (other than investment property) is recognised on the balance sheet at cost less accumulated depreciation.
The value of land (included in premises) is not depreciated. Depreciation on other assets is calculated using the straight-line method to
allocate the difference between the cost and the residual value over their estimated useful lives, as follows: the shorter of 50 years and the
remaining period of the lease for freehold/long and short leasehold premises; the shorter of 10 years and, if lease renewal is not likely, the
remaining period of the lease for leasehold improvements; 10 to 20 years for fixtures and furnishings; and 2 to 8 years for other equipment and
motor vehicles.
The assets’ residual values and useful lives are reviewed and, if appropriate, revised at each balance sheet date.
Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. In assessing the recoverable amount of assets the Group considers the effects of potential or actual changes in legislation,
customer behaviour, climate-related risks and other factors on the asset’s cash-generating unit (CGU). In the event that an asset’s CGU
carrying amount is determined to be greater than its recoverable amount the asset is written down immediately.
Investment property comprises freehold and long leasehold land and buildings that are held either to earn rental income or for capital
accretion or both. Investment property is carried at fair value based on current prices for similar properties, adjusted for the specific
characteristics of the property (such as location or condition). If this information is not available, the Group uses alternative valuation
methods such as discounted cash flow projections or recent prices in less active markets. These valuations are reviewed at least annually by
independent professionally qualified valuers. Investment property being redeveloped for continuing use as investment property, or for
which the market has become less active, continues to be valued at fair value.
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Note 2: Accounting policies continued
(J)Leases
Under IFRS 16, a lessor is required to determine if a lease is a finance or operating lease. A lessee is not required to make this determination.
(1)As lessor
Assets leased to customers are classified as finance leases if the lease agreements transfer substantially all of the risks and rewards of
ownership to the lessee but not necessarily legal title. All other leases are classified as operating leases. When assets are subject to finance
leases, the present value of the lease payments, together with any unguaranteed residual value, is recognised as a receivable, net of
allowances for expected credit losses and residual value impairment, within loans and advances to banks and customers. The difference
between the gross receivable and the present value of the receivable is recognised as unearned finance lease income. Finance lease income
is recognised in interest income over the term of the lease using the net investment method (before tax) so as to give a constant rate of
return on the net investment in the lease. Unguaranteed residual values are reviewed regularly to identify any impairment.
Operating lease assets are included within other assets at cost and depreciated over their estimated useful lives. The depreciation charge is
based on the asset’s residual value and the life of the lease. Operating lease rental income is recognised on a straight-line basis over the life
of the lease.
The Group evaluates non-lease arrangements such as outsourcing and similar contracts to determine if they contain a lease which is then
accounted for separately.
(2)As lessee
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the
Group. Assets and liabilities arising from a lease are initially measured on a present value basis. The lease payments are discounted using the
interest rate implicit in the lease, if that rate can be determined, or the Group’s incremental borrowing rate appropriate for the right-of-use
asset arising from the lease, and the liability recognised within other liabilities.
Lease payments are allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as
to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is
depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit
or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment and small items of
office furniture.
(K)Employee benefits
Short-term employee benefits, such as salaries, paid absences, performance-based cash awards and social security costs, are recognised
over the period in which the employees provide the related services.
(1)Pension schemes
The Group operates a number of post-retirement benefit schemes for its employees including both defined benefit and defined
contribution pension plans. A defined benefit scheme is a pension plan that defines an amount of pension benefit that an employee will
receive on retirement, dependent on one or more factors such as age, years of pensionable service and pensionable salary. A defined
contribution plan is a pension plan into which the Group pays fixed contributions; there is no legal or constructive obligation to pay further
contributions.
(i)Defined benefit schemes
Scheme assets are included at their fair value and scheme liabilities are measured on an actuarial basis using the projected unit credit
method. The defined benefit scheme liabilities are discounted using rates equivalent to the market yields at the balance sheet date on high
quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity
approximating to the terms of the related pension liability. The Group’s income statement charge includes the current service cost of
providing pension benefits, past service costs, net interest expense (income), and plan administration costs that are not deducted from the
return on plan assets. Past service costs, which represents the change in the present value of the defined benefit obligation resulting from a
plan amendment or curtailment, are recognised when the plan amendment or curtailment occurs. Net interest expense (income) is
calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset.
Remeasurements, comprising actuarial gains and losses, the return on plan assets (excluding amounts included in net interest expense
(income) and net of the cost of managing the plan assets), and the effect of changes to the asset ceiling (if applicable) are reflected
immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur.
Remeasurements recognised in other comprehensive income are reflected immediately in retained profits and will not subsequently be
reclassified to profit or loss.
The Group’s balance sheet includes the net surplus or deficit, being the difference between the fair value of scheme assets and the
discounted value of scheme liabilities at the balance sheet date. Surpluses are only recognised to the extent that they are recoverable
through reduced contributions in the future or through refunds from the schemes. In assessing whether a surplus is recoverable, the Group
considers (i) its current right to obtain a refund or a reduction in future contributions and (ii) the rights of other parties existing at the
balance sheet date. In determining the rights of third parties existing at the balance sheet date, the Group does not anticipate any future
acts by other parties.
(ii)Defined contribution schemes
The costs of the Group’s defined contribution plans are charged to the income statement in the period in which they fall due.
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Notes to the consolidated financial statements continued
for the year ended 31 December
Note 2: Accounting policies continued
(2)Share-based compensation
The Group operates a number of equity-settled, share-based compensation plans in respect of services received from certain of its
employees. The value of the employee services received in exchange for equity instruments granted under these plans is recognised as an
expense over the vesting period of the instruments, with a corresponding increase in equity. This expense is determined by reference to the
fair value of the number of equity instruments that are expected to vest. The fair value of equity instruments granted is based on market
prices, if available, at the date of grant. In the absence of market prices, the fair value of the instruments at the date of grant is estimated
using an appropriate valuation technique, such as a Black-Scholes option pricing model or a Monte Carlo simulation. The determination of
fair values excludes the impact of any non-market vesting conditions, which are included in the assumptions used to estimate the number
of options that are expected to vest. At each balance sheet date, this estimate is reassessed and if necessary revised. Any revision of the
original estimate is recognised in the income statement, together with a corresponding adjustment to equity. Cancellations by employees
of contributions to the Group’s Save As You Earn plans are treated as non-vesting conditions and the Group recognises, in the year of
cancellation, the amount of the expense that would have otherwise been recognised over the remainder of the vesting period.
Modifications are assessed at the date of modification and any incremental charges are charged to the income statement.
(L)Taxation
Tax expense comprises current and deferred tax. Current and deferred tax are charged or credited in the income statement except to the
extent that the tax arises from a transaction or event which is recognised, in the same or a different period, outside the income statement
(either in other comprehensive income, directly in equity, or through a business combination), in which case the tax appears in the same
statement as the transaction that gave rise to it. The tax consequences of the Group’s dividend payments (including distributions on other
equity instruments), if any, are charged or credited to the statement in which the profit distributed originally arose.
Current tax is the amount of corporate income taxes expected to be payable or recoverable based on the profit for the period as adjusted
for items that are not taxable or not deductible, and is calculated using tax rates and laws that were enacted or substantively enacted at
the balance sheet date.
Current tax includes amounts provided in respect of uncertain tax positions when management expects that, upon examination of the
uncertainty by His Majesty’s Revenue and Customs (HMRC) or other relevant tax authority, it is more likely than not that an economic
outflow will occur. Provisions reflect management’s best estimate of the ultimate liability based on their interpretation of tax law,
precedent and guidance, informed by external tax advice as necessary. Changes in facts and circumstances underlying these provisions are
reassessed at each balance sheet date, and the provisions are remeasured as required to reflect current information.
For the Group’s long-term insurance businesses, the tax expense is analysed between tax that is payable in respect of policyholders’ returns
and tax that is payable on the shareholders’ returns. This allocation is based on an assessment of the rates of tax which will be applied to
the returns under the current UK tax rules.
Deferred tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the
balance sheet. Deferred tax is calculated using tax rates and laws that have been enacted or substantively enacted at the balance sheet
date, and which are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax liabilities are generally recognised for all taxable temporary differences but not recognised for taxable temporary differences
arising on investments in subsidiaries where the reversal of the temporary difference can be controlled and it is probable that the difference
will not reverse in the foreseeable future. Deferred tax liabilities are not recognised on temporary differences that arise from goodwill which
is not deductible for tax purposes.
Deferred tax assets are recognised to the extent it is probable that taxable profits will be available against which the deductible temporary
differences can be utilised, and are reviewed at each balance sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are not recognised in respect of temporary differences that arise on initial recognition of assets and
liabilities acquired other than in a business combination, or where at the time of the transaction they give rise to equal taxable and
deductible temporary differences. Deferred tax is not discounted.
The Group has applied the exception to recognising and disclosing information about deferred tax assets and liabilities related to Pillar 2
income taxes currently required by IAS 12 Income Taxes.
(M)Insurance
The Group undertakes both life insurance and general insurance business. Insurance and participating investment contracts, and
reinsurance contracts issued and held, are accounted for under IFRS 17 Insurance Contracts.
Products sold by the life insurance business are classified into three categories:
•Insurance contracts are contracts that transfer significant insurance risk and may also transfer financial risk. The Group defines
significant insurance risk as the possibility of having to pay benefits on the occurrence of an insured event which are significantly higher
than the benefits payable if the insured event were not to occur. Once a contract has been classified as an insurance contract, it remains
an insurance contract until all obligations are extinguished unless that contract is derecognised due to a contract modification. These
contracts are classified as either direct participating contracts or contracts without direct participation features. Contracts without
direct participation features are accounted for using the general measurement model (GMM) for life contracts or the premium
allocation approach (PAA) for general insurance contracts. Direct participating contracts are contracts for which, at inception, the
contractual terms specify the policyholders participate in a clearly identified pool of underlying items. Under the terms of these
contracts the policyholders are entitled to a substantial share of the returns and change in fair value of the underlying items. These
contracts are accounted for under the variable fee approach (VFA)
•Participating investment contracts are investment contracts that contain a discretionary participation feature (DPF). They do not
transfer significant insurance risk, but contain a contractual right to receive, as a supplement to an amount not subject to the discretion
of the Group, additional amounts that are expected to be a significant portion of the total contractual benefits. The timing or amount
of these additional amounts are at the discretion of the Group and are contractually based on the returns on a specified pool of
contracts or type of contract, returns on a specified pool of assets held by the Group or profit or loss of a fund
Lloyds Banking Group plc Annual Report and Accounts 2025
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Note 2: Accounting policies continued
•For certain insurance and investment contracts, the contract can be partly invested in units which contain a DPF and partly in units
without. In these circumstances, where the contract also contains features that transfer significant insurance risk, they are classified as
insurance contracts. Where this is not the case, and the discretionary cash flows are expected to be a significant portion of the total
contractual benefits, they are classified as participating investment contracts. Where the discretionary cash flows are not expected to
be a significant portion of the total contractual benefits, they are classified as financial instruments. An investment component is
defined as the amount that an insurance contract requires the entity to repay to a policyholder in all circumstances, regardless of
whether an insured event occurs. The investment component of the insurance and participating investment contract is non-distinct and
is not separated. The Group applies judgement to determine the investment component for each contract considering the extent to
which insurance and investment components are highly interrelated or not applying factors such as: whether the policyholder is able to
benefit from one component unless the other component is present; and whether the value of the investment component is dependent
on the timing of the insured event. The value of the non-distinct investment component is determined on the following bases: for
immediate annuities, full claim amount when within the guaranteed period; for unit-linked and With-Profits contracts, policyholder’s
account value
The general insurance business issues only insurance contracts.
(1)Life insurance business
Recognition
The Group aggregates insurance and participating investment contracts into portfolios of contracts subject to similar risks and managed
together. Each portfolio of insurance contracts is divided into annual cohorts (by year of issue). Annual cohorts are divided into groups of
insurance and participating investment contracts based on profitability expectations at initial recognition. The directly attributable costs of
selling, underwriting and starting a group of insurance and participating investment contracts are allocated to the group of insurance and
participating investment contracts using a systematic and rational method.
On initial recognition, a group of insurance and participating investment contracts is measured as the total of the fulfilment cash flows and
the contractual service margin (CSM). The measurement includes all future cash flows that are within the contract boundary of each
contract in the group. The fulfilment cash flows comprise unbiased and probability-weighted estimates of future cash flows, discounted to
present value to reflect the time value of money and financial risks, plus an explicit risk adjustment for non-financial risk. The discount rate
applied reflects the time value of money, the characteristics of the cash flows, the liquidity characteristics of the insurance and
participating investment contracts and, where appropriate, is consistent with observable current market prices. The risk adjustment for
non-financial risk for a group of insurance and participating investment contracts is the compensation required for bearing the uncertainty
about the amount and timing of the cash flows that arises from non-financial risk. Diversification benefit is calculated based on Group level
diversification of risks. To determine the risk adjustments for non-financial risk for reinsurance contracts, the Group applies these
techniques both gross and net of excess of loss reinsurance and derives the amount of risk being transferred to the reinsurer as the
difference between the two results. The CSM of a group of insurance and participating investment contracts represents the unearned profit
that the Group expects to recognise as it provides insurance contract services under those contracts in the future. The Group's policy is to
include all insurance finance income and expenses in profit or loss.
Contract boundaries
The measurement of a group of contracts includes all future cash flows within the boundary of each contract in the group.
Cash flows are within the contract boundary:
•For an insurance contract, if arising from substantive rights and obligations that exist during the reporting period in which the Group can
compel the policyholder to pay premiums or has a substantive obligation to provide insurance contract services
•For a participating investment contract, if resulting from a substantive obligation of the Group to deliver cash at a present or future date
A substantive obligation to provide insurance contract services ends when the Group has the practical ability to reassess the risks of the
particular policyholder, and can set a price or level of benefits that fully reflects those reassessed risks; or the Group has the practical ability
to reassess the risks of the portfolio that contains the contract and can set a price or level of benefits that fully reflects the risks of that
portfolio, and the pricing of the premiums up to the reassessment date does not take into account risks that relate to periods after the
reassessment date.
For certain unitised With-Profits and unit-linked policies, a guaranteed minimum pension is payable at a vesting date. For certain
conventional With-Profits pensions, policyholders have the option to convert to an annuity on guaranteed terms. There is no contract
boundary at the vesting date of these policies; the pre and post vesting date phases are treated as a single insurance contract.
The contract boundary of each group is reassessed at the end of each reporting period.
Measurement
The carrying amount of a group of insurance and participating investment contracts at each reporting date is the sum of the liability for
remaining coverage (LRC) and the liability for incurred claims (LIC). The LRC comprises the fulfilment cash flows that relate to services that
will be provided under the contracts in future periods and any remaining CSM at that date. The LIC includes the fulfilment cash flows for
incurred claims and expenses that have not yet been paid, including claims that have been incurred but not yet reported. The fulfilment
cash flows of groups of insurance and participating investment contracts are measured at the reporting date using current estimates of
future cash flows, current discount rates and current estimates of the risk adjustment for non-financial risk. Changes in fulfilment cash flows
are recognised as follows:
•Changes related to future service are adjusted against the CSM unless the group is onerous in which case such changes are recognised in
the insurance service result in profit or loss
•Changes related to past or current service are recognised in the insurance service result in profit or loss
•The effects of the time value of money and financial risk are recognised as net finance income or expense from insurance, participating
investment and reinsurance contracts in profit or loss
The carrying amount of the CSM is remeasured at the end of each reporting period. For contracts measured under the GMM, interest is
accreted on the carrying amount of the CSM using the discount rate curve determined at the date of initial recognition of the group of
contracts. The CSM is also adjusted for the changes in fulfilment cash flows relating to future service at the locked-in discount rates
determined at initial recognition, unless the increases in fulfilment cash flows cause a group of contracts to become onerous or decreases in
fulfilment cash flows are allocated to the loss component of the liability for remaining coverage.
Lloyds Banking Group plc Annual Report and Accounts 2025
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Notes to the consolidated financial statements continued
for the year ended 31 December
Note 2: Accounting policies continued
The majority of the Group’s With-Profits and unit-linked insurance and participating investment contracts are direct participating contracts
under which the Group’s obligation to the policyholder is the payment of an amount equal to the fair value of the underlying items, less a
variable fee. On subsequent remeasurement of a group of direct participating contracts (measured under VFA), changes to the fulfilment
cash flows, discounted at current rates, reflecting changes in the obligation to pay the policyholder an amount equal to the fair value of the
underlying items are recognised in the income statement, within net finance income or expense from insurance, participating investment
and reinsurance contracts. The CSM is adjusted for changes in the amount of the Group’s share of the fair value of the underlying items,
which relate to future services, except where such changes result in recognition or reversal of the loss component for onerous groups, or
where the Group applies the risk mitigation option. For certain contracts with direct participation features, the Group mitigates financial
risks using equity and currency hedges. The Group does not adjust the CSM for changes in the fulfilment cash flows and/or entity’s share of
the underlying items that reflect some of the changes in the effect of time value of money and financial risk. These amounts are instead
reflected in profit or loss. The CSM is also adjusted for those fulfilment cash flows that do not vary based on the returns on underlying items
that relate to future service (including the effect of time value of money and financial risks not arising from underlying items, such as the
impact of minimum return guarantees), except where such changes result in recognition or reversal of the loss component for onerous
groups. Changes in fulfilment cash flows relating to future service adjust the CSM using current discount rates.
For contracts measured under the GMM or VFA at the end of each reporting period the appropriate proportion of the CSM is recognised in
the income statement to reflect the amount of profit related to the insurance contract services provided in the period. This is calculated
using coverage units, a measure used to determine the allocation of the CSM over the remaining coverage periods. The number of coverage
units in a group is the quantity of insurance contract services provided by the contracts in the group, determined by considering for each
contract the quantity of the benefits provided and its expected coverage period.
Derecognition
The Group derecognises an insurance and participating investment contract when it is extinguished (that is, when the obligation specified
in the contract expires or is discharged or cancelled) or if its terms are modified in a way that would have changed the accounting for the
contract significantly had the new terms always existed.
If a contract is derecognised, then the fulfilment cash flows of the group are adjusted to eliminate the present value of the future cash flows
and risk adjustment of the contract derecognised from the group, and the CSM of the group is adjusted for the change in fulfilment cash
flows, except where such changes are allocated to the loss component.
If a contract is derecognised because its terms are modified, then the CSM of the existing group is also adjusted for the premium that
would have been charged had the Group entered into a contract with the new contract’s terms at the date of modification, less any
additional premium charged for the modification. A new modified contract is recognised assuming the Group received the premium that
would have been charged had the Group entered into a contract with the new contract’s terms at the date of the modification.
Where the adjustments to CSM result in the CSM being reduced to nil, any further adjustments are recognised in the income statement in
insurance service expense.
(2)General insurance contracts
General insurance contracts issued by the Group are presented on the balance sheet within liabilities arising from insurance and
participating investment contracts. The Group applies the PAA to the measurement of general insurance contracts, which either have a
coverage period of each contract in the group of one year or less or have an annual re-pricing option.
For a group of general insurance contracts that is not onerous at initial recognition, the Group measures the LRC as any premium received
at initial recognition, less any insurance acquisition cash flows at that date, plus any other asset or liability previously recognised for cash
flows related to the group of contracts that the Group pays or receives before the group of insurance contracts is recognised.
The Group estimates the LIC using the methodology described in the Measurement section for life insurance contracts above.
Where, during the coverage period, facts and circumstances indicate that a group of insurance contracts is onerous, the Group recognises a
loss in the income statement for the net outflow, resulting in the carrying amount of the liability for the group being equal to the fulfilment
cash flows. A loss component is established by the Group within the LRC for such onerous group.
On subsequent measurement, the Group measures the carrying amount of the LRC at the end of each reporting period as the LRC at the
beginning of the period plus premiums received in the period, less insurance acquisition cash flows, plus any amounts relating to the
amortisation of the insurance acquisition cash flows recognised as an expense in the reporting period for the group, less the amount
recognised as insurance revenue for the services provided in the period. For onerous groups, the LRC is also adjusted for the remeasurement
of the loss component.
(3)Reinsurance
(i)Reinsurance contracts issued
Reinsurance contracts issued by the Group (where insurance risk is transferred to the Group) are accounted for under the GMM
as insurance contracts. These contracts are presented within other assets or liabilities arising from insurance and participating
investment contracts.
(ii)Reinsurance contracts held
The classification of contracts entered into by the Group with reinsurers under which the Group is compensated for amounts payable on
one or more other contracts issued by the Group is dependent on whether the contract with the reinsurer transfers significant insurance
risk to the reinsurer. Where the reinsurance contract transfers significant insurance risk (reinsurance contracts held), it is accounted for
under the GMM, as modified for reinsurance contracts held. The Group adjusts the CSM of the group to which a reinsurance contract held
belongs and as a result recognises income, when it recognises a loss on initial recognition of onerous underlying contracts.
Contracts that do not transfer significant insurance risk to the reinsurer are recognised within financial assets at fair value through profit or
loss as they are within a portfolio of financial assets that is managed, and whose performance is evaluated, on a fair value basis. These
contracts, while legally reinsurance contracts, do not meet the definition of a reinsurance contract under IFRS Accounting Standards.
Investment returns (including movements in fair value and investment income) allocated to these contracts are recognised on the face of
the income statement within net trading income.
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Note 2: Accounting policies continued
(4)Non-participating investment contracts
The Group’s non-participating investment contracts are primarily unit-linked. These contracts are accounted for under IFRS 9 as financial
liabilities whose value is contractually linked to the fair values of financial assets within the Group’s unitised investment funds. The value of
the unit-linked financial liabilities is determined using current unit prices multiplied by the number of units attributed to the contract
holders at the balance sheet date. Their value is never less than the amount payable on surrender, discounted for the required notice period
where applicable. Investment returns (including movements in fair value and investment income) allocated to those contracts are
recognised in the income statement through change in non-participating investment contracts.
Deposits and withdrawals are not accounted for through the income statement but are accounted for directly in the balance sheet as
adjustments to the non-participating investment contract liability.
The Group receives investment management fees in the form of an initial adjustment or charge to the amount invested. These fees are in
respect of services rendered in conjunction with the issue and management of investment contracts where the Group actively manages the
consideration received from its customers to fund a return that is based on the investment profile that the customer selected on
origination of the contract. These services comprise an indeterminate number of acts over the lives of the individual contracts and,
therefore, the Group defers these fees and recognises them over the estimated lives of the contracts, in line with the provision of
investment management services.
Costs which are directly attributable and incremental to securing new non-participating investment contracts are deferred. This asset is
subsequently amortised over the period of the provision of investment management services and its recoverability is reviewed in
circumstances where its carrying amount may not be recoverable. If the asset is greater than its recoverable amount it is written down
immediately through fee and commission expense in the income statement. All other costs are recognised as expenses when incurred.
(N)Foreign currency translation
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (the functional currency). Foreign currency transactions are translated into the appropriate
functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from
the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognised in the income statement, except when recognised in other comprehensive income as qualifying cash flow
hedges. Non-monetary assets that are measured at fair value are translated using the exchange rate at the date that the fair value was
determined. Translation differences on equities and similar non-monetary items held at fair value through profit and loss are recognised in
profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets measured at fair value through
other comprehensive income, such as equity shares, are included in the fair value reserve in equity unless the asset is a hedged item in a fair
value hedge.
The results and financial position of all Group entities that have a functional currency different from the presentation currency are
translated into the presentation currency as follows: the assets and liabilities of foreign operations, including goodwill and fair value
adjustments arising on the acquisition of a foreign entity, are translated into sterling at foreign exchange rates ruling at the balance sheet
date; and the income and expenses of foreign operations are translated into sterling at average exchange rates unless these do not
approximate to the foreign exchange rates ruling at the dates of the transactions, in which case income and expenses are translated at the
dates of the transactions.
Foreign exchange differences arising on the translation of a foreign operation are recognised in other comprehensive income and
accumulated in a separate component of equity together with exchange differences arising from the translation of borrowings and other
currency instruments designated as hedges of such investments. On disposal or liquidation of a foreign operation, the cumulative amount
of exchange differences relating to that foreign operation is reclassified from equity and included in determining the profit or loss arising on
disposal or liquidation.
(O)Provisions and contingent liabilities
Provisions are recognised in respect of present obligations arising from past events where it is probable that outflows of resources will be
required to settle the obligations and they can be reliably estimated.
Contingent liabilities are possible obligations whose existence depends on the outcome of uncertain future events or those present
obligations where the outflows of resources are uncertain or cannot be measured reliably. Contingent liabilities are not recognised in the
financial statements but are disclosed unless they are remote.
Provision is made for expected credit losses in respect of irrevocable undrawn loan commitments and financial guarantee contracts
(see (H) above).
(P)Share capital
Incremental costs directly attributable to the issue of new shares or options or to the acquisition of a business are shown in equity as a
deduction, net of tax, from the proceeds. Dividends paid on the Group’s ordinary shares are recognised as a reduction in equity in the
period in which they are paid.
Where the Company or any member of the Group purchases the Company’s share capital, the consideration paid is deducted from
shareholders’ equity as treasury shares until they are cancelled; if these shares are subsequently sold or reissued, any consideration received
is included in shareholders’ equity.
(Q)Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise cash and non-mandatory deposits held with central
banks, mandatory deposits held with central banks in demand accounts and amounts due from banks with an original maturity of less than
three months that are available to finance the Group’s day-to-day operations.
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Notes to the consolidated financial statements continued
for the year ended 31 December
Note 3: 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 those estimates.
Estimates, judgements and assumptions are continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances. In preparing the financial statements, the Group
has considered the impact of climate-related risks on its financial position and performance. While the effects of climate change represent
a source of uncertainty, the Group does not consider there to be a material impact on its judgements and estimates from the physical,
transition and other climate-related risks in the short term.
The significant judgements, apart from those involving estimation, made by management in applying the Group’s accounting policies in
these financial statements (critical judgements) and the key sources of estimation uncertainty that may have a significant risk of causing a
material adjustment to the carrying amount of assets and liabilities within the next financial year (key sources of estimation uncertainty),
which together are considered critical to the Group’s results and financial position, are disclosed within the following notes:
•Insurance business (note 8(I))
•Retirement benefit obligations (note 12)
•Tax (note 15)
•Fair value of financial assets and liabilities (note 17(D))
•Allowance for expected credit losses (note 21)
•Provisions (note 28)
Consideration of climate change
Financial statement preparation includes the consideration of the impact of climate change on the Group’s financial statements. There has
been no material impact identified on the financial reporting judgements and estimates. In particular, the directors considered the impact
of climate change in respect of the:
•Going concern of the Group for a period of at least 12 months from the date of approval of the financial statements
•Assessment of impairment of non-financial assets
•Carrying value and useful economic lives of property, plant and equipment
•Fair value of financial assets and liabilities. These are generally based on market indicators which include the market’s assessment of
climate risk
•Assessments on expected credit loss, focusing on specific climate-related macroeconomic, physical and transition risk impacts on credit
quality at a sector and segment level
•Forecasting of the Group’s future UK taxable profits, which impacts deferred tax recognition
Whilst there is currently no material short-term impact of climate change expected, the Group acknowledges the long-term nature of
climate risk and continues to monitor and assess climate risks highlighted in the risk management section on pages 150 to 152.
Note 4: Segmental analysis
Lloyds Banking Group provides a wide range of banking and financial services in the UK and in certain locations overseas.
The Group Executive Committee (GEC) has been determined to be the chief operating decision-maker, as defined by IFRS 8 Operating
Segments, for the Group. The Group’s operating segments reflect its organisational and management structures. The GEC reviews the
Group’s internal reporting based around these segments in order to assess performance and allocate resources. It considers interest income
and expense on a net basis and consequently the total interest income and expense for all reportable segments is presented net. The
segments are differentiated by the type of products provided and by whether the customers are individuals or corporate entities.
The segmental results and comparatives are presented on an underlying basis (pre-tax), the basis reviewed by the chief operating decision-
maker. The underlying basis is derived from the recognition and measurement principles of the IFRS Accounting Standards with the effects
of the following excluded in arriving at underlying profit:
•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 businesses, the unwind of acquisition-related fair value adjustments and the amortisation of purchased
intangible assets
Management believes that excluding volatility from underlying profit before tax provides useful information for investors on the
performance of the business because it allows for a comparable representation of the Group’s performance by removing the impact of
items caused by market movements outside the control of management.
For the purposes of the underlying income statement, operating lease depreciation (net of gains on disposal of operating lease assets) is
shown as an adjustment to total income.
The Group has three operating and reportable segments: Retail; Commercial Banking; and Insurance, Pensions and Investments:
•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
•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
•Insurance, Pensions and Investments offers insurance, investment and pension management products and services
Other comprises income and expenditure not attributed to the Group’s operating segments. These amounts include those arising from the
Group’s equity investment businesses and residual underlying net interest income after transfer pricing.
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.
Lloyds Banking Group plc Annual Report and Accounts 2025
229
Note 4: Segmental analysis continued
Inter-segment services are generally recharged at cost, although some attract a margin. Inter-segment lending and deposits are generally
entered into at market rates, except that non-interest bearing balances are priced at a rate that reflects the external yield that could be
earned on such funds.
For the majority of those derivative contracts entered into by business units for risk management purposes, the business unit recognises the
net interest income or expense on an accrual accounting basis and transfers the remainder of the movement in the fair value of the
derivative to the central function where the resulting accounting volatility is managed where possible through the establishment of hedge
accounting relationships. Any change in fair value of the hedged instrument attributable to the hedged risk is also recorded within the
central function. This allocation of the fair value of the derivative and change in fair value of the hedged instrument attributable to the
hedged risk avoids accounting asymmetry in the segmental results.
| Year ended 31 December 2025 | Retail<br><br>£m | CommercialBankingm | Insurance, Pensions and Investmentsm | Other<br><br>£m | Total<br><br>£m |
|---|---|---|---|---|---|
| Underlying net interest income | 9,637 | 479 | 13,635 | ||
| Underlying other income | 2,636 | 228 | 6,120 | ||
| Total underlying income | 12,273 | 707 | 19,755 | ||
| Operating lease depreciation1 | (1,445) | – | (1,454) | ||
| Net income | 10,828 | 707 | 18,301 | ||
| Operating costs | (5,807) | (168) | (9,761) | ||
| Remediation | (931) | 5 | (968) | ||
| Total costs | (6,738) | (163) | (10,729) | ||
| Underlying impairment (charge) credit | (734) | 1 | (795) | ||
| Underlying profit before tax | 3,356 | 545 | 6,777 | ||
| External income | 15,383 | (563) | 19,755 | ||
| External operating lease depreciation1 | (1,445) | – | (1,454) | ||
| Inter-segment (expense) income | (3,110) | 1,270 | – | ||
| Net income | 10,828 | 707 | 18,301 | ||
| Loans and advances to customers2 | 390,616 | 540 | 481,463 | ||
| External assets | 404,882 | 173,867 | 944,072 | ||
| Customer deposits | 325,169 | 225 | 496,457 | ||
| External liabilities | 331,244 | 140,266 | 896,205 | ||
| Analysis of underlying other income: | |||||
| Consumer lending | 2,075 | 2,075 | |||
| Consumer relationships | 561 | 561 | |||
| Business and Commercial Banking | 543 | ||||
| Corporate and Institutional Banking | 1,282 | ||||
| Life, Pensions and Investments | 1,018 | ||||
| General insurance | 277 | ||||
| Venture capital | 462 | 462 | |||
| Other | (234) | (98) | |||
| Underlying other income | 2,636 | 228 | 6,120 | ||
| Other items reflected in income statement above: | |||||
| Depreciation and amortisation | 2,352 | 587 | 3,477 | ||
| Defined benefit scheme credit | – | (37) | (37) | ||
| Non-income statement items: | |||||
| Additions to fixed assets | 4,173 | 1,851 | 6,323 | ||
| Investments in joint ventures and associates at end of year | – | 445 | 445 |
All values are in British Pounds.
1Net of losses on disposal of operating lease assets of £10 million.
2Other includes centralised fair value hedge accounting adjustments.
Lloyds Banking Group plc Annual Report and Accounts 2025
230
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 4: Segmental analysis continued
| Year ended 31 December 2024 | Retail<br><br>£m | Commercial<br><br>Banking<br><br>£m | Insurance, Pensions and Investmentsm | Other<br><br>£m | Total<br><br>£m |
|---|---|---|---|---|---|
| Underlying net interest income | 8,930 | 3,434 | 617 | 12,845 | |
| Underlying other income1 | 2,354 | 1,815 | 136 | 5,597 | |
| Total underlying income | 11,284 | 5,249 | 753 | 18,442 | |
| Operating lease depreciation2 | (1,319) | (6) | – | (1,325) | |
| Net income | 9,965 | 5,243 | 753 | 17,117 | |
| Operating costs1 | (5,566) | (2,752) | (200) | (9,442) | |
| Remediation | (750) | (104) | (26) | (899) | |
| Total costs | (6,316) | (2,856) | (226) | (10,341) | |
| Underlying impairment (charge) credit | (457) | 14 | 3 | (433) | |
| Underlying profit before tax | 3,192 | 2,401 | 530 | 6,343 | |
| External income | 13,566 | 3,981 | (397) | 18,442 | |
| External operating lease depreciation2 | (1,319) | (6) | – | (1,325) | |
| Inter-segment (expense) income | (2,282) | 1,268 | 1,150 | – | |
| Net income | 9,965 | 5,243 | 753 | 17,117 | |
| Loans and advances to customers3 | 372,250 | 87,602 | 5 | 459,857 | |
| External assets4 | 387,322 | 148,548 | 173,518 | 906,697 | |
| Customer deposits | 319,726 | 162,645 | 374 | 482,745 | |
| External liabilities4 | 324,730 | 207,066 | 135,494 | 860,809 | |
| Analysis of underlying other income: | |||||
| Consumer lending | 1,810 | 1,810 | |||
| Consumer relationships | 544 | 544 | |||
| Business and Commercial Banking | 533 | 533 | |||
| Corporate and Institutional Banking | 1,282 | 1,282 | |||
| Life, Pensions and Investments | 979 | ||||
| General insurance | 229 | ||||
| Venture capital | 457 | 457 | |||
| Other | (321) | (237) | |||
| Underlying other income | 2,354 | 1,815 | 136 | 5,597 | |
| Other items reflected in income statement above: | |||||
| Depreciation and amortisation | 2,303 | 338 | 556 | 3,426 | |
| Defined benefit scheme charge (credit) | 7 | 2 | (23) | (11) | |
| Non-income statement items: | |||||
| Additions to fixed assets | 3,485 | 107 | 1,956 | 5,623 | |
| Investments in joint ventures and associates at end of year | – | – | 542 | 542 |
All values are in British Pounds.
1In 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.
2Net of profits on disposal of operating lease assets of £59 million.
3Other includes centralised fair value hedge accounting adjustments.
4The Insurance, Pensions and Investments operating segment external assets included £5,122 million of disposal group assets and external liabilities included £5,268 million of disposal
group liabilities. Further details are provided in note 24 and note 27.
Lloyds Banking Group plc Annual Report and Accounts 2025
231
Note 4: Segmental analysis continued
| Year ended 31 December 2023 | Retail<br><br>£m | Commercial<br><br>Banking<br><br>£m | Insurance, Pensions and Investmentsm | Other<br><br>£m | Total<br><br>£m |
|---|---|---|---|---|---|
| Underlying net interest income | 9,647 | 3,799 | 451 | 13,765 | |
| Underlying other income | 2,159 | 1,691 | 64 | 5,123 | |
| Total underlying income | 11,806 | 5,490 | 515 | 18,888 | |
| Operating lease depreciation1 | (948) | (8) | – | (956) | |
| Net income | 10,858 | 5,482 | 515 | 17,932 | |
| Operating costs | (5,469) | (2,647) | (144) | (9,140) | |
| Remediation | (515) | (127) | (19) | (675) | |
| Total costs | (5,984) | (2,774) | (163) | (9,815) | |
| Underlying impairment (charge) credit | (831) | 511 | 5 | (308) | |
| Underlying profit before tax | 4,043 | 3,219 | 357 | 7,809 | |
| External income | 12,803 | 4,570 | 294 | 18,888 | |
| External operating lease depreciation1 | (948) | (8) | – | (956) | |
| Inter-segment (expense) income | (997) | 920 | 221 | – | |
| Net income | 10,858 | 5,482 | 515 | 17,932 | |
| Loans and advances to customers2 | 361,181 | 88,606 | (42) | 449,745 | |
| External assets | 376,789 | 150,834 | 169,563 | 881,453 | |
| Customer deposits | 308,441 | 162,752 | 203 | 471,396 | |
| External liabilities | 313,244 | 204,815 | 136,067 | 834,088 | |
| Analysis of underlying other income: | |||||
| Consumer lending | 1,553 | 1,553 | |||
| Consumer relationships | 606 | 606 | |||
| Business and Commercial Banking | 514 | 514 | |||
| Corporate and Institutional Banking | 1,177 | 1,177 | |||
| Life, Pensions and Investments | 966 | ||||
| General insurance | 171 | ||||
| Venture capital | 448 | 448 | |||
| Other | (384) | (312) | |||
| Underlying other income | 2,159 | 1,691 | 64 | 5,123 | |
| Other items reflected in income statement above: | |||||
| Depreciation and amortisation | 1,927 | 410 | 367 | 2,905 | |
| Defined benefit scheme charge (credit) | 53 | 21 | (159) | (79) | |
| Non-income statement items: | |||||
| Additions to fixed assets | 3,294 | 88 | 1,993 | 5,455 | |
| Investments in joint ventures and associates at end of year | – | – | 401 | 401 |
All values are in British Pounds.
1Net of profits on disposal of operating lease assets of £93 million.
2Other includes centralised fair value hedge accounting adjustments.
Geographical areas
The Group’s operations are predominantly UK-based and as a result an analysis between UK and non-UK activities is not provided.
Lloyds Banking Group plc Annual Report and Accounts 2025
232
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 4: Segmental analysis continued
Reconciliation of underlying basis to statutory basis
The underlying basis is the basis on which financial information is presented to the chief operating decision-maker which excludes certain
items included in the statutory results. The table below reconciles the statutory results to the underlying basis.
| Removal of: | ||||
|---|---|---|---|---|
| Year ended 31 December 2025 | Lloyds<br><br>Banking Group<br><br>statutory basis<br><br>£m | Volatility,<br><br>and other<br><br>items1<br><br>£m | Insurance<br><br>gross up2<br><br>£m | Underlyingbasism |
| Net interest income | 13,230 | 403 | 2 | 13,635 |
| Other income | 6,192 | (326) | 254 | 6,120 |
| (1,454) | – | (1,454) | ||
| Total income | 19,422 | (1,377) | 256 | 18,301 |
| Operating expenses3 | (11,966) | 1,493 | (256) | (10,729) |
| Impairment charge | (795) | – | – | (795) |
| Profit before tax | 6,661 | 116 | – | 6,777 |
All values are in British Pounds.
| Removal of: | ||||
|---|---|---|---|---|
| Year ended 31 December 2024 | LloydsBanking Groupstatutory basism | Volatility,<br><br>and other<br><br>items1<br><br>£m | Insurance<br><br>gross up2<br><br>£m | Underlyingbasism |
| Net interest income | 578 | (10) | 12,845 | |
| Other income | (375) | 246 | 5,597 | |
| (1,325) | – | (1,325) | ||
| Total income | (1,122) | 236 | 17,117 | |
| Operating expenses3 | 1,496 | (236) | (10,341) | |
| Impairment charge | (2) | – | (433) | |
| Profit before tax | 372 | – | 6,343 |
All values are in British Pounds.
| Removal of: | ||||
|---|---|---|---|---|
| Year ended 31 December 2023 | LloydsBanking Groupstatutory basism | Volatility,<br><br>and other<br><br>items1<br><br>£m | Insurance<br><br>gross up2<br><br>£m | Underlyingbasism |
| Net interest income | 479 | (12) | 13,765 | |
| Other income | (447) | 239 | 5,123 | |
| (956) | – | (956) | ||
| Total income | (924) | 227 | 17,932 | |
| Operating expenses3 | 1,235 | (227) | (9,815) | |
| Impairment charge | (5) | – | (308) | |
| Profit before tax | 306 | – | 7,809 |
All values are in British Pounds.
1In the year ended 31 December 2025 this comprises the effects of market and other volatility (gain of £72 million, 2024: losses of £144 million, 2023: gain of £35 million); the
amortisation of purchased intangibles (£86 million, 2024: £81 million, 2023: £80 million); restructuring (£46 million of merger, acquisition and integration costs, 2024: £40 million, 2023:
£154 million); and the fair value unwind (losses of £56 million, 2024: losses of £107 million, 2023: losses of £107 million).
2Under 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.
3Net of losses on disposal of operating lease assets of £10 million (2024: profit of £59 million; 2023: profit of £93 million). Statutory operating expenses includes operating lease
depreciation. On an underlying basis operating lease depreciation is included in net income.
Lloyds Banking Group plc Annual Report and Accounts 2025
233
Note 5: Net interest income
| 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | |
|---|---|---|---|
| Interest income: | |||
| Loans and advances to banks | 2,657 | 3,508 | 4,172 |
| Loans and advances to customers | 23,756 | 23,242 | 20,419 |
| Reverse repurchase agreements | 2,336 | 2,685 | 2,044 |
| Debt securities | 658 | 779 | 559 |
| Financial assets held at amortised cost | 29,407 | 30,214 | 27,194 |
| Financial assets at fair value through other comprehensive income | 1,342 | 1,074 | 857 |
| Total interest income1 | 30,749 | 31,288 | 28,051 |
| Interest expense: | |||
| Deposits from banks | (244) | (225) | (213) |
| Customer deposits | (9,257) | (10,132) | (7,148) |
| Repurchase agreements at amortised cost | (1,984) | (2,392) | (2,397) |
| Debt securities in issue at amortised cost2 | (5,299) | (5,493) | (4,253) |
| Lease liabilities | (28) | (31) | (30) |
| Subordinated liabilities | (707) | (738) | (712) |
| Total interest expense | (17,519) | (19,011) | (14,753) |
| Net interest income | 13,230 | 12,277 | 13,298 |
1Includes £1,213 million (2024: £1,104 million; 2023: £923 million) in respect of finance lease receivables.
2The impact of the Group’s hedging arrangements is included on this line.
Net interest income includes a debit of £1,869 million (2024: debit of £2,597 million; 2023: debit of £1,838 million) transferred from the
cash flow hedge reserve (see statement of comprehensive income).
Note 6: Net fee and commission income
| Year ended 31 December 2025 | Retail<br><br>£m | CommercialBankingm | Insurance, Pensions and Investmentsm | Other<br><br>£m | Total<br><br>£m |
|---|---|---|---|---|---|
| Fee and commission income: | |||||
| Current accounts | 430 | – | 673 | ||
| Credit and debit card fees | 845 | – | 1,324 | ||
| Commercial banking and treasury fees | – | – | 434 | ||
| Unit trust and insurance broking | – | – | 65 | ||
| Factoring | – | – | 66 | ||
| Other fees and commissions | 80 | 14 | 556 | ||
| Total fee and commission income | 1,355 | 14 | 3,118 | ||
| Fee and commission expense | (811) | (16) | (1,334) | ||
| Net fee and commission income | 544 | (2) | 1,784 |
All values are in British Pounds.
| Year ended 31 December 2024 | Retail<br><br>£m | CommercialBankingm | Insurance, Pensions and Investmentsm | Other<br><br>£m | Total<br><br>£m |
|---|---|---|---|---|---|
| Fee and commission income: | |||||
| Current accounts | 423 | – | 644 | ||
| Credit and debit card fees | 829 | – | 1,286 | ||
| Commercial banking and treasury fees | – | 1 | 373 | ||
| Unit trust and insurance broking | – | – | 71 | ||
| Factoring | – | – | 69 | ||
| Other fees and commissions | 74 | 17 | 500 | ||
| Total fee and commission income | 1,326 | 18 | 2,943 | ||
| Fee and commission expense | (745) | (16) | (1,184) | ||
| Net fee and commission income | 581 | 2 | 1,759 |
All values are in British Pounds.
Lloyds Banking Group plc Annual Report and Accounts 2025
234
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 6: Net fee and commission income continued
| Year ended 31 December 2023 | Retail<br><br>£m | CommercialBankingm | Insurance, Pensions and Investmentsm | Other<br><br>£m | Total<br><br>£m |
|---|---|---|---|---|---|
| Fee and commission income: | |||||
| Current accounts | 406 | – | 624 | ||
| Credit and debit card fees | 800 | – | 1,264 | ||
| Commercial banking and treasury fees | – | – | 334 | ||
| Unit trust and insurance broking | – | – | 69 | ||
| Factoring | – | – | 75 | ||
| Other fees and commissions | 85 | 25 | 560 | ||
| Total fee and commission income | 1,291 | 25 | 2,926 | ||
| Fee and commission expense | (673) | (16) | (1,095) | ||
| Net fee and commission income | 618 | 9 | 1,831 |
All values are in British Pounds.
Fees and commissions which are an integral part of the effective interest rate form part of net interest income shown in note 5. Fees and
commissions relating to instruments that are held at fair value through profit or loss are included within net trading income shown in
note 7.
In determining the disaggregation of fees and commissions the Group has considered how the nature, amount, timing and uncertainty of
revenue and cash flows are affected by economic factors. It has determined that the above disaggregation by product type provides useful
information that does not aggregate items that have substantially different characteristics.
At 31 December 2025, the Group held on its balance sheet £174 million (31 December 2024: £163 million) in respect of services provided to
customers and £92 million (31 December 2024: £75 million) in respect of amounts received from customers for services to be provided after
the balance sheet date. Current unsatisfied performance obligations amount to £207 million (31 December 2024: £195 million); the Group
expects to receive substantially all of this revenue by the end of 2027.
Income recognised during the year included £30 million (2024: £28 million) in respect of amounts included in the contract liability balance
at the start of the year and £nil (2024: nil) in respect of amounts from performance obligations satisfied in previous years.
The most significant performance obligations undertaken by the Group are in respect of current accounts, the provision of other banking
services for commercial customers and credit and debit card services.
In respect of current accounts, the Group receives fees for the provision of bank account and transaction services such as ATM services,
fund transfers, overdraft facilities and other value-added offerings.
For commercial customers, alongside its provision of current accounts, the Group provides other corporate banking services including
factoring and commitments to provide loan financing. Loan commitment fees are included in fees and commissions where the loan is not
expected to be drawn down by the customer.
The Group receives interchange and merchant fees, together with fees for overseas use and cash advances, for provision of card services to
cardholders and merchants.
Note 7: Net trading income
| 2025<br><br>£m | 20241<br><br>£m | 20231<br><br>£m | |
|---|---|---|---|
| Net gains on financial assets and liabilities at fair value through profit or loss: | |||
| Net gains on financial instruments held for trading2 | 716 | 778 | 518 |
| Net gains on other financial instruments mandatorily held at fair value through profit or loss | 555 | 662 | 561 |
| Net losses on financial liabilities designated at fair value through profit or loss | (252) | (336) | (341) |
| 1,019 | 1,104 | 738 | |
| Foreign exchange | 411 | 687 | 585 |
| Investment property gains (losses) | 55 | 21 | (16) |
| Net trading income | 1,485 | 1,812 | 1,307 |
1Comparative periods have been represented for presentational changes. See note 1.
2Includes hedge ineffectiveness in respect of fair value hedges (2025: loss of £54 million; 2024: loss of £81 million; 2023: loss of £267 million) and cash flow hedges (2025: gain of
£54 million; 2024: loss of £60 million; 2023: gain of £19 million).
Lloyds Banking Group plc Annual Report and Accounts 2025
235
Note 8: Insurance business
(A)Insurance service result
| 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | |
|---|---|---|---|
| Insurance revenue | |||
| Amounts relating to the changes in liabilities for remaining coverage: | |||
| CSM recognised for services provided | 590 | 449 | 329 |
| Change in risk adjustments for non-financial risk for risk expired | 49 | 58 | 84 |
| Expected claims and other insurance service expenses | 1,730 | 1,916 | 1,907 |
| Charges to funds in respect of policyholder tax and other | 200 | 108 | 87 |
| 2,569 | 2,531 | 2,407 | |
| Recovery of insurance acquisition cash flows | 117 | 105 | 87 |
| Total life | 2,686 | 2,636 | 2,494 |
| Total non-life | 752 | 655 | 514 |
| Total insurance revenue | 3,438 | 3,291 | 3,008 |
| Insurance service expense | |||
| Incurred claims and other insurance service expenses | (1,749) | (1,978) | (1,897) |
| Changes that relate to past service: adjustment to liabilities for incurred claims | – | (4) | – |
| Changes that relate to future service: (losses) reversal of losses on onerous contracts | (84) | (72) | 58 |
| Amortisation of insurance acquisition cash flows | (117) | (105) | (88) |
| Total life excluding net impairment loss on insurance acquisition assets | (1,950) | (2,159) | (1,927) |
| Net impairment loss on insurance acquisition assets | – | (9) | (7) |
| Total life | (1,950) | (2,168) | (1,934) |
| Total non-life1 | (593) | (565) | (480) |
| Total insurance service expense | (2,543) | (2,733) | (2,414) |
| Net (expense) income from reinsurance contracts held | (139) | (72) | 2 |
| Insurance service result | 756 | 486 | 596 |
1Includes weather-related claims of £111 million (2024: £82 million; 2023: £57 million), of which £97 million (2024: £64 million; 2023: £51 million) was related to severe weather events.
(B)Net investment return on assets held to back insurance and investment contracts and net insurance finance (expense)
income arising from insurance and investment contracts
The following table shows the net investment return on assets held to back insurance and participating investment contracts and the net
finance expense arising from insurance, participating investment and reinsurance contracts, as required by IFRS 17. For completeness, the
net investment return on assets held to back third party interests in consolidated funds and non-participating investment contracts and
the related finance expense is also shown. These contracts are accounted for under IFRS 9.
| 2025 | |||
|---|---|---|---|
| Life<br><br>£m | Non-life<br><br>£m | Total<br><br>£m | |
| Net gains on financial assets and liabilities at fair value through profit or loss | 15,408 | 34 | 15,442 |
| Foreign exchange | (42) | – | (42) |
| Investment property losses | (4) | – | (4) |
| Net investment return on assets held to back insurance and participating investment contracts | 15,362 | 34 | 15,396 |
| Net investment return on assets held to back third party interests in consolidated funds | 2,054 | ||
| Net investment return on assets held to back non-participating investment contracts | 6,394 | ||
| Investment return on assets held to back insurance and investment contracts1 | 23,844 | ||
| Changes in fair value of underlying items of direct participating contracts | (14,943) | – | (14,943) |
| Effects of risk mitigation option | 174 | – | 174 |
| Interest accreted | (701) | (14) | (715) |
| Effect of changes in interest rates and other financial assumptions | 64 | – | 64 |
| Effect of changes in fulfilment cash flows at current rates when CSM is unlocked at locked-in rates | 69 | – | 69 |
| Net finance expense from insurance and participating investment contracts | (15,337) | (14) | (15,351) |
| Net finance income from reinsurance contracts held | 54 | – | 54 |
| Net finance expense from insurance, participating investment and reinsurance contracts | (15,283) | (14) | (15,297) |
| Movement in third party interests in consolidated funds | (1,954) | ||
| Change in non-participating investment contracts | (6,793) | ||
| Net finance expense arising from insurance and investment contracts | (24,044) | ||
| Net investment return and finance result in respect of insurance and investment contracts | (200) |
Lloyds Banking Group plc Annual Report and Accounts 2025
236
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 8: Insurance business continued
| 2024 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Life<br><br>£m | Non-life<br><br>£m | Total<br><br>£m | ||||||
| Net gains on financial assets and liabilities at fair value through profit or loss | 10,247 | 38 | 10,285 | |||||
| Foreign exchange | 196 | – | 196 | |||||
| Investment property losses | (4) | – | (4) | |||||
| Net investment return on assets held to back insurance and participating investment contracts | 10,439 | 38 | 10,477 | |||||
| Net investment return on assets held to back third party interests in consolidated funds | 1,105 | |||||||
| Net investment return on assets held to back non-participating investment contracts | 4,431 | |||||||
| Net investment return on assets held to back insurance and investment contracts1 | 16,013 | |||||||
| Changes in fair value of underlying items of direct participating contracts | (10,844) | – | (10,844) | |||||
| Effects of risk mitigation option | 161 | – | 161 | |||||
| Interest accreted | (839) | (7) | (846) | |||||
| Effect of changes in interest rates and other financial assumptions | 1,001 | – | 1,001 | |||||
| Effect of changes in fulfilment cash flows at current rates when CSM is unlocked at locked-in rates | 140 | – | 140 | |||||
| Net finance expense from insurance and participating investment contracts | (10,381) | (7) | (10,388) | |||||
| Net finance income from reinsurance contracts held | 47 | – | 47 | |||||
| Net finance expense from insurance, participating investment and reinsurance contracts | (10,334) | (7) | (10,341) | |||||
| Movement in third party interests in consolidated funds | (1,059) | |||||||
| Change in non-participating investment contracts | (4,878) | |||||||
| Net finance expense arising from insurance and investment contracts | (16,278) | |||||||
| Net investment return and finance result in respect of insurance and investment contracts | (265) | 2023 | ||||||
| --- | --- | --- | --- | |||||
| Life<br><br>£m | Non-life<br><br>£m | Total<br><br>£m | ||||||
| Net gains on financial assets and liabilities at fair value through profit or loss | 11,218 | 35 | 11,253 | |||||
| Foreign exchange | 542 | – | 542 | |||||
| Investment property losses | (4) | – | (4) | |||||
| Net investment return on assets held to back insurance and participating investment contracts | 11,756 | 35 | 11,791 | |||||
| Net investment return on assets held to back third party interests in consolidated funds | 1,179 | |||||||
| Net investment return on assets held to back non-participating investment contracts | 3,772 | |||||||
| Net investment return on assets held to back insurance and investment contracts1 | 16,742 | |||||||
| Changes in fair value of underlying items of direct participating contracts | (10,293) | – | (10,293) | |||||
| Effects of risk mitigation option | 172 | – | 172 | |||||
| Interest accreted | (874) | (6) | (880) | |||||
| Effect of changes in interest rates and other financial assumptions | (654) | – | (654) | |||||
| Effect of changes in fulfilment cash flows at current rates when CSM is unlocked at locked-in rates | (80) | – | (80) | |||||
| Net finance expense from insurance and participating investment contracts | (11,729) | (6) | (11,735) | |||||
| Net finance expense from reinsurance contracts held | 51 | – | 51 | |||||
| Net finance expense from insurance, participating investment and reinsurance contracts | (11,678) | (6) | (11,684) | |||||
| Movement in third party interests in consolidated funds | (1,109) | |||||||
| Change in non-participating investment contracts | (3,983) | |||||||
| Net finance income arising from insurance and investment contracts | (16,776) | |||||||
| Net investment return and finance result in respect of insurance and investment contracts | (34) |
1Includes income of £15,009 million (2024: income of £10,688 million; 2023: income of £10,200 million) in respect of unit-linked and with-profit contracts measured applying the
variable fee approach. The assets generating the investment return held to back insurance and investment contracts are carried at fair value on the Group’s balance sheet.
