Lloyds Banking Group plc (LYG) September 2025 Capital Markets Day Transcript

Good afternoon, everybody.

As indicated, I'm Douglas Radcliffe and I'm the Group Investor Relations Director for Lloyd's. Sarah has been in my team for a little while now, so welcome on board, Sarah. We're really happy to be running another one of these briefings with ShareSoc. We view these events as an important way of actually keeping in touch with our retail shareholders so thank you for joining us. During the presentation today I will talk to our strategy in particular our outlook to 2026 and Sarah will talk to the latest financials including our half-year results which we released in July. We're intentionally using some of the slides from our half-year results so you can see what we presented to institutional investors at the time. The presentation should take about 20 minutes and we will then leave plenty of time for Q&A at the end. With that let's move on to the first slide. As many of you will know Lloyds is a UK focused retail and commercial bank. We have a simple operating model with the business split across three reporting divisions as outlined on the slide here retail banking commercial banking and insurance pensions and investments within these divisions our customers are supported by a comprehensive product suite this scale is underpinned by a portfolio of familiar and trusted brands such as lloyds bank halifax and scottish widows alongside a few newer brands you may be less familiar with, including Tusker, our car salary sacrifice proposition for corporates, and Lloyds Living, our private rental arm. The breadth of our franchise provides us with a key advantage in servicing more of our customers' needs, as well as understanding them better to provide more targeted offerings that deliver value for both customers and the group. As ever, we are guided by our purpose of helping Britain prosper. I'll now go on to our competitive strengths which differentiate our proposition on slide As many of you will be aware, we're the biggest UK bank, with 900 billion of assets and 28 million customers. This gives us extensive reach across the UK. We are also the number one provider in several of our core product areas, including mortgages, cards, loans and transport. Our capabilities across both banking and insurance are unique within the UK and offer a clear competitive advantage. We also have a strategic vision of being a UK customer-focused digital leader. We now have around 21 million mobile app customers and we are continually leveraging these digital strengths to innovate and improve our customer products and services. We see leadership in this digital area as being critical to long-term success, linked to our track record of investment in digital, AI and data. This enables us to innovate, to anticipate and meet customers' ever-evolving financial needs. I'll now provide an overview of our strategic focus areas on the next slide. In February of 2022, you may recollect that our CEO, Charlie Nunn, set out a five-year strategy for Lloyds Banking Group. This strategy focused on driving revenue growth and diversification, strengthening our cost and capital efficiency, and maximizing the potential of people, technology and data. Our revenue growth initiatives are focused on four key areas. deepening and innovating within the consumer space creating a new mass affluent offering building our corporate and institutional offering and digitizing and diversifying our SME business if you want any more detail on these initiatives please do look at our website as we've done a separate strategic seminars for each of these areas over the past couple of years we are now close to the end of the fourth year of our five-year strategy and are on track to deliver our 2026 targets, including over one and a half billion of additional revenues from strategic initiatives by 2026, with over one billion delivered to date on an annualised basis. We also continue to focus on increasing productivity and have delivered around one and a half billion of gross cost savings since 2021. Our strategic delivery reinforces our confidence in meeting our 2026 financial targets, which I shall now turn to. As said, we are confident in meeting our 2026 financial commitments with significant operating leverage supporting our guidance of a cost-income ratio below 50%, a return on tangible equity of greater than 15% and capital generation of greater than 200 basis points. On the final slide of this strategy section of the presentation I'll provide a few examples of how we are successfully delivering our strategy in the first half of 2025. We continue to build a highly differentiated franchise, for example we've continued to take a leading role in supporting the critically important housing sector, lending more than 8 billion to first-time buyers and supporting over 1 billion in funding to the social housing sector in the first half. At the same time, we are delivering growth through our strategic initiatives in a number of areas. This includes significantly increasing our penetration of protection products for mortgage customers and gaining share in sterling interest rate swaps in the commercial side. This business momentum is underpinning our sustained strength in financial performance in the first half of the year, which Sarah will now provide an overview of.

