Lloyds Banking Group Performance

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 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 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.

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 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.

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.

The appeal has been listed for hearing in March 2027, however final conclusion of the judicial process may not be for several years.

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 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.

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.

This is meeting customer growth objectives, generating diversified capital efficient growth and supporting customers in their transition to net zero.

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

Delivered £24.5 billon1 of sustainable financing towards the three year commitment of £30 billion between 2024 and 2026.

Invested almost £250 million in 2025 through LDC, taking total capital deployed since the start of 2020 to over £2 billion

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

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.

The UK insurance companies within the Group are regulated by the PRA.

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.

The minimum required capital must be maintained at all times throughout the year.

All minimum regulatory requirements of the insurance companies have been met during the year.

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.

Given the significant level of uncertainty in terms of the final outcome, the ultimate financial impact could materially differ from the amount provided.

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.

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.

The goodwill held in the Group’s balance sheet is tested at least annually for impairment.

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 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 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.

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.

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.

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.