Lloyds Banking Group plc Annual Report and Accounts 2025
237
Note 8: Insurance business continued
(C)Insurance and participating investment contracts assets and liabilities
| 2025 | 2024 | |||||
|---|---|---|---|---|---|---|
| Life<br><br>£m | Non-life<br><br>£m | Total<br><br>£m | Life<br><br>£m | Non-life<br><br>£m | Total<br><br>£m | |
| Insurance contract assets | 113 | – | 113 | – | – | – |
| Liabilities arising from insurance and participating investment<br><br>contracts1 | (134,906) | (412) | (135,318) | (121,700) | (387) | (122,087) |
| Other liabilities2 | – | – | – | (5,268) | – | (5,268) |
| Net liability | (134,793) | (412) | (135,205) | (126,968) | (387) | (127,355) |
| Insurance acquisition assets | – | 34 | 34 | – | 23 | 23 |
| Insurance and participating investment contacts net liability | (134,793) | (378) | (135,171) | (126,968) | (364) | (127,332) |
1Excluding insurance acquisition assets.
2Liabilities arising from insurance contracts relating to the disposal of the Group's bulk annuity business were classified as disposal group liabilities in 2024 and presented in Other
liabilities in note 27.
On 13 March 2024, the Group entered into a business transfer agreement with Rothesay Life plc for the sale of the Group’s bulk annuity
business and to pursue the transfer of associated business assets and assumed liabilities under Part VII of the Financial Services and Markets
Act 2000. A reinsurance agreement between the Group and Rothesay Life plc was signed on 30 April 2024 to materially de-risk the Group’s
bulk annuity portfolio. The Part VII transfer was completed in June 2025 and associated reinsurance agreements were concluded.
At 31 December 2024, the Group presented the assets and liabilities relating to the bulk annuity business, including the reinsurance
contract assets arising from the agreement between the Group and Rothesay Life plc, as a disposal group. At the Part VII transfer date, the
Group derecognised the assets and liabilities of the disposal group, comprising £4.9 billion of reinsurance contract assets, £5.1 billion of
insurance contract liabilities, £50 million of goodwill and a £9 million deferred tax asset. Following the derecognition requirements in IFRS
17 for transfers of contracts to a third party, the Group recognised £179 million in insurance revenue, representing the release of CSM for
future service at the transfer date. The derecognition of the goodwill and deferred tax asset was charged to other operating income. The
overall pre-tax gain on derecognition of the disposal group was £120 million.
Of the fair value of underlying items in respect of direct participating contracts of £121,347 million (2024: £110,045 million), £122,685 million
(2024: £111,435 million) were financial assets at fair value through profit or loss and £902 million (2024: £1,125 million) were derivative
financial liabilities.
(D)Reconciliation of insurance balances for liability for remaining coverage and liability for incurred claims
| 2025 | 2024 | |||
|---|---|---|---|---|
| Liabilities for<br><br>remaining coverage | Liabilities for<br><br>remaining coverage | |||
| Life | Excluding loss<br><br>component<br><br>£m | Losscomponentm | Excluding loss<br><br>component<br><br>£m | Losscomponentm |
| Net liability at 1 January1 | (125,854) | (515) | (118,724) | (466) |
| Contracts under the fair value<br><br>transition approach | 1,651 | – | 1,498 | – |
| Other contracts | 1,035 | – | 1,138 | – |
| Insurance revenue | 2,686 | – | 2,636 | – |
| Insurance service expenses2 | (120) | (40) | (105) | (44) |
| Insurance service result | 2,566 | (40) | 2,531 | (44) |
| Net finance expense from<br><br>insurance and participating<br><br>investment contracts | (15,313) | (19) | (10,371) | (5) |
| Exchange differences | (84) | – | 80 | – |
| Total change in profit or loss | (12,831) | (59) | (7,760) | (49) |
| Investment components | 10,411 | – | 10,205 | – |
| Premiums received | (10,618) | – | (10,679) | – |
| Claims and other insurance<br><br>service expenses paid | – | – | 849 | – |
| Insurance acquisition cash flows | 306 | – | 265 | – |
| Cash flows | (10,312) | – | (9,565) | – |
| Derecognition Consideration3 | 4,932 | – | – | – |
| Transfer to other items in the<br><br>balance sheet | – | – | (10) | – |
| Net liability at 31 December1 | (133,654) | (574) | (125,854) | (515) |
All values are in British Pounds.
1Excluding insurance acquisition assets.
2Losses and reversal of losses on onerous contracts amounted to a net loss of £84 million (2024: net losses of £72 million). Amortisation of insurance acquisition cash flows amounted to
£117 million (2024: £105 million).
3Derecognition consideration recognised due to transfer of bulk annuity business to Rothesay, as set out in section (C).
Lloyds Banking Group plc Annual Report and Accounts 2025
238
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 8: Insurance business continued
| 2024 | ||||
|---|---|---|---|---|
| Liabilities for<br><br>remaining coverage | ||||
| Non-life | Excluding losscomponentm | Losscomponentm | Excluding loss<br><br>component<br><br>£m | Losscomponentm |
| Net liability at 1 January1 | – | (25) | – | |
| Contracts under the fair value<br><br>transition approach | – | – | – | |
| Other contracts | – | 655 | – | |
| Insurance revenue | – | 655 | – | |
| Insurance service expenses2 | – | (32) | – | |
| Insurance service result | – | 623 | – | |
| Net finance income (expense)<br><br>from insurance and participating<br><br>investment contracts | – | – | – | |
| Total change in profit or loss | – | 623 | – | |
| Premiums received | – | (659) | – | |
| Claims and other insurance<br><br>service expenses paid | – | – | – | |
| Insurance acquisition cash flows | – | 29 | – | |
| Cash flows | – | (630) | – | |
| Net liability at 31 December1 | – | (32) | – |
All values are in British Pounds.
1Excluding insurance acquisition assets.
2Losses and reversal of losses on onerous contracts amounted to £nil (2024: £nil). Amortisation of insurance acquisition cash flows amounted to £31 million (2024: £32 million).
(E)Summary of contractual service margin and risk adjustment
| 2025 | 2024 | |||||
|---|---|---|---|---|---|---|
| Life<br><br>£m | Non-life<br><br>£m | Total<br><br>£m | Life<br><br>£m | Non-life<br><br>£m | Total<br><br>£m | |
| CSM on insurance and participating investment contracts1 | 4,385 | – | 4,385 | 4,646 | – | 4,646 |
| CSM on reinsurance contracts2 | (90) | – | (90) | (467) | – | (467) |
| Total CSM | 4,295 | – | 4,295 | 4,179 | – | 4,179 |
| Risk adjustment on insurance and participating investment contracts1 | 946 | 23 | 969 | 891 | 19 | 910 |
| Risk adjustment on reinsurance contracts2 | (39) | – | (39) | (68) | (1) | (69) |
| Total risk adjustment | 907 | 23 | 930 | 823 | 18 | 841 |
| Total | 5,202 | 23 | 5,225 | 5,002 | 18 | 5,020 |
1Includes CSM of £nil (2024: £544 million) and risk adjustment of £nil (2024: £36 million) arising from insurance contracts classified as disposal group liabilities and presented in other
liabilities. Further information on the disposal group is provided in section (C).
2Includes CSM of £nil (2024: £(426) million) and risk adjustment of £nil (2024: £(36) million) on reinsurance contracts classified as disposal group assets and presented in other assets.
Further information on the disposal group is provided in section (C).
Lloyds Banking Group plc Annual Report and Accounts 2025
239
Note 8: Insurance business continued
(F)Reconciliation of measurement components of insurance contract balances
| 2025 | |||||||
|---|---|---|---|---|---|---|---|
| Contractual service margin (CSM) | |||||||
| Life | Present<br><br>value of<br><br>future<br><br>cash<br><br>flows<br><br>£m | Riskadjustmentfor non-financialriskm | Contracts<br><br>measured<br><br>under the<br><br>fair value<br><br>approach<br><br>£m | Other<br><br>contracts<br><br>£m | Total CSM<br><br>£m | Total<br><br>£m | |
| Net liability at 1 January1 | (121,431) | (1,415) | (3,231) | (4,646) | (126,968) | ||
| Relating to current services | 179 | 190 | 400 | 590 | 820 | ||
| Contracts initially recognised in the year | (14) | – | (18) | (18) | (92) | ||
| Changes in estimates that adjust the CSM | 319 | 65 | (335) | (270) | – | ||
| Changes in estimates that result in losses and reversal<br><br>of losses on onerous contracts | 10 | – | – | – | 8 | ||
| Relating to future services | 315 | 65 | (353) | (288) | (84) | ||
| Relating to past services | (6) | – | – | – | – | ||
| Insurance service result | 488 | 255 | 47 | 302 | 736 | ||
| Net finance expense from insurance and participating<br><br>investment contracts | (15,302) | 5 | (40) | (35) | (15,337) | ||
| Exchange differences | (77) | (6) | – | (6) | (84) | ||
| Total change in profit or loss | (14,891) | 254 | 7 | 261 | (14,685) | ||
| Premiums received | (10,618) | – | – | – | (10,618) | ||
| Claims and other insurance service expenses paid | 12,240 | – | – | – | 12,240 | ||
| Insurance acquisition cash flows | 306 | – | – | – | 306 | ||
| Cash flows | 1,928 | – | – | – | 1,928 | ||
| Derecognition Consideration2 | 4,932 | – | – | – | 4,932 | ||
| Transfer to other items in the balance sheet | – | – | – | – | – | ||
| Net liability at 31 December1 | (129,462) | (1,161) | (3,224) | (4,385) | (134,793) |
All values are in British Pounds.
1Excluding insurance acquisition assets.
2Derecognition consideration recognised due to transfer of bulk annuity business to Rothesay, as set out in section (C).
| 2024 | |||||||
|---|---|---|---|---|---|---|---|
| Contractual service margin (CSM) | |||||||
| Life | Present<br><br>value of<br><br>future<br><br>cash<br><br>flows<br><br>£m | Riskadjustmentfor non-financialriskm | Contracts<br><br>measured<br><br>under the<br><br>fair value<br><br>approach<br><br>£m | Other<br><br>contracts<br><br>£m | Total CSM<br><br>£m | Total<br><br>£m | |
| Net liability at 1 January1 | (114,209) | (1,473) | (2,942) | (4,415) | (119,783) | ||
| Relating to current services | 46 | 155 | 294 | 449 | 553 | ||
| Contracts initially recognised in the year | 33 | – | (61) | (61) | (93) | ||
| Changes in estimates that adjust the CSM | 334 | (95) | (491) | (586) | – | ||
| Changes in estimates that result in losses and reversal<br><br>of losses on onerous contracts | (2) | – | – | – | 21 | ||
| Relating to future services | 365 | (95) | (552) | (647) | (72) | ||
| Relating to past services | (3) | – | – | – | (4) | ||
| Insurance service result | 408 | 60 | (258) | (198) | 477 | ||
| Net finance (expense) income from insurance and<br><br>participating investment contracts | (10,341) | (9) | (31) | (40) | (10,381) | ||
| Exchange differences | 72 | 7 | – | 7 | 80 | ||
| Total change in profit or loss | (9,861) | 58 | (289) | (231) | (9,824) | ||
| Premiums received | (10,679) | – | – | – | (10,679) | ||
| Claims and other insurance service expenses paid | 13,063 | – | – | – | 13,063 | ||
| Insurance acquisition cash flows | 265 | – | – | – | 265 | ||
| Cash flows | 2,649 | – | – | – | 2,649 | ||
| Derecognition Consideration | – | – | – | – | – | ||
| Transfer to other items in the balance sheet | (10) | – | – | – | (10) | ||
| Net liability at 31 December1 | (121,431) | (1,415) | (3,231) | (4,646) | (126,968) |
All values are in British Pounds.
1Excluding insurance acquisition assets.
Lloyds Banking Group plc Annual Report and Accounts 2025
240
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 8: Insurance business continued
The Group estimates the Risk adjustment separately from other components of the fulfilment cashflows using an explicit margins
approach. A confidence level scenario, allowing for diversification of risks across the insurance business, is used to determine the margins to
be applied to the best estimate assumptions which are then used to calculate the risk adjustment at a policy level. The risk adjustment
represents the difference in the value of the best estimate cash flows with and without these margins.
The confidence level corresponding to the risk adjustment is 85% (2024: 85%). The risk adjustment is calibrated to the value at risk over a
one-year time horizon at this confidence level for non-financial risks. This is translated, using statistical approximations, into an equivalent
confidence level on a value at risk basis over the expected lifetime of in-force policies of approximately 68% (2024: 68%) at end of the
reporting period.
(G)Impacts of insurance and participating investment contracts recognised in the year
| 2025 | 2024 | |||||
|---|---|---|---|---|---|---|
| Life | Profitable<br><br>contracts<br><br>issued<br><br>£m | Onerous<br><br>contracts<br><br>issued<br><br>£m | Total<br><br>£m | Profitable<br><br>contracts<br><br>issued<br><br>£m | Onerous<br><br>contracts<br><br>issued<br><br>£m | Total<br><br>£m |
| Insurance and participating investment contracts | ||||||
| Insurance acquisition cash flows | 123 | 185 | 308 | 56 | 203 | 259 |
| Claims and other directly attributable expenses | 5,573 | 524 | 6,097 | 1,446 | 4,498 | 5,944 |
| Estimates of the present value of future cash outflows | 5,696 | 709 | 6,405 | 1,502 | 4,701 | 6,203 |
| Estimates of the present value of future cash inflows | (5,761) | (630) | (6,391) | (1,577) | (4,659) | (6,236) |
| Risk adjustment for non-financial risk | 47 | 13 | 60 | 14 | 51 | 65 |
| Contractual service margin | 18 | – | 18 | 61 | – | 61 |
| Losses recognised on initial recognition | – | 92 | 92 | – | 93 | 93 |
(H)Life business contractual service margin run-off
The following table analyses the expected recognition of the contractual service margin (CSM) in profit or loss.
| At 31 December 2025 | Less than 1<br><br>year<br><br>£m | 1 to 2<br><br>years<br><br>£m | 2 to 3<br><br>years<br><br>£m | 3 to 4<br><br>years<br><br>£m | 4 to 5<br><br>years<br><br>£m | 5 to 10<br><br>years<br><br>£m | Over 10<br><br>years<br><br>£m | Total<br><br>£m | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Pensions and investments | (277) | (251) | (207) | (189) | (172) | (663) | (1,358) | (3,117) | ||||||||||
| Annuities, protection and other | (106) | (98) | (90) | (83) | (78) | (306) | (507) | (1,268) | ||||||||||
| Insurance and participating<br><br>investment contracts | (383) | (349) | (297) | (272) | (250) | (969) | (1,865) | (4,385) | ||||||||||
| Reinsurance contracts held | 12 | 10 | 8 | 7 | 6 | 18 | 29 | 90 | ||||||||||
| Total | (371) | (339) | (289) | (265) | (244) | (951) | (1,836) | (4,295) | At 31 December 2024 | Less than 1<br><br>year<br><br>£m | 1 to 2<br><br>years<br><br>£m | 2 to 3<br><br>years<br><br>£m | 3 to 4<br><br>years<br><br>£m | 4 to 5<br><br>years<br><br>£m | 5 to 10<br><br>years<br><br>£m | Over 10<br><br>years<br><br>£m | Total<br><br>£m | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| Pensions and investments | (240) | (218) | (199) | (164) | (152) | (591) | (1,169) | (2,733) | ||||||||||
| Annuities, protection and other1 | (660) | (106) | (98) | (90) | (83) | (331) | (545) | (1,913) | ||||||||||
| Insurance and participating<br><br>investment contracts | (900) | (324) | (297) | (254) | (235) | (922) | (1,714) | (4,646) | ||||||||||
| Reinsurance contracts held2 | 433 | 5 | 4 | 3 | 3 | 8 | 11 | 467 | ||||||||||
| Total | (467) | (319) | (293) | (251) | (232) | (914) | (1,703) | (4,179) |
1CSM of £(544) million arising from insurance contracts classified as disposal group liabilities was included in less than one year.
2CSM of £426 million arising from reinsurance contracts held classified as disposal group assets was included in less than one year.
(I)Life insurance sensitivity analysis
Critical accounting judgements and key sources of estimation uncertainty
| Critical judgements: | Determining the characteristics which make a product illiquid, the level of illiquidity premium to apply to<br><br>the discount rate of different products and how the illiquidity premium is determined |
|---|---|
| Key sources of estimation uncertainty: | Increase in illiquidity premia and widening of credit default spreads |
The following table demonstrates the effect of reasonably possible changes in key assumptions on profit before tax and equity disclosed in
these financial statements assuming that the other assumptions remain unchanged. In practice this is unlikely to occur, and changes in
some assumptions may be correlated. The sensitivities below are on a net of reinsurance basis. These amounts include movements in
liabilities relating to insurance and participating investment contracts and related assets in order to demonstrate the impacts on
shareholder profit and equity. Therefore, these sensitivities have not been applied to the proportion of assets and liabilities where the risks
are borne by the policyholder and where assets and liabilities are well matched so as not to have a significant impact on shareholder profit.
In 2025, the Group utilised all its remaining brought forward life assurance expenses to reduce the cost of policyholder tax charged on its
investment gains. Future investment gains cannot therefore be sheltered by expenses, and as a result the equity impacts in sensitivity table
below for 2025 includes the cost of policyholder tax whereas the 2024 comparatives do not.
Lloyds Banking Group plc Annual Report and Accounts 2025
241
Note 8: Insurance business continued
| 2025 | 2024 | ||||
|---|---|---|---|---|---|
| Change in variable | Increase<br><br>(reduction)<br><br>in profit<br><br>before tax<br><br>£m | Increase<br><br>(reduction)<br><br>in equity<br><br>£m | Increase<br><br>(reduction)<br><br>in profit<br><br>before tax<br><br>£m | Increase<br><br>(reduction)<br><br>in equity<br><br>£m | |
| Key sources of estimation uncertainty | |||||
| Risk free rate, including illiquidity premia | 1% reduction | 271 | 157 | 272 | 204 |
| 1% increase | (237) | (136) | (227) | (171) | |
| Widening of credit default spreads on corporate bonds<br><br>and other credit risky assets | 0.25% addition | (186) | (140) | (174) | (131) |
| Other market exposure | |||||
| Equity | 10% reduction | 64 | 145 | 137 | 103 |
| 10% increase | (58) | (144) | (127) | (95) | |
| Inflation | 50bps reduction | (77) | (58) | (88) | (66) |
| 50bps increase | 84 | 63 | 98 | 73 | |
| Other accounting estimates | |||||
| Annuitant mortality | 5% reduction | 33 | 25 | 48 | 36 |
| 5% increase | (37) | (28) | (45) | (33) | |
| Future maintenance and investment expenses | 10% reduction | 29 | 22 | 30 | 23 |
| 10% increase | (31) | (23) | (30) | (23) | |
| Non-annuitant mortality and morbidity | 5% reduction | 31 | 24 | 17 | 13 |
| 5% increase | (26) | (20) | (10) | (8) | |
| Lapse rates | 10% reduction | 8 | 6 | 5 | 4 |
| 10% increase | (9) | (6) | (4) | (3) |
At each measurement date, the Group estimates, based on information about past events, current conditions and forecasts of future
conditions, the expected value of future cash flows. The calculation uses a range of scenarios that reflect the full range of possible
outcomes. The assumptions used to develop the estimates of future cash flows are reassessed at each reported date to reflect conditions
existing at the measurement date.
Risk free rate, including illiquidity premia
The Group has applied judgement in determining the characteristics which make a product illiquid, the level of illiquidity premium to apply
to the discount rate of different products and how the illiquidity premium is determined, where material.
Due to the illiquid nature of their cash flows, an illiquidity premium has been applied to the discount rate of the Group’s annuity contracts.
At initial recognition, the illiquidity premium is calculated with reference to a strategic portfolio of assets, and subsequently measured to
reflect the mix of actual assets backing annuity contracts. To reflect differences between the characteristics of insurance contracts and a
reference portfolio, adjustments for credit risk are required when determining appropriate discount rates. The Group uses the fundamental
spread to maintain consistency with its Solvency II approach. For protection contracts, the illiquidity premium is based on the spread on a
covered bond index.
The average sterling yield curves that were used to discount the estimates of future cash flows that do not vary based on the returns of the
underlying items are as follows:
| 1 year | 5 year | 10 year | 20 year | 30 year | |
|---|---|---|---|---|---|
| 2025 | 4.74 | 5.25 | 6.00 | 6.24 | 5.57 |
| 2024 | 5.58 | 5.17 | 5.66 | 5.71 | 5.06 |
The Group determines the quantity of benefits provided under each contract using different bases, depending on the product. For with-
profits and unit linked products, the policyholder account value (or the guaranteed benefits, if higher) is used. For annuities, pre-vesting
date the defined amount payable is used (immediate annuities have no pre-vesting date period) and post-vesting date the annuity payout
is used.
Widening of credit default spreads on corporate bonds and other credit risky assets
The Group applies a sensitivity showing the impact of an increase in credit default spreads on corporate bonds and other credit risky assets
and the corresponding reduction in market values. Swap curves, the risk-free rate and illiquidity premia are all assumed to be unchanged
and therefore this sensitivity impacts the related assets.
Equity
The Group applies a sensitivity showing the impact of an instantaneous increase (decrease) in the value of equity markets. This impacts the
value of unit linked and with-profits business as the assets backing the policyholder liabilities rise (fall) leading to an increase (reduction) the
value of future annual management charges received. The overall impact is affected by the Group's unit-matching policy which mitigates
the impact of equity market movements on the value of these future charges. The Group also implements an equity market hedge along
with utilising the Risk Mitigation Option under IFRS17 to further mitigate equity market movement impacts.
Inflation
The Group applies a sensitivity showing the impact of an increase (decrease) in inflation. This impacts the level of expenses incurred across
all lines of business as well as any inflation linked premiums or benefits.
Lloyds Banking Group plc Annual Report and Accounts 2025
242
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 8: Insurance business continued
Mortality
The mortality assumptions for the main classes of business are set with regard to recent Group experience and general industry trends,
which are adjusted for smoker status and age/gender specific factors. The base mortality tables used for the annuities business for the year
ended 31 December 2025 and the prior period were selected from the bespoke mortality tables. The mortality improvements adopt the
100% Bespoke tables and CMI2024_{M/F}_Q3(7.25) HL-1_{2.0/1.8}%_{0.5/0.5}A_2013 for the year ended 31 December 2025; and the 100%
Bespoke tables and CMI 2023_{M/F}_(7.25)_{2.0/1.8}%_{0.5/0.5}A_2013 for the prior period.
Lapse rates
Lapse rates refer to the rate of policy termination or the rate at which policyholders stop paying regular premiums due under the contract.
Historical persistency experience is analysed using statistical techniques. As experience can vary considerably between different product
types and for contracts that have been in force for different periods, the data is broken down into broadly homogeneous groups for the
purposes of determining the Group’s lapse rate in determining the assumptions, which are set on a best estimates basis, based on
investigations of historical experience with some expert judgement overlays reflecting expectations of future trends and other external
data. The lapse rates for workplace pensions range from 1.3% to 16.9% (2024: 0.8% to 13.8%) and for longstanding business range from
0.5% to 74.1% (2024: 0.5% to 74.1%), the wide range being a result of the age and variety of products.
Note 9: Other operating income
| 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | |
|---|---|---|---|
| Operating lease rental income | 1,979 | 1,681 | 1,383 |
| Rental income from investment properties (note 24) | 190 | 172 | 146 |
| Other1 | 198 | 81 | 102 |
| Total other operating income | 2,367 | 1,934 | 1,631 |
1 Net gains on disposal of financial assets at fair value through other comprehensive income, previously reported separately, are presented within other.
Note 10: Operating expenses
| 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | |
|---|---|---|---|
| Staff costs: | |||
| Salaries and social security costs1 | 3,846 | 3,819 | 3,651 |
| Pensions and other retirement benefit schemes (note 12) | 527 | 526 | 355 |
| Restructuring and other staff costs | 334 | 327 | 487 |
| 4,707 | 4,672 | 4,493 | |
| Premises and equipment costs2 | 503 | 454 | 449 |
| Depreciation and amortisation3 | 3,477 | 3,426 | 2,905 |
| UK bank levy | 130 | 147 | 150 |
| Regulatory and legal provisions (note 28) | 968 | 899 | 675 |
| Other | 2,786 | 2,594 | 2,720 |
| Operating expenses before adjustment for: | 12,571 | 12,192 | 11,392 |
| Amounts attributable to the acquisition of insurance and participating investment contracts | (191) | (182) | (183) |
| Amounts reported within insurance service expenses | (414) | (409) | (386) |
| Total operating expenses | 11,966 | 11,601 | 10,823 |
1Including social security costs of £454 million (2024: £428 million; 2023: £371 million).
2Net of loss on disposal of operating lease assets of £10 million (2024: profit of £59 million; 2023: profit of £93 million).
3Including depreciation in respect of premises £101 million (2024: £96 million; 2023: £110 million), equipment £349 million (2024: £400 million; 2023: £388 million), operating lease
assets £1,470 million (2024: £1,410 million; 2023: £1,070 million) and right-of-use assets £182 million (2024: £198 million; 2023: £209 million).
Average headcount
The average number of persons on a headcount basis employed by the Group during the year was as follows:
| 2025 | 2024 | 2023 | |
|---|---|---|---|
| UK | 60,331 | 64,334 | 65,390 |
| Overseas | 3,707 | 1,895 | 807 |
| Total | 64,038 | 66,229 | 66,197 |
Performance-based compensation
The tables below analyse the Group’s performance-based compensation costs between those relating to the current performance year and
those relating to earlier years.
| Performance-based<br><br>compensation expense | Performance-based compensation expense<br><br>deferred until later years | |||||
|---|---|---|---|---|---|---|
| 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | |
| Awards made in respect of the year ended 31 December | 343 | 300 | 316 | 83 | 90 | 108 |
| Awards made in respect of earlier years | 92 | 96 | 124 | 37 | 34 | 22 |
| 435 | 396 | 440 | 120 | 124 | 130 |
Performance-based awards expensed in 2025 include cash awards amounting to £225 million (2024: £162 million; 2023: £169 million).
Lloyds Banking Group plc Annual Report and Accounts 2025
243
Note 11: Share-based payments
Charge to the income statement
The charge to the income statement is set out below:
| 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | |
|---|---|---|---|
| Deferred bonus plan | 186 | 206 | 241 |
| Options and shares granted in the year | 12 | 15 | 20 |
| Options and shares granted in prior years | 51 | 60 | 67 |
| 63 | 75 | 87 | |
| Total charge to the income statement | 249 | 281 | 328 |
During the year ended 31 December 2025 the Group operated the following share-based payment schemes, which are mainly
equity settled.
Group Performance Share plan
The Group operates a Group Performance Share plan that is part equity settled. Bonuses in respect of employee service in 2025 have been
recognised in the charge in line with the proportion of the deferral period completed.
Save-As-You-Earn schemes
Eligible employees may enter into contracts through the Save-As-You-Earn (SAYE) schemes to save up to £500 per month and, at the
expiry of a fixed term of three years, have the option to use these savings within six months of the expiry of the fixed term to acquire shares
in the Group at a discounted price of no less than 90% of the market price at the start of the invitation period.
Movements in the number of share options outstanding under the SAYE schemes are set out below:
| 2025 | 2024 | |||
|---|---|---|---|---|
| Number<br><br>of options | Weighted<br><br>average<br><br>exercise price<br><br>(pence) | Number<br><br>of options | Weighted<br><br>average<br><br>exercise price<br><br>(pence) | |
| Outstanding at 1 January | 797,624,786 | 42.30 | 1,311,205,148 | 31.70 |
| Granted | 119,602,764 | 74.35 | 200,820,157 | 52.35 |
| Exercised | (189,981,525) | 39.40 | (663,187,372) | 24.60 |
| Forfeited | (24,349,649) | 43.66 | (17,375,716) | 39.01 |
| Cancelled | (15,760,828) | 47.99 | (27,852,684) | 40.70 |
| Expired | (1,816,675) | 39.45 | (5,984,747) | 35.40 |
| Outstanding at 31 December | 685,318,873 | 48.52 | 797,624,786 | 42.30 |
| Exercisable at 31 December | 178,806 | 39.40 | 955,281 | 24.25 |
The weighted average share price at the time that the options were exercised during 2025 was £0.61 (2024: £0.47). The weighted average
remaining contractual life of options outstanding at the end of the year was 1.88 years (2024: 1.85 years).
The weighted average fair value of SAYE options granted during 2025 was £0.15 (2024: £0.09). The fair values of the SAYE options have
been determined using a standard Black-Scholes model.
Other share option plans
Executive Share Plans – buyout and retention awards
Share options may be granted to senior employees under the Lloyds Banking Group Executive Share Plan 2003, Lloyds Banking Group
Executive Group Ownership Share Plan and Deferred Bonus Scheme 2021 specifically to facilitate recruitment (to compensate new recruits
for any lost share awards), and also to make grants to key individuals for retention purposes. In some instances, grants may be made
subject to individual performance conditions.
Participants are not entitled to any dividends paid during the vesting period.
| 2025 | 2024 | |||
|---|---|---|---|---|
| Number<br><br>of options | Weighted<br><br>average<br><br>exercise price<br><br>(pence) | Number<br><br>of options | Weighted<br><br>average<br><br>exercise price<br><br>(pence) | |
| Outstanding at 1 January | 15,578,997 | nil | 26,131,255 | nil |
| Granted | – | nil | 768,170 | nil |
| Exercised | (6,945,829) | nil | (10,815,436) | nil |
| Forfeited | (253,070) | nil | (488,091) | nil |
| Lapsed | – | nil | (16,901) | nil |
| Outstanding at 31 December | 8,380,098 | nil | 15,578,997 | nil |
| Exercisable at 31 December | 200,359 | nil | 988,243 | nil |
The weighted average fair value of options granted in the year was £nil (2024: £0.46). The fair values of options granted have been
determined using a standard Black-Scholes model. The weighted average share price at the time that the options were exercised during
2025 was £0.75 (2024: £0.53). The weighted average remaining contractual life of options outstanding at the end of the year was 5.9 years
(2024: 6.2 years).
Included in the above are awards to the Group Chief Executive.
Lloyds Banking Group plc Annual Report and Accounts 2025
244
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 11: Share-based payments continued
Charlie Nunn joined the Group on 16 August 2021 as Group Chief Executive. He was granted deferred share awards over 8,301,708 shares to
replace unvested awards from his former employer, HSBC, that were forfeited as a result of him joining the Group.
| 2025<br><br>Number<br><br>of options | 2024<br><br>Number<br><br>of options | |
|---|---|---|
| Outstanding at 1 January | 3,968,909 | 5,337,899 |
| Exercised | (1,368,990) | (1,368,990) |
| Outstanding at 31 December | 2,599,919 | 3,968,909 |
Other share plans
Lloyds Banking Group Executive Group Ownership Share Plan
The plan, introduced in 2006, is aimed at delivering shareholder value by linking the receipt of shares to an improvement in the
performance of the Group over a three-year period. Awards are made within limits set by the rules of the plan, with the limits determining
the maximum number of shares that can be awarded equating to three times annual salary. In exceptional circumstances this may increase
to four times annual salary.
The Executive Group Ownership awards were replaced by Long Term Share Plan awards in 2021.
| 2025<br><br>Number<br><br>of shares | 2024<br><br>Number<br><br>of shares | |
|---|---|---|
| Outstanding at 1 January | 22,123,194 | 39,804,293 |
| Vested | (10,254,907) | (18,490,246) |
| Forfeited | – | (33,055) |
| Dividend award | – | 842,202 |
| Outstanding at 31 December | 11,868,287 | 22,123,194 |
Lloyds Banking Group Long Term Share Plan
The plan, approved at the 2020 AGM and introduced in 2021, replaced the Executive Group Ownership Share Plan and is intended to
provide alignment to the Group’s aim of delivering sustainable returns to shareholders, supported by its values and behaviours.
The awards in respect of the 2023 grant are due to vest in 2026 at a rate of 100%. Details in relation to the plan are provided in the
directors’ remuneration report.
| 2025<br><br>Number<br><br>of shares | 2024<br><br>Number<br><br>of shares | |
|---|---|---|
| Outstanding at 1 January | 195,879,295 | 262,409,389 |
| Vested | (62,272,967) | (53,608,504) |
| Forfeited | (4,809,902) | (12,921,590) |
| Outstanding at 31 December | 128,796,426 | 195,879,295 |
Lloyds Banking Group Long Term Incentive Plan
The plan, approved at the 2023 AGM and introduced in 2024, replaced the Long Term Share Plan and is intended to deliver stronger
alignment between variable reward outcomes and the creation of shareholder value through the delivery of our strategy and the deepening
of our relationships with our customers.
The awards in respect of the 2024 grant are due to vest in 2027. Details in relation to the plan are provided in the directors’ remuneration report.
| 2025<br><br>Number<br><br>of shares | 2024<br><br>Number<br><br>of shares | |
|---|---|---|
| Outstanding at 1 January | 75,063,395 | – |
| Granted | 46,999,778 | 75,063,395 |
| Outstanding at 31 December | 122,063,173 | 75,063,395 |
The weighted average fair value of awards granted in the year was £0.48 (2024: £0.30).
Executive Share Plans – buyout and retention awards
Share awards in the form of conditional shares may be granted to senior employees under the Lloyds Banking Group Executive Group
Ownership Share Plan and Deferred Bonus Scheme 2021 specifically to facilitate recruitment (to compensate new recruits for any lost share
awards), and also to make grants to key individuals for retention purposes. In some instances, grants may be made subject to individual
performance conditions. Participants are not entitled to any dividends paid during the vesting period.
| 2025 | 2024 | |
|---|---|---|
| Number<br><br>of shares | Number<br><br>of shares | |
| Outstanding at 1 January | 2,865,027 | – |
| Granted | 3,679,148 | 3,593,397 |
| Vested | (1,747,624) | (728,370) |
| Outstanding at 31 December | 4,796,551 | 2,865,027 |
The weighted average fair value of awards granted in the year was £0.73 (2024: £0.51).
Lloyds Banking Group plc Annual Report and Accounts 2025
245
Note 11: Share-based payments continued
Assumptions at 31 December 2025
The fair value calculations at 31 December 2025 for grants made in the year, using Black-Scholes models and Monte Carlo simulation, are
based on the following assumptions:
| SAYE | Executive<br><br>Share Plans | Long Term Share<br><br>Plan | |
|---|---|---|---|
| Weighted average risk-free interest rate | 3.87% | 3.81% | 4.13% |
| Weighted average expected life | 3.3 years | 1.5 years | 4.4 years |
| Weighted average expected volatility | 25% | 25% | 27% |
| Weighted average expected dividend yield | 5.0% | 6.0% | 6.0% |
| Weighted average share price | £0.84 | £0.80 | £0.71 |
| Weighted average exercise price | £0.74 | nil | nil |
Expected volatility is a measure of the amount by which the Group’s shares are expected to fluctuate during the life of an option. The
expected volatility is estimated based on the historical volatility of the closing daily share price over the most recent period that is
commensurate with the expected life of the option. The historical volatility is compared to the implied volatility generated from market
traded options in the Group’s shares to assess the reasonableness of the historical volatility and adjustments made where appropriate.
Share Incentive Plans
Matching shares
The Group undertakes to match shares purchased by employees up to the value of £45 per month; these matching shares are held in trust
for a mandatory period of three years on the employee’s behalf, during which period the employee is entitled to any dividends paid on such
shares. The award is subject to a non-market based condition: if an employee leaves within this three-year period for other than a ‘good’
reason, all of the matching shares are forfeited. Similarly, if the employees sell their purchased shares within three years, their matching
shares are forfeited.
The number of shares awarded relating to matching shares in 2025 was 26,409,397 (2024: 38,464,042), with an average fair value of £0.74
(2024: £0.53), based on market prices at the date of award.
Fixed share awards
Fixed share awards were introduced in 2014 in order to ensure that total fixed remuneration is commensurate with role and to provide a
competitive reward package for certain Lloyds Banking Group employees, with an appropriate balance of fixed and variable remuneration,
in line with regulatory requirements. The fixed share awards are delivered in Lloyds Banking Group plc shares, and are released over three
years with one third being released each year following the year of award. The number of shares purchased in relation to fixed share awards
in 2025 was 1,470,573 (2024: 1,541,751) with an average fair value of £0.81 (2024: £0.55) based on market prices at the date of the award.
The fixed share award is not subject to any performance conditions, performance adjustment or clawback. On an employee leaving the
Group, there is no change to the timeline for which shares will become unrestricted.
Since the beginning of 2023 the number of recipients of these awards has been reduced to the executive directors only.
Free shares
An award of shares may be made annually to employees up to a maximum of £3,600. The shares awarded are held in trust for a mandatory
period of three years on the employee’s behalf, during which period the employee is entitled to any dividends paid on such shares. The
award is subject to a non-market based condition. If an employee leaves the Group within this three-year period for other than a ‘good’
reason, all of the shares awarded will be forfeited.
There have not been any awards made since 2021.
Note 12: Retirement benefit obligations
Critical accounting judgements and key sources of estimation uncertainty
| Key sources of estimation uncertainty: | Discount rate applied to future cash flows |
|---|---|
| Expected lifetime of the schemes’ members | |
| Expected rate of future inflationary increases |
The net asset recognised in the balance sheet at 31 December 2025 in respect of the Group’s defined benefit pension scheme obligations
was £2,612 million, comprising an asset of £2,695 million and a liability of £83 million (2024: a net asset of £2,945 million comprising an
asset of £3,028 million and a liability of £83 million). The Group’s accounting policy for its defined benefit pension scheme obligations is set
out in note 2(K).
Income statement and balance sheet sensitivities to changes in the key sources of estimation uncertainty and other actuarial assumptions
are provided in part (v).
| 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | |
|---|---|---|---|
| Charge (credit) to the income statement | |||
| Defined benefit pension schemes | (39) | (13) | (80) |
| Other retirement benefit schemes | 2 | 2 | 1 |
| Total defined benefit schemes | (37) | (11) | (79) |
| Defined contribution pension schemes | 564 | 537 | 434 |
| Total charge to the income statement (note 10) | 527 | 526 | 355 |
Lloyds Banking Group plc Annual Report and Accounts 2025
246
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 12: Retirement benefit obligations continued
| 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|
| Amounts recognised in the balance sheet | ||
| Retirement benefit assets | 2,695 | 3,028 |
| Retirement benefit obligations | (120) | (122) |
| Total amounts recognised in the balance sheet | 2,575 | 2,906 |
The total amounts recognised in the balance sheet relate to:
| 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|
| Defined benefit pension schemes | 2,612 | 2,945 |
| Other retirement benefit schemes | (37) | (39) |
| Total amounts recognised in the balance sheet | 2,575 | 2,906 |
The Group holds on its balance sheet the net surplus or deficit, being the difference between the fair value of plan assets and the present
value of scheme liabilities, at the balance sheet date for each plan. Surpluses are only recognised to the extent that they are recoverable
through reduced contributions in the future or through potential future refunds from the schemes. In assessing whether a surplus is
recoverable, the Group considers its current right to obtain a refund or a reduction in future contributions together with the rights of third
parties, such as trustees, at the balance sheet date.
Pension schemes
Defined benefit schemes
(i)Characteristics of and risks associated with the Group’s schemes
The Group has established a number of defined benefit pension schemes in the UK and overseas, both funded and unfunded. All significant
schemes are funded and based in the UK, with the three most significant being the main sections of the Lloyds Bank Pension Scheme No. 1,
the Lloyds Bank Pension Scheme No. 2 and the HBOS Final Salary Pension Scheme. At 31 December 2025, these schemes represented 94%
of the Group’s total gross defined benefit pension assets (2024: 94%). These schemes provide retirement benefits calculated as a
proportion of final pensionable salary depending upon the length of pensionable service.
All of the UK funded schemes are operated as separate legal entities under trust law, are in compliance with the Pensions Act 2004 and are
managed by a Trustee Board (the Trustee) whose role is to ensure that the schemes are administered in accordance with the scheme rules
and relevant legislation, and to safeguard the assets in the best interests of all members and beneficiaries.
A valuation to determine the funding status of each scheme is carried out at least every three years, whereby scheme assets are measured
at market value and liabilities (technical provisions) are measured using prudent assumptions. If a funding deficit is identified, a recovery
plan is agreed between the employer and the scheme Trustee and sent to the Pensions Regulator for review. The Group does not provide
for these deficit contributions as the future economic benefits arising from these contributions are expected to be available to the Group.
The Group’s overseas defined benefit pension schemes are subject to local regulatory arrangements.
The 31 December 2022 triennial valuation for the main defined benefit schemes was completed in 2023, and following the contributions
paid in 2023, no further deficit contributions were paid for this triennial period (to 31 December 2025).
The Group pays regular contributions to meet benefits accruing over the year, and to cover the expenses of running the schemes.
The Group expects to pay contributions of at least £0.1 billion to its defined benefit schemes in 2026.
The Group provides additional security arrangements to a number of the UK schemes for the Group’s obligations to the schemes.
At 31 December 2025 the security arrangements held assets of £4.0 billion. The security arrangements are fully consolidated in the
Group’s balance sheet.
The last funding valuations of other Group schemes were carried out on a number of different dates. In order to report the position under
IAS 19 as at 31 December 2025, the most recent valuation results for all schemes have been updated by qualified independent actuaries.
The funding valuations use a more prudent approach to setting the discount rate and more conservative longevity and inflation
assumptions than the IAS 19 valuations.
In July 2024, the Court of Appeal handed down a judgment (Virgin Media Limited v NTL Pension Trustees Limited) which potentially has
implications for the validity of amendments made by pension schemes that were contracted out on a salary-related basis between 6 April
1997 and the abolition of contracting-out in 2016. The Government in September 2025, recognising that schemes and sponsoring
employers need clarity around scheme liabilities, proposed legislation to give affected pension schemes the ability to retrospectively obtain
written actuarial confirmation that historic benefit changes met the necessary standards. The Group has not made any allowance for the
possible impact of the ruling as it is currently unclear whether any additional liabilities might arise, and if they were to arise, how they would
be reliably measured. The Group is continuing to review scheme amendments to decide whether any subsequent actions are required and
will continue to monitor developments.
(ii)Amounts in the financial statements
| 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|
| Amount included in the balance sheet | ||
| Present value of funded obligations | (26,571) | (27,118) |
| Fair value of scheme assets | 29,183 | 30,063 |
| Net amount recognised in the balance sheet | 2,612 | 2,945 |
Lloyds Banking Group plc Annual Report and Accounts 2025
247
Note 12: Retirement benefit obligations continued
| 2025<br><br>£m | 2024<br><br>£m | |||||
|---|---|---|---|---|---|---|
| Net amount recognised in the balance sheet | ||||||
| At 1 January | 2,945 | 3,532 | ||||
| Net defined benefit pension credit | 39 | 13 | ||||
| Actuarial gains on defined benefit obligation | 412 | 2,940 | ||||
| Return on plan assets | (934) | (3,712) | ||||
| Employer contributions | 150 | 172 | ||||
| At 31 December | 2,612 | 2,945 | 2025<br><br>£m | 2024<br><br>£m | ||
| --- | --- | --- | ||||
| Movements in the defined benefit obligation | ||||||
| At 1 January | (27,118) | (30,201) | ||||
| Current service cost | (64) | (85) | ||||
| Interest expense | (1,459) | (1,385) | ||||
| Remeasurements: | ||||||
| Actuarial gains – demographic assumptions | 114 | 109 | ||||
| Actuarial (losses) gains – experience | (427) | 94 | ||||
| Actuarial gains – financial assumptions | 725 | 2,737 | ||||
| Benefits paid | 1,693 | 1,638 | ||||
| Past service cost | (30) | (35) | ||||
| Settlements | 2 | 1 | ||||
| Exchange and other adjustments | (7) | 9 | ||||
| At 31 December | (26,571) | (27,118) | 2025<br><br>£m | 2024<br><br>£m | ||
| --- | --- | --- | ||||
| Analysis of the defined benefit obligation | ||||||
| Active members | (1,960) | (2,463) | ||||
| Deferred members | (6,722) | (7,080) | ||||
| Dependants | (1,486) | (1,429) | ||||
| Pensioners | (16,403) | (16,146) | ||||
| At 31 December | (26,571) | (27,118) | 2025<br><br>£m | 2024<br><br>£m | ||
| --- | --- | --- | ||||
| Changes in the fair value of scheme assets | ||||||
| At 1 January | 30,063 | 33,733 | ||||
| Return on plan assets excluding amounts included in interest income | (934) | (3,712) | ||||
| Interest income | 1,624 | 1,551 | ||||
| Employer contributions | 150 | 172 | ||||
| Benefits paid | (1,693) | (1,638) | ||||
| Settlements | (2) | (1) | ||||
| Administrative costs paid | (32) | (33) | ||||
| Exchange and other adjustments | 7 | (9) | ||||
| At 31 December | 29,183 | 30,063 |
The credit recognised in the income statement for the year ended 31 December comprises:
| 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | |
|---|---|---|---|
| Current service cost | 64 | 85 | 88 |
| Net interest amount | (165) | (166) | (208) |
| Past service cost – plan amendments | 30 | 35 | 5 |
| Plan administration costs incurred during the year | 32 | 33 | 35 |
| Total defined benefit pension credit | (39) | (13) | (80) |
Lloyds Banking Group plc Annual Report and Accounts 2025
248
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 12: Retirement benefit obligations continued
(iii)Composition of scheme assets
| 2025 | 2024 | |||||
|---|---|---|---|---|---|---|
| Quoted<br><br>£m | Unquoted<br><br>£m | Total<br><br>£m | Quoted<br><br>£m | Unquoted<br><br>£m | Total<br><br>£m | |
| Debt instruments1: | ||||||
| Fixed interest government bonds | 6,326 | – | 6,326 | 6,985 | – | 6,985 |
| Index-linked government bonds | 15,382 | – | 15,382 | 15,550 | – | 15,550 |
| Corporate and other debt securities | 9,771 | – | 9,771 | 7,396 | – | 7,396 |
| Asset-backed securities | 3 | – | 3 | – | – | – |
| 31,482 | – | 31,482 | 29,931 | – | 29,931 | |
| Pooled investment vehicles | 653 | 5,964 | 6,617 | 686 | 7,342 | 8,028 |
| Property | – | 132 | 132 | – | 130 | 130 |
| Equity instruments | 12 | 59 | 71 | 23 | 66 | 89 |
| Money market instruments, cash, derivatives and other assets<br><br>and liabilities | 135 | (9,254) | (9,119) | 55 | (8,170) | (8,115) |
| At 31 December | 32,282 | (3,099) | 29,183 | 30,695 | (632) | 30,063 |
1Of the total debt instruments, £29,876 million (2024: £27,551 million) were investment grade (credit ratings equal to or better than ‘BBB’).
The assets of all of the funded plans are held independently of the Group’s assets in separate trustee-administered funds.
The pension schemes’ pooled investment vehicles comprise:
| 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|
| Alternative credit funds | 1,138 | 1,793 |
| Bond and debt funds | 276 | 449 |
| Equity funds | 1,644 | 1,553 |
| Hedge and mutual funds | – | 709 |
| Infrastructure funds | 1,012 | 1,059 |
| Liquidity funds | 1,702 | 1,449 |
| Property funds | 817 | 992 |
| Other | 28 | 24 |
| At 31 December | 6,617 | 8,028 |
The Trustee’s approach to investment is focused on acting in the members’ best financial interests, with the integration of ESG
(environmental, social and governance) considerations into investment management processes and practices. This policy is reviewed
annually (or more frequently as required) and has been shared with the schemes’ investment managers for implementation.
(iv)Assumptions
The principal actuarial and financial assumptions used in valuations of the defined benefit pension schemes were as follows:
| 2025<br><br>% | 2024<br><br>% | |
|---|---|---|
| Discount rate | 5.57 | 5.55 |
| Rate of inflation: | ||
| Retail Price Index (RPI) | 2.65 | 2.97 |
| Consumer Price Index (CPI) | 2.13 | 2.52 |
| Rate of salary increases | 0.00 | 0.00 |
| Weighted average rate of increase for pensions in payment | 2.52 | 2.69 |
To determine the RPI assumption a term-dependent inflation curve has been used adjusting for an assumed inflation risk premium. A gap of
100 basis points has been assumed between RPI and CPI from 2025 to 2030; thereafter a 20 basis point gap has been assumed.
| Men | Women | |||
|---|---|---|---|---|
| 2025<br><br>Years | 2024<br><br>Years | 2025<br><br>Years | 2024<br><br>Years | |
| Life expectancy for average member aged 60, on the valuation date | 26.5 | 26.4 | 28.6 | 28.5 |
| Life expectancy for average member aged 60, 15 years after the valuation date | 27.4 | 27.3 | 29.5 | 29.4 |
The mortality assumptions used in the UK scheme valuations are based on standard tables published by the Institute and Faculty of
Actuaries which were adjusted in line with the actual experience of the relevant schemes. The Group uses the 2023 CMI mortality
projections model to project future mortality improvements. In line with actuarial industry recommendations no weight is placed on 2020
and 2021 mortality experience and 15% weight on 2022 and 2023 mortality experience.
Lloyds Banking Group plc Annual Report and Accounts 2025
249
Note 12: Retirement benefit obligations continued
(v)Amount, timing and uncertainty of future cash flows
Risk exposure of the defined benefit schemes
While the Group is not exposed to any unusual, entity-specific or scheme-specific risks in its defined benefit pension schemes, it is exposed
to a number of significant risks, detailed below:
Inflation rate risk: The majority of the schemes’ benefit obligations are linked to inflation both in deferment and once in payment. Higher
inflation will lead to higher liabilities although this will be materially offset by holdings of inflation-linked gilts and, in most cases, caps on
the level of inflationary increases are in place to protect against extreme inflation.
Interest rate risk: The defined benefit obligation is determined using a discount rate derived from yields on AA-rated corporate bonds. A
decrease in corporate bond yields will increase plan liabilities although this will be materially offset by an increase in the value of bond
holdings and through the use of derivatives.
Longevity risk: The majority of the schemes’ obligations are to provide benefits for the life of the members so increases in life expectancy
will result in an increase in the schemes’ liabilities.
Investment risk: Scheme assets are invested in a diversified portfolio of debt securities, equities and other return-seeking assets. If the
assets underperform the discount rate used to calculate the defined benefit obligation, it will reduce the surplus or increase the deficit.
Volatility in asset values and the discount rate will lead to volatility in the net pension asset on the Group’s balance sheet and in other
comprehensive income. To a lesser extent this will also lead to volatility in the pension expense in the Group’s income statement.
In addition, the schemes themselves are exposed to liquidity risk with the need to ensure that liquid assets held are sufficient to meet
benefit payments as they fall due and there is sufficient collateral available to support their hedging activity.
The ultimate cost of the defined benefit obligations to the Group will depend upon actual future events rather than the assumptions made.
The assumptions made are unlikely to be borne out in practice and as such the cost may be higher or lower than expected.
Sensitivity analysis
The effect of reasonably possible changes in key assumptions on the Group’s income statement and on the net defined benefit pension
scheme asset from the change in value of scheme liabilities is set out below. The sensitivities provided assume that all other assumptions
and the value of the schemes’ assets remain unchanged. The calculations are approximate in nature and full detailed calculations could
lead to a different result. It is unlikely that isolated changes to individual assumptions will be experienced in practice. Due to the correlation
of assumptions, aggregating the effects of these isolated changes may not be a reasonable estimate of the actual effect of simultaneous
changes in multiple assumptions.
| Effect of reasonably possible alternative assumptions | ||||
|---|---|---|---|---|
| Increase (decrease) in the income<br><br>statement charge | Increase (decrease) in the<br><br>net defined benefit<br><br>pension scheme surplus | |||
| 2025<br><br>£m | 2024<br><br>£m | 2025<br><br>£m | 2024<br><br>£m | |
| Inflation (including pension increases)1: | ||||
| Increase of 0.25% | 27 | 28 | (455) | (484) |
| Decrease of 0.25% | (25) | (27) | 433 | 467 |
| Discount rate2: | ||||
| Increase of 0.25% | (46) | (51) | 659 | 718 |
| Decrease of 0.25% | 45 | 49 | (700) | (757) |
| Expected life expectancy of members: | ||||
| Increase of one year | 45 | 46 | (802) | (806) |
| Decrease of one year | (47) | (47) | 827 | 830 |
1At 31 December 2025, the assumed rate of RPI inflation is 2.65% and CPI inflation 2.13% (2024: RPI 2.97% and CPI 2.52%).
