Lloyds Banking Group plc (LYG) March 2026 Capital Markets Day Transcript

Good afternoon, ladies and gentlemen, and welcome to the Lloyds Banking Group PLC Investor presentation. Questions are encouraged. They can be submitted at any time via the Q&A tab. That's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and we'll publish our responses where it's appropriate to do so on the InvestorMeet Company platform. Before we begin, we would just like to submit the following poll. And if you would be most grateful. And I'd now like to hand you over to the team from Lloyds Banking Group PLC. Rohith, good afternoon, sir.

Thank you very much for that, Jake. And good afternoon, everybody. I'm Rohith Chandra Rajan, Director of Investor Relations at Lloyds. I'm joined here today by my colleague, Tom Grantham, who's a senior manager on the team. We're very happy to be running another of these briefings with InvestorMeet. They're a great way to engage with our shareholders so thank you very much for joining us in terms of how this hour is intended to run we've got a short presentation covering our financials and our strategy that should take about 15 minutes and then we'll spend most of the time on your questions so with that then let's move on to the first slide so as you'll all know Lloyds is a UK focused bank with a simple operating models split across four reporting areas. Those are retail banking, commercial banking, insurance, pensions and investments, and equity investments and central items. Within these divisions, we offer a comprehensive product suite to meet our customers' ever-evolving financial needs. And one of our core strengths is our portfolio of trusted and recognised brands. Those include, in particular, Lloyds Bank, Halifax, Bank of Scotland, and Scottish widows. The breadth of our franchise means we're uniquely placed to meet more of our customers' needs, as well as understanding them better to provide more tailored offerings that deliver value for both customers and to the group and its shareholders. And just on to the next slide, before I hand over to Tom on the financials, I just wanted to highlight a few of the things that we're really focused on firstly our purpose purpose-led strategic delivery which is accelerating benefiting customers and wider stakeholders secondly we're delivering our sustained strength in financial performance and meeting our 2025 guidance and the financial performance delivered strong capital generation enabling another 15 dividend growth and a 1.75 billion share buyback. Finally, we upgraded our guidance for 2026 financial performance and are confident in our outlook beyond this year. With that, let me hand over to Tom on the numbers and an update on our strategy.