Thanks, Douglas. As said, Lloyds Banking Group demonstrated sustained strength in financial performance during the first six months of the year. Statutory profit after tax in the first half was £2.5 billion, with a return on tangible equity of 14.1%. Net income of £8.9 billion was 6% higher than the prior year. This was driven by continued momentum in net interest income alongside 9% year-on-year growth in other operating income. H1 operating costs of £4.9 billion were up 4% year-on-year in line with our expectations. asset quality remains robust the h1 impairment charge of 442 million equates to an asset quality ratio of 19 basis points our performance resulted in strong capital generation of 86 basis points in the first half this supports our 15 increase in the interim dividend i'll now turn to slide slide 9 to look at developments in our customer franchise. Our customer balances showed good growth in the first six months across both lending and deposits. Group lending balances of $471 billion were up 3% or $11.9 billion since the start of 2025. This growth was largely driven by mortgages up 5.6 billion in h1 and 0.8 billion in q2 this is as a result of a healthy underlying market demand as well as our strategic initiatives in this area elsewhere in retail we've also seen growth in unsecured loans credit cards and motor finance Then in commercial banking, lending balances also grew by £1.2 billion in H1, including £0.9 billion in Q2. In particular, we saw growth in infrastructure lending within our corporate and institutional business. We have also grown deposits by 2% or £11.2 billion this year so far. This comprised £3.7 billion in retail, driven by inflows to savings accounts and as a result of a very strong performance throughout the ISA season in Q2, with over 375,000 cash ISA accounts opened. Commercial deposits increased by 7.6 billion in H1, including 5.3 billion in Q2. This is driven by growth in targeted sectors. So now turning to net interest income on the next slide. net interest income was 6.7 billion in H1, so up 5% year on year. NII continues to be supported by positive momentum in the net interest margin, with the Q2 margin of 304 basis points up slightly on Q1. NII was further supported by average interest earning assets of 460 billion in Q2, which was up 4.5 billion versus q1 so looking ahead we continue to expect net interest income for 2025 to be circa 13.5 billion and that's up around 700 million from last year this is built on further lending and deposit growth as well as a significant pickup in the income from the structural hedge indeed actually hedge income is expected to grow by 1.2 billion in 2025 and then a further 1.5 billion on top of that in 2026. I'll now talk to continued momentum in other income across the franchise on the next slide. So other income of 3 billion in the first half was up 9% on H1 last year. This included 1.5 billion in Q2, also up 9% year on year this growth is driven by broad-based momentum across the business linked to our strategic initiatives within retail 13 growth versus the prior year was supported by higher income from personal current accounts and also continued strength in our motor leasing business in commercial year-on-year strength in transaction banking income was offset by lower loan markets activity and then insurance pensions and investments delivered a strong performance up six percent year on year general insurance did particularly well within this with income net of claims up 35 percent then finally in equity investments lloyd's living is developing well with income up 19 year on year alongside growth in ldc which is our private equity arm Looking forward, we continue to expect ongoing growth in other income linked to both BAU growth and also strategic initiatives. Then turning briefly to operating lease depreciation, which is the depreciation charge for our operating lease business. That was 710 million in H1. and we continue to expect this operating lease depreciation charge to grow in line with profitable fleet growth and higher value vehicles going forward with volatility in the charge mitigated by a number of strategic actions that we've implemented this year. I'll now turn to costs on the next slide. So we remain very committed to cost discipline. H1 operating costs were 4.9 billion up four percent year on year or actually up two percent excluding some front loaded severance charges that we took in q1 and those were taken to accelerate efficiencies so overall operating costs are tracking in line with full year expectations with business growth and inflationary impacts including national insurance partially mitigated by savings driven from our strategic investment. Looking ahead we continue to expect operating costs of circa 9.7 billion for the full year. Remediation remains low at 37 million and there was no further charge for motor finance in the first half and I'll actually cover motor finance specifically in more detail on the next slide. So our provision for potential remediation costs relating to motor commissions stands at 1.15 billion. The provision is based on a range of probability weighted scenarios to address uncertainties around a number of assumptions. So I'm sure many of you will have followed the Supreme Court judgment on the 1st of August in respect of Wrench, Johnson and Hotcraft. That judgment overturned the Court of Appeals decision in relation to fiduciary duties and bribery and upheld an unfair relationship claim in the case of Mr Johnson. So whilst this judgment clearly provides additional clarity, there remain a number of uncertainties. The FCA will publish a consultation on an industry-wide redress scheme by early October. This means the ultimate impact on the group will be determined by a number of factors still to be resolved, particularly the outcome of the FCA consultation. However, after initial assessment of the judgment, the group currently believes that if there is any change to the provision, it is unlikely to be material in the context of the group. Clearly, we will continue to review any further information and update as and when necessary. I'll now turn to asset quality on the next slide. Asset quality remains robust. The H1 impairment charge of £442 million equates to an asset quality ratio of 19 basis points. This reflects stable credit quality during the period, with either stable or improving trends seen across our portfolios. Similarly, early warning indicators remain low and stable. We're very confident in the balance sheet given our prime customer base and a prudent approach to risk and we continue to expect the asset quality ratio to be circa 25 basis points for the full year. I'll now hand back to Douglas to cover capital distributions and wrap up the presentation.