2At 31 December 2025, the assumed discount rate is 5.57% (2024: 5.55%).
Sensitivity analysis method and assumptions
The sensitivity analysis above reflects the impact on the liabilities of the Group’s three most significant schemes which account for over
90% of the Group’s defined benefit obligations. While differences in the underlying liability profiles for the remainder of the Group’s
pension arrangements mean that they may exhibit slightly different sensitivities to variations in these assumptions, the sensitivities
provided above are indicative of the impact across the Group as a whole.
The inflation assumption sensitivity applies to the assumed rate of increase in both the Consumer Price Index (CPI) and the Retail Price
Index (RPI), and includes the impact on the rate of increases to pensions, both before and after retirement. These pension increases are
linked to inflation (either CPI or RPI) subject to certain minimum and maximum limits.
The sensitivity analysis (including the inflation sensitivity) does not include the impact of any change in the rate of salary increases as
pensionable salaries have been frozen since 2 April 2014.
The life expectancy assumption has been applied by allowing for an increase/decrease in life expectation from age 60 of one year, based
upon the approximate weighted average age for each scheme. While this is an approximate approach and will not give the same result as a
one year increase in life expectancy at every age, it provides an appropriate indication of the potential impact on the schemes from
changes in life expectancy.
There was no change in the methods and assumptions used in preparing the sensitivity analysis from the prior year.
Asset-liability matching strategies
The main schemes’ assets are invested in a diversified portfolio which are independently determined by the responsible governance body
for each scheme and in consultation with the employer.
Lloyds Banking Group plc Annual Report and Accounts 2025
250
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 12: Retirement benefit obligations continued
A significant goal of the asset strategies adopted by the schemes is to reduce volatility caused by changes in market expectations of
interest rates and inflation. In the main schemes this is achieved by investing in liability-driven investment (LDI) strategies. The assets in
these LDI strategies represented c.47% of scheme assets at 31 December 2025.
The LDI strategies are actively managed to reflect both changing market conditions and changes to the liability profile. At 31 December
2025 the asset-liability matching strategy mitigated c.110% of the liability sensitivity to interest rate movements and c.130% of the liability
sensitivity to inflation movements. In addition, a small amount of interest rate sensitivity arises through holdings of corporate and other
debt securities. The higher level of hedging provides greater protection to the funding position of the schemes.
The main schemes hold a number of longevity insurance contracts, hedging c.60% of their longevity risk exposure at 31 December 2025.
These arrangements form part of the schemes’ investment portfolio and reduce the risk of members living longer than expected through
the exchange of fixed payments for actual payments.
At 31 December 2025 the value of scheme assets included longevity swaps valued at £(217) million.
Maturity profile of defined benefit obligation
The following table provides information on the weighted average duration of the defined benefit pension obligation and the distribution
and timing of benefit payments:
| 2025<br><br>Years | 2024<br><br>Years | |
|---|---|---|
| Duration of the defined benefit obligation | 11 | 12 |
Maturity analysis of benefits expected to be paid:
| 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|
| Within 12 months | 1,816 | 1,800 |
| Between 1 and 2 years | 1,625 | 1,595 |
| Between 2 and 5 years | 5,229 | 5,134 |
| Between 5 and 10 years | 9,294 | 9,318 |
| Between 10 and 15 years | 8,993 | 9,150 |
| Between 15 and 25 years | 15,679 | 16,316 |
| Between 25 and 35 years | 10,382 | 11,294 |
| Between 35 and 45 years | 4,375 | 5,171 |
| In more than 45 years | 906 | 1,201 |
Maturity analysis method and assumptions
The projected benefit payments are based on the assumptions underlying the assessment of the obligations, including allowance for
expected future inflation. They are shown in their undiscounted form and therefore appear large relative to the discounted assessment of
the defined benefit obligations recognised in the Group’s balance sheet. They are in respect of benefits that have been accrued prior to the
respective year end date only and make no allowance for any benefits that may have been accrued subsequently.
Defined contribution schemes
The Group operates a number of defined contribution pension schemes in the UK and overseas.
During the year ended 31 December 2025 the charge to the income statement in respect of defined contribution schemes was £564 million
(2024: £537 million; 2023: £434 million), representing the contributions payable by the employer in accordance with each scheme’s rules.
Other retirement benefit schemes
The Group operates a number of schemes which provide post-retirement healthcare benefits to certain employees, retired employees and
their dependants. The principal scheme relates to former Lloyds Bank staff and under this scheme the Group has undertaken to meet the
cost of post-retirement healthcare for all eligible former employees (and their dependants) who retired prior to 1 January 1996. The Group
has entered into an insurance contract to provide these benefits and a provision has been made for the estimated cost of future insurance
premiums payable.
For the principal post-retirement healthcare scheme, the latest actuarial valuation of the liability was carried out at 31 December 2025 by
qualified independent actuaries. The principal assumptions used were as set out above in section (iv), except that the long-term rate of
increase in healthcare premiums has been assumed at 10.00% (2024: 10.00%).
Movements in the other retirement benefits obligation:
| 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|
| At 1 January | (39) | (44) |
| Actuarial gains | 2 | 4 |
| Insurance premiums paid | 2 | 3 |
| Charge for the year | (2) | (2) |
| At 31 December | (37) | (39) |
Lloyds Banking Group plc Annual Report and Accounts 2025
251
Note 13: Auditors’ remuneration
Fees payable to the Company’s auditors by the Group are included within other operating expenses and are as follows:
| 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | |
|---|---|---|---|
| Fees payable for the: | |||
| – audit of the Company’s current year annual report | 2.0 | 2.0 | 2.0 |
| – audits of the Company’s subsidiaries | 33.9 | 31.9 | 32.3 |
| – total audit fees in respect of the statutory audit of Group entities1 | 35.9 | 33.9 | 34.3 |
| – services normally provided in connection with statutory and regulatory filings or engagements | 6.5 | 6.7 | 6.6 |
| Total audit fees2 | 42.4 | 40.6 | 40.9 |
| Other audit-related fees2 | 1.5 | 1.5 | 1.3 |
| All other fees2 | 1.1 | 1.0 | 1.2 |
| Total non-audit services3 | 2.6 | 2.5 | 2.5 |
| Total fees payable to the Company’s auditors by the Group | 45.0 | 43.1 | 43.4 |
1As defined by the Financial Reporting Council (FRC).
2As defined by the Securities and Exchange Commission (SEC).
3As defined by the SEC. Total non-audit services as defined by the FRC include all fees other than audit fees in respect of the statutory audit of Group entities. These fees totalled £9.1
million in 2025 (2024: £9.2 million; 2023: £9.1 million).
The following types of services are included in the categories listed above:
Audit fees: This category includes fees in respect of the audit of the Group’s annual financial statements (including work related to the
adoption of new accounting standards) and other services in connection with regulatory filings. Other services supplied pursuant to
legislation relate primarily to costs incurred in connection with client asset assurance and with the Sarbanes-Oxley Act requirements
associated with the audit of the Group’s financial statements filed on its Form 20-F.
Other audit-related fees: This category includes fees in respect of services for assurance and related services that are reasonably related to
the performance of the audit or review of the financial statements, for example acting as reporting accountants in respect of debt
prospectuses required by the Listing Rules.
All other fees: This category includes other assurance services not related to the performance of the audit or review of the financial
statements, for example, the review of controls operated by the Group on behalf of a third party. The auditors are not engaged to provide
tax services.
It is the Group’s policy to use the auditors only on non-audit assignments in cases where their knowledge of the Group means that it is
neither efficient nor cost effective to employ another firm of accountants.
The Group has procedures that are designed to ensure auditor independence, including prohibiting certain non-audit services. All audit and
non-audit assignments must be pre-approved by the Audit Committee on an individual engagement basis; for certain types of non-audit
engagements where the fee is ‘de minimis’ the Audit Committee has pre-approved all assignments subject to confirmation by
management. On a quarterly basis, the Audit Committee receives and reviews a report detailing all pre-approved services and amounts
paid to the auditors for such pre-approved services.
During the year, the auditors also earned fees payable by entities outside the consolidated Lloyds Banking Group in respect of:
| 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | |
|---|---|---|---|
| Audits of Group pension schemes | 0.5 | 0.5 | 0.5 |
| Audits of the unconsolidated Open-Ended Investment Companies managed by the Group | 0.2 | 0.2 | 0.2 |
Note 14: Impairment
| Year ended 31 December 2025 | Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | POCI<br><br>£m | Total<br><br>£m |
|---|---|---|---|---|---|
| Loans and advances to banks | – | – | – | – | – |
| Loans and advances to customers | 14 | (82) | 999 | (64) | 867 |
| Debt securities | – | – | – | – | – |
| Financial assets at amortised cost | 14 | (82) | 999 | (64) | 867 |
| Financial assets at fair value through other comprehensive income | (1) | – | – | – | (1) |
| Other assets | 2 | – | – | – | 2 |
| Loan commitments and financial guarantees | (30) | (43) | – | – | (73) |
| Total impairment (credit) charge | (15) | (125) | 999 | (64) | 795 |
Lloyds Banking Group plc Annual Report and Accounts 2025
252
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 14: Impairment continued
| Year ended 31 December 2024 | Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | POCI<br><br>£m | Total<br><br>£m | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Loans and advances to banks | (7) | – | – | – | (7) | |||||||
| Loans and advances to customers | (147) | (289) | 949 | (6) | 507 | |||||||
| Debt securities | (4) | (2) | – | – | (6) | |||||||
| Financial assets at amortised cost | (158) | (291) | 949 | (6) | 494 | |||||||
| Financial assets at fair value through other comprehensive income | (3) | – | – | – | (3) | |||||||
| Other assets | (9) | – | – | – | (9) | |||||||
| Loan commitments and financial guarantees | (18) | (33) | – | – | (51) | |||||||
| Total impairment (credit) charge | (188) | (324) | 949 | (6) | 431 | Year ended 31 December 2023 | Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | POCI<br><br>£m | Total<br><br>£m | |
| --- | --- | --- | --- | --- | --- | |||||||
| Loans and advances to banks | (5) | (2) | – | – | (7) | |||||||
| Loans and advances to customers | 261 | (281) | 414 | (73) | 321 | |||||||
| Debt securities | – | 1 | – | – | 1 | |||||||
| Financial assets at amortised cost | 256 | (282) | 414 | (73) | 315 | |||||||
| Financial assets at fair value through other comprehensive income | (2) | – | – | – | (2) | |||||||
| Other assets | – | – | (10) | – | (10) | |||||||
| Loan commitments and financial guarantees | 27 | (25) | (2) | – | – | |||||||
| Total impairment charge (credit) | 281 | (307) | 402 | (73) | 303 |
The impairment charge includes a £137 million charge (2024: £24 million charge; 2023: £73 million charge) in respect of residual value
impairment and voluntary terminations within the Group’s UK Motor Finance business.
Note 15: Tax
Analysis of tax expense for the year
| 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | |
|---|---|---|---|
| UK corporation tax: | |||
| Current tax on profit for the year | (1,367) | (1,159) | (1,301) |
| Adjustments in respect of prior years | 86 | 89 | 51 |
| (1,281) | (1,070) | (1,250) | |
| Foreign tax: | |||
| Current tax on profit for the year | (139) | (122) | (101) |
| Adjustments in respect of prior years | (9) | 3 | 3 |
| (148) | (119) | (98) | |
| Current tax expense | (1,429) | (1,189) | (1,348) |
| Deferred tax: | |||
| Current year | (504) | (307) | (583) |
| Adjustments in respect of prior years | 29 | 2 | (54) |
| Deferred tax (expense) credit | (475) | (305) | (637) |
| Tax expense | (1,904) | (1,494) | (1,985) |
The tax expense is made up as follows:
| Tax (expense) credit attributable to policyholders | (219) | (137) | 30 |
|---|---|---|---|
| Shareholder tax expense | (1,685) | (1,357) | (2,015) |
| Tax expense | (1,904) | (1,494) | (1,985) |
Factors affecting the tax expense for the year
The UK corporation tax rate for the year was 25.0% (2024: 25.0%; 2023: 23.5%). The increase in applicable tax rate from 2023 relates to
the change in statutory tax rate effective from 1 April 2023. An explanation of the relationship between tax expense and accounting profit
is set out below.
Lloyds Banking Group plc Annual Report and Accounts 2025
253
Note 15: Tax continued
| 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | |
|---|---|---|---|
| Profit before tax | 6,661 | 5,971 | 7,503 |
| UK corporation tax thereon | (1,665) | (1,493) | (1,763) |
| Impact of surcharge on banking profits | (167) | (157) | (305) |
| Non-deductible costs: conduct charges | (70) | (27) | (29) |
| Non-deductible costs: bank levy | (33) | (37) | (35) |
| Other non-deductible costs1 | (72) | (73) | (52) |
| Non-taxable income1 | 99 | 51 | 76 |
| Tax relief on coupons on other equity instruments | 116 | 125 | 124 |
| (Non-deductible) non-taxable foreign exchange (losses) gains1 | (75) | 27 | (50) |
| Tax-exempt gains on disposals | 62 | 98 | 35 |
| Tax losses where no deferred tax recognised | (7) | (7) | (2) |
| Remeasurement of deferred tax due to rate changes | – | – | (14) |
| Differences in overseas tax rates | (5) | (9) | 6 |
| Policyholder tax in respect of the life assurance business | (71) | (75) | (61) |
| Deferred tax in respect of life assurance policyholder tax | (119) | (5) | 84 |
| Adjustments in respect of prior years | 106 | 94 | – |
| Tax effect of share of results of joint ventures | (3) | (1) | 1 |
| Provision for Pillar 2 current income taxes | – | (5) | – |
| Tax expense | (1,904) | (1,494) | (1,985) |
1(Non-deductible) non-taxable foreign exchange gains (losses) on non-sterling denominated other equity instruments and on net investment hedging of subsidiaries, previously shown in
aggregate within other non-deductible costs and non-taxable income, are now presented as an individual line item. Comparatives are represented on a consistent basis.
On 11 July 2023, the Government enacted its legislation implementing the G20-OECD Inclusive Framework Pillar 2 rules in the UK, including
a Qualified Domestic Minimum Top-Up Tax rule. This legislation seeks to ensure that UK-headquartered multinational enterprises pay a
minimum tax rate of 15% on UK and overseas profits arising after 31 December 2023. As a result, tax expense for 2024 included a current
tax charge of £5 million in respect of the Group’s Channel Islands businesses. In 2025, following changes to tax rates in the Channel Islands,
we do not expect any additional Pillar 2 charge to arise.
The Group paid UK and overseas corporation taxes of £1,575 million in the period, and received refunds of £200 million relating to tax
overpaid in respect of the previous period. In addition, the Group paid £730 million in respect of the Irish loss relief case (see note 36).
Deferred tax
The Group’s deferred tax assets and liabilities are as follows:
| Statutory position | 2025<br><br>£m | 2024<br><br>£m | Tax disclosure | 2025<br><br>£m | 2024<br><br>£m |
|---|---|---|---|---|---|
| Deferred tax assets | 3,990 | 5,005 | Deferred tax assets | 5,734 | 6,900 |
| Deferred tax liabilities | (146) | (125) | Deferred tax liabilities | (1,890) | (2,020) |
| Net deferred tax asset at 31 December | 3,844 | 4,880 | Net deferred tax asset at 31 December | 3,844 | 4,880 |
The statutory position reflects the deferred tax assets and liabilities as disclosed in the consolidated balance sheet and takes into account
the ability of the Group to net assets and liabilities where there is a legally enforceable right of offset and the deferred tax assets and
liabilities relate to income taxes levied by the same taxation authority. The tax disclosure of deferred tax assets and liabilities ties to the
amounts outlined in the tables below which splits the deferred tax assets and liabilities by type, before such netting.
Movements in deferred tax assets and liabilities (before taking into consideration the offsetting of balances within the same taxing
jurisdiction) can be summarised as follows:
| Deferred tax assets | Tax<br><br>losses<br><br>£m | Property,<br><br>plant and<br><br>equipment<br><br>£m | Provisions<br><br>£m | Long-term<br><br>assurance<br><br>business<br><br>£m | Share-<br><br>based<br><br>payments<br><br>£m | Pension<br><br>liabilities<br><br>£m | Derivatives<br><br>£m | Asset<br><br>revaluations1<br><br>£m | Other<br><br>temporary<br><br>differences<br><br>£m | Total<br><br>£m |
|---|---|---|---|---|---|---|---|---|---|---|
| At 1 January 2024 | 4,783 | 248 | 221 | 233 | 58 | 47 | 1,667 | 50 | 102 | 7,409 |
| Charge to the income statement | (133) | (75) | (22) | (167) | (1) | (9) | (63) | – | (10) | (480) |
| (Charge) credit to other comprehensive<br><br>income | – | – | – | – | – | – | (9) | 16 | – | 7 |
| Transfer to disposal group | – | – | – | (13) | – | – | – | – | – | (13) |
| Other charge to equity | – | – | – | – | (23) | – | – | – | – | (23) |
| At 31 December 2024 | 4,650 | 173 | 199 | 53 | 34 | 38 | 1,595 | 66 | 92 | 6,900 |
| (Charge) credit to the income statement | (401) | (81) | (58) | (53) | 2 | (5) | 37 | (29) | (1) | (589) |
| Credit (charge) to other comprehensive<br><br>income | – | – | 35 | – | – | – | (659) | (7) | – | (631) |
| Other credit to equity | – | – | – | – | 54 | – | – | – | – | 54 |
| At 31 December 2025 | 4,249 | 92 | 176 | – | 90 | 33 | 973 | 30 | 91 | 5,734 |
In 2024, deferred tax assets of £13 million were reclassified as disposal group assets and presented within other assets (see note 24).
Lloyds Banking Group plc Annual Report and Accounts 2025
254
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 15: Tax continued
| Deferred tax liabilities | Property,<br><br>plant and<br><br>equipment<br><br>£m | Capitalised<br><br>software<br><br>enhancements<br><br>£m | Long-term<br><br>assurance<br><br>business<br><br>£m | Acquisition<br><br>fair value<br><br>£m | Pension<br><br>assets<br><br>£m | Derivatives<br><br>£m | Other<br><br>temporary<br><br>differences<br><br>£m | Total<br><br>£m |
|---|---|---|---|---|---|---|---|---|
| At 1 January 2024 | – | (92) | – | (352) | (971) | (708) | (258) | (2,381) |
| (Charge) credit to the income statement | – | (31) | – | 124 | 3 | 164 | (85) | 175 |
| Credit to other comprehensive income | – | – | – | – | 154 | – | 22 | 176 |
| Exchange and other adjustments | – | – | – | – | – | – | 10 | 10 |
| At 31 December 2024 | – | (123) | – | (228) | (814) | (544) | (311) | (2,020) |
| (Charge) credit to the income statement | (45) | 33 | (73) | 32 | 2 | 154 | 11 | 114 |
| Credit to other comprehensive income | – | – | – | – | 85 | – | – | 85 |
| Acquisitions | – | – | – | (72) | – | – | – | (72) |
| Exchange and other adjustments | – | – | 5 | – | – | – | (2) | 3 |
| At 31 December 2025 | (45) | (90) | (68) | (268) | (727) | (390) | (302) | (1,890) |
1Financial assets at fair value through other comprehensive income.
Estimation of income taxes includes the assessment of recoverability of deferred tax assets. Deferred tax assets are only recognised to the
extent that they are considered more likely than not to be recoverable based on existing tax laws and forecasts of future taxable profits
against which the underlying tax deductions can be utilised.
The Group has recognised a deferred tax asset of £4,249 million (2024: £4,650 million) in respect of trading losses carried forward.
Substantially all of these losses have arisen in Bank of Scotland plc and Lloyds Bank plc, and they will be utilised as taxable profits arise in
those legal entities in future periods.
The Group’s expectations of future UK taxable profits require management judgement, and take into account the Group’s long-term
financial and strategic plans and anticipated future tax-adjusting items. In making this assessment, account is taken of business plans, the
Board-approved operating plan and the expected future economic outlook as set out in the strategic report, as well as the risks associated
with future regulatory, climate-related and other change, in order to produce a base case forecast of future UK taxable profits. Under
current law there is no expiry date for UK trading losses not yet utilised, and given the forecast of future profitability and the Group’s
commitment to the UK market, in management’s judgement it is more likely than not that the value of the losses will be recovered by the
Group while still operating as a going concern.
Banking tax losses that arose before 1 April 2015 can only be used against 25% of taxable profits arising after 1 April 2016, and they cannot
be used to reduce the surcharge on banking profits. These restrictions in utilisation mean that the value of the deferred tax asset in respect
of tax losses is only expected to be fully recovered by 2036 (2024: 2037) in the base case forecast. The rate of recovery of the Group’s tax
loss asset is not a straight line, being affected by the relative profitability of the different legal entities in future periods, and the relative size
of their tax losses carried forward. It is expected in the base case that 85% of the value will be recovered by 2033, when Lloyds Bank plc
will have utilised all of its available tax losses. It is possible that future tax law changes could materially affect the timing of recovery and
the value of these losses ultimately realised by the Group.
Strong life business investment returns in the year mean that its brought forward expenses have now been fully utilised in the calculation of
policyholder tax liabilities. As a result, there is no net deferred tax asset to recognise in respect of them (2024: £104 million).
Deferred tax not recognised
Deferred tax assets of £132 million (2024: £143 million) have not been recognised in respect of £526 million of UK tax losses and other
temporary differences which can only be used to offset future capital gains. UK capital losses can be carried forward indefinitely.
No deferred tax has been recognised in respect of foreign trade losses where it is not more likely than not that we will be able to utilise
them in future periods. Of the asset not recognised, £52 million (2024: £58 million) relates to losses that will expire if not used within
20 years, and £2 million (2024: £8 million) relates to losses with no expiry date.
As a result of parent company exemptions on dividends from subsidiaries and on capital gains on disposal there are no significant taxable
temporary differences associated with investments in subsidiaries, branches, associates and joint arrangements.
Critical accounting judgements and key sources of estimation uncertainty
| Critical judgement: | The Group believes that its interpretation of the tax rules on group relief are correct |
|---|
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.
Lloyds Banking Group plc Annual Report and Accounts 2025
255
Note 16: Measurement basis of financial assets and liabilities
The accounting policies in note 2 describe how different classes of financial instruments are measured, and how income and expenses,
including fair value gains and losses, are recognised. The following table analyses the carrying amounts of the financial assets and liabilities
by category and by balance sheet heading.
| Derivatives<br><br>designated<br><br>as hedging<br><br>instruments<br><br>£m | Mandatorily held at<br><br>fair value through<br><br>profit or loss | At fair valuethrough othercomprehensiveincomem | Held at<br><br>amortised<br><br>cost<br><br>£m | Insurance-relatedcontractsm | |||
|---|---|---|---|---|---|---|---|
| At 31 December 2025 | Held for<br><br>trading<br><br>£m | Otherm | |||||
| Financial assets | |||||||
| Cash and balances at central banks | – | – | – | 56,661 | 56,661 | ||
| Financial assets at fair value through<br><br>profit or loss | – | 25,537 | 214,876 | – | 240,413 | ||
| Derivative financial instruments | 25 | 19,702 | – | – | 19,727 | ||
| Loans and advances to banks | – | – | – | 7,236 | 7,236 | ||
| Loans and advances to customers | – | – | – | 481,463 | 481,463 | ||
| Reverse repurchase agreements | – | – | – | 50,986 | 50,986 | ||
| Debt securities | – | – | – | 13,987 | 13,987 | ||
| Financial assets at amortised cost | – | – | – | 553,672 | 553,672 | ||
| Financial assets at fair value through other<br><br>comprehensive income | – | – | – | – | 36,320 | ||
| Other | – | – | – | – | 514 | ||
| Total financial assets | 25 | 45,239 | 214,876 | 610,333 | 907,307 | ||
| Financial liabilities | |||||||
| Deposits from banks | – | – | – | 5,779 | 5,779 | ||
| Customer deposits | – | – | – | 496,457 | 496,457 | ||
| Repurchase agreements at amortised cost | – | – | – | 38,570 | 38,570 | ||
| Financial liabilities at fair value through<br><br>profit or loss | – | 23,666 | – | – | 27,909 | ||
| Derivative financial instruments | 290 | 15,842 | – | – | 16,132 | ||
| Notes in circulation | – | – | – | 2,118 | 2,118 | ||
| Debt securities in issue at amortised cost | – | – | – | 78,271 | 78,271 | ||
| Liabilities arising from insurance and<br><br>participating investment contracts | – | – | – | – | 135,284 | ||
| Liabilities arising from non-participating<br><br>investment contracts | – | – | – | – | 61,640 | ||
| Other | – | – | – | 1,026 | 1,026 | ||
| Subordinated liabilities | – | – | – | 9,894 | 9,894 | ||
| Total financial liabilities | 290 | 39,508 | – | 632,115 | 873,080 |
All values are in British Pounds.
Offsetting of financial assets and liabilities
| Related amounts where set off in the balance<br><br>sheet not permitted1 | ||||||
|---|---|---|---|---|---|---|
| At 31 December 2025 | Gross<br><br>amounts of<br><br>assets and<br><br>liabilities<br><br>£m | Amount<br><br>offset in<br><br>the balance<br><br>sheet2<br><br>£m | Net amounts<br><br>presented in<br><br>the balance<br><br>sheet<br><br>£m | Cash<br><br>collateral<br><br>(received)/<br><br>pledged<br><br>£m | Non-cash<br><br>collateral<br><br>(received)/<br><br>pledged<br><br>£m | Master netting and similar agreementsm |
| Derivative assets | 52,332 | (32,605) | 19,727 | (2,815) | (2,962) | (8,339) |
| Derivative liabilities | (50,775) | 34,643 | (16,132) | 3,006 | 882 | 8,339 |
| Net position | 1,557 | 2,038 | 3,595 | 191 | (2,080) | – |
| Reverse repurchase agreements held at fair value | 42,475 | (21,494) | 20,981 | (32) | (20,832) | – |
| Repurchase agreements held at fair value | (43,304) | 21,594 | (21,710) | (14) | 21,621 | – |
| Net position | (829) | 100 | (729) | (46) | 789 | – |
| Reverse repurchase agreements held at amortised cost | 63,862 | (12,876) | 50,986 | 75 | (50,843) | – |
| Repurchase agreements held at amortised cost | (51,345) | 12,775 | (38,570) | 2 | 38,424 | – |
| Net position | 12,517 | (101) | 12,416 | 77 | (12,419) | – |
All values are in British Pounds.
1The 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 and provides cash and securities collateral in respect of derivative transactions covered by these agreements. The right to set off balances under these master netting
agreements or to set off cash and securities collateral only arises in the event of non-payment or default and, as a result, these arrangements do not qualify for offsetting under IAS 32.
2The amounts offset in the balance sheet as shown above meet the criteria for offsetting under IAS 32.
Lloyds Banking Group plc Annual Report and Accounts 2025
256
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 16: Measurement basis of financial assets and liabilities continued
| Derivatives<br><br>designated<br><br>as hedging<br><br>instruments<br><br>£m | Mandatorily held at<br><br>fair value through<br><br>profit or loss | At fair valuethrough othercomprehensiveincomem | Held at<br><br>amortised<br><br>cost<br><br>£m | Insurance-relatedcontractsm | |||
|---|---|---|---|---|---|---|---|
| At 31 December 2024 | Held for<br><br>trading<br><br>£m | Otherm | |||||
| Financial assets | |||||||
| Cash and balances at central banks | – | – | – | 62,705 | 62,705 | ||
| Financial assets at fair value through<br><br>profit or loss | – | 25,450 | 190,475 | – | 215,925 | ||
| Derivative financial instruments | 48 | 24,017 | – | – | 24,065 | ||
| Loans and advances to banks | – | – | – | 7,900 | 7,900 | ||
| Loans and advances to customers | – | – | – | 459,857 | 459,857 | ||
| Reverse repurchase agreements | – | – | – | 49,476 | 49,476 | ||
| Debt securities | – | – | – | 14,544 | 14,544 | ||
| Financial assets at amortised cost | – | – | – | 531,777 | 531,777 | ||
| Financial assets at fair value through other<br><br>comprehensive income | – | – | – | – | 30,690 | ||
| Other | – | – | – | 173 | 5,654 | ||
| Total financial assets | 48 | 49,467 | 190,475 | 594,655 | 870,816 | ||
| Financial liabilities | |||||||
| Deposits from banks | – | – | – | 6,158 | 6,158 | ||
| Customer deposits | – | – | – | 482,745 | 482,745 | ||
| Repurchase agreements at amortised cost | – | – | – | 37,760 | 37,760 | ||
| Financial liabilities at fair value through<br><br>profit or loss | – | 22,981 | – | – | 27,611 | ||
| Derivative financial instruments | 355 | 21,321 | – | – | 21,676 | ||
| Notes in circulation | – | – | – | 2,121 | 2,121 | ||
| Debt securities in issue at amortised cost | – | – | – | 70,834 | 70,834 | ||
| Liabilities arising from insurance and<br><br>participating investment contracts | – | – | – | – | 122,064 | ||
| Liabilities arising from non-participating<br><br>investment contracts | – | – | – | – | 51,228 | ||
| Other | – | – | – | 1,708 | 6,986 | ||
| Subordinated liabilities | – | – | – | 10,089 | 10,089 | ||
| Total financial liabilities | 355 | 44,302 | – | 611,415 | 839,272 |
All values are in British Pounds.
Offsetting of financial assets and liabilities
| Potentialnet amountsif offsetof relatedamountspermittedm | |||||
|---|---|---|---|---|---|
| At 31 December 2024 | Grossamounts of assets andliabilitiesm | Cashcollateral(received)/pledgedm | Non-cash<br><br>collateral<br><br>(received)/<br><br>pledged<br><br>£m | Master netting and similar agreementsm | |
| Derivative assets | 60,118 | (4,139) | |||
| Derivative liabilities | (60,150) | 1,514 | |||
| Net position | (32) | (2,625) | |||
| Reverse repurchase agreements held at fair value | 35,463 | (20,389) | |||
| Repurchase agreements held at fair value | (35,561) | 19,991 | |||
| Net position | (98) | (398) | |||
| Reverse repurchase agreements held at amortised cost | 60,282 | (49,341) | |||
| Repurchase agreements held at amortised cost | (48,566) | 37,427 | |||
| Net position | 11,716 | (11,914) |
All values are in British Pounds.
1The 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 and provides cash and securities collateral in respect of derivative transactions covered by these agreements. The right to set off balances under these master netting
agreements or to set off cash and securities collateral only arises in the event of non-payment or default and, as a result, these arrangements do not qualify for offsetting under IAS 32.
2The amounts offset in the balance sheet as shown above meet the criteria for offsetting under IAS 32.
Lloyds Banking Group plc Annual Report and Accounts 2025
257
Note 17: Fair values of financial assets and liabilities
At 31 December 2025, the carrying value of the Group’s financial instrument assets held at fair value was £296,460 million
(2024: £270,680 million), and its financial instrument liabilities held at fair value was £105,681 million (2024: £100,515 million).
(A)Fair value measurement
Fair value is the price that would be received on sale of an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. It is a measure as at a specific date and may be significantly different from the amount which will
actually be paid or received on maturity or settlement date.
Wherever possible, fair values have been calculated using unadjusted quoted market prices in active markets for identical instruments to
those held by the Group. Where quoted market prices are not available, or are unreliable because of poor liquidity, fair values have been
determined using valuation techniques which, to the extent possible, use market observable inputs, but in some cases use non-market
observable inputs. Valuation techniques used include discounted cash flow analysis and pricing models and, where appropriate,
comparison to instruments with characteristics similar to those of the instruments held by the Group. The Group measures valuation
adjustments for its derivative exposures on the same basis as the derivatives are managed.
The carrying amount of the following financial instruments is a reasonable approximation of fair value: cash and balances at central banks,
items in the course of collection from banks, items in course of transmission to banks and notes in circulation. Liabilities arising from non-
participating investment contracts are carried at fair value.
Because a variety of estimation techniques are employed and significant estimates made, comparisons of fair values between financial
institutions may not be meaningful. Readers of these financial statements are thus advised to use caution when using this data to evaluate
the Group’s financial position.
Fair value information is not provided for items that are not financial instruments or for other assets and liabilities which are not carried at
fair value in the Group’s consolidated balance sheet. These items include intangible assets, property, plant and equipment, and
shareholders’ equity. These items are material and accordingly the Group believes that any fair value information presented would not
represent the underlying value of the Group.
Valuation control framework
The key elements of the control framework for the valuation of financial instruments include model validation, product implementation
review and independent price verification. These functions are carried out by appropriately skilled risk and finance teams, independent of
the business area responsible for the products.
Model validation covers both qualitative and quantitative elements relating to new models. In respect of new products, a product
implementation review is conducted pre and post-trading. Pre-trade testing ensures that the new model is integrated into the Group’s
systems and that the profit and loss and risk reporting are consistent throughout the trade lifecycle. Post-trade testing examines the
explanatory power of the implemented model, actively monitoring model parameters and comparing in-house pricing to external sources.
Independent price verification procedures cover financial instruments carried at fair value and are performed at a minimum on a monthly
basis. Valuation differences in breach of established thresholds are escalated to senior management. The results from independent pricing
and valuation reserves are reviewed monthly by senior management.
Formal committees, consisting of senior risk, finance and business management, meet at least quarterly to discuss and approve valuations
in more judgemental areas, in particular for unquoted equities, structured credit, derivatives and the credit valuation adjustment (CVA),
funding valuation adjustment (FVA) and other valuation adjustments.
Valuation of financial assets and liabilities
Assets and liabilities carried at fair value or for which fair values are disclosed have been classified into three levels according to the quality
and reliability of information used to determine the fair values.
Level 1
Level 1 fair value measurements are those derived from unadjusted quoted prices in active markets for identical assets or liabilities.
Products classified as level 1 predominantly comprise listed equity shares, treasury bills and other government securities.
Level 2
Level 2 valuations are those where quoted market prices are not available, for example where the instrument is traded in a market that is
not considered to be active or valuation techniques are used to determine fair value and where these techniques use inputs that are based
significantly on observable market data. Examples of such financial instruments include most over-the-counter derivatives, financial
institution issued securities, certificates of deposit and certain asset-backed securities.
Level 3
Level 3 portfolios are those where at least one input which could have a significant effect on the instrument’s valuation is not based on
observable market data. Such instruments would include the Group’s venture capital and unlisted equity investments which are valued
using various valuation techniques that require significant management judgement in determining appropriate assumptions, including
earnings multiples and estimated future cash flows. Certain of the Group’s asset-backed securities, loans and advances recognised at fair
value and derivatives are also classified as level 3.
Transfers in or out of the level 3 portfolio arise when inputs that could have a significant impact on the instrument’s valuation become
unobservable or observable, or where an unobservable input becomes significant or insignificant to an instrument’s value.
Lloyds Banking Group plc Annual Report and Accounts 2025
258
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 17: Fair values of financial assets and liabilities continued
(B)Financial assets and liabilities carried at fair value
(1)Financial assets (excluding derivatives)
Valuation hierarchy
At 31 December 2025, the Group’s financial assets (excluding derivatives) carried at fair value totalled £276,733 million (2024:
£246,615 million). The table below analyses these financial assets by balance sheet classification, asset type and valuation methodology
(level 1, 2 or 3, as described on page 257). The fair value measurement approach is recurring in nature. There were no significant transfers
between level 1 and 2 during the year.
| Level 1<br><br>£m | Level 2<br><br>£m | Level 3<br><br>£m | Total<br><br>£m | |
|---|---|---|---|---|
| At 31 December 2025 | ||||
| Trading assets | ||||
| Loans and advances to customers | – | 621 | – | 621 |
| Reverse repurchase agreements | – | 20,981 | – | 20,981 |
| Debt securities: | ||||
| Government securities | 2,908 | – | – | 2,908 |
| Asset-backed securities | – | 182 | – | 182 |
| Corporate and other debt securities | – | 845 | – | 845 |
| 2,908 | 1,027 | – | 3,935 | |
| Total trading assets | 2,908 | 22,629 | – | 25,537 |
| Other financial assets mandatorily held at fair value through profit or loss | ||||
| Loans and advances to banks | – | 2,851 | – | 2,851 |
| Loans and advances to customers | – | 2,322 | 6,058 | 8,380 |
| Debt securities: | ||||
| Government securities | 16,588 | 5 | – | 16,593 |
| Other public sector securities | – | 1,905 | – | 1,905 |
| Bank and building society certificates of deposit | – | 7,036 | – | 7,036 |
| Asset-backed securities | – | 272 | 651 | 923 |
| Corporate and other debt securities | – | 21,303 | 2,107 | 23,410 |
| 16,588 | 30,521 | 2,758 | 49,867 | |
| Treasury and other bills | 11 | – | – | 11 |
| Equity shares | 144,164 | – | 1,435 | 145,599 |
| Contracts held with reinsurers | – | 8,168 | – | 8,168 |
| Total other financial assets mandatorily held at fair value through profit or loss1 | 160,763 | 43,862 | 10,251 | 214,876 |
| Total financial assets at fair value through profit or loss | 163,671 | 66,491 | 10,251 | 240,413 |
| Financial assets at fair value through other comprehensive income | ||||
| Debt securities: | ||||
| Government securities | 22,875 | 308 | – | 23,183 |
| Asset-backed securities | – | 167 | 50 | 217 |
| Corporate and other debt securities | 1,276 | 11,593 | – | 12,869 |
| 24,151 | 12,068 | 50 | 36,269 | |
| Equity shares | – | – | 51 | 51 |
| Total financial assets at fair value through other comprehensive income | 24,151 | 12,068 | 101 | 36,320 |
| Total financial assets (excluding derivatives) at fair value | 187,822 | 78,559 | 10,352 | 276,733 |
1Other financial assets mandatorily at fair value through profit or loss include assets backing insurance contracts and investment contracts of £209,545 million. Included within these
assets are investments in unconsolidated structured entities of £45,991 million; see note 37.
Lloyds Banking Group plc Annual Report and Accounts 2025
259
Note 17: Fair values of financial assets and liabilities continued
| Level 1<br><br>£m | Level 2<br><br>£m | Level 3<br><br>£m | Total<br><br>£m | |
|---|---|---|---|---|
| At 31 December 2024 | ||||
| Trading assets | ||||
| Loans and advances to customers | – | 621 | – | 621 |
| Reverse repurchase agreements | – | 20,466 | – | 20,466 |
| Debt securities: | ||||
| Government securities | 3,473 | – | – | 3,473 |
| Asset-backed securities | – | 149 | – | 149 |
| Corporate and other debt securities | – | 741 | – | 741 |
| 3,473 | 890 | – | 4,363 | |
| Total trading assets | 3,473 | 21,977 | – | 25,450 |
| Other financial assets mandatorily held at fair value through profit or loss | ||||
| Loans and advances to banks | – | 2,787 | – | 2,787 |
| Loans and advances to customers | – | 2,418 | 6,010 | 8,428 |
| Debt securities: | ||||
| Government securities | 7,091 | 2 | – | 7,093 |
| Other public sector securities | – | 2,288 | – | 2,288 |
| Bank and building society certificates of deposit | – | 8,667 | – | 8,667 |
| Asset-backed securities | – | 285 | 367 | 652 |
| Corporate and other debt securities | – | 14,722 | 2,161 | 16,883 |
| 7,091 | 25,964 | 2,528 | 35,583 | |
| Treasury and other bills | 32 | – | – | 32 |
| Equity shares | 131,767 | – | 1,351 | 133,118 |
| Contracts held with reinsurers | – | 10,527 | – | 10,527 |
| Total other financial assets mandatorily held at fair value through profit or loss1 | 138,890 | 41,696 | 9,889 | 190,475 |
| Total financial assets at fair value through profit or loss | 142,363 | 63,673 | 9,889 | 215,925 |
| Financial assets at fair value through other comprehensive income | ||||
| Debt securities: | ||||
| Government securities | 15,146 | 115 | – | 15,261 |
| Asset-backed securities | – | 149 | 48 | 197 |
| Corporate and other debt securities | 1,152 | 13,755 | – | 14,907 |
| 16,298 | 14,019 | 48 | 30,365 | |
| Equity shares | – | – | 325 | 325 |
| Total financial assets at fair value through other comprehensive income | 16,298 | 14,019 | 373 | 30,690 |
| Total financial assets (excluding derivatives) at fair value | 158,661 | 77,692 | 10,262 | 246,615 |
1Other financial assets mandatorily at fair value through profit or loss include assets backing insurance contracts and investment contracts of £185,201 million. Included within these
assets are investments in unconsolidated structured entities of £86,630 million; see note 37.
Lloyds Banking Group plc Annual Report and Accounts 2025
260
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 17: Fair values of financial assets and liabilities continued
Movements in level 3 portfolio
The table below analyses movements in level 3 financial assets (excluding derivatives) at fair value, recurring basis.
| 2025 | 2024 | |||||
|---|---|---|---|---|---|---|
| Financial<br><br>assets at<br><br>fair value<br><br>through<br><br>profit or loss<br><br>£m | Financial<br><br>assets at<br><br>fair value<br><br>through other<br><br>comprehensive<br><br>income<br><br>£m | Total level 3<br><br>financial assets<br><br>(excluding<br><br>derivatives)<br><br>at fair value,<br><br>recurring basis<br><br>£m | Financial<br><br>assets at<br><br>fair value<br><br>through<br><br>profit or loss<br><br>£m | Financial<br><br>assets at<br><br>fair value<br><br>through other<br><br>comprehensive<br><br>income<br><br>£m | Total level 3<br><br>financial assets<br><br>(excluding<br><br>derivatives)<br><br>at fair value,<br><br>recurring basis<br><br>£m | |
| At 1 January | 9,889 | 373 | 10,262 | 11,681 | 284 | 11,965 |
| Exchange and other adjustments | (1) | 3 | 2 | 1 | (3) | (2) |
| Gains recognised in the income statement within<br><br>other income | 529 | 2 | 531 | 352 | 3 | 355 |
| (Losses) gains recognised in other comprehensive<br><br>income within the revaluation reserve in respect of<br><br>financial assets at fair value through other<br><br>comprehensive income | – | (71) | (71) | – | 92 | 92 |
| Purchases/increases to customer loans | 1,251 | – | 1,251 | 1,080 | – | 1,080 |
| Sales/repayments of customer loans | (1,365) | (206) | (1,571) | (3,266) | (3) | (3,269) |
| Transfers into the level 3 portfolio | 32 | – | 32 | 84 | – | 84 |
| Transfers out of the level 3 portfolio | (84) | – | (84) | (43) | – | (43) |
| At 31 December | 10,251 | 101 | 10,352 | 9,889 | 373 | 10,262 |
| Gains (losses) recognised in the income statement,<br><br>within other income, relating to the change in fair<br><br>value of those assets held at 31 December | 273 | 5 | 278 | 186 | (1) | 185 |
Valuation methodology for financial assets (excluding derivatives)
Loans and advances to banks and customers
The fair value of these assets is determined using discounted cash flow techniques. The discount rates are derived from market observable
interest rates, a risk margin that reflects loan credit ratings and an incremental illiquidity premium based on historical spreads at origination
on similar loans.
Reverse repurchase agreements
The fair value of these assets is determined using discounted cash flow techniques. The discount rates are derived from observable
repurchase agreement rate curves specific to the type of security sold under the reverse repurchase agreement.
Debt securities
Debt securities measured at fair value and classified as level 2 are valued by discounting expected cash flows using an observable credit
spread applicable to the particular instrument.
Where there is limited trading activity in debt securities, the Group uses valuation models, consensus pricing information from third party
pricing services and broker or lead manager quotes to determine an appropriate valuation. Debt securities are classified as level 3 if there is
a significant valuation input that cannot be corroborated through market sources or where there are materially inconsistent values for an
input. Asset classes classified as level 3 mainly comprise venture capital investments.
Equity investments
Unlisted equity and fund investments are valued using different techniques in accordance with the Group’s valuation policy and
International Private Equity and Venture Capital Guidelines.
Depending on the business sector and the circumstances of the investment, unlisted equity valuations are based on earnings multiples, net
asset values or discounted cash flows.
•A number of earnings multiples are used in valuing the portfolio including price earnings, earnings before interest and tax and earnings
before interest, tax, depreciation and amortisation. The particular multiple selected is appropriate for the size and type of business
being valued and is derived by reference to the current market-based multiple. Consideration is given to the risk attributes, growth
prospects and financial gearing of comparable businesses when selecting the appropriate multiple
•Discounted cash flow valuations use estimated future cash flows, usually based on management forecasts, with the application of
appropriate exit yields or terminal multiples and discounted using rates appropriate to the specific investment, business sector or recent
economic rates of return. Recent transactions involving the sale of similar businesses may sometimes be used as a frame of reference in
deriving an appropriate multiple
•For fund investments the most recent capital account value calculated by the fund manager is used as the basis for the valuation and
adjusted, if necessary, to align valuation techniques with the Group’s valuation policy
Unlisted equity investments and investments in property partnerships held in the life assurance funds are valued using third party
valuations. Management take account of any pertinent information, such as recent transactions and information received on particular
investments, to adjust the third party valuations where necessary.
Lloyds Banking Group plc Annual Report and Accounts 2025
261
Note 17: Fair values of financial assets and liabilities continued
(2)Financial liabilities (excluding derivatives)
Valuation hierarchy
At 31 December 2025, the Group’s financial liabilities (excluding derivatives) carried at fair value, comprised its financial liabilities at fair
value through profit or loss and totalled £27,909 million (2024: £27,611 million).
The table below analyses these financial liabilities by balance sheet classification and valuation methodology (level 1, 2 or 3, as described on
page 257). The fair value measurement approach is recurring in nature. There were no significant transfers between level 1 and 2 during the
year.
| Level 1<br><br>£m | Level 2<br><br>£m | Level 3<br><br>£m | Total<br><br>£m | |
|---|---|---|---|---|
| At 31 December 2025 | ||||
| Trading liabilities | ||||
| Liabilities in respect of securities sold under repurchase agreements | – | 21,710 | – | 21,710 |
| Short positions in securities | 1,722 | 234 | – | 1,956 |
| Total trading liabilities | 1,722 | 21,944 | – | 23,666 |
| Debt securities in issue designated at fair value through profit or loss | – | 4,226 | 17 | 4,243 |
| Total financial liabilities (excluding derivatives) at fair value | 1,722 | 26,170 | 17 | 27,909 |
| At 31 December 2024 | ||||
| Trading liabilities | ||||
| Liabilities in respect of securities sold under repurchase agreements | – | 20,564 | – | 20,564 |
| Short positions in securities | 2,400 | 17 | – | 2,417 |
| Total trading liabilities | 2,400 | 20,581 | – | 22,981 |
| Debt securities in issue designated at fair value through profit or loss | – | 4,608 | 22 | 4,630 |
| Total financial liabilities (excluding derivatives) at fair value | 2,400 | 25,189 | 22 | 27,611 |
Liabilities designated at fair value through profit or loss primarily represent debt securities in issue which either contain substantive
embedded derivatives which would otherwise need to be recognised and measured at fair value separately from the related debt
securities, or which are accounted for at fair value to significantly reduce an accounting mismatch.
The amount contractually payable on maturity of the debt securities held at fair value through profit or loss at 31 December 2025 was
£8,934 million, which was £4,691 million higher than the balance sheet carrying value (2024: £9,863 million, which was £5,233 million
higher than the balance sheet carrying value). At 31 December 2025 there was a cumulative £114 million increase in the fair value of these
liabilities attributable to changes in credit spread risk; this is determined by reference to the quoted credit spreads of Lloyds Bank plc, the
issuing entity within the Group. Of the cumulative amount, an increase of £126 million arose in 2025 and an increase of £78 million arose
in 2024.
For the fair value of collateral pledged in respect of repurchase agreements see page 255.
In addition to the liabilities above, the Group’s non-participating investment contracts are held at fair value through profit or loss and were
all categorised as level 2.
Movements in level 3 portfolio
The table below analyses movements in the level 3 financial liabilities (excluding derivatives) at fair value portfolio.
| 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|
| At 1 January | 22 | 42 |
| (Gains) losses recognised in the income statement within other income | (2) | 2 |
| Redemptions | (3) | (3) |
| Transfers out of the level 3 portfolio | – | (19) |
| At 31 December | 17 | 22 |
| (Gains) losses recognised in the income statement, within other income, relating to the change in fair value of those<br><br>liabilities held at 31 December | (2) | 3 |
Valuation methodology for financial liabilities (excluding derivatives)
Liabilities held at fair value through profit or loss
These principally comprise debt securities in issue which are classified as level 2 and their fair value is determined using techniques whose
inputs are based on observable market data. The carrying amount of the securities is adjusted to reflect the effect of changes in own credit
spreads and the resulting gain or loss is recognised in other comprehensive income.
In the year ended 31 December 2025, the own credit adjustment arising from the fair valuation of £4,243 million (2024: £4,630 million) of
the Group’s debt securities in issue designated at fair value through profit or loss resulted in a loss of £126 million (2024: loss of £78 million),
before tax, recognised in other comprehensive income.
Trading liabilities in respect of securities sold under repurchase agreements
The fair value of these liabilities is determined using discounted cash flow techniques. The discount rates are derived from observable
repurchase agreement rate curves specific to the type of security sold under the repurchase agreement.
Lloyds Banking Group plc Annual Report and Accounts 2025
262
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 17: Fair values of financial assets and liabilities continued
(3)Derivatives
Valuation hierarchy
All of the Group’s derivative assets and liabilities are carried at fair value. At 31 December 2025, such assets totalled £19,727 million
(2024: £24,065 million) and liabilities totalled £16,132 million (2024: £21,676 million).
The table below analyses these derivative balances by valuation methodology (level 1, 2 or 3, as described on page 257). The fair value
measurement approach is recurring in nature. There were no significant transfers between level 1 and level 2 during the year.
| 2025 | 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| Level 1<br><br>£m | Level 2<br><br>£m | Level 3<br><br>£m | Total<br><br>£m | Level 1<br><br>£m | Level 2<br><br>£m | Level 3<br><br>£m | Total<br><br>£m | |
| Derivative assets | 57 | 19,206 | 464 | 19,727 | 103 | 23,221 | 741 | 24,065 |
| Derivative liabilities | (29) | (15,879) | (224) | (16,132) | (79) | (21,175) | (422) | (21,676) |
Movements in level 3 portfolio
The table below analyses movements in level 3 derivative assets and liabilities carried at fair value.
| 2025 | 2024 | |||
|---|---|---|---|---|
| Derivative<br><br>assets<br><br>£m | Derivative<br><br>liabilities<br><br>£m | Derivative<br><br>assets<br><br>£m | Derivative<br><br>liabilities<br><br>£m | |
| At 1 January | 741 | (422) | 422 | (444) |
| Exchange and other adjustments | 19 | (9) | (15) | 7 |
| (Losses) gains recognised in the income statement within other income | (216) | 189 | 11 | (7) |
| Purchases (additions) | 7 | (7) | 5 | (4) |
| (Sales) redemptions | (22) | 25 | (29) | 53 |
| Transfers into the level 3 portfolio | – | – | 347 | (27) |
| Transfers out of the level 3 portfolio | (65) | – | – | – |
| At 31 December | 464 | (224) | 741 | (422) |
| (Losses) gains recognised in the income statement, within other income, relating to the<br><br>change in fair value of those assets or liabilities held at 31 December | (43) | 31 | 12 | (7) |
Valuation methodology for derivatives
The Group’s derivatives are valued using techniques including discounted cash flow and options pricing models, as appropriate. The types
of derivatives classified as level 2 and the valuation techniques used include:
•Interest rate swaps which are valued using discounted cash flow models; the most significant inputs into those models are interest rate
yield curves which are developed from publicly quoted rates
•Foreign exchange derivatives that do not contain options which are priced using rates available from publicly quoted sources
•Credit derivatives are valued using standard models with observable inputs, including publicly available yield and credit default swap
(CDS) curves
•Less complex interest rate and foreign exchange option products which are valued using volatility surfaces developed from publicly
available interest rate cap, interest rate swaption and other option volatilities; option volatility skew information is derived from a
market standard consensus pricing service
Complex interest rate products where inputs to the valuation are significant and unobservable are classified as level 3.
Derivatives where the counterparty becomes distressed from a credit perspective are generally reclassified to level 3 given limited
observability in all traded levels.
Lloyds Banking Group plc Annual Report and Accounts 2025
263
Note 17: Fair values of financial assets and liabilities continued
Derivative valuation adjustments
Derivative financial instruments which are carried in the balance sheet at fair value are adjusted where appropriate to reflect credit risk,
funding risk and liquidity.
| Adjustment | 2025<br><br>£m | 2024<br><br>£m |
|---|---|---|
| Credit Valuation Adjustment | 98 | 122 |
| Debit Valuation Adjustment | (43) | (42) |
| Funding Valuation Adjustment | 29 | 47 |
| Liquidity Adjustment | 57 | 60 |
| Other | 3 | 3 |
| Total | 144 | 190 |
Credit, Debit and Funding Valuation Adjustments (CVA, DVA and FVA) are applied to the Group’s over-the-counter derivative exposures
with counterparties that are not subject to strong interbank collateral arrangements. These exposures largely relate to the provision of risk
management solutions for corporate customers within the Corporate and Institutional Banking division.