Thanks, Rohit, and good to speak to you all, and thank you for joining. So, first of all, I'll touch on the financials, and then, as Rohit has said, I'll give a brief update on our strategy, and I'll put my hand back to Rohit to close off the presentation. So, in terms of the financials, as just said, we delivered sustained strength in our performance in 2025 and in line with guidance. Statutory profit after tax was $4.8 billion. That was up 6% year on year. And this resulted in a return on tangible equity of 12.9%, or 14.8%, excluding the motor provision that we took in the third quarter of the year. Within this, we delivered robust net income of $18.3 billion, up 7% versus 2024. This was driven by sustained growth across NII and other income, up 6% and 9% respectively. We retained cost discipline over the year, with operating costs in line with guidance at £9.8 billion. Remediation of £968 million included £800 million as a result of the aforementioned motor charge. Asset quality remained strong. The impairment charge of £795 million represented an asset quality ratio of 17 basis points. And finally, as Rohit said, we delivered strong capital generation of 147 basis points, or 178 basis points excluding motor, in line with our guidance. After distributions, which I'll come on to later, this resulted in a CT1 ratio of 13.2%. So let me quickly turn to movements in the balance sheet. So pleasingly, lending and deposits both grew strongly in 2025. Lending balances closed the year at £481 billion, up £22 billion, or 5%. In Q4, lending balances grew by £4 billion. Within this, retail saw growth across all of our business lines. In commercial banking, lending was down £0.2 billion in the fourth quarter. This represents further growth in targeted areas within our corporates and institutional business, offset by business-as-usual performance within BCB that included continued government-backed lending repayments. Turning to deposits, we saw a strong performance across both Q4 and the year as a whole. Total deposits were up by £13.8 billion in 2025. Q4 was down slightly by £0.2 billion. The fourth quarter saw growth in retail deposits across both savings and notably PCAs, with deposit churn continuing to ease as we have expected. Commercial deposits fell by £1.5 billion, driven by actions on low margin funding as well as by seasonal outflows in BCB. Let me now move on to income on the next slide. Net interest income for the year was £13.6 billion in line with our guidance. This represents an increase of 6% year on year with Q4 up 2% versus the prior quarter. Hedge income in 2025 was £5.5 billion, a material step up from last year and a little above our guidance. Our net interest margin increased 11 basis points to 306 basis points. Average interest earning assets of 463 billion for the full year were up 3% compared to 2024, with Q4 AIEAs just over 470 billion at 4.8 billion. For 2026, we're guiding to net interest income of around 14.9 billion. Within this, we expect margin expansion alongside continued healthy balance sheet growth across both retail and commercial. This also includes continued growth in a hedge income, rising to circa 7 billion in 2026, from that 5.5 billion I mentioned earlier, before increasing further to circa 8 billion in 2027, and continue growing towards the end of the decade. Turning now to other income. 2025 was another year of encouraging and broad-based growth in other income. We expect this pattern to continue. OOI was 6.1 billion in the year, up 9% versus 2024, and up 2% in Q4 versus Q3. The latter was supported by the full acquisition of Shredo's Personal Wealth, or Lloyd's Wealth, as it will soon be rebranded to. Growth over 2025 has been broad-based. Retail is up 12% year-on-year, commercial was up 1%, insurance, pensions and investments grew by 11%, and our equity investments business was up 15%. Turning to operating lease depreciation briefly, which is the depreciation charge for our operating fleet business. This was £1.45 billion in 2025, up 10% versus 2024. This was driven by fleet growth, high-value vehicles, and to an extent, electric vehicle price movements. However, altogether, it was essentially in line with the other income growth generated by the vehicle leasing business. Let me now move to costs on the next slide. Operating costs of £9.76 billion were in line with guidance. Year-on-year cost growth of 3% is on the back of continued strategic investment, volume growth and inflationary pressures, partly offset by further efficiencies. Looking ahead, we remain committed to delivering a 2026 cost-income ratio of less than 50%. Based on our current plan, that implies operating expenses of less than $9.9 billion. Remediation for 2025 was $968 million, including the $800 million motor provision taken in Q3. We wait to see the detail of the FCA's final proposals on motor post their consultation on Monday. Let me now turn to credit performance. Credit performance remains strong, and that reflects our prime customer base, prudent approach to risk, and healthy customer behaviours. Across retail, new to arrears remain low and stable. Early warning indicators likewise are also benign. In commercial, after some idiosyncratic cases in H1, such as fibre, the H2 picture was very constructive. Taking all of that together, the full year impairment charge was 795 million, equivalent to an asset quality ratio of 17 basis points. Looking forward, we expect the asset quality ratio to be circa 25 basis points for 2026. That's similar to the underlying run rate that we've seen during 2025. Let me move now to the macroeconomic outlook. So it's worth saying that these are the economic assumptions as at full year results at the end of January, and so clearly were prior to the recent geopolitical disruption. It's also worth saying that we review economic forecasts every quarter. However, as at full year, our expectations were that GDP would be 1.2% in 2026 in terms of growth. Unemployment was expected to peak at 5.3% in H1 2026. We assumed two 25 basis point cuts in UK bank rate in the year and house price growth was forecast at circa 2% in 2026 and 2027. Let me now turn then to our capital distributions. We continue to grow our shareholder distributions at an attractive pace. For 2025, the board recommended a final ordinary dividend of 2.43 pence per share, taking the total dividend for 2025 to 3.65 pence, up 15% year-on-year. In addition, we announced a share buyback of up to 1.75 billion, and together, this represents a total capital return of up to 3.9 billion, up 8% on 2024. This hopefully demonstrates our commitment to shareholder returns. Indeed, the 2025 dividend is now up more than 80% versus 2021. Given our confidence in growing capital generation, we will now review excess capital distributions in addition to ordinary dividends every half year going forward. Let me now quickly wrap up the financial update section. To summarise, in 2025, the group's financial performance showed sustained strength. Strategic execution and business momentum delivered continued balance sheet and income growth, alongside cost discipline and asset quality, allowing for growth in shareholder distributions. As we look ahead to 2026 and a culmination of our current strategic plan, we are confident in delivering on the financial guidance you can see set out in this slide. Beyond 2026, we are committed to continuing income growth, improving operating leverage and stronger sustainable returns. We will give far more detail on this in our strategic announcement with our half-year results this year. On that note, let me speak briefly to strategy on the next slide. We continue to successfully deliver a significant transformation. Over the last four years, we have meaningfully grown the balance sheet, driven diversified revenue growth, improved our cost and capital efficiency, whilst significantly de-risking the business and establishing a digital and AI leadership position. These actions have both enhanced the franchise and delivered attractive returns to our shareholders, including total capital distributions of around 15 billion. We're now entering the final phase of our five-year strategic plan, with delivery accelerating and momentum growing. This is translating into significant financial benefits. In particular, let me talk about how we're thinking about AI on the next slide. In 2025, we scaled 50 Gen AI use cases into full production, demonstrating significant potential and generating 50 million of in-year P&L benefit. It should be stressed this is based on a narrow definition of the latest technology, with the full spectrum of digital and AI initiatives contributing around 70% of our upgraded strategic initiatives revenue target of $2 billion by 2026 and over 60% of the total gross cost savings, $1.9 billion, realised since 2021. This represents a strong foundation for us to accelerate our progress in 2026, where we intend to increase the number of use cases with a particular focus on high-value agentic opportunities. This will deliver more than £100m of P&L benefit, capturing both revenues and costs, with significant upside beyond this as use cases are scaled and mature. This is just the start of the journey and we'll talk far more about our plans in this space as part of that strategic update that I mentioned in July. Let me close up then on slide 18. So as you've heard, we're successfully executing our strategy. This is reinforcing our competitive advantages and underpinning the delivery of strong shareholder outcomes. Our confidence extends beyond this, and we're excited about sharing our updated strategic plan in July. We'll provide more details on the actions we'll be taking to further strengthen and grow the core franchise, address new diversified growth opportunities, and deliver continued improvements in productivity, enabled by our leadership position across new and emerging technologies. We'll, of course, share more detail on our medium-term financials at that stage too. so with that I'll hand back to Rohit.