Thank you Sarah. So on the next slide as you can see capital generation of 86 basis points was strong in the first half of the year this supported sustained growth in shareholder distributions indeed at the half year we announced an interim dividend of 1.22 pence per share up 15 on last year as usual we will consider further capital distributions at the year end dividends per share have grown consistently over our strategic plan now up more than 80% versus 2021. Alongside this, we have undertaken consecutive and significant share buyback programmes. These have reduced the group share count by circa 16% since the end of 2021, supporting growth in value for our shareholders. I'll now wrap up on the final slide. In summary, the group is showing sustained strength and delivering in line with expectations. In the first six months of the year, we saw continued growth in net income, cost discipline and robust asset quality, driving strong capital generation and an increased interim dividend. Looking forward and based on this sustained strength, we feel very comfortable with our 2025 guidance and remain confident in our 2026 commitments. Both are set out in full on the slide. I hope you found this to be a useful and interesting update. To summarize we're very pleased with the progress so far and are excited about the opportunity to accelerate as we deliver our highly compelling investment case. So it looks as though that's now taken up about 20 minutes as expected so we'll now open up the call to Q&A. There is the ability on the actual drive to submit your questions we will then subsequently just go through each of the slides each of the questions as they come through and add further detail i think it probably makes sense for us to kick right into the questions so the first question that came through has actually come through about recent press articles about the unhappiness within the workforce by some of the measures taken as part of maximising potential of people. The question was really being what actions are being taken to ensure you obtain and retain the best talent to ensure success in the future. So obviously this is an interesting question. There's obviously been an element of speculation in the press with regard to performance management within Lloyds and how we look at structured support as a whole. In essence, this is actually, you know, very similar to the way many good organizations around the world actually manage performance. And actually, it's not something particularly new to the organization. Essentially, we want Lloyd's to be a high performing organization. You as shareholders, I suspect also want us to be a high performing organization. And our customers, clients and stakeholders all expect that that of us so basically what we want what we're trying to do at all times is actually ensure colleagues can achieve what they're capable of in our business and to do that we just have to be honest with those that need to contribute more and we have to make space for those with potential to progress and grow so really what I would say is you know that the press speculation that you you've read about is really about having an effective performance management approach within an organization and actually that's the right thing for any successful organization I think that probably covered that question another question was how should we think about the future mix of dividends and buybacks in your distributions please that's a really important question and one that we're frequently asked not just by retail shareholders but all also by institutional shareholders you know our our approach has actually been relatively or very consistent in fact over recent years we have a progressive and sustainable ordinary dividend policy that progressive and sustainable ordinary dividends you'll see that that's been reflected in the increase in ordinary dividend by 15 uh at the half year in essence from our perspective you know our belief is that we can continue to deliver that progressive and sustainable ordinary dividend over a number of years in addition to that what we look towards doing is actually having paying out excess capital to shareholders at the end of each year in recent years that's been undertaken through a buyback last year it was 1.7 billion the year before that it was two billion so you should fully expect the you know the board could to continue to consider excess capital repayments at the end of each year what's really important I suppose is is what it really means for or how you then you know contextualize what the level of that ordinary dividend is and what the level of the buyback is and that's why we give the guidance around the the capital generation. We've talked about delivering 175 basis points of capital generation this year. We've talked about delivering more than 200 basis points of capital next year. The other aspect that indicates almost like how much capital will actually pay out at the end of the year is the capital ratio that we pay down to. You'll see that we've indicated that we will pay down to a 13% CET1 ratio by the end of 2026. We pay down to 13.5% by the end of last year and we've indicated that there will be a journey to move towards the 13%. So you should fully expect us to pay down somewhere between the 13% and the 13.5% at the end of this year. So actually when you look at our approach to mix of dividends and buybacks, that's the way to look at it. What I would say is on the excess capital repatriation is that we're constantly looking and the board looks at what the most effective way to return excess capital is. In recent years, we very much believe that buybacks is the best way to do that. Clearly, that's something we'll consider as the share price has recovered, as our valuation versus our tangible net asset value has recovered. But certainly when we speak to retail shareholders, when we talk to institutional investors, the current view is given the significant value that both the market and we believe is still available, the view is still that I think that buybacks are the favoured approach. But we continue to listen to all investors to see exactly what the right approach should be going forward.