Credit valuation adjustment
A CVA is taken where the Group has a positive future uncollateralised exposure on derivative transactions. This adjustment reflects future
expectations of counterparty creditworthiness.
Debit valuation adjustment
A DVA is taken where the Group has a negative future uncollateralised exposure on derivative transactions. This adjustment reflects future
expectations of our own creditworthiness.
Funding valuation adjustment
An FVA is taken where the Group has a future uncollateralised exposure on derivative transactions. This adjustment reflects expected
future funding costs observed in the market.
Liquidity adjustment
A liquidity reserve is taken where the Group has an exposure valued at mid-market and requires an adjustment to value at bid or offer. This
adjustment reflects the cost of neutralising market risk through offsetting transactions in standard market conditions.
Lloyds Banking Group plc Annual Report and Accounts 2025
264
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 17: Fair values of financial assets and liabilities continued
(4)Sensitivity of level 3 valuations
Critical accounting judgements and key sources of estimation uncertainty
| Key sources of estimation uncertainty: | Interest rate spreads, credit spreads, earnings multiples, interest rate volatility and recovery rates |
|---|
The Group’s valuation control framework and a description of level 1, 2 and 3 financial assets and liabilities is set out in section (A) above.
The valuation techniques for level 3 financial instruments involve management judgement and estimates, the extent of which depends
on the complexity of the instrument and the availability of market observable information. In addition, in line with market practice,
the Group applies credit, debit and funding valuation adjustments in determining the fair value of its uncollateralised derivative positions.
A description of these adjustments is set out in section (3) above. A quantitative analysis of the sensitivities to market risk arising from
the Group’s trading portfolios is set out in the tables marked audited on page 193.
| 2025 | 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| Effect of reasonably possible<br><br>alternative assumptions1 | Effect of reasonably possible<br><br>alternative assumptions1 | |||||||
| Valuation techniques | Significant<br><br>unobservable inputs2 | Carrying<br><br>value<br><br>£m | Favourable<br><br>changes<br><br>£m | Unfavourablechangesm | Carrying<br><br>value<br><br>£m | Favourable<br><br>changes<br><br>£m | Unfavourablechangesm | |
| Financial assets at fair value through profit or loss | ||||||||
| Loans and<br><br>advances to<br><br>customers | Discounted cash flows | Interest rate<br><br>spreads<br><br>(+/- 16%)3 | 6,058 | 168 | 6,022 | 245 | ||
| Debt securities | Discounted cash flows | Credit spreads<br><br>(+/- 27%)4 | 860 | 36 | 621 | 35 | ||
| Equity and<br><br>venture capital<br><br>investments | Market approach | Earnings multiple<br><br>(+/- 10%)5 | 2,275 | 101 | 2,267 | 150 | ||
| Underlying asset/net<br><br>asset fair value (incl.<br><br>property prices) | n/a | 811 | 85 | 773 | 80 | |||
| Unlisted equities,<br><br>debt securities<br><br>and property<br><br>partnerships in<br><br>the life funds | Underlying asset/net<br><br>asset fair value (incl.<br><br>property prices),<br><br>broker quotes or<br><br>discounted cash flows | n/a | 247 | 1 | 206 | – | ||
| 10,251 | 9,889 | |||||||
| Financial assets at fair value through other comprehensive income | ||||||||
| Asset-backed<br><br>securities | Lead manager or<br><br>broker quote/<br><br>consensus pricing | n/a | 50 | 2 | 48 | 2 | ||
| Equity and<br><br>venture capital<br><br>investments | Underlying asset/net<br><br>asset fair value (incl.<br><br>property prices) | n/a | 51 | 3 | 325 | 33 | ||
| 101 | 373 | |||||||
| Derivative financial assets | ||||||||
| Interest rate<br><br>options | Option pricing<br><br>model | Interest rate<br><br>volatility<br><br>(12%/195%)6 | 202 | 4 | 394 | 4 | ||
| Interest rate<br><br>derivatives | Discounted cash flows | (+/- 8%)<br><br>uncertainty of<br><br>recovery rates7 | 262 | 21 | 347 | 21 | ||
| 464 | 741 | |||||||
| Level 3 financial assets carried at fair value | 10,816 | 11,003 | ||||||
| Financial liabilities at fair value through profit or loss | ||||||||
| Securitisation<br><br>notes and other | Discounted cash flows | Interest rate<br><br>spreads<br><br>(+/– 50bps)8 | 17 | 1 | 22 | 1 | ||
| Derivative financial liabilities | ||||||||
| Interest rate<br><br>derivatives | Option pricing model | Interest rate<br><br>volatility<br><br>(12% /195% )6 | 224 | 15 | 422 | 17 | ||
| Level 3 financial liabilities carried at fair value | 241 | 444 |
All values are in British Pounds.
1Where the exposure to an unobservable input is managed on a net basis, only the net impact is shown in the table.
2Ranges are shown where appropriate and represent the highest and lowest inputs used in the level 3 valuations.
32024: -241bps/+131bps.
42024: +/- 17%.
52024: 3.5/15.0.
62024: 11%/183%.
72024: +/- 8%.
82024: +/- 50bps.
Lloyds Banking Group plc Annual Report and Accounts 2025
265
Note 17: Fair values of financial assets and liabilities continued
Unobservable inputs
Significant unobservable inputs affecting the valuation of debt securities, unlisted equity investments and derivatives are as follows:
•Credit spreads represent the premium above the benchmark reference instrument required to compensate for lower credit quality;
higher spreads lead to a lower fair value
•Volatility parameters represent key attributes of option behaviour; higher volatilities typically denote a wider range of
possible outcomes
•Earnings multiples are used to value certain unlisted equity investments. The earnings multiples used are derived from those of listed
entities operating in the same sector with adjustments made for factors such as the size of the company and the quality of its earnings.
The majority of the Group’s venture capital investments are valued using an estimate of the company’s maintainable earnings before
interest, tax, depreciation and amortisation and in accordance with the International Private Equity and Venture Capital Valuation
Guidelines. A higher earnings multiple will result in a higher fair value
Reasonably possible alternative assumptions
Valuation techniques applied to many of the Group’s level 3 instruments often involve the use of two or more inputs whose relationship is
interdependent. The calculation of the effect of reasonably possible alternative assumptions included in the table above reflects such
relationships.
Debt securities
Reasonably possible alternative assumptions have been determined in respect of the Group’s structured credit investments by flexing
credit spreads.
Derivatives
Reasonably possible alternative assumptions have been determined in respect of swaptions in the Group’s derivative portfolios which are
priced using industry standard option pricing models. Such models require interest rate volatilities which may be unobservable at longer
maturities. To derive reasonably possible alternative valuations these volatility parameters have been flexed within a range of 12% to 195%
(2024: 11% to 183%).
Further reasonably possible alternative assumptions have been determined in respect of the recovery rate on distressed derivatives, with
recovery rates flexed by 8% in order to determine possible alternative valuations.
Unlisted equity, venture capital investments and investments in property partnerships
The valuation techniques used for unlisted equity and venture capital investments vary depending on the nature of the investment.
Reasonably possible alternative valuations for these investments have been calculated by reference to the approach taken, as appropriate
to the business sector and investment circumstances and as such the following inputs have been considered:
•For valuations derived from earnings multiples, consideration is given to the risk attributes, growth prospects and financial gearing of
comparable businesses when selecting an appropriate multiple
•The discount rates used in discounted cash flow valuations
•In line with International Private Equity and Venture Capital Guidelines, the values of underlying investments in fund investment portfolios
(C)Financial assets and liabilities carried at amortised cost
(1)Financial assets
Valuation hierarchy
The table below analyses the fair values of those financial assets of the Group which are carried at amortised cost by valuation
methodology (level 1, 2 or 3, as described on page 257). Financial assets carried at amortised cost are mainly classified as level 3 due to
significant unobservable inputs used in the valuation models. Where inputs are observable, debt securities are classified as level 1 or 2.
| Carrying<br><br>value<br><br>£m | Fair<br><br>value<br><br>£m | Valuation hierarchy | |||
|---|---|---|---|---|---|
| Level 1<br><br>£m | Level 2<br><br>£m | Level 3<br><br>£m | |||
| At 31 December 2025 | |||||
| Loans and advances to banks | 7,236 | 7,235 | – | – | 7,235 |
| Loans and advances to customers | 481,463 | 480,703 | – | – | 480,703 |
| Reverse repurchase agreements | 50,986 | 50,986 | – | 50,986 | – |
| Debt securities | 13,987 | 14,082 | – | 12,908 | 1,174 |
| At 31 December 2024 | |||||
| Loans and advances to banks | 7,900 | 7,892 | – | – | 7,892 |
| Loans and advances to customers | 459,857 | 455,846 | – | – | 455,846 |
| Reverse repurchase agreements | 49,476 | 49,476 | – | 49,476 | – |
| Debt securities | 14,544 | 14,380 | – | 11,980 | 2,400 |
Lloyds Banking Group plc Annual Report and Accounts 2025
266
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 17: Fair values of financial assets and liabilities continued
Valuation methodology
Loans and advances to banks
The carrying value of short-dated loans and advances to banks is assumed to be their fair value. The fair value of other loans and advances
to banks is estimated by discounting the anticipated cash flows at a market discount rate adjusted for the credit spread of the obligor or,
where not observable, the credit spread of borrowers of similar credit quality.
Loans and advances to customers
The Group provides loans and advances to commercial, corporate and personal customers at both fixed and variable rates.
To determine the fair value of loans and advances to customers, loans are segregated into portfolios of similar characteristics. A number of
techniques are used to estimate the fair value of fixed rate lending; these take account of expected credit losses based on historic trends,
prevailing market interest rates and expected future cash flows. For retail exposures, fair value is usually estimated by discounting
anticipated cash flows (including interest at contractual rates) at market rates for similar loans offered by the Group and other financial
institutions. Certain loans secured on residential properties are made at a fixed rate for a limited period, typically two to five years, after
which the loans revert to the relevant variable rate. The fair value of such loans is estimated by reference to market rates for similar loans of
maturity equal to the remaining fixed interest rate period. The fair value of commercial loans is estimated by discounting anticipated cash
flows at a rate which reflects the effects of interest rate changes, adjusted for changes in credit risk.
Reverse repurchase agreements
The carrying amount is deemed a reasonable approximation of fair value given the short-term nature of these instruments.
Debt securities
The fair values of debt securities are determined predominantly from lead manager quotes and, where these are not available, by
alternative techniques including reference to credit spreads on similar assets with the same obligor, market standard consensus pricing
services, broker quotes and other research data.
(2)Financial liabilities
Valuation hierarchy
The table below analyses the fair values of those financial liabilities of the Group which are carried at amortised cost by valuation
methodology (level 1, 2 or 3, as described on page 257).
| Carrying<br><br>value<br><br>£m | Fair<br><br>value<br><br>£m | Valuation hierarchy | |||
|---|---|---|---|---|---|
| Level 1<br><br>£m | Level 2<br><br>£m | Level 3<br><br>£m | |||
| At 31 December 2025 | |||||
| Deposits from banks | 5,779 | 5,779 | – | 5,779 | – |
| Customer deposits | 496,457 | 497,849 | – | 497,849 | – |
| Repurchase agreements at amortised cost | 38,570 | 38,570 | – | 38,570 | – |
| Debt securities in issue at amortised cost | 78,271 | 78,900 | – | 78,900 | – |
| Subordinated liabilities | 9,894 | 11,475 | – | 11,475 | – |
| At 31 December 2024 | |||||
| Deposits from banks | 6,158 | 6,158 | – | 6,158 | – |
| Customer deposits | 482,745 | 483,568 | – | 483,568 | – |
| Repurchase agreements at amortised cost | 37,760 | 37,760 | – | 37,760 | – |
| Debt securities in issue at amortised cost | 70,834 | 70,894 | – | 70,894 | – |
| Subordinated liabilities | 10,089 | 10,419 | – | 10,419 | – |
Valuation methodology
Deposits from banks and customer deposits
The fair value of bank and customer deposits repayable on demand is assumed to be equal to their carrying value.
The fair value for all other deposits is estimated using discounted cash flows applying either market rates, where applicable, or current rates
for deposits of similar remaining maturities.
Repurchase agreements at amortised cost
The carrying amount is deemed a reasonable approximation of fair value given the short-term nature of these instruments.
Debt securities in issue at amortised cost
The fair value of short-term debt securities in issue is approximately equal to their carrying value. Fair value for other debt securities in issue
is calculated based on quoted market prices where available. Where quoted market prices are not available, fair value is estimated using
discounted cash flow techniques at a rate which reflects market rates of interest and the Group’s own credit spread.
Subordinated liabilities
The fair value of subordinated liabilities is determined by reference to quoted market prices where available or by reference to quoted
market prices of similar instruments. Subordinated liabilities are classified as level 2, since the inputs used to determine their fair value are
largely observable.
(D)Reclassifications of financial assets
There have been no reclassifications of financial assets in 2024 or 2025.
Lloyds Banking Group plc Annual Report and Accounts 2025
267
Note 18: Maturities of assets and liabilities
The table below analyses assets and liabilities of the Group, other than liabilities arising from insurance and investment contracts (including
those classified as disposal group liabilities), into relevant maturity groupings based on the remaining contractual period at the balance
sheet date; balances with no fixed maturity such as goodwill, other intangible assets and property, plant and equipment are included in the
over 5 years category. Liabilities arising from insurance and investment contracts are analysed on a behavioural basis. Certain deposit
balances, included in the table below on the basis of their residual maturity, are repayable on demand upon payment of a penalty.
The table is provided on a contractual basis. The Group’s assets and liabilities may be repaid or otherwise mature earlier or later than
implied by their contractual terms and readers are, therefore, advised to use caution when using this data to evaluate the Group’s liquidity
position. In particular, amounts in respect of customer deposits are usually contractually payable on demand or at short notice. However, in
practice, these deposits are not usually withdrawn on their contractual maturity.
| Up to 1<br><br>month<br><br>£m | 1 to 3<br><br>months<br><br>£m | 3 to 6<br><br>months<br><br>£m | 6 to 9<br><br>months<br><br>£m | 9 to 12<br><br>months<br><br>£m | 1 to 2<br><br>years<br><br>£m | 2 to 5<br><br>years<br><br>£m | Over 5<br><br>years<br><br>£m | Total<br><br>£m | |
|---|---|---|---|---|---|---|---|---|---|
| At 31 December 2025 | |||||||||
| Assets | |||||||||
| Cash and balances at central banks | 56,661 | – | – | – | – | – | – | – | 56,661 |
| Financial assets at fair value through profit or loss | 12,449 | 8,163 | 5,217 | 3,636 | 1,880 | 7,267 | 14,941 | 186,860 | 240,413 |
| Derivative financial instruments | 1,626 | 1,759 | 759 | 583 | 418 | 1,179 | 2,814 | 10,589 | 19,727 |
| Loans and advances to banks | 1,890 | 1,576 | 1,249 | 575 | 231 | 473 | 1,235 | 7 | 7,236 |
| Loans and advances to customers | 18,991 | 13,984 | 15,869 | 13,550 | 11,358 | 37,418 | 69,454 | 300,839 | 481,463 |
| Reverse repurchase agreements | 9,911 | 14,193 | 11,114 | 3,901 | 1,489 | 6,875 | 3,503 | – | 50,986 |
| Debt securities | 88 | 459 | 1,597 | 370 | 446 | 1,152 | 2,804 | 7,071 | 13,987 |
| Financial assets at amortised cost | 30,880 | 30,212 | 29,829 | 18,396 | 13,524 | 45,918 | 76,996 | 307,917 | 553,672 |
| Financial assets at fair value through other<br><br>comprehensive income | 205 | 934 | 276 | 415 | 451 | 4,163 | 12,821 | 17,055 | 36,320 |
| Other assets | 2,668 | 841 | 153 | 1,083 | 90 | 222 | 276 | 31,946 | 37,279 |
| Total assets | 104,489 | 41,909 | 36,234 | 24,113 | 16,363 | 58,749 | 107,848 | 554,367 | 944,072 |
| Liabilities | |||||||||
| Deposits from banks | 1,921 | 386 | 813 | 951 | 115 | 449 | 1,134 | 10 | 5,779 |
| Customer deposits | 423,727 | 25,731 | 17,233 | 10,711 | 9,055 | 6,413 | 3,170 | 417 | 496,457 |
| Repurchase agreements at amortised cost | 11,865 | 9,699 | 6,511 | 876 | 232 | 6,269 | 1 | 3,117 | 38,570 |
| Financial liabilities at fair value through profit or<br><br>loss | 13,100 | 6,021 | 2,103 | 342 | 419 | 362 | 1,484 | 4,078 | 27,909 |
| Derivative financial instruments | 1,254 | 1,361 | 677 | 388 | 318 | 1,119 | 2,497 | 8,518 | 16,132 |
| Debt securities in issue at amortised cost | 243 | 9,345 | 11,459 | 6,594 | 3,193 | 13,787 | 21,566 | 12,084 | 78,271 |
| Liabilities arising from insurance and participating<br><br>investment contracts | 476 | 675 | 393 | 465 | 501 | 2,383 | 9,215 | 121,176 | 135,284 |
| Liabilities arising from non-participating<br><br>investment contracts | 481 | 718 | 1,063 | 1,050 | 1,038 | 4,018 | 10,984 | 42,288 | 61,640 |
| Other liabilities | 6,754 | 1,783 | 276 | 912 | 734 | 1,646 | 469 | 13,695 | 26,269 |
| Subordinated liabilities | – | 1,130 | – | – | 500 | – | 4,081 | 4,183 | 9,894 |
| Total liabilities | 459,821 | 56,849 | 40,528 | 22,289 | 16,105 | 36,446 | 54,601 | 209,566 | 896,205 |
Lloyds Banking Group plc Annual Report and Accounts 2025
268
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 18: Maturities of assets and liabilities continued
| Up to 1<br><br>month<br><br>£m | 1 to 3<br><br>months<br><br>£m | 3 to 6<br><br>months<br><br>£m | 6 to 9<br><br>months<br><br>£m | 9 to 12<br><br>months<br><br>£m | 1 to 2<br><br>years<br><br>£m | 2 to 5<br><br>years<br><br>£m | Over 5<br><br>years<br><br>£m | Total<br><br>£m | |
|---|---|---|---|---|---|---|---|---|---|
| At 31 December 2024 | |||||||||
| Assets | |||||||||
| Cash and balances at central banks | 62,705 | – | – | – | – | – | – | – | 62,705 |
| Financial assets at fair value through profit or loss | 13,096 | 6,843 | 6,680 | 3,675 | 2,837 | 4,244 | 11,030 | 167,520 | 215,925 |
| Derivative financial instruments | 2,405 | 2,302 | 1,079 | 774 | 659 | 1,237 | 3,062 | 12,547 | 24,065 |
| Loans and advances to banks | 2,842 | 1,350 | 903 | 452 | 187 | 583 | 1,579 | 4 | 7,900 |
| Loans and advances to customers | 18,748 | 12,747 | 15,375 | 12,271 | 11,010 | 34,790 | 67,901 | 287,015 | 459,857 |
| Reverse repurchase agreements | 22,793 | 13,356 | 6,945 | 2,764 | 1,524 | 1,355 | 739 | – | 49,476 |
| Debt securities | 40 | 1,439 | 232 | 358 | 273 | 4,128 | 2,183 | 5,891 | 14,544 |
| Financial assets at amortised cost | 44,423 | 28,892 | 23,455 | 15,845 | 12,994 | 40,856 | 72,402 | 292,910 | 531,777 |
| Financial assets at fair value through other<br><br>comprehensive income | 8 | 178 | 39 | 140 | 728 | 3,908 | 11,746 | 13,943 | 30,690 |
| Other assets | 3,231 | 1,015 | 157 | 1,030 | 106 | 295 | 643 | 35,058 | 41,535 |
| Total assets | 125,868 | 39,230 | 31,410 | 21,464 | 17,324 | 50,540 | 98,883 | 521,978 | 906,697 |
| Liabilities | |||||||||
| Deposits from banks | 1,783 | 669 | 540 | 171 | 171 | 350 | 2,413 | 61 | 6,158 |
| Customer deposits | 392,403 | 27,489 | 18,009 | 18,650 | 18,327 | 4,153 | 3,456 | 258 | 482,745 |
| Repurchase agreements at amortised cost | 8,698 | 5,140 | 1,660 | – | 13,227 | 93 | 8,942 | – | 37,760 |
| Financial liabilities at fair value through profit or<br><br>loss | 15,443 | 3,677 | 774 | 131 | 1,048 | 402 | 1,466 | 4,670 | 27,611 |
| Derivative financial instruments | 2,409 | 2,218 | 1,054 | 781 | 588 | 1,207 | 3,407 | 10,012 | 21,676 |
| Debt securities in issue at amortised cost | 3,222 | 10,190 | 6,074 | 4,265 | 2,089 | 8,190 | 26,525 | 10,279 | 70,834 |
| Liabilities arising from insurance and participating<br><br>investment contracts | 478 | 436 | 51 | 102 | 224 | 1,510 | 7,992 | 111,271 | 122,064 |
| Liabilities arising from non-participating<br><br>investment contracts | 419 | 646 | 1,058 | 1,211 | 1,165 | 4,362 | 9,807 | 32,560 | 51,228 |
| Other liabilities | 7,519 | 1,711 | 351 | 684 | 446 | 1,548 | 2,237 | 16,148 | 30,644 |
| Subordinated liabilities | – | 638 | 277 | – | 1,070 | 1,706 | 2,219 | 4,179 | 10,089 |
| Total liabilities | 432,374 | 52,814 | 29,848 | 25,995 | 38,355 | 23,521 | 68,464 | 189,438 | 860,809 |
Lloyds Banking Group plc Annual Report and Accounts 2025
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Note 19: Derivative financial instruments
The fair values and notional amounts of derivative instruments are set out in the following table:
| 2025 | |||||
|---|---|---|---|---|---|
| Contract/<br><br>notional<br><br>amount<br><br>£m | Fair value | Fair value | |||
| Assets<br><br>£m | Liabilitiesm | Assets<br><br>£m | Liabilities<br><br>£m | ||
| Trading and other | |||||
| Exchange rate contracts | 689,215 | 7,594 | 6,454 | 10,247 | 9,172 |
| Interest rate contracts | 15,086,291 | 11,797 | 8,924 | 13,436 | 11,644 |
| Credit derivatives | 5,566 | 75 | 170 | 87 | 172 |
| Equity, commodity and other contracts | 8,914 | 236 | 294 | 247 | 333 |
| Total derivative assets/liabilities – trading and other | 15,789,986 | 19,702 | 15,842 | 24,017 | 21,321 |
| Hedging | |||||
| Interest rate | |||||
| Currency swaps | 35 | 4 | – | 2 | – |
| Interest rate swaps | 211,737 | 8 | 253 | 6 | 337 |
| Designated as fair value hedges | 211,772 | 12 | 253 | 8 | 337 |
| Foreign exchange | |||||
| Currency swaps | 1,554 | 6 | 33 | 30 | 14 |
| Interest rate | |||||
| Interest rate swaps | 571,126 | 7 | 4 | 10 | 4 |
| Designated as cash flow hedges | 572,680 | 13 | 37 | 40 | 18 |
| Total derivative assets/liabilities – hedging | 784,452 | 25 | 290 | 48 | 355 |
| Total recognised derivative assets/liabilities | 16,574,438 | 19,727 | 16,132 | 24,065 | 21,676 |
All values are in British Pounds.
The notional amount of the contract does not represent the Group’s exposure to credit risk, which is limited to the current cost of replacing
contracts with a positive value to the Group should the counterparty default. To reduce credit risk the Group uses a variety of credit
enhancement techniques such as netting and collateralisation, where security is provided against the exposure; a large proportion of the
Group’s derivatives are held through exchanges such as London Clearing House and are collateralised through those exchanges.
The Group holds derivatives as part of the following strategies:
•Customer driven, where derivatives are held as part of the provision of risk management products to Group customers
•To manage and hedge the Group’s interest rate and foreign exchange risk arising from normal banking business. The hedge accounting
strategy adopted by the Group is to utilise a combination of fair value and cash flow hedge approaches
•Derivatives held in policyholder funds as permitted by the investment strategies of those funds
The principal derivatives used by the Group are as follows:
•Interest rate related contracts that include interest rate swaps, forward rate agreements and options. An interest rate swap is an
agreement between two parties to exchange fixed and floating interest payments, based upon interest rates defined in the contract,
without the exchange of the underlying principal amounts. Forward rate agreements are contracts for the payment of the difference
between a specified rate of interest and a reference rate, applied to a notional principal amount at a specific date in the future. An
interest rate option gives the buyer, on payment of a premium, the right, but not the obligation, to fix the rate of interest on a future
loan or deposit, for a specified period and commencing on a specified future date
•Exchange rate related contracts that include forward foreign exchange contracts, currency swaps and options. A forward foreign
exchange contract is an agreement to buy or sell a specified amount of foreign currency on a specified future date at an agreed rate.
Currency swaps generally involve the exchange of interest payment obligations denominated in different currencies. A currency option
gives the buyer, on payment of a premium, the right, but not the obligation, to sell specified amounts of currency at agreed rates of
exchange on or before a specified future date
•Credit derivatives, principally credit default swaps, are used by the Group as part of its trading activity and to manage its own exposure
to credit risk. A credit default swap is a swap in which one counterparty receives a premium at pre-set intervals in consideration for
guaranteeing to make a specific payment should a negative credit event take place
•Equity, commodity and other contracts including commodity swaps and options
Lloyds Banking Group plc Annual Report and Accounts 2025
270
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 19: Derivative financial instruments continued
The Group’s hedged items and gains and losses arising from hedge accounting are summarised as follows:
| Carrying amount of<br><br>the hedged item | Accumulated amount of<br><br>fair value adjustment on<br><br>the hedged item | Hedge<br><br>ineffectiveness<br><br>recognised in the<br><br>income<br><br>statement4<br><br>£m | |||
|---|---|---|---|---|---|
| Fair value hedges | Assets<br><br>£m | Liabilities<br><br>£m | Assets<br><br>£m | Liabilitiesm | |
| At 31 December 2025 | |||||
| Interest rate | |||||
| Fixed rate mortgages1 | 121,732 | – | (178) | – | (68) |
| Fixed rate issuance2 | – | 45,053 | – | 829 | 10 |
| Fixed rate bonds3 | 35,058 | – | (1,053) | – | 4 |
| Total | 156,790 | 45,053 | (1,231) | 829 | (54) |
| At 31 December 2024 | |||||
| Interest rate | |||||
| Fixed rate mortgages1 | 124,013 | – | (890) | – | (52) |
| Fixed rate issuance2 | – | 51,499 | – | 1,340 | (11) |
| Fixed rate bonds3 | 29,264 | – | (1,070) | – | (18) |
| Total | 153,277 | 51,499 | (1,960) | 1,340 | (81) |
All values are in British Pounds.
1Included within loans and advances to customers.
2Included within debt securities in issue at amortised cost and subordinated liabilities.
3Included within financial assets at amortised cost and financial assets at fair value through other comprehensive income.
4Hedge ineffectiveness is included in the income statement within net trading income.
| Gain (loss)<br><br>recognised<br><br>in other<br><br>comprehensive<br><br>income<br><br>£m | Amounts reclassified from<br><br>reserves to net interest income as: | Cash flow hedge reserve | Hedge<br><br>ineffectiveness<br><br>recognised in<br><br>the income<br><br>statement1<br><br>£m | |||
|---|---|---|---|---|---|---|
| Cash flow hedges | Hedged cash<br><br>flows that<br><br>will no<br><br>longer occur<br><br>£m | Hedged itemaffected incomestatementm | Continuing<br><br>hedges<br><br>£m | Discontinuedhedgesm | ||
| At 31 December 2025 | ||||||
| Foreign exchange | ||||||
| Foreign currency issuance2 | (3) | – | (11) | 138 | – | |
| Customer deposits3 | – | – | – | 9 | – | |
| Interest rate | ||||||
| Customer loans4 | 294 | – | (2,159) | (1,475) | 63 | |
| Central bank balances5 | 205 | – | (100) | (831) | 3 | |
| Customer deposits3 | (14) | – | 1,527 | 38 | (12) | |
| Total | 482 | – | (743) | (2,121) | 54 | |
| At 31 December 2024 | ||||||
| Foreign exchange | ||||||
| Foreign currency issuance2 | 61 | – | 75 | 59 | – | |
| Customer deposits3 | – | – | – | 5 | – | |
| Interest rate | ||||||
| Customer loans4 | (2,700) | – | (3,470) | (1,590) | (61) | |
| Central bank balances5 | (780) | – | (1,012) | (917) | (7) | |
| Customer deposits3 | 842 | – | 1,592 | 42 | 8 | |
| Total | (2,577) | – | (2,815) | (2,401) | (60) |
All values are in British Pounds.
1Hedge ineffectiveness is included in the income statement within net trading income. The reported hedge ineffectiveness includes an adjustment for off-market derivatives.
2Included within debt securities in issue at amortised cost and subordinated liabilities.
3Included within customer deposits.
4Included within loans and advances to customers.
5Included within cash and balances at central banks.
There was no gain or loss in either 2025 or 2024 reclassified from the cash flow hedge reserve for which hedge accounting had previously
been used but for which the hedged future cash flows are no longer expected to occur.
The accumulated amount of fair value hedge adjustments remaining on the balance sheet for hedged items that have ceased to be
adjusted for hedging gains and losses is a liability of £524 million relating to fixed rate issuances of £498 million and mortgages of
£26 million (2024: liability of £980 million relating to fixed rate issuances of £582 million and mortgages of £398 million).
Lloyds Banking Group plc Annual Report and Accounts 2025
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Note 19: Derivative financial instruments continued
Details of the Group’s hedging instruments are set out below:
| Maturity | ||||||
|---|---|---|---|---|---|---|
| Fair value hedges | Up to 1 month<br><br>£m | 1 to 3 months<br><br>£m | 3 to 12 monthsm | 1 to 5 years<br><br>£m | Over 5 yearsm | Totalm |
| At 31 December 2025 | ||||||
| Interest rate | ||||||
| Cross currency swap | ||||||
| Notional | – | – | 35 | 35 | ||
| Average fixed interest rate | – | – | 1.28% | |||
| Average EUR/GBP exchange rate | – | – | 1.38 | |||
| Interest rate swap | ||||||
| Notional | 395 | 5,503 | 132,417 | 211,737 | ||
| Average fixed interest rate | 3.00% | 3.24% | 3.33% | |||
| 211,772 | ||||||
| Cash flow hedges | ||||||
| At 31 December 2025 | ||||||
| Foreign exchange | ||||||
| Currency swap | ||||||
| Notional | 152 | 162 | 884 | 1,554 | ||
| Average EUR/GBP exchange rate | 1.13 | 1.16 | 0.98 | |||
| Average USD/GBP exchange rate | 1.33 | 1.31 | 1.29 | |||
| Interest rate | ||||||
| Interest rate swap | ||||||
| Notional | 12,636 | 31,911 | 321,862 | 571,126 | ||
| Average fixed interest rate | 4.03% | 3.43% | 3.59% | |||
| 572,680 | ||||||
| Total | 784,452 | |||||
| Fair value hedges | ||||||
| At 31 December 2024 | ||||||
| Interest rate | ||||||
| Cross currency swap | ||||||
| Notional | – | – | – | 43 | ||
| Average fixed interest rate | – | – | – | |||
| Average EUR/GBP exchange rate | – | – | – | |||
| Interest rate swap | ||||||
| Notional | 5,236 | 13,781 | 111,300 | 231,064 | ||
| Average fixed interest rate | 3.04% | 3.68% | 3.36% | |||
| 231,107 | ||||||
| Cash flow hedges | ||||||
| At 31 December 2024 | ||||||
| Foreign exchange | ||||||
| Currency swap | ||||||
| Notional | 107 | 441 | 763 | 1,963 | ||
| Average EUR/GBP exchange rate | 1.17 | 1.16 | 1.10 | |||
| Average USD/GBP exchange rate | 1.30 | 1.27 | 1.27 | |||
| Interest rate | ||||||
| Interest rate swap | ||||||
| Notional | 9,195 | 21,010 | 262,387 | 484,996 | ||
| Average fixed interest rate | 4.32% | 4.36% | 3.34% | |||
| 486,959 | ||||||
| Total | 718,066 |
All values are in British Pounds.
Lloyds Banking Group plc Annual Report and Accounts 2025
272
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 20: Loans and advances to customers
Tables showing the movement of loans advances to customers, compiled by comparing the position at the end of the year to that at the
beginning of the year, are shown in the Credit Risk section.
Note 21: Allowance for expected credit losses
The Group recognises an allowance for expected credit losses (ECLs) for loans and advances to customers and banks, other financial assets
held at amortised cost, financial assets (other than equity investments) measured at fair value through other comprehensive income and
certain loan commitment and financial guarantee contracts. At 31 December 2025, the Group’s expected credit loss allowance was
£3,228 million (2024: £3,481 million), of which £3,031 million (2024: £3,211 million) was in respect of drawn balances.
The Group’s total expected credit loss allowances were as follows:
| At 31 December 2025 | At 31 December 2024 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Allowance for expected credit losses | Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | POCI<br><br>£m | Total<br><br>£m | Stage 1<br><br>£m | Stage 2<br><br>£m | Stage 3<br><br>£m | POCI<br><br>£m | Total<br><br>£m |
| In respect of: | ||||||||||
| Loans and advances to banks | 1 | – | – | – | 1 | 1 | – | – | – | 1 |
| UK mortgages | 51 | 207 | 309 | 159 | 726 | 53 | 273 | 335 | 187 | 848 |
| Credit cards | 145 | 248 | 121 | – | 514 | 149 | 297 | 133 | – | 579 |
| Other | 368 | 343 | 226 | – | 937 | 329 | 326 | 227 | – | 882 |
| Retail | 564 | 798 | 656 | 159 | 2,177 | 531 | 896 | 695 | 187 | 2,309 |
| Commercial Banking | 173 | 279 | 382 | – | 834 | 205 | 264 | 413 | – | 882 |
| Other | – | – | – | – | – | – | – | – | – | – |
| Loans and advances to customers | 737 | 1,077 | 1,038 | 159 | 3,011 | 736 | 1,160 | 1,108 | 187 | 3,191 |
| Debt securities | 4 | – | 1 | – | 5 | 3 | – | 1 | – | 4 |
| Financial assets at amortised cost | 742 | 1,077 | 1,039 | 159 | 3,017 | 740 | 1,160 | 1,109 | 187 | 3,196 |
| Other assets | 6 | – | 8 | – | 14 | 7 | – | 8 | – | 15 |
| Provisions in relation to loan<br><br>commitments and financial guarantees | 113 | 83 | 1 | – | 197 | 142 | 126 | 2 | – | 270 |
| Total | 861 | 1,160 | 1,048 | 159 | 3,228 | 889 | 1,286 | 1,119 | 187 | 3,481 |
| Expected credit loss in respect of<br><br>financial assets at fair value through<br><br>other comprehensive income<br><br>(memorandum item) | 3 | – | – | – | 3 | 4 | – | – | – | 4 |
The calculation of the Group’s expected credit loss allowances and provisions against loan commitments and guarantees, which are set out
above, requires the Group to make a number of judgements, assumptions and estimates. The most significant are set out below:
Critical accounting judgements and key sources of estimation uncertainty
| Critical judgements: | Determining an appropriate definition of default against which a probability of default, exposure at default<br><br>and loss given default parameter can be evaluated |
|---|---|
| Establishing the criteria for a significant increase in credit risk (SICR) | |
| The individual assessment of material cases and the use of judgemental adjustments made to impairment<br><br>modelling processes that adjust inputs, parameters and outputs to reflect risks not captured by models | |
| Key source of estimation uncertainty: | Base case and multiple economic scenarios (MES) assumptions, including the rate of unemployment and the<br><br>rate of change of house prices, required for creation of MES scenarios and forward-looking credit parameters |
Definition of default
The probability of default (PD) of an exposure, both over a 12-month period and over its lifetime, is a key input to the measurement of the
ECL allowance. Default has occurred when there is evidence that the customer is experiencing significant financial difficulty which is likely
to affect the ability to repay amounts due. The definition of default adopted by the Group is described in note 2(H) Impairment of financial
assets. A Stage 3 asset that is no longer credit-impaired is transferred back to Stage 2 as no general probation period is applied to assets in
Stage 3. UK mortgages is an exception to this rule where a probation period is enforced for non-performing forborne and defaulted
exposures in accordance with prudential regulation.
Significant increase in credit risk
An ECL allowance equivalent to 12 months’ expected losses is established against assets in Stage 1; assets classified as Stage 2 carry an ECL
allowance equivalent to lifetime expected losses. Assets are transferred from Stage 1 to Stage 2 when there has been a significant increase
in credit risk (SICR) since initial recognition. Credit-impaired assets are transferred to Stage 3 with a lifetime expected losses allowance. If
an exposure that is classified as Stage 2 no longer meets the SICR criteria, which in some cases capture customer behaviour in previous
periods, it is moved back to Stage 1.
The Group uses both quantitative and qualitative indicators to determine whether there has been a SICR for an asset. The setting of
precise trigger points combined with risk indicators requires judgement and the use of different trigger points may have a material impact
upon the ECL allowance. The Group monitors the effectiveness of SICR criteria on an ongoing basis.
For UK mortgages a doubling of PD since origination is set as a quantitative SICR trigger. All originations post IFRS 9 adoption incorporate
forward looking information, and for recent Interest Only accounts the likelihood of default occurring at the end of term. This is
supplemented by qualitative triggers including where customers have surpassed their original contractual term through use of term
extensions, where fraud is evident, or where an account is in arrears.
Lloyds Banking Group plc Annual Report and Accounts 2025
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Note 21: Allowance for expected credit losses continued
For credit cards, loans and overdrafts an increase of three PD grades since origination on the retail master scale (RMS) shown below is set
as a quantitative SICR trigger. Assets are also assumed to have suffered a SICR if they have either been in arrears on three occasions, or in
default once, in the past 12 months.
| RMS grade | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| PD boundary1 (%) | 0.10 | 0.40 | 0.80 | 1.20 | 2.50 | 4.50 | 7.50 | 10.00 | 14.00 | 20.00 | 30.00 | 45.00 | 99.99 | 100.00 |
1Probability-weighted annualised lifetime probability of default.
For Commercial Banking a doubling of PD with a minimum increase in PD of 1% since origination is treated as a SICR. This is complemented
with the use of internal credit risk classifications and ratings as qualitative indicators to identify a SICR.
The Group does not use the low credit risk exemption in its staging assessments, though more simplistic SICR criteria are applied for
portfolios not listed above. All financial assets are assumed to have suffered a SICR if they are more than 30 days past due.
Individual assessments and application of judgement in adjustments to modelled ECL
The table below analyses total ECL allowances by portfolio, separately identifying the amounts that have been modelled, those that have
been individually assessed and those arising through the application of judgemental adjustments.
| At 31 December 2025 | At 31 December 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| Modelled<br><br>ECL<br><br>£m | Individually assessedm | Judgemental<br><br>adjustments<br><br>£m | Total<br><br>£m | Modelled<br><br>ECL<br><br>£m | Individually<br><br>assessed<br><br>£m | Judgemental<br><br>adjustments<br><br>£m | Total<br><br>£m | |
| UK mortgages | 623 | 108 | 731 | 720 | – | 132 | 852 | |
| Credit cards | 540 | 63 | 603 | 681 | – | (7) | 674 | |
| Other Retail | 916 | 75 | 991 | 860 | – | 90 | 950 | |
| Commercial Banking | 555 | (22) | 888 | 894 | 354 | (259) | 989 | |
| Other | 15 | – | 15 | 16 | – | – | 16 | |
| Total | 2,649 | 224 | 3,228 | 3,171 | 354 | (44) | 3,481 |
All values are in British Pounds.
Individually assessed ECL
Stage 3 ECL in Commercial Banking is largely assessed on an individual basis by the Business Support Unit using bespoke assessment of loss
for each specific client based on potential recovery strategies. While these assessments are based on the Group’s latest economic view, the
use of Group-wide multiple economic scenarios and weightings is not considered appropriate for these cases due to their individual
characteristics. In place of this, a range of case-specific outcomes are considered with any alternative better or worse outcomes that carry
a 25% likelihood taken into account in establishing a probability-weighted ECL. At 31 December 2025, individually assessed provisions for
Commercial Banking were £355 million (2024: £354 million) which reflected a range of £276 million to £440 million (2024: £309 million to
£437 million), based on the range of alternative outcomes considered.
Application of judgement in adjustments to modelled ECL
Impairment models fall within the Group’s model risk framework with model monitoring, periodic validation and back testing performed on
model components, such as probability of default. Limitations in the models or data inputs may be identified through these assessments
and review of model outputs, which may require appropriate judgemental adjustments to the ECL. These adjustments are determined by
considering the particular attributes of exposures which have not been adequately captured by the impairment models and range from
changes to model inputs and parameters, at account level (in-model adjustments), through to more qualitative post-model adjustments.
UK mortgages: £108 million (2024: £132 million)
These adjustments principally comprise:
Repossession risk: £85 million (2024: £110 million)
Additional ECL continues to be held judgementally to capture the potential repossession and recovery risk from specific subsets of largely
long-term defaulted cases. This is alongside an adjustment to capture a longer duration between default and repossession than model
assumptions use on existing and future defaults. The reduction in the period reflects methodology refinement and latest data points on the
population judged at risk.
Adjustment for specific segments: £13 million (2024: £13 million)
The Group monitors risks across specific segments of its portfolios which may not be fully captured through collective models. The
judgement for fire safety and cladding uncertainty remains in place as the only Mortgages segment sufficiently material to address, given
evidence of cases with defective cladding, or other fire safety issues.
Credit cards: £63 million (2024: £(7) million) and Other Retail: £75 million (2024: £90 million)
These adjustments principally comprise:
Lifetime extension: Credit cards: £49 million (2024: £55 million) and Other Retail: £9 million (2024: £10 million)
An adjustment is required to extend the lifetime used for Stage 2 exposures on Retail revolving products from a three-year modelled
lifetime, which reflected the outcome data available when the ECL models were developed, to a more representative lifetime. Incremental
defaults beyond year three are calculated through the extrapolation of the default trajectory observed throughout the three years and
beyond.
Adjustments to loss rates: Credit cards: £nil (2024: £(57) million) and Other Retail: £25 million (2024: £47 million)
A number of adjustments were previously made to the loss given default (LGD) assumptions used within unsecured and motor credit
models. For unsecured portfolios, the previous adjustments reflected the impact of changes in collection debt sale strategy on the Group’s
LGD models, incorporating up to date customer performance and forward flow debt sale pricing. These impacts have now been integrated
into the model solution following model refinements. The remaining adjustment for UK Motor Finance, within Other Retail, captures the
observed loss rates and the latest outlook on used car prices.
Lloyds Banking Group plc Annual Report and Accounts 2025
274
Note 21: Allowance for expected credit losses continued
Commercial Banking: £(22) million (2024: £(259) million)
These adjustments principally comprise:
Corporate insolvency rates: £(122) million (2024: £(253) million)
The volume of UK corporate insolvencies continues to exhibit an elevated trend beyond December 2019 levels, revealing a marked
misalignment between observed UK corporate insolvencies and the Group’s equivalent credit performance. This dislocation gives rise to
uncertainty over the drivers of the observed trends in the metric and the appropriateness of the Group’s Commercial Banking model
response which uses observed UK corporate insolvencies data to anchor future loss estimates to. Given the Group’s stable credit
performance, a negative adjustment is applied by reverting judgementally to the long-term average of the insolvency rate. The scale of the
negative adjustment reduced in the period reflecting both the reduction in observed actual UK corporate insolvencies rates, narrowing the
gap of the misalignment, as well from changes due to the interaction with the implementation of loss rate model enhancements in the
period.
Adjustments to loss given defaults (LGDs): £50 million (2024: £(80) million)
In preceding years, adjustments have been required to mitigate limitations identified in the modelling approach which were causing loss
given defaults to be inflated. These included the lack of benefit from amortisation of exposures relative to collateral values at default, and
the need to reflect an exposure-weighted calculation. These two adjustments have been released following respective enhancements to
models. One remaining adjustment remains for a specific segment of the SME portfolio which judgementally applies a more appropriate
blended LGD rate from credit risk profile segments more aligned to experience.
Corporate income gearing (CIG) adjustment: £nil (2024: £37 million)
An adjustment was raised at 31 December 2024, based upon the assessment of Corporate Income Gearing, a model parameter for
affordability used in Commercial Banking. This adjustment reversed the modelled ECL release seen from updating CIG drivers (interest
rates), given interest rates had merely reached a plateau which translated into a slower year-on-year increase. This slowdown gave a
modelled ECL release not judged representative of the continued pressure on borrowers and business margins. However, the maintenance
of those improvements in drivers over the first half of 2025 (including sustained lower base rates) gives support for the modelled release to
now be recognised, removing the judgemental adjustment.
Commercial Real Estate (CRE) price reduction: £nil (2024: £35 million)
This adjustment recognised the potential impact on loss rates from valuations on specific CRE sectors where evidence suggested valuations
may lag achievable levels, notably in cases of stressed sale. Recent performance reflects stabilisation in valuations and improved confidence
in the CRE sector, removing the judgemental adjustment.
Global tariff and geo-political disruption risks: £50 million (2024: £nil)
This new adjustment is to recognise the potential risks to specific drivers across various corporate sectors not reflected in broad
macroeconomic model drivers. These are potential nuanced risks to businesses inherent in the base case which could also worsen in the
downside scenarios. This assessment is judgemental and apportioned across all sectors given the uncertainty of how these risks would
emerge.
Generation of multiple economic scenarios
The estimate of expected credit losses is required to be based on an unbiased expectation of future economic scenarios. The approach
used to generate the range of future economic scenarios depends on the methodology and judgements adopted. The Group’s approach is
to start from a defined base case scenario, used for planning purposes, and to generate alternative economic scenarios around this base
case. The base case scenario is a conditional forecast underpinned by a number of conditioning assumptions that reflect the Group’s best
view of key future developments. If circumstances appear likely to materially deviate from the conditioning assumptions, then the base
case scenario is updated.
The base case scenario is central to a range of future economic scenarios generated by simulation of an economic model, for which the
same conditioning assumptions apply as in the base case scenario. These scenarios are ranked by using estimated relationships with
industry-wide historical loss data. With the base case already pre-defined, three other scenarios are identified as averages of constituent
scenarios located around the 15th, 75th and 95th percentiles of the distribution. The full distribution is therefore summarised by a practical
number of scenarios to run through ECL models representing an upside, the base case, and a downside scenario weighted at 30% each,
together with a severe downside scenario weighted at 10%. The scenario weights represent the distribution of economic scenarios and not
subjective views on likelihood. The inclusion of a severe downside scenario with a smaller weighting ensures that the non-linearity of losses
in the tail of the distribution is adequately captured. Macroeconomic projections may employ reversionary techniques to adjust the paths
of economic drivers towards long-run equilibria after a reasonable forecast horizon. The Group does not use such techniques to force the
MES scenarios to revert to the base case planning view. Utilising such techniques would be expected to be immaterial for expected credit
losses since loss sensitivity is minimal after the initial five years of the projections.
A forum under the chairmanship of the Chief Economist meets at least quarterly to review and, if appropriate, recommend changes to the
method by which economic scenarios are generated, for approval by the Chief Financial Officer and Chief Risk Officer. 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.
Lloyds Banking Group plc Annual Report and Accounts 2025
275
Note 21: Allowance for expected credit losses 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.
Scenarios by year
The key UK economic assumptions made by the Group are shown in the following tables across a number of measures explained below.
Annual assumptions
Gross domestic product (GDP) growth and Consumer Price Index (CPI) inflation are presented as an annual change, house price growth
and commercial real estate price growth are presented as the growth in the respective indices over each year. Unemployment rate and
UK Bank Rate are averages over the year.
Five year average
The five-year average reflects the average annual growth rate, or level, over the five-year period. It includes movements within the current
reporting year, such that the position as at 31 December 2025 covers the five years 2025 to 2029. The inclusion of the reporting year
within the five-year period reflects the need to predict variables which remain unpublished at the reporting date and recognises that
credit models utilise both level and annual changes. The use of calendar years maintains a comparability between the annual
assumptions presented.
Five year start to peak and trough
The peak or trough for any metric may occur intra year and therefore not be identifiable from the annual assumptions, so they are also
disclosed. For GDP, house price growth and commercial real estate price growth, the peak, or trough, reflects the highest, or lowest
cumulative quarterly position reached relative to the start of the five-year period, which as at 31 December 2025 is 1 January 2025. Given
these metrics may exhibit increases followed by greater falls, the start to trough movements quoted may be smaller than the equivalent
‘peak to trough’ movement (and vice versa for start to peak). Unemployment, UK Bank Rate and CPI inflation reflect the highest, or lowest,
quarterly level reached in the five-year period.
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Note 21: Allowance for expected credit losses continued
| At 31 December 2025 | 2025<br><br>% | 2026<br><br>% | 2027<br><br>% | 2028<br><br>% | 2029<br><br>% | 2025 to 2029<br><br>average<br><br>% | Start to<br><br>peak<br><br>% | Start to<br><br>trough<br><br>% | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Upside | ||||||||||||||||||
| Gross domestic product growth | 1.4 | 2.0 | 2.3 | 1.6 | 1.6 | 1.8 | 9.4 | 0.7 | ||||||||||
| Unemployment rate | 4.8 | 4.2 | 3.2 | 3.1 | 3.2 | 3.7 | 5.1 | 3.0 | ||||||||||
| House price growth | 0.8 | 3.5 | 7.1 | 6.9 | 6.0 | 4.8 | 26.4 | (0.1) | ||||||||||
| Commercial real estate price growth | 1.2 | 7.9 | 4.9 | 1.7 | 0.8 | 3.2 | 17.3 | 0.6 | ||||||||||
| UK Bank Rate | 4.13 | 3.94 | 4.59 | 5.07 | 5.33 | 4.61 | 5.39 | 3.75 | ||||||||||
| CPI inflation | 3.4 | 2.6 | 2.4 | 2.8 | 3.1 | 2.9 | 3.8 | 2.1 | ||||||||||
| Base case | ||||||||||||||||||
| Gross domestic product growth | 1.4 | 1.2 | 1.4 | 1.5 | 1.6 | 1.4 | 7.6 | 0.7 | ||||||||||
| Unemployment rate | 4.8 | 5.2 | 4.8 | 4.6 | 4.5 | 4.8 | 5.3 | 4.5 | ||||||||||
| House price growth | 0.8 | 1.6 | 1.9 | 2.2 | 3.1 | 1.9 | 9.8 | (0.1) | ||||||||||
| Commercial real estate price growth | 1.2 | 0.6 | 1.7 | 0.5 | 0.2 | 0.9 | 4.4 | 0.6 | ||||||||||
| UK Bank Rate | 4.13 | 3.44 | 3.25 | 3.44 | 3.50 | 3.55 | 4.50 | 3.25 | ||||||||||
| CPI inflation | 3.4 | 2.6 | 2.2 | 2.2 | 2.3 | 2.6 | 3.8 | 2.1 | ||||||||||
| Downside | ||||||||||||||||||
| Gross domestic product growth | 1.4 | (0.3) | (0.5) | 1.1 | 1.6 | 0.7 | 3.6 | 0.1 | ||||||||||
| Unemployment rate | 4.8 | 6.6 | 7.5 | 7.4 | 7.0 | 6.7 | 7.6 | 4.5 | ||||||||||
| House price growth | 0.8 | (0.2) | (4.7) | (5.7) | (2.8) | (2.6) | 0.9 | (12.2) | ||||||||||
| Commercial real estate price growth | 1.2 | (7.1) | (4.2) | (2.7) | (2.3) | (3.1) | 1.3 | (14.4) | ||||||||||
| UK Bank Rate | 4.13 | 2.74 | 1.09 | 0.75 | 0.52 | 1.85 | 4.50 | 0.45 | ||||||||||
| CPI inflation | 3.4 | 2.6 | 2.0 | 1.4 | 1.0 | 2.1 | 3.8 | 0.8 | ||||||||||
| Severe downside | ||||||||||||||||||
| Gross domestic product growth | 1.4 | (1.9) | (1.8) | 0.7 | 1.4 | 0.0 | 1.3 | (2.8) | ||||||||||
| Unemployment rate | 4.8 | 8.3 | 10.2 | 9.9 | 9.4 | 8.5 | 10.3 | 4.5 | ||||||||||
| House price growth | 0.8 | (1.2) | (11.1) | (12.2) | (7.8) | (6.5) | 0.8 | (28.4) | ||||||||||
| Commercial real estate price growth | 1.2 | (17.4) | (9.8) | (7.4) | (5.4) | (8.0) | 1.3 | (34.0) | ||||||||||
| UK Bank Rate | 4.13 | 1.91 | 0.10 | 0.03 | 0.01 | 1.24 | 4.50 | 0.01 | ||||||||||
| CPI inflation | 3.4 | 2.6 | 1.7 | 0.5 | (0.4) | 1.6 | 3.8 | (0.7) | ||||||||||
| Probability-weighted | ||||||||||||||||||
| Gross domestic product growth | 1.4 | 0.7 | 0.8 | 1.3 | 1.6 | 1.2 | 6.1 | 0.7 | ||||||||||
| Unemployment rate | 4.8 | 5.6 | 5.7 | 5.5 | 5.4 | 5.4 | 5.8 | 4.5 | ||||||||||
| House price growth | 0.8 | 1.3 | 0.2 | (0.2) | 1.1 | 0.6 | 2.8 | (0.1) | ||||||||||
| Commercial real estate price growth | 1.2 | (1.3) | (0.3) | (0.9) | (0.9) | (0.4) | 1.3 | (2.6) | ||||||||||
| UK Bank Rate | 4.13 | 3.23 | 2.69 | 2.78 | 2.81 | 3.13 | 4.50 | 2.64 | ||||||||||
| CPI inflation | 3.4 | 2.6 | 2.2 | 2.0 | 1.9 | 2.4 | 3.8 | 1.8 | Base case scenario by quarter1<br><br>At 31 December 2025 | First<br><br>quarter<br><br>2025<br><br>% | Second<br><br>quarter<br><br>2025<br><br>% | Third<br><br>quarter<br><br>2025<br><br>% | Fourth<br><br>quarter<br><br>2025<br><br>% | First<br><br>quarter<br><br>2026<br><br>% | Second<br><br>quarter<br><br>2026<br><br>% | Third<br><br>quarter<br><br>2026<br><br>% | Fourth<br><br>quarter<br><br>2026<br><br>% | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| 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 |
1Gross domestic product growth is presented quarter-on-quarter. House price growth, commercial real estate 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.