Thank you Tom I hope you found that useful to summarise we're very pleased with progress so far we're confident of meeting the objectives of our current strategy and we're excited about the next strategic phase supporting a compelling investment case of continued growth improving operating leverage and stronger sustainable returns. As promised we've left plenty of time for questions so let's now hand back to Jake for the Q&A.

Perfect guys that's great and thank you very much indeed for your presentation this afternoon. Ladies and gentlemen please do continue to submit your questions just by using the Q&A tab that's situated on the right hand corner of your screen but just while the team take a few moments to review those questions that have been submitted already just like to remind you that a recording of this presentation along with a copy of the slides and the published Q&A can all be accessed via your investor dashboards. Guys as you can see there we have received a number of questions uh throughout your presentation this afternoon thank you to all of those on the call for taking the time to submit their questions but at this point if i may just hand back to you to read out those questions and give your responses where it's appropriate to do so and if i pick up from you at the end that'd be great thank you brilliant thanks jake so i think the first question then which i'll hand over to rohyth what is the dividend policy for the group moving forwards uh yeah thank you very much for the question so uh the dividend policy is progressive and sustainable.

As Tom mentioned, we grew the dividend 15% last year. It's been growing at that pace for a while. And whilst we don't have a payout ratio, that is one of the benchmarks that we think about, particularly in terms of that dividend sustainability. So we want to grow, but we want to keep it at a sustainable level. We think there is plenty of room for continued strong dividend growth as earnings continue to expand, and also as we gradually increase the payout ratio over time. So the policy is progressive and sustainable growth. And we think that gives us lots of space for continued strong dividend growth.