I can do the press share one.

Go on then.

So there's a question. You bought back some of your preference shares in 2024, but at the end of last year you still had five class in issue, some with very high coupons. Over time, should we expect that you'll retire more of the preference share? So we've actually got four preference shares outstanding at the moment, so two a GDP, two a US dollar. We don't actually disclose whether we intend to redeem outstanding instruments in the future. It's very much considered on a case-by-case basis at the time. As you can imagine, we'll take into account a variety of economic, regulatory, legal and practical considerations. But we do continually monitor the market for any opportunities to repurchase or exchange those remaining preference shares outstanding. funding, so we will see.

Okay, another question has come in which is unsurprisingly about the economic environment and how we see almost like earnings progressing given a lower rate environment. It's really quite interesting at the moment because people talk about the UK economy and the environment as it stands at the moment. And actually, the environment as it stands, although it may not be necessarily exciting, isn't actually unsupportive to Lloyds Banking Group and how we operate. Certainly, if you get to the stage where rates are where they are at the moment, there's certainly much more of an ability to manage both the asset and the liability perspective. If you actually look at our economic expectations, and we're one of the few banks that actually update our economic expectations every quarter. You can see them in the slides, you can see them in the news release when we actually produce our results. And actually, you know, what you see is, you know, our current projections are probably GDP growth of about 1% both this year and next year. You're probably looking at unemployment peaking at about 5% next year. And you're looking at slight growth in in-house prices. The other area that was specifically referenced in the slides was actually the base rate. At the half year, we were actually expecting a couple of reductions in the base rate over the second half of the year. Clearly, if you look at the market and the market environment, I think the general expectation would be that that would be less than that now, but we will look towards updating those expectations as we move forward and when we issue our Q3 results at the end of October. The question, though, I suppose was really there is, irrespective of the resilience of the UK economy, what does it mean from our net interest margin going forward, even though the rates are reducing? Now, in essence, I think you know when you look at our net interest margin and our net interest income there are three primary factors that are probably influencing net interest income you know going forward over the over the short to medium term one of the way which which is very much a tailwind is structural hedge earnings when you look at it from a structural hedge perspective we have about 244 billion under investment effectively those are interest rate insensitive balances they've got a weighted average life of about three and a half years so in theory they would roll off over a seven year period being a weighted average life of three and a half years but essentially what you'll see at the moment is that that structural structural hedge is actually earning probably about 2.2 percent but actually as you reinvest that that those funds each year they're actually reinvested into a market that's only more like about three and a half to four percent so you can see that at the moment you're actually getting a benefit as you reinvest that 30 to 40 billion of maturities each year in the structural hedge so that's very much a tailwind that's slightly offset by a couple of headwinds, one of which is mortgage repricing. Effectively, if you look at it from a mortgage side, the current completion rate for mortgages is probably around 75 basis points. If you look at mortgages and the rate that they were written probably about during COVID and the like, it was significantly higher than that. So effectively, we've got business that's coming off quite high rates going on to lower rates. And that's been occurring over the last three, four, five years. In essence, that is a slight headwind when it comes to both net interest margin and net interest income. At the same time, what you've got is effectively deposit migration, which is effectively current account balances moving to savings accounts, where essentially the rate that's achieved is actually or the margin that's achieved is less because obviously the rate payable to customers is higher on savings balances. so that actually becomes effectively a headwind as well but the but basically the tailwind of the structural hedge more than offsets you know the benefit that's coming from you know those those two headwinds hence why we expect the um the net interest margin to increase this year we haven't actually you know given um effectively you know guidance beyond that for net interest income or indeed net interest margin. But you can see that the positive trends in those areas are very much driving the increased return on tangible equity. From a return on tangible equity perspective, we're expecting greater than 15% next year. And indeed, the capital generation, which we're expecting to increase from around 175 basis points to more than 200 basis points. So we're still very much of the belief that actually we can still see positive momentum in the net interest margin despite the fact that the base rate is falling.