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Note 21: Allowance for expected credit losses continued
| At 31 December 2024 | 2024<br><br>% | 2025<br><br>% | 2026<br><br>% | 2027<br><br>% | 2028<br><br>% | 2024 to 2028<br><br>average<br><br>% | Start to<br><br>peak<br><br>% | Start to<br><br>trough<br><br>% |
|---|---|---|---|---|---|---|---|---|
| Upside | ||||||||
| Gross domestic product growth | 0.8 | 1.9 | 2.2 | 1.5 | 1.4 | 1.6 | 8.9 | 0.7 |
| Unemployment rate | 4.3 | 3.5 | 2.8 | 2.7 | 2.8 | 3.2 | 4.4 | 2.7 |
| House price growth | 3.4 | 3.7 | 6.5 | 6.6 | 5.4 | 5.1 | 28.2 | 0.4 |
| Commercial real estate price growth | 0.7 | 7.8 | 6.7 | 3.2 | 0.5 | 3.7 | 20.0 | (0.8) |
| UK Bank Rate | 5.06 | 4.71 | 5.02 | 5.19 | 5.42 | 5.08 | 5.50 | 4.50 |
| CPI inflation | 2.6 | 2.8 | 2.6 | 2.9 | 3.0 | 2.8 | 3.5 | 2.0 |
| Base case | ||||||||
| Gross domestic product growth | 0.8 | 1.0 | 1.4 | 1.5 | 1.5 | 1.2 | 7.0 | 0.7 |
| Unemployment rate | 4.3 | 4.7 | 4.7 | 4.5 | 4.5 | 4.5 | 4.8 | 4.2 |
| House price growth | 3.4 | 2.1 | 1.0 | 1.4 | 2.4 | 2.0 | 10.5 | 0.4 |
| Commercial real estate price growth | 0.7 | 0.3 | 2.5 | 1.9 | 0.0 | 1.1 | 5.4 | (0.8) |
| UK Bank Rate | 5.06 | 4.19 | 3.63 | 3.50 | 3.50 | 3.98 | 5.25 | 3.50 |
| CPI inflation | 2.6 | 2.8 | 2.4 | 2.4 | 2.2 | 2.5 | 3.5 | 2.0 |
| Downside | ||||||||
| Gross domestic product growth | 0.8 | (0.5) | (0.4) | 1.0 | 1.5 | 0.5 | 3.2 | 0.0 |
| Unemployment rate | 4.3 | 6.0 | 7.4 | 7.4 | 7.1 | 6.4 | 7.5 | 4.2 |
| House price growth | 3.4 | 0.6 | (5.5) | (6.6) | (3.4) | (2.4) | 4.0 | (11.4) |
| Commercial real estate price growth | 0.7 | (7.8) | (3.1) | (0.9) | (2.3) | (2.7) | 0.7 | (12.9) |
| UK Bank Rate | 5.06 | 3.53 | 1.56 | 0.96 | 0.68 | 2.36 | 5.25 | 0.59 |
| CPI inflation | 2.6 | 2.8 | 2.3 | 1.8 | 1.2 | 2.1 | 3.5 | 0.9 |
| Severe downside | ||||||||
| Gross domestic product growth | 0.8 | (1.9) | (1.5) | 0.7 | 1.3 | (0.1) | 1.2 | (2.4) |
| Unemployment rate | 4.3 | 7.7 | 10.0 | 10.0 | 9.7 | 8.4 | 10.2 | 4.2 |
| House price growth | 3.4 | (0.8) | (12.4) | (13.6) | (8.8) | (6.7) | 3.4 | (29.2) |
| Commercial real estate price growth | 0.7 | (17.4) | (8.5) | (5.5) | (5.7) | (7.5) | 0.7 | (32.3) |
| UK Bank Rate – modelled | 5.06 | 2.68 | 0.28 | 0.08 | 0.02 | 1.62 | 5.25 | 0.02 |
| UK Bank Rate – adjusted1 | 5.06 | 4.03 | 2.70 | 2.23 | 1.95 | 3.19 | 5.25 | 1.88 |
| CPI inflation – modelled | 2.6 | 2.8 | 1.9 | 1.0 | 0.1 | 1.7 | 3.5 | (0.2) |
| CPI inflation – adjusted1 | 2.6 | 3.6 | 2.1 | 1.4 | 0.8 | 2.1 | 3.9 | 0.7 |
| Probability-weighted | ||||||||
| Gross domestic product growth | 0.8 | 0.5 | 0.8 | 1.2 | 1.4 | 1.0 | 5.7 | 0.7 |
| Unemployment rate | 4.3 | 5.0 | 5.5 | 5.4 | 5.3 | 5.1 | 5.5 | 4.2 |
| House price growth | 3.4 | 1.8 | (0.7) | (1.0) | 0.4 | 0.8 | 5.3 | 0.4 |
| Commercial real estate price growth | 0.7 | (1.7) | 1.0 | 0.7 | (1.1) | (0.1) | 0.7 | (1.3) |
| UK Bank Rate – modelled | 5.06 | 4.00 | 3.09 | 2.90 | 2.88 | 3.59 | 5.25 | 2.88 |
| UK Bank Rate – adjusted1 | 5.06 | 4.13 | 3.33 | 3.12 | 3.08 | 3.74 | 5.25 | 3.06 |
| CPI inflation – modelled | 2.6 | 2.8 | 2.4 | 2.2 | 1.9 | 2.4 | 3.5 | 1.8 |
| CPI inflation – adjusted1 | 2.6 | 2.9 | 2.4 | 2.3 | 2.0 | 2.4 | 3.5 | 1.9 |
1The 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.
| Base case scenario by quarter1<br><br>At 31 December 2024 | First<br><br>quarter<br><br>2024<br><br>% | Second<br><br>quarter<br><br>2024<br><br>% | Third<br><br>quarter<br><br>2024<br><br>% | Fourth<br><br>quarter<br><br>2024<br><br>% | First<br><br>quarter<br><br>2025<br><br>% | Second<br><br>quarter<br><br>2025<br><br>% | Third<br><br>quarter<br><br>2025<br><br>% | Fourth<br><br>quarter<br><br>2025<br><br>% |
|---|---|---|---|---|---|---|---|---|
| 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 |
1Gross domestic product growth is presented quarter-on-quarter. House price growth, commercial real estate 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.
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Note 21: Allowance for expected credit losses continued
ECL sensitivity to economic assumptions
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.
| At 31 December 2025 | At 31 December 2024 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Probability-<br><br>weighted<br><br>£m | Upside<br><br>£m | Base case<br><br>£m | Downside<br><br>£m | Severe<br><br>downside<br><br>£m | Probability-<br><br>weighted<br><br>£m | Upside<br><br>£m | Base case<br><br>£m | Downside<br><br>£m | Severe<br><br>downside<br><br>£m | |
| UK mortgages | 731 | 341 | 510 | 937 | 1,943 | 852 | 345 | 567 | 1,064 | 2,596 |
| Credit cards | 603 | 498 | 579 | 674 | 777 | 674 | 518 | 641 | 773 | 945 |
| Other Retail | 991 | 922 | 969 | 1,036 | 1,126 | 950 | 843 | 923 | 1,010 | 1,172 |
| Commercial Banking | 888 | 690 | 789 | 1,010 | 1,414 | 989 | 745 | 889 | 1,125 | 1,608 |
| Other | 15 | 15 | 15 | 15 | 15 | 16 | 16 | 16 | 16 | 17 |
| ECL allowance | 3,228 | 2,466 | 2,862 | 3,672 | 5,275 | 3,481 | 2,467 | 3,036 | 3,988 | 6,338 |
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% 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.
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 20241 | |||
|---|---|---|---|---|
| 1pp increase in<br><br>unemployment<br><br>£m | 1pp decrease in<br><br>unemployment<br><br>£m | 1pp increase in<br><br>unemployment<br><br>£m | 1pp decrease in<br><br>unemployment<br><br>£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) |
1For 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 20241 | |||
|---|---|---|---|---|
| 10pp increase<br><br>in HPI<br><br>£m | 10pp decrease<br><br>in HPI<br><br>£m | 10pp increase<br><br>in HPI<br><br>£m | 10pp decrease<br><br>in HPI<br><br>£m | |
| ECL impact | (172) | 261 | (207) | 312 |
1For 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.
Assessment of climate risk impacts on ECL
The Group continues to develop capabilities to quantify the potential impact of climate risks on ECL. This includes identifying the climate-
related risk drivers that could influence future credit losses for loan portfolios that have the highest sensitivity to climate risks and
commencing the use of more quantitative analysis on the impact of these risk drivers on ECL. The approach leverages the Group’s climate
scenario analysis, to identify the potential physical and transition risk impacts on credit quality. UK mortgages and Commercial Banking
portfolios are judged to have the highest sensitivity to climate risk, with both physical and transition risk drivers assessed.
UK mortgages physical and transition risks – additional costs arising from regulatory obligations of increased energy efficiency standards to
reduce carbon emissions and increased flood risk and coastal erosion, through property repair or rebuild and/or increased insurance premia.
This can result in affordability pressure, as well as decrease in property valuation, for borrowers owning low EPC rated properties or those in
areas prone to flooding or coastal erosion.
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Note 21: Allowance for expected credit losses continued
Commercial Banking physical and transition risks – increased costs or revenue disruption, or both, arising from chronic and acute physical
hazards from rising temperatures. Companies adapting to a sudden transition scenario could potentially lead to increased transition costs
in operations, direct carbon costs, and deteriorating financial performance due to changing consumer perspectives.
Macroeconomic and sector scenario risk assessments
Assessments were performed on the Group’s internally generated economic scenarios used in the measurement of expected credit losses
against external scenarios published by the Network for Greening the Financial System (NGFS).
The potential incremental impact of climate factors on key economic drivers was isolated from the Phase V NGFS Delayed Transition
scenario, which management judged the most plausible. The incremental risk to ECL was then quantified by overlaying the specific climate
impact of this scenario onto macroeconomic drivers within the Group’s base case and MES scenarios. The results from the most material
Retail portfolios, UK mortgages and Credit cards allowed management to conclude on an immaterial ECL impact for Retail below
£10 million (31 December 2024: below £5 million), and in Commercial Banking a separate climate assessment performed at sector level,
resulted in an ECL impact of below £15 million (31 December 2024: below £15 million).
The Group’s MES downside and severe downside scenarios, together comprising a 40% weighting in ECL calculations, are generally more
severe than the most adverse NGFS scenario (‘Net Zero 2050’). The assessment suggests that no material changes are required to the
Group’s existing suite of economic scenarios used within the ECL calculation.
In Commercial Banking, a top-down analysis using sectoral modelling was repeated to estimate the specific ECL impact of climate risk on
commercial credit conditions. This assessment specifically targets agriculture, automotive, transport, oil and gas, real estate and utilities
sectors where climate impacts were judged to be more significant. Resulting sector-specific, climate-adjusted credit cycle indices (CCI)
were used to calculate probability of default and resulting ECL. These adjusted CCI model inputs combined external NGFS Phase V
scenarios with client level valuation impacts where available, alongside historic impairment data. The Phase V scenarios introduced a
physical risk approach, requiring adjustments to ensure appropriate timing of impacts. Considering methodological limitations, the
additional ECL required was shown to be immaterial.
The Group recognises the ongoing uncertainty and limitations of climate scenario modelling, including external concerns reported in late
2025 for physical risk approaches. While NGFS scenarios continue to provide a consistent benchmark for assessing climate-related risks in
ECL, they are used with prudent adjustments.
Physical and transition risk assessments
The Group has enhanced its assessment of transition risk on the UK mortgage portfolio. Scope has been extended from Probability of
Default (PD) impacts only to also include Loss Given Default (LGD) considerations.
The affordability stress resulting from home retrofitting costs associated with higher EPC regulatory rating requirements, under multiple
scenarios was re-calculated. The provision impact was assessed by transforming the account level assessment of affordability and valuation
impacts to adjust inputs used in existing PD and LGD parameters. As at 31 December 2025, the impact on ECL has been estimated to be
less than £10 million (31 December 2024: less than £10 million) across buy-to-let (BTL), mainstream and legacy portfolios.
The physical risk assessment on the UK mortgage portfolio in 2025 continued to include both flooding and coastal erosion risk. The impacts
were based on an internally defined delayed transition outlook, out to 2050, aligned with the Group’s transition methodology. The
assessment showed that over 80% of the book was not exposed to flood risk damage. Over 99% had no risk to coastal erosion damage.
The impact on ECL to customers exposed to the affordability risk from flood and coastal erosion damage has been estimated to be
immaterial.
Whilst this supports no judgemental adjustment to ECL being required, the narrow scope does not capture the wider impact on loss rates
emanating from being located in a high-risk area. Similarly the current assessment excludes the potential affordability shocks or reduced
insurance coverage that could occur due to possible changes to insurance policy initiatives in this area.
| Assessment | Nature of risk assessed | Portfolios assessed | ECL impact<br><br>At 31 December 2025 | ECL impact<br><br>At 31 December 2024 |
|---|---|---|---|---|
| Macroeconomic impact from climate scenario | Scenario risk – macro level | Retail | < £10 million | < £5 million |
| Sector level impacts from climate scenario | Scenario risk – sector level | Commercial Banking<br><br>(excluding Business Banking) | < £15 million | < £15 million |
| Retrofitting cost to meet EPC regulation | Transition risk | UK mortgages | < £10 million | < £10 million |
| Flood risk | Physical risk | UK mortgages | < £5 million | < £5 million |
The climate risk assessments above remain limited due to the degree of uncertainty underpinning key assumptions used, as well as the
continuing developmental nature of the data, approach and models used in the quantification. These include, but are not limited to, the
analyses being restricted to PD impacts only for Commercial Banking; considering only the most material hazards for UK mortgages (flood
and coastal erosion); client valuation impacts not incorporating climate transition plans; the physical risk modelling for corporates currently
excluding broader components such as supply chain impacts, and more broadly the political landscape; future climate data enhancements
and further model development.
The ECL impacts resulting from these climate risk assessments remain immaterial. This continues to support management’s view that there
is a low residual risk of material error or omission in the Group’s financial statements due to climate-related risks and as a result no
adjustments have been made to ECL measured as at 31 December 2025. The current behavioural lives of the Group’s lending dilute the
potential exposure to the later emergence of potential physical climate impacts, with the incorporation of climate risk, in credit policy, as a
qualitative underwriting assessment within the Commercial Banking credit process and the origination process for mortgages providing
further mitigation on more recent originations.
Lloyds Banking Group plc Annual Report and Accounts 2025
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Note 22: Finance lease receivables
The Group’s finance lease receivables are classified as loans and advances to customers and accounted for at amortised cost. The
contractual maturity of these balances are analysed as follows:
| 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|
| Not later than 1 year | 7,835 | 6,202 |
| Later than 1 year and not later than 2 years | 5,176 | 5,251 |
| Later than 2 years and not later than 3 years | 4,142 | 4,297 |
| Later than 3 years and not later than 4 years | 2,731 | 2,868 |
| Later than 4 years and not later than 5 years | 418 | 516 |
| Later than 5 years | 357 | 475 |
| Gross investment | 20,659 | 19,609 |
| Unearned future finance income | (2,503) | (2,447) |
| Rentals received in advance | (22) | (18) |
| Net investment | 18,134 | 17,144 |
Equipment leased to customers under finance lease receivables relates to financing transactions to fund the purchase of aircraft, ships,
motor vehicles and other items. There was an allowance for uncollectable finance lease receivables included in the allowance for
impairment losses of £441 million (2024: £368 million).
The Group’s finance lease assets are comprised as follows:
| 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|
| Electric vehicles | 1,506 | 1,001 |
| Internal combustion engine vehicles | 12,740 | 11,557 |
| Self-charging hybrid vehicles | 575 | 347 |
| Plug-in hybrid vehicles | 1,604 | 1,306 |
| Other | 1,709 | 2,933 |
| Net investment | 18,134 | 17,144 |
Note 23: Goodwill and other intangible assets
| Goodwill<br><br>£m | Brands<br><br>£m | Purchased<br><br>credit card<br><br>relationships<br><br>£m | Customer-<br><br>related<br><br>intangibles<br><br>£m | Acquired<br><br>value of<br><br>in-force<br><br>business<br><br>£m | Capitalised<br><br>software<br><br>enhancements<br><br>£m | Total<br><br>£m | |
|---|---|---|---|---|---|---|---|
| Cost1: | |||||||
| At 1 January 2024 | 3,142 | 591 | 1,002 | 682 | 834 | 8,918 | 15,169 |
| Exchange and other adjustments | – | – | – | 3 | – | (5) | (2) |
| Additions and acquisitions | – | – | – | – | – | 1,259 | 1,259 |
| Disposals and write-offs2 | (50) | – | – | (423) | – | (216) | (689) |
| At 31 December 2024 | 3,092 | 591 | 1,002 | 262 | 834 | 9,956 | 15,737 |
| Exchange and other adjustments | – | – | – | 3 | – | (47) | (44) |
| Additions and acquisitions | 262 | – | – | 296 | – | 1,252 | 1,810 |
| Disposals and write-offs | – | – | – | – | – | (269) | (269) |
| At 31 December 2025 | 3,354 | 591 | 1,002 | 561 | 834 | 10,892 | 17,234 |
| Accumulated amortisation: | |||||||
| At 1 January 2024 | 344 | 205 | 762 | 483 | 680 | 4,389 | 6,863 |
| Exchange and other adjustments | – | – | – | 3 | – | (12) | (9) |
| Charge for the year3 | – | 1 | 70 | 13 | 17 | 1,221 | 1,322 |
| Disposals and write-offs | – | – | – | (422) | – | (205) | (627) |
| At 31 December 2024 | 344 | 206 | 832 | 77 | 697 | 5,393 | 7,549 |
| Exchange and other adjustments | – | – | – | 5 | – | (19) | (14) |
| Charge for the year3 | – | 1 | 71 | 18 | 15 | 1,270 | 1,375 |
| Disposals and write-offs | – | – | – | – | – | (269) | (269) |
| At 31 December 2025 | 344 | 207 | 903 | 100 | 712 | 6,375 | 8,641 |
| Balance sheet amount at 31 December 2025 | 3,010 | 384 | 99 | 461 | 122 | 4,517 | 8,593 |
| Balance sheet amount at 31 December 2024 | 2,748 | 385 | 170 | 185 | 137 | 4,563 | 8,188 |
1For acquisitions made prior to 1 January 2004, the date of transition to IFRS Accounting Standards, cost is included net of amounts amortised up to 31 December 2003.
2Disposals and write-offs includes goodwill of £50 million in 2024 that was classified as disposal group assets and presented within other assets in note 24.
3The charge for the year is recognised in operating expenses (note 10).
Lloyds Banking Group plc Annual Report and Accounts 2025
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Note 23: Goodwill and other intangible assets continued
Goodwill
On 9 October 2025, LBG Equity Investments Limited, a wholly owned subsidiary of the Group, acquired 49.9% of the ordinary share capital
of Schroders Personal Wealth Limited (SPW) in exchange for its stake in Cazenove Capital, bringing the Group’s ownership of SPW to 100%.
Goodwill of £262 million was recognised on the transaction. None of the goodwill is deductible for tax purposes.
The goodwill held in the Group’s balance sheet is tested at least annually for impairment. For the purposes of impairment testing the
goodwill is allocated to the appropriate cash-generating unit; of the total balance of £3,010 million (2024: £2,748 million), £2,383 million, or
79% (2024: £2,121 million, 77%) has been allocated to the Life and pensions cash-generating unit; £302 million, or 10% (2024: £302 million,
11%) has been allocated to the Credit card cash-generating unit in the Group’s Retail division; and £310 million, or 10% (2024: £310 million,
11%) to the Motor business cash-generating units, both in the Group’s Retail division. Management believes that any reasonably possible
change in the key assumptions (listed below) would not cause the recoverable amount of the goodwill to fall below its balance sheet
carrying value.
The recoverable amount of the goodwill relating to the Life and pensions business, is based on a value-in-use calculation. The calculation
uses pre-tax projections of future cash flows based upon budgets and plans approved by management covering a three-year period, the
related run-off of existing business in-force and a discount rate (pre-tax) of 11.0%. The budgets and plans are based upon past experience
adjusted to take into account anticipated changes in sales volumes, product mix and margins having regard to expected market conditions
and competitor activity. The discount rate is determined with reference to internal measures and available industry information. New
business cash flows beyond the plan period have been extrapolated using a reducing balance growth rate that falls from 3.5% to 2.0% after
20 years, which does not exceed the long-term average growth rate for the life assurance market.
The recoverable amount of the goodwill relating to the Motor business is based on a value-in-use calculation using post-tax cash flow
projections based on financial budgets and plans approved by management covering a three-year period and a discount rate (post-tax) of
10.5%, based on the Group’s cost of equity. This is equivalent to a pre-tax rate of 14.0%. The budgets and plans are based upon past
experience adjusted to take into account anticipated changes in sales volumes having regard to expected market conditions and
competitor activity. The cash flows beyond the plan period are extrapolated using a growth rate of 3.5%, which does not exceed the long-
term average growth rates for the markets in which the Motor business participates.
The recoverable amount of the goodwill relating to Credit cards has been based on a value-in-use calculation using post-tax cash flow
projections based on financial budgets and plans approved by management covering a three-year period and a discount rate (post-tax) of
10.5%, based on the Group’s cost of equity. This is equivalent to a pre-tax rate of 14.0%. The budgets and plans are based upon past
experience adjusted to take into account anticipated changes in credit card volumes having regard to expected market conditions and
competitor activity. The cash flows beyond the plan period are extrapolated using a growth rate of 3.5%, which does not exceed the long-
term average growth rates for the markets in which the Cards business participates.
Other intangible assets
The brand arising from the acquisition of Bank of Scotland in 2009 is recognised on the Group’s balance sheet and has been determined to
have an indefinite useful life. The carrying value at 31 December 2025 was £380 million (2024: £380 million). The Bank of Scotland name
has been in existence for over 300 years and there are no indications that the brand should not have an indefinite useful life. The
recoverable amount has been based on a value-in-use calculation. The calculation uses post-tax projections for a three-year period of the
income generated by the Bank of Scotland cash-generating unit, a discount rate of 10.5% and a future growth rate of 3.5%. Management
believes that any reasonably possible change in the key assumptions would not cause the recoverable amount of the Bank of Scotland
brand to fall below its balance sheet carrying value.
Note 24: Other assets
| 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|
| Insurance contract assets | 113 | – |
| Reinsurance contract assets2 | 401 | 422 |
| Investment in joint ventures and associates | 445 | 542 |
| Property, plant and equipment: | ||
| Investment properties (see below) | 3,917 | 3,281 |
| Premises | 1,126 | 1,100 |
| Equipment | 901 | 879 |
| Operating lease assets (see below) | 8,213 | 7,265 |
| Right-of-use assets (note 25) | 759 | 872 |
| 14,916 | 13,397 | |
| Prepayments | 1,792 | 1,634 |
| Disposal group assets1: | ||
| Deferred tax assets | – | 13 |
| Goodwill | – | 50 |
| Reinsurance contract assets2 | – | 5,059 |
| – | 5,122 | |
| Other assets | 2,988 | 3,671 |
| Total other assets | 20,655 | 24,788 |
1See Note 8 (C) for further detail.
2The Group’s reinsurance contract assets have decreased by £5,080 million from £5,481 million to £401 million predominantly as a result of the completion of the part VII transfer of
insurance contract liabilities to Rothesay Life plc in relation to the Group’s bulk annuity business and the conclusion of the associated reinsurance agreement.
Lloyds Banking Group plc Annual Report and Accounts 2025
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Note 24: Other assets continued
Investment properties
The Group’s investment properties are primarily held by Lloyds Living and by the Insurance, Pensions and Investments business, where they
back policyholder liabilities. They are valued by external Chartered Surveyors using industry standard techniques based on guidance from
the Royal Institute of Chartered Surveyors. The valuation methodology includes an assessment of general market conditions and sector
level transactions and takes account of expectations of occupancy rates, rental income and growth. Property valuations undergo individual
scrutiny using cash flow analysis to factor in the timing of rental reviews, capital expenditure, lease incentives, dilapidation and operating
expenses; these reviews utilise both observable and unobservable inputs. Within the fair value hierarchy, all of the Group’s investment
properties are categorised as level 3 (see note 17 for details of levels in the fair value hierarchy). The table below analyses movements in
level 3 investment properties, which are carried at fair value.
| 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|
| At 1 January | 3,281 | 2,862 |
| Acquisition of new properties | 606 | 640 |
| Additional expenditure on existing properties | 10 | 26 |
| Change in fair value | 99 | 67 |
| Disposals and other movements | (79) | (314) |
| At 31 December | 3,917 | 3,281 |
Rental income of £190 million (2024: £172 million) and direct operating expenses of £27 million (2024: £44 million) arising from investment
properties that generate rental income have been recognised in the income statement.
Details of capital expenditure in respect of investment properties which had been contracted for but not recognised in the financial
statements is given in note 36.
Operating lease assets where the Group is lessor
Equipment leased to customers under operating leases primarily relates to vehicle contract hire arrangements. At 31 December the future
minimum rentals receivable under non-cancellable operating leases were as follows:
| Within 1 year<br><br>£m | 1 to 2 years<br><br>£m | 2 to 3 years<br><br>£m | 3 to 4 years<br><br>£m | 4 to 5 years<br><br>£m | Over 5 years<br><br>£m | Total<br><br>£m | |
|---|---|---|---|---|---|---|---|
| At 31 December 2025 | 1,911 | 1,131 | 1,072 | 483 | 124 | 16 | 4,737 |
| At 31 December 2024 | 1,577 | 956 | 821 | 365 | 85 | 6 | 3,810 |
Equipment leased to customers under operating leases primarily relates to vehicle contract hire arrangements. Operating lease assets are
comprised as follows:
| 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|
| Electric vehicles | 4,534 | 3,894 |
| Internal combustion engine vehicles | 1,641 | 1,630 |
| Self-charging hybrid vehicles | 125 | 166 |
| Plug-in hybrid vehicles | 1,905 | 1,575 |
| Other | 8 | – |
| Total operating lease assets | 8,213 | 7,265 |
The group continues to mitigate used car price movements through a number of market and customer initiatives to improve performance
and reduce volatility, including lease extensions, used car leasing, remarketing agreements and residual value insurance.
Note 25: Lessee disclosures
The table below sets out the movement in the Group’s right-of-use assets, which are primarily in respect of premises, and are recognised
within other assets (note 24).
| 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|
| At 1 January | 872 | 1,055 |
| Exchange and other adjustments | (1) | 2 |
| Additions | 83 | 128 |
| Disposals | (13) | (115) |
| Depreciation charge for the year | (182) | (198) |
| At 31 December | 759 | 872 |
The Group’s lease liabilities are recognised within other liabilities (note 27). The maturity analysis of the Group’s lease liabilities on an
undiscounted basis is set out in the liquidity risk section.
The total cash outflow for leases in the year ended 31 December 2025 was £183 million (2024: £202 million). The amount recognised within
interest expense in respect of lease liabilities is disclosed in note 5.
Lloyds Banking Group plc Annual Report and Accounts 2025
283
Note 26: Debt securities in issue
| 2025 | 2024 | |||||
|---|---|---|---|---|---|---|
| At fair value<br><br>through profit<br><br>or loss<br><br>£m | At<br><br>amortised<br><br>cost<br><br>£m | Total<br><br>£m | At fair value<br><br>through profit<br><br>or loss<br><br>£m | At<br><br>amortised<br><br>cost<br><br>£m | Total<br><br>£m | |
| Senior unsecured notes issued | 4,226 | 37,532 | 41,758 | 4,608 | 40,019 | 44,627 |
| Covered bonds | – | 11,260 | 11,260 | – | 11,764 | 11,764 |
| Certificates of deposit issued | – | 7,333 | 7,333 | – | 5,776 | 5,776 |
| Securitisation notes | 17 | 6,325 | 6,342 | 22 | 5,185 | 5,207 |
| Commercial paper | – | 15,821 | 15,821 | – | 8,090 | 8,090 |
| Total debt securities in issue | 4,243 | 78,271 | 82,514 | 4,630 | 70,834 | 75,464 |
Covered bonds and securitisation programmes
At 31 December 2025, the covered bonds held by external parties and those held internally, were secured on certain loans and advances to
customers amounting to £22,072 million (2024: £26,202 million) which have been assigned to bankruptcy remote limited liability
partnerships to provide security for issues of covered bonds by the Group. The Group retains all of the risks and rewards associated with
these loans and the partnerships are consolidated fully with the loans retained on the Group’s balance sheet.
The Group has two covered bond programmes, which have ring-fence asset pools and guarantee the covered bonds issued by the Group.
At the reporting date the Group had over-collateralised these programmes to meet the terms of the programmes, to secure the rating of
the covered bonds and to provide operational flexibility. From time to time, the obligations of the Group to provide collateral may increase
due to the formal requirements of the programmes. The Group may also voluntarily contribute collateral to support the ratings of the
covered bonds.
Covered bonds includes Pfandbriefe, which the Group issued for the first time in 2024.
The Group’s securitisation vehicles issue notes that are held both externally and internally, and are secured on loans and advances to
customers amounting to £27,766 million at 31 December 2025 (2024: £27,657 million), the majority of which have been sold by subsidiary
companies to bankruptcy remote structured entities. As the structured entities are funded by the issue of debt on terms whereby the
majority of the risks and rewards of the portfolio are retained by the subsidiary, the structured entities are consolidated fully and all of
these loans are retained on the Group’s balance sheet.
Cash deposits of £3,359 million (2024: £3,256 million) which support the debt securities issued by the structured entities, the term
advances related to covered bonds and other legal obligations, are held by the Group. Additionally, the Group has certain contractual
arrangements to provide liquidity facilities to some of these structured entities. At 31 December 2025 these obligations had not been
triggered; the maximum exposure under these facilities was £11 million (2024: £11 million).
The Group recognises the full liabilities associated with its securitisation and covered bond programmes within debt securities in issue,
although the obligations of the Group in respect of its securitisation issuances are limited to the cash flows generated from the underlying
assets. The Group could be required to provide additional support to a number of the securitisation programmes to support the credit
ratings of the debt securities issued, in the form of increased cash reserves and the holding of subordinated notes. Further, certain
programmes contain contractual obligations that require the Group to repurchase assets should they become credit-impaired or as
otherwise required by the transaction documents. The Group has not provided financial or other support by voluntarily offering to
repurchase assets from any of its public securitisation programmes during 2025 (2024: none).
Note 27: Other liabilities
| 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|
| Third party interests in consolidated funds1 | 12,781 | 10,706 |
| Lease liabilities | 1,026 | 1,261 |
| Disposal group liabilities: | ||
| Liabilities arising from insurance contracts | – | 5,268 |
| Other creditors and accruals2 | 7,138 | 8,683 |
| Total other liabilities | 20,945 | 25,918 |
1Where a collective investment vehicle is consolidated, the interests of parties other than the Group are reported at fair value in other liabilities.
2Includes settlement balances, accruals and deferred income and reinsurance contract liabilities
The maturity analysis of the Group’s lease liabilities on an undiscounted basis is set out in the liquidity risk section on page 185.
Note 28: Provisions
Critical accounting judgements and key sources of estimation uncertainty
| Critical judgement: | Determining whether a present obligation exists and whether it is more likely than not that an outflow of<br><br>resources will be required to settle that obligation |
|---|---|
| Key sources of estimation uncertainty: | Populations impacted, level of remediation and response rates |
Determining the amount of the provisions, which represent management’s best estimate of the cost of settling these issues, requires the
exercise of significant judgement and estimation. It will often be necessary to form a view on matters which are inherently uncertain, such
as the scope of reviews required by regulators, and to estimate the number of future complaints, the extent to which they will be upheld,
the average cost of redress and the impact of decisions reached by legal and other review processes that may be relevant to claims
received. Consequently, the continued appropriateness of the underlying assumptions is reviewed on a regular basis against actual
experience and other relevant evidence and adjustments made to the provisions where appropriate.
Lloyds Banking Group plc Annual Report and Accounts 2025
284
Note 28: Provisions continued
| Provisionsfor financialcommitmentsand guaranteesm | Regulatory<br><br>and legal<br><br>provisions<br><br>£m | Other<br><br>£m | Total<br><br>£m |
|---|---|---|---|
| At 1 January 2025 | 1,600 | 443 | 2,313 |
| Exchange and other adjustments | 3 | (1) | 2 |
| Provisions applied | (295) | (479) | (774) |
| (Release) charge for the year | 968 | 452 | 1,347 |
| At 31 December 2025 | 2,276 | 415 | 2,888 |
All values are in British Pounds.
Provisions for financial commitments and guarantees
Provisions are recognised for expected credit losses on undrawn loan commitments and financial guarantees.
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.
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.
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Note 28: Provisions continued
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.
Other
The Group carries provisions of £119 million (31 December 2024: £154 million) in respect of dilapidations, rent reviews and other property-
related matters.
Provisions are also made for staff and other costs related to Group restructuring initiatives at the point at which the Group becomes
committed to the expenditure; at 31 December 2025 provisions of £170 million (31 December 2024: £135 million) were held.
The Group carries provisions of £41 million (31 December 2024: £35 million) for indemnities and other matters relating to legacy business
disposals in prior years. Whilst there remains significant uncertainty as to the timing of the utilisation of the provisions, the Group expects
the majority of the remaining provisions to have been utilised by 31 December 2026.
Note 29: Subordinated liabilities
The movement in subordinated liabilities during the year was as follows:
| Preference<br><br>shares<br><br>£m | Undated<br><br>£m | Dated<br><br>£m | Total<br><br>£m | |
|---|---|---|---|---|
| At 1 January 2024 | 466 | 144 | 9,643 | 10,253 |
| Issued during the year1: | ||||
| 4.375% Fixed Rate Reset Dated Subordinated Notes 2034 (€500 million) | – | – | 427 | 427 |
| 5.788% Fixed-to-Floating Rate Dated Subordinated Notes 2034 (A$250 million) | – | – | 128 | 128 |
| Floating Rate Dated Subordinated Notes 2034 (A$500 million) | – | – | 257 | 257 |
| – | – | 812 | 812 | |
| Repurchases and redemptions during the year1: | ||||
| 6.475% Non-cumulative Preference Shares callable 2024 (£186 million) | (47) | – | – | (47) |
| 4.5% Dated Subordinated Notes 2024 ($1,000 million) | – | – | (772) | (772) |
| (47) | – | (772) | (819) | |
| Foreign exchange movements | (1) | – | (24) | (25) |
| Other movements (cash and non-cash)2 | (5) | 1 | (128) | (132) |
| At 31 December 2024 | 413 | 145 | 9,531 | 10,089 |
| Issued during the year1: | ||||
| 4.00% Fixed Rate Reset Dated Subordinated Notes 2035 (€1,000 million) | – | – | 842 | 842 |
| 6.068% Fixed-to-Floating Rate Dated Subordinated Notes 2036 ($1,250 million) | – | – | 918 | 918 |
| – | – | 1,760 | 1,760 | |
| Repurchases and redemptions during the year1: | ||||
| 4.50% Fixed Rate Step-up Subordinated Notes 2030 (€441 million) | – | – | (371) | (371) |
| 4.50% Fixed Rate Step-up Subordinated Notes 2030 (€309 million) | – | – | (260) | (260) |
| 7.625% Dated Subordinated Notes 2025 (£273 million) | – | – | (273) | (273) |
| 4.582% Fixed Rate Dated Subordinated Notes 2025 ($1,328 million) | – | – | (996) | (996) |
| 4.582% Fixed Rate Dated Subordinated Notes 2025 ($25.6 million) | – | – | (19) | (19) |
| 5.75% Undated Step-up Subordinated Notes callable 2025 (£9 million) | – | (9) | – | (9) |
| – | (9) | (1,919) | (1,928) | |
| Foreign exchange movements | (3) | – | (277) | (280) |
| Other movements (cash and non-cash)2 | (3) | – | 256 | 253 |
| At 31 December 2025 | 407 | 136 | 9,351 | 9,894 |
1Issuances in the year generated cash inflows of £1,757 million (2024: £812 million); the repurchases and redemptions resulted in cash outflows of £1,928 million (2024: £819 million).
2Other movements include hedge accounting movements and cash payments in respect of interest on subordinated liabilities in the year amounting to £618 million (2024: £622 million)
offset by the interest expense in respect of subordinated liabilities of £707 million (2024: £738 million).
Lloyds Banking Group plc Annual Report and Accounts 2025
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Note 29: Subordinated liabilities continued
These securities will, in the event of the winding-up of the issuer, be subordinated to the claims of depositors and all other creditors of the
issuer, other than creditors whose claims rank equally with, or are junior to, the claims of the holders of the subordinated liabilities. The
subordination of specific subordinated liabilities is determined in respect of the issuer and any guarantors of that liability. The claims of
holders of preference shares and preferred securities are generally junior to those of the holders of undated subordinated liabilities, which in
turn are junior to the claims of holders of the dated subordinated liabilities.
Preference shares
The Company has in issue various classes of preference shares, with a nominal value of £74 million (296,227,449 shares), which are all
classified as liabilities under IFRS accounting standards and are shown below. This represents 0.50% of the total issued share capital
(59,181,971,051 shares) of the Group.
| Number of shares | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2025 | 2024 | 2023 | |||||||||
| 6% Non-cumulative Redeemable Preference shares of GBP0.25 | 400 | 400 | 400 | ||||||||
| 6.475% Non-cumulative Preference shares of GBP0.25 | – | – | 47,273,816 | ||||||||
| 9.25% Non-cumulative Irredeemable Preference shares of GBP0.25 | 252,510,147 | 252,510,147 | 252,510,147 | ||||||||
| 9.75% Non-cumulative Irredeemable Preference shares of GBP0.25 | 43,630,285 | 43,630,285 | 43,630,285 | ||||||||
| 6.413% Non-cumulative Fixed/Floating Rate Callable Preference shares of USD0.25 | 48,990 | 48,990 | 48,990 | ||||||||
| 6.657% Non-cumulative Fixed/Floating Rate Callable Preference shares of USD0.25 | 37,627 | 37,627 | 37,627 | ||||||||
| Total | 296,227,449 | 296,227,449 | 343,501,265 | 2025 | 2024 | 2023 | |||||
| --- | --- | --- | --- | --- | --- | --- | |||||
| £m | % of<br><br>share<br><br>capital | £m | % of<br><br>share<br><br>capital | £m | % of<br><br>share<br><br>capital | ||||||
| 6% Non-cumulative Redeemable Preference shares of GBP0.25 | – | – | – | – | – | – | |||||
| 6.475% Non-cumulative Preference shares of GBP0.25 | – | – | – | – | 12 | 0.07 | |||||
| 9.25% Non-cumulative Irredeemable Preference shares of<br><br>GBP0.25 | 63 | 0.43 | 63 | 0.42 | 63 | 0.40 | |||||
| 9.75% Non-cumulative Irredeemable Preference shares of<br><br>GBP0.25 | 11 | 0.07 | 11 | 0.07 | 11 | 0.07 | |||||
| 6.413% Non-cumulative Fixed/Floating Rate Callable Preference<br><br>shares of USD0.25 | – | – | – | – | – | – | |||||
| 6.657% Non-cumulative Fixed/Floating Rate Callable Preference<br><br>shares of USD0.25 | – | – | – | – | – | – | |||||
| Total | 74 | 0.50 | 74 | 0.49 | 86 | 0.54 |
In any general meeting of the Company which is held as a physical general meeting, a resolution put to the vote of the meeting shall be
decided by a poll unless the chair of the meeting determines that such resolution shall be decided on a show of hands, although in certain
circumstances such decision may be overridden by a sufficient number of shareholders demanding a poll. At a general meeting of the
Company, every holder of shares (whether ordinary or preference shares) who is present in person or by proxy and entitled to vote, shall
have one vote per share in relation to the resolutions on which they are entitled, respectively, to vote, whether such vote is held on a poll or
a show of hands.
100% of preference shares have voting rights. The preference shares represent 0.50% of the total voting rights of the Company, the
remainder being represented by the ordinary shares.
The rights and obligations attaching to the preference shares are set out in:
i.the Company’s articles of association, a copy of which can be obtained from Companies House or from our website
(www.lloydsbankinggroup.com/who-we-are/group-overview/corporate-governance.html );
ii.in respect of the 6% Non-cumulative Redeemable Preference shares, in Companies House form 128(1) filed at Companies House on
12 January 2005, a copy of which is available from Companies House (www.companieshouse.gov.uk ); and
iii.in respect of the other classes of preference shares, in the prospectus dated 20 November 2008 and published on the
National Storage Mechanism on that date, a copy of which prospectus is available on the National Storage Mechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism ).
None of the preference shares have any multiple or unequal voting rights.
As at 31 December 2025, the free float percentage of all of the Company’s ordinary and preference listed shares in issue was over 99.99%,
by both number of shares and nominal value. The balance was comprised of the 400 unlisted 6% Non-cumulative Redeemable Preference
shares of GBP0.25 each referred to above (£100 in total).
Lloyds Banking Group plc Annual Report and Accounts 2025
287
Note 30: Share capital
Issued and fully paid ordinary share capital
| Number of shares | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Ordinary shares of 10p (formerly 25p) each | 2025 | 2024 | 2023 | ||||||||
| At 1 January | 60,617,012,971 | 63,569,225,662 | 67,287,852,204 | ||||||||
| Issued under employee share schemes | 472,840,371 | 734,265,017 | 667,636,165 | ||||||||
| Share buyback programme (note 32) | (2,204,109,740) | (3,686,477,708) | (4,386,262,707) | ||||||||
| At 31 December | 58,885,743,602 | 60,617,012,971 | 63,569,225,662 | 2025 | 2024 | 2023 | |||||
| --- | --- | --- | --- | --- | --- | --- | |||||
| Ordinary shares of 10p (formerly 25p) each | £m | % of<br><br>share<br><br>capital | £m | % of<br><br>share<br><br>capital | £m | % of<br><br>share<br><br>capital | |||||
| At 31 December | 5,889 | 99.50 | 6,062 | 99.52 | 6,358 | 99.46 |
Ordinary shares
As permitted by the Companies Act 2006, the Company removed references to authorised share capital from its articles of association at
the annual general meeting on 5 June 2009. This change took effect from 1 October 2009. There are no restrictions on the transfer of shares
in the Company other than as set out in the articles of association and:
•Certain restrictions which may from time to time be imposed by law and regulations (for example, insider trading laws)
•Where directors and certain employees of the Company require the approval of the Company to deal in the Company’s shares
•Pursuant to the rules of some of the Company’s employee share plans where certain restrictions may apply while the shares are subject
to the plans
Where, under an employee share plan operated by the Company, participants are the beneficial owners of shares but not the registered
owners, the voting rights are normally exercised by the registered owner at the direction of the participant. Outstanding awards and
options would normally vest and become exercisable on a change of control, subject to the satisfaction of any performance conditions at
that time.
All of the Company’s issued ordinary share capital is listed (i.e. the free float percentage of the ordinary shares is 100%) and none of the
shares have any multiple or unequal voting rights; each share carries one vote. In addition, the Company is not aware of any agreements
between shareholders that may result in restrictions on the transfer of securities and/or voting rights.
The directors have authority to allot and issue ordinary and preference shares and to make market purchases of ordinary and preference
shares as granted at the annual general meeting on 15 May 2025. The authority to issue shares and the authority to make market
purchases of shares will expire at the next annual general meeting. Shareholders will be asked, at the annual general meeting, to give
similar authorities.
Subject to any rights or restrictions attached to any shares, on a show of hands at a general meeting of the Company every holder of shares
present in person or by proxy and entitled to vote has one vote and on a poll every member present and entitled to vote has one vote for
every share held. The special rights attached to any class of shares (including preference shares) in the Company may, subject to the
statutory provisions, be varied or abrogated either with the consent in writing of the holders of three-quarters in nominal value of the
issued shares of the class or with the sanction of a special resolution passed at a separate meeting of the holders of the shares of the class
(but not otherwise).
The holders of ordinary shares, who held 100% of the total ordinary share capital at 31 December 2025, are entitled to receive the
Company’s report and accounts, attend, speak and vote at general meetings and appoint proxies to exercise voting rights. Holders of
ordinary shares may also receive a dividend (subject to the provisions of the Company’s articles of association) and in the event of a
winding-up, may share in the assets of the Company.
The rights and obligations attached to the Company’s ordinary shares are set out in the Company’s articles of association, a copy of which
can be found at www.lloydsbankinggroup.com/who-we-are/group-overview/corporate-governance.html →.
Preference shares
The Company has in issue various classes of preference shares which are all classified as liabilities under IFRS accounting standards and
which are included in note 29. The statement above (under the heading ‘Ordinary shares’) in relation to the variation of special rights
attaching to any shares is also applicable to preference shares.
Note 31: Earnings per share
| 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | ||||||
|---|---|---|---|---|---|---|---|---|
| Profit attributable to ordinary shareholders – basic and diluted | 4,196 | 3,923 | 4,933 | 2025<br><br>million | 2024<br><br>million | 2023<br><br>million | ||
| --- | --- | --- | --- | |||||
| Weighted average number of ordinary shares in issue – basic | 59,790 | 62,413 | 64,953 | |||||
| Adjustment for share options and awards | 723 | 661 | 807 | |||||
| Weighted average number of ordinary shares in issue – diluted | 60,513 | 63,074 | 65,760 | |||||
| Basic earnings per share | 7.0p | 6.3p | 7.6p | |||||
| Diluted earnings per share | 6.9p | 6.2p | 7.5p |
Lloyds Banking Group plc Annual Report and Accounts 2025
288
Note 31: Earnings per share continued
Basic earnings per share are calculated by dividing the net profit attributable to equity shareholders by the weighted average number of
ordinary shares in issue during the year, which has been calculated after deducting 105 million (2024: 71 million; 2023: 180 million) ordinary
shares representing the Group’s holdings of own shares in respect of employee share schemes.
For the calculation of diluted earnings per share the weighted average number of ordinary shares in issue is adjusted to assume conversion
of all dilutive potential ordinary shares that arise in respect of share options and awards granted to employees. The number of shares that
could have been acquired at the annual average price of the Company’s shares based on the monetary value of the subscription rights
attached to outstanding share options and awards is determined. This is deducted from the number of shares issuable under such options
and awards to leave a residual bonus amount of shares which are added to the weighted average number of ordinary shares in issue, but no
adjustment is made to the profit attributable to equity shareholders.
There were 1 million anti-dilutive share options and awards excluded from the calculation of diluted earnings per share (2024: 16 million;
2023: 41 million).
Note 32: Other reserves
| 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | |
|---|---|---|---|
| Merger reserve | |||
| At 1 January | 7,102 | 7,149 | 7,149 |
| Redemption of preference shares (note 29)1 | – | (47) | – |
| At 31 December | 7,102 | 7,102 | 7,149 |
| Capital redemption reserve | |||
| At 1 January | 5,751 | 5,370 | 4,932 |
| Redemption of preference shares (note 29)1 | – | 12 | – |
| Shares cancelled under share buyback programme (see below) | 220 | 369 | 438 |
| At 31 December | 5,971 | 5,751 | 5,370 |
| Revaluation reserve in respect of debt securities held at fair value through other comprehensive income | |||
| At 1 January | (113) | (67) | 50 |
| Movements recognised in other comprehensive income | 24 | (46) | (117) |
| At 31 December | (89) | (113) | (67) |
| Revaluation reserve in respect of equity shares held at fair value through other comprehensive income | |||
| At 1 January | 93 | – | 57 |
| Movements recognised in other comprehensive income | 34 | 93 | (57) |
| Realised gains and losses transferred to retained profits | (107) | – | – |
| At 31 December | 20 | 93 | – |
| Cash flow hedge reserve | |||
| At 1 January | (3,755) | (3,766) | (5,476) |
| Movements recognised in other comprehensive income | 1,692 | 11 | 1,710 |
| At 31 December | (2,063) | (3,755) | (3,766) |
| Foreign currency translation reserve | |||
| At 1 January | (251) | (178) | (125) |
| Movements recognised in other comprehensive income | 54 | (73) | (53) |
| At 31 December | (197) | (251) | (178) |
| Total other reserves at 31 December | 10,744 | 8,827 | 8,508 |
1During the year ended 31 December 2024, the Group redeemed all of its outstanding 6.475% Non-cumulative Preference Shares at their combined sterling value of £47 million. These
preference shares had been accounted for as subordinated liabilities. On redemption an amount of £35 million was transferred from the distributable merger reserve to the share
premium account.
The merger reserve primarily comprises the premium on shares issued in January 2009 as part of the recapitalisation of the Group and the
acquisition of HBOS plc.
The capital redemption reserve represents transfers from distributable reserves in accordance with companies’ legislation upon the
redemption of ordinary and preference share capital.
The revaluation reserve in respect of debt securities and equity shares held at fair value through other comprehensive income represent the
cumulative after-tax unrealised change in the fair value of financial assets so classified since initial recognition; or in the case of financial
assets obtained on acquisitions of businesses, since the date of acquisition.
The cash flow hedge reserve represents the cumulative after-tax gains and losses on effective cash flow hedging instruments that will be
reclassified to the income statement in the periods in which the hedged item affects profit or loss.
The foreign currency translation reserve represents the cumulative after-tax gains and losses on the translation of foreign operations.
In 2025, 2024 and 2023 the Group commenced and completed share buyback programmes to repurchase outstanding ordinary shares. In
2025 the Group bought back and cancelled 2,204 million shares under the programme (2024: 3,686 million shares; 2023: 4,386 million
shares), for a total consideration, including expenses, of £1,710 million (2024: £2,011 million; 2023: £1,993 million). Upon cancellation,
£220 million (2024: £369 million; 2023: £438 million), being the nominal value of the shares repurchased, was transferred to the capital
redemption reserve.
Lloyds Banking Group plc Annual Report and Accounts 2025
289
Note 33: Other equity instruments
| 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | |
|---|---|---|---|
| At 1 January | 6,195 | 6,940 | 5,297 |
| Issued during the year: | |||
| £750 million 7.5% Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Contingent Convertible<br><br>Securities callable 2030 | 750 | – | – |
| $1,000 million 6.625% Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Contingent Convertible<br><br>Securities callable 2035 | 761 | ||
| $1,000 million 6.75% Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Contingent Convertible<br><br>Securities Callable 2031 | – | 763 | – |
| $1,250 million 8% Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Contingent Convertible<br><br>Securities Callable 2029 | – | – | 1,028 |
| £750 million 8.5% Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Contingent Convertible<br><br>Securities Callable 2028 | – | – | 750 |
| 1,511 | 763 | 1,778 | |
| Repurchases and redemptions during the year: | |||
| €750 million 6.375% Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Contingent Convertible<br><br>Securities Callable 2020 | (622) | – | – |
| $1,500 million 7.5% Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Contingent Convertible<br><br>Securities Callable 2025 | (1,137) | – | – |
| $1,675 million 7.5% Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Contingent Convertible<br><br>Securities | – | (1,008) | – |
| £500 million 5.125% Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Contingent Convertible<br><br>Securities Callable 2024 | – | (500) | – |
| £1,494 million 7.625% Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Contingent Convertible<br><br>Securities Callable 2023 | – | – | (135) |
| (1,759) | (1,508) | (135) | |
| Profit for the year attributable to other equity holders | 463 | 498 | 527 |
| Distributions on other equity instruments | (463) | (498) | (527) |
| At 31 December | 5,947 | 6,195 | 6,940 |
The AT1 securities are Fixed Rate Resetting Perpetual Subordinated Contingent Convertible Securities with no fixed maturity or
redemption date. The principal terms of the AT1 securities are described below:
•The securities rank behind the claims against Lloyds Banking Group plc of (a) unsubordinated creditors, (b) claims which are, or are
expressed to be, subordinated to the claims of unsubordinated creditors of Lloyds Banking Group plc but not further or otherwise, or (c)
whose claims are, or are expressed to be, junior to the claims of other creditors of Lloyds Banking Group, whether subordinated or
unsubordinated, other than those whose claims rank, or are expressed to rank, pari passu with, or junior to, the claims of the holders of
the AT1 securities in a winding-up occurring prior to a conversion event being triggered
•The securities bear a fixed rate of interest until the first reset date. After the first reset date or any reset date thereafter, in the event
that they are not redeemed, the AT1 securities will bear interest at rates fixed periodically in advance for five year periods based on
market rates
•Interest on the securities will be due and payable only at the sole discretion of Lloyds Banking Group plc, and Lloyds Banking Group plc
may at any time elect to cancel any interest payment (or any part thereof) which would otherwise be payable on any interest payment
date. There are also certain restrictions on the payment of interest as specified in the terms
•The securities are undated and are repayable, at the option of Lloyds Banking Group plc, in whole at the first call date or period, or on
any fifth anniversary after the first call date or period. In addition, the AT1 securities are repayable, at the option of Lloyds Banking
Group plc, in whole for certain regulatory or tax reasons. Any repayments require the prior consent of the PRA
•The securities convert into ordinary shares of Lloyds Banking Group plc, at a pre-determined price, should the CET1 ratio of the Group
fall below 7.0%
Note 34: Dividends on ordinary shares
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). This is 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), and will be paid on 19 May 2026. These financial statements do not reflect
the recommended final 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 306.