Thanks, Rahith. So we've had another question. How does the group measure ROI on digital investments, particularly in customer acquisition and retention? And is there evidence that digital engagement is deepening product penetration per customer? So maybe I'll start on that one. So in terms of how we measure, I guess, the return on investment in general i'd probably point to the strategic targets that we set at 22 to 26. so as mentioned in the presentation um we invested over 4 billion over the over the period of time we are planning on generating over two well circa 2 billion a strategic of income related to those strategic initiatives and circa 1.9 billion of gross cost saves as of 25 we haven't your question on digital and specifically. So digital and AI underpinned essentially 70% of those revenues and about 60% of those costs. And so from our perspective, there is strong return on those investments. And we do have stats internally to back those up, but we haven't disclosed those. But clearly, when we come to our next strategy, we will talk about essentially the ways that we'll measure and continue to make sure that we're generating sufficient ROI on those investments. In terms of any evidence that it's deepening product penetration with customers, I think there is. So one of the key tenets of our strategy was deepening relationships with customers. We actually set out a target of increasing products per customer by 5% out to 2024. We achieved that. And we have a target 24 to 26 to increase products per customer by 3%. And so we'll obviously update that as we get to the end of this year. But maybe some other stats to justify it. So clearly being able to utilise the fact that we have an insurance business and make sure that our retail customers can fully take advantage of that. One product in particular is protection insurance. Previously, with new mortgages for Lloyds, we sold less than 10% protection insurance products to those mortgage customers. We now sell more like 20%.

And so you can see that that's one example, but there are other examples of where we are getting much better of deepening those relationships with customers so next question here on wealth given the rise of free to trade share dealing services do you expect a reduction in revenue and maybe you can take that one uh yeah thank you tom so um we we do have one of the uh top four platforms in in halifax share dealing so we operate in that space as tom mentioned we've also now just recently brought uh schroder's personal worth which was a joint venture with schroder's uh back into uh into the group so it's now fully integrated into the group and as tom mentioned uh will be rebranded uh lloyd's wealth and that's part of a broader uh investment franchise which spans you know that that's that's very much advice led uh so face to face uh you know but we are also in the process of and as I mentioned we've got Alifax share dealing we're also in the process of developing an AI supported investment tool which will provide much more tailored guidance to customers you know in terms of not just understanding their risk appetite but also a bit more about their personal circumstances and their goals to help tailor portfolios of low-cost investments for them so you know that that's where we think there's significant growth we are developing that in conjunction with the regulator with the with the fca uh in a um in a sandbox or regulatory environment where where they have oversight of the testing it's being tested with friends and family so internally at the moment and something we expect to launch later in the year and we think that that that tool in particular is really important in terms of um democratizing if you would like uh investments for for the public in the uk where the government obviously is keen to move people out of cash savings and get people investing a lot more we think those types of tools can be very helpful and then there's a combination then of all of those three platforms uh that will give you potentially some hybrid operation where you know if you're doing something that's slightly more complex that you don't just want to rely on the ai tool you're happy to let the ai tool guide you but you want to speak to a real person uh before you actually execute against those plans you know that's potentially also uh um part of that offering so yes that's a very competitive space uh it's it's an area that we are expanding where we think there's a big customer need uh which the government also uh seems to be in favor of so we think this is a long-term trend that we are uniquely positioned to benefit from and to support customers with.

Brilliant. Thanks, Rayeth. And I think this is probably another question for you. Are there any signs of competitive pressure on mortgage margins or deposit pricing?

A short answer, yes. So the UK is a fairly consolidated banking market, but by the same token, still a very competitive one. so in terms of new mortgages we are writing new mortgage business at above 70 0.7 percent above what it was costing us to fund that business uh through last year uh that that was actually coming down very marginally so 0.01 or 0.02 percent per quarter uh we started the year um also very competitive uh there are there were a lot of mortgages written uh in late 2020 early 2021 and those were on five-year fixed rates are in the process of maturing uh you know those were uh very profitable mortgages for us uh and we took an outsized market share of them uh but the market is now jockeying to um to win that refinancing activity as it as it matures uh so it's a it's a very competitive market it's also quite a tricky market at the moment in that um as you would have seen from from the from the news flow uh interest rate expectations have moved are moving around a lot uh they're not moving day to day they are moving intraday uh which makes it very difficult to know we can see where our competitors are pricing we don't know quite how much they're making when they are selling uh new mortgages today because we don't know what their funding costs are so at the moment it's quite a volatile and quite a tricky market you know we're looking to be there to support customers uh but also to win good market share at good value for uh for the group and for investors and on the deposit side um you know i think they're they're really different segments to the market so the current account market is um number one very sticky but also very competitive in a way uh certainly in terms of new account openings uh the likes of the the the neobanks or the digital banks uh you know the likes of monzos chase etc have been very competitive uh they have been winning a lot of uh new accounts uh however what i would say is that we've been winning share in uh in balances quite consistently over recent years despite that very elevated competition uh you know i think the same also to a degree is true true of instant access accounts uh although again there are some very competitive offers there uh i think what what is um particularly stark at the moment is uh as we head into isa season where isas and time deposits are being priced that that is a that that's an extraordinarily competitive market again this year uh now we we don't yet know So whether that's that that pricing pressure is going to persist or whether it's a peculiarity of, you know, this being the final year that you'll be able to put all of your £20,000 ISA limit into cash savings compared to £12,000 from next year. So it's unclear at the moment, you know, how the market is going to evolve. But certainly for the time being, it remains a very competitive market where we are competing selectively, looking for value rather than needing to drive volumes in terms of deposits.