So do the M&A one?

Yes that makes sense.

Yeah so the question is are there any gaps in your product set that you'd like to close through M&A and you've made some interesting acquisitions in recent years that have added capabilities. Yeah so in terms of M&A first and foremost our strategy is an organic one so when we set out our strategy in February 2022. If you think about the scale of Lloyds Banking Group and the fact that we are already kind of number one market share in a lot of our key product areas, for us, any M&A is really kind of small and around the edges where we see opportunities to improve the customer journey or a customer offering that is easy to acquire versus us doing it kind of organically and building it in-house so when you think about the examples of acquisitions that we've made over the past couple of years tusker our car salary sacrifice uh proposition springs to mind as does embark which is a new share investment platform and so the two of those are very much kind of small and in terms of capital it didn't make a lot of impact um but we do look at all of these things in the round so when you read on the news about your ex-bank buying you know ex portfolio etc there are always things that we will have looked at but we will have decided for one reason or another and that it didn't make sense for us from a kind of a proposition perspective so it will look at all these things in the round and i'd say from our kind of product set there's nothing kind of in particular that we've kind of call out at the moment but we will obviously look at all of these things and very actively as of when they you know they come up for for sale or acquisition.

And I think actually linked to that, Sarah, is actually one of the areas that's also touched upon in another question. One of the other questions was talking about the profits associated from ending the AG Bell partnership in regard to SIP management and bringing it in-house. I'm not going to talk about individual profitability or different areas like that. But what I would say is that one of the strategic areas of focus for us as an organization is very much, you know, almost like the mass affluent and the wealth franchise. You know, from our side, you know, there's very much an area here that, you know, that customers in that mass affluent have not been able to access investment management in the same way that I think both from a Lloyd's perspective, we would like customers to be able to access and indeed from a regulatory perspective. perspective. And a lot of that is effectively from previous regulation that actually meant advice is only really available to those that have got much larger amounts of money. So it's one of the things that we're trying to look at from a mass affluent side. And one of the areas you'll see how that's actually developed in the last year or so is when you look at our representation in ISAs. If you look at it from an equity ISA perspective, I believe over the last 12 months we're actually almost like the number one or number two provider and actually that's a significant increase from where we were two, three, four years ago and it's a big area of focus about how we look at basically that mass affluent proposition and really ensuring that we've got everything available from execution only, share dealing you know all the way through to you know direct access to investments to advisory services and that's very much where we believe Lloyds can act as a unique provider in the UK market with both a banking proposition and indeed an insurance proposition available through Scottish Widows so yeah that's very much the way that we're looking at trying to enable that and one of the reasons that we think that's going to be more successful going forward is actually from a digital side it's not just the change in regulation that we've seen but it's also when you look at it from a digital side the insignificant investment that's gone into the app is really making a difference from this side you know a number of you may well be banking clients of Lloyd's and you can now see that actually you know on your banking app you can not only access your your current account your savings account but you can also access you know elements of Halifax share dealing limited so the execution only share dealing service you know there are also elements and you know how some people that are now able to access you know their pensions through Scottish widows through that as well and indeed look at other products such as general insurance that are all available and can be reviewed on the app so I think that that whole digital development and investment that's been made really provides a significant you know differential in the way that you know people look at the almost like the more holistic banking proposition going forward.