Dividends paid during the year were as follows:
| 2025<br><br>pence per<br><br>share | 2024<br><br>pence per<br><br>share | 2023<br><br>pence per<br><br>share | 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | |
|---|---|---|---|---|---|---|
| Final dividend recommended by directors at previous year end | 2.11 | 1.84 | 1.60 | 1,271 | 1,169 | 1,059 |
| Interim dividend paid in the year | 1.22 | 1.06 | 0.92 | 729 | 659 | 592 |
| 3.33 | 2.90 | 2.52 | 2,000 | 1,828 | 1,651 |
Lloyds Banking Group plc Annual Report and Accounts 2025
290
Note 34: Dividends on ordinary shares continued
The trustees of the following holdings of Lloyds Banking Group plc shares in relation to employee share schemes retain the right to receive
dividends but have chosen to waive their entitlement to the dividends on those shares as indicated: the Lloyds Banking Group Share
Incentive Plan (holding at 31 December 2025: 2,805,932 shares, 31 December 2024: 590,670 shares, waived rights to all dividends) and the
Lloyds Banking Group Employee Share Ownership Trust (holding at 31 December 2025: 84,427,788 shares, 31 December 2024:
125,361,633 shares, waived rights to all dividends).
The payment of dividends by subsidiaries and the ability of members of the Group to lend money to other members of the Group may be
subject to regulatory or legal restrictions, the availability of reserves and the financial and operating performance of the entity. A number of
Group subsidiaries, principally those with banking and insurance activities, are subject to regulatory capital requirements which require
minimum amounts of capital to be maintained relative to their size and risk. The Group actively manages the capital of its subsidiaries,
which includes monitoring the regulatory capital ratios for its banking and insurance subsidiaries and, on a consolidated basis, the Ring-
Fenced Bank sub-group, against approved risk appetite levels.
Note 35: Related party transactions
Key management personnel
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of an
entity; the Group’s key management personnel are the members of the Lloyds Banking Group plc Group Executive Committee together
with its non-executive directors.
The table below details, on an aggregated basis, key management personnel compensation:
| Compensation | 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m |
|---|---|---|---|
| Salaries and other short-term benefits | 15 | 14 | 16 |
| Share-based payments | 24 | 20 | 22 |
| Total compensation | 39 | 34 | 38 |
There were no contributions in respect of key management personnel to defined contribution pension schemes (2024 and 2023: none).
| Share plans | |||
|---|---|---|---|
| 2025<br><br>million | 2024<br><br>million | 2023<br><br>million | |
| At 1 January | 123 | 55 | 72 |
| Granted, including certain adjustments (includes entitlements of appointed key management personnel) | 44 | 78 | 27 |
| Exercised/lapsed (includes entitlements of former key management personnel) | (9) | (10) | (44) |
| At 31 December | 158 | 123 | 55 |
The tables below detail, on an aggregated basis, balances outstanding at the year end and related income and expense, together with
information relating to other transactions between the Group and its key management personnel:
| Loans | 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m |
|---|---|---|---|
| At 1 January | 1 | 1 | 2 |
| Advanced (includes loans to appointed key management personnel) | 1 | 1 | – |
| Repayments (includes loans to former key management personnel) | (1) | (1) | (1) |
| At 31 December | 1 | 1 | 1 |
The loans are on both a secured and unsecured basis and are expected to be settled in cash. The loans attracted interest rates of between
3.67% and 31.75% in 2025 (2024: 2.03% and 32.40%; 2023: 1.09% and 32.40%).
No provisions have been recognised in respect of loans given to key management personnel (2024 and 2023: £nil).
| Deposits | 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m |
|---|---|---|---|
| At 1 January | 8 | 14 | 10 |
| Placed (includes deposits of appointed key management personnel) | 42 | 31 | 44 |
| Withdrawn (includes deposits of former key management personnel) | (43) | (37) | (40) |
| At 31 December | 7 | 8 | 14 |
Deposits placed by key management personnel attracted interest rates of up to 6.25% (2024: 6.25%; 2023: 6.25%).
At 31 December 2025, the Group did not provide any guarantees in respect of key management personnel (2024 and 2023: none).
At 31 December 2025, transactions, arrangements and agreements entered into by the Group’s banking subsidiaries with directors and
connected persons included amounts outstanding in respect of loans and credit card transactions of £36.1 thousand with three directors
and one connected person (2024: £29.0 thousand with five directors and one connected person; 2023: £23.4 thousand with five directors
and no connected persons).
Subsidiaries
Details of the Group’s subsidiaries and related undertakings are given on pages 313 to 323. In accordance with IFRS 10 Consolidated
Financial Statements, transactions and balances with subsidiaries have been eliminated on consolidation.
Lloyds Banking Group plc Annual Report and Accounts 2025
291
Note 35: Related party transactions continued
Pension funds
The Group provides banking and some investment management services to a number of its pension funds. At 31 December 2025, customer
deposits of £128 million (2024: £113 million) related to the Group’s pension funds.
Collective investment vehicles
The Group manages 91 (2024: 88) collective investment vehicles, such as Open-Ended Investment Companies (OEICs) and of these
49 (2024: 50) are consolidated. The Group invested £45 million (2024: £142 million) and redeemed £525 million (2024: £513 million) in the
unconsolidated collective investment vehicles during the year and had investments, at fair value, of £744 million (2024: £1,461 million) at
31 December. The Group earned fees of £130 million from the unconsolidated collective investment vehicles during 2025 (2024:
£82 million).
Joint ventures and associates
At 31 December 2025 there were loans and advances to customers of £34 million (2024: £45 million) outstanding and balances within
customer deposits of £13 million (2024: £13 million) relating to joint ventures and associates.
During the year the Group paid fees of £3 million (2024: £4 million) to its Schroders Personal Wealth joint venture, which then became a
fully consolidated subsidiary on 9 October 2025 when the Group acquired the remaining 49.9% of the ordinary share capital of Schroders
Personal Wealth in exchange for its stake in Cazenove Capital.
In addition to the above balances, the Group has a number of other associates held by its venture capital business that it accounts for at
fair value through profit or loss. These investments are reported within financial assets at fair value through profit or loss on the face of the
balance sheet. At 31 December 2025, companies that are joint ventures and associates of the Group had total assets of £7,728 million
(2024: £7,635 million), total liabilities of £6,275 million (2024: £6,436 million) and for the year ended 31 December 2025 had turnover of
£3,072 million (2024: £3,630 million) and made a net loss of £221 million (2024: net loss of £328 million). In addition, the Group has
provided £1,646 million (2024: £1,651 million) of financing to these companies on which it received £135 million (2024: £116 million) of
interest income in the year.
Note 36: Contingent liabilities, commitments and financial guarantees
Contingent liabilities, commitments and guarantees arising from the banking business
At 31 December 2025 contingent liabilities, such as performance bonds and letters of credit, arising from the banking business were
£3,009 million (31 December 2024: £2,605 million).
The contingent liabilities of the Group arise in the normal course of its banking business and it is not practicable to quantify their future
financial effect. Total commitments and financial guarantees were £157,574 million (31 December 2024: £148,619 million), of which in
respect of undrawn formal standby facilities, credit lines and other commitments to lend, £88,135 million (31 December 2024:
£79,518 million) was irrevocable.
Capital commitments
Excluding commitments in respect of investment property, capital expenditure contracted but not provided for at 31 December 2025
amounted to £610 million (2024: £640 million) and related to assets to be leased to customers under operating leases. Capital expenditure
in respect of investment properties which had been contracted for but not recognised in the financial statements was £312 million (31
December 2024: £236 million). The Group’s management is confident that future net revenues and funding will be sufficient to cover these
commitments.
Interchange fees
With respect to multi-lateral interchange fees (MIFs), the Group is not a party in the ongoing or threatened litigation which involves the
card schemes Visa and Mastercard or any settlements of such litigation. However, the Group is a member/licensee of Visa and Mastercard
and other card schemes.
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.
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Note 36: Contingent liabilities, commitments and financial guarantees continued
Tax authorities
The Group has an open matter in relation to a claim for group relief of losses incurred in its former Irish banking subsidiary, which ceased
trading on 31 December 2010. In 2020, HMRC concluded its enquiry into the matter and issued a closure notice denying the group relief
claim. The Group appealed to the First Tier Tax Tribunal. The hearing took place in May 2023. In January 2025, the First Tier Tribunal
concluded in favour of HMRC. The Group believes it has applied the rules correctly and that the claim for group relief is correct. Having
reviewed the Tribunal’s conclusions and having taken appropriate advice the Group has appealed to the Upper Tier Tax Tribunal, and does
not consider this to be a case where an additional tax liability will ultimately fall due. If the final determination of the matter by the judicial
process is that HMRC’s position is correct, management believes that this would result in an increase in current tax liabilities of
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.
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’s application for permission to appeal the Court’s decision
not to determine a central legal issue on a summary basis was refused on 29 January 2026. The Group is continuing to defend the claims,
which are now proceeding to trial. At this stage, it is not practicable to estimate the timing of any such trial, the final outcome of the
matter or 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 28.
Note 37: Structured entities
The Group’s interests in structured entities are both consolidated and unconsolidated. Details of the Group’s interests in consolidated
structured entities are set out in note 26 for securitisations and covered bond vehicles, note 12 for structured entities associated with the
Group’s pension schemes, and below in part (A) and (B). Details of the Group’s interests in unconsolidated structured entities are included
below in part (C).
(A)Asset-backed conduits
In addition to the structured entities discussed in note 26, which are used for securitisation and covered bond programmes, the Group
sponsors an active asset-backed conduit, Cancara, which invests in client receivables and debt securities. The total consolidated exposure
of Cancara at 31 December 2025 was £2,043 million (2024: £2,272 million), comprising £1,387 million of loans and advances (2024:
£1,155 million), £588 million of debt securities (2024: £559 million) and £68 million of financial assets at fair value through profit or loss
(2024: £558 million).
All lending assets and debt securities held by the Group in Cancara are restricted in use, as they are held by the collateral agent for the
benefit of the commercial paper investors and the liquidity providers only. The Group provides liquidity facilities to Cancara under terms
that are usual and customary for standard lending activities in the normal course of the Group’s banking activities. During 2025 there have
continued to be planned drawdowns on certain liquidity facilities for balance sheet management purposes, supporting the programme to
provide funding alongside the proceeds of the asset-backed commercial paper issuance.
The Group could be asked to provide support under the contractual terms of these arrangements including, for example, if Cancara
experienced a shortfall in external funding, which may occur in the event of market disruption. The external assets in Cancara are
consolidated in the Group’s financial statements.
(B)Consolidated collective investment vehicles and limited partnerships
The assets of the Insurance business held in consolidated collective investment vehicles, such as Open-Ended Investment Companies and
limited partnerships, are not directly available for use by the Group. However, the Group’s investment in the majority of these collective
investment vehicles is readily realisable. As at 31 December 2025, the total carrying value of these consolidated collective investment
vehicle assets and liabilities held by the Group was £50,239 million (2024: £59,999 million).
The Group has no contractual arrangements (such as liquidity facilities) that would require it to provide financial or other support to the
consolidated collective investment vehicles; the Group has not previously provided such support and has no current intentions to provide
such support.
(C)Unconsolidated structured entities
The Group considers itself the sponsor of a structured entity where it is primarily involved in the design and establishment of the structured
entity and further where the Group transfers assets to the structured entity, markets products associated with the structured entity in its
own name and/or provides guarantees regarding the structured entity’s performance.
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Note 37: Structured entities continued
The Group sponsors a range of diverse investment funds and limited partnerships where it acts as the fund manager or equivalent decision-
maker and markets the funds under one of the Group’s brands. The following table describes the types of structured entities that the
Group does not consolidate but in which it holds an interest.
| Total assets of<br><br>structured entities | ||||
|---|---|---|---|---|
| Type of entity | Nature and purpose of structured entities | Interest held by the Group | 2025<br><br>£bn | 2024<br><br>£bn |
| Collective investment<br><br>vehicles and limited<br><br>partnerships | These vehicles are primarily financed by<br><br>investments from investors in the vehicles and<br><br>are matched by policyholder liabilities in the<br><br>Insurance division. | •Interests in units issued by the vehicles<br><br>•Fees from management of vehicles | 2,627 | 2,434 |
| Securitisation vehicles | These vehicles issue asset-backed notes to<br><br>investors and facilitate the management of<br><br>the Group’s balance sheet. | •Interest in notes issued by the vehicles<br><br>•Fees for loan servicing | 4 | 5 |
The following table sets out an analysis of the carrying amount of interest held by the Group in the unconsolidated structured entities. The
maximum exposure to loss is the carrying amounts of the assets held.
| Carrying amount | Recognised within; | 2025<br><br>£m | 2024<br><br>£m |
|---|---|---|---|
| Collective investment vehicles and limited partnerships | Financial assets at fair value through profit or loss | 45,991 | 86,630 |
| Notes held in securitisation vehicles | Financial assets at fair value through profit or loss; and<br><br>Financial assets at amortised cost | 1,186 | 2,403 |
| Interest rate derivatives provided to securitisation vehicles | Derivative financial instruments assets; and<br><br>Derivative financial instruments (liabilities) | 5 | 22 |
During the year the Group has not provided any non-contractual financial or other support to these entities and has no current intention of
providing any non-contractual financial or other support in the future.
The fee income earned from unconsolidated structured entities that the Group sponsors but does not have an interest in was £130 million
(2024: £82 million) for collective investment vehicles and £1 million (2024: £1 million) for securitisation vehicles. The carrying amount of
assets transferred to securitisation vehicles at the time of transfer was £nil (2024: £2,004 million) and the Group recognised £nil gain or loss
on transfer (2024: gain of £11 million).
Continuing involvement in financial assets that have been derecognised
The Group has derecognised financial assets in their entirety following transactions with securitisation vehicles, as noted above. The
continuing involvement largely arises from funding provided to the vehicles through the purchase of issued notes. The majority of these
notes are recognised as debt securities held at amortised cost. The remaining notes held by the Group, together with interest rate
derivatives transacted with the vehicles, are recognised at fair value through profit or loss. The carrying amount of these interests and the
maximum exposure to loss is included in the table above. At 31 December 2025 the fair value of the retained notes was £1,181 million (2024:
£2,401 million). The income from the Group’s interest in these structures for the year ended 31 December 2025 was £55 million (2024: £226
million) and cumulatively for the lifetime was £414 million (2024: £359 million).
Note 38: Transfers of financial assets
Transferred financial assets derecognised in their entirety with ongoing exposure
Through asset securitisations, the Group has transferred financial assets which were derecognised in their entirety, with some continuing
involvement. Further details are available in note 37.
Transferred financial assets that continue to be recognised
Details of transferred financial assets that continue to be recognised in full are as follows.
The Group enters into repurchase and securities lending transactions in the normal course of business that do not result in derecognition of
the financial assets as substantially all of the risks and rewards, including credit, interest rate, prepayment and other price risks are retained
by the Group. In all cases, the transferee has the right to sell or repledge the assets concerned.
As set out in note 26, included within financial assets measured at amortised cost are loans transferred under the Group’s securitisation and
covered bond programmes. As the Group retains all or a majority of the risks and rewards associated with these loans, including credit,
interest rate, prepayment and liquidity risk, they remain on the Group’s balance sheet. Assets transferred into the Group’s securitisation
and covered bond programmes are not available to be used by the Group while the assets are within the programmes. However, the Group
retains the right to remove loans from the covered bond programmes where they are in excess of the programme’s requirements. In
addition, where the Group has retained some of the notes issued by securitisation and covered bond programmes, the Group has the
ability to sell or pledge these retained notes.
In 2024, the Group securitised a portfolio of £1.25 billion of finance lease receivables. This transaction resulted in a partial derecognition of
the leases, as the Group neither retained nor transferred substantially all risks and rewards. As of 31 December 2025, the Group continues
to recognise £344 million (2024: £798 million) of these lease receivables with a gross up of the same amount in finance lease receivables
and other liabilities for the continuing involvement asset and liability required to be recognised under IFRS 9.
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Note 38: Transfers of financial assets continued
The table below sets out the carrying values of the transferred assets and the associated liabilities. For repurchase and securities lending
transactions, the associated liabilities represent the Group’s obligation to repurchase the transferred assets. For securitisation programmes,
the associated liabilities represent the external notes in issue (note 26). The liabilities shown in the table below have recourse to the
transferred assets.
| 2025 | 2024 | |||
|---|---|---|---|---|
| Assets<br><br>£m | Liabilities<br><br>£m | Assets<br><br>£m | Liabilities<br><br>£m | |
| Repurchase and securities lending transactions | ||||
| Financial assets at fair value through profit or loss | 5,255 | 4,151 | 2,340 | 1,089 |
| Debt securities held at amortised cost | 697 | – | 1,210 | – |
| Financial assets at fair value through other comprehensive income | 15,768 | 10,674 | 12,483 | 4,465 |
| Securitisation programmes | ||||
| Financial assets at amortised cost: | ||||
| Loans and advances to customers1 | 27,766 | 6,342 | 27,657 | 5,207 |
1The carrying value of associated liabilities excludes securitisation notes held by the Group of £16,264 million (31 December 2024: £17,079 million).
Note 39: Financial risk management
Financial instruments are fundamental to the Group’s activities and the associated risks represent a significant component of the overall
risks faced by the Group. The primary risks affecting the Group through its use of financial instruments are: market risk, credit risk, liquidity
risk, capital risk and insurance underwriting risk.
Market risk
The Group’s largest residual interest rate risk exposure arises from balances that are deemed to be insensitive to changes in market rates
(including current accounts, a portion of variable rate deposits and investable equity). The risk is managed through the Group’s structural
hedge which consists of longer-term fixed rate assets and interest rate swaps. The notional balance and duration of the structural hedge is
reviewed regularly by the Group Asset and Liability Committee. More information is set out on pages 187 to 193.
Credit risk
Credit risk appetite is set at Board level and is described and reported through a suite of metrics devised from a combination of accounting
and credit portfolio performance measures, which include the use of various credit risk rating systems as inputs and assess credit risk at a
counterparty level using three components: (i) the probability of default by the counterparty on its contractual obligations; (ii) the current
exposures to the counterparty and their likely future development, from which the Group derives the exposure at default; and (iii) the likely
loss ratio on the defaulted obligations, the loss given default. The Group uses a range of approaches to mitigate credit risk, including
internal control policies, obtaining collateral, using master netting agreements and other credit risk transfers, such as asset sales and credit
derivatives based transactions. The Group’s credit risk exposure is predominantly in the United Kingdom. More information is set out on
pages 154 to 178.
Liquidity risk
Liquidity risk is defined as the risk that the Group has insufficient financial resources to meet its commitments as they fall due, or can only
secure them at excessive cost. Liquidity risk is managed through a series of measures, tests and reports that are primarily based on
contractual maturity. The Group carries out monthly stress testing of its liquidity position against a range of scenarios, including those
prescribed by the PRA. The Group’s liquidity risk appetite is also calibrated against a number of stressed liquidity metrics. More information
is set out on pages 181 to 186.
Capital risk
The Group maintains capital levels across all regulated entities commensurate with a prudent level of solvency to achieve financial
resilience and market confidence. The Group assesses both its regulatory capital requirements and the quantity and quality of capital
resources it holds to meet those requirements in accordance with the relevant provisions of the Capital Requirements Directive (CRD V)
and Capital Requirements Regulation (UK CRR). This is supplemented through additional regulation set out under the PRA Rulebook and
through associated statements of policy, supervisory statements and other regulatory guidance. Close monitoring of regulatory capital
ratios is undertaken to ensure the Group meets regulatory requirements and risk appetite levels and deploys its capital resources efficiently.
Target capital levels take account of current and future regulatory requirements, capacity for growth and to cover uncertainties. At 31
December 2025, the Group’s common equity tier 1 capital was £32,930 million (31 December 2024: £31,979 million). Further details of the
Group’s capital resources are provided in the table marked audited on page 147.
The insurance business (the Scottish Widows Group) and each of the constituent UK insurance companies within it are regulated by the
PRA. The insurance businesses are required to calculate solvency capital requirements and available capital in accordance with Solvency II.
The Group complied with these requirements in 2025 and 2024. The Insurance business of the Group calculates regulatory capital on the
basis of an internal model, which was approved by the PRA on 5 December 2015, with the latest major change to the model approved in
November 2024. The capital position of the Group’s insurance businesses is reviewed on a regular basis by the Insurance, Pensions and
Investments Executive Committee. More information is set out on page 150.
Insurance underwriting risk
Insurance underwriting risk is the risk of adverse developments in the timing, frequency and severity of claims for insured/underwritten
events and in customer behaviour, leading to reductions in earnings and/or value and arises within the Group’s Insurance business.
Insurance underwriting risk is measured using a variety of techniques including stress, reverse stress and scenario testing, as well as
stochastic modelling. Current and potential future insurance underwriting risk exposures are assessed and aggregated on a range of stresses
including risk measures based on 1-in-200 year stresses for the Insurance business’s regulatory capital assessments and other supporting
measures where appropriate. The Group also mitigates insurance underwriting risk via the use of reinsurance arrangements.
More information is set out on page 180. The Group's critical accounting judgements and key sources of estimation uncertainty for its
Insurance business are set out in note 8.
Lloyds Banking Group plc Annual Report and Accounts 2025
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Note 40: Cash flow statement
(A)Change in operating assets
| 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | |
|---|---|---|---|
| Change in financial assets held at amortised cost | (26,316) | (21,106) | 12,311 |
| Change in financial assets at fair value through profit or loss | (24,505) | (9,872) | (22,539) |
| Change in derivative financial instruments | 4,446 | (4,082) | 1,805 |
| Change in other operating assets | 5,686 | (4,562) | (687) |
| Change in operating assets | (40,689) | (39,622) | (9,110) |
(B)Change in operating liabilities
| 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | |
|---|---|---|---|
| Change in deposits from banks | (376) | 4 | (1,110) |
| Change in customer deposits | 13,858 | 11,324 | (3,850) |
| Change in repurchase agreements | 810 | 57 | (10,893) |
| Change in financial liabilities at fair value through profit or loss | 172 | 2,619 | 6,925 |
| Change in derivative financial instruments | (5,216) | 1,524 | (3,893) |
| Change in debt securities in issue at amortised cost | 7,725 | (4,824) | 2,094 |
| Change in insurance contracts1 | 13,220 | 1,941 | 9,845 |
| Change in investment contract liabilities | 10,412 | 6,250 | 5,502 |
| Change in other operating liabilities2 | (5,202) | 4,708 | (388) |
| Change in operating liabilities | 35,403 | 23,603 | 4,232 |
1Includes insurance contracts presented within disposal group liabilities.
2Includes a decrease of £235 million (2024: decrease of £371 million; 2023: increase of £315 million) in respect of lease liabilities.
(C)Non-cash and other items
| 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | |
|---|---|---|---|
| Interest expense and hedging valuation adjustments on subordinated liabilities1 | 715 | 471 | 861 |
| Accretion of discounts and amortisation of premiums and issue costs | (488) | 195 | 1,259 |
| Revaluation of investment properties | (99) | (67) | 87 |
| Net gain on sale of financial assets at fair value through other comprehensive income | (3) | (7) | (122) |
| Share of post-tax results of associates and joint ventures | (1) | 13 | 16 |
| Profit on derecognition of joint ventures and associates | (121) | – | – |
| Loss/(profit) on disposal of tangible fixed assets | 65 | (36) | (61) |
| Net credit in respect of defined benefit schemes | (37) | (11) | (79) |
| Depreciation and amortisation | 3,477 | 3,426 | 2,905 |
| Regulatory and legal provisions | 968 | 899 | 675 |
| Other provision movements | (29) | (206) | (30) |
| Allowance for loan losses | 867 | 494 | 315 |
| Write-off of allowance for loan losses, net of recoveries | (1,097) | (1,029) | (1,115) |
| Impairment credit on undrawn balances | (73) | (51) | – |
| Impairment credit on financial assets at fair value through other comprehensive income | (1) | (3) | (2) |
| Transactions in own shares | 38 | (173) | 103 |
| Transfers to income statement from reserves | 1,869 | 2,597 | 1,838 |
| Foreign exchange impact on balance sheet2 | 709 | 1 | 502 |
| Other non-cash items | 91 | 42 | 176 |
| Total non-cash items | 6,850 | 6,555 | 7,328 |
| Contributions to defined benefit schemes | (152) | (175) | (1,345) |
| Payments in respect of regulatory and legal provisions | (295) | (401) | (378) |
| Other | 28 | 11 | 17 |
| Total other items | (419) | (565) | (1,706) |
| Non-cash and other items | 6,431 | 5,990 | 5,622 |
1Interest expense on subordinated liabilities and hedging valuation adjustments on subordinated debt, previously presented separately, are reported in aggregate.
2When considering the movement on each line of the balance sheet, the impact of foreign exchange rate movements is removed in order to show the underlying cash impact.
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Note 40: Cash flow statement continued
(D)Acquisition of Group undertakings, businesses and joint ventures
On 9 October 2025, LBG Equity Investments Limited, a wholly owned subsidiary of the Group, acquired 49.9% of the ordinary share capital
of Schroders Personal Wealth Limited (SPW) in exchange for its stake in Cazenove Capital, bringing the Group’s ownership of SPW to 100%.
Goodwill of £262 million was recognised on the transaction. None of the goodwill was deductible for tax purposes.
| 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | |
|---|---|---|---|
| Net assets acquired: | |||
| Cash and cash equivalents | 144 | – | 38 |
| Tangible fixed assets | 2 | – | – |
| Intangible assets (excluding goodwill) | 296 | – | 182 |
| Other assets | 152 | – | 672 |
| Deferred tax | (74) | – | (58) |
| Other liabilities | (166) | – | (646) |
| Goodwill arising on acquisition | 262 | – | 143 |
| Non cash consideration | (616) | – | – |
| Cash consideration | – | – | 331 |
| Less cash and cash equivalents acquired | (144) | – | (38) |
| Net cash (inflow)/outflow arising from acquisition of subsidiaries and businesses | (144) | – | 293 |
| Acquisition of and additional investment in joint ventures | 117 | 179 | 87 |
| Net cash (inflow)/outflow from acquisitions in the year | (27) | 179 | 380 |
(E)Analysis of cash and cash equivalents as shown in the balance sheet
| 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | |
|---|---|---|---|
| Cash and balances at central banks | 56,661 | 62,705 | 78,110 |
| Less mandatory reserve deposits1 | (37) | (21) | (1,930) |
| 56,624 | 62,684 | 76,180 | |
| Loans and advances to banks and reverse repurchase agreements with banks | 17,006 | 15,175 | 19,048 |
| Less amounts with a maturity of three months or more | (13,037) | (7,043) | (6,390) |
| 3,969 | 8,132 | 12,658 | |
| Total cash and cash equivalents2 | 60,593 | 70,816 | 88,838 |
1Mandatory reserve deposits are held with local central banks in accordance with statutory requirements. Where these deposits are not held in demand accounts and are not available
to finance the Group’s day-to-day operations they are excluded from cash and cash equivalents.
2Included within cash and cash equivalents at 31 December 2025 is £16 million (2024: £23 million; 2023: £31 million) of restricted cash and cash equivalents held within the Group’s
long-term insurance and investments operations, which is not immediately available for use in the business.
Note 41: Events since the balance sheet date
Share buyback
On 30 January 2026, the Group announced the launch of an ordinary share buyback of up to £1.75 billion. This represents the return to
shareholders of capital, surplus to that required to provide capacity to grow the business, meet current and future regulatory requirements
and cover uncertainties. The share buyback programme is expected to be completed, subject to continued authority from the PRA, by
31 December 2026.
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Parent company income statement
for the year ended 31 December
| 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | |
|---|---|---|---|
| Interest income | 804 | 800 | 632 |
| Interest expense | (1,031) | (1,096) | (1,129) |
| Net interest expense | (227) | (296) | (497) |
| Net trading (losses) income | (129) | 61 | 71 |
| Dividends from subsidiaries | 2,990 | 5,187 | 5,024 |
| Other operating income | 893 | 701 | 672 |
| Other income | 3,754 | 5,949 | 5,767 |
| Total income | 3,527 | 5,653 | 5,270 |
| Operating expenses | (164) | (216) | (225) |
| Impairment credit | 3 | 3 | 10 |
| Profit before tax | 3,366 | 5,440 | 5,055 |
| Tax credit | 23 | 48 | 84 |
| Profit for the year | 3,389 | 5,488 | 5,139 |
| Profit attributable to ordinary shareholders | 2,926 | 4,990 | 4,612 |
| Profit attributable to other equity holders | 463 | 498 | 527 |
| Profit for the year | 3,389 | 5,488 | 5,139 |
Total comprehensive income comprises only profit for the year.
The accompanying notes are an integral part of the parent company financial statements.
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298
Parent company balance sheet
at 31 December
| Note | 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|---|
| Assets | |||
| Cash and cash equivalents | 8 | 22 | |
| Financial assets at fair value through profit or loss | 3 | 19,703 | 23,370 |
| Derivative financial instruments | 3 | 298 | 519 |
| Debt securities | 1,623 | 2,354 | |
| Loans to subsidiaries | 9 | 16,949 | 17,068 |
| Investment in subsidiaries | 9 | 54,567 | 51,334 |
| Current tax recoverable | 6 | 75 | |
| Deferred tax assets | 5 | 85 | 23 |
| Other assets | 7 | 14 | |
| Total assets | 93,246 | 94,779 | |
| Liabilities | |||
| Due to subsidiaries | 150 | 3 | |
| Financial liabilities at fair value through profit or loss | 3 | 22,433 | 24,896 |
| Derivative financial instruments | 3 | 579 | 939 |
| Debt securities in issue at amortised cost | 6 | 9,941 | 8,310 |
| Other liabilities | 80 | 142 | |
| Subordinated liabilities | 7 | 9,970 | 9,720 |
| Total liabilities | 43,153 | 44,010 | |
| Equity | |||
| Share capital | 8 | 5,889 | 6,062 |
| Share premium account | 18,797 | 18,720 | |
| Merger reserve | 6,759 | 6,759 | |
| Capital redemption reserve | 5,971 | 5,751 | |
| Retained profits | 6,730 | 7,282 | |
| Shareholders’ equity | 44,146 | 44,574 | |
| Other equity instruments | 8 | 5,947 | 6,195 |
| Total equity | 50,093 | 50,769 | |
| Total equity and liabilities | 93,246 | 94,779 |
The accompanying notes are an integral part of the parent company financial statements.
The directors approved the parent company financial statements on 13 February 2026.
| Sir Robin Budenberg<br><br>Chair | Charlie Nunn<br><br>Group Chief Executive | William Chalmers<br><br>Chief Financial Officer |
|---|
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Parent company statement of changes in equity
for the year ended 31 December
| Attributable to ordinary shareholders | ||||||||
|---|---|---|---|---|---|---|---|---|
| Share capital1<br><br>£m | Share<br><br>premium1<br><br>£m | Merger<br><br>reserve2<br><br>£m | redemption<br><br>reserve3<br><br>£m | Retained<br><br>profits<br><br>£m | Total<br><br>£m | Other<br><br>equity<br><br>instruments<br><br>£m | Total<br><br>£m | |
| At 1 January 2023 | 6,729 | 18,504 | 6,806 | 4,932 | 5,222 | 42,193 | 5,297 | 47,490 |
| Total comprehensive income | – | – | – | – | 4,612 | 4,612 | 527 | 5,139 |
| Transactions with owners | ||||||||
| Dividends4 | – | – | – | – | (1,651) | (1,651) | – | (1,651) |
| Distributions on other equity<br><br>instruments | – | – | – | – | – | – | (527) | (527) |
| Issue of ordinary shares | 67 | 64 | – | – | – | 131 | – | 131 |
| Share buyback | (438) | – | – | 438 | (1,993) | (1,993) | – | (1,993) |
| Issue of other equity instruments | – | – | – | – | (13) | (13) | 1,778 | 1,765 |
| Repurchase and redemptions of<br><br>other equity instruments | – | – | – | – | – | – | (135) | (135) |
| Movement in treasury shares | – | – | – | – | 103 | 103 | – | 103 |
| Value of employee services | – | – | – | – | 227 | 227 | – | 227 |
| Total transactions with owners | (371) | 64 | – | 438 | (3,327) | (3,196) | 1,116 | (2,080) |
| At 31 December 2023 | 6,358 | 18,568 | 6,806 | 5,370 | 6,507 | 43,609 | 6,940 | 50,549 |
| Total comprehensive income | – | – | – | – | 4,990 | 4,990 | 498 | 5,488 |
| Transactions with owners | ||||||||
| Dividends4 | – | – | – | – | (1,828) | (1,828) | – | (1,828) |
| Distributions on other equity<br><br>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 | (47) | 12 | – | – | – | – |
| Issue of other equity instruments | – | – | – | – | (6) | (6) | 763 | 757 |
| Repurchase and redemptions of<br><br>other equity instruments | – | – | – | – | (316) | (316) | (1,508) | (1,824) |
| Movement in treasury shares | – | – | – | – | (173) | (173) | – | (173) |
| Value of employee services | – | – | – | – | 119 | 119 | – | 119 |
| Total transactions with owners | (296) | 152 | (47) | 381 | (4,215) | (4,025) | (1,243) | (5,268) |
| At 31 December 2024 | 6,062 | 18,720 | 6,759 | 5,751 | 7,282 | 44,574 | 6,195 | 50,769 |
| Total comprehensive income | – | – | – | – | 2,926 | 2,926 | 463 | 3,389 |
| Transactions with owners | ||||||||
| Dividends4 | – | – | – | – | (2,000) | (2,000) | – | (2,000) |
| Distributions on other equity<br><br>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 | – | – | – | – | (10) | (10) | 1,511 | 1,501 |
| Repurchase and redemptions of<br><br>other equity instruments | – | – | – | – | – | – | (1,759) | (1,759) |
| Movement in treasury shares | – | – | – | – | 38 | 38 | – | 38 |
| Value of employee services | – | – | – | – | 204 | 204 | – | 204 |
| Total transactions with owners | (173) | 77 | – | 220 | (3,478) | (3,354) | (711) | (4,065) |
| At 31 December 2025 | 5,889 | 18,797 | 6,759 | 5,971 | 6,730 | 44,146 | 5,947 | 50,093 |
1Share capital and share premium, previously presented in aggregate, are shown separately. Comparatives have been represented on a consistent basis.
2The merger reserve comprises the premium on shares issued on 13 January 2009 under the placing and open offer and shares issued on 16 January 2009 on the acquisition of HBOS plc,
offset by adjustments on the redemption of preference shares. Substantially all of the Company’s merger reserve is available for distribution.
3The capital redemption reserve represents transfers from the merger reserve in accordance with companies’ legislation and amounts transferred from share capital following the
cancellation of shares. For shares cancelled under share buyback programme, see note 32 to the consolidated financial statements.
4Details of the Company’s dividends are as set out in note 34 to the consolidated financial statements.
The accompanying notes are an integral part of the parent company financial statements.
Lloyds Banking Group plc Annual Report and Accounts 2025
300
Parent company cash flow statement
for the year ended 31 December
| 2025<br><br>£m | 2024<br><br>£m | 2023<br><br>£m | |
|---|---|---|---|
| Cash flows from operating activities | |||
| Profit before tax | 3,366 | 5,440 | 5,055 |
| Adjustments for: | |||
| Fair value and exchange adjustments and other non-cash items | 311 | (83) | 744 |
| Change in other assets | 4,405 | (1,850) | (1,317) |
| Change in other liabilities and other items | (747) | 4,523 | (555) |
| Dividends received | (2,990) | (5,187) | (5,024) |
| Distributions on other equity instruments received | (680) | (541) | (505) |
| Tax refunded | 84 | 115 | 4 |
| Net cash provided by (used in) operating activities | 3,749 | 2,417 | (1,598) |
| Cash flows from investing activities | |||
| Return of capital contribution | 1 | 1 | 1 |
| Dividends received | 2,990 | 5,187 | 5,024 |
| Distributions on other equity instruments received | 680 | 541 | 505 |
| Acquisitions of and capital injections to subsidiaries | (5,288) | (1,309) | (1,496) |
| Return of capital by subsidiaries | 2,054 | 800 | 278 |
| Amounts advanced to subsidiaries | (6,118) | (4,340) | (4,563) |
| Repayment of loans to subsidiaries | 5,796 | 2,055 | 3,556 |
| Interest received on loans to subsidiaries | 610 | 386 | 410 |
| Net cash provided by investing activities | 725 | 3,321 | 3,715 |
| Cash flows from financing activities | |||
| Dividends paid to ordinary shareholders | (2,000) | (1,828) | (1,651) |
| Distributions on other equity instruments | (463) | (498) | (527) |
| Interest paid on subordinated liabilities | (638) | (509) | (466) |
| Proceeds from issue of subordinated liabilities | 1,757 | 812 | 1,416 |
| Proceeds from issue of other equity instruments | 1,501 | 757 | 1,765 |
| Proceeds from issue of ordinary shares | 99 | 187 | 86 |
| Share buyback | (1,710) | (2,011) | (1,993) |
| Repayment of subordinated liabilities | (1,275) | (819) | (643) |
| Repurchase and redemptions of other equity instruments | (1,759) | (1,824) | (135) |
| Net cash used in financing activities | (4,488) | (5,733) | (2,148) |
| Change in cash and cash equivalents | (14) | 5 | (31) |
| Cash and cash equivalents at beginning of year | 22 | 17 | 48 |
| Cash and cash equivalents at end of year | 8 | 22 | 17 |
Interest received was £763 million (2024: £746 million; 2023: £604 million) and interest paid was £992 million (2024: £1,134 million;
2023: £1,086 million).
The accompanying notes are an integral part of the parent company financial statements.
Lloyds Banking Group plc Annual Report and Accounts 2025
301
Notes to the parent company financial statements
for the year ended 31 December
Note 1: Basis of preparation and accounting policies
The financial statements of Lloyds Banking Group plc have been prepared in accordance with United Kingdom adopted international
accounting standards and in conformity with the requirements of the Companies Act 2006. The financial statements have also been prepared
in accordance with IFRS® Accounting Standards as issued by the International Accounting Standards Board (IASB).
The financial information has been prepared under the historical cost convention, as modified by the revaluation of certain financial assets
and liabilities at fair value through profit or loss and all derivative contracts. The accounting policies of the Company are the same as those
of the Group, which are set out in note 2 to the consolidated financial statements. Investments in subsidiaries are carried at historical cost,
less any provisions for impairment. Fees payable to the Company’s auditors by the Group are set out in note 13 to the consolidated
financial statements.
Lloyds Banking Group plc was incorporated as a public limited company and registered in Scotland under the UK Companies Act 1985 on
21 October 1985 with the registered number SC095000. Lloyds Banking Group plc’s registered office is Lloyds Banking Group plc, The
Mound, Edinburgh EH1 1YZ, Scotland, and its principal executive offices in the UK are located at Lloyds Banking Group plc, 33 Old Broad
Street, London EC2N 1HZ.
Note 2: Measurement basis of financial assets and liabilities
The accounting policies in note 2 to the consolidated financial statements describe how different classes of financial instruments are
measured, and how income and expenses, including fair value gains and losses, are recognised. The following table analyses the carrying
amounts of the Company’s financial assets and liabilities by category and by balance sheet heading.
| Derivatives<br><br>designated<br><br>as hedging<br><br>instruments<br><br>£m | Mandatorily held at fair value<br><br>through profit or loss | Held atamortisedcostm | ||
|---|---|---|---|---|
| Held for<br><br>trading<br><br>£m | Otherm | |||
| At 31 December 2025 | ||||
| Financial assets | ||||
| Cash and cash equivalents | – | – | – | 8 |
| Financial assets at fair value through profit or loss | – | – | 19,703 | – |
| Derivative financial instruments | 29 | 269 | – | – |
| Debt securities | – | – | – | 1,623 |
| Loans to subsidiaries | – | – | – | 16,949 |
| Total financial assets | 29 | 269 | 19,703 | 18,580 |
| Financial liabilities | ||||
| Due to subsidiaries | – | – | – | 150 |
| Financial liabilities at fair value through profit or loss | – | – | – | – |
| Derivative financial instruments | 322 | 257 | – | – |
| Debt securities in issue at amortised cost | – | – | – | 9,941 |
| Subordinated liabilities | – | – | – | 9,970 |
| Total financial liabilities | 322 | 257 | – | 20,061 |
| At 31 December 2024 | ||||
| Financial assets | ||||
| Cash and cash equivalents | – | – | – | 22 |
| Financial assets at fair value through profit or loss | – | – | 23,370 | – |
| Derivative financial instruments | 38 | 481 | – | – |
| Debt securities | – | – | – | 2,354 |
| Loans to subsidiaries | – | – | – | 17,068 |
| Total financial assets | 38 | 481 | 23,370 | 19,444 |
| Financial liabilities | ||||
| Due to subsidiaries | – | – | – | 3 |
| Financial liabilities at fair value through profit or loss | – | – | – | – |
| Derivative financial instruments | 442 | 497 | – | – |
| Debt securities in issue at amortised cost | – | – | – | 8,310 |
| Subordinated liabilities | – | – | – | 9,720 |
| Total financial liabilities | 442 | 497 | – | 18,033 |
All values are in British Pounds.
Note 17 to the consolidated financial statements outlines the valuation hierarchy into which financial instruments measured at fair value
are categorised.
The assets held at fair value through profit or loss represent holdings of debt securities issued by subsidiaries. The contractual terms of such
instruments contain certain write-down and conversion features and so are not considered to satisfy the solely payments of principal and
interest test.
Lloyds Banking Group plc Annual Report and Accounts 2025
302
Notes to the parent company financial statements continued
for the year ended 31 December
Note 2: Measurement basis of financial assets and liabilities continued
Financial liabilities designated at fair value through profit or loss represent debt securities in issue which are accounted for at fair value to
significantly reduce an accounting mismatch. The changes in the credit risk of these liabilities are linked to the changes in credit risk on
corresponding assets that the Company holds at fair value through profit or loss, representing debt securities issued by subsidiaries. Given
the economic relationship between these assets and liabilities, the Company presents changes in the credit risk of its liabilities in profit or
loss in order to avoid creating or enlarging an accounting mismatch.
The amount contractually payable on maturity of the debt securities held at fair value through profit or loss at 31 December 2025 was
£21,722 million, which was £711 million lower than the balance sheet carrying value (2024: £24,488 million, which was £408 million lower
than the balance sheet carrying value). At 31 December 2025 there was a cumulative £984 million increase in the fair value of these
liabilities attributable to changes in credit risk (2024: increase of £845 million), of which a £139 million increase arose in 2025 and a
£89 million increase arose in 2024; this is determined by reference to the quoted credit spreads of the Company.
Note 3: Fair values of financial assets and liabilities
The valuation techniques for the Company’s financial instruments are as discussed in note 17 to the consolidated financial statements.
Valuation hierarchy
The table below analyses the assets and liabilities of the Company. With the exception of derivatives and those financial assets and
liabilities carried at fair value through profit or loss, all assets and liabilities are held at amortised cost. They are categorised into levels 1 to 3
based on the degree to which their fair value is observable. No assets or liabilities were categorised as level 1 (2024: none).
| 2025 | |||||||
|---|---|---|---|---|---|---|---|
| Carrying<br><br>value<br><br>£m | Fair<br><br>value<br><br>£m | Valuation hierarchy | Fair<br><br>value<br><br>£m | Valuation hierarchy | |||
| Level 2<br><br>£m | Level 3m | Level 2<br><br>£m | Level 3<br><br>£m | ||||
| Financial assets at fair value through profit or loss | 19,703 | 19,703 | 19,703 | – | 23,370 | 23,370 | – |
| Derivative financial instruments | 298 | 298 | 298 | – | 519 | 519 | – |
| Debt securities | 1,623 | 1,593 | 1,593 | – | 2,240 | 2,240 | – |
| Loans to subsidiaries | 16,949 | 16,949 | 16,949 | – | 17,068 | 17,068 | – |
| Total financial assets | 38,573 | 38,543 | 38,543 | – | 43,197 | 43,197 | – |
| Due to subsidiaries | 150 | 150 | 150 | – | 3 | 3 | – |
| Financial liabilities at fair value through profit or loss | 22,433 | 22,433 | 22,433 | – | 24,896 | 24,896 | – |
| Derivative financial instruments | 579 | 579 | 579 | – | 939 | 939 | – |
| Debt securities in issue at amortised cost | 9,941 | 9,976 | 9,976 | – | 8,140 | 8,140 | – |
| Subordinated liabilities | 9,970 | 10,505 | 10,505 | – | 10,038 | 10,038 | – |
| Total financial liabilities | 43,073 | 43,643 | 43,643 | – | 44,016 | 44,016 | – |
All values are in British Pounds.
The carrying amount of cash and cash equivalents (2025: £8 million; 2024: £22 million) is a reasonable approximation of fair value.
At 31 December 2025 £16,484 million of financial assets at fair value through profit or loss, £220 million of derivative financial assets,
£776 million of debt securities and £12,014 million of loans to subsidiaries included in total financial assets had maturities greater than one
year (2024: £18,195 million, £287 million, £1,736 million and £11,876 million). Of the balances included in total financial liabilities,
£19,031 million of financial liabilities at fair value through profit or loss, £504 million of derivative financial liabilities, £9,842 million of debt
securities in issue at amortised cost and £8,341 million of subordinated liabilities had maturities greater than one year at 31 December 2025
(2024: £20,237 million, £633 million, £6,082 million and £8,371 million).
Note 4: Derivative financial instruments
The Company holds derivatives to manage and hedge the Group’s interest rate and foreign exchange risk arising from issuance.
The principal derivatives used by the Company are as follows:
•Interest rate related contracts including interest rate swaps. An interest rate swap is an agreement between two parties to exchange
fixed and floating interest payments, based upon interest rates defined in the contract, without the exchange of the underlying principal
amounts.
•Exchange rate related contracts include currency swaps. Currency swaps generally involve the exchange of interest payment obligations
denominated in different currencies.
Note 5: Deferred tax
As at 31 December 2025 the Company carried a deferred tax asset of £85 million (2024: £23 million). There was no deferred tax liability at
31 December 2025 or 31 December 2024. The movement in the deferred tax asset during 2025 primarily related to financial liabilities at fair
value through profit and loss (giving rise to a £8 million credit to the income statement) and shared-based payments (giving rise to a
£54 million credit in equity).
Note 6: Debt securities in issue at amortised cost
These comprise notes issued by the Company in a number of currencies, although predominantly US dollars and Euros, with maturity dates
ranging up to 2038.
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303
Note 7: Subordinated liabilities
These liabilities will, in the event of the winding-up of the issuer, be subordinated to the claims of depositors and all other creditors of the
issuer. Any repayments of subordinated liabilities require the consent of the Prudential Regulation Authority.
| Undated<br><br>£m | Dated<br><br>£m | Total<br><br>£m | |
|---|---|---|---|
| At 1 January 2024 | 10 | 9,368 | 9,707 |
| Issued in the year1: | |||
| 4.375% Fixed Rate Reset Dated Subordinated Notes 2034 (500 million) | – | 427 | 427 |
| 5.788% Fixed-to-Floating Rate Dated Subordinated Notes 2034 (A250 million) | – | 128 | 128 |
| Floating Rate Dated Subordinated Notes 2034 (A500 million) | – | 257 | 257 |
| – | 812 | 812 | |
| Repurchases and redemptions during the year1: | |||
| 6.475% Non-cumulative Preference Shares callable 2024 (186 million) | – | – | (47) |
| 4.5% Dated Subordinated Notes 2024 (1,000 million) | – | (772) | (772) |
| – | (772) | (819) | |
| Foreign exchange and other movements (cash and non-cash) | – | 19 | 20 |
| At 31 December 2024 | 10 | 9,427 | 9,720 |
| Issued in the year1: | |||
| 4.00% Fixed Rate Reset Dated Subordinated Notes 2035 (1,000 million) | – | 840 | 840 |
| 6.068% Fixed-to-Floating Rate Dated Subordinated Notes 2036 (1,250 million) | – | 917 | 917 |
| – | 1,757 | 1,757 | |
| Repurchases and redemptions during the year1: | |||
| 4.50% Fixed Rate Step-up Subordinated Notes 2030 (309 million) | – | (260) | (260) |
| 4.582% Fixed Rate Dated Subordinated Notes 2025 (1,328 million) | – | (996) | (996) |
| 4.582% Fixed Rate Dated Subordinated Notes 2025 (25.6 million) | (19) | (19) | |
| – | (1,275) | (1,275) | |
| Foreign exchange and other movements (cash and non-cash) | – | (235) | (232) |
| At 31 December 2025 | 10 | 9,674 | 9,970 |
All values are in US Dollars.
1Issuances in the year generated cash inflows of £1,757 million (2024: £812 million); the repurchases and redemptions resulted in cash outflows of £1,275 million (2024: £819 million). Cash
payments in respect of interest on subordinated liabilities in the year amounted to £522 million (2024: £509 million).
Note 8: Share capital and other equity instruments
Details of the Company’s share capital and other equity instruments are as set out in notes 30 and 33 to the consolidated financial
statements.
Note 9: Related party transactions
Key management personnel
The key management personnel of the Group and the Company are the same. The relevant disclosures are given in note 35 to the
consolidated financial statements.
The Company has no employees (2024: nil).
As discussed in note 11 to the consolidated financial statements, the Group provides share-based compensation to employees through a
number of schemes; these are all in relation to shares in the Company and the costs of providing those benefits are treated as capital
contributions to the employing companies in the Group.
Investment in subsidiaries
| 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|
| At 1 January | 51,334 | 50,826 |
| Additions and capital injections | 5,137 | 1,167 |
| Capital contributions | 151 | 142 |
| Return of capital contributions | (1) | (1) |
| Capital repayments and redemptions | (2,054) | (800) |
| At 31 December | 54,567 | 51,334 |
Details of the subsidiaries and related undertakings are given on pages 313 to 323 and are incorporated by reference.
Certain subsidiary companies currently have insufficient distributable reserves to make dividend payments; however, there were no further
significant restrictions on any of the Company’s subsidiaries in paying dividends or repaying loans and advances. All regulated banking and
insurance subsidiaries are required to maintain capital at levels agreed with the regulators; this may impact the ability of those subsidiaries
to make distributions.
During the year ended 31 December 2025, the Company received dividends of £2,990 million (2024: £5,187 million; 2023: £5,024 million)
from subsidiaries.
Lloyds Banking Group plc Annual Report and Accounts 2025
304
Notes to the parent company financial statements continued
for the year ended 31 December
Note 9: Related party transactions continued
Amounts due to and from subsidiaries
At 31 December 2025 the Company had £19,703 million (2024: £23,370 million) of debt securities at fair value through profit or loss which
had been purchased from subsidiaries, £16,771 million (2024: £17,033 million) of net lending to subsidiaries and had £33 million
(2024: £66 million) of subordinated liabilities in issue to subsidiaries. During the year ended 31 December 2025, the Company advanced
£6,118 million (2024: £4,340 million) to subsidiaries and received £5,796 million (2024: £2,055 million) in loan repayments from subsidiaries.
In addition, at 31 December 2025 the Company had interest rate and currency swaps, predominantly with Lloyds Bank Corporate Markets
plc, with an aggregate notional principal amount of £45,685 million and a net negative fair value of £281 million (2024: notional principal
amount of £47,895 million and a net negative fair value of £420 million). Of this amount an aggregate notional principal amount of
£13,484 million and a net negative fair value of £293 million (2024: notional principal amount of £12,862 million and a net negative fair
value of £404 million) were designated as fair value hedges. Transactions with subsidiary undertakings arose in the ordinary course of
business and on substantially the same terms as those with third-parties.
Guarantees and other related party transactions
As part of the Group’s participation in the Bank of England’s Sterling Monetary Framework, the Company guarantees certain of its
subsidiaries’ liabilities to the Bank of England. These guarantees have no fixed term.
Information in respect of other related party transactions is given in note 35 to the consolidated financial statements.
Note 10: Financial risk management
Market risk
The Company is exposed to interest rate and currency risk on its debt securities in issue and its subordinated debt. As discussed in note 9,
the Company has entered into interest rate and currency swaps with Lloyds Bank Corporate Markets plc, to manage these risks.
Credit risk
The majority of the Company’s credit risk arises from amounts due from its wholly owned subsidiaries, principally Lloyds Bank plc.