Brilliant. Thanks, Rohit. We've had one question of what is the share price target for year-end 2026. Maybe I'll just briefly answer. So we obviously don't have a share price target or give an expectation. I guess it's worth saying that what we do do, we obviously concentrate on our own performance and we have a commitment to a greater than 16% roti and growing returns beyond this year as well in terms of what we've given for our outlook and what we're saying about our next strategy. And we also expect tangible net asset value of the business to grow as well. So that's our, I guess, commitment to improving returns and generating sustainable returns, which will ultimately deliver capital generation and therefore capital returns to investors. clearly though the share price is impacted by a number of different things particularly the external environment and the geopolitical environment so very difficult to say what we expect the share price to be at the year end. Rohith if you want to add.

Yeah maybe I'll just add to that as Tom said we you know the the management team here is focused on on running the business and running the business for good shareholder value our belief is that that you know those aspirations and expectations are not yet fully embedded in the share price obviously at the moment particularly impacted by geopolitics but it's you as our investors and the broader market that sets the share price not us but we are you know the business is absolutely being run for shareholder value. And maybe a question now on capital allocation you touched upon it earlier in terms of the different choices we can make but one question of will you be considering special dividends this year so the the board so in terms of how we think about cash allocation number one is the ordinary dividend as we discussed before you know that the policy there is it is a progressive and sustainable dividend so that that is the number one priority historically the board has then reviewed um you know what to do with any surplus capital each each year end uh we've announced now um you know given we are more confident on both profitability the broader environment and particularly the regulatory environment is that the board will now um think about those surplus capital distributions every half year uh typically that's taking the form of a shared buy back uh but special dividends and other forms of distribution or other uses of capital including occasionally uh m a are also uh included in that in those board discussions brilliant thanks right and one quick question which maybe i'll address so what is your net shares an issue target given buybacks offset by staff share allocation so you're correct and that is essentially the the

function for what determines the net shares in issue is the buybacks which ultimately leads to a reduction in shares offset by some staff allocations. It's probably worth saying here that because we have been committed to share buybacks and we've done a succession of buybacks over the last few years, we've reduced shares in issue as of full year 25 by about 17% versus the end of 2021. So that gives a sense of the direction of travel. That now takes us to I think under about 60 billion shares an issue. We don't give a target for where we'll go from here but clearly the fact that we announced a further buyback with the full year 25 results of 1.75 billion will be supportive to that continued reduction in shares an issue but we don't have an absolute target. Another question was what measures have Lloyd's put in place to avoid issues like the recent breach of data and car loans and other expensive remediation issues.