Then on there's a question around what's happening to loan quality and defaults at present and so as I kind of touched on in the slides asset quality has been very robust reflecting both the fact that we've got a relatively very prudent lending book, but also we're seeing very healthy customer behaviours in terms of customers paying off their credit card balances at the end of the month, customers having a relatively prudent approach to lending as well. So what we're actually seeing both on the retail side and the commercial side is that new to arrears are low and are either stable or falling across all the portfolios. And similarly, from an early warning indicator side, whether that be minimum repayment levels in cards are very low and stable. And similarly, on the commercial side, we're seeing things like working capital utilisation levels being very low. So what does that mean? Corporate clients aren't drawing down the whole extent of their RCF. They're able to meet their day-to-day payment needs using their own kind of working capital. So what did that mean? Asset quality ratio was only 19 basis points for the first half. It was actually only 11 basis points in Q2. So well within our 25 basis point guidance for 2025. So we feel very, very comfortable with asset quality in general.

Yeah, and I think just adding to that, I think that robust asset quality is driven by not just the prudent approach to risk that Lloyd's has taken over the last few years, but also the economic environment. And the economic environment, as I said earlier, is actually not unsupportive, given the fact that although you have GDP growth, which is relatively low, it's actually quite steady. And I think that relates to another one of the questions about actually where we expect interest rates to go to. One of the questions outstanding was, you know, at what level are Lloyd's expecting interest rates to bottom out? Well, we're probably expecting interest rates to bottom out at the moment, probably around the 3.5% level, somewhere like that. Obviously, rates at the moment are at 4%. Clearly, you know, we'll have to see how things progress and how things change. But I think, you know, that sort of level is broadly, you know, where our expectations lie. What I would say is at that sort of level, effectively customers have seen that actually they're really quite resilient. There was a little bit of a concern in the UK as mortgages repriced and as rates were rising and they increased, whether customers would be able to afford their mortgage repayments or the increases in mortgage repayments. But actually what we've seen is actually the customers have been really remarkably resilient and actually at the same time savings balances have increased you know not just on the commercial side but also also with retail customers so i think actually that the overall economic environment is actually quite you know good for credit at the moment as well and then there's another question on how resilient is the bank to a cyber security attack so from our side this is an area where we place a huge amount of investment every year so if you think about group costs and as you can imagine they're always kind of prioritization exercises that we go through but from a kind of

cyber security perspective that is always something where a lot of focus is placed and a lot of investment and actually we've been we've been very resilient to to kind of cyber attacks in general and I'd say that kind of linked to that and there's another question around digitization, really think about the investment spend that Lloyds has made over the past few years, 3 billion over three years, 4 billion over five years, a lot of that has been in technology and also in cyber. And that's starting to have a positive impact from an efficiency perspective and on cost to serve and cost to acquire retail customers. So I think we gave we gave stats around reduced cost to serve with our full year 24 results we also said at the half year that actually the strategy in our kind of strategic initiatives have generated 1.5 billion of gross cost savings so far and as a result of the strategy and we continue to see further opportunities to reduce manual back office processes and you know from a finance perspective from a risk perspective, from a retail perspective, you continue to see kind of branch closures and using digitization to really improve the kind of cost to serve and also improve the customer journeys as well, as Douglas was saying, in terms of building things into the app. From an SME perspective, we've considerably improved our mobile onboarding capabilities. So as you can imagine, it used to be a very manual process for a business banking customer to be onboarded, lots of kind of forms going through the post. But now it's done from a mobile perspective, much quicker and much easier. So that's really an area where we feel really pleased with the progress that we're making on the kind of tech and digital side. And actually, we're going to be doing a specific investor seminar later after our Q3 results, so in November, on digital and AI and how we are using both of those to drive a kind of competitive advantage and the opportunities that we see in the future.