Liquidity risk
The table below analyses financial instrument liabilities of the Company on an undiscounted future cash flow basis according to
contractual maturity, into relevant maturity groupings based on the remaining period at the balance sheet date; balances with no fixed
maturity are included in the over 5 years category. In the case of dated subordinated liabilities, the maturity presented is based on call date
where applicable. The Group’s preference shares have partially discretionary coupons and have been included in the below analysis. The
principal amount for undated subordinated liabilities and preference shares with no redemption option is included within the over 5 years
column; interest of £1 million (2024: £1 million) in respect of the undated subordinated liabilities and £28 million (2024: £28 million) in
respect of the preference shares, per annum is not included beyond 5 years.
| Up to 1<br><br>month<br><br>£m | 1 to 3<br><br>months<br><br>£m | 3 to 12<br><br>months<br><br>£m | 1 to 5<br><br>years<br><br>£m | Over<br><br>5 years<br><br>£m | Total<br><br>£m | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| At 31 December 2025 | ||||||||||||||
| Financial liabilities at fair value through profit or loss | 105 | 806 | 3,373 | 14,721 | 6,811 | 25,816 | ||||||||
| Debt securities in issue at amortised cost | 20 | 57 | 396 | 10,498 | 80 | 11,051 | ||||||||
| Subordinated liabilities | 24 | 1,169 | 919 | 5,991 | 6,698 | 14,801 | ||||||||
| Total non-derivative financial liabilities | 149 | 2,032 | 4,688 | 31,210 | 13,589 | 51,668 | ||||||||
| Derivative financial liabilities | ||||||||||||||
| Gross settled derivatives – outflows | 2,091 | 2,475 | 4,260 | 3,587 | – | 12,413 | ||||||||
| Gross settled derivatives – inflows | (2,073) | (2,462) | (4,219) | (3,586) | – | (12,340) | ||||||||
| Gross settled derivatives – net flows | 18 | 13 | 41 | 1 | – | 73 | ||||||||
| Net settled derivative liabilities | 381 | – | – | – | – | 381 | ||||||||
| Total derivative financial liabilities | 399 | 13 | 41 | 1 | – | 454 | Up to 1<br><br>month<br><br>£m | 1 to 3<br><br>months<br><br>£m | 3 to 12<br><br>months<br><br>£m | 1 to 5<br><br>years<br><br>£m | Over<br><br>5 years<br><br>£m | Total<br><br>£m | ||
| --- | --- | --- | --- | --- | --- | --- | ||||||||
| At 31 December 2024 | ||||||||||||||
| Financial liabilities at fair value through profit or loss | 874 | 1,786 | 2,958 | 17,090 | 6,149 | 28,857 | ||||||||
| Debt securities in issue at amortised cost | 22 | 1,076 | 1,369 | 6,375 | 75 | 8,917 | ||||||||
| Subordinated liabilities | 25 | 324 | 1,344 | 3,990 | 6,070 | 11,753 | ||||||||
| Total non-derivative financial liabilities | 921 | 3,186 | 5,671 | 27,455 | 12,294 | 49,527 | ||||||||
| Derivative financial liabilities | ||||||||||||||
| Gross settled derivatives – outflows | 2,213 | 2,675 | 5,543 | 2,194 | 267 | 12,892 | ||||||||
| Gross settled derivatives – inflows | (2,164) | (2,530) | (5,302) | (1,950) | – | (11,946) | ||||||||
| Gross settled derivatives – net flows | 49 | 145 | 241 | 244 | 267 | 946 | ||||||||
| Net settled derivative liabilities | 175 | – | – | – | – | 175 | ||||||||
| Total derivative financial liabilities | 224 | 145 | 241 | 244 | 267 | 1,121 |
Lloyds Banking Group plc Annual Report and Accounts 2025
305
Other
information
| Shareholder information | 306 |
|---|---|
| Alternative performance measures | 308 |
| Subsidiaries and related undertakings | 313 |
| Forward-looking statements | 324 |
Driven by
our purpose
Our purpose is what drives us, what makes us different
and defines how we profitably grow for all our stakeholders
Lloyds Banking Group plc Annual Report and Accounts 2025
306
Shareholder information
Annual general meeting (AGM)
The annual general meeting will be held at the Edinburgh International Conference Centre, The Exchange, Edinburgh EH3 8EE on
Thursday 14 May 2026 at 11am. Further details about the meeting, including the proposed resolutions and where shareholders can
stream the meeting live, can be found in our Notice of AGM which will be available shortly on our website .
Reports and communications
The Group issues regulatory announcements through the Regulatory News Service (RNS). Shareholders can subscribe for free via the
Investors section of our website , where our statutory reports and shareholder communications are available. A summary of the
scheduled reports and communications to be issued in 2026 is set out below:
| Available format | |||||
|---|---|---|---|---|---|
| Report/Communication | Month | Online | RNS | Paper | |
| Preliminary results | Jan | ü | ü | ü | |
| Publication of annual report | Feb | ü | ü | ü | |
| Pillar 3 report | Feb/Aug | ü | |||
| Mailing of annual report and annual review | Mar | ü | ü | ü | |
| Notice of AGM and voting materials | Mar | ü | ü | ü | |
| Q1 interim management statement | Apr | ü | ü | ü | |
| Country analysis1 | May | ü | |||
| Half-year results | Jul | ü | ü | ü | |
| Q3 interim management statement | Oct | ü | ü | ü |
1To be published on the Group’s website by 31 May 2026 in accordance with the Capital Requirements (Country-by-Country Reporting) Regulations 2013.
Share dealing facilities
We offer a choice of four share dealing services for our UK shareholders and customers. Please search for ‘share dealing’ within the website links
provided below, where you can also view the full range of services available. Alternatively, please use the additional contact details below.
| Service Provider | Telephone Dealing | Internet Dealing |
|---|---|---|
| Bank of Scotland Share Dealing | 0345 606 1188 | https://www.bankofscotland.co.uk/investing.html <br> |
| Halifax Share Dealing | 0345 722 5525 | https://www.halifax.co.uk/investing.html <br> |
| Lloyds Bank Direct Investments | 0345 606 0560 | https://www.lloydsbank.com/investing.html <br> |
| Scottish Widows Share Dealing | 0345 070 7129 | https://www.scottishwidows.co.uk/investing.html <br> |
Note:
All internet services are available 24/7. Telephone dealing services are available between 8am and 9pm, Monday to Friday, excluding English and Welsh public holidays. To open a share
dealing account with any of these services, you must be 18 years of age or over and be resident in the UK, Jersey, Guernsey or the Isle of Man.
Share dealing for the Lloyds Banking Group shareholder account
Share dealing services for the Lloyds Banking Group shareholder account are provided by Equiniti Shareview Dealing, operated by
Equiniti Financial Services Limited. Details of the services provided can be found either on the shareholder information page of our
website or by contacting Equiniti using the contact details provided on the next page.
Share price information
Shareholders can access both the latest and historical share prices via our website as well as listings in most national newspapers.
For a real-time buying or selling price, you will need to contact a stockbroker, or you can contact the share dealing providers detailed above.
Individual Saving Accounts (ISAs)
There are a number of options for investing in Lloyds Banking Group shares through an ISA. For details of services and products provided by
the Group please contact Bank of Scotland Share Dealing, Halifax Share Dealing, Lloyds Bank Direct Investments or Scottish Widows Share
Dealing using the contact details above.
Key dates
| 9 April 2026 | Shares quoted ex-dividend |
|---|---|
| 10 April 2026 | Record date |
| 27 April 2026 | Final date for joining or leaving the dividend reinvestment plan |
| 29 April 2026 | Q1 interim management statement |
| 14 May 2026 | Annual general meeting |
| 19 May 2026 | Dividend paid |
| 30 July 2026 | Half-year results |
| 29 October 2026 | Q3 interim management statement |
Lloyds Banking Group plc Annual Report and Accounts 2025
307
Analysis of shareholders
| Balance ranges | Total number<br><br>of holdings | Percentage<br><br>of holders | Total number<br><br>of shares | Percentage<br><br>issued capital |
|---|---|---|---|---|
| 1–999 | 1,679,803 | 81.9% | 487,563,992 | 0.8% |
| 1,000–9,999 | 318,898 | 15.6% | 846,637,657 | 1.4% |
| 10,000–99,999 | 48,824 | 2.4% | 1,250,595,306 | 2.1% |
| 100,000–999,999 | 2,228 | 0.1% | 519,003,450 | 0.9% |
| 1,000,000–4,999,999 | 473 | 0.0% | 1,170,340,552 | 2.0% |
| 5,000,000–9,999,999 | 146 | 0.0% | 1,044,624,243 | 1.8% |
| 10,000,000–49,999,999 | 234 | 0.0% | 5,609,956,584 | 9.5% |
| 50,000,000–99,999,999 | 80 | 0.0% | 5,744,461,475 | 9.8% |
| 100,000,000–499,999,999 | 68 | 0.0% | 14,903,704,082 | 25.3% |
| 500,000,000–999,999,999 | 14 | 0.0% | 9,774,960,052 | 16.6% |
| 1,000,000,000–99,999,999,999 | 7 | 0.0% | 17,533,896,209 | 29.8% |
| Totals | 2,050,775 | 100.0% | 58,885,743,602 | 100.0% |
American Depositary Receipts (ADRs)
Our shares are traded in the USA through a New York Stock Exchange-listed sponsored ADR facility with The Bank of New York Mellon as
the depositary. The ADRs are traded on the New York Stock Exchange under the symbol LYG. The CUSIP number is 539439109 and the
ratio of ADRs to ordinary shares is 1:4.
For details contact:
BNY Shareowner Services, 150 Royall St., Suite 101 Canton, MA 02021. Telephone: 1-866-259-0336 (US toll free),
international callers: +1 201-680-6825. Alternatively visit www.adrbny.com or email shrrelations@cpushareownerservices.com.
Security – share fraud and scams
Shareholders should exercise caution when unsolicited callers offer the chance to buy or sell shares with promises of huge returns. If it
sounds too good to be true, it usually is and we would ask that shareholders take steps to protect themselves. We strongly recommend
seeking advice from an independent financial adviser authorised by the Financial Conduct Authority (FCA). Shareholders can verify
whether a firm is authorised via the Financial Services Register which is available at www.fca.org.uk .
If a shareholder is concerned that they may have been targeted by such a scheme, please contact the FCA Consumer Helpline on
0800 111 6768 or use the online ‘Share Fraud Reporting Form’ available from their website (see above). We would also recommend
contacting the Police through Action Fraud on 0300 123 2040 or visiting www.actionfraud.org.uk for further information.
| Important shareholder and registrar information | |||
|---|---|---|---|
| --- | |||
| Shareholder information<br><br>help.shareview.co.uk <br><br><br>(from here you will be able to email your query securely) |
|||
| Registrar<br><br>Equiniti Limited, Aspect House, Spencer Road, Lancing,<br><br>West Sussex BN99 6DA | |||
| Shareholder helpline<br><br>+44 (0) 371 384 2990* (please use the country code when<br><br>contacting Equiniti Limited from outside the UK)<br><br>*Lines are open 8:30am to 5:30pm (UK time), Monday to<br><br>Friday (excluding public holidays in England and Wales).<br><br>For deaf and speech impaired customers, we welcome calls<br><br>via Relay UK. See www.relayuk.bt.com for more <br><br><br>information.<br><br>The company registrar is Equiniti Limited. They provide a<br><br>shareholder service, including a telephone helpline and<br><br>shareview, which is a free secure portfolio service. |
Your communications,<br><br>your choice – go digital!<br><br>•Receive company communications<br><br>like this by email<br><br>•Buy and sell shares<br><br>•Manage your shareholding online | ||
| --- | --- | ||
| Step 1<br><br>Register at<br><br>www.shareview.co.uk/info/register <br><br><br>or by scanning the QR code |
|||
| Step 2<br><br>Follow the on-screen instructions<br><br>to complete your registration | |||
| Step 3<br><br>Log on and update your<br><br>communications choice |
Lloyds Banking Group plc Annual Report and Accounts 2025
308
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 160. 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.
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<br><br>undrawn, expressed as a percentage of average gross loans and advances to customers for the period. This measure is useful in<br><br>assessing the credit quality of the loan book. |
|---|---|
| Assets under<br><br>administration (AuA) | AuA represents all assets managed or administered by or on behalf of the Group’s subsidiaries. It includes assets that are<br><br>reported within the Group statutory balance sheet and those that are reported independently. It is a useful measure as it<br><br>impacts potential earnings arising from Asset Management Charges and the relative size of the business. |
| Assets under<br><br>administration (net<br><br>flows) | AuA (net flows) measures the net position of inflows and outflows to AuAs and is a useful measure of growth in AuA. Inflows<br><br>include net premiums and deposits and other funds received from customers included in AuA. Outflows include net claims,<br><br>redemptions and surrenders under other funds withdrawn by customers from AuA. Net flows exclude market movements. |
| Banking net interest<br><br>margin | Banking net interest income on customer and product balances in the banking businesses as a percentage of average gross<br><br>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<br><br>of the Group’s operations before the effects of the underlying impairment credit or charge. |
| General insurance<br><br>combined ratio | General insurance combined ratio is a key metric used in the insurance industry to assess an insurer's profitability and<br><br>operational efficiency, with a ratio below 100% indicating profitability. It is calculated as incurred claims, and earned<br><br>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<br><br>useful for assessing the growth of the General Insurance business. |
| Life and pensions sales<br><br>(present value of new<br><br>business premiums) | Present value of regular premiums plus single premiums from new business written in the current period. This measure is<br><br>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<br><br>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<br><br>contracts, net of acquisition expenses (derived from the statutory balance sheet movements) and any loss component on<br><br>onerous contracts (which is recognised directly in the income statement) but does not include existing business increments. |
| Pro forma CET1 ratio | CET1 ratio adjusted for the effect of the full impact of the announced ordinary share buyback programme. Where disclosed,<br><br>the ratio is further adjusted for the effect of any dividend paid up by the Insurance business in the subsequent quarter prior to<br><br>the publication of the financial results. |
| Return on tangible<br><br>equity | Profit attributable to ordinary shareholders, annualised and divided by average tangible net assets. This measure is useful in<br><br>providing a consistent basis with which to measure the Group’s performance. |
Lloyds Banking Group plc Annual Report and Accounts 2025
309
| Tangible net assets per<br><br>share | Net assets excluding intangible assets such as goodwill and acquisition-related intangibles divided by the number of ordinary<br><br>shares in issue. This measure is useful in assessing shareholder value. |
|---|---|
| Underlying profit before<br><br>impairment | Underlying profit adjusted to remove the underlying impairment credit or charge. This measure is useful in allowing for a<br><br>comparable representation of the Group’s performance before the effects of the forward-looking underlying impairment<br><br>credit or charge. |
| Underlying profit | Statutory profit before tax adjusted for certain items as detailed above. This measure allows for a comparable representation<br><br>of the Group’s performance by removing the impact of certain items including volatility caused by market movements outside<br><br>the control of management. |
Reconciliation between statutory and underlying basis financial information
| Statutory basis | Removal of: | Underlying basisA | ||
|---|---|---|---|---|
| 2025 | £m | Volatility and<br><br>other items1,2<br><br>£m | Insurance<br><br>gross up3<br><br>£m | m |
| Net interest income | 13,230 | 403 | 2 | 13,635 |
| Other income | 6,192 | (326) | 254 | 6,120 |
| (1,454) | – | (1,454) | ||
| Total income | 19,422 | (1,377) | 256 | 18,301 |
| Operating expenses4 | (11,966) | 1,493 | (256) | (10,729) |
| Impairment charge | (795) | – | – | (795) |
| Profit before tax | 6,661 | 116 | – | 6,777 |
| 2024 | ||||
| Net interest income | 12,277 | 578 | (10) | 12,845 |
| Other income | 5,726 | (375) | 246 | 5,597 |
| (1,325) | – | (1,325) | ||
| Total income | 18,003 | (1,122) | 236 | 17,117 |
| Operating expenses4 | (11,601) | 1,496 | (236) | (10,341) |
| Impairment charge | (431) | (2) | – | (433) |
| Profit before tax | 5,971 | 372 | – | 6,343 |
All values are in British Pounds.
1In 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).
2In 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).
3Under 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.
4Net 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.
Asset quality ratioA
| 2025 | 2024 | |
|---|---|---|
| Underlying impairment charge (£m) | (795) | (433) |
| Remove non-customer underlying impairment charge (credit) (£m) | 1 | (23) |
| Underlying customer related impairment charge (£m) (a) | (794) | (456) |
| Loans and advances to customers (£bn) | 481.5 | 459.9 |
| Remove finance lease gross-up1 (£bn) | (0.4) | (0.8) |
| Underlying loans and advances to customersA (£bn) | 481.1 | 459.1 |
| Expected credit loss allowance (drawn, statutory basis) (£bn) | 3.0 | 3.2 |
| 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) (b) | 474.4 | 458.9 |
| Asset quality ratioA = (a) / (b) | 0.17% | 0.10% |
1The 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.
Lloyds Banking Group plc Annual Report and Accounts 2025
310
Alternative performance measures continued
Assets under administrationA
| 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|
| Total Insurance assets (£m) | 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 and Investments, but not on IFRS<br><br>balance sheet | 99,087 | 89,858 |
| Other | (2,934) | (3,281) |
| Total customer assets under administrationA (£m) | 279,623 | 247,131 |
Banking net interest marginA
| 2025 | 2024 | |
|---|---|---|
| Underlying net interest incomeA (£m) | 13,635 | 12,845 |
| Remove non-banking underlying net interest expense (£m) | 515 | 469 |
| Banking underlying net interest incomeA (£m) (a) | 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 assetsA (£bn) (b) | 462.9 | 451.2 |
| Banking net interest marginA (%) = (a) / (b) | 3.06% | 2.95% |
Cost:income ratioA
| 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|
| Operating costsA | 9,761 | 9,442 |
| Remediation | 968 | 899 |
| Total costs (a) | 10,729 | 10,341 |
| Net income (b) | 18,301 | 17,117 |
| Cost:income ratioA = (a) / (b) | 58.6% | 60.4% |
Loan to deposit ratioA
| At 31 Dec<br><br>2025 | At 31 Dec<br><br>2024 | |
|---|---|---|
| Underlying loans and advances to customersA (a) | 481.1 | 459.1 |
| Customer deposits (b) | 496.5 | 482.7 |
| Loan to deposit ratioA = (a) / (b) | 97% | 95% |
Life and pensions sales (present value of new business premiums)A
| 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|
| Premiums received | 10,620 | 10,679 |
| Investment sales | 13,715 | 10,986 |
| Effect of capitalisation factor | 4,047 | 3,609 |
| Effect of annualisation | 526 | 401 |
| Gross premiums from existing long-term business | (7,861) | (7,426) |
| Life and pensions sales (present value of new business premiums)A | 21,047 | 18,249 |
Lloyds Banking Group plc Annual Report and Accounts 2025
311
New business value of insurance and participating investment contracts recognised in the yearA
| 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|
| 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 premiums and transfers, of contracts initially<br><br>recognised in the year | 48 | 35 |
| Amounts relating to contracts modified to add a drawdown feature and recognised as new contracts | – | 4 |
| New business value of insurance and participating investment contracts recognised in the yearA | 80 | 111 |
General insurance combined ratioA
| 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|
| Insurance revenue | 752 | 655 |
| Adjustment for: | ||
| Allocation of reinsurance premiums | (49) | (47) |
| Net insurance revenue (b) | 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 (a) | 627 | 592 |
| General insurance combined ratio (%)A – (a) / (b) | 89% | 97% |
Operating costsA
| 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|
| 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 costsA | 9,761 | 9,442 |
Pro forma CET1 ratioA
| At 31 Dec<br><br>2025<br><br>% | At 31 Dec<br><br>2024<br><br>% | |
|---|---|---|
| CET1 ratio | 14.0% | 14.2% |
| Insurance dividend and share buyback accrual1 | (0.8)% | (0.7)% |
| Pro forma CET1 ratioA | 13.2% | 13.5% |
1Reflects 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.
Lloyds Banking Group plc Annual Report and Accounts 2025
312
Alternative performance measures continued
Return on tangible equityA
| 2025 | 2024 | |
|---|---|---|
| Profit attributable to ordinary shareholders (£m) (a) | 4,196 | 3,923 |
| Average shareholders’ equity (£bn) | 40.5 | 40.0 |
| Average goodwill and other intangible assets (£bn) | (7.8) | (8.0) |
| Average tangible equity (£bn) (b) | 32.7 | 32.0 |
| Return on tangible equity (%)A = (a) / (b) | 12.9% | 12.3% |
Tangible net assets per shareA
| At 31 Dec<br><br>2025<br><br>£m | At 31 Dec<br><br>2024<br><br>£m | |
|---|---|---|
| Ordinary shareholders’ equity | 41,721 | 39,521 |
| Remove goodwill and other intangible assets | (8,593) | (8,188) |
| Deferred tax and other adjustments | 366 | 350 |
| Tangible net assets (a) | 33,494 | 31,683 |
| Ordinary shares in issue, excluding own shares (b) | 58,799m | 60,491m |
| Tangible net assets per shareA = (a) / (b) | 57.0p | 52.4p |
Underlying profit before impairmentA
| 2025<br><br>£m | 2024<br><br>£m | |
|---|---|---|
| Statutory profit before tax | 6,661 | 5,971 |
| Remove impairment charge | 795 | 431 |
| Remove volatility and other items including restructuring | 116 | 374 |
| Underlying profit before impairmentA | 7,572 | 6,776 |
Lloyds Banking Group plc Annual Report and Accounts 2025
313
Subsidiaries and related undertakings
In compliance with section 409 of the
Companies Act 2006, the following
comprises a list of all related undertakings of
the Group, as at 31 December 2025. The list
includes each undertaking’s registered office
and the percentage of the class(es) of shares
held by the Group. All shares held are
ordinary shares unless indicated otherwise
in the notes.
Subsidiary undertakings
The Group directly or indirectly holds 100%
of the share class or a majority of voting
rights (including where the undertaking
does not have share capital as indicated)
in the following undertakings. All material
subsidiary undertakings are consolidated
by Lloyds Banking Group.
| Name of undertaking | Notes | |||
|---|---|---|---|---|
| A G Finance Ltd | 20 ii iii | |||
| A.C.L. Ltd | 1 i | |||
| ACL Autolease Holdings Ltd | 1 i | |||
| Alex Lawrie Factors Ltd | 9 i | |||
| Alex. Lawrie Receivables Financing Ltd | 9 i | |||
| Alpha Trustees Ltd | 20 i | |||
| Amberdate Ltd | 1 i v | |||
| Anglo Scottish Utilities Partnership 1 | + * | |||
| Aquilus Ltd | 13 i ‡ | |||
| Automobile Association Personal Finance Ltd | 4 i | |||
| Avalon Investment Services (Nominees) Ltd | 20 i | |||
| Avalon SIPP Trustees Ltd | 20 i | |||
| Bank of Scotland (B G S) Nominees Ltd | 5 * | |||
| Bank of Scotland Branch Nominees Ltd | 5 i | |||
| Bank of Scotland Central Nominees Ltd | 5 * | |||
| Bank of Scotland Edinburgh Nominees Ltd | 5 * | |||
| Bank of Scotland Equipment Finance Ltd | 13 i ‡ | |||
| Bank of Scotland plc | 5 i v | |||
| Bank of Scotland Structured Asset Finance Ltd | 1 i | |||
| Bank of Scotland Transport Finance 1 Ltd | 13 i ‡ | |||
| Bank of Wales Ltd | 13 i ‡ | |||
| Barents Leasing Ltd | 1 i | |||
| Birchcrown Finance Ltd | 1 v xiii | |||
| Black Horse (TRF) Ltd | 1 i | |||
| Black Horse Finance Holdings Ltd | 1 ii iii | |||
| Black Horse Group Ltd | 1 i v | |||
| Black Horse Ltd | 1 i | |||
| Black Horse Offshore Ltd | 7 i | |||
| Boltro Nominees Ltd | 1 i | |||
| BOS (Shared Appreciation Mortgages<br><br>(Scotland)) Ltd | 4 i | |||
| BOS (Shared Appreciation Mortgages (Scotland)<br><br>No. 2) Ltd | 4 i | |||
| BOS (Shared Appreciation Mortgages (Scotland)<br><br>No. 3) Ltd | 4 i | |||
| BOS (Shared Appreciation Mortgages) No. 1 plc | 4 # i | |||
| BOS (Shared Appreciation Mortgages) No. 2 plc | 4 # i | |||
| BOS (Shared Appreciation Mortgages) No. 3 plc | 4 # i | |||
| BOS (Shared Appreciation Mortgages) No. 4 plc | 4 # i | |||
| BOS (Shared Appreciation Mortgages) No. 5 plc | 4 i | |||
| BOS (Shared Appreciation Mortgages) No. 6 plc | 4 i | |||
| BOS (USA) Fund Investments Inc. | 11 xiv | |||
| BOS (USA) Inc. | 11 i | |||
| BOS Personal Lending Ltd | 4 ii iii | Name of undertaking | Notes | |
| --- | --- | |||
| BOSSAF Rail Ltd | 1 i | |||
| British Linen Leasing (London) Ltd | 5 i | |||
| British Linen Leasing Ltd | 5 i | |||
| British Linen Shipping Ltd | 5 i | |||
| Capital Bank Leasing 12 Ltd | 5 i | |||
| Capital Bank Leasing 3 Ltd | 13 i ‡ | |||
| Capital Bank Leasing 5 Ltd | 47 i | |||
| Capital Bank Property Investments (3) Ltd | 47 i ‡ | |||
| Capital Personal Finance Ltd | 4 i | |||
| Cardnet Merchant Services Ltd | 1 # ^ iii iv | |||
| Cashfriday Ltd | 9 i | |||
| Cavendish Online Ltd | 21 i | |||
| Cawley (Chester) Ltd | 47 ii iii<br><br>viii | |||
| CF Asset Finance Ltd | 13 i ‡ | |||
| Charterhall Nominees Ltd | 20 i | |||
| Cheltenham & Gloucester plc | 12 i | |||
| Citra Development Company (No. 1) Ltd | 1 i | |||
| Citra Development Company (No. 2) Ltd | 1 i | |||
| Citra Living British Waterways Ltd | 1 i | |||
| Citra Living Broadside Limited | 30 i | |||
| Citra Living Investments Ltd | 1 i | |||
| Citra Living Lease Company (No. 1) Ltd | 1 i | |||
| Citra Living Ltd | 1 i | |||
| Citra Living Nexus Ltd | 1 i | |||
| Citra Living Oldham Road Ltd | 30 i | |||
| Citra Living Operating Company (No. 1) Ltd | 1 i | |||
| Citra Living Properties (No. 1) Ltd | 1 i | |||
| Citra Living Properties (No. 2) Ltd | 1 i | |||
| Citra Living Properties (No. 3) Ltd | 1 i | |||
| Citra Living Properties (No. 4) Ltd | 1 i | |||
| Citra Living Properties (No. 5) Ltd | 1 i | |||
| Citra Living The Rise Cardiff Ltd | 1 i | |||
| Citra Living Unit Holder (No. 1) Ltd | 1 i | |||
| Citra Living Unit Holder (No. 2) Ltd | 1 i | |||
| Citra Living Wharf Street Ltd | 1 i | |||
| Citra Pathways Ltd | 1 i | |||
| Clerical Medical Finance Ltd | 20 i | |||
| Clerical Medical Investment Fund Managers Ltd | 4 i | |||
| Clerical Medical Non Sterling Property<br><br>Company Sàrl | 22 i | |||
| Cloak Lane Funding Sàrl | 23 i | |||
| Cloak Lane Investments Sàrl | 23 i | |||
| Conquest Securities Ltd | 1 v xiii | |||
| Corbiere Asset Investments Ltd | 1 ii iii | |||
| Dalkeith Corporation | 24 i ‡ | |||
| Dunstan Investments (UK) Ltd | 1 i | |||
| E.B.S. Pensioneer Trustees Ltd | 20 i | |||
| EBS Pensions Ltd | 20 i | |||
| EBS Self-Administered Personal Pension Plan<br><br>Trustees Ltd | 20 i | |||
| Embark Corporate Services Ltd | 20 ii | |||
| Embark Group Ltd | 20 i | |||
| Embark Investment Services Ltd | 20 i | |||
| Embark Investment Services Nominees Ltd | 20 i | |||
| Embark Investments Ltd | 20 i | |||
| Embark Pensions Trustees Ltd | 20 i | |||
| Embark Services Ltd | 20 i | |||
| Embark Trustees Ltd | 20 i | |||
| Eurolead Services Holdings Ltd | 9 i | Name of undertaking | Notes | |
| --- | --- | |||
| First Retail Finance (Chester) Ltd | 4 i | |||
| Forthright Finance Ltd | 47 i | |||
| France Industrial Premises Holding Company | 28 i | |||
| General Reversionary and Investment Company | 20 i # | |||
| Gresham Nominee 1 Ltd | 1 i | |||
| Gresham Nominee 2 Ltd | 1 i | |||
| Halifax Financial Brokers Ltd | 4 i | |||
| Halifax Financial Services (Holdings) Ltd | 4 i | |||
| Halifax Financial Services Ltd | 4 i | |||
| Halifax General Insurance Services Ltd | 4 i | |||
| Halifax Leasing (March No.2) Ltd | 1 i | |||
| Halifax Leasing (September) Ltd | 1 i | |||
| Halifax Life Ltd | 4 i | |||
| Halifax Loans Ltd | 4 i | |||
| Halifax Pension Nominees Ltd | 1 i | |||
| Halifax Share Dealing Ltd | 4 i | |||
| Halifax Vehicle Leasing (1998) Ltd | 4 i | |||
| Hamsard 3352 Ltd | 14 i | |||
| Hamsard 3353 Ltd | 14 i | |||
| HBOS Financial Services Ltd | 20 i | |||
| HBOS Investment Fund Managers Ltd | 4 i | |||
| HBOS plc | 5 i v vi | |||
| HBOS Social Housing Covered Bonds LLP | 47 * | |||
| HBOS UK Ltd | 5 i | |||
| Heidi Finance Holdings (UK) Ltd | 1 i | |||
| HGP III Ltd | 1 i | |||
| Hill Samuel Finance Ltd | 1 v xix | |||
| Hill Samuel Leasing Co. Ltd | 1 i | |||
| Home Shopping Personal Finance Ltd | 4 i | |||
| Horizon Capital 2000 Ltd | 5 i | |||
| Hornbuckle Mitchell Trustees Ltd | 20 i | |||
| Housing Growth Partnership GP LLP | 1 * | |||
| Housing Growth Partnership II GP LLP | 1 * | |||
| Housing Growth Partnership III GP LLP | 1 * | |||
| Housing Growth Partnership III LP | 1 * | |||
| Housing Growth Partnership Manager Ltd | 1 i | |||
| HSDL Nominees Ltd | 4 i | |||
| HVF Ltd | 1 i | |||
| Hyundai Car Finance Ltd | 20 i | |||
| International Motors Finance Ltd | 20 ii # | |||
| Katrine Leasing Ltd | 39 i ‡ | |||
| Landau Finance Ltd | 44 i | |||
| LB Healthcare Trustee Ltd | 1 i | |||
| LBCF Ltd | 9 i | |||
| LBG Brasil Administração LTDA | 38 i | |||
| LBG Equity Investments Ltd | 1 i ^ | |||
| LBI Leasing Ltd | 1 i | |||
| LDC (General Partner) Ltd | 40 i | |||
| LDC (Managers) Ltd | 40 i | |||
| LDC (Nominees) Ltd | 40 i | |||
| LDC GP LLP | 41 * | |||
| LDC I LP | 41 * | |||
| LDC II LP | 41 * | |||
| LDC IV LP | 41 * | |||
| LDC V LP | 41 * | |||
| LDC VI LP | 41 * | |||
| LDC VII LP | 41 * | |||
| LDC VIII LP | 40 * | |||
| LDC IX LP | 40 * |
Lloyds Banking Group plc Annual Report and Accounts 2025
314
Subsidiaries and related undertakings continued
| Name of undertaking | Notes | |||
|---|---|---|---|---|
| LDC Parallel (Nominees) Ltd | 40 i | |||
| LDC Parallel XV LP | 41 * | |||
| LDC X LP | 40 * | |||
| LDC XI LP | 40 * | |||
| LDC XII LP | 40 * | |||
| LDC XIII LP | 41 * | |||
| LDC XIV LP | 41 * | |||
| LDC XV LP | 41 * | |||
| Legacy Renewal Company Ltd | 5 i | |||
| LEIL Virgo Holdco Ltd | 1 i | |||
| Lex Autolease (CH) Ltd | 1 i | |||
| Lex Autolease (VC) Ltd | 1 i | |||
| Lex Autolease Carselect Ltd | 1 i | |||
| Lex Autolease Ltd | 1 i | |||
| Lex Vehicle Leasing (Holdings) Ltd | 13 ii iii xi<br><br>‡ | |||
| Lex Vehicle Leasing Ltd | 13 i ‡ | |||
| Lime Street (Funding) Ltd | 13 i ‡ | |||
| Lloyds (Gresham) Ltd | 13 i xi ‡ | |||
| Lloyds (Nimrod) Specialist Finance Ltd | 1 i | |||
| Lloyds America Securities Corporation | 11 xiv | |||
| Lloyds Asset Leasing Ltd | 1 i | |||
| Lloyds Bank (Colonial & Foreign) Nominees Ltd | 1 i | |||
| Lloyds Bank (I.D.) Nominees Ltd | 1 i | |||
| Lloyds Bank Asset Finance Ltd | 1 i | |||
| Lloyds Bank Commercial Finance Ltd | 9 i | |||
| Lloyds Bank Commercial Finance Scotland Ltd | 43 i | |||
| Lloyds Bank Corporate Asset Finance (HP) Ltd | 1 i | |||
| Lloyds Bank Corporate Asset Finance (No.1) Ltd | 1 i | |||
| Lloyds Bank Corporate Asset Finance (No.2) Ltd | 1 i | |||
| Lloyds Bank Corporate Asset Finance (No.3) Ltd | 1 i | |||
| Lloyds Bank Corporate Asset Finance (No.4) Ltd | 1 i | |||
| Lloyds Bank Corporate Markets plc | 1 i ^ | |||
| Lloyds Bank Corporate Markets<br><br>Wertpapierhandelsbank GmbH | 17 i | |||
| Lloyds Bank Covered Bonds (LM) Ltd | 6 i | |||
| Lloyds Bank Covered Bonds LLP | 6 * | |||
| Lloyds Bank Equipment Leasing (No. 7) Ltd | 13 i ‡ | |||
| Lloyds Bank Equipment Leasing (No. 9) Ltd | 1 i | |||
| Lloyds Bank Financial Services (Holdings) Ltd | 1 i v | |||
| Lloyds Bank General Insurance Holdings Ltd | 1 i | |||
| Lloyds Bank General Insurance Ltd | 1 i | |||
| Lloyds Bank General Leasing (No. 3) Ltd | 13 i ‡ | |||
| Lloyds Bank General Leasing (No. 5) Ltd | 13 i ‡ | |||
| Lloyds Bank GmbH | 29 i | |||
| Lloyds Bank Insurance Services Ltd | 1 i | |||
| Lloyds Bank Leasing (No. 6) Ltd | 1 i | |||
| Lloyds Bank Leasing Ltd | 1 i | |||
| Lloyds Bank Maritime Leasing (No. 10) Ltd | 1 i | |||
| Lloyds Bank MTCH Ltd | 1 i | |||
| Lloyds Bank Nominees Ltd | 1 i | |||
| Lloyds Bank Offshore Pension Trust Ltd | 33 i | |||
| Lloyds Bank Pension ABCS (No. 1) LLP | 1 * | |||
| Lloyds Bank Pension ABCS (No. 2) LLP | 1 * | |||
| Lloyds Bank Pensions Property (Guernsey) Ltd | 34 ii iii | |||
| Lloyds Bank plc | 1 ^ i vii | |||
| Lloyds Bank Property Company Ltd | 1 i | |||
| Lloyds Bank S.F. Nominees Ltd | 1 i | |||
| Lloyds Bank Subsidiaries Ltd | 1 i | Name of undertaking | Notes | |
| --- | --- | |||
| Lloyds Bank Trustee Services Ltd | 1 i | |||
| Lloyds Banking Group Pensions Trustees Ltd | 1 i | |||
| Lloyds Development Capital (Holdings) Ltd | 40 i | |||
| Lloyds Far East Sàrl | 23 i | |||
| Lloyds General Leasing Ltd | 1 i | |||
| Lloyds Hypotheken B.V. | 37 i | |||
| Lloyds Industrial Leasing Ltd | 1 i | |||
| Lloyds International Management Services<br><br>(Jersey) Ltd | 7 i | |||
| Lloyds International Pty Ltd | 8 i | |||
| Lloyds Leasing (North Sea Transport) Ltd | 1 i | |||
| Lloyds Leasing Developments Ltd | 13 i ‡ | |||
| Lloyds Offshore Global Services Private Ltd | 48 i | |||
| Lloyds Plant Leasing Ltd | 1 i | |||
| Lloyds Portfolio Leasing Ltd | 1 i | |||
| Lloyds Project Leasing Ltd | 1 i | |||
| Lloyds Property Investment Company No. 4 Ltd | 13 i ‡ | |||
| Lloyds Secretaries Ltd | 1 i | |||
| Lloyds Securities Inc. | 11 xiv | |||
| Lloyds TSB Pacific Ltd | 26 i | |||
| Lloyds UDT Asset Rentals Ltd | 13 i ‡ | |||
| Lloyds UDT Leasing Ltd | 1 i | |||
| Lloyds UDT Ltd | 13 i ‡ | |||
| Loans.co.uk Ltd | 47 i | |||
| London Taxi Finance Ltd | 1 ii iii | |||
| Lotus Finance Ltd | 20 ii iii | |||
| LTGP Limited Partnership Incorporated | 34 * | |||
| Maritime Leasing (No. 19) Ltd | 13 i ‡ | |||
| MBNA Europe Finance Ltd | 46 i | |||
| MBNA Europe Holdings Ltd | 47 i | |||
| MBNA Ltd | 47 i | |||
| MBNA R & L Sàrl | 49 i | |||
| MBNA Receivables Ltd | 32 i | |||
| Membership Services Finance Ltd | 4 i | |||
| Mitre Street Funding Sàrl | 23 i | |||
| NWS Trust Ltd | 5 i | |||
| Pacific Leasing Ltd | 13 i ‡ | |||
| Pensions Management (S.W.F.) Ltd | 5 * | |||
| Perry Nominees Ltd | 1 i | |||
| PIPS Asset Investments Ltd | 1 ii iii | |||
| Prestonfield Investments Ltd | 5 i | |||
| Proton Finance Ltd | 20 ii iii | |||
| R.F. Spencer and Company Ltd | 9 i | |||
| Raleigh Street (Walsall) Management Company<br><br>Ltd | 1 * | |||
| Ranelagh Nominees Ltd | 1 i | |||
| Retail Revival (Burgess Hill) Investments Ltd | 1 i | |||
| Saint Michel Holding Company No1 | 28 i | |||
| Saint Michel Investment Property | 28 i | |||
| Saint Witz 2 Holding Company No1 | 28 i | |||
| Saint Witz 2 Investment Property | 28 i | |||
| Savban Leasing Ltd | 1 i | |||
| Scotland International Finance B.V. | 35 i | |||
| Scottish Widows Administration Services<br><br>(Nominees) Ltd | 5 i | |||
| Scottish Widows Administration Services Ltd | 1 i | |||
| Scottish Widows Auto Enrolment Services Ltd | 1 i | |||
| Scottish Widows Europe | 27 i | |||
| Scottish Widows Financial Services Holdings | 5 i | Name of undertaking | Notes | |
| --- | --- | |||
| Scottish Widows’ Fund and Life Assurance<br><br>Society | 5 * | |||
| Scottish Widows Group Ltd | 5 ii ^ | |||
| Scottish Widows Industrial Properties Europe<br><br>B.V. | 18 i | |||
| Scottish Widows Ltd | 1 i | |||
| Scottish Widows Schroder Personal Wealth<br><br>(ACD) Ltd | 1 i | |||
| Scottish Widows Schroder Personal Wealth Ltd | 1 i | |||
| Scottish Widows Schroder Wealth Holdings Ltd | 1 i | |||
| Scottish Widows Services Ltd | 5 i | |||
| Scottish Widows Trustees Ltd | 5 i | |||
| Scottish Widows Unit Funds Ltd | 5 i | |||
| Scottish Widows Unit Trust Managers Ltd | 1 i | |||
| Seaspirit Leasing Ltd | 1 i | |||
| Share Dealing Nominees Ltd | 4 i | |||
| Shogun Finance Ltd | 20 i | |||
| St Andrew’s Group Ltd | 20 i ‡ | |||
| St Andrew’s Insurance plc | 20 i | |||
| St Andrew’s Life Assurance Ltd | 20 i | |||
| Standard Property Investment (1987) Ltd | 5 ii # | |||
| Sterling ISA Managers (Nominees) Ltd | 20 i | |||
| Sterling ISA Managers Ltd | 20 i | |||
| Sussex County Homes Ltd | 4 i | |||
| Suzuki Financial Services Ltd | 20 ii # | |||
| SW Funding plc | 5 i # | |||
| The Adviser Centre Ltd | 20 i | |||
| The Agricultural Mortgage Corporation plc | 45 i | |||
| The British Linen Company Ltd | 5 i | |||
| The Mortgage Business plc | 4 i | |||
| Thistle Leasing | + * | |||
| Tranquility Leasing Ltd | 1 i | |||
| TuskerDirect Ltd | 14 i | |||
| Uberior (Glasgow) Limited | 5 ii iii | |||
| Uberior (Moorfield) Ltd | 5 i | |||
| Uberior (West) Limited | 5 ii iii | |||
| Uberior ENA Ltd | 5 i | |||
| Uberior Equity Ltd | 5 i | |||
| Uberior Europe Ltd | 5 i | |||
| Uberior Fund Investments Ltd | 5 i | |||
| Uberior Infrastructure Investments Ltd | 31 i ‡ | |||
| Uberior Infrastructure Investments (No 2) Ltd | 1 i | |||
| Uberior Investments Ltd | 5 i | |||
| Uberior Trading Ltd | 5 i | |||
| Uberior Ventures Ltd | 31 i ‡ | |||
| UDT Budget Leasing Ltd | 13 i ‡ | |||
| UK PRS (Jersey) Properties I Ltd | 36 i | |||
| UK PRS 2 Limited Partnership | 1 * | |||
| UK PRS GP 2 Ltd | 1 i | |||
| UK PRS GP Ltd | 1 i | |||
| UK PRS Lettings I LLP | 1 * | |||
| UK PRS Limited Partnership | 1 * | |||
| UK PRS Member Limited | 1 i | |||
| UK PRS Nominee 2 Limited | 1 i | |||
| UK PRS Nominee Limited | 1 i | |||
| United Dominions Leasing Ltd | 1 i | |||
| United Dominions Trust Ltd | 1 i | |||
| Vine Street XV LP | 41 * | |||
| Ward Nominees (Abingdon) Ltd | 1 i | |||
| Waymark Asset Investments Ltd | 1 ii iii |
Lloyds Banking Group plc Annual Report and Accounts 2025
315
| Name of undertaking | Notes |
|---|---|
| West Craigs Ltd | 5 i |
| Wood Street Leasing Ltd | 1 i |
Subsidiary undertakings continued
The Group has determined that it has the
power to exercise control over the following
entities without having the majority of the
voting rights of the undertakings. Unless
otherwise stated, the undertakings do not
have share capital or the Group does not
hold any shares.
| Name of undertaking | Notes | |||
|---|---|---|---|---|
| Addison Social Housing Holdings Ltd | 36 | |||
| Cancara Asset Securitisation Ltd | 32 | |||
| Candide Financing 2021-1 B.V. | 19 | |||
| Candide Financing 2024-1 B.V | 19 | |||
| Candide Financing 2025-1 B.V | 19 | |||
| Cardiff Auto Receivables Securitisation 2022-1<br><br>plc | 16 ‡ | |||
| Cardiff Auto Receivables Securitisation 2024-1<br><br>plc | 6 | |||
| Cardiff Auto Receivables Securitisation Holdings<br><br>Ltd | 6 | |||
| Cardiff Auto Receivables Securitisation Holdings<br><br>No. 2 Ltd | 6 | |||
| Elland RMBS 2018 plc | 6 | |||
| Elland RMBS Holdings Ltd | 6 | |||
| Fontwell II Securities 2020 DAC | 42 | |||
| Fontwell Securities 2016 Ltd | 36 | |||
| Gresham Receivables (No. 10) Ltd | 32 | |||
| Gresham Receivables (No. 13) UK Ltd | 25 | |||
| Gresham Receivables (No. 20) Ltd | 32 | |||
| Gresham Receivables (No. 24) Ltd | 32 | |||
| Gresham Receivables (No.27) UK Ltd | 25 | |||
| Gresham Receivables (No. 32) UK Ltd | 25 | |||
| Gresham Receivables (No. 34) UK Ltd | 25 | |||
| Gresham Receivables (No.35) Ltd | 32 | |||
| Gresham Receivables (No.36) UK Ltd | 25 | |||
| Gresham Receivables (No.37) UK Ltd | 25 | |||
| Gresham Receivables (No.38) UK Ltd | 25 | |||
| Gresham Receivables (No.39) UK Ltd | 10 ‡ | |||
| Gresham Receivables (No.40) UK Ltd | 25 | |||
| Gresham Receivables (No.41) UK Ltd | 25 | |||
| Gresham Receivables (No.44) UK Ltd | 10 ‡ | |||
| Gresham Receivables (No.45) UK Ltd | 25 | |||
| Gresham Receivables (No.46) UK Ltd | 10 ‡ | |||
| Gresham Receivables (No.47) UK Ltd | 25 | |||
| Gresham Receivables (No.48) UK Ltd | 25 | |||
| Guildhall Asset Purchasing Company (No.11) UK<br><br>Ltd | 25 | |||
| Housing Association Risk Transfer 2019 DAC | 42 | |||
| Lloyds Bank Covered Bonds (Holdings) Ltd | 6 | |||
| Molineux RMBS 2016-1 plc | 16 ‡ | |||
| Molineux RMBS Holdings Ltd | 6 | |||
| Otium Lifetime Funding (No. 1) Ltd | 6 | |||
| Penarth Asset Securitisation Holdings Ltd | 6 | |||
| Penarth Funding 1 Ltd | 6 | |||
| Penarth Funding 2 Ltd | 6 | |||
| Penarth Master Issuer plc | 6 | |||
| Penarth Receivables Trustee Ltd | 6 | |||
| Permanent Funding (No. 1) Ltd | 6 | Name of undertaking | Notes | |
| --- | --- | |||
| Permanent Funding (No. 2) Ltd | 6 | |||
| Permanent Holdings Ltd | 6 | |||
| Permanent Master Issuer plc | 6 | |||
| Permanent Mortgages Trustee Ltd | 6 | |||
| Permanent PECOH Holdings Ltd | 6 | |||
| Permanent PECOH Ltd | 6 | |||
| Salisbury Securities 2015 Ltd | 36 | |||
| Salisbury II Securities 2016 Ltd | 36 | |||
| Salisbury II-A Securities 2017 Ltd | 36 | |||
| Salisbury III Securities 2019 DAC | 42 | |||
| Syon Securities 2019 DAC | 42 | |||
| Syon Securities 2020 DAC | 42 | |||
| Syon Securities 2020-2 DAC | 42 | |||
| Thistle Investments (AMC) Ltd | 6 | |||
| Wetherby II Securities 2018 DAC | 3 ‡ | |||
| Wetherby III Securities 2019 DAC | 42 | |||
| Wilmington Cards 2021-1 plc | 6 | |||
| Wilmington Cards Holdings Ltd | 6 | |||
| Wilmington Receivables Trustee Ltd | 6 | |||
| Yakima Funding No. 1 Ltd | 6 | |||
| Bank of Scotland Foundation • | 5 | |||
| Lloyds Bank Foundation for England & Wales • | 2 | |||
| Lloyds Bank Foundation for the Channel Islands • | 2 | |||
| MBNA General Foundation • | 47 | |||
| The Halifax Foundation for Northern Ireland • | 15 |
•A charitable foundation funded but not owned or
controlled by Lloyds Banking Group
Lloyds Banking Group plc Annual Report and Accounts 2025
316
Subsidiaries and related undertakings continued
Associated undertakings
The Group has a participating interest in the following undertakings.