I'd like to see more stability with the news uh being more positive rather negative and potentially expensive so uh roth do you want to maybe start on that and maybe i'll add if there's anything to add yeah yes so uh you know um we so number one we share your sentiment uh you know we we don't want those uh issues to persist uh i think a lot of them are legacy issues um notwithstanding the the recent issues with the app um you know motor finance uh as an example we will find out from the fca on monday uh how if and how it expects to run a remuneration scheme or remediation scheme for um for affected uh historical customers um you know we have raised a 1.95 billion provision in relation to that uh you know we will have to take a view um how the final proposals compared to the provision that we've raised our expectation is given that the fca's proposals back in october uh were the highest weighted scenario that we used in coming to that provision uh you know we're not far off uh you know unless there's very substantial change in what the fca proposes or or enforces uh there should not be a significant change or a material change in the provision but it could move up uh you know up or down to some degree uh we expect relatively modestly but more broadly I think from a conduct perspective or a regulation perspective more broadly actually the government has tasked both the regulators who look at conduct so the FCA but also capital liquidity in terms of the PRA to support competitiveness and growth of the UK economy uh as well as their primary um remits in terms of regulation i think you see that most clearly uh from a um uh from a conduct perspective where actually what you see from the fca i think over the last year or so has been much more inclusive so i think the conduct agenda in the uk is evolving in a positive way and whilst it doesn't always feel like i think the fca has been focused on you know trying to manage um the motor finance process uh to resolve it expediently and to have control of that process so actually i think you know they're trying to do something that's positive for the industry uh in terms of how we we manage the business as i said a lot of those issues are legacy on the um recent app issue uh it was uh an incident that was uh what was very regrettable uh was one that was short-lived uh what as soon as we're aware of it it was corrected within a couple of hours um the there was a relatively small number of uh customers impacted and we reported it to the regulator very very promptly uh you know we put a lot of updates through the app uh in terms of uh you know new releases new functionality So this is very much an isolated incident, but one that we are, you know, looking at in a lot of detail to ensure that doesn't, you know, it's not repeated.

Brilliant. So next question, what is the process for ensuring you don't pay too much for share buybacks?

And Rose, do you want to take that one? uh yes so share buybacks so we take a view at the beginning or the board takes a view at the beginning of the year or as i said going forward every half year as to whether number one that's the right use of capital and well if we have certain capital um should we be retaining it spending it or returning it uh if the view is that we're going to return it uh there is you know a a numerous mechanisms that that can be used to do that of which a share buyback is one um you know and that that is driven by that decision is driven by you know doing a number of things including whether we or not we see continued value in the shares so if we continue to see upside it makes sense to buy um the shares at below fair value uh you know also we we um you know have an ongoing dialogue uh with our investors uh in terms of uh whether they think that's an appropriate uh an appropriate tool to be using so it's you know it's a combination of things in terms of what the right cat allocation is uh where the valuations are and what investor appetite is uh i guess in terms of the way the share buyback is structured it is in part programmatic and in part there is some uh flex around that where the broker that that executes it for us you know is incentivized actually to buy um to accelerate the share buyback when when the price is low uh we report it every day and you will have seen a pickup actually in the recent share price weakness so we you know we look to take advantage of um points of share price weakness to accelerate the buyback selectively during the year great thanks right there's one more question Well, not one more question, but there's a question that I'll answer in a minute and maybe do you want to turn on and turn off your camera?