Yeah, and I suppose linked to that as well, I mean, both on the cost to acquire, is really how fundamentally you look at the cost-income ratio for the group as a whole. you know we probably had at the for the first half of the year we had a cost income ratio of about 55 percent we very much believe that there is an opportunity to reduce that indeed one of our core areas of guidance for 2026 is actually a cost income ratio of less than 50 percent so you can see there that clearly you know we're we're very much targeting you know further improvement during the course of this year and indeed into next year. And that improvement, I think, is very much from both sides. It's both from, you know, clearly, you know, the clue is in the title with the cost income ratio. But, you know, that's from both increasing income and very much control over costs. And, you know, that's really, you know, fundamental to the way that, you know, Lloyd's as a group operates. you know cost is very much a competitive advantage and will continue to be a competitive advantage yeah as we continue to progress not just this year but going forward and as we continue to invest in the business so I think that that whole digitalization and investment will be fundamental but is very much a priority for us there's a there's another question which sort of relates to one of the questions I was talking about earlier which was really about what's your buyback policy from from here going forward. So I touched that upon that a little bit earlier so effectively we have the progressive and sustainable ordinary dividend that's very much our approach and effectively what we'll do is they will then look at the or the board tends to look at the excess capital repatriation at the end of each each year and the board makes those decisions at that point in time. What I would be very clear about is the fact that actually the board has made it very clear that returning capital to shareholders is a priority. Now how that's done, we've been very clear with the progressive and sustainable ordinary dividend. The excess capital repatriation decision is made at the end of each year. The current view is that actually the buy back is, or undertaking a buy back, is the best approach to do that. But that's reviewed each year clearly there are alternatives you could undertake a special dividend you know you might and you know or a buyback alternatively you could actually use those funds either for m a or or indeed for further investments but you know our view is that we're already in making a significant amount of investment you know prior to actually you almost like announcing our capital generation of the around 175 basis points this year, the greater than 200 basis points next year. It will continue to be important, but it's how you repatriate that. And as Sarah mentioned earlier when she was talking about M&A, look, our strategy is very much an organic strategy. It's very much looked at value for the organization. Any potential acquisitions have to be aligned from a strategic perspective. They have to be aligned from a risk perspective and they have to deliver value. So from our perspective, there's nothing significant on the agenda at this moment in time, but naturally as one of the largest financial providers in the UK it's right for us to consider those options.

But I think from a perspective at the moment on buyback, buyback is our current approach to returning excess capital, but that decision is reviewed at the end of each year. there's then there's a couple of questions around share dealing and in particular you know what we are doing to encourage individuals to invest more of their cash rather than saving it so i think from our perspective i'd call out two things so firstly around 18 months ago we launched something called ready-made investments within our app this is a very simple easy investment tool where effectively you can put in the amount that you want to invest your risk appetite to kind of low medium high and the the tool will then recommend you an ETF type product so that's kind of the first thing that we're doing we're seeing kind of good take up there and clearly we would also say that if people want to use their money for savings we've also got a vast range of savings products so we've got products for for all different types of risk appetites and also different kind of macro environments so clearly what i'd say over the past few years is because interest rates have been so high the rates that you can get on on term deposits have also been very high and that has prompted customers to move their money into savings rather than investments however as a there's reason to believe that as and when rates come down those investment products become more attractive and so we've been building the ready-made investment products as well What we are also doing linked to our mass affluent proposition is also working with the FCA in a kind of a sandbox environment to look at AI driven kind of money management tools and whether there's more that we can do in that space, kind of particularly linked to investments as well as as well as savings products. So it's definitely an area that we're very much focused on. And as Douglas said, we've significantly increased our market share in stocks and shares, ICES. So we were probably about 5% market share a few years ago. And now from a flow perspective, so flow, new ICES, this and last year, it's been much more like 20%. So it's very much an area of focus.