| Name of undertaking | % of share class<br><br>held by immediate<br><br>parent company<br><br>(or by the Group<br><br>where this varies) | Registered office address | Notes |
|---|---|---|---|
| 00SC Ltd | 50% | 2 Pemberton Street, Nottingham, NG1 1GS | ii |
| 239 Kingsway Hove Ltd | 50% | 168 Church Road, Hove, BN3 2DL | ii |
| 4755AS Ltd | 50% | Kingsnorth House, Blenheim Way, Birmingham, West Midlands, England, B44 8LS | ii |
| Addison Social Housing Ltd | 20% | 18a Capricorn Centre, Cranes Farm Road, Basildon, Essex, SS14 3JJ | i ‡ |
| Agentis Health Group Ltd | 99% | Unit 4, 74 Dyke Road Mews, Brighton, BN1 3JD | ii & |
| Airline Services And Components Group Ltd | 94.45% | Squire Patton Boggs (UK) LLP (Ref: Csu), Rutland House, 148 Edmund Street, Birmingham, B3 2JR | ii & |
| Albany Bidco Ltd | 75.32% | Acora House, Albert Drive, Burgess Hill, West Sussex, United Kingdom, RH15 9TN | ii & |
| Aldreth Developments Ltd | 50% | No 1 Railshead Road, St Margarets, Isleworth, Middlesex, United Kingdom, TW7 7EP | ii ∞ |
| Alfred Homes Properties LLP | n/a | The New Barn, Church Farm Woodman Lane, Sparsholt, Winchester, Hampshire, United<br><br>Kingdom, SO21 2FR | * |
| Alfred Investment Properties Ltd | 50% | The New Barn, Church Farm Woodman Lane, Sparsholt, Winchester, Hampshire, United<br><br>Kingdom, SO21 2FR | i |
| Alfred Investments LLP | n/a | The New Barn, Church Farm Woodman Lane, Sparsholt, Winchester, Hampshire, United<br><br>Kingdom, SO21 2FR | * |
| Alfreton Road JV Ltd | 100% | 85 Buckingham Gate, London, England, SW1E 6PD | ii |
| Allan Water Homes (Chryston) Ltd | 50% | 24B Kenilworth Road, Bridge Of Allan, Stirling, Scotland, FK9 4DU | ii |
| Alphabet Bidco Ltd | 99.25% | Phoenix House, Smeaton Close, Rabans Lane Industrial Area, Aylesbury, Buckinghamshire,<br><br>United Kingdom, HP19 8UW | ii & |
| Angus International Safety Group Ltd | 88.93%<br><br>88.93% | Station Road, High Bentham, Near Lancaster, LA2 7NA | xvii &<br><br>xviii |
| Artisan Blythswood Quarter Ltd | 100% | 61 Bridge Street, Kington, HR5 3DJ | ii |
| Avantis Education Group Ltd | 99.25% | Unit 2 And 3, Jessop Court, Waterwells Business Park, Quedgeley, Gloucester, United<br><br>Kingdom, GL2 2AP | xviii & |
| Azul Holdco Ltd | 99.25% | 3rd Floor, One New Change, London, England, EC4M 9AF | xviii & |
| Backhouse (Castle Cary) JV Ltd | 50% | Number One Welcome Building, Avon Street, Bristol, BS2 0PS | ii |
| Backhouse (Westbury) JV Ltd | 50% | Number One Welcome Building, Avon Street, Bristol, BS2 0PS | ii |
| Balia Ltd | 50% | 85 Buckingham Gate, London, England, SW1E 6PD | i |
| Bar Bidco Ltd | 99.25% | Equity House, Blackbrook Park Avenue, Taunton, England, TA1 2PX | ii & |
| BCIS Holdings Ltd | 99.25% | Royal House 110 Station Parade, Harrogate, HG1 1EP | ii & |
| Beckstones (Rheda Park) Ltd | 50% | Agricola House, Cowper Road, Gilwilly Industrial Estate, Penrith, CA11 9BN | ii |
| Bergamot Ventures Ltd | 100% | C/O Milsted Langdon Llp Winchester House, Deane Gate Avenue, Taunton, United Kingdom,<br><br>TA1 2UH | iii ~ |
| BH Stoke Golding Property LLP | n/a | Grovelands Business Park, West Haddon Road, East Haddon, Northampton, NN6 8FB | * |
| BH Sutton Ltd | 50% | Grovelands Business Park, West Haddon Road, East Haddon, Northampton, NN6 8FB | ii |
| BH Woodville Ltd | 50% | Grovelands Business Park, West Haddon Road, East Haddon, Northampton, NN6 8FB | ii |
| Biozone Scientific Group Ltd | 99.25% | Unit 5a, Compass Business Park, Pacific Road, Cardiff, CF24 5HL | ii & |
| Blue Bay Travel Group Ltd | 99.17% | A4 Bellringer Road, Trentham Business Quarter, Stoke-On-Trent, ST4 8GB | xviii & |
| BoS Mezzanine Partners Fund LP | n/a | Fourth Floor, 7 Castle Street, Edinburgh, EH2 3AH | * |
| Bowbridge Homes (Frisby) Ltd | 50% | Unit 4, Shieling Court, Corby, England, NN18 9QD | ii |
| Bowland Fold (Halton) Ltd | 25% | Agricola House, Cowper Road, Gilwilly Industrial Estate, Penrith, England, CA11 9BN | i |
| Bramble Foods Group Ltd | 99.25%<br><br>99.25% | Crosby Road, Market Harborough, Leicestershire, England, LE16 9EE | ii &<br><br>xvi |
| Briar Homes (Barrhead) Ltd | 50% | Radleigh House, 1 Golf Road, Clarkston, Glasgow, G76 7HU | i |
| Briar Homes (Gladsmuir) Ltd | 50% | Radleigh House, 1 Golf Road, Clarkston, Glasgow, G76 7HU | i |
| Briar Homes (Howwood) Ltd | 50% | Radleigh House, 1 Golf Road, Clarkston, Glasgow, G76 7HU | ii |
| Briar Homes (Investments) Ltd | 100% | Radleigh House, 1 Golf Road, Clarkston, Glasgow, G76 7HU | ii |
| Briar Homes (Kennoway) Ltd | 50% | Radleigh House, 1 Golf Road, Clarkston, Glasgow, G76 7HU | i |
| Briar Homes (Newmains) Ltd | 50% | Radleigh House, 1 Golf Road, Clarkston, Glasgow, G76 7HU | ii |
| Briar Homes (Tillycairn) Ltd | 50% | Radleigh House, 1 Golf Road, Clarkston, Glasgow, G76 7HU | i |
| Bunnyhomes Church Lane at Cheriton Bishop Ltd | 25% | 22 Chancery Lane, London, England, WC2A 1LS | i |
| Bunnyhomes Primrose Fields At Appledore Ltd | 25% | 22 Chancery Lane, London, England, WC2A 1LS | i |
| BRICS (Earnley) LLP | n/a | 3rd Floor 22 Old Bond Street, London, W1S 4PY | * |
| Cayuga 013 LLP | n/a | Cayuga House, 2a Addison Road, Hove, England, BN3 1TN | * |
| Cayuga 018 LLP | n/a | 168 Church Road, Hove, BN3 2DL | * |
| Cheriton Bishop Holding Ltd | 50% | 22 Chancery Lane, London, England, WC2A 1LS | ii |
| City & General Securities Ltd | 100% | 10 Upper Berkeley Street, London, W1H 7PE | iii & |
Lloyds Banking Group plc Annual Report and Accounts 2025
317
| Name of undertaking | % of share class<br><br>held by immediate<br><br>parent company<br><br>(or by the Group<br><br>where this varies) | Registered office address | Notes |
|---|---|---|---|
| Coba Technology Ltd | 27.95% | 78 Cannon Street, London, EC4N 6HL | ii |
| Columbus UK Holdings Ltd | 99% | 1 Fore Street Avenue, Moorgate, London, United Kingdom, EC2Y 9DT | ii & |
| Connect Health Group Ltd | 99%<br><br>99% | The Light Box, Quorum Business Park, Benton Lane, Newcastle Upon Tyne, United Kingdom,<br><br>NE12 8EU | ii &<br><br>xvii |
| Cora Health Group Ltd | 99.25% | The Light Box, Quorum Business Park, Benton Lane, Newcastle Upon Tyne, United Kingdom,<br><br>NE12 8EU | ii & |
| Crossco (1462) Ltd | 99.25%<br><br>99.25% | 23a Falcon Court, Preston Farm Industrial Estate, Stockton-On-Tees, United Kingdom,<br><br>TS18 3TX | ii<br><br>xviii & |
| Crossco (1473) Ltd | 99.25% | Pipewell Quay, Pipewellgate, Gateshead, NE8 2BJ | xviii & |
| Cruden Homes (Aberlady) Ltd | 50% | 16 Walker Street, Edinburgh, EH3 7LP | ii |
| Cruden Homes (Barnton Avenue) Ltd | 50% | 16 Walker Street, Edinburgh, EH3 7LP | i |
| Cruden Homes (Longniddry South) Ltd | 50% | 16 Walker Street, Edinburgh, EH3 7LP | i |
| Cruden Homes (West Craigs) Ltd | 50% | 16 Walker Street, Edinburgh, EH3 7LP | i |
| Cruden Ventures Ltd | 100% | 16 Walker Street, Edinburgh, EH3 7LP | ii |
| D.U.K.E. Real Estate Ltd | 100% | Cromwell Property Group Spaces, Lochrin Square, 1 Lochrin Square, 92-98 Fountainbridge,<br><br>Edinburgh, United Kingdom, EH3 9QA | iii ~ ‡ |
| Derwent Rise (Seaton) Ltd | 25% | Agricola House, Cowper Road, Gilwilly Industrial Estate, Penrith, England, CA11 9BN | i |
| Devonshire Homes (Halwill) Ltd | 25% | Gotham House, Hammett Square, Phoenix Lane, Tiverton, Devon, EX16 6LT | ii |
| Devonshire Homes (Ilfracombe) Ltd | 100% | Gotham House, Hammett Square, Phoenix Lane, Tiverton, Devon, EX16 6LT | ii |
| Devonshire Homes (RGI) Ltd | 50% | Gotham House, Hammett Square, Phoenix Lane, Tiverton, Devon, EX16 6LT | ii |
| Devonshire Homes (St Austell) Ltd | 50% | Gotham House, Hammett Square, Phoenix Lane, Tiverton, Devon, EX16 6LT | ii |
| Devonshire Homes (Wincanton) Ltd | 25% | Gotham House, Hammett Square, Phoenix Lane, Tiverton, Devon, EX16 6LT | ii |
| Downtown Manchester BTR Ltd | 100% | 1 St. Georges Court, Altrincham Business Park, Altrincham, England, WA14 5UA | ii |
| Downtown Manchester Opco Ltd | 50% | 1 St. Georges Court, Altrincham Business Park, Altrincham, England, WA14 5UA | i |
| Downtown Manchester Propco Ltd | 50% | 1 St. Georges Court, Altrincham Business Park, Altrincham, England, WA14 5UA | i |
| Duchy Homes (Chapelgarth) Ltd | 50% | 3125 Century Way, Thorpe Park, Leeds, LS15 8ZB | ii |
| Duchy Homes (Elwick) Ltd | 50% | Middleton House, Westland Road, Leeds, United Kingdom, LS11 5UH | ii |
| Duncan and Todd Holdings Ltd | 89.25% | Unit 4 Kirkhill Commercial Park, Dyce Avenue, Dyce, Aberdeen, AB21 0LQ | ii & |
| Dundashill 4A Ltd | 50% | 305 Gray’s Inn Road, London, United Kingdom, WC1X 8QR | i |
| Durkan (Onslow) Ltd | 25% | Unit 4, Elstree Way, Borehamwood, England, WD6 1JD | i |
| Durkan Growth Ltd | 50% | Unit 4, Elstree Way, Borehamwood, England, WD6 1JD | ii |
| Eamont Chase (Penrith) Ltd | 25% | Agricola House, Cowper Road, Gilwilly Industrial Estate, Penrith, England, CA11 9BN | i |
| Eden Gardens (Etterby) Ltd | 25% | Agricola House, Cowper Road, Gilwilly Industrial Estate, Penrith, England, CA11 9BN | i |
| Edwards Homes (Hollybrook Park) Ltd | 50% | Edwards House Lakeside Business Village, St. Davids Park, Ewloe, United Kingdom, CH5 3XA | ii |
| EFG Holdco (CW) Ltd | 100% | 9th Floor, 80 Mosley Street, Manchester, M2 3FX | ii |
| Eiger Bidco Ltd | 99.25% | 4 Webster Court, Carina Park, Westbrook, Warrington, United Kingdom, WA5 8WD | ii & |
| Elovate Group Ltd | 100% | York House, Wetherby Road, Long Marston, YO26 7NH | xviii & |
| Ensco 1322 Ltd | 99% | Newbury House, 20 Kings Road West, Newbury, Berkshire, RG14 5XR | ii & |
| Ensco 1327 Ltd | 99% | 131 Finsbury Pavement, London, EC2A 1NT | ii & |
| Ensco 1337 Ltd | 99% | 41 Churchill Way, Lomeshaye Industrial Estate, Nelson, Lancashire, BB9 6RT | ii & |
| Ensco 1506 Ltd | 73.08% | Broadfield Law UK LLP, One Bartholomew Close, London, EC1A 7BL | ii & |
| Ettrickhaugh Development Company Ltd | 100% | Priorwood House, High Road, Melrose, Scottish Borders, Scotland, TD6 9EF | ii |
| Eudoros Bidco Ltd | 99.25% | 5 Soho Street, London, England, W1D 3DG | xviii & |
| Europa Property Company (Northern) Ltd | 100% | Europa House, 20 Esplanade, Scarborough, North Yorkshire, YO11 2AQ | viii |
| Eutopia Exeter 4 Ltd | 50% | The Stables, Little Coldharbour Farm, Tong Lane, Lamberhurst, Tunbridge Wells, Kent,<br><br>England, TN3 8AD | ii |
| Eutopia Exeter Gateway Ltd | 50% | The Stables, Little Coldharbour Farm, Tong Lane, Lamberhurst, Tunbridge Wells, Kent,<br><br>England, TN3 8AD | ii |
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Subsidiaries and related undertakings continued
Associated undertakings continued
| Name of undertaking | % of share class<br><br>held by immediate<br><br>parent company<br><br>(or by the Group<br><br>where this varies) | Registered office address | Notes |
|---|---|---|---|
| Express Engineering Group Holdings Ltd | 99% | Kingsway North, Team Valley Trading Estate, Gateshead, NE11 0EG | ii & |
| Farries Field (Stainburn) Ltd | 50% | Agricola House, Cowper Road, Gilwilly Industrial Estate, Penrith, Cumbria, CA11 9BN | ii |
| FDL Salterns Ltd | 50% | 2 Poole Road, Bournemouth, BH2 5QY | ii |
| Fitz&Knox Ltd | 100% | 33-35 Southernhay East, Exeter, EX1 1NX | ii |
| Generate Topco Ltd | 99.25% | Boxpark Unit 37-41 Boxpark Shoreditch, 2-10 Bethnal Green Road, London, E1 6GY | xviii & |
| Global Autocare Holding Ltd | 99% | The Hub, Gelderd Lane, Leeds, England, LS12 6AL | ii & |
| GPSEC LLP | n/a | 2a Addison Road, Hove, England, BN3 1TN | * |
| Grove Crescent Stratford Ltd | 50% | 3 Llys Y Bont, Parc Menai, Bangor, United Kingdom, LL57 4BN | i |
| Hamsard 3667 Ltd | 99.25% | Park House, Clifton Park, York, North Yorkshire, YO30 5PB | ii & |
| Hamsard 3731 Ltd | 85.21% | 55 Whitefriargate, Hull, HU1 2HU | ii & |
| Hamsard 3751 Ltd | 99.25% | Unit 17-20 Glacier Buildings, Harrington Road, Brunswick Business Park, Liverpool, England,<br><br>L3 4BH | ii & |
| Hamsard 3796 Ltd | 99.25% | The Harley Building, 77-79 New Cavendish Street, London, England, W1W 6XB | ii & |
| Hartfell Developments (Harker) Ltd | 100% | Langlands, Pallet Hill, Penrith, CA11 0BY | ii |
| Hazel Newco Ltd | 99.25% | Bradwood Court, St Crispin Way, Haslingden, Rossendale, Lancashire, United Kingdom,<br><br>BB4 4PW | xviii & |
| HB Developments (NW) Ltd | 50% | 116 Duke Street, Liverpool, Merseyside, England, L1 5JW | ii |
| Hercules Topco Ltd | 99.25% | 5th Floor, The Grange, 100 High Street, Southgate, London, N14 6BN | ii & |
| HG Developments (NW) Ltd | 45% | 116 Duke Street, Liverpool, Merseyside, England, L1 5JW | ii & |
| HGP II Ltd | 50% | 25 Gresham Street, London, EC2V 7HN | i |
| HGP Torsion Holdco Ltd | 50% | 1280 Century Way, Thorpe Park, Leeds, West Yorkshire, United Kingdom, LS15 8ZB | ii |
| HH (AG) Ltd | 100% | 17 Mann Island, Liverpool, England, L3 1BP | ii |
| Highcross Street Holdings Ltd | 50% | 18 St Christopher's Way, Pride Park, Derby, Derbyshire, DE24 8JY | ii |
| Highlands Bidco Ltd | 99% | Commsworld House, Queen Anne Drive, Newbridge, EH28 8LH | ii & |
| HJ Topco Ltd | 99.25% | Cavendish House, 39-41 Waterloo Street, Birmingham, B2 5PP | ii & |
| Hollins Homes (Bartle) Ltd | 25% | 22 Regent Street, Nottingham, NG1 5BQ | i ‡ |
| Hollins Homes (Galgates) Ltd | 25% | Riverside House, Irwell Street, Manchester, M3 5EN | i Δ |
| Hollins Homes (Loveclough) Ltd | 50% | C/O Grant Thornton Uk Llp 11th Floor, Landmark St Peter's Square, 1 Oxford Street,<br><br>Manchester, M1 4PB | ii ‡ |
| Hollins Homes (Utopia) Ltd | 50% | Riverside House, Irwell Street, Manchester, M3 5EN | ii Δ |
| Horse Health Wessex Holdings Ltd | 99.25% | Copied Hall Farm Winsor Road, Winsor, Southampton, Hampshire, United Kingdom, SO40 2HE | ii & |
| Housing Growth Partnership II LP | n/a | 25 Gresham Street, London, EC2V 7HN | * |
| Housing Growth Partnership Ltd | 50%<br><br>50% | 25 Gresham Street, London, EC2V 7HN | ii<br><br>iii |
| Housing Growth Partnership LP | n/a | 25 Gresham Street, London, EC2V 7HN | * |
| HPD (Conwy) Ltd | 100% | 20 George Street, Alderley Edge, England, SK9 7EJ | ii |
| Hylyfe Leicester Ltd | 50% | 2 Pemberton Street, Nottingham, England, NG1 1GS | i |
| IDSL Group Holdings Ltd | 99.25% | Magma House, 16 Davy Court Castle Mound Way, Rugby, Warwickshire, United Kingdom,<br><br>CV23 0UZ | ii & |
| IEG Group Ltd | 99.25% | Christian Douglass Accountants Limited, 2 Jordan Street, Knott Mill, Manchester, M15 4PY | ii & |
| IPE Roundway Ltd | 100% | 22 Gilbert Street, London, England, W1K 5HD | ii |
| Indigo 123 Ltd | 99.25% | 1 Caspian Way, Cardiff, Wales, CF10 4DQ | ii & |
| JRL Property (Castle Street) Holdings Ltd | 100% | 4 Elstree Way, Borehamwood, Hertfordshire, England, WD6 1RN | ii |
| JRL Property (Castle Street) Ltd | 50% | 4 Elstree Way, Borehamwood, Hertfordshire, England, WD6 1RN | i |
| JRL Property (Castle Street) Opco Ltd | 50% | 4 Elstree Way, Borehamwood, Hertfordshire, England, WD6 1RN | i |
| James Taylor Homes (Brighton) Ltd | 25% | James Taylor House, St. Albans Road East, Hatfield, United Kingdom, AL10 0HE | i |
| James Taylor Homes (Investment) Ltd | 50% | James Taylor House, St. Albans Road East, Hatfield, United Kingdom, AL10 0HE | ii |
| James Taylor Homes (Newton Longville) Ltd | 50% | James Taylor House, St. Albans Road East, Hatfield, United Kingdom, AL10 0HE | ii |
| James Taylor Homes (Verulamium) Ltd | 25% | James Taylor House, St. Albans Road East, Hatfield, United Kingdom, AL10 0HE | i |
| Kenmore Capital 3 Ltd | 100% | Grant Thornton UK LLP, 110 Queen Street, Glasgow, G1 3BX | iii ~ |
| Kier HGP Devco 2 LLP | n/a | 2nd Floor, Optimum House, Clippers Quay, Salford, England, M50 3XP | * |
| Kier HGP Holdings LLP | n/a | 2nd Floor, Optimum House, Clippers Quay, Salford, England, M50 3XP | * |
| Kier HGP Holdings 2 Ltd | 50% | 2nd Floor, Optimum House, Clippers Quay, Salford, England, M50 3XP | i |
| Kier HGP Tunbridge Wells LLP | n/a | 2nd Floor, Optimum House, Clippers Quay, Salford, England, M50 3XP | * |
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| Name of undertaking | % of share class<br><br>held by immediate<br><br>parent company<br><br>(or by the Group<br><br>where this varies) | Registered office address | Notes |
|---|---|---|---|
| Kingmead Homes (Warwick) Ltd | 50%<br><br>50%<br><br>50%<br><br>50% | 168 Church Road, Hove, East Sussex, United Kingdom, BN3 2DL | ii<br><br>iii<br><br>viii<br><br>xvi |
| Kingmead Homes Housing Growth LLP | n/a | 168 Church Road, Hove, East Sussex, United Kingdom, BN3 2DL | * |
| Kingswood Mobility Group Ltd | 99.25% | Browne Jacobson Llp (Cs) Mowbray House, Castle Meadow Road, Nottingham, England,<br><br>NG2 1BJ | xviii & |
| Kite Topco Ltd | 89.25%<br><br>22.13% | Floor 7, The Future Works, Brunel Way, Slough, Berkshire, England, SL1 1FQ | xvii &<br><br>xvi |
| Kruger Topco Ltd | 99.25% | Rhino House, Deans Road, Ellesmere Port, United Kingdom, CH65 4DR | ii & |
| L-L-O Orpington Ltd | 50% | 1st Floor, Arthur Stanley House, 40-50 Tottenham Street, London, W1T 4RN | ii |
| LMX Holdco Ltd | 99.25% | 1650 Parkway, Whiteley, Fareham, England, PO15 7AH | xviii & |
| Lucida Broking Holdings Ltd | 89.25%<br><br>89.25% | St James House, 27-43 Eastern Road, Romford, Essex, United Kingdom, RM1 3NH | ii &<br><br>ix |
| Lunesdale Rise (Kirkby Lonsdale) Ltd | 25% | Agricola House, Cowper Road, Gilwilly Industrial Estate, Penrith, England, CA11 9BN | i |
| M&GP (No. 2) Ltd | 50% | 10 Old Houghton Road, Hartford, Huntingdon, PE29 1YB | ii |
| MADE Partnership LLP | n/a | Barratt House, Cartwright Way, Forest Business Park, Bardon Hill, Coalville, Leicestershire,<br><br>United Kingdom, LE67 1UF | * |
| Meadow Rigg (Burneside Road) Ltd | 25% | Agricola House, Cowper Road, Gilwilly Industrial Estate, Penrith, Cumbria CA11 9BN | i |
| Measured Identity Hub Ltd | 97.92% | 3 Long Acre Willow Farm Business Park, Castle Donington, Derbyshire, England, DE74 2UG | ii & |
| Montague Centre (GPSEC) Ltd | 50% | 168 Church Road, Hove, BN3 2DL | i |
| Mortgage Brain Holdings Ltd | 16.67%<br><br>20% | 6 The Courtyard, Buntsford Gate, Buntsford Drive, Bromsgrove, Worcestershire, B60 3DJ | ii<br><br>iii |
| Motability Operations Group plc | 39.98% | 22 Bishopsgate, Level 6, 22 Bishopsgate, London, EC2N 4BQ | i |
| Neilson Active Holidays Group Ltd | 89.25% | Locksview, Brighton Marina, Brighton, BN2 5HA | ii & |
| Newday JVCO Ltd | 100% | 27 Esplanade, St. Helier, Jersey, JE1 1SG | x |
| North Kensington Gate HGP Ltd | 100% | Regina House, 124 Finchley Road, London, United Kingdom, NW3 5JS | ii |
| North Kensington Gate Ltd | 50% | Regina House, 124 Finchley Road, London, United Kingdom, NW3 5JS | i |
| Omniplex Learning Topco Ltd | 99.25% | Omniplex Learning, 45 Grosvenor Road, St Albans, Hertfordshire, United Kingdom, AL1 3AW | ii & |
| Onapp (Topco) Ltd | 82.5%<br><br>82.5% | 3MC Middlemarch Business Park, Siskin Drive, Coventry, United Kingdom, CV3 4FJ | xvii &<br><br>xviii |
| Origin (Topco) Ltd | 50% | Agricola House, 5 Cowper Road, Gilwilly Industrial Estate, Penrith, Cumbria, CA11 9BN | ii |
| Orwell (Basildon) JV Ltd | 50% | 1st Floor, 73-81 Southwark Bridge Road, London, SE1 0NQ | ii |
| Orwell (Basildon) Ltd | 25% | 1st Floor, 73-81 Southwark Bridge Road, London, SE1 0NQ | i |
| Osprey Aviation Services (UK) Ltd | 89.25%<br><br>89.25% | Blackwood House, Union Grove Lane, Aberdeen, AB10 6XU | xvii &<br><br>xviii & |
| PACE Group Holding Ltd | 97.19% | Building 29 Pensnett Trading Estate, Dandy Bank Road, Kingswinford, United Kingdom,<br><br>DY6 7TU | ii & |
| PAM Healthcare Ltd | 99.25% | 9 Lakeside Drive, (Also Known as 820 Mandarin Court) Centre Park, Warrington WA1 1GG | ii & |
| Pennine View (Calthwaite) Ltd | 25% | 5 Cowper Road, Gilwilly Industrial Estate, Penrith, Cumbria, CA11 9BN | i |
| PFP-Igloo Developments Ltd | 100% | 305 Gray’s Inn Road, London, United Kingdom, WC1X 8QR | ii |
| PFP-Igloo Fruitmarket Ltd | 50% | C/O Igloo Regeneration Limited Huckletree Ancoats, The Express Building, 9 Great Ancoats<br><br>Street, Manchester, Greater Manchester, United Kingdom, M4 5AD | i |
| PL & HGP Ltd | 50% | 3rd Floor, Tower House, 10 Southampton Street, London, United Kingdom, WC2E 7HA | ii |
| Plaistow Development Partners Ltd | 100% | 4th Floor 95 Gresham Street, London, EC2V 7AB | ii |
| Platform Leeds BTR1 OPCO Ltd | 50% | Marble Arch House, 66 Seymour Street, London, United Kingdom, W1H 5BT | i |
| Platform Leeds BTR1 PROPCO Ltd | 50% | Marble Arch House, 66 Seymour Street, London, United Kingdom, W1H 5BT | i |
| Platform Leeds Commercial Inn PROPCO Ltd | 50% | Marble Arch House, 66 Seymour Street, London, United Kingdom, W1H 5BT | i |
| Platform Leeds P1 DEVCO Ltd | 50% | Marble Arch House, 66 Seymour Street, London, United Kingdom, W1H 5BT | i |
| Platform Leeds P1 JVCO Ltd | 100% | Marble Arch House, 66 Seymour Street, London, United Kingdom, W1H 5BT | ii |
| Primrose Fields Holding Ltd | 50% | 22 Chancery Lane, London, England, WC2A 1LS | ii |
| Project Acorn Topco Ltd | 99.25% | Bridgford House, Heyes Lane, Alderley Edge, SK9 7JP | ii & |
| Project Airscope Bidco Ltd | 99.25% | CTI Digital, Suite 2A and 2B, South Central, 11 Peter Street, Manchester, M2 5QR | xviii & |
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Subsidiaries and related undertakings continued
Associated undertakings continued
| Name of undertaking | % of share class<br><br>held by immediate<br><br>parent company<br><br>(or by the Group<br><br>where this varies) | Registered office address | Notes |
|---|---|---|---|
| Project Atlantic Topco Ltd | 99.25% | Linhay House Linhay Business Park, Ashburton, Devon, TQ13 7UP | ii & |
| Project Bridgerton Bidco Ltd | 99.25% | 54 Charlotte Street, London, England, W1T 2NS | ii & |
| Project Bridgetown Ltd | 99.25% | Xyz Building, 3 Hardman Boulevard, Spinningfields, Manchester, United Kingdom, M3 3AQ | ii & |
| Project Drive Topco Ltd | 99.25% | Unit 1, Chalfont House Boundary Way, Hemel Hempstead Industrial Estate, Hemel<br><br>Hempstead, Hertfordshire, United Kingdom, HP2 7SJ | xviii & |
| Project Galaxy UK Topco Ltd | 99.25% | 3rd Floor, Q5 Quorum Business Park, Benton Lane, Newcastle Upon Tyne, United Kingdom,<br><br>NE12 8BS | ii & |
| Project Juno Topco Ltd | 99.25% | C/O Panthera Biopartners Limited, 228 Garstang Road, Fulwood, Preston, PR2 9QB | xviii & |
| Project Penny Ltd | 99.25% | 115 Victoria Road, Ferndown, United Kingdom, BH22 9HU | ii & |
| Project Sharp Topco Ltd | 99.25% | 1 Atlas Road, Hermitage Industrial Estate, Coalville, Leicestershire, LE67 3FQ | ii & |
| Project Sketch Ltd | 88.3% | 11 Vantage Way, Erdington, Birmingham, B24 9GZ | ii & |
| Project Stratos Topco Ltd | 99.25% | Birchin Court, 20 Birchin Lane, London, United Kingdom, EC3V 9DU | xviii & |
| Project Sutton Bidco Ltd | 99.25% | Chawston House, Chawston Lane, Chawston, Bedford, Bedfordshire, United Kingdom,<br><br>MK44 3BH | ii & |
| Project Venus Ltd | 99.25% | Lyndean House, 43-46 Queens Road, Brighton, East Sussex, BN1 3XB | ii & |
| Project Volta Topco Ltd | 99.25%<br><br>99.25% | Units 1 – 7 Dukeries Court, Medenside, Meden Vale, Mansfield, Nottinghamshire,<br><br>United Kingdom, NG20 9QU | xviii &<br><br>xii |
| Ramco Pipetech Holdings Ltd | 99.35% | Kingshill View, Prime Four Business Park, Kingswells, Aberdeen, AB15 8PU | ii & ‡ |
| RDIL 2021 Ltd | 99.25% | Old Printers Yard, 156 South Street, Dorking, Surrey, United Kingdom, RH4 2HF | xviii & |
| ROK Group (Exeter) Ltd | 100% | 26a Old Elvet, Durham, DH1 3HN | ii |
| Rocket Science Holdings Ltd | 99.17% | 20 St. Andrew Street, London, EC4A 3AG | xviii & ‡ |
| Safari Bidco Ltd | 99.25% | Upper Floor, The Granary, Stanley Grange, Ormskirk Road, Knowsley, Prescot, Merseyside,<br><br>England, L34 4AT | ii & |
| Sandsfield Way (Carlisle) Ltd | 25% | Agricola House, Cowper Road, Gilwilly Industrial Estate, Penrith, CA11 9BN | i & |
| ScarlettAbbott (Topco) Ltd | 99.25% | The Bonding Warehouse, Terry Avenue, York, YO1 6FA | ii & |
| Scenic Topco Ltd | 89.25% | Unit 1B, Pentwyn Business Centre, Wharfedale Road, Cardiff, Wales, CF23 7HB | ii & |
| Scotia (Brechin) Ltd | 100% | Ca’D’Oro Building, 45 Gordon Street, Glasgow, Scotland, G1 3PE | ii |
| Seahawk Bidco Ltd | 89.25% | Unit 2, Springfield Court, Summerfield Road, Bolton, United Kingdom, BL3 2NT | xviii & |
| Seahouses Topco Ltd | 99.25% | Unit J, Gildersome Spur, Leeds, United Kingdom , LS27 7JZ | xviii & |
| Sedex Information Exchange Ltd | 99.25%<br><br>99.25% | 18 St. Swithin's Lane, London, EC4N 8AD | iii &<br><br>xv |
| Shore Station (Edinburgh) JV LLP | n/a | 6 Duke Street, St James's, London, United Kingdom, SW1Y 6BN | * |
| Shore Station (Edinburgh) Company Ltd | 50% | 6 Duke Street, St James's, London, United Kingdom, SW1Y 6BN | i |
| Shore Station (Edinburgh) Development LLP | n/a | 6 Duke Street, St James's, London, United Kingdom, SW1Y 6BN | * |
| Solais Topco Ltd | 99.25% | Solais House, 19 Phoenix Crescent, Strathclyde Business Park, Bellshill, United Kingdom,<br><br>ML4 3NJ | ii & |
| SOLO Topco Ltd | 99% | Onecom House, 4400 Parkway, Whiteley, Fareham, Hampshire, PO15 7FJ | ii & |
| Southwark Estates (One) Ltd | 100% | Brock House, 19 Langham Street, London, W1W 6BP | ii |
| Stancliffe Homes (Bentley) Ltd | 50% | Office 3, Markham Lane, Markham Vale, Chesterfield, England, S44 5HY | ii |
| Star Live TopCo Ltd | 99.25% | 7 Fitzhamon Court, Wolverton Mill, Milton Keynes, England MK12 6LB | xviii & |
| Stratus (Holdings) Ltd | 82.5%<br><br>82.5% | 3MC Middlemarch Business Park, Siskin Drive, Coventry, West Midlands, England, CV3 4FJ | xvii<br><br>xviii & |
| The EMS Group Ltd | 99.25% | The Refinery, South Road, Ellesmere Port, United Kingdom, CH65 4LE | xviii & |
| The Exceed Partnership LP | n/a | C/O DWF Company Secretarial Services Limited, 1 Scott Place, 2 Hardman Street,<br><br>Manchester, United Kingdom, M3 3AA | * |
| The Woodlands (Carlisle) Ltd | 25% | Agricola House, Cowper Road, Gilwilly Industrial Estate, Penrith, Cumbria, CA11 9BN | i |
| Timec 1863 Ltd | 99.25% | Floor 2 Equinox House, 3.2 Silver Fox Way, Cobalt Business Park, Newcastle upon Tyne,<br><br>England, NE27 0QJ | ii & |
| Tolia Bidco Ltd | 99.25% | First Floor, 6 Dowgate Hill, London, England, EC4R 2SU | ii & |
| Topco Coffee Ltd | 99.25% | Lodge Farm Barn, Elvetham Park Estate, Hartley Wintney, Hampshire, United Kingdom,<br><br>RG27 8AS | xviii & |
| Torsion Developments Ltd | 50% | 1280 Century Way Thorpe Park, Leeds, West Yorkshire, United Kingdom, LS15 8ZB | ii |
| Two (PBSA) Holding LLP | n/a | 22b Court Street, Haddington, EH41 3JA | * |
| United House Group Holdings Ltd | 81.5% | C/O Interpath Ltd, 4th Floor, Tailors Corner, Thirsk Row, Leeds, LS1 4DP | ii & ‡ |
| Urban Centric (KC) Ltd | 50% | 33-35 Southernhay East, Exeter, EX1 1NX | i |
| Urban Centric (Trafalgar) Holdings Ltd | 100% | 33-35 Southernhay East, Exeter, EX1 1NX | ii |
| Urban Centric (Trafalgar) Ltd | 50% | 33-35 Southernhay East, Exeter, EX1 1NX | i |
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| Villafont (The Barns) Ltd | 25% | 1 St. George's Court, Altrincham Business Park, Altrincham, United Kingdom, WA14 5UA | i |
|---|---|---|---|
| Villafont (Garstang) Ltd | 25% | 1 St. George's Court, Altrincham Business Park, Altrincham, United Kingdom, WA14 5UA | i |
| Villafont (Galgate) Ltd | 25% | 1 St. George's Court, Altrincham Business Park, Altrincham, United Kingdom, WA14 5UA | i |
| Villafont (Herne Bay) Ltd | 100% | 1 St. Georges Court, Altrincham Business Park, Altrincham, United Kingdom, WA14 5UA | ii |
| Villafont (Lancashire) JVCO Ltd | 50% | 1 St. George's Court, Altrincham Business Park, Altrincham, United Kingdom, WA14 5UA | ii |
| Villas for Travel Ltd | 27.95% | 14 Hemmells, Laindon, Essex, SS15 6ED | ii |
| Wakefield Gardens (Lazonby) Ltd | 25% | Agricola House, Cowper Road, Gilwilly Industrial Estate, Penrith, Cumbria, CA11 9BN | i |
| Walker Warwick Land Ltd | 50% | 168 Church Road, Hove, England, BN3 2DL | i |
| Walker Warwick Ltd | 50% | 168 Church Road, Hove, England, BN3 2DL | i |
| Walnut Newco Ltd | 99.25% | c/o Roxburgh Milkins Limited, Merchants House North, Wapping Road, Bristol,<br><br>United Kingdom, BS1 4RW | ii & |
| Water Sustainability Ltd | 99.25% | Dominican House, St John's Street, Chichester, United Kingdom, PO19 1TU | ii & |
| Watford Way Developments Ltd | 100% | 4th Floor, 95 Gresham Street, London, EC2V 7AB | ii |
| Watkin Jones (Grove Crescent) Holdings Ltd | 100% | 3 Llys Y Bont, Parc Menai, Bangor, Wales, LL57 4BN | ii |
| WCCTV Group Ltd | 99.25% | James Watt House, James Watt Drive, Kingsway Business Park, Rochdale, England, OL16 4UG | ii & |
| Whiteburn Allanbank Ltd | 50% | 1 Jackson's Entry, Edinburgh, Scotland, EH8 8PJ | i |
| Whiteburn March Street Ltd | 50% | 1 Jackson's Entry, Edinburgh, Scotland, EH8 8PJ | i |
| Whiteburn Residential (March Street) Ltd | 50% | 1 Jackson's Entry, Edinburgh, Scotland, EH8 8PJ | i |
| Whiteburn Residential Ltd | 100% | 1 Jackson's Entry, Edinburgh, Scotland, EH8 8PJ | ii |
| Whiteburn Viewforth Development Ltd | 100% | 1 Jackson's Entry, Edinburgh, Scotland, EH8 8PJ | ii |
| Whittington Facilities Ltd | 100% | c/o Teneo Financial Advisory Limited, The Colmore Building, 20 Colmore Circus Queensway,<br><br>Birmingham, B4 6AT | xv Δ |
| Wind Bidco Ltd | 99.25% | Westcott House, Hesslewood Office Park, Ferriby Road, Hessle East, Yorkshire, HU13 0LH | ii & |
Collective investment vehicles
The following comprises a list of the Group’s and other external
collective investment vehicles (CIV’s), where the shareholding is
greater than or equal to 20% of the nominal value of any class of
shares, or a book value greater than 20% of the CIV’s assets.
| Name of undertaking | % of fund held by<br><br>immediate parent<br><br>(or by the Group<br><br>where this varies) | Notes | ||||
|---|---|---|---|---|---|---|
| ABRDN OEIC I | 1 | |||||
| abrdn European Real Estate Share Fund | 50.07% | |||||
| ABRDN OEIC VI | 1 | |||||
| abrdn Emerging Markets Equity Enhanced Index Fund | 71.82% | |||||
| ABSOLUTE INSIGHT FUNDS P.L.C. | 2 | |||||
| Insight Broad Opportunities Fund | 36.52% | |||||
| ACS POOLED PROPERTY | 3 | |||||
| Scottish Widows Pooled Property ACS Fund 1 | 100% | |||||
| Scottish Widows Pooled Property ACS Fund 2 | 100% | |||||
| BAILLIE GIFFORD INVESTMENT FUNDS ICVC | 4 | |||||
| Baillie Gifford Diversified Growth Fund | 56.42% | |||||
| BLACKROCK AUTHORISED CONTRACTUAL<br><br>SCHEME I | 5 | |||||
| ACS 30:70 Global Equity Tracker Fund | 33.84% | |||||
| ACS Climate Transition World Equity Fund | 93.32% | |||||
| ACS World Multifactor Equity Tracker Fund | 73.23% | |||||
| BLACKROCK COLLECTIVE INVESTMENT FUNDS | 5 | |||||
| BlackRock Global Corporate ESG Insights Bond Fund | 24.99% | |||||
| BLACKROCK FIXED INCOME DUBLIN FUNDS | 5 | |||||
| iShares Emerging Markets Local Government Bond<br><br>Index Fund (IE) | 82.26% | |||||
| BLACKROCK FIXED INCOME DUBLIN FUNDS PLC | 6 | |||||
| iShares Emerging Markets Government Bond Index<br><br>Fund (IE) | 73.32% | |||||
| BNY MELLON GLOBAL FUNDS PLC | 7 | |||||
| BNY Mellon Global Leaders Fund | 80.77% | |||||
| BNY MELLON INVESTMENT FUNDS | 8 | |||||
| BNY Mellon Global Absolute Return Fund | 76.1% | |||||
| BNY Mellon Global Dynamic Bond Fund | 26.7% | Name of undertaking | % of fund held by<br><br>immediate parent<br><br>(or by the Group<br><br>where this varies) | Notes | ||
| --- | --- | --- | ||||
| BNY Mellon Global Equity Fund | 27.28% | |||||
| BNY Mellon Global Multi-Strategy Fund | 42.31% | |||||
| BNY Mellon UK Opportunities Fund (Responsible) | 69.39% | |||||
| BNY Mellon UK Income Fund | 20.84% | |||||
| CG SCOTTISH WIDOWS LTAF | 9 | |||||
| CG Scottish Widows Diversified Credit LTAF | 100% | |||||
| CG Scottish Widows Growth LTAF | 100% | |||||
| FRANKLIN TEMPLETON GLOBAL FUNDS PLC | 10 | |||||
| FTGF Western Asset Multi-Asset Credit Fund | 55.36% | |||||
| HBOS INTERNATIONAL INVESTMENT FUNDS ICVC | 11 | |||||
| International Growth Fund | 62.89% | |||||
| HBOS PROPERTY INVESTMENT FUNDS ICVC | 11 | |||||
| UK Property Fund | 54.27% | |||||
| HBOS SPECIALISED INVESTMENT FUNDS ICVC | 11 | |||||
| Cautious Managed Fund | 48.02% | |||||
| HBOS UK INVESTMENT FUNDS ICVC | 11 | |||||
| UK Equity Tracker Fund | 54.14% | |||||
| HLE ACTIVE MANAGED PORTFOLIO AUSGEWOGEN | 12 | |||||
| HLE Active Managed Portfolio Ausgewogen | 48.93% | |||||
| HLE ACTIVE MANAGED PORTFOLIO DYNAMISCH | 12 | |||||
| HLE Active Managed Portfolio Dynamisch | 37.85% | |||||
| HLE ACTIVE MANAGED PORTFOLIO KONSERVATIV | 12 | |||||
| HLE Active Managed Portfolio Konservativ | 37.2% | |||||
| INVESCO AMERICAN INVESTMENT SERIES | 13 | |||||
| Invesco US Equity Fund | 35.7% | |||||
| INVESCO FIXED INTEREST INVESTMENT SERIES | 13 | |||||
| Invesco Global Bond Fund | 31.97% | |||||
| LAZARD INVESTMENT FUNDS | 14 | |||||
| Lazard Developing Markets Fund | 97.81% | |||||
| MGI FUNDS PLC | 15 | |||||
| Mercer Diversified Retirement Fund | 71.23% | |||||
| Mercer Long Term Growth Fund | 54.23% | |||||
| Mercer Multi Asset Defensive Fund | 39.25% | |||||
| Mercer Multi Asset Growth Fund | 55.27% |
Lloyds Banking Group plc Annual Report and Accounts 2025
322
Subsidiaries and related undertakings continued
| Name of undertaking | % of fund held by<br><br>immediate parent<br><br>(or by the Group<br><br>where this varies) | Notes | ||||
|---|---|---|---|---|---|---|
| Mercer Multi Asset High Growth Fund | 48.82% | |||||
| Mercer Multi Asset Moderate Growth Fund | 58.05% | |||||
| Mercer Passive Sustainable Global Equity Feeder Fund | 59.83% | |||||
| MORGAN STANLEY INVESTMENT FUNDS | 16 | |||||
| Global Credit Fund | 46.72% | |||||
| NORDEA 1, SICAV | 17 | |||||
| Nordea 1 – GBP Diversified Return Fund | 29.02% | |||||
| RETAIL AUTHORISED UNIT TRUSTS | 5 | |||||
| BlackRock Balanced Growth Portfolio Fund | 37.6% | |||||
| ROYAL LONDON EQUITY FUNDS ICVC | 18 | |||||
| Royal London UK Equity Income Fund | 20.62% | |||||
| SCHRODER FUNDS ICAV | 19 | |||||
| Schroder Sterling Liquidity Fund | 93% | |||||
| Schroder Sterling Short Duration Bond Fund | 97.83% | |||||
| SCHRODER INTERNATIONAL SELECTION FUND | 20 | |||||
| Emerging Market Bond | 65.41% | |||||
| Sustainable Emerging Market Synergy | 28.36% | |||||
| SCHRODER UNIT TRUSTS LIMITED | 21 | |||||
| Schroder Global ex UK Equity Tracker Component<br><br>Fund | 27.34% | |||||
| SCOTTISH WIDOWS INCOME AND GROWTH FUNDS<br><br>ICVC | 3 | |||||
| Balanced Growth Fund | 29.16% | |||||
| Corporate Bond 1 Fund | 82.56% | |||||
| Corporate Bond PPF Fund | 100% | |||||
| ESG-Tilted Sterling Corporate Bond Fund | 81.87% | |||||
| Global Tactical Asset Allocation 1 Fund | 84.67% | |||||
| Progressive Growth Fund | 41.79% | |||||
| UK Index Linked Gilt Fund | 100% | |||||
| SCOTTISH WIDOWS INVESTMENT SOLUTIONS<br><br>FUNDS ICVC | 3 | |||||
| Corporate Bond Fund | 69.2% | |||||
| Developed Asia Pacific (ex Japan ex Korea) Equity<br><br>Tracker Fund | 100% | |||||
| Developed Europe (ex UK) Equity Tracker Fund | 95.96% | |||||
| Developed Government Bond Tracker Fund | 73.96% | |||||
| Developed Markets Tilted Equity Tracker Fund | 72.69% | |||||
| Emerging Markets Tilted Equity Tracker Fund | 94.56% | |||||
| Fundamental Index Emerging Markets Equity Fund | 94.57% | |||||
| Fundamental Index Global Equity Fund | 92.5% | |||||
| Gilt Fund | 94.93% | |||||
| Global Environmental Solutions Fund | 93.64% | |||||
| High Income Bond Fund | 65.99% | |||||
| Japan Equity Fund | 99.19% | |||||
| Strategic Income Fund | 67.04% | |||||
| US Equity Fund | 97.09% | |||||
| SCOTTISH WIDOWS MANAGED INVESTMENT<br><br>FUNDS ICVC | 3 | |||||
| Balanced Growth Portfolio | 26.8% | |||||
| Cash Fund | 99.59% | |||||
| International Equity Tracker Fund | 78.14% | |||||
| Progressive Growth Portfolio 1 | 45.07% | |||||
| SCOTTISH WIDOWS OVERSEAS GROWTH<br><br>INVESTMENT FUNDS ICVC | 3 | |||||
| Global Growth Fund | 76.22% | |||||
| Global Select Growth Fund | 50.69% | Name of undertaking | % of fund held by<br><br>immediate parent<br><br>(or by the Group<br><br>where this varies) | Notes | ||
| --- | --- | --- | ||||
| SCOTTISH WIDOWS TRACKER AND SPECIALIST<br><br>INVESTMENT FUNDS ICVC | 3 | |||||
| Emerging Markets Fund | 77.55% | |||||
| UK Equity Tracker Fund | 66.64% | |||||
| UK Fixed Interest Tracker Fund | 62.05% | |||||
| UK Index-Linked Tracker Fund | 52.05% | |||||
| UK Tracker Fund | 42.11% | |||||
| SCOTTISH WIDOWS UK AND INCOME INVESTMENT<br><br>FUNDS ICVC | 3 | |||||
| Environmental Investor Fund | 75.41% | |||||
| SEI GLOBAL ASSETS FUND PLC | 22 | |||||
| The SEI Core Fund | 71.48% | |||||
| The SEI Defensive Fund | 60.66% | |||||
| The SEI Moderate Fund | 83.28% | |||||
| SEI GLOBAL MASTER FUND PLC | 23 | |||||
| The SEI Factor Allocation Global Equity Fund | 92.7% | |||||
| SPW INVESTMENT PORTFOLIO ICVC | 24 | |||||
| Schroders Personal Wealth IPS Growth Portfolio | 49.86% | |||||
| Schroders Personal Wealth IPS Income Portfolio | 55.61% | |||||
| SSGA | 25 | |||||
| State Street AUT Emerging Market Screened Index<br><br>Equity Fund | 99.63% | |||||
| THE SVS LEVITAS FUNDS | 26 | |||||
| SVS Levitas A Fund | 88.84% | |||||
| SVS Levitas B Fund | 85.74% | |||||
| UNIVERSE, THE CMI GLOBAL NETWORK FUND | 27 | |||||
| CMI Continental European Equity | 97.68% | |||||
| CMI Pacific Basin Enhanced Equity | 79.29% | |||||
| CMI UK Equity | 73.03% | |||||
| CMI US Enhanced Equity | 91.87% | |||||
| CMI US Equity Index Tracking | 44.95% | |||||
| CMIG Access 70% Flexible | 100% | |||||
| CMIG Access 80% | 100% | |||||
| CMIG Access 80% Flexible | 100% | |||||
| CMIG Access 90% Flexible | 100% | |||||
| CMIG Focus Euro Bond | 100% | |||||
| WS RUFFER MANAGED FUNDS | 28 | |||||
| WS Ruffer Diversified Return Fund | 23.17% |
Lloyds Banking Group plc Annual Report and Accounts 2025
323
Principal place of business for Collective Investment Vehicles
(1)abrdn Fund Managers Limited, 280 Bishopsgate, London, EC2M 4AG
(2)Absolute Insight Funds Plc, Riverside Two, Sir John Rogerson's Quay, Dublin 2,
D02 KV60, Ireland
(3)69 Morrison Street, Edinburgh, United Kingdom, EH3 8BW
(4)Calton Square, 1 Greenside Row, Edinburgh, EH1 3AN
(5)BlackRock Fund Managers Limited, 12 Throgmorton Avenue, London, EC2N 2DL
(6)200 Capital Dock, 79 Sir John Rogerson's Quay, Dublin 2, D02 RK57, Ireland
(7)One Dockland Central, Guild Street, IFSC, Dublin 1, Ireland
(8)BNY Mellon Investment Funds, BNY Mellon Centre, 160 Queen Victoria Street,
London, EC4V 4LA
(9)CG Scottish Widows LTAF, 2nd Floor, 29-30 Cornhill, London, EC3V 3NF
(10)20-26 Sir John Rogerson's Quay, Grand Canal Dock, Dublin 2, Ireland
(11)Trinity Road, Halifax, West Yorkshire, HX1 2RG
(12)Oppenheim Asset Management Services Sàrl. 2, Boulevard Konrad Adenauer,
L-1115 Luxembourg
(13)Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire, RG9 1HH
(14)Lazard Investment Funds, 20 Manchester Square, London, W1U 3PZ
(15)MGI Funds plc, 6th Floor, 2 Grand Canal Square, Dublin 2, Ireland
(16)MSIM Fund Management (Ireland) Limited, The Observatory,
7-11 Sir John Rogerson's Quay, Dublin 2, D02 VC42, Ireland
(17)Nordea 1, SICAV, 562, Rue de Neudorf, L-2220 Luxembourg
(18)80 Fenchurch Street, London, EC3M 4BY
(19)Schroder Investment Management (Ireland) Limited, Georges Court,
54-62 Townsend Street, Dublin 2, D02 R156
(20)5, Rue Höhenhof, L-1736, Senningerberg, Luxembourg
(21)1 London Wall Place, London, EC2Y 5AU
(22)SEI Global Assets Fund plc, One Charlemont Square, Dublin 2, Ireland
(23)SEI Global Master Fund plc, One Charlemont Square, Dublin 2, Ireland
(24)Schroders Personal Wealth (ACD), 25 Gresham Street, London, EC2V 7HN
(25)20 Churchill Place, Canary Wharf, London, E14 5HJ
(26)St Vincent St Fund Administration, 45 Gresham Street, London, EC2V 7BG
(27)Lemanik Asset Management S.A. 106, route d’Arlon, L-8210 Mamer,
Grand Duchy of Luxembourg
(28)3rd Floor Central Square, 29 Wellington Street, Leeds, LS1 4DL
Notes
*The undertaking does not have share capital
+The undertaking does not have a registered office
#In relation to Subsidiary Undertakings, an undertaking external to the Group
holds shares
^Shares held directly by Lloyds Banking Group plc
&The Group holds voting rights of between 20% and 49.9%
~The Group holds voting rights of 50%
‡The undertaking is in Liquidation
∞The undertaking is in Administrative Receivership
ΔThe undertaking is in Administration
(i)Ordinary Shares
(ii)A Ordinary Shares
(iii)B Ordinary Shares
(iv)Deferred Shares
(v)Preference Shares
(vi)Non-Voting Deferred Shares
(vii)6% Non-Cumulative Redeemable Preference Shares
(viii)C Ordinary Shares
(ix)Growth 2 Shares
(x)L Ordinary Shares
(xi)Redeemable Preference Shares
(xii)A1 Preferred Ordinary Shares
(xiii)Ordinary Non-Voting Shares
(xiv)Common Stock
(xv)Preferred B Ordinary Shares
(xvi)D Ordinary Shares
(xvii)A2 Ordinary Shares
(xviii)A1 Ordinary Shares
(xix)Ordinary Limited Voting Shares
Registered office addresses
(1)25 Gresham Street, London, EC2V 7HN
(2)Society Building, 8 All Saints Street, London, England, N1 9RL
(3)13-18 City Quay, Dublin 2, DO2 ED70
(4)Trinity Road, Halifax, West Yorkshire, HX1 2RG
(5)The Mound, Edinburgh, EH1 1YZ
(6)10th Floor, 5 Churchill Place, London, United Kingdom, E14 5HU
(7)9 Broad Street, St Helier, Jersey, JE2 3RR
(8)Minter Ellison, Governor Macquarie Tower, Level 40, 1 Farrer Place, Sydney,
NSW 2000, Australia
(9)1 Brookhill Way, Banbury, Oxon, OX16 3EL
(10)7th Floor, 21 Lombard Street, London, EC3V 9AH
(11)The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801, USA
(12)Barnett Way, Gloucester, GL4 3RL
(13)1 More London Place, London, SE1 2AF
(14)Building 4 Hatters Lane, Croxley Green Business Park, Watford, Hertfordshire,
WD18 8YF
(15)2 North Queen Street, Belfast, Northern Ireland, BT15 1ES
(16)18a Capricorn Centre, Cranes Farm Road, Basildon, Essex, SS14 3JJ
(17)Thurn-Und-Taxis-Platz 6, 60313, Frankfurt am Main, Germany
(18)Hoogoorddreef, 151101BA, Amsterdam, Netherlands
(19)Basisweg 10, Amsterdam, 1043AP, Netherlands
(20)33 Old Broad Street, London, EC2N 1HZ
(21)234 High Street, Exeter, EX4 3NL
(22)Citco REIF Services (Luxembourg) S.A., Carré Bonn, 20 Rue de la Poste,
L-2346 Luxembourg
(23)17 Boulevard F.W. Raiffeisen, L-2411 Luxembourg
(24)Corporation Service Company, 251 Little Falls Drive, Wilmington, DE 19808, USA
(25)Wilmington Trust SP Services (London) Limited, Third Floor, 1 King’s Arms Yard,
London, EC2R 7AF
(26)43/F, One Taikoo Place, 979 King’s Road, Quarry Bay, Hong Kong
(27)1, Avenue du Bois, L-1251 Luxembourg
(28)SAB Formalities, 23 Rue de Roule 75001, Paris, France
(29)Karl-Liebknecht-STR. 5, D-10178 Berlin, Germany
(30)28 Esplande, St. Helier, Jersey, JE2 3QA
(31)Atria One, 144 Morrison Street, Edinburgh, EH3 8EX
(32)26 New Street, St. Helier, Jersey, JE2 3RA
(33)3rd Floor, IFC5, Castle Street, St Helier, JE2 3BY, Jersey
(34)P O Box 186, Royal Chambers, St Julian’s Avenue, St. Peter Port, GY1 4HP, Guernsey
(35)De Entrée 254, 1101 EE, Amsterdam, Netherlands
(36)44 Esplanade, St. Helier, Jersey, JE4 9WG
(37)Fascinatio Boulevard 1302, 2909VA Capelle aan den IJssel, Netherlands
(38)Avenida Dr. Chucri Zaidan, n° 296, cj 231, Bairro Vila Cordeiro, Cidade de São Paulo,
Estado de São Paulo, Cep 04583-110 Brazil
(39)2nd Floor, Liberation House, Castle Street, St. Helier, JE1 1EY, Jersey
(40)One Vine Street, London, W1J 0AH
(41)50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ
(42)5th Floor, The Exchange, George’s Dock, IFSC, Dublin 1, Ireland
(43)110 St. Vincent Street, Glasgow, G2 4QR
(44)Building 4 Hatters Lane, Croxley Green Business Park, Watford, Hertfordshire,
WS18 8YF
(45) Keens House, Anton Mill Road, Andover, Hampshire, SP10 2NQ
(46)Glategny Court, Glategny Esplanade, St. Peter Port, GY1 1WR, Guernsey
(47)Cawley House, Chester Business Park, Chester, CH4 9FB, United Kingdom
(48)6/12, Primrose Road, Bangalore, 560025, India
(49)1A Heienhaff, Senningerberg, L-1736 Luxembourg
Lloyds Banking Group plc Annual Report and Accounts 2025
324
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; risks related to new and
emerging technologies, including artificial intelligence; 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.
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Head office
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www.lloydsbankinggroup.com
Registered office
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Registered in Scotland no. SC095000