Because I think you may have frozen. But the question is, how will Revolut impact your plans? So and there we go, I think, you're back. And so I guess the first thing to say, Revolut has been around for a while and it has impacted. It's clearly been a major competitor alongside other fintechs that we all we all know in the market. and so them getting their banking license clearly gives them optionality and allows them to do additional things but from our perspective it doesn't change our view of ultimately where the competitive landscape is heading and i think if anything emphasizes the direction of our strategy and maybe i'll just talk a little bit about what i mean by that ultimately when we think about what we've done over the last few years we have been keen to invest in the app and invest in the customer facing elements of the group but also invest in the back office what that has meant is that we can now be far more agile and we can be far more agile in line with some of those leading fintechs so for example for customers that want to onboard onto our app for a current account it now only takes seven minutes and that is in line with some of those leading fintechs and actually it's far better than we were a few years ago likewise when we onboard customers onto deposits and loans we we onboard them onto our core banking platform that's a cloud-based platform so again it means that we can access that data much more efficiently it also means we can change things much more quickly and so we have advantages now that are now in line with some of those leading fintechs and I think to your point to the point of the question the fact that Revolut have their full banking license only emphasizes the importance of doing that I think the other point to say here is that if we think about why customers choose Lloyds there's a multitude of reasons and I think those are things that we will emphasize and lean into when it comes to competing with the likes of Revolut firstly is the trust element I think people trust Lloyds and it's a trusted brand and that gives us an advantage, particularly when we install maybe new products, things like agency KI, things like digital assets. Having a brand that you trust is really important there. Secondly, we have scale and we have that data and therefore we have advantages in terms of how we are able to utilize that and make sure we can come out with good propositions for customers. And then finally, I guess most relevant to competing with the likes of Revolut but other fintechs is we have that breadth. And so I think the importance here is that we need to lean into those things so that when customers choose us we can make sure that we introduce them to the full breadth of the franchise and make sure that we can deepen that relationship to ensure that we can continue to win against those types of fintech so to answer your question very quickly it emphasizes the need to continue with our transformation but it also means that we need to continue to deal with high levels of competition which we're used to dealing with and we need to lean in to our strengths. So I think that hopefully answers the question. We've had one other question here on AI. Does the AI push drive your energy costs? If so, how can you mitigate this? So I can't answer that specifically. What I will say is that obviously we've dealt with inflation over the last few years. And that's not just inflation in energy costs, it's inflation in people costs, it's inflation in other aspects of the business. Clearly, like you say, there will be impacts of some of the investments that we put in i can't answer your question to what extent the push into ai impacts energy costs and but clearly there'll be offsets there because we've decommissioned some things such as legacy data centers and reintroduced things like the cloud so there'll be some offsets some puts and some takes overall though how do we mitigate those increasing costs well we do it by essentially being more efficient by generating gross cost saves and you heard earlier me talk about the 1.9 billion of gross cost saves that we have generated a business. That is by, for example, investing more efficiently, being more agile. It's also by reducing some of our property, consolidating some of our property. It's also by automating customer journeys. And so one good stat actually is that customer facing colleagues can now serve 45% more customers than they could before the start of the strategy. So I can't speak specifically to energy, but overall costs have clearly increased over the last few years in line with inflation. And definitely some of the investments have increased costs as well. But we continue to mitigate that to make sure that we can continue to invest into the business i think we've got one more sort of motor adjacent question right and so with motor the question is and you touched on it a little bit earlier uh has something changed in the way that we uh look at motor finance products um to eradicate the possibility of a similar occurrence uh and are there any penalties applied to those um that have maybe benefited from the uh from the previous sale those products uh yeah thank you tom so there are a few things that have changed in the motor finance industry so you know i i guess just going back a few years uh you know this is all about the

commission arrangements with uh with motor dealers and that was something that was reviewed by the fca between 2017 and 2019 they had a look at it at the time and they said they didn't really like these adjustable commission agreements which were prevalent in the market at the time they were no by no way Lloyd by no means Lloyd specific that was standard market practice so in 2020 they came to the decision that they that would no longer be allowable and we and our competitors changed the way that we sold a change of remuneration for the for the dealers on motor finance from 2021 onwards so that has been a change in the market then also the year before last there was a case that came to the court of appeal around whether the customer knew that the whether the customer really knew that the dealer was receiving a commission in response to that ruling we withdrew the products for about two weeks uh redrew all of our contracts uh uh which now require um customers to explicitly indicate uh that they understand that the the dealer is uh receiving a commission uh and then we read we we reopen the product and to be frank that's made very little difference to um to the volumes of business that we've been writing so So there has been a change in the way the industry operates. We all through this have complied with the law and the regulation, but the regulation has now changed. The law has now changed and we've made sure that we kept up to date with it.

Brilliant. Thanks, Ray. I think that gets us to the end of the questions that have been submitted. Jake, just to double check, that's the case from your side.

Absolutely, guys. And thank you very much indeed for being so generous of your time and addressing all of those questions that came in from investors this afternoon. And of course, if there are any further questions that do come through, we'll make these available to you after the presentation is ended just for you to review. But Rohif, perhaps before really now just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments just to wrap up with, that'd be great.

Yes, thank you.

So thank you again for joining us. we really do appreciate your time and your interest and would welcome your feedback i hope you found that a useful session uh and uh and thank you very much also to investor meet for hosting us uh and we look forward to updating you uh on the next phase of our strategy later in the year thank you perfect bro have tom that's great thank you once again for updating investors uh this afternoon could i please ask investors not to close this session as you'll now be automatically redirected to provide your feedback on behalf of the management team with lloyds banking group plc we would like to thank you for attending today's presentation that now concludes today's session so good afternoon to you all