Yeah, and that's very much reflective of the investment that's being made in that area and will continue to be made because we do feel with the customer franchise that we have that we should be able to meet those customer requirements, those customer needs through the services that we provide. Another question that actually, which is probably just more a general question is, what's the best way to register for these digital seminars? So a couple of things that I would say is, first of all, on the Investor Relations website, you can actually see the seminars that we've already undertaken. We've already undertaken seminars for effectively, you know, the four divisions that we were looking at from a strategic perspective. So you can actually see, you know, business updates from effectively the divisional executive teams along with Charlie. and it provides a good overview of both the strategic priorities and progress being made for each of those divisions. As Sarah indicated, we're going to be undertaking another one on digital and AI, which is the actual data is yet to be formalized, but it was probably likely to be in, well, probably it will be after the Q3 results, so before the end of the year. We will be announcing the formal date. That will probably be whether we do that pre-Q3 or at Q3. But all the detail will be available on our website. And indeed, you'll probably be able to watch it on the website as well. We normally do it as a live webinar. So through the investor relations area of LloydsBankingGroup.com. There's another question, which is always an interesting question from an IR perspective, which is asking me whether I feel that the current share price is an undervaluation. Asking that of an IR team is always clearly a one-sided view. But I think what I would say there is that actually you can see currently where we are delivering for 2025. You can see that. So, you know, you look at the returns. I think, you know, we had a return on tangible equity of what, 14.1% at the first half of the year. you can see that we are expecting to deliver 175 basis points of capital generation this year and actually we're well on track to do that but fundamentally what I would say is actually our guidance for return on tangible equity next year is greater than 15 percent so you can see the trajectory that we're expecting from a return on tangible equity perspective you can see that the trajectory that we're expecting from a capital generation perspective as well and you can see the trajectory that we're expecting when it comes to the

cost income ratio as well so you know our view is very much that yeah if we can deliver against that guidance we should be that should continue to be recognized in the share price and then kind of finally we've got a question around digitization so overall as a population where are your retail customers on the digitization journey where zero is no engagement 100 is full engagement where all processes are digital what i would say is that there you know clearly there's a range as you would expect there to be we've got 28 million customers and 22 million mobile app users so that indicates that a good proportion of our customers are very much digital and using our app on a kind of daily basis we've got that seven billion logons a year onto our mobile app so yeah really kind of really kind of considerably used app which is really important for us as it enables us to build better relationships with customers however you know clearly there are some customers who are not digitally active And that's why we've still got the largest branch provider in the UK with around 1,000 branches still remaining. So, yes, there is a range, but I'd say increasingly customers are becoming more and more digitally active.

And I think that that can be seen again. This is the beauty of the digital franchise and the digital operating environment in which we're currently participating. If you look at, you know, access to our app, you know, I think that our app is generally accessed, I think it's around 30 times a month by most customers. And actually that engagement is significant. In fact, it beats the vast majority of, you know, digital channels around there. In fact, I don't think there's any other, almost like channels that have the access that we do apart from maybe some of the social media apps. The only other question which we didn't touch directly was relating to share dealing through Scottish Widows. But I think that we've made it very clear how actually Halifax share dealing and the whole mass affluent and wealth management proposition is absolutely fundamental to the way that we're going to undertake business and have an enhanced proposition for customers going forward. So very much a key part of the way that we look at both banking and investments. I think that actually that completes all the questions. I hope actually having both Sarah and myself answering has not just enabled us to comprehensively respond to all the questions, but also given a bit of a variety from a voice perspective as well rather than hearing you know my my my male voice going on all the time so hopefully that's provided a bit of a balance and a bit more interest to you as well but thank you very much indeed for dialing in i hope it's been useful and i think mike you wanted to just um conclude yes thank you very much douglas and sarah it was a great double act you handled it all very well i didn't think we were going to get through all those questions in time.

I was watching the clock ticking down, but it was perfect timing. So well done. Quite a variety there as well, wasn't there? Anyway, yes, thank you. And do come along again and update us with more news as and when you've got the opportunity. We'd love to hear from you and love to see both again in the near future. And for the rest of it, have a good evening.

Great. Thanks very much. Thank you very much.